CIFU.L Regulatory News (CIFU)

RNS Announcement

Carador Income Fund plc

29 April 2019

FOR IMMEDIATE RELEASE

ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION DIRECTLY, OR INDIRECTLY, TO U.S. PERSONS OR INTO OR IN THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN.

A copy of the Company's Annual Report and Audited Financial Statements for the year ended 31 December 2018 as set out below, will be posted to the shareholders of the Company and will shortly be available on the Company's website http://www.carador.co.uk

ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018

CHAIRMAN'S REPORT

I am pleased to present the Annual Report including Audited Financial Statements for Carador Income Fund plc (the "Company") for the year ended 31 December 2018.

The US economy grew at approximately 3%, and corporate profits expanded at a rate of nearly 23% in 2018. We believe growth of the economy and of corporate profits will continue in 2019 but at lower rates than in 2018. Following the market peak in September, investors seemed to have confused slowing growth rates with a lack of growth itself; that confusion, compounded by well-known risks, such as trade war concerns and Brexit developments, seemed to contribute to a market sell-off in the final quarter of 2018. Contrary to investor concerns, we have observed little to no evidence of excess capacity or overheating in the market. Capacity utilisation is barely back to the 50‐year average and remains below the levels reached prior to the global financial crisis a decade ago. The money moving into capital expenditures thus far is mostly for intellectual property and technology, as opposed to traditional plants and property. We believe this should mean that even when CEOs deploy capital expenditures, it is not to expand but rather to squeeze more productivity out of existing workers (i.e., they are solving for tight labor markets, not overbuilding).

Performance1

During 2018, the US dollar class shares ("US Dollar Shares") generated a total Net Asset Value ("NAV") return of -10.52%3 (9.53% in 2017) including distributions. The negative NAV return was primarily driven by the sell-off in the loan market experienced in December 2018. The loan market subsequently recovered in early 2019, with the US Dollar share class showing an 8.76% year to date NAV return by 28 February 2019. The US Dollar Shares started the year with a NAV per share of $0.7504 and ended December at $0.6105, an 18.64% decline (3.34% decline in 2017) in the NAV per share, although as noted below, the US Dollar Shares also paid a total of $0.0696 per share in dividends over the period (2017: $0.0900 per share).

The US Dollar Shares closed 2018 at US$0.5700 (US$0.6988 in 2017), a 6.63% discount (6.88% discount at 31 December 2017) to the NAV at 31 December 2018. The annualised historical dividend yield based on the dividends paid during 2018 was 12.21% (12.88% at 31 December 2017).2

The repurchase pool class shares of the Company ("Repurchase Pool Shares") generated a total NAV return of -14.41% during 2018 (1.12% in 2017).3 It is not the intention of the Directors to declare a dividend in respect of the Repurchase Pool Shares. The Repurchase Pool Shares ended the year with a NAV per share of $0.6392 and a share price of $0.7250 ($0.7469 and $0.7250 at 31 December 2017, respectively).

The financial position and results for the financial year are set out in the statement of financial position and in the statement of comprehensive income on page 33 and 34, respectively. 

Dividends

The Company declared total dividends of $0.0637 per US Dollar Share for 2018 ($0.0900 in 2017). In February 2018, the Directors declared that it was the Board's objective to provide shareholders with regular dividends at levels that were sustainable and, to that date, the Company had paid a fixed dividend. In seeking to provide stable dividends at rates that reflect net income actually generated, the Company moved to a floating dividend such that, in any financial quarter, the dividends paid will be equal to the cash income the Company has received net of reasonable expenses while retaining an element of cashflow receipts on CLO Income Notes as principal for reinvestment. Cash income comprised cash received by the Company attributable to the CLO investments in the Company's portfolio and the income, if any, arising from cash held by the Company pending investment or distribution. This change in dividend policy was made in order to better align the Company's dividend distributions with its current level of cash flows.

Under the previous dividend methodology, the Company made the following dividend announcements in respect of Q4 2017:

· On 22 January 2018, the Board declared a dividend of $0.0225 per US Dollar share in respect of the period from 1 October 2017 to 31 December 2017. The dividend was paid on 7 February 2018.

[1] Past performance is not necessarily indicative of future results, and there can be no assurance that the Company will achieve comparable results, will meet its target returns, achieve its investment objectives, or be able to implement its investment strategy.

2 The 12 month Dividend Yield is based on the four quarterly dividends paid during 2018. Share price data is as at relevant year end.

3 The total NAV return is calculated by compounding the net monthly NAV returns (pre-dividend) for the year.

Dividends (continued)

Under the amended dividend methodology, the Company made the following dividend announcements in respect of the twelve months to 31 December 2018:

· On 23 April 2018, the Board declared a dividend of $0.0146 per US Dollar share in respect of the period from 1 January 2018 to 31 March 2018. The dividend was paid on 9 May 2018.

· On 20 July 2018, the Board declared a dividend of $0.0186 per US Dollar share in respect of the period from 1 April 2018 to 30 June 2018. The dividend was paid on 8 August 2018.

· On 19 October 2018, the Board declared a dividend of $0.0139 per US Dollar share in respect of the period from 1 July 2018 to 30 September 2018. The dividend was paid on 7 November 2018.

· On 22 January 2019, the Board declared a dividend of $0.0166 per US Dollar share in respect of the period from 1 October 2018 to 31 December 2018. The dividend was paid on 6 February 2019.

Following the extraordinary general meetings ("EGMs") on 17 December 2018, the Directors do not intend to declare any dividends in respect of the US Dollar Shares during the managed wind-down period.

Quarterly declared dividends per US Dollar Share and Net Cashflow Coverage of Net Income

Material Events

During the year ended 31 December 2018, the following partial redemptions have occurred on the Repurchase Pool Shares:

On 30 April 2018, the Company released its annual report and accounts for the full year 2017.

On 15 June 2018, the Board of Directors of the Company (the "Board") announced that it had engaged its financial advisers to commence a strategic review of the Company in order to consider future prospects and opportunities (the "Strategic Review").

On 29 June 2018, the Board announced that, as part of an internal reallocation of responsibilities within the Blackstone group, The Blackstone Group International Partners LLP ("BGIP") was appointed in place of GSO Capital Partners International LLP as investment advisor of the Company. BGIP shall act in an advisory capacity only and has no discretionary powers in respect of any of the assets of the Company.

At the annual general meeting (the "AGM") of the Company held on 4 July 2018, Shareholders approved the following ordinary and special resolutions:

Ordinary Resolutions

1. That the reports of the Board of Directors of the Company and of the auditor of the Company, KPMG, and the accounts for the year ended 31 December 2017 be and are hereby received and that the Company's affairs were reviewed.

2. That KPMG be re-appointed as auditors of the Company.

3. That the Directors be and are hereby authorised to fix the remuneration of the auditors of the Company.

4. That Mr Edward D'Alelio be re-elected as a Director of the Company.

5. That Mr Werner Schwanberg be re-elected as a Director of the Company.

6. That Mr Fergus Sheridan be re-elected as a Director of the Company.

7. That Mr Adrian Waters be re-elected as a Director of the Company.

Material Events (continued) 

Ordinary Resolutions (continued)

8. That Mr Nicholas Moss be re-elected as a Director of the Company.

9. That the Board be authorised to allot and issue up to 39,880,178 US Dollar Shares (or, if lower, such number of Shares as represent 10% of the US Dollar Shares in issue at the date of the AGM), such authority to expire at the conclusion of the next AGM of the Company unless previously renewed, varied or revoked by the Company in general meeting.

Special Resolution

10. That the Board be authorised to allot and issue up to 39,880,178 US Dollar Shares (or, if lower, such number of Shares as represent 10% of the US Dollar Shares in issue at the date of the AGM) without having previously to offer such Shares to Shareholders on a pre-emptive basis, such authority to expire at the conclusion of the next AGM of the Company unless previously renewed, varied or revoked by the Company in general meeting.

On 28 August 2018, the Board announced the results of the Strategic Review, whereby the Board had determined to offer shareholders the opportunity to vote on an orderly wind up of the Company, alongside an opportunity for those who wish to retain an investment in the CLO asset class to elect to roll over their holding in the Company's shares into Blackstone / GSO Loan Financing Limited ("BGLF", and the rollover opportunity, the "BGLF Rollover Opportunity").

On 23 November 2018, the Board issued a circular, notices and proxy forms detailing the resolutions that will be tabled at the EGMs to amend the investment objective and policy of the Company, to amend the constitution of the Company and to propose a managed wind-down of the portfolio attributable to the US Dollar Shares (the "Managed Wind-Down") with the BGLF Rollover Opportunity (the "2018 Circular").

On 17 December 2018, the Company announced the results of the EGMs held on that date:

· At the meeting of US Dollar Shareholders, the resolution was passed to approve changes to the Company's investment objective and policy to facilitate and authorise the Directors to instruct GSO / Blackstone Debt Funds Management LLC (the "Investment Manager") to effect a Managed Wind-Down of the portfolio attributable to the US Dollar Shares.

· At the meeting of all Company Shareholders, the resolution was passed amending the constitution of the Company to provide for the termination of the Company before 2022, and other changes to facilitate the BGLF Rollover Opportunity.

On 19 December 2018, the Company entered into an amended and restated investment management agreement with the Investment Manager, which contained amendments to facilitate the BGLF Rollover Opportunity by reflecting that shares will be repurchased during the Managed Wind-Down, as well as certain other consequential changes. The Company also entered into an amended registrar agreement with the Registrar to set out details of the obligations of the Registrar in connection with the BGLF Rollover Opportunity.

On 21 December 2018, the Company announced the results of the BGLF Rollover Opportunity which was offered both to US Dollar and Repurchase Pool Shareholders. Valid elections were received in respect of 133,450,591 US Dollar Shares and 488 Repurchase Pool Shares, resulting in 133,451,107 total shares converted to Carador rollover class shares. Approximately 34% of the US Dollar Share register elected to rollover into BGLF. The Board of the Company was informed by BGLF that it would allot one new C share for each Carador rollover share in consideration of the transfer of rollover assets to BGLF from the Company. This occurred post year end and the BGLF C shares were admitted to and began trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange on 7 January 2019.

As the Company is now in Managed Wind-Down, the expectation for realising assets and paying out cash to holders of US Dollar Shares is materially the same as was the process for the Repurchase Pool Shares. Based on advice received from the Investment Manager, the Directors currently expect that in normal circumstances it should be possible to realise the assets comprising a repurchase pool within approximately six to twelve months. However, this may take significantly longer in the case of certain assets or in less favourable market conditions.

Werner SchwanbergChairman

23 April 2019

INVESTMENT MANAGER'S REVIEW

For the twelve month period ended 31 December 2018

We are pleased to present our review of 2018. Some highlights include:

· Aggregate declared dividend of $0.0637 per share (2017: $0.0900 per share).

· NAV total return of -10.52% over the year (2017: 9.53%), including dividends paid, versus the Credit Suisse Leveraged Loan Index and the Credit Suisse High Yield Index 2018 returns of 1.14% and -2.37%, respectively. The negative NAV return was primarily driven by the sell-off in the loan market experienced in December 2018. The loan market subsequently recovered in early 2019, with the US Dollar share class showing a 8.76% year to date NAV return by 28 February 2019.4

· Historic dividend yield of 12.21% (share price as at 31 December 2018) (2017:12.88%).5

· The Company traded over $253 million notional in 2018 (2017: over $180 million), rotating out of shorter-dated Income Notes with limited upside into longer-dated positions or positions with potential refinance or reset opportunity.

· Continued actively adding value through refinancing and pursuing resets where economical, extending duration on Income Notes.

Bank Loan Market Overview6,7

In 2018, US bank loans returned 1.14% (vs. 4.25% in 2017). The somewhat muted full year performance of loans for 2018 was a result of a change in risk sentiment that triggered high velocity loan retail fund outflows in the US and an eventual technical sell off in the final quarter. While this affected the US market, loans proved their resilience and outperformed most asset categories in 2018. US loan spread tightening moderated from narrowing 34bp in 2017 to 9bp over the year to end 2018 at 348bp. US loan coupons were further supported by a 111bp increase in 3M LIBOR over 2018 to 281bp.

Gross total loan issuance was $621.8 billion in the US for 2018. The largest use of this capital was related to M&A activity (55.8% in the US) - a shift from 2017, where recap and refinancing was the largest use of issuance. The US loan market experienced growth in 2018, as measured by the Credit Suisse loan universe. The Credit Suisse Leveraged Loan Index, whose par outstanding rose from $1,075 billion to $1,225 billion (+14%). We expect net new issue loan supply to decline year-over-year for 2019, due in large part to the volatility experienced in the fourth quarter 2018.

Default rates for loans remained below historical averages throughout 2018 and ended the year at 1.6% in the US.6 We expect that they will remain below 2% throughout 2019 as loan issuer fundamentals remain strong. For US loan issuers, EBITDA grew by 10% on average in Q4 and revenue growth was 9%. Total leverage for US loan issuers decreased to 5.2x in Q4 and average interest coverage ratios improved to 4.6x.7

These strong corporate fundamentals, combined with low projected default rates, lead us to remain constructive on credit in 2019 and continue to believe that floating rate senior loans offer a compelling risk-reward opportunity. This is further supported by our view that the seniority of loans in the corporate structure offers defensive positioning unique to the asset class and one that is well suited for portfolio construction in a late cycle environment.

CLO Market Overview7,8

CLO issuance in 2018 was strong globally with record post-crisis CLO issuance in both the US and Europe. US CLO new issuance totalled $128.9 billion from 241 CLOs (2017 issuance of $118.1 billion from 212 CLOs) and European CLO new issuance totalled €27.3 billion from 66 CLOs (2017 issuance of €20.9 billion from 51 CLOs).

In the early part of 2018, US CLOs' liability cost reached post-crisis tights, but these were soon overwhelmed by the volumes spurred on by the roll-back of US risk retention requirements, which caused spreads to widen. Loan price volatility during the fourth quarter caused further widening of CLO liability costs, which led to a slow-down of CLO issuance. CLO liabilities continue to remain wide into 2019, posing a challenge to the CLO equity arbitrage.

In contrast to new issuance, CLO refinancing and reset activity declined in 2018 as CLO spreads widened globally, although activity remained robust. In 2018, $155.9 billion of US CLOs and €18.2 billion of European CLOs were refinanced or reset, the majority of which occurred in the first nine months of the year. In comparison, total refinancing and reset volume in 2017 was $167.0 billion in the US and €24.8 billion in Europe.

4 Credit Suisse Credit Suisse Leveraged Loan Index, Credit Suisse High Yield Index, as at 31 December 2018.

5 The 12 month Dividend Yield is based on four quarterly dividends per share paid during 2018 divided by the US Dollar share price at 31 December 2018.

6 Credit Suisse, as of 31 December 2018.

7 S&P/LCD, as of 31 December 2018. 

8 Wells Fargo, as of 31 December 2018.

CLO Market Overview (continued)

From a CLO fundamentals perspective, there was a divergence in some tests between the US and Europe. In the US, Caa holdings dropped by 0.40% and minimum overcollateralisation ("OC") cushions improved 0.20% to 4.35%, while Weighted Average Rating Factor ("WARF") improved from 2811 to 2807 on average. In Europe, CLO minimum OC cushions declined slightly from 4.56% to 4.37% over the year and WARF levels deteriorated from 2760 to 2858 on average. CCC buckets in the market improved and were broadly down by 0.90%.

Looking ahead, we expect that 2019 CLO gross issuance could reach US$90 billion in the US and €25 billion in Europe. However, it should be noted that late 2018 and early 2019 market conditions have resulted in a downward trend for CLO issuance forecasts.

Portfolio Update

(The information below relates to the portfolio of the US Dollar Shares).

During the year, the Company continued to benefit from active trading and management. The Company traded over $253 million notional in 2018 (2017: over $180 million), rotating out of shorter-dated Income Notes with limited upside into longer-dated positions or positions with potential refinance or reset opportunity.

The Investment Manager has continued to focus on top performing managers. The below table lists the top ten managers by exposure of the Income Notes*:

\* This forms an integral part of the financial statements.

In-line with its investment approach, the Company has been active in deals whose non-call end periods were approaching and used the strong environment for CLO liabilities to reposition itself to take advantage of the market opportunity. The Investment Manager completed seven resets during 2018, as it believes that resets can be supportive of long-term, sustainable income generation for Income Note holders. Actively trying to reset the CLOs of Income Note positions at attractive levels and extending their duration, where possible, has typically lead to increases in valuation and yields for Income Notes, benefitting the overall Company NAV.

