Final Results

RNS Number : 8460L

ICG-Longbow Snr Sec UK Prop DebtInv

24 April 2018

ICG-Longbow Senior Secured UK Property Debt Investments Limited

Annual Report And Consolidated Financial Statements

For the year ended 31 January 2018

ICG-Longbow Senior Secured UK Property Debt Investments Limited (the "Company") is pleased to announce the release of its Annual Financial Statements for the year ended 31 January 2018 which will shortly be available on the Company's website at (www.lbow.co.uk) where further information on the Company can also be found.

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

Chairman's Statement

Introduction

On behalf of the Board, it is my pleasure to present the fifth Annual Report for the Group for the year ended 31 January 2018. Group performance during the year has been robust, reflecting the mature and stable investment portfolio, with shareholder returns enhanced during the year with payment of a 2.25 pence per share special dividend in June 2017. The loan portfolio saw limited turnover, with only one significant repayment which allowed capital to be reinvested for the first time under the Group's new revised investment parameters which were approved by shareholders in March 2017. These revised parameters should allow the Company to continue to deliver a 6.0 pence per share target dividend, along with capital preservation across the cycle and a degree of capital appreciation.

Portfolio

The Group's loan portfolio increased during the year, with the new £9.00 million Quattro portfolio loan - the first under the revised investment parameters - closing in October 2017. This was supplemented by increases totalling £1.10 million to the Company's existing Northlands loan and a £1.93 million increase to the Meadow loan. The latter was also extended for up to a further two years to accommodate the borrower's business plan, with the Group benefiting from an enhanced coupon protection period.

Repayments were at a lower level than last year, with only the £10.0 million Lanos loan redeeming in full during the year, along with a partial £0.21 million prepayment of the BMO loan following a sale of one of the underlying security properties. On 28 February 2018, post year end, the Company received repayment in full of the £11.94 million IRAF loan, together with interest and exit fees of approximately £0.43 million.

Following the changes to the Group's portfolio, the weighted average LTV increased to 58.0% (31 January 2017: 57.0%), with the weighted average unexpired loan term being 1.37 years (31 January 2017: 1.85 years) and income protection period averaging 0.53 years (31 January 2017: 0.74 years).

The proceeds of the IRAF repayment, together with Group cash, were reinvested into the £16.20 million Affinity loan on 1 March 2018, minimising cash drag within the Group. Furthermore, an additional £0.92 million increase to the Northlands portfolio loan was completed in March 2018, in support of the borrower's business plan. An enhanced coupon protection period agreed on this loan will allow the Group to benefit from the performance of this modestly leveraged investment for a longer period than anticipated.

As a result of the highlighted post-year end changes to the portfolio, weighted average LTV is currently 61.7%, with the weighted average unexpired loan term as at the date of this report being 1.54 years, of which 0.82 years is income protected.

Revenue and Dividend Performance

Revenue for the year of £8.08 million (31 January 2017: £12.33 million) was below the prior year, principally due to the lower volume of loan repayments, and consequent reduction in the level of exit and prepayment fees received. Profit after tax of £5.90 million (31 January 2017: £10.41 million) included only £0.97 million of prepayment fees, compared with £4.24 million in the prior year.

An element of the exceptional prepayment fees received in the year to 31 January 2017 were paid out to shareholders as a special dividend on 2 June 2017, with total dividends paid or declared during the year being 8.25 pence per share (31 January 2017: 6.00 pence per share).

As highlighted in our previous report, much of the capital reinvested following the 2016 repayments was at interest coupons below the Group average, reflecting the original investment parameters and prevailing market rates for senior loans at the time. These relatively lower coupons also affected Group revenue when compared to the prior year, albeit such coupons are accretive when added to the retained prepayment fees for the purposes of maintaining the Company's target dividend of 6.00 pence per share.

NAV and Share Price Performance

As a result primarily of the special dividend of 2.25 pence per share paid in June 2017, the NAV per share fell to 100.80 pence (31 January 2017: 103.80 pence). While the loan portfolio is being repositioned in line with the new investment parameters, the Company has, and intends to continue to, when necessary, utilise its retained earnings from prepayment fees to supplement in-period earnings per share to maintain its target dividend of 6.00 pence per share. This will result in a modest reduction in NAV per share until the repositioning of the portfolio is complete.

The Company's shares traded in a range of 101.00 pence to 106.00 pence, and ended the year at 102.50 pence, a premium of circa 1.7% to NAV.

Change of strategy and share issuance programme

At the Extraordinary General Meeting on 1 March 2017, all resolutions presented pertaining to the Group's future strategy were passed, and following completion of the Quattro loan investment in October 2017, the Board announced a first issuance under the approved 2017 Placing Programme. With a robust level of demand the final issuance of 8,823,529 new shares was above the minimum level sought and the Board and I would like to thank shareholders for their support.

Post year end, on 13 March 2018 the Board announced a proposed placing of new shares to capitalise on the strength of the pipeline, following a series of shareholder meetings where the Company's performance and growth aspirations were generally well received. In the period leading up to and following this launch, a material softening in market conditions undoubtedly affected demand for the new placing, and the resultant issuance of 4.26 million new ordinary shares was lower than the Board had hoped for. Nonetheless I would like to thank those participating shareholders for their ongoing support in addition to welcoming new shareholders to the register.

Governance and Management

The Board continues to commit significant time and effort to its governance responsibilities. The Board has recently established a dedicated Investment Risk Committee to meet the increasing demands of, and to focus on, the monitoring and oversight of investment risk management. A full report on the work of this committee is included in the Corporate Governance Report.

In addition to its scheduled meetings, this year the Board commenced a series of monthly pipeline discussions with the Investment Adviser to monitor prospective investment opportunities for the Group, the outlook for loan redemptions, and prevailing market conditions. This has proved very useful in considering the prospects for further share issuance, and the Board intends to continue the practice in the forthcoming year.

In June 2017, the Management Engagement Committee of the Board conducted an on-site due diligence review of the Investment Adviser's policies and procedures, including discussions with its origination, loan monitoring, operations and compliance functions. The Committee was impressed by the thoroughness with which the Investment Adviser undertakes its work on behalf of the Group and has every confidence that it is well placed to continue its strong performance as the Group continues to transition its investment portfolio and position itself for future growth.

On 29 December 2017, the Group published its Key Information Document. The Board noted that the relatively lower risk of the Group's secured and defensive real estate debt investments was reflected in the results set out in that document. In order to gain a true and balanced perspective, all investors and prospective investors, should read our Key Information Document alongside other important publications, such as these Financial Statements, rather than taking any single document in isolation.

Following the acquisition during the year by Estera Group of Heritage Financial Services Group the Administrator and Company Secretary for the Company is Estera International Fund Managers (Guernsey) Limited, with effect from 10 January 2018. Mark Huntley stepped down from all executive functions with the Administrator. He remains an unpaid consultant to the firm.

Finally, the Board has taken a keen interest this year in the ESG performance of the Group and ICG-Longbow, its Investment Adviser. It is pleasing to note that the Investment Adviser has continued to develop its policies and procedures in this area, which included completing the Global Real Estate Sustainability Benchmark survey of real estate debt investors for the second time, with satisfactory results against its peer group. As a lender to and not an owner of property assets, the Group has limited ability directly to control or enhance sustainability performance of its security properties, but where able and appropriate to do so, will seek to influence and incentivise its borrowers to improve ESG performance through, for example, providing finance in support of capital expenditure works, as seen in the Affinity loan.

Outlook

The Board continues to believe that attractive market conditions remain for UK real estate debt investments, on which the Group can capitalise through both the repositioning of its existing portfolio, and via future growth. The Investment Adviser has developed a substantial and attractive pipeline of prospective investments, which if concluded should allow for rapid reinvestment of any repayment proceeds and the possibility of future equity issuance.

Following approval at the 1 March 2017 EGM, the authorities for the Company's 2017 Placing Programme expire on 26 April 2018. The Board remains unanimous in its ambition to grow the Company, which it believes is in the best interests of shareholders, in particular in light of the strength of the pipeline outlined above. As a result the Board is seeking renewal of the authority to issue shares pursuant to a new share issuance programme at the forthcoming AGM, with a separate prospectus to be published in due course. Any new Ordinary Shares issued will be issued at a premium to the prevailing Net Asset Value intended to at least cover the costs and expenses of the relevant placing. Further details of the advantages for the Company and its shareholders of granting these authorities is set out in the notice of AGM.

Jack Perry

Chairman

23 April 2018

Highlights

Performance

· NAV of £117.98 million as at 31 January 2018 (31 January 2017: £112.33 million).

· Total dividends paid or declared for the year ended 31 January 2018 of 8.25 pence per share (31 January 2017: 6.0 pence per share).

· Prepayment fees of £0.97 million (31 January 2017: £4.24 million), reflecting the lower volume of loan repayments and stable nature of the investment portfolio.

· Total income excluding prepayment fees of £7.10 million (31 January 2017: £8.09 million).

· Profit after tax of £5.90 million for the year ended 31 January 2018 (31 January 2017: £10.41 million), as a result of the reduction in exceptional prepayment fees earned.

· Earnings per share of 5.33 pence (31 January 2017: 9.62 pence).

· Adjusted earnings per share of 4.39 pence (31 January 2017: 5.69 pence), adjusted for one-off other fee income during the year totalling £1,042,285 (31 January 2017: £4,259,751).

Dividend

· Total dividends paid or declared for the year ended 31 January 2018 of 8.25 pence per share (31 January 2017: 6.0 pence per share), made up as follows:

o Interim dividends of 1.5 pence per share paid in respect of the three quarterly periods ending 30 April 2017, 31 July 2017 and 31 October 2017.

o Special dividend of 2.25 pence per share paid in respect of the exit and prepayment fees received during the year ended 31 January 2017.

o 4th interim dividend of 1.5 pence per share paid in April 2018 in respect of the quarter ended 31 January 2018.

· An ordinary resolution will be proposed at the forthcoming AGM to approve the interim dividends paid in this financial year.

Investment Portfolio

· During the year, the £10.00 million Lanos loan was repaid in full together with interest, exit and prepayment fees of £1.13 million, and £0.21 million was repaid on the BMO loan. A further £1.10 million was advanced on the Northlands loan; £1.93 million was advanced on the Meadow loan and £9.00 million was advanced on the new Quattro loan.

· As at 31 January 2018, the Group's investment portfolio comprised 10 loans with an aggregate principal balance of £111.15 million, representing 94.21% of the total equity attributable to the owners of the Company (31 January 2017: 10 loans with aggregate principal balance of £109.33 million, representing 97.33% of the total equity attributable to the owners of the Company).

· The weighted average coupon was 6.29% (31 January 2017: 6.24%).

· The portfolio weighted average LTV was 58.03% (31 January 2017: 57.04%), reflecting changes to the composition of the loan portfolio, and the weighted average ICR was 218% (31 January 2017: 235%).

· The portfolio weighted average residual term was 1.37 years, of which on average 0.53 years remains income protected (31 January 2017: residual term 1.85 years, income protected term 0.74 years).

Change of investment objective and policy and share issuance programme

· On 1 March 2017, shareholders approved the continuation of the Company, alongside certain changes to the investment

objective and policy and authorised the issue of shares pursuant to the 2017 Placing Programme.

· On 27 April 2017, the Company published the 2017 Placing Programme Prospectus raising £9.0 million in October 2017

and a further £4.3 million after the period end.

For further information, please contact:

Estera International Fund Managers (Guernsey) Limited:

James Christie

+44 (0)14 8174 2742

Cenkos Securities:

Tom Scrivens

Oliver Packard

Andrew Worne

Will Rogers

Alex Collins

+44 (0)20 7397 1915

+44 (0)20 7397 1918

+44 (0)20 7397 1912

+44 (0)20 7397 1920

+44 (0)20 7397 1913

Maitland Consultancy Limited:

Seda Ambartsumian

+44 (0)20 7379 5151

ICG-Longbow

Martin Wheeler

David Mortimer

+44 (0)20 3201 7502

+44 (0)20 3201 7532

Corporate Summary

Investment Objective

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

Structure

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

Investment Adviser

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

Investment Adviser's Report

Investment Objective

Fund facts
Fund launch:	5 February 2013	Fund type:	Closed ended investment company
Investment Adviser:	ICG-Longbow	Domicile:	Guernsey
Base currency:	GBP	Listing:	London Stock Exchange
Issued shares:	117.04 million	ISIN code:	GG0B8C23S81
Management fee:	1.0%	LSE code:	LBOW
		Website:	www.lbow.co.uk

Share price and NAV at 31 January 2018			Key portfolio statistics at 31 January 2018
Share price (pence per share):	102.50		Number of investments:	10
NAV (pence per share):	100.80		Percentage capital invested⁽²⁾:	95.21%
Premium:	1.69%		Weighted avg. investment coupon:	6.29%
Approved dividend (pence per share)⁽¹⁾:		1.50	Weighted avg. LTV:	58.03%
Dividend payment date⁽¹⁾:	20 April 2018		Weighted avg. ICR:	218%
⁽¹⁾For Quarter ended 31 January 2018 (Ex-dividend date 22 March 2018). ⁽²⁾ Loans advanced at amortised cost /Total equity attributable to the owners of the Company.

Summary

At 31 January 2018 the investment portfolio comprised ten loans, with the Lanos loan having been repaid and with capital reinvested into the Quattro loan, the first under the Group's revised investment parameters. A £1.93 million increase to the Meadow loan, along with an extension to the loan term, was also concluded at the end of the year.

The weighted average loan to value ratio has increased to 58.0% (31 January 2017: 57.0%) owing to the relatively high leverage point of the Quattro loan, with an entry LTV of 83.7%, compared to the outgoing Lanos loan, with an exit LTV of 50.0%. Each individual loan remains well secured, with portfolio ICR at 218%.

Following the year end, the £11.94 million IRAF loan repaid following a sale of the underlying properties. The proceeds were reinvested into a new £16.20 million commitment secured by a Bristol office building (the Affinity loan), together with a further £0.92 million advance under the Northlands facility. The effect of these changes increased portfolio LTV to 61.7%, but improved the weighted average loan coupon to 6.31%, the weighted average loan maturity to 1.54 years and the weighted average coupon protection period to 0.82 years.

As a result of the above changes, approximately £45 million of the Group's original investment portfolio has now been extended, repositioned or replaced since the change in the Company's investment parameters.

Group Performance

The Group experienced a year of relative stability in 2017, following a moderate amount of repayment and reinvestment activity in the prior year. Only one loan investment - the £10.00 million Lanos facility - repaid, as we were able to conclude extensions or increases to the Meadow and Northlands loans, accompanied by improved coupon protection periods, to secure the facilities for a longer expected term. The new £9.00 million Quattro loan, concluded in October 2017, carries a profit participation component and thus the potential for enhanced returns to supplement the quarterly coupon.

The portfolio continues to perform in line with expectations and in compliance with all of the Group's investment parameters.

Portfolio

Portfolio statistics	31 January 2018	31 January 2017
Number of loan investments	10	10
Aggregate principal advanced	£111,153,477	£109,329,750
Weighted average LTV	58.03%	57.04%
Weighted average ICR	218%	235%
Weighted average interest coupon	6.29% pa	6.24% pa
Weighted average unexpired loan term	1.37 years	1.85 years
Weighted average unexpired interest income protection	0.53 years	0.74 years
Cash held	£6,486,150	£3,258,954

Investment Portfolio as at 31 January 2018

Project	Region	Sector	Term start	Unexp term (yrs)	Day 1 balance (£m)	Day 1 LTV (%)	Day 1 ICR (%)	Principal Balance outstanding (£m)⁽¹⁾	Current LTV (%)	Current ICR (%)
IRAF	North West	Industrial/distribution	Jul-13	0.83	14.20	55.3	193	11.94	43.4	172
Meadow	London	Retail	Sep-13	1.99	18.07	65.0	150	20.00	69.4	103
Northlands	London	Mixed use	Nov-13	0.82	7.20	61.7	192	7.58	47.2	143
Hulbert	West Midlands	Industrial/distribution	Dec-13	0.84	6.57	65.0	168	6.57	50.4	192
Halcyon	National	Industrial/distribution	Dec-13	0.85	8.60	64.8	116	8.60	63.4	113
Cararra	Yorks/Humberside	Regional office	Dec-13	0.85	1.30	65.0	113	1.30	65.0	113
Ramada	North East	Other (hotel)	Apr-14	1.24	7.98	64.4	180	7.98	66.0	161
Commercial Regional Space	North West	Industrial/distribution	Mar-16	1.20	22.40	64.0	280	22.40	50.9	359
BMO	National	Mixed Use	Jan-17	1.20	16.00	55.4	404	15.79	51.1	405
Quattro	South East	Mixed Use	Oct-17	2.96	9.00	83.7	100	9.00	83.7	100
Total / weighted average				1.37	111.32	63.5	217	111.15	58.03	218

⁽¹⁾Total may vary due to rounding.

Economy and Financial Market Update

The rate of GDP growth accelerated in Q4 2017, leading to an annual growth rate for 2017 of 1.5%, exceeding most expectations for 2017 as a whole, a year which started with two quarters of very weak growth. However 2017's growth remains materially lower than each of the preceding three years. Looking forward, Capital Economics and the Bank of England's latest forecasts now see GDP growth of 1.8% in 2018 and 2019 compared to 1.6% and 1.7% previously.

The trend of strong employment growth continued and accelerated over the last quarter of the year. There were 32.25 million people in work as at January 2018, 402,000 more than a year earlier. The employment rate (the proportion of people aged from 16 to 64 who were in work) was 75.3%, higher than for a year earlier (74.6%) and the joint highest since comparable records began in 1971. There was also correspondingly lower unemployment, at 4.3%, down from 4.7% a year earlier and the joint lowest since 1975.

Average weekly earnings in the three months to January 2018 were 2.6% higher than a year earlier, the fastest rate of pay growth for two and a half years. Although this does not yet match inflation, there is some evidence that the strong employment growth observed has led to pay pressure building.

As at February 2018, consumer price inflation stood at 2.7%, compared with 2.3% a year earlier. The February 2018 figure does, however, show a marked reduction from the 3.0% rate in January 2018 and the 3.1% level, a six year high, in November 2017.

The Bank of England has indicated that it is concerned about the low level of slack in the economy. As such, there appears to be an increased prospect of a faster than anticipated rise in the Bank of England base rate during the year, with the first possibly as soon as May. This has to some extent been priced into five year swap rates, which have risen from circa 1.0% to 1.35% over the final quarter of the year. Capital Economics are expecting this to increase further, to circa 1.6%.

Occupational Demand/Supply

Against a backdrop of robust employment and continuing low level of real estate development across the UK, rental values grew by over 2% in 2017, according to the MSCI UK All Property Quarterly Index - broadly in line with 2016 levels. There is however a divergence between sectors, with industrial rents having increased by over 5%, compared with 1.5% growth for offices, and (perhaps surprisingly given sector headwinds) 1% growth in retail rental values.

Whilst London office rents have remained robust over 2017, with 1% rental value growth underpinned by strong take up by the tech sector and 'co-working' office providers, we understand from letting agents that leasing terms are beginning to soften with break clauses more readily available and rent free periods increasing moderately. In past downturns a softening of lease terms has been a pre-cursor to a fall in rental values and this is supported by Capital Economics' UK Commercial Property Analyst Report, February 2018, which is projecting a 10% fall in Central London office rents over the next four years. More positively, the same report projects that Rest of UK offices will perform strongly, recording positive rental growth of the same amount in the same period.

From our own perspective, we concur with the relative strength of the regional office market, based on take up of offices in our security portfolios in cities such as Leeds and Manchester. We have though been surprised that retail rental growth remained positive in 2017, given the economic headwinds faced by the sector, coupled with structural changes in retailing caused by the internet. Although there have been a number of prominent retail failures in recent months, it is worth remembering that many retailers continue to perform satisfactorily at both the prime and discount end of the value spectrum, and we believe relatively steadier performance in these sub-markets may be masking the material falls in rental values being witnessed in the mainstream shopping centre market.

There has been little change to reported national vacancy rates last quarter, which remain at circa 7% by ERV but letting agents are reporting shortages of Grade A office space in major regional cities throughout the UK, which we believe will lead to increased take up of refurbished Grade B+ offices in these cities over the next year. We would also expect vacancy rates in retail to start increasing over coming months, especially in shopping centres, which are already showing voids of circa 12% by area.

Property Investment Market

The MSCI UK All Property Quarterly Index reported capital value growth of 5.2% over 2017, leading to a 10% total return for the property market. Whilst this shows a strong year for UK property, it reflects a recovery from the negative sentiment in the aftermath of the EU referendum, which contributed to a fall in values of 1.6% in 2016. Consequently, all property capital values at the end of 2017 are just 3.6% higher than at the end of 2015, whilst over the same period the FTSE 100 index had grown over 22%.

As can be expected, there are strong variations in the amount of capital growth being recorded across sectors in 2017, ranging from less than 2% in retail to nearly 14% for industrial and with office growth at circa 4%. Within retail, there is further dispersion, with shopping centres accounting for a 2% fall, whilst standard shops, in part a function of high value central London unit shopping, recorded positive 4% growth. Again, we are surprised that the 2% fall in shopping centre values over the year is not larger but we expect that the material number of centres available but unsold at the end of 2017 will pull values down over the first part of this year. As at the date of this report, there is some evidence of transactions being concluded at these rebased values, a trend we expect to continue.

Investment market volumes generally surprised to the upside in 2017, with £16.5 billion of transactions recorded by Lambert Smith Hampton in Q4 2017, bringing the annual total to £58.8 billion - broadly in line with the five year average but up 25% on 2016. The strong performance of the industrial sector in terms of capital value movement is echoed in the transaction volumes, with a record £8 billion of transactions identified - up 31% on the five year average. However, even this volume has been exceeded by the alternative and specialist sectors, with £10 billion of sales recorded underpinned by a number of very large student accommodation portfolio transactions.

Finance Markets

Bank of England monitoring of the lending activity of UK banks - who are still the largest component of overall lending activity - shows that over 2017, the share that commercial real estate makes up of overall bank lending continues on a strong downward trend, ending the year at 6.8%, against 7.2% a year earlier and 7.6% a year before that.

A review of the year end accounts of the UK clearing banks affirms the trend of this group of lenders steadily reducing exposure to the sector. During the year, Lloyds Banking Group reported a reduction in its UK commercial real estate loan book by circa £2 billion (10%); Royal Bank of Scotland by circa £1 billion (5%); and Santander by circa £0.9 billion (10%).

Our view is that these reduced levels of banking participation in the UK market have now largely stabilised, but are unlikely to increase whilst the current regulatory framework governing real estate lending remains in place. Based on market activity we have witnessed across our investment teams, particularly in the second half of the year, UK banks are now competing more aggressively on pricing for lower leverage transactions (circa 50% LTV) - which work well from a regulatory capital perspective - with relatively little lending above 55% LTV. We expect this trend to continue, leaving the Company well placed to capture demand for senior whole loans in the 65% - 80% LTV range.

Portfolio Profile and Activity

The Group's investment portfolio was generally stable during the year, with only one notable repayment - the £10.00 million Lanos loan, which was accompanied by interest, exit and prepayment fees of approximately £1.13 million in aggregate. The proceeds were substantially reinvested in the £9.00 million Quattro loan.

Over the year the Group's investments have continued to perform in line with business plans with underlying performance generally stable or improving. All financial covenants are in compliance. The weighted average LTV at year end was 58.0% (31 January 2017: 57.0%), with the increase largely due to the new Quattro loan at an initial 83.7% LTV, partially offset by a significant valuation improvement on the Commercial Regional Space loan, which now shows a 50.9% LTV compared with 64.0% in the prior year.

The weighted average ICR on the portfolio remains healthy at 218%, falling moderately from the 235% seen in the prior year owing to the relatively low coverage of the Meadow and Quattro loans, both of which benefit from funded interest reserves.

Notable changes during the year included:

1. Commercial Regional Space - the investment continues to perform strongly with income generated by the security properties remaining robust, with ICR for the loan of 359% broadly in line with the previous year (358%). Further, a revaluation of the properties at the end of the year showed significant value improvement as a result of the income growth since origination, with LTV now 50.9% (31 January 2017: 64.0%).

2. Ramada - as highlighted in our previous report the hotel remains comfortably profitable although underlying trading has been weaker given the demand and supply dynamics in the local market. As such, and following a request from the borrower, we have agreed an amendment to one of the loan covenants to provide some headroom against the potential of a softening in trading. The Group in return will receive an extension to its income protection period and the amendment does not meaningfully dilute the Group's loan protection. The LTV position of the loan, at 66.0%, and ICR, at 161%, remains comfortable.

3. Meadow - the sponsor has continued to tailor its plans for a residential-led scheme on the site, following extensive discussions with the local council and the Greater London Authority. A revised planning application has been submitted, with determination expected in the forthcoming year. The property continues to benefit from an enhanced retail warehousing consent which underpins the value of the site should the residential application be unsuccessful.

4. Quattro - following the year end and in line with its business plan, the sponsor exchanged contracts to sell one of the assets securing the loan at a level matching the book valuation. On completion, it is anticipated that the net sale proceeds will be used to repay the Group's loan, reducing the LTV position on the facility.

The Investment Adviser believes the Group's loan portfolio continues to be satisfactorily secured, given its senior position with a weighted average exposure of 58.0% LTV at year end. Risk remains well-diversified at portfolio level by sector and region, with a previous concentration in North West industrial assets reducing after year end following the repayment of the IRAF loan. Exposures are predominantly against multi-property or multi-tenanted security, and where appropriate interest is supported by fully funded cash reserves.

Portfolio Outlook

We continue to seek to reposition the Group's loan book as original investments come towards the end of their contractual terms, with circa £45 million of investments having been increased, extended or newly originated in the past six months in accordance with the revised investment parameters. Where appropriate, this repositioning will involve the retention and extension of existing loans, whilst replacing any investments that do repay with opportunities from the current deal pipeline, which is as strong and deep as we have seen since the Company's IPO in 2013, and at generally modest LTV levels. In the coming year there should also be an opportunity for the Group to consider investing in ICG-Longbow's private funds.

We are also firmly focused on creating a platform for the Group to grow, and believe the current portfolio and strength of the pipeline, with supportive market conditions, provide a solid foundation for this future growth.

Loan Portfolio

As set out above, as at 31 January 2018, the Group's portfolio comprised ten loans with an aggregate principal balance outstanding of £111.15 million.

A summary of each of the individual loans as at 31 January 2018 is set out below:

IRAF

Initially a £14.20 million advance was made to LM Real Estate, to refinance a portfolio of five multi-let industrial and distribution warehouse units located in the North West of England, following which the borrower disposed of one of the properties resulting in a £0.9 million repayment.

LM Real Estate sold the majority of the remaining portfolio in September 2014 to a borrower (IRAF Catch Ltd), managed by Infrared Capital Partners. A new £11.94 million senior loan was made to IRAF on substantially the same terms secured on the residual portfolio, resulting in a net repayment of £1.37 million to reflect the excluded properties.

The loan repaid in full, together with accrued interest and exit fees, on 28 February 2018 after year end.

Property profile		Debt profile
Number of properties	4	Day one debt	£14,200,000
Property value (£)	£27,485,000	Debt outstanding	£11,935,000
Property value (£/sq. ft.)	£56.87	Original term	5.4 years
Property area sq. ft.	483,294	Maturity	December 2018
Number of tenants	31	Current LTV	43.4%
Weighted lease length	2.88 years	Current ICR	172%
		Loan exposure per sq. ft.	£24.70

Meadow

Originally an £18.07 million senior loan facility used to assist financing an established and well supported international real estate fund in the acquisition of a highly prominent retail park in North London. The borrower is an SPV owned by Meadow Real Estate Fund II LP and is managed by Meadow Partners, an international real estate investor and asset manager.

The estate is now vacant, save for some temporary occupancy of part of the site, and debt service continues to be met from a pre-funded reserve account (topped up quarterly) which provides interest cover through to loan maturity. The loan remains compliant with all covenants and is satisfactorily secured.

During the year, a £1.93 million increase was advanced to the borrower, with the loan extended for a further period of up to two years. The coupon protection period was also increased. The increase went towards reimbursement of the substantial expenditure the borrower has committed towards its business plan of securing a major residential-led planning consent on the site. Following lengthy discussions with the local authority and the GLA, a revised application was submitted during the year for a 717 unit build-to-rent scheme, with ancillary retail and leisure provision. A decision is pending, but the site continues to benefit from its existing enhanced retail warehouse planning consent.

Property profile		Debt profile
Number of properties	1	Day one debt	£18,070,000
Property value (£)	£28,815,000	Debt outstanding	£20,000,000
Property value (£/sq. ft.)	£310.23	Original term	4.3 years
Property area sq. ft.	92,882	Maturity	January 2020
Number of tenants	n/a	Current LTV	69.4%
Weighted lease length	n/a	Current ICR	103%
		Loan exposure per sq. ft.	£215.33

Northlands

Originally a £7.20 million senior loan facility used to refinance existing senior debt secured on a mixed use portfolio of high street retail and tenanted residential units located predominantly in London and the South East. The borrower is Northlands Holdings and group affiliates on a cross-collateralised basis.

The security portfolio is highly diverse across its property and tenant base, principally being let to retail and residential occupiers. The borrower completed a small disposal from the portfolio in July 2014, resulting in a £0.72 million part prepayment of the loan, triggering prepayment and exit fees. During the year, the sponsor acquired a property adjoining one of its existing assets, and the Group advanced a further £1.10 million during the year in support of this acquisition, together with further management initiatives including capital expenditure on the assets.

On a like-for-like basis, portfolio net income is up approximately 29% since origination, and given the exceptional income and valuation performance, the Group agreed and funded an additional £0.92 million advance post year-end, accompanied by an improvement to the income protection period, which allows this strongly performing loan to be retained for an extended period.

Property profile		Debt profile
Number of properties	16	Day one debt	£7,200,000
Property value (£)	£16,067,950	Debt outstanding	£7,577,250
Property value (£/sq. ft.)	£125.89	Original term	5.0 years
Property area sq. ft.	127,638	Original maturity	November 2018
Number of tenants	124	Current LTV	47.2%
Weighted lease length	2.39 years	Current ICR	143%
		Loan exposure per sq. ft.	£59.37

Hulbert

A £6.57 million loan to refinance a well let portfolio of industrial units predominantly located in Dudley in the West Midlands, with 80% by value being the 270,000 square foot Grazebrook Industrial Estate. The borrower, Hulbert Properties Ltd, is a West Midlands based private property company.

Performance has been generally stable during the year, and both LTV and ICR remain robust. With the loan maturing in December 2018, the sponsor has recently informed us that it plans to repay the facility most likely during the third quarter, via a sale of part of the portfolio and a refinance of the balance.

