CONTENTS
Overview
01 Corporate Summary
02 Financial Summary
03 Chairman’s Statement
05 Investment Manager’s Report
09 Investment Policy
Governance
10 Board of Directors
12 Report of the Directors
18 Directors’ Responsibilities Statement
19 Corporate Governance Report
27 Report of the Audit and Risk Committee
30 Independent Auditor’s Report
Financial Statements
36 Statement of Comprehensive Income
37 Statement of Financial Position
38 Statement of Changes In Equity
39 Statement of Cash Flows
40 Notes to the Financial Statements
Other Information
59 Alternative Performance Measures
60 Glossary of Capitalised Defined Terms
62 Directors and General Information
All capitalised terms are defined in the Glossary of Capitalised
Defined Terms on pages 60 to 61 unless separately defined.
01
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
Overview Governance Financial Statements Other Information
CORPORATE SUMMARY
INVESTMENT OBJECTIVE
In line with the revised Investment Objective and Policy approved by shareholders at the Extraordinary General
Meeting in January 2021, the Company is undertaking an orderly realisation of its investments.
STRUCTURE
The Company is a non-cellular company limited by shares and 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 Guernsey Financial Services Commission (GFSC) as a registered closed-ended collective investment
scheme. The Company’s Ordinary Shares were admitted to the premium segment of the Financial Conduct
Authority’s (FCA) 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 share capital comprises the Company’s Ordinary Shares
denominated in Pounds Sterling.
INVESTMENT MANAGER
The Company has appointed ICG Alternative Investment Limited as external discretionary investment manager,
under the Alternative Investment Fund Managers Directive (AIFMD) within a remit set by the Board.
02
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
FINANCIAL SUMMARY
KEY DEVELOPMENTS
O The Company is continuing to pursue an orderly
realisation of its assets, against a backdrop of
difficult market conditions. During the year, the
Company returned £15.7 million of shareholder
capital, equating to 12.9 pence per ordinary share.
O As at the date of this report, the Company has now
returned capital of 44.90 pence per ordinary share to
shareholders, equating to £54.46 million in total.
O The Company is now seeking to realise its
investments through formal enforcement actions
on all of its remaining loans with the appointment
of receivers or administrators over the properties or
borrowers in each case.
O Since 31 July 2023, the Company has increased ECL
provisions by £11.16 million to £32.48 million. This
brings the total ECL provisions made during the year
to 31 January 2024 to £28.54 million. The movement
in ECL provisions during the year to 31 January 2024
comprises:
– £6.31 million in respect of the Southport loan,
increasing the total provision to £8.60 million.
– £15.54 million in respect of the RoyaleLife loan,
increasing the total provision to £17.18 million.
– £6.68 million in respect of the Affinity loan,
increasing the total provision to £6.70 million.
O Total loans outstanding at gross carrying
value, excluding ECL adjustments, amount to
£66.12 million as at 31 January 2024. Total loans
outstanding after ECL adjustments amount to
£33.64 million as at 31 January 2024.
O Following extensive discussion between the Board
and the Investment Manager, their fee will reduce to
0.5% of Net Asset Value from 1% previously.
PERFORMANCE
O NAV of £36.22 million as at 31 January 2024 after
ECL adjustments of £(32.48 million) (31 January
2023: £77.35 million after ECL adjustments of
£(3.94 million)), (31 July 2023: £55.37 million after
ECL adjustments of £(21.32 million)).
O NAV per share as at 31 January 2024 of 29.86 pence.
O (Loss)/profit after tax of £(24.87) million for the
year ended 31 January 2024 (31 January 2023:
£1.96 million).
O (Loss)/Earnings per share for the year of
(20.51) pence (31 January 2023: 1.62 pence).
DIVIDEND
O No dividends were declared for the year ended
31 January 2024 (31 January 2023: 3.6 pence
per share).
O A Dividend of 0.5 pence per share of £0.61 million,
declared in respect of the period ended 31 January
2023 was paid in May 2023.
INVESTMENT PORTFOLIO
O As at 31 January 2024, the Company’s investment
portfolio comprised three loans with an aggregate
principal balance of £58.01 million, and a carrying
value after provision for ECL of £33.64 million
(31 January 2023: five loans with an aggregate
principal balance of £67.4 million, and a carrying
value of £68.96 million).
* Unless stated otherwise, loan balances are stated gross of ECL provisions for impairment. A comparison to the carrying value of the loans
is set out in Note 5 to the accounts.
03
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
CHAIRMAN’S STATEMENT
JACK PERRY CHAIRMAN
INTRODUCTION
On behalf of the Board, I present the
eleventh Annual Report for the Company,
for the year ended 31 January 2024.
The last 12 months have clearly been
very difficult for commercial property and
finance markets. The headwinds have
been well documented with conflicts in
Ukraine and the Middle East, inflationary
pressures and a tightening of monetary
policy across most western economies
creating uncertainty and volatility in many
markets. In the UK, rising short- and
long-term interest rates, combined with
valuation uncertainties, have led to a
severe slowdown in commercial property
transaction volumes which has continued
into 2024.
At the end of 2023 the UK slipped into a
technical recession and, while monthly
data for 2024 suggest a return to limited
GDP growth, economic and property
market conditions are widely expected to
remain sluggish in the near term.
Focusing on the sectors relevant to the
Company’s remaining investments, 2023
is likely to have been one of the worst
years on record for the office sector,
housing markets having been impacted
by higher mortgage costs, while hotel
transactions were also at a 10-year low,
as the Investment Manager notes below.
Offices have undoubtedly been affected
by negative sentiment, including from
the USA where high vacancy rates across
key metropolitan markets and rising
costs of finance have led to widespread
loan defaults and significant valuation
declines. While UK and European
markets typically have higher occupancy
rates than their US peers, investor views
on the sector remain heavily bearish.
In the context of the above, shareholders
will be aware that this has been a difficult
period for the Company as it seeks
to realise its remaining investments
in what continue to be challenging
market conditions. While the Company’s
Northlands loan repaid during the year
with ahead of target returns due to
default interest and fees, the Company
has, through enforcement processes,
taken control away from the borrowers of
all assets securing the remaining loans.
Those assets are either on the market for
sale or being readied for sale.
It is important to be clear with
shareholders that as the Company’s
remaining investments are impaired
with receivers or administrators in place,
the only exit route is through sale of the
underlying assets or loans themselves –
refinancing by the borrowers is no longer
a plausible route to exit. This exposes
the Company to the potential for further
delay in realisations, with conditions not
supportive of quick or easy asset sales.
As I set out in our Interim Report, an
illiquid market with few buyers is clearly
unhelpful for any seller, and it is not
clear how long it may take for liquidity to
improve materially. Buyers are under no
pressure to acquire assets and demand
steep discounts, as well as being able
to stretch out buying processes where
there is a lack of competitive bidding.
Accordingly, the market environment
for the Company to exit its remaining
investments is expected to remain
challenging in the near term.
Shareholders will recall that, in
recognition of the poor market conditions
and falling property values, as at 31 July
2023 we recognised Expected Credit
Loss (ECL) allowances against our three
remaining assets equivalent to 17.57
pence per share. Reflecting the continuing
difficult market conditions, which have
prevailed since then, along with agency
advice and indicative bidding levels for
the remaining properties, the Board has
determined it necessary to make further
provision for impairment against the
Company’s remaining loans, totalling
5.96 pence per share, as set out further
below. This brings the total ECL allowance
recognised during the year ended
31 January 2024 to 23.53 pence per share.
The total provision for ECL against the
remaining investments, including those
raised in prior periods, is 26.77 pence
per share.
The carrying values as at 31 January 2024
included in this report and accounts have
been, as highlighted above, established
in a market facing a continued period of
uncertainty, reduced credit availability
and deteriorating values in many sectors.
Accordingly, shareholders’ attention
is drawn to the risks to valuations as
discussed in the principal risks and notes
to the financial statements. The Board
believes that the stress analysis gives
some guidance to the possible impact
of further deterioration in the value of
the underlying properties securing its
investment portfolio, noting that any
further deterioration may not be limited
to the examples given.
Overview Governance Financial Statements Other Information
04
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
CHAIRMAN’S STATEMENT (CONTINUED)
As a consequence of the difficult sales
environment for the remaining assets,
the Board and Investment Manager
have been focused on seeking to drive
operating performance at property level
as well as seeking efficiencies within the
Company. In particular, I am aware that
shareholders have been eager to see
improved alignment of the Investment
Management fee structure. Accordingly,
as a result of extensive discussion
between the Board and the Investment
Manager, their fee will reduce to 0.5% of
Net Asset Value from 1% previously. This
halving of the investment management
fee will result in meaningful savings for
shareholders over the remaining life of
the Company and will apply from today’s
date. This is discussed further below and
in note 13 to the accounts.
PORTFOLIO
At 31 January 2024, the portfolio
comprised three loans with a total
principal balance outstanding of
£58.01 million (before impairment).
During the year the Company received
staged repayments, and ultimately full
redemption, of the £9.6 million balance
of the Northlands loan. With fees and
default interest charges, this realised
returns for shareholders modestly
ahead of underwritten levels.
As highlighted above, exit processes are
underway for the remaining portfolio
loans, although in order to avoid having
to accept a ‘forced sale’ price, some of
these may be protracted. The outlook
for the timing of the redemption of
the RoyaleLife loan, in particular, is
uncertain, and various options are being
explored by the Investment Manager as
set out below. The property securing
the Affinity loan is being readied for
sale following some leasing success,
although conditions for the office sector
remain difficult. The Southport hotel
securing our loan continues to attract
interest; however, interested parties
are under no competitive pressure
to accelerate their processes. This is
discussed further in the Investment
Manager’s report below.
DIVIDEND
The Company paid a 0.50 pence per
share dividend in May 2023, covering
the three months to 31 January 2023.
Given the current status of the portfolio,
the Board considers it unlikely that any
further dividends will be declared which
is in line with previous communications
to the market.
GOVERNANCE AND MANAGEMENT
As mentioned above, the Board is
acutely aware that shareholders
additionally wish to see a reduction
in central costs and overheads as the
Company’s portfolio continues to shrink
and that this includes the costs of the
Board itself. In this crucial stage of
the Company’s winding up process,
the Board and I feel that retaining the
varied skillsets of all the Directors is
critical to ensuring the best outturn for
shareholders. The Directors’ fees have
remained unchanged in the past year, as
they have for the past six years, despite
inflationary pressures and the intensity
of oversight required of the remaining
investments.
OUTLOOK
In our Interim Report and accounts
I wrote to you highlighting that the
Board expects to have to make difficult
decisions on the remaining investments
in the context of property market
conditions which remain challenging.
Despite a somewhat improved economic
backdrop I have to report that we have
not seen any improvement since that
time: liquidity remains constrained,
and the market environment is not
conducive to quick and easy exits. In my
discussions with shareholders during
the year, most of you have highlighted a
wish for an orderly realisation avoiding
the forced sale of assets and this
has been uppermost in the minds of
the Board as we seek to balance the
acceleration of sales processes with
optimising the value to be realised from
the remaining investments.
During our regular dialogue with major
shareholders over the past year, we
have acknowledged the frustration you
have with the apparent lack of progress
in realising loans, combined with the
disappointment of having to recognise
further substantial impairment
provisions and associated poor share
price performance. As I have highlighted
previously, regrettably there is no
easy way to accelerate realisations
without compromising unduly on
price. As a result, the Board’s focus
is on actively managing the remaining
assets to deliver value, to control costs
and to continue to seek the optimal
recovery possible. We will continue to
consult shareholders through our final
wind down.
JACK PERRY
Chairman
8 May 2024
05
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
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 2024,
and the general market conditions prevailing at that date. Any
forward-looking statements in this report reflect the latest
information available as at 1 May 2024.
INVESTMENT OBJECTIVE
The investment objective of the Company, as approved by
its shareholders in January 2021, is to conduct an orderly
realisation of the assets of the Company.
SUMMARY
As at 31 January 2024 the Company had three investments
remaining, all of which are being managed and realised
through enforcement processes. This report provides
a summary update on the realisation process for each
investment, and steps being taken by the Investment Manager
to secure optimum outcomes.
At the year end, and as discussed further below, the Company
made further provisions for impairment against each of its
remaining loans reflecting deteriorating market conditions
and property values. The aggregate carrying value of the
investments is now £33.64 million, or 27.73 pence per
ordinary share, against the aggregate principal advanced of
£58.01 million.
COMPANY PERFORMANCE
During the period, the Company received a series of partial
repayments of the Northlands loan, following sales of certain of
the portfolio properties, with full repayment received in December
2023. These payments totalled £9.6 million, together with
£0.5 million in aggregate of interest, default interest and fees.
At the period end, the Company had £2.9 million of cash, which
is largely held in high-interest accounts with rated clearing
banks. The Company’s available cash balances are considered
sufficient to cover all the Company’s ongoing costs and
expected working capital needs while maintaining a prudent
liquidity buffer and further capital to invest in the underlying
assets, should it prove necessary. At the date of this report,
no such investment has been committed although where
appropriate we will consider the merits of modest further
investment to preserve and enhance value.
PORTFOLIO SUMMARY
Portfolio statistics
31 January
2024
31 July
2023
(unaudited)
31 January
2023
Number of loan investments 3 4 4
Aggregate principal advanced
(1)
£58,007,806 £57,967,369 £67,443,056
Aggregate carrying value after ECL £33,639,051 £44,612,344 £68,963,675
Cash held £2,945,897 £11,348,746 £9,209,494
(1)
During the 6 months from 31 July 2023 to 31 January 2024, £85,389 principal in the Northlands loan was repaid, £174,174 of trapped cash was allocated
against the Affinity loan and there was a £300,000 increase to the Southport loan principal.
RECONCILIATION OF CHANGES IN BOOK VALUE
31 January 2024
31 July 2023
(unaudited) 31 January 2023
Project
Balance
outstanding
(£m)
(1)
Book Value
after ECL
(£m)
Book Value
per share
(p)
Book Value
after ECL
(£m)
Book Value
per share
(p)
Book Value
after ECL
(£m)
Book Value
per share
(p)
Affinity 17.13 11.34 9.3 15.99 13.2 17.76 14.6
Southport 15.50 7.91 6.5 9.38 7.7 13.70 11.3
RoyaleLife 25.38 14.39
11.9
18.72
15.4
27.67
22.8
Northlands – –
–
0.52
0.4
9.83
8.1
Total 58.01 33.64 27.7 44.61 36.7 68.96 56.8
(1)
Balance outstanding excludes accrued interest. A comparison to the carrying value of the loans is set out in Note 5 to the accounts.
INVESTMENT UPDATE
Southport
The Company’s Southport hotel loan continues to be run by
the administrator appointed by the Company, with services
provided by hotel sector specialists Michels & Taylor.
Despite the uncertainty caused by the administration and
cost pressures on hotel operations nationally, the asset
traded profitably in 2023 while maintaining the same local
management team. Trading at the hotel is seasonal, with
revenues strongest from April to October. Despite the
administration, the hotel has seen revenue performance rise
to close to the pre-Covid peak. On the costs side, pressure on
wages continues although falling utilities prices should help the
bottom line in 2024. Nonetheless, given the seasonal nature of
trading and impact of administration costs and empty running
costs of the adjoining leisure site, the Company does not
anticipate distributing any interest or capital repayments from
the loan in the near term.
Overview Governance Financial Statements Other Information
06
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
INVESTMENT MANAGER’S REPORT (CONTINUED)
INVESTMENT UPDATE (CONTINUED)
As reported last year, the property had previously been under
offer for sale to a large trade buyer, however certain of the
purchase conditions linked to freeholder consent could not be
satisfied and the buyer withdrew. Following this process we,
through the administrator, introduced a new joint selling agent
and relaunched the sales process which uncovered further
interested parties. At the time of writing, heads of terms have
been agreed with a North West focused hotelier known to ICG
who have made a credible bid, albeit subject to debt, at a level
that supports the carrying value of the loan. While that financing
process is being pursued, the agents continue to speak with
other interested parties.
RoyaleLife
The Company and its co-lenders appointed administrators over
parts of the borrower group in May 2023 and the entire borrower
group in August 2023. The Investment Manager, on behalf
of the Company and its co-lenders, has continued to work
to restructure the loan and underlying business to maintain
existing operations, improve efficiency and create a clean,
marketable structure for the medium term. This has been
undertaken against the backdrop of a corporate insolvency of
the borrower entities and bankruptcy of the ultimate beneficial
owner, resulting in material reputational risk to the brand.
During the reporting period and concluding in January, the sites
securing the loan were transferred into a new structure with a
new operator, with the in-place debt retained. The Company’s
loan was fully cross-collateralised with a second facility
provided by the Company’s co-lenders, allowing the Company
the benefit of a more diversified security pool, a wider operating
platform and greater economies of scale. Given the potential
for a conflict of interest in this arrangement, the Board took
independent legal advice on the cross-collateralisation before
agreeing to this restructure.
Additionally, the restructure also incurred certain legal, working
capital and stamp duty costs funded by the co-lenders, and
the Board determined that in view of the Company’s liquidity
position it would seek to meet its share of these costs through a
dilution of its share in the transferred loan rather than through
a cash payment.
Ahead of the restructure the administrator appointed selling
agents to run a marketing process covering the majority of the
security properties. The process was short with limited data
available to bidders. However, all of the sites marketed received
bids (some multiple bids) and three bids were received for the
entire marketed portfolio. While much of the bidding interest
can be characterised as opportunistic, two institutional bidders
emerged and discussions with one of these is ongoing, which,
if concluded, may lead to a partial disposal and realisation in
the near term. Again, this bidding interest is supportive of the
carrying value of the loan.
In tandem, the new operator has developed an independent
plan for the relaunch of the business with a view to selling the
portfolio and platform as a going concern after stabilisation.
This is being run in parallel with sales discussions and we
continue to explore the optimal route for recovery.
Whilst population demographics and housing sector
tailwinds remain compelling for the portfolio, the nature of
the administration and some of the associated publicity has
undoubtedly affected buyer liquidity and pricing, which is
reflected in the carrying value of the loan. We would refer
shareholders to the sensitivity analysis set out in the financial
statements (Note 5 (iv)) which reflect the range of potential
outcomes for the investment. The Investment Manager and the
Board are seeking to balance the prospect of earlier liquidity
against the optimal proceeds from realisation, noting significant
shareholder feedback received advocating against any ‘fire sale’
of the assets and balancing these against the holding costs of
the investment.
Affinity
We have previously reported that the office property securing
this loan has been historically well occupied, and as at the date
of these accounts a new letting was in solicitors’ hands with a
UK Government entity on the primary vacant space, at a new
record rental level for the building. Elsewhere, a lease extension
of the lower ground floor was recently completed at a 16%
increase to prior levels, illustrative of the continued growth in
rental levels in the Bristol market and at the property.
On the downside, one of the larger office tenants exercised a
break clause on part of its space within the building which it
then vacated in March 2024. While this reduces total income,
the Company will not be liable for empty business rates (as
there is a receiver appointed), mitigating the bottom line impact.
We would highlight that the overall rates shelter provided by the
receivership significantly outweighs the cost of the receivership
fees incurred and will continue to do so until closer to full
occupancy is achieved. Nonetheless, the weighted average
length remaining on the leases will continue to reduce, leading
to the potential for further tenant turnover in 2025.
Since placing the property into receivership we have worked
closely with the receiver and appointed selling agents to better
prepare the property for marketing, including discussing an
extension of the head leasehold interest with the freeholder,
Bristol City Council and have commissioned several third party
reports which should help provide comfort to potential buyers
and streamline the sale process. In recent months we have
seen a small number of office sales conclude in Bristol, after a
very challenged 2023, and this combined with the recent rental
evidence could allow for a somewhat improved marketing
environment. However, we would caution that liquidity remains
extremely thin in this market and pricing levels are considered
unlikely to rebound or show any signs of strengthening in the
near term.
ECONOMY AND FINANCIAL MARKET UPDATE
After a year of uncertainty and periods of volatility in key
economic data, the UK economy finished 2023 in a technical
recession, after a contraction between October and December.
Whilst GDP growth for 2023 remained marginally positive at
0.1%, the wider macroeconomic picture was subdued, with the
UK and European economies lagging the growth seen in the
United States.
While there have undoubtedly been times where it felt
otherwise, the UK’s political leadership showed more stability
than in 2022, although the significant erosion in support for the
governing Conservative party has led to ongoing speculation of
the timing of a general election and the expectation of a change
in government. Often election uncertainty can lead to a period of
inactivity in markets, however there is a perception that the UK
outcome is a forgone conclusion, with the US elections perhaps
more likely to cause market jitters.
07
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
INVESTMENT MANAGER’S REPORT (CONTINUED)
Overview Governance Financial Statements Other Information
As in 2022, inflation and interest rates were key drivers of
market activity. As with other western economies, the UK saw
a significant period of disinflation in the year as base effects
took historical energy price rises out of the index. CPI inflation
fell from 10.1% to 3.4% for the year to end February, however
the high inflation levels observed in the first half of 2023 led
to sustained interest rate rises over the period, from 3.5% to
5.25% in August. The combination of these factors, plus the
freeze on income tax thresholds, led to a year of heavy pressure
on household finances, in many cases more than offsetting
wage increases.
As set out below, these macro factors led to a subdued level
of activity in the commercial property sector, with uncertainty
affecting occupational, purchasing and lending decisions. More
recently, as inflation levels have fallen, early GDP data has been
more positive and the outlook for interest rates points to cuts,
we have seen signs of a return to optimism in certain sectors,
leaving market participants to redraw their business plans
once again.
OCCUPATIONAL DEMAND/SUPPLY
Offices
Central London office uptake stood flat year on year, with
strong pre-let activity and high single-digit prime rental growth
indicative of a flight to quality in the occupational markets,
particularly in the prime West End market, where prime rents
moved to £140 per sq ft. Outside of London, the market showed
strength in the Thames Valley and parts of the South East,
however uptake amongst the big six regional markets was down
15% year on year across 2023. Reflecting the continued mantra
of quality over quantity, Manchester and Edinburgh recorded
both the highest rental increases (8% and 12% respectively) as
well as the highest overall prime rents (£43 per sq ft), whilst
other markets lagged – Bristol take up was at a five-year low,
and prime rents remained flat year on year.
Retail & Industrial
The fate of the two other traditional property sectors has at
times seemed to be inversely correlated – as occupier demand
for physical retail has suffered in recent years, as shoppers
migrated online, industrial (including logistics) demand grew
ever higher with occupiers seeking to service this consumer
need. The market in 2023 tempered this pattern somewhat, as
demand for retail saw tentative green shoots emerge just as
rampant demand for the industrial sector cooled slightly.
Contradiction in economic indicators was also present in retail.
Despite an upswing in the GfK Consumer Sentiment Index
to -22 in December (+20 pts year on year, only 10 pts below
the long-term average), Christmas trading was weaker than
expected. Strong Black Friday spending coincided with an
increase in consumer credit of £2.0bn, indicating the cost of
living weighing heavily on households. Interlinking with softer
industrial growth, the e-commerce share of retail spend broadly
flatlined in 2023.
The occupational retail leasing story, depressed in the earlier
quarters of 2023 due to economic uncertainty, showed positive
momentum, driven by retailers competing for prime high street
pitches and higher quality stores. Locations such as Mount
Street in London and Edinburgh’s Princes Street saw rental
growth in 2023, as international new entrants (e.g. Sephora) and
previously online only retailers (e.g. Gymshark, Maniere de Voir)
took prime retail space. Overall, the sector remains polarised
with the best space in demand and weaker space remaining out
of favour.
In the industrial sector, availability at end Q4 stood at 66.5m sq
ft, 16% up year on year, and construction slowed, hampered
by factors such as lower demand a relative lack of funding
and higher build costs, helpfully mitigating the risk of market
oversupply.
Vacancy rates have increased in most markets over the
course of 2023, ranging between 4% (Midlands) and 8% (South
Yorkshire) across the regions. Prime rents have largely
stabilised in the last months of 2023, and a strong Q4 took
annual industrial take up to 32.5m sq ft, just 2% below the
pre-pandemic average, signalling market normalisation. Whilst
larger units lagged due to lessened demand from third party
logistics operators and retailers, small and mid-sized units
remained strong, reinforcing the sector’s resilience.
Leisure
Operationally, the hotel sector witnessed one of the strongest
years in memory in terms of topline performance, with
Average Daily Rates (ADR) growing 26% over the pre-Covid
2019 baseline. Whilst occupancy remained 40 bps below
2019, RevPAR (Revenue per available room, a key metric) was
positive overall. Notably, London’s phenomenal performance
over 2023 eclipsed the UK regions, which saw much more
measured growth with owners attempting to absorb significant
cost increases.
Whilst 2023 saw minimal supply growth, weakness in the
office markets has accelerated the number of conversions to
hotel use underway, converging with a strong push from the
Government to return beds currently used to house asylum
seekers, implying impending growth in the supply pipeline.
PROPERTY INVESTMENT MARKET
Full year 2023 investment volumes stood at c. £43bn, with
office, industrial and residential at c. £10bn each. Apart from
residential, volumes remain below long term averages across
the board, in what some consider may mark the low point of the
cycle. Alternative asset classes continue to be in high demand,
and the Build to Rent sector in particular catapulted forward
with landmark transactions including a 3,900 unit, £819m
Blackstone purchase in Q4, and multiple substantial student
housing transactions.
Overall, 2023 saw widespread rebasing of market prices,
although early 2024 has seen some signs of confidence re-
emerging in certain sectors. As government bond yields have
fallen, the spread to commercial real estate yields increased,
bolstering the relative attractiveness of the asset class. The
strain on construction also eased, and while costs remain
high and contractor insolvencies persist, the most significant
squeeze is believed to be surmounted, with materials availability
and labour cost becoming less of an issue. As in previous
quarters, the 2023 theme of flight to quality continued to play
out across all asset classes on the investment side. Whilst a
number of issues remain on the horizon for 2024, not least
the UK and US elections and a largely flatlining economy, the
anticipated lowering of interest rates and fall off in inflation
bode positively.
08
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
INVESTMENT MANAGER’S REPORT (CONTINUED)
PROPERTY INVESTMENT MARKET (CONTINUED)
In the office sector, 2023 was one of the worst years on record
for investment in both London and the regions. The continued
concerns over flexible working, occupier space requirements
and ESG retrofitting costs, combined with limited buyer appetite
and debt availability being scarce, has pushed yields towards
double digit levels for many previously sought after assets.
Industrial investment, previously buoyant, likewise recorded
a relatively weaker year, driven by a lack of larger assets
transacting, and yields repricing in the face of sustained higher
interest rates. A continued bid ask spread stalemate and higher
debt cost may weigh on investment volumes into 2024, albeit
anecdotally some of our borrower clients are reporting highly
competitive bidding re-emerging.
Despite occupational buoyancy in the hotel market, transaction
volumes were down year on year, and stood at a 10-year low
(excluding the Covid-impacted 2020). The regional market was
particularly impacted, and yields moved out 75-100 bps over
the year. Holiday Park operators reported a marked drop in
caravan and lodge sales in 2023, particularly at the upper end,
on the back of the economic climate, and both leisure parks and
regional pubs saw outward movements in yields over the course
of year.
FINANCE MARKETS
We believe loan to value (‘’LTV’’) ratios for new lending have
restabilised at lower levels and as such, a clearer picture of the
debt funding gap is emerging. As a consequence of reduced
property values and lower LTVs, in addition to declining interest
coverage ratios, there is a significant gap between available
debt capital and that required to refinance existing loans.
Across Europe, in both the public (listed) and private sectors,
this gap has been estimated at €300bn. While this may reduce
as interest rates come off, the gap remains a significant issue to
borrowers seeking refinance.
Whilst alternative debt funds were well poised to take a large
slice of this gap, a different obstacle to this has become more
prominent over 2023 – the after-effects of pension funds and
insurers rebalancing their portfolios (and reducing their real
estate debt allocation) has led to a reduction in the ability of
many of these players to raise funds and take advantage of
this situation.
ICG REAL ESTATE
8 May 2024
09
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
INVESTMENT POLICY
INVESTMENT OBJECTIVE
The investment objective of the Company, as approved by
the shareholders, is to conduct an orderly realisation of the
Company’s assets.
INVESTMENT POLICY
The assets of the Company are being 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
Company’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 Company may not make any new investments save that:
O investments may be made to honour commitments under
existing contractual arrangements or to preserve the value of
the underlying property security; and
O cash held by the Company 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 Company 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.
Overview Governance Financial Statements Other Information
10
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
BOARD OF DIRECTORS
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 a director and Chairman of the audit committee of the Witan
Investment Trust PLC. He will retire as Chairman of European Assets Trust PLC in May 2024.
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.
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
JACK PERRY CBE
Chairman and 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. 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. Furthermore, from 2016 to 2022, he was
a non-executive director of Empiric Student Property PLC. From 2002 to 2011 he was
Managing Director of Grosvenor Fund Management Limited and a member of the Board
of Grosvenor Group Limited, the international property group. Prior to joining Grosvenor,
he was Managing Director at Legal and General Property Limited, having previously held
a number of roles at Norwich Union (now Aviva). Stuart is a Chartered Surveyor with over
40 years’ experience in real estate both in the UK and overseas.
COMMITTEE MEMBERSHIP:
Audit and Risk Committee, Nomination Committee, Management Engagement Committee,
Remuneration Committee
STUART BEEVOR
Non-Executive
Independent Director
11
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
BOARD OF DIRECTORS (CONTINUED)
Other InformationFinancial StatementsGovernanceOverview
APPOINTMENT:
Appointed to the Board in September 2020
EXPERIENCE:
A Chartered Director, Fellow of the Institute of Directors and Chartered Accountant (FCA),
Fiona is a non-executive director with over 25 years’ experience working in financial
services in both London and the Channel Islands with experience in accounting, tax,
strategy, marketing, PR and the regulatory and listed company environments.
Among her appointments, in addition to that with the Company, Fiona is director of Sequoia
Economic Infrastructure Income Fund Limited, a FTSE 250 company. She is also director
and Chair of Doric Nimrod Air Two Limited and director of Doric Nimrod Air Three Limited,
companies admitted to trading on the Specialist Fund Segment of the LSE. Fiona is also a
member of the AIC Channel Islands Committee.
Until the end of July 2020, Fiona was Chief Executive Officer of The International Stock
Exchange Group Limited and prior to that she was CEO of Guernsey Finance, the
promotional body for Guernsey’s finance industry internationally. Previously, she was an
auditor and latterly tax adviser at PwC (London and Channel Islands) and KPMG (Channel
Islands) for over 13 years.
COMMITTEE MEMBERSHIP:
Audit and Risk Committee (Chair), Nomination Committee, Management Engagement
Committee, Remuneration Committee
FIONA LE POIDEVIN
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
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 over 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 currently a non-executive director of Schroder Oriental
Income Fund Limited.
Paul is a Chartered Fellow of the Chartered Institute for 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 Risk Committee, Nomination Committee, Management Engagement Committee,
Remuneration Committee
PAUL MEADER
Non-Executive
Independent Director
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ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
REPORT OF THE DIRECTORS
The Directors hereby submit the Annual Report and Financial
Statements for the Company for the year ended 31 January
2024. This Report of the Directors should be read together with
the Corporate Governance Report on pages 19 to 26.
BUSINESS REVIEW
A review of the Company’s business and its likely future
development is provided in the Chairman’s Statement on
pages 3 to 4 and in the Investment Manager’s Report on
pages 5 to 8.
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
on pages 36 to 58.
During the year, and since the year end, the Directors declared
the following dividends:
Dividend Quarter Ended Date of Declaration Payment Date
Amount per
Ordinary Share
(pence)
Interim dividend 31 January 2023 06 April 2023 04 May 2023 0.5
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.
Holders of Ordinary Shares are entitled to all dividends paid by the Company and, on a winding up, providing the Company has
satisfied all its liabilities, the shareholders are entitled to all of the surplus assets of the Company. The Ordinary Shares have no
right to fixed income.
Under Company Articles the Company may, from time to time, issue Redeemable B Shares in order to return capital to holders of
Ordinary Shares. The Company made two such issuances during the year, which were redeemed and cancelled:
No. B Shares issued Purpose Date of Declaration Payment Date
Par Value per
Redeemable B Share
(pence)
121,302,779 Return of Capital 26 January 2023 17 February 2023 5.50
121,302,779 Return of Capital 11 August 2023 1 September 2023 7.40
SHAREHOLDINGS OF THE DIRECTORS
The Directors’ beneficial interests in the shares of the Company as at 31 January 2024 and 2023 are detailed below:
Director
Ordinary Shares
of £1 each held
31 January 2024
% holding at
31 January 2024
Ordinary Shares
of £1 each held
31 January 2023
% holding at
31 January 2023
Mr Perry 108,609 0.09 108,609 0.09
Mr Beevor
30,000 0.02 30,000
0.02
Mr Meader 305,921 0.25 305,921 0.24
Mrs Le Poidevin – 0.00 – 0.00
Directors’ beneficial interests in the shares of the Company as at 2 May 2024, being the most current information available, are
unchanged from those disclosed above.
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ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
REPORT OF THE DIRECTORS (CONTINUED)
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 realise optimal recoveries
from the Company’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 ongoing basis with a view to
addressing any imbalance between the supply of and demand
for shares.
Shares purchased by the Company may be cancelled or held
as treasury shares. The Company may borrow and/or realise
investments in order to finance such share purchases.
The Company has not purchased any shares for treasury
or cancellation during the year or to date. During the year,
the Board considered if such a purchase of shares would be
appropriate and concluded that it would not be in the best
interests of shareholders.
DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE
The Company maintains insurance in respect of Directors’
and Officers’ liability in relation to their acts on behalf of
the Company.
SUBSTANTIAL SHAREHOLDINGS
As at 31 January 2024, 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.
Shareholder Shareholding % holding
Close Brothers Asset Management 21,029,244 17.34%
Almitas Capital 12,372,209 10.20%
Canopius 12,276,107 10.12%
TDC Pensionskasse 10,600,000 8.74%
Premier Miton Investors 10,500,000 8.66%
Intermediate Capital Group 10,000,000 8.24%
Hargreaves Lansdown, stockbrokers (Execution Only) 6,868,641 5.66%
Philip J Milton, stockbrokers 5,467,607 4.51%
CG Asset Management 4,882,100 4.02%
RBC Brewin Dolphin, stockbrokers 3,309,670 2.73%
Other InformationFinancial StatementsGovernanceOverview
14
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
REPORT OF THE DIRECTORS (CONTINUED)
SUBSTANTIAL SHAREHOLDINGS (CONTINUED)
In addition, the Company also provides the same information as at 23 April 2024, being the most current information available.
Shareholder Shareholding % holding
Close Brothers Asset Management 20,657,247 17.03%
Canopius 12,276,107 10.12%
Almitas Capital 11,972,209 9.87%
TDC Pensionskasse 10,600,000 8.74%
Premier Miton Investors 10,500,000 8.66%
Intermediate Capital Group 10,000,000 8.24%
Hargreaves Lansdown, stockbrokers (Execution Only) 6,903,552 5.69%
Philip J Milton, stockbrokers 5,702,660 4.70%
CG Asset Management 4,882,100 4.02%
RBC Brewin Dolphin, stockbrokers 3,122,970 2.57%
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 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 14 to the Financial Statements.
Following a review of the independence and effectiveness of
the external auditor, a resolution was proposed and accepted
at the 2023 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 and reasons for not putting the audit service
out to tender is set out in the Report of the Audit and Risk
Committee on pages 27 to 29.
ARTICLES OF INCORPORATION
The Company’s Articles of Incorporation may only be amended
by special resolution of the shareholders.
NMPI STATUS
The Company no longer meets the criteria to be an exempt
NMPI and the Company was removed from the AIC list of
excluded securities in the prior year.
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 consider whether they have
a reasonable expectation that the Company has adequate
resources to continue in operational existence for the
foreseeable future and whether there is any threat to the going
concern status of the Company. 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, following the appointment of receivers or
administrators in respect of the last remaining loans, the
investments will be realised as and when the underlying
property assets, or loans upon which they are secured, can
be sold in an orderly manner. The Company may take actions
with the consequence of accelerating or delaying realisation in
order to optimise shareholders’ returns in the context of the
Company’s size.
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
going concern in preparing the financial statements.
15
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
REPORT OF THE DIRECTORS (CONTINUED)
In the absence of a ready secondary market in real estate
loans by which to assess market value of the loans, the basis of
valuation for investments is amortised cost net of impairment,
recognising the realisable value of each property in the orderly
wind down of the Company. In accordance with the Company’s
IFRS 9 Policy the staging of each loan has been reviewed and
all loans are now considered to be at Stage 3. Consequently,
valuations reflect the ECL assuming a twelve month realisation
period, as detailed in Note 5. No material adjustments
have arisen solely 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 Company
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 financial statements on a basis other than going
concern due to the Company being in a managed wind down.
Since the EGM, 8 loans have repaid in full and £54.46 million
of capital has been returned to Shareholders. The Company’s
remaining three loans are now past due and receivers
or administrators have been appointed to accelerate the
realisation of the security underpinning the loans. As discussed
elsewhere in this report, market conditions have been, and
remain, unfavourable to near term realisations except to
opportunistic buyers seeking material discounts to value
in the face of high funding costs in order to generate their
target returns.
The valuations applied to the loans reflect the Board’s current
expectations of realisable values in a twelve month period,
however the Board have considered the Company’s working
capital requirements, assuming no further income or capital
receipts over a two year period.
Cashflow projections are prepared regularly. 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, liabilities and expected duration of
the Company at the time.
Having conducted a robust analysis on this basis, the Directors
remain satisfied that the Company can meet its liabilities as
they fall due over the period under consideration to February
2026, if the Company continues in operation up until that date.
The Company is likely to operate with a cashflow deficit in some
quarters. Cash reserves are held to cover these periods and
will be re-assessed with each loan repayment. The Company
will, on a prudent basis, maintain working capital reserves
to meet all liabilities as they fall due through to the latest
expected repayment date.
DIRECTORS’ RESPONSIBILITIES TO STAKEHOLDERS
Section 172 of the UK Companies Act 2006 applies directly
only 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.
Stakeholder Group Methods of Engagement Benefits of Engagements
Shareholders
The major investors in the Company’s
shares are set out on page 13.
Following a series of economic shocks
and the Company share price falling to
a deep discount to NAV, shareholders
supported a recommendation by
the Board in 2021, to wind down the
Company.
The Company sought to maintain
shareholder satisfaction through:
O Transparency of communication
O Capital preservation
O Payment of regular and sustainable
dividends for as long as considered
prudent and
O Return of capital on loan repayments
The Company engages with its
shareholders through the issue of
portfolio updates in the form of RNS
announcements.
The Company provides in depth
commentary on the investment portfolio,
corporate governance and corporate
outlook in its semi-annual and annual
financial statements.
The Board receives quarterly feedback
from its Broker in respect of their
investor engagement and investor
sentiment.
The engagement with shareholders,
through update calls and the AGM, will
continue through the wind down period
as capital is returned to investors.
In the financial year the Company issued:
O 4 Portfolio updates by way of RNS
The Company has continued in its
objective to execute the orderly
realisation of assets of the Company
during the year. During a period when
market conditions have not been
favourable towards this goal, discussions
involving Directors, the Investment
Manager and the Company’s brokers
have been held directly with major
shareholders during the year.
Engagement with shareholders
through these announcements enables
shareholders to take informed decision
as to the winding up process and
timetable.
Other InformationFinancial StatementsGovernanceOverview
16
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
REPORT OF THE DIRECTORS (CONTINUED)
Stakeholder Group Methods of Engagement Benefits of Engagements
Borrowers/Administrators and Receivers
The Company’s principal clients are
the borrowers to whom the Company
provides term finance.
During the year, other than in respect
of its Northlands loan which was
repaid, the Company has appointed
administrators or receivers in respect of
its remaining loans, and, consequently
the receiver/administrator now fulfils
the duties of the borrower and acts on
behalf of any other relevant creditors to
the borrower entity.
The Company engaged with its Borrowers,
and now engages with the administrators
and receivers, through its Investment
Manager.
The Investment Manager has formed and
maintained a close working relationship
with these parties through regular update
calls and the ongoing quarterly monitoring
of loans over their respective terms.
Following the appointment of receivers/
administrators, the Investment Manager
holds regular meetings to monitor the
performance of the underlying properties
and actions being undertaken to protect,
enhance and ultimately realise their value.
The Board monitors the timeliness and
quality of these engagements through its
regular engagement with the Investment
Manager.
A Director of the Company has met with
two of the administrators/receivers and
conducted site visits at certain of the
secured properties to understand the
specific market dynamics impacting
liquidity and value of the subject properties.
During the course of the year, the
Investment Manager has provided and
the Board reviewed regular updates to
the portfolio and investments. Further
specific updates have been provided on
investment specific matters throughout
the year.
The Investment Manager regularly
engaged with all its Borrowers during
the year to seek orderly repayment of the
Company’s loans, as was the case with
Northlands, but has ultimately appointed
of receivers/administrators due to the
borrowers’ defaults under the terms of
the original loans.
Through its engagement with the
administrators and receivers, the
Investment Manager is able to advise on
and monitor all actions being taken to
prepare assets for sale and the ensuing
sales process, and take actions to
support the asset level performance to
protect or enhance value.
Service Providers
The Company does not have any direct
employees; however, it works closely
with a number of service providers (the
Investment Manager, Administrator,
Company Secretary, Broker and other
professional service providers) whose
interests are aligned to the success of the
Company.
The quality and timeliness of their service
provision is critical to the success of the
Company.
The Company’s Management Engagement
Committee has identified its key
service providers. On an annual basis it
undertakes a review of performance based
on a questionnaire through which it also
seeks feedback.
Furthermore, the Board and its sub-
committees engage regularly with its
service providers on both a formal and
informal basis.
The Management Engagement Committee
will also regularly review all material
contracts for service quality and value.
The information provided given by the
service providers is used to review
the Company’s policies, controls, and
procedures to ensure open lines of
communication, operational efficiency,
robustness and, appropriate pricing for
services provided. Feedback has been
given to all relevant service providers
during the year.
In addition, following extensive discussion
between the Board and the Investment
Manager, their fee will reduce to 0.5% of
Net Asset Value from 1% previously, as
discussed in the Chairman’s statement.
Community & Environment
As an investment company whose
purpose was the provision of and
investment in commercial real estate
debt, the Company’s direct engagement
with the local community and the
environment is limited.
However, the Board recognises the role
the Company can play in terms of the
environment by supporting and guiding
Borrowers to find environmentally
friendly sustainable solutions in the
maintenance of their properties and
delivery of their business plan objectives
more generally.
Within its investment strategy, the
environmental and social impact of the
properties on which the Company’s
loans are secured was an important
consideration when it had made its
investments, and has remained so
through the monitoring of the loans and
actions of the Borrowers.
The community, environmental and social
impact has also been a consideration
in the choice to appoint receivers/
administrators in respect of the
Company’s remaining loans.
In the year to 31 January 2024, the
Company made no new loans.
In monitoring its investments and
providing working capital facilities for
the protection of development of the
properties the Investment Manager and
the Board have continued to consider the
environmental and social impact or such
developments or expenditure.
With respect to the loans now in
administration or receivership the
Investment Manager, on behalf of the
Company, continues to engage with
the relevant parties to ensure that the
properties are being maintained in good
order for their occupants and in the case
of operational properties a duty of care to
all stakeholders is being observed.
The ESG report provides further
information on the Investment Manager’s
approach to this important subject.
DIRECTORS’ RESPONSIBILITIES TO STAKEHOLDERS (CONTINUED)
17
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
REPORT OF THE DIRECTORS (CONTINUED)
KEY DECISIONS
Key decisions are defined as both those that are material to the
Company but also those that are significant to any of our key
stakeholders as discussed above.
In making the following key decisions, 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:
Given that further of the Company’s loans were fully repaid, the
Board approved two distributions of capital equating to 5.50 and
7.40 pence per share for the year.
The Board agreed to the Investment Manager’s
recommendation that the Company exercise its security
interests and appoint an administrator over the RoyaleLife
borrower companies and a receiver over the Spectrum
Affinity property.
In order to protect the value of its underlying property security,
the Board approved a restructure of the RoyaleLife loan, which
resulted in the cross collateralisation of its security with other
assets securing a similar loan made to the same borrower
group by its co-lenders.
The Board determined to retain a working capital buffer to
ensure the Company’s viability in the absence of any further
income or capital receipts during the foreseeable realisation
period of the remaining investments.
The Board reviewed the performance of the Investment
Manager, which was considered to be satisfactory. The Board
has agreed to a reduction to the Investment Manager’s fees
to control the Company’s cost base and improve the ultimate
value returned to shareholders. Accordingly, the Investment
Manager’s reappointment was confirmed.
FINANCIAL RISK MANAGEMENT POLICIES AND PROCEDURES
Financial Risk Management Policies and Procedures are
disclosed in Note 11 to the Financial Statements on pages 53
to 56.
PRINCIPAL RISKS AND UNCERTAINTIES
Principal Risks and Uncertainties are discussed in the
Corporate Governance Report on pages 19 to 26.
SUBSEQUENT EVENTS
Significant subsequent events have been disclosed in Note 16
to the Financial Statements on page 58.
ALTERNATIVE PERFORMANCE MEASURES
The Directors believe that the performance indicators detailed
in the Financial Highlights and Financial Summary on pages 1
and 2, which are typical for entities investing in real estate debt,
will provide shareholders with sufficient information to assess
how effectively the Company is meeting its objectives. The
alternative performance measures are described in the table
on page 59.
ANNUAL GENERAL MEETING
The AGM of the Company will be held at 12pm BST on 18 June
2024 at Floor 2, Trafalgar Court, Les Banques, St Peter Port,
Guernsey, GY1 4LY. 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.
Members of the Board will be in attendance at the AGM and will
be available to answer shareholder questions.
By order of the Board
JACK PERRY
Chairman
8 May 2024
Other InformationFinancial StatementsGovernanceOverview
18
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
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 Financial Statements
in accordance with UK adopted international accounting
standards (“IFRS”). 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 Company and of the profit or loss of the Company for that
period. In preparing these Financial Statements, the Directors
are required to:
O select suitable accounting policies in accordance with IAS 8:
Accounting Policies, Changes in Accounting Estimates and
Errors and then apply them consistently;
O make judgements and estimates that are reasonable
and prudent;
O present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
O 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 Company’s financial position and
financial performance;
O state that the Company has complied with IFRS, subject to any
material departures disclosed and explained in the Financial
Statements; and
O prepare the Financial Statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors confirm that they have complied with the above
requirements in preparing the Financial Statements.
The Directors are responsible for keeping proper accounting
records, which disclose with reasonable accuracy at any time,
the financial position of the Company and 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 Company’s
performance, business model and strategy.
The Directors are also responsible under the AIC Code to
promote the success of the Company 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 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 themselves
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 on pages 10
and 11, confirms to the best of their knowledge and belief that:
O 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 taken as a whole;
O the Annual Report includes a fair review of the development
and performance of the business and the position of the
Company, 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 Risk
Committee, the Directors consider the Annual Report and
Financial Statements, taken as a whole, as fair, balanced and
understandable and that it provides the information necessary
for shareholders to assess the Company’s performance,
business model and strategy.
By order of the Board
JACK PERRY FIONA LE POIDEVIN
Chairman Director
8 May 2024 8 May 2024
19
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
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 of Corporate Governance
(‘’AIC Code’’) and thereby complies with the UK Corporate
Governance Code. The Directors recognise the importance of
sound corporate governance, particularly the Principles and
Provisions addressed within 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 UK Corporate Governance Code or AIC Code
are deemed to meet the GFSC Code.
The AIC Code addresses all the principles set out in the UK
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 appropriate
information to shareholders.
The Board monitors developments in corporate governance to
ensure the Board remains aligned with best practice.
Throughout the year ended 31 January 2024, 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:
O the role of the chief executive;
O executive directors’ remuneration;
O the need for an internal audit function; and
O succession.
For the reasons set out in the AIC Code, and as explained in
the UK Corporate Governance Code, the Board considers that
the above provisions other than succession are not currently
relevant to the position of the Company, which delegates most
day-to-day functions to third parties.
The Directors have access to the services provided by the
Company Secretary, Ocorian Administration (Guernsey)
Limited, who ensure statutory obligations of the Company
are achieved.
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 Risk Committee on page 28.
As the Company is in wind down, the Board has determined
not to implement a succession plan for Directors as outlined
on page 23. The Board considers all Directors remain
independent.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
As an investment company, the Company’s activities only have
a limited direct impact on the environment.
Following the change in Investment Objective and Policy
approved by shareholders in January 2021, the Company is now
conducting an orderly realisation of its investments. As such,
the opportunity to implement material ESG changes across
its portfolio is 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 Website
As the Company will no longer make any new investments
and is actively seeking to realise the remaining assets
in its portfolio, the opportunities to support borrowers in
ESG matters is limited. However, where receivers and
administrators have been appointed to realise the value of the
underlying security assets, the Company and the Investment
Manager remain mindful of its ESG responsibilities particularly
toward the stakeholders in the operating assets.
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 and cooperative 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 risks in
order to achieve its objectives, but these risks are monitored
and managed. 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. In holding
the Investment Manager to account, the Board regularly raises
robust challenges of the choices and recommendations made
by them.
Other InformationFinancial StatementsGovernanceOverview
20
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
CORPORATE GOVERNANCE REPORT (CONTINUED)
THE BOARD
The Company is led and controlled by a Board of Directors,
which is collectively responsible for the remaining realisation
period 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 all 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 or have served 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
on pages 10 and 11 which set out their range of investment,
financial and business skills and experience represented. In
terms of gender balance, the Board has 25% female and 75%
male representation. Fiona Le Poidevin is the Chair of the Audit
and Risk Committee.
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 is 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
Three of the four remaining Directors were appointed in
November 2012 and Fiona Le Poidevin was appointed on
1 September 2020. Therefore, three of the four members of the
Board have served for longer than nine years to date. The issue
with respect to long tenure has arisen and, in accordance with
the AIC Code, when and if any Director shall have been in office
(or on re-election would have 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 Nomination Committee takes the lead in any discussions
relating to the appointment or re-appointment of Directors and
gives consideration to Board rotation in advance of the nine-
year tenure limit. The Board recognises that Directors serving
nine years or more may appear to have their independence
impaired. However, the Board nonetheless considers the
Directors to remain independent as noted further below. In
addition, the Board believes it is beneficial for shareholders
that there is continuity of Board leadership during this final
managed realisation phase before placing the Company
in liquidation.
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 ongoing 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.
Any Director who is elected or re-elected at that meeting
is treated as continuing in office throughout. If they are not
elected or re-elected, they shall retain office until the end of the
meeting or (if earlier) when a resolution is passed to appoint
someone in their 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
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.
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 one year from
the date of this report, 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 means that his tenure will continue
to exceed the recommended nine-year term. Similarly,
Mr Beevor and Mr Meader will also continue to exceed the
recommended nine-year term for the reasons stated, until the
Company is placed in liquidation.
21
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
CORPORATE GOVERNANCE REPORT (CONTINUED)
DIRECTORS’ REMUNERATION
The level of remuneration of the Directors reflects the time commitment and responsibilities of their roles. The Chairman is
entitled to annual remuneration of £50,000 (31 January 2023: £50,000). The Chair of the Audit and Risk Committee is entitled to
annual remuneration of £40,000 (31 January 2023: £40,000). The other independent Directors are entitled to annual remuneration of
£35,000 (31 January 2023: £35,000). These levels of remuneration have remained unchanged since July 2017.
During the year ended 31 January 2024 and the year ended 31 January 2023, the Directors’ remuneration was as follows:
Director
Expected fees
1 February 2024
to 31 January 2025
£
1 February 2023 to
31 January 2024
£
1 February 2022 to
31 January 2023
£
Jack Perry 50,000 50,000 50,000
Paul Meader 35,000 35,000 35,000
Stuart Beevor 35,000 35,000 35,000
Fiona Le Poidevin 40,000 40,000 40,000
The Company Directors’ fees for the year amounted to £160,000
(31 January 2023: £160,000) with outstanding fees of £31,250 due
to the Directors at 31 January 2024 (31 January 2023: £31,250)
(see Note 8).
All of the Directors are non-executive and are each considered
independent for the purposes of Chapter 15 of the Listing Rules.
DUTIES AND RESPONSIBILITIES
The Board has overall responsibility for maximising the
Company’s success by directing and supervising the affairs
of the business and meeting the appropriate interests of
shareholders and relevant stakeholders, while enhancing
the value of the Company and also ensuring the protection of
investors. The Board has adopted a Schedule of Matters which
sets out the particular duties of the Board. Such reserved
powers include the following:
O strategic matters;
O risk assessment and management including reporting,
compliance, governance, monitoring and control and financial
reporting;
O statutory obligations and public disclosure;
O declaring Company dividends;
O managing the Company’s advisers;
O appointment of a liquidator; and
O 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 this occur.
The Board’s responsibilities for the Annual Report are set out in
the Directors’ Responsibility Statement on page 18. 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. The Board assesses the training needs of
Directors on an annual basis.
The Board formally met four 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 the Board meeting schedule.
Other InformationFinancial StatementsGovernanceOverview
22
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
CORPORATE GOVERNANCE REPORT (CONTINUED)
DUTIES AND RESPONSIBILITIES (CONTINUED)
Attendance is further set out below:
Scheduled
Board
Meetings
Ad-hoc
Board
Meetings
Audit and Risk
Committee
Meetings
Ad-hoc
Committee
Meetings
Nomination
Committee
Meeting
Management
Engagement
Committee
Meeting
Remuneration
Committee
Meeting
Director 4 5 6 2 0 2 0
Stuart Beevor 4 5 6 2 – 2 –
Paul Meader 4 2 6 2 – 2 –
Jack Perry
(1)
4 5 – 2 – 2 –
Fiona Le Poidevin 4 5 6 2 – 2 –
(1)
Mr Perry has a standing invitation to Audit and Risk Committee meetings, however his attendance at the meetings is as an observer only and is not recorded.
The quorum for any Board meeting is two directors but
attendance by all Directors at each meeting is encouraged.
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 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
ongoing 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 Chairs 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 RISK COMMITTEE
The Audit and Risk Committee is chaired by Mrs Le Poidevin.
The Committee also comprises Mr Beevor and Mr Meader,
who held office throughout the year. Mr Perry has a standing
invitation to attend meetings. However, his attendance at these
meetings is as an observer only. The Chair of the Audit and
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 Risk Committee meetings and a private
meeting is held routinely with the external auditor to afford
them the opportunity of discussions without the presence of
the Investment Manager or Administrator. The Audit and Risk
Committee’s activities are contained in the Report of the Audit
and Risk Committee on pages 27 to 29.
MANAGEMENT ENGAGEMENT COMMITTEE
The Management Engagement Committee is chaired by
Mr Perry and also comprises Mr Meader, Mr Beevor and
Mrs Le Poidevin, all of whom held office throughout the year.
The Management Engagement Committee meets not less
than once a year pursuant to its terms of reference, which are
available on the Company’s website.
The Management Engagement Committee’s main function
is to review and make recommendations in relation to the
Company’s service providers. The Management Engagement
Committee will review, in particular, any proposed amendment
to the Investment Management 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 Risk Committee also reports on its relationship with the
external auditor.
NOMINATION COMMITTEE
The Nomination Committee is chaired by Mr Perry and also
comprises Mr Beevor, Mr Meader and Mrs Le Poidevin, all of
whom held office throughout the year. Given that the Company
is in orderly wind-down and that there is no expectation for
the Committee/Board composition to change for the reasons
provided in this Report, it was no longer deemed necessary for
the committee to meet at least once a year. 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. The
Nomination Committee met on 4 April 2024 and confirmed
that its terms of reference remained appropriate. Board
composition and tenure were discussed and the policy on both
issues was agreed as disclosed in the Corporate Governance
Report above. The directors’ independence was also reviewed
and each individual director was considered as independent.
