Blackstone/GSO LnFin - Annual Financial Report - Part 3
25/04/2017 17:45
- Part 3: For the preceding part double click ID:nRSY3203Db
Committee receives confirmations from the Service Providers that no material issues have arisen in respect of the system of
internal controls and risk management operated within the Company's Service Providers. The Committee confirms that this is
an ongoing process in order to manage the significant risks faced by the Company. We deem that, to date, there are no
significant issues in this area which need to be brought to your attention.
External Audit
It is the responsibility of the Audit Committee to monitor the performance, independence, objectivity and re-appointment of
Deloitte. The Audit Committee met with the Auditor to consider the audit strategy and plan for the audit. The audit plan
for the reporting period was reviewed, including consideration of the key financial statement and audit risks, to seek to
ensure that the audit was appropriately focused.
The Auditor attends the Audit Committee meetings throughout the year, which allows the opportunity to discuss any matters
the auditor may wish to raise without the Adviser or other Service Providers being present. Deloitte provides feedback at
each Audit Committee meeting on topics such as the key accounting matters, mandatory communications and the control
environment.
Deloitte was formally appointed as the Company's auditor for the 2014 period end audit following a competitive tender
process during 2014. The lead audit partner is rotated every five years to ensure continued independence and objectivity.
The Audit Committee continues to be satisfied with the performance of the Auditor. We have therefore recommended to the
Board that the Auditor, in accordance with agreed terms of engagement and remuneration, should continue as the Company's
auditor at the forthcoming Annual General Meeting. Accordingly a resolution proposing the reappointment of Deloitte as the
Company's auditor will be put to the Shareholders at the 2017 AGM.
In advance of the commencement of the annual audit, the Audit Committee reviewed a statement provided by the Auditor
confirming their independence within the meaning of the regulations and professional standards. In addition, in order to
satisfy itself as to the Auditor's independence, the Audit Committee undertook a review of the auditor compensation and the
balance between audit and non-audit fees.
The Audit Committee has agreed the types of permitted and non-permitted ongoing non-audit services and those which require
explicit prior approval. During the year, Deloitte were contracted to provide services related to the interim financial
statements, US tax compliance, tax advisory services and as reporting accountants with respect to the prospectus issuance,
the control environment and the Board's ability to rely thereon. The value of non-audit services provided by Deloitte and
charged in the period amounted to approximately E323,608. The overall quantum of non-audit services and the one-off fees
incurred for this work in 2016 in these roles is material to the overall audit fee. This has been considered, including the
role of the respective engagement teams and the independence of individuals from the audit engagement team, and the Audit
Committee is satisfied that the auditors have acted in an independent and professional manner.
A member of the Audit Committee will be available to Shareholders at the forthcoming AGM of the Company to answer any
questions relating to the role of the Audit Committee.
Gary Clark
Audit Committee Chair
25 April 2017
Independent Auditor's Report to the Members of Blackstone / GSO Loan Financing Limited
Opinion on financial statements of Blackstone/GSO Loan Financing Limited
In our opinion the financial statements:· give a true and fair view of the state of the Company's affairs as at 31 December 2016 and of its profit for the year then ended;· have been properly prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union; and· have been properly prepared in accordance with the Companies (Jersey) Law 1991.
The financial statements that we have audited comprise:· the Statement of Financial Position;· the Statement of Comprehensive Income;· the Statement of Changes in Equity;· the Statement of Cash Flow;· the Significant Accounting Policies;
and· the related notes 1 to 20.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.
Summary of our audit approach
Key risks The key risks that we identified in the current year were:· Compliance with consolidation requirements;· Valuation of Investments.Within this report, identified risks are the same as the prior year.
Materiality The materiality that we used in the current year was E6.6m which was determined on the basis of approximately 2% (2015: 2%) of the Net Asset Value of the Company.
Scoping All audit work for this company was performed directly by the audit engagement team.
