Blackstone Loan Regulatory News (BGLF)

19 MAY 2020

FOR IMMEDIATE RELEASE

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

THE BOARD OF DIRECTORS OF BLACKSTONE / GSO LOAN FINANCING LIMITED ANNOUNCE FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019

Graphs and charts are included in the published Annual Report and Audited Financial Statements which is available on the Company's website at https://www.blackstone.com/our-businesses/registered-products#c=blackstone-gso-loan-financing-limited

STRATEGIC REPORT

Reconciliation of IFRS NAV to Published NAV

At 31 December 2019, there was a difference between the NAV per Ordinary Share as disclosed in the Statement of Financial Position, €0.8543 per Ordinary share, ("IFRS NAV") and the published NAV, €0.9187 per Ordinary share, which was released to the LSE on 22 January 2020 ("Published NAV"). A reconciliation is provided in Note 16. 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 BGCF 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 BGCF 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 BGCF'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 Opportunity, 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.

Key Performance Indicators

Further information on the reconciliation between the IFRS NAV and the Published NAV can be found above.

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

Dividend History

Dividends paid on Ordinary Shares during the year ended 31 December 2019 amounted to €40,350,997.

Dividends paid on Ordinary Shares during the year ended 31 December 2018 amounted to €40,470,047.

Year Highs and Lows

Schedule of Investments

Schedule of Significant Transactions

C Shares

The intention of the Board was that, over time, the assets attributed to the rollover pool would be disposed of and the disposal proceeds re-invested in CSWs in the Lux Subsidiary and, in turn, PPNs in BGCF. BGCF would therefore have additional capital available for investment, and both the Company's Ordinary Shareholders and C Shareholders would potentially benefit from the enlargement of the portfolio, in particular through an increase in portfolio diversification and decrease in the Company's total expense ratio. On 24 October 2019, the Company announced that as at 1 October 2019, it had reinvested €62.6 million into BGCF as part of its realisation strategy. The graph below depicts this realization strategy, whereby 35 CLO assets had been disposed of by 30 November 2019.

[Graphs and charts are included in the published Annual Report and Audited Financial Statements which is available on the Company's website at https://www.blackstone.com/our-businesses/registered-products#c=blackstone-gso-loan-financing-limited]

On 24 October 2019, the Board also announced that the Company intended to convert the C Shares into Ordinary Shares and expected the Calculation Date to fall on 31 October 2019, with the Conversion Ratio and Conversion Date to be covered by a further announcement.

On 20 November 2019, the Company announced that the Calculation Date would fall on 29 November 2019 to accommodate dividend payment schedules in accordance with the Company's Articles of Association. The calculation of 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.

On 20 December 2019, the Company announced the Conversion Ratio of 0.5860 Ordinary Shares per C Share. The last trading day for the C Shares was 6 January 2020, and on the basis of the Conversion Ratio, 133,451,107 C Shares were converted into 78,202,348 Ordinary Shares on the same day, which were admitted to the premium listing segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange's Main Market for listed securities on 7 January 2020. The Ordinary Shares arising from the C Share Conversion rank pari passu with, and have the same rights as, the Ordinary Shares of the Company already in issue, including the right to receive dividends declared in respect of the Ordinary Share class following the C Share Conversion.

A summary of the performance of the C Share class over the period from 7 January 2019 to 29 November 2019 is presented below.

Performance of the C Share Class

Dividend History

Dividends paid on C Shares during the period ended 31 December 2019 amounted to €10,478,581.

Schedule of Significant Transactions

NAV Considerations

The Board considered the requirements around the recognition and accounting of the conversion of the C Shares into Ordinary Shares using a Published NAV for NAV basis as outlined in the Company's prospectus dated 23 November 2018. The Board considered this to have occurred at the point the C Share Calculation Ratio was approved i.e. using the Published NAVs for both the Ordinary Share class and the C Share class as at 29 November 2019. The Board also considered that any performance on the remaining directly held CLO assets post 29 November 2019 was captured through the combined pool of assets in one operating segment, given the conversion ratio had been fixed.

Refer to Note 13 for further details on operating segments and an explanation for the presentation of the C Share Class in the primary financial statements.

Chair's Statement

Company Returns and Net Asset Value (3)

The Company delivered an IFRS NAV total return per Ordinary Share of 18.31% in 2019 ((3.99)% in 2018), ending the year at €0.8543 (€0.8065 at 31 December 2018). The return was composed of dividend income of 11.76% and net portfolio movement of 6.55%. The Company's performance was supported by stable to increasing net interest margin levels, combined with outperformance relative to modelled assumptions on default rates.

On a Published NAV basis, the Company delivered a total return per Ordinary Share of 14.46% in 2019 (6.70% in 2018), ending the year at €0.9187 (€0.8963 at 31 December 2018). The return was composed of dividend income 11.76% and of net portfolio movement of 2.70%.

The Company paid four dividends in respect of the year ended 31 December 2019, totalling €0.10 per Ordinary Share and €0.0640 per C Share. Details of all dividend payments can be found within the Dividend History section for both the Ordinary Share and C Share at the front of this Annual Report.

Historical BGLF NAV and Share Price per Ordinary Share

The graph shows cumulative Published NAV and 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 https://www.blackstone.com/our-businesses/registered-products#c=blackstone-gso-loan-financing-limited]

Market Conditions

2019 global growth was at the weakest pace since the global financial crisis a decade ago, reflecting common influences across countries. Increasing trade barriers and geopolitical tensions and the associated uncertainty of these weighed on business sentiment and activity globally. As reported by the IMF, in some cases (for example, advanced economies and China), these developments magnified cyclical and structural slowdowns already under way. With the economic environment becoming more uncertain, firms turned cautious on future capital outlays and global purchases of machinery and equipment decelerated, evident by the persistent weakening in Eurozone manufacturing PMIs during 2019. Household demand for durable goods also weakened, although there was a pickup in the second quarter of 2019. This was particularly noticeable with automobiles, where regulatory changes, new emission standards, and the possibility of a shift to ride-share programmes weighed on sales in several countries. Faced with sluggish demand for durable goods, firms scaled back industrial production. This slowdown in industrial production resulted in a contraction in global trade, impacting GDP which fell from 3.61% in 2018 to 3.01% in 20194.

Central banks reacted aggressively to the weaker activity. Over the course of the year, several Central banks including the US Federal Reserve ("Fed") and the European Central Bank ("ECB") cut interest rates, while the ECB also restarted asset purchases. These policies averted a deeper slowdown. Lower interest rates and supportive financial conditions reinforced still-resilient purchases of nondurable goods and services, encouraging job creation. A bright spot was that strong labour markets, in combination with rising wages and low consumer price inflation, supported consumer spending in 2019. With the global industrial downturn driving a softening in Europe's economic outlook in particular, the onus fell on consumer spending to continue to drive growth. Low inflation and ultra-low interest rates across many European markets cushioned the European consumer somewhat. Similarly, a strong labour market and low unemployment in the US has lifted consumer confidence to near historic highs and continued to drive the US economy during 2019.

Accommodative global monetary policy and strong consumer sentiment compensated for the slowdown in industrial production in 2019 that allowed the global economy to continue to grow, albeit at a slower pace. This was positive news for risk assets with stock markets, such as the S&P 500 maintaining its bull run, which stretched back all the way to 2009, and fixed income assets recording strong positive returns in 2019.

Discount Management

The share price discount to the IFRS NAV narrowed from 5.77% at 31 December 2018 to 3.43% at 31 December 2019 and the share price discount to the Published NAV averaged 10.20% throughout 2019, and ended the year trading at a discount of 10.20% to the Published NAV (versus discount to the Published NAV of 15.21% at 31 December 2018). As a Board, we regularly weigh the balance between maintaining liquidity of the Ordinary Shares, the stability of any discount or premium, and the desire of Shareholders to see the Ordinary Shares trade as closely as possible to their intrinsic value. On 23 January 2019, the Board announced that, under the general authority conferred by the Company's Shareholders at its Annual General Meeting on 22 June 2018, it intended to buy back shares in the market using available cash with the goal of reducing the discount. In June 2019, the Board successfully bought back 2,380,956 Ordinary Shares at a cost of €1,928,574. At the AGM on 11 July 2019, the Board was granted authority to repurchase up to 14.99% of the issued share capital as at that date. No Ordinary Shares have been repurchased under this authority as of the date of this Annual Report. Refer to the Prospects and Opportunities in 2020 section for further details on the use of available cash.

BGLF Rollover Opportunity

On 21 December 2018, BGLF announced the results of the Rollover Opportunity, whereby shareholders in CIFU were provided with the opportunity to elect to rollover their investment in CIFU into an investment in newly issued C Shares of BGLF. Approximately 34% of the CIFU US Dollar Share register elected to rollover into Euro-denominated BGLF C Shares. In consideration for a transfer of assets equating to approximately $90 million, BGLF issued 133,451,107 BGLF C shares. These began trading on the SFS of the Main Market of the LSE on 7 January 2019.

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 BGCF 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 negotiations during 2019. The potential implications of a "hard Brexit" 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. With legislation to implement the withdrawal agreement passed in January 2020, the UK is currently in a transition period until December 2020 and attempting to formalise a trade agreement with the European Union. It is unclear at this time if this will be impacted by COVID-19. The Board will continue to monitor these trade arrangement discussions as they unfold.

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 has been rapidly evolving, and as cases of the virus have continued to be identified in additional countries, many countries have reacted by instituting quarantines and restrictions on travel. Such actions are creating disruption in global supply chains and adversely impacting a number of industries, such as transportation, hospitality and entertainment. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 presents 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, an economic slowdown 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. Refer to Note 20 for further details on the performance of the Company due to the onset of COVID-19 as well as the Portfolio Adviser's Review.

ESG

The practice of responsible investing has increasingly become a focus broadly for investors and boards and, the Board is pleased to report that the Company's Portfolio Adviser has formally adopted an ESG policy. While the Portfolio Adviser has long considered ESG factors into its investment approach, the Board views the formalisation of the ESG policy as positive. The policy is an extension of Blackstone's firmwide policy and covers the credit business specifically. Refer to the Portfolio Adviser's Review for further details on the Portfolio Adviser's ESG policy.

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 14 Board meetings and 24 Committee meetings, as well as undertaking two onsite due diligence reviews in March and July 2019 of our Portfolio Adviser. The Board used these visits to discuss various aspects of operational risk and controls, the loan and CLO markets, and the current market conditions. The July onsite was undertaken in the US office of our Portfolio Adviser which the Board felt was important given the increasing geographical importance of the Company's investment in the region.

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, Management Engagement Committee, the Remuneration and Nomination Committee and the Risk 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 in the Strategic Report - 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 2019, 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 and other information 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 2020

At the time of writing this, the impact and global reach of the COVID-19 virus is still to be determined. With so many unknowns surrounding the trajectory of the epidemic and the responses from governments and businesses, forecasters cannot aspire to precision. Softening global production will be impacted, and the infectious nature of the virus will impact consumer spending, especially in relation to leisure goods, activity and travel.

In an effort to head off further shock to the financial markets and support the flow of credit to businesses and households, the Federal Reserve Bank effected two emergency rate cuts during March 2020. Within BGCF, though the position of loans at the top of the capital structure are secured by the borrowing company's assets, the Board recognises that the current market environment is challenging and that there will be broad stress on the BGCF portfolio. It is our belief that the conservative investment process embedded in the BGCF portfolio construction is key to navigating the likely economic impact of a global downturn in 2020. While we believe there will be more market pressures during the remainder of 2020 and into 2021, the Board gains comfort from the robust investment approach of the Company's Portfolio Adviser to the selection of the underlying portfolios.

We will continue to consider how best to utilise available/excess cash, whether this will be to make additional investment in CSWs and in turn in PPNs in order to take advantage of market opportunities; repurchase shares in the market giving due consideration to the Company's share price; or to amend the Company's current dividend policy. We acknowledge that the best course of action at any point may be a combination of any or all of these options.

Dividends

On 23 April 2020, the Board announced that the Company has adopted a revised dividend policy targeting a total 2020 annual dividend of between €0.06 and €0.07 per Ordinary Share, which will 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. This follows from the comprehensive discussions between the Board and the Portfolio Adviser regarding the portfolio review conducted due to the onset of COVID-19, as explained in the Portfolio Advisers' Review.

The Board will keep the dividend policy under close review and may adjust the target dividend up or down as the impact of the pandemic unfolds.

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

Charlotte ValeurChair

19 May 2020

(3) 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. Certain countries have been susceptible to epidemics or pandemics, most recently COVID 19. The outbreak of such epidemics or pandemics, together with any resulting restrictions on travel or quarantines imposed, could have a negative impact on the economy and business activity globally (including in the countries in which the Company invests), and thereby could adversely affect the performance of the Company's investments. Furthermore, the rapid development of epidemics or pandemics could preclude prediction as to their ultimate adverse impact on economic and market conditions, and, as a result, present additional uncertainty with respect to the performance of the Company's investments or operations.

(4) Source: IMF, as at 18 December 2019

Portfolio Adviser's Review

We are pleased to present our review of 2019 and outlook for 2020.

Bank Loan Market Overview (5, 6)

Global loan markets performed well in 2019 with all fixed income asset classes posting positive returns despite concerns about a weakening global economy, Brexit uncertainty and US trade tensions. For 2019, European bank loans returned 5.0% (vs. 0.6% in 2018) and US bank loans returned 8.2% (vs. 1.1% in 2018). Robust CLO creation and institutional demand supported loan performance throughout the year. The strong investor appetite for high quality assets was a primary theme for 2019, resulting in a bifurcation of loan returns by quality. In both Europe and the US loan markets higher quality assets outperformed lower quality. 

In contrast to the general spread tightening recorded during 2017/2018, global loan spreads widened in 2019 as the spread in the European loan market widened by 4bp in 2019 (compared to 1bp narrowing in 2018) to end the year at 349bp. In the US, the loan market spread widened by 11bp (compared to 9bp narrowing in 2018) over the year to end 2019 at 359bp.

Gross total loan issuance fell in 2019 to $582 billion from $739 billion in 2018. Regionally, European loan issuance of €81 billion was recorded in 2019, down from €97 billion in 2018 while US loan issuance also fell to $492 billion in 2019 from $624 billion in 2018. Although lower when compared to the previous two years, European 2019's issuance volume is still ahead of any full year issuance from 2007-2016. In this context, 2019 issuance should be interpreted as a continuation of the market bull run in European loans, including a favourable environment for pricing and strong buyout activity (€44 billion of M&A related proceeds), as well as sizeable new-money add-ons. US loan issuance slowed in 2019 due to a decline in both M&A related financing and refinancing activity coupled with an increase in bond-for-loan refinancings and secured high yield issuance.

Throughout 2019, default rates for loans remained below historical averages and ended the year at 1.2% in the US and 0.0% in Europe, per Credit Suisse data. However, the disruption caused by COVID-19 has already resulted in increases to global default rates; as of 31 March 2020, the trailing twelve month default rate was 1.6% in the US and 0.5% in Europe (per Credit Suisse). We expect that these will continue to increase throughout 2020.

CLO Market Overview (7)

Global issuance of Collateralised Loan Obligation vehicles recorded another strong year in 2019 at $118 billion (although down from the $129 billion record year in 2018). 2019 was a record breaking year for European CLO gross issuance with volumes totalling €30 billion, 9% ahead of the previous year's high of €27 billion. US CLO gross issuance was down 8% in 2019 at $118 billion compared to $129 billion in 2018. Global CLO arbitrage was constrained throughout the year with both the weighted average cost of capital on CLO liabilities and the weighted average spread and price of assets remaining within a relatively tight band.

US CLO managers completed $43 billion in CLO refinancings and resets in 2019. While primary issuance remained close to last year's record, refinancing and reset volume dropped significantly versus last year ($156 billion in 2018). US managers were busiest in the second quarter of 2019, with $14 billion in refinancing/reset volume. European CLO issuers completed €11 billion of refinancings and resets, in addition to the post-crisis record primary volume of €30 billion, for a total of €41 billion in total capital markets activity for European CLOs in 2019 (€46 billion in 2018). Reset activity was minimal in 1H 2019 before picking up to €2 billion or more per quarter in the third and fourth quarter of 2019.

US CLO fundamentals mostly deteriorated in 2019. Year-over-year, minimum OC cushions fell (from 434bp to 404bp), WARF levels deteriorated (from 2814 to 2860 in 2019), and exposure to loans below 80 rose (from 1.4% to 3.8% in 2019). Bright spots were recorded, however, as exposure to CCC assets reduced by 10bp in 2019 to 3.8% (from 3.9%) and WAS increased by 7bp to 349bp. 

European CLO fundamentals experienced some weakening as CCC buckets increased from 1.2% in 2018 to 2.3%, and WARFs deteriorated from 2855 to 2945. However, WAS levels increased marginally (2bp to 367bp in 2019), equity net asset values increased to 53.7% in 2019 (from 46.9% in 2018) and diversity scores improved from 50 to 54 in 2019.

Gross primary CLO issuance forecasts for 2020 were initially robust due to expectations of liability tightening. However, as a result of COVID-19 and the resulting volatility within the loan and CLO markets, these forecasts are being re-evaluated in light of a halt in primary issuance in the month of March and we have begun to see the gross annual issuance forecasts be reduced by approximately 40% in the US from $90-100 billion to $50-70 billion. While primary issuance has not resumed in Europe, there has not yet been an update to the initial gross issuance of €26 billion projected for 2020.

Portfolio Update

BGCF

The portfolio composition was broadly consistent year-on-year. Through its investment in BGCF, BGLF maintained its relative exposure to US assets during 2019. As at 31 December 2019, based on NAV, 45% of BGCF's portfolio was composed of US CLO Income Notes (the most subordinated tranche of debt issued by an issuer under a CLO) and CLO warehouses (first loss positions) compared to 46% in December 2018. Exposure to directly held loans, net of leverage, maintained steady increasing from 18% to 19%, and European CLO Income Notes remained relatively stable at 36% from 37% at the end of 2018.

Within the portfolio, newer vintage CLOs have made first distributions that exceeded modelled cash flows, which helped to support the current distribution rate and helped to offset the diminishing cash flows from several of the older vintage CLOs. The spread tightening recorded for most of 2018 largely abated in 2019 and with a natural turning of the credit cycle, wider spreads, while not yet evident, should soon follow.

Throughout 2019, we registered a pickup in rating downgrades and watch-list activity and we had grown increasingly cognizant that the credit cycle had surpassed a decade of growth and that there may be limited opportunities of strength in the market in which to trim risk. Given this view, during periods of strong loan prices, we were aggressive in our approach to trim risk across the overall portfolio and within each individual CLO. Though the net result of the trading activity helped to offset impacts to CLO test cushions resulting from downgrades experienced throughout the year, we believe that the companies that we lend to will face a difficult road ahead and we remain keenly focused on continuing to manage and improve the overall risk profile of the portfolio.

It is in this part of the credit cycle where the benefits of portfolio vintage diversification and extension of the average reinvestment periods can provide for greater opportunities to invest in wider spreads and potentially generate greater cash flows to holders of CLO equity. Primary CLO issuance together with refinancing activity contributed to extend the weighted average reinvestment period, but were not sufficient to offset the aging of the larger BGCF holdings in older vintages. As of 31 December 2019, the weighted average remaining CLO reinvestment periods for European and US CLOs in the portfolio were 2.0 years and 3.1 years, respectively, compared to 2.2 years and 3.8 years at the end of 2018.

Throughout 2019, BGCF purchased €8.7 billion of assets (€5.4 billion net of sales). Additionally, BGCF invested €95.6 million in four European CLOs, $113.4 million in four US CLOs and $169.3 million in six US CLO warehouses during the year.

While refinancing activity was slower in 2019, the benefit from the prior years' refinancings and extensions of CLO liabilities remains evident in the strong cash flows generated by older vintage CLOs that have recently exited or are near exiting their reinvestment periods. Since 2017, refinancings and resets of the portfolio's CLO liabilities have resulted in cost savings of 0.46%, the CLO equity valuations improved 12.0% on average in the month immediately following the transaction, and annualised distributions improved 26.8% on average on the next payment date.(8) As we recognise that the cash flows in CLOs that exit their reinvestment periods are expected to diminish, we would consider alternatives of refinancing, resetting, or redeeming those transactions should we see opportunities to do so.

All investments made to-date have been consistent with the strategy of principal preservation and minimising credit-related losses, while generating stable returns through income and capital appreciation.

BGCF CLO Portfolio Positions (9)

As at 31 December 2019, the portfolio was invested in accordance with BGCF's investment policy and was diversified across 684 issuers (682 issuers in 2018) through the directly held loans and CLO portfolio, and across 27 countries (19 countries in 2018) and 31 different industries (30 in 2018). No individual borrower represented more than 2% of the overall portfolio at the end of 2019.

Key Portfolio Statistics (9)

Top 10 Holdings (9)

Top 5 Industries (9)

Top 5 Countries (9)

Directly Held CLOs

Consistent with the expected timing of six to twelve months, per the Company's prospectus, the directly held CLO portfolio was significantly liquidated during the year, rotating from 100% Rollover Assets and cash at the issuance date of BGLC shares to 4.6% of Rollover Assets and 87.0% BGCF PPNs (invested via the Lux Subsidiary) as at 31 December 2019 (8.4% net cash and expenses). The 4.6% remaining Rollover Assets represented less than 1% (0.8%) of BGLF's NAV. As at 31 December 2019, only six positions remained, the majority of which were sold within the first quarter of 2020.

Regulatory Update

In Europe, the Securitisation Regulation became effective on 1 January 2019 and, as previously reported, largely adopts the same concepts as the prior regulatory regime. In particular, the Securitisation Regulation sets out new reporting/transparency standards for securitisations, including the provision on a quarterly basis of substantial data at both the asset-level and the investor-level. The industry, including GSO, has been working to implement procedures to comply with these new standards before the relevant effective date, expected to be in the second or third quarter of 2020.

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.

BGCF's portfolio is managed so as 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, BGCF is broadly diversified across issuers, industries, and countries.

BGCF'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 BGCF. BGCF 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.

Integrating Environmental, Social and Governance ("ESG")

For over 35 years, Blackstone has been committed to being a responsible investor. This commitment is affirmed across the organization and guides our approach to investing. We believe that adequate consideration of ESG factors for each potential investment enhances our assessment of risk and helps us identify opportunities for transformation at each company where we invest. Consequently, we believe that a comprehensive ESG program, aside from being the right thing, 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. More detail on Blackstone's responsible investing objectives, which include integration, engagement, and reporting, can be found on the Blackstone website (https://www.blackstone.com/docs/default-source/black-papers/bx-responsible-investing-policy.pdf?sfvrsn=cef0a3ad_2.).

Additionally, GSO has long incorporated ESG considerations into our investment approach for the leveraged loan asset class, and recently implemented a formalized ESG policy for GSO. This is an extension of the firmwide Blackstone policy and covers the credit business specifically. This new policy memorializes the first phase of our formal ESG policy and was accompanied by introductory training across the global credit research teams. The next phase will include GSO working with a third-party ESG consultant in the planned development of sector specific guidelines for use in our investment process. Our goal is to create a robust policy that embeds ESG considerations into every stage of an investment hold period (initial diligence, investment committee review, ongoing monitoring, etc.). We believe that adequate consideration of ESG factors for each potential investment enhances our assessment of risk and also helps us identify opportunities.

As a credit investor, GSO will have less control over portfolio companies than equity investors; however, we may seek to reinforce certain aspects of 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.

During the holding period of an investment, the investment team actively monitors the investment and provides updates to the investment committee as needed, including with respect to ESG related matters. As part of this process, members of the investment team maintain direct dialogue with company management, follow all news developments, financial reporting, and industry events that impact the company and track company performance in order to update our views on credit quality, valuation and financial outlook. If potential ESG issues are identified, the firm may seek to remedy the situation via additional due diligence, the hiring of specialist advisors, or by abandoning the prospective investment.

While the GSO responsible investing policy does not explicitly track exposure to climate risk or monitor the carbon footprint of an investment, in practice, we take the ESG factors into consideration and incorporate into our initial evaluation and ongoing monitoring process. Our screening 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. In addition, in investments where we have a controlling equity position and an ability to influence the company, we also would include material issues (such as climate change and carbon intensity) in our ESG engagement with the company during our ownership. We anticipate engaging in a similar fashion with our non-equity investments on ESG matters in the future, however, it is obviously at the company and/or sponsor's discretion whether they welcome this dialogue and our expertise. With regard to measuring of carbon footprint, for portfolio companies that participate in our energy reduction program, we monitor electricity spend as an indicator of carbon intensity and emissions levels.

COVID-19 Analysis

GSO has conducted a detailed, bottom-up review of all c. 970 global companies within its portfolios to determine the potential impact of COVID-19 on the performance of these businesses. GSO focused not only on those sectors that have been directly impacted by COVID-19, including hotels, gaming and leisure, transportation, retail, automotive, and energy, but the entire universe of industries within its portfolios. The objective of the analysis was to determine the financial performance of the companies and loans within BGCF's CLO portfolio and the resulting likelihood of negative credit rating migration and/or default for each loan in which we hold a position, as well as expected timing of these events. The loan by loan analysis was then applied on a probability weighted basis to each portfolio and run through the respective CLO structures in an attempt to forecast the impact on BGCF's CLO investments.

The results of this exercise have allowed GSO to consider the likely impact on cash flows generated by the Company's investments in directly held CLOs and those held indirectly through BGCF. This impact assessment has enabled the Board and GSO to assess the sustainability of the Company's dividend in the short-term. The medium- and long-term impacts of the global pandemic remain uncertain. However, in the short-term, rating agency downgrades and corporate defaults of companies within GSO's portfolios may lead to temporary cash flow diversions away from subordinate note distributions as a result of breaches in interest diversion and/or over-collateralisation ratios within a number of CLOs to which the Company has exposure (through BGCF).

GSO has already taken numerous steps to seek to mitigate the impact of COVID-19 on the performance of its portfolios and will continue to monitor the rapidly evolving economic environment to identify risks and opportunities. Despite the near-term economic disruption and resulting dislocation in the global credit markets, GSO believes that these events create good investment opportunities and provide further prospects for BGLF to enhance shareholder value.

Blackstone / GSO Debt Funds Management Europe Limited

19 May 2020

(5) Source: S&P LCD, data as of 31 December 2019.

(6) Source: Credit Suisse, as of 31 December 2019.

(7) Sources: S&P/LCD, Wells Fargo, data as of 31 December 2019.

(8) Data as of 31 December 2019. MoM Increase in Valuation provides the month-over-month change as of the respective month before and after the CLO's refinancing. Orwell Park's refinancing priced on 31 July 2017, and as such, MoM % Valuation Increase compares July 2017 and August 2017 month end valuations.

(9) As at 31 December 2019.

Strategic Overview

Purpose

As an investment company, our purpose is to provide permanent capital to BGCF, a company established by DFME as part of its loan financing programme, with a view to generating stable and growing total returns for Shareholders through dividends and value growth.

We deliver our purpose through 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.

The Company's authorised share capital consists of an unlimited number of shares of any class. As at 31 December 2019, the Company's issued share capital was 402,319,490 Ordinary Shares and 133,451,107 C Shares. The Company also held 2,380,956 Ordinary Shares in treasury.

The Company has a wholly-owned Luxemburg subsidiary, Blackstone / GSO Loan Financing (Luxembourg) S.à r.l. which has an issued share capital of 2,000,000 Class A shares and 1 Class B share. As at 31 December 2019 all of the Class A and Class B shares were held by the Company together with 319,758,584 Class B CSWs issued by the Lux Subsidiary. The Lux Subsidiary invests in PPNs issued by BGCF, which in turn invests in CLOs and loans. The Company also holds CLO Income Notes and 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. DFME 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. DFM 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 BGCF.

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 DFME or DFM (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 DFME or DFM (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 consider BGCF 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, GSO 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 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 the Board acknowledges its duty to comply 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 outlined above. Additionally, the Company complies with the Principles and Provisions of the AIC Code as detailed 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.

Rollover Offer Proposal and Conversion of C Share

Directorate Change

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.

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, Uncertainties and Emerging Risks

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 (see the report of the activities of that committee below). 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.

After the year end, 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 has 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 will have on the Company, society and the economy, the existing four principal risks below are considered through the lens of COVID-19 and a fifth entry has been 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 ongoing Brexit process is a significant risk to the Company other than any impact reflected generally in international markets and the global economy. During the year, the Directors held discussions with the Portfolio Adviser's Brexit planning team to gain comfort that any other Brexit associated risk is mitigated. In addition, the Portfolio Adviser's credit research team of 31 investment professionals reviewed BGCF'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 believe 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.

Given the global focus of the strategy, the exposure to any one individual European country is low. As at 31 December 2019, the Company's indirect exposure to BGCF directly held assets classified as UK companies was 8.2%.

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 current economic conditions caused by the outbreak of COVID-19 as discussed further in the Chair's Statement, the Portfolio Adviser's Review and in Note 20. 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 above along with market conditions including the potential impact of COVID-19, 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 BGCF. BGCF's portfolio comprises the following categories of investments: (i) CLO Debt and CLO Income Notes securitised by BGCF, (ii) a portfolio of senior secured loans and bonds; and (iii) preference shares. The 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 BGCF.

In conjunction with the Portfolio Adviser, the Directors have considered the impact that extreme market scenarios, including the potential impact of COVID-19, could have on BGCF and where appropriate has analysed the effect on the Company's net cash flows over a five year horizon. These market scenarios were modelled using inputs based on actual conditions observed or experienced by the Portfolio Adviser during the global financial crisis and included assumptions on prepayment rates, default rates and reinvestment spreads and prices that would be impacted by severe but plausible scenarios. Owing to COVID-19, the Portfolio Adviser has conducted a further detailed, bottom-up review of all c. 970 companies within its portfolios to determine the potential impact of COVID-19 on the performance of these businesses. The Portfolio Adviser focused not only on those sectors that have been directly impacted by COVID-19, including hotels, gaming and leisure, transportation, retail, automotive, and energy, but the entire universe of industries within its portfolios.

The above impact assessment has also allowed the Directors and the Portfolio Adviser to assess the sustainability of the Company's dividend in the short-term. The medium and long-term impacts of the global pandemic remain uncertain. However, in the short-term, rating agency downgrades and corporate defaults of companies within BGCF's portfolios may lead to temporary cash flow diversions away from subordinate note distributions as a result of breaches in interest diversion and/or OC ratios within a number of CLOs to which the Company has exposure.

The Directors have adjusted its 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.

The Directors have adopted a revised dividend policy targeting a total 2020 annual dividend of between €0.06 and €0.07 per Ordinary Share, which will 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 Directors will keep the dividend policy under close review and may adjust the target dividend up or down as the impact of the pandemic unfolds.

The Directors are satisfied that the outcomes under these modelled extreme market scenarios and adoption of a revised dividend policy would 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 2025, which the Directors have determined constitutes an appropriate period to provide its viability statement. 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 the other principal risks. Whilst each of these risks is a principal risk and 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, 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 2019 And 31 December 2018 - 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://www.blackstone.com/our-businesses/registered-products#c=blackstone-gso-loan-financing-limited]

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 2019 And 31 December 2018 - 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://www.blackstone.com/our-businesses/registered-products#c=blackstone-gso-loan-financing-limited]

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 BGCF portfolio. Key assumptions which are different between the two bases as at 31 December 2019 and 31 December 2018 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 2019.

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 BGCF, 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 32,566,912 CSWs in the Lux Subsidiary during the year with a fair value of €41,578,263 to fund the quarterly dividend.

Source of the Company's Dividend - C Class

During the period from 7 January 2019 to 29 November 2019, the Company's C Class received income, on a quarterly basis, from the CLOs held within the C Class portfolio in addition to income from PPNs held by the Lux Subsidiary into which realised rollover assets had been reinvested into via CSWs. As mentioned above, the Company redeems CSWs on a quarterly basis to augment the income from the CLOs. As detailed above, the Company redeemed 3,541,948 CSWs in the Lux Subsidiary with a fair value of €3,723,415 during the period from 7 January 2019 to 29 November 2019 to fund the C Class 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.

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

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

A reconciliation of the above-mentioned APMs to the most directly reconcilable line items presented in the financial statements for the year ended 31 December 2019 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.

Future Developments

Significant Events after the Reporting Period

On 7 January 2020, the Company announced the completion of the C Share Conversion on the same day, and that the Company's issued share capital consists of 480,521,838 Ordinary Shares of no par value and the total number of voting rights is 480,521,838. The Company also holds 2,380,956 Ordinary Shares in treasury.

On 21 January 2020, the Board declared a dividend of €0.025 per Ordinary Share in respect of the period from 1 October 2019 to 31 December 2019 with an ex-dividend date of 30 January 2020. A total payment of €12,013,045 was processed on 28 February 2020.

On 4 March 2020, the Board announced that Winterflood Securities Limited had been appointed as joint corporate broker and joint financial adviser with immediate effect. Winterflood Securities Limited would act alongside Nplus1 Singer Advisory LLP.

COVID-19

As explained in the Chair's Statement, COVID-19 continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. Refer to the Portfolio Adviser's Review and Note 20 for further details on COVID-19.

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 2020 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 over 35 years of experience in finance, primarily as an investment banker in Denmark and UK. She has an extensive portfolio career with a number of Non-Executive Directorships ("NED") and Chair roles - as well as delivering training and advising boards in corporate governance through her company Global Governance Group.

Charlotte's board roles in listed organisations have taken in Chair of FTSE250 Kennedy Wilson Europe Real Estate Plc, NED of FTSE250 3i Infrastructure Plc, NED of JPMorgan Convertible Bond Fund, a NED of Phoenix Spree Deutschland Plc, NED of Renewable Energy Generation Ltd and Chair of DW Catalyst Ltd. Charlotte's unlisted experience includes being a Non-Executive Director of the international engineering firm Laing O'Rourke and Chair of The Institute of Directors (UK).

With significant experience in international corporate finance, Ms Valeur has a high level of technical knowledge of capital markets, especially debt / fixed income. Her non-executive board roles at a number of companies and her work as a governance consultant have provided her with an excellent understanding and experience of boardroom dynamics and corporate governance.

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. Mr 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 Mr Clark was managing director of the futures broker, GNI (Channel Islands) Limited in Jersey.

A specialist in alternative investment funds, Mr 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, Mr 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.

Heather MacCallum, CA

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

Date of appointment: 7 September 2017

Heather MacCallum is a Chartered Accountant and was a partner of KPMG Channel Islands for 15 years before retiring from the partnership in 2016. 

Ms MacCallum now holds a portfolio of non-executive directorships including Aberdeen Latin American Income Fund Limited and City Merchants High Yield Trust Limited, both of which are investment companies listed on the London Stock Exchange. She is the Chair of Jersey Water, an unlisted company.

She is a member of the Institute of Directors and the Institute of Chartered Accountants of Scotland (ICAS). She is also a past president of the Jersey Society of Chartered and Certified Accountants.

With 20 years' experience gained in a global professional services firm, Ms MacCallum brings financial experience including technical knowledge of accounting and auditing, especially in the context of financial services, and in particular the investment management sector.

Steven Wilderspin, FCA, IMC

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

Date of appointment: 11 August 2017

Steven Wilderspin, a qualified Chartered Accountant, has been the Principal of Wilderspin Independent Governance, which provides independent directorship services, since April 2007. He has served on a number of private equity, property and hedge fund boards as well as commercial companies.

In May 2018 Mr Wilderspin was appointed as a director of FTSE 250 HarbourVest Global Private Equity Limited.

In December 2017 Mr Wilderspin stepped down from the board of 3i Infrastructure plc, where he was chairman of the audit and risk committee, after ten years' service.

From 2001 until 2007, Mr Wilderspin was a director of fund administrator Maples Finance Jersey Limited where he was responsible for fund and securitisation structures. Before that, from 1997, Mr Wilderspin was Head of Accounting at Perpetual Fund Management (Jersey) Limited.

Mr Wilderspin has significant listed corporate governance experience, particularly in the area of risk management, so is well placed to lead the board through the development of its risk framework.

Mark Moffat

Position: Non-executive and independent director (resident in UK) 

Date of appointment: 8 January 2019

Mark Moffat has been involved in structuring, managing and investing in CLOs for over 20 years. Mr Moffat left GSO Capital Partners LP, part of the credit businesses of The Blackstone Group L.P., in April 2015 to pursue other interests.

Whilst at GSO Mr Moffat was a senior managing director and the portfolio manager responsible for investing in structured credit and co-head of the European activities of the Customised Credit Strategies division.

Mr Moffat joined GSO in January 2012 following the acquisition by GSO of Harbourmaster Capital Management Limited where he was co-head. Prior to joining Harbourmaster in 2007, Mr Moffat was head of European debt and equity capital markets and the European CLO business of Bear Stearns. At Bear Stearns, Mr Moffat was responsible for the origination, structuring and execution of CLOs in Europe over a seven-year period. Prior to Bear Stearns, Mr Moffat was global head of CLOs at ABN AMRO and a Director in the principal finance team of Greenwich NatWest.

With over 20 years of experience structuring, managing and investing in CLOs Mr Moffat brings a deep knowledge of how CLO structures and markets perform over the credit cycle.

DIRECTORS' REPORT

The Directors present the Annual Report and Audited Financial Statements for the Company for the year ended 31 December 2019.

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 2019.

Mark Moffat was appointed on 8 January 2019 following a lengthy consideration process with input from DFME and legal counsel. Having identified the need for an additional Board member with specific technical and market expertise, the Board, together with DFME, discussed possible candidates and identified Mr Moffat. A recruitment agency was not consulted due to the very specific nature of the knowledge and skills required, for which the Board felt they would be better able to source candidates in conjunction with DFME.

The Board met with Mr Moffat and considered his experience and non-independent status at appointment. They concluded that his technical expertise and his knowledge of the Portfolio Adviser would add value to and complement the existing Board.

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 2019, the Company's issued share capital consisted of 402,319,490 Ordinary Shares and 133,451,107 C Shares, excluding 2,380,956 treasury shares (31 December 2018: 404,700,446 Ordinary Shares).

Share Repurchase Programme

At the 2018 AGM, held on 22 June 2018, the Directors were granted authority to repurchase 60,664,597 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, on 5 and 6 June 2019, the Company has repurchased 2,380,956 Ordinary Shares for a total cost of €1,928,574.

At the 2019 AGM, held on 11 July 2019, the Directors were granted authority to repurchase 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.

This authority, which has not been used, will expire at the upcoming AGM. The Directors intend to seek annual renewal of this authority from Shareholders.

Authority to Allot

At the 2019 AGM, the Directors were granted authority to allot, grant options over, or otherwise dispose of up to 40,231,949 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 2020 AGM.

Shareholders' Interests

As at 31 December 2019, 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 2019 and 19 May 2020, the following 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 BGCF invests (either directly or indirectly) may have an environmental, social and governance impact. The Board have obtained and reviewed GSO's Responsible Investing Policy and considered their perspective on climate change. The Board noted that GSO 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 GSO's investment analysis and decision-making processes from pre-investment diligence to post-investment monitoring. GSO recognizes the value that incorporating ESG factors in investment research creates both in terms of mitigating risk and enhancing long-term performance across investments. GSO 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 a non-complex structure, 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

19 May 2020

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, with the exception of the following:

· Relationship with the manager (provisions 16 and 17); and

· New companies (provision 21).

Relationship with the manager (provisions 16 and 17)

As a self-managed fund, the Company does not have a manager, therefore, provisions 16 and 17 are not applicable to the Company.

New companies (provision 21)

This provision relates to the appointment of the chair and of the board of a new company. As the Company was incorporated during 2014, this provision is not applicable 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 below.

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 participated in the Board Apprentice scheme during 2019, having taken on two Board Apprentices 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. Both apprentices completed their term with the Board in October 2019. The Board wishes them both success in future board positions.

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 2019, 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

An external independent Board and Committee evaluation was undertaken by Value Alpha during the course

of the year.

The evaluation consisted of:

· Observation of Board and Committee meetings;

· Extensive interviews with each of the Directors and the Administrator and a meeting with the Portfolio Adviser; and

· A feedback session with the Directors.

The interviews collected both quantitative and qualitative data and covered the views of Directors on a number of issues associated with Director and Board effectiveness. The evaluation considered the Board's balance of skills, experience, independence and knowledge, as well as its diversity, including gender, how the Board works together as a unit, and other factors relevant to its effectiveness.

The evaluation concluded that areas of strong performance included: the Board's oversight of strategy; its ability to deliver accountability to stakeholders, particularly its Shareholders; and exercise of effective risk oversight; review of its governance arrangements; and understanding of the legal and regulatory context within which it operates.The evaluation also found that the Board exercised independent oversight, challenged constructively, displayed sound judgement and was versatile in being able to deal with the range of issues which came before it.

No significant recommendations were made which are required to be brought to the attention of 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.

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 identifying 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 2019 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 BGCF 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, its Compliance, Money Laundering Compliance Officer and Money Laundering Regulatory 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

During 2019, the Risk Committee reviewed its mandate to ensure effective operation in conjunction with the Audit Committee, and as a result, its key responsibilities, amongst others, remain:

· 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 2019, the Risk Committee met on four occasions. At the start of the year, the Committee recommended a new risk management framework to the Board, to govern how the Committee and/or Board identifies existing and emerging risks; determines risk appetite; identifies mitigation and controls; assesses, monitors and measures risk, and reports on risks. The Board adopted the Committee's proposals.

Subsequently, the specific areas of focus for the Committee during the year included:

· The potential Brexit impact on the Company and its investments, and on the operations of the Portfolio Adviser. There was not considered to be 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.

· The structuring of the Company's investments through Luxembourg and governance of the Company's Luxembourg subsidiary. This was considered during the year and, after the year end, the Chairs of 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.

· Cyber Risk. This was initially considered during the Board's due diligence visit to the Blackstone/GSO operations in New York in July. A report focused on the Company's main service providers was subsequently commissioned from KPMG who reported to the Committee after the year end. Minor action points from this report will be followed up by the Committee.

· The sustainability of the Company's dividend. This was a risk area mainly addressed at Board level during the year and was one of the main focuses of the New York due diligence visit. The Board were satisfied that the modelling provided by the Portfolio Adviser supported the sustainability of the dividend (however, see paragraph on COVID-19 below).

· The risk management environment of Blackstone/GSO. On the New York visit, the Committee were briefed on Blackstone/GSO's wider compliance and risk management framework including Internal Audit and met key executives with responsibility in these areas. This supplemented an earlier due diligence visit to Dublin.

Risk Monitoring

Being self-managed, the Board is responsible for both portfolio and risk management. However, due to the nature of the investment and the limited ability to look through the structure, traditional market and credit risk techniques do not apply at the Company level. That said, the Board regularly engages with the board of BGCF 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 our Depositary.

COVID-19

The Company's principal risks and uncertainties are as identified as above. Given the present COVID-19 pandemic, which emerged after the year end, that section considers the impact of the virus on these principal risks and the action that the Risk Committee and/or Board is taking to mitigate the risks where possible.

Steven Wilderspin

Risk Committee Chair

19 May 2020

DIRECTORS' REMUNERATION REPORT

Directors' Remuneration

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

The tables below outline the remuneration the Directors were entitled to during the year ended 31 December 2019 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.

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 as detailed below.

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.

In 2019 the Remuneration and Nomination Committee oversaw the appointment of Mr Moffat and the engagement of Value Alpha as a service provider to provide board evaluation.

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 16 April 2015, 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 except Mark Moffat 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:

On 8 January 2020, as a result of the C Share Conversion, Mark Moffat held 771,593 Ordinary Shares and no C Shares.

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 Chair19 May 2020

AUDIT COMMITTEE REPORT

Audit Committee

The Audit Committee comprises Heather MacCallum, Steven Wilderspin and Gary Clark and is chaired by Heather MacCallum. Ms 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 BGCF 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 five 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 2018 and the Half Yearly Financial Report for the six months ended 30 June 2019 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 2019. 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 2019 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, and revisions to the AIC Code.

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 for the interim review to 30 June 2019 and audit for the year ended 31 December 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 Audit Committee has agreed the types of permitted and non-permitted ongoing non-audit services and those which require explicit prior approval. During the year, Deloitte were contracted to review the Company's interim financial statements, provided services related to the Rollover Offer, US tax compliance and review of the C Share Conversion Ratio calculation. Audit fees have increased 34% year on year while audit related services increased 37% year on year. This is mainly due to the additional work undertaken by the Auditor around the valuation of directly held CLOs and the C Share class during the audit and interim review as well as the work undertaken by the Auditor for reviewing the C Share Conversion Ratio as required by the Articles. An amount of €20,740 was also incurred during the year and this related to additional fees for the audit for the year ended 31 December 2018. The value of non-audit services (US tax compliance) provided by Deloitte and charged in the period amounted to €13,955. In addition, the Company incurred €9,281 and €8,699 in respect of audit related services in connection with the Rollover Offer and the C Share Conversion Ratio calculation respectively. The overall quantum of non-audit services (€13,955) and the one-off fees (€17,980) incurred for Deloitte's work in 2019 is not material relative to the overall audit and review fees for the annual and interim financial reports (€175,584). This item 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 Chair19 May 2020

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 / GSO LOAN FINANCING LIMITED

Report on the audit of the financial statements

1. Opinion

We have audited the financial statements which comprise:

· the company statement of comprehensive income;

· the company statement of financial position;

· the company statement of changes in equity;

· the company cash flow statement; and

· the related notes 1 to 20.

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

4. Conclusions relating to going concern, principal risks and viability statement

5. Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

5.1. Valuation of investments in Luxembourg subsidiary 

6. Our application of materiality

6.1. Materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

6.2. Performance materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Performance materiality was set at 70% of materiality for the 2019 audit (2018: 70%). In determining performance materiality, we considered our risk assessment, including our assessment of the Company's overall control environment and our past experience of the audit, which has indicated a low number of corrected and uncorrected misstatements identified in prior periods.

6.3. Error reporting threshold

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of €410,000 (2018: €325,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

7. An overview of the scope of our audit

7.1. Scoping

Our audit was scoped by obtaining an understanding of the entity and its environment, including internal control, and assessing the risks of material misstatement. Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team. As the financial information used to determine the fair value of the investments is those of BGCF, we reviewed the 2019 audited financial statements of BGCF and the related audit work performed by the auditors of BGCF.

7.2. Our consideration of the control environment

As mentioned above, the Company has outsourced its accounting function to a third party service provider. Our audit scope included understanding of the relevant accounting processes and controls in place at the Company's third party accounting service provider. We performed the audit using substantive approach without placing reliance on controls. We reviewed the service auditor's report for the third party administrator of the Company.

8. Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information include where we conclude that:

· Fair, balanced and understandable - the statement given by the directors that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the control's position and performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or

· Audit Committee reporting - the section describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee; or

· Directors' statement of compliance with the UK Corporate Governance Code - the parts of the directors' statement required under the Listing Rules relating to the company's compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R (2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

9. Responsibilities of directors

As explained more fully in the statement of directors' responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

10. Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Report on other legal and regulatory requirements

11. Matters on which we are required to report by exception

11.1. Adequacy of explanations received and accounting records

Under the Companies (Jersey) Law, 1991 we are required to report to you if, in our opinion:

· we have not received all the information and explanations we require for our audit; or

· proper accounting records have not been kept, or proper returns adequate for our audit have not been received from branches not visited by us; or

· the financial statements are not in agreement with the accounting records and returns.

12. Use of our report

This report is made solely to the company's members, as a body, in accordance with Article 113A of the Companies (Jersey) Law, 1991. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Marc Cleeve, FCA

For and on behalf of Deloitte LLP

Recognized Auditor

Jersey

19 May 2020

STATEMENT OF FINANCIAL POSITION

C Shares were issued on 7 January 2019 and hence no comparative is presented for C Shares.

These financial statements were authorised and approved for issue by the Directors on 19 May 2020 and signed on their behalf by:

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

STATEMENT OF COMPREHENSIVE INCOME