Global credit markets demonstrated
strength and resilience through a year of record growth and broad recovery from the global COVID-19 pandemic in 2021. Borrowers
capitalized on historically low rates and spreads to shore up their balance sheets, and a global vaccination rollout helped drive
consumer spending, supporting economic growth and strong corporate earnings reflected in rallying equity markets. This was despite
ongoing disruption from the pandemic following the emergence of the Delta and Omicron variants. Other macro headwinds included
mounting inflation, rates, supply chain issues, and particularly for the Eurozone region, spiking energy prices.
The prospect of rising rates
drove a significant rotation of retail investors into loan funds, which experienced their first inflows since 2017, expanding the
retail portion of the US loan buyer base to 8%.5 Overall the loan market received $45.7 billion of net inflows last
year, of which $35.4 billion went into mutual funds and $10.3 billion went into loan exchange-traded-funds (“ETFs”).
High yield ETFs also experienced net inflows of $4.9 billion, but investors pulled $7.5 billion from high-yield mutual funds, resulting
in net outflows of $2.6 billion from the US high yield retail market.6
The CLO market, which accounts
for the lion’s share of demand for US loans, turned more mainstream in 2021 as the CLO investor base expanded and a strong
supply of loan assets fueled record issuance. The global outstanding CLO market crossed the $1 trillion mark in 2021,7
and US CLO issuers priced a record $187 billion of new transactions, double the previous year’s issuance.
Corporate stress largely faded
to the background and in the US, loan and high yield default rates moved inside 1%, to 0.5% and 0.3% respectively, well below pre-pandemic
levels.8 The number of US loan and bond issuers defaulting in 2021 was the lowest since 2007, while the universe of
distressed assets shrank. Upgrades outnumbered downgrades by a record ratio of 2:1, improving the rating profile of the sub-investment
grade universe.9 Credit metrics for both high yield and leveraged loans improved throughout the year, and corporates
reported strong earnings performance, underpinned by GDP growth and demonstating their ability to manage rising input costs.
We expect demand for loan assets
to grow further in 2022 as investors increasingly pivot to floating-rate strategies as the Federal Reserve is likely to embark
on rate hikes, expected as soon as March. While healthy balance sheets should support an ongoing robust carry environment for loans,
we also note that all credit markets should benefit from strong economic growth, and that improving fundamentals and rising earnings
growth should underpin high yield performance despite greater rate volatility. Credit fundamentals and credit selection will become
increasingly important as we expect fourth quarter 2021 and first quarter 2022 earnings to show more credit differentiation than
previous earnings seasons.
At Blackstone Credit, we value
your continued investment and confidence in us and in our family of funds. Additional information about our funds is available
on our website at www.blackstone-credit.com.
Blackstone Senior Floating Rate
Term Fund (“BSL” or herein, the “Fund”) is a closed-end term fund that trades on the New York Stock Exchange
under the symbol “BSL”. BSL’s primary investment objective is to seek high current income, with a secondary objective
to seek preservation of capital, consistent with its primary goal of high current income. Under normal market conditions, the Fund
invests at least 80% of its Managed Assets in senior, secured floating rate loans (“Senior Loans”). BSL may also invest
in second-lien loans and high yield bonds and employs financial leverage, which may increase risk to the Fund. The Fund has a limited
term, and absent shareholder approval to extend the life of the Fund, the Fund will dissolve on or about May 31, 2027.
As of December 31, 2021, BSL outperformed
its benchmark, the S&P/LSTA Leveraged Loan Index (“S&P LLI”), on a Net Asset Value (“NAV”) per
share basis for the one-year, three-year, five-year, ten-year, and since inception periods. On a share price basis, the Fund outperformed
its benchmark for the one-year, three-year, five-year, ten-year, and since inception periods. The shares of the Fund traded at
an average discount to NAV of 2.6% for the 12 months ended December 31, 2021, compared to its peer group average discount of 4.7%
over the same period.
The Fund’s outperformance
relative to the benchmark for the twelve months ended December 31, 2021 was primarily attributable to credit selection. The Fund’s
allocation to CLO securities also contributed to the Fund’s outperformance for the period. By issuer, the largest positive
contributors to performance were Carestream Health (Term Loan), Bright Bidco, and Inmar, and the most significant detractors were
Carestream Health Holdings (Warrant), Crown Finance, and Eastern Power.
During the period, we continued
to dynamically manage the Fund to reduce risk and take advantage of investment opportunities in improving economic conditions.
The Fund’s largest sector overweights were business equipment & services, electronics/electrical, and healthcare; the
largest sector underweights included lodging & casinos, cable & satellite television, and all telecom. The Fund reduced
its allocation to high yield bonds during the period in favor of broadly syndicated loans.
Opinion
on the Financial Statements and Financial Highlights
We
have audited the accompanying statements of assets and liabilities of Blackstone Senior Floating Rate Term Fund, Blackstone Long-Short
Credit Income Fund, and Blackstone Strategic Credit Fund (the "Funds"), including the portfolios of investments as of
December 31, 2021, the related statements of operations and cash flows for the year then ended, the statements of changes in net
assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then
ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material
respects, the financial position of each of the Funds as of December 31, 2021, and the results of their operations and their cash
flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in
the United States of America.
Basis
for Opinion
These
financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to
express an opinion on the Funds’ financial statements and financial highlights based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement,
whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial
reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial
reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as
of December 31, 2021, by correspondence with the custodian, brokers, and agent banks; when replies were not received from brokers
or agent banks, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
| DELOITTE & TOUCHE LLP |
|
| |
|
| Denver, Colorado |
|
| February 24, 2022 |
|
We
have served as the auditor of one or more investment companies in the Blackstone Credit Funds Complex since 2010.
| 78 | www.blackstone-credit.com |
| Blackstone
Credit Funds | Summary
of Dividend Reinvestment Plan |
December
31, 2021 (Unaudited)
Pursuant
to the Funds’ Dividend Reinvestment Plan (the “DRIP”), shareholders whose shares are registered in their own
name may ‘‘opt-in’’ to the plan and elect to reinvest all or a portion of their distributions in common
shares by providing the required enrollment notice to Computershare, the DRIP administrator. Shareholders whose shares are held
in the name of a broker or other nominee may have distributions reinvested only if such a service is provided by the broker or
the nominee or if the broker or the nominee permits participation in the DRIP. Shareholders whose shares are held in the name
of a broker or other nominee should contact the broker or nominee for details. A shareholder may terminate participation in the
DRIP at any time by notifying the DRIP administrator before the record date of the next distribution through the Internet, by
telephone or in writing. All distributions to shareholders who do not participate in the DRIP, or have elected to terminate their
participation in the DRIP, will be paid by check mailed directly to the record holder by or under the direction of the DRIP administrator
when the Board declares a distribution.
When
the Funds declare a distribution, shareholders who are participants in the applicable DRIP receive the equivalent of the amount
of the distribution in common shares. If you participate in the DRIP, the number of common shares of the Funds that you will receive
will be determined as follows:
(1)
If the market price of the common shares plus any brokerage commissions on the payable date (or, if the payable date is not a
New York Stock Exchange trading day, the immediately preceding trading day) for determining shareholders eligible to receive the
relevant distribution (the ‘‘determination date’’) is equal to or exceeds 98% of the NAV per common share,
the Fund will issue new common shares at a price equal to the greater of:
| (a) | 98%
of the NAV per share at the close of trading on the New York Stock Exchange on the determination
date or |
| (b) | 95%
of the market price per common share on the determination date. |
(2) If 98% of the NAV per common share exceeds the market price of the common shares plus any brokerage commissions on the determination date, the DRIP administrator will receive the distribution in cash and will buy common shares in the open market, on the New York Stock Exchange or elsewhere, for your account as soon as practicable commencing on the trading day following the determination date and terminating no later than the earlier of (a) 30 days after the distribution payment date, or (b) the record date for the next succeeding distribution to be made to the shareholders; except when necessary to comply with applicable provisions of the federal securities laws. If during this period: (i) the market price plus any brokerage commissions rises so that it equals or exceeds 98% of the NAV per common share at the close of trading on the New York Stock Exchange on the determination date before the DRIP administrator has completed the open market purchases or (ii) the DRIP administrator is unable to invest the full amount eligible to be reinvested in open market purchases, the DRIP administrator will cease purchasing common shares in the open market and the Fund will issue the remaining common shares at a price per share equal to the greater of (a) 98% of the NAV per share at the close of trading on the New York Stock Exchange on the determination date or (b) 95% of the then current market price per share.
The
DRIP administrator maintains all shareholder accounts in the dividend reinvestment plan and furnishes written confirmations of
all transactions in the account, including information needed by shareholders for personal and tax records. Common shares in the
account of each DRIP participant are held by the DRIP administrator in non-certificated form in the name of the participant, and
each shareholder’s proxy includes shares purchased pursuant to the DRIP.
There
is no charge to participants for reinvesting regular distributions and capital gains distributions. The fees of the DRIP administrator
for handling the reinvestment of regular distributions and capital gains distributions are included in the fee to be paid by us
to our transfer agent. There are no brokerage charges with respect to shares issued directly by us as a result of regular distributions
or capital gains distributions payable either in shares or in cash. However, each participant bears a pro rata share of brokerage
commissions incurred with respect to the DRIP administrator’s open market purchases in connection with the reinvestment
of such distributions. Shareholders that opt-in to the DRIP will add to their investment through dollar cost averaging. Because
all dividends and distributions paid to such shareholder will be automatically reinvested in additional common shares, the average
cost of such shareholder’s common shares will decrease over time. Dollar cost averaging is a technique for lowering the
average cost per share over time if the Fund’s NAV declines. While dollar cost averaging has definite advantages, it cannot
assure profit or protect against loss in declining markets.
The
automatic reinvestment of such dividends or distributions does not relieve participants of any income tax that may be payable
on such dividends or distributions.
You
may obtain additional information by contacting the DRIP administrator at the following address: Computershare, Attn: Sales Dept.,
P.O. Box 358035, Pittsburgh, PA 15252.
| Annual
Report | December 31, 2021 |
79 |
| Blackstone
Credit Funds | Additional Information |
December 31, 2021 (Unaudited)
Portfolio
Information. The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission (the
“SEC”) for the first and third quarters of each fiscal year as an exhibit on Form N-PORT within 60 days after the
end of the Funds’ fiscal quarter. The Funds' portfolio holdings information for the third month of each fiscal quarter on
Form N-PORT is available (1) on the Funds’ website located at www.blackstone-credit.com or (2) on the SEC’s website
at http://www.sec.gov. Holdings and allocations shown on any Form N-PORT are as of the date indicated in the filing and may not
be representative of future investments. Holdings and allocations should not be considered research or investment advice and should
not be relied upon in making investment decisions.
Proxy
Information. The policies and procedures used to determine how to vote proxies relating to securities held by the Funds
are available (1) without charge, upon request, by calling 1-877-876-1121, (2) on the Funds’ website located at
www.blackstone-credit.com, and (3) on the SEC’s website at http://www.sec.gov. Information regarding how the Funds
voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available on Form
N-PX by August 31 of each year (1) without charge, upon request, by calling 1-877-876-1121, (2) on the Funds’ website
located www.blackstone-credit.com, and (3) on the SEC’s website at http://www.sec.gov.
Senior
Officer Code of Ethics. The Funds file a copy of their code of ethics that applies to the Funds’ principal executive
officer, principal financial officer or controller, or persons performing similar functions, with the SEC as an exhibit to each
annual report on Form N-CSR. This will be available on the SEC’s website at http://www.sec.gov.
Tax
Information. The portion of distributions paid, or otherwise includable in taxable income, that can be attributed to qualified
interest income for the year ended December 31, 2021 are as follows:
| Fund |
Percentage |
| Blackstone
Senior Floating Rate Term Fund |
91.45% |
| Blackstone
Long-Short Credit Income Fund |
91.17% |
| Blackstone
Strategic Credit Fund |
91.41% |
In
early 2022, if applicable, shareholders of record will receive information regarding any distributions paid to them by the Funds
during the calendar year 2021 via Forms 1099 and 1042-S.
| 80 | www.blackstone-credit.com |
| Blackstone
Credit Funds | Summary
of Updated Information
Regarding the Funds |
December
31, 2021 (Unaudited)
The
following information in this annual report is a summary of certain information about the Funds and changes since BGB’s
and BSL’s annual shareholder reports for the period ended December 31, 2020 and BGX’s prospectus dated July 30, 2021,
as supplemented (with respect to each Fund, the “prior disclosure date”). The information provided may be new or updated
since the prior disclosure date. This information may not reflect all of the changes that have occurred since you purchased shares
of the Funds.
INVESTMENT
OBJECTIVES
BSL
The
Fund’s primary investment objective is to seek high current income, with a secondary objective to seek preservation of capital,
consistent with its primary goal of high current income.
BGX
The
Fund’s primary investment objective is to provide current income, with a secondary objective of capital appreciation.
BGB
The
Fund's primary investment objective is to seek high current income, with a secondary objective to seek preservation of capital,
consistent with its primary goal of high current income.
There
can be no assurance that the Funds will achieve their investment objectives.
There
have been no changes in the Funds’ investment objectives since the prior disclosure date.
INVESTMENT
STRATEGIES
There
have been no changes in the Funds' Investment Strategies since the prior disclosure date.
BSL
Under
normal market conditions, at least 80% of the Fund’s Managed Assets will be invested in senior, secured floating rate loans
(“Senior Loans”). This policy is not fundamental and may be changed by the board of trustees of the Fund with at least
60 days’ written notice provided to shareholders. Borrowers take out Senior Loans to refinance existing debt and for acquisitions,
dividends, leveraged buyouts, and general corporate purposes. “Managed Assets” means the total assets of the Fund
(including any assets attributable to any preferred shares that may be outstanding or to money borrowed from banks or financial
institutions or issued notes for investment purposes) minus the sum of the Fund’s accrued liabilities (other than Fund liabilities
incurred for the express purpose of creating leverage).
Senior
Loans typically are of below investment grade quality. Below investment grade quality securities (including Senior Loans) are
those that, at the time of investment, are rated Ba1 or lower by Moody’s Investors Service, Inc. (“Moody’s”)
and BB+ or lower by Standard & Poor’s Corporation Ratings Group (“S&P”) or Fitch Ratings, Inc. (“Fitch”),
or if unrated are determined by the Blackstone Liquid Credit Strategies LLC (the “Adviser”) to be of comparable quality.
Securities of below investment grade quality, commonly referred to as “junk” or “high yield” securities,
are regarded as having predominantly speculative characteristics with respect to an issuer’s capacity to pay interest and
repay principal.
The
Fund may invest up to 20% of its Managed Assets in (i) loan interests that are not secured by any collateral of the Borrower,
(ii) loan interests that have a lower than first lien priority on collateral of the Borrower, (iii) other income producing securities
(including, without limitation, U.S. government debt securities and investment and non-investment grade, subordinated and unsubordinated
corporate debt securities), (iv) warrants and equity securities issued by a Borrower or its affiliates as part of a package of
investments in the Borrower or its affiliates and (v) structured products (including, without limitation, collateralized loan
obligations, credit linked notes and derivatives, including credit derivatives).
The
Fund may invest in debt securities, including Senior Loans, of any credit quality, maturity and duration. The Fund may invest
in U.S. dollar and non-U.S. dollar denominated securities of issuers located anywhere in the world, and of issuers that operate
in any industry. The Fund may also invest in swaps, including single name credit default swaps, single name loan credit default
swaps, total return swaps, interest rate swaps and foreign currency swaps.
The
Fund may invest up to 50% of its Managed Assets in securities that are considered illiquid. “Illiquid securities”
are securities which cannot be sold within seven days in the ordinary course of business at approximately the value used by the
Fund in determining its net asset value.
During
temporary defensive periods or in order to keep the Fund’s cash fully invested, including during the period when the net
proceeds of the offering of common shares are being invested, the Fund may deviate from its investment policies and objectives.
During such periods, the Fund may invest
all or a portion of Managed Assets in U.S. government securities, including bills, notes and bonds differing as to maturity and
rates of interest that are either issued or guaranteed by the Treasury or by U.S. government agencies or instrumentalities; non-U.S.
government securities which have received the highest investment grade credit rating, certificates of deposit issued against funds
deposited in a bank or a savings and loan association; commercial paper; bankers’ acceptances; bank time deposits; shares
of money market funds; credit linked notes; repurchase agreements with respect to any of the foregoing; asset-backed securities
or any other fixed income securities that the Adviser considers consistent with this strategy. It is impossible to predict when,
or for how long, the Fund will use these alternative strategies. There can be no assurance that such strategies will be successful.
| Annual
Report | December 31, 2021 |
81 |
| Blackstone
Credit Funds | Summary
of Updated Information
Regarding the Funds |
December
31, 2021 (Unaudited)
Percentage
limitations described in this prospectus are as of the time of investment by the Fund and may be exceeded because of changes in
the market value or investment rating of the Fund’s assets or if a Borrower distributes equity securities as incident to
the purchase or ownership of a Senior Loan, Subordinated Loan (as defined below) or in connection with a reorganization of a Borrower.
Leverage.
The Fund currently utilizes leverage through borrowings, including loans from certain financial institutions and/or the issuance
of debt securities (collectively, “Borrowings”), in an aggregate amount of up to 33 1/3% of its Managed Assets at
the time the leverage is incurred in order to buy additional securities. The Fund may also borrow for temporary, emergency or
other purposes as permitted under the Investment Company Act of 1940, as amended (the “1940 Act”). All costs and expenses
related to any form of leverage used by the Fund will be borne entirely by common shareholders.
BGX
The
Fund seeks to achieve its investment objectives by employing a dynamic long-short strategy in a diversified portfolio of loans
and fixed-income instruments of predominantly U.S. corporate issuers, including first- and second-lien secured loans (“Secured
Loans”) and high yield corporate bonds of varying maturities. The loans and fixed-income instruments that the Fund invests
in long positions in are typically rated below investment grade at the time of purchase. Substantially all of the Fund’s
assets are invested in loans and fixed-income instruments that are below investment grade quality. Below investment grade quality
instruments are those that, at the time of investment, are rated Ba1 or lower by Moody’s and BB+ or lower by S&P or
Fitch, or if unrated are determined by the Adviser to be of comparable quality. Instruments of below investment grade quality,
commonly referred to as “junk” or “high yield” securities, are regarded as having predominantly speculative
characteristics with respect to an issuer’s capacity to pay interest and repay principal.
Under
normal market conditions, the Fund may maintain both long and short positions based predominantly on the Adviser’s fundamental
view on a particular investment. The Fund takes long positions in investments that the Adviser believes offer the potential for
attractive returns under various economic and interest rate environments. The Fund may take short positions in investments that
the Adviser believes will under-perform due to a greater sensitivity to earnings growth of the issuer, default risk or interest
rates. The Fund’s short positions, either directly or through the use of derivatives, may total up to 30% of the Fund’s
net assets. The term “net assets” means total assets of the Fund minus liabilities (including accrued expenses or
dividends).
The
Adviser believes that changing investment environments over time offer attractive investment opportunities with varying degrees
of investment risk in the loan and fixed-income instruments markets. In order to capitalize on attractive investments and effectively
manage potential risk, the Adviser believes that the combination of thorough and continuous credit analysis, diversification,
and the ability to reallocate investments among senior and subordinated debt with both a long and short strategy is critical to
achieving higher risk-adjusted returns relative to other high yield securities.
The
Fund invests at least 70% of its Managed Assets (as defined below) in Secured Loans. Secured Loans are made to U.S. and, to a
limited extent, non-U.S. corporations, partnerships and other business entities (“Borrowers”) that operate in various
industries and geographical regions. Secured Loans pay interest at rates that are determined periodically on the basis of a floating
base lending rate, primarily the London-Interbank Offered Rate (“LIBOR”) plus a premium. “Managed Assets”
means net assets plus any borrowings for investment purposes. For the purpose of the Managed Assets definition, the term “Borrowings”
includes the Fund’s Preferred Shares, the principal amount of any borrowings of money and any effective leverage obtained
through securities lending, swap contract arrangements, short selling or other derivative transactions (whether or not such amounts
are covered with segregated assets).
The
Fund may also invest in (i) unsecured loans, (ii) fixed-income instruments (including, without limitation, U.S. government debt
securities and investment grade and below investment grade, subordinated and unsubordinated corporate debt securities), (iii)
warrants and equity securities issued by a Borrower or issuer or its affiliates as part of a package investment in a Borrower
or issuer or its affiliates, (iv) structured products such as collateralized loan obligations and credit-linked notes and (v)
derivatives, including credit derivatives. The Fund invests at least 80% of its net assets, plus the amount of any borrowings
for investment purposes, in credit investments, including, but not limited to, loans and fixed-income instruments.
| 82 | www.blackstone-credit.com |
| Blackstone
Credit Funds | Summary
of Updated Information
Regarding the Funds |
December
31, 2021 (Unaudited)
Under
normal market conditions, the use of derivatives by the Fund does not exceed 30% of the Fund’s Managed Assets. In addition,
the Fund may invest up to 25% of its total assets in any one counterparty (at any one time). The Fund’s principal investments
in derivative instruments will include investments in credit default swaps, total return swaps, futures transactions, options
and options on futures as well as certain currency and interest rate instruments such as foreign currency forward contracts, currency
exchange transactions on a spot (i.e., cash) basis, put and call options on foreign currencies and interest rate swaps. In a total
return swap, the Fund pays the counterparty a floating short-term interest rate and receives in exchange the total return of underlying
loans or debt securities. The Fund bears the risk of default on the underlying loans or debt securities, based on the notional
amount of the swap. The Fund would typically have to post collateral to cover this potential obligation. An investment by the
Fund in credit default swaps will allow the Fund to obtain economic exposure to certain credits without having a direct exposure
to such credits. As a buyer of credit default swaps, Fund is able to express a negative view on a particular instrument, but they
are not short sales and are not subject to the Fund’s investment limitations with regard to short sales. The Fund may also
enter into futures contracts on securities or currencies. A futures contract is an agreement to buy or sell a security or currency
(or to deliver a final cash settlement price in the case of a contract relating to an index or otherwise not calling for physical
delivery at the end of trading in the contract) for a set price at a future date. As an example, the Fund may purchase or sell
exchange traded U.S. Treasury futures to alter the Fund’s overall duration as well as its exposure to various portions of
the yield curve. In addition, the Fund may purchase “call” and “put” options and options on futures contracts
for hedging or investment purposes and may engage in interest rate swaps to minimize the Fund’s exposure to interest rate
movements.
The
Fund may enter into repurchase agreements, in which the Fund purchases a security from a bank or broker-dealer and the bank or
broker-dealer agrees to repurchase the security at the Fund’s cost plus interest within a specified time. If the party agreeing
to repurchase should default, the Fund will seek to sell the securities which it holds. This could involve transaction costs or
delays in addition to a loss on the securities if their value should fall below their repurchase price. Repurchase agreements
maturing in more than seven days are considered to be illiquid securities.
The
Fund may enter into reverse repurchase agreements, under which the Fund will effectively pledge its assets as collateral to secure
a short-term loan. Generally, the other party to the agreement makes the loan in an amount equal to a percentage of the market
value of the pledge collateral. At the maturity of the reverse repurchase agreement, the Fund will be required to repay the loan
and correspondingly receive back its collateral. While used as collateral, the assets continue to pay principal and interest,
which are for the benefit of the Fund.
The
Fund may invest up to 10% of its Managed Assets in structured products, consisting of collateralized loan obligations (“CLOs”)
and credit-linked notes.
The
Fund may invest up to 20% of its Managed Assets in instruments that are denominated in non-U.S. currencies. In order to minimize
the impact of currency fluctuations, the Adviser may at times hedge certain or all of the Fund’s investments denominated
in foreign currencies into U.S. dollars. Foreign currency transactions in which the Fund is likely to invest include, foreign
currency forward contracts, currency exchange transactions on a spot (i.e., cash) basis, and put and call options on foreign currencies.
These transactions may be used to hedge against the risk of loss due to changing currency exchange rates.
The
Fund’s short positions, either directly or through the use of derivatives, may total up to 30% of the Fund’s net assets.
A “short sale” is a transaction in which the Fund sells a security that it does not own (and borrows the security
to deliver it to the buyer) in anticipation that the market price of the security will decline. The long and short positions held
by the Fund may vary over time as market opportunities develop.
As
part of its investment strategy, the Fund may sell short positions in investments that the Adviser believes will under-perform,
due to a greater sensitivity to earnings growth of the issuer, default risk and interest rates. The Fund may sell short certain
securities, including, but not limited to, U.S. Treasuries, investment grade and high yield corporate bonds, either for investment
and/or hedging and/or financing purposes. The Adviser expects that most of its short investments will be in U.S. Treasuries and
investment grade bonds. Because these securities have historically low upward volatility, this may serve to reduce the Fund’s
risk of loss from short sales. Short positions in high yield corporate bonds have a fixed coupon and may have a longer duration
and weighted average life than loan investments. The Adviser does not currently anticipate engaging in short sales on loans, but
may do so if an active market for selling loans short develops in the future.
The
Fund may also use credit default swaps to express a negative credit view on a loan or other investment. If the Fund purchases
protection under a credit default swap and no credit event occurs on the reference obligation, the Fund will have made a series
of periodic payments and recover nothing of monetary value. However, if a credit event occurs on the reference obligation, the
Fund (if the buyer of protection) will receive the full notional value of the reference obligation through a cash payment in exchange
for the reference obligation or alternatively, a cash payment representing the difference between the expected recovery rate and
the full notional value.
During
an expanding or normal economic cycle, the strategy of buying U.S. and, to a limited extent, foreign loans and fixed-income instruments
that are rated below investment grade is designed to generate a consistent level of monthly income and capital appreciation. However,
during general economy or market downturns, the “short” strategy of having sold borrowed securities that the Adviser
believes could decline in price, may help lessen the impact of a significant decline in the value of the Fund’s long holdings.
| Annual
Report | December 31, 2021 |
83 |
| Blackstone
Credit Funds | Summary
of Updated Information
Regarding the Funds |
December
31, 2021 (Unaudited)
In
times of unusual or adverse market, economic, regulatory or political conditions, the Fund may not be able, fully or partially,
to implement its short selling strategy. Periods of unusual or adverse market, economic, regulatory or political conditions may
exist for as long as six months and, in some cases, much longer. Regulatory limitations or bans on short selling activities may
prevent the Fund from fully implementing its strategy. To secure the Fund’s obligation to cover its short positions, the
Fund may pledge collateral as security to the broker, which may include securities that it owns. This pledged collateral is segregated
and maintained with the Fund’s custodian.
The
Fund may invest up to 25% of its Managed Assets in securities that, at the time of investment, are illiquid (determined using
the Securities and Exchange Commission’s (“SEC”) standard applicable to registered investment companies, i.e.,
securities that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days
or less without the sale or disposition significantly changing the market value of the securities). The Fund may also invest,
without limit, in securities that are unregistered (but are eligible for purchase and sale by certain qualified institutional
buyers) or are held by control persons of the issuer and securities that are subject to contractual restrictions on their resale
(“restricted securities”). However, restricted securities determined by the Adviser to be illiquid are subject to
the limitations set forth above.
Leverage.
The Fund incurs leverage through securities lending arrangements and/or swap contract arrangements. In addition, the Fund
may incur leverage by reinvesting the proceeds from the sale of borrowed securities (“short sales”) in accordance
with the Fund’s investment objectives; however, the Fund may also enter into shorting programs without incurring leverage.
Although certain forms of effective leverage used by the Fund, such as leverage incurred in securities lending, swap contract
arrangements, other derivative transactions or short selling, may not be considered senior securities under the 1940 Act, such
effective leverage will be considered leverage for the Fund’s leverage limits. The Fund’s use of these forms of effective
leverage will not exceed 30% of its net assets (as defined below). The Fund uses borrowings, including loans from certain financial
institutions and the issuance of debt securities (collectively, “Borrowings”), in an aggregate amount of up to 33
1/3% of the Fund’s total assets, less all liabilities and indebtedness not represented by senior securities, immediately
after such Borrowings. Furthermore, the Fund adds leverage to its portfolio through the issuance of preferred shares (“Preferred
Shares,” collectively with the Common Shares, “Shares”) and may in the future continue to use leverage through
such issuances in an aggregate amount of up to 33 1/3% of the Fund’s total assets immediately after such issuance. The Fund’s
total leverage and short sales exposure, either through traditional leverage programs or through securities lending, swap contract
arrangements, other derivative transactions or short selling (including the market value of securities the Fund is obligated to
repay through short sales even in transactions that do not result in leverage), will not exceed 40% of the Fund’s Managed
Assets (67% of the Fund’s net assets (as defined below)). The use of leverage is a speculative technique that involves special
risks and costs associated with the leveraging of the Shares. There can be no assurance that any leveraging strategy the Fund
employs will be successful during any period in which it is employed. As used in this Prospectus, the term “net assets”
means total assets of the Fund minus liabilities (including accrued expenses or dividends).
BGB
Under
normal market conditions, at least 80% of the Fund's Managed Assets (as defined below) will be invested in credit investments
comprised of corporate fixed income instruments and other investments (including derivatives) with similar economic characteristics.
Investments with similar economic characteristics may be made through derivatives, credit-linked notes, repurchase agreements
and investments in other investment companies. In each case, such investments will be directly tied to a single credit investment
or a pool of credit investments. "Managed Assets" means the Fund's net assets plus any borrowing for investment purposes,
including effective leverage (as defined below) and traditional leverage (as defined below). The term "net assets" means
total assets of the Fund minus liabilities (including accrued expenses or dividends). "Total assets" means Managed Assets
plus liabilities other than liabilities related to leverage.
The
Adviser currently expects the Fund's investments will be composed principally of Senior Secured Loans and high yield corporate
bonds. The Fund's investments may be allocated between these two types of instruments depending on market conditions, such that
the Fund may be primarily invested in Senior Secured Loans or primarily invested in high yield corporate bonds.
In
addition to the Fund's 80% policy above, under normal market conditions the Fund:
| ● | may
invest up to 30% of its Managed Assets in derivatives; |
| ● | may
invest up to 20% of its Managed Assets in fixed income instruments of stressed or distressed issuers; |
| ● | may
invest up to 20% of its Managed Assets in fixed income instruments issued by foreign corporate or government issuers; |
| ● | may invest
up to 20% of its Managed Assets in instruments that, at the time of investment, are illiquid; |
| ● | may
invest up to 10% of its Managed Assets in credit-linked notes; and |
| ● | may
invest up to 10% of its Managed Assets in other investment companies in the manner permitted by the 1940 Act. |
Fixed
Income Instruments. Under normal market conditions, the Adviser expects the Fund's investments in corporate fixed income instruments
to consist predominantly of Senior Secured Loans and/or high yield bonds; however, the Fund's investments in fixed income instruments
may also include, to a limited extent, debentures, notes, commercial paper, investment grade bonds, loans other than Senior Secured
Loans and other similar types of debt instruments, as well as derivatives related to or referencing these types of securities
and instruments.
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High
Yield Instruments. The Fund currently intends to invest substantially all of its assets in fixed income instruments that are
of below investment grade quality. Below investment grade quality instruments are those that, at the time of investment, are rated
Ba1 or lower by Moody's Investors Service, Inc. ("Moody's") and BB+ or lower by Standard & Poor's Corporation Ratings
Group ("S&P") or Fitch Ratings, Inc. ("Fitch"), or if unrated, are determined by the Adviser to be of
comparable quality. Instruments of below investment grade quality, commonly referred to as "junk" or "high yield"
instruments, are regarded as having predominantly speculative characteristics with respect to an issuer's capacity to pay interest
and repay principal.
Senior
Secured Loans. The Fund may invest in assignments or participations of Senior Secured Loans made to U.S. and, to a limited
extent, non-U.S. corporations, partnerships and other business entities ("Borrowers") which operate in various industries
and geographical regions. Most Senior Secured Loans pay interest at rates which are determined periodically on the basis of a
floating base lending rate, primarily the London-Interbank Offered Rate ("LIBOR"), plus a premium. Senior Secured Loans
typically have the highest position in a borrower's capital structure and are secured by collateral.
Derivatives.
Under normal market conditions, the use of derivatives by the Fund will not exceed 30% of the Fund's Managed Assets. The Fund
may use derivatives for investment or hedging purposes or as a form of effective leverage. The Fund's principal investments in
derivative instruments may include investments in total return swaps and credit default swaps, but the Fund may also invest in
futures transactions, options and options on futures as well as certain currency and interest rate instruments such as foreign
currency forward contracts, currency exchange transactions on a spot (i.e., cash) basis, put and call options on foreign currencies
and interest rate swaps. The Fund's investments in derivatives will be included under the 80% policy noted above so long as the
underlying asset of such derivatives is one or more corporate fixed income instruments.
In
a total return swap, the Fund pays the counterparty a floating short-term interest rate and receives in exchange the total return
of underlying assets. The Fund bears the risk of default on the underlying assets based on the notional amount of the swap. The
Fund would typically have to post collateral to cover this potential obligation.
An
investment by the Fund in credit default swaps will allow the Fund to obtain economic exposure to certain credits without having
a direct exposure to such credits. As a seller (or long position) of credit default swaps, the Fund is entitled to receive a stream
of periodic payments from the buyer of the swap, but if a credit event occurs in connection with the reference security, group
of securities or index, then the Fund will have to pay the full notional value of the reference obligation or alternatively, a
cash payment representing the difference between the expected recovery rate and the full notional value.
As
described above, the Fund may also invest in types of derivatives other than total return swaps and credit default swaps, but
does not currently expect such other derivatives to be material to its investment strategy. Such other derivative investments
are described in "The Fund's Investments—Other Investment Techniques—Derivatives" in this prospectus and
"Investment Policies and Techniques—Other Portfolio Contents— Derivatives" in the SAI.
Foreign
Instruments. Under normal market conditions, the Fund may invest up to 20% of its Managed Assets in fixed income instruments
issued by foreign corporate or government issuers. Such foreign instruments may be U.S. currency denominated or foreign currency
denominated. The Fund currently has no intention of investing in instruments of emerging markets Borrowers or issuers.
Stressed
or Distressed Instruments. As part of its investments in corporate fixed income instruments, the Fund may invest up to 20%
of its Managed Assets in fixed income instruments of stressed or distressed issuers. Such instruments may be rated in the lower
rating categories (Caa1 or lower by Moody's, or CCC+ or lower by S&P or Fitch) or, if unrated, are considered by the Adviser
to be of comparable quality. Such instruments are subject to very high credit risk. The Fund may not invest in issuers which are
in default at the time of purchase.
Credit-Linked
Notes. The Fund may invest up to 10% of its Managed Assets in credit-linked notes.
Other
Investment Companies. The Fund may invest up to 10% of its Managed Assets in other investment companies, including exchange
traded funds ("ETFs"), in the manner permitted by the 1940 Act.
Illiquid
and Restricted Securities. The Fund may invest up to 20% of its Managed Assets in instruments that, at the time of investment,
are illiquid (determined using the SEC’s standard applicable to registered investment companies, i.e., securities that cannot
be disposed of within seven days in the ordinary course of business at approximately the value at which the Fund has valued the
securities). The Fund may also invest, without limit, in securities that are unregistered (but are eligible for purchase and sale
by certain qualified institutional buyers) or are held by control persons of the issuer and securities that are subject to contractual
restrictions on their resale ("restricted securities"). However, restricted securities determined by the Adviser to
be illiquid are subject to the limitation set forth above.
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Credit Funds | Summary
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Leverage.
The Fund currently incurs leverage as part of its investment strategy. The Fund incurs leverage of up to 33 1/3% of its Managed
Assets by borrowing under a credit facility. Although the Fund has no current intention to do so, it may also issue Preferred
Shares (but will not issue auction rate preferred shares ("ARPS")), debt securities or commercial paper, or enter into
similar transactions to add leverage to its portfolio (collectively, together with borrowing money, "traditional leverage").
Although
it has no current intention to do so, the Fund may also incur leverage through total return swaps, securities lending arrangements,
credit default swaps or other derivative transactions (collectively, "effective leverage"). The Fund's use of effective
leverage will not exceed 25% of its Managed Assets. Although certain forms of effective leverage used by the Fund may not be considered
senior securities under the 1940 Act, such effective leverage will be considered leverage for the Fund's leverage limits.
The
Fund's total leverage, either through traditional leverage or effective leverage, will not exceed 40% of the Fund's Managed Assets.
The use of leverage is a speculative technique that involves special risks and costs. During periods when the Fund is using leverage,
the fees paid to the Adviser will be higher than if the Fund did not use leverage because the fees paid will be calculated on
the basis of the Fund's Managed Assets, which includes the assets obtained through effective leverage and traditional leverage.
RISKS
APPLICABLE TO EACH FUND
Investment
and Market Risk
An
investment in the Fund’s Common Shares is subject to investment risk, including the possible loss of the entire principal
amount invested. An investment in the Fund’s Common Shares represents an indirect investment in the portfolio of floating
rate instruments, other securities and derivative investments owned by the Fund, and the value of these investments may fluctuate,
sometimes rapidly and unpredictably. At any point in time an investment in the Fund’s Common Shares may be worth less than
the original amount invested, even after taking into account distributions paid by the Fund and the ability of common shareholders
to reinvest dividends. The Fund may also use leverage, which would magnify the Fund’s investment, market and certain other
risks.
Below
Investment Grade, or High Yield, Instruments Risk
The
Fund anticipates that it may invest substantially all of its assets in instruments that are rated below investment grade. Below
investment grade instruments are commonly referred to as “junk” or “high yield” instruments and are regarded
as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal. Lower grade instruments
may be particularly susceptible to economic downturns, which could adversely affect the ability of the issuers of such instruments
to repay principal and pay interest thereon, increase the incidence of default for such instruments and severely disrupt the market
value of such instruments.
Lower
grade instruments, though higher yielding, are characterized by higher risk. They may be subject to certain risks with respect
to the issuing entity and to greater market fluctuations than certain lower yielding, higher rated instruments. The retail secondary
market for lower grade instruments may be less liquid than that for higher rated instruments. Adverse conditions could make it
difficult at times for the Fund to sell certain instruments or could result in lower prices than those used in calculating the
Fund’s NAV. Because of the substantial risks associated with investments in lower grade instruments, investors could lose
money on their investment in Common Shares of the Fund, both in the short-term and the long-term.”
“Covenant-lite”
Obligations Risk (new since the prior disclosure date for BSL and BGB)
The
Fund may invest in, or obtain exposure to, obligations that may be “covenant-lite,” which means such obligations lack
certain financial maintenance covenants. While these loans may still contain other collateral protections, a covenant-lite loan
may carry more risk than a covenant- heavy loan made by the same borrower as it does not require the borrower to provide affirmation
that certain specific financial tests have been satisfied on a routine basis as is required under a covenant-heavy loan agreement.
Should a loan held by the Fund begin to deteriorate in quality, the Fund’s ability to negotiate with the borrower may be
delayed under a covenant-lite loan compared to a loan with full maintenance covenants. This may in turn delay the Fund’s
ability to seek to recover its investment.
Valuation
Risk
Unlike
publicly traded common stock which trades on national exchanges, there is no central place or exchange for most of the Fund’s
investments to trade. The Fund’s investments generally trade on an “over-the-counter” market which may be anywhere
in the world where the buyer and seller can settle on a price. Due to the lack of centralized information and trading, the valuation
of loans or fixed-income instruments may carry more risk than that of common stock. Uncertainties in the conditions of the financial
market, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate
asset pricing. In addition, other market participants may value securities differently than the Fund. As a result, the Fund may
be subject to the risk that when an instrument is sold in the market, the amount received by the Fund is less than the value of
such instrument carried on the Fund’s books.
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Credit Funds | Summary
of Updated Information
Regarding the Funds |
December
31, 2021 (Unaudited)
Swap
Risk
The
Fund may also invest in credit default swaps, total return swaps and interest rate swaps. Such transactions are subject to market
risk, liquidity risk, risk of default by the other party to the transaction, known as “counterparty risk,” and risk
of imperfect correlation between the value of such instruments and the underlying assets and may involve commissions or other
costs. When buying protection under a swap, the risk of loss with respect to swaps generally is limited to the net amount of payments
that the Fund is contractually obligated to make. However, when selling protection under a swap, the risk of loss is often the
notional value of the underlying asset, which can result in a loss substantially greater than the amount invested in the swap
itself. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become relatively
liquid; however, there is no guarantee that the swap market will continue to provide liquidity. If the Adviser is incorrect in
its forecasts of market values, interest rates or currency exchange rates, the investment performance of the Fund would be less
favorable than it would have been if these investment techniques were not used. In a total return swap, the Fund pays the counterparty
a floating short-term interest rate and receives in exchange the total return of underlying loans or debt securities (or pays
an equivalent amount, if the total return is negative). The Fund bears the risk of default on the underlying loans or debt securities,
based on the notional amount of the swap. The Fund would typically have to post collateral to cover potential obligations under
the swap.
Credit
Risk
Credit
risk is the risk that one or more Loans or other instruments in the Fund’s portfolio will decline in price or fail to pay
interest or principal when due because the issuer of the instrument experiences a decline in its financial status. While a senior
position in the capital structure of a Borrower or issuer may provide some protection with respect to the Fund’s investments
in certain Loans, losses may still occur because the market value of Loans is affected by the creditworthiness of Borrowers or
issuers and by general economic and specific industry conditions and the Fund’s other investments will often be subordinate
to other debt in the issuer’s capital structure. To the extent the Fund invests in below investment grade instruments, it
will be exposed to a greater amount of credit risk than a fund which invests in investment grade securities. The prices of lower
grade instruments are more sensitive to negative developments, such as a decline in the issuer’s revenues or a general economic
downturn, than are the prices of higher grade instruments. Instruments of below investment grade quality are predominantly speculative
with respect to the issuer’s capacity to pay interest and repay principal when due and therefore involve a greater risk
of default. In addition, the Fund may enter into credit derivatives which may expose it to additional risk in the event that the
instruments underlying the derivatives default.
Interest
Rate Risk
The
fixed-income instruments that the Fund may invest in are subject to the risk that market values of such securities will decline
as interest rates increase. These changes in interest rates have a more pronounced effect on securities with longer durations.
Typically, the impact of changes in interest rates on the market value of an instrument will be more pronounced for fixed-rate
instruments, such as most corporate bonds, than it will for Loans or other floating rate instruments. Fluctuations in the value
of portfolio securities will not affect interest income on existing portfolio securities but will be reflected in the Fund’s
NAV.
Systematic
Strategies Related to Bond Investments Risk
With
respect to the bond portion of the Fund’s portfolio, to the extent to which the proprietary model used by the Adviser (the
"Model") or comparable methods or strategies are employed, certain of the Adviser’s securities analysis methods
will rely on the assumption that the companies whose securities are purchased or sold, the rating agencies that review these securities,
and other publicly available sources of information about these securities, are providing accurate and unbiased data. While the
Adviser is alert to indications that data may be incorrect, there is always a risk that the Adviser’s analysis may be compromised
by inaccurate or misleading information.
The
Model the Adviser intends to utilize to manage the Fund’s bond investments could lead to unsatisfactory investments. The
Adviser might not be able to effectively implement the Model, and there can be no guarantee that the Fund will achieve the desired
results.
Certain
aspects of the Adviser’s investment process with respect to the Model are dependent on complex proprietary software, which
requires constant development and refinement. The Adviser has implemented procedures designed to appropriately control the development
and implementation of the Model. However, analytical, coding and implementation errors present substantial risks to complex models
and quantitative investment management strategies. The Adviser cannot guarantee that its internal controls will be effective in
all circumstances.
The
Fund could be negatively affected by undetected software defects or fundamental issues with the Adviser’s method of interpreting
and acting upon the Model’s output. The Adviser’s implementation of its investment strategy with respect to the Fund’s
bond portfolio utilizing the Model will rely on the analytical and mathematical foundation of the Model and the incorporation
of the Model’s outputs into a complex computational environment. Any such strategy is also dependent on the quality of the
market data utilized by the Model, changes in credit market conditions, creation and maintenance of the Model’s software
and the successful incorporation of the Model’s output into the construction of the Fund’s bond portfolio. There is
always a possibility of human error in the creation, maintenance and use of the Model.
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Moreover,
the Adviser’s portfolio managers exercise discretion in the utilization of the Model, and the investment results of the
relevant portion(s) of the Fund’s investments are dependent on the ability of portfolio managers to correctly understand
and implement or disregard the Model’s signals. There can be no assurance that utilizing the Model will yield better results
than any other investment method.
LIBOR
Risk
Changes
in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect the Fund’s
credit arrangements and the Fund’s floating rate debt investments. Instruments in which the Fund invests may pay interest
at floating rates based on LIBOR or may be subject to interest caps or floors based on LIBOR. The Fund and issuers of instruments
in which the Fund invests may also obtain financing at floating rates based on LIBOR. The underlying collateral of floating rate
debt investments in which the Fund invests may pay interest at floating rates based on LIBOR. Derivative instruments utilized
by the Fund and/or issuers of instruments in which the Fund may invest may also reference LIBOR. On July 27, 2017, the FCA announced
that it would phase out LIBOR as a benchmark by the end of 2021. The Administrator of LIBOR announced that most LIBOR settings
will no longer be published after the end of 2021 and a majority of USD LIBOR settings will no longer be published after June
30, 2023. The FRS, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation have issued guidance encouraging
market participants to adopt alternatives to LIBOR in new contracts as soon as practicable and no later than December 31, 2021,
and the FCA has indicated that market participants should not rely on LIBOR being available after 2021. As an alternative to LIBOR,
the FRS, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial
institutions, recommended replacing U.S.-dollar LIBOR with SOFR, a new index calculated by short- term repurchase agreements,
backed by Treasury securities. Abandonment of, or modifications to, LIBOR could have adverse impacts on newly issued financial
instruments and the Fund’s existing financial instruments which reference LIBOR. While some instruments may contemplate
a scenario where LIBOR is no longer available by providing for an alternative rate setting methodology, not all instruments may
have such provisions and there is significant uncertainty regarding the effectiveness of any such alternative methodologies. Abandonment
of, or modifications to, LIBOR also could lead to significant short-term and long-term uncertainty and market instability. While
some instruments may contemplate a scenario where LIBOR is no longer available by providing for an alternative rate setting methodology,
not all instruments may have such provisions and there is significant uncertainty regarding the effectiveness of any such alternative
methodologies. Abandonment of, or modifications to, LIBOR could lead to significant short-term and long-term uncertainty and market
instability. Uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR,
or any changes announced with respect to such reforms, may result in a sudden or prolonged increase or decrease in the reported
LIBOR rates and the value of LIBOR-based loans and securities, including those of other issuers the Fund currently owns or may
in the future own. In addition, from time to time the Fund invests in floating rate loans and investment securities whose interest
rates based on to LIBOR. If LIBOR ceases to exist, unless adequate fallback provisions are included, the Fund and its underlying
obligors will likely need to amend or restructure the Fund’s existing LIBOR-based debt instruments and any related hedging
arrangements that extend beyond December 31, 2021, or June 30, 2023, depending on the applicable LIBOR tenor and pending the outcome
of the LIBOR administrator’s consultation. Although many LIBOR rates will be phased out at the end of 2021, as originally
intended, a selection of widely used USD LIBOR rates will continue to be published until June 2023 in order to assist with the
transition. Uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR,
or any changes announced with respect to such reforms, may result in a sudden or prolonged increase or decrease in the reported
LIBOR rates and the value of LIBOR-based loans and securities, including those of other issuers the Fund currently owns or may
in the future own. In addition, from time to time, the Fund invests in floating rate loans and investment securities whose interest
rates are based on LIBOR. Such amendments and restructurings may be difficult, costly and time consuming.
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The
expected discontinuation of LIBOR could have a significant impact on the Fund’s business. There could be significant operational
challenges for the transition away from LIBOR including, but not limited to, amending loan agreements with borrowers on investments
that may have not been modified with fallback language and adding effective fallback language to new agreements in the event that
LIBOR is discontinued before maturity. Beyond these challenges, the Fund anticipates there may be additional risks to the Fund’s
current processes and information systems that will need to be identified and evaluated by us. Due to the uncertainty of the replacement
for LIBOR, the potential effect of any such event on the Fund’s cost of capital and net investment income cannot yet be
determined. In addition, the cessation of LIBOR could:
| ● | Adversely
impact the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any LIBOR-linked
securities, loans and derivatives that may be included in the Fund’s assets and liabilities; |
| ● | Require
extensive changes to documentation that governs or references LIBOR or LIBOR-based products, including, for example, pursuant
to time-consuming renegotiations of documentation to modify the terms of investments; |
| ● | Result
in inquiries or other actions from regulators in respect of the Fund’s preparation and readiness for the replacement of
LIBOR with one or more alternative reference rates; |
| ● | Result
in disputes, litigation or other actions with portfolio companies/the Fund's underlying obligors (as applicable), or other counterparties,
regarding the interpretation and enforceability of provisions in the Fund’s LIBOR-based investments, such as fallback language
or other related provisions, including, in the case of fallbacks to the alternative reference rates, any economic, legal, operational
or other impact resulting from the fundamental differences between LIBOR and the various alternative reference rates; |
| ● | Require
the transition and/or development of appropriate systems and analytics to effectively transition the Fund’s risk management
processes from LIBOR-based products to those based on one or more alternative reference rates, which may prove challenging given
the limited history of the proposed alternative reference rates; and |
| ● | Cause
us to incur additional costs in relation to any of the above factors. |
There
is no guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions, significant increases
in benchmark rates, or borrowing costs to borrowers, any of which could have a material adverse effect on the Fund’s business,
result of operations, and financial condition. In addition, the transition to a successor rate could potentially cause (i) increased
volatility or illiquidity in markets for instruments that currently rely on LIBOR, (ii) a reduction in the value of certain instruments
held by the Fund, or (iii) reduced effectiveness of related Fund transactions, such as hedging. It remains uncertain how such
changes would be implemented and the effects such changes would have on the Fund, issuers of instruments in which the Fund invests
and financial markets generally.
Force
Majeure Risk
The
Fund may be affected by force majeure events (e.g., acts of God, fire, flood, earthquakes, outbreaks of an infectious disease,
pandemic or any other serious public health concern, war, terrorism, nationalization of industry and labor strikes). Force majeure
events could adversely affect the ability of the Fund or a counterparty to perform its obligations. The liability and cost arising
out of a failure to perform obligations as a result of a force majeure event could be considerable and could be borne by the Fund.
Certain force majeure events, such as war or an outbreak of an infectious disease, could have a broader negative impact on the
global or local economy, thereby affecting the Fund. Additionally, a major governmental intervention into industry, including
the nationalization of an industry or the assertion of control, could result in a loss to the Fund if an investment is affected,
and any compensation provided by the relevant government may not be adequate.
Epidemic
and Pandemic Risk
The
world has been susceptible to epidemics/pandemics, most recently COVID-19, which has been designated as a pandemic by the World
Health Organization. Any outbreak of COVID-19, SARS, H1N1/09 flu, avian flu, other coronavirus, Ebola or other existing or new
epidemics/pandemics, or the threat thereof, together with any resulting restrictions on travel or quarantines imposed, has had,
and will continue to have, an adverse impact on the economy and business activity globally (including in the countries in which
the Fund invests), and thereby is expected to adversely affect the performance of the Fund’s investments and the Fund’s
ability to fulfill its investment objectives. Furthermore, the rapid development of epidemics/pandemics 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 Fund and the performance of its investments.
COVID-19
Risk
During
the first quarter of 2020, there was a global outbreak of COVID-19, which has spread to over 200 countries and territories,
including the United States, and has spread to every state in the United States. The World Health Organization has designated
COVID-19 as a pandemic, and numerous countries, including the United States, have declared national emergencies with respect
to COVID-19. The global impact of the COVID-19 pandemic has been rapidly evolving, resulting in numerous deaths, and as cases
of COVID-19 have continued to be identified in additional countries, many countries have reacted by instituting (or strongly
encouraging) quarantines and prohibitions/restrictions on travel, closing financial markets and/or restricting trading,
closing offices, schools, courts and other public venues, and limiting operations of non-essential businesses, and other
restrictive measures designed to help slow the spread of COVID-19. Such actions, as well as the general uncertainty
surrounding the dangers and impact of COVID-19, are creating significant disruption in global supply chains and economic
activity, increasing rates of unemployment and adversely impacting
many industries. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of
global economic slowdown.
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The
outbreak of the COVID-19 pandemic has at times had, and is expected to continue to pose a risk of having, a material adverse impact
on the Fund’s NAV and portfolio liquidity among other factors. These impacts will likely continue to some extent as the
outbreak persists and potentially even longer. Although many or all facets of the Fund’s business have been or could be
impacted by COVID-19, the Adviser currently believes the following impacts to be the most material:
| ● | The
Fund’s NAV per share had initially decreased as a result of the outbreak, and although the Fund’s NAV per share has
recently increased, the Fund expects the impact of the outbreak to continue, in some instances materially, which could result
in future decreases in the Fund’s NAV. The decrease in NAV per share was the result of a deterioration in prices across
the Fund’s portfolio investments and across the global credit markets, including the Fund’s quoted syndicated loan
investments and high yield bond investments. The price of these investments deteriorated as a result of market conditions triggered
by the COVID-19 pandemic, including increased credit risk for the Fund’s obligors as their businesses were impacted by the
outbreak and technical selling pressure as other market participants began selling assets in an effort to realize liquidity. It
is possible that the value of the Fund’s investments, and therefore the Fund’s NAV per share, could result in another
decrease during the period of the COVID-19 outbreak and potentially longer. The Fund believes its investments in obligors in certain
industries have been, and will continue to be, most affected by the COVID-19 outbreak. Additionally, the majority of the Fund’s
investments have experienced, and may continue to experience, a wide range of effects from the outbreak, ranging from insignificant
to significant. |
| ● | The
issuers of the Fund’s underlying investments may not be able to make interest payments, which would adversely impact the
Fund’s performance. Many of these businesses are adversely affected by COVID-19 and are experiencing lost revenue as quarantines
and other social disruption have slowed or stopped purchases of their products or services or have forced them to limit or suspend
operations. Furthermore, although most of the Fund’s investments are first lien loans and secured by first lien security
interests in the applicable issuer’s assets, if an issuer defaults on its loan there is no guarantee we will be able to
recover the principal amount of the loan. |
| ● | Disruption
in the financial markets caused by the COVID-19 outbreak could restrict the Fund’s access to financing and such financing
may not be on as favorable terms as the Fund could have obtained prior to the outbreak of the pandemic. Furthermore, because of
declining values of certain of the Fund’s assets, the Fund has sold, and may continue to sell, assets in order to remain
in compliance with the Fund’s leverage tests. This factor may limit the Fund’s ability to make new investments and
adversely impact the Fund’s performance. |
The
immediately preceding outcomes are those the Adviser considers to be most material as a result of the pandemic. The Fund has also
experienced, and may experience in the future, other negative impacts to its business as a result of the pandemic that could exacerbate
other risks described in this prospectus, including:
| ● | significant
mark-downs in the fair value of the Fund’s investments and decreases in NAV per share; |
| ● | weakening
financial conditions, or the bankruptcy or insolvency of, obligors of the Fund, which may result in the inability of such obligors
to meet debt obligations, delays in collecting accounts receivable, defaults, or forgiveness or deferral of interest payments
from such obligors; |
| ● | significant
volatility in the markets for syndicated loans, which could cause rapid and large fluctuations in the values of such investments
and adverse effects on the liquidity of any such investments, and may also require the Fund to repay certain of its financing
arrangements or result in the Fund having insufficient liquid assets to cover its obligations and be required to treat such obligations
as senior securities under the 1940 Act; |
| ● | the
Fund’s investments may require a workout, restructuring, recapitalization or reorganizations that involve additional investment
from the Fund and/or that result in greater risks and losses to the Fund; |
| ● | deteriorations
in credit and financing market conditions, which may adversely impact the Fund’s ability to access financing for its investments
on favorable terms or at all; |
| ● | operational
impacts on the Adviser, Distributor, administrator, custodian, transfer agent, and the Fund’s other third-party service
providers, vendors and counterparties, including independent valuation firms, the Fund’s financial intermediaries, its lenders
and other providers of financing, brokers and other counterparties that we purchase and sell assets to and from, derivative counterparties,
and legal and diligence professionals that we rely on for acquiring the Fund’s investments; |
| 90 | www.blackstone-credit.com |
| Blackstone
Credit Funds | Summary
of Updated Information
Regarding the Funds |
December
31, 2021 (Unaudited)
| ● | limitations
on the Fund’s ability to ensure business continuity in the event the Adviser’s, or the Fund’s counsel or other
third-party service providers’ respective continuity of operations plan is not effective or improperly implemented or deployed
during a disruption; |
| ● | the
availability of key personnel of the Adviser, administrator, custodian, transfer agent, and the Fund’s other service providers
as they face changed circumstances and potential illness during the epidemic/pandemic; |
| ● | difficulty
in valuing the Fund’s assets in light of significant changes in the financial markets, including difficulty in making market
comparisons, and circumstances affecting the Adviser’s, Administrator’s and the Fund’s service providers’
personnel during the pandemic; |
| ● | significant
changes to the valuations of pending investments; and |
| ● | limitations
on the Fund’s ability to make distributions or dividends, as applicable, to the Fund’s common shareholders or preferred
shareholders, as applicable, and/or to comply with the requirements to maintain the Fund’s status as a RIC due to material
adverse impacts on the Fund’s cash flows from operations or liquidity. |
The
rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic
and market conditions, and, as a result, present material uncertainty and risk with respect to the Fund and the performance of
its investments. The full extent of the impact and effects of COVID-19 on the Fund’s and its investments’ operational
and financial performance will depend on future developments, including, among other factors, the duration and spread of the outbreak,
along with related travel advisories, quarantines and restrictions, development of viable treatment options or availability of
vaccines, the recovery time of the disrupted supply chains and industries, the impact of COVID-19 on overall goods and services,
investor liquidity, consumer confidence and spending levels, the impact of labor market interruptions, the impact of government
interventions, and uncertainty with respect to the duration of the global economic slowdown. COVID-19 and the current financial,
economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect
to the Fund’s performance, portfolio liquidity, ability to pay distributions and make share repurchases.
Market
Disruption and Geopolitical Risk
The
Fund may be adversely affected by uncertainties such as terrorism, international political developments, and changes in government
policies, taxation, restrictions on foreign investment and currency repatriation, currency fluctuations and other developments
in the laws and regulations of the countries in which it is invested. Likewise, natural and environmental disasters, epidemics
or pandemics, and systemic market dislocations may be highly disruptive to economies and markets. Uncertainties and events around
the world may (i) result in market volatility, (ii) have long-term effects on the U.S. and worldwide financial markets and (iii)
cause further economic uncertainties in the United States and worldwide. The Fund cannot predict the effects of geopolitical events
in the future on the U.S. economy and securities markets.
Lender
Liability Risk
A
number of U.S. judicial decisions have upheld judgments obtained by Borrowers against lending institutions on the basis of various
evolving legal theories, collectively termed “lender liability.” Generally, lender liability is founded on the premise
that a lender has violated a duty (whether implied or contractual) of good faith, commercial reasonableness and fair dealing,
or a similar duty owed to the Borrower or has assumed an excessive degree of control over the Borrower resulting in the creation
of a fiduciary duty owed to the Borrower or its other creditors or shareholders. Because of the nature of its investments, the
Fund may be subject to allegations of lender liability.
In
addition, under common law principles that in some cases form the basis for lender liability claims, if a lender or bondholder
(a) intentionally takes an action that results in the undercapitalization of a Borrower to the detriment of other creditors of
such Borrower, (b) engages in other inequitable conduct to the detriment of such other creditors, (c) engages in fraud with respect
to, or makes misrepresentations to, such other creditors or (d) uses its influence as a stockholder to dominate or control a Borrower
to the detriment of other creditors of such Borrower, a court may elect to subordinate the claim of the offending lender or bondholder
to the claims of the disadvantaged creditor or creditors, a remedy called “equitable subordination.”
Because
affiliates of, or persons related to, the Adviser may hold equity or other interests in obligors of the Fund, the Fund could be
exposed to claims for equitable subordination or lender liability or both based on such equity or other holdings.
| Annual
Report | December 31, 2021 |
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| Blackstone
Credit Funds | Summary
of Updated Information
Regarding the Funds |
December
31, 2021 (Unaudited)
Counterparty
Risk
The
Fund is subject to credit risk with respect to the counterparties to its derivatives contracts (whether a clearing corporation
in the case of exchange- traded instruments or our hedge counterparty in the case of OTC instruments) purchased by the Fund. Counterparty
risk is the risk that the other party in a derivative transaction will not fulfill its contractual obligation. Changes in the
credit quality of the companies that serve as the Fund’s counterparties with respect to their derivative transactions will
affect the value of those instruments. By entering into derivatives, the Fund assumes the risks that theses counterparties could
experience financial or other hardships that could call into question their continued ability to perform their obligations. In
the case of a default by the counterparty, the Fund could become subject to adverse market movements while replacement transactions
are executed. The ability of the Fund to transact business with any one or number of counterparties, the possible lack of a meaningful
and independent evaluation of such counterparties’ financial capabilities, and the absence of a regulated market to facilitate
settlement may increase the potential for losses by the Fund. Furthermore, concentration of derivatives in any particular counterparty
would subject the Fund to an additional degree of risk with respect to defaults by such counterparty.
The
Adviser evaluates and monitors the creditworthiness of counterparties in order to ensure that such counterparties can perform
their obligations under the relevant agreements. If a counterparty becomes bankrupt or otherwise fails to perform its obligations
under a derivative contract due to financial or other difficulties, the Fund may experience significant delays in obtaining any
recovery under the derivative contract in a dissolution, assignment for the benefit of creditors, liquidation, winding-up, bankruptcy
or other analogous proceedings. In addition, in the event of the insolvency of a counterparty to a derivative transaction, the
derivative contract would typically be terminated at its fair market value. If the Fund is owed this fair market value upon the
termination of the derivative contract and its claim is unsecured, the Fund will be treated as a general creditor of such counterparty,
and will not have any claim with respect to the underlying assets. The Fund may obtain only a limited recovery or may obtain no
recovery at all in such circumstances. In addition, regulations that were adopted by prudential regulators in 2019 require certain
bank-regulated counterparties and certain of their affiliates to include in certain financial contracts, including many derivatives
contracts, terms that delay or restrict the rights of counterparties, such as the Fund, to terminate such contracts, foreclose
upon collateral, exercise other default rights or restrict transfers of credit support in the event that such counterparty and/or
its affiliates are subject to certain types of resolution or insolvency proceedings.
Certain
categories of interest rate and credit default swaps are subject to mandatory clearing, and more categories may be subject to
mandatory clearing in the future. The counterparty risk for cleared derivatives is generally lower than for uncleared OTC derivative
transactions because generally a clearing organization becomes substituted for each counterparty to a cleared derivative contract
and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to the clearing
house for performance of financial obligations. However, there can be no assurance that a clearing house, or its members, will
satisfy the clearing house’s obligations (including, but not limited to, financial obligations and legal obligations to
segregate margins collected by the clearing house) to the Fund. Counterparty risk with respect to certain exchange-traded and
over-the-counter derivatives may be further complicated by recently enacted U.S. financial reform legislation.
Potential
Conflicts of Interest Risk
The
Adviser will be subject to certain conflicts of interest in its management of the Fund. These conflicts will arise primarily from
the involvement of the Adviser, Blackstone Alternative Credit Advisors LP (“Blackstone Credit”), The Blackstone Group,
Inc. (“Blackstone”) and their affiliates in other activities that may conflict with those of the Fund. The Adviser,
Blackstone Credit, Blackstone and their affiliates engage in a broad spectrum of activities. In the ordinary course of their business
activities, the Adviser, Blackstone Credit, Blackstone and their affiliates may engage in activities where the interests of certain
divisions of the Adviser, Blackstone Credit, Blackstone and their affiliates or the interests of their clients may conflict with
the interests of the Fund or the common shareholders. Other present and future activities of the Adviser, Blackstone Credit, Blackstone
and their affiliates may give rise to additional conflicts of interest, which may have a negative impact on the Fund.
In
addressing these conflicts and regulatory, legal and contractual requirements across its various businesses, Blackstone has implemented
certain policies and procedures (e.g., information walls) that may reduce the positive firm-wide synergies that the Adviser may
have potentially utilized for purposes of finding attractive investments. Additionally, Blackstone may limit a client and/or its
portfolio companies from engaging in agreements with or related to companies in which any fund of Blackstone has or has considered
making an investment or which is otherwise an advisory client of Blackstone and/or from time to time restrict or otherwise limit
the ability of the Fund to make investments in or otherwise engage in businesses or activities competitive with companies or other
clients of Blackstone, either as result of contractual restrictions or otherwise. Finally, Blackstone has in the past entered,
and is likely in the future to enter, into one or more strategic relationships in certain regions or with respect to certain types
of investments that, although possibly intended to provide greater opportunities for the Fund, may require the Fund to share such
opportunities or otherwise limit the amount of an opportunity the Fund can otherwise take.
As
part of its regular business, Blackstone provides a broad range of services other than those provided by the Adviser, including
investment banking, underwriting, capital markets syndication and advisory (including underwriting), placement, financial advisory,
restructuring and advisory, consulting, asset/property management, mortgage servicing, insurance (including title insurance),
monitoring, commitment, syndication, origination, servicing, management consulting and other similar operational and finance matters,
healthcare consulting/brokerage, group purchasing, organizational, operational, loan servicing, financing, divestment and other
services. In addition, Blackstone may provide services in the future beyond those currently
provided. The Fund will not receive a benefit from the fees or profits derived from such services. In such a case, a client of
Blackstone would typically require Blackstone to act exclusively on its behalf. This request may preclude all of Blackstone clients
(including the Fund) from participating in related transactions that would otherwise be suitable. Blackstone will be under no
obligation to decline any such engagements in order to make an investment opportunity available to the Fund. In connection with
its other businesses, Blackstone will likely come into possession of information that limits its ability to engage in potential
transactions. The Fund’s activities are expected to be constrained as a result of the inability of the personnel of Blackstone
to use such information. For example, employees of Blackstone from time to time are prohibited by law or contract from sharing
information with members of the Adviser’s investment team that would be relevant to monitoring the Fund’s portfolio
and other investment decisions. Additionally, there are expected to be circumstances in which one or more of certain individuals
associated with Blackstone will be precluded from providing services related to the Fund’s activities because of certain
confidential information available to those individuals or to other parts of Blackstone (e.g., trading may be restricted). Blackstone
has long term relationships with a significant number of corporations and their senior management. In determining whether to invest
in a particular transaction on behalf of the Fund, the Adviser will consider those relationships, and may decline to participate
in a transaction as a result of such relationships. To the extent permitted by the 1940 Act, the Fund may also co-invest with
clients of Blackstone in particular investment opportunities, and the relationship with such clients could influence the decisions
made by the Adviser with respect to such investments. The Fund may be forced to sell or hold existing investments (possibly at
disadvantageous times or under disadvantageous conditions) as a result of various relationships that Blackstone may have or transactions
or investments Blackstone and its affiliates may make or have made. The inability to transact in any security, derivative or loan
held by the Fund could result in significant losses or lost opportunity costs to the Fund.
| 92 | www.blackstone-credit.com |
| Blackstone
Credit Funds | Summary
of Updated Information
Regarding the Funds |
December
31, 2021 (Unaudited)
Limitations
on Transactions with Affiliates Risk
The
1940 Act limits our ability to enter into certain transactions with certain of our affiliates. As a result of these restrictions,
we may be prohibited from buying or selling any security directly from or to any portfolio company of or private equity fund managed
by Blackstone, Blackstone Credit or any of their respective affiliates. However, the Fund may under certain circumstances purchase
any such portfolio company’s loans or securities in the secondary market, which could create a conflict for the Adviser
between the interests of the Fund and the portfolio company, in that the ability of the Adviser to recommend actions in the best
interest of the Fund might be impaired. The 1940 Act also prohibits certain “joint” transactions with certain of our
affiliates, which could include investments in the same portfolio company (whether at the same or different times). These limitations
may limit the scope of investment opportunities that would otherwise be available to us. Although the Fund has received an exemptive
order from the SEC that permits it, among other things, to co-invest with certain affiliates of the Adviser and certain funds
managed and controlled by the Adviser and its affiliates, it may only do so in accordance with certain terms and conditions that
limit the types of transactions the Fund may engage in.
Dependence
on Key Personnel Risk
The
Adviser is dependent upon the experience and expertise of certain key personnel in providing services with respect to the Fund’s
investments. If the Adviser were to lose the services of these individuals, its ability to service the Fund could be adversely
affected. As with any managed fund, the Adviser may not be successful in selecting the best-performing securities or investment
techniques for the Fund’s portfolio and the Fund’s performance may lag behind that of similar funds. The Adviser has
informed the Fund that the investment professionals associated with the Adviser are actively involved in other investment activities
not concerning the Fund and will not be able to devote all of their time to the Fund’s business and affairs. In addition,
individuals not currently associated with the Adviser may become associated with the Fund and the performance of the Fund may
also depend on the experience and expertise of such individuals.
Prepayment
Risk
During
periods of declining interest rates, Borrowers or issuers may exercise their option to prepay principal earlier than scheduled.
For fixed rate securities, such payments often occur during periods of declining interest rates, forcing the Fund to reinvest
in lower yielding securities, resulting in a possible decline in the Fund’s income and distributions to common shareholders.
This is known as prepayment or “call” risk. Below investment grade instruments frequently have call features that
allow the issuer to redeem the security at dates prior to its stated maturity at a specified price (typically greater than par)
only if certain prescribed conditions are met (“call protection”). An issuer may redeem a below investment grade instrument
if, for example, the issuer can refinance the debt at a lower cost due to declining interest rates or an improvement in the credit
standing of the issuer. Loans and the loans underlying CLOs in which the Fund invests typically do not have call protection after
a certain period from initial issuance. For premium bonds (bonds acquired at prices that exceed their par or principal value)
purchased by the Fund, prepayment risk may be enhanced.
UK
Exit from the EU
The
UK formally left the EU on January 31, 2020 (commonly known as “Brexit”), subject to a transition period that ended
on December 31, 2020. During an 11-month transition period, the United Kingdom, including its businesses and people, abided by
applicable EU rules, honored the United Kingdom’s trade relationships with EU countries, and prepared for the new post-Brexit
rules which took effect on January 1, 2021.
Since
the June 2016 referendum in the UK, global financial markets have experienced significant volatility due to the uncertainty around
Brexit. There will likely continue to be considerable uncertainty as to the longer term economic, legal, political and social
framework to be put in place between the
UK and the EU, in particular as to the arrangements which will apply to its relationships with the EU and with other countries.
This process and/or the uncertainty associated with it may adversely affect the return on investments economically tied to the
UK (and consequently the Fund). This may be due to, among other things: (i) increased uncertainty and volatility in UK, EU and
other financial markets; (ii) fluctuations in asset values; (iii) fluctuations in exchange rates; (iv) increased illiquidity of
investments located, listed or traded within the UK, the EU or elsewhere; (v) changes in the willingness or ability of financial
and other counterparties to enter into transactions, or the price at which and terms on which they are prepared to transact; and/or
(vi) changes in legal and regulatory regimes to which the Fund’s investments are or become subject.
| Annual
Report | December 31, 2021 |
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| Blackstone
Credit Funds | Summary
of Updated Information
Regarding the Funds |
December
31, 2021 (Unaudited)
Repurchase
Agreements Risk
Subject
to its investment objectives and policies, the Fund may invest in repurchase agreements as a buyer for investment purposes. Repurchase
agreements typically involve the acquisition by the Fund of debt securities from a selling financial institution such as a bank,
savings and loan association or broker-dealer. The agreement provides that the Fund will sell the securities back to the institution
at a fixed time in the future. The Fund does not bear the risk of a decline in the value of the underlying security unless the
seller defaults under its repurchase obligation. In the event of the bankruptcy or other default of a seller of a repurchase agreement,
the Fund could experience both delays in liquidating the underlying securities and losses, including (1) possible decline in the
value of the underlying security during the period in which the Fund seeks to enforce its rights thereto; (2) possible lack of
access to income on the underlying security during this period; and (3) expenses of enforcing its rights. In addition, as described
above, the value of the collateral underlying the repurchase agreement will be at least equal to the repurchase price, including
any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution,
the Fund generally will seek to liquidate such collateral. However, the exercise of the Fund’s right to liquidate such collateral
could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase
were less than the repurchase price, the Fund could suffer a loss.
Reverse
Repurchase Agreements Risk
The
Fund’s use of reverse repurchase agreements involves many of the same risks involved in the Fund’s use of leverage,
as the proceeds from reverse repurchase agreements generally will be invested in additional securities. There is a risk that the
market value of the securities acquired in the reverse repurchase agreement may decline below the price of the securities that
the Fund has sold but remains obligated to repurchase. In addition, there is a risk that the market value of the securities retained
by the Fund may decline. If the buyer of securities under a reverse repurchase agreement were to file for bankruptcy or experiences
insolvency, the Fund may be adversely affected. Also, in entering into reverse repurchase agreements, the Fund would bear the
risk of loss to the extent that the proceeds of the reverse repurchase agreement are less than the value of the underlying securities.
In addition, due to the interest costs associated with reverse repurchase agreements transactions, the Fund’s NAV will decline,
and, in some cases, the Fund may be worse off than if it had not used such instruments.
Investments
in Equity Securities or Warrants Incidental to Investments in Fixed Income Instruments
From
time to time the Fund also may invest in or hold common stock and other equity securities or warrants incidental to the purchase
or ownership of a fixed income instrument or in connection with a reorganization of an issuer. Investments in equity securities
incidental to investments in fixed income instruments entail certain risks in addition to those associated with investments in
fixed income instruments. Because equity is merely the residual value of an issuer after all claims and other interests, it is
inherently more risky than the bonds or loans of the same issuer. The value of the equity securities may be affected more rapidly,
and to a greater extent, by company-specific developments and general market conditions. These risks may increase fluctuations
in the Fund's NAV. The Fund frequently may possess material non-public information about a Borrower or issuer as a result of its
ownership of a fixed income instrument. Because of prohibitions on trading in securities while in possession of material non-public
information, the Fund might be unable to enter into a transaction in a security of an issuer when it would otherwise be advantageous
to do so.
Inflation/Deflation
Risk
Inflation
risk is the risk that the value of certain assets or income from the Fund’s investments will be worth less in the future
as inflation decreases the value of money. As inflation increases, the real value of the Common Shares and Preferred Shares, and
distributions thereon, can decline.
In
addition, during any periods of rising inflation, the dividend rates or borrowing costs associated with the Fund’s use of
leverage would likely increase, which would tend to further reduce returns to common shareholders. Deflation risk is the risk
that prices throughout the economy decline over time—the opposite of inflation. Deflation may have an adverse effect on
the creditworthiness of issuers and may make issuer defaults more likely, which may result in a decline in the value of the Fund’s
portfolio.
U.S.
Government Debt Securities Risk
U.S.
government debt securities generally do not involve the credit risks associated with investments in other types of debt
securities, although, as a result, the yields available from U.S. government debt securities are generally lower than the
yields available from other securities. Like other debt securities, however, the values of U.S. government securities change
as interest rates fluctuate. Fluctuations in the value of portfolio securities will not affect interest income on existing
portfolio securities but will be reflected in the Fund’s NAV. Since the magnitude of these fluctuations will generally
be greater at times when the Fund’s average maturity is longer, under certain market conditions the Fund may, for
temporary defensive purposes, accept lower current income from short-term investments rather than investing in higher
yielding long-term securities. In addition, the recent
economic crisis in the United States has negatively impacted government-sponsored entities, which include Federal Home Loan Banks,
Fannie Mae and Freddie Mac. As the real estate market has deteriorated through declining home prices and increasing foreclosure,
government-sponsored entities, which back the majority of U.S mortgages, have experienced extreme volatility and in some cases
a lack of liquidity. In September 2008, Fannie Mae and Freddie Mac were placed under a conservatorship of the U.S. federal government.
Any Fund investments issued by Federal Home Loan Banks and Fannie Mae may ultimately lose value.
| 94 | www.blackstone-credit.com |
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Credit Funds | Summary
of Updated Information
Regarding the Funds |
December
31, 2021 (Unaudited)
Cyber-Security
Risk and Identity Theft Risks
The
Fund’s operations are highly dependent on the Adviser’s information systems and technology and the Fund relies heavily
on the Adviser’s financial, accounting, communications and other data processing systems. The Adviser’s systems may
fail to operate properly or become disabled as a result of tampering or a breach of its network security systems or otherwise.
In addition, the Adviser’s systems face ongoing cybersecurity threats and attacks. Attacks on the Adviser’s systems
could involve, and in some instances have in the past involved, attempts intended to obtain unauthorized access to its proprietary
information, destroy data or disable, degrade or sabotage its systems, or divert or otherwise steal funds, including through the
introduction of computer viruses, “phishing” attempts and other forms of social engineering. Cyberattacks and other
security threats could originate from a wide variety of external sources, including cyber criminals, nation state hackers, hacktivists
and other outside parties. Cyberattacks and other security threats could also originate from the malicious or accidental acts
of insiders, such as employees of the Adviser.
There
has been an increase in the frequency and sophistication of the cyber and security threats the Adviser faces, with attacks ranging
from those common to businesses to those that are more advanced and persistent, which may target the Adviser because, as an alternative
asset management firm, the Adviser holds a significant amount of confidential and sensitive information about its investors, its
portfolio companies or obligors (as applicable) and potential investments. As a result, the Adviser may face a heightened risk
of a security breach or disruption with respect to this information. There can be no assurance that measures the Adviser takes
to ensure the integrity of its systems will provide protection, especially because cyberattack techniques used change frequently
or are not recognized until successful. If the Adviser’s systems are compromised, do not operate properly or are disabled,
or it fails to provide the appropriate regulatory or other notifications in a timely manner, the Adviser could suffer financial
loss, a disruption of its businesses, liability to its investment funds and fund investors, including the Fund and common shareholders,
regulatory intervention or reputational damage. The costs related to cyber or other security threats or disruptions may not be
fully insured or indemnified by other means.
In
addition, the Fund could also suffer losses in connection with updates to, or the failure to timely update, the Adviser’s
information systems and technology. In addition, the Adviser has become increasingly reliant on third party service providers
for certain aspects of its business, including for the administration of certain funds, as well as for certain information systems
and technology, including cloud-based services. These third party service providers could also face ongoing cyber security threats
and compromises of their systems and as a result, unauthorized individuals could gain, and in some past instances have gained,
access to certain confidential data.
Cybersecurity
has become a top priority for regulators around the world. Many jurisdictions in which the Adviser operates have laws and regulations
relating to data privacy, cybersecurity and protection of personal information, including, as examples, the General Data Protection
Regulation in the EU and that went into effect in May 2018 and the California Consumer Privacy Act that went into effect in January
2020. Some jurisdictions have also enacted laws requiring companies to notify individuals and government agencies of data security
breaches involving certain types of personal data.
Breaches
in security, whether malicious in nature or through inadvertent transmittal or other loss of data, could potentially jeopardize
the Adviser, its employees’ or the Fund’s investors’ or counterparties’ confidential, proprietary and
other information processed and stored in, and transmitted through, the Adviser’s computer systems and networks, or otherwise
cause interruptions or malfunctions in its, its employees’, the Fund’s investors’, the Fund’s counterparties’
or third parties’ business and operations, which could result in significant financial losses, increased costs, liability
to the Fund’s investors and other counterparties, regulatory intervention and reputational damage. Furthermore, if the Adviser
fails to comply with the relevant laws and regulations or fail to provide the appropriate regulatory or other notifications of
breach in a timely matter, it could result in regulatory investigations and penalties, which could lead to negative publicity
and reputational harm, and may cause the Fund’s investors and clients to lose confidence in the effectiveness of its security
measures.
Obligors
of the Fund also rely on data processing systems and the secure processing, storage and transmission of information, including
payment and health information. A disruption or compromise of these systems could have a material adverse effect on the value
of these businesses. The Fund may invest in strategic assets having a national or regional profile or in infrastructure, the nature
of which could expose it to a greater risk of being subject to a terrorist attack or security breach than other assets or businesses.
Such an event may have material adverse consequences on the Fund’s investment or assets of the same type or may require
obligors of the Fund to increase preventative security measures or expand insurance coverage.
Finally,
the Adviser’s and the Fund’s technology, data and intellectual property and the technology, data and intellectual
property of their portfolio companies or obligors (as applicable) are also subject to a heightened risk of theft or compromise
to the extent the Adviser and the Fund’s portfolio companies or obligors (as applicable) engage in operations outside the
United States, in particular in those jurisdictions that do not have comparable levels
of protection of proprietary information and assets such as intellectual property, trademarks, trade secrets, know-how and customer
information and records. In addition, the Adviser and the Fund and their portfolio companies or obligors (as applicable) may be
required to compromise protections or forego rights to technology, data and intellectual property in order to operate in or access
markets in a foreign jurisdiction. Any such direct or indirect compromise of these assets could have a material adverse impact
on the Adviser and the Fund and their portfolio companies or obligors (as applicable).
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Report | December 31, 2021 |
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| Blackstone
Credit Funds | Summary
of Updated Information
Regarding the Funds |
December
31, 2021 (Unaudited)
Portfolio
Turnover Risk
The
Fund’s annual portfolio turnover rate may vary greatly from year to year, as well as within a given year. However, portfolio
turnover rate is not considered a limiting factor in the execution of investment decisions for the Fund. High portfolio turnover
may result in the realization of net short- term capital gains by the Fund which, when distributed to common shareholders, will
be taxable as ordinary income. A high portfolio turnover may increase the Fund’s current and accumulated earnings and profits,
resulting in a greater portion of the Fund’s distributions being treated as a dividend to the Fund’s common shareholders.
In addition, a higher portfolio turnover rate results in correspondingly greater brokerage commissions and other transactional
expenses that are borne by the Fund.
Government
Intervention in the Financial Markets
The
recent instability in the financial markets has led the U.S. government to take a number of unprecedented actions designed to
support certain financial institutions and segments of the financial markets that have experienced extreme volatility, and in
some cases a lack of liquidity. Federal, state, and other governments, their regulatory agencies or self-regulatory organizations
may take additional actions that affect the regulation of the securities or structured products in which the Fund invests, or
the issuers of such securities or structured products, in ways that are unforeseeable. Borrowers under Secured Loans held by the
Fund may seek protection under the bankruptcy laws. Legislation or regulation may also change the way in which the Fund itself
is regulated. Such legislation or regulation could limit or preclude the Fund’s ability to achieve its investment objectives.
The Adviser will monitor developments and seek to manage the Fund’s portfolio in a manner consistent with achieving the
Fund’s investment objectives, but there can be no assurance that it will be successful in doing so.
Inflation
and Supply Chain Risk
Economic
activity has continued to accelerate across sectors and regions. Nevertheless, due to global supply chain issues, a rise in energy
prices and strong consumer demand as economies continue to reopen, inflation is showing signs of acceleration in the U.S. and
globally. Inflation is likely to continue in the near to medium-term, particularly in the U.S., with the possibility that monetary
policy may tightenin response. Persistent inflationary pressures could affect our portfolio companies profit margins.
FUND
SPECIFIC RISKS
BSL
Derivatives
Risk
Under
normal market conditions, the use of derivatives by the Fund, other than for hedging purposes, will not exceed 20% of the Fund’s
Managed Assets on a mark-to-market basis. The Fund’s use of derivative instruments may be speculative and involves investment
risks and transaction costs to which the Fund would not be subject absent the use of these instruments, and the use of derivatives
generally involves leverage in the sense that the investment exposure created by the derivatives may be significantly greater
than the Fund’s initial investment in the derivatives. In some cases, the use of derivatives may result in losses in excess
of principal or greater than if they had not been used. The ability to successfully use derivative instruments depends on the
ability of the Adviser. The skills needed to employ derivatives strategies are different from those needed to select a portfolio
security and, in connection with such strategies, the Adviser must make predictions with respect to market conditions, liquidity,
currency movements, market values, interest rates and other applicable factors, which may be inaccurate. The use of derivative
instruments may require the Fund to sell or purchase portfolio securities at inopportune times or for prices below or above the
current market values, may limit the amount of appreciation the Fund can realize on an investment or may cause the Fund to hold
a security that it might otherwise want to sell. The Fund may also have to defer closing out certain derivative positions to avoid
adverse tax consequences and there may be situations in which derivative instruments are not elected that result in losses greater
than if such instruments had been used. Amounts paid by the Fund as premiums and cash or other assets held in margin accounts
with respect to the Fund’s derivative instruments would not be available to the Fund for other investment purposes, which
may result in lost opportunities for gain. Changes to the derivatives markets as a result of the continuous promulgation of rules
under the Dodd- Frank Act and other government or international and other government regulation may also have an adverse effect
on the Fund’s ability to make use of derivative transactions. In addition, the use of derivatives is subject to other risks,
each of which may create additional risk of loss, including liquidity risk, interest rate risk, credit risk and management risk
as well as the following risks:
| ● | Correlation
Risk. Imperfect correlation between the value of derivative instruments and the underlying assets of the Fund creates the possibility
that the loss on such instruments may be greater than the gain in the value of the underlying assets in the Fund’s portfolio. |
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| ● | Duration
Mismatch Risk. The duration of a derivative instrument may be significantly different than the duration of the related liability
or asset. |
| ● | Valuation
Risk. The prices of derivative instruments, including swaps, futures, forwards and options, could be highly volatile and such
instruments may subject us to significant losses. The value of such derivatives also depends upon the price of the underlying
asset, reference rate or index, which may also be subject to volatility. In addition, actual or implied daily limits on price
fluctuations and speculative position limits on the exchanges or over-the-counter markets in which we may conduct our transactions
in derivative instruments may prevent prompt liquidation of positions, subjecting us to the potential of greater losses. In addition,
significant disparities may exist between “bid” and “asked” prices for derivative instruments that are
traded over-the-counter and not on an exchange. |
| ● | Liquidity
Risk. Derivative instruments, especially when purchased in large amounts, may not be liquid in all circumstances, so that in volatile
markets we may not be able to close out a position without incurring a loss. |
| ● | Counterparty
Risk. Derivative instruments also involve exposure to counterparty risk, since contract performance depends in part on the financial
condition of the counterparty. |
In
addition, the Adviser may cause the Fund to invest in derivative instruments that are neither presently contemplated nor currently
available, but which may be developed in the future, to the extent such opportunities are both consistent with the Fund’s
investment objectives and legally permissible. Any such investments may expose the Fund to unique and presently indeterminate
risks, the impact of which may not be capable of determination until such instruments are developed and/or the Adviser determines
to make such an investment on behalf of the Fund.
In
October 2020, the SEC adopted a new rule that changes the regulatory framework around the use of derivatives by registered investment
companies, such as the Fund. The new rule, which will go into effect on February 21, 2021 with a compliance date 18 months thereafter,
will require registered investment companies to adopt a written policies and procedures reasonably designed to manage the Fund’s
derivatives risks. In the event that the Fund’s derivatives exposure exceeds 10% of its net assets, the Fund will be required
to adopt a written derivatives risk management program and comply with a value-at-risk based limit on leverage risk. The Board
of Trustees will have an oversight role in ensuring these new requirements are being taken into account and, if required, will
appoint a derivatives risk manager to handle the day-to-day responsibilities of the derivatives risk program.
Senior
Loans Risk
Under
normal market conditions, the Fund will invest at least 80% of its Managed Assets in Senior Loans. This policy is not fundamental
and may be changed by the board of trustees of the Fund with at least 60 days’ written notice provided to shareholders.
Senior Loans hold the most senior position in the capital structure of a business entity, are secured with specific collateral
and have a claim on the assets and/or stock of the Borrower that is senior to that held by unsecured creditors, subordinated debt
holders and stockholders of the Borrower. Senior Loans are usually rated below investment grade or may also be unrated. As a result,
the risks associated with Senior Loans are similar to the risks of below investment grade securities, although Senior Loans are
senior and secured in contrast to other below investment grade securities, which are often subordinated or unsecured. Nevertheless,
if a Borrower under a Senior Loan defaults or goes into bankruptcy, the Fund may recover only a fraction of what is owed on the
Senior Loan or nothing at all. Senior Loans are subject to a number of risks described elsewhere in this Prospectus, including
credit risk, liquidity risk and management risk.
There
is less readily available and reliable information about most Senior Loans than is the case for many other types of securities,
including securities issued in transactions registered under the Securities Act of 1933, as amended, or registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). As a result, the Adviser will rely primarily on its own evaluation
of a Borrower’s credit quality rather than on any available independent sources. Therefore, the Fund will be particularly
dependent on the analytical abilities of the Adviser.
The
Fund will typically invest in Senior Loans rated below investment grade, which are considered speculative because of the credit
risk of their issuers. Such companies are more likely than investment grade issuers to default on their payments of interest and
principal owed to the Fund, and such defaults could reduce the Fund’s net asset value and income distributions. An economic
downturn would generally lead to a higher non-payment rate, and a Senior Loan may lose significant market value before a default
occurs. Moreover, any specific collateral used to secure a Senior Loan may decline in value or become illiquid, which would adversely
affect the Senior Loan’s value.
In
general, the secondary trading market for Senior Loans is not well developed. No active trading market may exist for certain Senior
Loans, which may make it difficult to value them. Illiquidity and adverse market conditions may mean that the Fund may not be
able to sell Senior Loans quickly or at a fair price. To the extent that a secondary market does exist for certain Senior Loans,
the market for them may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods.
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Senior
Loans and other variable rate debt instruments are subject to the risk of payment defaults of scheduled interest or principal.
Such payment defaults would result in a reduction of income to the Fund, a reduction in the value of the investment and a potential
decrease in the net asset value of the Fund. Similarly, a sudden and significant increase in market interest rates may increase
the risk for payment defaults and cause a decline in the value of these investments and in the Fund’s net asset value. Other
factors (including, but not limited to, rating downgrades, credit deterioration, a large downward movement in stock prices, a
disparity in supply and demand of certain securities or market conditions that reduce liquidity) can reduce the value of Senior
Loans and other debt obligations, impairing the Fund’s net asset value.
Although
the Senior Loans in which the Fund will invest will be secured by collateral, there can be no assurance that such collateral could
be readily liquidated or that the liquidation of such collateral would satisfy the Borrower’s obligation in the event of
non-payment of scheduled interest or principal. In the event of the bankruptcy or insolvency of a Borrower, the Fund could experience
delays or limitations with respect to its ability to realize the benefits of the collateral securing a Senior Loan. In the event
of a decline in the value of the already pledged collateral, if the terms of a Senior Loan do not require the Borrower to pledge
additional collateral, the Fund will be exposed to the risk that the value of the collateral will not at all times equal or exceed
the amount of the Borrower’s obligations under the Senior Loans. To the extent that a Senior Loan is collateralized by stock
in the Borrower or its subsidiaries, such stock may lose some or all of its value in the event of the bankruptcy or insolvency
of the Borrower. Those Senior Loans that are under-collateralized involve a greater risk of loss.
Some
Senior Loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate
the Senior Loans to presently existing or future indebtedness of the Borrower or take other action detrimental to lenders, including
the Fund. Such court action could under certain circumstances include invalidation of Senior Loans.
If
legislation or state or federal regulations impose additional requirements or restrictions on the ability of financial institutions
to make loans, the availability of Senior Loans for investment by the Fund may be adversely affected. In addition, such requirements
or restrictions could reduce or eliminate sources of financing for certain Borrowers. This would increase the risk of default.
If legislation or federal or state regulations require financial institutions to increase their capital requirements this may
cause financial institutions to dispose of Senior Loans that are considered highly levered transactions. Such sales could result
in prices that, in the opinion of the Adviser, do not represent fair value. If the Fund attempts to sell a Senior Loan at a time
when a financial institution is engaging in such a sale, the price the Fund could get for the Senior Loan may be adversely affected.
The
Fund may acquire Senior Loans through assignments or participations. The Fund will typically acquire Senior Loans through assignment
and may elevate a participation interest into an assignment as soon as practicably possible. The purchaser of an assignment typically
succeeds to all the rights and obligations of the assigning institution and becomes a lender under the credit agreement with respect
to the debt obligation; however, the purchaser’s rights can be more restricted than those of the assigning institution,
and the Fund may not be able to unilaterally enforce all rights and remedies under the loan and with regard to any associated
collateral. A participation typically results in a contractual relationship only with the institution participating out the interest,
not with the Borrower. Sellers of participations typically include banks, broker-dealers, other financial institutions and lending
institutions. The Adviser has adopted best execution procedures and guidelines to mitigate credit and counterparty risk in the
atypical situation when the Fund must acquire a Senior Loan through a participation. The Adviser has established a risk and valuation
committee that regularly reviews each broker-dealer counterparty for, among other things, its quality and the quality of its execution.
The established procedures and guidelines require trades to be placed for execution only with broker-dealer counterparties approved
by the risk and valuation committee of the Adviser. The factors considered by the committee when selecting and approving brokers
and dealers include, but are not limited to: (i) quality, accuracy, and timeliness of execution, (ii) review of the reputation,
financial strength and stability of the financial institution, (iii) willingness and ability of the counterparty to commit capital,
(iv) ongoing reliability and (v) access to underwritten offerings and secondary markets. In purchasing participations, the Fund
generally will have no right to enforce compliance by the Borrower with the terms of the loan agreement against the Borrower,
and the Fund may not directly benefit from the collateral supporting the debt obligation in which it has purchased the participation.
As a result, the Fund will be exposed to the credit risk of both the Borrower and the institution selling the participation. Further,
in purchasing participations in lending syndicates, the Fund will not be able to conduct the due diligence on the Borrower or
the quality of the Senior Loan with respect to which it is buying a participation that the Fund would otherwise conduct if it
were investing directly in the Senior Loan, which may result in the Fund being exposed to greater credit or fraud risk with respect
to the Borrower or the Senior Loan than the Fund expected when initially purchasing the participation.
The
Fund may obtain exposure to Senior Loans through the use of derivative instruments, which have become increasingly available.
Although the Fund does not have an intention to do so, the Fund may utilize these instruments and similar instruments that may
be available in the future. Derivative transactions involve the risk of loss due to unanticipated adverse changes in securities
prices, interest rates, the inability to close out a position, imperfect correlation between a position and the desired hedge,
tax constraints on closing out positions and portfolio management constraints on securities subject to such transactions. The
potential loss on derivative instruments may be substantial relative to the initial investment therein. The Fund may also be subject
to the risk that the counterparty in a derivative transaction will default on its obligations.
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Credit Funds | Summary
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Subordinated
Loans Risk
The
Fund may invest up to 20% of its Managed Assets in Subordinated Loans. Subordinated Loans generally are subject to similar risks
as those associated with investments in Senior Loans except that such loans are subordinated in payment and/or lower in lien priority
to first lien holders. In the event of default on a Subordinated Loan, the first priority lien holder has first claim to the underlying
collateral of the loan. Subordinated Loans are subject to the additional risk that the cash flow of the Borrower and property
securing the loan or debt, if any, may be insufficient to meet scheduled payments after giving effect to the senior unsecured
or senior secured obligations of the Borrower. This risk is generally higher for subordinated unsecured loans or debt, which are
not backed by a security interest in any specific collateral. Subordinated Loans generally have greater price volatility than
Senior Loans and may be less liquid.
Structured
Products Risk
The
Fund may invest up to 20% of its Managed Assets in structured products, including, without limitation, CLOs, structured notes,
credit linked notes and derivatives, including credit derivatives. Holders of structured products bear risks of the underlying
investments, index or reference obligation and are subject to counterparty risk. The Fund may have the right to receive payments
only from the structured product, and generally does not have direct rights against the issuer or the entity that sold the assets
to be securitized. While certain structured products enable the investor to acquire interests in a pool of securities without
the brokerage and other expenses associated with directly holding the same securities, investors in structured products generally
pay their share of the structured product’s administrative and other expenses. Although it is difficult to predict whether
the prices of indices and securities underlying structured products will rise or fall, these prices (and, therefore, the prices
of structured products) will be influenced by the same types of political and economic events that affect issuers of securities
and capital markets generally. If the issuer of a structured product uses shorter term financing to purchase longer term securities,
the issuer may be forced to sell its securities at below market prices if it experiences difficulty in obtaining short-term financing,
which may adversely affect the value of the structured products owned by the Fund.
Certain
structured products may be thinly traded or have a limited trading market. CLOs are typically privately offered and sold. As a
result, investments in CLOs may be characterized by the Fund as illiquid securities. In addition to the general risks associated
with debt securities discussed herein, CLOs carry additional risks, including, but not limited to: (i) the possibility that distributions
from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline
in value or default; (iii) the possibility that the investments in CLOs are subordinate to other classes or tranches thereof;
and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes
with the issuer or unexpected investment results.
Investments
in structured notes involve risks, including credit risk and market risk. Where the Fund’s investments in structured notes
are based upon the movement of one or more factors, including currency exchange rates, interest rates, referenced bonds and stock
indices, depending on the factor used and the use of multipliers or deflators, changes in interest rates and movement of the factor
may cause significant price fluctuations. Additionally, changes in the reference instrument or security may cause the interest
rate on the structured note to be reduced to zero, and any further changes in the reference instrument may then reduce the principal
amount payable on maturity. Structured notes may be less liquid than other types of securities and more volatile than the reference
instrument or security underlying the note.
CLO
Risk
In
addition to the general risks associated with debt securities and structured products discussed herein, CLOs carry additional
risks, including, but not limited to (i) the possibility that distributions from collateral securities will not be adequate to
make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the possibility that
the investments in CLOs are subordinate to other classes or tranches thereof, (iv) the potential of spread compression in the
underlying loans of the CLO, which could reduce credit enhancement in the CLOs and (v) the complex structure of the security may
not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.
CLO
junior debt securities that the Fund may acquire are subordinated to more senior tranches of CLO debt. CLO junior debt securities
are subject to increased risks of default relative to the holders of superior priority interests in the same securities. In addition,
at the time of issuance, CLO equity securities are under-collateralized in that the liabilities of a CLO at inception exceed its
total assets. Though not exclusively, the Fund will typically be in a first loss or subordinated position with respect to realized
losses on the assets of the CLOs in which it is invested. The Fund may recognize phantom taxable income from its investments in
the subordinated tranches of CLOs.
Between
the closing date and the effective date of a CLO, the CLO collateral manager will generally expect to purchase additional collateral
obligations for the CLO. During this period, the price and availability of these collateral obligations may be adversely affected
by a number of market factors, including price volatility and availability of investments suitable for the CLO, which could hamper
the ability of the collateral manager to acquire a portfolio of collateral obligations that will satisfy specified concentration
limitations and allow the CLO to reach the initial par amount of collateral prior to the effective date. An inability or delay
in reaching the target initial par amount of collateral may adversely affect the timing and amount of interest
or principal payments received by the holders of the CLO debt securities and distributions of the CLO on equity securities and
could result in early redemptions which may cause CLO debt and equity investors to receive less than the face value of their investment.
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December
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The
failure by a CLO in which the Fund invests to satisfy financial covenants, including with respect to adequate collateralization
and/or interest coverage tests, could lead to a reduction in the CLO’s payments to the Fund. In the event that a CLO fails
certain tests, holders of CLO senior debt may be entitled to additional payments that would, in turn, reduce the payments the
Fund would otherwise be entitled to receive. Separately, the Fund may incur expenses to the extent necessary to seek recovery
upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting CLO or
any other investment the Fund may make. If any of these occur, it could adversely affect the Fund’s operating results and
cash flows.
The
Fund’s CLO investments are exposed to leveraged credit risk. If certain minimum collateral value ratios and/or interest
coverage ratios are not met by a CLO, primarily due to senior secured loan defaults, then cash flow that otherwise would have
been available to pay distributions to the Fund on its CLO investments may instead be used to redeem any senior notes or to purchase
additional senior secured loans, until the ratios again exceed the minimum required levels or any senior notes are repaid in full.
Liquidity
Risk
The
Fund may invest up to 50% of its Managed Assets in securities that are considered illiquid. “Illiquid securities”
are securities which cannot be sold within seven days in the ordinary course of business at approximately the value used by the
Fund in determining its net asset value. The Fund may not be able to readily dispose of such securities at prices that approximate
those at which the Fund could sell such securities if they were more widely- traded and, as a result of such illiquidity, the
Fund may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations.
Limited liquidity can also affect the market price of securities, thereby adversely affecting the Fund’s net asset value
and ability to make dividend distributions.
Some
Senior Loans are not readily marketable and may be subject to restrictions on resale. Senior Loans are not listed on any national
securities exchange and no active trading market may exist for the Senior Loans in which the Fund will invest. Where a secondary
market exists, the market for some Senior Loans may be subject to irregular trading activity, wide bid/ask spreads and extended
trade settlement periods. The Fund has no limitation on the amount of its assets which may be invested in securities that are
not readily marketable or are subject to restrictions on resale.
Leverage
Risk
The
Fund currently anticipates utilizing leverage in an aggregate amount of up to 331/3% of its Managed Assets at the time the leverage
is incurred in order to buy additional securities. The Fund currently anticipates that it will issue preferred shares and/or notes
and it may also borrow funds from banks and other financial institutions. The use of leverage to purchase additional securities
creates an opportunity for increased common share dividends, but also creates risks for the holders of common shares. Leverage
is a speculative technique that exposes the Fund to greater risk and increased costs than if it were not implemented. Increases
and decreases in the value of the Fund’s portfolio will be magnified when the Fund uses leverage. As a result, leverage
may cause greater changes in the Fund’s net asset value which will be borne entirely by the Fund’s common shareholders.
The Fund will also have to pay dividends on its preferred shares or interest on its notes or borrowings, if any, which will increase
expenses and may reduce the Fund’s return. These dividend payments or interest expenses may be greater than the Fund’s
return on the underlying investments. The Fund’s leveraging strategy may not be successful.
The
Fund intends to issue preferred shares and/or notes as a form of leverage. Any such leverage of the Fund would be senior to the
Fund’s common shares, such that holders of preferred shares and/or notes would have priority over the common shareholders
in the distribution of the Fund’s assets, including dividends, distributions of principal proceeds after the reinvestment
period and liquidating distributions. If preferred shares are issued and outstanding, holders of the preferred shares would elect
two trustees of the Fund, and would vote separately as a class on certain matters which may at times give holders of preferred
shares disproportionate influence over the Fund’s affairs. If the preferred shares were limited in their term, redemptions
of such preferred shares would require the Fund to liquidate its investments and would reduce the Fund’s use of leverage,
which could negatively impact common shareholders.
In
addition, the Fund will pay (and the holders of common shares will bear) all costs and expenses relating to the issuance and ongoing
maintenance of any preferred shares and/or notes issued by the Fund, including higher advisory fees. Accordingly, the Fund cannot
assure you that the issuance of preferred shares and/or notes will result in a higher yield or return to the holders of the common
shares.
The
Fund anticipates that any money borrowed from a bank or other financial institution for investment purposes will accrue interest
based on shorter-term interest rates that would be periodically reset. So long as the Fund’s portfolio provides a higher
rate of return, net of expenses, than the interest rate on borrowed money, as reset periodically, the leverage may cause the holders
of common shares to receive a higher current rate of return than if the Fund were not leveraged. If, however, long-term and/or
short-term rates rise, the interest rate on borrowed money could exceed the rate of return on securities held by the Fund, reducing
return to the holders of common shares. Recent developments in the credit markets may adversely
affect the ability of the Fund to borrow for investment purposes and may increase the costs of such borrowings, which would reduce
returns to the holders of common shares.
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There
is no assurance that a leveraging strategy will be successful. Leverage involves risks and special considerations for common shareholders,
including:
| ● | the
likelihood of greater volatility of net asset value, market price and dividend rate of the common shares than a comparable portfolio
without leverage; |
| ● | the
risk that fluctuations in interest rates on borrowings and short-term debt or in dividend payments on, principal proceeds distributed
to, or redemption of any preferred shares and/or notes that the Fund has issued will reduce the return to the common shareholders; |
| ● | the
effect of leverage in a declining market, which is likely to cause a greater decline in the net asset value of the common shares
than if the Fund were not leveraged, which may result in a greater decline in the market price of the common shares; |
| ● | when
the Fund uses financial leverage, the investment advisory and administrative fees payable to the Adviser and ALPS will be higher
than if the Fund did not use leverage, and may provide a financial incentive to the Adviser to increase the Fund’s use of
leverage and create an inherent conflict of interest; and |
| ● | leverage
may increase expenses, which may reduce total return. |
If
the Fund issues preferred shares and/or notes or borrows money the Fund will be required to maintain asset coverage in conformity
with the requirements of the 1940 Act.
The
Fund may be subject to certain restrictions on investments imposed by guidelines of one or more rating agencies, which may issue
ratings for the preferred shares and/or notes or short-term debt securities issued by the Fund. These guidelines may impose asset
coverage or portfolio composition requirements that are more stringent than those imposed by the 1940 Act. Certain types of borrowings
by the Fund may result in the Fund being subject to covenants in credit agreements relating to asset coverage and portfolio composition
requirements. These covenants and restrictions may negatively affect the Fund’s ability to achieve its investment objectives.
Foreign
Currency Risk
Because
the Fund may invest in securities denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency
exchange rates may affect the value of securities in the Fund and the unrealized appreciation or depreciation of investments.
Currencies of certain countries may be volatile and therefore may affect the value of securities denominated in such currencies,
which means that the Fund’s net asset value could decline as a result of changes in the exchange rates between foreign currencies
and the U.S. dollar. The Adviser may, but is not required to, elect for the Fund to seek to protect itself from changes in currency
exchange rates through hedging transactions depending on market conditions. The Fund may incur costs in connection with the conversions
between various currencies. In addition, certain countries may impose foreign currency exchange controls or other restrictions
on the repatriation, transferability or convertibility of currency.
BGX
Derivatives
Risk
Under
normal market conditions, the use of derivatives by the Fund does not exceed 30% of the Fund’s Managed Assets. The Fund’s
derivative investments have risks, including: the imperfect correlation between the value of such instruments and the underlying
assets of the Fund, which creates the possibility that the loss on such instruments may be greater than the gain in the value
of the underlying assets in the Fund’s portfolio; the loss of principal; the possible default of the other party to the
transaction; and illiquidity of the derivative investments. If a counterparty becomes bankrupt or otherwise fails to perform its
obligations under a derivative contract due to financial difficulties, the Fund may experience significant delays in obtaining
any recovery under the derivative contract in a bankruptcy or other reorganization proceeding. In addition, in the event of the
insolvency of a counterparty to a derivative transaction, the derivative contract would typically be terminated at its fair market
value. If the Fund is owed this fair market value in the termination of the derivative contract and its claim is unsecured, the
Fund will be treated as a general creditor of such counterparty, and will not have any claim with respect to the underlying security.
Certain of the derivative investments in which the Fund may invest may, in certain circumstances, give rise to a form of financial
leverage, which may magnify the risk of owning such instruments. Furthermore, the ability to successfully use derivative investments
depends on the ability of the Adviser to predict pertinent market movements, which cannot be assured. Thus, the use of derivative
investments to generate income, for hedging, for currency or interest rate management or other purposes may result in losses greater
than if they had not been used, may require the Fund to sell or purchase portfolio securities at inopportune times or for prices
below or above the current market values, may limit the amount of appreciation the Fund can realize on an investment or may cause
the Fund to hold
a security that it might otherwise want to sell. In addition, there may be situations in which the Adviser elects not to use derivative
investments that result in losses greater than if they had been used. Amounts paid by the Fund as premiums and cash or other assets
held in margin accounts with respect to the Fund’s derivative investments would not be available to the Fund for other investment
purposes, which may result in lost opportunities for gain. Changes to the derivatives markets as a result of the Dodd-Frank Act
and other government regulation may also have an adverse effect on the Fund’s ability to make use of derivative transactions.
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Report | December 31, 2021 |
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Credit Funds | Summary
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In
October 2020, the SEC adopted a new rule that changes the regulatory framework around the use of derivatives by registered investment
companies, such as the Fund. The new rule, which will go into effect on February 21, 2021 with a compliance date 18 months thereafter,
will require registered investment companies to adopt a written policies and procedures reasonably designed to manage the Fund’s
derivatives risks. In the event that the Fund’s derivatives exposure exceeds 10% of its net assets, the Fund will be required
to adopt a written derivatives risk management program and comply with a value-at-risk based limit on leverage risk. The Board
of Trustees will have an oversight role in ensuring these new requirements are being taken into account and, if required, will
appoint a derivatives risk manager to handle the day-to-day responsibilities of the derivatives risk program.
Secured
Loans Risk
Under
normal market conditions, the Fund invests at least 70% of its Managed Assets in Secured Loans. Secured Loans hold senior positions
in the capital structure of a business entity, are secured with specific collateral, and have a claim on the assets and/or stock
of the Borrower that is senior to that held by unsecured creditors, subordinated debt holders, and stockholders of the Borrower.
The Secured Loans the Fund invests in are usually rated below investment grade or may also be unrated. As a result, the risks
associated with Secured Loans are similar to the risks of below investment grade instruments, although Secured Loans are senior
and secured in contrast to other below investment grade instruments, which are often subordinated or unsecured. Nevertheless,
if a Borrower under a Secured Loan defaults, becomes insolvent or goes into bankruptcy, the Fund may recover only a fraction of
what is owed on the Secured Loan or nothing at all. Secured Loans are subject to a number of risks described elsewhere in this
Prospectus, including credit risk, liquidity risk, below investment grade, or high yield, instruments risk and management risk.
Although
the Secured Loans in which the Fund invests in are secured by collateral, there can be no assurance that the Fund will have first-lien
priority in such collateral or that such collateral could be readily liquidated or that the liquidation of such collateral would
satisfy the Borrower’s obligation in the event of non-payment of scheduled interest or principal. In the event of the bankruptcy
or insolvency of a Borrower, the Fund could experience delays or limitations with respect to its ability to realize the benefits
of the collateral securing a Secured Loan. In the event of a decline in the value of the already pledged collateral, if the terms
of a Secured Loan do not require the Borrower to pledge additional collateral, the Fund will be exposed to the risk that the value
of the collateral will not at all times equal or exceed the amount of the Borrower’s obligations under the Secured Loans.
To the extent that a Secured Loan is collateralized by stock in the Borrower or its subsidiaries, such stock may lose some or
all of its value in the event of the bankruptcy or insolvency of the Borrower. Those Secured Loans that are under-collateralized
involve a greater risk of loss.
In
general, the secondary trading market for Secured Loans is not fully-developed. No active trading market may exist for certain
Secured Loans, which may make it difficult to value them. Illiquidity and adverse market conditions may mean that the Fund may
not be able to sell certain Secured Loans quickly or at a fair price. To the extent that a secondary market does exist for certain
Secured Loans, the market for them may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement
periods.
Some
Secured Loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate
the Secured Loans to presently existing or future indebtedness of the Borrower or take other action detrimental to lenders, including
the Fund. Such court action could under certain circumstances include invalidation of Secured Loans.
If
legislation or state or federal regulations impose additional requirements or restrictions on the ability of financial institutions
to make loans, the availability of Secured Loans for investment by the Fund may be adversely affected. In addition, such requirements
or restrictions could reduce or eliminate sources of financing for certain Borrowers. This would increase the risk of default.
If
legislation or federal or state regulations require financial institutions to increase their capital requirements this may cause
financial institutions to dispose of Secured Loans that are considered highly levered transactions. Such sales could result in
prices that, in the opinion of the Adviser, do not represent fair value. If the Fund attempts to sell a Secured Loan at a time
when a financial institution is engaging in such a sale, the price the Fund could get for the Secured Loan may be adversely affected.
The
Fund acquires Secured Loans through assignments or participations. The Fund typically acquires Secured Loans through assignment
and may elevate a participation interest into an assignment as soon as practicably possible. The purchaser of an assignment typically
succeeds to all the rights and obligations of the assigning institution and becomes a lender under the credit agreement with respect
to the debt obligation; however, the purchaser’s rights can be more restricted than those of the assigning institution,
and the Fund may not be able to unilaterally enforce all rights and remedies under the loan and with regard to any associated
collateral. A participation typically results in a contractual relationship only with the institution
participating out the interest, not with the Borrower. Sellers of participations typically include banks, broker-dealers, other
financial institutions and lending institutions. The Adviser has adopted best execution procedures and guidelines to mitigate
credit and counterparty risk in the atypical situation when the Fund must acquire a Secured Loan through a participation. The
Adviser has established a counterparty and liquidity committee that regularly reviews each broker-dealer counterparty for, among
other things, its quality and the quality of its execution. The established procedures and guidelines require trades to be placed
for execution only with broker-dealer counterparties approved by the counterparty and liquidity committee of the Adviser. The
factors considered by the committee when selecting and approving brokers and dealers include, but are not limited to: (i) quality,
accuracy, and timeliness of execution, (ii) review of the reputation, financial strength and stability of the financial institution,
(iii) willingness and ability of the counterparty to commit capital, (iv) ongoing reliability and (v) access to underwritten offerings
and secondary markets. In purchasing participations, the Fund generally has no right to enforce compliance by the Borrower with
the terms of the loan agreement against the Borrower, and the Fund may not directly benefit from the collateral, if any, supporting
the debt obligation in which it has purchased the participation. As a result, the Fund will be exposed to the credit risk of both
the Borrower and the institution selling the participation. Further, in purchasing participations in lending syndicates, the Fund
may not be able to conduct the due diligence on the Borrower or the quality of the Secured Loan with respect to which it is buying
a participation that the Fund would otherwise conduct if it were investing directly in the Secured Loan, which may result in the
Fund being exposed to greater credit or fraud risk with respect to the Borrower or the Secured Loan than the Fund expected when
initially purchasing the participation.
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| Blackstone
Credit Funds | Summary
of Updated Information
Regarding the Funds |
December
31, 2021 (Unaudited)
Fixed-Income
Instruments Risk
The
Fund may invest up to 30% of its Managed Assets in fixed-income instruments, such as U.S. government debt securities and investment
grade and below investment grade, subordinated and unsubordinated corporate debt securities. Fixed-income instruments are subject
to many of the same risks that affect Secured Loans and unsecured loans, however they are often unsecured and typically lower
in the issuer’s capital structure than loans, and thus may be exposed to greater risk of default and lower recoveries in
the event of a default. This risk can be further heightened in the case of below investment grade instruments. Additionally, most
fixed-income instruments are fixed-rate and thus are generally more susceptible than floating rate loans to price volatility related
to changes in prevailing interest rates.
Unsecured
Loans Risk
The
Fund may invest in unsecured loans. Unsecured loans generally are subject to similar risks as those associated with investments
in Secured Loans except that such loans are not secured by collateral. In the event of default on an unsecured loan, the first
priority lien holder has first claim to the underlying collateral of the loan. Unsecured loans are subject to the additional risk
that the cash flow of the Borrower may be insufficient to meet scheduled payments after giving effect to the secured obligations
of the Borrower. Unsecured loans generally have greater price volatility than Secured Loans and may be less liquid.
Short
Selling Risk
The
Fund may engage in short sales for investment and risk management purposes, including when the Adviser believes an investment
will under- perform due to a greater sensitivity to earnings growth of the issuer, default risk or interest rates. The Fund may
also engage in short sales for financing purposes. In times of unusual or adverse market, economic, regulatory or political conditions,
the Fund may not be able, fully or partially, to implement its short selling strategy. Periods of unusual or adverse market, economic,
regulatory or political conditions may exist for as long as six months and, in some cases, much longer.
Short
sales are transactions in which the Fund sells a security or other instrument that it does not own but can borrow in the market.
Short selling allows the Fund to profit from a decline in market price to the extent such decline exceeds the transaction costs
and the costs of borrowing the securities and to obtain a low cost means of financing long investments that the Adviser believes
are attractive. If a security sold short increases in price, the Fund may have to cover its short position at a higher price than
the short sale price, resulting in a loss. The Fund is permitted to have substantial short positions and must borrow those securities
to make delivery to the buyer under the short sale transaction. The Fund may not be able to borrow a security that it needs to
deliver or it may not be able to close out a short position at an acceptable price and may have to sell related long positions
earlier than it had expected. Thus, the Fund may not be able to successfully implement its short sale strategy due to limited
availability of desired securities or for other reasons. Also, there is the risk that the counterparty to a short sale may fail
to honor its contractual terms, causing a loss to the Fund.
Generally,
the Fund will have to pay a fee or premium if it borrows securities and will be obligated to repay the lender of the security
any dividends or interest that accrues on the security during the term of the loan. The amount of any gain from a short sale will
be decreased, and the amount of any loss increased, by the amount of such fee, premium, dividends, interest or expense the Fund
pays in connection with the short sale.
Until
the Fund replaces a borrowed security, it may be required to maintain a segregated account of cash or liquid assets with a broker
or custodian to cover the Fund’s short position. Generally, securities held in a segregated account cannot be sold unless
they are replaced with other liquid assets. The Fund’s ability to access the pledged collateral may also be impaired in
the event the broker becomes bankrupt insolvent or otherwise fails to comply with the terms of the contract. In such instances
the Fund may not be able to substitute or sell the pledged collateral and may experience significant
delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery
or may obtain no recovery in these circumstances. Additionally, the Fund must maintain sufficient liquid assets (less any additional
collateral pledged to the broker), marked-to-market daily, to cover the borrowed securities obligations. This may limit the Fund’s
investment flexibility, as well as its ability to meet other current obligations.
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Credit Funds | Summary
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Because
losses on short sales arise from increases in the value of the security sold short, such losses are theoretically unlimited. By
contrast, a loss on a long position arises from decreases in the value of the security and is limited by the fact that a security’s
value cannot decrease below zero. The Adviser’s use of short sales in combination with long positions in the Fund’s
portfolio in an attempt to improve performance or reduce overall portfolio risk may not be successful and may result in greater
losses or lower positive returns than if the Fund held only long positions. It is possible that the Fund’s long securities
positions will decline in value at the same time that the value of its short securities positions increase, thereby increasing
potential losses to the Fund. In addition, the Fund’s short selling strategies will limit its ability to fully benefit from
increases in the fixed- income markets.
By
investing the proceeds received from selling securities short, the Fund could be deemed to be employing a form of leverage, which
creates special risks. The use of leverage may increase the Fund’s exposure to long securities positions and make any change
in the Fund’s NAV greater than it would be without the use of leverage. This could result in increased volatility of returns.
There is no guarantee that any leveraging strategy the Fund employs will be successful during any period in which it is employed.
Finally, regulations imposed by the SEC or other regulatory bodies relating to short selling may restrict the Fund’s ability
to engage in short selling.
Structured
Products Risk
The
Fund may invest up to 10% of its Managed Assets in structured products, consisting of CLOs and credit-linked notes. Holders of
structured products bear risks of the underlying investments, index or reference obligation and are subject to counterparty risk.
The
Fund may have the right to receive payments only from the structured product, and generally does not have direct rights against
the issuer or the entity that sold the assets to be securitized. While certain structured products enable the investor to acquire
interests in a pool of securities without the brokerage and other expenses associated with directly holding the same securities,
investors in structured products generally pay their share of the structured product’s administrative and other expenses.
Although it is difficult to predict whether the prices of indices and securities underlying structured products will rise or fall,
these prices (and, therefore, the prices of structured products) will be influenced by the same types of political and economic
events that affect issuers of securities and capital markets generally. If the issuer of a structured product uses shorter term
financing to purchase longer term securities, the issuer may be forced to sell its securities at below market prices if it experiences
difficulty in obtaining short-term financing, which may adversely affect the value of the structured products owned by the Fund.
Certain
structured products may be thinly traded or have a limited trading market. CLOs and credit-linked notes are typically privately
offered and sold. As a result, investments in CLOs and credit-linked notes may be characterized by the Fund as illiquid securities.
In addition to the general risks associated with debt securities discussed herein, CLOs carry additional risks, including, but
not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other
payments; (ii) the quality of the collateral may decline in value or default; (iii) the possibility that the investments in CLOs
are subordinate to other classes or tranches thereof; and (iv) the complex structure of the security may not be fully understood
at the time of investment and may produce disputes with the issuer or unexpected investment results.
Liquidity
Risk
The
Fund may invest up to 25% of its Managed Assets in securities that, at the time of investment, are illiquid (determined using
the SEC’s standard applicable to registered investment companies, i.e., securities that the Fund reasonably expects cannot
be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly
changing the market value of the securities). The Fund may also invest in restricted securities. Investments in restricted securities
could have the effect of increasing the amount of the Fund’s assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase these securities.
Illiquid
and restricted securities may be difficult to dispose of at a fair price at the times when the Fund believes it is desirable to
do so. The market price of illiquid and restricted securities generally is more volatile than that of more liquid securities,
which may adversely affect the price that the Fund pays for or recovers upon the sale of such securities. Illiquid and restricted
securities are also more difficult to value, especially in challenging markets. The Adviser’s judgment may play a greater
role in the valuation process. Investment of the Fund’s assets in illiquid and restricted securities may restrict the Fund’s
ability to take advantage of market opportunities. In order to dispose of an unregistered security, the Fund, where it has contractual
rights to do so, may have to cause such security to be registered. A considerable period may elapse between the time the decision
is made to sell the security and the time the security is registered, thereby enabling the Fund to sell it. Contractual restrictions
on the resale of securities vary in length and scope and are generally the result of a negotiation between the issuer and acquiror
of the securities. In either case, the Fund would bear market risks during that period.
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Credit Funds | Summary
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31, 2021 (Unaudited)
Some
loans and fixed-income instruments are not readily marketable and may be subject to restrictions on resale. Loans and fixed-income
instruments may not be listed on any national securities exchange and no active trading market may exist for certain of the loans
and fixed-income instruments in which the Fund will invest. Where a secondary market exists, the market for some loans and fixed-income
instruments may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods.
Leverage
Risk
The
Fund incurs leverage as part of its investment strategy. All costs and expenses related to any form of leverage used by the Fund
are borne entirely by common shareholders. Certain forms of effective leverage used by the Fund, such as leverage incurred in
securities lending, swap contract arrangements, other derivative transactions or short selling, may not be considered senior securities
under the 1940 Act, but will be considered leverage for the Fund’s leverage limits. The Fund’s use of these forms
of effective leverage will not exceed 30% of its net assets. The Fund uses borrowings. Furthermore, the Fund adds leverage to
its portfolio through the issuance of preferred shares. The Fund’s total use of leverage and short sales exposure, either
through traditional leverage programs or through securities lending, total swap contract arrangements, other derivative transactions
or short selling (including the market value of securities the Fund is obligated to repay through short sales even in transactions
that do not result in leverage), will not exceed 40% of the Fund’s Managed Assets (67% of the Fund’s net assets).
With respect to its short positions in securities and certain of its derivative positions, the Fund may maintain an amount of
cash or liquid securities in a segregated account equal to the face value of those positions.
The
Fund may also offset derivative positions against one another or against other assets to manage the effective market exposure
resulting from derivatives in its portfolio. To the extent that the Fund does not segregate liquid assets or otherwise cover its
obligations under such transactions, such transactions will be treated as borrowings for purposes of the requirement under the
1940 Act that the Fund may not enter into any such transactions if the Fund’s borrowings would thereby exceed 33 1/3% of
its Managed Assets. In addition, to the extent that any offsetting positions do not behave in relation to one another as expected,
the Fund may perform as if it were leveraged. The Fund’s use of leverage could create the opportunity for a higher return
for common shareholders but would also result in special risks for common shareholders and can magnify the effect of any losses.
If the income and gains earned on the securities and investments purchased with leverage proceeds are greater than the cost of
the leverage, the return on the common shares will be greater than if leverage had not been used. Conversely, if the income and
gains from the securities and investments purchased with such proceeds do not cover the cost of leverage, the return on the common
shares will be less than if leverage had not been used. There is no assurance that a leveraging strategy will be successful. Leverage
involves risks and special considerations for common shareholders including:
| ● | the
likelihood of greater volatility of NAV and market price of the common shares than a comparable portfolio without leverage; |
| ● | the
risk that fluctuations in interest rates on Borrowings and short-term debt or in the dividend rates on the MPRS that the Fund
may pay will reduce the return to the common shareholders or will result in fluctuations in the dividends paid on the common shares; |
| ● | the
effect of leverage in a declining market, which is likely to cause a greater decline in the NAV of the common shares than if the
Fund were not leveraged, which may result in a greater decline in the market price of the common shares; and |
| ● | when
the Fund uses certain types of leverage, the investment advisory fee payable to the Adviser will be higher than if the Fund did
not use leverage. |
The
Fund may continue to use leverage if the benefits to the Fund’s shareholders of maintaining the leveraged position are believed
to outweigh any current reduced return.
Foreign
Currency Risk
Because
the Fund may invest up to 20% of its Managed Assets in securities or other instruments denominated or quoted in currencies other
than the U.S. dollar, changes in foreign currency exchange rates may affect the value of instruments held by the Fund and the
unrealized appreciation or depreciation of investments. Currencies of certain countries may be volatile and therefore may affect
the value of instruments denominated in such currencies, which means that the Fund’s NAV could decline as a result of changes
in the exchange rates between foreign currencies and the U.S. dollar. The Adviser may, but is not required to, seek to protect
the Fund from changes in currency exchange rates through hedging transactions depending on market conditions. The Fund may incur
costs in connection with the conversions between various currencies. In addition, certain countries may impose foreign currency
exchange controls or other restrictions on the repatriation, transferability or convertibility of currency.
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Report | December 31, 2021 |
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Summary
of Updated Information |
| Blackstone Credit Funds |
Regarding
the Funds |
December 31, 2021 (Unaudited)
BGB
Derivatives Risk
Under normal market conditions, the use
of derivatives by the Fund will not exceed 30% of the Fund’s Managed Assets. The Fund may enter into derivatives for investment,
hedging or leverage purposes. The Fund’s derivative investments have risks, including:
Credit-Linked Notes Risk
The Fund may invest up to 10% of its Managed
Assets in credit-linked notes. Holders of credit-linked notes bear risks of the underlying investments, index or reference obligation
and are subject to counterparty risk.
Credit-linked notes are structured products
used to transfer credit risk. The performance of the notes is linked to the performance of an underlying reference obligation or
reference portfolio (“reference entities”). The notes are usually issued by a special purpose vehicle (“SPV”)
that sells credit protection through a credit default swap transaction in return for a premium and an obligation to pay the transaction
sponsor should a reference entity experience a certain credit event or events, such as bankruptcy. The SPV invests the proceeds
from the notes to cover its contingent payment obligation. Revenue from the investments and the money received as premium are used
to pay interest to note holders. The main risk of credit-linked notes is the risk of the reference entity experiencing a credit
event that triggers the contingent payment obligation. Should such an event occur, the SPV would have to pay the transaction sponsor
and payments to the note holders would be subordinated.
The Fund may have the right to receive
payments only from the SPV and generally does not have direct rights against the issuer or the entity that sold the assets to be
securitized. While certain credit-linked notes enable the investor to acquire interests in a pool of securities without the brokerage
and other expenses associated with directly holding the same securities, investors in credit-linked notes generally pay their share
of the SPV’s administrative and other expenses. Although it is difficult to predict whether the prices of indices and securities
underlying credit-linked notes will rise or fall, these prices (and, therefore, the prices of credit-linked notes) will be influenced
by the same types of political and economic events that affect issuers of securities and capital markets generally. If the SPV
of a credit-linked note uses shorter term financing to purchase longer term securities, the SPV may be forced to sell its securities
at below market prices if it experiences difficulty in obtaining short-term financing, which may adversely affect the value of
the credit-linked notes owned by the Fund.
Certain credit-linked notes may be thinly
traded or have a limited trading market. Credit-linked notes are typically privately offered and sold. As a result, investments
in credit-linked notes may be characterized by the Fund as illiquid securities.
Counterparty Risk
If a counterparty becomes bankrupt or otherwise
fails to perform its obligations under a derivative contract due to financial difficulties, the Fund may experience significant
delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding. In addition,
in the event of the insolvency of a counterparty to a derivative transaction, the derivative contract would typically be terminated
at its fair market value. If the Fund is owed this fair market value in the termination of the derivative contract and its claim
is unsecured, the Fund will be treated as a general creditor of such counterparty, and will not have any claim with respect to
the underlying security.
Leverage Risk
The derivative investments in which the
Fund may invest will give rise to forms of financial leverage, which may magnify the risk of owning such instruments.
Illiquidity Risk
Certain derivative instruments may be difficult
or impossible to sell at the time that the Fund would like or at the price that the Fund believes the derivative is currently worth.
Correlation Risk
Imperfect correlation between the value
of derivative instruments and the underlying assets of the Fund creates the possibility that the loss on such instruments may be
greater than the gain in the value of the underlying assets in the Fund’s portfolio.
Derivative instruments are also subject
to the risk of the loss of principal. Furthermore, the ability to successfully use derivative investments depends on the ability
of the Adviser to predict pertinent market movements, which cannot be assured. Thus, the use of derivative investments may result
in losses greater than if they had not been used, may require the Fund to sell or purchase portfolio securities at inopportune
times or for prices below or above the current market values, may limit the amount of appreciation the Fund can realize on an investment
or may cause the Fund to hold a security that it might otherwise want to sell. In addition, there may be situations in which the
Adviser elects not to use derivative investments that result in losses greater than if they had been used. Amounts paid by the
Fund as premiums and cash or other assets held in margin accounts with respect to the Fund’s derivative investments would
not be available to the Fund for other investment purposes, which may result in lost opportunities for gain.
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Implementation of the provisions of the
Dodd-Frank Act will likely impact the use of derivatives by entities, which may include the Fund, and is intended to improve the
existing regulatory framework by closing the regulatory gaps and eliminating the speculative trading practices that contributed
to the 2008 financial market crisis. The legislation is designed to impose stringent regulation on the over-the-counter derivatives
market in an attempt to increase transparency and accountability by, among other things, requiring many derivative transactions
to be cleared and traded on an exchange, expanding entity registration requirements, imposing business conduct requirements on
dealers and requiring banks to move some derivatives trading units to a non-guaranteed affiliate separate from the deposit-taking
bank or divest them altogether. While many provisions of the Dodd-Frank Act must be implemented through future rulemaking, and
any regulatory or legislative activity may not necessarily have a direct, immediate effect upon the Fund, it is possible that,
upon the effectiveness of these rules, they could potentially limit or completely restrict the ability of the Fund to use these
instruments as a part of its investment strategy, increase the costs of using these instruments or make them less effective. Limits
or restrictions applicable to the counterparties with which the Fund engages in derivative transactions could also prevent the
Fund from using these instruments or affect the pricing or other factors relating to these instruments, or may change availability
of certain investments.
In October 2020, the SEC adopted a new
rule that changes the regulatory framework around the use of derivatives by registered investment companies, such as the Fund.
The new rule, which will go into effect on February 21, 2021 with a compliance date 18 months thereafter, will require registered
investment companies to adopt a written policies and procedures reasonably designed to manage the Fund’s derivatives risks.
In the event that the Fund’s derivatives exposure exceeds 10% of its net assets, the Fund will be required to adopt a written
derivatives risk management program and comply with a value-at-risk based limit on leverage risk. The Board of Trustees will have
an oversight role in ensuring these new requirements are being taken into account and, if required, will appoint a derivatives
risk manager to handle the day-to-day responsibilities of the derivatives risk program.
Senior Secured Loans Risk
As part of its investments in corporate
fixed income instruments, the Fund may invest in fixed, variable and floating rate Senior Secured Loans arranged through private
negotiations between a Borrower and one or more financial institutions. In certain market conditions, the Fund may predominantly
invest in Senior Secured Loans. Senior Secured Loans hold senior positions in the capital structure of a business entity, are secured
with specific collateral and have a claim on the assets and/or stock of the Borrower that is senior to that held by unsecured creditors,
subordinated debt holders and stockholders of the Borrower. The Senior Secured Loans the Fund will invest in are usually rated
below investment grade or may also be unrated. Although Senior Secured Loans are senior and secured in contrast to other below
investment grade instruments, which are often subordinated or unsecured, the risks associated with Senior Secured Loans are similar
to the risks of below investment grade instruments. Additionally, if a Borrower under a Senior Secured Loan defaults, becomes insolvent
or goes into bankruptcy, the Fund may recover only a fraction of what is owed on the Senior Secured Loan or nothing at all. Senior
Secured Loans are subject to a number of risks described elsewhere in this prospectus, including credit risk, liquidity risk and
below investment grade instruments risk.
Although the Senior Secured Loans in which
the Fund will invest will be secured by collateral, there can be no assurance that such collateral can be readily liquidated or
that the liquidation of such collateral would satisfy the Borrower’s obligation in the event of non-payment of scheduled
interest or principal.
In the event of the bankruptcy or insolvency
of a Borrower, the Fund could experience delays or limitations with respect to its ability to realize the benefits of the collateral
securing a Senior Secured Loan. In the event of a decline in the value of the already pledged collateral, if the terms of a Senior
Secured Loan do not require the Borrower to pledge additional collateral, the Fund will be exposed to the risk that the value of
the collateral will not at all times equal or exceed the amount of the Borrower’s obligations under the Senior Secured Loan.
To the extent that a Senior Secured Loan is collateralized by stock in the Borrower or its subsidiaries, such stock may lose some
or all of its value in the event of the bankruptcy or insolvency of the Borrower. Senior Secured Loans that are under-collateralized
involve a greater risk of loss.
In general, the secondary trading market
for Senior Secured Loans is not fully-developed. No active trading market may exist for certain Senior Secured Loans, which may
make it difficult to value them. Illiquidity and adverse market conditions may mean that the Fund may not be able to sell certain
Senior Secured Loans quickly or at a fair price. To the extent that a secondary market does exist for certain Senior Secured Loans,
the market for them may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods.
Some Senior Secured Loans are subject to
the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate the Senior Secured Loans to presently
existing or future indebtedness of the Borrower or take other action detrimental to lenders, including the Fund. Such court action
could under certain circumstances include invalidation of Senior Secured Loans.
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If legislation or state or federal regulations
impose additional requirements or restrictions on the ability of financial institutions to make Senior Secured Loans, the availability
of Senior Secured Loans for investment by the Fund may be adversely affected. In addition, such requirements or restrictions could
reduce or eliminate sources of financing for certain Borrowers. This would increase the risk of default.
If legislation or federal or state regulations
require financial institutions to increase their capital requirements this may cause financial institutions to dispose of Senior
Secured Loans that are considered highly levered transactions. Such sales could result in prices that, in the opinion of the Adviser,
do not represent fair value. If the Fund attempts to sell a Senior Secured Loan at a time when a financial institution is engaging
in such a sale, the price the Fund could get for the Senior Secured Loan may be adversely affected.
The Fund will typically acquire Senior
Secured Loans through assignments. The purchaser of an assignment typically succeeds to all the rights and obligations of the assigning
institution and becomes a lender under the credit agreement with respect to the debt obligation; however, the purchaser’s
rights can be more restricted than those of the assigning institution, and the Fund may not be able to unilaterally enforce all
rights and remedies under the Senior Secured Loan and with regard to any associated collateral.
The Fund may, but will not typically, invest
in a Senior Secured Loan through a participation. A participation typically results in a contractual relationship only with the
institution selling the participation interest, not with the Borrower. Sellers of participations typically include banks, broker-dealers,
other financial institutions and lending institutions. Certain participation agreements also include the option to convert the
participation in the loan to a full assignment of the loan under agreed upon circumstances. The Adviser has adopted best execution
procedures and guidelines to seek to mitigate credit and counterparty risk in the atypical situation when the Fund must acquire
a Senior Secured Loan through a participation. In purchasing participations, the Fund generally will have no direct right to enforce
compliance by the Borrower with the terms of the loan agreement against the Borrower, and the Fund may not directly benefit from
the collateral supporting the debt obligation in which it has purchased the participation. As a result, the Fund will be exposed
to the credit risk of both the Borrower and the institution selling the participation.
Segregation and Coverage Risks
Certain portfolio management techniques,
such as, among other things, entering into swap agreements, using reverse repurchase agreements, futures contracts or other derivative
transactions, may be considered senior securities under the 1940 Act unless steps are taken to segregate the Fund’s assets
or otherwise cover its obligations. To avoid having these instruments considered senior securities, in some cases the Fund may
segregate liquid assets with a value equal (on a daily mark-to-market basis) to its obligations under these types of leveraged
transactions, enter into offsetting transactions or otherwise cover such transactions. In cases where the Fund does not cover such
leveraged transactions, such instruments may be considered senior securities and the Fund’s use of such leveraged transactions
will be required to comply with the restrictions on senior securities under the 1940 Act. The Fund may be unable to use segregated
assets for certain other purposes, which could result in the Fund earning a lower return on its portfolio than it might otherwise
earn if it did not have to segregate those assets in respect of or otherwise cover such portfolio positions. To the extent the
Fund’s assets are segregated or committed as cover, it could limit the Fund’s investment flexibility. Segregating assets
and covering positions will not limit or offset losses on related positions.
Liquidity Risk
The Fund may invest up to 20% of its Managed
Assets in instruments that, at the time of investment, are illiquid (determined using the SEC’s standard applicable to registered
investment companies, i.e., instruments that cannot be disposed of by the Fund within seven days in the ordinary course of business
at approximately the amount at which the Fund has valued the securities). The Fund may also invest, without limit, in restricted
securities, which could have the effect of increasing the amount of the Fund’s assets invested in illiquid securities if
qualified institutional buyers are unwilling to purchase these securities.
Illiquid and restricted securities may
be difficult to dispose of at a fair price at the times when the Fund believes it is desirable to do so. The market price of illiquid
and restricted securities generally is more volatile than that of more liquid securities, which may adversely affect the price
that the Fund pays for or recovers upon the sale of such securities. Illiquid and restricted securities are also more difficult
to value, especially in challenging markets. The Adviser’s judgment may play a greater role in the valuation process. Investment
of the Fund’s assets in illiquid and restricted securities may restrict the Fund’s ability to take advantage of market
opportunities. In order to dispose of an unregistered security, the Fund, where it has contractual rights to do so, may have to
cause such security to be registered. A considerable period may elapse between the time the decision is made to sell the security
and the time the security is registered, thereby enabling the Fund to sell it. Contractual restrictions on the resale of securities
vary in length and scope and are generally the result of a negotiation between the issuer and acquiror of the securities. In either
case, the Fund would bear market risks during that period.
Leverage Risk
The Fund anticipates incurring leverage
as part of its investment strategy. All costs and expenses related to any form of leverage used by the Fund will be borne entirely
by the common shareholders. The Fund’s total leverage, either through traditional leverage or effective leverage, will not
exceed 40% of the Fund’s Managed Assets.
| 108 |
www.blackstone-credit.com |
| |
Summary of Updated Information |
| Blackstone Credit Funds |
Regarding the Funds |
December 31, 2021 (Unaudited)
The Fund’s use of leverage could create the opportunity
for a higher return for common shareholders but would also result in special risks for common shareholders and can magnify the
effect of any losses. If the income and gains earned on the securities and investments purchased with leverage proceeds are greater
than the cost of the leverage, the return on the common shares will be greater than if leverage had not been used. Conversely,
if the income and gains from the securities and investments purchased with such proceeds do not cover the cost of leverage, the
return on the common shares will be less than if leverage had not been used. There is no assurance that a leveraging strategy will
be successful. Leverage involves risks and special considerations compared to a comparable portfolio without leverage including:
| ● | the likelihood of greater volatility of NAV, market price
and distribution rate of the common shares; |
| ● | the risk that fluctuations in interest rates on borrowings
and short-term debt or in the dividend rates on any preferred shares that the Fund may pay will reduce the return to the common
shareholders or will result in fluctuations in the dividends paid on the common shares; |
| ● | the effect of leverage in a declining market, which is
likely to cause a greater decline in the NAV of the common shares than if the Fund were not leveraged, which may result in a greater
decline in the market price of the common shares; |
| ● | when the Fund uses leverage, the investment advisory and
administrative fees payable to the Adviser and ALPS will be higher than if the Fund did not use leverage, and may provide a financial
incentive to the Adviser to increase the Fund’s use of leverage and create an inherent conflict of interest; and |
| ● | leverage may increase expenses, which may reduce total
return. |
The Fund may continue to use leverage if
the benefits to the common shareholders of maintaining the leveraged position are believed to outweigh any current reduced return,
but expects to reduce, modify or cease its leverage if it is believed the costs of the leverage will exceed the return provided
from the investments made with the proceeds of the leverage.
Foreign Currency Risk
Because the Fund may invest in securities
or other instruments denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency exchange rates
may affect the value of instruments held by the Fund and the unrealized appreciation or depreciation of investments. Currencies
of certain countries may be volatile and therefore may affect the value of instruments denominated in such currencies, which means
that NAV could decline as a result of changes in the exchange rates between foreign currencies and the U.S. dollar. The Fund may
incur costs in connection with the conversions between various currencies. In addition, certain countries may impose foreign currency
exchange controls or other restrictions on the repatriation, transferability or convertibility of currency.
Non-Diversification Risk
The Fund is classified as “non-diversified”
under the 1940 Act. As a result, it can invest a greater portion of its assets in obligations of a single issuer than a “diversified”
fund. The Fund may therefore be more susceptible than a diversified fund to being adversely affected by any single corporate, economic,
political or regulatory occurrence. The Fund intends to qualify for the special tax treatment available to “regulated investment
companies” under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and thus intends
to satisfy the diversification requirements of Subchapter M, including its less stringent diversification requirements that apply
to the percentage of the Fund’s total assets that are represented by cash and cash items (including receivables), U.S. government
securities, the securities of other regulated investment companies and certain other securities.
PORTFOLIO MANAGER INFORMATION
Robert Post was added as a portfolio manager
for the Funds on August 3, 2020.
Robert Post is a Principal and Portfolio
Manager of the US leveraged loan and high yield strategies in Blackstone Credit’s LCS unit. Prior to joining Blackstone Credit
in 2017, Mr. Post was a Junior Portfolio Manager at BlackRock, where his responsibilities included various leveraged loan and high
yield mandates. Previously, Mr. Post was an Analyst at BMO Capital Markets, where he was involved with the ongoing monitoring and
structuring of leveraged finance transactions. Mr. Post began his career at MetLife Investments as a credit analyst focused on
corporate bonds. Mr. Post received a B.A. in Economics with a concentration in Financial Markets from Colby College.
FUND ORGANIZATIONAL STRUCTURE
Since the prior disclosure date, there
have been no changes in the Fund’s charter or by-laws that would delay or prevent a change of control of the Fund.
| Annual Report | December 31, 2021 |
109 |
| Blackstone Credit Funds |
Summary of Fund Expenses |
December 31, 2021 (Unaudited)
The purpose of the following table and
example is to help you understand all fees and expenses common shareholders would bear directly or indirectly. The table below
is based on the capital structure of the Funds as of December 31, 2021 (except as noted below).
| |
Senior Floating Rate Term Fund |
Long-Short Credit Income Fund |
Strategic Credit Fund |
| ANNUAL EXPENSES |
|
|
|
| Advisory Fees (1) |
1.33% |
1.20% |
1.57% |
| Dividends on Preferred Shares (2) |
0.00% |
0.37% |
0.25% |
| Other expenses (3) |
0.45% |
0.52% |
0.37% |
| Interest on Borrowed Funds (4) |
0.59% |
0.60% |
0.59% |
| TOTAL ANNUAL EXPENSES |
2.37% |
2.69% |
2.78% |
| (1) | The Adviser receives a monthly management fee at the
annual rate of 0.90% and 1.00% of the average daily managed assets of BSL and BGB, respectively. The Adviser receives 1.20% of
the average daily value of BGX’s net assets. |
| (2) | Assumes the annual dividend rate for the MRPS is 3.61%
as of December 31, 2021 for BGX and BGB and is not increased as a result of any downgrade in the ratings of the MRPS. If the ratings
of the MRPS are downgraded, the Fund’s dividend expense may increase. |
| (3) | “Other Expenses” are estimated amounts for
the current fiscal year based on the Fund’s fees and expenses for the year ended December 31, 2021. “Other Expenses”
include professional fees and other expenses, including, without limitation, SEC filing fees, printing fees, administration fees,
transfer agency fees, custody fees, trustee fees and insurance costs. |
| (4) | Interest Payments on Borrowed Funds is based on estimated
amounts for the current fiscal year. The actual amount of interest expense borne by the Fund will vary over time in accordance
with the level of the Fund’s borrowings and market interest rates. Interest Payments on Borrowed Funds are required to be
treated as an expense of the Fund for accounting purposes. |
Example
As required by the relevant SEC regulations,
the following example illustrates the expenses that you would pay on a $1,000 investment in each Funds’ Common Shares assuming
(i) total annual expenses of 2.37%, 2.69% and 2.78% for BSL, BGX and BGB, respectively of net assets attributable to each Funds’
Common Shares, (ii) a 5% annual return and (iii) reinvestment of all dividends and distributions at NAV:
| |
1 Year |
3 Years |
5 Years |
10 Years |
| Blackstone Senior Floating Rate Term Fund |
$24 |
$74 |
$126 |
$270 |
| Blackstone Long-Short Credit Income Fund |
$27 |
$84 |
$142 |
$302 |
| Blackstone Strategic Credit Fund |
$28 |
$86 |
$147 |
$310 |
The example should not be considered
a representation of future expenses. Actual expenses may be greater or less than those assumed. The example assumes that the
estimated “Other expenses” set forth in the Annual Expenses table are accurate, and that all dividends and distributions
are reinvested at NAV. Moreover, the Funds’ actual rate of return may be greater or less than the hypothetical 5% return
shown in the example.
| 110 |
www.blackstone-credit.com |
| Blackstone Credit Funds |
Senior Securities |
December 31, 2021 (Unaudited)
The table below sets forth the senior securities
outstanding as of the end of each Funds’ fiscal years or period ended 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020
and 2021.
Blackstone Senior Floating Rate Term Fund
| Year | |
Name of Loan | |
Total Amount Outstanding
(in thousands) | | |
Asset Coverage Per $1,000
of Indebtedness | | |
Involuntary Liquidating
Preference Per Unit(1) | | |
Average Market Value
Per Unit(2) | |
| 2012 | |
Preferred Shares | |
$ | 48,000 | | |
$ | 3,036 | | |
$ | 1,000 | | |
| – | |
| 2012 | |
Senior Securities | |
$ | 96,000 | | |
$ | 4,057 | | |
| – | | |
| – | |
| 2013 | |
Preferred Shares | |
$ | 48,000 | | |
$ | 3,035 | | |
$ | 1,000 | | |
| – | |
| 2013 | |
Senior Securities | |
$ | 96,000 | | |
$ | 4,556 | | |
| – | | |
| – | |
| 2014 | |
Revolving Credit Facility | |
$ | 133,000 | | |
$ | 3,069 | | |
| – | | |
| – | |
| 2015 | |
Revolving Credit Facility | |
$ | 119,500 | | |
$ | 3,032 | | |
| – | | |
| – | |
| 2016 | |
Revolving Credit Facility | |
$ | 131,000 | | |
$ | 3,047 | | |
| – | | |
| – | |
| 2017 | |
Revolving Credit Facility | |
$ | 132,000 | | |
$ | 3,030 | | |
| – | | |
| – | |
| 2018 | |
Revolving Credit Facility | |
$ | 124,000 | | |
$ | 3,029 | | |
| – | | |
| – | |
| 2019 | |
Revolving Credit Facility | |
$ | 123,500 | | |
$ | 3,031 | | |
| – | | |
| – | |
| 2020 | |
Revolving Credit Facility | |
$ | 100,000 | | |
$ | 3,153 | | |
| – | | |
| – | |
| 2021 | |
Revolving Credit Facility | |
$ | 105,500 | | |
$ | 3,079 | | |
| – | | |
| – | |
| (1) | The amount to which a holder of each class of senior
security would be entitled upon the involuntary liquidation of the Fund in preference to the holder of any class of security with
a junior ranking. |
| (2) | Not applicable, as senior securities are not registered
for public trading. |
Blackstone Long-Short Credit Income Fund
| Year | |
Name of Loan | |
Total Amount Outstanding
(in thousands) | | |
Asset Coverage Per $1,000
of Indebtedness | | |
Involuntary Liquidating
Preference Per Unit(1) | | |
Average Market Value
Per Unit(2) | |
| 2012(3) | |
Revolving Credit Facility | |
| – | | |
| – | | |
| – | | |
| – | |
| 2013(3) | |
Revolving Credit Facility | |
| – | | |
| – | | |
| – | | |
| – | |
| 2014 | |
Revolving Credit Facility | |
$ | 73,000 | | |
$ | 4,100 | | |
| – | | |
| – | |
| 2015 | |
Revolving Credit Facility | |
$ | 96,000 | | |
$ | 3,033 | | |
| – | | |
| – | |
| 2016 | |
Revolving Credit Facility | |
$ | 93,000 | | |
$ | 3,314 | | |
| – | | |
| – | |
| | |
MRPS (Series A) | |
$ | 20,000 | | |
$ | 2,905 | | |
$ | 1,000 | | |
| – | |
| 2017 | |
Revolving Credit Facility | |
$ | 112,000 | | |
$ | 3,117 | | |
| – | | |
| – | |
| | |
MRPS (Series A) | |
$ | 20,000 | | |
$ | 2,644 | | |
$ | 1,000 | | |
| – | |
| 2018 | |
Revolving Credit Facility | |
$ | 107,500 | | |
$ | 3,032 | | |
| – | | |
| – | |
| | |
MRPS (Series A) | |
$ | 20,000 | | |
$ | 2,556 | | |
$ | 1,000 | | |
| – | |
| 2019 | |
Revolving Credit Facility | |
$ | 108,000 | | |
$ | 3,037 | | |
| – | | |
| – | |
| | |
MRPS (Series A) | |
$ | 20,000 | | |
$ | 2,562 | | |
$ | 1,000 | | |
| – | |
| 2020 | |
Revolving Credit Facility | |
$ | 95,900 | | |
$ | 3,189 | | |
| – | | |
| – | |
| | |
MRPS (Series A) | |
$ | 20,000 | | |
$ | 2,638 | | |
$ | 1,000 | | |
| – | |
| 2021 | |
Revolving Credit Facility | |
$ | 98,900 | | |
$ | 3,157 | | |
| – | | |
| – | |
| | |
MRPS (Series A) | |
$ | 20,000 | | |
$ | 2,626 | | |
$ | 1,000 | | |
| – | |
| (1) | The amount to which a holder of each class of senior
security would be entitled upon the involuntary liquidation of the Fund in preference to the holder of any class of security with
a junior ranking. |
| (2) | Not applicable, as senior securities are not registered
for public trading. |
| (3) | At December 31, 2012 and 2013, the Fund did not have
a revolving credit agreement or MRPS, but it had securities lending arrangements with cash collateral received valued as $52,405,671
and $38,219,410, respectively |
| Annual Report | December 31, 2021 |
111 |
| Blackstone Credit Funds |
Senior Securities |
December 31, 2021 (Unaudited)
Blackstone Strategic Credit Fund
| Year | |
Name of Loan | |
Total Amount Outstanding
(in thousands) | | |
Asset Coverage Per $1,000
of Indebtedness | | |
Involuntary Liquidating
Preference Per Unit(1) | | |
Average Market Value
Per Unit(2) | |
| 2012 | |
Revolving Credit Facility | |
$ | 125,000 | | |
$ | 7,851 | | |
| – | | |
| – | |
| 2013 | |
Revolving Credit Facility | |
$ | 390,000 | | |
$ | 3,190 | | |
| – | | |
| – | |
| 2014 | |
Revolving Credit Facility | |
$ | 389,500 | | |
$ | 3,062 | | |
| – | | |
| – | |
| 2015 | |
Revolving Credit Facility | |
$ | 331,000 | | |
$ | 3,051 | | |
| – | | |
| – | |
| 2016 | |
Revolving Credit Facility | |
$ | 377,000 | | |
$ | 2,989 | | |
| – | | |
| – | |
| | |
MRPS (Series A) | |
$ | 45,000 | | |
$ | 2,777 | | |
$ | 1,000 | | |
| – | |
| 2017 | |
Revolving Credit Facility | |
$ | 375,000 | | |
$ | 3,132 | | |
| – | | |
| – | |
| | |
MRPS (Series A) | |
$ | 45,000 | | |
$ | 2,796 | | |
$ | 1,000 | | |
| – | |
| 2018 | |
Revolving Credit Facility | |
$ | 361,500 | | |
$ | 3,015 | | |
| – | | |
| – | |
| | |
MRPS (Series A) | |
$ | 45,000 | | |
$ | 2,682 | | |
$ | 1,000 | | |
| – | |
| 2019 | |
Revolving Credit Facility | |
$ | 356,500 | | |
$ | 3,037 | | |
| – | | |
| – | |
| | |
MRPS (Series A) | |
$ | 45,000 | | |
$ | 2,697 | | |
$ | 1,000 | | |
| – | |
| 2020 | |
Revolving Credit Facility | |
$ | 309,100 | | |
$ | 3,196 | | |
| – | | |
| – | |
| | |
MRPS (Series A) | |
$ | 45,000 | | |
$ | 2,790 | | |
$ | 1,000 | | |
| – | |
| 2021 | |
Revolving Credit Facility | |
$ | 323,800 | | |
$ | 3,131 | | |
| – | | |
| – | |
| | |
MRPS (Series A) | |
$ | 45,000 | | |
$ | 2,749 | | |
$ | 1,000 | | |
| – | |
| (1) | The amount to which a holder of each class of senior
security would be entitled upon the involuntary liquidation of the Fund in preference to the holder of any class of security with
a junior ranking. |
| (2) | Not applicable, as senior securities are not registered
for public trading. |
| 112 |
www.blackstone-credit.com |
| Blackstone Credit Funds |
Market and Net Asset Value Information |
December 31, 2021 (Unaudited)
The Funds’ Common Shares are listed
on the the New York Stock Exchange and trade under the tickers and commenced trading as shown below.
| Fund |
Ticker |
Trading Commencement |
| Blackstone Senior Floating Rate Term Fund |
BSL |
May 26, 2010 |
| Blackstone Long-Short Credit Income Fund |
BGX |
January 27, 2011 |
| Blackstone Strategic Credit Fund |
BGB |
September 26, 2012 |
Our Common Shares have traded both at a
premium and at a discount in relation to the Funds’ NAV per share. We cannot predict whether our Common Shares will trade
at a premium or discount to NAV in the future. Our issuance of additional Common Shares may have an adverse effect on prices in
the secondary market for our Common Shares by increasing the number of Common Shares available, which may create downward pressure
on the market price for our Common Shares.
The following tables set forth for each
of the periods indicated the range of high and low closing sale price of our Common Shares and the quarter-end sale price, each
as reported on the Exchange, the NAV per share of Common Shares and the premium or discount to NAV per share at which our Common
Shares were trading. NAV is generally determined on each business day that the Exchange is open for business. See “Net Asset
Value” for information as to the determination of our NAV.
Each Fund believes that there are no material
unresolved written comments, received 180 days or more before December 31, 2021, from the Staff of the SEC regarding any of its
periodic or current reports under the Exchange Act or the 1940 Act, or its registration statement.
This privacy policy sets forth the Adviser’s
policies with respect to nonpublic personal information of individual investors, shareholders, prospective investors and former
investors of investment funds managed by the Adviser. These policies apply to individuals only and are subject to change.
If you have any questions or comments about this Privacy Notice,
or if you would like us to update information we have about you or your preferences, please email us at PrivacyQueries@Blackstone.com
or access our web form www.blackstone.com/privacy.
Blackstone Inc.
Attn: Legal & Compliance
345 Park Avenue
New York, NY 10154
Blackstone is committed to protecting
and respecting your privacy. Blackstone is a global financial services firm with offices, branches, operations and entities globally,
including as described at this link: https://www.blackstone.com/privacy#appendixA
When you provide us with your Personal
Data, each Fund Party that decides how and why Personal Data is processed acts as a “data controller”. In simple
terms, this means that the Fund Party makes certain decisions on how to use and protect your Personal Data – but only to
the extent that we have informed you about the use or are otherwise permitted by law.
Where your Personal Data is processed by
an entity controlled by, or under common control with, the Blackstone entity/ies managing a Fund for its own purposes, this entity
will also be a data controller.
The types of Personal Data that we collect
and share depends on the product or service you have with us and the nature of your investment.
The Personal Data collected about you will
help us to provide you with a better service and facilitate our business relationship.
We may combine Personal Data that you provide
to us with Personal Data that we collect from you, or about you from other sources, in some circumstances. This will include Personal
Data collected in an online or offline context.
As a result of our relationship with you
as an investor, in the past 12 months we may have collected Personal Data concerning you in the following categories:
We collect, and have collected, Personal Data about you from
a number of sources, including from you directly: