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 2021

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 2021 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

for the year ended 31 January 2021

Portfolio

£117.34 Million(1) committed to nine loans as at 31 January 2021

£110.07 Million invested in nine loans as at 7 May 2021

Performance

(1) The difference between this amount and the principal advanced figure, that is disclosed in note 5, to date of £109,319,992, represents outstanding amounts available 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 eighth Annual Report for the Group, for the year ended 31 January 2021.

The financial year was dominated by the outbreak, impact of and response to Covid-19. The effects on society, businesses and the economy have been unprecedented in peace time, and while many of the immediate shocks have now been addressed, the UK will continue to deal with the after effects on employment, fiscal and monetary policy and the public finances for several years to come. In this context, the possible effects of Brexit - now finally resolved some four years after the referendum - may seem immaterial by comparison.

Despite the overall resilience of the loan portfolio, the Company's share price fell to a material discount to NAV as a result of the wider market re-rating following the onset of Covid-19. In light of this, and noting feedback received from shareholders on the relative lack of liquidity in the Company's shares and the challenges in growing the Company to ameliorate this, the Board recommended revising the Company's Investment Objective and Policy to allow for an orderly realisation of investments and the return of capital over time to shareholders. This recommendation was approved at an Extraordinary General Meeting on 14 January 2021, and the Company expects to make the first resultant capital distribution during Q2 2021 or early Q3 2021.

Against this turbulent public health and economic backdrop and the above change in Investment Objective and Policy, the Board's principal responsibility to maximise returns to shareholders has remained uppermost in its agenda. It is pleasing, therefore, that the performance of the Company's portfolio continues to show defensive characteristics, during times of such stress, that the original investment parameters were designed to provide. In particular the senior and bilateral-only lending approach has allowed the Investment Manager to retain control over the management of the Company's investments, without reference to third party lenders with possibly competing agendas. This has allowed the Company to provide support to borrowers where necessary and appropriate, but also to generate additional returns through loan repricing and fees.

As a result, I am pleased to report that the Company delivered robust earnings growth, with earnings per share up 21% year on year, and a fully covered dividend during the period. The underlying performance of the Company's portfolio has proved resilient throughout, with no impairments, and more recently some of the Company's investments have seen a notable improvement in their risk positioning, as detailed further in the Investment Manager's Report.

The Board is very much aware that the recommendation at the EGM was not universally supported, with some 23.8% of votes cast against the proposals. While acknowledging the strength of feeling on this issue, I would like to highlight that this opposition came from a small number of shareholders. The Board, having evaluated all alternative options, continues to believe that the proposals represent the best course of action for the Company. The positive endorsement of over 75% of our shareholders and the narrowing of the share price discount to NAV in the period following the announcement provides some support to this view.

The Company enters the realisation period in a position of strength; its financial position and liquidity remains robust and it is well-placed to address any second-order impacts of the Covid-19 pandemic, should they arise. While it is a matter of disappointment to the Board that the Company was unable to grow to the extent we would have wished, the Board and the Investment Manager are satisfied that the Company has to date delivered on its investment objectives and expects to continue to do so while shareholder capital is steadily returned.

Portfolio

At 31 January 2021, the portfolio comprised nine loans with a total principal balance outstanding of £109.3 million.

The Company concluded three new loan investments in the first half of 2020, comprising approximately £28.9 million of commitments in aggregate. Full details of these loans are provided in the following Investment Manager's Report. One of these - the £4.25 million Carrara loan - has since repaid following a sale of the property, generating an attractive return for shareholders given the resultant prepayment fees. No investments were concluded during the second half of the year.

In March 2020 the Company's £21.5 million Meadows loan was repaid in full, together with exit and prepayment fees of approximately £0.7 million, following a sale of the residential site securing the loan. The remaining £11.3 million invested in the BMO Partners loan was repaid in full in October 2020, following a £4.4 million partial repayment earlier in the year. Apart from fulfilling financial commitments made to existing borrowers, no new lending will now be undertaken.

Governance and Management

During the year, the Company's management arrangements were amended and the Company appointed ICG Alternative Investment Limited as external discretionary investment manager, under the Alternative Investment Fund Management Directive (AIFMD) within a remit set by the Board. Previously, the Company was internally managed by the Board and advised by Intermediate Capital Managers Limited (an affiliate of ICG Alternative Investment Limited) under the terms of a non-discretionary investment advisory agreement.

The Board believes that, in conjunction with the other changes set out below, these arrangements will allow for efficiencies in the Company's ongoing operations. There has been no change to the rate of management fees payable by the Company as a result of this amendment.

In tandem with the change of management arrangements, the Company was required to appoint a depositary and accordingly Ocorian Depositary (UK) Limited has been appointed depositary to the Company.

As reported in the Company's interim report and accounts, the Board resolved to simplify its corporate structure by collapsing the Luxembourg subsidiary company which has historically acted as the lender for the Group's investments. These investments will be transferred to the Company, at par, and in a manner that does not cause any adverse tax consequences for the Group or its shareholders. The process of winding up the Luxembourg company has now commenced, which will allow the loan investments to be transferred to the Company. Over time, the Company expects this restructuring to reduce pro forma operating expenses by approximately £200,000 per annum, the benefit of which will support the dividend and process of shareholder capital return in future periods.

The Company also saw some changes to the Board composition during the year. Fiona Le Poidevin was appointed as a non-executive director with effect from 1 September 2020 and was elected to the Board at the Company's AGM on 25 September 2020. Separately, Mark Huntley stood down as a director at the 2020 AGM. Patrick Firth will also stand down as a Director at the 2021 AGM in June. Patrick has been a diligent and astute Chairman of the Audit and Operational Risk Committee since the inception of the Company. On behalf of the Board, I would like to thank both Mark and Patrick for their outstanding contribution to the Company's success over the past eight years since the IPO. We welcome Fiona, who will succeed Patrick as Chair of the Audit and Operational Risk Committee and who brings a wealth of experience and complementary skills to the Board.

As a consequence of the adoption of the orderly realisation policy and the resultant limited future life of the Company, the Board has revised its plans and its guidelines on director and chairman tenure. This is discussed in detail in the Corporate Governance Report.

Post Year End Trading

In April 2021 the Group received a £1.06 million partial prepayment of the Southport Hotel loan. This reduces the outstanding balance of the loan to £15.00 million as at the date of these accounts.

Outlook

In line with the revised Investment Objective and Policy approved by shareholders in the Extraordinary General Meeting in January 2021, the Company is now undertaking an orderly realisation of its investment portfolio. As sufficient funds become available the Board intends to return capital to shareholders, taking account of the Company's working capital requirements and funding commitments.

The portfolio continues to be managed with an intention to achieve a balance between maximising the net value received from the Group's investments and making timely returns to Shareholders. Currently, the expectation is that capital will be returned as and when loans are repaid by the borrowers. As the Investment Manager noted in their report, we currently expect full capital and income payments from all loans and see no reason for any impairments. The table in the Investment Manager's report also sets out the remaining unexpired terms of all loans in the portfolio as at 31 January 2021. As of the date of this report, eight out of the nine loans will be repayable in under two years with the ninth being repayable within two and a half years. While it is not possible to provide precision around the timing of returns of capital to shareholders, because loans may not always be repaid upon their contractual maturity dates, such maturity dates do provide shareholders with a guide to the likely future distribution schedule.

Upon repayment of a loan, we intend to return capital to shareholders as soon as it is practical, subject to the need to retain a buffer for current follow-on commitments and operating expenses. Also, the quantum of any distribution needs to be economic for shareholders. We anticipate seeking to hold a minimum of £5 million in cash in the short term to meet commitments which will reduce over time. This should mean that sufficient capital is available to make our first distribution to shareholders in Q2 or early Q3 2021.

It should be noted that we are aware of some borrowers engaging in early refinancing discussions. Any such refinancing would accelerate the timetable for shareholder distributions. A loan portfolio sale or sale of individual loans is currently considered unlikely but is not ruled out as it would also be a means of accelerating the return of capital to shareholders.

We were pleased to have been able to pay a fully covered dividend last year despite the challenges presented by Covid-19. This remains the case today. Of course, as loans repay, our contracted income will fall. During this orderly realisation phase, it is not the Board's intention to support dividends out of capital but only to continue to pay dividends from our net income. The income from the portfolio as a percentage of NAV is not expected to vary significantly as the portfolio reduces in size. The investment management fee will remain constant as a percentage of NAV. However, once the Company's asset base shrinks materially, our total expense ratio will edge higher. 

We shall keep shareholders updated regularly with progress against our new objective. The Board is grateful to shareholders for their support during a very challenging year and recognises the hard work undertaken by our Investment Manager in a difficult market and in effecting the fundamental change to our investment objective and policy.

Jack Perry

Chairman

7 May 2021

Financial Summary

Performance

· Total income of £9.95 million (31 January 2020: £8.51 million), up 17% on the prior year.

· Profit after tax up 21%, to £7.41 million for the year ended 31 January 2021 (31 January 2020: £6.11 million).

· Earnings per share of 6.11 pence (31 January 2020: 5.04 pence).

· NAV of £119.25 million as at 31 January 2021 (31 January 2020: £119.12 million).

· Total dividends paid or declared for the year ended 31 January 2021 of 6.00 pence per share (31 January 2020: 6.00 pence per share).

· No credit losses or impairments in the investment portfolio.

Dividend

· Total dividends paid or declared for the year ended 31 January 2021 of 6.00 pence per share (31 January 2020: 6.00 pence per share), made up as follows:

o Interim dividend of 1.50 pence per share paid in respect of quarter ended 30 April 2020

o Interim dividend of 1.50 pence per share paid in respect of quarter ended 31 July 2020

o Interim dividend of 1.50 pence per share paid in respect of quarter ended 31 October 2020

o Interim dividend of 1.50 pence per share paid in respect of quarter ended 31 January 2021

Investment Portfolio

· On 14 January 2021 the Company adopted a revised Investment Objective and Policy to allow for an orderly realisation of investments and the return of capital over time to shareholders.

· As at 31 January 2021, the Group's investment portfolio comprised nine loans with an aggregate principal balance of £109.32 million, representing 91.67% of the shareholders' equity (31 January 2020: 10 loans with aggregate principal balance of £120.77 million, representing 101.39% of the shareholders' equity).

· The weighted average coupon on drawn capital, before recognition of arrangement and exit fees, was 7.19% (31 January 2020: 7.51%).

· The portfolio weighted average LTV was 69.3% (31 January 2020: 65.8%), reflecting changes to the composition of the loan portfolio.

· The portfolio weighted average residual term was 1.76 years, of which, on average, 0.72 years remains income protected (31 January 2020: residual term 1.85 years, income protected term 1.01 years).

· As a result of new investment activity and redemptions after the financial year end, the Group's portfolio as at 7 May 2021 comprises nine loans with an aggregate principal balance of £110.07 million.

· The portfolio weighted average LTV as at 7 May 2021 is 70.8%, the weighted average residual loan term is 1.52 years, and the weighted average loan coupon is 7.19%.

· The Directors do not consider there to have been any impairments on loan balances as at 7 May 2021.

For further information, please contact:

Corporate Summary

Investment Objective

In line with the revised Investment Objective and Policy approved by shareholders in the Extraordinary General Meeting in January 2021, the Company is now undertaking an orderly realisation of its investments.

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. The Board resolved to simplify its corporate structure by collapsing the Luxembourg subsidiary company which has historically acted as the lender for the Group's investments. Following year ended 31 January 2021, the process of winding up the Luxembourg company has now commenced.

Investment Manager

During the year, the Company's management arrangements were amended and the Company appointed ICG Alternative Investment Limited as external discretionary investment manager, under the Alternative Investment Fund Management Directive (AIFMD) within a remit set by the Board. Previously, the Company was internally managed by the Board, after receiving advice from Intermediate Capital Managers Limited (an affiliate of ICG Alternative Investment Limited) under the terms of a non-discretionary investment advisory agreement.

Investment Manager's Report

The Investment Manager's Report refers to the performance of the loans and the portfolio for the year to 31 January 2021 and the general market conditions prevailing at that date. The Investment Manager continues to work closely with the Board to ascertain any residual or consequential impacts of the Covid-19 pandemic and associated policy response. Any forward-looking statements in this report reflect the latest information available as at 7 May 2021.

Investment Objective

The investment objective of the Group, as approved by the shareholders of the Company, was revised during the period and is now to conduct an orderly realisation of the assets of the Group.

Summary

At 31 January 2021, the investment portfolio comprised nine loans. Principal activity in the period included:

· Repayment in full of the £21.5 million Meadows loan, together with exit and prepayment fees of £0.7 million;

· Completion of a £7.8 million loan commitment secured on an industrial estate in Knowsley, Merseyside;

· Completion of a £16.9 million commitment secured by an office property in St James's, London;

· Restructure of the Group's Carrara loan into a £4.25 million facility secured by an office property in Leeds, with the subsequent repayment of this loan in full in January 2021;

· Partial £4.4 million repayment, and subsequent £11.3 million full repayment, of the BMO Partners loan.

As a consequence of the above activity, total commitments at period end stood at £117.3 million (31 January 2020: £128.6 million) with the par value of the loan portfolio being £109.3 million (31 January 2020: £120.8 million).

The weighted average loan to value ratio increased to 69.3% (31 January 2020: 65.8%) reflecting the changes to the portfolio composition, in particular the repayment of the lowly-leveraged BMO loan. The weighted average coupon rate now stands at 7.19% (31 January 2020: 7.51%), with returns supplemented by contractual arrangement and exit fees.

Following the year end, the Company received a £1.1 million partial repayment of the Southport loan. As such, as at the date of this report, the Group's portfolio totals nine investments with an aggregate committed balance of £116.7 million, of which £110.1 million is drawn. The weighted average LTV is 70.8%, with a weighted average interest coupon of 7.19% and weighted average loan maturity of 1.52 years.

Group Performance

The Investment Manager's primary focus during the period was monitoring the performance and outlook for its existing loan positions in the light of the Covid-19 disruption. We summarise the status of each investment in more detail below but would highlight that we continue to believe the Company has a satisfactory security position on all of its investments and does not expect any shortfall in interest, principal or fees on any of the investments.

In March 2020 the Company closed a £7.75 million commitment secured by a multi-let industrial estate in Knowsley, Merseyside, with a business plan to construct a new, pre-let industrial unit on part of the site whilst managing the existing units for long-term value. The Company provided a capital expenditure commitment in support of this plan, which has now been fully drawn with the new unit now complete and tenanted.

In July 2020, the Company was able to take advantage of the notable reduction in debt market liquidity caused by Covid-19 to refresh its investment portfolio, closing a £16.9 million loan commitment secured by a prime office in St James's, London, originally leased to a UK Government agency and with a plan to refurbish. The Company is participating in a larger £22.3 million loan alongside another client of the Investment Manager.

Additionally, the Company completed an increase and extension to its Carrara loan facility, taking the balance to £4.25 million secured by the full freehold interest in a recently refurbished and fully let office building in Leeds. The property was subsequently sold in January 2021, with the loan repaying in full along with a prepayment fee.

During the year the Company received a partial and then full repayment of the BMO Partners facility, following a refinancing of the portfolio assets by third-party lenders.

As a result of these portfolio changes, the Group's loan commitments now total approximately £117.3 million, of which £109.3 million is drawn. Portfolio LTV remains robust and defensive at 69.3%, all secured by first ranking mortgage investments. The weighted average loan coupon of 7.19% is supplemented by contractual arrangement and exit fees, along with the possibility of ad hoc returns from repricing loans or receiving prepayment fees.

Notwithstanding the challenges presented by Covid-19, our borrowers have generally made solid progress against their business plans:

· The sponsor of the LBS loan completed a refurbishment of the property and secured a letting for the majority of the space at a rental level well ahead of our expectations. This led to a material improvement in value, with the LTV ratio reducing to 57.1%.

· The sponsor of the Affinity loan continued its refurbishment of vacant space at the property and saw positive new leasing and lease renewal activity during the year.

· The RoyaleLife sponsor secured new planning permissions across its portfolio which, combined with ongoing expenditure on its properties, resulted in a valuation increase of approximately 15%. Following ongoing drawdown of its capex facilities along with interest capitalisation, LTV is now 75.4%.

· The Knowsley borrower secured a key lease regear and, following year end, completed its capex programme.

The most challenging investments remain the Southport loan (due to disruption in the hotel sector) and the Quattro loan, where interest arrears persist but we have seen positive steps forward in business plan delivery. In the case of the Southport loan, we have received repayment of previously capitalised loan interest; in the case of Quattro the level of arrears has been reduced. In each case we have line of sight to performance being regularised and do not believe the Company will suffer any loss or impairment on the facilities. These investments are considered further below.

Portfolio

Investment Portfolio as at 31 January 2021

(1) For the Southport and RoyaleLife facilities, Balance outstanding includes capitalised interest. Total balances may differ due to rounding.

(2) For the Southport and Knowsley facilities, LTV is calculated based on the most recent third party valuation of the properties, plus capital expenditure works at cost

Economy and Financial Market Update

UK economic data saw significant volatility in 2020, with unprecedented GDP decline - highlighted by a 19.8% quarter-on-quarter fall in Q2 2020 - offset by an equally unparalleled rebound, with the economy growing by 16.9% in Q3 2020. UK GDP finished the year some 7.3% below its pre-pandemic level.

Moving into 2021, economic data has generally surprised to the upside given the return to a national lockdown in the UK from late-December. In its February Monetary Policy Report, the Bank of England was forecasting a Q1 2021 GDP fall of 4.2%; subsequently BoE policymakers have suggested the reduction is likely to be much more modest. This was reflected in the data, with the January 2021 GDP decline revised from 2.9% to 2.2%, followed by an uptick in February to a 0.4% month-on-month rise.

Given the magnitude of economic disruption caused by Covid-19 and the subsequent scale of the policy response, the effects of the UK reaching the end of the Brexit transition period has been difficult to quantify. Imports to and exports from the EU fell markedly in January 2021, on the face of it concerning but partially explained by stockpiling in the run up to year end. Exports to the EU rebounded by 46.6% in February, according to the ONS, but it is still too early to assess the overall effect.

Labour markets have also proved far more resilient than initial expectations, clearly aided by the furlough scheme. Payroll employment rose modestly in January and February 2021, with underlying wage growth of 2.5% - 3% per annum, according to the ONS. Unemployment at the end of February 2021 was estimated at 4.9% and, whilst a slight fall from the January figure of 5.0%, it is not expected to peak until Q4 2021 (at 6.5%, according to the Office for Budgetary Responsibility). The rate is still notably lower than following the financial crisis when it exceeded 8%. It is also robust compared to the likes of Germany (6%), France (8%) and the Eurozone as a whole (8.1%).

With business and consumer confidence surveys at their highest levels since the start of the pandemic, driven by the UK's successful vaccination programme, the economic outlook appears more positive than it has been for some months. Nonetheless we are mindful that much of the damage caused by Covid-19 - to the economy, labour market and public finances - has not fully filtered through.

Occupational Demand/Supply

Offices

A major narrative during the year has been the extent to which the enforced 'work from home' diktat, with employees becoming accustomed to flexible working, may shape longer term trends in the office market and particularly the level of occupational demand. Whilst many workers and companies are eager to see a return to the office, others will take a more flexible approach - PwC, BP and Nationwide have all announced that employees will be able to work from home more regularly. Whilst this points to the potential for lower space requirements, this could be offset by reducing densities (i.e. offering more space per worker and greater amenity provision) reversing a decade-long trend in the other direction.

Nonetheless the most recent data point to demand falling, particularly in London, where vacancy has risen sharply as a marked slowdown in leasing activity combined with tenants shedding space has materially affected net absorption. JLL reported a vacancy rate of 7.5% at the end of 2020, above the 20-year average. Since then, CBRE has reported that vacancy reached 8.8% in February 2021, the highest level since the dot-com crash. This is very likely to rise further in the near term. The impact on rents was most heavily felt in the City Core, with net effective levels down 5% in H2 2020, per Avison Young. The West End and Midtown were relatively less affected.

In the regional office markets the story is somewhat different. Manchester is the only market seeing a significant increase in supply, according to Savills, in part due to strong development activity in the city centre adding to available Grade A space. Headline rents in five of the 'Big Six' regional cities increased in 2020, led by Birmingham and Leeds, up 7.2% and 6.7% respectively. Many regional markets have seen only modest development activity and the pipeline remains limited, which should help support rental levels in future.

The rise in London vacancy will clearly temper rental values in that market but, on a national basis, market observers remain relatively unmoved; the latest IPF consensus forecasts from February 2021 suggest a decline in office rents (nationally) of a modest 2.1% in 2021, returning to growth thereafter and averaging 1% per annum for the period 2021 - 2025.

Industrial

Last year we highlighted the structural tailwinds benefiting the UK industrial market, and there is no doubt that Covid-19 has helped drive demand for the sector further. CBRE reports that industrial and warehouse take up reached 43 million sq ft in 2020, a new record high. Nearly half of this was in just two regions - the South East and East Midlands. Available space unsurprisingly fell, despite the delivery of over 8 million square feet of speculative space, with Colliers reporting a national vacancy rate in the warehouse market of only 5.8%, and a growing shortage of stock in some locations.

This activity translated into continued growth in rental levels, with prime rents increasing in every quarter of 2020, according to CBRE, and annual rental growth of 2.6%.

Retail

The Company has little exposure to the well-documented travails of the UK retail market, with the sector's exposure to structural changes in how consumers shop, together with oversized physical estates, continuing to provide challenges. The decline has been exacerbated by the marked drop off in non-food retail sales, with fashion hit particularly hard. According to Cushman & Wakefield, fashion retailers saw monthly sales declines averaging 37% between March and September 2020, compared to the equivalent period in the prior year. For some operators the silver lining has been the rise in online sales, which accounted for nearly 30% of the overall total in 2020.

The impact on rental levels has been stark. According to Savills, average net effective rents (i.e. after adjusting for incentives such as rent free periods) fell by 15.4% in 2020 across shopping centre and high street units. Cushman & Wakefield place the rental decline on the high street at a still higher level, of 19% year-on-year.

While many retailers are clearly struggling, landlords in the sector have also been hit hard as tenants have used the Government's moratorium on commercial evictions to withhold rent payment, or to pay on their own terms. Many have worked consensually with landlords to agree payment plans, but some retailers have taken a unilateral approach. Knight Frank estimate that market-wide, 50% of 2020 retail rents were still owed going into 2021.

It is important to note that not all retail is the same and not all retailers have suffered. Supermarkets have continued to trade well, as have discounters and many bulky goods retailers - Kingfisher plc reported a 44% rise in adjusted pre-tax profits in the year to 31 January 2021, driven by a 13% rise in B&Q sales in the UK. As a result of this we have seen continued buyer demand for foodstore investments, and more recently a rise in out-of-town retail park transactions.

Hotel

Perhaps the starkest indication of the effect of the pandemic on UK hotel markets is in occupancy figures. According to PwC, London hotels showed occupancy of 28.8% in 2020, compared to 83.4% in 2019, with much of this likely to have been weighted to Q1. Regional hotel occupancy also fell, from 75.4% to 37.5%, although domestic travel and 'staycations' over the summer saw some regions benefit from exceptionally strong trade, with markets such as Bournemouth, Brighton and Plymouth experiencing occupancy levels of over 90% over large parts of August, according to Savills.

Last year we reported that both London and the UK regions experienced both room rate and RevPAR growth, but rates collapsed in 2020. PwC report that average daily room rates in London fell from £154 to £99 per night, with regional markets falling from £71 to £61 per night. The question for operators, investors and lenders is whether, and how soon, trading in this sector will bounce back to something in line with pre-pandemic levels. There is a widely-held view that pent-up demand and ongoing international travel restrictions will lead to a favourable summer for parts of the UK hotel market, particularly in the regions, which should bode well for the Company's Southport Hotel loan. Parts of the London market in particular, reliant on international tourism and business travel, may continue to suffer.

Property Investment Market

Commercial property sales volumes were understandably muted during the year. Q2 2020 saw only £4.2 billion of transactions, according to Jones Lang LaSalle (JLL), the lowest quarterly level since Q2 2009 and the height of the financial crisis. Markets were notably brighter in Q4 2020 however, with sales of £19.4 billion being up 6% on the prior year and 10% above the 10 year average for the period. This led to an overall volume of investments in 2020 of £42.7 billion, some 15% down on the relatively sedate 2019 figure. By comparison, JLL note that 10-year average volumes stand at £52 billion.

One of the notable impacts of Covid-19 on the property markets has been in reinforcing pre-existing structural changes and trends. As such it is perhaps unsurprising that industrial property (seen as resilient to and in some instance benefiting from Covid-19  effects) had a comparatively strong year, with £8.3 billion of sales concluded, up 43% on 2019. Approximately £16.6 billion of offices were traded, and in the sector perhaps most affected by Covid-19, hotel sales totalled only £1.7 billion, the lowest level since 2009. Similarly the shopping centre market remained in almost total paralysis, with Knight Frank reporting only £340 million of trades, just 10% of the long-term average, with only five deals concluded in excess of £20 million.

In terms of returns, the MSCI index showed total returns for industrial property of 10.3% in the 12 months to February 2021, an almost mirror image of retail property returns, which were minus 10.1%. Total returns for office properties were negative 1.7% on the year.

Finance Markets

Outstanding debt to the UK property markets, as reported to the Bank of England, rose by 2.8% in the year to January 2021, to £167.6 billion. This appears somewhat counterintuitive given the lack of material transactional activity in property markets. We attribute this growth in large part to borrowers drawing down on pre-existing funding lines (where they were able to do so), as evidenced by over £7 billion of net new lending reported in the three months from March 2020. There is also likely to have been an effect from borrowers agreeing payment holidays or capitalising interest, particularly in the retail and hospitality sectors.

Net new lending fell by £1.8 billion in Q4 2020, likely indicative of caution following the introduction of the tiering system and the second UK lockdown; this continued into January 2021 albeit February showed a modest bounce back. We continue to expect finance markets to be relatively sedate in the coming year, particularly amongst UK clearing banks, although there remain substantial pockets of liquidity particularly amongst so-called alternative lenders, notably challenger banks, insurers and debt funds.

We did observe a material change in loan pricing during 2020, with senior loans of up to 60% LTV seeing credit margins widen by 50-100 basis points, and higher LTV loans perhaps 100-200 basis points wider. At the same time, LTVs have fallen as risk appetite has waned, and we have seen improved structural features including interest reserves - to protect against possible non-payment of tenant rents - and higher levels of amortisation.

In large part liquidity in the finance markets was reserved for those sectors seen as more resilient to Covid-19, in particular industrial and warehousing property, residential for rent and food retail. This has broadened more recently, with greater activity returning to office markets and parts of the retail warehouse sector.

Whilst we have not seen any published data on the matter, we are anecdotally aware that lenders across the markets have worked collaboratively with their borrowers to agree covenant waivers, interest deferrals and payment holidays to help their customers address the challenges presented by Covid-19. The Company has taken a similar approach in a limited number of cases to its own portfolio, where it has been appropriate to do so. As the UK steadily emerges from restrictions and markets reopen, we expect lenders to take a firmer hand in asserting their rights under loans.

Portfolio Outlook

Over 60% of the investment portfolio security has been originated or revalued post Covid-19, and for the balance we have seen either positive business plan progress or visibility towards a repayment. As a result, we are satisfied with the underlying security position of all of the Company's investments. With a weighted average LTV exposure of 69.3% at year end and a highest exposure of 80.1%, the portfolio has proved able to withstand the sharp contraction in the UK economy and stressed market conditions seen during the period, as detailed further in the Viability Statement.

The investments which have proved most problematic during the period, being the Quattro, Southport and RoyaleLife loans, have each seen credit improvements in the latter part of the year which has continued post-year end, with a £1.1 million partial repayment of the Southport loan.

The Company is now pursuing an orderly realisation of its investments, with the portfolio largely on a stable footing. As such part of our focus has turned to managing the portfolio towards exit, where possible supporting borrowers in their business plan delivery to allow for timely sales or refinancing strategies, whilst ensuring the portfolio continues to generate sufficient coupon and fees to allow for a fully-covered dividend for as long as possible. In doing so we will continue to balance maximisation of returns from the loans against timely return of capital to shareholders.

Loan Portfolio

A summary of each of the individual loans as at 31 January 2021 is set out below:

ICG Real Estate

7 May 2021

Investment Policy

Investment objective

The investment objective of the Group, as approved by the shareholders of the Company, was revised during the year and is now to conduct an orderly realisation of the assets of the Group.

Investment policy

The assets of the Group will be realised in an orderly manner, returning cash to Shareholders at such times and in such manner as the Board may, in its absolute discretion, determine. The Board will endeavour to realise all the Group's investments in a manner that achieves a balance between maximising the net value received from those investments and making timely returns to Shareholders. The Group may not make any new investments save that:

· investments may be made to honour commitments under existing contractual arrangements or to

preserve the value of the underlying property security; and

· cash held by the Group may be invested 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 may utilise borrowings from time to time to finance its working capital requirements provided

such borrowings will not exceed an amount equal to 20% of the Group's Net Asset Value immediately

following the drawdown of the borrowings.

The Group will continue to comply with the restrictions imposed by the Listing Rules in force from time

to time.

Any material change to the Company'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 Chairman in November 2012

Experience: Jack is an independent non-executive board member and adviser to a number of public and private companies. He is currently Chairman of European Assets Trust PLC and a director and chairman of the audit committee of the Witan Investment Trust plc. He previously served as Chief Executive of Scottish Enterprise, Scotland's enterprise, innovation and investment agency for six years until November 2009.

Prior to this he was the managing partner of Ernst & Young in Glasgow. In addition, he was Regional Industry Leader for Scotland and Northern Ireland for Ernst & Young's Technology & Communications and Consumer Products practices. Jack is a former Chairman of the Confederation of British Industry (CBI) Scotland and was a member of the CBI President's Committee.

He is a former non-executive director of FTSE 250 company, Robert Wiseman Dairies PLC and Capital for Enterprise Ltd. He also served as a member of the Advisory Committee of Barclays UK & Ireland Private Bank.

Jack is a member of the Institute of Chartered Accountants of Scotland.

Committee Membership: Nomination Committee, Management Engagement Committee, Remuneration 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 a non-executive director of Empiric Student Property plc and a Trustee Director of the Legal & General UK Senior Pension Scheme. From 2004 to 2013 he was a non-executive director at Unite Group Plc and from 2013 to 2020 a non-executive director of Metropolitan Thames Valley Housing. 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 35 years' experience in real estate both in the UK and overseas.

Committee Membership: Audit and Operational Risk Committee, Management Engagement 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 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, India Capital Growth Fund Limited and NextEnergy Solar Fund Limited.

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

Fiona Le Poidevin - Non-Executive Independent Director

Appointment: Appointed to the Board in September 2020

Experience: Fiona is a non-executive director with a particular focus on listed investment companies and private equity. A Chartered Director, Fellow of the Institute of Directors and Chartered Accountant (FCA), Fiona has over 23 years' experience working in financial services in both London and the Channel Islands across the accounting and tax professions with experience in strategy, marketing, PR and the regulatory and listed company environments.

Until the end of July 2020, Fiona was Chief Executive Officer of The International Stock Exchange Group Limited, a company listed on The International Stock Exchange, where she was responsible for the commercial aspects of the exchange group's operation. Previously Fiona was Chief Executive of Guernsey Finance, the promotional body for Guernsey's finance industry internationally, and prior to this she was an auditor and latterly tax adviser at PwC (London and Channel Islands) and KPMG (Channel Islands) for over 13 years.

Fiona is a member of the AIC Channel Islands Committee and the IoD Guernsey Committee and non-executive Chairman of a local Sea Scouts group.

Committee Membership: Audit and Operational Risk Committee, Nomination Committee, Management Engagement 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 Canaccord Genuity based in Guernsey, prior to which he was Chief Executive of Corazon Capital. He has 35 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: Volta Finance Limited and Schroder Oriental 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. Paul is a resident of Guernsey.

Committee Membership: Audit and Operational 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 2021. 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 is 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. As reported in the Company's interim report and accounts, the Board resolved to simplify its corporate structure by collapsing the Luxembourg subsidiary company which has historically acted as the lender for the Group's investments. These investments have now been transferred to the Company, at par, and in a manner that does not cause any adverse tax consequences for the Group or its shareholders. The process of winding up the Luxembourg company has now commenced, and over time the Company expects this restructuring to reduce pro forma operating expenses by approximately £200,000 per annum, the benefit of which will support the dividend and process of shareholder capital return in future periods.

Principal Activities

In line with the revised Investment Objective and Policy approved by shareholders in the Extraordinary General Meeting in January 2021, the Company is now undertaking an orderly realisation of its investments. As sufficient funds become available the Board intends to return capital to shareholders, taking account of the Company's working capital requirements and funding commitments.

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 Manager'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 2021 and 2020 are detailed below:

(1) Shareholding is held via PCAs

(2) Mark Huntley retired 25 September 2020

(3) Fiona Le Poidevin appointed 1 September 2020

Directors' beneficial interests in the shares of the Company as at 13 April 2021, being the most current information available, 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. While the Directors consider it valuable to retain this authority, in light of the process to effect an orderly realisation of assets, it is considered unlikely that this authority would be exercised.

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 2021, 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 31 March 2021, 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 2021 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 a non‐EU domiciled alternative investment fund and appointed ICG Alternative Investments Limited as its discretionary Investment Manager on 25 November 2020. Prior to this appointment the Company was internally managed. 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, are required to satisfy themselves that they 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. At the EGM of the Company on 14 January 2021, following a recommendation from the Board published in a circular on 16 December 2020, shareholders voted by the requisite majority in favour of a change to the Company's Objectives and Investment Policy which would lead to an orderly realisation of the Company's assets and a return of capital to shareholders.

It is intended that the investments will be realised as and when the loans fall due, and the Directors expect that

the investments will be held to maturity with the last loan repaying by the end of 2023. Whilst the Directors are satisfied that the Company has adequate resources to continue in operation throughout the realisation period and to meet all liabilities as they fall due, given the Company is now in a managed wind down the Directors consider it appropriate to adopt a basis other than a going concern in preparing the consolidated financial statements. No material adjustments arose as a result of ceasing to apply the going concern basis.

Viability Statement

The AIC Code requires that, the Directors make a viability statement in which they assess the prospects of the Group over a period longer than the 12 months required by the going concern provision.

A change in Investment Policy was approved by the shareholders at the EGM on 14 January 2021 with the resultant intention that the Company undergo an orderly realisation of assets, returning capital to shareholders. For this reason, and as discussed above, the Company is preparing the consolidated financial statement on a basis other than a going concern due to the Company being in a managed wind down. Reflecting the maturity profile of the Company's investments, the Board expects the wind down of the Company to be completed within two to three years, although this cannot be guaranteed.

Cashflow projections have been prepared based on the Board's current intention to hold all investments to maturity, and in two scenarios reflecting expected maturity and legal maturity. The Board intends to return surplus capital to investors following each loan repayment, whilst it remains prudent to do so and taking into account the commitments and liabilities of the Company at the time.

Having conducted a robust analysis of the above scenarios, the Directors remain satisfied that the Group can, in all quarters, meet its liabilities as they fall due over the period under consideration (to January 2024). The Company expects to maintain positive cashflows in all but the final quarter, and intends to distribute surplus net profits by way of dividend whilst it remains prudent to do so.

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, following changes in Guernsey regulations and substance requirements for self-managed alternative investment funds, the Board decided to appoint ICG Alternative Investments Ltd (ICG AIL) (a sister company of the incumbent Investment Adviser, Intermediate Capital Managers Limited) as its discretionary Investment Manager. The Board was satisfied that ICG AIL had the requisite procedures, controls and approvals to fulfil the role and that the same ICG Real Estate team would continue to support the Company as they had done whilst acting for the Investment Adviser. The Board and the Investment Manager have agreed a remit and operating framework which is fully aligned to the Company's Investment Policy and Objectives.

Following the outbreak of the Covid-19 Pandemic and its continuing impact on the Company's share price, which has maintained a material discount to NAV, and acknowledging the consequential difficulty in delivering growth (a key objective based on shareholder feedback), the Board decided to approach shareholders to recommend that the Company be placed into an orderly realisation. The Board was satisfied that, after consultation with major shareholders, such measures were in the best interests of the Company and its shareholders by offering shareholders some certainty as to returns in the short term faced with the uncertainty of being able to raise further capital necessary to deliver the original investment objectives in the longer term. The Board further believe that, given the nature and uncertainty of the secondary loan market in UK commercial property finance, an orderly realisation through repayment at maturity currently offers better returns than asset sales. As a result of the decision to wind down the Company the Board is reviewing its composition and succession arrangements and is expected to reduce in size in line with the ongoing requirements of the Company.

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 14.00 BST on 28 June 2021 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.

Due to the ongoing Covid-19 pandemic, whilst restrictions in the Bailiwick of Guernsey have been eased, any person arriving into the Bailiwick of Guernsey is presently required to register their journey on a travel tracker and is required to self-isolate for a period of 7 to 21 days upon arrival. In light of the restrictions currently in place, whilst Guernsey based shareholders are permitted to physically attend the AGM, all Shareholders are strongly encouraged to appoint the "Chairman of the Meeting" as their proxy and provide voting instructions in advance of the AGM, in accordance with the instructions explained in the Notice and on the accompanying Form of Proxy. If the Board believes it has become appropriate to make alternative arrangements for the holding of the AGM due to Covid-19, it will ensure that Shareholders are given as much notice as possible. Any further information will be made available by an announcement through a Regulatory Information Service and through the Company's website.

By order of the Board

Jack Perry

Chairman

7 May 2021

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 Manager. 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, whose names are set out in the Board of Directors section, 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.

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, is 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 2021, 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 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 Manager 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.

Following the change in Investment Objective and Policy approved by shareholders in January 2021, the Group is now conducting an orderly realisation of its investments. As such the opportunity to implement material ESG changes across its portfolio is likely to be relatively limited, and ESG considerations are expected to be limited to monitoring the existing investments for their own performance in this area.

Nonetheless the Board continues to believe that it is in shareholders' interests to consider environmental, social and governance factors in monitoring its investments. The parent of the Investment Manager 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 and the monitoring of each investment opportunity.

The parent of the Investment Manager continues to develop its ESG policies and procedures. Its responsible investment policy is available to view at: ICG Responsible Investing Policy

The Board relies on the Investment Manager to apply its Responsible Investment Policy and any associated ESG considerations to the investments of 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. Moreover, as the Group will no longer make any new investments, it is considered unlikely there will be significant opportunities to support borrowers in ESG matters outside of the delivery of existing business plans.

During the challenges presented by Covid-19, the Investment Manager has worked consensually with borrowers to assist them in preserving the social as well as economic value in their business. In particular, the Group agreed to capitalise interest payments on the Southport Hotel and RoyaleLife investments, which are partially or wholly reliant on operating cashflows to service debt. This has allowed the borrowers of those investments greater freedom to manage working capital, meet supplier payments, and retain or furlough staff. The investments are still considered to be well secured and the Group has, therefore, been able to use its strong financial position to assist its borrowers directly in delivering what the Board considers to be a social good.

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 Manager. The Board believes that it has a very constructive relationship with the Investment Manager 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 Manager 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 Manager both formally and informally to ensure the Board remains regularly updated on all issues. Ordinarily, 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 Manager, 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 which is complied with by the Directors of ICG Longbow Senior Secured UK Property Debt Investments Limited and relevant personnel of the Investment Manager.

Board Tenure and Re-election

Four of the five Directors were appointed in November 2012 and Fiona Le Poidevin was appointed on 1 September 2020 therefore no member of the Board has served for longer than nine 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 at each annual general meeting of the Company all Directors shall retire from office and may offer themselves for election or re‐election by the Members. Mr Perry, Mr Beevor, Mr Meader and Mrs Le Poidevin will retire as Directors of the Company in accordance with the Articles and will be put forward for re-election at the forthcoming AGM. Mr Firth will not be offering himself for re-election and will retire from the Board following the AGM.

Any Director who is elected or re-elected at that meeting is treated as continuing in office throughout. If he or she is not elected or re-elected, he or she 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 remains confident that its membership 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.

The Company's policy on Chair tenure is that the Chair should not normally serve longer than nine years as a Director and/or Chair unless it is determined to be in the best interests of the Company, its shareholders and stakeholders. In such circumstances, the independence of the other directors will ensure that the Board as a whole remains independent.

On 14 January 2021, the Company's shareholders voted for the orderly realisation of the Company's assets and the return of capital to shareholders. As the Company now has a finite remaining operating life, not expected to exceed three years, it is considered in the best interests of shareholders and stakeholders to maintain the continuity and experience of the existing Board. In addition, it is considered impractical to attract, recruit and induct new Board members for such a short period of time. Accordingly, the current Chair of the Company, barring unforeseen circumstances, is expected to remain in office until the Company is placed into liquidation. In practice this may mean that his tenure exceeds the recommended nine-year term. Similarly, some other Directors may remain beyond nine years.

Subject to the above, retirements of Directors will take place starting during 2021 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 2020: £50,000). The Chairman of the Audit and Operational Risk Committee is entitled to annual remuneration of £40,000 (31 January 2020: £40,000). The other independent Directors are entitled to annual remuneration of £35,000 (31 January 2020: £35,000).

During the year ended 31 January 2021 and the year ended 31 January 2020, the Directors' remuneration was as follows:

(1) Mark Huntley retired 25 September 2020

(2) Fiona Le Poidevin appointed 1 September 2020

The Company Directors' fees for the year amounted to £199,953 (31 January 2020: £197,500) with outstanding fees of £45,995 due to the Directors at 31 January 2021 (31 January 2020: £49,375) (see Note 13). Total fees for the year to 31 January 2022 are expected to be £176,219.

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 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 Manager attend relevant sections of the Board meetings by invitation and the Directors also liaise with the Investment Manager whenever required and there is regular contact outside of the Board meeting schedule.

Attendance is further set out below:

Footnotes

(1) Resigned 25 September 2020

(2) Mr Perry is not a member of the Audit and Operational Risk Committee and was not a member of the Investment Risk Committee, which was disbanded on 10 December 2020.

(3) Appointed 1 September 2020 at which point 2 Audit and Operational Risk Committee Meetings, 2 Investment Risk Meetings, 1 Nomination Committee Meeting and 1 Management Engagement Committee Meeting had already occurred.

(4) Mrs Le Poidevin was not a member of the Investment Risk Committee which was disbanded on 10 December 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.

An EGM of the Company was held on 14 January 2021. The recommendations at the EGM were not universally supported, with some 23.8% of votes cast against the proposals. The Board, having evaluated all alternative options, continues to believe that the proposals represent the best course of action for the Company. The positive endorsement of over 75% of our shareholders and the narrowing of the share price discount to NAV in the period following the announcement provides some support to this view.

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 Manager 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 Mrs Le Poidevin who was appointed on 25 September 2020. Mr Huntley retired from the committee on 25 September 2020. Mrs Le Poidevin is expected to Chair the Audit and Operational Risk Committee following the AGM on 28 June 2021 at which point Mr. Firth will retire. 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 Manager 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 Manager 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 was chaired by Mr Meader and also comprised Mr Beevor, Mr Firth and Mr Mortimer, a representative of the Investment Manager. Following the appointment of an external Investment Manager, the Investment Risk Committee was disbanded on 10 December 2020 and its remaining duties assumed by the Board as a whole.

The Investment Risk Committee's remit was 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 reviewed 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, Mr Meader, Mr Beevor and Mrs Le Poidevin all of whom, with the exception of Mrs Le Poidevin who was appointed member of the committee on 25 September 2020 and Mr Beevor who was appointed member of the committee on 10 December 2020, 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 Manager (including effective and active monitoring and supervision of the activities of the Investment Manager) in its role as investment manager 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 Meader and Mrs Le Poidevin all of whom, with the exception of Mrs Le Poidevin who was appointed member of the committee on 25 September 2020, held office throughout the year. Mr Huntley retired from the committee on 25 September 2020. The Nomination Committee meets at least once a year pursuant to its terms of reference and last met on 10 December 2020. 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 Directors proposed for re-election 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. During the year the Nomination Committee engaged an executive search consultant, OSA, to assist with recruitment. Members of the Board had interviewed several shortlisted candidates and Mrs Fiona Le Poidevin, the former head of The International Stock Exchange was appointed on 1 September 2020.

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 comprises of Mr Perry, Mr. Meader and Mr Beevor who have held office from 12 December 2019, when the Remuneration Committee was formed, and Mrs Le Poidevin who was appointed to the Committee on 10 December 2020. Mr. Huntley retired from the committee on 25 September 2020 and Mr. Meader was subsequently appointed as the Chairman which has been ratified since the year ended 31 January 2021.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. Due to the restrictions placed on travel to Guernsey during 2020 and onwards, as a result of the Covid-19 pandemic, it had not been possible to form a quorum in Guernsey for the Committee to meet during 2020. Consequently no meetings have been held during the year. The Board have kept the matter of remuneration under observation and the Directors' fees remained unchanged for the year to 31 January 2021. No change in remuneration is proposed for the year to 31 January 2022.

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 Manager, 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 Manager 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.

Internal Control and Financial Reporting

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 Manager, 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 Manager 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 Manager 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 Manager 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 Manager 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. This year due to Covid-19 restrictions, the visit to the Investment Manager has been postponed. 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 Management Agreement

The Company entered into an agreement with the Investment Manager on 25 November 2020 replacing the Investment Advisory Agreement with Intermediate Capital Managers Limited. This sets out the Investment Manager'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 Manager 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 Manager, in the opinion of the Directors the continuing appointment of the Investment Manager 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 Manager 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. Following the appointment of an external Investment Manager, the Investment Risk Committee was disbanded on 10 December 2020 and its remaining duties assumed by the Board as a whole. The Audit and Operational Risk Committee 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 in the past, through these committees, and now through the Audit and Operational Risk Committee and via the Board 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:

The Company's principal risk factors, subject to the recent change in the Investment Policy, 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 Manager and Administrator regarding risks that the Group faces. When required, experts will be employed to gather information, including property surveyors, tax managers, legal managers, and environmental managers.

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, Mr Meader, who held office throughout the year and Mrs Le Poidevin who was appointed on 25 September 2020. Mr Huntley retired from the committee on 25 September 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 Manager. 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 two members being Chartered Accountants.

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 Manager, 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 Manager 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 Manager 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 Manager 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 2021, 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 Manager 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 Manager 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 Manager 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 Manager, 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 Manager and Administrator on the Group's risk evaluation process and reviews changes to significant risks identified. Furthermore, the Investment Risk Committee monitored the risks associated with the investments and the compliance of the investment portfolio with the investment restrictions of the Group. Following the appointment of an external Investment Manager, the Investment Risk Committee was disbanded on 10 December 2020 and its remaining duties assumed by the Board as a whole.

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 Manager, 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 eighth 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, provision of tax 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 key 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 concluded that the auditor implemented sufficiently robust processes to deliver a high quality audit. Accordingly, the Committee recommended to the Board that Deloitte LLP be reappointed as auditor for the year ending 31 January 2022.

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

7 May 2021

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 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 public interest 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. Emphasis of matter - Financial statements prepared other than on a going concern basis

We draw attention to Note 2 b) of the consolidated financial statements, which indicates that the consolidated financial statements have been prepared on a basis other than that of a going concern. Our opinion is not modified in respect of this matter.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

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. Revenue recognition 

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 2021 audit (2020: 70%). In determining performance materiality, we considered the following factors:

· our risk assessment, including our assessment of the group's overall control environment and that we consider it appropriate to rely on controls over a number of business processes; 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 (2020: £119,000), 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

Our audit was scoped by obtaining an understanding of the group and its environment, including internal control, and assessing the risks of material misstatement for the Company and its subsidiary. In assessing the control environment, we also considered the control environments of the key service providers, including the administrators of the group, to whom the board have delegated certain functions for the Company and its subsidiary. Audit work to respond to the risks of material misstatement was performed directly by the group audit team

8. Other information

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

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

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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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.

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. Extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

11.1. Identifying and assessing potential risks related to irregularities

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:

· the nature of the industry and sector, control environment and business performance including the design of the Group's remuneration policies, key drivers for directors' remuneration, bonus levels and performance targets;

·  the Group's own assessment of the risks that irregularities may occur either as a result of fraud or error that was approved by the board on 10 December 2020;

· results of our enquiries of management and the audit committee about their own identification and assessment of the risks of irregularities;

· any matters we identified having obtained and reviewed the Group's documentation of their policies and procedures relating to:

o identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;

o detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;

o the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;

the matters discussed among the audit engagement team and relevant internal specialists, including tax and credit specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas:

· The assessment of expected credit losses (ECL) on loans advanced ; and

· Revenue recognition.

In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.

We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the Companies (Guernsey) Law, 2008 and the Listing Rules.

In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the group's ability to operate or to avoid a material penalty. These included the group's regulatory solvency requirements.

11.2. Audit response to risks identified

As a result of performing the above, we identified assessment of ECL on loans and revenue recognition as key audit matters related to the potential risk of fraud. The key audit matters section of our report explains the matters in more detail and also describes the specific procedures we performed in response to those key audit matters.

In addition to the above, our procedures to respond to risks identified included the following:

· reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;

· enquiring of management and the audit committee concerning actual and potential litigation and claims;

· performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;

· reading minutes of meetings of those charged with governance and reviewing correspondence with Guernsey Financial Services Commission;

· reviewing the disclosures in the Audit and Operational Risk Committee Report; and

· in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Report on other legal and regulatory requirements

12. Corporate Governance Statement

The Listing Rules require us to review the directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Group's compliance with the provisions of the UK Corporate Governance Code specified for our review.

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

13.1. Adequacy of explanations received and accounting records

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

14. Other matters which we are required to address

14.1. Auditor tenure

Following the recommendation of the audit committee, we were re-appointed by board on 25 September 2020 to audit the financial statements for the year ending 31 January 2021 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 8 years, covering the years ending 31 January 2014 to 31 January 2021.

14.2. Consistency of the audit report with the additional report to the audit committee

Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with ISAs (UK).

15. 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

7 May 2021

Consolidated Statement of Comprehensive Income

For the year ended 31 January 2021

All items within the above statement have been derived from discontinuing activities on the basis of the orderly realisation of the company's assets.

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 7 May 2021 and signed on their behalf by:

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

Consolidated Statement of Changes in Equity

For the year ended 31 January 2021

For the year ended 31 January 2020

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

Consolidated Statement of Cash Flows

For the year ended 31 January 2021

The accompanying notes form an integral part of these 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. tThe 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 2021.

In line with the revised Investment Objective and Policy approved by shareholders in the Extraordinary General Meeting in January 2021, the Company is now undertaking an orderly realisation of its investments. As sufficient funds become available the Board intends to return capital to shareholders, taking account of the Company's working capital requirements and funding commitments.

During the year, the Company's management arrangements were amended and the Company appointed ICG Alternative Investment Limited as external discretionary investment manager, under the Alternative Investment Fund Management Directive (AIFMD) within a remit set by the Board. The Board resolved to simplify its corporate structure by collapsing the Luxembourg subsidiary company which has historically acted as the lender for the Group's investments. Following year ended 31 January 2021, the process of winding up the Luxembourg company has now commenced.

2. Accounting policies

a) Basis of preparation

The Financial Statements for the year ended 31 January 2021 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 reviewed the following new and revised IFRS standards and interpretations that have been issued and are now effective:

The adoption of these standards and interpretations has had no impact on the Consolidated Financial Statements of the Group.

b) Going concern

The Directors, at the time of approving the Financial Statements, are required to satisfy themselves that they 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. At the EGM of the Company on 14 January 2021, following a recommendation from the Board published in a circular on 16 December 2020, shareholders voted by the requisite majority in favour of a change to the Company's Objectives and Investment Policy which would lead to an orderly realisation of the Company's assets and a return of capital to shareholders.

It is intended that the investments will be realised as and when the loans fall due, and the Directors expect that the investments will be held to maturity with the last loan repaying by the end of 2023. Whilst the Directors are satisfied that the Company has adequate resources to continue in operation throughout the realisation period and to meet all liabilities as they fall due, given the Company is now in a managed wind down, the Directors consider it appropriate to adopt a basis other than a going concern in preparing the consolidated financial statements. The Directors anticipate that the basis of valuation for investments in future is expected to change to fair value. The Directors do not anticipate this will lead to any material change in their carrying value. No material adjustments arose as a result of ceasing to apply the going concern basis.

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 10.

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

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They comprise loans and trade and other receivables.

They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition, and subsequently carried at amortised cost using the effective interest rate method, less allowance for ECL. The effect of discounting on these trade and other receivables is not considered to be material.

ii) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments with an original maturity of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

iii) Effective interest rate method

The effective interest rate method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

iv) Impairment of financial assets

The Group recognises a loss allowance for ECL on trade receivables and loan receivables. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group always recognises 12-month ECL for trade receivables and loan receivables that fall under stage 1 assets. For stage 2 assets, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. The ECL on these financial assets are estimated using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. The Group has adopted a simplified model for trade receivables where lifetime ECL is estimated and does not materially differ from the twelve-month ECL.

v) Significant increase in credit risk

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument at the reporting date with the risk of a default occurring on the financial instrument at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward‑looking information that is available without undue cost or effort. Forward‑looking information considered includes the future prospects of the industries in which the Group's debtors operate, obtained from economic expert reports, real estate forecasts, financial analysts, governmental bodies, relevant think‑tanks and other similar organisations, as well as consideration of various external sources of actual and forecast economic information that relate to the Group's core operations.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition:

• an actual or expected significant deterioration in the financial instrument's external (if available) or internal credit rating;

• significant deterioration in external market indicators of credit risk for a particular financial instrument,

e.g. a significant increase in the credit spread, the credit default swap prices for the debtor, or the length of time or the extent to which the fair value of a financial asset has been less than its amortised cost;

• existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor's ability to meet its debt obligations;

• an actual or expected significant deterioration in the operating results of the debtor;

• significant increases in credit risk on other financial instruments of the same debtor; or

• an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor's ability to meet its debt obligations.