TIDMNBDD TIDMNBDX TIDMNBDG
RNS Number : 2637X
NB Distressed Debt Invest. Fd. Ltd
27 August 2020
NB DISTRESSED DEBT INVESTMENT FUND LIMITED
2020 Interim Report
Unaudited Consolidated Interim Financial Statements
For the six month period ended 30 June 2020
COMPANY OVERVIEW | Features
Features
NB Distressed Debt Investment Fund Limited (the "Company")
The Company is a closed-ended investment company incorporated
and registered in Guernsey on 20 April 2010 with registration
number 51774 . The Company is governed under the provisions of the
Companies (Guernsey) Law, 2008 (as amended) (the "Law"), and the
Registered Collective Investment Scheme Rules 2018 issued by the
Guernsey Financial Services Commission ("GFSC"). It is a
non-cellular company limited by shares and has been declared by the
GFSC to be a registered closed-ended collective investment scheme.
The Company trades on the Specialist Fund Segment ("SFS") of the
London Stock Exchange ("LSE").
The Company is a member of the Association of Investment
Companies (the "AIC") and is classified within the Debt - Loans
& Bonds Category.
Investment Objective
The Company's primary objective is to provide investors with
attractive risk-adjusted returns through long-biased, opportunistic
exposure to stressed, distressed and special situation
credit-related investments while seeking to limit downside risk by,
amongst other things, focusing on senior and senior secured debt
with both collateral and structural protection.
Investment Policy
More information on the Company's investment policy is provided
below of the Annual Report and Financial Statements for the year
ended 31 December 2019.
Alternative Investment Fund Manager ("AIFM") and Manager
Investment management services are provided to the Company by
Neuberger Berman Investment Advisers LLC (the "AIFM") and Neuberger
Berman Europe Limited (the "Manager"), collectively the "Investment
Manager". The AIFM is responsible for risk management and
discretionary management of the Company's Portfolio and the Manager
provides, amongst other things, certain administrative services to
the Company.
Share Capital
At 30 June 2020 the Company's share capital comprised the
following(1) :
Ordinary Share Class ("NBDD")
15,382,770 Ordinary Shares, none of which were held in
treasury.
Extended Life Share Class ("NBDX")
82,495,074 Extended Life Shares, none of which were held in
treasury.
New Global Share Class ("NBDG")
42,929,950 New Global Shares, none of which were held in
treasury.
(1) In addition the Company has two Class A Shares in issue.
Further information is provided in the Capital Structure section of
this report below.
For the purposes of efficient portfolio management, the Company
has established a number of wholly-owned subsidiaries domiciled in
the US, the Cayman Islands and Luxembourg. All references to the
Company in this document refer to the Company together with its
wholly-owned subsidiaries.
Non-Mainstream Pooled Investments
The Company currently conducts its affairs so that the shares
issued by the Company can be recommended by Independent Financial
Advisers to ordinary retail investors in accordance with the
Financial Conduct Authority's ("FCA") rules in relation to
non-mainstream pooled investment ("NMPI") products and intends to
continue to do so for the foreseeable future.
The Company's shares are excluded from the FCA's restrictions
which apply to NMPI products.
Company Numbers
Ordinary Shares
LSE ISIN code: GG00BDFZ6F78
Bloomberg code: NBDD: LN
Extended Life Shares
LSE ISIN code: GG00BMY71631
Bloomberg code: NBDX:LN
New Global Shares
LSE ISIN code: GG00BMY71748
Bloomberg code: NBDG:LN
Legal Entity Identifier
YRFO7WKOU3V511VFX790
Website
www.nbddif.com
COMPANY OVERVIEW | Capital Structure
Capital Structure
The Company's share capital consists of three different share
classes, all of which are in the harvest period: the Ordinary Share
Class; the Extended Life Share Class; and the New Global Share
Class. These share classes each have different capital return
profiles and, in one instance a different geographical remit. In
addition, the Company has two Class A Shares in issue. While the
Company's share classes are all now in harvest, returning capital
to shareholders, the Company's corporate umbrella itself has an
indefinite life to allow for flexibility for the Company to add new
share classes if demand, market opportunities and shareholder
approval supported such a move, although the Company has no current
plans to create new share classes. Each share class is considered
in turn below.
Ordinary Share Class
NBDD was established at the Company's launch on 10 June 2010
with a remit to invest in the global distressed debt market with a
focus on North America. The investment period of NBDD expired on 10
June 2013.
Voting rights: Yes
Denomination: US Dollars
Hedging: Portfolio hedged to US Dollars
Authorised share capital: Unlimited
Par value: Nil
Extended Life Share Class
A vote was held at a class meeting of NBDD shareholders on 8
April 2013 where the majority of shareholders voted in favour of a
proposed extension.
Following this meeting and with the NBDD shareholders' approval
of the extension, on 9 April 2013 a new Class, NBDX, was created
and the NBDX Shares were issued to 72% of initial NBDD investors
who elected to convert their NBDD Shares to NBDX Shares. NBDX had a
remit to invest in the global distressed debt market with a focus
on North America. The investment period of NBDX expired on 31 March
2015.
Voting rights: Yes
Denomination: US Dollars
Hedging: Portfolio hedged to US Dollars
Authorised share capital: Unlimited
Par value: Nil
New Global Share Class
NBDG was created on 4 March 2014 and had a remit to invest in
the global distressed market with a focus on Europe and North
America. The investment period of NBDG expired on 31 March
2017.
Voting rights: Yes
Denomination: Pound Sterling
Hedging: Unhedged portfolio
Authorised share capital: Unlimited
Par value: Nil
Class A Shares
The Class A Shares are held by a trustee pursuant to a purpose
trust established under Guernsey law. Under the terms of the Trust
Deed the Trustee holds the Class A Shares for the purpose of
exercising the right to receive notice of general meetings of the
Company but the Trustee shall only have the right to attend and
vote at general meetings of the Company when there are no other
Shares of the Company in issue.
Voting rights: No
Denomination: US Dollars
Authorised share capital: 10,000 Class A Shares
Par value: US Dollar $1
2020 INTERIM PERFORMANCE REVIEW | Financial Highlights
Financial Highlights
Key Figures
Extended
Ordinary Life Share New Global
At 30 JUNE 2020 (unaudited) Share Class Class Share Class Aggregated
-------------------------------- ------------- ------------ ------------- -----------
Net Asset Value ("NAV")
($ millions) 10.5 58.5 32.5 101.5
================================ ============= ============ ============= ===========
NAV per Share ($) 0.6845 0.7087 0.7568 -
================================ ============= ============ ============= ===========
Share Price ($) 0.655 0.48 0.6271(1) -
================================ ============= ============ ============= ===========
NAV per Share (GBP) - - 0.6125 -
================================ ============= ============ ============= ===========
Share Price (GBP) - - 0.5075 -
================================ ============= ============ ============= ===========
Premium /(Discount) to
NAV per Share (4.31%) (32.27%) (17.14%) -
================================ ============= ============ ============= ===========
Portfolio of Distressed
Investments ($ millions) 6.4 48.1 29.9 84.4
================================ ============= ============ ============= ===========
Cash and Cash Equivalents
($ millions) 4.2 20.0 15.0 39.2
================================ ============= ============ ============= ===========
Total Expense Ratio ("TER")(2) 2.24% 2.23% 2.41% -
================================ ============= ============ ============= ===========
Ongoing Charges (3) 2.16% 2.13% 2.21% -
================================ ============= ============ ============= ===========
Extended
Ordinary Life Share New Global
At 31 December 2019 (AUDIted) Share Class Class Share Class Aggregated
-------------------------------- ------------- ------------ ------------- -----------
Net Asset Value ("NAV")
($ millions) 14.0 105.8 79.3 199.1
================================ ============= ============ ============= ===========
NAV per Share ($) 0.9086 0.9266 1.1047 -
================================ ============= ============ ============= ===========
Share Price ($) 0.845 0.735 0.9432(1) -
================================ ============= ============ ============= ===========
NAV per Share (GBP) - - 0.8339 -
================================ ============= ============ ============= ===========
Share Price (GBP) - - 0.712 -
================================ ============= ============ ============= ===========
Premium /(Discount) to
NAV per Share (7.00%) (20.68%) (14.62%) -
================================ ============= ============ ============= ===========
Portfolio of Distressed
Investments ($ millions) 13.2 102.8 76.8 192.8
================================ ============= ============ ============= ===========
Cash and Cash Equivalents
($ millions) 1.9 1.6 2.4 5.9
================================ ============= ============ ============= ===========
Total Expense Ratio ("TER")(2) 2.15% 2.21% 2.31% -
================================ ============= ============ ============= ===========
Ongoing Charges (3) 2.10% 2.11% 2.14% -
================================ ============= ============ ============= ===========
(1) Stated in US Dollars, the GBP price as at 30 June 2020 and
31 December 2019 converted to US Dollars using respective
period/year end exchange rates.
(2) The TERs represent the Company's management fees and all
other operating expenses, as required by US Generally Accepted
Accounting Principles ("US GAAP"), expressed as a percentage of
average net assets.
(3) In the year to 30 June 2020, the Company's annualised
Ongoing Charges were 2.15%. This figure is based on an expense
figure for the year to 30 June 2020 of $1,771,494. This figure,
which has been prepared in accordance with AIC guidance represents
the Company's management fees and all other operating expenses,
excluding finance costs payable, expressed as a percentage of
average net assets. No performance fees were payable as at 30 June
2020. The Ongoing Charges by share class are disclosed above.
Summary of Value in Excess of Original Capital Invested
Ordinary Extended Life New Global
Share Class Share Class Share Class
At 30 June 2020 ($) ($) (GBP)
------------------------------------- -------------- -------------- --------------
Original Capital Invested (124,500,202) (359,359,794) (110,785,785)
------------------------------------- -------------- -------------- --------------
Total Capital Distributions 129,627,394 259,844,033 42,460,798
------------------------------------- -------------- -------------- --------------
Total Income Distributions (1) 3,166,835 14,896,010 2,685,521
------------------------------------- -------------- -------------- --------------
Distributions as % of Original
Capital 107% 76% 41%
------------------------------------- -------------- -------------- --------------
Total Buybacks - 11,238,074 10,055,842
------------------------------------- ============== -------------- --------------
NAV 10,530,249 58,461,924 26,294,504
------------------------------------- -------------- -------------- --------------
Total of NAV Plus Capital and
Income Returned ("Value") 143,324,478 344,440,041 81,494,858
------------------------------------- -------------- -------------- --------------
Value in Excess of Original Capital
Invested 18,824,276 (14,919,753) (29,290,927)
------------------------------------- -------------- -------------- --------------
Value as % of Original Capital
Invested 115% 96% 74%
------------------------------------- -------------- -------------- --------------
Ordinary Extended Life New Global
Share Class Share Class Share Class
At 31 December 2019 ($) ($) (GBP)
------------------------------------- -------------- -------------- --------------
Original Capital Invested (124,500,202) (359,359,794) (110,785,785)
------------------------------------- -------------- -------------- --------------
Total Capital Distributions 129,627,394 236,873,855 24,473,845
------------------------------------- -------------- -------------- --------------
Total Income Distributions (1) 3,166,835 14,896,010 2,685,521
------------------------------------- -------------- -------------- --------------
Distributions as % of Original
Capital 107% 70% 25%
------------------------------------- -------------- -------------- --------------
Total Buybacks - 10,255,281 9,346,306
------------------------------------- -------------- -------------- --------------
NAV 13,976,415 105,771,674 59,862,782
------------------------------------- -------------- -------------- --------------
Total of NAV Plus Capital and
Income Returned ("Value") 146,770,644 367,796,820 96,368,454
------------------------------------- -------------- -------------- --------------
Value in Excess of Original Capital
Invested 22,270,442 8,437,026 (14,417,331)
------------------------------------- -------------- -------------- --------------
Value as % of Original Capital
Invested 118% 102% 87%
------------------------------------- -------------- -------------- --------------
(1) By way of dividend
A detailed breakdown of the Company's distributions is provided
on the Company's website at www.nbddif.com under "Investor
Information", "Capital Activity".
2020 INTERIM PERFORMANCE REVIEW | Chairman's Statement
Chairman's Statement
Dear Shareholder,
The six-month period ended 30 June 2020 was one of near
unprecedented economic and social disruption but, notwithstanding,
the Company delivered further capital distributions to the
shareholders of the NBDX and NBDG share classes consistent with the
now well-established and orderly realisation of the portfolios.
With each share class in its harvest period, we continue to seek to
balance the pace of exits and the value achieved for shareholders
as we return capital to our investors. As a reminder the Ordinary
class shareholders will no longer receive capital distributions
until such time as all final assets attributable to them have been
realised to ensure compliance with UK regulations.
Company Performance
By the 30 June 2020, the Company had returned a total of $132.8m
or 106.7% of NBDD investors' original capital of $124.5m, $251.7m
or 70.06% of NBDX investors' original capital of $359.4m and
GBP27.1m or 24.52% of NBDG investors' original capital of
GBP110.8m. Additionally, $0.05m was spent on buying back NBDX
shares and GBP11.5m was spent on buying back NBDG shares in a
manner accretive to net asset value ("NAV"). The Board continually
reviews the most appropriate means to return capital to
shareholders to maximise the benefit to shareholders and we look
forward to reporting further realisations in the coming quarters
and the subsequent distribution of those proceeds on the receipt of
the funds.
On 17 June 2020, we announced a further capital distribution of
$10.5m to our NBDX shareholders and GBP10.5m to our NBDG
shareholders which was paid to the NBDX and NBDG shareholders on 10
July 2020.
Securing the balance between the pace of exits and the value for
shareholders is an active exercise. In many instances, assets will
need intense management to realise their full potential. In
response to the market improvements post the March lows the
Investment Manager realised all the remaining holdings of listed
equities so as to safeguard against any further market declines.
The Board continues to monitor all costs to ensure that they are
appropriate as we are conscious that shareholders may be concerned
about the impact of costs on a reducing portfolio during the
harvest period.
The balance between capital distributions and buybacks is
nuanced. Our policy continues to be to try to monitor and manage
the share price discount to NAV in a way that is accretive to those
shareholders who do not wish to sell.
Annual General Meeting ("AGM") Results
We were pleased to see that shareholders voted overwhelming in
favour of all resolutions proposed at our AGM held on 25 June 2020
and would like to take the opportunity to thank you all for your
votes and support.
Brexit
As previously reported in our annual report, Brexit has not
impacted our operations in any material manner and having reviewed
the portfolio extensively, we do not believe there is any
significant impact from Brexit at the end of the transition period.
Shareholders are reminded that the NBDD and NBDX Portfolios are US
Dollar denominated and any non-US exposure is hedged back to the US
Dollars. However, the outcome of Brexit has not had a material
direct impact on these Portfolios. NBDG, on the other hand, is a
Pound Sterling denominated, but unhedged, share class with a
broader geographic remit than the other two share classes and the
Board expects some continued volatility in the currency markets,
which in turn would translate into volatility in the value of
NBDG's non-Sterling assets. At the time of writing, uncertainty
remains around the future relationship between the United Kingdom
and the European Union.
COVID-19
As reported at the time of our Annual Report, the world has
experienced unprecedented times as a result of the COVID-19
pandemic and the value of many of our assets have been negatively
affected. I am pleased to be able to report that our key service
providers have continued to provide services to the Company
throughout the pandemic and thank them for their efforts .
The various valuation methodologies we use to value your
portfolio's holdings have been reviewed and we consider that they
remain appropriate for determining values at any given point in
time. However, the timing of the orderly realisation of these
assets is less certain and the quantum of the proceeds therefrom is
difficult to predict. Our objectives will remain the same; to
maximise the benefit to investors during this harvest period and to
continue to provide updated information regarding asset values.
Outlook
As reported in the annual report the Ordinary class of shares
will be the first to commence the final wind up process, followed
by the Extended share class and then the New Global share class. As
is normally the case with investment companies, as opposed to those
with commercial undertakings, this does not currently have any
material impact on the Company's ability to continue as a going
concern or remain viable. However, the whole process must be
managed in a way that ensures compliance with UK regulations.
The Extended and Global classes will continue to distribute
until their net assets are reduced to approximately $34.4m and
GBP8.1m respectively. In certain cases, the cash associated with
these share classes will need to remain in underlying corporate
vehicles while tax and other matters relating to those vehicles are
concluded. We will keep investors appraised of developments in
respect of the remaining assets.
We had previously indicated that we expect the final
distribution of the Ordinary share class to be made during the
course of this year and that remains the case. The wind up of the
other two classes will take a little longer but we hope to complete
the realisation process in the next couple of years. As noted
earlier, upheaval in financial markets and global trade uncertainty
may impact these timings and we will keep shareholders updated via
the quarterly fact sheets.
We have announced that with effect from 13 September 2020
Jefferies International Limited will replace Stifel Nicolaus Europe
Limited ("Stifel") as sole broker and financial adviser to the
Company and I would like to take this opportunity to thank Stifel
for their services.
On behalf of the Board, I would like to thank our longstanding
shareholders for your support of our Company. We look forward to
updating you further on investment realisations throughout the
remainder of the year.
John Hallam
Chairman
26 August 2020
2020 INTERIM PERFORMANCE REVIEW | Investment Manager's
Report
Investment Manager's Report
Ordinary Share Class
Summary
During the first half of 2020 the NAV per share decreased by
24.7%. We continued to see significant volatility in the markets
due to the spread of COVID-19 and its impact on global growth
expectations. The long term effects of COVID-19 on the global
economy remain unknown at this time. With the sale of the public
equities in the first half of the year, the remaining investments
await realisation events. The Investment Manager is committed to
realising the investments in a timely manner and winding down the
share class as soon as practicable, but there is one asset we are
working through which will determine the final distribution date.
The Investment Manager is evaluating options to wind down the share
class. For regulatory reasons, the final 10% of the total return
(NAV plus cumulative distributions) in respect of any class of
participating shares in NB Distressed Debt Investment Fund Limited
("NBDDIF") will be returned to shareholders with a final compulsory
redemption of all of the outstanding shares of that class. As such,
there will be no further distribution for NBDD until the final
distribution to investors and the wind-down of the share class.
Portfolio Update
NBDD ended the first half of 2020 with a NAV per share of
$0.6845 compared to $0.9086 at end of 2019. The NAV decrease was
principally driven by lower prices in the investments in light of
the COVID-19 crisis and realised losses in exits of public
equities. At 30 June 2020, 93% of NBDD's NAV was invested in
distressed assets (including cash, receivables and net payables)
with 7% held in cash net of payables (see table below). Cash
continues to build as assets are realised. The portfolio consisted
of 7 issuers across 6 sectors. The largest sector concentrations
were in surface transportation, financial intermediaries and
packaging.
Cash Analysis
====================== ========
Balance Sheet - Cash $4.2m
====================== ========
Collateral cash ($3.5m)
====================== ========
Other payables ($0.0m)
====================== ========
Total available cash $0.7m
====================== ========
Notable events below describe activity in the investments during
the first six months of 2020:
-- During the period, Exide Technologies filed for Chapter 11
bankruptcy due to the global shutdown and COVID-19. The company
does not expect to reorganise and has begun a sales process for the
various business units. The valuation impact was a ($1.1m)
unrealised loss. The magnitude of the unrealised loss is due to the
decline in business operations as well as the decision to not
reorganise and sell off the business units.
-- The Company completed the exit of all public equities.
Significant Price Movement during first half of 2020
(approximately 1% of NBDD NAV or $100,000)
INDUSTRY INSTRUMENT TOTAL RETURN COMMENT
(US DOLLARS
MILLIONS)
-------------------------- ------------- ------------- ------------------------------------
Auto Components Private (1.1) Company filed for Chapter 11
Note bankruptcy and intends to sell
business units and not reorganise.
-------------------------- ------------- ------------- ------------------------------------
Surface Transport Total Return (0.8) Loss due to FX movement which
Swap was offset by FX hedge.
-------------------------- ------------- ------------- ------------------------------------
Containers & Private (0.4) Profitability affected by COVID-19
Packaging Equity related business slowdown.
-------------------------- ------------- ------------- ------------------------------------
Financial intermediaries Private (0.2) Underlying bonds decreased with
Note effects from COVID-19.
-------------------------- ------------- ------------- ------------------------------------
Exits
During the first half of the year, we saw four exits, which
generated a total return of $(3.4m). This brings the total number
of exits since inception in NBDD to 49, with total return of
$40.2m. Detailed descriptions of the exits are at the end of this
report.
Partial Realisations
The partial realisations generated a total return of $(0.5m) as
of 30 June 2020. Detailed descriptions of the partial realisations
are at the end of this report.
Distributions
To date, $132.8m or 107% of original capital has been
distributed to investors in the form of capital distributions via
redemptions and income dividends. Total value available to
investors including NAV and all distributions paid is $143.3m (115%
of original capital). As explained above, for regulatory reasons,
the final 10% of the total return (NAV plus cumulative
distributions) in respect of any class of participating shares in
NBDDIF will be returned to shareholders with a final compulsory
redemption of all of the outstanding shares of that class. The next
distribution for NBDD will be the final distribution to investors
and will wind down the share class. Our current expectation is to
wind down the share class as soon as practicable. However there is
one asset we are working through which will determine the final
distribution date. We will continue to update investors as we gain
clarity on the realisations.
Extended Life Share Class
Summary
During the first six months, the NAV per share decreased by
23.5%. We continued to see significant volatility in the markets
due to the spread of COVID-19 and its impact on global growth
expectations and economic recovery. The effects of COVID-19 on the
global economy remain unknown at this time. With the sale of the
public equities in the first half of the year, the remaining
investments await realisation events. The Investment Manager is
committed to realising the investments in a timely manner and
winding down the share class as soon as practicable.
Portfolio Update
NBDX ended the first half of the year with a NAV per share of
$0.7087 compared to $0.9266 at end of 2019. At 30 June 2020, 98% of
NBDX's NAV was invested in distressed assets (including cash
receivables and net payables held in subsidiaries) with 2% held in
cash (see table below). At 30 June 2020, NAV decreased 23.5% during
the period principally due to losses in public equities and
unrealised losses in the existing portfolio with the impact of
COVID-19. With the exit of the public equities, the NBDX portfolio
consisted of 13 issuers across 10 sectors. The largest sector
concentrations were in surface transportation, shipping, lodging
& casinos, and financial intermediaries.
Cash Analysis
====================================== =========
Balance Sheet - Cash $20.0m
====================================== =========
Cash held in wholly-owned subsidiary
accounts $0.0m
====================================== =========
Collateral cash ($7.9m)
====================================== =========
Cash held for income distribution
payable ($10.5m)
====================================== =========
Other payables ($0.3m)
====================================== =========
Total available cash $1.3m
====================================== =========
Notable events below describe activity in the investments during
first half of 2020:
-- During the period, Exide Technologies filed for Chapter 11
bankruptcy due to the global shutdown and COVID-19. The company
does not expect to reorganise and has begun a sales process for the
various business units. The valuation impact was a ($9.7m)
unrealised loss. The magnitude of the unrealised loss is due to the
decline in business operations as well as the decision to not
reorganise and sell off the business units.
-- The Company completed the exit of all public equities.
-- Non Ferrous Metals investment - The sale of the company was
completed and private shares tendered for cash.
Significant Price Movements during first half of 2020
(approximately 1% of NBDX NAV or $600,000)
INDUSTRY INSTRUMENT TOTAL RETURN COMMENT
(US DOLLARS
MILLIONS)
----------------- --------------- ------------- ------------------------------------
Auto Components Private Note (9.7) Company filed for Chapter 11
bankruptcy and intends to sell
business units and not reorganise.
----------------- --------------- ------------- ------------------------------------
Financial Private Note (3.0) Underlying bonds decreased with
intermediaries effects from COVID-19.
----------------- --------------- ------------- ------------------------------------
Surface Total Return (2.1) Loss due to FX movement which
Transport Swap was offset by FX hedge.
----------------- --------------- ------------- ------------------------------------
Shipping Bank debt (1.3) Decline in vessel valuations
Investments due to global downturn related
to COVID-19.
----------------- --------------- ------------- ------------------------------------
Containers Private Equity (1.2) Profitability affected by COVID-19
& packaging related business slowdown.
----------------- --------------- ------------- ------------------------------------
Exits
During the first half of the year, we saw nine exits for NBDX,
which generated a total return of $(37.7m). This brings the total
number of exits since inception in NBDX to 66 with total return of
$77.7m. Detailed descriptions of the exits are at the end of this
report.
Partial Realisations
The partial realisations generated a net gain of $(1.2m) in the
first half of the year and $15.4m over the life of the Company.
Detailed descriptions of the partial realisations are at the end of
this report.
Distributions
During the first six months of 2020, NBDX approved distributions
of $23m. The company made a $12.5m capital distribution via
redemption of shares which, when combined with a further
distribution of $10.5m approved in the second quarter and paid in
July 2020, gives total distributions (dividends, redemptions and
buy-backs) of $286.1m or 80% of original capital. Total value
available to investors including NAV and all distributions paid is
$344.4m or 96% of original capital. With the uncertainty as to how
long the economic downturn will last, certain realisations in NBDX
have been delayed. For regulatory reasons, the final 10% of total
return in respect of any class of participating shares in NBDDIF
will be returned to shareholders with the final compulsory
redemption of all of the outstanding shares of that class. The
Investment Manager is committed to realising the investments in a
timely manner to distribute cash to investors as soon as
possible.
Share Buybacks
During the first six months of 2020, NBDX purchased 1.7m of its
own shares under the buyback programme at a cost of $1m and
weighted average discount of (27.97%). The shares have been
cancelled.
New Global Share Class
Summary
During the first six months, the NAV per share decreased by
26.5%. We continued to see significant volatility in the markets
due to the spread of COVID-19 and its impact on global growth
expectations and economic recovery. The effects of COVID-19 on the
global economy remain unknown at this time. With the sale of the
public equities in the first half of the year, the remaining
investments await realisation events. The Investment Manager is
committed to realising the investments in a timely manner and
winding down the share class as soon as practicable.
Portfolio Update
NBDG ended the first half of 2020 with a NAV per share of
GBP0.6125 compared to GBP0.8339 at the end of 2019. At 30 June
2020, 94% of NBDG's NAV was invested in distressed assets
(including cash receivables and net payables held in subsidiaries)
with 6% held in cash (see table below). NAV decreased 26.5% during
the quarter principally due to losses in public equities and
unrealised losses in the existing portfolio with the impact of
COVID-19. With the exit of the public equity investments, the
portfolio consisted of 13 issuers across 7 sectors. The largest
sector concentrations were in lodging & casinos, commercial
mortgage, surface transportation and shipping.
Cash Analysis
====================================== =========
Balance Sheet - Cash $15.0m
====================================== =========
Cash held in wholly-owned subsidiary
accounts $0.0m
====================================== =========
Cash held for income distribution
payable ($13.0m)
====================================== =========
Other payables ($0.1m)
====================================== =========
Total available cash $1.9m
====================================== =========
Notable events involving NBDG's investments during the first
half of 2020 are below :
-- During the period, Exide Technologies filed for Chapter 11
bankruptcy due to the global shutdown and COVID-19. The company
does not expect to reorganise and has begun a sales process for the
various business units. The valuation impact was a (GBP4.0m)
unrealised loss. The magnitude of the unrealised loss is due to the
decline in business operations as well as the decision to not
reorganise and sell off the business units.
-- The Company completed the exit of all public equities.
-- Non Ferrous Metals investment - The sale of the company was
completed and private shares tendered for cash.
Significant Price Movements during first half of 2020
(approximately 1% of NBDG NAV or GBP300,000)
INDUSTRY INSTRUMENT TOTAL RETURN COMMENT
(GBP MILLIONS)
------------------ -------------- ---------------- ------------------------------------
Surface Transport Bank Debt 0.4 Arbitration progressing during
Investments COVID-19.
------------------ -------------- ---------------- ------------------------------------
Lodging & Casinos Bank Debt (1.6) Hotel shutdown due to COVID-19
Investments quarantine.
------------------ -------------- ---------------- ------------------------------------
Auto Components Private (4.0) Company filed for Chapter 11
Note bankruptcy and intends to sell
business units and not reorganise.
------------------ -------------- ---------------- ------------------------------------
Exits
During the first six months of 2020, we saw ten exits, which
generated a total return of GBP(14.4m). This brought the total
number of exits since inception to 29 with a total return of
GBP(5.5m). Detailed descriptions of the exits are at the end of
this report.
Partial Realisations
There were no partial realisations in NBDG during the first six
months of 2020.
Distributions
During the first six months of 2020, the company made a GBP7.5m
capital distribution via redemption of shares which, when combined
with a further distribution of GBP10.5m approved in the second
quarter and paid in July 2020, gives total distributions
(dividends, redemptions and buy-backs) of GBP55.2m or 50% of
original capital. Total value available to investors including NAV
and all distributions paid is GBP81.5m or 74% of original capital.
With the uncertainty as to how long the economic downturn will
last, certain realisations in NBDG have been delayed. For
regulatory reasons, the final 10% of total return in respect of any
class of participating shares in NBDDIF will be returned to
shareholders with the final compulsory redemption of all of the
outstanding shares of that class. The Investment Manager is
committed to realising the investments in a timely manner to
distribute cash to investors as soon as possible.
Share Buybacks
During the first six months, NBDG purchased 1.2m shares under
the buyback programme at a cost of GBP0.7m and weighted average
discount of (17.45%). The shares have been cancelled.
Summary of Exits across all Share Classes
The total exits during the first half of 2020 can be summarised
as follows:
-- NBDD - Four exits
-- NBDX - Nine exits
-- NBDG - Ten exits
Exits experienced from inception to date were as follows:
NBDD 49 exits with a total return of $40.2m, IRR of 12% and ROR
of 22%
NBDX 66 exits with a total return of $77.5m, IRR of 7% and ROR
of 13%
NBDG 29 exits with a total return of (GBP5.5m), IRR of (4)% and
ROR of (5)%
The annualised internal rate of return ("IRR") is computed based
on the actual dates of the cash flows of the security (purchases,
sales, interest and principal pay downs), calculated in the base
currency of each portfolio. The Rate of Return ("ROR") represents
the change in value of the security (capital appreciation,
depreciation and income) as a percentage of the purchase amount.
The purchase amount can include multiple purchases.
Exit L (Exit 20 for NBDG and Exit 58 for NBDD)
Cash Invested Cash Received Total Return Months
Exit (millions) (millions) (millions) IRR ROR Held
L Exit
======== ===== ================ ================ =============== ======== ====== =========
NBDG 20 GBP1.5 GBP0.2 (GBP1.3) (32.3)% 85.2% 59
======== ===== ================ ================ =============== ======== ====== =========
NBDD 58 $5.7 $0.7 ($5.0) (34.2)% 87.1% 59
======== ===== ================ ================ =============== ======== ====== =========
Exit M (Exit 21 for NBDG and Exit 59 for NBDD)
Cash Invested Cash Received Total Return Months
Exit (millions) (millions) (millions) IRR ROR Held
M Exit
======== ===== ================ ================ =============== ======== ====== =========
NBDG 21 GBP1.6 GBP0.6 (GBP1.0) (29.2)% 62.4% 59
======== ===== ================ ================ =============== ======== ====== =========
NBDD 59 $1.7 $0.5 ($1.2) (30.5)% 68.9% 59
======== ===== ================ ================ =============== ======== ====== =========
Exit N (Exit 46 for NBDD and Exit 60 for NBDX)
Cash Invested Cash Received Total Return Months
Exit (millions) (millions) (millions) IRR ROR Held
N Exit
======== ===== ================ ================ =============== ======== ======== =========
NBDD 46 $2.0 $1.6 ($0.4) (23.3)% (21.0)% 84
======== ===== ================ ================ =============== ======== ======== =========
NBDX 60 $5.1 $4.0 ($1.1) (23.3)% (21.0)% 84
======== ===== ================ ================ =============== ======== ======== =========
Exit O (Exit 22 for NBDG and 61 for NBDX)
Cash Invested Cash Received Total Return Months
Exit (millions) (millions) (millions) IRR ROR Held
O Exit
======== ===== ================ ================ =============== ======== ======== =========
NBDG 22 GBP8.8 GBP3.4 (GBP5.4) (44.2)% (61.1)% 64
======== ===== ================ ================ =============== ======== ======== =========
NBDX 61 $7.5 $2.3 ($5.2) (52.9)% (69.9)% 64
======== ===== ================ ================ =============== ======== ======== =========
Exit P (Exit 23 for NBDG, Exit 47 for NBDD and Exit 62 for
NBDX)
Cash Invested Cash Received Total Return Months
Exit (millions) (millions) (millions) IRR ROR Held
P Exit
======== ===== ================ ================ =============== ======== ======== =========
NBDG 23 GBP15.9 GBP10.9 (GBP5.0) (22.1)% (31.6)% 71
======== ===== ================ ================ =============== ======== ======== =========
NBDD 47 $3.0 $1.5 ($1.5) (7.1)% (45.1)% 111
======== ===== ================ ================ =============== ======== ======== =========
NBDX 62 $10.1 $4.8 ($5.3) (9.1)% (52.5)% 111
======== ===== ================ ================ =============== ======== ======== =========
Exit Q (Exit 24 for NBDG and Exit 63 for NBDX)
Cash Invested Cash Received Total Return Months
Exit (millions) (millions) (millions) IRR ROR Held
Q Exit
======== ===== ================ ================ =============== ======= ======== =========
NBDG 24 GBP6.2 GBP5.6 (GBP0.6) (2.1)% (9.4)% 75
======== ===== ================ ================ =============== ======= ======== =========
NBDX 63 $10.1 $6.8 ($3.3) (7.7)% (32.1)% 75
======== ===== ================ ================ =============== ======= ======== =========
Exit R (Exit 25 for NBDG)
Cash Invested Cash Received Total Return Months
Exit (millions) (millions) (millions) IRR ROR Held
R Exit
======== ===== ================ ================ =============== ======== ======== =========
NBDG 25 GBP1.3 GBP0.8 (GBP0.5) (20.1)% (39.6)% 44
======== ===== ================ ================ =============== ======== ======== =========
Exit S (Exit 26 for NBDG and Exit 64 for NBDX)
Cash Invested Cash Received Total Return Months
Exit (millions) (millions) (millions) IRR ROR Held
S Exit
======== ===== ================ ================ =============== ====== ====== =========
NBDG 26 GBP5.8 GBP9.6 GBP3.8 11.8% 66.4% 74
======== ===== ================ ================ =============== ====== ====== =========
NBDX 64 $3.2 $4.9 $1.7 9.0% 53.8% 74
======== ===== ================ ================ =============== ====== ====== =========
Exit T (Exit 27 for NBDG and Exit 65 for NBDX)
Cash Invested Cash Received Total Return Months
Exit (millions) (millions) (millions) IRR ROR Held
T Exit
======== ===== ================ ================ =============== ======= ======== =========
NBDG 27 GBP5.4 GBP4.5 (GBP0.9) (3.4)% (16.5)% 74
======== ===== ================ ================ =============== ======= ======== =========
NBDX 65 $11.8 $6.8 ($5.0) (9.0)% (41.8)% 80
======== ===== ================ ================ =============== ======= ======== =========
Exit U (Exit 28 for NBDG, Exit 48 for NBDD and Exit 66 for
NBDX)
Cash Invested Cash Received Total Return Months
Exit (millions) (millions) (millions) IRR ROR Held
U Exit
======== ===== ================ ================ =============== ======== ======== =========
NBDG 28 GBP9.1 GBP6.7 (GBP2.4) (13.5)% (26.8)% 68
======== ===== ================ ================ =============== ======== ======== =========
NBDD 48 $1.0 $0.3 ($0.7) (26.6)% (66.3)% 85
======== ===== ================ ================ =============== ======== ======== =========
NBDX 66 $19.6 $6.1 ($13.5) (28.4)% (69.0)% 85
======== ===== ================ ================ =============== ======== ======== =========
Exit V (Exit 29 for NBDG and Exit 49 for NBDD)
Cash Invested Cash Received Total Return Months
Exit (millions) (millions) (millions) IRR ROR Held
V Exit
======== ===== ================ ================ =============== ======= ======= =========
NBDG 29 GBP12.8 GBP12.0 (GBP0.8) (3.7)% (6.0)% 76
======== ===== ================ ================ =============== ======= ======= =========
NBDD 49 $8.8 $7.9 ($0.9) (3.4)% (9.5)% 111
======== ===== ================ ================ =============== ======= ======= =========
Summary of Partial Realisations across all Share Classes
All partial realisations currently in the portfolio are reported
as at 30 June 2020 and it should be noted that their IRR and ROR
are likely to be different at the time of the final exit. These
were the following partial realisations:
-- NBDD - Two
-- NBDX - Two
-- NBDG - None
Partial Realisation B: NBDD and NBDX
NBDD and NBDX invested $7.1m to purchase first lien secured bank
debt with attached private equity of an international packaging
company. The debt was repaid in full shortly after the purchase
with the receipt of $5.8m and the Company retained the equity,
receiving dividends of $1.7m during the holding period. During the
second quarter the company's sale to a complementary packaging
company was announced. NBDX and NBDD elected to receive sale
proceeds in cash and newly created shares in the acquirer for a
combined value of $4.0m. In the third quarter of 2017, the Company
received $1.5m cash as part of the sale proceeds from the disposal
completed at the end of the second quarter of 2017 and $1.0m for
partial redemption of new shares received in the acquirer. The
company's operating performance declined due to raw material price
increases. The current value of the private equity position is
$0.5m generating a total return of $3.4m as of 30 June 2020. IRR
was 25% and ROR was 48% with a holding period of 92 months at 30
June 2020.
Value of
Cash Received Residual
Effective Cash Invested to Date Investment Total Return MonthS
B Period (millions) (millions) (millions) (millions) IRR ROR Held
====== ============= ================ ============== ============= =============== ====== ====== =========
NBDD H1 2017 $2.0 $2.8 $0.1 $1.0 25% 48% 92
====== ============= ================ ============== ============= =============== ====== ====== =========
NBDX H1 2017 $5.1 $7.2 $0.4 $2.5 25% 48% 92
====== ============= ================ ============== ============= =============== ====== ====== =========
Partial Realisation C: NBDD and NBDX
NBDD and NBDX invested $9.2m in preferred equity certificates
("PECs") and private equity of a European packaging company. The
PECs were retired in full in 2015 and the company paid dividends on
the equity during the holding period. Cash received to date is
$23.2m. In the second quarter, the company announced it was
purchasing another complementary packaging company (Partial
Realisation B, above) and completing a recapitalisation to
refinance existing debt, provide cash for the acquisition and pay a
dividend to shareholders. The company's operating performance
declined due to raw material price increases. The current value of
the private equity position is $3.8m, generating a total return of
$17.8m as at 30 June 2020. IRR was 52% and ROR was 193% with a
holding period of 94 months at 30 June 2020.
Cash Value of
Received Residual
Effective Cash Invested to Date Investment Total Return Months
C Period (millions) (millions) (millions) (millions) IRR ROR Held
====== ============= ================ ============ ============= =============== ====== ====== =========
NBDD H1 2017 $2.6 $6.5 $1.1 $5.0 52% 193% 94
====== ============= ================ ============ ============= =============== ====== ====== =========
NBDX H1 2017 $6.6 $16.7 $2.7 $12.8 52% 193% 94
Neuberger Berman Investment Advisers LLC Neuberger Berman Europe Limited
26 August 2020 26 August 2020
2020 INTERIM PERFORMANCE REVIEW | Portfolio Information
Portfolio Information
Ordinary Share Class
Top 7(1) Holdings at 30 June 2020
Purchased % of
Holding Sector Instrument Status Country NAV Primary Asset
---------- ------------------------ ------------ ----------- ----------- ------ --------------------------------
1 Surface Transport(2) Trade Claim Defaulted Brazil 28.7% Municipal claim
========== ======================== ============ =========== =========== ====== ================================
Post-Reorg Manufacturing Plant
2 Specialty Packaging Equity Post-Reorg Luxembourg 10.0% and Equipment
========== ======================== ============ =========== =========== ====== ================================
Financial Secured Residential real
3 Intermediaries Notes Post-Reorg US 4.7% estate
========== ======================== ============ =========== =========== ====== ================================
Post-Reorg Manufacturing/distribution/real
4 Specialty Packaging Equity Post-Reorg Luxembourg 1.4% estate
========== ======================== ============ =========== =========== ====== ================================
Building & Secured Manufacturing Plant
5 Development Loan Defaulted US 0.7% and equipment
========== ======================== ============ =========== =========== ====== ================================
Secured
6 Auto Components Loan Post-Reorg US 0.2% Cash & securities
========== ======================== ============ =========== =========== ====== ================================
Secured
7 Utilities Loan Post-Reorg US 0.0% Cash & securities
========== ======================== ============ =========== =========== ====== ================================
Total 46%
========== ======================== ============ =========== =========== ====== ================================
Sector Breakdown(3)
For Sector and Country breakdown, click on, or paste the
following link into your web browser, to view page 1 in the
associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/2637X_1-2020-8-26.pdf
(1) Ordinary Share Class holds seven investments by issuer.
(2) As at 30 June collateral pledged is included in the Surface
Transport Market Value.
(3) Categorisations determined by Neuberger Berman; percentages
determined by Neuberger Berman and U.S Bank Global Fund Services
(Guernsey) Limited / U.S. Bank Global Fund Services (Ireland)
Limited as Administrator / Sub-Administrator to the Company. Please
note that irrespective of the "sector" in which an investment is
made, the underlying assets constituting the collateral for the
investment comprise real estate assets in a majority of cases. As a
result, NBDD's overall exposure to the real estate sector may be
more than its actual direct exposure to that sector.
Country Breakdown(4)
For Sector and Country breakdown, click on, or paste the
following link into your web browser, to view page 2 in the
associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/2637X_1-2020-8-26.pdf
(4) Categorisations determined by Neuberger Berman and
percentages determined by the Administrator, based on market values
at 30 June 2020 and 31 December 2019.
(5) As at 30 June collateral pledged is included in the Brazil
Market Value.
Extended Life Share Class
Top 10 Holdings at 30 June 2020
Purchased % of
Holding Sector Instrument Status Country NAV Primary Asset
---------- --------------------- --------------------- ----------- ------------ ----- ---------------------
Secured Loan/Private Marshall
1 Shipping Equity Post-Reorg Islands 17% Ships
========== ===================== ===================== =========== ============ ===== =====================
2 Surface Transport(1) Trade Claim Defaulted Brazil 11% Municipal Claim
========== ===================== ===================== =========== ============ ===== =====================
Financial
3 Intermediaries Secured Notes Defaulted US 11% Cash and Securities
========== ===================== ===================== =========== ============ ===== =====================
Commercial Commercial Real
4 Mortgage Secured Loan Defaulted Netherlands 9% Estate
========== ===================== ===================== =========== ============ ===== =====================
Hotel/Lodging
Lodging & Real Estate and
5 Casinos Secured Notes Post-Reorg US 8% Casino
========== ===================== ===================== =========== ============ ===== =====================
Post-Reorg
6 Oil & Gas Equity Post-Reorg US 7% Ethanol Plant
========== ===================== ===================== =========== ============ ===== =====================
7 Surface Transport Secured Loan Defaulted Spain 7% Concession
========== ===================== ===================== =========== ============ ===== =====================
Hotel/Lodging
Lodging & Real Estate and
8 Casinos Secured Loan Defaulted US 7% Casino
========== ===================== ===================== =========== ============ ===== =====================
Manufacturing
9 Auto Components Secured Loan Post-Reorg US 5% Plant and Equipment
========== ===================== ===================== =========== ============ ===== =====================
Specialty Post-Reorg Manufacturing
10 Packaging Equity Post-Reorg Luxembourg 5% Plant and Equipment
========== ===================== ===================== =========== ============ ===== =====================
Total 87%
========== ===================== ===================== =========== ============ ===== =====================
Sector Breakdown(2)
For Sector and Country breakdown, click on, or paste the
following link into your web browser, to view page 3 in the
associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/2637X_1-2020-8-26.pdf
(1) As at 30 June collateral pledged is included in the Surface
Transport Market Value.
(2) Categorisations determined by Neuberger Berman; percentages
determined by Neuberger Berman and U.S Bank Global Fund Services
(Guernsey) Limited / U.S. Bank Global Fund Services (Ireland) as
Administrator / Sub-Administrator to the Company. Please note that
irrespective of the "sector" in which an investment is made, the
underlying assets constituting the collateral for the investment
comprise real estate assets in a majority of cases. As a result,
NBDX's overall exposure to the real estate sector may be more than
its actual direct exposure to that sector.
Country Breakdown(3)
For Sector and Country breakdown, click on, or paste the
following link into your web browser, to view page 4 in the
associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/2637X_1-2020-8-26.pdf
(3) Categorisations determined by Neuberger Berman and
percentages determined by the Administrator, based on market values
at 30 June 2020 and 31 December 2019.
(4) As at 30 June collateral pledged is included in the Brazil
Market Value.
New Global Share Class
Top 8(1) Holdings at 30 June 2020
Purchased % of
Holding Sector Instrument Status Country NAV Primary Asset
---------- ----------------------- ----------------------- ----------- ------------ ----- -------------------
Lodging & Secured Loan/Private
1 Casino Equity Current Spain 23% Hotel/Casino
========== ======================= ======================= =========== ============ ======= =================
Commercial Commercial
2 Mortgage Secured Loan Defaulted Netherlands 20% Real Estate
========== ======================= ======================= =========== ============ ======= =================
3 Surface Transportation Secured Loan Defaulted Spain 13% Legal Claim
========== ======================= ======================= =========== ============ ======= =================
Secured Loan/Private Marshall
4 Shipping Equity Post-Reorg Islands 12% Ships
========== ======================= ======================= =========== ============ ======= =================
Lodging &
5 Casino Secured Notes Defaulted US 7% Hotel/Casino
========== ======================= ======================= =========== ============ ======= =================
6 Oil & Gas Private Equity Post-Reorg US 5% Ethanol Plant
========== ======================= ======================= =========== ============ ======= =================
Manufacturing
7 Auto Components Secured Loan Post-Reorg US 3% Plant
========== ======================= ======================= =========== ============ ======= =================
8 Utilities Private Claim Post-Reorg US 0% Power Plants
========== ======================= ======================= =========== ============ ======= =================
Total 83%
========== ========================= ===================== =========== ============ ======= =================
Sector Breakdown(2)
For Sector and Country breakdown, click on, or paste the
following link into your web browser, to view page 5 in the
associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/2637X_1-2020-8-26.pdf
(1) Global Share Class holds eight investments by issuer
(2) Categorisations determined by Neuberger Berman; percentages
determined by Neuberger Berman and U.S Bank Global Fund Services
(Guernsey) Limited / U.S. Bank Global Fund Services (Ireland)
Limited as Administrator / Sub-Administrator to the Company. Please
note that irrespective of the "sector" in which an investment is
made, the underlying assets constituting the collateral for the
investment comprise real estate assets in a majority of cases. As a
result, NBDG's overall exposure to the real estate sector may be
more than its actual direct exposure to that sector.
Country Breakdown(3)
For Sector and Country breakdown, click on, or paste the
following link into your web browser, to view page 6 in the
associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/2637X_1-2020-8-26.pdf
(3) Categorisations determined by Neuberger Berman and
percentages determined by the Administrator, based on market values
at 30 June 2020 and 31 December 2019.
GOVERNANCE | Interim Management Report and Directors'
Responsibility Statement
Interim Management Report and Directors' Responsibility
Statement
Principal Risks and Uncertainties
The principal risks of the Company are in the following
areas:
-- investment activity and performance;
-- principal risks associated to harvest periods;
-- level of premium or discount;
-- market price risk;
-- fair valuation of illiquid assets;
-- accounting, legal and regulatory risk; and
-- operational risk.
These risks, and the way in which they are managed, are
described in more detail in the Strategic Report on pages 27 to 29
of the Company's latest annual report and audited financial
statements for the year ended 31 December 2019, which can be found
on the Company's website at
www.nbddif.com/pdf/annual_report_nbddif_2019.pdf . The Board's view
is that these risks remain appropriately identified for the
remainder of 2020.
In addition to the Principal Risks, there remains uncertainty of
the full and long term impacts of the global novel coronavirus
("COVID-19") pandemic. The Board considers downside risk to global
growth and delay in global economic recovery and market liquidity
arising from the COVID-19 pandemic could potentially result in a
risk of the reduction in portfolio performance and delays to
realisation of assets. The Investment Manager reviews the portfolio
on a regular basis for impact of COVID-19 on underlying assets,
performance etc. To manage this risk further, the Investment
Manager reviews time to realisation quarterly to ensure balance
between timing and value. In addition to its usual quarterly risk
review, the Board will monitor the impact of the COVID-19 outbreak
as the pandemic develops and further information becomes
available.
Going Concern
Having reassessed the principal risks, the Directors consider it
appropriate to prepare the Unaudited Consolidated Interim Financial
Statements (the "Financial Statements") on a going concern
basis.
Related Party Transactions
The contracts with the Investment Manager and Directors are the
only related party transactions currently in place. Other than fees
payable in the ordinary course of business, there have been no
material transactions with related parties, which have affected the
financial position or performance of the Company in the six month
period ended 30 June 2020. Additional related party disclosures are
given in Note 6 below.
Directors' Responsibilities Statement
The Board of Directors confirms that, to the best of its
knowledge:
-- The Financial Statements have been prepared in conformity
with US generally accepted accounting principles ("US GAAP"), give
a true and fair view of the assets, liabilities, financial position
and the return of the undertakings included in the consolidation as
a whole as required by DTR 4.2.4R of the Disclosure Guidance and
Transparency Rules ("DTR") of the UK's Financial Conduct Authority
(the "UK FCA"); and
-- The combination of the Chairman's Statement, the Investment
Manager's Report, this Interim Management Report and the notes to
the Financial Statements meet the requirements of an interim
management report, and include a fair view of the information
required by:
1. DTR 4.2.7R, being an indication of important events that have
occurred during the first six months of the current financial year
and their impact on the set of financial statements together with a
description of the principal risks and uncertainties for the
remaining six months of the year; and
2. DTR 4.2.8R, being related party transactions that have taken
place in the first six months of the current financial year and
that have materially affected the financial position or performance
of the Company during that period; and any changes in the related
party transactions described in the last annual report that could
do so.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website and for the preparation and dissemination of
Financial Statements. Legislation in Guernsey governing the
preparation and dissemination of the Financial Statements may
differ from legislation in other jurisdictions.
These Interim Report and Financial Statements have been reviewed
by the Company's auditor and their report is set out below.
By order of the Board
John Hallam Christopher Legge
Chairman
Director
26 August 2020 26 August 2020
GOVERNANCE | Independent Review Report
Independent Review Report to NB Distressed Debt Investment Fund
Limited
Conclusion
We have been engaged by NB Distressed Debt Investment Fund
Limited (the "Company") to review the consolidated financial
statements (the "financial statements") in the half-yearly
financial report for the six months ended 30 June 2020 of the
Company and its subsidiaries (together the "Group") which comprises
the unaudited consolidated statement of assets and liabilities,
unaudited consolidated statement of operations, unaudited
consolidated statement of changes in net assets, unaudited
consolidated statement of cash flows, unaudited consolidated
condensed schedule of investments and the related explanatory
notes.
Based on our review, nothing has come to our attention that
causes us to believe that the financial statements for the period
ended 30 June 2020 do not give a true and fair view of the
financial position of the Company as at 30 June 2020 and of its
financial performance and its cash flows for the six month period
then ended in conformity with U.S generally accepted accounting
principles and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The financial statements included in this interim report have
been prepared in conformity with U.S generally accepted accounting
principles.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the financial statements in the half-yearly financial report based
on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement letter to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Barry Ryan
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants, Guernsey
26 August 2020
FINANCIAL STATEMENTS | Unaudited Consolidated Statement of
Assets and Liabilities
Unaudited Consolidated Statement of Assets and Liabilities
31 December
30 JUNE 2020 2019
(EXPRESSED IN US DOLLARS EXCEPT WHERE
STATED OTHERWISE) (UNAUDITED) (AUDITED)
======================================================== ======================= === ===============
Assets
======================================================== ======================= === ===============
Investments at fair value (2020: cost
of $159,954,482; 2019: cost of $248,770,370) 84,414,417 192,864,208
======================================================== ======================= === ===============
Forward currency contracts 1,690,599 -
======================================================== ======================= === ===============
Warrants (2020: cost of $371,508; 2019:
cost of $752,955) - 153
======================================================== ======================= === ===============
Cash and cash equivalents 27,405,645 4,990,652
======================================================== ======================= === ===============
Restricted Cash:
======================================================== ======================= === ===============
Money Market Fund 390,793 819,074
======================================================== ======================= === ===============
Total return Swap Collateral 11,395,000 -
======================================================== ======================= === ===============
125,296,454 198,674,087
======================================================== ======================= === ===============
Other assets
======================================================== ======================= === ===============
Interest receivables 1,340,075 707,187
======================================================== ======================= === ===============
Receivables for investments sold 1,325,088 895,182
======================================================== ======================= === ===============
Other receivables and prepayments 201,544 643,658
======================================================== ======================= === ===============
Withholding tax receivable 143,348 -
======================================================== ======================= === ===============
Total assets 128,306,509 200,920,114
======================================================== ======================= === ===============
Liabilities
======================================================== ======================= === ===============
Credit default swap (2020: cost of $99,945;
2019: cost of $99,945) 16,370 77,983
======================================================== ======================= === ===============
Total return swap (2020: cost of $Nil) 1,689,548 -
======================================================== ======================= === ===============
Forward currency contracts 1,224,039 890,781
======================================================== ======================= === ===============
Accrued expenses and other liabilities 300,247 406,717
======================================================== ======================= === ===============
Redemption payable 23,457,699 -
======================================================== ======================= === ===============
Payables to Investment Manager and affiliates 139,176 493,060
======================================================== ======================= === ===============
Total liabilities 26,827,079 1,868,541
======================================================== ======================= === ===============
Net assets 101,479,430 199,051,573
======================================================== ======================= === ===============
Net assets attributable to Ordinary Shares
(shares 2020: 15,382,770;
2019: 15,382,770) 10,530,249 13,976,415
======================================================== ======================= === ===============
Net asset value per Ordinary Share 0.6845 0.9086
======================================================== ======================= === ===============
Net assets attributable to Extended Life
Shares (shares 2020: 82,495,074;
2019: 114,146,794) 58,461,923 105,771,674
======================================================== ======================= === ===============
Net asset value per Extended Life Share 0.7087 0.9266
======================================================== ======================= === ===============
Net assets attributable to New Global
Shares (shares 2020: 42,929,950;
2019: 71,787,915) GBP26,294,504 GBP 59,862,782
======================================================== ======================= === ===============
Net asset value per New Global Share GBP0.6125 GBP0.8339
======================================================== ======================= === ===============
Net assets attributable to New Global
Shares (USD equivalent) 32,487,258 79,303,484
======================================================== ======================= === ===============
Net asset value per New Global Share (USD
equivalent) 0.7568 1.1047
======================================================== ======================= === ===============
The Financial Statements were approved and authorised for issue
by the Board of Directors on 26 August 2020, and signed on its
behalf by:
John Hallam Christopher Legge
Chairman Director
The accompanying notes on below are an integral part of the
Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Statement of Operations
Unaudited Consolidated Statement of Operations
30 JUNE 2020 30 JUNE 2019
(EXPRESSED IN US DOLLARS) (UNAUDITED) (UNAUDITED)
================================================ ==== ============= === =============
Income
================================================ ==== ============= === =============
Interest income 2,359,532 3,770,658
====================================================== ============= === =============
Dividend income net of withholding
tax (2020: $Nil; 2019: $Nil) 197,103 252,474
====================================================== ============= === =============
2,556,635 4,023,132
===================================================== ============= === =============
Expenses
================================================ ==== ============= === =============
Investment management fee 1,183,176 1,873,729
====================================================== ============= === =============
Professional and other expenses 510,222 571,981
====================================================== ============= === =============
Administration fee 75,824 115,761
====================================================== ============= === =============
Loan administration and custody fees 21,177 112,216
====================================================== ============= === =============
Directors' fees and expenses 97,466 127,029
====================================================== ============= === =============
1,887,865 2,800,716
===================================================== ============= === =============
Net investment income 668,770 1,222,416
====================================================== ============= === =============
Realised and unrealised loss from
investments and foreign exchange
================================================ ==== ============= === =============
Net realised loss on investments,
credit default swap, warrants, total
return swap and forward currency transactions (31,783,615) (2,565,444)
====================================================== ============= === =============
Net change in unrealised loss on investments,
credit default swap, warrants, total
return swap and forward currency transactions (19,507,965) (2,120,343)
====================================================== ============= === =============
Income taxes from net realised/unrealised
(loss)/gain on investments - 315,071
====================================================== ============= === =============
Realised and unrealised loss from
investments and foreign exchange (51,291,580) (4,370,716)
====================================================== ============= === =============
Net decrease in net assets resulting
from operations (50,622,810) (3,148,300)
====================================================== ============= === =============
The accompanying notes on below are an integral part of the
Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Statement of Changes
in Net Assets
Unaudited Consolidated Statement of Changes in Net Assets
FOR THE SIX MONTH
PERIODED 30 JUNE
30 JUNE 2020 2020 30 JUNE
(UNAUDITED) 30 JUNE Extended 2020
(EXPRESSED IN US 2020 OrdinarY Life New GlobaL 30 JUNE
DOLLARS) Shares Shares Shares 2020 Aggregated
===================== =============================== =============================== =============================== ===============================
Net assets at the
beginning of
the period 13,976,415 105,771,674 79,303,484 199,051,573
===================== =============================== =============================== =============================== ===============================
Net investment
(loss)/income (53,929) 570,576 152,123 668,770
===================== =============================== =============================== =============================== ===============================
Net realised loss on
investments,
credit default
swap, warrants,
total return swap
and forward
currency
transactions (1,425,243) (12,427,388) (17,930,984) (31,783,615)
===================== =============================== =============================== =============================== ===============================
Net change in
unrealised loss
on investments,
credit default
swap, warrants,
total return
swap and forward
currency
transactions (1,966,994) (11,499,968) (6,041,003) (19,507,965)
===================== =============================== =============================== =============================== ===============================
Income taxes from
net
realised/unrealised
loss on investments - - - -
===================== =============================== =============================== =============================== ===============================
Net cost of share
buybacks - (982,793) (894,202) (1,876,995)
===================== =============================== =============================== =============================== ===============================
Shares redeemed
during the period - (22,970,178) (22,102,160) (45,072,338)
===================== =============================== =============================== =============================== ===============================
Net assets at the
end of the
period 10,530,249 58,461,923 32,487,258 101,479,430
===================== =============================== =============================== =============================== ===============================
30 JUNE
2019 30 JUNE
FOR THE SIX MONTH PERIODED 30 JUNE Extended 2019
30 JUNE 2019 (UNAUDITED) 2019 Ordinary Life New Global 30 JUNE
(EXPRESSED IN US DOLLARS) Shares Shares Shares 2019 Aggregated
===================================== =============================== ============= ============ =================
Net assets at the beginning of
the period 22,876,360 148,482,314 97,042,815 268,401,489
===================================== =============================== ============= ============ =================
Net investment (loss)/income (72,200) 979,245 315,371 1,222,416
===================================== =============================== ============= ============ =================
Net realised gain on investments,
credit default swap and forward
currency transactions (389,893) (2,467,320) 291,769 (2,565,444)
===================================== =============================== ============= ============ =================
Net change in unrealised loss
on investments, credit default
swap, warrants and forward currency
transactions (94,150) (447,790) (1,578,403) (2,120,343)
===================================== =============================== ============= ============ =================
Income taxes from net
realised/unrealised
gains on investments 109,954 241,943 (36,826) 315,071
===================================== =============================== ============= ============ =================
Net cost of share buybacks - (918,373) (308,469) (1,226,842)
===================================== =============================== ============= ============ =================
Shares redeemed during the period (7,991,975) (19,991,952) (8,535,657) (36,519,584)
===================================== =============================== ============= ============ =================
Net assets at the end of the
period 14,438,096 125,878,067 87,190,600 227,506,763
===================================== =============================== ============= ============ =================
The accompanying notes on below are an integral part of the
Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Statement of Cash
Flows
Unaudited Consolidated Statement of Cash Flows
FOR THE SIX MONTH PERIODED 30 JUNE 2020 AND 30 JUNE 2019
30 JUNE 2020 30 JUNE 2019
(EXPRESSED IN US DOLLARS) (UNAUDITED) (UNAUDITED)
============================================ ===== ==== ============= === =============
Cash flows from operating activities:
=================================================== ==== ============= === =============
Net decrease in net assets resulting
from operations (50,622,810) (3,148,300)
=================================================== ==== ============= === =============
Adjustment to reconcile net decrease
in net assets resulting from operations
to net cash flow provided by operations:
=================================================== ==== ============= === =============
Net realised loss on investments, credit
default swap, warrants, total return
swap and forward currency transactions 31,783,615 2,565,444
=================================================== ==== ============= === =============
Net change in unrealised gain on investments,
credit default swap, warrants, total
return swap and forward currency transactions 19,507,965 2,120,343
=================================================== ==== ============= === =============
Accretion of discount on loans and bonds 21,780 (298,350)
=================================================== ==== ============= === =============
Changes in interest receivable (632,888) (423,542)
=================================================== ==== ============= === =============
Changes in receivables for investments
sold (429,906) 22,305
=================================================== ==== ============= === =============
Changes in other receivables and prepayments 442,114 3,044
=================================================== ==== ============= === =============
Changes in deferred tax asset (143,348) 2,818,467
=================================================== ==== ============= === =============
Changes in deferred tax liability - (355,057)
=================================================== ==== ============= === =============
Changes in payables, accrued expenses
and other liabilities (460,354) 255,923
=================================================== ==== ============= === =============
Cash received on settled forward currency
contracts and spot currency contracts 2,351,563 972,266
=================================================== ==== ============= === =============
Purchase of investments (2,629,750) (3,606,497)
=================================================== ==== ============= === =============
Sale of investments 64,961,134 42,520,216
=================================================== ==== ============= === =============
Purchase of short term investments (44,506,881) -
=================================================== ==== ============= === =============
Sale of short term investments 37,351,466 -
=================================================== ==== ============= === =============
Net cash provided by operating activities 56,993,700 43,446,262
=================================================== ==== ============= === =============
Cash flows from financing activities:
=================================================== ==== ============= === =============
Cost of share buybacks (1,876,995) (1,226,842)
=================================================== ==== ============= === =============
Shares redeemed during the period (21,614,639) (36,519,584)
=================================================== ==== ============= === =============
Net cash used in financing activities (23,491,634) (37,746,426)
=================================================== ==== ============= === =============
Net increase in cash, cash equivalents
and restricted cash 33,502,066 5,699,836
=================================================== ==== ============= === =============
Cash and cash equivalents at the beginning
of the period 4,990,652 7,596,274
=================================================== ==== ============= === =============
Restricted cash at the beginning of the
year 819,074 -
=================================================== ==== ============= === =============
Effect of exchange rate changes on cash
and cash equivalents (120,354) (10,636)
=================================================== ==== ============= === =============
Cash and cash equivalents at the end
of the period 27,405,645 12,572,424
=================================================== ==== ============= === =============
Restricted cash at the end of the year 11,785,793 713,050
=================================================== ==== ============= === =============
The accompanying notes on below are an integral part of the
Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Condensed Schedule
of Investments
Unaudited Consolidated Condensed Schedule of Investments (by
financial instrument)
AT 30 JUNE
2020 Extended New
(UNAUDITED) Ordinary Life Global Total
(EXPRESSED IN Shares Shares Shares Company
US DOLLARS) Cost Fair Value (%)(1) (%)(1) (%)(1) (%)(1)
=============== ===================== ===================== ========== ===================== ======== ====================
Portfolio of
Distressed
Investments
=============== ===================== ===================== ========== ===================== ======== ====================
Bank Debt
Investments 64,950,484 42,737,531 0.71 38.97 61.19 42.11
=============== ===================== ===================== ========== ===================== ======== ====================
Private Equity 39,027,593 12,653,882 11.44 13.22 11.45 12.47
=============== ===================== ===================== ========== ===================== ======== ====================
Private Note 44,600,790 17,591,257 4.96 23.33 10.56 17.33
=============== ===================== ===================== ========== ===================== ======== ====================
Temporary
Investments
=============== ===================== ===================== ========== ===================== ======== ====================
US Treasury
Bills 11,375,615 11,431,747 43.89 6.75 8.82 11.27
=============== ===================== ===================== ========== ===================== ======== ====================
Total
Investments 159,954,482 84,414,417 61.00 82.27 92.02 83.18
=============== ===================== ===================== ========== ===================== ======== ====================
Ordinary
Shares 12,798,292 6,422,974 61.00 - - 6.33
=============== ===================== ===================== ========== ===================== ======== ====================
Extended Life
Shares 98,888,393 48,095,743 - 82.27 - 47.39
=============== ===================== ===================== ========== ===================== ======== ====================
New Global
Shares 48,267,797 29,895,700 - - 92.02 29.46
=============== ===================== ===================== ========== ===================== ======== ====================
159,954,482 84,414,417 61.00 82.27 92.02 83.18
=============== ===================== ===================== ========== ===================== ======== ====================
Credit Default
Swap
=============== ===================== ===================== ========== ===================== ======== ====================
Ordinary
Shares (28,318) (4,638) (0.04) - - -
=============== ===================== ===================== ========== ===================== ======== ====================
Extended Life
Shares (71,627) (11,732) - (0.02) - (0.01)
=============== ===================== ===================== ========== ===================== ======== ====================
(99,945) (16,370) (0.04) (0.02) - (0.01)
=============== ===================== ===================== ========== ===================== ======== ====================
Forward
Currency
Contracts
=============== ===================== ===================== ========== ===================== ======== ====================
Assets
=============== ===================== ===================== ========== ===================== ======== ====================
Ordinary
Shares - 405,566 3.85 - - 0.40
=============== ===================== ===================== ========== ===================== ======== ====================
Extended Life
Shares - 1,285,033 - 2.20 - 1.27
=============== ===================== ===================== ========== ===================== ======== ====================
- 1,690,599 3.85 2.20 - 1.67
=============== ===================== ===================== ========== ===================== ======== ====================
Liabilities
=============== ===================== ===================== ========== ===================== ======== ====================
Ordinary
Shares - (269,748) (2.56) - - (0.27)
=============== ===================== ===================== ========== ===================== ======== ====================
Extended Life
Shares - (954,291) - (1.63) - (0.94)
=============== ===================== ===================== ========== ===================== ======== ====================
- (1,224,039) (2.56) (1.63) - (1.21)
=============== ===================== ===================== ========== ===================== ======== ====================
Total Return
Swap(2)
=============== ===================== ===================== ========== ===================== ======== ====================
Ordinary
Shares - (471,781) (4.48) - - (0.46)
=============== ===================== ===================== ========== ===================== ======== ====================
Extended Life
Shares - (1,217,767) - (2.09) - (1.20)
=============== ===================== ===================== ========== ===================== ======== ====================
- (1,689,548) (4.48) (2.09) - (1.66)
=============== ===================== ===================== ========== ===================== ======== ====================
Warrants
=============== ===================== ===================== ========== ===================== ======== ====================
Extended Life
Shares 206,269 - - - - -
=============== ===================== ===================== ========== ===================== ======== ====================
New Global
Shares 165,239 - - - - -
=============== ===================== ===================== ========== ===================== ======== ====================
371,508 - - - - -
=============== ===================== ===================== ========== ===================== ======== ====================
(1) This is the Fair Value expressed as a percentage of total
Company NAV, Ordinary Share NAV, Extended Life Share NAV and New
Global Share NAV .
(2) The Trade Claim held as per the 2019 comparative has been
structured into a fully funded Total Return Swap with a major US
financial institution. See Note 3 below.
The accompanying notes on below are an integral part of the
Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Condensed Schedule
of Investments
Extended
AT 31 DECEMBER 2019 Ordinary Life New Global Total
(AUDITED) Shares Shares Shares Company
(EXPRESSED IN US DOLLARS) Cost Fair Value (%)(1) (%)(1) (%)(1) (%)(1)
============================ ============ ============ =========== ========== ============ ==========
Portfolio of Distressed
Investments
============================ ============ ============ =========== ========== ============ ==========
Bank Debt Investments 63,993,341 44,839,681 0.54 23.20 25.50 22.53
============================ ============ ============ =========== ========== ============ ==========
Private Equity 60,966,636 39,031,269 21.17 19.57 19.39 19.61
============================ ============ ============ =========== ========== ============ ==========
Private Note 44,371,898 28,347,559 6.30 20.81 6.88 14.24
============================ ============ ============ =========== ========== ============ ==========
Public Equity 62,363,549 64,453,075 33.83 22.64 45.11 32.38
============================ ============ ============ =========== ========== ============ ==========
Trade Claim (2) 13,032,089 12,149,475 24.31 8.27 - 6.10
============================ ============ ============ =========== ========== ============ ==========
Temporary Investments
============================ ============ ============ =========== ========== ============ ==========
US Treasury Bills 4,042,857 4,043,149 8.22 2.74 - 2.03
============================ ============ ============ =========== ========== ============ ==========
Total Investments 248,770,370 192,864,208 94.37 97.23 96.88 96.89
============================ ============ ============ =========== ========== ============ ==========
Ordinary Shares 17,758,457 13,188,939 94.37 - - 6.63
============================ ============ ============ =========== ========== ============ ==========
Extended Life Shares 141,969,927 102,843,628 - 97.23 - 51.66
============================ ============ ============ =========== ========== ============ ==========
New Global Shares 89,041,986 76,831,641 - - 96.88 38.60
============================ ============ ============ =========== ========== ============ ==========
248,770,370 192,864,208 94.37 97.23 96.88 96.89
============================ ============ ============ =========== ========== ============ ==========
Credit Default Swap
============================ ============ ============ =========== ========== ============ ==========
Ordinary Shares (28,318) (22,095) (0.16) - - (0.01)
============================ ============ ============ =========== ========== ============ ==========
Extended Life Shares (71,627) (55,888) - (0.05) - (0.03)
============================ ============ ============ =========== ========== ============ ==========
(99,945) (77,983) (0.16) (0.05) - (0.04)
============================ ============ ============ =========== ========== ============ ==========
Forward Currency Contracts
============================ ============ ============ =========== ========== ============ ==========
Assets
============================ ============ ============ =========== ========== ============ ==========
Ordinary Shares - 121,184 0.87 - - 0.06
============================ ============ ============ =========== ========== ============ ==========
Extended Life Shares - 335,899 - 0.32 - 0.17
============================ ============ ============ =========== ========== ============ ==========
- 457,083 0.87 0.32 - 0.23
============================ ============ ============ =========== ========== ============ ==========
Liabilities
============================ ============ ============ =========== ========== ============ ==========
Ordinary Shares - (280,190) (2.00) - - (0.14)
============================ ============ ============ =========== ========== ============ ==========
Extended Life Shares - (1,067,674) - (1.01) - (0.54)
============================ ============ ============ =========== ========== ============ ==========
- (1,347,864) (2.00) (1.01) - (0.68)
============================ ============ ============ =========== ========== ============ ==========
Warrants
============================ ============ ============ =========== ========== ============ ==========
Extended Life Shares 478,733 109 - - - -
============================ ============ ============ =========== ========== ============ ==========
New Global Shares 274,222 44 - - - -
============================ ============ ============ =========== ========== ============ ==========
752,955 153 - - - -
============================ ============ ============ =========== ========== ============ ==========
(1) This is the Fair Value expressed as a percentage of total
Company NAV, Ordinary Share NAV, Extended Life Share NAV and New
Global Share NAV .
(2) The trade claim was structured through a fully funded total
return swap with a major US financial institution.
The accompanying notes on below are an integral part of the
Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Condensed Schedule
of Investments
Unaudited Consolidated Condensed Schedule of Investments
Investments with the following issuers comprised greater than 5%
of Total Company NAV
30 JUNE 2020 Extended New
(UNAUDITED) Ordinary Life Global Total
(EXPRESSED IN Fair Shares Shares Shares Company
US DOLLARS) Country Industry Nominal Cost Value (%)(1) (%)(1) (%)(1) (%)(1)
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
Dumas Shipping Marshall
TL A Islands Shipping 2,120,719 2,120,719 1,378,468 - 1.68 1.22 1.36
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
Dumas Shipping Marshall
TL B Islands Shipping 17,886,272 17,558,117 11,626,077 - 14.18 10.27 11.46
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
AB Zwolle T/L Commercial
EUR 01/06/2020 Netherlands Mortgage 18,526,730 13,646,548 11,787,900 - 8.94 20.20 11.62
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
US Treasury
N/B 1.500% United United
02/15/30 States States 9,650,000 10,376,253 10,431,801 34.39 6.75 8.82 10.28
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
Buffalo Thunder
Dev Auth 11.000%
12/09/22 SR: United Lodging
Regs States & Casinos 14,001,965 11,641,233 7,000,982 - 7.99 7.18 6.90
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
Hotel Puerta Lodging
America (Equity) Spain & Casinos 934 3,013,332 1,850,423 - - 5.70 1.82
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
Hotel Puerta
America Pik Lodging
Addon EUR Spain & Casinos 1,384,196 1,488,764 1,554,660 - - 4.79 1.53
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
Hotel Puerta
America Pik Lodging
TL EUR Spain & Casinos 3,506,761 3,793,212 3,938,619 - - 12.12 3.88
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
TP Ferro
Concesionaria Surface
TL 1L 31/03/2016 Spain Transport 18,787,735 18,531,522 6,330,433 - 5.43 9.71 6.24
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
TP Ferro
Concesionaria
TP Ferro 1L
TL-B EUR
(First-Lien) Surface
EUR Spain Transport 253,557 291,509 284,783 - 0.24 0.44 0.28
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
TP Ferro
Concesionaria
TP Ferro 1L
TL-C Surface
(First-Lien) Spain Transport 109,686 109,686 109,686 - 0.09 0.17 0.11
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
TP Ferro
Concesionaria
TP Ferro TL-A Surface
(First-Lien) Spain Transport 1,259,335 1,259,335 1,259,335 - 1.08 1.94 1.24
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
ACA Fin Guaranty
Corp
12-31/12/2019 United Financial
Frn States Intermediaries 69,599,357 11,086,183 3,479,968 4.72 5.10 - 3.43
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
ACA Fin Gur
Sur Non Vt
12-31/12/2019 United Financial
Frn States Intermediaries 64,723,682 10,274,884 3,236,184 - 5.54 - 3.20
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
White Energy
Holding Company United Oil &
LLC (Equity) States Gas 367 9,174,989 5,872,000 - 7.17 5.17 5.79
================= ============= ================ ============================ ========================= ============================================================= ================= ========= ======= =====================================
114,366,286 70,141,319 39.11 64.19 87.71 69.14
============================================================================= ========================= ============================================================= ================= ========= ======= =====================================
(1) T his is the Fair Value expressed as a percentage of total
Company NAV, Ordinary Share NAV, Extended Life Share NAV and New
Global Share NAV.
The accompanying notes on below are an integral part of the
Interim Financial Statements.
Investments with the following issuers comprised greater than 5%
of Total Company NAV
31 DECEMBER Extended New
2019 (AUDITED) Ordinary Life Global Total
(EXPRESSED IN Fair Shares Shares Shares Company
US DOLLARS) Country Industry Nominal Cost Value (%)(1) (%)(1) (%)(1) (%)(1)
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
Securities
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
Twin Rivers
Worldwide United Lodging
Holdings States & Casinos 793,386 6,349,931 20,318,615 - 5.76 17.94 10.21
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
Dumas Shipping Marshall
TL B Islands Shipping 17,232,859 16,788,999 13,596,726 - 9.17 4.92 6.83
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
Dumas Shipping Marshall
TL A Islands Shipping 2,043,246 2,043,246 1,612,121 - 1.09 0.58 0.81
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
Torm plc Denmark Shipping 1,169,202 14,207,442 13,049,678 - 5.80 8.73 6.56
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
AB Zwolle T/L Commercial
EUR 01/06/2020 Netherlands Mortgage 18,526,730 13,646,548 12,810,493 - 5.37 8.99 6.44
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
Five Point
Holdings United Building
LLC-CL A States & Development 1,720,599 23,945,425 11,975,369 15.46 6.03 4.34 6.02
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
Aleris
International United Nonferrous
Inc States Metals/Minerals 589,611 20,100,668 11,202,609 - 5.82 6.35 5.63
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
Surface
Tratex III Brazil Transport 9 12,015,693 11,092,750 22.18 7.56 - 5.57
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
Eagle Bulk
Shipping United
Inc States Shipping 2,303,182 7,582,125 10,571,605 1.32 4.42 7.20 5.31
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
Exide
Technologies
11.000% 10/31/24 United
SR:REGs States Auto Components 2,810,467 2,505,671 2,388,897 0.11 1.60 0.85 1.20
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
Exide
Technologies
11.000% 10/31/24 United
SR:REGS States Auto Components 6,778,720 6,043,543 6,100,848 0.28 4.09 2.18 3.05
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
Exide Private United
Common States Auto Components 4,913,258 8,210,824 8,598,201 7.73 4.08 4.04 4.32
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
Exide
Technologies
Common Stock United
Escrow States Auto Components 23,389,000 - 2 - - - -
================== ============= ================= =========== ============ ============ ========= ========= ======= ========
133,440,115 123,317,914 47.08 60.79 66.13 61.95
================================================== =========== ============ ============ ========= ========= ======= ========
(1) T his is the Fair Value expressed as a percentage of total
Company NAV, Ordinary Share NAV, Extended Life Share NAV and New
Global Share NAV.
The accompanying notes on below are an integral part of the
Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Condensed Schedule of
Investments
Unaudited Consolidated Condensed Schedule of Investments (by
geography)
Extended
AT 30 JUNE 2020 (UNAUDITED) Ordinary Life New Global Total
(EXPRESSED IN US Shares Shares Shares Company
DOLLARS) Cost Fair Value (%)(1) (%)(1) (%)(1) (%)(1)
============================= ============ =========== ========= ========= =========== =========
Geographic diversity
of Portfolio s
============================= ============ =========== ========= ========= =========== =========
Portfolio of Distressed
Investments
============================= ============ =========== ========= ========= =========== =========
Luxembourg 1,893,980 4,297,745 11.41 5.30 - 4.24
============================== ============ =========== ========= ========= =========== =========
Marshall Islands 20,682,639 13,610,037 - 16.60 12.02 13.41
============================== ============ =========== ========= ========= =========== =========
Netherlands 13,646,548 11,787,900 - 8.94 20.20 11.62
============================== ============ =========== ========= ========= =========== =========
Spain 28,710,672 15,551,250 - 7.04 35.19 15.32
============================== ============ =========== ========= ========= =========== =========
United States 83,645,029 27,735,738 5.70 37.64 15.79 27.32
============================== ============ =========== ========= ========= =========== =========
Temporary Investments
============================= ============ =========== ========= ========= =========== =========
United States 11,375,614 11,431,747 43.89 6.75 8.82 11.27
============================== ============ =========== ========= ========= =========== =========
159,954,482 84,414,417 61.00 82.27 92.02 83.18
============================= ============ =========== ========= ========= =========== =========
(1) This is the Fair Value expressed as a percentage of total
Company NAV, Ordinary Share NAV, Extended Life Share NAV and New
Global Share NAV.
The accompanying notes on below are an integral part of the
Interim Financial Statements.
AT 31 DECEMBER
2019
(AUDITED) Extended
(EXPRESSED IN Ordinary Life New Global Total
US Shares Shares Shares Company
DOLLARS) Cost Fair Value (%)(1) (%)(1) (%)(1) (%)(1)
=============== ============ ============ ================ ================ ================ ================
Geographic
diversity
of Portfolio s
=============== ============ ============ ================ ================ ================ ================
Portfolio of
Distressed
Investments
=============== ============ ============ ================ ================ ================ ================
Brazil 13,032,089 12,149,474 24.31 8.27 - 6.10
================ ============ ============ ================ ================ ================ ================
Denmark 14,207,442 13,049,678 - 5.80 8.73 6.56
================ ============ ============ ================ ================ ================ ================
Greece 357,242 293,876 0.59 0.20 - 0.15
================ ============ ============ ================ ================ ================ ================
Luxembourg 1,893,981 6,115,253 12.23 4.17 - 3.07
================ ============ ============ ================ ================ ================ ================
Marshall
Islands 19,836,048 16,144,863 - 10.88 5.84 8.11
================ ============ ============ ================ ================ ================ ================
Netherlands 13,646,548 12,810,493 - 5.37 8.99 6.44
================ ============ ============ ================ ================ ================ ================
Spain 26,822,155 16,158,401 - 3.59 15.58 8.12
================ ============ ============ ================ ================ ================ ================
United States 154,932,009 112,099,021 49.02 56.21 57.74 56.31
================ ============ ============ ================ ================ ================ ================
Temporary
Investments
=============== ============ ============ ================ ================ ================ ================
United States 4,042,856 4,043,149 8.22 2.74 - 2.03
================ ============ ============ ================ ================ ================ ================
248,770,370 192,864,208 94.37 97.23 96.88 96.89
=============== ============ ============ ================ ================ ================ ================
(1) This is the Fair Value expressed as a percentage of total
Company NAV, Ordinary Share NAV, Extended Life Share NAV and New
Global Share NAV.
The accompanying notes on below are an integral part of the
Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Condensed Schedule
of Investments
Unaudited Consolidated Condensed Schedule of Investments (by
sector)
Ordinary Extended Life New Global
AT 30 JUNE 2020 (UNAUDITED) Shares Shares Shares Total Company
(EXPRESSED IN US DOLLARS) Cost Fair Value (%)(1) (%)(1) (%)(1) (%)(1)
=================================== ============ =========== ========= ============== =========== ==============
Industry diversity of Portfolios
=================================== ============ =========== ========= ============== =========== ==============
Portfolio of Distressed
Investments
=================================== ============ =========== ========= ============== =========== ==============
Auto Components 20,059,797 3,874,127 0.24 4.70 3.38 3.82
=================================== ============ =========== ========= ============== =========== ==============
Building & Development 1,934,272 269,330 0.71 0.33 - 0.27
=================================== ============ =========== ========= ============== =========== ==============
Commercial Mortgage 13,646,548 11,787,900 - 8.94 20.20 11.62
=================================== ============ =========== ========= ============== =========== ==============
Containers and Packaging 1,893,981 4,297,744 11.41 5.30 - 4.24
=================================== ============ =========== ========= ============== =========== ==============
Financial Intermediaries 21,361,067 6,716,151 4.72 10.64 - 6.62
=================================== ============ =========== ========= ============== =========== ==============
Lodging & Casinos 23,930,029 18,319,613 - 14.78 29.78 18.02
=================================== ============ =========== ========= ============== =========== ==============
Oil & Gas 9,174,989 5,872,000 - 7.18 5.17 5.79
=================================== ============ =========== ========= ============== =========== ==============
Shipping 20,682,639 13,610,037 - 16.60 12.02 13.41
=================================== ============ =========== ========= ============== =========== ==============
Surface Transport 20,415,364 8,207,549 - 7.04 12.60 8.09
=================================== ============ =========== ========= ============== =========== ==============
Utilities 15,480,182 28,219 0.03 0.01 0.05 0.03
=================================== ============ =========== ========= ============== =========== ==============
Temporary Investments
=================================== ============ =========== ========= ============== =========== ==============
United States 11,375,614 11,431,747 43.89 6.75 8.82 11.27
=================================== ============ =========== ========= ============== =========== ==============
159,954,482 84,414,417 61.00 82.27 92.02 83.18
=================================== ============ =========== ========= ============== =========== ==============
(1) This is the Fair Value expressed as a percentage of total
Company NAV, Ordinary Share NAV, Extended Life Share NAV and New
Global Share NAV.
The accompanying notes on below are an integral part of the
Interim Financial Statements.
Ordinary Extended Life New Global
AT 31 DECEMBER 2019 (AUDITED) Shares Shares Shares Total Company
(EXPRESSED IN US DOLLARS) Cost Fair Value (%)(1) (%)(1) (%)(1) (%)(1)
================================== ============ ============ ========= ============== =========== ==============
Industry diversity of Portfolios
================================== ============ ============ ========= ============== =========== ==============
Portfolio of Distressed
Investments
================================== ============ ============ ========= ============== =========== ==============
Air Transport 20,522 4,079 - - - -
================================== ============ ============ ========= ============== =========== ==============
Auto Components 21,125,365 20,189,585 8.38 11.81 8.23 10.14
================================== ============ ============ ========= ============== =========== ==============
Building & Development 25,882,044 12,245,025 16.00 6.21 4.34 6.15
================================== ============ ============ ========= ============== =========== ==============
Commercial Mortgage 13,646,548 12,810,493 - 5.37 8.99 6.44
================================== ============ ============ ========= ============== =========== ==============
Containers and Packaging 1,893,980 6,115,253 12.23 4.17 - 3.07
================================== ============ ============ ========= ============== =========== ==============
Financial Intermediaries 21,009,992 10,122,906 5.37 8.86 - 5.09
================================== ============ ============ ========= ============== =========== ==============
Lodging & Casinos 28,850,186 39,919,106 - 13.97 31.70 20.05
================================== ============ ============ ========= ============== =========== ==============
Nonferrous Metals/Minerals 20,303,171 11,435,364 - 5.94 6.49 5.74
================================== ============ ============ ========= ============== =========== ==============
Oil & Gas 14,717,311 7,813,912 - 4.71 3.56 3.93
================================== ============ ============ ========= ============== =========== ==============
Shipping 41,982,857 40,060,022 1.91 21.30 21.77 20.13
================================== ============ ============ ========= ============== =========== ==============
Surface Transport 33,035,557 19,729,734 24.30 11.88 4.77 9.91
================================== ============ ============ ========= ============== =========== ==============
Utilities 22,259,980 8,375,580 17.96 0.27 7.03 4.21
================================== ============ ============ ========= ============== =========== ==============
Temporary Investments
================================== ============ ============ ========= ============== =========== ==============
United States 4,042,856 4,043,149 8.22 2.74 - 2.03
================================== ============ ============ ========= ============== =========== ==============
248,770,370 192,864,208 94.37 97.23 96.88 96.89
================================== ============ ============ ========= ============== =========== ==============
(1) This is the Fair Value expressed as a percentage of total
Company NAV, Ordinary Share NAV, Extended Life Share NAV and New
Global Share NAV.
The accompanying notes on below are an integral part of the
Interim Financial Statements.
FINANCIAL STATEMENTS | Notes to the Unaudited Consolidated
Interim Financial Statements
NOTE 1 - ORGANISATION AND DESCRIPTION OF BUSINESS
The Company is a closed-ended investment company registered and
incorporated in Guernsey under the provisions of the Companies
(Guernsey) Law, 2008 (as amended) (the "Companies Law") with
registration number 51774. The Company's shares are traded on the
Specialist Fund Segment ("SFS") of the London Stock Exchange
("LSE"). All share classes are in the harvest period.
The Company's objective is to provide investors with attractive
risk-adjusted returns through long-biased, opportunistic stressed,
distressed and special situation credit-related investments while
seeking to limit downside risk by, amongst other things, focusing
on senior and senior secured debt with both collateral and
structural protection.
The Company's share capital is denominated in US Dollars for
Ordinary Shares and Extended Life Shares and Pounds Sterling for
New Global Shares.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
In August 2018, Financial Accounting Standards Board ("FASB")
issued FASB Accounting Standards Update ("ASU") 2018-13, Fair Value
Measurement (Accounting Standards Codification ("ASC") 820) -
Disclosure Framework - Changes to the Disclosure Requirements for
Fair Value Measurement. The Company has adopted ASU 2018-13 for the
interim period. The adoption resulted in the removal of Level 1 and
Level 2 transfer disclosures.
(a) Basis of Preparation
The accompanying Unaudited Consolidated Interim Financial
Statements ("Financial Statements") give a true and fair view of
the assets, liabilities, financial position and return and have
been prepared in conformity with accounting principles generally
accepted in the United States of America ("US GAAP") and Companies
Law and are expressed in US Dollars. All adjustments considered
necessary for the fair presentation of the financial statements,
for the period presented, have been included.
The Company is regarded as an Investment Company and follows the
accounting and reporting guidance in Financial Accounting Standards
Board ("FASB") Accounting Standards Codification ("ASC") Topic 946.
Accordingly, the Company reflects its investments on the Unaudited
Consolidated Statement of Assets and Liabilities at their estimated
fair values, with unrealised gains and losses resulting from
changes in fair value reflected in net change in unrealised
gain/(loss) on investments, credit default swap, warrants, total
return swap and forward currency transactions in the Unaudited
Consolidated Interim Statement of Operations.
The Board recognises that the Portfolios are now in their
harvest periods. The Directors have a reasonable expectation that
the Company has adequate resources to continue in operational
existence for the twelve months from the date these accounts are
signed and the foreseeable future. Thus, they continue to prepare
the Financial Statements in accordance with U.S. generally accepted
accounting principles, as liquidation is not imminent.
The Financial Statements include the results of the Company and
its wholly-owned subsidiaries, whose accounting policies are
consistent with those of the Company.
Wholly-owned subsidiaries, London Wabash LLC, London Jackson
Holdco LLC, London Dearborn (Global) LLC and London Wabash (Global)
LLC are incorporated in Delaware and operate in the United
States.
Wholly-owned subsidiaries, London Lake Michigan LP and London
Lake Michigan (Global) LP are incorporated in the Cayman
Islands.
Wholly-owned subsidiaries, London Lux Masterco 1 S.a.r.l. ,
London Lux Debtco 1 S.a.r.l. and London Lux Propco 1 S.a.r.l. are
incorporated in Luxembourg.
Partially owned indirect subsidiaries NB Distressed Debt
Aggregating Inc. and Chicago Aircraft Fund LLC are incorporated in
Delaware and operate in the United States.
(b) Use of Estimates
The preparation of these Financial Statements in conformity with
US GAAP requires that the Directors make estimates and assumptions
(as mentioned in detail on note 2 (f) below) that affect the
reported amounts of assets and liabilities at the date of the
financial statements and reported amounts of income and expenses
during the reporting period.
Actual results could differ significantly from these
estimates.
(c) Cash and Cash Equivalents
The Company holds cash and cash equivalents in US Dollar and
non-US Dollar denominated currencies with original maturities of
less than 90 days that are both readily convertible to known
amounts of cash and so near maturity that they represent an
insignificant risk of change in value to be cash equivalents. As at
30 June 2020, the Company has cash balances in various currencies
equating to $39,191,438 (Cost: $39,242,835) (31 December 2019:
$5,809,726). These balances consisted of Pound Sterling: $520,878
(31 December 2019: $301,217), Euro: $639,650 (31 December 2019:
$2,368,477), US Dollar: $38,008,375 (31 December 2019: $3,117,024),
and Australian Dollar: $22,535 (31 December 2019: $23,008).
(d) Payables/Receivables on Investments Purchased/Sold
At 30 June 2020, the amount payable/receivable on investments
purchased/sold represents amounts due for investments
purchased/sold that have been contracted for but not settled on the
Unaudited Consolidated Statement of Assets and Liabilities
date.
(e) Foreign Currency Translation
Assets and liabilities denominated in foreign currency are
translated into US Dollars at the currency exchange rates on the
date of valuation. On initial recognition, foreign currency sales
and purchases transactions are recorded and translated at the spot
exchange rate at the transaction date and for all other
transactions, the average rate is applied. Non-monetary assets and
liabilities are translated at the historic exchange rate.
The Company does not separate the changes relating to currency
exchange rates from those relating to changes in fair value of the
investments. These fluctuations are included in the net realised
gain and net change in unrealised gain/(loss) on investments,
credit default swap, warrants, total return swap and forward
currency transactions in the Unaudited Consolidated Statements of
Operations.
(f) Fair Value of Financial Instruments
The fair value of the Company's assets and liabilities that
qualify as financial instruments under FASB ASC 825, Financial
Instruments, approximate the carrying amounts presented in the
Unaudited Consolidated Statement of Assets and Liabilities.
Fair value prices are estimates made at a discrete point in
time, based on relevant market data, information about the
financial instruments, and other factors.
Fair value is determined using available market information and
appropriate valuation methodologies. Estimates of fair value of
financial instruments without quoted market prices are subjective
in nature and involve various assumptions and estimates that are
matters of judgement. Accordingly, fair values are not necessarily
indicative of the amounts that will be realised on disposal of
financial instruments. The use of different market assumptions
and/or estimation methodologies may have a material effect on
estimated fair value amounts.
The following estimates and assumptions were used at 30 June
2020 and 31 December 2019 to estimate the fair value of each class
of financial instruments:
-- Cash and cash equivalents - The carrying value reasonably
approximates fair value due to the short-term nature of these
instruments.
-- Receivables for investments sold - The carrying value
reasonably approximates fair value as it reflects the value at
which investments are sold to a willing buyer and the settlement
period on their balances is short term.
-- Interest receivables and other receivables and prepayments -
The carrying value reasonably approximates fair value.
-- Quoted investments are valued according to their bid price at
the close of the relevant reporting date. Investments in private
securities are priced at the bid price using a pricing service for
private loans. If a price cannot be ascertained from the above
sources, the Company will seek bid prices from third party
broker/dealer quotes for the investments.
-- Warrants are priced using the bid price provided by third
party broker / dealer market quotes.
-- In cases where no third party price is available, or where
the Investment Manager determines that the provided price is not an
accurate representation of the fair value of the investment, the
Investment Manager determines the valuation based on its fair
valuation policy. Further information on valuations is provided in
Note 2 (g), "Investment transactions, investment income/expenses
and valuation" below.
-- Payables for investments purchased - The carrying value
reasonably approximates fair value as they reflect the value at
which investments are purchased from a willing seller and the
settlement period on their balances is short term.
-- Payables to Investment Manager and affiliates and accrued
expenses and other liabilities - The carrying value reasonably
approximates fair value.
-- Forward currency contracts are revalued using the forward
exchange rate prevailing at the Unaudited Consolidated Statement of
Assets and Liabilities date.
-- Total Return Swaps are priced using Mark to market prices provided by a third party broker.
The Company follows guidance in ASC 820, Fair Value Measurement
("ASC 820"), where fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date. Fair value measurements are determined within a framework
that establishes a three-tier hierarchy which maximises the use of
observable market data and minimises the use of unobservable inputs
to establish a classification of fair value measurements for
disclosure purposes.
Inputs refer broadly to the assumptions that market participants
would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation
technique used to measure fair value using a pricing model and/or
the risk inherent in the inputs for the valuation technique. Inputs
may be observable or unobservable.
Observable inputs reflect the assumptions market participants
would use in pricing the asset or liability based on market data
obtained from sources independent of the Company. Unobservable
inputs reflect the Company's own assumptions about the assumptions
market participants would use in pricing the asset or liability
based on the information available. The inputs or methodology used
for valuing assets or liabilities may not be an indication of the
risks associated with investing in those assets or liabilities.
ASC 820 classifies the inputs used to measure these fair values
into the following hierarchy:
Level 1 : Quoted prices are available in active markets for
identical investments as of the reporting date.
Level 2 : Pricing inputs are other than quoted prices in active
markets, which are either directly or indirectly observable as of
the reporting date, and fair value is determined through the use of
models or other valuation methodologies.
Level 3 : Pricing inputs are unobservable for the investment and
include situations where there is little, if any, market activity
for the investment. The inputs used in the determination of the
fair value require significant management judgment or
estimation.
In all cases, the level in the fair value hierarchy within which
the fair value measurement in its entirety falls has been
determined based on the lowest level of input that is significant
to the fair value measurement. The Company's assessment of the
significance of a particular input to the fair value measurement in
its entirety requires judgment and considers factors specific to
each investment.
The following is a summary of the levels within the fair value
hierarchy in which the Company invests:
FAIR VALUE OF FINANCIAL INSTRUMENTS AT 30 JUNE 2020 (UNAUDITED)
(EXPRESSED IN US DOLLARS) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
======================================================== =========== ============ =========== ============
Bank Debt Investments - 10,305,364 32,432,167 42,737,531
======================================================== =========== ============ =========== ============
Private Equity - 28,220 12,625,662 12,653,882
======================================================== =========== ============ =========== ============
Private Note - 13,717,134 3,874,123 17,591,257
======================================================== =========== ============ =========== ============
US Treasury Bills 11,431,747 - - 11,431,747
======================================================== =========== ============ =========== ============
Investments at fair value 11,431,747 24,050,718 48,931,952 84,414,417
======================================================== =========== ============ =========== ============
Credit Default Swap - (16,370) - (16,370)
======================================================== =========== ============ =========== ============
Total Return Swap - (1,689,548) - (1,689,548)
======================================================== =========== ============ =========== ============
Forward Currency Contracts - 466,560 - 466,560
======================================================== =========== ============ =========== ============
Total investments that are accounted for at fair value 11,431,747 22,811,360 48,931,952 83,175,059
======================================================== =========== ============ =========== ============
FAIR VALUE OF FINANCIAL INSTRUMENTS AT 31 DECEMBER 2019 (AUDITED)
(EXPRESSED IN US DOLLARS) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
======================================================== =========== ============ =========== ============
Bank Debt Investments - 11,102,474 33,737,207 44,839,681
======================================================== =========== ============ =========== ============
Private Equity - 11,690,747 27,340,522 39,031,269
======================================================== =========== ============ =========== ============
Private Note - 17,123,888 11,223,671 28,347,559
======================================================== =========== ============ =========== ============
Public Equity 64,453,075 - - 64,453,075
======================================================== =========== ============ =========== ============
Trade Claim - - 12,149,475 12,149,475
======================================================== =========== ============ =========== ============
US Treasury Bills 4,043,149 - - 4,043,149
======================================================== =========== ============ =========== ============
Investments at fair value 68,496,224 39,917,109 84,450,875 192,864,208
======================================================== =========== ============ =========== ============
Warrants - 153 - 153
======================================================== =========== ============ =========== ============
Credit Default Swap - (77,983) - (77,983)
======================================================== =========== ============ =========== ============
Forward Currency Contracts - (890,781) - (890,781)
======================================================== =========== ============ =========== ============
Total investments that are accounted for at fair value 68,496,224 38,948,498 84,450,875 191,895,597
======================================================== =========== ============ =========== ============
The following table summarises the significant unobservable
inputs the Company used to value its investments categorised within
Level 3 at 30 June 2020. The table is not intended to be
all-inclusive but instead captures the significant unobservable
inputs relevant to our determination of fair values.
Primary Significant
Valuation unobservable
Type Sector Fair Value ($) Technique Inputs Range Input
=================== ================== =============== ================= ================= ==================
Bank Debt Building & Market Unadjusted
Investments Development 269,329 Information Broker Quote N/A
=================== ================== =============== ================= ================= ==================
Bank Debt Commercial Market
Investments Mortgage 11,787,900 Comparatives Discount Rate 10%
=================== ================== =============== ================= ================= ==================
Bank Debt Market
Investments Lodging & Casinos 5,493,278 Comparatives EBITDA Multiple 7x
=================== ================== =============== ================= ================= ==================
Bank Debt Market $7.75 million per
Investments Shipping 13,004,543 Information Value Per Vessel vessel
=================== ================== =============== ================= ================= ==================
Bank Debt Market Unadjusted
Investments Surface Transport 1,877,116 Information Broker Quote N/A
=================== ================== =============== ================= ================= ==================
Market
Private Equity Auto Components 3 Comparatives EBITDA Multiple 6-7x
=================== ================== =============== ================= ================= ==================
Containers and Market
Private Equity Packaging 4,297,744 Comparatives EBITDA Multiple 8.75x
=================== ================== =============== ================= ================= ==================
Market
Private Equity Lodging & Casinos 1,850,423 Comparatives EBITDA Multiple 7x
=================== ================== =============== ================= ================= ==================
Market Unadjusted
Private Equity Oil & Gas 5,872,000 Information Broker Quote N/A
=================== ================== =============== ================= ================= ==================
Market $7.75 million per
Private Equity Shipping 605,493 Information Value Per Vessel vessel
=================== ================== =============== ================= ================= ==================
Market
Private Note Auto Components 3,874,123 Comparatives EBITDA Multiple 7x
=================== ================== =============== ================= ================= ==================
Total 48,931,952
======================================= =============== ================= ================= ==================
The following table summarises the significant unobservable
inputs the Company used to value its investments categorised within
Level 3 at 31 December 2019. The table is not intended to be
all-inclusive but instead captures the significant unobservable
inputs relevant to our determination of fair values.
Primary Significant
Valuation unobservable
Type Sector Fair Value ($) Technique Inputs Range Input
=================== ================== =============== ================= ================= ==================
Bank Debt Building & Market Unadjusted
Investments Development 269,656 Information Broker Quote N/A
=================== ================== =============== ================= ================= ==================
Bank Debt Commercial Market
Investments Mortgage 12,810,493 Comparatives Discount Rate 10%
=================== ================== =============== ================= ================= ==================
Bank Debt Market
Investments Lodging & Casinos 3,983,830 Comparatives EBITDA Multiple 13-14x
=================== ================== =============== ================= ================= ==================
Bank Debt Market $9 million per
Investments Shipping 15,208,846 Information Value Per Vessel vessel
=================== ================== =============== ================= ================= ==================
Bank Debt Market Unadjusted
Investments Surface Transport 1,464,382 Information Broker Quote N/A
=================== ================== =============== ================= ================= ==================
Market Residual Value/
Private Equity Air Transport 4,079 Information Cash Receivable N/A
=================== ================== =============== ================= ================= ==================
Market
Private Equity Auto Components 9,181,463 Information EBITDA Multiple 6-7x
=================== ================== =============== ================= ================= ==================
Containers and Market
Private Equity Packaging 6,115,253 Comparatives EBITDA Multiple 10x
=================== ================== =============== ================= ================= ==================
Market
Private Equity Lodging & Casinos 4,594,312 Comparatives EBITDA Multiple 13-14x
=================== ================== =============== ================= ================= ==================
Market Unadjusted
Private Equity Oil & Gas 6,509,399 Information Broker Quote N/A
=================== ================== =============== ================= ================= ==================
Market $9 million per
Private Equity Shipping 936,016 Information Value Per Vessel vessel
=================== ================== =============== ================= ================= ==================
Market
Private Note Auto Components 11,008,124 Information EBITDA Multiple 6-7x
=================== ================== =============== ================= ================= ==================
Market Unadjusted
Private Note Utilities 215,547 Information Broker Quote N/A
=================== ================== =============== ================= ================= ==================
Market Unadjusted
Trade Claim Surface Transport 12,149,475 Information Broker Quote N/A
=================== ================== =============== ================= ================= ==================
Total 84,450,875
======================================= =============== ================= =====================================
Changes in any of the above inputs may positively or adversely
impact the fair value of the relevant investments.
Level 3 assets are valued using single bid-side broker quotes or
by good faith methods of the Investment Manager. For single broker
quotes the Investment Manager uses unobservable inputs to assess
the reasonableness of the broker quote. For good faith valuations,
the Investment Manager directly uses unobservable inputs to produce
valuations. The significant unobservable inputs used in Level 3
assets at 30 June 2020 and 31 December 2019 are outlined in the
tables above.
These inputs vary by asset class. For example, real estate asset
valuations may utilise discounted cash flow models using an average
value per square foot and appropriate discount rate. Other assets
may be valued based on analysis of the liquidation of the
underlying assets. In general, increases/(decreases) to per unit
valuation inputs such as value per square foot, will result in
increases/(decreases) to investment value.
Similarly, increases/(decreases) of asset realisation inputs
(liquidation estimate, letter of intent, etc.) will also result in
increases/(decreases) in value. In situations where discounted cash
flow models are used, increasing/(decreasing) discount rates or
increasing/(decreasing) weighted average life, in isolation, will
generally result in (decreased)/increased valuations.
The following is a reconciliation of opening and closing
balances of assets and liabilities measured at fair value on a
recurring basis using Level 3 inputs:
FOR THE PERIODED
30 JUNE 2020 (UNAUDITED)
(EXPRESSED IN US DOLLARS)
Bank Debt Private Trade Private
Investments Equity Claim Note Total
================================= ============= ============= ============= ============ =============
Balance, 31 December 2019 33,737,207 27,340,522 12,149,475 11,223,671 84,450,875
================================== ============= ============= ============= ============ =============
Purchases 2,619,404 - - 10,346 2,629,750
================================== ============= ============= ============= ============ =============
Sales and distributions (32,662) (563,490) (10,963,563) - (11,559,715)
================================== ============= ============= ============= ============ =============
Realised gain/(loss) on sale of
investments 30,315 (881,071) (2,068,527) - (2,919,283)
================================== ============= ============= ============= ============ =============
Unrealised (loss)/gain on
investments (3,922,097) (13,270,299) 882,615 (7,359,894) (23,669,675)
================================== ============= ============= ============= ============ =============
Transfers from level 2 into
Level 3 - - - - -
================================= ============= ============= ============= ============ =============
Balance, 30 June 2020 32,432,167 12,625,662 - 3,874,123 48,931,952
================================== ============= ============= ============= ============ =============
Change in unrealised (loss)/gain
on
investments
included in Unaudited
Consolidated
Statement of Operation for Level
3
investments held as of 30 June
2020 (3,922,094) (13,270,302) 882,614 (7,359,895) (23,669,677)
================================== ============= ============= ============= ============ =============
The following is a reconciliation of opening and closing
balances of assets and liabilities measured at fair value on a
recurring basis using Level 3 inputs:
FOR THE YEARED
31 DECEMBER 2019
(AUDITED)
(EXPRESSED IN US
DOLLARS)
Bank Debt Private Trade Private
Investments Equity Claim Warrants Note Total
==================== ============= ============= =========== ========== ============= =============
Balance, 31 December
2018 38,201,360 45,511,526 12,081,316 199,745 7,056,781 103,050,728
===================== ============= ============= =========== ========== ============= =============
Purchases 1,957,203 7,341,874 - - 4,254,321 13,553,398
===================== ============= ============= =========== ========== ============= =============
Sales and
distributions (2,818,093) (38,966,767) - - ( 7,517,824) (49,302,684)
===================== ============= ============= =========== ========== ============= =============
Realised loss on
sale of investments (22,089,132) (202,957) - - (13,285,081) (35,577,170)
===================== ============= ============= =========== ========== ============= =============
Unrealised
gain/(loss) on
investments 18,485,869 (1,023,154) 68,159 (199,745) 4,946,900 22,278,029
===================== ============= ============= =========== ========== ============= =============
Transfers from level
2 into Level 3 - 14,680,000 - - 15,768,574 30,448,574
===================== ============= ============= =========== ========== ============= =============
Balance, 31 December
2019 33,737,207 27,340,522 12,149,475 - 11,223,671 84,450,875
===================== ============= ============= =========== ========== ============= =============
Change in unrealised
gain/(loss) on
investments
included in
Consolidated
Statement
of Operation for
Level 3 investments
held as of 31
December 2019 18,485,869 (1,023,166) 68,159 (199,745) 4,759,549 22,090,666
===================== ============= ============= =========== ========== ============= =============
The Company's policy is to recognise transfers into and out of
Level 3 as of the actual date of the event or change in
circumstances that caused the transfer. During the year the Company
had three transfers out of Level 2 into Level 3 of fair value
amounting to $30,448,574 as prices were unobservable.
(g) Investment transactions, investment income/expenses and
valuation
Investment transactions are accounted for on a trade-date basis.
Upon sale or maturity, the difference between the consideration
received and the cost of the investment is recognised as a realised
gain or loss. The cost is determined based on the average cost
method. All transactions relating to the restructuring of current
investments are recorded at the date of such restructuring. The
difference between the fair value of the new consideration received
and the cost of the original investment is recognised as a realised
gain or loss. Unrealised gains and losses on an investment are the
difference between the cost if purchased during the period or fair
value at the previous year end and the fair value at the current
period end. Unrealised gains and losses are included in the
Unaudited Consolidated Statement of Operations.
Operating expenses are recognised on an accruals basis.
Operating expenses include amounts directly or indirectly incurred
by the Company as part of its operations. Each share class will
bear its respective pro-rata share based on its respective NAVs of
the ongoing costs and expenses of the Company. Each share class
will also bear all costs and expenses of the Company determined by
the Directors to be attributable solely to it. Any costs incurred
by a share buyback are charged to that share class.
For the period ended 30 June 2020, ($21,780) (30 June 2019:
$298,350) was recorded to reflect accretion of discount on loans
and bonds during the period.
Interest earned on debt instruments is accounted for, net of
applicable withholding taxes and it is recognised as income over
the terms of the loans and bonds. Discounts received or premiums
paid in connection with the acquisition of loans and bonds are
amortised into interest income using the effective interest method
over the contractual life of the related loan and bond. If a loan
is repaid prior to maturity, the recognition of the fees and costs
is accelerated as appropriate. The Company raises a provision when
the collection of interest is deemed doubtful. Dividend income is
recognised on the ex-dividend date net of withholding tax.
Payment-in-kind ("PIK") interest is computed at the contractual
rate specified in the loan agreement for any portion of the
interest which may be added to the principal balance of a loan
rather than paid in cash by the obligator on the scheduled interest
payment date. PIK interest is periodically added to the principal
balance of the loan and recorded as interest income. The Investment
Manager places a receivable on non-accrual status when the
collection of principal or interest is deemed doubtful. The amount
of interest income recorded, plus initial costs of underlying PIK
interest is reviewed periodically to ensure that these do not
exceed fair value of those assets.
The Company carries investments on its Unaudited Consolidated
Statement of Assets and Liabilities at fair value in accordance
with US GAAP, with changes in fair value recognised in the
Unaudited Consolidated Statement of Operations in each reporting
period. Fair value is defined as the price that would be received
on the sale of an asset or paid to transfer a liability (i.e. the
"exit price") in an orderly transaction between market participants
at the measurement date.
Quoted investments are valued according to their bid price at
the close of the relevant reporting date. Investments in private
securities are priced at the bid price using a pricing service for
private loans.
If a price cannot be ascertained from the above sources the
Company will seek bid prices from third party broker/dealer quotes
for the investments. The Investment Manager believes that bid price
is the best estimate of fair value and is in line with the
valuation policy adopted by the Company.
In cases where no third party price is available, or where the
Investment Manager determines that the provided price is not an
accurate representation of the fair value of the investment, the
Administrator will value such investments with the input of the
Investment Manager who will determine the valuation based on its
fair valuation policy. As part of the investment fair valuation
policy, the Investment Manager prepares a fair valuation memorandum
for each such investment presenting the methodology and assumptions
used to derive the price. This analysis is presented to the
Investment Manager's Valuation Committee for approval.
The following criteria are considered when applicable:
-- The valuation of other securities by the same issuer for
which market quotations are available;
-- The reasons for absence of market quotations;
-- The soundness of the security, its interest yield, the date
of maturity, the credit standing of the issue and the current
general interest rates;
-- Any recent sales prices and/or bid and ask quotations for the security;
-- The value of similar securities of issuers in the same or
similar industries for which market quotations are available;
-- The economic outlook of the industry;
-- The issuer's position in the industry;
-- The financial statements of the issuer; and
-- The nature and duration of any restriction on disposition of the security.
(h) Derivative Contracts
The Company may, from time to time, hold derivative financial
instruments for the purposes of managing foreign currency exposure.
These derivatives are measured at fair value in conformity with US
GAAP with changes in fair value recognised in the Unaudited
Consolidated Statement of Operations in each reporting period.
As part of the Company's investment strategy, the Company enters
into over-the-counter ("OTC") derivative contracts which may
include forward currency contracts, credit default swaps, total
return swaps and warrants.
Forward currency contracts are valued at the prevailing forward
exchange rate of the underlying currencies on the reporting date
and the value recorded in the financial statements represents net
unrealised gain and loss on forwards as at 31 December. Forward
contracts are generally categorised in Level 2 of the fair value
hierarchy.
The credit default swap has been entered into on the OTC market.
The fair value of the credit default swap contract is derived using
a pricing service provided by Markit Partners. Markit Partners use
a pricing model that is widely accepted by marketplace
participants. Their pricing model takes into account multiple
inputs including specific contract terms, interest rate yield
curves, interest rates, credit curves, recovery rates, and current
credit spreads obtained from swap counterparties and other market
participants. Many inputs into the model do not require material
subjectivity as they are observable in the marketplace or set per
the contract. Other than the contract terms, valuation is mainly
determined by the difference between the contract spread and the
current market spread. The contract spread (or rate) is generally
fixed and the market spread is determined by the credit risk of the
underlying debt or reference entity. If the underlying debt is
liquid and the OTC market for the current spread is active, credit
default swaps are categorised in Level 2 of the fair value
hierarchy. If the underlying debt is illiquid and the OTC market
for the current spread is not active, credit default swaps are
categorised in Level 3 of the fair value hierarchy.
The total return swap is valued using a mark to market prices
provided by a third party broker.
The Company to date also holds two warrants (2019: six warrants)
which it prices based on the bid price provided by a third party
broker/dealer quote.
(i) Taxation
The Company is not subject to income taxes in Guernsey; however,
it may be subject to taxes imposed by other countries on income it
derives from investments.
Such taxes are reflected in the Unaudited Consolidated Statement
of Operations. In accordance with US GAAP, management is required
to determine whether a tax position of the Company is more likely
than not to be sustained upon examination by the applicable taxing
authority, including resolution of any related appeals or
litigation processes, based on the technical merits of the
position. The tax benefit to be recognised is measured as the
largest amount of benefit that is greater than fifty percent likely
of being realised upon ultimate settlement. De-recognition of a tax
benefit previously recognised could result in the Company recording
a tax liability that would reduce net assets. US GAAP also provides
guidance on thresholds, measurement, de-recognition,
classification, interest and penalties, accounting in interim
periods, disclosure, and transition that is intended to provide
better financial statement comparability among different
entities.
There were no uncertain tax positions at 30 June 2020 or 31
December 2019. The Company is subject to examination for US Federal
and state tax returns for calendar years 2017-2020.
During the period ended 30 June 2020, the Company recorded
current income tax benefit/expense $ Nil (31 December 2019 income
tax expense: $134,860). Deferred taxes are recorded to reflect the
tax consequences of future years' differences between the tax basis
of assets and their financial reporting basis. The deferred tax
benefit recorded for the period ended 30 June 2020 was $ Nil (31
December 2019 deferred tax benefit: $355,057). The net total income
tax benefit/expense from realised/unrealised gains/(losses) on
investments for the period ended 30 June 2020 was $Nil (31 December
2019 income tax benefit: $220,197).
NOTE 3 - DERIVATIVES
In the normal course of business, the Company uses derivative
contracts in connection with its proprietary trading activities.
Investments in derivative contracts are subject to additional risks
that can result in a loss of all or part of the derivative
investment. The Company's derivative activities and exposure to
derivative contracts are classified by the following primary
underlying risks: foreign currency exchange rate, credit, and
equity price. In addition to its primary underlying risks, the
Company is also subject to additional counterparty risk due to
inability of its counterparties to meet the terms of their
contracts.
Forward Contracts
The Company enters into forwards for the purposes of managing
foreign currency exposure.
Credit Default Swap
The Company uses credit default swap agreements on corporate or
sovereign issues to provide a measure of protection against
defaults of the issuers (i.e., to reduce risk where a Company owns
or has exposure to the referenced obligation) from time to
time.
There was one credit default swap position (Brazilian
Government) held at 30 June 2020 (31 December 2019: one).
Total Return Swap
The Company entered into two fully funded total return swaps on
2 May 2011 and 18 April 2012. These swaps matured on 25 February
2020 and rolled over into a new swap agreement. New ISDA
regulations enacted in 2019 require booking the total return swaps
with cash collateral maintained vs fully funded swaps.
As at 31 December 2019 the net value of the swaps was
$12,149,475. As of June 30, 2020 the net value of the swap and
related cash collateral was $9,705,452 (comprised of restricted
cash collateral of $11,395,000 and Total Return Swap liability of
$(1,689,548), as reflected in the unaudited interim consolidated
balance sheet. From the year end until the maturity date of 25
February 2020, there was a decline in the fair value of the swaps
of $1,185,912 which is included in "Net realised loss on
investments, credit default swap, warrants, total return swap and
forward currency transactions" above. Of this amount, $1,434,274
was an unrealised loss relating to the change in foreign exchange
rates during that period which was partially offset by a change in
the fair value of the position. When the new swap was booked, cash
collateral was required to be deposited with a banking intermediary
and is included in restricted cash as of 30 June 2020. The
underlying asset of the swaps is denominated in Brazilian Real and
the foreign exchange exposure is hedged to offset any change in
value in underlying asset due to the FX movements.
Derivative activity
For the period ended 30 June 2020 and for the year ended 31
December 2019 the volume of the Company's derivative activities
based on their notional amounts and number of contracts,
categorised by primary underlying risk, are as follows:
30 JUNE 2020 (UNAUDITED) LONG EXPOSURE SHORT EXPOSURE
========================== =================================== =======================================
Primary underlying NOTIONAL
risk AMOUNTS NUMBER OF CONTRACTS NOTIONAL AMOUNTS NUMBER OF CONTRACTS
========================== ============= ==================== ================= ====================
Foreign currency
exchange rate
========================== ============= ==================== ================= ====================
Forward currency
contracts $ 98,040,992 7 $108,357,010 9
========================== ============= ==================== ================= ====================
Financial assets
========================== ============= ==================== ================= ====================
Credit default
swap $12,000,000 1 - -
========================== ============= ==================== ================= ====================
Total return swap - - $10,963,562 2
========================== ============= ==================== ================= ====================
Total $110,040,992 8 $119,320,572 11
========================== ============= ==================== ================= ====================
Equity price
========================== ============= ==================== ================= ====================
Warrants $371,508 2 - -
========================== ============= ==================== ================= ====================
31 DECEMBER 2019
(AUDITED) LONG EXPOSURE SHORT EXPOSURE
==================== ============================== =======================================
Primary underlying NUMBER OF
risk NOTIONAL AMOUNTS CONTRACTS NOTIONAL AMOUNTS NUMBER OF CONTRACTS
==================== ================= =========== ================= ====================
Foreign currency
exchange rate
==================== ================= =========== ================= ====================
Forward currency
contracts $ 210,139,227 8 $ 210,690,634 9
==================== ================= =========== ================= ====================
Financial assets
==================== ================= =========== ================= ====================
Credit default
swap $ 12,000,000 1 - -
==================== ================= =========== ================= ====================
Total return swap - - - -
==================== ================= =========== ================= ====================
Total $ 222,139,227 9 $ 210,690,634 9
==================== ================= =========== ================= ====================
Equity price
==================== ================= =========== ================= ====================
Warrants $ 752,955 6 - -
==================== ================= =========== ================= ====================
Derivative activity (continued)
The following tables show, at 30 June 2020 and 31 December 2019,
the fair value amounts of derivative contracts included in the
Unaudited Consolidated Statement of Assets and Liabilities,
categorised by primary underlying risk. Balances are presented on a
gross basis prior to application of the impact of counterparty and
collateral netting. Total derivative assets and liabilities are
adjusted on an aggregate basis to take into account the effects of
master netting arrangements and, where applicable, have been
adjusted by the application of cash collateral receivables and
payables with its counterparties. The tables also identify, at 30
June 2020 and 31 December 2019, the realised and unrealised gain
and loss amounts included in the Unaudited Consolidated Statement
of Operations, categorised by primary underlying risk:
Realised gain
30 JUNE 2020 (UNAUDITED) Derivative Assets Derivative Liabilities (loss) NET CHANGE IN Unrealised gain (loss)
Primary underlying risk ($) ($) ($) ($)
=========================== ================== ======================= ================ =====================================
Foreign currency exchange
rate
=========================== ================== ======================= ================ =====================================
Forward currency
contracts 1,690,599 (1,224,039) 2,352,752 1,357,341
=========================== ================== ======================= ================ =====================================
Credit
=========================== ================== ======================= ================ =====================================
Purchased protection
=========================== ================== ======================= ================ =====================================
Credit default swap - (16,370) (91,999) 61,613
=========================== ================== ======================= ================ =====================================
Total return swap - (1,689,548) - (1,689,548)
=========================== ================== ======================= ================ =====================================
Equity price
=========================== ================== ======================= ================ =====================================
Warrants - - - 381,294
=========================== ================== ======================= ================ =====================================
Total 1,690,599 (2,929,957) 2,260,753 110,700
=========================== ================== ======================= ================ =====================================
Realised gain
31 DECEMBER 2019 (AUDITED) Derivative Assets Derivative Liabilities (loss) NET CHANGE IN Unrealised gain (loss)
Primary underlying risk ($) ($) ($) ($)
============================= ================== ======================= ============== =====================================
Foreign currency exchange
rate
============================= ================== ======================= ============== =====================================
Forward currency contracts - (890,781) 2,591,545 (1,474,455)
============================= ================== ======================= ============== =====================================
Credit
============================= ================== ======================= ============== =====================================
Purchased protection
============================= ================== ======================= ============== =====================================
Credit default swap - (77,983) (89,643) (9,220)
============================= ================== ======================= ============== =====================================
Equity price
============================= ================== ======================= ============== =====================================
Warrants 153 - - (200,511)
============================= ================== ======================= ============== =====================================
Total 153 (968,764) 2,501,902 (1,684,187)
============================= ================== ======================= ============== =====================================
Offsetting assets and liabilities
Amounts due from and to brokers are presented on a net basis, by
counterparty, to the extent the Company has the legal right to
offset the recognised amounts and intends to settle on a net
basis.
The Company presents on a net basis the fair value amounts
recognised for OTC derivatives executed with the same counterparty
under the same master netting agreement.
The Company is required to disclose the impact of offsetting
assets and liabilities presented in the Unaudited Consolidated
Statement of Assets and Liabilities to enable users of the
Financial Statements to evaluate the effect or potential effect of
netting arrangements on its financial position for recognised
assets and liabilities.
These recognised assets and liabilities include financial
instruments and derivative contracts that are either subject to an
enforceable master netting arrangement or similar agreement or meet
the following right of set off criteria:
-- each of the two parties owes the other determinable amounts;
-- the Company has the right to set off the amounts owed with
the amounts owed by the other party;
-- the Company intends to set off; and
-- the Company's right of set off is enforceable at law.
The Company is subject to enforceable master netting agreements
with its counterparties of credit default swap with Bank of America
Merrill Lynch of $Nil (31 December 2019: $Nil), and foreign
currency exchange contracts with Royal Bank of Canada of ($77,069)
(31 December 2019: ($2,979)), Societe Generale of ($172,160) (31
December 2019: ($1,861)) and UBS AG of $715,789 (31 December 2019:
($885,939)). These agreements govern the terms of certain
transactions and reduce the counterparty risk associated with
relevant transactions by specifying offsetting mechanisms and
collateral posting arrangements at pre -- arranged exposure levels.
There was a new collateral arrangement during the period for the
total return swaps of $11,395,000.
The following tables, at 30 June 2020 and 31 December 2019, show
the gross and net derivatives assets and liabilities by contract
type and amount for those derivatives contracts for which netting
is permissible.
30 JUNE 2020 (UNAUDITED)
(EXPRESSED IN US DOLLARS )
NET AMOUNTS OF
RECOGNISED ASSETS
PRESENTED IN THE
GROSS AMOUNTS OFFSET UNAUDITED CONSOLIDATED
GROSS AMOUNTS OF IN THE STATEMENTS STATEMENT OF ASSETS
DESCRIPTION RECOGNISED ASSETS OF ASSETS AND LIABILITIES AND LIABILITIES
================== =================== =========================== ========================
Forward currency
contracts 1,690,599 - 1,690,599
================== =================== =========================== ========================
Total 1,690,599 - 1,690,599
================== =================== =========================== ========================
Net Amounts of
Recognised LIABILITIES
Presented in the
Gross Amounts Offset Unaudited Consolidated
Gross Amounts of in the Statements Statement of Assets
Description Recognised Liabilities of Assets and Liabilities and Liabilities
=================== ======================== =========================== ========================
Forward currency
contracts (1,224,039) - (1,224,039)
=================== ======================== =========================== ========================
Credit default
swap (16,370) - (16,370)
=================== ======================== =========================== ========================
Total return swap (1,703,520) - (1,703,520)
=================== ======================== =========================== ========================
Total (2,929,957) - (2,929,957)
=================== ======================== =========================== ========================
31 DECEMBER 2019 (AUDITED)
(EXPRESSED IN US DOLLARS )
NET AMOUNTS OF
RECOGNISED ASSETS
GROSS AMOUNTS OFFSET PRESENTED IN THE
GROSS AMOUNTS OF IN THE STATEMENTS CONSOLIDATED STATEMENT
DESCRIPTION RECOGNISED ASSETS OF ASSETS AND LIABILITIES OF ASSETS AND LIABILITIES
================== =================== =========================== ===========================
Forward currency
contracts 457,083 (457,083) -
================== =================== =========================== ===========================
Warrant 153 - 153
================== =================== =========================== ===========================
Total 457,236 (457,083) 153
================== =================== =========================== ===========================
Net Amounts of
Recognised LIABILITIES
Gross Amounts Offset Presented in the
Gross Amounts of in the Statements Consolidated Statement
Description Recognised Liabilities of Assets and Liabilities of Assets and Liabilities
================== ======================== =========================== ===========================
Forward currency
contracts (1,347,864) 457,083 (890,781)
================== ======================== =========================== ===========================
Credit default
swap (77,983) - (77,983)
================== ======================== =========================== ===========================
Total (1,425,847) 457,083 (968,764)
================== ======================== =========================== ===========================
NOTE 4 - RISK FACTORS
The Company's investments are subject to various risk factors
including market and credit risk, interest rate and foreign
exchange risk, and the risks associated with investing in private
securities. Investments in private securities and partnerships are
illiquid, and there can be no assurances that the Fund will be able
to realise the value of such investments in a timely manner.
Additionally, the Fund's investments may be highly concentrated in
certain industries. Non-U.S. dollar denominated investments may
result in foreign exchange losses caused by devaluations and
exchange rate fluctuations. In addition, consequences of political,
social, economic, diplomatic changes or public health condition may
have disruptive effects on market prices or fair valuations of
foreign investments.
Market Risk
Market risk is the potential for changes in the value of
investments. Categories of market risk include, but are not limited
to, interest rates. Interest rate risks primarily result from
exposures to changes in the level, slope and curvature of the yield
curve, the volatility of interest rates and credit spreads. Details
of the Company's investment Portfolio at 30 June 2020 and 31
December 2019 are disclosed in the Unaudited Consolidated Condensed
Schedule of Investments. Each separate investment exceeding 5% of
net assets is disclosed separately.
Credit Risk
The Company may invest in a range of corporate and other bonds
and other credit sensitive securities. Until such investments are
sold or are paid in full at maturity, the Company is exposed to
credit risk relating to whether the issuer will meet its
obligations when the securities fall due. Distressed debt
securities by nature are securities in companies which are in
default or are heading into default and will expose the Company to
a higher than normal amount of credit risk.
The Company may invest a relatively large percentage of its
assets in issuers located in a single country, a small number of
countries, or a particular geographic region. As a result, the
Company's performance may be closely aligned with the market,
currency or economic, political or regulatory conditions and
developments in those countries or that region, and could be more
volatile than the performance of more geographically diversified
investments. Refer to the Schedule of Investments above for
concentration of credit risk.
The Company maintains positions in a variety of securities,
derivative financial instruments and cash and cash equivalents in
accordance with its investment strategy and guidelines. The
Company's trading activities expose the Company to counterparty
credit risk from brokers, dealers and other financial institutions
(collectively, "counterparties") with which it transacts business.
"Counterparty credit risk" is the risk that a counterparty to a
trade will fail to meet an obligation that it has entered into with
the Company, resulting in a financial loss to the Company. The
Company's policy with respect to counterparty credit risk is to
minimise its exposure to counterparties with perceived higher risk
of default by dealing only with counterparties that meet the credit
standards set out by the Investment Manager.
All the Company's cash and investment assets other than
derivative financial instruments are held by the Custodian. The
Custodian segregates the assets of the Company from the Custodian's
assets and other Custodian clients. Management believes the risk is
low with respect to any losses as a result of this concentration.
The Company conducts its trading activities with respect to
non-derivative positions with a number of counterparties.
Counterparty credit risk borne by these transactions is mitigated
by trading with multiple counterparties.
In addition, the Company may trade in OTC derivative instruments
and in derivative instruments which trade on exchanges with
generally a limited number of counterparties and as a consequence
the Company is subject to counterparty credit risk related to the
potential inability of counterparties to these derivative
transactions to perform their obligations to the Company. The
Company's exposure to counterparty credit risk associated with
counterparty non-performance is generally limited to the fair value
(derivative assets and liabilities) of OTC derivatives reported as
net assets, net of collateral received or paid, pursuant to
agreements with each counterparty. The Investment Manager attempts
to reduce the counterparty credit risk of the Company by
establishing certain credit terms in its International Swaps and
Derivatives Association (ISDA) Master Agreements (with netting
terms) with counterparties, and through credit policies and
monitoring procedures. Under ISDA Master Agreements in certain
circumstances (e.g. when a credit event such as a default occurs)
all outstanding transactions under the agreement are terminated,
the termination value is assessed and only a single net amount is
due or payable in settlement of all transactions. The Company
receives and gives collateral in the form of cash and marketable
securities and it is subject to the ISDA Master Agreement Credit
Support Annex. This means that securities received/given as
collateral can be pledged or sold during the term of the
transaction. The terms also give each party the right to terminate
the related transactions on the other party's failure to post
collateral. Exchange-traded derivatives generally involve less
counterparty exposure because of the margin requirements of the
individual exchanges.
Generally, these contracts can be closed out at the discretion
of the Investment Manager and are governed by the futures and
options clearing agreements signed with the future commission
merchants ("FCMs"). FCMs have capital requirements intended to
assure that they have sufficient capital to protect their customers
in the event of any inadequacy in customer funds arising from the
default of one or more customers, adverse market conditions, or for
any other reason.
The credit risk relating to derivatives is detailed further in
Note 3.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to
meet its obligations as and when these fall due.
Liquidity risk is managed by the Investment Manager so as to
ensure that the Company maintains sufficient working capital in
cash or near cash form so as to be able to meet the Company's
ongoing requirements as these are budgeted for.
COVID-19 Risk
The recent outbreak of the COVID-19 pandemic in many countries
remains a rapidly evolving situation, has disrupted global travel
and supply chains, and has adversely impacted global commercial
activity, the transportation industry and various financial
sectors. The rapid development and fluidity of this situation
precludes any prediction as to its ultimate impact, which may have
a continued adverse effect on economic and market conditions and
trigger a period of global economic downturn. Such conditions
(which may be across industries, sectors or geographies) may impact
the financial performance of the Company.
Other Risks
Legal, tax and regulatory changes could occur during the term of
the Company that may adversely affect the Company. The regulatory
environment for alternative investment vehicles is evolving, and
changes in the regulation of alternative investment vehicles may
adversely affect the value of investments held by the Company or
the ability of the Company to pursue its trading strategies.
NOTE 5 - SHARE CAPITAL
The Company's authorised share capital consists of:
10,000 Class A Shares authorised, of par value $1 each (which
carry no voting rights); and, an unlimited number of shares of no
par value which may, upon issue, be designated as Ordinary Shares,
Extended Life Shares or New Global Shares and Subscription Shares
(each of which carry voting rights) or Capital Distribution
Shares.
The issued share capital of the Company, which is denominated in
US Dollars, consists of Ordinary Shares, Class A Shares and
Extended Life Shares and in Pounds Sterling consists of New Global
Shares. Shareholders of Ordinary Shares, Extended Life Shares and
New Global Shares have the right to attend and vote at any general
meeting of the Company. Class A shareholders do not have the right
to attend and vote at a general meeting of the Company save where
there are no other shares of the Company in issue.
The Class A Shares are held by Carey Trustees Limited (the
"Trustee"), pursuant to a purpose trust established under Guernsey
law. Under the terms of the NBDDIF Purpose Trust Deed, the Trustee
holds the Class A Shares for the purpose of exercising the right to
receive notice of general meetings of the Company but the Trustee
shall only have the right to attend and vote at general meetings of
the Company when there are no other shares of the Company in
issue.
The original investment period expired on 10 June 2013 and a
proposal was made to Ordinary Shareholders to extend the investment
period by 21 months to 31 March 2015. A vote was held at a class
meeting of shareholders on 8 April 2013 where the majority of
shareholders voted in favour of the proposed extension.
Following this meeting and with the Ordinary Shareholders
approval of the extension, a new class, the Extended Life Shares,
was created and the Extended Life Shares were issued to 72% of
initial Investors who elected to convert their Ordinary Shares to
Extended Life Shares. The rest of investors remain invested on the
basis of the existing investment period.
The New Global Share Class was created in March 2014 and its
investment period ended on 31 March 2017.
At 30 June 2020, the Company had the following number of shares
in issue:
31 December
30 June 2020 2019
Issued and fully paid up: (UNAUDITED) (AUDITED)
============================================= ============= ============
Class A Shares 2 2
============================================= ============= ============
Ordinary Share Class of no par value (Nil
in treasury; 2019: Nil) 15,382,770 15,382,770
============================================= ============= ============
Extended Life Share Class of no par value
(Nil in treasury; 2019: Nil) 82,495,074 114,146,794
============================================= ============= ============
New Global Share Class of no par value (Nil
in treasury; 2019: Nil) 42,929,950 71,787,915
============================================= ============= ============
Reconciliation of the number of shares in issue in each class
(excluding Class A) at 30 June 2020:
Ordinary Extended New Global
(UNAUDITED) Shares Life Shares Shares Total
=============================== ========================== ============= ============= =============
Balance at 31 December 2019 15,382,770 114,146,794 71,787,915 201,317,479
=============================== ========================== ============= ============= =============
Shares redeemed during the
period - (29,939,898) (27,635,465) (57,575,363)
=============================== ========================== ============= ============= =============
Buybacks (Shares repurchased) - (1,711,822) (1,222,500) (2,934,322)
=============================== ========================== ============= ============= =============
Balance at 30 June 2020 (1) 15,382,770 82,495,074 42,929,950 140,807,794
=============================== ========================== ============= ============= =============
(1) Balance of issued shares (less Treasury shares) used to
calculate NAV
Reconciliation of the number of shares in issue in each class at
31 December 2019:
Ordinary Extended New Global
(AUDITED) Shares Life Shares Shares Total
=============================== ============ ============= ============= =============
Balance at 31 December 2018 23,395,578 154,104,598 82,770,361 260,270,537
=============================== ============ ============= ============= =============
Shares redeemed during the
year (8,012,808) (37,527,305) (10,032,446) (55,572,559)
=============================== ============ ============= ============= =============
Buybacks (Shares repurchased) - (2,430,499) (950,000) (3,380,499)
=============================== ============ ============= ============= =============
Balance at 31 December 2019
(1) 15,382,770 114,146,794 71,787,915 201,317,479
=============================== ============ ============= ============= =============
(1) Balance of issued shares (less Treasury shares) used to
calculate NAV
Distributions
Set out below are details of the capital returns by way of
compulsory partial redemptions approved during the period ended 30
June 2020 and year ended 31 December 2019.
2020 Extended Life Share
(UNDAUDITED) Ordinary Share Class Class New Global Share Class
Number Per
Distribution of Per Share Distribution Number Per Share Distribution Number Share
Amount Shares Amount Amount of Shares Amount Amount of Shares Amount
============== ============ ======= ========= ============ ========== ========= ============ ========== =======
19 March
2020 - - - $4,986,260 5,434,023 $0.9176 - - -
============== ============ ======= ========= ============ ========== ========= ============ ========== =======
18 May 2020 - - - $7,491,958 9,536,606 $0.7856 $9,136,423 11,206,038 $0.8153
============== ============ ======= ========= ============ ========== ========= ============ ========== =======
30 June 2020 - - - $10,491,960 14,969,269 $0.7009 $12,965,737 16,429,427 $0.8153
============== ============ ======= ========= ============ ========== ========= ============ ========== =======
- - - $22,970,178 29,939,898 - $22,102,160 27,635,465 -
============== ============ ======= ========= ============ ========== ========= ============ ========== =======
2019 Extended Life Share
(AUDITED) Ordinary Share Class Class New Global Share Class
Number Per
Distribution of Per Share Distribution Number Per Share Distribution Number Share
Amount Shares Amount Amount of Shares Amount Amount of Shares Amount
=========== ============ ========= ========= ============ ========== ========= ============ ========== ========
1 April
2019 $ 7,991,975 8,012,808 $ 0.9974 $ 19,991,952 20,648,577 $ 0.9682 $ 8,535,657 7,198,961 $ 1.1857
=========== ============ ========= ========= ============ ========== ========= ============ ========== ========
27 August
2019 - - - $ 4,991,952 5,418,379 $ 0.9213 $ 3,060,855 2,833,485 $ 1.0802
=========== ============ ========= ========= ============ ========== ========= ============ ========== ========
25 November
2019 - - - $ 10,491,950 11,460,349 $ 0.9155 - - -
=========== ============ ========= ========= ============ ========== ========= ============ ========== ========
$7,991,975 8,012,808 - $35,475,854 37,527,305 - $11,596,512 10,032,446 -
=========== ============ ========= ========= ============ ========== ========= ============ ========== ========
Buybacks
Under the authority granted to the Directors at the 2019 and
2020 AGMs, between 1 January 2020 and 30 June 2020, 1,711,822
Extended Life Shares were repurchased and cancelled by the Company
for gross consideration of $982,793 and 1,222,500 New Global Shares
were repurchased and cancelled by the Company for gross
consideration of $894,202 (GBP709,536).
NOTE 6 - MATERIAL AGREEMENTS AND RELATED PARTY TRANSACTIONS
Investment Management Agreement ("IMA")
The Board is responsible for managing the business affairs of
the Company but delegates certain functions to the Investment
Manager under an IMA dated 9 June 2010 (as amended).
On 17 July 2014, the Company, the Manager and the AIFM made
certain classificatory amendments to their contractual arrangements
for the purposes of the AIFM Directive. The Sub-Investment
Management Agreement was terminated on 17 July 2014 and Neuberger
Berman Investment Advisers LLC (formerly Neuberger Berman Fixed
Income LLC), which was the Sub-Investment Manager, was appointed as
the AIFM per the amended and restated IMA dated 17 July 2014. Under
this agreement, the AIFM is responsible for risk management and
day-to-day discretionary management of the Company's Portfolios
(including un-invested cash). The risk management and discretionary
portfolio management functions are performed independently of each
other within the AIFM structure. The AIFM is not required to, and
generally will not, submit individual investment decisions for
approval by the Board. The Manager, Neuberger Berman Europe
Limited, was appointed under the same IMA to provide, amongst other
things, certain administrative services to the Company. On 31
December 2017 the Company entered into an Amendment Agreement
amending the IMA.
Per the IMA and in relation to the Ordinary Shares and Extended
Life Shares, the Manager is entitled to a management fee, which
shall accrue daily, and be payable monthly in arrears, at a rate of
0.125% per month of the respective NAVs of the Ordinary Share and
Extended Life Share classes. Soft commissions are not used.
Per the IMA and in relation to the New Global Shares, the
Manager is entitled to a management fee, which accrues daily, and
is payable monthly in arrears, at a rate of 0.125% per month of the
NAV of the New Global Share Class (excluding, until such time as
the New Global Share Class is 85% invested, any cash balances (or
cash equivalents)). The 85% threshold was crossed on 16 June 2015
and the Company is charged 0.125% per month on the NAV of the New
Global Share Class.
For the period ended 30 June 2020, the management fee expense
was $1,183,176 (30 June 2019: $1,873,729). At 30 June 2020, the
management fee payable was $139,176 (31 December 2019:
$493,060).
The Manager pays a fee to the AIFM out of the management fee
received from the Company. The Company does not pay any fees
directly to the AIFM.
Performance Fee
In addition, the Manager is entitled to a performance fee. The
performance fee for Ordinary Shares, Extended Life Shares and New
Global Shares (collectively the "Shares") will only become payable
once the Company has made aggregate distributions in cash to the
shareholders of the Shares (which shall include the aggregate price
of all Shares repurchased or redeemed by the Company) equal to the
aggregate gross proceeds from issuing Shares (the "Contributed
Capital") plus such amounts as will result in the shareholders
having received a realised (cash-paid) IRR in respect of the
Contributed Capital equal to Preferred Return, following which
there will be a 100% catch up payable to the Manager until the
Manager has received 20% of all amounts in excess of Contributed
Capital distributed to the shareholders and paid to the Manager as
a performance fee with, thereafter, all amounts distributed by the
Company 20:80 between the Manager's performance fee and the cash
distributed to shareholders.
The preferred rate of return for Ordinary Shares is an
annualised 6%, for Extended Life Shares was an annualised 6% from
2010 to April 2013 and is 8% from April 2013 to date and for New
Global Shares is an annualised 8%. For the purposes of financial
reporting, the performance fee is recognised on an accruals
basis.
No performance fees were paid or payable in respect of any of
the classes for the period ended 30 June 2020 or 31 December 2019,
nor would any be paid if the Company were to realise all its assets
at their carrying values at the period end.
Soft commissions are not used to pay for services used by the
Investment Manager.
Administration, Company Secretarial and Custody Agreements
Effective 1 March 2015, the Company entered into an
Administration and Sub-Administration Agreement with U.S. Bank
Global Fund Services (Guernsey) Limited and U.S. Bank Global Fund
Services (Ireland) Limited, a wholly-owned subsidiary of U.S.
Bancorp (the "Administration Agreement"). Under the terms of the
Administration Agreement, Sub-Administration services are delegated
to U.S. Bank Global Fund Services (Ireland) Limited (the
"Sub-Administrator"). The Sub-Administration Service Level
Agreement was amended and approved on 21 February 2018.
The Sub-Administrator is responsible for the day-to-day
administration of the Company (including but not limited to the
calculation and publication of the estimated daily NAV).
Administration, Company Secretarial and Custody Agreements
(continued)
Under the terms of the Administration Agreement, the
Sub-Administrator is entitled to a fee of 0.09% for the first $500m
of net asset value, 0.08% for the next $500m and 0.07% for any
remaining balance, accrued daily and paid monthly in arrears and
subject to an annual minimum of $100,000.
Effective 1 March 2015, the Company entered into a Custody
Agreement with U.S. Bank National Association (the "Custodian") to
provide loan administration and custody services to the Company.
Under the terms of the Custody Agreement the Custodian is entitled
to an annual fee of 0.025% of net asset value with a minimum annual
fee of $25,000.
Effective 20 June 2017, Carey Commercial Limited was appointed
the Company Secretary. The Company Secretary is entitled to an
annual fee of GBP65,800 plus fees for ad-hoc board meetings and
additional services.
For the period ended 30 June 2020, the administration fee
expense was $75,824 (30 June 2019: $115,761), the secretarial fee
was $28,386(1) of which $7,286(1) was in relation to the
administration of the ongoing buyback programme, (30 June 2019:
$72,405) and the loan administration and custody fee expense was
$21,177(1) (30 June 2019: $112,216). At 30 June 2020, the
administration fee payable is $8,977(2) (31 December 2019:
$14,535), the secretarial fee payable is $73,831(2) (31 December
2019: $86,256) and the loan administration and custody fee payable
is $5,620(2) (31 December 2019: $11,779).
Directors' Remuneration and Other Interests
The Directors are related parties and are remunerated for their
services at a fee of $45,000 plus GBP10,000 each per annum ($60,000
plus GBP10,000 for the Chairman, $50,000 plus GBP10,000 for the
Chairman of the Audit Committee). For the period ended 30 June
2020, the Directors' fees and travel expenses amounted to
$97,466(1) (30 June 2019: $127,029). Michael J. Holmberg, the
non-independent Director, has waived the fees for his services as a
Director. There were no other related interests for the period
ended 30 June 2020.
(1) Amount is included under Professional and other expenses in
the Unaudited Consolidated Statement of Operations
(2) Amounts are included under Accrued expenses and other
liabilities in the Unaudited Consolidated Statement of Assets and
Liabilities and Unaudited Consolidated Statement of Operations
NOTE 7 - FINANCIAL HIGHLIGHTS
Extended
Ordinary Extended New Global Ordinary Life New Global
Shares Life Shares Shares Shares Shares Shares
($) ($) (GBP) ($) ($) (GBP)
PERIOD PERIOD
ended PERIOD ended ended Year ended Year ended Year ended
Per share operating 30 June 30 June 30 June 31 DECEMBER 31 DECEMBER 31 DECEMBER
performance 2020 2020 2020 2019 2019 2019
(UNAUDITED) (UNAUDITED) (UNAUDITED) (audited) (audited) (audited)
Net asset value per
share at beginning
of the period/year 0.9086 0.9266 0.8339 0.9778 0.9635 0.9206
============================ ============ ============= ============ ============= ============= =============
Impact of share buybacks - 0.0034 0.0021 - 0.0020 0.0015
============================ ============ ============= ============ ============= ============= =============
Impact of share redemptions - (0.0025) (0.0031) (0.0022) 0.0008 (0.0009)
============================ ============ ============= ============ ============= ============= =============
Income/(loss) from
investment operations
(3)
============================ ============ ============= ============ ============= ============= =============
Net investment (loss)/
income (0.0033) 0.0087 0.0022 (0.0063) 0.0183 0.0098
============================ ============ ============= ============ ============= ============= =============
Net realised and
unrealised loss from
investments and foreign
exchange (0.2208) (0.2275) (0.2226) (0.0607) (0.0580) (0.0971)
============================ ============ ============= ============ ============= ============= =============
Total loss from
investment operations (0.2241) (0.2188) (0.2204) (0.0670) (0.0397) (0.0873)
============================ ============ ============= ============ ============= ============= =============
Net asset value per
share at end of the
period/year 0.6845 0.7087 0.6125 0.9086 0.9266 0.8339
============================ ============ ============= ============ ============= ============= =============
(3) Weighted average number of shares outstanding was used for
calculation.
Extended Extended
Ordinary Life New Global Ordinary Life New Global
Shares Shares Shares Shares Shares Shares
====================== ============ ============ ============ ============= ============= =============
PERIOD PERIOD PERIOD
ended ended ended Year ended Year ended Year ended
NAV Total Return 30 June 30 June 30 June 31 DECEMBER 31 DECEMBER 31 DECEMBER
(1,2) 2020 2020 2020 2019 2019 2019
(UNAUDITED) (UNAUDITED) (UNAUDITED) (audited) (audited) (audited)
NAV Total Return
before performance
fee (24.66%) (23.52%) (26.55%) (7.08%) (3.83%) (9.42%)
Performance fee - - - - - -
NAV Total Return
after performance
fee including an
income distribution
by way of dividend (24.66%) (23.52%) (26.55%) (7.08%) (3.83%) (9.42%)
(1) NAV Total Return is calculated for the Ordinary Shares,
Extended Life Shares and New Global Shares only and is calculated
based on movement in the NAV and does not reflect any movement in
the market value of the shares. A shareholder's return may vary
from these returns based on participation in new issues, the timing
of capital transactions etc. It assumes that all income
distributions of the Company, paid by way of dividend, were
reinvested, without transaction costs. Class A shares are not
presented as they are not profit participating shares.
(2) An individual shareholder's return may vary from these
returns based on the timing of the shareholder's subscriptions.
Extended Extended
Ordinary Life New Global Ordinary Life New Global
Shares Shares Shares Shares Shares Shares
============================== ============ ============ ============ ============= ============= =============
PERIOD PERIOD PERIOD
ended ended ended Year ended Year ended Year ended
Ratios to avErage 30 June 30 June 30 June 31 DECEMBER 31 DECEMBER 31 DECEMBER
net ASSETS 2020 2020 2020 2019 2019 2019
(UNAUDITED) (UNAUDITED) (UNAUDITED) (audited) (audited) (audited)
Net investment income/(loss)
before and after
performance fees (0.83%) 2.11% 0.49% (0.66%) 1.92% 1.13%
============================== ============ ============ ============ ============= ============= =============
Total expenses after
performance fee (2.24%) (2.23%) (2.41%) (2.15%) (2.21%) (2.31%)
============================== ============ ============ ============ ============= ============= =============
NOTE 8 - RECONCILIATION OF NET ASSET VALUE TO PUBLISHED NAV
In preparing the Financial Statements, there were adjustments
relating to investment valuations. The impact of these adjustments
on the NAV per Ordinary Share, Extended Life Share and New Global
Share is detailed below:
Extended
Ordinary Extended Life New Global
Ordinary Share Class Life Share Class New Global Share Class
Share Class NAV per Share Class NAV per Share Class NAV per
Net Assets Share Net Assets Share Net Assets Share
($) ($) ($) ($) (GBP) (GBP)
========================= ============ ============ ============ ============ ============ ============
Published net assets
at 30 June 2020 10,530,249 0.6845 58,461,923 0.7087 26,292,698 0.6125
========================= ============ ============ ============ ============ ============ ============
Deferred Tax Adjustment - - - - - -
========================= ============ ============ ============ ============ ============ ============
Valuation adjustments - - - - - -
========================= ============ ============ ============ ============ ============ ============
Net assets per Unaudited
Consolidated Financial
Statements 10,530,249 0.6845 58,461,923 0.7087 26,292,698 0.6125
========================= ============ ============ ============ ============ ============ ============
Extended
Ordinary Extended Life New Global
Ordinary Share Class Life Share Class New Global Share Class
Share Class NAV per Share Class NAV per Share Class NAV per
Net Assets Share Net Assets Share Net Assets Share
($) ($) ($) ($) (GBP) (GBP)
============================ ============ ============ ============ ============ ============ ============
Published net assets
at 31 December 2019 13,976,415 0.9086 105,771,674 0.9266 59,934,598 0.8349
============================ ============ ============ ============ ============ ============ ============
Deferred Tax Adjustment - - - - (71,816) (0.0010)
============================ ============ ============ ============ ============ ============ ============
Valuation adjustments - - - - - -
============================ ============ ============ ============ ============ ============ ============
Net assets per Consolidated
Financial Statements 13,976,415 0.9086 105,771,674 0.9266 59,862,782 0.8339
============================ ============ ============ ============ ============ ============ ============
NOTE 9 - SIGNIFICANT EVENTS DURING THE PERIOD
COVID-19
The recent outbreak of the COVID-19 in many countries, which is
a rapidly evolving situation, has, among other things, disrupted
global travel and supply chains, and has adversely impacted global
commercial activity, the transportation industry and commodity
prices in the energy sector. The impact of this virus has
negatively affected and may continue to affect the economies of
many nations, individual companies and the global securities and
commodities markets, including liquidity and volatility, in ways
that cannot necessarily be foreseen at the present time. The rapid
development and fluidity of this situation precludes any prediction
as to its ultimate impact, which may have a continued adverse
effect on economic and market conditions and trigger a period of
global economic downturn. Such conditions (which may be across
industries, sectors or geographies) have impacted and may continue
to impact operating performance at the Company's portfolio
companies.
NOTE 10 - SUBSEQUENT EVENTS
In the period 30 June 2020 to 19 August 2020, being the last
practicable date prior to signing, the Company has bought back
1,175,000 NBDX shares and 783,333 NBDG shares for cancellation.
The Directors have evaluated subsequent events up to 26 August
2020, which is the date that the Unaudited Consolidated Interim
Financial Statements were available to be issued, and have
concluded there are no further items that require disclosure or
adjustment to the Unaudited Consolidated Interim Financial
Statements
ADDITIONAL INFORMATION | Contact Details
Contact Details
Directors
John Hallam (Chairman)
Michael Holmberg
Christopher Legge
Stephen Vakil
All c/o the Company's registered office.
Registered Office
1(st) & 2(nd) Floors, Elizabeth House
Les Ruettes Brayes
St Peter Port
Guernsey
GY1 1EW
Company Secretary
Carey Commercial Limited
Alternative Investment Fund Manager
Neuberger Berman Investment Advisers LLC
Manager
Neuberger Berman Europe Limited
Custodian and Principal Bankers
US Bank National Association
Designated Administrator
U.S. Bank Global Fund Services (Guernsey) Limited
Independent Auditor
KPMG Channel Islands Limited
Sub-Administrator
U.S. Bank Global Fund Services (Ireland) Limited
Financial Adviser and Corporate Broker
Stifel Nicolaus Europe Limited until 13 September 2020
Jefferies International Limited after 13 September 2020
Solicitors to the Company (as to English law and U.S. securities
law)
Herbert Smith Freehills LLP
Advocates to the Company (as to Guernsey law)
Carey Olsen
Registrar
Link Market Services (Guernsey) Limited
UK Transfer Agent
Link Asset Services
34 Beckenham Road
Beckenham
Kent
BR3 4TU
United Kingdom
Shareholders holding shares directly and not through a broker,
saving scheme or ISA and have queries in relation to their
shareholdings should contact the Registrar on +44 (0)371 664 0445.
(Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be charged at the
applicable international rate. Lines are open between 9 a.m. to
5:30 p.m. (excluding bank holidays)). Shareholders can also access
their details via the Registrar's website:
www.signalshares.com .
Full contact details of the Company's advisers and Manager can
be found on the Company's website.
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IR KZGZRGVKGGZZ
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