BBGI Global Infrastructure Regulatory News (BBGI)

29 March 2017

BBGI SICAV S.A.

('BBGI' or the 'Company')

Annual Results for financial year ended 31 December 2016

This announcement contains inside information

COMPANY OVERVIEW

Key characteristics as at 31 December 2016

FINANCIAL AND OPERATIONAL HIGHLIGHTS

§ Investment Basis NAV[5] ("NAV") per share up 13.1% at 126.1 pence as at 31 December 2016 (111.5 pence - 31 December 2015).

§ NAV up 13.6% at £545.0 million as at 31 December 2016 (£479.8 million - 31 December 2015).

§ Total shareholder return ("TSR") since listing in December 2011 to 31 December 2016 of 70.7%[6] equating to a compound annual growth rate ("CAGR") of 11.2% which is well above the IRR target of 7% to 8% on the £1 IPO issue price.

§ During the year, the Board increased the annual dividend target by 4.2% to 6.25 pence per share. An interim dividend of 3.125 pence per share was paid on 26 October 2016 and a further dividend of 3.125 pence per share is proposed for the year ended 31 December 2016.

§ An Ongoing Charges ratio of 0.98% that we believe continues to be the lowest in the UK listed infrastructure sector.

§ Market capitalisation increased to £596.5 million at 31 December 2016, up 7.2% from £556.3 million at 31 December 2015.

§ Shares continue to trade at a premium to the NAV, and stood at a premium of 9.4% as at 31 December 2016[7].

§ Portfolio performance and cash receipts were ahead of business plan and underlying financial models.

§ At 31 December 2016, the Group had, on an Investment Basis, a net debt position of £21.4 million consisting of a total cash balance of £23.8 million and total borrowings outstanding of £45.2 million. In addition the Company has utilised a further £25.1 million of the debt facility to cover outstanding letters of credit.

§ The portfolio of 39 projects has a fair market value of c. £569.9 million at 31 December 2016, with additional equity of £23.4 million committed.

§ Average discount rate of 7.56% at 31 December 2016 compared with 7.86% at 31 December 2015.

§ The successful transitions of Women's College Hospital from ramp-up phase to full operations, and Ohio River Bridges from construction to ramp-up phase, have contributed to the reduction in the average discount rate.

§ Significant foreign exchange tailwind resulted in a £51.2 million uplift in the portfolio value. Put into context, since listing in December 2011 the net cumulative effect of foreign exchange movement on the portfolio value has been an uplift of £6.6 million or 1.2% of the NAV at 31 December 2016. The Company continues to hedge forward forecast project distributions on a four-year rolling basis in line with its hedging policy.

§ International Financial Reporting Standards NAV ("IFRS NAV") of £538.8 million as at 31 December 2016 (£482.4 million - 31 December 2015).

§ Net profit under IFRS of £80.2 million for the year ended 31 December 2016 (£35.6 million - year ended 31 December 2015).

§ Global demand for PPP infrastructure assets remains strong, with demand exceeding supply in most markets. This trend has continued to have a favourable impact on valuations, but also makes it more difficult to find new investment opportunities which are accretive.

§ We will pursue attractive primary development opportunities on a selective basis and will also continue to consider secondary acquisitions on an opportunistic basis.

CHAIRMAN'S STATEMENT

I am pleased to introduce this Annual Report for the year ended 31 December 2016.

The underlying performance for the year was robust with cash flows coming in ahead of the business model and discount rates continuing to edge down. Cost control has been rigorous and ongoing charges, which are largely Euro denominated, came in at 0.98%. Altogether, this performance has given the Board the confidence to propose raising the full year dividend to 6.25 pence per share, an increase of 4.2% for the year.

The financial numbers for the year to 31 December 2016 have been heavily influenced by the weakening of Sterling, the company's reporting currency, following the UK's EU membership referendum. Some 61% of the Company's assets are located outside the UK and denominated in major currencies other than Sterling. The resultant £51.2 million foreign exchange uplift on the portfolio value, together with the results of active asset management and the bringing into operation of assets previously under construction, have all contributed to a NAV increase of 13.6%. It is noteworthy that the net effect of foreign exchange movements since the Company was listed in December 2011 has been an increase in the portfolio value of £6.6 million, or 1.2% of the NAV at 31 December 2016.

With interest rates remaining low across the world, competition for infrastructure assets offering strong uncorrelated yields from secure counter-parties remains intense. As a result, your company has continued to bid for primary opportunities where better value for shareholders is perceived and only selectively bids for secondary opportunities. The Management Report sets out the status of our current pipeline of investment opportunities.

As previously advised legislation was scheduled to be tabled at the Luxembourg parliament which would enable the company to raise new capital without having to limit the price to within a 5% premium of the latest published NAV per share at the time of the issue. Although we are confident that the legislation will be passed, unfortunately the implementation is still in progress and the Company still has no clear line of sight as to when it will be approved. Consequently in order to raise the additional capital to progress our strategic plans, we are today announcing a 'tap issue' placing of new shares in the Company to raise c.£58.5 million, with the net proceeds to be utilised initially in paying down bank debt.

Better news is emerging from the exemptions which are likely to be available following the OECD project on Base Erosion and Profit Shifting (BEPS) on the limitation of interest deductibility. We believe, now, that any adverse effect on the Company's cash flows should not be material.

Since our launch in 2011, management has worked diligently to ensure the success of the company and has produced a compound annual total shareholder return of 11.2%. In accordance with our Articles, a motion to support the continuation of the Company will be tabled at the AGM and I encourage you to vote in favour.

The Management Team regularly meets with investors and the Supervisory Board receives investor feedback at each meeting both directly and from the Company's brokers. Additionally my colleagues and I are always available to meet with any investor who wishes to do so.

2016 has been a year where the outcome of democratic processes has surprised the experts not least in the UK referendum on the European Union and in the USA Presidential Election. The consequences of both are much speculated upon but remain uncertain. Your Board will continue to monitor events and take action to ensure that BBGI is as well placed as possible. Nonetheless we expect that your company's strong cash flows, long term contracts with sound counter-parties and diversified assets which underpin its ability to pay dividends will continue to offer a reassuring degree of certainty. We believe this proposition will continue to be attractive to investors.

David Richardson

Chairman

BBGI SICAV S.A.

28 March 2017

INVESTMENT POLICY AND OBJECTIVES

INVESTMENT POLICY

Introduction

The Company's investment policy is to invest in equity, subordinated debt and/or similar interests issued in respect of infrastructure projects that have been developed predominantly under the PPP/PFI or similar procurement models. The Company principally invests in projects that are operational and that have completed construction. Accordingly, investment in projects that are under construction will be limited to 25% of the portfolio value (calculated as at the time of investment).

Project revenue stream characteristics

The Company invests predominantly in projects whose revenue streams are public sector or government-backed, although the Company may invest in projects whose revenue streams are backed by non-governmental organisations that the Directors believe carry an appropriate credit risk and represent a low counterparty risk, for example as alternative infrastructure procurement models develop (such as private-private partnerships). Investment in projects whose revenue streams are not public sector or government-backed will be limited to 25% of the portfolio value, calculated as at the time of investment.

The Company primarily invests in projects where payments received by the project entities, and hence the revenue streams from the projects, do not generally depend on the level of use of the underlying project asset and as such are "availability-based". Projects are characterised as having an "availability-based" revenue stream if, on average, 75% or more of payments received by the relevant project entity do not depend on the level of use of the project asset. Investment in projects where, on average, 25% or more of payments received by the project entities depend on the level of use made of the project assets ("demand-based") will be limited to 25% of the portfolio value, calculated as at the time of investment.

Geographic focus

The Directors believe that attractive opportunities for the Company will continue to arise in jurisdictions where PPP/PFI is a practised route for delivering infrastructure investments. The Company intends to invest predominantly in projects that are located in Europe, North America, Australia and New Zealand. However, the Company may also invest in projects in other markets should suitable opportunities arise.

The Company will seek to mitigate country risk by concentrating predominantly on investment opportunities in countries where the Directors consider that project structures are reliable, where (to the extent applicable) public sector counterparties carry what the Management Board consider to be an appropriate credit risk or alternatively where insurance or guarantees are available for the sovereign credit risk, where financial markets are relatively mature and where a reliable judicial system exists to facilitate the enforcement of rights and obligations under project documentation.

Origination of investments

Each of the investments in the portfolio complies with the investment policy and further investments will only be acquired if they comply with the Company's investment policy.

Further investments will be subject to satisfactory due diligence and agreement on price which will be negotiated on an arm's length basis and on normal commercial terms. It is anticipated that any further investments will be acquired out of existing cash resources, borrowings including letters of credit, funds raised from the issue of new capital in the Company or any combination of the three.

Single investment limit and diversity of clients and suppliers

In order to ensure that the Company has a spread of investment risk, it is the Company's intention that when any new acquisition is made, the investment (or, in the event of an acquisition of a portfolio of investments, each investment in the portfolio) acquired does not have an acquisition value (or, if it is an additional stake in an existing investment, the combined value of both the existing stake and the additional stake acquired) is not greater than 20% of the portfolio value of the Company immediately post-acquisition (but subject always to a maximum limit of 25% of the portfolio value immediately post-acquisition). In order to avoid over-reliance on either a single client or a single contractor when selecting new investments to acquire, the Company will seek to ensure that the portfolio of project entities in which the Company invests has a range of clients and supply chain contractors.

Borrowing and leverage

The Company intends to make prudent use of leverage (and leverage in the context of the Company shall exclude indebtedness in place at project entity level) primarily to finance the acquisition of investments and for working capital purposes. The Company will ensure that the Company's outstanding borrowings, excluding intra-group borrowings and the debts of underlying project entities but including any financial guarantees to support subscription obligations, will be limited to 33% of the portfolio value. The Company may borrow in currencies other than Pounds Sterling ("Sterling") as part of its currency hedging strategy.

Currency and hedging policy

The Company will continue to invest in project entities that are located not just in the UK and, as a result, some of the Company's underlying investments will be denominated in currencies other than Sterling. For example, investments in the current portfolio are denominated in Australian dollars, Canadian dollars, euros, Norwegian kroner and US dollars as well as Sterling. However, any dividends declared and paid on the Company's ordinary shares will be made in Sterling, and the market price and net asset value of the ordinary shares will be reported in Sterling.

Any currency rate hedging transactions will only be undertaken for the purpose of assisting the Company in meeting its dividend distribution targets. Hedging transactions will not be undertaken for speculative purposes. Management will continue to review the hedging strategy on an annual basis.

Interest rate hedging may also be carried out to seek to provide protection against increasing costs of servicing any debt drawn down by the Company to finance investments. This may involve the use of interest rate derivatives and similar derivative instruments.

Potential disposals of investments

Whilst the Directors may elect to retain investments over the long term, they will regularly monitor the valuations of such project entities and any secondary market opportunities to dispose of investments. The Company only intends to dispose of investments where it is considered that appropriate value can be realised for the Company or where the Management Board otherwise believes that it is appropriate to do so. Proceeds from the disposal of investments will generally be reinvested, or may be distributed at the discretion of the Directors.

The Company will not be required to dispose of investments and to rebalance its investment portfolio as a result of a change in the respective valuations of investments, although in such circumstances the Management Board will review the composition of the investment portfolio as a whole and consider whether any rebalancing is in the interests of shareholders.

Amendments to and compliance with the investment policy

Changes to the investment policy may only be made with the approval of the CSSF and the shareholders by way of ordinary resolution, in accordance with the Luxembourg law of 17 December 2010 on undertakings for collective investments (the "Law") and (for as long as the ordinary shares are listed on the Official List) in accordance with the UK Listing Authority listing rules (the "Listing Rules"). The investment policy restrictions detailed above apply at the time of the acquisition of any new investment.

In the event of any breaches of the investment restrictions contained in the investment policy, the Company will inform shareholders through an announcement on a Regulatory Information Service.

INVESTMENT OBJECTIVES

Looking forward to 2017 and beyond, the Company will continue to seek to provide investors with secure and predictable long-term cash flows whilst actively managing the investment portfolio, with the intention of maximising the capital value over the longer term. The Company is currently targeting a dividend of 6.25 pence per share per annum with the aim to increase this distribution progressively over the longer term. The Company targets an IRR in the region of 7% to 8% on the £1 IPO issue price, to be achieved over the longer term.

INVESTMENT PORTFOLIO

As at 31 December 2016, BBGI's assets consisted of interests in 39 high-quality, availability-based, PPP/PFI infrastructure assets in the transport, healthcare, education, justice and other services sectors. Located in Australia, Canada, Continental Europe, the UK and the US, 100% of the assets by value are operational[8]. 

BBGI has equity and subordinated debt subscription obligations in Mersey Gateway Bridge ("MGB") and equity subscription obligations in North Commuter Parkway ("NCP"), collectively amounting to approximately £23.4 million at 31 December 2016. The subscription obligations are due for payment upon the scheduled construction completion of the respective projects. Assuming, for pro-forma purposes only, that the equity and/or subordinated debt subscription obligations for MGB and for NCP were paid down at 31 December 2016, the portfolio split would be 97% operational, 1% early-stage construction and 2% late-stage construction.

Portfolio Summary

The concessions granted to project entities in the portfolio are predominantly granted by a variety of public sector clients or entities which are government backed. All project entities in the portfolio are located in countries which are highly rated (Aa1/AA for the UK; Aaa/AAA for Australia, Canada, Germany and Norway; Aaa/AA+ for the US) by Moody's and by Standard & Poor's.

PORTFOLIO BREAKDOWN at 31 December 2016

Overview of the portfolio as at 31 December 2016 is shown in the tables below:

Global portfolio with 39 assets; all located in AA to AAA rated countries

Diversified sector exposure with a bias towards availability roads and bridges

Weighted average concession life is 22.6 years and weighted average debt life is 19.2 years

Well diversified portfolio with no major single asset exposure

The above only considers those projects where the equity commitments have been paid down.

96% of portfolio owned 50% or more

100% availability based income; no demand risk

FIVE LARGEST PROJECTS

Golden Ears Bridge, Canada (Availability Road)

The Golden Ears Bridge in Vancouver is a 1 km, six-lane road that spans the Fraser River and connects Maple Ridge and Pitt Meadows to Langley and Surrey. The scheme, which opened in March 2009, also includes more than 3.5 km of structures including ramps, viaducts, minor bridges and underpasses, and more than 13 km of mainline roadway, a large part of which has been landscaped. The project consists of the design, construction upgrade, finance and operation for 32 years.

The project brought close to C$1 billion in construction-related activity to the area. Commuters using the new bridge can save up to 40 minutes per peak-hour round-trip from Maple Ridge to Langley.

Northern Territory Secure Facilities, Australia (Justice)

The facility, located near Darwin, includes three separate centres:

§ A 1,000 bed multi-classification men and women's correctional centre to replace the existing outdated facilities at Berrimah.

§ A 30 bed secure mental health and behavioural management centre, a first of its kind in the Territory.

§ A 48 bed supported accommodation and program centre for community-based offenders with facilities designed to support the government's goals of enhanced rehabilitation, education and reduced reoffending rates in the Territory.

BBGI acquired its initial interest in this project while it was still in construction and then subsequently acquired the remaining 50% stake in July 2015. The facility became operational in November 2014. The new facility allows Northern Territory Corrections to engage prisoners into structured daily programs in order to foster rehabilitation and stronger re-integration.

Victoria Prisons, Australia (Justice)

The Metropolitan Remand Centre accommodates up to approximately 950 male prisoners and is located approximately 20 km from the Melbourne city centre.

The second, smaller facility is the Marngoneet Correctional Centre that houses approximately 550 male prisoners, and is the State's major intensive treatment facility for male prisoners. It offers treatment programs to promote rehabilitation, reduce repeat offending and to prepare prisoners for transition back into the community.

Both prisons started operation in 2006. In 2013 and 2016, significant augmentation orders were undertaken to expand the prisoner capacity.

M80 Motorway, UK (Availability Road)

The section of road between Stepps and Haggs is an all-purpose dual carriageway and was the only non-motorway section of the A80 between Glasgow and the end of the M80 at Dunblane. The project involved construction of 18 km of dual two/three lane motorway with associated slip roads and infrastructure from Stepps in North Lanarkshire to Haggs in Falkirk. Traffic availability was achieved in August 2011, with the work undertaken reducing congestion for road users and improving journey times and reliability.

Women's College Hospital (Health)

This replacement hospital, in Toronto, Ontario, is a multi-storey building (approximately 430,000 square feet) consisting of ambulatory care, surgical research and educational facilities, as well as administrative, parking and other non-clinical space to support the Hospital's comprehensive and integrated approach to providing quality women's health care to patients with a need for diagnostics, extended treatments and chronic care. The project was delivered in two phases. The first phase became operational in May 2013. The second phase achieved substantial completion in September 2015 and final completion (which involved the integration of phases one and two) occurred in March 2016. Women's College Hospital was recognised as one of the best operational projects in Canada and North America, and received awards from the Canadian Counsel for Public Private Partnerships and the P3 Awards respectively.

Facility management

Management continually reviews the potential concentration risk in respect of facility management contractors. Management has not identified any significant exposure risk and therefore remains comfortable with the current contract allocation.

Representation at project level

With regard to the project entities acquired, the Management Board has taken, in most cases, two board seats within each portfolio asset. More information on the performance of the project entities is provided in the Valuation section of this report.

Relationship with clients

The Management Board continues to work hard to build and maintain a good dialogue with the Group's public sector clients and partners. We believe that having a regular dialogue with public sector clients is important for the partnership relationship and can help prevent issues from escalating, especially as some public sector clients are under increased fiscal constraints. The Management Board is engaged through its representation at the project level in actively resolving issues, proactively identifying efficiencies and facilitating variations that benefit both shareholders and public sector clients.

Across the entire portfolio, BBGI remains comfortable with the counterparty risk of the public sector clients, and the Management Board is not aware of any instances of financial distress that might lead to default. Facility management continues to be performed at a high level and, with the exception of the Burg prison project referred to below, there are no significant incidents to report.

In the event of poor performance by the facility manager, then the associated cost, typically a deduction from the unitary payment, will be passed on to the facility manager.

Burg Prison

There is a dispute between the client and a subcontractor on the Burg prison project. The dispute itself, which relates to the interpretation of the indexation mechanism, has resulted in the client making substantial retentions. Although the project company is a party to the formal dispute, it has not suffered any losses as the retentions incurred have all been passed on to the subcontractor. During 2016 the courts ruled in favour of the client. The dispute went to appeal and, in January 2017, the appeal court also ruled in favour of the client. The objective of the subcontractor is now to agree an invoicing procedure that provides sufficient evidence of the disputed indexation element. Due to this, a risk premium has been included in the valuation of the project. To date, deductions on the project have been minimal. The project itself makes up approx. 1% of the total portfolio value.

As a general rule, the public sector clients have been diligent in managing their infrastructure costs. The Company's representatives at the project level continue to work closely with all contracted parties, including the client, facility managers and managed service providers, the objective of which is to ensure that both a quality service and value for money is being delivered to the public client.

We are aware of situations, particularly in the UK, where the client has proactively sought to apply deductions to realise savings. There have been published reports on some PPP/PFI projects where material performance deductions have been levied through strict contractual interpretation by some clients for asset-wide defects, one example being breaches in fire-compartment walls in buildings. Efforts to realise savings have been largely focused on health care projects (often acute care hospitals) in response to pressure on NHS trust budgets and, in some cases, have resulted in significant deductions on concession payments and lock up of distributions under the loan agreements. As acute care UK hospital PPPs account for less than 1.5% of BBGI's portfolio value, this development does not present a material exposure to the Group. Notwithstanding this, BBGI will continue to monitor this development closely, in particular any potential knock-on effect it may have on other UK PPP sectors in which BBGI is invested. While the impact to the Group's portfolio is currently immaterial, if this situation migrates to other sectors and the issues are not resolved satisfactorily, it could affect the value of these projects.

REPORT OF THE MANAGEMENT BOARD

BUSINESS REVIEW

Business of the Company

The Management Board is very pleased to present the results for the year ended 31 December 2016. Both the management report for the consolidated financial statements and the standalone financial statements have been presented as one single report.

Highlights

BBGI's goals for 2016 remained consistent with those of previous years i.e. to actively manage the portfolio in order to enhance returns and to position the Company for continued selective growth. Certain key performance indicators for 2016 are highlighted below:

Key Performance Indicators ("KPIs")

The Company's portfolio of investments performed well during the year, with cash flows ahead of the business plan. During the year, the investment portfolio enjoyed a significant uplift in valuation driven primarily by the weakening of Sterling against all major currencies in the wake of the UK EU membership referendum, and also as a result of continued active management, the construction completion effect on discount rates, disciplined cost control and the continued strong market demand for PPP infrastructure assets.

It is worth noting that whilst foreign exchange has played a significant part in contributing to the portfolio value growth during the year under review this should however be put into context. Since listing in December 2011 the cumulative net effect of foreign exchange movement on BBGI's portfolio valuation has been an uplift in value of £6.6 million or 1.2% of the NAV at 31 December 2016.

In light of the continued favourable portfolio performance, the Board resolved to increase its annual dividend target from 6.00 pence per share to 6.25 pence per share, which represents an increase of 4.2%.

Growth in the portfolio

Interest in PPP infrastructure assets once again remained robust throughout 2016. As reported last year there is more investment capital searching for PPP assets than there is supply, maintaining pressure on prices. While this environment has been positive from a portfolio valuation perspective, it has been more difficult to identify and acquire projects on terms that are accretive to shareholders.

New Secondary Acquisitions

In March, BBGI completed the acquisition of 100% of the equity and subordinated debt interests in the Belfast Metropolitan College ("BMC") project in Northern Ireland. BMC is an educational campus composed of two five-storey teaching facilities and a two-storey engineering facility with associated car parking and a landscaped courtyard. The project is operational and the concession runs until January 2026. The BMC acquisition was part of a transaction that included the North West Regional College ("NWRC") project, also in Northern Ireland, which transferred in December 2015. Because the Company has had previous dealings with the vendor, the acquisition of these projects was conducted on a directly negotiated basis without having to engage in a broad auction process. The combined acquisition cost for both projects was £11.7 million. BBGI will receive availability payments during the concession periods from the governing bodies of each of BMC and NWRC.

While only one acquisition completed during the year, it was not due to lack of interest, but rather adherence to our investing discipline. There were many investment opportunities presented to, and considered by, BBGI in 2016 but none of them was considered value accretive to shareholders. We came close to transacting on opportunities in Canada and Australia, but ultimately were either outbid or vendors sold to co-shareholders who exercised pre-emption rights. In addition, we have been heavily engaged in a number of consortia bids for primary projects, as described below.

We avoided the broad auction processes and incurred less than £100,000 in bid/pursuit costs. We also avoided "strategy drift" and have not altered our investment metric or relaxed our acquisition criteria in order to grow.

Despite a competitive acquisition environment, the Company still expects to grow the portfolio on favourable terms. We are currently considering a number of strategic opportunities which we believe to be attractive.

Primary Investment Activity - bidding on new PPP projects

As our portfolio grows, and projects currently in construction move into their operational phase, we will continue to add construction exposure to maintain an appropriate mix. As a number of senior members of our team have experience managing PPP bids and seeing assets through the construction phase, we believe some exposure (less than 25%) can be attractive. We see this as an opportunity to organically grow the NAV over time and will continue to ensure that the dividend target is not compromised. The substantial construction completion of the Ohio River Bridges project in the US in December 2016 once again demonstrated the value that can be generated by successfully taking a project from construction to operational phase.

We are continuing to actively build our pipeline of development opportunities ("primary investments") to replace those projects that have become operational.

Primary investment activities involve sourcing and originating, bidding for and winning new infrastructure development projects, typically as part of a consortium for PPP projects. Often these primary PPP bids are led by construction companies that are keen to secure the opportunity to construct the asset, but may be keen to have a partner like BBGI for a number of reasons: 

· consortia are attracted to BBGI because of our extensive project credentials that can assist with the shortlisting process;

· having a financial partner is a pre-requisite for some construction companies so they can avoid consolidating the project company debt onto the balance sheet of the parent company;

· BBGI's cost of capital is often lower than construction companies, so involving BBGI can make the bid more competitive;

· BBGI is a long-term investor which is attractive to government and government-backed counterparties; and

· BBGI is considered a reliable source of liquidity should a construction partner decide to sell in the future.

2016 has been a busy year for the Company in terms of building up a primary development pipeline, which saw BBGI join various consortia formed to pursue major transport infrastructure projects in North America, Australia and Europe:

Gordie Howe International Bridge (Can/US): BBGI is a member of one of three consortia short-listed to develop proposals for the Gordie Howe International Bridge with an expected cost in excess of C$2 billion. The bridge is a high profile project which will connect Michigan and Ontario and will be paid for by the Canadian federal government. The formal procurement process began in Q3 2016 and, if successful, financial close will occur in H2 2017.

Fargo-Moorhead Flood diversion project (US): BBGI is a member of one of four consortia which were short-listed for the approximately US$800 million Fargo-Moorhead flood diversion PPP opportunity in North Dakota, USA. The procurement process began in December 2016.

Outer Suburban Arterial Roads (AUS): BBGI is member of one of three consortia short-listed for an A$1.8 billion PPP project to upgrade and maintain eight arterial roads in the western suburbs of Melbourne, Australia. The project is the first of its kind in Australia and calls for duplication and widening as well as maintaining 700 km of roads between the suburbs of Werribee and Footscray. It is the first part of the Outer Suburban Arterial Roads program, and a larger package of motorway and suburban road upgrades worth A$6.2 billion (£3.8 billion).

Norwegian Pipeline: BBGI is a member of a consortium seeking to pre-qualify for an upcoming pipeline of PPP projects in Norway. The first road project is the RV3/RV25 Ommangsvollen-Grundset (Central Norway), the procurement process for which is expected to start in Q2 2017. The transaction size is expected to be approximately £360 million.

In addition, BBGI is in advanced discussions on various other transport projects, and is supporting consortia to pursue social infrastructure projects.

These primary investment opportunities are considered attractive to the Management Board because they are typically well priced on a risk-adjusted basis. Nevertheless, each opportunity will be subject to detailed due diligence on a case-by-case basis.

Although there is no certainty that BBGI and its consortia partners will be finally selected on any of the above- mentioned projects, the pipeline is attractive and we aim to continue to develop it further.

This primary investment activity demonstrates BBGI's ability to grow the portfolio of infrastructure investments not only by acquiring operational projects but also by partnering with construction companies in consortium bids on new PPP projects. BBGI will continue to selectively pursue further growth opportunities in both new and existing assets. Further information on construction risk can be obtained from the Company's prospectus which is available on the Company's website.

Future growth

Since going public in 2011, the Management Board has been able to grow the Company successfully from 19 assets to 39 assets as at 31 December 2016. The Company has benefitted from the Management Board's ability to source attractive investment opportunities from a variety of sources and in different geographies.

The Management Board has been very conscious of the need to exercise restraint and discipline in pursuing selective and accretive growth. To this extent our strategy has not changed, we will remain very selective and surgical in pursuing new investment opportunities and will only move forward with those opportunities which we believe will create shareholder value. There are a handful of core guidelines that we will continue to follow in 2017:

Remain disciplined on price: We will remain focused on pursuing opportunities that are accretive. We believe our internal management structure serves us well in this regard. As the only internally managed London-listed PPP Investment Company, the individuals making the investment decisions work directly for the Company and not for an external manager. Unlike the structure with a typical external manager, the management team is not rewarded for assets under management or paid acquisition fees. Therefore there is a clear alignment of interests between the Company's management and its shareholders with no bias for growth at BBGI unless it is beneficial to shareholders.

Follow through on integration and asset management initiatives: In an increasingly competitive acquisition environment, bidders are often requested to consider synergies and various savings as part of their bids to be successful. Synergies and savings will only be priced when management are confident they can be achieved. For an acquisition to be value accretive these enhancements need to be implemented post acquisition, so we will only price those enhancements we are comfortable to achieve post-acquisition.

Keep an eye on bid costs: While we will continue to examine and consider a wide variety of opportunities, we will remain focused on bid costs and will only incur due diligence costs for opportunities where we have a reasonable prospect of success. We will be careful in allocating our energy and budgets only to the best opportunities. In 2016, BBGI incurred less than £100,000 of broken bid costs. Additionally, we have kept our costs low over the reporting period by having a relatively modest credit facility (£110 million) which results in lower standby fees, while still retaining the flexibility to consider larger transactions by having a further £70 million accordion tranche for which no standby fees are paid.

While price is always a key consideration, BBGI has been able to differentiate itself in a number of transactions by being able to transact quickly and discreetly, having specific credentials and regional knowledge, or offering the best value by being able to consider synergies or efficiencies. We remain optimistic that we will be able to continue to grow the portfolio on attractive terms.

Construction exposure

The Company's investment policy is to invest principally in projects that are operational and that have completed construction. Accordingly, investment in projects that are under construction will be limited to 25% of the Portfolio Value. The rationale for this approach is to be able to produce a stable dividend for our shareholders, while at the same time gaining some exposure to the potential NAV uplift that occurs when projects move from a successful construction stage to the operational stage.

As at 31 December 2016, BBGI has two projects - Mersey Gateway Bridge and North Commuter Parkway - which are currently in construction. These projects account for 3% of portfolio value on a pro forma basis[18]. Construction in each case is being carried out by experienced contractors with a proven track record for delivery. The monitoring and management of these projects will continue to be a key focus for the Management Board in 2017.

While there is some increased risk associated with investing in projects during the construction phase, we believe the higher returns afforded during the construction phase are attractive on a risk-adjusted basis. We also consider these risks to be manageable as the construction risk is generally passed down to creditworthy construction subcontractors. The typical construction contract is a fixed-price, date-certain contract where the construction contractor is responsible for any potential cost overruns or delays. Construction support packages typically consist of letters of credit or bonds from third parties and, to the extent necessary, parent company guarantees from the parents of the construction companies.

In addition, the Company's asset management team has several individuals with specific PPP construction experience to help identify, manage and, where possible, mitigate any potential risks relating to construction. The skills inherent in this team have given the Company the confidence to pursue primary development opportunities.

During the year, the Management Board oversaw the completion of the Ohio River Bridges project, which opened to traffic on time and on-budget on 18 December 2016. Despite cold weather, over 500 enthusiastic motorists participated in the opening ceremonies and then joined the public caravan in order to be among the first to cross the bridge and drive the 8 ½ mile bridge and tunnel project. At the opening ceremony, the bridge was officially named the Lewis and Clark Bridge.

Over the past five years, BBGI has participated in several similar opening ceremonies and demonstrated its ability to successfully manage projects from the construction phase into the operational phase across three continents. Past projects which were successfully transitioned into the operational phase, and in doing so delivered NAV uplift, include Avon & Somerset Police Headquarters (UK), Mersey Care Mental Health Facility (UK), Finchley Memorial Hospital (UK), Women's College Hospital (Canada), and Northern Territory Secure Facilities (Australia).

The Management Board believes that the Company's ability to meet its dividend targets has not been compromised by this construction exposure and will continue to monitor this closely as the portfolio grows.

BBGI remains optimistic for further NAV growth, particularly once the two projects currently in construction within the Company's portfolio move closer to, and into, the operational phase. The ability to provide such organic growth in NAV as particular potential risks in assets reduce over time is an important and differentiating characteristic of the Company.

As we look forward to 2017 and beyond, we would hope that some of the primary development opportunities for which we have been short-listed or are considering (including those described in more detail in the 'Growth in the portfolio' section earlier in this report) will materialise into new investment opportunities, and will replace some of the current construction exposure as these projects complete and move towards the stable operational phase of their lifecycle. 

Hedging

The Company's global portfolio of assets brings with it an inevitable exposure to foreign exchange movements on future portfolio distributions denominated in Australian dollars (AUD), Canadian dollars (CAD), euros (EUR), Norwegian kroner (NOK) and US dollars (USD). A review of the hedging strategy is carried out on an annual basis. The Management Board has implemented a policy of using forward contracts to hedge a portion of its anticipated foreign currency portfolio distributions. The Company seeks to provide protection for Sterling dividends that it aims to pay on the ordinary shares over the next four years, in order to reduce the risk of currency fluctuations and the volatility of returns that may result from such currency exposure.

While the Company tries to mitigate the impacts of foreign currency movements on the NAV by hedging a portion of the expected distributions coming from the portfolio over the next four years, it would not be economical to attempt to fully immunise the portfolio against any NAV changes due to foreign exchange movements.

The portfolio benefited from a foreign exchange gain of £51.2 million over the course of 2016. The net uplift in portfolio value from foreign exchange since listing in December 2011 has been £6.6 million or 1.2% on a NAV per share basis.

In March 2016, the Company, in accordance with its hedging policy, entered into a number of forward currency contracts in order to partially hedge the impact of currency fluctuations on portfolio distributions over the hedged period. The hedges were rolled for a period of four years. Also in July, the Company entered into a number of additional currency forwards, again in accordance with its hedging policy. By hedging in July it enabled the Company to lock in favourable exchange rates when compared to the closing rates used for the 31 December 2015 valuation. The Company does not currently hedge euro cash flows, as it currently forecasts that these cash flows will continue to be used to cover the Group's running costs which are largely euro denominated.

At 31 December 2016, 61% of the portfolio by value has cash flows denominated in currencies other than Sterling.

Investment performance

Share price

The Company's share price has performed well and has maintained a strong premium to NAV through the reporting period. We continue to believe that a key benefit of the portfolio is the high-quality cash flows derived from long-term government-backed contracts. As a result, the portfolio performance is largely uncorrelated to the many wider economic factors that may cause market volatility in other sectors.

The share price closed the year at £1.38, an increase of 6.7% in 2016 representing a 9.4% premium to the NAV per share at the year-end. TSR in calendar year 2016 was 11.2% whilst TSR from IPO to 31 December 2016 was 70.7% or a CAGR of 11.2%.

The shareholder return for the year ended 31 December 2016 was 18.6% on a growth in NAV per share and dividend paid basis[19].

Distribution policy

Distributions on the ordinary shares are planned to be paid twice a year, normally in respect of the six months to 30 June and the year ended 31 December. Subject to market conditions and to the level of the Company's available funds, it is intended that distributions will be paid twice per annum in May/June and in October.

Dividends

On 29 June 2016, the Company paid a final dividend of 3.00 pence per share for the year ended 31 December 2015. In August 2016, BBGI announced an increase in its annual dividend target from 6.00 pence per share to 6.25 pence per share, which represents an increase of 4.2%. The 2016 interim dividend of 3.125 pence per share was paid on 26 October 2016. The Board proposes a final dividend of 3.125 pence per share (with a scrip alternative) for the year ended 31 December 2016, which would result in a total distribution of 6.25 pence per share for the year.

Investor communications

The Company places great importance on communication with its shareholders and welcomes their views. It is the intention of the Company to remain at the forefront of disclosure and transparency in its asset class, and therefore the Boards regularly review the level and quality of the information that the Company makes public.

Formal reports are made by the Company twice a year through the annual and interim reports and financial statements. In addition, management statements and other current information on the Company provided through the Company's website pages and market announcements assist in keeping investors and other interested parties informed. At Shareholder General Meetings, each share is entitled to one vote; all votes validly cast at such meetings (including by proxy) are counted, and the results of such meetings are announced by the Company on the day of the relevant meeting.

The Boards are keen to develop and maintain positive relationships with the Company's shareholders. As part of this process, at the end of March and August each year immediately following release of the annual and interim results, the Co-CEOs present the results to analysts and subsequently conduct roadshows and offer shareholder visits to discuss the results, explain the ongoing strategy and receive feedback.

Outside of these formal visits, feedback from investors is received via the Management Board and the Corporate Brokers and, together with the feedback from results meetings, this is reported to the Supervisory Board. Throughout the year under review, Board members have made themselves available to major shareholders and key sector analysts, both collectively and on a one-to-one basis, for discussion of key issues and expectations around Company performance, and will continue to do so. Board members intend to continue to be available to meet with shareholders periodically to facilitate open two-way communication on the development of the Company. Shareholders may contact members of both the Management and Supervisory Boards at the registered office of the Company, which address can be found on the final page of the Annual Report or on the Company's website at www.bb-gi.com. Given this level of engagement with shareholders, the Boards consider therefore that they meet the requirements of AIC Code Principle 19.

Share capital

The issued share capital of the Company is 432,215,636 ordinary shares of no par value. All of the ordinary shares issued rank pari passu. There are no special voting or other rights attaching to any of the ordinary shares. During the year ended 31 December 2016 the Company issued 1,822,633 shares as a result of shareholder scrip elections.

Share Issue Price Restriction

As previously reported, under the Luxembourg law of 17 December 2010 on undertakings for collective investments, the Company is restricted from issuing shares at a price exceeding the NAV per share plus 5%. This same restriction is also referred to in the Company's Articles. At 31 December 2016 the Company's shares were trading at a premium of 9.4% to NAV per share.

A Bill of Law seeking to remove this NAV per share +5% limitation for closed-ended funds was approved by the Council of Government in December 2015 and tabled with the Luxembourg Parliament in January 2016. In anticipation of the change in law, the Company convened an EGM of its shareholders on 30 April 2016, the purpose being to request shareholders' approval to remove the reference to the 5% restriction from the Company's articles (subject to the Bill being enacted into law). This was successfully achieved with over half the Company's shareholders voting on the three resolutions proposed, and 100% of them voting in favour. It was anticipated that the Luxembourg parliament would enact the suggested amendments into law during the course of Q3 or Q4 2016, however this is still awaited and there is currently no indication as to when this might happen. Whilst the law remains unchanged ,the Company will continue to adhere to the current Luxembourg law and UK Listing Rules when setting the price of new issues.

Voting rights

There are no restrictions on the voting rights attaching to ordinary shares.

Discount management

Although the Company's shares have traded at a premium since flotation, the Management Board will actively monitor any discount to the NAV per ordinary share at which the ordinary shares may trade in the future. The Management Board will report to the Supervisory Board on any such discount and propose actions to mitigate this.

Purchases of ordinary shares by the Company in the market

In order to assist in the narrowing of any discount to the NAV at which the ordinary shares may trade from time to time and/or to reduce discount volatility, the Company may, subject to shareholder approval:

§ make market purchases of up to 14.99% p.a. of its issued ordinary shares; and

§ make tender offers for the ordinary shares.

No shares have been bought back during the year ended 31 December 2016. The most recent authority to purchase ordinary shares which may be held in treasury or subsequently cancelled was granted to the Company on 30 April 2016 and expires on the date of the next Annual General Meeting ("AGM") to be held on 28 April 2017 at which point the Company proposes that its authority to buy back shares be renewed.

Continuation vote

The Company's Articles of Association required the Boards to offer a continuation vote to the Company's shareholders at the AGM held on 30 April 2015 to allow the Company to continue in its current form, with a further vote every two years. In accordance with the Articles therefore, a further continuation vote will be offered to shareholders at the forthcoming AGM on 28 April 2017.

Details of substantial shareholders

As at 10 March 2017, being the latest available information, management are aware of the following shareholders holding more than 5% of the Company's ordinary shares.

VALUATION

The Management Board is responsible for carrying out the fair market valuation of the Company's investments, which it then presents to the Supervisory Board. The valuation is carried out on a six-monthly basis as at 30 June and 31 December each year. An independent professional third party reviews this valuation.

The valuation is determined using the discounted cash flow methodology. The cash flows forecast to be received by the Company or its subsidiaries, generated by each of the underlying assets, and adjusted as appropriate to reflect the risk and opportunities, have been discounted using project-specific discount rates. The valuation methodology remains unchanged from previous reporting periods.

The Company uses the following macroeconomic assumptions for the cash flows:

1 A lower inflation rate for 2017 is used in the project entities' financial models when compared to the previous valuation. This is applicable for projects for which the documentation does not prescribe the actual published rate, if available, to be used for the next 12 months from the date of the indexed being published. The short-term 1% transition deposit rate period has been extended by one additional year.2 All Canadian projects have a long-term 2.0% indexation factor with the exceptions of North East Stoney Trail and Northwest Anthony Henday Drive, which have a slightly different indexation factor derived from a basket of regional labour, CPI and commodity indices.3 Tax rate is 27% in Alberta and Saskatchewan, 26% in British Columbia and 26.5% in Ontario.4 As published on www.oanda.com.5 Long-term Consumer Price Index 2.50%/long-term Labour Price Index 3.50%.6 Cash on Debt Service Reserve Accounts and Maintenance Service Reserve Accounts can be invested on a six-month basis. Other funds are deposited on a shorter term.7 Including Solidarity charge, excluding Trade tax which varies between communities.8 Indexation of revenue based on basket of four specific indices.9 UK Corporate tax decreases from 19% to 17% in 2020.10 80% of ORB indexation factor for revenue is contractual and is not tied to CPI.

Other key inputs and assumptions include:

§ Any deductions or abatements during the operations period are passed down to subcontractors or are part of the planned lifecycle expenditures.

§ Cash flows to and from the Company's subsidiaries and the portfolio investments are received at the times anticipated.

§ Where the operating costs of the Company or portfolio investments are fixed by contract, such contracts are performed, and where such costs are not fixed, they are in line with the budget.

§ The contracts under which payments are made to the Company and its subsidiaries remain on track and are not terminated before their contractual expiry dates.

Over the 12-month period from 31 December 2015 to 31 December 2016, the Company's NAV increased from £479.8 million to £545.0 million. The increase in NAV per share from 111.5 pence to 126.1 pence or 13.1% is primarily a result of the key drivers listed below:

NAV movement 31 December 2015 to 31 December 2016

1 These figures represent the assets and liabilities of the Group's consolidated subsidiaries; they exclude the project investments and include, amongst other items, the Group's consolidated cash balances and borrowings.

2 This represents the net effect of assumed lower deposit rates, lower inflation rate for 2017, lower UK tax rate and lower Norwegian tax rate.

3 While distributions from projects reduce the portfolio value, they do not have an impact on the Company's NAV as the effect of the reduction in the portfolio value (investments at fair value through profit or loss) is offset by the receipt of cash (cash and cash equivalents) at the consolidated group level. These distributions are shown net of withholding tax.

4 The uplift resulting from the transition of Women's College Hospital (Canada) project from ramp-up phase towards the stable operational phase, and the Ohio River Bridges project from construction to the ramp-up phase. In addition, the construction premiums on the Mersey Gateway Bridge project and the North Commuter Parkway project have been slightly reduced as we move closer to construction completion.

NAV per share growth December 2011 to 31 December 2016

The table below provides a breakdown of the component parts that contributed to the growth in the NAV per share from listing in December 2011 to 31 December 2016.

(1) Includes amongst others the effect from the unwinding of discount and from capital increases.

Key drivers for NAV growth

Growth based on rebased valuation

During the year ended 31 December 2016 the Company recognised £43.2 million from the "unwinding of discounts" and value enhancements. As the Company moves closer to forecast project dividend payment dates, the time value of those cash flows increases on a net present value basis as a result of the "unwinding of discount". The portfolio value growth from the unwinding of discount during the year was approximately £41.1 million or 8.5% on a NAV per share basis.

The difference, £2.1 million, or 0.4% on a NAV per share basis, above the anticipated growth from unwinding of discount, represents a value enhancement made up of the net effect of value enhancements across the portfolio through active management, which include amongst others:

§ Renewal or change of service provider of Management Services Agreements for the Australian assets, and for some UK, German and Canadian assets on more favourable terms;

§ Lower forecast insurance costs;

§ Lower costs realised and forecast on some projects;

§ Earlier than forecast extraction of cash;

§ Additional income on variation orders;

§ A more favourable tax status on three assets;

§ The net result of the gain on the refinancing of the Staffordshire Fire and Rescue Service project, the loss realised on the refinancing of the Northern Territory Secure Facilities ("NTSF") project, and the estimated loss on the refinancing of the Royal Women's College Hospital ("RWH") project.

The net effect of inflation, against the 31 December 2015 modelled assumptions, on the portfolio value has been negative.

Discount rates and sensitivity

The discount rates used for individual assets range between 7.30% and 10.20%. The value weighted average rate is approximately 7.56% (7.86% at 31 December 2015). This methodology calculates the weighted average based on the value of each project in proportion to the total portfolio value, i.e. based on the net present value of their respective future cash flows.

An alternative methodology to calculate the weighted average discount rate would be to calculate the weightings based on the nominal future cash flows for each project. Based on that calculation, the rate is 7.68% (8.02% at 31 December 2015).

The discount rates used for individual project entities are based on BBGI's knowledge of the market, discussions with advisors and publicly available information on relevant transactions.

We have differentiated the asset classes with respect to discount rates. For stable operational projects, such as typical schools, hospitals and roads, we have applied discount rates at the lower end of the range mentioned above. Further adjustments have been applied to acute hospitals in the UK where a risk premium of 50bps continues to be applied. This risk premium reflects the special situation in the UK where public health clients are under cost pressure and are actively looking for savings. This drive for cost savings has resulted in some large deductions on UK acute hospitals and, consequently, distribution lock ups. To date BBGI has not been affected, with the only acute hospital in the BBGI portfolio being the Gloucester Royal Hospital. BBGI continues to apply a modest risk premium for complex prison projects to reflect the higher complexity of such projects, and also applied a risk premium to a limited number of projects to reflect the individual situations.

The following table shows the sensitivity of the NAV to a change in the discount rate:

1 Based on the average discount rate of 7.56%.

Foreign exchange and sensitivity

BBGI values its portfolio of assets by discounting anticipated future cash flows. The present value of these cash flows are converted to Sterling at either the hedged rate, for a predetermined percentage of cash flows forecast to be received over the next four years, or at the closing rate for unhedged future cash flows. Although the closing rate is the required conversion rate to use, it is not necessarily representative of future exchange rates as it reflects a specific point in time.

Other than the four-year contracted hedge rates, the Company has used the following exchange rates to value the portfolio:

A significant proportion of the Company's underlying investments are denominated in currencies other than Sterling. The Company maintains its accounts, prepares the valuation and pays distributions in Sterling. Accordingly, fluctuations in exchange rates between Pounds Sterling and the relevant local currencies will affect the value of the Company's underlying investments. During 2016, the depreciation of Pounds Sterling against the AUD, CAD, NOK, EUR and USD accounted for an increase in the portfolio value of £51.2 million. Since listing in December 2011, the net cumulative effect of foreign exchange movement on the portfolio value has been an uplift of £6.6 million or 1.2% of NAV at 31 December 2016.

The following table shows the sensitivity of the net asset value to a change in foreign exchange rates:

1 Sensitivity in comparison to the foreign exchange rates at 31 December 2016 and taking into account the hedges in place, derived by applying a 10% increase or decrease to the GBP/foreign currency rate.

Inflation sensitivity

The project cash flows are positively correlated with inflation (e.g. RPI or CPI). The table below demonstrates the effect on the NAV of a change in inflation rates compared to the macroeconomic assumptions in the table above:

1 Compared to the assumptions set out in the macroeconomic assumptions above.

Deposit rate sensitivity

The project cash flows are positively correlated with the deposit rates. The table below demonstrates the effect on the NAV of a change in deposit rates compared to the macroeconomic assumptions above:

1Sensitivity in comparison to the assumptions set out in the macroeconomic assumptions above.

Lifecycle costs sensitivity

Of the 39 projects in the portfolio, 13 project companies retain the lifecycle obligations. The remaining 26 projects have this obligation passed down to the subcontractor. The table below demonstrates the impact on the NAV of a change in lifecycle costs:

1Sensitivity applied to the 13 projects in the portfolio which retain the lifecycle obligation, i.e. the obligation is not passed down to the subcontractor. These projects represent 49% of the total portfolio value as at 31 December 2016.

The Management and Supervisory Boards have approved the net asset value calculation on an Investment Basis as at 31 December 2016.

FINANCIAL RESULTS

BASIS OF ACCOUNTING

The Company has prepared its financial statements under IFRS. In accordance with IFRS 10, IFRS 12 and IAS 27, the Company (an Investment Entity) does not consolidate certain subsidiaries, in a similar manner to the Company's pro forma investment basis data, which continue to be included in this section of the Report of the Management Board. As an Investment Entity, the Company does not consolidate its investments in PPP assets that are subsidiaries on a line by line basis, but instead recognises them as investments at fair value through profit or loss.

INCOME AND COSTS

Group Level Corporate Cost Analysis

The table below is prepared on an accruals basis.

The Company increased the corporate credit facility in May 2016 from £80 million to £110 million. The increase in interest and other finance costs is predominantly due to this larger facility.

The comparative increase in Staff Costs is mainly due to foreign exchange movements during the reporting period. The majority of the Groups employees receive payment in euros with all remuneration converted into the Company's functional currency, Sterling, for reporting purposes. During the year ended 31 December 2016, there was a notable strengthening of the euro against Sterling resulting in an increase in Staff Costs on a Sterling or functional currency basis only. The Company continues to utilise its euro denominated project distributions to partially fund the Company's euro denominated working capital requirements and therefore continues to benefit from the natural foreign exchange hedge that this offers. Further detail of staff costs is provided in the Remuneration section.

Of the acquisition costs incurred during the year, only £96,000 related to unsuccessful bid costs which did not result in a value accretive acquisition.

The comparative increase in taxes was primarily driven by the withholding tax applied on portfolio distributions throughout the year.

Ongoing Charges

The "Ongoing Charges" ratio was prepared in accordance with the AIC recommended methodology. The ratio represents the reduction in shareholder returns as a result of recurring operational expenses incurred in managing BBGI.

The Company is internally managed and, as such, is not subject to performance fees or acquisition-related fees.

BALANCE SHEET

Pro forma balance sheet

Under IFRS, the derivative financial instruments, i.e. the forward currency contracts, are presented at fair value. Under the Investment Basis the contracted forward rates are applied to the hedged distributions with the unhedged distributions converted at the 31 December 2016 closing rate.

Summary net corporate cash flow

During the year ended 31 December 2016 the Company received, on a consolidated IFRS basis, £42.5 million of portfolio distributions (2015: £33.8 million) which was ahead of business plan and the underlying financial models. These distributions were recorded in the standalone financial statements of the recipient as dividends, interest payments, capital and subordinated debt principal repayments.

The net cash receipts for the year ended 31 December 2016, after deducting the net cash outflow for Group operating costs, finance costs, and realised losses on foreign exchange derivatives, were £32.6 million (2015: £27.9 million).

The table below summarises the cash received by the holding companies from the investments net of certain cash outflows for the Group level corporate costs. For further detail on corporate cash flows, refer to the Consolidated Statement of Cash Flows in the Group's Consolidated Financial Statements.

(1) Includes the withholding tax deducted at source on the distributions from investments.

Three-year comparative of Investment Basis NAV

The published NAV increased by 13.6% to £545.0 million at 31 December 2016 (2015: £479.8 million). This equates to a growth in NAV per share of 13.1% to 126.1 pence at 31 December 2016 (2015: 111.5 pence).

FINANCING

Tap issue

Following its 2016 AGM, the Company has the ability to issue up to 10% of its issued share capital via tap issues in order to finance further acquisitions or repay debt. The Company intends to ask shareholders to renew this authority at its forthcoming AGM.

The Company also announced today, 29 March 2017, an intended placing of new ordinary shares to raise c. £58.5 million at a placing price (equivalent to the 31 December 2016 NAV per share, adjusted for the unwinding of the discount, for foreign exchange movements and a 4.9% premium) of 136.00 pence per share. The proceeds of the placing will be used to substantially repay outstanding borrowings and thereby provide financing flexibility with respect to the Company's investment pipeline.

The Company does not use structural gearing.

Credit facility

The Company has a multi-currency Revolving Credit Facility ("RCF") with ING Bank and KfW IPEX-Bank, and in May 2016 utilised part of the accordion tranche provision, to increase the total commitment from £80 million to £110 million. The Company retains the ability, by utilising the accordion provision, to increase further the total commitment under the facility to £180 million. No commitment fees are paid on the unutilised segment of the accordion tranche.

The Company uses the facility primarily to fund acquisitions and to provide letters of credit for investment obligations. The intention is to repay the facility from time to time through equity fundraisings. The Company does not use structural gearing. The term of the facility is three years, expiring in January 2018. The borrowing margin is 185 bps over LIBOR. At 31 December 2016, the Company had utilised £70.3 million of the £110 million facility, of which £25.1 million has been used to cover letters of credit.

Management intend to commence the process of refinancing the RCF in Q2/Q3 2017.

Project refinancing

In April 2016, BBGI successfully closed the £45 million refinancing on the Stoke & Staffordshire Fire Stations ("SSFR") project, realising an attractive margin reduction of 115 bps. This refinancing was carried out on an opportunistic basis with the original loan not due to mature until 2035, further demonstrating BBGI's ability to create shareholder value by active asset management.

Management was pleased with the outcome given that the process concluded in a market where margins were beginning to rise and, consequently, quite a number of refinancings were put on hold or abandoned.

The refinancing of NTSF for a further 5 years concluded in July 2016. The refinancing resulted in a loss compared to our financial model. This loss was mainly due to the unexpected swap close out costs attributable to one lender who was no longer active in the Australian market and, as a result, executed their swap termination rights under the loan agreement.

The 31 December 2016 valuation of RWH was adjusted to reflect the new refinancing assumptions which if realised would result in a refinancing loss. The refinancing process itself commenced during the reporting period and Management expect the process to conclude during H1 2017.

Subject to a successful refinancing of RWH with long-term debt, only NTSF will have short-term debt in place. All other PPP/PFI projects in the BBGI portfolio have long-term amortising debt in place, which will not require refinancing.

It is expected that the long-term amortising debt of Women's College Hospital will be refinanced sometime before July 2019 when there is an increase in the lending margin and a cash sweep in favour of the lenders, both of which act as an incentive to refinance.

Management will actively seek to refinance projects on an opportunistic basis when there is a possibility that it will result in an uplift in the project value. As at 31 December 2016, the weighted average PPP project concession length remaining was 22.6 years and the weighted average portfolio debt maturity was 19.2 years. Debt financing at the project level is structured in a way that does not provide any recourse to the Company.

Status for taxation

As a SICAV, the Company is not subject to taxes on capital gains or income but is subject to an annual subscription tax of 0.05% on its NAV. All of the other Group consolidated companies are subject to taxation at the applicable rate in their respective jurisdictions.

The net income of the unconsolidated subsidiaries is taxed in their respective jurisdictions. As a consequence of the adoption of IFRS 10, the Company is classified as an Investment Entity (see Note 2 of the Consolidated Financial Statements), meaning the tax expenses of the unconsolidated subsidiaries are not included within the consolidated financial statements but are embedded in the present value of the project itself.

BEPS 4: Interest Deductions and Other Financial Payments

On 5 October 2015, the OECD published its final recommendations on its Base Erosion Profit Shifting ("BEPS") initiative. Action 4 under the initiative sets out recommendations regarding best practices in the design of rules to prevent base erosion through using interest expense. Specifically, it is recommended that member countries adopt a "fixed ratio rule" which would limit net deductions of interest to a percentage of EBITDA.

BBGI has continued to follow developments closely over the reporting period. In December 2016 the first draft of the UK Finance Bill 2017 was released with a further draft released post the balance sheet date in January 2017. The draft Bill provides some further clarity, particularly in the area of Public Benefit Exemption ("PBE"). Two of the more notable features are the following:

· Increased clarity over the type of investment that should qualify for PBE, which appears to be somewhat broader than was expected from the earlier consultation stage, and;

· It is now expected that 'Grandfathering' will be available for related party interest paid by qualifying companies where: (i) the loan has been in place since before May 2016; and (ii) the income is broadly fixed under long-term contracts (at least 10 years).

Based on the above updates, BBGI does not currently expect the implementation of BEPS Action 4 to have a material adverse impact on the Company's cash flows in the UK.

The advice received to date from the other relevant jurisdictions where BBGI invests is that, for the most part, the respective Governments believe that their existing rules, most notably thin capitalisation rules, continue to be an effective means to limit the scope for BEPS and as such, no significant changes are expected as a result of BEPS Action 4.

BBGI will however continue to monitor the initiative very closely across the various jurisdictions in which it is invested.

Other Tax Developments 

BBGI continues to work closely with its global tax advisors to assess the impact, if any, which could result from the implementation of various other tax developments. In this context the Company is currently assessing amongst others the impact that certain tax measures could have on Group cash flows, specifically BEPS Action 2: neutralising the effect of hybrid mismatch arrangements and also the impact the latest Luxembourg taxation circular on intra group financing could have on the Group's cash flows.

BBGI will continue to review these developments and assess whether any structural changes are required.

Going concern basis of accounting

The Management Board has examined significant areas of possible financial risk including cash and cash requirements. It has not identified any material uncertainties which would cast significant doubt on the Company's ability to continue as a going concern for a period of not less than 12 months from the date of approval of the financial statements. The Management Board has satisfied itself that the Company has adequate resources to continue in operational existence for the foreseeable future. After due consideration, the Management Board believes it is appropriate to adopt the going concern basis in preparing the financial statements. Please see Note 2 to the financial statements.

Viability statement

As part of their ongoing process of monitoring risk, and as required by the UK Corporate Governance Code Provision C.2.2 and the AIC Code Principle 15, the Directors have considered the viability and prospects of the Company for a period of five years. This period is considered an appropriate and acceptable length of time in which to consider the Company continuing in existence from a risk perspective. In making this judgement, the Directors have considered detailed information provided at Board meetings, including: the Company's investment policy; project reviews; the risk matrix (including the principal risks and uncertainties); current relevant financial and economic information; long-term economic assumptions; scenario testing; and annual and semi-annual valuations. In addition, this five-year period aligns with the typical planning periods considered by the Boards during their periodic strategic reviews of the business.

The Company's investment policy is to invest in equity, subordinated debt and/or similar interests issued in respect of infrastructure projects developed mainly under PPP/PFI - or similar - procurement models, principally into already operational projects (construction completed), with public sector/government-backed revenue streams, and "availability-based" payments received from project entities. In addition, investments are only made into jurisdictions with: relatively mature financial markets; public sector counterparties with appropriate credit risk; and reliable legal systems. More detail on the Company's investment policy can be found in the relevant section of this annual report.

Each of the principal risks and uncertainties the Company faces, along with detailed descriptions of the areas and factors of the risks as well as explanations of the processes by which the Boards monitor, review and assess them, can be found in the Governance section of this annual report, under the heading "Risk and Risk Management". In order to maintain its viability, the Company has put in place a robust risk and internal controls framework with the objectives of reducing the likelihood and impact of: poor decision-making; risk-taking above agreed levels; human error; or deliberate bypassing of control processes. The Boards regularly review and assess the principal risks facing the Company - including and in particular those that could threaten its business model, strategy, solvency, liquidity and future performance - as well as the monitoring, management and mitigation of the exposure to these risks.

In addition to the risk management and mitigation in place, a valuation of each project is carried out every six months at each of the Company's financial half-year and year-ends (30 June and 31 December respectively). Such valuations are based on long-term discounted future cash flows that are themselves predominantly based on long-term contracts and other assumptions. Once complete, each valuation is independently reviewed by a professional valuer and is also subject to the audit/review of the Company's external auditor. A more detailed description of the valuations, assumptions and stress-testing applied can be found in the Valuation section of the Report of the Management Board.

Given the investment policy, risk management and valuation processes that are in place therefore, the Boards have the reasonable expectation that the Company can continue in operation and be able to meet its liabilities, commitments and dividend targets over the five-year period assessed, subject to world markets, no adverse unexpected event occurring and the global economy continuing to function within a range of stressed scenarios. The Company is also subject to a biennial shareholder continuation vote.

MARKET DEVELOPMENT

BBGI's growth strategy in the current market

In a low interest rate environment, PPP/PFI assets with stable, predictable, inflation-linked cash flows derived from creditworthy government or government-backed counterparties are seen as an attractive investment proposition by many investors. In addition, a greater acceptance and understanding of infrastructure as a mainstream asset class and key component of a well-diversified portfolio have caused more investors, especially those with long-dated liabilities to match, to increase their allocations to the sector.

As a result, there have been several investors including pension funds, insurance companies and infrastructure funds who are aggressively bidding on the limited supply of PPP/PFI products and causing prices to increase or remain at relatively high valuation levels.

The secondary market for social and transport infrastructure was very competitive in 2016, and we expect this trend to persist in 2017. As a result, discount rates in the sector are expected to remain at current levels or to show further but more moderate levels of tightening, with the corresponding positive effect on the valuation of our existing assets.

In this competitive environment, vendors often require prospective purchasers to price in lifecycle savings, refinancing gains, aggressive tax structures, portfolio efficiencies and other upsides to secure an acquisition. The result is that the margin for error has decreased and it is increasingly difficult to source acquisitions that will be accretive to shareholders. A recent survey of institutional investors in the sector by Preqin reported that there is US$137 billion of 'dry powder' held by infrastructure investment funds, and 53% of surveyed fund managers believe that asset pricing will be their biggest challenge in 2017.

A key component of our growth strategy has been to consider opportunities in creditworthy countries outside the UK. Often the competition is not quite as intense and more attractive pricing and terms can be obtained. During the year, we came close to selection as the preferred bidder on acquisition opportunities in Australia and Canada, and made one follow-on investment in the UK. We are committed to maintaining our pricing discipline in 2017 regardless of whether we are considering assets in construction or in operation.

Another key component of our growth strategy will be to consider projects in the bidding/construction stage, as we believe the pricing on construction projects is more attractive on a risk-adjusted basis. Often the competition for construction assets is less intense as some investors require current yield, do not have sufficient and adequate asset management staff to oversee construction assets, or have mandates that restrict investment at this stage. BBGI has also used its strong PPP credentials to make it an appealing partner to construction companies who sometimes lack long-term ownership credentials, which are often required as part of the pre-qualification processes run by procuring government authorities.

Using this approach, BBGI has been short-listed for a number of opportunities over the past two years and will continue with this strategy. In addition to the various opportunities listed in the 'Growth in the portfolio' section earlier in this report, the Company is also actively considering other attractive development opportunities, about which more details will be provided at the appropriate time.

The Management Board expects it will be able to secure construction assets at higher discount rates during the construction stage and will be well positioned to realise the potential value uplift when the assets become operational. In addition, projects acquired at this stage often have pre-emption rights, which can facilitate further investment on favourable terms.

In 2015, the Management Board oversaw the successful transition of three projects from construction phase into the operational/ramp-up phase. During 2016, the East End Crossing Project completed construction on time and on budget. In 2017 and 2018, the Management Board further expects both the Mersey Gateway and North Commuter Parkway projects to complete construction respectively, and it is actively looking to replenish some of this construction stage exposure by pursuing select primary projects at the bidding phase.

This development pipeline represents an exciting opportunity for BBGI and will provide an attractive alternative to only acquiring assets in the secondary market. BBGI intends to pursue the strategy further and will selectively consider development opportunities so long as, in aggregate, construction assets remain below 25% of the portfolio and they do not compromise the Company's ability to satisfy its dividend targets.

Currently we are evaluating a range of opportunities. These range by sector, geography, and/or stage of investment, but all fit the Company's stated investment objectives and growth strategy. We are confident the pipeline could result in new value-accretive investments for the Company.

REVIEW OF MARKETS

The Management Board believes that the geographic and political diversification offered by participation in numerous PPP markets is attractive to the Company, provided new investments have the appropriate balance of risk and return. BBGI has significant investment expertise in key infrastructure markets internationally, and its global portfolio provides a unique platform to access opportunities and build relationships with potential vendors.

PPP procurement and levels of competition vary from market to market. In most markets, infrastructure under-investment persists and budget constraints often necessitate the involvement of the private sector to finance and deliver much-needed infrastructure projects. Below is a review of BBGI's key markets.

UK

The UK PPP/PFI market was once considered the most vibrant and robust market in the world. Over 700 PFI projects delivering investments of over £60 billion have been signed since 1992. However, in recent years, the pace of primary activity has slowed.

Ever since 52% of the UK electorate voted to leave the EU in June 2016, BREXIT has dominated the UK's political and economic discourse. Since then the future of infrastructure spending has been a major source of economic debate. In the Autumn Statement Phillip Hammond, the Chancellor of the Exchequer, announced that the government would make a modest increase in its spending on infrastructure. This includes an additional £1.1 billion on local road networks and £450 million on the rail system over the next five years.

The Chancellor also stated that further new projects (including its PF2 initiative) would be announced in the coming months and that the government would extend its project guarantee scheme until 2026. Therefore, for the time being, the BREXIT vote has had a minimal negative impact on UK infrastructure.

InfraDeals, part of the Inframation Group, is currently tracking 20 PPP projects in active procurement in the UK. There are still good prospects to be found, even though investment opportunities in traditional primary project finance transactions have fallen compared with historic volumes. Attractive opportunities exist in the transport sector. Highways England may look to attract further investment in roads, as the government looks to boost productivity.

The UK market continues to be the largest source of secondary market transactions globally. There has been a reduction in secondary market PPP/PFI deal flow, reflecting the slowdown in public sector procurement since 2010. While supply has decreased, there has been no corresponding decrease in demand - more equity investors are chasing a similar or reduced number of transactions. This has resulted in a trend of lower discount rates for stable, mature secondary projects over a number of years.

BBGI will continue to participate cautiously and selectively in auctions but also actively look for negotiated transactions. Our focus will be on smaller, more opportunistic investments where the competition is less intense. BBGI will also continue to consider primary development opportunities in the UK.

Canada

Canada is the world's most prolific PPP market, and is one of the most mature and stable. To date 177 deals have reached financial close, of which 28 were in the last 12 months. Half a dozen provinces, at least 15 municipalities, and the federal government are the major drivers in this market. 

Over the last number of years, the Canadian market has shifted from an emphasis on the healthcare and justice sectors, to transport. There is also now more activity in the wastewater and waste-to-energy sectors. 

Provincial agencies such as Infrastructure Ontario, Partnerships BC, SaskBuilds, Alberta Infrastructure, Partnerships New Brunswick, and Société Québécoise des Infrastructures are at the heart of Canada's P3 program. These independent entities are responsible for the majority of projects in procurement.

Infrastructure Ontario is the biggest agency in terms of size, with over 450 employees and the numbers of deals (74) to reach financial close. However, in recent years the emergence of PPPs in provinces such as Saskatchewan and in new municipalities has been a major theme. In Saskatchewan, a total of six deals have closed: four projects delivered by SaskBuilds and two at a municipal level in the city of Saskatoon. The projects have been delivered across both the social and civil sectors. 

While Canada has seen significant movements in terms of transportation infrastructure, there is still a robust pipeline of small and mid-sized social infrastructure projects.

The secondary market has great potential throughout Canada, considering the number of deals that have reached financial close since 2004. The Canadian secondary market is expected to be active in 2017 as projects developed over the last two or three years come into operation and may be offered for sale. Now with seven projects in Canada, BBGI is a well-known market participant and has very good exposure to deal flow.

BBGI expects to build on its recent success in the primary market with the North Commuter Parkway, and is actively bidding or considering a number of upcoming primary bids.

USA

The US will have to spend roughly US$3.6 trillion by 2020 in order to maintain its existing infrastructure, according to conservative estimates. While PPPs have been instrumental in getting a number of projects over the line, only a few states have used the procurement method to date.

Established market participants such as Virginia, Texas, Florida and Indiana retained their place as PPP market leaders in 2016. More recent entrants such as Pennsylvania, North Carolina and Ohio also reached financial close on their first PPPs. US states and municipalities have historically been much more reluctant to adopt PPPs than their Canadian counterparts. However the federal government, and an increasing number of state legislatures, have recently begun taking steps to make PPPs more acceptable for stakeholders. 

As a presidential candidate, Donald Trump made an ambitious pledge to mobilise anywhere from half a trillion to a trillion dollars into upgrading the nation's aging roads, bridges and transportation hubs. Rather than rely solely on direct federal spending, Trump advisers have said they would probably use tax credits and public-private partnerships. During his first address to a joint session of Congress on 28 February 2017, Trump revealed the size of his planned infrastructure programme as US$1 trillion, some of which is to be funded by "private capital".

In anticipation of this promised major infrastructure initiative, the National Governors Association recently forwarded a list of 428 "shovel-ready" projects to the new administration. The list includes an array of transportation, water, energy and emergency-response projects. The sheer size of the list underscores the intense interest in the initiative from governors in both political parties. We await more detail on this ambitious proposal from the new president.

Going forward, we expect that the success of the Ohio River Bridges/East End Crossing project, which opened on time and on budget, will create opportunities for BBGI, as this project is one of a limited number of high-profile availability-style transportation projects to have reached construction completion.

In the medium term, we expect a modest number of mostly transportation assets to come to the secondary market, as projects that have reached financial close move into operations and construction companies consider recycling their equity.

Continental Europe

European infrastructure markets remain active with certain countries offering an attractive pipeline of new projects. We witnessed an increase in both primary and secondary deal flow and, accordingly, we believe these markets, in particular Holland, Germany and the Nordic states, are likely to provide investment opportunities over the medium term.

The German federal government has announced plans to procure €7.5 billion of new road projects under the PPP model. The programme, dubbed the "Neue Generation ÖPP" will see 10+ road PPPs launched, with two to three new road procurements each year until the end of 2019. The A3 PPP road in Bavaria was the most recent project announced to start procurement with more projects to follow. With six existing assets in Germany, and German language skills within our team, BBGI is well positioned to consider these upcoming opportunities.

The Norwegian highway PPP programme is providing investors with a pipeline of dealflow in 2017-2019. The first of those projects to be procured include the Rv3/Rv25 in March 2017, followed by the E10/RV85 and Rv555 projects in 2018. BBGI is hoping to leverage its experience with the E18 road project in Norway to secure participation in consortia bidding to deliver these new projects.

The Company is also actively considering opportunities in the Netherlands and Belgium, where a mix of transportation and social infrastructure opportunities are being considered. The Dutch market continues to be one of the most reliable markets in Europe, with a consistent pipeline of sizeable deals that regularly attract major international developers and financers. 

In Spain, Portugal and Italy, assets procured under historic programmes are creating secondary market opportunities. BBGI has not focused much attention on the opportunities in Southern Europe given the weak credit ratings of these countries and the tendency of some public sector clients to renegotiate contracts.

Australia

The country is turning towards infrastructure investments as the next economic growth engine, as the commodities boom is winding down. Inexpensive capital and high demand for infrastructure assets is fuelling brownfield and greenfield transactions. A strong pipeline of greenfield PPP projects and state asset sales is on the horizon.

The current federal government, led by Malcolm Turnbull of the Liberal Party, has been a vocal supporter of increased investment in infrastructure, carrying on from Tony Abbott who dubbed himself as the "Infrastructure Prime Minister". One of this regime's flagship projects is the Asset Recycling Program. Under this, the central government pays out the equivalent of 15% of the proceeds from any regional government asset privatisation that is reinvested in new infrastructure projects.

In the PPP pipeline, there are still many rail and light rail projects that are due for tender. Sydney Metro Northwest and Southwest are set to receive funds from the electricity networks' sale, and the Parramatta Light Rail is scheduled to announce its preferred route by the end of this year.

Prison and social housing projects are also in the pipeline, with New South Wales looking to procure a new 600-bed prison at Grafton as a PPP. The region is also evaluating proposals for social housing projects from the private sector through the Premier's Innovation Initiative.

BBGI has three large operational assets in Australia and is widely viewed as one of the more active secondary investors in the market. We will continue to monitor the market and are hopeful that some select opportunities may emerge in 2016.

GOVERNANCE

Introduction

The Company is internally managed with a two-tier governance structure that comprises a Supervisory Board and a Management Board (together, the "Boards"), with the responsibilities of each as indicated in this report.

The Company is regulated by the CSSF under Part II of the Luxembourg law of 17 December 2010 on undertakings for collective investments and is subject to the Luxembourg law of 12 July 2013 on Alternative Investment Fund Managers ("AIFM Law") that implemented the EU Alternative Investment Funds Managers Directive ("AIFMD") into national legislation.

Since its IPO in December 2011, the Company's operating environment has become increasingly complex for both it and its stakeholders. A raft of regulations since then to which the Company must adhere have added to the Company's costs, and have brought new challenges to the complexity of oversight and management of the business. Good corporate governance is therefore becoming increasingly critical. Indeed, it lies at the heart of the Company's success, supporting better access to external finance and investment, and sending a message to the stakeholders that the Company is being well run and that they can have confidence in its long-term success.

Recent behaviour by a few organisations has, however, meant that changes may well be made to parts of the UK corporate governance regime, as evidenced by the UK Government's Corporate Governance Reform Green Paper published at the end of 2016. We will follow the discussions and developments arising out of this Green Paper closely, particularly where they are likely to affect BBGI.

The Company takes corporate governance matters seriously. The Boards recognise the importance of a strong corporate governance culture and have put in place a framework for corporate governance which they believe is appropriate for the Company. BBGI is a member of the Association of Investment Companies ("AIC") and as such reports against the AIC Code of Corporate Governance ("AIC Code"), which principles and recommendations are carefully considered, and follows the AIC Corporate Governance Guide for Investment Companies ("AIC Guide").

Although revised versions of both the UK Corporate Governance Code ("UK Code") and subsequently the AIC Code (to reflect the various changes to the UK Code) were published in early and mid-2016 respectively, applying to reporting periods beginning on or after 17 June 2016, the Company has followed the previous AIC Code dated February 2015 for the 2016 reporting period. The Company has worked throughout the year to ensure it complies with the AIC Code and, in the event that it does not, to explain why. The Boards consider that reporting against the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), provides appropriate information to shareholders.

AIFM

The Company is authorised by the CSSF to act as an Alternative Investment Fund Manager ("AIFM"). Being so authorised, the Company is subject to increased regulatory supervision from the CSSF. The recurring cost of such regulatory supervision costs the Company in the region of £100,000 per annum.

During the year under review, with the exception of the appointment of a new Risk Manager mentioned below in the section "Delegated functions", there have been no material changes in respect of Art. 20 Para. 2(d) of the AIFM Law that would warrant further disclosure to investors.

Internal controls - general

The Management Board is responsible for setting up the Company's system of internal control, and the Supervisory Board for reviewing its effectiveness. The Management Board has therefore established an ongoing process designed to meet the particular needs of the Company in managing the risks to which it is exposed.

In addition to the above, at each quarterly meeting the Supervisory Board monitors the Company's investment performance against its stated objective, and reviews its activities to ensure that the Management Board is adhering to the investment policy and guidelines. During these meetings, the Management Board (which has agreed on clearly defined investment criteria, returns targets and risk appetite) reports in detail on these issues including, but not limited to operating performance, cash projections, investment valuations and corporate governance matters.

The Company recognises that effective control systems can only seek to manage and mitigate the risks of failure to achieve business objectives; they cannot eliminate them. By their very nature, these procedures are not able to provide absolute assurance against material misstatement or loss.

Delegated functions

Amongst other requirements, the Company is required under the AIFM Law to have dedicated Risk Management, Compliance, and Internal Audit functions, each of which is required to be both functionally and hierarchically separate from the functions of the operating units. Accordingly, the following third party service providers, who are experts in their respective fields, are to these roles:

§ Compliance: 99 Advisory Luxembourg - ICE (previously The ICE Breakers S.A.)

§ Custodian, Depository, Paying Agent, Transfer Agent: RBC Investor Services Bank S.A.

§ Internal Audit: Grant Thornton ABAX Consulting

§ Risk Management: SGG Fund Management S.A.

Notwithstanding these appointments, the Company's Management Board retains overall responsibility for the correct and effective operation of the delegated functions. Accordingly, the members of the Management Board have been appointed as Designated Board Members ("DBMs") with oversight and control responsibilities for their respective functions.

Material contracts

The following new material contracts relating to the governance of the Company were entered into during the year ended 31 December 2016:

§ Global IT Services PSF: IT Services Provider

§ SGG: Risk Management Services

During the year under review, the third party service provider for Risk Management, Grant Thornton ABAX Investment Services, informed the Company that Grant Thornton was unable to continue to provide both risk management and internal audit services. Accordingly, in June, the Management Board approved the appointment of SGG Fund Management S.A. ("SGG") to provide the full suite of risk management services to the Company, to take effect from 1 September 2016. There has been no increase in costs to the Company because of this change, nor was there any disruption during the handover. In addition, formal written regulatory approval of this appointment was received from the CSSF on 29 August 2016.

ADMINISTRATION

Incorporation and administration

The ordinary shares were created in accordance with Luxembourg law and conform to the regulations made thereunder, have all necessary statutory and other consents, and are duly authorised according to, and operate in conformity with, the Articles of Association (the "Articles").

Articles of Association

The Articles were approved and formalised before a Luxembourg notary public on 24 November 2011. The Articles are filed with the Luxembourg Registre de Commerce et des Sociétés and are published in the Mémorial. The Articles may be amended in accordance with the rules set out in article 32 of the Articles.

A copy of the Articles is available for inspection at the Company's registered offices during normal business hours.

REMUNERATION

Supervisory Board remuneration

The Supervisory Board members are the Company's Non-Executive Directors and are paid a fixed quarterly fee. These fees are considered annually by the Supervisory Board, acting as the Remuneration Committee, based on the advice and recommendations of the Management Board. No member of the Supervisory Board is entitled to vote on his own remuneration. Supervisory Board members are not entitled to any other fees, pension payments, incentive plans or any other form of compensation, with the exception of ex gratia fees that are considered in the event of exceptional and substantial increase in the members' workload.

During the year under review, the annual fee paid to the Chairman of the Supervisory Board was £55,000 (2015: £55,000) and the annual fees paid to both the Senior Independent Director and the Chairman of the Audit Committee were £42,500 (2015: £42,500).

The aggregate fee paid to the members of the Supervisory Board during 2016 was £140,000 (2015: £140,000). No additional fees were paid during the year.

Management and staff remuneration

The Company believes that an appropriate remuneration programme for each Manager and employee of the Group plays an important role in achieving the short and long-term business objectives that ultimately drive business success and alignment with long-term shareholder goals.

The level and structure of the remuneration to which the Management Board members and employees of the Group are entitled are reviewed on an annual basis by the Supervisory Board acting as the Company's Remuneration Committee. Appropriate benchmarking with comparable listed businesses is periodically undertaken with the intention of ensuring that the remuneration programme remains competitive. Other than the LTIP payment mechanism, which is subject to shareholder approval, the Supervisory Board is responsible for setting the remuneration levels and targets of the Management Board. It should be noted that the annual review may not result in any change in the levels of remuneration.

Remuneration programme objectives

The objectives of the remuneration programme are to:

§ attract and retain highly qualified Management and employees with a history of proven success;

§ align the interests of the Group's Management and employees with shareholders' interests, the execution of the Company's investment policy and the fulfilment of the Company's investment objectives;

§ establish performance goals that, if met, are expected to be accretive to long-term shareholder value; and

§ link compensation to performance goals and provide meaningful rewards for achieving these goals.

Under the programme, every employee of the Group receives an annual base salary payable monthly in arrears.

Management Board remuneration

Each member of the Management Board receives an annual base fee payable monthly in arrears and participates in a long-term incentive plan ("LTIP"). In addition, each member participates in a short-term incentive plan ("STIP"). No member of the Management Board receives an additional fee for acting as a member of the Management Board.

Both Mr Denny and Mr Schramm receive all cash entitlements under the remuneration programme in EUR. Mr Ball receives all cash entitlements in CAD. Payments in currencies other than Sterling, the reporting currency of the Group, can result in both positive and negative foreign exchanges movements.

Service/management contracts

BBGI Management HoldCo S.à r.l. has agreed separate service contracts with the Co-CEOS, Mr Schramm and Mr Ball. These contracts are on identical terms and conditions, save for the currency of payment as noted above. The key features of the service contracts are as follows:

§ the Threshold, Target and Maximum levels of the STIP are set at 50%, 100% and 125% of average annual salary respectively;

§ the Threshold, Target and Maximum levels of the LTIP awards are set at 50%, 100% and 150% of salary at the date of grant;

§ LTIPs granted with return periods commencing from December 2014 onwards will be settled in shares;

§ an expected shareholding of 150% of salary was set. This can be attained over a five-year period commencing May 2014;

§ Malus clauses enabling unpaid bonuses to be withdrawn are included for both the STIP and LTIP.

Notice periods to/from the Company of 12 months from May 2016 (previously 24 months' notice) apply in respect of Mr Ball and Mr Schramm. With respect to Mr Denny, a notice period to/from the Company of 6 months applies.

Fixed remuneration

The combined annual base fee entitlement of the members of the Management Board at 31 December 2016 is £832,663 (2015: £686,034). Of the £146,629 increase between 2015 and 2016, £132,792 is directly attributable to the impact of Sterling weakening against the CAD and EUR over the reporting period.

In addition to their base fees, both Mr Schramm and Mr Ball received a monthly car allowance during the year amounting to £26,053 (2015: £23,491) and a supplementary annual payment of 5% of their annual fee to provide pension, retirement or similar benefits.

Short-term incentive plan ("STIP")

Under the STIP, awards for Mr Ball and Mr Schramm are subject to the achievement of pre-determined performance objectives set by the Supervisory Board at the beginning of the relevant financial year. The maximum amount payable under the STIP is 125% of the relevant executive's annual fee, with a target performance to produce an entitlement of 100% of fee and a minimum performance threshold to produce 50%. The relevant annual fee is the total base fee paid in the year.

Mr Denny's 2016 target performance objectives entitle him to a maximum €90,000 payment.

The Supervisory Board is responsible for determining both whether the relevant performance objectives (which may be financial and non-financial) have been satisfied and the level of award under the STIP for the relevant year. If agreed, awards will be paid after the accounts have been audited.

During the year ended 31 December 2016, the combined amount accrued in respect of the 2016 STIP amounted to £709,459 (2015: £610,135). Payments under the STIP are made in CAD and EUR.

Long-term incentive plan ("LTIP")

During the year under review a combined amount of £262,612 (2015: £310,218) was accrued against those LTIPs which have been awarded but not vested.

As of 31 December 2016, the combined amount accrued but not yet paid to Mr Ball, Mr Denny and Mr Schramm with respect to the 2013, 2014 and 2015 LTIP award letters amounted to £834,114 (2015: £677,676). Further details on the individual awards are set out below.

Cash-based LTIP awards

2012 award

In December 2015, after the end of the Return Period, the Company made a payment of C$350,000 to Mr Ball based on the estimated amount due under the 2012 award. In January 2016, the Company made a payment of €250,000 to Mr Schramm under the 2012 award. Also in January, an adjusting payment of C$2,890 was made to Mr Ball. All awards were settled in cash.

2013 award

During the year ended 31 December 2016, an accrual of £54,612 (2015: £212,218) was recorded in respect of the 2013 award granted to Mr Ball, Mr Schramm and Mr Denny. The total combined amount outstanding under this award amounted to £527,114 at 31 December 2016. The award for Mr Ball and Mr Schramm was measured by reference to a threshold hurdle of a TSR of 16.50% achieved over the three-year return period, starting from the date of each individual annual award letter, with the maximum amount payable for achieving a 25% or greater TSR over the same return period.

In January 2017, Mr Ball and Mr Schramm each received the maximum amount payable under the 2013 award of C$366,123 and €259,375 respectively in full settlement of the Company's obligations.

The award granted to Mr Denny in May 2014 has a return period that commenced in December 2013. A TSR of 16.50%, the threshold, will pay €50,000; achieving a TSR of approximately 22.50% will earn the maximum amount of €100,000. Interim achievements will be interpolated. Payment of Mr Denny's award is scheduled for May 2017.

Share-based LTIP awards

A key feature of these awards is that they will be settled entirely by way of Company shares and not in cash as was the case with all previous awards granted. All awards which are to be settled by shares fall under the scope of IFRS 2 "Share-Based Payments" and its specific requirements. The Company has engaged EY to carry out the valuation of awards falling under the scope of IFRS 2 with the resulting valuation being used as the basis for the cost to be amortised over the return period. Refer to the Consolidated Financial Statements for further detail on share-based payments.

2014 award

The granting of the 2014 award was put on hold in order to await the result of the resolution put to shareholders at the April 2015 AGM. The LTIP awards were subsequently granted to the members of the Management Board in August 2015, noting however that the return period would commence from December 2014.

Half of the LTIP target award will be measured by reference to TSR. The other half will be measured by reference to the percentage increase in the Company's NAV per share).

As regards Mr Ball and Mr Schramm, the maximum award that may be made under the LTIP is 150% of the relevant executive's base salary in that financial year, with a target award of 100% and a minimum threshold of 50%.

With respect to Mr Denny, the maximum award that may be made under the LTIP is €100,000 with a threshold award of €50,000. Interim achievements will be interpolated.

During the year ended 31 December 2016, an expense of £98,000 (2015: £98,000) was accrued in respect of the 2014 awards.

2015 award

In December 2015, the Management Board members were each granted an LTIP award. Other than the return period, which runs from December 2015 to December 2018, all the other features remain identical to those in the 2014 award as outlined above.

During the year ended 31 December 2016, an expense of £108,000 was accrued in respect of the 2015 award.

2016 award

In December 2016, the Management Board members were each granted an LTIP award. Other than the return period, which runs from December 2016 to December 2019, all the other features remain identical to those in the 2014 award as outlined above.

No expense was accrued during the year ended 31 December 2016 under this award.

No loan has been granted to, nor any guarantee provided for the benefit of, any manager by the Company. There are no family relationships between Mr Ball, Mr Denny and Mr Schramm.

At no time will Mr Ball, Mr Denny and Mr Schramm acquire or have options over any shares in BBGI Management HoldCo S.à r.l., which is and is intended to be wholly owned by the Company.

As at the date of this Annual Report, there are no amounts set aside, needing to be set aside or accrued by the Company to provide pension, retirement or similar benefits to any member of the Management Board.

Remuneration and AIFM law

In 2013, the European Securities and Markets Authority ("ESMA") published its final guidelines on sound remuneration policies under the AIFMD. These guidelines indicate that remuneration disclosures may be made on a "proportional" basis and acknowledge that the application of proportionality may lead, exceptionally, to the "disapplication" of some requirements provided this is reconcilable with the risk profile, risk appetite and strategy of the AIFM and the AIFs it manages. According to the Guidelines, the different risk profiles and characteristics among AIFMs justify a proportionate implementation of the remuneration principles and, where a company chooses to disapply requirements, it must be able to explain the rationale to a competent authority.

The Company's position

As part of the AIFM authorisation application, the Company obtained the following derogations from the CSSF, on proportionate grounds, from three of the remuneration policy principles: i) to pay a substantial part of the variable remuneration in shares; ii) the ex post incorporation of risk for variable remuneration ("malus" or "clawback"); and iii) to establish a Remuneration Committee. Accordingly, the Company has technically disapplied these three remuneration policy principles. However, the Company has applied the spirit of the rules. LTIPs granted from the 2014 award onwards will be settled in Company shares. Furthermore, malus clauses are included in their STIP and LTIP contracts. As mentioned above, the Supervisory Board acts as the Company's Remuneration Committee.

Total basic and variable remuneration for the financial year

The total basic remuneration paid to all members of staff (including the Management Board members) during the year under review was £1.77 million (2015: £1.42 million). The total variable remuneration accrued for all members of staff for the financial year ending 31 December 2016 was £1.21 million. The total variable remuneration paid to all members of staff for the financial year ending 31 December 2015 was £1.12 million.

THE BOARDS OF DIRECTORS

This table sets out the expiry dates of the current terms of the directors' appointments. All appointments may be renewed in accordance with the provisions of the Company's Articles.

Board members and other interests

Duncan Ball, Michael Denny and Frank Schramm, the members of the Management Board, are also BBGI Management HoldCo managers. Apart from Mr Ball and Mr Schramm who both hold service contracts and Mr Denny who holds a management contract, no other member of the Group held service or management contracts during the year under review.

No loan has been granted to, nor any guarantee provided for the benefit of, any director by the Company.

There are no family relationships between the members of the Boards. David Richardson, Colin Maltby and Howard Myles are all considered to be independent Board members as: (i) they have not been employees of the Company; (ii) have not had material business relationships with the Company; (iii) have not received performance-based remuneration from the Company; (iv) do not have family ties with any of the Company's advisers, directors or senior employees; (v) do not hold cross-directorships or have links with other directors through involvement on other companies; (vi) do not represent a significant shareholder; and (vii) have not served on the Board for more than nine years.

Board members' shareholdings

Board diversity and tenure

The Boards have considered their diversity, as recommended by the AIC Code, along with the Davies Review "Women on Boards" Five Year Summary of October 2015. They concur that Board appointments must always be made on merit, that boards should have a balance of relevant skills, experience, length of service and knowledge of the Company, and that Independent Directors should take the lead in the appointment of new Directors.

The Company is currently 5 years old, with no new appointments made to the Supervisory Board since listing and admission to trading on the London Stock Exchange in December 2011. One appointment has been made on the Management Board over the same period where Michael Denny replaced Arne Speer as a member of the Board with effect from 30 April 2013. As stated later in this Governance section under "Committees of the Supervisory Board - Nominations Committee", the Supervisory Board, acting as the Nominations Committee, together with the Management Board reviewed the succession plans of the Company and concluded that their present composition embodies an appropriate diversity of perspectives and relevant skills, qualifications and experience. Accordingly, they agreed that at the current time no new appointments were required, and there continued to be no necessity for the formalisation of a policy on tenure. As the Company matures, however, it will become necessary to agree such a policy, and may become relevant to seek greater diversity by length of service, gender, ethnicity, nationality or other criteria. However, the Boards remain committed to conducting any evaluation of prospective candidates, as of their own members, without discrimination on grounds of gender, age, nationality, ethnicity, faith or sexual orientation. Their overriding objective is to select members on merit with relevant and complementary skills to help the Company maximise value for shareholders. 

Management Board

General

The Management Board is responsible for the day-to-day management of the Company, including administration, preparation of semi-annual valuations, the statutory financial statements, the management accounts, business plans, presenting results and information to shareholders, coordinating all service providers to the Group, and giving the Supervisory Board general advice and feedback. The Management Board is responsible, inter alia, for undertaking the discretionary investment management of the Company's assets and those of the rest of the Group; it therefore carries out the function of investment manager. Accordingly, the Company has not engaged an external investment manager.

The Management Board comprises three members, each contractually engaged by BBGI Management HoldCo, a direct subsidiary of the Company, therefore none of them is deemed independent by AIC Code Principle 2. However, the Management Board's functions are overseen by the Supervisory Board which itself meets the independence criteria set out in Principle 2. Whilst this two-tier structure is not envisaged by the AIC Code, the Company considers that an independent Supervisory Board ensures the Company is compliant with Principle 2.

The Company's Articles require that the Management Board's members are elected on an annual basis by the Supervisory Board, not by shareholders; in itself therefore, this does not meet the requirements of AIC Code Principle 3, which requires that directors should be subject to election by shareholders. However, as the Management Board carries out the role of investment manager, the Supervisory Board deems it appropriate that it elects the members of the Management Board. The Articles also require that the members of the Supervisory Board themselves be subject to annual election by shareholders, who may also dismiss any such member; accordingly, the Company considers that this procedure satisfies the requirements of Principle 3.

Performance evaluation and reappointment

As stated above, the Management Board carries out the functions of the Company's investment manager, and its Directors are appointed by the Supervisory Board for a period of one year (renewable). Mr Ball and Mr Schramm were both originally appointed on 5 October 2011 with Mr Denny originally appointed on 30 April 2013.

The Supervisory Board evaluates the performance of the Management Board and its Directors annually to ensure that the Management Board collectively, and its Directors individually, continue to operate effectively and efficiently, and that the continued appointment of the individual Directors is in the best interests of the Company and its shareholders as a whole. The Supervisory Board, satisfied with the evaluations carried out in 2015 and latterly in 2016, resolved to renew Mr Denny's appointment for a further term of one year with effect from 30 April 2016, and those of Mr Ball and Mr Schramm for a further term of one year with effect from 5 October 2016.

Attendance at Management Board meetings during the financial year ended 31 December 2016

* From time to time there are unscheduled meetings of the Management Board, most of which are called at short notice to approve documents previously discussed or of a technical nature. Due to the generally short notice given, not all members are always able to attend; however, this has not been the case for the year under review.

Supervisory Board

General

The Supervisory Board consists of three members who are all Non-Executive Directors, each of whom is considered to be independent.

In accordance with the Articles, all members of the Supervisory Board are elected for a period ending at the Annual General Meeting of the Company in April every year, at which time they are required to retire. They may if they so wish offer themselves for re-election by shareholders; however, re-appointment is not automatic. Although the Company is not a member of the FTSE 350, the annual re-election requirement of the AIC Code Principle 3 is met by the Articles which provide for a more stringent process than that required for non-FTSE 350 companies.

The Supervisory Board believes that its members have an appropriate balance of skills and experience to enable them to fulfil their obligations. The Supervisory Board meets at least four times a year and between these formal meetings there is regular contact with the Management Board and the Company's brokers. The members of the Supervisory Board are kept fully informed of investment and financial controls, and other matters relevant to their remit. Both Supervisory and Management Board members also have access, where necessary in the furtherance of their duties, to independent professional advice at the expense of the Company. In the period under review, the Supervisory Board met five times. Attendance of individual Supervisory Board members can be found in the table below.

As previously mentioned, the Supervisory Board members have a breadth and diversity of experience relevant to the Company, and the Company believes that any future changes to the composition of the Supervisory Board can be managed without undue disruption. On appointment to the Supervisory Board, new members will be provided with an induction.

The Supervisory Board considers items laid out in the Notices and Agendas of meetings, which are formally circulated to its members in advance of the meeting as part of the Board papers; members may also request the addition of any agenda item they consider appropriate for Board discussion. At each meeting, the members are required to advise of any potential or actual conflicts of interest prior to discussion.

Annual performance evaluation

The Supervisory Board evaluates its performance and considers the term and independence of each member on an annual basis; for the year ended 31 December 2016, this process has now been completed. The evaluation performed comprised completion of a questionnaire followed by collation of all comments into a summary. The Supervisory Board considered the results of this evaluation process and agreed that the current composition of both the Supervisory Board and its Audit Committee reflected a suitable mix of skills and experience, that each body was functioning effectively, and that the performance of each individual member had been effective and appropriate. For the evaluation of the Chairman, the Senior Independent Director discussed the results of the questionnaire with the Chairman personally prior to further distribution to, and discussion with, the remaining member.

As the Company is not a FTSE 350 company, an externally facilitated evaluation of the Supervisory Board every three years (as proposed by AIC Code Principle 7) was not conducted. In addition, no independent third party has been appointed to manage the exercise as the Board considers the current process to be appropriate.

From time to time there are unscheduled meetings of the Supervisory Board, most of which are called at short notice to approve documents previously discussed or of a technical nature. Due to the generally short notice given, not all members are always able to attend. However, no unscheduled meetings were called during 2016.

Other listed company directorships

Re-election of Supervisory Board members

In accordance with the Articles, Supervisory Board members are elected for a period ending at the Company's next AGM, at which time they are eligible for reappointment. Each member of the Supervisory Board has decided to offer himself for re-election at the forthcoming AGM and, as a result of the successful performance evaluation described above, the Supervisory Board recommends the re-election of each member. The supporting biography of each member can be found immediately following the Chairman's Statement of this annual report.

Review/monitoring obligations/delegation of responsibilities of Supervisory Board

The primary focus at Supervisory Board meetings is a review of investment performance and associated matters such as risk management, marketing/investor relations, gearing, general administration and compliance, peer group information and industry issues. In addition, it is responsible for establishing and monitoring compliance with the Company's investment policy, providing general supervisory oversight to the operations of the Group as a whole, appointing (or dismissing) the members of the Management Board, and supervising and monitoring the appointment and performance of the Company's third-party service providers (and those of its subsidiaries). In the case of these latter two roles, the Board acts as Nominations Committee and Management Engagement Committee respectively, as described below.

The Supervisory Board will continue to regularly consider the Company's strategy taking account of market conditions and feedback from the Management Board, the Company's joint Brokers and shareholders. The investment strategy, as set out in the Company's prospectuses and this annual report, is reviewed regularly in conjunction with the Management Board.

COMMITTEES OF THE SUPERVISORY BOARD

There is only one constituted Committee of the Supervisory Board; that is, the Audit Committee. It operates under clearly defined terms of reference, and these are available from the company secretary upon request.

There are no other Committees as the Supervisory Board considers its size to be such that it would be unnecessarily burdensome to establish them. The Board as a whole therefore carries out the functions of Management Engagement, Nominations and Remuneration Committees, including inter alia making recommendations in relation to the Group's remuneration programme and on proposed changes of the Group's senior personnel. There are therefore no terms of reference in relation to such Committees. When acting in the capacity as these individual Committees, the meetings are chaired by Mr Richardson, the Independent Chairman of the Supervisory Board.

Other Committee functions

§ Remuneration Committee

Acting as Remuneration Committee, the Supervisory Board met four times during the financial year to review the levels and structure of the remuneration, compensation, and other benefits and entitlements for the directors, officers and employees of the Company and its subsidiaries. Further information in relation to both Executive and Non-Executive Directors remuneration can be found in the Remuneration section of this report.

§ Nominations Committee

During the financial year, the Supervisory Board met four times as Nominations Committee to consider the renewal of the appointments of the Management Board members (which appointments are renewable annually for one year only) and to review the succession plans for both Boards.

As stated under "Management Board - Performance Evaluation and Reappointment", each member of the Management Board was reappointed for a further year. In respect of succession planning, the detailed plans developed for all senior positions were reviewed. These plans are regularly updated by the Management Board and reviewed with the Supervisory Board at least annually.

§ Management Engagement Committee

In its role as Management Engagement Committee, the Supervisory Board met on four occasions during the year under review to consider, together with the Management Board, the performance and ongoing appointments of the Company's third-party service providers.

§ Audit Committee

The Audit Committee (the "Committee") has operated throughout the year in accordance with the AIC Code. As indicated above, it does so within clearly defined terms of reference including all matters indicated by Disclosure and Transparency Rule 7.1 and the AIC Code. It comprises the three independent Non-Executive Directors who are also members of the Supervisory Board: Howard Myles is Chairman of the Committee, with Colin Maltby and David Richardson the other members. Biographical details of each member can be found immediately following the Chairman's Statement.

The Committee's responsibilities are as follows:

§ Where requested, providing advice to the Supervisory Board on whether the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy;

§ monitoring the integrity of the financial statements of the Group and any formal announcements relating to the Group's financial performance and reviewing significant financial reporting judgements contained therein;

§ reviewing the Group's internal financial controls and, unless expressly addressed by the Board itself, the Group's internal control and risk management systems, including reviewing the Internal Auditors annual regulatory report;

§ monitoring and reviewing the effectiveness of the Company's internal audit function;

§ making recommendations to the Supervisory Board for resolutions to be put to shareholders for approval at the AGM on the appointment, re-appointment and removal of the external auditor, and for approval of the associated remuneration and terms of engagement;

§ reviewing and monitoring the external auditor's independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK and Luxembourg professional and regulatory requirements;

§ developing and implementing a policy on the engagement of the external auditor to supply non-audit services, taking into account relevant guidance and legislation regarding the provision of non-audit services by the external audit firm; and

§ reviewing the Group's Annual and Interim Reports and Financial Statements.

The Committee is required to report its findings to the Supervisory Board, identifying any matters on which it considers that action or improvement is needed, and make recommendations on the steps to be taken. In the event of any conflict between the provisions of the AIC Code and the provisions of the law on the Audit Profession, the Company will comply with the provisions of the law on the Audit Profession and will disclose any such conflict.

The external Auditor is invited to attend those Committee meetings at which the annual and interim financial statements are considered, and at other times if considered necessary by the Committee.

Meetings

The Committee is required to meet not less than twice a year, and at such other times as the Committee Chairman may require. Additional meetings may be requested by any other member of the Committee, or the external Auditor, if deemed necessary. Other Directors and third parties may be invited by the Committee to attend meetings as and when appropriate.

From time to time there are unscheduled meetings of the Audit Committee, most of which are called at short notice meetings to approve documents previously discussed or of a technical nature. Due to the generally short notice given, not all members are always able to attend. However, no unscheduled meetings were called during 2016.

AGM

The Committee Chairman attends each AGM of the Company and is prepared to respond to any shareholder questions on the Committee's activities.

RISK AND RISK MANAGEMENT

The Board, with the support of the appointed Risk Manager, considers the process of identifying, evaluating and managing the significant risks faced by the Company on an ongoing basis. The Management Board has established internal controls to manage these risks by reference to a risk register, and reviews and monitors this register and the various risks on a quarterly basis. The Supervisory Board also reviews the key risks affecting the Company at each scheduled quarterly Board meeting, by reference to said risk register. If a new risk develops or the likelihood of a risk occurring increases, where appropriate and to the extent possible, a mitigation strategy is developed and implemented, together with enhanced monitoring. The Audit Committee also reviews the effectiveness of the Company's risk management and internal control systems at least annually.

The Management Board set out the material risks relating to the Company's portfolio in the Company's IPO prospectus dated 6 December 2011, and updated them in the two prospectuses that followed dated 26 June 2013 and 19 November 2013 respectively; each prospectus is available on the Company's website. General areas of risk and the processes are set out below within the relevant area of risk.

Economic, external and financial risks

§ A significant proportion of the Company's underlying investments, 61% of portfolio value at 31 December 2016, are denominated in currencies other than Sterling. The Company maintains its financial statements, prepares the valuation and pays distributions in Sterling. Accordingly, fluctuations in exchange rates between Sterling and the relevant local currencies will directly affect the value of the Company's underlying investments, the distributions and the ultimate rate of return realised by investors. The Company has implemented currency hedging arrangements in respect of the non-Sterling investments denominated in AUD, CAD, NOK and USD for a period of four years in order to mitigate some of this risk.

§ The Company has investments in project entities and business activities in different jurisdictions, and external, economic and financial factors have the capacity to affect these. In particular, the performance of the investments can be affected by changes in macroeconomic factors such as foreign exchange, inflation rates, interest rates and deposit rates.

§ Different laws and regulations apply within the jurisdictions where the Company and the project entities are located, and the Company and investments in such countries may be affected by changes in law, tax and accounting regimes, directives, political climate, and other changes that cannot be easily foreseen. The underlying financial models of project entities and the business model of the Company are based on assumptions regarding the prevailing tax, accounting and legal frameworks. Any change in those assumptions could affect the Company's ability to meet targets and its investment objectives. Where possible, this will be mitigated, but there may be instances where this will not be possible. The Company and the service providers for the underlying project entities continually monitor any potential or actual changes.

§ The project entities typically have some cash reserves and deposits. From a financial modelling perspective, an assumption is usually made that the deposits can be placed at a forecast rate that varies depending on country and historical long-term averages. The effect on investment returns if deposit rates exceed or fall below the projections for this long-term rate is dependent on the amount of deposits.

§ The revenues and expenditure of project entities developed under PPP/PFI are frequently partly or wholly subject to indexation. From a financial modelling perspective, an assumption is usually made that inflation will increase at a long-term rate (which may vary depending on country and prevailing inflation forecasts). The effect on investment returns if inflation exceeds or falls below the projections for this long-term rate is dependent on the nature of the underlying project earnings, the extent to which the project entity's costs are affected by inflation and any unitary charge indexation provisions agreed with the client on any project. The Company's ability to meet targets and its investment objectives may be adversely or positively affected by higher or lower than expected inflation. There is also a risk that general operating costs may be higher than forecast in the financial model. This may be due to, inter alia, inflation. Project entities typically mitigate that risk to some extent by seeking to match the indexation of the revenues to the indexation of the operational cost.

§ The Company's debt facility has a floating rate that is not hedged. The Company's performance may be affected by changes in interest rates. The underlying project entities have sought to hedge substantially all their floating rate interest liabilities against changes in underlying interest rates.

§ To the extent that the Company does not have cash reserves pending investment, the Company expects to bridge finance further investments by way of the credit facility or by issuing additional equity. Although the Company has had a credit facility in place since July 2012 (which was refinanced in January 2015), there can be no guarantee that this will always be the case or that it will be able to issue further shares in the market.

Operational/asset related risks

§ In some projects, a refinancing may be required to repay the project entity's obligations as they fall due. For the existing portfolio, in relation to senior debt financing, this applies to the Northern Territory Secure Facilities project, Royal Women's Hospital project (and only with respect to one of two tranches of bonds), and the Women's College Hospital project where the bond expires in 2019 and, in the event that no refinancing can be arranged, a cash sweep applies where all net operational cash will be used to repay the bond. Where a project carries a requirement to refinance, there is a risk that such refinancing cannot be secured at the forecast financing costs or at all. This could have an impact on the timing and/or amounts of distributions or other payments in respect of investment capital by such project entity. The Company believes that the current refinancing assumptions in the models are adequate.

§ Although it is intended that the main construction and operational risks will be passed on by the project entities contractually to the relevant subcontractor or service providers (including any penalty payments or deductions to the client), or covered by insurance, there continues to be some risk that the anticipated returns of the project entities will be adversely affected by underperformance or performance failures.

§ To the extent that the actual costs incurred by a project entity differ from the forecast costs, and cannot be passed on to subcontractors, e.g. insurance costs, the expected investment returns may be adversely affected.

§ If there is a subcontractor service failure or subcontractor insolvency which is sufficiently serious to cause a project entity to terminate or to be required by the client to terminate a subcontract, or the relevant subcontract expires prior to the end of the concession period (which is the case on some road projects), there may be a loss of revenue during the time taken to find a replacement subcontractor. In addition, the replacement subcontractor may levy a surcharge to assume the subcontract or charge more to provide the services. Despite available securities such as parent company guarantees and letters of credit, these losses and costs may not be recoverable from the defaulting subcontractor.

§ The client is generally given rights of termination under PPP/PFI contractual agreements. The compensation (if any) which the project entity is entitled to receive on termination will depend on the reason for termination and the terms of the project agreement. In some instances, the compensation will not include amounts designed specifically to repay the equity investment. Where termination is for client default, or the client voluntarily terminates the project agreement without fault on either side, the compensation is likely to extend to some of the lost equity returns, although this cannot be guaranteed. The Company has currently no indication that any of the clients intend to voluntarily terminate the agreement or of any potential client default.

§ During the life of an investment, components of the project assets (such as asphalt in the case of roads and elevators, roofs and air handling plants in the case of buildings) are likely to need inter alia to be replaced or undergo a major refurbishment. The timing and costs of such replacements or refurbishments is forecast, modelled and provided for by each project entity based upon manufacturers' data and warranties, and specialist advisers are usually retained by the project entities to assist in such forecasting of lifecycle timings, scope of work and costs. However, various factors such as shorter than anticipated asset lifespans, vandalism, or underestimated costs and/or inflation higher than forecast may result in lifecycle costs being higher than the financial model projections or occurring earlier than projected. The contractual matrix for the current portfolio is intended to pass this risk down to subcontractors (in particular for the social infrastructure projects), but where this risk is retained (generally on transport projects) or where it is not otherwise effectively passed down to subcontractors, any cost implication will generally be borne by the affected project entities.

§ Typically, the client will have the right to terminate the project agreement where the project entity or a shareholder or subcontractor (or one of their employees) has committed bribery, corruption or another fraudulent act. In these circumstances, it is likely that the majority, if not all, of the investment will be lost. The Company has a compliance system in place and is currently not aware of any such acts that could trigger that risk.

§ The costing of, and pricing for, infrastructure projects relies on large and detailed financial models. There is a risk that errors may be made in the assumptions, calculations or methodology used in a financial model. In such circumstances, the figures and/or the returns generated by the project entity may be different to those estimated or projected. The risk is mitigated for project entities where the models have been updated a number of times and/or operational model audits have been undertaken. The Company typically engages a third party advisor to carry out a model review as part of its acquisition due diligence process.

Strategic and management risks

§ To assist the Company in managing any share price premiums or discounts to NAV, the Company has the ability to make market purchases of up to 14.99% per annum of the ordinary shares in issue. In addition, a continuation vote is offered to shareholders every two years, the next of which will be proposed at the Company's AGM on 28 April 2017.

§ The Company seeks to provide its shareholders with a minimum 6.25 pence per share per annum target dividend and a 7% to 8% IRR on the £1 IPO issue price, based on long-term stable and contracted government-backed revenue streams that are partly inflation linked. The Company's portfolio value is prepared semi-annually by the Management Board in good faith; it is then independently reviewed by a professional valuer, and finally reviewed/audited by KPMG. However, there is a risk that the Company may fail to reach the return objectives. The ultimate realisation of the market value of an asset depends largely on judgements, economic conditions and other conditions beyond the control of the Company. Valuations do not necessarily represent the price at which an investment can be sold.

§ Further investments intended to be made by the Company comprise interests in project entities that are not publicly traded or freely marketable and often subject to restrictions on transfer; such investments may, therefore, be difficult to value. This could lead to an overpayment for investments during an acquisition. The Company has internal processes in place that seek to minimise these risks through regular review of the peer group, discussions with advisors, regular external confirmation of the portfolio value, and the annual audit process.

§ The due diligence process undertaken during an acquisition may not reveal all facts and circumstances relevant to a particular investment. The Company seeks to mitigate this risk where possible by a structured due diligence process, typically with the support of external advisors, market knowledge, site visits and contractual protections in the acquisition agreements.

§ The success of the Company will depend, inter alia, upon the skill and expertise of the Management Board and the individuals employed within the Group in identifying, selecting, acquiring and managing the investments. There is also no certainty that key investment professionals will continue to work for the Group in the long term.

§ The concessions granted to project entities are predominantly granted by a variety of public sector clients in the UK, Canada, Australia, Germany, Norway and the US. Although the Management Board believes such public sector clients generally represent a low counterparty risk, the possibility of a default remains and has increased in recent years, and may vary from country to country. This risk could increase if the Company has one public sector client that is the counterparty to more than one investment. The Company has a wide range of public clients.

§ The Company and its business may be impacted by bribery, fraud and corruption. The Company has a compliance system in place and is not aware of any such acts that could trigger that risk.

§ A single subcontractor may be responsible for providing services to various project entities in which the Company will invest, and the Company has set no limit as to the number of project entities to which a single subcontractor may provide services. In such instances, the default or insolvency of such single subcontractor could adversely affect a number of the Company's investments. A similar situation may apply with respect to default, impairment or insolvency relating to financial counterparties, such as banks and insurance companies. Any credit support provided in respect of the performance of the relevant obligation may not be sufficient and may not respond at all. This could have a material adverse effect on the project entity concerned and might not only reduce financial returns but could adversely affect the Company's reputation. Apleona (previously called Bilfinger Real Estate Asset Management or "BREAM") is the day-to-day management service provider for a substantial number of these project entities and as such there is some concentration risk from this relationship.

§ Where the project entities have made deposits with financial institutions, these are typically short or medium term. By monitoring the exposure across the portfolio, the Company seeks to mitigate any over-reliance on any single counterparty and ensure that these institutions have an acceptable credit rating.

Insurance

The Company has taken out both Directors and Officers ("D&O") liability insurance and Professional Indemnity ("PI") insurance. The cover provided under the PI policy is compliant with the requirements of the AIFM law.

Environmental, Social and Governance ("ESG")

As companies' influence on global economic activity increases, the resultant effect on the environment and society in general is much greater than before. Corporate Governance is therefore inextricably linked to both, so good corporate governance practices are essential to ensure that the impact a company can have in these areas is mitigated to the greatest extent possible. Adopting such good practices should also have the effect of reducing the possibility of more onerous legal/regulatory changes being imposed that could seriously affect relevant business activities.

As part of their corporate social responsibility, the Boards recognise the importance of ensuring that the Company develops appropriate environmental, social and ethical policies. The Company has implemented its ESG policies, which have been designed to ensure that the Company follows best practices in relation to corporate responsibility. The policies are monitored and updated on an ongoing basis. Furthermore, and allied to this ESG Policy, the Company strives to ensure that all the project companies within its portfolio have implemented effective ESG policies and processes.

In terms of employment, the Company is an Equal Opportunities Employer, committed to the principles of respect, fairness and loyalty, as well as equal treatment and pay between men and women. It has a strict Code of Conduct policy in place to ensure equal treatment of its entire staff, and to prevent any employee suffering any form of discrimination or harassment due to their nationality, gender, sexual orientation, ethnicity, religion, ethical beliefs, handicap or age, and it will not tolerate any such abuse.

Once the Company has acquired an investment in a project entity, through its representatives on the Board of the project company it then undertakes regular reviews of the environmental, social governance and ethical policies that the project entity has in place and its adherence to these policies in the delivery of its services. Health and Safety practices are also monitored across the Company's portfolio and any serious breaches or incidents are reported to the Management Board, which in turn reports these to the Supervisory Board.

An infrastructure project can have an immense impact on the local communities and the environment. Accordingly, the Company requires that its representatives within the various project companies strive to ensure that, firstly, said companies develop and maintain positive relationships with the communities affected by their particular project and secondly, that all necessary steps / mitigating actions (to the extent practical) are taken to lessen or, if at all possible, to nullify the impact on the environment. BBGI's vision is to promote the conservation, protection and improvement of the physical and natural environments surrounding its projects through careful monitoring, local engagement and management. The Mersey Gateway Bridge project in the UK is an example of such an initiative, further details of which can be found through the following link http://www.merseygateway.co.uk/mersey-gateway-environmental-trust/.

Donations

The Company made no political donations during the year. Total charitable donations for the year did not exceed £500.

AUDIT COMMITTEE REPORT

Introduction

I am pleased to present the Audit Committee's formal report to shareholders on how it has conducted its responsibilities for the year ended 31 December 2016.

Responsibilities and composition

The main responsibilities of the Audit Committee can be found within the Governance section of this Annual Report, under the heading "Committees of the Supervisory Board".

Each of the three Non-Executive Directors is a member of the Committee, which is chaired by me, and our biographies can be found immediately after the Chairman's Statement. The Board considers that at least one Committee member has recent and relevant financial experience for the Committee to discharge its functions effectively.

Due to the size of the Supervisory Board, the Chairman, David Richardson, is also a member of the Committee, and this enables him to not only bring his extensive accounting knowledge to the table but also keeps him fully informed of any issues that may arise.

2016: the year under review

The Audit Committee met twice in the year to 31 December 2016 and member attendance can be found within the Governance section of this Annual Report, under the heading "Committees of the Supervisory Board". At these meetings, the Committee considered, inter alia:

§ the 2015 Annual and 2016 Interim reports and financial statements;

§ the Reports of the external Auditor;

§ the implications of the 2016 Audit Reform Law[20] on the governance of the Company and the responsibilities of the Audit Committee;

§ the external Auditor's terms of appointment and remuneration (including overseeing the independence of the Auditor particularly as it relates to the provision of non-audit services);

§ review/approval of the external Auditor's plan for the following financial year;

§ the appropriateness of the Company's accounting policies;

§ the risk register of the Company;

§ the adequacy of the internal control systems and standards; and

§ the Internal Auditor's Annual Report of the year under review.

Significant risks considered

During the year under review, the Audit Committee held discussions with both the Management Board, the external Auditor and the Company's internal auditor. The Committee concluded from these discussions that the most significant risk of material misstatement in the Company's financial statements continues to be the fair valuation of the investment portfolio, and in particular the discount rates applied and the key macro-economic assumptions used when valuing these investments. This risk of material misstatement is considered carefully when the Committee reviews the Company's annual and interim financial statements. The fair market valuation of the investments (which is carried out by the Management Board) is conducted every six months at 30 June and 31 December respectively; this is then reviewed by an independent third-party valuer, after which it is presented to the Supervisory Board. As outlined in Note 10 to the financial statements the total fair value of the investment portfolio at 31 December 2016 was £569.9 million.

The Management Board members were available during the Audit Committee review process to provide detailed explanations of the rationale used for the valuation of investments. The external Auditor was also invited to attend the Audit Committee meetings at which the annual and interim financial statements were considered in order to present the conclusion of its work, which included a review of the adequacy of the valuation.

Subsequent to the valuation and ensuing reviews, the Committee concluded that the valuation process of the Company's investments for the year ended 31 December 2016 had been properly carried out and the investments fairly valued.

Appointment of external Auditors

As stated above, the Committee annually reviews the performance of KPMG Luxembourg, Société coopérative ("KPMG"), the Company's external Auditor. In doing so, we consider a range of factors including the quality of service, specialist expertise and the level of audit fee. Following that review, the Committee remains satisfied with KPMG's effectiveness and therefore has not considered it necessary, to date, to require it to tender for the audit work. There are no contractual obligations restricting the choice of external Auditor. The reappointment of the external Auditor is subject to shareholder approval at the Annual General Meeting. In accordance with the new Audit Reform Law, a mandatory audit tendering process will be carried out in 2021 after the completion of a 10-year audit cycle by KPMG.

Non-Audit Services ("NAS")

Under the new Audit Reform Law, fees for permissible NAS provided by the external auditor to the Company or its controlled undertakings, where performed for three consecutive financial years, must not in any year exceed 70% of the average annual fees charged by the external auditor in the last three consecutive financial years for statutory audits of the Company and its controlled EU undertakings. These provisions are enforceable for periods beginning after 17 June 2019. During the year under review, the Company has put in place certain procedures to ensure continued compliance with these new provisions, amongst which is that, with immediate effect, the Audit Committee will approve all NAS to be performed by the external auditor that are not prohibited before such NAS are carried out.

As a result of its work during the period, the Audit Committee concludes that it has acted in accordance with its terms of reference and has ensured the independence and objectivity of the external Auditor. The Audit Committee has recommended to the Board therefore that KPMG Luxembourg, Société coopérative be re-appointed as the Company's external Auditor.

Conclusion

In conclusion, the Audit Committee is of the opinion that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

APPROVAL

On behalf of the Audit Committee

Howard Myles

Chairman of the Audit Committee

28 March 2017

MANAGEMENT BOARD RESPONSIBILITIES STATEMENT

The Management Board of the Company is responsible for ensuring proper preparation of the annual report and financial statements of the Company for each financial period in accordance with applicable laws and regulations, which require it to:

i) give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group as of and at the end of the financial period, in accordance with International Financial Reporting Standards as adopted by the European Union and the Listing Rules;

ii) give a true and fair view of the development and performance of the business and the position of the Group; and

iii) give a true and fair description of the principal risks and uncertainties the Group may encounter, and put in place an appropriate control framework designed to meet the Group's particular needs and the risks to which it is exposed.

In addition, the Management Board is responsible for ensuring that the Company is in compliance with applicable company law and other UK or Luxembourg applicable laws and regulations, providing a description of the risks and uncertainties the Group may encounter, and putting in place an appropriate control framework designed to meet the Group's particular needs and the risks to which it is exposed.

In preparing such financial statements, the Management Board is responsible for:

§ selecting suitable accounting policies and applying them consistently;

§ making judgements and estimates that are reasonable and prudent;

§ stating whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

§ preparing the financial statements on a going concern basis, unless it is inappropriate to presume that the Group will continue in business;

§ maintaining proper accounting records which disclose with reasonable accuracy the financial position of the Group and enable them to ensure that the financial statements comply with all relevant regulations; and

§ safeguarding the assets of the Group and taking reasonable steps for the prevention and detection of fraud and other irregularities.

Management Board Responsibilities Statement

We confirm that to the best of our knowledge:

§ the financial statements have been prepared in accordance with the applicable set of accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and Group included in the consolidation as a whole.

§ the Chairman's Statement and the Report of the Management Board include a fair review of the development and performance of the business and the position of the Company and Group included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that it faces.

Luxembourg, 28 March 2017

Signatures

Duncan Ball, Co-CEO Frank Schramm, Co-CEO Michael Denny, CFO

To the Shareholders ofBBGI SICAV S.A.

6E, route de Trèves

L-2633 Senningerberg

REPORT OF THE REVISEUR D'ENTREPRISES AGREE

Report on the consolidated financial statements and separate financial statements

Following our appointment by the Annual General Meeting of the Shareholders dated 29 April 2016, we have audited the accompanying consolidated financial statements of BBGI SICAV S.A. (the 'Company') and its subsidiaries (the 'Group'), which comprise the consolidated statement of financial position as at 31 December 2016, the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

We have also audited the accompanying separate financial statements of the Company, which comprise the statement of financial position as at 31 December 2016 and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory notes.

Management Board's responsibility for the consolidated financial statements and separate financial statements

The Management Board is responsible for the preparation and fair presentation of these consolidated financial statements and separate financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as the Management Board determines is necessary to enable the preparation of consolidated financial statements and separate financial statements that are free from material misstatement, whether due to fraud or error.

Responsibility of the Réviseur d'Entreprises agréé

Our responsibility is to express an opinion on these consolidated financial statements and separate financial statements based on our audits. We conducted our audits in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements and separate financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and separate financial statements. The procedures selected depend on the judgement of the Réviseur d'Entreprises agréé, including the assessment of the risks of material misstatement of the consolidated financial statements and separate financial statements, whether due to fraud or error. In making those risk assessments, the Réviseur d'Entreprises agréé considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements and separate financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Management Board, as well as evaluating the overall presentation of the consolidated financial statements and separate financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of BBGI SICAV S.A. as of 31 December 2016, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

In our opinion, the separate financial statements give a true and fair view of the financial position of BBGI SICAV S.A. as of 31 December 2016, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

Other information

The Management Board is responsible for the other information. The other information comprises the information included in the management report and the Corporate Governance Statement but does not include the consolidated financial statements, the separate financial statements and our report of réviseur d'entreprises agréé thereon.

Our opinion on the consolidated financial statements and the separate 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 consolidated financial statements and the separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements and the separate financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. 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 this fact. We have nothing to report in this regard.

Other matter

The Corporate Governance Statement includes information required by Article 68bis paragraph (1) of the law of 19 December 2002 on the commercial and companies register and on the accounting records and annual accounts of undertakings, as amended.

Report on other legal and regulatory requirements

The management report, is consistent with the consolidated financial statements and the separate financial statements and has been prepared in accordance with the applicable legal requirements.

The information required by Article 68bis paragraph (1) letters c) and d) of the law of 19 December 2002 on the commercial and companies register and on the accounting records and annual accounts of undertakings, as amended and included in the Corporate Governance Statement is consistent with the consolidated financial statements and the separate financial statements and has been prepared in accordance with applicable legal requirements.

Luxembourg, 28 March 2017 KPMG Luxembourg

Société coopérative

Cabinet de révision agréé

Frauke Oddone

Partner

The accompanying notes form an integral part of the consolidated financial statements.

The accompanying notes form an integral part of the consolidated financial statements.

The accompanying notes form an integral part of the consolidated financial statements.

The accompanying notes form an integral part of the consolidated financial statements.

The accompanying notes form an integral part of the consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2016

1. Reporting entity

BBGI SICAV S.A. ("BBGI", or the "Company" or, together with its consolidated subsidiaries, the "Group") is an investment company incorporated in Luxembourg in the form of a public limited company (société anonyme) with variable share capital (société d'investissement à capital variable, or "SICAV") and regulated by the Commission de Surveillance du Secteur Financier ("CSSF") under Part II of the Luxembourg law of 17 December 2010 on undertakings for collective investments with an indefinite life. The Company qualifies as an alternative investment fund within the meaning of Article 1 (39) of the law of 12 July 2013 on alternative investment fund managers ("2013 Law") implementing Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 and is authorised as an internal alternative investment fund manager in accordance with Chapter 2 of the 2013 Law. The Company was admitted to the official list of the UK Listing Authority (premium listing, closed-ended investment fund) and to trading on the main market of the London Stock Exchange on 21 December 2011.

The Company's registered office is EBBC, 6E, route de Trèves, L-2633 Senningerberg, Luxembourg.

The Company is a closed-ended investment company that invests principally in a diversified portfolio of Public Private Partnership ("PPP")/Private Finance Initiative ("PFI") infrastructure or similar assets. The Company has limited investment in projects that are under construction.

As at 31 December 2016, the Group employed 18 staff (31 December 2015: 14 staff).

Reporting period

The Company's reporting period runs from 1 January to 31 December each year. The Company's consolidated statement of financial position, consolidated income statement, consolidated statement of comprehensive income and consolidated statement of cash flows include comparative figures as at 31 December 2015.

The amounts presented as "non-current" in the consolidated statement of financial position are those expected to be settled after more than one year. The amounts presented as "current" are those expected to be settled within one year.

These consolidated financial statements were approved by the Board on 28 March 2017.

2. Basis of preparation

Statement of compliance

The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and the provisions of the Standard of Recommended Practices issued by the Association of Investment Companies ("AIC SORP").

All items presented in the consolidated income statement and consolidated statement of comprehensive income respectively are considered "capital" in nature.

Changes in accounting policy

The accounting policies, measurement and valuation principles applied by the Group in these consolidated financial statements are the same as those applied by the Group in its annual consolidated financial statements as of and for the year ended 31 December 2015.

Basis of measurement

These consolidated financial statements have been prepared on the historical cost basis, except for derivative financial instruments and investments at fair value through profit or loss ("FVPL investments") which are reflected at fair value.

Functional and presentation currency

These consolidated financial statements are presented in Pounds Sterling, the Company's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise stated.

Use of estimates and judgements

The preparation of consolidated financial statements in conformity with IFRS requires the Management Board to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

In the process of applying the Group's accounting policies, the Management Board has made the following judgements that have the most significant effect on the amounts recognised in the consolidated financial statements.

The Company as an Investment Entity

The Management Board has assessed that the Company is an Investment Entity in accordance with the provisions of IFRS 10. The Company meets the following criteria to qualify as an Investment Entity:

a) Obtains funds from one or more investors for the purpose of providing those investors with investment management services:

The Group is internally managed with management focused solely on managing those funds received from its shareholders in order to maximise investment income/returns.

b) Commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both:

The investment objectives of the Company are to:

- Provide investors with secure and highly predictable long-term cash flows whilst actively managing the investment portfolio with the intention of maximising the capital value over the long term.

- Target a dividend of 6.25 pence per share per annum. The Company will aim to increase thisdistribution progressively over the longer term.

- Target an IRR in the region of 7% to 8% on the £1 IPO issue price of its ordinary shares, to be achieved over the longer term via active management, to enhance the value of existing investments.

The above-mentioned objectives support the fact that the main business purpose of the Company is to seek to maximise investment income for the benefit of its shareholders.

c) Measures and evaluates performance of substantially all of its investments on a fair value basis:

The investment policy of the Company is to invest in equity, subordinated debt or similar interests issued in respect of infrastructure projects that have been developed predominantly under the PPP/PFI or similar procurement models. Each of these PPP/PFI projects is valued at fair value. The valuation is carried out on a six-monthly basis as at 30 June and 31 December each year.

Based on the Management Board's assessment, the Company also meets the typical characteristics of an Investment Entity as follows:

a) it has more than one investment - as at 31 December 2016, the Company has 39 PPP/PFI investments;

b) it has more than one investor - the Company is listed on the London Stock Exchange with its shares held by a broad pool of investors;

c) it has investors that are not related parties of the entity - other than those shares held by the Supervisory Board and Management Board directors, and certain other employees, all remaining shares in issue (more than 99%) are held by non-related parties of the Company; and

d) it has ownership interests in the form of equity or similar interests - the Group holds interests in PPP/PFI projects in the form of equity interests, subordinated debt and similar instruments.

Fair valuation of financial assets and financial liabilities

The Group accounts for its investments in PPP/PFI entities ("SPC" or "Project Entities") as FVPL investments.

The valuation is determined using the discounted cash flow methodology. The cash flows forecasted to be received by the Company or its consolidated subsidiaries, generated by each of the underlying assets, and adjusted as appropriate to reflect the risk and opportunities, have been discounted using project specific discount rates. The valuation methodology is the same one used in previous reporting periods.

The fair value of other financial assets and liabilities, other than current assets and liabilities, is determined by discounting future cash flows at an appropriate discount rate and with reference to recent market transactions, where appropriate. Further information on assumptions and estimation uncertainties are disclosed in Note 18.

Fair values are categorised into different levels in a fair value hierarchy based on the inputs in the valuation methodology, as follows:

§ Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.

§ Level 2: inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

§ Level 3: inputs for the asset or liability that are not based on observable market data ("unobservable inputs").

If the inputs to measure fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety at the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognises transfers between levels of fair value hierarchy at the end of the reporting period in which the change has occurred.

Going concern basis of accounting

The Management Board has examined significant areas of possible financial risk including cash and cash requirements. It has not identified any material uncertainties which would cast significant doubt on the Company's ability to continue as a going concern for a period of less than 12 months from the date of approval of the consolidated financial statements. The Management Board has satisfied itself that the Company has adequate resources to continue in operational existence for the foreseeable future. After due consideration, the Management Board believes it is appropriate to adopt the going concern basis of accounting in preparing the consolidated financial statements.

3. Significant accounting policies

The accounting policies set out below have been applied consistently by the Company and its subsidiaries.

Basis of consolidation

Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to direct the relevant activities i.e. the activities that significantly affect the investee's returns and to obtain those returns. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

The Group measures goodwill at the acquisition date as:

- the fair value of the consideration transferred; plus

- the recognised amount of any non-controlling interests in the acquiree; plus

- if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less

- the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When there is an excess of value over consideration, a bargain purchase gain is recognised immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognised in profit or loss.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes in fair value of the contingent consideration are recognised in profit or loss.

Subsidiaries

Subsidiaries are investees controlled by the Company (directly or indirectly). The Company controls an investee if it is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The Company is an Investment Entity and measures investments in certain subsidiaries at fair value through profit or loss. In determining whether the Company meets the definition of an Investment Entity, the management considered the Group structure as a whole (see also Note 2).

Although the Company qualifies as an Investment Entity and is required to value certain subsidiaries at fair value, the Company has a number of subsidiaries which provide services that relate to the Company's investment activities. These subsidiaries are consolidated on a line by line basis.

Acquisition of non-controlling interests (consolidated subsidiaries)

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result. Adjustments to non-controlling interest arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.

Loss of control (consolidated subsidiaries)

For subsidiaries which are consolidated on a line by line basis, upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an investment at fair value through profit or loss or as an available-for-sale financial asset depending on the level of influence retained.

Transactions eliminated on consolidation (consolidated subsidiaries)

Intra-group receivables, liabilities, revenue and expenses are eliminated in their entirety when preparing the consolidated financial statements. Gains that arise from intra-group transactions and that are unrealised from the standpoint of the Group on the balance sheet date are eliminated in their entirety. Unrealised losses on intra-group transactions are also eliminated in the same way as unrealised gains, to the extent that the loss does not correspond to an impairment loss.

Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated into Pounds Sterling at the exchange rate at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into Pounds Sterling at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into Pounds Sterling at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on translation are recognised in profit or loss as a gain or loss on currency translation.

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Pounds Sterling at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Pounds Sterling at the average exchange rates during the year, if such does not significantly deviate from the exchange rates at the date on which the transaction is entered into. If significant deviations arise then the exchange rate at the date of transaction is used.

Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity except for exchange differences from intragroup monetary items which are reflected in the profit and loss. However, if the foreign operation is a non-wholly owned consolidated subsidiary, then the relevant portion of the translations difference is allocated to non-controlling interest. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a consolidated subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency gains and losses arising from such an item are considered to form part of a net investment in the foreign operation and are recognised in other comprehensive income, and presented in the translation reserve in equity.

Financial instruments

Non-derivative financial assets

The Group initially recognises loans and receivables on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the date that the Group becomes a party to the contractual provisions of the instrument and when the significant risk and rewards of ownership are transferred to the Group.

In general, the Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate financial asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables, and available-for-sale financial assets.

At balance sheet date, except for investments accounted for at fair value through profit or loss, all non-derivative financial assets of the Group have been classified as loans and receivables.

Investments at fair value through profit or loss

The Company is an Investment Entity and therefore values its investment in subsidiaries at fair value through profit or loss, except where the subsidiary provides investment related services or activities. The fair value of an investment in subsidiary includes the fair value of the equity, loans and interest receivable and any other amounts which are included in the discounted estimated cash flow (which is used to compute the fair value) from such subsidiary. The Company subsequently measures its investment in certain subsidiaries at fair value in accordance with IAS 39 and IFRS 13, with changes in fair value recognised in profit or loss in the period of change. The fair value estimation of investments in subsidiaries is described in Note 18.

In addition to valuing certain subsidiaries at fair value through profit or loss, the Company also values investments in associates and jointly controlled entities at fair value.

The Company meets the definition of IAS 28 paragraph 18 for a venture capital organisation or a similar entity and upon initial recognition has designated its investment in joint ventures and associates at fair value through profit or loss. The Group manages the performance of each of the joint ventures and associates on a fair value basis in accordance with the Group's investment strategy. The information about associates and joint ventures is provided internally on a fair value basis to the Group's Management Board and Supervisory Board. The Group therefore measures its associates and joint ventures at fair value in accordance with IAS 39 with changes in fair value recognised in profit or loss in the period of change. The fair value estimation of investments in joint venture and associates is described in Note 18.

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. Jointly controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Non-derivative financial liabilities

The Group classifies non-derivative financial liabilities into the "other financial liability" category. Such financial liabilities are recognised initially at fair value less any direct attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

The Group derecognises a financial liability (or part of a financial liability) from the statement of financial position when, and only when, it is extinguished or when the obligation specified in the contract or agreement is discharged or cancelled or expired. The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is considered in profit or loss.

Derivative financial instruments

The Group may hold derivative financial instruments to hedge its foreign currency, interest rate and other risk exposures.

When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognised immediately in profit or loss.

Impairment

Non derivative financial assets

A financial asset not classified at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence of impairment. A financial asset or group of financial assets is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset(s), and that loss event(s) had an impact on the estimated future cash flows of the asset(s) that can be estimated reliably.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised. When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to a liability. The unwinding of such discount is recognised as finance cost.

Intangible assets and goodwill

Goodwill that arises on the acquisition of consolidated subsidiaries is presented with intangible assets. For the measurement of goodwill at initial recognition, please see recognition policy on business combination. Goodwill is measured at cost less accumulated impairment losses and is tested at least annually for impairment.

Other intangible assets, if any, that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and term deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of change in their fair value, and are used by the Group in the management of its short-term commitments.

Share capital

Ordinary shares are classified as equity. Given that the Company has no contractual obligation to deliver cash or any other financial asset or to exchange financial assets or liabilities with another entity under conditions that are unfavourable, the Company classifies the issued shares to be equity rather than liability. Moreover, no shareholder has the right to request the redemption of issued shares.

Costs directly attributable to the issue of ordinary shares, or which are associated with the establishment of the Company, that would otherwise have been avoided are recognised as a deduction from equity net of any tax effects.

Dividend income

Dividend income is recognised in profit or loss on the date on which the right to receive payment is established. This is the date on which the payment of a dividend is authorised.

Finance income and finance costs

Interest income and expenses are recognised in profit or loss using the effective interest method.

The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial instrument (or, where appropriate, a shorter period) to the carrying amount of the financial instrument. When calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of the financial instrument, but not future credit losses. Interest received or receivable and interest paid or payable are recognised in profit or loss as finance income and finance costs, respectively.

Operating expenses

All operating expenses are recognised in profit and loss on an accruals basis.

Tax

According to the Luxembourg regulations regarding SICAV companies, the Company itself is exempt from paying income and/or capital gains taxes in Luxembourg. It is, however, liable to annual subscription tax of 0.05% of its net asset value computed under investment basis (Investment Basis NAV), payable quarterly and assessed on the last day of each quarter.

Income tax on the consolidated subsidiaries' profits for the year comprises current and deferred tax. Current and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous periods.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

- Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

- Temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that the Company is able to control the timing of the reversal of the temporary difference and it is probable that they will not reverse in the foreseeable future; and

- Taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Employee benefits

Short-term and other long-term employee benefits are expensed as the related services are provided. A liability is recognised for the amount expected to be paid, and discounted at present value if necessary, if the Group has present legal or constructive obligation to pay this amount as a result of a past service provided by the employee and the obligation can be estimated reliably.

For share-based payment arrangements, the grant-date fair value of the equity settled share-based payment arrangement is recognised as an expense, with a corresponding increase in additional paid in capital over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect related service and non-market performance conditions if revised. The market condition related to the award is measured at the date of grant and there is no adjustment of expense/income to the profit or loss for differences between expected and actual outcomes.

Segment reporting

Segment results that are reported to the Management Board include items directly attributable to segments as well as those that can be allocated on a reasonable basis.

New standards and interpretations not yet adopted

The IASB and IFRIC have issued a number of standards and interpretations with an effective date after the beginning of the year of these consolidated financial statements as follows:

· In November 2009, the IASB issued IFRS 9 (Financial Instruments), containing rules for the classification and measurement of financial assets. In October 2010, it issued new requirements for the classification and measurement of financial liabilities, incorporating them into IFRS 9. The new standard defines two instead of four measurement categories for financial assets, with classification to be based partly on the company's business model and partly on the characteristics of the contractual cash flows from the respective financial asset. In the case of equity investments that are not held for trading, an entity may irrevocably opt at initial recognition to recognise future changes in their fair value outside profit or loss in the statement of comprehensive income. In November 2013, the IASB issued further amendments under the title "Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39". The focus of the amendments is on a thorough revision of hedge accounting rules with the aim of more appropriately reflecting risk management activities in the financial statements. This involves additional disclosures in the notes. In July 2014, the IASB published the new rules for the disclosure of financial instrument impairments. This new impairment model is based on the principle of accounting for expected losses. It also introduces a third measurement category "fair value through other comprehensive income" for certain debt instruments. IFRS 9 is to be applied for annual periods beginning on or after 1 January 2018. The Group is currently evaluating the impact the standard will have on the presentation of the Group's financial position and results of operations.

· In April 2016, the IASB issued IFRS 15 (Revenue from contracts with customers). IFRS 15 replaces existing guidance and introduces a new model for revenue recognition that is based on the transfer of control. This affects the timing and amount of revenue in certain instances. IFRS 15 is applicable for annual periods beginning on or after 1 January 2017 but has not yet been endorsed by the European Union. The changes are not expected to have a material impact on the Group's financial position or results of operations.

· In January 2016, the IASB issued IFRS 16 (Leases). IFRS 16 introduces a single, on-balance sheet accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. IFRS 16 is applicable for annual periods beginning on or after 1 January 2019 but has not yet been endorsed by the European Union. The changes are not expected to have a material impact on the Group's financial position or results of operations.

· In September 2014, the IASB published the seventh set of "Annual Improvements to IFRSs". The amendments address details of the recognition, measurement and disclosure of business transactions and serve to standardise terminology. They consist mainly of editorial changes to existing standards. They are applicable for annual periods beginning on or after 1 July 2016. The changes are not expected to have a material impact on the presentation of the Group's financial position or results of operations.

· In January 2016, the IASB published amendments to IAS 12 (Income Taxes) under the title "Recognition of Deferred Tax Assets for Unrealised Losses". These amendments clarify the accounting for deferred tax assets related to debt instruments measured at fair value. The amendments are to be applied for annual periods beginning on or after 1 January 2017. They have not yet been endorsed by the European Union. The Group is currently evaluating the impact the changes will have on the presentation of its financial position and results of operations.

· In January 2016, the IASB published amendments to IAS 7 (Statement of Cash Flows) under its Disclosure Initiative. The following changes in liabilities arising from financing activities must be disclosed in the future: (i) changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; (v) other changes. The amendments are to be applied for annual periods beginning on or after 1 January 2017. They have not yet been endorsed by the European Union. The Group is currently evaluating the impact the changes will have on the presentation of its financial position and results of operations.

4. Segment reporting

IFRS 8 - Operating Segments adopts a "through the eyes of the management" approach to an entity's reporting of information relating to its operating segments, and also requires an entity to report financial and descriptive information about its reportable segments.

Based on a review of information provided to the Management Board, the Group has identified five reportable segments based on the geographical concentration risk. The main factor used to identify the Group's reportable segments is the geographical location of the projects. The Management Board has concluded that the Group's reportable segments are: (1) UK; (2) Mainland Europe; (3) Australia; (4) North America; and (5) Holding Activities. These reportable segments are the basis on which the Group reports information to the Management Board.

Segment information for the year ended 31 December 2016 is presented below: