Blackstone Loan Regulatory News (BGLF)

28 APRIL 2023

FOR IMMEDIATE RELEASE

RELEASED BY BNP PARIBAS S.A., JERSEY BRANCH FINAL RESULTS ANNOUNCEMENT

THE BOARD OF DIRECTORS OF BLACKSTONE LOAN FINANCING LIMITED ANNOUNCE FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2022

Blackstone Loan Financing Limited

Annual Report and Audited Financial Statements for the Year Ended 31 December 2022

A Note From Our Chair

2022 was an eventful year for the global economy. A combination of macro events, including the Russia-Ukraine conflict, rising inflation and subsequent coordinated monetary policy tightening by central banks tempered investor sentiment.

Despite this backdrop, the Company delivered a total return per ordinary share of 5.22% on a Published NAV basis, ending the period with a NAV of €0.9081 per share. On an IFRS NAV basis, the Company returned a total return per ordinary share of (19.19)%, ending the period with a NAV of €0.6784 per share. The difference between the Published and IFRS NAV return is the differing valuation bases, with the main driver being the discount rate used. Refer to below for details on the key assumptions that significantly contribute to the valuation divergence.

The Board is cautiously optimistic for 2023, encouraged by recent improving macroeconomic data and falling energy prices. The Board is also cognisant of the impact that ongoing interest rate hikes is expected to have on credit performance. The Board gains comfort from the robust investment approach of the Company's Portfolio Adviser and their ability to select an underlying portfolio of high-quality borrowers, supported by strong underlying protections.

All of us on the Board thank our Shareholders for participating in the consultation process that took place after year end.

As noted below, I am due to rotate off the Board at the 2023 AGM (expected to be held in July). It has been a pleasure to serve on the Board for the last 9 years as Chair of the Company. I will leave the Chair position in the very capable hands of Mr Steven Wilderspin, who will be appointed as Chair following the 2023 AGM.

Charlotte Valeur Chair27 April 2023

Strategic Report

About the Company

The Company was incorporated on 30 April 2014 as a closed-ended investment company limited by shares under the laws of Jersey and is authorised as a listed fund under the Collective Investment Funds (Jersey) Law 1988. The Company continues to be registered and domiciled in Jersey. The Company's ordinary shares are quoted on

the Premium Segment of the Main Market of the LSE.

The Company has a wholly-owned Luxemburg subsidiary, Blackstone / GSO Loan Financing (Luxembourg) S.à r.l., which has an issued share capital of 2,000,000 Class A shares and 1 Class B share. As at 31 December 2022, all of the Class A and Class B shares were held by the Company together with 239,550,782 Class B CSWs issued by the Lux Subsidiary. The Lux Subsidiary invests in PPNs issued by BCF, which in turn invests in CLOs and loans.

Refer to below for more details on the Company's purpose, values and principle activities.

As outlined in the Company's Prospectus, the Company's investment objective is to provide Shareholders with stable and growing income returns and to grow the capital value of the investment portfolio by exposure to floating rate senior secured loans and bonds directly and indirectly through CLO securities and investments in Loan Warehouses. The Company seeks to achieve its investment objective through exposure (directly or indirectly) to one or more companies or entities established from time to time ("Underlying Companies"), such as BCF.

Refer to below for more details on the Company's investment policy and strategy, which form the 'business model' of the Company.

Elements of the Company's investment strategy

Reconciliation of IFRS NAV to Published NAV

At 31 December 2022, there was a difference between the NAV per ordinary share as disclosed in the Statement of Financial Position, €0.6784 per ordinary share ("IFRS NAV") and the published NAV, €0.9081 per ordinary share, which was released to the LSE on 23 January 2023 ("Published NAV"). The reconciliation is provided below and in Note 16 in the notes to the financial statements. The difference between the two valuations is entirely due to the different valuation bases used, as explained in detail below.

Valuation policy for the Published NAV

The Company publishes a NAV per ordinary share on a monthly basis in accordance with its Prospectus. The valuation process in respect of the Published NAV incorporates the valuation of the Company's CSWs and underlying PPNs (held by the Lux Subsidiary). These valuations are, in turn, based on the valuation of the BCF portfolio using a CLO intrinsic calculation methodology per the Company's Prospectus, which we refer to as a "mark to model" approach. As documented in the Prospectus, certain "Market Colour" (market clearing levels, market fundamentals, BWIC, broker quotes or other indications) is not incorporated into this methodology. This valuation policy is deemed to be an appropriate way of valuing the Company's holdings and of tracking the long-term performance of the Company as the underlying portfolio of CLOs held by BCF are comparable to held to maturity instruments, and the Company expects to receive the benefit of the underlying cash flows over the CLOs' entire life cycles.

Refer to the 'Shareholder Consultation' section in the Chair's Statement for proposals regarding the future valuation policy of Directors.

Valuation policy for the IFRS NAV

For financial reporting purposes on an annual and semi-annual basis, to comply with IFRS as adopted by the EU, the valuation of BCF's portfolio is at fair value using models that incorporate Market Colour at the year-end date, which we refer to as a "mark to market" approach. IFRS fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as at the measurement date and is an "exit price" e.g. the price to sell an asset. An exit price embodies expectations about the future cash inflows and cash outflows associated with an asset or liability from the perspective of a market participant. IFRS fair value is a market-based measurement, rather than an entity-specific measurement and so incorporates general assumptions that market participants are applying in pricing the asset or liability, including assumptions about risk.

Both the mark to model Published NAV and mark to market IFRS NAV valuation bases use modelling techniques and input from third-party valuation specialists.

Key Performance Indicators

Further information on the reconciliation between the IFRS NAV and the Published NAV can be found in Note 16 in the notes to the financial statements. Refer to 'Discount management' in the Chair's Statement below for the latest share price discount to the Published NAV.

Performance

* BGLP is the ticker for the Company's Sterling Quote and has been presented for information purposes only.

The Company is not managed in reference to a benchmark, however commentary to market indices and market performance is detailed in the Portfolio Adviser's report below.

Dividend and other key data

On 21 January 2022, the Board announced that the Company had adopted a dividend policy targeting a total 2022 annual dividend of between €0.07 and €0.08 per ordinary share, to consist of quarterly payments of €0.0175 per ordinary share for the first three quarters and a final quarter payment of a variable amount to be determined at that time. In accordance with the Company's dividend policy, the Board declared dividends of €0.0175 per ordinary share for the first three quarters of 2022 and a dividend of €0.0275 per ordinary share for the fourth quarter.

On 23 January 2023, the Board also announced that it is targeting a total 2023 annual dividend of between €0.08 and €0.09 per ordinary share, which will consist of quarterly payments of €0.02 per ordinary share for the first three quarters and a final quarter payment of a variable amount to be determined at that time.

Year highs and lows

Schedule of significant transactions

The proceeds of the redemptions are used to fund dividends and share buy backs, and to cover other administrative costs. The Company subscribes to CSWs in order for the Lux Subsidiary to further invest in PPNs issued by BCF.

Chair's Statement

Dear Shareholders,

Company returns and net asset value(4)

The Company delivered an IFRS NAV total return per ordinary share of (19.19)% over 2022, ending the period with a NAV of €0.6784.

On a Published NAV basis, the Company delivered a total return per ordinary share of 5.22% during 2022, ending the year with a NAV of €0.9081. The return was composed of dividend income 8.83% and of net portfolio movement of (3.61)%. Refer to below for the calculation of the IFRS and Published NAV total return.

As highlighted above, the Company uses different valuation policies to determine Published and IFRS NAV. As at 31 December 2022, the variance between Published and IFRS NAV was €0.2297 per share, which is primarily associated with the discount rates used under the two methodologies. The table below further explains the rationale regarding the differences in the assumptions that have contributed to the variance as at 31 December 2022.

During 2022, the Company's performance on a Published NAV basis was supported, through its investment in BCF, by robust distributions from the underlying CLO and loan portfolio. CLO distributions have continued to benefit from refinancing and reset activity during 2021/2022 as well as the absence of CLO CCC basket breaches, which could cause diversions of cash flows away from CLO equity. However, the portfolio (primarily the loans directly held by BCF and those CLOs that have exited their reinvestment periods, as reflected in the mark-to-market loss of €70m loss in the Statement of Comprehensive Income) was not immune to broader loan market movements, noting that European and US loans returned -3.3%(5) and -1.1%(5), respectively, over the year as discussed in more detail in the Portfolio Adviser's Review.

