Blackstone Loan Regulatory News (BGLF)

29 APRIL 2021

FOR IMMEDIATE RELEASE

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

THE BOARD OF DIRECTORS OF BLACKSTONE LOAN FINANCING LIMITED ANNOUNCE FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020

Blackstone Loan Financing Limited (formerly Blackstone / GSO Loan Financing Limited)

Annual Report and Audited Financial Statements for the Year Ended 31 December 2020

A Note From Our Chair

The Company's performance was impacted by actual and expected downgrade stresses arising from the onset of COVID-19 on the global economy in the first quarter, before largely recovering in the second half of the year.

Despite this backdrop, the Company delivered an IFRS NAV total return per Ordinary Share of 8.85% in 2020, ending the year at €0.8557 per share.

The Board's outlook for 2021 is optimistic but remains uncertain as it is predicated on the successful rollout of COVID-19 inoculations and a reduction in the virus infection rate. However, we believe a strong rebound will likely occur during the second half of 2021 due to additional stimulus, pent-up consumer demand, and the continued roll-out of vaccinations.

Charlotte ValeurChair29 April 2021

Strategic Report

Key Performance Indicators

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

Performance

([1]) Refer to Glossary for an explanation of the terms used above and elsewhere within this report

(2) Bloomberg closing price at period end

(3) Dividend Yield presented as €0.07 per annum, given the first three quarterly dividends of €0.015 per share and fourth quarter dividend of €0.025, and the share price as at 31 December 2020

Reconciliation of IFRS NAV to Published NAV

At 31 December 2020, there was a difference between the NAV per Ordinary Share as disclosed in the Statement of Financial Position, €0.8557 per Ordinary Share, ("IFRS NAV") and the published NAV, €0.8435 per Ordinary Share, which was released to the LSE on 22 January 2021 ("Published NAV"). A reconciliation is provided 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.

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 Blackstone Corporate Funding Designated Activity Company ("BCF") (formerly Blackstone / GSO Corporate Funding Designated Activity Company) 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, bids wanted in competition ("BWIC"), broker quotes or other indications) is not incorporated into this methodology. The Directors believe that this valuation process is the 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 cycle.

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 period 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. The smaller number of CLOs held directly by the Company, as a result of the Rollover Offer, are valued using a mark to market approach for both the Published NAV and IFRS NAV, consistent with the valuation methodology per the Company's Prospectus.

The Directors, as set out in the Prospectus, will continue to assess the performance of the Company using the Published NAV. Additional information and commentary on Market Colour, credit risk exposure and any material divergence from the different valuation bases referred to above will be communicated by the Directors and Portfolio Adviser if and when appropriate.

Dividend History

On 23 April 2020, pursuant to a review of BCF's portfolio in light of COVID-19, the Board announced that the Company had adopted a revised dividend policy targeting a total 2020 annual dividend of between €0.06 and €0.07 per Ordinary Share, to consist of quarterly payments of €0.015 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 revised dividend policy, the Board declared dividends of €0.015 per Ordinary Share for the first three quarters of 2020 and a dividend of €0.025 per Ordinary Share for the fourth quarter.

The Board also announced that it would keep the dividend policy under close review as the impact of the COVID-19 pandemic unfolds. Refer to Note 21 for an update to the dividend policy after the year end.

C Share Dividends for the Period Ended 31 December 2019

Refer to Corporate Activity and Note 9 for details on the conversion of the Company's C Shares into Ordinary Shares. Consequently, no dividends were declared on the C Shares between 1 January 2020 and their conversion on 6 January 2020.

Year Highs and Lows

Schedule of Investments

Schedule of Significant Transactions

Refer to Corporate Activity and Note 9 for details on the conversion of the Company’s C Shares into Ordinary Shares.

Company Returns and Net Asset Value (4) 

The Company delivered an IFRS NAV total return per Ordinary Share of 8.85% in 2020 ((18.31)% in 2019), ending the year at €0.8557 per share (€0.8543 at 31 December 2019). This return was composed of 9.11% from dividends and (0.26)% from net portfolio movement.

On a Published NAV basis, the Company delivered a total return per Ordinary Share of (0.22)% in 2020 (14.46% in 2019), ending the year at €0.8435 per share (€0.9187 at 31 December 2019). This return was composed of 8.63% from dividends and (8.85)% from net portfolio movement.

The Company's performance was impacted by actual and expected downgrade stresses arising from the onset of COVID-19 on the global economy in the first quarter, before largely recovering in the second half of the year.

An explanation of the difference between the IFRS NAV and the Published NAV is included above.

On 23 April 2020, the Board announced that the Company had adopted a revised 2020 dividend policy targeting a total annual dividend of between €0.06 and €0.07 per Ordinary Share, ultimately achieving the top end of this target range. The policy was revised downwards to prepare for potential losses and reduction in expected cash flows from the underlying CLOs as a result of the impact of COVID-19. The Company declared four dividends in respect of the year ended 31 December 2020, totalling €0.07 per share. Details of all dividend payments can be found within the Dividend History section at the front of this Annual Report.

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.

[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

In 2020, the world witnessed a global pandemic not matched in over a century. To quell the skyrocketing levels of infection, countries across the globe effectively shuttered their economies to protect their citizen's lives. The economic impact of these efforts was severe and resulted in significant financial and social repercussions. The contraction of global growth for 2020 is estimated at (3.5)%.(5) In the face of such unprecedented events, central banks and federal governments rolled out support packages to insulate economies as best they could. Advanced economies, less constrained by elevated debt levels, generally were better able to deliver large direct spending and liquidity supports relative to GDP.

In what undoubtedly would otherwise have been centre stage if not for the novel coronavirus ("COVID-19"), the Brexit trade deal discussions dragged on throughout 2020. It was not until 30 December 2020 that after much negotiating, a deal was agreed. This was greeted with welcome relief on both sides and provided certainty to businesses around trade and tariffs. In the US, Joe Biden won the presidential election and was sworn in as the 46th President of the United States. As part of President Biden's COVID-19 rescue plan, he has proposed a $1.9 trillion support package which should spur the economy forward in 2021.

Financial markets ended the year strongly, as equity bull markets recorded new highs and US and European credit assets finished the year in positive territory. This is even more impressive given the dramatic selloff in risk assets during Q1, with volatility reaching levels not recorded since the global financial crisis. The Company, through its investment in BCF was not immune to this volatility, however, with its diversified and defensively positioned portfolio, invested across multiple sectors, geographies and vintages, it was able to navigate the worst of this volatility. Global central banks' intervention and individual government support packages helped to allay market concerns around liquidity and corporate fundamentals, which provided a tailwind to risk assets as the year progressed.

Looking ahead, with growing vaccine availability and improved test and tracing capabilities, local transmission of the virus is expected to fall. As economies reopen and fiscal support packages remain in place, economic activity should increase and fiscal deficits in most countries should decline as revenues rise and expenditures decline in line with the recovery. The IMF projects global economic growth of 5.5% in 2021. This is predicated on a successful suppression of the virus, a consistent recovery in global trade activity (8% growth in 2021) and inflation to remain subdued below the 1.5% target rate of central banks. All three of these assumptions are less than certain and the inflation assumption now looking particularly suspect. Until recently investors dismissed the idea of a rapid recovery, believing that the recession led to significant scarring and a return to normality would take time. The pace of the recovery has therefore taken market participants by surprise. As demand surges, inflationary pressures will rise and leave policy makers in the unenviable position of balancing inflation and the economic recovery.

Discount Management

The share price discount to Published NAV was in the range 8.81%(6) to 36.71%(6) and averaged 21.91%(6) throughout 2020 and ended the year trading at a discount of 20.57%(5) (versus discount of 10.20% at 2019 year-end). This was mainly due to the market uncertainty brought about by the COVID-19 pandemic. As a Board, we regularly weigh the balance between maintaining liquidity of the shares, the stability of any discount, and the desire of Shareholders to see the Ordinary Shares trade as closely as possible to their intrinsic value.(7) During 2020, the Company repurchased 3,498,507 shares for €2,118,749 at an average discount of 25.18% using available cash with the goal of reducing the discount. From 1 January 2021 to 28 April 2021, the Company further repurchased 125,000 shares for €81,250 at an average discount of 23.02%. As of 28 April 2021, the share price discount to Published NAV was 8.17%.

Blackstone Loan Financing C Share Update

On 7 January 2020, the conversion of the BGLF C shares into Ordinary shares was completed. The intention to undertake this conversion was announced by BGLF on 24 October 2019, following the investment of €62.6 million into BCF with proceeds from the sale of relevant assets acquired under the C Share rollover process, which represented 85.8% (87.3% including cash) of the value of assets in the C share pool. The Conversion Ratio was based on the net assets attributable to the Ordinary Shares and C Shares as at close of business on 29 November 2019.

Brexit Update

The Board closely monitored the Brexit trade deal negotiations during 2020, which culminated with a deal being finalised on 30 December 2020. The potential implications of a "hard Brexit" as a result of no trade deal being agreed before the year end deadline to BGLF was evaluated across its service providers, including areas such as human resources, counterparty relationships, supply chains, macroeconomic, and regulatory policy, as well as with regards to its marketing registrations, and was deemed to have a negligible impact on the long-term sustainability of the Company.

COVID-19

The Directors continue to carefully monitor the ongoing developments regarding COVID-19, which continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The global impact of the outbreak continues to evolve, however, the successful development of multiple vaccines and the rollout of vaccination programmes across the globe is encouraging. Nevertheless, COVID-19 continues to present material uncertainty and risk with respect to portfolio asset performance and financial results of the Company. In addition to the factors described above, other factors that may affect market, economic and geopolitical conditions, and thereby adversely affect the Company include, without limitation, a slowdown in economic recovery in Europe and internationally, changes in interest rates and/or a lack of availability of credit in Europe and internationally, commodity price volatility and changes in law and/or regulation, and uncertainty regarding government and regulatory policy.

ESG

The practice of responsible investing remains a key focus for investors. 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. This commitment is affirmed across the organisation and guides its approach to investing. A summary of Blackstone's responsible investing approach can be found below.

The Board

Good governance remains at the heart of our work as a Board and is taken very seriously. We believe that the Company maintains high standards of corporate governance. The Board was very active during the year, convening a total of 13 Board meetings and 30 Committee meetings, as well as undertaking a virtual due diligence review in September 2020 of our Portfolio Adviser. The Board used these meetings to discuss various aspects of operational risk and controls, the loan and CLO markets, and the current market conditions.

In addition, as can be seen from the corporate activity during the year, the Board and its advisers have worked hard to ensure the continued success and growth of the Company to put it in the best position to take advantage of all appropriate opportunities.

The work of the Board is 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 joint work of the Risk and Audit committees has given valuable support to the longer-term viability considerations of the Board as described under the Viability Statement in Risk Overview.

The Company is a member of the 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.

Shareholder Communications

During 2020, using our Portfolio Adviser and Brokers, we continued our programme of engagement with current and prospective Shareholders. We sincerely hope that you found the monthly factsheets, quarterly letters, quarterly update webcasts and market commentary valuable. We are always pleased to have contact with Shareholders, and we welcome any opportunity to meet with you and obtain your feedback.

Prospects and Opportunities in 2021

The Company sold part of their equity position in one CLO in February 2021 and completely sold their equity positions in two CLOs in March 2021. All three sales were at levels accretive to the Published NAV and favourable to mark-to-market valuations.

As of 28 April 2021, the latest Published NAV was €0.8494 per share.

The Board's outlook for 2021 is optimistic but remains uncertain as it is predicated on the successful rollout of COVID-19 inoculations and a reduction in the virus infection rate. However, we believe a strong rebound will likely occur during the second half of 2021 due to additional stimulus, pent-up consumer demand, and the continued roll-out of vaccinations. With this uncertain trajectory of the markets and global economy in 2021, the Board gains comfort from the robust investment approach of the Company's Portfolio Adviser that selects an underlying portfolio of high-quality companies supported by robust underlying protections.

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

Charlotte ValeurChair29 April 2021

(4) 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.

(5) Source: IMF, as of January 2021.

(6) The discount has been calculated with reference to the Published NAV pertaining to the reporting periods ending each month end date.

(7) Represents the BGLF Euro share price.

Portfolio Adviser's Review

We are pleased to present our review of 2020 and outlook for 2021.

- Following the extreme market volatility induced by the COVID-19 pandemic and subsequent recovery in global credit markets, investors experienced a full market cycle throughout 2020.

- US loans and European loans returned 2.78% and 2.38% in 2020 and experienced a default rate of 4.4% and 1.2%, respectively.(8) By the end of the year, US and European CLO liability spreads normalised to pre-COVID-19 levels in tandem with a loan market recovery.

- Blackstone Credit CLOs outperformed peers with respect to ratings actions. Following the COVID-19 shock to credit markets, only 1.4% of Blackstone Credit US CLO bonds were downgraded, compared to 9.6% for the market. For European CLOs, 1.4% of BXC CLO bonds were downgraded, compared to 2.5% for the market.(9)

- CLO securitisations in BCF generated positive cashflow over 2020. The weighted average annualised cash on cash distribution rates for European and US CLO income notes was 15.6% and 17.1%, respectively, with strong contributions across vintages.(10)

- BCF used the robust market technical in the fourth quarter to reduce a number of CLO excess positions at levels above both the mark-to-model and mark-to-market bid prices for those positions. By freeing up capital, BCF was able to extend reinvestment periods, invest in higher return propositions, increase vintage diversity, and be better prepared for potential volatility.

Bank Loan Market Overview (11,12)

In 2020, global loan markets experienced the worst bout of volatility and market disruption since the 2008 financial crisis. This disruption was caused by the rapid spread of COVID-19 across the globe in the first quarter and the dramatic slowdown in economic activity resulting from related business shutdowns and travel restrictions. Central banks began to intervene on an unprecedented scale in March to ensure sufficient liquidity and orderly market functioning. At the same time, US and European governments enacted aggressive fiscal stimulus measures to help ease investors' and business owners' fundamental concerns. Both the US and European credit markets rebounded at an impressive rate in the months following March and ended the year with positive returns. US loans and European loans returned 2.78% and 2.38% in 2020, respectively.

Despite economic uncertainty and a pause on new issue loan supply in March 2020, the global credit markets quickly reopened to issuers in need of capital. Many corporations first bolstered their liquidity by drawing down revolving lines of credit and then refinanced existing debt at favourable rates given the downward shift in treasuries and the strong investor demand for corporate credit. Issuance in the US and European loan markets decreased year-over-year; gross US loan issuance totalled $96.6 billion, a 20% decrease, while European loan issuance also decreased by 20% in 2020 to €65 billion.(13) We expect issuance to increase in both regions in 2021.

Global loan spreads diverged in 2020. The US loan spread narrowed by 1bp to end the year at 358bp (compared to 11bp widening in 2019), while the European loan market spread widened by 14bp in 2020 (compared to 4bp widening in 2019) to end the year at 363bp. (14)

Global loan default rates were manageable throughout 2020. After peaking at 4.5%, the US loan LTM par-weighted default rate ended the year at 4.4%.(15) Defaults in Europe were more muted with the LTM default rate peaking at just 1.3% for European loans and ending the year at 1.2%. In 2021, default rate forecasts are predicted to decrease by more than half in the US to 2.0% and fall to 1.1% in Europe.(16)

CLO Market Overview (17)

Demand for both US and European CLOs was slower to materialise following the market downturn resulting in higher CLO liability spreads. Global issuance of CLOs fell in 2020 to $118 billion (down from the $151 billion in 2019). Regionally, US CLOs recorded 2020 gross issuance of $93 billion, down 21% on 2019's issuance of $118 billion. European CLO issuance fell in tandem with the US, recording gross issuance of €22 billion which was a 26% decrease on the €30 billion recorded in 2019.(18) When demand resurfaced it was for CLOs with shorter reinvestment and non-call periods. This allowed equity investors the optionality to reset liability spreads in a tighter spread environment if one materialised, and in doing so potentially boosting future CLO equity returns. By year end, US and European CLO liability spreads normalised to pre-COVID-19 levels, as the global loan market recovered and defaults slowed. CLO refinancings and resets were limited primarily to early Q1 and late Q4 when the environment was more favourable. US CLO managers completed $32 billion in CLO refinancings and resets in 2020, while European CLO issuers recorded just €1 billion of refinancings and resets.

US CLO fundamentals mostly deteriorated in 2020 due to difficulties experienced by the underlying companies. Year on year, minimum OC cushions fell (from 410bp to 277bp), WARF levels deteriorated (from 2862 in 2019 to 3116 in 2020), and exposure to CCC assets rose (from 3.7% in 2019 to 7.7% in 2020). Although a deterioration when compared to 2019 year end, these fundamentals improved significantly from their June 2020 levels. Weighted Average Asset Price ("WAP") ended 2020 at 97.3%, broadly in-line with December 2019 levels and Weighted Average Spreads ("WAS") increased by 27bp to 377bp.

European CLO fundamentals also deteriorated in 2020. OC cushions decreased from 430bp to 348bp, WARF increased from 2964 to 3261 and CCC buckets increased from 1.9% in 2019 to 6.4%. WAP recovered well to 97.9%, although remained below the 2019 level of 98.8%, while WAS decreased by 2bp to 377bp. Fundamental CLO deterioration in both the US and Europe during 2020 resulted in some CLOs in the market breaching their OC or interest diversion tests and impacting cash flows to investors.

Gross primary CLO issuance forecasts are up in both the US and Europe for 2021 as a result of favourable equity arbitrage, anchored in a tightening of the AAA spread and continued improvement in loan fundamentals. US CLO issuance is forecast to grow by 9-19% to $100-$110 billion. In Europe, the 2021 CLO gross issuance is forecast to return to the 2019 levels of between €25-€30 billion. Including forecasts for refinancing/reset volumes for 2021, European CLO issuance could reach a new record of between €54-€64 billion.

Portfolio Update

BCF

In recognition of a credit cycle that extended well beyond the average cycle, we had been proactively reducing risk within the loan portfolios in the years leading up to 2020. As such, the BCF CLOs were well positioned for the unexpected dislocation related to the economic shutdowns due to COVID-19 and demonstrated greater resilience relative to the broader universe of CLOs both in the US and in Europe.(19) BCF CLOs experienced lower CCC exposures and fewer CLO tranche downgrades versus peers in 2020. All 45 BCF CLO equity positions continued to receive uninterrupted cash flows, with none of the BCF CLOs experiencing a breach in either their minimum OC or interest diversion tests during the year.

Performance of Blackstone managed CLOs was broadly recognised by the market in 2020.(20)Blackstone was able to access the capital markets and reopen the CLO market with the first new CLO issuance after the market had been shut for several weeks in the first quarter. Additionally, in 2020, as CLO debt investors re-engaged in the CLO market, they recognised and compensated BX Credit for superior portfolio quality and performance with lower cost of CLO liabilities to the benefit of BX Credit subordinated note investors, including BCF and BGLF.

Throughout 2020, BCF purchased €5.6 billion of assets (€2.2 billion net of sales). Additionally, BCF grew its CLO portfolio, through investments in four European CLOs, and four US CLOs, together representing €2.9 billion of loan assets. BCF also invested $32.1 million in a US CLO warehouse, a portion of which was termed out into a CLO during the year. These new CLOs further diversified the portfolio across vintages and while their reinvestment periods were zero to three years and shorter than the four-to-five-year reinvestment periods of prior years, the addition of new CLOs to the portfolio helped to offset the effect of the passage of time within the existing CLO portfolio. Overall, the pro-forma year end portfolio reinvestment period was 1.9 years versus 2.6 years in January 2020.

CLOs continued to generate positive cashflow in BCF during 2020 albeit net income declined year-over-year due in part to a second quarter LIBOR mismatch experienced in the US CLOs which was subsequently corrected by the third quarter. The weighted average annualised cash-on-cash distribution rates for European and US CLO income notes was 15.6% and 17.1%, respectively, with strong contributions across vintages.

As of 31 December 2020, 41% of BCF's portfolio was composed of US CLO Income Notes (the most subordinated tranche of debt issued by a CLO) and CLO warehouses (first loss positions), compared to 45% in December 2019. European CLO Income Notes increased to 41% from 36% at the end of 2019. Exposure to directly held loans, net of leverage, reduced from 19% to 13%.(21)

Through its investment in BCF, BGLF took advantage of improved liquidity and equity valuations in the market and sold down certain positions in which the holding quantities were in excess of required retention or majority level. These market transactions demonstrated a depth of demand for the positions sold, with executed prices that exceeded modelled marks, as well as mark-to-market bid prices. We believe this strong execution was in part due to scarcity of Blackstone CLO equity, as well as in recognition of expected future performance. We view the successful sale of the excess CLO positions as a validation of the mark-to-model valuation used by BCF.

As the impact of COVID-19 on the global economy became apparent in early 2020, our analyst team engaged with management of our borrowers and sponsors in an effort to re-underwrite the risk across our loan portfolio and better understand the economic impact of the pandemic on our borrowers, as well as the risk of potential downgrade and default. These views were then utilised to help forecast for each CLO, the potential failures of interest diversion or OC tests in order to determine the potential for CLO equity cash flow disruptions, if any. This analysis has continued to be updated each quarter and provides guidance on projected net income available to BGLF.

Importantly, because every CLO owned within this strategy is also managed by Blackstone Credit, we have underwritten in detail every loan to which each CLO is exposed. This, in conjunction with our team and proprietary tools, allows us to conduct the type of bottom up analysis which differentiates BGLF relative to peer funds. This analysis is a critical component of our investment process, and as a result, is one of our core competencies. While individual company analysis is clearly central to what we do, aggregating this into a portfolio view and then a CLO view is central to our day-to-day CLO management process.

The NAV is influenced by both the actual performance of loans and CLOs as well as by forward views and assumptions for credit performance. Loans performed throughout the year and the default loss rate for the portfolio was 0.08%, compared to 0.48% for European Loans and 2.46% for US loans.(22) Following the initial dislocation in the broader markets in March, swift response by governments with fiscal stimulus provided an ample injection of liquidity to financial markets, which in turn had the effect of positively shifting the market sentiment and outlook for credit with each subsequent quarter. These factors supported a continued improvement in the NAV and by year end, while the NAV had not fully recovered to pre-COVID levels, the outlook remains positive for further recovery.

We continue to focus on liability management and while 2020 did not afford many opportunities to refinance liabilities or extend maturities, as we look ahead, we find the portfolio well positioned to take advantage of the current technical strength in the CLO liability market. So far in 2021, there has been a steady volume of CLO refinancings and resets of all vintages. Within our portfolio, we continue to actively evaluate each CLO that is callable in this calendar year and anticipate a busy year of CLO activity including new issues and refinancings and resets where accretive to do so. As it relates to liability management, we are focused on improving the portfolio net interest margins in the near term and ensure that the structures provide for sufficient flexibility in portfolio and risk management over the longer term.

CLO Portfolio Positions (23)

As at 31 December 2020, the portfolio was invested in accordance with BCF's investment policy and was diversified across 682 issuers (684 issuers in 2019) through the directly held loans and CLO portfolio, and across 30 countries (27 countries in 2019) and 29 different industries (31 industries in 2019). No individual borrower represented more than 2% of the overall portfolio at the end of 2020.

Key Portfolio Statistics (24)

Top 10 Industries

Top 5 Countries

** Netherlands was not part of the Top 5 as at 31 December 2019. Germany made up 3.86% of the Portfolio as at 31 December 2019.

Top 20 Issuers

Directly Held CLOs

The majority of the outstanding positions of Rollover Assets were sold within the first quarter of 2020. As of 31 December 2020, the market value of Rollover Assets totalled €549,437 or 0.13% of NAV.

Regulatory Update

In Europe, the European Regulation on sustainability-related disclosures in the financial services sector ("SFDR") was published on 27 November 2019. With an effective date of 10 March 2021, SFDR requires certain firms, including private banks, wealth managers and advisers to comply with new rules on disclosure as regards sustainable investments and sustainability risks. Asset managers, including Blackstone Credit ("BX Credit") (formerly GSO Capital Partners LP), have been working to implement procedures which will allow us to comply with the SFDR when the regulatory reporting requirements come into effect in January 2022. BX Credit continues to monitor regulatory developments with regards to SFDR, including the publication of additional Regulatory Technical Standards.

In connection with the Securitisation Regulation, widely anticipated secondary legislation setting out the prescribed form of reporting templates was published on 3 September 2020 and use of these reporting templates became mandatory to investors from 23 September 2020. BX Credit was well positioned to transition to the use of these formal reporting templates, and these reporting templates are used in respect of all in-scope CLOs.

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

For over 35 years, Blackstone has been committed to being a responsible investor. This commitment is affirmed across the organisation and guides our approach to investing. We believe that adequate consideration of environmental, social, and governance ("ESG") factors for each potential investment enhances our assessment of risk and also helps us identify opportunities for transformation at each company where we invest. Consequently, we believe that a comprehensive ESG program drives value and enhances returns. We also believe that understanding ESG factors helps us understand trends and how they will shape demand and markets in years to come. Our framework applies to all investment opportunities, though the exact application of that framework varies by asset class, investment objective and the unique characteristics of each investment.

Objectives

Blackstone's responsible investing objectives are outlined below:

§ Integration

Consider environmental, social, and governance issues when evaluating investment opportunities and when managing / monitoring portfolios and assets. Pursue high-quality sources of ESG data and intelligence; where appropriate, integrate that data into our research process and also use that data to enhance our understanding of markets and consumer trends. Actively use ESG considerations to transform our portfolio companies in ways that both manage risk and are value accretive for our investment portfolios. In addition, integrate ESG considerations into our business practices outside of the investment process.

§ Engagement

Work together with our portfolio entities, managers, transaction partners, peers, and other partners to advance principles of responsible investment and corporate social responsibility. Share our ESG philosophy broadly and use our leadership position to influence others and advance the dialogue of the importance of ESG integration in finance and for corporate actors generally.

§ Reporting

Be transparent with our investors and other stakeholders about Blackstone's responsible investing initiatives, successes, and goals.

Approach and Responsibilities

Across all of Blackstone's businesses, ESG is core to what we do. Our approach includes an evaluation of ESG considerations (pre- and post-investment decision making) as a standard part of the investment and the asset / portfolio management processes. Primary responsibility lies with our investment teams because these considerations support investment decisions. Together with Portfolio Operations and our asset management teams, the investment teams are also expected to continue to keep these issues front of mind through the life of the investment.

BX Credit's Chief Sustainability Officer supports the investment and asset management teams by driving initiatives that are aimed at improving operational and environmental performance across the portfolio. Other functional experts within Portfolio Operations (including Talent Management, Procurement and Healthcare Cost Containment) are expected to consider ESG insights in delivering operating intervention capabilities across the portfolio.

The ESG team coordinates ESG initiatives across the firm to ensure consistency in approach and, with the assistance of the Legal & Compliance department, compliance with this policy. The ESG team is also responsible for establishing and/or revising this Policy in consultation with BX Credit's ESG Steering Committee which is comprised of professionals from across the firm's business units and functional groups, investor reporting, and also for reporting on ESG integration across BX Credit to Blackstone's President and Chief Operating Officer.

[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]

Blackstone Credit's Commitment to ESG

BX Credit believes that a key component of being a prudent investor is an active evaluation of the ESG components of its investments to assess the potential economic effects thereof. Review of ESG risks to investment performance is integrated into BX Credit's investment analysis and decision-making processes from pre-investment diligence to post-investment monitoring. BX Credit recognises the value that incorporating 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 applicable ESG factors into its decision-making processes, as summarised below:

Due Diligence Process

Investment teams within BX Credit consider ESG factors that may impact investment performance during the due diligence phase of an investment. ESG due diligence will vary based on (i) the nature of BX Credit's investment, (ii) the transaction process and timeline, (iii) the level of access to information, specifically as it pertains to ESG factors, and (iv) the target portfolio company's (the "Target") sector or business model. For all investments, BX Credit endeavours to review all syndication materials and other public sources of information to develop insights into the Target's business and operations and to facilitate the identification of environmental, social or governance matters that have affected or may be affecting the Target.

Reporting to Investment Committee

Material ESG issues arising from diligence are described in the appropriate investment committee materials and discussed in the relevant investment committee forum.

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 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 considerations that warrant investment committee discussion, both in the context of the company's industry and on a stand-alone basis.

As a credit investor, BX Credit will have less control over portfolio companies than equity investors; however, we may seek to reinforce certain aspects of value-enhancing ESG compliance through contractual obligations and covenants in governing agreements with portfolio companies. Underwriting due diligence includes among other things, material environmental, public health, safety, social and governance issues associated with lending to a company.

At this time the BX Credit does not explicitly track exposure to climate risk or monitor the carbon footprint of an investment. In practice, we take the ESG factors that may impact investment performance into consideration and incorporate such factors into our initial evaluation of an investment and our ongoing investment monitoring process. Our evaluation criteria are based on the materiality of the ESG risk considering (a) whether it has a current impact or a potential future impact and (b) any mitigating actions the issuer undertakes to address the risk. In general, industries with a high carbon footprint face significant transition risk with regard to climate change, and that risk would need to be evaluated before making an investment decision.

Furthermore, in 2020, BX Credit worked with a third party ESG consulting firm to draft a set of ESG sector-specific guidelines. These sector guidelines are intended to help analysts conduct focused due diligence on the issuers in which we invest through active engagement with the company and, if applicable, the sponsor. BX Credit is working to directly integrate the sector guidelines into our investment procedures during 2021.

Blackstone Ireland Limited

29 April 2021

(8) Source: Credit Suisse Leveraged Loan Index, Credit Suisse Western European Leveraged Loan Index (Hedged to Euro), Credit Suisse Default Report, 31 December 2020.

(9) Source: Blackstone Credit analysis as at 31 December 2020. Certain tranches of CLOs may have been placed on negative watch, affirmed, or downgraded by more than one rating agency. Analysis includes non-BCF CLOs.

(10) Blackstone Credit, Intex. As at 7 January 2021.

(11) Source: S&P LCD, data as of 31 December 2020.

(12) Source: Credit Suisse, as of 31 December 2020. US loans and European loans are represented by the Credit Suisse Leveraged Loan Index and Credit Suisse Western European Leveraged Loan Index (Hedged to Euro), respectively.

(13) Source: S&P LCD, data as of 31 December 2020.

(14) Source: Blackstone Credit analysis as at 31 December 2020. Certain tranches of CLOs may have been placed on negative watch, affirmed, or downgraded by more than one rating agency. Analysis includes non-BCF CLOs

(15) Source: Credit Suisse, as of 31 December 2020.

(16) Source: Credit Suisse, as of 31 December 2020, J.P.Morgan, as of 1 March 2021.

(17) Sources: S&P/LCD, Barclays, data as of 31 December 2020.

(18) Source: LCD, data as of 31 December 2020.

(19) Demonstrated by the BCF portfolio recorded a loss rate below that of both US and European loans as measured by Credit Suisse.

(20) Demonstrated by demand for BX Credit CLO Equity positions sold during the year and pricing achieved on new issue CLOs.

(21) Portfolio percentages are based on BCF NAV as of 31 December 2020.

(22) Source: Credit Suisse, as of 31 December 2020.

(23) As of 31 December 2020.

(24) As of 31 December 2020.

Strategic Overview

Purpose

The Company's purpose is to provide permanent capital to BCF, a company established by Blackstone Ireland Limited ("BIL") (formerly Blackstone / GSO Debt Funds Management Europe Limited) 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 our values, which form the backbone of what the Company does and are an important part of our culture.

Values

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

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

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

Sustainability - As an investment company we aim to maintain and deliver attractive and sustainable returns for our 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. Up until their conversion into Ordinary Shares on 7 January 2020, the Company's C Shares were quoted on the SFS of the Main Market of the LSE. Refer to Corporate Activity for further details on the C Share conversion.

The Company's authorised share capital consists of an unlimited number of shares of any class. As at 31 December 2020, the Company's issued share capital was 477,023,331 Ordinary Shares. The Company also held 5,879,463 Ordinary Shares in treasury.

The Company has a wholly-owned Luxembourg 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 2020 all of the Class A and Class B shares were held by the Company together with 284,879,854 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 also holds directly held CLO Mezzanine Notes which formed part of the Rollover Assets and are yet to be realised and reinvested in CSWs.

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. Blackstone Liquid Credit Strategies LLC ("BLCS") (formerly GSO / Blackstone Debt Funds Management LLC) acts as Portfolio Manager in relation to the Rollover Assets (as defined in the Company's Prospectus published on 23 November 2018).

BNP Paribas Securities Services S.C.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 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 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.

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.

The Company incorporates ESG factors as part of its investment strategy. Refer below for further details.

The Company operates with Euro as its functional currency. The Rollover Assets and 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. In accordance with the Company's investment policy, up to 100 per cent. (as appropriate) of the Company's exposure to such non-Euro assets is hedged, subject to suitable hedging contracts being available at appropriate times and on acceptable terms.

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 interests of the Company's employees;

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

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

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

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

The Board maintains a reputation for high standards of business conduct and endeavours 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

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.

C Share Conversion

Broker Update

COVID-19

Revised 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 through the structure. The Board seeks to ensure that the dividend policy is sustainable without eroding capital. 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.

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; assesses, monitors and measures risk; and reports on risks.

The Board reviews risks at least twice a year and receives deep-dive reports on specific risks as recommended by the Risk Committee (refer to the Risk Committee Report). Throughout the year under review the Board considered 15 main risks which have a higher probability and a significant potential impact on performance, strategy, reputation, or operations (Category A risks). Of these, the first four 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 another 14 less significant existing or emerging risks (Category B risks) which are monitored on a watch list.

During the year, as the COVID-19 pandemic grew, the Board and the Risk Committee considered the impact that the situation would have on the Company's business and its service providers. As a result, the Board elevated risks relating to Reliance on Service Providers and Business Continuity from Category B to Category A and downgraded risk relating to Third Party Investors in the Originator from Category A to Category B. Category A risks relating to Reporting and Filing Deadlines and Tax, Legal and Regulatory Requirements were merged. Due to the material impact that the epidemic was expected to have on the Company, society and the economy, the existing four principal risks below were considered through the lens of COVID-19 and a fifth principal risk was added regarding operational risk, that aggregates a number of Category A risks that are operational in nature.

Brexit

The Directors do not believe that the UK's departure from the European Union poses a significant ongoing risk to the Company other than any impact reflected generally in international markets and the global economy. Last year, the Directors held discussions with the Portfolio Adviser's Brexit planning team to gain comfort that any other Brexit associated risk was mitigated. In addition, the Portfolio Adviser's fundamental credit research team of 35 investment professionals reviewed BCF's portfolio of UK-exposed issuers, based on potential impact as a result of Brexit. When considering Brexit's impact on the portfolio, it is important to look at not just where the credit is domiciled, but what the exposure is to the UK and the impact of Brexit specifically related to that business. The team identified and analysed what they believed to be the main risks for UK businesses that could potentially have an impact on margins, availability of goods, and employees, which include but are not limited to: foreign exchange risk, tariffs, supply chain impacts, availability of workers, consumer confidence, and regulatory changes.

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 economic impact the outbreak of COVID-19 had during 2020 and continues to have into 2021, as discussed further in the Chair's Statement and the Portfolio Adviser's Review. 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 the principal risks of the Company as detailed below along with the evolution of market conditions pursuant to the outbreak of the COVID-19 pandemic, the Company's current position, investment objective and strategy and the performance of the Portfolio Adviser.

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 have considered each of the principal risks of the Company that could materially affect the cash flows derived from these investments and hence how these could impact the cash flows received by BGLF from BCF.

The Directors adjusted the Company's dividend policy for the calendar year 2020, pursuant to the comprehensive discussions between the Directors and the Portfolio Adviser regarding the portfolio review and uncertain near-term outlook. On 23 April 2020, the Directors announced they had adopted a revised dividend policy targeting a total 2020 annual dividend of between €0.06 and €0.07 per Ordinary Share, to consist of quarterly payments of €0.015 per Ordinary Share for the first three quarters and a final quarter payment of a variable amount to be determined at that time. The adjustment to the Company's dividend policy had a positive effect on the Company's cash and cash equivalents while allowing the Directors to assess the impact of the COVID-19 pandemic and provide for any unforeseen consequences. As the year progressed and more information became available on the impact of COVID-19 on BCF's portfolio, in line with the revised dividend policy, the Board declared dividends of €0.015 per Ordinary Share for the three quarters of 2020, and a dividend of €0.025 per Ordinary Share for the fourth quarter.

The Directors continue to regularly review the revised dividend policy, but at present are satisfied that the outcomes modelled by the Portfolio Adviser under extreme market scenarios, in light of COVID-19 and the adoption of a revised dividend policy will allow the Company to generate sufficient cash flow and ensure that the Company would be able to meet its liabilities, as they fall due.

The Directors have assessed the prospects of the Company over the five-year period to 30 April 2026, 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 macroeconomic, 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 also considered other key risks. 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.

On the basis of this assessment of the principal risks facing the Company and the modelled extreme market scenarios by the Portfolio Adviser, including the potential impact of COVID-19, 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 2020 And 31 December 2019 - 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 2020 And 31 December 2019 - 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 2020 and 31 December 2019 are detailed below:

All of the assumptions above are based on weighted averages.

Certain assumptions, which underpin the year-end Published NAV, such as a lower conditional prepayment rate, discount rate and a 12-month recovery lag on assumed defaulted assets, are generally more conservative. The below table further explains the rationale regarding the differences in the assumptions that significantly contributed to the valuation divergence as at 31 December 2020.

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 41,678,730 CSWs in the Lux Subsidiary during the year with a fair value of €51,840,511 to fund the quarterly dividend.

Alternative Investment Fund Managers' Directive

The Alternative Investment Fund Managers' Directive ("AIFMD") requires certain information to be made available to investors in alternative investment funds ("AIFs") before they invest and requires that material changes to this information be disclosed in the annual report of each AIF. There have 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.

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 2020 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

Refer to Note 16 for further details on the adjustments per Ordinary Share.

(25) Published NAV is an APM from which these metrics are derived

(26) Refer to details on management of the discount in the Chair's Statement

Future Developments

Significant Events after the Reporting Period

On 6 January 2021, the Company announced that at the Extraordinary General Meeting held earlier that day a special resolution had been duly passed to change the name of the Company from 'Blackstone / GSO Loan Financing Limited' to 'Blackstone Loan Financing Limited'.

On 13 January 2021, the Company announced that the name change had taken effect from and including 11 January 2021.

On 22 January 2021, the Board declared a dividend of €0.025 per Ordinary Share in respect of the period from 1 October 2020 to 31 December 2020 with an ex-dividend date of 4 February 2021. A total payment of €11,923,083 was processed on 5 March 2021.

On 23 April 2021, the Board declared a dividend of €0.0175 per Ordinary Share in respect of the period from 1 January 2021 to 31 March 2021 with an ex-dividend date of 6 May 2021. The dividend will be paid on 4 June 2021.

Updated Conflict Disclosures

On 2 March 2021 the Company announced that it was seeking acknowledgment by Shareholders of certain updated disclosures with respect to potential conflicts of interest which may arise within The Blackstone Group, Inc., available online at www.bglf.co.uk under Terms of Reference & Key Roles. A formal request was sent to Shareholders asking for their acknowledgement.

Share Repurchase Programme

On 12 March 2021 the Company announced that the Company's Joint Brokers had been appointed to manage a share repurchase programme to repurchase Ordinary shares within certain pre-set parameters, which would run until 26 May 2021.

Repurchase of Ordinary Shares

During the period from 1 January 2021 to 28 April 2021, the Company repurchased 125,000 shares at a cost of €81,250.

Outlook

It is the Board's intention that the Company will pursue its investment objective and investment policy as detailed above. Further comments on the outlook for the Company for the 2021 financial year and the main trends and factors likely to affects its future development, performance and position are contained within the Chair's Statement and the Portfolio Adviser's Review.

Directors' Biographies

The Directors appointed to the Board as at the date of approval of this Annual Report and Audited Financial Statements are:

Charlotte Valeur

Position: Chair of the Board (non-executive and independent director, resident in Jersey) 

Date of appointment: 13 June 2014

Charlotte Valeur has extensive experience in financial markets as an investment banker and is an experienced FTSE Non-Executive Director and Chair. 

She is a regular public speaker and delivers training in corporate governance globally. In addition, she conducts board reviews and advises boards on corporate governance through her company Global Governance Group and is a visiting Professor in governance at University of Strathclyde.

Charlotte has substantial board experience as Chair of FTSE250 Kennedy Wilson Europe Real Estate Plc, Chair of DW Catalyst Fund Ltd, NED of Renewable Energy Generation Ltd, NED of Phoenix Spree Deutschland Ltd, NED of JPMorgan Convertibles Income Fund, NED of FTSE250 3i Infrastructure Plc and NED of DGI9 Plc. Her unlisted company board experience includes NED of NTR Plc, NED of Laing O'Rourke and Chair of the U.K. Institute of Directors. She is also Chair and founder of Board Apprentice.

She is a member of the London Stock Exchange Primary Markets Group and serves on the Advisory Board of the Moller Institute, Churchill College, and University of Cambridge.

Gary Clark, ACA

Position: Chair of the Remuneration and Nomination Committee and NAV Review Committee; Senior Independent Director (non-executive and independent director, resident in Jersey) 

Date of appointment: 13 June 2014

Gary Clark acts as an independent non-executive director for a number of investment managers including Emirates NBD, Aberdeen Standard Capital and ICG. Until 1 March 2011 he was a managing director at State Street and their head of Hedge Fund Services in the Channel Islands. Gary Clark, a Chartered Accountant, served as chairman of the Jersey Funds Association from 2004 to 2007 and was managing director at AIB Fund Administrators Limited when it was acquired by Mourant in 2006. This business was sold to State Street in 2010. Prior to this Gary Clark was managing director of the futures broker, GNI (Channel Islands) Limited in Jersey.

A specialist in alternative investment funds, Gary Clark was one of several practitioners involved in a number of significant changes to the regulatory regime for funds in Jersey, including the introduction of both Jersey's Expert Funds Guide and Jersey's Unregulated Funds regime.

As a Chartered Accountant with over 30 years' experience in financial services, including many years focused on running fund administration businesses in alternative asset classes, Gary Clark brings a wealth of highly relevant experience, at both board level and as an executive, in fund / asset management operations, including in particular valuation, accounting and administrative controls and processes.

DIRECTORS' REPORT

The Directors present the Annual Report and Audited Financial Statements for the Company for the year ended 31 December 2020.

Directors

The Directors of the Company on the date the financial statements were approved are detailed above. All directors were directors of the Company throughout the year ended 31 December 2020.

The Board and Employees

The Board currently comprises three male and two female Directors. The Company has no employees and therefore there is nothing further to report in respect of gender representation within the Company.

Full details of the Company's policy on Board Diversity can be found in the Corporate Governance Report.

Share Capital

The Company's share capital consists of an unlimited number of shares. As at 31 December 2020, the Company's issued share capital consisted of 477,023,331 Ordinary Shares, excluding 5,879,463 treasury shares (31 December 2019: 402,319,490 Ordinary Shares and 133,451,107 C Shares, excluding 2,380,956 treasury shares).

Share Repurchase Programme

At the 2019 AGM, held on 11 July 2019, the Directors were granted authority to repurchase up to 60,307,691 Ordinary Shares (being equal to 14.99% of the aggregate number of Ordinary Shares in issue at the date of the AGM) for cancellation, or to be held as treasury shares.

Under this authority, the Company has repurchased a total of 105,000 Ordinary Shares at a total cost of €70,100 (excluding fees and commissions).

At the 2020 AGM, held on 16 July 2020, the Directors were granted authority to repurchase up to 72,014,484 Ordinary Shares (being equal to 14.99% of the aggregate number of Ordinary Shares in issue at the date of the AGM) for cancellation, or to be held as treasury shares.

Under this authority, the Company has repurchased a total of 3,393,507 Ordinary Shares at a total cost of €2,048,649 (excluding fees and commissions) during the year ended 31 December 2020.

Under this authority, the Company has repurchased a total of 125,000 Ordinary Shares at a total cost of €81,250 (excluding fees and commissions) during the period from 1 January 2021 to 28 April 2021.

The Directors intend to seek annual renewal of this authority from Shareholders.

Authority to Allot

At the 2020 AGM, the Directors were granted authority to allot, grant options over, or otherwise dispose of up to 48,041,683 Ordinary Shares (being equal to 10.00% of the aggregate number of Ordinary Shares in issue at the date of the AGM). This authority will expire at the 2021 AGM.

Shareholders' Interests

As at 31 December 2020, the Company had been notified, in accordance with Chapter 5 of the Disclosure Guidance and Transparency Rules (which covers the acquisition and disposal of major shareholdings and voting rights), of the following Shareholders with an interest of greater than 5% in the Company's issued share capital:

Between 31 December 2020 and 28 April 2021, no notifications were received.

Statement of Disclosure of Information to the Auditor

The Directors who held office as at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware and that they have taken the steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Environmental, Employee, Social, Community and Human Rights Matters

The Company is a closed ended investment company with no employees, and therefore its environmental and climatic impact is minimal. The Board notes that the companies in which BCF invests (either directly or indirectly) may have an environmental, social and governance impact. The Board have obtained and reviewed BX Credit's Responsible Investing Policy and considered their perspective on climate change. The Board noted that BX Credit is of the belief that a key component of being a responsible investor is an active evaluation of ESG components of its investments. Hence, a review of ESG risks is integrated into BX Credit's investment analysis and decision-making processes from pre-investment diligence to post-investment monitoring. BX Credit recognises the value that incorporating ESG factors in investment research creates both in terms of mitigating risk and enhancing long-term performance across investments. BX Credit integrates review and consideration of applicable ESG factors into its decision-making processes. Refer to the Portfolio Adviser's Review for further details on the Portfolio Adviser's ESG policy.

Modern slavery

The Company would not fall into the scope of the UK Modern Slavery Act 2015 (as the Company does not have any turnover derived from goods and services) if it was incorporated in the UK. Furthermore, as a closed-ended investment company, the Company has no employees and its supply chain is considered to be low risk given that suppliers are typically professional advisers based in either the Channel Islands or the UK. Based on these factors, the Board have considered that it is not necessary for the Company to make a slavery and human trafficking statement.

Gary Clark

Director

29 April 2021

CORPORATE GOVERNANCE REPORT

Statement of Compliance with Corporate Governance

The Board of the Company has considered the Principles and Provisions of the AIC Code. The AIC Code addresses the Principles and Provisions set out in the UK Code, as well as setting out additional Provisions on issues that are of specific relevance to the Company, as an investment company.

The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the FRC and supported by the Jersey Financial Services Commission provides more relevant information to shareholders.

The Company has complied with the Principles and Provisions of the AIC Code as they apply to the Company.

The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the Principles and Provisions set out in the UK Code to make them relevant for investment companies.

The Board

The Board consists of five non-executive directors. Their biographies can be found above.

The Board meets at least four times a year and is in regular contact with the Portfolio Adviser, the Portfolio Manager, the Administrator and the Company Secretary. Furthermore, the Board is supplied with information in a timely manner from the Portfolio Adviser, Portfolio Manager, the Company Secretary and other advisers in a form and of a quality appropriate for it to be able to discharge its duties.

Board Apprentices

The Board participates in the Board Apprentice scheme and took on 2 Board Apprentices from 1 April 2021, having previously taken on two Board Apprentices for one year in October 2018. The Board consider this a valuable exercise in mentoring already accomplished individuals to be future directors, fostering equality and developing board culture.

Duties and Responsibilities

The Board has overall responsibility for maximising the Company's success by directing and supervising the affairs of the business and meeting the appropriate interests of Shareholders and relevant stakeholders, while enhancing the value of the Company and also ensuring the protection of investors. A summary of the Board's responsibilities is as follows:

· statutory obligations and public disclosure;

· strategic matters and financial reporting;

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

· other matters having a material effect on the Company.

The Board is responsible to Shareholders for the overall management of the Company. The Board has delegated certain operational activities of the Company to the Portfolio Adviser, Administrator and Company Secretary. The Board reserves the power of decisions relating to the determination of investment policy, the approval of changes in strategy, capital structure, statutory obligations and public disclosure, and the entering into of any material contracts by the Company.

Board Attendance

The following table shows the number of meetings held by the Board and each committee for the year ended 31 December 2020, as well as the Directors' and Committee Members' attendance.

Chair

The Chair is responsible for leadership of the Board, ensuring its effectiveness on all aspects of its role and setting its agenda. The Chair is also responsible for ensuring that the Directors receive accurate, timely and clear information and for effective communication with Shareholders.

Board Independence

For the purpose of assessing compliance with principle G, provisions 10 and 13 of the AIC Code, the Board considers all of the current Directors to be independent.

The Directors consider that there are no factors, as set out in provision 13 in the AIC Code, which compromise the other Directors' independence and that all Directors contribute comprehensively to the affairs of the Company. The Board reviews the independence of all Directors annually. The Company Secretary acts as secretary to the Board and Committees and, in doing so, assists the Chair in ensuring that all Directors have full and timely access to all relevant documentation, organises induction of new Directors, is responsible for ensuring that the correct Board procedures are followed and advises the Board on corporate governance matters.

Board Evaluation

During 2020, the Board conducted their own review using BoardMetrix, a board evaluation tool. This evaluation assessed the Board's performance in the following areas:

· board composition/skills;

· strategic review;

· workings of the board;

· risk oversight;

· performance oversight; and

· stakeholder management.

The performance of each Director and the Committees of the Board were also assessed as part of this evaluation.

The evaluation concluded that the Board was strong across all of the above areas and that the Directors and the Board's Committees were performing effectively. No significant recommendations were made which are required to be brought to the attention of the Shareholders.

Committees of the Board

The Board has established six committees: an Audit Committee; a Management Engagement Committee; a NAV Review Committee; a Remuneration and Nomination Committee; a Risk Committee; and an Inside Information Committee. Each committee has formally delegated duties and responsibilities within written terms of reference. These are available on the Company's website, blackstone.com/bglf, under "Terms of Reference".

The current committee memberships are detailed below.

(27) The Inside Information Committee is a committee of any two Directors.

Audit Committee

The terms of reference state that the Audit Committee will meet not less than three times a year and will meet with the Auditor at least once a year. The report on the role and activities of this committee and its relationship with the Auditor is included in the Audit Committee Report.

Management Engagement Committee

The terms of reference state that the Management Engagement Committee shall meet at least once a year; will have responsibility for monitoring and reviewing the Portfolio Adviser's performance; and will recommend to the Board whether the continued appointment of the Portfolio Adviser is in the best interests of the Company and Shareholders.

NAV Review Committee

The terms of reference state that the NAV Review Committee shall meet at least once a month to review and consider the Company's NAV calculation, fact sheet and related stock exchange announcement(s).

Remuneration and Nomination Committee

The terms of reference state that the Remuneration and Nomination Committee will meet not less than twice a year and shall be responsible for all aspects of the appointment and remuneration of Directors. The remuneration duties of the committee include determining and agreeing with the Board the framework or broad policy for the remuneration of the Directors and to review its ongoing appropriateness and relevance.

The nomination duties of the committee include regularly reviewing the structure, size and composition of the Board, including the balance of skills, experience, independence and knowledge, as well as identifying, nominating and recommending for the approval of the Board, candidates to fill Board vacancies as they arise.

Director Re-Election and Tenure

The Remuneration and Nomination Committee and the Board are strongly committed to striking the correct balance between the benefits of continuity and those that come from the introduction of new perspectives to the Board.

It is the intention of the Board that each Director will retire after no longer than nine years in their role and the Board has adopted a policy whereby all Directors will be put up for re-election every year. Accordingly, all Directors will be put forward for re-election at the forthcoming AGM. Each of the Directors has demonstrated a strong commitment to the Company and the Board believes each Director's re-election to be in the best interests of the Company.

The Board also maintains a succession planning matrix covering the Directors' skills, the Board's diversity, and the Directors' expected year of retirement should they hold office for nine years. The matrix is used by the Remuneration and Nomination Committee to identify any additional skills that would benefit the Board and to help the Remuneration and Nomination Committee establish when to begin recruiting for any new directors. The Board also keeps its diversity under review.

Risk Committee

The terms of reference state that the Risk Committee shall meet at least two times a year. The activities of this committee are outlined in the Risk Committee Report.

Inside Information Committee

The Inside Information Committee is responsible for considering whether anything brought to its attention constitutes inside information and monitoring the disclosure and control of such information.

Board Diversity

The Board believes in and values the importance of a broad range of skills, experience and diversity, including gender, for the effective functioning of the Board, all of which are considered when determining the optimum composition of the Board. The Board has a policy that aims to have a minimum of 40% of either gender represented on the Board, and also recognises the importance of inclusivity in its diversity policy. The Board ensures compliance with its policy in respect of any appointments to the Board. At 31 December 2020 and at the date of approval of these financial statements, 60% of the Directors were male and 40% were female.

Internal Controls

The Board has applied principle O of the AIC Code by establishing a continuous process for identifying, evaluating and managing the principal risks that the Company faces. The Board is responsible for the Company's system of internal controls and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Board's monitoring covers all controls, including financial, operational and compliance controls and risk management. It is based principally on reviewing reports from the Portfolio Adviser and BCF to consider whether significant risks are identified, evaluated, managed and controlled and whether any significant weaknesses are promptly remedied and indicate a need for more extensive monitoring.

The Audit Committee assists the Board in discharging its monitoring responsibilities.

During the course of the Board's review of the system of internal controls, it has not identified nor been advised of any failings or weaknesses which it has determined to be significant. Therefore, no confirmation in respect of necessary actions has been made.

The Board is also responsible for setting the overall investment policy and monitors the services provided by the Portfolio Adviser at regular Board meetings. The Board receives regular reports from the Portfolio Adviser, together with quarterly reports from the Administrator, the Company Secretary, the Depositary, Compliance (including the Money Laundering Compliance Officer and Money Laundering Reporting Officer) and from the Portfolio Adviser covering compliance matters.

The Directors clearly define the duties and responsibilities of their agents and advisers, whose appointments are made after due consideration, and monitor their ongoing performance, which is done with the assistance of the Management Engagement Committee. All of the Company's agents and advisers maintain their own systems of internal control on which they report to the Board. These systems are designed to ensure effectiveness and efficient operation, internal control and compliance with laws and regulations. In establishing the systems of internal control, regard is paid to the materiality of relevant risks, the likelihood of costs being incurred and the costs of control. It follows, therefore, that the systems of internal control can only provide reasonable but not absolute assurance against the risk of material misstatement or loss.

The Directors are satisfied that the continued appointment of the relevant service providers is in the best interests of the Shareholders.

The Board has reviewed the need for an internal audit function and has decided that the systems and procedures employed by the Administrator and Portfolio Adviser, including their own internal controls and procedures, provide sufficient assurance that a sound system of risk management and internal control, to safeguard the Shareholders' investment and the Company's assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary. Full details are set out in the Audit Committee Report.

The Company has appointed Nplus 1 Singer Advisory LLP and Winterflood Investment Trusts as its joint brokers. Together with the brokers, the Portfolio Adviser assists the Board in communicating with and understanding the views of the Company's major Shareholders.

RISK COMMITTEE REPORT

Membership

The Risk Committee comprises Steven Wilderspin (Chair), Charlotte Valeur, Heather MacCallum, Gary Clark and Mark Moffat.

Key Objectives

The Risk Committee has been established to assist the Board in its oversight of risk through ensuring the Company maintains a high standard of risk identification, monitoring and management so as to minimise investment risks and any other risks not covered by the Audit Committee.

Responsibilities

The Risk Committee's key responsibilities are:

· ensuring the Company's compliance with its investment objectives, policies, restrictions and borrowing limits;

· ensuring that appropriate policies and reporting exists for the monitoring of the Company's key risks;

· developing and maintaining a risk register documenting identified risks, their mitigants, likelihood and impact, which is reviewed regularly by the Board with action points and newly identified risks being appropriately dealt with;

· defining risk review activities regarding investment decisions, transactions and exposures for approval by the Board; and

· ensuring due regard is given to all regulations, codes, and laws that the Company is subject to.

Committee Meetings

In 2020, the Risk Committee met on four occasions. The specific areas of focus for the Committee during the year included:

· The impact of the COVID-19 pandemic. The Committee reviewed the operational resilience of the Company's key service providers to ensure that they could continue providing services throughout the year, particularly during periods of lockdown. The Committee reviewed all of the Company's risks through the lens of the pandemic to ensure that any new or heightened risk was identified and appropriately dealt with - see the Risk Overview. Other than the heightened operational risk, the most material increase in risk related to the sustainability of the Company's dividend and level of the Company's share price discount to Published NAV. These areas were addressed by the Board as described above.

· The structuring of the Company's investments through Luxembourg and governance of the Company's Luxembourg subsidiary. Just before the COVID-19 pandemic hit, early in 2020, the Chairs of the Risk and Audit Committees conducted a due diligence visit to the subsidiary in Luxembourg and met the board and members of the Portfolio Adviser's Luxembourg team. The visiting Chairs were very satisfied with the engagement of the subsidiary board and the strength of the operational team in Luxembourg.

· Cyber Risk. The Committee considered a report, commissioned from KPMG, that focused on the cyber threat resilience of the Company's main service providers - Blackstone Credit (Portfolio Adviser), BNP Paribas (Administrator) and Link (Registrar). Minor action points from this report were followed up by the Committee. KPMG also made some general recommendations regarding the risk around the activities of the Board and consequently the board has engaged a dedicated IT service provider in Jersey to manage an email service for the directors as well as providing back-up and access to more secure document management capabilities.

· Registration Services. The Committee considered a reasonably straight forward data issue that arose at the Registrar who confirmed there was no loss of data or data sent externally. Taking account of their length of service since IPO, the Committee recommended to the Board that the registration service be re-tendered. This process will be completed in 2021.

· Guidance for Risk Committees issued by the Risk Coalition. During the year the Chair of the Committee considered the guidance for risk committees published by the Risk Coalition and engaged with the authors and the AIC regarding its application to Investment Companies. As a result, after the year-end, in February 2021 the Committee approved new terms of reference for the Risk Committee incorporating its key principles, but not its detailed provisions which will instead be used for reference purposes.

· The potential Brexit impact on the Company and its investments, and on the operations of the Portfolio Adviser. Although this was kept under review, Brexit was not considered likely to have a major impact on the Company, and the Portfolio Adviser was well-placed to arrange its affairs between Dublin, London and Luxembourg to mitigate any operational risk to its business. No issues for the Company actually arose when the UK left the EU or at the end of the transition period.

· Valuation Assumption Error. The Committee investigated the circumstances giving rise to the valuation assumption error announced to the stock market on 1 September 2020. Following the identification of this valuation assumption error, no adjustment was made to the Published NAV. The Committee satisfied itself that the Portfolio Adviser had established robust new procedures with the third-party valuation agent to prevent such errors recurring. After the year-end a new third-party valuation agent was engaged.

Risk Monitoring

Being internally managed, the Company is responsible for both portfolio and risk management. However, due to the nature of the investment and the limited ability to look through, traditional market and credit risk techniques do not apply at the Company level. That said, the Board regularly engages with the board of BCF and discusses with them key areas of risk.

Investment risk management and monitoring, to ensure the successful pursuance of our investment objective, is therefore mainly through the Company's monthly NAV reporting process and the monitoring of investment restrictions and eligibility criteria as carried out by the Depositary.

Steven Wilderspin

Risk Committee Chair

29 April 2021

DIRECTORS' REMUNERATION REPORT

Directors' Remuneration

This report provides relevant information in respect of the Directors' remuneration.

The tables below outlines the remuneration the Directors were entitled to during the year ended 31 December 2020 for their services.

The Chairs of the Management Engagement Committee, NAV Review Committee, Remuneration and Nomination Committee, Audit Committee and Risk Committee each received additional fees, which are included in the amounts above, for the additional responsibilities and time commitment required in undertaking these roles. Additionally, the Senior Independent Director received additional fees for the additional responsibilities and time commitment required in undertaking this role.

The Remuneration and Nomination Committee increased Heather MacCallum's additional fee for services provided as Audit Committee Chair by £5,000 effective 1 August 2020 to reflect the increased time commitment required. The table above includes a pro-rated amount of £2,090.

Directors' remuneration is payable in Sterling quarterly in arrears. No other remuneration (fixed or variable) or compensation was paid or is payable by the Company during the year to any of the Directors. There has been no change to the Company's remuneration policy.

The Company has no employees, accordingly, there is no difference in policy on the remuneration of Directors and the remuneration of employees. No Director is entitled to receive any remuneration which is performance-related.

The Remuneration and Nomination Committee reviews the Remuneration Policy and Directors' remuneration on an annual basis.

Remuneration Policy

Directors' fees are determined by the Remuneration and Nomination Committee under the terms of the remuneration policy (the "Remuneration Policy") approved on 11 July 2019, as derived from the Company's Articles of Association. The Remuneration and Nomination Committee also considers the remuneration levels of similar companies and consults external remuneration consultants where this is deemed appropriate.

The Remuneration and Nomination Committee consists of all Directors and is involved in deciding Directors' remuneration and ensuring that remuneration received reflects the Directors' duties, responsibilities and the value of their time.

The Company does not provide pensions or other retirement or superannuation benefits, death or disability benefits, or other allowances or gratuities to the Directors or specified connected parties. The Remuneration Policy also prohibits payments to a Director for loss of office or as consideration for, or in connection with, his or her retirement from office. Whilst the Remuneration Policy permits part of their fee to be paid in the form of fully-paid up shares in the capital of the Company, the Directors' fees are not currently paid this way.

In addition, the Remuneration Policy allows for reasonable travel, hotel and other expenses incurred by the Directors in the course of performing their duties or from their performance of a special service on behalf of the Company.

The limit for the aggregate fees payable to the Directors is £300,000 per annum.

Directors' Interests

The Directors held the following number of Ordinary shares in the Company as at the year end:

Prior to 8 January 2020, Mark Moffat held 601,028 Ordinary Shares and 291,068 C Shares. The Company's C Shares were converted to Ordinary Shares with effect from 8 January 2020 and Mr Moffat's resulting Ordinary Shareholding is included above (this is unchanged from 8 January 2020 to 31 December 2020).

There have been no other changes to the Directors' Interests as at the date of the approval of these financial statements.

Service Contracts and Policy on Payment of Loss of Office

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. Directors' appointments may be terminated at any time by giving three month's written notice, with no compensation payable upon leaving office for whatever reason.

Gary ClarkRemuneration and Nomination Committee Chair29 April 2021

AUDIT COMMITTEE REPORT

Audit Committee

The Audit Committee comprises Heather MacCallum, Mark Moffat, Steven Wilderspin and Gary Clark and is chaired by Heather MacCallum. Heather MacCallum has recent and relevant financial experience in accounting and auditing, and the Audit Committee as a whole has competence relevant to the sector in which the Company operates.

In addition to formal meetings, the Audit Committee has worked with the Portfolio Adviser and Auditor to assess the operations and controls of BCF and to assess in particular what reliance the Audit Committee can place on the control environment. The Chair has also had a number of discussions with the Auditor, the Portfolio Adviser and the Administrator around the annual audit and half year financial reporting processes.

Role of the Audit Committee

The function of the Audit Committee is to ensure that the Company maintains high standards of integrity, financial reporting and internal controls.

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

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

· reviewing and reporting to the Board on any significant financial reporting issues and judgements;

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

· monitoring the statutory audit of the annual financial statements 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, reappointment 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;

· reviewing and challenging where necessary significant accounting policies and practices; and

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

How the Audit Committee Has Discharged Its Responsibilities

The Audit Committee met six times during the year. Representatives of the Portfolio Adviser, Company's Auditor and the Administrator were invited to the meetings as appropriate.

Monitoring the Integrity of the Financial Statements Including Significant Judgements

We reviewed the Company's Annual Report and Audited Financial Statements for the year ended 31 December 2019 and the Half Yearly Financial Report for the six months ended 30 June 2020 prior to discussion and approval by the Board, and the significant financial reporting issues and judgements which they contain. We also reviewed the external auditor's reports thereon, which were discussed with the Auditor. We reviewed the appropriateness of the Company's accounting principles and policies, and monitored changes to, and compliance with, accounting standards on an ongoing basis.

After the year end, we had further meetings and we reviewed, prior to making any recommendations to the Board, the Annual Report and Audited Financial Statements for the year ended 31 December 2020. In undertaking this review, we discussed with the Auditor, the Portfolio Adviser and the Administrator the critical accounting policies and judgements that have been applied.

The Auditor reported to the Committee on any non-trivial misstatements that they had found during the course of their work and confirmed that under ISA (UK) no material amounts remained unadjusted.

As requested by the Board, we also reviewed the Annual Report and are able to confirm to the Board that, in our view, the Annual Report, taken as a whole, is fair, balanced and understandable and provided the information necessary for Shareholders to assess the Company's position, performance, business model and strategy.

Significant Accounting Matters

The Committee considered the key accounting issues, matters and judgements regarding the Company's 2020 Annual Report and Financial Statements and disclosures including those relating to:

Assessment of Risks and Uncertainties

The risks associated with the Company's financial instruments, as disclosed in the financial statements, particularly in Note 10, represent a key accounting disclosure. The Audit Committee and the Risk Committee review critically, on the basis of input from the service providers, the process of ongoing identification and measurement of these risks disclosures.

Other Matters

During the year, the Committee considered compliance with relevant legislation, performance metrics and related disclosures in the Company's financial statements.

Risk Management and Internal Controls

The Board as a whole is responsible for the Company's system of internal controls; however, the Audit Committee assists the Board in meeting its obligations in this regard. The daily operational activities of the Company were delegated to its 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 of the service providers as regulated entities. However, the Audit Committee reviews periodic reports from the service providers to ensure that no material issues have arisen in respect of the system of internal controls and risk management operated by the Company's service providers. The Committee confirms that this is an ongoing process conducted in order to manage the risks faced by the Company. We deem that, to date, there are no significant issues in this area which need to be brought to your attention.

External Audit

It is the responsibility of the Audit Committee to monitor the performance, independence, objectivity and re-appointment of the Auditor. The Audit Committee met with Deloitte LLP ("Deloitte") to consider the audit strategy and plan for the audit. The audit plan for the reporting period was reviewed, including consideration of the key financial statement and audit risks, to seek to ensure that the audit was appropriately focused.

The Auditor attends the Audit Committee meetings throughout the year, as applicable, which allows the opportunity to discuss any matters the Auditor may wish to raise without the Portfolio Adviser or other service providers being present. The Auditor provides feedback at relevant Audit Committee meetings on topics such as the key accounting matters, mandatory communications and the control environment. The Audit Committee also discusses the performance of the Auditor independently of the Auditor.

Deloitte was formally appointed as Auditor for the Company's 2014 period-end audit following a competitive tender process during 2014. The lead audit partner is rotated every five years to ensure continued independence and objectivity; consequently a new lead audit partner has been in place since the interim review to 30 June 2019.

The Audit Committee continues to be satisfied with the performance of the Auditor. We have therefore recommended to the Board that the Auditor, in accordance with agreed terms of engagement and remuneration, should continue as the Company's auditor after the forthcoming Annual General Meeting. Accordingly, a resolution proposing the reappointment of Deloitte as the Company's auditor will be put to the Shareholders at the 2020 AGM.

In advance of the commencement of the annual audit, the Audit Committee reviewed a statement provided by the Auditor confirming their independence as defined under relevant regulation and professional standards. In addition, in order to satisfy itself regarding the Auditor's independence, the Audit Committee undertook a review of the Auditor's compensation and the balance between audit and non-audit fees.

During 2019, the Audit Committee reviewed its policy with respect to non-audit services and continually monitored the level of non-audit services provided by the Auditor to ensure alignment and compliance with best practice. The Company's policy sets out the permitted types of non-audit services that can be provided by Deloitte, which are consistent with the FRC's Revised Ethical Standard (2019). All proposed non-audit services required explicit approval from the Audit Committee. During the year, Deloitte were contracted to review the Company's interim financial statements. Audit fees for the year ended 31 December 2020 have increased by 5% compared to 2019 (refer to Note 3 for further details). This is mainly due to the additional work undertaken by the Auditor with respect to going concern and valuations due to the uncertainty created by the COVID-19 pandemic. Audit-related services decreased 17% year on year. In the prior year the Auditor had undertaken additional work as Reporting Accountant and reviewing the C Share Conversion Ratio as required by the Articles. An amount of €12,095 was also incurred during the year and this related to additional fees for the audit for the year ended 31 December 2019. These items has been given due consideration by the Audit Committee, who reviewed inter-alia the role of the respective engagement teams and the independence of individuals from the audit engagement team and concluded it was satisfied the Auditor had acted in an independent and professional manner.

Heather MacCallumAudit Committee Chair29 April 2021

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and 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 IFRS, as adopted by the EU. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of the affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that Directors:

· properly select and apply accounting policies;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements in IFRS as adopted by the EU are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company's financial position and financial performance; and

· make an assessment of the Company's ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with The Companies (Jersey) Law 1991. They are also responsible 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 responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names are listed below, confirms that, to the best of that Director's knowledge and belief:

· the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

· the Strategic 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 that they face; and

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

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF BLACKSTONE LOAN FINANCING LIMITED

Report on the audit of the financial statements

1. Opinion

We have audited the financial statements which comprise:

· the statement of comprehensive income;

· the statement of financial position;

· the statement of changes in equity;

· the cash flow statement; and

· the related notes 1 to 21.

The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.

2. Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report.

We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council's (the 'FRC's') Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

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

3. Summary of our audit approach