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
23
CORPORATE GOVERNANCE REPORT (CONTINUED)
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 Risk
Committee, the Nomination Committee, the Management
Engagement Committee, the Remuneration Committee,
individual Directors and the Chairman is carried out and the
results are considered by the whole Board.
The internal evaluation conducted by the Board 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 Board 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 and
knowledge of the Directors is appropriate to the requirements
of the Company.
The Nomination Committee has also reviewed the composition,
structure and diversity of the Board, the independence of the
Directors and whether each of the Directors has sufficient time
available to discharge their duties effectively. The Committee
and the Board confirm that they believe that the Board has
an appropriate mix of skills and backgrounds and that all
Directors should be considered as independent in accordance
with the provisions of the AIC Code and have the time available
to discharge their duties effectively.
Accordingly, the Board recommends that shareholders
vote in favour of the re-election of all Directors at the
forthcoming AGM.
SUCCESSION PLANNING
The 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. The Board considers it beneficial for shareholders
that there is continuity of Board leadership during this final,
managed realisation phase before placing the Company in
liquidation. Therefore, the Board has determined that, barring
any unforeseen circumstances, the present complement
of Directors will continue in office until the appointment of
a liquidator.
REMUNERATION COMMITTEE
The Remuneration Committee is chaired by Mr Perry and
comprises of 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. 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.
There had been no changes to the Director fees since they
were set on 1 July 2017 and they were not expected to change,
subject to any unforeseen circumstances, so an annual
meeting was no longer deemed necessary. The Remuneration
Committee met on 4 April 2024 and confirmed that its terms of
reference remained appropriate. It was agreed that there will
be no increase to fees during the realisation period subject to
any unforeseen circumstances. No change in remuneration is
therefore proposed for the year to 31 January 2025.
INTERNAL CONTROL AND FINANCIAL REPORTING
The Directors acknowledge that they are responsible for
establishing and maintaining the Company’s system 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:
O the Board has delegated the day-to-day operations of the
Company to the Administrator and Investment Manager,
however it remains accountable for all functions it delegates;
O 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 continues to do so through the Management
Engagement Committee;
O 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
O the Administrator provides administration and corporate
secretarial services to the Company. The Administrator
maintains a system of internal controls on which it reports to
the Board.
The Board has reviewed the need for an internal audit function
and has decided that the systems and procedures employed by
the Administrator and Investment 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
Company’s assets, is maintained. An internal audit function
specific to the Company is therefore considered unnecessary,
as explained on page 28.
Other InformationFinancial StatementsGovernanceOverview
24
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
CORPORATE GOVERNANCE REPORT (CONTINUED)
INTERNAL CONTROL AND FINANCIAL REPORTING (CONTINUED)
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 ISAE3402 report: Assurance
Report on Controls at a Service Organisation Audit which is
provided to the Board when finalised. The last available report
is dated 23 March 2023 and covers the year to 31 October
2021. The report for the period to 31 October 2022 is expected
shortly. For the period to 31 October 2023, the Administrator
is undertaking a Global Service Organisation Control (SOC-1)
Report which will be available in Q2 2024. The Board has
received an assurance from the Administrator that there
have been no material changes in their control environment
that would adversely affect the Auditor’s Opinion in the most
recently published ISAE 3402 and the Directors have held
further satisfactory discussions with the Administrator around
key controls employed. 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 major weaknesses or failings 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 was undertaken by the Directors on
8 February 2024 as part of the internal control environment.
Given the uncertainty in regards to the remaining life of
the Company, the Board may consider a further visit to the
Investment Manager’s office, if required. The conclusions of
these reviews have been satisfactory, providing assurance
on the control environment to the Board. In addition, the
Company maintains a website which contains comprehensive
information, including regulatory announcements, share
price information, financial reports, investment objectives and
strategy, investor contacts and information on the Board.
INVESTMENT MANAGEMENT AGREEMENT
The Company has entered into an agreement with the
Investment Manager. This sets out the Investment Manager’s
key responsibilities, this includes being 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 interest 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 Company’s risk
management framework and risk culture. The Audit and Risk
Committee undertook a robust assessment of the Company’s
principal risks and associated risk appetite, taking into account
changes in the business and the external environment.
Determination of the risk appetite allows the Company to
assess the nature and extent of principal risks that it is exposed
to and/or willing to take to achieve objectives.
The Board considers the process for identifying, evaluating
and managing any significant risks faced by the Company on
an ongoing 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 agreed all recommendations
proposed by the Audit and Risk Committee. 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 and 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.
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
25
CORPORATE GOVERNANCE REPORT (CONTINUED)
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
The Directors have identified the following as the principal risks faced by the Company:
Description Nature of Risk Potential Impact Mitigation
Inability to
secure sales
of underlying
properties
to facilitate
timely capital
repayments
Market, geopolitical and
economic conditions
are currently volatile
and the outlook
unsure. The Company’s
three key loans are
in administration or
receivership.
The Company’s
Borrowers retain a
right of redemption
but have been unable
to raise sufficient
equity to refinance the
current loans.
In adverse market
conditions with low
transaction volumes
and high costs of debt,
the appointed Receivers
and Administrators may
find it challenging to
secure sales.
This could result in delayed sale
of the underlying properties and/
or reduced quantum of capital
proceeds.
The thin market liquidity combined
with receivership/administrator
sales may also attract only
opportunistic buyers seeking high
returns and deep discounts in
order to proceed with a perceived
distressed sale with very limited
indemnities or warranties being
offered.
The Investment Manager has appointed a
receiver or administrator to each of the three
key loans remaining and is ensuring the
property securing each loan is being actively
managed, with income and condition being
maintained wherever possible and economic
to do so.
The Investment Manager maintains an active
dialogue with all the administrators/receivers
and keeps the Board informed of any issues
arising. Loans and the underlying security are
monitored on an ongoing basis to identify any
further deterioration or distress.
The Investment Manager remains an active
participant in the UK CRE financing market
and as such is continually monitoring
property and finance market conditions,
meaning it is well placed to deal with any
issues. Current conditions mean that
reconciling a timely exit with maximising
shareholder value is challenging.
Fall in collateral
values, and
accuracy of
valuations
Commercial property
values are typically
linked to a property’s
ability to generate
cashflows and are
benchmarked against
comparable properties.
Economic and market
volatility create material
uncertainty in terms of
property valuations.
This may impact the Company’s
ability to accurately determine
collateral values and to
appropriately consider the level
of permanent impairment of any
particular investment, within the
target timeframe to realise that
investment.
The current volatile market conditions may
make the accuracy of valuations somewhat
unreliable with significant but unknown
bid offer spreads between buyer and seller
aspirations. As things stand at the time of
review, the market for refinancing loans or
the sale of underlying properties is uncertain.
The Board obtains external valuations as
appropriate but also makes judgements
based on offers in hand, valuer and agency
advice and outlook for each specific property.
Given the market uncertainty and lack
of transactional evidence, the Company
applies a probability weighted approach to
the range of outcomes based on differing
realisation scenarios.
Portfolio
Diversification
The Company is in wind
down with only three
loans remaining.
The Company no longer benefits
from portfolio diversification, but
carries the specific risks associated
with the remaining loans.
The remaining loans are in
receivership or administration and,
as such, the Company’s income
generation is and cashflow are
unpredictable.
Furthermore, the Company’s
fixed costs will thereof comprise a
greater proportion of the Group’s
revenues which may impact the
amount of funds available for
distribution to shareholders.
As part of the orderly realisation, the
Investment Manager and the Board have
stepped up monitoring of the individual
investments and the Board receives
frequent formal and informal reports from
the Investment Manager.
The Board also continues to closely monitor
the Company’s costs, to ensure optimum
value is obtained during the realisation of
the portfolio.
However, with only three loans outstanding,
the portfolio’s concentration risk has
increased significantly and will continue to
increase as loans are repaid.
The Board will adopt a prudent approach
to the repayment of capital to shareholders
to ensure that the Company remains viable
and avoids becoming a distressed seller
through the final realisation process.
Other InformationFinancial StatementsGovernanceOverview
26
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
CORPORATE GOVERNANCE REPORT (CONTINUED)
Description Nature of Risk Potential Impact Mitigation
Liquidation
process and
timeliness of
final capital
distribution
The Company’s
liquidation is expected
to follow repayment of
the final loan and the
discharge of all creditors
and claims, timings of
which is uncertain for
the reasons set out
above.
Liquidation of the Company may
be delayed and it may continue to
operate with high fixed costs relative
to the remaining income streams.
The performance of all loans and timings of
repayments is monitored closely.
The Board and Investment Manager will
continue to weigh the merits of accelerated
exits versus orderly repayment to maximise
shareholder returns where possible.
Potential claims and liabilities will be
identified and addressed in advance
wherever possible.
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
The Company’s principal risk factors are fully set out in the
Company’s 2018 Prospectus available on the Company’s website
(www.lbow.co.uk) and should be reviewed by shareholders,
together with the supplemental prospectus issued in 2019,
albeit in the context that the Company has now adopted a
new Investment Policy and is in managed wind down which
has changed the nature of many of the principal risk factors,
as described above.
Emerging risks are regularly considered to assess any
potential impact on the Company and to determine whether any
actions are required. Emerging risks include those related to
regulatory/legislative change, the war in the Middle East 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 also relies on periodic reports
provided by the Investment Manager and Administrator regarding
risks that the Company faces. When required, experts will be
employed to gather information, including property surveyors,
tax managers, legal managers or environmental managers
as appropriate.
By order of the Board
JACK PERRY FIONA LE POIDEVIN
Chairman Director
8 May 2024 8 May 2024
27
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Governance Financial Statements Other Information
Overview
REPORT OF THE AUDIT AND RISK COMMITTEE
The Audit and Risk Committee, chaired by Mrs Le Poidevin,
operates within clearly defined terms of reference (which are
available from the Company’s website) and includes all matters
indicated by Disclosure and Transparency Rule 7.1, the AIC
Code and the UK Code. Its other members are Mr Beevor and
Mr Meader.
Only independent Directors can serve on the Audit and Risk
Committee. Members of the Audit and Risk Committee must be
independent of the Company’s external auditor and Investment
Manager. The Audit and Risk Committee will meet no less than
twice a year, and at such other times as the Audit and Risk
Committee Chair 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 Risk Committee should have recent
and relevant financial experience and is satisfied that the Audit
and Risk Committee is properly constituted in that respect, with
all members being highly experienced and, in particular, with
one member having a background as a chartered accountant.
The duties of the Audit and Risk Committee in discharging
its responsibilities include reviewing the Annual Report
and 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 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 Risk Committee are:
O reviewing and monitoring the integrity of the Financial
Statements of the Company and any formal announcements
relating to the Company’s financial performance, reviewing
significant financial reporting judgements contained in them;
O reporting to the Board on the appropriateness of the
Company’s accounting policies and practices including critical
judgement areas;
O reviewing any draft impairment reviews of the Company’s
investments prepared by the Investment Manager and making
a recommendation to the Board on any impairment in the
value of the Company’s investments;
O 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;
O 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;
O monitoring and reviewing annually the auditor’s independence,
objectivity, expertise, resources, qualification and non-audit
work;
O considering annually whether there is a need for the Company
to have its own internal audit function;
O monitoring the internal financial control and risk management
systems on which the Company is reliant;
O reviewing and considering the UK Code, the AIC Code and the
FRC Guidance on Audit and Risk Committees; and
O reviewing the risks facing the Company and monitoring the
risk matrix.
The Audit and 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 Risk
Committee meetings as the Directors deem appropriate and
the Audit and 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 Risk Committee in relation
to the financial reporting is to review with the Administrator,
Investment Manager and the auditor the appropriateness of
the Annual Report and Financial Statements, concentrating on,
amongst other matters:
O the quality and acceptability of accounting policies and
practices;
O the clarity of the disclosures and compliance with financial
reporting standards and relevant financial and governance
reporting requirements;
O material areas in which significant judgements have been
applied or where there has been discussion with the external
auditor including the going concern status and viability
statement;
O whether 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
Company’s performance, business model and strategy; and
O any correspondence from regulators in relation to the
Company’s financial reporting.
To aid its review, the Audit and 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 Risk Committee supports the external
auditor and recognises the necessary professional scepticism
their role requires.
Other InformationFinancial StatementsGovernanceOverview
28
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
REPORT OF THE AUDIT AND RISK COMMITTEE
(CONTINUED)
MEETINGS
During the year ended 31 January 2024, the Audit and Risk
Committee met formally on four occasions. The matters
discussed at those meetings included:
O review of the terms of reference of the Audit and Risk
Committee for approval by the Board;
O review of the accounting policies and format of the Financial
Statements;
O detailed review of the Annual Report and Financial
Statements, Interim Report and recommendation for approval
by the Board including the basis other than that of a going
concern and the viability statement;
O detailed review and updating of the Company’s risk matrix;
O review and approval of the audit plan and final Audit and Risk
Committee report of the auditor;
O discussion and approval of the fee for the external audit;
O assessment of the independence of the external auditor;
O assessment of the effectiveness of the external audit process
as described below; and
O review of the Company’s key risks and internal controls.
PRIMARY AREA OF JUDGEMENT
The Audit and Risk Committee determined that the key risk of
misstatement of the Company’s Financial Statements relates
to the valuation and recoverability of the loans, in the context of
the judgements necessary to evaluate any related impairment
of the loans and associated credit loss.
The Company’s loans are the key value driver for the
Company’s NAV and interest income. Judgements over the
level of any impairment and recoverability of loan principal and
interest could significantly affect the NAV.
The Company’s remaining loans are past due and, in each
case, the underlying assets are subject to either receivership
or administration process at the behest of the Company. The
Committee reviews the Investment Manager’s monitoring
of the subject properties and performance of its appointed
asset managers, receivers, administrators and sales agents
to ensure all reasonable steps are being taken in the orderly
realisation of the assets.
The Committee also receives updates from the Investment
Manager regarding the trading performance of each property.
As a result, the Committee seeks to determine the level of
impairment to the loans.
The Audit and Risk Committee notes that critical judgements
have been made in relation to the assessment of the estimation
of the loss given default to each of the remaining three loans.
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 Risk Committee focused their work on
disclosures required in the Annual Report following
requirements under the AIC Code, consideration of emerging
risks, environmental, social and governance matters and on
subsequent event disclosures.
The Audit and Risk Committee also focused on IFRS 9 and in
particular the assessment of the credit risk changes and loss
given default in relation to the loan portfolio. The Audit and 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 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 internal
credit rating of each loan as at 31 January 2024 was reviewed. All
three loans, Affinity, RoyaleLife and Southport were identified as
Stage 3 and have an impairment provision of £32.48 million. All
loans were discussed at the Audit and Risk Committee meeting
to review the Annual Report, with the Investment Manager, the
Administrator and Auditor. In line with requirements of IFRS as
set out in the accounting policies, interest accruing and unpaid
on Stage 3 loans recognised as Income net of ECL allowance in
the Statement of Comprehensive Income.
The Audit and 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 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 Risk Committee. The work of the Audit
and Risk Committee is driven primarily by the Company’s
assessment of its principal risks and uncertainties as set
out on pages 24 to 26 of the Corporate Governance Report,
and it receives reports from the Investment Manager and
Administrator on the Company’s risk evaluation process and
reviews changes to significant risks identified. Furthermore,
the Investment Manager monitors the risks associated with
the investments and the compliance of the investment portfolio
with the investment restrictions of the Company.
INTERNAL AUDIT
The Audit and 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 Company’s assets, is
maintained. Furthermore, the visit to the Investment Manager’s
London office on 8 February 2024 gave the Committee
assurance around the Investment Manager’s internal controls
and included a discussion with the Investment Manager’s
head of internal audit. An internal audit function specific to the
Company is therefore considered unnecessary.
29
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Overview
Other InformationFinancial StatementsGovernanceOverview
REPORT OF THE AUDIT AND RISK COMMITTEE
(CONTINUED)
EXTERNAL AUDIT
Deloitte LLP has been the Company’s external auditor since
the Company’s inception. This is the eleventh audit period and
therefore the Company is obliged to consider tendering for a
new audit firm. As the Company is in a managed realisation, the
Audit and Risk Committee has determined that Deloitte LLP
should remain as auditor until the Company has wound up.
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 Risk Committee has considered
the re-appointment of the auditor and decided not to put the
provision of the external audit out to tender, given the limited
life of the Company.
The objectivity of the auditor is reviewed by the Audit and
Risk Committee which also reviews the terms under which
the external auditor may be appointed to perform non-audit
services. The Audit and 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 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 Risk Committee before being initiated.
The external auditor may not undertake any work for the
Company in respect of the following matters – preparation
of the Financial Statements, provision of investment
advice, taking management decisions or advocacy work in
adversarial situations.
The Committee reviews the scope and results of the audit, its
cost effectiveness and the independence and objectivity of the
auditor, with particular regard to the level of non-audit fees.
The Committee regularly monitors non-audit services
being provided by the external auditor to ensure there is no
impairment to their independence or objectivity.
Notwithstanding such services, the Audit and 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 Risk Committee will consider:
O discussions with or reports from the auditor describing its
arrangements to identify, report and manage any conflicts of
interest; and
O the extent of non-audit services provided by the auditor and
arrangements for ensuring the independence, objectivity,
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 Risk
Committee will review:
O the auditor’s fulfilment of the agreed audit plan and variations
from it;
O discussions or reports highlighting the major issues that arose
during the course of the audit;
O feedback from other service providers evaluating the
performance of the audit team;
O arrangements for ensuring independence and objectivity;
O the robustness of the auditor in handling key accounting and
audit judgements; and
O 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 Risk Committee discuss the extent of the auditor’s
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 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 Risk Committee has
recommended to the Board that Deloitte LLP be reappointed as
auditor for the year ending 31 January 2025.
The Board’s recommendation to shareholders on the re-
appointment of Deloitte LLP as external auditor will be put to
shareholders at the Annual General Meeting.
The Chair of the Audit and 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 Risk Committee
FIONA LE POIDEVIN
Chair of the Audit and Risk Committee
8 May 2024
30
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
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
In our opinion the financial statements of ICG-Longbow Senior Secured UK Property Debt Investments Limited (the ‘Company’):
O give a true and fair view of the state of the Company’s affairs as at 31 January 2024 and of its loss for the year then ended;
O have been properly prepared in accordance with United Kingdom adopted international accounting standards;
O have been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.
We have audited the financial statements which comprise:
O the statement of comprehensive income;
O the statement of financial position;
O the statement of changes in equity;
O the statement of cash flows; and
O the related notes 1 to 16.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom adopted
international accounting standards.
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 Company 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 confirm that
we have not provided any non-audit services prohibited by the FRC’s Ethical Standard to the Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. EMPHASIS OF MATTER – FINANCIAL STATEMENTS PREPARED OTHER THAN ON A GOING CONCERN BASIS
We draw attention to note 2 b) in the financial statements, which indicates that the 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.
4. SUMMARY OF OUR AUDIT APPROACH
Key audit matters
The key audit matter that we identified in the current year was:
O The assessment of expected credit losses (ECL) on loans advanced
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
The materiality that we used in the current year was £0.72 million which was determined on
the basis of approximately 2% of the net asset value.
Scoping
We performed a full scope audit to respond to the risks of material misstatement.
Significant changes in
our approach
We have not identified income recognition as a key audit matter this year. The reason is that all
remaining loans were defaulted, and income was generated on stage 3 loans on a net carrying
amount after deduction of expected credit loss provision. Income has been recognised from
the Northland loan which was largely repaid during the year.
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Overview
Other InformationFinancial StatementsGovernanceOverview
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
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
Key audit
matter
description
As at 31 January 2024, the aggregate value of loans advanced at amortised cost amounted to £33.6 million (2023:
£69.0 million) representing 92% of total assets (2023: 89%).
As described in the Report of the Audit and Risk Committee, the Company’s loans are the key value driver for the
net asset value and income from loans. Judgements over the level of potential impairment of loan values using the
expected credit losses (ECL) model under IFRS 9
Financial Instruments
, and the recoverability thereof, has been
identified as a key audit matter.
As the contractual maturity of all loans was past due, a key source of estimation uncertainty within the ECL model
is the determination of the loss given default (‘LGD’), which is made with reference to collateral asset values and
net proceeds receivable from the sale, the expected timing of the sale or refinance of those assets. In valuing the
underlying collateral, the Investment Manager has historically engaged with external valuation experts and for
the current year has also relied on a mixture of offers received and real estate agencies advice. In doing so the
Investment Manager has determined a number of probability weighted scenarios.
The Investment Manager and the Board may seek to manipulate the assumptions adopted to influence key
performance indicators. As such, there is an incentive to overstate the value of loans and we identified this as a
potential area for fraud.
The estimate also considers the impact of loan-specific matters which are mainly the judgements around the
values of the collaterals such as:
O adequacy of valuations performed by external valuation experts and real estate agencies as well as scenarios
proposed by the Investment Manager;
O credibility of third party offers;
O weightings and discounts adopted between different scenarios;
O estimated cost to sell underlying collateral; and
O estimated timing of collateral disposals.
This matter is explained further in the Report of the Audit and Risk Committee on page 28. Note 2(k) and note 3 to
the financial statements set out the associated accounting policy and disclosure in respect of critical judgements
and key sources of estimation uncertainty, note 5 set out the composition of the debt portfolio as well as the stress
analysis and note 11 sets out details of the associated risk factors, including credit risk.
How the scope
of our audit
responded to
the key audit
matter
We have:
O Obtained an understanding and tested relevant controls relating to the ECL assessment process;
O Obtained valuations reports for the underlying collateral as well as real estate agencies advice received;
O Assessed the competence, capability, and objectivity of valuation experts and real estate agencies used;
O With involvement of our valuation specialists we estimated net proceeds receivable for the underlying collateral
and assessed assumptions made by the Investment Manager in respect of the collateral valuation including:
–
adequacy of the valuations;
–
credibility of third party offers;
–
weightings and discounts adopted; and
–
estimated cost to sell and the estimated timing of such disposals;
O Alongside our credit specialists, we assessed the appropriateness of the ECL provision by challenging the
Investment Manager’s scenario analysis and performing our own assessment. The assumptions considered
included:
– Collateral value;
– Offers received on the underlying collateral and likelihood of completion; and
– Estimated net proceed and impact of discounting (if any);
O Tested the mathematical accuracy of the ECL provision model;
O Performed a stand back analysis and assessed the ECL provision retrospectively; and
O Evaluated the appropriateness of disclosures made in the financial statements in light of the requirements of
IFRS 7
Financial Instruments: Disclosures
.
Key
observations
Having carried out the procedures, we concluded that the resulting ECL provision is appropriately
accounted for.
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Annual Report And Financial Statements
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
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:
Materiality
£0.72 million (2023: £1.6 million)
Basis for determining
materiality
2% (2023: 2%) of net asset value (“NAV”)
Rationale for the
benchmark applied
We believe net asset value is the most appropriate benchmark as it is considered one of the
principal considerations in assessing financial performance.
NAV £36m
Materiality £0.72m
NAV Materiality
Audit Committee
reporting threshold
£0.03m
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. Performance materiality was set at 70% of
materiality for the 2024 audit (2023: 70%). In determining performance materiality, we considered the following factors:
O our risk assessment, including our assessment of the overall control environment; and
O 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 and Risk Committee that we would report to the Committee all audit differences in excess of £36,000 (2023:
£80,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report
to the Audit and Risk Committee on disclosure matters that we identified when assessing the overall presentation of the financial
statements.
7. AN OVERVIEW OF THE SCOPE OF OUR AUDIT
7.1. Scoping
Our audit was scoped by obtaining an understanding of the Company and its environment, including internal control, and assessing
the risks of material misstatement of the Company. Audit work to respond to the risks of material misstatement was performed
directly by the audit engagement team.
7.2. Our consideration of the control environment
The Company is administered by a third party Guernsey regulated service provider. As part of our audit, we obtained an understanding
of relevant controls established at the service provider. We tested the controls around the ECL provision however, we did not place
reliance on the controls.
7.3. Our consideration of climate-related risks
As described in the Environmental Social and Governance Report included in the Corporate Governance Report, the Company’s
activities only have a limited direct impact on the environment as set out in page 19. We have performed the following procedures:
O held discussions with management to understand the process of identifying climate-related risks and the impact on the Company’s
financial statements.
O read the Environmental Social and Governance Report included in the Corporate Governance Report to consider whether it is
materially consistent with the financial statements and our knowledge obtained in the audit.
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Annual Report And Financial Statements
Overview
Other InformationFinancial StatementsGovernanceOverview
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
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.
We have nothing to report in this regard.
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 Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company 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:
O the nature of the industry and sector, control environment and business performance including the design of the Company’s
remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
O the Company’s own assessment of the risks that irregularities may occur either as a result of fraud or error;
O results of our enquiries of management, the directors and the Audit and Risk Committee about their own identification and
assessment of the risks of irregularities, including those that are specific to the Company’s sector;
O any matters we identified having obtained and reviewed the Company’s documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
– 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 credit specialists and real
estate valuation specialist, 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 area:
• The assessment of expected credit losses (ECL) on loans advanced;
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ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
11. EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD (CONTINUED)
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 framework that the Company 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, the Listing
Rules and relevant tax legislation.
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 Company’s ability to operate or to avoid a material penalty. These included the
Company’s regulatory licences and The Protection of Investors (Bailiwick of Guernsey) Law, 2020.
11.2 Audit response to risks identified
As a result of performing the above, we identified the assessment of expected credit losses (ECL) on loans advanced as a key audit
matter related to the potential risk of fraud. The key audit matters section of our report explains the matter in more detail and also
describes the specific procedures we performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
O 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;
O enquiring of management and the Audit and Risk Committee concerning actual and potential litigation and claims;
O performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
O reading minutes of meetings of those charged with governance and reviewing correspondence with the Guernsey Financial Services
Commission; and
O 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 Company’s compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
O the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any
material uncertainties identified set out on page 14;
O the directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the
period is appropriate set out on page 14;
O the directors’ statement on fair, balanced and understandable set out on page 18;
O the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 18;
O the section of the annual report that describes the review of effectiveness of risk management and internal control systems set
out on page 23; and
O the section describing the work of the Audit and Risk Committee set out on page 22.
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Overview
Other InformationFinancial StatementsGovernanceOverview
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
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:
O we have not received all the information and explanations we require for our audit; or
O proper accounting records have not been kept by the Company; or
O the financial statements are not in agreement with the accounting records.
We have nothing to report in respect of these matters.
14. OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS
14.1. Auditor tenure
Following the recommendation of the Audit and Risk Committee, we were re-appointed by the board on 6 November 2023 to audit
the financial statements for the year ending 31 January 2024. The period of total uninterrupted engagement including previous
renewals and reappointments of the firm is 11 years, covering the years ending 31 January 2014 to 31 January 2024.
14.2. Consistency of the audit report with the additional report to the Audit and Risk Committee
Our audit opinion is consistent with the additional report to the Audit and Risk 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
8 May 2024
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ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 January 2024
Notes
1 February 2023 to
31 January 2024
£
1 February 2022 to
31 January 2023
£
Income
Income from loans 2 e) 4,896,000 7,136,574
Other fee income from loans 2 f) 5,168 133,051
Income from cash and cash equivalents 53,518 2,864
Total income 4,954,686 7,272,489
Expenses
Investment Management fees 13 551,167 761,047
Directors’ remuneration 12 160,000 160,000
Audit fees for the Company 14 63,013 42,353
ECL provision on financial assets 5 28,507,897 3,940,181
Other expenses 15 548,860 409,085
Total expenses 29,830,937 5,312,666
(Loss)/profit for the year before tax (24,876,251) 1,959,823
Taxation charge 4 – –
(Loss)/profit for the year after tax (24,876,251) 1,959,823
Total comprehensive (loss)/income for the year (24,876,251) 1,959,823
Basic and diluted (Loss)/Earnings per Share (pence) 9 (20.51) 1.62
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 Company had no recognised gains or losses for either period other than those included in the results above.
The accompanying notes from 1 to 16 form an integral part of these Financial Statements.
37
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
STATEMENT OF FINANCIAL POSITION
As at 31 January 2024
Other InformationFinancial StatementsGovernanceOverview
The accompanying notes from 1 to 16 form an integral part of these Financial Statements.
Notes
31 January 2024
£
31 January 2023
£
Assets
Current Assets
Loans advanced 5 33,639,051 68,963,675
Trade and other receivables 6 30,718 43,435
Cash and cash equivalents 7 2,945,829 9,209,494
Total current assets 36,615,598 78,216,604
Total assets 36,615,598 78,216,604
Liabilities
Current Liabilities
Trade and other payables 8 391,470 861,653
Total current liabilities 391,470 861,653
Total liabilities 391,470 861,653
Net assets 36,224,128 77,354,951
Equity
Share capital 10 64,650,361 80,298,419
Retained loss (28,426,233) (2,943,468)
Total equity attributable to the owners of the Company 36,224,128 77,354,951
Number of Ordinary Shares in issue at year end 10 121,302,779 121,302,779
Net Asset Value per Ordinary Share (pence) 9 29.86 63.77
The Financial Statements were approved by the Board of Directors on 8 May 2024 and signed on their behalf by:
JACK PERRY FIONA LE POIDEVIN
Chairman Director
8 May 2024 8 May 2024
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ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
The accompanying notes from 1 to 16 form an integral part of these Financial Statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 January 2024
Notes
Number
of shares
Ordinary
Share
capital
£
B Share
capital
£
Retained
(loss)/
earnings
£
Total
£
As at 1 February 2023 121,302,779 80,298,419 – (2,943,468) 77,354,951
Total comprehensive loss – – – (24,876,251) (24,876,251)
Dividends paid 10 – – – (606,514) (606,514)
B Shares issued February 2023 10 121,302,779 (6,671,653) 6,671,653 – –
B Shares redeemed & cancelled
February 2023 10 (121,302,779) – (6,671,653) – (6,671,653)
B Shares issued August 2023 10 121,302,779 (8,976,405) 8,976,405 – –
B Shares redeemed & cancelled
August 2023 10 (121,302,779) – (8,976,405) – (8,976,405)
As at 31 January 2024 121,302,779 64,650,361 – (28,426,233) 36,224,128
For the year ended 31 January 2023
Notes
Number
of shares
Ordinary
Share
capital
£
B Share
capital
£
Retained
(loss)/
earnings
£
Total
£
As at 1 February 2022 121,302,779 87,576,589 – 191,426 87,768,015
Total comprehensive income – – – 1,959,823 1,959,823
Dividends paid 10 – – – (5,094,717) (5,094,717)
B Shares issued May 2022 10 121,302,779 (7,278,170) 7,278,170 – –
B Shares redeemed & cancelled
May 2022 10 (121,302,779) – (7,278,170) – (7,278,170)
As at 31 January 2023 121,302,779 80,298,419 – (2,943,468) 77,354,951
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
39
The accompanying notes from 1 to 16 form an integral part of these Financial Statements.
STATEMENT OF CASH FLOWS
For the year ended 31 January 2024
Notes
1 February 2023 to
31 January 2024
£
1 February 2022 to
31 January 2023
£
Cash flows generated from operating activities
(Loss)/profit for the year (24,876,251) 1,959,823
Adjustments for non-cash items and working capital movements:
Movement in other receivables 6 12,718 459,050
Movement in other payables and accrued expenses 8 (296,009) 68,430
Loan amortisation and ECL provision 25,889,373 1,193,484
729,831 3,680,787
Loans advanced less arrangement fees (308,400) (487,610)
Arrangement fees received – 64,740
Loans repaid 5 9,569,476 13,523,240
Net loans repaid less arrangement fees 9,261,076 13,100,370
Net cash generated from operating activities 9,990,907 16,781,157
Cash flows used in financing activities
Dividends paid 10 (606,514) (5,094,717)
Return of Capital paid 10 (15,648,058) (7,278,170)
Net cash (used in) financing activities (16,254,572) (12,372,887)
Net (decrease)/increase in cash and cash equivalents (6,263,665) 4,408,270
Cash and cash equivalents at the start of the year 9,209,494 4,801,224
Cash and cash equivalents at the end of the year 2,945,829 9,209,494
Other InformationFinancial StatementsGovernanceOverview
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ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 January 2024
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.
The registered office address is Floor 2, PO Box 286, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 4LY.
The Company’s shares were admitted to the Premium Segment of the Official List and to trading on the Main Market of the London
Stock Exchange on 5 February 2013.
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.
ICG Alternative Investment Limited is the external discretionary investment manager.
2. ACCOUNTING POLICIES
a) Basis of preparation
The Financial Statements for the year ended 31 January 2024 have been prepared in accordance with UK adopted international
accounting standards and the Companies (Guernsey) Law, 2008.
The same accounting policies and methods of computation have been followed in the preparation of these Financial Statements as
in the Annual Report and Financial Statements for the year ended 31 January 2023.
At the date of approval of these Financial Statements, the Company 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 Financial Statements of the Company.
Effective for periods
commencing
IFRS 17 Insurance Contracts (Amendments to address concerns and implementation challenges
that were identified after IFRS 17 was published)
01 January 2023
IAS 1 Presentation of Financial Statements (Amendments regarding the disclosure of accounting
policies)
01 January 2023
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendments regarding
the definition of accounting estimates)
01 January 2023
IAS 12 Income Taxes (Amendments regarding deferred tax on leases and decommissioning
obligations
01 January 2023
The following new and revised IFRS standards and interpretations that have been issued and are not yet effective. The Company
intends to adopt these new and amended standards and interpretations, if applicable, when they become effective.
Effective for periods
commencing
IFRS 7 Financial Instruments: Disclosures (Amendments regarding supplier finance
arrangements)
01 January 2024
IFRS 16
Leases (Amendments to clarify how a seller-lessee subsequently measures sale and
leaseback transactions)
01 January 2024
IAS 1 Presentation of Financial Statements (Amendments regarding the classification of
liabilities)
01 January 2024
IAS 1 Presentation of Financial Statements (Amendments regarding the classification of debt
with covenants)
01 January 2024
IAS 7 Statement of Cash Flows (Amendments regarding supplier finance arrangements) 01 January 2024
41
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
b) Going concern
The Directors, at the time of approving the Financial Statements, are required to consider whether they have a reasonable
expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and whether
there is any threat to the going concern status of the Company. 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, following the appointment of receivers or administrators in respect of the last remaining loans, the investments
will be realised as and when the underlying property assets, or loans upon which they are secured, can be sold in an orderly
manner. The Company may take actions with the consequence of accelerating or delaying realisation in order to optimise
shareholders’ returns in the context of the Company’s size.
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 going concern in preparing the financial statements.
In the absence of a ready secondary market in real estate loans by which to assess market value of the loans, the basis of valuation
for investments is amortised cost net of impairment, recognising the realisable value of each property in the orderly wind down of
the Company. In accordance with the Company’s IFRS 9 Policy the staging of each loan has been reviewed and all loans are now
considered to be at Stage 3. Consequently, valuations reflect the ECL assuming a twelve month realisation period, as detailed in
Note 5. No material adjustments have arisen solely as a result of ceasing to apply the going concern basis.
c) 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 Company’s investments and most transactions are denominated in Pounds Sterling.
d) 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 the Statement of Comprehensive Income.
e) Interest income
In accordance with IFRS 9 interest income is recognised when it is probable that the economic benefits will flow to the Company
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.
For financial assets in stage 3, interest is recognised on a net basis after allowance for ECL. For financial assets in Stage 2, where
the Company considers that the quantum or timeliness of the economic benefit cannot be measured reliably, in accordance with
IFRS, interest will be recognised on a gross basis and an ECL provision will be raised.
Interest on cash and cash equivalents is recognised on an accruals basis.
f) 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.
g) Operating expenses
Operating expenses are the Company’s costs incurred in connection with the ongoing management of the Company’s investments
and administrative costs. Operating expenses are accounted for on an accruals basis.
h) 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 £1,600 which is included within other expenses. The Company is required to apply annually to obtain exempt status
for the purposes of Guernsey Taxation.
i) 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 Statement of Changes In Equity. Any dividends that are
declared post year end are disclosed in note 16.
Other InformationFinancial StatementsGovernanceOverview
42
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
j) 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 Company’s performance and to allocate resources is the total return on the Company’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 Company is organised into one main operating segment, being the provision of a portfolio of UK
commercial property backed senior debt investments.
The majority of the Company’s income is derived from loans secured on commercial and residential property in the United Kingdom.
Due to the Company’s nature, it has no employees.
k) Financial instruments
Financial assets and financial liabilities are recognised in the Company’s Statement of Financial Position when the Company
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 Statement of Financial Position and Statement of Comprehensive Income when there is a currently
enforceable legal right to offset the recognised amounts and the Company 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 Company’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 total claim value less allowance for Expected Credit Loss (ECL). The effect of discounting on 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 Company 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 Company
always recognises a 12-month ECL for trade receivables and loan receivables that fall under stage 1 assets. For stage 2 assets,
the Company recognises a lifetime ECL when there has been a significant increase in credit risk since initial recognition. In
respect of the Stage 3, non-performing loans, lifetime expected credit losses are also recognised, and interest is calculated on
the net carrying amount and subject to further provision for impairment in the event that it is unlikely to be received. The ECL
on Stage 1 and Stage 2 loans are estimated using a provision matrix based on the Investment Manager’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 Company has adopted a simplified model for trade receivables where lifetime ECL is estimated and does not materially
differ from the 12-month ECL.
43
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
k) Financial instruments(continued)
The ECL for Stage 3 loans is assessed based on the expected net realisable value of the underlying properties, taking inputs from
various external sources including property valuations, agency advice, comparable evidence and offers received. Where specific
valuation evidence is not available or unclear, a risk probability weighted approach will be applied to a range of outcomes.
v) Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Company
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 Company 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 Company’s debtors operate, obtained from economic expert reports, 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 Company’s core operations.
In particular, the following information is taken into account when assessing whether credit risk has increased significantly
since initial recognition:
O an actual or expected significant deterioration in the financial instrument’s external (if available) or internal credit rating;
O 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;
O 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;
O any actual or expected significant deterioration in the operating results of the debtor;
O significant increases in credit risk on other financial instruments of the same debtor; or
O 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.
Despite the foregoing, the Company assumes that the credit risk on a financial instrument has not increased significantly since
initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is
determined to have low credit risk if:
(1) The financial instrument has a low risk of default;
(2) The debtor has a strong capacity to meet its contractual cash flow obligations in the near term; and
(3) Adverse changes in economic and business conditions have not, or will not in the foreseeable future, reduce the ability of the
borrower to fulfil its contractual cash flow obligations. Where the ability to meet cashflow obligations, including payment of
interest, are impacted the risk associated with the financial instrument may be considered to have increased.
The Company considers a financial asset to have low credit risk when the asset has external credit rating of ‘investment grade’
in accordance with the globally understood definition or if an external rating is not available, the asset has an internal rating of
‘performing’. Performing means that the counterparty has a strong financial position and there are no past due amounts.
The Company regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase
in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit
risk before the amount becomes past due.
vi) Definition of default
The Company considers the following as constituting an event of default for internal credit risk management purposes as
historical experience indicates that financial assets that meet any of the following criteria may not be fully recoverable:
O when there is a breach of financial covenants by the debtor which has not be waived or where the lender’s rights have not been
reserved pending action by the borrower;
O information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors,
including the Company, in full (without taking into account any collateral held by the Company); or
O when the Company have appointed administrators or receivers to the debtor.
There is a rebuttable presumption that where loans are past due or interest is unpaid for more than 30 days, this leads to a
significant increase in credit risk or that if unpaid for more than 90 days this leads to an event of default. However, the Company
may elect to waive the default or give a period of forbearance and reserve its rights in respect of the default to enhance returns
and hence may rebut the presumption that there is a significant increase in credit risk or an event of default.
Other InformationFinancial StatementsGovernanceOverview
44
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
k) Financial instruments(continued)
vii) Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows
of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data about the
following events:
(a) significant financial difficulty of the issuer or the borrower;
(b) a breach of contract, such as a default or past due event (see (vi) above);
(c) the lenders to the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty having
granted to the borrower concessions that the lenders would not otherwise consider;
(d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
(e) the disappearance of an active market for that financial asset because of financial difficulties.
viii) Write-off policy
The Company writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and
there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy
proceedings, or in the case of loan receivables, when the amounts are over two years past due, whichever occurs sooner.
Financial assets written off may still be subject to enforcement activities under the Company’s recovery procedures, taking into
account legal advice where appropriate. Any recoveries made are recognised in profit or loss.
ix) Measurement and recognition of ECL
The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a
default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical
data adjusted by forward-looking information as described above. As for the exposure at default, for financial assets, this is
represented by the asset’s gross carrying amount at the reporting date.
For financial assets, the ECL is estimated as the difference between all contractual cash flows that are due to the Company in
accordance with the contract and all the cash flows that the Company expects to receive, discounted at the original effective
interest rate.
If the Company has measured the loss allowance for a financial instrument at an amount equal to lifetime ECL in the previous
reporting period but determines at the current reporting date that the conditions for lifetime ECL are no longer met, the
Company measures the loss allowance at an amount equal to 12-month ECL at the current reporting date, except for assets for
which a simplified approach was used.
The Company’s measurement of ECL reflects an unbiased and probability-weighted amount that is determined by evaluating the
range of possible outcomes as well as incorporating the time value of money. The Company has also considered reasonable and
supportable information from past events, current conditions and reasonable and supportable forecasts for future economic
conditions when measuring ECL.
O Stage 1 covers financial assets that have not deteriorated significantly in credit risk since initial recognition;
O Stage 2 covers financial assets that have significantly deteriorated in credit quality since initial recognition; and
O Stage 3 covers financial assets that have objective evidence of impairment at the reporting date.
Twelve-month ECL are recognised in stage 1, while lifetime ECL are recognised in stages 2 and 3. The Company’s remaining
loan book are all past due and as a result 12 month and lifetime ECL will be the same.
x) Modification of cash flows
Having performed adequate due diligence procedures, the Company may negotiate or otherwise modify the contractual cash
flows of loans to customers, usually as a result of loan extensions. When this happens, the Company assesses whether or not
the new terms are substantially different to the original terms.
If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Company
recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification
gain or loss in profit or loss. The new gross carrying amount is recalculated by discounting the modified cash flows at the
original effective interest rate.
If terms are substantially different the original asset is derecognised and a new financial asset is recognised. It is assumed that
the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid
net of any fees received and discounted using the original effective rate is at least 10 per cent different from the discounted present
value of the remaining cash flows of the original financial asset. If the modification is not substantial, the difference between: (1) the
carrying amount of the liability before the modification; and (2) the present value of the cash flows after modification is recognised
in profit or loss as the modification gain or loss within other gains and losses as explained in paragraph above.
45
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
k) Financial instruments(continued)
xi) Derecognition of financial assets
The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If
the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the
transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have
to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company
continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the
sum of the consideration received and receivable, is recognised in profit or loss.
Financial liabilities
The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and
its characteristics.
All financial liabilities are initially recognised at fair value net of transaction costs incurred. All purchases of financial liabilities are
recorded on a trade date, being the date on which the Company becomes party to the contractual requirements of the financial
liability. Unless otherwise indicated the carrying amounts of the Company’s financial liabilities approximate to their fair values.
The Company’s financial liabilities consist of only financial liabilities measured at amortised cost.
i) Financial liabilities measured at amortised cost
These include trade payables and other short-term monetary liabilities, which are initially recognised at fair value and
subsequently carried at amortised cost using the effective interest rate method.
ii) Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or
have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and
payable is recognised in profit or loss.
i) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are recognised as the proceeds received, net of direct issue costs.
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY IN APPLYING THE COMPANY’S
ACCOUNTING POLICIES
The preparation of the Financial Statements under IFRS requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if
the revision affects both current and future periods.
Critical accounting judgements
In assessing the ECL, the Board have made critical judgements in relation to the staging of the loans and assessments which impact
the loss given default. In assessing whether the loans have incurred a significant increase in credit risk the Investment Manager,
on behalf of the Board, assesses the credit risk attaching to each of the loans, and the value of the properties on which they are
secured. The Company has adopted the Investment Manager’s internal credit rating methodology and has used its loss experience to
benchmark investment performance and potential impairment for Stage 1, Stage 2 and Stage 3 loans under IFRS 9 considering both
probability of default and loss given default. The judgement applied in allocating each investment to Stage 1, 2 or 3 is key in deciding
whether losses are considered for the next 12 months or over the residual life of the loan. It is noted that the Company’s remaining
loans are all now past due, and that receivers or administrators have been appointed over the Company’s security.
The Investment Manager and the Board will also take into consideration the likely repayment term of loans that have become
past due and the actions to be taken, by the appointed receiver or administrator to repay such loans. Consequently a loan which is
past due, but otherwise performing, may continue to be assessed as Stage 1 where there is an active repayment plan in place, or
supporting evidence that the loan can be repaid in full and the Company has given a period of forbearance whilst reserving its rights
to, or charging, default interest.
Other InformationFinancial StatementsGovernanceOverview
46
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY IN APPLYING THE COMPANY’S
ACCOUNTING POLICIES (CONTINUED)
Critical accounting judgements (continued)
The Investment Manager and the Board will also take into account prevailing economic and market conditions, investor sentiment
and outlook over the expected term of the investments to realisation or repayment. In this regard the sustained rise in UK interest
rates over the past eighteen months, and interest rate outlook implied by the five year swap rate, has dramatically reduced
liquidity in property and finance markets as well as affecting asset prices in many property sectors. As a result, the number of UK
commercial property transactions in the first half of 2023 was over 50% lower than the same period in the prior year, and 37% below
the 10-year average. The UK economy fell into a technical recession at the end of 2023, and whilst headline inflation is now falling
core pressures remain, with rate cuts not now expected until H2 2024. Geopolitical concerns are high with the continuing war in
Ukraine, escalating hostilities in the Gaza and the Middle East, and further uncertainties caused by an upcoming general elections
in the UK and US.
Against the backdrop of interest rate rises and liquidity issues as discussed in the Investment Manager’s Report, the Investment
Manager and Board agree that all remaining investments have a heightened credit risk. At the reporting date all three loans are
subject to enforcement action and, in the absence of an active and liquid property market, are considered as Stage 3 assets with a
material risk of credit loss.
Key sources of estimation uncertainty
The measurement of both the initial and ongoing ECL allowance for loan receivables measured at amortised cost is an area that
has required the use of significant assumptions about credit behaviour such as likelihood of borrowers continuing to support their
properties through interest payments and equity injections, or defaulting and the resulting losses.
In assessing the probability of default for loans at Stage 1 and Stage 2, the Board has taken note of the experience and loss history
of the Investment Manager which may not be indicative of future losses. The default probabilities are based on a number of factors
including rental income trends, interest cover and LTV headroom and sectoral trends which the Investment Manager believes to be
a good predictor of the probability of default, in accordance with recent market studies of European commercial real estate loans.
In line with the Company’s investment strategy at the time, most loans benefited from significant LTV headroom at origination,
with business plans designed to deliver further value increases over time. This combined with tight covenants generally enabled
the Investment Manager to manage risk over the term of the loans. However, following the change in Investment Strategy to one
of orderly wind down and the reduction of the portfolio to just three remaining assets, the Investment Manager and the Board have
placed greater emphasis on the source and delivery of repayment of each loan when assessing valuation and the risk of capital loss.
As discussed above, a material reduction in transactional evidence and higher funding costs have led to a fall in property values
generally, but with those sectors subject to structural change (e.g. offices), and interest rates (e.g. residential housing for sale)
being particularly impacted. As a result all remining loans have evidence of heightened credit risk with the equity buffer having been
eroded by falls in property values, and as such have been assessed as Stage 3 loans.
The Board’s valuation of Stage 3 assets (those loans considered to have a material risk of credit loss), is first informed by third party
property valuations and supporting comparative transactional evidence, including marketing processes being undertaken. The
Investment Manager and the Board will then overlay property level cashflows, expected sales costs and other factors considered
necessary to achieve exits within the target timeframes for returning capital to shareholders.
All of the Company’s Stage 3 assets are subject to enforcement action in the form of administration or receivership at the
reporting date. As a result, the Company has considered the likelihood of achieving sales at the most recent third-party valuation
or at discounts to reflect the current lack of liquidity in the relevant property sector and the Company’s target timeframes and
the probability of such outcomes. These probabilities and discounts are further informed by prospective purchasers’ offers or
expressions of interest where properties have been marketed.
In arriving at the investment valuations, the Investment Manager has overlayed the expected costs of sale and exit timeframes to
determine a weighted average valuation of each loan under the expected interest rate method and, thereby, the expected credit loss
for each loan that may result.
Revenue recognition is considered a significant accounting judgement and estimate that the Directors make in the process of
applying the Company’s accounting policies. In respect of the Company’s Stage 3 loans, interest income will be recognised through
in the Statement of Comprehensive Income net of ECL allowance. In view of the trading conditions of the Southport hotel and
liquidity challenges facing the RoyaleLife loan, the Directors consider it unlikely that interest payments will be received in the
near term. The Affinity property remains well occupied and able to meet its interest liabilities in full from rents receivable, however
the receiver will likely reserve some cash for working capital purposes in order to prepare the property for sale with a full due
diligence pack. Interest on the Affinity Loan will therefore also be recognised on a net basis after ECL allowance, whilst any cash
withheld by the receiver will form part of the final settlement.
4. TAXATION
No tax was chargeable for the current year ended 31 January 2024. (31 January 2023: £Nil)
47
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5. LOANS ADVANCED
(i) Loans advanced
1 February 2023 to
31 January 2024
£
1 February 2022 to
31 January 2023
£
Loans gross carrying value: 66,116,828 72,903,856
Less: Expected Credit Losses (32,477,777) (3,940,181)
33,639,051 68,963,675
31 January 2024
Principal
advanced
£
31 January 2024
Carrying value
before ECL
allowance
£
31 January 2023
Principal
advanced
£
31 January 2023
At amortised
cost before ECL
allowance
£
Northlands
(1)
– – 9,561,076 9,829,286
Affinity 17,125,789 18,033,451 17,299,963 17,774,436
Southport
(2)
15,500,000 16,511,470 15,200,000 15,988,651
RoyaleLife 25,382,017 31,571,907 25,382,017 29,311,483
58,007,806 66,116,828 67,443,056 72,903,856
(1)
Repaid in full during the year
(2)
There was a £300,000 increase to the Southport loan principal during the year.
(ii) Valuation considerations
As noted above, the Company is now in the process of an orderly wind down. It had been the intention of the Investment Manager
and Directors to hold loans through to their repayment date, and seek a borrower led repayment in order to maximise value for
the shareholders. Economic and property market conditions have not enabled this, with commercial property transactions in some
sectors at their lowest levels for 15 years.
The carrying value amounts of the loans in the Financial Statements have been adjusted for expected credit losses. For further
information regarding the status of each loan and the associated risks see the Investment Manager’s Report.
As loans have fallen past due and enforcement actions have been taken, the Directors have also reassessed the likelihood and
timing of receipt of any exit fees associated with the loans in the context of the current underlying property value and weak
market conditions.
Each property on which investments are secured was subject to an independent, third-party valuation at the time the investment
was entered into and updated valuations have been obtained over the term of the loans as deemed appropriate, based on
the performance of the subject properties and prevailing macro and micro market conditions. All investments are made on
a hold to maturity basis. Each investment is being closely monitored including a review of the performance of the underlying
property security.
Third party property valuations are typically based on the specific particulars of the property (rent, Weighted Average Unexpired
Lease Term (WAULT), vacancy, condition and location) and assume a normal marketing period and sales process. Valuers
benchmark against comparative evidence from recent transactions in similar properties in similar locations.
All the remaining Investments are considered to be Stage 3 assets and were, at year end, subject to enforcement action.
Accordingly, the carrying value of each loan has been reviewed and further provisions for expected credit loss raised. The carrying
value of each Stage 3 investment has been calculated to reflect the net present value of the expected net proceeds from, and
timing of, exit under a range of scenarios reflecting the latest property valuation, the cost of disposal (including enforcement action
taken), and potential discount to valuation that a willing buyer may offer in the current market for a purchase out of administration/
receivership in an accelerated process with limited vendor warranties and indemnities.
Other InformationFinancial StatementsGovernanceOverview
48
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5. LOANS ADVANCED (CONTINUED)
(iii) IFRS 9 – Impairment of Financial Assets
As discussed above, during 2023 the UK commercial property market has experienced a period of historically low transaction
volumes, as buyers adjust their pricing in order to generate target returns in a higher interest rate environment with uncertain
occupational demand in many sectors. Conversely, unless forced, sellers are inclined to hold properties where they can in the
expectation of improved liquidity as the economic outlook stabilises and medium-term interest rates fall. In this context, valuation
and, therefore, the ECL for each investment has been recalculated based on the underlying property performance and property
valuations together with any sales/marketing experience to date and is discussed further below.
The internal credit rating of each loan as at 31 January 2024 has been reviewed. Southport was identified as a Stage 3 asset at
31 January 2023, and the loan has remained a Stage 3 asset, with an ECL provision of £8,597,121 (31 January 2023: £2,288,651).
The RoyaleLife and Affinity loans, that were identified as Stage 2 assets at 31 January 2023, when third party property valuations
exceeded the debt outstanding, however, both are now identified as Stage 3 assets, with aggregate ECL provisions of £23,880,311
(31 January 2023: £1,651,530).
As at 31 January 2024
Stage 1 Stage 2 Stage 3 Total
Principal advanced – – 58,007,806 58,007,806
Gross carrying value – – 66,116,828 66,116,828
Less ECL allowance – – (32,477,777) (32,477,777)
– – 33,639,051 33,639,051
As 31 July 2023
Stage 1 Stage 2 Stage 3 Total
Principal advanced 85,389 – 57,881,980 57,967,369
Gross carrying value 517,935 – 65,414,598 65,932,533
Less ECL allowance – – (21,320,189) (21,320,189)
517,935 – 44,094,409 44,612,344
As at 31 January 2023
Stage 1 Stage 2 Stage 3 Total
Principal advanced 9,561,076 42,681,981 15,200,000 67,443,056
Gross carrying value 9,829,286 47,085,919 15,988,651 72,903,856
Less ECL allowance – (1,651,530) (2,288,651) (3,940,181)
9,829,286 45,434,389 13,700,000 68,963,675
The Northlands loan, identified as stage 1 as at 31 January 2023, was repaid in stages through the year and then in full in December
2023, through a combination of property sales, and a refinance of the residual assets.
The Southport hotel was identified as a Stage 3 asset at 31 January 2023. This followed the appointment of an administrator who
marketed the hotel for sale and was proceeding with a conditional offer at £14.50 million reflected in the ECL at the time. The
prospective purchaser was unable to satisfy a condition of its offer, linked to planning consents, and withdrew from the process. The
Hotel, which continues to trade positively, is now subject to an offer at £9.25 million, slightly below valuation and agency guidance.
In assessing the ECL as at 31 January 2024, the Investment Manager and the Board have considered a range of potential outcomes
based on the current offer, valuation and market advice and adopted a probability weighted approach, discounting the resultant
cashflows to the balance sheet date.
Following failed attempts by the borrower of the Affinity loan to complete a refinance of the Company’s loan, or to repay via a
sale, the Affinity loan was identified as a stage 3 asset at the time of the Company’s interim report given the risk of loss that was
emerging. Subsequently, the Investment Manager, on behalf of the Company, appointed a receiver over the property in September
2023, in order to take control of the exit process. Whilst the property remains well occupied with new leases and regears being
completed, there are rolling lease events at the property over the coming twelve months. Investor demand for regional offices is at
a low due to uncertainties surrounding occupational demand and capital expenditure requirements in a post Covid, remote working,
environment. These uncertainties combining with a higher interest rate environment have materially impacted the valuation of the
property which is down by approximately 40% from over £20 million in April 2023, in line with the wider market where there are
very few if any bidders for regional office assets. The receiver is preparing the property for market and intends to launch a sales
process shortly. The Investment Manager and the Board have considered the agency and receiver advice to determine the likely
net realisable value of the property and timeframe in which it might be achieved. As with the other the Stage 3 loans, a range of
outcomes have been considered and probabilities applied to each in determining the ECL of the loan as at 31 January 2024.
49
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5. LOANS ADVANCED (CONTINUED)
(iii) IFRS 9 – Impairment of Financial Assets (continued)
As previously reported, the companies holding the sites securing the RoyaleLife loan were placed into administration during 2023 to
protect the assets from other creditor claims. Whilst the sites remain open and continue to trade, it became apparent through the work
of the administrator that the business was unable to support itself and the Sponsor no longer had the means, or was unwilling, to inject
further capital for working capital purposes. The Investment Manager appointed a new operator to take over the running of the sites in
order to protect their cashflows. Furthermore, given the specific nature of the sites and planning consents in place, it was necessary
to protect the property security from other creditor claims and sites were transferred into a new holding structure, along with part
of the debt, at the end of 2023. As part of this process, a shortform sales process was undertaken by the administrator, and a new
valuer appointed.
The Investment Manager continues to work with the replacement operator, administrator and other advisors to maximise the potential
outcome for lenders, exploring in parallel a sale and relaunch of the parks under a new brand. Given the latest valuation and the
outcome of the administrator-led sales process, the Board and Investment Manager consider there to be a material risk of loss and the
loan was categorised as Stage 3 at the time of the Company’s interim report. In determining the ECL as at 31 January 2024 the Board
and the Investment Manager have adopted the same probability weighted approach and considered a range of outcomes linked to sale
of the properties, where negotiations continue with an institutional buyer, and to the relaunch of the underlying business with an exit over
time. The Company together with its co-lenders retain the rights, under the original loan, to any recoveries linked to the administration
process and the bankruptcy proceedings against the previous beneficial owner, albeit no value has been attached to such claims.
A reconciliation of the ECL allowance is presented as follows:
Expected Credit Loss Allowances
At 31 January
2023
£
Movement in
ECL Allowance
during year
£
At 31 January
2024
£
Affinity (12,702) (6,684,609) (6,697,311)
Southport (2,288,651) (6,308,470) (8,597,121)
RoyaleLife (1,638,828) (15,544,517) (17,183,345)
(3,940,181) (28,537,596) (32,477,777)
Movement in
ECL Allowance
during year
£
Other
adjustments
(1)
£
ECL allowance
charged to SOCI
£
All loans (28,537,596) (29,699) (28,507,897)
(1)
Other adjustments include Spectrum trapped cash adjustment.
(iv) IFRS 9 Impairment – Stress Analysis
The carrying values of the remaining investments above contemplate sales in a difficult market and have been adjusted for expected
credit losses, making allowance for the potential impact sales out of receivership/administration, on the properties’ underlying
liquidity and attractiveness to buyers, as well as the timeframe in which the Company is seeking to realise its investments.
The remaining loans are all subject to enforcement processes, which may be an additional factor in the liquidity of and buyer pools
for the subject assets. Following the additional provision for ECL, all three of those loans are held at 100% LTV. Two of the loans
(Southport and RoyaleLife) are secured against operating assets which brings additional complexity for buyers when compared to,
say, single tenant investment properties and, in the case of RoyaleLife, operates in a new and emerging sector of retirement living.
The Investment Manager and the Board have considered the impact of a further 10%, 20% and 30% reduction in the underlying property
values, broadly reflecting a one, two and three stage credit deterioration as previously presented, and recalculated its probability
weighted valuations on this basis. The negative impact of these further declines in property values on the portfolio as a whole is set
out below.
Stress test impact on Expected Credit Loss at 31 January 2024
31 January 2024 31 January 2023
One grade deterioration in credit rating £3,279,000 £3,286,000
Two grade deterioration in credit rating £6,558,000 £5,072,000
Three grade deterioration in credit rating £9,837,000 £5,412,000
Other InformationFinancial StatementsGovernanceOverview
50
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5. LOANS ADVANCED (CONTINUED)
(iv) IFRS 9 Impairment – Stress Analysis (continued)
All efforts continue to be made by the Investment Manager and the Board to crystalise the value in the remaining investments
in a reasonable time frame in order to return capital to shareholders and proceed to the liquidation of the Company. However,
as discussed above, in the current market many properties for sale are not receiving any bids, even where they are considered
distressed, and the limited number of buyers active in the market are seeking out the maximum distress in order achieve best
relative value and maximise their potential returns. Accordingly, the timing of the final realisation of the Company’s remaining
assets cannot be predicted with certainty. The Board and Investment Manager have considered the impact of a delay in the
realisation of the remaining loans. A 3 month delay would, at 31 January 2024, reduce the net present value of the cashflows
arising by 2.5% (£780,000), whilst a 6 month delay would result in a 5.0% (£1,540,000) reduction in the net present value of the
cashflows arising.
The current performance of each loan is discussed in the Investment Manager’s report.
6. TRADE AND OTHER RECEIVABLES
31 January 2024
£
31 January 2023
£
Other receivables 30,718 43,435
The Company has management policies in place to ensure that all receivables are received within the credit time frame. The
Directors consider that the carrying amount of all receivables approximates to their fair value.
7. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash held by the Company and short-term bank deposits held with maturities of twelve months
or less. The carrying amounts of these assets approximate their fair value.
The table below shows the Company’s cash balances and the banks in which they are held:
31 January 2024
£
31 January 2023
£
Lloyds Bank International Limited 590,594 581,954
Barclays Bank plc 590,594 581,983
Butterfield Bank (Guernsey) Limited 594,252 582,571
Royal Bank of Scotland International Limited 1,170,389 7,462,986
2,945,829 9,209,494
8. TRADE AND OTHER PAYABLES
31 January 2024
£
31 January 2023
£
Investment Management fees (see Note 13) 236,597 517,343
Directors’ remuneration (see Note 12) 31,250 31,250
Administration fees (see Note 13) 67,917 43,283
Audit fees (see note 14) 17,150 50,138
Other expenses 38,556 40,465
Trade creditors – 179,174
391,470 861,653
Trade creditors comprise amounts payable to borrowers. The Company has management policies in place to ensure that all
payables are paid within the credit time frame. The Directors consider that the carrying amount of all payables approximates to
their fair value.
51
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
9. EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE
Earnings per share
1 February 2023
to 31 January 2024
1 February 2022
to 31 January 2023
Loss/(profit) for the year (£) (24,876,251) 1,959,823
Weighted average number of Ordinary Shares in issue 121,302,779 121,302,779
Basic and diluted (Loss)/EPS (pence) (20.51) 1.62
The calculation of basic and diluted (loss)/earnings per share is based on the (loss)/profit for the year and on the weighted average
number of Ordinary Shares in issue in for the year ended 31 January 2024.
There are no dilutive shares in issue at 31 January 2024 (31 January 2023: none).
Net Asset Value per share
31 January 2024 31 January 2023
NAV (£) 36,224,128 77,354,951
Number of Ordinary Shares in issue 121,302,779 121,302,779
NAV per share (pence) 29.86 63.77
The calculation of NAV per share is based on Net Asset Value and the number of Ordinary Shares in issue at the year end.
10. SHARE CAPITAL
The authorised share capital of the Company is represented by an unlimited number of Ordinary Shares with or without a par value
which, upon issue, the Directors may designate as (a) Ordinary Shares; (b) B Shares; and (c) C Shares, in each case of such classes
and denominated in such currencies as the Directors may determine.
31 January 2024
Number of shares
31 January 2023
Number of shares
Authorised
Ordinary Shares of no par value Unlimited Unlimited
B Shares of no par value Unlimited Unlimited
Total No Total No
Ordinary Shares 121,302,779 121,302,779
B Shares
B Shares issued May 2022 – 121,302,779
B Shares redeemed and cancelled May 2022 – (121,302,779)
B Shares issued February 2023 121,302,779 –
B Shares redeemed and cancelled February 2023 (121,302,779) –
B Shares issued August 2023 121,302,779 –
B Shares redeemed and cancelled August 2023 (121,302,779) –
– –
£ £
Share capital brought forward 80,298,419 87,576,589
Repaid in the year (15,648,058) (7,278,170)
Share capital carried forward 64,650,361 80,298,419
Other InformationFinancial StatementsGovernanceOverview
52
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
10. SHARE CAPITAL (CONTINUED)
Dividends
Dividends are recognised by the Company in the quarterly NAV calculation following the declaration date. A summary of the
dividends declared and/or paid during the year ended 31 January 2024 and 31 January 2023 are set out below:
1 February 2023 to 31 January 2024
Dividend
per share
Pence
Total dividend
£
Interim dividend in respect of quarter ended 31 January 2023 0.50 606,514
0.50 606,514
1 February 2022 to 31 January 2023
Dividend
per share
Pence
Total
dividend
£
Interim dividend in respect of quarter ended 31 January 2022 1.10 1,334,331
Interim dividend in respect of quarter ended 30 April 2022 1.10 1,334,331
Interim dividend in respect of quarter ended 31 July 2022 1.00 1,213,028
Interim dividend in respect of quarter ended 31 October 2022 1.00 1,213,027
4.20 5,094,717
Following shareholder approval of proposed changes to the Company’s Investment Objectives and Investment Policy which allows
an orderly realisation of the Company’s assets and return of capital to shareholders, the Board has made it clear that payment of
quarterly dividends would continue only whilst it remained prudent to do so.
Due to the enforcement actions in place over all three remaining assets, trading levels have been reduced and accordingly levels of
operating cashflow are projected to be significantly reduced.
The Company has a predictable cost base and the ability to hold back capital from the imminent (contracted) and prospective
future repayments to meet costs and preserve working capital over the medium to long-term. However, it is no longer considered
appropriate to distribute a regular dividend.
Return of Capital
Return of Capital is recognised by the Company in the quarterly NAV calculation following the declaration date.
The Directors announced two returns in the year and have returned a total amount of 12.90 pence per Ordinary Share to
shareholders, being £15,648,058 in total based on the current number of Ordinary Shares in issue. This return of capital was
effected by way of an issue of redeemable B Shares to existing shareholders pro rata to their shareholding on the record date set
out below and the subsequent redemption of those B Shares.
1 February 2023 to 31 January 2024
Return of Capital
per share
Pence
Total Return
of Capital
£
Return of Capital February 2023 5.50 6,671,653
Return of Capital August 2023 7.40 8,976,405
12.90 15,648,058
1 February 2022 to 31 January 2023 Pence £
Return of Capital May 2022 6.00 7,278,170
6.00 7,278,170
53
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
10. SHARE CAPITAL (CONTINUED)
Rights attaching to Shares
The Company has a single class of Ordinary Shares which are not entitled to a fixed dividend. The company had two issues of
redeemable B shares which were redeemed throughout the year on a Return of Capital payment to shareholders of the redeemable
B shares.
At any General Meeting of the Company each Ordinary Shareholder is entitled to have one vote for each share held. The Ordinary
Shares also have the right to receive all income attributable to those shares and participate in distributions made and such income
shall be divided pari passu among the holders of Ordinary Shares in proportion to the number of Ordinary Shares held by them.
The Company’s Articles include a B Share mechanism for returning capital to Shareholders and following Shareholder approval on 14
January 2021, the Company has and will continue to utilise this mechanism in future. When the Board determines to return capital to
Shareholders, the Company will issue B Shares, paid up out of the Company’s assets, to existing Shareholders pro rata to their holding
of Ordinary Shares at the time of such issue. The amount paid up on the B Shares will be equal to the cash distribution to be made to
Shareholders via the B Share mechanism. The B Shares shall be redeemable at the option of the Company following issue and the
redemption proceeds (being equal to the amount paid up on such B Shares) paid to the holders of such B Shares on such terms and in
such manner as the Directors may from time to time determine. It is therefore expected that the B Shares will only ever be in issue for
a short period of time and will be redeemed for cash shortly after their issue in order to make the return of capital to Shareholders.
It is intended that following each return of capital the Company will publish a revised estimated Net Asset Value and Net Asset Value
per Ordinary Share based on the prevailing published amounts adjusted to take into account the return of capital. The number of
Ordinary Shares in issue will remain unchanged.
11. RISK MANAGEMENT POLICIES AND PROCEDURES
The Company through its investment in senior loans is exposed to a variety of financial risks, including market risk (including
currency risk and interest rate risk), credit risk and liquidity risk. The Company’s overall risk management procedures focus on the
unpredictability of operational performance of the borrowers and on property fundamentals and seek to minimise potential adverse
effects on the Company’s financial performance.
The Directors are ultimately responsible for the overall risk management approach within the Company. The Directors have
established procedures for monitoring and controlling risk. The Company has investment guidelines that set out its overall business
strategies, its tolerance for risk and its general risk management philosophy.
In addition, the Investment Manager monitors and measures the overall risk bearing capacity in relation to the aggregate risk
exposure across all risk types and activities. Further details regarding these policies are set out below:
Market risk
Market risk includes market price risk, currency risk and interest rate risk. If a borrower defaults on a loan and the real estate
market enters a downturn it could materially and adversely affect the value of the collateral over which loans are secured. This risk
is considered by the Board to be as a result of credit risk as it relates to the borrower defaulting on the loan.
The Company’s overall market position is monitored by the Investment Manager and is reviewed by the Directors on an ongoing basis.
Currency risk
The Company’s currency risk exposure is considered to be immaterial as all investments have been and will be made in Pounds
Sterling.
Interest rate risk
Interest rate risk is the risk that the value of financial instruments and related income from cash and cash equivalents will fluctuate
due to changes in market interest rates.
The majority of the Company’s financial assets are loans advanced, which are at a fixed rate of interest, and cash and cash equivalents.
Other InformationFinancial StatementsGovernanceOverview
54
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
11. RISK MANAGEMENT POLICIES AND PROCEDURES (CONTINUED)
The following table shows the portfolio profile of the material financial assets as at 31 January 2024 and 31 January 2023:
31 January 2024
£
31 January 2023
£
Floating rate
Cash 2,945,829 9,209,494
Fixed rate
Loans advanced, net of ECL allowance 33,639,051 68,968,675
36,584,880 78,178,169
The timing of interest payments on the loans advanced is summarised in the table on page 56.
Credit risk
Credit risk is the risk that a counterparty will be unable to pay amounts in full when due. The Company’s main credit risk exposure
are on the loans advanced, where the Company invests in secured senior debt, and in respect of monies held with banks.
With respect to its loan portfolio the Company has adopted the Investment Manager’s internal credit rating methodology to assess
and monitor the creditworthiness of each loan and resultant credit risk, PD and LGD. The model takes into account factors below
such as:
O financial risk of the borrower – considers the financial position of the borrower in general and considers LTV, ICR and amortisation
profile/debt maturity;
O property risk – where the property location, quality (specification, condition) and letting risk are considered;
O income risk – the income risk category considers, tenant diversity, tenant credit quality and lease length ratio, sector diversity and
geographical diversity; and
O borrower/structure risk – where factors such as history of the borrower/sponsor, loan control (security package) and covenants are
considered.
The credit rating methodology is dynamic and recognises the interplay between diversity and quality as a risk mitigant. The
Company’s current credit risk grading framework comprises the following categories and portfolio weightings:
Grade Description
Maximum
credit risk
exposure
2024
Maximum
credit risk
exposure
2023
AAA, AA+ Virtually no risk – –
AA to A Low risk – –
BBB Moderate risk – 9,595,622
BB Average risk – 17,182,749
B Acceptable risk – –
CCC+ Borderline Risk – –
CCC Special Mention – –
CC Substandard – 26,405,642
D Doubtful 60,493,105 15,734,452
D Loss – –
55
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
11. RISK MANAGEMENT POLICIES AND PROCEDURES (CONTINUED)
The classification of loans for the purpose of considering expected credit loss are discussed in the company’s accounting policies and
in note 5 above, these include a deterioration in credit rating from the date of initial recognition and are not based solely on the absolute
credit rating at a point in time.
The Company has previously used the Investment Manager’s loss experience to benchmark investment performance and potential
impairment for Stage 1 and Stage 2 assets under IFRS 9 considering expected loss given default. In the case of Stage 3 assets the
Company considers the net realisable value of the underlying property security in determining expected credit loss. The total exposure
to credit risk arises from default of the loan counterparty and the carrying amounts of other financial assets best represent the
maximum credit risk exposure at the year-end date, including the principal advanced on loans, interest outstanding on loans and cash
and cash equivalents. As at 31 January 2024, the maximum credit risk exposure was £60,493,105 (31 January 2023: £68,918,465).
The Investment Manager has adopted procedures to reduce credit risk exposure through the inclusion of covenants in loans issued,
along with conducting credit analysis of the counterparties, their business and reputation, which is monitored on an ongoing basis.
The Investment Manager routinely analyses the profile of the Company’s underlying risk in terms of exposure to significant tenants,
reviewing market data and forecast economic trends to benchmark borrower performance and to assist in identifying potential future
stress points.
Collateral held as security
Each loan is secured by a charge of commercial real estate property pledged by the borrower. To diversify credit risk the Company
maintains its cash and cash equivalents across four (31 January 2023: four) different banking groups as shown below. In order to cover
operational expenses, a working capital balance at Royal Bank of Scotland International Limited is maintained and monitored. This is
subject to the Company’s credit risk monitoring policies.
The table below shows the Company’s cash balances and the credit rating for each counterparty:
Rating
31 January 2024
£
31 January 2023
£
Lloyds Bank International Limited A 590,594 581,954
Barclays Bank plc A 590,594 581,983
Butterfield Bank (Guernsey) Limited BBB+ 594,252 582,571
Royal Bank of Scotland International Limited A- 1,170,389 7,462,986
2,945,829 9,209,494
The carrying amount of these assets approximates their fair value.
Other InformationFinancial StatementsGovernanceOverview
56
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
11. RISK MANAGEMENT POLICIES AND PROCEDURES (CONTINUED)
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its liabilities as they fall due. The Company’s loans advanced are
illiquid and may be difficult or impossible to realise for cash at short notice.
The Company manages its liquidity risks through the regular preparation and monitoring of cash flow forecasts to ensure that it can
meet its obligations as they fall due. The Company expects the meet it ongoing obligations though existing cash reserves.
Liquidity risks arise in respect of other financial liabilities of the Company due to counterparties. The Company’s loan assets are
all now past due and in default and the financial liabilities all have maturity dates within one year. An analysis of the maturity of
financial assets classified as loans advanced is shown in the table below:
Less than
one year
£
Between one
and five years
£
Total as at
31 January 2024
£
Affinity – principal 17,125,789 – 17,299,963
Affinity – interest and exit fees 326,231 – 527,335
Southport – principal 15,500,000 – 15,500,000
Southport – interest and exit fees 490.356 – 277,089
RoyaleLife – principal 25,382,017 – 25,382,017
RoyaleLife – interest and exit fees 4,261,464 – 4,322,659
63,085,857 – 63,309,063
Less than
one year
£
Between one
and five years
£
Total as at
31 January 2023
£
Northlands – principal 9,561,076 – 9,561,076
Northlands – interest and exit fees 316,874 – 316,874
Affinity – principal 17,299,963 – 17,299,963
Affinity – interest and exit fees 326,231 – 326,231
Southport – principal 15,200,000 – 15,200,000
Southport – interest and exit fees 534,452 – 534,452
RoyaleLife – principal 25,382,017 – 25,382,017
RoyaleLife – interest and exit fees 4,261,464 – 4,261,464
72,882,077 – 72,882,077
Capital management policies and procedures
The Company’s capital management objectives are to ensure that the Company will be able to continue to meet all of its liabilities as
they fall due and to maximise the income and capital return to equity shareholders.
In accordance with the Company’s investment policy, the Company’s principal use of cash has been to fund investments in the
form of loans sourced by the Investment Manager, as well as on-going operational expenses and payment of dividends and other
distributions to shareholders in accordance with the Company’s dividend policy.
The Board, with the assistance of the Investment Manager, monitors and reviews the broad structure of the Company’s capital on
an ongoing basis.
The Company has no externally imposed capital requirements. The Company’s capital at the year-end comprised equity share
capital and reserves.
57
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12. RELATED PARTY TRANSACTIONS AND DIRECTORS’ REMUNERATION
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the
party in making financial or operational decisions.
In the opinion of the Directors, on the basis of shareholdings advised to them, the Company has no immediate or ultimate
controlling party.
Directors
The Directors’ fees for the year amounted to £160,000 (31 January 2023: £160,000) with outstanding fees of £31,250 due to the
Directors at 31 January 2024 (31 January 2023: £31,250) (see Note 8).
13. MATERIAL AGREEMENTS
Investment Manager Agreement
Investment Management fees for the year amounted to £551,167 (31 January 2023: £761,047), of which £236,597 (31 January 2023:
£517,343) was outstanding at the year-end (see Note 8).
The Investment Manager was entitled to a management fee at a rate equivalent to 1% per annum of the Net Asset Value paid
quarterly in arrears based on the average Net Asset Value as at the last business day of each month in each relevant quarter.
The Board has agreed an amendment to the Investment Manager’s fee structure to align more closely with market capitalisation
of the Company and ultimate value returned to shareholders and as a result of extensive discussion between the Board and the
Investment Manager, it has been agreed that fee will reduce to 0.5% of Net Asset Value from 1% previously. This halving of the
investment management fee will result in meaningful savings for shareholders over the remaining life of the Company and will
apply from today’s date.
The Investment Manager’s agreement became effective from 25 November 2020 and shall continue thereafter unless terminated
in accordance with the terms of the agreement. The Investment Manager’s appointment cannot be terminated by the Company
with less than 12 months’ notice. The Company may terminate the Investment Management Agreement with immediate effect
if the Investment Manager has committed any material, irremediable breach of the Investment Management Agreement or has
committed a material breach and fails to remedy such breach within 30 days of receiving notice from the Company requiring it to
do so; or the Investment Manager is no longer authorised and regulated by the FCA or is no longer permitted by the FCA to carry on
any regulated activity necessary to perform its duties under the Investment Management Agreement.
The Investment Manager may terminate their appointment immediately if the Company has committed any material, irremediable
breach of the Investment Management Agreement or has committed a material breach and fails to remedy such breach within 30
days of receiving notice from the Company requiring it to do so.
Administration Agreement
The Administrator has been appointed to provide day to day administration and company secretarial services to the Company, as
set out in the Administration Agreement. Under the terms of the Administration Agreement, the Administrator is entitled to a fixed
fee of £90,000 per annum for services such as administration, corporate secretarial services, corporate governance, regulatory
compliance and stock exchange continuing obligations provided to the Company. The Administrator will also be entitled to an
accounting fee charged on a time spent basis with a minimum fee of £40,000 per annum. Administration and accounting fees for the
year amounted to £239,806 (31 January 2023: £155,832) of which £67,917 (31 January 2023: £43,283) was outstanding at the year end.
Registrar Agreement
The Registrar has been appointed to provide registration services to the Company and maintain the necessary books and records,
as set out in the Registrar Agreement.
Under the terms of the Registrar Agreement, the Registrar is entitled to an annual fee from the Company equal to £1.78 per
shareholder per annum or part thereof, subject to a minimum of £7,500 per annum. Other Registrar activities will be charged for in
accordance with the Registrar’s normal tariff as published from time to time.
Depositary Agreement
The Depositary has been appointed from 25 November 2020 to provide depositary services under the AIFMD to the Company, which
include cash monitoring, asset verification and oversight, as set out in the Depositary Agreement.
Under the terms of the Depositary Agreement, the Depositary is entitled to a fixed fee from the Company of £25,000 per annum.
Other InformationFinancial StatementsGovernanceOverview
58
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14. AUDITOR’S REMUNERATION
Audit and non-audit fees payable to the auditors can be analysed as follows:
31 January 2024
£
31 January 2023
£
Audit fees for the Company 63,013 48,025
Total Audit fees 63,013 48,025
There were no non-audit fees paid during the year.
15. OTHER EXPENSES
31 January 2024
£
31 January 2023
£
Broker fees 50,000 25,550
Administration fees 239,806 155,832
Regulatory fees 17,872 21,415
Listing fees 13,230 15,239
Legal and professional fees 118,645 71,296
Other expenses 109,307 119,753
548,860 409,085
16. SUBSEQUENT EVENTS
There are no material subsequent events noted after the reporting date.
59
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Governance Financial Statements Other InformationOverview
ALTERNATIVE PERFORMANCE MEASURES
Performance Measure Definition Reason for Use
Weighted Average Loan Coupon The money weighted average rate of
interest being charged on each investment
at the relevant reporting date.
To provide shareholders with a means to
assess whether the interest payable on the
Company’s loans reflects the risk of such
loans; and whether this is in line with the
Company’s investment parameters and
shareholders’ return expectations.
Capital Distribution Per Share The total annual Return of Capital to
shareholders divided by the number of
Shares in issue (other than shares held in
treasury).
To assist shareholders in assessing the
performance of the Company in relation to
its Investment Objectives.
Weighted Average Loan Maturity/
Portfolio Weighted Average Residual
Term
The money weighted average period
from the relevant reporting date until
the Company’s investments reach their
contractual repayment date.
To provide transparency to the Company’s
investment outlook and likely level of loan
repayments, and to assist shareholders in
identifying whether the remaining duration
of the loans reflects their own investment
time frames.
Weighted Average Loan to Value
Ratio/Portfolio Weighted Average LTV
The money weighted average Loan to
Value ratio at the relevant reporting date,
calculated on the basis of the outstanding
loan amount for each investment as a
percentage of the most recent Market
Value of the properties securing each
investment.
To provide transparency to the Company’s
risk positioning and to demonstrate
compliance with the investment restrictions.
Current LTV The current Loan to Value ratio for
each individual loan at the relevant
reporting date, calculated on the basis
of the outstanding loan amount for each
investment as a percentage of the most
recent Market Value of the property
securing the investment.
To provide transparency to the Company’s
risk positioning and to demonstrate
compliance with the investment restrictions.
Total Income per Share The total income of the Company
as disclosed in the Statement of
Comprehensive Income divided by the
number of Ordinary Shares in issuance at
the relevant reporting date.
To provide transparency to the Company’s
investment returns.
NAV per Share The net asset value of the Company
divided by the number of Ordinary Shares
in issuance at the relevant reporting date.
To assist shareholders in assessing the
performance of the Company over a period
in relation to its Investment Objectives.
Dividend per Share The total dividends per Ordinary Share
declared and/or paid during the relevant
reporting period.
To assist shareholders in assessing the
performance of the Company in relation to
its Investment Objectives.
Shareholder Total Return since IPO Share price movements combined with
dividends paid on the assumption that
dividends have been reinvested.
To assist shareholders in assessing the total
return earned over the life of the Company.
Share Price Premium/Discount The percentage difference between the
NAV per share and the quoted price of
each Ordinary Share as at the relevant
reporting date.
To assist shareholders in identifying and
monitoring the performance of the Company.
Percentage Capital Invested The aggregate value of the investments
at amortised cost divided by total
shareholder equity. Where the figure
exceeds 100%, the investments will
be partially funded by the Company’s
debt facility.
To assist shareholders in identifying and
monitoring the performance of the Company
and the level of gearing.
60
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
GLOSSARY OF CAPITALISED DEFINED TERMS
“Administrator” means Ocorian Administration (Guernsey)
Limited;
“Administration Agreement” means the Administration
Agreement dated 23 January 2013 between the Company and
the Administrator;
“Admission” means the admission of the shares to the
premium listing segment of the Official List and to trading on
the London Stock Exchange;
“AEOI” means Automatic Exchange of Information;
“Affinity” means Impact Spectrum Limited;
“AGM” or “Annual General Meeting” means the general
meeting of the Company;
“AIC” means the Association of Investment Companies;
“AIC Code” means the AIC Code of Corporate Governance;
“AIFMD” means the Alternative Investment Fund Managers
Directive;
“Annual Report” or “Annual Report and Financial Statements”
means the annual publication of the Company provided to
the shareholders to describe their operations and financial
conditions, together with their Financial Statements;
“Articles of Incorporation” or “Articles” means the articles of
incorporation of the Company, as amended from time to time;
“Board” or “Directors” or “Board of Directors” means the
directors of the Company from time to time;
“B shares” means a redeemable Ordinary Share of no par value
in the capital of the Company issued and designated as a B
Share of such class, and denominated in such currency, as may
be determined by the Directors at the time of issue. Issued for
the purpose of returning capital in accordance with Article 8;
“Capital Distribution Per Share” means the total annual Return
of Capital to shareholders divided by the number of Shares in
issue (other than shares held in treasury);
“Code” or “Corporate Governance Code” means the UK
Corporate Governance Code 2019 as published by the Financial
Reporting Council;
“Companies Law” means the Companies (Guernsey) Law, 2008,
(as amended);
“Company” means ICG-Longbow Senior Secured UK Property
Debt Investments Limited;
“CRS” means Common Reporting Standard;
“ECL” means expected credit losses;
“EPS” or “Earnings per share” means Earnings per Ordinary
Share of the Company and is expressed in Pounds Sterling;
“ESG” means Environmental, Social and Governance;
“EU” means the European Union;
“Euro” or “€” means Euro;
“FATCA” means Foreign Account Tax Compliance Act;
“FCA” means the UK Financial Conduct Authority (or its
successor bodies);
“Financial Statements” means the audited financial statements
of the Company, including the Statement of Comprehensive
Income, the Statement of Financial Position, the Statement of
Changes in Equity, the Statement of Cash Flows, and associated
notes;
“FRC” means the Financial Reporting Council;
“FTSE” means the Financial Times Stock Exchange;
“GDP” means gross domestic product;
“GFSC” means the Guernsey Financial Services Commission;
“GIIN” means Global Intermediary Identification Number;
“GFSC Code” means the GFSC Finance Sector Code of
Corporate Governance;
“IAS” means international accounting standards as issued by
the Board of the International Accounting Standards Committee;
“ICG” means Intermediate Capital Group PLC;
“ICR” means interest coverage ratio;
“IFRS” means the UK adopted international accounting
standards;
“Interest Cover Ratio” or “ICR” means the debt/profitability
ratio used to determine how easily a company can pay interest
on outstanding debt;
“Interim Report” means the Company’s interim report and
unaudited interim condensed financial statements for the period
ended 31 July;
“Investment Manager” or “ICG-Longbow” means ICG
Alternative Investment Limited or its associates;
“Investment Manager Agreement” means Investment
Management Agreement dated 25 November 2020 between the
Company and the Investment Manager;
“IPO” means the Company’s initial public offering of shares to
the public which completed on 5 February 2013;
“ISAE 3402” means International Standard on Assurance
Engagements 3402, “Assurance Reports on Controls at a
Service Organisation”;
“ISIN” means an International Securities Identification Number;
“LGD” means loss given default;
“Listing Rules” means the listing rules made by the FCA under
section 73A Financial Services and Markets Act 2000;
“London Stock Exchange” or “LSE” means London Stock
Exchange plc;
“LTV” means Loan to Value ratio;
61
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
Governance Financial Statements Other InformationOverview
GLOSSARY OF CAPITALISED DEFINED TERMS (CONTINUED)
“Main Market” means the main securities market of the
London Stock Exchange;
“Management Engagement Committee” means a formal
committee of the Board with defined terms of reference;
“Memorandum” means the Company’s memorandum;
“NAV per share” means the Net Asset Value per Ordinary Share
divided by the number of Shares in issue (other than shares held
in treasury);
“Net Asset Value” or “NAV” means the value of the assets of
the Company less its liabilities, calculated in accordance with
the valuation guidelines laid down by the Board, further details
of which are set out in the 2017 Prospectus;
“Northlands” means London & Guildford Properties Limited,
London & Weybridge Properties Limited, Lamborfore Limited,
Northlands Holdings Limited, Peeble Stone Limited, Auldana
Limited, Felixstow Limited, Richmond Lodge Construction
Limited, Piperton Finance Limited and Alton & Farnham
Properties Limited;
“Official List” is the Premium Segment of the FCA’s
Official List;
“PD” means probability of default;
“Registrar” means Link Asset Services (Guernsey) Limited
(formerly Capita Registrars (Guernsey) Limited);
“Registrar Agreement” means the Registrar Agreement dated
31 January 2013 between the Company and the Registrar;
“RoyaleLife” means collectively, Time GB Properties LendCo
Limited, Royal Parks Limited, Ambassador Royale Parks Parent
Limited and Ambassador Royale Parks Intermediate Limited;
“Schedule of Matters” means the Schedule of Matters
Reserved for the Board, adopted 23 January 2013, amended
25 September 2020;
“SOCI” means the Statement of Comprehensive Income;
“Southport” means Waterfront Southport Properties
Limited and Waterfront Hotels (Southport) Limited – now in
administration;
“Sq ft” means square feet;
“UK” or “United Kingdom” means the United Kingdom of Great
Britain and Northern Ireland;
“£” or “Pounds Sterling” means British pound sterling and
“pence” means British pence.
62
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
DIRECTORS AND GENERAL INFORMATION
Board of Directors
Jack Perry
(Chair)
Stuart Beevor
Paul Meader
Fiona Le Poidevin
Audit and Risk Committee
Fiona Le Poidevin
(Chair)
Stuart Beevor
Paul Meader
Management Engagement Committee
Jack Perry
(Chair)
Paul Meader
Fiona Le Poidevin
Stuart Beevor
Nomination Committee
Jack Perry
(Chair)
Stuart Beevor
Paul Meader
Fiona Le Poidevin
Remuneration Committee
Paul Meader
(Chair)
Jack Perry
Stuart Beevor
Fiona Le Poidevin
Investment Manager
ICG Alternative Investment Limited
Procession House
55 Ludgate Hill
London
United Kingdom
EC4M 7JW
Registered office
P.O. Box 286
Floor 2
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 4LY
Independent Auditor
Deloitte LLP
PO Box 137
Regency Court
Glategny Esplanade
St. Peter Port
Guernsey
GY1 3HW
Guernsey Administrator and
Company Secretary
Ocorian Administration (Guernsey) Limited
P.O. Box 286
Floor 2
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 4LY
Depositary
Ocorian Depositary (UK) Limited
5th Floor
20 Fenchurch Street
London
England
EC3M 3BY
Registrar
Link Asset Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey
GY2 4LH
Corporate Broker and Financial Adviser
Cavendish Securities plc
6-8 Tokenhouse Yard
London
United Kingdom
EC2R 7AS
Identifiers
GIIN: 6IG8VS.99999.SL.831
ISIN: GG00B8C23S81
Sedol: B8C23S8
Ticker: LBOW
Website: www.lbow.co.uk
English Solicitors to the Company
Gowling WLG (UK) LLP
4 More London Riverside
London
United Kingdom
SE1 2AU
Guernsey Advocates to the Company
Carey Olsen
Carey House
PO Box 98
Les Banques
St Peter Port
Guernsey
GY1 4BZ
Bankers
Butterfield Bank (Guernsey) Limited
PO Box 25
Regency Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 3AP
Barclays Bank plc
6-8 High Street
St Peter Port
Guernsey
GY1 3BE
Lloyds Bank International Limited
PO Box 136
Sarnia House
Le Truchot
St Peter Port
Guernsey
GY1 4EN
The Royal Bank of Scotland International
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey
GY1 4BQ
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
63
CAUTIONARY STATEMENT
The Chairman’s Statement and Investment Manager’s Report have been prepared solely to provide additional information for
shareholders to assess the Company’s strategies and the potential for those strategies to succeed. These should not be relied
on by any other party or for any other purpose.
The Chairman’s Statement and Investment Manager’s Report may include statements that are, or may be deemed to be,
“forward-looking statements”. These forward-looking statements can be identified by the use of forward-looking terminology,
including the terms “believes”, “estimates”, “anticipates”, “expects”, “intends”, “may”, “will” or “should” or, in each case, their
negative or other variations or comparable terminology.
These forward-looking statements include all matters that are not historical facts. They appear in a number of places
throughout this document and include statements regarding the intentions, beliefs or current expectations of the Directors
and the Investment Manager, concerning, amongst other things, the investment objectives and investment policy, financing
strategies, investment performance, results of operations, financial condition, liquidity, prospects, and distribution policy of
the Company and the markets in which it invests.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend
on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future
performance.
The Company’s actual investment performance, results of operations, financial condition, liquidity, distribution policy and the
development of its financing strategies may differ materially from the impression created by the forward-looking statements
contained in this document.
Subject to their legal and regulatory obligations, the Directors and the Investment Manager expressly disclaim any obligations
to update or revise any forward-looking statement contained herein to reflect any change in expectations with regard thereto
or any change in events, conditions or circumstances on which any statement is based.
ICG-Longbow Senior Secured UK Property Debt Investments Limited
P.O. Box 286
Floor 2, Trafalgar Court
Les Banques, St Peter Port, Guernsey
GY1 4LY, Channel Islands.
T +44 (0) 1481 742742
F +44 (0) 1481 742698
Further information available online:
www.lbow.co.uk
