What are the characteristics of Level 2 quoted prices for instruments, as defined by Bw Premier Collection?

According to Bw Premier Collection's 2025 Franchise Disclosure Document, Level 2 quoted prices for instruments are defined by specific characteristics related to market activity and valuation methods. These characteristics include quoted prices for similar instruments in active markets. Additionally, Level 2 includes quoted prices for identical or similar instruments in markets that are not active, indicating that the market may be thin or transactions may be infrequent. Finally, Level 2 also encompasses model-derived valuations in which significant inputs and significant value drivers are observable in active markets, suggesting that while a model is used, its key components are based on real-world, observable data.

For a prospective Bw Premier Collection franchisee, understanding these definitions is crucial for interpreting the company's financial statements and assessing the fair value of its assets and liabilities. The use of Level 2 inputs suggests that Bw Premier Collection may hold financial instruments that are not easily valued using direct market prices, requiring more complex valuation techniques. This could reflect the complexity of the company's investment portfolio or the nature of the assets it holds.

It is important to note that the FDD also mentions Level 1 and Level 3 valuations, providing a hierarchy of valuation methods based on the observability of inputs. Level 1 uses quoted prices for identical instruments in active markets, while Level 3 relies on unobservable inputs or value drivers. The choice of valuation level impacts the reliability and subjectivity of the fair value measurements, with Level 1 being the most reliable and Level 3 the least. Franchisees should consider these factors when evaluating the financial health and risk profile of Bw Premier Collection.