TIDMNBMI
RNS Number : 8230I
NB Global Monthly Income Fund Ltd
21 April 2022
NB GLOBAL MONTHLY INCOME FUND LIMITED
2021 ANNUAL REPORT
Audited Financial Statements
for the Year Ended 31 December 2021
COMPANY OVERVIEW | Features
Features
NB Global Monthly Income Fund Limited (the "Company")
The Company is a closed-ended investment company incorporated
and registered in Guernsey on 10 March 2011 with registered number
53155. 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. It is a
non-cellular company limited by shares and has been declared by the
Guernsey Financial Services Commission to be a registered
closed-ended collective investment scheme. On 20 April 2011, the
Company was admitted to the Official List of the UK Listing
Authority with a premium listing trading on the Main Market of the
London Stock Exchange ("LSE").
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 certain administrative services to the Company.
Investment Objective
The Company's investment objective is to provide the Company's
shareholders with consistent levels of monthly income, while
maintaining or increasing the Net Asset Value ("NAV") per Share
over time. Details of the Company's investment objective and
investment policy can be found on the Company's website,
www.nbgmif.com .
Investment Policy and Strategy
To pursue its investment objective, the Company will invest in
credit assets with the following target portfolio allocations: (i)
50-70% in traditional credit, meaning high yield bonds, floating
rate loans and investment grade corporate bonds; and (ii) 30-50% in
alternative credit, meaning "special situations" (consisting
generally of tradeable but less liquid debt securities, such as
stressed credit and CLO debt tranches), mezzanine debt, "club" loan
transactions (being syndicated lending opportunities presented
through the Company's or Investment Manager's relationship with
loan arrangers and/or borrowers) and private corporate loans issued
directly to borrowers. Investments in alternative credit will not
represent more than 50% of Net Asset Value at the time of
investment.
The Company's investments will be issued in U.S. Dollars,
Sterling and Euros by corporations, partnerships and other business
issuers based primarily in North America, the UK and Europe. At the
time of investment these loans, bonds and other debt instruments
will often be non-investment grade.
The Company expects that it will typically hold the majority of
its assets directly, however where the Investment Manager considers
it appropriate the Company may obtain investment exposure to loans,
bonds and other debt instruments through investments in other
collective investment vehicles. The Company will not invest more
than 15 per cent. of its total assets in other listed closed-ended
investment funds at any time.
Capital Structure
As at 31 December 2021, the Company's share capital comprised
323,268,152 Sterling Ordinary Shares ("NBMI") of no par value (of
which 76,083,114 were held in treasury).
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 investment 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 non-mainstream pooled investment products.
LIBOR
Working groups and official sector committees, including the
Financial Stability Board ("FCB"), set out clear timelines to aid
in market participants' plans for a smooth transition from LIBOR to
new risk-free reference rates. The FCB announced the dates after
which representative LIBOR rates were no longer available. All
LIBOR settings either ceased to be provided by any administrator or
no longer were representative:
-- immediately after 31 December 2021, in the case of all
sterling, euro, Swiss franc and Japanese yen settings, and the
1-week and 2-month US dollar settings; and
-- immediately after 30 June 2023, in the case of the remaining US dollar settings
Alternative risk-free reference rates, such as SONIA in the U.K.
and SOFR in the U.S., are robust, stable and rooted in active and
liquid underlying markets. SONIA is now widely used across all core
sterling markets, supporting a wide range of borrowers across
different sectors.
Dividends
Dividends are paid monthly. The Company's dividend policy is
detailed further below.
The rolling 12-month dividend yield (based on the dividends
declared in respect of the period and share price as at 31 December
2021) was 5.27%.
COMPANY OVERVIEW | Business Model
Purpose and Values
The purpose of the Company is to carry out business as an
investment company and to provide returns to shareholders through
achieving its investment objective as described on previously in
this document.
The values of the Company are discussed and agreed upon by the
Board. The Board seeks to run the Company with a culture of
openness, high integrity and accountability. It is conscious that
it demonstrates these values through its behaviour both within
itself and its dealings with its stakeholders. It seeks to act in
the spirit of mutual respect, trust and fairness. The Board is
robust in its challenge of the Investment Manager and other service
providers but tries always to be constructive and collegiate. The
Board expects its members to exhibit an independence of mind and
not to be wary of asking tough questions. Moreover, it expects and
encourages its key service providers to exhibit similar values.
Principal Activities and Structure
The chart below sets out the ownership, organisational and
investment structure of the Company.
INVESTMENT STRUCTURE OF THE COMPANY
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* Further information on the Company's investment management
arrangements can be found further below .
Global Diversification
The Investment Manager seeks to manage risk through in-depth
credit research utilising proprietary analytical processes. It
seeks to build an actively managed portfolio diversified by region,
industry, credit quality and issuer. Sector weightings are adjusted
based on economic and market analysis. Typically, no industry will
represent more than 15 per cent. of Net Asset Value at the time of
investment. At the time of investment, no more than 5 per cent. of
Net Asset Value shall be concentrated in a single issuer.
Defensive Qualities
The Company's portfolio of investments is intended to focus on
those industries regarded as defensive. Defensive industries are
those the Investment Manager believes are less affected by changes
in economic conditions and that are likely to demonstrate the
strongest capital preservation. The Company's investments are
broadly summarised as traditional credit and alternative credit
investments.
Traditional Credit Investments
Traditional credit describes the Company's investments in high
yield bonds, investment grade corporate bonds and senior secured
floating rate loans.
High Yield Bonds
The high yield strategy is an actively managed fixed income
strategy that is geared to generate returns from multiple sources
by investing in a diversified portfolio of below investment grade
corporate debt and includes both secured and unsecured securities.
The primary goal of the Investment Manager's security selection
process seeks to avoid deteriorating credits. In addition, the
portfolio management team combines sector and quality rotation with
the aim of capturing additional returns.
The strategy's universe is a screened sub-set of the broad high
yield market. From the combined broad high yield rated universe,
the Investment Manager screens out issuers with less than $500
million in publicly traded debt outstanding, defaulted securities,
and issuers with less than $100 million in EBITDA. It also
eliminates outliers including severely distressed and one-time
issuers. The remaining group (representing about 90% of the market
as captured by the ICE BofA Global High Yield Constrained Index )
is subject to the Investment Manager's credit and relative value
process to select its best ideas.
Investment Grade Corporate Bonds
An investment grade corporate bond is a corporate bond rated
BBB- or above by a third party ratings agency and has a lower risk
of default than non-investment grade bonds.
The investment grade credit strategy is actively managed and
seeks to add value from multiple sources, including sector
allocation decisions, security selection and duration/yield curve
positioning.
The universe from which the portfolio management team selects
securities in the strategy comprises a broad spectrum of investment
grade bonds that are included in (or consistent with those included
in) the primary published bond market indexes. The team starts with
securities included in the Bloomberg Barclays U.S. Credit Index and
adds: 1) issues that may not qualify for inclusion due to size or
registration, 2) issues that may not qualify based on nuances of
rating requirements, 3) unique structures and 4) credit default
swaps. This universe comprises the broad spectrum of issue types
primarily with a minimum rating of BBB -- /Baa3.
Senior Secured Floating Rate Loans
Senior secured floating rate loans, also known as floating rate
secured loans or leveraged loans, are debt obligations originated
and arranged by banks or other financial entities (also known as an
arranger) on behalf of corporations, partnerships and other
business issuers to finance activities such as mergers and
acquisitions, leveraged buyouts, recapitalisations, refinancings,
capital expenditure or for other general corporate purposes.
These will typically be syndicated to a pool of lenders that
collaborate to provide financing for the borrower. Once the bank
loan is issued, lenders have the option to hold their portion for
the life of the loan or to sell it to other investors in the
secondary market.
The senior secured floating rate loans that the Company invests
in are generally non-investment grade, that is rated at or below
BB+ by a third party rating agency.
The senior secured floating rate loans owned by the company
typically hold the most senior position in the capital structure of
the borrower and are secured with specific collateral, giving
lenders a claim on the assets that are senior to the claims of
unsecured creditors, subordinated debt holders and stockholders of
the borrower. The security package typically incorporates a first
priority over all of the borrower's assets including receivables,
inventory, bank accounts, property, plant and equipment. In the
event of a default or bankruptcy, the holders of the loans should
be in a better position to maximise recovery of their debt than
other creditors due to their position in the capital structure.
If the reference interest rate exceeds the floor, then such
loans pay the prevailing reference interest rate as well as the
credit spread. The return is generated by reference interest rate
or the reference interest rate floor, the spread over reference
interest rate paid by the borrower due to the terms of the
underlying loan and the discount. The discount occurs because new
issues are commonly priced, in the Investment Managers' experience,
at a discount to the par value of the loan.
Alternative Credit Investments
Alternative credit describes the Company's investments in the
following categories of alternative credit products:
-- Stressed credit;
-- CLO debt tranches;
-- Club loan transactions; and
-- Private corporate loans.
Stressed Credit
The inclusion of investments which are classified as 'stressed
credit' is to provide the Company with attractive risk adjusted
returns through opportunistic stressed, distressed and "special
situation" investments. The Investment Manager's investment team
will seek to identify mispriced or otherwise overlooked securities
or assets in dislocated sectors that lack liquidity and in
circumstances in which "unnatural holders" of such securities or
assets are under economic as well as regulatory pressure to sell,
and where acquiring such securities or assets has, in the team's
judgment, the potential to produce attractive absolute returns
while also providing substantial downside protection.
The Investment Manager will seek to source such opportunities
through Neuberger Berman's $45 billion Non-Investment Grade Credit
platform (bank loans, high yield, and special situations) and from
financial institutions, banks, companies and funds, which find
themselves holding non-performing loans or other types of assets
that are not consistent with their portfolio objectives or
constraints, making such investors "unnatural holders," and under
both economic and regulatory pressure to reduce their exposure to
these dislocated or troubled asset classes. The Investment Manager
believes that these opportunities, if properly managed, have the
potential to offer attractive returns to investors that understand
the risks and uncertainty of such investments, have the necessary
capital (so as to be able to absorb the illiquidity of such
investments) and are able to accept a longer-term time horizon for
these holdings.
Type of investments : Stressed credit assets include: bankruptcy
situations; out-of-court restructurings and workouts; as well as
"special situations".
-- Bankruptcy situations : Primarily in public and private
securities of bankrupt companies and/or companies that have
recently emerged from bankruptcy. The primary focus is on senior
and senior secured debt.
-- Out-of-court restructurings/workouts : From time to time, the
Company may invest in out-of-court restructuring or a workout
scenario, in which the Investment Manager believes there is an
opportunity to influence the process to increase value.
-- Special situations: Refers to investments in stressed or
event-driven situations where the Investment Manager identifies
significantly under-valued assets either in loan or bond
format.
In general, the Company will acquire assets in the secondary
market, however, in certain circumstances; the Company may also
invest directly in portfolio companies, such as making direct loans
in circumstances where the Investment Manager believes that the
risk reward parameters are compelling.
CLO Debt Tranches / Mezzanine Notes
The Company's investments in Collateralised Loan Obligations
("CLO") debt tranches will be in mezzanine notes. These are
typically rated either BB or high single B.
A CLO is a type of asset backed security supported by interest
and principal payments generated from a pool of non-investment
grade loan and debt instruments. The issue of CLO securities
involves a form of securitisation, where principal and interest
payments from multiple corporate loans and debt instruments are
pooled together, packaged into securities in various tranches. A
CLO security is a securitised asset.
The pools of loans and debt instruments are managed by a
collateral manager appointed by the CLO. The collateral manager is
responsible for selecting the loans and debt instruments to be
purchased and sold and for determining the timing of such purchases
and sales in accordance with the CLO's governing documents.
CLOs typically issue securities in three tranches, each of which
offers distinct risk and return profiles. Each tranche varies in
terms of the priority and rate at which its holders will be paid
out when income is received by the CLO, from the underlying loans.
The senior tranche securities will receive income in priority to
all other tranches but will receive the lowest rate, while the most
junior tranche will not receive any income payment but will benefit
from any increases in the value of the pool of underlying loans and
will bear the primary risk of defaults in this pool. In order of
priority of receipt of income, the tranches are: senior, mezzanine
and equity tranches. Mezzanine notes are typically issued by a CLO
with original ratings ranging from A/A2 to B-/B3.
The Company will hold mezzanine notes and so will receive income
only after payments to the CLO's senior notes have been made in
full. Additionally, if an individual CLO's coverage ratio and/or
portfolio tests are not met, cash flow that would otherwise have
been available to apply towards the mezzanine notes may instead be
used to redeem senior notes and/or purchase additional collateral.
This may result in the deferral, reduction or elimination of
interest and/or principal due to the holders of mezzanine notes.
The Company will not have recourse against a CLO for any such
deferral, reduction or elimination made in accordance with the
terms of a CLO's structuring documents. The Investment Manager's
review of the CLO incorporates detailed scenario analysis which
will include the assessment of the CLO's coverage ratio tests and
the potential impact on the CLO's expected cash flows. An
individual CLO's coverage ratio serves to preserve the collective
value of the CLO's underlying portfolio of loans for the benefit of
debt investors at the expense of the equity investors in case of a
certain level of credit stress in the underlying loan
portfolio.
CLO BALANCE SHEET
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'Club' Loan Transactions
The Investment Manager, through its relationship with loan
arrangers and/or borrowers, from time to time is presented with
syndicated lending opportunities, which are referred to in this
report as 'Club' loan transactions. These are secured floating rate
loans, which usually rank second in priority in the creditor
waterfall.
CREDITOR WATERFALL
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In the leveraged loan market, it is common for issuers with
larger size capital structures to seek to include a portion of
junior capital in the structure, however these instruments are not
always syndicated widely. Additionally, liquidity in these
instruments will usually be lower than in the first lien equivalent
debt tranches. Junior or 2(nd) lien tranches pay a higher coupon to
holders than is available to 1(st) lien debt holders to compensate
for the relative subordination.
Private Corporate Loans
The Investment Manager's European private loans team have
expertise in arranging and investing in primary, non-sponsored
private corporate loans issued through a pan-European network of
co-investing banks to borrowers. All deals are directly acquired on
behalf of investors via true-sale and rank senior in the capital
structure. Most of these deals are fitted with financial
covenants.
The objective is to provide investors with a viable alternative
to publicly traded investment grade and crossover bonds while
generating higher returns. The Investment Manager expects to
achieve this by rigorous analysis and selection when investing in
private loans to generally A- to BB- rated European private or
public companies (not private equity sponsor-owned) with attractive
relative value in line with loan tenor, rating and structural
considerations (e.g. seniority, covenants, collateral). By
targeting this relatively conservative market segment, the
Investment Manager believes it can mitigate the impact of
deteriorating credits.
The table below summarizes the main characteristics of a
representative loan:
Representative Loan Characteristics(1)
--------------------------------------------------------------------------------------------------
Company Profile Well-established firms with clear track records, stable business models
and conservative financial ratios
------------------- -----------------------------------------------------------------------------
Borrower Size Minimum turnover: EUR 100m
------------------- -----------------------------------------------------------------------------
Ownership Structure Predominantly privately owned or listed companies
------------------- -----------------------------------------------------------------------------
Format Bi-laterally negotiated senior corporate loans: Secured or Unsecured,
Fixed or Floating rate
------------------- -----------------------------------------------------------------------------
Term 5-10 years, amortizing or bullet repayment
------------------- -----------------------------------------------------------------------------
Loan Size EUR 25 - 150m, although potentially higher
------------------- -----------------------------------------------------------------------------
Typical Covenant Pari Passu, Cross Default, Negative Pledge, Change of Control, Max. Leverage,
Set Min. Equity, Interest Coverage
------------------- -----------------------------------------------------------------------------
Typical Use of Smaller acquisitions, extending debt maturity profile, strategic capex
Proceeds or refinancing while avoiding market publicity, diversification of funding
sources.
------------------- -----------------------------------------------------------------------------
Credit Rating Investment Grade/Crossover (A- to BB). Each loan externally rated by
Solvency II compliant rating agency.
------------------- -----------------------------------------------------------------------------
1 These characteristics are deduced from former market
experience but can be optimized depending on deal features and are
subject to change
Investment Process
The Investment Manager focuses on experience-based, in-depth
credit and industry analyses, disciplined portfolio construction
and ongoing portfolio surveillance.
For both traditional and alternative credit, the portfolio
management team's investment process begins with the screening of
the broad opportunity set to identify the securities that the team
will consider for purchase and then narrow down to a set of "best
ideas." The goal is to reduce the broad universe to a manageable
size of potential investments that the team will subject to its
detailed fundamental analysis. The analysts then carry out in-depth
proprietary credit research. The Investment Manager believes this
is the most important component for successful fixed income credit
investing. The team's credit research is fundamental and focuses on
understanding an issuer's financial strength.
Investment Philosophy
The Investment Manager believes that attractive investment
results can be achieved throughout all market cycles using a
proactive investment process that incorporates experience and
investment judgment supported by risk management techniques. The
Investment Manager further believes that successful investing in
non-investment grade credit is driven by a strict discipline that
seeks to: avoid credit deterioration, select securities in which
the spread is attractive on a relative value basis, and rotate
across credit tiers and industry sectors.
Risk management is an important element of the Investment
Manager's philosophy. The Investment Manager employs proprietary
models and systems to seek to manage risk so that risk levels are
consistent with the Company's investment objective.
Investment Selection
The Investment Manager's investment process begins with the
screening of the market to identify the securities that the team
will consider for purchase. The team's goal is to reduce the
universe of investable issuers to a manageable size of potential
investments that the team will subject to its detailed fundamental
analysis. The screening process will differ by type of investment,
be it Traditional or Alternative credit products. Taking US High
Yield as an example, from the combined broad high yield rated
universe (roughly 900 issuers), analysts screen out issuers with
less than $500 million in publicly-traded debt outstanding,
defaulted securities, and issuers with less than $100 million in
EBITDA. When establishing the universe of eligible investments, the
team also eliminates issuers that it is currently biased against
owning such as unsecured airlines, fashion-oriented retailers and
certain finance companies. Outliers including severely distressed
and one-time issuers are also eliminated. The remaining group of
about 600 issuers (representing about 90% of the dollar value of
the ICE BofA Global High Yield Constrained Index) is then subject
to the Investment Manager's credit and relative value process to
select its best ideas.
INVESTMENT PROCESS - US HIGH YIELD EXAMPLE
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The Investment Manager utilises its Credit Best Practices
checklist to try to ensure that analysts cover important aspects of
credit research. This covers the material credit aspects of the
investment decision, including:
-- Financial review with specific attention to revenue and cost
drivers, predictability of cash flows; internal cash flow
generation and the implications for interest and principal payments
and capital expenditures
-- Deal structure and covenants
-- Environmental Social and Governance ("ESG") Scorecard
-- Sources of liquidity such as bank lines, cash on hand, access
to capital markets, and asset sales
-- In-depth inspection of applicable filings with an eye toward
any outstanding litigation and other
commentary germane to the investment decision
-- Thorough review of any other indentures
-- Assessment of relative valuation based on its internally
generated credit quality rating and prevailing spreads for the
industries and quality tiers
In addition to thoroughly understanding the company from a
financial point of view, the team focuses on knowing a company's
management. Analysts visit with management at least twice per year
(currently virtually but under normal circumstances at their
offices or at road shows and conferences) and speak with their
company contacts at least quarterly. The Investment Manager
believes it is extremely important to know the management team, in
addition to analysing their financials. Furthermore, a full ESG
analysis is completed by the Investment Manager's research
analysts, incorporating customised, industry specific factors and
leveraging the Sustainability Accounting Standards Board ("SASB")
Alliance framework to develop our own proprietary ESG score for
every company in which the Investment Manager and the Company
invests.
An important output of the Investment Manager's credit research
is its internal rating system. Research analysts assign an internal
credit rating to each potential investment and use that rating to
compare the security's value to other securities in the same
industry and similarly rated securities across other industries.
The internal rating is a key driver in the valuation process and
analysts use it to combine insightful relative valuation work with
disciplined credit analysis. The team supplements their internal
rating with third-party ratings when analysing relative value.
Finally, the analyst reviews the investment's relative value.
The team seeks opportunities that it believes offer adequate
compensation for risk and avoids ones that do not. Investment
decisions are heavily influenced by the issue's yield relative to
market yields for the relevant quality rating category (as assigned
by public domain rating agencies and, more importantly as assigned
by the team's analysts) and industry sector.
Once the analyst has completed thorough due diligence on the
opportunity and made a recommendation, the idea is reviewed within
the appropriate sector team where different analyst perspectives
are assessed in the evaluation process.
After an investment idea has been thoroughly evaluated by the
Investment Manager's sector team (Consumer, Technology & Media,
Healthcare & Metals, Homebuilding & Industrials, Energy,
Telecommunications, Cable & Broadcasting and Cyclicals &
Transportation), it is then reviewed by the senior professionals
who constitute the Investment Manager's credit committee.
Once the credit is approved, the final step is implementation.
After an investment idea is approved by the credit committee,
implementation is the responsibility of the Portfolio Construction
Team (portfolio managers and traders) that establishes overall
portfolio structure. This team evaluates the various ideas that are
available for implementation within the context of each client's
investment objectives and specific investment guidelines. By way of
example, please refer to the diagram above for an illustrated
description of the Investment Manager's investment process in
relation to US High Yield investment opportunities.
Research
Proprietary research is a critical element of the Investment
Manager's process and is the basis for the team's investment
decisions. The Investment Manager's research teams are structured
along sector lines. Each analyst has significant industry and
company-specific knowledge and is responsible for understanding an
issuer's capital structure, from the most senior to the most junior
of securities. To leverage its credit resources, the team also
works closely with the team of global investment grade
analysts.
Each analyst carries out detailed credit analysis through the
Investment Manager's proprietary credit best practices checklist
(the "Checklist"). The Checklist covers the qualitative and
quantitative aspects that the portfolio management team believes is
vital to making an investment decision. The Investment Manager's
credit research is fundamental and focuses on understanding a
company's financial strength as it is reflected in interest
coverage ratios and free cash flow generation. Analysts look at
reported results and also project forward, using scenario analysis,
to seek to understand the issuer's likely credit profile in the
future.
Credit Best Practices Checklist
The Investment Manager's Checklist provides the framework for a
rigorous and repeatable investment process that seeks to
incorporate relevant top-down and bottom-up data and analysis.
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1 This material is intended as a broad overview of the portfolio
managers' style, philosophy and investment process and is subject
to change without notice.
For each company, the analyst models the financials across three
scenarios: base case, upside case and downside case. Analysts
monitor each company relative to the scenarios and keep close tabs
on relevant information (commodity prices, economic statistics,
etc.) that the analysts believe could cause a change in each
company's ability to service its debt.
In addition to thoroughly understanding the company from a
financial point of view, the analysts focus on assessing the
material ESG risks and opportunities of the company through
bottom-up fundamental analysis and the completion of an NB ESG
Scorecard. ESG research is a critical component of the team's
fundamental research process that determines Internal Credit
Ratings. The team believes that the integration of ESG factors in
its investment process adds value as it helps to identify risks
generally not captured by traditional corporate credit analysis and
to analyse the non-financial aspects of businesses. ESG analysis is
performed by the Non-Investment Grade Credit research team, not
outsourced to a centralised group within the firm or to a third
party ESG rating service. The Investment Manager's proprietary ESG
scoring process is completed for all issuers in portfolios and ESG
weightings are customised based on specific industry criteria
identified by the research analysts. The team monitors performance
attribution in order to determine whether the ESG analysis has
identified risks and opportunities as expected.
Integration of ESG Analysis into the Investment Process
Principles for Responsible Investment ("PRI")
(https://www.unpri.org/) has awarded Neuberger Berman an A+ for its
fixed income ESG integration
Differentiated ESG Process
-- ESG is a critical component of the fundamental research
process that determines Internal Credit Ratings
-- ESG analysis is performed by the Non-Investment Grade Credit
research team , not outsourced to a
centralized group within Neuberger Berman or third party ESG rating service
-- Proactive engagement with issuers to enhance disclosure,
improve ESG analysis, and effect positive change
-- Quarterly ESG Review with Credit Committee
-- Performance attribution is monitored to determine the impact of ESG analysis
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Finally, the analyst reviews the investment's relative value.
The team seeks opportunities that it believes offer adequate
compensation for risk and seeks to avoid ones that do not.
Investment decisions are heavily influenced by the issue's spread
relative to market spreads for the relevant quality rating category
(as assigned by public domain rating agencies and, more
importantly, as assigned by analysts) and industry sector. An
important component of the portfolio management team's buy and sell
discipline is its internal rating system. The team does not merely
rely on third-party ratings when analysing relative value. Instead,
a rating is determined for each issuer's securities based on an
analyst's financial analysis. This rating is used for spread
comparisons across quality and industry levels.
Neuberger Berman's credit research team is divided into industry
verticals as illustrated below. Ideas are fed up to the Investment
Manager's credit committee, which consists of the senior portfolio
managers from across the non-investment grade platform.
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Further information on the Company's investment strategy and
process can be found in the Company's most recent prospectuses,
which are available on the Company's website at www.nbgmif.com
under the "Investor Information" tab.
Hedging
As the Company's shares are denominated in Pound Sterling
(Sterling Ordinary Shares) and investments are denominated in U.S.
Dollars, Euro or Pound Sterling, holders of the Company's shares
would be indirectly exposed to foreign currency fluctuations
between the currency in which such shares are denominated and the
currency of the non-Pound Sterling investments made by the Company.
Consequently, the Investment Manager seeks to engage in currency
hedging between the U.S. Dollar and any other currency in which the
assets of the Company or a class of shares is denominated, subject
to suitable hedging contracts such as forward currency exchange
contracts being available in a timely manner and on terms
acceptable to the Investment Manager, at its sole and absolute
discretion.
Gearing and Derivatives
The Company may use derivatives for hedging as well as for
efficient portfolio management, including managing currency risks
between cash flows from its investments and Pound Sterling being
the currency of the Shares. The Company is expected to be managed
primarily on an ungeared basis, however the Company may, from time
to time, be geared tactically through the use of borrowings for
investment and short-term liquidity purposes. The Directors will
restrict borrowing to an amount not exceeding 20 per cent. of Net
Asset Value at the time of drawdown.
Cash Exit Facility
The Company may, at the Board's absolute discretion, offer to
eligible Shareholders the opportunity to tender up to 25 per cent.
of their holdings (a "Cash Exit Facility Offer") at a price equal
to the prevailing Net Asset Value per Share, less two per cent. If
the Board resolves to exercise its discretion (as they expect to do
if the Company is trading at a discount to NAV per Ordinary Share
of greater than 2 per cent. as at the date of any Cash Exit
Facility Offer, the first Cash Exit Facility Offer is expected to
close on 30 June 2022 and subsequent Cash Exit Facility Offers
every six months thereafter. Further details and the terms and
conditions applicable to the first Cash Exit Facility Offer, if
made, will be published in a Shareholder circular (the "Cash Exit
Facility Circular"). in advance of the close date. In connection
with any subsequent Cash Exit Facility Offers, the Company will
publish an RIS announcement notifying Shareholders of the Board's
decision to make a Cash Exit Facility Offer.
Winding Up
From the end of June 2022, should the Company's NAV fall below
GBP150m and taking into account market conditions, the Directors
intend to propose a wind-up of the Company.
STRATEGIC REVIEW | Financial Highlights
Financial Highlights
Key Figures
(U.S. Dollars in millions, except As at 31 DECEMBER As at 31 DECEMBER
per share data) 2021 2020
=================================== ================== ==================
Net Asset Value
=================================== ================== ==================
- Sterling Ordinary Shares $315.7 $317.4
=================================== ================== ==================
Net Asset Value per share
=================================== ================== ==================
- Sterling Ordinary Shares GBP0.9429 GBP0.9394
=================================== ================== ==================
Share price
=================================== ================== ==================
- Sterling Ordinary Shares GBP0.8880 GBP0.8160
=================================== ================== ==================
Discount to Net Asset Value Per
Share (1)
=================================== ================== ==================
- Sterling Ordinary Shares (5.82%) (13.14%)
=================================== ================== ==================
Investments $307.4 $297.7
=================================== ================== ==================
Net investment income per share GBP0.0488 GBP0.0365
=================================== ================== ==================
Earnings per share GBP0.0456 GBP0.0030
=================================== ================== ==================
Dividends per share (2)
=================================== ================== ==================
- Sterling Ordinary Shares 4.68 pence 3.90 pence
=================================== ================== ==================
Current Gross Portfolio Yield (1) 6.27% 6.08%
=================================== ================== ==================
Annualised dividend yield (1)
=================================== ================== ==================
- Sterling Ordinary Shares 5.27% 4.78%
=================================== ================== ==================
NAV Total Return (1)
=================================== ================== ==================
- Sterling Ordinary Shares 5.89% 2.99%
=================================== ================== ==================
Share Price Return (1)
=================================== ================== ==================
- Sterling Ordinary Shares 14.08% (6.97%)
=================================== ================== ==================
On-Going Charges (1)
=================================== ================== ==================
- Sterling Ordinary Shares 1.12% 1.11%
=================================== ================== ==================
1 Further explanation and definitions of the calculation is
contained in the section "Alternative Performance Measures" further
below.
2 Dividends are those that were declared in respect of the
year.
STRATEGIC REVIEW | Chair's Statement
Chair's Statement
Dear Shareholder,
It is with pleasure that I present to you the Annual Report of
NB Global Monthly Income Fund Limited for the year ended 31
December 2021.
Performance
Over the year, the Company's share price total return was 14.08%
per Sterling Ordinary Share (2020: (6.97%)). The Company's Net
Asset Value ("NAV") total return per share for the year was 5.89%
(2020: 2.99%). As of 31 December 2021, the Portfolio's gross
current yield was 6.27%, and the gross yield to maturity was
6.58%.
Dividends
The Company continued to meet its objective of providing regular
and sustainable dividends. From the final quarter of 2020, the
Company moved from a quarterly to a monthly distribution policy.
During 2021, a monthly dividend of 0.39p was paid for a total of
4.68p for the year. This is compared to the 3.9p per share paid in
2020, an increase of 20%. The increase in dividends paid by the
Company was made possible by the higher yield of the portfolio
following the change in investment strategy implemented in
2020.
We were pleased to announce on 20 January 2022 an annual
dividend target rate for 2022 of 5.25% of NAV as at 4 January 2022,
which equates to 0.415 pence per share paid monthly and an increase
of 6.4% over the year 2021. I would like to take the opportunity to
remind our shareholders that the Company (as a consequence of the
passing of the resolutions at the EGM on 8 September 2020) became
an "offshore fund" for UK tax purposes under the UK's offshore fund
rules with effect from 1 January 2020. The Company obtained
approval by HMRC to treat the Company, as from 1 January 2020, as a
"reporting fund" for these purposes, details of which can be found
in the EGM circular dated 17 August 2020 available on the Company's
website. Details of the excess reportable income, if any, for each
year can also be found on the Company's website. In order to avoid
having any excess reportable income for 2021, the Board has
resolved to increase the May 2022 dividend by 0.205 pence per
share.
Portfolio Construction
As of 31 December 2021, the allocation in the portfolio was
broadly 64% to traditional credit and 36% to alternative credit.
The overall Fund exposure to floating rate assets was 70%. Floating
Rate Loans remained the portfolio's largest allocation at just over
35%, followed by High Yield Bonds and Private Debt. In terms of
rating by credit quality, as at year end the portfolio held an
allocation of 14.0% in BBB/BB rated securities, 46.1% in B rated
securities and with an allocation of 33.5% to securities rated CCC
and below.
Discount Management
During the year ended 31 December 2021, the Company's discount
ranged between 13.8% and 4.3% per Sterling Ordinary Share finishing
the year at a 5.8% discount.
On 3 March 2020, on 11 June 2020 and on 14 June 2021 we sought
shareholder approval to renew the authority for the Company to make
market purchases of its own Shares, which was duly granted. The
Board will seek to renew this authority, as required, to provide
the flexibility to act on an opportunistic basis. There were no
repurchases of Sterling Ordinary Shares during the year ended 31
December 2021.
With effect from 8 September 2020, the annual continuation vote
and redemption triggers were withdrawn and replaced with, at the
discretion of the Board, a bi-annual tender the first of which, if
offered, will close at the end of June 2022. (See further down for
more details).
In addition, from the end of June 2022, should the NAV fall
below GBP150m the Board will consider, subject to prevailing market
conditions, proposing that the Company be wound up.
Shareholder Engagement
During the year, the Investment Manager, Broker and I contacted
a significant number of our major shareholders on a one-to-one
basis to discuss the Company and to understand investor views on
our strategy.
Annual General Meeting ("AGM") results
All of the resolutions proposed at the AGM in June 2021 were
duly passed with no significant votes lodged against any
resolution.
COVID-19
The latest COVID-19 Omicron variant, while a serious health
issue, has less severe symptoms than at first feared and compared
to the Delta variant. Vaccination rates vary in the U.S. and Europe
but generally, the populations have good levels of protection in
comparison to previous spikes in COVID-19. In the near term, we do
have concerns that some businesses are seeing higher levels of
staff absence with many employees required to isolate which is
causing logistical issues for some Issuers. Looking further out, we
are turning more constructive that from Spring of 2022 onwards,
economic activity will likely be far less impacted by Omicron or
other COVID-19 factors, especially as we move from pandemic to
endemic and as both supply chain and labour disruptions begin to
normalise. As such, we are turning more constructive on issuers
which, while appropriately capitalised, are set to benefit from a
resurgence in consumer spending on services, hospitality and
entertainment as well as other activities such as business and
leisure travel.
Operationally, the Company has continued to function without any
discernible disruption. All of our major service providers have
been able to maintain full-service levels throughout the pandemic
and the Board is confident that this will continue to be the case,
with many employees having returned to the office on a more
flexible basis in the first quarter of 2022.
Outlook
Your Board believes that the current annualized dividend yield
of 5.27% as at 31 December 2021, on the Company's shares at the
current share price is attractive on a risk-adjusted basis given
the current low interest rate environment and considering the
prudent investment approach taken by the Investment Manager. The
Board is targeting increased dividends for 2022, currently 0.415
pence per month, equivalent to 4.98p per share for the year. We
believe the Company continues to offer a favourable risk-adjusted
total return and is confident with the Investment Manager's
performance to date in executing the revised strategy.
While the massive fiscal and accommodative monetary support, put
in place as a result of the pandemic, will be moderating over the
intermediate term, solid consumer business balance sheets and still
strong end demand will continue to deliver above-trend economic
growth in 2022. In this environment, non-investment grade credit is
likely to continue to see favourable demand given the persistent
search for yield and durable income. That said, central banks will
be looking to raise short-term interest rates to fight higher
inflation which actually will benefit senior floating rate loans
and CLOs as well as the shorter duration global high yield. Given
an earlier and faster normalisation of monetary policy plus the
very favourable fundamentals of issuers, floating rate loans -
unlike previous cycles - will see the carry component likely
"float" a lot earlier given the unusual nature of the pandemic -
induced, very short, deep recession and extremely sharp recovery
and the necessary actions that the Fed, BoE and ECB will have to
take to fight higher inflation. There remains some uncertainty
about the path of COVID given the potential for new variants and we
could see come short-term bouts of volatility from this and
geopolitical concerns, but we believe that the manager's
fundamental credit research, focus on relative valuations and aim
to avoid defaults position them well to take advantage of any
market volatility.
Directors have been monitoring the developments in Ukraine and
undertook a detailed review of the portfolio in March 2022. The
Company has no/does not have investments or portfolio companies
headquartered or with material operations in Russia, Ukraine or
neighbouring countries. We therefore do not expect/expect any
material impact on the Company but will continue to monitor
closely.
Thank you for your continued support.
Rupert Dorey
Chair
20 April 2022
STRATEGIC REVIEW | Investment Manager's Report
Investment Manager's Report
Market and Macroeconomic Environment
Non-investment grade credit finished the year with solid returns
despite the rising number of Delta COVID cases earlier last year
and Omicron cases later in the year. Returns in the reporting
period were driven by favourable fundamentals and strong demand for
higher yielding, lower duration fixed income, despite the
uncertainty of new COVID variants. Also, in December, the Federal
Reserve Chair hinted at an accelerated taper and rate hike timeline
due to persistent inflation. That said, for most of 2021, central
bankers had been tolerant of inflation because of the pandemic and
guided that returning employment to potential and inflation to a
higher target was a priority. Central bankers got their wish and
then some as inflation became more persistent than desired. The
Bank of England surprised with a 15 basis point rate hike in
December which signals they are worried about inflation being more
firmly entrenched. Omicron which has less severe symptoms, was
shrugged off by investors who seem to hold the view that it was
unlikely to derail the economic recovery. Fundamentals across
non-investment grade credit markets improved throughout the
reporting period and remained solid as at year end with default
rates below or near all-time lows and technicals in a very
favourable supply/demand balance with record CLO production, strong
demand from investors and the increasing volume of "rising stars"
likely to reduce the available supply in global high yield
Senior floating rate loans ended the reporting period in
positive territory on improving issuer fundamentals, large positive
retail inflows and strong new issue volume in CLOs. U.S. senior
floating rate loans-measured by the S&P/LSTA Leveraged Loan
Index (the "S&P LLI")-provided a return of 5.20% in 2021 with
lower credit rating tiers outperforming the higher rated as CCC, B
and BB returned 12.45%, 5.22% and 3.12%, respectively. The European
Leveraged Loan Index returned 4.81%, excluding currency effects.
Second lien loans saw healthy returns and were up 13.53% over the
full year.
The global high yield bond market also ended the reporting
period in positive territory driven by improving economic activity,
better-than-expected earnings, and accommodative central bankers
who more recently have focused on plans to remove the massive
monetary stimulus as a result of much higher inflation. Moreover,
with high yield corporate fundamentals markedly improving-evidenced
by default rates declining to all-time lows-high yield spreads
tightened over the period. Additionally, attractive yields and
lower relative duration fuelled investor demand for the asset
class. In global high yield, lower quality securities, such as
those rated CCC and below in the ICE BofA Global High Yield Index
(Total Return, Hedged, USD) saw much better performance with
returns of 8.75%, whereas BB and B securities returned 2.97% and
1.22%, respectively for the full year. This compares to the overall
ICE BofA Global High Yield Constrained Index (Hedged, USD) return
of 3.04%.
The CLO new-issue market set records with issuance year to date
through December 31 of $186.7 billion which exceeded the prior
full-year record of $129 billion in 2018. U.S. leveraged loan
retail funds continued to see very strong inflows totalling $33.8
billion in 2021. CLO debt had stable, overall positive performance
in 2021, as the asset class continued to adequately absorb record
new issuance and reset volumes. Investor demand remained strong
benefitting from higher near-term rates and strong underlying
fundamental performance as well as continued attractive relative
value vs. other fixed income assets. The CLO BB index gained 11.20%
for the full year 2021.
Defaults continued their descent toward and through record lows
in non-investment grade credit markets, which is consistent with
improving balance sheets and solid earnings growth. The trailing
12M par weighted default rate for the S&P LLI as of December
2021 was 0.29%, down 388 basis points from last year's peak of
4.17% in September 2020 and flat from a month ago. In European
loans, the trailing 12M par weighted default rate was 0.62%, down
199 basis point from the October 2020 peak and down 13 basis points
compared to the prior month. Furthermore, the distressed ratios
also remain very low as the share of distressed issuers in the
S&P LLI and ELLI are now down to 0.99% and 0.57%, respectively.
The share of U.S. High Yield bonds trading at distressed levels
(+1,000 basis points or wider) was 2.0% as at 31 December 2021
which also bodes well for the default outlook. In December, the par
weighted LTM U.S. high yield default rate decreased to 0.27%, or 11
basis points lower than the prior record low. While defaults and
the share of distressed issuers remain low, we continue to be
vigilant in avoiding credit deterioration and issuers that do not
meet our disciplined credit underwriting standards.
Non-investment grade credit-with its lower duration profile,
attractive yields relative to other fixed income and improving
credit fundamentals-will likely continue to see favourable investor
demand.
Performance 1 January 2021 - 31 December 2021
For the period of 1 January 2021 to 31 December 2021, the NAV
total return of the NB Global Monthly Income Fund - Sterling Share
Class GBP was 5.89%. (Performance data quoted represents past
performance and does not indicate future results. Total returns
shown are net of all fees and expenses and include reinvestment of
income dividends and other distributions, if any).
During the period, holdings in the Oil & Gas, Broadcast
Radio & TV and Health Care sectors were the most significant
drivers of performance whilst the Business Equipment &
Services, Utilities and Food & Drug Retailers sector holdings
were the biggest detractors. The Company's positioning in B rated
issuers contributed the most to performance whilst positioning in
CCC rated issuers added the least over the period.
As of 31 December 2021, Global Floating Rate Loans was the
portfolio's largest allocation at 35.5% followed by Global High
Yield Bonds at 27.6%. The Company's allocation to BBB/BB rated
credits was at 14% while our exposure to CCC and below rated
issuers finished the period at 33.6%. The overall Fund exposure to
floating rate assets was at 70% at the end of the reporting period,
with an average duration for the entire portfolio of 1.24 years.
Regarding sector allocation, the top three weights included
Electronics (Technology), Health Care and Oil & Gas whilst the
bottom three weights included Forest Products, Steel and Brokers,
Dealers & Investment Houses.
Over the period 1 January 2021 to 31 December 2021, the dividend
income was consistently GBP0.0039 per share every month.
Portfolio Positioning
NBMI as at December 31 2021
ASSET ALLOCATION % (MV) CREDIT QUALITY % (MV)
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NBMI as at December 31 2020
ASSET ALLOCATION % (MV) CREDIT QUALITY % (MV)
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Outlook
In our view, yields on non-investment grade credit are more than
compensating investors for the benign default outlook, will
continue to provide durable income and are especially attractive
compared to other fixed income alternatives. While the persistence
of inflation has been acknowledged by central banks, above-trend
real GDP growth and better pricing power should remain supportive
of issuer fundamentals. Strong consumer balance sheets, growing
nominal wages, businesses working to rebuild inventories and rehire
plus more clarity on central bank tapering and rate hike timelines
should continue to be supportive of economic activity and financial
conditions. Our global research team continues to monitor the
investment thesis for each issuer in the fund given the uncertainty
around supply chain disruptions, labour supply constraints and
Omicron's potential impact on demand in certain consumer-facing
sectors such as travel, lodging, leisure and entertainment. Even
with the uncertainty of the pandemic, higher inflation and
potential political risk which could result in pockets of
short-term volatility, we believe our bottom-up, fundamental credit
research process focused on security selection while seeking to
avoid credit deterioration and putting only our "best ideas" into
portfolios, position us well to take advantage of any
volatility.
While the Russian invasion of Ukraine post year end presents
further geopolitical and market risk, we have considered the
potential impact of this event on asset values and no direct impact
has been identified. We continue to monitor the situation.
Neuberger Berman Investment Advisers LLC Neuberger Berman Europe Limited
20 April 2022 20 April 2022
STRATEGIC REVIEW | Portfolio Information
Portfolio Information
Top 10 Issuers as at 31 December 2021 (excluding cash)
FAIR VALUE PORTFOLIO
ISSUER SECTOR ($) WEIGHT
=============================== ============================== =========== ==========
Intelsat Jackson Holdings Telecommunications/Cellular
SA Communications 5,745,682 1.82%
----------------------------- ------------------------------- ----------- ------------
Chariot Buyer LLC Building & Development 5,218,500 1.65%
----------------------------- ------------------------------- ----------- ------------
Constellation Automotive
Limited Automotive 4,757,863 1.51%
----------------------------- ------------------------------- ----------- ------------
Team Health Holdings Inc Health Care 4,530,016 1.43%
----------------------------- ------------------------------- ----------- ------------
CSC Holdings LLC Cable & Satellite Television 4,483,125 1.42%
----------------------------- ------------------------------- ----------- ------------
Retailers (except food
Great Outdoors Group LLC and drug) 3,965,858 1.26%
----------------------------- ------------------------------- ----------- ------------
Uniti Group Inc/CSL Capital Telecommunications/Cellular
LLC Communications 3,951,380 1.25%
----------------------------- ------------------------------- ----------- ------------
Retailers (except food
EG Group Ltd and drug) 3,912,728 1.24%
----------------------------- ------------------------------- ----------- ------------
Phoenix Newco Inc Health Care 3,603,600 1.14%
----------------------------- ------------------------------- ----------- ------------
American Airlines Group
Inc Air Transport 3,557,456 1.13%
----------------------------- ------------------------------- ----------- ------------
Top 10 S&P Sector Breakdown
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Key Statistics
31 DECEMBER 31 DECEMBER
2021 2020
------------------------- ----------- -----------
Current Gross Portfolio
Yield (1) 6.27% 6.08%
------------------------- ----------- -----------
Number of Investments 293 245
------------------------- ----------- -----------
Number of Issuers 231 197
------------------------- ----------- -----------
1 The Company's Current Gross Portfolio Yield is a market-value
weighted average of the current yields of the holdings in the
portfolio, calculated as the coupon (base rate plus spread) divided
by current price. The calculation does not take into account any
fees, Company expenses or sales charges paid, which would reduce
the results. The Current Gross Portfolio Yield for the Company will
fluctuate from month to month. The Current Gross Portfolio Yield
should be regarded as an estimate of the Company's rate of
investment income and it will not equal what is distributed by way
of dividends by the Company.
STRATEGIC REVIEW | Strategic Report
Strategic Report
Investment Objective and Business Model
The Company's investment objective and business model have been
discussed previously in this document.
Principal Risks and Risk Management
The Board is responsible for the Company's system of internal
financial and operating controls and for reviewing its
effectiveness. The Board has satisfied its responsibility by using
the Company's risk matrix as its core element in establishing the
Company's system of internal financial and reporting controls while
monitoring the investment limits and restrictions set out in the
Company's investment objective and policy. The Board has carried
out a robust assessment of the emerging and principal risks and
uncertainties facing the Company including those that would
threaten its business model, future performance, solvency or
liquidity.
The principal risks, which have been identified, and the steps
taken by the Board to mitigate these areas are as follows:
RISK MITIGATION
===== ===========
Macroeconomic Conditions
Macroeconomic conditions change The Board receives regular reports
significantly and to the detriment from the Investment Manager on the
of the portfolio or the Company macroeconomic conditions and their
causing a credit or liquidity effect on the health of the portfolio.
risk to crystallise. The approach to managing credit
risk and liquidity risk is set out
further below.
Credit Risk
This is the risk that the Company The Investment Manager carries out
buys a loan or bond of a particular extensive, independent due diligence
Issuer and it does not perform on each asset, and has a particular
as expected and either defaults focus on stable, performing credits
on a payment or experiences a that evidence strong track records
significant drop in the secondary through previous economic cycles.
market value. Issuer size is also considered and
the Investment Manager continues
to favour the larger issuers in
the market, defined by having debt
issuance greater than $500m or equivalent
in sterling or euros. These issuers
tend to have broader syndicates,
which can aid liquidity in the secondary
market. As well as screening out
the smaller issuers, the Investment
Manager also excludes highly cyclical
industries and companies with limited
earning visibility from its investment
process.
Once a particular investment has
been made, the Investment Manager
is focused on monitoring it. A range
of relevant data is reviewed on
an ongoing basis for each investment,
including, but not limited to, key
financial drivers, commodity prices,
stock prices, regulatory developments,
financial results, press releases
and management commentary to identify
any indicators of credit deterioration.
More detail on the Investment Manager's
processes are preciously in this
document.
To manage this risk further, the
Board ensures a diversification
of investments with the Investment
Manager operating in accordance
with the investment limits and restrictions
policy determined by the Board.
The Directors monitor the implementation
and results of the investment process
with the Investment Manager at each
quarterly Board meeting and monitor
risk factors in respect of the portfolio.
Liquidity Risk
The risk that the Company will Liquidity risk is managed by the
not be able to meet its obligations Investment Manager, in conjunction
as and when they fall due. with the Administrator, 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 cash requirements.
The majority of the Company's
investments are highly liquid
which would act as a safeguard
in the unlikely event of an unplanned
cash requirement. Regular liquidity
updates are provided to the Board
. On a monthly basis, a summary
of Income and Expenses, net investment
income and distributions paid
is provided to the Board. The
Board also receives quarterly
expense reports form the Sub-Administrator,
to aid monitoring of cash liquidity.
Level of Discount or Premium
A discount or premium to NAV While the Directors may seek
can occur for a variety of reasons, to mitigate any discount or premium
including market conditions or to NAV per Share through the
to the extent investors undervalue discount management mechanisms
the management activities of set out in the Prospectus and
the Investment Manager or discount EGM Circular dated 17 August
their valuation methodology and 2020, there can be no guarantee
judgment. that such mechanisms will be
successful.
Operational Risk
Disruption to, or the failure Details of how the Board monitors
of either the Investment Manager's, the services provided by its
Administrator's or Sub- Administrator's major service providers and the
accounting, dealings or payment key elements designed to provide
systems, or the Custodian's records effective internal control are
could prevent adequate safeguarding explained further in the internal
of the Company's assets, the controls section of the Corporate
accurate reporting or monitoring Governance Report which is set
of the Company's financial position out further below. The key service
and the receipt or transmission providers are contracted to provide
of payments. their services through qualified
professionals and the Board receives
Furthermore, the Company must regular internal control reports
comply with the provisions of from the Administrator and Sub-Administrator
the Law and, since its shares that confirm compliance with
are listed on the Official List service standards.
of the UK Listing Authority and
trade on the Main Market of the The Board relies on its Company
LSE, the Company is subject to Secretary, the Administrator,
the Financial Conduct Authority's Broker and other professional
("FCA") Listing Rules and the advisers to ensure compliance
Disclosure Guidance and Transparency with all relevant legislation
Rules ("DTRs") . A breach of and regulatory requirements.
the legislation could result
in the Company and/or the Directors
being fined or subject to criminal
proceedings. A breach of the
Listing Rules could result in
the suspension of the Company's
shares and therefore a reduction
in shareholder value.
Investment Activity and Fund
Performance
The Board has managed these risks
An unsuccessful investment strategy by ensuring a diversification
may result in underperformance of investments. The Investment
against the Company's objective. Manager operates in accordance
This might be due to the skills with the investment limits and
of the Investment Manager falling restrictions policy set out in
short in its selection of sectors the Company's Investment Policy
or issues in which to invest and as further determined by the
or style drift. Board. The Directors review the
limits and restrictions on a regular
basis and the Administrator monitors
adherence to the limits and restrictions
every month and will notify any
breaches to the Board. The Investment
Manager provides the Board with
management information including
performance data and reports,
and the Corporate Broker provides
shareholder analyses. The Directors
monitor the implementation and
results of the investment process
with the Investment Manager at
each Board meeting and monitor
risk factors in respect of the
Portfolios. Investment strategy
is reviewed at each Board meeting.
Heat Map of Principal Risks
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Principal Risks' Expected Direction of Change
RISK CATEGORY EXPECTED DIRECTION OF CHANGE
========================== =====================================================
MACRO ECONOMIC CONDITIONS Neutral. The material uncertainty surrounding
the Ukraine situation has created a spike
in volatility in the short term. Other things
being equal we expect interest rate rises
from the Fed in 2022 to combat significant
inflationary pressures resulting from excess
liquidity provision and supply induced shocks
resulting from de-globalisation of supply
chains.
========================== =====================================================
CREDIT RISK Neutral. Defaults rates are expected to remain
well below historical average levels, but
the expected tightening in financial conditions
and likely slower growth will see default
rates increase from current historically low
levels.
========================== =====================================================
LIQUIDITY RISK Unchanged. Liquidity Risk is managed by the
Investment Manager to ensure that the Company
maintains sufficient working capital in cash
or near cash forms as to be able to meet the
Company's cash requirements. The underlying
portfolio is moderately less liquid than before
the strategy change (September 2020) but the
Board is likely to be less active in buybacks.
========================== =====================================================
INVESTMENT ACTIVITY Moderately positive. Fed rate rises will likely
AND PERFORMANCE benefit floating rate returns and make FRNs
relatively more attractive vs. bonds, but
could be counterbalanced by credit spreads
widening particularly if growth slows more
sharply.
========================== =====================================================
LEVEL OF DISCOUNT Positive. The near-term volatility induced
/ PREMIUM by COVID-19 in March 2020 in almost all sectors
impacted negatively on the Company's relatively
stable discount level during 2020. This relative
stability was achieved following substantial
share buy backs. Following the change in investment
strategy and cash exit offer (September 2020),
the discount has narrowed again and stabilised
within a relatively narrow band. The Board
believes the Company offers a relatively attractive
risk adjusted investment proposition. Effective
June 2022, the Company's bi-annual tender
offer (for details see further below) will,
in the long-term, contribute to effective
management of the discount at which the Company's
shares trade.
========================== =====================================================
OPERATIONAL RISK No expected change. The Board has continued
to discuss the impact of COVID-19 with all
the Company's Key Service Providers and remains
satisfied that the Company can continue, and
has continued, to be run effectively. However,
this situation will be regularly reviewed
as matters evolve.
========================== =====================================================
Emerging Risks
The Board undertakes a quarterly assessment of all risks on a
forward-looking basis, and in discussion with the Investment
Manager identifies emerging risks in addition to assessing expected
changes to existing risks as discussed above. The Board assesses
the likelihood and impact of emerging risks. The Board discusses
and agrees appropriate mitigation or management of emerging risks
as and when they are identified. Such examples of emerging risks
identified in the year include global supply chain bottlenecks
resulting from the impact of COVID-19, the threat from new variants
and disruption from further restrictions, heightened geo-political
risks particularly following the Russian invasion of Ukraine and
the increasing spotlight on ESG and climate change particularly
following COP 26. Emerging risks are managed through discussion of
the likelihood and impact at each quarterly Board meeting. Should
an emerging risk be determined to have any material potential
impact on the Company, appropriate mitigating measures and controls
are agreed.
Going Concern
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 liquidity
of investments and the income deriving from those investments as of
the reporting date and have determined that the Company has
adequate financial resources to meet its liabilities as they fall
due.
However, should there be a cash exit offer at the end of June
2022 and at the end of December 2022 and both are taken up by
Shareholders in full, the Company's NAV would likely drop below
GBP150m after January 2023, which would result in the Board,
subject to market conditions at the time, bringing forward a
proposal to wind-up the Company. This currently represents a
material uncertainty as to the ability of the Company to continue
in operation. After making enquiries of the Investment Manager and
the Sub-Administrator, the Directors are however, satisfied that
the Company has adequate resources to discharge its liabilities as
they fall due for at least one year from the date these Financial
Statements were approved notwithstanding this material uncertainty.
Accordingly, the Directors continued to adopt a going concern basis
in preparing these Financial Statements.
Viability Statement
The Directors have assessed the prospects of the Company over
the three-year period to 31 December 2024 in accordance with
provision 36 of the AIC Code of Corporate Governance, published in
February 2019 (the "AIC Code"). The Board conducted this review for
a period of 3 years, a period that was selected for the following
reasons:
-- The nature of the credit investments held by the Company have
an average maturity of approximately three years which allows the
investment cash flows, recycling of investments, and expenditure
commitments of the Company to be reasonably forecast over this
timeframe.
-- The impacts on the Company of other factors can be reasonably
assessed within this timeframe. Beyond a three-year timeframe, the
impact of external forces, such as changes to legislation, market
forces or other unknown factors, becomes less able to be predicted
or assessed in analysing the viability of the Company.
The three-year review considers the Company's cash flow, cash
distributions and other key financial ratios over each year. The
three-year review also makes certain assumptions about the normal
level of expenditure likely to occur and considers whether
financing facilities will be required. Importantly, the three-year
review period to 31 December 2024 encompasses the possibility that
there may be cash exit offers (as detailed in the going concern
section above) or that very poor performance results in the
Company's NAV falling below GBP150m from January 2023. As such,
there is a material uncertainty as to the Company's viability.
In their assessment of the viability of the Company, the
Directors have carried out a robust assessment of the Company's
emerging and principal risks detailed previously in this document.
The Directors have performed a quantitative and qualitative
analysis that included the Company's income and expenditure
projections and the fact that the Company's investments mainly
comprise realisable securities which can be expected to be sold to
meet funding requirements if necessary. As part of this assessment,
the Directors reviewed a series of stress test scenarios carried
out by the Investment Manager, which included an assumption of a
significant (60%) fall in income and no reduction in expenses and
were satisfied that the Company would continue to be viable
financially. The Directors consider it highly likely that, in such
a scenario, expenses would fall rather than remain at current
levels as the main expense, the Investment Manager's fee, which is
driven by the NAV, would be expected to fall as a result of either
declining value of assets or sale of assets to cover the
operational costs. A risk to the analysis however is the
possibility that the cost of hedging, which is cash settled
quarterly, is extreme for a particular quarter at a time when
liquidity in the credit markets is severely impacted. The
Investment Manager reviews the hedging positions daily and
considers it highly unlikely that such a situation would arise and
cause the Company not to be able to settle its liabilities as they
fall due. The Directors have made the assumption therefore that
this would not happen.
Based on the Company's processes for monitoring operating costs,
the Investment Manager's compliance with the investment objective,
asset allocation, the portfolio risk profile, liquidity risk and
financial controls, assuming stressed market conditions and the
assumptions referred to above, notwithstanding the material
uncertainty discussed above the Directors have concluded that there
is a reasonable expectation that the Company will be able to
continue in operation and meet its liabilities as they fall due
over the three year period to 31 December 2024.
Performance Measurement and Key Performance Indicators
In order to measure the success of the Company in meeting its
objective and to evaluate the performance of the Investment
Manager, the Directors take into account the following performance
indicators:
-- Returns and NAV - The Board reviews at each board meeting the
performance of the portfolio as well as the NAV, income and share
price of the Company;
-- Discount/premium to NAV - At each quarterly Board meeting,
the Board monitors the level of the Company's discount or premium
to NAV and reviews the average discount/premium for the Company's
peer group. The Company publishes a NAV per share on a daily basis
through the official newswire of the LSE. This figure is calculated
in accordance with the AIC's guide which includes current financial
year revenue, the same basis as that calculated for the Financial
Statements;
-- The Directors examine the revenue forecast monthly and
consider the yield of the portfolio and the amount available for
distribution; and
-- The Board considers the performance of other comparable
income funds at each quarterly Board meeting.
Management Arrangements
Investment Management Arrangements
On 17 July 2014, the Company and the Investment Manager made
certain classificatory amendments to their contractual arrangements
for the purposes of the European Commission's Directive on
Alternative Investment Fund Managers (the "AIFM Directive"). The
Sub Investment Management Agreement was terminated on 17 July 2014
and Neuberger Berman Investment Advisers LLC, which was the Sub
Investment Manager, was appointed as the AIFM per the amended and
restated Investment Management Agreement ("IMA") dated 17 July
2014. Under this agreement, the AIFM is responsible for risk
management and day-to-day discretionary management of the Company's
portfolios (including un-invested cash). The risk management and
discretionary portfolio management functions are performed
independently of each other within the AIFM structure. The AIFM is
not required to, and generally will not, submit individual
investment decisions for approval by the Board. The Manager,
Neuberger Berman Europe Limited, was appointed under the same IMA
to provide, amongst other things, certain administrative services
to the Company. Please refer to Note 3 for details of fee
entitlement.
On 31 December 2017, an amendment to the IMA was approved. Under
the amendment, the responsibility for the manufacture of the
Company's Key Information Document was delegated to the AIFM and
other changes were made relating to MiFID II, anti-money
laundering, bribery, cyber security and data protection On 1
October 2019, the IMA was amended to reflect a reduction in the
Investment Manager's fee to 0.65% of NAV. Effective 8 September
2020, the IMA was further amended to reflect a change to the
Investment Manager's fee:
NAV amounts of the Company and Applicable rate of management fee
to such NAV amount
Up to GBP500 million: 0.75 per cent. of NAV per annum
Between GBP500 million and up to GBP750 million: 0.70 per cent.
of NAV per annum
Between GBP750 million and up to GBP1 billion: 0.65 per cent. of
NAV per annum
Above GBP1 billion: 0.60 per cent. of NAV per annum
The IMA can be terminated either by the Company or the
Investment Manager, but in certain circumstances, the Company would
be required to pay compensation to the Investment Manager of six
months' management charges. No compensation is payable if notice of
termination of more than six months is given.
Administration and Custody Agreement
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. Bank
Global Fund Services (Guernsey) Limited. Under the terms of the
agreement, Sub-Administration services are delegated to U.S. Bank
Global Fund Services (Ireland) Limited (the "Sub-Administrator").
U.S. Bank National Association (the "Custodian") was appointed
custodian to the Company effective 1 March 2015. On 4 June 2018,
the Company entered into an Amendment to the Administration and
Sub-Administration Agreement in respect of the requirements of
relevant data protection regulations. On 5 February 2020, the
Company entered into an amendment to the fee schedule to both the
Custodian Agreement and Administration and Sub-Administration
Agreement to reflect a reduction in fees charged by the
Administrator and Custodian. It was further amended effective 2
October 2020 to reflect a further reduction in fees.
See Note 3 for details of fee entitlement.
Company Secretarial and Registrar Arrangements
Company secretarial services are provided by Sanne Fund Services
(Guernsey) Limited formerly Praxis Fund Services Limited. Registrar
services are provided by Link Market Services (Guernsey)
Limited.
See Note 3 for details of fee entitlement.
GOVERNANCE | Directors
Directors
Rupert Dorey (Chair)
Rupert Dorey is a resident of Guernsey and has over 35 years of
experience in financial markets. Mr Dorey was at Credit Suisse
First Boston Limited for 17 years from 1988 to 2005 where he
specialised in credit related products, including derivative
instruments where his expertise was principally in the areas of
debt distribution, origination and trading, covering all types of
debt from investment grade to high yield and distressed debt. He
held a number of senior positions at Credit Suisse First Boston
Limited, including establishing Credit Suisse First Boston
Limited's high yield debt distribution business in Europe, fixed
income credit product coordinator for European offices and head of
UK Credit and Rates Sales. Since 2005 he has been acting in a
Non-Executive Directorship capacity for a number of Hedge Funds,
Private Equity & Infrastructure Funds, for both listed and
unlisted vehicles. Rupert is a former President of the Guernsey
Chamber of Commerce and is a member of the Institute of
Directors.
Laure Duhot (Chair of the Management Engagement Committee and
the Remuneration and Nomination Committee)
Laure is resident in the United Kingdom and brings over 30 years
of professional experience in the investment banking and property
sectors, specialising in alternative real estate assets, including
investing in and the development of healthcare properties, private
market rent ("PRS"), affordable housing, student and senior living
across the UK and in Europe. Laure has a proven track record in
fund management, corporate finance, private equity and capital
markets and previous senior roles include the European Investment
Bank, Lehman Brothers, Macquarie Capital Partners, Sunrise Senior
Living, Pradera, Grainger and Lendlease. Laure's non-executive
experience includes board positions at a number of investment funds
and property companies, including Thames Valley Housing Group, the
Guinness Partnership, the MedicX fund and InLand Homes plc. Laure
currently serves as a non-executive director of Primary Healthcare
Properties plc and Safestore plc.
David Staples (Chair of the Audit and Risk Committee and Senior
Independent Director)
Mr Staples, a resident of Guernsey, is a fellow of the Institute
of Chartered Accountants in England and Wales and an associate of
the Chartered Institute of Taxation. He also holds the Institute of
Directors' Diploma in Company Direction.
Mr Staples was a partner for thirteen years of
PricewaterhouseCoopers ("PwC") and led the tax practice in the
South East of England, advising several large family and
owner-managed businesses. He was also a member of the management
board of the firm's London and South East Middle Markets Tax
Practice. Since leaving PwC in 2003, Mr Staples has served on the
boards of several listed companies as a non-executive director
including as chair of MedicX Fund Limited and Duet Real Estate
Finance Limited. He is currently a director and audit committee
chair of two other listed companies, Ruffer Investment Company
Limited and Baker Steel Resources Trust Limited. His other
appointments are as chair of the general partner companies of the
main global private equity funds advised by Apax Partners.
GOVERNANCE | Directors' Report
Directors' Report
Share Capital
The share capital of the Company consists of: (a) an unlimited
number of shares which upon issue the Directors may classify as
U.S. Dollar Shares, Sterling Shares or Euro Shares or as shares of
such other classes as the Directors may determine; (b) an unlimited
number of B Shares which upon issue the Directors may classify as B
Shares of such classes denominated in such currencies as the
Directors may determine; (c) an unlimited number of C Shares which
upon issue the Directors may classify as C Shares of such classes
denominated in such currencies as the Directors may determine.
The number of shares in issue at 31 December 2021 was as
follows:
Sterling Ordinary Shares 323,268,152 (1)
(1) of which 76,083,114 were held in treasury.
The U.S. Dollar Ordinary Share Class was closed on 3 August 2020
following a compulsory conversion into Sterling Ordinary
Shares.
The number of shares in issue at 31 December 2020 was as
follows:
Sterling Ordinary Shares 323,268,152 (2)
(2) of which 76,083,114 were held in treasury
The number of shares in issue as at 13 April 2022, being the
latest practicable date prior to publication of this report, was as
follows:
Sterling Ordinary Shares 323,268,152(3)
(3) of which 76,083,114 are held in treasury
Share Repurchases
At the Annual General Meeting ("AGM") of the Company held on 14
June 2021, the Directors were granted the general authority to
purchase in the market up to 14.99% of the class of shares.
This authority will expire at the AGM expected to be held in
June 2022. Pursuant to this authority, and subject to the Law and
the absolute discretion of the Directors, the Company may purchase
Ordinary Shares of a particular class in the market on an ongoing
basis with a view to addressing any imbalance between the supply of
and demand for Ordinary Shares of such class. The Directors will
only apply this authority if the share price is standing at a
discount to the NAV per share thereby increasing the NAV per
Ordinary Share of that class and assisting in managing the discount
to NAV per Ordinary Share of that class. The Directors intend to
seek annual renewal of this authority from shareholders to enable
the Board to act on an opportunistic basis.
NBMI Cumulative Share Buybacks 1 January 2016 - 31 December
2021
To support the share price and provide liquidity in the Shares
and accretion to NAV per Share for ongoing shareholders, the
Company has, since 2017, proactively repurchased over 859 million
Ordinary shares. In addition, the Company redeemed 164,790,024
shares on 8 September 2020 following the cash exit offer to
investors. Since that date the Board has not exercised its
authority to buy back any shares.
Share Conversions
Until 3 August 2020, the Company offered a monthly conversion
facility pursuant to which shareholders could elect to convert some
or all of their shares of a class into shares of any other class.
During the period to 3 August 2020, shareholders elected to convert
205,766 Sterling Ordinary Shares into U.S. Dollar Ordinary Shares
and 1,905,961 U.S. Dollar Ordinary Shares into Pound Sterling
Ordinary Shares. Following the closure of the U.S. Dollar Ordinary
Share Class on 3 August 2020, the monthly conversions were
discontinued.
Dividends and Dividend Policy
The Company seeks, in each financial year, to distribute amounts
to shareholders by way of monthly dividends equal in aggregate to
the target distribution for that year. The Board's policy is that
dividends will only be paid out of net cash income and net realised
investment profits of the Company.
Following the implementation of the new investment policy and
realignment of the Company's Portfolio effective 8 September 2020,
distributions are made by way of a dividend in each calendar month
(instead of the quarterly basis which was effective until 30
September 2020) in accordance with the expected dividend timetable
published by the Company. It is the intention of the Board that the
monthly dividends shall be paid in approximately equal amounts, to
the extent that this is possible.
In order to avoid having any excess reportable income for 2021,
the Board has resolved to increase the May 2022 dividend by 0.205
pence per share.
The Articles also permit the Directors, in their absolute
discretion, to offer a scrip dividend alternative to shareholders
from time to time when a cash dividend is declared. The Directors'
intention is not to offer a scrip dividend at any time that the
shares trade at a discount to the NAV per Share. On 21 December
2015, due to the prevailing discount at that time, the Board
decided to replace the scrip dividend alternative with a Dividend
Re-Investment Plan ("DRIP"), whereby shareholders have the option
to re-invest their cash dividend in the Company's shares on an
efficient basis. Following the payment of the September, third
quarter dividend announced on 8 October 2020, the Company
discontinued the DRIP.
The below table sets out the dividends paid by the Company that
were declared in respect of 2021:
DIVID PER
PERIOD DATE DECLARED PAYMENT DATE STERLING SHARE
============================ ============== ============== ================
Month ended 31 January 2021 21 January 12 February
- Ordinary Shares 2021 2021 GBP0.0039
============================ ============== ============== ================
Month ended 28 February 18 February
2021 - Ordinary Shares 2021 12 March 2021 GBP0.0039
============================ ============== ============== ================
Month ended 31 March 2021
- Ordinary Shares 18 March 2021 09 April 2021 GBP0.0039
============================ ============== ============== ================
Month ended 30 April 2021
- Ordinary Shares 22 April 2021 14 May 2021 GBP0.0039
============================ ============== ============== ================
Month ended 31 May 2021
- Ordinary Shares 20 May 2021 11 June 2021 GBP0.0039
============================ ============== ============== ================
Month ended 30 June 2021
- Ordinary Shares 17 June 2021 09 July 2021 GBP0.0039
============================ ============== ============== ================
Month ended 31 July 2021 13 August
- Ordinary Shares 22 July 2021 2021 GBP0.0039
============================ ============== ============== ================
Month ended 31 August 2021 19 August 10 September
- Ordinary Shares 2021 2021 GBP0.0039
============================ ============== ============== ================
Month ended 30 September 23 September 15 October
2021 - Ordinary Shares 2021 2021 GBP0.0039
============================ ============== ============== ================
Month ended 31 October 2021 21 October 12 November
- Ordinary Shares 2021 2021 GBP0.0039
============================ ============== ============== ================
Month ended 30 November 18 November 10 December
2021 - Ordinary Shares 2021 2021 GBP0.0039
============================ ============== ============== ================
Month ended 31 December 21 December 14 January
2021 - Ordinary Shares 2021 2022 GBP0.0039
============================ ============== ============== ================
The below chart sets out the quarterly/monthly* dividends per
share paid by the Company from Q3 2011 to 31(st) December 2021:
Dividends per Share NBMI
Click on, or paste the following link into your web browser, to
view page 12 of the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/8230I_1-2022-4-20.pdf
Source: U.S. Bank Global Fund Services (Guernsey) Limited. Past
performance is not indicative of future returns. Please refer to
the dividend policy above and which is available in the Company's
prospectus which can be found on https://www.nbgmif.com
1. The first dividend covered a five-month period.
December 2020 and 2021 dividends were paid January of the next
year.
* Starting October 2020, dividends moved to a monthly cycle.
Annual dividend yield based on the dividends declared in respect
of the period and the share price as at 31 December 2021
Substantial Share Interests
Based upon information deemed reliable as provided by the
Company's registrar, as at 31 March 2022 the following shareholders
owned 5% or more of the issued shares of the Company.
Number of Percentage of
Sterling Ordinary Share
SHAREHOLDER Shares Class (%)
===================================== =================== ==============
BBHISL Nominees Limited 129481 ACCT 24,864,403 7.69%
===================================== =================== ==============
Notifications of Shareholdings
In the year to 31 December 2021 the Company was notified in
accordance with Chapter 5 of the DTR (which covers the acquisition
and disposal of major shareholdings and voting rights), of the
following voting rights as a shareholder of the Company. When more
than one notification has been received from any shareholder, only
the latest notification is shown. For non-UK issuers, the
thresholds prescribed under DTR 5.1.2 for notification of holdings
commence at 5%. Notifications received by the Company below 5% are
included here for completeness only.
VOTING RIGHTS Percentage
of Sterling of total
Ordinary voting rights
SHAREHOLDER Date Shares (%)(1)
========================== ============ ============== ===============
East Riding of Yorkshire 27 January
Council 2021 10,577,075 4.27%
========================== ============ ============== ===============
Brown Shipley & Co 28 October
Limited 2021 9,872,876 3.99%
========================== ============ ============== ===============
8 November
Almitas Capital LLC 2021 8,494,549 3.44%
========================== ============ ============== ===============
(1) Calculated at time of announcement
Since the year end, 1 TR-1 notifications was received by the
Company. When more than one notification has been received from any
shareholder, only the latest notification is shown.
Percentage of
VOTING RIGHTS total
of Sterling voting rights
SHAREHOLDER Ordinary Shares (%)(1)
=============== ================= =================
Quilter Plc 12,526,507 5.07%
=============== ================= ===============
(1) Calculated at time of announcement
Directorship Disclosures in Public Companies Listed on a Stock
Exchange
Company Names Exchange(s)
============================== ============
Mrs Laure Duhot
============================== ============
Primary Healthcare Properties London
PLC
============================== ============
Safestore plc London
============================== ============
Mr Rupert Dorey
============================== ============
Third Point Investors Limited London
============================== ============
Mr David Staples
================================== =======
Ruffer Investment Company Limited London
================================== =======
Baker Steel Resources Trust London
Limited
================================== =======
Life of the Company
The Company does not have a fixed life. However, as required
under Article 51 of the Articles of Incorporation, which were in
effect until 8 September 2020, the Directors were required to
propose an Ordinary Resolution that the Company continues its
business as a closed-ended investment company (a "continuation
resolution"). The first continuation resolution, which fell due on
or before the third anniversary of admission, was passed on 19
March 2014. The second continuation resolution fell on 5 April
2017, being before the sixth anniversary of admission and was also
duly passed. From 2018, the continuation resolution, as required by
the Articles, was proposed annually at the annual general meeting,
and was duly passed in May 2019 and the final vote was passed on 11
June 2020.
Since the passing of the resolutions proposed at the EGM on 8
September 2020 and amendment to the Articles, there is no longer a
requirement that an annual continuation vote take place nor will
the Company be required to offer a tender should the discount to
NAV trade beyond a 5% average over the final three months of the
financial year. Instead, the Company may, at the Board's absolute
discretion, offer to eligible Shareholders the opportunity to
tender up to 25 per cent. of their holdings (a "Cash Exit Facility
Offer") at a price equal to the prevailing Net Asset Value per
Share, less two per cent. If the Board resolves to exercise its
discretion (as they expect to do if the Company is trading at a
discount to NAV per Ordinary Share of greater than 2 per cent. as
at the date of any Cash Exit Facility Offer), the first Cash Exit
Facility Offer is expected to close on 30 June 2022 and subsequent
Cash Exit Facility Offers every six months thereafter. Further
details and the terms and conditions applicable to the first Cash
Exit Facility Offer will be published in a Shareholder circular.
(In connection with any subsequent Cash Exit Facility Offers, the
Company will publish an RIS announcement notifying Shareholders of
the Board's decision to make a Cash Exit Facility Offer on the
basis of the terms and conditions as previously set out in the Cash
Exit Facility Offer. Additionally, the three-year review period to
31 December 2024 makes assumptions that the Company's NAV will not
fall below GBP150m from June 2022. However, should the cash exit
offer at the end of June 2022 and at the end of December 2022 be
taken up in full the Company's NAV would likely drop below GBP150m
after January 2023, which would result in the Board, subject to
market conditions at the time, bringing forward a proposal to
wind-up the Company.
Anti-Bribery and Corruption Policy
The Board of the Company has a zero-tolerance approach to
instances of bribery and corruption. Accordingly, it expressly
prohibits any Director or associated persons, when acting on behalf
of the Company, from accepting, soliciting, paying, offering or
promising to pay or authorise any payment, public or private, in
the United Kingdom or abroad to secure any improper benefit for
themselves or for the Company. The Investment Manager has also
adopted a zero-tolerance approach to instances of bribery and
corruption. The Board insists on strict observance with these same
standards by its service providers in their activities for the
Company and continues to refine its process in this regard.
Criminal Facilitation of Tax Evasion Policy
The Board of the Company has a zero-tolerance commitment to
preventing persons associated with it from engaging in criminal
facilitation of tax evasion. The Board has satisfied itself in
relation to its key service providers that they have reasonable
provisions
in place to prevent the criminal facilitation of tax evasion by
their own associated persons and will not work with service
providers who do not demonstrate the same zero tolerance commitment
to preventing persons associated with it from engaging in criminal
facilitation of tax evasion.
General Data Protection Regulation
The Company takes privacy and security of your information
seriously and will only use such personal information as set out in
the Company's privacy notice which can be found on the Company's
website at https://www.nbmif.com/pdf/privacy_policy.pdf
Employees and Socially Responsible Investment
The Company has a management contract with the Investment
Manager. The Company has no employees and all of its directors are
non-executive, with day-to-day activities being carried out by
third parties. There are therefore no disclosures to be made in
respect of employees and its own direct environmental impact is
minimal. The Company's main investment activities are carried out
by Neuberger Berman, which is a signatory to the Principles of
Responsible Investment and has an ongoing commitment to
strengthening and refining its environmental, social and governance
("ESG") approach, see the Investment Manager's website for further
details at https://www.nb.com/en/global/esg/philosophy .
The Investment Manager incorporates an ESG assessment into its
internal credit ratings for non-investment grade credit. Its
approach is to consider the valuation implications of ESG risks and
opportunities alongside traditional factors in the investment
process and to focus on companies or themes, which are judged to be
'better' according to environmental, social and governance
characteristics. Further details of Neuberger Berman's Principles
for Responsible Investment are given on its website at
www.nb.com/pages/public/en-gb/principles-for-responsible-investment.aspx
.
Global Greenhouse Gas Emissions
The Company has no significant greenhouse gas emissions to
report from its operations for the year to 31 December 2021 (2020 -
none), nor does it have responsibility for any other emissions
producing sources. During 2021, the Board's travel incurred
approximately 0.2 tonnes of CO(2) (2020: 0.5 tonnes of CO(2) ). The
Board intends to offset carbon emissions arising from its air
travel.
Gender Metrics
The Board consists of two men and one woman (33% female
representation) as at 31 December 2021. More information on the
Board's consideration of diversity is given in the Corporate
Governance Report further below.
The Modern Slavery Act 2015 ("MSA")
The MSA requires companies to prepare a slavery and human
trafficking statement for each financial year of the organisation.
As the Company has no employees and does not supply goods or
services, the MSA does not directly apply to it. The MSA
requirements more appropriately relate to the Investment Manager
which is a signatory of the Principles of Responsible Investment
(please see "Employees and Socially Responsible Investment" above)
which include social factors such as working conditions, including
slavery and child labour. The MSA of the Investment Manager is
available on its website at www.nb.com.
Key Stakeholder Groups
The Company identifies its key stakeholder groups as
follows:
Shareholders
All Board decisions are made with the Company's success in mind,
which is ultimately for the long-term benefit of its
stakeholders.
Service Providers
As an investment company the Company does not have any employees
and conducts its core activities through third-party service
providers. Our service providers' relationships are vital to our
overall success, so as a Board we carefully consider the selection
of, and engagement and continued relationship with our key service
providers being the Investment Manager, Administrator, Custodian,
Broker, Legal Advisers, Registrar, Auditor and Company
Secretary.
The Board recognises the benefits of fostering strong business
relationships with its key service providers and seeks to ensure
each is committed to the performance of their respective duties to
a high standard and, where practicable, that each provider is
motivated to adding value within their sphere of activity.
The Board has delegated various duties to external parties
including the management of the investment portfolio, the custodial
services (including the safeguarding of assets), the registration
services and the day-to-day company secretarial, administration and
accounting services. Each of these contracts was entered into after
full and proper consideration by the Board of the quality and cost
of services offered. Each provider has an established track record
and, through regulatory oversight and control, are required to have
in place suitable policies to ensure they maintain high standards
of business conduct, treat customers fairly, and employ corporate
governance best practice.
The Company continues to have regular two-way face-to-face
meetings with all key service providers via virtual connection. The
Board respects and welcomes the views of all stakeholders. Any
queries or areas of concern regarding the Company's operations can
be raised with the Company Secretary.
Stakeholders and Section 172
Whilst directly applicable to UK registered companies, the
intention of the AIC Code is that matters set out in section 172 of
the UK Companies Act, 2006 are reported. The following disclosures
offer some insight into how the Board uses its meetings as a
mechanism for discharging its duties under Provision 5 of the AIC
Code, including the breadth of matters it discussed and debated
during the year and the key stakeholder groups that were central to
those discussions. The Board's commitment to maintaining the
high-standards of corporate governance recommended in the AIC Code,
combined with the directors' duties of enshrined in Company law,
the constitutive documents, the Disclosure Guidance and
Transparency Rules, and Market Abuse Regulation, ensures that
shareholders are provided with frequent and comprehensive
information concerning the Company and its activities via the
Company's website and Regulatory Information Service ("RIS")
announcements on the London Stock Exchange such as the quarterly
factsheets, which resumed in January 2021 following a brief pause
after the September 2020 EGM.
Each Board meeting follows a carefully tailored agenda agreed in
advance by the Board and Company Secretary. A typical meeting will
comprise reports on current financial and operational performance
from Administrator, market update from the Broker, portfolio
performance from the Investment Manager, with regulatory and
governance updates from the Company Secretary and where required, a
detailed deep dive into an area of particular strategic importance
or concern. Through oversight and control, the Company has in place
suitable policies to ensure it maintains high standards of business
conduct, treats stakeholders fairly, and employ high standards of
corporate governance.
Whilst the primary duty of the Directors is owed to the Company,
the Board considers as part of its discussions and decision-making
process the interests of all key stakeholder groups as identified
above. Particular consideration being given to the continued
alignment between the activities of the Company and those that
contribute to delivering the Board's strategy.
Employee Engagement & Business Relationships
The Company conducts its core activities through third-party
service providers and does not have any employees. The Board
recognises the benefits of fostering strong business relationships
with its key service providers and seeks to ensure each is
committed to the performance of their respective duties to a high
standard and, where practicable, that each provider is motivated to
adding value within their sphere of activity. Details on the
Board's approach to service provider engagement and performance
review are contained in the Management Engagement Committee
Report.
Disclosure of Information to the Auditor
The Directors who were members of the Board at the time of
approving this report are listed on previously in this document.
Each of those Directors confirms that:
-- he or she has taken all steps a director might reasonably be
expected to have taken to be aware of relevant audit information
and to establish that the Company's auditor is aware of that
information.
For and on behalf of the Board
Rupert Dorey
Chair
20 April 2022
GOVERNANCE | Corporate Governance Report
Corporate Governance Report
Applicable Corporate Governance Codes
The Board has considered the principles and provisions of the
AIC Code of Corporate Governance (the "AIC Code"), published in
February 2019. The AIC Code addresses the principles and provisions
set out in the UK Corporate Governance Code (the "UK Code") as well
as setting out additional provisions on issues that are of specific
relevance to the Company.
The Board considers that reporting against the principles and
provisions of the AIC Code provides more relevant information to
shareholders. The AIC Code has been endorsed by the Financial
Reporting Council and Guernsey Financial Services Commission.
Copies of the AIC Code can be found at www.theaic.co.uk . It
includes an explanation of how the AIC Code adapts the Principles
and Provisions set out in the UK Code to make them relevant for
investment companies.
The Company has complied with the principles and provisions of
the AIC Code to the extent they are applicable to the Company.
On 1 January 2012, the Guernsey Financial Services Commission's
("GFSC") "Finance Sector Code of Corporate Governance" came into
effect and was amended in February 2016 and 10 June 2021 (the "GFSC
Code"). The GFSC Code states that companies, which report against
the UK Code or the AIC Code, are deemed to meet the GFSC Code and
need take no further action.
Corporate Governance Statement
Throughout the year ended 31 December 2021, the Company has
complied with the recommendations of the AIC Code, except where
explanations have been provided. The Company assesses its
compliance with the recommendations of the AIC through conducting
an annual analysis and addressing any gaps identified.
The Directors believe that this Annual Report and Financial
Statements ("Annual Report") presents a fair, balanced and
understandable assessment of the Company's position and prospects,
and provides the information necessary for shareholders to assess
the Company's performance, business model and strategy.
The Company complies with the corporate governance statement
requirements pursuant to the FCA's DTR by virtue of the information
included in the Corporate Governance section of the Annual Report
together with information contained in the Strategic Review and the
Directors' Report. There is no information that is required to be
disclosed under Listing Rule 9.8.4.
Our Governance Framework
Chair - Rupert Dorey
Responsibilities:
The leadership, operation and governance of the Board, ensuring effectiveness,
and setting the agenda for the Board.
More details are provided below.
Senior Independent Director - David Staples
Responsibilities:
* Working in close contact with and providing support
to the Chair, particularly in relation to corporate
governance.
* Liaising with and being available to Board members
and shareholders as required outside conventional
communication channels.
* Meeting annually with Board members to review the
performance of the Chair of the Board.
* When requested to do so, attending meetings with
major shareholders to obtain a balanced understanding
of any issues, concerns, and providing feedback to
the Board
The Board Members of NB Global Monthly Income Fund Limited (as at 31
December 2021):
Rupert Dorey, Laure Duhot and David Staples - all independent non-executive
directors.
Responsibilities:
Overall conduct of the Company's business and setting the Company's
strategy.
The Company Secretary, Sanne Fund Services (Guernsey) Limited, through
its representative acts as Secretary to the Board and Committees and
in doing so it:
* assists the Chair in ensuring that all Directors have
full and timely access to all relevant documentation;
* will organise induction of new Directors; and
* is responsible for ensuring that the correct Board
procedures are followed and advises the Board on
corporate governance matters.
Management Engagement Remuneration and Nomination
AUDIT AND RISK COMMITTEE Committee Committee
Members: Members: Members:
David Staples (Chair) Laure Duhot (Chair) Laure Duhot (Chair)
Rupert Dorey Rupert Dorey Rupert Dorey
Laure Duhot David Staples David Staples
Responsibilities: Responsibilities: Responsibilities:
The provision of effective To review performance To ensure the Board comprises
governance over the appropriateness of all service providers individuals with the necessary
of the Company's financial (including the Investment skills, knowledge and
reporting including the Manager but excluding experience to ensure that
adequacy of related disclosures, the external auditor). the Board is effective
the performance of the in discharging its responsibilities
external auditor, and and oversight of all matters
the management of the relating to corporate
Company's systems of internal governance, and to review
financial and operating the on-going appropriateness
controls and business and relevance of the remuneration
risks. More details further policy.
below.
More details further below. More details further below.
======================================== =========================== =====================================
The Board, chaired by Rupert Dorey who is responsible for its
leadership and for ensuring its effectiveness in all aspects of its
role, currently consists of three non-executive Directors. The
biographical details of the Directors holding office at the date of
this report are listed previously in this document, and demonstrate
a breadth of investment, financial and professional experience. The
Board considers that all the Directors have different qualities and
areas of expertise on which they may lead where issues arise and to
whom concerns can be conveyed. The balance and independence of the
Board is kept under review by the Remuneration and Nomination
Committee, details of which can be found further below.
Board Independence and Composition
The Chair and all Directors are considered independent of the
Company's Investment Manager, the Company Secretary, the
Administrator and Sub-Administrator . The Directors consider that
they all contribute to the affairs of the Company in an adequate
manner. The Board reviews the independence of all Directors
annually. Rupert Dorey was deemed to be independent by the Board
prior to his appointment as Chair of the Company.
Having served as a director since incorporation of the Company,
Sandra Platts stepped down as a director at the 2021 AGM following
the appointment of Laure Duhot as her successor on 25 November
2020.
Directors' Appointment
No Director has a service contract with the Company. Directors
have agreed letters of appointment with the Company, copies of
which are available for review by shareholders at the Registered
Office and will be available at the 2022 AGM. Rupert Dorey has
served since 1 March 2015, David Staples has served since 14 June
2018 and Laure Duhot has served since 25 November 2020. Directors
may resign at any time by giving one month's written notice to the
Board.
In accordance with the AIC Code all Directors are subject to
re-election annually by shareholders. The Remuneration and
Nomination Committee reviewed the independence, contributions and
performance of each Director together with results of the 2021
internal Board Evaluation and have determined that it is in the
best interests of the Company that Rupert Dorey, David Staples and
Laure Duhot should stand for re-election.
Tenure of Non-Executive Directors
The Board has adopted a policy on tenure that it considers
appropriate for an investment company. The Board does not believe
that length of service, by itself, leads to a closer relationship
with the Investment Manager or necessarily affects a Director's
independence. The Board's tenure and succession policy seeks to
ensure that the Board is well balanced and will be refreshed by the
appointment of new Directors with the skills and experience
necessary to replace those lost by Directors' retirements or as
identified to assist in the formulation and delivery of the
strategy of the Company. The Board seeks to encompass past and
current experience of various areas relevant to the Company's
business.
Directors are expected to devote such time as is necessary to
enable them to discharge their duties. Other business
relationships, including those that conflict or may potentially
conflict with the interests of the Company, are taken into account
when appointing Board members and are monitored on a regular
basis.
The dates of appointment of all Directors are provided in the
Directors' Remuneration Report and a summary of shareholder
elections is provided below.
Years from Considered to
Date first elected first election be independent
by shareholders to 2022 AGM by the Board
============== =================== ================ ================
Rupert Dorey June 2015 7 Yes
============== =================== ================ ================
David Staples May 2019 3 Yes
============== =================== ================ ================
Laure Duhot June 2021 1 Yes
============== =================== ================ ================
Succession
The Board have looked to balance the tenure of the Directors on
the Board and during 2021 continued to realise its succession plan
with Sandra Platts having stepped down at the AGM on 14(th) June
2021 following the appointment of Laure Duhot on 25(th) November
2020. This process has ensured a smooth transfer of knowledge and
ensured diversity in length of tenure on the Board. Given the
nature of the Company, being an externally managed investment
company with no employees and no executives, the Board believes its
succession plan and orderly rotation of long serving directors has
been in the best interests of the Company and the Board will act on
the recommendations of the Remuneration and Nomination Committee in
relation to its composition on an annual basis.
Re-election of Directors
Rupert Dorey, David Staples and Laure Duhot each submit
themselves for re-election at the AGM to be held in June 2022. The
Remuneration and Nomination Committee confirmed to the Board that
the contributions made by each of the Directors offering themselves
for re-election/election at the 2022 AGM continue to support the
overall effective operation of the Board and that shareholders
should support their re-election.
Board Diversity
The Board considers that its members have a balance of skills
and experience which are relevant to the Company. The Board
supports the recommendations of the Davies Report and notes the
recommendations of the Parker Review into ethnic diversity and the
Hampton-Alexander Review on gender balance in FTSE leadership. The
Board believes in the value and importance of diversity in the
boardroom and the Board agreed to meet a target of at least 33%
female representation on the Board. The Board continues to
encourage diversity and recognises that directors with diverse
skills sets, capabilities and experience gained from different
backgrounds appropriate to the company enhance the Board.
Board Responsibilities
The Board meets at least four times each year and deals with the
important aspects of the Company's affairs including the setting
and monitoring of investment strategy and the review of investment
performance. The Investment Manager takes decisions as to the
purchase and sale of individual investments, in line with the
investment policy and strategy set by the Board. The Investment
Manager together with the Company Secretary, Administrator and
Sub-Administrator also ensures that all Directors receive, in a
timely manner, all relevant management, regulatory and financial
information relating to the Company and its portfolio of
investments. Representatives of the Investment Manager attend each
Board meeting, enabling Directors to question on any matters of
concern or seek clarification on certain issues. Matters
specifically reserved for decision by the Board have been defined
and a procedure set out in their respective appointment letters for
Directors in the furtherance of their duties to take independent
professional advice at the expense of the Company.
Conflict of Interests
Directors are required to disclose all actual and potential
conflicts of interest to the Board as they arise for consideration
and the Board may impose restrictions or refuse to authorise
conflicts if deemed appropriate. The Directors have undertaken to
notify the Company Secretary as soon as they become aware of any
new potential conflicts of interest that would need to be approved
by the Board. Only Directors who have no material interest in the
matter being considered will be able to participate in the Board
approval process. It has also been agreed that the Directors will
seek prior approval from the Board in advance of any proposed
external appointments.
None of the Directors had a material interest in any contract,
which is significant to the Company's business. The Directors'
Remuneration Report provides information on the remuneration and
interests of the Directors. Further below details Directors'
appointments on other listed companies.
Performance Evaluation
The performance of the Board, its committees and the Directors
was reviewed by the Remuneration and Nomination Committee in
November 2021 by means of an internal questionnaire. The Company
Secretary collated the resuts of the questionnaires and the results
were reviewed by and discussed by the Remuneration and Nomination
Committee, whose Chair reported to the Board. No material areas of
concern were raised.
As a result of the 2021 Board performance evaluation, the Board
has agreed:
-- That all Directors are considered independent;
-- Rupert Dorey, David Staples and Laure Duhot should be
proposed for re-election at the 2022 AGM; and
-- The Board composition was diverse and appropriate in regards
to skills, number, experience and gender.
The Remuneration and Nomination Committee (excluding Rupert
Dorey) led by the Senior Independent Director reviewed the Chair.
It was agreed that the Chair continued to lead the Board and
performed his duties very well.
The Board will continue to review its procedures, its
effectiveness and development in the year ahead.
Induction/Information and Professional Development
Directors are provided, on a regular basis, with key information
on the Company's policies, regulatory requirements and its internal
controls. Regulatory and legislative changes affecting Directors'
responsibilities are put to the Board as they arise along with
changes to best practice from, amongst others, the Investment
Manager, Company Secretary and the Auditor. Advisers to the Company
also prepare reports for the Board from time to time on relevant
topics and issues. In addition, Directors attend relevant seminars
and events to allow them to continually refresh their skills and
knowledge and keep up with changes within the investment company
industry for which each Director maintains a log, provided to the
Company Secretary on at least annual basis as a record of his/her
continued professional development. The Chair reviewed the training
and development needs of each Director during the annual Board
evaluation process and is satisfied that all Directors actively
keep up to date with industry developments and issues.
When new Directors are appointed to the Board, they will be
provided with all relevant information regarding the Company and
their duties and responsibilities as Directors. In addition, a new
Director will also spend time with representatives of the
Investment Manager, and other service providers as may be
appropriate, in order to learn more about their processes and
procedures. The induction process for Laure Duhot, who joined the
Board on 25 November 2020, included meetings with key service
providers to gain an understanding of the Company's key business
relationships, its business model and its stakeholder audience. The
induction process includes a historic review of key events in the
Company's history, access to all Company material and documents,
and various meetings with the Directors to become familiar with the
Company's operating practices and board dynamics.
