Funding Circle Holdings plc
£14BN >120,000 £4.5BN #1
Our story so far
lent through our plat-
form since 2010
SMEs helped since 2010 loans under
management
SME loans platform
in the UK
BUILD THE PLACE
WHERE SMALL
BUSINESSES GET
THE FUNDING THEY
NEED TO WIN.
Our mission
WE DELIVER AN AMAZING
EXPERIENCE FOR SMALL BUSINESSES
POWERED BY MACHINE LEARNING
AND TECHNOLOGY.
How we do it
Contents
Strategic report
01 Highlights
02 Funding Circle at a glance
03 Investment case
04 Chair’s statement
06 Chief Executive Officer’s statement
08 Chief Executive Officer’s Q&A
10 Our market
12 Technology and data
16 New products and capabilities
20 Strategic priorities
22 Our model
24 Our people
28 Sustainability
38 Engaging our stakeholders
42 Key performance indicators
44 Financial review
51 Risk management
55 Principal risks and uncertainties
64 Viability statement
Corporate governance
67 Chair’s introduction
68 Board of Directors
70 Corporate governance report
77 Division of responsibilities
78 Board effectiveness
80 Audit, risk and internal control
81 Report of the Nomination Committee
85 Report of the Audit Committee
91 Report of the Risk and
93 Report of the ESG Committee
96 Directors’ remuneration report
106 Annual report on remuneration
120 Report of the Directors
123 Statement of Directors’ responsibilities
in respect of the financial statements
Financial statements
125 Independent auditors’ report
132 Consolidated statement of
comprehensive income
133 Consolidated balance sheet
134 Consolidated statement of changes
135 Consolidated statement of cash flows
136 Notes forming part of the consolidated
financial statements
182 Company balance sheet
183
184 Company statement of cash flows
185 Notes forming part of the Company
financial statements
193 Glossary
194 Shareholder and Company information
Our performance
Statutory financial
Total income
£206.9M
2020: £222.0m
Profit before tax
£64.1M
2020: £(108.1)m
APM
AEBITDA
£91.8M
2020: £(63.8)m
Operational
Loans under management
£4.5BN
2020: £4.2bn
Originations
£2.3BN
2020: £2.7bn
Our year in brief
A year supporting SMEs as
they drive the economic
recovery
X £2.3 billion originated to over 27,000
SMEs across the UK and the US
X Small businesses accessed Funding
Circle finance through our core loan
product, marketplace offering and
the government-guaranteed loan
schemes in the UK and the US
We continued to reinvent
small business lending
through our technology
X 70% of applications in the UK now
receiving instant decisions
X Application in six minutes, decision
in as little as nine seconds and
money in borrower’s account in 24
hours
X Beta launched new product
small business problems
X Launched an Application
Programming Interface (“API”) that
enables UK partners to seamlessly
offer Funding Circle loans to SMEs
within their own website
Resilient funding and loan
performance
X £2.5 billion investor capital raised in
2021 to lend to UK and US SMEs
X All investor cohorts expected to
deliver positive returns in the UK and
the US
Profitable in 2021
X Group: £91.8 million AEBITDA,
£64.2 million operating profit
X UK: £61.9 million AEBITDA,
X US: £28.4 million AEBITDA,
Culture and diversity are
fundamental to our success
X 86% would recommend Funding
Circle as a place to work
X We recorded our highest-ever
employee engagement score of 73%
in our annual employee survey
X 34% of senior leadership positions
are held by women and our gender
pay gap is now at its lowest level
The Strategic Report was approved by the Board on 10 March 2022.
Lisa Jacobs
Chief Executive Officer
Annual Report and Accounts 2021 01
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Highlights
<2%
We help solve small
business problems
At Funding Circle we deliver an amazing customer experience for
small businesses using machine learning, technology and data.
Funding Circle at a glance
100,000
jobs supported by UK SME
borrowers
1
£7BN
UK GDP contribution
1
SME lending as a share
of bank balance sheets
2
1. Source: Funding Circle’s 2021 impact, Oxford Economics, March 2022.
2. Source: Bank of England, US Federal Reserve, FDIC.
More
customers
More
data
Better
machine
learning
models
Better
customer
experience
More
operating
leverage
New
products
A great customer experience is built
seamless technology.
Over the past decade, we’ve built a
technology platform that is revolutionising
SME lending. Thanks to our instant
decision capabilities, small businesses
can complete a loan application in
minutes and receive a lending decision
and at an affordable rate.
Today, as a leading global platform for
small business loans, we’ve helped
£14 billion. This finance is helping to
create jobs and power the economy.
A virtuous circle drives
innovation, improvements
andcompetitive advantage
Our technology platform enables us
We innovate and iterate in a continuous
feedback loop, committed to driving
improvements in machine learning,
technology and data.
This feedback loop has resulted in
strong customer satisfaction scores
and high repeat rates, enabling us to
grow alongside our small businesses.
As we get bigger and help more small
businesses access the finance they
need, we’re building a stronger
competitive advantage.
This in turn, creates a virtuous circle
that ensures we continue to meet the
borrowing and business finance needs
of hundreds of thousands of SMEs.
Strategic report
Funding Circle Holdings plc02
WHAT MAKES FUNDING
CIRCLE UNIQUE
Investment case
3.5%
UK market share
Proven business model and
strong positioninthe UK
Largest UK lending platform with ten
years’ experience.
World class technology that delivers
superior customer experience
Technology and data science system delivering
instant decisions and personalised journeys to
customers – a first globally.
70%
of UK applications now
getting instant decisions
£91.8M
Group AEBITDA
Strong financials with healthy
balance sheet
Profitable in 2021 and expect to be
AEBITDA profitable going forward.
£305BN
Total addressable market
in the UK and US
Significant addressable market
SMEs are underserved by traditional lenders
and represent a significant addressable market.
Annual Report and Accounts 2021 03
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Read more on
P12
Read more on
P20
Read more on
P10
Read more on
P44
A decade of R&D now
comingto fruition
2020 triggered a seismic shift in demand
for online services and products,
including online borrowing. This trend
persisted in 2021, as SMEs continued to
search for and access finance online.
Small business owners have now come
borrowing; one that relies on technology
rather than face-to-face meetings
Following a decade of investment in our
technology platform, we’re now able to
meet these demands by offering loans
whereas other lenders can take weeks
ongoing investment in machine learning,
70% of our loan applications in the UK
receive an instant decision. Already,
more than two-thirds of our customers
can receive funds into their account
without having to speak to a member
branch. At the same time, we continue
customers able to speak to our teams
should they prefer.
These developments are an astonishing
achievement when you consider how
things used to be: business owners
spending considerable time and effort
trying to convince a bank manager
technology is also getting the risk
balance right; we’re helping more and
more borrowers while delivering
consistently positive returns to
Thanks to the team
In the past couple of years, we’ve taken
huge steps forward during a period of
ongoing challenges and uncertainty.
None of this would have been possible
without the commitment and dedication
of our team of Circlers. Last year, I said
how humbling it was to see the
commitment of every Circler as we
responded to the immediate challenge
I continue to be hugely impressed by the
unwavering passion and energy of the
team. On behalf of the Board, I want to
congratulate and thank every single
Circler within the Company.
CEO transition and the Board
As our Company evolves, so too does
Samir Desai has stepped back from the
day-to-day running of the Company and
continues as a Non-Executive Director.
It’s a testament to the succession
planning work of the Nomination
Committee and the Board that we’ve
leading our UK business, and I believe as
CEO she will take Funding Circle to the
next level in this exciting new phase for
the Company.
During the pandemic, the Board has had
to step up in what has been an incredibly
dynamic environment, while managing a
number of changes at Board level. I’m
hugely thankful to all who have served
during this period. We’ve successfully
steered a constant and steady path
towards fulfilling our Company mission
while maintaining a happy, loyal team
and strong business culture.
Last year, I reported on an extraordinary
2020. It started well for our business, a
period of deep uncertainty and challenge
then followed, yet it ended with Funding
Circle established as a leading player in
the provision of funding for SMEs in the
UK and the US economies.
In 2021, the advantages we have in our
online operating model and technology
continued to result in a significantly
enhanced market share for Funding
Circle in the distribution of small
business loans. In our core UK market,
we successfully transitioned from one
government-guaranteed loan product
(CBILS) to another (RLS), while
re-introducing our core loan product.
RLS and PPP, Funding Circle has played
a leading role in helping small companies
drive the economic recovery both in the
UK and the US. The pandemic has
accelerated our evolution and I’m
confident that the strengths we have
shown and the position we have gained
will be maintained as the market begins
to normalise.
Chair’s statement
Continuing support for
SMEs and consolidating our
gains as the market begins
to normalise
Andrew Learoyd
Chair
Funding Circle Holdings plc04
Strategic report
Entering an exciting
newphase
Last year, I ended my statement by
referring to four core Funding Circle
strengths that have been highlighted by
the pandemic: our business and financial
model; government commitment
supporting SMEs; customer loyalty; and
the ability of our team to deliver. This
year, I will end by stating that those four
strengths are still valid, but made more
ambitious by our recently launched
medium-term plan. Within this plan, our
core strengths are enhanced by new
products and capabilities in both the UK
and the US. Starting with FlexiPay, our
new short-term finance product for
SMEs, I’m confident we will supplement
the growth of our core product for many
years to come.
Today, our business is the strongest it
has ever been, yet clearly we remain
misunderstood by some in the public
markets. This is disappointing, especially
given everything we’ve achieved over the
past two years. We’ve proven our
business model, significantly increased
our market share, moved to profitability
at least a year ahead of expectation, and
we’re generating cash with a robust
balance sheet. We will continue to
manage the business for the long-term.
And we will continue to deliver on the
value of the operational and financial
leverage that is now so obviously within
reach. I hope and expect that
achievement of these goals will result in
increased recognition and appreciation
success story.
A final word on the situation unfolding in
Ukraine, by which I am deeply shocked
and saddened by. It seems that the week
I draft my reflections on Funding Circle’s
past year has a habit of coinciding with a
period of pivotal uncertainty: in 2019
Brexit, and in 2020 the pandemic. These
events are put into perspective by the
very human tragedy of what is now
happening in eastern Europe. Our
thoughts and hopes are with the people
of Ukraine. The security of their safety
and future is far more important than
whatever economic winds blow our way
as a result.
Andrew Learoyd
Chair
10 March 2022
SUPPORTING BUSINESSES
Mark Robinson
Just Strong
Women’s “athleisure” brand Just Strong
was launched by personal trainer
MarkRobinson from his garage in 2017.
Agovernment-backed Funding Circle
loan helped Mark take his business to
thenext level.
Back in 2017, Mark Robinson noticed how gym-goers were
particularly loyal to small American brands. And inspired by UK
phenomenon Gymshark, he decided to enter the fashion industry,
printing and packing “athleisure” clothes from his home in Yorkshire.
In 2021, as more women began wearing “gym gear” while working
from home, orders began to accelerate. But to meet increased
benefit from a Funding Circle loan through the Recovery Loan
Scheme (“RLS”).
Strong increase capacity and drive up sales. The company now
Strong’s turnover doubled, with the company reaching a landmark
200,000th order in just four years. The label also benefited from
invaluable support on social media, including more than 350,000
FROM STRENGTH
TO STRENGTH
Annual Report and Accounts 2021 05
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Our focus now is on embedding Funding
Circle into the everyday lives of SMEs
and helping them in more ways. We’re
working to achieve these goals through
the launch of FlexiPay. As our first
short-term finance product, FlexiPay
gives greater flexibility to SMEs and has
received extremely positive feedback
We’ve also started to embed our
services into partners’ environments –
Circle. In the UK, we’ve created an API
where partners can natively embed
Funding Circle into their own websites,
while in the US we’re developing our
Lending as a Service (LaaS) proposition.
These developments will enable us to
get closer to those spaces and moments
in which our customers are organically
transacting, providing increased
opportunities for them to access our
funding products and services.
Stepping back from day-to-day
activities and handing over the
reins to Lisa
After 12 years as CEO and Founder, and
with the business in the strongest
position it has ever been, in September
2021 I decided the time was right to
take a step back. I’m convinced in the
strength of the business, the exciting
opportunities ahead of us, and, most
importantly, in Lisa’s abilities to take
Funding Circle to the next level. I’ve
worked with Lisa for almost ten years
now, and I know she’s the right person
to take over as CEO and guide the
business through its next phase.
Financial and
operationaloverview
2021 was the year in which we proved
the efficiency and profitability of our
platform, with our market-leading
technology enabling us to process high
volumes of applications at speed. We
originated £2.3 billion to over 27,000
small businesses across the UK and the
US. We also continued to deliver
resilient returns through the cycle and
attracted record levels of capital – £2.5
billion – to the platform. This led to a
total income of £206.9 million and loans
under management of £4.5 billion.
Our focus for the past two years has
been on profitable growth, and I am
pleased to report that in 2021 we
exceeded guidance and delivered
AEBITDA of £91.8 million and operating
profit of £64.2 million. We also ended
the year with net assets of £288.0
million and a strong cash pile of £224.0
million. At the same time, we laid the
foundations for the next stage of our
exciting multi-product, multi-channel
future. So, overall a very satisfying year
for Funding Circle.
We’ve continuously evolved
our tech infrastructure and
it’srevolutionising the way
weoperate
Funding Circle has spent the last
decade in R&D, building a technology
platform and advanced machine
learning risk models, which have now
been trained through a recession. This
investment is beginning to reap rewards;
the flexibility of our platform has
enabled us to evolve our core term
product while simultaneously
developing new products and
capabilities for our customers.
The pandemic has proven that our
platform is an effective way of delivering
funds to small businesses during a
crisis – the very circumstance in which
we started Funding Circle 12 years ago.
I’m incredibly proud that, during the
pandemic, we were able to provide
support to SMEs when they needed it
most, as the third-largest CBILS lender
in the UK and through PPP in the US.
In 2021, as the UK shifted from crisis to
recovery, SMEs continued to seek
finance from Funding Circle, but this
time with a view to growing their
businesses and powering the economy.
In the UK alone, our small business
customers unlocked 100,000 jobs and
contributed £7 billion to GDP – a huge
impact. We provided support to these
customers through a combination of
core loans and government-guaranteed
loan schemes. It was a monumental
effort that wouldn’t have been possible
without the hard work and dedication
Chief Executive Ocer’s statement
Funding Circle was founded
during a crisis to help SMEs
and power the economy
Samir Desai
Outgoing Chief Executive Officer
Strategic report
Funding Circle Holdings plc06
Looking ahead, I’ll no longer be
overseeing day-to-day activities at
Funding Circle, but will continue to use
my experience and knowledge to
support the business. I’ll continue to be
involved as a Non-Executive Director,
focusing on our new multi-product
proposition and assisting the Global
Leadership Team and fellow Board
members. I have full confidence in
we’re taking.
It’s been a great journey so far, and
enhanced technological capabilities,
2022 will be the start of a new, dynamic
and transformative period in Funding
Circle’s evolution. I think everyone
across the business would agree, the
future is very exciting.
Samir Desai
Outgoing Chief Executive Officer
10 March 2022
SUPPORTING BUSINESSES
GROWTH PLANS
DISTILLED
Alex Jungmayr and Ellen Wakelam
In The Welsh Wind Distillery
Founded in 2018, In The Welsh Wind
Distillery, owned by couple Alex
Jungmayr and Ellen Wakelam,
implemented expansion plans following
the lifting of Covid-19 restrictions.
In The Welsh Wind Distillery in Tan-y-groes – a hamlet north of
Cardigan on the west coast of Wales – took off after opening for
business in 2018. But plans for growth had to be put on hold as the
pandemic hit.
With the lifting of restrictions, founders Alex and Ellen used a Funding
Circle loan to make their dreams a reality. They hired 15 people and
began to expand their “grain-to-grass” ethos, using only grain grown
within 10 miles to make their whisky. Able now to implement their
providing training and jobs and opening up local opportunities.
Despite the increase in online shopping, the couple recognises the
value of purchasing face to face from small businesses. And by
shaping a positive narrative that links to the local landscape
Our focus now is on
embedding Funding
Circle into the
everyday lives of
SMEs and helping
them in more ways.
Annual Report and Accounts 2021 07
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Q
What first attracted you to
FundingCircle?
As the daughter of SME owners, I’ve always been a very
passionate small business advocate and acutely aware of the
challenges that small businesses can face. When I joined
Funding Circle nearly a decade ago, I was attracted to a
purpose-driven business of brilliant people focused on using
the latest technology to make small businesses’ lives easier.
Fast forward ten years and that is still true today. We have
grown from 40 people to over 800, but we continue to invest
businesses and the broader economy win. In 2021,
Q
What will you bring to the
CEOrole?
It is a privilege to be stepping into this role to lead Funding
Circle and our incredible Circlers. As a part of the leadership
team for nearly a decade, I know the business very well. As
Chief Strategy Officer, I led our capital raising and international
expansion and launched our first institutional investor loan
product in the UK. As UK Managing Director, I led the UK
business through the Covid-19 pandemic, supporting our
customers, becoming accredited under the government loan
schemes and executing against our strategic plan.
I am hugely proud of what we’ve achieved and the impact
we’ve had so far. We have supported over 120,000 small
businesses and provided over £14 billion of funding. This has
been down to the incredible dedication of our team of Circlers
and the drive of Samir and the rest of the leadership team.
Lisa Jacobs
New Chief Executive Officer
MEET THE CEO
Lisa Jacobs became Funding Circle’s CEO on 1st January 2022.
Now in her ninth year at the Company, Lisa has extensive
experience first as Chief Strategy Officer and then running the
UK business, the largest division within the Group. In this Q&A,
Lisa explains how she will be taking Funding Circle to the next
level in this exciting phase for the Company.
Read Lisa Jacobs’ bio
p68
Chief Executive Ocer’s Q&A
Strategic report
Funding Circle Holdings plc08
Q
How have you approached your
first three months in the role?
I’ve spent the first three months listening and speaking to
stakeholders internally and externally, building my knowledge
of certain areas of the business, and refining and launching
our new medium-term strategy.
Having been with the business for over a decade and coming
from the UK MD role, I was already very close to the UK
business, so I’ve spent time with our US Circlers in Denver and
with the teams that are core to delivering our medium-term
strategy as well as gaining some valuable external perspectives.
I have launched our new medium-term plan to the business
recently and look forward to leading the team to deliver
against it.
Q
What is
your strategy?
Over the last twelve years, we have invested in our technology
and data infrastructure to revolutionise SME lending. As a result
of this we have a product that our customers love, consistently
lending to more than 120,000 businesses. We have also reached
Our strategy is to continue our profitable growth, building on
these core foundations to deliver three customer-focused
pillars – attracting more businesses, saying yes to more
businesses and being number one in new products.
We will attract more businesses through our direct channels,
building on the tailwinds of further digitisation in the SME lending
market and we will embed our instant decision lending
technology into partners’ environments, enabling them to deliver
the same superior customer experience to their customers.
We will say yes to more businesses by creating personalised
journeys and propositions; expanding our set of products to
serve more businesses and deepening our marketplace
integrations with other lenders to support more businesses
with different products.
Finally, building on our core platform, we will launch new
product categories for our customers. These products will
deepen our engagement with our customers, allowing us to
solving some of their most difficult challenges enabling them
to focus on running their businesses.
This strategy is underpinned by the continued focus on our
foundations. We will continue our technology and data
investment to enable innovation at pace; build scalable
products and processes and high-performing teams who
Q
How would you describe your
leadership style?
I’m very passionate about what we do at Funding Circle. It’s a
special place to work. We are mission-led, values-driven,
inclusive and supportive and that enables our Circlers to get on
and do what they do best – innovating and executing. In the early
years of Funding Circle, I co-created our values – think smart,
make it happen, be open, stand together and live the adventure.
These are the guiding principles behind how we behave and
modelling these.
I have ambitious goals and high expectations but I lead by
example. That means I’m not afraid to get stuck in and get my
hands dirty, but I also aim to create an environment that
empowers those around me to do their greatest work.
Q
So corporate culture is an important
area of focus for you?
Ours is a mission-led business and I believe culture is one of
our most important assets. In an age of remote working,
employees have a huge amount of choice in how and where
they work and culture becomes hugely important. Funding
Circle is a place where people genuinely enjoy working every
day and are motivated by what we’re trying to achieve. During
the pandemic, in particular, as our customers struggled, I was
humbled by their passion, dedication, talent and hard work.
Q
What was it like leading the UK
business during the pandemic?
What were your biggest learnings?
It was a challenging period for us, like many of our customers
and businesses around the world. However, it was also an
opportunity to show the power of our platform. We pivoted
lending under the government loan schemes. The speed and
agility we have paid off as we were able to scale our monthly
volumes to double pre-Covid levels. Alongside this, we proved
the effectiveness of our risk modelling and servicing with
resilient investor returns.
Q
What are you most proud of as a
Company in 2021?
When Funding Circle first started in 2010, it typically took three
months for borrowers to get a loan. We announced our arrival
by reducing that wait time to three weeks. A decade later,
we’ve been able to bring our technology and data analytics to
provide instant decisions for borrowers. This is a remarkable
achievement in itself but also one that provides important
foundations for us to build upon over the medium-term.
Q
What are you most excited about
going into 2022?
While we’ve made significant progress in leveraging our
technology and data, we’re just getting started. We are at the
early stages of what we can do. I’m personally most excited
about the opportunity we have to become the small business
lending platform where a customer can not only borrow, but pay
and spend as well. Key to this is the rollout of FlexiPay, and the
feedback we’ve had from customers so far is really encouraging.
With our new products and capabilities, our customer journey
to 2024 will see hundreds of thousands of SMEs using
Funding Circle to meet their borrowing and business finance
needs through a rich ecosystem of solutions. As such, I’m
really excited about our next phase of growth and I believe our
best is yet to come.
Annual Report and Accounts 2021 09
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Our market
Small businesses are driving
the economic recovery, but
remain underserved
SMEs are vital to the global economy, creating jobs, stimulating
growthand driving innovation. They account for 70% of private sector
employment and 50–60% of the economic value created across the
OECD region. But despite the crucial role they are playing in the
post-pandemic recovery, SMEs continue to be underserved by traditional
lenders and typically represent less than 2% of banks’ balance sheets.
Thrivers are those SMEs that continued
to grow their business and adapt to
businesses in this group have taken
through government-guaranteed loan
schemes in the UK to support their
growth plans and build for the future.
This group has grown in size and the
share of SMEs in the UK planning to
grow has doubled since Q2 2020 and
has now returned to pre-pandemic
pandemic had little or no effect on their
business overall, and 9% experienced
4
Markets began to normalise
In the UK, while 2020 saw an injection of
new lending, primarily through BBLS, in
2021 a similar amount was lent to SMEs
as in 2019. However, this lending was
weighted towards the first half of 2021
as the tail-end of the government-
guaranteed loan schemes concluded.
and had to borrow in order to cover cash
flow shortfalls – typically through the
Bounce Back Loan Scheme (“BBLS”) in
the UK. This group has reduced as the
recovery gathered pace, with the share
of SMEs in the UK reporting significant
decreases in turnover halved. Similarly
in the US, the share of SMEs reporting
earning less than $500 per month is
now more than four times smaller.
1
Hedgers are those SMEs that have been
only lightly impacted by the pandemic.
They have borrowed under the
government-guaranteed loan schemes
confidence amongst SMEs increased
throughout 2021, the share of SMEs
holding cash reserves has started to
decrease. The proportion of UK SMEs
happy to use finance to meet their
growth aspirations is also at its highest
level since 2016.
2
And around 40% of
3
The economic recovery
gathered pace in 2021
2021 was another challenging year for
small businesses. In the UK, it started with
a third national lockdown, and ended with
cost pressures building on the horizon.
However, yet again, SMEs demonstrated
their resilience and ability to adapt, playing
an integral role in driving the UK economic
recovery as restrictions eased.
During the pandemic, we saw the
emergence of three broad groups of
SMEs which we’ve identified as
Survivors, Hedgers and Thrivers. These
groups were impacted by, and have
responded to, the disruption and
Survivors, Hedgers
andThrivers
Survivors are those SMEs that were
most affected by lockdown restrictions
and social distancing rules. For example,
those businesses in the retail, hospitality
and leisure sectors that have struggled
Small businesses are underserved by traditional lenders
SME loans as a % of banks’ balance sheets
5
SMEs as a % of GDP and employment
6
50–70%
<2%
1. Source: United States Census Bureau’s Small Business Pulse Survey.
2. Source: BVA BDRC.
3. Source: Funding Circle’s 2021 impact, Oxford Economics, March 2022.
4. Source: United States Census Bureau’s Small Business Pulse Survey.
5. Source: Bank of England, US Federal Reserve, FDIC.
6. Source: OECD SME and Entrepreneurship Outlook 2019.
Strategic report
Funding Circle Holdings plc
10
With lending in the second half of the
year lower than its pre-pandemic
before the market fully normalises.
The end of the Coronavirus Business
Interruption Loan Scheme (“CBILS”) in
March 2021 enabled lenders, including
Funding Circle, to reintroduce their core
loan product offerings alongside
Recovery Loan Scheme (“RLS”) loans.
We were pleased to be the first lending
platform to receive accreditation under
RLS.
Similarly in the US, having supported
14,000 businesses through the
Paycheck Protection Program (“PPP”),
we re-introduced our core loan product
and expanded our marketplace lending
2021.
The pandemic has
permanently changed how
SMEs access finance
While we expect the UK and the US
as they were before. The pandemic has
from which Funding Circle continues to
benefit.
The events of the past two years have
triggered a seismic shift in online
adoption, with 40% of SMEs increasing
their use of online banking services
across the OECD region. This trend
persisted in 2021, as SMEs continued
as the economic recovery began. 68%
going forward.
We’re also seeing increased appetite
particularly among SMEs that accessed
finance for the first time during the
pandemic and are now more
comfortable with borrowing to support
their business plans. 60% of UK SMEs
that took a Funding Circle loan in 2021
were first-time users of online finance.
In addition, Funding Circle is benefiting
from heightened expectations around
customer service and ease of access,
driven by SME online adoption. Over
borrowers say they will come back to
the platform first in future. We anticipate
borrower demand to accelerate in 2022.
The increased need among small
relationships with lenders has opened
up new opportunities, shaping the
development of new Funding Circle
products and capabilities (see page 16).
SME success remains vital
tothe economic recovery
Access to finance will continue to be
critical for SMEs as they look to invest
and grow.
In the UK, we will continue to operate
our core loan product and originate
to roll out our new products and
capabilities and expand our marketplace
offering. In the US, we will continue to
expand our core loan product and our
marketplace offering.
We look forward to supporting new and
existing SME customers, whose future
success continues to be vital to the
global economic recovery.
68%
of SMEs are looking to manage
more of their business via digital
channels going forward
96%
of SMEs wait over two weeks
40%
of SMEs expect to require finance
in the next 12 months, primarily for
growth or investment
60%
of SMEs that took a Funding Circle
loan in 2021 were first-time users
of online finance
A NEW CHAPTER
IN BUSINESS
DEVELOPMENT
David Wavre
A Great Read
David Wavre worked in publishing
before launching A Great Read in
2007, taking inspiration from book
clubs and the growth in e-commerce.
David took out a Funding Circle loan
to help meet growing demand.
As bored Brits looked for distraction
during the lockdowns of 2021, family
business A Great Read saw an
opportunity for growth. Taking out a
Funding Circle loan, it set about
improving its premises, expanding
marketing, ramping up technology
As the name might suggest, A Great
Read originally sold books. But as the
pandemic took hold, it diversified into
board games, jigsaw puzzles and
colouring books for children and adults.
The company, based in Wiltshire, also
increased its range of educational
books to support home schooling. And
with telephone support staff favoured
over automation, A Great Read enabled
customers to have “proper
conversations” with real people.
Despite fierce competition from the
online behemoths that dominate the
market, A Great Read has seen its
website turnover rise by 139%. In 2021,
leveraging its Funding Circle loan, the
company took over a large vacant
warehouse to accommodate growth
volumes, increasing capacity to almost
the company hit more than one million
sales and saw turnover skyrocket.
Annual Report and Accounts 2021 11
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTSCORPORATE GOVERNANCE FINANCIAL STATEMENTS
Technology and data
At Funding Circle, we’re reinventing small business lending
through machine learning, technology and data. By making
sure we have the technology to help our customers win,
we’realso helping to power the economies in which we work.
way we operate. And today, through a
fully automated process that caters for
loans of any size and any risk, we’re
reinventing small business lending.
Thanks to our pioneering instant
decision lending capabilities, 70% of
This means borrowers can apply for a
loan in six minutes, receive a decision in
their account in 24 hours. This
technology is world class. We’ve
achieved this while retaining a human
touch for borrowers who need it.
Reinventing small
businesslending
Over the past ten years, we’ve built the
capability for any SME in the UK to
receive an automated decision – a first
globally in SME term lending. When we
started in 2010, we were reliant on
publicly available data only and our
time, we’ve accumulated significant
amounts of data and gained extensive
insights on small businesses. By
constantly evolving our technology
infrastructure, we’ve revolutionised the
SMEs struggle to get money
from traditional sources
Lending to small businesses is
complicated. The small business
population is diverse, presenting
wide-ranging and complex risks and
significant credit exposures. SME risk
fragmented and not easy to predict.
Historically, banks have managed these
challenges by focusing on specific
segments and traditional banking
solutions – for example, targeting larger
companies with more available data,
lending to existing bank customers
underwriting. This has led to poor
outcomes for small businesses, with
restricted access to finance, high
decline rates, limited loan sizes, and
cumbersome application processes
– months of waiting and mountains of
paperwork. Around 96% of SMEs that
went to a bank first waited over two
weeks to receive a lending decision.
As a result, SMEs have struggled
funding they need to win, one that
leverages technology and machine
learning to make a real difference.
26m
businesses
in our data
lake
10+ years of
experience
2bn data
points
£14bn lent
toSMEs
8th
generation
UK risk
models
>900,000
applications
Our unique capabilities are shaped by:
Small business lending
powered by machine learning,
technology and data
Strategic report
Funding Circle Holdings plc12
We know that some businesses still
example, regarding sophisticated cases
or complex business structures.
By offering a variety of ways for
customers to interact with us, we
ensure we deliver the right experience
for the right business at the right time.
Our 4D system
Our success is based on an end-to-end
technology system that forms a key part
of our overall technology platform. It is
made up of four key components:
X Data accumulation
X Data engineering
X Data science
X Decision Engine platform
Together, these components integrate
to help us gather, manage and leverage
data to enhance our decision-making
capabilities. We call it our “4D” system
and it forms a deep moat around our
business. This moat is fully defensible
and very difficult to replicate, as we’ve
SME data over ten years of innovation
and investment.
Our 4D system
Data
accumulation
Decision Engine
platform
Data
engineering
Data
science
Annual Report and Accounts 2021 13
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
workable, digitised information. This
process involves stitching together
individual pieces of data we gather from
different sources – P&Ls, balance
sheets and bank statements – to create
a precisely structured database from
which our data scientists can work.
Data science
Funding Circle data scientists analyse
our data in order to understand its
patterns and characteristics, carrying
out the following core activities:
X Diagnostic analysis
X Pattern analysis
X Predictive analysis
X Scenario simulations
X Decision optimisation
X Back-testing
X Validation
X Monitoring
These activities help us make sense of
the data we’ve accumulated and
develop accurate statistical and
predictive models. These models,
likelihood of a customer responding to
an offer or accepting a loan. They help
us decide who we should accept from a
risk perspective, which enhances our
customer targeting.
Decision Engine platform
The brain of our platform, the Decision
Engine, is the culmination of our
technology systems and processes. It
enables us to leverage our predictive
models to make accurate and optimised
decisions, in real time. The Decision
Engine is the bridge between our
machine learning and the borrower,
helping us utilise the insights we’ve
best software and solutions.
Taking the complexity out of the
borrower experience, it determines what
the borrower needs to see in order to
interact with Funding Circle. The
Decision Engine generates bespoke
truly personalised customer journey.
Here’s how the 4D
systemworks:
Data accumulation
Our system begins with learning, which
we achieve through data collection and
creation. This data is a combination of
publicly available data and bespoke data
we generate through customer
engagement and analysis. Leveraging
this accumulated data, we’ve created a
with information about customer
engagement and their behaviours
around taking on and repaying loans.
This vital evidence underpins and
informs our technology developments
and decisions.
Data engineering
To make accurate risk decisions, a huge
amount of data needs to be ingested,
cleaned, managed and maintained.
Thanks to our data engineering systems
and tools, we’re able to do this at speed,
time, and channelling it into our data
lake. We then convert this data into
Technology and data continued
Data science
Data lake
AI-powered decisions
Pattern analysis
Predictive analysis
Back-testing
Validation
Accurate statistical and
predictive models
Enhance our
customertargeting
Personalised
experience
Strategic report
Funding Circle Holdings plc14
Driving value and deepening
engagement
Through the transformation of our tech
infrastructure and systems, we’ve
than any other platform lender. This
information means we can conduct
granular customer risk analysis, leading
to improved risk models, better
understanding of credit performance
and smarter decisions. In addition, our
4D system allows us to gather, manage
and leverage data to enhance our
decision making.
This world-class system powers the
Funding Circle flywheel which drives
innovation, improvements and a
competitive advantage.
For borrowers, this means we provide a
seamless experience, enabling speed,
increased customisation. The feedback
loop results in strong customer
satisfaction scores and higher repeat
rates.
For investors, this mean we provide
positive and secure returns. And it also
helps us to grow alongside our
customers, all part of a virtuous circle
so that we can continue to meet the
finance needs of hundreds of thousands
of SMEs.
Scalability, agility and speed
At Funding Circle, we’ve built our
technology systems to be scalable,
flexible and fast. We use our Decision
Engine and machine learning capabilities
to operate multiple automated customer
and product journeys via decision tree
configurations. The system interrogates
the data at each step of the process to
determine the next step for the customer.
This means we can handle a wide range
of existing customers, while leveraging
our platform to create completely new
types of funding products.
Our technology infrastructure also
provides us with the flexibility to
constantly test new ideas and ways of
working. We learn, pivot and adapt to
help solve more funding problems for
small businesses, innovating in a
continuous feedback loop to drive
improvements in all areas.
And while we’ve always been a fast-
moving organisation, the pace of
innovation at Funding Circle is faster
today than it has ever been. With our new
technology platform, we now have the
capability to build three to four different
product propositions concurrently. This
data, which helps reduce the time it takes
our engineers to get completed code into
production, in turn, accelerating
development and deployment.
Investing in our technology
capabilities and culture
In 2021, we continued to invest in our
technology capabilities. We grew our
tech teams to ensure we can meet the
needs of SMEs across multiple
products and channels. Specifically, we
focused on bringing in senior
technology leaders to drive our scaling
activities, honing our engineers’
capabilities and tools, and investing in
data engineering. We also embedded
site reliability engineers into our delivery
groups to enhance the testing and
delivery of code.
What’s really exciting is that we’re still at
the early stages of what we can do with
this technology. Our journey to 2024 will
see hundreds of thousands of SMEs
using Funding Circle to meet their
borrowing and business finance needs,
through a rich ecosystem of solutions.
Our multi-product proposition will cater
different depths of interaction and
experience (see page 16).
In 2022, we will invest further in data
analysts, scientists and strategists,
while also making significant
investments in data security. Above
commitment of building a genuine
technology and data-focused culture,
not just within our tech teams but
across the Company as a whole.
Marketing optimisation
Together, these processes
and components lead to:
Increased conversion rates
Strong investor returns
Long-term customer
engagement
Predictive models lead to accurate
targeting and relevant offers; this
ensures our marketing is effective
and efficient, so we don’t waste
time, energy or money.
Targeted offers, informed by
predictive analysis, increase the
likelihood of converting leads
Through careful customer
we’re able to ensure a good return
on investment.
By personalising the customer
experience, we increase the
likelihood of repeat borrowing and
product use, leading to deeper and
longer-term relationships.
80–90 NPS
in the UK and the US
Annual Report and Accounts 2021 15
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
CREATING NEW PRODUCTS
TOHELP SOLVE MORE
FUNDING PROBLEMS FOR
SMALL BUSINESSES
We’re constantly innovating and developing our technology to deliver easy,
fast and flexible funding solutions to small businesses. In 2021, we beta
launched an exciting new product, FlexiPay, and new capability enabling
partners to offer Funding Circle loans within their own website via an API.
Our new short-term finance product,
FlexiPay, and embedded finance
solution are part of our strategic shift
towards a multi-product, multi-channel
proposition. Our ambition is to offer a
broader set of products that cater to
depths of interaction and experience.
We see a future whereby we’re able to be
a more meaningful part of our
customers’ lives – supporting them
daily, weekly and monthly as they
borrow, pay and spend.
FlexiPay
than ever before. Increasingly, they need
to transact at much shorter notice and
engage with lenders on a just-in-time
basis. They also need to manage and
control their cash flow and adapt to
changing and challenging
circumstances – as seen during the
pandemic, which created a wave of
purchases, investments and capital
deployments among SMEs.
FlexiPay, the first short-term finance
product offered by Funding Circle in the
UK, is designed to meet these evolving
solution that empowers small businesses
to control their own payments on any
expense, anywhere.
FlexiPay enables businesses to spread
any UK invoice or supplier payment over
three months, with the initial payment
made upfront on their behalf. It gives
SMEs greater flexibility to negotiate with
suppliers, deal with unexpected payments
and cover ad-hoc business costs.
Flexibility and control
Businesses can apply within minutes for
a credit facility of between £2,000 and
£50,000. Approved customers can
access their funds almost immediately,
to make payments to suppliers of £100
and over.
3% flat fee on each transaction, with no
interest or uncertainty about what they
suppliers are confidential and made in
the business’ name, so there’s no sign of
external assistance.
Helping to smooth expenses into cash
flow, FlexiPay can help businesses
obtain discounts with their suppliers for
timely or early payments and, in some
cases, ultimately lower the overall costs.
And unlike a term loan, it can be used as,
when and how a customer wants.
A closer customer relationship
FlexiPay creates a more intimate
relationship between the customer
Putting us closer to the actual
transaction needs of small businesses,
interaction, helping us build deeper
relationships on a “borrow-pay-spend”
basis – relationships that should
encourage higher repeat rates over time.
We launched FlexiPay in beta in
September 2021 to a selection of our
existing customers in the UK. Following
hugely positive feedback, at the end of
2021 we expanded our efforts to make
the product available to more existing
customers. Early this year we launched
FlexiPay in beta to new customers and
plan to roll the product out further in 2022.
FlexiPay Card
As the next stage of the FlexiPay roll-out
in the UK, we’re also developing a
business charge card, to help
businesses settle monthly payments
and meet daily expenditure needs.
FlexiPay Card will enable small
businesses to spend money for up to 30
days interest free, with 1% cashback for
those which repay their balance at the
end of the month. Card bills can also be
rolled over into a three-month FlexiPay
credit, providing an additional layer of
flexibility. We opened the FlexiPay Card
wait list in late 2021. We expect to
launch the product to a selection of our
existing customers by the end of 2022,
following the roll-out of FlexiPay in the
first half of the year.
Strategic report
Funding Circle Holdings plc16
New products and capabilities
BORROW
SPEND
PAY
I applied for FlexiPay because customers were paying
me late, which meant I was short on cash flow. I like the
product as it helps me pay suppliers on time, keep a good
reputation and manage cash flow. The application
process was straightforward and it only took a few
minutes to complete. I’d be happy to recommend
FlexiPay toothers.
Carl Whetstone-Veitch,
Annual Report and Accounts 2021 17
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
FLEXIPAY:
Enables businesses to spread
any UK invoice or supplier
payment over three months, with
a one-off 3% fee, interest free.
Businesses can apply
almost immediately.
FLEXIPAY
CARD:
Enables businesses to pay
The card gives one month of
set-up fees.
Businesses can apply online
within minutes.
EMBEDDED
FINANCE:
Enables partners to offer
Businesses can apply
almost immediately.
Embedded finance solution
Funding Circle is at the stage of maturity
now where we can enable external
partners to tap into our technology and
machine learning for the benefit of their
customers. As a sign of our confidence in
strength of our technology platform, in
December 2021 we launched a new
embedded finance solution in the UK. Via
a newly created Application
Programming Interface (“API”), partners
can now natively embed Funding Circle
into their own websites, providing
customers with fast and seamless
access to small business loans. This new
solution provides partners’ customers
with a frictionless way to apply for a loan
of up to £500,000 in minutes, receive a
decision in seconds, and have money in
The business finance platforms Funding
Options and Capitalise.com were the
first to integrate with the new Funding
Circle API, providing a blueprint for
additional partnerships expected in
2022 and beyond.
And in the US, we will be launching our
Lending as a Service (“LaaS”) partnership
programme with banks and other large
SME providers who are looking to leverage
our technology platform to provide small
business loans to their customers.
Enabling a myriad of use cases and
integrations, this pipeline will form part of
embedded finance that’s predicted to
1
. The market is expected
to experience significant growth due to the
increasing availability of APIs and their
Increased reach and range
The embedded finance solution enables
Funding Circle to shift from being a
those places where our customers
organically transact. In this way, it helps
to ensure we’re offering the right product
to the right business at the right time.
referral proposition to more
online-driven partnerships.
By expanding our offer through partner
platforms, we’re extending Funding
Circle’s reach and exposing more
customers to a broader range of
services, giving them the just-in-time
digital interactions they desire, and
helping them access the funds they
need to win.
I signed up to FlexiPay as I had a payment due to a supplier and it
allowed me to buy extra supplies which I needed. FlexiPay is one of
the best ideas for small businesses and I will definitely be using it on
an ongoing basis and telling people about it. It is really clear how
repayments work and how much I owe.
Paul Teather,
Director of P&W Waste Solutions
New products New capabilities
Strategic report
Funding Circle Holdings plc18
New products and capabilities continued
Kai Price and Amanda Nelson
Att Pynta
Att Pynta is a Scandinavian-inspired homeware brand
founded by Kai Price and Amanda Nelson, who used a
government-backed Funding Circle loan to boost their
working capital.
Founded in 2014, Att Pynta curates homeware collections from makers, designers and
artisans from across Scandinavia and the UK. The focus is on pieces that are timeless,
sustainably produced and made to last a lifetime. In addition to a showroom in London,
Despite the initial challenges of lockdown, as people started working remotely their
Pynta and the business had to adapt, outsourcing to a warehouse and scaling operations.
The homeware brand also started offering appointments over FaceTime to talk through
customer needs and showcase items from the showroom. Att Pynta is now using a
looking to maintain growth and leverage momentum.
DECORATIVE
DETAIL
SUPPORTING BUSINESSES
Annual Report and Accounts 2021 19
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
A new period
of transformation
Strategic priorities
We’ve achieved great things over the
past ten years, building the capability for
any SME in the UK to receive an instant
lending decision – a first globally. But
we’re always looking at what we can do
next to delight our customers and help
them to keep on winning.
Despite our strong position, there
explore further – namely, expanding
conversion rates and deepening
customer engagement.
medium-term plan is designed to help
us grasp these opportunities. Our most
ambitious plan to date, it defines our
strategic priorities and marks the start
of a new and transformative period for
Funding Circle.
The new medium-term plan is based on
three strategic pillars:
X Attract more businesses
X Say yes to more businesses
X #1 in new products
And is underpinned by three core
foundations:
X Technology and data to enable
innovation at pace
X Scalable products and processes
X High-performing teams executing
brilliantly
By delivering on our strategic priorities,
we will transform Funding Circle into a
multi-product, multi-platform Company.
Strategic pillars
The strategic pillars are the three
Attract more businesses
Strengthen direct and indirect
channels, and embed natively in more
partner environments to attract
businesses at the right time.
We’re working on a number of areas,
including growing and improving our
existing distribution channels, and
leveraging our market-leading
technology. We’re particularly excited
about embedding our services into
partners’ environments in both the UK
and the US.
In the UK, we’ve created a new
capability to enable partners to
seamlessly offer Funding Circle loans to
We are in a strong position
Consistently
highcustomer
satisfaction with
market-leading
NPS
70% of UK
applications now
receiving instant
decisions
Market
leadership
position in
the UK
Increase in
online adoption
and new data
sources
(Open Banking)
Strong and
diverse funding
relationships
In 2021, we continued to deliver on our mission of
building the place where small businesses get the funding
they need to win. To support this mission and our next
phase of growth, during the year we developed our new
medium-term plan.
Strategic report
Funding Circle Holdings plc20
the US, we’re developing our Lending as
a Service (“LaaS”) proposition.
Through these developments, we’re
deepening key relationships and
increasing our distribution potential. It’s
extend our reach and attract more
businesses in the UK and the US.
Say yes to more businesses
Develop a broader set of solutions,
personalised to customers’ needs, so
we can support more businesses.
We aim to enable deeper and broader
market integrations to deliver the right
product to each applicant. We’re
creating an expanded set of Funding
Circle term loans, supported by a
diversified funding base including banks
and asset managers. We’re also
expanding our marketplace offering,
connecting borrowers with other
lenders in the market, offering further
products beyond our current range,
such as larger loans, asset finance and
invoice finance.
#1 in new products
Empower small businesses to not only
borrow, but to pay and spend as well.
In 2022, we will continue the roll-out of
FlexiPay, which enables businesses to
spread any UK invoice or supplier
payment over three months. It will be
made available to all existing customers
and new business prospects in the UK.
We will also launch FlexiPay Card in the
UK to help SMEs settle monthly
payments and meet daily expenditure
needs. We expect to launch to a
selection of our existing customers by
the end of 2022, following the roll-out of
FlexiPay in the first half of the year.
Core foundations
The core foundations are the primary
enablers that will drive the delivery of
our strategic pillars:
Technology and data to enable
innovation at pace
Through ongoing investment in
technology, we aim to continually
improve our capacity to develop
execute our strategic priorities.
We will also continue to develop our
data-centric culture and invest in the
right tooling to enable advanced analytics.
Simultaneously, we will enhance our
automation by increasing support for
data producers and analysts, ensuring
they can curate and leverage data to
optimise value for customers.
Scalable products and
processes
Our aim is to lend, service, partner and
innovate at scale for our customers.
Over the next three years, we will
continue to focus on putting the right
processes and capabilities in place
at scale efficiently, while remaining
These efforts will ensure we deliver the
medium-term plan with improved cost
management, increased operational
agility, enhanced predictability and
greater, more efficient scaling potential.
High-performing teams that
execute brilliantly
On our journey to 2024, we will continue
to attract, retain and develop high-
performing teams that have the
knowledge and skills to enable fast
delivery for our customers. We want to
ensure we have the right talent and
capabilities to deliver on our strategic
goals, while continuing to maintain our
process will involve:
X Building for the future: ensuring our
organisational structure works and
supports our future multi-product
model
X Building skills for success: defining,
and capabilities to deliver our
X Building the Incredible: evolving our
compelling Circler proposition to
ensure we successfully compete for
and retain top talent
S
c
a
l
e
p
r
o
d
u
c
t
s
a
n
d
Attract more
businesses
Say yes
tomore
businesses
#1 in new
products
p
r
o
c
e
s
s
e
s
e
f
f
i
c
i
e
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Annual Report and Accounts 2021 21
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Our model
How we create value
Borrowers
Small businesses can access fast,
affordable finance through our
core loan product and new
product, FlexiPay.
Our borrower base is highly diversified across
regions and industries, which helps to deliver
stable returns and mitigates the effects of
adverse economic conditions.
C.120,000
borrowers globally since 2010
Marketplace borrowers
By connecting borrowers with
other lenders in the market, we
offer further products beyond our
current range, such as larger loans,
asset finance and invoice finance.
Typical businesses
thatborrow through
theplatform:
X 11 years’ trading history
X Eight employees
X ~£1 million revenue
X ~£80,000 loan size
X 50 months’ average term
X Six-minute application and
See page 16 for more on our new products.
We continue to demonstrate the resilience of our
unique model and remain the preferred way for
SMEs to access finance.
More
customers
More
data
Better
machine
learning
models
Better
customer
experience
More
operating
leverage
New
products
Strategic report
Funding Circle Holdings plc22
Investors
Investors can earn resilient returns
Our original innovation ten years ago opened up the SME
asset class to investors. The platform model enables
investors to make incremental investments, and our
investor base is deep, diverse and stable, including a
wide range of institutions and public bodies:
X 48% asset managers
X 35% banks
X 8% bond programme
X 5% retail funds
X 3% national entities
X 1% funds
Value created
For borrowers
We provide SMEs with fast, flexible,
customer experience using machine learning,
technology and data. This means they are free
business while contributing to the local
community and economy.
For investors
We provide investors with access to an
attractive asset class, previously mostly held
importance to economies.
For employees
Our employees have the opportunity to
impact on a huge societal issue. To help them
achieve this, we’ve created a culture dedicated
to learning and the personal growth of everyone
who works here.
£2.5BN
investor capital raised in2021
5.0–6.0%
expected investor returns for loans
originated in the UK in 2021
86%
would recommend Funding Circle
asaplace to work
£14BN
lent to businesses
Funding Circle
How we make money
As a company, Funding Circle makes money in
two principal ways:
Operating income
X Transaction fee income from the fees we
charge borrowers
X Servicing fee income from the fees we
charge investors
Investment income
X The net interest income on loans invested
within Funding Circle’s investment vehicles
Annual Report and Accounts 2021 23
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Our people
Building an incredible place
towork and learn, together
In 2021, the working lives of employees around the world continued to be
impacted by the pandemic restrictions. We therefore continued to prioritise
the health, safety and welfare of our Circlers. By listening to our people and
responding to their needs, we introduced a “best of both” hybrid working
model to support life in the “new normal” at Funding Circle.
Strategic report
Funding Circle Holdings plc24
Protecting the mental health
and wellbeing of Circlers
In 2021, we continued to enhance our
people promise, Build the Incredible.
Having seen the power of culture and
community during the pandemic, we felt
it was important to maintain and
strengthen who we are. In particular, we
realised that supporting mental health
and wellbeing is critical as the
boundaries between work and life
become blurred.
We therefore offered increased support
to Circlers, including a professional
mental health and wellbeing service.
our management population. And we ran
panel discussions with senior leaders
about their own wellbeing journey,
helping to break down the barriers
More broadly, ensuring our managers
they need to look after their teams is
crucial. To this end, we continued to
develop our manager programme, with
new modules to support hybrid working.
We also delivered our first-ever leadership
development programme. The three-
month scheme, designed to hone
leadership capabilities, was devised
using direct feedback from our leadership
population and deployed through
one-to-one coaching, training, peer
learning and informal leadership “cafés”.
We’re very proud of our managers and
leaders at Funding Circle. Their centrality
to our culture and success is reflected
in the consistently high leadership
scores we receive in our Circler
engagement surveys.
Enhancing diversity, equity
andinclusion
We want to ensure our Company is a
place where everyone feels they belong
and can give their best. In particular,
we’re committed to promoting gender
our gender pay gap is now at its lowest
level to date. Our mean pay gap has also
fallen to 18.5% and the median to 27.1%.
We focus on recruiting and retaining
senior female talent, as evidenced by the
increased proportion of women in senior
leadership positions, which is now at
34%. We also place a strong emphasis
on developing our internal talent. We
believe these commitments are key to
driving long-term change across the
industry, given the historical under-
representation of women in this area.
We continue to invest in our people,
focusing in particular on creating a safe,
open and inclusive working environment
where everyone can be themselves.
We’re extremely grateful for our
employees’ unwavering commitment
during the challenges of the past two
years. Their efforts and achievements
have helped us understand more than
ever that our culture is one of our greatest
assets. We’re stronger together. It’s
certainly something our Circlers believe,
as they showed in our 2021 annual
engagement survey, which recorded the
highest scores we’ve ever seen.
Introducing a new
hybridmodel for working –
thebestofboth
Throughout the year, we considered
what the post-pandemic world might
mean for our people, and for life at
Funding Circle. In keeping with our
values, we did not pretend to have all the
answers and engaged directly with
Circlers to elicit their views on the future
of work. Employee ideas and opinions
were therefore central to the
development of our new working model,
just as they are critical to our Circler
proposition, Build the Incredible.
From the surveys and feedback
sessions we conducted, it was clear
Circlers wanted more flexibility in their
working lives. At the same time, views
on the pros and cons of remote working
were evenly split. While many said they
appreciated the advantages of working
remotely, others placed great value on
the creative and collaborative
interaction that occurs in our offices.
We therefore set out to combine the
“best of both” in our new working model.
The new model empowers each Circler
to work flexibly in a way that delivers the
best of both for themselves
professionally and personally, and the
best of both for Funding Circle too. Our
physical workspaces remain important
to us, but we want Circlers to work
dynamically in a way that makes sense
for them and their team. Our time is now
split between remote and office
working, in whatever way works best for
both Circlers and their teams in any
given week.
Empowering flexibility is at the heart of
this model, a model we’ll continue to
test, iterate and evolve during 2022.
Pay gap
%
2021 27.1%
2020 32.2%
2021 18.5%
2020 21.4%
Mean pay gap
Median pay gap
All Circlers
2020:
41% Female
Senior Management
2020:
33% Female
Global Leadership Team
2020:
38% Female
Group Board
2020:
20% Female
Gender breakdown
as at 31 December 2021
Annual Report and Accounts 2021 25
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Our people continued
Enhancing diversity, equity
andinclusion continued
At Funding Circle, we want our Company
to be as diverse as the small businesses
we serve and the communities in which
we operate, both of which are at the
heart of what we do.
Over the past two years, we’ve come
culture can be. By taking steps to
support our culture, we know we can
realise our potential.
One of the biggest developments has
been the further empowerment of our
and Inclusion (“DEI”) team, they have been
a major driving force for positive change
in the Company. We currently have five
main Circler-led groups engaging and
delivering initiatives they believe are
important. In 2021, such initiatives
included educational sessions on LGBT+
rights and prejudice at work, celebrations
of Black History Month and Pride Month,
and a stem cell donor initiative, to name
but a few. We also continued our
mentorship programme for
schoolchildren with Future Frontiers.
In addition, all groups collaborated on a
series called “Open Circle”, a discussion
OUR CULTURE
BUILDING A
LEARNING CULTURE
One of the key goals of our Circler promise is to embed a learning mindset across the
business and create a “career accelerator” for our people. We believe everyone
should have the opportunity to learn, grow, develop and pursue the skills and careers
they want. To support this goal, we provide best-in-class training to all Circlers
through our internal learning platforms and our peer-to-peer network, FC Academy.
Circlers also receive an annual learning allowance, enabling them to pursue training
and development opportunities, alongside our formal professional training policy.
In addition, it’s important our working environment cultivates and nurtures a learning
mindset. Circlers join us at different stages of their careers. For many, this is their first
professional role, while others have been working for several years. As a result,
Circlers are given the opportunity to gain valuable experience from each other and to
learn on the job. We also have an active apprenticeship programme to provide young
people with alternative routes to employment.
OUR VALUES
Think smart
Challenge assumptions, seek
insights and make informed
decisions. Everyone has a voice,
Make it happen
Be courageous and take ownership.
Take small steps fast and commit to
seeing it through.
Be open
Treat everybody with respect and be
honest with each other. Transparency
and integrity build trust.
Stand together
Listen, understand and support each
other. Win or lose as one.
Live the adventure
Bring your passion with you every
morning and have fun.
Strategic report
Funding Circle Holdings plc26
forum with diversity champions where
panels openly discuss challenging
Our policy for the employment of
opportunities to develop skills and
secure roles relevant for them and their
career ambitions. This includes making
reasonable adjustments to the workplace
to support this. Our recruitment process
ensures all applications, including those
from disabled persons, are treated
We’re incredibly proud of the inclusive
environment we’ve created. Our Circlers
feel the same: 86% believe people from
opportunities to succeed at Funding
Circle, with 83% telling us they feel
respected and can be themselves at
work. We also reported 73% engagement
in 2021, the highest ever reported at
Funding Circle.
We believe our culture and talent are
true differentiators and while there is
always more we can do, we remain fully
committed to building an incredible
place to work and learn.
CIRCLER-LED GROUPS
OUR DEI STATEMENT
We’re here to Build the Incredible at Funding Circle. We know we can only achieve this
through an inclusive and diverse culture where Circlers of all backgrounds feel
confident in bringing their whole selves to work, where they can contribute their ideas,
have opportunities to be successful and their talents nurtured. Through empowering
our people we are not only building something incredible for our customers, but an
incredible place to work too.
We live by our Company values and cherish our diversity, whether that relates to
culture, gender, race and ethnicity, sexual orientation, gender identity and expression,
disability, marital status, age, nationality, religion, thought, belief, experience or
expression. We Stand Together, as one.
GROWING DEI
FROM WITHIN
Fanni Vilmanyi,
Learning & DEI Lead
at Funding Circle
I’m lucky enough to have watched Funding Circle grow from a young start-up
to the exciting company it is today, while keeping its tight-knit, inspiring
DEI can often be viewed as a box-ticking exercise; all too often this results in it
becoming PR focused, rather than an intentional effort to foster inclusivity and
progress. So it’s a breath of fresh air to see Funding Circle genuinely growing DEI
from within, with our Circlers taking a grassroots approach.
Three and a half years ago, I joined the People Operations team not recognising
within myself the need to champion marginalised communities. I soon
discovered the magic of our Circler-led groups and I’ve never looked back. I
craved to make an impact through these groups both inside and outside of
Funding Circle. Over time, volunteering, fundraising, educational awareness and
building an inclusive workplace with Funding Circle became so integral to my
everyday life that I turned these activities into my professional career!
be their authentic selves at work, new Circler groups popping up full of driven
people who want to drive positive change, and all our leaders backing our efforts
wholeheartedly. I’m proud to say I belong at Funding Circle.
Women @FC
To help Funding Circle be the best
FinTech company for women to
Let’s talk about Race
To break the silence and remove the
taboos about Race.
Circle of Pride
To champion an inclusive workplace
for all through an LGBT+ lens.
FC Impact
To come together and give back.
Parents @FC
To provide a safe space and a
network for parents.
Annual Report and Accounts 2021 27
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
XBegan to implement our
approach to ESG Risk
Management
• Integrated ESG components
into our risk taxonomy
• Conducted a preliminary
ESG risk assessment
• Established baseline internal
ESG management
information and reporting
XBecame a signatory to the
UN-supported Principles
for Responsible
Investment (“PRI”),
focusing in particular on
private debt
XBecame a signatory
inFebruary 2022 to the
UN Global Compact to
formalise our alignment
with the Compact’s
TenPrinciples on
humanrights, labour,
theenvironment and
anti-corruption
XProgressed our carbon
strategy, gaining support
from a leading climate
industry expert,
progressing our journey
to understanding our full
carbon footprint and
offsetting our operational
emissions for the first
time for 2020
XBegan a strategy review
to better understand the
commercial landscape for
ESG-related products and
customer-facing
initiatives
XConducted employee
engagement surveys
regarding our social
impact programme
Strategic report
Funding Circle Holdings plc28
Sustainability
Building a sustainable business
The integration of a robust environmental, social and governance
(“ESG”) framework within Funding Circle’s business is key to
achieving our mission and strategic objectives. We continue to
strengthen our ESG best practices to improve stakeholder support
and increase shareholder value.
framework in 2020, formalising our
approach to ESG integration within our
ERMF and in our day-to-day operations.
Our efforts to implement our ESG
framework are focused around four key
areas: carbon strategy; social impact;
governance and risk management.
ESG framework
In 2019, our Board established the Funding
Circle ESG framework to determine how
we could contribute to the creation of a
sustainable low-carbon economy, and to
continue establishing a more diverse and
inclusive working environment. The Board
approved the expansion of the ESG
We acknowledge the need for urgency
in addressing ESG-related issues in
society. But we are also conscious of
the inherent complexity of these issues
and the challenges of putting in place
robust practices to deliver positive
outcomes. We will continue to pursue
such outcomes through our ESG
framework, while reviewing our goals
and performance on an annual basis.
Funding Circle’s corporate culture and
values, strong governance practices
and robust Enterprise Risk Management
Framework (“ERMF”) drive our approach
to ESG. In 2021, we focused on
developing our climate reporting to the
standards set out by the Task Force on
Climate-related Financial Disclosures
(“TCFD”), specifically our reporting
related to governance, strategy, risk
management, metrics and targets and
social impact. As part of our carbon
strategy, for the first time ever we offset
our operational carbon footprint –
relating to our 2020 CO
2
emissions –
through carbon credit projects. We also
continued to enhance our diversity,
In 2021, we began to implement our approach to ESGrisk
management, made progress on our carbon strategy, added
toour voluntary membership commitments to help inform our
ESG practices and began to build on our approach to supporting
positive and sustainable social impact. As part of this process, we:
OUR ESG ROADMAP
Annual Report and Accounts 2021 29
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Other
X Women in Finance Charter: signatory since 2018
X Member of FTSE4Good Index
2019
2020
2021
X Board established the Funding Circle
X
framework and set up Board-level ESG Committee
X Our carbon strategy includes plans for achieving
carbon neutrality for our operational boundary
emissions by 2023 and net zero by 2030
X Began to implement our approach to ESG risk
management and focused on developing our
climate reporting to the standards set out by the
Task Force on Climate-related Financial
Disclosures (“TCFD”)
X Became signatory to the Principles for
Responsible Investment (“PRI”)
X Carbon strategy: started work with external
provider to support the verification of our Scope 1
and 2, and Scope 3 (business travel and waste)
GHG emissions, with the aim of reaching carbon
neutrality for our operational boundary emissions
by 2023
X Carbon strategy: for the first time we offset our
operational carbon footprint (relating to our 2020
emissions for Scope 1 and 2, and Scope 3
(business travel and waste), through carbon credit
projects (for 900 tCO
2
e)
X Social impact: conducted employee engagement
X
2022 and beyond
X
X Intention to produce an annual carbon transition
plan mapping our journey to net zero by 2030
Task Force on Climate-related
Financial Disclosures (“TCFD”)
Funding Circle remains committed to
the full implementation of the TCFD
recommendations, with the goal of
enhancing our understanding of the
risks and opportunities presented by
climate change and of keeping our
stakeholders fully informed about such
risks and opportunities. In addition to
the TCFD disclosure included in this
recently announced by the UK
Government, from 2022 Funding Circle
intends to produce an annual carbon
transition plan mapping our journey to
net zero by 2030. Our strategy sets
ambitious but achievable goals designed
to address our environmental impacts,
including through targeted carbon
reduction and offsetting strategies
across our value chain, which we plan to
develop further in 2022 as part of our
carbon transition plan.
Strategic report
Funding Circle Holdings plc30
Sustainability continued
Task Force on Climate-related Financial Disclosures (“TCFD”) continued
The following table sets out Funding Circle’s current TCFD disclosure, including those areas in which we will look to more
consistently align with the TCFD recommendations during 2022 and beyond.
Governance Disclosure
Describe the Board’s
oversight of climate-
related risks and
opportunities
The Board retains ultimate responsibility for providing the strategic focus, support and oversight of the implementation of the
Group’s ESG strategy, including climate change-related risks and opportunities.
The Board delegates certain matters to the ESG Committee, including management and oversight of the Group’s ESG strategy
Committee member Board champion. These Board champions work with the Global Leadership Team (“GLT”) and other senior
leaders in the business to progress the Group’s ESG strategy and framework.
The Board and the ESG Committee have substantial and varied experience with ESG related issues, and climate change in
particular. Within the ESG Committee, Matthew King is the Board champion in connection with our carbon strategy and brings
experience as a Non-Executive Director of other more resource intensive industries where climate-change is of critical focus.
Within the wider Board, Eric Daniels has been on the Advisory Board of the Smithsonian Tropical Research Institute (“STRI”) for
the past ten years. STRI is recognised as one of the premier scientific institutions in the fields of tropical life sciences and
sustainability. Eric Daniels has also been an active supporter of the Atkinson Center for Sustainability at Cornell University. Geeta
Gopalan currently also serves as Non-Executive Director and Chair of the risk committee for Virgin Money plc where she has
gained substantial experience in respect of ESG related risk management, including climate related risk in the banking sector.
We have also sought expert advice on our carbon management strategy and provided presentations to the ESG committee
through internal and external providers to increase their awareness and understanding of our carbon strategy as well as more
technical topics such as carbon foot printing and offsetting. The Board has reviewed and approved our ESG framework and a
formal carbon strategy.
Please also see “Risk management” on pages 51 to 54, “Principal risks and uncertainties” on pages 55 to 56, the report of the
Risk and Compliance Committee on page 92 and the report of the ESG committee on page 93 for more information on Board
oversight of climate-related risks, the ESG Committee of the Board, and incorporation of these risks in Principal Risks within our
Enterprise Risk Management Framework (“ERMF”).
Describe management’s
role in assessing and
managing climate-
related risks and
opportunities
The GLT is responsible for implementing our ESG framework, with direct management responsibility held by our General
Counsel. ESG risks are directly supervised and managed by the leadership team of each Business Unit and reviewed at the
Executive Risk Committee. A working group of senior leaders and other Circlers is responsible for the implementation of our
environmental and carbon strategy on a day-to-day basis.
In late 2021, we began a strategy review to better understand the commercial landscape for ESG-related products and
customer-facing initiatives, including business opportunities related to climate change. Please also see “Remuneration” on
page 96 for more information on how climate-related factors are considered as a component of executive compensation.
Strategy
Describe the climate-
related risks and
opportunities the
organisation has
identified over the short,
medium and long-term
In 2021, we carried out a risk assessment of climate-related risks and opportunities over the short (one year or less),
X Reputation:
X
products, or increases in carbon offset or transition costs may adversely impact the business
X
X Credit:
X Credit:
X
acute or chronic adverse environmental events
Opportunities (short to medium-term)
X
X
neutrality and net zero, in 2022 we also will develop a carbon transition plan that will look at opportunities related to a reduction
Annual Report and Accounts 2021 31
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Strategy continued
Describe the impact of
climate-related risks and
opportunities on the
organisation’s
businesses, strategy
and financial planning
To date, the impact of climate-related risks and opportunities on our business and strategy has been limited and our efforts in
this regard are at an early stage and limited in scope.
The financial impact on our business of climate-related risks and opportunities has been limited, as has the budgeting and
financial planning impact. The financial impact primarily relates to fees and costs linked to carbon foot-printing and
verification, neutrality certification, offsetting and reporting. These costs are likely to increase in future (in particular in
respect of emissions reductions or offsets related to Scope 3 emissions), however, we do not believe they will be material in
the short to medium-term and we have yet to carry out a detailed forecasting of these costs.
We are in the process of carrying out a commercial strategy assessment in respect of climate-change related opportunities,
which we expect to complete in 2022; however, to date climate-change related opportunities have not been considered a
material opportunity in respect of business strategy or financial planning, and we do not expect such opportunities to form a
material component of the business strategy in the short to medium-term. We assessed the materiality of climate change
related impacts to Funding Circle using a risk classification matrix to prioritise, classify and escalate risks and issues. The
matrix assesses risks by evaluating the likelihood and impact. It assesses controls by evaluating design and effectiveness.
The classification matrix is applicable to all risk types and risk issues with a detailed methodology for the score computation.
Ultimately, risk exposure is reduced by the control sufficiently such that residual risk is considered to be within risk appetite.
This methodology ensures a consistent approach to rating and prioritising key risk exposures across the Company. We
applied a simple rating of low, medium or high in regard to materiality, impact and likelihood to cause an actual or potential
material negative impact on Funding Circle’s financial performance or reputation. To date, our materiality assessment of
Describe the resilience
of the organisation’s
strategy, taking into
consideration different
climate-related
scenarios, including a
2°C or lower scenario
We have not yet carried out a detailed climate-related scenario analysis. We have started to engage with external advisers
regarding market practice and standards related to such scenario analysis and will continue to review this during 2022.
Qualitatively, we believe our strategy should be resilient under different climate-related scenarios, including a 2°C or lower
scenario. Given the nature of our business, we believe that the longer-term risks identified in connection with more severe
climate-related risk scenarios are not currently material considerations for the business in light of our relatively short to
medium-term time horizons. Our online platform model allows us to have a limited physical presence, and our relatively
short-term and data-driven products allow us to implement changes to our products, credit strategy, marketing and
or assist in the transition of, impacted industries. Our loan products are relatively short in duration (with a maximum term of
up to six years and, given the effects of portfolio composition by term, loan size, defaults and prepayments, our portfolio of
loans under management has a weighted average life of approximately 10 to 24 months, varying by product type and vintage
year of origination). In addition, our loan products are unsecured; therefore, we do not currently focus on certain longer-term
climate-related risks, including physical risks that could adversely affect various forms of security, such as real estate, or
which are currently beyond our strategic or risk planning time horizon.
Our SME borrower customer base is comprised of a large number of borrowers in connection with loans of relatively small
size (i.e. is highly granular), broadly distributed by industry sector and geography, and largely not in industries considered as
significantly affected by transition risk or physical risks. Given this lack of concentration risk, except in extreme scenarios, our
overall borrower portfolio should be resilient to transition risks, such as increased costs or regulation, or the localised or
regional impacts of physical risks. Lastly, we draw on a diverse pool of investors to fund our loan products and we are able to
Risk management
Describe the
organisation’s
processes for
identifying and
assessing climate-
related risks
Our ERMF describes our risk management approach and supports clear accountability for managing risk across the
Company. A core principle of our ERMF is that all Circlers are accountable for identifying, escalating and debating the risks
we face. Currently, ESG-related risks, including climate-related risks, are incorporated in our ERMF as a strategic risk, owned
by the CEO, and adhere to the “evaluate, respond and monitor” format described on page 54. In 2021 we reviewed our ERMF
risk appetite statement and risk taxonomy regarding environmental risks. We identified climate-related risks within our
existing principal risk areas, primarily related to funding, strategy, reputation, and credit risk. We conducted working sessions
to assess the risks and opportunities that could impact the business in the short, medium and long-term. These sessions
helped to inform our views on the applicable materiality for each impacted category, and to align with relevant ESG disclosure
standards, in particular TCFD.
Describe the
organisation’s
processes for managing
climate-related risks
We are at a relatively early stage in our management of climate-related risks. As an initial step, we have formalised Board
ownership of the overall ESG risk agenda, including climate-related risks, and are clarifying ownership of ESG related risks
directly supervised and managed by the leadership team of each Business Unit and reviewed at the ERC. We have also
developed a carbon strategy that includes plans for achieving carbon neutrality in respect of our operational emissions by
strategic actions related to ESG practices including related to short to medium-term climate related risks and opportunities.
As part of our ERMF review we identified a number of areas for further development, which we intend to progress in due
course including:
X Further embedding ESG and climate-related risks and opportunities into day-to-day practices and first line teams
X Updating our risk appetite statement to specifically identify climate-related risks and opportunities
X Training for Circlers in climate-related risks and ESG generally
X
In 2022, we will develop a carbon transition plan to address near, medium and long-term goals for the reduction and
offsetting of our various sources of emissions. See also “Risk Management” in this Annual Report for more information about
the integration of ESG related risks, including climate-related risks.
Strategic report
Funding Circle Holdings plc32
Sustainability continued
Risk Management
continued
Describe how processes
for identifying,
assessing and
managing climate-
related risks are
integrated into the
organisation’s overall
risk management
In 2021, we began to incorporate climate-related risks into our ERMF, with a view to identifying, measuring and monitoring
these risks within our business. The Enterprise Risk Management team reports to the Board and GLT on this subject.
Additional work is needed to integrate climate-related risk management into our first- and second line teams, for example by
embedding climate-related risks into our product development, strategy and training.
In respect of our loan products, we have started work to understand methodologies for identifying and assessing climate-
impact of climate change on our business customers presents a significant challenge in managing and addressing certain
climate-related risks with respect to our loans under management or in respect of new product offerings. In particular,
emissions data linked to SMEs and goods and services, and data on investor climate risk mitigation measures are generally
of borrowers and related loan products, and improve and deepen the integration of climate-related risks into our processes
and overall risk management in respect of the business more generally.
Metrics and targets
Disclose the metrics
used by the organisation
to assess climate-
related risks and
opportunities in line with
its strategy and risk
management process
In 2021, we began to identify and to a limited extent monitor climate-related intensity metrics for our loans under
management by industrial classification code, which provides only limited information. It is too early for us to draw any
meaningful conclusions from this data, but we believe it will help to inform our understanding of climate-related risks and
opportunities as more and better data becomes available. We do expect to continue to develop further metrics during the
course of 2022 to monitor climate related risks and opportunities in respect of our loans under management; however, we
believe this will be part of a longer-term process as more and better data hopefully becomes available and our understanding
and sophistication with this data improves.
In respect of our general business operations, we anticipate developing further metrics and targets in respect of our own
operations emissions and reductions plans during the course of 2022 (in particular in connection with our carbon transition
plan). The identified climate-related risks and opportunities will be monitored and assessed in line with our standard ERMF
practices.
Our energy and GHG emission metrics are disclosed on pages 33 to 34.
Disclose Scope 1, Scope
2, and, if appropriate,
Scope 3 greenhouse
gas (“GHG”) emissions
and related risks
Our 2021 Scope 1 and 2, and limited Scope 3 (business travel and waste) GHG emissions are disclosed on page 33.
Describe the targets
used by the organisation
to manage climate-
related risks and
opportunities and
performance against
targets
In 2022, as part of our wider Scope 3 emissions reporting and carbon transition plan, we expect to better understand the
climate-related risks and opportunities we face. We will also begin to set more specific targets around reducing emissions,
improving our data collection, and engaging with more strategic initiatives.
Funding Circle’s carbon strategy sets out our approach to climate-related risks and opportunities in our business. It includes
the following short, medium and long-term goals:
X Achieve carbon neutrality by 2023 and net zero by 2030. We are on track with our carbon neutrality goal in respect of our
Scope 1 and 2 (and limited Scope 3) emissions for our operational boundary, with wider Scope 3 emissions work to be
progressed in 2022
X Offset difficult-to-reduce Scope 1 and 2 emissions starting in 2021. This goal was partially achieved as we offset our
2020 direct Scope 1 and 2 (and limited Scope 3) emissions during the year and intend to offset 2021 Scope 1 and 2 (and
limited Scope 3) emissions during 2022
X
X Offset difficult-to-reduce Scope 3 emissions, starting in 2023 at the latest
Task Force for Climate-related Financial Disclosures (TCFD) continued
Annual Report and Accounts 2021 33
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Our climate impact
This section includes our mandatory
reporting of greenhouse gas emissions in
line with The Companies Act 2006
(Strategic Report and Directors’ Report)
Regulations 2013 and the Streamlined
Energy and Carbon Reporting (“SECR”)
under the Companies (Directors’ Report)
and Limited Liability Partnerships (Energy
and Carbon Report) Regulations 2018.
have determined that the most
appropriate for our business is tonnes of
CO
2
2
e) per £m of total
income. Our GHG emissions reporting
is aligned with our financial reporting year.
The GHG accounting follows the
methodology set out by the WRI/
WBCSD Greenhouse Gas Protocol.
conversion factors for company
reporting (published by BEIS) in our
calculations. For CE electricity
emissions we have used the
International Energy Agency (“IEA”)
international conversion factors for
location-based measures and AIB
Residual Emissions Mix for market-
based measures. For US emissions we
have used regional data from
Environmental Protection Agency e-Grid
and Green-e
®
Residual Mix Emissions
Rates. The selected boundary includes
Funding Circle’s Scope 1, Scope 2 and
Scope 3 categories, covering waste
generated in operations and business
travel. In accordance with the SECR, we
report our emissions data using an
operational control approach to define
our organisational boundary in respect
of the energy consumption and
emissions for which we are responsible.
Global GHG emissions data for period
1 January to 31 December
2021
tCO
2
e
2020
tCO
2
4
2019
tCO
2
e
Scope 1¹ 129 132 147
Scope 2
2
– location based 300 378 493
Scope 2
2
– market based 371 437 —
Scope 3 (business travel and waste)
3
112 222 —
Total gross emissions (Scope 1 and 2) – location based 429 509 640
– market based 569 —
Total gross emissions (Scope 1, 2 and 3) – location based 731 —
– market based 612 790 —
Full-time employee (“FTE”) (average over the applicable reporting period) 904 1,002 —
Total income (£m) 206.9 222.0 177.3
Intensity ratio (Scope 1 and 2): tCO
2
e/ FTE – location based 0.47 0.51 —
– market based 0.57 —
Intensity ratio (Scope 1 and 2): tCO
2
e/ £m – location based
6
2.07 2.29 3.61
– market based
6
2.42 2.56 —
Intensity ratio (Scope 1, 2 and 3): tCO
2
e/ FTE – location based 0.60 0.73 —
– market based 0.68 0.79 —
Intensity ratio (Scope 1, 2 and 3): tCO
2
e/ £m – location based
6
2.62 3.29 —
– market based
6
2.96 3.56 —
1. Scope 1 includes combustion of fuels and operation of facilities, principally natural gas related to our leased office space.
2. Scope 2 includes electricity purchased for use in connection with our leased office space.
3. Scope 3 includes business travel and waste generated in operations. No waste data was available for our San Francisco office, however, this is not considered to be material
given the office size and very low occupancy during 2021.
4. Following a review of our emissions data and calculation methodologies in 2021, we identified a small number of inaccuracies in the data provided or calculations applied to the
data in our 2020 Annual Report, which we have updated in the figures shown in this report, which we do not believe are material to the overall information provided.
5. Limited emissions data was collected and reported prior to 2020; information for 2019 has been provided for comparison to most recent reporting period not subject to
Covid-19 impacts.
2
2
e”) per £m of total income.
In line with our environmental reporting
criteria, we report on all significant
sources of GHG emissions from our
business that are under our operational
control. Our emissions disclosure
methodology remains largely consistent
with 2020; however, we have added
additional fields to more closely track
relevant guidance. We did not undertake
any specific measures to reduce our
emissions during 2021; however, we did
begin to address GHG emissions within
our ESG framework, and our 2021
footprint is the chosen baseline for our
carbon neutrality commitment.
Strategic report
Funding Circle Holdings plc34
Sustainability continued
Regional breakdown of energy consumption data
for period 1 January to 31 December
Scope 1 Scope 2
2021 2020
2
2019
1
2021 2020
2
2019
1
Region
UK 349,552 380,719 326,315 954,078
US 79,469 295,981 421,159 469,443 686,193 855,662
CE (Germany and Netherlands)
3
NA
3
NA
NA
3
72,132 132,506
Total 645,533 801,878 829,081 1,084,640 1,942,246
1. Limited emissions data was collected and reported prior to 2020; information for 2019 has been provided for comparison to the most recent reporting period not subject to
Covid-19 impacts.
2. Following a review of our emissions data and calculation methodologies in 2021, we identified a small number of inaccuracies in the data provided or calculations applied
3. Information was not available 2019 and 2020, and we ceased to hold office space in Germany from the end of 2020 and in the Netherlands during 2021 (although the office
Our climate impact continued
In 2021 we continued to engage with
industry experts to accurately measure
and verify our in-scope emissions and
to develop strategies to reduce or offset
these emissions. We are working with a
leading climate change advisory firm to
measure, verify and certify our 2021
Scope 1 and Scope 2 emissions, as well
as limited Scope 3 emissions (related to
waste and business travel) in
ISO 14064 in order to support a
statement of carbon neutrality in
respect of our operational boundary
(excluding our wider Scope 3
emissions), which we hope to complete
our baseline year for purposes of
reduction efforts. Our aim is to reach a
solid understanding of our material
2022. In late 2021, we also began the
process to measure and verify our full
Scope 3 emissions, including Scope 3
emissions related to our loan products
(for example pursuant to certain
industry standard methodologies
currently being developed in the banking
industry).
As part of our more in-depth review of our
emissions data in 2021, we also reviewed
our 2020 emissions data; however, we
emissions and we felt that 2020 was
the reduction in office use and business
travel due to Covid-19 safety measures.
Although we have chosen not to seek
verification for this data, we have offset
those emissions through the purchase
of carbon credits for 900 tCO
2
e in two
emissions avoidance and removal
projects that are independently audited
and validated, and verified to recognised
global standards: Mississippi Valley
Reforestation, USA (ACR), and Solar Water
Heating, India (CDM and Gold Standard).
In 2021, the ongoing pandemic
restrictions led to a substantial
reduction in the use of our offices,
resulting in overall lower carbon
emissions for the business compared
The majority of our people continued
gradually returning to the office in early
2022, but with typically limited numbers
of days in the office. We have not yet
measured or calculated employee home
working within our Scope 3 emissions,
which we intend to undertake in 2022.
decreased compared to 2020, largely as
moving to a smaller space during 2021,
and the termination of leases for our
providers. Our business air travel
increased in 2021 compared to 2020,
although it remained lower than
pre-pandemic activity, and we expect
this item to increase as international
business travel becomes more
normalised going forward. Overall, data
lack of standardised processes to capture
this data from third parties suppliers
Annual Report and Accounts 2021 35
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Public policy and
responsiblelending
Our aim is for Funding Circle to continue
to be a trusted and reputable Company,
working with government, regulators
and industry to uphold the highest
industry standards. To this end, we
actively engage with local, national,
federal and supra-national government
agencies, legislators, policy makers and
industry groups. This engagement helps
us develop insight and policy leadership
on issues affecting small businesses,
investors and the wider FinTech
industry. We also submit position
papers and participate in expert
hearings, consultations and other
In both the UK and US, Funding Circle
supported businesses during the
pandemic by providing loans through
government SME guarantee
programmes and a variety of
forbearance measures. In the UK,
the financial services sector, and the
Confederation of British Industry, a
broader business advocacy group.
Through our membership of industry
body Innovate Finance, we also helped
to amplify the important role FinTech
plays in the UK.
Social impact
In addition to the positive economic
impact of our SME lending activities, we
are working to drive more positive social
outcomes through our Company and
employees. Despite the limitations
imposed by the pandemic, in 2021
causes and initiatives in each of our
geographies. Please see Our people on
to offer Circlers two paid volunteer
“Impact Days” a year to positively
contribute to issues they feel
passionately about.
In 2021, we began a review of our social
impact strategy to identify ways for the
business to continue to support
Circler-led initiatives and also explore
areas where we can contribute
positively as a business in our
communities. As described above,
social impact forms a core component
of our ESG framework, with Board
ownership and oversight through the
ESG Committee. As with our carbon
strategy, there is a dedicated Board
champion for social impact and we
strategy, which we hope to expand on
employee survey to better understand
drivers to employee engagement and to
inform our social impact programme,
and we also began an ESG strategy
review to better understand the
commercial landscape for ESG-related
products and customer-facing
initiatives, including in respect of our
social impact programme.
FINANCIAL INCLUSION
US criminal decline
referralprogramme
In the US, people with criminal
records, especially people of colour,
face major barriers when
reintegrating into society.
Entrepreneurship can decrease the
likelihood of recidivism, but most
small business lenders have policies
that prohibit lending to applicants
with criminal histories.
In 2021, Funding Circle launched a
Association of Enterprise Opportunity
(“AEO”) in the US. Through this
initiative, we refer US loan applications
declined on criminal grounds to AEO
and its Community Development
Financial Institution (“CDFI”) partners.
These partners underwrite the loans
using R3Score, a new platform that
assesses the risks of lending to
applicants with a criminal record. AEO
will analyse the repayment data on
loans made through CDFI, with a view
to shaping more enlightened lender
decline policies.
Strategic report
Funding Circle Holdings plc36
Sustainability continued
Public policy and
responsiblelending continued
In the US, Funding Circle is a member
Coalition (“RBLC”), a network of
non-profit and for-profit lenders,
investors and small business advocates.
Members of the Coalition share a
commitment to innovation and
responsible behaviour in small business
lending. We are also a signatory of the
Small Business Borrowers’ Bill of Rights
(“BBOR”), the first cross-sector
consortium supporting the rights of
small business, and we are a member of
the Innovative Lending Platform
Association (“ILPA”). Finally, in 2021 we
were appointed to the US Consumer
Financial Protection Bureau (“CFPB”)
Small Business Regulatory Enforcement
Fairness Act advisory review panel.
Other commitments
As part of our broader commitments as
a responsible Company, we have made
a number of voluntary commitments
and take a stand on the following
issues:
X We have joined the UN Global
Compact to formalise our alignment
with its Ten Principles on human
rights, labour, the environment and
anti-corruption. We look forward to
integrating the UNGC principles into
our ESG programme and leveraging
this framework to help guide our
efforts in the future
X We are a signatory to the Principles
for Responsible Investment (“PRI”),
which we believe is an important
signal to our investors and
shareholders and we hope will drive
positive engagement and outcomes
with these and other stakeholders
Human rights
X We respect and promote human
rights through our employment
policies and practices
X We apply these policies and
works at, or is part of, Funding Circle
Modern slavery
X We have a zero-tolerance approach
to modern slavery and human
trafficking
X We have published a Modern Slavery
Act Transparency Statement in
compliance with section 54 of the
Modern Slavery Act
Annual Report and Accounts 2021 37
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
X As part of our procurement process
we ask suppliers for their Modern
Slavery Statement
Code of Conduct
X We are dedicated to implementing
and maintaining the highest
standards of behaviour, ethics and
integrity among our workforce
X We have created a culture where
adherence to these standards is
recognised and rewarded
X Our Code of Conduct establishes
these standards and addresses
subjects such as integrity, conflicts
of interest and non-discrimination.
Employees are trained annually on
our Code of Conduct rules
X We have whistleblowing policies
whistleblowing officers in each
Anti-money laundering, anti-corruption
and anti-bribery
X We recognise that our reputation
X We uphold all laws relevant to
countering bribery and corruption
accordance with our global
anti-bribery and corruption policy
X Circlers are trained and evaluated
annually on bribery and
Data protection and information
security
X As an online lending platform,
data protection, data privacy and
information security, and we seek
protection laws
X All employees complete data
protection, data privacy and
information security training at least
once a year, and extra training may
sensitive data
Procurement
X
share their environmental policies
corporate social responsibility with
responses factored into the overall
supplier rating
We actively engage with
allourstakeholders
We are committed to building open and constructive relationships with
all our stakeholders. Our shared mission with borrowers, investors and
our people is to ensure that a vital, historically underserved part of our
economy can access the funding it needs to win.
In 2021, we engaged with our stakeholders in a variety of ways to ensure
they continued to feel connected and supported at all times.
Engaging our stakeholders
Borrowers
SMEs are the growth engine of the economy, and it is our
mission to help them fulfil their ambitions.
How we engage
X Constant monitoring of customer feedback, including
customer satisfaction surveys
X Regular focus groups with SME borrowers around product
changes and new marketing campaigns
X The Board reviews strategy and monitors performance in
light of customer feedback, with the aim of meeting the
needs of borrowers more effectively
X Throughout 2021, we provided regular email updates and
communications, including on the launch of our new
products, the reintroduction of our core term loan product
and our accreditation under RLS
Outcomes of engagement
X We achieved a NPS of 80–90 for borrowers in the UK and
the US
Investors
Providing resilient returns to a wide range of investors
How we engage
X We provide bi-annual reporting on loan performance
including on our website. This is updated in line with our
X We provide information and support to retail investors
engagement, in 2021 our Chief Risk Officer provided
X Active engagement with investors on their direct lending
and investment products, as well as engagement with
Outcomes of engagement
X We onboarded a number of new institutional investors,
including banks and asset managers, further diversifying
our investor base and funding sources
X £2.5 billion investor capital raised in 2021
Strategic report
Funding Circle Holdings plc38
Flower Station
Leading UK florist Flower Station creates lovingly hand-crafted bouquets.
ItsDirector and Founder, David Cohen, used his Funding Circle business
loantolaunch new brands and grow his business.
David set up Flower Station over 20 years ago as a drive-through florist at a disused petrol station. He now runs several flower
During lockdown, with his stores having to close, David pivoted the company’s operations online. As a result, business
online operations and branched out into new services, such as weddings and office plant contracts. He also began providing
guaranteed same-day delivery on orders up to 6p.m. in London.
The company used a Funding Circle loan to support these expansion activities and develop new brands – for example, the new
Love Rose website, which sells high-end preserved roses, and Letterbuds, a subscription service for home-delivered budded
flowers. The funds also enabled the completion of an online flower school, which provides video lessons on flower arranging.
Business is blooming.
FLOURISHING
THROUGH FUNDING
SUPPORTING BUSINESSES
Annual Report and Accounts 2021 39
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Engaging our stakeholders continued
Shareholders
We maintain transparent and open engagement with our
shareholders. This enables the Board to clearly
communicate its strategy, provide updates on our
performance and receive regular feedback.
How we engage
X Regular shareholder communications such as full and
half-year results, and ad-hoc trading statement updates
X Analyst and investor meetings and presentations/investor
roadshows, as well as ad-hoc meetings and events with
larger shareholders and prospective shareholders
X 2021 AGM was once again open to shareholders, as we
returned to in-person, business-as-usual shareholder
engagement. Our proposed Remuneration Policy was
approved, following open engagement with major
shareholders
X The Chair, Chief Executive Officer, Chief Financial Officer
and Director of Investor Relations regularly communicate
provide regular reports to the Board on shareholder
interactions
X Announcement in September that our CEO and Founder,
Samir Desai, would be stepping back from his day-to-day
activities and transitioning to a Non-Executive Director role
be succeeding Samir as CEO. Following this news, Samir
and Lisa met with all key shareholders to discuss the
transition
Outcomes of engagement
X Incorporated our shareholders’ opinions throughout the
year into the shaping of Company strategy and other key
developments
Circlers
Our people are our business. We are committed to creating
a culture where Circlers thrive and share in our mission,
values and ambition.
How we engage
X Regular all-hands meetings for all Circlers, including our
weekly Local and monthly Global Gatherings, and our
bi-annual Full and Half Circle events. These meetings
provide an opportunity for Circlers to share information
Company’s performance
X
engagement Non-Executive Director, and employee
groups. Employee representatives provide updates on
those meetings to the Board and, in turn, update Circlers
X Circler group FC Impact coordinates our internal
volunteering and charity initiatives
X Regular culture surveys, with results shared with the Board,
along with diversity reports and updates on diversity and
inclusion initiatives
Outcomes of engagement
X We further embedded our new Circler promise, Build the
Incredible. We also recorded our highest ever employee
engagement score of 73% in our annual employee survey
Section 172(1) statement
The Directors recognise that they have a duty to promote the success of the Company in accordance
with s.172(1) of the Companies Act 2006. Further details on how the Board operates and the way in
which it reaches decisions, including the matters discussed and debated during the year, are set out in
the Governance section on pages 67 to 79. Some examples of how the Directors have had regard to the
factors set out in section 172(1)(a)–(f) when discharging their duties are on pages 75 and 76.
Strategic report
Funding Circle Holdings plc40
Communities
The SMEs we serve are at the centre of our communities.
We are passionate advocates of charitable causes and
issues related to social impact and community engagement.
How we engage
X Continual development and implementation of our
understanding of, and priorities for, engagement with
X Regular meetings with investors including discussions
regarding their ESG investment criteria as they apply to
X Circler group FC Impact coordinates our internal
volunteering and charity initiatives
X Our charitable and community engagement activities
resumed in 2021 following a pause during the first year
Outcomes of engagement
X Progressed our new ESG strategy, which sets out a formal
framework for operating as a responsible business and is
overseen by our ESG Committee. As part of our carbon
strategy, for the first time ever we offset our operational
carbon footprint – relating to our 2020 CO
2
emissions
– through carbon credit projects. These projects have a
positive community impact and contribute to the UN
Sustainable Development Goals (“UN SDGs”)
X Became a signatory to the UN Global Compact, expressing
corruption
X Held a combination of virtual and in-person initiatives
through the FC Impact team. These included holding
employment skills training sessions for young adult
wheelchair users, a Christmas toy drive for children’s
hospitals and a canal-clean up, as well as raising money
Government and regulators
Our goal is for Funding Circle to always be known as a
trusted and reputable Company, and to work with regulators
and industry to ensure best practice.
How we engage
X Engagement with local, national, federal and supra-national
government agencies, including regulators, legislators,
policy makers and industry groups. These interactions
provide insight and leadership on policy and rulemaking
related to issues affecting SME borrowers, investors or
lending in the FinTech industry
X Contribution to the discourse and debate on industry
issues, including submitting position papers and participating
in expert hearings, consultations, forums and other policy
engagement initiatives
X Board ensures it uses the results of the above engagement,
Outcomes of engagement
X Worked with the British Business Bank in the UK to become
the first lending platform to be accredited under RLS. We
also worked with industry and the UK Government to help
shape the scheme, as well as priority areas of The Kalifa
Review of UK FinTech to maintain our industry’s global
reputation
X In the US, we continued to participate in PPP and launched
the forgiveness portion of the programme with more than
70% of PPP loans facilitated by us fully forgiven by the end
of 2021
Annual Report and Accounts 2021 41
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Key performance indicators
How we measure
ourperformance
Total income (£m)
£206.9m
Basic earnings/(loss)
pershare (pence)
17.4p
2020
2020 2020 2020
2019
2019 2019 2019
2021
2021 2021 2021
2021 2021
Profit/(loss) before tax (£m)
£64.1m
Definition
The Group generates total income
principally from: transaction fees earned
from originating loans with borrowers;
servicing fees from servicing of loans
under management; and investment
income net of investment expense
Definition
This represents the total value of
outstanding principal and interest
through marketplace referrals to
Definition
Basic earnings/(loss) per share is
defined as the profit/(loss) for the year
attributable to ordinary equity holders
weighted average number of ordinary
Definition
This represents the total cost of
third-party marketing expenditure
Definition
Profit/(loss) before tax is defined as
net income after taking into account
all operating expenses and finance
income, costs and share of profit/(loss)
Definition
This represents the monetary value
platform or through marketplace
key driver of both transaction fees and
future expected servicing fees and
Links to strategy:
1
2
3
4
Links to strategy:
1
2
3
4
Links to strategy:
1
2
3
4
Links to strategy:
1
2
3
4
Links to strategy:
1
2
3
4
Links to strategy:
1
2
3
4
Financial | Statutory
Operational
4,457 28
4,214 2,742 30
3,731 2,350 42
Loans under management (£m)
£4,457m
Marketing costs (%)
28%
Originations (£m)
£2,296m
2019 2019
2020 2020
Strategic report
42
2020 2020
2019 2019
2021 2021
Definition
operating profit/(loss) before
depreciation and amortisation, share-
based payments and associated social
security costs, foreign exchange gains/
is the principal profit measure used
Definition
assets, property, plant and equipment,
securitisation financing and funding
a key liquidity measure and is the net
amount of cash used or generated
Links to strategy:
1
2
3
4
Links to strategy:
1
2
3
4
Financial | Alternative performance measures (“APMs”)
Free cash flow (£m)
£82.8m
Adjusted EBITDA (£m)
£91.8m
Focus areas relevant to our KPIs
Attract more businesses and say yes to more businesses
1
#1 in new products
2
Technology and data to enable innovation at pace
3
Scalable products and processes and high-performing teams that execute brilliantly
4
Annual Report and Accounts 2021 43
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Financial review
Our performance was
aboveexpectations
The financial year has seen significant growth in net income and
operating profit compared to the previous year. The Group’s operating
profit of £64.2 million compared to a loss of £106.3 million in 2020.
2021 overview
continued to provide loans through
X
with applications received by that
date continuing to be processed until
X The Paycheck Protection Program
guaranteed scheme introduced
to cease in June 2022 and we will
transition to operating solely our core
also relaunched our core product for
As a result of these schemes running
through 2021, originations for the year
were weighted towards the first half of
continued growth quarter on quarter
Originations
£m
£m
2021
FY
£m
£m
£m
2020
£m
1,381 1,972 662 2,111
247 316 410 171 581
7 1 8 40 10 50
1,635 661 2,296 1,112 1,630 2,742
The loans under each of the government
schemes have different characteristics,
X
this scheme, the British Business
guarantee to lenders, should the
loan default, in exchange for a fee
the origination fees on behalf of
borrowers together with the interest
No principal repayments were
borrowers pay the interest and
principal repayments were required
pay the interest and principal
Oliver White
Chief Financial Officer
Strategic report
44
X
the BBB continued to provide a
guarantee to lenders to ensure that
there was sufficient availability from
lenders to support small businesses,
again in exchange for a fee from the
the loan amounts and fee being
similar to the core loan product with
borrowers paying the origination
fees, interest and repayments and
X
PPP scheme have very different
by the SBA but there are no servicing
is because borrowers are allowed
to apply for the loans to be forgiven
by the SBA if the funds are used to
pay eligible expenses such as payroll
by the strong origination performance
originated loans continued to repay
during the year and borrowers who had
taken out PPP loans were applying for
Loans under management
31 December
2021
£m
2020
£m
3,944 3,271
425
88 184
4,457 4,214
Annual Report and Accounts 2021 45
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Geographic highlights
2021 2020
Net income/(loss)
United
Kingdom
£m
United
States
£m
Developing
Markets
£m
Total
£m
£m
States
£m
Markets
£m
Total
£m
137.7 25.1 2.7 165.5
Net investment income 21.7 19.7 — 41.4 —
Total income 159.4 44.8 2.7 206.9
10.5 18.1 — 28.6 —
Net income/(loss) 169.9 62.9 2.7 235.5
2021 2020
Segment profit
United
Kingdom
£m
United
States
£m
Developing
Markets
£m
Total
£m
£m
States
£m
Markets
£m
Total
£m
Adjusted EBITDA 61.9 28.4 1.5 91.8
(9.7) (4.1) (0.1) (13.9)
Share-based payments and social
security costs (7.6) (1.3) — (8.9)
(0.3) (0.6) — (0.9) — — — —
Exceptional items — (3.9) — (3.9) —
Operating profit/(loss) 44.3 18.5 1.4 64.2
1
29.7 (9.4) 1.5 21.8
1
32.2 37.8 — 70.0 —
United Kingdom
with loans under management growing
2020, in line with originations, the strong
growth in loans under management
drove higher servicing fees and resulted
2020, driven by the continuing paying
down of loans in the investment vehicles
loans held within its warehouse vehicle,
paying off the bank debt associated
The SME loans that are held in the
investment vehicles are carried on
improved actual performance and
prospects for small businesses, as the
economy has opened up, compared to
when the country was still under a full
lockdown, the fair value of the loans has
improved materially resulting in a
Marketing costs remained at similar
income, with other costs remaining
United States
of trading in 2021 as it continued to
originate PPP loans before reverting
to its core product in June 2021 as
although PPP was paused between
to be undertaken with funds coming
that date, all PPP lending was done
through our marketplace (referral)
model for which we earned reduced
origination in 2021 totalled £316 million
compared to £581 million in 2020,
remained at consistent levels to 2020 at
vehicles continued to amortise down
Together these led to investment
The improved economic outlook in
strength and resilience of our borrowers,
led to material improvements in fair
(being investment income and fair
Strategic report
46
Financial review continued
operations, downsizing the premises
incentives paid in the early stages of
million and an improvement in the
in loss was also impacted by a stronger
pound with the average $:£ exchange
Finance review
Overview
The drivers for this are strong originations, record loans under management, cost actions and the quality of our underwriting
Profit and loss
2021 2020
Before
exceptional
items
£m
Exceptional
items
£m
Total
£m
Before
exceptional
items
£m
Exceptional
items
£m
Total
£m
Transaction fees 115.0 — 115.0 —
Servicing fees 47.0 — 47.0 —
Other income 3.5 — 3.5 —
Fee income (“operating income”) 165.5 — 165.5 —
53.7 — 53.7 —
(12.3) — (12.3) —
Total income 206.9 — 206.9 —
28.6 — 28.6 —
Net income 235.5 — 235.5 —
People costs (77.7) — ( 77.7 )
Marketing costs (46.9) — (46.9) —
(13.9) (3.9) (17.8)
0.1 — 0.1 —
Other costs (29.0) — (29.0)
Operating expenses (167.4) (3.9) (171.3)
Operating profit/(loss) 68.1 (3.9) 64.2
Total income, which consists of
operating income and investment
income less investment expense,
principally due to the reduced net
Operating income, which includes
transaction fees, service fees and
X Transaction fees, being the fees
reduction reflects the seven months
five months during 2021 up until
use of the PPP liquidity facility to
originate loans directly rather than
referring them to our partners for
a referral fee; and ii) following the
extension of the programme, PPP
loans in 2021 were generally lower
value loans which attracted a higher
Annual Report and Accounts 2021 47
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Finance review continued
Profit and loss continued
X Servicing fees, being the annual
fees for servicing loans under
management, increased to
X Other income represents a fee
premium we receive from certain
institutional investors in respect of
buying back defaulted loans under a
historical loan purchase commitment
together with collection fees where
we are able to charge a fee to
investors for recovering monies
Net investment income represents the
investment income, less investment
expense, on loans invested within
No new loans were originated in the
securitisation vehicles during the year
and the net investment income earned
has continued to reduce as loans paid
accelerated following the monetisation
of the warehouse vehicles through
selling of the loans and the repayment
Fair value gains/(losses) represent the
investments in SME loans held on
balance sheet that are carried at fair
discounted cash flows that take into
account projected cash flows from the
underlying SME loans including principal
and interest repayments, prepayment
rates and expected levels of defaults
lockdown with significant uncertainties
Since then, there has been an overall
improved view of the economic outlook
and accordingly there has been a
more favourable view on the expected
default levels and recoveries with
consequential improvements to the
valuation of the loans held on balance
Net income, defined as total income
after fair value adjustments, was
Operating expenses
People costs
2021
£m
2020
£m
People costs 85.9
(8.2)
People costs net of CDS 77.7
929 1,002
979 863
Marketing costs, which consist of
online and direct mail, TV and brand
campaigns and broker commissions,
remained flat year-on-year with overall
Depreciation, amortisation and
impairment costs
impairments of the right-of-use
caused by the downsizing of the San
Loan repurchase charges relate to the
buy back certain defaulted loans from
certain financial institutions under a
the business received a fee premium
accounted for under the expected credit
reflecting the increased likelihood that
there would be further defaulted loans
Other costs, which include cost of sales,
cost of sales and investor incentives
that were required in 2020 in the early
stages of the PPP programme but were
Strategic report
48
Financial review continued
Balance sheet and investments
31 December
2021
2020
Operating
business
£m
Investment in
trusts and
co-investments
£m
Securitisation
SPVs
£m
PPP loans
£m
Other
investments
£m
Total
£m
Total
£m
5.8 39.1 148.1 71.6 9.2 273.8 558.8
208.3 — 14.4 1.3 — 224.0 103.3
Other assets/(liabilities) — — (0.8) 0.3 — (0.5) 11.1
Borrowings/bonds — — (140.3) (73.2) — (213.5) (489.8)
Cash and investments 214.1 39.1 21.4 — 9.2 283.8 183.4
Other assets 67.9 — — — — 67.9 109.0
Other liabilities (63.7) — — — — (63.7) (74.8)
Equity 218.3 39.1 21.4 — 9.2 288.0 217.6
Our investment in the securitisation
SPVs is split between two types:
i) The vertical tranches where we are
equal participation in all classes of
to pay down and are now valued at
ii) The horizontal tranches
— once
loans are securitised, we held the
residual horizontal tranches with
These tranches have the potential
to earn the greatest returns, but
loans are valued at fair value using
discounted cash flow forecasts,
improved economic assumptions
have increased the value of the
horizontals and they are now valued
has been driven by the strong
Annual Report and Accounts 2021 49
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Finance review continued
Cash flow
2021
£m
2020
£m
Adjusted EBITDA 91.8
(28.6)
Purchase of tangible and intangible assets (9.4)
Net payment of lease liabilities (7.9)
36.9
Fee cash flow 82.8
Net investment in associates 3.9
Net investment in trusts and co-investments (18.8)
Net investment in warehouses 63.8
Net investment in securitisations (10.4)
Other (1.5)
Effect of foreign exchange 0.9
Movement in the year 120.7
103.3
Cash and cash equivalents at the end of the year 224.0
Subsequent events
Changes to retail lending:
Strategic report
50
Financial review continued
Our customers know there’s
noreward without risk
pandemic is being contained, and we
will maintain a very focused and prudent
approach to credit risk management
experience in 2021, we are confident
that our products and processes are
resilient and adapted to continuously
supporting small businesses through
Beside the intense activities involved
in managing credit risk, we have also
been able in 2021 to make further
progress with the strengthening of our
broader risk management and control
environment, notably:
X we implemented a new technology
platform for loan originations that
improves the borrower experience
whilst enabling further automation of
lending decisions and key controls;
X enhanced quality controls were
also implemented in our loan
issuance department to ensure full
compliance with government-backed
lending programmes, translating
accepted so far;
X we continued to strengthen our
defences against cyberattacks
X we remained vigilant on client money
controls and reporting;
X we continued to monitor and
strengthen financial crime controls
and ensured compliance with anti-
money laundering and sanctions
regulation; and
X we have continued to implement
evaluating and monitoring ESG
risk within our Enterprise Risk
suggest that our investors will earn
a positive net return on every cohort
of loans we historically originated,
of small business entrepreneurs, this
success reflects the credit quality of the
loan portfolio we originated before the
crisis, as well as the trusted relationship
we have built with our customers and
the effectiveness of our collections
proven to be highly adaptable to the
changes in the credit environment and
to the evolution of the government-
backed lending programmes, with
multiple adjustments in product
features and credit parameters
implemented within days, enabling
us to support small businesses
portfolio of government-backed loans
originated since 2020 shows very low
levels of fraud incidence and credit risk
As we restarted core lending outside
government-guarantees in 2021, we
have also originated loans that are
demonstrates that our risk models and
fraud defences continue to perform
and adapt through a crisis and that
our change management and testing
The credit environment is likely to
remain uncertain and volatile in 2022,
with gradual improvements as the
an uncertain macroeconomic
experienced several waves of public
restrictions affecting their business
operations and modifying the
programmes supporting small
evolved rapidly, with various effects
feared a surge in business bankruptcies
and adverse financial performance
The vast majority of customers who
requested payment plans in 2020 at
repayments and gradually cured
lockdowns and trading challenges, we
have also not seen any new spike in
Jerome Le Luel
Global Chief Risk Officer
Risk management
Annual Report and Accounts 2021 51
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Direct access to FC Board
As we head into 2022, there are
significant headwinds and uncertainty
in the macroeconomic environment
that may be further exacerbated by
does not have any direct exposure to
in monitoring the macroeconomic
environment and will adjust our
Overall, we are proud of the good work
accomplished in 2021 across the
organisation to keep our employees,
borrowers and investors safe and
contribute to supporting society and
future is still uncertain, but we are
confident we can successfully navigate
some level of uncertainty with focus
Risk management overview
Risk management sits at the heart
effective management of all key
risks is critical to meet our strategic
objectives and to achieve sustainable
need to be identified, understood and
appropriately addressed to protect our
regardless of their position, play
their part in managing risk within the
us to manage the risks inherent in our
business activities seamlessly, every
day, through the active participation of
common approach to risk management,
with clear roles and responsibilities, and
provides the foundations for a strong
Our approach to risk management
consists of:
X putting our culture at the heart of
everything we do;
X investing in robust risk capabilities,
including advanced data and risk
analytics; and
X doing the right thing for our customers,
As part of the second line of
defence, the Risk team oversees risk
our first line of defence colleagues in
example by providing training and
expert support for centralised risk
information management or complex
Risk culture
open and strong risk culture encourages
ethical behaviour and professional
Three lines of defence
Compliance
monitoring
ERM
Credit
quality
Global CRO
Data and
analytics
Global
General
Counsel
US
compliance
European
compliance
Audit
US CROEurope CRO
Europe MD US MD CFO
FC BoardFC CEO
FirstSecondThird
Strategic report
52
Risk management continued
part of our ongoing effort to reinforce
employees, environment, community
Board role
The Board is responsible for setting
the strategy, corporate objectives and
responsibility for reviewing the
effectiveness of the risk management
framework to the Board Risk and
the level of risk acceptable under each
principal risk category, whilst providing
oversight to ensure there is an adequate
framework in place for reporting and
Chief Risk Officer and the
Risk function
leads the Risk function, which is
independent from the business and has
responsible for developing, maintaining
responsible for providing assurance
to the Board that the principal risks
are appropriately managed and that
Risk management policies
risk management policies defining
mandatory requirements to mitigate the
principal risks that we face, with clear
risk limits and requirements to monitor
these policies and controls to verify
compliance and to adapt to changes in
Risk appetite
Our risk appetite is defined as the
level of risk that we, as a company, are
prepared to accept whilst pursuing our
core business strategy, recognising
a range of possible outcomes as
Board sets the risk appetite and reviews
a guideline for shaping business
strategies and defining the level of
basis for ongoing dialogue between
management and the Board with
evolving risk profile, allowing strategic
and financial decisions to be made on
Risk governance
framework that is documented in
framework includes delegations of
model across all markets in which we
structure have been designed to
manage our principal risks in a
consistent manner across the Group,
Risk governance structure
Business Unit Committees
Board Committees
Group Committees
Technology Security and Risk
Sub-Committee
Regulatory, Reputation and
Conduct Risk Committee
Credit Risk
Committee
Operational Risk
Committee
Funding Circle Holdings Board
Funding Circle Ltd Board
Risk and Compliance Committee
Funding Circle Holdings Board
Audit Committee
Disclosure CommitteeExecutive Risk Committee
Balance Sheet Management
Committee
Funding Circle Holdings Board
Environmental, Social and Governance
Committee
Annual Report and Accounts 2021 53
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Risk management continued
Risk culture continued
Risk governance continued
comprising the members of the Global
committees focused on each principal
Executive Risk Committee
environment, social and governance
risks are managed by the leadership
Balance Sheet
Management Committee
The Balance Sheet Management
of funding risk and Group balance
Credit Risk
Management Committee
Regulatory, Reputation and Conduct
Risk Committee
The Regulatory, Reputation and
on the management of regulatory,
reputation and conduct risks, and
Operational Risk Committee
is to ensure that operational controls
are effective and that operational and
financial crime risks are adequately
Disclosure Committee
The Board has delegated to the
overseeing the disclosure of information
Evaluate
As part of its responsibilities under
recognised a series of risks that are
organised under a consistent and
simple taxonomy with a hierarchy
of risk categories, which facilitates
The management of these risks is
assigned to designated business
owners who formally assess on a
regular basis the level of these risks, the
adequacy of controls and the need for
Respond
The appropriate risk response ensures
risk responses:
X accept the risk;
X take mitigation actions (such
as additional risk controls) to
reduce the risk;
X stop the existing activity/do not start
the proposed activity to remove
the risk; or
X continue the activity and transfer the
Monitor
report no less than three times a year
detailing the risks facing the Group and
and regular reports about the activities
Risk assurance
Assurance on the management of
auditors in various geographies in which
Risk assessment framework
A standard risk assessment framework is used to evaluate risks at both the
assessments are carried out by those individuals, teams and departments that are
Enterprise risk
management
1
3 2
1. Evaluate
X
X Set risk appetite
X Assess adequacy of
existing controls
X Estimate residual risk
2. Respond
X
X Prioritise remediation work and
assign responsibilities
3. Monitor
X
risk appetite
X Report, analyse and escalate
risk incidents
X
X Track delivery of agreed control
improvements
Strategic report
54
The Board confirms that throughout 2021 a robust assessment of the
principal risks facing Funding Circle was completed. A comprehensive
list of Group-wide risks and emerging risks was reviewed and monitored
throughout the year. The most significant risks and uncertainties faced by
Funding Circle are listed in the table below, categorised by principal risk:
Strategic risk
Strategic risk is defined as the failure to build a sustainable, diversified and profitable business that can successfully adapt
to environment changes due to the inefficient use of Funding Circle’s available resources.
Risk appetite
business that can successfully adapt to environment changes including in connection with environmental, social and governance
Key risks Management of risk Change in risk in year
Strategic risk
The risk that Funding
Circle does not achieve
its key business
objectives and maintain
its competitive advantage
and business operations.
strategic planning process based on risk appetite,
financial considerations, strategic themes and
manage strategic risk by:
X performing an in-depth business strategy review
at least once a year;
X reviewing financials, strategic plans for new
products/initiatives, and other management
information;
X reviewing the strategic risk implications of new
products, business expansion, entry into new
X in addition, the Board provides oversight of
strategic risk and approves business strategic
and there is a higher level of SME market
uncertainty that may lead to fluctuations
Additionally, there are potential changes
in borrower behaviour and preferences
in the wake of the government guarantee
schemes and the broader adoption
of uncertainty in the interest rate
environment and from inflation, which
may affect investor return expectations
performance and demand may be
carefully and is continuously adjusting
product offerings to fit market conditions
Annual Report and Accounts 2021 55
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Principal risks and uncertainties
Strategic risk continued
Key risks Management of risk Change in risk in year
Economic environment
Financial risk that
is associated with
macroeconomic or
political factors that may
affect Funding Circle’s
financial and/or credit
performance.
portfolios and perform stress test simulations to
help ensure that investor returns remain resilient in
include (but are not limited to):
X annual stress testing of loan portfolios in
each market;
X resilient credit strategy and continuous tuning of
risk and pricing parameters to correct for possible
deviations in returns;
X independent validation and continuous
monitoring of the performance of credit
risk models;
X monthly monitoring of internal and external
X agile capability to rapidly deploy pricing and credit
strategy adjustments deemed necessary;
X experienced in-house collections and recoveries
capabilities with built-in scalability; and
X with regard to government-backed programmes,
controls and audits of scheme guarantee
losses has been moderate so far, the crisis
continues to be a high risk to the overall
economy with new variants causing
levels, but new risks have emerged,
with higher inflation and supply chain
adjusting our credit strategies and using
government guarantees when available to
minimise downside risks, whilst gradually
Overall, we are satisfied with the credit
performance experienced so far on loans
The current inflationary environment may
our institutional investors, to ensure that
pricing and returns of loan originations
Environmental, social and governance risk
Environmental, social
and/or governance
characteristics could
cause an actual or
potential material
negative impact
on Funding Circle’s
financial performance
X Our approach to managing ESG is outlined in our
X
with direct responsibility for setting the strategic
X ESG risks are identified, evaluated and monitored in
X
Climate Change Risk
formally recognised as part of our enterprise risk
management framework and is assessed as part of
As a first step, the Board has reviewed and approved
but achievable goals to align our business to The
Paris Agreement goals to target carbon reduction
and offsetting strategies for our full value chain in line
with the science based target level of decarbonisation
Strategic report
56
Principal risks and uncertainties continued
Funding and balance sheet risk
Funding and balance sheet risk is defined as the risks associated with platform funding (matching borrower demand and
investor cash supply), capital commitments and corporate liquidity through normal and stress scenarios.
Risk appetite
Key risks Management of risk Change in risk in year
Funding risk
The risk that demand
from borrowers for loans
cannot be met when
and where they fall due
or can only be met at
an uneconomic price.
This risk varies with the
economic attractiveness
of Funding Circle loans
as an investment, the
level of diversification
of funding sources and
the level of resilience of
these funding sources
through economic cycles.
platform that efficiently matches the supply of
X building long-term relationships with investors
and developing a forward-looking pipeline of new
investors;
X actively managing concentration risk and
diversifying sources of funding;
X
whether through direct lending capacity,
securitisation capacity or investment fund
lending vehicles;
X monitoring a broad range of management
information and key performance indicators at
and Board level; and
X
experienced good demand from
This demonstrates the trust our funding
partners place in the soundness of our
risk management, and the experience
they had with previous investments that
delivered positive returns despite the
our future funding needs are well covered
Balance sheet risk
The risk that Funding
Circle investment
positions reduce in value
or cannot be exited
at an economically
viable price.
The risk that Funding
Circle liabilities cannot
be met when and
where they fall due or
can only be met at an
uneconomic price.
X
sheet exposures and following a set of agreed
investment principles to guide capital allocation;
X maintaining a prudent level of liquidity to cover
unexpected outflows to ensure that we are able
to meet financial commitments for an extended
period, including under stress scenarios;
X considering a broad range of management
information and key performance indicators at
X leveraging a dedicated and experienced Balance
Our overall approach to having a robust
balance sheet and prudent management
Some investment positions held by
at an economically viable price, reducing
our balance sheet risk exposure and
More cash was generated through
cover our liquidity needs, including when
Annual Report and Accounts 2021 57
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Credit risk
Credit risk is the risk of financial loss to an investor should any borrower fail to fulfil their contractual repayment obligations.
Credit risk management is the sum of activities necessary to deliver a risk profile at portfolio level in line with Funding Circle
management’s expectations, in terms of net loss rate, risk-adjusted rate of return and its volatility through economic cycles.
Risk appetite
attention to deliver credit performance and returns in line with expectations
Key risks Management of risk Change in risk in year
Credit risk
Borrower acquisition
Credit performance
and returns of new
loans can deviate from
expectations due to
several factors: changes
in credit quality of
incoming applications,
calibration of risk models
or strategy parameters,
and control gaps
in processing loan
applications.
Portfolio risk
management
Credit performance
and returns of existing
portfolio can deviate
from expectations
due to several factors:
deterioration of credit
environment, increased
competition driving
higher prepayment rates,
effectiveness of portfolio
monitoring, collections
and recoveries.
portfolios that generate positive returns for investors
X formulating credit risk policies (covering credit
assessment and risk grading, portfolio monitoring
and reporting, collections and recoveries) and
ensuring adherence to these policies;
X recruiting, training and managing expert risk
professionals with the adequate skills, objectives
and capacity;
X establishing the formal mandates and
authorisation structure for setting risk
parameters and approving loans;
X performing independent quality control of
X limiting concentration risk to counterparties
X actively monitoring the performance of the
affect performance;
X implementing adequate procedures and
controls for model risk (including the
independent validation and monitoring of credit
scoring models);
X performing annual stress tests with high-quality
standards; and
X with regards to government programmes, tightly
improvement in the performance of
our loan portfolio following the initial
returns on our historical loan portfolios
trended better in 2021 than originally
Also, early risk read on loans originated
during the pandemic shows performance
of focus was placed on ensuring
compliance with government-guarantee
loan scheme rules, which so far has led to
high pay-out ratios of claims filed in the
a strong position from a credit risk
standpoint, with proven risk tools and
from enhanced in-house collections
capabilities:
X adequately staffed and well trained
department;
X forbearance tools and policies fully
integrated in the customer life cycle
management; and
X robust controls and customer-oriented
culture (vulnerable people process,
treating customers fairly, complaints
management and other customer-
Strategic report
58
Principal risks and uncertainties continued
Regulatory, reputation and conduct risk
Regulatory, reputation and conduct risk is defined as engaging in activities that detract from Funding Circle’s goal of being
a trusted and reputable company with products, services and processes designed for customer success and delivered in a
way that will not cause customer detriment or regulatory censure.
Risk appetite
services company with products, services and processes designed for customer success and delivered in a way that will not
Key risks Management of risk Change in risk in year
Regulatory risk
The risk that Funding
Circle’s ability to
effectively manage its
regulatory relationships
is compromised or
diminished, that the
Group’s governance and
controls framework is
not satisfactory given
business growth, or
that there is business
interruption by reason
of non-compliance
with regulation or the
introduction of business-
impacting regulation.