Please see summary of reset activity below:

Portfolio Update (continued)

In a tightening market, refinancing CLO liabilities has been a good way to offset collateral spread tightening. Refinancing a deal is, in general, slightly easier to implement than reset and is generally controlled by the majority equity holder. The Investment Manager has also benefited from the lower CLO liability costs via eight refinancings as detailed below:

As at 31 December 2018, the top five investment exposures were*:

\* This forms an integral part of the financial statements.

The Investment Manager believes that the combination of strong CLO manager selection, lower liability costs and longer duration facilitate economical and robust financing for loans in varying credit cycles.

Risk Management

The Company's portfolio of CLO investments has been managed to minimise default risk and potential loss through credit analysis performed by the Investment Manager's experienced credit research team. Achieving diversification has been part of the Company's investment objective, and each investment has been assessed with a view to provide diversification in terms of underlying assets, issuer, sector, and maturity profile.

At the EGM of the Shareholders of the US Dollar Shares that was convened on 17 December 2018, the investment objective of the Company was changed such that the Company will be managed with the intention of realising all remaining assets of the Company with a view to returning capital to the Shareholders in an orderly manner as part of the Managed Wind-Down.

The Managed Wind-Down will be effected with a view to the Company realising all of its investments in a manner that achieves a balance between maximising the value from the Company's investments and making timely returns of capital to Shareholders.

The Company will cease to make any new investments except where necessary in the reasonable opinion of the Investment Manager in order to protect or enhance the value of any existing investments or to facilitate orderly disposals.

Any cash received by the Company as part of the realisation process prior to its distribution to Shareholders will be held by the Company as cash on deposit and/or as cash equivalents. The Company will not undertake new borrowing other than for short-term purposes. The investment restrictions set out in the 2017 prospectus of the Company will not apply during the Managed Wind-Down, subject to the requirements of the Central Bank, the Companies Act and the UK Listing Authority.

Please also refer to note 11 for a more fulsome description of the risk involved in an investment in the Company.

Events Post Balance Sheet Date

On 28 August 2018, the Board announced the BGLF Rollover Opportunity, as detailed in note 1. On 21 December 2018, it was announced that 33.463% of US Dollar Shareholders and 0.002% of Repurchase Pool Shareholders elected to roll their investment in the Company into an investment in BGLF C Shares. Subsequent to the year end, 133,450,591 US Dollar Shares and 488 Repurchase Pool Shares were converted into 133,451,107 Rollover Shares. Following this, BGLF allotted and admitted to trading on the Specialist Fund Segment of the Main Market of the LSE one new C share for each Rollover Share in consideration of the transfer of Rollover assets from the Company to BGLF. The listing of the BGLF C Shares was effective as and from 7 January 2019.

On 21 February 2019, the Company announced the first partial compulsory redemption of US Dollar Shares, which would facilitate 51,068,428 of US Dollar Shares redeemed at a rate of $0.6364 per US Dollar Share (approximately 19.246% of the US Dollar Shares) on 28 February 2019. After this redemption, 80.754% of the US Dollar Shares remained outstanding.

Also on 21 February 2019, the Company announced the eighth partial compulsory redemption of Repurchase Pool Shares, which would facilitate 4,681,645 of Repurchase Pool Shares redeemed at a rate of $0.6942 per Repurchase Pool Share (approximately 19.003% of the outstanding Repurchase Pool Shares) on 28 February 2019. After this redemption, 13.814% of the issued Repurchase Pool Shares remained outstanding.

On 23 April 2019, the Company announced the second partial compulsory redemption of US Dollar Shares, which would facilitate 31,655,342 of US Dollar Shares redeemed at a rate of $0.6476 per US Dollar Share (approximately 14,773% of the US Dollar Shares) on 30 April 2019. After this redemption, 68.825% of the US Dollar Shares will be outstanding.

Also, on 23 April 2019, the Company announced the ninth partial compulsory redemption of Repurchase Pool Shares, which would facilitate 2,103,491 of Repurchase Pool Shares redeemed at a rate of $0.7131 per Repurchase Pool Share (approximately 10.541% of the Repurchase Pool Shares) on 30 April 2019. After this redemption, 12.358% of the Repurchase Pool Shares will be outstanding.

GSO / Blackstone Debt Funds Management LLC

23 April 2019

 DIRECTORS' REPORT

PRINCIPAL ACTIVITIES

The Company is a closed-ended limited liability investment company domiciled and incorporated under the laws of the Republic of Ireland with variable capital pursuant to the Irish Companies Act 2014. The Company was incorporated on 20 February 2006 under registration number 415764. The Company is authorised by the Central Bank of Ireland (the "Central Bank"), pursuant to Part 24 of the Companies Act 2014. The Company's US Dollar Shares have a listing on the Premium Segment of the Official List of the UK Listing Authority and are admitted to trading on the Main Market of the London Stock Exchange (the "LSE"). The Company's Repurchase Pool Shares are admitted to trading on the Specialist Fund Segment of the Main Market of the LSE.

At an EGM on 26 June 2013, a resolution was passed which provided that at the AGM to be held in the financial year 2022 and in every tenth financial year thereafter, the Board would propose a special resolution to the effect that the Company continue for a further ten financial years. However, on 17 December 2018, two EGMs of the Company were convened at which: (a) shareholders holding US Dollar Shares approved changes to the investment objective and policy of the Company to facilitate and authorise the Board to instruct the Investment Manager to effect a Managed Wind-Down of the portfolio attributable to the US Dollar Shares; and (b) shareholders of the Company approved amendments to the constitution of the Company to provide for the termination of the Company before 2022.

On 21 December 2018, it was announced that 33.463% of US Dollar Shareholders and 0.002% of Repurchase Pool Shareholders elected to roll their investment in the Company into an investment in BGLF C Shares. Please refer to note 1 for further details on the Managed Wind-Down of the Company.

INVESTMENT OBJECTIVE

From 17 December 2018

Further to the Shareholder resolution of the Company that was passed by Shareholders of US Dollar Shares on 17 December 2018, the investment objective of the Company is to realise all remaining assets of the Company with a view to returning capital to the Shareholders in an orderly manner. The assets that are subject to the Managed Wind-Down will not include the assets of the Company that are transferred as part of the BGLF Rollover Opportunity.

Prior to 17 December 2018

Prior to 17 December 2018, the investment objective of the Company was to produce attractive and stable returns with low volatility compared to equity markets by investing in a diversified portfolio of senior notes of collateralised loan obligations ("CLOs") collateralised by senior secured bank loans and equity and mezzanine tranches of CLOs. CLOs are debt securities backed by a diversified pool of underlying assets. The CLO uses the cash flows from this portfolio of assets to back the issuance of multiple classes of rated debt securities which, together with the Income Notes, are used to fund the purchase of the underlying assets.

INVESTMENT POLICY

From 17 December 2018

Further to the Shareholder resolution of the Company that was passed by Shareholders of US Dollar Shares on 17 December 2018, the investment policy of the Company is to effect the Managed Wind-Down with a view to the Company realising all of its investments in a manner that achieves a balance between maximising the value from the Company's investments and making timely returns of capital to the Shareholders. Any assets to which rollover elections relate are to be transferred in accordance with the provisions of the BGLF Rollover Opportunity, following which the Company may sell its remaining investments either to co-investors in the relevant asset or to third parties, but in all cases with the objective of achieving the best available price in a reasonable time scale.

The Company will cease to make any new investments except where necessary in the reasonable opinion of the Investment Manager in order to protect or enhance the value of any existing investments or to facilitate orderly disposals.

Any cash received by the Company as part of the realisation process prior to its distribution to Shareholders will be held by the Company as cash on deposit and/or as cash equivalents. The Company will not undertake new borrowing other than for short-term purposes. The investment restrictions set out in the 2017 Prospectus of the Company will not apply during the Managed Wind-Down, subject to the requirements of the Central Bank, the Companies Act and the UK Listing Authority.

The modification to the Company's investment policy is considered a material change to the investment policy, which has been approved by the Financial Conduct Authority ("FCA") and required the consent of Shareholders in accordance with the Listing Rules and the requirements of the Central Bank.

INVESTMENT POLICY (continued)

Prior to 17 December 2018

Prior to 17 December 2018, the Company's investment policy was to achieve its investment objective through investment in cashflow CLO transactions, managed by portfolio managers with proven track records. It sought to achieve diversification across asset class, geography, manager, and maturity profile. Each CLO was collateralised by a diverse pool of fixed income assets, which may have included:

· senior secured bank loans;

· investment grade loans;

· project finance debt;

· asset-backed securities or other asset-backed obligations;

·  mortgage-backed securities; and/or

· debt securities issued by other CLOs.

The Company may have also invested in other collective investment schemes for the purposes of gaining exposure to the types of CLO transactions described above, or otherwise to pursue the investment objective and policy of the Company. The Company sought to have minimal exposure to portfolios where the underlying assets comprised unsecured corporate bonds (investment grade or otherwise). The Company limited its investment in synthetic CLO transactions, at the time of investment, to 25% of the net asset value ("NAV"). It was intended that the Company's investments comprise equity and mezzanine tranches in actively managed portfolios, with a variety of portfolio managers. The Company may also have invested in senior tranches of leveraged loan CLOs where attractive opportunities could be identified. Such opportunities may have included investments in senior tranches of CLOs in respect of which the Collateral consisted of fee streams due to portfolio managers from underlying leveraged loan CLOs. The Company may have invested in new issue CLO transactions in the Primary Market and transactions in the Secondary Market where attractive opportunities could be identified.

REVIEW OF DEVELOPMENT OF THE BUSINESS AND FUTURE DEVELOPMENTS

A detailed review of the business and future developments of the Company is included in the Investment Manager's report.

BREXIT

Transactions in the Company's Shares are settled through CREST, a settlement service run by Euroclear UK & Ireland, and are listed on the Official List of the UK Listing Authority (i.e. the FCA, acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000), and traded on the LSE's Main Market. There had been some uncertainty as to the position of the United Kingdom and the arrangements which will apply to its relationships with the EU and other countries following its exit from the EU, in particular whether the shares of the Company could continue to be permitted to be settled through CREST. However on 19 December 2018, the European Commission adopted a temporary equivalence decision ("Decision") under Article 25 of the Central Securities Depositories Regulation (EU/2014/909) in respect of UK authorised Central Securities Depositories ("CSDs"). This means that in the event of a hard-Brexit, UK CSDs, such as CREST, can continue to provide their services within the EU for a specified period, and so the Shares of the Company can continue to be permitted to be settled through CREST during this period. The Decision entered into force on 20 December 2018 and, should the UK leave the EU without an agreed withdrawal agreement, will apply for two years from Brexit day.

RESULTS FOR THE FINANCIAL YEAR AND STATE OF AFFAIRS

The financial position and results for the financial year are set out in the statement of financial position and in the statement of comprehensive income. The loss for the financial year attributable to participating equity holders of US Dollar Shares amounted to US$28,034,722 (2017: US$36,411,229).

Please refer to note 15 for details of distributions declared on the US Dollar Shares during the financial year ended 31 December 2018.

No dividends were declared in respect of the Repurchase Pool Shares. See note 7 for further details on the Repurchase Pool Shares.

 TRANSACTIONS INVOLVING DIRECTORS

 See note 5 and note 10 for details of transactions involving Directors.

MATERIAL CHANGES DURING THE YEAR

See note 16 for details of other material events occurring during the financial year. 

EVENTS SINCE FINANCIAL YEAR END

See note 17 for details of material events occurring after the reporting date.

DIRECTORS

The names of the persons who were Directors at any time during the financial year are set out in the section entitled "Management and Administration". As at 31 December 2018, all five Directors are non-executive, each of whom, apart from Ed D'Alelio, are independent of the Investment Manager. No Director has a service contract with the Company. The Directors have each entered into a letter of engagement with the Company setting out the terms of their appointment, copies of which are available for review by the Shareholders.

DIRECTORS' AND COMPANY SECRETARY'S INTERESTS

Neither the Directors (including family interests) nor the company secretary, State Street Fund Services (Ireland) Limited (the "Company Secretary"), have any shareholdings in the Company as at 31 December 2018.

MANAGEMENT ARRANGEMENTS

The Investment Manager acts as investment manager of the Company pursuant to the terms of the investment management agreement dated 11 October 2017 between the Investment Manager and the Company.

The management fees and other fees payable to the Investment Manager are disclosed in note 5. After due consideration of the investment experience, resources and reputation of the Investment Manager as a whole, it is the opinion of the Directors that the continuing appointment of the Investment Manager on the terms agreed is in the interest of Shareholders as a whole. The Investment Management Agreement may be terminated on six-months' notice by either party and may also be terminated by either party with immediate effect on the occurrence of certain events, including: (i) if an order has been made or an effective resolution passed for liquidation of the other party; (ii) if a receiver or similar officer has been appointed in respect of the other party or its assets or the other party becomes subject to an administration order; (iii) if the other party enters into an arrangement with its creditors, or any of them or the other party is or is deemed to be unable to pay its debts; (iv) if the other party ceases or threatens to cease to carry on its business or threatens to make any material alteration to the nature of its business as carried out on the date of the investment management agreement; or (v) if the other party commits a material breach of its obligations under the investment management agreement and such breach (if capable of being remedied) is not remedied within 28 days of receiving notice of the breach. The duration of the Investment Manager's appointment has not been fixed.

ACCOUNTING RECORDS

The Directors are responsible for ensuring that adequate accounting records, as outlined in Sections 281 to 285 of the Companies Act 2014, are kept by the Company. To achieve this, the Directors have employed a service organisation, State Street Fund Services (Ireland) Limited (the "Administrator"). The accounting records are maintained at the Company's registered office at 78 Sir John Rogerson's Quay, Dublin 2, Ireland.

PRINCIPAL RISKS, UNCERTAINTIES, RISK MANAGEMENT OBJECTIVES AND POLICIES

At the EGM of the Shareholders of the US Dollar Shares that was convened on 17 December 2018, the investment objective of the Company was changed such that the Company will be managed with the intention of realising all remaining assets of the Company with a view to returning capital to the Shareholders in an orderly manner as part of the Managed Wind-Down.

The Company's investment objective was to produce attractive and stable returns with a low volatility compared to equity markets by investing in a diversified portfolio of senior notes of CLOs collateralised by senior secured bank loans and equity and mezzanine tranches of CLOs.

Investment in the Company carries with it a degree of risk including, but not limited to, business risks and the risks associated with financial instruments. As at the year end, the primary business risk is the risk that the Company may not achieve the desired return on sale of the assets.

A summary of the primary risks relating to the Company are:

· In calculating its NAV, the Company may be required to rely on estimates of the value of securities in which the Company invests which are unaudited or subject to little verification or other due diligence.

· There are risks related to CLO securities, including leveraged credit risk, the potential for interruption and deferral of cash flow, asset/liability mismatch risk, currency risk, volatility risk, liquidity risk, reinvestment risk and risks associated with collateral.

· The success of the Company is significantly dependent on the expertise of the Investment Manager and the Investment Manager's ability to source CLOs that are suitable to be held in the Company's portfolio.

· The success of the Company is significantly dependent on the expertise of the Investment Manager and the Investment Manager's ability to realising all of the Company's investments in a manner that achieves a balance between maximising the value from the Company's investments and making timely returns of capital to the Shareholders

· Restrictions on withdrawal of capital means that Shareholders must be prepared to bear the risks of owning an interest in the shares for an extended period of time.

· The market price of the shares can fluctuate and there is no guarantee that the market prices of shares will reflect fully their underlying NAV.

PRINCIPAL RISKS, UNCERTAINTIES, RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

The past performance of the Company is not necessarily indicative of, and cannot be relied upon as a guide to, the future performance of the Company.

See note 11 for further details on the risks associated with financial instruments.

COMPANY CORPORATE GOVERNANCE

Introduction

The Company is subject to and complies with Irish statute including the Companies Act 2014, with the Listing Rules of the UK Listing Authority, and with the voluntary Corporate Governance Code for Collective Investments Schemes and Management Companies issued by the Irish Funds Industry Association in December 2011 (the "Irish Code").

The Listing Rules of the UK Listing Authority requires the Company to apply the main principles of the UK Corporate Governance Code (the "UK Code") published by the Financial Reporting Council (the "FRC") in September 2014, and the Board is required to report to Shareholders on how it has done so.*

The Irish Code is a voluntary code that was issued by the Irish Funds Industry Association in December 2011 and was adopted by the Company in 2012. The Irish Code provides a framework for the organisation and operation of funds to ensure that funds operate efficiently and in the interests of Shareholders.**

The Board considers that the Company has complied with the main provisions contained in the Irish Code and the UK Code, (except as outlined in the sections entitled "Compliance with the UK Code" and "Compliance with the Irish Code") and throughout this accounting period, and that it complies with corporate governance requirements in Ireland. The paragraphs below describe how the relevant principles of corporate governance are applied by the Company.

In the opinion of the Directors, the annual report and audited financial statements are fair, balanced and understandable and provide the information necessary for the Shareholders to assess the Company's performance, business model and strategy.

The Board

The Board currently consists of five non-executive Directors, each of whom, apart from Ed D'Alelio, is independent of the Investment Manager. Werner Schwanberg is the Chairman of the Board (the "Chairman"). The Board accepts collective responsibility for the decisions of the Board. The Board had four scheduled board meetings during the financial year ended 31 December 2018 (see the table below) and between these formal meetings, there was regular contact between the Board, the Investment Manager, the Company Secretary and the Company's brokers. The Directors are kept fully informed of investment and financial controls and other matters that are relevant to the business of the Company and should be brought to the attention of the Directors.

The Directors, where necessary in the furtherance of their duties, have access to independent professional advice at the expense of the Company.

The attendance record of Directors at the meetings for the financial year ended 31 December 2018 is set out below:

The Board has a breadth of experience relevant to the Company and the Directors believe that any changes to the Board's composition can be managed without undue disruption. With any new Director appointment to the Board, consideration will be given as to whether an induction process is appropriate and upon any such appointment the new Director would be available to meet Shareholders upon request. There is a robust process in place for ensuring the Board has the right information at the right time and in the right format to enable the Directors to make informed decisions. The Chairman sets the Board agenda, assisted by the Company Secretary. An annual board timetable is prepared by the Company Secretary to map out the flow of key report/items submitted to the Board and to ensure that sufficient time is allocated for discussions and material issues.

\* The UK Code can be found at:

https://www.frc.org.uk/

**A copy of the Irish Code can be found at:

http://www.irishfunds.ie/media-centre/news-archive/67-corporate-governance-code-and-faqs/faqs

The Board (continued)

Directors may request any agenda items to be added that they consider appropriate for Board discussion. Additionally, each Director is required to inform the Board of any potential or actual conflicts of interest prior to Board discussion.

Questions arising at any meeting shall be determined by a majority of votes. In case of an equality of votes, the Chairman shall have a second or casting vote. A Director may, and the Company Secretary on the requisition of a Director shall, at any time summon a meeting of the Directors. The quorum necessary for the transaction of business of the Directors may be fixed by the Directors, and unless so fixed at any other number shall be two.

The primary focus at Board meetings is a review of the overall business of the Company including investment policy, investment performance, risks affecting the Company (investment and other) and other matters (including, but not limited to, administration, corporate governance and compliance, marketing/investor relations, peer group information and industry issues). The Board evaluates Board composition and considers the tenure of each Director on an annual basis and believes that the mix of skills (including investment and accounting skills), experience, ages and length of service are appropriate to the requirements of the Company. The Board conducts an annual performance evaluation of the Board, its committees and individual Directors.

The evaluation of the Board considers, among other things, the balance of experience, skills, independence, knowledge and time commitments of the Board and how it works together as a unit. The Chairman leads a discussion among the Board through the use of a questionnaire, and the feedback from each Board member to the questions posed by the questionnaire are recorded in meeting minutes. In addition to this annual performance review of the Board, a formal review of the performance of the Board, the individual Directors and the Chairman is carried out every three financial years.

Directors' duties and responsibilities

The duties and responsibilities of the Directors cover the following areas:

· statutory obligations and public disclosure;

· strategic matters and financial reporting;

· oversight of management and personnel matters;

· risk assessment and management, including reporting, monitoring, governance and control; and

· other matters having a material effect on the Company.

Nomination/remuneration committees

The nomination committee was established during 2017 and is requested and authorised by the Board to lead the process for considering and selecting suitable candidates for appointment as Directors of the Company and make recommendations thereon to the Board, and also to review any matters relating to nominations for appointment as directors as may otherwise be requested by the Board from time to time. The Chairman of the nomination committee is Fergus Sheridan. Adrian Waters and Edward D'Alelio are the other members of the committee. There were no nomination committee meetings held in the financial year ended 31 December 2018 and one meeting held after the financial year on 23 January 2019.

A remuneration committee was established on 6 April 2011. The Board has adopted a documented terms of reference in respect of the remuneration committee evidencing all delegated authorities given to its members. The Chairman of the remuneration committee is Edward D'Alelio. Nicholas Moss and Fergus Sheridan are the other members of the committee.

The functions of the remuneration committee are as follows:

1. responsibility for the preparation of recommendations to the Board regarding the remuneration of the members of the Board;

2. provide support and advice to the Board on determining an overall remuneration policy of the Company that is consistent with the objectives, values and interests of the Company and reflects comparable compensation levels of the peer universe for the Company;

3. oversee and review the implementation of the remuneration policy of the Company; and

4. perform any other activities as the Board deems necessary or appropriate.

Pricing committee

The Company's pricing policy was approved at the board meeting on 27 August 2013. This policy and its associated process replaced the previously defined process, which was undertaken by the pricing committee. The current process is implemented by the Investment Manager, which reports to the Pricing Liaison Director and the Administrator on a monthly basis. Edward D'Alelio was appointed as Pricing Liaison Director at a board meeting on 24 April 2013.

Audit committee

The Audit committee comprised Adrian Waters, Fergus Sheridan and Nicholas Moss for the financial year ended 31 December 2018. The Audit committee examines, amongst other things, the effectiveness of the internal systems, the annual report and audited financial statements and interim report of the Company, and aims to identify significant risks facing the Company. It also oversees the remuneration and engagement of KPMG (the "Auditor"), as well as the Auditor's independence and any non-audit services provided by them. See the Audit Committee's report for further details in relation to its role and responsibilities.

Internal controls

The Board is ultimately responsible for the system of internal controls for the Company, identifying significant risks facing the Company and oversight of the system of controls to mitigate them. The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. The Audit committee assists the Board in discharging these responsibilities.

This process has been in place for the financial year under review and up to the date of approval of the annual report and audited financial statements and is reviewed by the Board and accords with the Irish Code and the UK Code. The Board has reviewed the effectiveness of the system of internal controls. In particular, it has reviewed and updated the process for identifying and evaluating the significant risks affecting the Company and the policies by which these risks are managed. The principal financial instrument risks are described in note 11.

The Board has also identified the following additional risks and uncertainties:

Delegated activities

As there is delegation of daily operational activity, described below, the Company has no direct internal audit function. The Board receives regular reporting from the service providers to the Company and conducts an annual review of the service providers. The internal control systems seek to keep the Company within its risk appetite.

The Board has delegated the responsibility for (i) management of the Company's investment portfolio, (ii) provision of custody services and (iii) administration, registrar and corporate secretarial functions of the Company including independent calculation of the NAV and production of the annual report and financial statements, which are independently audited. Whilst the Board delegates responsibility, it retains accountability for the functions it delegates and is responsible for the systems of internal control. Formal contractual agreements have been put in place between the Company and providers of these services. Compliance reports are provided on a quarterly basis by the Administrator.

Corporate responsibility

The Company's business is concerned with investment. It considers the ongoing concerns of its Shareholders by open and regular dialogue with and through the appointed Investment Manager and the Company's brokers.

The Company does not have any employees.

Going concern statement

Resolutions passed by Shareholders of the Company at the EGMs on 17 December 2018 approved the division of the Company's assets and liabilities attributable to each class of Shareholder into a new asset pool, the rollover class pool, reflecting elections by holders to receive shares to be issued by BGLF pursuant to the BGLF Rollover Opportunity as described in the Chairman's report. Following the transfer of the relevant assets to BGLF, the Company's remaining assets, which are held in pools attributable to the remaining US Dollar Shares and Repurchase Pool Shares are to be sold as realisation opportunities arise. Any cash generated will be returned to the relevant Shareholders by means of a redemption of Shares, from time to time. In the context of the realisation strategy, which is expected to lead to the termination of the Company, the Directors do not consider it appropriate to apply the going concern basis to the statement of financial position as at 31 December 2018, which has been prepared on a non-going concern basis. The comparative statement of financial position as at 31 December 2017 was prepared on a going concern basis, which the Directors considered appropriate in the context of the Company's objectives, resources and prospects as at that date.

Viability statement

The Directors have conducted an assessment of the principal risks and uncertainties facing the Company in the context of the proposed realisation and distribution of the Company's assets and its subsequent termination as detailed in note 1. The Directors have also considered the Company's policy for monitoring and managing the Company's exposure to such risks and uncertainties. The Directors have a reasonable expectation that the Company will be able to meet its liabilities as they fall due, based on the Company's intention to retain sufficient cash when determining the amounts to be distributed to Shareholders as the Company's investments are realised. However, in view of the intention to terminate the Company when the assets have been substantially realised, which may occur within the next 12 months, it is not appropriate for the Directors to make a statement about the prospects of the Company in respect of the next 12 months (or for any other period) as envisaged by paragraph C 2.2 of the UK Code and paragraph 9.8.6 (3) of the FCA's Listing Rules.

Relations with Shareholders

The Investment Manager and the Company's brokers maintain a regular dialogue with Shareholders, the feedback from which is reported to the Board. In addition, Board members are available to respond to Shareholders' questions at the AGM and on an ad hoc basis if necessary.

In each financial year, the Company shall hold a general meeting of the Company as its AGM in Ireland. At least twenty-one days' notice (excluding the day of mailing and the day of the meeting) shall be given in respect of each general meeting of the Company. The notice shall specify the venue and time of the meeting, the business to be transacted at the meeting and that a proxy may attend and vote on behalf of any shareholder.

The requirements for quorum and majorities at all general meetings are set out in the articles of association of the Company (the "Articles of Association"). An ordinary resolution is a resolution passed by a simple majority of the votes cast and a special resolution is a resolution passed by a majority of 75% or more of the votes cast.

Relations with Shareholders (continued)

The Articles of Association provide that matters may be determined at a meeting of Shareholders on a show of hands unless a poll is requested by five Shareholders or Shareholders holding 10% or more of the shares or unless the Chairman of the meeting requests a poll. Subject to disenfranchisement by law in the event of noncompliance with any notice requiring disclosure of the beneficial ownership of shares, the Articles of Association provide that each share gives the holder one vote in relation to any matters relating to the Company which are submitted to Shareholders for a vote by poll, and each shareholder present at a meeting has one vote in relation to any matters relating to the Company which are submitted to Shareholders for a vote by show of hands. If there are multiple share classes in existence, all shares of each class have equal voting rights, except that in matters affecting only a particular class, only shares of that class shall be entitled to vote.

The Board monitors the trading activity and shareholder profile on a regular basis. Shareholder sentiment is also ascertained by the careful monitoring of the discount/premium at which the shares trade in the market against the NAV per share when compared to the discounts/premiums experienced by the Company's peer group.

The Company reports formally to Shareholders twice each financial year and a proxy voting card is sent to Shareholders with the annual report and audited financial statements. Additionally, the Investment Manager's monthly reports are available to Shareholders through the Company's website. The Regulatory News Service of the LSE assist in keeping Shareholders informed.

Computershare Investor Services (Ireland) Limited (the "Registrar") monitors the voting of Shareholders, and proxy voting is taken into consideration when votes are cast at the AGM. Shareholders may contact the Directors via the Company Secretary.

Compliance with the UK Code

Throughout the financial year ended 31 December 2018, the Company has complied with the UK Code, with the following exceptions:

A4.1 - The Board has considered whether a Senior Independent Director should be appointed. In light of the fact that all Directors are non-executive and given the size and complexity of the Company, the Board has determined that this appointment is not necessary.

As outlined above, the Board considers that the appointment of a Senior Independent Director is not necessary given the size and complexity of the Company. However, in accordance with the Irish Code, the Board carries out an appraisal of the performance of the overall Board and of each Director (including the Chairman) on an annual basis, with a formal documented evaluation of the overall Board and of each Director (including the Chairman) taking place every three financial years. The Board considers that this appraisal process is appropriate for the Company.

B.1 - This provision is not fully complied with as it calls for a balance of executive and non-executive Directors and the Company only has non-executive Directors. However, the Directors have a broad range of experience and given the nature of the Company's activity and outsourcing of executive functions and that the majority of Directors are deemed to be independent under the UK Code, it is not considered necessary to appoint executive Directors.

B1.1 - While several Directors have served on the Board for more than nine years from the date of their first election, the Board considers these Directors to be independent because none of such Directors:

· Have been an employee of the Company or Group within the last five years;

· Have had within the last three years, a material business relationship with the Company either directly, or as a partner, shareholder, Director or senior employee of a body that has such a relationship with the Company;

· Received or receives additional remuneration from the Company apart from a Director's fee, participates in the Company's share option or a performance related pay scheme, or is a member of the Company's pension scheme;

· Have close family ties with any of the Company's advisers or Directors;

· Hold cross-directorships or have significant links with other Directors through involvement in other companies or bodies; or

· Represent a significant shareholder.

Further, the Board considers such Directors discharge their director duties in an independent manner.

B2.3 - This provision is complied with save that, all of the Directors are appointed pursuant to letters of appointment for a term which expires when the Director is (i) removed or vacates office; (ii) resigns, or (iii) terminates his appointment. A Director's appointment may be terminated in accordance with the Company's Articles of Association without compensation.

Compliance with the UK Code (continued)

B2.4 - Whilst the Company does not have a formal diversity policy in place, diversity, including gender diversity, is considered by the Company in the evaluation of the Board and its performance, and will be taken into account in making any future Board appointments. As the Company is in wind-down, the Board has determined that a formal diversity policy is not required at this time.

C3.6 - Since the Company does not have any employees, the Company does not have an internal audit function. The Audit Committee annually considers whether an internal audit function is needed and makes a recommendation to the Board. The Board considers that an internal audit function is not necessary, given the size and complexity of the Company, and the use of an external auditor.

E.1 - Since the Company does not have any employees, it is the management team of the Investment Manager who has most regular contact with Shareholders on behalf of the Board. Comments received from such Shareholders are fed back to the Board both from the Investment Manager and the Company's brokers. All Directors are available to attend the AGM, and are available to communicate with Shareholders.

Compliance with the Irish Code

The Company adopted the Irish Code with effect from 31 December 2012, and has complied with the Irish Code with the following exception:

Paragraph 4.2 - This provision is not fully complied with as it recommends that at least one Director be an employee, partner or director of the promoter or Investment Manager. However, the Directors have a broad range of experience and it is considered that there is a good balance of skills and expertise on the Board. In addition, the Directors are satisfied with the support and reporting provided by the Investment Manager on an ongoing basis such that it is not considered necessary to have a representative of the Investment Manager on the Board.

Additional corporate governance disclosures under Irish Company Law

The Board is ultimately responsible for overseeing the establishment and maintenance of adequate internal control and risk management systems of the Company in relation to the financial reporting process. As the Company has no employees and all Directors serve in a non-executive capacity, all functions including the preparation of the financial statements have been outsourced. The Company has appointed State Street Fund Services (Ireland) Limited as its administrator consistent with the regulatory framework applicable to investment fund companies. The Administrator has functional responsibility for the preparation of the interim and annual financial statements and the maintenance of the accounting records. On appointing the Administrator, the Board noted that it was regulated by the Central Bank and, in the Board's opinion, had significant experience as an administrator. The Board also noted the independence of the Administrator from the Company's Investment Manager.

Subject to the supervision of the Board, the appointment of the Administrator is intended to manage rather than eliminate the risk of failure to achieve the Company's financial reporting objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Board and Audit Committee evaluates and discusses significant accounting and reporting issues as the need arises. The Board and Audit Committee review the financial statements prior to their approval, though it should be noted that such review does not include verification of information in the financial statements to source documents. The annual financial statements are subject to an independent audit.

Internal control and risk management systems in relation to financial reporting

The Administrator prepares the Company's financial statements and uses various internal controls and checklists to ensure the financial statements include complete and appropriate disclosures required under IFRS as adopted by the European Union and relevant legislation.

During the financial period of the financial statements, the Board is responsible for the review and approval of the annual financial statements as set out in the Statement of Directors' Responsibilities. The Board and the Audit Committee evaluate and discuss significant accounting and reporting issues as the need arises.

Capital structure

As at 23 April 2019, so far as the Directors are aware, no person other than those listed below, had an interest, directly or indirectly, in 5% or more of the issued share capital of the Company.

Capital structure (continued)

Only holders of US Dollar Shares participate in dividends. As disclosed in the 2018 Circular, the Board do not intend to declare any dividends during the wind-down period, therefore no further dividends will be paid in respect of any shares after the payment of the dividend in respect of the quarter ended 31 December 2018.

Appointment and replacement of Directors

With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association, the Companies Act 2014, and the Listing Rules of the UK Listing Authority as applicable to investment funds. The Articles of Association themselves may be amended by special resolution of the Shareholders.

Powers of the Directors

The Directors are responsible for managing the business affairs of the Company in accordance with the Articles of Association. The Directors may delegate certain functions to the Administrator and other parties, subject to the supervision and direction by the Directors. The Directors have delegated the day-to-day administration of the Company to the Administrator and the investment management function to the Investment Manager.

The Articles of Association provide that the Directors may exercise all the powers of the Company to borrow money, to mortgage or charge its undertaking, property or any part thereof and may delegate these powers to the Investment Manager. However, the amount and circumstances in which the Company may borrow are limited by the limitations set out in the Prospectus.

The Directors may at any time, and from time to time, temporarily suspend the calculation of the NAV and the issue and conversion of shares during:

· any period when any of the principal markets or stock exchanges on which a substantial part of the investments are quoted is closed, otherwise than for ordinary holidays, or during which dealings thereon are restricted or suspended;

· any period when, as a result of political, economic, military or monetary events or any circumstances outside the control, responsibility and power of the Directors, disposal or valuation of a substantial part of the investments is not reasonably practicable without this being seriously detrimental to the interests of the Shareholders or if, in the opinion of the Directors, the NAV cannot be fairly calculated; and

· any breakdown in the means of communication normally employed in determining the value of the investments or when for any reason the current prices on any market of a substantial part of the investments cannot be promptly and accurately ascertained.

Any suspension of the calculation of the NAV of the US Dollar Shares or of the Repurchase Pool Shares shall be notified immediately to the Central Bank. All reasonable steps will be taken to bring the period of suspension to an end as soon as possible. Where such a suspension of the NAV is likely to continue for a period exceeding ten business days, it will be notified by the Company by announcement through a Regulatory Information Service. The Directors may decline to accept any application for the issue of shares and may cease to offer shares in the Company for allotment or subscription for a definite period or otherwise.

RESPONSIBILITY STATEMENT

The Directors are responsible for preparing the Directors' Report and the Company's audited financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and in accordance with the provisions of the Companies Act 2014.

Section 289 of the Companies Act 2014 provides that the Directors shall not approve the financial statements unless they are satisfied that they give a true and fair view of the Company's assets, liabilities and financial position as at the end of the financial year and of the profit or loss of the Company for that financial year.

In preparing the financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether the financial statements comply with IFRS as adopted by the European Union and in accordance with the Companies Act 2014;

· assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

· use the going concern basis of accounting unless they either intend to liquidate the Company or cease operations or have no realistic alternative but to do so. As explained in note 2, the Directors do not believe that it is appropriate to prepare these financial statements on a going concern basis.

Under applicable law and the requirements of the Irish Code and the Listing Rules issued by the UK Listing Authority, the Directors are also responsible for preparing a Directors' report and reports relating to Directors' remuneration and corporate governance that comply with that law and those rules. In particular, in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, as amended (the "Transparency Regulations"), the Directors are required to include in their report a fair review of the business and a description of the principal risks and uncertainties facing the Company and a responsibility statement relating to these and other matters, included below.

The Directors are responsible for keeping adequate accounting records which correctly record and explain the transactions of the Company, and which disclose with reasonable accuracy at any time the assets, liabilities, financial position and profit or loss of the Company, and which enable them to ensure that the financial statements of the Company are prepared in accordance with IFRS as adopted by the EU, and comply with the Companies Act 2014, and enable the financial statements to be audited. They are responsible for such internal controls as they determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for safeguarding the assets of the Company, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are also responsible for preparing a Directors' report that complies with the requirements of the Companies Act 2014.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website www.carador.co.uk. Legislation in the Republic of Ireland concerning the preparation and dissemination of financial statement may differ from legislation in other jurisdictions.

Responsibility Statement, as required by the Transparency Regulations and UK Corporate Governance Code

Each of the Directors, whose names and functions are listed under "The Board" under "Company Corporate Governance" above, confirm that, to the best of that Director's knowledge and belief that:

· the financial statements, prepared in accordance with IFRS as adopted by the EU, and applied in accordance with the provisions of the Companies Act 2014, give a true and fair view of the assets, liabilities, financial position of the Company as at 31 December 2018, and its profit or loss for the financial year then ended;

· the Directors' report contained in the annual report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties it faces; and

· the annual report and audited financial statements, taken as a whole, provides the information necessary to assess the Company's performance, business model and strategy and is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's position and performance, business model and strategy.

CONNECTED PARTY TRANSACTIONS

The Central Bank Non-UCITS Notices, NU 2.10 - 'Dealings by promoter, manager, partner, trustee, investment adviser and group companies' states in paragraph one that any transaction carried out with a collective investment scheme by a promoter, manager, partner, trustee, investment adviser and/or associated or group companies of these ("connected parties") must be carried out as if negotiated at arm's length. Transactions must be in the best interests of the Shareholders.

The Directors are satisfied that there are arrangements in place, to ensure that the obligations set out in paragraph one of NU 2.10 are applied to all transactions with connected parties; and the Directors are satisfied that transactions with connected parties entered into during the period complied with the obligations set out in paragraph one of NU 2.10.

COMPLIANCE WITH ALTERNATIVE INVESTMENT FUND MANAGERS REGULATIONS

Under AIFMD, the Company is required to make certain disclosures on an annual basis. An analysis of realised gains/(losses) and the movement on unrealised gains/(losses) is provided in note 4. All other AIFMD disclosures, including on leverage and remuneration, are disclosed by way of annual Article 22 and Article 23 reports. As with the financial year ending 31 December 2017, these reports will be posted to the Company's website by 30 June 2019.

RETENTION REQUIREMENTS UNDER AIFMD AND EU SECURITISATION REGULATION

Under Article 17 of AIFMD, alternative investment fund managers ("AIFM") may only assume exposure to securitisations as defined therein on behalf of one or more alternative investment funds ("AlFs") if the originator, sponsor or original lender of the securitisation has explicitly disclosed to the AIFM that it retains, on an ongoing basis, a material net economic interest in the securitisation, which shall not be less than 5% (the "retention requirement"). The Company is an AIF for the purposes of AIFMD and the Investment Manager is designated as the AIFM of the Company. The Central Bank has noted that, in accordance with Article 67(1)(b) of AIFMD, ESMA was required to issue advice to the European Commission on the application of the AIFMD passport, and related obligations such as the retention requirements, to non-EU AIFMs. If that advice is positive, the European Commission must adopt a delegated act specifying the date when the non-EU AIFM passport will be "turned on".

The latest advice issued by ESMA was published on 19 July 2016, although it is not clear if or when the European Commission will adopt the delegated act envisaged under AIFMD. The Central Bank has noted that, as at the date of the financial statements, this process is underway and the outcome is not yet known and, accordingly, professional investor funds such as the Company can continue to be managed by non-EU AIFMs under the existing transitional arrangements until the European Commission has reached a decision. The Central Bank has stated that, at that time, this position will be revisited and, if necessary, revised to align it with the European Commission's decision and any transitional arrangements provided. Separately, on 17 January 2018, the EU Securitisation Regulation (EU) 2017/2402 (the "Securitisation Regulation") entered into force, and applies from 1 January 2019.

The Securitisation Regulation amends Article 17 of AIFMD and also contains provisions potentially bringing into scope non-EU AIFMs marketing and/or managing AIFs in the EU.

To the extent they are applicable, the retention and other requirements could operate as a material restriction on the investment activities of the Company. In particular, if CLOs then held by the Company do not meet with the retention requirement, corrective action may need to be taken to ensure compliance with AIFMD and the Securitisation Regulation including, if appropriate and in the best interests of investors in the context of the Managed Wind-Down, disposal of the CLOs, thereby incurring additional costs and selling at a price less than would otherwise have been the case if the CLOs had been held for the desired length of time.

These and other restrictions and/or conditions imposed by AIFMD and the Securitisation Regulation may result in (i) the restructuring of the Company and/or its relationships with service providers, and (ii) restrictions on the investment activities the Investment Manager or the Company may engage in.

AUDITORS

The Directors believe that they have taken all steps necessary to make themselves aware of any relevant audit information and have established that the Company's statutory auditor is aware of that information. In so far as they are aware, there is no relevant audit information of which the Company's statutory auditor is unaware.

The auditors, KPMG, have confirmed their willingness to continue in office in accordance with Section 383(2) of the Companies Act 2014.

On behalf of the Board of Directors:

Fergus Sheridan Adrian Waters

23 April 2019

AUDIT COMMITTEE REPORT 

Dear Shareholders,

I am pleased to report to you on the activities of the Audit Committee for the financial year ended 31 December 2018.

ROLE OF THE AUDIT COMMITTEE

The Board has established a terms of reference in respect of the composition of the Audit Committee, its role, responsibilities, authority and evidence of the delegated authorities given to its members (the "Terms of Reference"). The Company applies the revised UK Code as introduced by the FRC in September 2014 which relate to financial years commencing on or after 1 October 2014.

The Audit Committee's main roles and responsibilities include, but are not limited to, the following:

· monitoring the financial reporting process of the Company, the integrity of the financial statements and any formal announcements relating to the Company's financial performance;

· assessing any significant financial reporting judgements;

· reviewing and monitoring the effectiveness of the Company's risk management and internal control arrangements;

· monitoring the statutory audit of the annual accounts of the Company and its effectiveness;

· reviewing the external auditor's performance, independence and objectivity;

· making recommendations to the Board in relation to the appointment, re-appointment and/or removal of the external auditor, the approval of the external auditor's remuneration and the terms of the engagement;

· implementing policies surrounding the engagement of the external auditor to supply non-audit services (where appropriate);

· contributing to a climate of discipline and control which is aimed at reducing the opportunity for fraud;

· reporting to the Board on how it has discharged its responsibilities; and

· considering the long term viability statement.

In regard to the above responsibilities, I confirm, on behalf of the Audit Committee (the "Committee"), that, to the best of our knowledge and belief, the Committee fulfilled its responsibilities in line with our Terms of Reference and in accordance with the UK Code.

DELEGATION OF DUTIES

The Company has no employees as all functions, including preparation of the financial statements, have been outsourced to various service providers. The daily operational activities have been outsourced to GSO/Blackstone Debt Funds Management LLC (the "Investment Manager"), the Administrator, State Street Custodial Services (Ireland) Limited (the "Custodian"), the Registrar and Company Secretary (together, the "outsourced service providers").

MEMBERSHIP OF THE COMMITTEE

The Committee was established on 17 April 2007 and consists of Nicholas Moss, Fergus Sheridan and myself, Adrian Waters, as chairman.

All the members of the Committee are considered to be independent non-executive directors and the Committee has concluded that its membership meets the requirements of C.3.1 of the UK Code. Each Committee member is expected to be financially literate and to have knowledge of the following key areas:

1. financial reporting principles and accounting standards;

2. the regulatory framework within which the Company operates;

3. the Company's internal control and risk management environment; and

4. factors impacting the Company's Financial Statements.

As a Committee, we meet at least three times a financial year. Personnel from the Company's outsourced service providers along with representatives of the Company's external auditor, KPMG, attend the Committee meetings when appropriate.

In his role as a member of the Committee, each member is available to discuss any particular matter with his fellow Board members and, in addition, the Committee has the opportunity to meet with KPMG without the presence of outsourced service providers. In order to ensure that all Directors are kept up to date and informed of the Committee's work, I provide a verbal report to the Board at Board meetings on key matters discussed at the Committee meetings. In addition, the minutes of all Committee meetings are available to the Board.

HOW THE AUDIT COMMITTEE HAS DISCHARGED ITS RESPONSIBILITIES

In the financial year under review, the Audit Committee has met four times, attendance at which is set out in the Directors' report. The Committee meetings focused on the following key areas:

Monitoring the integrity of the financial statements including significant judgements

· The Committee reviewed the appropriateness of the Company's accounting principles and policies, and monitors changes to, and compliance with, accounting standards on an ongoing basis;

· Prior to recommending their publication to the Board, the Committee reviewed the Unaudited Condensed Interim Financial Statements ("Unaudited Interim Report") for the six month period ended 30 June 2018, having previously discussed the Unaudited Interim Report with the outsourced service providers and KPMG. The Committee compared the results with management accounts and budgets, focusing on key areas of judgements; and

· The Committee reviewed, prior to making any recommendations to the Board, the annual report and audited financial statements ("Annual Report") for the financial year ended 31 December 2018. In undertaking this review, the Committee discussed with outsourced service providers and KPMG the critical accounting policies and judgements that have been applied.

KPMG reported to the Committee on any misstatements that they had found during the course of their work and confirmed that under ISAs (Ireland), no material misstatements were identified.

The Committee considered the requirements of the UK Code, in line with best practice reporting. The Committee specifically reviewed the annual report and audited financial statements to conclude whether the financial reporting is fair, balanced, understandable, comprehensive and consistent with (i) prior year reporting; and (ii) how the Board assesses the performance of the Company's business during the financial year, as required for companies with a Premium Listing under the UK Corporate Governance Code. As part of this review, the Committee considered if the annual report and audited financial statements provided the information necessary to Shareholders to assess the Company's performance, strategy and business model and reviewed the description of the Company's key performance indicators.

The Committee presented its conclusions to the Board and the Board concluded that it considered the annual report and audited financial statements, taken as a whole, to be fair, balanced and understandable and provides the information necessary for the Shareholders to assess the Company's performance, business model and strategy.

SIGNIFICANT ACCOUNTING MATTERS

During the financial year, the Committee considered key accounting issues, matters and judgements regarding the Company's financial statements and disclosures including those relating to:

Assessment of going concern and IAS 1 Presentation of Financial Statements ("IAS 1")

The Company assessed IAS 1.25 in respect of the decision to complete a Managed Wind-Down of the Company. IAS 1.25 requires management to make an assessment of the Company's ability to continue as a going concern. The Directors do not consider it appropriate to apply the going concern basis to the financial statements and the financial statements are therefore prepared on a non-going concern basis. Although the financial statements are prepared on a different basis to the prior year financial statements, there is no substantial change as the main assets and liabilities are financial assets and liabilities and are shown at fair value.

Please refer to the Going concern statement included in the Directors' Report and Note 2C for further details.

Valuation of Financial Assets at Fair Value through Profit or Loss

Valuation of financial assets is considered a significant matter and is monitored by the Investment Manager, the Administrator, the Custodian, the Committee and the Board. The Committee receives and reviews reports on the processes for the valuation of assets on a regular basis. The Committee may propose or recommend changes based on their review of the reports for their consideration, including the adequacy of the relevant disclosures in the financial statements. The Committee discussed the valuation process and methodology with the Investment Manager in August 2018 as part of the review of the Interim Report. The Investment Manager carries out a monthly valuation and provides a detailed valuation report to the Company. The Committee met with the external auditor at the time at which the Committee reviewed and agreed the external auditor's audit plan in January 2019 and, in particular, discussed the audit approach on the valuation. Following discussion, the Committee were satisfied that the judgements made and methodologies applied were objective and appropriate and that the appropriate accounting treatment has been adopted. KPMG report to the Committee on their assessment of the Company's valuation methodologies and procedures applied financial year on financial year, as well as the consideration if the valuation of assets is fairly stated. See further details outlined in notes 2, 4 and 11 of the financial statements.

SIGNIFICANT ACCOUNTING MATTERS (continued)

Fair Value Hierarchy Levelling Assessment

The Directors, in conjunction with the Investment Manager, determine the fair value of CLO investments using independent, unadjusted indicative broker quotes. The categorisation of the CLO investments in the fair value hierarchy is dependent on whether or not the broker quotes reflect actual current market transactions, or if they are indicative prices based on the brokers' valuation models, depending on the significance and observability of the inputs to the model. For CLOs to be categorised as Level 2, fair value must be determined using observable inputs. If the valuation cannot be verified as being based significantly on observable inputs, then the investments would fall into Level 3. The Directors, in conjunction with the Investment Manager, assessed what was "observable" in the market for the measurement of CLO Mezzanine Note and CLO Income Note valuations as at 31 December 2018. Given the low volume of trading, it was concluded that there was little market colour available at or around the measurement date. Therefore, all investments were categorised as Level 3 as at 31 December 2018.

Assessment of IFRS 9 Financial Instruments ("IFRS 9")

The Company adopted IFRS 9 with effect from 1 January 2018. The standard was issued in July 2014 and became effective for periods beginning on or after 1 January 2018. It specifies how an entity should classify and measure financial assets and financial liabilities, including some hybrid contracts. IFRS 9 largely retains the existing requirements in IAS 39 Financial Instruments: Recognition and Measurement ("IAS 39") for the classification and measurement of financial liabilities. However, it eliminates the previous IAS 39 categories for financial assets of held to maturity, loans and receivables, and available for sale.

The standard does not have a significant impact on the Company's financial position or performance, as it continues to classify its financial instruments at fair value through profit or loss. See note 2 for further details on the adoption of IFRS 9.

Assessment of Consolidation Requirements

For the Unaudited Interim Report and the Annual Report, relevant discussions and analysis was undertaken on behalf of the Committee by the Investment Manager in relation to the Company's holdings in subordinated tranches of CLOs and the definition of control under IFRS 10 Consolidated Financial Statements ("IFRS 10"). The Committee discussed the assessment of the consolidation requirements with the Investment Manager in August 2018 as part of the review of the Interim Report. The Investment Manager carries out this assessment semi-annually and reports to the Company. The Committee met with the external auditor at the time at which the Committee reviewed and agreed the external auditor's audit plan in January 2019 and, in particular, discussed the audit approach on the assessment of the consolidation requirements.

The Committee critically reviewed, evaluated and agreed, having consulted with the Investment Manager, that the Company meets the definition of an Investment Entity and availed of the Investment Entity Amendment under IFRS 10. Furthermore, analysis was performed on behalf of the Committee by the Investment Manager to establish the existence of any subsidiaries at the financial year end under IFRS 10. Following discussion with KPMG, and the deliberations of the Committee, we were satisfied that the financial statements deal appropriately with each of the areas of judgement and applicable IFRS 10 and IFRS 12 requirements. Based on this assessment, the Board has concluded that at the financial year end, the Company has no subsidiaries for financial reporting purposes, in accordance with IFRS 10. See further details in notes 2 and 9 of the financial statements.

Assessment of Risks and Uncertainties

The risks associated with the Company's financial instruments, as disclosed in the financial statements, particularly in note 11, represent a key accounting disclosure. The Committee critically reviews, on the basis of input from the outsourced service providers, the process of ongoing identification and measurement of these risk disclosures.

Other Matters

Prior to preparation of the 2018 Annual Report and the financial year end audit, the Committee considered the effect of any key new reporting requirements impacting the Company. During the financial year, the Committee received communications from the outsourced service providers and from KPMG on other accounting matters including tax, audit fees, anti-money laundering procedures, as well as a representation letter and Unaudited Interim Report.

TERMINATION OF THE COMPANY

On 28 August 2018, following a strategic review, the Board determined to offer Shareholders the opportunity to vote on an orderly wind up of the Company alongside the BGLF Rollover Opportunity for those who wished to retain an investment in the CLOs asset class. BGLF is an investment fund that invests in floating rate senior secured loans directly and indirectly through CLO securities. BGLF's portfolio advisor is an affiliate of the Investment Manager.

TERMINATION OF THE COMPANY (continued)

On 17 December 2018, two EGMs of the Company were convened at which: (a) shareholders holding US Dollar Shares approved changes to the investment objective and policy of the Company to facilitate and authorise the Board to instruct the Investment Manager to effect a Managed Wind-Down of the portfolio attributable to the US Dollar Shares; and (b) shareholders of the Company approved amendments to the constitution of the Company to provide for the termination of the Company before 2022.

On 21 December 2018, it was announced that 33.463% of US Dollar Shareholders and 0.002% of Repurchase Pool Shareholders elected to roll their investment in the Company into an investment in BGLF C Shares. Please refer to note 1 for further details on the Managed Wind-Down of the Company.

RISK MANAGEMENT AND INTERNAL CONTROLS

The Board as a whole is responsible for the Company's system of internal control; however, the Committee assists the Board in meeting its obligations in this regard. The daily operational activities of the Company were delegated to the outsourced service providers and, as a result, the Company has no direct internal audit function and instead places reliance on the external and internal audit controls applicable to the outsourced service providers as regulated entities. However, the Committee receives confirmations from the outsourced service providers that no material issues have arisen in respect of the system of internal controls and risk management operated within the Company's outsourced service providers. The Committee confirms that this is an ongoing process in order to manage the significant risks faced by the Company. We deem that, to date, there are no significant issues in this area which need to be brought to your attention.

EXTERNAL AUDIT

It is the responsibility of the Committee to monitor the performance, independence, objectivity and re-appointment of KPMG. In January 2019, the Committee met with KPMG who presented their Audit Strategy and Plan for the financial year; the Committee agreed the audit plan for the financial year, highlighting the key financial statement and audit risks, to seek to ensure that the audit was appropriately focused.

KPMG attends our Committee meetings throughout the financial year, as appropriate, which allows the opportunity to discuss any matters the auditor may wish to raise without the Investment Manager or other outsourced service providers being present. KPMG provides feedback at each Committee meeting on topics such as the key accounting matters, mandatory communications and the control environment.

KPMG was formally appointed as the Company's auditor for the 2010 financial year end audit following a competitive tender process during 2010. The lead audit partner is rotated every five financial years to ensure continued independence and objectivity.

The Committee continues to be satisfied with the performance of KPMG. We have therefore recommended to the Board that KPMG, in accordance with agreed terms of engagement and remuneration, should continue as the Company's auditor at the forthcoming AGM.

In advance of the commencement of the annual audit, the Committee reviewed a statement provided by KPMG confirming their independence within the meaning of the regulations and professional standards. In addition, in order to satisfy itself as to KPMG's independence, the Committee undertook a review of the auditor compensation and the balance between audit and non-audit fees.

It is also the responsibility of the Committee to approve the guidelines for using the external auditors for non-audit work, and to annually assess the work done to ensure that the independence of the external auditors is maintained and to ensure appropriate disclosures of these services are included in the annual report. The Committee is the first point of call for discussion with the auditor when required. Annually, the Committee reviews the schedule of audit and non-audit fees of the auditor with particular regard to the auditors' independence and objectivity. The Committee has agreed the types of permitted and non-permitted non-audit services and those which require explicit pre-approval. During the financial year, the value of non-audit services provided by KPMG amounted to US$135,767 plus VAT (2017: US$121,955 plus VAT). Whilst non-audit services as a proportion of audit services amount to approximately 43.30% (2017: 72.84%), the overall quantum of non-audit services is not considered to be material. See note 5 for further details.

On 17 June 2016, new EU rules, Statutory Instrument No.312 of 2016, on statutory audit became applicable. The new rules established a list of non-audit services that could not be provided by the statutory auditor and imposed limitations on the fees charged for non-audit services. In addition to the review for ensuring compliance with the new EU rules, the Audit Committee performed an assessment of any threats to independence and the safeguards in place to mitigate such threats before providing approval for the provision of any non-audit services. The audit committee is satisfied with the charge for non audit services during the financial year in proportion to audit fees.

COMMITTEE EFFECTIVENESS

The effectiveness of the Committee is reviewed on an annual basis by both the Board and the Committee itself. Following such reviews, I am pleased to advise that the Committee is considered to continue to operate effectively and efficiently. A member of the Committee will be available to Shareholders at the forthcoming AGM of the Company to answer any questions relating to the role of the Committee.

Yours sincerely

Adrian Waters

On behalf of the Audit Committee

23 April 2019

STATEMENT OF CUSTODIAN'S RESPONSIBILITIES AND CUSTODIAN'S REPORT TO THE SHAREHOLDERS

We have enquired into the conduct of Carador Income Fund plc (the "Company") for the year ended 31 December 2018, in our capacity as Custodian to the Company.

This report including the opinion has been prepared for and solely for the shareholders in the Company as a body, in accordance with the Central Bank's Non - UCITS Notice 7, and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown.

RESPONSIBILITIES OF THE CUSTODIAN

Our duties and responsibilities are outlined in the Central Bank's Non - UCITS Notice 7. One of those duties is to enquire into the conduct of the Company in each annual accounting period and report thereon to the shareholders.

Our report shall state whether, in our opinion, the Company has been managed in that period in accordance with the provisions of the Company's Memorandum and Articles of Association and the Non - UCITS Notices. It is the overall responsibility of the Company to comply with these provisions. If the Company has not so complied, we as Custodian must state why this is the case and outline the steps which we have taken to rectify the situation.

BASIS OF CUSTODIAN OPINION

The Custodian conducts such reviews as it, in its reasonable opinion, considers necessary in order to comply with its duties as outlined in Non - UCITS Notice 7 and to ensure that, in all material respects, the Company has been managed (i) in accordance with the limitations imposed on its investment and borrowing powers by the provisions of the Company's Memorandum and Articles of Association and the appropriate regulations and (ii) otherwise in accordance with the Company's constitutional documentation and the appropriate regulations.

OPINION

In our opinion, the Company has been managed during the year, in all material respects:

(i) in accordance with the limitations imposed on the investment and borrowing powers of the Company by the Memorandum and Articles of Association and by the Central Bank under the powers granted to it by Part 24 of the Companies Act, 2014; and

(ii) otherwise in accordance with the provisions of the Memorandum and Articles of Association, Part 24 of the Companies Act, 2014.

State Street Custodial Services (Ireland) Limited

78 Sir John Rogerson's Quay

Dublin 2

Ireland

23 April 2019

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF Carador Income Fund PLC

Report on the audit of the financial statements

Opinion

We have audited the financial statements of Carador Income Fund plc ('the Company') for the year ended 31 December 2018, which comprise the statement of financial position, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows and the related notes, including the accounting policies in note 2. The financial reporting framework that has been applied in their preparation is Irish Law and International Financial Reporting Standards (IFRS) as adopted by the European Union ("EU").

In our opinion, the financial statements:

- give a true and fair view of the assets, liabilities and financial position of the Company as at 31 December 2018 and of its loss for the year then ended;

- have been properly prepared in accordance with IFRS as adopted by the EU; and

- have been properly prepared in accordance with the requirements of the Companies Act 2014.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and applicable law. Our responsibilities under those standards are further described in the Auditor's Responsibilities section of our report. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the audit committee.

We were formally appointed as the Company's auditor by the shareholders for the 2010 financial year end audit following a competitive tender process during 2010. The period of total uninterrupted engagement is the 9 years ended 31 December 2018. We have fulfilled our ethical responsibilities under, and we remained independent of the Company in accordance with, ethical requirements applicable in Ireland, including the Ethical Standard issued by the Irish Auditing and Accounting Supervisory Authority (IAASA) as applied to public interest entities. No non-audit services prohibited by that standard were provided. 

Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In arriving at our audit opinion above, we determine that there was one key audit matter as follows (unchanged from 2017):

Valuation of financial assets at fair value through profit or loss of US$ 232m (2017: US$ 394m)

Refer to page 22 (Audit Committee Report), page 38 (accounting policy) and notes 4, 9 and 11 to the financial statements (financial disclosures).

Our application of materiality and an overview of the scope of our audit 

The materiality for the financial statements as a whole was set at US$2.61 million (2017: US$2.99 million). This has been determined using a benchmark of the Company's total assets (of which it represents 1% (2017: 1% of net assets) as at 31 December 2018 which we determined, in our professional judgment, to be one of the principal benchmarks within the financial statements relevant to the shareholders of the Company in assessing financial performance, and this is also a generally accepted auditing benchmark used for companies in this industry.

Approach for materiality calculation has changed from the prior year. In the current year the net assets attributable to the participating holders of Repurchase Pool and US Dollar Class Shares qualify as liabilities and are presented as such in the financial statements, which results in the net assets attributable to the participating equity holders of US Dollar Class shares being equal to $Nil.

We report to the Audit Committee all corrected and uncorrected misstatements we identified through our audit with a value in excess of US$0.13 million (2017: US$0.15 million), in addition to other audit misstatements below that threshold that we believe warranted reporting on qualitative grounds.

Our assessment of materiality has informed our identification of significant risks of material misstatement and the associated audit procedures performed in the area detailed above. Those procedures have been designed to provide reasonable assurance that the financial statements, taken as a whole, are free from material misstatements.

Our audit of the Company was undertaken to the materiality level specified above and, other than certain valuation work noted above, the audit procedures have been undertaken and performed by the audit team based in Dublin.

Emphasis of matter - non-going concern basis of preparation

We draw attention to the disclosure made in note 2 to the financial statements which explains that the financial statements are not prepared on the going concern basis for the reason set out in that note. Our opinion is not modified in respect of this matter.

Other information

The Directors are responsible for the preparation of the other information presented in the Annual Report together with the financial statements. The other information comprises the information included in the Directors' report, Chairman's Report, the Investment Manager's Review, the Audit Committee Report and the Statement of Depositary's Responsibilities and Depository's Report to the Shareholders.

The financial statements and our auditor's report thereon do not comprise part of the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.

Based solely on our work on the other information we report that:

- we have not identified material misstatements in the directors' report;

- in our opinion, the information given in the directors' report is consistent with the financial statements; and

- in our opinion, the directors' report has been prepared in accordance with the Companies Act 2014. 

Disclosures of principal risks and longer-term viability

Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw attention to in relation to:

- the Principal Risks disclosures on page 10 describing these risks and explaining how they are being managed and mitigated;

- the Directors' confirmation within the Viability statement on page 16 that they have carried out an assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity; and

- the Directors' explanation in the Going Concern Statement on page 16 of how they have assessed the prospects of the Company, over what period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Other corporate governance disclosures

We are required to address the following items and report to you in the following circumstances:

- Fair, balanced and understandable: if we have identified material inconsistencies between the knowledge we acquired during our financial statements audit and the directors' statement that they consider that the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy;

- Report of the Audit Committee: if the section of the Annual Report describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee; and

- Statement of compliance with UK Corporate Governance Code: if the directors' statement does not properly disclose a departure from provisions of the UK Corporate Governance Code specified by the Listing Rules for our review.

We have nothing to report in these respects.

In addition as required by the Companies Act 2014, we report, in relation to information given in the Corporate Governance Statement on pages 12 to 18, that:

- based on the work undertaken for our audit, in our opinion, the description of the main features of internal control and risk management systems in relation to the financial reporting process, and information relating to voting rights and other matters required by the European Communities (Takeover Bids (Directive 2004/EC) Regulations 2006 and specified for our consideration, is consistent with the financial statements and has been prepared in accordance with the Act;

- based on our knowledge and understanding of the Company and its environment obtained in the course of our audit, we have not identified any material misstatements in that information; and

- the Corporate Governance Statement contains the information required by the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017.

We also report that, based on work undertaken for our audit, other information required by the Act is contained in the Corporate Governance Statement.

Our opinions on other matters prescribed by the Companies Act 2014 are unmodified

We have obtained all the information and explanations which we consider necessary for the purpose of our audit.In our opinion, the accounting records of the Company were sufficient to permit the financial statements to be readily and properly audited and the financial statements are in agreement with the accounting records.

We have nothing to report on other matters on which we are required to report by exception

The Companies Act 2014 requires us to report to you if, in our opinion, the disclosures of directors' remuneration and transactions required by Sections 305 to 312 of the Act are not made.

The Listing Rules of the UK Listing Authority require us to review:

- the Directors' Statement, set out on page 16, in relation to going concern and longer-term viability;

- the part of the Corporate Governance Statement on pages 12 - 18 relating to the Company's compliance with the provisions of the UK Corporate Governance Code and the Irish Corporate Governance Annex specified for our review; and

- certain elements of disclosures in the report to shareholders by the Board of Directors' Remuneration Committee.

Respective responsibilities and restrictions on use

Directors' responsibilities

As explained more fully in their statement set out on page 13, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. The risk of not detecting a material misstatement resulting from fraud or other irregularities is higher than for one resulting from error, as they may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control and may involve any area of law and regulation and not just those directly affecting the financial statements.

A fuller description of our responsibilities is provided on IAASA's website at

https://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-a98202dc9c3a/Description_of_auditors_responsiblities_for_audit.pdf.

The purpose of our audit work and to whom we owe our responsibilities

Our report is made solely to the Company's members, as a body, in accordance with Section 391 of the Companies Act 2014. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for our report, or for the opinions we have formed.

Signature: Date: 23 April 2019

Vincent Reillyfor and on behalf ofKPMGChartered Accountants, Statutory Audit Firm1 Harbourmaster Place

International Financial Services Centre

Dublin 1

STATEMENT OF FINANCIAL POSITIONAs at 31 December 2018

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

The Company is in the process of a Managed Wind-Down, therefore the financial statements are prepared on a non-going concern basis. See note 1 for further details.

*Balances include investment in unconsolidated subsidiaries. See note 9 for further details.

**US Dollar Shares were classified as equity in the previous year but in the current year the terms have been changed such that the shares now qualify as liabilities and are presented as such. See note 2C for further details.

The financial statements were authorised and approved for issue by the Directors on 23 April 2019 and signed on their behalf by:

Werner Schwanberg Adrian Waters

STATEMENT OF COMPREHENSIVE INCOME

For the financial year ended 31 December 2018

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

The Company is in the process of a Managed Wind-Down, therefore the financial statements are prepared on a non-going concern basis. See note 1 for further details. All amounts in the above statement of comprehensive income arose from discontinued operations.

*US Dollar Shares were classified as equity in the previous year but in the current year the terms have been changed such that the shares now qualify as liabilities and are presented as such. See note 2C for further details. The amounts presented above show the operating results at the date of reclassification and the subsequent fair value movement has been recorded as a change in fair value of the reclassified US Dollar Shares. For the period from 17 December 2018 to 31 December 2018, fair value movement on US Dollar Shares amounted to US$Nil.

STATEMENT OF CHANGES IN EQUITYFor the financial year ended 31 December 2017

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

The Company is in the process of a Managed Wind-Down, therefore the financial statements are prepared on a non-going concern basis. See note 1 for further details.

* US Dollar Shares were classified as equity in the previous year but in the current year the terms have been changed such that the shares now qualify as liabilities and are presented as such. See note 2C for further details.

STATEMENT OF CASH FLOWS

For the financial year ended 31 December 2018

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

The Company is in the process of a Managed Wind-Down, therefore the financial statements are prepared on a non-going concern basis. See note 1 for further details.

*Balances include investment in unconsolidated subsidiaries. See note 9 for further details.

NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 31 December 2018

1 GENERAL

Carador Income Fund PLC (the "Company") is a closed-ended limited liability investment company domiciled and incorporated under the laws of the Republic of Ireland with variable capital pursuant to the Irish Companies Act 2014. The Company was incorporated on 20 February 2006 under registration number 415764. The Company is authorised by the Central Bank of Ireland (the "Central Bank"), pursuant to Part 24 of the Companies Act 2014. The US Dollar Shares are admitted to the Official List of the UK Listing Authority with a premium listing and are admitted to trading on the Main Market of the London Stock Exchange (the "LSE").

On 31 October 2017, the Company converted 144,451,569 US Dollar Shares on a one to one basis into US Dollar denominated Repurchase Pool shares of no par value ("Repurchase Pool Shares"). Repurchase Pool Shares are classified as a liability in accordance with the requirements of IAS 32. On 22 November 2017, the Repurchase Pool Shares were admitted to trading on the Specialist Fund Segment of the Main Market of the LSE. The assets attributable to the Repurchase Pool Shares will be realised over time and the proceeds (net of fees, expenses and other liabilities) will be paid out to the Repurchase Pool Shareholders by way of the compulsory repurchase, in tranches, of the Repurchase Pool Shares.

On 15 June 2018, the Board of Directors of the Company (the "Board") announced that, following the Repurchase Opportunity provided to Shareholders in October 2017, the Company engaged its financial advisers to commence a strategic review of the Company in order to consider future prospects and opportunities. On 28 August 2018, the Board announced that, following the strategic review, the Board determined to offer all Shareholders the opportunity to vote on an orderly wind up of the Company alongside a rollover opportunity for those who wished to retain an investment in the CLOs asset class (the "Rollover"). The Rollover Opportunity enables Shareholders who wish to retain an investment in the CLO asset class to elect to roll over their investment in the Company into an investment in Blackstone/GSO Loan Financing Limited ("BGLF"). BGLF is an investment fund that invests in floating rate senior secured loans directly and indirectly through CLO securities. BGLF's portfolio advisor is an affiliate of the Investment Manager.

On 23 November 2018, a circular detailing the proposal to amend the investment objective and policy of the Company, to amend the constitution of the Company and to propose a Managed Wind-Down with the Rollover opportunity was published (the "2018 Circular").

On 17 December 2018, two EGMs of the Company were convened at which: (a) shareholders holding US Dollar Shares approved changes to the investment objective and policy of the Company to facilitate and authorise the Board to instruct the Investment Manager to effect a Managed Wind-Down of the portfolio attributable to the US Dollar Shares; and (b) shareholders of the Company approved amendments to the constitution of the Company to provide for the termination of the Company before 2022.

On 21 December 2018, it was announced that 33.463% of US Dollar Shareholders and 0.002% of Repurchase Pool Shareholders elected to roll their investment in the Company into an investment in BGLF C Shares. Subsequent to the year end, 133,450,591 US Dollar Shares and 488 Repurchase Pool Shares were converted into 133,451,107 Rollover Shares. Following this, BGLF allotted and admitted to trading on the Specialist Fund Segment of the Main Market of the LSE one new C share for each Rollover Share in consideration of the transfer of Rollover assets from the Company to BGLF. The listing of the BGLF C Shares was effective as and from 7 January 2019.

The Rollover Class Shares were created by allocating to such class a pro rata amount of the assets and liabilities of the Company attributable to the Shares converted using the latest published NAV available as at the Rollover Class Conversion Date. The Company repurchased all of the Rollover Class Shares in-kind and transferred the assets attributable to the Rollover Class Shares to BGLF in exchange for shares in BGLF issued to Rollover Class Shareholders as at the BGLF Rollover Date.

Further to the Shareholder resolution of the Company that was passed by Shareholders of US Dollar Shares on 17 December 2018, the investment objective of the Company is to realise all remaining assets of the Company with a view to returning capital to the Shareholders in an orderly manner. The assets that are subject to the Managed Wind-Down will not include the assets of the Company that are transferred as part of the BGLF Rollover Opportunity. Prior to 17 December 2018, the investment objective of the Company was to produce attractive and stable returns with low volatility compared to equity markets by investing in a diversified portfolio of senior notes of CLOs collateralised by senior secured bank loans and equity and mezzanine tranches of CLOs.

As at 31 December 2018, there were 398,801,780 US Dollar Shares and 24,637,358 Repurchase Pool Shares in issue. US Dollar Shares and Repurchase Pool Shares include shares that will be converted to Rollover Shares after the year end.

2 SIGNIFICANT ACCOUNTING POLICIES

2A STATEMENT OF COMPLIANCE

The Company's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") as adopted by the European Union and also in accordance with Irish Company Law.

2B ADOPTION OF NEW ACCOUNTING STANDARDS AND AMENDMENTS, INCLUDING ACCOUNTING POLICY CHANGES

New standards adopted during the financial year ended 31 December 2018 that impacted the Company's financial statements are detailed below.

IFRS 9 Financial Instruments ("IFRS 9")

The Company adopted IFRS 9 with effect from 1 January 2018. The standard was issued in July 2014 and became effective for periods beginning on or after 1 January 2018. It specifies how an entity should classify and measure financial assets and financial liabilities, including some hybrid contracts. IFRS 9 largely retains the existing requirements in IAS 39 Financial Instruments: Recognition and Measurement ("IAS 39") for the classification and measurement of financial liabilities. However, it eliminates the previous IAS 39 categories for financial assets of held to maturity, loans and receivables and available for sale.

The standard does not have a significant impact on the Company's financial position or performance, as it continues to classify its financial instruments at fair value through profit or loss. The impact of IFRS 9 on the classification and measurement of financial assets and liabilities is set out in note 2D.

IFRS 15 Revenue from Contracts with Customers ("IFRS 15")

IFRS 15 was issued in May 2014 and became effective for periods beginning on or after 1 January 2018. It establishes the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. The standard did not have any material impact on the Company's financial position, performance nor did it have any material impact on the disclosures in the financial statements, as the Company does not have customers, to which it delivers goods or services.

2C BASIS OF PREPARATION

The Company is in the process of a Managed Wind-Down, therefore it is no longer appropriate to prepare the financial statements on a going concern basis. The financial statements are prepared on a non-going concern basis. Although the financial statements are prepared on a different basis to the prior year financial statements, there is no substantial change as the main assets and liabilities are financial assets and liabilities and are shown at fair value.

The Company's financial statements have been prepared on a historical cost basis, except for financial instruments measured at fair value through profit or loss.

The functional currency of the Company is US Dollar (US$), as the Board have determined that this reflects the Company's primary economic environment. The presentation currency of the financial statements is also US Dollar.

The financial statements comprise the Company's statement of financial position, statement of comprehensive income, statement of changes in net assets and statement of cash flows together with the related notes. These notes also incorporate financial instrument disclosures which are required by IFRS 7 that are contained in the Annual Report in the section entitled "Investment Manager's review".

The Company qualifies as an investment entity in accordance with IFRS 10 Consolidated Financial Statements ("IFRS 10") Investment Entity Amendment, and, therefore, the Company does not consolidate subsidiaries but accounts for them at fair value through profit or loss.

The Company's liabilities are expenses payable to service providers. For the financial year ended 31 December 2018 and 2017, net assets attributable to holders of Repurchase Pool Shares were classified as liabilities. The NAV of the US Dollar Shares was classified as equity as at 31 December 2017. On 17 December 2018, due to the change in the investment objective of the Company and the decision taken to either transfer to BGLF or realise all remaining assets with a view to returning capital to the remaining Shareholders, the classification of US Dollar Shares changed from equity to liability, in line with IAS 32. The measurement of the shares did not change.

The liabilities are linked to the NAV of each share class and thus fluctuate as the NAV of each share class decreases. This results in the Company being able to comfortably cover the liabilities as they fall due.

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

2D CHANGE IN ACCOUNTING POLICIES

The Company adopted IFRS 9 with effect from 1 January 2018. A number of other new standards are also effective from 1 January 2018, but they do not have a material effect on the Company's financial statements.

As permitted by the transition provisions of IFRS 9, comparative information throughout the financial statements has not generally been restated to reflect the requirements of the standard.

Except for the changes noted below, the Company has consistently applied the other accounting policies to all periods presented in the financial statements.

IFRS 9

IFRS 9 replaces IAS 39 and introduces new requirements for classification and measurement, impairment and hedge accounting. IFRS 9 is not applicable to items that have already been derecognised at 1 January 2018, the date of initial application.

The Company has adopted consequential amendments to IFRS 7 Financial Instruments: Disclosures ("IFRS 7") and IAS 1 Presentation of Financial Statements ("IAS 1"), which are applied to disclosures about 2018 but have not generally been applied to comparative information.

The adoption of IFRS 9 had no material impact on the NAV of the Company.

(i) Classification and measurement of financial assets and financial liabilities

IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income and fair value through profit or loss. The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. IFRS 9 eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.

IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities.

The adoption of IFRS 9 has not had a significant effect on the Company's accounting policies related to financial liabilities and derivative financial instruments.

(ii) Impairment

IFRS 9 replaces the 'incurred loss' model in IAS 39 with an expected credit loss ("ECL") model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at fair value through other comprehensive income, but not to financial assets held at fair value through profit or loss. Under IFRS 9, credit losses are recognised earlier than under IAS 39. The adoption of IFRS 9 did not result in recognition of any impairment.

(iii) Transition

Changes in accounting policies resulting from the adoption of IFRS 9 have not been applied retrospectively.

Comparative periods have not been restated. Differences in the carrying amounts of financial assets resulting from the adoption of IFRS 9 are recognised in net assets attributable to participating Shareholders as at 1 January 2018. Accordingly, the information presented for the 31 December 2017 financial statements does not reflect the requirements of IFRS 9, but rather those of IAS 39.

There has been no restatement of numbers presented in comparative periods. Income Note CLOs are measured at their "dirty" prices, as the Board deems this to better reflect the trading conventions of the asset class. Income derived from the Income Note CLOs is presented in the profit and loss statement within net gains and losses (inclusive of accrued interest) on financial assets at fair value through profit or loss. This has not changed in the current period.

The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application.

· The determination of the business model within which a financial asset is held.

· The revocation of previous designations of certain financial assets as measured at fair value through profit or loss.

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

2D CHANGE IN ACCOUNTING POLICIES (continued)

IFRS 9 (continued)

Impact of the adoption of IFRS 9

The following table shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for the Company's financial assets and financial liabilities as at 1 January 2018.

*Under IAS 39, these financial assets were designated as at fair value through profit or loss because they were managed on a fair value basis and their performance was monitored on this basis. These assets have been classified as mandatorily measured at fair value through profit or loss under IFRS 9. See note 2E(i) for further detail.

IFRS 9 has not resulted in changes in the carrying amount of the Company's financial instruments due to changes in measurement categories. All financial assets that were classified as fair value through profit or loss under IAS 39 are still classified as fair value through profit or loss under IFRS 9.

In addition, the application of the ECL model under IFRS 9 has had no material difference on the carrying amounts of the Company's amortised cost financial assets. The Company has applied the general approach to the ECL model applicable to its financial assets measured at amortised cost. Following assessment, the Company has not recorded an expected credit loss allowance against the Company's other receivables due to the short-term nature of the assets.

The carrying amounts of amortised cost instruments continue to approximate these instruments' fair value on the date of transition after transitioning to IFRS 9.

The net assets attributable to participating holders of US Dollar Shares and net assets attributable to participating holders of Repurchase Pool Shares are classified as financial liabilities at fair value through profit or loss. IFRS 9 contains an option to designate irrevocably on initial recognition a financial liability as measured at fair value through profit or loss, when doing so results in more relevant information because the designation eliminates or significantly reduces an accounting mismatch. The predominant risk for this liability is asset risk, rather than its own credit risk. Due to the short timeframe between the payments made to the Repurchase Pool Shareholders and US Dollar Shareholders after the relevant assets have been sold, the Directors have assessed that the credit risk on this liability is minimal. As such, the movement in the fair value of the Repurchase Pool Shares and US Dollar Shares are all reflected within the statement of comprehensive income. There are therefore no gains and losses being accounted for through other comprehensive income.

2E FINANCIAL INSTRUMENTS

Accounting Policy under IFRS 9 effective from 1 January 2018

(i) Recognition and initial measurement

The Company initially recognises financial assets and financial liabilities at fair value through profit or loss on the trade date, which is the date on which the Company becomes a party to the contractual provisions of the instrument. Other financial assets and financial liabilities are recognised on the date on which they are originated.

A financial asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

2E FINANCIAL INSTRUMENTS (continued)

Accounting Policy under IFRS 9 effective from 1 January 2018 (continued)

(i) Recognition and initial measurement (continued)

A financial asset is measured at amortised cost if it meets both of the following conditions and is not at fair value through profit or loss:

- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest ("SPPI").

All other financial assets of the Company are measured at fair value through profit or loss.

Business model assessment

In making an assessment of the objective of the business model in which a financial asset is held, the Company considers all of the relevant information about how the business is managed, including:

- the documented investment strategy and the execution of this strategy in practice. This includes whether the investment strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;

- how the performance of the portfolio is evaluated and reported to the Company's management;

- the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

- how the Investment Manager is compensated: e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

- the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Company's continuing recognition of the assets.

The Company has determined that it has two business models.

- Held-to-collect business model: this includes cash and cash equivalents and receivables. These financial assets are held to collect contractual cash flow.

- Other business model: this includes debt securities and equity investments. These financial assets are managed and their performance is evaluated, on a fair value basis, with frequent sales taking place.

On 17 December 2018, two EGMs of the Company were convened at which: (a) shareholders holding US Dollar Shares approved changes to the investment objective and policy of the Company to facilitate and authorise the Board to instruct the Investment Manager to effect a Managed Wind-Down of the portfolio attributable to the US Dollar Shares; and (b) shareholders of the Company approved amendments to the constitution of the Company to provide for the termination of the Company before 2022. Further to these resolutions, the Company's business model is held-to-collect business model discussed above.

Assessment whether contractual cash flows are SPPI

For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition. 'Interest' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are SPPI, the Company considers the contractual terms of the instrument.

Reclassifications

Financial assets are not reclassified subsequent to their initial recognition unless the Company were to change its business model for managing financial assets, in which case all affected financial assets would be reclassified on the first day of the first reporting period following the change in the business model.

(ii) Subsequent Measurement

Financial assets at fair value through profit or loss

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income and expense and foreign exchange gains and losses, are recognised in profit or loss in net gain/(loss) on financial assets at fair value through profit or loss in the statement of comprehensive income.

Mezzanine and Income CLO tranches are included in this category.

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

2E FINANCIAL INSTRUMENTS (continued)

Accounting Policy under IFRS 9 effective from 1 January 2018 (continued)

(ii) Subsequent Measurement (continued)

Financial assets at amortised cost

These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses, if any. Interest income, foreign exchange gains and losses, impairment and any gain or loss on derecognition is recognised in the statement of comprehensive income.

Cash and cash equivalents and receivables are included in this category.

Financial liabilities

Financial liabilities are classified as measured at amortised cost or at fair value through profit or loss.

A financial liability is classified as at fair value through profit or loss if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at fair value through profit or loss are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

Financial liabilities at amortised cost include expenses payable. Financial liabilities at fair value through profit or loss include net assets attributable to participating holders of US Dollar Shares and net assets attributable to participating holders of Repurchase Pool Shares.

Fair value measurement

See note 4 for details of how the Company measures fair value.

Amortised cost measurement

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured on initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.

(iii) Impairment

IFRS 9 replaces the 'incurred loss' model in IAS 39 with an ECL model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at fair value through other comprehensive income, but not to financial assets held at fair value through profit or loss. Under IFRS 9, credit losses are recognised earlier than under IAS 39.

The Company considers a financial asset to have low credit risk when the credit rating of the counterparty is equivalent to the globally understood definition of 'investment grade'. The Company considers this to be BBB- or higher per Standards and Poor's Rating Agency.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

Credit-impaired financial assets

At each reporting date, the Company assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amounts of the assets in the statement of financial position. There were no loss allowances accounted for as at 31 December 2018.

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

2E FINANCIAL INSTRUMENTS (continued)

Accounting Policy under IFRS 9 effective from 1 January 2018 (continued)

(iii) Impairment (continued)

The gross carrying amount is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof.

(iv) Derecognition

The Company 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 of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset that is derecognised) and the consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss. Any interest in such transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.

The Company enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. If all or substantially all of the risks and rewards are retained, then the transferred assets are not derecognised. Transfers of assets with retention of all or substantially all of the risks and rewards include sale and repurchase transactions.

The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.

(v) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the assets and settle the liability simultaneously. For the financial year ended 31 December 2018, there were no financial assets or liabilities subject to enforceable, master netting arrangements or similar agreements which would require disclosure.

Income and expenses are presented on a net basis for gains and losses from financial instruments at fair value through profit or loss and foreign exchange gains and losses.

Accounting Policy under IAS 39 as at 31 December 2017

(i) Classification

As at 31 December 2017, the Company classified its financial assets and financial liabilities into categories in accordance with IAS 39 Financial Instruments: Recognition and Measurement.

The category of financial assets and financial liabilities at fair value through profit or loss comprised:

Financial assets at fair value through profit or loss other than held for trading

Financial assets classified in this category were designated by management on initial recognition as part of a group of financial assets which were managed and their performance evaluated on a fair value basis, in accordance with a documented investment strategy. The term "financial assets designated at fair value through profit or loss" included investments in CLOs. IFRS 10 includes an Investment Entity Amendment which also requires subsidiaries to be accounted for at fair value through profit or loss in accordance with IAS 39.

Financial liabilities at fair value through profit or loss other than held for trading

Financial liabilities classified in this category were designated by management on initial recognition as part of a group of financial liabilities which were managed and their performance evaluated on a fair value basis, in accordance with a documented investment strategy. This category included net assets attributable to holders of Repurchase Pool Shares which were classified as liabilities in accordance with IAS 32. The movement in the fair value of the amounts attributable to the Repurchase Pool Shares were reflected within the statement of comprehensive income as 'Fair value movement on Repurchase Pool Shares' within the Finance Costs section.

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

2E FINANCIAL INSTRUMENTS (continued)

Accounting Policy under IAS 39 as at 31 December 2017 (continued)

(i) Classification (continued)

Financial assets at amortised cost

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, and they are carried at amortised cost. The Company included in this category cash and cash equivalents and other receivables. The amortised cost of a financial asset is the amount at which the instrument is measured at initial recognition (its fair value) adjusted for initial direct costs, minus principal repayments, plus or minus the cumulative amortisation, using an effective interest rate method, of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.

(ii) Recognition and initial measurement

Financial assets and financial liabilities were measured initially at fair value, being the transaction price, including transaction costs for items that were subsequently measured at amortised cost, on the trade date, which is the date on which the Company became a party to the contractual provisions of the instrument. Transaction costs on financial assets at fair value through profit or loss were expensed immediately.

(iii) Subsequent measurement

After initial measurement, the Company measured financial instruments classified at fair value through profit or loss at their fair values. Changes in fair value were recorded within "Net (loss)/gain on financial assets at fair value through profit or loss" in the statement of comprehensive income. See note 4 for details of how the Company measures fair value.

All other financial instruments not at fair value were measured on an amortised cost basis.

(iv) Impairment

Financial assets that were stated at amortised cost were reviewed at each reporting date to determine whether there was objective evidence of impairment. If any such indication existed, an impairment loss would have been recognised in the statement of comprehensive income as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the financial assets original effective interest rate. If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost decreased and the decrease could have been linked objectively to an event occurring after the write-down, the write-down would have been reversed through the statement of comprehensive income.

(v) Derecognition

The Company derecognised a financial asset when the contractual rights to the cash flows from the financial asset expired or it transferred the financial asset and the transfer qualified for derecognition in accordance with IAS 39. The Company derecognised a financial liability when the obligation specified in the contract was discharged, cancelled or expired.

(vi) Offsetting financial instruments

Financial assets and liabilities were offset and the net amount reported in the statement of financial position where there was a legally enforceable right to offset the recognised amounts and there was an intention to settle on a net basis, or realise the assets and settle the liability simultaneously. For the financial year ended 31 December 2017, there were no financial assets or liabilities subject to enforceable, master netting arrangements or similar agreements which would have required disclosure.

2F INTEREST INCOME AND INTEREST EXPENSE ON CASH AND CASH EQUIVALENTS

Interest income on cash and cash equivalents is recognised separately through profit or loss in the statement of comprehensive income, on an effective interest rate basis.

2G PARTICIPATING SHARES

The participating share capital of the Company comprises US Dollar Shares and Repurchase Pool Shares. The US Dollar Shares were classified as equity as at 31 December 2017. Further to the resolution on 17 December 2018, resolving to transfer to BGLF or realise all remaining assets of the Company with a view to returning capital to the Shareholders in an orderly manner, the US Dollar Shares are now classified as a financial liability, which are stated at fair value which approximates carrying value at the reporting date. The assets that are subject to the Managed Wind-Down will not include the assets of the Company that are transferred as part of the BGLF Rollover Opportunity. The Repurchase Pool Shares are classified as a financial liability based on the substance of the contractual arrangement in accordance with IAS 32, and are stated at fair value which approximates carrying value on the reporting date.

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

2H FEES AND CHARGES

Expenses are charged through profit or loss in the statement of comprehensive income on an accruals basis.

2I CASH AND CASH EQUIVALENTS

Cash comprises current deposits with banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investments or other purposes.

2J NET (LOSS)/GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Net (loss)/gain on financial assets at fair value through profit or loss consists of coupons received and realised and unrealised gains and losses on financial assets at fair value through profit or loss, calculated as described in note 2E. For the purposes of the statement of cash flows, the coupon income is considered an operating activity.

2K FOREIGN CURRENCY

Transactions in foreign currencies are translated to the functional currency at the foreign currency exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to US Dollar at the foreign currency closing exchange rate ruling at the reporting date. Foreign currency exchange differences relating to investments at fair value through profit or loss are included in "Net (loss)/gain on financial assets at fair value through profit or loss" in the statement of comprehensive income. All other foreign currency exchange differences relating to monetary items, including cash, are presented in "Net (loss)/gain on foreign exchange" in the statement of comprehensive income.

2L TAXATION

Income tax expense is recognised through profit or loss in the statement of comprehensive income except to the extent that it relates to 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 financial year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous periods.

Under current law and Irish practice, the Company qualifies as an investment undertaking under Section 739B of the Taxes Consolidation Act 1997 and is not therefore chargeable to Irish tax on its relevant income or relevant gains. See note 14 for further details.

2M DISTRIBUTIONS

Distributions to the holders of US Dollar Shares were recorded through the statement of changes in net assets when they were declared to Shareholders. Holders of the Repurchase Pool Shares are not entitled to any dividend distributions. As disclosed in the 2018 Circular, the Board do not intend to declare any dividends during the wind-down period, therefore no further dividends will be paid in respect of any shares after the payment of the dividend in respect of the quarter ended 31 December 2018.

2N OPERATING SEGMENTS

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Company's Chief Operating Decision Makers and for which discrete financial information is available. The Chief Operating Decision Makers for the Company are the Investment Manager and the Board. In considering the segments of the Company, the Company has considered the information reviewed by the Company's Chief Operating Decision Makers and determined that there are two operating segments, the US Dollar Shares and the Repurchase Pool Shares, in existence as at 31 December 2018 and 2017. Further details of this assessment are set out under Segmental Reporting in note 3.

2O SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the financial statements requires management 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

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

In accordance with IFRS 13 Fair Value Measurement ("IFRS 13"), the Company applies the definition of fair value, being the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Company has access at that date. The fair value of a liability reflects its non-performance risk.

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

2O SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)

Estimates (continued)

When the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active market quotations, they are determined using valuation techniques including the use of broker prices. See note 4 for further details of the fair value hierarchy levels as at 31 December 2018 and 2017. See note 3 for details of the NAV attributable to the Repurchase Pool Shares and US Dollar Shares.

Judgements

Application of IFRS 10, its related IE Amendment and IFRS 12 Disclosure of Interests in Other Entities ("IFRS 12")

The Board is satisfied that the Company meets the definition of an investment entity, and have concluded that as at 31 December 2018, none of its investments meet the definition of subsidiary structured entities in accordance with IFRS 10. All CLOs in which the Company invests meet the definition of non-controlled structured entities in accordance with IFRS 12. As at 31 December 2017, the Company's investments in Keuka Park CLO Ltd 2013-1A, Pinnacle Park CLO Ltd 2014-1A and Sheridan Square CLO Ltd met the definition of subsidiary structured entities in accordance with IFRS 10 and all remaining CLOs in which the Company invested met the definition of non-controlled structured entities in accordance with IFRS 12. These conclusions are further detailed in note 9.

2P NEW STANDARDS AND INTERPRETATIONS APPLICABLE TO FUTURE REPORTING PERIODS

New standards, amendments and interpretations issued but not effective in 2018 and not early adopted

The Company has considered all the upcoming International Accounting Standards Board's ("IASB's") standards including those not yet endorsed by the EU. Standards will be adopted from their EU effective dates. The adoption of these new standards, interpretations and amendments is not expected to have a material impact on the Company's financial statements in the period of initial application.

The following new standards, amendments to standards and interpretations have been issued to date and are not yet effective for the year ended 31 December 2018, and have not been applied nor early adopted, where applicable, in preparing these financial statements:

*Annual periods beginning on or after

3 SEGMENTAL REPORTING

As required by IFRS 8 Operating Segments ("IFRS 8"), the information provided to the Board and the Investment Manager, who are the Chief Operating Decision Makers, can be classified into two segments as at 31 December 2018 and 2017, the US Dollar Shares and the Repurchase Pool Shares. Repurchase Pool Shares are shares in the Company which participate in a separate pool of assets and liabilities within the Company created for the purposes of the repurchase opportunity announced in 2017.

The Board has assessed that the Rollover Shareholders do not constitute a separate operating segment under IFRS 8, as they are not separately assessed for the purposes of reviewing performance or allocating resources. The Investment Manager and the Board assessed the US Dollar Shares as a whole, including both the Rollover Shareholders and those Shareholders who did not avail of the Rollover Opportunity. Discrete financial information is not available for the Rollover Shareholders as separate books and records are not maintained for the Rollover Shareholders. Books and records continue to be maintained for the US Dollar Shares as a whole, which includes the relevant information pertaining to the Rollover Shareholders. Accordingly, there is no requirement to change the existing operating segments within the Company for the purposes of the financial statements for the year ended 31 December 2018.

3 SEGMENTAL REPORTING (continued)

The following tables detail the revenue, loss and net assets split between the operating segments for the year ended 31 December 2018 and as at 31 December 2018.

As discussed in note 1, on 21 December 2018, it was announced that 33.463% of US Dollar Shareholders and 0.002% of Repurchase Pool Shareholders elected to roll their investment in the Company into an investment in BGLF C Shares. Assets to which rollover elections relate are to be transferred in accordance with the provisions of the BGLF Rollover Opportunity,

The following tables detail the revenue, profit and net assets split between the operating segments for the 2 months ended 31 December 2017 for the Repurchase Pool Shares and for the twelve months ended 31 December 2017 for the US Dollar Shares, and as at 31 December 2017.

3 SEGMENTAL REPORTING (continued)

Major Customers

The Company regards the holders of both classes of shares as customers, because it relies on their funding for continuing operations and meeting its objectives. The Company's shareholding structure is not exposed to a significant shareholder concentration. A breakdown of shares held by employees of the Investment Manager is detailed in note 10. The Company's largest shareholder as at the date of approval of the financial statements is outlined in the Directors' Report.

4 FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Net (loss)/gain on financial assets at fair value through profit or loss is comprised of the following:

As described in the accounting policies note, the Company has financial assets measured at fair value through profit or loss. The financial instruments recognised at fair value are analysed between those whose fair value is based on:

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

· Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted market prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.

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

4 FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)

The following tables analyse financial instruments measured at fair value as at 31 December 2018 and 2017 by the level in the fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the statement of financial position. All fair value measurements below are recurring.

The Company determines the fair value for the CLOs using independent, unadjusted indicative broker quotes. A broker quote is not generally a binding offer. The categorisation of the CLOs is dependent on whether or not the broker quotes reflect actual current market transactions, or if they are indicative prices based on the broker's valuation models, depending on the significance and observability of the inputs to the model.

The Investment Manager can challenge the marks that come from the independent brokers if they appear off-market or unrepresentative but has no discretion to disregard a mark if a broker dealer does not adjust it after a challenge.

For CLOs that have been categorised as Level 2, fair value has been determined using independent broker quotes based on observable inputs. If valuation cannot be verified as being based significantly on observable inputs, then the investments would fall into Level 3.

The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

For each class of assets and liabilities not measured at fair value in the statement of financial position but for which fair value is disclosed, the Company is required to disclose the level within the fair value hierarchy at which the fair value measurement would be categorised and a description of the valuation technique and inputs used in the technique.

For the financial year ended 31 December 2018 and 2017, cash and cash equivalents, receivable for investments sold, other receivables and expenses payable, whose carrying amounts approximate fair value, are classified as Level 2 within the fair value hierarchy.

For the financial year ended 31 December 2018, net assets attributable to participating holders of US Dollar Shares and net assets attributable to participating holders of Repurchase Pool Shares are classified as Level 3 within the fair value hierarchy, as the value of the shares is based on NAV per share which does not have observable inputs readily available to market. For the financial year ended 31 December 2018, the presentation of net assets attributable to participating holders of US Dollar Shares changed from equity to liability, in line with IAS 32, as detailed in note 2C. For the financial year ended 31 December 2017, net assets attributable to participating holders of Repurchase Pool Shares were classified as liabilities and disclosed as Level 3 within the fair value hierarchy.

Transfers between Level 1, 2 and 3

There were no transfers between Level 1 and Level 2 during the financial year ended 31 December 2018 and 2017. Where transfers between levels arise, they are deemed to occur at the end of the reporting period.

As at 31 December 2018, all CLOs were classified as Level 3. As at 31 December 2017, CLOs with a fair value of US$91,088,972 were classified as Level 3.

4 FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)

Transfers between Level 1, 2 and 3 (continued)

As at 31 December 2018, certain CLOs with a fair value of US$195,282,158 were transferred from Level 2 to Level 3. This followed a Board reassessment as to what constitutes an 'observable' input in the fair market valuation to determine the level within the hierarchy in which a broker quote is categorised. This is highly subjective. Given the low volume of trading in December, it was concluded that there was little market colour available at or around the measurement date and this resulted in the re-classification of the CLO equity as a Level 3 investment due to the illiquidity of the product, lack of trading activity and the unobservable inputs used in the valuations.

As at 31 December 2017, certain CLOs with a fair value of US$74,355,559 were transferred from Level 2 to Level 3. As at 31 December 2017, the classification of the Level 3 assets reflected the dispersion in the indicative broker quotes for some Income Note positions during the financial year. The change in the classification level was a result of decreased liquidity for some Income Note positions in the market and wider spreads reflected by a higher spectrum of indicative broker quotes, which were factors that indicated that the broker quotes were not based on observable prices.

Level 3 financial instruments

The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of the fair value hierarchy as at 31 December 2018:

Change in unrealised gains or losses for the financial year included in profit or loss for the CLOs within Level 3 of the fair value hierarchy amounted to US$18,257,992 (US Dollar Shares (US$17,156,842) and Repurchase Pool Shares (US$1,101,150)) (2017: Company US$1,353,435). These gains and losses are included in net (loss)/gain on financial assets at fair value through profit or loss in the statement of comprehensive income.

The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of the fair value hierarchy as at 31 December 2017:

4 FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)

Level 3 financial instruments (continued)

The following table sets out information about significant unobservable inputs used as at 31 December 2018 in measuring financial instruments categorised as Level 3 in the fair value hierarchy:

\* The ranges provided in the table above refer to the highest and lowest broker quotes received across the range of CLOs held. The ranges reflect the different stages of the lifecycle of each of the CLOs on an individual basis. The low ranges in the table above are prices from CLOs which have been called and are in wind-down.

The following table sets out information about significant unobservable inputs used as at 31 December 2017 in measuring financial instruments categorised as Level 3 in the fair value hierarchy:

The above analysis also gives an approximation of the sensitivity of the different asset classes to market risk as at 31 December 2018 and 2017 that seems reasonable considering the current market environment and the nature of the Company's assets' main underlying risks. This sensitivity analysis presents an approximation of the potential effects of events that could have been reasonably expected to occur as at the reporting date.

4 FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)

Level 3 financial instruments (continued)

The following table shows a reconciliation of the net assets attributable to participating holders of Repurchase Pool Shares from the opening balance to the closing balance as at 31 December 2018 and 2017:

The following table shows a reconciliation of the net assets attributable to participating holders of US Dollar Shares from the opening balance to the closing balance as at 31 December 2018:

The following table sets out information about significant unobservable inputs used as at 31 December 2018 in measuring the liabilities categorised as Level 3 in the fair value hierarchy:

The following table sets out information about significant unobservable inputs used as at 31 December 2017 in measuring the liability categorised as Level 3 in the fair value hierarchy:

5 OPERATING EXPENSES

INVESTMENT MANAGER

The Investment Manager is entitled to receive a base management fee from the Company of 1.5% per annum of the NAV of the Company, calculated and payable monthly in arrears.

The management fee is calculated on the net assets less the market value of investments managed by the Investment Manager, if such investments are or have been made in the primary market (i.e. the market in which investors have the first opportunity to buy a newly issued security). Note 10 details the deals managed by the Investment Manager or its affiliates and whether they were sourced in the primary or secondary market.

The investment management fees for the year ended 31 December 2018 for the US Dollar Shares amounted to US$3,283,221 (2017: US$4,727,324) and US$517,148 for the Repurchase Pool Shares (2017: US$209,032).

US Dollar Shares

The Investment Manager is entitled to a performance fee in respect of the US Dollar Shares equivalent to 13% of the amount by which the value of the NAV per US Dollar Share as at the financial year end or relevant repurchase date, as applicable, plus dividends per US Dollar Share (if any) paid in the period exceeds the value of the NAV per US Dollar Share, as increased by the performance fee hurdle rate (as defined below) plus 2%, as at the end of the previous completed accounting reference period in respect of which a performance fee was paid (including for the avoidance of doubt, all previous periods since the US Dollar Share performance period was last paid in respect of the US Dollar Shares).

The performance fee hurdle rate is the greater of the 12 month US Dollar LIBOR or 4%.

If a US Dollar Share performance fee was not paid in respect of the previous accounting reference period, US Dollar Libor shall be the annualised annually compounded US Dollar London Inter-Bank Offered Rate for 12-month deposits in respect of all previous relevant accounting periods since such US Dollar Share performance fee was last paid.

Repurchase Pool Shares

The Investment Manager is entitled to a performance fee in respect of the Repurchase Pool Shares equivalent to 13% of the amount by which the NAV per Repurchase Pool Share as at the end of the relevant accounting period or the relevant repurchase date, as applicable, plus dividends per Share (if any) paid in the period exceeds the value of the NAV per Repurchase Pool Share (or per US Dollar Share, as applicable), as increased by the Repurchase Pool Hurdle Rate (as defined below) plus 2%, as at the end of the most recent previous completed accounting period in respect of which a performance fee was paid (including, for the avoidance of doubt, all previous periods since the US Dollar Share performance fee was last paid in respect of the US Dollar Shares which have converted into Repurchase Pool Shares).

A separate account will be established to track the performance fee payable to the Investment Manager in respect of the Repurchase Pool Shares.

1. As at each Repurchase Date, this account will be credited or debited to reflect the amount of over-or-under-performance of the Repurchase Pool Shares repurchased as at that date, multiplied by the performance fee rate referred to above.

2. At the end of the relevant accounting period, an amount reflecting the over-or-underperformance of the Repurchase Pool Shares in issue as at that date, multiplied by the performance fee rate referred to above, will be credited to or debited from this account.

3. If the aggregate amount resulting from 1 and 2 above is a credit balance, this amount will be payable to the Investment Manager.

4. If the aggregate amount resulting from 1 and 2 above is a debit balance, no performance fee will be payable to the Investment Manager and the balance of this account shall be reset to zero for the next accounting period.

Where all remaining Repurchase Pool Shares are repurchased on a date prior to the end of an accounting period, such Repurchase Date shall be deemed to be the end of the accounting period for purposes of the above calculations.

The performance fee is accrued on a monthly basis and is paid annually within 14 days of receipt of the calculation by the Company from State Street Fund Services (Ireland) Limited (the "Administrator").

The calculation of the performance fee is verified by State Street Custodial Services (Ireland) Limited (the "Custodian"). The performance fees charged for the year ended 31 December 2018 amounted to US$Nil for the US Dollar Shares (2017: US$660,768) and US$Nil for the Repurchase Pool Shares (2017: (US$119,020)).

The Company also reimburses the Investment Manager for all out-of-pocket expenses reasonably incurred in the performance of its duties.

5 OPERATING EXPENSES (continued)

ADMINISTRATOR AND CUSTODIAN

The Administrator and Custodian shall be entitled to receive aggregate fees of up to 0.10% per annum of the NAV of the Company for the provision, respectively, of administration, accounting, trustee and custodial services to the Company, subject to a minimum monthly fee of US$10,000. The overall charge for the above-mentioned fees for the Company for the financial year ended 31 December 2018 and 2017 are reflected in the statement of comprehensive income and the amounts due as at 31 December 2018 and 2017 are disclosed below for information purposes.

DIRECTORS' FEES

The Company's Directors are entitled to a fee in remuneration for their services as Directors at a rate to be determined from time to time by the remuneration committee of the Company and disclosed in the financial statements.

During the financial year ended 31 December 2018, Directors' fees amounted to US$365,219 (2017: US$334,459) plus out of pocket expenses of US$34,740 (2017: US$33,196), of which US$Nil (2017: US$Nil) remained payable at the financial year end.

OTHER OPERATING EXPENSES

Other operating expenses are disclosed separately in the statement of comprehensive income.

Accruals excluding audit, Directors and other professional fee accruals as at 31 December 2018 and 2017 are detailed in the following table:

The remaining balance of the expense accrual consists of auditors' fees of US$299,770 (2017: US$250,206) inclusive of VAT and other professional fees of US$279,816 (2017: US$133,512).

AUDITORS FEES

The Company incurred the following audit, assurance and tax fees (including expenses) during the financial year of which US$243,715 (2017: US$143,515) was outstanding at the financial year end.

\* The above amounts incurred for the financial year ended 31 December 2018 and 2017 are before the inclusion of VAT.

*\* Tax advisory fees are included in other operating expenses in the statement of comprehensive income.

**\* The above amounts were paid to the statutory auditor for work undertaken by them in relation to the review of the interim financial statements and the Financial Position and Prospects Procedures ("FPPP") review.

6 CASH AND CASH EQUIVALENTS

Cash and cash equivalents balances are held with the Custodian.

7 PARTICIPATING SHARES

As at 31 December 2018, the issued share capital of the Company comprises US Dollar Shares and Repurchase Pool Shares. Two subscriber shares were also in issue. Further details on the Company share capital is set out below.

US DOLLAR SHARES

The authorised share capital of the Company shall not be less than the currency equivalent of €2 represented by two subscriber shares and the maximum issued share capital shall not be more than the currency equivalent of €500 billion divided into an unspecified number of non-redeemable shares.

As at 31 December 2018, there were 398,801,780 US Dollar Shares (2017: 398,801,780) in issue. As at 31 December 2018, net assets attributable to participating holders of US Dollar Shares were US$243,472,380 (2017: US$299,264,762).

REPURCHASE POOL SHARES

The Company's Articles of Association contains certain provisions regarding share repurchase arrangements which may be offered to Shareholders. Repurchase Pool Shares are shares in the Company which participate in a separate pool of assets and liabilities within the Company created for the purposes of a repurchase opportunity.

The Board elected to propose a repurchase opportunity for approval by ordinary resolution by the Shareholders and further to the vote taken at the Annual General Meeting ("AGM") held on 31 July 2017 and approval of the repurchase opportunity, Shareholders representing 26.6% of the then issued US Dollar Shares elected to avail of the repurchase opportunity.

On 31 October 2017, the Company converted 144,451,569 US Dollar Shares on a one to one basis to Repurchase Pool Shares of no par value. On 22 November 2017, the Repurchase Pool Shares were admitted to trading on the Specialist Fund Segment of the Main Market of the LSE. At the discretion of the Board, and as cash becomes available upon the realisation of assets, capital will be returned on a pro rata basis in US Dollars to the exiting Repurchase Pool Shareholders, by the Company making a compulsory repurchase of Repurchase Pool Shares.

As at 31 December 2018, there were 24,637,358 Repurchase Pool Shares (2017: 144,451,569) in issue. As at 31 December 2018, net assets attributable to participating holders of Repurchase Pool Shares were US$15,748,150 (31 December 2017: US$107,889,914). 

C SHARES

At the AGM held on 31 July 2017, the Shareholders approved a 12 month Placement Programme to allow for the raising of additional capital to be issued as either US Dollar or C Shares. Under the Placement Programme C Shares were to be made available for subscription at US$1 per C shares. The gross placing proceeds of the Placement Programme may be up to US$300 million. Further details of the Placement Programme are set out in the Prospectus.

The C Shares would convert to US Dollar Shares (ranking pari passu) on the basis of the conversion ratios which would be calculated once 90 percent of the assets attributable to the relevant C share class (or such lower percentage as the Board may determine in their absolute discretion) have been invested or committed to be invested, which the Board anticipated would occur within three months of the issuance of the relevant C Shares. The Placement Programme closed on 10 October 2018. No C Shares were ever issued.

VOTING RIGHTS

The Company has issued two subscriber shares of €1 each. These shares do not participate in the profits of the Company. Holders of US Dollar Shares and Repurchase Pool Shares participate in the profits of their respective share class and hold voting rights, with Shareholders having one vote in respect of each whole share held.

CAPITAL MANAGEMENT

The Company is closed-ended. At an Extraordinary General Meeting ("EGM") on 26 June 2013, a resolution was passed which provided that at the AGM to be held in the financial year 2022 and in every tenth financial year thereafter, the Board would propose a special resolution to the effect that the Company continue for a further ten financial years. However, at an EGM on 17 December 2018, a resolution was passed to approve changes to the investment objective and policy of the Company to facilitate and authorise the Board to instruct the Investment Manager to effect either a Rollover into BGLF or a Managed Wind-Down of the portfolio attributable to the US Dollar Shares. A resolution was also passed amending the constitution to provide for the termination of the Company before 2022.

7 PARTICIPATING SHARES (continued)

CAPITAL MANAGEMENT (continued)

Until 17 December 2018, the objectives for managing capital were:

· to invest the capital in investments meeting the description, risk exposure and expected return indicated in its Prospectus;

· to achieve consistent returns while safeguarding capital by investing in CLOs backed by corporate loans or holding cash;

· to maintain sufficient liquidity to meet the expenses of the Company and to meet distribution commitments; and

· to maintain sufficient size to make the operation of the Company cost-efficient.

As the Company is now in the process of a Managed Wind-Down, the objective for managing capital is now to realise all remaining assets and return capital to the Shareholders in an orderly manner.

During the financial year ended 31 December 2018, the Board distributed all or part of the net income of the US Dollar Shares (after reasonable expenses and retaining an element of cash flow receipts on Income Notes of CLOs) from the underlying investments as quarterly dividends in January, April, July and October. Repurchase Pool Shares have no entitlement to distributions. On 21 February 2018, the Board announced that in seeking to provide stable dividends at rates that reflect net income actually generated, the Company would move to a floating dividend such that, in any financial quarter, the dividends paid are equal to the cash income the Company has received, net of reasonable expenses, while retaining an element of cash flow receipts on CLO Income Notes as principal for reinvestment.

Below is the movement in Repurchase Pool Shares and US Dollar Shares during the year ended 31 December 2018.

Below is the movement in Repurchase Pool Shares and US Dollar Shares during the year ended 31 December 2017.

8 SOFT COMMISSIONS

There are no agreements for the provision of any services by means of soft commission.

9 INTERESTS IN OTHER ENTITIES

INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES

IFRS 12 defines a structured entity as an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to the administrative tasks only and the relevant activities are directed by means of contractual agreements.

A structured entity often has some of the following features or attributes:

(a) restricted activities;

(b) a narrow and well defined objective;

(c) insufficient equity to permit the structured entity to finance its activities without subordinated financial support;

and

(d) financing in the form of multiple contractually linked instruments that create concentrations of credit or other risks.

Involvement with unconsolidated structured entities

The Company has concluded that CLOs in which it invests, that are not subsidiaries for financial reporting purposes, meet the definition of structured entities because:

· the voting rights in the CLOs are not the dominant rights in deciding who controls them, as they relate to administrative tasks only;

· each CLO's activities are restricted by its Prospectus; and

· the CLOs have narrow and well-defined objectives to provide investment opportunities to investors.

Subsidiary undertakings

As at 31 December 2018, the Company had no subsidiary undertakings for financial reporting purposes that are also structured entities. As at 31 December 2017, the Company had three subsidiary undertakings for financial reporting purposes that are also structured entities, being Keuka Park CLO Ltd 2013-1A, Pinnacle Park CLO Ltd 2014-1A and Sheridan Square CLO Ltd. Pinnacle Park CLO Ltd 2014-1A was sold on 6 February 2018, while Keuka Park CLO Ltd 2013-1A and Sheridan Square CLO Ltd made their final equity distribution in December 2018. To meet the definition of a subsidiary under the single control model of IFRS 10, the investor has to control the investee within the meaning of IFRS 10.

Control involves power, exposure to variability of returns and a linkage between the two:

(i) The investor has existing rights that give it the ability to direct the relevant activities that significantly affect the investee's returns;

(ii) The investor has exposure or rights to variable returns from its involvement with the investee; and

(iii) The investor has the ability to use its power over the investee to affect the amount of the investor's returns.

In the case of the subsidiary undertakings listed above as at 31 December 2017 (the "entities"), the relevant activities of each are the investment decisions which are made by their asset managers acting as their agents. Power over the entities' relevant activities was attributed to the Company through a call option it had, as the holder of the majority of the preference shares of each of these entities. The impact of these call options was that it gave the Company the ability to direct or stop the early termination of each of the subsidiary deals, and hence, decision making power on the life of the deals, and therefore the ability to control the variability of returns.

The Company was also considered to have contingent power over the three entities, due to the fact that it could have removed any of the subsidiaries' asset managers in certain contingent circumstances as the Company was the majority holder of the preference shares. It could therefore be considered that the Company had contingent power which could have impacted the variability of returns in the future.

To determine control, there has to be a linkage between power and the exposure to the variable returns. The main linkage arose from the call options which allowed the Company to control the continual payments of returns, and it was therefore an indication of linkage between power and variability in returns.

Investment entity status

To continue to avail of the exemption in IFRS 10 from the requirement to prepare consolidated financial statements, the Company must meet the definition of an investment entity. The Directors are satisfied that the Company meets both the required criteria and typical characteristics of an investment entity.

9 INTERESTS IN OTHER ENTITIES (continued)

INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES (continued)

Below is a summary of the Company's holdings in non-subsidiary unconsolidated structured entities as at 31 December 2018: