REG - ICG-Longbow Senior - Annual Report & Financial Statements 31 Jan 2025
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RNS Number : 9281G ICG-Longbow Snr Sec UK Prop DebtInv 01 May 2025
ICG-Longbow Senior Secured UK Property Debt Investments Limited
Annual Report And Financial Statements
For the year ended 31 January 2025
Company Number: 55917
All capitalised terms are defined in the Glossary of Capitalised Defined Terms
unless separately defined.
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.
Financial Summary
for the year ended 31 January 2025
Key Developments
· In line with its Investment Objective, the Company is
continuing to progress an orderly realisation of its assets. While all
remaining loans are (or have been) subject to formal enforcement processes, as
at the date of this report, two assets are under offer with the third being
prepared for further marketing.
· Total loans outstanding at amortised cost plus interest
receivable, excluding ECL adjustments, amount to £68.03 million as at 31
January 2025 (£66.12 million as at 31 January 2024 and £67.46 million as at
31 July 2024).
· Total loans outstanding net of ECL adjustments were £29.90
million as at 31 January 2025 (£33.64 million as at 31 January 2024 and
£31.91 million as at 31 July 2024).
· In line with the evolving bidding evidence on the properties
securing the Company's loans, and the expected time frames for realisation,
the Company has made further adjustments to the ECL provisions across the
portfolio, which has reduced NAV per share at 31 Jan 2025 (27.15 pence per
share) by 2.71 pence compared to 31 January 2024 (29.86 pence per share).
Performance
· NAV of £32.93 million as at 31 January 2025 after total ECL
provision of £(38.13 million) (31 January 2024: £36.22 million after total
ECL provision of £(32.48) million).
· NAV per share as at 31 January 2025 of 27.15 pence (31 January
2024: 29.86 pence).
· Loss after tax of £3.30 million for the year ended 31 January
2025 (31 January 2024: £(24.87) million).
· Loss per share for the period of (2.72) pence (31 January 2024:
(20.51) pence).
Dividend
· In line with the Board's guidance, no dividends were declared
or paid in the year to 31 January 2025 (year to 31 January 2024: nil).
Investment Portfolio
· As at 31 January 2025, the Company's investment portfolio
comprised three loans with an aggregate principal balance of £57.75 million,
and a carrying value after provision for ECL of £29.90 million (31 January
2024: three loans with an aggregate principal balance of £58.01 million, and
a carrying value of £33.64 million).
· The Company is realising the remaining investments, which are
or have been subject to enforcement processes controlled by administrators or
receivers. The Investment Manager continues to progress asset management
initiatives alongside these parties while working towards sales and
realisations.
*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.
Chairman's Statement
Introduction
On behalf of the Board, I present the Annual Report for the Company for the
year ended 31 January 2025.
The Company continues to be focused on the most effective way to realise its
remaining investments. In my discussions with shareholders over the past
year I have noted, and share, some of the frustrations around the delayed pace
of this realisation. Shareholders have, however, been equally clear that
they wish to avoid assets being sold at distressed prices, and the Board and
Investment Manager have been assessing the exit strategies for each investment
with this firmly in mind.
As the Investment Manager reports below, while market conditions remain
difficult with uncertainty prevailing, there has been a modest improvement in
transaction volumes for prime stock and in certain preferred sectors.
Despite this, liquidity for mid-market or regional assets such as those held
by the Company remains patchy with bid-ask spreads often wide and only
opportunist buyers prepared to offer. While finance market conditions have
eased somewhat, interest rates have not fallen as far or as fast as some had
projected at the time of our previous annual report, and - until the recent
tariff-led disruption - the benchmark five-year swap rate has in fact been
higher in 2025 than in the same period last year.
The Company's three remaining investments with a total principal balance
outstanding of £57.75 million (before impairment), are, or have been, subject
to enforcement processes. At the time of writing, the Affinity and Southport
assets are under offer for sale, with further detail set out by the Investment
Manager below. The Royale investment continues to be managed by the
Investment Manager's preferred operating partner, who are reporting improving
buyer interest in acquiring individual bungalow homes as the UK residential
market enters its peak buying season.
The Investment Manager is continuing to explore the right time for an exit of
Royale and has engaged with a number of parties during the reporting period.
Shareholders may have seen media reports of a legal claim being filed by the
lenders against Avison Young, the valuer of the portfolio assets, and I can
confirm that the Company is a party to this claim. While we will keep
shareholders updated on any material developments in respect of the claim, for
legal reasons we are not able to provide any further detail at this stage and
no value is ascribed to it in these accounts.
As I have highlighted previously, the Company's remaining investments are
impaired and so the only plausible exit route is through sale of the
underlying assets or the loans themselves, rather than a refinancing. This
means the Company is entirely reliant on a liquid investment market in order
to exit and, as a result of unsupportive market conditions, we have continued
to experience delays in these realisation processes.
In light of the slow progress of realisations the Board has been focused on
controlling costs and during the period negotiated a halving of the Investment
Manager's fee rate, which took effect in May 2024. Latterly, the Board have
concluded that it is appropriate to reduce the size of the Board itself, with
both Stuart Beevor and Fiona Le Poidevin retiring as Directors as at 31
January 2025. I would like to extend my thanks to both of them for their hard
work and service during their tenures.
Valuation and Impairment
As in our previous annual report and accounts issued in May 2024, and interim
report and accounts from October 2024, the Board and Investment Manager have
carefully considered the expected realisable value of its remaining
investments, balancing the range of expected proceeds and the target timeframe
for returning capital to investors. The Board is also very conscious of the
time value of money and the opportunity cost of unproductive capital. And
while steps have been taken to dramatically reduce operating expenses, the
cost of maintaining a listed vehicle is significant. In these circumstances,
the Board understands the urgency in effecting sales at reasonable but fair
prices. We believe the Investment Manager has been very diligent in their
pursuit of this objective. Their approach has been informed by prevailing
market conditions and bidding evidence for the assets securing the remaining
investments. The Board has also considered the sensitivity to both price
movements and timings as set out in note 4 to the accounts. Accounting
standards require us to provide against unpaid interest, which has led to
adjustments to the ECL (Expected Credit Loss) provisions on the remaining
investments.
In aggregate, ECL provisions totalling net £5.66 million have been charged in
the reporting period, reflecting £2.59 million related to loan principal and
£3.07 million in respect of accrued default interest. The net impact on NAV
is a reduction of £2.59 million.
The breakdown of these adjustments across the three outstanding loans is as
follows:
· Affinity - an additional ECL provision of £1.14 million in the
year, although this reflected an increase of £2.32 million recognised at 31
July 2024, with a subsequent improvement of £1.18 million for the six months
to 31 January 2025, driven by an increasing probability of a sale completing.
· RoyaleLife - an additional ECL provision of £2.75 million,
driven by the expected lower probability attached to a near term sale and by a
change to the projected time frame for full realisation.
· Southport - an additional ECL provision of £1.76 million,
reflecting the advance and subsequent impairment of a working capital
facility, and adjustment to the anticipated time frame for completion.
The net impact of trading and all adjustments to ECLs during the reporting
period equates to a diminution of NAV of 2.14 pence per share.
Dividend and Return of Capital
The Company will only look to declare dividends when cashflow and profits
prudently allow. No dividends were paid in the period and the Board does not
envisage the declaration of any dividends henceforth.
No capital distribution was made during the period and the level and pace of
capital returns will be dictated by the realisation of the remaining loans.
NAV and Share Price Performance
The Company's NAV stood at £32.93 million as at 31 January 2025 (31 January
2024: £36.22 million), largely as a result of the increase in ECL provisions
detailed above.
The Company's share price ended the period at 22.40 pence per share, up from
21.30 pence as at 31 January 2024. The Board notes that, in general, trading
volumes in the stock have been very modest, reflecting the status of the
Company in run off. The share price reflected, at period end, a 17.5% discount
to the Company's NAV.
Outlook
The Company continues to make slow but sure progress towards exiting its
remaining positions in the light of market conditions which still provide
headwinds for challenged assets. These headwinds have increased over the past
few weeks as investors in all asset classes try to take stock of the
implications of US tariffs and the potential impact of global trade wars. The
Board, therefore, does not foresee any near term improvement in local market
conditions and indeed have been concerned that such uncertainties appear to
have added further delay to already protracted deal negotiations. However, the
Board remains hopeful that the Investment Manager's continued diligent
management of the former RoyaleLife portfolio will lead to growing liquidity
for that investment in the coming months.
As in previous reports I wish to thank shareholders for their ongoing
patience. The Board is acutely aware that many wish to see the assets sold and
vehicle wound up. Nonetheless, the Board remains focused on protecting
shareholder value through avoiding forced sales, and delivering realisations
and returns of capital as expediently as possible.
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 2025, and the general market conditions
prevailing at that date. Any forward-looking statements in this report reflect
the latest information available as at 28 April 2025.
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 2025 the Company had three investments remaining, all of
which are being managed and realised through enforcement processes, or have
previously been subject to those processes. This report provides a summary
update on the realisation progress 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 £29.90 million, or 24.65 pence per ordinary
share, against the aggregate principal advanced of £57.75 million.
Portfolio Summary
Portfolio statistics 31 January 2025 31 July 2024 (unaudited) 31 January 2024
Number of loan investments 3 3 3
Aggregate principal advanced £57,754,806 £57,754,806 £58,007,806
Aggregate carrying value after ECL £29,896,891 £31,913,445 £33,639,051
Cash held £3,200,201 £2,791,562 £2,945,897
Breakdown of Book Value of Loans
31 January 2025 31 July 2024 31 January 2024
(unaudited)
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 16.57 9.53 7.9 8.92 7.4 11.34 9.3
Southport 15.80 7.07 5.8 8.80 7.3 7.91 6.5
RoyaleLife 25.38 13.30 11.0 14.19 11.7 14.39 11.9
Total 57.75 29.90 24.7 31.91 26.4 33.64 27.7
((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 hotel remains in administration with Michels & Taylor, as sector
specialist, operating the property on behalf of the administrator and lender.
The lengthy administration process has seen trading performance begin to
suffer in some areas given the ongoing uncertainty, and regrettably the
business environment in the entire town of Southport has been challenged as a
consequence of the horrific stabbings seen during July 2024.
More positively for the medium term, the local Council has continued to make
progress on the development of the Marine Lake Events Centre ("MLEC") on the
site adjoining the hotel. Demolition works of the previous venue are
nearing completion and Graham Construction has been appointed as preferred
contractor for the new complex. Alongside the administrator, we have had
constructive dialogue with the Council in the past year (who are also the
freeholder of the hotel site) to engage with them on the evolving project and
opportunity for a hotel owner.
The hotel has been subject to competing bids, and although progress on a sale
has been protracted, we have now settled on a preferred buyer who is an
experienced north-west based hotelier. The buyer has provided proof of funding
and has instructed solicitors, and continues to progress the legal
documentation. While the bid price is materially above the carrying value of
the loan, and envisages a sale completion in the next three months, in view of
the historic challenges and time taken to progress a sale of this asset we
have prudently also placed weight on alternative or delayed exit scenarios in
assessing the carrying value of the loan.
Affinity
The property was subject to a competitive bid process in the fourth quarter of
2024, with two leading parties identified. We formally placed the asset under
offer in late November with the expectation of exchanging contracts in the
early part of 2025. As the buyer progressed its due diligence several delays
arose, some of which were understandable and some which seem to have been the
result of the buyer prioritising other projects. While legals had been
concluded and we had hoped to be a in position to exchange contracts in March
2025, the buyer's original equity partner unexpectedly withdrew from the deal
at a very late stage. While a replacement partner has been found there has
been a further delay while new joint venture documentation is drafted.
There has been no change in the agreed price for the asset, and the
underbidder's interest remains live while the sale process concludes. The
rising potential to exchange contracts at the agreed price has been reflected
in the carrying value of the loan, and we consider that a three-month period
should be sufficient to conclude a sale to the current or underbidder.
RoyaleLife
The portfolio continues to be run effectively by our chosen operating partner,
the Ambassador Group, under the new branding of Regency Living. Several of the
portfolio sites have been relaunched for sale under the new branding, with
bungalow sales restarting in earnest in the fourth quarter.
We continue to receive various approaches from potential buyers for some or
all of the portfolio, and have engaged with those we consider to be credible.
We spent significant time with one such potential buyer who expended
considerable monies on due diligence, however as time passed we became
concerned about their ability to perform and will revisit with them at a later
time. Moreover, with the business on a steadily surer footing, we have also
carefully considered the optimal marketing strategy from a process and timing
perspective, and have engaged professionals in this regard.
As set out earlier in this report, during the period we initiated legal
proceedings on behalf of the lenders against one of the parties involved in
the transaction. While the claim is a matter of public record, and the
Company is a party to the claim, we are not in a position to comment on the
matter further and are unlikely to be in a position to do so while proceedings
continue.
Economy and Financial Market Update
The reporting period was dominated by the outcomes of the various elections in
major economies, with the UK in July, the US in September and most recently
Germany in February. While the election in the UK of a Labour government
with a commanding majority was hoped to bring an element of stability and the
prospect of a return to meaningful economic growth, this was stymied by the
government's first budget which contained significant tax rises which were
widely seen as unfriendly to business, job creation and growth.
The return of the Trump administration in the US generated a whirlwind of
policy announcements, most relevant being across tariff and trade policy. In
addition to it becoming increasingly apparent that Europe is no longer a US
geopolitical priority or preferred trading partner, the direction of trade
policy has been and is expected to remain highly uncertain and volatile.
More recently the UK government seems to have acknowledged the challenges
presented with a tougher public spending settlement expected alongside a
recognition that taxpayer monies will be reallocated towards defence and
critical infrastructure. The government is also beginning to win plaudits for
some proposed supply side reforms, particularly to the labyrinthine planning
system.
Overall the UK economic picture remains relatively subdued, and while the
inflation prints and outlook appear more benign than in previous years (partly
due to base effects), GDP growth is still largely flatlining with many
forecasters including the OBR revising forecasts downwards. With government
borrowing still significant, 10-year gilt rates exceeded 4.9% in January
before slipping back, and, relevant to real estate markets, the benchmark
five-year swap rate is actually higher than at the time of our last report.
Occupational Demand/Supply
Offices
The occupational story in the Office sector continues to show strength in
parts, particularly for prime assets. At 3.5m sq ft of take up in Q4 2024, the
Central London market posted its third consecutive quarter of growth, and
marginally outperformed the Q4 long term average level. As a result, the
pipeline of transactions under offer now stands significantly below long term
average, however availability has also declined to just over 20m sq ft, at a
vacancy rate of 7.6%.
The Regional occupational market also performed well in parts across 2024.
Headline rental growth continued, confirming occupier appetite for quality
accommodation, albeit the second half was more subdued than H1, finishing 2024
at c. 5% growth across the year. The overall regional office vacancy rate
remained higher than Central London at 8.7%, with significant variance between
cities (Edinburgh Grade A vacancy stood at <0.5%, against Newcastle at
4.0%).
Industrials
Letting sizes have fallen, with 2024 showing only seven transactions of over
500,000 sq ft, reflecting 27% of the Big Box market and down from 47% at 2020
peak. Across the wider market (including Mid Box and Multi-let industrial)
take up in H1 2024 outperformed H2, with Q4 take up of 6.4m sq ft marginally
ahead of Q3. Retail and Manufacturing occupiers were most active. Vacancy has
increased both against 2023 and quarter-on-quarter, standing at 6.3%, in line
with levels recorded 2010-2015.
The composition of units has changed however, as the amount of Grade A space
available is at its highest level in over a decade, and Grade C space has
contracted to sub-10% - a result of withdrawal of units from market for
refurbishment and redevelopment. Reflecting the evolving demand and supply
landscapes, annual rental growth moderated to 3.4% for Mid Box units, and 3.1%
for Big Box.
Retail & Leisure
The long running monthly GfK / NIQ consumer confidence survey remains in a
holding pattern, with only small, point by point increases in confidence in
Q4, after a sharp decrease in Q3. This built the backdrop for an unexpected
quarter-on-quarter fall in Q4 2024 retail sales, despite rising real earnings
and historically low unemployment. Softening of pricing in the leisure sector
also reflected this.
Sentiment in the West End prime retail subsector remained strong, with vacancy
rates now down to 2.2%, and rental growth in Central London increasing very
slightly in Q4 to result in a 10.4% annual uplift. Contrasting figures from
national shopping centres and high streets showed vacancy rates holding steady
at 17% and 13% respectively. Nationally, net effective rents fell 3.8% in
these subsectors in Q4, thought to be a reaction to the Chancellor's budget.
It remains to be seen how the employer national insurance and minimum wage
increases announced in that budget affects occupational decisions across both
retail and leisure sectors. Lord Wolfson, the respected CEO of Next, has
suggested his retailer's wage bill will increase by £70m per annum from the
changes.
Property Investment Market
Annual investment volumes in the UK were £53.6bn, according to CBRE. This
showed a modest level of year-on-year growth, albeit remains subdued with the
2024 total still c. 10% below the long term (10 year) average. Activity
across sectors was more evenly divided than in previous years, and across the
full year, the Living and Office sectors saw the highest transaction volumes
at £10.4bn and £9.2bn respectively, with some market participants suggesting
this represents a potential bottoming out of the office markets (as volumes
were almost unchanged, year on year).
We also observed the continued institutionalisation of the Living market,
which has posted investment volumes of c. £10bn consistently for six years
now, despite new development being constricted. These levels may temporarily
reduce in 2025/2026 as the Building Safety Act delays the new supply pipeline.
The only sector posting markedly above-average volumes was Hotels, at £5.5bn.
Finance Markets
During the reporting period we observed a steady tightening of lending
margins, particularly on traditional senior loans, which has continued through
to the date of this report. Overall, we estimate that average senior lending
margins are circa 25bp tighter than 12 months ago, with LTV ratios circa 2.5%
to 5% higher. We consider that prime lending margins now stand at 150 - 200
basis points, depending on sector. This is reflective of the return to the
market of UK and international banks, who as a group seem to be far more
active than in prior years, with competition for strong transactions in the
sub-60% LTV space now more intensive. We would caution that for any
transactions or property assets falling outside traditional banks' risk
appetite, liquidity is often thinner and lending margins can be materially
higher.
An emerging area of liquidity is in larger loans, where debt funds are the
primary financiers, often supported by 'back leverage', particularly
loan-on-loan or repo facilities. This has been an attractive financing tool
both for debt funds who can diversify fund exposures and potentially enhance
returns, but also for the underlying banks where the regulatory capital
treatment of loan-on-loan investments can be superior to direct lending.
Finally we have seen something of a re-emergence of the CMBS market in Europe
in 2025, where in prior years transactions had been limited to a handful of
loans sponsored by Blackstone. At the time of writing, 2025 issuance of
European CMBS was already higher than the whole of 2024.
Outlook
Although many market participants started 2025 with a feeling of optimism, the
recent market disruption caused by US tariff policy has undoubtedly affected
sentiment in recent weeks. With investors in many cases playing a waiting
game, the prospect of a material recovery in transaction volumes or asset
pricing in 2025 now appears lower than earlier in the year, albeit the
improvement in lending margins and recent reduction in UK reference swap
rates, if sustained, may help some real estate investors to see value in the
markets.
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:
· investments may be made to honour commitments
under existing contractual arrangements or to preserve the value of the
underlying property security; and
· cash held by the 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.
Board of Directors
Jack Perry CBE - Chairman and Non-Executive Independent Director
Appointment: Appointed to the Board and as Chairman in November 2012
Experience: Jack is an independent non-executive board member and adviser to a
number of public and private companies. He was appointed to the Board of
Alliance Witan PLC on 10 October 2024, having been a director and Chairman of
the Audit & Risk Committee of the Witan Investment Trust plc. He
previously served as Chief Executive of Scottish Enterprise, Scotland's
enterprise, innovation and investment agency for six years until November
2009.
Prior to this, he was the managing partner of Ernst & Young in Glasgow. In
addition, he was Regional Industry Leader for Scotland and Northern Ireland
for Ernst & Young's Technology & Communications and Consumer Products
practices.
He is the former Chairman of European Assets Trust PLC and a 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: Audit and Risk Committee, Nomination Committee,
Management Engagement Committee, Remuneration Committee
Paul Meader - Non-Executive Independent Director
Appointment: Appointed to the Board in November 2012
Experience: Paul is an independent director of investment companies, insurers
and investment funds. Until 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.
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 (Chair), Nomination Committee,
Management Engagement Committee, Remuneration Committee
Stuart Beevor, who has served as Director and Fiona Le Poidevin, who has
served as a Director and Chair of the Audit and Risk Committee, have retired
from the Board of the Company with effect from 31 January 2025.
Report of the Directors
The Directors hereby submit the Annual Report and Financial Statements for the
Company for the year ended 31 January 2025. This Report of the Directors
should be read together with the Corporate Governance Report.
Business Review
A review of the Company's business and its likely future development is
provided in the Chairman's Statement and in the Investment Manager's Report.
Listing Requirements
Since being admitted on 5 February 2013 to the Official List maintained by the
FCA, the Company has complied with the applicable UK Listing Rules.
Results and Dividends
The results for the year are set out in the Financial Statements.
The Directors do not recommend the payment of a dividend in respect of the
year ended 31 January 2025 (31 January 2024: nil)
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 no issuances during the year.
Shareholdings of the Directors
The Directors' beneficial interests in the shares of the Company as at 31
January 2025 and 2024 are detailed below:
Director Ordinary Shares % holding at Ordinary Shares % holding at
of £1 each held 31 January 2025 of £1 each held 31 January 2024
31 January 2025 31 January 2024
Mr Perry 108,609 0.09 108,609 0.09
Mr Beevor((1)) 30,000 0.02 30,000 0.02
Mr Meader 305,921 0.25 305,921 0.25
Mrs Le Poidevin((1)) - 0.00 - 0.00
((1) ) Mr Beevor and Mrs Le Poidevin retired from the Board with
effect from 31 January 2025.
Mr Perry's and Mr Meader's beneficial interests in the shares of the Company
as at 30 April 2025, being the most current information available, are
unchanged from those disclosed above.
Directors' Authority to Buy Back Shares
The Directors believe that the most effective means of minimising any discount
to Net Asset Value which may arise on the Company's share price, is to 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 2025, 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
TrinityBridge 20,100,181 16.57%
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%
Philip J Milton, stockbrokers 7,267,641 5.99%
Hargreaves Lansdown, stockbrokers (EO) 6,907,137 5.69%
CG Asset Management 4,882,100 4.02%
Bhavesh Patel 4,782,430 3.94%
In addition, the Company also provides the same information as at 16 April
2025, being the most current information available.
Shareholder Shareholding % holding
TrinityBridge 19,844,186 16.36%
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%
Philip J Milton, stockbrokers 7,257,771 5.98%
Hargreaves Lansdown, stockbrokers (EO) 6,581,705 5.43%
CG Asset Management 4,882,100 4.02%
Bhavesh Patel 4,782,430 3.94%
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 2024 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.
Articles of Incorporation
The Company's Articles of Incorporation may only be amended by special
resolution of the shareholders.
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 and
sold in an orderly manner. The Company may take actions to accelerate or delay
the marketing and realisation processes for each investment in order to
optimise shareholders' returns.
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 net 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 in each case to
stabilise the property assets and realise the security underpinning the loans
in an orderly manner. 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 net realisable values within 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, due to the Company's
investment policy being an orderly realisation of the assets and the likely
timing of sales. The Board considers two years to be an appropriate period
being the maximum foreseeable future life of the Company.
Cashflow projections are prepared regularly. The Board intends to return
surplus capital to investors following the realisation of the collateral
supporting each loan, 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 2027, if the Company continues in
operation up until that date. The Company is likely to operate with a cashflow
deficit in most 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.
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
Following a series of economic shocks and the Company share price falling to a The Company engages with its shareholders through the issue of portfolio The Company has continued in its objective to execute the orderly realisation
deep discount to NAV, shareholders supported a recommendation by the Board in updates in the form of RNS announcements. of assets of the Company during the year. During a period when market
2021, to wind down the Company.
conditions have not been favourable towards this goal, the Directors, the
Investment Manager and the Company's brokers have held a number of meetings
with major shareholders during the year, with meetings centred around the
The Company provides in depth commentary on the investment portfolio, release of the annual and half-year results of the Company. In addition, a
The Company sought to maintain shareholder satisfaction through: corporate governance and corporate outlook in its semi-annual and annual series of ad-hoc discussions were held during the year. Shareholders have
financial statements. generally been understanding of the difficulties associated with disposal and
· Transparency of communication
have overwhelmingly expressed a preference to avoid fire sales.
· Capital preservation
Engagement with shareholders through these meetings and announcements enables
The Board receives quarterly feedback from its Broker in respect of their shareholders to take informed decision as to the winding up process and
· Return of capital on loan repayments investor engagement and investor sentiment. timetable.
The engagement with shareholders,
through update calls and the AGM, will continue through the wind down period
as capital is returned to investors.
The Chairman meets major shareholder regularly following the release of annual
and half year results. He remains available for further discussion at
shareholders' request.
Stakeholder Group Methods of Engagement Benefits of Engagements
Borrowers/Administrators and Receivers
The Company engaged with its Borrowers, and now engages with the During the course of the year, the
administrators and receivers, through its Investment Manager.
The Company's principal clients are the borrowers to whom the Company provides
Investment Manager has provided and the Board reviewed regular updates to the
term finance. portfolio and investments. Further specific updates have been provided on
investment specific matters throughout the year.
The Investment Manager has formed and maintained a close working relationship
with these parties through regular update calls and the ongoing quarterly
During the year, the Company continues to have administrators or receivers monitoring of loans over their respective terms.
in respect of its remaining loans, and, the receiver/administrator fulfils the
The Investment Manager regularly engaged with all its Borrowers during the
duties of the borrower and acts on behalf of any other relevant creditors to year to seek orderly repayment of the Company's loans, but continue to appoint
the borrower entity.
receivers/administrators due to the borrowers' defaults under the terms of the
Following the appointment of receivers/administrators, the Investment Manager original loans.
holds regular meetings to monitor the performance of the underlying properties
and actions being undertaken to protect, enhance and ultimately realise their
value.
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
The Board monitors the timeliness and asset level performance to protect or enhance value.
quality of these engagements through its
regular engagement with the Investment
Manager.
During the year, a Director of the Company has regularly met both virtually
and in person 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.
Service Providers
The Company does not have any direct employees; however, it works closely with The Company's Management Engagement Committee has identified its key service The information provided given by the service providers is used to review the
a number of service providers (the Investment Manager, Administrator, Company providers. On an annual basis it undertakes a review of performance based on a Company's policies, controls, and procedures to ensure open lines of
Secretary, Broker and other professional service providers) whose interests questionnaire through which it also seeks feedback. communication, operational efficiency, robustness and, appropriate pricing for
are aligned to the success of the Company.
services provided. Feedback has been given to all relevant service providers
during the year.
Furthermore, the Board and its sub-committees engage regularly with its
The quality and timeliness of their service provision is critical to the service providers on both a formal and informal basis.
success of the Company.
In addition, following extensive discussion between the Board and the
Investment Manager, the Investment Management fee has reduced to 0.5% of Net
Asset Value from 1% previously, as discussed in the Chairman's statement and
The Management Engagement Committee will also regularly review all material with effect from 9 May 2024.
contracts for service quality and value.
Community & Environment
As an investment company whose purpose was the provision of and investment in Within its investment strategy, the environmental and social impact of the In the year to 31 January 2025, the Company made no new loans.
commercial real estate debt, the Company's direct engagement with the local properties on which the Company's loans are secured was an important
community and the environment is limited. consideration when it had made its investments, and has remained so through
the monitoring of the loans and actions of the Borrowers.
In monitoring its investments and providing working capital facilities for the
protection of development of the properties the Investment Manager and the
However, the Board recognises the role the Company can play in terms of the
Board have continued to consider the environmental and social impact or such
environment by supporting and guiding Borrowers to find environmentally The community, environmental and social impact has also been a consideration developments or expenditure.
friendly sustainable solutions in the maintenance of their properties and in the choice to appoint receivers/administrators in respect of the Company's
delivery of their business plan objectives more generally. remaining loans.
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.
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:
The Board agreed to the Investment Manager's recommendation that the Company
participates in legal action against one of the parties involved in the
original RoyaleLife transaction.
The Board agreed to pursue a sale of the asset securing the Affinity loan and
to the agent, receiver and Investment Manager recommendations as to the
acceptability of the sale price agreed.
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 has sought to minimise the fixed cost base of the Company and it
agreed it was an appropriate time to reduce the size of the Board from four to
two Directors.
The Board reviewed the performance of the Investment Manager, which was
considered to be satisfactory. Following negotiations with the Investment
Manager, a reduction in the Investment Manager's fees to 0.5% from 1%
previously of Net Asset Value was agreed to control the Company's cost base
and improve the ultimate value returned to shareholders. The new fee basis
came into effect from 9 May 2024. Accordingly, the Investment Manager's
reappointment was confirmed.
The Board also agreed to participate in legal proceedings against one of the
parties linked to the RoyaleLife transaction.
Financial Risk Management Policies and Procedures
Financial Risk Management Policies and Procedures are disclosed in Note 11 to
the Financial Statements.
Principal Risks and Uncertainties
Principal Risks and Uncertainties are discussed in the Corporate Governance
Report.
Subsequent Events
Significant subsequent events have been disclosed in Note 16 to the Financial
Statements.
Alternative Performance Measures
The Directors believe that the performance indicators detailed in the
Financial Summary, 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.
Annual General Meeting
The AGM of the Company will be held at 8:30am BST on 19 June 2025 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
30 April 2025
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:
· select suitable accounting policies in accordance with IAS 8:
Accounting Policies, Changes in Accounting Estimates and Errors and then apply
them consistently;
· make judgements and estimates that are reasonable and prudent;
· present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific
requirements in IFRS are insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Company's
financial position and financial performance;
· state that the Company has complied with IFRS, subject to any
material departures disclosed and explained in the Financial Statements; and
· prepare the Financial Statements on a going concern basis unless
it is inappropriate to presume that the 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 confirms to the best of their knowledge and belief that:
· the Financial Statements, prepared in accordance with IFRS, give
a true and fair view of the assets, liabilities, financial position and profit
or loss of the Company taken as a whole;
· the Annual Report includes a fair review of the development and
performance of the business and the position of the Company, 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
Paul
Meader
Chairman
Director
30 April 2025
30 April 2025
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 (http://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 Corporate
Governance Code 2024 (''the 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 (http://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 2025, 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:
· Board Leadership and Company Purpose (Principles A to E);
· Division of Responsibilities (Principles F to I);
· Composition, Succession and Evaluation (Principles J to L);
· Audit, Risk and Internal Control (Principles M to O); and
· Remuneration (Principles P to R)
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.
As the Company is in wind down, the Board has determined not to implement a
succession plan for Directors. 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:
Responsible Investing Policy - ICG
(https://www.icgam.com/sustainability/investing-responsibly/responsible-investing-policy/)
-
www.icgam.com/sustainability/investing-responsibly/responsible-investing-policy/
(https://www.icgam.com/~/media/Files/I/ICGAM-V2/responsible-investing-documents/2021-icg-responsible-investing-policy-2.pdf)
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.
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
listed in 'Board of Directors' section of this report set out their range of
investment, financial and business skills and experience represented. In terms
of gender balance, the Board now has 100% male representation following the
retirement of Fiona Le Poidevin and Stuart Beevor from the Board with effect
from 31 January 2025. This does not meet UK Listing Rules targets around
diversity, due to the Board now being reduced to two, during the managed wind
down. It is considered impractical to recruit new directors within the limited
future existence of the Company.
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
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 board has sought to control the cost base of the Company as assets have
shrunk. As noted above, some progress is being made in relation to the
remaining three loans and, accordingly, the board agreed in early 2025 that
this was an appropriate time to reduce the size of the board.
Accordingly, Stuart Beevor, who served as Director and Fiona Le Poidevin, who
has served as a Director and Chair of the Audit and Risk Committee, retired
from the Board of the Company with effect from 31 January 2025. Jack Perry
and Paul Meader have remained as Directors.
The two remaining Directors, Mr Perry and Mr Meader, were appointed in
November 2012 and have therefore served longer than nine years to date.
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 and Mr Meader 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 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 two years from the date of this report, 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 Meader will also continue
to exceed the recommended nine-year term for the reasons stated, until the
Company is placed in liquidation.
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 2024: £50,000). The Chair of the Audit
and Risk Committee is entitled to annual remuneration of £40,000 (31 January
2024: £40,000). The other Independent Directors is entitled to annual
remuneration of £35,000 (31 January 2024: £35,000). These levels of
remuneration have remained unchanged since July 2017.
During the year ended 31 January 2025 and the year ended 31 January 2024, the
Directors' remuneration was as follows:
1 February 2024 to 31 January 2025 1 February 2023 to 31 January 2024 1 February 2022 to 31 January 2023
Director £ £ £
Jack Perry 50,000 50,000 50,000
Paul Meader 35,000 35,000 35,000
Stuart Beevor((1)) 35,000 35,000 35,000
Fiona Le Poidevin((1)) 40,000 40,000 40,000
(1) Mr Beevor and Mrs Le Poidevin retired from the Board with effect
from 31 January 2025.
The Company Directors' fees for the year amounted to £160,000 (31 January
2024: £160,000) with outstanding fees of £31,250 due to the Directors at 31
January 2024 (31 January 2024: £31,250) (see Note 8). Aggregate fees for the
year to 31 January 2025 are expected to be £90,000.
Both of the remaining Directors are non-executive and are each considered
independent for the purposes of Chapter 15 of the Listing Rules.
Duties and Responsibilities
The Board has overall responsibility for maximising the Company's success by
directing and supervising the affairs of the business and meeting the
appropriate interests of shareholders and relevant stakeholders, while
enhancing the value of the Company and also ensuring the protection of
investors. The Board has adopted a Schedule of Matters which sets out the
particular duties of the Board. Such reserved powers include the following:
• strategic matters;
• risk assessment and management including reporting,
compliance, governance, monitoring and control and financial reporting;
• statutory obligations and public disclosure;
• declaring Company dividends;
• managing the Company's advisers;
• appointment of a liquidator; and
• other matters having a material effect on the Company.
The Directors have access to the advice and services of the Administrator, who
is responsible to the Board for ensuring that Board procedures are followed
and that it complies with Companies Law and applicable rules and regulations
of the GFSC and the London Stock Exchange. Where necessary, in carrying out
their duties, the Directors may seek independent professional advice and
services at the expense of the Company. The Company maintains appropriate
Directors' and Officers' liability insurance in respect of legal action
against its Directors, should this occur.
The Board's responsibilities for the Annual Report are set out in the
Directors' Responsibility Statement. The Board is also responsible for issuing
appropriate Interim Reports and other price-sensitive public reports.
One of the key criteria the Company uses when selecting non-executive
Directors, is their confirmation prior to their appointment that they will be
able to allocate sufficient time to the Company to discharge their
responsibilities in a timely and effective manner. 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. In addition, informal update calls are
held, generally fortnightly, between the Directors and the Investment Manager.
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.
Attendance is further set out below :
Director Scheduled Board Ad-hoc Board Audit and Risk Committee Ad-hoc
Meetings Meetings Meetings Committee
4 2 6 Meetings Management Engagement
- Nomination Committee Remuneration
Committee Meeting Committee
Meeting 1 Meeting
1 1
Stuart Beevor 4 2 6 - 1 1 1
Paul Meader 3 2 6 - 1 1 1
Jack Perry((1)) 4 2 - - 1 1 1
Fiona Le Poidevin 4 2 6 - 1 1 1
(1)) Mr Perry had a standing invitation to Audit and Risk Committee meetings,
however his attendance at the meetings is as an observer only and is not
recorded. From 31(st) January 2025, Mr Perry is a member of the Audit and Risk
Committee.
The quorum for any Board meeting is two directors.
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 now chaired Mr Meader, following Mrs Le
Poidevin's retirement with effect from 31 January 2025. The Committee also
comprised of Mr Beevor and Mr Meader, who held office throughout the year, up
until Mr Beevor's retirement from the Board with effect from 31 January 2025.
Mr Perry had a standing invitation to attend meetings and his attendance at
these meetings was as an observer only. From 31 January 2025, Mr Perry is now
a member of the Committee. 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.
Management Engagement Committee
The Management Engagement Committee is chaired by Mr Perry and comprised Mr
Meader, Mr Beevor and Mrs Le Poidevin, all of whom held office throughout the
year, up until the retirement from the Board of Mrs Le Poidevin and Mr Beevor.
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 comprised Mr Beevor,
Mr Meader and Mrs Le Poidevin, all of whom held office throughout the year, up
until the retirement of Mrs Le Poidevin and Mr Beevor from the Board. 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 3 April 2025 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.
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 two Directors will continue in office until the
appointment of a liquidator.
Remuneration Committee
The Remuneration Committee is chaired by Mr Perry and comprised of Mr Meader,
Mr Beevor and Mrs Le Poidevin, all of whom held office throughout the year, up
until the retirement from the Board of Mrs Le Poidevin and Mr Beevor. 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 3 April 2025 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
2026.
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:
• 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;
• 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;
• the Board monitors the actions of the Investment Manager at
regular Board meetings and is also given frequent updates on developments
arising from the operations and strategic direction of the underlying
borrowers; and
• the Administrator provides administration and 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.
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 a
SOC 1 Type 2 Report on Controls at a Service Organisation Audit which is
provided to the Board when finalised. The last available report is dated 2
February 2025 and covers the year to 31 October 2024. The Board has received
an assurance from the Administrator up to 31 January 2025 that there have been
no material changes in their control environment that would adversely affect
the Auditor's Opinion in the most recently published SOC 1 Type 2 Report 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 with regard to the remaining life of the Company, the
Board will consider a further visit to the Investment Manager's office, during
the current financial year, 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.
The Directors have identified the following as the principal risks faced by
the Company:
Description Nature of Risk Potential Impact Mitigation Movement of Risk in year
Inability to secure sales of underlying properties to facilitate timely Market, geopolitical and economic conditions are currently volatile and the This could result in delayed sale of the underlying properties and/or reduced The Investment Manager has appointed a receiver, administrator or operating →
capital repayments. outlook unsure. The Company's three key loans are in administration or quantum of capital proceeds. partner to each of the three key loans remaining and is ensuring the property
receivership.
securing each loan is being actively managed, with income and condition being
maintained wherever possible and economic to do so.
The thin market liquidity combined with receivership/administrator sales may
The Company's Borrowers retain a right of redemption but have been unable to also attract only opportunistic buyers seeking high returns and deep discounts
raise sufficient equity to refinance the current loans. in order to proceed with a perceived distressed sale with very limited The Investment Manager maintains an active dialogue with all of the
indemnities or warranties being offered. administrators/receivers, operating partners and agents active on each
investment and keeps the Board informed of any issues arising. Loans and the
underlying security are monitored on an ongoing basis to identify any further
In adverse market conditions with low transaction volumes and high costs of
deterioration or distress.
debt, the appointed Receivers and Administrators may find it challenging to
secure sales.
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 This may impact the Company's ability to accurately determine collateral The current volatile market conditions may make the accuracy of valuations ↓
generate cashflows and are benchmarked against comparable properties. values, and to appropriately consider the level of permanent impairment of any somewhat unreliable with significant but unknown bid offer spreads between
particular investment, within the target timeframe to realise that investment. buyer and seller aspirations. As things stand at the time of review, the
Economic and market volatility create material uncertainty in terms of
market for refinancing loans or the sale of underlying properties is
property valuations. 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 As part of the orderly realisation, the Investment Manager and the Board have →
specific risks associated with the remaining loans. stepped up monitoring of the individual investments and the Board receives
frequent formal and informal reports from the Investment Manager.
The remaining loans are in receivership or administration and, as such, the
Company's income generation is and cashflow are unpredictable. The Board also continues to closely monitor the Company's costs, to ensure
optimum value is obtained during the realisation of the portfolio.
Furthermore, the Company's fixed costs will thereof comprise a greater
proportion of the Group's revenues which may impact the amount of funds However, with only three loans outstanding, the portfolio's concentration risk
available for distribution to shareholders. 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.
Liquidation process and timeliness of final capital distribution. The Company's liquidation is expected to follow repayment of the final loan Liquidation of the Company may be delayed and it may continue to operate with The performance of all loans and timings of repayments is monitored closely. →
and the discharge of all creditors and claims, timings of which is uncertain high fixed costs relative to the remaining income streams.
for the reasons set out above.
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.
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 impact of tariff
related changes in global trade and investment, the war in the Middle East and
Ukraine 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 Paul Meader
Chairman Director
30 April 2025 30 April 2025
Report of the Audit and Risk Committee
The Audit and Risk Committee was chaired by Mrs Le Poidevin up until her
retirement from the Board with effect from 31 January 2025. The Audit and Risk
Committee is now chaired by Mr Meader from 31 January 2025. The Audit and Risk
Committee 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
member is Mr Perry who was appointed on 31 January 2025.
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:
• 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;
• reporting to the Board on the appropriateness of the
Company's accounting policies and practices including critical judgement
areas;
• 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;
• meeting regularly with the external auditor to review their
proposed audit plan and the subsequent audit report and assess the
effectiveness of the audit process and the levels of fees paid in respect of
both audit and non-audit work;
• making recommendations to the Board in relation to the
appointment, re-appointment or removal of the external auditor and approving
their remuneration and the terms of their engagement;
• monitoring and reviewing annually the auditor's
independence, objectivity, expertise, resources, qualification and non-audit
work;
• considering annually whether there is a need for the Company
to have its own internal audit function;
• monitoring the internal financial control and risk
management systems on which the Company is reliant;
• reviewing and considering the UK Code, the AIC Code and the
FRC Guidance on Audit and Risk Committees; and
• 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:
• the quality and acceptability of accounting policies and
practices;
• the clarity of the disclosures and compliance with financial
reporting standards and relevant financial and governance reporting
requirements;
• material areas in which significant judgements have been
applied or where there has been discussion with the external auditor including
the going concern status and viability statement;
• 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
• 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.
Meetings
During the year ended 31 January 2025, the Audit and Risk Committee met
formally on four occasions. The matters discussed at those meetings included:
• review of the terms of reference of the Audit and Risk
Committee for approval by the Board;
• review of the accounting policies and format of the
Financial Statements;
• detailed review of the Annual Report and Financial
Statements, Interim Report and recommendation for approval by the Board
including the basis other than that of a going concern and the viability
statement;
• detailed review and updating of the Company's risk matrix;
• review and approval of the audit plan and final Audit and
Risk Committee report of the auditor;
• discussion and approval of the fee for the external audit;
• assessment of the independence of the external auditor;
• assessment of the effectiveness of the external audit
process as described below; and
• review of the 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. In addition,
during the year, a member of the Committee regularly attended calls with
agents and administrators as well as made site visits.
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 2025 was reviewed.
All three loans, Affinity, RoyaleLife and Southport were identified as Stage 3
and have an impairment provision of £38.13 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.
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 in
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.
External Audit
Deloitte LLP has been the Company's external auditor since the Company's
inception. This is the twelfth 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 Deloitte LLP lead audit partner, Mr Marc Cleeve, started his tenure in
2024 (in respect of the year ended 31 January 2025) and his current rotation
will end with the audit of the 2029 Annual Report and Financial Statements.
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:
• discussions with or reports from the auditor describing its
arrangements to identify, report and manage any conflicts of interest; and
• the extent of non-audit services provided by the auditor and
arrangements for ensuring the independence, 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:
• the auditor's fulfilment of the agreed audit plan and
variations from it;
• discussions or reports highlighting the major issues that
arose during the course of the audit;
• feedback from other service providers evaluating the
performance of the audit team;
• arrangements for ensuring independence and objectivity;
• the robustness of the auditor in handling key accounting and
audit judgements; and
• a summary of the FRC's Audit Quality Review report for
Deloitte and discuss the findings with the audit partner to determine if any
of the indicators in that report had particular relevance to this year's audit
of the Company. Specifically, the Audit and 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 2026.
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
Paul Meader
Chair of the Audit and Risk Committee
30 April 2025
Statement of Comprehensive Income
For the year ended 31 January 2025
1 February 2024 to 1 February 2023 to
Notes 31 January 2025 31 January 2024
£ £
Income
Income from loans 2 e) 3,066,342 4,896,000
Other fee income from loans 2 f) - 5,168
Income from cash and cash equivalents 74,417 53,518
Total income 3,140,759 4,954,686
Expenses
Investment Management fees 13 183,236 551,167
Directors' remuneration 12 160,000 160,000
Audit fees for the Company 14 85,650 63,013
ECL charge on loan capital 2,589,160 23,988,249
ECL charge on default interest income 3,066,342 4,519,648
Other expenses 15 352,366 548,860
Total expenses 6,436,754 29,830,937
Loss for the year before tax (3,295,995) (24,876,251)
Taxation charge 4 - -
Loss for the year after tax (3,295,995) (24,876,251)
Total comprehensive loss for the year (3,295,995) (24,876,251)
Basic and diluted Loss per Share (pence) 9 (2.72) (20.51)
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.
Statement of Financial Position
As at 31 January 2025
Notes 31 January 2025 31 January 2024
£ £
Assets
Current Assets
Loans advanced 5 29,896,891 33,639,051
Trade and other receivables 6 41,179 30,718
Cash and cash equivalents 7 3,200,201 2,945,829
Total current assets 33,138,271 36,615,598
Total assets 33,138,271 36,615,598
Liabilities
Current Liabilities
Trade and other payables 8 210,138 391,470
Total current liabilities 210,138 391,470
Total liabilities 210,138 391,470
Net assets 32,928,133 36,224,128
Equity
Share capital 10 64,650,361 64,650,361
Retained loss (31,722,228) (28,426,233)
Total equity attributable to the owners of the Company 32,928,133 36,224,128
Number of Ordinary Shares in issue at year end 10 121,302,779 121,302,779
Net Asset Value per Ordinary Share (pence) 9 27.15 29.86
The Financial Statements were approved by the Board of Directors on 30 April
2025 and signed on their behalf by:
Jack Perry Paul Meader
Chairman Director
30 April 2025 30 April 2025
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 2025
Number Ordinary Share B Share Retained
Notes of shares capital capital (loss) Total
£ £ £ £
As at 1 February 2024 121,302,779 64,650,361 - (28,426,233) 36,224,128
Total comprehensive loss - - - (3,295,995) (3,295,995)
As at 31 January 2025 121,302,779 64,650,361 - (31,722,228) 32,928,133
For the year ended 31 January 2024
Number Ordinary Share B Share Retained
Notes of shares capital capital (loss) 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
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 2025
1 February 2024 to 1 February 2023 to
Notes 31 January 2025 31 January 2024
£ £
Cash flows generated from operating activities
Loss for the year (3,295,995) (24,876,251)
Adjustments for non-cash items and working capital movements:
Movement in other receivables 6 (10,461) 12,718
Movement in other payables and accrued expenses 8 (181,332) (296,009)
Loan amortisation and ECL provision 2,589,160 25,889,373
(898,628) 729,831
Loans advanced less arrangement fees (300,000) (308,400)
Loans repaid 5 1,453,000 9,569,476
Net loans repaid less arrangement fees 1,153,000 9,261,076
Net cash generated from operating activities 254,372 9,990,907
Cash flows used in financing activities
Dividends paid 10 - (606,514)
Return of Capital paid 10 - (15,648,058)
Net cash used in financing activities - (16,254,572)
Net increase/(decrease) in cash and cash equivalents 254,372 (6,263,665)
Cash and cash equivalents at the start of the year 2,945,829 9,209,494
Cash and cash equivalents at the end of the year 3,200,201 2,945,829
The accompanying notes from 1 to 16 form an integral part of these Financial
Statements.
Notes to the Financial Statements
1. General information
ICG-Longbow Senior Secured UK Property Debt Investments Limited is a
non-cellular company limited by shares and was incorporated in Guernsey under
the Companies Law on 29 November 2012 with registered number 55917 as a
closed-ended investment company. 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 2025 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 2024.
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 material impact
on the Financial Statements of the Company.
Effective for periods commencing
IAS 1 Classification of Liabilities as Current or Non-current and Non-current 01 January 2024
Liabilities with Covenants
Certain new accounting standards and amendments to accounting standards have
been published that are not mandatory for 31 January 2025 reporting periods
and have not been early adopted by the Company. The new standard and
amendments are not expected to have a material impact, on the entity in future
reporting periods and on foreseeable future transactions.
Effective for periods commencing
IFRS 18 Presentation and Disclosure in Financial Statements (replacing IAS 1 - 01 January 2027
Presentation of Financial Statements)
IAS 21 Lack of exchangeability 01 January 2025
IFRS 9 and IFRS 7 Classification and Measurement of Financial Instruments 01 January 2026
General Annual Improvements to IFRS Accounting Standards- Volume 11 01 January 2026
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.
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. Interest income is recognised net of ECL allowance in the
Statement of Comprehensive Income for all Stage 3 loans.
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.
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:
• an actual or expected significant deterioration in the financial
instrument's external (if available) or internal credit rating;
• significant deterioration in external market indicators of credit risk for
a particular financial instrument,
e.g. a significant increase in the credit spread, the credit default swap
prices for the debtor, or the length of time or the extent to which the fair
value of a financial asset has been less than its amortised cost;
• existing or forecast adverse changes in business, financial or economic
conditions that are expected to cause a significant decrease in the debtor's
ability to meet its debt obligations;
• any actual or expected significant deterioration in the operating results
of the debtor;
• significant increases in credit risk on other financial instruments of the
same debtor; or
• an actual or expected significant adverse change in the regulatory,
economic, or technological environment of the debtor that results in a
significant decrease in the debtor's ability to meet its debt obligations.
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:
• 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;
• 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
• 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.
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.
· Stage 1 covers financial assets that have not deteriorated
significantly in credit risk since initial recognition;
· Stage 2 covers financial assets that have significantly
deteriorated in credit quality since initial recognition; and
· 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.
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.
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.
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 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 primarily informed by marketing processes
being undertaken and bids received. In addition, underlying business
performance and cashflows arising are considered, where relevant. 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 or had been 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 marketing level or bid received 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.
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. Net carrying values of
the remaining Stage 3 loans are disclosed in note 5.
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 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 largely occupied and able to service a significant
proportion of its interest liabilities in full from rents receivable, however
the receiver has, and will likely continue to, reserve some cash for working
capital purposes in order to facilitate the sale of the property. 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 2025. (31 January
2024: £Nil)
5. Loans advanced
(i) Loans advanced
1 February 2024 to 31 January 2025 1 February 2023 to 31 January 2024
£ £
Loans gross carrying value: 68,030,170 66,116,828
Less: Expected Credit Allowance (38,133,279) (32,477,777)
29,896,891 33,639,051
31 January 2025 31 January 2025 31 January 2024 31 January 2024
Principal advanced Carrying value before ECL allowance Principal advanced At amortised cost before ECL allowance
£ £ £ £
Affinity 16,572,789 17,374,512 17,125,789 18,033,451
Southport 15,800,000 17,428,494 15,500,000 16,511,470
RoyaleLife 25,382,017 33,227,164 25,382,017 31,571,907
57,754,806 68,030,170 58,007,806 66,116,828
(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 relevant
sectors remaining depressed.
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. 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 provisions for expected credit loss
amended. 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 value, the
cost of disposal (including enforcement action taken), and of the
administration/receivership.
(iii) IFRS 9 - Impairment of Financial
Assets
As discussed above, during 2023 and 2024, the UK commercial property market
has experienced a period of 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, third party bids on the underlying assets themselves,
and property valuations together with any sales/marketing experience to date
as discussed further below.
The internal credit rating of each loan as at 31 January 2025 has been
reviewed. All three loans which were identified as Stage 3 assets at 31
January 2024, have remained Stage 3 assets, with an ECL provision of
£38,133,279 (31 January 2024: £32,477,777).
As at 31 January 2025
Stage 1 Stage 2 Stage 3 Total
Principal advanced - - 57,754,806 57,754,806
Gross carrying value - - 68,030,170 68,030,170
Less ECL allowance((i)) - - (38,133,279) (38,133,279)
- - 29,896,891 29,896,891
As at 31 July 2024 (Unaudited)
Stage 1 Stage 2 Stage 3 Total (Unaudited)
Principal advanced - - 57,754,806 57,754,806
Gross carrying value - - 67,457,768 67,457,768
Less ECL allowance((i)) - - (35,544,323) (35,544,323)
- - 31,913,445 31,913,445
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((i)) - - (32,477,777) (32,477,777)
- - 33,639,051 33,639,051
Southport
The Southport hotel has been identified as a Stage 3 asset since 31 January
2023. Following an aborted sales process and a remarketing exercise, the
hotel, which continues to generate positive EBITDA, is subject to a bid in
excess of book value. In assessing the ECL as at 31 January 2025, the
Investment Manager and the Board have, consistent with prior periods,
considered a range of potential outcomes based on the current bid, other bids
received and market advice and have adopted a probability weighted approach,
discounting the resultant cashflows to the expected completion.
Affinity
The Investment Manager, on behalf of the Company, appointed a receiver over
the property attached to the Affinity loan in September 2023, with the
Affinity loan being identified as a stage 3 asset at 31 January 2024. Whilst
the majority of the property remains occupied, leasing is challenging and
there are rolling lease events over the coming twelve months. Investor demand
for regional offices remains low due to uncertainties surrounding occupational
demand and capital expenditure requirements in a post Covid-19, remote
working, environment.
These uncertainties combining with a higher interest rate environment have
materially impacted the valuation of the property, which was over £20 million
in April 2023. After a formal marketing process several bids were received
during Q4 2024, with the leading bids in excess of £10 million. The
Investment Manager and the Board have considered these bids alongside agency
and receiver advice to determine the likely net realisable value of the
property and timeframe in which it might be achieved, along with the
probability of completion at the offered levels. 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 2025.
RoyaleLife
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. The sites were sold into a new holding
company structure at the end of the last financial year and the Company's
debt, together with that of its co-lenders, was restructured to facilitate the
transaction. Consequently, the Company now participates in a fully cross
collateralised loan to the new operating structure whilst retaining a claim
against any proceeds arising from the ongoing administration of the old
operating structure. The administrator ran a sales process prior to the
restructure from which an institutionally backed offer for the entire platform
came forward, and heads of terms were agreed. Whilst the sales process
continues, the Company's (and its co-lenders') timetable has not been adhered
to and consequently the Investment Manager is continuing to support the new
operator to rebrand and relaunch the sale of individual bungalow homes in
order to retain optionality and maximise value for the lenders. The Investment
Manager continues to work with the administrator to explore all avenues for
recovery of losses against the original borrower platform.
The Board and Investment Manager consider there to be a material risk of loss
and the loan was categorised as Stage 3 in July 2023, with the restructured
loan remaining at Stage 3. In determining the ECL as at 31 January 2025 the
Board and the Investment Manager have considered an offer from an
institutional buyer which has been received and adopted the same probability
weighted approach and considered a range of outcomes linked to sale of the
properties (where negotiations continue), 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. The Company is also party to a legal claim
against the original valuer of the portfolio, as set out elsewhere in this
report, albeit no value has been attached to any such legal claims.
A reconciliation of the ECL allowance is presented as follows:
Expected Credit Loss Allowances
At 31 January 2024 ECL movement related to loan capital ECL movement related to default interest At 31 January 2025
£ £ £ £
Affinity (6,697,311) (794,061) (349,482) (7,840,855)
Southport (8,597,121) (617,024) (1,146,638) (10,360,782)
RoyaleLife (17,183,345) (1,655,257) (1,093,040) (19,931,642)
(32,477,777) (3,066,342) (2,589,160) (38,133,279)
(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 of 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, or have been, subject to enforcement processes, which
may be an additional factor in the liquidity of buyer pools for the subject
assets. 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.
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 potential 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 2025
31 January 2025 31 January 2024
10% reduction in property value £2,933,000 £3,279,000
20% reduction in property value £5,875,000 £6,558,000
30% reduction in property value £8,817,000 £9,837,000
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 2025,
reduce the net present value of the cashflows arising by 2.3% (£700,000),
whilst a 6 month delay would result in a 4.6% (£1,382,000) 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 2025 31 January 2024
£ £
Other receivables 41,179 30,718
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 2025 31 January 2024
£ £
Lloyds Bank International Limited 301,532 590,594
Barclays Bank plc 301,552 590,594
Butterfield Bank (Guernsey) Limited 301,877 594,252
Royal Bank of Scotland International Limited 2,295,240 1,170,389
3,200,201 2,945,829
8. Trade and other payables
31 January 2025 31 January 2024
£ £
Investment Management fees (see Note 13) 39,831 236,597
Directors' remuneration (see Note 12) 31,250 31,250
Administration fees (see Note 13) 67,917 67,917
Audit fees (see note 14) 34,800 17,150
Other expenses 36,340 38,556
210,138 391,470
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.
9. Earnings per share and Net Asset Value per share
Earnings per share
1 February 2024 to 1 February 2023 to
31 January 2025 31 January 2024
Loss for the year (£) (3,295,995) (24,876,251)
Weighted average number of Ordinary Shares in issue 121,302,779 121,302,779
Basic and diluted (Loss)/EPS (pence) (2.72) (20.51)
The calculation of basic and diluted loss per share is based on the loss for
the year and on the weighted average number of Ordinary Shares in issue in for
the year ended 31 January 2025.
There are no dilutive shares in issue at 31 January 2025 (31 January 2024:
none).
Net Asset Value per share
31 January 2025 31 January 2024
NAV (£) 32,928,133 36,224,128
Number of Ordinary Shares in issue 121,302,779 121,302,779
NAV per share (pence) 27.15 29.86
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 2025 31 January 2024
Number of shares 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 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 64,650,361 80,298,419
Repaid in the year - (15,648,058)
Share capital carried forward 64,650,361 64,650,361
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 is set out below. No dividends were
declared or paid in respect of the period 1 February 2024 to 31 January 2025:
Dividend per share Total dividend
1 February 2023 to 31 January 2024 Pence £
Interim dividend paid in respect of quarter ended 31 January 2023 0.50 606,514
0.50 606,514
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 which have taken 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.
There was no return of capital made during the year ended 31 January 2025.
Return of Capital per share Total Return of Capital
1 February 2023 to 31 January 2024 Pence £
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
Rights attaching to Shares
The Company has a single class of Ordinary Shares which are not entitled to a
fixed dividend. During the year ended 31 January 2024, 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 price 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.
The following table shows the portfolio profile of the material financial
assets as at 31 January 2025 and 31 January 2024:
31 January 2025 31 January 2024
£ £
Floating rate
Cash 3,200,201 2,945,829
Fixed rate
Loans advanced, net of ECL allowance 29,896,891 33,639,051
33,097,092 36,584,880
The timing of interest payments on the loans advanced is summarised in the
table in the Liquidity Risk section.
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, Probability of
Default (PD), and Loss Given Default (LGD).
The model takes into account factors below such as:
· financial risk of the borrower - considers the financial position
of the borrower in general and considers LTV, ICR and amortisation
profile/debt maturity;
· property risk - where the property location, quality
(specification, condition) and letting risk are considered;
· income risk - the income risk category considers, tenant
diversity, tenant credit quality and lease length ratio, sector diversity and
geographical diversity; and
· 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 2025 Maximum credit risk exposure 2024
AAA, AA+ Virtually no risk - -
AA to A Low risk - -
BBB Moderate risk - -
BB Average risk - -
B Acceptable risk - -
CCC+ Borderline Risk - -
CCC Special Mention - -
CC Substandard - -
D Doubtful 68,030,170 66,116,828
D Loss - -
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
2025, the maximum credit risk exposure was £68,039,973 (31 January 2024:
£60,493,105).
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 2024: 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 2025 31 January 2024
£ £
Lloyds Bank International Limited A 301,532 590,594
Barclays Bank plc A 301,552 590,594
Butterfield Bank (Guernsey) Limited BBB+ 301,877 594,252
Royal Bank of Scotland International Limited A- 2,295,240 1,170,389
3,200,201 2,945,829
The carrying amount of these assets approximates their fair value.
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 2025
£ £ £
Affinity - principal 16,572,789 - 16,572,789
Affinity - interest and exit fees 326,231 - 326,231
Southport - principal 15,800,000 - 15,800,000
Southport - interest and exit fees 490,356 - 490,356
RoyaleLife - principal 25,382,017 - 25,382,017
RoyaleLife - interest and exit fees 4,261,464 - 4,261,464
62,832,857 - 62,832,857
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
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 during the
managed wind-down.
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.
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 2024:
£160,000) with outstanding fees of £31,250 due to the Directors at 31
January 2025 (31 January 2024: £31,250) (see Note 8). Fees for the year
to 31 January 2026 have been set at an aggregate total of £90,000.
13. Material Agreements
Investment Manager Agreement
Investment Management fees for the year amounted to £183,236 (31 January
2024: £551,167), of which £39,831 (31 January 2024: £236,597) was
outstanding at the year-end (see Note 8).
The Board 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 was agreed that fee will reduce to
0.5% of Net Asset Value from 1% previously. This came into effect on 9 May
2024. This halving of the investment management fee has, and will continue to,
result in meaningful savings for shareholders over the remaining life of the
Company.
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 £177,256 (31
January 2024: £239,806) of which £67,917 (31 January 2024: £67,917) 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.
14. Auditor's Remuneration
Audit and non-audit fees payable to the auditors can be analysed as follows:
31 January 2025
31 January 2024
£ £
Audit fees for the Company 85,650 63,013
Total Audit fees 85,650 63,013
No non-audit fees were paid during the year.
15. Other Expenses
31 January 2025 31 January 2024
£ £
Broker fees 50,000 50,000
Administration fees 177,256 239,806
Regulatory fees 20,483 17,872
Listing fees 1,854 13,230
Legal and professional fees 20,489 118,645
Other expenses 82,284 109,307
352,366 548,860
16. Subsequent events
There are no material subsequent events noted after the reporting date.
alternative performance measures
Performance Measure Definition Reason for Use Calculation
Total Income per Share The total income of the Company as disclosed in the Statement of Comprehensive To provide transparency to the Company's investment returns. 2.59 pence per share for the year ended 31 January 2025 (4.08 pence per share
Income divided by the number of Ordinary Shares in issuance at the relevant
for the year ended 31 January 2024).
reporting date.
NAV per Share The net asset value of the Company divided by the number of Ordinary Shares in To assist shareholders in assessing the performance of the Company over a 27.15 pence for the year ended 31 January 2025 (29.86 pence for the year ended
issuance at the relevant reporting date. period in relation to its Investment Objectives. 31 January 2024).
Dividend per Share The total dividends per Ordinary Share declared and/or paid during the To assist shareholders in assessing the performance of the Company in relation No dividends were declared or paid during the year ended 31 January 2025 (0.5
relevant reporting period. to its Investment Objectives. pence per share was declared in respect of the period ended 31 January 2023
and paid during the year ended 31 January 2024).
Share Price Premium / Discount The percentage difference between the NAV per share and the quoted price of To assist shareholders in identifying and monitoring the performance of the Share price discount of 17.5% for the year ended 31 January 2025 (discount of
each Ordinary Share as at the relevant reporting date. Company. 28.7% for the year ended 31 January 2024)
Percentage Capital Invested The aggregate value of the investments at amortised cost divided by total To assist shareholders in identifying and monitoring the performance of the 90.8% of total assets for the year ended 31 January 2025 (92.9% of total
shareholder equity. Where the figure exceeds 100%, the investments will be Company and the level of gearing. assets for the year ended 31 January 2024)
partially funded by the Company's debt facility.
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 Corporate Governance Code 2024" means the AIC Code;
"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;
"EGM" means an Extraordinary General Meeting of the Company;
"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;
"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;
"ISIN" means an International Securities Identification Number;
"LGD" means loss given default;
"London Stock Exchange" or "LSE" means London Stock Exchange plc;
"LTV" means Loan to Value ratio;
"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 MUFG Corporate Markets (Guernsey) Limited (formerly Link
Asset Services (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;
"SOC 1 Type 2 Report" means System and Organization Controls 1. A report that
focuses on the internal controls over financial reporting;
"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;
"UK Listing Rules" means the listing rules made by the FCA under section 73A
Financial Services and Markets Act 2000;
"£" or "Pounds Sterling" means British pound sterling and "pence" means
British pence.
directors and general information
Board of Directors Independent Auditor English Solicitors to the Company
Jack Perry Deloitte LLP Gowling WLG (UK) LLP
(Chair)
Stuart Beevor (retired 31 January 2025) PO Box 137 4 More London Riverside
Paul Meader Regency Court London
Fiona Le Poidevin (retired 31 January 2025) Glategny Esplanade United Kingdom
St. Peter Port SE1 2AU
Audit and Risk Committee Guernsey
Paul Meader (Chair) GY1 3HW Guernsey Advocates to the Company
Jack Perry Carey Olsen
Fiona Le Poidevin (retired 31 January 2025) Guernsey Administrator and Company Secretary Carey House
Stuart Beevor (retired 31 January 2025) Ocorian Administration (Guernsey) Limited PO Box 98
P.O. Box 286 Les Banques
Management Engagement Committee Floor 2 St Peter Port
Jack Perry Trafalgar Court Guernsey
(Chair)
Les Banques GY1 4BZ
Paul Meader
St Peter Port
Fiona Le Poidevin (retired 31 January 2025)
Guernsey Bankers
Stuart Beevor(retired 31 January 2025)
GY1 4LY Butterfield Bank (Guernsey) Limited
PO Box 25
Nomination Committee
Depositary Regency Court
Jack Perry (Chair)
Ocorian Depositary (UK) Limited Glategny Esplanade
Stuart Beevor (retired 31 January 2025)
5th Floor St Peter Port
Paul Meader
20 Fenchurch Street Guernsey
Fiona Le Poidevin (retired 31 January 2025)
London GY1 3AP
England
Remuneration Committee
EC3M 3BY Barclays Bank plc
Paul Meader (Chair)
6-8 High Street
Jack Perry
Registrar St Peter Port
Stuart Beevor (retired 31 January 2025)
MUFG Corporate Markets (Guernsey) Guernsey
Fiona Le Poidevin (retired 31 January 2025)
Mont Crevelt House GY1 3BE
Bulwer Avenue
Investment Manager
St Sampson Lloyds Bank International Limited
ICG Alternative Investment Limited
Guernsey PO Box 136
Procession House
GY2 4LH Sarnia House
55 Ludgate Hill
Le Truchot
London
Corporate Broker and Financial Adviser St Peter Port
United Kingdom
Cavendish Securities plc Guernsey
EC4M 7JW
1 Bartholomew Close GY1 4EN
London
Registered office
United Kingdom The Royal Bank of Scotland International
P.O. Box 286
EC1A 7BL Royal Bank Place
Floor 2
1 Glategny Esplanade
Trafalgar Court
Identifiers St Peter Port
Les Banques
GIIN: 6IG8VS.99999.SL.831 Guernsey
St Peter Port
ISIN: GG00B8C23S81 GY1 4BQ
Guernsey
Sedol: B8C23S8
GY1 4LY
Ticker: LBOW
Website: www.lbow.co.uk (http://www.lbow.co.uk)
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
Further information available online:
www.lbow.co.uk (http://www.lbow.co.uk)
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. END FR BRGDSUXXDGUGRecent news on ICG Longbow Senior Secured UK Property Debt Investments
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