X
our business and we engage with policy makers
and resources in external relations, including
educating policy makers, regulators and other
influencers on the features, benefits and impact
X
practices and controls focused on regulatory risk,
including controls designed to comply with the
X
governance and controls, and continue to train
all employees in such matters as are relevant to
X
we have hired an ESG Project Manager and
are working with a service provider to assist
with emissions foot printing, verification
There is continued regulatory attention
regarding the viability of firms and the possible
Prolonged pause of retail investor product and
resulting level of client money held continue
investment continues to be perceived as
Proactive engagement with the
ESG-related risk is an area of expected
increased regulation, for example in the form
of mandatory disclosures (including on net
Proactive monitoring continues as this
Reputation risk
Operational or
performance failures
could lead to negative
publicity that could
adversely affect our
brand, business, results,
operations, financial
condition or prospects.
practices and controls focused on reputation
management, including:
X
products and initiatives;
X engaging fully with regulators in relation to any
such new or iterated products and initiatives that
might impact on customer outcomes;
X undertaking specific projects to address
identified risk topics and issues; and
X updating and refining our approach to issue and
2020 continue to operate in 2021, and have
Quality assurance testing and training
and Recoveries department, enabling
Conduct risk/treating customers fairly
Funding Circle’s
activities (or the failure
to satisfactorily perform
its activities) could
impact the delivery of fair
customer outcomes.
X
performance is reported and additional oversight
X
X
X
embedded and a Business Support function has
regulations and ensuring positive customer
outcomes continue to be fundamental
monitoring of employees and controls in
a remote/hybrid environment, we do not
Annual Report and Accounts 2021 59
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from
external events.
Risk appetite
significant and non-anticipated operational risk losses
Key risks Management of risk Change in risk in year
Process risk
Failure to originate and
service loans in line
with Funding Circle
internal policies, investor
guidelines and third
party loan guarantees
(e.g. the British Business
Bank and Small Business
Administration) may
result in Funding Circle
repurchasing loans from
investors.
The risk of operational
incident could impact
the ability to originate
new loans or the ability
to service loans through
collections from
borrowers and return of
money to investors.
X continuing to automate key controls;
X performing robust first line quality assurance and
secondary checks on manual processes;
X monitoring and testing of key controls;
X reviewing key risk indicators as part of the
X reporting, reviewing and resolving
operational errors;
X performing independent quality control checks
and ensuring highlighted issues are resolved;
X implementing adequate policies and procedures;
X providing training and education on risk culture
and risk management; and
X performing supplier due diligence and
undertaking ongoing performance monitoring of
technology platform for loan originations
loan originations has improved the
borrower experience and lending process
associated with the platform migration and
the introduction of new processes as we
outsourced selective functions which
management framework in place that
ensures adequacy of suppliers and
independent quality checks to ensure
that all loans originated (unsecured and
government schemes) are compliant with
The report was unqualified with only two
well established control environment over
Strategic report
60
Principal risks and uncertainties continued
Operational risk continued
Key risks Management of risk Change in risk in year
Information security
Failure to protect the
confidential information
of Funding Circle’s
borrowers, investors
and IT systems may
lead to financial loss,
reputational damage and
regulatory censure.
X
responsible for managing information security
security threats before they disrupt operations;
responding to alerts; and ensuring we have the
X
we maintain in-depth defence with a multi-layered
X
the Board via the Technology Security and Risk
we transition back to hybrid office/home
processes as part of our vulnerability
management programme and have
conducted a ransomware table top
exercise to assess our cyberattack
readiness, with identified findings being
security improvement programme to
further enhance our control environment
to build preventative, detective and
procedural controls through technology,
people and process improvements
Technology risk
Failure of the technology
platform could have a
material adverse impact
on Funding Circle’s
business, results of
operations, financial
condition or prospects.
X
place with direct oversight for technology risk to
X
infrastructure to ensure that the platform is
Technology risks did not materially
increase as a result of moving to a remote
workforce, since the capability to do so
was already largely in place before the
reliance on technology with remote
roadmap during 2021, and at the same
lending schemes and the introduction
we made extra investments in the
reliability and maintainability of our
Annual Report and Accounts 2021 61
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Operational risk continued
Key risks Management of risk Change in risk in year
Data risk
Failure in our ability to
acquire, use secure and
transform our data assets
could result in adverse
material impacts across
Funding Circle.
X Our data risk management framework is aligned
X
X
will continue to invest in technology to
systematically measure the quality of our
our data governance framework and
organisational structure to manage all
Financial crime
Risk of regulatory
breach, financial loss
or reputational damage
arising from a failure
to adequately manage
or prevent money
laundering, terrorist
financing, bribery
and corruption, or to
comply with sanctions
regulations.
X
designed to counter money laundering, terrorist
financing, corruption and bribery is fundamental
X The Board has adopted policies to address
financial crimes that have been implemented
X
team within the first line of defence that is
advised, challenged and monitored by the second
government-backed loan schemes,
roll-out there is heightened industry risk
that fraudsters could attempt to exploit
continued to undertake rigorous fraud,
in sections of programmes that could
So far, we have not identified a material
proportion of loan defaults that would
be related to fraudulent applications
Strategic report
62
Principal risks and uncertainties continued
Operational risk continued
Key risks Management of risk Change in risk in year
Client money risk
Failure of Funding Circle
to adequately protect and
segregate client money
may lead to financial loss,
reputational damage and
regulatory censure.
investors in segregated client money bank accounts
X
focused on providing oversight and challenge
regarding the effectiveness of client money
controls, making decisions in relation to client
money and reviewing management information
and regulatory returns, as well as reviewing risks
and mitigating controls when introducing new
product cash flows into client money framework;
X
including an Annual Report and quarterly
management information, prepared for
and approved by the Senior Manager with
and highlights key risks and steps to mitigate;
X specific compliance monitoring activity;
X periodic internal audit reviews covering
governance and control over client assets; and
X
control environment in relation to
payment creation, payment authorisation,
reconciliation review and monthly
New controls were created in 2020
for the money flows related to trust
and these controls have been embedded
and applied to additional trust structures
needed for participation in the new
To assist borrowers through the
pandemic we also increased our
enhancements required for our payment
systems to process partial payments
from borrowers on payment plans were
deployed in Q4 2020, with new controls
implemented and monitoring continuing
throughout the period to ensure a robust
assets continued during 2021 and the
considerations given to the published
increased client money balances and
adequate client asset arrangements,
to be made with our retail investors to
create awareness of funds available to
withdraw to reduce the balance held
Annual Report and Accounts 2021 63
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Assessment of prospects
constitutes an appropriate period over
which to perform the assessment as:
X
medium-term planning process;
X it represents a period over which
there is a reasonable degree
of confidence in the reliability
and accuracy of forecasts
notwithstanding the disruption to
SME businesses and to the lending
of our core loan products caused
stimulus programmes due to end
during 2022; and
X periods beyond this point in a
business model, as set out on pages
20 to 23, are fundamental in driving the
growth of the business and therefore
that are likely to affect the future
prospects of the Group, aside from
macroeconomic factors, include the
ability to:
X transition away from the current
government stimulus packages and
the recommencement of our core
lending products;
X develop and introduce new
lending products;
X
businesses to our platforms;
X diversify and increase funding from
a variety of investors in order to meet
future borrower demand; and
X continue to invest in data analytics
and technology leading to innovation,
expanded datasets, enhanced credit
models, better customer experience
and a greater conversion rate
process involves a detailed review of
of regional and functional leaders,
together with a review and discussion at
The strategic plan starts with the
subject to reforecasting periodically
extended into the second and third year
drivers and expected growth rates
Progress against the financial budget
and forecasts is then reviewed each
and reported to, and challenged by,
Key assumptions
The key assumptions underpinning
the strategic plan (before severe but
plausible scenarios) include:
X levels of marketing spend, the
number of applications, conversion
rates, average loan sizes and mix
of product channels which drive
originations and loans under
X levels of repayments, prepayments,
defaults and recoveries which drive
X expected yields on loans originated
and service fee charges which drive
fee income;
X interest income receipts and
interest expenses related to our
investment vehicles which drive net
investment income;
X costs across geographies with
specific focus on fixed costs and
those that fluctuate with income
such as marketing costs;
X headcount consideration across
functions and departments given it is
X an assumption of continued
infrastructure and its product set
but with the expectation of no
infrastructure or major data loss;
X an orderly transition in 2022 away
from government-backed products
lending products; and
X
stress into 2022 and therefore tighter
we expect that the economy and SMEs
will recover from the current market
does not result in long-lasting negative
government stimulus packages over
the medium term, although longer-
term stimulus packages would likely
further given the move to online that the
Strategic report
64
Viability statement
In accordance with the UK Corporate Governance Code (the “Code”),
the Directors have assessed the future prospects and viability of
the Group for a period significantly longer than 12 months from the
approval of the financial statements.
Assessment of viability
The output of the medium-term plan
of the future prospects of the Group over
have considered and carried out a
robust assessment of the principal
They have also considered the potential
impact of the risks on the viability
of the Group with specific focus on
shorter-term liquidity needs and its
availability, including liquidity currently
tied up in investment products, noting
that there has been a large amount of
monetisation of these products in 2021
such that the Group now holds almost
The financial plan was then subject to
differing scenarios to assess those risks
and quantify the financial impact on the
and capital guardrails that it monitors
which are of particular importance in the
The scenario that represented the
most severe but plausible scenario
sensitivity took into account the likely
scenario is hypothetical and severe but
designed to stress the business model
Severe but plausible scenario
A severe global downturn impacts
that there would not be additional
government intervention as this would
as in that instance we would expect to
be originating loans under government
expected that:
X there would be a short-term period in
year 1 where there would be limited
transaction fees earned as the Group
moves to only originating core loan
X following a further severe global
downturn there would again be a
significant increase in the number of
and our invested capital cash flows;
X the returns for investors would be
negatively affected resulting in a
withdrawal of funding; and
X this in turn would reduce the level
of originations below pre-pandemic
levels unless higher incentives
were offered to investors to
A further subset of risks, including the
reduction in trust from both borrowers
and investors, has also been considered
The mitigating actions that would
be taken by management include a
reduction in the overall marketing
spend, a tightening of the credit
models to improve the levels of return
for investors and increased costs of
Links to principal risks and
uncertainties
X Strategic risk
X
X
Going concern and viability
The stress testing confirmed that the
remained positive and that none of the
scenarios would threaten the viability of
the Group over the assessment period
above, with appropriate management
actions, the scenarios were controllable
liquidity for the broader assessment of
The shorter-term projections within the
the Group had net assets of £288 million,
together with unrestricted cash of
capital, some of which could be monetised
during the assessment, and after stress
scenarios are modelled, the Group
The Group has financial covenants
with institutional investors for servicing
agreements for which there are
unrestricted cash, tangible net worth
and after stress scenarios, the Group
There may be significant uncertainty
in the macroeconomic environment
crisis may have indirect implications for
incoporated into the stress scenario
above, the impact of the crisis is not
considered to impact the conclusions
regarding the going concern or viability
have a reasonable expectation that
the Group will be able to continue in
operation and meet its liabilities and
obligations as they fall due over the
for at least the next 12-month period
Annual Report and Accounts 2021 65
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
CORPORATE
GOVERNANCE
Funding Circle Holdings plc66
67 Chair’s introduction
68 Board of Directors
70 Corporate governance report
77 Division of responsibilities
78 Board effectiveness performance evaluation
80 Audit, risk and internal control
81 Report of the Nomination Committee
85 Report of the Audit Committee
91 Report of the Risk and Compliance Committee
93 Report of the ESG Committee
96 Directors’ remuneration report
106 Annual report on remuneration
120 Report of the Directors
123 Statement of Directors’ responsibilities in respect of the financial statements
A robust and pro-active
system of governance
Chair’s introduction
Committee, which was successfully
demonstrated in 2021 with a
smooth CEO transition, successful
appointments to the Board and changes
to the GLT. We officially welcomed
Helen Beck and Matthew King as
independent Non-Executive Directors
to the Board and both have brought a
wealth of knowledge and invaluable
insight to the work of the Board and
its Committees this year. Ensuring
Board appointments and succession
planning at the highest levels align with
Funding Circle’s culture is crucial, and
the Committee continues to focus on
promoting diversity of gender, social
and ethnic backgrounds, cognitive
and personal strengths across senior
appointments. For full details on the
changes to the Board, please see
our Nomination Committee report
on page 81.
For the first half of 2022, the Board will
be focused on supporting Lisa Jacobs
as she takes up the mantle as CEO from
Samir Desai. Following a successful
transition period since September
2021, the Board are confident that
Lisa will bring exceptional leadership
strength in her new role as previously
demonstrated in her role as UK
Managing Director. Furthermore, the
Board is looking forward to continuing
to benefit from Samir’s knowledge,
passion and energy as he takes up
a Non-Executive Director seat at the
Board table.
The Board and I are excited to see
what the next phase planned for the
Company is going to bring and I would
like to thank the Board and all of our
Circlers for their work and contribution
during 2021.
Andrew Learoyd
Chair
10 March 2022
this strong culture, which is led from
the top and supported by a robust
governance and control framework,
provides a strong foundation for a
successful, sustainable business that
benefits all our stakeholders.
During the pandemic, the Board and
its Committees have had to adapt
to constant change, new challenges
and demands. The Board’s role as
it emerges from the pandemic is to
oversee and challenge the Group’s
medium-term plan, with a focus
on long-term sustainability, taking
into account the interests of all our
stakeholders. We understand that
for the Company to be successful
it is important that it continues to
strengthen its engagement with all
stakeholders, giving consideration
to their needs and interests in the
decision making process. In this report
we explain how the directors have
considered various stakeholder groups
when making decisions and in doing
so, complied with their duties under
section 172 of the Companies Act 2006.
Reports from the Chairs of each of our
Board Committees provide further detail
on their delegated responsibilities and
how they work together with the Board
to generate value and fulfil Funding
Circle’s purpose.
Last year I reported that the Board
decided to establish an ESG Committee
to ensure that we had a dedicated forum
for agreeing, setting and implementing
our ESG goals. New to our corporate
governance section this year is our ESG
Committee report which details the
progress made towards ensuring our
ESG strategy is closely aligned to the
Company’s purpose, values and culture.
There is more to be done on this in 2022
and I look forward to reporting on our
progress with ESG in our 2022 report.
I have been impressed with the
effectiveness of our succession
planning, led by the Nomination
I am pleased to introduce Funding
Circle’s Corporate Governance
Report for the financial year ended
In this report you will find further
information on our corporate
governance arrangements including
the structure of our Board and its
Committees and how we have applied
the UK Corporate Governance Code
2018. The Board practices high
standards of corporate governance
to support the Group in the way it
conducts its business and to ensure
decisions have a positive impact on
the wider community. We believe
that good governance is not simply a
matter of regulatory compliance but
about instilling the right behaviours and
culture throughout the organisation.
In my time as Chair, Funding Circle
has truly embraced the value and
importance of building a strong
corporate culture and is firmly focused
on the pursuit of inclusion and diversity
at all levels. It is important to the Board
that we continue to invest in Circlers
and nurture an environment where
everyone can be themselves. Culture
remains one of the Company’s greatest
assets and I am proud to see that this
has shone through in Funding Circle’s
annual engagement survey this year
which recorded the highest scores
that the Company has ever seen. For
full details please see the Our people
section on page 24 and the engagement
with Circlers on page 40. I believe that
Andrew Learoyd
Chair
Annual Report and Accounts 2021 67
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Corporate governance
1. Andrew Learoyd
Chair of the Board
Term of office: Appointed to the Board as a Non-Executive Director in
February 2010 and became Chair of the Board in May 2016.
Independent: On appointment.
Skills and experience: Andrew spent 23 years working in investment
banking as a research analyst, in corporate finance, equity capital markets
and finally as Chief Operating Officer of the Equities Division in Europe
of Goldman Sachs. He retired as a Managing Director of Goldman Sachs
in 2006. Andrew has been involved as an angel investor, Non-Executive
Director and consultant to several start-up businesses.
External appointments: Andrew is also an independent Non-Executive
Director of Funding Circle Ltd. He is currently a Non-Executive Director of
Threshold Sports Limited, which creates and delivers outdoor events for
the public, corporate and charity sectors. Andrew is also a director of WLG
Learning Ltd which provides educational services for children with special
learning disabilities.
Term of office: Oliver was appointed to the Board as Chief Financial
Officer on 15 June 2020.
Independent: Not applicable.
Skills and experience: Oliver has spent the majority of his 30 years’
experience working in financial services, payments and lending. He joined
from Vanquis Bank where he served as Chief Financial Officer. He was
formerly the Chief Financial Officer at Barclaycard, where he managed a
global business with combined assets of £40 billion, £5 billion of revenues
and £1.6 billion of profits. Oliver is a chartered management accountant
and holds an MBA from Warwick Business School.
External appointments: None.
Term of office: Samir co-founded Funding Circle in 2010, and was
appointed to the Board as Chief Executive Officer in January 2010.
Independent: No.
Skills and experience: Prior to founding Funding Circle, Samir was
a Management Consultant at the Boston Consulting Group and an
Investment Executive at Olivant, a private equity firm that invests in
financial services businesses in Europe, the Middle East and Asia. In 2015,
Samir was awarded a CBE for services to financial services.
External appointments: None.
3. Samir Desai CBE
Founder, Non-Executive Director (as at 1 January 2022)
4. Oliver White
Chief Financial Officer
1
7
10
4
6
8
2
3
11
9
5
2. Lisa Jacobs
Chief Executive Officer
Term of office: Lisa was appointed to the Board as Chief Executive Officer
on 1 January 2022.
Independent: Not applicable.
Skills and experience: Lisa joined funding circle in 2012 and was
previously UK Managing Director, responsible for the overall strategic
direction and day-to day operation at Funding Circle UK. She has
also previously held the role of Chief Strategy Officer, where she was
responsible for developing and launching new product propositions,
international expansion and incubating new business areas. Prior to
Funding Circle, Lisa worked as a consultant, both independently and for
the Boston Consulting Group. She has advised national and multinational
companies, from a variety of industries, on strategic and operational
initiatives covering growth, new product development, reorganisation and
transformation, amongst others. In addition, she has worked for NGOs in
Tanzania and India.
External appointments: None.
R
D
N
E
D
D
Corporate governance
Funding Circle Holdings plc68
Board of Directors
Term of office: Eric was appointed to the Board as a Non-Executive
Director in September 2016. He became Chair of the Risk and Compliance
Committee in September 2018.
Independent: Yes.
Skills and experience: Eric was previously Group Chief Executive Officer
of the Lloyds Banking Group, the FTSE 100 listed banking group, retiring in
2011. Prior to joining Lloyds in 2001, he spent 25 years with Citigroup in a
range of management positions.
Eric holds a Master of Science in Management from the Massachusetts
Institute of Technology and a Bachelor of Arts in History from Cornell University.
External appointments: Eric currently holds a range of appointments
which include as a Non-Executive Director of Russell Reynolds Associates
and membership on the Advisory Board of the Smithsonian Tropical
Research Institute. He also advises on a number of private companies.
5. Eric Daniels
Non-Executive Director
A
RC
Term of office: Hendrik was appointed to the Board as a Non-Executive
Director in September 2013.
Independent: No.
Skills and experience: Hendrik joined Accel in 2004 and focuses on
software, FinTech and consumer internet companies. He led Accel’s
investments in KAYAK (NASDAQ: KYAK, acquired by Priceline),
Showroomprive (EPA: SRP), Funding Circle (LON: FCH), Callsign, Celonis,
CHECK24, Instana, Miro and WorldRemit.
Hendrik started his career in Silicon Valley as an engineer at Hewlett-
Packard before founding a venture-backed software company. He is
External appointments: Hendrik serves as Manager, Partner Director
and/or Member at a number of Accel entities, as well as a Director or
supervisory board member of several other companies.
7. Hendrik Nelis
Non-Executive Director
RC
Term of office: Geeta was appointed to the Board as a Non-Executive
Director in November 2018. She became Chair of the Audit Committee in
November 2018. Geeta was appointed as Senior Independent Director to
succeed Bob Steel when he stepped down at the AGM in May 2021.
Independent: Yes.
Skills and experience: Geeta has over 25 years of experience of financial
services and retail banking, particularly payments and digital innovation.
Geeta was formerly Executive Chair of Monitise Europe. Among the
many roles in her career, Geeta was Director of Payment Services with
HBOS plc and previously Managing Director, UK Retail Bank and Business
Development Head EME at Citigroup. She is a chartered accountant.
External appointments: Geeta serves as Non-Executive Director of
Virgin Money UK PLC (formerly CYBG plc) (where she is Chair of the risk
committee), Wizink Bank S.A. (where she is Chair of the risk committee)
and Ultra Electronic Holdings plc (where she is Chair of the remuneration
committees). Geeta is also a Trustee for the Old Vic Theatre.
6. Geeta Gopalan
Senior Independent Director
RC
A
N
R
D
Term of office: Neil was appointed to the Board as a Non-Executive
Director in March 2011.
Independent: No.
Skills and experience: Neil is a Co-Founder and Partner of Index Ventures.
Before starting Index Ventures, he spent four years with Montgomery
Securities in San Francisco. Neil was previously a Director of Photobox
Holdco Limited, Supercell Oy and The Climate Corporation.
External appointments: Neil is currently a Director on various boards
of companies based in the UK, Europe, the Cayman Islands and the US
including Prodigy Investments Limited, Raisin GmbH, Nexthink SA, Pitch
Software GmbH, Sofia Holdings Limited, Taxfix GmbH and Typeform S.L.
He is also the Co-Chair of Human Rights Watch.
8. Neil Rimer
Non-Executive Director
E
Term of office: Helen was appointed to the Board as a Non-Executive
Director in June 2021.
Independent: Yes.
Skills and experience: Helen has over 25 years of experience in financial
services, particularly in remuneration design, regulation and human
resources. Helen was formerly a Partner at Deloitte and, among her
previous roles in her career, Helen was Global Head of Reward at Standard
Bank, Head of McLagan Europe (part of Aon) and held roles in human
resources at Fidelity International.
External appointments: Helen serves as Non-Executive Director of
Ashmore Group PLC (where she is Chair of the remuneration committee),
Governor of the University of Bedfordshire, Court Governor of the
committee for The British Olympic Association.
9. Helen Beck
Non-Executive Director
E
N
R
Term of office: Lucy was appointed Company Secretary in July 2014.
Independent: Not applicable.
Skills and experience: Lucy is responsible for the Legal, Compliance and
People functions of the business, in addition to being Company Secretary.
Prior to joining Funding Circle, Lucy was one of the founder members of
Kemp Little LLP, a technology focused City law firm. She was managing
partner of the firm from 2009 until 2011, when she became Wonga’s first
General Counsel.
External appointments: Lucy serves on the Board of the charities Bardhan
Research and Education Trust of Rotherham and The Emerson Trust.
D
11. Lucy Vernall
Company Secretary, General Counsel
and Chief People Officer
Term of office: Matthew was appointed to the Board as a Non-Executive
Director in May 2021.
Independent: Yes.
Skills and experience: Matthew has over 36 years of experience in
financial services. Having qualified as a solicitor with Slaughter and May,
Matthew held a number of risk management positions with HSBC over a
15-year period across Asia, Australia, the Americas and Europe.
External appointments: Matthew is also the Chair of Funding Circle Ltd’s
Board. Matthew is currently a Non-Executive Chair of Savannah Resources
plc, an AIM-listed mining and exploration company.
10. Matthew King
Non-Executive Director
E
A
Board Committees
Audit Committee
Remuneration Committee
Nomination Committee
Risk and Compliance
Committee
ESG Committee
Market Disclosure
Committee
Committee Chair
A
R
N
RC
E
D
Annual Report and Accounts 2021 69
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Corporate governance code compliance
The Board believes that a robust corporate governance
framework is essential to deliver the high standards of governance
and long-term investment that the Company needs to thrive and
fulfil its purpose to help small business win. With that in mind, the
Board applies the principles and provisions of the UK Corporate
Governance Code 2018 (the “Code”) available at www.frc.org.uk.
The Board utilises the associated guidance to help it achieve long-
term sustainable success and its wider objectives.
During the financial year ended 31 December 2021, the
Company has applied the principles and believes it has
complied with the provisions of the Code. In this report we
have explained the following areas where we recognise that
there may be views that are not universally accepted or that
Provisions 9 and 19 – Chair’s independence and tenure:
Although the Board has always considered that Andrew’s
tenure should reset on IPO, it recognises this is not a view
that is universally accepted; details are set out in Chair’s
performance and tenure in the Nomination Committee Report
on page 83.
Provision 11 – At least half of the Board excluding the Chair
should be independent: The Company complied with this
provision as at 31 December 2021; however, the Board
recognises that from 1 January 2022 this will no longer
be the case. The Board has explained its position in Board
composition and independence in the Nomination Report
on page 82.
Below we have provided some examples of how the spirit of
the Code has been applied, with cross-references to other
sections of this Annual Report.
Board leadership and Company purpose
As highlighted throughout the Annual Report, the Board
complied with Provision 5 through the appointment of a
designated Non-Executive Director. This role is now held by
Helen Beck and has proven effective in improving engagement
with the workforce as demonstrated through the results of
employee engagement surveys. Please see our People on
page 24 and Engaging with our Stakeholders on page 40
Division of responsibilities
The Board was delighted to make several new independent
Director appointments in 2021 as well as the appointment
of Geeta Gopalan as Senior Independent Director, giving due
consideration to the requisite principles and provisions of the
Code. A document detailing the role of each of the Chair, CEO
and Senior Independent Director can be found on our website
here: https://corporate.fundingcircle.com/who-we-are/
corporate-governance/board-responsibilities/.
Composition, succession and evaluation
The Nomination Committee demonstrated the success of
its work on succession planning especially in relation to the
smooth transition of the CEO appointment. The strategic
approach that the Committee took has proven that its
members take Board composition seriously, ensuring that the
Board works efficiently and effectively with the right level of
experience and diversity. For further details, see succession
planning and changes to the Board in the Nomination
Committee Report on page 82
Purpose, values and culture
Our purpose is to help small business win. When small
businesses succeed, they create jobs, support local
communities and drive the economy forward, which is why we
focus on helping them to win. Our borrowers are at the centre
of everything we do and our employees work together to build
the next chapter.
We have defined our values to deliver our purpose, which will
guide the decisions we take. Our values define what it means
to be part of Funding Circle and represent who we are and
how our team behaves. The five values Circlers live by can be
found in the Our people section on page 26.
We consider our employees and culture fundamental to
the success of our business and in 2021 we continued to
invest in our people by ensuring a safe, open and inclusive
working environment where people feel they belong and
can be themselves. Our team consists of a talented group
of individuals who have a strong alignment with our mission
and share the same drive and passion as our customers.
We believe that creating the right culture is crucial for both
retaining and attracting talent. In 2021 we continued to
enhance our people promise, Build the Incredible, having
realised the value of culture and community during the
first year of the pandemic. Supporting mental health and
wellbeing became even more important in a hybrid working
environment where the boundaries between work and life are
increasingly blurred.
Through our employee share plans, all Circlers have the
opportunity to become shareholders in the Company, which
helps to ensure they are aligned with our mission, vision and
objectives. Our “Equity for All” share plan, which operates
as a share incentive plan and was launched in 2020, had an
89.5% take-up in 2021. The Board regularly receives reports
on people-related matters, including results from our culture,
engagement and wellbeing surveys, which have enabled
the Board to monitor employee engagement, satisfaction
and wellbeing, as well as to understand how our employees
have adapted to hybrid working. The Directors also spend
time with employees, for example by participating from time
to time in our local and global gatherings or as part of the
workforce engagement programme run by Helen Beck in her
role as the designated Non-Executive Director for workforce
engagement. For more details on the Board’s engagement
with the workforce, please see the Engaging our stakeholders
section on page 40.
Significant progress was made with the new ESG strategy
led by the ESG Committee. The Committee carried out its
first full year cycle of meetings dedicated to ensuring the
Group operates responsibly from an environmental, social
and governance perspective and remains on track with
commitments to offsetting/ reducing our operational carbon
footprint. Directors continue to complete training, along
with other Circlers, covering issues such as unconscious
bias. For further information relating to our commitment to
sustainability and ESG work, please see pages 28 and 93.
Corporate governance report
Corporate governance
Funding Circle Holdings plc70
……
Nomination Committee
Key objectives Principal responsibilities
Reviewing the structure, size and composition of
the Board, responsible for succession planning
and making recommendations on appointments
to the Board.
Membership
Andrew Learoyd (Chair)
Geeta Gopalan
Helen Beck
Nomination Committee Report – page 81
X Leads the process for Board appointments and makes
recommendations to the Board
X Reviews the structure, size and composition of the Board and makes
recommendations to the Board about any changes
X Considers plans and makes recommendations to the Board for
orderly succession for appointments to the Board and the Global
Leadership Team
X Keeps the Executive and Non-Executive leadership needs of the Group
under review
X Evaluates the combination of skills, knowledge, experience,
independence and diversity on the Board
X Reviews the results of the Board performance evaluation process, where
they relate to the composition of the Board
X Makes recommendations to the Board about the re-election of Directors
Audit Committee
Key objectives Principal responsibilities
Overseeing the financial and corporate
reporting and internal financial controls of the
Group, managing internal and external audit
procedures and reviewing and overseeing the
Group’s procedures in relation to whistleblowing,
bribery, fraud, money laundering and other
financial crime.
Membership
Geeta Gopalan (Chair)
Eric Daniels
Matthew King
Audit Committee Report – page 85
X Monitors the integrity of the Company’s financial statements
X Reviews and reports to the Board on significant financial reporting
issues and judgements
X Assesses the effectiveness of the Group’s financial reporting procedures
X Monitors and keeps under review the adequacy and effectiveness of the
Group’s internal financial controls and (in conjunction with the Risk and
Compliance Committee) internal control and risk management systems
X Reviews and approves the role and mandate of the Group’s Internal Audit
function and monitors and reviews the effectiveness of its work
X Oversees the relationship of the Company with the external auditors,
recommends their appointment and reviews their effectiveness, fees,
terms of engagement and independence and approves the provision of
non-audit services by the external auditors
Matters reserved for the Board and role of the
Committees
The Board has adopted a formal schedule of matters reserved
for its approval and delegated other specific responsibilities
to the Committees. The matters reserved for the Board are
reviewed annually and include:
X Group strategy, which is reviewed by the Board and
management regularly during the year
X The Group’s annual operating budget
X Major investments, acquisitions and capital projects
X Financial reporting
X Internal controls and risk management
X Material contracts and expenditure
X Certain shareholder communications
X Board membership and other appointments
X Corporate governance matters
X Remuneration of Directors and the Global Leadership Team
X The Group’s environmental, social and governance policy,
framework and reporting
Each Board Committee has written Terms of Reference defining its role and responsibilities as summarised in the table below, which are
also available on the Group’s corporate website: corporate.fundingcircle.com/investors/governance.
Annual Report and Accounts 2021 71
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Corporate governance report continued
Risk and Compliance Committee
Key objectives Principal responsibilities
Reviewing and making recommendations to
the Board in relation to the Group’s internal
control and risk management systems
and compliance with the Group ERMF, the
Group’s compliance with legal and regulatory
requirements and policies and the effectiveness
and appropriateness of the Group’s corporate
governance framework.
Membership
Eric Daniels (Chair)
Hendrik Nelis
Geeta Gopalan
Risk and Compliance Committee Report – page 91
X Assesses the emerging and current principal risk exposure of the Group
and advises the Board on those risk exposures and future risk strategy
X Advises the Board on the Group’s overall risk appetite, tolerance and
strategy for the purpose of achieving its long-term strategic objectives
X Reviews the Group’s capability to identify and manage new risk types
X Monitors and keeps under review the adequacy and effectiveness of the
Group’s internal control and risk management systems, in conjunction with
the Audit Committee
X Considers and approves the remit and effectiveness of the Risk
Management and Compliance functions
X Provides advice and challenge necessary to embed and maintain a
supportive risk and compliance culture throughout the Group
X Monitors and keeps under review the policies and overall process for
identifying and assessing strategic, platform funding and liquidity,
operational, credit and regulatory, reputational and conduct risks and
managing their impact on the Group
X Considers and approves the annual compliance monitoring and testing plan
Remuneration Committee
Key objectives Principal responsibilities
Determining the remuneration of the Directors
and the Global Leadership Team and determining
the policy for the Executive Directors as well
as monitoring and reviewing its ongoing
appropriateness and relevance.
Membership
Helen Beck (Chair)
Andrew Learoyd
Geeta Gopalan
Directors’ Remuneration Report – page 96
X Determines the remuneration of the Chair, the Executive Directors and
the Global Leadership Team (the “Executive Group”)
X Considers, monitors and reviews the ongoing appropriateness and relevance
of the Remuneration Policy (including its level and structure) and consults
with significant shareholders and other stakeholders as appropriate
X Promotes long-term shareholdings by Executive Directors that support
alignment with long-term shareholder interests and develops a formal
policy for post-employment shareholding requirements encompassing
both unvested and vested shares
X Considers, determines and approves the provisions of the service
agreements of the Executive Group and ensures that any payments that
may be made under such provisions are fair to the individual and the
Company, or the relevant member of the Group (as appropriate)
X Reviews workforce remuneration and related policies and the alignment
of incentives and rewards with culture and takes these into account
when determining the remuneration of the Executive Group
X Reviews and approves the policy for authorising claims for expenses
from the Directors
X Reviews the design of any new share incentive schemes for approval by
the Board and, as required, the Company’s shareholders
Market Disclosure Committee
The Board has delegated to the Market Disclosure Committee responsibility for overseeing the disclosure of information by the
Company to meet its obligations under the Market Abuse Regulation, the Financial Conduct Authority’s Listing Rules and the
Disclosure and Transparency Rules. The Market Disclosure Committee is chaired by the Company Secretary and comprises
the Chair of the Board, the Chair of the Audit Committee, the CEO, the CFO and the CRO. The Committee has at least three
scheduled meetings a year and meets more frequently on an as needed basis. In 2021, the Committee met six times.
ESG Committee
The Board has delegated to the ESG Committee responsibility for overseeing and monitoring the implementation of the
Company’s environmental, social and governance policy and framework, as approved by the Board. The Committee also
oversees the Board’s workforce engagement in conjunction with the designated workforce engagement Non-Executive
Director. The Committee is chaired by the Chair of the Board, who is joined by Helen Beck (Workforce Engagement Director),
Neil Rimer and Matthew King. See the ESG Committee Report on page 93.
Matters reserved for the Board and role of the Committees continued
Corporate governance
Funding Circle Holdings plc72
The table below sets out attendance at Board meetings in 2021, including the strategy meeting held in October 2021. The
Company Secretary attended all of the Board meetings in 2021. The attendance for the Committee meetings are detailed in each
of the Committee reports.
Director No. of meetings Attendance
Andrew Learoyd 7/7 100%
Samir Desai 7/7 100%
Oliver White 7/7 100%
Eric Daniels 7/7 100%
Geeta Gopalan 7/7 100%
Hendrik Nelis 7/7 100%
Neil Rimer 6/7 86%
Helen Beck (appointed 1 June 2021) 4/4 100%
Matthew King (appointed 19 May 2021) 5/5 100%
Cath Keers (resigned 19 May 2021) 2/2 100%
Bob Steel (resigned 19 May 2021) 2/2 100%
Ed Wray (resigned 19 May 2021) 2/2 100%
The Board and Board Committee meeting schedule for 2022
has been approved by the Board and the Committees and
the Board will meet formally at least six times during the year,
including a Board strategy meeting. Ad hoc meetings may
be called as and when appropriate, as was the case in 2021.
The Audit Committee will continue to hold four meetings
as in 2021 to ensure the Committee continues to provide
appropriate oversight of the Group’s control environment and
evolving business with additional products.
The Board’s activities throughout the year are underpinned
by our external reporting calendar and our internal business
planning processes. A rolling annual agenda ensures that all
important topics receive sufficient attention. Standing items
provide an anchor to the strategy and provide the Board with
a consistent view of progress during the year, whilst sessions
on priority topics allow deeper insight. A summary of the
Board’s key activities during 2021 is set out on the next page.
In addition, some examples of key decisions taken by the
Board in 2021, in the context of its section 172 duties, are set
out on page 75.
Global Leadership Team
Day-to-day management of the Group, including the
implementation of the Group’s business plan and strategy, is
delegated by the Board to the Global Leadership Team, chaired by
the CEO. The Global Leadership Team is responsible for managing
the business, delivering the strategy, managing risk, ensuring
regulatory compliance, establishing financial and operational
targets and monitoring performance against those targets.
Board activity
Board meetings are planned around the key events in the
corporate calendar, including the half-year and full-year results
and the Annual General Meeting (“AGM”), and a strategy
meeting is held each year. The Board also receives a monthly
management financial report. The Chair and Non-Executive
Directors have had the opportunity to have regular discussions
without Executive Directors present.
Annual Report and Accounts 2021 73
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Q1 2021
X Full-year results announcement
X Annual Report and Accounts
X US business deep dive
X Balance sheet strategy
X 2021 forecast
X Investor relations
X Review of key policies
X Evaluation of the Chair
X Board effectiveness
X Succession planning
Q4 2021
X Strategy meeting
X Investor relations
X Medium-term plan discussion
and approval
X 2022 budget and plan
X FlexiPay deep dive
Q2 2021
X UK business deep dive
X Growth initiatives and
technology platform
X People/employee engagement
X Investor relations
X ESG Committee update and
Terms of Reference established
X Appointment of Matthew King
and Helen Beck to the Board
X Approval of restricted share
awards to Executive Directors
X AGM
X Appointment of Geeta Gopalan
as Senior Independent Director
Q3 2021
X Appointment of Geeta Gopalan
to the Remuneration Committee
X Half-year results
X CEO transition
In addition, at each Board meeting the standing agenda includes:
X Approval of minutes (circulated to all Directors in advance for comment) and review of outstanding actions
X Corporate governance and Committee reports
X Report from the CEO, including key developments in the Group’s business and trading updates
X Financial and operational review
Agendas and accompanying papers are distributed to the Board and Committee members well in advance of each Board or
Committee meeting. These include reports from Executive Directors, other members of senior management and external
advisers, as appropriate. All Directors have direct access to senior management should they require additional information on
any of the items to be discussed.
The Audit Committee and the Risk and Compliance Committee receive further regular and specific reports to allow the
monitoring of the adequacy of the Group’s systems of internal controls (described in more detail in the Audit Committee Report
on page 85 and the Risk and Compliance Committee Report on page 91).
2021 Board activities
Corporate governance report continued
Corporate governance
Funding Circle Holdings plc74
Board decision making and Section 172 duties
As set out in the Section 172(1) Statement on page 40, the Directors are fully aware of their section 172 duties (and receive
training on their duties on an annual basis). In discharging these duties, the Directors have regard to the factors set out in section
172(1)(a)-(f) of the Companies Act 2006, as well as to other factors which they consider relevant to the decision being made
(for example, the views of regulators). While the Board accepts that not every decision it makes will result in a positive outcome
for all of the Company’s stakeholders, by considering the Company’s purpose, mission and values together with its strategic
priorities and having a process in place for decision making, the Directors aim to make sure the Board’s decisions are consistent
and predictable. Some examples of how the Directors have had regard to the matters set out in section 172(1)(a)-(f) when
discharging their duties during the year are set out below.
Principal decision
Key stakeholders
considered
Board’s decision making process
Becoming an
accredited lender
under RLS
Borrowers
Investors
Community
Government
Having ensured that Funding Circle was able to use its unique position to support
as many small businesses as possible during the first year of the pandemic through
facilitating CBILS lending in the UK and PPP in the US, the Board made sure that
the Group was able to continue this support into 2021, becoming the first FinTech
lender to be accredited for the Recovery Loan Scheme.
The Board (in conjunction with the Risk and Compliance Committee) carefully
considered proposals to reintroduce core lending to lower risk borrowers in both the
UK and the US , oversaw the transition from CBILS to RLS and continued to oversee
the implementation of robust controls and continued monitoring of the government
guaranteed loans.
Supporting Circlers
through the pandemic
and return to office and
hybrid working
Employees Ensuring a continued focus on the health and wellbeing of Circlers remained of
critical importance to the Board as the pandemic continued to impact ways of
working. The Board received updates on the results of wellbeing and engagement
surveys and direct feedback from workforce engagement sessions and considered
plans for the implementation of return to office and hybrid working.
Balance sheet strategy Investors
Shareholders
In order to promote long-term success of the Company for the benefit of shareholders
and other stakeholders, the Board reviewed its previous balance sheet strategy coupled
with the experience of Covid-19 and approved management’s proposal of investment
principles and provided feedback on the application of the proposed principles. The
Board considered how balance sheet investment fit within the wider funding strategy
and governance with the proposed principles identifying a clear framework within
which to operate to strengthen the platform and benefit shareholders.
As part of its ongoing review of investments held for sale by Funding Circle, the Board
approved sales of portfolios of loans held in US and UK warehouses which reduced
investment income but significantly improved the Group’s cash position.
Appointment of
Matthew King
and Helen Beck to
replace retiring Non-
Executive Directors
Borrowers
Investors
Community
Employees
Following the decision of Bob Steel, Ed Wray and Cath Keers to step down from the
Board at the Annual General Meeting on 19 May 2021, the Board agreed that it was
in the best interests of the Group and its stakeholders to appoint two independent
Non-Executive Directors. Following a thorough recruitment process (for full details
see our 2020 Annual Report and 2021 Nomination Committee Report on page 81) it
was agreed that the appointment of Matthew King and Helen Beck was in the best
interests of the Company’s employees and investors and necessary to maintain the
high standards of business conduct at Funding Circle and promote the success of the
Company in the long term.
ESG Committee Terms
of Reference and
strategy approved
Community
Borrowers
Investors
Employees
Regulators
The Board is committed to ensuring the impact of the Company’s operations on the
community and the environment is a positive one. The Board approved a new ESG
framework in December 2020, the implementation of which was delegated to the
ESG Committee.
In 2021, the ESG Committee completed its first full year cycle of meetings which
included the creation of Terms of Reference and an ESG strategy that would
address environmental, social and governance as well as diversity, equity and
inclusion (“DEI”) issues effectively. For more information relating to the work of the
ESG Committee see page 93.
Annual Report and Accounts 2021 75
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Principal decision
Key stakeholders
considered
Board’s decision making process
Appointment of Lisa
Jacobs as CEO
Community
Borrowers
Investors
Suppliers
Employees
Regulators
The Nomination Committee had delegated responsibility for overseeing a CEO
succession planning project which came to fruition in 2021 following Samir’s
decision to step back from the day-to-day activity of running Funding Circle.
Following an extensive process to appoint a successor, the Board decided to
appoint Lisa Jacobs as Chief Executive Officer of Funding Circle effective from
2021 and worked alongside Samir to ensure a smooth CEO transition process.
The Board’s decision to appoint Lisa Jacobs as CEO was made with regard to the
interests of the Company’s employees and the Company’s business relationships
with suppliers, customers and others. Lisa demonstrated the core strengths and
qualities that the Board was looking for and had the benefit of understanding
Funding Circle well.
Appointment of
Samir Desai as Non-
Executive Director
Community
Borrowers
Investors
Employees
Regulators
In addition to appointing Lisa Jacobs as Samir’s successor, the Board also made
the decision to appoint Samir as a Non-Executive Director to the Funding Circle
Board with effect from 1 January 2022. More information regarding the terms
of Samir’s appointment to the Board can be found in the Nomination Committee
Report on page 81.
As a major shareholder and founder, Samir’s appointment as Non-Executive
Director to the Board will help to support a smooth transition of leadership and was
in the best and long-term interests of all stakeholders.
Medium-term plan
approved with strategy
set up to 2024
Community
Borrowers
Investors
Employees
Regulators
A medium-term plan was prepared for Board discussion with the objective
of providing a baseline set of financials for 2022 – 2025, ensuring the plan is
appropriate for the Group, to set direction and targets for the 2022 budget, develop
KPIs and further strategic discussion. Furthermore, the decision to approve the
medium-term plan and strategy took into consideration the desirability of the
Company maintaining a reputation for high standards of business conduct and the
likely long-term consequences and success of the Company.
Monitoring the
progression of our
instant decision making
capabilities and the roll
out of FlexiPay
Community
Borrowers
Investors
Suppliers
Employees
Regulators
Enhancing our offerings to our borrowers is a key area of priority for the Board.
Following a strategic decision to diversify Funding Circle’s product set to introduce
FlexiPay at the end of 2020 (made possible by the development and roll-out of our
new technology platform), the Board continued to review and monitor its roll-out
taking into account the interests of all stakeholders. The Board discussed the
development of the FlexiPay product and the proposal for the FlexiPay product at
meetings and strategy sessions during the year, providing challenge and insight on
aspects of the proposition and approving guard rails for the initial launch of FlexiPay
to subsets of existing borrowers. The Board focused particularly on the interests
of customers, ensuring that borrower feedback was sought and considered
throughout the development of the product.
Corporate governance report continued
Board decision making and Section 172 duties continued
Corporate governance
Funding Circle Holdings plc
76
How we are organised
There is a clear division of responsibilities between the Chair and the
CEO (which has been set out in writing and approved by the Board)
and these responsibilities, as well as the role of the Senior Independent
Director and other members of the Board, are set out below:
Responsible for:
X The leadership and overall
effectiveness of the Board and for
upholding high standards of corporate
governance throughout the Group and
particularly at Board level
X Setting the Board agendas with the
Company Secretary and CEO and the
recommendation of an annual Board
and Committee meeting schedule
X Promoting a culture of openness and
debate, in particular by facilitating the
effective contribution of Non-Executive
Directors, and ensuring constructive
relations between Executive and Non-
Executive Directors
X Ensuring effective communication with
shareholders, including in relation to
governance, remuneration and strategy
Responsible for:
X All aspects of finance including
financial planning, tax, treasury and
procurement
X Investor relations
X Working with the CEO to develop
and implement the Group’s strategic
objectives, annual budget and
business plan
X Ensuring effective financial
compliance and control
Responsible for:
X Providing objective and constructive
challenge to management
X Assisting with the development
X Scrutinising and monitoring financial
and operational performance and the
Group’s risk management framework
Responsible for:
X Being available to all Directors to
provide advice and assistance on
X Advising Directors on their duties
X Ensuring compliance with the Board’s
procedures and with applicable laws
and regulations
Responsible for:
X Leadership of the Global Leadership
Team in the executive management
of the Group
X The delivery of the Group’s strategy
X The development of the annual budget
and business plans and commercial
objectives with the Board
X Setting an example and
communicating to the Group’s
employees the expectations of the
Board in relation to the Group’s culture,
values and behaviour
X Ensuring appropriate, timely and
accurate information is disclosed
X Managing the Group’s risk profile in
line with the extent of risk identified
as acceptable by the Board and
ensuring appropriate internal controls
are in place.
Responsible for:
X Being available to shareholders if they
have concerns, which contact through
the normal channels of the Chair, CEO
or other Executive Directors has failed
to resolve
X Attending meetings with and listening
to the views of major shareholders
as required
X Providing a sounding board for the
Chair and acting as an intermediary
X Meeting other Non-Executive Directors
without the Chair present once a year
to appraise the Chair’s performance
Chair
Chief Financial Officer Non-Executive Directors Company Secretary
Chief Executive Officer Senior Independent Director
Division of responsibilities
Annual Report and Accounts 2021 77
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Board eectiveness
performance evaluation
The Board takes its continuous improvement and development very seriously and, at the end of 2021, conducted an internal
effectiveness review. A thorough questionnaire was devised and distributed to all Directors on the Board and the Company
Secretary. The Company Secretarial team consulted with the Chair to determine the topics covered by the questionnaire and,
as the neutral party, oversaw the process of collecting responses and analysing and presenting the outcomes. Effectiveness
reviews for the Committees of the Board were also conducted and details of these evaluations are provided in the Committee
reports as follows: Nomination Committee on page 84, Remuneration Committee on page 107, Audit Committee on page 90 and
Risk and Compliance Committee on page 92.
In compliance with the Code, the evaluation asked respondents to consider the Board’s composition and diversity and how
effectively members work together to achieve objectives. Having identified some areas in need of review, the questionnaire was
developed to comprise eight sections covering the following areas: lessons learned from the past 12 months, leadership and
purpose, division of responsibility and composition, meeting process, boardroom behaviours, development and support, risk and
controls, and stakeholders and culture. A summary of what each section covered and the outcomes agreed by the Board can be
found below:
Section 1 – The past 12 months
This section required respondents to provide comments regarding the Board’s learning from the past 12 months and to reflect
on how the Board could use the experience of the past 12 months to improve effectiveness.
Section 2 – Leadership and purpose
The questions in this section asked respondents to evaluate how the Board complies with statutory obligations in regard to
section 172 of the Companies Act 2006, the effectiveness of the existing combination of executive and Non-Executive Directors,
the effectiveness of the Chair’s leadership, Commitment of Board members to their roles and challenge in the boardroom.
Section 3 – Division of responsibility and composition
This section asked respondents to assess the composition of the Board in relation to whether it reflects sufficient diversity
of gender, social and ethnic backgrounds and cognitive and personal strengths. The combination of skills, experience and
knowledge of Board members was also evaluated.
Section 4 – Meeting process
Questions addressed the quality and timeliness of information received by the Board, the appropriateness of the length of Board
meetings to discuss substantive matters and the quality of debate and the effectiveness of existing processes to inform the
Board of material matters between meetings.
Section 5 – Board behaviours
Respondents were asked to evaluate boardroom behaviours which included rating the extent to which the Board embodies
the purpose, vision, values and desired culture of Funding Circle and whether individual Board members arrive prepared
for meetings.
Board eectiveness performance evaluation
Corporate governance
Funding Circle Holdings plc78
Section 6 – Board development and support
This section reviewed the quality of support provided by the Company Secretarial team and the quality of reporting from
Committees up to the Board. Non-Executive Directors were also asked to evaluate the support and training opportunities
provided to them and whether this was sufficient for them to carry out their roles.
Section 7 – Risk and controls
Questions intentionally addressed the requirement of Principle O of the Code and asked Board members to evaluate the
appropriateness of the Board’s focus on risk and risk management, the framework of controls used by the Board to assess and
manage risk and the Board’s strategy for dealing with and reporting on principal and emerging risks.
Section 8 – Stakeholders and culture
This section evaluated the extent to which the Board understood the views of the Company’s stakeholders, the consideration
of ESG issues, workforce policies and practice and whether the Company’s mission, values and strategy were aligned with the
Company’s culture.
Outcomes
There were good ratings across all sections of the evaluation, demonstrating confidence that the Board was working effectively
with strong Company Secretarial support in place and Board members demonstrating behaviours that embodied and reflected
the purpose, mission, values and desired culture at Funding Circle. In regard to risk and controls, there was confidence that the
Board had good procedures and frameworks in place.
In addition, the evaluation identified some areas for improvement which the Board has committed to addressing in 2022, which
include but are not limited to:
X CEO and Chair to review the Board agenda plan for 2022, including the length of meetings to optimise the Board meeting
time and ensuring the right amount of time is spent on contentious and critical areas. Carry out a continual review
throughout the year to confirm effectiveness
X Identify actions that the Board can take in 2022 to improve engagement with all stakeholders
X Further discuss Board composition and determine whether additional skills are required on the Board
X Ensure sufficient time for Committee reports and for Non-Executive Directors to meet without management present
External evaluation
The Board recognises the value of an externally facilitated evaluation in helping to recognise its strengths and weaknesses
Annual Report and Accounts 2021 79
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
operate. This includes ensuring that an
appropriate system of risk governance
is in place throughout the Group. To
discharge this responsibility, the Board
has established frameworks for risk
management and internal control using
a “Three Lines of Defence” model and
reserves for itself the setting of the
Group’s risk appetite. In 2021, the Board
and management completed a Three
Lines of Defence exercise which was
effective in ensuring alignment between
management and the Board. For further
details on the Three Lines of Defence
model, please see page 52.
The Board oversees the Group’s risk
management and internal control
system and is responsible for reviewing
its effectiveness. During the year, the
Board carried out a robust assessment
of the principal risks and uncertainties
facing the Group, which are described
in more detail on pages 55 to 63 of
the Strategic Report and the Reports
of the Risk and Compliance and
The Board retains ultimate responsibility
for the Group’s systems of internal
control and risk management but has
delegated in-depth monitoring of the
establishment and operation of prudent
and effective controls in order to assess
and manage risks associated with the
Group’s operations to the Risk and
Compliance and Audit Committees.
The Risk and Compliance Committee
also monitors compliance with the
ERMF. More information on the ERMF is
provided on page 54.
Members of the Global Leadership
Team are responsible for the application
of the ERMF, for implementing and
monitoring the operation of the systems
of internal control and for providing
assurance to the Risk and Compliance
and Audit Committees and the Board.
Risk management and compliance
constitute the second line of defence
in the “Three Lines of Defence” model.
The Risk Management function is
accountable for the quantitative and
qualitative oversight and challenge
of the identification, measurement,
monitoring and reporting of principal
risks and for developing the ERMF.
The Compliance function supports
and advises the business on the
identification, measurement and
management of its regulatory and
conduct risks. It is accountable for
maintaining the compliance standards
and framework within which the Group
operates, and monitoring and reporting
on its compliance risk profile. The
third line of defence is Internal Audit,
which is provided by an in-house
team led by an experienced Head of
Internal Audit, with co-source specialist
support from Deloitte as required.
The Internal Audit function provides
independent and objective assessment
on the robustness of the ERMF and
the appropriateness and effectiveness
of internal controls to the Risk and
Compliance and Audit Committees
and the Board. More information on the
Internal Audit function is set out in the
Audit Committee Report on page 89.
The Board has delegated to the Audit
Committee responsibility for overseeing
the financial and corporate reporting
and internal financial controls of the
Company and its subsidiaries. This
includes reviewing the content of the
Annual Report and Accounts and
advising the Board on whether, taken
as a whole, it is fair, balanced and
understandable. Details of this process
and the focus of the review and of the
Audit Committee’s role, activities and
relationship with the external auditors
are on pages 85 to 90 of the Report of
the Audit Committee.
Responsibility for preparing
the Annual Report and Accounts
The Board is responsible for maintaining
adequate accounting records and seeks
to ensure compliance with statutory and
regulatory obligations. An explanation
from the Directors about their
responsibility for preparing the financial
statements is on page 123 in the
Statement of Directors’ Responsibilities.
The Company’s external auditors
explain their responsibilities
on page 130.
Risk management and
internalcontrol systems
The Board is responsible for promoting
the long-term success of the Company
for the benefit of shareholders, while
taking into account the interests of
our other key stakeholders including
our people, borrowers, investors in our
loans and the communities in which we
Audit, risk and internal control
Audit, risk and
internal control
Corporate governance
Funding Circle Holdings plc80
assessed the suitability of Lisa
Jacobs succeeding Samir as CEO
and on 9 September 2021, we
announced her succession to the
role with effect from 1 January 2022.
X Following the decision of Bob
Steel to retire from the Board, the
Committee recommended the
appointment of Geeta Gopalan as
Senior Independent Director.
X Ed Wray and Cath Keers also retired
from the Board leaving vacancies for
two additional independent Non-
Executive Directors. Having carefully
considered potential candidates for
the role (as detailed in our Annual
Report 2020) the Committee
recommended the appointment
of Helen Beck as an independent
Non-Executive Director to the Board
and as Chair of the Remuneration
Committee on 1 June 2021. Helen
was also appointed as a member of
the Nomination Committee and ESG
Committee and replaced Andrew
Learoyd as the designated Non-
X The Committee reviewed the
suitability of Matthew King as an
independent Non-Executive Director
to the Board and recommended
his appointment on 19 May 2021.
Matthew was also recommended
to be appointed as a member of
of the ESG Committee. He continues
to serve as the Chair of our regulated
UK board, Funding Circle Ltd
(“FCL”), the FCL Audit Committee,
and the FCL Risk and Compliance
Committee. As Chair he holds the
Senior Management Function and
spends a significant amount of time
with the UK business.
2022 priorities
X Oversee the appointment of Lisa
Jacobs as CEO and supporting her
as she takes on her new role.
X Refresh and developing the Board,
GLT and senior management
succession plans in light of the
CEO transition and growth plans
X Continue to review the structure,
size and composition of the
Board, taking into account the
skills and qualities required for
the Board and its Committees to
deliver the Company’s long-term
strategy, considering the external
environment, and to allow continual
refreshing of the Board.
On behalf of the Board, I am pleased to
present the Nomination Committee’s
Report for the year ended 31
December 2021.
2021 has been a year of change and
the Committee has had the opportunity
to demonstrate the importance of
robust succession planning, having
overseen a smooth CEO transition and
changes to the independent Non-
Executive Directors. The Committee
met frequently to ensure that all areas
under its remit have been properly
carried out in accordance with the
Committee’s Terms of Reference and
that appointments to the Board and
changes to the Global Leadership Team
have been carefully considered before
recommending to the Board.
2021 highlights
X After 12 years as CEO, Samir Desai
decided to step back from day-to-day
activities. The Committee reviewed
Samir’s suitability to continue on the
Board as a Non-Executive Director
and recommended his transition
to this role with effect from 1
January 2022.
X In line with the Committee’s
succession plan, the members
Report of the Nomination Committee
Andrew Learoyd
Chair of the Nomination Committee
Members and attendance
Member Meetings Attendance
Andrew Learoyd (Chair) 4/4 100%
Geeta Gopalan (appointed 19 May 2021) 3/3 100%
Helen Beck (appointed 1 June 2021) 3/3 100%
Bob Steel (resigned 19 May 2021) 1/1 100%
Cath Keers (resigned 19 May 2021) 1/1 100%
Report of the
NominationCommittee
Annual Report and Accounts 2021 81
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Role of the Committee
For information regarding
the Committee’s role and key
responsibilities, please see page 71 of
the Corporate Governance Report and
the Terms of Reference on our website
at corporate.fundingcircle.com/who-
we-are/corporate-governance/board-
committees/.
Board composition and
independence
As at 31 December 2021, the Directors
considered the Board to be compliant
with the UK Corporate Governance
Code 2018 (the “Code”) in respect of
Director independence with all Non-
Executive Directors, other than Hendrik
Nelis and Neil Rimer, being considered
independent. However, the Committee
recognises that from 1 January 2022,
with Samir moving to a non-executive
role and Lisa joining the Board, this will
no longer be the case. The Committee
believes that the current composition
of the Board, despite technical
non-compliance with the Code, is
appropriate to provide consistency
and support to the management
team following the CEO transition and
considers that the non-independent
Non-Executive Directors bring
significant knowledge and expertise to
the Board which is currently positive
for the Company and its stakeholders.
However, the Committee plans to
continue to review the composition
of the Board alongside the existing
balance of skills and knowledge
and focus on succession planning
to enable it to meet both diversity
and independence expectations to
discharge its responsibilities and
support the Company’s medium-term
plan and future development.
The Committee reviewed Directors’
independence in 2021 which included
looking at share options held by
Andrew Learoyd and Eric Daniels
that had been awarded pre-IPO and
were fully vested. Prior to listing, the
Company granted options to some
Non-Executive Directors under the
Company’s share option plans but no
options have been granted to them
since IPO and all options held by Non-
Executive Directors have vested. It is
the Board’s position that the historical
granting of options does not impair the
independence of those Non-Executive
Directors. For further details regarding
the Chair’s independence, please see
the section on Chair’s performance and
tenure below.
For further information on the roles of
the Board please see page 77 of the
Corporate Governance Report.
Diversity and inclusion
This year, the Company has made
huge strides in ensuring it provides
and maintains a diverse and inclusive
culture, free from discrimination of any
kind. Diversity, equity and inclusion
(“DEI”) is a priority which extends across
the Company at all levels to ensure all
individuals feel represented, treated
fairly with equality of opportunity and
included. To ensure this, we have a
Group-wide diversity policy and a
Company DEI statement which extends
to Board appointments. The policy
sets out the Company’s commitment
that all candidates are considered
fairly regardless of gender, race, age,
sexual orientation and academic or
professional background. The Company
ensures all Circlers receive diversity and
inclusion training, as well as the Board
and the FCL Board.
DEI is a key component of the ESG
framework which was approved by the
Board in 2020 and rolled out this year
alongside a new diversity and inclusion
engagement plan to help ensure the
delivery of our objectives. A full cycle of
ESG Committee meetings took place
in 2021 to monitor the implementation
and delivery of the framework and the
Nomination Committee provided further
governance structure to support and
oversee the implementation of diversity
goals. As part of this work, Helen Beck
also took over the role of dedicated
Non-Executive Workforce Director. For
further information on the progress
of our work on DEI and sustainability
please see pages 27, 28 and 95.
The Committee recognises the benefits
of having a diverse Board in its broadest
sense and when reviewing the structure,
size and composition of the Board,
as well as making appointments to
the Board, the Committee takes into
account diversity in its widest sense.
The Committee is particularly pleased
that the Board currently exceeds the
targets in the Parker review on ethnic
diversity and that the recruitment
of Helen Beck and Lisa Jacobs has
improved female representation on the
Board. As at 31 December 2021, the
Board had 22% female representation.
With Lisa joining the Board from
1 January, the representation has
increased to 30%. The Committee
recognises that this does not meet
the Hampton Alexander review target
of 33% and will continue to review
and improve female representation
on the Board. The Committee plans
to maximise the opportunity for
potential Board candidates from diverse
backgrounds by ensuring short lists
include those from diverse gender,
social and ethnic backgrounds that
reflect the diversity at Funding Circle
and the wider community.
Furthermore, the Company still plans
to achieve its target of 40% female
representation across senior levels by
2025. For further information about our
Women in Finance target and current
figures on senior female leadership
representation please see the Our
People section on page 25.
Report of the Nomination Committee continued
Corporate governance
Funding Circle Holdings plc82
Samir decided to step back from his
executive role as CEO. It was of critical
importance to the Committee and
the Board that the right successor
be appointed to the CEO role and so
Egon Zehnder completed some work
to identify suitable external candidates
alongside internal candidates that had
been identified by the Committee as
appropriate successors. Following
extensive candidate mapping and
in-depth executive development plans
for the potential internal candidates,
it was determined by the Committee
that the internal candidates were
stronger and therefore it would be in
the best interests of the Company to
recommend them for consideration
by the Board. The succession plan
was then implemented and used to
develop the terms of the CEO transition
to ensure an organised changeover
of leadership. This culminated in the
Committee’s decision to recommend
the appointment of Lisa Jacobs,
who had demonstrated exceptional
leadership strength as UK Managing
Director, particularly throughout the
pandemic, to the role of CEO and to
the Board with effect from 1 January
2022 and to recommend the transition
of Samir Desai to a non-executive
role (subject to the standard NED
appointment terms) with effect from
The Committee was also required to
implement the succession plan for the
role of UK Managing Director to replace
Lisa Jacobs. The Committee consulted
with Egon Zehnder to evaluate internal
candidates alongside external ones
and a thorough and rigorous evaluation
and interview process was followed to
identify the right successor for the role.
Following this process, the Committee
made a recommendation to the Board
to appoint an internal candidate,
Alexander Allen, to the role of UK
Managing Director.
Chair’s performance
and tenure
As explained in our 2020 report,
Andrew was appointed to the Board
in 2010 and took on the role of
Chair in May 2016 prior to Funding
Circle going public. As set out in
previous reports, the Board has
always considered that Andrew’s
tenure, for the purposes of the Code,
should reset on IPO. The Board
also recognises that this view is not
one that is universally accepted and
thus the requirement of a maximum
tenure of nine years as prescribed by
the Code may not be fulfilled. The
Directors strongly believe that it is
critical and in the best interests of the
Company and its stakeholders that
Andrew remains as Chair to provide
continuity and stability of leadership
and support throughout the CEO
transition and to deliver the medium-
term plan as the Company emerges
from the pandemic. In the meantime,
the Committee will continue to
develop a suitable succession plan
for the Board, including the role
of the Chair, with support from a
third party (as it did for the CEO
succession plan) in due course.
The review by the Board of the
Chair, which was facilitated by me as
Senior Independent Director, was
very positive and Andrew was
recognised for very ably steering the
Company through arguably
challenging times. The Committee
recommended unanimously that
Andrew continue in post as Chair of
the Board at this critical time. The
Board supports this recommendation
and is satisfied that Andrew
continues to demonstrate objective
judgement, promote constructive
challenge amongst other Board
members and actively seeks counsel
of other independent
Non-Executives”.
Geeta Gopalan
Senior Independent Director
Succession planning and
changes to the Board
The Committee continues to develop
and maintain a succession plan for
Board and senior management roles
that promotes diversity of gender, social
and ethnic backgrounds and cognitive
and personal strengths. The succession
plans for Executive Directors and senior
management roles are prepared on both
short and long-term bases, whilst those
for Non-Executive Directors reflect the
need to refresh the Board regularly.
The succession plan for independent
Non-Executive Director replacements
for Bob Steel, Cath Keers and Edward
Wray was implemented following the
Annual General Meeting (“AGM”) in
May with the appointment of Matthew
King and Helen Beck to the Board. The
appointments were approved following
a rigorous process (as detailed in
our 2020 report) to ensure they were
aligned with the desired composition of
the Board. The decision was also made,
following the resignation of Bob Steel, to
appoint Geeta Gopalan as his successor
to the role of Senior Independent Director.
Ongoing discussions by the Committee
throughout the year have acknowledged
that there could be consideration
of further changes to the Board to
improve diversity and ensure additional
independence as well as to enhance
the skills and knowledge around the
Board table.
Most significantly, the transition of
as CEO and the transition of Samir
to Non-Executive Director have
demonstrated the effectiveness of
the Committee’s development and
implementation of the succession
plan for the role of CEO. As mentioned
in previous Annual Reports, the
Committee engaged with Egon Zehnder
in regard to long-term planning for a
diverse pipeline of talent which included
succession planning in the event that
Annual Report and Accounts 2021 83
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Committee effectiveness
The Committee undertook an
effectiveness review for 2021
by completing a self-assessed
questionnaire which had been created
by the Secretariat to enable the
Committee to compare and contrast
its performance with the previous
year. The questions evaluated the
constitution, composition and set-up
of the Committee, the process of the
meetings including whether there was
sufficient time dedicated to discussions
and the core focus of the work of
Overall, the outcomes of the
effectiveness review were positive and
showed improvement from the previous
year which, in part, was attributed to
the new composition of the Committee.
The questionnaire revealed that the
succession plan for both the Board
and senior management was good and
would continue to be developed in 2022.
The process of setting and meeting
diversity objectives and strategies
for Funding Circle alongside the ESG
Committee was working seamlessly
and Committee members were pleased
with the progress made. The evaluation
also highlighted the value of completing
a deeper dive on succession planning
for senior management over the next 12
months in light of the changes due to
take place in 2022.
Re-election
The position of each Board member
was closely reviewed during the year as
part of the consideration of succession
arrangements and the Board and
Committee evaluation process. The
Committee is satisfied that there is a
good balance of skills and experience
on the Board to support the Company’s
future development and, accordingly,
recommended to the Board that each
Director stand for re-election at the
forthcoming AGM.
Andrew Learoyd
Chair of the Nomination Committee
10 March 2022
Commitment and interests
The Committee reviewed the
commitment of all Directors to the
Board both in regard to dedication to the
role and time available to carry out their
duties, which included consideration
of existing directorships. It concluded
that all Directors were dedicated and
able to commit appropriate time to their
roles and that none of the Directors’
conflict of interest.
Board induction and training
Both Matthew King and Helen Beck
received comprehensive induction
programmes on appointment which
took place over several months to
help them familiarise themselves
with the business. Director induction
programmes are designed to provide
Directors with a mixture of written
material (through a dedicated Board
portal) and face to face interaction with
key members of staff.
In addition to a comprehensive
induction programme, Directors are also
asked to complete e-learning (which
includes annual refresher training) on
key topics to keep their knowledge
current and enhance their experience,
such as training on their duties and
responsibilities as directors of a listed
company and on diversity, equity and
inclusion. During the year the Board was
also given various presentations by the
Company’s advisers, brokers and senior
management. Directors who are also
appointed to the Board of Funding Circle
Ltd (“FCL”), an FCA regulated entity, also
undertake training on the protection of
client assets and money (CASS) and
the Senior Managers and Certification
Regime (“SMCR”).
The Committee, with the support of
the Company Secretary, considers the
development areas and training needs
of Directors that are relevant to the
business, including those that arise out
of the year-end evaluations.
Report of the Nomination Committee continued
Corporate governance
Funding Circle Holdings plc84
Report of the Audit Committee
X The Committee evaluated the
effectiveness of the Group’s in-house
Internal Audit team which completed
its first full 12-month cycle of internal
audits. The evaluation assessed the
team’s independence, objectivity,
reporting and overall effectiveness
and concluded that the function was
well managed and effective.
X The Committee recommended
the reappointment of the external
auditors to the Group Board.
X The Committee discussed, evaluated
and approved the scope of the
External Auditors’ non-audit services
including the approval of the non-
audit service fees in line with the
Group’s policy.
X The Committee reviewed the
adequacy and security of the Group’s
whistleblowing arrangements which
included additional signposts to
Circlers highlighting the importance
of speaking up and speaking
out. The Committee received
regular whistleblowing updates
and provided reports to the Board
In 2021 with the pandemic not yet
abated the Company’s financial process
and controls were tested with systems
and processes having to adapt rapidly.
Together with learnings from 2020, the
Company continues to be managed well
with the control environment maturing
suitably. The Committee has been
busy ensuring that as the business
evolves with new product launches, and
platform and technology developments
designed to help our customers win,
they are done so with appropriate
focus on risk-based controls. The key
highlights of the Committee’s work this
year can be found below.
Key highlights 2021
X The Committee has reviewed the
integrity of financial statement
reporting for both the Half Year
and Annual Report and Accounts,
ensuring that they were fair, balanced
and understandable, taking into
account significant accounting
judgements, estimates and
disclosures, the impact of the macro-
Geeta Gopalan
Chair of the Audit Committee
environment on valuation of loan
assets and bond liabilities, expected
credit losses, liquidity, financial
covenants and the Group’s ability
to continue as a going concern,
together with its viability disclosures.
X The Committee discussed and
challenged the appropriateness
of the accounting treatment of
significant transactions, including
disposals, along with scrutinising the
valuation of the Group’s assets.
X The Committee closely monitored
the impact of Covid-19 on key
accounting matters and judgemental
areas of focus for the Company.
X The Committee received
and discussed reports from
the Internal Audit team, with
particular focus on any control
weaknesses identified and control
approved and monitored delivery of,
and changes to, the 2021 Internal
Audit plan and reviewed and
approved the 2022 Internal Audit
plan and financial budget.
Members and attendance
Member Meetings Attendance
Geeta Gopalan (Chair) 4/4 100%
Eric Daniels 4/4 100%
Ed Wray (resigned 19 May 2021) 1/1 100%
Matthew King (appointed 19 May 2021) 3/3 100%
Report of the
AuditCommittee
Annual Report and Accounts 2021 85
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Key highlights 2021 continued
X The Committee reviewed and
oversaw (in conjunction with the Risk
and Compliance Committee) the
Group’s procedures and policies for
detecting and preventing fraud and its
systems and controls for preventing
bribery and money laundering.
X The Committee also considered the
practical implications of the BEIS
consultation “Restoring trust in audit
and corporate governance: proposals
on reforms”.
2022 priorities
X Continue to assess accounting
judgements and estimates,
particularly in relation to valuations
of loans associated with SMEs which
are heavily impacted by the prevailing
macroeconomic environment and
the accounting treatment in respect
of the new loan products as new
lending schemes are rolled out and
core lending restarts.
X Continue to review the Group’s
internal financial controls and
control systems to ensure these
are developed to reflect the Group’s
evolving business, including the
impact of hybrid working on the
control environment, the extension
of government-guaranteed loans, the
continuation of term loan products
and controls on balance sheet and
funding management.
X Oversee, in conjunction with the Risk
and Compliance Committee and
the Internal Audit team, activities to
further mature the Group’s Enterprise
Risk Management Framework and IT
general control environment.
X Continue to oversee the performance
and independence of the Internal and
External Audit teams.
Committee composition, skills
and experience
The Audit Committee complies with
the Code’s Provision 24 in regard
to requirements for a minimum
membership of two independent
Non-Executive Directors that does
not include the Chair of the Board.
All members of the Committee have
relevant financial experience across
banking and financial services. To
keep up to date with the Company’s
evolving business and regulatory
news, the Committee receives regular
updates from senior management and
the External Auditors. All Committee
members demonstrate competency
relevant to the sector in which Funding
Circle operates.
Role of the Committee
For information regarding
the Committee’s role and key
responsibilities, please see page 71 of
the Corporate Governance Report and
the Terms of Reference on our website
at corporate.fundingcircle.com/who-
we-are/corporate-governance/board-
committees/.
At the end of each Committee meeting,
the Committee members have an
opportunity to privately discuss matters
with the External and Internal Auditors
without management present.
Operating rhythm
ofthe Committee
The Committee met four times during
2021 and the attendance is detailed in
the table at the beginning of this report.
Meetings are also attended by invitation
by representatives of the external
auditors, the Head of Internal Audit,
the CFO, the CEO, the Chair and, when
deemed appropriate, other members
of the senior management team. The
Committee received information on
a timely basis and meetings were
scheduled to allow members to have
the appropriate discussions on the
agenda items.
As Funding Circle Ltd (“FCL”) is
authorised and regulated by the
Financial Conduct Authority, it has its
own Audit Committee, chaired by the
Chair of the FCL Board, Matthew King.
The FCL Audit Committee meets at
the same time as the Committee and
Matthew King attends in his capacity
as both member of the Committee and
Chair of the FCL Audit Committee.
The external auditors and the Head of
Internal Audit attended all Committee
meetings in the year and the Committee
also met with them separately without
management present.
Report of the Audit Committee continued
Corporate governance
Funding Circle Holdings plc86
Significant issues considered in relation to the financial statements
The Committee assessed the quality and appropriateness of, and adherence to, the Group’s accounting policies and principles.
It reviewed whether the accounting estimates and judgements made by management were appropriate. The significant issues
and accounting judgements considered by the Committee in respect of the half year ended 30 June 2021 and year ended 31
December 2021 are set out below.
Reporting issue Audit Committee action
Principal risks and viability
As a listed company, the Directors must satisfy
themselves, and make a statement in the Annual
Report, on the going concern and viability of the Group.
The period over which the Directors have determined
the viability assessment is three years. The continued
impact of Covid-19 on the macroeconomic environment
and the uncertainty it has created have led to increased
importance of clear disclosure and transparency with
The Committee reviewed reports from management that set out its
view on both the shorter-term going concern and longer-term viability of
the Group. These included:
X Reviewing the Group’s principal risks as set out on pages 55 to 63
X Assessing and reviewing the adherence to the risk appetite set by
the Risk and Compliance Committee to track the Group’s capital,
liquidity and exposures of its funding products
X Reviewing the Group’s short and medium-term plan, its cash, capital
and liquidity
X Reviewing the outcomes of stress testing after applying a severe but
plausible scenario aligned to the principal risks
X Reviewing the risk, going concern and viability disclosures with
regard to the clarity surrounding scenarios, uncertainties, sensitivities
Having challenged and considered the outcomes of management’s
assessment, the Committee concluded to recommend the Viability
Statement to the Board for approval and considers that related
disclosures are sufficiently clear and transparent.
Valuation of financial instruments
The Group holds significant levels of financial
instruments at fair value on its balance sheet. These
instruments are valued using valuation estimation
techniques including discounting cash flow analysis
and valuation models and these values are sensitive to
the assumptions underpinning the cash flows leading
to increased estimation uncertainty.
The Committee received and reviewed papers from management that
The Committee also considered the views of the external auditors on
the valuation approach and the assumptions, including benchmarking
the assumptions with the external auditors’ internal valuations team.
The Committee considered the disclosures within the Annual Report
and after due challenge concluded that the valuations were reasonable
and the disclosures were appropriate.
Carrying value of investments in the Parent Company
The Group considered the carrying values of the
investments in subsidiaries held in the Parent
Company for indicators of impairment.
In the previous year following a strategic reset of the US
business, along with an update to the Group’s income
and cost forecasts, the underlying projected cash flows
of the US business cash-generating unit were insufficient
to cover the carrying value of the Parent Company’s
investment in the US and it was significantly impaired.
The Parent Company’s investment in the US business
was assessed for impairment again in the year.
It was concluded there remained sufficient headroom in the
Parent Company accounts in respect of the investments.
As members of the Board, all Committee members received updates
on the financial performance of the Group and its medium-term plan as
part of the 2022 budget process.
The Committee also reviewed papers from management during the
year which set out the key assumptions underpinning the impairment
assessment and the level of headroom and sensitivity to those
assumptions, the financial projections of which were based on the
medium-term plan.
The Group’s external auditors provided their view of the assessment
to the Committee, including their challenge of the discount rates and
management’s medium-term plan assumptions.
After due challenge and discussion, the Committee was comfortable that
there remained sufficient levels of headroom over the carrying values
of the assets associated with the cash-generating units and that the
remaining investments in the Parent Company accounts were supportable.
Annual Report and Accounts 2021 87
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Reporting issue Audit Committee action
Exceptional items
The Group has a defined accounting policy for the
treatment and presentation of non-recurring and
material items as exceptional. These exceptional
items are also presented in a columnar fashion on the
consolidated statement of comprehensive income
in order to increase transparency and understanding
for readers.
The impairment of the right-of-use asset and the
associated fixed assets in the US, following the sublet
of the San Francisco lease, totalling £3.9 million has
been disclosed as an exceptional item.
This follows the restructuring of the US and European
businesses in 2020 for which exceptional items totalled
£18.7 million, of which £13.7 million was in respect of
impairment of goodwill and right-of-use assets and
£5.0 million was for other restructuring costs.
The Committee received papers from management setting out the
analysis of the exceptional items and the rationale for their inclusion.
The Committee received the views of the external auditors on the items
that management had included within these costs.
The Committee considered and challenged the appropriateness of
presenting the impairment separately from other costs.
It noted that the disclosure as exceptional was consistent with the
Group’s accounting policy and with prior year presentations, and
concluded that the amounts and this presentation were appropriate.
Alternative performance measures (“APMs”)
The Group uses APMs in its reporting of adjusted
EBITDA for the Group. These measures are defined
within the segmental information note on page 151
The Group uses these measures as they provide
an insight into the underlying performance of the
business and how it is managed. They also provide a
closer approximation to cash generation which is key
to the business.
The members of the Committee, also being Board members, received
management and operational information about the Group’s underlying
performance which included these key measures.
The Committee considered the other measures used by the Group,
including loans under management and originations, and agreed that
these were significant drivers of fees earned by the Group and, in turn,
its financial performance and as such required sufficient disclosure to
explain the revenue performance.
The Committee considered the appropriateness of these APMs in
providing meaningful information about the underlying performance of
the business and obtained the view of the use of these APMs from the
external auditors.
The Committee concluded that these APMs should continue to be
used in the Group’s external reporting, noting that these had not been
given undue prominence relative to statutory measures and that an
appropriate reconciliation to statutory measures was provided.
Fair, balanced and understandable reporting
The Board is required to report as to whether the
contents of the 2021 Annual Report and Accounts, when
taken as a whole, is fair, balanced and understandable.
At the request of the Board, the Committee has assessed the
information contained within the Annual Report. This assessment
included discussions with management on the underlying financial
processes, and confirmation from the management team that the
information contained within the Annual Report is fair, balanced and
understandable. The Committee also discussed the contents of the
Annual Report with the external auditors.
Having considered all of the available information including previously
published information about the business and press releases through
the year, it has concluded that, in its judgement, the 2021 Annual
Report and Accounts, when taken as a whole, is fair, balanced
Report of the Audit Committee continued
Significant issues considered in relation to the financial statements continued
Corporate governance
Funding Circle Holdings plc88
Internal controls
Throughout the year the Committee
has monitored and kept under review
the adequacy and effectiveness of the
Group’s internal controls, by receiving
regular reports from management,
Internal Audit and External Audit
on matters in relation to control
including the effectiveness and testing,
discussing and challenging the same.
The Committee receives updates
on the findings of Internal Audit’s
investigations at each meeting; see
“Internal Audit” below for more details of
the reviews that took place in the year.
PwC tested internal controls over the
loan servicing processes of FCL for the
year ended 30 September 2021. This is
part of the annual International Standard
on Assurance Engagements (ISAE) 3402
Controls Report which is shared with
institutional investors.
The scope of the report was expanded
to include the new Recovery Loan
Schemes (“RLS”) as part of the overall
whole and partial loan services. The
report was unqualified with only
two exceptions reported as a result
of FCL’s well established control
environment over those services.
The Audit Committee reviewed and
was kept informed of the progress
of this report which was released
Internal audit
Throughout 2021 the Internal Audit
plan was regularly reassessed to
ensure it remained focused on the
Group’s key risks and priorities. All
proposed audit plan adjustments were
reviewed, challenged and approved
by the Committee. Areas reviewed
by the Internal Audit team during
2021 included:
X RLS originations control framework
X IT general controls
X Enterprise Risk Management
Framework maturity
X Borrower interest and repayment
calculations
X Balance sheet management
governance and stress testing
X Enterprise data governance
In addition to the assurance work
highlighted above, the Head of Internal
Audit facilitated a “three lines” review
and challenge session, giving Directors
helpful insights regarding overall
assurance activities across the Group.
The Internal Audit plan for 2022
was approved by the Committee in
December 2021 and aligns to areas
of highest inherent risk and continued
strategic, operational and regulatory
focus, including:
X Credit model build, test and ongoing
validation
X Sales team operational and
conduct controls
X Transaction and loans under
management fee calculation and
application
X FlexiPay operational scaling
and control
X IT asset management
X Anti-money laundering control
frameworks
The Committee approved the Internal
Audit 2022 financial budget and
reviewed the adequacy of Internal
Audit team capacity and the capability
and use of external expertise
where required.
An effectiveness review was conducted
by the Committee to evaluate the
performance of the in-house Internal
Audit team after the first full year cycle
of in-house internal audits since the
team was created.
The review evaluated the overall
effectiveness of the Internal Audit
team including: understanding of the
business, governance processes,
risk environment and internal control
framework; quality of reporting;
interaction with the Committee and
other areas of the business; support of
strategic priorities; and independence
and objectivity.
A separate assessment confirmed that
there was good alignment between
Internal Audit arrangements and the best
practice recommendations contained
in the Institute of Internal Auditors’
publication “Guidance on Effective
Internal Audit in Financial Services”.
The outcomes of the evaluation were
discussed by the Committee along
with the Head of Internal Audit where
actions and objectives were agreed
for the forthcoming year. Overall,
the Committee was satisfied that
the Internal Audit team remained
independent, objective and effective,
with sufficient resources available to
provide the necessary assurance across
the Group.
Whistleblowing
The Company takes whistleblowing
seriously and wants all employees
to feel able to raise concerns freely.
This year, the Committee reviewed
and approved the whistleblowing
policy. The Code of Conduct for all
employees which was adopted in
2020, emphasises the importance of
employees speaking up and speaking
out. The Committee will continue to
review the policy annually to ensure it
is in line with legal requirements and
expectations.
The whistleblowing process is well
advertised to all employees, who are
made aware of the importance of it.
There was one potential whistleblowing
incident that was investigated in 2021
and it was concluded that there were
no areas of regulatory violation that
required reporting.
Annual Report and Accounts 2021 89
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
External auditors
First appointed: 2015.
Length of tenure: six years.
PwC were appointed as External
Auditors in 2015 following a formal
tender process. The lead audit partner,
Nick Morrison, has held the position for
three years.
The Committee is of the opinion that
the independence and objectivity of the
External Auditors and the effectiveness
of the audit process are safeguarded
and remain robust. The Committee
has taken into account the assurances
provided by the auditors confirming
that all their partners and staff involved
with the audit are independent. The
Committee last undertook a formal
assessment of PwC’s effectiveness
during 2020 and it will carry out its next
assessment in Q2 2022.
The Committee recommends that
PwC be reappointed as the Company’s
External Auditors for the financial year
ending 31 December 2022. A resolution
recommending the appointment of PwC
as External Auditors of the Company
will be put to shareholders at the
Company’s AGM in June 2022. The
external audit contract will be put out to
tender at least every ten years post-IPO
in accordance with the Competition
and Markets Authority order and
The Committee confirms that the Group
is in compliance with The Statutory
Audit Services for Large Companies
Market Investigation (Mandatory Use
of Competitive Tender Processes and
Audit Committee Responsibilities)
Order 2014.
Non-audit services
The engagement of the External Audit
firm to provide non-audit services to the
Group can impact on the independence
assessment, and the Company has,
therefore, adopted a policy which
requires Committee approval for non-
audit services. This policy is in line with
PwC’s internal policies and the FRC’s
Revised Ethical Standard, and gives me,
as Chair of the Committee, delegated
authority from the Committee to
approve individual non-audit services
items of up to £50,000 per service.
All fees paid to PwC for non-audit
services have been approved by the
Committee or the Chair (in accordance
with the non-audit services policy),
with a summary of all non-audit
services being provided at each
Committee meeting.
During the year ended 31 December
2021, PwC were engaged to provide non-
audit services relating to the following:
Description £000
Interim review of half year
results announcement 135
CASS reporting 90
ISAE 3402 controls
assurance 115
Other 3
Total 343
The Audit Committee concluded that it
was in the best interests of the Group
to purchase these services from PwC
on the basis that they were able to
provide them more efficiently than an
alternative provider (or, in some cases,
they were required to be performed by
the External Auditors).
PwC are prohibited from providing
certain non-audit services to safeguard
auditor objectivity and independence,
including but not limited to internal
audit work, valuations work and tax-
related work.
Audit fees payable to PwC for the
year ended 31 December 2021
PwC have confirmed to the Committee
that they remained independent
during the year.
Committee effectiveness
The Committee completed an
effectiveness review for 2021. A
questionnaire was distributed to all the
members of the Committee and the
CFO and the answers were analysed by
the Company Secretarial team to create
a report that provided the Committee
with recommendations for actions and
objectives in 2022.
The questionnaire addressed the
composition and set-up of the
Committee, the timeliness and quality of
the papers, the work of the Committee
and whether it sufficiently reviews and
challenges the activities and findings of
the internal and External Auditors. The
questionnaire also assessed whether
the Committee sufficiently safeguarded
auditor independence and objectivity.
Overall, the results of the evaluation
were positive with the Committee
agreeing that the composition and
set-up of the Committee and meetings
were satisfactory and there was good
support from the Company Secretarial
team. The Committee agreed that,
amongst other things, it would give
further focus to changes required in
annual reporting for 2022.
Geeta Gopalan
Chair of the Audit Committee
10 March 2022
Report of the Audit Committee continued
Corporate governance
Funding Circle Holdings plc90
Report of the Risk and Compliance Committee
X The Committee approved further
progression through milestones
established for further development
of the technology platform. The
Committee has kept tight guardrails
on this project to manage risk
prudently and the continued
automation of processes and
execution of the plans is a key
highlight for the year.
X The Committee oversaw the
successful launch of the trial of the
FlexiPay product and will continue
to monitor and mitigate the risks
associated with this product
throughout 2022 as it grows.
X Initial integration of ESG risk into the
ERMF and development of a forward
looking view of emerging risks.
X The Committee received regular
reports on information security and
technology risk with the Group’s move
into a multi-product environment.
X The Committee oversaw further
improvements in model risk
management with continued
enhancements made to
model controls.
X The Committee approved a new
balance sheet stress scenario with
updated risk appetite limits as stress
test assumptions were revisited
and updated.
Members and attendance
Member Meetings Attendance
Eric Daniels (Chair) 3/3 100%
Geeta Gopalan 3/3 100%
Hendrik Nelis 2/3 66%
On behalf of the Board, I am pleased
to present the Report of the Risk and
Compliance Committee for the year
ended 31 December 2021.
The Committee has continued to carry
out its role of monitoring and reviewing
risk for the Group including the nature
and extent of principal and emerging
risks against an uncertain macro
environment. For in-depth information
relating to the Group’s approach to
risk and identification of principal and
emerging risks for 2021, please refer to
the Strategic Report on page 51.
I have been very happy to see the
continued development of the Group’s
risk management capabilities and
the overall control environment,
with a number of material changes
successfully navigated including the
transition to the Recovery Loan Scheme
and the relaunch of core lending in both
the US and the UK.
Eric Daniels
Chair of the Risk and Compliance
Committee
Highlights from 2021
X The Committee closely monitored
the risks relating to Covid-19
including strategic risk, reputational
risk, operational risk and credit risk,
ensuring that they were managed
and mitigated appropriately.
Following unprecedented activity
in collections, the Committee
oversaw a transformation plan for
the Collections, Recoveries and
Litigation team, receiving updates
on how Funding Circle monitored,
managed and mitigated risk, with
a focus on forbearance, borrower
outcomes and feedback and
vulnerable borrowers.
X The Committee approved
updates to the Enterprise Risk
Management Framework (“ERMF”)
and improvements to the controls
library, which all contributed to
an increasingly robust control
environment. In 2021, the Group
achieved a “mature” level of use
of the ERMF. Commitment to
demonstrating further integration
of the framework will be
continued in 2022.
Report of the Risk and
Compliance Committee
Annual Report and Accounts 2021 91
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Highlights from 2021 continued
X The Committee participated in a
Three Lines of Defence exercise
which evaluated the effectiveness
of the Group’s approach to risk
management and enhanced
alignment between management
and the Board on risk for the Group
as a whole.
X Further clarity on government
guaranteed loan programmes,
which included an extension of RLS
through to June 2022, enabled the
Committee to oversee stabilisation
of risk and positive changes around
funding plans for the UK.
X Approval of the annual risk and
control self-assessment approach
and approval of proposed risk
scenarios for the purpose of year-
end fair value adjustments.
2022 priorities
X The Committee recognises that as
the Company continues to grow and
embrace new products and further
automation of processes, the way in
which it monitors and reviews risk
management will also need to flex
and change. One of the Committee’s
priorities will be to continue tracking
the development and growth of
the business alongside its risk
management protocols and control
frameworks to ensure processes
continue to enable achievement
of the Board’s long-term
X One of the most significant risks is
people and, as the phrase “the great
resignation” continues to ring true for
so many businesses, the Committee
is cognisant of the impact of this
on achieving the Group’s long-term
strategic objectives. The Committee
will ensure that people risk remains
a priority, with a focus on retention,
talent acquisition, wellbeing
and continuing a diverse and
inclusive culture.
X The Committee will continue to
monitor the risks relating to Covid-19
as they emerge and ensure these
risks are managed appropriately.
X The Committee will continue to
develop and monitor emerging risks,
including in relation to inflation and
increase in interest rates.
X The Committee will apply further
scrutiny to information security
and technology risk and ensure
vulnerabilities are flagged and
prioritised quickly.
X The Committee will continue to
discuss and determine the extent
of the ESG risk (specifically climate
related) to the Group and work
with the ESG Committee to further
identify and mitigate this through
deeper integration with the ERMF.
Committee composition,
skillsand experience
The Risk and Compliance Committee
was established by the Board to have
delegated authority for reviewing and
making recommendations in relation
to, inter alia, the Company’s appetite
for risk and future risk strategy, risk
management and compliance systems
and monitoring of the implementation
and integration of the ERMF.
Two out of three members of the
Committee are independent Non-
Executive Directors and, combined,
the members bring a wealth of risk
management experience to the
meetings relevant to the sector within
which the Group operates. In addition
to the members of the Committee, the
CRO, CEO, CFO, Chair of the Board,
Company Secretary and Head of
Internal Audit are invited to attend
Committee meetings.
Role of the Committee
For information regarding the
Committee’s role and key responsibilities,
please see page 72 of the Corporate
Governance Report and the Terms
corporate.fundingcircle.com/who-we-
are/corporate-governance/board-
committees/.
Other matters
Committee effectiveness
An effectiveness review of the
Committee’s performance was
completed at the end of the year.
The review comprised an extensive
questionnaire that evaluated the
Committee’s overall performance,
composition and set-up and,
importantly, the work of the Committee
including its role in reviewing and
challenging the Group’s control, risk
management and compliance systems
and appetite for risk. The questionnaire
was completed by members of the
Committee and the CRO.
The outcomes of the review were
positive overall with most areas
addressed scoring high ratings.
especially climate-related risks as
emerging risks that should be focused
on during 2022. Additional agenda
items of note for the next 12 months
(that would require more in-depth
monitoring and review) included
new products such as FlexiPay and
continued focus on technology and
infrastructure risk.
In addition to the Committee’s own
effectiveness review, the Board also
evaluated its oversight of risk as part of
its effectiveness review. All members of
the Board were satisfied that the Board
has sufficient focus on risk and risk
management as it pertains to the Group’s
strategy and that a framework of prudent
and effective controls was in place which
enabled risk to be assessed and managed
appropriately. For further information
on the outcomes of the annual Board
evaluation please see page 78.
Eric Daniels
Chair of the Risk and Compliance
Committee
10 March 2022
Report of the Risk and Compliance Committee continued
Corporate governance
Funding Circle Holdings plc92
Report of the ESG Committee
X Engaged a leading climate change
advisory firm to measure, verify
X Approved the Company joining
the UN Global Compact– it was
determined by the Committee along
with management that this was
the most meaningful sustainability
framework for the business.
2022 priorities
X Achieve carbon neutrality certification,
and progressing carbon strategy
towards net zero by 2030, with a
focus on Scope 3 emissions and
carbon transition planning.
X Progress ESG-related strategy
objectives and opportunities, with
respect to internal and external
stakeholders.
X Assist in the integration of ESG-
related risks into ERMF and into
business processes and overall
risk management, in particular for
climate-related risks.
X Progress the development and
implementation of the social impact
framework, with a focus on employee
and wider community engagement.
Members and attendance
Member Meetings Attendance
Andrew Learoyd (Chair) 4/4 100%
Matthew King 4/4 100%
Neil Rimer 4/4 100%
Helen Beck 2/2 100%
The ESG Committee completed its
first full cycle of meetings in 2021 and
continues with an approach that seeks
to be authentic and balanced with
buy-in across the business including
at the top levels of management. In
developing its approach to ESG matters,
the Committee has taken steps to
understand the varying opportunities
and challenges presented by ESG issues
across the Group.
I’m pleased with the progress the
Group has made this year towards
implementation of the agreed ESG
framework, in particular our efforts
to integrate ESG factors into our risk
management processes and taking
initial steps in assessing the potential
business implications of climate
change pursuant to the Task Force on
Climate-Related Financial Disclosures
(“TCFD”) recommendations.
While the Committee recognises that
there is much more work to be done,
we have seen significant progress on
our key pillars of carbon management,
social impact and DE&I and towards
ensuring that our ESG strategy is
closely aligned to Funding Circle’s goals
and values.
Andrew Learoyd
Chair of the ESG Committee
Key highlights from 2021
X Established a strong, effective
structure of the Committee with
each Non-Executive Director
member taking responsibility,
together with a representative
from senior management, for
championing each of the following
areas: environmental, social, DEI and
workforce engagement.
X Drew up Terms of Reference to
define the structure and purpose of
the Committee which were approved
by the Board.
X Appointed a permanent, dedicated
ESG Project Manager to provide
oversight and project management
to all things ESG related at Funding
Circle. The ESG Project Manager
works with relevant members of
X Continued engagement with the
workforce through the Non-Executive
Director appointment for workforce,
Helen Beck. For further details on our
workforce engagement work please
see pages 40 and 70.
X Integrated ESG components into our
risk taxonomy and conducted an
ESG risk assessment as part of ESG-
related risk integration into the ERMF.
X Obtained signatory status to the UN-
supported Principles for Responsible
Investment (“PRI”).
Report of the
ESG Committee
Annual Report and Accounts 2021 93
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Role and composition of
the Committee
The Committee is responsible for
ensuring the Group has an ESG strategy
and framework that are regularly
reviewed and remain fit for purpose.
It is designed to provide oversight of
ESG matters and compliance with
the relevant legal and regulatory
requirements. The Committee
ensures that both short and long-
term objectives for ESG activities are
developed, implemented and measured
appropriately. The Committee assists
in identifying ESG risks and seeks out
opportunities that enable Funding
Circle to engage with the community or
other stakeholder groups in a positive
way that benefits society and protects
the long-term value of the Company. It
also has responsibility for ensuring the
workforce is engaged with and aware of
the ESG objectives of the Group.
The Committee met four times in 2021,
as it was newly formed, and will meet
three times in 2022.
There are four Non-Executive Director
members of the Committee, each with
a responsibility for championing the
areas covered. Andrew Learoyd is Chair
of the Committee and responsible
for DEI, Matthew King focuses on
carbon strategy, Neil Rimer champions
community engagement, and Helen
Beck was appointed as workforce
engagement Non-Executive Director.
Environmental
The Committee defines the “E” as
the Group’s impact on the natural
environment and its adaptation to
climate change including climate-
related risks and opportunities. In 2021,
the Committee has overseen progress
made on the Group’s carbon strategy
in partnership with an external climate
change consultant and focused on
reporting in line with the Task Force on
Climate-related Financial Disclosures
(“TCFD”) recommendations.
Working closely with an external climate
change consultant, the Committee has
a short-term objective to achieve carbon
neutral status and a long-term goal of
being net zero by 2030, aligning with the
Paris Agreement goal of 1.5°C. In regard
to carbon offsetting, the Committee is
keen to ensure that any initiatives are
meaningful in themselves and to the
workforce and therefore continues to
engage with Circlers to further develop
this topic.
In-depth discussions have taken place
throughout 2021 to understand what
the best approach might be for Funding
Circle in regard to the Group’s carbon
strategy and understanding the climate-
related impact of its lending activities.
Social
Social is defined by the Committee
as the Group’s interactions with
employees, customers, suppliers, other
stakeholders and the communities in
which it operates and the role of the
Group in society including through
workplace policies, ethical procurement,
financial product safety, privacy and
data security, responsible investment
and other social opportunities.
At the start of 2021, the Committee
identified the “S” of ESG as needing
additional focus and a clear strategic
approach. To ensure it was driving
the strategy on “social” in the right
direction, the Committee sought input
from Circlers through a social impact
survey to identify engagement areas
that resonated with staff and where
impact could potentially be magnified.
To continue developing the approach
to social, the Committee has allocated
budget and dedicated resource to
further develop and implement a
framework and themes in 2022.
Governance
Whilst overall responsibility for
corporate governance is a matter
reserved for the Board, the Committee
has delegated authority to lead on
ethical conduct of the business and
approach to good corporate behaviour
in connection with ESG-related
matters. The Committee’s work in this
area has extended to supporting the
integration of ESG-related risks into
the Group’s ERMF, receiving regular
updates on the latest regulatory and
compliance requirements and ensuring
the requirement in the UK Corporate
Governance Code to engage with the
workforce is satisfied.
Corporate governance
Funding Circle Holdings plc94
Report of the ESG Committee continued
Diversity, equity and
inclusion (DEI)
In 2021, the Committee made a lot of
progress on DEI. At Funding Circle, DEI
is comprised of the following parts:
diversity is the representation of all
varied identities and differences (be
that race, ethnicity, gender, sexual
orientation, gender identity and
expression, disability, marital status,
age, nationality, religion, thought, belief,
experience or expression), collectively
or as individuals; equity seeks to
ensure fair treatment, equality of
opportunity, and fairness in access to
information and resources for all; and
inclusion builds a culture of belonging
by actively inviting the contribution
and participation of all people and
cultivating a workplace where all unique
talents, skills, and perspectives are
valued and utilised.
The Committee sought to obtain better
data to measure diversity. Whilst the
Group continued its internal campaign
to obtain diversity data from Circlers
themselves, the Committee was
conscious that there were other ways
of measuring success in achieving
diversity. Understanding how the size
of the organisation could impact data
and thinking about ethnicity pay gap
and beyond were key parts of the
Committee’s discussions.
A full proposition was developed to
ensure the organisation was joined
up on overall goals and coordination
between geographies. The framework
was centred around three core
objectives and a DEI statement and
will be used to continue to make
progress in 2022.
The Committee has utilised Circler
groups to enhance the conversation on
DEI which include Women@FC, Circle
of Pride, Let’s Talk About Race and FC
Impact. Further details about these
groups can be found on page 27.
Committee effectiveness
As a new Committee, it was decided
that a full effectiveness review will be
carried out in 2022 and on an annual
basis thereafter.
Andrew Learoyd
Chair of the ESG Committee
10 March 2022
Annual Report and Accounts 2021 95
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Directors’ remuneration report
years, and Restricted Share awards.
As explained in last year’s report and
discussed with shareholders at the
beginning of 2021, the Committee
increased the CEO’s salary to bring it
more into line with market practice and
begin to reflect the size and complexity
of the Group’s operations. Samir Desai
waived this increase for 2021, but the
bonus and Restricted Share awards
were calculated on the basis of the
increased salary (referred to below as
“reference salary”).
Annual bonus 2021
The CEO and CFO were each eligible
for a bonus in 2021 with maximum
opportunities equal to 133% of reference
salary and 100% of salary respectively.
The annual bonus performance
measures were AEBITDA, Operating
Income and non-financial performance
(each weighted one-third). The non-
financial elements, which align with
Funding Circle strategy, comprised
measures focused on customers/
stakeholders, Circlers and risk and
sustainability, as well as personal
performance. To reflect the importance
of a robust ESG framework to achieving
our mission and strategic objectives (see
further detail on pages 24 to 37 of the
strategic report), ESG specific measures
focused on Circler engagement,
diversity and carbon management
were included in the Circler and risk and
sustainability categories.
The Committee agreed that overall
Group and personal performance
had been excellent in a difficult and
challenging environment. Through
CBILS, followed by a successful
transition to RLS and reintroduction
of core lending, in the UK and PPP in
the US, Funding Circle played a leading
role in helping small businesses drive
the economic recovery in both our
Helen Beck
Chair of the Remuneration Committee
On behalf of the Board, I am pleased
to present the Directors’ Remuneration
Report for the year ended 31 December
2021. I want to thank my predecessor,
Cath Keers, for her leadership of the
Remuneration Committee, and Ed Wray
(who resigned from the Board in May
2021) for his years of service on the
Committee. I’d also like to thank the
other Committee members, Andrew
Learoyd and Geeta Gopalan (who joined
on 6 September 2021, replacing Ed),
and the Circlers who have supported
to my first annual statement as Chair
of the Remuneration Committee, this
report contains:
X a summary of our Directors’
Remuneration Policy (the “Policy”),
which was approved at the 2021
AGM by 98.6% of shareholders and
will apply for three years from the
date of approval; and
X the Annual Report on Remuneration,
which sets out payments made to
the Directors for the year ended
31 December 2021 and how our
Remuneration Policy is intended to
be implemented in 2022. The Annual
Report on Remuneration is subject
to an advisory shareholder vote at
the 2022 AGM.
Review of 2021
We were delighted with the support
received from shareholders for both
our Policy and Annual Report on
Remuneration at the 2021 AGM. We
believe that this was in part due to our
extensive shareholder consultation
during the Policy review, and want to
thank shareholders for their feedback
that informed the development of
our Policy. One of the Committee’s
main focuses during 2021 was the
implementation of the Policy which
involved for Executive Directors the
introduction of an annual bonus, with
40% being deferred into shares for three
Directors’
remuneration report
Corporate governance
Funding Circle Holdings plc96
geographies. Investment in risk and
technology has also reaped rewards
with both significant improvements to
the core product and the development
of new products and capabilities for
customers in 2021. The Committee was
however cognisant that the AEBITDA
and Operating Income targets were
set based on the Board approved
December 2021 budget and did not
fully factor in the extension of CBILS in
the UK, PPP in the US or the impact of
the improved economy on the fair value
of investments. The Committee also
considered this outcome taking into
account the experience of shareholders,
Circlers, customers, and other
stakeholders and considered it to be
appropriate. Therefore, notwithstanding
the strong performance from the
Group and the Executive Directors, the
Committee considered it appropriate
to reflect the exceptional nature of the
year and reduce the formulaic vesting
outcome of the bonus by 10%. The
CEO therefore earned a bonus equal to
78.4% of maximum (104.2% of reference
salary) and the CFO earned 79.9% of
maximum (79.9% of salary). 40% of the
amount earned is deferred into shares
for 3 years.
Restricted Share awards 2021
Restricted Share awards were granted to
the CEO and CFO on 19 May 2021 equal
to 133% of reference salary and 100% of
salary respectively in line with our Policy.
Vesting of the Restricted Share awards
in 2024 will be subject to a financial
underpin based on operating income as
well as qualitative underpins to ensure
that Executive Directors are not rewarded
where the Committee considers there
to have been a failure in performance,
including serious breach of regulation,
material reputational damage and gross
misconduct. The financial underpin was
set such that annual operating income
must be on average £150 million over
the period of three years from 2021 to
2023. Prior to vesting, the Committee
will assess whether actual performance
of the Company and Executive Directors
is reflected to guard against payment
for failure or against windfall gains. The
Committee retains the discretion to
make any adjustment to vesting it deems
necessary. In line with our Policy, vested
awards will then be subject to a two year
holding period.
CEO transition
After 12 years, Samir Desai decided
to step back from his role as CEO. He
did not receive any payments linked
to his resignation. On his resignation.
his unvested 2021 Restricted Share
award and Share Incentive Plan free and
matching shares lapsed in full following
his resignation and, as previously
reported, he did not take up his LTIP
award for either 2019 or 2020. He
received no further payments linked to
his resignation. In accordance with the
pre-IPO share plan, he has retained his
pre-IPO awards. He will receive his 2021
bonus, 40% of which will be deferred
into shares for 3 years.
As announced on 9 September 2021,
Lisa Jacobs, Managing Director of
Funding Circle UK, succeeded Samir
Desai as Chief Executive Officer on
Samir has remained on the Board,
becoming a Non-Executive Director on
1 January 2022, for which he receives
the standard fee.
Remuneration
arrangements for 2022
Lisa Jacob’s remuneration
arrangements have been set in
accordance with the Remuneration
Policy, with her salary and incentive
levels in line with agreed salary increase
for the previous CEO, recognising the
need to retain and incentivise a highly
talented individual in a very competitive
market. The Committee considered the
remuneration arrangements against
both internal relativities and market
benchmarking. In the course of its role,
the Committee will continue to review
the salary against the appropriate
benchmarking and competitive market
and may increase where it feels
appropriate and justifiable.
Oliver White’s salary was set at £400,000
when he joined in 2020, which the
Committee considered appropriate for
a high calibre CFO with the experience
required for the scale and complexity of
the business. The CFO’s salary remains
competitively positioned against
the market and the Committee has
determined that there will be no salary
increase for 2022.
The maximum annual bonus
entitlement for the CEO and CFO will
be equal to 133% of salary and 100%
of salary respectively. The annual
bonus measures will be AEBITDA, Total
Income and non-financial objectives
(each weighted one-third), with the
intention that the targets to achieve
the maximum bonus are appropriately
calibrated to reflect the growth
aspirations for the Group. As in 2021,
the non-financial objectives are aligned
with Funding Circle’s strategy and will
be focused on customers/stakeholders,
Circlers and risk and sustainability with
ESG measures incorporated in both
Circlers and risk and sustainability. An
additional specific measure has been
included to reflect the importance of the
progression of our carbon management
plan including setting targets to achieve
meaningful reduction in GHG emissions
towards our goal of net zero by 2030. In
line with our Policy, 40% of any bonus
earned will be deferred into shares for
three years.
Annual Report and Accounts 2021 97
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Remuneration arrangements
for 2022 continued
For both the annual bonus financial
measures and the Restricted Share
financial underpin, the Committee
agreed that Total Income was a more
appropriate revenue measure than
Operating Income going forwards. This
change recognises that investment
income is an ongoing part of Funding
Circle’s income, with the balance sheet
being used in accordance with Board
approved investment principles, and
ensures that management are not
incentivised to maximise one form of
income over another.
In accordance with our Policy, the
number of Restricted Shares granted to
Executive Directors in 2022 and 2023
will be equal to the number granted in
2021. Accordingly, the CEO and the CFO
will be awarded 358,177 and 269,306
Restricted Shares respectively in 2022.
Application of the Policy means that
the face value of the award is reduced
if there has been a fall in the share
price, which aligns with proxy agency
guidance. As shown in our “Illustration of
the application of Remuneration Policy
in 2022” charts, the grant date face
value of 2022 Restricted Share awards
would be c.50% lower compared to 2021
Restricted Share awards (assuming
a share price of 73.9p at the time the
2022 Restricted Share awards are
granted, which was the share price as
Vesting of the Restricted Shares will be
subject to a financial underpin based
on Total Income (as referred to above)
as well as qualitative underpins on
the same basis as 2021. The financial
underpin has been set such that annual
Total Income must be on average
£181.3 million over the period of three
years from 2022 to 2024. As with the
2021 grants, the Committee retains the
discretion to make any adjustments to
vesting it deems necessary.
Both Executive Directors will receive
benefits in line with other UK employees,
including Private Medical Insurance and
life assurance. They are both entitled to
a pension contribution or cash in lieu of
5% of salary.
Non-Executive Director and
Chair of the Board fees
Non-Executive Director fees were
reviewed in January 2022 with changes
being made for the first time since they
were set in 2018. No changes were
made to the base fee but the fee for
chairing a Committee and the board of
the UK regulated entity was increased
from £10,000 to £15,000 to reflect the
significant work being carried out by our
independent Non-Executive Directors
and the Chair of Funding Circle Ltd.
Additionally, the fee for the Chair of the
Board has been increased by 3.5% from
£200,000 to £207,000. The increase
for the Chair of the Board was in line
with the historical increase for Circlers,
but below the average 2022 increase
for Circlers.
Remuneration arrangements
for Circlers
I wish to thank all of our Circlers for
once again delivering exceptional
performance in difficult and trying
times. All Circlers contribute to the
achievement of Funding Circle’s long-
term success and the Board believes
that extending share ownership
throughout the Group fosters
stewardship and enhances loyalty and
engagement. I’m really proud that our
Employee Engagement score was at
its highest ever level of 73% and 86%
of Circlers would recommend Funding
Circle as a place to work.
In 2020, we introduced an all-employee
share plan (“Equity for All”), discretionary
restricted share awards for senior
management, and an annual bonus
for managers, specialists and the
leadership team. See page 105 for
the key elements of Circlers’ incentive
arrangements. The Policy introduced in
2021 was designed to align Executive
Directors and Circlers.
The group annual bonus for 2021 is
being awarded in full to eligible Circlers,
with payment being based on AEBITDA
performance. Our people section at
pages 24 to 27 sets out how Funding
Circle has responded to the changing
employment environment following the
pandemic. The Committee continues
to monitor Circler engagement and
wellbeing and consider whether
wider remuneration within Funding
Circle remains competitive, receiving
regular updates during the year
Conclusion
On behalf of the Remuneration
Committee, I would like to thank
2021 and hope to continue to receive
your support at our 2022 AGM, where
I will be available to respond to any
questions shareholders may have on
this report or in relation to any of the
Committee’s activities.
Helen Beck
Chair of the Remuneration Committee
10 March 2022
Directors’ remuneration report continued
Corporate governance
Funding Circle Holdings plc98
Remuneration Policy
The Remuneration Policy, as summarised below, applies to the roles of Chair, Executive Director and Non-Executive Director. This
policy was approved by a binding shareholder vote at the 2021 AGM, and will apply for a maximum of three years from the 2021
AGM. A full version of the Remuneration Policy can be found in the 2020 Annual Report and Accounts available on our website at:
https://corporate.fundingcircle.com/investors/results-reports-presentations.
Executive Directors’ remuneration
Element of
remuneration Key features
Purpose and
link to strategy Maximum opportunity Performance measures
Salary
Reviewed annually in March.
Salaries take account of the
external market and the overall
employee context.
Supports the
attraction and
retention of the
best talent.
No prescribed maximum
salary level or salary
increases.
Account will be taken
of increases applied to
employees as a whole when
determining salary increases.
Committee retains the
discretion to award higher
increases where it considers
it appropriate, such as, but not
limited to:
X where an Executive
Director has had a change
in scope or responsibility;
X an Executive Director’s
development or
performance in role (e.g.
to align a newly appointed
Executive Director’s salary
with the market over time);
X where there is a significant
change in the size and/
or complexity of the
Company; and
X where salary has
previously been positioned
behind market, and there
is a re-basing of the overall
remuneration package.
n/a
Allowances
and benefits
Executive Directors’ benefits
currently include, but are not
limited to, life assurance and
private medical insurance.
The Committee may determine
that Executive Directors should
receive additional reasonable
benefits if appropriate,
taking into account typical
market practice and practice
throughout the Group.
Market competitive
(and cost effective)
benefits provide
reassurance and
risk mitigation and
support retention
of talent.
The value of benefits is not
capped as it is determined by
the cost to the Company, which
may vary. Benefits offered to
Executive Directors are in line
with those available to other
employees in the Group.
n/a
Pension
Executive Directors are
entitled to receive employer
contributions to the Funding
Circle Ltd defined contribution
pension plan.
Individuals are entitled to
receive some or all of their
pension allowance as cash in
lieu of pension contribution.
To provide retirement
benefits for Executive
Directors.
Maximum contribution in
line with contribution to
other employees in the
Group, which is currently 5%
of salary.
n/a
Annual Report and Accounts 2021 99
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Element of
remuneration Key features
Purpose and
link to strategy Maximum opportunity Performance measures
All-employee
plans
Executive Directors are eligible to
participate in HMRC tax-efficient
plans that are available to all
employees.
Funding Circle currently operates
a Share Incentive Plan.
To encourage
share ownership
and alignment with
shareholders.
Participation levels are in line
with HMRC limits.
n/a
Annual Bonus Awards are based on
performance (typically
measured over a financial
year) against key financial and
non-financial measures.
40% of any bonus earned
will normally be deferred into
shares for three years.
The Executive Directors
may, at the discretion of
the Committee, receive
dividend equivalents on the
deferred shares.
Malus and clawback
provisions apply.
The Committee has discretion
to amend the pay-out should
any formulaic outcome not
reflect the Committee’s
assessment of overall
business performance,
the performance of the
individual, or the experience
of shareholders or other
stakeholders over the
performance period.
To motivate
and reward the
achievement of
the Group’s annual
financial and
strategic targets.
A maximum opportunity
in respect of any
financial year of:
CEO: 133% of salary.
Other Executive Directors:
100% of salary.
Measures and targets will
normally be set annually by the
Committee and will be in line
with Funding Circle’s strategy.
A mix of both financial and
non-financial measures will be
used, with at least 60% of the
annual bonus normally based
on financial measures.
The target annual bonus is 50%
of maximum opportunity, with
100% of maximum payable
for maximum performance.
Details of pay-outs between
these levels will be disclosed
in the relevant Directors’
Remuneration Report.
Directors’ remuneration report continued
Executive Directors’ remuneration continued
Corporate governance
Funding Circle Holdings plc100
Element of
remuneration Key features
Purpose and
link to strategy Maximum opportunity Performance measures
Restricted
Share awards
Executive Directors are granted
Restricted Share awards with
a three-year vesting period,
subject to performance
underpins.
Following the end of the
vesting period, the awards
will be subject to a two-year
holding period.
Awards may be granted in
the form of conditional share
awards or nil-cost options.
The Executive Directors
may, at the discretion of the
Committee, receive dividend
equivalents on vested shares.
The awards are subject
to malus and clawback
provisions.
Align Executive
Directors with
shareholders’
interests and promote
stewardship and good
governance over a
long time horizon.
A Restricted Share award may
be granted to an Executive
Director in respect of each
financial year over a fixed
number of shares.
The maximum number of
shares that can be awarded in
respect of each financial year
will be calculated based on
such number of shares as have
a market value at the grant
date of the awards in respect of
the 2021 financial year equal to
133% of salary for the CEO and
100% of salary for the CFO.
For these purposes, the
market value of a share will be
determined by the Committee
using an average share price.
Granting as a fixed number
of shares further aligns
Executive Directors to
shareholders, rewarding share
price appreciation whilst
depreciation is penalised.
Prior to each grant, the
Committee will review the
number of shares to be granted
to ensure the fixed number of
shares remains appropriate,
taking into account factors
including the share price at the
time of grant and the target total
compensation for companies of
a similar size and complexity.
Performance underpins may be
based around key financial and/
or strategic measures.
In addition, the Committee
has discretion to reduce the
vesting outcome should it
not reflect the Committee’s
assessment of overall business
performance, the performance
of the individual, or the
experience of shareholders or
other stakeholders over the
vesting period.
In-post
shareholding
requirement
Executive Directors are
expected to build and
maintain a holding of
Supports our
ownership mentality
focus, promotes
stewardship and helps
align management
with shareholders.
Minimum shareholding
requirement, to be
satisfied within five years
of appointment, of no less
than 200% of salary for all
Executive Directors. If any
Executive Director does not
meet the requirement, subject
to consideration by the
Committee of the factors at
the time, they will be expected
to retain all of the net of tax
number of shares vesting
under any of the Company’s
discretionary share incentive
arrangements until the
requirement is met.
n/a
Post-exit
shareholding
requirement
Executive Directors are
expected to retain a proportion
of their shareholding for a two
year period after they have left
Funding Circle.
To reinforce long-
term alignment of
Executive Directors’
interests with those
of shareholders
post cessation of
employment.
Minimum post-exit
shareholding requirement of
“guideline shares” equal to
200% of salary for all Executive
Directors or the actual
shareholding on departure,
if lower. “Guideline shares”
do not include shares which
the Executive Director held at
IPO, purchased in the market
directly or acquired pursuant to
the exercise of pre-IPO awards.
n/a
Annual Report and Accounts 2021 101
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Payments for loss of office
The principles on which the determination of payments for loss of office will be approached are set out below.
Policy
Payment in lieu of notice The Committee has discretion to make a payment in lieu of notice based on salary for the unexpired period of
notice. The payment would be made in monthly instalments and subject to mitigation.
Per the CEO’s service agreement, the CEO will not receive a payment in lieu of notice where the Committee
determines that unvested share awards may remain capable of vesting (which otherwise would ordinarily lapse
on cessation of employment).
Annual bonus This will be at the discretion of the Committee on an individual basis and the decision as to whether or not
to pay a bonus in full or in part will be dependent on a number of factors, including the circumstances of the
Executive Director’s departure and their contribution to the business during the performance period in question.
Any bonus earned will normally be pro-rated for time in service during the performance period and will, subject
to performance, be paid at the usual time (although the Committee retains discretion to pay the bonus earlier
in appropriate circumstances) and in the normal manner. Any bonus earned for the year of departure and, if
relevant, for the prior year may be paid wholly in cash at the discretion of the Committee.
Deferred bonus award If an Executive Director leaves for any reason (other than being dismissed for cause) during the
deferral period then unvested awards will continue and vest at the normal vesting date. In exceptional
circumstances (including if a participant dies), the Committee may decide that the Executive Director’s
unvested award will vest and be released early at the date of cessation of employment, in which case the
Committee has discretion to apply time pro rating in limited circumstances.
Restricted Share awards The extent to which any unvested awards will vest will be determined in accordance with the LTIP rules.
Unvested awards will normally lapse on cessation of employment. However, unless a participant is dismissed
for cause, the Committee has discretion to determine that the unvested awards will continue and remain
capable of vesting at the normal vesting date. To the extent that the awards vest, a two-year holding period
would then normally apply. In exceptional circumstances (including if a participant dies), the Committee
may decide that the Executive Director’s awards will vest and be released early at the date of cessation of
employment or at some other time (e.g. at the vesting date).
In either case, vesting will depend on the extent to which the performance underpins have been satisfied and
will be subject to a pro rata reduction for time served during the vesting period (although the Committee has
discretion to disapply time pro rating if the circumstances warrant it).
If an Executive Director leaves for any reason (other than being dismissed for cause) after an award has vested
but before it has been released (i.e. during a holding period), their award will ordinarily continue to be released
at the normal release date. In exceptional circumstances (including if a participant dies), the Committee may
decide that the Executive Director’s award will be released early at the date of cessation of employment.
Change of control Deferred bonus awards and Restricted Share awards will vest early in the event of a takeover, merger or
other relevant corporate event.
Deferred bonus awards will typically vest in full.
As regards Restricted Share awards, vesting will depend on the extent to which the performance underpins
have been satisfied, with the Committee taking into account relevant factors at the time, and will be
subject to a pro rata reduction for time served during the vesting period (although the Committee has
discretion to disapply time pro rating if the circumstances warrant it).
Alternatively, the Committee may permit deferred bonus awards and Restricted Share awards to be
exchanged for equivalent awards of shares in a different company (including the acquiring company).
Other payments Executive Directors will be entitled to payment for accrued holiday.
Awards under the Share Incentive Plan may be released in the event of cessation of employment or change of
control in accordance with the plan rules.
The Committee reserves the right to make payments by way of settlement of any claim arising in connection
with cessation of employment.
Legacy awards The extent to which the 2020 performance based LTIP awards vest will be determined in accordance with the
LTIP rules and the Remuneration Policy at the time they were granted.
The extent to which unvested Growth Shares and pre-IPO options vest will be determined in accordance
with the terms of the awards agreed prior to IPO. In particular, additional protection will apply in the event of
a termination of employment or engagement in anticipation of, upon or within 12 months following a change
of control of the Company, where such termination is deemed to be connected with the change of control.
In those circumstances, the participant will be entitled to receive a cash payment or other form of award (the
“replacement award”) which vests upon the termination of their employment. The value of the replacement
award will be determined by reference to the portion of the participant’s unvested pre-IPO awards that would
have vested (but for the change of control) over the period of 24 months following the change of control or, if
later, the 24 months following their termination. The agreed provisions are subject to the Company’s discretion to
determine that a greater number of shares subject to a pre-IPO award should vest upon a change of control.
Directors’ remuneration report continued
Corporate governance
Funding Circle Holdings plc102
Recruitment policy
The Company’s recruitment remuneration policy aims to give the Committee sufficient flexibility to secure the appointment
of high calibre executives to strengthen the management team and secure the skill sets necessary to deliver the Group’s
strategic aims.
When hiring a new Executive Director, the Committee will typically align the remuneration package with the Remuneration Policy
as set out above. The Committee may include other elements of pay which it considers appropriate, however, this discretion is
capped and is subject to the principles and the limits referred to below. The key terms and rationale for any such element would
be disclosed in the Directors’ Remuneration Report for the relevant year.
Policy
Salary Salary will be set at a level appropriate to the role and the experience of the Executive Director being appointed.
This may include agreement on future increases up to a market rate, in line with increased experience and/or
responsibilities, subject to good performance, where it is considered appropriate.
Buy-out awards It may be necessary to make additional awards in connection with the recruitment to buy-out
remuneration terms forfeited by the individual on leaving a previous employer if it considers the cost can
be justified and it is in the best interests of the Company. Buy-out awards are not subject to a formal cap.
The Committee will seek to make buy-outs subject to what are, in its opinion, comparable requirements
Where considered appropriate, buy-out awards will be liable to forfeiture or recovery provisions on
Maximum level of variable
remuneration
The Committee will not offer non-performance-related variable remuneration. The maximum level of
variable remuneration which may be granted (excluding buy-out awards) will be in line with the limits for
the CEO as set out in the Remuneration Policy table above.
Other elements of
remuneration
Other elements may be included in the following circumstances:
X An interim appointment being made to fill an Executive Director role on a short-term basis.
X If exceptional circumstances require that the Chair or a Non-Executive Director takes on an executive
function on a short-term basis.
X If an Executive Director is recruited at a time in the year when it would be inappropriate to provide an
annual bonus or Restricted Share award for that year. Subject to the limit on variable remuneration set
out above, the quantum in respect of the period employed during the year may be transferred to the
subsequent year.
X If the Executive Director is required to relocate, reasonable relocation, travel and subsistence payments
may be provided (either via one-off or ongoing payments or benefits for up to two years).
For an internal appointment, any legacy arrangements will either continue on their original terms or be adjusted to reflect the new
appointment, as appropriate.
Any share awards referred to in this section will be granted as far as possible under the Company’s existing share plans.
of an Executive Director.
Fees payable to a newly appointed Chair or Non-Executive Director will be in line with the fee policy in place at the time of appointment.
Annual Report and Accounts 2021 103
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Policy on external appointments
Executive Directors may hold external directorships and retain any fees for such directorships if the Board determines that such
appointments do not cause any conflict of interest.
Illustrations of the application of the Remuneration Policy in 2022
Illustration assumptions
Element of pay Minimum Target Maximum
Maximum + 50% share
Fixed remuneration:
X Base salary – Effective 1 March 2022
X Benefits – in line with 2021 benefits disclosed in the single figure table, for the new CEO this is based on the value of her
benefits in 2021
X Pension – 5% of salary
Annual bonus No payout 50% of maximum
Maximum payout
Restricted shares No vesting. Assumes the
underpin is not met.
Grant value vests: 358,177 shares for the CEO and
269,306 for the CFO. Assumes share price of £0.739,
which was the share price on 28 February 2022.
Grant value multiplied by 1.5
Non-Executive Directors’ remuneration
Element of
remuneration Key features Purpose and link to strategy
Fees The fees paid to the Non-Executive Directors are determined by the Board as
a whole. The Chair and the Non-Executive Directors are paid annual fees and
do not participate in any of the Company’s incentive arrangements or receive
any pension provision or other benefits.
Additional fees are payable for additional Board duties, including acting as
Senior Independent Director and for chairing the Audit Committee, Risk and
Compliance Committee and Remuneration Committee. Additional fees may
be paid in the exceptional event that Non-Executive Directors are required to
commit substantial additional time above that normally expected for the role.
The Non-Executive Directors are not entitled to any compensation on
termination of their appointment.
The Non-Executive Directors are entitled to reimbursement of reasonable
expenses. Additional fees or benefits may be provided at the discretion of
the Committee in the case of the Chair, and the Board in the case of the other
Non-Executive Directors.
Overall fees paid to the Chair and Non-Executive Directors will remain within
the limits set by the Company’s Articles of Association.
Fees are set at a level to reflect the amount
order to carry out their duties as members of
the Board and its Committees and to attract
and retain Non-Executive Directors of the
highest calibre with relevant commercial
As an early stage private company, which did not pay Directors’ fees, the Company has historically granted options to certain
Non-Executive Directors under the Company’s pre-IPO share option plan. Although the options granted will continue to be held
by those Non-Executive Directors going forwards, no further options have or will be granted to Non-Executive Directors post-IPO
under any of the Company’s share option plans. The options held by the relevant Non-Executive Directors are all fully vested.
Directors’ remuneration report continued
Corporate governance
Funding Circle Holdings plc104
Minimum Minimum
Fixed Annual Bonus Restricted shares
422 425
953
824
1,219
1,024
1,351
1,124
0 0
£300k £300k
£600k £600k
£1,500k £1,500k
£1,200k £1,200k
£900k £900k
£1,800k £1,800k
Target TargetMaximum MaximumMaximum +
50% share price
increase
Maximum +
50% share price
increase
CEO CFO
100% 44.3%
27.9%
27.8%
34.6%
43.7%
21.7%
31.2%
39.4%
29.4%
100% 51.6%
24.3%
24.1%
41.5%
39.1%
19.4%
37.8%
35.6%
26.6%
Remuneration Policy for Circlers
The Committee receives regular updates on overall pay and conditions in the Group, and pay and employment conditions
generally in the Group are taken into account when setting Executive Directors’ remuneration.
The approach to annual salary reviews is consistent across the Group, with consideration given to the level of experience,
responsibility, individual performance and salary levels in comparable companies.
Nearly 60% of Circlers are eligible for either the annual bonus plan or other bonus arrangements. Opportunities vary by
organisational level and function. From inception, a key element of the remuneration philosophy has been to support share
ownership across the business. This has been achieved through making equity incentives available to all Circlers to encourage
them to behave as owners – taking decisions that balance long-term value creation with achieving shorter-term strategic priorities.
The key elements to the incentive arrangements are:
X The Global Leadership Team and other senior management and senior specialist roles participate in a discretionary
share-based LTIP with grant size increasing with seniority. The grants for Circlers in leadership roles include a multiplier
X The leadership team, managers and specialists participate in an annual bonus plan (and the majority of Circlers participate
X All Circlers participate in an equity grant that operates in the UK as a Share Incentive Plan.
Equity awarded to Circlers, including the existing Global Leadership Team (other than the Executive Directors), is subject
to continued employment for the two years following the grant date but is not otherwise normally subject to performance
conditions. Our workforce engagement director (previously Cath Keers and now Helen Beck) frequently holds workforce
engagement sessions with Circlers. A range of topics are discussed including Executive remuneration. Feedback from
Alignment between Executive and Circlers’ remuneration
The Executive Directors’ Policy was designed to align Circler and Executive pay. We introduced an annual bonus plan for the
Global Leadership Team, managers and specialists in 2020 and then introduced an annual bonus for Executive Directors in 2021.
The introduction of Restricted Share awards for the Executive Directors also matches the introduction of equity schemes for
Circlers which are based on continued employment only. The main differences between how Executive Directors and Circlers are
remunerated are the longer time periods (vesting, holding and deferral), tougher performance criteria, and there being no share
price multiplier on the Restricted Share awards.
Annual Report and Accounts 2021 105
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual report on remuneration
This part of the report sets out how the Remuneration Policy has been applied in 2021 and how the Committee intends to apply the
Remuneration Policy in 2022. This part of the report will be subject to an advisory shareholder vote at the 2022 AGM.
Role of the Committee
The Committee’s primary role is to determine the remuneration of the Directors and Global Leadership Team and to determine
the Remuneration Policy for the Executive Directors as well as monitoring and reviewing its ongoing appropriateness and
relevance. In doing so, the Committee ensures that the Remuneration Policy is aligned with the Company’s key remuneration
principles as well as taking into account the principles of clarity, simplicity, risk, predictability, proportionality and alignment to
culture set out in the 2018 UK Corporate Governance Code.
How our remuneration is aligned with the principles of the Code
Alignment to strategy
and culture
X The design of remuneration at Funding Circle is aligned to our values, culture and strategy.
X The annual bonus is based on Group financial and strategic performance promoting collective accountability
and helps to align the Executive Directors’ incentive structure with the wider Group.
X Restricted Share awards fully align with our remuneration philosophy of ensuring that senior management
are significant share owners, promoting good stewardship and incentivising Executive Directors to create
long term value as the business continues to mature.
Clarity and Simplicity X Our Policy aligns the Executive Directors’ pay with pay for other Circlers.
X Our Policy is simple to understand for participants and shareholders and promotes long term stewardship.
Risk X Our Policy appropriately balances fixed and variable pay as well as short- and long-term incentives.
X Opportunities are set at a level which rewards performance at the same time as not unduly encouraging
excessive risk taking.
X The annual bonus and Restricted Shares are subject to malus and clawback provisions and the Committee
has the discretion to adjust pay outcomes.
X The Restricted Shares are granted as a fixed number of shares rather than a fixed % of salary. This means
that share price appreciation is rewarded and depreciation is penalised.
Proportionality X A significant portion of the total remuneration opportunity for Executive Directors is variable pay. This
variable pay is aligned to Company strategy through the choice of performance measures and the link to
share price.
Predictability X Our Policy is clear on the threshold, target and maximum levels of pay that Executives can earn.
Notwithstanding that actual outcomes will vary based on the level of achievement and share price performance.
The key responsibilities of the Committee are summarised on page 72 and further details on the Committee’s roles and
responsibilities can be found in our Terms of Reference on our corporate website.
Committee composition
Helen Beck joined the Board and became the Remuneration Committee Chair on 1 June 2021, taking over from Cath Keers who
stepped down on 19 May 2021. Geeta Gopalan joined the Committee on 6 September 2021 and replaced Ed Wray who stepped
down on 19 May 2021. None of the members who have served on the Committee during the year had any personal interest in the
matters decided by the Committee and are all considered to be independent by the Company. The Company Secretary acted as
Secretary to the Committee.
Committee members Number of meetings attended
Helen Beck, Chair
2/2
Andrew Learoyd
4/4
Geeta Gopalan
1/1
Cath Keers, former Chair
2/2
Ed Wray, former member
2/2
The Executive Directors, Chief People Officer, other members of the senior management team and our external remuneration
consultants, Deloitte LLP, were invited to Committee meetings where it was deemed appropriate. No individuals were involved in
decisions relating to their own remuneration.
Annual report on remuneration
Corporate governance
Funding Circle Holdings plc106
2021 Committee highlights
X engaged with shareholders in order to receive support for our Remuneration Policy;
X implemented our Remuneration Policy;
X determined the payout of the CFO’s buyout bonus;
X approved the payout of the 2020 annual bonus for Circlers;
X approved the design of the 2021 annual bonus for Circlers and the equity plans;
X set the 2021 annual bonus targets for Executive Directors;
X set the 2021 Restricted Share Plan underpin and approved the grants for Executive Directors;
X considered the appropriate remuneration package for our new CEO; and
X oversaw the reward of members of the Global Leadership Team and all other Circlers.
2022 Committee priorities
X determine the payout of the Executive Directors’ annual bonus;
X approve the remuneration arrangements for the Global Leadership Team;
X approve the design of the 2022 annual bonus for Circlers and the equity plans;
X set the 2022 annual bonus targets, ensuring they align with Funding Circle’s strategy as well as our ESG priorities;
X set the 2022 Restricted Share Plan underpin and approve the grants for Executive Directors; and
X continue to monitor remuneration practice across the Company as a whole, keeping abreast of current and evolving
market practice.
Committee effectiveness
As noted on page 78, the Committee undertook an effectiveness review during 2021, whereby each Committee member and,
by invitation, the Chief People Officer, completed a tailored questionnaire. The question set covered topics such as the quality
of the remuneration support provided to the Committee and the appropriateness of the remuneration policies and practices
implemented in 2021. Following a productive discussion, the Committee agreed it was working well and would implement the
recommendations suggested during 2022, for example an additional regular meeting will be added on an ongoing basis. It was
noted that the new Remuneration Committee Chair’s background and knowledge has been invaluable to the Committee and also
the business.
External advisers
The Committee is satisfied that the advice it has received from its appointed adviser Deloitte LLP as remuneration consultants
is independent and that the engagement partner and team that have provided remuneration advice do not have connections
with the Company that might impair their independence. Deloitte was appointed by the Committee in 2019. Deloitte is a founder
member of the Remuneration Consultants Group and, as such, voluntarily operates under its Code of Conduct in relation to
executive remuneration matters in the UK.
The fee paid to Deloitte LLP in 2021 in relation to advice provided to the Committee was agreed by the Company in advance for
specific projects and was £20,800. Deloitte also provided advice to the Group during 2021 in relation to risk advisory, share plan
advisory and corporate tax advisory services.
Annual Report and Accounts 2021 107
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Letters of appointment and service contracts
Director
Commencement date of
current term Expiry of current term
Notice period
From Company From Director
Executive Directors
Samir Desai 18 September 2018 31 December 2021 Twelve months Twelve months
Oliver White 15 June 2020 n/a Six months Six months
Lisa Jacobs 1 January 2022 n/a Twelve months Twelve months
Non-Executive Directors
Samir Desai 1 January 2022 1 January 2025 One month One month
Andrew Learoyd 10 September 2021 10 September 2024 One month One month
Eric Daniels 18 September 2021 18 September 2024 One month One month
Geeta Gopalan 1 November 2021 1 November 2024 One month One month
Harry Nelis 5 September 2021 5 September 2024 One month One month
Neil Rimer 5 September 2021 5 September 2024 One month One month
Matthew King 19 May 2021 19 May 2024 One month One month
Helen Beck 1 June 2021 1 June 2024 One month One month
The Executive Directors’ service contracts are on a rolling basis. All Non-Executive Directors have letters of appointment with
the Company. The appointments of each of the Non-Executive Directors are for an initial term of three years, these have been
extended for those Non-Executive Directors whose term had expired. The appointment of each Non-Executive Director is subject
to re-election at the AGM.
Shareholder voting
The Committee’s resolutions at the Company’s 2021 AGM in respect of the Remuneration Policy and the Annual Report on Remuneration
received the following votes from shareholders:
Remuneration Policy
Number of votes
Votes cast in favour 226,078,928 98.17% 219,192,706 95.18%
Votes cast against 3,229,853 1.40% 11,093,878 4.82%
Votes withheld 977,804 0.42% 1 0.00%
Total votes cast (including withheld) 230,286,585 100.00% 230,286,585 100.00%
Annual report on remuneration continued
Corporate governance
Funding Circle Holdings plc108
Single total figure of remuneration (audited)
The following tables set out the aggregate emoluments earned by the Directors in the year ended 31 December 2021 and
2021
Salary
and fees
£000
Taxable
benefits
£000
Bonus
£000
Pensions
£000
Long-term
incentives
£000
Total
£000 Other
Total
fixed
£000
Total
variable
£000
Executive Directors
Samir Desai
5
— — —
Oliver White 5 — —
Non-Executive Directors
Andrew Learoyd — — — — — —
7
(stepped down
— — — — — —
Eric Daniels 65 — — — — 65 — 65 —
Bob Steel
(stepped down
— — — — — —
Cath Keers (stepped down
19 May 2021) — — — — — —
Geeta Gopalan — — — — — —
Helen Beck (appointed
— — — — — —
Matthew King (appointed
19 May 2021) — — — — — —
Hendrik Nelis
8
— — — — — — — — —
Neil Rimer
8
— — — — — — — — —
2020
Executive Directors
Samir Desai 200 1 — — — 201 — 201 —
Oliver White (appointed
215 1 — 7 — 223
6
223 —
Non-Executive Directors
Andrew Learoyd 190 — — — — 190 — 190 —
Ed Wray
7
55 — — — — 55 — 55 —
Eric Daniels 62 — — — — 62 — 62 —
Bob Steel 62 — — — — 62 — 62 —
Cath Keers 62 — — — — 62 — 62 —
Geeta Gopalan 62 — — — — 62 — 62 —
Hendrik Nelis
8
— — — — — — — — —
Neil Rimer
8
— — — — — — — — —
1. The Board and the Global Leadership Team voluntarily reduced their salaries and fees by 20% over the period March to May 2020 in response to the Covid-19 pandemic.
2. Taxable benefits for Executive Directors principally include private medical cover and life assurance cover. Taxable benefits for Non-Executive Directors relate to reimbursement
of travel to the workplace. The Company ensures that the Non-Executive Directors are kept whole by settling the expense and any related tax. The figures shown include the
cost of the taxable benefit plus the related tax charge.
3. Executive Directors were eligible for a 5% of base salary pension contribution with effect from October 2020 (previously 3% of base salary). The CEO opted not to take up his
right to the pension contribution.
4. No long-term incentives vested in respect of 2020 or 2021.
5. As disclosed in the 2020 Directors’ Remuneration Report, Samir Desai was awarded a salary increase from £210,000 to £400,000 effective from 1 January 2021, however, he
waived the increase for 2021. His annual bonus opportunity and Restricted Share award opportunity were determined based on the £400,000 salary, which is referred to in this
Directors’ Remuneration Report as his reference salary.
6. The buy-out of Oliver White’s Vanquis 2019 and 2020 bonus awards forfeit on cessation of employment.
7. Ed Wray stepped down as Chair of Funding Circle Ltd in April 2020, at which point his Non-Executive Director fee became £55,000 in line with the Non-Executive
Director base fee.
8. Hendrik Nelis and Neil Rimer, who are not independent Non-Executive Directors, have waived their entitlement to a fee.
Annual Report and Accounts 2021 109
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
2021 annual bonus
An annual bonus for Executive Directors was introduced under our new Policy and we want to thank shareholders for supporting
its introduction. The maximum opportunities were 133% of reference salary for the CEO and 100% of salary for the CFO. 67% of
the annual bonus was based on financial measures with the remainder based on non-financial measures. The measures were
set by the Committee and are in line with Funding Circle’s strategy. Stretching financial targets were set by the Committee taking
into account our 2021 budget and broker forecasts at the time. An on-target bonus could be earned for achieving 2021 budget
performance. The Committee considered that a wide target range between threshold and maximum was appropriate taking
into account the continued economic uncertainty. An asymmetrical target range was set around on-target performance such
that the difference between maximum and on-target performance was twice the difference between on-target and threshold
performance. This was to ensure that the bonus would only pay out towards maximum for truly stretching performance
against budget.
Structure of the 2021 bonus
Element (weighting %)
Threshold
(0% payout)
Target
(50% payout)
Maximum
(100% payout) Outcome
Implied payout of
element
CEO CFO
AEBITDA (34%) £10m £20m £40m £91.8m 100%
Operating Income (33%) £135m £150m £180m £165.5m 75.8%
Non-financial measures (33%)
See below 85% 90%
Total (% of max) 87.1% 88.7%
Discretionary reduction of formulaic outcome by 10% (% of max) 78.4% 79.9%
Final outcome (£k) 417 319
Non-financial measures
Category Details on objectives Performance assessment
Stakeholders –
for our customers
shareholders
Customers
X Our Net Promoter Score was at our target of 80%.
X Over 2021, Funding Circle dealt with customer complaints effectively,
notwithstanding the increased volume of customer contact activity caused
by the pandemic. Customer complaints rose due to increased collection and
recoveries activity caused by the pandemic.
X Brand awareness of 46% was in line with our expectations.
X Roll out of our instant decision lending has continued to be a success,
enabling us to say “Yes” to more businesses. Over 70% of loan decisions are
now automated.
Shareholders
X Significant progress has been made with respect to diversifying our
shareholder base.
Circlers – Building
an incredible place
to work and learn
Employees
X Employee engagement is at an all-time high of 73%, exceeding our target of
70% by 3%, and an increase of 4% from 2020.
X Our Employee Net Promoter Score of 86% also exceeded our target by 6%.
Gender
X Our gender pay gap is now at its lowest level to date at Funding Circle. Our
mean gender pay gap is down to 18.5% from 21.4% in 2020, and the median
gender pay gap has also fallen to 27.1% from 32.2% in 2020.
X Significant progress has been made against our Women In Finance charter
commitment to have 40% female representation in our senior leadership by
2025. We are currently at 34% of senior leadership, up from 31%.
Annual report on remuneration continued
Corporate governance
Funding Circle Holdings plc110
Category Details on objectives Performance assessment
Risk and
sustainability –
Building a resilient
and sustainable
business to support
all of our stakeholders
ESG goals
X Progress made in setting ESG strategy with a Carbon Trust project plan
developed – initially measuring our emissions and then offsetting, and ESG
reports now being integrated into loan portfolio monitoring.
X Social impact framework developed following a Circler survey with 3 stages
identified: Consolidating what we already do, Enabling the infrastructure,
and Orienting towards longer-term strategic opportunities.
Credit quality / net investor returns of loan cohorts
X Credit risk metrics improved over the year and have been at “Green” levels
for the majority of the year and improving.
X The vast majority of loan cohorts are projected to provide returns greater
than those forecast with only 1 projected to be lower.
Operational & governance excellence
X A number of audits carried out on behalf of the British Business Bank and
other investors which received positive feedback and no material issues
were found.
X Loan buybacks have decreased year on year and are well within our risk
appetite limits.
X Further development of ERMF and three lines of defence model.
Change management
X Funding Circle became accredited for the Recovery Loan Scheme in 2021
and transitioned smoothly from CBILS lending.
X We relaunched our core offering in 2021 after being focused on CBILS and
BBILS, requiring a significant internal shift.
X Completed the rollout of new technology platform for limited companies,
transforming our business, and we began the next stage of our future by
beta launching FlexiPay and API, and exploring LaaS in the US.
CEO personal
performance
A year of huge leadership change in which Samir has proved the effectiveness
of his succession hiring and development of the Global Leadership Team and
their direct successors. He has effectively delegated over the year and ensured
a smooth transition to the new CEO.
Governance also came to the fore with the significant pivot of the business
into untested areas with continued successful implementation of the 2020
Government backed schemes in H1 2021, implementation of the Recovery
Loan Scheme, new products and credit risk management in a challenging
economic environment.
CFO personal
performance
The CFO has put clear succession plans in place for the Finance department,
has retained key staff, and has created a culture that has led to high
engagement in the department.
He has provided leadership and necessary challenge where needed across
the business. He has provided calm, thoughtful, open and transparent input in
Board and GLT conversations and provided challenge to management team
and CEO where needed.
He has taken over the investor relations activities and, working with
the Communications team, now manages the relationships with many
shareholders independently.
In 2021, he actively managed cost discipline across the business, ensuring
Funding Circle remains a sustainable business. In addition, he has tackled
Balance Sheet risk management and set up an effective process for
understanding and taking risk.
Based on the performance against all of the non-financial objectives and personal performance, the Committee determined that
the CEO would receive 85% of maximum of the non-financial element and CFO would receive 90% of maximum.
Annual Report and Accounts 2021 111
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
2021 annual bonus continued
Remuneration Committee discretion applied
The Committee agreed that overall Group and personal performance had been excellent in a difficult and challenging
environment. Through CBILS, followed by a successful transition to RLS and reintroduction of core lending, in the UK and PPP
in the US, Funding Circle played a leading role in helping small businesses drive the economic recovery in both our geographies.
Investment in risk and technology has also reaped rewards with both significant improvements to the core product and the
development of new products and capabilities for customers in 2021. The Committee was however cognisant that the AEBITDA
and Operating Income targets were set based on the Board approved December 2021 budget and did not fully factor in the
extension of CBILS in the UK, PPP in the US or the impact of the improved economy on the fair value of investments. The
Committee also considered this outcome taking into account the experience of shareholders, Circlers, customers, and other
stakeholders and considered it to be appropriate. Therefore, notwithstanding the strong performance from the Group and
the Executive Directors, the Committee considered it appropriate to reflect the exceptional nature of the year and reduce the
formulaic vesting outcome of the bonus by 10%. The CEO therefore earned a bonus equal to 78.4% of maximum (104.2% of
reference salary) and the CFO earned 79.9% of maximum (79.9% of salary). 40% of the amount earned is deferred into shares for
three years.
Restricted Share awards granted during 2021
Restricted Share awards were granted to the Executive Directors on 19 May 2021 under our Policy, for which we thank
shareholders for the approval once again. Details of the awards are set out below:
Type of award
Number of
shares
Face value
1,2
Grant date Vesting date Holding period
Samir Desai
Nil-cost share
option 358,177 £532,000 19 May 2021 19 May 2024
19 May 2024
to 19 May
2026
Oliver White
Nil-cost share
option 269,306 £400,000 19 May 2021 19 May 2024
19 May 2024
to 19 May
2026
1. Based on a grant date share price of £1.4853.
2. The CEO was awarded Restricted Shares with a value equal to 133% of reference salary and the CFO an award with a value equal to 100% of salary. These lapsed on
Vesting will be subject to a financial underpin based on operating income as well as qualitative underpins to ensure that Executive
Directors are not rewarded where the Committee considers there to have been a failure in performance, including serious breach
of regulation, material reputational damage and gross misconduct. The financial underpin was set such that annual operating
income must be on average £150m over the period of three years from 2021 to 2023. Prior to vesting, the Committee will assess
whether actual performance of the Company and Executive Directors is reflected to guard against payment for failure or against
windfall gains. The Committee retains the discretion to make any adjustment to vesting it deems necessary.
Annual report on remuneration continued
Corporate governance
Funding Circle Holdings plc112
Directors’ shareholding and share interests (audited)
Table of Directors’ share interests as at 31 December 2021
1
Beneficially
owned shares
Vested but
unexercised
awards
Unvested
awards
(not subject to
performance
conditions)
Unvested
awards
(subject to
performance
conditions) Total
Executive Directors
Samir Desai 16,397,164 1,343,750 806,250 — 18 ,547,16 4
Oliver White 138,121 — 71,237 1,194,696 1,404,054
Non-Executive Directors
Andrew Learoyd 1,689,991 100,000 — — 1,789,991
Ed Wray (stepped down 19 May 2021) — — — — —
Eric Daniels — 383,204 — — 383,204
Bob Steel (stepped down 19 May 2021) 614,754 350,000 — — 964.754
Cath Keers (stepped down 19 May 2021) 12,045 — — — 12,045
Geeta Gopalan 33,216 — — — 33,216
Helen Beck (appointed 1 June 2021) 9,235 — — — 9,235
Matthew King (appointed 19 May 2021) 15,400 — — — 15,400
Hendrik Nelis — — — — —
Neil Rimer — — — — —
1. Or date of leaving employment from the Company if earlier.
2. Includes shares owned by connected persons.
3. Vested Growth and ESS Shares are treated as legally owned shares.
The Company’s share ownership requirements are that Executive Directors shall (subject to personal circumstance) build and
maintain a shareholding equivalent to at least 200% of salary over five years. At the end of the 2021 financial year, the CEO
complied with this requirement. The CFO was appointed to the Board on 15 June 2020 and currently holds unvested options
subject to continued employment only (which count towards the shareholding guideline) equal to 58.6% of salary, calculated
into account.
As an early stage private company, which did not pay Directors’ fees, the Company has historically granted options to certain
Non-Executive Directors under the Company’s pre-IPO share option plan. Although the options granted will continue to be held
by those Non-Executive Directors going forward, no further options have or will be granted to Non-Executive Directors post-IPO
under any of the Company’s share option plans. The options held by the relevant Non-Executive Directors are all vested.
Annual Report and Accounts 2021 113
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Table of Directors’ vested and unvested share awards (audited)
Award type
1
No. of
awards at
1 January
2021
Awards
granted
in the year
Awards
lapsed
in the year
Awards
vested
in the year
Awards
exercised
in the year
No. of
awards at
Date of
grant/vesting
commenced
Exercise price/
subscription price
Market price
on exercise
Executive Directors
Samir Desai
Vested Growth — — — 403,125 (403,125)
2
— 01/08/2017 £0.02 n/a
Unapproved 806,250 — — 537,50 0 — 13/06/2018 £0.001 n/a
Unvested SIP 4,991 3,967 (8,958) — — — 03/11/2020 £0.00 n/a
Growth 403,125 — — (403,125) — — 01/08/2017 £0.02 n/a
Unapproved 1,343,750 — — (537,500) — 13/06/2018 £0.001 n/a
Restricted shares — 358,177 (358,177) — — — 19/05/2021 £0.01 n/a
Oliver White
Vested 2018 LTIP Bonus — — — 240,602 (240,602) — 19/06/2021 £0.00 £1.50
Unvested 2018 Long Term Incentive Plan 925,390 — — — — 19/06/2020 £0.00 n/a
2018 LTIP Bonus 240,602 — — (240,602) — — 19/06/2020 £0.00 n/a
SIP 4,991 3,967 — — — 03/11/2020 £0.00 n/a
Restricted shares — 269,306 — — — 19/05/2021 £0.00 n/a
2020 bonus buyout — 71,237 — — — 26/03/2021 £0.00 n/a
Non-Executive Directors
Andrew Learoyd
Vested Unapproved 100,000 — — — — 18/06/2015 £0.32 n/a
Ed Wray — — — —
Vested Unapproved 571,400 — — — (571,400) — 19/08/2011 £0.03 £1.49
Unapproved 100,000 — — — (100,000) — 18/06/2015 £0.32 £1.49
Eric Daniels
Vested Unapproved 195,704 — — — — 22/04/2013 £0.03 n/a
Unapproved 187,500 — — — — 01/03/2016 £0.39 n/a
Bob Steel
Vested Unapproved 250,000 — — — — 15/07/2014 £0.21 n/a
Unapproved 100,000 — — — — 18/06/2015 £0.35 n/a
1. Historically there have been two different types of awards granted to Executive Directors: conditional shares (referred to in the table above as “ESS” and “Growth”) and
unapproved options (referred to in the table above as “Unapproved”). Other than in certain circumstances as set out on page 102 (e.g. on termination of employment or change
of control), vested unapproved options can be exercised during a period of ten years from the date of grant.
2. Growth shares vesting in year are immediately transferred and become beneficially owned shares.
Payments for loss of office
As noted on page 97, Samir Desai did not receive any payments linked to his resignation as CEO. His unvested Restricted Share
awards (i.e. the award granted in 2021) and Share Incentive Plan free and matching shares lapsed in full following his resignation
and as previously reported he did not take up his LTIP for either 2019 or 2020.
Payments to former Directors
There were no payments made to former Directors during the year.
Annual report on remuneration continued
Corporate governance
Funding Circle Holdings plc114
Table of Directors’ vested and unvested share awards (audited)
Award type
1
No. of
awards at
1 January
2021
Awards
granted
in the year
Awards
lapsed
in the year
Awards
vested
in the year
Awards
exercised
in the year
No. of
awards at
Date of
grant/vesting
commenced
Exercise price/
subscription price
Market price
on exercise
Executive Directors
Samir Desai
Vested Growth — — — 403,125 (403,125)
2
— 01/08/2017 £0.02 n/a
Unapproved 806,250 — — 537,50 0 — 13/06/2018 £0.001 n/a
Unvested SIP 4,991 3,967 (8,958) — — — 03/11/2020 £0.00 n/a
Growth 403,125 — — (403,125) — — 01/08/2017 £0.02 n/a
Unapproved 1,343,750 — — (537,500) — 13/06/2018 £0.001 n/a
Restricted shares — 358,177 (358,177) — — — 19/05/2021 £0.01 n/a
Oliver White
Vested 2018 LTIP Bonus — — — 240,602 (240,602) — 19/06/2021 £0.00 £1.50
Unvested 2018 Long Term Incentive Plan 925,390 — — — — 19/06/2020 £0.00 n/a
2018 LTIP Bonus 240,602 — — (240,602) — — 19/06/2020 £0.00 n/a
SIP 4,991 3,967 — — — 03/11/2020 £0.00 n/a
Restricted shares — 269,306 — — — 19/05/2021 £0.00 n/a
2020 bonus buyout — 71,237 — — — 26/03/2021 £0.00 n/a
Non-Executive Directors
Andrew Learoyd
Vested Unapproved 100,000 — — — — 18/06/2015 £0.32 n/a
Ed Wray — — — —
Vested Unapproved 571,400 — — — (571,400) — 19/08/2011 £0.03 £1.49
Unapproved 100,000 — — — (100,000) — 18/06/2015 £0.32 £1.49
Eric Daniels
Vested Unapproved 195,704 — — — — 22/04/2013 £0.03 n/a
Unapproved 187,500 — — — — 01/03/2016 £0.39 n/a
Bob Steel
Vested Unapproved 250,000 — — — — 15/07/2014 £0.21 n/a
Unapproved 100,000 — — — — 18/06/2015 £0.35 n/a
1. Historically there have been two different types of awards granted to Executive Directors: conditional shares (referred to in the table above as “ESS” and “Growth”) and
unapproved options (referred to in the table above as “Unapproved”). Other than in certain circumstances as set out on page 102 (e.g. on termination of employment or change
of control), vested unapproved options can be exercised during a period of ten years from the date of grant.
2. Growth shares vesting in year are immediately transferred and become beneficially owned shares.
Payments for loss of office
As noted on page 97, Samir Desai did not receive any payments linked to his resignation as CEO. His unvested Restricted Share
awards (i.e. the award granted in 2021) and Share Incentive Plan free and matching shares lapsed in full following his resignation
and as previously reported he did not take up his LTIP for either 2019 or 2020.
Payments to former Directors
There were no payments made to former Directors during the year.
Annual Report and Accounts 2021 115
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual report on remuneration continued
Performance graph
The chart below illustrates the Company’s TSR performance compared with that of the FTSE AllShare Index. This index has
been chosen as the Company is a constituent and it is considered the most appropriate benchmark against which to assess
the relative performance of the Company. The chart shows the value of £100 invested in Funding Circle at the IPO offer price of
£4.40 per share on 28 September 2018 compared with the value of £100 invested in the FTSE AllShare Index.
CEO remuneration table
The table below sets out the CEO’s single figure of total remuneration.
£000 2020 2019 2018 2017 2016
CEO total remuneration
1,2
201 211 4,081 204 160
1. The 2018 figure includes share options that were granted prior to IPO which were subject to continued employment only.
2. The CEO received no bonus from 2016 to 2020.
Relative importance of spend on pay
The table below sets out our relative importance of spend on pay. There have been no dividends paid to date.
Total income and adjusted EBITDA have been presented as these are two key performance measures used by the Directors in
assessing performance.
2020
%
Change
Total income £222.0m (7)%
Adjusted EBITDA £(63.8)m 244%
Employee costs £89.5m (13)%
Average number of employees 911 (12)%
Funding Circle plc FTSE AllShare Index
£
0
20
40
60
80
100
120
Sep 2018 Dec 2018 Dec 2019 Dec 2021Dec 2020
Corporate governance
Funding Circle Holdings plc116
Percentage change in Directors’ remuneration compared with employees
The table below sets out the annual percentage change in remuneration from 2019 to 2021 for each of the Directors compared
to that for an average employee.
2020 to 2021 2019 to 2020
Salary/fees
Benefits Annual bonus Salary/fees
Benefits Annual bonus
Executive Directors
Samir Desai +5% +33.6%
2
n/a -5% 0% n/a
Oliver White
3
— +8.4% n/a n/a n/a n/a
Non-Executive Directors
Andrew Learoyd +5% — — -5% — —
Ed Wray
4,5
+5% — — -15% — —
Eric Daniels +5% — — -5% -100% —
Bob Steel
4
+5% — — -5% — —
Cath Keers
4
+5% — — -5% -100% —
Geeta Gopalan +15% — — -5% — —
Helen Beck
6
n/a — — n/a — —
Matthew King
7
n/a — — n/a — —
Hendrik Nelis
8
n/a — — n/a — —
Neil Rimer
8
n/a — — n/a — —
Average employee
9
-13.3% +8.7% +17.1% -1.7% +1.8% +61.2%
1. The Board and the Global Leadership Team voluntarily reduced their salaries and fees by 20% over the period March to May 2020 in response to the Covid-19 pandemic. This is
the reason for the change in salaries and fees shown above. No Director received a salary or fee increase during 2020 or 2021. The CEO waived his salary increase for 2021.
2. Samir Desai’s benefits did not include a pension contribution or cash in lieu which he waived his right to
3. Oliver White was appointed to the Board on 15 June 2020.
4. Ed Wray, Bob Steel and Cath Keers stepped down from the Board on 19 May 2021.
5. Ed Wray stepped down as Chair of Funding Circle Ltd in April 2020, at which point his Non-Executive Director fee became £55,000 in line with the Non-Executive
Director base fee.
6. Helen Beck was appointed to the Board on 1 June 2021.
7. Matthew King was appointed to the Board on 19 May 2021.
8. Hendrik Nelis and Neil Rimer, who are not independent Non-Executive Directors, have waived their entitlement to a fee.
9. The annual percentage change of the average remuneration of the Company’s employees, calculated on a full-time equivalent basis.
CEO pay ratio
Funding Circle is committed to remunerating its employees fairly and competitively. We calculated our CEO pay ratio using the
prescribed Methodology A, as shown in the table below. Methodology A was selected as this is considered the most accurate
approach and is generally the preferred approach by shareholders and proxy agencies.
Year Method 25th percentile pay ratio Median pay ratio 75th percentile pay ratio
2021 Option A 18.4 11.6 6.9
2020 Option A 5.8 3.8:1 2.3:1
2019 Option A 6.8:1 3.9:1 2.5:1
There has been an increase in the CEO pay ratio for 2021 due to the introduction and payment of an annual bonus for the CEO.
Annual Report and Accounts 2021 117
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
CEO pay ratio continued
Total pay and benefits used to calculate the ratios
The table below sets out the UK employee percentile pay and benefits used to determine the above pay ratios and the salary
component for each figure.
CEO 25th percentile Median 75th percentile
2021
Salary component £210,000 £29,274 £44,208 £77,5 42
Total pay and benefits £628,511 £34,111 £54,031 £91,598
The CEO remuneration is the total single figure remuneration for the relevant years and 2020 and 2021 is disclosed on page
109. The UK employee total remuneration has been calculated based on the amount paid or receivable for the relevant years.
Implementation of the Remuneration Policy for the year ended 31 December 2022
Salary
The table below shows the salaries for the Executive Directors as at 1 January 2022 in comparison to base salary as at
1 January
2022
1 January
2021
% change
Lisa Jacobs £400,000 N/A N/a
Oliver White £400,000 £400,000 —
1. Oliver White’s salary was set at £400,000 on his appointment to the Board (15 June 2020).
Annual bonus
The maximum opportunity for the CEO is 133% of salary and for the CFO is 100% of salary. The target opportunity for both is
50% of maximum opportunity. The annual bonus measures will be AEBITDA, Total Income and non-financial (each weighted
one-third). 40% of any bonus earned will be deferred into shares for 3 years. We have moved from Operating Income to Total
Income for 2022 as the Committee agreed that it was a more appropriate measure going forwards. This change recognises
that investment income is an ongoing part of Funding Circle’s income, with the balance sheet being used in accordance with
Board approved investment principles, and ensures that management are not incentivised to maximise one form of income
over another.
The Board considers the actual targets for 2022 to be commercially sensitive at this time, however, we will provide retrospective
disclosure of these targets in next year’s report.
The Committee may apply its discretion to amend the bonus pay-out should any formulaic assessment of performance not
reflect the Committee’s assessment of overall business performance, the performance of the individual, or the experience of
shareholders or other stakeholders over the performance period.
Restricted Share awards
In accordance with our Policy, the number of Restricted Shares granted to Executive Directors in 2022 and 2023 will be equal
As disclosed on page 97, Lisa Jacobs was appointed CEO effective from 1 January 2022 and her salary and incentive levels
have been set in line with the previous CEO recognising the need to retain and incentivise a highly talented individual in a very
competitive market.
Accordingly, the CEO and the CFO will be awarded 358,177 and 269,306 Restricted Shares respectively in 2022. Application of
the Policy means that the face value of the award is reduced if there has been a fall in the share price, which aligns with proxy
agency guidance. As shown in our “Illustration of the application of Remuneration Policy in 2022” charts, the grant date face
value of 2022 Restricted Share awards would be c.50% lower compared to 2021 Restricted Share awards (assumes a share price
of 73.9p at the time the 2022 Restricted Share awards are granted, which was the share price as of 28th February 2022).
Vesting will be subject to a financial underpin based on Total Income as well as qualitative underpins to ensure that Executive
Directors are not rewarded where the Committee considers there to have been a failure in performance, including serious breach
of regulation, material reputational damage and gross misconduct. The financial underpin has been set such that annual income
must be on average £181.3 million over the period of three years from 2022 to 2024. Prior to vesting, the Committee will assess
whether actual performance of the Company and Executive Directors is reflected to guard against payment for failure or against
windfall gains. The Committee retains the discretion to make any adjustment to vesting it deems necessary.
Corporate governance
Funding Circle Holdings plc118
Annual report on remuneration continued
Benefits and pension contributions
In line with our Policy, the benefits offered to Executive Directors are in line with those available to other employees in the Group.
All Circlers (including Executive Directors) are offered the opportunity to receive Private Medical Insurance, life assurance, dental
insurance, and a health cash plan paid for by Funding Circle. Circlers can upgrade their cover and include family members/
spouses/partners at their own cost. The Executive Directors, and all UK Circlers, are eligible to receive a pension contribution or
cash in lieu of 5% of salary.
2021 & 2022 Non-Executive Director and Chair fees
The Chair fee and Non-Executive Director fees were reviewed in January 2022. Whilst these fees are reviewed annually, they
have not been changed since Funding Circle’s IPO in September 2018. Since the fees were set, the role and responsibilities of
Committee Chairs, the Chair of Funding Circle Ltd. and the Chair of the Board have increased. We are therefore increasing the
Committee Chair fees by £5,000 to £15,000. Additionally, the fee for the Chair of the Board has been increased by 3.5% which is
in line with the historic average annual increase for Circlers, but below the average increase awarded for Circlers in 2022.
When reviewing the fees we also considered fees paid at Financial Services organisations of a similar size and complexity and,
as an additional reference point, the FTSE SmallCap Top Half.
It has been determined that the Non-Executive Director fees will be as set out in the table below, and are effective from
Fee 2021 2022
Chair fee £200,000 £207,000
Non-Executive Director base fee £55,000 £55,000
Senior Independent Director fee £10,000 £10,000
Committee Chair fees (other than the Nomination Committee) £10,000 £15,000
Chair of Funding Circle Ltd — £15,000
This report has been prepared in accordance with the Companies Act 2006, Schedule 8 of the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008 (as amended), the 2018 UK Corporate Governance Code and
the UK Listing Authority’s Listing Rules.
Annual Report and Accounts 2021 119
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Report of the Directors
for the year ended 31 December 2021
The Directors present their report (the “Directors’ Report”) and the Annual Report and Accounts for the year ended 31 December 2021.
Information required to be part of the Directors’ Report either by statute, by Listing Rule 9.8 or by the DTRs can be found either in
this section or elsewhere in this document, as indicated in the table below. All information located elsewhere in this document is
incorporated into this Directors’ Report by reference:
Section of Annual Report Page reference
Information required by LR9.8/DTRs
Corporate Governance Statement Corporate Governance Statement (page 70)
Going Concern and Viability Statement Risk management (page 64)
Directors’ interests Remuneration Report (page 113) and Directors’ Report (page 121)
Long-term incentive schemes Remuneration Report (page 114)
Waiver of emoluments Remuneration Report (page 109)
Powers for the Company to buy back its shares Report of the Directors (page 121)
Allotment of shares during the year Note 18 to the financial statements
Significant shareholders Report of the Directors (page 122)
Related party agreements Note 26 to the financial statements
Diversity policy Nomination Committee Report (page 82)
Climate-related financial disclosures See Sustainability (pages 29 to 34)
Statutory information
Stakeholder engagement Strategic Report – Our Stakeholders (pages 38 to 41). See also Board
decision making and section 172 duties on pages 75 to 76 of the Corporate
Governance Report
Employee engagement Strategic Report – Our Stakeholders (pages 38 to 41) and Our People (page 24).
See also Board decision making and section 172 duties on pages 75 to 76 of the
Corporate Governance Report
Policy concerning the employment of disabled persons Strategic Report – Our people (page 27)
Financial instruments Note 17 to the financial statements
Future developments of the business Strategic Report (pages 4 to 23)
Greenhouse gas emissions, energy consumption and
energy efficiency action Strategic Report – Sustainability (pages 33 to 34)
Significant agreements Report of the Directors (page 121)
Non-financial reporting Strategic Report – see below
Management Report
This Report of the Directors, together with the Strategic Report on pages 1 to 65, forms the Management Report for the purposes of
DTR 4.1.5R.
Strategic Report
Section 414A of the Companies Act 2006 (the “Act”) requires the Directors to present a Strategic Report in the Annual Report and
Accounts. The information can be found on pages 1 to 65.
The Company has chosen, in accordance with section 414C (11) of the Act and as noted in this Directors’ Report, to include
certain matters in its Strategic Report that would otherwise be disclosed in this Directors’ Report.
Section 414C of the Act requires the Company to include within its Strategic Report a non-financial statement setting out such
information as is required by section 414CB of the Act. Such information is set out in the Our people section on pages 24 to 27,
the Sustainability section on pages 28 to 37, the Our Model and Strategic priorities sections on pages 20 to 23, our Key performance
indicators on page 42, and the Risk management and Going concern and Viability statement sections on pages 51 to 65.
Directors
The Directors of the Company during the year and for the period up to the date of this report were:
Andrew Learoyd (Chair)
Samir Desai CBE
(co-founder, Chief Executive Officer to Non-
Executive Director on 1 January 2022)
Lisa Jacobs – appointed on 1 January 2022
(Chief Executive Officer)
Oliver White
(Chief Financial Officer)
Geeta Gopalan
(Senior Independent Director)
Eric Daniels
(Independent Non-Executive Director)
Hendrik Nelis
(Non-Executive Director)
Neil Rimer
(Non-Executive Director)
Matthew King – appointed 19 May 2021
(Independent Non-Executive Director)
Helen Beck – appointed 1 June 2021
(Independent Non-Executive Director)
Cath Keers – resigned 19 May 2021
(Independent Non-Executive Director)
Bob Steel – resigned 19 May 2021
(Senior Independent Director)
Ed Wray – resigned 19 May 2021
Independent Non-Executive Director)
Corporate governance
Funding Circle Holdings plc120
Insurance and indemnities
The Company maintains appropriate
insurance to cover Directors’ and Officers’
liability for itself and its subsidiaries.
In addition the Company indemnifies
each Director under a separate deed of
indemnity. The Company also indemnifies
each Director under its Articles of
Association. Such indemnities are
qualifying indemnities for the purposes
of, and permitted under, section 234
of the Act.
Directors’ interests
The number of ordinary shares in
which the Directors were beneficially
interested as at 31 December 2021 is
set out in the Directors’ Remuneration
Report on page 113. There were no
additional ordinary shares allotted to
the Directors In the period between 31
December 2021 and 8 March 2022.
There were no other changes during
that period to the number of ordinary
shares in which the Directors were
beneficially interested.
In line with the requirements of the Act,
each Director has notified the Company
of any situation in which he or she
has, or could have, a direct or indirect
interest that conflicts, or possibly
may conflict, with the interests of the
Company (a situational conflict). The
Board has formal procedures to deal
with Directors’ conflicts of interest.
None of the Directors has a material
interest in any significant contract
with the Company or any member of
its Group.
Results and dividends
The Group’s and the Company’s audited
financial statements for the year are set
out on pages 132 to 192.
The Directors do not recommend
payment of a final dividend for 2021
(2020: £nil).
Appointment and replacement
of Directors
The rules governing the appointment
and replacement of Directors are set
out in the Company’s Articles and are
governed by the Code, the Act and
related legislation. All Directors will
offer themselves for re-election to the
Company’s Board at the AGM.
Amendment of the Articles
The Company’s Articles of Association
may only be amended by a special
resolution at a general meeting of
shareholders. No amendments
are proposed to be made to the
existing Articles of Association at the
forthcoming AGM.
Authority to allot or purchase
the Company’s shares
The Articles permit the Directors to
issue or approve the purchase by the
Company of its own shares, subject to
obtaining shareholders’ prior approval.
The authority to issue or buy back
shares will expire at the 2022 AGM, and
it will be proposed at the meeting that
the Directors be granted new authorities
to issue and buy back shares. The
Directors currently have authority to
approve the Company’s purchase of
up to 35,330,154 of the Company’s
ordinary shares. However, the Company
did not repurchase any of its ordinary
shares during the year.
Share capital
The Company’s issued share capital
comprises ordinary shares of £0.001,
each of which are listed on the London
Stock Exchange. The issued share
capital of the Company as at 31
December 2021 comprises 356,619,718
ordinary shares of £0.001 each. Further
information regarding the Company’s
issued share capital can be found on
page 171 of the financial statements.
Details of the shares held by the Group’s
Employee Benefit Trusts are disclosed
in note 18 to the financial statements.
Rights attaching to shares
All shares have the same rights
(including voting and dividend rights
and rights on a return of capital) and
restrictions as set out in the Articles,
described below. Except in relation to
dividends and rights on a liquidation of
the Company, the shareholders have
no rights to share in the profits of the
Company. The Company’s shares are
not redeemable. However, following any
grant of authority from shareholders,
the Company may purchase or contract
to purchase any of the shares on or
off market, subject to the Act and the
requirements of the Listing Rules.
Voting rights
All members who hold ordinary shares
are entitled to attend and vote at the
AGM. On a show of hands at a general
meeting, every member present in
person shall have one vote and, on a
poll, every member present in person
or by proxy shall have one vote for
every share of which he or she is the
holder. No shareholder holds ordinary
shares carrying special rights relating
to the control of the Company and
the Directors are not aware of any
agreements between holders of the
Company’s shares that may result in
restrictions on voting rights.
Shares held by the Company’s
Employee Benefit Trusts rank pari
passu with the shares in issue and
have no special rights. Voting rights
and rights of acceptance of any offer
relating to shares held in trust rest with
the Trustees and are not exercisable
by employees, although the Trustees
will exercise such rights arising from
allocated shares in accordance with the
relevant participant’s directions.
Restrictions on transfer
ofsecurities
The Articles do not contain any
restrictions on the transfer of ordinary
shares in the Company other than the
usual restrictions applicable where any
amount is unpaid on a share. All issued
share capital of the Company at the
date of this report is fully paid. Certain
restrictions are also imposed by laws
and regulations (such as insider dealing
and market requirements relating to
closed periods) and requirements
of the Disclosure Guidance and
Transparency Rules, as well as the
Company’s own dealing codes, whereby
Directors, persons connected to the
Directors and certain employees of the
Company require approval to deal in the
Company’s securities.
Change of control
The details of the additional protections
that apply in the event of termination
of employment due to a takeover bid in
respect of certain of the CEO’s pre-IPO
awards are set out on page 102 under
“Legacy awards”. These additional
protections also apply to LTIP Awards
held by members of the GLT (but
excluding the Executive Directors). Save
in respect of these awards, there are no
agreements between the Company and
its Directors or employees providing
for compensation for loss of office
or employment (whether through
resignation, purported redundancy or
otherwise) because of a takeover bid.
Annual Report and Accounts 2021 121
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Change of control continued
The Group is party to a limited number of funding agreements that include change of control provisions which, in the event
of a change of control of the Company, could result in the termination of those arrangements, generally resulting in the
discontinuation of further loan origination and termination of servicing by the Group under the affected arrangement. In addition,
the Group participates in one or more lending schemes that benefit from a form of government-backed guarantee and it is
expected that, in the event of a change of control of the Company, the consent of the relevant loan guarantor would be required
to enable the Group’s continued participation in those schemes.
Significant shareholdings
As at 31 December 2021 and 28 February 2022, the Company has been notified pursuant to DTR5.1, or is otherwise aware, of the
following significant interests in the issued ordinary share capital of the Company:
Name of shareholder
Number
of ordinary
shares as at
31 December
2021
Percentage
issued share
capital as at
31 December
2021
Number
of ordinary
shares as at
28 February
2022
Percentage
issued share
capital as at
28 February
2022
Nature of
holding
Index Ventures 58,618,351 16.44 58,618,351 16.44 Indirect
Aktieselskabet CBH 46,5 07,936 13.04 46,507,936 13.04 Indirect
Accel London Management 26,906,743 7.5 4 26,906,743 7.5 4 Indirect
T Rowe Price Global Investments 22, 837,919 6.40 22,470,392 6.30 Indirect
Jupiter Asset Management 19,935,766 5.59 19,935,766 5.59 Indirect
DST Managers 16,505,378 4.63 16,505,378 4.63 Indirect
Mr Samir Desai 16,397,164 4.60 16,397,164 4.60 Indirect
Capital Group 14,713,073 4.13 14,713,073 4.13 Indirect
Ninety One 14,176,859 3.98 14,136,859 3.96 Indirect
Mr James Meekings 9,478,357 2.66 9,668,833 2.71 Indirect
In the period between 28 February and 8 March 2021 (the latest practicable date prior to the date of this report), the Company
received no further notifications pursuant to DTR5.
Research and development
The Group invests in the research and
development of technology and software
products that enable the Group to achieve
its key performance objective of growing
lending to small businesses whilst
delivering resilient returns to investors.
Political donations
There were no political donations made
during the year or the previous year.
External branches
The Company has subsidiaries in the
United Kingdom, the United States
of America, Germany, Spain and the
Netherlands but the Group had no
registered external branches during the
reporting period or prior year.
External auditors
PwC have confirmed their willingness
to continue as external auditors and
a resolution to reappoint them as the
Company’s external auditors, and
to authorise the Directors to fix the
auditors’ remuneration, will be proposed
at the 2022 AGM.
Statement of disclosure of
information to auditors
Each of the persons who is a Director
at the date of approval of this report
confirms that:
X so far as the Director is aware, there
is no relevant audit information
of which the Company’s external
auditors are unaware; and
X the Director has taken all the steps
that he/she ought to have taken as
a Director in order to make himself/
herself aware of any relevant audit
information and to establish that the
Company’s auditors are aware of
This confirmation is given and should
be interpreted in accordance with the
provisions of section 418 of the Act.
2021 AGM
The Company’s AGM will take place
at 12:00 p.m. on 9 June 2022 at the
Company’s offices at 71 Queen Victoria
Street, London EC4V 4AY.
A separate circular, comprising a letter
from the Chair of the Board, Notice
of Meeting and explanatory notes
on the resolutions being proposed,
has been circulated to shareholders
and is available on our website,
corporate.fundingcircle.com/investors/
shareholder-meetings.
It is not anticipated that the AGM will
be impacted by Covid-19 as in previous
years; however, the Board continues to
closely monitor government guidance
in relation to Covid-19, including any
imposed restrictions, and will provide
an update on our website at corporate.
fundingcircle.com/investors/shareholder-
meetings and, where appropriate, by
an announcement via a Regulatory
Information Service, if any changes are
required to the AGM arrangements.
Report of the Directors continued
Corporate governance
Funding Circle Holdings plc122
Statement of Directors’ responsibilities in respect of the financial statements
The Directors are responsible for
preparing the Annual Report and the
financial statements in accordance with
applicable law and regulation.
Company law requires the Directors
to prepare financial statements for
each financial year. Under that law the
Directors have prepared the Group
and Company financial statements
in accordance with International
Accounting Standards in conformity
with UK-adopted international
accounting standards.
Under company law, Directors must not
approve the financial statements unless
they are satisfied that they give a true
and fair view of the state of affairs of the
Group and Company and of the profit
or loss of the Group for that period. In
preparing the financial statements, the
Directors are required to:
X select suitable accounting policies
and then apply them consistently;
X state whether applicable UK-adopted
international accounting standards
have been followed, subject to any
material departures disclosed and
explained in the financial statements;
X make judgements and accounting
estimates that are reasonable and
prudent; and
X prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Group and Company will continue
in business.
The Directors are also responsible
for taking reasonable steps for the
prevention and detection of fraud
The Directors are also responsible
for keeping adequate accounting
records that are sufficient to show and
explain the Group’s and Company’s
transactions and disclose with
reasonable accuracy at any time the
financial position of the Group and
Company and enable them to ensure
that the financial statements and the
Directors’ Remuneration Report comply
with the Companies Act 2006.
The Directors are responsible for
the maintenance and integrity of the
Company’s website. Legislation in
the United Kingdom governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual
Report and Accounts, taken as a whole,
is fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Group’s and
Company’s position and performance,
business model and strategy.
Each of the Directors, whose names and
functions are listed in the Report of the
Directors confirm that, to the best of
their knowledge:
X the Group and Company financial
statements, which have been
prepared in accordance with UK-
adopted international accounting
standards, give a true and fair view
of the assets, liabilities and financial
position of the Group and Company,
and of the profit of the Group; and
X the Strategic Report includes a
fair review of the development and
performance of the business and the
position of the Group and Company,
together with a description of the
principal risks and uncertainties that
they face.
In the case of each Director in office
at the date the Directors’ report
is approved:
X so far as the Director is aware, there
is no relevant audit information of
which the Group’s and Company’s
auditors are unaware; and
X they have taken all the steps that
they ought to have taken as a
Director in order to make themselves
aware of any relevant audit
information and to establish that the
Group’s and Company’s auditors are
aware of that information.
Approved by the Board and signed on
its behalf.
Lisa Jacobs
Chief Executive Officer
10 March 2022
Annual Report and Accounts 2021 123
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
FINANCIAL
STATEMENTS
Funding Circle Holdings plc124
125 Independent auditors’ report
132 Consolidated statement of comprehensive income
133 Consolidated balance sheet
134 Consolidated statement of changes in equity
135 Consolidated statement of cash flows
136 Notes forming part of the consolidated financial statements
182 Company balance sheet
183 Company statement of changes in equity
184 Company statement of cash flows
185 Notes forming part of the Company financial statements
193 Glossary
194 Shareholder and Company information
Report on the audit of the financial statements
Opinion
In our opinion, Funding Circle Holdings plc’s Group financial statements and Company financial statements (the “financial statements”):
give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2021 and of the Group’s profit and
the Group’s and Company’s cash flows for the year then ended;
have been properly prepared in accordance with UK-adopted international accounting standards; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which comprise:
the consolidated and Company balance sheets as at 31 December 2021; the consolidated statement of comprehensive income, the
consolidated and Company statements of changes in equity and the consolidated and Company statements of cash flows for the year
then ended; and the notes to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of
our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in note 4, we have provided no non-audit services to the Company or its controlled undertakings in the period
under audit.
Our audit approach
Overview
Audit scope
Our audit included full scope audits of the UK and US components which accounted for approximately 98% of the Group’s total
income and 93% of the Group’s profit before taxation.
We performed audit procedures over specific balances in respect of the Funding Circle Central Europe (“FCCE”) component at a
Group level which together with the full scope audits accounted for 98% of the Group’s total income and 93% of the Group’s profit
before taxation.
Key audit matters
Valuation of SME loans (securitised) (Group)
Carrying value of the Company’s investment in the US subsidiary (Company)
Materiality
Overall Group materiality: £1,800,000 (2020: £1,890,000) based on 5% of the average of profit/loss before taxation for the previous
three years, adjusted for exceptional items and fair value gains and losses.
Overall Company materiality: £3,400,000 (2020: £3,400,000) based on 1% of total assets.
Performance materiality: £1,350,000 (2020: £1,400,000) (Group) and £2,500,000 (2020: £2,500,000) (Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Independent auditors’ report
to the members of Funding Circle Holdings plc
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 125
Financial statements
Report on the audit of the financial statements continued
Our audit approach continued
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the 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)
identified by the auditors, 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, and any comments we make on the results of our procedures
thereon, 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.
This is not a complete list of all risks identified by our audit.
The impact of Covid-19 on the audit (Group and Company), valuation of unrated bond liabilities (reported together with the valuation of
SME loans) (Group), valuation of loan repurchase liability (Group) and valuation of non-financial assets in the US GCU (reported together
with the carrying value of investment in the US subsidiary) (Group and Company), which were key audit matters last year, are no longer
included because:
our consideration of the impact of Covid-19 in the current year is captured by our key audit matter on the valuation of SME loans
(securitised) and it no longer represents an area of increased audit attention in its own right;
unrated bond liabilities have been settled in the year thus reducing the liabilities held and as such reducing the risk of material
misstatement arising on the valuation of the remaining portfolio;
the estimation uncertainty in relation to the determination of expected credit losses on the loan repurchase liability has reduced given
the amortisation of the underlying loans, the portfolio performance in the period and the improving economic environment; and
the risk of misstatement related to the carrying value of the non-financial assets in the US CGU has decreased this year given the
carrying value of the assets has reduced year on year and the increased headroom arising from stronger operational performance.
Otherwise, the key audit matters below are consistent with last year.
Key audit matter How our audit addressed the key audit matter
Valuation of SME loans (securitised) (Group)
Refer to Report of the Audit Committee – Significant issues
considered in relation to the financial statements (page 87); note 1
(accounting policies); note 2 (critical accounting estimates and
key sources of estimation uncertainty); note 13 (investment
in SME loans); and note 17 (financial risk management) of the
Group financial statements.
The Group consolidates portfolios of SME loan portfolios which
are held in securitised vehicles. The SME loans (securitised) are
recorded on the balance sheet at fair value with resultant gains
and losses recognised in the income statement.
As at the balance sheet date, the Group holds investments in
SME loans (securitised) amounting to £148.1m.
The estimation of the fair value of the SME loans (securitised)
requires models which ultilise both observable and unobservable
inputs, with reasonable movements in each key assumption
resulting in material changes to fair value. Judgement is required
to determine an appropriate discount rate, default rate and
recovery rate, leading to a level of estimation uncertainty. As a
result the valuation of the SME loans (securitised) has been an
area of focus in our audit.
Our audit procedures comprised the following:
We understood and evaluated the design and implementation of controls
relating to the valuation of the Group’s portfolio of SME loans (securitised).
We engaged our valuation experts to assess the appropriateness of the
methodology used by management in determining the valuation of the
investments in SME loans (securitised) which are held at fair value. This
included assessing the appropriateness of the key assumptions within
the valuation model which we considered to be the discount rate, default
rate and recovery rate. Our assessment of the reasonableness of the
assumptions included comparison to third party data where available.
We derived our own independent estimate of the discount rate and
compared this to that used by management.
We built our own independent model to re-calculate the fair value using
management’s assumptions.
Based on the above procedures performed, and the evidence obtained, we
concluded that the estimated fair value of the SME loans (securitised) was
reasonable.
We evaluated the appropriateness of the critical accounting estimates
and key sources of estimation uncertainty in note 2 to the Group financial
statements and the disclosures on financial instruments in note 13 and note
17 and considered these to be reasonable.
Independent auditors’ report continued
to the members of Funding Circle Holdings plc
Financial statements
Funding Circle Holdings plc126
Report on the audit of the financial statements continued
Our audit approach continued
Key audit matters continued
Key audit matter How our audit addressed the key audit matter
Carrying value of the Company’s investment in the US
subsidiary (Company)
Refer to Report of the Audit Committee – Significant issues
considered in relation to the financial statements (page
87; note 1 accounting policies including critical accounting
judgements and key sources of estimation uncertainty); and
note 5 (investments in subsidiary undertakings) of the Company
financial statements.
The Company holds an investment in the US subsidiary
with a carrying value of £65.1m after impairment. IAS 36
‘Impairment of Assets’ requires that investments are subject to
an impairment review when there is an indication that an asset
may be impaired. The indications that the carrying value of the
investment in the US subsidiary may be impaired are:
the impact of the US business restructuring activities
completed in the prior year; and
the impact on operational results following the closure of
the PPP scheme with the US business returning to core and
Marketplace activities.
Management performed an impairment assessment and
estimated the recoverable amount using a value-in-use model.
The significant assumptions in this assessment included the
revenue growth rate and the discount rate.
Our audit procedures comprised the following:
We understood and evaluated the design and implementation of controls
relating to the Company’s impairment assessments.
We assessed the methodology used by management against the
requirements of the financial reporting framework and tested the
mathematical accuracy of the model.
We have agreed the forecast financial information to budgets and
forecasts approved by senior management and the Board, including the
Medium Term Plan.
We evaluated the reliability of management’s forecasting by comparing
actual results with previous years’ forecasts.
We compared the forecast growth rates with those achieved by the
We identified the key drivers in management’s forecasts and assessed
their reasonableness by comparing them to historical results. Where
significant improvements were forecast in key assumptions underpinning
the forecast cash flow growth, we challenged management on whether
the forecast improvements were reasonable and supportable and obtained
corroborating evidence to assess these assumptions.
We performed sensitivity analysis to assess the susceptibility of change
in key assumptions including where management was unable to support
forward looking assumptions.
We assessed the appropriateness of the discount rate assumption by
using our valuation experts to derive an independent view on the rate.
We engaged tax experts to review and assess the reasonableness of the
group’s transfer pricing policy and arrangements. We tested whether
transfer pricing adjustments were consistent with the policy and have been
appropriately reflected within the model.
Based on the above procedures performed, and the evidence obtained,
we considered the Directors’ conclusion that the carrying value of the US
subsidiary is not impaired to be reasonable.
We evaluated the appropriateness of the related disclosures in note 1
(accounting policies including the critical accounting estimates and key
sources of estimation uncertainty) to the Company’s financial statements
and note 5 (investments in subsidiaries) and considered these to be
reasonable.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in
which they operate.
1) Audit approach to Funding Circle’s operations: We performed a risk assessment, giving consideration to relevant external and internal
factors, including Covid-19, climate change, and economic risks, relevant accounting and regulatory developments, and Funding
Circle’s strategy. We also considered our knowledge and experience obtained in prior year audits. As part of considering the impact
of climate change in our risk assessment, we evaluated management’s assessment of the impact of climate risk, which is set out on
pages 30 to 32. We designed our audit approach for the products and services that substantially make up Funding Circle’s businesses
in the UK, US and CE, such as platform lending, marketplace referrals and the origination of, and investment in, SME loan portfolios.
The audit approach was designed by a partner and team members who are specialists in the relevant areas. The risk assessment and
audit approach were provided to the US audit team who contributed to the Group audit.
2) Audit work for in scope components: Through our risk assessment and scoping we identified the US group and three components of
the UK group as full scope components due to being financially significant. We considered FCCE as a limited scope entity for specific
balances including loan repurchase liability and cash. We instructed our network firm in the US to perform a full scope audit of the US
component. The Group audit team performed the audit work for the UK components and the specific work over FCCE balances. We
assigned materiality levels to components reflecting the size of their operations. The performance materiality levels ranged from £1.0
million to £1.3 million. We determined the level of involvement we needed to have in their audit work to be able to conclude whether
sufficient appropriate audit evidence had been obtained as a basis for our opinion on the Group financial statements as a whole.
This included active and regular dialogue with the partner and team responsible for the audit of the US component, the issuance of
instructions, reviewing their audit plan and strategy and a review of their audit working papers and their findings in certain areas.
Analytical review procedures were performed over FCCE, a non-significant component with material balances, to mitigate the risk of
material misstatement.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 127
Report on the audit of the financial statements continued
Our audit approach continued
How we tailored the audit scope continued
3) Audit procedures undertaken at a Group level and on the Company: We ensured that appropriate further work was undertaken for
the Group and Company. Certain account balances were audited centrally by the Group engagement team, including the Company’s
investment in subsidiary undertakings, the investments in associates, the valuation of SME loans, the consolidation of the Group’s
4) Using the work of others: We used the evidence provided by our valuation experts and specialists for our work on the significant
assumptions used in the impairment assessment over the Company’s investment in the US subsidiary, and the valuation of the SME
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – Group Financial statements – Company
Overall materiality £1,800,000 (2020: £1,890,000). £3,400,000 (2020: £3,400,000).
How we determined it 5% of the average of profit/loss before taxation for the previous
three years, adjusted for exceptional items and fair value gains
and losses.
1% of total assets.
Rationale for
benchmark applied
We determined materiality by applying 5% to the average
consolidated profit/loss before taxation for the previous three
years after adjusting for exceptional items and fair value
gains and losses. We consider profit/loss before taxation to
be the most appropriate benchmark used in assessing the
performance of the Group as the business is listed and profit
orientated. Given the volatility in the underlying performance
caused by recent challenging economic conditions resulting
from Covid-19, we consider it appropriate to take an average of
the results of the preceding three years. We believe that profit/
loss before taxation adjusted for exceptional items and fair value
gains and losses is an appropriate measure as it eliminates
the impact of one-off non-recurring items which significantly
impact comparability.
We consider total assets to be the most
appropriate benchmark to apply on
the basis that the Company is a non-
trading investment Company that holds
investment in the Group’s subsidiaries.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range
of materiality allocated across components was between £1,400,000 and £1,700,000. Certain components were audited to a local
statutory audit materiality that was also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the
nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes.
Our performance materiality was 75% (2020: 75%) of overall materiality, amounting to £1,350,000 (2020: £1,400,000) for the Group
financial statements and £2,500,000 (2020: £2,500,000) for the Company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £90,000 (Group
audit) (2020: £95,000) and £90,000 (Company audit) (2020: £95,000) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s and the Company’s ability to continue to adopt the going concern basis of
accounting included:
performing a risk assessment to identify factors that could impact the going concern basis of accounting, including the impact of
external risks including Covid-19 and climate change;
understanding and evaluating management’s financial forecasts and liquidity and regulatory capital over the going concern period
including an evaluation of the stress testing performed by management;
review of management’s covenant compliance monitoring and the impact of the stress scenarios on the covenants;
substantiation of financial resources available to the Group and Company as at the balance sheet date including the unrestricted cash;
and
reading and evaluating the adequacy of the disclosures made in the financial statements in relation to going concern.
Independent auditors’ report continued
to the members of Funding Circle Holdings plc
Financial statements
Funding Circle Holdings plc128
Report on the audit of the financial statements continued
Conclusions relating to going concern continued
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s and the
Company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate
to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information, which includes reporting based on the Task Force on Climate-related Financial
Disclosures (TCFD) recommendations. Our opinion on the financial statements does not cover the other information and, accordingly,
we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance 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 an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of 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
With respect to the Strategic report and Report of the Directors, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic report and Report of the Directors
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Report of the
Directors for the year ended 31 December 2021 is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic report and Report of the Directors.
Directors’ remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code
specified for our review. Our additional responsibilities with respect to the corporate governance statement as other information are
described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing
material to add or draw attention to in relation to:
the directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
the disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
the directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material uncertainties to the Group’s and Company’s ability to continue to
do so over a period of at least twelve months from the date of approval of the financial statements;
the directors’ explanation as to their assessment of the Group’s and Company’s prospects, the period this assessment covers and
why the period is appropriate; and
the directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 129
Report on the audit of the financial statements continued
Corporate governance statement continued
Our review of the directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit and
only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in
alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with
the financial statements and our knowledge and understanding of the Group and Company and their environment obtained in the course
of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
the directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the Group’s and Company’s position, performance, business model and strategy;
the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
the section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the Company’s compliance
with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review
by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities in respect of the financial statements, the directors are responsible
for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true
and fair view. The directors are also responsible for such internal control as they 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 and the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ 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 auditors’ 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 the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations
related to the Group’s provision of regulated products and services under its Financial Conduct Authority (“FCA”) licence, and we
considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws
and regulations that have a direct impact on the financial statements such as the Companies Act 2006. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and
determined that the principal risks were related to bias in accounting estimates and judgements and the posting of manual journal
entries in respect of fee income. The Group engagement team shared this risk assessment with the component auditors so that
they could include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the Group
engagement team and/or component auditors included:
review of correspondence with, and reports to, the FCA;
review of customer complaints to identify any indicators of breaches in laws and regulations;
enquiries of the Directors, the Chair of the Audit Committee, the Head of Internal Audit and management, including the Group’s
general counsel and the Group’s head of legal and regulatory, including consideration of known or suspected instances of non-
compliance with laws and regulation and fraud;
review of all internal audit reports issued in the period to identify any indicators of breaches in laws and regulations;
identifying and testing journal entries and period end adjustments, including those with unusual account combinations, including
entries made in respect of fee income and posted by unexpected users; and
challenging significant assumptions and judgements made by management in its accounting estimates, in particular in relation
those used in the determination of the fair value of SME loans (securitised), impairment assessment in respect of the US subsidiary,
capitalisation of development costs and the presentation and disclosure of items such as exceptionals in the financial statements.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also,
the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Independent auditors’ report continued
to the members of Funding Circle Holdings plc
Financial statements
Funding Circle Holdings plc130
Report on the audit of the financial statements continued
Responsibilities for the financial statements and the audit continued
Auditors’ responsibilities for the audit of the financial statements continued
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We
will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling
to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
we have not obtained all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from
branches not visited by us; or
certain disclosures of directors’ remuneration specified by law are not made; or
the Company financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the directors on 4 August 2015 to audit the financial
statements for the year ended 31 December 2015 and subsequent financial periods. The period of total uninterrupted engagement is
seven years, covering the years ended 31 December 2015 to 31 December 2021.
Other matter
In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial
statements will form part of the ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial
Conduct Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no
assurance over whether the annual financial report will be prepared using the single electronic format specified in the ESEF RTS.
Nick Morrison (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
10 March 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 131
Consolidated statement of comprehensive income
for the year ended 31 December 2021
Note
31 December
2021
Before
exceptional
items
£m
Exceptional
items
£m
31 December
2021
£m
31 December
2020
Before
exceptional
items
£m
Exceptional
items
£m
31 December
2020
£m
Transaction fees 115 . 0 — 11 5 . 0 12 2 . 5 — 12 2 . 5
Servicing fees 4 7. 0 — 4 7. 0 30.2 — 30.2
Other income 3.5 — 3.5 3.0 — 3.0
Fee income 16 5 . 5 — 16 5 . 5 15 5 . 7 — 15 5 . 7
Investment income 5 3 .7 — 5 3 .7 89. 0 — 8 9.0
Investment expense (12 . 3 ) — (12 . 3 ) (22. 7 ) — (22. 7 )
Total income 2 0 6 .9 — 2 0 6 .9 222.0 — 222. 0
Fair value gains/(losses) 28.6 — 28.6 (118 . 3 ) — (118 . 3 )
Net income 3 2 35.5 — 23 5.5 10 3 .7 — 10 3 .7
People costs 4, 6 ( 7 7. 7 ) — ( 7 7.7 ) (8 1. 3 ) (4 .0 ) (8 5 . 3 )
Marketing costs 4 (4 6 . 9 ) — (4 6. 9 ) (4 6 . 8 ) — (4 6. 8 )
Depreciation, amortisation and
impairment 4 (13 . 9 ) (3 .9 ) (1 7. 8 ) (1 7. 2 ) (13 .7 ) (3 0 .9 )
Loan repurchase credit/(charge) 4 0 .1 — 0 .1 (6 . 2 ) — (6 . 2 )
Other costs 4 (29. 0 ) — (29. 0 ) (39. 8 ) (1. 0 ) (4 0 . 8 )
Operating expenses 4 (1 6 7. 4 ) (3 .9 ) (17 1. 3 ) (19 1. 3 ) (18 . 7 ) (2 10 . 0 )
Operating profit/(loss) 6 8 .1 (3 .9 ) 64.2 (8 7. 6 ) (18 .7 ) (10 6 . 3 )
Finance income 7 0 .1 — 0 .1 0.4 — 0.4
Finance costs 7 (1 .1 ) — (1 .1 ) (1. 4 ) — (1. 4 )
Share of net profit/(loss) of
associates 30 0.9 — 0 .9 (0 .8 ) — (0 .8 )
Profit/(loss) before taxation 6 8.0 (3 .9 ) 6 4 .1 (8 9. 4 ) (18 . 7 ) (10 8 .1 )
Income tax 8 (2 .9 ) — (2 .9 ) (0 .2 ) — (0 .2 )
Profit/(loss) for the year 6 5 .1 (3 .9 ) 61 . 2 (8 9.6 ) (18 .7 ) (10 8 . 3 )
Other comprehensive
income
Items that may be reclassified
subsequently to profit and loss:
Exchange differences on
translation of foreign operations 20 1.4 — 1. 4 1. 7 — 1.7
Total comprehensive
profit/(loss) for the year 66.5 (3 .9 ) 62 .6 (8 7. 9 ) (18 .7 ) (10 6 . 6 )
Total comprehensive
profit/(loss) attributable to:
Owners of the Parent 66.5 (3 .9 ) 62 .6 (8 7. 9 ) (18 .7 ) (10 6 . 6 )
Earnings/(loss) per share
9 18 . 5 p 1 7. 4 p (25 .8 )p (3 1. 2 )p
Diluted earnings/(loss)
9 1 7.1 p 16 . 0 p (25 . 8 )p (3 1. 2 )p
1. Exceptional items are detailed within note 5.
All amounts relate to continuing activities.
The notes on pages 136 to 181 form part of these financial statements.
Financial statements
Funding Circle Holdings plc132
Consolidated balance sheet
as at 31 December 2021
Note
31 December
2021
£m
31 December
2020
1
£m
Non-current assets
Intangible assets 11 2 4 .9 24 .4
Property, plant and equipment 12 1 4 .1 28 .7
Investment in associates 30 7. 6 11 . 0
Investment in trusts and co-investments 13 3 9.1 2 1. 2
Investment in SME loans (other) 13 74 . 2 25 .0
Trade and other receivables 14 4 .1 —
Current assets
Investment in SME loans (warehouse) 13 3.2 2 2 1. 8
Investment in SME loans (securitised) 13 1 4 8 .1 27 9.8
Investment in SME loans (other) 13 1.6 —
Trade and other receivables 14 25.0 6 7. 0
Cash and cash equivalents 23 224 .0 10 3 . 3
Total assets 5 6 5.9 782 .2
Current liabilities
Trade and other payables 15 36 .4 3 4 .1
Bank borrowings 17 — 17 1. 2
Bonds 17 14 0 . 3 294.3
Short-term provisions and other liabilities 16 3.4 8 .7
Lease liabilities 12 6.9 7. 3
Non-current liabilities
Long-term provisions and other liabilities 16 0 .7 1. 2
Bank borrowings 17 73.2 24 .3
Lease liabilities 12 17. 0 23.5
Total liabilities 2 7 7. 9 5 6 4.6
Equity
Share capital 18 0.4 0.3
Share premium account 19 293.0 29 2.6
Foreign exchange reserve 20 11.1 9.7
Share options reserve 1 9 .1 13 . 6
Accumulated losses 21 (3 5. 6 ) (9 8 .6 )
Total equity 288.0 2 1 7. 6
Total equity and liabilities 5 6 5.9 782 .2
1. See note 1.
The financial statements on pages 132 to 181 were approved by the Board and authorised for issue on 10 March 2022. They
were signed on behalf of the Board by:
Oliver White
Director
Company registration number 07123934
The notes on pages 136 to 181 form part of these financial statements.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 133
Consolidated statement of changes in equity
for the year ended 31 December 2021
Note
Share
capital
£m
Share
premium
account
£m
Foreign
exchange
reserve
£m
Share
options
reserve
£m
Retained
earnings/
(accumulated
losses)
£m
Total
equity
£m
Balance at 1 January 2020 0.3 292 .3 8 .0 11 .9 6 .5 31 9.0
Loss for the year 21 — — — — (10 8 . 3 ) (10 8 .3 )
Other comprehensive income
Exchange differences on translation of
20 — — 1.7 — — 1. 7
Total comprehensive income/(expense) — — 1.7 — (10 8 .3 ) (10 6. 6 )
Transactions with owners
Transfer of share option costs 21 — — — (3 .2 ) 3 .2 —
Issue of share capital 18, 19 — 0.3 — — — 0.3
Employee share schemes – value of
Balance at 31 December 2020 0.3 29 2.6 9.7 13 . 6 (9 8 .6 ) 2 1 7. 6
Profit for the year 21 — — — — 61. 2 61. 2
Other comprehensive income
Exchange differences on translation of
20 — — 1. 4 — — 1. 4
Total comprehensive income — — 1.4 — 61.2 62.6
Transactions with owners
Transfer of share option costs 21 — — — (1. 8 ) 1. 8 —
Issue of share capital 18, 19 0 .1 0.4 — — — 0 .5
Employee share schemes – value of
Balance at 31 December 2021 0.4 293.0 11.1 19 .1 (35 .6 ) 288.0
The notes on pages 136 to 181 form part of these financial statements.
Financial statements
Funding Circle Holdings plc134
Consolidated statement of cash flows
for the year ended 31 December 2021
Note
31 December
2021
£m
31 December
2020
£m
Net cash inflow from operating activities 23 1 0 0 .1 3 3 .1
Investing activities
Purchase of intangible assets 11 (8 .6 ) (9.5 )
Purchase of property, plant and equipment 12 (0. 8 ) (0 .8 )
Origination of SME loans (other) 17 (2 13 . 5 ) (25 .0 )
Cash receipts from SME loans (other) 17 16 3. 7 —
Purchase of SME loans (warehouse phase) 17 — (2 8 6.9 )
Cash receipts from SME loans (warehouse phase) 17 5 8.6 14 6. 9
Cash receipts from SME loans (securitised) 17 15 0. 2 2 11 . 7
Proceeds from sale of SME loans (warehouse phase) 17 1 7 6 .1 —
Proceeds from sale of investment bonds 17 — 4.0
Investment in trusts and co-investments 17 (2 2 .1 ) (2 0 .9 )
Cash receipts from investments in trusts and co-investments 17 3. 3 —
Redemption in associates 26, 30 3.9 1.9
Dividends from associates 26, 30 — 0.4
Interest received 7 0 .1 0.4
Net cash inflow from investing activities 3 10.9 2 2.2
Financing activities
Proceeds from bank borrowings 23 208.2 2 3 0 .1
Repayment of bank borrowings 23 (3 3 1. 3 ) (2 9 9 .1 )
Proceeds from issuance of bonds 23 — 18 6. 5
Payment of bond liabilities 23 (16 0. 6 ) (2 26 .1 )
Proceeds from the exercise of share options 0.4 0.2
Proceeds from subleases 0.2 —
Payment of lease liabilities 23 (8 .1 ) (7. 8 )
Net cash outflow from financing activities (2 91. 2 ) (116 . 2 )
Net increase/(decrease) in cash and cash equivalents 11 9 . 8 (6 0 .9 )
Cash and cash equivalents at the beginning of the year 10 3 . 3 16 4 .5
Effect of foreign exchange rate changes 0.9 (0 . 3 )
Cash and cash equivalents at the end of the year 23 2 24.0 10 3 . 3
The impact of exceptional items on the consolidated statement of cash flows is detailed in note 5.
The notes on pages 136 to 181 form part of these financial statements.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 135
Notes forming part of the consolidated financial statements
for the year ended 31 December 2021
1. Accounting policies
General information
Exchange and is domiciled and incorporated in the United Kingdom under the Companies Act 2006 and registered in England
and Wales. The address of its registered office is given on page 194. The consolidated financial statements of the Group for the
year ended 31 December 2021 comprise the Company and its subsidiaries (together referred to as the “Group” and individually
as “Group entities”).
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
Going concern
The Group’s business activities together with the factors likely to affect its future development and position are set out in the
Strategic Report.
The financial statements are prepared on a going concern basis as the Directors are satisfied that the Group has the resources
to continue in business for the foreseeable future (which has been taken as at least 12 months from the date of approval of the
financial statements).
The Group made a total comprehensive profit of £62.6 million during the year ended 31 December 2021 (2020: loss of
£224.0 million of cash and cash equivalents (2020: £103.3 million) of which £24.6 million (2020: £44.2 million) is held within
The Group has prepared detailed cash flow forecasts for the next 15 months and has updated the going concern assessment
The base case scenario assumes:
the new government-guaranteed Recovery Loan Scheme (“RLS”) in the UK is not extended beyond June 2022;
there remains macroeconomic stress in H1 2022 from inflation, supply chain and ongoing Covid-19-related pressures with
lending in the US steadily recovers; and
costs and headcount remain relatively flat other than increased investment in technology and risk.
Management prepared a severe but plausible downside scenario in which:
further macroeconomic volatility occurs in H1 2022 following the tapering of government support along with increased
inflation and interest rates reducing borrower demand leading to decreased originations;
investment returns reduce owing to increased funding costs, widening discount rates and deterioration in loan performance;
an operational event occurs requiring a cash outlay; and
a downside loss scenario is applied to Funding Circle’s on-balance sheet investment in SME loans resulting in higher initial fair
value losses and lower cash flows to the subordinate tranches of investments it owns.
Management has reviewed financial covenants the Group must adhere to in relation to its servicing agreements. These are
with institutional investors for which there are unrestricted cash, tangible net worth and debt to tangible net worth ratios.
Management has also reviewed regulatory capital requirements. In the downside scenario the risk of covenant or capital
requirement breach is considered remote.
The Directors have made enquiries of management and considered budgets and cash flow forecasts for the Group and have,
at the time of approving these financial statements, a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future. Further detail is contained in the Strategic Report on
pages 64 and 65.
Basis of preparation
The Group presents its annual financial statements in conformity with United Kingdom laws and regulations.
On 31 December 2020, International Financial Reporting Standards (“IFRS”) as adopted by the European Union at that date
were brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject
to endorsement by the UK Endorsement Board. The Group transitioned to UK-adopted International Accounting Standards
in its consolidated financial statements on 1 January 2021. The financial statements have been prepared in accordance
with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable
to companies reporting under those standards. In the previous year the accounts were prepared in accordance with IFRS
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and IFRS in conformity with the requirements of
the Companies Act 2006, including International Accounting Standards (“IAS”) and interpretations issued by the International
Financial Reporting Standard Interpretations Committee (“IFRS-IC”).
Financial statements
Funding Circle Holdings plc136
1. Accounting policies continued
Basis of preparation continued
This change in basis of preparation is required by UK company law for the purposes of financial reporting as a result of the
UK’s exit from the EU on 31 January 2020 and the cessation of the transition period on 31 December 2020. This change does
not constitute a change in accounting policy but rather a change in framework which is required to ground the use of IFRS in
company law. However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the
change in framework. The financial statements have been prepared on the historical cost basis except for certain financial
instruments that are carried at fair value through profit and loss (“FVTPL”).
The preparation of financial statements requires the use of certain accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group’s accounting policies. Changes in assumptions may have a
significant impact on the financial statements in the year the assumptions changed. Management believes that the underlying
assumptions are appropriate. The areas involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the financial statements, are disclosed in note 2.
Representation of comparative information
Investment in SME loans (other) of £24.3 million and related bank borrowings of £24.3 million have been reclassified in the
comparative period from current to non-current to reflect the expected life of Paycheck Protection Program (“PPP”) loan assets
impact on the profit and loss or net assets of the Group. There was no impact on periods prior to the comparative period.
Significant changes in the current reporting year
The financial position and performance of the Group were affected by the following events and transactions during the year
ended 31 December 2021:
i) Sale of US and UK warehouse loan assets (note 17)
In June 2021, Funding Circle sold SME loan assets from the warehouses in the US for £64.3 million as part of its strategy of
monetising pre-pandemic investments. The bank borrowings associated with the loans were fully repaid using the proceeds.
In November 2021, Funding Circle sold SME loan assets from the warehouse in the UK for £111.8 million as part of its strategy of
monetising pre-pandemic investments. The bank borrowings associated with the loans were fully repaid using the proceeds.
Certain SME loan assets in the warehouses were not sold as part of the transactions and remain on the balance sheet under
investment in SME loans (warehouse).
ii) The UK Government’s Recovery Loan Scheme (“RLS”) and relaunch of core lending
During the year, Funding Circle became an accredited lender under RLS, the new government-guaranteed loan scheme
successor to CBILS. Under the terms of the scheme Funding Circle is required to co-invest in loans originated through this
scheme. The loans are beneficially owned by investors under trust structures in which Funding Circle retains a small stake.
Additionally, core loans have been relaunched and are originated via the same trust structures in the UK.
In certain RLS and core loan co-investments in the UK and in the relaunch of core lending in the US, Funding Circle co-invests in
notes of the leveraged structured vehicles on a pari passu basis along with majority investors. These notes are subordinate to
senior notes issued to the senior borrowing facility provider of the vehicle. These vehicles are the sole beneficiaries of the trust
structures under which loans are originated by drawing down on the subordinate and senior note facilities during an investment
period. Once the investment period ends the vehicles distribute returns from the amortisation of the associated loans to the
senior and subordinate note holders after paying any running expenses of the vehicle.
The Group does not consolidate the trusts or the structured vehicles or the loans held within the trusts or borrowings and other
net assets of the vehicles, instead recognising its interest in the loans or vehicles as investment in trusts and co-investment
assets on the balance sheet. This investment is held at FVTPL and interest is recognised within investment income in the
consolidated statement of comprehensive income.
iii) The US Government’s Paycheck Protection Program (“PPP”) loan funding
During the year, the US Government’s PPP scheme was extended until May 2021. Funding Circle continued to fund PPP loans
via its lending platform, predominantly drawing down on the US Government’s Federal PPP lending facility. As a result the Group
holds £71.9 million (31 December 2020: £24.3 million) of PPP loans on balance sheet included within investment in SME loans
(other) with a corresponding draw down on the SBA facility of £73.2 million (31 December 2020: £24.3 million) included within
bank borrowings. The PPP loans on balance sheet and PPPLF liability may not directly offset due to timing of cash payments
and forgiveness of the loans and repayment of the liability. These loans are recognised initially at fair value and are subsequently
held at amortised cost as the business model under which the assets are held is to collect contractual cash flows. The loans are
guaranteed and borrowers are incentivised to apply for forgiveness on the loans. Once a loan is forgiven by the SBA, the loan and
related borrowing are extinguished.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 137
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
1. Accounting policies continued
Significant changes in the current reporting year continued
iii) The US Government’s Paycheck Protection Program (“PPP”) loan funding continued
Transaction fee income and broker commission expense associated with these loans are treated under IFRS 9 as an adjustment
to the effective interest rate and are amortised over the expected life of the loans. While the contractual life of the PPP loans is up
to five years, due to the design of the PPP loan programme, the loans are expected to be forgiven in a shorter period of time. The
Group has determined that the estimated expected life of PPP loans is 16 months from origination. In arriving at this estimate,
it has considered: the time frame in which PPP borrowers are incentivised to apply for forgiveness prior to being required to
commence repayments on the loans; recent steps the SBA has taken to streamline the forgiveness process; and trends in
historical PPP loans. The impact of the estimate on the year ended 31 December 2021 is the extent to which fee income and
broker cost are deferred. At 31 December 2021 £2.6 million fee income received and £0.2 million of broker commission expense
incurred were deferred to future periods.
Changes in accounting policy and disclosures
The Group has adopted the following new and amended IFRSs and interpretations from 1 January 2021 on a full
retrospective basis.
Standard/interpretation Content
Applicable for financial
years beginning on/after
Amendments to IFRS 7, IFRS 9 and IAS 39 –
Interest Rate Benchmark Reform – Phase 2
Reliefs relating to interest rate
benchmark reforms
1 January 2021
Amendments to IFRS 16 – Covid-19 Related Rent Concessions Leases 1 June 2020
The amendments and interpretations listed above did not materially affect the current year and are not expected to materially
affect future years.
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021
reporting years and have not been early adopted by the Group as follows:
Standard/interpretation Content
Applicable for financial
years beginning on/after
Amendments to IFRS 3 – Reference to the Conceptual Framework Business combinations 1 January 2022
Amendments to IAS 16 – Property, Plant and Equipment:
Proceeds before Intended Use
Property, plant and equipment 1 January 2022
Amendments to IAS 37 – Onerous Contracts – Costs of
Fulfilling a Contract
Provisions – onerous contracts 1 January 2022
Amendments to IAS 1 – Classification of Liabilities as
Presentation of financial statements 1 January 2023
Amendments to IAS 8 – Definition of Accounting Estimates Accounting policies, changes in
accounting estimates
1 January 2023
Amendments to IAS 1 and IFRS Practice Statement 2 –
Disclosure of Accounting Policies
Accounting policies 1 January 2023
Amendments to IAS 12 – Deferred Tax Related to Assets and
Liabilities Arising from a Single Transaction
Deferred tax 1 January 2023
These standards are not expected to have a material impact on the Group in the current or future reporting years or on
foreseeable future transactions.
Summary of new and amended accounting policies
There were no significant new accounting policies or amendments to existing accounting policies during the year.
Financial statements
Funding Circle Holdings plc138
1. Accounting policies continued
Summary of existing accounting policies
Basis of consolidation
Where the Group has control over an investee, it is classified as a subsidiary. The Group controls an investee if all three of the
following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the
investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that
there may be a change in any of these elements of control.
Structured entities are entities that are designed so that their activities are not governed by voting rights. In assessing whether
the Group has power over such entities, the Group considers factors such as the purpose and design of the entity; its practical
ability to direct the relevant activities of the entity; the nature of the relationship with the entity; and the size of its exposure to the
variability of returns of the entity.
The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity.
Intercompany transactions and balances between Group companies are therefore eliminated in full.
The Group applies the acquisition method to account for business combinations. In the consolidated balance sheet, the
acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition
date. Acquisition-related costs are recognised in profit or loss as incurred. The results of acquired operations are included in
Foreign currency translation
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in
which they operate (their “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency
monetary assets and liabilities are translated at the prevailing rate at the reporting date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to
that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the
profit or loss on disposal.
Presentation currency
These consolidated financial statements are presented in GBP sterling, which is the Group’s presentation currency.
All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated
at the prevailing rate at the reporting date. Income and expense items are translated at the average exchange rates for the year,
unless exchange rates fluctuate significantly during that year, in which case the exchange rates at the date of transactions are
used. Exchange differences arising are recognised in other comprehensive income and accumulated in equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign
entity and translated at the prevailing rate at the reporting date.
Segment reporting
Operating segments are reported in the manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker, which is the function responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Global Leadership Team that makes strategic decisions. For
each identified operating segment, the Group has disclosed information for the key performance indicators that are assessed
internally to review and steer performance in the Strategic Report.
Transactions between segments are on an arm’s length basis in a manner similar to transactions with third parties.
Exceptional items
Exceptional items are the items of income or expense that the Group considers are material, one-off in nature and of
such significance that they merit separate presentation in order to aid the reader’s understanding of the Group’s financial
performance. Such items would include profits or losses on disposal of businesses; transaction costs; acquisitions and
disposals; major restructuring programmes; significant goodwill or other asset impairments; and other particularly significant
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 139
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
1. Accounting policies continued
Income recognition
Fee income is recognised in line with IFRS 15 which provides a single, principles-based five-step model to be applied to all
contracts with customers:
1) identify the contract with the customer;
2) identify the performance obligations in the contract, introducing the new concept of “distinct”;
3) determine the transaction price;
4) allocate the transaction price to the performance obligations in the contracts, on a relative stand-alone selling price basis; and
5) recognise income when (or as) the entity satisfies its performance obligation.
Fee income earned for the arrangement of loans is classified as transaction fees and is a cost of the borrower except for
government-guaranteed loans which are a cost to the government (with the exception of RLS where it remains a cost to the
borrower). The contract signed by the borrower and related terms are clearly identifiable. The performance obligation in the
contract is considered to be the funding of the loan through the marketplace platform and the transaction price is clearly stated
in the borrower’s contract. Fees are recognised immediately once loans are fully funded on the marketplace and after the loans
are accepted by the borrowers. At this point the performance obligation has been met and there are no clawback provisions.
Such fees are automatically deducted from the amount borrowed (or subsequently invoiced in the case of government-
guaranteed loans with the exception of RLS) and recognised at that point as the Group has the right to consideration and the
performance obligation has been satisfied.
Fee income earned from referrals to partner institutions is classified as transaction fees and is a cost to the partner institution.
There are contracts in place with partner institutions with clearly identifiable terms. The performance obligation in the contract
is considered to be the referral by the Group and subsequent funding of the referred loan by the partner institution and the
transaction price is clearly stated in the referral agreement. Fees are recognised once the referred loan has been funded by the
partner institution and accepted by the referred borrower. At this point the performance obligation has been met and there are
Fee income earned from servicing third party loans is classified as servicing fees and is a cost of the investor, except in the case
of certain government schemes that permit a service fee such as CBILS (though not RLS), where the government bears the
cost in the first year. It comprises an annualised fee representing a percentage of outstanding principal. The contractual basis
for the servicing fee and transaction price is based on the terms and conditions agreed by investors to the lending platform.
The performance obligation is servicing the loans and allocating repayments of the loan parts to the respective lenders. The
transaction price is allocated as a percentage of the outstanding principal balance, representing the outstanding performance
obligation. Fees are recognised on a monthly basis upon repayment of loan parts. Due to the conditions of the loans, there are
Other income includes excess premium earned from arrangements to buy back defaulted loans from certain institutional
investors and income earned on certain bought back loans. Other income also includes income from collections charges levied
on the recovery of loans. These are recognised as services are performed on an accruals basis.
Net income includes the following elements under which the recognition criteria of IFRS 9 and not IFRS 15 are applied:
Investment income includes:
interest income from SME loans and investments in trusts that the Group holds on balance sheet.
Investment expense includes:
interest payable on funds borrowed to finance the acquisition of underlying loan investments;
interest payable on bond liabilities held on balance sheet;
amortisation of costs associated with the issuing of bonds and the credit facility; and
gains/losses from changes in fair value of interest hedging instruments.
Fair value gains/losses includes:
gains/losses from changes in the fair value of financial assets and liabilities held on balance sheet.
Net income recorded in the financial statements is generated in the UK, the US, Germany and the Netherlands. All fees are
calculated based on the above income recognition policy.
Administrative expenses
Administrative expenses are recognised as an expense in the statement of comprehensive income in the period in which they are
incurred on an accruals basis.
Financial statements
Funding Circle Holdings plc140
1. Accounting policies continued
Share-based payments
The Group operates a number of equity-settled share-based compensation plans, under which the Group receives services from
employees as consideration for equity instruments (options and shares) of the Company. The fair value of the employee services
received in exchange for the grant of the options and shares is recognised as an expense. The total amount to be expensed is
determined by reference to the fair value of the options and shares granted:
including any market performance conditions (for example, an entity’s share price);
excluding the impact of any service and non-market performance vesting conditions (for example, net income, earnings per
share and remaining an employee of the Group over a specified time period); and
including the impact of any non-vesting conditions (for example, the requirement for employees to save).
Non-market vesting conditions are included in assumptions about the number of options and shares that are expected to vest.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are
to be satisfied. At the end of each reporting period, the Group revises its estimate of the number of options and shares that are
expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any,
in the income statement, with a corresponding adjustment to equity.
When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable
transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
The grant by the Company of options and shares over its equity instruments to the employees of subsidiary undertakings in the
Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date
fair value, is recognised over the vesting period as an increase in investment in subsidiary undertakings, with a corresponding
credit to equity in the Parent entity (the “Company”) accounts.
Pension obligations
The Group operates a defined contribution pension scheme for employees in the UK, US and Netherlands. The schemes are
pension plans under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive
obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating
to employee service in the current and prior years. Contributions payable to the Group’s pension scheme are charged to the
statement of comprehensive income in the year to which they relate. The Group has no further payment obligations once the
contributions have been paid.
Current and deferred tax
The tax expense for the year comprises current and deferred tax. Current tax 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 in the
countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. The Group
has established transfer pricing policies and ensures mechanisms are in place in ensuring subsidiaries receive an appropriate
tax rate and base. It establishes provisions, where appropriate, based on amounts expected to be paid to the tax authorities.
Deferred tax assets for unused tax losses, tax credits and deductible temporary differences are recognised to the extent that it is
probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and
joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient
taxable profit available against which the temporary difference can be utilised.
Deferred tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and
joint arrangements, except for any deferred tax liability where the timing of the reversal of the temporary difference is controlled
by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on
either the same taxable entity or different taxable entities and there is an intention to settle the balances on a net basis.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss.
Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted at the year-end date and are
expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax balances are
not discounted.
Dividends
Dividends are recognised when they become legally payable, in accordance with the Companies Act 2006.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 141
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
1. Accounting policies continued
Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the “acquisition date”).
Goodwill is measured as the excess of the sum of the fair value of consideration transferred, the amount of any non-controlling
interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over the net of the
acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is
allocated to each of the Group’s cash-generating units (“CGUs”) expected to benefit from the synergies of the combination.
CGUs to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment
loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit
pro rata on the basis of the carrying amount of each non-financial asset in the unit. An impairment loss recognised for goodwill
is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Intangible assets
Intangible assets with finite useful lives are amortised 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 licences
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific
software. These costs are amortised over the licence period, which is up to five years as at 31 December 2021.
Capitalised development costs
Costs associated with maintaining computer software programs are recognised as an expense as incurred. Development costs
that are directly attributable to the design, build 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 build of the platform products so that they will be available for use;
management intends to complete the build of the platform products for use within the Group;
there is an ability to use the platform products;
it can be demonstrated how the platform products will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use the platform products are
available; and
the expenditure attributable to the platform products 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.
The capitalisation of employee costs is based on the amount of time spent on specific projects which meet the criteria as a
proportion of their total time, and this proportion of their salary-related costs is attributed to the applicable projects.
Other development expenditure that does not meet these criteria is 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, ranging from three to five years.
Other intangibles
Other intangibles relate to the technology platform and customer relationship (representing fees due on contracted loans
expected to be realised in the foreseeable future) acquired on a business combination. These costs are amortised over their
estimated useful lives, which do not exceed three years.
Tangible fixed assets
Tangible fixed assets are stated at cost less depreciation and any provision for impairment. Depreciation is provided on all
tangible fixed assets, at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis
over its expected useful life, as follows:
Computer equipment 1–3 years
Furniture and fixtures 3–5 years
Leasehold improvements that qualify for recognition as an asset are measured at cost and are presented as part of property,
plant and equipment in the non-current assets section on the balance sheet. Depreciation on leasehold improvements is
calculated using the straight-line method over the lease term.
Financial statements
Funding Circle Holdings plc142
1. Accounting policies continued
Impairment of tangible and intangible assets
Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are
tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by
which the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the
asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of
comprehensive income.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the
asset’s recoverable amount since the last impairment loss was recognised. If this was the case, the carrying amount of the asset
(or CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU)
Leases
At inception of a contract, the Group assesses whether or not a contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
When a lease is recognised in a contract the Group recognises a right-of-use asset and a lease liability at the lease
commencement date.
Right-of-use assets are initially measured at cost, comprising the initial measurement of the lease liability, less any lease
incentives. Subsequently, right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated
impairment losses, and are adjusted for certain remeasurements of the lease liability. Depreciation is calculated on a straight-line
basis over the length of the lease.
Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
fixed payments less any lease incentives receivable;
variable lease payments based on an index or a rate, initially measured using the index or rate at the commencement date; and
amounts expected to be payable by the Group under residual value guarantee.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Group’s
incremental borrowing rate is used, which is the rate that the Group would have to pay to borrow the funds necessary to obtain an
asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
where possible, uses recent third party financing received by the individual lessee as a starting point, adjusted to reflect
changes in financing conditions since third party financing was received;
uses an approach taking the risk-free interest rate adjusted for credit risk for leases held by Funding Circle Holdings plc; and
makes adjustments specific to the lease for term, country and currency.
Subsequently, the lease liability is measured by increasing the carrying amount to reflect interest on the lease liability and
reducing it by the lease payments made. The lease liability is remeasured when there is a lease modification.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included
in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease
liability is reassessed and adjusted against the right-of-use asset.
Extension and termination options are included in a number of property leases in the Group. Management considers the facts
and circumstances that may create an economic incentive to exercise an extension or termination option in order to determine
whether the lease term should include or exclude such options. Extension or termination options are only included within
the lease term if they are reasonably certain to be exercised in the case of extension options and not exercised in the case of
termination options.
Considerations include:
if leasehold improvements are expected to have significant value at the end of the lease term;
expected costs or business disruption as a result of replacing a lease; and
significant penalties incurred in order to terminate.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 143
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
1. Accounting policies continued
Leases continued
Lease terms are reassessed if the option is exercised or if a significant event occurs which impacts the assessment of
reasonable certainty.
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e. those
leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also
applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease
payments on short-term leases and leases of low-value assets are recognised as expenses on a straight-line basis over the lease term.
When the Group is an intermediate lessor, entering into a sublease, it accounts for the head lease and the sublease separately.
The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
Rental income from operating leases is recognised on a straight-line basis over the lease term and the Group retains the
right-of–use asset deriving from the head lease and the lease liability on the balance sheet.
Amounts due from lessees under finance leases are recognised as receivables equivalent to the Group’s net investment in
the lease and the right-of-use asset from the head lease is derecognised. Any difference resulting from the derecognition of
the right-of-use asset and recognition of the net investment in the sublease is recognised in the consolidated statement of
comprehensive income. The head lease liability remains on the balance sheet and interest expense continues to be recognised,
while interest income is recognised from the sublease.
Consolidation of special purpose vehicles (“SPVs”)
Subsidiaries are those entities, including structured vehicles, over which the Group has control. The Group controls an entity
when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the investee. The Group has power over an entity when it has existing rights that give it the current ability
to direct the activities that most significantly affect the entity’s returns. Power may be determined on the basis of voting rights or,
in the case of structured entities, other contractual arrangements.
The Group assesses whether it controls SPVs and the requirement to consolidate them under the criteria of IFRS 10. Control
is determined to exist if the Group has the power to direct the activities of each entity (for example, managing the performance
of the underlying assets and raising debt on those assets which is used to fund the Group) and uses this control to obtain a
variable return (for example, retaining the residual risk on the assets). Structures that do not meet these criteria are not treated as
subsidiaries and the assets are derecognised when they are sold.
Where the Group manages the administration of its securitised assets and is exposed to the risks and rewards of the underlying
assets through its continued investment or where the Group does not retain a direct ownership interest in an SPE, but the
Directors have determined that the Group controls those entities, they are treated as subsidiaries and are consolidated.
Investment in associates
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations
made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.
The Group’s investment in its associate is accounted for using the equity method.
Under the equity method of accounting, the investments are initially recognised at cost. This is adjusted thereafter to recognise
the Group’s share of the post-acquisition profits or losses of the investee in the consolidated statement of comprehensive
income. The Group’s share of movements in other comprehensive income of the investee is recognised in other comprehensive
income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment.
When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any
other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in these
entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its
investment in its associate. At each reporting date, the Group determines whether there is an indication that the investment
in the associate is impaired. If there is such an indication, the Group calculates the amount of impairment as the difference
between the recoverable amount of the associate and its carrying value, and then recognises the loss within the statement of
comprehensive income.
Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair
value. Any difference between the carrying amount of the associate upon loss of significant influence or joint control and the
Financial statements
Funding Circle Holdings plc144
1. Accounting policies continued
Financial instruments
Financial assets
The Group determines the classification of its financial assets at initial recognition. The requirements of IFRS 9 for classification
and subsequent measurement are applied, which require financial assets to be classified based on the Group’s business model
for managing the asset and the contractual cash flow characteristics of the asset:
financial assets are measured at amortised cost if they are held within a business model, the objective of which is to hold
financial assets in order to collect contractual cash flows, and their contractual cash flows represent solely payments of
principal and interest;
financial assets are measured at fair value through other comprehensive income (“FVTOCI”) if they are held within the
business model defined as ”held to collect and sell”, the objective of which is achieved by both collecting contractual cash
flows and selling financial assets, and their contractual cash flows represent solely payments of principal and interest; and
financial assets that do not meet the criteria to be amortised cost or FVTOCI are measured at fair value through profit or
loss (“FVTPL”). In addition, the Group may, at initial recognition, designate a financial asset as measured at FVTPL if doing so
eliminates or significantly reduces an accounting mismatch.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value
through profit or loss, directly attributable transaction costs. The purchase of any credit-impaired assets is also at fair value after
any impairment.
Except for certain investments in SME loans as described below, the Group does not recognise on its balance sheet loans
arranged between borrowers and investors as it is not a principal party to the contracts and is not exposed to the risks and
rewards of these loans.
With the exception of investment in SME loans under cure period, investment in trusts and co-investments, investment in SME
loans (warehouse) and investment in SME loans (securitised), all financial assets are held to collect contractual cash flows.
Under certain circumstances the Group holds investments in SME loans. The five types of investment in SME loans held are
as follows:
i) Investment in SME loans (curing)
In the US, investors commit to provide funding to FC Marketplace, LLC (the originator of the borrower loans) in advance of the
physical transfer of monies. Funding Circle USA, Inc. initially funds these committed loans to the borrowers and recovers the
monies from the investors after the two to three-day cure period and therefore retains the credit risk during this short period.
Investments in SME loans (curing) have been classified as financial assets at fair value through profit or loss.
The above classification is mainly because all such loans are acquired principally for selling in the short-term. They are initially
recognised at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being
recognised in the consolidated statement of comprehensive income.
ii) Investment in SME loans (warehouse)
During the warehouse phase of the securitisation programme, the SME loans purchased using both the Group’s cash and
amounts borrowed under credit facilities are held on the Group’s balance sheet. These investments in SME loans have been
classified as financial assets at fair value through profit or loss. The above classification is because all such loans are acquired
principally for selling in the short-term and the collection of interest is incidental. They are initially measured at fair value on the
balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated
statement of comprehensive income.
iii) Investment in SME loans (securitised)
Under risk retention regulations the Group is required to retain at least 5% of the bonds issued by the securitisation SPV.
Retaining a significant proportion of the residual
Whilst the Group is required to retain 5% of the overall bond issuance, where the Group holds a significant proportion of the
unrated bonds (referred to as the “residual”), the Group consolidates the securitisation SPV as it considers that the risks and
rewards of ownership continue to reside with the Group. As a result the underlying SME loan book held in the SPV is recognised
on balance sheet along with the bond liabilities to third parties. They are initially measured at fair value on the balance sheet
with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of
comprehensive income.
Selling a significant portion of the residual
Where the Group sells a significant portion of the residual, the Group may no longer be deemed to retain the majority of the risks
and rewards of ownership and the Group would deconsolidate the securitisation SPV. The Group would subsequently apply
the derecognition rules of IFRS 9 to the investment in SME loans. Cash on the sale of the Group’s investment in the residual is
treated as an investing activity.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 145
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
1. Accounting policies continued
Financial instruments continued
Financial assets continued
iv) Investment in SME loans (other)
The Group has originated PPP loans using the SBA’s PPPLF facility which are held on balance sheet. Additionally the Group holds
investments in certain SME business loans as a result of a commercial arrangements with institutional investors and in certain
circumstances the Group also buys back loans from investors.
The Group also holds investments in shorter-term SME loans under its FlexiPay product on balance sheet enabling businesses to
spread UK invoices or payments over three months with the initial payment made on a borrower’s behalf.
These loans are all classified as investment in SME loans (other) (see note 13).
These investments in other SME loans are classified as amortised cost (as they are held solely to collect principal and interest
payments) and are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment.
PPP loans are fully guaranteed by the SBA.
v) Investment in trusts and co-investments
The Group holds a small beneficial ownership in trusts set up to fund CBILS, RLS and core loans with the remaining majority
of the beneficial ownership held by institutional investors. The SME loans are originated by a Group subsidiary, Funding Circle
Focal Point Lending Limited for CBILS and Funding Circle Eclipse Lending Limited for RLS and core loans, which retain legal title
to the loans. These entities hold this legal title of trust on behalf of the majority investors who substantially retain the economic
benefits the CBILS, RLS and core loans generate and therefore the trusts and the assets held within, including the SME loans, are
not consolidated.
The Group assesses whether it controls the trust structure under the criteria of IFRS 10. Control is determined to exist if the
Group has the power to direct the activities of entities and structures and uses this control to obtain a variable return, to which it
is exposed to the majority of the variability. As the Group’s holding is small compared to the majority investor and pari passu, the
Group is not exposed to the majority of the variability in the cash flows of the trust, and it is not considered to control the trust
structures, so they are not consolidated by the Group.
Investments in trusts are classified at fair value through profit and loss. They are initially recognised at fair value on the balance
sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement
of comprehensive income.
The Group recognises transaction fee income on origination of loans within the trust and service fee income on the assets
within the trust, eliminating its proportional ownership share of the service fees. A scheme lender fee is charged in relation to the
origination of CBILS and RLS loans and investment income is recognised in relation to returns on the investment.
Other financial assets
Financial assets recognised in the balance sheet as trade and other receivables are classified as amortised cost. They are
recognised initially at fair value and subsequently measured at amortised cost less provision for impairment.
Net investments in sublease receivables are recognised as other receivables representing the net present value of the lease
payment receivable. Interest is recognised within finance income in the statement of comprehensive income.
Cash and cash equivalents are classified as amortised cost with the exception of money market funds that are classified
as FVTPL. Cash and cash equivalents include cash in hand, deposits held at call with banks, money market funds and other
short-term highly liquid investments with original maturities of three months or less. The carrying amount of these assets
approximates to their fair value.
Impairment of financial assets held at amortised cost
The Group applies the impairment requirements of IFRS 9. The IFRS 9 impairment model requires a three-stage approach:
Stage 1 includes financial instruments that have not had a significant increase in credit risk since initial recognition or that
have low credit risk at the reporting date. For these assets, 12-month expected credit losses (“ECLs”) (that is, expected losses
arising from the risk of default in the next 12 months) are recognised and interest income is calculated on the gross carrying
amount of the asset (that is, without deduction for credit allowance).
Stage 2 includes financial instruments that have had a significant increase in credit risk since initial recognition (unless they
have low credit risk at the reporting date) but are not credit-impaired. For these assets, lifetime ECLs (that is, expected losses
arising from the risk of default over the life of the financial instrument) are recognised, and interest income is still calculated on
the gross carrying amount of the asset. The Group assumes there has been a significant increase in credit risk if outstanding
amounts on the financial assets exceed 30 days, in line with the rebuttable presumption per IFRS 9 at which point the assets
are considered to be stage 2.
Financial statements
Funding Circle Holdings plc146
1. Accounting policies continued
Financial instruments continued
Financial assets continued
Impairment of financial assets held at amortised cost continued
Stage 3 consists of financial assets that are credit-impaired, which is when one or more events that have a detrimental impact
on the estimated future cash flows of the financial asset have occurred. For these assets, lifetime ECLs are also recognised,
but interest income is calculated on the net carrying amount (that is, net of the ECL allowance). The Group defines a default,
classified as stage 3, as an asset with any outstanding amounts exceeding a 90-day due date, which reflects the point at
which the asset is considered to be credit-impaired.
In some circumstances where assets are bought back by the Group, the financial asset associated with the purchase meets
the definition of purchased or originated credit-impaired (“POCI”), and impairment is therefore based on lifetime ECLs.
The Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at
amortised cost and recognises a loss allowance for such losses at each reporting date. The measurement of ECLs reflects:
an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
the time value of money; and
reasonable and supportable information that is available without undue cost or effort at the reporting date about past events,
current conditions and forecasts of future economic conditions.
If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the
carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment
loss is recognised in the statement of comprehensive income.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the financial assets expire or the
Group has either transferred the contractual right to receive the cash flows from that asset, or has assumed an obligation to pay
those cash flows to one or more recipients.
The Group derecognises a transferred financial asset if it transfers substantially all the risks and rewards of ownership.
Financial liabilities
Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost.
The fair value of a non-interest-bearing liability is its discounted repayment amount. If the due date of the liability is less than one
year, discounting is omitted.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
Bank borrowings
Bank borrowings (drawdowns under the credit facilities) are recognised initially at fair value, being their issue proceeds net
of transaction costs incurred. These instruments are subsequently measured at amortised cost using the effective interest
rate method.
Derivative financial instruments
Interest rate caps are in place to partially mitigate the floating rate interest rate risk associated with drawn amounts from
borrowing facilities and risk associated with floating rate ABS bond liabilities consolidated into the Group. The derivatives are
recognised initially at fair value reflecting the time value implicit in the premium paid and are subsequently measured at fair value
with gains and losses recognised in profit or loss. See note 17 for details of interest rate risk.
Bonds
Bonds represent the bond liabilities which the Group must pay to the bond holders from the cash flows generated from the SME
loans (securitised) held on balance sheet. The liability excludes any amount of bonds that the Group has retained as these are
eliminated upon consolidation.
IFRS 9 permits a company to elect to fair value the bond liabilities where there is an accounting mismatch. In the Group’s case
the associated assets generating the cash flows to pay the bonds are the SME loans (securitised) which are measured at fair
value through profit and loss.
As the cash flows from the SME loans are used to repay the rated bond tranches in advance of the unrated bonds, the Group
does not consider there to be a significant accounting mismatch as default levels impact the unrated bonds first. Therefore the
rated bonds are measured at amortised cost. However, as the unrated bonds are most affected by fair value movements in the
SME loans, the Group has elected to measure the unrated tranches of bonds at fair value through profit and loss to eliminate the
accounting mismatch.
See note 17 for details of the fair value methodology and interest rate risk.
Transaction costs associated with the issuance of bonds are deferred to the balance sheet and recognised over the lifetime of
the bonds using the effective interest rate method.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 147
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
1. Accounting policies continued
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
Loan repurchases
Loan repurchase contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder
for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt
instrument. Loan repurchase contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are
directly attributable to the issuance of the contract. The liability is subsequently measured at the higher of the best estimate
of the expenditure required to settle the present obligation at the reporting date and the amount recognised less cumulative
amortisation. The expected credit loss model is used to measure and recognise the financial liability (as further detailed
in note 16).
Share capital
Ordinary shares are classified as equity where their terms include no contractual obligation to transfer cash or another financial
asset to another entity.
Earnings/(loss) per share
The Group presents basic and diluted earnings/(losses) per share (“EPS”) for its ordinary shares. Basic and diluted EPS are
calculated by dividing the profit/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. The dilutive potential ordinary shares include those share options granted to employees under
the Group’s share-based compensation schemes which do not have an exercise price or where the exercise price is less than the
average market price of the Company’s ordinary shares during the year.
Shares held by the Employee Benefit Trust and Share Incentive Plan Trust
The Company has established an offshore Employee Benefit Trust (“EBT”) and an onshore Share Incentive Plan (“SIP”) Trust.
The EBT and SIP Trust provide for the issue of shares to Group employees principally under share option schemes and SIP
respectively. The Group has control of the EBT and SIP Trust and therefore consolidates the Trusts in the Group financial statements.
Reserves
Foreign exchange reserve
The foreign exchange reserve represents the cumulative foreign currency translation movement on the assets and liabilities of
the Group’s international operations at year-end exchange rates and on the profit and loss items from average exchange rates
Share options reserve
The share options reserve represents the cumulative charges to income under IFRS 2 Share-based Payments on all share options
and schemes granted, net of share option exercises. The costs are transferred to retained earnings when options are exercised.
2. Critical accounting judgements and key sources of estimation uncertainty
The preparation of the consolidated financial statements requires the Group to make estimates and judgements that affect
the application of policies and reported amounts. Critical judgements represent key decisions made by management in the
application of the Group accounting policies. Where a significant risk of materially different outcomes exists due to management
assumptions or sources of estimation uncertainty, this will represent a key source of estimation uncertainty.
Estimates and judgements are continually evaluated and are based on experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances. Although these estimates are based on management’s
best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.
The significant judgements and estimates applied by the Group in the financial statements have been applied on a consistent
basis with the financial statements for the year to 31 December 2020.
Financial statements
Funding Circle Holdings plc148
2. Critical accounting judgements and key sources of estimation uncertainty continued
Critical judgements
Consolidation and deconsolidation of special purpose vehicles (“SPVs”) and investment in trusts and co-
investments (note 17)
As part of its asset-backed securitisation programmes, the Group has established warehouse and securitisation SPVs.
Judgement is required in determining who is most exposed to the variability of returns and who has the ability to affect those
returns and therefore who should consolidate these vehicles and subsequently deconsolidate them. Where the Group has a
significant interest in the junior tranches of the securitisation vehicles or the subordinated debt in the warehouses, the Group
consolidates them. Where this interest is reduced, the Group considers whether the vehicles should be deconsolidated.
The Group also holds a small beneficial ownership in trusts set up to fund CBILS, RLS and core loans with the remaining majority
of the beneficial ownership held by institutional investors. The SME loans are originated by a Group subsidiary, Funding Circle
Focal Point Lending Limited for CBILS and Funding Circle Eclipse Lending Limited for RLS and core loans, which retain legal title
to the loans. These entities hold this legal title of trust on behalf of the majority investors who substantially retain the economic
benefits the CBILS, RLS and core loans generate and therefore the trusts and the assets held within, including the SME loans, are
not consolidated.
The Group assesses whether it controls the trust structure under the criteria of IFRS 10. Control is determined to exist if the
Group has the power to direct the activities of entities and structures and uses this control to obtain a variable return, to which
it is exposed to the majority of the variability. As the Group’s holding is small in comparison to the majority investor and is pari
passu, the Group is not exposed to the majority of the variability in the cash flows of the trust, and it is not considered to control
the trust structures, so they are not consolidated by the Group.
Loans originated through the platform
The Group originates SME loans through its platform which are funded primarily by banks, asset managers, other institutional
investors, funds, national entities, retail investors or by usage of its own capital. Judgement is required to determine whether
these loans should be recognised on the Group’s balance sheet. Where the Group, its subsidiaries or SPVs which it consolidates
have legal and beneficial ownership to the title of those SME loans, they are recognised on the Group’s balance sheet. Where this
is not the case, the loans are not recognised at the point of origination.
Key sources of estimation uncertainty
The following are the key sources of estimation uncertainty that the Directors have identified in the process of applying the
Group’s accounting policies and have the most significant effect on the amounts recognised in the financial statements.
Fair value of financial instruments (note 17)
At 31 December 2021, the carrying value of the Group’s financial instrument assets held at fair value was £302.5 million
In accordance with IFRS 13 Fair Value Measurement, the Group categorises financial instruments carried on the consolidated
balance sheet at fair value using a three-level hierarchy. Financial instruments categorised as level 1 are valued using quoted
market prices and therefore there is minimal estimation applied in determining fair value. However, the fair value of financial
instruments categorised as level 2 and, in particular, level 3 is determined using valuation estimation techniques including
discounted cash flow analysis and valuation models. The most significant estimation is with respect to discount rates and
default rates.
Since 31 December 2020 the assumptions related to estimating fair value have been revised to reflect the observed actual
performance of SME loans and a revision to the timing of the assumed defaults to occur later given the extension of government
support measures to H2 2021. The combination of favourable observed performance and later defaults on an amortising pool
of loans has led to a lower lifetime cumulative default expectation net of recoveries and an increase in the relative estimation of
fair value of the loans. Additionally, market drivers of discount rates such as observed tightening in collateralised loan obligation
spreads have resulted in the estimated cash flows being discounted at a lower rate which has led to an increase in the relative
estimation of fair value of the loans and bonds.
Sensitivities to assumptions in the valuation of investment in trusts and co-investments , investment in SME loans (warehouse)
and money market funds within cash and cash equivalents are not disclosed below as reasonably possible changes in the
assumptions would not result in material changes in the carrying values.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 149
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
2. Critical accounting judgements and key sources of estimation uncertainty continued
Key sources of estimation uncertainty continued
Fair value of financial instruments (note 17) continued
Sensitivities to the default rates and discount rates are illustrated below.
Description
Fair value
£m Unobservable input Inputs
Relationship of
unobservable inputs to fair value
Investment in SME
loans (securitised)
148.1 Lifetime cumulative default rate
as % of original
US: 19.6% and
19.8%
1
UK : 17.3 %
A change in the lifetime cumulative
default rate would have the
following impact:
US SPV1¹: +50/-110 bps would
decrease/increase fair value by
£(0.8) million/£1.7 million
respectively.
US SPV2¹: +80/-170 bps would
decrease/increase fair value by
£(1.6) million/£3.4 million
respectively.
UK: +40/-150 bps would decrease/
increase fair value by £(0.9) million/
£3.4 million respectively.
Bonds (unrated) (12.8) Lifetime cumulative default rate
of associated assets
17.3% A change in the lifetime cumulative
default rate by +40/-150 bps would
decrease/increase fair value by
£0.3 million and £(1.2) million
respectively.
1. Two cumulative default rates are presented for the US representing the portfolios in each of the two respective securitisation vehicles. Separate sensitivities to default rates for
the US securitisation vehicles represent the respective seasoning of the loans and the different reasonably possible range of outcomes.
The above sensitivities represent management’s estimate of the reasonably possible range of outcomes and as a result the fair
value of the assets and liabilities measured at fair value could materially diverge from management’s estimate.
Description
Fair value
£m Unobservable input Inputs
Relationship of
unobservable inputs to fair value
Investment in SME
loans (securitised)
148.1 Discount rate US: 8.0%
UK: 8.2%
A change in the discount rates by
+/-100 bps would decrease/
increase fair value by £1.6
million/£(1.6) million respectively.
Bonds (unrated) (12.8) Discount rate 13.3% A change in the discount rate by
+100/-100 bps would decrease/
increase fair value by £0.2
million/£(0.2) million respectively.
It is considered that the range of reasonably possible outcomes in relation to the discount rate used could be +/-100 bps and as a
result the fair value of the assets could materially diverge from management’s estimate.
As the discount rate is risk adjusted, it should be noted that the sensitivities to discount rate and to lifetime cumulative default
rate contain a level of overlap regarding credit risk. The sensitivity in expected lifetime cumulative defaults should not also be
applied to the sensitivity of the credit risk element of the risk-adjusted discount rate and the sensitivities are most meaningful
viewed independently of each other.
Estimated recoverable amount of non-financial assets (notes 10, 11 and 12)
Non-financial assets (primarily goodwill, intangible assets and property, plant and equipment) are held within the Group within
cash-generating units (“CGUs”) which are expected to benefit from the assets. The Group has four CGUs, being Funding Circle
USA (“FCUSA”) and its subsidiaries, Funding Circle Ltd (“FCUK”) and its subsidiaries, Funding Circle Global Partners Limited
(“FCGPL”) and the German and Dutch businesses (Funding Circle Continental Europe or “FCCE”). These assets are assessed
annually for impairment in the case of goodwill or when indicators of impairment are identified for the other assets.
The impairment test involves comparing the carrying value of the non-financial assets held for use to their recoverable amount
for each CGU. The recoverable amount represents the higher of the CGU’s fair value net of selling costs and its value in use,
which were determined using discounted cash flow methodology.
During the prior year ended 31 December 2020, impairment was recognised in relation to the goodwill in FCUSA as the recoverable
amount calculated was below the carrying amount and the goodwill was fully impaired by £12.0 million. As the goodwill was fully
impaired in 2020, an annual impairment review was not necessary in 2021 and as there were no indicators of impairment identified,
an impairment test was not undertaken for the year ended 31 December 2021 in relation to the other non-financial assets.
Financial statements
Funding Circle Holdings plc150
3. Segmental information
IFRS 8 Operating Segments requires the Group to determine its operating segments based on information which is used
internally for decision making. Based on the internal reporting information and management structures within the Group, it
has been determined that there are three geographic operating segments. Reporting on this basis is reviewed by the Global
Leadership Team (“GLT”) which is the chief operating decision-maker (“CODM”). The GLT is made up of the Executive Directors
and other senior management and is responsible for the strategic decision making of the Group.
The three reportable segments consist of the geographic segments: the United Kingdom, the United States and Developing
Markets. The Developing Markets segment includes the Group’s businesses in Germany and the Netherlands.
The GLT measures the performance of each segment by reference to a non-GAAP measure, adjusted EBITDA, which is defined
as profit/loss before finance income and costs, taxation, depreciation and amortisation (“EBITDA”), and additionally excludes
share-based payment charges and associated social security costs, foreign exchange and exceptional items (see note 5).
Together with operating profit/loss, adjusted EBITDA is a key measure of Group performance as it allows better comparability
Net income/(loss)
31 December 2021 31 December 2020
United
Kingdom
£m
United
States
£m
Developing
Markets
£m
Total
£m
United
Kingdom
£m
United
States
£m
Developing
Markets
£m
Total
£m
Total income 159.4 44.8 2.7 206.9 152.9 63.0 6.1 222.0
Fair value gains/(losses) 10.5 18.1 — 28.6 (43.8) (74.5) — (118.3)
Net income/(loss) 169.9 62.9 2.7 235.5 109.1 (11.5) 6.1 103.7
Segment profit
31 December 2021 31 December 2020
United
Kingdom
£m
United
States
£m
Developing
Markets
£m
Total
£m
United
Kingdom
£m
United
States
£m
Developing
Markets
£m
Total
£m
Adjusted EBITDA 61.9 28.4 1.5 91.8 6.5 (62.4) (7.9) (63.8)
Depreciation and
amortisation (9.7) (4.1) (0.1) (13.9) (9.4) (6.5) (1.3) (17.2)
Share-based payments
and social security costs ( 7.6) (1.3) — (8.9) (5.0) (1.2) (0.4) (6.6)
Foreign exchange losses (0.3) (0.6) — (0.9) — — — —
— (3.9) — (3.9) — (13.5) (5.2) (18.7)
Operating profit/(loss) 44.3 18.5 1.4 64.2 (7.9) (83.6) (14.8) (106.3)
Net income by type
In addition to the segmental reporting of performance under IFRS 8, the table below sets out net income by its type:
31 December
2021
£m
31 December
2020
£m
Transaction fees 115.0 122.5
Servicing fees 47.0 30.2
Other income 3.5 3.0
Fee income 165.5 155.7
Investment income 53.7 89.0
Investment expense (12.3) (22.7)
Total income 206.9 222.0
Fair value gains/(losses) 28.6 (118.3)
Net income 235.5 103.7
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 151
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
4. Operating expenses
31 December 2021 31 December 2020
Before
exceptional
items
£m
Exceptional
£m
Total
£m
Before
exceptional
items
£m
Exceptional
£m
Total
£m
Depreciation 5.9 — 5.9 9.0 — 9.0
Amortisation 8.0 — 8.0 8.2 — 8.2
Rental income and other recharges (0.9) — (0.9) (1.1) — (1.1)
Operating lease rentals:
– Other assets — — — — — —
– Land and buildings 0.1 — 0.1 0.1 — 0.1
Employment costs (including
contractors) 77.7 — 77.7 81.3 4.0 85.3
Marketing costs
(excluding employment costs) 46.9 — 46.9 46.8 — 46.8
Data and technology 9.0 — 9.0 10.9 — 10.9
Loan repurchase (credit)/charge (0.1) — (0.1) 6.2 — 6.2
Impairment of goodwill — — — — 12.0 12.0
Impairment of intangible and
tangible assets — 3.9 3.9 — 1.7 1.7
Other expenses 20.8 — 20.8 29.9 1.0 30.9
Total operating expenses 167.4 3.9 171.3 191.3 18.7 210.0
Auditors’ remuneration
31 December
2021
£m
31 December
2020
£m
Audit fees
– Fees payable to the Company’s auditors for the audit of the Parent Company and consolidated
financial statements 0.5 0.6
– Fees payable to the Company’s auditors and its associates for the statutory audit of the financial
statements of subsidiaries of the Company 0.3 0.1
Total audit fees 0.8 0.7
Non-audit service fees
– Audit-related assurance services 0.2 0.2
– Other non-assurance services 0.1 0.1
Total non-audit service fees 0.3 0.3
5. Exceptional items
31 December
2021
£m
31 December
2020
£m
Restructuring costs — 6.0
Share-based payment credit relating to restructuring — (1.0)
Impairment of goodwill (note 10) — 12.0
Impairment of non-financial assets (notes 11 and 12) 3.9 1.7
Total 3.9 18.7
Financial statements
Funding Circle Holdings plc152
5. Exceptional items continued
Exceptional items are the items of income or expense that the Group considers are material, one-off in nature and of such
significance that they merit separate presentation in order to aid the reader’s understanding of the Group’s financial performance.
During the year to 31 December 2021 certain floors of the San Francisco office were sublet to third parties for the remainder
of the term of the head lease for an amount lower than the head lease rental. As a result the sublease was determined to be a
finance lease which resulted in the right-of-use asset being derecognised and a net investment in sublease recognised on the
balance sheet. The difference between the carrying value of the right-of-use asset and the net investment in the sublease was
£3.3 million and has been recorded in the statement of comprehensive income as an impairment under exceptional items.
Additionally it was determined that the fixed assets associated with the office were impaired in full as they were no longer used
by the Group resulting in impairment of £0.6 million. There was no cash movement in relation to the impairment.
In the previous year ended 31 December 2020, the Group restructured the German and Dutch (Developing Markets) businesses
to focus on referring loans it originates to local lenders. This restructuring resulted in one-off costs in the comparative year
totalling £4.6 million comprising redundancy costs of £4.0 million, a related share-based payment credit of £(0.4) million and
other costs of £1.0 million. An additional impairment on right-of-use assets was incurred of £0.6 million. Cash payments
associated with these items totalled £0.8 million in the year ended 31 December 2021 (2020: £3.8 million). See note 16 for
movement in associated provisions and note 23 for cash flow.
In the previous year, the Group reorganised the US business, centralising the US technology team in the UK and moving sales
and marketing to Denver, resulting in a net reduction of c.85 roles. This restructuring resulted in one-off costs in the comparative
year totalling £0.4 million, comprising redundancy costs of £1.0 million and related share-based payment credits of £(0.6) million.
An additional impairment on the right-of-use assets was recognised of £1.1 million. Cash payments associated with these items
totalled £nil in the year ended 31 December 2021 (2020: £1.1 million). See note 16 for movement in associated provisions and
note 23 for cash flow.
In the previous year, following a change in the Group’s income and cost forecasts, an event indicating the possibility of
impairment was identified and the Group has undertook a goodwill impairment review as a result of which it was identified that
goodwill in relation to the Funding Circle USA business was carried at a value higher than the CGU’s recoverable amount driven
by a reduction in the future discounted cash flows of the CGU. As a result, an impairment was recognised of £12.0 million in the
year ended 31 December 2020. There was no cash movement in relation to the impairment.
6. Employees
The average monthly number of employees (including Directors) during the year was:
2021
Number
2020
Number
UK 634 601
US 155 240
Developing Markets 15 70
804 911
In addition to the employees above, the average monthly number of contractors during the year was 125 (2020: 91).
Employment costs (including Directors’ emoluments) during the year were:
31 December 2021 31 December 2020
Before
exceptional
items
£m
Exceptional
items
£m
Total
£m
Before
exceptional
items
£m
Exceptional
items
£m
Total
£m
Wages and salaries 61.4 — 61.4 70.8 4.0 74.8
Social security costs 6.2 — 6.2 6.9 1.0 7.9
Pension costs 1.8 — 1.8 1.2 — 1.2
Share-based payments 8.9 — 8.9 6.6 (1.0) 5.6
78.3 — 78.3 85.5 4.0 89.5
Contractor costs 7.6 — 7.6 5.2 — 5.2
Less: capitalised development costs (8.2) — (8.2) (9.4) — (9.4)
Employment costs net of capitalised
development costs 77.7 — 77.7 81.3 4.0 85.3
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 153
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
7. Net finance (costs)/income
31 December
2021
£m
31 December
2020
£m
Interest receivable 0.1 0.4
Total finance income 0.1 0.4
Interest on lease liabilities (1.1) (1.4)
Total finance costs (1.1) (1.4)
Net finance costs (1.0) (1.0)
8. Income tax
The Group is subject to all taxes applicable to a commercial company in its countries of operation. The UK profits of the
Company are subject to UK income tax at the standard corporation tax rate of 19% (2020: 19%).
31 December
2021
£m
31 December
2020
£m
Current tax
UK
Current tax on profits for the year 2.7 0.2
Adjustment in respect of prior years (0.1) —
2.6 0.2
US and Developing Markets
Current tax on profits for the year — —
Adjustment in respect of prior years 0.3 —
Total current tax charge 0.3 —
Deferred tax
UK
Deferred tax on profits for the year — —
Adjustment in respect of prior years — —
— —
US and Developing markets
Deferred tax on profits for the year — —
Adjustments in respect of prior years — —
— —
Total deferred tax charge — —
Total tax charge 2.9 0.2
The above tax charge represents the current year tax liability on the Group’s taxable profit and true up of tax deducted from
the RDEC receivable for 2019 and 2020. In the prior year, the tax charge represents the amount of tax deducted from the RDEC
receivable for 2020.
The Group charge for the year can be reconciled to the profit/(loss) before tax shown per the consolidated statement of
comprehensive income as follows.
Financial statements
Funding Circle Holdings plc154
8. Income tax continued
Factors affecting the tax charge for the year
31 December
2021
£m
31 December
2020
£m
Profit/(loss) before taxation 64.1 (108.1)
Taxation on profit/(loss) at 19% (2020: 19%) 12.2 (20.5)
Effects of:
Research and development (0.6) 0.2
Effect of foreign tax rates 2.6 (7.7)
Non-taxable/non-deductible expenses 1.8 (0.1)
Temporary differences not recognised (8.3) 23.2
Utilisation of tax losses (5.9) —
Impairment charge and other exceptional items 1.1 5.1
Total tax charge 2.9 0.2
The Group is taxed at different rates depending on the country in which the profits arise. The key applicable tax rates include the
UK 19%, the US 21%, Germany 30% and the Netherlands 25%. The effective tax rate for the year was 4.5% (2020: (0.2%)).
The statutory UK corporation tax rate is currently 19% (effective 1 April 2020). The UK Government announced on 3 March 2021 that
The Group has recognised a deferred tax liability of £3.2 million (2020: £3.3 million) relating to the property, plant and equipment
in the UK. The deferred tax liability is predominantly due to the accelerated capital allowances of £2.6 million (2020: £1.5 million)
and in relation to securitisation and warehouse vehicles of the UK which are domiciled in Ireland of £0.6 million (2020: £1.8 million).
The increase in the deferred tax liability with regard to the accelerated capital allowances is due to the treatment of the
capitalised development spend for the purposes of RDEC claim. The decrease in the deferred tax liability with regard to the
securitisation and warehouse vehicles of the UK which are domiciled in Ireland is predominantly due to the sale of the loans in
Great Trinity Lending DAC warehouse in 2021 and repayment of associated liabilities of the entity. A deferred tax asset relating
to unrelieved tax losses of £3.2 million (2020:£3.3 million) has been recognised in the UK to the extent of the above mentioned
deferred tax liability pursuant to IAS 12 para 74. Deferred tax has been determined using the applicable effective future tax rate
that will apply in the expected period of utilisation of the recognised deferred tax assets or liabilities.
Unrecognised deferred tax
31 December
2021
£m
31 December
2020
£m
Property, plant and equipment 10.3 10.6
Carry forward losses 257.3 247.9
Deferred stock options 15.7 10.7
US R&D credit 2.1 2.0
US fair value adjustments 46.3 7 7.2
Other 3.7 4.4
Unrecognised deferred tax assets 335.4 352.8
Based on the temporary differences, there are total unrecognised deferred tax assets of £92.1 million (2020: £91.8 million).
The Group has unrelieved tax losses of £257.3 million (2020: £247.9 million) that are available for offset against future taxable
profits. The Group has not recognised a deferred tax asset in respect of these losses, or in respect of other temporary differences,
as there is not sufficient certainty of future taxable profits being generated to utilise these losses. Significant losses relating to
the total of £257.3 million include £53.9 million which relates to the UK and £97.0 million to Germany and therefore have no expiry
period, with £102.8 million relating to losses arising in the US and of which £21.3 million will expire in 2034, £26.4 million will
expire in 2035, £21.1 million will expire in 2036 and remaining balance of £34.0 million have no expiry period.
Factors affecting the tax charge in future years
Factors that may affect the Group’s future tax charge include the geographic location of the Group’s earnings, the tax rates in
those locations, changes in tax legislation and the use of brought forward tax losses. The calculation of the Group’s total tax
charge involves a degree of estimation and judgement with respect to the recognition of any deferred tax asset.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 155
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
9. Earnings/(loss) per share
Basic earnings/(loss) per share amounts are calculated by dividing the profit/(loss) for the year attributable to ordinary equity
holders of the Company by the weighted average number of ordinary shares outstanding during the year.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. The dilutive potential ordinary shares include those share options granted to employees under
the Group’s share-based compensation schemes which do not have an exercise price or where the exercise price is less than the
average market price of the Company’s ordinary shares during the year.
The following table reflects the income and share data used in the basic and diluted loss per share computations:
31 December
2021
31 December
2020
Profit/(loss) for the year (£m) 61.2 (108.3)
Basic weighted average number of ordinary shares in issue (million) 351.5 347.0
Basic earnings/(loss) per share 17.4p (31.2)p
Profit/(loss) for the year before exceptional items (£m) 65.1 (89.6)
Basic weighted average number of ordinary shares in issue (million) 351.5 347.0
Basic earnings/(loss) per share before exceptional items 18.5p (25.8)p
Profit/(loss) for the year (£m) 61.2 (108.3)
Diluted weighted average number of ordinary shares in issue (million) 381.7 3 47.0
Diluted earnings/(loss) per share 16.0p (31.2)p
Profit/(loss) for the year before exceptional items (£m) 65.1 (89.6)
Diluted weighted average number of ordinary shares in issue (million) 381.7 3 47.0
Diluted earnings/(loss) per share before exceptional items 17.1p (25.8)p
10. Goodwill
Total
£m
Cost and carrying amount
At 1 January 2020 11.3
Impairment charge (note 5) (12.0)
Exchange differences 0.7
At 31 December 2020 —
At 1 January 2021 —
At 31 December 2021 —
In the prior year ended 31 December 2020 impairment of £12.0 million was recorded in relation to the goodwill in Funding
Circle USA (“FCUSA”) and its subsidiaries, as the recoverable amount calculated was below the carrying amount following an
impairment test. The cumulative amount of impairment losses in relation to goodwill recognised in the year ended 31 December
2020 was £12.0 million. Further details of the impairment assessment are detailed within note 2.
Financial statements
Funding Circle Holdings plc156
11. Intangible assets
Capitalised
development
costs
£m
Computer
software
£m
Other
intangibles
£m
Total
£m
Cost
At 1 January 2020 47.3 1.0 1.1 49.4
Exchange differences (0.5) — — (0.5)
Additions 9.4 0.1 — 9.5
Disposals (10.7) (0.3) — (11.0)
At 31 December 2020 45.5 0.8 1.1 47.4
At 1 January 2021 45.5 0.8 1.1 47.4
Exchange differences (0.2) 0.1 0.1 —
Additions 8.5 0.1 — 8.6
Disposals (4.8) (0.1) — (4.9)
At 31 December 2021 49.0 0.9 1.2 51.1
Accumulated amortisation
At 1 January 2020 24.0 0.8 1.0 25.8
Exchange differences — — — —
Charge for the year 8.0 0.2 — 8.2
Disposals (10.7) (0.3) — (11.0)
At 31 December 2020 21.3 0.7 1.0 23.0
At 1 January 2021 21.3 0.7 1.0 23.0
Exchange differences (0.1) — 0.2 0.1
Charge for the year 8.0 — — 8.0
Disposals (4.8) (0.1) — (4.9)
At 31 December 2021 24.4 0.6 1.2 26.2
Carrying amount
At 31 December 2021 24.6 0.3 — 24.9
At 31 December 2020 24.2 0.1 0.1 24.4
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 157
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
12. Property, plant and equipment, right-of-use assets and lease liabilities
The Group has right-of-use assets which comprise property leases held by the Group. Information about leases for which the
Group is a lessee is presented below.
Analysis of property, plant and equipment between owned and leased assets
31 December
2021
£m
31 December
2020
£m
Property, plant and equipment (owned) 2.7 3.9
Right-of-use assets 11.4 24.8
14.1 28.7
Reconciliation of amount recognised in the balance sheet
Leasehold
improvements
£m
Computer
equipment
£m
Furniture
and fixtures
£m
Right-of-use
assets
(property)
£m
Total
£m
Cost
At 1 January 2020 5.8 4.8 3.0 49.4 63.0
Disposals (0.1) (1.6) (0.2) (2.2) (4.1)
Additions 0.4 0.4 — — 0.8
Exchange differences — — — (0.4) (0.4)
At 31 December 2020 6.1 3.6 2.8 46.8 59.3
At 1 January 2021 6.1 3.6 2.8 46.8 59.3
Disposals (1.4) (1.8) (1.0) — (4.2)
Additions — 0.7 0.1 — 0.8
Exchange differences — 0.2 — (0.4) (0.2)
Derecognition of right-of-use assets — — — (15.4) (15.4)
At 31 December 2021 4.7 2.7 1.9 31.0 40.3
Accumulated depreciation
At 1 January 2020 3.0 4.0 1.5 15.5 24.0
Disposals (0.1) (1.6) (0.2) (2.2) (4.1)
Charge for the year 0.8 0.8 0.4 7.0 9.0
Impairment (exceptional) — — — 1.7 1.7
Exchange differences — — — — —
At 31 December 2020 3.7 3.2 1.7 22.0 30.6
At 1 January 2021 3.7 3.2 1.7 22.0 30.6
Disposals (1.4) (1.8) (1.0) — (4.2)
Charge for the year 0.8 0.6 0.3 4.2 5.9
Impairment (exceptional) 0.2 — 0.4 3.3 3.9
Exchange differences (0.1) (0.1) 0.1 — (0.1)
Derecognition of right-of-use assets — — — (9.9) (9.9)
At 31 December 2021 3.2 1.9 1.5 19.6 26.2
Carrying amount
At 31 December 2021 1.5 0.8 0.4 11.4 14.1
At 31 December 2020 2.4 0.4 1.1 24.8 28.7
During the year, right-of-use assets related to the US San Francisco office were sublet in a finance sublease. As a result the
right-of-use asset was derecognised and a net investment in sublease was recognised within other receivables. During the
year the right-of-use asset related to the Netherlands business was exited along with the corresponding head lease liability.
During the previous year ended 31 December 2020, right-of-use assets were identified as part of the FCCE and FCUSA
restructures, which were considered to be individual CGUs for which the recoverable amount was considered to be the future
potential sublet value. The estimated discounted cash flows from sublet income were compared to the carrying value of the
asset and an impairment of £1.7 million was recognised. See note 5 for related exceptional items.
Financial statements
Funding Circle Holdings plc158
12. Property, plant and equipment, right-of-use assets and lease liabilities continued
Lease liabilities
Amounts recognised on the balance sheet were as follows:
31 December
2021
£m
31 December
2020
£m
Current 6.9 7.3
Non-current 17.0 23.5
Total 23.9 30.8
Amounts recognised in the statement of comprehensive income were as follows:
31 December
2021
£m
31 December
2020
£m
Depreciation charge of right-of-use assets (property) 4.2 7.0
Interest expense (included in finance costs) 1.1 1.4
Expense relating to short-term leases and leases of low-value assets 0.1 0.1
The total cash outflow for leases (excluding short-term and low-value leases) in 2021 was £8.1 million (2020: £7.8 million).
A maturity analysis illustrating the undiscounted contractual cash flows of lease liabilities is included within the liquidity risk
disclosure within note 17.
As at 31 December 2021 the potential future undiscounted cash outflows that have not been included in the lease liability due to
lack of reasonable certainty the lease extension options might be exercised amounted to £nil (2020: £nil).
13. Investment in SME loans
31 December
2021
£m
31 December
2020
1
£m
Non-current
Investment in SME loans (other) – amortised cost 74.2 25.0
Investment in trusts and co-investments – FVTPL 39.1 21.2
Total non-current 113.3 46.2
Current
Investment in SME loans (other) – amortised cost 1.6 —
Investment in SME loans (warehouse) – FVTPL 3.2 221.8
Investment in SME loans (securitised) – FVTPL 148.1 279.8
Total current 152.9 501.6
Total 266.2 547.8
1. See note 1.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 159
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
14. Trade and other receivables
31 December
2021
£m
31 December
2020
£m
Other receivables 4.1 —
Non-current trade and other receivables 4.1 —
Trade receivables 1.8 1.6
Other receivables¹ 10.0 15.5
Prepayments 4.8 3.6
Accrued income² 6.2 43.7
Rent and other deposits 2.2 2.6
Current trade and other receivables 25.0 67.0
29.1 67.0
1. Includes £3.6 million (2020: £7.5 million) in relation to cash and liquidity reserves held in the UK securitisation vehicle which will unwind to make payments to bond holders in
the future.
2. Includes £nil (2020: £36.2 million) in relation to transaction fees receivable on CBILS originations. Accrued income outstanding at the start of the year was subsequently collected.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables described earlier.
No trade receivables were overdue or impaired.
Included in rent and other deposits are £1.6 million of rental deposits (2020: £1.9 million) in respect of the Group’s property
leases which expire over the next five years.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
15. Trade and other payables
31 December
2021
£m
31 December
2020
£m
Trade payables 3.7 2.1
Other taxes and social security costs 4.9 3.7
Other creditors 11.4 5.6
Accruals and deferred income 16.4 22.7
36.4 3 4.1
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
16. Provisions and other liabilities
Dilapidation
£m
Loan repurchase
£m
1
£m
Other
£m
Total
£m
At 1 January 2020 0.9 2.9 — 0.2 4.0
Exchange differences — 0.2 — (0.1) 0.1
Additional provision/liability — 6.2 6.0 3.2 15.4
Amount utilised — (4.1) (4.9) (0.6) (9.6)
At 31 December 2020 0.9 5.2 1.1 2.7 9.9
Exchange differences — (0.3) (0.1) 0.2 (0.2)
Additional provision/liability — — — 1.1 1.1
Amount utilised — (2.6) (0.8) (0.2) (3.6)
Amount reversed (0.3) (0.1) — (2.7) (3.1)
At 31 December 2021 0.6 2.2 0.2 1.1 4.1
1. Restructuring provision is in relation to reorganisation of the US, German and Dutch businesses; see note 5.
Financial statements
Funding Circle Holdings plc160
16. Provisions and other liabilities continued
31 December
2021
£m
31 December
2020
£m
Current provisions and other liabilities 3.4 8.7
Non-current 0.7 1.2
4.1 9.9
The dilapidation provision represents an estimated cost for dismantling the customisation of offices and restoring the leasehold
premises to its original state at the end of the tenancy period. The provision is expected to be utilised by 2025.
Loan repurchase liability
In certain historical circumstances, in the less mature markets, Funding Circle has entered into arrangements with institutional
investors to assume the credit risk on the loan investments made by the institutional investors. Under the terms of the agreements,
the Group is required either to make payments when the underlying borrower fails to meet its obligation under the loan contract
or buy the defaulted loan from the investors at its carrying value. In return for these commitments, the Group is entitled to the
excess returns or additional income which is recorded as other income.
Under IFRS 9, the Group is required to provide for these loan repurchases under the expected credit loss (“ECL”) model.
The liability related to each loan arranged is based on the ECLs associated with the probability of default of that loan in the next
12 months unless there has been a significant increase in credit risk of that loan since origination. The Group assumes there
has been a significant increase in credit risk if outstanding amounts on the loan investment exceed 30 days, in line with the
rebuttable presumption per IFRS 9.
The Group defines a default, classified within non-performing, as a loan investment with any outstanding amounts exceeding
a 90-day due date, which reflects the point at which the loan is considered to be credit-impaired. Under the loan repurchase
contracts, this was the point at which there is an obligation for the Group to make a payment under the contract or buy back
the loan. However, while the buyback agreement is contractually defined as 90 days past due, due to the impact of Covid-19, a
consent letter was signed with the institutional investors in April 2020 to accommodate loans on forbearance plans whereby
loans on such plans will be repurchased at 180 days past due. However, the definition of default for the purposes of expected
credit losses remains 90 days past due and the buyback may lag the default definition applied.
If the loan is bought back by the Group, at the point of buyback, the financial asset associated with the purchase meets the
definition of purchased or originated credit-impaired (“POCI”), this element of the reserve is therefore based on lifetime ECLs.
After being bought back, POCI loans and associated impairment provisions are recognised within investment in SME loans
(other) on the balance sheet.
The Group bands each loan investment using an internal risk rating and assesses credit losses on a collective basis.
Performing:
12-month
ECL
£m
Underperforming:
lifetime
ECL
£m
Non-performing:
lifetime
ECL
£m
Total
£m
At 1 January 2020 2.1 0.8 — 2.9
Exchange differences 0.1 0.1 — 0.2
Liability against loans transferred from performing (0.3) 0.5 4.9 5.1
Amounts utilised — — (4.1) (4.1)
Loans repaid (0.8) — — (0.8)
Change in probability of default 1.1 0.1 0.7 1.9
At 31 December 2020 2.2 1.5 1.5 5.2
Exchange differences (0.1) (0.1) (0.1) (0.3)
Liability against loans transferred from performing (0.2) (0.5) 1.7 1.0
Amounts utilised — — (2.6) (2.6)
Loans repaid (0.9) (0.4) (0.6) (1.9)
Change in probability of default 0.4 (0.1) 0.5 0.8
At 31 December 2021 1.4 0.4 0.4 2.2
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 161
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
16. Provisions and other liabilities continued
Loan repurchase liability continued
At 31 December 2020
Expected credit
loss coverage
%
Basis for
recognition of
loan repurchase
liability
Gross assets
of external
parties subject
to loan repurchase
liability
£m
Loan
repurchase
liability
£m
Performing (due in 30 days or less) 10.8 12-month ECL 20.3 2.2
Underperforming (31–90 days overdue) 71.5 Lifetime ECL 2.1 1.5
Non-performing (90+ days overdue) 79.0 Lifetime ECL 1.9 1.5
Total 24.3 5.2
At 31 December 2021
Expected credit
loss coverage
%
Basis for
recognition of
loan repurchase
liability
Gross assets
of external
parties subject
to loan repurchase
liability
£m
Loan
repurchase
liability
£m
Performing (due in 30 days or less) 15.3 12-month ECL 8.8 1.4
Underperforming (31–90 days overdue) 63.6 Lifetime ECL 0.6 0.4
Non-performing (90+ days overdue) 76.5 Lifetime ECL 0.6 0.4
Total 10.0 2.2
The percentages applied above are based on the Group’s past experience of delinquencies and loss trends, as well as forward-looking
information in the form of macroeconomic scenarios governed by an impairment committee, which considers macroeconomic
forecasts such as changes in interest rates, GDP and inflation.
Macroeconomic scenarios are probability weighted within the model and include stress scenarios of: i) low losses, a high
GDP, market confidence and political stability; ii) normal losses based on baseline economic conditions; iii) high losses with
manufacturing and political instability; and iv) very high losses with an acceleration of defaults having reached a peak in H2 2021
The stress scenario used was a geography-weighted scenario reflecting higher losses on the Netherlands book than that
gradually afterwards.
The expected credit loss model includes actual defaults determined by monthly cohort, adjusted for forecasted lifetime
cumulative default rates. It applies the latest default curve and lifetime default rates tailored to each cohort based on the
expected lifetime default rate. When actual defaults trend higher than the curve, the forecast default curve is shifted upwards to
align with actual performance. Estimated recoveries from defaults are discounted back to their present value using the effective
interest rate.
Estimation is required in assessing individual loans and when applying statistical models for collective assessments, using
historical trends from past performance as well as forward-looking information including macroeconomic forecasts in each
market together with the impact on loan defaults. The most significant estimation is with default rates on performing loans.
weighted average default rate estimate were to change by +/-250 bps the liability would change by £1.4 million for the year
The maximum exposure the Group might have to pay at the balance sheet date if 100% of eligible loans were required to be
bought back would be £10.0 million (2020: £24.3 million). This would be dependent on the timing of any eligible loans defaulting.
Repayments of eligible loans are no longer reinvested and therefore the final loan is due to expire in December 2024, along with
the associated financial guarantees. At 31 December 2021, there is only one portfolio of loans.
Financial statements
Funding Circle Holdings plc162
17. Financial risk management
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.
The risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits
and controls and to monitor risks and ensure any limits are adhered to. The Group’s activities are reviewed regularly and potential
risks are considered.
Risk factors
The Group has exposure to the following risks from its use of financial instruments:
credit risk;
liquidity risk; and
market risk (including foreign exchange risk, interest rate risk and other price risk).
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
investments;
trade and other receivables;
cash and cash equivalents;
trade and other payables;
bank borrowings;
bonds;
lease liabilities; and
loan repurchase liabilities.
Categorisation of financial assets and financial liabilities
The tables show the carrying amounts of financial assets and financial liabilities by category of financial instrument as at
Assets
Fair
value through
profit and loss
£m
Amortised
cost
£m
Other
£m
Total
£m
Investment in SME loans (other) — 75.8 — 75.8
Investment in SME loans (warehouse) 3.2 — — 3.2
Investment in SME loans (securitised) 148.1 — — 148.1
Investment in trusts and co-investments 39.1 — — 39.1
Trade and other receivables — 24.3 — 24.3
Cash and cash equivalents 112.1 111.9 — 224.0
302.5 212.0 — 514.5
Liabilities
Fair
value through
profit and loss
£m
Amortised
cost
£m
Other
£m
Total
£m
Trade and other payables — (15.2) — (15.2)
Loan repurchase liability — — (2.2) (2.2)
Bank borrowings — (73.2) — (73.2)
Bonds (12.8) (127.5) — (140.3)
Lease liabilities — (23.9) — (23.9)
(12.8) (239.8) (2.2) (254.8)
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 163
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
17. Financial risk management continued
Principal financial instruments continued
Categorisation of financial assets and financial liabilities continued
The tables show the carrying amounts of financial assets and financial liabilities by category of financial instrument as at
Assets
Fair
value through
profit and loss
£m
Amortised
cost
£m
Other
£m
Total
£m
Investment in SME loans (other) — 25.0 — 25.0
Investment in SME loans (warehouse) 221.8 — — 221.8
Investment in SME loans (securitised) 279.8 — — 279.8
Investment in trusts and co-investments 21.2 — — 21.2
Trade and other receivables 0.3 63.1 — 63.4
Cash and cash equivalents 24.8 78.5 — 103.3
547.9 166.6 — 714.5
Liabilities
Fair
value through
profit and loss
£m
Amortised
cost
£m
Other
£m
Total
£m
Trade and other payables — (7.7) — ( 7.7 )
Loan repurchase liability — — (5.2) (5.2)
Bank borrowings — (195.5) — (195.5)
Bonds (7.8) (286.5) — (294.3)
Lease liabilities — (30.8) — (30.8)
(7.8) (520.5) (5.2) (533.5)
Financial instruments measured at amortised cost
Financial instruments measured at amortised cost, rather than fair value, include cash and cash equivalents, trade and other
receivables, investment in SME loans (other), bank borrowings, lease liabilities, certain bonds and trade and other payables. Due
to their nature, the carrying value of each of the above financial instruments approximates to their fair value.
Other financial instruments
Loan repurchase liabilities are measured at the amount of loss allowance determined under IFRS 9.
Financial instruments measured at fair value
IFRS 13 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair
value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement.
Disclosure of fair value measurements by level is according to the following fair value measurement hierarchy:
level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date;
level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either
directly or indirectly; and
level 3 inputs are unobservable inputs for the assets or liabilities.
The fair value of financial instruments that are not traded in an active market (for example, investments in SME loans) is
determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is
available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are
observable, the instrument is included in level 2. The investments categorised as level 2 relate to derivative financial instruments.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
Financial statements
Funding Circle Holdings plc164
17. Financial risk management continued
Financial instruments measured at fair value continued
Fair value measurement using
31 December 2021
Quoted prices
in active
markets
(level 1)
£m
Significant
observable
inputs
(level 2)
£m
Significant
unobservable
inputs
(level 3)
£m
Total
£m
Financial assets
Investment in SME loans (warehouse) — — 3.2 3.2
Investment in SME loans (securitised) — — 148.1 148.1
Investment in trusts and co-investments — — 39.1 39.1
Cash and cash equivalents 112.1 — — 112.1
112.1 — 190.4 302.5
Financial liabilities
Bonds — — (12.8) (12.8)
— — (12.8) (12.8)
Fair value measurement using
31 December 2020
Quoted prices
in active
markets
(level 1)
£m
Significant
observable
inputs
(level 2)
£m
Significant
unobservable
inputs
(level 3)
£m
Total
£m
Financial assets
Trade and other receivables — 0.1 0.2 0.3
Investment in SME loans (warehouse) — — 221.8 221.8
Investment in SME loans (securitised) — — 279.8 279.8
Investment in trusts and co-investments — — 21.2 21.2
Cash and cash equivalents 24.8 — — 24.8
24.8 0.1 523.0 547.9
Financial liabilities
Bonds — — ( 7.8) ( 7.8)
— — (7.8) (7.8)
The fair value of investment in SME loans (warehouse) has been estimated by discounting future cash flows of the loans using discount
rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value
and carrying amount of the investment in SME loans (warehouse) was £3.2 million at 31 December 2021 (2020: £221.8 million).
The fair value of investment in SME loans (securitised) represents loan assets in the securitisation vehicles and has been
estimated by discounting future cash flows of the loans using discount rates that reflect the changes in market interest rates and
observed market conditions at the reporting date. The estimated fair value and carrying amount of the investment in SME loans
(securitised) was £148.1 million at 31 December 2021 (2020: £279.8 million).
Bonds represent the unrated tranches of bond liabilities measured at fair value through profit and loss (the rated tranches of
bonds are measured at amortised cost). The fair value has been estimated by discounting future cash flows in relation to the
bonds using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting
date. The estimated fair value and carrying amount of the bonds was £12.8 million at 31 December 2021 (2020: £7.8 million).
Investment in trusts and co-investments represents the Group’s investment in the trusts and other vehicles used to fund CBILS,
RLS and certain core loans and is measured at fair value through profit and loss. The government-owned British Business Bank
will guarantee up to 80% of the balance of CBILS loans in the event of default (and between 70% and 80% of RLS loans). The fair
value has been estimated by discounting future cash flows in relation to the trusts using discount rates that reflect the changes
in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of
the investment in trusts and co-investments was £39.1 million at 31 December 2021 (2020: £21.2 million).
The most relevant significant unobservable input relates to the default rate estimate and discount rates applied to the fair value
calculation, details of which are set out in note 2 for those with material estimation uncertainty.
Fair value movements on investment in SME loans (warehouse), investment in SME loans (securitised), investments in trusts and
bonds (unrated) are recognised through the profit and loss account in fair value gains/(losses).
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 165
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
17. Financial risk management continued
Financial instruments measured at fair value continued
A reconciliation of the movement in level 3 financial instruments is shown as follows:
Investment in
SME loans
(warehouse)
£m
Investment in
SME loans
(securitised)
£m
Bonds
(unrated)
£m
Investment
in trusts and
co-investments
£m
Trade and
other receivables
£m
At 1 January 2020 342.0 366.6 (20.0) — —
Additions 286.9 — — 20.9 —
Securitisations (214.2) 214.2 — — —
Transfers (0.2) — — — 0.2
Repayments (146.9) (211.7) 4.2 — —
Disposal — — (4.0) — —
Net (loss)/gain on the change in fair value of financial
instruments at fair value through profit and loss (43.4) (87.2) 12.0 0.3 —
Foreign exchange loss (2.4) (2.1) — — —
At 31 December 2020 221.8 279.8 ( 7.8) 21.2 0.2
Additions — — — 22.1 —
Transfers 0.2 — — — (0.2)
Repayments (58.6) (150.2) — (3.3) —
Disposal (176.1) — — — —
Net gain/(loss) on the change in fair value of financial
instruments at fair value through profit and loss 16.3 18.2 (5.0) (0.9) —
Foreign exchange (loss)/gain (0.4) 0.3 — — —
At 31 December 2021 3.2 148.1 (12.8) 39.1 —
Financial risk factors
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers and cash and cash equivalents held at banks.
The Group’s maximum exposure to credit risk by class of financial asset is as follows:
31 December
2021
£m
31 December
2020
1
£m
Non-current
Investment in SME loans (other) 74.2 25.0
Investment in trusts and co-investments 39.1 21.2
Trade and other receivables:
– Other receivables 4.1 —
Current
Investment in SME loans (other) 1.6 —
Investment in SME loans (warehouse) 3.2 221.8
Investment in SME loans (securitised) 148.1 279.8
Trade and other receivables:
– Trade receivables 1.8 1.6
– Other receivables 10.0 15.5
– Accrued income 6.2 43.7
– Rent and other deposits 2.2 2.6
Cash and cash equivalents 224.0 103.3
Total gross credit risk exposure 514.5 714.5
Less bank borrowings and bond liabilities² (213.5) (489.8)
Total net credit risk exposure 301.0 224.7
1. See note 1.
2. Included within bank borrowings are £73.2 million (31 December 2020: £24.3 million) in relation to draw downs on the PPPLF.
Financial statements
Funding Circle Holdings plc166
17. Financial risk management continued
Financial risk factors continued
In addition the Group is subject to financial guarantees it has issued to buy back loans detailed in the loan repurchase liability
in note 16. The Group’s maximum exposure to credit risk on financial guarantees were every eligible loan required to be bought
back would be £10.0 million (2020: £24.3 million).
Investment in SME loans (warehouse) and investment in SME loans (securitised) relate to the underlying pool of SME loans
in both the warehouse and securitisation vehicles. Whilst there is credit risk from the loans defaulting, these SME loans and
the associated bank debt or third party bonds are held within bankruptcy remote vehicles. If the SME loans were to all default,
then the bank debt or third party bonds do not receive their money back. Therefore the overall exposure to the Group for these
investments is the Group’s net investment in the SME loans which is after taking account of the bank debt and third party bonds.
Under IFRS 9, the Group is required to provide for loans measured at amortised cost under the expected credit loss (“ECL”)
model. The impairment related to each loan is based on the ECLs associated with the probability of default of that loan in the
next 12 months unless there has been a significant increase in credit risk of that loan since origination. The Group assumes
there has been a significant increase in credit risk if outstanding amounts on the loan investment exceed 30 days, in line with
The Group defines a default, classified within non-performing, as a loan investment with any outstanding amounts exceeding
a 90-day due date, which reflects the point at which the loan is considered to be credit-impaired. In some circumstances where
loans are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or
originated credit-impaired (“POCI”), this element of the impairment is therefore based on lifetime ECLs.
The investment in SME loans (other) includes PPP loans funded by the use of the PPPLF. The loans are guaranteed by the
US Government in the event of default and the loans are anticipated to be forgiven. At the point of default and subsequent
collection of the guarantee or point of forgiveness, the loan and the respective borrowings under the PPPLF are extinguished.
The investment in SME loans (other) also includes loans which have been brought back from investors and are held at amortised
cost and the current portion of SME loans (other) includes £1.6 million (2020: £nil) of investments in short-term SME loans under
its FlexiPay product, enabling businesses to spread UK invoices or payments over three months with the initial payment made on
a borrowers behalf. These are all measured at amortised cost.
The gross principal value of the loans is £91.1 million (2020: £39.3 million), of which £75.7 million (2020: £26.1 million) is
performing, £0.3 million (2020: £nil) is underperforming, £1.1 million (2020: £0.4 million) is non-performing and £14.0 million
(2020: £12.8 million) is POCI at 31 December 2021. An allowance for expected credit losses of £15.3 million (£12.6 million) is
held against these loans, of which £0.6 million (0.7%) (2020: £0.1 million (0.3%)) is held against performing loans, £0.3 million
(100%) (2020: £nil) against underperforming loans, £1.1 million (100.0%) (2020: £0.4 million (100%)) on non-performing loans and
The carrying value of the loans totalled £75.8 million (2020: £26.6 million), of which £75.1 million (2020: £26.0 million) was
performing, £nil (2020: £nil) was underperforming, £nil (2020: £nil) was non-performing and £0.7 million (2020: £0.6 million) was POCI.
An impairment charge of £1.3 million (2020: £0.3 million) was recognised through the statement of comprehensive income in the
year to 31 December 2021 within other operating expenses.
Trade receivables represent the invoiced amounts in respect of servicing fees due from institutional investors. The risk of
financial loss is deemed minimal because the counterparties are well established financial institutions.
Ongoing credit evaluation is performed on the financial condition of other receivables and, where appropriate, a provision for
impairment is recorded in the financial statements.
Other receivables include net investment in subleases of offices representing the present value of future sublease payments
receivable. Where appropriate, impairment is recorded where the receivable is in doubt
Individual risk limits for banks and financial institutions are set by external rating agencies. The Group’s treasury policy has
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient financial resources to meet its liabilities
when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Group’s position.
The Group’s liquidity position is monitored and reviewed on an ongoing basis by the Directors.
The amounts disclosed in the following tables are the contractual undiscounted cash flows. The liquidity requirements of the
bonds are met from cash flows generated by the investment in SME loans (securitised) and the liquidity requirements of bank
borrowings are met from cash flows generated by investment in SME loans (warehouse) and SME loans (other).
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 167
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
17. Financial risk management continued
Financial risk factors continued
Liquidity risk continued
The maturity analysis of financial instruments at 31 December 2021 and 31 December 2020 is as follows:
At 31 December 2021
Less than
3 months
£m
Between
3 months
and 1 year
£m
Between 1
and 5 years
£m
Over
5 years
£m
Total
undiscounted
cash flows
£m
Impact of
2
£m
Carrying
amount
£m
Financial liabilities
Trade and other payables (15.2) — — — (15.2) — (15.2)
Bank borrowings — — (73.2) — (73.2) — (73.2)
Bonds (28.8) (60.5) (60.8) (0.2) (150.3) 10.0 (140.3)
Loan repurchase liability
1
(2.2) — — — (2.2) — (2.2)
Lease liabilities (1.7) (5.2) (18.9) — (25.8) 1.9 (23.9)
(47.9) (65.7) (152.9) (0.2) (266.7) 11.9 (254.8)
At 31 December 2020
Less than
3 months
£m
Between
3 months
and 1 year
£m
Between 1
and 5 years
£m
Over
5 years
£m
Total
undiscounted
cash flows
£m
Impact of
2
£m
Carrying
amount
£m
Financial liabilities
Trade and other payables (7.7) — — — (7.7) — ( 7.7)
Bank borrowings (171.2) — (24.3) — (195.5) — (195.5)
Bonds (45.9) (101.7) (164.3) — (311.9) 17.6 (294.3)
Loan repurchase liability
1
(5.2) — — — (5.2) — (5.2)
Lease liabilities (1.8) (5.5) (24.3) (2.2) (33.8) 3.0 (30.8)
(231.8) (107.2) (212.9) (2.2) (554.1) 20.6 (533.5)
1. Financial guarantees provided for in the loan repurchase liability are allocated to the earliest period in which the guarantee could possibly be called.
2. Included within the impact of discounting on bonds is £1.1 million of deferred bond issuance costs (2020: £2.5 million).
During 2021, the Group maintained revolving credit facility agreements of up to £220 million in the UK and $180 million and
of SME loans for the warehouses. In the prior year ended 31 December 2020, due to the impact of Covid-19 and the refocus
towards CBILS and PPP loan originations, the warehouses ceased reinvestment of proceeds from SME loans and commenced
paying down the outstanding facility balances. During the year the majority of the SME loans in the UK and US warehouses were
sold and the borrowing facilities fully paid down using the proceeds. As at 31 December 2021, the amounts drawn in the UK and
US totalled £nil (2020: £120.6 million) and $nil (2020: $69.2 million) respectively. Interest was payable on the borrowings in the
UK at 2.25% plus one month London Inter-Bank Offered Rate (“LIBOR”) and in the US at 2.5% plus the three month commercial
paper rate on the initial facility and at three month USD LIBOR + 3.0% on the second facility respectively.
Additionally in the US the Group has drawn $98.7 million (2020: $33.1 million) on the PPP Liquidity Facility available from the
Federal Reserve Bank at a fixed interest rate of 0.35%.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
prices. The Group’s market risk arises from open positions in interest-bearing assets and liabilities, to the extent that these are
exposed to general and specific market movements.
a) Other price risk
The fair value of the SME loans which are held at fair value through profit and loss can fluctuate depending on market pricing
of relative interest rates and credit risk. This is reflected in the discount rate used to derive a valuation for the loan assets.
exposed to greater estimation uncertainty is disclosed in note 2.
b) Interest rate risk
The Group is exposed to interest rate risk in relation to financial liabilities through drawn committed borrowing facilities and on
bonds and on financial assets through investment in SME loans.
Non-trading interest rate risk
The Group’s interest risk on financial instruments is limited to interest receivable on loan note investments, cash and cash equivalent
balances and interest on bonds and bank borrowings. The maturities of financial instruments subject to interest rate risk are as follows:
Financial statements
Funding Circle Holdings plc168
17. Financial risk management continued
Financial risk factors continued
Market risk continued
b) Interest rate risk continued
Less than 3 months Between 3 months and 1 year Between 1 and 5 years
At 31 December
2021
£m
2020
£m
2021
£m
2020
£m
2021
£m
2020
£m
Fixed rate
Investment in SME loans (other)
2
1.6 — — — 74.2 25.0
Investment in trusts and
co-investments — — — — 39.1 21.2
Investment in SME loans
(warehouse)¹ — 1.6 0.1 2.8 3.1 217.4
Investment in SME loans
(securitised)¹ 0.2 0.2 10.1 8.3 137.8 271.3
Bank borrowings
2
— — — — (73.2) (24.3)
Bonds¹ — — — — (80.2) (169.9)
Floating rate
Cash and cash equivalents 224.0 103.3 — — — —
Bank borrowings — (171.2) — — — —
Bonds
1
— — — — (60.1) (124.4)
225.8 (66.1) 10.2 11.1 40.7 216.3
1. The bonds, investment in SME loans (warehouse) and investment in SME loans (securitised) are classified as current on the balance sheet, reflecting that the holding in residual
junior notes and investment in SME loans in the warehouse by the Group are held to sell, and upon sale the Group would expect to deconsolidate the related assets of the
securitisation vehicles. The above table represents the contractual maturities.
2. The fixed rate bank borrowings and investment in SME loans (other) represent the Group’s drawing of the PPP liquidity facility in the US in order to fund PPP loan originations.
These are classified as non-current on the balance sheet, and the above table represents the contractual maturities, although the PPP loans could be forgiven by the SBA and
the associated liability could be repaid from the proceeds within 12 months of the balance sheet date.
There are no financial assets which are held for a period of over five years.
Interest rate risk sensitivity analysis – non-trading interest (fixed rate)
Interest on loan note investments including investment in SME loans (other), investment in SME loans (warehouse), investment
in SME loans (securitised), investment in trusts and co-investments, certain bank borrowings (in the US) and bond liabilities (in
the US) is fixed until the maturity of the investment, and is not impacted by market rate changes. The level of future interest rate
receivable would be similar to that received in the year and the impact of movements in interest rates on the value of the assets
is considered immaterial to the Group’s overall performance for the year.
Interest rate risk sensitivity analysis – non-trading interest (floating rate)
Interest on cash and cash equivalent balances is subject to movements in base rates. The Directors monitor interest rate risk
and note that while interest rates have been at a historical low for some time there have recently been rate rises observed. The
Directors believe that any reasonable increase in the base rate would not significantly impact the Group. Interest on bonds (in the
UK) is subject to movements in the Sterling Overnight Index Average Rate (“SONIA”). However, the Group has mitigated the risk of
increases in interest rates through the use of interest rate caps. A 1.0% increase in SONIA would result in an increase of projected
annual interest expense for the year ended 31 December 2022 of £0.4 million.
Following the financial crisis, the reform and replacement of benchmark interest rates such as GBP LIBOR and other inter-bank
offered rates (“IBORs”) has become a priority for global regulators. There remains some uncertainty around the timing and
precise nature of these changes.
As described above, the Group was previously exposed to GBP and USD LIBOR on bank borrowings; however, with the repayment
the exposure is since diminished. The Group has monitored the market and output from industry working groups and regulators
which manage the transition to the new benchmark interest rates away from GBP LIBOR to SONIA and USD LIBOR to SOFR.
In response to the transition the Group has identified all its LIBOR exposures and has executed its plan to smoothly transition
to alternative benchmark rates. Given the Group’s exposures related to bank borrowings, which are since repaid, the impact is
limited and the Group relies on fall-back language within the contracts. Contracts have been amended where necessary to factor
in the basis differential between LIBOR and SONIA and agreements have been updated as necessary.
The amendments to IFRS 9 will be applied until uncertainty arising from the benchmark interest rate reforms that the Group is
exposed to ends. This uncertainty will remain until the Group’s contracts that reference LIBOR are amended to reference the
alternative benchmark which is complete for the UK and remains ongoing for the US, however, there are no remaining material
exposures to USD LIBOR at 31 December 2021.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 169
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
17. Financial risk management continued
Financial risk factors continued
Market risk continued
b) Interest rate risk continued
Instruments used by the Group
Interest rate caps mitigate risk of increases in floating rate interest on borrowing facilities used to fund the origination of loans for
the securitisation warehouses.
All derivatives are held at fair value through profit and loss with movements in the fair value being recognised in fair value gains/
(losses) within net income. Derivatives are not designated into formal hedging relationships within the Group.
At 31 December 2021
Interest rate cap
UK securitisation
Notional amount £177m
Underlying GBP SONIA
Strike rate 2.0%
Maturity July 2024
Fair value £nil
1. The UK securitisation interest rate cap notional is set on a declining basis in line with the expected repayment of bonds subject to floating rate SONIA benchmark.
c) Sensitivity analysis
IFRS 7 requires disclosure of sensitivity analysis for each type of market risk to which the entity is exposed at the report date
showing how profit or loss and equity would have been affected by changing the relevant risk variables that were reasonably
possible at that date.
As discussed above, the Group does not have significant exposure to price or cash flow risk and therefore no sensitivity analysis
for those risks has been disclosed with the exception of sensitivity to discount rates on SME loans held at fair value through
profit and loss within note 2.
d) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily
with respect to the US dollar, the UK pound and the euro. Foreign exchange risk arises from future commercial transactions,
recognised assets and liabilities and net investments in foreign operations.
The Group’s policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency with the
cash generated from their own operations in that currency. Where Group entities have liabilities denominated in a currency other
than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that
currency will, where possible, be transferred from elsewhere within the Group.
Apart from these particular cash flows, the Group aims to fund expenses and investments in the respective currency and to
manage foreign exchange risk at a local level by matching the currency in which income is generated and expenses are incurred.
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.
The table below sets out the Group’s currency exposures from financial assets and liabilities held by Group companies
in currencies other than their functional currencies and resulting in exchange movements in the income statement and
balance sheet.
31 December 2021 31 December 2020
US dollars
£m
GBP
£m
EUR
£m
Total
£m
US dollars
£m
GBP
£m
EUR
£m
Total
£m
Cash and cash
equivalents 0.2 — 2.2 2.4 0.2 — 2.3 2.5
Intra-Group assets — — — — — — — —
Intra-Group liabilities (20.8) (0.1) (4.0) (24.9) (0.5) (10.1) (8.3) (18.9)
The Group assessed the sensitivity to a 5% depreciation and 5% appreciation in pound sterling against the relevant foreign
currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to senior management personnel and
represents management’s assessment of a reasonably possible change in foreign exchange rates. The sensitivity analysis
includes only outstanding foreign currency-denominated monetary items and adjusts their translation at the year end for a 5%
change in foreign currency rates. The sensitivity analysis excludes quasi-equity loans to foreign operations within the Group.
Financial statements
Funding Circle Holdings plc170
17. Financial risk management continued
Financial risk factors continued
Market risk continued
d) Foreign exchange risk continued
The Group’s sensitivity to fluctuations in foreign currencies is related to the US dollar and euro amounts held in the Parent Company.
Appreciation in pound sterling Depreciation in pound sterling
At 31 December
Income
statement
2021
£m
Equity
2021
£m
Income
statement
2020
£m
Equity
2020
£m
Income
statement
2021
£m
Equity
2021
£m
Income
statement
2020
£m
Equity
2020
£m
US dollars (1.0) (3.3) (0.5) (2.9) 1.1 3.6 0.6 3.2
Euros (0.1) 0.5 (0.3) 0.5 0.1 (0.5) 0.3 (0.5)
(1.1) (2.8) (0.8) (2.4) 1.2 3.1 0.9 2.7
Capital management
The Group considers its capital to comprise its ordinary share capital, share premium, foreign exchange reserve, share options
reserve and retained earnings. Quantitative detail is shown in the consolidated statement of changes in equity.
The Directors’ objective when managing capital is to safeguard the Group’s ability to continue as a going concern in order to
provide returns for the shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
The Directors monitor a number of KPIs at both the Group and individual subsidiary level on a monthly basis. As part of the
budgetary process, targets are set with respect to operating expenses in order to effectively manage the activities of the Group.
Performance is reviewed on a regular basis and appropriate actions are taken as required. These internal measures indicate the
performance of the business against budget/forecast and confirm that the Group has adequate resources to meet its working
capital requirements.
The Group is subject to externally imposed capital requirements by the Financial Conduct Authority but these are lower than
internally set requirements. During the period the Group complied with all externally imposed requirements.
Sources of estimation uncertainty and critical judgements that may result in a material adjustment in future periods are outlined
in note 2.
18. Share capital
31 December
2021
Number
31 December
2021
£
31 December
2020
Number
31 December
2020
£
Called up, allotted and fully paid
Ordinary shares of £0.001 356,619,718 356,620 352,943,975 352,944
During 2021, the Company issued 3,675,743 ordinary shares of £0.001 ranking pari passu with ordinary shares in issue (2020:
4,544,701) in connection with employee share schemes, giving rise to a total share premium of £0.4 million (2020: £0.3 million).
Included in the total number of ordinary shares outstanding are 283,786 (2020: 1,114,518) shares held by the Group’s Employee
Benefit Trust and 2,984,437 (2020: 2,508,079) shares held by the Group’s Share Incentive Plan Trust.
19. Share premium account
2021
£m
2020
£m
At 1 January 292.6 292.3
Exercise of options – proceeds received 0.4 0.3
At 31 December 293.0 292.6
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 171
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
20. Foreign exchange reserve
£m
At 1 January 2020 8.0
Exchange difference on translating the net assets of foreign operations 1.7
At 31 December 2020 9.7
Exchange difference on translating the net assets of foreign operations 1.4
At 31 December 2021 11.1
Exchange differences relating to the translation of the net assets of the Group’s subsidiaries from their functional currency into
the Company’s functional currency are recognised directly in the foreign exchange reserves within equity.
21. (Accumulated losses)/retained earnings
£m
At 1 January 2020 6.5
Capital reduction —
Transfer of share option costs 3.2
Loss for the year (108.3)
At 31 December 2020 (98.6)
Transfer of share option costs 1.8
Profit for the year 61.2
At 31 December 2021 (35.6)
The transfer of share option costs is in relation to the exercise of share options during the year and their associated costs in the
share options reserve which are transferred to (accumulated losses)/retained earnings.
22. Share-based payment
The Company operates share schemes for all employees of the Group. The terms of the main current schemes from which the
Group’s employees benefit are set out below.
Post-IPO employee share plans
Since the Company’s admission on the London Stock Exchange to the year ended 31 December 2019, the Company operated
a single discretionary share-based long-term incentive plan (“LTIP”). In November 2020, the Company introduced a Share
Incentive Plan (“SIP”) approved by HMRC, which includes free shares, partnership shares and matching shares. This plan is only
relevant for UK-based employees; the LTIP will continue to make awards for non-UK-based employees and employees in senior
management positions.
The main features of the LTIP and SIP are set out below.
Post-IPO – LTIP
Form of LTIP Awards
The Board grants awards in the form of restricted stock units at no cost or options to acquire shares at no cost (a nil-
cost option).
Performance conditions
LTIP Awards are not currently subject to performance conditions with the exception of LTIP Awards granted to Executive
Directors which are subject to performance conditions. Refer to the Remuneration Report for further details.
Any performance condition may be amended or substituted if one or more events occur which cause the Board to reasonably
consider that an amended or substituted performance condition would be more appropriate and would not be materially less
difficult to satisfy than originally intended.
Vesting and release of LTIP Awards
LTIP Awards granted to employees, excluding Executive Directors, currently vest subject to continued service only (“Time-Based
Vesting”) in accordance with a vesting schedule set at grant.
LTIP Awards granted to Executive Directors vest at the end of three years subject to achievement of performance conditions.
Further details are shown in the Remuneration Report.
The Board may determine at grant that an LTIP Award is subject to an additional holding period following vesting (a “Holding
Period”). LTIP Options will be exercisable from the date of vesting or, if applicable, the end of the Holding Period until the tenth
anniversary of the grant date, or such earlier date as the Board determines.
Financial statements
Funding Circle Holdings plc172
22. Share-based payment continued
Post-IPO employee share plans continued
Post-IPO – LTIP continued
Cessation of employment
LTIP Options may normally be exercised to the extent vested for a period of six months after ceasing employment or 12 months
after death (or such other period as the Board may determine).
Post-IPO – SIP
Form of SIP awards
The Board grants awards in the form of: free shares, partnership shares and matching shares.
Performance conditions
There are no performance conditions attached to free shares, partnership shares and matching shares.
Free shares
Under the SIP, UK employees are eligible to receive up to a maximum of £3,600, or 10% of annual salary if less, of free shares per
tax year. Free shares will be awarded annually with a forfeiture period of two years and a holding period of three years.
Matching shares
UK employees are invited to buy partnership shares from pre-tax salary with a maximum investment in each tax year of £1,800,
or 10% of annual salary if less. Partnership shares are purchased every month. Employees can withdraw partnership shares
from the SIP at any time although there are tax advantages if the shares are retained in the SIP for at least three years.
Participants are awarded one matching share for every one partnership share they purchase. There are tax advantages if the
matching shares are retained in the SIP for at least three years.
Whilst employed by the Company, a participant will forfeit a corresponding number of matching shares if they choose to transfer
partnership shares out of the SIP within three years of the date of purchase.
Under normal circumstances, if a participant leaves the Company before the second anniversary of the date of award, they
will forfeit their matching shares. If they leave between two and three years of the date of award, they retain their matching
shares but those shares must be removed from the SIP and any tax advantages are lost. If a participant leaves under special
circumstances, they will retain all of their matching shares, regardless of how long they have been held in the SIP.
Pre-IPO employee share plans
EMI Options
Prior to June 2014, the Company issued options to UK subsidiary undertakings’ employees under the EMI Options Scheme.
Since then, the Company is not eligible to issue under the scheme.
Unapproved Options
The Company has an Unapproved Options Scheme for all employees of the Group. In accordance with standard vesting terms,
the full award will vest four years after the vesting start date, with 25% vesting on the first anniversary of the vesting date and
6.25% every three months thereafter. If the options remain unexercised after a period of ten years from the date of grant, the
options expire. Options are forfeited if the employee leaves the Group before the options vest.
US Options Scheme 2
Options granted under the “US Options Scheme 2” are Unapproved Options granted to US employees as either non-qualifying
options or incentive stock options. The US Options Scheme 2 has the same vesting period as Unapproved Options. If the options
remain unexercised after a period of ten years from the date of grant, the options expire. Unvested options are forfeited if the
employee leaves the Group before the options vest.
Growth Shares with “shadow” Unapproved Options
Growth Shares were an upfront award of B, D or E ordinary shares with a nominal value of £0.00001 per share where the ability to
receive dividends and a capital return from the shares was conditional on the achievement of a performance target (namely, the
growth of the enterprise value of the business beyond a hurdle). According to the terms and conditions, the performance target
differed depending on the underlying share.
If this performance target was met, the participants would profit from the whole of the value of the business, not just the growth
from the date of the award, on the same basis as the ordinary shares.
The Growth Shares were each issued in conjunction with a “shadow” Unapproved Option. The Unapproved Option could be exercised
if the applicable enterprise value hurdle is not met upon an exit event. Both the Growth Shares and the “shadow” Unapproved Options
vested according to the Company’s standard vesting terms, as discussed in the description of Unapproved Options above.
All share-based incentives are subject to service conditions. Such conditions are not taken into account in the fair value of the
service received. The fair value of services received in return for share-based incentives is measured by reference to the fair
value of share-based incentives granted. The estimate of the fair value of the share-based incentives is measured using market
prices. When market prices do not exist for shares or rights to shares with similar characteristics, fair value is determined by
using a valuation technique (either the Monte Carlo or Black-Scholes pricing model as is most appropriate for each scheme).
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 173
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
22. Share-based payment continued
Charge for the year
Included in operating expenses of the Group is a charge for share-based payments and associated social security costs of
Movements in share plans
Details of movements in the share schemes during the year are as follows:
EMI Options Unapproved Options
Free shares and
matching shares LTIP Awards US Options Scheme Total
Number and WAEP
1
Number and WAEP Number and WAEP Number and WAEP Number and WAEP Number and WAEP
Number £ Number £ Number £ Number £ Number £ Number £
Outstanding at
481,312 0.027 7,315,334 0.298 — — 8,513,092 — 4,606,207 0.426 20,915,945 0.199
Granted during
the year — — — — 2,519,616 — 11,34 0,072 — — — 13,859,688 —
Exercised during
the year (170,000) 0.027 (486,791) 0.309 — — (944,652) — (208,008) 0.390 (1,809,451) 0.131
Forfeited during
the year (5,000) 0.027 (536,454) 0.266 (20,319) — (4,393,292) — (743,344) 0.444 (5,698,409) 0.083
Outstanding at
31 December
2020 306,312 0.027 6,292,089 0.300 2,499,297 —
14,515,220
— 3,654,855 0.424 27,267,773 0.140
EMI Options Unapproved Options
Free shares and
matching shares LTIP Awards US Options Scheme Total
Number and WAEP Number and WAEP Number and WAEP Number and WAEP Number and WAEP Number and WAEP
Number £ Number £ Number £ Number £ Number £ Number £
Outstanding at
306,312 0.027 6,292,089 0.300 2,499,297 —
14,515,220
— 3,654,855 0.424 27,267,773 0.140
Granted during
the year — — — — 1,340,578 — 8,680,546 — — — 10,021,124 —
Exercised during
the year — — (1,108,496) 0.200 (31,582) — (982,792) — (709,527) 0.367 (2,832,397) 0.170
Forfeited during
the year (7,312) 0.027 (41,509) 0.850 (950,520) — (2,872,931) — (126,048) 0.598 (3,998,320) 0.028
Outstanding at
31 December
2021 299,000 0.027 5,142,084 0.317 2,857,773 —
19,340,043
— 2,819,280 0.431 30,458,180 0.106
1. Weighted average exercise price.
The following table summarises information about the share awards outstanding at 31 December 2021:
EMI Options Unapproved Options
Free shares and
matching shares LTIP Awards US Options Total
Range of
exercise prices
Number and WARCL
1
Number and WARCL Number and WARCL Number and WARCL Number and WARCL Number and WARCL
Number Years Number Years Number Years Number Years Number Years Number Years
£0–£0.008 — — 2,260,017 6.4 2,857,773 — 19,340,043 7.5 — — 24,457,833 6.6
£0.009–£0.176 299,000 1.3 214,299 1.5 — — — — 24,385 2.4 5 37,68 4 1.4
£0.177–£0.471 — — 2,305,977 5.5 — — — — 2,196,012 3.8 4,501,989 4.7
£0.472–£1.75 — — 361,791 6.5 — — — — 598,883 6.4 960,674 6.4
299,000 1.3 5,142,084 5.8 2,857,773 —
19,340,043
7.5 2,819,280 4.4 30,458,180 6.2
The following table summarises information about the share awards outstanding at 31 December 2020:
EMI Options Unapproved Options
Free shares and
matching shares LTIP Awards US Options Total
Range of
exercise prices
Number and WARCL
2
Number and WARCL Number and WARCL Number and WARCL Number and WARCL Number and WARCL
Number Years Number Years Number Years Number Years Number Years Number Years
£0–£0.008 — — 2,260,017 7.4 2,499,297 — 14,515,220 7.4 120,969 7.6 19,395,503 6.3
£0.009–£0.176 306,312 2.2 789,918 1.1 — — — — 28,456 — 1,124,686 1.3
£0.177–£0.471 — — 2,866,949 6.9 — — — — 2,855,402 4.4 5,722,351 5.7
£0.472–£1.75 — — 375,205 7.5 — — — — 650,028 6.3 1,025,233 6.7
306,312 2.2 6,292,089 6.4 2,499,297 —
14,515,220
7.4 3,654,855 4.8 27,267,7 73 6.0
1. Weighted average remaining contractual life.
Financial statements
Funding Circle Holdings plc174
22. Share-based payment continued
Unapproved Options Scheme
There have been no Unapproved Options granted since IPO in 2018. The weighted average fair values of options granted under the
Unapproved Options Scheme and the US Options Scheme ranged between £0.73 and £1.80 per option respectively in the previous
year. These values were determined using the Black-Scholes valuation model. The significant inputs into the model are as follows:
Unapproved Options Scheme
31 December
2018
Share price (various times during the year) £1.89
Exercise price £nil–£0.44
Expected life 4 years
Expected volatility 48%
Risk-free interest rate (between) 0.93%–1.02%
Dividend yield Nil
Forward exchange rate – US Options (between) 0.769
LTIP Awards
Since all LTIP Awards were made post-IPO, the Company has used its share price at grant date as the fair value of the LTIP
Awards granted during the year to employees.
In the prior financial year, the only exception to this was for awards made to the former Chief Financial Officer, who departed
prior to the end of this financial year (these awards have therefore lapsed). These awards contained market-based performance
conditions and the fair value at grant date was calculated using a Black-Scholes model.
The incumbent Chief Financial Officer’s LTIP Awards do not contain market-based performance conditions but do include
non-market performance conditions (refer to the Remuneration Report for further detail) and, therefore, the Company’s share
price at grant date is the fair value used, with the likelihood of achieving the non-market performance conditions factored into
Free shares and matching shares
The Company has used its share price at grant date as the fair value of free shares and matching shares granted during the year
to employees.
23. Notes to the consolidated statement of cash flows
Cash inflow/(outflow) from operating activities
31 December
2021
£m
31 December
2020
£m
Profit/(loss) before taxation 64.1 (108.1)
Adjustments for
Depreciation of property, plant and equipment 5.9 9.0
Amortisation of intangible assets 8.0 8.2
Impairment of goodwill (exceptional item) — 12.0
Impairment of intangible and tangible assets (exceptional item) 3.9 1.7
Share-based payment restructuring credit (exceptional item) — (1.0)
Interest receivable (0.1) (0.4)
Interest payable 1.1 1.4
Non-cash employee benefits expense – share-based payments and associated social security costs 8.5 6.4
Fair value (gains)/losses (28.6) 118.3
Movement in restructuring provision (exceptional item) (0.9) 1.1
Movement in loan repurchase liability (3.0) 2.3
Movement in other provisions (1.9) 2.5
Share of (gains)/losses of associates (0.9) 0.8
Other non-cash movements (0.7) 1.2
Changes in working capital
Movement in trade and other receivables 46.4 (35.3)
Movement in trade and other payables 1.4 13.0
Tax paid (3.1) —
Net cash inflow from operating activities 100.1 33.1
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 175
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
23. Notes to the consolidated statement of cash flows continued
Cash and cash equivalents
31 December
2021
£m
31 December
2020
£m
Cash and cash equivalents 224.0 103.3
The cash and cash equivalents balance is made up of cash, money market funds and bank deposits. The carrying amount
of these assets is approximately equal to their fair value. Included within cash and cash equivalents above is cash of £1.0
million (2020: £1.0 million) which is restricted in use in the event of rental payment defaults and cash held in the securitisation
SPVs of £14.4 million (2020: £38.9 million including warehouse SPVs for on-payment to lenders) which has been collected for
on-payment to bond holders and is therefore restricted in its use. A further £9.2 million (2020: £4.3 million) of cash is held which
is restricted in use to repaying investors in CBILS and RLS loans and paying CBILS and RLS-related costs to the UK Government.
At 31 December 2021, money market funds totalled £112.1 million (2020: £24.8 million).
Analysis of changes in liabilities from financing activities
1 January
2020
£m
Cash flow
£m
Exchange
movements
£m
Other non-cash
movements
£m
31 December
2020
£m
Bank borrowings (265.8) 69.0 1.3 — (195.5)
Bonds (348.7) 35.6 6.8 12.0 (294.3)
Lease liabilities (38.3) 7.8 (0.3) — (30.8)
Liabilities from financing activities (652.8) 112.4 7.8 12.0 (520.6)
1 January
2021
£m
Cash flow
£m
Exchange
movements
£m
Other non-cash
movements
£m
31 December
2021
£m
Bank borrowings (195.5) 123.1 (0.8) — (73.2)
Bonds (294.3) 160.6 (1.6) (5.0) (140.3)
Lease liabilities (30.8) 8.1 (0.1) (1.1) (23.9)
Liabilities from financing activities (520.6) 291.8 (2.5) (6.1) (237.4)
24. Operating lease arrangements
As disclosed in notes 1 and 12, leases of low-value items or short-term leases continue to be treated as operating leases.
31 December
2021
£m
31 December
2020
£m
Lease payments under operating leases recognised as an expense in the year 0.1 0.1
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable
operating leases of £nil (2020: £nil).
Operating lease payments represent payments for lease assets that are individually considered low value.
25. Dividends per share
No ordinary dividends were declared or paid in the current or previous financial years.
Financial statements
Funding Circle Holdings plc176
26. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
Compensation of key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the Group. The Group’s key management personnel comprises the Global Leadership Team (“GLT”), which is made
up of the Executive Directors and other senior management as defined in note 3 as the chief operating decision maker (“CODM”)
and the Non-Executive Directors of the Group.
31 December
2021
£m
31 December
2020
£m
Salaries and short-term benefits 4.2 3.3
Equity-based compensation 1.9 1.9
Post-employment benefits 0.1 0.1
6.2 5.3
Further details on Directors’ remuneration are disclosed in the Remuneration Report in the Corporate Governance section of the
Annual Report and Accounts on pages 96 to 119.
Transactions with other related parties
During the year the Group invested £nil (2020: £0.4 million) into entities accounted for as associates, received capital
redemptions of £3.9 million (2020: £2.3 million) and received dividends of £nil (2020: £0.4 million).
During the year the Group received service fees from loans held by Knightrider Lending Designated Activity Company of
These entities are subsidiaries of the Group’s associates, as detailed in note 30.
27. Ultimate controlling party
In the opinion of the Directors, the Group does not have a single ultimate controlling party.
28. Contingent liabilities
As part of the ongoing business, the Group has operational requirements with its investors. At any point in time, it is possible that
a particular investor may expect the Group to buyback their loan if they did not believe that the terms of business had been fully
complied with. Where a loan is bought back it is presented within Investment in SME loans (other) on the face of the consolidated
balance sheet and held at amortised cost under IFRS 9.
In common with other businesses, the Group is involved from time to time in disputes in the ordinary course of business.
recovery of monies owed under a loan agreement. There is one current case in the US. Funding Circle considers these claims
consolidated results or net assets; however, as proceedings are in the early stages the outcome cannot be reliably measured.
29. Subsequent events
There have been no subsequent events since the balance sheet date.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 177
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
30. Interests in other entities
Investments in subsidiaries
The Group had the following subsidiaries, all of which have been included in these consolidated financial statements. The
proportion of the voting rights in subsidiary undertakings held directly by the Company does not differ from the proportion of
ordinary shares held.
Subsidiary undertakings
Place of
incorporation
Proportion of
ownership
interest
Directly/
indirectly
held Registered office address
Funding Circle Ltd UK 100% Directly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Asset Finance Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle BB Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Eclipse Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Focal Point Lending
Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Global Partners Limited UK 100% Directly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Midco Limited UK 100% Directly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Property Finance Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Trustee Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Made To Do More Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Horizon Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle USA, Inc. USA 100% Directly
85 Second Street, 4th Floor,
San Francisco, California 94105
Funding Circle Notes Program, LLC USA 100% Indirectly
85 Second Street, 4th Floor,
San Francisco, California 94105
FC Marketplace, LLC USA 100% Indirectly
85 Second Street, 4th Floor,
San Francisco, California 94105
Funding Circle Investor Funds, LLC USA 100% Indirectly
85 Second Street, 4th Floor,
San Francisco, California 94105
FC Capital US LLC USA 100% Indirectly
85 Second Street, 4th Floor,
San Francisco, California 94105
FC Capital US II LLC USA 100% Indirectly
85 Second Street, 4th Floor,
San Francisco, California 94105
FC Depositor US LLC USA 100% Indirectly
85 Second Street, 4th Floor,
San Francisco, California 94105
Funding Circle CE GmbH Germany 100% Directly Bergmannstraße 71/72, 10961 Berlin
Funding Circle Deutschland GmbH Germany 100% Indirectly Bergmannstraße 71/72, 10961 Berlin
Funding Circle Connect GmbH Germany 100% Indirectly Bergmannstraße 71/72, 10961 Berlin
FC Forderungsmanagement GmbH Germany 100% Indirectly Bergmannstraße 71/72, 10961 Berlin
Funding Circle Espana S.L. Spain 100% Indirectly
Calle Claudio Coello número 91,
3a planta, 28006 Madrid
Funding Circle Nederland B.V. Netherlands 100% Indirectly Atrium, Strawinskylaan 3075,
4th Floor, 1077 ZX Amsterdam
Financial statements
Funding Circle Holdings plc178
30. Interests in other entities continued
Investments in associates
Set out below are the associates of the Group as at 31 December 2021 which, in the opinion of the Directors, are material to the
Group. The entities listed below have share capital consisting solely of ordinary shares, which are held directly by the Group. The
country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the
same as the proportion of voting rights held.
Associate entity name
Place of
incorporation
Proportion of
ownership
interest
Directly/
indirectly
held Registered office address
Funding Circle European SME Direct
Lending Fund I¹ Ireland 24% Indirectly 70, Sir John Rogerson’s Quay, Dublin 2, Ireland
Funding Circle UK SME Direct Lending
Fund I¹
Ireland 8% Indirectly 70, Sir John Rogerson’s Quay, Dublin 2, Ireland
1. Private sub-fund held via the Funding Circle ICAV, an Irish collective asset-management vehicle constituted as an umbrella fund with registered office address of 70, Sir John
Rogerson’s Quay, Dublin 2, Ireland.
The associates outlined above directly hold investments in subsidiary entities as detailed below, which are considered to be
related parties of the Group.
Other related party name
Place of
incorporation Relationship
% ownership by
associate Immediate parent entity Registered office address
Knightrider Lending
Designated Activity
Company
Ireland Subsidiary
of associate
100% Funding Circle European SME
Direct Lending Fund I
70, Sir John Rogerson’s Quay,
Dublin 2, Ireland
Throgmorton Lending
Designated Activity
Company
Ireland Subsidiary
of associate
100% Funding Circle UK SME Direct
Lending Fund I
70, Sir John Rogerson’s Quay,
Dublin 2, Ireland
The tables below provide summarised financial information for those associates that are material to the Group. The information
disclosed reflects the amounts presented in the financial statements of the relevant associates and not Funding Circle Holdings
plc’s share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity method,
including modifications for differences in accounting policy. While the Group holds less than 20% ownership in Funding Circle
UK SME Direct Lending Fund I the Group considers that it has significant influence over the entity through representation on its
Board and so continues to account for it as an associate instead of a trade investment.
The associates are sub-funds which invest in SME loans, and the Group is exposed to default and prepayment risk with respect
to the performance of the underlying loans in the associates, to the extent that the share of profit from associate may diminish.
The table below illustrates the Group’s maximum exposure to the investment in associate which represents the value on the
Group balance sheet. The value of the investment is derived from net asset value statements from the sub-funds; however, being
private these are not from observable market data, and therefore the fair value is considered to be aligned to the carrying value.
Summarised balance sheet (Group’s share)
Funding Circle
European
SME Direct
Lending Fund I
31 December
2021
£m
Funding Circle
UK
SME Direct
Lending Fund I
31 December
2021
£m
Funding Circle
European
SME Direct
Lending Fund I
31 December
2020
£m
Funding Circle
UK
SME Direct
Lending Fund I
31 December
2020
£m
Non-current assets 3.1 3.7 5.4 5.0
Current assets 0.6 0.5 0.8 0.3
Current liabilities — — — —
Non-current liabilities — — — —
Net assets 3.7 4.2 6.2 5.3
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 179
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2021
30. Interests in other entities continued
Reconciliation of associates’ total shareholders’ equity to carrying amount in Funding Circle Holdings plc’s consolidated
financial statements
Funding Circle
European
SME Direct
Lending Fund I
2021
£m
Funding Circle
UK
SME Direct
Lending Fund I
2021
£m
Funding Circle
European
SME Direct
Lending Fund I
2020
£m
Funding Circle
UK
SME Direct
Lending Fund I
2020
£m
Opening net assets as at 1 January 2021 26.3 64.1 35.1 35.6
Shares issued in the year — — 1.2 30.4
Profit for the year 2.0 3.1 (1.9) 0.9
Exchange differences (1.6) — 1.9 —
Other comprehensive income — — — —
Capital redemptions in the year (11.2) (15.4) (9.6) —
Dividends paid in the year — (0.5) (0.4) (2.8)
Closing net assets as at 31 December 2021 15.5 51.3 26.3 6 4.1
Group’s share in % 23.6% 8.3% 23.6% 8.3%
Group’s share of net assets as at 31 December 2021 3.7 4.2 6.2 5.3
Accounting policy alignment (0.2) (0.1) (0.2) (0.3)
Group’s carrying amount 3.5 4.1 6.0 5.0
Summarised statement of comprehensive income (Group’s share)
Funding Circle
European
SME Direct
Lending Fund I
2021
£m
Funding Circle
UK
SME Direct
Lending Fund I
2021
£m
Funding Circle
European
SME Direct
Lending Fund I
2020
£m
Funding Circle
UK
SME Direct
Lending Fund I
2020
£m
Gross income 0.5 0.5 0.7 0.5
Profit/(loss)for the year 0.6 0.3 (0.4) 0.1
Other comprehensive income/(loss) — — — —
Total comprehensive income/(loss) 0.6 0.3 (0.4) 0.1
Dividends received from associates — — 0.1 0.3
Capital redemptions received from associates 2.6 1.3 2.3 —
Interest in other entities
Stichting Derdengelden Funding Circle is not a direct or indirect subsidiary of Funding Circle Holdings plc but is an independent
special purpose foundation which is required in the Netherlands to safeguard borrower and investor funds and is consolidated as
it is controlled by the Group. The registered office address is Atrium, Strawinskylaan 3075, 4th Floor, 1077 ZX Amsterdam.
Funding Circle Holdings Employee Benefit Trust was established on 14 September 2018. The purpose of the trust is to facilitate
the acquisition of shares in the Company by, or for the benefit of, existing and future employees of the Company and Group
subsidiaries and is consolidated as it is controlled by the Group.
Consolidated structured entities: Small Business Origination Loan Trust 2019-3 DAC, Great Trinity Lending 1 DAC, Small Business
Lending Trust 2019-A, Small Business Lending Grantor Trust 2019-A, Small Business Lending Trust 2020-A and Small Business
Lending Grantor Trust 2020-A are consolidated structured warehouse and securitisation entities which either hold SME loan
assets in a warehouse or hold the portfolio of SME loans and issue bonds after securitisation has occurred.
The entities are bankruptcy remote special purpose vehicles and as such there is no requirement for the Group to provide
financial support to the entities. The entities’ activities are not governed by voting rights and the Group has assessed that it has
power over the entities based on the purpose and design of the entity and ability to direct the relevant activities of the entity, the
nature of the relationship with the entity and the size of its exposure to the variability of the returns from each entity.
As explained in note 17, the Group experiences credit risk and prepayment risk in relation to the SME loan assets net of bond
liabilities, and interest rate risk in relation to the warehouse loan facilities and floating rate bond liabilities which is partially
mitigated through the use of derivative financial instruments.
Financial statements
Funding Circle Holdings plc180
30. Interests in other entities continued
Interest in other entities continued
The principal activities of the Group’s most significant subsidiary undertakings are set out below. These are considered
significant in the context of the Group’s business, results and financial position.
Subsidiary undertakings Principal activity
Funding Circle Ltd Acts as facilitator and performs intermediary services in respect of all loans made through the
Funding Circle platform in the UK.
Funding Circle USA, Inc. The US operating subsidiary of Funding Circle. Acts as the administrator of the Funding Circle
platform in the US.
FC Marketplace, LLC Acts as originator and servicer of all loans made through the Funding Circle platform in the US.
FC Marketplace, LLC sells each loan it originates, on a servicing retained basis, to third party
institutional investors or to affiliates (e.g. Funding Circle Notes Program, LLC) on an arm’s length
basis. FC Marketplace, LLC initially holds loans for a two to three days cure period before selling
the loan on to the investor or affiliate.
Funding Circle Notes Program, LLC A special purpose bankruptcy remote entity which issues loan payment dependent debt
securities to accredited investors. It uses the proceeds to purchase a specific corresponding
loan made through the Funding Circle platform from FC Marketplace, LLC. The entity retains the
contractual rights to receive the cash flows from the loan assets it has purchased, but has
assumed a contractual obligation to pay those cash flows to the holders of the debt securities.
The eligibility criteria have been met to derecognise the loan assets and associated issued debt
securities as a pass-through arrangement under IFRS 9.
Funding Circle Focal Point Lending
Limited
Subsidiary via which CBILS loans are originated and which holds legal title to loans which are
held via trust structures for the beneficial ownership of institutional investors.
Funding Circle Eclipse Lending Limited Subsidiary via which RLS loans are originated and which holds legal title to loans which are held
via trust structures for the beneficial ownership of institutional investors.
Funding Circle Deutschland GmbH Operates the Funding Circle platform in Germany and services loans.
Funding Circle Nederland B.V. Operates the Funding Circle platform in the Netherlands and services loans.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 181
Company balance sheet
as at 31 December 2021
Note
31 December
2021
£m
31 December
2020
£m
Non-current assets
Investments in subsidiary undertakings 5 281.9 303.3
Loans due from subsidiary undertakings 7 — —
281.9 303.3
Current assets
Loans due from subsidiary undertakings 7 0.1 10.1
Trade and other receivables 6 0.3 1.0
Cash and cash equivalents 11 63.4 27.8
63.8 38.9
Total assets 345.7 342.2
Current liabilities
Trade and other payables 8 1.8 1.7
Total liabilities 1.8 1.7
Equity
Share capital 9 0.4 0.3
Share premium account 9 293.0 292.6
Share options reserve 19.1 13.6
Retained earnings 10 31.4 34.0
Total equity 343.9 340.5
Total equity and liabilities 345.7 342.2
The Company’s loss for the year was £4.4 million (2020: loss of £161.9 million).
The financial statements on pages 182 to 192 were approved by the Board and authorised for issue on 10 March 2022. They
were signed on behalf of the Board by:
Oliver White
Director
Company registration number 07123934
The notes on pages 185 to 192 form part of these financial statements.
Financial statements
Funding Circle Holdings plc182
Company statement of changes in equity
for the year ended 31 December 2021
Note
Share capital
£m
Share
premium
account
£m
Share options
reserve
£m
Retained
earnings
£m
Total equity
£m
Balance at 1 January 2020 0.3 292.3 11.9 192.7 497.2
Loss for the year 10 — — — (161.9) (161.9)
Transactions with owners
Transfer of share option costs — — (3.2) 3.2 —
Issue of share capital 9 — 0.3 — — 0.3
Employee share schemes – value of
employee services
— — 4.9 — 4.9
Balance at 31 December 2020 0.3 292.6 13.6 34.0 340.5
Loss for the year 10 — — — (4.4) (4.4)
Transactions with owners
Transfer of share option costs — — (1.8) 1.8 —
Issue of share capital 9 0.1 0.4 — — 0.5
Employee share schemes – value of
employee services — — 7.3 — 7.3
Balance at 31 December 2021 0.4 293.0 19.1 31.4 343.9
The notes on pages 185 to 192 form part of these financial statements.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 183
Company statement of cash flows
for the year ended 31 December 2021
Note
31 December
2021
£m
31 December
2020
£m
Net cash outflow from operating activities 11 (2.4) (3.5)
Investing activities
Loans advanced to subsidiary undertakings 7 (10.0) (29.0)
Loan repayment from subsidiary undertakings 7 19.8 20.7
Capital contribution to subsidiary undertakings 5 — (41.6)
Capital redemptions from subsidiary undertakings 5 27.3 —
Interest received 0.5 0.2
Net cash inflow/(outflow) from investing activities 37.6 (49.7)
Financing activities
Proceeds on the issue of shares from the exercise of share options 0.4 0.2
Net cash inflow from financing activities 0.4 0.2
Net increase/(decrease) in cash and cash equivalents 35.6 (53.0)
Cash and cash equivalents at the beginning of the year 27.8 80.8
Cash and cash equivalents at the end of the year 11 63.4 27.8
The notes on pages 185 to 192 form part of these financial statements.
Financial statements
Funding Circle Holdings plc184
Notes forming part of the Company financial statements
for the year ended 31 December 2021
1. Significant accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that
Act, the separate financial statements have been prepared in accordance with UK-adopted International Accounting Standards
and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The
Company is a public company limited by shares and registered, incorporated and domiciled in England and Wales. The address
of its registered office is given on page 194.
The financial statements have been prepared on the historical cost basis except for certain financial instruments that are carried
at fair value through profit and loss (“FVTPL”). The principal accounting policies adopted are the same as those set out in note
1 to the consolidated financial statements except as noted below. These policies have been consistently applied to all the years
presented, unless otherwise stated.
The principal activities of the Company and the nature of the Company’s operations are as a holding company for a global SME
loan platform.
As permitted by the exemption in section 408 of the Companies Act 2006, the profit and loss account of the Company is
The financial statements are prepared on a going concern basis as the Directors are satisfied that the Group has the resources
to continue in business for the foreseeable future (which has been taken as 12 months from the date of approval of the
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment (see note 5 for further details).
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements requires the Company to make estimates and judgements that affect the application of
policies and reported amounts. Where a significant risk of materially different outcomes exists due to management assumptions
or sources of estimation uncertainty, this will represent a key source of estimation uncertainty. Estimates and judgements are
continually evaluated and are based on experience and other factors, including expectations of future events that are believed to
be reasonable under the circumstances. Although these estimates are based on management’s best knowledge of the amount,
event or actions, actual results ultimately may differ from those estimates. There were no critical accounting judgements in the
year ended 31 December 2021.
Key sources of estimation uncertainty
Impairment of investments in subsidiary undertakings (note 5)
The carrying value of investment in subsidiary undertakings is reviewed for impairment on an annual basis. The recoverable
amount is determined based on the higher of value in use and fair value less cost to sell, with value in use being applied for this
assessment where an indicator of impairment is identified. The use of this method requires the estimate of future cash flows
expected to arise from the continuing operation of the subsidiaries and the choice of a suitable discount rate in order to calculate
the present value. Actual outcomes could vary significantly from these estimates.
No impairment was recognised in relation to Funding Circle USA, Inc. in the year ended 31 December 2021, however, the investment
remains subject to estimation uncertainty and its value could materially diverge from management’s estimate. The Group
prepares a five-year management plan for its operations, which is used in the value-in-use calculation. For compound annual
growth rates the majority of the sensitivity is in the growth rate applied to the fifth year which is forecast out into perpetuity.
fifth-year income growth of 25% and fifth-year cost growth of 16%;
pre-tax discount rate of 14.5%;
income beyond the five-year period is extrapolated using an estimated growth rate of 2.0%; and
the impact of transfer pricing arrangements within the Group are considered and assumed to be cash settled further
supporting cash flows of the US business.
The above assumptions are based on historical trends and future market expectations.
The key assumptions were stressed and the estimated value in use was not sensitive to these for the year ended 31 December
2021, with sufficient headroom above the carrying value, even under severe stress assumptions.
In the prior year ended 31 December 2020, following the impact of Covid-19 and a change in the investments’ income and cost
forecasts, an event indicating the possibility of impairment was identified and an impairment review undertaken. Impairment
was identified in relation to the investment in the Funding Circle USA, Inc. CGU as the carrying value exceeded the value in use
determined by this impairment assessment. The investment was impaired by £155.9 million to £88.2 million.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 185
Notes forming part of the Company financial statements continued
for the year ended 31 December 2021
2. Financial risk management
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.
The risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk
limits and controls, and to monitor risks and ensure any limits are adhered to. The Company’s activities are reviewed regularly
and potential risks are considered.
Risk factors
The Company has exposure to the following risks from its use of financial instruments:
credit risk;
liquidity risk;
market risk (including currency risk, interest rate risk and other price risk); and
foreign exchange risk.
Principal financial instruments
The principal financial assets and liabilities of the Company, from which financial instrument risk arises, are as follows:
loans due from related undertakings;
trade and other receivables;
cash and cash equivalents; and
trade and other payables.
Categorisation of financial assets and financial liabilities
The table shows the carrying amounts and fair values of financial assets and financial liabilities by category as at
Carried at amortised cost Carried at fair value
Carrying
amount
£m
Fair value
£m
Based on
market
derived data
£m
Based on
individual
valuation
parameters
£m
Assets
Loans due from related undertakings 0.1 0.1 — —
Trade and other receivables 0.1 0.1 — —
Cash and cash equivalents 14.1 14.1 49.3 —
14.3 14.3 49.3 —
Liabilities
Trade and other payables (0.1) (0.1) — —
(0.1) (0.1) — —
IFRS 13 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair
value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement.
Disclosure of fair value measurements by level is according to the following fair value measurement hierarchy:
level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date;
level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either
directly or indirectly; and
level 3 inputs are unobservable inputs for the assets or liabilities.
The Company’s financial assets measured at fair value are all categorised as level 1.
Financial statements
Funding Circle Holdings plc186
2. Financial risk management continued
Categorisation of financial assets and financial liabilities continued
The table shows the carrying amounts and fair values of financial assets and financial liabilities by category as at
Carried at amortised cost Carried at fair value
Carrying
amount
£m
Fair value
£m
Based on
market
derived data
£m
Based on
individual
valuation
parameters
£m
Assets
Loans due from related undertakings 10.1 10.1 — —
Trade and other receivables 0.9 0.9 — —
Cash and cash equivalents 13.4 13.4 14.4 —
24.4 24.4 14.4 —
Liabilities
Trade and other payables (0.2) (0.2) — —
(0.2) (0.2) — —
Financial instruments measured at amortised cost
Financial assets and liabilities measured at amortised cost, rather than fair value, include loans due from subsidiary
undertakings, cash and cash equivalents, trade and other receivables and trade and other payables. Due to their short-term
nature, the carrying value of the above items approximates their fair value.
The fair value of cash and cash equivalents at 31 December 2021 and 31 December 2020 approximates the carrying value.
Credit risk is mitigated as cash and cash equivalents are held with reputable institutions.
Financial risk factors
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial asset fails to meet its
contractual obligations, and arises principally from the Company’s receivables from related undertakings and cash and cash
equivalents held at banks.
The Company’s maximum exposure to credit risk by class of financial asset is as follows:
31 December
2021
£m
31 December
2020
£m
Non-current
Loans due from related undertakings — —
Current
Loans due from related undertakings 0.1 10.1
Trade and other receivables:
– Amounts due from related undertakings 0.1 0.9
Cash and cash equivalents 63.4 27.8
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities
when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Company’s position.
The Company’s liquidity position is monitored and reviewed on an ongoing basis by the Directors.
The amounts disclosed in the below tables are the contractual undiscounted cash flows.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 187
Notes forming part of the Company financial statements continued
for the year ended 31 December 2021
2. Financial risk management continued
Financial risk factors continued
Liquidity risk continued
The maturity analysis of financial assets and liabilities at 31 December 2021 and 31 December 2020 is as follows:
At 31 December 2021
Less than
3 months
£m
Between
3 months
and 1 year
£m
Between 1
and 5 years
£m
Over
5 years
£m
Financial assets
Trade and other receivables 0.1 — — —
Cash and cash equivalents 63.4 — — —
Loans due from related undertakings 0.1 — — —
63.6 — — —
Financial liabilities
Trade and other payables (0.1) — — —
(0.1) — — —
At 31 December 2020
Less than
3 months
£m
Between
3 months
and 1 year
£m
Between 1
and 5 years
£m
Over
5 years
£m
Financial assets
Trade and other receivables 0.9 — — —
Cash and cash equivalents 27.8 — — —
Loans due from related undertakings 10.1 — — —
38.8 — — —
Financial liabilities
Trade and other payables (0.2) — — —
(0.2) — — —
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
prices. The Company’s market risk arises from open positions in interest-bearing assets and liabilities, to the extent that these
are exposed to general and specific market movements.
a) Other price risk
The Company is not exposed to market risk with respect to financial instruments as it does not hold any marketable equity securities.
b) Cash flow and fair value interest rate risk
Interest on cash and cash equivalent balances is subject to movements in base rates. The Directors monitor interest rate risk and
note that while interest rates have been at a historical low for some time, recent rate rises have been observed. A 0.5% increase
in base rates could increase the annual interest earned by c.£0.3 million (2020: c.£0.1 million).
c) Sensitivity analysis
IFRS 7 requires disclosure of sensitivity analysis for each type of market risk to which the entity is exposed at the reporting date
showing how profit or loss and equity would have been affected by changing the relevant risk variables that were reasonably
possible at that date.
As discussed above, the Company does not have significant exposure to interest rate risk, cash flow risk or other price risk and
therefore no sensitivity analysis for those risks has been disclosed.
d) Foreign exchange risk
The Company has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.
Foreign exchange risk is disclosed in note 17 to the consolidated financial statements.
Financial statements
Funding Circle Holdings plc188
2. Financial risk management continued
Capital management
The Company considers its capital to comprise equity share capital, share premium, share options reserve and
retained earnings.
The Directors’ objective when managing capital is to safeguard the Company’s ability to continue as a going concern in order to
provide returns for the shareholders and benefits for other stakeholders.
The Company is not subject to any externally imposed capital requirements.
The Directors monitor a number of KPIs at both the Company and individual subsidiary level on a monthly basis. As part of
the budgetary process, targets are set with respect to operating expenses in order to effectively manage the activities of the
Company. Performance is reviewed on a regular basis and appropriate actions are taken as required. These internal measures
indicate the performance of the business against budget/forecast and confirm that the Company has adequate resources to
meet its working capital requirements.
3. Company loss for the year
The Company made a comprehensive loss for the year of £4.4 million (2020: comprehensive loss of £161.9 million).
4. Employees
The Company had no employees during the current or prior year other than Directors who numbered 10 (2020: 10). The Company
did not operate any pension schemes during the current or preceding year. Directors received emoluments in respect of their
services to the Company during the year of £1.3 million (2020: £1.2 million). For further information see the Remuneration Report
on page 109.
5. Investments in subsidiary undertakings
2021
£m
2020
£m
Balance at 1 January 303.3 416.2
Capital contribution regarding employee services in subsidiaries 5.9 4.1
(Capital reduction)/additions (27.3) 41.6
Impairment — (158.6)
Balance at 31 December 281.9 303.3
Investments in subsidiary undertakings, which are listed in note 30 of the Group financial statements, are all stated at cost less
any provision for impairment.
During the year the Company made capital contributions in the form of cash investments of £nil (2020: £2.0 million), £nil
respectively and received £3.4 million (2020: £nil) from Funding Circle Global Partners Limited and £23.9 million (2020: £nil)
In addition to the above, the Company recognised a capital contribution of £5.9 million (2020: £4.1 million) representing the
service cost for the employees of its subsidiaries, under the Company’s share option schemes.
No impairment was recognised in the year ended 31 December 2021 in relation to investment in subsidiary undertakings.
investment in Funding Circle USA, Inc. to a value of £88.2 million, £2.0 million in relation to the Company’s investment in Funding
Circle CE GmbH to a value of £nil and £0.7 million in relation to the Company’s investment in Funding Circle Midco Limited to a
value of £nil as the value in use calculated was below the carrying amount.
The cumulative amount of impairment losses in relation to investment in subsidiaries is £236.1 million (2020: £236.1 million).
6. Trade and other receivables
31 December
2021
£m
31 December
2020
£m
Amounts due from related undertakings 0.1 0.9
Prepayments 0.2 0.1
0.3 1.0
The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 189
Notes forming part of the Company financial statements continued
for the year ended 31 December 2021
7. Loans due from subsidiary undertakings
31 December
2021
£m
31 December
2020
£m
Funding Circle USA, Inc. — 10.0
Stichting Derdengelden Funding Circle 0.1 0.1
Current portion 0.1 10.1
Amount due from Group undertakings
During 2021, the Company operated a loan facility agreement with Funding Circle Ltd (subsidiary company). Under the terms of
the agreement, the Company provided an unsecured sterling revolving credit facility of a total principal amount not exceeding
£20.0 million (2020: £20.0 million) to Funding Circle Ltd which is repayable at the end of the facility term of five years on
During the year the Company has provided £5.0 million (2020: £19.0 million) of additional funding under the facility agreement.
Total interest income of £nil (2020: £nil) has been recognised in the Company statement of comprehensive income.
In the current year, Funding Circle Ltd settled certain amounts due under the intercompany loan obligations cumulative of
interest of £5.0 million (2020: £19.0 million) with the Company. £5.0 million of this was settled via cash (2020: £10.0 million).
During the year the Company operated a revolving credit facility to Funding Circle CE GmbH of up to €2.0 million (2020: up to
€2.0 million). Any drawn amount under the facility bears an interest of 3.5% above the base rate of the Bank of England and is
repayable at the end of the facility term of five years on 18 July 2024. The facility was drawn by £nil (2020: £nil) at the balance
sheet date. Funding Circle CE GmbH repaid £0.8 million of the facility during 2020.
During the year, the Company continued to operate an unsecured sterling revolving credit facility for £1 million with its subsidiary
(Funding Circle Global Partners Limited (“FCGPL”)). Under the agreement, any drawn amount under the facility bears an interest
of 3.5% above the base rate of the Bank of England and is repayable with the principal amount at the end of the facility term of
five years on 30 June 2022. The facility was drawn by £nil (2020: £nil) at the balance sheet date. The carrying amount of this
receivable approximates to its fair value.
During the year, the Company continued to operate a term loan facility to Funding Circle USA, Inc. of up to £7.7 million. Any drawn
amount under the facility bears an interest of 3.5% above the base rate of the Bank of England and is repayable at the end of the
facility term of five years on 13 January 2025. In addition, the Company continued to provide a revolving credit facility to Funding
Circle USA, Inc. of up to $3.0 million. Any drawn amount under the facility bears an interest of 3.5% above the base rate of the
Bank of England and is repayable at the end of the facility term of five years on 27 January 2025.
In the current year, Funding Circle USA, Inc. settled certain amounts due under the intercompany loans cumulative of interest
recognised in the Company statement of comprehensive income. The facilities were drawn by £nil (2020: £7.7 million) and
During the year, the Company provided a new revolving credit facility to Funding Circle USA, Inc. of up to £10.0 million. Any drawn
amount under the facility bears an interest of 3.5% above the base rate of the Bank of England and is repayable at the end of the
facility term of five years on 21 January 2026.
During the year, the Company has provided £5.0 million of additional funding under the facility agreement. Funding Circle USA,
Inc. settled certain amounts due under the intercompany loan obligations cumulative of interest of £5.0 million. The facility was
drawn by £nil at the balance sheet date.
During the prior year the Company provided a revolving credit facility to Funding Circle Canada Inc. of up to £2.1 million. The
facility was undrawn at the balance sheet date as the subsidiary was dissolved in 2020. In 2019 the Company impaired this loan
balance in full under the expected credit loss model. During 2020 the loan was repaid in full and the impairment was reversed as
a credit of £0.9 million to profit and loss.
Financial statements
Funding Circle Holdings plc190
8. Trade and other payables
31 December
2021
£m
31 December
2020
£m
Accruals 1.3 1.1
Taxes and social security costs 0.4 0.4
Other creditors — 0.2
Amounts due to related undertakings 0.1 —
1.8 1.7
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
9. Share capital and share premium
The movement on these items is disclosed in notes 18 and 19 to the consolidated financial statements.
10. Retained earnings
£m
At 1 January 2020 192.7
Transfer of share option costs 3.2
Loss for the year (161.9)
At 31 December 2020 34.0
Transfer of share option costs 1.8
Loss for the year (4.4)
At 31 December 2021 31.4
11. Notes to the Company statement of cash flows
Cash outflow from operating activities
31 December
2021
£m
31 December
2020
£m
Loss before taxation (4.4) (161.9)
Adjustments for
Interest receivable (0.5) (0.2)
Non-cash employee benefits expense – share-based payments 1.5 1.1
Impairments (note 5 and note 7) — 158.6
Reversal of prior year impairment charge — (0.9)
Changes in working capital
Movement in trade and other receivables 0.7 (0.6)
Movement in trade and other payables 0.3 0.4
Net cash outflow from operating activities (2.4) (3.5)
Cash and cash equivalents
2021
£m
2020
£m
Balance at 1 January 27.8 80.8
Cash flow 35.6 (53.0)
Balance at 31 December 63.4 27.8
These comprise cash held by the Company, short-term bank deposits with an original maturity of three months or less and
money market funds. The carrying amount of cash balances approximates their fair value. As at 31 December 2021, money
market funds totalled £49.3 million (2020: £14.4 million).
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 191
Notes forming part of the Company financial statements continued
for the year ended 31 December 2021
12. Related parties
Amounts owed by related parties Amounts owed to related parties
31 December
2021
£m
31 December
2020
£m
31 December
2021
£m
31 December
2020
£m
Short-term payables/receivables
Funding Circle Ltd — 0.8 0.1 —
Funding Circle USA, Inc. 0.1 0.1 — —
Intercompany loans
Funding Circle USA, Inc. — 10.0 — —
Stichting Derdengelden Funding Circle 0.1 0.1 — —
0.2 11.0 0.1 —
During the year, the Company received payment of expenses for amounts of £1.2 million (2020: received payment of expenses
for amounts of £0.4 million) from Funding Circle Ltd.
During the year the Company received return of capital of £3.4 million (2020: £nil) from Funding Circle Global Partners Limited
and £23.9 million (2020: £nil) from Funding Circle USA, Inc.
As at the year end, the Company was owed a cumulative amount of £nil (2020: £10.0 million) and £0.1 million (2020: £0.1 million)
from loans with Funding Circle USA, Inc. and Stichting Derdengelden Funding Circle.
See note 14 in relation to remuneration of key management personnel.
13. Parent Company guarantee – exemption from audit for subsidiary companies
The following UK entities, all of which are 100% owned by the Group, are not subject to an audit by virtue of section 479A of the
Companies Act 2006 relating to subsidiary companies:
Company Registration number
Funding Circle Asset Finance Limited 07832868
Funding Circle BB Limited 12593368
Funding Circle Eclipse Lending Limited 12570773
Funding Circle Focal Point Lending Limited 12407296
Funding Circle Global Partners Limited 10554628
Funding Circle Midco Limited 11793162
Funding Circle Property Finance Limited 08896582
Funding Circle Horizon Lending Limited 13451185
Funding Circle Trustee Limited 07239092
The Company will guarantee the debts and liabilities of the above UK subsidiary undertakings at the balance sheet date in
accordance with section 479C of the Companies Act 2006. The Company has assessed the probability of loss under the
guarantee as remote.
The Company will guarantee the debt and liabilities of the European subsidiary Funding Circle CE GmbH and therefore meets the
requirements of section 264(3) HGB and the entity is not subject to audit by virtue of this guarantee. The Company has assessed
the probability of loss under the guarantee as remote.
The following UK entity, which is 100% owned by the Group, is exempt from the requirement to prepare accounts by virtue of
section 394A and section 448A of the Companies Act 2006 relating to the individual accounts of dormant subsidiaries:
Company Registration number
Made To Do More Limited 10575978
14. Remuneration of key management personnel
The remuneration of key management personnel is disclosed in note 26 to the consolidated financial statements.
15. Ultimate controlling party
In the opinion of the Directors, the Group does not have a single ultimate controlling party.
Financial statements
Funding Circle Holdings plc192
Glossary
Alternative performance measures
The Group uses a number of alternative performance measures (“APMs”) within its financial reporting. These measures are not
defined under the requirements of IFRS and may not be comparable with the APMs of other companies. The Group believes
these APMs provide stakeholders with additional useful information in providing alternative interpretations of the underlying
performance of the business and how it is managed and are used by the Directors and management for performance analysis
and reporting. These APMs should be viewed as supplemental to, but not as a substitute for, measures presented in the financial
statements which are prepared in accordance with IFRS.
APM
Closest equivalent
IFRS measure
Adjustments to reconcile
to IFRS measure Definition
Income statement
Adjusted EBITDA EBITDA, while not defined
under IFRS, is a widely
accepted profit measure.
Refer to note 3. Profit/loss before finance income and costs, taxation,
depreciation and amortisation (“EBITDA”) and
additionally excludes share-based payment charges
and associated social security costs, foreign exchange
and exceptional items.
Investment
operating AEBITDA
EBITDA, while not defined
under IFRS, is a widely
accepted profit measure.
Refer to Finance Review. Investment AEBITDA refers to investment income,
investment expense and fair value adjustments and
operating AEBITDA represents AEBITDA excluding
investment AEBITDA.
Net investment
income
Net income. Refer to Finance Review. Net investment income represents investment income
less investment expense.
Exceptional items None. Refer to note 5. Items which the Group excludes from adjusted EBITDA
in order to present a measure of the Group’s
performance. Each item is considered to be significant
in nature or size and is treated consistently between
periods. Excluding these items from profit metrics
provides the reader with additional performance
information on the business as it is consistent with how
information is reported to the Board and GLT.
Cash flow
Free cash flow Cash generated from
operating activities.
Refer to Finance Review. Net cash flows from operating activities less the cost of
purchasing intangible assets, property, plant and
equipment, lease payments and interest received. It
excludes the warehouse and securitisation financing
and funding cash flows.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2021 193
Shareholder and Company information
Shareholder information
Receiving shareholder information by email:
You can opt to receive shareholder information from us by
email rather than by post. We will then email you whenever we
add shareholder communications to the Company website. To
set this up, please visit www.shareview.co.uk and register for
electronic communications (“e-comms”).
If you subsequently wish to change this instruction or revert to
receiving documents or information by post, you can do so by
contacting the Company’s registrars at the address shown in
the Company information opposite. You can also change your
communication method back to post by logging in to your
Shareview account and going to “update my communication
preferences” within the “Quick links” section.
The registrars can also be contacted by telephone on
+44 (0)371 384 2030 (non-UK callers +44 (0)121 415 7047)
or +44 (0)371 384 2255 (text phone). Calls to this number
cost no more than a national rate call from any type of phone
or provider. These prices are for indication purposes only; if
in doubt, please check the cost of calling this number with
your phone line provider. Lines are open 8.30 a.m.–5.30 p.m.,
Mon-Fri excluding public holidays in England and Wales.
Shareholder enquiries
If you have any queries relating to your shareholding, dividend
payments or lost share certificates, or if any of your details
change, please contact the Company’s registrars by visiting
www.shareview.co.uk or by using the contact details above.
Annual shareholder calendar
Final results announced 10 March 2022
Annual Report published 8 April 2022
Annual General Meeting 9 June 2022
Interim Report
As part of our e-comms programme, we have decided not to
produce a printed copy of our Interim Report. We will instead
publish the report on our website. It is expected that this year’s
report will be available on our website in September.
Company information
Directors
Executive Directors
L Jacobs (Chief
Executive Officer)
O J White (Chief
Financial Officer)
Non-Executive Directors
A D Learoyd (Chair)
S Desai CBE (Founder)
J E Daniels
G Gopalan
H W Nelis
N A Rimer
H Beck
M J W King
Company Secretary
L K Vernall
Independent auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London SE1 2RT
Bankers
Barclays Bank UK plc
1 Churchill Place
London E14 5HP
Santander UK plc
2 Triton Square
Regent’s Place
London NW1 3AN
Lloyds Banking Group plc
25 Gresham Street
London EC2V 7AE
Solicitors
Freshfields Bruckhaus
Deringer LLP
65 Fleet Street
London EC4Y 1HS
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Brokers
Goldman Sachs
International
25 Shoe Lane
London EC4A 4AU
Numis Securities Limited
The London Stock
Exchange Building
10 Paternoster Square
London EC4M 7LT
Registered office
Registered number
07123934
Cautionary statement
Certain statements included in our 2021 Annual Report, or incorporated by reference to it, may constitute “forward-looking
statements” in respect of the Group’s operations, performance, prospects and/or financial condition.
Forward-looking statements involve known and unknown risks and uncertainties because they are beyond the Group’s
control and are based on current beliefs and expectations about future events about the Group and the industry in which the
Group operates.
No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of
risks and uncertainties facing the Group. If the assumptions on which the Group bases its forward-looking statements change,
actual results may differ from those expressed in such statements. The forward-looking statements contained in this report
reflect knowledge and information available at the date of this Annual Report and the Group undertakes no obligation to update
these forward-looking statements except as required by law.
This report does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase, any
shares or other securities in the Company, and nothing in this report should be construed as a profit forecast.
Financial statements
Funding Circle Holdings plc194
CBP011636
Funding Circle Holdings plc’s commitment to environmental issues is reflected in this
Annual Report, which has been printed on Amadeus Silk, an FSC
®
certified material.
This document was printed by Pureprint Group using its environmental print
technology, with 99% of dry waste diverted from landfill, minimising the impact
®
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Both the printer and the paper mill are registered to ISO 14001.
Funding Circle Holdings plc
71 Queen Victoria Street
London
EC4V 4AY
corporate.fundingcircle.com
Funding Circle Holdings plc
Funding Circle Holdings plc