Property profile		Debt profile
Number of properties	3	Day one debt	£6,565,000
Property value (£)	£13,040,000	Debt outstanding	£6,565,000
Property value (£/sq. ft.)	£45.52	Original term	5.0 years
Property area sq. ft.	286,454	Maturity	December 2018
Number of tenants	12	Current LTV	50.4%
Weighted lease length	2.56 years	Current ICR	192%
		Loan exposure per sq. ft.	£22.92

Halcyon

A £8.60 million senior loan facility utilised to refinance a portfolio of freehold ground rents.

The Halcyon security comprises a diversified portfolio of 21 freehold ground rent investments with a weighted unexpired lease term of 87 years, of which 72% are industrial with leasehold rents receivable based on 22-25% of market rent, with the balance being leisure uses at ground rents of 50%. There is the possibility that the latter will see the level of gearing reduced during the coming year, which will reduce the level of portfolio income and thus value. As a result any such reduction in ground rent would be accompanied by a partial repayment of debt.

With the loan being secured by a portfolio of defensive freehold ground rent investments, the security position is considered strong despite an ICR below the average of the Group's investments.

Property profile		Debt profile
Number of properties	21	Day one debt	£8,600,000
Property value (£)	£13,591,000	Debt outstanding	£8,600,000
Property value (£/sq. ft.)	£36.64	Original term	5.0 years
Property area sq. ft.	370,972	Maturity	December 2018
Number of tenants	4	Current LTV	63.4%
Weighted lease length	85.96 years	Current ICR	113%
		Loan exposure per sq. ft.	£21.86

Carrara

A £1.30 million senior loan facility was used to refinance an individual ground rent investment.

The Carrara security comprises a single virtual freehold ground rent investment located in Leeds with an unexpired lease term of 84 years, subject to a ground rent of 25% of market rent. The property is a modern office building on an established business park accessed from the M1 motorway, which is fully let to a strong covenant. Discussions are ongoing with the occupational tenant for a prospective lease renewal, in the whole or part of the asset, in the coming period.

Given the Group's senior position in the capital structure against the superior freehold interest in the asset, the security position remains very strong.

Property profile		Debt profile
Number of properties	1	Day one debt	£1,300,000
Property value (£)	£2,000,000	Debt outstanding	£1,300,000
Property value (£/sq. ft.)	£81.73	Original term	5.0 years
Property area sq. ft.	24,470	Maturity	December 2018
Number of tenants	1	Current LTV	65.0%
Weighted lease length	82.94 years	Current ICR	113%
		Loan exposure per sq. ft.	£53.13

Ramada

A £7.98 million loan to Quay Hotels Limited, which has a maturity date of April 2019.

The investment is secured by a first and only charge over the Ramada Encore hotel in Gateshead, a modern 200 bedroom hotel which was constructed in 2012. The secured property, which is operated by Wyndham Hotels Group, is situated in a highly visible location in Gateshead Quays, adjacent to the Baltic Centre for Contemporary Art and within a short walk of the Sage Gateshead concert venue and the Millennium footbridge which links Gateshead and Newcastle quayside areas.

As highlighted in our previous report, whilst remaining profitable with occupancy of approximately 70% for the year, trading has softened recently given the demand and supply dynamics in the area. As such, following a request from the sponsor the Group has amended one of the loan covenants to provide some headroom against the potential of further negative effects on trade. In return the Group will receive an increase to its income protection period.

The LTV position of the loan, at 66%, and ICR (161%) remain robust, and with the recent announcement of a new £200 million arena, concert hall and conference centre to be built in Gateshead, very close to the subject property, the prospects of longer term growth have improved.

Property profile		Debt profile
Number of properties	1	Day one debt	£7,982,500
Property value (£)	£12,100,000	Debt outstanding	£7,982,500
Property value (£/bed)	£60,500	Original term	5.0 years
Bedrooms	200	Maturity	April 2019
		Current LTV	66.0%
		Current ICR	161%
		Loan exposure per bed	£39,912.50

Commercial Regional Space

A £22.40 million loan to Commercial Regional Space Limited and affiliates made on 16 March 2016, and secured by first charges against two multi-let industrial estates located in Lancashire comprising 1.25 million sq. ft. of accommodation and providing a highly diversified income stream from lettings to over 160 tenants.

Performance has remained robust during the year, with income stable. A revaluation concluded during the year showed a significant increase in value, with a resultant reduction in LTV from 64.0% to 50.9%. The loan is considered very well secured.

Property profile		Debt profile
Number of properties	2	Day one debt	£22,400,000
Property value (£)	£44,000,000	Debt outstanding	£22,400,000
Property value (£/sq. ft.)	£35.23	Original term	3 years
Property area sq. ft.	1,247,090	Maturity	April 2019
Number of tenants	167	Current LTV	50.9%
Weighted lease length	1.66 years	Current ICR	359%
		Loan exposure per sq. ft.	£17.93

BMO

On 31 January 2017, the Company advanced a new £16.00 million loan to clients of BMO Real Estate Partners, with an initial LTV ratio of 55.4% and a maturity date in April 2019. The loan was originally secured by first charges against a portfolio of 17 properties located across the UK, principally in the high street retail and industrial sectors, and provides a diversified income stream from lettings to 57 tenants.

During the year, one of the portfolio properties was sold resulting in a partial prepayment of the loan of £0.21 million. Income generally has been stable in the year; however values have increased modestly with a resultant reduction in LTV to 51.1%.

Property profile		Debt profile
Number of properties	16	Day one debt	£16,000,000
Property value (£)	£30,930,000	Debt outstanding	£15,793,727
Property value (£/bed)	£96.57	Original term	2 years
Property area sq. ft.	320,281	Maturity	April 2019
Number of tenants	57	Current LTV	51.1%
Weighted lease length	8.92 years	Current ICR	405%
		Loan exposure per sq. ft.	£49.31

Quattro

On 17 October 2017, the Group advanced a new £9.00 million loan to a private property company, secured by three mixed use assets in and around the London Borough of Kingston. The Group initially financed a £6 million participation in the loan, acquiring the minority £3 million position from ICG following an equity issuance under the 2017 Placing Programme.

The loan carries an initial LTV ratio of 83.7%, at the top end of the Group's investment parameters. However it offers significant income and value growth opportunities. Further, the sponsor's business plan envisages sale of one of the security assets in the short term. Post year-end, contracts were exchanged for such sale at a price in line with market value, and on completion, it is anticipated the net sale proceeds will be applied in repayment of the loan, reducing the LTV position.

The loan is structured with a profit participation component, allowing the Group to benefit from any future value growth in the portfolio whilst retaining the security of a senior first mortgage position. There has been no value growth to date.

Property profile		Debt profile
Number of properties	3	Day one debt	£9,000,000
Property value (£)	£10,750,000	Debt outstanding	£9,000,000
Property value (£/bed)	£282.61	Original term	3.2 years
Property area sq. ft.	38,038	Maturity	January 2021
Number of tenants	8	Current LTV	83.7%
Weighted lease length	12 years	Current ICR	100%
		Loan exposure per sq. ft.	£236.61

ICG-Longbow

23 April 2018

Investment Policy

Investment Objective

Investment Policy

The Group's investment policy is to invest in:

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

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

Investment Restrictions

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

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

· are originated by the Investment Adviser or its Associates;

· are denominated in Pounds Sterling;

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

· benefit from loan covenants structured to ensure that a material decrease in the income or value from the underlying

property will trigger an event of default or cash-flow lock-up;

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

· have an LTV no higher than 85% at the time of origination or acquisition provided however that the aggregate value

of the loans with an LTV of greater than 80% shall be no greater than 20% of the Group's gross asset value; and

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

At the time any investment is made:

· the maximum percentage of the Group's gross assets allocated to a single loan shall be 10%, provided that the limit

may be increased to 15% in respect of loans benefiting from Investment Grade Tenants and 20% in respect of loans

benefiting from a diversified tenant profile;

· the maximum percentage of the Group's gross assets allocated to a single borrower (together with its parents,

subsidiaries and/or affiliates) shall be 20%;

· the maximum exposure of the gross rents receivable on all loan investments to a single underlying tenant shall be 10%,

except in the case of the UK Government, when the maximum exposure shall be 25%;

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

gross assets;

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

· the maximum exposure to property which is not a mainstream property sector, an alternative property sector or the

mixed property sector shall be 5% of the Group's gross assets;

· the maximum exposure to property within a single UK economic region shall be 30% of the Group's gross assets,

provided that the maximum exposure to Greater London property shall be 60% of the Group's gross assets; and

· the value of the Group's security which is not freehold tenure or long-leasehold tenure with an unexpired term of more

than 50 years shall not be greater than 5% of the total value of the Group's security.

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

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

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

· the relevant ICG Private Fund's investment parameters, investment policy and/or investment objective, as the case may

be, require that at least 90% of that ICG Private Fund's capital is invested in Pounds Sterling denominated loans secured

by commercial real estate and at least 60% in loans secured by first ranking security over Commercial Property;

· the maximum percentage of the Group's gross assets committed to a single ICG Private Fund shall be 20%, where gross

assets are calculated on the assumption that the Group's commitment to such fund is fully utilised; and

· the maximum percentage of the Group's gross assets committed to all ICG Private Funds shall be 30%, where gross

assets are calculated on the assumption that the Group's commitment to such funds is fully utilised.

Gearing

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

Cash Management Policy

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

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

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

Board of Directors

Jack Perry CBE - Chairman and Non-Executive Independent Director

Jack Perry pursues a career as a portfolio non-executive director. In addition to a number of current public and charitable appointments, he is chairman of European Assets Trust NV and a non-executive director of Witan Investment Trust plc. He was Chief Executive Officer of Scottish Enterprise and prior to this was a managing partner and regional industry leader for Ernst & Young LLP. Jack was also chairman of CBI Scotland. He has served on the Boards of FTSE 250 and other public and private companies and is a member of the Institute of Chartered Accountants of Scotland.

Committee Membership: Nomination Committee, Management Engagement Committee

Stuart Beevor - Non-Executive Independent Director

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

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

Patrick Firth - Non-Executive Independent Director

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

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

Mark Huntley - Non-Executive Director

Mark has over 40 years' experience in the fund and fiduciary sector and much of his involvement in the fund and private asset sectors has involved real estate and private equity investments. He holds a number of board appointments on listed and private funds and property advisory boards including Heritage Diversified Investments PCC Limited, Stirling Mortimer No.8 Fund UK Land Limited, Stirling Mortimer No.9 Fund UK Land 2 Limited. He has been actively involved in real estate investment in the UK and internationally. He also has experience of a number of private and listed debt structures. Mark is an associate of the Institute of Financial Services (Trustee Diploma). He is a consultant to the Administrator.

Committee Membership: Investment Risk Committee, Nomination Committee

Paul Meader - Non-Executive Independent Director

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

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

Report of the Directors

The Directors hereby submit the Annual Report and Consolidated Financial Statements for the Group for the year ended 31 January 2018. This Report of the Directors should be read together with the Corporate Governance Report.

General Information

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

Principal Activities

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

Business Review

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

Listing Requirements

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

Results and Dividends

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

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

Dividend	Quarter Ended	Date of Declaration	Payment Date	Amount per Ordinary Share (pence)
Interim dividend	31 January 2017	27 April 2017	2 June 2017	1.50
Special dividend	31 January 2017	27 April 2017	2 June 2017	2.25
Interim dividend	30 April 2017	30 June 2017	4 August 2017	1.50
Interim dividend	31 July 2017	22 September 2017	27 October 2017	1.50
Interim dividend	31 October 2017	8 December 2017	19 January 2018	1.50
Interim dividend	31 January 2018	13 March 2018	20 April 2018	1.50

Share Capital

At incorporation on 29 November 2012, the Company issued one founding ordinary share of no par value. On 5 February 2013 the Company issued a further 104,619,249 ordinary shares of no par value at £1 per ordinary share in an IPO. On 24 April 2014, the Company issued 3.6 million new ordinary shares at 102 pence per share, a premium of 2 pence per share above IPO issue price. On 26 October 2017, the Company issued 8.82 million new ordinary shares at 102 pence per share, a premium of 2 pence per share above IPO issue price. Following the year end, on 27 March 2018, the Company issued 4.26 million new Ordinary shares pursuant to the remaining authority to allot a further 31.2 million shares under the 2017 Placing Programme.

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. At the EGM held on 1 March 2017, the proposed resolution that Company have the power to allot up to an additional 40,000,000 shares was duly passed without amendment.

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

Shareholdings of the Directors

The Directors with beneficial interests in the shares of the Company as at 31 January 2018 and 2017 are detailed below:

Director	Ordinary Shares of £1 each held 31 January 2018	% holding at 31 January 2018	Ordinary Shares of £1 each held 31 January 2017	% holding at 31 January 2017
Jack Perry	50,000	0.04	20,000	0.02
Stuart Beevor	20,000	0.02	20,000	0.02
Patrick Firth	10,000	0.01	10,000	0.01
Mark Huntley	10,000	0.01	10,000	0.01
Paul Meader	25,000	0.02	10,000	0.01

Directors' beneficial interests in the shares of the Company as at 28 March 2018, being the most current information available, are as follows:

Director	Ordinary Shares of £1 each held 28 March 2018	% holding at 28 March 2018
Jack Perry	50,000	0.04
Stuart Beevor	30,000	0.02
Patrick Firth	10,000	0.01
Mark Huntley	10,000	0.01
Paul Meader	25,000	0.02

Directors' Authority to Buy Back Shares

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

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

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

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

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

The Company did not purchase any shares for treasury or cancellation during the year or to date.

Directors' and Officers' Liability Insurance

The Group maintains insurance in respect of directors' and officers' liability in relation to their acts on behalf of the Group. Insurance is in place, having been renewed on 30 December 2017.

Substantial Shareholdings

As at 31 January 2018, the Company had been notified, in accordance with Chapter 5 of the Disclosure and Transparency Rules, of the following substantial voting rights as shareholders of the Company.

Shareholder	Shareholding	% holding
Close Brothers Asset Management	20,600,281	17.60
TDC Pensionskasse	10,653,156	9.10
Premier Asset Management	10,500,000	8.97
Intermediate Capital Group	10,000,000	8.54
Brooks Macdonald	9,982,065	8.53
Sompo Canopius	7,094,530	6.06
Kleinwort Hambros	6,517,810	5.57

In addition, the Company also provides the same information as at 28 March 2018, being the most current information available.

Shareholder	Shareholding	% holding
Close Brothers Asset Management	21,107,781	17.40
Brooks Macdonald	11,886,384	9.80
TDC Pensionskasse	10,653,156	8.78
Premier Asset Management	10,500,000	8.66
Intermediate Capital Group	10,000,000	8.24
Sompo Canopius	7,094,530	5.85
Kleinwort Hambros	6,641,615	5.48

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

Independent External Auditor

Deloitte LLP has been the Company's external auditor since the Company's incorporation. The Audit and Operational Risk Committee reviews the appointment of the external auditor, its effectiveness and its relationship with the Company, which includes monitoring the use of the external auditor for non-audit services and the balance of audit and non-audit fees paid, as included in note 15. Following a review of the independence and effectiveness of the external auditor, a resolution will be proposed at the 2018 Annual General Meeting to re-appoint Deloitte LLP. Each Director believes that there is no relevant information of which the external auditor is unaware. Each had taken all steps necessary, as a Director, to be aware of any relevant audit information and to establish that Deloitte LLP is made aware of any pertinent information. This confirmation is given and should be interpreted in accordance with the provisions of Section 249 of the Companies Law. Further information on the work of the external auditor is set out in the Report of the Audit and Operational Risk Committee.

Articles of Incorporation

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

NMPIs

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

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

AIFMD

The Company is an internally managed non-EU domiciled alternative investment fund. Any offer of shares to prospective investors within selected member states of the European Economic Area (including 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.

Change of Control

There are no agreements that the Company considers significant and to which the Company is party that would take effect, alter or terminate upon change of control of the Company following a takeover bid.

Going Concern

The Directors, at the time of approving the Financial Statements, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and do not consider there to be any threat to the going concern status of the Group. The Group was substantially invested at 31 January 2018, with loans advanced at amortised cost representing 95.21% of the total equity attributable to the owners of the Company. The Board expects that the loan portfolio will generate enough cash flows to pay on-going expenses and generate returns to shareholders for the foreseeable future. The Directors have considered the cash position, maturity profile and performances of current investments made by the Group, and its ability to reinvest maturing loans and have concluded that it is appropriate to adopt the going concern basis of accounting in preparing the Financial Statements.

The first continuation vote was held on 1 March 2017 and passed by the shareholders. The requirement for subsequent annual continuation votes has been amended so that any follow-on continuation resolutions shall be held every five years at which the Directors shall propose an ordinary resolution that the Company continues its business as a closed-ended collective investment scheme.

Viability Statement

As required by the AIC Code, the Directors have assessed the prospects of the Group over a period longer than 12 months required by the going concern provision. The Board has conducted this review for the period to January 2021, which is deemed appropriate given:

(i) the maturity profile of the Group's current loan portfolio from November 2018 to January 2021;

(ii) the increasing likelihood of early repayment as prepayment protection terms expire;

(iii) the investment objectives of the Group and the revised investment policy approved by shareholders at the EGM 1 March 2017; and

(iv) the continuation vote that was passed at the EGM held on 1 March 2017.

The Group's capital is substantially invested, and can be reinvested under the new investment policy as loans repay or as new capital is raised. Based on past performance the returns generated from each investment should be stable and predictable in the medium term.

The Investment Adviser has prepared and the Board has reviewed the Group's revenue, cashflow and working capital projections over the next three years, and considered the impact of some of the principal risks of the Group. The Investment Adviser and the Board evaluated the resilience of the Group to the occurrence of these risks in severe yet plausible scenarios. This evaluation has applied through the following scenarios to the portfolio of loans prevailing at 31 January 2018 and known subsequent changes;

· each loan repays at the expiry of its respective income protection provision or, where this has passed six months before full term. Capital is reinvested within the target investment policy after three months (the "Base Case");

· the UK economy enters a period of severe recession causing a 20% reduction in interest collection as a result of a combination of tenant defaults and falling rents which in turn cause a sharp correction to property values similar to 2008. Underperforming assets are not realised and capital is redeployed after six months of loan repayment (the "Stress Case").

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

The Base Case scenario has been further stressed to consider the impact of falling property yields and increasing competition amongst lenders which cause interest rates on new investments to fall to 5%.

Having conducted a robust analysis of the above scenarios and stresses applied to each, the Directors remain satisfied that the Group remains viable.

Financial Risk Management Policies and Objectives

Financial Risk Management Policies and Objectives are disclosed in Note 11.

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.

Annual General Meeting

The AGM of the Company will be held at 2.00 pm BST on 23 May 2018 at Lefebvre Place, Lefebvre Street, St Peter Port, Guernsey. Details of the resolutions to be proposed at the AGM, together with explanations, will appear in the Notice of Meeting to be distributed to shareholders together with this Annual Report.

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

23 April 2018

Directors' Responsibilities Statement

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

The Companies Law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors are required to prepare the Consolidated Financial Statements in accordance with IFRS. Under the Companies Law, the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing these Financial Statements, the Directors are required to:

· select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and

Errors and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

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

understandable information;

· provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to

understand the impact of particular transactions, other events and conditions on the Group's financial position and

financial performance;

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

Statements; and

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

continue in business.

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

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

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

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

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

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

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

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

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

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

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

By order of the Board

Jack Perry

Patrick Firth

Chairman

Director

23 April 2018

Corporate Governance Report

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

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

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

The Board monitors developments in corporate governance to ensure the Board remains aligned with best practice especially with respect to the increased focus on diversity. The Board acknowledges the importance of diversity, including gender, for the effective functioning of the Board and commits to supporting diversity in the boardroom. It is the Board's ongoing aspiration to have a well diversified representation. The Board also values diversity of business skills and experience because Directors with diverse skills sets, capabilities and experience gained from different geographical backgrounds enhance the Board by bringing a wide range of perspectives to the Company.

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

Throughout the year ended 31 January 2018, the Company has complied with the recommendations of the AIC Code and the relevant provisions of Section 1 of the Corporate Governance Code, except as set out below.

The Corporate Governance Code includes provisions relating to:

· the role of the chief executive;

· executive directors' remuneration; and

· the need for an internal audit function.

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

The Company does not have a chief executive or any executive directors. The Company has not established a separate remuneration committee as the Company has no executive officers; there is no Chief Executive position and no Senior Independent Director. As an investment company the Company has no employees, all Directors are non-executive and independent of the Investment Adviser and therefore the Directors consider the Company has no requirement for a Chief Executive or Senior Independent Director and the Board is satisfied that any relevant issues can be properly considered by the Board. The absence of an internal audit function is discussed in the Report of the Audit and Operational Risk Committee.

As an investment company, the Group's activities have no direct impact on the environment. However the Board believes that it is in the shareholders' interest to consider environmental, social and governance factors when selecting and retaining investments. The Investment Adviser is a signatory to the UN Principles for Responsible Investment and these principles are applied in practice, taking a proactive approach to considering ESG factors in all investment decisions. The Investment Adviser has continued to develop its ESG policies and procedures, which included completing the Global Real Estate Sustainability Benchmark survey of real estate debt investors for the second time, with satisfactory results against its peer group as discussed further in the Chairman's Statement.

The Board

The Company is led and controlled by a Board of Directors, which is collectively responsible for the long-term success of the Company. It does so by acting in the interests of the Company, creating and preserving value and has as its foremost principle acting in the interests of shareholders. The Company believes that the composition of the Board is a fundamental driver of its success as the Board must provide strong and effective leadership of the Company. The current Board was selected, as their biographies illustrate, to bring a breadth of knowledge, skills and business experience to the Company. The Directors details are listed in the Board of Directors section which set out their range of investment, financial and business skills and experience represented.

The Chairman of the Board must be independent and is appointed in accordance with the Company's Articles of Incorporation. Mr Perry is considered to be independent because he:

• has no current or historical employment with the Investment Adviser;

• has no current directorships in any other investment funds managed by the Investment Adviser;

• is not an executive of a self-managed company or an ex-employee who has left the executive team of a self-managed company within the last five years.

The Board meets at least four times a year and, in addition, there is regular contact between the Board, the Investment Adviser and the Administrator. Further, the Board requires to be supplied in a timely manner with information by the Investment Adviser, the Company Secretary and other advisers in a form and of a quality appropriate to enable it to discharge its duties.

Board Tenure and Re-election

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

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

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

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

Directors' Remuneration

The level of remuneration of the Non-executive Directors reflects the time commitment and responsibilities of their roles. Having reviewed the Directors remuneration for similar alternative asset class investment companies, after benchmarking these against the current fees and considering the additional tasks to be undertaken in connection with the company as its market capitalisation increases, and in recognition of the increased level of regulatory obligations on the Company, the Board concluded that the Directors' fees should be increased with effect from 1 July 2017. The Directors are entitled to annual remuneration of £35,000 (31 January 2017: £27,500), with Patrick Firth receiving an additional annual fee of £5,000 (31 January 2017: £5,000) for acting as chairman of the Audit and Operational Risk Committee. It was also agreed by the non-executive Directors in the absence of the Chairman that he should receive annual remuneration of £50,000 (31 January 2017: £40,000 per annum).

During the year ended 31 January 2018 and the year ended 31 January 2017, the Directors' remuneration was as follows:

	1 February 2017 to	1 February 2016 to
	31 January 2018	31 January 2017
Director	£	£
Jack Perry	50,833	40,000
Stuart Beevor	36,875	27,500
Patrick Firth	41,875	32,500
Mark Huntley	36,875	27,500
Paul Meader	36,875	27,500

The Company Directors' fees for the year amounted to £203,333 (31 January 2017: £155,000) with outstanding fees of £48,750 (31 January 2017: £38,750) due to the Directors at 31 January 2018 (see Note 8). As noted above, the Directors' annual remuneration increased with effect from 1 July 2017. During the year, each Director received an additional, one-off fee of £5,000 for extra services they have performed in connection with the 2017 Placing Programme.

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

Duties and Responsibilities

The Board has overall responsibility for maximising the Company's success by directing and supervising the affairs of the business and meeting the appropriate interests of shareholders and relevant stakeholders, while enhancing the value of the Company and also ensuring the protection of investors. A summary of the Board's responsibilities is as follows:

• statutory obligations and public disclosure;

• strategic matters and financial reporting;

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

• other matters having a material effect on the Company.

The Board is responsible to shareholders for the overall management of the Company. The Board has adopted a Schedule of Matters which sets out the particular duties of the Board. Such reserved powers include decisions relating to the determination of investment policy and approval of changes in strategy, capital structure, statutory obligations and public disclosure, and entering into any material contracts by 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 on an on-going basis.

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 formally met four times during the year and the 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. 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. In addition to their meeting commitments, the Non-executive Directors also make themselves available to management whenever required and there is regular contact outside the Board meeting schedule.

Attendance is further set out below:

Director	Scheduled Board Meetings (max 4)	Ad-hoc Board Meetings (max 3)	Audit and Operational Risk Committee Meetings (max 3)	Investment Risk Committee (max 2)	Nomination Committee Meetings (max 1)	Management Engagement Committee Meetings (max 1)
Jack Perry⁽¹⁾	4	3	2	n/a	1	1
Stuart Beevor⁽²⁾	4	2	3	2	1	1
Patrick Firth	4	2	3	n/a	1	1
Mark Huntley	4	2	n/a	2	1	n/a
Paul Meader	4	3	3	2	1	-

⁽¹⁾Mr Perry stepped down from his duties on the Audit and Operational Risk Committee on 21 September 2017 at which point two Audit and Operational Risk Committee meetings had already taken place with one remaining to be held.

^{(2 )}Mr Beevor stepped down from his duties on the Management Engagement Committee on 21 September 2017 at which point one Management Engagement Committee meeting had already taken place. No further Management Engagement Committee meetings were held during the year.

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

Committees of the Board

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

Each committee of the Board has written terms of reference, approved by the Board, summarising its objectives, remit and powers, which are available on the Company's website (www.lbow.co.uk) and are reviewed on an annual basis. All committee members are provided with an appropriate induction on joining their respective committees, as well as on-going access to training. Minutes of all meetings of the committees are made available to all Directors and feedback from each of the committees is provided to the Board by the respective committee Chairmen at the next Board meeting. The Chairman of each committee attends the AGM to answer any questions on their committee's activities.

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 management whenever necessary, and have access to the services of the Company Secretary.

Audit and Operational Risk Committee

The Audit and Operational Risk Committee is chaired by Mr Firth and also comprises Mr Beevor and Mr Meader, all of whom held office throughout the year. Mr Perry resigned from the Audit and Operational Risk Committee on 21 September 2017. Other Directors have a standing invitation to attend meetings. However, their attendance at these meetings is as an observer only. The Chairman of the Audit and Operational Risk Committee, the Investment Adviser and the external auditor, Deloitte LLP, have held discussions regarding the audit approach and identified risks. The external auditors attend Audit and Operational Risk Committee meetings and a private meeting is routinely held with the external auditors to afford them the opportunity of discussions without the presence of management. The Audit and Operational Risk Committee activities are contained in the Report of the Audit and Operational Risk Committee.

Investment Risk Committee

The Investment Risk Committee was established on 21 September 2017 and is chaired by Mr Meader and also comprises Mr Beevor, Mr Huntley, Mr Christie and Mr Mortimer. Mr Christie is a representative of Luxco and the Administrator and Mr Mortimer is a representative of the Investment Adviser. All members held office throughout the period from 21 September 2017. The Investment Risk Committee will meet not less than twice a year pursuant to its terms of reference which are available on the Company's website.

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

Management Engagement Committee

The Management Engagement Committee is chaired by Mr Perry and also comprises Mr Firth and Mr Meader, all of whom held office throughout the year. Mr Beevor resigned from the Management Engagement Committee on 21 September 2017. The Management Engagement Committee will meet not less than once a year pursuant to its terms of reference which are available on the Company's website.

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

Board Performance Evaluation

In accordance with Principle 7 of the AIC Code which requires a formal and rigorous annual evaluation of its performance, the Board formally reviews its performance annually through an internal process.

Internal evaluation of the Board, the Audit and Operational Risk Committee, the Nomination Committee, the Management Engagement Committee and individual Directors took the form of self-appraisal questionnaires and discussion to determine effectiveness and performance as well as the Directors' continued independence. 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.

New Directors will receive an induction on joining the Board. Directors regularly meet with the senior management employed by the Investment Adviser both formally and informally to ensure that the Board remains regularly updated on all issues. All members of the Board are members of professional bodies and serve on other Boards, which ensures they are kept abreast of the latest technical developments in their areas of expertise. The Board arranges for presentations from the Investment Adviser, the Company's brokers and other advisers on matters relevant to the Company's business. The Board assesses the training needs of Directors on an annual basis.

Nomination Committee

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

Pursuant to its terms of reference, 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 Board believes that, as a whole, it comprises an appropriate balance of skills, experience and knowledge. The Board also believes that diversity of experience and approach, including gender diversity, amongst Board members is of great importance and it is the Company's policy to give careful consideration to issues of Board balance and diversity when making new appointments.

The Board is satisfied with the current composition and functioning of its members. When appointing Board members, its priority is based on merit, but will be influenced by the strong desire to maintain board diversity, including gender.

Internal Control and Financial Reporting

The Directors acknowledge that they are responsible for establishing and maintaining the Group and 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 Group and Company to the Administrator and Investment

Adviser, however, it remains accountable for all functions it delegates;

• the Board clearly defines the duties and responsibilities of the Company's agents and advisers and appointments

are made by the Board after due and careful consideration. The Board monitors the on-going performance of such

agents and advisers and will continue to do so through the Management Engagement Committee;

• the Board monitors the actions of the Investment Adviser at regular Board meetings and is also given frequent

updates on developments arising from the operations and strategic direction of the underlying borrowers; and

• the Administrator provides administration and company secretarial services to the Company. The Administrator

maintains a system of internal control on which it reports to the Board.

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

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

The systems of control referred to above are designed to ensure effectiveness and efficient operation, internal control and compliance with laws and regulations. In establishing the systems of internal control, regard is paid to the materiality of relevant risks, the likelihood of costs being incurred and costs of control. It follows, therefore, that the systems of internal control can only provide reasonable but not absolute assurance against the risk of material misstatement or loss.

The Company has delegated the provision of services to external service providers whose work is overseen by the Management Engagement Committee at its regular scheduled meetings. Each year a detailed review of performance pursuant to their terms of engagement is undertaken by the Management Engagement Committee. An on-site review of the Investment Adviser and an assessment of the Luxembourg Administrator were undertaken in June 2017. The conclusions of these reviews were highly satisfactory providing assurance to the Board. In addition, the Company maintains a website which contains comprehensive information, including regulatory announcements, share price information, financial reports, investment objectives and strategy, investor contacts and information on the Board.

Investment Advisory Agreement

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

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

Relations with shareholders

The Board welcomes shareholders' views and places great importance on communication with its shareholders. The Company's AGM provides a forum for shareholders to meet and discuss issues with the Directors of the Company. The Chairman and other Members of the Board have made, and will continue to make themselves available to meet shareholders at other times.

The Company reports formally to shareholders in a number of ways; regulatory news releases through the London Stock Exchange's regulatory News Service, announcements are issued in response to events or routine reporting obligations; an Interim Report is published in September each year, outlining performance to 31 July, which is made available on the Company's website; the Annual Report is published in April each year, for the year ended 31 January, which is made available on the Company's website. In addition, the Company's website (http://www.lbow.co.uk) contains comprehensive information, including company notifications, share information, financial reports, investment objectives and policy, investor contacts and information on the Board and corporate governance. The Board receives comprehensive shareholder reports from the Company's Registrar at all quarterly Board meetings and regularly monitors the views of shareholders and the shareholder profile of the Company.

Whistleblowing

The Board has considered the AIC Code recommendations in respect of arrangements by which staff of the Investment Adviser or Administrator may, in confidence, raise concerns within their respective organisations about possible improprieties in matters of financial reporting or other matters. It has concluded that adequate arrangements are in place for the proportionate and independent investigation of such matters and, where necessary, for appropriate follow-up action to be taken within their organisation.

Principal risks and uncertainties

Each Director is fully aware of the risks inherent in the Company's business and understands the importance of identifying, evaluating and monitoring these risks. The Board has adopted procedures and controls that enable it to carry out a robust assessment of the risks facing the Company, manage these risks within acceptable limits and to meet all of its legal and regulatory obligations. The Board is committed to upholding and maintaining our zero tolerance towards the criminal facilitation of tax evasion.

The Board thoroughly considers the process for identifying, evaluating and managing any significant risks faced by the Company on an on-going basis and these risks are reported and discussed at Board meetings. It 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 upheld.

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 Company's principal risk factors are fully discussed in the Company's 2017 Prospectus, available on the Company's website (www.lbow.co.uk) and should be reviewed by shareholders.

The Directors have identified the following as the key risks faced by the Company:

Risks relating to the loan portfolio performance and recovery:

Description	Potential Impact	Mitigation
Real estate loan non-performance	Real estate loans made by the Group may, after funding, become non-performing for a wide variety of reasons, including non-payment of principal or interest, as well as covenant violations by the borrower in respect of the underlying loan documents.	The Group's current investment parameters require an equity buffer of at least 15% (and 25% by average) of the property security's value to shield against any reduction in capital values. The actual equity buffer at 31 January 2018 was 42%. All loans include covenants which give the lender the opportunity to intervene and take protective action at an early stage if the value of the underlying property or the income profile reduces materially. In order to identify any such deterioration, loans are monitored on a quarterly basis for signs of underperformance or distress.
Property valuations	Valuations of property and property-related assets are inherently subjective due to the individual nature of each property. As a result, valuations are subject to uncertainty and, in determining market value, valuers are required to make certain assumptions and such assumptions may prove to be inaccurate. This is particularly so in periods of volatility or when there are limited real estate transactional data against which property valuation can be benchmarked.	All investments are monitored on a quarterly basis for early warning signs of underperformance or distress. The maturity of the loans and the Investment Adviser's direct property market experience, including its ongoing interactions with the market in respect of other funds it manages, should also help it to identify any potential inaccuracies in the independent third party valuations, or adverse trends in the market as a whole.
Inability to roll-over loans and reinvest at levels consistent with the investment objective	Following early repayment of a facility, in whole or in part, the Group may not be able to reinvest the surplus cash at an interest rate which is accretive to investor returns. The identified pipeline of projects from the Investment Adviser becomes unavailable or is not offered for another reason.	Each of the Group's loans benefit from an income protection or minimum earnings clause which will act as a deterrent to early repayments, but which also serves to provide a buffer to enable the Group to redeploy the proceeds of an early repayment at prevailing market rates in a manner accretive to the Group. The Company's shareholders approved an amendment to its investment restrictions in March 2017. The amended investment policy and restrictions have been designed to enable the Group to invest with the necessary returns in a continuing benign interest rate environment. The Investment Adviser has a track record of investing in fund compliant senior secured loans at the target rates of return. The Board monitors on a regular basis the investment pipeline and timetable for investment completion, and holds a monthly call with the Investment Adviser to monitor the long-range pipeline, progress in closing transactions, and pricing of each transaction.
Market conditions	The performance of the Group and its underlying investments may be affected by other economic conditions such as changes to equity risk premiums, corporate failure rates, changes in laws or regulations, national and international political circumstances etc. These risks are particularly acute given the potential volatility of the capital and credit markets, and the Investment Adviser may be unable to predict whether, or to what extent or for how long, such conditions may occur and affect the operation of the Group.	Whilst market conditions may have a significant impact on the share price of the Company, the impact on its investments and underlying performance will be less severe to the extent it does not impact the confidence of property investors or the occupational markets. The Group's investment strategy, based on diverse underlying income and thorough cashflow - based underwriting, and property due diligence will mitigate the risk of properties and/or locations becoming undesirable due to other market conditions during the term of the investments. The general economic backdrop is monitored by the Investment Adviser.

In the event of a repayment, the Company would endeavour to redeploy the capital received. However, if capital could not be redeployed under the Group's investment policy and investment restrictions in a manner which would, in the Directors' opinion, be beneficial to shareholders, then the Directors would consider a return of capital to shareholders in the most efficient manner possible.

Risks relating to Group structure:

Description

Potential Impact

Mitigation

Change in tax legislation and ensuring the corporate structure is fit for purpose

A change in tax legislation applicable to the Group or Company, resulting in increased tax liabilities for the Group or Company and a consequential reduction in yield or capital to investors. The risk of such change is heightened as the UK withdraws from Europe. The Group may also be impacted by the OECD's BEPS legislation. BEPS refers to the tax planning strategies of multinational corporations that exploit mismatches in national tax rules to shift artificial profits to low or no-tax locations, resulting in little or no overall corporate tax being paid. While the Investment Adviser does not believe the Company is an intended target of the OECD's BEPS measures, being neither a multinational company nor involved in artificial arrangements, it is currently unclear what the implications will be for the Group or the real estate sector. It is possible that the implementation of the BEPS actions in the UK or other jurisdictions through which the Group invests may have negative implications for the Group, including the potential for a reduction in the tax deductibility of debt interest.

The corporate structure of the Company is regularly reviewed and, where appropriate, external tax advice sought. ICG-Longbow continues to monitor developments in UK and European legislation. With respect to BEPS, the Group continues to monitor the situation but it is currently unclear what the implications will be for the Group or the real estate sector. The Investment Adviser is in constant contact with advisers and industry bodies to be able to monitor the potential impact of changes in regulation and legislation.

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

By order of the Board

Jack Perry	Patrick Firth
Chairman	Director
23 April 2018	23 April 2018

Report of the Audit and Operational Risk Committee

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

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

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

Responsibilities

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

• reviewing and monitoring the integrity of the Financial Statements of the Group and any formal announcements

relating to the Group's financial performance, reviewing significant financial reporting judgements contained in

them;

• reporting to the Board on the appropriateness of our accounting policies and practices including critical judgement

areas;

• reviewing any draft impairment reviews of the Group's investments prepared by the Investment Adviser, and

making a recommendation to the Board on any impairment in the value of the Group's investments;

• meeting regularly with the external auditor to review their proposed audit plan and the subsequent audit report

and assess the effectiveness of the audit process and the levels of fees paid in respect of both audit and non-audit

work;

• making recommendations to the Board in relation to the appointment, re-appointment or removal of the external

auditor and approving their remuneration and the terms of their engagement;

• monitoring and reviewing annually the auditor's independence, objectivity, expertise, resources, qualification and

non-audit work;

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

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

reliant;

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

and

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

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

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

Financial Reporting

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

• the quality and acceptability of accounting policies and practices;

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

governance reporting requirements;

• material areas in which significant judgements have been applied or there has been discussion with the external

auditor including going concern and viability statement;

• whether the Annual Report and Consolidated Financial Statements, taken as a whole, is fair, balanced and

understandable and provides the information necessary for shareholders to assess the Group's performance,

business model and strategy; and

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

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

Meetings

During the year ended 31 January 2018, the Audit and Operational Risk Committee met formally on three occasions. The matters discussed at those meetings include:

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

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

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

• review of the Group's risk matrix;

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

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

• assessment of the independence of the external auditor;

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

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

Primary Area of Judgement

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

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

The Board reviews the compliance of all loans with terms and covenants at each Board meeting. The Board also receives updates from the Investment Adviser regarding the trading performance for each borrower, the borrower's performance under the loans and on the general UK property market. As a result, the Board is able to determine the level, if any, of any impairment to the loans. In addition, in March 2016, a sub group of the Board conducted an on-site review of the Investment Advisers' processes and controls for monitoring investment performance and borrower compliance. The results of that review were deemed to be satisfactory.

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

The Audit and Operational Risk Committee reviewed detailed impairment analysis and current loan performance reports prepared by the Investment Adviser. These were discussed with the Investment Adviser at length. The Audit and Operational Risk Committee believes that whilst there is an on-going risk that the capital invested may not be recoverable or there may be delays in recovering the capital, it is satisfied with the security held and has concluded that none of the loans were impaired at the reporting date or the subsequent period to the date of this Annual Report.

The Audit and Operational Risk Committee also reviewed the income recognition and the treatment of arrangement and exit fees which were based on effective interest rate calculations prepared by the Investment Adviser and the Administrator. The main assumptions of the calculations were that none of the loans were impaired and that each loan would be repaid at the end of the agreed loan term. These were discussed at the Audit and Operational Risk Committee meeting to review the Annual Report, with the Investment Adviser, the Administrator and Auditor. The Audit and Operational Risk Committee is satisfied that the Group interest income has been recognised in line with the requirements of IFRS and as none of the loans were impaired the income recognised has not been adjusted.

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

Risk Management

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

Internal Audit

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

External Audit

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

The external auditor is required to rotate the audit partner every five years. The current Deloitte LLP lead audit partner, Mrs Nicola Paul, started her tenure in 2014 (in respect of the year ended 31 January 2015) and her current rotation will end with the audit of the 2019 Annual Report and Financial Statements. The Audit and Operational Risk Committee shall give advance notice of any retendering plans within the Annual Report. The Audit and Operational Risk Committee has considered the re-appointment of the auditor and decided not to put the provision of the external audit out to tender at this time.

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

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

The Committee reviews the scope and results of the audit, its cost effectiveness and the independence and objectivity of the auditor, with particular regard to the level of non-audit fees. Notwithstanding such services, the Audit and Operational Risk Committee considers Deloitte LLP to be independent of the Company and that the provision of such non-audit services is not a threat to the objectivity and independence of the conduct of the audit as appropriate safeguards are in place.

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

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

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

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

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

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

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

• arrangements for ensuring independence and objectivity; and

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

The Audit and Operational Risk Committee is satisfied with Deloitte LLP's effectiveness and independence as auditor having considered the degree of diligence and professional scepticism demonstrated by them. Having carried out the review described above and having satisfied itself that the auditor remains independent and effective, the Audit and Operational Risk Committee has recommended to the Board that Deloitte LLP be reappointed as auditor for the year ending 31 January 2019.

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

The Chairman of the Audit and Operational Risk Committee will be available at the Annual General Meeting to answer any questions about the work of the Committee.

On behalf of the Audit and Operational Risk Committee

Patrick Firth

Chairman of the Audit and Operational Risk Committee

23 April 2018

Independent Auditor's Report

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

Report on the audit of the financial statements

Opinion
In our opinion the financial statements: · give a true and fair view of the state of the Group's affairs as at 31 January 2018 and of the Group's profit for the year then ended; · have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; · have been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008. We have audited the financial statements of ICG-Longbow Senior Secured UK Property Debt Investments Limited (the 'parent company') and its subsidiary (the 'Group') which comprise: · the Consolidated Statement of Comprehensive Income; · the Consolidated Statement of Financial Position; · the Consolidated Statement of Changes in Equity; · the Consolidated Statement of Cash Flows; and · the related notes 1 to 16. The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council's (FRC's) Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited by the FRC's Ethical Standard were not provided to the Group. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit matters		The key audit matters that we identified in the current year were: · the assessment of any impairment in value of loans advanced; and · revenue recognition.
Materiality		The materiality we used for the Group financial statements was £2.36 million which was determined as 2% of the Net Asset Value. We also applied a lower materiality threshold of £0.35 million based on 5% of Investment Income.
Scoping		Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team.
Significant changes in our approach		There have been no significant changes in our approach from the prior year.
Conclusions relating to going concern, principal risks and viability statement
Going concern We have reviewed the Directors' statement in note 2(b) to the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them and their identification of any material uncertainties to the Group's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements. We are required to state whether we have anything material to add or draw attention to in relation to that statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our knowledge obtained in the audit. Principal risks and viability statement Based solely on reading the directors' statements and considering whether they were consistent with the knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of the directors' assessment of the Group's ability to continue as a going concern, we are required to state whether we have anything material to add or draw attention to in relation to: • the disclosures that describe the principal risks and explain how they are being managed or mitigated; • the Directors' confirmation that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; or the Directors' explanation as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. We are also required to report whether the directors' statement relating to the prospects of the Group required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.			We confirm that we have nothing material to report, add or draw attention to in respect of these matters. We confirm that we have nothing material to report, add or draw attention to in respect of these matters.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The assessment of any impairment in value of loans advanced
Key audit matter description	As at 31 January 2018, loans totalling £112.33 million (31 January 2017: £109.9 million) are carried at amortised cost less any provision for impairment as disclosed in Note 2 k)i) and Note 5 of the Consolidated Financial Statements. As described in the Report of the Audit and Operational Risk Committee, the Group's loans are the key value driver for the Group Net Asset Value and interest income. Judgements over the level of any impairment and recoverability of loan interest could significantly affect these key performance indicators. Impairment is considered to be the most critical accounting judgment and estimate made in applying the Group's accounting policies as described in Note 3. The specific areas of judgement include: · the determination of the appropriate assumptions underlying the impairment analysis; and · the impact of loan-specific matters to the forecast cash flows for each loan.
How the scope of our audit responded to the key audit matter	Our procedures included: · reviewing the loan due diligence (including third party property valuations) in respect of each loan in existence at the balance sheet date; · challenging the assumptions made and evaluating the monitoring data gathered by the Investment Manager in assessing whether the loans are impaired at the balance sheet date, which includes, but is not limited to summary financial and non-financial information provided by the borrower and progress against original business plans; · scrutinising third party validation of the underlying property valuation and considering whether the assumptions used in those valuations are appropriate at the balance sheet date; · reviewing each loan to assess whether the loan has breached its covenants or defaulted on any loan interest payments due and considering other financial information available on the borrower to assess their ability (or otherwise) to meet future payment commitments; and · assessing the design and implementation of key controls relating to the valuation of loans.
Key observations	Having carried the procedures, we found that judgements and assumptions formed by management on impairment analysis, appear to be appropriate.


Revenue recognition
Key audit matter description	As stated in the Report of the Audit and Operational Risk Committee, the incorrect treatment of any arrangement fees, exit fees, prepayment fees and the impact of loan impairments in the effective interest rate calculations may significantly affect the level of income recorded in the period, thus affecting the level of distributable income. In addition, the existence of prepayment fees arising from early principal repayments during the period will impact on the income recognised and may not be recorded in accordance with the effective interest rate requirements set out in IAS 39. Income from loans advanced totalled £7.04 million for the year ended 31 January 2018 (31 January 2017: £8.07 million), with further other income of £1.04 million (31 January 2017: £4.26 million) received as a result of early principal repayments (see note 5). The accounting policies related to this key audit matter can be found in Note 2 e) and Note 3.
How the scope of our audit responded to the key audit matter	Our procedures included: · assessing management's judgements in respect of the estimated contractual cash flows (including arrangement and exit fees) as detailed in Note 3, through examination of the amortisation schedules prepared for each loan so as to assess whether they are in accordance with the effective interest rate requirements set out in IAS 39; · recalculating interest income using the effective interest rate, taking into account the impact of any prepayments and other loan related fees on the income recognised; · tracing a sample of coupon receipts, as reflected on the amortisation schedules, to the bank statements; · assessing the specific cut-off judgements taken in respect of the Lanos prepayments fees received; · considering the impact of any impairment on the recognition of income recorded in the period; and · assessing the design and implementation of key controls relating to recognition of revenue.
Key observations	Having carried out the procedures, we found out that judgments and assumptions underlying the treatment of loan related fees and impairment analysis formed by management, appear to be appropriate.

Our application of materiality

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

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

Group materiality

£2.36 million (2017: £2.24 million)

Basis for determining materiality

We determined materiality for the Group to be £2.36 million (31 January 2017: £2.24 million), which is below 2% (31 January 2017: 2%) of Net Asset Value.

We have applied a lower materiality threshold of £351,000 (31 January 2017: £405,000) (based on 5% of net income (31 January 2017: 5%)) in respect of loan interest income.

Rationale for the benchmark applied

We believe Net Asset Value is the most appropriate benchmark as it is considered to be one of the principal considerations for members of the Group in assessing financial performance.

A lower threshold has been used for loan interest income as such transactions are important to investors and provide the revenue to support distributions to shareholders.

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £47,000 (2017: £44,000) for the Group, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

An overview of the scope of our audit
The consolidated financial statements of the Group incorporates the financial statements of the parent company and its subsidiary as defined in the opinion paragraph above. Material transactions of the subsidiary and parent company were included within the scope of our audit of the consolidated financial statements conducted using the Group materiality set out above. Our audit was scoped by obtaining an understanding of the Group and its environment, including internal control, and assessing the risks of material misstatement. Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team for both the parent entity and its wholly owned subsidiary, ICG-Longbow Senior Debt S.A., which holds the portfolio of loan investments of the Group. ICG-Longbow Senior Secured UK Property Debt Investments Limited uses service organisations to manage book-keeping and support in the preparation of the financial statements. As such, we have assessed the design and implementation of relevant controls established by the service organisations.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information include where we conclude that: · Fair, balanced and understandable - the statement given by the directors that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or · Audit committee reporting - the section describing the work of the audit committee does not appropriately address matters communicated by us to the audit committee; or	We have nothing to report in respect of these matters.

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

Responsibilities of directors

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

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

Auditor's responsibilities for the audit of the financial statements

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

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

Use of our report

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

Report on other legal and regulatory requirements

Matters on which we are required to report by exception

Adequacy of explanations received and accounting records

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

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

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

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

We have nothing to report in respect of these matters.

Nicola Sarah Paul FCA

for and on behalf of Deloitte LLP

Recognised Auditors

Guernsey, Channel Islands

23 April 2018

Consolidated Statement of Comprehensive Income

For the year ended 31 January 2018


		1 February 2017 to 31 January 2018	1 February 2016 to 31 January 2017
		£	£
	Notes
Income
Income from loans	2 e)	7,035,459	8,070,123
Other fee income from loans	2 f), 5	1,042,285	4,259,751
Income from cash and cash equivalents		1,928	4,991
Total income		8,079,672	12,334,865

Expenses
Investment advisory fees	13,14	1,141,405	1,110,981
Administration fees	13,14	170,000	175,000
Directors' remuneration	13	203,333	155,000
Luxco operating expenses		153,379	83,095
Broker fees		52,775	54,344
Audit fees	15	40,000	36,000
Regulatory fees		21,765	18,683
Listing fees		10,161	9,280
Legal and professional fees		372,840	76,440
Other expenses		117,187	102,887
Total expenses		2,282,845	1,821,710

Profit for the year before tax		5,796,827	10,513,155

Taxation (credit)/charge	4	(98,541)	100,214

Profit for the year after tax		5,895,368	10,412,941

Total comprehensive income for the year		5,895,368	10,412,941

Basic and diluted Earnings per share (pence)	9	5.33	9.62

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

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

Consolidated Statement of Financial Position

As at 31 January 2018


		31 January 2018	31 January 2017
		£	£
	Notes
Assets
Cash and cash equivalents	7	6,486,150	3,258,954
Trade and other receivables	6	202,182	25,020
Loans advanced at amortised cost	5	112,331,666	109,943,262
Total assets		119,019,998	113,227,236

Liabilities
Other payables and accrued expenses	8	1,037,809	898,542
Total liabilities		1,037,809	898,542

Net assets		117,982,189	112,328,694

Equity
Share capital	10	114,857,090	106,038,522
Retained earnings		3,125,099	6,290,172
Total equity attributable to the owners of the Company		117,982,189	112,328,694

Number of ordinary shares in issue at year end		117,042,779	108,219,250

Net Asset Value per ordinary share (pence)	9	100.80	103.80

The Financial Statements were approved by the Board of Directors on 23 April 2018 and signed on their behalf by:

Jack Perry

Patrick Firth

Chairman

Director

23 April 2018

Consolidated Statement of Changes in Equity

For the year ended 31 January 2018

		Number	Share	Retained
	Notes	of shares	capital	earnings	Total
			£	£	£

As at 1 February 2017		108,219,250	106,038,522	6,290,172	112,328,694

Share issue	10	8,823,529	9,000,000	-	9,000,000
Share issue costs	10	-	(181,432)	-	(181,432)
Profit for the year		-	-	5,895,368	5,895,368
Dividends paid	10	-	-	(9,060,441)	(9,060,441)

As at 31 January 2018		117,042,779	114,857,090	3,125,099	117,982,189

For the year ended 31 January 2017

		Number	Share	Retained
	Notes	of shares	capital	earnings	Total
			£	£	£

As at 1 February 2016		108,219,250	106,038,522	2,370,387	108,408,909

Profit for the year		-	-	10,412,941	10,412,941
Dividends paid	10	-	-	(6,493,156)	(6,493,156)

As at 31 January 2017		108,219,250	106,038,522	6,290,172	112,328,694

Consolidated Statement of Cash Flows

For the year ended 31 January 2018

		1 February 2017 to	1 February 2016 to
		31 January 2018	31 January 2017
	Notes	£	£

Cash flows generated from operating activities
Profit for the year		5,895,368	10,412,941
Adjustments for non-cash items:
Movement in other receivables		(177,162)	3,337
Movement in other payables and accrued expenses		241,027	(170,238)
Movement in tax payable		(101,760)	102,693
Loan amortisation		(706,539)	(696,888)
		5,150,934	9,651,845
Loans advanced less arrangement fees		(11,940,000)	(38,317,973)
Loans repaid		10,258,135	33,112,109
Net loans advanced less arrangement fees		(1,681,865)	(5,205,864)
Net cash generated from operating activities		3,469,069	4,445,981

Cash flows used in financing activities
Proceeds from issue of shares	10	9,000,000	-
Share issue costs paid	10	(181,432)	-
Dividends paid	10	(9,060,441)	(6,493,156)
Net cash used in financing activities		(241,873)	(6,493,156)

Net movement in cash and cash equivalents		3,227,196	(2,047,175)
Cash and cash equivalents at the start of the year		3,258,954	5,306,129

Cash and cash equivalents at the end of the year		6,486,150	3,258,954

Notes to the Consolidated Financial Statements

For the year ended 31 January 2018

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 and principal place of business of the Company is Heritage Hall, PO Box 225, Le Marchant Street, St Peter Port, Guernsey, GY1 4HY, Channel Islands.

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

The Consolidated Financial Statements comprise the Financial Statements of the Group as at 31 January 2018.

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

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

2. Accounting policies

a) Basis of preparation

The Financial Statements for the year ended 31 January 2018 have been prepared in accordance with IFRS as adopted in the EU and the Companies Law.

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

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

		Effective dates
IFRS 9	Financial Instruments	1 January 2018
IFRS 15	Revenue from Contracts with Customers	1 January 2018
IFRIC 22	Foreign Currency Translations and Advance Consideration	1 January 2018

IFRS 11	Joint arrangements (Amendments resulting from Annual Improvements 2015-2017 Cycle)	1 January 2019
IFRS 16	Leases	1 January 2019
IAS 12	Income Taxes (Amendments resulting from Annual Improvements 2015-2017 Cycle)	1 January 2019
IFRIC 23	Uncertainty over Income Tax Treatments	1 January 2019

The Directors do not anticipate that the adoption of these standards and interpretations in future periods will have a significant impact on the Consolidated Financial Statements of the Group with the exception of the adoption of IFRS 9 as described below.

IFRS 9 Financial Instruments, effective from 1 January 2018, to replace IAS 39 Financial Instruments: Recognition and Measurement

Nature and scope of new or amended standard

IFRS 9 introduces a new approach to the classification of financial assets, which is driven by the business model in which the asset is held and their contractual cash flow characteristics. IFRS 9 requires financial assets to be classified into two measurement categories: (i) those measured at fair value; and (ii) those measured at amortised cost. A new business model was introduced which does allow certain financial assets to be categorised as "fair value through other comprehensive income" in certain circumstances.

The requirements for financial liabilities are mostly carried forward unchanged from IAS 39. However, the main change was made to the fair value option for financial liabilities to address the issue of an entity's own credit risk.

The new model introduces a single impairment model being applied to all financial instruments, as well as an "expected credit loss" model for the measurement of financial assets. IFRS 9 carries forward the de-recognition requirements of financial assets and liabilities from IAS 39.

Effect on the Financial Statements

The standard is effective on or after 1 January 2018 and will be adopted by the Group beginning with the NAV for the period ending 30 April 2018, the Interim Report for the period ending 31 July 2018 and the Annual Report for the year ending 31 January 2019.

Currently, under IAS 39, impairment losses are recognised when a loss event occurs; whereas under IFRS 9 the "expected credit loss" approach will be required which may result in losses being recognised more quickly. However, as all investments are secured by way of a fully registered first legal charge over the property, and there is no subordinated debt or secondary charges registered, the Directors believe that based on the current positions of the loans, as disclosed in Note 5, no significant impact on the Consolidated Financial Statements will arise. In particular, the Group does not expect to recognise expected credit losses on initial adoption of IFRS 9.

It is also anticipated that the loans will meet both the business model criteria and cash flow characteristic criteria and as such will continue to be measured at amortised cost using the effective interest method upon adoption of IFRS 9.

b) Going concern

The Group is now substantially invested with loans advanced at amortised cost representing 95.21% of the total equity attributable to the owners of the Company and expects that the loan portfolio will generate enough cash flows to pay on-going expenses and returns to shareholders. The Directors have considered the cash position and performances of current investments made by the Group and have concluded that it is appropriate to adopt the going concern basis of accounting in preparing the Financial Statements.

The first continuation vote was held on 1 March 2017 and passed by the shareholders. The requirement for subsequent annual continuation votes has been amended so that any follow-on continuation resolutions shall be held every five years and the Directors shall propose an ordinary resolution that the Company continues its business as a closed-ended collective investment scheme.

c) Basis of consolidation

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

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

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

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

d) Functional and presentation currency

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

e) Interest income

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

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

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

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 £1,200 which is included within other expenses. The Company is required to apply annually to obtain exempt status for the purposes of Guernsey Taxation.

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

i) Dividends

Dividends paid during the year are disclosed in the Consolidated Statement of Changes in Equity. Dividends declared post year end are disclosed in the 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 Group's performance and to allocate resources is the total return on the Group's Net Asset Value, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the Financial Statements.

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

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

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

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

k) Financial instruments

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

Financial assets

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

Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss', 'held-to-maturity' investments, 'available-for-sale' financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

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

i) Loans and receivables

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

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

The Group has loans and receivables with a prepayment option embedded. The key factors considered in the valuation of prepayment options include the exercise price, the interest rate of the host loan contract, differential to current market interest rates, the risk free rate of interest, contractual terms of the prepayment option, and the expected term of the option. Given the low probability of exercise and undeterminable exercise date, the value attributed to these embedded derivatives is considered to be £nil.

ii) Derecognition of financial assets

A financial asset (in whole or in part) is derecognised either when:

· the Group has transferred substantially all the risks and rewards of ownership; or

· it has neither transferred nor retained substantially all the risks and rewards and when it no longer has control over the assets or a portion of the asset; or

· the contractual right to receive cash flow has expired.

iii) 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.

iv) 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.

v) Impairment of financial assets

Financial assets are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been adversely affected.

Objective evidence of impairment could include:

· significant financial difficulty of the borrower;

· default or delinquency in interest or principal payments;

· a substantial fall in the underlying property income;

· a substantial fall in the value of the underlying property security; or

· it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

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 Group becomes party to the contractual requirements of the financial liability. Unless otherwise indicated the carrying amounts of the Group's financial liabilities approximate to their fair values.

The Group'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

A financial liability (in whole or in part) is derecognised when the Group has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the Consolidated Statement of Comprehensive Income.

l) 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 in applying the Group'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 period if the revision affects both current and future periods.

Impairment is considered to be the most critical accounting judgement and estimate that the Directors make in the process of applying the Group's policies and which has the most significant effect on the amounts recognised in the Financial Statements (see Note 5).

Revenue recognition is considered a significant accounting judgement and estimate that the Directors make in the process of applying the Group's policies (see Note 2 e) and 2 f)).

The Directors consider judgements and estimations in determining the fair value of prepayment options embedded within the contracts for loans advanced. The key factors considered in the valuation of prepayment options include the exercise price, the interest rate of the host loan contract, differential to current market interest rates, the risk free rate of interest, contractual terms of the prepayment option, and the expected term of the option.

4. Taxation

The Group's tax charge of £(98,541) (2017: £100,214) consists of taxes levied on Luxco. From 1 January 2017, the minimum net wealth tax charge was £4,365. The net wealth tax charge, set at a rate of 0.5% (2016: 0.5%), on Luxco's global assets (net worth), determined as at the 1 January of each calendar year totalled £4,365 (2017: £6,956). The corporate income tax charge, including corporate income tax and municipal business tax, amounted to £nil for 2017 set by the Luxembourg Tax Administration. Hence, taxation charges of £103,661, in relation to Luxco taxation for the year ended 31 January 2017, were reversed during the year.

	1 February 2017 to 31 January 2018	1 February 2016 to 31 January 2017
	£	£
Net wealth tax - current year	4,365	7,061
Net wealth tax - prior year	(27,470)	-
Fixed income tax - current year	-	70,502
Fixed income tax - prior year	(75,316)	-
Municipal business tax - current year	-	22,388
Municipal business tax - prior year	(875)	-
Non-deductible VAT	755	263
	(98,541)	100,214

5. Loans advanced

	31 January 2018	31 January 2018	31 January 2017	31 January 2017
	Principal advanced	At amortised cost	Principal advanced	At amortised cost
	£	£	£	£
IRAF	11,935,000	12,150,584	11,935,000	12,090,936
Meadow	20,000,000	20,413,021	18,070,000	18,304,076
Northlands	7,577,250	7,690,133	6,477,250	6,515,144
Hulbert	6,565,000	6,666,450	6,565,000	6,607,396
Halcyon	8,600,000	8,730,605	8,600,000	8,654,038
Cararra	1,300,000	1,319,743	1,300,000	1,308,168
Ramada	7,982,500	8,077,179	7,982,500	8,007,693
Commercial Regional Space	22,400,000	22,556,213	22,400,000	22,492,465
BMO	15,793,727	15,770,768	16,000,000	15,911,483
Quattro	9,000,000	8,956,970	-	-
Lanos	-	-	10,000,000	10,051,863
	111,153,477	112,331,666	109,329,750	109,943,262

The Directors consider that the carrying value amounts of the loans, recorded at amortised cost in the Financial Statements, are approximately equal to their fair value. No element of the loans advanced is past due or impaired. For further information and the associated risks see the Investment Adviser's Report, the Statement of Principal Risks and Note 11.

Amortised cost is calculated using the effective interest rate method which takes into account all contractual terms (including arrangement and exit fees) that are an integral part of the loan agreement. As these fees are taken into account when determining initial net carrying value, their recognition in profit or loss is effectively spread over the life of the loan. The Group's accounting policy on the measurement of financial assets is discussed further in Note 2 k).

The Group's investments are in the form of bilateral loans, and as such are illiquid investments with no readily available secondary market. Whilst the terms of each loan includes repayment and prepayment fees, in the absence of a liquid secondary market, the Directors do not believe a willing buyer would pay a premium to the par value of the loans to recognise such terms and as such the amortised cost is considered representative of the fair value of the loans.

Each property on which investments are secured was subject to an independent, third party valuation at the time the investment was entered into. All investments are made on a hold to maturity basis. Each investment is monitored on a quarterly basis, in line with the underlying property rental cycle, including a review of the performance of the underlying property security. No market or other events have been identified through this review process which would result in a fair value of the investments significantly different to the carrying value.

Whilst the loans are performing and the balance outstanding in each case is at a substantial discount to the value of the underlying real estate on which they are secured, the Directors do not consider the loans to be impaired, or for there to be a risk of not achieving full recovery.

On 27 March 2017, the Group received a repayment of £10,000,000 on the Lanos loan. As part of this repayment, the Group received a total of £1,132,445 in interest and exit and prepayment fees in accordance with the terms of the loan agreement. Excluding interest, other fee income amounted to £978,258.

On 27 March 2017, the Group advanced £500,000 and on 2 May 2017 advanced a further £600,000 on the Northlands loan. The increase is on substantially the same terms and conditions as the existing loan.

On 10 May 2017, the Group received a partial repayment of £206,273 on the BMO loan.

On 18 October 2017, the Group made a new loan of £9,000,000 to Quattro, a privately-held property company. The Quattro loan has a maturity date of January 2021 and is in accordance with the Company's revised investment policy, approved by shareholders at the EGM in March 2017. The Group initially financed £6,000,000 of the Quattro loan with a £3,000,000 minority participation held by ICG, which was subsequently acquired by the Group on 30 October 2017.

On 26 January 2018, the Group advanced a further £1,930,000 on the Meadow loan. The increase is on substantially the same terms and conditions as the existing loan and extends the final maturity date to January 2020. The Group received an amendment fee of £50,000 on the Meadow loan in January 2018.

Other fee income from loans represents further insignificant amounts received in relation to loans amounting to £14,027 (31 January 2017: £15,000). These fees, together with other fees received on the Lanos and Meadow loans as noted above, resulted in total other fee income received of £1,042,285.

Following the year end, on 28 February 2018, the Group received repayment in full of the £11.94 million IRAF loan, together with interest and exit fees of approximately £0.43 million. On 2 March 2018, the Group made a new loan of £16,200,000 to an affiliate of Affinity Global Real Estate. The Affinity loan has a maturity date of May 2020 and is in accordance with the Company's revised investment policy, approved by shareholders at the EGM in March 2017. The Group also advanced a further £0.9 million commitment on the Northlands loan and has extended the coupon protection period of the total Northlands loan of £8.5 million.

6. Trade and other receivables

	31 January 2018	31 January 2017
	£	£
Other receivables	202,182	25,020

There are no material past due or impaired receivable balances outstanding at the year end.

The Group has financial risk management policies in place to ensure that all receivables are received within the credit time frame. The Board of Directors considers that the carrying amount of all receivables approximates to their fair value.

7. Cash and cash equivalents

Cash and cash equivalents comprises cash held by the Group and short-term bank deposits held with maturities of three months or less. The carrying amounts of these assets approximate their fair value.

8. Other payables and accrued expenses

	31 January 2018	31 January 2017
	£	£
Investment advisory fees (see Note 13)	865,836	562,854
Taxes payable	23,335	125,095
Share issue costs payable	10,000	-
Directors' remuneration (see Note 13)	48,750	38,750
Administration fees (see Note 13)	30,833	31,465
Broker fees	28,953	29,438
Audit fees	28,000	26,000
Other expenses	2,102	84,940
	1,037,809	898,542

The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame. The Board of Directors considers 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 2017 to	1 February 2016 to
	31 January 2018	31 January 2017
Profit for the year (£)	5,895,368	10,412,941
Weighted average number of ordinary shares in issue	110,564,133	108,219,250
Basic and diluted EPS (pence)	5.33	9.62
Adjusted basic and diluted EPS (pence)	4.39	5.69

The calculation of basic and diluted Earnings per share is based on the profit for the year and on the weighted average number of ordinary shares in for the year ended 31 January 2018.

The calculation of adjusted basic and diluted Earnings per share is based on the profit for the year, adjusted for one-off other fee income during the year totalling £1,042,285 (31 January 2017: £4,259,751).

There are no dilutive shares in issue at 31 January 2018 (31 January 2017: none).

Net Asset Value per share

	31 January 2018	31 January 2017
NAV (£)	117,982,189	112,328,694
Number of ordinary shares in issue	117,042,779	108,219,250
NAV per share (pence)	100.80	103.80

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; (c) C shares, in each case of such classes and denominated in such currencies as the Directors may determine.

	31 January 2018	31 January 2017
	£	£
Authorised
Ordinary shares of no par value	Unlimited	Unlimited
Issued and fully paid:	Total No	Total No
Ordinary shares of no par value
Shares as at inception	1	1
Issued on 5 February 2013	104,619,249	104,619,249
Issued on 24 April 2014	3,600,000	3,600,000
Issued on 26 October 2017	8,823,529	-
	117,042,779	108,219,250

	£	£
Share capital brought forward	106,038,522	106,038,522
Movements for the year:
Ordinary shares issued on 26 October 2017	9,000,000	-
Share issue costs	(181,432)	-
Share capital	114,857,090	106,038,522

At an EGM held on 1 March 2017, each of the proposed resolutions in connection with the continuation vote and proposed capital raise were duly passed without amendment. These included changes to the investment policy, the continuation vote, amendments to the Articles of Incorporation and the power to allot an additional 40,000,000 shares.

On 26 October 2017, the Company issued 8.8 million new Ordinary shares pursuant to the terms and conditions of the Company's 2017 Placing Programme set out the in 2017 Prospectus. These shares were issued at a price of 102 pence per Ordinary share, representing a premium of 2 pence per share and raising gross proceeds of £9,000,000. The proceeds net of issue costs of £181,432 (2% of gross proceeds), amounted to £8,818,568.

Following the year end, on 27 March 2018, the Company issued 4.26 million new Ordinary shares pursuant to the remaining authority to allot a further 31.2 million shares under the 2017 Placing Programme. These shares were issued at a price of 101 pence per Ordinary share, representing a premium of 1 pence per share and raising gross proceeds of £4.3 million. Following the issue, there are 121,302,779 Ordinary shares in issue.

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 2018 and 31 January 2017 are set out below:

	Dividend per share	Total dividend
1 February 2017 to 31 January 2018	Pence	£
Interim dividend in respect of quarter ended 31 January 2017	1.50	1,623,289
Special dividend in respect of quarter ended 31 January 2017	2.25	2,434,933
Interim dividend in respect of quarter ended 30 April 2017	1.50	1,623,289
Interim dividend in respect of quarter ended 31 July 2017	1.50	1,623,289
Interim dividend in respect of quarter ended 31 October 2017	1.50	1,755,641
	8.25	9,060,441

Dividends

	Dividend per share	Total dividend
1 February 2016 to 31 January 2017	Pence	£
Interim dividend in respect of quarter ended 31 January 2016	1.50	1,623,289
Interim dividend in respect of quarter ended 30 April 2016	1.50	1,623,289
Interim dividend in respect of quarter ended 31 July 2016	1.50	1,623,289
Interim dividend in respect of quarter ended 31 October 2016	1.50	1,623,289
	6.00	6,493,156

Additional interim dividend

On 13 March 2018, the Directors declared an interim dividend in respect of the quarter ended 31 January 2018 of £1,755,642 equating to 1.5 pence per ordinary share to shareholders on the register as at the close of business on 22 March 2018.

Rights attaching to Shares

The Company has a single class of ordinary shares which are not entitled to a fixed dividend. 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.

11. Risk Management Policies and Procedures

The Group 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 Group'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 Group's financial performance.

The Board of Directors is ultimately responsible for the overall risk management approach within the Group. The Board of Directors has established procedures for monitoring and controlling risk. The Group has investment guidelines that set out its overall business strategies, its tolerance for risk and its general risk management philosophy.

In addition, the Investment Adviser monitors and measures the overall risk bearing capacity in relation to the aggregate risk exposure across all risk types and activities. Further details regarding these policies are set out below:

Market risk

Market risk includes market price risk, currency risk and interest rate risk. If a borrower defaults on a loan and the real estate market enters a downturn it could materially and adversely affect the value of the collateral over which loans are secured. This risk is considered by the Board to be as a result of credit risk as it relates to the borrower defaulting on the loan.

Market risk is moderated through a careful selection of loans within specified limits. The Group's overall market position is monitored by the Investment Adviser and is reviewed by the Board of Directors on an on-going basis.

Currency risk

The Group's currency risk exposure is considered to be immaterial as all investments have been and will be made in Pounds Sterling, with immaterial expenses incurred in Euro by Luxco.

Interest rate risk

Interest rate risk is the risk that the value of financial instruments and related income from the cash and cash equivalents will fluctuate due to changes in market interest rates.

The majority of the Group's financial assets are loans advanced, which are at a fixed rate of interest and cash and cash equivalents. The Group's interest rate risk is limited to interest earned on cash deposits.

The following table shows the portfolio profile of the financial assets at 31 January 2018 and 31 January 2017:

	31 January 2018	31 January 2017
	£	£
Floating rate
Cash	6,486,150	3,258,954
Fixed rate
Loans advanced at amortised cost	112,331,666	109,943,262
	118,817,816	113,202,216

The timing of interest payments on the loans advanced is summarised in the table below.

Credit risk

Credit risk is the risk that a counterparty will be unable to pay amounts in full when due. The Group's main credit risk exposure is on the loans advanced, where the Group invests in secured senior debt.

There was a concentration risk as at 31 January 2018 due to 10 advanced loans being in existence and exposure is solely to the UK real estate market; however this risk is mitigated as the loans are secured by collateral and being spread across a variety of sectors within the UK property market. There is also credit risk in respect of other financial assets as a portion of the Group's assets are cash and cash equivalents. The banks used to hold cash and cash equivalents have been diversified to spread the credit risk to which the Group is exposed. 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, cash and cash equivalents and interest outstanding on loans. As at 31 January 2018, the maximum credit risk exposure was £117,827,695 (31 January 2017: £112,584,321).

The Investment Adviser 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 on-going basis. The Investment Adviser routinely analyses the profile of the Group'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.

To diversify credit risk the Company maintains its cash and cash equivalents across four (31 January 2017: four) different banking groups as shown below, which have parent companies rated Baa or higher by MIS or an equivalent. In order to cover operational expenses, a working capital balance at Royal Bank of Scotland International Limited is monitored and maintained. To diversify credit risk within Luxco, cash and cash equivalents are maintained at appropriate levels of operational capital with interest payments made to the Company on a regular basis. This is subject to the Group's credit risk monitoring policies.

	31 January 2018
	£
Royal Bank of Scotland Global Banking (Luxembourg) S.A.	1,723,531
Lloyds Bank International Limited	1,554,210
Barclays Bank plc	1,554,219
ABN AMRO (Guernsey) Limited	1,554,190
Royal Bank of Scotland International Limited	100,000
	6,486,150

	31 January 2017
Royal Bank of Scotland Global Banking (Luxembourg) S.A.	2,335,137
Lloyds Bank International Limited	274,896
Barclays Bank plc	274,489
ABN AMRO (Guernsey) Limited	274,459
Royal Bank of Scotland International Limited	99,973
	3,258,954

The carrying amount of these assets approximates their fair value.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its liabilities as they fall due. The Group's loans advanced are illiquid and may be difficult or impossible to realise for cash at short notice.

Liquidity risks arise in respect of other financial liabilities of the Group due to counterparties. However, at 31 January 2018, there was sufficient liquidity in the form of cash and cash equivalents to satisfy the Group's obligations. The Group expects to meet its on-going obligations from cash flows generated by the loan portfolio. Except for the loans advanced, the Group's financial assets and 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 2018
	£	£	£
IRAF - principal	11,935,000	-	11,935,000
IRAF - interest and exit fees	964,283	-	964,283
Meadow - principal	-	20,000,000	20,000,000
Meadow - interest and exit fees	1,494,448	1,904,110	3,398,558
Northlands - principal	7,577,250	-	7,577,250
Northlands - interest and exit fees	674,687	-	674,687
Hulbert - principal	6,565,000	-	6,565,000
Hulbert - interest and exit fees	580,148	-	580,148
Halcyon - principal	8,600,000	-	8,600,000
Halcyon - interest and exit fees	706,378	-	706,378
Cararra - principal	1,300,000	-	1,300,000
Cararra - interest and exit fees	106,778	-	106,778
Ramada - principal	-	7,982,500	7,982,500
Ramada - interest and exit fees	638,600	343,357	981,957
Commercial Regional Space - principal	-	22,400,000	22,400,000
Commercial Regional Space - interest and exit fees	987,840	433,977	1,421,817
BMO - principal	-	15,793,727	15,793,727
BMO - interest and exit fees	500,228	124,035	624,263
Quattro - principal	-	9,000,000	9,000,000
Quattro - interest and exit fees	720,000	1,530,000	2,250,000
	43,350,640	79,511,706	122,862,346

	Less than one year	Between one and five years	Total as at 31 January 2017
	£	£	£
IRAF - principal	-	11,935,000	11,935,000
IRAF - interest and exit fees	835,450	964,283	1,799,733
Meadow - principal	18,070,000	-	18,070,000
Meadow - interest and exit fees	1,649,816	-	1,649,816
Northlands- principal	-	6,477,250	6,477,250
Northlands - interest and exit fees	516,760	575,322	1,092,082
Hulbert - principal	-	6,565,000	6,565,000
Hulbert - interest and exit fees	510,181	577,360	1,087,541
Halcyon - principal	-	8,600,000	8,600,000
Halcyon - interest and exit fees	603,649	703,079	1,306,728
Cararra - principal	-	1,300,000	1,300,000
Cararra - interest and exit fees	91,249	106,279	197,528
Lanos - principal	-	10,000,000	10,000,000
Lanos - interest and exit fees	782,849	952,740	1,735,589
Ramada - principal	-	7,982,500	7,982,500
Ramada - interest and exit fees	636,850	981,957	1,618,807
Commercial Regional Space - principal	-	22,400,000	22,400,000
Commercial Regional Space - interest and exit fees	985,134	1,421,817	2,406,951
BMO - principal	-	16,000,000	16,000,000
BMO - interest and exit fees	481,907	628,274	1,110,181
	25,163,845	98,170,861	123,334,706

The Group could also be exposed to prepayment risk, being the risk that the principal may be repaid earlier than anticipated, causing the return on certain investments to be less than expected. The Group, where possible, seeks to mitigate this risk by inclusion of income protection clauses that protect the Group against any prepayment risk on the loans advanced for some of the period of the loan. To date, all loans include income protection clauses in the event of prepayment of the loans for the majority of the loan term. As at the year end date the residual weighted average income protection period was 0.53 years (31 January 2017: 0.74 years).

