TIDMNBDD TIDMNBDX TIDMNBDG
RNS Number : 3911K
NB Distressed Debt Invest. Fd. Ltd
25 August 2023
NB DISTRESSED DEBT INVESTMENT FUND LIMITED
2023 Interim Report
unaudited CONSOLIDATED interim Financial Statements
For the six month period ended 30 june 2023
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 and Guidance 2021
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
on page 4 of the Annual Report and Financial Statements for the
year ended 31 December 2022.
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
As at 30 June 2023 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")
47,875,446 Extended Life Shares, none of which were held in
treasury.
New Global Share Class ("NBDG")
27,821,698 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
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: GG00BRZRVJ00
Bloomberg code: NBDX:LN
New Global Shares
LSE ISIN code: GG00BNTXRB08
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 $1
2023 INTERIM PERFORMANCE REVIEW | Financial Highlights
Financial Highlights
Key Figures
Extended
Ordinary Life Share New Global
AS At 30 jUNE 2023 (uNAUDITED) Share Class Class Share Class(1) Aggregated
-------------------------------- ------------- ------------ ---------------- -----------
Net Asset Value ("NAV")
($ millions) 12.2 49.2 23.1 84.5
================================ ============= ============ ================ ===========
NAV per Share ($) 0.7959 1.0267 0.8290 -
================================ ============= ============ ================ ===========
Share Price ($) 0.740 0.5600 0.4513 -
================================ ============= ============ ================ ===========
NAV per Share (GBP) - - 0.6521 -
================================ ============= ============ ================ ===========
Share Price (GBP) - - 0.355 -
================================ ============= ============ ================ ===========
Premium /(Discount) to
NAV per Share (7.02%) (45.46%) (45.56%) -
================================ ============= ============ ================ ===========
Portfolio of Distressed
Investments ($ millions) 7.4 31.8 22.1 61.3
================================ ============= ============ ================ ===========
Cash and Cash Equivalents
($ millions) 4.3 15.5 0.7 20.5
================================ ============= ============ ================ ===========
Total Expense Ratio ("TER")(2) 1.08% 1.18% 1.53% -
================================ ============= ============ ================ ===========
Ongoing Charges (3) 1.05% 1.13% 1.48% -
================================ ============= ============ ================ ===========
Extended
AS At 31 December 2022 Ordinary Life Share New Global
(AUDITED) Share Class Class Share Class(1) Aggregated
-------------------------------- ------------- ------------ ---------------- -----------
Net Asset Value ("NAV")
($ millions) 11.9 58.5 24.8 95.2
================================ ============= ============ ================ ===========
NAV per Share ($) 0.7730 0.9728 0.7987 -
================================ ============= ============ ================ ===========
Share Price ($) 0.740 0.4800 0.4691 -
================================ ============= ============ ================ ===========
NAV per Share (GBP) - - 0.6640 -
================================ ============= ============ ================ ===========
Share Price (GBP) - - 0.39 -
================================ ============= ============ ================ ===========
Premium /(Discount) to
NAV per Share (4.27%) (50.66%) (41.26%) -
================================ ============= ============ ================ ===========
Portfolio of Distressed
Investments ($ millions) 7.3 42.5 24.0 73.8
================================ ============= ============ ================ ===========
Cash and Cash Equivalents
($ millions) 4.4 15.2 0.2 19.8
================================ ============= ============ ================ ===========
Total Expense Ratio ("TER")(2) 0.97% 0.99% 1.33% -
================================ ============= ============ ================ ===========
Ongoing Charges (3) 0.95% 0.96% 1.29% -
================================ ============= ============ ================ ===========
(1) Stated in US Dollars, the GBP price as at 30 June 2023 and
31 December 2022 converted to US Dollars using respective
period/year end exchange rates.
(2) The TERs represent the operating expenses, as required by US
Generally Accepted Accounting Principles ("US GAAP"), expressed as
a percentage of average net assets.
(3) In the period to 30 June 2023, the Company's Ongoing Charges
were 1.21%. This figure is based on an expense figure for the
period to 30 June 2023 of $547,458. This figure, which has been
prepared in accordance with AIC guidance represents the Company's
operating expenses, excluding finance costs payable, expressed as a
percentage of average net assets. Effective 18 March 2021, the
Investment Manager had waived its entitlement to all fees from the
Company. The Ongoing Charges by share class are disclosed
above.
Summary of Value in Excess of Original Capital Invested
Extended
Ordinary Life New Global
Share Class Share Class Share Class
AS At 30 June 2023 ($) ($) (GBP)
------------------------------------- -------------- -------------- --------------
Original Capital Invested (124,500,202) (359,359,794) (110,785,785)
------------------------------------- -------------- -------------- --------------
Total Capital Distributions 129,627,394 290,315,104 51,444,766
------------------------------------- -------------- -------------- --------------
Total Income Distributions (1) 3,166,835 20,695,255 5,070,285
------------------------------------- -------------- -------------- --------------
Distributions as % of Original
Capital 107% 87% 51%
------------------------------------- -------------- -------------- --------------
Total Buybacks - 12,112,379 10,924,963
------------------------------------- ============== -------------- --------------
NAV 12,243,896 49,152,033 18,141,858
------------------------------------- -------------- -------------- --------------
Total of NAV Plus Capital and
Income Returned ("Value") 145,038,125 372,274,771 85,581,872
------------------------------------- -------------- -------------- --------------
Value in Excess of Original Capital
Invested 20,537,923 12,914,977 (25,203,913)
------------------------------------- -------------- -------------- --------------
Value as % of Original Capital
Invested 116% 104% 77%
------------------------------------- -------------- -------------- --------------
Extended
Ordinary Life New Global
Share Class Share Class Share Class
AS At 31 December 2022 ($) ($) (GBP)
------------------------------------- -------------- -------------- --------------
Original Capital Invested (124,500,202) (359,359,794) (110,785,785)
------------------------------------- -------------- -------------- --------------
Total Capital Distributions 129,627,394 278,812,413 49,279,634
------------------------------------- -------------- -------------- --------------
Total Income Distributions (1) 3,166,835 20,695,255 5,070,285
------------------------------------- -------------- -------------- --------------
Distributions as % of Original
Capital 107% 83% 49%
------------------------------------- -------------- -------------- --------------
Total Buybacks - 12,112,379 10,924,963
------------------------------------- ============== -------------- --------------
NAV 11,890,321 58,477,990 20,598,910
------------------------------------- -------------- -------------- --------------
Total of NAV Plus Capital and
Income Returned ("Value") 144,684,550 370,098,037 85,873,792
------------------------------------- -------------- -------------- --------------
Value in Excess of Original Capital
Invested 20,184,348 10,738,243 (24,911,993)
------------------------------------- -------------- -------------- --------------
Value as % of Original Capital
Invested 116% 103% 78%
------------------------------------- -------------- -------------- --------------
(1) By way of dividend
2023 INTERIM PERFORMANCE REVIEW | Chairman's Statement
Chairman's Statement
Dear Shareholder,
The six-month period ending 30 June 2023 continued to see
interest rate increases, high inflation, the war in Ukraine, rising
recession risk and volatile energy prices. 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
As at 30 June 2023, the Company had returned a total of $129m or
107% of NBDD investors' original capital of $124.5m, $290m or 87%
of NBDX investors' original capital of $359.4m and GBP51.4m or 51%
of NBDG investors' original capital of GBP110.8m. Currently we are
in what we hope to be the final stages of harvesting a number of
investments and we will keep investors informed as they occur. It
is our intention to fully harvest NBDD during the next 12 months,
subject to market conditions and with this in mind the Investment
Manager is evaluating all options. 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. We would therefore
remind shareholders that with effect from 18 March 2021 our
investment manager has agreed to waive all future fees.
Annual General Meeting ("AGM") Results
We were pleased to see that shareholders voted overwhelmingly in
favour of all resolutions proposed at our AGM held on 28 June 2023.
We appreciate that circumstances have adversely impacted the
results the company has achieved and would like to take the
opportunity to thank you all for your votes and continued support.
We would continue to highlight the importance of voting in the AGM.
We are always happy to receive any questions or concerns from
shareholders ahead of the AGM so they can be addressed
beforehand.
Board Composition, Independence and Diversity
Due to the expected wind up of the fund it is not considered
appropriate or practical to refresh the board at this time and we
believe the results of the relevant AGM resolutions endorse this
approach.
Distributions
During the period we made good progress on the realisation of
assets. Following the receipt of proceeds from the realisation of a
lodging & casinos investment the Board resolved on April 17,
2023 to make capital distributions of $0.1356 and GBP0.0698 per
share in respect of the NBDX and NBDG classes respectively. These
distributions were made by a compulsory pro rata redemption of
shares held as at May 2, 2023 with payment being made on May 17,
2023.
On 16 June, 2023, the Board announced a further capital
distribution of $0.0651 per Extended Life Share, again from the
realisation of a lodging & casinos investment, which was paid
13 July 2023.
We will continue to put our income distribution policy to a
shareholder vote at each annual general meeting. I would like to
remind shareholders that such distributions occur on an ad-hoc
basis and are not expected to be either material or equal for each
share class.
Outlook
As I said in the annual report, the final distributions from
each share class have been delayed. The Ordinary class of shares
will be the first to commence the final wind-up process in the next
12 months, 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 to 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 $36.5m and GBP8.4m 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.
For regulatory reasons, the final 10% of the total return (NAV
plus cumulative distributions) in respect of any class of
participating shares in the Company will be returned to
shareholders with a final compulsory redemption of all of the
outstanding shares of that class.
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
24 August 2023
2023 INTERIM PERFORMANCE REVIEW | Investment Manager's
Report
Investment Manager's Report
Ordinary Share Class
Summary
The NAV per share increased by 3.0 % for the period ended June
30, 2023. Public markets were volatile as investors monitored
multiple themes that could impact global growth, including
tightening fiscal and monetary conditions, persistently higher
inflation, supply chain disruptions, a tight labour market, the
ongoing Russian war in Ukraine, and recent bank failures. All could
lead to elevated volatility over the next 12 months and beyond.
Given these circumstances, the timing and quantum of any financial
impact on the portfolio remains very difficult to predict. Despite
the uncertainty, 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. Currently
we are in what we hope to be the final stages of harvesting a
number of investments and we will keep investors informed as they
occur. It is our intention to fully harvest NBDD during the next 12
months.
Portfolio Update
NBDD ended the period with a NAV per share of $0.7959 compared
to $0.7730 at end of 2022. The rise in NAV was principally driven
by an increase in the value of a packaging company investment. At
30 June 2023, 57% of NBDD's NAV was invested in distressed assets,
and $4M in US Government securities which represented a further 43%
of NAV, with a minimal amount cash net of payables (see table
below). Cash balances will continue to increase as assets are
realised, subject to variations in collateral cash, but as noted
previously cannot be distributed until the final liquidation of the
share class. The portfolio consisted of 5 issuers across four
sectors. The largest sector concentrations were in surface
transportation, containers & packaging and financial
intermediaries.
There were no notable events during 2023.
Cash Analysis
====================== ========
Balance Sheet - Cash $4.3m
====================== ========
Collateral cash ($3.1m)
====================== ========
Other payables ($0.0m)
====================== ========
Total available cash $1.2m
====================== ========
Significant Price Movement during 2023 (more than 1% of NBDD NAV
or approximately $120,000)
INDUSTRY INSTRUMENT TOTAL RETURN COMMENT
(US DOLLARS MILLIONS)
----------------------- ------------------ ------------------------ ---------------------------
Containers & packaging Private Equity 0.4 Sponsor Equity Injection
Surface transport Total Return Swap 0.3 Interest accruals
Exits
During the period, we had no exits. The total number of exits
since inception in NBDD is 51, with a total return of $35.4m.
Partial Realisations
The partial realisations have generated net realised gains of
$7.8m over the life of the fund. 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 to investors
including NAV and all distributions paid is $145.0m (116% of
original capital). 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 shareholders and will wind down
the share class which is expected to be in 2024, assuming
supportive market conditions. We will continue to update investors
as we gain clarity on the realisations.
Extended Life Share Class
Summary
The NAV per share increased by 5.5 % for the period ended June
30, 2023. Public markets were volatile as investors monitored
multiple themes that could impact global growth, including
tightening fiscal and monetary conditions, persistently higher
inflation, supply chain disruptions, a tight labour market, the
ongoing Russian war in Ukraine, and recent bank failures. All could
lead to elevated volatility over the next 12 months and beyond.
Given these circumstances, the timing and quantum of any financial
impact on the portfolio remains very difficult to predict. Despite
the uncertainty, the Investment Manager is committed to realising
the investments in a timely manner and winding down the share class
as soon as practicable. Currently we are in what we hope to be the
final stages of harvesting a number of investments and we will keep
investors informed as they occur. It is our intention to fully
harvest NBDX during the next 12 months.
Portfolio Update
NBDX ended the period with a NAV per share of $1.0267 compared
to $0.9728 at end of 2022. At 30 June 2023, 82% of NBDX's NAV was
invested in distressed assets, and $1.9M in US Government
securities which represented a further 18% of NAV with a minimal
amount of cash net of payables (see table below). Cash balances
will continue to increase as assets are realised, subject to
variations in collateral cash, but as noted previously not all can
be distributed until the final liquidation of the share class. The
NAV per share increase during the period was principally driven by
a distribution received from a financial intermediary investment,
an increase in value of a packaging investment, and the exit of two
lodging & casinos investments. The NBDX portfolio consists of 8
issuers across 6 sectors. The largest sector concentrations were in
surface transportation, financial intermediaries, oil & gas,
containers & packaging.
Cash Analysis
====================== ========
Balance Sheet - Cash $15.5m
====================== ========
Collateral cash ($8.7m)
====================== ========
Other payables ($0.1m)
====================== ========
Total available cash $6.6m
====================== ========
Notable events below describe activity in the investments during
2023:
-- In March of 2023, a restructuring agreement for a lodging
& casinos investment was executed which resulted in a paydown
of the Secured Notes. Proceeds were received in April. NBDX
received approximately $6.4mm.
-- In May of 2023, we exited another lodging & casinos
investment in the secondary market. NBDX received approximately
$2.0mm.
-- In June 2023, a financial intermediary investment made a
distribution to its surplus note holders of approximately $33.4
million, of which NBDX received $4.3mm.
Significant Price Movements during 2023 (approximately 1% of
NBDX NAV or $490,000)
INDUSTRY INSTRUMENT TOTAL RETURN COMMENT
(USD MILLIONS)
------------------- ---------------- ---------------- -------------------------
Containers &
Packaging Private Equity 1.1 Sponsor Equity Injection
Total Return
Surface Transport Swap 0.7
Exits
In 2023 we had two exits. The total number of exits since
inception in NBDX to 71 with total return of $70.9m.
Partial Realisations
The partial realisations generated net realised gains of $20.0m
over the life of the Company. Detailed descriptions of the partial
realisations are at the end of this report.
Distributions
During 2023 NBDX made $11.5m distributions. The total
distributions to date (dividends, redemptions and buy-backs) amount
to $323.1m or 90% of original capital. Total value to investors
including NAV and all distributions paid is $372.3m or 104% of
original capital. 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 has undertaken a review of all the investments
in the light of a changed market and we have updated the
distribution schedule for the investments based on current
expectations. Our current expectation is to wind down the share
class in 2024, assuming supportive market conditions. We will
continue to update investors as we gain clarity on the
realisations.
New Global Share Class
Summary
The NAV per share decreased by 1.79% for the period ended June
30, 2023. Public markets were volatile as investors monitored
multiple themes that could impact global growth, including
tightening fiscal and monetary conditions, persistently higher
inflation, supply chain disruptions, a tight labour market, the
ongoing Russian war in Ukraine, and recent bank failures. All could
lead to elevated volatility over the next 12 months and beyond.
Given these circumstances, the timing and quantum of any financial
impact on the portfolio remains very difficult to predict. Despite
the uncertainty, the Investment Manager is committed to realising
the investments in a timely manner and winding down the share class
as soon as practicable. Currently we are in what we hope to be the
final stages of harvesting a number of investments and we will keep
investors informed as they occur. It is our intention to fully
harvest NBDG during the next 12 months.
Portfolio Update
NBDG ended the period with a NAV per share of GBP0.6521 compared
to GBP0.6640 at the end of 2022. At 30 June 2023, 97% of NBDG's NAV
was invested in distressed assets and 3% of NAV with a minimal
amount of cash net of payables (see table below). NAV per share
decreased during the period principally due to a reduction in value
of a lodging & casinos investment and the strengthening of the
Pound Sterling . T he portfolio consisted of 5 issuers across 5
sectors. The largest sector concentrations were in lodging &
casinos, commercial mortgage, surface transportation and oil &
gas.
Cash Analysis
====================== ========
Balance Sheet - Cash $0.7m
====================== ========
Other payables ($0.1m)
====================== ========
Total available cash $0.6m
====================== ========
Notable events involving NBDG's investments during 2023 are
below :
-- In March of 2023, a restructuring agreement for a lodging
& casinos investment was executed which resulted in a paydown
of the Secured Notes. Proceeds were received in April. NBDG
received approximately GBP2.6mm.
Significant Price Movements during 2023 (approximately 1% of
NBDG NAV or GBP180,000)
INDUSTRY INSTRUMENT TOTAL RETURN COMMENT
(USD MILLIONS)
------------------ ------------------------------------ ----------------- ---------------
Lower Expected
Surface Transport Bank Debt Investments 0.2 Value
Exits
During 2023 there was one exit. The total number of exits since
inception is 32 with a total return of GBP2.7m. Detailed
descriptions of the exits are at the end of this report.
Partial Realisations
There were no partial realisations in NBDG during 2023.
Distributions
During 2023, there were GBP2.2m of distributions. Total
distributions to date (dividends, redemptions, and buy-backs) are
GBP67.4m or 61% of original capital. Total value to investors
including NAV and all distributions paid is GBP85.6m or 77% of
original capital. 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 the outstanding shares of that class. The
investment manager has undertaken a review of all the investments
in the light of a changed market and we have updated the
distribution schedule for the investments based on current
expectations. Our current expectation is to wind down the share
class in 2024, assuming supportive market conditions. We will
continue to update investors as we gain clarity on the
realisations.
Summary of Exits across all Share Classes
Exits experienced from inception to date were as follows:
NBDD 51 exits with a total return of $35.4m, IRR (1) of 10% and
ROR of 19%
NBDX 71 exits with a total return of $70.9m, IRR (1) of 5% and
ROR of 12%
NBDG 32 exits with a total return of GBP(2.2m), IRR (1) of (4)%
and ROR of (2)%
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. Total Return
represents the inception to date gain/loss on an investment.
Exit A1 (Exit 32 for NBDG and Exit 70 for NBDX)
Cash Invested Cash Received Total Return Months
Exit (millions) (millions) (millions) IRR ROR Held
A1 Exit
======== ===== ================ ================ =============== ====== ====== =========
8.9 67.8
NBDX 70 $7.8 $13.0 $5.3 % % 101
======== ===== ================ ================ =============== ====== ====== =========
12.9 109.9
NBDG 32 GBP2.5 GBP5.2 GBP2.7 % % 101
======== ===== ================ ================ =============== ====== ====== =========
Exit A2 (Exit 71 for NBDX)
Cash Invested Cash Received Total Return Months
Exit (millions) (millions) (millions) IRR ROR Held
A2 Exit
======== ===== ================ ================ =============== ====== ====== =========
NBDX 71 $14.0 $20.2 $6.1 8.0% 43.7% 116
======== ===== ================ ================ =============== ====== ====== =========
Summary of Partial Realisations across all Share Classes
All partial realisations currently in the portfolio are reported
as at 30 June 2023 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:
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 of 2017 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 $1.3m generating a total return of $4.2m as of 30 June
2023. IRR was 25% and ROR was 59% with a holding period of 128
months at 30 June 2023.
Cash Value of
Cash Received Residual
Effective Invested to Date Investment Total Return MonthS
B Period (millions) (millions) (millions) (millions) IRR ROR Held
====== ============= ============= ============ ============= =============== ====== ====== =========
NBDD H1 2017 $2.0 $2.8 $0.4 $1.2 25% 59% 128
====== ============= ============= ============ ============= =============== ====== ====== =========
NBDX H1 2017 $5.1 $7.2 $1.0 $3.0 25% 59% 128
====== ============= ============= ============ ============= =============== ====== ====== =========
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 $9.6m, generating a total return of
$23.6m as at 30 June 2023. IRR was 52% and ROR was 256% with a
holding period of 131 months at 30 June 2023.
Cash Value of
Cash Received Residual
Effective Invested to Date Investment Total Return Months
C Period (millions) (millions) (millions) (millions) IRR ROR Held
====== ============= ============= ============ ============= =============== ====== ====== =========
NBDD H1 2017 $2.6 $6.5 $2.7 $6.6 52% 256% 131
====== ============= ============= ============ ============= =============== ====== ====== =========
NBDX H1 2017 $6.6 $16.7 $6.9 $17.0 52% 256% 131
Neuberger Berman Investment Advisers LLC Neuberger Berman Europe Limited
24 August 2023 24 August 2023
2023 INTERIM PERFORMANCE REVIEW | Portfolio Information
Portfolio Information
Ordinary Share Class
Top 4(1) Holdings as at 30 June 2023
Purchased % of
Holding Sector Instrument Status Country NAV Primary Asset
---------- ------------------------- ------------ ----------- ----------- ----- --------------------
1 Surface Transport(2) Trade Claim Defaulted Brazil 31% Municipal Claim
========== ========================= ============ =========== =========== ===== ====================
Post-Reorg Manufacturing Plant
2 Specialty Packaging Equity Post-Reorg Luxembourg 22% and Equipment
========== ========================= ============ =========== =========== ===== ====================
Secured
3 Financial Intermediaries Notes Post-Reorg US 3% Cash & Securities
========== ========================= ============ =========== =========== ===== ====================
Post-Reorg Manufacturing Plant
4 Specialty Packaging Equity Post-Reorg Luxembourg 3% and Equipment
========== ========================= ============ =========== =========== ===== ====================
Total 59%
========== ========================= ============ =========== =========== ===== ====================
Sector Breakdown(3)
[For Investment Structure of the Company, 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/3911K_1-2023-8-24.pdf
(1) Ordinary Share Class holds four investments by issuer.
(2) As at 30 June 2023 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.
[For Investment Structure of the Company, 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/3911K_1-2023-8-24.pdf)
(4) Categorisations determined by Neuberger Berman and
percentages determined by the Administrator, as a percentage of the
net asset values as at 30 June 2023 and 31 December 2022.
(5) As at 30 June 2023 collateral pledged is included in the
Brazil Market Value.
Extended Life Share Class
Top 8(1) Holdings as at 30 June 2023
%
Purchased of
Holding Sector Instrument Status Country NAV Primary Asset
---------- --------------------- -------------- ----------- ------------ ----- --------------------
1 Surface Transport(2) Trade Claim Defaulted Brazil 20% Municipal Claim
========== ===================== ============== =========== ============ ===== ====================
Post-Reorg
2 Oil & Gas Equity Post-Reorg US 16% Ethanol Plant
========== ===================== ============== =========== ============ ===== ====================
Specialty Post-Reorg Manufacturing Plant
3 Packaging Equity Post-Reorg Luxembourg 14% and Equipment
========== ===================== ============== =========== ============ ===== ====================
Commercial Commercial Real
4 Mortgage Secured Loan Defaulted Netherlands 10% Estate
========== ===================== ============== =========== ============ ===== ====================
5 Surface Transport Secured Loan Defaulted Spain 9% Concession
========== ===================== ============== =========== ============ ===== ====================
Financial
6 Intermediaries Secured Notes Defaulted US 8% Cash and Securities
========== ===================== ============== =========== ============ ===== ====================
Manufacturing Plant
7 Auto Components Secured Loan Post-Reorg US 4% and Equipment
========== ===================== ============== =========== ============ ===== ====================
Specialty Post-Reorg Manufacturing Plant
8 Packaging Equity Post-Reorg Luxembourg 2% and Equipment
========== ===================== ============== =========== ============ ===== ====================
Total 83%
========== ===================== ============== =========== ============ ===== ====================
Sector Breakdown(3)
[For Investment Structure of the Company, 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/3911K_1-2023-8-24.pdf
(1) Extended Share Class holds eight investments by issuer.
(2) As at 30 June 2023 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) as
Administrator / Sub-Administrator to the Company.
[For Investment Structure of the Company, 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/3911K_1-2023-8-24.pdf
(4) Categorisations determined by Neuberger Berman and
percentages determined by the Administrator, as a percentage of the
net asset values as at 30 June 2023 and 31 December 2022.
(5) As at 31 December 2022 collateral pledged is included in the
Brazil Market Value.
New Global Share Class
Top 5(1) Holdings as at 30 June 2023
Purchased % of
Holding Sector Instrument Status Country NAV Primary Asset
---------- ------------------------- ----------------- ----------- ------------ ----- -------------------
Secured Loan
Lodging & / Private
1 Casinos Equity Current Spain 37% Hotel/Casino
========== ======================= =================== =========== ============ ======= =================
Commercial Commercial
2 Mortgage Secured Loan Defaulted Netherlands 26% Real Estate
========== ======================= =================== =========== ============ ======= =================
3 Surface Transportation Secured Loan Defaulted Spain 18% Legal Claim
========== ======================= =================== =========== ============ ======= =================
4 Oil & Gas Private Equity Post-Reorg US 14% Ethanol Plant
========== ======================= =================== =========== ============ ======= =================
Manufacturing
5 Auto Components Secured Loan Post-Reorg US 3% Plant
========== ======================= =================== =========== ============ ======= =================
Total 98%
========== =========================== =============== =========== ============ ======= =================
Sector Breakdown(2)
[For Investment Structure of the Company, 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/3911K_1-2023-8-24.pdf
(1) Global Share Class holds five 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.
[For Investment Structure of the Company, 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/3911K_1-2023-8-24.pdf
(3) Categorisations determined by Neuberger Berman and
percentages determined by the Administrator, as a percentage of the
net asset values as at 30 June 2023 and 31 December 2022.
2023 INTERIM PERFORMANCE REVIEW | GOVERNANCE
Interim Management Report and Directors' Responsibility
Statement
Principal and Emerging Risks and Uncertainties
The principal and emerging risks of the Company are in the
following areas:
-- investment activity and performance;
-- principal risks associated with harvest periods;
-- level of premium or discount;
-- market price risk;
-- fair valuation of illiquid assets;
-- accounting, legal and regulatory risk;
-- operational risk;
-- climate related risks; and
-- issuance of new regulations;
These risks, and the way in which they are managed, are
described in more detail in the Strategic Report on pages 24 to 25
of the Company's latest annual report and audited financial
statements for the year ended 31 December 2022, which can be found
on the Company's website at
www.nbddif.com/pdf/nbddif_annual_report_2022_042923.pdf. The
Board's view is that these risks remain appropriately identified
for the remainder of 2023.
In addition to the Principal Risks, the invasion of Ukraine is
of concern and the Company has considered its potential impact on
asset values, and while no direct impact has been identified,
values are affected by its impact on the global economy. To manage
these risks further, the Investment Manager reviews time to
realisation quarterly to ensure balance between timing and value.
Moreover, while the risks associated with the COVID 19 pandemic
have largely receded the Investment Manager continues to monitor
the situation.
Going Concern
The financial position of the Company is set out below. In
addition, note 4 to the Unaudited Consolidated Interim Financial
Statements includes the Company's objectives, policies and
processes for managing its capital, its financial risk management
and its exposures to credit risk and liquidity risk.
The Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern including reviewing the
on-going cash flows and the level of cash balances, the likely
liquidity of investments and any income deriving from those
investments as of the reporting date as well as taking into
consideration the impact of emerging risks and have determined that
the Company has adequate financial resources to meet its
liabilities as they fall due.
Having reassessed the principal and emerging 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 2023. 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
24 August 2023 24 August 2023
2023 INTERIM PERFORMANCE REVIEW | GOVERNANCE
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 2023 of the
Company and its subsidiaries (together, the "Group"), which
comprises the unaudited consolidated statement of assets and
liabilities, the unaudited consolidated statement of operations,
the unaudited consolidated statement of changes in net assets, the
unaudited consolidated statement of cash flows, the 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 in the
half-yearly financial report for the six months ended 30 June 2023
do not give a true and fair view of the financial position of the
Group as at 30 June 2023 and of its financial performance and its
cash flows for the six month period then ended, in accordance 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) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued by the Financial Reporting Council
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.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Scope of review
section of this report, nothing has come to our attention to
suggest that the directors have inappropriately adopted the going
concern basis of accounting or that the directors have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However future events or conditions
may cause the Group to cease to continue as a going concern, and
the above conclusions are not a guarantee that the Group will
continue in operation.
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 interim financial report in accordance with the
DTR of the UK FCA.
The financial statements included in this interim report have
been prepared in accordance with U.S. generally accepted accounting
principles.
In preparing the half-yearly financial report, the directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
liquidation is imminent.
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. Our conclusion, including our conclusions relating
to going concern, are based on procedures that are less extensive
than audit procedures, as described in the scope of review
paragraph of this report.
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
24 August 2023
FINANCIAL STATEMENTS | Unaudited Consolidated Statement of
Assets and Liabilities
Unaudited - see accompanying accountants report
Unaudited Consolidated Statement of Assets and Liabilities
AS AT 30 JUNE 2023 AND 31 DECEMBER 2022
30 June 31 December
2023 2022
(EXPRESSED IN US DOLLARS EXCEPT WHERE
STATED OTHERWISE) (Unaudited) (Audited)
============================================== ============== === ===================================
Assets
============================================== ============== === ===================================
Investments at fair value (2023: cost
of $89,077,176; 2022: cost of $103,009,846) 61,368,128 73,743,616
============================================== ============== === ===================================
Forward currency contracts 137,116 12,018
============================================== ============== === ===================================
Total Return Swaps (2023: cost of $Nil
, 2022: cost of $Nil) 2,802,366 1,558,420
============================================== ============== === ===================================
Cash and cash equivalents 8,617,196 8,733,589
============================================== ============== === ===================================
Restricted Cash:
============================================== ============== === ===================================
Forward currency contracts Collateral 820,000 90,000
============================================== ============== === ===================================
Total return swap Collateral 10,970,000 10,970,000
============================================== ============== === ===================================
84,714,806 95,107,643
============================================== ============== === ===================================
Other assets
============================================== ============== === ===================================
Interest receivables 436,736 596,024
============================================== ============== === ===================================
Receivables for investments sold 39,907 498,514
============================================== ============== === ===================================
Other receivables and prepayments 29,863 72,304
============================================== ============== === ===================================
Withholding tax receivable 445,762 445,762
============================================== ============== === ===================================
Total assets 85,667,074 96,720,247
============================================== ============== === ===================================
Liabilities
============================================== ============== === ===================================
Credit default swap (2023: cost of $16,821;
2022: cost of $16,821) 42,900 21,494
============================================== ============== === ===================================
Forward currency contracts 911,324 1,269,365
============================================== ============== === ===================================
Accrued expenses and other liabilities 252,270 282,649
============================================== ============== === ===================================
Total liabilities 1,206,494 1,573,508
============================================== ============== === ===================================
Net assets 84,460,580 95,146,739
============================================== ============== === ===================================
Net assets attributable to Ordinary Shares
(shares 2023: 15,382,770;
2022: 15,382,770) 12,243,896 11,890,321
============================================== ============== === ===================================
Net asset value per Ordinary Share 0.7959 0.7730
============================================== ============== === ===================================
Net assets attributable to Extended Life
Shares (shares 2023: 47,875,446;
2022: 60,116,016) 49,152,033 58,477,990
============================================== ============== === ===================================
Net asset value per Extended Life Share 1.0267 0.9728
============================================== ============== === ===================================
Net assets attributable to New Global
Shares (shares 2023: 27,821,698;
2022: 31,023,609) GBP18,141,858 GBP 20,598,909
============================================== ============== === ===================================
Net asset value per New Global Share GBP0.6521 GBP0.6640
============================================== ============== === ===================================
Net assets attributable to New Global
Shares (USD equivalent) 23,064,651 24,778,428
============================================== ============== === ===================================
Net asset value per New Global Share
(USD equivalent) 0.8290 0.7987
============================================== ============== === ===================================
The Unaudited Consolidated Interim Financial Statements were
approved and authorised for issue by the Board of Directors on 24
August 2023, and signed on its behalf by:
John Hallam Christopher Legge
Chairman Director
The accompanying notes below are an integral part of the
Unaudited Consolidated Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Statement of Operations
Unaudited - see accompanying accountants report
Unaudited Consolidated Statement of Operations
FOR THE SIX MONTH PERIODED 30 JUNE 2023 AND 30 JUNE 2022
(UNAUDITED)
30 jUNE
2023 30 jUNE 2022
(EXPRESSED IN US DOLLARS) (UNAUDITED) (UNAUDITED)
=============================================== ==== ============== === === ==============
Income
=============================================== ==== ============== === === ==============
Interest income 1,196,890 2,788,620
===================================================== ============== === === ==============
1,196,890 2,788,620
==================================================== ============== === === ==============
Expenses
=============================================== ==== ============== === === ==============
Professional and other expenses 418,980 494,094
===================================================== ============== === === ==============
Administration fee 43,636 49,412
===================================================== ============== === === ==============
Loan administration and custody fees 9,959 15,187
===================================================== ============== === === ==============
Directors' fees and expenses 96,725 97,900
===================================================== ============== === === ==============
569,300 656,593
==================================================== ============== === === ==============
Net investment income 627,590 2,132,027
===================================================== ============== === === ==============
Realised and unrealised (loss)/gain
from investments and foreign exchange
=============================================== ==== ============== === === ==============
Net realised gain on investments,
credit default swap, total return
swap and forward currency transactions 1,836,516 546,562
===================================================== ============== === === ==============
Net change in unrealised gain on investments,
credit default swap, total return
swap and forward currency transactions 1,050,289 1,491,006
===================================================== ============== === === ==============
Realised and unrealised gain from
investments and foreign exchange 2,886,805 2,037,568
===================================================== ============== === === ==============
Net increase in net assets resulting
from operations 3,514,395 4,169,595
===================================================== ============== === === ==============
The accompanying notes below are an integral part of the
Unaudited Consolidated Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Statement of Changes
in Net Assets
Unaudited - see accompanying accountants report
Unaudited Consolidated Statement of Changes in Net Assets
FOR THE SIX MONTH PERIODED 30 JUNE 2023 (UNAUDITED)
30 JUNE 30 JUNE
2023 30 JUNE 2023 2023 30 JUNE
Ordinary Extended New Global 2023
(EXPRESSED IN US DOLLARS) Shares Life Shares Shares Aggregated
================================ =========== ============= ============ =============
Net assets at the beginning
of the period 11,890,321 58,477,990 24,778,428 95,146,739
================================ =========== ============= ============ =============
Net investment gain 11,102 188,164 428,324 627,590
================================ =========== ============= ============ =============
Net realised gain/(loss)
on investments, credit
default swap and forward
currency transactions 365,374 2,059,942 (588,800) 1,836,516
================================ =========== ============= ============ =============
Net change in unrealised
gain/(loss) on investments,
credit default swap and
forward currency transactions (22,901) (71,372) 1,144,562 1,050,289
================================ =========== ============= ============ =============
Shares redeemed during
the period - (11,502,691) (2,697,863) (14,200,554)
================================ =========== ============= ============ =============
Net assets at the end
of the period 12,243,896 49,152,033 23,064,651 84,460,580
================================ =========== ============= ============ =============
FOR THE SIX MONTH PERIODED 30 JUNE 2022 (UNAUDITED)
30 JUNE 30 JUNE
2022 30 JUNE 2022 2022 30 JUNE
Ordinary Extended New Global 2022
(EXPRESSED IN US DOLLARS) Shares Life Shares Shares Aggregated
================================ ============ ============= ============ ============
Net assets at the beginning
of the period 13,887,833 74,450,993 32,215,319 120,554,145
================================ ============ ============= ============ ============
Net investment (loss)/gain (44,404) 1,460,412 716,019 2,132,027
================================ ============ ============= ============ ============
Net realised (loss)/gain
on investments, credit
default swap and forward
currency transactions (242,763) 736,512 52,813 546,562
================================ ============ ============= ============ ============
Net change in unrealised
(loss)/gain on investments,
credit default swap and
forward currency transactions (1,046,046) 1,459,930 1,077,122 1,491,006
================================ ============ ============= ============ ============
Dividends - (3,302,348) (1,647,824) (4,950,172)
================================ ============ ============= ============ ============
Net assets at the end
of the period 12,554,620 74,805,499 32,413,449 119,773,568
================================ ============ ============= ============ ============
The accompanying notes below are an integral part of the
Unaudited Consolidated Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Statement of Cash
Flows
Unaudited - see accompanying accountants report
Unaudited Consolidated Statement of Cash Flows
FOR THE SIX MONTH PERIODED 30 JUNE 2023 AND 30 JUNE 2022
30 JUNE
30 JUNE 2023 2022
(UNAUDITED) (UNAUDITED)
============================================ ====== ==== ============== === ==============
Cash flows from operating activities:
==================================================== ==== ============== === ==============
Net increase in net assets resulting
from operations 3,514,395 4,169,595
==================================================== ==== ============== === ==============
Adjustment to reconcile net increase/(decrease)
in net assets resulting from operations
to net cash flow provided by operations:
==================================================== ==== ============== === ==============
Net realised gain on investments, credit
default swap, total return swap and forward
currency transactions (1,836,516) (546,562)
==================================================== ==== ============== === ==============
Net change in unrealised (gain) on investments,
credit default swap, total return swap
and forward currency transactions (1,050,289) (1,491,006)
==================================================== ==== ============== === ==============
Accretion of discount on loans and bonds 63,648 (91,835)
==================================================== ==== ============== === ==============
Changes in interest receivable 159,288 280,557
==================================================== ==== ============== === ==============
Changes in receivables for investments
sold 458,607 37,783
==================================================== ==== ============== === ==============
Changes in other receivables and prepayments 42,441 51,447
==================================================== ==== ============== === ==============
Changes in withholding tax receivable - -
==================================================== ==== ============== === ==============
Changes in payables, accrued expenses
and other liabilities (30,379) 3,162
==================================================== ==== ============== === ==============
Cash received on settled forward currency
contracts and spot currency contracts (2,334,367) (724,615)
==================================================== ==== ============== === ==============
Capitalised payment in kind (1,101,998) (2,054,670)
==================================================== ==== ============== === ==============
Sale of investments 16,897,272 10,548,892
==================================================== ==== ============== === ==============
Net cash provided by operating activities 14,782,102 10,182,748
==================================================== ==== ============== === ==============
Cash flows from financing activities:
==================================================== ==== ============== === ==============
Shares redeemed during the period (14,200,554) -
==================================================== ==== ============== === ==============
Changes in movement in forward currency
collateral payable - 880,000
==================================================== ==== ============== === ==============
Net cash (used in)/ from financing activities (14,200,554) 880,000
==================================================== ==== ============== === ==============
Net increase in cash, cash equivalents
and restricted cash 581,548 11,062,748
==================================================== ==== ============== === ==============
Cash and cash equivalents at the beginning
of the period 8,733,589 4,370,854
==================================================== ==== ============== === ==============
Restricted cash at the beginning of the
period 11,060,000 10,970,000
==================================================== ==== ============== === ==============
Effect of exchange rate changes on cash
and cash equivalents 32,059 (17,816)
==================================================== ==== ============== === ==============
Cash and cash equivalents at the end
of the period 8,617,196 15,415,786
==================================================== ==== ============== === ==============
Restricted cash at the end of the period 11,790,000 10,970,000
==================================================== ==== ============== === ==============
Supplemental cash flow information
There were no reorganisations requiring disclosure in the period to
30 June 2023 (30 June 2022: None).
The accompanying notes below are an integral part of the
Unaudited Consolidated Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Condensed Schedule
of Investments
Unaudited - see accompanying accountants report
Unaudited Consolidated Condensed Schedule of Investments (by
financial instrument)
Extended
AS AT 30 JUNE 2023 Ordinary Life New Global Total
(UNAUDITED) Shares Shares Shares Company
(EXPRESSED IN US DOLLARS) Cost Fair Value (%)(1) (%)(1) (%)(1) (%)(1)
============================ =========== =========== =========== ========= ============ =========
Portfolio of Distressed
Investments
============================ =========== =========== =========== ========= ============ =========
Bank Debt Investments 50,776,643 33,851,612 0.00 33.97 74.38 40.08
============================ =========== =========== =========== ========= ============ =========
Private Equity 11,238,099 17,826,931 25.12 19.89 21.58 21.11
============================ =========== =========== =========== ========= ============ =========
Private Note 19,707,684 3,717,786 2.25 7 - 4.40
============================ =========== =========== =========== ========= ============ =========
Short term Investments
============================ =========== =========== =========== ========= ============ =========
US Treasury Bills 7,354,750 5,971,799 33.04 3.92 - 7.07
============================ =========== =========== =========== ========= ============ =========
Total Investments 89,077,176 61,368,128 60.41 64.78 95.96 72.66
============================ =========== =========== =========== ========= ============ =========
Ordinary Shares 7,010,194 7,396,782 60.41 - - 8.76
============================ =========== =========== =========== ========= ============ =========
Extended Life Shares 48,353,557 31,840,117 - 64.78 - 37.70
============================ =========== =========== =========== ========= ============ =========
New Global Shares 33,713,425 22,131,229 - - 95.96 26.20
============================ =========== =========== =========== ========= ============ =========
89,077,176 61,368,128 60.41 64.78 95.96 72.66
============================ =========== =========== =========== ========= ============ =========
Credit Default Swap
============================ =========== =========== =========== ========= ============ =========
Ordinary Shares (4,715) (12,025) (0.10) - - (0.01)
============================ =========== =========== =========== ========= ============ =========
Extended Life Shares (12,106) (30,875) - (0.06) - (0.04)
============================ =========== =========== =========== ========= ============ =========
(16,821) (42,900) (0.10) (0.06) - (0.05)
============================ =========== =========== =========== ========= ============ =========
Forward Currency
Contracts
============================ =========== =========== =========== ========= ============ =========
Assets
============================ =========== =========== =========== ========= ============ =========
Ordinary Shares - 22,697 0.19 - - 0.03
============================ =========== =========== =========== ========= ============ =========
Extended Life Shares - 114,419 - 0.23 - 0.13
============================ =========== =========== =========== ========= ============ =========
- 137,116 0.19 0.23 - 0.16
============================ =========== =========== =========== ========= ============ =========
Liabilities
============================ =========== =========== =========== ========= ============ =========
Ordinary Shares - (255,889) (2.09) - - (0.30)
============================ =========== =========== =========== ========= ============ =========
Extended Life Shares - (655,435) - (1.33) - (0.78)
============================ =========== =========== =========== ========= ============ =========
- (911,324) (2.09) (1.33) - (1.08)
============================ =========== =========== =========== ========= ============ =========
Total Return Swap(2)
============================ =========== =========== =========== ========= ============ =========
Ordinary Shares - 782,530 6.39 - - 0.93
============================ =========== =========== =========== ========= ============ =========
Extended Life Shares - 2,019,836 - 4.10 - 2.39
============================ =========== =========== =========== ========= ============ =========
- 2,802,366 6.39 4.10 - 3.32
============================ =========== =========== =========== ========= ============ =========
(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. See Note 3.
The accompanying notes below are an integral part of the
Unaudited Consolidated Interim Financial Statements.
Extended
AS AT 31 DECEMBER Ordinary Life New Global Total
2022 (AUDITED) Shares Shares Shares Company
(EXPRESSED IN US DOLLARS) Cost Fair Value (%)(1) (%)(1) (%)(1) (%)(1)
========================== ===================== ================== =========== ========= ============ =========
Portfolio of Distressed
Investments
========================== ===================== ================== =========== ========= ============ =========
Bank Debt Investments 45,738,879 27,358,457 - 18.82 65.99 28.75
========================== ===================== ================== =========== ========= ============ =========
Private Equity 17,788,092 24,502,057 21.86 28.64 20.81 25.76
========================== ===================== ================== =========== ========= ============ =========
Private Note 32,100,083 15,923,291 5.21 21.86 10.17 16.74
========================== ===================== ================== =========== ========= ============ =========
Short term Investments
========================== ===================== ================== =========== ========= ============ =========
US Treasury Bills 7,382,792 5,959,811 33.95 3.29 - 6.26
========================== ===================== ================== =========== ========= ============ =========
Total Investments 103,009,846 73,743,616 61.02 72.61 96.97 77.51
========================== ===================== ================== =========== ========= ============ =========
Ordinary Shares 7,085,668 7,255,206 61.02 - - 7.63
========================== ===================== ================== =========== ========= ============ =========
Extended Life Shares 59,089,019 42,461,578 - 72.61 - 44.63
========================== ===================== ================== =========== ========= ============ =========
New Global Shares 36,835,159 24,026,832 - - 96.97 25.25
========================== ===================== ================== =========== ========= ============ =========
103,009,846 73,743,616 61.02 72.61 96.97 77.51
========================== ===================== ================== =========== ========= ============ =========
Credit Default Swap
========================== ===================== ================== =========== ========= ============ =========
Ordinary Shares (4,715) (6,025) (0.05) - - (0.01)
========================== ===================== ================== =========== ========= ============ =========
Extended Life Shares (12,106) (15,469) - (0.03) - (0.02)
========================== ===================== ================== =========== ========= ============ =========
(16,821) (21,494) (0.05) (0.03) - (0.03)
========================== ===================== ================== =========== ========= ============ =========
Forward Currency
Contracts
========================== ===================== ================== =========== ========= ============ =========
Assets
========================== ===================== ================== =========== ========= ============ =========
Ordinary Shares - 3,953 0.03 - - -
========================== ===================== ================== =========== ========= ============ =========
Extended Life Shares - 8,065 - 0.01 - 0.01
========================== ===================== ================== =========== ========= ============ =========
- 12,018 0.03 0.01 - 0.01
========================== ===================== ================== =========== ========= ============ =========
Liabilities
========================== ===================== ================== =========== ========= ============ =========
Ordinary Shares - (231,261) (1.94) - - (0.24)
========================== ===================== ================== =========== ========= ============ =========
Extended Life Shares - (1,038,104) - (1.78) - (1.09)
========================== ===================== ================== =========== ========= ============ =========
- (1,269,365) (1.94) (1.78) - (1.33)
========================== ===================== ================== =========== ========= ============ =========
Total Return Swap(2)
========================== ===================== ================== =========== ========= ============ =========
Ordinary Shares - 435,022 3.66 - - 0.46
========================== ===================== ================== =========== ========= ============ =========
Extended Life Shares - 1,123,398 - 1.91 - 1.18
========================== ===================== ================== =========== ========= ============ =========
- 1,558,420 3.66 1.91 - 1.64
========================== ===================== ================== =========== ========= ============ =========
(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. See Note 3.
The accompanying notes below are an integral part of the
Unaudited Consolidated Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Condensed Schedule
of Investments
Unaudited - see accompanying accountants report
Unaudited Consolidated Condensed Schedule of Investments
Investments with the following issuers comprised greater than 5%
of Total Company NAV
AS AT 30 JUNE
2023 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)
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
Investments
at fair value
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
Containers
Package Holdings and
1 (Private Note) Luxembourg Packaging 11,108,610 - 9,613,182 21.94 14.09 - 11.38
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
Containers
Package Holdings and
6 (Private Note) Luxembourg Packaging 2,948,481 1,893,980 1,333,039 3.05 1.95 - 1.58
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
US Treasury N/B
1.500% 02/15/30
(US Treasury United United
Bills) States1 States 6,975,000 7,354,750 5,971,799 33.04 3.92 - 7.07
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
AB Zwolle T/L
EUR 01/06/2020 Commercial
(Bank Debt Investments) Netherlands Mortgage 19,650,713 14,291,794 10,633,708 - 9.59 25.67 12.59
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
TP Ferro Concesionaria
T/L 1L 31/03/2016 Surface
(Bank Debt Investments) Spain Transport 18,787,735 18,531,522 4,099,484 - 4.18 8.86 4.85
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
TP Ferro Concesionaria
TP Ferro 1L TL-B
EUR (First-Lien)
EUR (Bank Debt Surface
Investments) Spain Transport 524,835 593,161 572,595 - 0.58 1.24 0.68
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
TP Ferro Concesionaria
TP Ferro T/L-A
(First-Lien) Surface
(Bank Debt Investments) Spain Transport 2,606,681 2,606,681 2,606,681 - 2.65 5.65 3.09
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
TP Ferro Concesionaria
TP Ferro 1L T/L-C
(First-Lien) Surface
(Bank Debt Investments) Spain Transport 227,038 227,038 227,038 - 0.23 0.49 0.27
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
TP Ferro PIK
5A 4/20
Surface
(Bank Debt Investments) Spain Transport 462,230 462,230 462,230 - 0.47 1.00 0.55
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
TP Ferro PIK
5B 7/22
Surface
(Bank Debt Investments) Spain Transport 263,758 263,758 263,758 - 0.27 0.57 0.31
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
White Energy
Holding Company
LLC (Private United Oil &
Equity) States Gas 367 9,174,989 11,010,000 - 15.99 13.66 13.03
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
Hotel Puerta
America PIK T/L
EUR Lodging
(Bank Debt Investments) Spain & Casinos 3,901,657 4,293,218 4,256,708 - - 18.46 5.04
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
Hotel Puerta
America PIK Addon
EUR Lodging
(Bank Debt Investments) Spain & Casinos 1,540,070 1,675,349 1,680,216 - - 7.28 1.99
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
Hotel Puerta
America PIK PPL
EUR Lodging
(Bank Debt Investments) Spain & Casinos 1,090,003 1,281,898 1,189,193 - - 5.16 1.41
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
Hotel Puerta
America Lodging
(Private Equity) Spain & Casinos 934 3,013,332 1,072,685 - - 4.65 1.27
========================== ============= ============ =========== =========== =========== ========= ========= ======= ========
65,663,700 54,992,316 58.03 53.93 92.69 65.11
===================================================== =========== =========== =========== ========= ========= ======= ========
(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.
(2) Floating Rate Note (FRN) - variable coupon rate during the
period as per contract notice.
The accompanying notes below are an integral part of the
Unaudited Consolidated Interim Financial Statements.
Investments with the following issuers comprised greater than 5%
of Total Company NAV
Extended New
31 DECEMBER 2022 Ordinary Life Global
(AUDITED) Shares Shares Shares Total Company
(EXPRESSED IN US DOLLARS) Country Industry Nominal Cost Fair Value (%)(1) (%)(1) (%)(1) (%)(1)
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
Investments at fair value
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
Package Holdings 1 Containers and
(Private Note) Luxembourg Packaging 11,108,610 - 8,103,345 19.04 9.99 - 8.52
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
Package Holdings 6 Containers and
(Private Note) Luxembourg Packaging 2,948,481 1,893,980 1,123,710 2.64 1.38 - 1.18
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
AB Zwolle T/L EUR
05/31/2023 (Bank Debt Commercial
Investments) Netherlands Mortgage 19,200,256 14,043,835 10,671,960 - 8.09 23.98 11.22
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
US Treasury N/B 1.500%
02/15/30 United
(US Treasury Bills) States United States 6,975,000 7,382,792 5,959,811 33.95 3.29 - 6.26
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
Buffalo Thunder Dev Auth
11.00% 12/09/29 SR: Regs United
(Private Note) States Lodging & Casinos 14,001,965 11,641,233 7,561,061 - 8.62 10.17 7.95
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
TP Ferro Concesionaria
T/L 1L 31/03/2016
(Bank Debt Investments) Spain Surface Transport 18,787,735 18,531,522 4,010,242 - 3.44 8.06 4.21
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
TP Ferro Concesionaria TP
Ferro T/L-A (First-Lien)
(Bank Debt Investments) Spain Surface Transport 2,309,778 2,309,778 2,309,778 - 1.97 4.66 2.43
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
TP Ferro PIK 5B 7/22
(Bank Debt Investments) Spain Surface Transport 234,516 234,516 234,516 - 0.20 0.47 0.25
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
TP Ferro Concesionaria TP
Ferro 1L T/L-B EUR
(First-Lien) EUR (Bank
Debt Investments) Spain Surface Transport 465,056 527,661 496,331 - 0.42 1.00 0.52
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
TP Ferro PIK 5A 4/20
(Bank Debt Investments) Spain Surface Transport 409,581 409,581 409,581 - 0.35 0.83 0.43
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
TP Ferro Concesionaria TP
Ferro 1L T/L-C
(First-Lien)
(Bank Debt Investments) Spain Surface Transport 201,179 201,179 201,179 - 0.17 0.41 0.21
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
White Energy Holding
Company LLC United
(Private Equity) States Oil & Gas 367 9,174,989 11,010,000 - 13.44 12.71 11.57
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
ACA Fin Guaranty Corp
12-12/31/2025 Frn United Financial
(Private Note) States Intermediaries 66,659,722 10,617,941 4,332,882 5.21 6.35 - 4.55
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
ACA Fin Gur Sur Non Vt
12-12/31/2025 Frn United Financial
(Private Note) States Intermediaries 61,989,978 9,840,909 4,029,349 - 6.89 - 4.23
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
Hotel Puerta America PIK
T/L EUR
(Bank Debt Investments) Spain Lodging & Casinos 3,643,760 4,017,977 3,888,803 - - 15.69 4.09
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
Hotel Puerta America
(Private Equity) Spain Lodging & Casinos 934 3,013,332 1,110,956 - - 4.48 1.18
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
Hotel Puerta America PIK
PPL EUR
(Bank Debt Investments) Spain Lodging & Casinos 1,090,003 1,281,898 1,163,306 - - 4.69 1.22
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
Hotel Puerta America PIK
Addon EUR
(Bank Debt Investments) Spain Lodging & Casinos 1,438,272 1,566,706 1,534,996 - - 6.19 1.61
========================== ============= =================== ============ =========== =========================================================================================================== ================= ================= ======= ======================
96,689,829 68,151,806 60.84 64.60 93.34 71.63
========================================================================= =========== =========================================================================================================== ================= ================= ======= ======================
(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.
(2) Floating Rate Note (FRN) - variable coupon rate during the
period as per contract notice.
The accompanying notes below are an integral part of the
Unaudited Consolidated Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Condensed Schedule of
Investments
Unaudited - see accompanying accountants report
Unaudited Consolidated Condensed Schedule of Investments (by
geography)
AS AT 30 JUNE 2023 Extended
(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 10,946,221 24.98 16.05 - 12.96
========================== =========== =========== ========= ========= =========== =========
Netherlands 14,291,794 10,633,708 - 9.59 25.67 12.59
========================== =========== =========== ========= ========= =========== =========
Spain 32,948,190 16,430,589 - 8.39 53.36 19.45
========================== =========== =========== ========= ========= =========== =========
United States 32,588,462 17,385,811 2.39 26.83 16.93 20.59
========================== =========== =========== ========= ========= =========== =========
Short term Investments
(US Treasury Bills)
========================= =========== =========== ========= ========= =========== =========
United States 7,354,750 5,971,799 33.04 3.92 - 7.07
========================== =========== =========== ========= ========= =========== =========
89,077,176 61,368,128 60.41 64.78 95.96 72.66
========================= =========== =========== ========= ========= =========== =========
(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 below are an integral part of the
Unaudited Consolidated Interim Financial Statements.
AS AT 31 DECEMBER
2022 Extended
(AUDITED) 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 9,227,056 21.69 11.37 - 9.70
====================== ============ ==================== ================ ==================== ================ ================
Netherlands 14,043,835 10,671,960 - 8.09 23.98 11.22
====================== ============ ==================== ================ ==================== ================ ================
Spain 32,094,148 15,359,687 - 6.56 46.50 16.14
====================== ============ ==================== ================ ==================== ================ ================
United States 47,595,091 32,525,102 5.38 43.30 26.49 34.19
====================== ============ ==================== ================ ==================== ================ ================
Short term
Investments
(US Treasury Bills)
===================== ============ ==================== ================ ==================== ================ ================
United States 7,382,792 5,959,811 33.95 3.29 - 6.26
====================== ============ ==================== ================ ==================== ================ ================
103,009,846 73,743,616 61.02 72.61 96.97 77.51
===================== ============ ==================== ================ ==================== ================ ================
(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 below are an integral part of the
Unaudited Consolidated Interim Financial Statements.
FINANCIAL STATEMENTS | Unaudited Consolidated Condensed Schedule
of Investments
Unaudited - see accompanying accountants report
Unaudited Consolidated Condensed Schedule of Investments (by
sector)
Ordinary Extended Life New Global
AS AT 30 JUNE 2023 (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 3,705,793 2,658,025 0.14 3.84 3.27 3.15
==================================== =========== =========== ========= ============== =========== ==============
Commercial Mortgage 14,291,794 10,633,709 - 9.59 25.67 12.59
==================================== =========== =========== ========= ============== =========== ==============
Containers and Packaging 1,893,980 10,946,222 24.98 16.05 - 12.96
==================================== =========== =========== ========= ============== =========== ==============
Financial Intermediaries 19,707,682 3,717,786 2.25 7.00 - 4.40
==================================== =========== =========== ========= ============== =========== ==============
Lodging & Casinos 10,263,797 8,198,801 - - 35.55 9.71
==================================== =========== =========== ========= ============== =========== ==============
Oil & Gas 9,174,989 11,010,000 - 15.99 13.66 13.03
==================================== =========== =========== ========= ============== =========== ==============
Surface Transport 22,684,391 8,231,786 - 8.39 17.81 9.75
==================================== =========== =========== ========= ============== =========== ==============
Short term Investments
==================================== =========== =========== ========= ============== =========== ==============
US Treasury Bills 7,354,750 5,971,799 33.04 3.92 - 7.07
==================================== =========== =========== ========= ============== =========== ==============
89,077,176 61,368,128 60.41 64.78 95.96 72.66
==================================== =========== =========== ========= ============== =========== ==============
(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 below are an integral part of the
Unaudited Consolidated Interim Financial Statements.
AS AT 31
DECEMBER 2022
(AUDITED) Ordinary Extended Life New Global
(EXPRESSED IN Shares Shares Shares Total Company
US DOLLARS) Cost Fair Value (%)(1) (%)(1) (%)(1) (%)(1)
================ ============ =========== ======================= ================ ================ ================
Industry
diversity of
Portfolios
================ ============ =========== ======================= ================ ================ ================
Portfolio of
Distressed
Investments
================ ============ =========== ======================= ================ ================ ================
Auto Components 3,705,793 3,154,044 0.17 3.83 3.61 3.31
================ ============ =========== ======================= ================ ================ ================
Commercial
Mortgage 14,043,835 10,671,960 - 8.09 23.98 11.22
================ ============ =========== ======================= ================ ================ ================
Containers and
Packaging 1,893,980 9,227,056 21.69 11.37 - 9.70
================ ============ =========== ======================= ================ ================ ================
Financial
Intermediaries 20,458,849 8,362,230 5.21 13.24 - 8.79
================ ============ =========== ======================= ================ ================ ================
Lodging &
Casinos 24,135,372 17,696,890 - 12.79 41.24 18.60
================ ============ =========== ======================= ================ ================ ================
Oil & Gas 9,174,989 11,010,000 - 13.44 12.71 11.58
================ ============ =========== ======================= ================ ================ ================
Surface
Transport 22,214,236 7,661,625 - 6.56 15.43 8.05
================ ============ =========== ======================= ================ ================ ================
Short term
Investments
================ ============ =========== ======================= ================ ================ ================
US Treasury
Bills 7,382,792 5,959,811 33.95 3.29 - 6.26
================ ============ =========== ======================= ================ ================ ================
103,009,846 73,743,616 61.02 72.61 96.97 77.51
================ ============ =========== ======================= ================ ================ ================
(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 below are an integral part of the
Unaudited Consolidated Interim Financial Statements.
FINANCIAL STATEMENTS | Notes to the Unaudited Consolidated
Interim Financial Statements
Unaudited - see accompanying accountants report
NOTE 1 - ORGANISATION AND DESCRIPTION OF BUSINESS
NB Distressed Debt Investment Fund Limited (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
(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 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, total return swap and forward currency transactions in the
Unaudited Consolidated Statement of Operations.
The Board recognises that the Portfolios (the Ordinary Share
Class; the Extended Life Share Class; and the New Global Share
Class) 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. The Financial Statements
include full consolidation of any owned subsidiaries, except where
the effect on the Company's financial position and results of
operations are immaterial. Transactions between the Company and the
subsidiaries have been eliminated on consolidation.
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.
(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 and Restricted Cash
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 2023, the Compan y has cash balances in various currencies
equating to $20,407,196 (Cost: $20,395,283) (31 December 2022:
$19,793,589 (Cost: $19,641,661 ) including cash and cash
equivalents of $8,617,196 (31 December 2022: $8,733,589) as well as
restricted cash of $11,790,000 (31 December 2022: $11,060,000).
Restricted cash of $10,970,000 (31 December 2022: $10,970,000) is
collateral for the total return swap positions and restricted cash
of $820,000 (31 December 2022: $90,000) is collateral for forward
currency contracts.
(d) Payables/Receivables on Investments Purchased/Sold
At 30 June 2023, 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, 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 as at 30 June
2023 and 31 December 2022 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.
-- 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 (e.g.
level 3 investments included overleaf), 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.
-- 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.
-- Credit Return Swaps are priced using a pricing service provided by Markit Partners.
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 judgement 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 judgement 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 AS AT 30 JUNE 2023 (UNAUDITED)
(EXPRESSED IN US DOLLARS) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
================================= ========== ========================= ===================== =====================
Bank Debt Investments - 7,860,000 25,991,612 33,851,612
================================= ========== ========================= ===================== =====================
Private Equity - 3,150,000 14,676,931 17,826,931
================================= ========== ========================= ===================== =====================
Private Note - - 3,717,786 3,717,786
================================= ========== ========================= ===================== =====================
US Treasury Bills 5,971,799 - - 5,971,799
================================= ========== ========================= ===================== =====================
Investments at fair value 5,971,799 11,010,000 44,386,329 61,368,128
================================= ========== ========================= ===================== =====================
Credit Default Swap - (42,900) - (42,900)
================================= ========== ========================= ===================== =====================
Total Return Swap - - 2,802,366 2,802,366
================================= ========== ========================= ===================== =====================
Forward Currency Contracts -
Assets - 137,116 - 137,116
================================= ========== ========================= ===================== =====================
Forward Currency Contracts -
Liabilities - (911,324) - (911,324)
================================= ========== ========================= ===================== =====================
Total investments that are
accounted for at fair value 5,971,799 10,192,892 47,188,695 63,353,386
================================= ========== ========================= ===================== =====================
FAIR VALUE OF FINANCIAL INSTRUMENTS AT 31 DECEMBER 2022 (AUDITED)
(EXPRESSED IN US DOLLARS) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
================================= ========== ========================= ===================== =====================
Bank Debt Investments - - 27,358,457 27,358,457
================================= ========== ========================= ===================== =====================
Private Equity - 11,010,000 13,492,057 24,502,057
================================= ========== ========================= ===================== =====================
Private Note - 7,561,061 8,362,230 15,923,291
================================= ========== ========================= ===================== =====================
US Treasury Bills 5,959,811 - - 5,959,811
================================= ========== ========================= ===================== =====================
Investments at fair value 5,959,811 18,571,061 49,212,744 73,743,616
================================= ========== ========================= ===================== =====================
Credit Default Swap - (21,494) - (21,494)
================================= ========== ========================= ===================== =====================
Total Return Swap - - 1,558,420 1,558,420
================================= ========== ========================= ===================== =====================
Forward Currency Contracts -
Assets 12,018 12,018
================================= ========== ========================= ===================== =====================
Forward Currency Contracts -
Liabilities - (1,269,365) - (1,269,365)
================================= ========== ========================= ===================== =====================
Total investments that are
accounted for at fair value 5,959,811 17,292,220 50,771,164 74,023,195
================================= ========== ========================= ===================== =====================
The following table summarises the significant unobservable
inputs the Company used to value its investments categorised within
Level 3 as at 30 June 2023. The table is not intended to be
all-inclusive but instead captures the significant unobservable
inputs relevant to our determination of fair values.
Significant
Primary Valuation unobservable
Type Sector Fair Value ($) Technique Inputs Range Input
==================== ==================== =============== =================== =================== =============
Bank Debt Market
Investments Commercial Mortgage 10,633,708 Comparatives Discount Rate 10%
==================== ==================== =============== =================== =================== =============
Bank Debt Market
Investments Lodging & Casinos 7,126,117 Comparatives Discount Rate 15%
==================== ==================== =============== =================== =================== =============
Bank Debt Surface Transport Unadjusted Broker
Investments 8,231,787 Market Information Quote N/A
==================== ==================== =============== =================== =================== =============
Private Equity Auto Components 2,658,025 Market Information EBITDA Multiple 4-5X
==================== ==================== =============== =================== =================== =============
Containers and Market
Private Equity Packaging 10,946,221 Comparatives EBITDA Multiple 10.25X
==================== ==================== =============== =================== =================== =============
Market
Private Equity Lodging & Casinos 1,072,685 Comparatives Discount Rate 15%
==================== ==================== =============== =================== =================== =============
Private Note Financial Unadjusted Broker
Intermediaries 3,717,786 Market Information Quote N/A
==================== ==================== =============== =================== =================== =============
Total Return Swap Surface Transport Unadjusted Broker
2,802,366 Market Information Quote N/A
==================== ==================== =============== =================== =================== =============
Total 47,188,695
========================================== =============== =================== =================== =============
The following table summarises the significant unobservable
inputs the Company used to value its investments categorised within
Level 3 as at 31 December 2022. The table is not intended to be
all-inclusive but instead captures the significant unobservable
inputs relevant to our determination of fair values.
Significant
Primary Valuation unobservable
Type Sector Fair Value ($) Technique Inputs Range Input
==================== ==================== =============== =================== =================== =============
Bank Debt Market
Investments Commercial Mortgage 10,671,960 Comparatives Discount Rate 10%
==================== ==================== =============== =================== =================== =============
Bank Debt Market
Investments Lodging & Casinos 6,587,107 Comparatives Discount Rate 15%
==================== ==================== =============== =================== =================== =============
Bank Debt Unadjusted Broker
Investments Lodging & Casinos 2,437,766 Market Information Quote N/A
==================== ==================== =============== =================== =================== =============
Bank Debt Unadjusted Broker
Investments Surface Transport 7,661,625 Market Information Quote N/A
==================== ==================== =============== =================== =================== =============
Private Equity Auto Components 3,154,044 Market Information EBITDA Multiple 4-5X
==================== ==================== =============== =================== =================== =============
Containers and Market
Private Equity Packaging 9,227,056 Comparatives EBITDA Multiple 11X
==================== ==================== =============== =================== =================== =============
Market
Private Equity Lodging & Casinos 1,110,956 Comparatives Discount Rate 15%
==================== ==================== =============== =================== =================== =============
Financial Market
Private Note Intermediaries 8,362,230 Comparatives Discount Rate 25%
==================== ==================== =============== =================== =================== =============
Unadjusted Broker
Total Return Swap Surface Transport 1,558,420 Market Information Quote N/A
==================== ==================== =============== =================== =================== =============
Total 50,771,164
========================================== =============== =================== =================== =============
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 as at 30 June 2023 and 31 December 2022 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 2023 (UNAUDITED)
(EXPRESSED IN US DOLLARS)
Bank
Debt Private Trade Private
Investments Equity Claim Note Total
===================================== ============= =========== ========== ============ ==============
Balance, 31 December 2022 27,358,457 13,492,057 1,558,420 8,362,230 50,771,164
====================================== ============= =========== ========== ============ ==============
Purchases (includes
purchases-in-kind) 1,101,996 - - - 1,101,996
====================================== ============= =========== ========== ============ ==============
Sales and distributions (2,723,833) - - (4,723,503) (7,447,336)
====================================== ============= =========== ========== ============ ==============
Realised gain on sale of
investments 145,216 - - 3,972,336 4,117,552
====================================== ============= =========== ========== ============ ==============
Unrealised (loss)/gain on
investments 109,776 1,184,874 1,243,946 (3,893,277) (1,354,681)
====================================== ============= =========== ========== ============ ==============
Transfers from Level 2 into
Level 3 - - - - -
===================================== ============= =========== ========== ============ ==============
Balance, 30 June 2023 25,991,612 14,676,931 2,802,366 3,717,786 47,188,695
====================================== ============= =========== ========== ============ ==============
Change in unrealised (loss)/gain
on investments included
in Unaudited Consolidated
Statement of Operation for
Level 3 investments held
as at 30 June 2023 109,776 1,184,874 1,243,946 (3,893,277) (1,354,681)
====================================== ============= =========== ========== ============ ==============
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 period the
Company had no transfers out of Level 3 into Level 2 of fair value
amounting to $Nil. The Company had no transfer out of Level 2 into
Level 3 of fair value amounting to $Nil.
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
2022
(EXPRESSED IN US DOLLARS)
Bank
Debt
Investments Private Equity Trade Claim Private Note Total
=============================== ============= =============== ============ ============= =============
Balance, 31 December 2021 47,181,981 21,836,374 (875,121) 6,641,858 74,785,092
================================ ============= =============== ============ ============= =============
Purchases (includes
purchases-in-kind) 4,240,602 - - - 4,240,602
================================ ============= =============== ============ ============= =============
Sales and distributions (28,047,566) - - (4,187,464) (32,235,030)
================================ ============= =============== ============ ============= =============
Realised (loss)/gain on sale of
investments (2,239,259) (1,003,803) - 3,521,541 278,479
================================ ============= =============== ============ ============= =============
Unrealised gain/(loss) on
investments 3,766,473 (7,340,514) 2,433,541 2,386,295 1,245,795
================================ ============= =============== ============ ============= =============
Transfers from Level 2 into
Level 3 2,456,226 - - - 2,456,226
================================ ============= =============== ============ ============= =============
Balance, 31 December 2022 27,358,457 13,492,057 1,558,420 8,362,230 50,771,164
================================ ============= =============== ============ ============= =============
Change in unrealised
(loss)/gain on investments
cluded in Audited Consolidated
Statement
of Operation for Level 3
investments held as at 31
December 2022 (867,184) (8,344,317) 2,433,541 2,386,295 (4,391,665)
================================ ============= =============== ============ ============= =============
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 no
transfers out of Level 3 into Level 2 of fair value amounting to
$Nil. The Company
had one transfer out of Level 2 into Level 3 of fair value
amounting to $2,456,226 on 28 December 2022, due to a lack of
observable
inputs into the valuation.
(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 2023, $63,648 (30 June 2022:
$91,835) 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.
Capitalised 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
and to provide a measure of protection against defaults of
corporate or sovereign issuers. 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 and total
return swaps.
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.
(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 as at 30 June 2023 or 31
December 2022. The Company files its tax returns as prescribed by
the tax laws of the jurisdictions in which it operates. In the
normal course of business, the Company is subject to examination by
federal and certain state, local, and foreign tax regulators.
State, local and foreign tax returns, if applicable, are generally
subject to audit according to varying limitations dependent upon
the jurisdiction. As of 30 June 2023, the Company's U.S. federal
income tax returns are subject to examination under the three-year
statute of limitations.
During the period ended 30 June 2023, the Company recorded
current income tax expense $Nil (30 June 2022 income tax expense:
$Nil). 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 2023 was $Nil (30 June 2022 deferred
tax benefit: $Nil). The net total income tax benefit/expense from
realised/unrealised gains/(losses) on investments for the period
ended 30 June 2023 was $Nil (30 June 2022 income tax expense:
$Nil).
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 Currency 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 as at 30 June 2023 (31 December 2022: 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.
The new swap rolls on an annual basis. The swap was booked on 02
March 2022 and matured on 01 February 2023. A realised event
occurred on the value of the swap as at 01 February 2023
$2,075,537. The next maturity will occur on 01 February 2024. The
value of the swap, exclusive of related cash collateral, as at 30
June 2023 is $2,802,366 (31 December 2022: $1,558,420) representing
a change in market value of $726,829 in the period since the 01
February 2023 maturity.
As at 30 June 2023 the net value of the swap and related cash
collateral was $13,772,366 (31 December 2022: $12,528,420)
(comprised of restricted cash collateral of $10,970,000 (31
December 2022: $10,970,000) and total return swap asset of
$2,802,366 (31 December 2022: swap asset of $1,558,420), as
reflected in the Unaudited Consolidated Statement of Assets and
Liabilities. 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 2023 and for the year ended 31
December 2022 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 2023 (UNAUDITED) LONG EXPOSURE SHORT EXPOSURE
============================= ============================== =======================================
NUMBER OF
Primary underlying risk NOTIONAL AMOUNTS CONTRACTS NOTIONAL AMOUNTS NUMBER OF CONTRACTS
============================= ================= =========== ================= ====================
Foreign exchange risk
============================= ================= =========== ================= ====================
Forward currency contracts $61,790,242 27 $62,804,635 28
============================= ================= =========== ================= ====================
Credit risk
============================= ================= =========== ================= ====================
Credit default swap $9,971,000 1 - -
============================= ================= =========== ================= ====================
Total return swap - - $10,960,348 2
============================= ================= =========== ================= ====================
31 DECEMBER 2022 (AUDITED) LONG EXPOSURE SHORT EXPOSURE
============================= ============================== =======================================
NUMBER OF
Primary underlying risk NOTIONAL AMOUNTS CONTRACTS NOTIONAL AMOUNTS NUMBER OF CONTRACTS
============================= ================= =========== ================= ====================
Foreign exchange risk
============================= ================= =========== ================= ====================
Forward currency contracts $ 131,688,489 61 $ 107,370,134 64
============================= ================= =========== ================= ====================
Credit risk
============================= ================= =========== ================= ====================
Credit default swap $ 9,971,000 1 - -
============================= ================= =========== ================= ====================
Total return swap - - $ 10,960,348 2
============================= ================= =========== ================= ====================
The following tables show, as at 30 June 2023 and 31 December
2022, 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, as at
30 June 2023 and 31 December 2022, 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 2023 (UNAUDITED) Derivative Assets Derivative Liabilities (loss) NET CHANGE IN Unrealised gain (loss)
Primary underlying risk ($) ($) ($) ($)
============================ =================== ======================== =============== ======================================
Foreign currency exchange
rate
============================ =================== ======================== =============== ======================================
Forward currency contracts 137,116 (911,324) (2,334,366) 483,140
============================ =================== ======================== =============== ======================================
Credit
============================ =================== ======================== =============== ======================================
Purchased protection
============================ =================== ======================== =============== ======================================
Credit default swap - (42,900) - (21,405)
============================ =================== ======================== =============== ======================================
Total return swap 2,802,366 - 2,075,537 1,243,946
============================ =================== ======================== =============== ======================================
Realised gain
31 DECEMBER 2022 (AUDITED) Derivative Assets Derivative Liabilities (loss) NET CHANGE IN Unrealised gain (loss)
Primary underlying risk ($) ($) ($) ($)
============================== =================== ======================== =============== ======================================
Foreign currency exchange
rate
============================== =================== ======================== =============== ======================================
Forward currency contracts 12,018 (1,269,365) 1,963,445 (1,667,174)
============================== =================== ======================== =============== ======================================
Credit
============================== =================== ======================== =============== ======================================
Purchased protection
============================== =================== ======================== =============== ======================================
Credit default swap - (21,494) 37,783 (8,853)
============================== =================== ======================== =============== ======================================
Total return swap 1,558,420 - (123,624) 2,433,541
============================== =================== ======================== =============== ======================================
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, the total return
swaps and foreign currency exchange contracts. 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.
Derivative activity
The following tables, as at 30 June 2023 and 31 December 2022,
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 2023 (UNAUDITED)
(EXPRESSED IN US DOLLARS )
AMOUNTS NOT OFFSET IN THE
CONSOLIDATED STATEMENT OF ASSETS
AND LIABILITIES
NET AMOUNTS OF
RECOGNISED
ASSETS
GROSS AMOUNTS PRESENTED IN
OFFSET IN THE THE
GROSS CONSOLIDATED CONSOLIDATED
AMOUNTS OF STATEMENTS OF STATEMENT OF FINANCIAL FINANCIAL
RECOGNISED ASSETS AND ASSETS AND INSTRUMENTS COLLATERAL NET
DESCRIPTION ASSETS LIABILITIES LIABILITIES (POLICY ELECTION) RECEIVED(1) AMOUNT
================= ================ ================ =============== ================== ================ ========
Forward currency
contracts 137,116 - 137,116 (10,897) - 126,219
================= ================ ================ =============== ================== ================ ========
Total return
swaps 2,802,366 - 2,802,366 - (2,802,366) -
================= ================ ================ =============== ================== ================ ========
Total 2,939,482 - 2,939,482 (10,897) (2,802,366) 126,219
================= ================ ================ =============== ================== ================ ========
AMOUNTS NOT OFFSET IN THE
CONSOLIDATED STATEMENT OF ASSETS AND
LIABILITIES
NET AMOUNTS OF
RECOGNISED
GROSS AMOUNTS ASSETS PRESENTED
OFFSET IN IN THE
GROSS THE CONSOLIDATED CONSOLIDATED
AMOUNTS STATEMENTS STATEMENT OF FINANCIAL FINANCIAL
OF RECOGNISED OF ASSETS ASSETS AND INSTRUMENTS COLLATERAL NET
DESCRIPTION LIABILITIES AND LIABILITIES LIABILITIES (POLICY ELECTION) RECEIVED(1) AMOUNT
============ =============== =================== ================= ================== ================= ========
Forward currency
contracts (911,324) - (911,324) 10,897 900,427 -
================== ========== ========== ======= ========
Credit default
swap (42,900) - (42,900) - 42,900 -
================== ========== ========== ======= ========
Total (954,224) - (954,224) 10,897 943,327 -
================== ========== ========== ======= ========
(1) The amount netted off is a portion of the total collateral
as per the Unaudited Consolidated Statement of Assets and
Liabilities.
The following table, as at 31 December 2022, show the gross and
net derivatives assets and liabilities by contract type and amount
for those derivatives contracts for which netting is
permissible.
31 DECEMBER 2022 (AUDITED)
(EXPRESSED IN US DOLLARS )
AMOUNTS NOT OFFSET IN THE
CONSOLIDATED STATEMENT OF ASSETS
AND LIABILITIES
NET AMOUNTS
GROSS AMOUNTS OF RECOGNISED
OFFSET IN ASSETS
THE PRESENTED
CONSOLIDATED IN THE
GROSS STATEMENTS CONSOLIDATED
AMOUNTS OF ASSETS STATEMENT OF FINANCIAL FINANCIAL
OF RECOGNISED AND ASSETS AND INSTRUMENTS COLLATERAL NET
DESCRIPTION ASSETS LIABILITIES LIABILITIES (POLICY ELECTION) RECEIVED(1) AMOUNT
================ =============== =============== =============== ================== =============== ==========
Forward
currency
contracts 12,018 - 12,018 (12,018) - -
================ =============== =============== =============== ================== =============== ==========
Total return
swaps 1,558,420 - 1,558,420 - - 1,558,420
================ =============== =============== =============== ================== =============== ==========
Total 1,570,438 - 1,570,438 (12,018) - 1,558,420
================ =============== =============== =============== ================== =============== ==========
AMOUNTS NOT OFFSET IN THE
CONSOLIDATED STATEMENT OF ASSETS AND
LIABILITIES
NET AMOUNTS
OF RECOGNISED
GROSS AMOUNTS ASSETS PRESENTED
OFFSET IN IN THE
GROSS THE CONSOLIDATED CONSOLIDATED
AMOUNTS STATEMENTS STATEMENT OF FINANCIAL FINANCIAL
OF RECOGNISED OF ASSETS ASSETS AND INSTRUMENTS COLLATERAL NET
DESCRIPTION LIABILITIES AND LIABILITIES LIABILITIES (POLICY ELECTION) RECEIVED(1) AMOUNT
============ =============== =================== ================= ================== ================= ========
Forward currency
contracts (1,269,365) - (1,269,365) 12,018 - (1,257,347)
================== ============ ============ ======= ============
Credit default
swap (21,494) - (21,494) - - (21,494)
================== ============ ============ ======= ============
Total (1,290,859) - (1,290,859) 12,018 - (1,278,841)
================== ============ ============ ======= ============
(1) The amount netted off is a portion of the total collateral
as per the Unaudited Consolidated Statement of Assets and
Liabilities.
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 Company will be
able to realise the value of such investments in a timely manner.
Additionally, the Company'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 as at 30 June 2023 and 31
December 2022 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 Unaudited Consolidated Condensed
Schedules 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.
Other Risks
The invasion of Ukraine is of concern and the Company has
considered its potential impact on asset values, and while no
direct impact has been identified, values are affected by its
impact on the global economy.
While the risks associated with the COVID 19 pandemic have
largely receded the Investment Manager continues to monitor the
situation.
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.
The impact of these risks can have a substantial impact on the
valuation and ultimately the realisation of assets.
Market disruptions associated with current geopolitical events
have had a global impact, and uncertainty exists as to their
implications. Such disruptions can potentially adversely affect the
assets, and thus the performance, of the Company. The Board
continues to monitor this situation.
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 consists of Ordinary
Shares, Class A Shares and Extended Life Shares, all denominated in
US dollars, and New Global Shares denominated in Pounds Sterling.
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.
As at 30 June 2023, the Company had the following number of
shares in issue:
30 June 31 December
Issued and fully paid up 2023 (UNAudited) 2022 (audited)
================== ================
Class A Shares 2 2
============================================= ================== ================
Ordinary Share Class of no par value (Nil
in treasury; 2022: Nil) 15,382,770 15,382,770
============================================= ================== ================
Extended Life Share Class of no par value
(Nil in treasury; 2022: Nil) 47,875,446 60,116,016
============================================= ================== ================
New Global Share Class of no par value (Nil
in treasury; 2022: Nil) 27,821,698 31,023,609
============================================= ================== ================
Reconciliation of the number of shares in issue in each class
(excluding Class A) as at 30 June 2023:
Ordinary Extended New Global
Shares Life Shares Shares Total
=============================== =========== ============= ============ =============
Balance as at 31 December
2022 15,382,770 60,116,016 31,023,609 106,522,395
=============================== =========== ============= ============ =============
Shares redeemed during the
period - (12,240,570) (3,201,911) (15,442,481)
=============================== =========== ============= ============ =============
Buybacks (Shares repurchased) - - - -
=============================== =========== ============= ============ =============
Balance as at 30 June 2023
(1) 15,382,770 47,875,446 27,821,698 91,079,914
=============================== =========== ============= ============ =============
(1) Balance of issued shares used to calculate NAV
Reconciliation of the number of shares in issue in each class
(excluding Class A) as at 31 December 2022:
Ordinary Extended New Global
Shares Life Shares Shares Total
=============================== =========== ============= ============= =============
Balance as at 31 December
2021 15,382,770 80,545,074 41,116,617 137,044,461
=============================== =========== ============= ============= =============
Shares redeemed during the
year - (20,429,058) (10,093,008) (30,522,066)
=============================== =========== ============= ============= =============
Buybacks (Shares repurchased) - - - -
=============================== =========== ============= ============= =============
Balance as at 31 December
2022 (1) 15,382,770 60,116,016 31,023,609 106,522,395
=============================== =========== ============= ============= =============
(1) Balance of issued 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 2023 and the year ended 31 December 2022.
30 June
2023
Extended Life Share
(UNAUDITED) Ordinary Share Class Class New Global Share Class
Number Per Per Number
Distribution of Share Distribution Number Share Distribution of Per Share
Amount Shares Amount Amount of Shares Amount Amount Shares Amount
============== ============ ======= ======= ============ ========== ======== ============ ========= =========
2 May 2023 - - - $8,149,711 8,487,514 $0.9602 GBP2,165,132 3,201,911 GBP0.6762
============== ============ ======= ======= ============ ========== ======== ============ ========= =========
29 June
2023 - - - $3,352,980 3,753,056 $0.8934 - - -
============== ============ ======= ======= ============ ========== ======== ============ ========= =========
- - - $11,502,691 12,240,570 - GBP2,165,132 3,201,911 -
============== ============ ======= ======= ============ ========== ======== ============ ========= =========
31 December
2022
Extended Life Share
(AUDITED) Ordinary Share Class Class New Global Share Class
Number Per Per
Distribution of Share Distribution Number Share Distribution Number Per Share
Amount Shares Amount Amount of Shares Amount Amount of Shares Amount
============= ============ ======= ======= ============ ========== ======== ============ ========== =========
21 November
2022 - - - $18,968,380 20,429,058 $0.9285 GBP8,036,339 10,093,008 GBP0.7962
============= ============ ======= ======= ============ ========== ======== ============ ========== =========
- - - $18,968,380 20,429,058 - GBP8,036,339 10,093,008 -
============= ============ ======= ======= ============ ========== ======== ============ ========== =========
Buybacks
No shares were repurchased by the Company during either the
period ended 30 June 2023 or the year ended 31 December 2022.
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 uninvested 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. On the 30 January 2023 the Company entered into
an Amendment Agreement amending the IMA for data protection
purposes to note the obligation on the recipient UK investment
manager to comply with the new SCCs in transferring personal data
to the US AIFM.
Per the IMA and in relation to the Ordinary Shares and Extended
Life Shares, the Manager was entitled to a management fee, which
shall accrued daily, and was 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 were not
used.
Per the IMA and in relation to the New Global Shares, the
Manager was entitled to a management fee, which accrued daily, and
was 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 had become 85% invested, any cash
balances (or cash equivalents)). The 85% threshold was crossed on
16 June 2015 and from such date the Company was charged 0.125% per
month on the NAV of the New Global Share Class.
Effective 18 March 2021, the Investment Manager had waived its
entitlement to all fees from the Company. Accordingly, there was no
management fees expensed in the period or the preceding financial
year nor were any fees outstanding at either 30 June 2023 or 31
December 2022.
Performance Fee
Effective 18 March 2021, the Investment Manager had waived its
entitlement to a performance fee. The performance fee for Ordinary
Shares, Extended Life Shares and New Global Shares (collectively
the "Shares") only became payable once the Company had made
aggregate distributions in cash to the shareholders of the Shares
(which included 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
resulted in the shareholders having received a realised (cash-paid)
IRR in respect of the Contributed Capital equal to Preferred
Return, following which there would be a 100% catch up payable to
the Manager until the Manager had 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 was an
annualised 6%, for Extended Life Shares was an annualised 6% from
2010 to April 2013 and was 8% from April 2013 to date and for New
Global Shares was an annualised 8%. For the purposes of financial
reporting, the performance fee was recognised on an accrual
basis.
Accordingly no performance fees were paid or payable in respect
of any of the classes for the period ended 30 June 2023 or the year
ended 31 December 2022, nor would any be paid if the Company were
to realise all of 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).
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 28 February 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 GBP73,000 plus fees for ad-hoc board meetings and
additional services.
For the period ended 30 June 2023, the administration fee
expense was $43,636 (30 June 2022: $49,412), the secretarial fee
was $53,092(1) of which $Nil(1) was in relation to the
administration of the ongoing buyback programme, (30 June 2022:
$55,241(1) ) and the loan administration and custody fee expense
was $9,959 (30 June 2022: $15,187). At 30 June 2023, the
administration fee payable is $6,046(2) (31 December 2022:
$5,955(2) ), the secretarial fee payable is $19,263(2) (31 December
2022: $24,559(2) ) and the loan administration and custody fee
payable is $665(2) (31 December 2022: $3,344(2) ).
(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
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
2023, the Directors' fees and travel expenses amounted to $96,725
(30 June 2022: $97,900). Michael J. Holmberg, the non-independent
Director, has waived the fees for his services as a Director. There
were no other related interests for the period ended 30 June
2023.
The Company has not set any requirements or guidelines for
Directors to own shares in the Company. The beneficial interests of
the Directors and their connected persons in the Company's shares
as at 30 June 2023 are shown in the table below:
Total No.
No. of Ordinary No. of Extended No. of New of
Director Shares Life Shares Global Shares Shares
=================== ================= ================ =============== ==========
John Hallam - 43,840 33,462 77,302
=================== ================= ================ =============== ==========
Michael Holmberg - 19,356 34,982 54,338
=================== ================= ================ =============== ==========
Christopher Legge - - - -
=================== ================= ================ =============== ==========
Stephen Vakil - - 18,253 18,253
=================== ================= ================ =============== ==========
NOTE 7 - FINANCIAL HIGHLIGHTS
Extended
Ordinary Extended New Global Ordinary Life New Global
Shares Life Shares Shares Shares Shares Shares
($) ($) (GBP) ($) ($) (GBP)
Per share Period Period Period YEAR ended YEAR ended
operating ended ended 30 ended 30 31 December 31 December
performance 30 june june 2023 june 2023 YEAR ended 2022 (AUDITED) 2022 (AUDITED)
2023 (Unaudited) (Unaudited 31 December
(Unaudited) 2022 (AUDITED)
Net asset value
per share at
beginning of
the period/year 0.7730 0.9728 0.6640 0.9028 0.9243 0.5785
================= ================ ============= ============ ================ ================ ================
Impact of share
redemptions - 0.0065 0.0001 - - -
================= ================ ============= ============ ================ ================ ================
Impact of
dividend
distribution - - - - 0.0025 (0.0052)
================= ================ ============= ============ ================ ================ ================
I ncome/(loss)
from investment
operations (1)
================= ================ ============= ============ ================ ================ ================
Net investment
income 0.0007 0.0033 0.0112 0.0015 0.0605 0.0531
================= ================ ============= ============ ================ ================ ================
Net realised
and unrealised
gain/(loss)
from
investments
and foreign
exchange 0.0222 0.0441 (0.0232) (0.1313) (0.0145) 0.0376
================= ================ ============= ============ ================ ================ ================
Gain/(loss)
from investment
operations 0.0229 0.0474 (0.0120) (0.1298) 0.0459 0.0897
================= ================ ============= ============ ================ ================ ================
Net asset value
per share at
end of the
period/year(2) 0.7959 1.0267 0.6521 0.7730 0.9728 0.6640
================= ================ ============= ============ ================ ================ ================
(1) Weighted average number of shares outstanding was used for
calculation.
(2) Each share classes net assets includes the underlying assets
and liabilities directly attributable to the respective share
class.
Extended
Ordinary Extended New Global Ordinary Life New Global
Shares Life Shares Shares Shares Shares Shares
($) ($) (GBP) ($) ($) (GBP)
Period Period Period YEAR ended YEAR ended
ended 30 ended 30 ended 30 YEAR ended 31 December 31 December
NAV Total return june 2023 june 2023 june 2023 31 December 2022 (AUDITED) 2022 (AUDITED)
(2, 3) (Unaudited) (Unaudited) (Unaudited 2022 (AUDITED)
NAV Total Return
before
performance
fee 2.96% 5.54% (1.79%) (14.38%) 5.25% 14.78%
================== ============= ============= ============ ================ ================ ================
NAV Total Return
after
performance
fee including
an income
distribution
by way of
dividend 2.96% 5.54% (1.79%) (14.38%) 5.25% 14.78%
================== ============= ============= ============ ================ ================ ================
(2) NAV Total Return is calculated for the Ordinary Shares,
Extended Life Shares and New Global Shares only and is calculated
based on movement in the NAV and does not reflect any movement in
the market value of the shares. A shareholder's return may vary
from these returns based on participation in new issues, the timing
of capital transactions etc. It assumes that all income
distributions of the Company, paid by way of dividend, were
reinvested, without transaction costs. Class A shares are not
presented as they are not profit participating shares.
(3) An individual shareholder's return may vary from these
returns based on the timing of the shareholder's subscriptions.
Extended
Ordinary Extended New Global Ordinary Life New Global
Shares Life Shares Shares Shares Shares Shares
($) ($) (GBP) ($) ($) (GBP)
Ratio to Period Period Period YEAR ended YEAR ended
average ended ended 30 ended 31 December 31 December
net assets 30 june june 2023 30 june YEAR ended 2022 (AUDITED) 2022 (AUDITED)
2023 (Unaudited) 2023 31 December
(Unaudited) (Unaudited 2022 (AUDITED)
---------------- --------------- ------------- --------------- --------------- ---------------- ----------------
Net investment
income before
and after
performance
fees 0.19% 0.69% 3.51% 0.17% 6.46% 8.36%
================ =============== ============= =============== =============== ================ ================
Total expenses
and
performance
fee (1.08%) (1.18%) (1.53%) (0.97%) (0.99%) (1.33%)
================ =============== ============= =============== =============== ================ ================
NOTE 8 - RECONCILIATION OF NET ASSET VALUE TO PUBLISHED NAV
In preparing the Financial Statements, there were adjustments
relating to investment valuations. The impact of these adjustments
on the NAV per Ordinary Share, Extended Life Share and New Global
Share is detailed below:
Extended Extended
Ordinary Life Life New Global
Ordinary Share Class Share Share Class New Global Share Class
Share Class NAV per Class NAV per Share Class NAV per
Net Assets Share Net Assets Share Net Assets Share
($) ($) ($) ($) (GBP) (GBP)
========================= ============ ============ =========== ============ ============ ============
Published net assets
as at 30 June 2023 11,997,036 0.7799 48,514,859 1.0134 18,141,858 0.6521
========================= ============ ============ =========== ============ ============ ============
Valuation adjustments 246,860 0.0160 637,174 0.0133 - -
========================= ============ ============ =========== ============ ============ ============
Net assets per Unaudited
Consolidated Interim
Financial Statements 12,243,896 0.7959 49,152,033 1.0267 18,141,858 0.6521
========================= ============ ============ =========== ============ ============ ============
Extended Extended
Ordinary Life Life New Global
Ordinary Share Class Share Share Class New Global Share Class
Share Class NAV per Class NAV per Share Class NAV per
Net Assets Share Net Assets Share Net Assets Share
($) ($) ($) ($) (GBP) (GBP)
======================== ============ ============ =========== ============ ============ ============
Published net assets
as at 31 December
2022 11,930,152 0.7756 58,517,599 0.9734 20,524,544 0.6616
======================== ============ ============ =========== ============ ============ ============
Valuation adjustments (39,831) (0.0026) (39,609) (0.0006) 74,365 0.0024
======================== ============ ============ =========== ============ ============ ============
Net assets per Audited
Consolidated Financial
Statements 11,890,321 0.7730 58,477,990 0.9728 20,598,909 0.6640
======================== ============ ============ =========== ============ ============ ============
NOTE 9 - SUBSEQUENT EVENTS
The Directors have evaluated subsequent events up to 24 August
2023, which is the date that the Financial Statements were
available to be issued. On 24 August 2023, the Board approved a
capital distribution by way of partial redemption for the holders
of NBDX shares of $3.76m payable 25 September 2023.
There are no further items that require disclosure or adjustment
to Financial Statements.
ADDITIONAL INFORMATION | Contact Details
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
Jefferies International Limited
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 Group
Central Square
29 Wellington Street
Leeds
LS1 4DL
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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END
IR FLFIRTFISFIV
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