Going concern and the directors' assessment of the principal risks that would threaten the solvency or liquidity of the Company
We are required to state whether we have anything material to add or draw attention to in relation to:• the directors' confirmation above that they have carried out a robust assessment of the principal risks facing the Company, including those that We confirm that we have nothing material to add or draw attention to in respect of these matters. We agreed with the directors' adoption of the going concern basis of accounting and we did not identify any such material uncertainties. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company's ability to continue as a going concern.
would threaten its business model, future performance, solvency or liquidity;• the disclosures below that describe those risks and explain how they are being managed or mitigated;• the directors' statement below in note 2.2 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 Company's ability to continue to do so over a period of at least twelve
months from the date of approval of the financial statements; and• the directors' explanation as to how they have assessed the prospects of the Company, 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 Company 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.
Independence
We are required to comply with the Financial Reporting Council's Ethical Standards for Auditors and confirm that we are independent of the Company and we have fulfilled our other ethical responsibilities in accordance with those standards. We confirm that we are independent of the Company and we have fulfilled our other ethical responsibilities in accordance with those standards. We also confirm we have not provided any of the prohibited non-audit services referred to in those standards.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team.
Compliance with consolidation requirements
Risk description As disclosed in note 10(a) to the financial statements, investments at the year-end comprised of class B Cash Settlement Warrants (the "CSWs") E329,213,705 and class A and B shares E2,000,001 issued by the Company's wholly owned subsidiary, Blackstone /
GSO Loan Financing (Luxembourg) S.a.r.l. (the "Lux Subsidiary"). Compliance with accounting treatment for investments relating to consolidation requirements and related disclosures in accordance with the provisions of IFRS 10 are essential for financial
statements to give a true and fair view of the financial position and results of the Company. As a result of the restructuring completed during year, we have two separate matters to consider: Non-Consolidation of BGCF Management's assessment is that the
Company is not required to consolidate BGCF as it is not deemed to have control and accordingly recognises its investment in BGCF at Fair Value Through Profit or Loss. Following the transfer of its investment in BGCF to a new subsidiary in Luxembourg, as
disclosed in note 1 to the financial statements, management has revisited the assessment to demonstrate that the Company meets the "Investment Entity" criteria and the investment in subsidiary should be accounted for as an 'Investment in Subsidiary' at
fair value through profit and loss rather than consolidating the results of the subsidiary in the financial statements. Disclosure of Interests in Other Entities There is a key judgement around this risk and whether the Company has the ability through
legal agreements or through its activities to control BGCF. Connected to this, the level of disclosures, whilst prescribed in accounting standards, does involve management judgement in determining the appropriate level and detail to be disclosed in the
financial statements. Refer to the Audit Committee Report, Significant Accounting Policies and Note 11 to the Financial statements.
How the scope of our audit responded to the risk Our procedures included:· we inquired of management on regulatory matters and reviewed the legal framework, contractual terms, transactions and overall relationship between the Company, either directly or indirectly through its subsidiary and BGCF; ·
we assessed the review performed by management on the ability of the Company or its subsidiary to control BGCF. Our assessment also considered the changes in the Company's structure, activities or contractual terms as well as any development in the
relevant financial reporting framework and regulatory requirements; and · we assessed the adequacy and quality of the "IFRS 12 - Disclosure of Interests in Other Entities" against best practice using our technical compliance tools and experience in
the other listed entities.
Key observations No matters were identified by our procedures which required reporting to those charged with governance.
Valuation of Investments
Risk description Following the completion of the restructuring, as disclosed in note 1 to the financial statements, the Company's investment in the EU PPNs, issued by BGCF, was transferred to a wholly owned subsidiary in Luxembourg. For the purpose of the Company's
financial statements, as an investment entity, the investment in the subsidiary accounted for as "Investment in subsidiary at Fair Value Through Profit and Loss" and the investment in BGCF held by the subsidiary is fair valued. Investments in BGCF,
E331,213,706 as detailed in note 6 to the financial statements, are illiquid investments, not traded on an active market and are valued using valuation techniques determined by the Directors and classified as level III under IFRS 13 -Fair Value
Measurement. Valuation is therefore a key area of judgement and has a significant impact on the Net Assets Value ("NAV") which is the most significant Key Performance Indicator ("KPI") of the Company and has a direct effect on the recognition of gains and
losses on investments. The Company holds one investment in CSWs in the Lux Subsidiary. The fair value of CSWs is based on the NAV of the Lux Subsidiary which is based substantially in turn on the NAV of BGCF attributable to PPNs. As disclosed within note
2.11 (a) to the financial statements, the fair value of investment is determined using fair value techniques. The directors use their judgement, with the assistance of the Adviser, in selecting an appropriate valuation technique and refer to techniques
commonly used by market practitioners. For investments in BGCF and underlying CLOs and equity tranches retained by BGCF, assumptions are made based on quoted market rates adjusted for specific features of any instrument. There is a risk that a third party
valuer has used an incorrect methodology, inaccurate data is supplied by the CLO Manager of BGCF or inappropriate assumptions are used concerning market information. Refer to Audit Committee Report, Significant Accounting Policies and Note 6 to the
Financial statements).
How the scope of our audit responded to the risk Our procedures on valuation of investments included:· We assessed the valuation methodology for the financial instruments issued by BGCF against industry standards and IFRS 13;· As the financial information used to determine the fair value of the
investments is that of BGCF, we have reviewed the 2016 and 2015 audited financial statements of BGCF and related audit procedures performed by the auditor of BGCF. We instructed BGCF's auditor to report to us on a full audit scope after we reviewed their
audit plan for the year ended 31 December 2016. We also physically met with BGCF's auditor to review and discuss their working papers; · We involved a member of our specialist complex financial instruments team to review the valuation of investments
and related disclosures in the financial statements; · We tested the valuation by comparing information and assumptions used by management to information available from external independent sources such as Bloomberg or Intex; and· We have
reviewed the calculations of the change in value of PPNs held by the Subsidiary in Luxembourg and Cash Settled Warrants (CSWs) held by the Company for the period and its recognition in the statement of comprehensive income.
Key observations No differences were identified by our testing which required reporting to those charged with governance.
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:
Materiality E6,600,000 (2015: E6,500,000)
Basis for determining materiality We determined materiality for the Company, which is approximately 2% (2015: 2%) of the Net Asset Value of the Company.
Rationale for the benchmark applied The reason for using Net Asset Value is that this is the key performance indicator for investments in the Company.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of E132,000 (2015:
E130,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We
also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the
financial statements.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the entity and its environment, including internal control, and assessing the risks of material misstatement. Our
audit scope included the assessment of design and implementation of accounting processes and controls in place at third party accounting service provider. Audit work to
respond to the risks of material misstatement was performed directly by the audit engagement team.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting recordsUnder the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion:· we have not We have nothing to report in respect of these matters.
received all the information and explanations we require for our audit; or· adequate accounting records have not been kept by the Company; orthe financial statements
are not in agreement with the accounting records.
Our duty to read other information in the Annual ReportUnder International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, We confirm that we have not identified any such inconsistencies or misleading statements.
information in the annual report is:· materially inconsistent with the information in the audited financial statements; or· apparently materially incorrect based
on, or materially inconsistent with, our knowledge of the Company acquired in the course of performing our audit; or· otherwise misleading. In particular, we are
required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors' statement that they consider the
annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which
we consider should have been disclosed.
Other matter
Corporate Governance StatementAlthough not required to do so, the directors have voluntarily chosen to make a corporate governance statement detailing the extent of their We have nothing to report arising from our review.
compliance with the UK Corporate Governance Code. We reviewed the part of the Corporate Governance Statement relating to the Company's compliance with certain provisions
of the UK Corporate Governance Code.
Respective responsibilities of directors and auditor
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. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). We also comply with International Standard on Quality Control 1 (UK and Ireland). Our audit methodology and tools
aim to ensure that our quality control procedures are effective, understood and applied. Our quality controls and systems include our dedicated professional standards
review team and independent partner reviews. This report is made solely to the Company's members, as a body, in accordance with Article 113A of the Companies (Jersey) Law
1991. 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.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's
circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies
with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our
report.
Andrew Isham
for and on behalf of Deloitte LLP
Chartered Accountants and Recognized Auditor
St. Helier
Jersey, UK
25 April 2017
Statement of Financial Position
As at 31 December 2016
As at As at
31 December 2016 31 December 2015
Notes E E
Current assets
Cash and cash equivalents 7 & 10 813,119 252,610
Other receivables 5 709,343 62,365
Financial assets designated at fair value through profit or loss 6 & 10 331,213,706 326,032,708
Total current assets 332,736,168 326,347,683
Current liabilities
Payables 8 (397,848) (377,323)
Total current liabilities (397,848) (377,323)
Net assets 15 332,338,320 325,970,360
Capital and reserves
Stated capital 9 325,023,176 331,307,652
Retained earnings 7,315,144 (5,337,292)
Equity Shareholders' funds 332,338,320 325,970,360
Net Asset Value per Euro share 14 1.0238 0.9839
These financial statements were authorised and approved for issue by the Directors on 25 April 2017 and signed on their
behalf by:
Charlotte Valeur Gary Clark
Chair Director
The accompanying notes form an integral part of the financial statements.
Statement of Comprehensive Income
For the year ended 31 December 2016
Year ended Year ended
31 December 2016 31 December 2015
Notes E E
Income
Realised gain on foreign exchange 1,002 504
Net gains on financial assets designated at fair value through profit or loss 6 42,879,937 26,220,359
Total income 42,880,939 26,220,863
Expenses
Operating expenses 3 (2,361,651) (1,444,877)
Profit before taxation 40,519,288 24,775,986
Taxation 2 - -
Profit after taxation 40,519,288 24,775,986
Interest expense (7,033) (3,856)
Total comprehensive income for the year attributable to Shareholders 40,512,255 24,772,130
Basic and diluted earnings per Euro share 13 0.1237 0.0771
The Company has no items of other comprehensive income, and therefore the profit for the year is also the total
comprehensive income.
All items in the above statement are derived from continuing operations. No operations were acquired or discontinued during
the year.
The accompanying notes form an integral part of the financial statements.
Statement of Changes in Equity
For the year ended 31 December 2016
Notes Stated capital Retainedearnings Total
E E E
Equity Shareholders' funds at 1 January 2016 9 331,307,652 (5,337,292) 325,970,360
Total comprehensive income for the year attributable to Shareholders - 40,512,255 40,512,255
Transactions with owners, recorded directly to equity
Repurchase of shares 9 (6,284,476) - (6,284,476)
Dividends to Shareholders - (27,859,819) (27,859,819)
(6,284,476) (27,859,819) (34,144,295)
Equity Shareholders' funds at 31 December 2016 325,023,176 7,315,144 332,338,320
For the year ended 31 December 2015
Notes Stated capital Retainedearnings Total
E E E
Equity Shareholders' funds at 1 January 2015 9 301,200,000 (2,248,440) 298,951,560
Total comprehensive income for the year attributable to Shareholders - 24,772,130 24,772,130
Transactions with owners, recorded directly to equity
Proceeds from issuance of shares 9 30,107,652 - 30,107,652
Dividends to Shareholders - (27,860,982) (27,860,982)
30,107,652 (27,860,982) 2,246,670
Equity Shareholders' funds at 31 December 2015 331,307,652 (5,337,292) 325,970,360
The accompanying notes form an integral part of the financial statements.
Statement of Cash Flow
For the year ended 31 December 2016
Year ended31 December 2016 Year ended31 December 2015
E E
Cash flow from operating activities
Total comprehensive income for the year attributable to Shareholders 40,512,255 24,772,130
Adjustments to reconcile profit after tax to net cash flows:
- Unrealised (gain) / loss on financial assets designated at fair value through profit and loss (34,130,662) 3,243,967
- Realised gain on financial assets designated at fair value through profit and loss (1,322,881) -
Purchase of financial assets designated at fair value through profit or loss (18,000,000) (29,999,526)
Proceeds from sale of financial assets designated at fair value through profit or loss 48,272,545 -
Changes in working capital
Increase in other receivables (646,978) (41,142)
Increase / (decrease) in payables 20,525 (56,433)
Net cash generated from / (used in) operating activities 34,704,804 (2,081,004)
Cash flow from financing activities
Proceeds from subscriptions - 30,107,652
Repurchase of shares (6,284,476) -
Dividends paid (27,859,819) (27,860,982)
Net cash (used in) / generated from financing activities (34,144,295) 2,246,670
Net increase in cash and cash equivalents 560,509 165,666
Cash and cash equivalents at the start of the year 252,610 86,944
Cash and cash equivalents at the end of the year 813,119 252,610
The accompanying notes form an integral part of the financial statements.
Notes to the Financial Statements
For the year ended 31 December 2016
1 General information
The Company is a closed-ended limited liability investment company domiciled and incorporated under the laws of Jersey with
variable capital pursuant to the Collective Investment Funds (Jersey) Law 1988. It was incorporated on 30 April 2014 under
registration number 115628. The Company's Euro shares were admitted to trading on the SFS of the LSE on 23 July 2014 and
from 17 April 2015 to TISE.
The Company's investment objective is to provide Shareholders with stable and growing income returns, and to grow the
capital value of the investment portfolio by exposure predominately to floating rate senior secured loans directly and
indirectly through CLO Securities and investments in loan warehouses. The Company seeks to achieve its investment objective
solely through exposure (directly or indirectly) to one or more risk retention companies or entities established from time
to time ("Risk Retention Companies").
At 31 December 2016, all shares in issue were Euro shares. The Company may issue one or more additional classes of shares
in accordance with the Articles of Association.
The Company's registered address is Liberté House, 19-23 La Motte Street, St Helier, Jersey, JE2 4SY, Channel Islands.
Change in structure
In July 2015, upon advice, the Company resolved to change its structure. Accordingly, on 23 July 2015, a wholly owned
Luxemburg subsidiary, Blackstone / GSO Loan Financing (Luxembourg) S.à r.l. (the "Lux Subsidiary"), was incorporated with
an issued share capital of 20,000 Class A shares held by the Company. Subsequently, the 15 Class B2 BGCF shares held in
Blackstone / GSO Loan Financing 2 Limited (the "Subsidiary") were transferred to the Company and the Subsidiary was
dissolved on 23 December 2015.
On 3 February 2016, the Luxembourg restructuring took place. This comprised the Company transferring its entire holding of
unsecured Profit Participating Notes ("PPNs") to the Lux Subsidiary. The transfer was undertaken in two tranches:
i. In the first tranche, the Company transferred Euro PPNs with a principal amount of E2,011,299 (together with any
accrued but unpaid interest) in exchange for 1,980,000 Class A shares and 1 Class B share in the Lux Subsidiary;
ii. In the second tranche the Company transferred Euro PPNs with a principal amount of E313,918,227 (together with any
accrued but unpaid interest) in exchange for 309,033,367 CSWs issued by the Lux Subsidiary.
On 20 December 2016, the 15 Class B2 BGCF shares were redeemed by BGCF. The proceeds were invested in new CSWs issued by
the Lux Subsidiary and subsequently in new PPNs issued by BGCF.
2 Significant accounting policies
2.1 Statement of compliance
The Annual Report and Financial Statements ("Annual Report") are prepared in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority and with International Financial Reporting Standards ("IFRS") as
adopted by the European Union, which comprise standards and interpretations approved by the International Accounting
Standards Board ("IASB"), and interpretations issued by the International Financial Reporting Standards and Standing
Interpretations Committee as approved by the International Accounting Standards Committee ("IASC") which remain in effect.
The financial statements give a true and fair view of the Company's affairs and comply with the requirements of the
Companies (Jersey) Law 1991.
The accounting policies in respect of financial instruments are set out below in Note 2.7 respectively due to the
significance of financial instruments to the Company. In addition, please refer to Note 2.11 for details of the impact of
IFRS 10 "Consolidated Financial Statements" ("IFRS 10") on the presentation of the results of the Company as a result of
the Luxembourg restructuring.
The principal accounting policies applied in the preparation of these financial statements are set out below. These
policies have been consistently applied to all years presented.
2.2 Basis of preparation
The Company's financial statements have been prepared on a historical cost basis, except for financial instruments measured
at fair value through profit or loss.
The Company's functional currency is the Euro, which is the currency of the primary economic environment in which it
operates. The Company's performance is evaluated and its liquidity is managed in Euros. Therefore, the Euro is considered
as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions.
The financial statements are presented in Euros, except where otherwise indicated.
The financial statements have been prepared on a going concern basis. The disclosures with respect to the Directors'
assessment on the use of the going concern basis are provided in the Executive Summary.
2.3 Interest income and expense on cash and cash equivalents
Income receivable and payable on cash and cash equivalents is recognised separately through profit or loss in the Statement
of Comprehensive Income, on an effective interest rate yield basis.
2.4 Shares in issue
The shares of the Company are classified as equity based on the substance of the contractual arrangements and in accordance
with the definition of equity instruments under IAS 32 "Financial Instruments: Presentation" ("IAS 32").
The proceeds from the issue of shares are recognised in the Statement of Changes in Equity, net of the incremental issuance
costs.
2.5 Fees and charges
Expenses are charged through profit or loss in the Statement of Comprehensive Income on an accruals basis.
2.6 Cash and cash equivalents
Cash comprises current deposits with banks.
Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and are
subject to an insignificant risk of changes in value. They are held for the purpose of meeting short term cash commitments
rather than for investments or other purposes. Cash equivalents are revalued at the end of the reporting period using
market rates and any increases / decreases are recognised in the Statement of Comprehensive Income. There were no such
holdings during the year ended 31 December 2016 (31 December 2015: E Nil).
2.7 Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of
the instruments.
Financial assets
(a) Classification
The Company classifies its investments in accordance with IAS 39 Financial Instruments: Recognition and Measurement ("IAS
39") as financial assets at fair value through profit or loss. These are financial instruments held for investment
purposes. Financial assets also include cash and cash equivalents and other receivables.
Financial assets designated at fair value through profit or loss at inception
Financial assets designated at fair value through profit or loss at inception are financial instruments that are not
classified as held for trading but are managed, and their performance is evaluated on a fair value basis in accordance with
the Company's documented investment strategy.
The Company's policy requires the Adviser and the Board to evaluate the information about these financial assets on a fair
value basis together with other related financial information.
(b) Recognition, measurement and derecognition
Purchases and sales of investments are recognised on the trade date - the date on which the Company commits to purchase or
sell the investment. Financial assets designated at fair value through profit or loss are measured initially and
subsequently at fair value. Transaction costs are expensed as incurred and movements in fair value are recorded in the
Statement of Comprehensive Income.
Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Company
has transferred substantially all risks and rewards of ownership.
(c) Fair value estimation
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
As at 31 December 2016, the Company held 295,083,704 CSWs, 2,000,000 Class A shares and 1 Class B share issued by the Lux
Subsidiary (the "Investments") (31 December 2015: 311,012,708 PPNs and 15 Class B2 shares issued by BGCF and 20,000 Class A
shares in the Lux Subsidiary). These Investments are not listed or quoted on any securities exchange, are not traded
regularly and on this basis no active market exists. The Company is not entitled to any voting rights in respect of the Lux
Subsidiary by reason of their ownership of the CSWs.
The fair value of the CSWs is based on the NAV of the Lux Subsidiary which is based substantially in turn on the NAV of
BGCF attributable to the PPNs. The fair values of the Class A and Class B shares held in the Lux Subsidiary are deemed to
approximate to their cost.
(d) Valuation process
The Directors have held discussions with third party providers of BGCF in order to gain comfort around the valuation of the
assets in the BGCF portfolio and through this, the valuation of the CSWs and PPNs as of the Statement of Financial Position
date.
The Directors, through ongoing communication with the Adviser including quarterly meetings, discuss the performance of the
Adviser and the underlying portfolio and in addition review monthly investment performance reports. The Directors analyse
the BGCF portfolio in terms of the investment mix in the portfolio. The Directors also consider the impact of general
credit
- More to follow, for following part double click ID:nRSY3203Dd
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