TIDMBGLF

RNS Number : 1352X

Blackstone Loan Financing Limited

29 April 2021

29 APRIL 2021

FOR IMMEDIATE RELEASE

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

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

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

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

A Note From Our Chair

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

Despite this backdrop, the Company delivered an IFRS NAV total return per Ordinary Share of 8.85% in 2020, ending the year at EUR0.8557 per share.

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

Charlotte Valeur

Chair

29 April 2021

Strategic Report

Key Performance Indicators

 
                               IFRS NAV                       Published NAV 
 
 NAV(1)                        EUR0.8557                        EUR0.8435 
                        (31 Dec 2019: EUR0.8543)         (31 Dec 2019: EUR0.9187) 
 
 NAV total return(1)             8.85%                           (0.22)% 
                        (31 Dec 2019: (18.31)%)            (31 Dec 2019: 14.46%) 
 
 Discount(1)                   (21.70)%                         (20.57)% 
                         (31 Dec 2019: (3.43)%)          (31 Dec 2019: (10.20)%) 
 
 Dividend                       EUR0.07                          EUR0.07 
                         (31 Dec 2019: EUR0.10)           (31 Dec 2019: EUR0.10) 
 

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

Performance

 
 Ticker      IFRS NAV    Published   Share Price(2)    Discount     Discount    Dividend 
            per Share          NAV                     IFRS NAV    Published       Yield 
                         per Share                                       NAV 
--------  -----------  -----------  ---------------  ----------  -----------  ---------- 
 BGLF 
 31 Dec                                                                           10.45% 
  2020      EUR0.8557    EUR0.8435        EUR0.6700    (21.70)%     (20.57)%         (3) 
 31 Dec 
  2019      EUR0.8543    EUR0.9187        EUR0.8250     (3.43)%     (10.20)%      12.12% 
 BGLP 
 31 Dec 
  2020      GBP0.7647    GBP0.7538        GBP0.6000    (21.54)%     (20.40)%   10.47%(3) 
 31 Dec 
  2019      GBP0.7226    GBP0.7771        GBP0.7050     (2.44)%      (9.28)%      12.00% 
--------  -----------  -----------  ---------------  ----------  -----------  ---------- 
 
 
                               LTM        3-Year         Annualised   Cumulative 
                         Return(1)    Annualised    Since Inception        Since 
                                                                       Inception 
---------------------  -----------  ------------  -----------------  ----------- 
 BGLF IFRS NAV               8.85%         7.31%              6.76%       52.42% 
 BGLF Published NAV        (0.22)%         6.79%              6.51%       50.21% 
 BGLF Ordinary Share 
  Price                    (9.92)%       (1.56)%              3.45%       24.41% 
 European Loans              2.38%         2.63%              3.20%       22.50% 
 US Loans                    2.78%         3.98%              3.84%       27.47% 
---------------------  -----------  ------------  -----------------  ----------- 
 

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

(2) Bloomberg closing price at period end

(3) Dividend Yield presented as EUR0.07 per annum, given the first three quarterly dividends of EUR0.015 per share and fourth quarter dividend of EUR0.025, and the share price as at 31 December 2020

Reconciliation of IFRS NAV to Published NAV

At 31 December 2020, there was a difference between the NAV per Ordinary Share as disclosed in the Statement of Financial Position, EUR0.8557 per Ordinary Share, ("IFRS NAV") and the published NAV, EUR0.8435 per Ordinary Share, which was released to the LSE on 22 January 2021 ("Published NAV"). A reconciliation is provided in Note 16 in the Notes to the Financial Statements. The difference between the two valuations is entirely due to the different valuation bases used.

Valuation Policy for the Published NAV

The Company publishes a NAV per Ordinary Share on a monthly basis in accordance with its Prospectus. The valuation process in respect of the Published NAV incorporates the valuation of the Company's CSWs and underlying PPNs (held by the Lux Subsidiary). These valuations are, in turn, based on the valuation of the Blackstone Corporate Funding Designated Activity Company ("BCF") (formerly Blackstone / GSO Corporate Funding Designated Activity Company) portfolio using a CLO intrinsic calculation methodology per the Company's Prospectus, which we refer to as a "mark to model" approach. As documented in the Prospectus, certain "Market Colour" (market clearing levels, market fundamentals, bids wanted in competition ("BWIC"), broker quotes or other indications) is not incorporated into this methodology. The Directors believe that this valuation process is the appropriate way of valuing the Company's holdings, and of tracking the long-term performance of the Company as the underlying portfolio of CLOs held by BCF are comparable to held to maturity instruments and the Company expects to receive the benefit of the underlying cash-flows over the CLOs' entire life cycle.

Valuation Policy for the IFRS NAV

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

Both the mark to model Published NAV and mark to market IFRS NAV valuation bases use modelling techniques and input from third-party valuation specialists. The smaller number of CLOs held directly by the Company, as a result of the Rollover Offer, are valued using a mark to market approach for both the Published NAV and IFRS NAV, consistent with the valuation methodology per the Company's Prospectus.

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

Dividend History

Whilst not forming part of the Company's investment objective or investment policy, it is currently intended that dividends are payable in respect of each calendar quarter, two months after the end of that quarter.

On 23 April 2020, pursuant to a review of BCF's portfolio in light of COVID-19, the Board announced that the Company had adopted a revised dividend policy targeting a total 2020 annual dividend of between EUR0.06 and EUR0.07 per Ordinary Share, to consist of quarterly payments of EUR0.015 per Ordinary Share for the first three quarters and a final quarter payment of a variable amount to be determined at that time. In accordance with the Company's revised dividend policy, the Board declared dividends of EUR0.015 per Ordinary Share for the first three quarters of 2020 and a dividend of EUR0.025 per Ordinary Share for the fourth quarter.

The Board also announced that it would keep the dividend policy under close review as the impact of the COVID-19

pandemic unfolds.   Refer to Note 21 for an update to the dividend policy after the year end. 

Ordinary Share Dividends for the Year Ended 31 December 2020

 
Period in respect of          Date Declared   Ex-dividend Date   Payment Date  Amount per Ordinary Share 
---------------------------  --------------  -----------------  -------------  ------------------------- 
                                                                                                     EUR 
---------------------------  --------------  -----------------  -------------  ------------------------- 
1 Jan 2020 to 31 Mar 2020       23 Apr 2020        30 Apr 2020    29 May 2020                     0.0150 
1 Apr 2020 to 30 Jun 2020       21 Jul 2020        30 Jul 2020    28 Aug 2020                     0.0150 
1 Jul 2020 to 30 Sept 2020      21 Oct 2020        29 Oct 2020    27 Nov 2020                     0.0150 
1 Oct 2020 to 31 Dec 2020       22 Jan 2021         4 Feb 2021     5 Mar 2021                     0.0250 
---------------------------  --------------  -----------------  -------------  ------------------------- 
 

Ordinary Share Dividends for the Year Ended 31 December 2019

 
Period in respect of          Date Declared   Ex-dividend Date   Payment Date  Amount per Ordinary Share 
---------------------------  --------------  -----------------  -------------  ------------------------- 
                                                                                                     EUR 
---------------------------  --------------  -----------------  -------------  ------------------------- 
1 Jan 2019 to 31 Mar 2019       18 Apr 2019         2 May 2019    31 May 2019                     0.0250 
1 Apr 2019 to 30 Jun 2019       18 Jul 2019        25 Jul 2019    23 Aug 2019                     0.0250 
1 Jul 2019 to 30 Sept 2019      18 Oct 2019        31 Oct 2019    29 Nov 2019                     0.0250 
1 Oct 2019 to 31 Dec 2019       21 Jan 2020        30 Jan 2020    28 Feb 2020                     0.0250 
---------------------------  --------------  -----------------  -------------  ------------------------- 
 

C Share Dividends for the Period Ended 31 December 2019

 
Period in respect of          Date Declared   Ex-dividend Date   Payment Date  Amount per 
                                                                                  C Share 
---------------------------  --------------  -----------------  -------------  ---------- 
                                                                                      EUR 
---------------------------  --------------  -----------------  -------------  ---------- 
1 Oct 2018 to 31 Dec 2018       22 Jan 2019        31 Jan 2019     1 Mar 2019     0.01452 
1 Jan 2019 to 31 Mar 2019       18 Apr 2019         2 May 2019    31 May 2019      0.0205 
1 Apr 2019 to 30 Jun 2019       18 Jul 2019        25 Jul 2019    23 Aug 2019      0.0214 
1 Jul 2019 to 30 Sept 2019      18 Oct 2019        31 Oct 2019    29 Nov 2019      0.0221 
---------------------------  --------------  -----------------  -------------  ---------- 
 

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

Year Highs and Lows

 
                                        2020       2020       2019       2019 
                                        High        Low       High        Low 
Published NAV per Ordinary Share   EUR0.8992  EUR0.7663  EUR0.9215  EUR0.8824 
BGLF Share Price (last price)      EUR0.8400  EUR0.4500  EUR0.8550  EUR0.7500 
BGLP Share Price (last price)      GBP0.7200  GBP0.4200  GBP0.7600  GBP0.6600 
---------------------------------  ---------  ---------  ---------  --------- 
 

Schedule of Investments

As at 31 December 2020

 
                                               Nominal       Market  % of Net Asset 
                                              Holdings        Value           Value 
                                                                EUR 
-----------------------------------------  -----------  -----------  -------------- 
Investment held in the Lux Subsidiary: 
CSWs                                       284,879,854  381,605,063           93.48 
Shares (2,000,000 Class A and 1 Class B)     2,000,001    6,395,083            1.57 
 
CLOs held directly                           6,522,171      549,437            0.13 
Other Net Assets                                         19,655,592            4.82 
-----------------------------------------  -----------  -----------  -------------- 
Net Assets Attributable to Shareholders                 408,205,175          100.00 
-----------------------------------------  -----------  -----------  -------------- 
 

Schedule of Significant Transactions

 
Date of Transaction      Transaction Type    Quantity      Amount               Reason 
                                                              EUR 
---------------------  ------------------  ----------  ----------  ------------------- 
CSWs held by the Company - Ordinary Share Class 
3 Feb 2020                   Subscription   6,800,000   6,800,000  Investments in PPNs 
14 Feb 2020                    Redemption   9,282,079  12,304,242     To fund dividend 
15 May 2020                    Redemption  12,896,006  15,096,970     To fund dividend 
12 Aug 2020                    Redemption  11,256,352  14,063,391     To fund dividend 
16 Nov 2020                    Redemption   8,244,293  10,375,908     To fund dividend 
---------------------  ------------------  ----------  ----------  ------------------- 
 

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

CHAIR'S STATEMENT

Company Returns and Net Asset Value (4)

The Company delivered an IFRS NAV total return per Ordinary Share of 8.85% in 2020 ((18.31)% in 2019), ending the year at EUR0.8557 per share (EUR0.8543 at 31 December 2019). This return was composed of 9.11% from dividends and (0.26)% from net portfolio movement.

On a Published NAV basis, the Company delivered a total return per Ordinary Share of (0.22)% in 2020 (14.46% in 2019), ending the year at EUR0.8435 per share (EUR0.9187 at 31 December 2019). This return was composed of 8.63% from dividends and (8.85)% from net portfolio movement.

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

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

On 23 April 2020, the Board announced that the Company had adopted a revised 2020 dividend policy targeting a total annual dividend of between EUR0.06 and EUR0.07 per Ordinary Share, ultimately achieving the top end of this target range. The policy was revised downwards to prepare for potential losses and reduction in expected cash flows from the underlying CLOs as a result of the impact of COVID-19. The Company declared four dividends in respect of the year ended 31 December 2020, totalling EUR0.07 per share. Details of all dividend payments can be found within the Dividend History section at the front of this Annual Report.

Historical BGLF NAV and Share Price

The graph shows cumulative Published NAV and Ordinary Share price total returns and cumulative returns on European and US loans.

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

Market Conditions

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

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

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

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

Discount Management

The share price discount to Published NAV was in the range 8.81%(6) to 36.71%(6) and averaged 21.91%(6) throughout 2020 and ended the year trading at a discount of 20.57%(5) (versus discount of 10.20% at 2019 year-end). This was mainly due to the market uncertainty brought about by the COVID-19 pandemic. As a Board, we regularly weigh the balance between maintaining liquidity of the shares, the stability of any discount, and the desire of Shareholders to see the Ordinary Shares trade as closely as possible to their intrinsic value.(7) During 2020, the Company repurchased 3,498,507 shares for EUR2,118,749 at an average discount of 25.18% using available cash with the goal of reducing the discount. From 1 January 2021 to 28 April 2021, the Company further repurchased 125,000 shares for EUR81,250 at an average discount of 23.02%. As of 28 April 2021, the share price discount to Published NAV was 8.17%.

Blackstone Loan Financing C Share Update

On 7 January 2020, the conversion of the BGLF C shares into Ordinary shares was completed. The intention to undertake this conversion was announced by BGLF on 24 October 2019, following the investment of EUR62.6 million into BCF with proceeds from the sale of relevant assets acquired under the C Share rollover process, which represented 85.8% (87.3% including cash) of the value of assets in the C share pool. The Conversion Ratio was based on the net assets attributable to the Ordinary Shares and C Shares as at close of business on 29 November 2019.

Brexit Update

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

COVID-19

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

ESG

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

The Board

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

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

The work of the Board is assisted by the Audit Committee, NAV Review Committee, Management Engagement Committee, the Remuneration and Nomination Committee, the Risk Committee and the Inside Information Committee. The joint work of the Risk and Audit committees has given valuable support to the longer-term viability considerations of the Board as described under the Viability Statement in Risk Overview.

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

Shareholder Communications

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

Prospects and Opportunities in 2021

Sales of CLO positions

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

As of 28 April 2021, the latest Published NAV was EUR0.8494 per share.

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

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

Charlotte Valeur

Chair

29 April 2021

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

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

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

(7) Represents the BGLF Euro share price.

Portfolio Adviser's Review

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

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

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

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

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

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

Bank Loan Market Overview (11,12)

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

Despite economic uncertainty and a pause on new issue loan supply in March 2020, the global credit markets quickly reopened to issuers in need of capital. Many corporations first bolstered their liquidity by drawing down revolving lines of credit and then refinanced existing debt at favourable rates given the downward shift in treasuries and the strong investor demand for corporate credit. Issuance in the US and European loan markets decreased year-over-year; gross US loan issuance totalled $96.6 billion, a 20% decrease, while European loan issuance also decreased by 20% in 2020 to EUR65 billion.(13) We expect issuance to increase in both regions in 2021.

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

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

CLO Market Overview (17)

Demand for both US and European CLOs was slower to materialise following the market downturn resulting in higher CLO liability spreads. Global issuance of CLOs fell in 2020 to $118 billion (down from the $151 billion in 2019). Regionally, US CLOs recorded 2020 gross issuance of $93 billion, down 21% on 2019's issuance of $118 billion. European CLO issuance fell in tandem with the US, recording gross issuance of EUR22 billion which was a 26% decrease on the EUR30 billion recorded in 2019.(18) When demand resurfaced it was for CLOs with shorter reinvestment and non-call periods. This allowed equity investors the optionality to reset liability spreads in a tighter spread environment if one materialised, and in doing so potentially boosting future CLO equity returns. By year end, US and European CLO liability spreads normalised to pre-COVID-19 levels, as the global loan market recovered and defaults slowed. CLO refinancings and resets were limited primarily to early Q1 and late Q4 when the environment was more favourable. US CLO managers completed $32 billion in CLO refinancings and resets in 2020, while European CLO issuers recorded just EUR1 billion of refinancings and resets.

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

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

Gross primary CLO issuance forecasts are up in both the US and Europe for 2021 as a result of favourable equity arbitrage, anchored in a tightening of the AAA spread and continued improvement in loan fundamentals. US CLO issuance is forecast to grow by 9-19% to $100-$110 billion. In Europe, the 2021 CLO gross issuance is forecast to return to the 2019 levels of between EUR25-EUR30 billion. Including forecasts for refinancing/reset volumes for 2021, European CLO issuance could reach a new record of between EUR54-EUR64 billion.

Portfolio Update

BCF

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

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

Throughout 2020, BCF purchased EUR5.6 billion of assets (EUR2.2 billion net of sales). Additionally, BCF grew its CLO portfolio, through investments in four European CLOs, and four US CLOs, together representing EUR2.9 billion of loan assets. BCF also invested $32.1 million in a US CLO warehouse, a portion of which was termed out into a CLO during the year. These new CLOs further diversified the portfolio across vintages and while their reinvestment periods were zero to three years and shorter than the four-to-five-year reinvestment periods of prior years, the addition of new CLOs to the portfolio helped to offset the effect of the passage of time within the existing CLO portfolio. Overall, the pro-forma year end portfolio reinvestment period was 1.9 years versus 2.6 years in January 2020.

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

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

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

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

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

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

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

CLO Portfolio Positions (23)

 
                                                                                                           Distributions 
                                                                                                              Through 
                                                                                                            Last Payment 
                                                                                                                Date 
-------------  --------  ------  --------  -------  ----  ---------  -------  ---------  --------  -----  --------------- 
                                                          Reinvest.                      Current 
                          Deal   Position           % of    Period   Current   Current     Net      NIM 
               Closing    Size     Owned    % of     BCF     Left     Asset   Liability  Interest   3M 
                 Date      (M)      (M)    Tranche   NAV    (Yrs)     Coupon    Cost      Margin   Prior   Ann.    Cum. 
-------------  --------  ------  --------  -------  ----  ---------  -------  ---------  --------  -----  ------  ------- 
EUR CLO Income Note Investments 
------------------------------------------------------------------------------------------------------------------------- 
 Phoenix 
  Park          Jul-14   EUR417  EUR23.3    51.4%   1.3%    2.32      3.65%     1.78%     1.87%    1.91%  14.2%    89.2% 
 Sorrento 
  Park          Oct-14   EUR310  EUR29.5    51.8%   0.9%    0.00      3.63%     1.92%     1.71%    1.76%  15.3%    93.1% 
 Castle Park    Dec-14   EUR261  EUR24.0    52.2%   1.2%    0.00      3.59%     1.95%     1.64%    1.68%  15.2%    88.8% 
 Dartry Park    Mar-15   EUR338  EUR22.8    51.1%   1.1%    0.00      3.58%     1.82%     1.76%    1.85%  14.2%    79.7% 
 Orwell Park    Jun-15   EUR357  EUR24.2    51.0%   1.4%    0.00      3.57%     1.56%     2.01%    2.08%  15.5%    83.5% 
 Tymon Park     Dec-15   EUR375  EUR22.7    51.0%   1.5%    0.00      3.61%     1.40%     2.22%    2.27%  16.1%    77.8% 
 Elm Park       May-16   EUR544  EUR31.9    56.1%   2.4%    0.00      3.60%     1.39%     2.21%    2.27%  13.8%    60.8% 
 Griffith 
  Park          Sep-16   EUR456  EUR26.0    53.4%   1.6%    2.38      3.68%     1.82%     1.86%    1.86%  10.1%    42.6% 
 Clarinda 
  Park          Nov-16   EUR415  EUR23.1    51.2%   1.3%    0.00      3.67%     1.81%     1.86%    1.86%  11.6%    46.3% 
 Palmerston 
  Park          Apr-17   EUR415  EUR24.0    53.3%   1.5%    0.30      3.65%     1.55%     2.10%    2.12%  13.7%    48.4% 
 Clontarf 
  Park          Jul-17   EUR414  EUR29.0    66.9%   1.7%    0.59      3.56%     1.59%     1.97%    1.99%  15.4%    51.0% 
 Willow Park    Nov-17   EUR412  EUR23.4    60.9%   1.7%    1.54      3.59%     1.58%     2.01%    2.03%  17.8%    51.1% 
 Marlay Park    Mar-18   EUR413  EUR24.6    60.0%   1.8%    1.29      3.56%     1.40%     2.16%    2.21%  19.4%    49.5% 
 Milltown 
  Park          Jun-18   EUR409  EUR24.1    65.0%   1.9%    1.54      3.64%     1.50%     2.15%    2.16%  17.5%    41.0% 
 Richmond 
  Park          Jul-18   EUR548  EUR46.2    68.3%   2.1%    0.53      3.60%     1.53%     2.06%    2.08%  18.0%    40.6% 
 Sutton Park    Oct-18   EUR408  EUR24.0    66.7%   1.9%    2.37      3.61%     1.72%     1.89%    1.90%  15.9%    33.1% 
 Crosthwaite 
  Park          Feb-19   EUR513  EUR33.0    64.7%   2.2%    2.70      3.67%     2.00%     1.66%    1.65%  13.3%    23.9% 
 Dunedin 
  Park          Sep-19   EUR409  EUR25.3    52.9%   1.8%    3.31      3.66%     1.78%     1.89%    1.90%  10.7%    11.8% 
 Seapoint 
  Park          Nov-19   EUR406  EUR21.6    70.5%   1.8%    3.39      3.66%     1.84%     1.82%    1.84%  13.1%    13.0% 
 Holland 
  Park          Nov-19   EUR428  EUR39.1    72.1%   1.8%    3.37      3.67%     1.91%     1.76%    1.73%  11.4%    11.4% 
 Vesey Park     Apr-20   EUR405  EUR24.5    80.3%   2.1%    3.88      3.70%     1.96%     1.73%    1.70%  37.0%    20.3% 
 Avondale 
  Park          Jun-20   EUR284  EUR18.7    63.0%   1.8%    2.55      3.60%     2.52%     1.08%    1.07%   n/a      n/a 
 Deer Park      Sep-20   EUR344  EUR28.5   100.0%   2.3%    2.79      3.58%     2.27%     1.32%    1.16%   n/a      n/a 
 Marino Park    Dec-20   EUR324  EUR17.0    71.4%   1.6%    3.04      3.85%     1.84%     2.01%     n/a    n/a      n/a 
-------------  --------  ------  --------  -------  ----  ---------  -------  ---------  --------  -----  ------  ------- 
USD CLO Income Note Investments 
------------------------------------------------------------------------------------------------------------------------- 
 Dorchester 
  Park          Feb-15    $503    $44.5     67.0%   1.2%    0.00      3.83%     1.67%     2.16%    2.23%  16.8%    94.8% 
 Grippen 
  Park          Mar-17    $611    $29.8     50.1%   1.6%    1.30      3.86%     1.95%     1.91%    1.97%  14.5%    52.1% 
 Thayer Park    May-17    $515    $27.4     50.1%   1.1%    1.30      3.67%     1.98%     1.69%    1.77%  16.2%    55.7% 
 Catskill 
  Park          May-17   $1029    $56.0     51.6%   2.3%    1.30      3.66%     1.94%     1.72%    1.81%  15.6%    53.3% 
 Dewolf Park    Aug-17    $614    $31.7     51.6%   1.7%    1.79      3.92%     1.96%     1.96%    1.98%  16.1%    50.4% 
 Gilbert 
  Park          Oct-17   $1022    $51.8     50.8%   2.7%    1.79      3.86%     1.92%     1.95%    2.01%  16.2%    48.3% 
 Long Point 
  Park          Dec-17    $611    $29.5     50.1%   1.6%    2.05      3.73%     1.64%     2.09%    2.15%  21.3%    59.7% 
 Stewart 
  Park          Jan-18    $874    $92.2     50.1%   1.9%    2.00      3.75%     1.70%     2.05%    2.11%  14.0%    38.3% 
 Greenwood 
  Park          Mar-18   $1075    $53.9     50.1%   3.2%    2.29      3.85%     1.61%     2.24%    2.30%  19.7%    51.4% 
 Cook Park      Apr-18   $1025    $53.6     50.1%   2.9%    2.29      3.69%     1.56%     2.13%    2.20%  18.4%    46.5% 
 Fillmore 
  Park          Jul-18    $561    $30.2     54.3%   1.7%    2.54      3.70%     1.82%     1.88%    1.94%  15.6%    34.6% 
 Myers Park     Sep-18    $510    $26.4     50.1%   1.5%    2.80      3.74%     1.87%     1.87%    1.92%  16.4%    34.2% 
 Harbor Park    Dec-18    $716    $39.7     50.1%   2.1%    3.05      3.83%     1.92%     1.90%    1.91%  16.6%    30.5% 
 Buckhorn 
  Park          Mar-19    $502    $24.2     50.1%   1.4%    3.30      3.73%     2.18%     1.55%    1.62%  17.1%    27.1% 
 Niagara 
  Park          Jun-19    $453    $22.1     50.1%   1.4%    3.54      3.90%     1.98%     1.92%    1.90%  15.6%    20.3% 
 Southwick 
  Park          Aug-19    $503    $26.1     59.9%   1.5%    3.55      3.94%     2.16%     1.78%    1.80%  16.8%    19.5% 
 Beechwood 
  Park          Dec-19    $810    $48.9     61.1%   2.8%    4.05      3.99%     2.20%     1.79%    1.78%  15.8%    13.1% 
 Allegany 
  Park          Jan-20    $505    $30.2     66.2%   1.8%    4.04      3.91%     2.16%     1.76%    1.81%   9.8%    7.5% 
 Harriman 
  Park          Apr-20    $502    $29.2     70.0%   2.0%    2.30      3.78%     1.99%     1.79%    1.34%  38.1%    19.1% 
 Cayuga Park    Aug-20    $393    $22.8     71.7%   1.8%    2.54      3.83%     2.34%     1.48%    1.44%   n/a      n/a 
 Stratus 
  2020-2        Sep-20    $299    $24.2    100.0%   1.7%     n/a      3.55%     2.04%     1.51%    1.54%   n/a      n/a 
 

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

Key Portfolio Statistics (24)

 
                                             Current WA 
                        % of     Current WA   Liability  WA Remaining 
                         NAV   Asset Coupon        Cost    RPs (CLOs) 
EUR CLOs              40.56%          3.63%       1.76%     1.5 Years 
US CLOs               39.82%          3.80%       1.89%     2.2 Years 
Directly Held Loans 
 (less leverage)      12.66%          3.85%       1.85%           n/a 
US CLO Warehouses      0.86%          3.99%       1.34%           n/a 
Net Cash & Expenses    6.10%              -           -           n/a 
====================  ======  =============  ==========  ============ 
 

Top 10 Industries

 
Industry                                % of Portfolio 
                                      31 December 2020 
====================================  ================ 
Healthcare and Pharmaceuticals                  15.21% 
====================================  ================ 
Services Business                               10.44% 
====================================  ================ 
High Tech Industries                             9.32% 
====================================  ================ 
Banking, Finance, Insurance , Real 
 Estate                                          8.71% 
====================================  ================ 
Media Broadcasting and Subscription              6.81% 
====================================  ================ 
Hotels, Gaming and Leisure                       6.22% 
====================================  ================ 
Chemicals, Plastics and Rubber                   6.03% 
====================================  ================ 
Construction and Building                        5.21% 
====================================  ================ 
Telecommunications                               4.55% 
====================================  ================ 
Services Consumer                                3.72% 
====================================  ================ 
 
 
Industry                                % of Portfolio 
                                      31 December 2019 
====================================  ================ 
Healthcare and Pharmaceuticals                  15.03% 
====================================  ================ 
Services Business                               10.84% 
====================================  ================ 
High Tech Industries                             9.71% 
====================================  ================ 
Banking, Finance, Insurance , Real 
 Estate                                          8.84% 
====================================  ================ 
Hotels, Gaming and Leisure                       7.80% 
====================================  ================ 
Chemicals, Plastics and Rubber                   5.40% 
====================================  ================ 
Construction and Building                        4.96% 
====================================  ================ 
Telecommunications                               4.95% 
====================================  ================ 
Media Broadcasting and Subscription              4.67% 
====================================  ================ 
Services Consumer                                3.92% 
====================================  ================ 
 

Top 5 Countries

 
Country                              % of Portfolio 
                 31 December 2020  31 December 2019 
United States              52.73%            54.39% 
United Kingdom              9.81%            10.35% 
France                      7.36%             7.63% 
Luxembourg                  6.26%             5.79% 
Netherlands                 4.52%                ** 
===============  ================  ================ 
 

** Netherlands was not part of the Top 5 as at 31 December 2019. Germany made up 3. 86% of the Portfolio as at 31 December 2019.

Top 20 Issuers

 
                                          Total                                                        WA 
                            Portfolio      Par                                                       Coupon      WA 
                    #          Par     Outstanding                                     WA      WA    (All-In  Maturity 
                Facilities    (EURM)     (EURM)      Moody's Industry   Country       Price  Spread   Rate)   (Years) 
--------------  ----------  ---------  -----------  ------------------  -----------  ------  ------  -------  -------- 
                                                    Banking, Finance, 
                                                     Insurance and 
                                                     Real Estate 
Paysafe             4          216        2,685      (FIRE)             Luxembourg    99.8   4.28%    4.74%     4.3 
Paysafe is a payment service provider offering services to businesses 
 and consumers. Operating across three segments i) payment processing, 
 ii) prepaid solutions and iii) digital wallets. It has been growing 
 significantly both organically and by M&A (strong track record 
 in M&A in identifying, acquiring, and extrapolating synergies). 
---------------------------------------------------------------------------------------------------------------------- 
                                                                        United 
Refinitiv           2          176        7,620     Services Business    States      100.0   3.25%    3.30%     4.8 
Refinitiv is a leading player in the financial data and technology 
 markets with strong positions in data feeds, desktop, compliance 
 and risk services, and trading volumes. It provides critical news, 
 information, and analytics, enabling transactions and connecting 
 communities of trading, investment, financial and corporate professionals. 
 It also provides leading regulatory and operational risk management 
 solutions. 
---------------------------------------------------------------------------------------------------------------------- 
                                                    Retail (Global      United 
Euro Garages        5          170        4,829      Petrol Stations)    Kingdom      98.6   4.04%    4.15%     4.1 
Euro Garages is the leading global independent convenience retail 
 and fuel station operator with a fuel, convenience retail and Food-to-Go 
 offering with partnerships with leading brands such as Esso, BP, 
 Shell, Dunkin Donuts and Pizza Hut among others. 
---------------------------------------------------------------------------------------------------------------------- 
                                                    Healthcare 
Siemens                                             and 
 Audio              2          169        2,911     Pharmaceuticals     Denmark       97.4   3.96%    3.98%     5.2 
WS Audiology / Siemens Audio was created following the completion 
 of the merger between Sivantos and Widex. The combined company 
 operates in 125 markets and holds the third position in the hearing 
 aid market globally. 
---------------------------------------------------------------------------------------------------------------------- 
                                                    Media Broadcasting 
Numericable         4          162        4,887      and Subscription   France        98.7   3.10%    3.15%     4.9 
Numericable is one of the largest telecommunications operators 
 in France by revenues and number of subscribers, with major positions 
 in residential fixed, residential mobile, B2B, wholesale and media. 
---------------------------------------------------------------------------------------------------------------------- 
AkzoNobel                                           Chemicals, 
 Specialty                                           Plastics and 
 Chemicals          2          160        5,237      Rubber             Netherlands   99.5   3.14%    3.21%     4.8 
AkzoNobel Specialty Chemicals represents a collection of specialty 
 and commodity chemical and polymer businesses split across five 
 divisions: Surface Chemistry (surfactants and polymers), ethylene 
 and sulphur derivatives, polymer chemistry (includes catalysts 
 and polymer additives), industrial chemicals (includes chlor-alkali 
 and other industrial chemicals), and pulp and performance chemicals 
 (includes hydrogen peroxide and other bleaching chemicals, and 
 variety of other chemicals). 
---------------------------------------------------------------------------------------------------------------------- 
                                                    Media Broadcasting 
Ziggo               2          154        4,314      and Subscription   Netherlands   99.8   2.85%    2.90%     7.9 
Ziggo is one of the largest cable operators in the Netherlands. 
 The company provides radio, television, internet, and telephone 
 services. The company was created as a result of the merger between 
 Multikabel, @Home and Casema. 
---------------------------------------------------------------------------------------------------------------------- 
McAfee,                                             High Tech           United 
 LLC                2          152        3,306     Industries           States      100.3   3.61%    3.67%     3.8 
                         McAfee, LLC is the second largest security software vendor globally, 
                            after Symantec. McAfee serves both the consumer and enterprise 
                            security markets, with a focus on consumer endpoint protection. 
---------------------------------------------------------------------------------------------------------------------- 
Virgin                                              Media Broadcasting  United 
 Media              4          147        5,260      and Subscription    Kingdom      99.9   2.66%    2.71%     7.8 
                         Virgin Media is a British telecommunications company which provides 
                          telephone, television, and internet services in the United Kingdom. 
                           Virgin Media is a subsidiary of Liberty Global, an international 
                                      television and telecommunications company. 
---------------------------------------------------------------------------------------------------------------------- 
                                                    Banking, Finance, 
                                                     Insurance and 
                                                     Real Estate 
Ion Trading         2          145        2,944      (FIRE)             Ireland      100.1   3.45%    4.45%     3.9 
                           Ion Trading is a global financial software and services company 
                           that offers mission critical trading infrastructure solutions to 
                          banks and other financial institutions. In particular, the company 
                           provides high performance trading solutions for electronic fixed 
                           income markets, including support for cash, futures, repos, money 
                           markets, interest rate swaps and credit default swaps. The group 
                                           serves 800+ customers worldwide. 
---------------------------------------------------------------------------------------------------------------------- 
                                                    Beverage, Food      United 
Froneri             4          133        4,797      and Tobacco         Kingdom      99.1   2.59%    2.66%     6.1 
                           Froneri is a global ice cream manufacturer with its headquarters 
                            in North Yorkshire, England. It is the second largest ice cream 
                         producer by volume in the world, after Unilever. Froneri was created 
                         in 2016 as a joint venture between Nestle and PAI Partners to combine 
                                              their ice cream activities. 
---------------------------------------------------------------------------------------------------------------------- 
Quintiles                                           Healthcare 
 IMS                                                and                 United 
 Incorporated       5          130        3,528     Pharmaceuticals      States       99.8   1.91%    1.99%     3.7 
                            Quintiles IMS Incorporated provides information and technology 
                         services to the pharmaceutical and healthcare industries. The company 
                        offers services such as product and portfolio management capabilities, 
                            commercial effectiveness solutions, managed care, and consumer 
                                 health. Quintiles IMS operates in the United States. 
---------------------------------------------------------------------------------------------------------------------- 
TDC A/S             2          117        2,950     Telecommunications  Denmark       99.8   3.12%    3.12%     4.4 
                         TDC Group is the Danish telecom incumbent offering mobile services, 
                            broadband as well as TV and entertainment services. The company 
                         is active in B2B and Wholesale segments and has a presence in Norway. 
---------------------------------------------------------------------------------------------------------------------- 
                                                    Media Broadcasting 
UPS                 6          114        3,897      and Subscription   Netherlands  100.0   2.83%    2.91%     8.1 
                         UPC is a cable operator in Switzerland, Poland & Slovakia. It offers 
                                          broadband, TV and mobile services. 
---------------------------------------------------------------------------------------------------------------------- 
Micro 
 Focus 
 International                                      High Tech           United 
 plc                5          112        3,920     Industries           States       99.8   3.51%    3.65%     3.9 
                          Micro Focus International is a software business that specialises 
                        in managing a portfolio of infrastructure software assets and provides 
                            customers with application management solutions to improve the 
                          effectiveness and efficiency of their core IT systems. It provides 
                           enterprise application solutions, specifically software solutions 
                         for assessing, developing, testing, managing and modernizing existing 
                            applications. Micro Focus' solutions offer cost effective ways 
                       for organisations to avoid replacing their mission critical applications 
                          with expensive, risky and lengthy package software implementations 
                                             or rewriting custom upgrades. 
---------------------------------------------------------------------------------------------------------------------- 
TKE                 3          110        3,859     Capital Equipment   Germany      101.0   4.34%    4.46%     6.6 
                           Thyssenkrupp is the number four player in the global market for 
                        elevator and escalator technology. The company designs, manufacturers, 
                        installs, services, and modernises elevators, escalators, and platform 
                                                        lifts. 
---------------------------------------------------------------------------------------------------------------------- 
Ineos                                               Chemicals, 
 Finance                                             Plastics and 
 plc                4          108        4,280      Rubber             Luxembourg    99.2   2.15%    2.55%     3.8 
                       Ineos, through its subsidiaries, manufactures specialty and intermediate 
                        chemicals such as ethylene oxide, acetate esters, glycol, and specialty 
                                      polymers. Ineos serves customers worldwide. 
---------------------------------------------------------------------------------------------------------------------- 
                                                    Banking, Finance, 
                                                     Insurance and 
Nets -                                               Real Estate 
 Evergood           3          106        2,502      (FIRE)             Denmark      100.0   3.38%    3.42%     4.1 
                           Based in Denmark, Nets is the number one operator in the Nordic 
                        region and number two in the European payments space (behind Worldpay). 
                        The business is vertically integrated across the card and account-based 
                        payments value chain, operating across 3 segments; Merchant Acquiring; 
                                Financial and Network Services and Corporate Services. 
---------------------------------------------------------------------------------------------------------------------- 
                                                    Hotels, Gaming 
Tipico              2          103        1,437      and Leisure        Luxembourg    99.7   3.54%    3.54%     1.9 
                        Tipico is the market leader in German retail and online sportsbetting. 
                         It operates its retail channel through its 1250 outlets. The company 
                                         is primarily active in sportsbetting. 
---------------------------------------------------------------------------------------------------------------------- 
Xella 
 International                                      Construction 
 S.A                2          101        1,673      and Building       Luxembourg    99.6   3.95%    3.95%     5.3 
                         Xella International is a leading European producer of wall building 
                           materials and insulation products. The company operates 95 plants 
                          across 17 countries and key countries of operation include Germany, 
                                          France, Poland and the Netherlands. 
---------------------------------------------------------------------------------------------------------------------- 
 

Directly Held CLOs

The majority of the outstanding positions of Rollover Assets were sold within the first quarter of 2020. As of 31 December 2020, the market value of Rollover Assets totalled EUR549,437 or 0.13% of NAV.

Regulatory Update

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

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

Risk Management

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

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

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

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

Blackstone Responsible Investing Approach

The Importance of Responsible Investing

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

Objectives

Blackstone's responsible investing objectives are outlined below:

-- Integration

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

-- Engagement

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

-- Reporting

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

Approach and Responsibilities

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

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

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

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

Blackstone Credit's Commitment to ESG

BX Credit believes that a key component of being a prudent investor is an active evaluation of the ESG components of its investments to assess the potential economic effects thereof. Review of ESG risks to investment performance is integrated into BX Credit's investment analysis and decision-making processes from pre-investment diligence to post-investment monitoring. BX Credit recognises the value that incorporating ESG factors in our investment research creates both in terms of mitigating risk and enhancing long-term performance across our various investments. To that end, BX Credit integrates review and consideration of applicable ESG factors into its decision-making processes, as summarised below:

Due Diligence Process

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

Reporting to Investment Committee

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

   Post-Investment   Monitoring 

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

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

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

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

Blackstone Ireland Limited

29 April 2021

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(23) As of 31 December 2020.

(24) As of 31 December 2020.

Strategic Overview

Purpose

The Company's purpose is to provide permanent capital to BCF, a company established by Blackstone Ireland Limited ("BIL") (formerly Blackstone / GSO Debt Funds Management Europe Limited) as part of its loan financing programme, with a view to generating stable and growing total returns for Shareholders through dividends and value growth.

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

Values

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

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

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

Sustainability - As an investment company we aim to maintain and deliver attractive and sustainable returns for our shareholders.

Principal Activities

The Company was incorporated on 30 April 2014 as a closed-ended investment company limited by shares under the laws of Jersey and is authorised as a listed fund under the Collective Investment Funds (Jersey) Law 1988. The Company continues to be registered and domiciled in Jersey. The Company's Ordinary Shares are quoted on the Premium Segment of the Main Market of the LSE. Up until their conversion into Ordinary Shares on 7 January 2020, the Company's C Shares were quoted on the SFS of the Main Market of the LSE. Refer to Corporate Activity for further details on the C Share conversion.

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

The Company has a wholly-owned Luxembourg subsidiary, Blackstone / GSO Loan Financing (Luxembourg) S.à r.l. which has an issued share capital of 2,000,000 Class A shares and 1 Class B share. As at 31 December 2020 all of the Class A and Class B shares were held by the Company together with 284,879,854 Class B CSWs issued by the Lux Subsidiary. The Lux Subsidiary invests in PPNs issued by BCF, which in turn invests in CLOs and loans. The Company also holds directly held CLO Mezzanine Notes which formed part of the Rollover Assets and are yet to be realised and reinvested in CSWs.

The Company is a self-managed company. BIL acts as Portfolio Adviser to the Company and, pursuant to the Advisory Agreement, provides advice and assistance to the Company in connection with its investment in the CSWs. Blackstone Liquid Credit Strategies LLC ("BLCS") (formerly GSO / Blackstone Debt Funds Management LLC) acts as Portfolio Manager in relation to the Rollover Assets (as defined in the Company's Prospectus published on 23 November 2018).

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

Investment Objective

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

Investment Policy

Overview

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.

Investment Limits and Risk Diversification

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

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

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

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

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

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

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

   --      A vertical strip; or 
   --      A combination of a vertical strip and US horizontal strip. 

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

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

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

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

 
                                                                                          % of an Underlying Company's 
Maximum Exposure                                                                                     Gross Asset Value 
Per obligor                                                                                                          5 
Per industry sector                                                                                                 15 
                                                               (With the exception of one industry, which may be up to 
                                                                                                                  20%) 
To obligors with a rating lower than B-/B3/B-                                                                      7.5 
To second lien loans, unsecured loans, mezzanine loans and 
 high yield bonds                                                                                                   10 
----------------------------------------------------------  ---------------------------------------------------------- 
 

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.

Changes to Investment Policy

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

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

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

The Board considers BCF to be a substantial Underlying Company.

Company Borrowing Limit

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

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

Investment Strategy

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

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

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

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

   --      CLO Income Notes will not be levered; 

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

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

To the extent that they are financed, vertical strips are anticipated to require less capital than horizontal strips, which is expected to result in more efficient use of the Underlying Companies' capital. In addition, since the return profile on financed vertical strips is different to retained CLO Income Notes, BX Credit believes that vertical strips may be more robust through a market downturn, although projected IRRs may be slightly lower. However, an investment in vertical strips is not expected to impact the Company's stated target return.

From time to time, as part of its ongoing portfolio management, the Underlying Companies may sell positions as and when suitable opportunities arise. Where not bound by risk retention requirements, it is the intention that the Underlying Companies would seek to maintain control of the call option of any CLOs securitised.

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

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

The portfolio of the Underlying Companies in which the Company invests (through its wholly-owned subsidiary) remains broadly divided between European CLOs and US CLOs.

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

The Company operates with Euro as its functional currency. The Rollover Assets and a significant proportion of the portfolio of assets held by Underlying Companies to which the Company has exposure may, from time to time, be denominated in currencies other than Euro. In accordance with the Company's investment policy, up to 100 per cent. (as appropriate) of the Company's exposure to such non-Euro assets is hedged, subject to suitable hedging contracts being available at appropriate times and on acceptable terms.

Section 172(1) Statement

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

   a)     the likely consequences of any decision in the long-term; 
   b)    the interests of the Company's employees; 

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

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

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

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

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

Stakeholder engagement

Shareholders

 
               Why we engage                                           How we engage 
------------------------------------------  ------------------------------------------------------------------ 
 Shareholders provide the necessary               The Board engages with its shareholders 
  capital for the Company to pursue                by: 
  its purpose and strategy as                      a) publishing: 
  outlined in the Company's Prospectus.            i. announcements on the LSE, 
                                                   including: 
  The Company also aims to ensure                   *    the Company's Published NAV performance, announced on 
  its long-term success and sustainability               a monthly basis; 
  through its shareholder relationships, 
  based on transparency and openness, 
  and thereby fostering shareholder                 *    updated dividend guidance, as announced with regard 
  confidence. This in-turn benefits                      to the Company's updated dividend policy on 23 April 
  the liquidity of the Company's                         2020; 
  shares and the Company's reputation 
  as an esteemed market participant. 
                                                   ii. monthly performance reports, 
                                                   on the Company's website, covering 
                                                   the performance of the Company 
                                                   and its underlying portfolio, 
                                                   and including information on 
                                                   the composition of the underlying 
                                                   portfolio; 
                                                   iii. monthly market commentary 
                                                   reports issued by BX Credit 
                                                   and published on the Company's 
                                                   website (since July 2020) covering 
                                                   US and EU loan, high yield and 
                                                   CLO performance figures with 
                                                   commentary, as well as the market 
                                                   outlook; 
                                                   iv. quarterly investor reports, 
                                                   published on the Company's website, 
                                                   which provide an overview of 
                                                   the Company's and the Underlying 
                                                   Company's quarterly results, 
                                                   together with a market overview; 
                                                   v. the Company's Half-Yearly 
                                                   Financial Report and the Annual 
                                                   Report and Audited Financial 
                                                   Statements; 
                                                   vi. the Company's Key Information 
                                                   Document and a memorandum on 
                                                   costs; 
                                                   vii. ad-hoc reports, on the 
                                                   Company's website, as and when 
                                                   required to provide further 
                                                   insights into the relevant market 
                                                   situation; 
                                                   b) the Board and representatives 
                                                   of the Portfolio Adviser holding 
                                                   investor calls to provide market 
                                                   updates. In addition to quarterly 
                                                   updates the Company scheduled 
                                                   an ad hoc call on 27 March 2020 
                                                   to provide all shareholders 
                                                   with a corporate update in light 
                                                   of the Coronavirus pandemic 
                                                   and its expected impact on the 
                                                   global economy. Going forward 
                                                   it is anticipated that investor 
                                                   calls will be scheduled as required; 
                                                   c) telephone discussions between 
                                                   Directors and individual shareholders. 
                                                   Four such calls were held at 
                                                   shareholders' request during 
                                                   2020, on which the matters discussed 
                                                   included: 
                                                   i. total return - Shareholders' 
                                                   return since inception; 
                                                   ii. ESG - Shareholders' desire 
                                                   and expectations for ESG-compliant 
                                                   investments and greater transparency; 
                                                   iii. marketing - the level of 
                                                   marketing being done and the 
                                                   need to ensure this is sufficient; 
                                                   iv. discount management - actions 
                                                   being undertaken by the Company 
                                                   to remedy the share price discount 
                                                   and the timeliness of any such 
                                                   actions; 
                                                   v. liquidity - how liquidity 
                                                   in the Company's shares could 
                                                   be improved, including the possibility 
                                                   of liquidity events and restructuring; 
                                                   and 
                                                   vi. Directors' shareholdings 
                                                   - with a view to promoting the 
                                                   alignment of Directors' and 
                                                   shareholders' interests; 
                                                   vii. transparency in the Company's 
                                                   reporting - disclosure of underlying 
                                                   loans and ability to disclose 
                                                   expected IRR under different 
                                                   scenarios; and 
                                                   viii. confirmation of the foreign 
                                                   exchange rate applied where 
                                                   shareholders have elected to 
                                                   receive their dividend in Sterling. 
                                                   d) the Board engaging with its 
                                                   shareholders through its Portfolio 
                                                   Adviser and Brokers who communicate 
                                                   pertinent information from any 
                                                   discussions they have had with 
                                                   the Company's shareholders; 
                                                   and 
                                                   e) written communication with 
                                                   shareholders in response to 
                                                   queries received, as applicable. 
 
                                                   Additionally, the Board (including 
                                                   the different committee Chairs) 
                                                   is available at the AGM to answer 
                                                   questions in their areas of 
                                                   responsibility and the Chair 
                                                   encourages shareholders to contact 
                                                   her or any other Director with 
                                                   any queries or comments they 
                                                   may have. 
------------------------------------------  ------------------------------------------------------------------ 
 
 
 
                               Outcome 
--------------------------------------------------------------------- 
      Shareholders receive relevant information allowing them to 
       make informed decisions about their shareholding(s), and to 
       engage with the Company and its advisers on any matters they 
       consider relevant. 
 
       During the year, actions taken by the Board following on from 
       shareholder discussions include: 
 
        *    enhanced ESG and responsible investment disclosure in 
             this Annual Report; 
 
 
        *    the inception of quarterly investor calls; 
 
 
        *    buybacks and the share repurchase programme 
             undertaken, please refer to the Chair's Statement 
             above and the share repurchase programme coverage 
             below; 
 
 
        *    The Board, Brokers and Portfolio Adviser discuss 
             liquidity and discount management on both an ongoing 
             and frequent basis; and 
 
 
        *    Enhancement of portfolio information covered on the 
             quarterly investor call; and 
 
 
        *    The announcement of the foreign exchange rate applied 
             for shareholders who have elected to receive their 
             dividend in Sterling. 
 
 
 
       There was no impact on the Directors' remuneration as a result 
       of the above discussions. 
 
       All Directors are kept informed of shareholder engagement, 
       as necessary, so that they are aware of and understand the 
       views communicated. Any pertinent matters are followed up 
       on by the Board and shareholder views are considered as part 
       of the Directors' decision-making processes. 
--------------------------------------------------------------------- 
 

Service Providers

 
             Why we engage                              How we engage 
---------------------------------------  ------------------------------------------ 
 As an investment company with            The Board engages with its Portfolio 
  no employees, the Company is             Adviser on an on-going basis 
  reliant on its service providers         through: 
  to conduct its business. The             a) Regular communication with 
  Board considers the Portfolio            representatives as required, 
  Adviser, the Administrator and           such as telephone and email 
  the Registrar to be critical             correspondence, discussing ad-hoc 
  to the Company's day-to-day              matters which may arise; 
  operations.                              b) monthly meetings to receive 
                                           updates on the performance of 
  The Board views the Company's            the portfolio; 
  other service providers, such            c) quarterly board meetings 
  as brokers, auditors and lawyers         to receive detailed updates 
  as being highly important in             on, but not limited to, the 
  enabling the Company to meet             loan and CLO markets and activity 
  its regulatory and legal requirements    updates for the Underlying Company. 
  as necessary.                            This includes discussions about 
                                           capital inflows, performance 
                                           of current investments and return 
                                           attribution; 
                                           d) due diligence meetings with 
                                           senior representatives of the 
                                           Portfolio Adviser held virtually 
                                           in 2020; and 
                                           e) ad-hoc meetings to discuss 
                                           various day-to-day operational 
                                           matters or strategic matters. 
 
                                           The Board engages with its Administrator 
                                           on an on-going basis including: 
                                           a) Regular communication with 
                                           representatives, such as telephone 
                                           and email correspondence, to 
                                           discuss any ad-hoc matters; 
                                           b) monthly meetings to discuss 
                                           the Published NAV as computed 
                                           by the Administrator; 
                                           c) quarterly Board meetings 
                                           at which the Board receives 
                                           accounting, company secretarial 
                                           and compliance updates and liaises 
                                           with the Administrator on any 
                                           pertinent matters; 
                                           d) production of the Company's 
                                           Half-Yearly Financial Report 
                                           and Annual Report and Audited 
                                           Financial Statements; 
                                           e) ad-hoc meetings to discuss 
                                           various day-to-day operational 
                                           matters; and 
                                           f) annual service review meetings. 
                                           The Company's Registrar is responsible 
                                           for maintaining the Company's 
                                           share register and for processing 
                                           any corporate actions. The Registrar's 
                                           reports are available via an 
                                           online platform, and the Company 
                                           otherwise engages as necessary 
                                           with the Registrar via email 
                                           and telephone. 
---------------------------------------  ------------------------------------------ 
 
 
                              Outcome 
------------------------------------------------------------------ 
 The Company is well managed and the Board receives appropriate 
  and timely advice and guidance, together with responses to 
  any queries the Board has. The Board's engagement with its 
  service providers enables it to help facilitate the effective 
  running of the Company. This in-turn helps promote the Company's 
  sustainability. 
------------------------------------------------------------------ 
 

Underlying Company

 
              Why we engage                             How we engage 
-----------------------------------------  --------------------------------------- 
 The Board's purpose and strategy           The Board engages with the Portfolio 
  is implemented through investment          Adviser and the board of directors 
  in the Underlying Company, BCF.            of the Underlying Company to 
  Understanding the capital requirements,    understand their capital requirements 
  specifically the timing and                and performance. It does so 
  quantum, of the Underlying Company         through the methods described 
  is important to the Board to               above. 
  ensure the Company can provide 
  capital as required and so that            The Board also had a virtual 
  redemptions of Cash Settlement             meeting with the board of BCF 
  Warrants are appropriately factored        during 2020. 
  in so as to not adversely impact 
  the operations of the Underlying 
  Company. 
 
  Additionally, understanding 
  the performance of the Underlying 
  Company is vital to ensuring 
  the Company can deliver on its 
  investment objective of income 
  and capital appreciation. 
-----------------------------------------  --------------------------------------- 
 
 
                               Outcome 
--------------------------------------------------------------------- 
 The Board keeps abreast of capital requirements and the performance 
  of the Underlying Company. In doing so the Board aims to understand 
  the Underlying Company's past performance and contributing 
  factors to this, together with their prospective outlook. 
  From this process the Board looks to help ensure effectiveness 
  of the Portfolio Adviser and so promote the long-term success 
  of the Company. 
--------------------------------------------------------------------- 
 

Wider Society

 
             Why we engage                           How we engage 
--------------------------------------  --------------------------------------- 
 As a responsible corporate citizen      The Board welcomes the views 
  the Company recognises that             of stakeholders to remain current 
  its operations have an environmental    in their understanding of stakeholder 
  footprint and an impact on wider        views relating to environmental 
  society.                                and social matters. 
 
                                          The Board seeks to uphold the 
                                          highest standards of professionalism 
                                          and corporate governance and 
                                          embraces diversity, inclusion 
                                          and ESG. The Board expects the 
                                          same from its service providers, 
                                          and asks its service providers 
                                          to provide an overview of their 
                                          diversity and ESG policies on 
                                          an annual basis. Mr Clark has 
                                          taken responsibility for ESG 
                                          items at Board-level. During 
                                          2020 Mr Clark liaised with BX 
                                          Credit to better understand 
                                          their processes for upholding 
                                          high standards of ESG and responsible 
                                          investing; such discussions 
                                          remain ongoing as ESG procedures 
                                          and requirements evolve. 
 
                                          In endeavouring to exemplify 
                                          best corporate governance practice, 
                                          the Board aims to positively 
                                          influence the wider corporate 
                                          and economic environment and 
                                          inspire stakeholder trust. 
 
                                          In light of the COVID-19 pandemic 
                                          in 2020 the majority of the 
                                          Company's meetings were held 
                                          virtually, meaning a reduced 
                                          amount of travel and corresponding 
                                          emissions. 
--------------------------------------  --------------------------------------- 
 
 
                            Outcome 
--------------------------------------------------------------- 
 The Board is conscious of the importance of good governance, 
  including diversity, inclusion and ESG specifically and seeks 
  to positively influence the wider society and its service 
  providers. 
--------------------------------------------------------------- 
 

Corporate Activity

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

C Share Conversion

 
                            Description 
------------------------------------------------------------------ 
 On 7 January 2020, the Company announced the completion of 
  the conversion of its C Shares into Ordinary Shares. 133,451,107 
  C Shares were converted into 78,202,348 Ordinary Shares based 
  on a Conversion Ratio of 0.5860 Ordinary Shares per C Share. 
------------------------------------------------------------------ 
 
 
     Impact on long-term success           Stakeholder considerations 
------------------------------------  ----------------------------------- 
 The issue and subsequent conversion   An increase in the number of 
  of the C shares were undertaken       Ordinary Shares in issue spreads 
  with a view to increasing the         the Company's fixed costs over 
  Company's size thereby improving      a wider shareholder base thereby 
  diversification of the Company's      reducing the total expense ratio. 
  portfolio and improving liquidity. 
------------------------------------  ----------------------------------- 
 

Broker Update

 
                           Description 
----------------------------------------------------------------- 
 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 acts alongside Nplus1 Singer Advisory LLP. 
----------------------------------------------------------------- 
 
 
     Impact on long-term success             Stakeholder considerations 
-------------------------------------  -------------------------------------- 
 To increase the strength and           The Board views the appointment 
  depth of the broker advice received    of Winterflood as complimentary 
  by the Company and the scope           to the Company's existing engagement 
  of the                                 with N+1 Singer, and deems this 
  Joint Brokers' market coverage,        to be in the best interests 
  with the intention of improving        of stakeholders for the increase 
  the liquidity of the Company's         in knowledge and contacts available 
  shares.                                to the Company. 
-------------------------------------  -------------------------------------- 
 

COVID-19

 
                             Description 
--------------------------------------------------------------------- 
 As explained in the Chair's Statement, during 2020, COVID-19 
  adversely impacted global commercial activity and presented 
  significant volatility in financial markets. Refer also to 
  the Portfolio Adviser's Review. 
  In light of the COVID-19 pandemic the Directors spoke regularly 
  with BX Credit regarding market conditions and the performance 
  of the portfolio, and published the following updates to investors, 
  together with hosting an ad hoc investor call on 27 March 
  2020. The Company also amended its dividend policy, as detailed 
  below. The latter half of the year saw more certainty in the 
  markets and any updates were covered as part of the routine 
  quarterly investor calls. 
  On 23 March 2020, the Company announced a detailed review 
  of the companies within the BCF portfolio to determine the 
  potential impact of COVID-19 on these businesses and an investor 
  call on 27 March 2020 to provide a market update. 
  On 23 April 2020, the Company announced an update on the status 
  of the Portfolio Adviser's portfolio review, together with 
  an amended dividend policy and subsequent dividend declaration 
  in light of COVID-19. The Company announced that BX Credit 
  had conducted a detailed, bottom up review of all c. 970 companies 
  within the BCF portfolio and the likely impact of COVID-19 
  on cashflows. While the medium and long-term impacts of the 
  global pandemic remained uncertain, in the short-term BX Credit 
  expected that rating agency downgrades and corporate defaults 
  may lead to temporary cashflow 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 BCF). Pursuant 
  to this, BX Credit took numerous steps to seek to mitigate 
  the impact of COVID-19 on the performance of the BCF portfolio 
  and monitored the economic environment to identify risks and 
  opportunities. 
--------------------------------------------------------------------- 
 
 
       Impact on long-term success             Stakeholder considerations 
----------------------------------------  ------------------------------------ 
 A review, together with relevant          The Board kept stakeholders 
  actions, were taken to help               informed of the review; the 
  mitigate the impact of COVID-19           likely impact of COVID-19 on 
  and with a view to avoiding               the BCF portfolio; and any actions 
  a significant reduction or significant    taken by the Board and BX Credit 
  volatility in the Company's               to mitigate such impacts to 
  performance during a period               enable stakeholders to make 
  of high uncertainty.                      informed decisions during a 
                                            difficult period. 
----------------------------------------  ------------------------------------ 
 

Revised Dividend Policy

 
                            Description 
------------------------------------------------------------------ 
 On 23 April 2020, the Company announced that pursuant to the 
  review of BCF's portfolio in light of COVID-19, the Board 
  had adopted a revised Dividend Policy targeting a total 2020 
  annual dividend of between EUR0.06 and EUR0.07 per ordinary 
  share, to consist of quarterly payments of EUR0.015 per ordinary 
  share for the first three quarters and a final quarter payment 
  of a variable amount to be determined at that time, later 
  declared as EUR0.025 for Q4 2020. The Company further announced 
  that it would keep the dividend policy under close review 
  as the impact of the COVID-19 pandemic unfolded. 
 
  On 21 January 2021, the Board announced that the Company has 
  adopted a revised dividend policy targeting a total 2021 annual 
  dividend of between EUR0.07 and EUR0.08 per Ordinary Share, 
  which will consist of quarterly payments of EUR0.0175 per 
  Ordinary Share for the first three quarters and a final quarter 
  payment of a variable amount to be determined at that time. 
------------------------------------------------------------------ 
 
 
     Impact on long-term success            Stakeholder considerations 
-------------------------------------  ------------------------------------ 
 Amending the dividend to ensure        Stakeholders are provided with 
  the long-term sustainability           a degree of certainty as to 
  of the Company, particularly           the level of shareholder dividends 
  in light of any uncertainty            and the sustainability of the 
  presented by the COVID-19 pandemic.    Company is also enhanced. 
  At the same time the revised 
  dividend policy provides sufficient 
  flexibility to pay more or less 
  for Q4 dependent on the year's 
  results. 
-------------------------------------  ------------------------------------ 
 

Share Repurchase Programme

 
                            Description 
------------------------------------------------------------------ 
 From 30 June 2020 to 27 November 2020 the Company undertook 
  30 share repurchases and repurchased a total of 3,498,507 
  shares at a weighted average price of EUR0.66 per share. The 
  repurchased shares were held in treasury during 2020 and remain 
  in treasury. 
  On 21 October 2020 the Company announced that it intended 
  to continue repurchasing shares in the market using available 
  cash with a view to reducing the discount to NAV at which 
  the Company's Ordinary Shares were currently trading, noting 
  the Directors' ability to do this using available cash, subject 
  to having been granted authority to do so, should the Ordinary 
  Shares trade at an average discount to NAV per Share of more 
  than 7.5 per cent. as measured each month over the preceding 
  six month trading period, as covered by the Company's prospectus 
  issued on 23 November 2018. 
  It was noted that the Directors were conscious of the discount 
  at which the Company's Ordinary Shares were trading and they 
  would continue to monitor the Company's share price and relevant 
  factors such as the Company's available cash resources, in 
  connection with any decision to repurchase shares, together 
  with the Company's approach to share repurchases. 
  Since 31 December 2020 the Company has repurchased 125,000 
  shares at a price of EUR81,250. 
------------------------------------------------------------------ 
 
 
   Impact on long-term success          Stakeholder considerations 
---------------------------------  ------------------------------------ 
 Increasing the NAV per Ordinary    The Board believes that undertaking 
  Share and assisting to minimise    repurchases of Ordinary Shares 
  the discount to the NAV per        addresses any imbalance between 
  Ordinary Share at which the        the supply of, and demand for, 
  Ordinary Shares are trading.       the Ordinary Shares. 
---------------------------------  ------------------------------------ 
 

RISK OVERVIEW

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

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

Risk Appetite

The Board's strategic risk appetite is to balance the amount of income distributed by the Company by way of dividend with the opportunity to reinvest the returns received from the underlying CLO investments in further CLO equity through the structure. The Board seeks to ensure that the dividend policy is sustainable without eroding capital. Where the Company's share price is at a material discount to the NAV per share the Board may decide to repurchase shares in accordance with its share buyback policy instead of, or as well as, reinvestment into CLOs.

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

Principal Risks and Uncertainties

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

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

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

 
Principal risk                                               COVID-19 commentary 
---------------------------------------------------------    --------------------------------------------------------- 
Investment performance 
A key risk to the Company is unsatisfactory investment        Credit markets, along with most other asset classes, 
performance due to an economic downturn                       were initially badly hit by the expected 
along with continued political uncertainty which could        impact of COVID-19 on companies and markets. However, as 
negatively impact global credit markets                       the actual impact of the pandemic 
and the risk reward characteristics for CLO structuring.      on specific companies and markets has become clearer, 
This could directly impact the performance                    markets have adjusted and rebounded 
of the underlying CLOs that the Company invests in and it     somewhat. 
could also result in a reduced number 
of suitable investment opportunities and/or lower             The Portfolio Adviser conducted detailed reviews of the 
shareholder demand.                                           companies behind the Company's underlying 
                                                              portfolio and, within the parameters of the CLOs, traded 
                                                              in and out of different names to 
                                                              re-orientate the portfolios for the COVID-19 
                                                              environment. 
 
                                                              The Board takes comfort from the pedigree of Blackstone 
                                                              Credit as Portfolio Advisers and their 
                                                              ability to trade and manage risk in the portfolios in 
                                                              difficult circumstances, as demonstrated 
                                                              in the GFC and as seen in 2020. 
---------------------------------------------------------    --------------------------------------------------------- 
Share price discount 
The price of the Company's shares may trade at a discount     Due to the inherent uncertainty created by the onset of 
relative to the underlying net asset                          the COVID-19 pandemic, the Company's 
value of the shares.                                          discount initially widened as far as 36.71%, although 
                                                              there had been no sustained selling 
                                                              pressure. 
 
                                                              The discount subsequently narrowed somewhat but remained 
                                                              in the range 16% - 30% for the rest 
                                                              of the year. 
 
                                                              As the likely impact of the pandemic became clearer in 
                                                              mid-2020, the Board commenced buying 
                                                              back some of the Company's shares. The Board also began 
                                                              consulting with advisers to formulate 
                                                              a clearer policy regarding the application of cash 
                                                              generated by the underlying portfolio between 
                                                              distributions to shareholders, amounts re-invested into 
                                                              the portfolio and amounts available 
                                                              to buy back the Company's shares where there is a 
                                                              discount. Refer to the sections Discount 
                                                              Management in the Chair's Statement and Share Repurchase 
                                                              Programme in Corporate Activity. 
---------------------------------------------------------    --------------------------------------------------------- 
Investment valuation                                         The Directors use their judgement, with the assistance of 
The investment in the Lux Subsidiary is accounted for at     the Portfolio Adviser, in selecting 
fair value through profit or loss                            an appropriate valuation technique and refer to 
and the investment in PPNs issued by BCF held by the Lux     techniques commonly used by market practitioners. 
Subsidiary are at fair value. Investments                    The board of directors of BCF likewise use their 
in BCF (the PPNs) are illiquid investments, not traded on    judgement in determining the valuation of 
an active market and are valued                              investments and underlying CLOs and equity tranches 
using valuation techniques determined by the Directors.      retained by BCF. Independent valuation 
The underlying CLO investments held                          service providers are involved in determining the fair 
by BCF are valued using modelling methodologies,             value of underlying CLOs. 
described in the Company's Prospectus, that                  The Board and Portfolio Adviser have paid close attention 
are based upon many assumptions.                             to developing market expectations 
The valuation of the Company's investments therefore         and assumptions through the pandemic, to ensure that 
requires a significant judgement and                         valuations reflect reasonable future 
there is a risk that they are incorrectly valued due to      scenarios. 
calculation errors or incorrect assumptions.                 Sales of equity positions, announced to the stock market 
                                                             on 11 December 2020, in the CLOs 
                                                             held by BCF, to third parties, during the year have 
                                                             validated that the Company's valuation 
                                                             policy is reasonable. 
                                                             The Risk Committee Report mentions a valuation assumption 
                                                             error that was announced in September 
                                                             2020. This was fully investigated by the Portfolio 
                                                             Adviser and the Risk Committee was satisfied 
                                                             with the action taken to prevent such an error recurring. 
---------------------------------------------------------    --------------------------------------------------------- 
Income distribution model                                    The Directors use their judgement, with the assistance of 
The Company receives cash flows from its underlying          the Portfolio Adviser, in setting 
exposure to debt and CLO investments held                    the Company's distribution policy to ensure that it is 
by BCF. Each underlying CLO will pay out a mixture of        appropriate given the performance of 
income and capital return over its life                      the underlying CLOs. 
with a terminal capital value in the 70 to 80% range. BCF    As a result of the initial COVID-19 impact assessment 
aims to distribute most of the proceeds                      conducted by the Portfolio Adviser in 
that it receives from CLO investments to the Company (via    March/April 2020, the Company decided to amend its 
PPNs) whilst reinvesting some of                             dividend policy. The target for 2020 dividends 
the proceeds back into CLOs to maintain capital invested.    was announced as a range from EUR0.06 to EUR0.07 per 
In turn, the Company aims to distribute                      share. This was to ensure that there 
income received to shareholders, in accordance with its      was sufficient cover for distributions in the reasonable 
distribution policy, without eroding                         downside scenarios identified by 
capital.                                                     the Portfolio Adviser. 
There is a risk that the distribution policy at the          Due to the robust performance of the underlying portfolio 
Company level may be too generous or re-investment           relative to the modelled downside 
at the BCF level may not be sufficient, resulting in the     scenarios, the Company was able to pay dividends for 2020 
erosion of underlying capital invested.                      of EUR0.07 per share and announced 
                                                             a target range for 2021 of EUR0.07 to EUR0.08 per share. 
---------------------------------------------------------    --------------------------------------------------------- 
Operational 
The Company has no employees, systems or premises and is      The Risk Committee has reviewed the arrangements put in 
reliant on its Portfolio Adviser                              place by key service providers to 
and service providers for the delivery of its investment      ensure continuity of service to the Company and is 
objective and strategy.                                       currently satisfied that they are sufficient. 
                                                              This will be kept under regular review. 
The COVID-19 pandemic means that all of the Company's 
service providers are operating under 
business continuity procedures with staff mainly working 
from home. This increases the risk 
of control breakdowns, errors and omissions and 
regulatory breaches. 
 
As the pandemic takes its course there is also an 
increased risk that key individuals at the 
Portfolio Adviser and other service providers will be ill 
or otherwise unable to work. This 
will reduce the capacity for the Company to operate. 
---------------------------------------------------------    --------------------------------------------------------- 
 

Brexit

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

Going Concern

The Directors have considered the Company's investment objective, risk management and capital management policies, its assets and the expected income from its investments while factoring in the economic impact the outbreak of COVID-19 had during 2020 and continues to have into 2021, as discussed further in the Chair's Statement and the Portfolio Adviser's Review. The Directors are of the opinion that the Company is able to meet its liabilities and ongoing expenses as they fall due and they have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, these financial statements have been prepared on a going concern basis and the Directors believe it is appropriate to continue to adopt this basis for a period of at least 12 months from the date of approval of these financial statements.

Viability Statement

At least once a year the Directors carry out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity. The Directors also assess the Company's policies and procedures for monitoring, managing and mitigating its exposure to these risks. In assessing viability the Directors have considered the principal risks of the Company as detailed below along with the evolution of market conditions pursuant to the outbreak of the COVID-19 pandemic, the Company's current position, investment objective and strategy and the performance of the Portfolio Adviser.

As explained above, the Company's underlying investment exposure is to the investment portfolio of BCF. BCF's portfolio comprises the following categories of investments: (i) CLO Debt and CLO Income Notes securitised by BCF, (ii) a portfolio of senior secured loans and bonds; and (iii) preference shares. The majority of CLO investments in the portfolio have a non-call period of approximately two years from their origination date and cannot be redeemed until these expire. The Directors have considered each of the principal risks of the Company that could materially affect the cash flows derived from these investments and hence how these could impact the cash flows received by BGLF from BCF.

The Directors adjusted the Company's dividend policy for the calendar year 2020, pursuant to the comprehensive discussions between the Directors and the Portfolio Adviser regarding the portfolio review and uncertain near-term outlook. On 23 April 2020, the Directors announced they had adopted a revised dividend policy targeting a total 2020 annual dividend of between EUR0.06 and EUR0.07 per Ordinary Share, to consist of quarterly payments of EUR0.015 per Ordinary Share for the first three quarters and a final quarter payment of a variable amount to be determined at that time. The adjustment to the Company's dividend policy had a positive effect on the Company's cash and cash equivalents while allowing the Directors to assess the impact of the COVID-19 pandemic and provide for any unforeseen consequences. As the year progressed and more information became available on the impact of COVID-19 on BCF's portfolio, in line with the revised dividend policy, the Board declared dividends of EUR0.015 per Ordinary Share for the three quarters of 2020, and a dividend of EUR0.025 per Ordinary Share for the fourth quarter.

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

The Directors have assessed the prospects of the Company over the five-year period to 30 April 2026, which the Directors have determined constitutes an appropriate period to provide its viability statement. The Directors regularly receive financial forecasts from the Portfolio Adviser presented on a quarterly basis for at least the next four to five years. The Directors believe that financial forecasts to support its investment strategy can be subject to changes dependent upon investment performance, deployment of capital and regulatory, legal and tax developments for which the impact beyond a five year term is difficult to assess. In addition, the extent to which macroeconomic, political, social, technological and regulatory changes beyond a five-year term may have a plausible impact on the Company are difficult to envisage.

The Directors also considered other key risks. Whilst each of these key risks could have an impact on the long-term sustainability of the Company, the Directors concluded that each was sufficiently mitigated and would therefore not impact the viability of the Company over a five-year period.

On the basis of this assessment of the principal risks facing the Company and the modelled extreme market scenarios by the Portfolio Adviser, including the potential impact of COVID-19, used to assess the Company's prospects, and in the absence of any unforeseen circumstances, the Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five-year period of their assessment. However, it is worth noting that there is no intention for the life of the Company to be limited to this five-year period.

Performance Analysis

IFRS NAV Performance Analysis for the Years Ended 31 December 2020 And 31 December 2019 - Contributors to Change

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

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

Published NAV Performance Analysis for the Years Ended 31 December 2020 And 31 December 2019 - Contributors to Change

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

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

Other Information

Valuation Methodology

As noted above, the Published NAV and the IFRS NAV may diverge because of different key assumptions used to determine the valuation of the BCF portfolio. Key assumptions which are different between the two bases as at 31 December 2020 and 31 December 2019 are detailed below:

 
 Asset             Valuation       Input              IFRS   Published     IFRS   Published 
                    Methodology                        NAV         NAV      NAV         NAV 
                                                      31 December 2020     31 December 2019 
                   Discounted      Constant 
 CLO Securities     Cash Flows      default rate     1.75%       1.83%    1.98%       2.00% 
   Conditional 
    prepayment 
    rate                                               23%         24%      25%         20% 
   Reinvestment 
    spread (bp 
    over LIBOR)                                     370.00      359.23   354.77      380.82 
   Recovery 
    rate loans                                      60.00%      60.00%   70.00%      70.00% 
   Recovery 
    lag (Months)                                         0          12        0          12 
   Discount 
    rate                                            14.55%      14.00%   15.67%      12.04% 
  -----------------------------------------------  -------  ----------  -------  ---------- 
 

All of the assumptions above are based on weighted averages.

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

 
 Assumptions    IFRS NAV                               Published NAV 
-------------  -------------------------------------  ------------------------------------ 
 Reinvestment   Largely weighted by a CLO's            Represents a normalised, 
  Spread         current portfolio weighted             long-term view of loan 
                 average spread, which assumes          spreads to be achieved 
                 that the CLO investment                over the life of the CLO's 
                 manager will continue to               remaining reinvestment 
                 reinvest in collateral                 period. Initially informed 
                 with a similar spread and              by the underwriting model 
                 rating composition to the              at issuance, the assumption 
                 existing collateral pool.              is periodically reviewed 
                 In addition, weighting                 and updated to the extent 
                 may be given to primary                of secular changes in loan 
                 loan spreads to the extent             spreads. 
                 current primary market 
                 opportunities suggest different 
                 spreads than the existing 
                 portfolio. 
 Discount       Intended to reflect the                Based on the expected rate 
  Rate           market required rate of                of return for a newly originated 
                 return for similar securities          CLO equity security on 
                 and is informed by market              a hold to maturity basis. 
                 research, BWICs, market                The expected rate of return 
                 colour for comparable transactions,    is based on a long-term 
                 and dealer runs. The discount          market average and is periodically 
                 rate may vary based on                 reviewed and updated to 
                 underlying loan prices,                the extent of secular changes 
                 exposure to distressed                 in the market. 
                 assets or industries, manager 
                 performance, and time remaining 
                 in reinvestment period. 
                 Discount rates have tightened 
                 materially since Q1 2020 
                 given the recovery of the 
                 loan market and central 
                 bank stimulus. The Company 
                 completed several opportunistic 
                 trades of excess positions 
                 in Q4 2020. The discount 
                 rates implied by such trades 
                 helped inform the discount 
                 rates assumed for mark 
                 to market valuations. 
-------------  -------------------------------------  ------------------------------------ 
 

Source of the Company's Dividend - Ordinary Class

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

The Company redeems CSWs on a quarterly basis to transfer the income from the Lux Subsidiary. As detailed above, the Company redeemed 41,678,730 CSWs in the Lux Subsidiary during the year with a fair value of EUR51,840,511 to fund the quarterly dividend.

Alternative Investment Fund Managers' Directive

The Alternative Investment Fund Managers' Directive ("AIFMD") requires certain information to be made available to investors in alternative investment funds ("AIFs") before they invest and requires that material changes to this information be disclosed in the annual report of each AIF. There have been no material changes (other than those reflected in these financial statements) to this information requiring disclosure.

Alternative Performance Measures

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

 
             Published NAV total          Published NAV per             (Discount) / Premium 
              return per Ordinary          Ordinary Share(25)            per Ordinary Share 
              Share(25) 
Definition   The increase in the          Gross assets less             BGLF's closing 
              Published NAV per            liabilities (including        share price on 
              Ordinary Share plus          accrued but unpaid            the LSE less the 
              the total dividends          fees) determined              Published NAV per 
              paid per Ordinary            in accordance with            share as at the 
              Share during the             the section entitled          period end, divided 
              period, with such            "Net Asset Value"             by the Published 
              dividends paid being         in Part I of the              NAV per share as 
              re-invested at NAV,          Company's Prospectus,         at that date 
              as a percentage of           divided by the number 
              the NAV per share            of Ordinary Shares 
              as at period end             at the relevant time 
Reason       NAV total return             The Published NAV             The discount or 
              summarises the Company's     per share is an indicator     premium per Ordinary 
              true growth over             of the intrinsic              Share is a key 
              time while taking            value of the Company.         indicator of the 
              into account both                                          discrepancy between 
              capital appreciation                                       the market value 
              and dividend yield                                         and the intrinsic 
                                                                         value of the Company 
Target       11%+                         Not applicable                Maximum discount 
                                                                         of 7.5% 
Performance 
  2020       (0.22)%                      0.8435                        (20.57)% (26) 
  2019       14.46%                       0.9187                        (10.20)% 
  2018       6.70%                        0.8963                        (15.21)% 
  2017       1.38%                        0.9378                        5.03% 
  2016       13.28%                       1.0238                        (1.10)% 
-----------  -------------------------    --------------------------    --------------------- 
 

A reconciliation of the above-mentioned APMs to the most directly reconcilable line items presented in the financial statements for the year ended 31 December 2020 is presented below:

Published NAV total return per Ordinary Share

 
                                          31 December 2020  31 December 2019 
Opening Published NAV per Ordinary 
 Share (A)                                       EUR0.9187         EUR0.8963 
Adjustments per Ordinary Share (B)             EUR(0.0644)       EUR(0.0898) 
Opening IFRS NAV per Ordinary Share 
 (C=A+B)                                         EUR0.8543         EUR0.8065 
 
Closing Published NAV per Ordinary 
 Share (D)                                       EUR0.8435         EUR0.9187 
Adjustments per Ordinary Share (E)               EUR0.0122       EUR(0.0644) 
Closing IFRS NAV per Ordinary Share 
 (F=D+E)                                         EUR0.8557         EUR0.8543 
 
Dividends paid during the year (G)               EUR0.0700         EUR0.1000 
 
Published NAV total return per Ordinary 
 Share 
 (H=(D-A+G)/A)                                     (0.57)%            13.66% 
Impact of dividend re-investment 
 (I)                                                 0.35%             0.80% 
Published NAV total return per Ordinary 
 Share with dividends re-invested 
 (J=H+I)                                           (0.22)%            14.46% 
 
IFRS NAV total return per Ordinary 
 Share 
 (K=(F-C+G)/C)                                       8.36%            18.33% 
Impact of dividend re-investment 
 (L)                                                 0.49%           (0.02)% 
IFRS NAV total return per Ordinary 
 Share with 
 dividends re-invested (M=K+L)                       8.85%            18.31% 
----------------------------------------  ----------------  ---------------- 
 

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

Published NAV per Ordinary Share

 
                                      31 December 2020  31 December 2019 
Published NAV per Ordinary Share 
 (A)                                         EUR0.8435         EUR0.9187 
Adjustments per Ordinary Share (B)           EUR0.0122       EUR(0.0644) 
IFRS NAV per Ordinary Share (C=A+B)          EUR0.8557         EUR0.8543 
------------------------------------  ----------------  ---------------- 
 

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

(Discount) / Premium per Ordinary Share

 
                                         31 December 2020  31 December 2019 
Published NAV per Ordinary Share 
 (A)                                            EUR0.8435         EUR0.9187 
Adjustments per Ordinary Share (B)              EUR0.0122       EUR(0.0644) 
IFRS NAV per Ordinary Share (C=A+B)             EUR0.8557         EUR0.8543 
 
Closing share price as at 31 December 
 per the LSE (D)                                EUR0.6700         EUR0.8250 
 
Discount to Published NAV per Ordinary 
 Share 
 (E=(D-A)/A)                                     (20.57)%          (10.20)% 
Discount to IFRS NAV per Ordinary 
 Share 
 (F=(D-C)/C)                                     (21.70)%           (3.43)% 
---------------------------------------  ----------------  ---------------- 
 

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

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

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

Future Developments

Significant Events after the Reporting Period

Name Change

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

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

Dividends

On 22 January 2021, the Board declared a dividend of EUR0.025 per Ordinary Share in respect of the period from 1 October 2020 to 31 December 2020 with an ex-dividend date of 4 February 2021. A total payment of EUR11,923,083 was processed on 5 March 2021.

On 23 April 2021, the Board declared a dividend of EUR0.0175 per Ordinary Share in respect of the period from 1 January 2021 to 31 March 2021 with an ex-dividend date of 6 May 2021. The dividend will be paid on 4 June 2021.

Updated Conflict Disclosures

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

Share Repurchase Programme

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

Repurchase of Ordinary Shares

During the period from 1 January 2021 to 28 April 2021, the Company repurchased 125,000 shares at a cost of EUR81,250.

Outlook

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

Directors' Biographies

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

Charlotte Valeur

   Position:   Chair of the Board (non-executive and independent director, resident in Jersey) 
   Date of appointment:   13 June 2014 

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

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

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

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

Gary Clark, ACA

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

   Date of appointment:   13 June 2014 

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

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

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

 
 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. 
 
  Heather 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 Jersey utility 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, Heather 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 2007. He has served 
  on a number of private equity, property and hedge fund boards 
  as well as commercial companies. 
 
  In February 2021 Steven Wilderspin was appointed as a director 
  of FTSE 250 GCP Infrastructure Investments Ltd and in May 2018 
  Steven Wilderspin was appointed as a director of FTSE 250 HarbourVest 
  Global Private Equity Limited. 
 In December 2017 Steven Wilderspin stepped down from the board 
  of FTSE 250 3i Infrastructure plc, where he was chairman of 
  the audit and risk committee, after ten years' service. 
 
  From 2001 until 2007, Steven Wilderspin was a director of fund 
  administrator Maples Finance Jersey Limited where he was responsible 
  for fund and securitisation structures. Before that, from 1997, 
  Steven Wilderspin was Head of Accounting at Perpetual Fund 
  Management (Jersey) Limited. 
 
  Steven 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. Mark Moffat left GSO Capital 
  Partners LP (now Blackstone Credit), part of the credit businesses 
  of The Blackstone Group L.P., in April 2015 to pursue other 
  interests. 
 Whilst at GSO Capital Partners LP 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. 
 
  Mark Moffat joined GSO Capital Partners LP in January 2012 
  following the acquisition by GSO Capital Partners LP of Harbourmaster 
  Capital Management Limited where he was co-head. Prior to joining 
  Harbourmaster in 2007, Mark 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, Mark 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 Mark 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 2020.

Directors

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

The Board and Employees

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

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

Share Capital

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

Share Repurchase Programme

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

Under this authority, the Company has repurchased a total of 105,000 Ordinary Shares at a total cost of EUR70,100 (excluding fees and commissions).

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

Under this authority, the Company has repurchased a total of 3,393,507 Ordinary Shares at a total cost of EUR2,048,649 (excluding fees and commissions) during the year ended 31 December 2020.

Under this authority, the Company has repurchased a total of 125,000 Ordinary Shares at a total cost of EUR81,250 (excluding fees and commissions) during the period from 1 January 2021 to 28 April 2021.

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

Authority to Allot

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

Shareholders' Interests

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

 
Shareholder                        Percentage of Voting Rights 
BlackRock Inc                                           22.95% 
Quilter plc                                             21.26% 
Blackstone Treasury Asia Pte Ltd                         9.01% 
FIL Limited                                              6.89% 
---------------------------------  --------------------------- 
 

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

Statement of Disclosure of Information to the Auditor

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

Environmental, Employee, Social, Community and Human Rights Matters

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

Modern slavery

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

Gary Clark

Director

29 April 2021

CORPORATE GOVERNANCE REPORT

Statement of Compliance with Corporate Governance

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

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

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

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

The Board

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

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

Board Apprentices

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

Duties and Responsibilities

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

   --      statutory obligations and public disclosure; 
   --      strategic matters and financial reporting; 

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

   --      other matters having a material effect on the Company. 

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

Board Attendance

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

 
                                               Charlotte    Gary                                           Mark 
Meeting                                 Total     Valeur   Clark  Steven Wilderspin  Heather MacCallum   Moffat 
Quarterly Board                             4          4       4                  4                  4        4 
Ad Hoc Board                                5          4       5                  5                  5        5 
Ad Hoc board (Dividend Declaration)         4          4       4                  4                  4        4 
Audit Committee                             6        N/A       6                  6                  6        6 
Management Engagement Committee             1          1       1                  1                  1        1 
NAV Review Committee                       12        N/A      11                 12                 12       12 
Remuneration and Nomination Committee       4          4       4                  4                  4        4 
Risk Committee                              4          4       4                  4                  4        4 
Inside Information Committee (27)           3          1       2                  3                  2        2 
--------------------------------------  -----  ---------  ------  -----------------  -----------------  ------- 
 

Chair

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

Board Independence

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

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

Board Evaluation

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

   --      board composition/skills; 
   --      strategic review; 
   --      workings of the board; 
   --      risk oversight; 
   --      performance oversight; and 
   --      stakeholder management. 

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

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

Committees of the Board

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

The current committee memberships are detailed below.

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

Audit Committee

The Audit Committee comprises all Directors, except Charlotte Valeur, and is chaired by Heather MacCallum.

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 Management Engagement Committee comprises all Directors and is chaired by Charlotte Valeur.

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 NAV Review Committee comprises all Directors, except Charlotte Valeur, and is chaired by Gary Clark.

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 Remuneration and Nomination Committee comprises all Directors and is chaired by Gary Clark.

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 Risk Committee comprises all Directors and is chaired by Steven Wilderspin.

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 comprises any two members of the Board.

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

Board Diversity

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

Internal Controls

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

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

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

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

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

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

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

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

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

RISK COMMITTEE REPORT

Membership

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

Key Objectives

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

Responsibilities

The Risk Committee's key responsibilities are:

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

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

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

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

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

Committee Meetings

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

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

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

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

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

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

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

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

Risk Monitoring

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

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

Steven Wilderspin

Risk Committee Chair

29 April 2021

DIRECTORS' REMUNERATION REPORT

Directors' Remuneration

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

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

 
                                      Total fixed remuneration  Total fixed remuneration 
                                            for the year ended        for the year ended 
                                              31 December 2020          31 December 2019 
                                                           GBP                       GBP 
Charlotte Valeur                                        61,000                    61,000 
Gary Clark                                              46,000                    46,000 
Heather MacCallum                                       46,590                    44,500 
Steven Wilderspin                                       44,500                    44,500 
Mark Moffat                                             38,000                    38,000 
Total Directors' Remuneration                          236,090                   234,000 
------------------------------------  ------------------------  ------------------------ 
Total Directors' Remuneration (EUR)                    263,391                   264,988 
------------------------------------  ------------------------  ------------------------ 
 

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

The Remuneration and Nomination Committee increased Heather MacCallum's additional fee for services provided as Audit Committee Chair by GBP5,000 effective 1 August 2020 to reflect the increased time commitment required. The table above includes a pro-rated amount of GBP2,090.

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

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

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

Remuneration Policy

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

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

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

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

The limit for the aggregate fees payable to the Directors is GBP300,000 per annum.

Directors' Interests

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

 
Shares                   Type  As at 31 December 2020  As at 31 December 2019 
Charlotte Valeur     Ordinary                  11,500                  11,500 
Gary Clark           Ordinary                 168,200                 108,200 
Heather MacCallum    Ordinary                       -                       - 
Steven Wilderspin    Ordinary                  20,000                  20,000 
Mark Moffat          Ordinary                 771,593                 601,028 
Mark Moffat                 C                       -                 291,068 
------------------  ---------  ----------------------  ---------------------- 
 

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

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

Service Contracts and Policy on Payment of Loss of Office

No Director has a service contract with the Company. The Directors have each entered into a letter of engagement with the Company setting out the terms of their appointment. Directors' appointments may be terminated at any time by giving three month's written notice, with no compensation payable upon leaving office for whatever reason.

Gary Clark

Remuneration and Nomination Committee Chair

29 April 2021

AUDIT COMMITTEE REPORT

Audit Committee

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

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

Role of the Audit Committee

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

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

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

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

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

-- monitoring the statutory audit of the annual financial statements of the Company and its effectiveness;

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

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

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

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

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

How the Audit Committee Has Discharged Its Responsibilities

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

Monitoring the Integrity of the Financial Statements Including Significant Judgements

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

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

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

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

Significant Accounting Matters

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

 
Significant Area          How Addressed 
Valuation of investments  The investment in the Lux Subsidiary is accounted for at fair value through profit or loss 
                          and the investment in PPNs issued by BCF held by the Lux Subsidiary are at fair value. 
                          Investments 
                          in BCF (the PPNs) are illiquid investments, not traded on an active market and are valued 
                          using valuation techniques determined by the Directors and classified as Level 3 under IFRS 
                          13 "Fair Value Measurement." 
 
                          Valuation is therefore considered a significant area and is monitored by the Board, the 
                          Audit 
                          Committee, the Portfolio Adviser and the Administrator. The Audit Committee receives and 
                          reviews 
                          reports on the processes for the valuation of investments. Following discussion, we were 
                          satisfied 
                          that the judgements made and methodologies applied were prudent and appropriate and that an 
                          appropriate accounting treatment has been adopted in accordance with IFRS 9. 
 
                          Please see Notes 2, 6, 10 and 16 in the financial statements for further details 
------------------------  -------------------------------------------------------------------------------------------- 
 

Assessment of Risks and Uncertainties

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

Other Matters

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

Risk Management and Internal Controls

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

External Audit

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

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

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

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

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

During 2019, the Audit Committee reviewed its policy with respect to non-audit services and continually monitored the level of non-audit services provided by the Auditor to ensure alignment and compliance with best practice. The Company's policy sets out the permitted types of non-audit services that can be provided by Deloitte, which are consistent with the FRC's Revised Ethical Standard (2019). All proposed non-audit services required explicit approval from the Audit Committee. During the year, Deloitte were contracted to review the Company's interim financial statements. Audit fees for the year ended 31 December 2020 have increased by 5% compared to 2019 (refer to Note 3 for further details). This is mainly due to the additional work undertaken by the Auditor with respect to going concern and valuations due to the uncertainty created by the COVID-19 pandemic. Audit-related services decreased 17% year on year. In the prior year the Auditor had undertaken additional work as Reporting Accountant and reviewing the C Share Conversion Ratio as required by the Articles. An amount of EUR12,095 was also incurred during the year and this related to additional fees for the audit for the year ended 31 December 2019. These items has been given due consideration by the Audit Committee, who reviewed inter-alia the role of the respective engagement teams and the independence of individuals from the audit engagement team and concluded it was satisfied the Auditor had acted in an independent and professional manner.

Heather MacCallum

Audit Committee Chair

29 April 2021

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and Audited Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with IFRS, as adopted by the EU. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of the affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that Directors:

   --      properly select  and apply accounting policies; 

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

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

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

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with The Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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

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

-- the Strategic report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face; and

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

 
 Charlotte Valeur   Heather MacCallum 
 Director           Director 
 29 April 2021 
 

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

Report on the audit of the financial statements

   1.     Opinion 

In our opinion the financial statements of Blackstone Loan Financing Limited (the 'company'):

-- give a true and fair view of the state of the company's affairs as at 31 December 2020 and of its profit for the year then ended;

-- have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and

   --      have been prepared in accordance with Companies (Jersey) Law, 1991. 

We have audited the financial statements which comprise:

   --      the statement of comprehensive income; 
   --      the statement of financial position; 
   --      the statement of changes in equity; 
   --      the cash flow statement; and 
   --      the related notes 1 to 21. 

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

   2.     Basis for opinion 

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

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

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

   3.     Summary of our audit approach 
 
Key audit matters    The key audit matter that we identified in the current 
                      year was the valuation of investments in the Luxembourg 
                      subsidiary. 
                      Within this report, key audit matters are identified 
                      as follows:  Newly identified 
                        Increased level of risk 
                        Similar level of risk 
                        Decreased level of risk 
-------------------  --------------------------------------------------------- 
Materiality          The materiality that we used for the financial statements 
                      in the current year was EUR 8,200,000, which was 
                      determined on the basis of Net Assets Value of the 
                      company. 
-------------------  --------------------------------------------------------- 
Scoping              All of the audit work to respond to the risks of 
                      material misstatement was performed directly by the 
                      audit engagement team. 
-------------------  --------------------------------------------------------- 
Significant changes  There are no significant changes in our approach 
 in our approach      in the current year. 
-------------------  --------------------------------------------------------- 
 
   4.     Conclusions relating to going concern 

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Our evaluation of the directors' assessment of the company's ability to continue to adopt the going concern basis of accounting included:

   --         Carrying out the following on the forecasts provided by the directors': 

o Testing the arithmetic accuracy and integrity of the model used for preparation of the forecasts;

o Assessing whether the cash flows included in the forecast were in line with relevant agreements and market expectations; and

o Assessing the other key inputs used in the forecasts for reasonableness and consistency with prior years and industry norms.

-- Evaluating the forecasts prepared by the directors' in prior years to assess whether they are in line with actual results in current year;

-- Evaluating the directors' assessment of the impact of Brexit and Covid-19 on the operations of the company and its regulatory and liquidity requirements.

-- Assessing the appropriateness of the going concern disclosures in the financial statements.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

In relation to the reporting on how the company has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors' statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

   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 the Luxembourg subsidiary 
 
Key audit matter         The investments in subsidiary are accounted at Fair 
 description              Value Through Profit and Loss. 
 
                          Investments in Blackstone / GSO Loan Financing (Luxembourg) 
                          S.a.r.l. which total EUR 388,000,146 (2019: EUR 396,392,271) 
                          as detailed on page 75 in note 6 to the financial 
                          statements, are illiquid investments, not traded 
                          on an active market and are valued using valuation 
                          techniques determined by the Directors and classified 
                          as level III under IFRS : Fair Value Measurement 
                          ("IFRS 13"). Valuation is therefore a key area of 
                          judgement and has a significant impact on the Net 
                          Assets Value ("NAV") which is the most significant 
                          Key Performance Indicator ("KPI") of the Company 
                          and has a direct effect on the recognition of gains 
                          and losses on investments. 
 
                          The investments, commitments and obligations contracted 
                          by Blackstone Corporate Funding Designated Activity 
                          Company ("BCF") are driving the performance of its 
                          NAV, the valuation of the investments in BCF and 
                          ultimately the performance of the Company and its 
                          listed shares. We consider BCF as the principal source 
                          of risks and rewards for the Company with BCF's financial 
                          situation represented by its Net Asset Value as the 
                          main component for the fair valuation of the investments. 
 
                          The Covid-19 pandemic led initially to a dearth of 
                          transaction activity for Collateralised Loan Obligations 
                          ("CLO") equity notes. In comparison to the half year, 
                          by year end activity levels had recovered which helped 
                          provide market evidence more akin to that seen in 
                          prior years. 
 
                          Reviewing risk monitoring, performance and the investments' 
                          valuation for the Company, requires an assessment 
                          of the positions within BCF. BCF's investment positions 
                          in debt instruments, related credit risk and liquidity 
                          exposures should be compliant with the quality, diversification 
                          and overall limitations imposed by the Prospectus. 
 
 
                          The Directors use their judgment, with the assistance 
                          of the Adviser, Blackstone Ireland Limited ('BIL'), 
                          in selecting an appropriate valuation technique and 
                          refer to techniques commonly used by market practitioners. 
                          For investments in BCF and the underlying collateralised 
                          loan obligations (CLOs) and the equity tranches retained 
                          by that company, assumptions are made based on quoted 
                          market rates adjusted for specific features of any 
                          instrument. BCF uses Markit to price loan asset portfolio. 
 
                          There is a risk that a third party valuer has used 
                          an incorrect methodology, inaccurate data is supplied 
                          by the CLO Manager of the Originator or inappropriate 
                          assumptions are used concerning market information. 
                          The key assumptions include discount, prepayment, 
                          reinvestment and default rates. 
 
                          Refer to page 55 to 57 (audit committee report), 
                          pages 70 to 73 (Significant Accounting Policies) 
                          and pages 75 to 79 (Note 6 to the Financial statements). 
-----------------------  ----------------------------------------------------------------- 
How the scope                  In response to this key audit matter: 
 of our audit responded          *    We obtained understanding of the relevant controls 
 to the key audit                     over the valuation process. 
 matter 
 
                                 *    We assessed the valuation methodology for the 
                                      financial instruments issued by BCF against industry 
                                      standards and IFRS 13. 
 
 
                                 *    We involved our financial instruments specialists to 
                                      assess the valuation of investments and related 
                                      disclosures in the financial statements. 
 
 
                                 *    We involved our own CLO valuation specialists to 
                                      review the test of valuations performed by the 
                                      auditors of BCF, comparing information and 
                                      assumptions used by management to information 
                                      available from external independent reliable sources 
                                      such as Bloomberg or Intex, including any impact of 
                                      discount / premium to NAV. 
 
 
                                 *    We tested the calculation of the change in value of 
                                      investments for the year and its recognition in the 
                                      statement of comprehensive income. 
 
 
                                 *    We assessed the appropriateness of disclosures 
                                      (including disclosures related to sensitivity) made 
                                      by the Company in accordance with requirements of 
                                      IFRS 13. 
-----------------------  ----------------------------------------------------------------- 
Key observations         Based on the work performed we concluded that the 
                          valuation of investments in the Luxembourg subsidiary 
                          is appropriate. 
-----------------------  ----------------------------------------------------------------- 
 
   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:

 
Materiality                           EUR 8,200,000 (2019: EUR 8,200,000) 
------------------------------------  -------------------------------------------------------------------------------- 
Basis for determining materiality     We determined materiality for the Company, which is approximately 2% (2019: 2%) 
                                      of the Net 
                                      Asset Value of the Company. 
------------------------------------  -------------------------------------------------------------------------------- 
Rationale for the benchmark applied   Net Asset Value is the key performance indicator for investments in the Company 
                                      and is therefore 
                                      selected as the appropriate benchmark. 
------------------------------------  -------------------------------------------------------------------------------- 
 

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

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 2020 audit (2019: 70%). In determining performance materiality, we considered our risk assessment, including our assessment of the Company's overall control environment including impact of Covid-19 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 EUR410,000 (2019: EUR410,000), 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.

7.2. Our consideration of the control environment

A third party administrator maintains the books and records of the Company. Our audit therefore included obtaining an understanding of the controls at this service organisation, to the extent that they are relevant to the Company.

   8.    Other information 

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

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

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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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.

We have nothing to report in this regard.

   9.    Responsibilities of directors 

As explained more fully in the directors' responsibilities statement, 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.

11. Extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

   11.1.    Identifying and assessing potential risks related to irregularities 

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:

-- the nature of the industry and sector, control environment and business performance including the design of the company's remuneration policies, key drivers for directors' remuneration, bonus levels and performance targets;

-- results of our enquiries of management, the board of directors, the audit committee and risk committee about their own identification and assessment of the risks of irregularities;

-- any matters we identified having obtained and reviewed the company's documentation of their policies and procedures relating to:

o identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;

o detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;

o the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;

-- the matters discussed among the audit engagement team and including significant component audit teams and relevant internal specialists, including; tax and valuations specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud exists in the valuation of investments in the Luxembourg subsidiary. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.

We also obtained an understanding of the legal and regulatory framework that the company operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the Companies (Jersey) Law, 1991, Listing Rules and tax legislation.

In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the company's ability to operate or to avoid a material penalty. These included the company's compliance with the Jersey Financial Services Commission (JFSC) regulatory requirements.

   11.2.    Audit response to risks identified 

As a result of performing the above, we identified valuation of investments in the Luxembourg subsidiary as a key audit matter related to the potential risk of fraud. The key audit matters section of our report explains the matter in more detail and also describes the specific procedures we performed in response to that key audit matter.

In addition to the above, our procedures to respond to risks identified included the following:

-- reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;

-- enquiring of management and the audit committee concerning actual and potential litigation and claims;

-- performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;

-- reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with the JFSC;

-- in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Report on other legal and regulatory requirements

12. Corporate Governance Statement

The Listing Rules require us to review the directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the company's compliance with the provisions of the UK Corporate Governance Code specified for our review.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:

-- the directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 34;

-- the directors' explanation as to its assessment of the company's prospects, the period this assessment covers and why the period is appropriate set out on page 35;

   --       the directors' statement on fair, balanced and understandable set out on page 59; 

-- the board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 35;

-- the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 56; and

   --       the section describing the work of the audit committee set out on pages 55 to 57. 

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

   13.1.    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 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. 

We have nothing to report in respect of these matters.

14. 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, BA, FCA

For and on behalf of Deloitte LLP

Recognised Auditor

Jersey

29 April 2021

Statement of Financial Position

As at 31 December 2020

 
                                                                                    As at                  As at 
                                                                         31 December 2020   31 December 2019(28) 
                                                                 Notes                EUR                    EUR 
---------------------------------------------------------------  -----  -----------------  --------------------- 
Current assets 
Cash and cash equivalents                                                      20,725,819             11,464,088 
Other receivables                                                  5              151,038                232,474 
Financial assets at fair value through profit or loss - Lux Co     6          388,000,146            396,392,271 
Financial assets at fair value through profit or loss - CLOs       6              549,437              3,192,772 
Total current assets                                                          409,426,440            411,281,605 
---------------------------------------------------------------  -----  -----------------  --------------------- 
 
Non-current liabilities 
Intercompany loan                                                  7            (869,988)              (534,660) 
---------------------------------------------------------------  -----  -----------------  --------------------- 
Total non-current liabilities                                                   (869,988)              (534,660) 
---------------------------------------------------------------  -----  -----------------  --------------------- 
 
Current liabilities 
Payables                                                           8            (351,277)              (240,954) 
---------------------------------------------------------------  -----  -----------------  --------------------- 
Total current liabilities                                                       (351,277)              (240,954) 
---------------------------------------------------------------  -----  -----------------  --------------------- 
 
Total liabilities                                                             (1,221,265)              (775,614) 
---------------------------------------------------------------  -----  -----------------  --------------------- 
 
Net assets                                                       15,16        408,205,175            410,505,991 
---------------------------------------------------------------  -----  -----------------  --------------------- 
 
Capital and reserves 
Stated capital                                                     9          471,465,875            480,304,329 
Retained earnings                                                            (63,260,700)           (69,798,338) 
Shareholders' Equity                                                          408,205,175            410,505,991 
---------------------------------------------------------------  -----  -----------------  --------------------- 
 
Net Asset Value per Share                                         15               0.8557                 0.8543 
---------------------------------------------------------------  -----  -----------------  --------------------- 
 

These financial statements were authorised and approved for issue by the Directors on 29 April 2021 and signed on their behalf by:

 
 
 
 
   Charlotte Valeur     Heather MacCallum 
 Director             Director 
 

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

(28) Refer to Note 13 Segmental reporting for further details.

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2020

 
                                                                                     Year ended             Year ended 
                                                                               31 December 2020   31 December 2019(29) 
                                                                       Notes                EUR                    EUR 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
Income 
Realised gain/(loss) on foreign exchange                                                 29,321               (20,526) 
Net gain on financial assets at fair value through profit or loss - 
 Lux Co                                                                  6           36,356,525             60,950,562 
Net loss on financial assets at fair value through profit or loss - 
 CLOs                                                                    6          (1,953,328)            (9,910,600) 
Income distributions from CLOs                                                          407,376              9,928,261 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
Total income                                                                         34,839,894             60,947,697 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
 
Expenses 
Operating expenses                                                       3          (1,312,505)            (1,285,114) 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
Profit before taxation                                                               33,527,389             59,662,583 
Taxation                                                               2.11                   -                      - 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
Profit after taxation                                                                33,527,389             59,662,583 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
 
Loan interest expense                                                    7             (11,335)                (6,196) 
Bank interest expense                                                                  (95,397)               (49,555) 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
Total interest expense                                                                (106,732)               (55,751) 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
 
Total comprehensive income for the year attributable to Shareholders                 33,420,657             59,606,832 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
 
Basic and diluted earnings per Share                                    14               0.0699                 0.1348 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
 

The Company has no items of other comprehensive income, and therefore the profit for the year is also the total comprehensive income.

All items in the above statement are derived from continuing operations. No operations were discontinued during the year.

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

(29) Refer to Note 13 Segmental reporting for further details.

Statement of Changes in Equity

For the year ended 31 December 2020

 
                                Notes  Stated Capital  Retained Earnings         Total 
                                                  EUR                EUR           EUR 
------------------------------  -----  --------------  -----------------  ------------ 
Shareholders' Equity 
 at 1 January 2020                9       480,304,329       (69,798,338)   410,505,991 
Total comprehensive 
 income for the year 
 attributable to Shareholders                       -         33,420,657    33,420,657 
 
Transactions with owners 
Conversion of C shares            9       (6,719,705)          6,719,705             - 
Dividends                        18                 -       (33,602,724)  (33,602,724) 
Ordinary Shares repurchased       9       (2,118,749)                  -   (2,118,749) 
------------------------------  -----  --------------  -----------------  ------------ 
                                          (8,838,454)       (26,883,019)  (35,721,473) 
------------------------------  -----  --------------  -----------------  ------------ 
 
Shareholders' Equity 
 at 31 December 2020              9       471,465,875       (63,260,700)   408,205,175 
------------------------------  -----  --------------  -----------------  ------------ 
 

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

For the year ended 31 December 2019

 
                                Notes  Stated Capital(30)  Retained Earnings(29)         Total 
                                                      EUR                    EUR           EUR 
------------------------------  -----  ------------------  ---------------------  ------------ 
Shareholders' Equity 
 at 1 January 2019                9           404,962,736           (78,575,592)   326,387,144 
Total comprehensive 
 income for the year 
 attributable to Shareholders                           -             59,606,832    59,606,832 
 
Transactions with owners 
Issuance of Shares                9            77,270,167                      -    77,270,167 
Dividends                        18                     -           (50,829,578)  (50,829,578) 
Ordinary Shares repurchased       9           (1,928,574)                      -   (1,928,574) 
                                               75,341,593           (50,829,578)    24,512,015 
------------------------------  -----  ------------------  ---------------------  ------------ 
 
Shareholders' Equity 
 at 31 December 2019              9           480,304,329           (69,798,338)   410,505,991 
------------------------------  -----  ------------------  ---------------------  ------------ 
 

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

(30) Refer to Note 13 Segmental reporting for further details.

Statement of Cash Flows

For the year ended 31 December 2020

 
                                                                                     Year ended             Year ended 
                                                                               31 December 2020   31 December 2019(31) 
                                                                       Notes                EUR                    EUR 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
Cash flow from operating activities 
Total comprehensive income for the year attributable to Shareholders                 33,420,657             59,606,832 
 
Adjustments to reconcile profit after tax to net cash flows: 
 
  *    Unrealised gain on financial assets at fair value 
       through profit and loss                                           6         (25,011,152)           (46,266,826) 
 
  *    Realised gain on financial assets at fair value 
       through profit and loss                                           6          (9,288,389)            (4,639,594) 
Purchase of financial assets at fair value through profit or loss        6          (7,078,010)           (64,585,325) 
Proceeds from sale of financial assets at fair value through profit 
 or loss                                                                 6           52,413,011            102,401,653 
Changes in working capital 
Decrease in other receivables                                                            81,436                579,201 
Increase/(decrease) in payables                                                         110,323            (1,056,226) 
Net cash generated from operating activities                                         44,647,876             46,039,715 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
 
Cash flow from financing activities 
Proceeds from issuance of shares                                                              -              7,446,204 
Issue cost                                                                                    -              (780,506) 
Ordinary Shares repurchased                                              9          (2,118,749)            (1,928,574) 
Increase in intercompany loan                                           17              335,328                297,603 
Dividends paid                                                          18         (33,602,724)           (50,829,578) 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
Net cash used in financing activities                                              (35,386,145)           (45,794,851) 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
 
Net increase in cash and cash equivalents                                             9,261,731                244,864 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
 
Cash and cash equivalents at the start of the year                                   11,464,088             11,219,224 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
Cash and cash equivalents at the end of the year                                     20,725,819             11,464,088 
---------------------------------------------------------------------  -----  -----------------  --------------------- 
 
 
 Supplemental disclosure of non-cash    31 December 2019 
  flow information                                   EUR 
-------------------------------------  ----------------- 
 Transfer of assets from Rollover 
  Offer                                     (70,604,469) 
 Rollover Offer costs                            780,506 
 Issue of C Shares in specie                  77,270,167 
-------------------------------------  ----------------- 
 Cash proceeds from Rollover Offer             7,446,204 
-------------------------------------  ----------------- 
 

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

(31) Refer to Note 13 Segmental reporting for further details.

Notes to the Financial Statements

For the year ended 31 December 2020

   1              General information 

The Company is a closed-ended limited liability investment company domiciled and incorporated under the laws of Jersey with variable capital. It was incorporated on 30 April 2014 under registration number 115628. The Company's Ordinary Shares are quoted on the Premium Segment of the Main Market of the LSE and the Company has a premium listing on the Official List of the FCA. The Company's C Shares were quoted on the SFS of the Main Market of the LSE until 6 January 2020.

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.

As at 31 December 2020, the Company's stated capital comprised 477,023,331 Ordinary Shares of no par value (31 December 2019: 402,319,490), each carrying the right to 1 vote; 5,879,463 Ordinary Shares held in treasury (31 December 2019: 2,380,956); and no C Shares (31 December 2019: 133,451,107 C Shares of no par value, carrying no voting rights). The Company may issue one or more additional classes of shares in accordance with the Articles of Association.

The Company has a wholly owned Luxembourg subsidiary, Blackstone / GSO Loan Financing (Luxembourg) S.à r.l., which has an issued share capital of 2,000,000 Class A shares and 1 Class B share held by the Company as at 31 December 2020 and 31 December 2019. The Company also holds 284,879,854 Class B CSWs (31 December 2019: 319,758,584) issued by the Lux Subsidiary. The Company also holds two directly held CLO Mezzanine Notes (31 December 2019: 6 directly held CLO Income Notes and 2 directly held Mezzanine Notes) which formed part of the Rollover Assets and are yet to be realised and reinvested in CSWs.

The Company's registered address is IFC 1, The Esplanade, St Helier, Jersey, JE1 4BP, Channel Islands.

   2              Significant accounting policies 
   2.1          Statement of compliance 

The Annual Report and Audited Financial Statements (the "Annual Report") are prepared in accordance with the Disclosure Guidance and Transparency Rules of the FCA and with IFRS as adopted by the EU. The financial statements give a true and fair view of the Company's affairs and comply with the requirements of the Companies (Jersey) Law 1991, as amended.

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been applied consistently to the Company's financial statements for all years presented except for the adoption of new and amended standards as set out below.

   2.2          Basis of preparation 

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

The Company's functional currency is the Euro, which is the currency of the primary economic environment in which it operates. The Company's performance is evaluated and its liquidity is managed in Euro. Therefore, Euro is considered as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. The financial statements are presented in Euro, except where otherwise indicated.

The financial statements have been prepared on a going concern basis. The disclosures with respect to the Directors' assessment on the use of the going concern basis are provided above in the "Strategic Report - Risk Overview" section.

Non-consolidation of BCF

To determine control, there has to be a linkage between power and the exposure to risks and rewards. The main link from ownership would allow a company to control the payments of returns and operating policies and decisions of a subsidiary.

Non-consolidation of BCF

To meet the definition of a subsidiary under the single control model of IFRS 10, the investor has to control the investee.

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

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

-- the investor has exposure or rights to variable returns from its involvement with the investee; and

-- the investor has the ability to use its power over the investee to affect the amount of the investor's returns.

In the case of BCF, the relevant activities are the investment decisions made by it. However, in the Lux Subsidiary's case, the power to influence or direct the relevant activities of BCF is not attributable to the Lux Subsidiary. The Lux Subsidiary does not have the ability to direct or stop investments by BCF; therefore, it does not have the ability to control the variability of returns. Accordingly, BCF has been determined not to be a subsidiary undertaking as defined under IFRS 10 and the Lux Subsidiary's investment in the PPNs issued by BCF are accounted for at fair value through profit or loss.

Non-consolidation of CLOs

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

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

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

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

2.3 New standards, amendments and interpretations issued and effective for the financial year beginning 1 January 2020

Definition of material (amendments to IAS 1 and IAS 8)

The International Accounting Standards Board has redefined its definition of material, issued practical guidance on applying the concept of materiality and issued proposals focused on the application of materiality to disclosure of other accounting policies. The amendments do not have a material impact on the Company's financial statements.

There are no standards, amendments to standards and interpretations that are effective for the financial year beginning 1 January 2020 that have a material effect on the financial statements of the Company.

2.4 New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2020 and not early adopted

There are no standards, amendments and interpretations which have been issued but are not yet effective and not early adopted, that will affect the Company's financial statements.

   2.5          Income 

2.5a Interest income and expense

Interest income and expense is recognised under IFRS 9 separately through profit or loss in the Statement of Comprehensive Income, on an effective interest rate yield basis.

2.5b Income distributions from CLOs

Income from the financial assets at fair value through profit or loss - CLOs is recognised under IFRS 9 in the Statement of Comprehensive Income as Income distributions from CLOs. Income from the CLOs is recognised on an accruals basis.

   2.6          Shares in issue 

The shares of the Company are classified as equity, based on the substance of the contractual arrangements and in accordance with the definition of equity instruments under IAS 32 Financial Instruments: Presentation ("IAS 32").

The proceeds from the issue of shares are recognised in the Statement of Changes in Equity, net of the incremental issuance costs.

Share repurchased by the Company are deducted from equity. No gain or loss is recognised in the Statement of Comprehensive Income on the purchase, sale or cancellation of the Company's own equity instruments. The consideration paid or received is recognised directly in the Statement of Changes in Equity. Shares repurchased are recognised on the trade date.

   2.7          Fees and charges 

Expenses are charged through profit or loss in the Statement of Comprehensive Income on an accruals basis.

   2.8          Cash and cash equivalents 

Cash comprises current deposits with banks.

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Cash equivalents are revalued at the end of the reporting period using market rates and any increases / decreases are recognised in the Statement of Comprehensive Income. There were no such holdings during the year ended 31 December 2020 (31 December 2019: EURNil).

   2.9          Financial instruments 

Investments and other financial assets

   (i)            Initial recognition 

The Company recognises a financial asset or a financial liability in its Statement of Financial Position when, and only when, the Company becomes party to the contractual provisions of the instrument. Purchases and sales of investments are recognised on the trade date - the date on which the Company commits to purchase or sell the investment.

   (ii)           Classification 

The Company classifies its financial assets in the following measurement categories:

-- those to be measured subsequently at fair value (either through OCI, or through profit or loss); and

   --      those to be measured at amortised cost. 

The classification depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses are either to be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the company has made an irrevocable election at the time of initial recognition to account for the equity instrument at FVOCI.

The Company reclassifies debt instruments when and only when its business model for managing those assets changes.

   (iii)          Measurement 

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at FVPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

For the year ended 31 December 2020

Debt instruments

Subsequent measurement of debt instruments depends on the Company's business model for managing the asset and the cash flow characteristics of the asset. The Company's business model is to manage its debt instruments and to evaluate their performance on a fair value basis. The Company's policy requires the Portfolio Adviser and the Board to evaluate the information about these financial assets on a fair value basis together with other related financial information. Consequently, these debt instruments are measured at fair value through profit or loss.

Equity instruments

The Company subsequently measures all equity investments at fair value. Dividends from such investments are recognised in profit or loss as other income when the Company's right to receive payments is established.

Changes in fair value of financial assets at FVPL are recognised in "net gain/(loss) on financial assets at fair value through profit or loss" in the Statement of Comprehensive Income.

   (iv)          Derecognition 

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.

   (v)           Fair value estimation 

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 at the measurement date.

As at 31 December 2020, the Company held 284,879,854 CSWs, 2,000,000 Class A shares and 1 Class B share issued by the Lux Subsidiary (the "Investments") (31 December 2019: 319,758,584 CSWs, 2,000,000 Class A shares and 1 Class B share). These Investments are not listed or quoted on any securities exchange, are not traded regularly and, on this basis, no active market exists. The Company is not entitled to any voting rights in respect of the Lux Subsidiary by reason of their ownership of the CSWs, however, the Company controls the Lux Subsidiary through its 100% holding of the shares in the Lux Subsidiary.

The fair value of the CSWs and the Class A and Class B shares are based on the net assets of the Lux Subsidiary which is based substantially in turn on the fair value of the PPNs issued by BCF.

The Company determines the fair value of the CLOs held directly using third party valuations.

   (vi)          Valuation process 

The Directors have held discussions with BIL in order to gain comfort around the valuation of the CLOs, the underlying assets in the BCF portfolio and through this, the valuation of the PPNs and CSWs a s of the Statement of Financial Position date.

The Directors, through ongoing communication with the Portfolio Adviser including quarterly meetings, discuss the performance of the Portfolio Adviser and the underlying portfolio and in addition review monthly investment performance reports. The Directors analyse the BCF portfolio in terms of the investment mix in the portfolio. The Directors also consider the impact of general credit conditions and more specifically credit events in the US and European corporate environment on the valuation of the CSWs, PPNs and the BCF portfolio.

Portfolio

The Directors discuss the valuation process to understand the methodology regarding the valuation of its underlying portfolio and direct CLO holding, both comprising Level 3 assets. The majority of Level 3 assets in BCF are comprised of CLOs. In reviewing the fair value of these assets, the Directors look at the assumptions used and any significant fair value changes during the period under analysis.

Net Asset Value

The IFRS NAV of the Company is calculated by the Administrator based on information from the Portfolio Adviser and is reviewed and approved by the Directors, taking into consideration a range of factors including the unaudited IFRS NAV of both the Lux Subsidiary and BCF, and other relevant available information. The other relevant information includes the review of available financial and trading information of BCF and its underlying portfolio, advice received from the Portfolio Adviser and such other factors as the Directors, in their sole discretion, deem relevant in considering a positive or negative adjustment to the valuation.

The estimated fair values may differ from the values that would have been realised had a ready market existed and the difference could be material.

The fair value of the CLOs held directly, CSWs and the Class A and Class B shares are assessed on an ongoing basis by the Board.

Financial liabilities

   (vii)         Classification 

Financial liabilities include payables which are held at amortised cost using the effective interest rate method.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or where appropriate a shorter period, to the net carrying amount on initial recognition.

   (viii)        Recognition, measurement and derecognition 

Financial liabilities are measured initially at their fair value plus any directly attributable incremental costs of acquisition or issue.

Gains and losses are recognised in the Statement of Comprehensive Income when the liabilities are derecognised.

The Company derecognises a financial liability when the obligation specified in the contract is discharged, cancelled or expires.

   2.10        Foreign currency translations 

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the Statement of Financial Position date are translated to Euro at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the Statement of Comprehensive Income.

Foreign currency gains and losses are included in profit or loss on the Statement of Comprehensive Income as part of "Realised gain/(loss) on foreign exchange". Foreign currency gains and losses on financial assets classified at fair value through profit or loss - CLOs are included in profit or loss on the Statement of Comprehensive Income as part of "Net loss on financial assets at fair value through profit or loss - CLOs" for the year ended 31 December 2020.

   2.11        Taxation 

Profit arising in the Company for the year of assessment will be subject to Jersey tax at the standard corporate income tax rate of 0% (31 December 2019: 0%).

   2.12        Dividends 

Dividends to Shareholders are recorded through the Statement of Changes in Equity when they are declared to Shareholders.

   2.13        Critical accounting judgements and estimates 

The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect items reported in the Statement of Financial Position and Statement of Comprehensive Income. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets and liabilities affected in future periods.

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

Estimates

   (a)           Fair value 

For the fair value of all financial instruments held, the Company determines fair values using appropriate techniques.

Refer to Note 2.9 and Note 12 for further details on the significant estimates applied in the valuation of the companies' financial instruments and the underlying financial instruments in BCF.

Judgements

   (b)           Non-consolidation of the Lux Subsidiary 

The Company meets the definition of an Investment Entity as defined by IFRS 10 and is required to account for its investments at fair value through profit or loss.

The Company has multiple unrelated investors and holds multiple investments in the Lux Subsidiary. The Company has been deemed to meet the definition of an Investment Entity per IFRS 10 as the following conditions exist:

-- the Company has obtained funds for the purpose of providing investors with investment management services;

-- the Company's business purpose, which has been communicated directly to investors, is investing solely for returns from capital appreciation, investment income, or both; and

-- the performance of investments made through the Lux Subsidiary are measured and evaluated on a fair value basis.

The Company has also considered the typical characteristics of an investment entity per IFRS 10 in assessing whether it meets the definition of an Investment Entity.

The Company controls the Lux Subsidiary through its 100% holding of the voting rights and ownership. The Lux Subsidiary is incorporated in Luxembourg.

Refer to Note 11 for further disclosures relating to the Company's interest in the Lux Subsidiary.

   3              Operating expenses 
 
                                                         Year ended         Year ended 
                                                   31 December 2020   31 December 2019 
                                                                EUR                EUR 
------------------------------------------------  -----------------  ----------------- 
Professional fees                                           269,601            263,427 
Administration fees                                         329,706            365,607 
Brokerage fees                                              105,197             57,487 
Regulatory fees                                              44,914             30,661 
Directors' fees and other expenses (see Note 4)             264,829            282,075 
Audit fees and audit related fees                           196,788            214,304 
Non-audit fees                                                    -             13,955 
Registrar fees                                               53,964             30,662 
Sundry expenses                                              47,506             26,936 
------------------------------------------------  -----------------  ----------------- 
                                                          1,312,505          1,285,114 
------------------------------------------------  -----------------  ----------------- 
 

Administration fees

Under the administration agreement, the Administrator is entitled to receive variable fees based on the Published NAV of the Company for the provision of administrative and compliance oversight services and a fixed fee for the provision of company secretarial services. The overall charge for the above-mentioned fees for the Company for the year ended 31 December 2020 was EUR329,706 (31 December 2019: EUR365,607) and the amount due at 31 December 2020 was EUR52,470 (31 December 2019: EUR46,267).

Advisory fees

Under the Advisory Agreement, the Portfolio Adviser is entitled to receive out of pocket expenses, all reasonable third-party costs, and other expenses incurred in the performance of its obligations. On this basis, the Portfolio Adviser recharged EUR82,612 to the Company (31 December 2019: EURNil) comprising primarily legal fees of EUR80,359 for the year ended 31 December 2020. This amount has been included under Professional fees.

Audit and non-audit fees

The Company incurred EUR196,788 (31 December 2019: EUR214,304) in audit and audit-related fees during the year of which EUR116,188 (31 December 2019: EUR65,497) was outstanding at the year end.

The Company did not incur any non-audit fees during the year (31 December 2019: EUR13,955 incurred and outstanding at the year end). The table below outlines the audit, audit related and non-audit services received during the year.

 
                                                                                       Year ended         Year ended 
                                                                                 31 December 2020   31 December 2019 
                                                                                              EUR                EUR 
-----------------------------------------------------------------------------   -----------------  ----------------- 
Audit of the Company                                                                      118,753            113,307 
Additional fee for the prior year audit                                                    12,095             20,740 
Audit-related services - review of interim financial report                                65,940             62,277 
Other audit-related services - C Share Conversion Ratio                                         -              8,699 
Other audit-related services - Reporting Accountant - for the year ended 31 
 December 2018                                                                                  -              9,281 
------------------------------------------------------------------------------  -----------------  ----------------- 
Total audit and audit-related services                                                    196,788            214,304 
------------------------------------------------------------------------------  -----------------  ----------------- 
 
Tax compliance services                                                                         -             13,955 
Total non-audit services                                                                        -             13,955 
------------------------------------------------------------------------------  -----------------  ----------------- 
Total fees to Deloitte LLP and member firms                                               196,788            228,259 
------------------------------------------------------------------------------  -----------------  ----------------- 
 

Professional fees

Professional fees comprise EUR101,994 in legal fees and EUR167,607 in other professional fees. In 2019, professional fees comprised EUR104,657 in legal fees and EUR158,770 in other professional fees.

   4              Directors' fees 

The Company has no employees. The Company incurred EUR263,391 (31 December 2019: EUR264,988) in Directors' fees (consisting exclusively of short-term benefits) during the year of which EUR66,752 (31 December 2019: EUR55,467) was outstanding at the year end. No pension contributions were payable in respect of any of the Directors.

Refer to the Directors' Remuneration Report for further details on the Directors' remuneration and their interests.

   5              Other receivables 
 
                                  As at              As at 
                       31 December 2020   31 December 2019 
                                    EUR                EUR 
--------------------  -----------------  ----------------- 
Prepayments                      23,190             28,453 
Interest receivable             127,848            204,021 
                                151,038            232,474 
--------------------  -----------------  ----------------- 
 
   6              Financial assets at fair value through profit or loss 
 
                                                     As at                 As at              As at              As at 
                                          31 December 2020      31 December 2019   31 December 2019   31 December 2019 
                                                     Total  Ordinary Share class            C Share              Total 
                                                                                              class 
---------------------------------------  -----------------  --------------------  -----------------  ----------------- 
                                                       EUR                   EUR                EUR                EUR 
---------------------------------------  -----------------  --------------------  -----------------  ----------------- 
Financial assets at fair value through 
 profit or loss - Lux Co                       388,000,146           338,476,744         57,915,527        396,392,271 
---------------------------------------  -----------------  --------------------  -----------------  ----------------- 
Financial assets at fair value through 
 profit or loss - CLOs                             549,437                     -          3,192,772          3,192,772 
---------------------------------------  -----------------  --------------------  -----------------  ----------------- 
 

Financial assets at fair value through profit or loss - Lux Co consists of 284,879,854 CSWs, 2,000,000 Class A shares and 1 Class B share issued by the Lux Subsidiary (31 December 2019: 319,758,584 CSWs, 2,000,000 Class A shares and 1 Class B share issued by the Lux Subsidiary). Financial assets at fair value through profit or loss - CLOs consists of 2 directly held CLO Mezzanine Notes (31 December 2019: 6 directly held CLO Income Notes and 2 directly held Mezzanine Notes), which formed part of the Rollover Assets. These have yet to be realised and re-invested in CSWs and then used by the Lux Subsidiary to invest in PPNs issued by BCF.

CSWs

The Company has the right, at any time during the exercise period (being the period from the date of issuance and ending on earlier of the 3 February 2046 or the date on which the liquidation of the Lux Subsidiary is closed), to request that the Lux Subsidiary redeems all or part of the CSWs at the redemption price (see below), by delivering a redemption notice, provided that the redemption price will be due and payable only if and to the extent that (a) the Lux Subsidiary will have sufficient funds available to settle its liabilities to all other ordinary or subordinated creditors, whether privileged, secured or unsecured, prior in ranking to the CSWs, after any such payment, and (b) the Lux Subsidiary will not be insolvent after payment of the redemption price.

The redemption price is the amount payable by the Lux Subsidiary on the redemption of CSWs outstanding, which shall be at any time equal to the fair market value of the ordinary shares (that would have been issued in case of exercise of all CSWs), as determined by the Board on a fully diluted basis on the date of redemption, less a margin (determined by the Board on the basis of a transfer pricing report prepared by an independent advisor), and the redemption price for each CSW shall be obtained by dividing the amount determined in accordance with the preceding sentence by the actual number of CSWs outstanding.

If at the end of any financial year there is excess cash, as determined in good faith by the Lux Subsidiary board (but for this purpose only), the Lux Subsidiary will automatically redeem, to the extent of such excess cash, all or part of the CSWs at the redemption price provided the requirements in the previous paragraph are met, unless the Company notifies the Lux Subsidiary otherwise. For the avoidance of doubt, to the extent the subscription price for the CSWs to be redeemed has not been paid at the time the CSWs were issued, the subscription price for such CSWs to be redeemed shall be deducted from the Redemption Price.

CSWs listed in an exercise notice may not be redeemed.

Class A and Class B shares held in the Lux Subsidiary

Class A and Class B shares are redeemable and have a par value of one Euro per share. Class A and Class B Shareholders have equal voting rights commensurate with their shareholding.

Class A and Class B Shareholders are entitled to dividend distributions from the net profits of the Lux Subsidiary (net of an amount equal to five per cent of the net profits of the Lux Subsidiary which is allocated to the general reserve, until this reserve amounts to ten per cent of the Lux Subsidiary's nominal share capital).

Dividend distributions are paid in the following order of priority:

-- Each Class A share is entitled to the Class A dividend, being a cumulative dividend in an amount of not less than 0.10% per annum of the face value of the Class A shares.

-- Each Class B share is entitled to the Class B dividend (if any), being any income such as but not limited to interest or revenue deriving from the receivable from the PPN's held by the Lux Subsidiary, less any non-recurring costs attributable to the Class B shares.

Any remaining dividend amount for allocation of the Class A dividend and Class B dividend shall be allocated pro rata among the Class A shares.

The Board does not expect income in the Lux Subsidiary to significantly exceed the anticipated annual running costs of the Lux Subsidiary and therefore does not expect that the Lux Subsidiary will pay significant, or any, dividends although it reserves the right to do so.

Fair value hierarchy

IFRS 13 requires an analysis of investments valued at fair value based on the reliability and significance of information used to measure their fair value.

The Company categorises its financial assets according to the following fair value hierarchy detailed in IFRS 13 that reflects the significance of the inputs used in determining their fair values:

   --      Level 1: Quoted market price (unadjusted) in an active market for an identical instrument. 

-- Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

-- Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable variable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

 
31 December 2020                                                 Level 1  Level 2      Level 3        Total 
                                                                     EUR      EUR          EUR          EUR 
Financial assets at fair value through profit or loss - Lux Co         -        -  388,000,146  388,000,146 
Financial assets at fair value through profit or loss - CLOs           -        -      549,437      549,437 
---------------------------------------------------------------  -------  -------  -----------  ----------- 
 
 
31 December 2019                                                 Level 1  Level 2      Level 3        Total 
                                                                     EUR      EUR          EUR          EUR 
Financial assets at fair value through profit or loss - Lux Co         -        -  396,392,271  396,392,271 
---------------------------------------------------------------  -------  -------  -----------  ----------- 
Financial assets at fair value through profit or loss - CLOs           -        -    3,192,772    3,192,772 
---------------------------------------------------------------  -------  -------  -----------  ----------- 
 

The Company determines the fair value of the financial assets at fair value through profit or loss - Lux Co using the unaudited IFRS NAV of the Lux Subsidiary and the audited IFRS NAV of BCF.

The Company determines the fair value of the CLOs held directly using third party valuations. The Portfolio Adviser can challenge the marks if they appear off-market or unrepresentative of fair value.

During the years ended 31 December 2020 and 31 December 2019, there were no reclassifications between levels of the fair value hierarchy.

The Company's maximum exposure to loss from its interests in the Lux Subsidiary and indirectly in BCF is equal to the fair value of its investments in the Lux Subsidiary.

Financial assets at fair value through profit or loss reconciliation

The following table shows a reconciliation of all movements in the fair value of financial assets - Lux Co categorised within Level 3 between the start and the end of the reporting period:

 
31 December 2020                                                                     Total 
                                                                                       EUR 
---------------------------------------------------------------------------  ------------- 
Balance as at 1 January 2020                                                   396,392,271 
Purchases - CSWs                                                                 6,800,000 
Sale proceeds - CSWs                                                          (51,548,650) 
Realised gain on financial assets at fair value through profit or loss           9,233,413 
Unrealised gain on financial assets at fair value through profit or loss        27,123,112 
---------------------------------------------------------------------------  ------------- 
Balance as at 31 December 2020                                                 388,000,146 
---------------------------------------------------------------------------  ------------- 
 
Realised gain on financial assets at fair value through profit or loss           9,233,413 
Total change in unrealised gain on financial assets for the year                27,123,112 
Net gain on financial assets at fair value through profit or loss - Lux Co      36,356,525 
---------------------------------------------------------------------------  ------------- 
 
 
31 December 2019                                                                    Total 
                                                                                      EUR 
---------------------------------------------------------------------------  ------------ 
Balance as at 1 January 2019                                                  315,890,482 
Purchases - CSWs                                                               64,524,232 
Sale proceeds - CSWs                                                         (44,973,005) 
Realised gain on financial assets at fair value through profit or loss          8,864,144 
Unrealised gain on financial assets at fair value through profit or loss       52,086,418 
---------------------------------------------------------------------------  ------------ 
Balance as at 31 December 2019                                                396,392,271 
---------------------------------------------------------------------------  ------------ 
 
Realised gain on financial assets at fair value through profit or loss          8,864,144 
Total change in unrealised gain on financial assets for the year               52,086,418 
---------------------------------------------------------------------------  ------------ 
Net gain on financial assets at fair value through profit or loss - Lux Co     60,950,562 
---------------------------------------------------------------------------  ------------ 
 

The following table shows a reconciliation of all movements in the fair value of financial assets - CLOs categorised within Level 3 between the start and the end of the reporting period:

 
31 December 2020                                                                             Total 
                                                                                               EUR 
--------------------------------------------------------------------------------  ---------------- 
Balance as at 1 January 2020                                                             3,192,772 
PIK capitalised                                                                            278,010 
Sale proceeds - CLOs                                                                     (864,361) 
Realised gain on financial assets at fair value through profit or loss - CLOs           54,976(32) 
Unrealised loss on financial assets at fair value through profit or loss - CLOs        (2,111,960) 
--------------------------------------------------------------------------------  ---------------- 
Balance as at 31 December 2020                                                             549,437 
--------------------------------------------------------------------------------  ---------------- 
 
Realised gain on financial assets at fair value through profit or loss - CLOs          158,632(32) 
Total change in unrealised loss on financial assets for the year - CLOs                (2,111,960) 
--------------------------------------------------------------------------------  ---------------- 
Net loss on financial assets at fair value through profit or loss - CLOs               (1,953,328) 
--------------------------------------------------------------------------------  ---------------- 
 
 
31 December 2019                                                                             Total 
                                                                                               EUR 
--------------------------------------------------------------------------------  ---------------- 
Balance as at 1 January 2019                                                                     - 
Purchases - CLOs                                                                        70,665,562 
Sale proceeds - CLOs                                                                  (57,428,648) 
Realised loss on financial assets at fair value through profit or loss - CLOs          (4,224,550) 
Unrealised loss on financial assets at fair value through profit or loss - CLOs    (5,819,592)(33) 
--------------------------------------------------------------------------------  ---------------- 
Balance as at 31 December 2019                                                           3,192,772 
--------------------------------------------------------------------------------  ---------------- 
 
Realised loss on financial assets at fair value through profit or loss - CLOs          (4,224,550) 
Total change in unrealised loss on financial assets for the year - CLOs           (5,686,050) (33) 
--------------------------------------------------------------------------------  ---------------- 
Net loss on financial assets at fair value through profit or loss - CLOs               (9,910,600) 
--------------------------------------------------------------------------------  ---------------- 
 

Refer to Other Information above , Note 2.9 and Note 12 for valuation methodology of financial assets at fair value through profit and loss.

The Company's investments, through the Lux Subsidiary, in BCF are untraded and illiquid. The Board has considered these factors and concluded that there is no further need to apply a discount for illiquidity as at the end of the reporting period.

Quantitative information of significant unobservable inputs and sensitivity analysis to significant changes in unobservable inputs - Level 3

The significant unobservable inputs used in the fair value measurement of the financial assets at fair value through profit or loss - Lux Co within Level 3 of the fair value hierarchy together with a quantitative sensitivity analysis as at 31 December 2020 and 31 December 2019 are as shown below:

 
 Asset Class          Fair Value      Unobservable   Ranges   Weighted         Sensitivity to changes 
                                            Inputs             average    in significant unobservable 
                                                                                               inputs 
------------------  ------------  ----------------  -------  ---------  ----------------------------- 
                             EUR 
------------------  ------------  ----------------  -------  ---------  ----------------------------- 
 CSWs                381,605,063      Undiscounted      N/A        N/A          20% increase/decrease 
                                            NAV of                                   will have a fair 
                                               BCF                                    value impact of 
                                                                                                  +/- 
                                                                                        EUR76,321,012 
------------------  ------------  ----------------  -------  ---------  ----------------------------- 
 Class A and           6,395,083      Undiscounted      N/A        N/A          20% increase/decrease 
  Class B shares                            NAV of                                   will have a fair 
                                               the                                    value impact of 
                                    Lux Subsidiary                                                +/- 
                                                                                         EUR1,279,016 
------------------  ------------  ----------------  -------  ---------  ----------------------------- 
 Total as 
  at 
  31 December 
  2020               388,000,146 
------------------  ------------  ----------------  -------  ---------  ----------------------------- 
 
 Asset Class          Fair Value      Unobservable   Ranges   Weighted         Sensitivity to changes 
                                            Inputs             average    in significant unobservable 
                                                                                               inputs 
------------------  ------------  ----------------  -------  ---------  ----------------------------- 
 CSWs                390,685,286      Undiscounted      N/A        N/A          20% increase/decrease 
                                            NAV of                                   will have a fair 
                                              BGCF                                    value impact of 
                                                                                                  +/- 
                                                                                        EUR78,137,057 
-----------------  -------------  ----------------  -------  ---------  ----------------------------- 
 Class A and           5,706,985      Undiscounted      N/A        N/A          20% increase/decrease 
  Class B shares                            NAV of                                   will have a fair 
                                               the                                    value impact of 
                                    Lux Subsidiary                                                +/- 
                                                                                         EUR1,141,397 
------------------  ------------  ----------------  -------  ---------  ----------------------------- 
 Total as 
  at 
  31 December 
  2019               396,392,271 
------------------  ------------  ----------------  -------  ---------  ----------------------------- 
 
 

The significant unobservable inputs used in the fair value measurement of the financial assets at fair value through profit or loss - CLOs, comprising directly held CLO Mezzanine Notes, within Level 3 of the fair value hierarchy together with a quantitative sensitivity analysis as at 31 December 2020 and 31 December 2019 are as shown below:

 
 Asset Class     Fair Value   Unobservable   Ranges   Weighted             Sensitivity 
                                    Inputs     (34)    average           to changes in 
                                                                           significant 
                                                                          unobservable 
                                                                                inputs 
--------------  -----------  -------------  -------  ---------  ---------------------- 
                        EUR 
--------------  -----------  -------------  -------  ---------  ---------------------- 
 Mezzanine Notes 
---------------------------  -------------  -------  ---------  ---------------------- 
 Directly                                                        20% increase/decrease 
  Held CLO                                                                 will have a 
  Mezzanine                    Third party   0.1% -                  fair value impact 
  Notes             549,437     valuations    23.6%      10.3%       of +/- EUR109,887 
--------------  -----------  -------------  -------  ---------  ---------------------- 
 Total as 
  at 
  31 December 
  2020              549,437 
--------------  -----------  -------------  -------  ---------  ---------------------- 
 
 
 Asset Class        Fair Value   Unobservable   Ranges(33)   Weighted              Sensitivity to 
                                       Inputs                 average      changes in significant 
                                                                                     unobservable 
                                                                                           inputs 
-----------------  -----------  -------------  -----------  ---------  -------------------------- 
                           EUR 
-----------------  -----------  -------------  -----------  ---------  -------------------------- 
 Income Notes 
-----------------  -----------  -------------  -----------  ---------  -------------------------- 
                                                                            20% increase/decrease 
 Directly                                                                        will have a fair 
  Held CLO                        Third party                                        value impact 
  Income Notes         809,385     valuations   0% - 35.5%       6.7%           of +/- EUR161,877 
-----------------  -----------  -------------  -----------  ---------  -------------------------- 
 Mezzanine Notes 
------------------------------  -------------  -----------  ---------  -------------------------- 
 Directly                                                                 20% increase/decrease 
  Held CLO                                                                     will have a fair 
  Mezzanine                       Third party        20.1%                      value impact of 
  Notes              2,383,387     valuations      - 73.0%      43.1%            +/- EUR476,677 
-----------------  -----------  -------------  -----------  ---------  ------------------------ 
 Total as 
  at 
  31 December 
  2019               3,192,772 
-----------------  -----------  -------------  -----------  ---------  -------------------------- 
 
 
   7              Intercompany loan 
 
                                                     As at                 As at              As at              As at 
                                          31 December 2020      31 December 2019   31 December 2019   31 December 2019 
                                                                                            C Share 
                                                     Total  Ordinary Share Class              Class              Total 
---------------------------------------  -----------------  --------------------  -----------------  ----------------- 
                                                       EUR                   EUR                EUR                EUR 
---------------------------------------  -----------------  --------------------  -----------------  ----------------- 
Intercompany loan - payable to the Lux 
 Subsidiary                                        869,988               534,660                  -            534,660 
---------------------------------------  -----------------  --------------------  -----------------  ----------------- 
Interclass balance receivable/(payable)                  -               114,549          (114,549)                  - 
---------------------------------------  -----------------  --------------------  -----------------  ----------------- 
 

The intercompany loan - payable to the Lux Subsidiary is a revolving unsecured loan between the Company and the Lux Subsidiary. The intercompany loan has a maturity date of 13 September 2033 and is repayable at the option of the Company up to the maturity date. Interest is accrued at a rate of 1.6% per annum and is payable annually only when a written request has been provided to the Company by the Lux Subsidiary.

The interclass balance represents amounts receivable by the Ordinary Share Class from the C Share Class and payable by the C Share Class to the Ordinary Share Class for expenses incurred by the Company, which are split between the Ordinary Share Class and the C Share Class in proportion to their respective monthly NAVs.

   8              Payables 
 
                                                 As at              As at 
                                      31 December 2020   31 December 2019 
                                                   EUR                EUR 
-----------------------------------  -----------------  ----------------- 
Professional fees                               91,844             39,391 
Administration fees                             52,470             46,267 
Directors' fees                                 66,752             55,467 
Audit fees                                     116,188             65,497 
Intercompany loan interest payable              18,933              7,598 
Other payables                                   5,090             26,734 
Total payables                                 351,277            240,954 
-----------------------------------  -----------------  ----------------- 
 

All payables are due within the next twelve months.

   9              Stated capital 

Authorised

The authorised share capital of the Company is represented by an unlimited number of shares of any class at no par value.

Allotted, called up and fully-paid

 
Ordinary Shares                                             Number of shares  Stated capital 
                                                                                         EUR 
----------------------------------------------------------  ----------------  -------------- 
As at 1 January 2020                                             402,319,490     403,034,162 
Issue of Ordinary Shares upon conversion of C Shares              78,202,348      70,550,462 
Shares repurchased during the period and held in treasury        (3,498,507)     (2,118,749) 
----------------------------------------------------------  ----------------  -------------- 
Total Ordinary Shares as at 31 December 2020                     477,023,331     471,465,875 
----------------------------------------------------------  ----------------  -------------- 
 
 
C Shares                                Number of shares  Stated capital 
                                                                     EUR 
--------------------------------------  ----------------  -------------- 
As at 1 January 2020                         133,451,107      77,270,167 
C Share conversion and cancellation        (133,451,107)    (77,270,167) 
--------------------------------------  ----------------  -------------- 
Total C Shares as at 31 December 2020                  -               - 
--------------------------------------  ----------------  -------------- 
 

Allotted, called up and fully-paid

 
Ordinary Shares                                             Number of shares  Stated capital 
                                                                                         EUR 
----------------------------------------------------------  ----------------  -------------- 
As at 1 January 2019                                             404,700,446     404,962,736 
Shares repurchased during the period and held in treasury        (2,380,956)     (1,928,574) 
----------------------------------------------------------  ----------------  -------------- 
Total Ordinary Shares as at 31 December 2019                     402,319,490     403,034,162 
----------------------------------------------------------  ----------------  -------------- 
 
 
C Shares                                            Number of shares  Stated capital 
                                                                                 EUR 
--------------------------------------------------  ----------------  -------------- 
As at 1 January 2019                                               -               - 
Shares issued during the period                          133,451,107      77,270,167 
--------------------------------------------------  ----------------  -------------- 
Total C Shares as at 31 December 2019                    133,451,107      77,270,167 
--------------------------------------------------  ----------------  -------------- 
Total issued share capital as at 31 December 2019        535,770,597     480,304,329 
--------------------------------------------------  ----------------  -------------- 
 

Ordinary Shares

At the 2019 AGM, held on 11 July 2019, the Directors were granted authority to repurchase up to 14.99% of the issued share capital as at the date of the 2019 AGM for cancellation or to be held as treasury shares. Under this authority, during the year ended 31 December 2020, the Company purchased 105,000 of its Ordinary Shares of no par value at a total cost of EUR70,100. These Ordinary Shares are being held as treasury shares.

At the 2020 AGM, held on 16 July 2020, the Directors were granted authority to repurchase up to 14.99% of the issued share capital as at the date of the 2020 AGM for cancellation or to be held as treasury shares. Under this authority, during the year ended 31 December 2020, the Company purchased 3,393,507 of its Ordinary Shares of no par value at a total cost of EUR2,048,649. These Ordinary Shares are being held as treasury shares.

At the 2020 AGM, the Directors were granted authority to allot, grant options over or otherwise dispose of up to 48,041,684 Shares (being equal to 10.00% of the Shares in issue at the date of the AGM). This authority will expire at the 2021 AGM.

As at 31 December 2020, the Company had 477,023,331 Ordinary Shares in issue and 5,879,463 Ordinary Shares in treasury (31 December 2019: 402,319,490 Ordinary Shares in issue and 2,380,956 Ordinary Shares in treasury).

Refer to Note 21 for further details on repurchases of Ordinary Shares under the 2020 AGM authority subsequent to the reporting period. This authority will expire at the 2021 AGM. The Directors intend to seek annual renewal of this authority from Shareholders.

Voting rights - Ordinary Shares

Holders of Ordinary Shares have the right to receive income and capital from assets attributable to such class. Ordinary Shareholders have the right to receive notice of general meetings of the Company and have the right to attend and vote at all general meetings.

Dividends

The Company may, by resolution, declare dividends in accordance with the respective rights of the Shareholders, but no such dividend shall exceed the amount recommended by the Directors. The Directors may pay fixed rate and interim dividends.

A general meeting declaring a dividend may, upon the recommendation of the Directors, direct that payment of a dividend shall be satisfied wholly or partly by the issue of Ordinary shares or the distribution of assets and the Directors shall give effect to such resolution.

Except as otherwise provided by the rights attaching to or terms of issue of any Shares, all dividends shall be apportioned and paid pro rata according to the amounts paid on the Shares during any portion or portions of the period in respect of which the dividend is paid. No dividend or other monies payable in respect of any Share shall bear interest against the Company.

The Directors may deduct from any dividend or other monies payable to a Shareholder all sums of money (if any) presently payable by the holder to the Company on account of calls or otherwise in relation to such Shares.

Any dividend unclaimed after a period of 10 years from the date on which it became payable shall, if the Directors so resolve, be forfeited and cease to remain owing by the Company.

The dividends declared by the Board during the year are detailed above.

Refer to Note 21 for dividends declared after the year end.

Repurchase of Ordinary Shares

The Board intends to seek annual renewal of this authority from the Ordinary Shareholders at the Company's AGM, to make one or more on-market purchases of Shares in the Company for cancellation or to be held as Treasury shares.

The Board may, at its absolute discretion, use available cash to purchase Shares in issue in the secondary market at any time.

Rights as to Capital

On a winding up, the Company may, with the sanction of a special resolution and any other sanction required by the Companies Law, divide the whole or any part of the assets of the Company among the Shareholders in specie provided that no holder shall be compelled to accept any assets upon which there is a liability. On return of assets on liquidation or capital reduction or otherwise, the assets of the Company remaining after payments of its liabilities shall subject to the rights of the holders of other classes of shares, to be applied to the Shareholders equally pro rata to their holdings of Shares.

Capital management

The Company is closed-ended and has no externally imposed capital requirements. The Company's capital as at 31 December 2020 comprises shareholders' equity at a total of EUR408,205,175 (31 December 2019: EUR410,505,991).

The Company's objectives for managing capital are:

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

-- to achieve consistent returns while safeguarding capital by investing via the Lux Subsidiary in BCF and other Underlying Companies;

-- to maintain sufficient liquidity to meet the expenses of the Company and to meet dividend commitments; and

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

The Board monitors the capital adequacy of the Company on an on-going basis and the Company's objectives regarding capital management have been met.

Refer to Note 10C Liquidity Risk for further discussion on capital management, particularly on how the distribution policy is managed.

C Shares

On 7 January 2019, the Company issued 133,451,107 C Shares in specie as a result of the Rollover Offer. The Rollover Offer included a transfer of assets amounting to EUR70,604,469, cash proceeds amounting to EUR7,446,204 and incurred EUR780,506 in costs. The C Shares were admitted to trading on the SFS of the main market of the LSE. As at 31 December 2020, the Company had no C Shares in issue (31 December 2019: 133,451,107) following the conversion and cancellation as described below.

Voting rights - C Class

Holders of C Shares have the right to receive income and capital from the C Share assets attributable to such class. C Shareholders do not have the right to receive notice of or to attend or vote at any general meeting of the Company.

Dividends

Holders of C Shares are entitled to dividends as described in the section "Dividends" above.

Conversion

On 24 October 2019, the Company announced that it had reinvested EUR62.6 million into BCF as part of its realisation strategy and that the Company intended to convert the C Shares into Ordinary Shares. 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 -

EUR362,950,897 (NAV per Share of EUR 0.9021) and C Shares - EUR 70,550,461 (NAV per Share of EUR 0.5287) 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.

On this basis, 133,451,107 C Shares would convert into 78,202,348 Ordinary Shares. The 78,202,348 Ordinary Shares were admitted to the premium listing segment of the Official List of the FCA and to trading on the LSE's Main Market for listed securities on 7 January 2020.

   10           Financial risk management 

The Company is exposed to market risk (including interest rate risk, currency risk and price risk), credit risk and liquidity risk arising from the financial instruments it holds and the markets in which it invests.

   10A         Market risk 

Market risk is the current or prospective risk to earnings or capital of the Company arising from changes in interest rates, foreign exchange rates, commodity prices or equity prices.

The Company holds three investments, denominated in Euro, in the Lux Subsidiary in the form of CSWs, Class A and Class B shares and directly holds, as part of the Rollover Offer, two directly held CLO Mezzanine Notes, denominated in USD. The CSWs are the main driver of the Company's performance.

Financial market disruptions may have a negative effect on the valuations of BCF's investments and, by extension, on the NAV of the Lux Subsidiary and the Company and/or the market price of the Company's Euro shares, and on liquidity events involving BCF's investments. Any non-performing assets in BCF's portfolio may cause the value of BCF's portfolio to decrease and, by extension, the NAV of the Lux Subsidiary and the Company. Adverse economic conditions may also decrease the value of any security obtained in relation to any of BCF's investments.

A sensitivity analysis is shown below disclosing the impact on the IFRS NAV of the Company, if the fair value of the Company's investments at the year end increased or decreased by 20%. This level of change is considered to be reasonably possible based on observations of past and possible market conditions.

 
                                                     Year ended  Increase by  Decrease by 
                                               31 December 2020          20%          20% 
                                                            EUR          EUR          EUR 
--------------------------------------------  -----------------  -----------  ----------- 
Financial assets held at fair value through 
 profit or loss: 
CSWs                                                381,605,063  457,926,076  305,284,050 
Class A and Class B shares                            6,395,083    7,674,100    5,116,066 
CLOs                                                    549,437      659,324      439,549 
--------------------------------------------  -----------------  -----------  ----------- 
                                                    388,549,583 
--------------------------------------------  -----------------  -----------  ----------- 
 
 
                                                     Year ended  Increase by  Decrease by 
                                               31 December 2019          20%          20% 
                                                            EUR          EUR          EUR 
--------------------------------------------  -----------------  -----------  ----------- 
Financial assets held at fair value through 
 profit or loss: 
CSWs                                                390,685,286  468,822,343  312,548,228 
Class A and Class B shares                            5,706,985    6,848,382    4,565,588 
CLOs                                                  3,192,772    3,831,326    2,554,218 
--------------------------------------------  -----------------  -----------  ----------- 
                                                    399,585,043 
--------------------------------------------  -----------------  -----------  ----------- 
 

The calculations are based on the investment valuation at the Statement of Financial Position date and are not representative of the period as a whole, and may not be reflective of future market conditions.

   i.      Interest rate risk 

Interest rate movements affect the fair value of investments in fixed interest rate securities and floating rate loans and on the level of income receivable on cash deposits.

The interest income received by the Lux Subsidiary from investments held at fair value through profit or loss is the interest income on the PPNs received from BCF. Its calculation is dependent on the profit generated by BCF as opposed to interest rates set by the market. Interest rate sensitivity analysis is presented for BCF in Note 12 since any potential movement in market interest rates will impact BCF's holdings which in turn will impact the interest income received by the Lux Subsidiary on the PPNs.

The Company is exposed to interest rate risk on CLOs directly held by the Company.

Interest rate risk is monitored on an on-going basis, and is managed and mitigated to the extent that is possible by the CLO manager through active portfolio management, and the use of the Underlying Companies offering documents and investment policies, which permits portfolio management techniques to rotate between asset classes and levels of risk as appropriate in accordance with policies and procedures in place.

The following tables detail the Company's interest rate risk as at 31 December 2020 and 31 December 2019:

 
31 December 2020                                        Interest bearing  Non-interest bearing        Total 
                                                                     EUR                   EUR          EUR 
------------------------------------------------------  ----------------  --------------------  ----------- 
Assets 
Cash and cash equivalents                                     20,725,819                     -   20,725,819 
Other receivables                                                      -               151,038      151,038 
Financial assets at fair value through profit or loss            549,437           388,000,146  388,549,583 
------------------------------------------------------  ----------------  --------------------  ----------- 
Total assets                                                  21,275,256           388,151,184  409,426,440 
------------------------------------------------------  ----------------  --------------------  ----------- 
Liabilities 
Intercompany loan                                              (869,988)                     -    (869,988) 
Payables                                                               -             (351,277)    (351,277) 
------------------------------------------------------  ----------------  --------------------  ----------- 
Total liabilities                                              (869,988)             (351,277)  (1,221,265) 
------------------------------------------------------  ----------------  --------------------  ----------- 
Total interest sensitivity gap                                20,405,268 
------------------------------------------------------  ----------------  --------------------  ----------- 
 
 
31 December 2019                                        Interest bearing  Non-interest bearing        Total 
                                                                     EUR                   EUR          EUR 
------------------------------------------------------  ----------------  --------------------  ----------- 
Assets 
Cash and cash equivalents                                     11,464,088                     -   11,464,088 
Other receivables                                                      -               232,474      232,474 
Financial assets at fair value through profit or loss          3,192,772           396,392,271  399,585,043 
------------------------------------------------------  ----------------  --------------------  ----------- 
Total assets                                                  14,656,860           396,624,745  411,281,605 
------------------------------------------------------  ----------------  --------------------  ----------- 
Liabilities 
Intercompany loan                                              (534,660)                     -    (534,660) 
Payables                                                               -             (240,954)    (240,954) 
------------------------------------------------------  ----------------  --------------------  ----------- 
Total liabilities                                              (534,660)             (240,954)    (775,614) 
------------------------------------------------------  ----------------  --------------------  ----------- 
Total interest sensitivity gap                                14,122,200 
------------------------------------------------------  ----------------  --------------------  ----------- 
 

As at 31 December 2020 and 31 December 2019, the majority of the Company's interest rate exposure arose in the fair value of the underlying BCF portfolio which is largely invested in senior secured loans of companies predominantly in Western Europe or North America. Most of the investments in senior secured loans carry variable interest rates and various maturity dates. Refer to Note 12 which details BCF's exposure to interest rate risk.

The Company is exposed to interest rate risk on its cash balances and directly held CLOs but this is not deemed to be significant for the years ended 31 December 2020 and 31 December 2019.

   ii.     Currency risk 

Foreign currency risk is the risk that the values of the Company's assets and liabilities are adversely affected by changes in the values of foreign currencies by reference to the Company's base currency. The functional currency of the Company and its Lux Subsidiary is the Euro.

The Company and the Lux Subsidiary are not subject to significant foreign currency risk since the majority of their investments are denominated in Euro and their share capital are also denominated in Euro.

Refer to Note 12 which details BCF's exposure to currency risk. BCF hedges US CLO equity exposure by reference to mark to model valuations incorporated in the Published NAV as defined above.

The Company is exposed to currency risk on its investments in the directly held CLOs which are denominated in USD. To reduce the impact on the Company of currency fluctuations and the volatility of returns which may result from currency exposure, the Company may hedge the currency exposure of the directly held CLOs of the Company with the use of derivatives. The Company did not have any derivatives at the year end.

   iii.    Price risk 

Price risk is the risk that the value of the Company's indirect investments in BCF through its holding in the Lux Subsidiary does not reflect the true value of BCF's underlying investment portfolio.

BCF's portfolio may at any given time include securities or other financial instruments or obligations which are very thinly traded, for which a limited market exists or which are restricted as to their transferability under applicable securities laws. These investments may be extremely difficult to value accurately.

Further, because of overall size or concentration in particular markets of positions held by BCF, the value of its investments which can be liquidated may differ, sometimes significantly, from their valuations. Third-party pricing information may not be available for certain positions held by BCF. Investments held by BCF may trade with significant bid-ask spreads. BCF is entitled to rely, without independent investigation, upon pricing information and valuations furnished to BCF by third parties, including pricing services and valuation sources.

Absent bad faith or manifest error, valuation determinations in accordance with BCF's valuation policy are conclusive and binding. In light of the foregoing, there is a risk that the Company, in redeeming all or part of its investment while BCF holds such investments, could be paid an amount less than it would otherwise be paid if the actual value of BCF's investment was higher than the value designated for that investment by BCF. Similarly, there is a risk that a redeeming BCF interest holder might, in effect, be over-paid at the time of the applicable redemption if the actual value of BCF's investment was lower than the value designated for that investment by BCF, in which case the value of BCF interests to the remaining BCF interest holders would be reduced. Refer to Note 12 for further details.

The Company is exposed to price risk on its investments in the directly held CLOs. The price risk that applies to the directly held CLOs is limited and is restricted to the concentration risk of the investments between asset class and geographical exposure. The directly held CLOs which formed part of the Rollover Assets have been realised by the Portfolio Manager in a manner that maximises the value from the Company's investments in those directly held CLOs.

The Board monitors and reviews the Company's NAV production process on an ongoing basis.

   10B         Credit risk 

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Board has in place monitoring procedures in respect of credit risk which is reviewed on an ongoing basis.

The Company's credit risk is attributable to its cash and cash equivalents, other receivables and financial assets at fair value through profit or loss. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.

BIL monitors for the Company, the Lux Subsidiary, BCF and its subsidiaries the creditworthiness of financial institutions with whom cash is held, or with whom investment or derivative transactions are entered into, on a regular basis.

The carrying amounts of financial assets best represent the maximum credit risk exposure at the Statement of Financial Position date. At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:

 
                                                                    As at              As at 
                                                         31 December 2020   31 December 2019 
                                                                      EUR                EUR 
------------------------------------------------------  -----------------  ----------------- 
Cash and cash equivalents                                      20,725,819         11,464,088 
Other receivables                                                 151,038            232,474 
Financial assets at fair value through profit or loss         388,549,583        399,585,043 
------------------------------------------------------  -----------------  ----------------- 
Total assets                                                  409,426,440        411,281,605 
------------------------------------------------------  -----------------  ----------------- 
 

The Company is exposed to a potential material singular credit risk in the event that it requests a repayment of the CSWs from the Lux Subsidiary and receives an acceptance of that repayment request. Under the CSW agreement between the Company and the Lux Subsidiary, any payment obligation by the Lux Subsidiary to the Company is conditional upon the receipt of an equivalent amount by the Lux Subsidiary which is derived from the PPNs issued by BCF. The Board is aware of this risk and the concentration risk to the Lux Subsidiary and indirectly to BCF.

Additionally, under the Profit Participating Note Issuing and Purchase Agreement ("PPNIPA") between the Lux Subsidiary and BCF, if the net proceeds from a liquidation of the collateral obligations as defined in the PPNIPA available to unsecured creditors of BCF (the "Liquidation Funds") are less than the aggregate amount payable by BCF in respect of its obligations to its unsecured creditors, including to the Lux Subsidiary and the other parties to the PPNIPA (such negative amount being referred to as a "shortfall"), the amount payable by BCF to the Lux Subsidiary and the other parties to the PPNIPA in respect of BCF's obligations under the PPNs will be reduced to such amount of the Liquidation Funds which is available in accordance with the regulatory requirements and the senior debt restrictive covenants to satisfy such payment obligation upon the distribution of the Liquidation Funds among all of BCF's unsecured creditors on a pari passu and pro rata basis, and shall be applied for the benefit of the Lux Subsidiary and the other parties to the PPNIPA. In such circumstances the other assets of BCF will not be available for the payment of such shortfall, and the rights of the Lux Subsidiary and the other parties to the PPNIPA to receive any further amounts in respect of such obligations shall be extinguished and the Noteholders and the other parties to the PPNIPA may not take any further action to recover such amounts.

The Company is exposed to credit risk on its investments in the directly held CLOs. The directly held CLOs which formed part of the Rollover Assets have been realised by the Portfolio Manager in a manner that maximises the value from the Company's investments in those directly held CLOs. Additionally, the Portfolio Manager generally trades via the DTC or Euroclear, which on the whole, limits counterparty risk.

During the years ended 31 December 2020 and 31 December 2019 all cash was placed with BNP Paribas Securities S.C.A, as Custodian. The ultimate parent of BNP Paribas Securities S.C.A is BNP Paribas which is publicly traded with a credit rating of A+ (Standard & Poor's).

The credit risk associated with debtors is limited to other receivables. Credit risk is mitigated by the Company's policy to only undertake significant transactions with leading commercial counterparties. It is the opinion of the Board that the carrying amounts of these financial assets represent the maximum credit risk exposure as at the reporting date.

The Board continues to monitor the Company's exposure to credit risk.

Refer to Note 12 which details BCF's exposure to credit risk.

   10C         Liquidity risk 

Liquidity risk is the risk that the Company will encounter difficulties in realising assets or otherwise raising funds to meet financial commitments.

The Company has been established as a closed-ended vehicle. Accordingly, there is no right or entitlement attaching to the Company's shares that allows them to be redeemed or repurchased by the Company at the option of the Shareholder. This significantly reduces the liquidity risk of the Company.

Under the terms of the unsecured PPNs issued to its investors, BCF is contractually obliged to ensure that its portfolio is managed in accordance with the Company's investment objective and policy. In the event that BCF fails to comply with these contractual obligations, the Company, through the Lux Subsidiary, could elect for the unsecured PPNs to become immediately due and repayable to it from BCF, subject to any applicable legal, contractual and regulatory restrictions. Given the nature of the investments held by BCF there is no guarantee and indeed, it is highly unlikely that the applicable legal, contractual and regulatory restrictions would permit BCF to immediately repay the unsecured PPNs on the Company making such an election.

If the Company were to elect for the unsecured PPNs to be repaid, BCF's failure to fully comply with its contractual obligations to do so or BCF being restricted from doing so by law, regulation or contract could have a significant adverse effect on the Company's business, financial condition, results of operations and/or the market price of the shares.

The PPNs are unsecured obligations of BCF and amounts payable on the PPNs will be made solely from amounts received in respect of the assets of BCF available for distribution to its unsecured creditors. BCF is permitted to incur leverage in the form of secured debt by way of one or more revolving credit facilities. Such secured debt will rank ahead of the PPNs in respect of any distributions or payments by BCF. In an enforcement scenario under any revolving credit facility, the provider(s) of such facilities will have the ability to enforce their security over the assets of BCF and to dispose of or liquidate, on their own behalf or through a security trustee or receiver, the assets of BCF in a manner which is beyond the control of the Company. In such an enforcement scenario, there is no guarantee that there will be sufficient proceeds from the disposal or liquidation of BCF's assets to repay any amounts due and payable on the PPNs and this may adversely affect the performance of the Company's business, financial condition and results of operations.

Consequently, in the event of a materially adverse event occurring in relation to BCF or the market generally, the ability of the Company to realise its investment and prevent the possibility of further losses could, therefore, be limited by its restricted ability to realise its investment via the Lux Subsidiary in BCF. This delay could materially affect the value of the PPNs and the timing of when BCF is able to realise its investments, which may adversely affect the Company's business, financial condition, results of operations and/or the market price of the shares.

The directly held CLOs have been actively sold by the Portfolio Manager to facilitate reinvestment into CSWs issued by the Lux Subsidiary, which may in turn be reinvested into PPNs issued by BCF.

The liquidity profile of BCF as at 31 December 2020 is in Note 12.

To meet the Company's target dividend, the Company will require sufficient payments from the CSWs held and in the event these are not received, the Board has the discretion to determine the amount of dividends paid to Shareholders.

   11           Interests in other entities 

Interests in unconsolidated structured entities

IFRS 12 "Disclosure of Interests in Other Entities" defines a structured entity as an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to the administrative tasks only and the relevant activities are directed by means of contractual agreements. A structured entity often has some of the following features or attributes:

   --      restricted activities; 
   --      a narrow and well-defined objective; 

-- insufficient equity to permit the structured entity to finance its activities without subordinated financial support; and

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

Involvement with unconsolidated structured entities

The Directors have concluded that the CSWs and voting shares of the Lux Subsidiary in which the Company invests, but that it does not consolidate, meet the definition of a structured entity.

The Directors have also concluded that BCF also meets the definition of a structured entity.

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

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

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

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

Interests in subsidiary

As at 31 December 2020, the Company owns 100% of the Class A and Class B shares in the Lux Subsidiary comprising 2,000,000 Class A shares and one Class B share (31 December 2019: 2,000,000 Class A shares and one Class B share).

The Lux Subsidiary's principal place of business is Luxembourg.

Other than the investments noted above, the Company did not provide any financial support for the years ended 31 December 2020 and 31 December 2019, nor had it any intention of providing financial or other support.

The Company has an intercompany loan payable to the Lux Subsidiary as at 31 December 2020. Refer to Note 7 for further details.

   12           Financial and other information on BCF 

The Board has provided the following information on BCF, which has been extracted from its audited financial statements for the year ended 31 December 2020, as it believes this will provide further insight to the Company's Shareholders into the operations of BCF, the asset mix in its portfolio and the risks to which BCF is exposed.

As at 31 December 2020, the Lux Subsidiary held a 35.4% (31 December 2019: 37.4%) interest in the PPNs issued by BCF. The disclosures have not been apportioned according to the Lux Subsidiary's PPN holding, as the Board believes to do so would be misleading and not an accurate representation of the Company's investment in BCF.

Principal activities

BCF was established as an originator vehicle under European risk retention rules for CLO securitisations. It may also invest in senior secured loans, either directly or indirectly through CLO warehouses, and underlying companies. BCF is funded by proceeds from the issuance of PPNs together with other financial resources available to it, such as the BCF Facility.

Investment policy

BCF'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. BCF intends to pursue its investment policy by using the proceeds from the issue of PPNs (together with proceeds from other financial resources available to it) to invest in such assets.

BCF may invest (directly or through other Underlying Companies) predominantly in European or US senior secured loans, CLO Income Note securities (the most subordinated tranche of debt issued by a CLO issuer), loan warehouses and other assets. Investments in loan warehouses will typically be in the form of an obligation to purchase preference shares or a subordinated loan. There is no limit on the maximum European or US exposure. BCF is not expected to invest (directly or through other Underlying Companies) in senior secured loans domiciled outside North America or Western Europe.

A CLO is a pooled investment vehicle which may invest in a diversified group of debt securities, in this case predominantly senior secured loans. To finance its investments, the CLO vehicle issues debt in the form of Senior Notes and CLO Income Note securities to investors. The servicing and repayment of these notes is linked directly to the performance of the underlying portfolio of assets.

The portfolio of assets underlying the CLO Income Note securities consist mainly of senior secured loans, mezzanine loans, second lien loans and high yield bonds. The portfolio of assets within BCF consists mainly of CLO Income Note securities. Distributions on the CLO Income Note securities, by way of interest payments, are payable on a quarterly basis on dates established in the formation documents of the CLOs.

As at 31 December 2020 and 31 December 2019, BCF had no exposure to CLOs held as a vertical strip (as defined in the Company's Investment Strategy).

Subsidiaries

BCF has acquired the majority, or all, of the CLO Income Note securities issued by a number of European CLO issuers (the "Direct CLO Subsidiaries"). The twenty-five Direct CLO Subsidiaries (incorporated in Ireland) are presented below:

 
 
Name of subsidiary    Currency   Deal Size  % Subordinated Equity 
                                 (million)             Notes Held 
                                                 31 December 2020 
-------------------  ---------  ----------  --------------------- 
Phoenix Park CLO 
 DAC                       EUR      EUR417                  51.4% 
Sorrento Park 
 CLO DAC                   EUR      EUR310                  51.8% 
Castle Park CLO 
 DAC                       EUR      EUR261                  52.1% 
Dartry Park CLO 
 DAC                       EUR      EUR338                  51.1% 
Dorchester Park 
 CLO DAC                   USD        $503                  67.0% 
Orwell Park CLO 
 DAC                       EUR      EUR357                  51.0% 
Tymon Park CLO 
 DAC                       EUR      EUR375                  51.0% 
Elm Park CLO DAC           EUR      EUR543                  56.1% 
Griffith Park 
 CLO DAC                   EUR      EUR456                  53.4% 
Palmerston Park 
 CLO DAC                   EUR      EUR415                  53.3% 
Clarinda Park 
 CLO DAC                   EUR      EUR415                  51.2% 
Clontarf Park 
 CLO DAC                   EUR      EUR414                  66.9% 
Willow Park CLO 
 DAC                       EUR      EUR412                  60.9% 
Marlay Park CLO 
 DAC                       EUR      EUR413                  60.0% 
Milltown Park 
 CLO DAC                   EUR      EUR409                  65.0% 
Richmond Park 
 CLO DAC                   EUR      EUR548                  68.3% 
Sutton Park CLO 
 DAC                       EUR      EUR408                  66.7% 
Crosthwaite Park 
 CLO DAC                   EUR      EUR513                  64.7% 
Dunedin Park CLO 
 DAC                       EUR      EUR408                  52.9% 
Seapoint Park 
 CLO DAC                   EUR      EUR406                  70.5% 
Holland Park CLO 
 DAC                       EUR      EUR428                  72.1% 
Vesey Park CLO 
 DAC                       EUR      EUR405                  80.3% 
Avondale Park 
 CLO DAC                   EUR      EUR284                  63.0% 
Deer Park CLO 
 DAC                       EUR      EUR344                 100.0% 
Marino Park CLO 
 DAC                       EUR      EUR324                  70.8% 
-------------------  ---------  ----------  --------------------- 
 

BCF has also acquired 100% of the PPNs issued by BGCM DAC, which was established on 1 August 2019. BGCM DAC holds 100% of the Series 2 and Series 3 interests of BCM LLC, a US manager-originator vehicle established on 14 May 2019. The establishment of BCM LLC created a structure capable of meeting potential demand for US CLOs from European institutional investors requiring compliance with European risk retention rules. BCM LLC holds CLO Income Note securities in six US CLOs (the "Indirect CLO Subsidiaries") as listed below and preference shares in one warehouse, Tallman Park CLO warehouse.

 
 
Name of subsidiary    Currency   Deal Size  % Subordinated Equity 
                                 (million)             Notes Held 
                                                 31 December 2020 
-------------------  ---------  ----------  --------------------- 
Southwich Park CLO 
 Limited                   USD        $503                  60.0% 
Beechwood Park CLO 
 Limited                   USD        $810                  61.1% 
Stratus CLO 2020-2 
 Limited                   USD        $299                 100.0% 
Harriman Park CLO 
 Limited                   USD        $502                  70.0% 
Cayuga Park CLO 
 Limited                   USD        $393                  72.0% 
Allegany Park CLO 
 Limited                   USD        $505                  66.2% 
-------------------  ---------  ----------  --------------------- 
 

Prior to 1 July 2020, BCM LLC also held Class A preference shares in the US MOA. On 1 July 2020, the US MOA was merged into BCM LLC, at which time 86.02% (representing BCM LLC's ownership of the US MOA) of each underlying US CLO of the US MOA was transferred to BCM LLC. As this resulted in BCM LLC holding less than the majority of certain CLO positions, BCM LLC purchased a small amount of these US CLOs in order to maintain a majority economic position in each CLO investment. As a result of this merger, from 1 July 2020, the underlying US CLOs that were previously held by BCF through the US MOA are now held by BCF through BCM LLC.

In accordance with IFRS 10, the Direct CLO Subsidiaries, the Indirect CLO Subsidiaries, BGCM DAC and BCM LLC, are all deemed to be subsidiaries of BCF and are consolidated under its financial reporting framework. During the year ended 31 December 2019, the directors of BCF determined that BCM LLC did not control the US MOA, as defined in IFRS 10, and therefore, the US MOA and its underlying US CLO investments were not consolidated. As detailed above, effective 1 July 2020, the US MOA was merged into BCM LLC and the US MOA's investments in the US CLOs were transferred to BCM LLC. For the year ended 31 December 2020, the directors of BCF determined that BCM LLC did not control such US CLOs transferred from the US MOA, and therefore, are not consolidated.

As at 31 December 2020, BCM LLC held investments in the following non-consolidated US CLOs:

 
 
Name 
--------------------------- 
Gilbert Park CLO Limited 
Stewart Park CLO Limited 
Catskill Park CLO Limited 
Dewolf Park CLO Limited 
Long Point Park CLO Limited 
Greenwood Park CLO Limited 
Grippen Park CLO Limited 
Thayer Park CLO Limited 
Cook Park CLO Limited 
--------------------------- 
 

BCF also directly holds CLO Income Note securities in US CLOs which it was not responsible for originating. As at 31 December 2020, BCF had direct holdings in the following US CLOs (together with the non-consolidated US CLOs held through BCM LLC, the "Non-Consolidated US CLOs"):

 
 
Name 
------------------------- 
Buckhorn Park CLO Limited 
Filmore Park CLO Limited 
Harbor Park CLO Limited 
Niagara Park CLO Limited 
Myers Park CLO Limited 
------------------------- 
 

The directors of BCF have determined that BCF did not control the US MOA (through BGCM DAC and BCM LLC), nor does it control any of the Non-Consolidated US CLOs or US CLO warehouses held directly by BCF or through BCM LLC, as defined in IFRS 10. Therefore, these entities have not been consolidated for the purposes of presenting BCF's consolidated financial statements. These investments have been classified as financial assets held at fair value through profit or loss.

The directors of BCF do not anticipate any change in its structure or investment objectives.

Valuation of financial instruments

As at 31 December 2020 and 2019, the loans held were broker priced through Markit, and the bond investments were valued by prices provided by IDC. The majority of these assets were classified as Level 2 since the input into the Markit price consisted of at least two quotes, however, a small number of holdings priced through Markit consisted of only one quote. Such assets were classified as Level 3. Both loans and bonds are priced at current mid prices.

The CLO Income Note securities issued by the Direct CLO Subsidiaries are listed on Euronext Dublin and are valued by a third party. The approach to valuing these CLO Income Note securities incorporates CLO specific information and modelling techniques. Factors include (i) granular loan level data, such as the concentration and quality of various loan level buckets, for example, second liens, covenant lites and other structured product assets, as well as several other factors including: discount rate, default rates, prepayment rates, recovery rates, recovery lag and reinvestment spread (these factors are highly sensitive and variations may materially affect the fair value of the asset), and (ii) structural analysis on a deal by deal basis. Pricing includes checks on all structural features of each CLO, such as the credit enhancement of each bond and various performance triggers (including over-collateralisation tests, interest coverage and diversion tests). Furthermore, reinvestment language specific to each CLO deal is assessed, as well as the collateral manager's performance and capabilities.

Investments in CLO Income Note securities of US CLO Issuers, held directly or indirectly, are valued using an equivalent methodology. Similar to the above, valuation of such CLO Income Note securities uses significant unobservable inputs and accordingly are classified as Level 3. Investments in the CLO Income Note securities of the CLO Subsidiaries and the Non-Consolidated US CLOs, and in the preference shares of the CLO warehouses are valued on the above basis using significant unobservable inputs, and accordingly, are classified as Level 3.

The PPNs and debt issued by the CLO Subsidiaries are categorised as Level 3, as they are valued using a model which is based on the fair value of the underlying assets and liabilities of the relevant entity.

The following tables analyse within the fair value hierarchy BCF's financial instruments carried at fair value as at 31 December 2020 and 31 December 2019:

 
31 December 2020                                                Level 1      Level 2          Level 3            Total 
                                                                    EUR          EUR              EUR              EUR 
--------------------------------------------------------------  -------  -----------  ---------------  --------------- 
Financial assets measured at fair value through profit or 
loss: 
- Investments in senior secured loans and bonds                       -  122,982,606       12,993,749      135,976,355 
- Investments in CLO Income Notes                                     -            -      520,436,700      520,436,700 
- Investment in BGCM DAC                                              -            -      339,404,431      339,404,431 
- Derivative financial assets                                         -   11,400,424                -       11,400,424 
--------------------------------------------------------------  -------  -----------  ---------------  --------------- 
Total financial assets                                                -  134,383,030      872,834,880    1,007,217,910 
--------------------------------------------------------------  -------  -----------  ---------------  --------------- 
 
Financial liabilities measured at fair value through profit or 
loss: 
- PPNs                                                                -            -  (1,092,553,639)  (1,092,553,639) 
Total financial liabilities                                           -            -  (1,092,553,639)  (1,092,553,639) 
--------------------------------------------------------------  -------  -----------  ---------------  --------------- 
 
 
31 December 2019                                                Level 1      Level 2          Level 3            Total 
                                                                    EUR          EUR              EUR              EUR 
--------------------------------------------------------------  -------  -----------  ---------------  --------------- 
Financial assets measured at fair value through profit or 
loss: 
- Investments in senior secured loans and bonds                       -  351,411,969        3,488,750      354,900,719 
- Investments in CLO Income Notes                                     -            -      535,308,879      535,308,879 
- Investment in BGCM DAC                                              -            -      282,791,684      282,791,684 
- Derivative financial assets                                         -    1,227,374                -        1,227,374 
--------------------------------------------------------------  -------  -----------  ---------------  --------------- 
Total financial assets                                                -  352,639,343      821,589,313    1,174,228,656 
--------------------------------------------------------------  -------  -----------  ---------------  --------------- 
 
Financial liabilities measured at fair value through profit or 
loss: 
- PPNs                                                                -            -  (1,056,882,313)  (1,056,882,313) 
--------------------------------------------------------------  -------  -----------  ---------------  --------------- 
Total financial liabilities                                           -            -  (1,056,882,313)  (1,056,882,313) 
--------------------------------------------------------------  -------  -----------  ---------------  --------------- 
 

The following table shows the movement in Level 3 of BCF's fair value hierarchy for the years ended 31 December 2020 and 31 December 2019:

 
31 December 2020                             Financial assets measured at FVPL  Financial liabilities measured at FVPL 
                                                                           EUR                                     EUR 
-------------------------------------------  ---------------------------------  -------------------------------------- 
Opening balance                                                    821,589,313                         (1,056,882,313) 
Net (loss)/gain on financial assets and 
 liabilities measured at fair value through 
 profit 
 or loss                                                          (73,533,922)                              49,525,754 
Purchases/Issuances                                                244,301,339                            (85,197,080) 
Sales/Redemptions                                                (119,521,850)                                       - 
Closing Balance                                                    872,834,880                         (1,092,553,639) 
-------------------------------------------  ---------------------------------  -------------------------------------- 
 
 
31 December 2019                             Financial assets measured at FVPL  Financial liabilities measured at FVPL 
                                                                           EUR                                     EUR 
-------------------------------------------  ---------------------------------  -------------------------------------- 
Opening balance                                                    623,480,199                           (787,146,684) 
Net gain/(loss) on financial assets and 
 liabilities measured at fair value through 
 profit 
 or loss                                                             3,531,929                             (2,379,953) 
Purchases/Issuances                                                710,364,958                           (267,355,676) 
Sales/Redemptions                                                (506,115,504)                                       - 
Movement out of Level 3                                            (9,672,269)                                       - 
Closing Balance                                                    821,589,313                         (1,056,882,313) 
-------------------------------------------  ---------------------------------  -------------------------------------- 
 

BCF's policy is to recognise transfers into and transfers out of fair value hierarchy levels as of the last day of the accounting period. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the years ended 31 December 2020 or 31 December 2019.

Sensitivity of BCF Level 3 holdings to unobservable inputs

A number of holdings as at 31 December 2020 and 31 December 2019 were priced through Markit where the input into the Markit price was only one price, so they were classified as Level 3. These loan assets are not modelled on analysts' prices but are from dealers' runs therefore there are no unobservable inputs into the prices.

The CLO Income Notes were valued by a third party using a CLO intrinsic calculation methodology and were classified as Level 3 because the valuation technique incorporates significant unobservable inputs. The CLO prices are determined by consideration of several factors including the following: default rates, prepayment rates, recovery rates, recovery lag and reinvestment spread. These factors are highly sensitive, and variations may materially affect the fair value of the asset. These metrics are accumulated from various market sources independent of BIL. Additionally, valuation incorporates a review of each CLO indenture and the latest underlying CLO loan portfolio forming various projections based on the quality of the collateral, the collateral manager capabilities and general macroeconomic conditions. The sensitivity of the fair values of the CLO Notes, in particular CLO Income Notes to the traditional risk variables measured separately including market risk and interest rate risk may not be the most appropriate analysis for this asset class. The sensitivity to valuation assumptions including interest rates has an interdependent impact with other significant market variables as noted in the assumptions used for valuing CLO Income Notes. Given the values are based on third party prices, the sensitivity to the key assumptions is not required to be provided.

The assets classified as Level 3 represented 86.7% (2019: 70.0%) of the total financial assets. If the price of the holdings classified as Level 3 increased or decreased by 5% it would result in an increase or decrease in the value of the financial assets of EUR 43,641,744 (4.3% of the total financial assets) (2019: EUR 41,079,466 (3.5% of the total financial assets)). There also would be an equal and opposite effect on the valuation of the PPNs (4.3%) (2019: (3.5%)).

The financial liabilities at fair value through profit or loss consist of the PPNs. The PPNs are valued using a model based on the fair value of the underlying assets and liabilities. If the value of the underlying assets or liabilities changes then there would be an equal and opposite effect on the valuation of the PPNs.

Financial instruments and associated risks

The Lux Subsidiary holds one investment in BCF in the form of PPNs. The PPNs are the main driver of the Lux Subsidiary's performance and consequently that of the Company. The performance of the PPNs is driven solely by the underlying portfolio of BCF and therefore consideration of the risks to which BCF is exposed to have also been made.

Market risk

Market risk is the current or prospective risk to earnings or capital of BCF arising from changes in interest rates, foreign exchange rates, commodity prices or equity prices. Market risk embodies the potential for both losses and gains.

Market price risk arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss BCF might suffer through holding market positions in the face of price movements caused by factors specific to the individual investment or factors affecting all instruments traded in the market. In addition, local, regional or global events may have a significant impact on BCF and the price of its investments.

As all of the financial instruments are carried at fair value through profit or loss, all changes in market conditions will directly impact the valuation of the PPNs.

(i) Currency risk

Foreign currency risk arises as the value of future transactions, recognised monetary assets and monetary liabilities denominated in other currencies may fluctuate due to changes in foreign exchange rates. Foreign exchange exposure relating to non-monetary assets and liabilities is considered to be a component of market price risk, not foreign currency risk.

BCF's financial statements are denominated in Euro, though investments in the US CLO warehouses, US CLOs, and senior secured loans and bonds are made and realised in other currencies. Changes in rates of exchange may have an adverse effect on the value, price or income of the investments of BCF.

BIL monitors foreign currency risk on a periodic basis. Typically, derivative contracts serve as components of BCF's asset hedging program and are utilised primarily to reduce foreign currency risk to BCF's investments. Foreign currency risk on non-base currency loans and bonds is minimised by the leveraged structure of BCF and by the use of the multi-currency BCF Facility to draw down funds. Non-base GBP and USD investments are funded by use of the corresponding currency leverage of the BCF Facility which creates a matching of asset and liability currency risk and minimising the impact of fluctuations in exchange rates. Rolling currency forwards are used to manage the foreign currency exposure of the preference shares of the US CLO warehouses, the CLO Income Notes of the Indirect CLO Subsidiaries, Dorchester Park CLO DAC and the Non-Consolidated US CLOs denominated in foreign currencies. The market value of these USD positions is hedged by offsetting USD forward notional amounts to ensure BCF is fully hedged.

The following table sets out BCF's total exposure to foreign currency risk and the net exposure to foreign currencies of the monetary assets and liabilities as at 31 December 2020 and 31 December 2019:

 
31 December 2020                British Pound  United States Dollars 
                                          EUR                    EUR 
------------------------------  -------------  --------------------- 
Investments in senior secured 
 loans and bonds                    1,969,655                      - 
Investments in CLO Income 
 Notes                                      -            101,013,068 
Investment in BGCM DAC                      -            339,404,431 
BCF Facility                      (4,291,104)            (1,262,242) 
Cash and cash equivalents           3,267,348                 48,403 
Other assets and liabilities      (1,967,691)             15,423,445 
------------------------------  -------------  --------------------- 
Net position                      (1,021,792)            454,627,105 
Notional amount of currency 
 forwards                                   -          (438,189,910) 
------------------------------  -------------  --------------------- 
Net exposure                      (1,021,792)             16,437,195 
------------------------------  -------------  --------------------- 
 
Sensitivity 10%                     (102,179)              1,643,720 
------------------------------  -------------  --------------------- 
 
 
31 December 2019                British Pound  United States Dollars 
                                          EUR                    EUR 
------------------------------  -------------  --------------------- 
Investments in senior secured 
 loans and bonds                   12,420,354              3,966,459 
Investments in CLO Income 
 Notes                                      -            158,782,181 
Investment in BGCM DAC                      -            282,791,684 
------------------------------  -------------  --------------------- 
 
 
BCF Facility                   (18,444,833)   (11,151,480) 
Cash and cash equivalents         5,578,229      5,918,399 
Other assets and liabilities      2,246,394     16,502,400 
Net position                      1,800,144    456,809,643 
Notional amount of currency 
 forwards                                 -  (500,646,940) 
-----------------------------  ------------  ------------- 
Net exposure                      1,800,144   (43,837,297) 
-----------------------------  ------------  ------------- 
 
Sensitivity 10%                     180,014    (4,383,730) 
-----------------------------  ------------  ------------- 
 

Sensitivity analysis - BCF

At 31 December 2020 and 2019, had the Euro strengthened by 10% (2019: 10%) in relation to all currencies, with all other variables held constant, the net asset / liability exposure would have increased by the amounts shown above for BCF. There would be no impact on the total comprehensive income of BCF because the fair value movement on financial liabilities would move in the opposite direction and cancel the effect of the foreign exchange movement.

A 10% weakening of the base currency, against GBP and US Dollar, would have resulted in an equal but opposite effect than that on the tables above, on the basis that all other variables remain constant. These calculations are based on historical data. Future currency movements and correlations between holdings could vary significantly from those experienced in the past.

(ii) Interest rate risk

Interest rate risk arises from the effects of fluctuations in the prevailing levels of market interest rates on the fair value of financial assets and liabilities and future cash flow.

The PPNs issued by BCF are limited recourse obligations and are valued based on the fair value of the underlying assets and liabilities. As the interest attached to the PPNs is based on the income earned by BCF, any fluctuations in the prevailing level of market interest rates that negatively affect the fair value of the underlying financial assets will result in an offsetting decrease in the fair value of the PPNs.

The interest rate risk associated with cash and cash equivalents is deemed to be insignificant due to negligible interest rates and no expected movement.

The following table details BCF's exposure to interest rate risk as at 31 December 2020. It includes the carrying value of BCF's assets and liabilities at fair values, categorised by the type of interest rate attached to the assets and liabilities, whether it be floating rate, fixed or non-interest bearing:

 
31 December 2020                                             Floating rate  Fixed rate   Non-interest            Total 
                                                                                              bearing 
                                                                       EUR         EUR            EUR              EUR 
---------------------------------------------------------  ---------------  ----------  -------------  --------------- 
Financial assets measured at fair value through profit or 
loss: 
- Investments in senior secured loans and bonds                130,988,193   4,988,162              -      135,976,355 
- Investments in CLO Income Notes                              520,436,700           -              -      520,436,700 
- Investment in BGCM DAC                                       339,404,431           -              -      339,404,431 
- Derivative financial assets                                   11,400,424           -              -       11,400,424 
Receivable for investments sold                                          -           -    349,344,373      349,344,373 
Other receivables                                                        -           -     32,837,068       32,837,068 
Cash and cash equivalents                                      102,502,515           -              -      102,502,515 
---------------------------------------------------------  ---------------  ----------  -------------  --------------- 
Total assets                                                 1,104,732,263   4,988,162    382,181,441    1,491,901,866 
---------------------------------------------------------  ---------------  ----------  -------------  --------------- 
 
Financial liabilities measured at fair value through 
profit or loss: 
- PPNs                                                     (1,092,553,639)           -              -  (1,092,553,639) 
BCF Facility                                                 (103,633,100)           -              -    (103,633,100) 
Payable for investments purchased                                        -           -  (292,363,103)    (292,363,103) 
Other payables and accrued expenses                                      -           -    (3,345,764)      (3,345,764) 
---------------------------------------------------------  ---------------  ----------  -------------  --------------- 
Total liabilities                                          (1,196,186,739)           -  (295,708,867)  (1,491,895,606) 
---------------------------------------------------------  ---------------  ----------  -------------  --------------- 
Total interest sensitivity gap                                (91,454,476)   4,988,162 
---------------------------------------------------------  ---------------  ----------  -------------  --------------- 
 

The following table details BGCF's exposure to interest rate risk as at 31 December 2019. It includes the carrying value of BGCF's assets and liabilities at fair values, categorised by the type of interest rate attached to the assets and liabilities, whether it be floating rate, fixed or non-interest bearing:

 
31 December 2019                                             Floating rate  Fixed rate   Non-interest            Total 
                                                                                              bearing 
                                                                       EUR         EUR            EUR              EUR 
---------------------------------------------------------  ---------------  ----------  -------------  --------------- 
Financial assets measured at fair value through profit or 
loss: 
- Investments in senior secured loans and bonds                337,939,901  16,960,818              -      354,900,719 
- Investments in CLO Income Notes                              535,308,879           -              -      535,308,879 
- Investment in BGCM DAC                                       282,791,684           -              -      282,791,684 
- Derivative financial assets                                    1,227,374           -              -        1,227,374 
Receivable for investments sold                                          -           -    253,971,470      253,971,470 
Other receivables                                                        -           -     29,965,349       29,965,349 
Cash and cash equivalents                                       72,920,097           -              -       72,920,097 
---------------------------------------------------------  ---------------  ----------  -------------  --------------- 
Total assets                                                 1,230,187,935  16,960,818    283,936,819    1,531,085,572 
---------------------------------------------------------  ---------------  ----------  -------------  --------------- 
 
Financial liabilities measured at fair value through 
profit or loss: 
- PPNs                                                     (1,056,882,313)           -              -  (1,056,882,313) 
BCF Facility                                                 (244,676,065)           -              -    (244,676,065) 
Payable for investments purchased                                        -           -  (226,523,038)    (226,523,038) 
Other payables and accrued expenses                                      -           -    (2,998,796)      (2,998,796) 
---------------------------------------------------------  ---------------  ----------  -------------  --------------- 
Total liabilities                                          (1,301,558,378)           -  (229,521,834)  (1,531,080,212) 
---------------------------------------------------------  ---------------  ----------  -------------  --------------- 
Total interest sensitivity gap                                (71,370,443)  16,960,818 
---------------------------------------------------------  ---------------  ----------  -------------  --------------- 
 

Sensitivity analysis

At 31 December 2020, had the base interest rates strengthened/weakened by 2% (2019: 2%) in relation to all holdings subject to interest with all other variables held constant, the finance income would increase/decrease by EUR 1,729,326 (2019: EUR 1,088,193) which would subsequently impact the amount available for distribution as finance expense. There would be no impact on the total comprehensive income of BCF. The interest rate sensitivity information is a relative estimate of risk and is not intended to be a precise and accurate number. The calculations are based on historical data. Future price movements and correlations between securities could vary significantly from those experienced in the current financial year.

(iii) Price risk

Price risk is the risk that the value of investments will fluctuate as a result of changes in market prices (other than those arising from currency risk and interest rate risk) whether caused by factors specific to an individual investment, its issuer or all factors affecting all investments traded in the market.

BCF attempts to mitigate asset pricing risk by using external pricing and valuation sources and by permitting the collateral manager, subject to certain requirements, to sell collateral obligations and reinvest the proceeds. The CLO manager monitors the assets within each CLO to ensure that they do not breach the collateral quality tests and portfolio profile tests. Where possible, prices are received from brokers on a monthly basis. Broker prices for loans are sourced from Markit, a composite price provider, and broker prices for bonds are sourced from IDC.

Credit risk

Credit risk is the current or prospective risk to earnings and capital arising from a counterparty's failure to meet the terms of any contract with BCF, or otherwise fail to perform as agreed. The receipt of monies owed will be subject to and dependent on the counterparty's ability to pay such monies.

BCF is therefore open to risks relating to the creditworthiness of the counterparty. If the counterparty fails to make any cash payments required to settle an investment, BCF may lose principal as well as any anticipated benefit from the transaction.

Credit risk in financial instruments arises from cash and cash equivalents and investments in debt securities, as well as credit exposures of transactions with brokers related to transactions awaiting settlement (i.e. receivable for investment sold and other receivables).

BIL, through its investment strategy, will endeavour to avoid losses relating to defaults on the underlying assets. In-house credit research is used to identify asset allocation opportunities amongst potential borrowers and industry segments and to take advantage of episodes of market mis-pricing. Segments and themes that are likely to be profitable are subjected to rigorous analysis and risk is allocated to these opportunities consistent with investment objectives. All transactions involve credit research analysts with relevant industry sector experience.

The credit analysis performed involves developing a full understanding of the business and associated risk of the loan or bond issuer and a full analysis of the financial risk, which leads to an overall assessment of credit risk. BIL analyses credit concentration risk based on the counterparty, country and industry of the financial assets that BCF holds.

At the reporting date, BCF's financial assets exposed to credit risk are as follows:

 
BCF                                         31 December    31 December 
                                                   2020           2019 
                                                    EUR            EUR 
----------------------------------------  -------------  ------------- 
Financial assets measured at fair value 
 through profit or loss                     995,817,486  1,173,001,282 
Derivative financial assets                  11,400,424      1,227,374 
Receivables for investments sold            349,344,373    253,971,470 
Other receivables                            32,837,068     29,965,349 
Cash at bank                                102,502,515     72,920,097 
----------------------------------------  -------------  ------------- 
Total                                     1,491,901,866  1,531,085,572 
----------------------------------------  -------------  ------------- 
 

Amounts in the above tables are based on the carrying value of the financial assets as at the reporting date.

Financial assets measured at fair value through profit or loss

BCF's investment policy is to invest predominantly in:

(i) a diverse portfolio of senior secured loans (including broadly syndicated, middle market or other loans);

(ii) CLO Income Notes issued by the Issuer CLOs whose investments will be focused predominantly in European and US senior secured loans; and

(iii) US CLO Income Notes (held directly or indirectly) whose investments are focused predominantly in US senior secured loans.

Financial assets measured at fair value through profit or loss (continued)

The investments in senior secured loans and bonds held directly by BCF had the following credit quality as rated by Moody's:

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

The senior secured loans and bonds held directly by BCF are concentrated in the following industries:

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

In addition to the senior secured loans and bonds held directly, BCF invests in CLO Income Notes issued by European and US CLO Issuers whose investments are focused predominantly in European and US senior secured loans. Each CLO's investment activities are restricted by its prospectus and the CLOs have narrow and well-defined objectives to provide investment opportunities to investors. In order to avoid excessive concentration of risk, the policies and procedures of each CLO include specific guidelines to focus on maintaining a diversified portfolio. As CLO Income Noteholder in the CLOs, BCF is exposed to the credit risk on the underlying senior secured loans and bonds held by the CLOs. In addition, the CLO Income Notes are limited recourse obligations of the CLOs which are payable solely out of amounts received by the CLO in respect of the financial assets held.

The underlying investments in senior secured loans and bonds recognised as financial assets of BCF's Direct CLO Subsidiaries had the following credit quality as rated by Moody's:

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

Financial assets measured at fair value through profit or loss (continued)

The senior secured loans and bonds held by the Direct CLO Subsidiaries of BCF are concentrated in the following industries:

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

The underlying investments in senior secured loans and bonds recognised as financial assets of the Indirect CLO Subsidiaries of BCF had the following credit quality as rated by Moody's:

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

The senior secured loans and bonds held by the Indirect CLO Subsidiaries are concentrated in the following industries:

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

During the year, BCF held (directly and indirectly) CLO Income Notes in US CLOs which are not consolidated as subsidiaries. Prior to 1 July 2020, the US CLOs that are held indirectly by BCF were held through the US MOA. From 1 July 2020, such US CLOs are held indirectly through BCM LLC, following a decision to merge BCM LLC

with the US MOA. Accordingly, BCF is exposed to the credit risk on the underlying US senior secured loans and bonds held by such US CLOs. In addition, the CLO Income Notes are limited recourse obligations of the US CLOs which are payable solely out of amounts received by the US CLO in respect of the financial assets held.

The underlying investments in senior secured loans and bonds recognised as financial assets of the US CLOs (whose Income Notes are held directly and indirectly by BCF) had the following credit quality as rated by Moody's:

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

The underlying financial assets of the US CLOs (whose Income Notes are held directly and indirectly by BCF)) exposed to credit risk were concentrated in the following industries:

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

Liquidity risk

Liquidity is the risk that BCF may not be able to meet its financial obligations as they fall due. The ability of BCF to meet its obligations is dependent on the receipt of interest and principal from the underlying collateral portfolios. Obligations may arise from: financial liabilities at fair value, payable for investments purchased, BCF Facility, interest payable on CLO Income Notes, derivative financial liabilities, other payables and accrued expenses.

At the reporting date, the financial obligations exposed to liquidity risk are as follows:

Financial liabilities measured at fair value through profit or loss

Financial liabilities at fair value comprise PPNs issued by BCF.

All PPNs issued are limited recourse. The recourse of the noteholders, which includes BGLF through the Lux Subsidiary, is limited to the proceeds available to unsecured creditors at such time from the debt obligations, CLO Income Notes and other obligations which comply with the investment policy. Therefore, from the perspective of BCF, the associated liquidity risk of the PPNs is reduced.

   13           Segmental reporting 

As per IFRS 8 Operating Segments, an operating segment is a component of an entity

   --      that engages in business activities from which it may earn revenues and incur expenses; 

-- whose operating results are reviewed regularly by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and

   --      for which discrete financial information is available. 

The Board, who is the chief operating decision maker, classified the Company into two operating segments - the Ordinary Share Class and the C Share Class - following completion of the Rollover Offer, in the Half Yearly Financial Report for the six months ended 30 June 2019.

Following the substantial sale of relevant assets acquired under the C Share rollover process and EUR62.6 million (representing 85.8% of the value of the assets in the C Share class as at 1 October 2019) reinvested into CSWs in the Lux Subsidiary and subsequently into PPNs in BCF, the Board classified the Company into one operating segment as at 31 December 2019 and resolved to convert the C Shares into Ordinary Shares. The calculation of the conversion ratio of the C Shares into Ordinary Shares was undertaken using the NAVs 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 ratio had been fixed.

However, given the two operating segments operated throughout most of the year ended 31 December 2019, the Board considered it to be appropriate to disclose the performance of both the Ordinary Share and C Share Classes in the Annual Report and Audited Financial Statements for the year ended 31 December 2019.

During the year ended 31 December 2020, the Board classified the Company into one operating segment - the Ordinary Share Class. The presentation of the comparatives for 31 December 2019 has been amended to present the Company's financial position as at 31 December 2019 and the performance for the year ended 31 December 2019 in aggregate as opposed to two operating segments.

During the years ended 31 December 2020 and 31 December 2019, the Company's primary exposure was to the Lux Subsidiary in Europe. The Lux Subsidiary's primary exposure is to BCF, an Irish entity. BCF's primary exposure is to the US and Europe.

   14           Basic and diluted earnings per Share 
 
                                                                As at                   As at 
                                                     31 December 2020   31 December 2019 (35) 
                                                                  EUR                     EUR 
--------------------------------------------------  -----------------  ---------------------- 
Total comprehensive income for the year                    33,420,657              59,606,832 
Weighted average number of shares during the year         478,307,769             442,117,788 
Basic and diluted earnings per Ordinary Share                  0.0699                  0.1348 
--------------------------------------------------  -----------------  ---------------------- 
 
   15           Net asset value per Ordinary Share 
 
                                                      As at              As at 
                                           31 December 2020   31 December 2019 
                                                        EUR                EUR 
----------------------------------------  -----------------  ----------------- 
IFRS Net asset value                            408,205,175        410,505,991 
Number of Ordinary Shares at year end           477,023,331        480,521,838 
----------------------------------------  -----------------  ----------------- 
IFRS Net asset value per Ordinary Share              0.8557             0.8543 
----------------------------------------  -----------------  ----------------- 
 

The number of Ordinary Shares at 31 December 2020 and 31 December 2019 has been calculated as follows:

 
                                                       As at              As at 
                                            31 December 2020   31 December 2019 
C Shares                                                   -        133,451,107 
Conversion ratio (as detailed in Note 9)                   -             0.5860 
New Ordinary Shares                                        -         78,202,348 
 
Add: Existing Ordinary Shares                    477,023,331        402,319,490 
Number of Ordinary Shares at year end            477,023,331        480,521,838 
-----------------------------------------  -----------------  ----------------- 
 
   16           Reconciliation of Published NAV to IFRS NAV per the financial statements 
 
                                                                    As at                         As at 
                                                         31 December 2020              31 December 2019 
                                                       NAV  NAV per share            NAV  NAV per share 
                                                       EUR            EUR            EUR            EUR 
-------------------------------------------  -------------  -------------  -------------  ------------- 
 
Published NAV attributable to Shareholders     402,369,392         0.8435    441,434,524         0.9187 
Adjustment - valuation                           5,835,783         0.0122   (30,928,533)       (0.0644) 
IFRS NAV                                       408,205,175         0.8557    410,505,991         0.8543 
-------------------------------------------  -------------  -------------  -------------  ------------- 
 

As noted above, there can be a difference between the Published NAV and the IFRS NAV per the financial statements, mainly because of the different bases of valuation. The above table reconciles the Published NAV to the IFRS NAV per the financial statements.

   17           Reconciliation of liabilities arising from financing activities 
 
                                            As at              As at 
                                 31 December 2020   31 December 2019 
                                              EUR                EUR 
------------------------------  -----------------  ----------------- 
Opening balance                           534,660            237,057 
Increase in intercompany loan             335,328            297,603 
Closing balance                           869,988            534,660 
------------------------------  -----------------  ----------------- 
 
   18           Dividends 

The Company declared and paid the following dividends on Ordinary Shares during the year ended 31 December 2020.

 
Period in respect of          Date Declared   Ex-dividend Date   Payment Date  Amount per Ordinary Share  Amount paid 
---------------------------  --------------  -----------------  -------------  -------------------------  ----------- 
                                                                                                     EUR          EUR 
---------------------------  --------------  -----------------  -------------  -------------------------  ----------- 
1 Oct 2019 to 31 Dec 2020       21 Jan 2020        30 Jan 2020    28 Feb 2020                     0.0250   12,013,045 
1 Jan 2020 to 31 Mar 2020       23 Apr 2020        30 Apr 2020    29 May 2020                     0.0150    7,207,827 
1 Apr 2020 to 30 Jun 2020       21 Jul 2020        30 Jul 2020    28 Aug 2020                     0.0150    7,205,127 
1 Jul 2020 to 30 Sept 2020      21 Oct 2020        29 Oct 2020    27 Nov 2020                     0.0150    7,176,725 
---------------------------  --------------  -----------------  -------------  -------------------------  ----------- 
Total                                                                                                      33,602,724 
-----------------------------------------------------------------------------  -------------------------  ----------- 
 

The Company declared and paid the following dividends on Ordinary Shares and C Shares during the year ended 31 December 2019:

 
Period in respect of           Date Declared   Ex-dividend Date   Payment Date  Amount per Ordinary Share  Amount paid 
----------------------------  --------------  -----------------  -------------  -------------------------  ----------- 
                                                                                                      EUR          EUR 
----------------------------  --------------  -----------------  -------------  -------------------------  ----------- 
1 Oct 2018 to 31 Dec 2018        22 Jan 2019        31 Jan 2019     1 Mar 2019                     0.0250   10,117,511 
1 Jan 2019 to 31 Mar 2019        18 Apr 2019         2 May 2019    31 May 2019                     0.0250   10,117,511 
1 Apr 2019 to 30 Jun 2019        18 Jul 2019        25 Jul 2019    23 Aug 2019                     0.0250   10,057,987 
1 July 2019 to 30 Sept 2019      18 Oct 2019        31 Oct 2019    29 Nov 2019                     0.0250   10,057,988 
----------------------------  --------------  -----------------  -------------  -------------------------  ----------- 
Total                                                                                                       40,350,997 
------------------------------------------------------------------------------  -------------------------  ----------- 
 
 
Period in respect of           Date Declared   Ex-dividend Date   Payment Date  Amount per  Amount paid 
                                                                                   C Share 
----------------------------  --------------  -----------------  -------------  ----------  ----------- 
                                                                                       EUR          EUR 
----------------------------  --------------  -----------------  -------------  ----------  ----------- 
1 Oct 2018 to 31 Dec 2018        22 Jan 2019        31 Jan 2019     1 Mar 2019     0.01452    1,937,710 
1 Jan 2019 to 31 Mar 2019        18 Apr 2019         2 May 2019    31 May 2019     0.02050    2,735,748 
1 Apr 2019 to 30 Jun 2019        18 Jul 2019        25 Jul 2019    23 Aug 2019     0.02140    2,855,854 
1 July 2019 to 30 Sept 2019      18 Oct 2019        31 Oct 2019    29 Nov 2019     0.02210    2,949,269 
----------------------------  --------------  -----------------  -------------  ----------  ----------- 
Total                                                                                        10,478,581 
------------------------------------------------------------------------------  ----------  ----------- 
 
   19           Related party transactions 

All transactions between related parties were conducted on terms equivalent to those prevailing in an arm's length transaction. In accordance with IAS 24 "Related Party Disclosures", the related parties and related party transactions during the year comprised:

Transactions with entities with significant influence

As at 31 December 2020, Blackstone Asia Treasury Pte held 43,000,000 Ordinary Shares in the Company (31 December 2019: 43,000,000).

Transactions with key management personnel

The Directors are the key management personnel as they are the persons who have the authority and responsibility for planning, directing and controlling the activities of the Company. The Directors are entitled to remuneration for their services. Refer to Note 4 for further detail.

Transactions with other related parties

At 31 December 2020, current employees of the Portfolio Adviser and its affiliates, and accounts managed or advised by them, hold 24,875 Ordinary Shares (31 December 2019: 24,875) which represents 0.005% (31 December 2019: 0.006%) of the issued shares of the Company.

The Company has exposure to the CLOs originated by BCF, through its investment in the Lux Subsidiary. BIL is also appointed as a service support provider to BCF and as the collateral manager to the Direct CLO Subsidiaries. BLCS has been appointed as the collateral manager to BCM LLC, Dorchester Park CLO Designated Activity Company and the Indirect CLO Subsidiaries.

Transactions with Subsidiaries

The Company held 284,879,854 CSWs as at 31 December 2020 (31 December 2019: 319,758,584) following the issuance of 6,800,000 and redemption of 41,678,730 CSWs by the Lux Subsidiary. Refer to Note 6 for further details.

As at 31 December 2020, the Company held 2,000,000 Class A shares and 1 Class B share in the Lux Subsidiary with a nominal value of EUR2,000,001 (31 December 2019: 2,000,000 Class A shares and 1 Class B share in the Lux Subsidiary with a nominal value of EUR2,000,001).

As at 31 December 2020, the Company held an intercompany loan payable to the Lux Subsidiary amounting to EUR869,988 (31 December 2019: EUR534,660).

   20           Controlling party 

In the Directors' opinion, the Company has no ultimate controlling party.

   21           Events after the reporting period 

The Board has evaluated subsequent events for the Company through to 29 April 2021, the date the financial statements are available to be issued, and, other than those listed below, concluded that there are no material events that require disclosure or adjustment to the financial statements.

Dividends

On 21 January 2021, the Board declared a dividend of EUR0.025 per Ordinary Share in respect of the period from 1 October 2020 to 31 December 2020 with an ex-dividend date of 4 February 2021. A total payment of EUR11,923,083 was processed on 5 March 2021.

On 21 January 2021, the Board announced that the Company has adopted a revised dividend policy targeting a total 2021 annual dividend of between EUR0.07 and EUR0.08 per Ordinary Share, which will consist of quarterly payments of EUR0.0175 per Ordinary Share for the first three quarters and a final quarter payment of a variable amount to be determined at that time.

On 23 April 2021, the Board declared a dividend of EUR0.0175 per Ordinary Share in respect of the period from 1 January 2021 to 31 March 2021 with an ex-dividend date of 6 May 2021. The dividend will be paid on 4 June 2021.

Repurchase of Ordinary Shares

During the period from 1 January 2021 to 28 April 2021, the Company repurchased, under the 2020 AGM authority, 125,000 of its Ordinary Shares of no par value at a total cost of EUR81,250 (excluding fees and commissions).

(32) The difference between these two figures of EUR103,656 relates to a realised gain on the management fee rebate element arising from two of the previously directly held CLOs whereby BLCS was the CLO manager.

(33) The difference between these two figures of EUR133,542 relates to an unrealised gain on the management fee rebate element arising from one of the previously directly held CLOs whereby BLCS was the CLO manager.

(34) The ranges provided in the tables above refer to the highest and lowest marks received across the range of CLOs held. The ranges reflect the different stages of the lifecycle of each of the CLOs on an individual basis. The low ranges in the tables above are prices from CLOs which have been called and are in wind-down.

(35) Refer to Note 13 Segmental reporting for further details.

Company Information

 
 Directors                                                                       Registered Office 
 Ms Charlotte Valeur (Chair)                                                     IFC 1 
  Mr Gary Clark                                                                   The Esplanade 
  Ms Heather MacCallum                                                            St Helier 
  Mr Steven Wilderspin                                                            Jersey 
  Mr Mark Moffat                                                                  JE1 4BP, Channel Islands 
  All c/o the Company's registered office 
----------------------------------------------------------------------------    -------------------------------------- 
 Portfolio Adviser                                                               Registrar 
 Blackstone Ireland Limited (formerly known as Blackstone / GSO Debt Funds       Link Asset Services (Jersey) Limited 
 Management Europe                                                                12 Castle Street 
 Limited)                                                                         St Helier 
 30 Herbert Street                                                                Jersey, JE2 3RT, Channel Islands 
 2(nd) Floor 
 Dublin 2, Ireland 
----------------------------------------------------------------------------    -------------------------------------- 
 Administrator / Company Secretary / Custodian / Depositary                      Auditor 
----------------------------------------------------------------------------    -------------------------------------- 
 BNP Paribas Securities Services S.C.A.                                          Deloitte LLP 
  IFC 1                                                                           Gaspé House 
  The Esplanade                                                                   66-72 Esplanade 
  St Helier                                                                       St Helier 
  Jersey                                                                          JE2 3QT 
  JE1 4BP, Channel Islands                                                        Channel Islands 
 Legal Adviser to the Company (as to Jersey Law)                                 Legal Adviser to the Company 
                                                                                  (as to English Law) 
----------------------------------------------------------------------------    -------------------------------------- 
 Carey Olsen                                                                     Herbert Smith Freehills LLP 
  47 Esplanade                                                                    Exchange House 
  St Helier                                                                       Primrose Street 
  Jersey                                                                          London 
  JE1 0BD, Channel Islands                                                        EC2A 2EG 
                                                                                  United Kingdom 
 Joint Broker                                                                    Joint Broker (from 4 March 2020) 
 Nplus1 Singer Advisory LLP                                                      Winterflood Securities Limited 
  1 Bartholomew Lane                                                              The Atrium Building 
  London, EC2N 2AX , United Kingdom                                               Cannon Bridge House, 25 Dowgate Hill 
                                                                                  London, EC4R 2GA, United Kingdom 
 
 
 Glossary 
 AGMGlossary                Annual General Meeting 
 AIC                        the Association of Investment Companies, 
                             of which the Company is a member 
 AIC Code                   AIC Code of Corporate Governance 2019 
 APMs                       Alternative Performance Measures 
 Articles                   the Articles of Incorporation of the 
                             Company 
 BCF                        Blackstone Corporate Funding Designated 
                             Activity Company (formerly known as Blackstone 
                             / GSO Corporate Funding Designated Activity 
                             Company) 
 BCF Facility               BCF entered into a facility agreement 
                             dated 1 June 2017, as amended, between 
                             (1) BCF (as borrower), (2) Citibank Europe 
                             plc, UK Branch (as administration agent), 
                             (3) Bank of America N.A. London Branch 
                             (as an initial lender), (4) BNP Paribas 
                             (as an initial lender), (5) Deutsche 
                             Bank AG, London Branch (as initial lender), 
                             (6) Citibank N.A. London Branch (as account 
                             bank, custodian and trustee) and (7) 
                             Virtus Group LP (as collateral administrator) 
 BCM LLC                    Blackstone CLO Management LLC (formerly 
                             known as Blackstone / GSO CLO Management 
                             LLC) 
 BGCM DAC                   BGCM Designated Activity Company 
 BGLC                       Ticker for the Company's C Share Quote 
 BGLF or the Company        Blackstone Loan Financing Limited (formerly 
                             known as Blackstone / GSO Loan Financing 
                             Limited) 
 BGLP                       Ticker for the Company's Sterling Quote 
 BIL or the Portfolio       Blackstone Ireland Limited (formerly 
  Adviser                    known as Blackstone / GSO Debt Funds 
                             Management Europe Limited) 
 BLCS or the Portfolio      Blackstone Liquid Credit Strategies LLC 
  Manager or the Rollover    (formerly known as GSO / Blackstone Debt 
  Portfolio Manager          Funds Management LLC) 
 Board                      the Board of Directors of the Company 
 BWIC                       Bids Wanted In Competition 
 BX Credit                  Blackstone Alternative Credit Advisors 
                             LP or Blackstone Credit (formerly known 
                             as GSO Capital Partners LP) 
 CSWs                       Cash Settlement Warrants 
 CLO                        Collateralised Loan Obligation 
 DTC                        Depositary Trust Company 
 DTR                        Disclosure Guidance and Transparency 
                             Rules 
 Discount / Premium         calculated as the NAV per share as at 
                             a particular date less BGLF's closing 
                             share price on the London Stock Exchange, 
                             divided by the NAV per share as at that 
                             date 
 Dividend yield             calculated as the last four quarterly 
                             dividends declared divided by the share 
                             price as at the relevant date 
 ECB                        European Central Bank 
 ESG                        Environmental, social and governance 
 EU                         European Union 
 FAFVPL                     Financial assets at fair value through 
                             profit or loss 
 FCA                        Financial Conduct Authority (United Kingdom) 
 Fed                        Federal Reserve 
 FRC                        Financial Reporting Council (United Kingdom) 
 FVPL                       Fair value through profit or loss 
 FVOCI                      Fair value through other comprehensive 
                             income 
 GFC                        Global Financial Crisis 
 IDC                        International Data Corporation 
 IFRS                       International Financial Reporting Standards 
 IFRS 10                    IFRS 10 Consolidated Financial Statements 
 IFRS 13                    IFRS 13 Fair Value Measurement 
 IFRS NAV                   Gross assets less liabilities (including 
                             accrued but unpaid fees) determined in 
                             accordance with IFRS as adopted by the 
                             EU 
 IMF                        International Monetary Fund 
 LCD                        S&P Global Market Intelligence's Leveraged 
                             Commentary & Data provides in-depth coverage 
                             of the leveraged loan market through 
                             real-time news, analysis, commentary, 
                             and proprietary loan data 
 Loan Warehouse             A special purpose vehicle incorporated 
                             for the purposes of warehousing US and/or 
                             European floating rate senior secured 
                             loans and bonds 
 LSE                        London Stock Exchange 
 LTM                        Last twelve months 
 Lux Subsidiary             Blackstone / GSO Loan Financing (Luxembourg) 
                             S.à r.l. 
 MoM                        Month-over-month 
 NAV                        Net asset value 
 NAV total return per       Calculated as the increase / decrease 
  Ordinary share             in the NAV per Ordinary share plus the 
                             total dividends paid per Ordinary share 
                             during the period, with such dividends 
                             paid being re-invested at NAV, as a percentage 
                             of the NAV per Ordinary share 
 NIM                        Net interest margin 
 OC                         Overcollateralisation 
 OCI                        Other Comprehensive Income 
 PMIs                       Purchasing Managers' Indices 
 PPNs                       Profit Participating Notes 
 Published NAV              Gross assets less liabilities (including 
                             accrued but unpaid fees) determined in 
                             accordance with the section entitled 
                             "Net Asset Value" in Part I of the Company's 
                             Prospectus and published on a monthly 
                             basis 
 Return                     Calculated as the increase /decrease 
                             in the NAV per Euro Ordinary share plus 
                             the total dividends paid per Euro Ordinary 
                             share, with such dividends paid being 
                             re-invested at NAV, as a percentage of 
                             the NAV per Euro Ordinary share. 
                             LTM return is calculated over the period 
                             January 2020 to December 2020. 
 Rollover Assets            The assets attributable to the Carador 
                             Income Fund plc Rollover Shares - a pool 
                             of CLO assets from Carador Income Fund 
                             plc 
 Rollover Offer             As announced by the Board on 28 August 
                             2018, a rollover proposal to offer newly 
                             issued C Shares to electing shareholders 
                             of Carador Income Fund plc, in consideration 
                             for the transfer of a pool of CLO assets 
                             from Carador Income Fund plc to the Company 
 RP                         Reinvestment period 
 SFS                        Specialist Fund Segment 
 UK Code                    UK Corporate Governance Code 2018 
 USD                        United States Dollar 
 US MOA                     United States Majority Owned Affiliate 
                             - Blackstone / GSO US Corporate Funding 
                             Limited 
 Underlying Company         A company or entity to which the Company 
                             has a direct or indirect exposure for 
                             the purpose of achieving its investment 
                             objective, which is established to, among 
                             other things, directly or indirectly, 
                             purchase, hold and/or provide funding 
                             for the purchase of CLO Securities 
 WA                         Weighted average 
 WAP                        Weighted Average Asset Price 
 WARF                       Weighted Average Rating Factor 
 WAS                        Weighted average spread 
 

A copy of the Company's Annual Financial Report will be available shortly from the Company Secretary, (BNP Paribas Securities Services S.C.A., Jersey Branch, IFC1, The Esplanade, St Helier, Jersey, JE1 4BP), or will be circulated on the Company's website.

IFC1 - The Esplanade - St Helier - Jersey - JE1 4BP

Company Secretary

Tel: +44 (0) 1534 813783 / 709178

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

NOTE: PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE RESULTS AND THERE CAN BE NO ASSURANCE THAT BLF WILL ACHIEVE COMPARABLE RESULTS.

IMPORTANT INFORMATION

Any reference herein to future returns or distributions is a target and not a forecast and there can be no guarantee or assurance that it will be achieved.

This document has been issued by Blackstone Loan Financing Limited (the "Company"), and should not be taken as an offer, invitation or inducement to engage in any investment activity and is solely for the purpose of providing information about the Company. This document does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any share in the Company or securities in any other entity, in any jurisdiction, including the United States, Canada, Japan or South Africa nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with, any contract or investment decision whatsoever, in any jurisdiction.

This document, and the information contained therein, is not for viewing, release, distribution or publication in or into the United States, Canada, Japan, South Africa or any other jurisdiction where applicable laws prohibit its release, distribution or publication, and will not be made available to any national, resident or citizen of the United States, Canada, Japan or South Africa. The distribution of this document in other jurisdictions may be restricted by law and persons into whose possession this document comes must inform themselves about, and observe, any such restrictions. Any failure to comply with the restrictions may constitute a violation of the federal securities law of the United States and the laws of other jurisdictions.

The Company has not been and will not be registered under the US Investment Company Act of 1940, as amended (the "Investment Company Act") and, as such, holders of the Shares will not be entitled to the benefits of the Investment Company Act. The shares issued by the Company (the "Shares") have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"), or with any securities regulatory authority of any state or other jurisdiction of the United States. The Shares may not be offered, sold, resold, pledged, taken up, exercised, renounced, delivered, distributed or otherwise transferred, directly or indirectly, into or within the United States, or to, or for the account or benefit of, US persons (as defined in Regulation S under the Securities Act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States and in a manner which would not require the Company to register under the Investment Company Act.. No public offering of the Shares is being made in the United States.

In addition, the Shares are subject to restrictions on transferability and resale in certain jurisdictions and may not be transferred or resold except as permitted under applicable securities laws and regulations. Investors may be required to bear the financial risks of their investment in the Shares for an indefinite period of time. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdictions.

This document may contain forward-looking statements that represent the Company's opinions, expectations, beliefs, intentions, estimates or projections. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. Any statement other than a statement of historical fact is a forward-looking statement. By their nature, forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors because they relate to events and depend on circumstances that will occur in the future whether or not outside the control of the Company. Actual results may differ materially from those expressed or implied by any forward-looking statement and even if the results of the Company are consistent with such forward-looking statement, those results may not be indicative of results in subsequent periods. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Recipients of this document should not place undue reliance on any forward-looking statement, which speaks only as of the date of its issuance.

No liability whatsoever (whether in negligence or otherwise) arising directly or indirectly from the use of this document is accepted and no representation, warranty or undertaking, express or implied, is or will be made by the Company, or any of its directors, officers, employees, advisers, representatives or other agents ("Agents") for any information or any of the opinions contained herein or for any errors, omissions or misstatements. None of the Agents makes or has been authorised to make any representation or warranties (express or implied) in relation to the Company or as to the truth, accuracy or completeness of this document, or any other written or oral statement provided. In particular, no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on any projections, targets, estimates or forecasts contained in this document and nothing in this document is or should be relied on as a promise or representation as to the future.

Unless otherwise indicated, the information provided herein is based on matters as they exist as of the date of preparation and not as of any future date. Recipients of this document are encouraged to contact the Company's representatives to discuss the procedures and methodologies used to make the projections and other information provided herein.

All investments are subject to risk, including the loss of the principal amount invested. Past performance is not necessarily indicative of future results, and there can be no assurance that BLF 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, most recently COVID-19, which may be designated as pandemics by world health authorities. The outbreak of such epidemics, together with any resulting restrictions on travel or quarantines imposed, has had and will continue to have a negative impact on the economy and business activity globally (including in the countries in which the Company invests), and thereby is expected to adversely affect the performance of the Company's Investments. Furthermore, the rapid development of epidemics could preclude prediction as to their ultimate adverse impact on economic and market conditions, and, as a result, presents material uncertainty and risk with respect to the Company and the performance of its Investments. All investments to be held by the Company involve a substantial degree of risk, including the risk of total loss. The value of shares and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested. You should always seek expert legal, financial, tax and other professional advice before making any investment decision.

Blackstone Loan Financing Limited is a self-managed Jersey registered alternative investment fund, and is regulated by the Jersey Financial Services Commission as a 'listed fund' under the Collective Investment Funds (Jersey) Law 1988 (the "Funds Law") and the Jersey Listed Fund Guide published by the Jersey Financial Services Commission. The Jersey Financial Services Commission is protected by the Funds Law against liability arising from the discharge of its functions thereunder. The Jersey Financial Services Commission has neither reviewed nor approved of the issue of this document.

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END

FR SESFAUEFSEDL

(END) Dow Jones Newswires

April 30, 2021 02:00 ET (06:00 GMT)

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