The Chair is available to meet Directors individually at any
time should they have matters on company business which they wish
to raise privately. There have been no issues or concerns that have
been raised by Directors in the financial year ended 31 December
2021.
Independent Advice
The Board recognises that there may be occasions when one or
more of the Directors feels it is necessary to take independent
legal advice at the Company's expense. A procedure has been adopted
to enable them to do so, which is managed by the Company
Secretary.
Indemnities
To the extent permitted by the Law, the Company's Articles
provide an indemnity for the Directors against any liability except
such (if any) as they shall incur by or through their own breach of
trust, breach of duty or negligence. Each Director has an
Instrument of Indemnity with the Company.
During the year, the Company has maintained insurance cover for
its Directors under a Directors' and Officers' liability insurance
policy.
Shareholder Engagement
The Board believes that the maintenance of good relations with
shareholders is important for the long-term prospects of the
Company. Since admission, the Board has sought engagement with
shareholders. Where appropriate the Chair, and other Directors are
available for discussion about governance and strategy with
shareholders and the Chair ensures communication of shareholders'
views to the Board. The Board receives feedback on the views of
shareholders from its Corporate Brokers and the Investment Manager,
and shareholders are welcome to contact the Chair, Senior
Independent Director or any other Director at any time via the
Company Secretary.
The Company ceased its quarterly investor update calls effective
January 2020 as the way in which it communicates with key investors
has evolved with a preference among shareholders for regular
virtual or face-to-face meetings. Furthermore, the whole Board,
including the committee chairs, welcome the opportunity to meet
with investors on a one-to-one basis, upon request. The Chair has
had discussions with a number of investors on a one-to-one basis
during the year and continues to welcome meetings with all
investors.
The Board believes that the AGM provides an appropriate forum
for shareholders to communicate with the Board and encourages
participation. All Directors will attend the 2022 AGM. There is an
opportunity for individual shareholders to question the Chair of
the Board, the Senior Independent Director, and the Chair of each
of the Audit and Risk Committee, the Management Engagement
Committee and the Remuneration and Nomination Committee at the
AGM.
The Annual Reports, Key Information Documents, monthly fact
sheets and monthly holdings are available to provide shareholders
with a clear understanding of the Company's activities and its
results. This information is supplemented by the daily calculation
and publication on the London Stock Exchange of the NAV of the
Company's Ordinary Shares. The Board is informed of relevant
promotional documents issued by the Investment Manager. All
documents issued by the Company can be viewed on the website,
www.nbgmif.com .
2022 AGM
The 2022 AGM will be held in Guernsey on 15 June 2022. The
Company is closely monitoring the COVID-19 situation, including
guidance issued by the States of Guernsey, and will continue to do
so in the lead up to the AGM. The COVID-19 situation is constantly
evolving and the States of Guernsey may change current guidance
and/or travel restrictions available at www.covid19.gov.gg .
Updates to changes to the proceedings of the AGM will be published
on the Company's website www.nbgmif.com and notified by the Company
via an RIS announcement. The Directors will continue to consider
the latest instructions from relevant authorities in conjunction
with guidance available from professional and regulatory bodies to
ensure the AGM is held in accordance with its statutory
requirements and with the Company's Articles of Incorporation. The
Notice for the AGM sets out the ordinary and special resolutions to
be proposed at the meeting. Separate resolutions are proposed for
each substantive issue.
It is the intention of the Board that the Notice of AGM be
issued to shareholders so as to provide at least twenty working
days' notice of the meeting. Shareholders wishing to lodge
questions in advance of the meeting and specifically related to the
resolutions proposed are invited to do so by writing to the Company
Secretary at the registered office address given further below.
Voting on all resolutions at the AGM is on a poll. The proxy
votes cast, including details of votes withheld are disclosed to
those in attendance at the meeting and the results are published on
the website and announced via a RIS Service. Where a significant
number of votes have been lodged against a proposed resolution
(being greater than 20%), the Board intends to identify those
shareholders and further understand their views to address their
concerns. An update on the views and actions taken will be
published no later than six months after the shareholder meeting.
The Board notes that any resolution which receives a high
percentage of votes against it will be included in the Investment
Association's Public Register. The Public Register is an aggregated
list of publicly available information regarding meetings of
companies in the FTSE All-Share who have received significant
shareholder opposition to proposed resolutions or have withdrawn a
resolution prior to the shareholder vote.
Board Meetings
The Board meets at least quarterly. Certain matters are
considered at all quarterly board meetings including the
performance of the investments, NAV and share price and associated
matters such as asset allocation, risks, strategy, marketing and
investor relations, peer group information and industry issues.
Consideration is also given to administration and corporate
governance matters, and where applicable, reports are received from
the Board committees.
The Chair is responsible for ensuring the Directors receive
complete information in a timely manner concerning all matters
which require consideration by the Board. Through the Board's
ongoing programme of shareholder engagement and the reports
produced by each key service provider, the Directors are satisfied
that sufficient information is provided so as to ensure the matters
set out in Section 172 of the UK Companies Act 2006 are taken into
consideration as part of the Board's decision-making process.
Directors unable to attend a board meeting are provided with the
board papers and can discuss issues arising in the meeting with the
Chair or another non-executive Director.
13 ad-hoc board meetings were held during the year. The purpose
of these meetings was mostly to approve the payment of monthly
dividends.
Attendance at scheduled meetings of the Board and its committees
in the 2021 financial year
Remuneration Management
Audit and and Nomination Engagement
Board Risk Committee Committee Committee
==================== ======== ================= ================ ============
Number of meetings
during the year 4 5 1 1
==================== ======== ================= ================ ============
Rupert Dorey 4 5 1 1
==================== ======== ================= ================ ============
Laure Duhot 4 5 1 1
==================== ======== ================= ================ ============
Sandra Platts
( resigned on
14 June 2021) 1 2 0 0
==================== ======== ================= ================ ============
David Staples 4 5 1 1
==================== ======== ================= ================ ============
Board Committees
The Board has established an Audit and Risk Committee, a
Management Engagement Committee and a Remuneration and Nomination
Committee with defined terms of reference and duties. Further
details of these committees can be found in their reports further
below. The terms of reference for each committee can be found on
the Company's website https://www.nbgmif.com .
The Board has not established an Inside Information Committee as
a quorum of the Board will review and determine any inside
information and any delay to the disclosure thereof to meet the
requirements of the UK Market Abuse Regulations.
For and on behalf of the Board
Rupert Dorey
Chair
20 April 2022
GOVERNANCE | Audit and Risk Committee Report
Audit and Risk Committee Report
Membership
David Staples - Chair (Independent non-executive Director)
Rupert Dorey(1) (Company Chair and independent non-executive
Director)
Laure Duhot (Independent non-executive Director)
(1) The Board believes it is appropriate for the Company Chair
to be a member of the Committee as he is deemed by the Board to be
an independent non-executive Director, it is a small board and the
Chair's financial background and experience of the asset class is
valuable to the Committee.
Key Objectives
The provision of effective governance over the appropriateness
of the Company's financial reporting including the adequacy of
related disclosures, the performance of the external auditor, and
the management of the Company's systems of internal financial and
operating controls and business risks.
Responsibilities
-- Monitoring and reviewing the Company's financial results announcements, Annual and Half-Yearly Financial
Statements and monitoring compliance with relevant statutory and listing requirements;
-- Reporting to the Board on the appropriateness of the Company's accounting policies and practices including
critical accounting policies, judgements, estimates, and practices;
-- Advising the Board on whether the Committee believes the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Company's performance,
business model and strategy;
-- Overseeing the relationship with the external auditor (please refer to the Terms of Reference which are available
on the Company's website for further detail on the responsbilities in relation to the external auditor);
-- Considering the financial and other implications on the independence of the auditor arising from any non-audit
services to be provided by the auditor. Maintaining a non-audit services policy.
-- Reporting to the Board on the effectiveness of the Company's risk management framework; and
-- Compiling a report on its activities to be included in the Company's Annual Report.
The Committee members have a wide range of financial and
commercial expertise necessary to fulfil its duties. The Chair of
the Committee is a Fellow of the Institute of Chartered Accountants
in England and Wales and an associate of the Chartered Institute of
Taxation, and has recent and relevant financial experience, as
required by the AIC Code.
Committee Meetings
The Committee meets at least three times a year. Only members of
the Committee and its Secretary have the right to attend the
meetings. However, representatives of the Investment Manager,
Administrator and Sub-Administrator are invited to attend the
meetings on a regular basis and other non-members may be invited to
attend all or part of a meeting as and when appropriate and
necessary. The Company's external auditor, KPMG Channel Islands
Limited ("KPMG") is invited to each meeting. The Chair of the
Committee also met separately with KPMG without the Investment
Manager being present.
Main Activities during the year
The Committee assisted the Board in carrying out its
responsibilities in relation to financial reporting requirements,
risk management and the assessment of internal financial and
operating controls. It also managed the Company's relationship with
the external auditor.
The Committee reported to the Board at each scheduled quarterly
board meeting on the activity of the Committee and matters of
particular relevance to the Board in the conduct of their work. The
Committee reviewed the effectiveness of the Company's risk
management framework in relation to the investment policy; assessed
the risks involved in the Company's business and how they were
controlled and monitored by the Investment Manager; monitored and
reviewed the effectiveness of the risk management function of the
Investment Manager, Administrator and the Sub-Administrator ;
reviewed the risks associated with the valuation of investments and
reviewed the Company's procedures concerning prevention and
detection of fraud.
The Board requested that the Committee advise them on whether it
believes the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company's performance, business model
and strategy.
The Committee's terms of reference were updated during the year
and can be found on the Company's website https://www.nbgmif.com
.
At its five meetings during the year, the Committee focused
on:
Financial Reporting
The primary role of the Committee in relation to financial
reporting is to review with the Investment Manager, Company
Secretary, Administrator, Sub-Administrator and KPMG the
appropriateness of the Half-Year and Annual Financial Statements
concentrating on, amongst other matters:
-- The quality and acceptability of accounting policies and practices;
-- The clarity of the disclosures and compliance with financial reporting standards and relevant financial and
governance reporting requirements;
-- Material areas in which significant judgements and estimates have been applied or where there has been discussion
with the external auditor;
-- The viability of the Company, taking into account the principal and emerging risks it faces;
-- Whether the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's performance, business model and strategy; and
-- Any correspondence from regulators in relation to the quality of the Company's financial reporting.
To aid its review, the Committee considers reports from the
Investment Manager, Company Secretary, Administrator,
Sub-Administrator and also reports from KPMG on the outcomes of
their half-year review and annual audit.
Significant Issues
In relation to this Annual Report the following significant
issue was considered by the Committee:
Significant How the Issue was Addressed
issue
================== ==========================================================
The valuation The Committee analysed the investment portfolio of
of the Company's the Company in terms of investment mix, fair value
investments hierarchy and valuation. The Committee discussed
in depth with the Investment Manager the appropriateness
and robustness of the multi-sourced pricing information
used to derive the valuations including the valuation
methodologies applied for the less liquid investments
classified as level 3 in the fair value hierarchy.
Discussions were also held with the Investment Manager
and KPMG to ensure, as far as possible, that the
valuations were prepared in line with the valuation
process and methodology set out in the Company's
accounting policies. No material discrepancies were
identified. The Committee held meetings with KPMG
throughout the year. During the April 2022 Audit
Committee meeting, KPMG presented the results of
their audit to the Committee and confirmed that the
results of KPMG's audit testing were satisfactory.
Internal Controls and Risk Management
The Committee has established a process for identifying,
evaluating and managing any major risks faced by the Company,
including emerging and principal risks. The process is subject to
regular review by the Board and accords with the AIC Code.
The Committee is responsible to the Board for the Company's
system of internal financial and operating controls and for
reviewing its effectiveness. However, the system is designed to
manage rather than eliminate risks of failure to achieve the
Company's business objectives and can only provide reasonable and
not absolute assurance against material misstatement or loss. The
Committee has received and reviewed the Systems and Organisation 1
Controls report of the Sub-Administrator covering the 12-month
period to 30 September 2021 and there were no material
deficiencies.
The Committee receives reports from the Investment Manager on
the Company's risk evaluation process and reviews changes to
significant risks identified. The Committee has undertaken a full
review of the Company's business risks, which have been analysed
and recorded in a risk report, which is reviewed and updated
regularly. The Board receives each quarter from the Investment
Manager a formal report which details the steps taken to monitor
the areas of risk including those that are not directly the
responsibility of the Investment Manager and which reports the
details of any known internal control failures. No material
internal control failures were reported to or found by the
Committee.
The Board's assessment of the Company's principal risks and
uncertainties is set out previously in this document.
External Audit
The effectiveness of the external audit process is dependent on
appropriate audit risk identification at the start of the audit
cycle. The Committee received a detailed audit plan from KPMG
identifying their assessment of the significant audit risks. For
the 2021 financial year the significant audit risks identified were
in relation to the risk of management override of controls and the
valuation of investments. The Committee challenged the work
performed by the auditor to test these significant risks. The
Committee assessed the effectiveness of the half-year review and
year end audit process in addressing these matters through the
reporting received from KPMG at both the half-year and year end
respectively. In addition, the Committee sought feedback from the
Investment Manager, Company Secretary, the Administrator and
Sub-Administrator on the effectiveness of the audit process. For
the 2021 financial year, the Committee was satisfied that there had
been appropriate focus and challenge on the significant and other
areas of audit risk leading the Committee to conclude that the
effectiveness of the external auditor and the audit process were
satisfactory.
The Committee concluded that the effectiveness of the external
auditor and the audit process were satisfactory.
Appointment and Independence
The Committee considers the reappointment of the external
auditor, including the rotation of the audit partner, and assesses
their independence on an annual basis. The external auditor is
required under applicable Ethical Standards to rotate the audit
partner responsible for the audit every five years. In its
assessment of the independence of KPMG, the Committee received
confirmation that there were no relationships between the Company
and KPMG which may have compromised KPMG's independence and that
KPMG had completed all relevant checks to be able to confirm this.
The Committee approved the fees for audit services for 2021 after a
review of the level and nature of work to be performed, and after
being satisfied that the fees were appropriate for the scope of the
work required. The Company is incorporated in Guernsey, and
therefore despite being listed on the Main Market of the London
Stock Exchange it is not required to comply with The Statutory
Audit Services for Larger Companies Market Investigation (Mandatory
Use of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014 (the "Order") which came into force in
the UK on 1 January 2015. The Committee does however keep these
developments under review when determining policy on audit
tendering and the Company has decided it will seek to comply with
the provisions of the Order.
The Committee has advised the Board that it should put the
external audit out to tender at least every ten years. Following
the tender process in the autumn of 2020, KPMG was selected to
replace PwC who had served as auditor for ten years with effect
from the completion of the 2020 audit. KPMG will be recommended to
shareholders for re-appointment at the 2022 general meeting. There
are no contractual obligations restricting the Committee's choice
of external auditor and the Company does not indemnify the external
auditor.
Non-Audit Services
To safeguard the objectivity and independence of the external
auditor, the Committee has a formal policy governing the engagement
of the external auditor to provide non-audit services. The external
auditor and the Committee have agreed that all non-audit services
require the pre-approval of the Committee prior to the commencement
of any work.
KPMG was remunerated GBP118,000 for services rendered in 2021.
Of this amount, GBP90,000 was in relation to the year-end audit and
GBP28,000 for procedures performed in respect to the half-year
review. No other non-audit services were undertaken by KPMG for the
Company during the year.
Committee Evaluation
The Committee undertook an evaluation during the year, as part
of the Board evaluation performed in the year. Details of this
process can be found under "Performance evaluation" previously in
this document. The Committee was satisfied that it had undertaken
its duties efficiently and effectively.
David Staples
On behalf of the Audit and Risk Committee
20 April 2022
GOVERNANCE | Management Engagement Committee Report
Management Engagement Committee ("MEC") Report
Membership
Laure Duhot - Chair (Independent non-executive Director)
Rupert Dorey(1) (Company Chair and independent non-executive
Director)
David Staples (Independent non-executive Director)
1 The Board believes it is appropriate for the Company Chair to
be a member of the Committee as he is deemed by the Board to be an
independent non-executive Director, it is a small board and the
Chair's financial background and experience of the asset class is
valuable to the Committee.
Key Objectives
To review performance of all service providers (including the
Investment Manager).
Responsibilities
-- To annually review the performance, relationships and
contractual terms of all service providers (including the
Investment Manager);
-- Review and make recommendations on any proposed amendment to
the Investment Management Agreement ("IMA"); and
-- To review the performance of, and contractual arrangements
with the Investment Manager including:
- Monitor and evaluate the Investment Manager's investment
performance and, if necessary, providing appropriate guidance;
- To consider whether an independent appraisal of the Investment
Manager's services should be made;
- To consider requiring the Investment Manager to provide
attribution and volatility analyses and considering whether these
should be published;
- Review the level and method of remuneration and the notice
period, using peer group comparisons;
- To put in place procedures by which the Committee regularly
reviews the continued retention of the Investment Manager's
services;
- Review the level and method of remuneration and the notice
period. The Committee should give due weight to the competitive
position of the Company against the peer group;
- To ensure that the Investment Manager has a sound system of
risk management and internal controls and that these are maintained
to safeguard shareholder's investment and the Company's assets
MEC Meetings
Only members of the MEC and the Secretary have the right to
attend MEC meetings. However, representatives of the Investment
Manager, Administrator and Sub-Administrator may be invited by the
MEC to attend meetings as and when appropriate.
Main Activities during the year
The MEC met once during the year and reviewed the performance,
relationships and contractual terms of all service providers during
November 2021 including the Investment Manager. The MEC reviewed
the terms of reference for the MEC and recommended to the Board
that the Terms of Reference be re-adopted. The current Terms of
Reference are available on the Company's website
https://www.nbgmif.com .
During 2021, the Directors undertook a virtual due diligence
visit with the Investment Manager, followed by a visit to the
offices of the Investment Manager in London in October 2021.
Detailed updates were provided regarding investment risk and
valuations, operational risk, fund accounting and portfolio
management and performance.
In February 2020, a due diligence visit was carried out by the
Board with U.S. Bank Global Fund Services (Ireland) Limited and no
concerns were raised with respect to their operations, controls or
processes. The Committee intends to schedule a physical visit with
U.S. Bank Global Fund Services (Ireland) Limited later in 2022.
Continued Appointment of the Investment Manager and other
Service Providers
The Board reviews investment performance at each Board meeting
and a formal review of all service providers is conducted annually
by the MEC. The annual third-party service provider review process
includes two-way feedback, which provides the Board with an
opportunity to understand the views, experiences and any
significant issues encountered by service providers during the
year. As part of the Board's annual performance evaluation,
feedback is received on the quality of service and the
effectiveness of the working relationships with each of the
Company's key service providers.
As a result of the 2021 annual review it is the opinion of the
Directors that the continued appointment of the Investment Manager
and the other current service providers on the terms agreed is in
the interest of the Company's shareholders as a whole. The Board
considers that the Investment Manager has extensive investment
management resources and wide experience in managing investments
and is satisfied with the quality and competitiveness of the fee
arrangements of the Investment Manager and the Company's other
service providers.
Laure Duhot
On behalf of the Management Engagement Committee
20 April 2022
GOVERNANCE | Remuneration and Nomination Committee Report
Remuneration and Nomination Committee ("RNC") Report
Membership
Laure Duhot - Chair (Independent non-executive Director)
Rupert Dorey(1) (Company Chair and independent non-executive Director)
David Staples (Independent non-executive Director)
1 The Board believes it is appropriate for the Company Chair to
be a member of the Committee as he is deemed by the Board to be an
independent non-executive Director, it is a small board and the
Chair's financial background and experience of the asset class is
valuable to the Committee.
Key Objectives
To ensure the Board comprises individuals with the necessary
skills, knowledge and experience such that it is effective in
discharging its responsibilities and to review the on-going
appropriateness and relevance of the remuneration policy. Having
considered the size of the Board and the nature, scale and
complexity of the Company, the Board is satisfied that all
Directors are appointed as members of the RNC.
Responsibilities
-- Determine the remuneration policy of the Company and make recommendations to the Board accordingly within the
aggregate limit set by the Articles;
-- Prepare an annual report on Directors' remuneration;
-- Considers the need to appoint external remuneration consultants;
-- Regularly review and make recommendations in relation to the structure, size and composition of the Board
including the diversity and balance of skills, knowledge and experience, and the independence of the
non-executive Directors;
-- Oversees the performance evaluation of the Board, its committees and individual Directors (see previously in this
document);
-- Reviews the tenure of each of the non-executive Directors;
-- Leads the process for identifying and making recommendations to the Board regarding candidates for appointment as
Directors, giving full consideration to succession planning and the leadership needs of the Company; and
-- Makes recommendations to the Board on the composition of the Board's committees.
RNC Meetings
Only members of the RNC and the Secretary have the right to
attend RNC meetings. However, representatives of the Investment
Manager, Administrator and Sub-Administrator are invited by the RNC
to attend meetings as and when appropriate. In the event there are
matters arising concerning either an individual's membership of the
Board or their remuneration, they would absent themselves from the
meeting as required and another independent non-executive Director
would take the chair if this applied to the RNC Chair.
Main Activities during the year
The RNC met once during the year and considered succession
planning and replenishment of the Board and reviewed Directors'
remuneration. The RNC also reviewed the results of the annual
evaluation of the performance of the Board and its committees, the
Chair and individual directors which was carried out by way of
internal evaluation questionnaire and discussion. The RNC
considered that the results provided confirmed the continued
appropriateness of the balance of skills, experience, independence
and knowledge of the Company and that the activities of the Board
continued to be effective in promoting the strategy, and the
long-term sustainable success of the Company.
The terms of reference for the RNC were reviewed and the Board
re-adopted the terms of reference for the RNC. The terms of
reference are available on the Company's website at
https://www.nbgmif.com . The Board's diversity policy was agreed in
March 2012 and in the 2018 Annual Report the Board set an objective
to meet 33% female representation during 2020, which was met
following the appointment of Laure Duhot in November 2020. The
Board supports the recommendations of the Davies Report and
Hampton-Alexander Review, notes the recommendations of the Parker
Review and believes in and values the importance of diversity,
including gender, to the effective functioning of the Board. At 31
December 2020, the Board had 50% female representation, however
after Sandra Platts stepped down at the 2021 AGM, this figure
reduced to 33% during 2021 as planned, once the size of the board
went back to three independent Directors, as previously; this was
deemed to balance out the need for all necessary skills and
experience, with optimal efficiency, given the size of the Company.
The Board will continue to focus on encouraging diversity of
business skills and experience, recognising that Directors with
diverse skills sets, capabilities and experience gained from
different backgrounds enhance the Board. The RNC intends to take
into consideration gender balance and diversity when it recommends
the appointment of new female directors in the future, alongside
other considerations such as the specialist skill set relevant to
the Company's investment activities and merit.
The RNC reviewed the fees paid to the Board of Directors and
proposed to retain the current levels. In line with the Company's
remuneration policy, fees will continue to be reviewed to ensure
that they remain appropriate reflecting the time commitment and
responsibilities of the role.
Further, the RNC considered the remuneration policy and agreed
that it remained appropriately positioned. A detailed "Directors'
Remuneration Report" to shareholders from the RNC on behalf of the
Board, is contained further below.
Laure Duhot
On behalf of the Remuneration and Nomination Committee
20 April 2022
GOVERNANCE | Directors' Remuneration Report
Directors' Remuneration Report
Annual Statement
This report meets the relevant requirements of the Listing Rules
of the FCA and the AIC Code and describes how the Board has applied
the principles relating to Directors' remuneration. An ordinary
resolution to receive and approve this report will be proposed at
the AGM on 15 June 2022.
Directors' Fees
The Company paid the following fees to the Directors for the
years ended 31 December 2021 and 31 December 2020:
Total BOARD Total BOARD
FEES 2021 FEES 2020
ROLE US$ US$
=================== ============================== ============ ============
Chair
Member of the Remuneration
and Nomination Committee
Member of the Audit
and Risk Committee
Member of the Management
Rupert Dorey Engagement Committee 68,148 63,220
=================== ============================== ============ ============
Member of the Audit
and Risk Committee (until
resignation on 11 June
2020)
Member of the Remuneration
and Nomination Committee
(until resignation on
11 June 2020)
Member of the Management
Engagement Committee
(until resignation on
11 June 2020)
Senior Independent Director
(until resignation on
Richard Battey(1) 11 June 2020) - 24,431
=================== ============================== ============ ============
Member of the Audit
and Risk Committee
Chair of the Remuneration
and Nomination Committee
(from 14 June 2021 onwards)
Chair of the Management
Engagement Committee
Laure Duhot(2) (from 14 June 2021 onwards) 59,626 5,227
=================== ============================== ============ ============
Chair of the Remuneration
and Nomination Committee
(until resignation on
14 June 2021)
Chair of the Management
Engagement Committee
(until resignation on
14 June 2021)
Member of the Audit
and Risk Committee (until
resignation on 14 June
Sandra Platts(4) 2021) 29,335 59,290
Chair of the Audit and
Risk Committee
Member of the Remuneration
and Nomination Committee
Member of the Management
Engagement Committee
David Staples(3) Senior Independent Director 67,534 61,731
=================== ============================== ============ ============
Total 224,643 213,899
=================================================== ============ ============
1 Richard Battey resigned as a Director of the Company on 11
June 2020
2 Laure Duhot was appointed a Director of the Company on 25
November 2020, and as Chair of the Remuneration & Nomination
Committee and Management Engagement Committee from 14 June
2021.
3 David Staples was appointed Senior Independent Director on 11
June 2020.
4 Sandra Platts resigned as a Director of the Company on 14 June
2021
No other remuneration or compensation was paid or is payable by
the Company during the year to any of the Directors, other than
reimbursed travel expenses of $993 (31 December 2020: $2,206).
Please refer to Note 3 for more details on Directors'
remuneration.
Changes to the Board
Sandra Platts resigned from the Board on 14 June 2021.
Remuneration Policy
The determination of the Directors' fees is a matter dealt with
by the RNC and the Board. The RNC considers the remuneration policy
annually to ensure that it remains appropriately positioned and
takes into account any expected changes in time commitments.
Directors will review the fees paid to the boards of directors of
similar investment companies. No Director is to be involved in
decisions relating to individual aspects of his or her own
remuneration, however the Board, as a whole, sets the level of
directors' fees.
No Director has a service contract with the Company and
Directors' appointments may be terminated at any time by one
month's written notice with no compensation payable at
termination.
Directors are authorised to claim reasonable expenses from the
Company in relation to the performance of their duties.
The Company's policy is that the fees are payable quarterly in
arrears to the Directors and should reflect the time commitment
required by the Board on the Company's affairs and the level of
responsibility borne by the Directors and should be sufficient to
enable high calibre candidates to be recruited and be comparable to
those paid by similar companies. It is not considered appropriate
that the Directors' remuneration should be performance related, and
none of the Directors are eligible for bonuses, pension benefits,
share options, long-term incentive schemes or other benefits in
respect of their services as non-executive Directors of the
Company. Furthermore, the Chair of the Board, Senior Independent
Director and Chair of the other Committees are paid a higher fee
than the other Directors in recognition of their more onerous roles
and more time spent. The Board may amend the level of remuneration
paid within the limits of the Company's Articles.
The Company's Articles limit the aggregate fees payable to the
Board of Directors to a total of GBP500,000 per annum. The Chair of
the RNC may consult with principal shareholders of the Company
should it be proposed to exceed the aggregate limit.
Statement by the Chair of the RNC
In accordance with the Directors' remuneration policy, the
Directors' fees were reviewed by the RNC during its meeting in
November 2021 where it was recommended that fees should be
maintained at the current level (see table below). The level of
directors' fees will continue to be reviewed annually by the
RNC.
Role Fee (GBP)
---------------------------------------------- ----------
Non-Executive Director 40,000
Chair of the Company 50,000
Chair of the Audit and Risk Committee
(additional fee) 6,000
Senior Independent Director (additional
fee) 3,000
Chair of the Remuneration and Nomination
Committee (additional fee) 3,000
Chair of the Management Engagement Committee
(additional fee) 3,000
No Director was involved in deciding his or her own
remuneration. The level of the directors' fees will continue to be
reviewed annually by the RNC.
Service Contracts and Policy on Payment for Loss of Office
Directors are appointed with the expectation that they will
stand for annual re-election. Rupert Dorey was appointed on 1 March
2015, David Staples was appointed on 14 June 2018 and Laure Duhot
was appointed on 25 November 2020. Directors may resign at any time
by giving one month's notice in writing to the Board. Directors'
appointments are reviewed during the annual board evaluation.
Directors are not entitled to any payments for loss of office.
No Director has a service contract with the Company. Directors
have agreed letters of appointment with the Company. Directors'
election is discussed previously in this document. The names and
biographies of the Directors holding office at the date of this
report are listed previously in this document. All of the Directors
are subject to annual re-election.
Directors' Interests
The Company has not set any requirements or guidelines for
Directors concerning ownership of shares in the Company. The
beneficial interests of the Directors and their connected persons
(where applicable) in the Company's shares are shown further
below.
Advisors to the RNC
The RNC has not sought the paid advice or professional services
by any outside person in respect of its consideration of the
Directors' remuneration during 2021. The RNC sought input from the
Manager and its Brokers during its deliberations of the
remuneration policy.
Statement of Voting at AGM
At the last AGM, votes on the remuneration report were cast as
follows:
For Against Withheld
Number Number Number
=================== ============ ======== =========
2021 Remuneration
Report 114,635,631 43,845 46,034
=================== ============ ======== =========
Laure Duhot
On behalf of the Remuneration and Nomination Committee
20 April 2022
GOVERNANCE | Directors' Responsibility Statement
Directors' Responsibility Statement
The Directors are responsible for preparing the Financial
Statements for each financial year, which give a true and fair
view, in accordance with applicable Guernsey Law and accounting
principles generally accepted in the United States ("US GAAP"), of
the state of affairs of the Company and of the profit or loss for
the year.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of its profit or
loss for that period. In preparing these financial statements, the
directors are required to:
-- Select suitable accounting policies and apply them consistently;
-- Make judgements and estimates that are reasonable, relevant and reliable;
-- State whether applicable accounting standards have been followed, subject to any material departures disclosed
and explained in the Financial Statements; and
-- assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going
concern; and
-- use the going concern basis of accounting unless liquidation is imminent.
The Directors confirm that they have complied with the above
requirements in preparing the Financial Statements.
The Directors are responsible for keeping proper accounting
records, which disclose with reasonable accuracy at any time the
financial position of the Company and to enable them to ensure that
the Financial Statements comply with the Law. The Directors are
also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
So far as the Directors are aware, there is no relevant audit
information of which the Company's auditor is unaware. Each
Director has taken all the steps that he or she ought to have taken
as a director in order to make himself or herself aware of any
relevant audit information and to establish that the Company's
auditor is aware of that information.
The Directors confirm to the best of their knowledge that:
-- The Financial Statements which have been prepared in
conformity with US GAAP give a true and fair view of the assets,
liabilities, financial position and profit of the Company, as
required by DTR 4.1.12R and are in compliance with the requirements
set out in the Law; and
-- The Annual Report includes a fair review of the information
required by DTR 4.1.8R and DTR 4.1.11R, which provides an
indication of important events and a description of principal risks
and uncertainties which face the Company.
The maintenance and integrity of the Company's website is the
responsibility of the Directors; the work carried out by the
auditor does not involve consideration of these matters and,
accordingly, the auditor accepts no responsibility for any changes
that may have occurred to the Financial Statements since they were
initially presented on the website.
Legislation in Guernsey governing the preparation and
dissemination of Financial Statements may differ from legislation
in other jurisdictions.