The Company paid four dividends to ordinary Shareholders during 2022, totaling €0.08 per share, which is at the upper end of the 2022 dividend target of €0.07 - €0.08 per share. The increased dividend paid in the fourth quarter is a result of the strong continued and expected cash flows of the underlying portfolio. Looking ahead to 2023, the Board has announced an elevated dividend policy that targets a total annual dividend of €0.08 - €0.09(6), which represents a potential 12.5% increase to dividend per share. Details of all dividend payments can be found within the 'Dividend and other key data' section at the front of this financial report.

To remind investors, the Company's dividends are funded from the cash flows generated by the Company's underlying CLO and loan portfolio held within BCF. The Board considers three strategic priorities when allocating these cash flows:

· Paying a sustainable dividend sufficiently covered by cash generated, that does not erode the capital of theCompany over time;

· Providing funds to implement the Board's share buyback policy; and

· Reinvesting surplus cash proceeds in order to grow the Company's NAV over time.

First of all, the Board's framework considers both realised and forward-looking expectations of underlying cash flows to derive a target range for the dividend for the coming year. The Board then considers the Company's share price and calculations of the NAV per share in order to allocate budgets for share buybacks and re-investment.

Historical BGLF NAV and share price

The graph shows cumulative Published NAV and ordinary share price total returns and cumulative returns on European and US loans(7).

[Graphs and charts are included in the published Annual Report and Audited Financial Statements which is available on the Company's website at http://blackstone.com/bglf]

Historical BCF default loss rate

The graph shows the default loss rate, which incorporates asset recovery, within the BCF portfolio and the default loss rate of European and US loans(8).

[Graphs and charts are included in the published Annual Report and Audited Financial Statements which is available on the Company's website at http://blackstone.com/bglf]

Market conditions

After a relatively strong start to the year, financial markets succumbed to volatility over 2022 as headwinds gathered. Central banks became more hawkish amid growing concerns over persistent inflation caused by rising energy prices, supply chain disruptions and Russia's invasion of Ukraine. A risk-off sentiment gripped the market, pushing credit spreads to widen as recession risk increased.

Against this backdrop, the loan market outperformed high yield and investment grade markets. Credit metrics for below investment grade companies remained healthy over the year, but as the year progressed, profit margins began to be squeezed due to inflationary pressures.

Looking ahead, despite rising interest rates, we expect floating rate credit, a natural interest rate and inflation hedge, to perform well and anticipate a promising environment for investors within leveraged loans and CLOs. Although reported GDP figures point toward the view of a recession, a trend of generally positive corporate earnings surprises so far this year, coupled with a strong labour market could provide a foundation for economic stability.

Discount management

The share price discount to Published NAV widened from 15.75% on 31 December 2021 to 26.77% on 31 December 2022. The share price discount to IFRS NAV narrowed from a discount of 13.43% on 31 December 2021 to 1.98% on 31 December 2022. During 2022, the Company repurchased 16,406,180 shares for €11,478,926 at an average discount of 22.95% using available cash with the goal of reducing the volatility and quantum of discount. As of 31 March 2023, the share price discount to Published NAV was 18.95%. As a Board, we regularly weigh the balance between maintaining liquidity of the shares, the stability and quantum of any discount and the desire of Shareholders to see the ordinary shares trade as closely as possible to their inherent value. Please see the announcement dated 23 January 2023 for more details.

Shareholder Consultation

On 26 January 2023, the Company announced it would undertake a Shareholder Consultation on potential policy amendments in light of the prevailing and persistent discount to NAV at which the Company's shares trade and with a view to broadening investor interest in the Company's shares and maximising Shareholder total return. An announcement was made on 17 March 2023, covering the following results of the Shareholder Consultation:

- It was discussed that there are times when reinvestment by the Company into BCF may be unattractive but direct investment in primary market CLOs managed and controlled by the Portfolio Adviser may still be attractive. The Board believes such flexibility to be in the interests of Shareholders and will propose a change to the Company's investment policy to allow such investment to be put forward at the time of the Company's AGM expected to be held in July 2023.

- The Board will continue to monitor the situation and consult with Shareholders and if there is no significant improvement in the discount, the Board will consider putting forward a continuation vote alongside the AGM in 2024. In the period between now and the 2024 AGM, the Board will continue to use all tools at its disposal, principally its buyback policy, in an effort to mitigate the share price discount to NAV while taking into account the market environment for CLOs.

- Shareholders expressed concern that the mark to model approach, whilst reflective of the hold to maturity nature of retention assets, was not a good benchmark for assessing current market risk and therefore whether the Company's shares are trading at discount or premium to the risk of the underlying assets. The Board is considering these points and believes there is merit in adopting a mark to market valuation methodology for the monthly published NAV at a time when the NAV derived from both methodologies are broadly aligned.

Transition away from LIBOR

The transition away from LIBOR to SOFR primarily impacts BCF's US CLO portfolio, which accounts for 43.6% of BCF's NAV as of year-end. Blackstone has been working through amendments to transition the liabilities of the US CLOs it manages, including those in BCF's US CLO portfolio, from LIBOR to SOFR. It is anticipated that BCF's US CLOs will transition to SOFR on 30 June 2023, either by amendment or the LIBOR Act. If the transition occurs on such date, BCF's US CLOs will first utilise SOFR on the July 2023 interest determination dates and the first payments to debt holders in such CLOs based on SOFR will occur on the October 2023 payment dates. Under normal market conditions, the Portfolio Adviser expects the impact to BCF's US CLO equity positions to be relatively muted due to the ability to refinance and the expectation of converging forward rates and applicable credit spread adjustments on loans in transition.

Recent market events

Local, regional, or global events such as bank failures (e.g. Silicon Valley Bank), conflicts (e.g., Russia/Ukraine), acts of terrorism, public health issues like pandemics or epidemics (e.g., COVID-19), recessions, or other economic, political and global macro factors and events could lead to a substantial economic downturn or recession in the US and global economies and have a significant impact on the Company and its investments. The recovery from such downturns is uncertain and may last for an extended period of time or result in significant volatility and many of the risks discussed herein associated with an investment in the Company may be increased. The Board continues to monitor noteworthy market events and developments on a continuous basis.

Ongoing conflict in Ukraine

The Board and the Portfolio Adviser are deeply saddened by the ongoing humanitarian crisis in Ukraine. When the conflict first commenced, the Board engaged the Portfolio Adviser to understand any expected impacts to BCF's portfolio. BCF did not and currently does not, have any direct exposure to issuers domiciled in Russia, Ukraine or Belarus and the vast majority of underlying loan issuers in the portfolio had very limited exposure with respect to revenue and EBITDA. Within Europe, there are a small handful of issuers identified with marginally higher revenue exposure and the Portfolio Adviser remains comfortable on the credit quality of these issuers going forward. In the US loan portfolio, revenue exposure to Russia remains even lower versus Europe.

ESG

The practice of responsible investing remains a key focus for investors and for Blackstone. The Board regularly engages with the Company's Portfolio Adviser regarding their ESG policy. Blackstone has committed to being a responsible investor for over 35 years and is a signatory to the PRI. This commitment is affirmed across the organisation and guides its approach to investing.

Whilst the Company is currently exempt from the requirement to report against the TCFD recommendations, the Board continues to actively discuss ESG matters with BX Credit with a view of obtaining meaningful information to provide to Shareholders. The Board fully acknowledges the importance of the TCFD recommendations and expects the companies to which BCF provides finance to be compliant in their reporting against TCFD recommendations, as may be required by applicable law or regulation. We continue to liaise with BCF on progress in this area.

Refer to the Portfolio Adviser's Review below for further details on the Portfolio Adviser's ESG policy.

During 2022, the Board has undertaken various actions as part of its commitment on ESG, namely:

- the Board continues to participate in the Board apprentice scheme as outlined below;

- the Board has made inquiries of its key service providers principally via a questionnaire which includes questions regarding aspects of ESG. The responses to the questionnaire are reviewed by the Management and Engagement Committee;

- the Board has liaised with BX Credit to gain an understanding of their ongoing ESG initiatives and processes; and;

- the Board has considered the impact of its own carbon emissions with a view to determining a process for carbon offsetting which will be progressed during 2023.

The Board

Good governance remains at the heart of our work as a Board and is taken very seriously. The Board believes that the Company maintains high standards of corporate governance. The Board was very active during the period, convening a total of 15 Board meetings and 13 Committee meetings (excluding 12 NAV Review Committee meetings), as well as undertaking a virtual due diligence meeting with the Portfolio Adviser in October 2022, the agenda for which covers risk and compliance, risk oversight monitoring, finance and accounting and the wider market. The Board also met with the BCF Board at the same time.

During the period, the Board and its advisers have met frequently, with the Company's advisers providing general updates as well as recommendations on pertinent matters such as the Company's share repurchase programme. The Board deems the careful consideration of such matters to be critical to ensuring the long-term success of the Company, particularly in light of the challenges and uncertainty faced since the start of 2022.

The work of the Board is also assisted by the Audit Committee, NAV Review Committee, Management Engagement Committee, the Remuneration and Nomination Committee, the Risk Committee and the Inside Information Committee.

The Company is a member of AIC and adheres to the AIC Code which is endorsed by the FRC and meets the Company's obligations in relation to the UK Code.

In terms of composition, Mr Gary Clark and I have informed the Board of our intention to retire at the Company's next AGM as we will have both reached nine years of service. The Company also announced the appointment of Mr Giles Adu as non-executive director, which is now confirmed to be effective from the date of 2023 AGM. The Board has given consideration to Chair succession and believes it to be in the best interests of the Company that Mr Steven Wilderspin be appointed as the new Chair following the 2023 AGM.

Refer to below for further details on these changes.

Shareholder communications

During 2022, using our Portfolio Adviser and Brokers, the Board continued its programme of engagement with current and prospective Shareholders. The Board sincerely hopes that you found the monthly factsheets, quarterly letters, quarterly update webcasts and market commentary valuable. The Board is always pleased to have contact with Shareholders, and welcomes any opportunity to meet with you and obtain your feedback. Refer to more details on Shareholder engagement under Section 172(1) statement below and to the 'Shareholder Consultation' section in the Chair's Statement.

Prospects and opportunities in 2023

The Board maintains an optimistic but cautious outlook heading into 2023, as markets continue to react swiftly to macroeconomic data and central bank actions. Global economies have proven resilient so far, but persistent inflation suggests that central banks will keep rates higher for longer. The Board expects additional volatility until rates stabilise. Furthermore, the recent failures of Silicon Valley Bank (SVB) and Credit Suisse has perpetuated volatility with an expectation of tightening of financial conditions as banks and other lenders become more conservative. That said, corporate fundamentals are expected to remain solid, supported by better-than-feared earnings and stable interest coverage ratios. The Board gains comfort from the robust investment approach of the Company's Portfolio Adviser and their ability to select an underlying portfolio of high-quality borrowers, supported by strong underlying protections.

The Board wishes to express its thanks for the support of the Company's Shareholders.

Charlotte Valeur Chair

27 April 2023

Portfolio Adviser's Review

Bank loan market overview

The global loan market started 2022 in a fundamentally good position following the strong economic recovery in 2021 that generated record supply and healthy risk adjusted returns across the asset class. However, the resurgence came to a halt in February with Russia's invasion of Ukraine and as the market realised that inflation would be more persistent than originally thought. Supply chain issues remained as a major headwind for issuers although they eased as the year progressed. Loans were also caught up in the UK's LDI pension crisis which swept through global credit markets.

Despite the barrage of headwinds, investors generally viewed loans as a safe haven against the most pressing concern of 2022: rising inflation and interest rates. The Federal Funds rate started the year off at 0.00% to 0.25% and by year-end, reached 4.25% to 4.50%, representing one of the most aggressive tightening policies in history. Similarly, the ECB hiked base rates in the Eurozone from (0.50)% to 2.00% during the year. The S&P 500 recorded its worst annual return since 2008 at (18.8)% as a result. By comparison, loans outperformed other debt and equity markets in 2022, generally due to their floating rate nature. Total returns for European and US loans ended the year at (3.3)% and (1.1)% respectively versus high yield at (11.6)% in Europe and (11.2)% in the US. Average prices for the European and US leveraged loan indices fell to €91.56 and $91.89 from €98.71 and $98.39 at the end of 2021, respectively.

Loan outperformance came against a thin primary pipeline and global loan volume stood at just $505 billion (€473 billion) in 2022, roughly half of that during 2021's record breaking year. Issuance was weighted toward higher quality issuers looking to term out maturities.

Turning to fundamentals, many companies reported 'better-than-feared' earnings in 2022 after strong refinancing activity post COVID-19 left balance sheets in good shape. Still, rising credit concerns pushed spreads across European and US loans (represented by 3-year discount margin) wider by 248bp and 213bp to 661bp and 652bp respectively as the year progressed. Rolling 12 month loan defaults ticked up in the second half of 2022, ending the year at 1.1% in the US and 1.9% in Europe, although these remain within the 10-year historical averages of 2.2% for both regions(9).

Looking ahead to 2023 and despite kicking off the year with a more constructive market tone, we expect ongoing volatility as credit markets adjust to the higher-for-longer narrative and digest the recent bank failures of SVB and Credit Suisse. We expect credit fundamentals to remain solid and for corporates to continue to access debt capital markets to both refinance and raise new debt. Interest coverage ratios have remained stable through all signs of volatility in the market and reported earnings could continue to deliver.

CLO market overview

In stark contrast to the prior year, throughout 2022, the CLO market experienced numerous headwinds but nonetheless, ended the year with robust primary issuance of €28 billion in Europe and $129 billion in the US. 2022's CLO issuance volume marked the third largest year on record(10) , following a record year of issuance in 2021 and brought the total outstanding volume of CLOs globally to nearly $1.1 trillion(11). That was despite technically driven volatility at the top of the CLO debt stack, due in part to LDI-related weakness. Reduced demand from US and Japanese banks(12), the dominant buyers of CLO AAAs(13), was another factor.

Underlying the full year headline issuance volume, the running spread between assets and liability costs (known as CLO arbitrage) came under pressure in the second half of the year, due in part to the sustained high cost of liabilities as some dominant buyers of CLO AAAs remained side-lined following the LDI-related, technically driven secondary market sell off in CLO AAAs. While the impact of a diminished spread arbitrage on CLO equity performance can be offset to some degree through the purchase of discounted loans, capturing that price arbitrage during periods of volatility requires access to warehouse financing that remains open and available for use, which is not always the case across all managers. Issuance in 2022 skewed heavily to larger, more established managers and demonstrates advantages of greater access to warehouse financing in order to better achieve an attractive equity arbitrage.

Within the broad market, the weighted average cost of capital for new issue European CLOs widened by 134 basis points to 324 basis points and similarly by 132 basis points to 311 basis points for US CLOs over 2022. The higher cost of debt resulted in a lower net interest margin, to CLO equity investors of new issue deals. However, as noted above, the expected return in new issue CLOs is based on buying loans at discounted prices, thereby benefitting from the 'pull-to-par' effect, in addition to the traditional return from net interest margin. 

Though volatility creates a challenging environment for primary CLO creation, it also provides opportunities for more seasoned vintages of CLOs to improve performance through portfolio rotation into higher quality and or wider spread loans, which highlights a key benefit of the CLO structure and its long term, non-mark-to-market financing, particularly for those CLOs which have longer remaining reinvestment periods.

Despite that rating downgrades outpaced upgrades, CLO fundamentals remained resilient throughout the year, underscoring the impact of active management on the portfolio quality and robustness of CLO structures. Commonly used measures of CLO portfolio quality showed improvements as managers have been taking advantage of the volatility in order to improve quality, as measured by reduced exposures to CCC-rated assets and stable WARF levels. Caa-rated buckets in European CLOs finished 2022 at 3.1% on average, down from 3.6% at the end of 2021, and in the US, Caa-rated buckets ended the year at 3.7%, compared to 4.1% at the end of 2021. Similarly, WARFs ended the year at 2892 in Europe and 2833 in the US, below the 5-year averages of 2924 and 2897, respectively.

While volatility and technical factors have become a more constant market feature, we believe that we are at the start of a period of transition where the CLO primary market and CLO formation will continue to be more heavily influenced by fundamental credit performance as well as liability performance, as measured by rating stability and liquidity.

Additionally, looking forward, returns across floating rates assets, including senior loans and CLOs, should continue to benefit from further central bank rate hikes in 2023. We expect the focus from managers to be on preservation of capital through active risk management.

Portfolio update - BCF

From the beginning of the year, BCF's CLOs were well insulated from dislocations related to rising inflation and interest rates. At Blackstone, we first identified inflation as a potential issue in 2021 by observing labour and input costs in our portfolio companies. Our belief that inflation would prove stickier than many expected influenced much of the trading within our portfolios over the past year. We leveraged our expansive network of CFOs to discuss corporate fundamentals and expectations, providing valuable insight. At the same time, we continued to stress test the issuers in our portfolios with higher forward looking base rates. Each quarter, our credit research team re-underwrites each loan and provides guidance on the timing and expected probability of defaults or downgrades to CCC on a loan-by-loan basis. While our view on the credit environment has shifted to a more cautious perspective and our expectations of downgrades and defaults have risen in the past year, these increases are modest and remain well within CLO limits. To date, higher default and downgrade assumptions have not caused any of BCF's CLOs to experience a disruption of cash flows and our analysis shows this to be the case even in stressed scenarios.

For the first half of the year, much of the focus within BCF's loan portfolio was on exiting tail risk names amidst the mounting macro headwinds. Our investment focus has shifted to rotate up in quality to protect against rating risk, credit risk and price migration, turning to issuers from defensive sectors in what we call 'good neighbourhoods' with secular tailwinds and robust cash generation.

As the year progressed, volatility continued to be a central theme, catalysed by a shock to the UK gilt markets following the UK government's proposed mini-budget announcement. In our view, the general re-pricing of risk created a buying opportunity and a compelling relative value opportunity for cross border issuers. Simultaneously, BCF continued to pare back exposure to lower quality assets to get ahead of any downgrades and preserve distributions within the CLO portfolio. Consistent with this approach, BCF's industry concentration is led by a 16.7% weighting towards healthcare at year-end, a defensive sector with strong pricing power, beneficial given an environment of interest rate rises and inflationary pressure. By comparison, sectors with elevated risk to consumer spending, such as leisure/travel entertainment, remain outside of the top five industry concentration.

The graph below shows the top five industry concentrations for the BCF portfolio as of 31 December 2022(14).

[Graphs and charts are included in the published Annual Report and Audited Financial Statements which is available on the Company's website at http://blackstone.com/bglf]

As of the end of 2022, BCF remains a defensively positioned portfolio of 675 loan issuers diversified across 29 sectors and 26 countries. The portfolio remains concentrated around B1-B2 rated issuers and holds 4.6% Caa-rated assets (at the facility level), which is broadly flat from the start of the year. In line with the market, the portfolio's average loan price declined to around €90 and $98 from €98 and $100 at the end of last year. Assets priced below €/$80 increased from 0.5% at the start of the year to 6.4% at the end of December. We see minimum refinancing risk in the portfolio as loan maturities are generally wrapped around 2028.

BCF's portfolios demonstrated strong collateral quality metrics compared to the market and peer managers in 2022. With respect to defaults during the year, the BCF portfolio maintained a lower default rate of 0.54% compared to the European and US loan indices of 1.90% and 1.10%(15), respectively. According to data available at the end of January(16), Blackstone's CLOs outperformed the peer average amongst the largest managers in terms of IDT cushions and other similar tests(17). The IDT is the ratio of a CLO's assets to its liabilities and is a widely used measure of portfolio quality. A breach of the test diverts cash flows, which would have otherwise been paid to equity holders to protect debt holders and the 'cushion' is the margin of safety to the breach level. These are important tests that ensure equity distributions are well protected, the Company's income is well supported and dividends remain well covered. To note, the Company's year-on-year dividend cover increased from 1.32 times to 1.63 times at year-end 2022.

Even with challenging market conditions for CLO origination, BCF invested in five new issue CLOs in 2022, three in Europe and two in the US, bringing the number of originated CLOs within the portfolio to 49 spanning 9 vintage years, reemphasising the wholesale exposure investors experience through this vehicle. Given interest rate movements throughout the year, the expected return for recent new issue deals is in part based on the pull-to-par effect, with underlying assets being bought at a discount. This is in addition to the traditional return from spread arbitrage (as explained previously), which were temporarily squeezed toward the end of the year due to a timing mismatch between the base rates used for assets and liabilities, and we expect this to normalise over time as interest rates stabilise. Despite this, CLO distributions remained robust and have maintained uninterrupted cash flows from each CLO since inception. BCF's weighted average remaining reinvestment period was 1.9 years at the end of 2022, providing ample runway to actively reinvest in loans, taking advantage of both lower prices and generally wider spreads in the current environment.

Looking forward, BCF will, as always, prioritise managing its portfolio to effectively navigate through the market turbulence, while opportunistically issuing new CLOs when we believe the economics are attractive. We will continue to leverage our wealth of resources and experience across numerous credit cycles to invest in a prudent manner that is supportive of CLO returns to investors.

The graph below shows the current IDT cushion for Blackstone's European CLOs and US CLOs compared to peers

as of 31 December 2022(18).

[Graphs and charts are included in the published Annual Report and Audited Financial Statements which is available on the Company's website at http://blackstone.com/bglf]

CLO portfolio positions

As of 31 December 2022, the Company was invested in accordance with its and BCF's investment policy and was diversified across 675 issuers (2021: 727) through directly held loans and the CLO portfolio, across 26 countries (2021: 30) and 29 different industries(25) (2021: 29). No individual borrower represented more than 2% of the overall portfolio at the end of December 2022 and December 2021.

Key Portfolio Statistics

Top 10 industries(28)

Top 5 Countries(30)

Top 20 issuers(31)

Regulatory update

Blackstone continues to monitor operational resilience and business continuity risk and there is an ongoing focus on enhancing and strengthening the operational resilience framework.

On 6 April 2022, the European Commission adopted the Delegated Regulation (as amended from time to time) supplementing EU Regulation (EU) 2019/2088 (the "SFDR") with regard to the regulatory technical standards ("RTS") specifying the details of the content and presentation of the information in relation to the principle of "do no significant harm", information in relation to sustainability indicators and adverse sustainability impacts, and the content and presentation of the disclosure regarding the promotion of environmental or social characteristics (Article 8 SFDR) and sustainable investment objectives (Article 9 SFDR) in pre-contractual documents, on websites and in periodic reports. The SFDR RTS have applied since 1 January 2023. BX Credit continues to monitor regulatory developments with regards to SFDR. Interest limitation rules, implemented as part of Directive 2016/1164/EU (the so-called Anti-Tax Avoidance Directive), apply to certain EU CLO issuers with respect to their accounting periods commencing on or after 1 January 2022. To date, the interest limitation rules have not adversely impacted BX Credit's CLO business.

Risk management

Given the natural asymmetry of fixed income, our experienced credit team focuses on truncating downside risk and avoiding principal impairment and believes that the best way to control and mitigate risk is by remaining disciplined in all market cycles and by making careful credit decisions while maintaining adequate diversification.

BCF's portfolio is managed to minimise default risk and credit related losses, which is achieved through in-depth fundamental credit analysis and diversified portfolios in order to avoid the risk of any one issuer or industry adversely impacting overall performance. As outlined in the Portfolio Update section, BCF is broadly diversified across issuers, industries and countries.

BCF's base currency is denominated in Euro, though investments are also made and realised in other currencies. Changes in rates of exchange may have an adverse effect on the value, price or income of the investments of BCF. BCF may utilise different financial instruments to seek to hedge against declines in the value of its positions as a result of changes in currency exchange rates.

Through the construction of solid credit portfolios and our emphasis on risk management, capital preservation and fundamental credit research, we believe the Company's investment strategy will continue to be successful.

Blackstone responsible investing approach

The importance of responsible investing

Blackstone seeks to incorporate Environmental, Social and Governance ("ESG") principles to develop strong, resilient companies and assets that deliver long-term value for our investors. We believe integrating ESG factors into the investment process has the potential to create value for our investors through operational and financial performance improvements at the portfolio company level and identifying attractive thematic investment opportunities at the sector level. We are committed to incorporating ESG into our operating philosophy and applicable investment decision-making processes.

Across our corporate and investment activities, we have identified ESG topics that we believe can most affect our ability to build strong companies of enduring value. We continue to make progress on ESG initiatives related to our core themes, decarbonization, diversity, equity and inclusion and strong governance, while seeking to generate attractive returns.

We aim to integrate ESG across Blackstone. We have a robust, well-staffed effort in ESG focused on using ESG tools to enhance the value of our investments, consistent with our fiduciary responsibilities to our clients. Our senior leadership and Board of directors are highly supportive and engaged on ESG.

Objectives

Blackstone's responsible investing objectives are outlined below:

Integration

The integration of material ESG factors into our applicable investment decisions and ownership is an important part of fulfilling our mission to create strong returns for our investors. Based on our experience, we think that consideration of ESG factors not only enhances our assessment of risk and value creation - it helps us identify opportunities for transformation. We believe that our ESG program can strengthen companies, drive value, enhance returns and help to create better outcomes for people and communities.

Engagement

We regularly engage with our limited partners, investors, portfolio companies and stakeholders, and industry through membership and/or participation of organizations such as the PRI and the TCFD. We seek to partner with select portfolio companies to implement best practices through offering tools, training, and expertise; manage material ESG factors; implement Blackstone-specific initiatives; and measure progress.

Reporting

We aim to be transparent with our investors and other stakeholders about Blackstone's responsible investing initiatives, successes and goals. Blackstone reports its ESG initiatives on its website at https://www.blackstone.com/our-impact/an-integrated-approach-to-esg/. We value regular, frequent engagement with our stakeholders on ESG matters.

Approach and responsibilities

As investors, we aim to make our companies and assets more resilient and competitive through capturing ESG opportunities and managing ESG risks to drive value for our investors. Blackstone considers relevant ESG issues both during the due diligence of potential investments and throughout our ownership period and expect our portfolio companies to manage ESG risks responsibly.

Refer to Blackstone's ESG Policy for additional information.

Dr Jean Rogers, Founder and Former CEO of the Sustainability Accounting Standards Board (SASB), joined Blackstone in December 2021 as Global Head of ESG. Dr Rogers oversees Blackstone's corporate ESG team, leading strategy, integration, reporting and engagement. She partners closely with our business unit heads of ESG, operational and asset management teams and other functional groups across Blackstone.

Blackstone's Sustainability team led by James Mandel, Blackstone's Chief Sustainability Officer, provides oversight and management of Blackstone's sustainability program. Individual business unit's ESG teams develop and implement a dedicated ESG program for their investments and related initiatives, with support and guidance from the Corporate ESG team, to drive long-term value.

Rita Mangalick is the Global Head of ESG for BX Credit and oversees the ESG policy integration, reporting, engagement and value creation initiatives for BX Credit. Ms Mangalick is supported by members of the BX Credit ESG team as well as ESG leads across BX Credit's key business functions.

Additionally, BX Credit has an ESG Working Group that includes senior representatives from BX Credit's Investment, Institutional Client Solutions ("ICS"), Asset Management and Legal and Compliance teams and is chaired by Ms Mangalick. The BX Credit ESG Working Group meets quarterly and discusses a variety of ESG-related topics, including, as applicable: review of investments; investor requests; market trends and newly adopted or pending legislation, rules, and regulation; and revisions and/or amendments to BX Credit ESG Policy. Below is a visual of Blackstone's integrated ESG team approach:

[Graphs and charts are included in the published Annual Report and Audited Financial Statements which is available on the Company's website at http://blackstone.com/bglf]

Blackstone ESG Team

BX Credit's commitment to ESG

BX Credit's focus on ESG stems from our commitment to prudent investing and our culture that prioritizes value creation and robust corporate governance. We seek to consider material ESG risks and opportunities throughout the diligence process and seek opportunities to enhance the sustainability profile of our investments to improve investor returns and drive value, where applicable. We incorporate relevant ESG principles into our investment process with approaches tailored to our various strategies.

BX CREDIT recognizes the value that incorporating material ESG factors in our investment research creates, both in terms of mitigating risk and enhancing long-term performance across our various investments. To that end, BX CREDIT integrates review and consideration of material ESG factors into its decision-making processes, as summarized below:

Comprehensive Due Diligence

To integrate ESG due diligence into our investment process, it is important for our team to have a deep understanding of the material ESG factors to review in due diligence, to be educated on emerging trends in ESG and to appreciate relevant KPIs to evaluate. We have learned that these topics can vary significantly across industries and therefore BX Credit partnered with a third-party ESG consultant to create a sector-specific tool based on the Sustainability Accounting Standards Board ("SASB") standards that provide a framework to conduct ESG due diligence. The proprietary tool helps our teams identify material ESG risks that may impact a company's performance, so that we are able to focus our diligence on assessing these risks in a more targeted fashion to drive value for our investors. The tool includes industry-specific due diligence questions, potential KPIs to track, detailed guidance on considerations for evaluating the topic and recommended resources for additional research. Guided by sector materiality, we further refine the relevant ESG factor considerations within the investment process based on the investment strategy, asset class, and the nature of the transactions.

Investment Committee Engagement and Documentation

When an investment is brought to investment committee, material ESG considerations and risks arising from diligence will be described in an ESG analysis section within the appropriate investment committee materials and discussed in the relevant investment committee forum as applicable. If material ESG concerns are identified, BX Credit may seek to remedy the situation via additional due diligence, the hiring of specialist advisors, or further discussions with company management.

Active Post-Investment Monitoring

On an ongoing basis, investment teams monitor the performance of BX Credit's investments, which includes, but is not limited to, assessing financial, operational, industry-specific and material ESG-related factors, as applicable. Periodically, BX Credit investment teams will update the investment committee on the performance of issuers and highlight any material ESG concerns or opportunities that warrant investment committee discussion, both in the context of the company's industry and on a stand-alone basis.

At its level, Blackstone has calculated corporate, operational scope 1, scope 2 and select scope 3 (excludes financed emissions) emissions. This information can be found on page 27(32) of our ESG Update. Blackstone is also in the process of assessing the carbon emissions of its portfolio companies where it has majority ownership and board control.

Blackstone recognizes the attractive market/economic opportunity of investing in companies that are supporting the energy transition to drive long-term value for our investors. Blackstone believes that supporting its portfolio companies on environmental factors creates value. It has a history of generating value for its companies through improvements in efficiency of energy usage and shifting consumption to cleaner energy sources. Starting in 2021, Blackstone began seeking to reduce carbon emissions by 15% on average across certain new investments(33) where it controls energy usage within the first three years of ownership. The target may not apply to certain categories of investment and emissions reduction may be measured on a carbon intensity basis (versus an absolute reduction). These initiatives are believed to have the potential to result in significant cost savings and operational improvements for portfolio companies to create value.

ESG Disclaimer

ESG initiatives described in these disclosures related to Blackstone's portfolio, portfolio companies, and investments (collectively, "portfolio companies") are aspirational and not guarantees or promises that all or any such initiatives will be achieved. Statements about ESG initiatives or practices related to portfolio companies do not apply in every instance and depend on factors including, but not limited to, the relevance or implementation status of an ESG initiative to or within the portfolio company the nature and/or extent of investment in, ownership of, control or influence exercised by Blackstone with respect to the portfolio company and other factors as determined by investment teams, corporate groups, asset management teams, portfolio operations teams, companies, investments, and/or businesses on a case by case basis. In particular, the ESG initiatives or practices described in these disclosures are less applicable to or not implemented at all with respect to Blackstone's public markets investing businesses, specifically, Credit, Hedge Fund Solutions (BAAM) and Harvest. In addition, Blackstone will not pursue ESG initiatives for every portfolio company. Where Blackstone pursues ESG initiatives for portfolio companies, there is no guarantee that Blackstone will successfully enhance long term Shareholder value and achieve financial returns. There can be no assurance that any of the ESG initiatives described in these disclosures will exist in the future, will be completed as expected or at all, or will apply to or be implemented uniformly across Blackstone business units or across all portfolio companies within a particular Blackstone business unit. Blackstone may select or reject portfolio companies or investments on the basis of ESG related investment risks, and this may cause Blackstone's funds and/or portfolio companies to underperform relative to other sponsors' funds and/or portfolio companies which do not consider ESG factors at all or which evaluate ESG factors in a different manner. Any selected investment examples, case studies and/or transaction summaries presented or referred to in these disclosures are provided for illustrative purposes only and should not be viewed as representative of the present or future success of ESG initiatives implemented by Blackstone or its portfolio companies or of a given type of ESG initiatives generally. There can be no assurances that Blackstone's investment objectives for any fund will be achieved or that its investment programs will be successful. Past performance is not a guarantee of future results. While Blackstone believes ESG factors can enhance long term value, Blackstone does not pursue an ESG based investment strategy or limit its investments to those that meet specific ESG criteria or standards, except with respect to products or strategies that are explicitly designated as doing so in their Offering Documents or other applicable governing documents. Any such ESG factors do not qualify Blackstone's objectives to seek to maximize risk adjusted returns. Some, or all, of the ESG initiatives described in these disclosures may not apply to the Company's investments and none are binding aspects of the management of the assets of the Company. The Company does not promote environmental or social characteristics, nor does it have sustainable investments as its objective.

Blackstone Ireland Limited

27 April 2023

Strategic Overview

Purpose

The Company's purpose is to provide permanent capital to BCF, a company established by BIL as part of its loan financing programme, with a view to generating stable and growing total returns for Shareholders through dividends and value growth.

The Board delivers the Company's purpose by working in line with its values, which form the backbone of what the Company does and are an important part of its culture.

Values

Integrity and trust - The Company seeks to act with integrity in everything it does and to be trustworthy. It seeks to uphold the highest standards of professionalism driven by its corporate governance processes.

Transparency - The Company aims to ensure that all of its activities are undertaken with utmost transparency and openness to sustain trust.

Opportunity - The ability to see and to seize opportunities which are in the best interests of its Shareholders.

As an investment company, the Company aims to maintain and deliver attractive and sustainable returns for its Shareholders.

Principal activities

The Company was incorporated on 30 April 2014 as a closed-ended investment company limited by shares under the laws of Jersey and is authorised as a listed fund under the Collective Investment Funds (Jersey) Law 1988. The Company continues to be registered and domiciled in Jersey. The Company's ordinary shares are quoted on the Premium Segment of the Main Market of the LSE.

The Company's authorised share capital consists of an unlimited number of shares of any class. As at31 December 2022, the Company's issued share capital was 444,578,522 ordinary shares. The Company also held 38,324,272 ordinary shares in treasury.

The Company has a wholly-owned Luxemburg subsidiary, Blackstone / GSO Loan Financing (Luxembourg) S.à r.l., which has an issued share capital of 2,000,000 Class A shares and 1 Class B share. As at 31 December 2022, all of the Class A and Class B shares were held by the Company together with 239,550,782 Class B CSWs issued by the Lux Subsidiary. The Lux Subsidiary invests in PPNs issued by BCF, which in turn invests in CLOs and loans.

The Company is a self-managed company. BIL acts as Portfolio Adviser to the Company and pursuant to the Advisory Agreement, provides advice and assistance to the Company in connection with its investment in the CSWs.

BNP Paribas S.A., Jersey Branch acts as Administrator, Company Secretary, Custodian and Depositary to the Company.

Investment objective

As outlined in the Company's Prospectus, the Company's investment objective is to provide Shareholders with stable and growing income returns and to grow the capital value of the investment portfolio by exposure to floating rate senior secured loans and bonds directly and indirectly through CLO securities and investments in Loan Warehouses. The Company seeks to achieve its investment objective through exposure (directly or indirectly) to one or more companies or entities established from time to time ("Underlying Companies"), such as BCF.

Investment policy

As outlined in the Company's Prospectus, the Company's investment policy is to invest (directly, or indirectly through one or more Underlying Companies) in a diverse portfolio of senior secured loans (including broadly syndicated, middle market or other loans, such investments being made by the Underlying Companies directly or through investments in Loan Warehouses, bonds and CLO Securities) and generate attractive risk-adjusted returns from such portfolios. The Company intends to pursue its investment policy by investing (through one or more subsidiaries) in profit participating instruments (or similar securities) issued by one or more Underlying Companies.

Each Underlying Company will use the proceeds from the issue of the profit participating instruments (or similar securities), together with the proceeds from other funding or financing arrangements it has in place currently or may have in the future, to invest in: (i) senior secured loans, bonds, CLO Securities and Loan Warehouses; or (ii) other Underlying Companies which, themselves, invest in senior secured loans, bonds, CLO Securities and Loan Warehouses. The Underlying Companies may invest in European or US senior secured loans, bonds, CLO Securities, Loan Warehouses and other assets in accordance with the investment policy of the Underlying Companies. Investments in Loan Warehouses, which are generally expected to be subordinated to senior finance provided by third-party banks, will typically be in the form of an obligation to purchase preference shares or a subordinated loan. There is no limit on the maximum US or European exposure. The Underlying Companies do not invest substantially directly in senior secured loans or bonds domiciled outside North America or Western Europe.

The Company's investment strategy is to implement its investment policy by investing directly or indirectly through the Underlying Companies, in a portfolio of senior secured loans and bonds or in Loan Warehouses containing senior secured loans and bonds and in connection with such strategy, to own debt and equity tranches of CLOs and in the case of European CLOs and certain US CLOs, to be the risk retention provider in each.

The Underlying Companies may periodically securitise a portion of the loans or a Loan Warehouse in which they invest, into CLOs which may be managed either by such Underlying Company itself, by BIL or BLCS (or one of their affiliates), in their capacity as the CLO manager.

Where compliance with the European Risk Retention Requirements is sought (which may include both EUR and US CLOs), the Underlying Companies will retain exposures of each CLO, which may be held as:

· CLO Income Notes equal to: (i) between 51% and 100% of the CLO Income Notes issued by each such CLO in the case of European CLOs; or (ii) CLO Income Notes representing at least 5% of the credit risk relating to the assets collateralising the CLO in the case of US CLOs (each of (i) and (ii), (the "horizontal strip"); or

· Not less than 5% of the principal amount of each of the tranches of CLO Securities in each such CLO (the "vertical strip").

In the case of deals structured to be compliant with the European Risk Retention Requirements, the applicable Underlying Company may determine that, due to its role as an "originator" with respect to such transaction, such Underlying Company should also comply with the US Risk Retention Regulations. In addition, an Underlying Company may invest in CLOs, such as middle market CLOs, which are not exempt from the US Risk Retention Regulations and as a result, may be required to retain exposure to such CLOs in accordance with such rules. In such a scenario, the Underlying Company will retain exposures to such transactions for the purpose of complying with the US Risk Retention Regulations, which may be held as:

· CLO Income Notes representing at least 5% of the fair market value of the CLO Securities (including CLO Income Notes) issued by such CLO (the "US horizontal strip");

· A vertical strip; or

· A combination of a vertical strip and US horizontal strip.

To the extent attributable to the Company, the value of the CLO Income Notes retained by Underlying Companies in any CLO will not exceed 25% of the Published NAV of the Company at the time of investment.

Investments in CLO Income Notes and Loan Warehouses are highly leveraged. Gains and losses relating to underlying senior secured loans will generally be magnified. Further, to the extent attributable to the Company, the aggregate value of investments made by Underlying Companies in vertical strips of CLOs (net of any directly attributable financing) will not exceed 15% of the Published NAV of the Company at the time of investment. This limitation shall apply to Underlying Companies in aggregate and not to Underlying Companies individually.

Loan Warehouses may eventually be securitised into CLOs managed either by an Underlying Company itself or by BIL or BLCS (or one of their affiliates), in their capacity as the CLO Manager. To the extent attributable to the Company, the aggregate value of investments made by Underlying Companies in any single externally financed warehouse (net of any directly attributable financing) shall not exceed 20% of the Published NAV of the Company at the time of investment and in all externally financed warehouses taken together (net of any directly attributable financing) shall not exceed 30% of the Published NAV of the Company at the time of investment. These limitations shall apply to Underlying Companies in aggregate and not to Underlying Companies individually.

The following limits (the "Eligibility Criteria") apply to senior secured loans and bonds (and to the extent applicable, other corporate debt instruments) directly held by any Underlying Company (and not through CLO Securities or Loan Warehouses):

For the purposes of these Eligibility Criteria, "gross asset value" shall mean gross assets, including any investments in CLO Securities and any undrawn commitment amount of any gearing under any debt facility. Further, for the avoidance of doubt, the "maximum exposures" set out in the Eligibility Criteria shall apply on a trade date basis.

Each of these Eligibility Criteria will be measured at the close of each business day on which a new investment is made and there will be no requirement to sell down in the event the limits are breached at any subsequent point (for instance, as a result of movement in the gross asset value or the sale or downgrading of any assets held by an Underlying Company).

In addition, each CLO in which an Underlying Company holds CLO Securities and each Loan Warehouse in which an Underlying Company invests will have its own eligibility criteria and portfolio limits. These limits are designed to ensure that: (i) the portfolio of assets within the CLO meets a prescribed level of diversity and quality as set by the relevant rating agencies that rate securities issued by such CLO or (ii) in the case of a Loan Warehouse, that the warehoused assets will eventually be eligible for a rated CLO. The CLO Manager will seek to identify and actively manage assets which meet those criteria and limits within each CLO or Loan Warehouse. The eligibility criteria and portfolio limits within a CLO or Loan Warehouse may include the following:

· A limit on the weighted average life of the portfolio;

· A limit on the weighted average rating of the portfolio;

· A limit on the maximum amount of portfolio assets with a rating lower than B-/B3/B-; and

· A limit on the minimum diversity of the portfolio.

CLOs in which an Underlying Company may hold CLO Securities or Loan Warehouses in which an Underlying Company may invest also have certain other criteria and limits, which may include:

· A limit on the minimum weighted average of the prescribed rating agency recovery rate;

· A limit on the minimum amount of senior secured assets;

· A limit on the maximum aggregate exposure to second lien loans, high yield bonds, mezzanine loans and unsecured loans;

· A limit on the maximum portfolio exposure to covenant-lite loans;

· An exclusion of project finance loans;

· An exclusion of structured finance securities;

· An exclusion on investing in the debt of companies domiciled in countries with a local currency sub-investment grade rating; and

· An exclusion of leases.

This is not an exhaustive list of the eligibility criteria and portfolio limits within a typical CLO or Loan Warehouse and the inclusion or exclusion of such limits and their absolute levels are subject to change depending on market conditions. Any such limits applied shall be measured at the time of investment in each CLO or Loan Warehouse.

Any material change to the investment policy of the Company would be made only with the approval of ordinary Shareholders.

It is intended that the investment policy of each substantial Underlying Company will mirror the Company's investment policy, subject to such additional restrictions as may be adopted by a substantial Underlying Company from time to time. The Company will receive periodic reports from each substantial Underlying Company in relation to the implementation of such substantial Underlying Company's investment policy to enable the Company to have oversight of its activities.

If a substantial Underlying Company proposes to make any changes (material or otherwise) to its investment policy, the Directors will seek ordinary Shareholder approval of any changes which are either material in their own right or when viewed as a whole together with previous non-material changes, constitute a material change from the published investment policy of the Company. If ordinary Shareholders do not approve the change in investment policy of the Company such that it is once again materially consistent with that of such substantial Underlying Company, the Directors will redeem the Company's investment in such substantial Underlying Company (either directly or if the Company's investment in a subsidiary is invested by such subsidiary in such substantial Underlying Company (either directly or through one or more other Underlying Companies), by redeeming the securities held by the Company in such subsidiary and procuring that the subsidiary redeems its investment in such substantial Underlying Companies (either directly or through one or more other Underlying Companies)), as soon as reasonably practicable but at all times subject to the relevant legal, regulatory and contractual obligations.

The Board considers BCF to be a substantial Underlying Company.

Company borrowing limit

The Company will not utilise borrowings for investment purposes. However, the Directors are permitted to borrow up to 10% of the Company's Published NAV for day-to-day administration and cash management purposes. For the avoidance of doubt, this limit only applies to the Company and not the Underlying Companies.

In accordance with the Company's Prospectus, the Company may use hedging or derivatives (both long and short) for the purposes of efficient portfolio management. It is intended that up to 100% (as appropriate) of the Company's exposure to any non-Euro assets will be hedged, subject to suitable hedging contracts being available at appropriate times and on acceptable terms.

The Company has exposure to non-Euro assets through its investment in the Underlying Company which has hedging arrangements in place to protect against unfavourable currency fluctuation.

Investment strategy

Whether the senior secured loans, bonds or other assets are held directly by an Underlying Company or via CLO Securities or Loan Warehouses, it is intended that, in all cases, the portfolios will be actively managed (by the Underlying Companies or the CLO Manager, as the case may be) to minimise default risk and potential loss through comprehensive credit analysis performed by the Underlying Companies or the CLO Manager (as applicable).

Vertical strips in CLOs in which Underlying Companies may invest are expected to be financed partly through term finance for investment-grade CLO Securities, with the balance being provided by the relevant Underlying Company investing in such CLO. This term financing may be full-recourse, non-mark to market, long-term financing which may, among other things, match the maturity of the relevant CLO or match the reinvestment period or non-call period of the relevant CLO. In particular and although not forming part of the Company's investment policy, the following levels of, or limitations on, leverage are expected in relation to investments made by Underlying Companies:

· Senior secured loans and bonds may be levered up to 2.5x with term finance;

· Investments in "first loss" positions or the "warehouse equity" in Loan Warehouses will not be levered;

· CLO Income Notes will not be levered;

· Investments in CLO Securities rated B- and above at the time of issue may be funded entirely with term finance; and

· Investments in a vertical strip may be levered 6.0-7.0x, with term finance as described above.

To the extent that they are financed, vertical strips are anticipated to require less capital than horizontal strips, which is expected to result in more efficient use of the Underlying Companies' capital. In addition, since the return profile on financed vertical strips is different to retained CLO Income Notes, BX Credit believes that vertical strips may be more robust through a market downturn, although projected IRRs may be slightly lower. However, an investment in vertical strips is not expected to impact the Company's stated target return. From time to time, as part of its ongoing portfolio management, the Underlying Companies may sell positions as and when suitable opportunities arise. Where not bound by risk retention requirements, it is the intention that the Underlying Companies would seek to maintain control of the call option of any CLOs securitised.

With respect to investments in CLO Securities, while the Underlying Companies maintain a focus on investing in newly issued CLOs, it will also evaluate the secondary market for sourcing potential investment opportunities in CLO Securities.

Whilst the intention is to pursue an active, non-benchmark total return strategy, the Company is cognisant of the positioning of the loan portfolios against relevant indices. Accordingly, the Underlying Companies will track the returns and volatility of such indices, while seeking to outperform them on a consistent basis. In-depth, fundamental credit research dictates name selection and sector over-weighting/under-weighting relative to the benchmark, backstopped by constant portfolio monitoring and risk oversight. The Underlying Companies will typically look to diversify their portfolios to avoid the risk that any one obligor or industry will adversely impact overall returns. The Underlying Companies also place an emphasis on loan portfolio liquidity to ensure that if their credit outlook changes, they are free to respond quickly and effectively to reduce or mitigate risk in their portfolio. The Company believes this investment strategy will be successful in the future as a result of its emphasis on risk management, capital preservation and fundamental credit research. The Directors believe the best way to control and mitigate risk is by remaining disciplined in market cycles, by making careful credit decisions and maintaining adequate diversification. The portfolio of the Underlying Companies in which the Company invests (through its wholly-owned subsidiary) remains broadly divided between European CLOs and US CLOs.

Refer to above for an understanding of the different elements of the investment strategy.

The Company incorporates ESG factors as part of its investment strategy where applicable. Refer to above for further details. The Company operates with Euro as its functional currency. A significant proportion of the portfolio of assets held by Underlying Companies to which the Company has exposure may, from time to time, be denominated in currencies other than Euro. The Underlying Companies utilise different financial instruments to seek to hedge against declines in the value of its portfolio as a result of changes in currency exchange rates.

Section 172(1) statement

The Company, being a member of the AIC, complies with Provision 5 of the AIC Code and consequently voluntarily complies with section 172(1) of the UK Companies Act 2006 to act in a way that promotes the success of the Company for the benefit of its Shareholders as a whole, having regard to (amongst other things):

a) the likely consequences of any decision in the long-term;

b) the need to foster the Company's business relationships with suppliers, customers and others;

c) the impact of the Company's operations on the community and the environment;

d) the desirability of the Company maintaining a reputation for high standards of business conduct; and

e) the need to act fairly as between members of the Company.

The Board maintains a reputation for high standards of business conduct and endeavors to act fairly as between members of the Company by acting with integrity and establishing trust as referred to in the Company's values. Additionally, the Company complies with the Principles and Provisions of the AIC Code as detailed in the Statement of Compliance with Corporate Governance below. Information on how the Board has engaged with its stakeholders and promoted the success of the Company, whilst having regard to the above, is outlined below. This covers the key decisions the Board has taken during the year.

Stakeholder engagement

Shareholders

Service providers

Underlying company

Wider society

Regulators

Corporate Activity

The principal decisions taken below are the ones that the Board considers have the greatest impact on the Company's long-term success. The Board considers the factors outlined under the Section 172(1) statement and the wider interests of stakeholders as a whole in all decisions it takes on behalf of the Company.

Dividend policy

Share Repurchase Programme

Risk Overview

Each Director is aware of the risks inherent in the Company's business and understands the importance of identifying, evaluating and monitoring these risks. The Board has adopted procedures and controls to enable it to manage these risks within acceptable limits and to meet all of its legal and regulatory obligations.

The Board considers the process for identifying, evaluating and managing any significant risks faced by the Company on an ongoing basis and these risks are reported and discussed at Board meetings. It ensures that effective controls are in place to mitigate these risks and that a satisfactory compliance regime exists to ensure all applicable local and international laws and regulations are upheld.

Risk appetite

The Board's strategic risk appetite is to balance the amount of income distributed by the Company by way of dividend with the opportunity to reinvest the returns received from the underlying CLO investments in further CLO equity. The Board seeks to ensure that the dividend policy is sustainable. Where the Company's share price is at a material discount to the NAV per ordinary share the Board may decide to repurchase shares in accordance with its share buyback policy instead of, or as well as, reinvestment into CLOs.

When considering other risks, the Board's risk appetite is effectively governed by a cost benefit analysis when assessing mitigation measures. However, at all times the Company will seek to follow best practice and remain compliant with all applicable laws, rules and regulations.

Statement on risk management and internal controls

Principal risks and uncertainties

As recommended by the Risk Committee, the Board has adopted a risk management framework to govern how the Board identifies existing and emerging risks, determines risk appetite, identifies mitigation and controls and how the Board assesses, monitors, measures and reports on risks.

The Board's strategic risk appetite is to balance the amount of income distributed by the Company by way of dividend with the opportunity to reinvest the returns received from the underlying CLO investments in further CLO equity. The Board seeks to ensure that the dividend policy is sustainable. Where the Company's share price is at a material discount to the NAV per share the Board may decide to repurchase shares in accordance with its share buyback policy instead of, or as well as, reinvestment into CLOs.

When considering other risks, the Board's risk appetite is effectively governed by a cost benefit analysis when assessing mitigation measures. However, at all times the Company will seek to follow best practice and remain compliant with all applicable laws, rules and regulations.

The Board reviews risks at least twice a year and receives deep-dive reports on specific risks as recommended by the Risk Committee. Throughout the period under review, the Board considered a set of sixteen main risks which have a higher probability and a significant potential impact on performance, strategy, reputation or operations (Category A risks). Of these, the five risks identified below were considered the principal risks faced by the Company where the combination of probability and impact was assessed as being most significant. The Board also considered twelve other less significant existing or emerging risks (Category B risks) which are monitored on a watch list.

During the year, the day-to-day impact of the COVID-19 pandemic on the Company's investments and the operations of its service providers decreased. After Russia's invasion of Ukraine, the Portfolio Adviser reviewed the underlying portfolio of companies that the Company is exposed to and identified a very small number whose revenue and earnings might be impacted by the conflict. These positions have been closely monitored by the Portfolio Adviser and opportunities have been taken to trim the exposure, so it is now negligible. More recently, the macro-economic environment has deteriorated, with rising inflation and interest rates and the Portfolio Adviser has focused on positioning the underlying portfolio appropriately. The Portfolio Adviser has closely monitored these positions and managed their risk accordingly. Refer to above for further details. The commentary below describes the factors affecting each of the principal risks during the year.

Going concern

The Directors have considered the Company's investment objective, risk management and capital management policies, its assets and the expected income from its investments while factoring in the continuing economic impact from the inflationary environment, increasing interest rates and the impact of Russia's invasion of Ukraine. The Directors have also considered the principal risks as outlined above and have concluded that these do not have any impact on the going concern status of the Company. The Directors are of the opinion that the Company is able to meet its liabilities and ongoing expenses as they fall due and they have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, these financial statements have been prepared on a going concern basis and the Directors believe it is appropriate to continue to adopt this basis for a period of at least 12 months from the date of approval of these financial statements.

Viability statement

At least once a year the Directors carry out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity. The Directors also assess the Company's policies and procedures for monitoring, managing and mitigating its exposure to these risks. In assessing viability, the Directors have considered on an individual basis, each of the principal risks of the Company as detailed above along with the evolution of market, economic and political conditions, the Company's current position, investment objective and strategy and the performance of the Portfolio Adviser, and hence how these could impact the cash flows received by BGLF from its Lux Subsidiary and ultimately from BCF.

The Directors believe that the principal risk most likely to impact viability is that relating to investment performance. As explained above, the Company's underlying investment exposure is to the investment portfolio of BCF. BCF's portfolio comprises the following categories of investments: (i) CLO Debt and CLO Income Notes securitised by BCF, (ii) a portfolio of senior secured loans and bonds and (iii) preference shares. The majority of CLO investments in the portfolio have a non-call period of approximately two years from their origination date and cannot be redeemed until these expire.

The directors considered two extreme market scenarios.

1. Scenario 1 included assumptions which mirrored the global financial crisis, namely:

· CLO warehouses assume no cash flows for the first three years, followed by 14% yield cash flows on 50% impaired principal.

· The revolving facility assumes a 10% haircut on cash flows from the loan balance for the first three years, no haircuts are assumed for the following two years.

2. Scenario 2 included assumptions which incorporated severe spread stress, namely:

· Assumes no adjustment to the 14% statically yielding CLO warehouse cash flows.

· For the revolver, an average coupon of 3.25% was applied to a static financing vehicle based on an approximated historical run rate.

The Directors also considered other key risks on top of the above, as outlined above, and concluded that these risks do not impact the resilience or sustainability of the Company's business model. Whilst each of these key risks could have an impact on the long-term sustainability of the Company, the Directors concluded that each was sufficiently mitigated and would therefore not impact the viability of the Company over a five-year period.

The Directors have assessed the prospects of the Company over the five-year period to 30 April 2028 which the Directors have determined constitutes an appropriate period to provide its viability statement. The Directors regularly receive financial forecasts from the Portfolio Adviser presented on a quarterly basis for at least the next four to five years. The Directors believe that financial forecasts to support its investment strategy can be subject to changes dependent upon investment performance, deployment of capital and regulatory, legal and tax developments for which the impact beyond a five-year term is difficult to assess. In addition, the extent to which macro-economic, political, social, technological and regulatory changes beyond a five-year term may have a plausible impact on the Company are difficult to envisage.

The Directors continue to regularly review the Company's dividend policy, but at present are satisfied that the outcomes modelled by the Portfolio Adviser under extreme market scenarios will allow the Company to generate sufficient cash flow to meet the dividend policy and ensure that the Company is able to meet its liabilities, as they fall due. Should the Company need to take action to mitigate the threats to viability, it will consider reduction in the dividend to ensure continued viability.

On the basis of this assessment of the principal risks facing the Company and the modelled extreme market scenarios by the Portfolio Adviser used to assess the Company's prospects and in the absence of any unforeseen circumstances, the Directors confirm that 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 five-year period of their assessment. However, it is worth noting that there is no intention for the life of the Company to be limited to this five-year period.

Performance Analysis

IFRS NAV performance analysis for the years ended 31 December 2022 and31 December 2021 - contributors to change

[Graphs and charts are included in the published Annual Report and Audited Financial Statements which is available on the Company's website at https://blackstone.com/bglf]

Further commentary on the Company's performance is contained in the Chair's Statement and the Portfolio Adviser's Review.

Published NAV performance analysis for the years ended 31 December 2022 and 31 December 2021 - contributors to change

[Graphs and charts are included in the published Annual Report and Audited Financial Statements which is available on the Company's website at https://blackstone.com/bglf]

Further commentary on the Company's performance is contained in the Chair's Statement and the Portfolio Adviser's Review.

Other Information

Valuation methodology

As noted above, the Published NAV and the IFRS NAV may diverge because of different key assumptions used to determine the valuation of the BCF portfolio. Key assumptions which are different between the two bases as at 31 December 2022 and 31 December 2021 are detailed below:

All of the assumptions above are based on weighted averages.

* Deal level constant default rate

Certain assumptions which underpin the year-end Published NAV, such as reinvestment spread and the discount rate, are generally more conservative than those underlying in the IFRS NAV. The below table further explains the rationale regarding the differences in the assumptions that significantly contributed to the valuation divergence as at 31 December 2022.

Source of the Company's dividend - ordinary class

The Company through its investments in the Lux Subsidiary receives income, on a quarterly basis, on the PPNs held by the latter in BCF, which continues to generate positive cash flows from its CLO income note investments and from its portfolio of directly held and warehoused loans.

The Company redeems CSWs on a quarterly basis to transfer the income from the Lux Subsidiary. As detailed above, the Company redeemed 35,146,135 CSWs in the Lux Subsidiary during the year with a fair value of €57,293,420 to fund the quarterly dividends.

Alternative Investment Fund Managers' Directive

The AIFMD requires certain information to be made available to investors in AIFs before they invest and requires that material changes to this information be disclosed in the annual report of each AIF. There has been no material changes (other than those reflected in these financial statements) to this information requiring disclosure.

Alternative Performance Measures

In accordance with ESMA Guidelines on APMs, the Board has considered which APMs are included in the Annual Report and Audited Financial Statements and require further clarification. An APM is defined as a financial measure of historical or future financial performance, financial position or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. APMs included in the financial statements, which are unaudited and outside the scope of IFRS, are detailed in the table below.

* Refer to details on management of the discount in the Chair's Statement.

** Published NAV is an APM from which these metrics are derived.

A reconciliation of the above-mentioned APMs to the most directly reconcilable line items presented in the financial statements for the year ended 31 December 2022 is presented below:

Published NAV total return per ordinary share

Refer to Note 16 for further details on the adjustments per ordinary share.

Published NAV per ordinary share

Refer to Note 16 for further details on the adjustments per ordinary share.

(Discount)/Premium per ordinary share