LBOW Icg-longbow Senior Secured Uk Property Debt Investments Limited

ICG-Longbow Senior Secured UK Property Debt Investments Limited

Interim Report And

Unaudited Condensed Interim Financial Statements

For the six months ended 31 July 2024

ICG-Longbow Senior Secured UK Property Debt Investments Limited ("the Company") is pleased to announce the released of its Interim Financial Statements for the six months ended 31 July 2024 which will shortly be available on the Company's website at (ww.lbow.co.uk) where further information on the Company can also be found. The interim financial statements are also available for viewing on the National Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.        

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

Financial Highlights

Key Developments

·       The Company is continuing to progress an orderly realisation of its assets.  As at the date of this report, the assets securing all three of the remaining Investments have been marketed for sale. One is under offer;  due diligence is ongoing on a second; and a bidding process is underway on the third.

·       All remaining loans are, or have been, subject to formal enforcement processes. The RoyaleLife ownership and operations have been restructured and the Investment Manager and lenders are supporting the new operator, who continues to pursue an organic business plan to drive income and to enhance the value of the underlying portfolio assets. 

·       As a consequence of recent bidding evidence on the properties securing the Company's loans, and the expected time frames for realisation, the Company has made further adjustments to the ECL provisions across the portfolio, which has reduced NAV per share by 1.55 pence.

·       Total loans outstanding at amortised cost plus interest receivable, excluding ECL adjustments, amount to £67.46 million as at 31 July 2024.

Performance

·       NAV of £34.35 million as at 31 July 2024 after ECL adjustments of £(35.54 million) (31 January 2024: £36.22 million after ECL adjustments of £(32.48 million)), (31 July 2023: £55.37 million after ECL adjustments of £(21.32 million)).

·       NAV per share as at 31 July 2024 of 28.32 pence (31 January 2024: 29.86 pence), (31 July 2023: 45.64 pence).

·       Loss after tax of £1.87 million for the six months ended 31 July 2024 (31 July 2023: £14.71 million).

·       Loss per share for the period of 1.55 pence (31 July 2023: 12.13 pence).

Dividend

·       In line with the Board's recent guidance, no dividends were declared or paid in the six months to 31 July 2024 (six months to 31 July 2023: 0.50 pence per share). 

Investment Portfolio

·       As at 31 July 2024, the Company's investment portfolio comprised three loans with an aggregate principal balance of £57.75 million, and a carrying value after provision for ECL of £31.91 million (31 January 2024: three loans with an aggregate principal balance of £58.01 million, and a carrying value of £33.64 million).

·       The Company is realising the remaining investments, largely through enforcement processes controlled by administrators or receivers. The Investment Manager continues to progress asset management initiatives alongside these parties while working towards sales and realisations.

*Unless stated otherwise, loan balances are stated gross of ECL provisions for impairment.  A comparison to the carrying value of the loans is set out in Note 4 to the accounts.

Corporate Summary

Investment Objective

In line with the revised Investment Objective and Policy approved by shareholders at the Extraordinary General

Meeting in January 2021, the Company is undertaking an orderly realisation of its investments.

Structure

The Company is a non-cellular company limited by shares incorporated in Guernsey on 29 November 2012 under

the Companies Law. The Company's registration number is 55917, and it has been registered with the GFSC as

a registered closed-ended collective investment scheme. The Company's ordinary shares were admitted to the

premium segment of the FCA's Official List and to trading on the Main Market of the London Stock Exchange as

part of its IPO which completed on 5 February 2013. The issued capital comprises the Company's ordinary shares

denominated in Pounds Sterling. Following the dissolution of ICG Longbow Senior Debt S.A. on 18 January 2022, the Company  assumed the assets and liabilities of its former subsidiary.

Investment Manager

The Company has appointed ICG Alternative Investment Limited as external discretionary investment manager, under the Alternative Investment Fund Managers Directive (AIFMD), within a remit set by the Board.

Chairman's Statement

Introduction

On behalf of the Board, I present the Unaudited Interim Financial Statements for the Company for the six months ended 31 July 2024.

In prior reports over the last two years, I have highlighted the consistently difficult market conditions for exiting investments, driven by some of the lowest levels of transaction volumes seen since the financial crisis.  During the reporting period the situation has not materially improved, as the Investment Manager reports below, albeit a reduction in benchmark interest rates and a new Government in the UK seems to have provided the foundations for some emerging liquidity and improving sentiment in the second half of the financial year.  Many of you will have seen evidence of this in the listed REIT sector, where there has been a significant volume of corporate activity in recent weeks.

The Company's three remaining investments with a total principal balance outstanding of £57.75 million (before impairment), are largely being managed and realised through enforcement processes. At the time of writing the Southport asset is under offer for sale.  Detailed due diligence is continuing with respect to a potential sale of the RoyaleLife portfolio, whilst an offer has been received and more are expected in respect of the Affinity asset.  

As the Company's remaining investments are impaired, the only plausible exit route is through sale of the underlying assets or the loans themselves, rather than a refinancing. This means the Company is entirely reliant on a liquid investment market in order to exit with, regrettably, the potential for protracted realisation processes, or the risk of further impairment if conditions deteriorate.

Despite this difficult backdrop, the Investment Manager has made some progress towards exits during the period.  The Southport hotel asset has been subject to competitive bidding and, at the time of writing, is under offer to a credible counterparty at a level in excess of the carrying value of the loan. 

The portfolio securing the RoyaleLife investment remains subject to a bid from an institutional buyer, albeit the due diligence process has been protracted. As a result, the Investment Manager's operating partner continues actively to manage the portfolio under a new platform and relaunched brand, as set out further below. Supporting the build out of this platform has formed a key part of the Investment Manager's efforts during the period and is considered critical in preventing further value erosion of the investment and laying the foundations for future growth. 

The asset securing the Affinity loan was relaunched for sale during the reporting period, with an initial bid received and further bids expected shortly. The Investment Manager continues to pursue low-cost asset management initiatives around leasing, planning and refurbishment with a view to enhancing the attractiveness of the investment to potential buyers.

While the Board has been encouraged by some of this progress, we are acutely aware that no sales were completed in the period, and that many shareholders remain impatient to see capital returned and the Company wound up.  Shareholders should be assured that the Board is firmly aligned to this, and continues to apply close scrutiny of the Investment Manager's progress. Members of the Board now regularly join as observers in meetings with selling agents and other professionals.  Shareholders will also recall that the reduction in the Investment Manager's fee rate became effective during the period, which has resulted in significant cost savings.

Speed of realisation nonetheless needs to be balanced against the need to secure appropriate value from the remaining assets, as many of you have made clear to me in our discussions over recent months. 

Valuation and Impairment

As set out in our annual report and accounts issued in May, the Board and Investment Manager carefully considered the expected realisable value of its remaining investments, balancing the range of expected proceeds and also the target timeframe for returning capital to investors.

The Board has revised its expectations of realisable value and transaction timing in light of the most recent market evidence and taking into account the prevailing market conditions, and has revised its ECL provisions accordingly. The Board has also considered the sensitivity to both price movements and timings as set out in note 4 to the accounts.

Emerging bidding evidence on the assets securing the portfolio loans and the requirement under accounting standards to provide against unpaid interest has led to the following adjustments to the ECL (Expected Credit Loss) provisions on the remaining investments, as follows: 

·      RoyaleLife - an additional ECL provision of £1.02 million, driven solely by a change to the projected time frame for full realisation.

·      Southport - a reduction in the ECL provision of £0.28 million, driven by an improved bid for the asset and adjustment to the anticipated time frame for completion.

·      Affinity - an additional ECL provision of £2.32 million, reflecting market demand for regional offices, initial bidding interest for the property and an adjustment to the income profile and projected time frame for realisation.

In aggregate, therefore, ECL provisions totalling net £3.07 million have been charged in the reporting period - £1.48 million related to loan principal and £1.59 million in respect of accrued default interest. The net impact on NAV being £1.48 million.

The net impact of trading and all adjustments to ECLs during this six month period equates to a diminution of NAV of 1.55p per share.

Revenue and Profitability

Accrued income from the loan portfolio for the period totalled £1.59 million (31 July 2023: £3.11 million), however this is largely offset by a provision for ECL in relation to such interest.  After accounting for impairments, the Company realised a loss for the period of £1.87 million (31 July 2023: loss of £14.71 million).

Losses per share for the period were 1.55 pence (31 July 2023: loss of 12.13 pence), reflecting  further provisions of expected credit losses recognised against the remaining portfolio loans. Details of the ECL provisions are set out in the notes to the condensed accounts.

Dividend and Return of Capital

As previously reported to shareholders, the Company will only look to declare dividends when cashflow and profits prudently allow. No dividends were paid in the period and the Board does not envisage the declaration of any dividends henceforth.

No capital distribution was made during the period and the level and pace of capital returns will be dictated by the realisation of the remaining loans. 

NAV and Share Price Performance

The Company's NAV decreased to £34.35 million as at 31 July 2024 (31 January 2024: £36.22 million), largely as a result of the increase in ECL provisions detailed above.

The Company's share price ended the period at 19.65 pence per share, down from 21.30 pence as at 31 January 2024. The share price reflected, at period end, a 30.61% discount to the Company's NAV.

Outlook

The UK Property market has experienced an extremely challenging period with very limited liquidity in many sectors and significant bid-ask spreads. While consequent transaction volumes have been low, there are now some signs that a correction in values, combined with an emerging sense that the worst might be over, has led to tentative optimism in previously moribund parts of the market.

The Company has seen some signs of this in its own remaining portfolio.  After a lengthy marketing campaign, the Southport asset has been subject to competing bids; initial interest has also been received in the Affinity office asset and further bids are expected shortly. The RoyaleLife portfolio has gone through an extremely challenging period in administration, and following a sale and debt restructure the recent relaunch of sales under new branding should help improve trading and, in time, make the portfolio more attractive to a wider range of purchasers.

I must be clear with shareholders that exiting the remaining assets will continue to be challenging. Any improvement in market conditions is unlikely, in the near term, to lead to material changes to asset valuations and increased recoveries, but may result in an acceleration of realisation time frames and greater execution certainty as more buyers emerge.  The Board recognises that shareholders do not expect the loans to be held for the long term in the hope of pricing recovery but is equally mindful of the need to avoid being a forced seller. 

I would like to thank shareholders for their ongoing patience which I hope will bear fruit in the coming period.  The Board remains focused on protecting and enhancing shareholder value and delivering returns of capital in the best manner possible. 

Jack Perry

Chairman

03 October 2024

Investment Manager's Report

Summary

As at 31 July 2024 the Company had three investments remaining, which are largely being managed and realised through enforcement processes. This report provides a summary update on the realisation process for each investment, and steps being taken by ICG Real Estate to secure those outcomes.

Portfolio

Investment Update

Southport - Hotel

The hotel securing the Company's Southport loan continues to be run by the administrator, through a specialist hotel operating partner and local management team.

As previously reported the asset has been on the market for sale for an extended period, with a previously agreed purchase aborting in 2023 which necessitated remarketing in 2024.

While the sales process has been protracted, during H1 2024 the level of interest increased and as a consequence the asset has seen an element of competitive bidding, at pricing levels in excess of the carrying value of the loan.  In September the administrator placed the property under offer and entered into a period of exclusivity with a north-west based property company, with no onerous conditions attached to the bid. While there is no assurance this transaction will complete, this represents positive progress toward a potential exit of this investment. 

During the reporting period, and following a request from the administrator, the Company determined to provide a further £0.3 million of funding to support working capital and allow for continued investment in the asset during the sales process.

RoyaleLife - Bungalow Parks

In January we concluded, through the administrator, the sale of the sites into a new structure with a new operator, as reported to shareholders in our Annual Report and Accounts.  The existing loan has thus been restructured and fully cross-collateralised with another security portfolio, previously financed by the Company's co-lenders, being private funds advised by the Investment Manager.  This has provided shareholders with a more diversified portfolio, and the business has now been relaunched under the 'Regency Living' brand, with the operator in the early stages of implementing a comprehensive organic plan to rebuild the business and enhance the portfolio.  

During the reporting period we have had consistent interest in the portfolio from an institutional buyer which initially submitted a fully approved, all-cash bid for 29 of the 35 sites. This party subsequently submitted a follow-on bid for the remaining six sites. 

In recent weeks the due diligence process for the acquisition has become protracted and, while we have been responsive to enquiries, the Investment Manager is not prepared to continue with this process indefinitely. As a consequence, on behalf of the Company and its co-lenders, we are now accelerating our work with the operators to enhance the business, platform and portfolio for the longer term.   

Affinity - Office

As shareholders will be aware a Law of Property Act (LPA) Receiver was appointed over this Bristol office property in H2 2023, and the Investment Manager has worked closely with them on the management and marketing strategy during the course of H1. 

While transactional activity for regional offices has remained subdued, we launched the asset to market in early July 2024.  Initial interest has been reasonably robust with multiple viewings, albeit many prospective bidders are considering the asset for future alternative uses rather than as a long-term office investment, and as such there is a high level of scrutiny on the appetite of the Council (who are the freeholder) to support a change of use.

The selling agents have received one initial bid for the asset, with further bids expected shortly.  There is, however, no assurance that any final bids will be at levels acceptable to the Company, or that a sale will conclude.   Nonetheless, in light of the emerging bidding evidence, along with agency guidance and a change to the expected timeframe for realisation, the Company has determined to make a further ECL provision of £2.32 million on the investment.

The receiver continues actively to market the remaining vacant space within the property and, where possible, seek lease renewals or regears with in-place tenants.  A key lease renewal was completed during the period, albeit another major tenant downsized their space within the building.  The Company received distributions from the asset totalling £0.6 million during the reporting period, which have been applied in reduction of the principal balance of the loan, with the balance of rental income being retained by the LPA Receiver for working capital purposes.   A further £0.4 million distribution was received after period end.

Reconciliation of Changes in Book Value

Economy and Financial Market Update

Long awaited normalisation of inflation materialised in H1 2024, finally reaching the target 2.0% level in May. Whilst this offered relief to consumers, the picture underneath the headline rate showed a number of continuing challenges, such as stubborn services inflation. Much commentator discussion in H1 2024 centred around timing expectations of a first interest rate cut. Whilst hopes of early cuts were dashed by inflation, the continued (headline) downward trend did lay the foundations for a modest initial cut of 0.25% in August, although only by a slim Monetary Policy Committee majority of 5-4. Expectations for continued cuts in H2 remain uncertain on the basis of finely balanced economic data.

After 2023's frequent public sector strikes, the incoming Labour government added c. £10bn to the budget for public sector pay, agreeing above-inflation pay increases of 5-6%. Private sector pay continued to rise at just above inflationary levels, causing some to question the sustainability of low inflation numbers. This was underpinned by continued low and declining unemployment, lastly at 4.2% in Q2 2024.

H1 2024 also brought with it GDP growth, albeit modest (0.6% and  0.7% for Q1 and Q2 respectively) and the UK economy looked to be well positioned, growing at twice the rate of the Eurozone. After snap elections in early July, positive economic bulletins eased the first weeks in office for the UK's new government, however a tough budget is anticipated which may cause continued market upheaval in the months ahead.

Occupational Demand/Supply

The office market stood steady at c. 8 million sq ft of take up and 60 million sq ft of availability in H1 2024. Behind these figures, demand for the best quality office space within well located, high specification, and sustainable buildings remains strong.  By contrast, second hand supply stands above its historic average. In total, 9.1 million sq ft of office developments are expected to complete in 2024, an above average level of completions, albeit 40% of this space is already pre-let or under offer. Acquisitions of offices for change of use are increasing, with over £400 million acquired for this purpose in Central London alone over H1 2024.

Within the industrial market, sector wide vacancy stood at 5.75% at end H1 2024, approximately 150 bps higher than in June 2023, and mainly comprised of second-hand space. Prime rental growth also halved on a trailing twelve-month basis, to 7.8%, however this remains robust, and most regions are still showing growth. Completions slowed with space under construction down 45% against last year, with an expectation that vacancy at year end will remain below the long-term average, allowing the sector to retain its positive supply/demand dynamics.

Improving consumer confidence in H1 2024 contributed to a stabilising retail market, and all-retail vacancy holding at 11.7%. Best in class assets on retail parks and key London streets have seen vacancy compress further, creating competition and driving rents. Distress appears limited to a few high-profile names (e.g. Ted Baker), and e-commerce share of the market remained stable.

In the hotel sector, London's occupancy has now returned to pre-Covid-19 levels, whilst in the regions, it is only slightly below. According to HotStats, UK wide TRevPAR (total revenue per available room) was 10% higher in the year to March 2024 than the prior period, albeit food + beverage revenues were largely flat and conference and banqueting revenues down.  Occupancy has largely been lower in the major regional markets (down 10% in Manchester and Glasgow) but average room rate growth has helped the top line.  Profit margins improved over H1 2024, with a fall in utilities expenses and increased efficiencies through higher occupancy trickling down, but cost pressures remain, particularly in wages.

Property Investment Market

After a subdued 2023, the UK investment market in H1 2024 brought some relief in the form of transaction volume growth, albeit from a very low base. A total of £22.1bn transacted, a 35% increase on a trailing 12-month basis, however the picture at asset class level differed vastly.

The bifurcation of office assets and markets between prime and secondary stock remained firmly in place, with no movement in prime yields over the last half year,  but outward pressure remaining in provincial markets, particularly for secondary stock. Market liquidity has focused on smaller lot sizes. 

H1 2024 industrial investment volume totalled £2.6bn, with expectations of full year volumes on par with 2023. After moving out to 5.25% at end 2023, an improving market in H1 2024 generated sufficient downward pressure to push prime yields back to 5.0%. Multi-let transactions dominated, and the South East accounted for both the highest transaction volumes on a trailing 12 month and Q2 2024 basis. Given prime industrial yields remain in line with the Bank of England base rate, no significant change in pricing is expected until interest rates and debt costs reduce.

Both retail warehousing and food stores remained attractive from an investment perspective, with prime yields sharpening 50 bps over the last six months to 5.50% and expected to further benefit from interest rate cuts. Total investment volumes remain low, with a lack of available stock hampering transactions, however trailing 12-month volume of £1.5bn, in line with offices (£1.6bn) or hotels (£1.5bn) shows growing confidence in the sector.

The first half of 2024 brought an unusual hotel investment market. Headline investment volumes stood at their highest since 2018, however these numbers were bolstered by a handful of large portfolios trading into private equity hands - Village Hotels to Blackstone, the Edwardian Collection to Starwood, and Landsec's portfolio to Ares. Under the headline figures, very few single assets transacted, with market participants still seeking evidence for prevailing valuation levels.

Finance Markets

Net bank lending to commercial property rose at its fastest pace since 2021 in June 2024, with a net increase of £1.3bn, rounding out three consecutive rises in the quarter. July's result remained positive at a £540 million increase; however the focus remains almost entirely on standing assets after a sluggish start to the year. It is likely that a significant uptick in development finance may be required to meet the new government's ambitious housing targets going forward.

The increase in lending was reflected in the Bank of England's Q2 Credit Conditions Survey. The results showed a sharp upswing in availability of commercial real estate credit throughout H1 and going forward, pointing to market stabilisation. The key factor cited was a change in sector specific risks, which may point to an expectation that the UK CRE market has now rebased. For prime yields, latest yield tables show at least half of all sectors have stabilised, with interest rate cuts and cheaper financing being the only anticipated impetus for change.

In a sign of markets facing up to reality, the first losses on AAA CMBS bonds since the Global Financial Crisis were felt in June of this year on the Elizabeth Finance 2018 issuance. Seen more positively, this at least indicated a bid in the market for the underlying retail assets, being three regional UK shopping centres. One new CMBS deal priced in May 2024, backed by Blackstone UK logistics assets, showing continued dominance of the industrial sector and the resulting financing appetite for the sector and the Blackstone brand as sponsor.

Portfolio Outlook

In recent weeks there have been clear signs of liquidity emerging in parts of the property market.  The proposed takeovers of Capital & Regional, Tritax Eurobox and Balanced Commercial Property Trust, by NewRiver Retail, SEGRO and Starwood respectively, have made headlines in the listed sector, but private markets activity also appears to be improving, albeit in sectors such as offices many buyers remain opportunistic. 

The assets securing the Company's remaining loans are not in those sectors experiencing the highest levels of investor demand, however the emerging bidding activity has been encouraging after an extremely challenging period in the markets.  We are hopeful that this will finally lead to realisations in the second half of this year. 

The RoyaleLife investment remains the most challenging to manage, but also the one which will be most impactful upon shareholders if a positive outcome can be delivered from what has latterly been a difficult investment.  As a result, the Investment Manager has not lost sight of the importance to drive income and value from this portfolio, and enhance its attractiveness to the market, while also pursuing the ongoing bidding interest.

ICG Alternative Investment Limited

03 October 2024

Directors' Responsibilities Statement

The Directors are responsible for preparing this Interim Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

•    The Unaudited Condensed Interim Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and

•    The Chairman's Statement and Investment Manager's Report include a fair review of the information required by:

(i)   DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the Unaudited Condensed Interim Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(ii)  DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position and performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report and Financial Statements that could do so.

On behalf of the Board

Jack Perry

Chairman

03 October 2024

Principal Risks and Uncertainties

The Company invests primarily in UK commercial real estate loans of a fixed rate nature; as such, it is exposed to the performance of the borrower and the underlying property on which its loans are secured. 

The principal risks and uncertainties of the Company were identified in detail in the Annual Report and Financial Statements for the year ended 31 January 2024.

In addition to regular risk reviews, emerging risks are considered as they arise, to assess any potential impact on the Company and to determine whether any actions are required.

As a result of such risks emerging, the Audit and Risk Committee regularly reviews its assessment of the key risks faced by the Company, which are currently identified as the following:

·      The inability to secure the sale or refinancing of an underlying property will frustrate the timely repayment of capital;

·      Imprecision of valuations will impact the Company's ability to accurately determine collateral values and to appropriately consider the potential impairment of any particular investment;

·      A further deterioration in property market conditions or liquidity could likely result in a further reduction in shareholder value;

·      Portfolio diversification: the effect on the Company of challenges experienced on the smaller number of remaining investments is magnified and could lead to increased volatility in cash flows or net asset values;

·      Some of the Company's costs are fixed and will therefore consume a greater proportion of the Company's revenues as the Company shrinks, which will impact the amount of funds available for distribution to shareholders;

·      Complications with the liquidation process could affect timing of the final distribution to shareholders.

Condensed Statement of Comprehensive Income

FOR THE SIX-MONTH PERIOD TO 31 JULY 2024

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

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

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

Condensed Statement of Financial Position

As at 31 July 2024

The Interim Financial Statements were approved by the Board of Directors on 03 October 2024 and signed on their behalf by:

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

Condensed Statement of Changes in Equity

For the SIX-MONTH period to 31 July 2024

For the SIX-MONTH period to 31 July 2023

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

Condensed Statement of Cash Flows

For the SIX-MONTH period to 31 July 2024

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

1. General information

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

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

The unaudited condensed financial statements comprise the financial statements of the Company as at 31 July 2024.

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

ICG Alternative Investment Limited is the external discretionary investment manager.

2. Accounting policies

a) Basis of preparation

The Interim Financial Statements included in this Interim Report, have been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the EU, and the Disclosure, Guidance and Transparency Rules of the FCA.

The Interim Financial Statements have not been audited or reviewed by the Company's Auditor.

The Interim Financial Statements do not include all the information and disclosures required in the Annual Report and Financial Statements and should be read in conjunction with the Company's Annual Report and Financial Statements for the year ended 31 January 2024, which are available on the Company's website (www.lbow.co.uk). The Annual Report and Financial Statements have been prepared in accordance with IFRS as adopted by the EU.

Other than as set out above, the same accounting policies and methods of computation have been followed in the preparation of these Interim Financial Statements as in the Annual Report and Financial Statements for the year ended 31 January 2024. In particular the Company has adopted the same approach to valuation of financial instruments including critical accounting judgements and estimation of uncertainties as set out in detail in the notes to the Annual Report and Financial Statements for the year ended 31 January 2024.

There were no new standards or interpretations effective for the first time for periods beginning on or after 1 January 2024 that had a significant effect on the Company's financial statements. Furthermore, none of the amendments to standards that are effective from 1 January 2024, had a significant effect on the Company's interim condensed financial statements. It is not anticipated that any standard which is not yet effective, will have a material impact on the Company's financial position or on the performance of the Company's statements.