By order of the Board
Rupert Dorey
Chair
20 April 2022
GOVERNANCE | Independent Auditor's Report
Independent Auditor's Report to the members of NB Global Monthly
Income Fund Limited
Our opinion is unmodified
We have audited the financial statements of NB Global Monthly
Income Fund Limited (the "Company"), which comprise the Statement
of Assets and Liabilities including the Condensed Schedule of
Investments as at 31 December 2021, the Statements of Operations,
Changes in Net Assets and Cash Flows for the year then ended, and
notes, comprising significant accounting policies and other
explanatory information.
In our opinion, the accompanying financial statements:
-- give a true and fair view of the financial position of the
Company as at 31 December 2021, and of the Company's financial
performance and cash flows for the year then ended;
-- are prepared in conformity with U.S. generally accepted accounting principles; and
-- comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Company in
accordance with, UK ethical requirements including the FRC Ethical
Standard as required by the Crown Dependencies' Audit Rules and
Guidance. We believe that the audit evidence we have obtained is a
sufficient and appropriate basis for our opinion.
Material uncertainty relating to going concern
The risk Our response
-------------------------------------- -------------------------------------- --------------------------------------
Going concern Disclosure quality Our procedures included but were not
Refer to the Strategic Report. The financial statements explain how limited to:
We draw attention to note 2 of the the directors have formed a judgement We obtained and inspected the
financial statements, "Basis of that it is appropriate directors' approved written
Preparation" section, which to adopt the going concern basis of assessment of going concern on the
indicates that, should the cash exit preparation for the Company. Company and corroborated the
offers at the end of June 2022 and That judgement is based on an assessment with our knowledge of the
end of December 2022 evaluation of the inherent risks to business.
be taken up by Shareholders in full, the Company's business model We considered the risk that the
the Company's net asset value would and how those risks might affect the outcome of the cash exit offers could
likely drop below Company's financial resources or affect the Company for
GBP150m from January 2023, which ability to continue the going concern period by
would result in the Board, subject to operations over a period of at least inspecting minutes of meetings held
market conditions at a year from the date of approval of by the directors, assessing
the time, proposing to wind-up the the financial statements forecasted performance and key
Company. (the "going concern period"). financial metrics including the
These events and condition The risk for our audit is whether or discount of the Company's share
constitutes a material uncertainty not those risks are such that they price against its net asset value and
that may cast significant doubt amounted to a material inquiring with management as their
on the Company's ability to continue uncertainty that may cast significant current expectation
as a going concern. Our opinion is doubt about the ability to continue of the outcome of the future cash
not modified in respect as a going concern. exit offers and the likelihood of any
of this matter. If so, that fact is required to be future proposal to
disclosed (as has been done) and, wind-up the Company.
along with a description Assessing disclosures:
of the circumstances, is a key We considered whether the going
financial statement disclosure. concern disclosure in note 2 to the
financial statements gives
a full and accurate description of
the directors' assessment of going
concern, including the
identified risks and dependencies.
-------------------------------------- -------------------------------------- --------------------------------------
Other key audit matters: our assessment of the risks of material
misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. Going concern is a
significant key audit matter and is described in the key audit
matter section below. In arriving at our audit opinion above, the
other key audit matter was as follows:
The risk Our response
-------------------------------------- -------------------------------------- --------------------------------------
Valuation of Investments at fair Basis: Our audit procedures included but
value ("Investments") The Company's investment portfolio were not limited to:
$307,358,954; represents the most significant Internal Controls:
(2020: 297,712,245) balance on the statement We assessed the design and
Refer to the Audit Committee Report, of assets and liabilities and is the implementation of the control in
the Condensed Schedule of Investments principal driver of the Company's net place over the valuation of unquoted
and note 2(e) "Fair asset value (2021: investments.
Value of financial instruments and 97%; 2020: 94%). Challenging managements' assumptions
derivatives". The Company's investment portfolio and inputs including use of our KPMG
comprises global floating rate loans specialist as applicable:
of $109.2m, global We performed inquiries with the
high yield bonds of $84.7m, private Investment Manager to understand and
debt of $68.6m, collaterised loan assess the valuation
obligations ("CLO") methodology used to estimate the fair
debt tranches of $33.6m, special value of Investments and ensured
situations of $9.3m and equity these are in line with
investments of $1.9m, as disclosed the Company's stated valuation
in note 2(e). The fair value is based policies.
on prices provided by a third party For global high yield bonds and
pricing source, certain equity positions we
in the absence of which, the independently priced these
Investment Manager's pricing investments
committee will determine a fair to third party pricing sources.
value as at year-end. For private debt, special situations
Risk: and global floating rate loan
The valuation of the Company's investments which had relatively
Investments is considered a low liquidity scores, we
significant area of our audit, independently priced these
given that it represents the majority investments to third party pricing
of the net assets of the Company and sources
in view of the and further manually evaluated the
significance of estimates and relevance and reliability of those
judgements that may be involved in prices.
the determination of fair For CLO debt tranches and certain
value. global floating rate loan investments
and private debt positions,
we determined independent reference
prices through the use of fundamental
cash flow modelling,
sourcing key inputs and assumptions
used, such as the default rates,
discount margins and
prepayment rates, from observable
market data.
-------------------------------------- -------------------------------------- --------------------------------------
For a private debt position and an equity position valued internally by the Investment Manager
(amounting to $3.3m), we assessed and challenged the key assumptions based on available market
information and corroborated key inputs to supporting documentation.
Assessing disclosures:
We also considered the Company's disclosures (Note 2(a)) in relation to the use of estimates,
the Company's valuation of investments policies and fair value of financial instruments (Note
2(e)) for compliance with US generally accepted accounting principles.
---- ---- ------------------------------------------------------------------------------------------------
Our application of materiality and an overview of the scope of
our audit
Materiality for the financial statements as a whole was set at
$6,356,000, determined with reference to a benchmark of net assets
of $315,681,147, of which it represents approximately 2.0%.
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole. Performance
materiality for the Company was set at 75% of materiality for the
financial statements as a whole, which equates to $4,767,000. We
applied this percentage in our determination of performance
materiality because we did not identify any factors indicating an
elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding $317,000, in addition to other
identified misstatements that warranted reporting on qualitative
grounds.
Our audit of the Company was undertaken to the materiality level
specified above, which has informed our identification of
significant risks of material misstatement and the associated audit
procedures performed in those areas as detailed above.
Going concern basis of preparation
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Company
or to cease their operations, and as they have concluded that the
Company's financial position means that this is realistic for at
least a year from the date of approval of financial statements
("the going concern period"). As stated in our key audit matters
section of our report, they have also concluded that there is a
material uncertainty relating to going concern.
An explanation of how we evaluated the directors' assessment is
set out in our key audit matters section of our report. Our
conclusions based on this work:
-- we consider that the directors' use of the going concern
basis of accounting in the preparation of the financial statements
is appropriate;
-- we have nothing material to add or draw attention to in
relation to the directors' statement in note 2 to the financial
statements on the use of going concern basis of accounting and
their identification therein therein of a material uncertainty over
the Company's ability to continue to use that basis for the going
concern period and we found the going concern disclosure in note 2
to be acceptable; and
-- the related statement under the Listing Rules set out
previously in this document of the annual report is materially
consistent with the financial statements and our audit
knowledge.
Fraud and breaches of laws and regulations - ability to
detect
Identifying and responding to risks of material misstatement due
to fraud
To identify risks of material misstatement due to fraud ("fraud
risks") we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. Our risk assessment procedures included:
-- enquiring of management as to the Company's policies and
procedures to prevent and detect fraud as well as enquiring whether
management have knowledge of any actual, suspected or alleged
fraud;
-- reading minutes of meetings of those charged with governance; and
-- using analytical procedures to identify any unusual or unexpected relationships.
As required by auditing standards, we perform procedures to
address the risk of management override of controls, in particular
the risk that management may be in a position to make inappropriate
accounting entries. On this audit we do not believe there is a
fraud risk related to revenue recognition because the Company's
revenue streams are simple in nature with respect to accounting
policy choice, and are easily verifiable to external data sources
or agreements with little or no requirement for estimation from
management. We did not identify any additional fraud risks.
We performed procedures including
-- Identifying journal entries and other adjustments to test
based on risk criteria and comparing any identified entries to
supporting documentation; and
-- incorporating an element of unpredictability in our audit procedures.
Identifying and responding to risks of material misstatement due
to non-compliance with laws and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our sector experience and through discussion with
management (as required by auditing standards), and from inspection
of the Company's regulatory and legal correspondence, if any, and
discussed with management the policies and procedures regarding
compliance with laws and regulations. As the Company is regulated,
our assessment of risks involved gaining an understanding of the
control environment including the entity's procedures for complying
with regulatory requirements.
The Company is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation and taxation legislation and we assessed the extent of
compliance with these laws and regulations as part of our
procedures on the related financial statement items.
The Company is subject to other laws and regulations where the
consequences of non-compliance could have a material effect on
amounts or disclosures in the financial statements, for instance
through the imposition of fines or litigation or impacts on the
Company's ability to operate. We identified financial services
regulation as being the area most likely to have such an effect,
recognising the regulated nature of the Company's activities and
its legal form. Auditing standards limit the required audit
procedures to identify non-compliance with these laws and
regulations to enquiry of management and inspection of regulatory
and legal correspondence, if any. Therefore if a breach of
operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches
of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance
with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the
inherently limited procedures required by auditing standards would
identify it.
In addition, as with any audit, there remains a higher risk of
non-detection of fraud, as this may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report but does not include the financial statements and our
auditor's report thereon. Our opinion on the financial statements
does not cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Disclosures of emerging and principal risks and longer term
viability
We are required to perform procedures to identify whether there
is a material inconsistency between the directors' disclosures in
respect of emerging and principal risks and the viability
statement, and the financial statements and our audit
knowledge.
Based on those procedures, other than the material uncertainty
related to going concern referred to above, we have nothing further
material to add or draw attention to in relation to:
-- the directors' confirmation within the Viability Statement
that they have carried out a robust assessment of the emerging and
principal risks facing the Company, including those that would
threaten its business model, future performance, solvency or
liquidity;
-- the emerging and principal risks disclosures describing these
risks and explaining how they are being managed or mitigated;
-- the directors' explanation in the Viability Statement as to
how they have assessed the prospects of the Company, over what
period they have done so and why they consider that period to be
appropriate, and their statement as to whether they have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
-- We are also required to review the Viability Statement, set
out previously in this document under the Listing Rules. Based on
the above procedures, we have concluded that the above disclosures
are materially consistent with the financial statements and our
audit knowledge.
Corporate governance disclosures
We are required to perform procedures to identify whether there
is a material inconsistency between the directors' corporate
governance disclosures and the financial statements and our audit
knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements
and our audit knowledge:
-- the directors' statement that they consider that the annual
report and financial statements taken as a whole is fair, balanced
and understandable, and provides the information necessary for
shareholders to assess the Company's position and performance,
business model and strategy;
-- the section of the annual report describing the work of the
Audit Committee, including the significant issues that the audit
committee considered in relation to the financial statements, and
how these issues were addressed; and
-- the section of the annual report that describes the review of
the effectiveness of the Company's risk management and internal
control systems.
We are required to review the part of Corporate Governance
Statement relating to the Company's compliance with the provisions
of the UK Corporate Governance Code specified by the Listing Rules
for our review. We have nothing to report in this respect.
We have nothing to report on other matters on which we are
required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion:
-- the Company has not kept proper accounting records; or
-- the financial statements are not in agreement with the accounting records; or
-- we have not received all the information and explanations,
which to the best of our knowledge and belief are necessary for the
purpose of our audit.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out previously in
this document, the directors are responsible for: the preparation
of the financial statements including being satisfied that they
give a true and fair view; such internal control as they determine
is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error;
assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless liquidation is
imminent.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities .
The purpose of this report and restrictions on its use by
persons other than the Company's members as a body
This report is made solely to the Company's members, as a body,
in accordance with section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members, as a body, for our audit work, for this report, or for the
opinions we have formed.
Dermot Dempsey
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
20 April 2022
FINANCIAL STATEMENTS | Statement of Assets and Liabilities
Statement of Assets and Liabilities
AS AT 31 DECEMBER 2021 AND 31 december
2020 31 DECEMBER 31 december
(Expressed in U.S. Dollars) Notes 2021 2020
======================================== ======== ============== ==============
Assets
======================================== ======== ============== ==============
Investments, at fair value (2021:
cost of $310,963,360, 2020: cost
of $295,411,529) 2 307,358,954 297,712,245
======================================== ======== ============== ==============
Derivative assets, at fair value
(2021: cost of $Nil, 2020: cost
of $Nil) 2 (e) 551,564 12,993,970
======================================== ======== ============== ==============
Cash and cash equivalents
======================================== ======== ============== ==============
- Sterling (2021: cost of $71,815,
2020: cost of $1,742,815) 73,532 1,795,941
======================================== ======== ============== ==============
- Euro (2021: cost of $186,021,
2020: cost of $3,345,715) 187,093 3,447,099
======================================== ======== ============== ==============
- U.S. Dollar 11,407,318 10,651,883
======================================== ======== ============== ==============
Total cash and cash equivalents 11,667,943 15,894,923
======================================== ======== ============== ==============
319,578,461 326,601,138
======================================== ======== ============== ==============
Other assets
======================================== ======== ============== ==============
Receivables for investments sold 2,964,458 7,354,637
======================================== ======== ============== ==============
Interest receivable 2,802,128 2,044,589
======================================== ======== ============== ==============
Other receivables and prepayments 229,088 130,293
======================================== ======== ============== ==============
Total other assets 5,995,674 9,529,519
======================================== ======== ============== ==============
Total assets 325,574,135 336,130,657
======================================== ======== ============== ==============
Liabilities
======================================== ======== ============== ==============
Payables for investments purchased 5,529,950 17,812,405
======================================== ======== ============== ==============
Payables to Investment Manager
and affiliates 3 599,135 567,605
======================================== ======== ============== ==============
Derivative liabilities, at fair
value (2021: proceeds of $Nil, 2
2020: proceeds of $Nil) (e) 2,134,666 108,468
======================================== ======== ============== ==============
Dividend payable 1,305,719 -
======================================== ======== ============== ==============
Accrued expenses and other liabilities 3 323,518 233,007
======================================== ======== ============== ==============
Total liabilities 9,892,988 18,721,485
======================================== ======== ============== ==============
Total assets less liabilities 315,681,147 317,409,172
======================================== ======== ============== ==============
Share capital 752,021,562 752,021,562
======================================== ======== ============== ==============
Accumulated reserves (436,340,415) (434,612,390)
======================================== ======== ============== ==============
Total net assets 315,681,147 317,409,172
======================================== ======== ============== ==============
Net Asset Value per share GBP0.9429 GBP0.9394
======================================== ======== ============== ==============
The Financial Statements were approved and authorised for issue by the Board of Directors on
20 April 2022 , and signed on its behalf by:
David Staples
Director
The accompanying notes form an integral part of the Financial
Statements
FINANCIAL STATEMENTS | Condensed Schedule of Investments
Condensed Schedule of Investments
Fair Value
As at 31 DECEMBER 2021 as %
(Expressed in U.S. Dollars) Cost Fair Value of Net Assets
------------------------------------ ------------ ------------ ---------------
Portfolio of investments
------------------------------------ ------------ ------------ ---------------
Financial investments
------------------------------------ ------------ ------------ ---------------
* Private Debt 68,345,866 68,628,397 21.74%
------------------------------------ ------------ ------------ ---------------
* Special Situations 11,234,289 9,278,095 2.94%
------------------------------------ ------------ ------------ ---------------
* CLO Debt Tranches 33,858,274 33,637,153 10.66%
------------------------------------ ------------ ------------ ---------------
* Global High Yield Bonds 85,843,950 84,704,896 26.83%
------------------------------------ ------------ ------------ ---------------
* Global Floating Rate Loans 108,561,394 109,185,622 34.59%
------------------------------------ ------------ ------------ ---------------
* Equity 3,119,587 1,924,791 0.60%
------------------------------------ ------------ ------------ ---------------
Total financial investments 310,963,360 307,358,954 97.36%
------------------------------------ ------------ ------------ ---------------
Forward exchange contracts
------------------------------------ ------------ ------------ ---------------
- Euro to Sterling - (47,220) (0.01%)
------------------------------------ ------------ ------------ ---------------
- Sterling to U.S. Dollar - (2,133,872) (0.68%)
------------------------------------ ------------ ------------ ---------------
- U.S. Dollar to Euro - 398,842 0.13%
------------------------------------ ------------ ------------ ---------------
- U.S. Dollar to Sterling - 199,148 0.06%
------------------------------------ ------------ ------------ ---------------
- (1,583,102) (0.50%)
------------------------------------ ------------ ------------ ---------------
Fair Value
as %
Cost Fair Value of Net Assets
Geographic diversity of investment
portfolio (domicile of issuer)
------------------------------------ ------------ ------------ ---------------
Australia/Oceania 3,991,090 3,984,149 1.26%
------------------------------------ ------------ ------------ ---------------
Caribbean 11,219,336 11,166,755 3.54%
------------------------------------ ------------ ------------ ---------------
North America 244,254,010 241,149,026 76.39%
------------------------------------ ------------ ------------ ---------------
Europe 51,498,924 51,059,024 16.17%
------------------------------------ ------------ ------------ ---------------
310,963,360 307,358,954 97.36%
------------------------------------ ------------ ------------ ---------------
Fair Value
As at 31 december 2020 as %
(Expressed in U.S. Dollars) Cost Fair Value of Net Assets
------------------------------------ ------------ ------------ ---------------
Portfolio of investments
------------------------------------ ------------ ------------ ---------------
Financial investments
------------------------------------ ------------ ------------ ---------------
* Private Debt 33,958,211 34,437,669 10.85%
------------------------------------ ------------ ------------ ---------------
* Special Situations 20,266,537 18,053,663 5.69%
------------------------------------ ------------ ------------ ---------------
* CLO Debt Tranches 20,809,276 20,794,373 6.55%
------------------------------------ ------------ ------------ ---------------
* Global High Yield Bonds 74,211,202 77,741,222 24.49%
------------------------------------ ------------ ------------ ---------------
* Global Floating Rate Loans 141,682,088 142,807,252 44.99%
------------------------------------ ------------ ------------ ---------------
* Equity 3,037,230 2,564,191 0.81%
------------------------------------ ------------ ------------ ---------------
* Warrants 1,446,985 1,313,875 0.41%
------------------------------------ ------------ ------------ ---------------
Total financial investments 295,411,529 297,712,245 93.79%
------------------------------------ ------------ ------------ ---------------
Forward exchange contracts
------------------------------------ ------------ ------------ ---------------
- Euro to Sterling - 16,210 0.01%
------------------------------------ ------------ ------------ ---------------
- Sterling to U.S. Dollar - 14,695,380 4.63%
------------------------------------ ------------ ------------ ---------------
- U.S. Dollar to Euro - (972,747) (0.31%)
------------------------------------ ------------ ------------ ---------------
- U.S. Dollar to Sterling - (853,341) (0.27%)
------------------------------------ ------------ ------------ ---------------
- 12,885,502 4.06%
------------------------------------ ------------ ------------ ---------------
Fair Value
as %
Cost Fair Value of Net Assets
Geographic diversity of investment
portfolio (domicile of issuer)
------------------------------------ ------------ ------------ ---------------
Africa 428,624 439,656 0.14%
------------------------------------ ------------ ------------ ---------------
Caribbean 21,491,946 21,686,873 6.83%
------------------------------------ ------------ ------------ ---------------
North America 222,400,952 222,228,205 70.01%
------------------------------------ ------------ ------------ ---------------
Europe 51,090,007 53,357,511 16.81%
------------------------------------ ------------ ------------ ---------------
295,411,529 297,712,245 93.79%
------------------------------------ ------------ ------------ ---------------
Industry diversity of
Investment Portfolio 31 DECEMBER 2021 31 DECEMBER 2020
( Expressed in U.S. Dollars) Cost Fair Value Cost Fair Value
--------------------------------- ------------ ------------ ------------ ------------
Aerospace & Defence 2,632,038 2,588,263 3,580,931 3,734,342
--------------------------------- ------------ ------------ ------------ ------------
Air Transport 3,413,326 3,557,457 3,812,001 4,023,735
--------------------------------- ------------ ------------ ------------ ------------
Automotive 7,744,244 7,751,948 3,638,794 3,907,317
--------------------------------- ------------ ------------ ------------ ------------
Broadcast Radio & Television 2,119,862 1,972,212 5,569,180 5,315,591
--------------------------------- ------------ ------------ ------------ ------------
Brokers, Dealers & Investment
Houses 1,017,505 1,002,690 - -
--------------------------------- ------------ ------------ ------------ ------------
Business Equipment & Services 23,577,127 20,947,052 16,540,266 16,359,847
--------------------------------- ------------ ------------ ------------ ------------
Building & Development 13,627,368 13,680,036 5,673,567 5,914,375
--------------------------------- ------------ ------------ ------------ ------------
Cable & Satellite Television 9,727,116 9,534,252 4,176,887 4,287,162
--------------------------------- ------------ ------------ ------------ ------------
Chemicals & Plastics 5,417,731 5,410,970 7,569,955 7,801,492
--------------------------------- ------------ ------------ ------------ ------------
Clothing & Textiles 3,139,039 3,177,263 1,089,218 1,113,735
--------------------------------- ------------ ------------ ------------ ------------
Containers & Glass Products 3,364,469 3,309,094 8,399,895 8,692,676
--------------------------------- ------------ ------------ ------------ ------------
Drugs 2,224,541 2,166,927 2,336,763 2,340,471
--------------------------------- ------------ ------------ ------------ ------------
Electronics/Electrical 36,235,879 36,264,483 27,705,664 27,946,069
--------------------------------- ------------ ------------ ------------ ------------
Equipment Leasing 2,646,689 2,868,831 682,670 892,500
--------------------------------- ------------ ------------ ------------ ------------
Financial Intermediaries 39,076,219 38,957,891 27,342,736 27,598,620
--------------------------------- ------------ ------------ ------------ ------------
Food Products 2,199,203 2,238,694 2,561,430 2,673,010
--------------------------------- ------------ ------------ ------------ ------------
Food Service 5,106,078 5,077,235 2,880,703 2,882,709
--------------------------------- ------------ ------------ ------------ ------------
Food/Drug Retailers 2,675,165 2,671,627 5,499,763 6,069,074
--------------------------------- ------------ ------------ ------------ ------------
Health Care 31,480,919 30,717,732 37,928,909 37,490,825
--------------------------------- ------------ ------------ ------------ ------------
Hotels & Casinos 1,922,801 1,927,294 7,657,376 7,869,935
--------------------------------- ------------ ------------ ------------ ------------
Industrial Equipment 14,556,294 14,601,519 10,900,236 10,921,898
--------------------------------- ------------ ------------ ------------ ------------
Insurance 9,007,693 8,995,312 6,924,232 6,983,828
--------------------------------- ------------ ------------ ------------ ------------
Leisure Goods/Activities/Movies 8,064,803 8,498,939 15,659,107 16,484,850
--------------------------------- ------------ ------------ ------------ ------------
Nonferrous Metals & Minerals 3,263,537 3,297,688 2,263,628 2,446,675
--------------------------------- ------------ ------------ ------------ ------------
Oil & Gas 23,584,995 23,779,127 35,132,372 34,351,520
--------------------------------- ------------ ------------ ------------ ------------
Publishing 2,152,501 2,147,834 - -
--------------------------------- ------------ ------------ ------------ ------------
Retailers (except food
and drug) 13,053,746 13,290,974 16,257,890 16,500,222
--------------------------------- ------------ ------------ ------------ ------------
Steel 253,281 248,750 3,224,023 3,142,798
--------------------------------- ------------ ------------ ------------ ------------
Surface Transport 4,629,321 4,679,610 556,729 700,866
--------------------------------- ------------ ------------ ------------ ------------
Telecommunications/Cellular
Communications 17,096,099 16,850,891 20,333,442 20,090,220
--------------------------------- ------------ ------------ ------------ ------------
Utilities 15,953,771 15,146,359 9,513,162 9,175,883
--------------------------------- ------------ ------------ ------------ ------------
310,963,360 307,358,954 295,411,529 297,712,245
--------------------------------- ------------ ------------ ------------ ------------
As at 31 December 2021, issuers with the following investments
comprised of greater than 1% of NAV (Excluding cash):
Securities % of
(EXPRESSED IN U.S. DOLLARS) Country Industry Fair Value NAV
============================== ============= ============================= ======================= =======
Intelsat Jackson Holdings
SA 5,745,682 1.82%
---------------------------------------------------------------------------- ----------------------- -------
Telecommunications/Cellular
Intelsat DIP 1L 09/21 DIP Luxembourg Communications 3,469,942 1.10%
------------------------------ ------------- ----------------------------- ----------------------- -------
Telecommunications/Cellular
Intelsat Jackson Hldg Luxembourg Communications 962,182 0.30%
------------------------------ ------------- ----------------------------- ----------------------- -------
Telecommunications/Cellular
Intelsat Jackson Hldg Luxembourg Communications 812,395 0.26%
------------------------------ ------------- ----------------------------- ----------------------- -------
Telecommunications/Cellular
Intelsat Jackson Hldg Luxembourg Communications 501,163 0.16%
------------------------------ ------------- ----------------------------- ----------------------- -------
Chariot Buyer LLC 5,218,500 1.65%
---------------------------------------------------------------------------- ----------------------- -------
Chamberlain Group 2L TL United
10/21 States Building & Development 5,218,500 1.65%
------------------------------ ------------- ----------------------------- ----------------------- -------
Constellation 4,757,863 1.52%
---------------------------------------------------------------------------- ----------------------- -------
Constellation 1L TL-B EUR
07/21 New Zealand Automotive 3,204,961 1.02%
------------------------------ ------------- ----------------------------- ----------------------- -------
Constellation 2L TL GBP
07/21 New Zealand Automotive 779,188 0.25%
------------------------------ ------------- ----------------------------- ----------------------- -------
Constellation 1L TL-B EUR United
07/21 Kingdom Automotive 773,714 0.25%
------------------------------ ------------- ----------------------------- ----------------------- -------
Team Health Holdings Inc 4,530,017 1.43%
---------------------------------------------------------------------------- ----------------------- -------
United
Team Health Holdings Inc States Health Care 2,572,216 0.81%
------------------------------ ------------- ----------------------------- ----------------------- -------
Team Health Holdings Inc United
6.375% 02/01/25 SR:144A States Health Care 1,684,838 0.53%
------------------------------ ------------- ----------------------------- ----------------------- -------
Team Health Holdings Inc United
6.375% 02/01/25 SR:REGS States Health Care 272,963 0.09%
------------------------------ ------------- ----------------------------- ----------------------- -------
CSC Holdings LLC 4,483,125 1.42%
---------------------------------------------------------------------------- ----------------------- -------
CSC Holdings LLC 5.750% United Cable & Satellite
01/15/30 SR:144A States Television 4,483,125 1.42%
------------------------------ ------------- ----------------------------- ----------------------- -------
Great Outdoors Group LLC 3,965,858 1.26%
============================================================================ ----------------------- -------
United Retailers (except
Bass Pro 1L TL-B 02/21 States food and drug) 3,965,858 1.26%
============================== ------------- ----------------------------- ----------------------- -------
Uniti Group Inc/CSL Capital
LLC 3,951,380 1.25%
---------------------------------------------------------------------------- ----------------------- -------
Uniti Group Inc/CSL Capital United Telecommunications/Cellular
6.500% 02/15/29 SR:144A States Communications 3,951,380 1.25%
============================== ------------- ----------------------------- ----------------------- -------
EG Group Ltd 3,912,728 1.23%
---------------------------------------------------------------------------- ----------------------- -------
United Retailers (except
EG Group Ltd Kingdom food and drug) 2,313,710 0.73%
============================== ------------- ----------------------------- ----------------------- -------
United Retailers (except
Optfin TL B 1L GBP Kingdom food and drug) 989,860 0.31%
------------------------------ ------------- ----------------------------- ----------------------- -------
United Retailers (except
Optfin TL B1 1L EUR Kingdom food and drug) 609,158 0.19%
------------------------------ ------------- ----------------------------- ----------------------- -------
Phoenix Newco Inc 3,603,600 1.14%
============================================================================ ======================= =======
United
Parexel 2L TL-B 7/21 States Health Care 3,603,600 1.14%
============================== ------------- ----------------------------- ======================= =======
American Airlines Group
Inc 3,557,457 1.12%
---------------------------------------------------------------------------- ----------------------- -------
United
AAdvantage 1L TL 03/21 States Air Transport 2,477,532 0.78%
------------------------------ ------------- ----------------------------- ----------------------- -------
American Airlines Group United
3.750% 03/01/25 SR:144A States Air Transport 1,079,925 0.34%
------------------------------ ------------- ----------------------------- ----------------------- -------
Brock Holdings III Inc 3,288,557 1.04%
---------------------------------------------------------------------------- ----------------------- -------
Brock Holdings Notes 15% United Business Equipment
04/24/22 States & Services 1,896,183 0.60%
------------------------------ ------------- ----------------------------- ----------------------- -------
United Business Equipment
Brock Holdings III Inc. States & Services 1,392,374 0.44%
------------------------------ ------------- ----------------------------- ----------------------- -------
Asurion LLC 3,246,444 1.03%
---------------------------------------------------------------------------- ----------------------- -------
United
Asurion 2L TL-B4 07/21 States Insurance 2,279,031 0.72%
------------------------------ ------------- ----------------------------- ----------------------- -------
United
Asurion LLC States Insurance 967,413 0.31%
------------------------------ ------------- ----------------------------- ----------------------- -------
CD&R Dock Bidco Ltd 3,212,075 1.03%
---------------------------------------------------------------------------- ----------------------- -------
United
CD&R Dock Bidco Ltd Kingdom Food Service 2,888,700 0.92%
------------------------------ ------------- ----------------------------- ----------------------- -------
United
CD&R Dock Bidco Ltd Kingdom Food Service 323,375 0.11%
------------------------------ ------------- ----------------------------- ----------------------- -------
53,473,286 16.94%
-------------------------------------------------------------------------- ----------------------- -------
As at 31 December 2020, issuers with the following investments
comprised of greater than 1% of NAV (Excluding cash):
Securities
(EXPRESSED IN U.S. % of
DOLLARS) Country Industry Fair Value NAV
=========================== ============ ================================= =========== =======
Intelsat Jackson Holdings
SA 5,847,094 1.84%
---------------------------------------------------------------------------- ----------- -------
Telecommunications/Cellular
Intelsat Jackson Holdings Luxembourg Communications 3,530,407 1.11%
--------------------------- ------------ --------------------------------- ----------- -------
Telecommunications/Cellular
Intelsat Jackson Holdings Luxembourg Communications 977,063 0.31%
--------------------------- ------------ --------------------------------- ----------- -------
Telecommunications/Cellular
Intelsat DIP 1L 04/20 Luxembourg Communications 830,059 0.26%
--------------------------- ------------ --------------------------------- ----------- -------
Telecommunications/Cellular
Intelsat Jackson Holdings Luxembourg Communications 509,565 0.16%
--------------------------- ------------ --------------------------------- ----------- -------
Bass Pro Group LLC 5,766,992 1.82%
---------------------------------------------------------------------------- ----------- -------
Bass Pro T/L-B 1L United Retailers (except
USD States food and drug) 5,766,992 1.82%
--------------------------- ------------ --------------------------------- ----------- -------
VVC Holding Corp 5,170,918 1.63%
---------------------------------------------------------------------------- ----------- -------
Athenahealth 1L T/L-B United
1/19 States Health Care 3,448,868 1.09%
--------------------------- ------------ --------------------------------- ----------- -------
Athenahealth 2L T/L-B United
1/18 States Health Care 1,722,050 0.54%
--------------------------- ------------ --------------------------------- ----------- -------
Brock Holdings III
Inc. 4,993,182 1.57%
---------------------------------------------------------------------------- ----------- -------
Brock Holdings Notes United Business Equipment
15% 10/24/22 States & Services 2,619,598 0.82%
--------------------------- ------------ --------------------------------- ----------- -------
Brock Holdings III United Business Equipment
Inc. States & Services 2,373,584 0.75%
--------------------------- ------------ --------------------------------- ----------- -------
GTT Communications 4,700,706 1.48%
---------------------------------------------------------------------------- ----------- -------
GTT Communications United Telecommunications/Cellular
Inc. States Communications 2,024,118 0.64%
--------------------------- ------------ --------------------------------- ----------- -------
GTT Communications United Telecommunications/Cellular
BV States Communications 1,063,466 0.34%
--------------------------- ------------ --------------------------------- ----------- -------
GTT Communications United Telecommunications/Cellular
1L DD 1 States Communications 1,026,532 0.32%
--------------------------- ------------ --------------------------------- ----------- -------
GTT Communications United Telecommunications/Cellular
1L T/L 1 States Communications 586,590 0.18%
--------------------------- ------------ --------------------------------- ----------- -------
Kleopatra Holdings 4,663,721 1.47%
---------------------------------------------------------------------------- ----------- -------
Kleopatra Holdings Containers & Glass
2 SCA Germany Products 4,663,721 1.47%
--------------------------- ------------ --------------------------------- ----------- -------
Carnival Corp 4,319,501 1.36%
---------------------------------------------------------------------------- ----------- -------
United
Carnival 1L T/L-06/20 States Leisure Goods/Activities/Movies 1,901,594 0.60%
--------------------------- ------------ --------------------------------- ----------- -------
Carnival Corp 7.625%
03/01/26 Panama Leisure Goods/Activities/Movies 1,291,046 0.41%
--------------------------- ------------ --------------------------------- ----------- -------
Carnival Corp 11.500%
04/01/23 Panama Leisure Goods/Activities/Movies 965,861 0.30%
--------------------------- ------------ --------------------------------- ----------- -------
Carnival Corp 9.875%
08/01/27 Panama Leisure Goods/Activities/Movies 161,000 0.05%
--------------------------- ------------ --------------------------------- ----------- -------
EG Finco LTD 4,088,060 1.29%
---------------------------------------------------------------------------- ----------- -------
EG Group 2L TL EUR United Retailers (except
(3/18) Kingdom food and drug) 2,101,040 0.66%
=========================== ------------ --------------------------------- ----------- -------
United Retailers (except
Optfin TL B 1L GBP Kingdom food and drug) 988,238 0.31%
=========================== ------------ --------------------------------- ----------- -------
United Retailers (except
Optfin TL B1 1L EUR Kingdom food and drug) 650,830 0.21%
=========================== ------------ --------------------------------- ----------- -------
United Retailers (except
Optfin TL 2L USD States food and drug) 347,952 0.11%
--------------------------- ------------ --------------------------------- ----------- -------
Epicor Software Corp 3,691,163 1.16%
---------------------------------------------------------------------------- ----------- -------
Epicor Software 1L United
T/L-B 07/20 States Electronics/Electrical 2,119,818 0.66%
--------------------------- ------------ --------------------------------- ----------- -------
Epicor Software 2L United
T/L-B 07/20 States Electronics/Electrical 1,571,345 0.50%
--------------------------- ------------ --------------------------------- ----------- -------
Aveanna Healthcare
LLC 3,466,025 1.09%
---------------------------------------------------------------------------- ----------- -------
United
Aveanna 1L TL 09/20 States Health Care 1,228,788 0.39%
------------ ---------------------------------
United
Aveanna 2L TL 02/17 States Health Care 995,000 0.31%
=========================== ------------ --------------------------------- =========== =======
Aveanna HEALTHCARE United
LLC States Health Care 647,497 0.20%
=========================== ------------ --------------------------------- =========== =======
United
Epic Health 1L TL States Health Care 594,740 0.19%
=========================== ------------ --------------------------------- =========== =======
Granite US Holdings
Corp 3,429,314 1.08%
---------------------------------------------------------------------------- ----------- -------
Granite US Holdings United
Corp States Industrial Equipment 2,596,814 0.82%
--------------------------- ------------ --------------------------------- ----------- -------
Granite US Holdings United
Corp 110% 10/01/27 States Industrial Equipment 832,500 0.26%
--------------------------- ------------ --------------------------------- ----------- -------
Realogy Group 3,322,500 1.05%
---------------------------------------------------------------------------- ----------- -------
United
Realogy Group LLC States Building & Development 3,322,500 1.05%
--------------------------- ------------ --------------------------------- ----------- -------
Total 53,459,176 16.84%
---------------------------------------------------------------------------- ----------- -------
As at 31 December 2021, the below were the largest 50
investments based on the NAV:
Securities Fair
(EXPRESSED IN U.S. value
DOLLARS) Country Industry $ %
-------------------------- ---------------- --------------------------------- ------------ -------
Chariot Buyer LLC United States Building & Development 5,218,500 1.65%
-------------------------- ---------------- --------------------------------- ------------ -------
Cable & Satellite
CSC holdings LLC United States Television 4,483,125 1.42%
-------------------------- ---------------- --------------------------------- ------------ -------
Great Outdoors Group Retailers (except
LLC United States food and drug) 3,965,858 1.26%
-------------------------- ---------------- --------------------------------- ------------ -------
Uniti Group Inc/CSL Telecommunications/Cellular
Capital LLC United States Communications 3,951,380 1.25%
-------------------------- ---------------- --------------------------------- ------------ -------
Phoenix newco Inc United States Health Care 3,603,600 1.14%
-------------------------- ---------------- --------------------------------- ------------ -------
Intelsat Jackson Telecommunications/Cellular
Hldg Luxembourg Communications 3,469,942 1.10%
-------------------------- ---------------- --------------------------------- ------------ -------
Constellation Automotive
Ltd New Zealand Automotive 3,204,961 1.02%
-------------------------- ---------------- --------------------------------- ------------ -------
Traverse Midstream
Partners LLC United States Oil & Gas 2,973,781 0.94%
-------------------------- ---------------- --------------------------------- ------------ -------
Envision Healthcare
Corp United States Health Care 2,956,848 0.94%
-------------------------- ---------------- --------------------------------- ------------ -------
CD&R Dock Bidco Ltd United Kingdom Food Service 2,888,700 0.92%
-------------------------- ---------------- --------------------------------- ------------ -------
Prairie ECI Acquiror
LP United States Oil & Gas 2,847,585 0.90%
-------------------------- ---------------- --------------------------------- ------------ -------
Cineworld Cinemas
Holdings Ltd United States Leisure Goods/Activities/Movies 2,840,854 0.90%
-------------------------- ---------------- --------------------------------- ------------ -------
Deerfield Duff & Business Equipment
Phelps LLC United States & Services 2,759,813 0.88%
-------------------------- ---------------- --------------------------------- ------------ -------
BCP Renaissance Parent
LLC United States Oil & Gas 2,654,553 0.84%
-------------------------- ---------------- --------------------------------- ------------ -------
Milano Acquisition
LLC United States Insurance 2,572,904 0.82%
-------------------------- ---------------- --------------------------------- ------------ -------
Team Health Holdings
Inc United States Health Care 2,572,216 0.81%
-------------------------- ---------------- --------------------------------- ------------ -------
BCP Raptor LLC United States Oil & Gas 2,561,242 0.81%
-------------------------- ---------------- --------------------------------- ------------ -------
American Airlines
Group Inc United States Air Transport 2,477,532 0.78%
-------------------------- ---------------- --------------------------------- ------------ -------
Retailers (except
EG Group Ltd United Kingdom food and drug) 2,313,710 0.73%
-------------------------- ---------------- --------------------------------- ------------ -------
Redstone Buyer LLC United States Electronics/Electrical 2,290,531 0.73%
-------------------------- ---------------- --------------------------------- ------------ -------
Asurion LLC United States Insurance 2,279,031 0.72%
-------------------------- ---------------- --------------------------------- ------------ -------
BCP Raptor II LLC United States Oil & Gas 2,276,000 0.72%
-------------------------- ---------------- --------------------------------- ------------ -------
Sophia LP United States Electronics/Electrical 2,155,125 0.69%
-------------------------- ---------------- --------------------------------- ------------ -------
AA Bond Co Ltd United States Financial Intermediaries 2,114,665 0.67%
-------------------------- ---------------- --------------------------------- ------------ -------
CQP Holdco LP United States Oil & Gas 2,035,313 0.64%
-------------------------- ---------------- --------------------------------- ------------ -------
Magnetite CLO Ltd
Mgane_15-15X United States Financial Intermediaries 2,021,029 0.64%
-------------------------- ---------------- --------------------------------- ------------ -------
Woof Intermediate
Inc United States Food Products 2,011,260 0.64%
-------------------------- ---------------- --------------------------------- ------------ -------
MHI Holdings LLC United States Industrial Equipment 2,001,074 0.64%
-------------------------- ---------------- --------------------------------- ------------ -------
Global Air Lease
Co Ltd 6.500% 09/15/24 United States Equipment Leasing 1,999,963 0.63%
-------------------------- ---------------- --------------------------------- ------------ -------
First Brands Group
LLC United States Automotive 1,990,955 0.63%
-------------------------- ---------------- --------------------------------- ------------ -------
Quantum Health Inc United States Health Care 1,987,513 0.63%
-------------------------- ---------------- --------------------------------- ------------ -------
New Fortress Energy
Inc United States Utilities 1,925,450 0.61%
-------------------------- ---------------- --------------------------------- ------------ -------
Brock Holdings Notes Business Equipment
15% 04/24/22 United States & Services 1,896,183 0.60%
-------------------------- ---------------- --------------------------------- ------------ -------
Kestrel Acquisition
LLC United States Utilities 1,832,862 0.58%
-------------------------- ---------------- --------------------------------- ------------ -------
Ivanti Software Inc United States Electronics/Electrical 1,781,602 0.56%
-------------------------- ---------------- --------------------------------- ------------ -------
The Edelman Financial
Group Inc United States Financial Intermediaries 1,772,956 0.56%
-------------------------- ---------------- --------------------------------- ------------ -------
Convergeone Holdings
Inc United States Electronics/Electrical 1,711,394 0.54%
-------------------------- ---------------- --------------------------------- ------------ -------
Team Health Holdings
Inc 6.375% 02/01/25 United States Health Care 1,684,838 0.53%
-------------------------- ---------------- --------------------------------- ------------ -------
FCG Acquisitions
Inc United States Industrial Equipment 1,677,795 0.53%
-------------------------- ---------------- --------------------------------- ------------ -------
Trinitas CLO Ltd
TRNTS_19-10X United States Financial Intermediaries 1,657,201 0.52%
-------------------------- ---------------- --------------------------------- ------------ -------
Nonferrous Metals
Covia Holdings LLC United States & Minerals 1,656,820 0.52%
-------------------------- ---------------- --------------------------------- ------------ -------
Nonferrous Metals
US Silica Co United States & Minerals 1,640,869 0.52%
-------------------------- ---------------- --------------------------------- ------------ -------
Tibco Software Inc United States Electronics/Electrical 1,621,734 0.51%
-------------------------- ---------------- --------------------------------- ------------ -------
Crosby US Acquisition
Corp United States Industrial Equipment 1,615,232 0.51%
-------------------------- ---------------- --------------------------------- ------------ -------
Altice France Holding Cable & Satellite
SA France Television 1,612,500 0.51%
-------------------------- ---------------- --------------------------------- ------------ -------
Varsity Brands Holding
Co Inc United States Clothing & Textiles 1,604,256 0.51%
-------------------------- ---------------- --------------------------------- ------------ -------
Sundyne US Purchaser
Inc United States Industrial Equipment 1,596,618 0.51%
-------------------------- ---------------- --------------------------------- ------------ -------
Syncsort Incorporated
(clearlake) United States Electronics/Electrical 1,596,000 0.51%
-------------------------- ---------------- --------------------------------- ------------ -------
Optiv Inc United States Electronics/Electrical 1,585,513 0.51%
-------------------------- ---------------- --------------------------------- ------------ -------
Comstock Resources
Inc United States Oil & Gas 1,583,625 0.50%
-------------------------- ---------------- --------------------------------- ------------ -------
117,533,011 37.23%
----------------------------------------------------------------------------- ------------ -------
As at 31 December 2020, the below were the largest 50
investments based on the NAV (Audited):
Securities Fair
(EXPRESSED IN U.S. value
DOLLARS) Country Industry $ %
----------------------------- ---------------- --------------------------------- ------------ -------
Retailers (except
Bass Pro 1L T/L-B United States food and drug) 5,766,992 1.82%
----------------------------- ---------------- --------------------------------- ------------ -------
Kleopatra Holdings Containers & Glass
2 SCA Germany Products 4,663,721 1.47%
----------------------------- ---------------- --------------------------------- ------------ -------
Intelsat Jackson Telecommunications/Cellular
Hldg Luxembourg Communications 3,530,407 1.11%
----------------------------- ---------------- --------------------------------- ------------ -------
Athenahealth 1L T/L-B
1/19 United States Health Care 3,448,868 1.09%
----------------------------- ---------------- --------------------------------- ------------ -------
Realogy Group LLC United States Building & Development 3,322,500 1.05%
----------------------------- ---------------- --------------------------------- ------------ -------
Enterprise Merger
Sub Inc. United States Health Care 3,096,917 0.98%
----------------------------- ---------------- --------------------------------- ------------ -------
Eagleclaw United States Oil & Gas 2,994,580 0.94%
----------------------------- ---------------- --------------------------------- ------------ -------
Rover United States Oil & Gas 2,868,510 0.90%
----------------------------- ---------------- --------------------------------- ------------ -------
Team Health Holdings
Inc. United States Health Care 2,866,589 0.90%
----------------------------- ---------------- --------------------------------- ------------ -------
Telecommunications/Cellular
Uniti Group Inc. United States Communications 2,802,750 0.88%
----------------------------- ---------------- --------------------------------- ------------ -------
Deerfield Duff & Business Equipment
Phelps LLC United States & Services 2,786,967 0.88%
----------------------------- ---------------- --------------------------------- ------------ -------
Constellation Automotive
Limited United Kingdom Automotive 2,710,939 0.85%
----------------------------- ---------------- --------------------------------- ------------ -------
Caprock Midstream
LLC United States Oil & Gas 2,689,685 0.85%
----------------------------- ---------------- --------------------------------- ------------ -------
Playtika Holding
Corp United States Leisure Goods/Activities/Movies 2,661,648 0.84%
----------------------------- ---------------- --------------------------------- ------------ -------
Brock Holdings III Business Equipment
Inc. United States & Services 2,619,598 0.83%
----------------------------- ---------------- --------------------------------- ------------ -------
Cineworld Cinemas
Holdings Ltd United States Leisure Goods/Activities/Movies 2,606,311 0.82%
----------------------------- ---------------- --------------------------------- ------------ -------
Granite US Holdings
Corp United States Industrial Equipment 2,596,814 0.82%
----------------------------- ---------------- --------------------------------- ------------ -------
Milano Acquisition
LLC United States Insurance 2,590,666 0.82%
----------------------------- ---------------- --------------------------------- ------------ -------
Medallion Midland
Acquisition LP United States Oil & Gas 2,541,000 0.80%
----------------------------- ---------------- --------------------------------- ------------ -------
Casino Guichard Perrachon
SA France Food/Drug Retailers 2,479,391 0.78%
----------------------------- ---------------- --------------------------------- ------------ -------
First Quantum Minerals Nonferrous Metals
Ltd Canada & Minerals 2,446,675 0.77%
----------------------------- ---------------- --------------------------------- ------------ -------
Traverse Midstream
Partners LLC United States Oil & Gas 2,414,742 0.76%
----------------------------- ---------------- --------------------------------- ------------ -------
Brock Holdings III Business Equipment
Inc. United States & Services 2,373,584 0.75%
----------------------------- ---------------- --------------------------------- ------------ -------
Oryx Midstream Holdings
LLC United States Oil & Gas 2,370,147 0.75%
----------------------------- ---------------- --------------------------------- ------------ -------
Mrc Global (US) Inc. United States Steel 2,293,423 0.72%
----------------------------- ---------------- --------------------------------- ------------ -------
Garda World Security Business Equipment
Corp (Ontario) Canada & Services 2,287,712 0.72%
----------------------------- ---------------- --------------------------------- ------------ -------
Asurion LLC United States Insurance 2,211,920 0.70%
----------------------------- ---------------- --------------------------------- ------------ -------
Ahead DB Borrower
LLC United States Electronics/Electrical 2,208,510 0.70%
----------------------------- ---------------- --------------------------------- ------------ -------
Tallgrass Energy
LP United States Oil & Gas 2,203,833 0.69%
----------------------------- ---------------- --------------------------------- ------------ -------
Epicor Software Corp United States Electronics/Electrical 2,119,818 0.67%
----------------------------- ---------------- --------------------------------- ------------ -------
Kestrel Acquisition
LLC United States Utilities 2,118,511 0.67%
----------------------------- ---------------- --------------------------------- ------------ -------
Tenet Healthcare
Corporation United States Health Care 2,110,000 0.66%
----------------------------- ---------------- --------------------------------- ------------ -------
Ortho-Clinical Diagnostics
Inc. United States Health Care 2,110,000 0.66%
----------------------------- ---------------- --------------------------------- ------------ -------
Retailers (except
Eg Finco Ltd United Kingdom food and drug) 2,101,040 0.66%
----------------------------- ---------------- --------------------------------- ------------ -------
Sophia LP United States Electronics/Electrical 2,079,000 0.65%
----------------------------- ---------------- --------------------------------- ------------ -------
Dedalus Finance Gmbh Germany Electronics/Electrical 2,074,106 0.65%
----------------------------- ---------------- --------------------------------- ------------ -------
Business Equipment
Vivint Inc United States & Services 2,058,997 0.65%
----------------------------- ---------------- --------------------------------- ------------ -------
Alterra Mountain
Co United States Leisure Goods/Activities/Movies 2,054,527 0.65%
----------------------------- ---------------- --------------------------------- ------------ -------
Lucid Energy Group
II Borrower LLC United States Oil & Gas 2,034,209 0.64%
----------------------------- ---------------- --------------------------------- ------------ -------
GTT Communications Telecommunications/Cellular
Inc. United States Communications 2,024,118 0.64%
----------------------------- ---------------- --------------------------------- ------------ -------
MHI Holdings Llc United States Industrial Equipment 2,012,018 0.63%
----------------------------- ---------------- --------------------------------- ------------ -------
Woof Intermediate
Inc. United States Food Products 2,005,000 0.63%
----------------------------- ---------------- --------------------------------- ------------ -------
Consolidated Communications Telecommunications/Cellular
Inc. United States Communications 2,001,344 0.63%
----------------------------- ---------------- --------------------------------- ------------ -------
Magnetite CLO Ltd
Mgane_15-15X Cayman Islands Financial Intermediaries 1,992,168 0.63%
----------------------------- ---------------- --------------------------------- ------------ -------
Apidos CLO Apid_20-34X Cayman Islands Financial Intermediaries 1,980,478 0.62%
----------------------------- ---------------- --------------------------------- ------------ -------
ITT Holdings LLC United States Oil & Gas 1,980,000 0.62%
----------------------------- ---------------- --------------------------------- ------------ -------
Quantum Health Inc. United States Health Care 1,975,000 0.62%
----------------------------- ---------------- --------------------------------- ------------ -------
Tech Data Corporation United States Electronics/Electrical 1,910,412 0.60%
----------------------------- ---------------- --------------------------------- ------------ -------
Antero Midstream
Partners LP United States Oil & Gas 1,904,078 0.60%
----------------------------- ---------------- --------------------------------- ------------ -------
Carnival Corp United States Leisure Goods/Activities/Movies 1,901,594 0.60%
----------------------------- ---------------- --------------------------------- ------------ -------
125,001,817 39.37%
-------------------------------------------------------------------------------- ------------ -------
FINANCIAL STATEMENTS | Statement of Operations
Statement of Operations
1 January 1 JANUARY
2021 to 2020 TO
31 DECEMBER 31 DECEMBER
(Expressed in U.S. Dollars) Note 2021 2020
Income
------------------------------------------------------ ----- ------------- -------------
Interest income net of withholding taxes 2(b) 19,835,710 21,445,286
------------------------------------------------------ ----- ------------- -------------
Other income from investments 351,548 279,862
------------------------------------------------------ ----- ------------- -------------
Total income 20,187,258 21,725,148
------------------------------------------------------ ----- ------------- -------------
Expenses
------------------------------------------------------ ----- ------------- -------------
Investment management and services 3 2,425,841 2,819,518
------------------------------------------------------ ----- ------------- -------------
Administration and professional fees 3 958,444 1,564,479
------------------------------------------------------ ----- ------------- -------------
Directors' fees and travel expenses 3 225,725 216,256
------------------------------------------------------ ----- ------------- -------------
Total expenses 3,610,010 4,600,253
------------------------------------------------------ ----- ------------- -------------
Net investment income 16,577,248 17,124,895
------------------------------------------------------ ----- ------------- -------------
Realised and unrealised gains and losses
------------------------------------------------------ ----- ------------- -------------
Net realised gain/(loss) on investments 2(e) 3,664,416 (23,498,335)
------------------------------------------------------ ----- ------------- -------------
Net realised gain on derivatives 2(e) 13,249,047 16,710,613
------------------------------------------------------ ----- ------------- -------------
Total net realised gain/(loss) 16,913,463 (6,787,722)
------------------------------------------------------ ----- ------------- -------------
Net change in unrealised (depreciation)/appreciation
on investments 2(e) (3,209,563) 11,225,729
------------------------------------------------------ ----- ------------- -------------
Net change in unrealised depreciation
on derivatives 2(e) (14,468,604) (23,564,875)
------------------------------------------------------ ----- ------------- -------------
Total net unrealised depreciation (17,678,167) (12,339,146)
------------------------------------------------------ ----- ------------- -------------
Realised and unrealised (loss)/gain on
foreign currency 2(e) (294,413) 2,286,890
------------------------------------------------------ ----- ------------- -------------
Net realised and unrealised gain/(loss) (1,059,117) (16,839,978)
------------------------------------------------------ ----- ------------- -------------
Net increase in net assets resulting
from operations 15,518,131 284,917
------------------------------------------------------ ----- ------------- -------------
Earnings per share GBP0.0456 GBP0.0030
------------------------------------------------------ ----- ------------- -------------
FINANCIAL STATEMENTS | Statement of Changes in Net Assets
Statement of Changes in Net Assets
FOR THE YEAR 1 January 2021 to 31 DECEMBER
2021
(Expressed in U.S. Dollars) VALUE
-------------------------------------------- -------------
Net assets as at 1 January 2021 317,409,172
--------------------------------------------- -------------
Dividends declared (17,246,156)
--------------------------------------------- -------------
Net increase in net assets resulting from
operations 15,518,131
--------------------------------------------- -------------
Net assets as at 31 December 2021 315,681,147
--------------------------------------------- -------------
FOR THE YEAR 1 January 2020 to 31 DECEMBER
2020
(Expressed in U.S. Dollars) VALUE
-------------------------------------------- --------------
Net assets as at 1 January 2020 578,032,783
--------------------------------------------- --------------
Dividends paid/declared (21,235,175)
--------------------------------------------- --------------
Net movement from share buybacks and share
conversions (239,673,353)
--------------------------------------------- --------------
Net increase in net assets resulting from
operations 284,917
--------------------------------------------- --------------
Net assets as at 31 December 2020 317,409,172
--------------------------------------------- --------------
FINANCIAL STATEMENTS | Statement of Cash Flows
Statement of Cash Flows
1 January 1 January
2021 to 2020 to
31 DECEMBER 31 December
(Expressed in U.S. Dollars) Note 2021 2020
---------------------------------------------- ----- -------------- --------------
Cash flows from operating activities:
---------------------------------------------- ----- -------------- --------------
Net increase in net assets resulting
from operations 15,518,131 284,917
---------------------------------------------- ----- -------------- --------------
Adjustment to reconcile net increase
in net assets resulting from operations
to net cash provided by operating
activities:
---------------------------------------------- ----- -------------- --------------
Net realised (gain)/loss on investments (3,664,416) 23,498,335
---------------------------------------------- ----- -------------- --------------
Net change in unrealised depreciation
on investments and derivatives 17,678,167 12,339,146
---------------------------------------------- ----- -------------- --------------
Net change in unrealised gain on translation
of assets and liabilities (199,927) (487,799)
---------------------------------------------- ----- -------------- --------------
Amortisation of discounts/premiums (547,607) (737,152)
---------------------------------------------- ----- -------------- --------------
Changes in receivables for investments
sold 4,390,179 2,987,225
---------------------------------------------- ----- -------------- --------------
Changes in interest receivable(1) (757,539) (293,358)
---------------------------------------------- ----- -------------- --------------
Changes in other receivables and prepayments (98,795) (92,903)
---------------------------------------------- ----- -------------- --------------
Changes in payables for investments
purchased (12,282,455) 6,864,311
---------------------------------------------- ----- -------------- --------------
Changes in payables to Investment
Manager and affiliates 31,530 (407,825)
---------------------------------------------- ----- -------------- --------------
Changes in accrued expenses and other
liabilities 90,511 (96,302)
---------------------------------------------- ----- -------------- --------------
Purchase of investments(2) 2(e) (280,677,501) (419,147,028)
---------------------------------------------- ----- -------------- --------------
Realisation of investments(2) 2(e) 272,033,252 635,533,679
---------------------------------------------- ----- -------------- --------------
Net cash generated from operating
activities 11,513,530 260,245,246
---------------------------------------------- ----- -------------- --------------
Cash flows from financing activities:
---------------------------------------------- ----- -------------- --------------
Net movement from share buybacks and
share swaps - (244,670,663)
---------------------------------------------- ----- -------------- --------------
Dividends paid (15,940,437) (21,235,175)
---------------------------------------------- ----- -------------- --------------
Net cash used in financing activities (15,940,437) (265,905,838)
---------------------------------------------- ----- -------------- --------------
Effect of exchange rate changes on
cash 199,927 487,799
---------------------------------------------- ----- -------------- --------------
Net decrease in cash and cash equivalents (4,226,980) (5,172,793)
---------------------------------------------- ----- -------------- --------------
Cash and cash equivalents at beginning
of the year 15,894,923 21,067,716
---------------------------------------------- ----- -------------- --------------
Cash and cash equivalents at end of
the year 11,667,943 15,894,923
---------------------------------------------- ----- -------------- --------------
(1) Interest received for the year ended 31 December 2021
totalled $19,078,171 (2020: $21,151,928)
2 Included in these figures is $38,785,967 (2020: $19,518,509)
of non-cash transactions. These arose due to the repricing and
restructuring of certain investments during the year.
FINANCIAL STATEMENTS | Notes to the Financial Statements
For the year ended 31 December 2021
NOTE 1 - DESCRIPTION OF BUSINESS
The Company is a closed-ended investment company incorporated
and registered in Guernsey with registered number 53155. It is a
non-cellular company limited by shares and has been declared by the
Guernsey Financial Services Commission to be a registered
closed-ended collective investment scheme. On 20 April 2011, the
Company was admitted to the Official List of the UK Listing
Authority with a premium listing trading on the Main Market of the
LSE.
As previously required under Article 51 of the Company's
Articles of Incorporation (applicable at the time), at the AGM held
on 11 June 2020 an ordinary resolution was proposed that the
Company continues its business as a closed-ended investment company
and was duly passed. Following the EGM held on 8 September 2020
where all resolutions were passed, the Company adopted new Articles
which no longer require that a continuation vote be proposed.
Instead, the Company may, at the Board's absolute discretion, offer
to eligible Shareholders the opportunity to tender up to 25 per
cent. of their holdings (a "Cash Exit Facility Offer") at a price
equal to the prevailing Net Asset Value per Share, less two per
cent. If the Board resolves to exercise its discretion (as they
expect to do if the Company is trading at a discount to NAV per
Ordinary Share of greater than 2 per cent. as at the date of any
Cash Exit Facility Offer), the first Cash Exit Facility Offer is
expected to close on 30 June 2022 and subsequent Cash Exit Facility
Offers every six months thereafter. Further details and the terms
and conditions applicable to the first Cash Exit Facility Offer
will be published in a Shareholder circular (the "Cash Exit
Facility Circular"). In connection with any subsequent Cash Exit
Facility Offers, the Company will publish an RIS announcement
notifying Shareholders of the Board's decision to make a Cash Exit
Facility Offer on the basis of the terms and conditions as
previously set out in the Cash Exit Facility Offer. Additionally,
from the end of June 2022, the Board intends, subject to market
conditions at the time, to propose a wind-up of the Company should
its NAV drop beneath GBP150 million.
The Company's investment objective is to provide its
shareholders with consistent levels of monthly income, while
maintaining or increasing the Net Asset Value ("NAV") per share
over time. To pursue its investment objective, the Company invests
in credit assets with the following target portfolio allocations:
(i) 50-70% in traditional credit, meaning high yield bonds,
floating rate loans and investment grade corporate bonds; and (ii)
30-50% in alternative credit, meaning "special situations"
(consisting generally of tradeable but less liquid debt securities,
such as stressed credit and CLO debt tranches), mezzanine debt,
"club" loan transactions (being syndicated lending opportunities
presented through the Company's or Investment Manager's
relationship with loan arrangers and/or borrowers) and private
corporate loans issued directly to borrowers. Investments in
alternative credit will not represent more than 50% of Net Asset
Value at the time of investment.
The Company's share capital is denominated in Pound Sterling and
consists of 323,268,152 Pound Sterling Ordinary Shares as at 31
December 2021, of which 76,083,114 were held in treasury. Refer to
Note 6 for further information.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The accompanying Financial Statements which give a true and fair
view, have been prepared on a going concern basis and in accordance
with accounting principles generally accepted in the United States
of America ("US GAAP"), The Companies (Guernsey) Law 2008 and the
Financial Accounting Standards Board ("FASB") Accounting Standards
Codification ("ASC") Topic 946 ("ASC 946"). The Board believes that
the underlying assumptions are appropriate and that the Company's
Financial Statements therefore are fairly presented in accordance
with US GAAP.
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 liquidity
of investments and the income deriving from those investments as of
the reporting date and have determined that the Company has
adequate financial resources to meet its liabilities as they fall
due.
However, should there be a cash exit offer at the end of June
2022 and at the end of December 2022 which are taken up by
Shareholders in full, the Company's NAV would likely drop below
GBP150m after January 2023, which would result in the Board,
subject to market conditions at the time, bringing forward a
proposal to wind-up the Company. This currently represents a
material uncertainty to the ability of the Company to continue in
operation. After making enquiries of the Investment Manager and the
Sub-Administrator, the Directors are however, satisfied that the
Company has adequate resources to discharge its liabilities as they
fall due for at least one year from the date these Financial
Statements were approved notwithstanding this material
uncertainty.. Accordingly, the Directors continued to adopt a going
concern basis in preparing these Financial Statements.
New Accounting Standards
There are no new accounting standards or updates to existing
standards that are effective as of 1 January 2021 that would be
expected to have a significant impact on the Company.
(a) Critical accounting judgement and estimates
The preparation of Financial Statements in conformity with US
GAAP requires that the Directors make estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. Such estimates and
associated assumptions are generally based on historical experience
and various other factors that are believed to be reasonable under
the circumstances, and form the basis of making the judgments about
attributing values of assets and liabilities that are not readily
apparent from other sources. Actual results may vary from such
accounting estimates in amounts that may have a material impact on
the financial results and position of the Company.
Critical accounting estimates
The only area where estimates are significant to the Financial
Statements is the valuation of investments in Note 2(e).
Critical judgements
The functional currency for the Company is U.S. Dollars because
this is the currency of the primary economic environment in which
it operates.
The Directors consider that the Company is engaged in a single
segment of business, being investment into credit assets with
target portfolio allocations as per the Company's investment
policy, hence segment reporting is not required.
(b) Revenue recognition
Interest earned on debt instruments is accounted for net of
applicable withholding taxes and is recognised as income over the
terms of the loans. Discounts received or premiums paid in
connection with the acquisition of loans are amortised into
interest income using the effective interest method over the
contractual life of the related loan. If a loan is paid off 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.
(c) Cash and cash equivalents
The Company's cash and cash equivalents comprise cash in hand
and demand deposits and highly liquid investments 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
insignificant risk of changes in value.
(d) Foreign currency transactions
Monetary assets and liabilities denominated in a currency other
than U.S. Dollars are remeasured in U.S. Dollar equivalents using
spot rates as at the reporting date. On initial recognition, a
foreign currency transaction is recorded and converted at the spot
exchange rate at the transaction date. Non-monetary assets and
liabilities measured at fair value are translated using spot rates
as at the date when fair value is determined. Transactions during
the year, including purchases and sales of securities, income and
expenses, are translated at the rate of exchange prevailing on the
date of the transaction. The rates of exchange against U.S. Dollars
at 31 December 2021 were 1.35440 USD: 1GBP and 1.13720 USD: 1EUR
(31 December 2020 were 1.36720 USD: 1GBP and 1.22360 USD:
1EUR).
(e) Fair value of financial instruments and derivatives
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
Statement of Assets and Liabilities. A financial instrument is
defined by FASB ASC 825 as cash, evidence of an ownership interest
in an entity, or a contract that creates a contractual obligation
or right to deliver to or receive cash or another financial
instrument from a second entity on potentially favourable terms.
Fair value estimates are made at a discrete point in time, based on
relevant market data, information about the financial instruments,
and other factors.
Fair value was 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 judgment. Accordingly, fair values are not necessarily
indicative of the amounts realised on disposition of financial
instruments. The use of different market assumptions and/or
estimation methodologies may have a material effect on estimated
fair value amounts.
The following estimates and assumptions were used at 31 December
2021 to estimate the fair value of each class of financial
instruments:
- Valuation of financial investments - The special situations,
CLO debt tranches, private debt, global floating rate loans,
warrants and bonds are valued at bid price. The Investment Manager
and the Directors believe 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
Investment Manager will determine the valuation based on the
Investment Manager's fair valuation policy. Any investments made
through the secondary market are generally marked based on market
quotations, to the extent available, and the Investment Manager
will take into account current pricing of the security.
- Cash and cash equivalents - The net realisable value is a
reasonable estimate of fair value due to the short-term nature of
these instruments.
- Receivables for investments sold - The net realisable value
reasonably approximates fair value as they reflect the value at
which investments are sold to a willing buyer and settlement period
on their balances is short term.
- Interest receivables - The net realisable value reasonably approximates fair value.
- Other receivables - The net realisable value reasonably approximates fair value.
- Private Debt - For the primary issuance of private debt
investments, the valuation is based on a discounted cash flow (DCF)
approach. For secondary purchases, the valuation is based on
unadjusted broker quotes or pricing provided by approved pricing
sources.
- Derivatives - The Company estimates fair values of derivatives
based on the latest available forward exchange rates.
- Payables for investments purchased - The net carrying value
reasonably approximates fair value as they reflect the value at
which investments are purchased from a willing seller and
settlement period on their balances is short term.
- Payables to the Investment Manager and affiliates - The net
carrying value reasonably approximates fair value when repayment
period is short-term.
- Accrued expenses and other short-term liabilities - The net
carrying value reasonably approximates fair value when repayment
period is short-term.
A fair value hierarchy that prioritises the inputs to valuation
techniques used to measure fair value is established under FASB ASC
Topic 820. The objective of a fair value measurement is to
determine 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 (an exit price). Accordingly,
the fair value hierarchy gives the highest priority to valuations
based upon unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to
valuations based upon unobservable inputs that are significant to
the valuation (Level 3).
The levels of the fair value hierarchy under FASB ASC Topic
820-10-35-39 to 55 are as follows:
The guidance establishes three levels of the fair value
hierarchy as follows:
Level 1 : Quoted prices are available in active markets for
identical investments as of the reporting date.
Level 2 : Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
or indirectly.
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.
The inputs or methodologies used for valuing securities are not
necessarily an indication of the risk associated with investing in
those securities. Transfers between levels of the fair value
hierarchy are deemed to have occurred at the end of the reporting
period.
The Company, where possible, uses independent third-party
vendors to price its portfolio. As part of its valuation process,
the AIFM evaluates the number of broker quotes that combine to make
up the valuation provided by these vendors and if it believes that
the number of broker quotes is not sufficient to ensure a Level 2
price it designates those positions Level 3. As at 31 December 2021
the AIFM designated 12 (31 December 2020: 14) of its Global
Floating Rate loans, 10 (31 December 2020: 8) of its Private Debt
loans, 1 (31 December 2020: 1) Global High Yield Bond, 1 of its
Private Equities (31 December 2020: 1) and 18 (31 December 2020: 2)
CLO Debt Tranches at Level 3. With respect to the level 3 equity
positions, the Investment Manager's Investment Committee has
derived the fair value, based on comparable companies in similar
industries. Level 1 positions are listed on an exchange. Level 2
positions are observable pricing inputs in active markets and fair
value is determined through use of models or other valuation
methodologies.
The following table details the Company's financial instruments
that were accounted for at fair value as at 31 December 2021.
Financial Instruments at Fair Value as at 31 DECEMBER 2021
--------------------------------------------------------------------------------------------
Level Level 2 Level 3
Financial investments 1 ($) ($) ($) Total ($)
------------------------------ ------------ -------------- ------------- --------------
Private Debt - 58,188,397 10,440,000 68,628,397
------------------------------- ------------ -------------- ------------- --------------
Special Situations - 9,278,095 - 9,278,095
------------------------------- ------------ -------------- ------------- --------------
CLO Debt Tranches - 14,633,865 19,003,288 33,637,153
------------------------------- ------------ -------------- ------------- --------------
Global High Yield - 82,808,713 1,896,183 84,704,896
------------------------------- ------------ -------------- ------------- --------------
Global Floating Rate
Loans 99,651,520 9,534,102 109,185,622
------------------------------- ------------ -------------- ------------- --------------
Equity 532,417 - 1,392,374 1,924,791
------------------------------- ------------ -------------- ------------- --------------
Total financial investments 532,417 264,560,590 42,265,947 307,358,954
------------------------------- ------------ -------------- ------------- --------------
Level Level 2 Level 3
1 ($) ($) ($) Total ($)
------------------------------ ------------ -------------- ------------- --------------
Balance at start of
the year - 264,634,951 33,077,294 297,712,245
------------------------------- ------------ -------------- ------------- --------------
Purchases during the
year (1) - 247,783,822 32,893,679 280,677,501
------------------------------- ------------ -------------- ------------- --------------
Sales during the year
(1) (1,786,169) (252,981,184) (17,265,899) (272,033,252)
------------------------------- ------------ -------------- ------------- --------------
Realised gain on investments 718,759 2,601,123 344,534 3,664,416
------------------------------- ------------ -------------- ------------- --------------
Unrealised gain/(loss)
on revaluation 152,842 (1,267,566) (2,094,839) (3,209,563)
------------------------------- ------------ -------------- ------------- --------------
Amortisation - 547,607 - 547,607
------------------------------- ------------ -------------- ------------- --------------
Transfer from Level
3 to Level 1 1,446,985 - (1,446,985) -
------------------------------- ------------ -------------- ------------- --------------
Transfer from Level
3 to Level 2 - 8,230,079 (8,230,079) -
------------------------------- ------------ -------------- ------------- --------------
Transfer from Level
2 to Level 3 - (4,988,242) 4,988,242 -
------------------------------- ------------ -------------- ------------- --------------
Balance at end of
the year 532,417 264,560,590 42,265,947 307,358,954
------------------------------- ------------ -------------- ------------- --------------
Due to changes in observable inputs, the Company transferred
securities from Level 2 to Level 3, from Level 3 to Level 2 and
from Level 3 to Level 1 of the fair value hierarchy. Level 3 assets
are valued using single broker quotes or valuation models.
(1) Included in these figures is $38,785,967 of non-cash
transactions. These arose due to the repricing and restructuring of
certain investments during the year.
DERIVATIVES at Fair Value
as at 31 DECEMBER 2021
------------------------------------ ---------------- ------- ------------ ------- ------------
No. of NOTIONAL Level Level Level
Financial assets contracts AMOUNTS 1 ($) 2 ($) 3 ($) Total ($)
----------------------- ----------- ---------------- ------- ------------ ------- ------------
Derivatives (for
hedging purposes
only) 5 1,508,873,601 - 551,564 - 551,564
----------------------- ----------- ---------------- ------- ------------ ------- ------------
Financial liabilities
----------------------- ----------- ---------------- ------- ------------ ------- ------------
Derivatives (for
hedging purposes
only) 12 (1,517,172,656) - (2,134,666) - (2,134,666)
----------------------- ----------- ---------------- ------- ------------ ------- ------------
Total 17 (8,299,055) - (1,583,102) - (1,583,102)
----------------------- ----------- ---------------- ------- ------------ ------- ------------
The Company considers the notional amounts as at 31 December
2021 to be representative of the volume of its derivative
activities during the year ended 31 December 2021.
The following table details the Company's financial instruments
that were accounted for at fair value as at 31 December 2020.
Financial Instruments at Fair Value as at 31 DECEMBER 2020
------------------------------------------------------------------------------------------------
Level Level 2 Level 3
Financial investments 1 ($) ($) ($) Total ($)
------------------------------ ------------- --------------- -------------- ---------------
Private Debt - 24,264,306 10,173,363 34,437,669
------------------------------- ------------- --------------- -------------- ---------------
Special Situations - 18,053,663 - 18,053,663
------------------------------- ------------- --------------- -------------- ---------------
CLO Debt Tranches - 19,694,373 1,100,000 20,794,373
------------------------------- ------------- --------------- -------------- ---------------
Global High Yield - 75,121,624 2,619,598 77,741,222
------------------------------- ------------- --------------- -------------- ---------------
Global Floating Rate
Loans - 127,310,378 15,496,874 142,807,252
------------------------------- ------------- --------------- -------------- ---------------
Equity - 190,607 2,373,584 2,564,191
------------------------------- ------------- --------------- -------------- ---------------
Warrants - - 1,313,875 1,313,875
------------------------------- ------------- --------------- -------------- ---------------
Total financial investments - 264,634,951 33,077,294 297,712,245
------------------------------- ------------- --------------- -------------- ---------------
Level Level 2 Level 3
1 ($) ($) ($) Total ($)
------------------------------ ------------- --------------- -------------- ---------------
Balance at start of
the year 1,503,253 495,662,575 28,468,522 525,634,350
------------------------------- ------------- --------------- -------------- ---------------
Purchases during the
year (1) 117,601 391,420,018 27,609,409 419,147,028
------------------------------- ------------- --------------- -------------- ---------------
Sales during the year
(1) (726,452) (620,534,224) (14,273,003) (635,533,679)
------------------------------- ------------- --------------- -------------- ---------------
Realised loss on investments (1,283,238) (18,420,018) (3,795,079) (23,498,335)
------------------------------- ------------- --------------- -------------- ---------------
Unrealised gain on
revaluation 388,836 9,586,606 1,250,287 11,225,729
------------------------------- ------------- --------------- -------------- ---------------
Amortisation - 737,152 - 737,152
------------------------------- ------------- --------------- -------------- ---------------
Transfer from Level
3 to Level 2 - 6,182,842 (6,182,842) -
------------------------------- ------------- --------------- -------------- ---------------
Balance at end of
the year - 264,634,951 33,077,294 297,712,245
------------------------------- ------------- --------------- -------------- ---------------
Due to changes in observable inputs, the Company transferred
securities from Level 3 to Level 2 of the fair value hierarchy.
Level 3 assets are valued using single broker quotes or valuation
models.
(1) Included in these figures is $19,518,509 of non-cash
transactions. These arose due to the repricing and restructuring of
certain investments during the year.
DERIVATIVES at Fair Value as
at 31 December 2020
------------------------------------ ---------------- -------------------- ------- -----------
No. of NOTIONAL Level Level Level
Financial assets contracts AMOUNTS 1 ($) 2 ($) 3 ($) Total ($)
----------------------- ----------- ---------------- ------- ----------- ------- -----------
Derivatives (for
hedging purposes
only) 14 2,277,246,283 - 12,993,970 - 12,993,970
----------------------- ----------- ---------------- ------- ----------- ------- -----------
Financial liabilities
----------------------- ----------- ---------------- ------- ----------- ------- -----------
Derivatives (for
hedging purposes
only) 4 (2,220,868,977) - (108,468) - (108,468)
----------------------- ----------- ---------------- ------- ----------- ------- -----------
Total 18 56,377,306 - 12,885,502 - 12,885,502
----------------------- ----------- ---------------- ------- ----------- ------- -----------
The Company considers the notional amounts as at 31 December
2020 to be representative of the volume of its derivative
activities during the year ended 31 December 2020.
The following tables summarise the significant unobservable
inputs the Company used to value its investments categorised within
Level 3 at 31 December 2021. The tables are not intended to be
all-inclusive but instead capture the significant unobservable
inputs relevant to the determination of fair values.
Unobservable Inputs as at 31 DECEMBER 2021
Sector Significant Weighted
Fair Value Primary Valuation unobservable Range Average
($) Technique Inputs / INPUT*
=================== =========== ================== ====================== =========== =========
Unadjusted
Private Debt 10,440,000 Vendor Pricing Broker Quote 1 N/A
------------------- =========== ================== ====================== =========== =========
Unadjusted
CLO Debt Tranches 19,003,288 Vendor Pricing Broker Quote 1 N/A
------------------- =========== ================== ====================== =========== =========
Second Lien
Global High Yield 1,896,183 Market Approach Quotations 98.63 N/A
------------------- =========== ================== ====================== =========== =========
Global Floating Unadjusted
Rate Loans 9,534,102 Vendor Pricing Broker Quote 1 N/A
------------------- =========== ================== ====================== =========== =========
Enterprise
value/EBITDA
Equity 1,392,374 Market Approach multiple (EV/EBITDA) 9x N/A
=================== =========== ================== ====================== =========== =========
Total 42,265,947
=================== ===========
* Debt Investments with a single broker quote result in Level 3
classification. Unobservable inputs from the broker quote were not
included because the Company does not develop the quantitative
inputs and they are not readily available. The EBITDA multiple
increase/(decrease) results in an increase/(decrease) in the
valuation of the equity.
Unobservable Inputs as at 31 DECEMBER 2020
Sector Fair Significant Weighted
Value Primary Valuation unobservable Range Average
($) Technique Inputs / INPUT*
=================== =========== =================== ================ =========== =========
Unadjusted
Private Debt 10,173,363 Vendor Pricing Broker Quote 1 N/A
------------------- =========== =================== ================ =========== =========
Unadjusted
CLO Debt Tranches 1,100,000 Vendor Pricing Broker Quote 1 N/A
------------------- =========== =================== ================ =========== =========
Global High Yield 2,619,598 Market Approach Second Lien N/A N/A
Quotations
------------------- =========== =================== ================ =========== =========
Global Floating Unadjusted
Rate Loans 15,496,874 Vendor Pricing Broker Quote 1 N/A
------------------- =========== =================== ================ =========== =========
Equity 2,373,584 Market Comparables EBITDA multiple 4-18 N/A
=================== =========== =================== ================ =========== =========
Warrants 1,313,875 Vendor Pricing Exercise Price N/A N/A
------------------- =========== =================== ================ =========== =========
Total 33,077,294
=================== ===========
* Debt Investments with a single broker quote result in Level 3
classification. Unobservable inputs from the broker quote were not
included because the Company does not develop the quantitative
inputs and they are not readily available. The EBITDA multiple
increase/(decrease) results in an increase/(decrease) in the
valuation of the equity.
Derivative activity
The derivatives assets and liabilities per each counterparty are
offset in accordance with the guidance in Accounting Standards
Codification Topic 210 (ASC 210) section 210-20-45 and ASC 815
section 815-10-45 to determine the net amounts presented in the
Statement of Assets and Liabilities. As at 31 December 2021, there
were 5 counterparties for the forward contracts (31 December 2020:
5). The Company is subject to enforceable master netting agreements
with its counterparties of foreign currency exchange contracts with
Royal Bank of Canada of ($145,582) (31 December 2020: $260,679),
State Street of $551,564 (31 December 2020: $14,578), Westpac of
($1,935,769) (31 December 2020: $107,572),Goldman Sachs of ($9,468)
(31 December 2020: ($108,468)) and UBS AG of ($43,846) (31 December
2020: $12,611,141). These agreements govern the terms of certain
transactions and reduce the counterparty risk associated with
relevant transactions by specifying offsetting mechanisms.
The following table, at 31 December 2021, show the gross and net
derivatives assets and liabilities by contract type and amount for
those derivatives contracts for which netting is permissible.
NET AMOUNTS OF
GROSS AMOUNTS RECOGNISED ASSETS
OFFSET IN THE PRESENTED IN THE
GROSS AMOUNTS STATEMENTS OF STATEMENT OF ASSETS
OF RECOGNISED ASSETS AND LIABILITIES AND LIABILITIES
DESCRIPTION ASSETS ($) ($) ($)
================== =============== ======================== =====================
Forward currency
contracts 704,827 (153,263) 551,564
================== =============== ======================== =====================
Total 704,827 (153,263) 551,564
================== =============== ======================== =====================
Net Amounts of
Gross Amounts Recognised LIABILITIES
Offset in the Presented in the
Gross Amounts Statements of Statement of Assets
of Recognised Assets and Liabilities and Liabilities
Description Liabilities ($) ($) ($)
================== ================= ======================== ========================
Forward currency
contracts (2,287,929) 153,263 (2,134,666)
================== ================= ======================== ========================
Total (2,287,929) 153,263 (2,134,666)
================== ================= ======================== ========================
There is no collateral for forward contracts.
The following table, at 31 December 2020, show the gross and net
derivatives assets and liabilities by contract type and amount for
those derivatives contracts for which netting is permissible.
NET AMOUNTS OF
GROSS AMOUNTS RECOGNISED ASSETS
OFFSET IN THE PRESENTED IN THE
GROSS AMOUNTS STATEMENTS OF STATEMENT OF ASSETS
OF RECOGNISED ASSETS AND LIABILITIES AND LIABILITIES
DESCRIPTION ASSETS ($) ($) ($)
================== =============== ======================== =====================
Forward currency
contracts 14,711,590 (1,717,620) 12,993,970
================== =============== ======================== =====================
Total 14,711,590 (1,717,620) 12,993,970
================== =============== ======================== =====================
Net Amounts of
Gross Amounts Recognised LIABILITIES
Offset in the Presented in the
Gross Amounts Statements of Statement of Assets
of Recognised Assets and Liabilities and Liabilities
Description Liabilities ($) ($) ($)
================== ================= ======================== ========================
Forward currency
contracts (1,826,088) 1,717,620 (108,468)
================== ================= ======================== ========================
Total (1,826,088) 1,717,620 (108,468)
================== ================= ======================== ========================
There is no collateral for forward contracts.
The following table presents the impact of derivative
instruments on the Statement of Operations in conformity with US
GAAP.
FOR THE YEARED FOR THE YEARED
31 DECEMBER 2021 31 DECEMBER 2020
($) ($)
--------------------------------------- ------------------- ---------------------
Net realised gain on derivatives 13,249,047 16,710,613
--------------------------------------- ------------------- ---------------------
Net change in unrealised depreciation
on derivatives (14,468,604) (23,564,875)
--------------------------------------- ------------------- ---------------------
Total (1,219,557) (6,854,262)
--------------------------------------- ------------------- ---------------------
Primary underlying risks (credit risk, liquidity risk and market
risk) associated with the derivatives are explained in Note 4.
The Company presents the gain or loss on derivatives in the
Statement of Operations.
The net realised and unrealised gain/(loss) on investments shown
in the Statement of Operations For the year ended 31 December 2021
by type of investment is as follows:
FOR THE YEARED 31 DECEMBER 2021
(EXPRESSED IN U.S. DOLLARS)
----------------------------------------- -------------
Realised gain on investments 8,250,003
----------------------------------------- -------------
Realised loss on investments (4,585,587)
----------------------------------------- -------------
3,664,416
----------------------------------------- -------------
Realised gain on derivatives 27,429,337
----------------------------------------- -------------
Realised loss on derivatives (14,180,290)
----------------------------------------- -------------
13,249,047
----------------------------------------- -------------
Unrealised gain on investments 8,557,960
----------------------------------------- -------------
Unrealised loss on investments (11,767,523)
----------------------------------------- -------------
(3,209,563)
----------------------------------------- -------------
Unrealised gain on derivatives 2,568,251
----------------------------------------- -------------
Unrealised loss on derivatives (17,036,855)
----------------------------------------- -------------
(14,468,604)
----------------------------------------- -------------
Realised and unrealised gain on foreign
currency transactions 1,271,975
----------------------------------------- -------------
Realised and unrealised loss on foreign
currency transactions (1,566,388)
----------------------------------------- -------------
(294,413)
----------------------------------------- -------------
The net realised and unrealised gain/(loss) on investments shown
in the Statement of Operations for the year ended 31 December 2020
by type of investment is as follows:
FOR THE YEARED 31 DECEMBER 2020
(EXPRESSED IN U.S. DOLLARS)
----------------------------------------- -------------
Realised gain on investments 3,438,583
----------------------------------------- -------------
Realised loss on investments (26,936,918)
----------------------------------------- -------------
(23,498,335)
----------------------------------------- -------------
Realised gain on derivatives 84,143,012
----------------------------------------- -------------
Realised loss on derivatives (67,432,399)
----------------------------------------- -------------
16,710,613
----------------------------------------- -------------
Unrealised gain on investments 17,333,254
----------------------------------------- -------------
Unrealised loss on investments (6,107,525)
----------------------------------------- -------------
11,225,729
----------------------------------------- -------------
Unrealised gain on derivatives 30,702,956
----------------------------------------- -------------
Unrealised loss on derivatives (54,267,831)
----------------------------------------- -------------
(23,564,875)
----------------------------------------- -------------
Realised and unrealised gain on foreign
currency transactions 3,538,994
----------------------------------------- -------------
Realised and unrealised loss on foreign
currency transactions (1,252,104)
----------------------------------------- -------------
2,286,890
----------------------------------------- -------------
(f) Investment Transactions, Investment Income, Expenses and
Valuation
All investment transactions are recorded 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 first in, first
out ("FIFO") cost method.
The Company carries investments on its Statement of Assets and
Liabilities at fair value in accordance with US GAAP, with changes
in fair value recognised within the Statement of Operations in each
reporting period. Quoted investments are valued according to their
bid price as 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. Asset backed securities are
valued according to their bid price. 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 Directors believe 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
Investment Manager determines the valuation based on the Investment
Manager's fair valuation policy. The overall criterion for fair
value is a price at which the securities involved would change
hands in a transaction between a willing buyer and a willing
seller, neither being under compulsion to buy or sell and both
having the same knowledge of the relevant facts.
Consistent with the above criterion, the following criteria are
considered when applicable:
-- Valuation of other securities by the same issuer for which market quotations are available;
-- Reasons for absence of market quotations;
-- The credit quality of the issuer and the related economics;
-- Recent sales prices and/or bid and ask quotations for the security;
-- Value of similar securities of issuers in the same or similar
industries for which market quotations are available;
-- Economic outlook of the industry;
-- Issuer's position in the industry;
-- The financial information of the issuer; and
-- The nature and duration of any restriction on disposition of the security.
(g) Derivative Contracts
The Company may, from time to time, hold derivative financial
instruments for the purposes of hedging foreign currency exposure.
These derivatives are measured at fair value in accordance with US
GAAP, with changes in fair value recognised within the Statement of
Operations in each reporting year.
Depending on the product and the terms of the transaction, the
fair value of the over the counter (OTC) derivative products, such
as foreign exchange contracts, can be modelled taking into account
the counterparties' credit worthiness and using a series of
techniques, including simulation models.
Many pricing models do not entail material subjectivity because
the methodologies employed do not necessitate significant judgments
and the pricing inputs are observed from actively quoted markets.
The forward exchange contracts valued by the Company using pricing
models fall into this category and are categorised within level 2
of the fair value hierarchy.
The Company may enter into forward foreign currency contracts to
hedge against foreign currency exchange risk and for investment
purposes.
As shares are denominated in Pound Sterling and investments are
denominated in U.S. Dollars, Euro or Sterling, holders of any class
of shares are subject to foreign currency fluctuations between the
currency in which such shares are denominated and the currency of
the investments made by the Company. Consequently, the Investment
Manager seeks to engage in currency hedging between the U.S. Dollar
and any other currency in which the assets of the Company or a
class of shares is denominated, subject to suitable hedging
contracts such as forward currency exchange contracts being
available in a timely manner and on terms acceptable to the
Investment Manager, in their sole and absolute discretion.
Note 2 (e) details the gross and net derivative asset and
liability position by contract type and the amount for those
derivative contracts for which netting is permissible under US
GAAP. The derivative assets and liabilities have been netted where
an enforceable master netting arrangement is in place.
(h) Taxation
The Company is exempt from Guernsey tax on income derived from
non-Guernsey sources. However, certain of its underlying
investments may generate income that is subject to tax in other
jurisdictions, principally in the United States and typically by
way of withholding taxes levied on interest and other income paid
to the Company. During the year ended 31 December 2021, the Company
suffered withholding taxes of $42,398 (31 December 2020: $28,741).
As of 31 December 2021, withholding taxes receivable (reclaimed)
totalled $135,882 (31 December 2020: $93,484).
The changes to the Company's discount control mechanisms
approved by shareholders at the EGM resulted in the Company
becoming an "offshore fund" for UK tax purposes under the UK's
offshore fund rules. On 26 January 2021 the Company was approved by
HM Revenue and Customs ("HMRC") to be treated as a "reporting fund"
for these purposes with effect from the beginning of its accounting
period commencing 1 January 2020 and is required to calculate its
income in accordance with the relevant rules applicable to offshore
reporting funds and report its "excess reportable income" to
shareholders. This can be found on the Company's website.
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 has 50% or higher chance 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. This policy also provides guidance on
thresholds, measurement, de-recognition, classification, interest
and penalties, accounting in periods, disclosure, and transition
that intends to provide better Financial Statements comparability
among different entities.
As of 31 December 2021, the Company has recorded no liability
for net unrecognised tax benefits relating to uncertain tax
positions it has taken or expects to take in future tax returns (31
December 2020: Nil)
(i) Dividends
Dividends are charged in the Statement of Changes in Net Assets
in the period in which the dividends are declared.
(j) Expenses
Operating expenses are recognised in the Statement of Operations
on an accruals basis. Operating expenses include amounts directly
or indirectly incurred by the Company as part of its
operations.
(k) Share capital, share buybacks and treasury shares
Any costs incurred by a share buyback and by a sale of shares
held in treasury will be charged to that share class. Costs
directly attributable to the issue of new shares (that would have
been avoided if there had not been a new issue of new shares) are
written off against the value of the ordinary share premium.
Dividends paid on the ordinary shares are recognised in the
Statement of Changes in Equity. The Company's own shares can be
repurchased and held in treasury to be reissued in the future or
subsequently cancelled. Holders of ordinary shares are entitled to
attend, speak and vote at general meetings of the Company. Each
ordinary share (excluding shares in treasury) carries one vote.
Shares held in treasury do not carry voting rights.
NOTE 3 - AGREEMENTS AND RELATED PARTIES TRANSACTIONS
Related Party Agreements
Investment Management Agreement
The Board is responsible for managing the business affairs of
the Company but delegates certain functions to the Investment
Manager under the Investment Management Agreement (the "Agreement")
dated 18 March 2011.
The Manager of the Company is Neuberger Berman Europe Limited
(which is a related party), an indirectly wholly owned subsidiary
of NB Group. On 17 July 2014, the Company, the Manager and
Neuberger Berman Investment Advisers LLC (which was the
Sub-Investment Manager) made certain classification amendments to
the Agreement for the purposes of the AIFM Directive.
The Sub-Investment Management Agreement was terminated on 17
July 2014 and the Sub-Investment Manager was appointed as the AIFM
per the amended and restated Investment Management Agreement
("IMA") dated 17 July 2014. The Manager, Neuberger Berman Europe
Limited, was appointed under the same agreement. In accordance with
the terms of the IMA, the Manager shall pay a fee to the AIFM out
of the Investment Management fee received from the Company. The
Company does not pay any fees to the AIFM . On 31 December 2017,
the Company entered into an Amendment Agreement amending the IMA in
respect of the manufacture of the Company's Key Information
Document by the AIFM, MiFID II, anti-money laundering and bribery,
cyber security and data protection. On 1 October 2019, the IMA was
amended to reflect a reduction in the Investment Manager's fee and
was amended again effective 8 September 2020 to reflect further
changes to the Investment Manager's fees.
The AIFM is responsible for risk management and the
discretionary management of the assets held in the Company's
portfolio and will conduct the day-to-day management of the
Company's assets (including uninvested cash). The AIFM is not
required to and generally will not submit individual investment
decisions for approval by the Board. The Manager provides certain
administrative services to the Company.
Until 7 September 2020, the Manager was entitled to a management
fee of 0.65% per annum of the Company's NAV. The IMA was amended on
8 September 2020 and the Investment Manager thereafter is entitled
to the following rates per annum of the Company's NAV:
On first GBP500m of the NAV 0.75%
On GBP500m - GBP750m of the NAV 0.70%
On 750m - GBP1bn of the NAV 0.65%
Any amount greater than GBP1bn of the NAV 0.60%
For the year ended 31 December 2021, the management fee expense
was $2,425,841 (31 December 2020: $2,819,518), of which $599,135
(31 December 2020: $567,605) was unpaid at the year end.
The Manager is not entitled to a performance fee.
Directors
The Directors are related parties and are remunerated for their
services at a fee of GBP40,000 per annum each (GBP50,000 for the
Chair). The Chair of the Audit and Risk Committee receives an
additional GBP6,000 for services in this role. The Chair of the
Management Engagement Committee and the Chair of the Remuneration
and Nomination Committee receive an additional GBP3,000 each per
annum and the Senior Independent Director receives an additional
GBP3,000 per annum. For the year ended 31 December 2021, the
Directors' fees and travel expenses amounted to $225,725 (31
December 2020: $216,256). Of these, $Nil were owing at the year-end
(31 December 2020: $Nil).
As at 31 December 2021, Mr Dorey (inc. spouse) and Mr Staples
held 245,671 and 45,000 Sterling Ordinary Shares in the Company
respectively (31 December 2020: Mr Dorey (inc. spouse) and Mr
Staples held 245,671 and 45,000 Sterling Ordinary Shares in the
Company respectively). Mrs Platts resigned as a Director on 14 June
2021. Ms. Duhot did not hold any shares in the Company at 31
December 2021 (31 December 2020: Nil). As at 31 December 2021 Mr
Dorey's wife held 80,671 Sterling Ordinary Shares (31 December
2020: 80,671 Sterling Ordinary Shares).
During the year ended December 2021, the Directors received the
following dividend payments on their shares held: Mr Dorey GBP7,722
(2020: GBP1,698); Mr Staples GBP2,106 (2020: GBP1,443) and Mr
Dorey's wife received GBP3,775 (2020: GBP3,351).
Neuberger Berman Europe Limited and Neuberger Berman Investment
Advisers LLC
The contracts with Neuberger Berman Europe Limited and Neuberger
Berman Investment Advisers LLC are classified as related party
transactions. Other than fees payable in the ordinary course of
business and the additional fees disclosed in Note 3, there have
been no material transactions with related parties, which have
affected the financial position or performance of the Company in
the financial period.
Significant Agreements
Administration, Custody and Company Secretary Agreement
Effective 1 March 2015, the Company entered into an
Administration and Sub-Administrator agreement with U.S. Bank
Global Fund Services (Guernsey) Limited ("Administrator") and U.S.
Bank Global Fund Services (Ireland) Limited ("Sub-Administrator"),
both wholly owned subsidiaries of U.S. Bancorp. This agreement was
subject to an amendment effective 1 October 2020. Under the terms
of the agreement, Sub-Administration services are delegated to U.S.
Bank Global Fund Services (Ireland) Limited.
For the year ended 31 December 2021, the administration fee was
$132,403 (31 December 2020: $237,953 ) of
which $10,096 (31 December 2020: $13,538) was unpaid at the year end.
Effective 22 April 2019, Sanne Fund Services (Guernsey) Limited
was appointed the Company Secretary and is entitled to an annual
fee of GBP80,000 plus out of pocket expenses . For the year ended
31 December 2021, the secretarial fees were $124,601 (31 December
2020: $119,184), of which $30,716 (31 December 2020: $27,339) was
unpaid at the year end.
Effective 1 March 2015, U.S. Bank National Association
("Custodian") became the Custodian of the Company. The Custodian
fees for the year ended 31 December 2021 were $41,907 (31 December
2020 : $51,671 ) and the amount owing to them was $16,801 (31
December 2020: $48,454 ) .
Effective 1 January 2020, the Company entered into an amendment
agreement to reduce the Administration and Custodian fees, which
was further amended effective 1 October 2020 to reflect further
reductions to the Administration fees.
Professional fees
Professional fees during the year were $659,534 ( 31 December
2020 : $1,155,669).
Registrar's Agreement
Link Market Services (Guernsey) Limited is the appointed
registrar of the Company. For the year ended 31 December 2021, the
Registrar's fees amounted to $95,667 ( 31 December 2020: $117,436).
Of these, $73,738 (31 December 2020: $25,769) was unpaid at the
year end.
Corporate Broker Agreement
Effective 1 January 2019, Numis Securities Limited were
appointed the Company's Corporate Broker and Financial Advisors. As
at 31 December 2021 Numis Securities Limited are entitled to an
annual retainer fee of GBP50,000 p.a. For the year ended 31
December 2021, the Corporate Broker and Financial Advisors' fees
amounted to $68,846 (31 December 2020: $89,726). Of these, $nil (31
December 2020: $nil) were unpaid at the year end.
NOTE 4 - RISK FACTORS
Market Risk
Market risk is the potential for changes in the value of
investments. Market risk includes interest rate risk, foreign
exchange risk and price risk.
Interest Rate Risk
Interest rate risk primarily results from exposures to changes
in the level, slope and curvature of the yield curve, the
volatility of interest rates and credit spreads. Floating rate
investments, such as senior secured loans, typically receive a
coupon, which is linked to a variable base rate, usually LIBOR or
EURIBOR. As such, income earned will be affected by changes in the
variable component albeit downward moves are likely to be capped by
the LIBOR/EURIBOR floors that are prevalent in the majority of
transactions. The Financial Conduct Authority announced in 2017 it
would not compel or persuade panel banks to make LIBOR submissions
after 2021.
The Company invests predominantly in floating rate investments;
however, it does have material exposure to fixed rate investments,
which are subject to interest rate risk through movements in their
market price when interest rates change. In preparation for the
transition from LIBOR to new reference rates, credit spread
adjustments had been worked out well ahead of the transition, so we
do not believe there to be any material valuation risk as a result
of the shift to a new reference rate (e.g., SOFR in the US and
SONIA in the UK). Basically, the concept of a credit spread
adjustment is, by design, intended to equalize the total coupon on
loans before and after the transition to ensure that no party
(borrower or lender) benefits simply from the conversion. Another
way to state this is that without a spread adjustment, there would
be some value transfer (likely from lenders to borrowers / issuers)
upon transition from LIBOR to SOFR- and SONIA-based rates. The
spread adjustment is only intended to be used for legacy debt
maturing after LIBOR is no longer used. New issues that use a SOFR-
or SONIA-based rate do not require a spread adjustment, since the
margin over the reference rate can be set at the appropriate level
at issuance. Moreover, we have documented the LIBOR-related
contract language for securities we hold that reference LIBOR.
Price Risk
Price Risk is the risk that the price of the security will fall.
The Investment Manager manages the exposure to price risk by
diversifying the portfolio.
Foreign Exchange Risk
Foreign Exchange Risk arises from various currency exposures,
primarily with respect to Sterling and Euro investments and share
issue proceeds. The Company makes use of hedging techniques, as
part of its risk management strategy, including but not limited to
the use of forward exchange contracts to mitigate its exposure to
this risk. These instruments involve market risk, credit risk, or
both kinds of risks. Risks arise from the possible inability of
counterparties to meet the terms of their contracts and from
movement in currency and interest rates.
Credit Risk
The Company may invest in a range of bank debt investments and
corporate and other bonds. Until such investments are sold or are
paid in full at maturity, the Company is exposed to issuer credit
risk, relating to whether the issuer will make interest and/or
principal payments on their debt obligations.
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 assets other than derivative financial
instruments were held by the Custodian. The Custodian segregates
the assets of the Company from the Custodian's own assets and other
Custodian clients' assets. The Investment Manager believes the risk
is low with respect to any losses as a result of this ring-fencing.
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 trades in over-the-counter ("OTC")
derivative instruments. 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.
Geographic Concentration 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.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to
meet its obligations as and when these become due. Liquidity risk
is managed by the Investment Manager 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 they
fall due.
Participation Commitments
With respect to the senior loans, the Company may: 1) invest in
assignments; 2) act as a participant in primary lending syndicates;
or 3) invest in participations. If the Company purchases a
participation of a senior loan interest, the Company would
typically enter into a contractual agreement with the lender or
other third party selling the participation, rather than directly
with the borrower. As such, the Company not only assumes the credit
risk of the borrower, but also that of the selling participant or
other persons positioned between the Company and the borrower. As
of 31 December 2021, there were no such outstanding participation
commitments in the Company.
Other Risks
Legal, tax and regulatory changes could occur that may adversely
affect the Company. The regulatory environment for alternative
investment companies is evolving, and changes in the regulation of
investment companies may adversely affect the value of investments
held by the Company or the ability of the Company to pursue its
trading strategies. The effect of any future regulatory change on
the Company could be substantial and adverse. The Board has
considered the specific risks faced by the Company as a result of
Brexit. At the portfolio level, the Board expects the impact of
Brexit to be limited given the hedging arrangements in place and
the robust investment process the Investment Manager has always
adopted and its positioning in U.S., better rated, performing
issuers and majority of investments being in the U.S. At the
Company level the impact could be felt more directly through
volatility of exchange rates. However, the Company seeks to
mitigate this by using hedging techniques as disclosed previously
in this document.
NOTE 5 - CONTINGENCIES
In the opinion of the Directors, there were no contingencies as
at year end.
NOTE 6 - SHARE CAPITAL
The share capital of the Company consists of an unlimited number
of Ordinary Shares of no par value, which upon issue the Directors
may classify as:
(i) U.S. Dollar Ordinary Shares, Sterling Ordinary Shares or
Euro Ordinary Shares or as shares of such other classes as the
Directors may determine;
(ii) B Shares of such classes denominated in such currencies as
the Directors may determine; and
(iii) C Shares of such classes denominated in such currencies as
the Directors may determine.
The rights attached to the above shares are one vote in respect
of each share held.
(iv) In respect of a Share of a class denominated in any
currency other than U.S. Dollars or Sterling held by the
shareholder, such number of votes per Share of such class as shall
be determined by the Directors in their absolute discretion upon
the issue for the first time of shares of the relevant class.
The Directors may effect distributions of capital proceeds
attributable to the Ordinary Shares to holders of Ordinary Shares
by issuing B Shares of a particular class to holders of Ordinary
Shares of a particular class pro-rata to their holding of Ordinary
Shares of such class.
The B Shares are issued on terms such that each B Share shall be
compulsorily redeemed by the Company shortly following issue and
the redemption proceeds paid to the holders of such B Shares on
such terms and in such manner as the Directors may from time to
time determine.
The Directors are authorised to issue C Shares of such classes
(and denominated in such currencies) as they may determine in
accordance with Article 4 and with C Shares of each such class
being convertible into Ordinary Shares of such class as the
Directors may determine at the time of issue of such C Shares.
The C Shares will not carry the right to attend and receive
notice of any general meetings of the Company, nor will they carry
the right to vote at such meetings.
The C Shares will be entitled to participate in a winding-up of
the Company or on a return of capital in relation to the C share
surplus as defined in the Prospectus.
The C Shares will be entitled to receive such dividends as the
Directors may resolve to pay to such holders out of the assets
attributable to such class of C Shares.
There were no U.S. Dollar Ordinary, Euro Ordinary Shares, B
Shares or C Shares in issue as at 31 December 2021 or as at 31
December 2020.
As at 31 December 2021, the Company's share capital comprised
323,268,152 Sterling Ordinary Shares ("NBMI") of no par value (of
which 76,083,114 were held in treasury). On 3 August 2020, the
Company compulsorily converted all U.S. Dollar Ordinary Shares into
Sterling Ordinary Shares and subsequently closed the U.S. Dollar
Share Class. Further, in tandem with the proposals made at the EGM
held on 8 September 2020, the Company offered to its investors a
cash exit offer (the meaning of which is given in the EGM
Circulated dated 17 August 2020 available on the Company's website)
and redeemed 40% of the issued share capital effective 8 September
2020 to those investors who had elected to participate in the cash
exit offer.
Sterling
FROM 1 JANUARY 2021 TO 31 DECEMBER 2021 Ordinary Shares
----------------------------------------- -----------------
Balance as at 1 January 2021 247,185,038
------------------------------------------ -----------------
Balance as at 31 December 2021 (2) 247,185,038
------------------------------------------ -----------------
U.S. Dollar Sterling
FROM 1 JANUARY 2020 TO 31 DECEMBER 2020 Ordinary Shares Ordinary Shares
----------------------------------------- ----------------- -----------------
Balance as at 1 January 2020 27,711,386 433,276,307
----------------------------------------- ----------------- -----------------
Monthly conversions(1) (1,649,207) 1,372,976
----------------------------------------- ----------------- -----------------
Compulsory Conversion (24,156,179) 19,487,060
----------------------------------------- ----------------- -----------------
Share buybacks (1,906,000) (206,951,305)
----------------------------------------- ----------------- -----------------
Balance as at 31 December 2020 (2) - 247,185,038
----------------------------------------- ----------------- -----------------
(1) The Company offered a monthly conversion facility pursuant
to which shareholders may elect to convert some or all of their
shares of a class into shares of any
other class until the mandatory conversion on 31 July 2020.
(2) Balance of issued shares (less Treasury shares) used to
calculate NAV per share.
Treasury Shares
As at 31 December 2021, the Company held the following shares in
treasury:
31 DECEMBER 31 DECEMBER
2021 2020
============================= ============ =============
Sterling Ordinary Treasury
Shares (1)
============================= ============ =============
Opening number of shares 76,083,114 75,000,000
============================== ============ =============
Shares bought into Treasury - 1,083,114
============================== ============ =============
Shares sold or cancelled - -
from Treasury
============================= ============ =============
Closing number of shares 76,083,114 76,083,114
============================== ============ =============
(1) The Company has an approved share buyback programme and may
elect to buyback ordinary shares at certain times during the year
either for cancellation or to be held as Treasury shares at the
absolute discretion of the Directors. There were no shares which
were bought back during the year ended 31 December2021.
The Computation for earnings per share for the years ended 31
December 2021 and 31 December 2020 are as follows:
31 DECEMBER 31 DECEMBER
2021 2020
========================================== ============== =============
Net increase in net assets resulting
from operations GBP11,283,207 GBP1,059,758
========================================== ============== =============
Divided by weighted average shares
outstanding for
Sterling Ordinary Shares 247,185,038 353,677,735
=========================================== ============== =============
Earnings per share for Sterling Ordinary
Shares GBP0.0456 GBP0.0030
=========================================== ============== =============
Note 7 - FINANCIAL HIGHLIGHTS
Sterling
Ordinary ShareS as at
31 DECEMBER 2021 31 DECEMBER 2021 (GBP)
======================================= ========================
Per share operating performance
--------------------------------------- ------------------------
NAV per share at the beginning of the
year 0.9394
--------------------------------------- ------------------------
Income from investment operations
(a)
--------------------------------------- ------------------------
Net income per share for the year 0.0488
--------------------------------------- ------------------------
Net realised and unrealised loss from
investments (0.0022)
--------------------------------------- ------------------------
Foreign currency translation gain 0.0076
--------------------------------------- ------------------------
Total gain from operations 0.0542
--------------------------------------- ------------------------
Distributions per share during the
year (0.0507)
--------------------------------------- ------------------------
NAV per share at the end of the year 0.9429
--------------------------------------- ------------------------
NAV Total return 1, (b) 5.89%
--------------------------------------- ------------------------
Ratios to average net assets (b)
--------------------------------------- ------------------------
Net investment income 5.13%
--------------------------------------- ------------------------
On-Going Charges 1.12%
--------------------------------------- ------------------------
(a) The weighted average number of shares outstanding for the
year was used for calculation. See note 6 also.
(b) An individual shareholder's return may vary from these
returns based on the timing of the shareholder's investments in the
Company.
(1) The NAV total return is the % of change in NAV per share
from the start of the year. It assumes that dividends paid to
shareholders are reinvested at NAV at the time the shares are
quoted ex-dividend.
Sterling
Ordinary ShareS as at
31 DeCEMBER 2020 31 DECEMBER 2020 (GBP)
======================================= ========================
Per share operating performance
--------------------------------------- ------------------------
NAV per share at the beginning of
the year 0.9594
--------------------------------------- ------------------------
Share buybacks and share swaps during
the year 0.0336
--------------------------------------- ------------------------
Income from investment operations
(a)
--------------------------------------- ------------------------
Net income per share for the year
(b) 0.0365
--------------------------------------- ------------------------
Net realised and unrealised loss from
investments (0.0230)
--------------------------------------- ------------------------
Foreign currency translation (0.0221)
--------------------------------------- ------------------------
Total gain from operations (0.0086)
--------------------------------------- ------------------------
Distributions per share during the
year (0.0450)
--------------------------------------- ------------------------
NAV per share at the end of the year 0.9394
--------------------------------------- ------------------------
NAV Total return 1, (b) 2.99%
--------------------------------------- ------------------------
Ratios to average net assets (b)
--------------------------------------- ------------------------
Net investment income 4.09%
--------------------------------------- ------------------------
On-Going Charges 1.11%
--------------------------------------- ------------------------
(a) The weighted average number of shares outstanding for the
year was used for calculation. See note 6 also.
(b) An individual shareholder's return may vary from these
returns based on the timing of the shareholder's investments in the
Company.
(1) The NAV total return is the % of change in NAV per share
from the start of the year. It assumes that dividends paid to
shareholders are reinvested at NAV at the time the shares are
quoted ex-dividend.
NOTE 8 - RECONCILIATION OF NET ASSET VALUE TO PUBLISHED NAV
STERLING ORDINARY
SHARES GBP
=============================================== =================
Published net assets at 31 December 2021 (US$) 317,803,498
=============================================== =================
Valuation adjustments (US$) (2,122,351)
=============================================== =================
Net assets per Financial Statements (US$) 315,681,147
=============================================== =================
NOTE 9 - SUBSEQUENT EVENTS
Dividends declared post year-end amounted to GBP0.01245 per
share.
Directors have been monitoring the developments in Ukraine and
undertook a detailed review of the portfolio in March 2022. The
Company has no investments or portfolio companies headquartered or
with material operations in Russia, Ukraine or neighbouring
countries. We therefore do not expect any material impact on the
Company but will continue to monitor closely.
The Directors have evaluated subsequent events up to 20(th)
April 2022, which is the date that the Financial Statements were
available to be issued and have concluded there are no further
items that require disclosure or adjustment to the Financial
Statements.
APPIX | FUND 3.3 Disclosure Addendum to the 2021 Annual Report
(unaudited)
FUND 3.3 Disclosure Addendum to the 2021 Annual Report
The following disclosures to investors are required as per
Section 3.2 'Investor Information' and Section 3.3 "Annual report
of an AIF" of the FCA Investment Funds sourcebook (" FUND 3.2 " and
" FUND 3.3 ").
Changes to FUND 3.2.2 R Disclosures
FUND 3.2.2 R (previously Article 23(1) of Directive 2011/61/EU
on Alternative Investment Fund Managers Directive ("AIFMD"))
requires certain information to be made available to investors in
alternative investment funds ("AIFs") in the United Kingdom before
they invest and requires that material changes to this information
be disclosed in the annual report of each AIF.
There have been no material changes (other than those reflected
in the financial statements) to this information requiring
disclosure..
Leverage
For the purposes of this disclosure, leverage is any method by
which an AIF's exposure is increased, whether through borrowing of
cash or securities, or leverage embedded in foreign exchange
forward contracts or by any other means.
FUND 3.2.6 provides that AIFM's must periodically disclose the
total amount of leverage employed by that AIF. Regulation (EU)
2013/231 is part of retained law in the United Kingdom and requires
that each leverage ratio be expressed as the ratio between an AIF's
exposure and its net asset value ("NAV"), and prescribes two
required methodologies, the gross methodology and the commitment
methodology, for calculating such exposure. Using the
above-mentioned methodologies, the leverage of the Fund as at 30
September 2021 is disclosed below:
Leverage calculated pursuant to the gross methodology: 1.16
Leverage calculated pursuant to the commitment methodology: 1.18
Liquidity and risk management systems and profile
Current risk profile risk management systems
The portfolio managers and risk management professionals of
Neuberger Berman Investment Advisers LLC (the "AIFM") regularly
review the investment performance and the portfolio composition of
the Fund in the light of the Fund's investment objective, policy
and strategy; the principal risks and investment or economic
uncertainties that have been identified as relevant to the Fund;
internal risk measures and the interests and profile of
investors.
The AIFM assesses the Fund's current and prospective need for
liquidity on an on-going basis and ensures that liquidity is
available when required. The risk profile of the Fund calculated by
the AIFM was as follows:
Market risk profile
The market risk indicators calculated by the AIFM as at 30
September 2021 are listed in the table here below:
< 5 yrs 5 - 15 > 15 yrs Risk measure description
yrs
========= ======== ======== ========= ===============================
Net DV01 USD USD 0 Change of 1 bps of rate
18,324 22,909
========= ======== ======== ========= ===============================
Net CS01 USD USD 0 Change of 1 bps for spread
63,061 21,817
========= ======== ======== ========= ===============================
The expected annual investment return
/ IRR in normal market conditions
(in %) 0
Historical Monte Carlo Simulation Parametric
Simulation Simulation
======== ============ ======================= ============
VAR (1) N/A 5 % N/A
======== ============ ======================= ============
1 Value at Risk
Counterparty risk profile
The top five counterparties to which the Fund had the greatest
mark-to-market net counterparty credit exposure, measured as a % of
the NAV of the Fund are listed in the table below:
Ranking Name of Counterparty NAV percentage of
the total exposure
value of the counterparty
============================= ======================= ===========================
First counterparty exposure US Bank 1.99
Second counterparty
exposure TRNTS 1.72
Third counterparty exposure Brock Holdings 1.70
Fourth counterparty
exposure Chamberlain Group 1.64
Fifth counterparty exposure Intelsat Jackson Hlgs 1.55
============================= ======================= ===========================
The top five counterparties that had the greatest mark-to-market
net counterparty credit exposure to the Fund, measured as a % of
the NAV of the Fund are listed in the table below:
Ranking Name of Counterparty NAV percentage of
the total exposure
value of the counterparty
============================= ====================== ===========================
First counterparty exposure Westpac 0.61
Second counterparty
exposure RBC 0.05
Third counterparty exposure UBS 0.01
Fourth counterparty Goldman Sachs <0.01
exposure
Fifth counterparty exposure N/A N/A
============================= ====================== ===========================
Liquidity Profile
(a) Portfolio Liquidity Profile
In normal market conditions the portfolio can be liquidated as
follows:
50% within one day or less
44% within 2 to 7 days
6% within 8 to 30 days
The Fund had USD 10,912,888 unencumbered cash available to
it.
(b) Investor Liquidity Profile
Percentage of investor equity in the Fund that can be redeemed,
in normal market conditions, is as follows:
0.2 % within one day or less
1.23% within 2 to 7 days
4.62% within 8 to 30 days
12.26% within 31 to 90 days
18.39% within 91 to 180 days
63.3% within 181 to 365 days
(c) Investor Redemption
Does the Fund provide investors with withdrawal No
/ redemption rights in the ordinary course?
Report on Remuneration
The Neuberger Berman Compensation Committee is responsible for
the compensation practices within the Neuberger Berman group, and
Neuberger Berman also operates a structure throughout the group to
ensure appropriate involvement and oversight of the compensation
process, so that compensation within the group rewards success
whilst reflecting appropriate behaviours.
Neuberger Berman recognises the need to ensure that compensation
arrangements do not give rise to conflicts of interest, and this is
achieved through the compensation policies as well as through the
operation of specific policies governing conflicts of
interests.
Neuberger Berman's compensation philosophy is one that focuses
on rewarding performance and incentivizing employees. Employees at
Neuberger Berman may receive compensation in the form of base
salary, discretionary bonuses and/or production compensation.
Investment professionals receive a fixed salary and are eligible
for an annual bonus. The annual bonus for an individual investment
professional is paid from a "bonus pool" made available to the
portfolio management team with which the investment professional is
associated. Once the final size of the available bonus pool is
determined, individual bonuses are determined based on a number of
factors including the aggregate investment performance of all
strategies managed by the individual (including the three-year
track record in order to emphasize long-term performance),
effective risk management, leadership and team building, and
overall contribution to the success of Neuberger Berman.
Neuberger Berman considers a variety of factors in determining
fixed and variable compensation for employees, including firm
performance, individual performance, overall contribution to the
team, collaboration with colleagues across the firm, effective
partnering with clients to achieve goals, risk management and the
overall investment performance. Neuberger Berman strives to create
a compensation process that is fair, transparent, and competitive
with the market.
A portion of bonuses may be awarded in the form of contingent or
deferred cash compensation, including under the "Contingent
Compensation Plan", which serves as a means to further align the
interests of employees with the interest of clients, as well as
rewarding continued employment. Under the Contingent Compensation
Plan a percentage of a participant's compensation is awarded in
deferred contingent form. Contingent amounts take the form of a
notional investment based on a portfolio of Neuberger Berman
investment strategies and/or a contingent equity award, and
Neuberger Berman believes that this gives each participant further
incentive to operate as a prudent risk manager and to collaborate
with colleagues to maximise performance across all business areas.
The programs specify vesting and forfeiture terms, including that
vesting is normally dependent on continued employment and
contingent amounts can be forfeited in cases including misconduct
or the participants participating in detrimental activity.
The proportion of the total remuneration of the staff of the
AIFM attributable to the Fund, calculated with reference to the
proportion of the value of the assets of the Fund managed by the
AIFM to the value of all assets managed by the AIFM, was $520,517
representing $100,867 of fixed compensation and $419,650 of
variable compensation. There were 1,349 members of staff of the
AIFM who shared in the remuneration paid by the AIFM.
Compensation by the AIFM to senior management and staff whose
actions had a material impact on the risk profile on the Fund in
respect of 2021 was $375,978,168 in relation to senior management
and $1,226,796 in respect of 'risk takers'. The compensation figure
for senior management has not been apportioned, while the
compensation figure for risk takers has been apportioned by
reference to the number of AIFs whose risk profile was materially
impacted by each individual staff member.
Neuberger Berman Investment Advisers LLC
20 April 2022
APPIX | Alternative Performance Measures (APMs)
Alternative Performance Measures (APMs)
In accordance with ESMA Guidelines on Alternative Performance
Measures ("APMs") the Board has considered what APMs are included
in the Annual Report and Financial Statements which require further
clarification. An APM is defined as a financial measure of
historical or future financial performance, financial position, or
cash flows, other than a financial measure defined or specified in
the applicable financial reporting framework. APMs may not have a
standard meaning prescribed by US GAAP and therefore may not be
comparable to similar measures presented by other entities. APMs
included in the Annual Report and Financial Statements are deemed
to be as follows:
Alternative PURPOSE and/or description CalculatioN
performance
measures
================== ===================================== =====================================
Net Asset Value The total return is the Opening NAV per share (A)
("NAV") total % of change in NAV per Closing NAV per share (B)
return share from the start of Daily NAV Movement (C)
the year. It assumes that = (B-A/A)
dividends paid to shareholders
are reinvested at NAV at Dividend to date(1) = D
the time the shares are Reinvested Dividend (E)
quoted ex-dividend. = (1+C)*D
NAV Total Return = ((B+E)-A)/A
(1) Monthly dividends
added on ex-date.
================== ===================================== =====================================
(Discount) The share price of an Investment NAV per share(2) (A)
or Premium Company is derived from Quoted Share price per
to NAV buyers and sellers trading share(2) (B)
the company's shares on
the stock market. This (Discount) or Premium
price is not identical = (B-A)/A
to the NAV. If the share
price is lower than the (2) As at 31 December
NAV per share, the shares 2021
are trading at a discount.
This could indicate that
there are more sellers
than buyers. Shares trading
at a price above the NAV
per share, are said to
be at a premium. This is
expressed as a percentage.
================== ===================================== =====================================
On-going charges On-going Charges (formerly Annualised ongoing charges
known as Total Expense Ratio (A)
[TER]) are calculated using Average undiluted net asset
the AIC Methodology, which value in the period (B)
is a measure, expressed
as a percentage of NAV, Ongoing charges (%) = (A)/(B)
of the regular, recurring
costs of the Company. "On-going
charges are those expenses
of a type which are likely
to recur in the foreseeable
future, whether charged
to capital or revenue, and
which relate to the operation
of Company, excluding the
costs of acquisition/disposal
of investments, financing
charges and gains/losses
arising on investments.
Ongoing charges are based
on costs incurred in the
year as being the best estimate
of future costs".
================== ======================================= =====================================
Current Gross The Company's Current Gross Coupon (A)
Portfolio Yield Portfolio Yield is a market-value Current security price (B)
weighted average of the Relative weight of security
current yields of the holdings = security market value/portfolio
in the portfolio, calculated market value = (C)
as the coupon (base rate
plus spread) divided by Current Gross Portfolio Yield
current price. The calculation = [(A/B)*C]
does not take into account
any fees, Company's expenses
or sales charges paid, which
would reduce the results.
================== ======================================= =====================================
12 month rolling The rolling 12 month dividend Sum of Monthly Dividends (A)
dividend yield yield is based on the dividends Share price 31 December 2021
declared in respect of the (B)
12 months to 31 December
2021 and share price as Rolling Dividend Yield = (A)
at 31 December 2021. / (B)
================== ======================================= =====================================
Yield to Maturity The Company's Current Yield Number of years to maturity
to Maturity (YTM) is a market-value of security (n)
weighted average of the Coupon (A)
current yields of the holdings Current security price (B)
in the portfolio, The YTM Face value, security market
is the annual return rate value or par value (C)
anticipated on a security Relative weight of security
if held until it matures. = security market value/portfolio
market value = (D)
YTM= [(A +C-B)*D]
n
C+B
2
================== ======================================= =====================================
Share Price The share price total return Opening Share Price per share
Total Return is the % of change in Share (A)
Price from the start of Closing Share Price per share
the year until the end of (B)
the year. It assumes that Daily Share Price Movement
dividends paid to shareholders (C) = (B-A/A)
are reinvested at the share
price at the time the shares Dividend to date(1) = D
are quoted ex-dividend. Reinvested Dividend (E) =
(1+C)*D
Share Price Total Return =
((B+E)-A)/A
(1) Monthly dividends added
on ex-date.
================== ======================================= =====================================
ADDITIONAL INFORMATION | Contact Details
Registrar
Link Market Services
(Guernsey) Limited
UK Transfer Agent
Link Asset Services
34 Beckenham Road
Beckenham
Kent
BR3 4TU
United Kingdom
Shareholders holding
shares directly and
not through a broker,
saving scheme or ISA
and have queries in
relation to their shareholdings
should contact the
Registrar on +44 (0)371
664 0445. Calls are
charged at the standard
geographic rate and
will vary by provider.
Calls outside the United
Kingdom will be charged
at the applicable international
rate. Lines are open
between 9 a.m. to 5:30
p.m. (excluding bank
holidays). Shareholders
can also access their
details via Link's
website:
www.signalshares.com
Contact Details Full contact details
of the Company's advisers
Directors and Manager can be
found on the Company's
Rupert Dorey - Chair Designated Administrator website.
Laure Duhot
David Staples U.S. Bank Global Fund
Services (Guernsey)
All c/o the Company's Limited
registered office.
Custodian and Principal
Registered Office Bankers
Sarnia House US Bank National Association
Le Truchot
St Peter Port Sub-Administrator
Guernsey
GY1 1GR U.S. Bank Global Fund
Services (Ireland)
Company Secretary Limited
Sanne Fund Services Financial Adviser and
(Guernsey) Limited Corporate Broker
Solicitors to the Company Numis Securities Limited
(as to English law
and U.S. securities Alternative Investment
law) Fund Manager
Herbert Smith Freehills Neuberger Berman Investment
LLP Advisers LLC
Advocates to the Company Manager
(as to Guernsey law)
Neuberger Berman Europe
Carey Olsen Limited
ADDITIONAL INFORMATION | Shareholder Information
Shareholder Information
Website
Information relating to the Company can be found on the Company's
website: www.nbgmif.com
The contents of websites referred to in this document are not
incorporated in to, nor do they form part of, this report.
Annual Reports
Copies of the Company's annual reports may be obtained from
the Company Secretary or by visiting https://www.nbgmif.com
under the Investor Information section.
Net Asset Value Publication
The NAV is published daily. It is calculated at the close of
business each day and notified to the London Stock Exchange
the next business day. It can also be found on the Company's
website.
Company Numbers
Sterling Ordinary Shares
LSE ISIN code: GG00B3KX4Q34
Bloomberg code: NBMI:LN
Legal Entity Identifier
549300P4FSBHZFALLG04
Association of Investment Companies
The Company is a member of the Association of Investment Companies.
Contact details are as follows:
+44 (0)20 7282 555
enquiries@theaic.co.uk
www.theaic.co.uk
Registrar
The Registrar provides an on-line and telephone share dealing
service to existing shareholders who are not seeking advice
on buying or selling. This service is available at www.linksharedeal.com
or by phoning +44(0)371 664 0445. Calls cost 12p per minute
plus network charges +44(0)20 3367 2699 (from outside the UK).
Lines are open 8 a.m. to 4:30 p.m. Monday to Friday (excluding
UK bank holidays).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
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END
FR BKKBNDBKBQQB
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