The Group has loans and receivables with a prepayment option embedded. Given the low probability of exercise and indeterminable exercise date, the value attributed to these embedded derivatives is considered to be £nil (31 January 2017: £nil).

Capital management policies and procedures

The Group's capital management objectives are to ensure that the Group will be able to continue as a going concern and to maximise the income and capital return to equity shareholders.

In accordance with the Group's investment policy, the Group's principal use of cash has been to fund investments in the form of loans sourced by the Investment Adviser, as well as on-going operational expenses and payment of dividends and other distributions to shareholders in accordance with the Company's dividend policy.

The Board, with the assistance of the Investment Adviser, monitors and reviews the broad structure of the Company's capital on an on-going basis.

The Company has no externally imposed capital requirements.

12. Subsidiary

At the date of this Annual Report the Company had one wholly owned subsidiary, ICG-Longbow Senior Debt S.A., registered in Luxembourg.

13. 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

On 1 November 2017, Mark Huntley, Director of the Company, ceased to be a Director of the Company's Administrator and assumed the role of consultant to the Administrator. During the year, the Company incurred administration fees in relation to services provided by the Company's Administrator of £170,000 (31 January 2017: £175,000) of which £30,833 (31 January 2017: £31,465) was outstanding at the year end (see Note 8). Mark Huntley also received a Director's fee of £36,875 (31 January 2017: £27,500) of which £8,750 (31 January 2017: £6,875) was outstanding at the year end.

The Company Directors' fees for the year amounted to £203,333 (31 January 2017: £155,000) with outstanding fees of £48,750 (31 January 2017: £38,750) due to the Directors at 31 January 2018 (see Note 8). With effect from 1 July 2017, the remuneration of the Chairman increased from £40,000 to £50,000 per annum, the remuneration of the Chairman of the Audit and Operational Risk Committee increased from £32,500 to £40,000 per annum and the remuneration of the Directors increased from £27,500 to £35,000 per annum. During the year, each Director received an additional, one-off fee of £5,000 for extra services they have performed in connection with the 2017 Placing Programme.

Investment Adviser

Investment advisory fees for the year amounted to £1,141,405 (31 January 2017: £1,110,981), of which £865,836 (31 January 2017: £562,854) was outstanding at the year end (see Note 8).

As disclosed in Note 5, on 18 October 2017, the Group made a new loan of £9,000,000 to Quattro. The Group initially financed £6,000,000 of the Quattro loan with a £3,000,000 minority participation held by ICG, which was subsequently acquired by the Group on 30 October 2017.

14. Material Agreements

Investment Advisory Agreement

The Company and the Investment Adviser have entered into the Investment Advisory Agreement, pursuant to which the Investment Adviser has been given responsibility for the non-discretionary management of the Company's (and any of the Company's subsidiaries) assets (including uninvested cash) in accordance with the Group's investment policies, restrictions and guidelines.

Under the terms of the Investment Advisory Agreement, the Investment Adviser is entitled to a management fee at a rate equivalent to 1% per annum of the Net Asset Value paid quarterly in arrears based on the average Net Asset Value as at the last business day of each month in each relevant quarter.

The Investment Adviser's appointment cannot be terminated by the Company with less than 12 months' notice. The Company may terminate the Investment Advisory Agreement with immediate effect if the Investment Adviser has committed any material, irremediable breach of the Investment Advisory 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 Adviser 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 Advisory Agreement. The Investment Adviser may terminate their appointment immediately if the Company has committed any material, irremediable breach of the Investment Advisory 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. As disclosed in Note 1, the Investment Adviser, which trades under the name of ICG-Longbow is authorised and regulated by the FCA.

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 both to the Company and some limited administration services to Luxco in conjunction with the Luxembourg Administrator. 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. Accounting fees for the year amounted to £80,000 (31 January 2017: £80,000).

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 £1.72 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.

15. Auditors' Remuneration

Audit and non-audit fees payable to the auditors can be analysed as follows:

	1 February 2017 to 31 January 2018	1 February 2016 to 31 January 2017
	£	£
Deloitte LLP Audit fees	40,000	36,000

Deloitte LLP Professional services in relation to the 2017 Prospectus	51,000	-
Deloitte LLP Professional services in relation to the share issue	6,000	-
Deloitte LLP Non-audit fees	57,000	-

16. Subsequent events

On 28 February 2018, the Group received repayment in full of the £11.94 million IRAF loan, together with interest and exit fees of approximately £0.43 million.

On 2 March 2018, the Group made a new loan of £16,200,000 to an affiliate of Affinity Global Real Estate. The Affinity loan has a maturity date of May 2020 and is in accordance with the Company's revised investment policy, approved by shareholders at the EGM in March 2017.

On 2 March 2018, the Group announced an additional circa £0.9 million commitment on the Northlands loan and has extended the coupon protection period of the total Northlands loan of £8.5 million.

On 13 March 2018, the Company declared a dividend of 1.5 pence per ordinary share in respect of the quarter ended 31 January 2018, payable on 20 April 2018.

On 27 March 2018, the Company issued 4.26 million new Ordinary shares pursuant to the remaining authority to allot a further 31.2 million shares under the 2017 Placing Programme. These shares were issued at a price of 101 pence per Ordinary share, representing a premium of 1 pence per share and raising gross proceeds of £4.3 million. Following the issue, there are 121,302,779 Ordinary shares in issue.

glossary of capitalised defined terms

"Administrator" means Estera International Fund Managers (Guernsey) Limited (formerly Heritage International Fund Managers 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 Affinity Global Real Estate;

"AGM" or "Annual General meeting" means the general meeting of the Company;

"AIC" means the Association of Investment Companies;

"AIC Code" means the AIC Code of Corporate Governance;

"AIC Guide" means the AIC Corporate Governance Guide for Investment Companies;

"AIFMD" means the Alternative Investment Fund Managers Directive;

"Annual General Meeting" or "AGM" means the general meeting of the Company;

"Annual Report" or "Annual Report and Consolidated Financial Statements" means the annual publication of the Group provided to the shareholders to describe their operations and financial conditions, together with their Consolidated Financial Statements;

"Articles of Incorporation" or "Articles" means the articles of incorporation of the Company, as amended from time to time;

"AST" means assured shorthold tenancy;

"Audit and Operational Risk Committee" means the Audit and Operational Risk Management Committee, a formal committee of the Board with defined terms of reference;

"Basel III" means an international regulatory accord that introduced a set of reforms designed to improve the regulation, supervision and risk management within the banking sector;

"BEPS" means Base erosion and profit shifting;

"BMO" means BMO Real Estate Partners;

"Board" or "Directors" or "Board of Directors" means the directors of the Company from time to time;

"Brexit" means the potential departure of the UK from the EU;

"Cararra" means Cararra Ground Rents;

"CBI" means the Confederation of British Industry;

"Circular" means the Circular of the Company dated 11 January 2017 regarding proposals for a change in investment objective and policy, the 2017 Placing Programme for 40 million shares and the continuation vote;

"Code" or "Corporate Governance Code" means the UK Corporate Governance Code 2016 as published by the Financial Reporting Council;

"Commercial Regional Space" means Commercial Regional Space Limited;

"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;

"Disclosure Guidance and Transparency Rules" or "DTRs" means the disclosure guidance published by the FCA and the transparency rules made by the FCA under section 73A of FSMA;

"EBITDA" means earnings before interest, taxes, depreciation and amortisation;

"EGM" means the Extraordinary General Meeting of the Company held on 1 March 2017;

"EPS" or "Earnings per share" means Earnings per ordinary share of the Company and is expressed in Pounds Stirling;

"ERV" means Estimated Rental Value;

"ESG" means Environmental, Social and Governance;

"EU" means the European Union;

"Euro" or "€" means Euros, the currency introduced at the start of the third stage of European economic and monetary union;

"FATCA" means Foreign Account Tax Compliance Act;

"FCA" means the UK Financial Conduct Authority (or its successor bodies);

"Financial Statements" or "Consolidated Financial Statements" means the audited consolidated financial statements of the Group, including the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows, and 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;

"GLA" means the Greater London Authority;

"Group" means the Company, ICG Longbow Senior Secured UK Property Debt Investments Limited together with its wholly owned subsidiary, ICG Longbow Senior Debt S.A (Luxco);

"GFSC Code" means the GFSC Finance Sector Code of Corporate Governance;

"Halcyon" means Halcyon Ground Rents;

"Hulbert" means Hulbert Properties;

"IAS" means international accounting standards as issued by the Board of the International Accounting Standards Committee;

"ICG" means Intermediate Capital Group PLC;

"ICG Private Funds" means private real estate debt funds managed or advised by the Investment Adviser or its associates;

"IFRS" means the International Financial Reporting Standards, being the principles-based accounting standards, interpretations and the framework by that name issued by the International Accounting Standards Board, as adopted by the EU;

"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 Grade Tenant" means a tenant that is rated Aaa to Baa3 by MIS and/or AAA to BBB- by S&P;

"Investment Adviser" or "ICG-Longbow" means Intermediate Capital Managers Limited or its Associates;

"Investment Advisory Agreement" means Investment Advisory Agreement dated 31 January 2013 between the Company and the Investment Adviser, as amended and restated on 27 April 2017;

"Investment Risk Committee" means the Investment Risk Committee, a formal committee of the Board with defined terms of reference;

"IPD" means the Investment Property Databank;

"IPF" means the International Property Forum;

"IPO" means the Company's initial public offering of shares to the public which completed on 5 February 2013;

"IPO Prospectus" means the prospectus published on 31 January 2013 by the Company in connection with the IPO of ordinary shares;

"IRAF" means IRAF Portfolio;

"ISAE 3402" means International Standard on Assurance Engagements 3402, "Assurance Reports on Controls at a Service Organisation";

"ISIN" means an International Securities Identification Number;

"Lanos" means Lanos (York);

"LIBOR" means the London Interbank Offered Rate;

"London Stock Exchange" or "LSE" means London Stock Exchange plc;

"LTV" means Loan to Value ratio;

"Luxco" means the Company's wholly owned subsidiary, ICG-Longbow Senior Debt S.A.;

"Luxembourg Administrator" means Ocorian Services (Luxembourg) S.à r.l (formerly MAS International S.à r.l.) being the administrator of Luxco;

"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;

"Meadow" means Meadow Real Estate Fund II;

"MIS" means Moody's Investors Service Ltd, a credit rating agency registered in accordance with Regulation (EC) No 1060/2009 with effect from 31 October 2011;

"MSCI" means Morgan Stanley Capital Index;

"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 Group 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;

"Nomination Committee" means a formal committee of the Board with defined terms of reference;

"Northlands" means Northlands Portfolio;

"NMPIs" means Non-Mainstream Pooled Investments;

"OECD" means The Organisation for Economic Co-operation and Development;

"Official List" is the Premium Segment of the UK Listing Authority's Official List;

"Ramada" means Ramada Gateshead;

"Registrar" means Link Asset Services (Guernsey) Limited (formerly Capita Registrars (Guernsey) Limited);

"Registrar Agreement" means the Registrar Agreement dated 31 January 2013 between the Company and the Registrar;

"REIT" means real estate investment trust;

"RICS" means the Royal Institute of Chartered Surveyors;

"Schedule of Matters" means the Schedule of Matters Reserved for the Board, adopted 23 January 2013;

"SDLT" means stamp duty land tax;

"S&P" means Standard & Poor's Credit Market Services Europe Limited, a credit rating agency registered in accordance with Regulation (EC) No 1060/2009 with effect from 31 October 2011;

"Single Property Sector" means office, retail, industrial/warehousing and Other Sectors (all other real estate sectors);

"SPV" means special purpose vehicle;

"Stewardship Code" means the UK Stewardship Code;

"UK" or "United Kingdom" means the United Kingdom of Great Britain and Northern Ireland;

"UK Listing Authority" or "UKLA" means the Financial Conduct Authority;

"US" or "United States" means the United States of America, it territories and possessions;

"2017 Placing Programme" means the placing programme in connection with the 2017 Prospectus published in April 2017;

"2017 Prospectus" means the prospectus published in April 2017 by the Company in connection with the 2017 Placing Programme; and

"£" or "Pounds Sterling" means British pound sterling and "pence" means British pence.

directors and general information

Board of Directors

Jack Perry (Chairman) Stuart Beevor

Patrick Firth

Mark Huntley

Paul Meader

Audit and Operational Risk Committee

Patrick Firth (Chairman)

Stuart Beevor

Paul Meader

Investment Risk Committee

Paul Meader (Chairman)

Stuart Beevor

James Christie

Mark Huntley

David Mortimer

Management Engagement Committee

Jack Perry (Chairman)

Patrick Firth

Paul Meader

Nomination Committee

Jack Perry (Chairman)

Stuart Beevor

Patrick Firth

Mark Huntley

Paul Meader

Investment Adviser

Intermediate Capital Managers Limited

Juxon House

100 St Paul's Churchyard

London

EC4M 8BU

Registered office

Heritage Hall

PO Box 225

Le Marchant Street

St Peter Port

Guernsey

GY1 4HY

Independent Auditor

Deloitte LLP

PO Box 137

Regency Court

Glategny Esplanade

St. Peter Port

Guernsey

GY1 3HW

Guernsey Administrator and Company Secretary

Estera International Fund Managers (Guernsey) Limited (formerly Heritage International Fund Managers Limited)

Heritage Hall

PO Box 225

Le Marchant Street
St. Peter Port
Guernsey
GY1 4HY

Luxembourg Administrator

Ocorian Services (Luxembourg)

S.à r.l (formerly MAS International S.à r.l.)

6c Rue Gabriel Lippmann

Munsbach

Luxembourg

L-5365

Registrar

Link Asset Services (Guernsey) Limited (formerly Capita Registrars (Guernsey) Limited)

Mont Crevelt House

Bulwer Avenue

St Sampson

Guernsey

GY2 4LH

Corporate Broker and Financial Adviser

Cenkos Securities plc

6-8 Tokenhouse Yard

London

EC2R 7AS

Identifiers

ISIN: GG00B8C23S81

Sedol: B8C23S8

Ticker: LBOW

Website: www.lbow.co.uk

English Solicitors to the Company

King & Wood Mallesons LLP (until 7 March 2017)

10 Queen Street Place

London

EC4R 1BE

Gowlings WLG (UK) LLP (effective 7 March 2017)

4 More London Riverside,

London,

SE1 2AU

Guernsey Advocates to the Company

Carey Olsen

Carey House

PO Box 98

Les Banques

St Peter Port

Guernsey

GY1 4BZ

Bankers

ABN AMRO (Guernsey) Limited

Martello Court

Admiral Park

St Peter Port

Guernsey

GY1 3QJ

Barclays Bank plc

6-8 High Street

St Peter Port

Guernsey

GY1 3BE

Lloyds Bank International Limited

PO Box 136

Sarnia House

Le Truchot

St Peter Port

Guernsey

GY1 4EN

The Royal Bank of Scotland International

Royal Bank Place

1 Glategny Esplanade

St Peter Port

Guernsey

GY1 4BQ

cautionary statement

The Chairman's Statement and Investment Adviser'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 Adviser'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 Adviser, 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 Adviser 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

Heritage Hall, PO Box 225,

Le Marchant Street, St Peter Port, Guernsey,

GY1 4HY, Channel Islands.

T +44 (0) 1481 742742

F +44 (0) 1481 730617

Further information available online:

www.lbow.co.uk

This information is provided by RNS

The company news service from the London Stock Exchange

END

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