Icg-longbow Regulatory News (LBOW)

ICG-Longbow Senior Secured UK Property Debt Investments Limited

Annual Report And Consolidated Financial Statements

For the year ended 31 January 2020

ICG-Longbow Senior Secured UK Property Debt Investments Limited (the "Company") is pleased to announce the release of its Annual Financial Statements for the year ended 31 January 2020 which will shortly be available on the Company's website at (www.lbow.co.uk) where further information on the Company can also be found.

All capitalised terms are defined in the Glossary of Capitalised Defined Terms unless separately defined.

Financial Highlights

Portfolio

£128.6 Million(1) committed in ten loans as at 31 January 2020

£105.6 Million invested in ten loans as at 6 May 2020

Performance

(1) The difference between this amount and principal advanced to date of £120,769,516 as disclosed in note 5, represents outstanding amounts to be drawn by borrowers under existing facility agreements.

(2) These are Alternative Performance Measures, refer to the Alternative Performance Measures section below for details.

Chairman's Statement

Introduction

On behalf of the Board, it is my pleasure to present the seventh Annual Report for the Group, for the year ended 31 January 2020.

Since the Group's year end, a pandemic has been declared following the outbreak and rapid spread of the novel coronavirus ("Covid-19") throughout the world. In response, the UK entered a Government-mandated lockdown on 23 March 2020, for a minimum period of six weeks, closing down substantial parts of the economy including the retail, leisure and hospitality sectors in particular. While the Government has put in place an unprecedented economic support package to lessen the impact on businesses and individuals, the duration and the full impact of the lockdown and longer term restrictions is unknown at the date of this report.

The Board and the Investment Adviser have considered the potential impact of Covid-19 on the Group and the portfolio and ran various stress tests as discussed in the Viability Statement.

However, the Board is satisfied the Group is entering this period of great uncertainty in a strong financial position, with ample cash liquidity, no debt and a well-diversified portfolio of first ranking mortgage loans which carry a weighted average LTV ratio of 68.2% as at 6 May 2020.

The Directors consider that any decisions made in response to the impact of Covid-19 are non-adjusting events that arose after the reporting date. Except where indicated, the commentary in this Annual Report relates to the period ending 31 January 2020.

Given the challenging economic and political backdrop in the UK during 2019, the Board was pleased with the Group's performance with a marked improvement in profitability and full dividend cover restored. The investment portfolio was refreshed and grew modestly, as the exit of legacy loans and reinvestment of capital into more remunerative and longer-dated loans allowed the Group to grow revenues and move to what provides, on a pro forma basis, a fully covered dividend with the opportunity for some medium-term NAV growth.

Total income for the financial year to 31 January 2020 was £8.5 million (£7.6 million for year to 31 January 2019) producing earnings per share, after costs, of 5.04 pence (2019: 4.36 pence). This increase reflects the strength of returns generated from the new investments concluded during the year, combined with reinvestment or repricing of certain of the Group's legacy loans which previously carried lower coupon rates.

Portfolio

At 31 January 2020, the portfolio comprised ten loans, of which four represented new transactions completed during the reporting period. These new transactions, totalling circa £58 million of commitments, carry a weighted average underwritten IRR of 9.4% and demonstrate the Group's ability to continue to secure high quality and remunerative investments for shareholders.

During the year the Board considered an investment in the most recent ICG-Longbow private fund. However, given the drawdown profile and duration of that fund compared to direct investment opportunities at the time, it was felt the direct investment opportunities offered shareholders a superior risk return profile and a more balanced portfolio overall. As such no fund investment was concluded.

The Group made periodic drawdowns on its revolving credit facility, of up to £10 million during the year (of which £5.2 million was outstanding at the year-end), which allowed the Group to commit to new investments and structure loans with follow-on tranches, in the absence of loan redemptions or equity fundraising. Over the year this minimised cash drag and was modestly accretive to shareholders.

The weighted average maturity of the portfolio at year end was 1.85 years, albeit the duration of new loans completed during the period and after the year end at 3.7 years on a weighted average basis, lays the foundations for income generation and dividend sustainability in the longer term.

Following year end, the Group completed one new loan, with an overall funding commitment of £7.8 million, secured by an industrial property in the North West, while receiving prepayment of the Meadow loan in the amount of £21.5 million following a sale of the underlying property. The latter was accompanied by exit and prepayment fees of £0.7 million and in the Board's view, supports the Group's strategy of extending strongly performing loans where possible, in order to secure refreshed coupon protection periods and benefit from the corresponding prepayment fees if redeemed early, as in this case.

While concluding a robust level of investment, the Group was highly focused on maintaining underwriting standards during what at times was a challenging market in which to lend. The Investment Adviser has continued to steer clear of the troubled shopping centre market as it sought to avoid exposing shareholders to the ongoing uncertainties facing that sector. Although two investments saw challenges during the period, with the BMO loan reaching the end of its contractual term and the Quattro loan falling behind on its interest payments, in each of these cases there is line of sight to matters being regularised and the Board does not believe any shareholder capital is at risk.

Dividend

As highlighted in our previous report, the Company has in prior periods supplemented the earnings generated from the portfolio with the release of historic profits in order to maintain its dividend. When these retained profits were fully utilised, the Board elected to continue to maintain the 1.50 pence per share quarterly dividend by supplementing ongoing earnings with payments from capital. The dividend paid from capital amounted to 0.96 pence during the year.

With all legacy lower-yielding loans having now run off and the portfolio consisting exclusively of higher returning and accretive investments, the dividend is now fully covered on a pro forma basis and, subject to the impacts of Covid-19, the Board anticipates the dividend will remain fully covered from profits in the near term, with the additional prospect of some medium-term NAV growth in line with the Company's investment objectives.

Governance and Management

During the year, the Board paid close attention to the updated recommendations in the AIC Code of Corporate Governance, published in February 2019.

Additionally, the Board spent considerable time this year on succession planning given all of the Directors have been in place since November 2012. The Board has an agreed plan in place for the orderly retirement of existing Directors and to provide for the regular refreshment of skills and talent, alongside the need to improve diversity. This is considered further in the Corporate Governance Report.

Post Year End Trading

Shareholders will be interested in the Group's trading experience and in particular an update on rent and interest collection across its portfolio during the first quarter of the new financial year.

The majority of the Group's investments are secured by properties or portfolios backed by highly diversified cashflows from commercial and residential tenants. Across these investments, and despite the unprecedented market conditions, the Group's borrowers as of 4 May 2020 report that rent collection for these properties has generally been robust and, as a result, interest payments have been made in full or (in one case where payment is not yet due) sufficient rents have been collected to make the interest payment.

Three of the investments are secured by operational assets or are in sectors which have been adversely affected by the ongoing UK lockdown. These investments account for approximately 45% of quarterly interest payments in aggregate. In these cases, the Group as a responsible lender has chosen to defer or capitalise the interest payments due in order to assist the underlying borrowers with working capital management during the lockdown period. The amounts do not materially affect portfolio LTV or expected returns. The Investment Adviser has conducted additional robust Covid-19 stress testing and has line of sight to resolution of these arrears in each case. The Group has a satisfactory equity cushion on all of its investments and does not expect any shortfall in either total interest receipts during the term of each loan or to any capital repayments by loan maturity.

Outlook

Following year end, the Group completed a new £7.8 million commitment secured by an industrial property and drew down a further £2.9 million on committed capital expenditure facilities. The repayment of the Meadow loan, together with exit and prepayment fees, allows for reinvestment, on a suitably conservative basis, into longer term loans which we expect will be accretive to shareholders and again add further duration to the loan profile.

As a consequence of the global Covid-19 pandemic, economic forecasts for 2020 are at the time of writing gyrating wildly almost on a daily basis with no clear consensus on the extent of the negative impact on UK GDP for 2020 or the speed of recovery. It is clear that certain sectors such as the retail, travel and leisure industries will be disproportionately impacted. Others such as healthcare, distribution and IT productivity tools may prove to be highly resilient. Based on our understanding of the performance of our borrowers and the industries in which they operate we believe our portfolio of assets remains well secured with an adequate margin of equity to withstand the current economic downturn and the worst sector-specific effects arising from the health emergency.

During the year, several shareholders expressed eagerness to see the Company grow, albeit noting the challenging fundraising environment given political and economic uncertainty experienced during the past financial year before the Covid-19 outbreak reached the UK shores. Obviously, the Board's primary focus now has shifted to the protection of capital and the maintenance of current revenues.

While the Company's shares returned to a premium at year end, the market disruption caused by Covid-19 has led to the shares trading at a discount to NAV for a prolonged period, which is likely to fetter the opportunity to undertake further share issuance in the near to medium term. While the Board and Investment Adviser continue to share an ambition for growth, should new issuance not be possible the Board will continue to seek to manage the Company in the most effective manner for shareholders as a whole.

The Group's liquidity position remains strong, and as of 6 May 2020 the Group has cash of approximately £15 million and undrawn credit facilities of £25 million, giving total available liquidity of approximately £40 million. The Investment Adviser has seen a noticeable increase in pipeline enquiries over the past three weeks, and on a cautious basis is continuing to explore attractive new lending opportunities in line with the Group's investment parameters.

The Board continues to believe the Company represents an attractive investment opportunity for shareholders, providing a highly defensive and stable return at levels significantly above the expected performance of direct property investment.

Jack Perry

Chairman

6 May 2020

Financial Summary

Performance

· Total income excluding prepayment fees of £8.48 million (31 January 2019: £7.64 million).

· Profit after tax of £6.11 million for the year ended 31 January 2020 (31 January 2019: £5.26 million).

· Earnings per share of 5.04 pence (31 January 2019: 4.36 pence).

· NAV of £119.12 million as at 31 January 2020 (31 January 2019: £120.28 million).

· Total dividends paid or declared for the year ended 31 January 2020 of 6.00 pence per share (31 January 2019: 6.00 pence per share).

Dividend

· Total dividends paid or declared for the year ended 31 January 2020 of 6.00 pence per share (31 January 2019: 6.00 pence per share), made up as follows:

o Interim dividend of 1.5 pence per share paid in respect of quarter ended 30 April 2019

o Interim dividend of 1.5 pence per share paid in respect of quarter ended 31 July 2019

o Interim dividend of 1.5 pence per share paid in respect of quarter ended 31 October 2019

o Interim dividend of 1.5 pence per share paid in respect of quarter ended 31 January 2020

Investment Portfolio

· As at 31 January 2020, the Group's investment portfolio comprised ten loans with an aggregate principal balance of £120.77 million, representing 101.39% of the shareholders' equity (31 January 2019: 9 loans with aggregate principal balance of £107.22 million, representing 89.14% of the shareholders' equity).

· The weighted average coupon on drawn capital was 7.51% (31 January 2019: 6.23%).

· The weighted average IRR on new investments was 9.4%.

· The portfolio weighted average LTV was 65.8% (31 January 2019: 62.2%), reflecting changes to the composition of the loan portfolio.

· The portfolio weighted average residual term was 1.85 years, of which, on average, 1.01 years remains income protected (31 January 2019: residual term 0.96 years, income protected term 0.42 years).

· As a result of new investment activity and redemptions after the financial year end, the Group's portfolio as at 6 May 2020 comprises ten loans with an aggregate principal balance of £106 million.

· The portfolio weighted average LTV as at 6 May 2020 is 68.2%, the weighted average residual loan term is 2.06 years, and the weighted average loan coupon is 7.48%.

· Despite the unprecedented market conditions post year end as a result of Covid-19, the Group's borrowers report that rent collection has generally been robust and sufficient to make interest payments. The Directors do not consider there to have been any defaults or incurred loss events on loan balances as at 6 May 2020.

· As at 6 May 2020, the Group has £nil outstanding on its revolving credit facility.

For further information, please contact:

Corporate Summary

Investment Objective

The investment objective of the Group, as approved by the shareholders of the Company, is "to construct a portfolio of UK real estate debt related investments predominantly comprising loans secured by first ranking fixed charges against commercial property investments, with the aim of providing shareholders with attractive, quarterly dividends, capital preservation and, over the longer term, a degree of capital appreciation."

Structure

The Company is a non-cellular company limited by shares incorporated in Guernsey on 29 November 2012 under the Companies Law. The Company's registration number is 55917, and it has been registered with the GFSC as a registered closed-ended collective investment scheme. The Company's ordinary shares were admitted to the premium segment of the FCA's Official List and to trading on the Main Market of the London Stock Exchange as part of its IPO which completed on 5 February 2013. The issued capital comprises the Company's ordinary shares denominated in Pounds Sterling. The Company makes investments in its portfolio through ICG-Longbow Senior Debt S.A., the Company's wholly owned subsidiary.

Investment Adviser

The Investment Adviser (Intermediate Capital Managers Limited), which trades under the name of ICG-Longbow, is authorised and regulated by the FCA. The assets of the Company are managed by the Board after receiving advice from the Investment Adviser under the terms of the non-discretionary Investment Advisory Agreement.

Investment Adviser's Report

The Investment Adviser's Report refers to the performance of the loans and the portfolio for the year to 31 January 2020, and the general market conditions prevailing at that date and prior to the UK Covid-19 lockdown. The Investment Adviser continues to work closely with the Board to ascertain the immediate and consequential impacts of the UK lockdown. Whilst the long-term effects on the UK economy and commercial property sectors will remain unclear until after the UK's exit strategy is revealed, any forward-looking statements in this report reflect the latest information available as at 6 May 2020.

Investment Objective

The investment objective of the Group, as approved by the shareholders of the Company, is "to construct a portfolio of UK real estate debt related investments predominantly comprising loans secured by first ranking fixed charges against commercial property investments, with the aim of providing shareholders with attractive, quarterly dividends, capital preservation and, over the longer term, a degree of capital appreciation."

Summary

At 31 January 2020, the investment portfolio comprised ten loans, following a period of transition in which the legacy Ramada Gateshead and Commercial Regional Space loans repaid, whilst £46 million of new commitments were made across the Southport, RoyaleLife and LBS loans. Additionally, the Company's longstanding Northlands loan was refinanced onto a new three-year term, with the £12.5 million commitment taking total new transactions to £58 million over the period.

The weighted average loan to value ratio increased to 65.8% (31 January 2019: 62.2%) reflecting these changes to the portfolio composition, which remains comfortably within the Company's investment parameters.

Following the year end, the Group received repayment of the £21.5 million Meadow loan, following completion of the sponsor's business plan and a sale of the underlying property. The proceeds were partially reinvested into a new £7.8 million loan commitment secured by an industrial estate in the North West, which carries an initial LTV ratio of 60.3%. The new loan carries a three-year term, and is accretive to shareholders benefiting from a minimum contractual return.

Following these changes, the Group's portfolio totals ten investments with an aggregate committed balance of £115.1 million, of which £105.6 million is drawn. The weighted average LTV is 68.2%, with a weighted average interest coupon of 7.48% and weighted average loan maturity of 2.1 years.

Group Performance

The Group's performance saw improvement in 2019, as lower-yielding legacy loans, in particular the Commercial Regional Space investment, were repaid and the proceeds reinvested in higher returning opportunities. The Company's working capital facility was used judiciously, minimising cash drag and allowing the Group to enter into forward-dated and follow-on funding commitments to grow the portfolio.

As referenced below, during the year some operational challenges were seen in the Quattro and BMO loans albeit the difficulties are being rectified and we continue to believe the portfolio is well secured and, other than the as yet unknown impacts of Covid-19, performing in line with expectations.

Portfolio

Investment Portfolio as at 31 January 2020

(1) Loan was extended post period end to December 2020

(2) Totals vary due to roundings

Economy and Financial Market Update

Whilst UK GDP data was unexciting, with annualised growth during 2019 of only 1.1% (and nil growth in Q4 2019 given the Brexit and election uncertainty), this sluggish result should be seen in the context of weak performance by our Eurozone peers. Annualised French GDP growth was recorded at only 0.8% in 2019, Germany continued to struggle (+0.5% in 2019), and Italian GDP flatlined (0.0% in 2019).

Following the election of a Conservative Government in December 2019 with a majority ahead of consensus expectations, the UK left the EU on 31 January 2020. Whilst considerable uncertainty remains about the nature of the future trading relationship, both anecdotal evidence and flash data in January and February pointed to an overall improvement in business and consumer confidence following the election outcome, with the prospect of (at least) five years of what is widely expected to be a pro-business administration, and with a Commons majority in place to deliver its agenda. This initial 'Boris Bounce' has been firmly overtaken by events.

From late February 2020 onwards, and in particular since early March, markets became increasingly wary and volatile as a result of the outbreak of Covid-19 in China and its subsequent global spread. The actions of government in response to the continuing effects of Covid-19 have rendered most economic forecasts redundant. Economic forecasts are being regularly updated with increasingly bearish outlooks. A severe recession looks certain and, with no precedent, commentators are increasingly focused on the timing and nature of the subsequent recovery.

Occupational Demand/Supply

Offices

In the London office markets, take-up in 2019 outperformed expectations according to Savills, with take-up across the City and West End of 11.1 million sq ft overall, some 13% down on 2018 but 7% above the 10-year average. In a year with two Brexit block dates and a General Election, Savills believes this demonstrates the strength and resilience of the market. The general strength of demand in the London office market has seen the vacancy rate remain at low levels by historic standards, at 4.8% at the end of Q4 2019 compared to the 10-year average of 5.7%.

Whilst the headline demand and supply statistics are positive, a note of caution is that serviced office providers accounted for 23% of City office take-up (1.5 million sq ft) during 2019. The sustainability of this business model is under increasing scrutiny following the (effective) failure of WeWork and more recently the effects of Covid-19. The true longevity of the model and resulting impact on the traditional office market will only play out in the medium term.

In the regional office market, comprising the top ten cities outside London, CBRE reports that total take-up during 2019 was 6.4 million sq ft, 15% behind 2018 take-up levels although in line with the 5 year average. Availability declined by 9%, largely driven by strong pre-let activity and low levels of new construction. Pre-let activity continues to be very strong with 54% of the 5.9 million sq ft under construction at the end of Q4 2019, already let or under offer. This demonstrated the continued strength of key regional cities.

Industrial

The UK industrial market continued to perform strongly in 2019, supported by structural tailwinds, with Cushman & Wakefield reporting FY 2019 take-up at 32.5 million sq ft, representing an 18% decline on the record level seen in 2018 (39.7 million sq ft), but still representing a 5% increase on the ten year average.

The sector has gone through a few years of rapid transformation with occupiers reacting quickly to fast-changing consumer needs, and developers reacting through provision of new space. Availability during 2019 continued to rise as a result (+21% YoY) to 71.8 million sq ft; the by-product of this surge in supply has been a reduction in the rate of rental growth, with Cushman & Wakefield's prime rent index for 100,000 sq ft+ and 50-100,000 sq ft units rising by 1.9% and 2.1% respectively during Q4 2019, compared to 3% during 2018.

Retail

The UK retail market stresses are well documented, with the sector continuing to be exposed to structural changes in how consumers shop. Together with wider cost pressures and in particular the increasingly controversial business rates regime, this has created stress on retailers' business models and trading viability, with knock on pressure on demand for stores and rental levels. UK retail sales declined by 1% in the three months to December (per the ONS), and the British Retail Consortium reported that annual sales in 2019 fell for the first time in 25 years.

At the end of 2019, CBRE anticipated this challenging trading environment would lead to a 1.8% fall in rental values during 2020, but in our view for many centres this would be a substantial underestimate. The longer-term outlook for rental values within specific retail sub-sectors (shopping centres, retail parks or high street) will depend to a large extent on a location or scheme adapting to new shopping patterns and whether they provide a sufficient sense of 'destination' and ancillary services to sustain footfall and maintain the attractiveness of the space to shoppers and occupiers.

Hotel

The UK hotel market, supported by positive macro factors in the UK, has performed strongly over the past few years. However rising operating costs, particularly payroll (where the National Living Wage rose to £8.72 per hour in April 2020 with further increases to £10.50 per hour by 2024), has put pressure on margins and will be a core focus for hotel owners going forwards. Knight Frank report that London and the top-15 UK regional cities have witnessed rising annual payroll costs of 5.1% and 6.3% respectively.

In the UK regions, 2019 revenue performance was modestly positive, albeit with occupancy and average room rate growth softening (RevPAR growth of +1.5% in the period to September 2019). With margins coming under pressure, the strength of management teams and the property fundamentals in terms of location and revenue mix will dictate the extent to which trading volatility can be minimised.

The London market, whilst subject to the same operating pressures as regional assets, continued to demonstrate its impressive resilience delivering RevPAR growth of 3.5% in the period to end September 2019, achieved largely through room rate growth of 4.3%, whilst occupancy has softened modestly (by 0.6%). London's position as a global 'hub' for tourists and businesses no doubt assisted, together with the declining value of the pound. London occupancy levels at 81.4% were amongst the highest in Europe.

Property Investment Market

After a strong performance in 2018 with transaction levels at the second highest for a decade, 2019 was a more challenging year for the UK investment market. Brexit, economic and political worries, along with continuing structural problems in retail, persuaded many investors to postpone decisions and wait for clarity. Almost all sectors saw a fall in activity to below-average levels, with total investment volumes for 2019 of £49.5 bn according to Lambert Smith Hampton, a fall of 20% on 2018.

Retail, at just under £5.0 bn of transactions, recorded its lowest annual volume on record, and shopping centre investment fell below £1.0 bn for the first time in 20 years. On a more positive note, the alternatives sector performed strongly in 2019, and is now an established mainstream asset class. According to Lambert Smith Hampton, the 'Living' sector (Student Housing, Hotels and PRS/BTR residential) took a market share of around a third of total transaction volumes in 2019 - more than Industrial and Retail combined. The single largest deal of Q4 2019 was in the healthcare sector - a £1.5bn acquisition of a portfolio of acute care hospitals.

MSCI All Property total returns for 2019 stood at 1.2%, with Retail at -6.8% dragging down overall performance. Negative rental and capital value growth is accelerating, primarily driven by retail but amplified as the level of rental growth slowed in offices, industrial and hotels, which no longer offsets the decline in retail performance.

Finance Markets

According to Bank of England data, net lending to UK property slowed sharply in Q4 2019 and it is hard to avoid the conclusion that this was election related, given the fourth quarter is often a busy period in finance markets. Net lending for the quarter of £836 million compared to £2.28 billion in Q3 and £2.76 billion in Q2. Whilst debt outstanding to property is at its highest level since 2014, as a share of overall (economy-wide) debt, real estate exposure remains low at 6.9%.

Moving into 2020, data for January and February reported net new lending by banks and building societies of £231 million, a relatively modest level notwithstanding improved confidence following the election outcome. We expect to see Covid-19 weigh heavily on banks' lending appetite for the remainder of 2020, with efforts focused on managing loan books and supporting existing customers rather than growth. Moreover, we anticipate that banks' management and credit committee time will be focused on implementing the Government's lending programmes to SMEs and corporates, as a higher priority than property lending.

During the year we did not see any material changes in lending parameters or pricing, albeit we did observe compression in the pricing of certain types of mezzanine debt over the latter part of 2019, specifically larger loans secured by trophy properties. We would also highlight what we perceive as the ongoing and market-wide discipline in maintaining lending covenants (LTV and ICR / income) with the 'cov-lite' packages now commonly seen in the corporate lending markets not featuring regularly in property lending. Whilst we are aware that many of these covenants have been waived by lenders across the market (on a widespread but temporary basis) owing to the Covid-19 disruption, as and when market conditions normalise they will continue to offer a protection mechanism to lenders.

Portfolio Profile and Activity

The Group's investment portfolio underwent a positive transformation during the year, with strong investment activity totalling approximately £58 million offsetting two repayments - the £22.4 million Commercial Regional Space loan and the £8.0 million Ramada Gateshead loan - along with the longer term refinancing of the Northlands loan.

The Group's Meadow, Halycon and Carrara loans were all extended during the period allowing shareholders to continue to benefit from these accretive investments, with the additional benefit of further fees and renewed prepayment protection.

The repayment of lower-yielding loans (in particular Commercial Regional Space), and their replacement with higher-returning investments, has led to a significant improvement in the weighted average loan coupon, which at year end was 7.51% (31 January 2019: 6.23%). Moreover, the newer loans carry meaningful arrangement and exit fees, such that the projected weighted average IRR for loans concluded during the year is circa 9.4%.

Over the reporting period the Group's investments have generally continued to perform in line with business plans, albeit challenges were seen in the Quattro and BMO loans. The former fell behind on interest payments whilst a capital expenditure programme was concluded, whilst the latter did not repay on its scheduled maturity date as the sponsor's refinancing efforts were delayed. In each case there is line of sight to the matter being rectified, and we do not consider any capital to be at risk.

Following year end, in March 2020, the Group advanced a new £7.8 million loan commitment to a vehicle controlled by Seybourne Estates, secured by an industrial estate in Merseyside. The loan is structured on a three-year term, carries an initial LTV ratio of 60.3% and is accretive to shareholders.

Also in March 2020, the Group received repayment of the £21.5 million Meadow loan, following successful completion of the business plan and a sale of the underlying property securing the loan. The repayment was accompanied by exit and prepayment fees totalling approximately £0.7 million.

Following these changes, the portfolio comprises ten loans with a weighted average LTV of 68.2% and a weighted average coupon rate of 7.48%. The average unexpired loan term at the date of these accounts is 2.06 years.

Portfolio Outlook

As discussed above, in response to the Covid-19 pandemic the UK Government announced extreme measures to slow down the spread of the virus amongst the population. These measures, which were announced on 20th March 2020 and followed by emergency legislation on 24th March, included the closure of all pubs, restaurants, leisure and sports facilities; school closures; restrictions on non-essential travel; and enforced social distancing including in the workplace. At the time of writing these arrangements will remain in place for a minimum period of six weeks, although some European governments are now beginning to ease such restrictions giving a pointer to the UK's potential exit from lockdown. The emergency legislation also gave protections to tenants for non-payment of rents in addition to the economic support packages.

As discussed elsewhere in this report, the full and consequential impacts of Covid-19 are not yet known and cannot be estimated with any certainty given their unprecedented nature, however the Group has compiled a portfolio of sectoral and geographically diverse loans secured by first ranking mortgages on a hold to maturity basis. The Investment Adviser believes the Group's loan portfolio continues to be satisfactorily secured, with a weighted average exposure of 65.8% LTV at year end and a highest individual exposure of 80.6%, and able to withstand the impacts of a short term lockdown of the UK economy as discussed in the Viability Statement.

Following the repayment of the Group's Meadow loan and the subsequent investment activity, the ongoing transition of the investment portfolio away from its initial legacy investments to a sustainable, diversified and high-quality blend of commercial property loans has essentially been completed. The portfolio investments each carry strong coupons and a mixed maturity profile, and provide the basis for a fully covered dividend and a degree of capital appreciation in the future.

Loan Portfolio

The review of the loan portfolio refers to the performance of the loans for the year to 31 January 2020. The Investment Adviser continues to work closely with Borrowers to ascertain the immediate and consequential impacts of the UK lockdown on their underlying tenants and business plans. Whilst the long-term effects on the UK economy and commercial property sectors will remain unclear until after the UK's exit strategy is revealed, any forward-looking statements in this report reflect the latest information available as at 6 May 2020.

As set out above, as at 31 January 2020, the Group's portfolio comprised ten loans with an aggregate principal balance outstanding of £120.77 million.

A summary of each of the individual loans as at 31 January 2020 is set out below:

ICG-Longbow

6 May 2020

Investment Policy

Investment Objective

The investment objective of the Group, as approved by the shareholders of the Company, is "to construct a portfolio of UK real estate debt related investments predominantly comprising loans secured by first ranking fixed charges against commercial property investments, with the aim of providing shareholders with attractive, quarterly dividends, capital preservation and, over the longer term, a degree of capital appreciation."

Investment Policy

The Group's investment policy is to invest in:

· direct real estate debt investments via a diversified loan portfolio comprised of first ranking loans secured on UK Commercial Property, with an aggregate LTV of no more than 75% (based on the initial valuations at the time of loan origination or acquisition once fully invested); and

· ICG Private Funds acquired in primary or secondary transactions, including from the Investment Adviser or its associates.

Investment Restrictions

A. The following restrictions apply to loan investments within the portfolio.

The Group will, subject as set out below, only invest in loans that:

· are originated by the Investment Adviser or its associates;

· are denominated in Pounds Sterling;

· benefit from a first ranking fixed charge over the relevant properties, including in respect of any receivable income;

· benefit from loan covenants structured to ensure that a material decrease in the income or value from the underlying property will trigger an event of default or cash-flow lock-up;

· have a term of no greater than ten years from the date of investment;

· have an LTV no higher than 85% at the time of origination or acquisition provided however that the aggregate value of the loans with an LTV of greater than 80% shall be no greater than 20% of the Group's gross asset value; and

· are bilateral (other than where syndicated with other funds managed by the Investment Adviser or its associates).

At the time any investment is made:

· the maximum percentage of the Group's gross assets allocated to a single loan shall be 10%, provided that the limit may be increased to 15% in respect of loans benefiting from Investment Grade Tenants and 20% in respect of loans benefiting from a diversified tenant profile;

· the maximum percentage of the Group's gross assets allocated to a single borrower (together with its parents, subsidiaries and/or affiliates) shall be 20%;

· the maximum exposure of the gross rents receivable on all loan investments to a single underlying tenant shall be 10%, except in the case of the UK Government, when the maximum exposure shall be 25%;

· the maximum exposure to a mainstream property sector or the mixed property sector shall be 50% of the Group's gross assets;

· the maximum exposure to an alternative property sector shall be 25% of the Group's gross assets;

· the maximum exposure to property which is not a mainstream property sector, an alternative property sector or the mixed property sector shall be 5% of the Group's gross assets;

· the maximum exposure to property within a single UK economic region shall be 30% of the Group's gross assets, provided that the maximum exposure to Greater London property shall be 60% of the Group's gross assets; and

· the value of the Group's security which is not freehold tenure or long-leasehold tenure with an unexpired term of more than 50 years shall not be greater than 5% of the total value of the Group's security.

The Group will not invest in subordinated loans and mezzanine loans, bridge loans, development loans or loan-on-loan financings.

B. The following restrictions apply to the portfolio's indirect real estate exposure.

The Group may only invest in ICG Private Funds where at the date of making an investment or commitment:

· the relevant ICG Private Fund's investment parameters, investment policy and/or investment objective, as the case may be, require that at least 90% of that ICG Private Fund's capital is invested in Pounds Sterling denominated loans secured by commercial real estate and at least 60% in loans secured by first ranking security over Commercial Property;

· the maximum percentage of the Group's gross assets committed to a single ICG Private Fund shall be 20%, where gross assets are calculated on the assumption that the Group's commitment to such fund is fully utilised; and

· the maximum percentage of the Group's gross assets committed to all ICG Private Funds shall be 30%, where gross assets are calculated on the assumption that the Group's commitment to such funds is fully utilised.

Gearing

The Group may utilise borrowings from time to time in order to finance its working capital requirements provided that such borrowings will not exceed an amount equal to 20% of the Group's Net Asset Value immediately following the drawdown of the borrowings.

Cash Management Policy

Cash held by the Group pending investment or distribution will be held in either cash or cash equivalents. The Group may invest in quoted bond and other debt instruments with a final maturity of less than 365 days as well as money market funds for the purposes of cash management provided any such instrument has a minimum credit rating. The Group will not apply gearing to these temporary investments.

The Group will not invest in other listed or unlisted closed-ended funds.

Any material change to the Group's published investment policy will be made only with the prior approval of shareholders by ordinary resolution at a general meeting of the Company.

Board of Directors

Jack Perry CBE - Chairman and Non-Executive Independent Director

Appointment: Appointed to the Board and as a Chairman in November 2012

Experience: Jack pursues a career as a portfolio non-executive director. He is chairman of European Assets Trust PLC and a non-executive director and Chairman of the Audit Committee of Witan Investment Trust plc. He was Chief Executive Officer of Scottish Enterprise and prior to this was a managing partner and regional industry leader for Ernst & Young LLP. Jack was also chairman of CBI Scotland. He has served on the Boards of FTSE 250 and other public and private companies and is a member of the Institute of Chartered Accountants of Scotland.

Committee Membership: Nomination Committee, Management Engagement Committee,

Stuart Beevor - Non-Executive Independent Director

Appointment: Appointed to the Board in November 2012

Experience: Stuart is an Independent Consultant with various roles advising clients in real estate fund management, investment, development and asset management. He is Board Member of Metropolitan Thames Valley Housing and non-executive director of Empiric Student Property plc. From 2004 to 2013 he was a non-executive director at Unite Group Plc. From 2002 to 2011 he was Managing Director of Grosvenor Fund Management Limited and a member of the Board of Grosvenor Group Limited, the international property group. Prior to joining Grosvenor, he was Managing Director at Legal and General Property Limited, having previously held a number of roles at Norwich Union (now Aviva). Stuart is a Chartered Surveyor with over 30 years' experience in real estate both in the UK and overseas.

Committee Membership: Audit and Operational Risk Committee, Investment Risk Committee, Nomination Committee, Remuneration Committee

Patrick Firth - Non-Executive Independent Director

Appointment: Appointed to the Board in November 2012

Experience: Patrick qualified as a Chartered Accountant with KPMG Guernsey in 1991 and is also a member of the Chartered Institute for Securities and Investment. He has worked in the fund industry in Guernsey since joining Rothschild Asset Management (CI) Limited in 1992 before moving to become Managing Director at Butterfield Fund Services (Guernsey) Limited (subsequently Butterfield Fulcrum Group (Guernsey) Limited), a company providing third party fund administration services, where he worked from April 2002 until June 2009. He is a non-executive director of a number of investment funds and management companies, including GLI Finance Limited, Riverstone Energy Limited, Guernsey Portfolios PCC Limited and NextEnergy Solar Fund Limited. Mr Firth is a resident of Guernsey.

Committee Membership: Audit and Operational Risk Committee, Nomination Committee, Management Engagement Committee, Investment Risk Committee

Mark Huntley - Non-Executive Independent Director

Appointment: Appointed to the Board in November 2012

Experience: Mark has over 40 years' experience in the fund and fiduciary sector and much of his involvement in the fund and private asset sectors has involved real estate and private equity investments. He holds a number of board appointments on listed and private funds and property advisory boards including non-executive board appointment of the following listed companies: Macau Property Opportunities Fund Limited, Stirling Mortimer No.8 Fund UK Land Limited and Stirling Mortimer No.9 Fund UK Land 2 Limited. He has been actively involved in real estate investment in the UK and internationally. He also has experience of a number of private and listed debt structures. Mr Huntley is an Associate of the Institute of Financial Services (Trustee Diploma).

Committee Membership: Audit and Operational Risk Committee, Investment Risk Committee, Nomination Committee, Remuneration Committee

Paul Meader - Non-Executive Independent Director

Appointment: Appointed to the Board in November 2012

Experience: Paul is an independent director of investment companies, insurers and investment funds. Until the autumn of 2012 he was Head of Portfolio Management for Collins Stewart based in Guernsey, prior to which he was Chief Executive of Corazon Capital. He has over 30 years' experience in financial markets in London, Dublin and Guernsey, holding senior positions in portfolio management and trading. Prior to joining Corazon he was Managing Director of Rothschild's Swiss private-banking subsidiary in Guernsey. He is a non-executive director of the following listed companies: Guaranteed Investment Products 1 PCC Limited, Volta Finance Limited, Schroder Oriental Income Fund Limited and SQN Asset Finance Income Fund Limited. Paul is a Chartered Fellow of the Chartered Institute of Securities & Investments, a past Commissioner of the Guernsey Financial Services Commission and past Chairman of the Guernsey International Business Association. He is a graduate of Hertford College, Oxford.

Committee Membership: Audit and Operational Risk Committee, Investment Risk Committee, Nomination Committee, Management Engagement Committee, Remuneration Committee

Report of the Directors

The Directors hereby submit the Annual Report and Consolidated Financial Statements for the Group for the year ended 31 January 2020. This Report of the Directors should be read together with the Corporate Governance Report.

General Information

The Company is a non-cellular company limited by shares incorporated in Guernsey on 29 November 2012 under the Companies Law. The Company's registration number is 55917, and it has been registered with the GFSC as a registered closed-ended collective investment scheme. The Company's ordinary shares were admitted to the premium segment of the FCA's Official List and to trading on the Main Market of the London Stock Exchange on 5 February 2013.

Principal Activities

The principal activity of the Group is to invest in senior secured debt investments. The investment objective of the Group is to construct a portfolio of UK real estate debt related investments predominantly comprising loans secured by first ranking fixed charges against commercial property investments, with the aim of providing shareholders with attractive, quarterly dividends, capital preservation and, over the longer term, a degree of capital appreciation.

Business Review

A review of the Group's business and its likely future development is provided in the Chairman's Statement and in the Investment Adviser's Report.

Listing Requirements

Since being admitted on 5 February 2013 to the Official List, maintained by the FCA, the Company has complied with the applicable Listing Rules.

Results and Dividends

The results for the year are set out in the Financial Statements below.

During the year, and since the year end, the Directors declared the following dividends:

Share Capital

The Company has one class of ordinary shares. The issued nominal value of the ordinary shares represents 100% of the total issued nominal value of all share capital. Under the Company's Articles of Incorporation, on a show of hands, each shareholder present in person or by proxy has the right to one vote at Annual General Meetings. On a poll, each shareholder is entitled to one vote for every share held.

Shareholders are entitled to all dividends paid by the Company and, on a winding up, providing the Company has satisfied all of its liabilities, the shareholders are entitled to all of the surplus assets of the Company. The ordinary shares have no right to fixed income.

Shareholdings of the Directors

The Directors with beneficial interests in the shares of the Company as at 31 January 2020 and 2019 are detailed below:

With the exception of Paul Meader, who purchased an additional 32,000 shares in March 2020, Directors' beneficial interests in the shares of the Company as at 6 May 2020 are unchanged from those disclosed above.

Directors' Authority to Buy Back Shares 

The Directors believe that the most effective means of minimising any discount to Net Asset Value which may arise on the Company's share price, is to deliver strong, consistent performance from the Group's investment portfolio in both absolute and relative terms. However, the Board recognises that wider market conditions and other considerations will affect the rating of the shares in the short term and the Board may seek to limit the level and volatility of any discount to Net Asset Value at which the shares may trade. The means by which this might be done could include the Company repurchasing shares. Therefore, subject to the requirements of the Listing Rules, the Companies Law, the Articles and other applicable legislation, the Company may purchase shares in the market in order to address any imbalance between the supply of and demand for shares or to enhance the Net Asset Value of shares.

In deciding whether to make any such purchases the Directors will have regard to what they believe to be in the best interests of shareholders and in accordance with the applicable Guernsey legal requirements which require the Directors to be satisfied on reasonable grounds that the Company will, immediately after any such repurchase, satisfy a solvency test prescribed by the Companies Law and any other requirements in its Memorandum and Articles of Incorporation. The making and timing of any buybacks will be at the absolute discretion of the Board and not at the option of the shareholders. Any such repurchases would only be made through the market for cash at a discount to Net Asset Value.

Annually the Company passes a resolution granting the Directors general authority to purchase in the market up to 14.99% of the shares in issue immediately following Admission at a price not exceeding the higher of (i) 5% above the average mid-market values of shares for the five business days before the purchase is made or (ii) the higher of the last independent trade or the highest current independent bid for shares. The Directors intend to seek renewal of this authority from the shareholders at the Annual General Meeting.

Pursuant to this authority, and subject to the Companies Law and the discretion of the Directors, the Company may purchase shares in the market on an on-going basis with a view to addressing any imbalance between the supply of and demand for shares.

Shares purchased by the Company may be cancelled or held as treasury shares. The Company may borrow and/or realise investments in order to finance such share purchases.

The Company has not purchased any shares for treasury or cancellation during the year or to date. During the year the Board considered if such a purchase of shares would be appropriate and concluded that it would not be in the best interests of shareholders.

Directors' and Officers' Liability Insurance

The Group maintains insurance in respect of directors' and officers' liability in relation to their acts on behalf of the Group.

Substantial Shareholdings

As at 31 January 2020, the Company had been notified, in accordance with Chapter 5 of the Disclosure and Transparency Rules, of the following substantial voting rights as shareholders of the Company.

In addition, the Company also provides the same information as at 24 April 2020, being the most current information available.

The Directors confirm that there are no securities in issue that carry special rights with regard to the control of the Company.

Independent External Auditor

Deloitte LLP has been the Company's external auditor since the Company's incorporation. The Audit and Operational Risk Committee reviews the appointment of the external auditor, its effectiveness and its relationship with the Company, which includes monitoring the use of the external auditor for non-audit services and the balance of audit and non-audit fees paid, as included in Note 15. Following a review of the independence and effectiveness of the external auditor, a resolution will be proposed at the 2020 Annual General Meeting to re-appoint Deloitte LLP. Each Director believes that there is no relevant information of which the external auditor is unaware. Each had taken all steps necessary, as a Director, to be aware of any relevant audit information and to establish that Deloitte LLP is made aware of any pertinent information. This confirmation is given and should be interpreted in accordance with the provisions of Section 249 of the Companies Law. Further information on the work of the external auditor is set out in the Report of the Audit and Operational Risk Committee.

Articles of Incorporation

The Company's Articles of Incorporation may only be amended by special resolution of the shareholders.

NMPI Status

There is no change to the Company's status in respect of NMPI and the Company remains on the AIC list of exempted securities.

The Company continues to make all reasonable efforts to conduct its affairs in such a manner so that its shares can be recommended by UK financial advisers to ordinary retail investors in accordance with the FCA's rules relating to non-mainstream investment products.

AIFMD

The Company is an internally managed non-EU domiciled alternative investment fund. Any offer of shares to prospective investors within selected member states of the European Economic Area and the UK will be made in accordance with the applicable national private placement regime, and the Company will notify its intention to market to the competent authority in each of the selected member states for the purposes of compliance with AIFMD.

AEOI Rules

Under AEOI Rules the Company continues to comply with both FATCA and CRS requirements to the extent relevant to the Company.

The Board is committed to upholding and maintaining a zero tolerance policy towards the criminal facilitation of tax evasion.

Change of Control

There are no agreements that the Company considers significant and to which the Company is party that may affect its control following a takeover bid.

Going Concern

The Directors, at the time of approving the Financial Statements, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and do not consider there to be any threat to the going concern status of the Group. The Group was fully invested at 31 January 2020, with loans advanced at amortised cost representing 101% of the total equity attributable to the owners of the Company. Following the year end and repayment of the Meadow loan the Company's Revolving Credit Facility was repaid and at the date of this report the Company has unallocated cash resources in excess of £ 5.0m. The Board expects that the loan portfolio will generate sufficient cash flows to pay on-going expenses and generate returns to shareholders for a period of at least twelve months from the date of approval of the Consolidated Financial Statements. The Directors have considered the cash position, maturity profile and performances of current investments made by the Group, and its ability to reinvest maturing loans and have concluded that it is appropriate to adopt the going concern basis of accounting in preparing the Financial Statements.

The first continuation vote was held on 1 March 2017 and passed by the shareholders. Follow-on continuation resolutions shall be held every five years at which the Directors shall propose an ordinary resolution that the Company continues its business as a closed-ended collective investment scheme. The first follow-on continuation resolution will be required on or before the Annual General Meeting of the Company to be held in 2022.

The Directors have considered the immediate and potential impacts of Covid-19 on the Company as reflected in the Viability Statement below. The Company enters this period of uncertainty in a strong financial position with no debt drawn under the RCF and unallocated cash reserves.

Viability Statement

As required by the AIC Code, the Directors have assessed the prospects of the Group over a period longer than 12 months required by the going concern provision. The Board has conducted this review for a period covering the period to 31 January 2023, which is deemed appropriate given: 

(i) the maturity profile of the Group's current loan portfolio from April 2019 to October 2023;

(ii) the Company's intention to replace existing loans at maturity with new loans of 3-5 year tenure as they expire;

(iii) the expectation that the weighted average loan term will remain 2-3 years; and

(iv) the date of the next scheduled continuation vote being 2022, which the Board presumes will be passed.

The Group's capital has remained substantially invested and can be reinvested under the new investment policy utilising the RCF in advance of expected loan repayments. Based on past performance the returns generated from each investment should be stable and predictable in the medium term.

The Investment Adviser has prepared and the Board has reviewed the Group's revenue, cashflow and working capital projections over the next three years, and considered the impact of some of the principal risks of the Group. The Investment Adviser and the Board evaluated the resilience of the Group to the occurrence of these risks in severe yet plausible scenarios as at the date of these financial statements. This evaluation has applied through the following key scenarios to the portfolio of loans prevailing at 31 January 2020 and known subsequent changes:

· Each loan repays at the expiry date. Utilising the Company's revolving credit facility, capital is invested in advance of loan maturity within the target investment policy and reflecting the Investment Adviser's transaction pipeline. Loan repayments are used to reduce borrowing under the RCF after three months (the "Base Case");

· The UK economy enters a period of severe recession causing a 20% reduction in interest collection as a result of a combination of tenant defaults and falling rents which in turn cause a sharp correction to property values similar to that which was experienced in 2008. During this period the RCF remains available, but is not extended, and underperforming assets are not realised before maturity (the "Stress Case").

It was assumed that there would be no changes relating to the Group structure, which includes changes in tax legislation applicable to the Group or Company and changes to fund legislation, and for the purpose of the projections that no new capital was raised.

The Investment Adviser and the Board further considered the impact of Brexit on the performance of the loan portfolio, and the Group's ability to redeploy capital. Following the UK General Election in December 2019 and the UK's subsequent withdrawal from the European Union on 31 January 2020, the Bank of England's Consensus forecast for 2020 was for the UK economy to show modest growth (1.1% GDP growth), with stable employment and inflation in line with target. This positive outlook was mirrored by an increase in property investment activity following the general election. In its latest Budget announcement, the Government forecast modestly improving GDP growth in the medium term. As such, and given the diverse nature of the underlying portfolio, the Company does not consider that BREXIT and UK trade negotiations will have a materially adverse impact on the economy or the portfolio.

Since the Consensus Forecast was issued, and as caveated in the Budget announcement, a global pandemic has been declared in response to the spread of the Covid-19, with many countries taking dramatic steps to stem the spread of the virus, including closing schools, businesses and even borders. Until very recently the UK remained in the 'containment' stage with very few restrictions being imposed, but the Government has warned of a more widespread impact and took measures within its Budget to support the economy, and small businesses in particular, through this period.

Following the emergency measures taken by the UK Government in March 2020, in response to the rapid spread of Covid-19, which include the shut-down of the hospitality, leisure and non-essential retail sectors and with associated travel restrictions impacting the wider economy, the Investment Adviser has prepared and the Board considered an additional viability analysis, the "Covid-19 Stress Scenario". The principal assumptions underpinning the Covid-19 Stress Scenario are that:

· UK economy will remain in full shut-down for three months,

· there will be a gradual easing of restrictions and business as usual will resume after six months, and

· scheduled maturities and repayments will be delayed until the banking systems recover and business as usual resumes.

· the Company will remain a responsible lender and not seek to enforce security if borrowers breach covenants as a result of the UK lockdown or related legislation.

The impact of this scenario has been considered for each investment with outcomes ranging from a full deferral of interest in the hospitality and non-food retail sectors where recovery will be delayed through to partial payment in the ground rents office and industrial sectors. Business plans linked to constructions, capital expenditure, and sales are assumed to be delayed by at least six months with a gradual recovery commencing in the final quarter of 2020.

Outcomes of the Covid-19 Stress Scenario have also been further stressed by a 20% reduction in interest income in line with the Base Case scenario outlined above.

Having conducted a robust analysis of the above scenarios and stresses applied to each, the Directors remain satisfied that the Group can, in all quarters, meet its liabilities as they fall due and remains viable over the period under consideration (to May 2023). In the most severe stress scenarios, whilst the Company would maintain positive cashflow, this would be insufficient to cover a full target dividend until normal, pre Covid-19, levels of business activity resume in the UK, which we assume to be in 2021.

Directors' Responsibilities to Stakeholders

Section 172 of the UK Companies Act 2006 applies directly to UK domiciled companies. Nonetheless the AIC Code requires that the matters set out in section 172 are reported on by all companies, irrespective of domicile. This requirement does not conflict with Guernsey company law.

Section 172 recognises that directors are responsible for acting in a way that they consider, in good faith, is the most likely to promote the success of the Company for the benefit of its shareholders as a whole. In doing so, they are also required to consider the broader implications of their decisions and operations on other key stakeholders and their impact on the wider community and the environment. Key decisions are those that are either material to the Company or are significant to any of the Company's key stakeholders. The Company's engagement with key stakeholders and the key decisions that were made or approved by the Directors during the year are described below.

Key Decisions

Key decisions are defined as both those that are material to the Group, but also those that are significant to any of our key stakeholder groups as discussed above.

In making the following key decision the Board considered the outcome from its stakeholder engagement as well as the need to maintain a reputation for high standards of business conduct and the need to act fairly between the members of the company:

During the year the Board decided to maintain its quarterly dividend at 1.5 pence per share for the period during which the portfolio was being transitioned.

The Board was satisfied, given the Company's investment pipeline, that dividend cover would be restored, and took the decision to maintain its quarterly dividend in light of shareholder feedback obtained through the Investment Adviser's and the Broker's direct engagement with existing and potential shareholders.

Financial Risk Management Policies and Procedures

Financial Risk Management Policies and Procedures are disclosed in Note 11 to the Financial Statements.

Principal Risks and Uncertainties

Principal Risks and Uncertainties are discussed in the Corporate Governance Report.

Subsequent Events

Significant subsequent events have been disclosed in Note 19 to the Financial Statements.

Alternative Performance Measures

The Directors believe that the performance indicators detailed in the Financial Highlights and Financial Summary, which are typical for entities investing in real estate debt, will provide shareholders with sufficient information to assess how effectively the Group is meeting its objectives. The alternative performance measures are described in the table in the Alternative Performance Measures section.

Annual General Meeting

The AGM of the Company will be held at 2.00pm BST on 25 September 2020 at Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 4LY, subject to any alterations brought about by Covid-19. Details of the resolutions to be proposed at the AGM, together with explanations of the AGM arrangements, will appear in the Notice of Meeting to be distributed to shareholders.

Subject to the restrictions in place as a result of Covid-19 it is intended that members of the Board will be in attendance at the AGM and will be available to answer shareholder questions. The Board will keep the arrangements for the AGM under review.

By order of the Board

Jack Perry

Chairman

6 May 2020

Directors' Responsibilities Statement

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.

The Companies Law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors are required to prepare the Consolidated Financial Statements in accordance with IFRS as adopted by the European Union. Under the Companies Law, the 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 of the profit or loss of the Group for that period. In preparing these Financial Statements, the Directors are required to:

· select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance;

· state that the Group has complied with IFRS, subject to any material departures disclosed and explained in the Financial Statements; and

· prepare the Financial Statements on a going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors confirm that they have complied with the above requirements in preparing the Financial Statements.

The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time, the financial position of the Group and enable them to ensure that the Financial Statements comply with Companies Law. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with law and regulations.

The Directors are responsible for ensuring that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's performance, business model and strategy.

The Directors are also responsible under the AIC Code to promote the success of the Group for the benefit of its members as a whole and in doing so have regard for the needs of wider society and other stakeholders.

As part of the preparation of the Annual Report and Consolidated Financial Statements the Directors have received reports and information from the Company's Administrator and Investment Adviser. The Directors have considered, reviewed and commented upon the Annual Report and Financial Statements throughout the drafting process in order to satisfy itself in respect of the content.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the website (www.lbow.co.uk).

Legislation in Guernsey governing the preparation and dissemination of the Financial Statements may differ from legislation in other jurisdictions.

Responsibility Statement of the Directors in Respect of the Annual Report under the Disclosure and Transparency Rules

Each of the Directors confirms to the best of their knowledge and belief that:

· the Financial Statements, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

· the Annual Report includes a fair review of the development and performance of the business and the position of the Company and its subsidiary, together with a description of the principal risks and uncertainties faced; and

· the Annual Report and Consolidated Financial Statements include information required by the FCA and ensuring that the Company complies with the provisions of the Listing Rules, Disclosure Guidelines and Transparency Rules of the FCA. With regard to corporate governance, the Company is required to disclose how it has applied the principles and complied with the provisions of the Corporate Governance Code applicable to the Company.

Responsibility Statement of the Directors in Respect of the Annual Report under the Corporate Governance Code

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations. Having taken advice from the Audit and Operational Risk Committee, the Directors consider the Annual Report and Financial Statements, taken as a whole, as fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Group's performance, business model and strategy.

By order of the Board

Corporate Governance Report

As a UK premium listed Company, ICG-Longbow Senior Secured UK Property Debt Investment Limited's governance policies and procedures are based on the principles of the Corporate Governance Code as required under the Listing Rules. The Corporate Governance Code is available on the Financial Reporting Council's website, www.frc.org.uk.

The Company became a member of the AIC effective 27 February 2013 and has therefore put in place arrangements to comply with the AIC Code and, in accordance with the AIC Code, voluntarily complies with the Corporate Governance Code. The Directors recognise the importance of sound corporate governance, particularly the requirements of the AIC Code. The AIC Code is available on the AIC's website, www.theaic.co.uk.

The Company is subject to the GFSC Code, which applies to all companies registered as collective investment schemes in Guernsey. The GFSC has also confirmed that companies which report against the Corporate Governance Code or AIC Code are deemed to meet the GFSC Code.

The AIC Code addresses all the principles set out in the Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to investment companies such as the Company. The Board considers that reporting against the principles and recommendations of the AIC Code provides better information to shareholders.

The Board monitors developments in corporate governance to ensure the Board remains aligned with best practice and has welcomed new recommendations introduced by the AIC in 2019 regarding the Board's culture and values and relationships with key stakeholders.

Throughout the year ended 31 January 2020, the Company has complied with the recommendations of the AIC Code and the relevant provisions of Section 1 of the Corporate Governance Code, except as set out below.

The Corporate Governance Code includes provisions relating to:

· the role of the chief executive;

· executive directors' remuneration; and

· the need for an internal audit function.

For the reasons set out in the AIC Code, and as explained in the Corporate Governance Code, the Board considers that the above provisions are not currently relevant to the position of the Company, being an internally managed investment company, which delegates most day-to-day functions to third parties.

As an investment company, the Company has no employees, all Directors are non-executive and independent of the Investment Adviser and therefore the Directors consider the Company has no requirement for a Chief Executive or Senior Independent Director and the Board is satisfied that any relevant issues can be properly considered by the Board. The absence of an internal audit function is discussed in the Report of the Audit and Operational Risk Committee.

Environmental Social and Governance Report

As an investment company, the Group's activities only have a limited impact on the environment. The Group has no employees and its offices are based in Guernsey and Luxembourg with a majority of the directors based in those locations, thus minimising the need for numerous or lengthy flights to attend Board meetings, with the associated environmental impact.

The Board believes that it is in shareholders' interests to consider environmental, social and governance factors when selecting and retaining investments. The parent of the Investment Adviser is a longstanding signatory to the UN Principles for Responsible Investment and has a fully formalised and embedded Responsible Investing Policy which is applied to all investment decisions. The policy includes influencing on ESG matters through direct engagement, assessment screening and monitoring of each investment opportunity.

The parent of the Investment Adviser has continued throughout the year to develop its ESG policies and procedures, including this year adding a specific climate change policy, and is collaborating across the industry to raise standards and joining the new PRI Investor Reference Group on Corporate Reporting. Its responsible investment policy is available to view at https://www.icgam.com/strategies//~/media/Files/I/ICGAM-V2/responsible-investing-documents/2019-icg-responsible-investing-policy.pdf

The Board relies on the Investment Adviser to apply its Responsible Investment Policy and any associated ESG considerations to investments made by the Group. As a lender to rather than direct owner of real estate assets, the Group is generally in a position only to influence rather than control the ESG impacts of its borrowers. However the Board is pleased to note that several of the Group's investments make specific and positive contributions to ESG, including for example via capital expenditure projects supported by the Group's financing facilities which lead to improved environmental and energy performance; or offering positive social benefits such as the provision of residential retirement living.

Moreover, the Board is pleased to note that the parent of the Investment Adviser, Intermediate Capital Group plc, is named as a constituent of the FTSE4Good index. This means that is has been independently assessed according to the FTSE4Good criteria by FTSE Russell (the trading name of FTSE International Limited and Frank Russell Company) and has satisfied the requirements to become a constituent of the FTSE4Good Index Series. Created by the global index provider FTSE Russell, the FTSE4Good Index Series is designed to measure the performance of companies demonstrating strong Environmental, Social and Governance practices. The FTSE4Good indices are used by a wide variety of market participants to create and assess responsible investment funds and other products.

Culture and Values

The Board recognises that its tone and culture is important and will greatly impact its interactions with shareholders and service providers as well as the development of long-term shareholder value. The importance of sound ethical values and behaviours is crucial to the ability of the Company to achieve its objectives successfully.

The Board individually and collectively seeks to act with diligence, honesty and integrity. It encourages its members to express differences of perspective and to challenge but always in a respectful, open, cooperative and collegiate fashion. The Board encourages diversity of thought and approach and chooses its members with this approach in mind. The governance principles that the Board has adopted are designed to ensure that the Company delivers long term value to its shareholders and treats all shareholders equally. All shareholders are encouraged to have an open dialogue with the Board.

The Board recognises that the Company will take investment and other risks in order to achieve its objectives but these risks are monitored and managed and the Company seeks to avoid excessive risk-taking in pursuit of returns. A large part of the Board's activities are centred upon what is necessarily an open and respectful dialogue with the Investment Adviser. The Board believes that it has a very constructive relationship with the Investment Adviser whilst holding them to account and questioning the choices and recommendations made by them.

The Board

The Company is led and controlled by a Board of Directors, which is collectively responsible for the long-term success of the Company. It does so by acting in the interests of the Company, creating and preserving value and has as its foremost principle to act in the interests of shareholders.

The Company believes that the composition of the Board is a fundamental driver of its success as the Board must provide strong and effective leadership of the Company. The current Board was selected, as their biographies illustrate, to bring a breadth of knowledge, skills and business experience to the Company. All Directors are members of professional bodies and serve on other boards, which ensures that they are kept abreast of the latest technical developments in their areas of expertise. The Directors details are listed in the Board of Directors section which set out their range of investment, financial and business skills and experience represented.

The Chairman leads the Board and is responsible for its overall effectiveness in directing the Company. The Chairman must be independent and is appointed in accordance with the Company's Articles of Incorporation. In considering the independence of the Chairman, the Board took note of the provisions of the AIC Code relating to independence and has determined that Mr Perry is an independent director.

The Board meets at least four times a year and, in addition, there is regular contact between the Board, the Investment Adviser and the Administrator. At each meeting the Board follows a formal agenda that covers the business to be discussed. Directors meet regularly with the senior management employed by the Investment Adviser both formally and informally to ensure the Board remains regularly updated on all issues. The Board visits the Investment Adviser, at least annually. Tis year due to Covid-19 restrictions, the visit to the Investment Adviser has been postponed. The Board also has regular contact with the Administrator, and the Board requires to be supplied in a timely manner with Information by the Investment Adviser, the Company Secretary and other advisers in a form and of a quality to enable it to discharge its duties.

The Company has adopted a share dealing code for the Board and will seek to ensure compliance by the Board and relevant personnel of the Investment Adviser and other third party service providers with the terms of the share dealing code.

Board Tenure and Re-election

All Directors were appointed in November 2012 therefore no member of the Board has served for longer than eight years to date. As such no issue has arisen to be considered by the Board with respect to long tenure. In accordance with the AIC Code, when and if any Director shall have been in office (or on re-election would at the end of that term of office) for more than nine years the Company will consider further whether there is a risk that such a Director might reasonably be deemed to have lost independence through such long service.

The Board recognises that Directors serving nine years or more may appear to have their independence impaired. However, the Board may nonetheless consider Directors to remain independent as noted further below.

The Nomination Committee shall take the lead in any discussions relating to the appointment or re-appointment of Directors, and give consideration to Board rotation in advance of the nine year tenure limit.

A Director who retires at an Annual General Meeting may, if willing to continue to act, be elected or re-elected at that meeting. If, at a general meeting at which a Director retires, the Company neither re-elects that Director nor appoints another person to the Board in the place of that Director, the retiring Director shall, if willing to act, be deemed to have been re-appointed unless at such meeting it is expressly resolved not to fill the vacated office or a resolution for the re-appointment of the Director is put to the meeting and lost.

Directors are appointed under letters of appointment, copies of which are available at the registered office of the Company. The Board considers its composition and succession planning on an on-going basis. The Company's Articles of Incorporation specify that not greater than one third by number of the Directors will be subject to annual re-election at each subsequent Annual General Meeting of the Company and that each of the Directors should submit themselves for re-election at least every three years. Mr Firth and Mr Meader will retire as Directors of the Company in accordance with the policy adopted by the Board and will be put forward for re-election at the forthcoming AGM. 

Any Director who is elected or re-elected at that meeting is treated as continuing in office throughout. If he is not elected or re-elected, he shall retain office until the end of the meeting or (if earlier) when a resolution is passed to appoint someone in his place or when a resolution to elect or re-elect the Director is put to the meeting and lost.

The Board has an agreed succession plan for the orderly retirement of existing Directors and to provide for the regular refreshment of skills and talent. The Board remains confident that its succession plan respects both the letter and the spirit of the Code regarding Board composition, diversity, particularly with respect to gender, and how effectively members work together to achieve the Company's objectives.

Regular retirements of Directors will take place starting during 2020 ensuring that the Company complies with the 2019 AIC Code.

Directors' Remuneration

The level of remuneration of the Non-executive Directors reflects the time commitment and responsibilities of their roles. The Chairman is entitled to annual remuneration of £50,000 (31 January 2019: £50,000). The Chairman of the Audit and Operational Risk Committee is entitled to annual remuneration of £40,000 (31 January 2019: £40,000) and the Chairman of the Investment Risk Committee is entitled to annual remuneration of £37,500 effective from 1 May 2018 (31 January 2019: £37,500). The other independent Directors are entitled to annual remuneration of £35,000 (31 January 2019: £35,000).

On 12 December 2019 the Remuneration Committee recommended no change to Directors' fees, therefore Directors' fees will remain at the same level as below for the year ended 31 January 2021.

The Company Directors' fees for the year amounted to £197,500 (31 January 2019: £196,875) with outstanding fees of £49,375 due to the Directors at 31 January 2020 (31 January 2019: £49,375) (see Note 8).

All of the Directors are non-executive and are each considered independent for the purposes of Chapter 15 of the Listing Rules.

Duties and Responsibilities

The Board has overall responsibility for maximising the Company's success by directing and supervising the affairs of the business and meeting the appropriate interests of shareholders and relevant stakeholders, while enhancing the value of the Company and also ensuring the protection of investors. The Board has adopted a Schedule of Matters which sets out the particular duties of the Board. Such reserved powers include the following:

• strategic matters;

• risk assessment and management including reporting, compliance, governance, monitoring and control and financial reporting;

• statutory obligations and public disclosure;

• declaring Company dividends;

• managing the Company's advisers; and

• other matters having a material effect on the Company.

The Directors have access to the advice and services of the Administrator, who is responsible to the Board for ensuring that Board procedures are followed and that it complies with Companies Law and applicable rules and regulations of the GFSC and the London Stock Exchange. Where necessary, in carrying out their duties, the Directors may seek independent professional advice and services at the expense of the Company. The Company maintains appropriate Directors' and Officers' liability insurance in respect of legal action against its Directors should it occur.

The Board's responsibilities for the Annual Report are set out in the Directors' Responsibility Statement. The Board is also responsible for issuing appropriate Interim Reports and other price-sensitive public reports.

One of the key criteria the Company uses when selecting non-executive Directors is their confirmation prior to their appointment that they will be able to allocate sufficient time to the Company to discharge their responsibilities in a timely and effective manner. New Directors will receive an induction on joining the Board and the Board assesses the training needs of Directors on an annual basis.

The Board formally met five times during the year and ad-hoc Board meetings were called in relation to specific events or to issue approvals, often at short notice and did not necessarily require full attendance. Each Board member receives a comprehensive Board pack at least five days prior to each meeting which incorporates a formal agenda together with supporting papers for items to be discussed at the meeting. Directors are encouraged when they are unable to attend a meeting to give the Chairman their views and comments on matters to be discussed, in advance. Representatives of the Investment Adviser attend relevant sections of the Board meetings by invitation and the Directors also liaise with the Investment Adviser whenever required and there is regular contact outside the Board meeting schedule.

Attendance is further set out below:

Footnotes

(1) Absent due to a family bereavement

(2) Appointed 7 March 2019

(3) As an Observer only

(4) Appointed 25 March 2020

A quorum is comprised of any two or more members of the Board from time to time, to perform administrative and other routine functions on behalf of the Board, subject to such limitations as the Board may expressly impose on this committee from time to time.

Conflicts of interest

A Director has a duty to avoid a situation in which he or she has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company. The Board requires Directors to declare all appointments and other situations that could result in a possible conflict of interest and has adopted appropriate procedures to manage and, if appropriate, approve any such conflicts. The Board is satisfied that there is no compromise to the independence of those Directors who have appointments on the boards of, or relationships with, companies outside the Company.

Committees of the Board

The Board believes that it and its committees have an appropriate composition and blend of backgrounds, skills and experience to discharge their duties effectively. The Board is of the view that no one individual or small group dominates decision-making. The Board keeps its membership, and that of its committees, under review to ensure that an acceptable balance is maintained, and that the collective skills and experience of its members continue to be refreshed. It is satisfied that all Directors have sufficient time to devote to their roles and that undue reliance is not placed on any individual.

Each committee of the Board has written terms of reference, approved by the Board, summarising its objectives, remit and powers, which are available on the Company's website (www.lbow.co.uk) and are reviewed on an annual basis. Each Committee has access to such external advice as it may consider appropriate.

All committee members are provided with an appropriate induction on joining their respective committees, as well as on-going access to training. Minutes of all meetings of the committees are made available to all Directors and feedback from each of the committees is provided to the Board by the respective committee Chairmen at the next Board meeting.

The Board and its committees are supplied with regular, comprehensive and timely information in a form and of a quality that enables them to discharge their duties effectively. All Directors are able to make further enquiries of the Investment Adviser and Administrator whenever necessary, and have access to the services of the Company Secretary.

Audit and Operational Risk Committee

The Audit and Operational Risk Committee is chaired by Mr Firth and also comprises Mr Beevor and Mr Meader, who held office throughout the year, and Mr Huntley who was appointed on 25 March 2020. Other Directors have a standing invitation to attend meetings. However, their attendance at these meetings is as an observer only.  The Chairman of the Audit and Operational Risk Committee, the Investment Adviser and the external auditor, Deloitte LLP, have held discussions regarding the audit approach and identified risks. The external auditors attend Audit and Operational Risk Committee meetings and a private meeting is routinely held with the external auditors to afford them the opportunity of discussions without the presence of the Investment Adviser or Administrator. The Audit and Operational Risk Committee activities are contained in the Report of the Audit and Operational Risk Committee.

Investment Risk Committee

The Investment Risk Committee was established on 21 September 2017 and is chaired by Mr Meader and also comprises Mr Beevor, Mr Huntley, Mr Firth and Mr Mortimer, a representative of the Investment Adviser. With the exception of Mr Firth who was appointed on 7 March 2019, all committee members held office throughout the year. Mr Christie, a representative of Luxco, retired from the Investment Risk Committee on 7 March 2019. The Investment Risk Committee meets not less than twice a year pursuant to its terms of reference which are available on the Company's website.

The Investment Risk Committee's remit is to monitor the risks associated with the investments and to monitor the compliance of the investment portfolio with the investment restrictions of the Group. The Investment Risk Committee reviews the performance and investment risks associated with the individual investments, the effectiveness of the Investment Adviser's investment underwriting and investment structuring/documentation processes and its compliance with them, and the effectiveness of the Investment Adviser's investment management and risk reporting processes, challenging where appropriate.

Management Engagement Committee

The Management Engagement Committee is chaired by Mr Perry and also comprises Mr Firth and Mr Meader, all of whom held office throughout the year. The Management Engagement Committee meets not less than once a year pursuant to its terms of reference which are available on the Company's website.

The Management Engagement Committee's main function is to review and make recommendations in relation to the Company's service providers. The Management Engagement Committee will review, in particular, any proposed amendment to the Investment Advisory Agreement and will keep under review the performance of the Investment Adviser (including effective and active monitoring and supervision of the activities of the Investment Adviser) in its role as investment adviser to the Company as well as the performance of other principal service providers to the Company. The Audit and Operational Risk Committee also report on their relationship with the external auditor.

Nomination Committee

The Nomination Committee is chaired by Mr Perry and also comprises Mr Beevor, Mr Firth, Mr Huntley and Mr Meader, all of whom held office throughout the year. The Nomination Committee meets at least once a year pursuant to its terms of reference and last met on 12 December 2019. The Nomination Committee's remit is to review regularly the structure, size and composition of the Board, to give full consideration to succession planning for Directors, to keep under review the leadership needs of the Company and be responsible for identifying and nominating, for the approval of the Board, candidates to fill Board vacancies as and when they arise.

Board Performance Evaluation

In accordance with Provision 26 of the AIC Code, the Board is required to undertake a formal and rigorous evaluation of its performance on an annual basis. The Board believes that annual evaluations are helpful and provide a valuable opportunity for continuous improvement. Such an evaluation of the performance of the Board as whole, the Audit and Operational Risk Committee, the Nomination Committee, the Management Engagement Committee, the Remuneration Committee, individual Directors and the Chairman is carried out under the mandate of the Nomination Committee.

The internal evaluation conducted by the Nomination Committee during the year took the form of self-appraisal questionnaires and discussion to determine effectiveness and performance as well as the Directors' continued independence. The responses were consolidated and anonymised and common themes identified in order for the Nomination Committee to determine key actions and next steps for improving Board and Committee effectiveness and performance.

The evaluation concluded that the Board is performing satisfactorily and is acquitting its responsibilities well in the areas reviewed which incorporated: investment matters, Board composition and independence, relationships and communication, shareholder value, knowledge and skills, Board processes and the performance of the Chairman. The Board believes that the current mix of skills, experience, knowledge and age of the Directors is appropriate to the requirements of the Company.

The Nominations Committee has also reviewed the composition, structure and diversity of the Board, the independence of the Directors and whether each of the Directors has sufficient time available to discharge their duties effectively. The Committee and the Board confirm that they believe that the Board has an appropriate mix of skills and backgrounds and that all Directors should be considered as Independent in accordance with the provisions of the AIC Code and have the time available to discharge their duties effectively.

Accordingly, the Board recommends that shareholders vote in favour of the re-election of all Directors at the forthcoming AGM.

Succession Planning

The Nomination Committee recognises the continuing importance of planning for the future and ensuring that succession plans are in place. To assist with the Board agreed succession plan the Nomination Committee has engaged an executive search consultant, OSA, who have been asked to provide a list of suitable candidates.

In considering appointments to the Board, the Nomination Committee takes into account the ongoing requirements of the Company and evaluates the balance of skills, experience, independence, knowledge and time commitments of each candidate. Appointments are therefore made on personal merit and against objective criteria with the aim of bringing new skills and different perspectives to the Board whilst taking into account the existing balance of knowledge, experience and diversity. The Board also believes that diversity of experience and approach, including gender diversity, amongst Board members is of great importance and it is the Company's policy to give careful consideration to issues of Board balance and diversity when making new appointments.

Remuneration Committee

The Remuneration Committee is chaired by Mr Huntley and also comprises Mr Beevor and Mr Meader all of whom held office from 12 December 2019 when the Remuneration Committee was formed. The Remuneration Committee is responsible for recommending and monitoring the level and structure of remuneration for all the Directors, including any compensation payments, taking into account the time commitments and responsibilities of Directors and any other factors which it deems necessary, including the recommendations of the AIC Code. The Remuneration Committee meets at least once a year pursuant to its terms of reference and last met on 12 December 2019. During this meeting the Remuneration Committee conducted a review of the level of Directors' fees and recommended to the Board that the Directors' fees should remain unchanged.

Internal Control and Financial Reporting

The Directors acknowledge that they are responsible for establishing and maintaining the Group's and the Company's systems of internal controls and reviewing its effectiveness. Internal control systems are designed to manage rather than eliminate the failure to achieve business objectives and can only provide reasonable but not absolute assurance against material misstatements or loss. The Directors can confirm they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The key procedures which have been established to provide internal control are:

• the Board has delegated the day to day operations of the Group and Company to the Administrator and Investment Adviser, however, it remains accountable for all functions it delegates;

• the Board clearly defines the duties and responsibilities of the Company's agents and advisers and appointments are made by the Board after due and careful consideration. The Board monitors the on-going performance of such agents and advisers and will continue to do so through the Management Engagement Committee;

• the Board monitors the actions of the Investment Adviser at regular Board meetings and is also given frequent updates on developments arising from the operations and strategic direction of the underlying borrowers; and

• the Administrator provides administration and company secretarial services to the Company. The Administrator maintains a system of internal control on which it reports to the Board.

The Board has reviewed the need for an internal audit function and has decided that the systems and procedures employed by the Administrator and Investment Adviser, including their own internal controls and procedures, provide sufficient assurance that an appropriate level of risk management and internal control, which safeguards shareholders' investment and the Group's assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary.

Internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes. The Administrator and Investment Adviser both operate risk controlled frameworks on a continual ongoing basis within a regulated environment. The Administrator undertakes an ISAE 3402: Assurance Report on Controls at a Service Organisation audit annually which is provided to the Board when finalised. The Administrator also formally reports to the Board quarterly through a compliance report. The Investment Adviser formally reports to the Board quarterly, including relevant updates regarding their policies and procedures, and also engages with the Board on an ad-hoc basis as required. No weaknesses or failing within the Administrator or Investment Adviser have been identified.

The systems of control referred to above are designed to ensure effectiveness and efficient operation, internal control and compliance with laws and regulations. In establishing the systems of internal control, regard is paid to the materiality of relevant risks, the likelihood of costs being incurred and costs of control. It follows, therefore, that the systems of internal control can only provide reasonable but not absolute assurance against the risk of material misstatement or loss. This process has been in place for the year under review and up to the date of approval of this Annual Report and Financial Statements. It is reviewed by the Board and is in accordance with the FRC's internal control publication: Guidance on Risk Management, Internal Control and Related Financial and Business Reporting.

The Company has delegated the provision of services to external service providers whose work is overseen by the Management Engagement Committee at its regular scheduled meetings. Each year a detailed review of performance pursuant to their terms of engagement is undertaken by the Management Engagement Committee. An on-site review of the Investment Adviser and an assessment of the Luxembourg Administrator were undertaken in February 2019. The conclusions of these reviews were highly satisfactory, providing assurance to the Board. In addition, the Company maintains a website which contains comprehensive information, including regulatory announcements, share price information, financial reports, investment objectives and strategy, investor contacts and information on the Board.

Investment Advisory Agreement

The Company has entered into an agreement with the Investment Adviser. This sets out the Investment Adviser's key responsibilities, which include identifying and recommending suitable investments for the Company to enter into and negotiating on behalf of the Company the terms on which such investments will be made. The Investment Adviser is also responsible to the Board for all issues relating to the maintenance and monitoring of existing investments.

In accordance with Listing Rule 15.6.2(2) R and having formally appraised the performance and resources of the Investment Adviser, in the opinion of the Directors the continuing appointment of the Investment Adviser on the terms agreed is in the interests of the shareholders as a whole.

Whistleblowing

The Board has considered the AIC Code recommendations in respect of arrangements by which staff of the Investment Adviser or Administrator may, in confidence, raise concerns within their respective organisations about possible improprieties in matters of financial reporting or other matters.

It has concluded that adequate arrangements are in place for the proportionate and independent investigation of such matters and, where necessary, for appropriate follow-up action to be taken within their organisation.

Principal risks and uncertainties

During the year the Board has overseen the continued enhancement of the Group's risk management framework and risk culture. This has been achieved via the Audit and Operational Risk Committee and Investment Risk Committee. The Committees undertook a robust assessment of the Group's principal risks and associated risk appetite, taking into account changes in the business and the external environment.

The Board, through these committees, thoroughly considers the process for identifying, evaluating and managing any significant risks faced by the Company on an on-going basis and these risks are reported and discussed at Board meetings. This ensures that effective controls are in place to mitigate these risks and that a satisfactory compliance regime exists to ensure all applicable local and international laws and regulations are adhered to.

The Board can confirm that it has undertaken a robust assessment of the principal risks facing the Company. In its most recent assessment of risks the Board has considered the particular risks that the Company may face as a result of Covid-19 either directly or indirectly. The risks set out below represent a snapshot of the Company's current principal risk profile. These risks have been ranked considering the magnitude of potential impact, probability and taking into account the effectiveness of existing controls. This is not an exhaustive list of all risks the Company faces. As the macro environment changes and country and industry circumstances evolve, new risks may arise or existing risks may recede or the rankings of these risks may change.

For each material risk, the likelihood and potential impact are identified. The Company's financial instrument risks are discussed in Note 11 to the Financial Statements.

The Directors have identified the following as the key risks faced by the Company as the impact of Covid-19 begins to be felt on the UK and global economies:

Risks relating to Group structure:

The Company's principal risk factors are fully set out in the Company's 2018 Prospectus, available on the Company's website (www.lbow.co.uk) and should be reviewed by shareholders.

Emerging risks are regularly considered to assess any potential impact on the Group and to determine whether any actions are required. Emerging risks include those related to regulatory/legislative change and macroeconomic and political change.

In summary, the above risks are mitigated and managed by the Board through continual review, policy setting and updating of the Company's detailed risk matrix to ensure that procedures are in place with the intention of minimising the impact of the above mentioned risks. The Board relies on periodic reports provided by the Investment Adviser and Administrator regarding risks that the Group faces. When required, experts will be employed to gather information, including property surveyors, tax advisers, legal advisers, and environmental advisers.

By order of the Board

Report of the Audit and Operational Risk Committee

The Audit and Operational Risk Committee, chaired by Mr Firth, operates within clearly defined terms of reference (which are available from the Company's website) and includes all matters indicated by Disclosure and Transparency Rule 7.1, the AIC Code and the UK Code. Its other members are Mr Beevor and Mr Meader, who held office throughout the year and Mr Huntley who was appointed on 25 March 2020. Only independent Directors can serve on the Audit and Operational Risk Committee. Members of the Audit and Operational Risk Committee must be independent of the Company's external auditor and Investment Adviser. The Audit and Operational Risk Committee will meet no less than twice a year, and at such other times as the Audit and Operational Risk Committee Chairman shall require.

The Committee members have considerable financial and business experience and the Board has determined that the membership as a whole has sufficient recent and relevant sector and financial experience to discharge its responsibilities. The Board has taken note of the requirement that at least one member of the Audit and Operational Risk Committee should have recent and relevant financial experience and is satisfied that the Audit and Operational Risk Committee is properly constituted in that respect, with all members being highly experienced and, in particular, with one member having a background as a chartered accountant.

The duties of the Audit and Operational Risk Committee in discharging its responsibilities include reviewing the Annual Report and Consolidated Financial Statements and the Interim Report, the system of internal controls, and the terms of appointment of the Company's independent auditor together with their remuneration. It is also the formal forum through which the auditor will report to the Board of Directors. The objectivity of the auditor is reviewed by the Audit and Operational Risk Committee which will also review the terms under which the external auditor is appointed to perform non-audit services and the fees paid to them or their affiliated firms overseas.

Responsibilities

The main duties of the Audit and Operational Risk Committee are:

• reviewing and monitoring the integrity of the Financial Statements of the Group and any formal announcements relating to the Group's financial performance, reviewing significant financial reporting judgements contained in them;

• reporting to the Board on the appropriateness of the Group's accounting policies and practices including critical judgement areas;

• reviewing any draft impairment reviews of the Group's investments prepared by the Investment Adviser, and making a recommendation to the Board on any impairment in the value of the Group's investments;

• meeting regularly with the external auditor to review their proposed audit plan and the subsequent audit report and assess the effectiveness of the audit process and the levels of fees paid in respect of both audit and non-audit work;

• making recommendations to the Board in relation to the appointment, re-appointment or removal of the external auditor and approving their remuneration and the terms of their engagement;

• monitoring and reviewing annually the auditor's independence, objectivity, expertise, resources, qualification and non-audit work;

• considering annually whether there is a need for the Company and its Group to have its own internal audit function;

• monitoring the internal financial control and risk management systems on which the Company and its Group is reliant;

• reviewing and considering the UK Code, the AIC Code, the FRC Guidance on Audit and Operational Risk Committees; and

• reviewing the risks facing the Group and monitoring the risk matrix.

The Audit and Operational Risk Committee is required to report its findings formally to the Board, identifying any matters on which it considers that action or improvement is needed, and make recommendations on the steps to be taken.

The external auditor is invited to attend the Audit and Operational Risk Committee meetings as the Directors deem appropriate and the Audit and Operational Risk Committee has the opportunity to meet the external auditor without representatives of the Investment Adviser or the Administrator being present at least once per year.

Financial Reporting

The primary role of the Audit and Operational Risk Committee in relation to the financial reporting is to review with the Administrator, Investment Adviser and the auditor the appropriateness of the Interim Report and Annual Report and Consolidated Financial Statements, concentrating on, amongst other matters:

• the quality and acceptability of accounting policies and practices;

• the clarity of the disclosures and compliance with financial reporting standards and relevant financial and governance reporting requirements;

• material areas in which significant judgements have been applied or where here has been discussion with the external auditor including the going concern and viability statement;

• whether the Annual Report and Consolidated Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's performance, business model and strategy; and

• any correspondence from regulators in relation to the Group's financial reporting.

To aid its review, the Audit and Operational Risk Committee considers reports from the Administrator and Investment Adviser and also reports from the auditor on the outcome of their annual audit. The Audit and Operational Risk Committee supports the external auditor and recognises the necessary professional scepticism their role requires.

Meetings

During the year ended 31 January 2020, the Audit and Operational Risk Committee met formally on 5 occasions. The matters discussed at those meetings include:

• review of the terms of reference of the Audit and Operational Risk Committee for approval by the Board;

• review of the accounting policies and format of the Financial Statements;

• detailed review of the Annual Report and Financial Statements, Interim Report and recommendation for approval by the Board including the going concern basis and the viability statement;

• review of the Group's risk matrix;

• review and approval of the audit plan and final Audit and Operational Risk Committee report of the auditor;

• discussion and approval of the fee for the external audit;

• assessment of the independence of the external auditor;

• assessment of the effectiveness of the external audit process as described below; and

• review of the Group's key risks and internal controls.

Primary Area of Judgement

The Audit and Operational Risk Committee determined that the key risk of misstatement of the Group's Financial Statements relates to the recoverability of the loans, in the context of the judgements necessary to evaluate any related impairment of the loans.

The Group's loans are the key value driver for the Group's NAV and interest income. Judgements over the level of any impairment and recoverability of loan interest could significantly affect the NAV.

The Board reviews the compliance of all loans with terms and covenants at each Board meeting. The Board also receives updates from the Investment Adviser regarding the trading performance for each borrower, the borrower's performance under the loans and on the general UK property market. As a result, the Board is able to determine the level, if any, of any impairment to the loans.

The Audit and Operational Risk Committee notes that critical judgements have been made in relation to the assessment of the staging of the loans together with the estimation of the probability of default and also the loss given default.

The incorrect treatment of any arrangement, exit and prepayment fees and the impact of loan impairments in the effective interest rate calculations may significantly affect the level of income recorded in the year thus affecting the level of distributable income.

The Audit and Operational Risk Committee focused their work on disclosures required in the Annual Report following new requirements under the AIC Code, emerging risks, environmental, social and governance matters and on subsequent event disclosures which considered the potential impact of Covid-19 on the Group.

The Audit and Operational Risk Committee also focused on continuing to embed IFRS 9 and in particular the assessment of the credit risk changes, probability of default and loss given default in relation to the loan portfolio. The Audit and Operational Risk Committee has reviewed detailed impairment analysis and current loan performance reports prepared by the Investment Adviser together with the consideration of the current collateral values underpinning the loan portfolio.

The Audit and Operational Risk Committee also considered the potential for impairment of the portfolio in the longer term, in accordance with IFRS 9, based on an agreed credit rating methodology which is benchmarked against the Group's previous experience in managing senior debt and whole loan portfolios.

The Audit and Operational Risk Committee also reviewed the income recognition and the treatment of arrangement and exit fees which were based on effective interest rate calculations prepared by the Investment Adviser and the Administrator. The main assumptions of the calculations were that none of the loans were impaired and that each loan would be repaid at the end of the agreed loan term. These were discussed at the Audit and Operational Risk Committee meeting to review the Annual Report, with the Investment Adviser, the Administrator and Auditor. The Audit and Operational Risk Committee is satisfied that the Group interest income has been recognised in line with the requirements of IFRS.

The Audit and Operational Risk Committee has reviewed the judgements and estimations in determining the fair value of prepayment options embedded within the contracts for loans advanced. The key factors considered in the valuation of prepayment options include the exercise price, the interest rate of the host loan contract, differential to current market interest rates, the risk free rate of interest, contractual terms of the prepayment option, and the expected term of the option. In response to these factors it has been evaluated that the probability of exercise by the borrower is low and the timing of exercise is indeterminable. As a result, the Audit and Operational Risk Committee has concluded that it is appropriate no value is attributed to embedded prepayment options.

Risk Management

The Company's risk assessment process and the way in which significant business risks are managed is a key area of focus for the Audit and Operational Risk Committee. The work of the Audit and Operational Risk Committee is driven primarily by the Group's assessment of its principal risks and uncertainties as set out in the Corporate Governance Report, and it receives reports from the Investment Adviser and Administrator on the Group's risk evaluation process and reviews changes to significant risks identified. Furthermore, the Investment Risk Committee monitors the risks associated with the investments and the compliance of the investment portfolio with the investment restrictions of the Group.

Internal Audit

The Audit and Operational Risk Committee continues to review the need for an internal audit function and has decided that the systems and procedures employed by the Administrator and the Investment Adviser, including their own internal controls and procedures, provide sufficient assurance that an appropriate level of risk management and internal control, which safeguards shareholders' investment and the Group's assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary.

External Audit

Deloitte LLP has been the Company's external auditor since the Company's inception. This is the seventh audit period.

The external auditor is required to rotate the audit partner every five years. The current Deloitte LLP lead audit partner, Mr David Becker, started his tenure in 2020 (in respect of the year ended 31 January 2020) and his current rotation will end with the audit of the 2024 Annual Report and Financial Statements. The Audit and Operational Risk Committee shall give advance notice of any retendering plans within the Annual Report. The Audit and Operational Risk Committee has considered the re-appointment of the auditor and decided not to put the provision of the external audit out to tender at this time.

The objectivity of the auditor is reviewed by the Audit and Operational Risk Committee which also reviews the terms under which the external auditor may be appointed to perform non-audit services. The Audit and Operational Risk Committee reviews the scope and results of the audit, its cost effectiveness and the independence and objectivity of the auditor, with particular regard to any non-audit work that the auditor may undertake. In order to safeguard auditor independence and objectivity, the Audit and Operational Risk Committee ensures that any other advisory and/or consulting services provided by the external auditor do not conflict with its statutory audit responsibilities. Advisory and/or consulting services will generally only cover reviews of Interim Reports and capital raising work. Any non-audit services conducted by the auditor outside of these areas will require the consent of the Audit and Operational Risk Committee before being initiated.

The external auditor may not undertake any work for the Group in respect of the following matters - preparation of the Financial Statements, provision of investment advice, taking management decisions or advocacy work in adversarial situations.

The Committee reviews the scope and results of the audit, its cost effectiveness and the independence and objectivity of the auditor, with particular regard to the level of non-audit fees.

The Committee regularly monitors non-audit services being provided by the external auditor to ensure there is no impairment to their independence or objectivity.

Notwithstanding such services, the Audit and Operational Risk Committee considers Deloitte LLP to be independent of the Company and that the provision of such non-audit services is not a threat to the objectivity and independence of the conduct of the audit as appropriate safeguards are in place.

To fulfil its responsibility regarding the independence of the auditor, the Audit and Operational Risk Committee will consider:

• discussions with or reports from the auditor describing its arrangements to identify, report and manage any conflicts of interest; and

• the extent of non-audit services provided by the auditor and arrangements for ensuring the independence and objectivity and robustness and perceptiveness of the auditor and their handling of key accounting and audit judgements.

To assess the effectiveness of the auditor, the Audit and Operational Risk Committee will review:

• the auditor's fulfilment of the agreed audit plan and variations from it;

• discussions or reports highlighting the major issues that arose during the course of the audit;

• feedback from other service providers evaluating the performance of the audit team;

• arrangements for ensuring independence and objectivity;

• the robustness of the auditor in handling key accounting and audit judgements; and

• a summary of the FRC's Audit Quality Review report for Deloitte and discuss the findings with the audit partner to determine if any of the indicators in that report had particular relevance to this year's audit of the Company. Specifically the Audit and Operational Risk Committee discuss the extent of the auditors' challenge of estimates and assumptions in key areas of judgement, including asset valuations and impairment testing and the quality of the firm's audit of revenue.

The Audit and Operational Risk Committee is satisfied with Deloitte LLP's effectiveness and independence as auditor having considered the degree of diligence and professional scepticism demonstrated by them. Having carried out the review described above and having satisfied itself that the auditor remains independent and effective, the Audit and Operational Risk Committee has recommended to the Board that Deloitte LLP be reappointed as auditor for the year ending 31 January 2021.

The Audit and Operational Risk Committee has provided the Board with its recommendation to the shareholders on the re-appointment of Deloitte LLP as external auditor which will be put to shareholders at the Annual General Meeting.

Subject to the Covid-19 restrictions being lifted, the Chairman of the Audit and Operational Risk Committee will be available at the Annual General Meeting to answer any questions about the work of the Committee.

On behalf of the Audit and Operational Risk Committee

Patrick Firth

Chairman of the Audit and Operational Risk Committee

6 May 2020

Independent Auditor's Report

to the Members of ICG-Longbow Senior Secured UK Property Debt Investments Limited

Report on the audit of the financial statements

1. Opinion

We have audited the financial statements which comprise:

· the Consolidated Statement of Comprehensive Income;

· the Consolidated Statement of Financial Position;

· the Consolidated Statement of Changes in Equity;

· the Consolidated Statement of Cash flows; and

· the related notes 1 to 19.

The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.

2. Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report.

We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council's (the 'FRC's') Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

3. Summary of our audit approach

4. Conclusions relating to going concern, principal risks and viability statement

We are also required to report whether the directors' statement relating to the prospects of the Group required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit. 

5. Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

5.1. The assessment of expected credit losses (ECL) on loans advanced ↔

5.2. Inappropriate recognition of income from loans ↔

6. Our application of materiality

6.1. Materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

6.2. Performance materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group Performance Materiality was set at 70% of group materiality for the 2020 audit (2019: 70%). In determining performance materiality, we considered the following factors:

· our risk assessment, including our assessment of the group's overall control environment; and

· our past experience of the audit, which has indicated a low number of corrected and uncorrected misstatements identified in prior periods.

6.3. Error reporting threshold

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £119,000 (2019: £120,200), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

7. An overview of the scope of our audit

7.1. Scoping

Our audit was scoped by obtaining an understanding of the Group and its environment, including internal control, and assessing the risks of material misstatement. Audit work to respond to the risks of material misstatement was performed directly by the group audit engagement team.

Our audit scope provides full scope audit coverage of 100% of the Group's income from loans, loans advanced and 100% of net assets. Our audit focus was on the parent entity and its wholly owned subsidiary, ICG-Longbow Senior Debt S.A., which holds the portfolio of loan investments of the Group.

At the group level, we have tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no additional risks of material misstatement on the aggregated financial information of the Group. 

7.2. Our consideration of the control environment

The accounting function for the Group is provided by Ocorian Administration (Guernsey) Limited and Ocorian Services (Luxembourg) S.à. r.l ('the Administrators'). We have obtained an understanding of relevant controls at the Administrators that are relevant to the accounting cycles (business processes) of the Group.

8. Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information include where we conclude that:

· Fair, balanced and understandable - the statement given by the directors that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or

· Audit committee reporting - the section describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee; or

· Directors' statement of compliance with the UK Corporate Governance Code - the parts of the directors' statement required under the Listing Rules relating to the company's compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R (2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

9. Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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

10. Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

11. Matters on which we are required to report by exception

11.1. Adequacy of explanations received and accounting records

Under the Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:

· we have not received all the information and explanations we require for our audit; or

· proper accounting records have not been kept by the parent company; or

· the financial statements are not in agreement with the accounting records.

12. Use of our report

This report is made solely to the company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

David Becker

For and on behalf of Deloitte LLP

Recognised Auditor

St Peter Port, Guernsey

6 May 2020

Consolidated Statement of Comprehensive Income

For the year ended 31 January 2020

All items within the above statement have been derived from continuing activities.

The Group has no recognised gains or losses for either period other than those included in the results above, therefore, no separate statement of other comprehensive income has been prepared.

The accompanying notes form an integral part of these Consolidated Financial Statements.

Consolidated Statement of Financial Position

The Financial Statements were approved by the Board of Directors on 4 May 2020 and signed on their behalf by:

Consolidated Statement of Changes in Equity

For the year ended 31 January 2020

For the year ended 31 January 2019

Consolidated Statement of Cash Flows

For the year ended 31 January 2020

Notes to the Consolidated Financial Statements

1. General information

ICG-Longbow Senior Secured UK Property Debt Investments Limited is a non-cellular company limited by shares and was incorporated in Guernsey under the Companies Law on 29 November 2012 with registered number 55917 as a closed-ended investment company. With effect from 29 April 2019, the registered office address is Floor 2, PO Box 286, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 4LY.

The Company's shares were admitted to the Premium Segment of the Official List and to trading on the Main Market of the London Stock Exchange on 5 February 2013.

The Consolidated Financial Statements comprise the Financial Statements of the Group as at 31 January 2020.

The investment objective of the Group, as approved by the shareholders of the Company, is to construct a portfolio of UK real estate debt related investments predominantly comprising loans secured by first ranking fixed charges against commercial property investments, with the aim of providing shareholders with attractive, quarterly dividends, capital preservation and, over the longer term, a degree of capital appreciation.

The Investment Adviser, which trades under the name of ICG-Longbow, is authorised and regulated by the FCA. The assets of the Company are managed by the Board under the advice of the Investment Adviser under the terms of the Investment Advisory Agreement.

2. Accounting policies

a) Basis of preparation

The Financial Statements for the year ended 31 January 2020 have been prepared in accordance with IFRS as adopted in the EU and the Companies Law and on the historical cost basis as modified for the measurement of certain financial instruments.

In the preparation of these Financial Statements, the Company followed the same accounting policies and methods of computation as compared with those applied in the previous year.

At the date of approval of these Financial Statements, the Group has not applied the following new and revised IFRS standards and interpretations that have been issued but yet are not effective:

The Directors do not anticipate that the adoption of these standards and interpretations in future periods will have a significant impact on the Consolidated Financial Statements of the Group.

b) Going concern

The Directors, at the time of approving the Financial Statements, have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of at least twelve months from the date of approval of the Consolidated Financial Statements and do not consider there to be any threat to the going concern status of the Group. The Directors have considered the immediate and potential impacts of Covid-19 on the Company by performing additional severe stress tests on the Group's cash flow forecasts covering at least the next 12 months and are satisfied that the Group can meet its liabilities as they fall due over this period. Further detail regarding the assumptions adopted when forming this conclusion can be found in the Viability Statement.

c) Basis of consolidation

The Consolidated Financial Statements incorporate the Financial Statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 January each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the Consolidated Statement of Comprehensive Income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

The Group is not considered an 'Investment Entity' as defined by IFRS 10 Consolidated Financial Statements as it does not meet the criteria set out therein, specifically it does not measure and evaluate the performance of substantially all of its investments on a fair value basis.

d) Functional and presentation currency

The Financial Statements are presented in Pounds Sterling, which is the functional currency as well as the presentation currency as all the Group's investments and most transactions are denominated in Pounds Sterling.

e) Foreign currencies

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in Consolidated Statement of Comprehensive Income.

f) Interest income

In accordance with IFRS 9 interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition. Arrangement and exit fees which are considered to be an integral part of the contract are included in the effective interest rate calculation.

Interest on cash and cash equivalents is recognised on an accruals basis.

g) Other fee income

Other fee income includes prepayment and other fees due under the contractual terms of the debt instruments. Such fees and related cash receipts are not considered to form an integral part of the effective interest rate and are accounted for on an accruals basis.

h) Operating expenses

Operating expenses are the Group's costs incurred in connection with the on-going management of the Group's investments and administrative costs. Operating expenses are accounted for on an accruals basis.

i) Taxation

The Company is exempt from Guernsey taxation under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 for which it pays an annual fee of £1,200 which is included within other expenses. The Company is required to apply annually to obtain exempt status for the purposes of Guernsey Taxation.

The Group is liable to Luxembourg tax arising on the results and capitalisation of its Luxembourg registered entity which is included in tax charge for the year (see Note 4).

j) Dividends

Dividends payable are recognised as distributions in the financial statements when the Company's obligation to make payment has been established. Dividends paid during the year are disclosed in the Consolidated Statement of Changes in Equity. Dividends declared post year end are disclosed in Note 19.

k) Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors, as a whole. The key measure of performance used by the Board to assess the Group's performance and to allocate resources is the total return on the Group's Net Asset Value, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the Financial Statements.

For management purposes, the Group is organised into one main operating segment, being the provision of a diversified portfolio of UK commercial property backed senior debt investments.

The majority of the Group's income is derived from loans secured on commercial and residential property in the United Kingdom.

Due to the Group's nature it has no employees.

The Group's results do not vary significantly during reporting periods as a result of seasonal activity.

l) Financial instruments

Financial assets and financial liabilities are recognised in the Group's Consolidated Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are only offset and the net amount reported in the Consolidated Statement of Financial Position and Consolidated Statement of Comprehensive Income when there is a currently enforceable legal right to offset the recognised amounts and the Group intends to settle on a net basis or realise the asset and liability simultaneously.

Financial assets

All financial assets are recognised and de-recognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Financial assets are classified into the following specified categories: financial assets at fair value through profit or loss, financial assets at fair value through Other Comprehensive Income or financial assets at amortised cost. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

The Group's financial assets currently comprise loans, trade and other receivables and cash and cash equivalents.

i) Loans and receivables