REG - NB Global Mthly Inc. - Annual Financial Report
17/04/2024 07:01
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RNS Number : 8752K NB Global Monthly Income Fund Ltd 17 April 2024
NB GLOBAL MONTHLY INCOME FUND LIMITED
2023 ANNUAL REPORT
ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
COMPANY OVERVIEW | Features
Features
NB Global Monthly Income Fund Limited (the "Company" or "Fund")
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
Prior to the passing of shareholder resolutions at the Company's extraordinary
general meeting held on 27 January 2023 (the "Shareholder Resolutions"), the
Company's investment objective had been to target consistent levels of monthly
income, whilst seeking to preserve or increase investors' capital. Following
the passing of the Shareholder Resolutions, the Company's investment objective
is now is to undertake a managed wind-down of its portfolio ("Managed
Wind-down") and to realise all existing assets in the Company's portfolio in
an orderly manner. Details of the Company's investment objective and
investment policy can be found on the Company's website, www.nbgmif.com
(http://www.nbgmif.com) .
Wind-down Strategy
The Company pursues its investment objective by effecting an orderly
realisation of its assets and making timely returns of capital to
Shareholders, by way of several capital distributions. The Company aims to
sell its assets, including both liquid and less liquid assets, in a manner
that will optimise Shareholder value.
The Company has ceased to make any new investments or to undertake capital
expenditure except where, in the opinion of the Board and the Investment
Manager:
· the investment is a follow-on investment made in connection with
an existing asset in order to comply with the Company's pre-existing
obligations; or
· failure to make the follow-on investment may result in a breach
of contract or applicable law or regulation by the Company; or
· the investment is considered necessary to protect or enhance the
value of any existing investments or to facilitate orderly disposals.
Following the passing of the Shareholder Resolutions, the Company has executed
and continues to execute the Managed Wind-down. The Board has implemented the
Managed Wind-down by realising the assets comprised in the Portfolio in an
orderly manner and has made capital distributions to Shareholders during the
Managed Wind-down period as and when sufficient cash was realised to make it
economically expedient to make a distribution. At an appropriate point in the
future, proposals to place the Company into liquidation will be put to
Shareholders.
Any cash received by the Company as part of the realisation process, but prior
to its distribution to Shareholders, will be held by the Company as cash on
deposit and/or as cash equivalents. Regular distributions of proceeds from the
realisation of assets have been made to Shareholders during the year as
follows:
Date of cash distribution of sale proceeds Number of shares redeemed % of shares redeemed since EGM vote of January 2023 Total amount distributed
27 March 2023 43,206,203 19.40% £34,997,024
31 May 2023 46,047,295 20.47% £36,939,140
13 July 2023 35,888,693 15.78% £28,477,678
26 September 2023 25,218,501 11.08% £20,000,000
27 November 2023 29,143,537 13.05% £23,539,233
Total 179,504,229 66.73% £143,953,075
Capital Structure
As at 31 December 2023, the Company's share capital comprised 42,182,147
Sterling Ordinary Shares ("NBMI") of no par value (of which nil were held in
treasury). On 20 February 2024, another compulsory redemption for £23,038,365
was announced at a price of 79.04 pence per share, and a redemption date of 19
March 2024. This resulted in approximately 69.10% of the existing share
capital being redeemed. As at 31 March 2024, the Company's Share Capital
comprised of 13,034,418 Sterling Ordinary Shares ("NBMI") of no par value (of
which nil 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.
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 ("FSB"), set out clear timelines to aid in market
participants' plans for a smooth transition from LIBOR to new risk-free
reference rates. The FSB 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 across currency
settings from 1 July 2023 onwards. 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
Following the approval of the proposals put forward at the Company's
extraordinary general meeting held on 27 January 2023, the last monthly
dividend of 0.90 pence per share was paid on 21 February 2023 in relation to
the month of January 2023, the Company moving to paying dividends on a
quarterly rather than monthly basis. The first such dividend of 1.48 pence per
share in relation to the quarter ended 31 March 2023 was paid on 23 May 2023.
A second dividend for the period ended 30 June 2023 was declared on 18 July
2023 for 2.30 pence per share and was paid on 16 August 2023. On 22 November
2023 a dividend of 2.10 pence per share was paid in relation to the quarter
ended 30 September 2023. No dividend was paid in relation to the quarter ended
31.12.2023 as there was insufficient net income to distribute.
The Board intends to pay quarterly dividends where there is sufficient net
income to do so. As the Managed Wind-down has progressed, the net income from
the Company's portfolio has greatly reduced. As a result of this reduction,
the Company may have insufficient net income to pay dividends as was the case
for the December quarter.
The rolling 12-month dividend yield (based on the dividends declared in
respect of the period and share price as at 31 December 2023) was 10.58%.
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.
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.
The Investment Manager has relied on seeks to manage risk through in-depth
credit research utilising proprietary analytical processes to manage risk,
over time. 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
(below investment grade corporate debt including both secured and unsecured
securities), investment grade corporate bonds (corporate bonds rated BBB- or
above by a third party ratings agency and with a lower risk of default than
non-investment grade bonds) and senior secured floating rate loans.
As at the date of this report, the portfolio has significantly changed, with a
greater proportion of the portfolio being less liquid and in turn higher
risk.
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.
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
Stressed credit investments may be 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 have
been under economic as well as regulatory pressure to sell.
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.
· Special situations: Refers to investments in stressed or
event-driven situations where the Investment Manager has identified
significantly under-valued assets either in loan or bond format.
'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
These are primary, non-sponsored private corporate loans issued through a
pan-European network of co-investing banks to borrowers. Such loans rank
senior in the capital structure and most contain financial covenants of the
borrower.
The table below summarizes the main characteristics of a representative loan:
Representative Loan Characteristics
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 Set Pari Passu, Cross Default, Negative Pledge, Change of Control, Max. Leverage,
Min. Equity, Interest Coverage
Typical Use of Proceeds Smaller acquisitions, extending debt maturity profile, strategic capex 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.
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 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.
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.
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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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, prior to
the wind down can be found in the Company's most recent prospectuses, which
are available on the Company's website at www.nbgmif.com
(http://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
During the Managed Wind-down, the Company has not and will not undertake
borrowing other than for short-term working capital purposes. No gearing was
employed in the year ended 31(st) December 2023 (31 December 2022: Nil). The
Company may use derivatives for hedging as well as for efficient portfolio
management, including managing currency risks between cash flows from its
assets and Sterling, being the currency of the Shares.
STRATEGIC REVIEW | Financial Highlights
Financial Highlights
Key Figures
(U.S. Dollars in millions, except per share data) As at 31 DECEmber 2023 As at 31 DECEMBER 2022
( ) (Liquidation basis)
Net Asset Value
- Sterling Ordinary Shares $41.2 $211.4
Net Asset Value per share
- Sterling Ordinary Shares £0.7656 £0.7926
Share price
- Sterling Ordinary Shares £0.6920 £0.7140
Discount to Net Asset Value Per Share (1)
- Sterling Ordinary Shares (9.61%) (9.92%)
Net investment income per share(3) £0.0591 £0.0636
( )
Earnings per share(3) £0.1303 (£0.2185)
Dividends per share (2)
- Sterling Ordinary Shares 7.32 pence 5.74 pence
Current Gross Portfolio Yield (1) 14.62% 10.51%
Annualised dividend yield (1)
- Sterling Ordinary Shares 10.58% 6.68%
NAV Total Return (1)
- Sterling Ordinary Shares 5.86% (10.09%)
Share Price Return (1)
- Sterling Ordinary Shares 7.14% (13.60%)
On-Going Charges (1)
- Sterling Ordinary Shares (2.44%) (1.22%)
1 Further explanation and definitions of the calculation is contained in the
section "Alternative Performance Measures".
2 Dividends are those that were declared in respect of the year.
3 Calculated based on full year investment income and earnings.
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 2023.
Managed Wind Down
The Board announced on 21 November 2022 that participation in a cash exit
offer in December 2022 would likely result in the Company's net asset value
falling below £150 million, which would have rendered the Company, in the
opinion of the Board, sub-scale. That probable outcome, combined with the
Company's persistent share price discount to NAV per share and feedback from
Shareholders, led the Board to believe that it was in the best interests of
the Company and its Shareholders as a whole that the Company be placed into a
Managed Wind-down.
An EGM notice and circular was published on 20 December 2022 seeking
Shareholder approval to realise the Company's portfolio in an orderly manner
and to distribute portfolio realisation proceeds to Shareholders over time.
This required amendment to the Company's Investment Objective and Policy and
articles of incorporation. On 27 January 2023, both resolutions as set out in
the EGM notice and circular were duly passed by a poll with over 98% in
favour.
In the period between 27 January and 31 December 2023, there were five
compulsory redemptions amounting to £143.9 million being distributed to
Shareholders. This was equivalent to approximately 79.8% of fund NAV as of 27
January 2023 which exceeded the previously stated target of having distributed
75% of that NAV in cash by the year-end.
On 20 February 2024, the Board announced its intention to distribute a further
£23 million to Shareholders. This compulsory redemption was made on 5 March
2024 and means that the Company has now distributed approximately 92.55% of
the NAV as of 27 January 2023.
Dividends
Following the results of the EGM, the Company moved to pay dividends quarterly
where there was sufficient net income to do so. As the Managed Wind-down has
progressed, the income from the Portfolio has reduced accordingly. As a result
of this reduction, the Company may have insufficient net income to pay
dividends, which was indeed the case for the December quarter.
In the period between 27 January and 31 December 2023, the Company distributed
approximately £6.36 million by way of dividends, equivalent to £0.0786 per
share.
Performance
For the year ended 31 December 2023, the NAV total return on ordinary shares
was 5.86%, during the same period the total share price return was 7.14%.
(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).
Portfolio Positioning
At 31 December 2023, the portfolio was principally exposed to Global Floating
Rate Loans (2%), Global High Yield bonds (12%), Private Debt (61%) and Special
situations (20%). Of this, 87% was invested in floating rate assets with the
remainder in fixed rate debt, with a combined duration of 0.25 years. In terms
of rating, 19% was single B and 77% was CCC, with the remainder being unrated.
At 15 April 2024, the last practicable date before publishing this report, the
portfolio was principally exposed to Equities (56%), Private Debt (29%) and
Special situations (15%).
Annual General Meeting ("AGM") Results
All the resolutions proposed at the AGM held on 6 June 2023 were duly passed
with no significant votes lodged against any resolution.
Discount Management
At the 2023 AGM shareholders approved the use of a buyback facility for up to
14.99% of the Company's Shares. The Board has not operated this facility.
Instead, following the Shareholder Resolutions passed at the EGM of 27 January
2023, capital has been returned to Shareholders via periodic compulsory
redemptions of shares. The Board intends to continue to keep Shareholders
informed of the redemption process at appropriate intervals.
Outlook
Since shareholders approved the managed wind down of the Company at the 27th
January 2023 EGM, around 92.5% of the Company's then NAV has been returned in
cash to shareholders by compulsory capital redemptions. The remaining NAV of
approximately $12.4 million consists of $5.6 million of cash, $1.5 million
sales awaiting settlement and $6.1 million in ten discrete investments less
$0.8 million of liabilities as at 15 April 2024. The remaining investments
have very limited liquidity and the Board cannot accurately determine when or
how much they can be realised for. The Board is conscious that the ongoing
costs of maintaining a listed vehicle is prohibitive for anything other than a
short period of time. For this reason the Board is considering its options
including putting forward for shareholder approval resolutions to delist the
Company from the LSE and place the Company in the hands of a liquidator.
Thank you for your continued support
Rupert Dorey
Chairman
16 April 2024
STRATEGIC REVIEW | Investment Manager's Report
Investment Manager's Report
Market and Macroeconomic Environment
Non-investment grade credit markets finished the reporting period with strong
returns despite some volatility earlier in the year from a relatively
short-lived mini-banking crisis and uncertainty around economic growth and the
path of interest rates. The strong 2023 returns were boosted by risk-on
sentiment late in the year as markets priced in rate cuts for 2024 despite
resilient economic data. For calendar year 2023, high yield bond and loan
market returns were among the highest since 2019 and the Great Financial
Crisis, respectively. Yields declined across fixed income during the final
quarter of the year, primarily driven by a fall in 10-year U.S. Treasury
yields. The yield on U.S. 10-Year Treasuries ended December at 3.87%,
declining 71 basis points since the end of the third quarter and roughly flat
compared to the start of the start of the year. Yields on 10-year U.K. Gilts
and German Bunds also declined over the fourth quarter and were also down
compared to the beginning of 2023. Broadly, non-investment grade issuer
aggregate fundamentals of EBITDA growth, free cash flow, interest coverage and
leverage remain in somewhat favorable ranges and earnings generally came in
better-than-feared, but some lower-quality issuers have been experiencing
earnings pressure more recently.
The loan market saw very strong results over the reporting period driven by
higher base rates, resilient economic growth, lessening inflation pressures
and a late-year risk-on rally which propelled weighted average bid prices to
move up 379 basis points in the year to close at $96.23. Over the reporting
period, the Morningstar LSTA U.S. Leveraged Loan Index ("the LLI") returned
13.32% (in USD terms) and the Morningstar European Leveraged Loan Index ("the
ELLI") returned 13.42% (excluding currency). Lower quality loans in the LLI
outperformed the highest quality as securities rated BB, B and CCC and below
returned 10.18%, 14.82% and 17.54%, respectively. The Morningstar U.S.
Leveraged Loan 100 Index-a measure of the largest and most liquid loan
issuers-returned 13.20%, slightly underperforming the overall index. The
Second Lien Loans index returned 22.74% over the period.
The global high yield bond market also had strong returns in 2023 as credit
spreads tightened materially over the year. The ICE BofA Global High Yield
Constrained Index (Total Return, Hedged, USD) returned 12.97% for the full
year 2023. In global high yield, lower quality securities, such as those rated
CCC & below and B in the ICE BofA Global High Yield Index, outperformed
with returns of 17.70% and 14.18%, respectively, whereas BB securities were up
11.36%.
CLO debt spreads were meaningfully tighter in the final quarter of the year,
as economic data and statements from the Federal Reserve later in the year
indicated that there would be no further rate hikes, with the market
increasingly gravitating toward a "soft landing" economic scenario and the
potential for future rate cuts later in 2024. Secondary non-investment grade
CLO trading volumes declined 13% quarter-over-quarter. The CLO BB index gained
7.33% during the fourth quarter and was up 24.52% for the full year 2023.
Returns have been driven approximately two thirds by coupon income and one
third by price appreciation. As of the end of December, higher quality CLO BBs
were trading around S+675 in secondary markets. Despite macro and geopolitical
concerns through the year, we continue to be fundamentally confident in the
significant structural protection provided against credit losses in the
underlying loan portfolios. CLO structures in general, and CLO BBs in
particular, have showed themselves once again to be very robust.
Defaults still remain relatively low across non-investment grade credit but
have continued to move up from all-time lows reached in 2022. This trend in
defaults is consistent with relatively healthy balance sheets and solid
interest coverage despite rising borrowing costs. The trailing 12M
par-weighted default rate for the LLI as of year-end was 1.53%, up 5 basis
point from the prior month and 264 basis points lower than the September 2020
peak of 4.17%. In European loans, the trailing 12M par-weighted default rate
was 1.62%, up 19 basis point compared to the prior month and 100 basis points
lower than the October 2020 peak. Compared to the prior month, the share of
distressed issuers in the U.S. declined and were up slightly in the European
loan market. The distressed ratio was 4.54% for the LLI and 3.59% for the ELLI
in December, which compares to November's 5.34% and 3.17%, respectively. As of
December, the par weighted trailing 12-month U.S. high yield default rate was
2.08% unchanged from the prior month and up 124 basis points year to date.
While the default rate has risen off the lows in 2022, we expect default rates
in 2024 to remain in a range that is just below the long-term average. This
outlook is based on our bottom-up assessment of issuers and driven by the
higher-quality ratings mix in high yield (48% of issuers with credit ratings
of BB), less aggressive new issuance, fewer near-term maturities, as well as
an energy sector that is far healthier than in the past few cycles.
Performance 31 December 2022 to 31 December 2023
For the year ended 31 December 2023, the NB Global Monthly Income
Fund-Sterling Share Class GBP-returned 5.86%. (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 Diversified Financial Services, Technology
& Electronics and Healthcare sectors were the most significant drivers of
performance whilst holdings in the Packaging, Energy and Aerospace/Defence
sectors were the largest detractors from performance, albeit modest. The
Company's positioning in CCC, B and Not Rated issuers added the most to
performance whilst positioning in BB rated issuers added the least over the
period.
As at 31 December 2023, Private Debt was the portfolio's largest allocation at
48.9% followed by Distressed Debt at 12.4%, U.S. Loans at 6.8% and European
Loans at 1.4%. The Company's allocation to B rated credits was 15.6% whilst
the exposure to CCC & below rated issuers finished the period at 64.4%.
The overall Fund exposure to floating rate assets was at 88% at the end of the
reporting period, with an average duration of 0.25 years.
Portfolio Positioning
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As at 31 December 2023
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As at 31 December 2023
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As at 31 December 2022
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Outlook
We continue to believe that despite the strong performance of non-investment
grade markets over the past 12 months, valuations are still more than
compensating investors for the benign default outlook, and that these
instruments will continue to provide resilient income especially when compared
to other fixed income alternatives. We have already seen that the lagged
effects of monetary tightening and changes to consumer behaviour have helped
materially reduce the rate of inflation, which in time should allow central
banks to consider starting a cycle of monetary policy easing. Relatively
healthy consumer and business balance sheets and growing nominal GDP should
continue to remain supportive for issuer fundamentals, in our view.
Nevertheless, we remain conscious of the risks to the downside economically,
and as such, our analyst team remains focused on the specific credit
fundamentals of individual issuers, stress testing names for such a scenario.
We would also highlight that whilst incoming macroeconomic data and overall
credit cycle dynamics can move non-investment grade credit markets day-to-day,
we remain very focused on industry-specific trends and idiosyncratic risks to
individual issuers.
Neuberger Berman Investment Advisers
LLC Neuberger Berman Europe
Limited
16 April
2024
16 April 2024
STRATEGIC REVIEW | Portfolio Information
Portfolio Information
Top 10 Issuers as at 31 December 2023 (excluding cash)
ISSUER SECTOR NET REALISABLE VALUE ($) PORTFOLIO WEIGHT
BROCK HOLDINGS III LLC Business Equipment & Services 5,377,971 15.76%
CHARIOT BUYER LLC Building & Development 5,325,000 15.60%
IVANTI SOFTWARE INC Business Equipment & Services 2,263,083 6.63%
EG GROUP LTD Retailers (except food and drug) 2,001,377 5.86%
TEAM HEALTH HOLDINGS INC Health Care 1,770,202 5.19%
REDSTONE BUYER LLC Electronics/Electrical 1,497,648 4.39%
CONSTANT CONTACT INC Electronics/Electrical 1,275,000 3.74%
WOOF INTERMEDIATE INC Food Products 1,200,000 3.52%
CONVERGEONE HOLDINGS INC Electronics/Electrical 1,151,284 3.37%
MAVERICK BIDCO INC Electronics/Electrical 1,150,000 3.37%
Top 10 S&P Sector Breakdown
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Top 10 S&P Sector Breakdown
Key Statistics 31 DECEMBER 2023 31 DECEMBER 2022
Current Gross Portfolio Yield (1) 14.62% 10.51%
Number of Investments 34 231
Number of Issuers 27 193
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 significantly and to the detriment of the The Board receives regular reports from the Investment Manager on the
portfolio or the Company causing a credit or liquidity risk to crystallise. macroeconomic conditions and their effect on the health of the portfolio. The
approach to managing credit risk and liquidity risk is set out further below.
Credit Risk
This is the risk that the loan or bond of a particular Issuer does not perform The Investment Manager carried out extensive, independent due diligence on
as expected and either defaults on a payment or experiences a significant drop each asset, and has a particular focus on stable, performing credits that
in the secondary market value. evidence strong track records through previous economic cycles. Issuer size
was also considered and the Investment Manager continued 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 have been
discussed previously in this document.
Liquidity Risk
The risk that the Company will not be able to meet its obligations as and when Liquidity risk is managed by the Investment Manager, in conjunction with the
they fall due. 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. 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 from the Sub-Administrator, to aid monitoring of cash
liquidity.
Operational Risk
Disruption to, or the failure of either the Investment Manager's, Details of how the Board monitors the services provided by its major service
Administrator's or Sub- Administrator's accounting, dealings or payment providers and the key elements designed to provide effective internal control
systems, or the Custodian's records could prevent adequate safeguarding of the are explained further in the internal controls section of the Corporate
Company's assets, the accurate reporting or monitoring of the Company's Governance Report. The key service providers are contracted to provide their
financial position and the receipt or transmission of payments. services through qualified professionals and the Board receives regular
internal control reports from the Administrator and Sub-Administrator that
confirm compliance with service standards.
Furthermore, the Company must comply with the provisions of the Law and, since
its shares are listed on the Official List of the UK Listing Authority and
trade on the Main Market of the LSE, the Company is subject to the Financial The Board relies on its Company Secretary, the Administrator, Broker and other
Conduct Authority's ("FCA") Listing Rules and the Disclosure Guidance and professional advisers to ensure compliance with all relevant legislation and
Transparency Rules ("DTRs"). A breach of the legislation could result in the regulatory requirements.
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.
Concentration Risk
As the portfolio has shrunk and continues to shrink, the concentration risk
has increased markedly and will continue to do so.
As the Company is in wind-down this is an unmitigated risk associated with the
liquidation.
Heat Map of Principal Risks
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Principal Risks' Expected Direction of Change
RISK CATEGORY EXPECTED DIRECTION OF CHANGE
MACRO ECONOMIC CONDITIONS The impact of geopolitical and global macro events is unlikely to have a
material impact on the value of the company given the progress made on the
managed wind down.
LIQUIDITY RISK Moderately negative. 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. During the
Managed Wind-down, the liquidity of the underlying portfolio will reduce. The
Board is very focused, when making compulsory redemptions of Shares and
dividend payments, on ensuring that sufficient cash funds remain within the
Company to meet any liabilities
OPERATIONAL RISK No expected change. The Board is satisfied that entering the Managed Wind-down
will not impact this risk. The key service providers are all experienced in
effecting the wind-down of funds.
CREDIT & CONCENTRATION RISK As the portfolio shrinks, the credit and concentration risks de-facto will
increase.
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. 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, where possible, appropriate mitigating measures and controls are
agreed.
Going Concern
As a result of the Company being placed into managed wind-down on 27 January
2023, consideration was made to present these Financial Statements on the
liquidation basis of accounting in accordance with Accounting Standard Update
("ASU") 2013-07, "Presentation of Financial Statements (Topic 205) -
Liquidation Basis of Accounting. Factors such as the difference in valuation
of the Company's assets using the going concern and the liquidation bases, and
the movement in NAV due to accrual of costs to completion of liquidation were
considered. In relation to these Financial Statements, it was established that
the liquidation basis of accounting has a material impact on the information
disclosed. The Financial Statements have therefore been prepared on a
liquidation basis.
The Board, in consultation with the Investment Manager, anticipates that
within the next twelve months it will recommend to Shareholders that the
Company appoints a liquidator and the Company be placed into liquidation. The
Board expects that the Shareholders will approve such a recommendation. After
making enquiries of the Investment Manager and the Sub-Administrator, the
Directors are satisfied that the Company has adequate resources to discharge
its liabilities as they fall due for at least the period to the date of
appointment of a liquidator from the date these Financial Statements were
approved. Furthermore, the Directors anticipate that any liquidation will be a
solvent liquidation.
Viability Statement
In accordance with provision 8.2 paragraph 36 of the AIC Code of Corporate
Governance, published in February 2019 (the "AIC Code"), the Directors have
assessed the future prospects of the Company. The Board announced on 21
November 2022 that participation in the December Cash Exit offer would likely
result in the Company's net asset value falling below £150 million, rendering
the Company, in the opinion of the Board, sub-scale and therefore not viable
over the longer term. That probable outcome, combined with the Company's
persistent share price discount to NAV per share and recent feedback from
Shareholders, led the Board to believe that it was in the best interests of
the Company and its Shareholders as a whole that the Company be placed into a
managed wind-down. At the end of this process, the Board anticipates it will
put forward proposals to Shareholders to appoint a liquidator to liquidate the
Company. In making their assessment the Directors have considered the
Company's status as an investment entity, its investment objectives, the
principal and emerging risks it faces, its current position and the time
period over which its assets are likely to be realised, a two-year period
ending 31 December 2024.
The Directors have performed a quantitative and qualitative analysis that
included the Company's income, capital realisations and expenditure
projections during the remainder of the expected wind-down period. At the date
of this report, the Company has cash balances, net of liabilities of $4.8
million, with a further $1.5 million awaiting settlement. The Directors, in
coming to their decision as to the timing and quantum of the next compulsory
redemption of shares (the mechanism used to return capital to shareholders)
will retain sufficient cash to cover anticipated working capital requirements
together with a buffer to cover any unanticipated costs or delay in the
planned on-going Portfolio realisations under the Managed Wind-down. Despite
this caution, should a liquidity issue arise, it would still be possible to
defer future planned distributions and/ or raise cash from accelerated sales
from the Portfolio, albeit undesirable as they would likely be at prices lower
than planned.
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 remaining life, which is projected to be for the 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.
· Since the commencement of the Managed Wind-down, the Directors
regularly review the pace of trades made to sell down the portfolio and the
cash settlement of those trades. The Directors also consider when it is
economic to make returns to shareholders either by the compulsory redemption
of shares and/or the payment of dividends.
· As the portfolio reduces further to a small number of the less
liquid assets, the Board will look at optimising shareholders' returns,
weighing in the Company's operating costs against the merit of an accelerated
sale of the remaining of its assets at a discount to NAV.
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 £500 million: 0.75 per cent. of NAV per annum
Between £500 million and up to £750 million: 0.70 per cent. of NAV per annum
Between £750 million and up to £1 billion: 0.65 per cent. of NAV per annum
Above £1 billion: 0.60 per cent. of NAV per annum
Effective 27 January 2023 the IMA was further amended to reflect a reduction
in the Investment Manager's applicable fee above by 7.5 basis points until 50%
of the Company's assets by market value held as at the date of the EGM have
been realised and thereafter a reduction to the applicable fee above by a
further 7.5 basis points until all of the Company's assets have been realised.
Any existing asset held by the Company will be deemed to have been realised at
the date at which the contract for the sale of the asset is entered into, as
opposed to the date at which the Company receives the proceeds from the sale
of the asset.
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.
It has been negotiated with the Investment Manager that the requirement for
not less than 6 months' written notice shall not apply to any notice to
terminate served by the Company, following the appointment of a liquidator.
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 35 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 prior 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 Limited,
InLand Homes plc and ORPEA SA where she was part of the team which
successfully negotiated a multi-billion debt restructuring and rescue package
for the company. Laure currently serves as a Non-Executive Director of Primary
Healthcare Properties plc, Safestore plc and the Lifestory Group. She is also
the independent member on the CBRE-IM UK Investment Committee.
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 was also, until recently, a
director and audit committee chair of two other listed companies, Ruffer
Investment Company Limited and Baker Steel Resources Trust Limited. Until 31
December 2022, he was chair of the general partner companies of the main
global private equity funds advised by Apax Partners. He presently holds no
other listed company directorships.
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 2023 was as follows:
Sterling Ordinary
Shares
42,182,147(1)
(1) of which Nil 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 2022 was as follows:
Sterling Ordinary
Shares
297,767,735(2)
(2) of which 76,083,114 were held in treasury
On 24 April 2023 the Board cancelled all shares held at treasury.
The number of shares in issue as at 16 April 2024was as follows:
Sterling Ordinary
Shares
13,034,418(3)
(3) of which Nil were held in treasury
Share Repurchases
At the Annual General Meeting ("AGM") of the Company held on 6 June 2023, 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 2024.
Dividends and Dividend Policy
During the Managed Wind-down, the Company moved to paying dividends on a
quarterly rather than monthly basis, with the first such dividend being paid
in relation to the period ended 31 March 2023. The Board intends to pay
quarterly dividends where there is sufficient net income to do so. As the
Managed Wind-down has progressed, the income from the Portfolio has greatly
reduced. As a result of this reduction, the Company is likely to have
insufficient net income to pay dividends.
The below table sets out the dividends paid by the Company that were declared
in respect of 2023:
PERIOD DATE DECLARED PAYMENT DATE DIVIDEND PER STERLING SHARE
Excess reportable income for 2022 25 January 2023 21 February 2023 $0.0090
1 January 2023 to 31 January 2023 19 January 2023 14 February 2023 £0.0054
Quarter ended 31 March 2023 21 April 2023 23 May 2023 £0.0148
Quarter ended 30 June 2023 18 July 2023 16 August 2023 £0.023
Quarter ended 30 September 2023 25 October 2023 22 November 2023 £0.021
Substantial Share Interests
Based upon information deemed reliable as provided by the Company's registrar,
as at 10 April 2024, being the latest practicable date prior to publication of
this report, the following shareholders owned 5% or more of the issued shares
of the Company.
Number of Sterling Ordinary Shares Percentage of Share
Class (%)
SHAREHOLDER
BHISL Nominees Limited 1,254,073 9.62
BNY (OCS) Nominees Limited 655,843 5.03
Goldman Limited 811,150 6.22
JP Morgan Securities LLC 2,101,022 16.12
State Street Nominees Limited 943,286 7.24
Notifications of Shareholdings
In the year to 31 December 2023 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 of Sterling Ordinary Shares Percentage of total voting rights (%)(1)
SHAREHOLDER Date
Almitas Capital LLC 19 October 2023 9,684,934 10.03%
City of London Investment Management Company Limited 7 December 2023 2,017,068 4.78%
(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.
VOTING RIGHTS of Sterling Ordinary Shares Percentage of total
voting rights (%)(1)
SHAREHOLDER DATE
Almitas Capital LLC 11 January 2024 7,166,316 16.99%
(1) Calculated at time of announcement
Directorship Disclosures in Other Public Companies Listed on a Stock Exchange
Company Names Exchange(s)
Mrs Laure Duhot
Primary Healthcare Properties PLC London
Safestore plc London
Mr Rupert Dorey
Third Point Investors Limited London
Mr David Staples
None to disclose
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.
Under the terms of the Managed Wind-down, the Board and the Investment Manager
are committed to distributing as much of the available cash from the
realisation of assets as soon as reasonably practicable having regard to cost
efficiency and working capital requirements. Accordingly, redemptions have
been and will be made regularly but, in order to minimise the administrative
burden and costs of redemptions, not necessarily as soon as cash becomes
available. The return of cash to Shareholders pursuant to the Managed
Wind-down has and continues to be effected through the compulsory redemptions
of Shares in volumes and on dates to be determined at the Directors' sole
discretion. Shares will be redeemed from all Shareholders pro rata to their
existing holdings of Shares on the relevant record date for any given
Redemption Date. The Directors are authorised to make such redemptions under
the Articles of Incorporation of the Company (the "Articles").
Redemptions of Shares will become effective on each redemption date, being a
date chosen at the Directors' absolute discretion, as determined by the
Directors to be in the best interests of the Company and Shareholders as a
whole. In determining the timing of any Redemption Date, the Directors will
take into account the amount of cash available for payment of redemption
proceeds and the costs associated with such redemption. The Shares redeemed
will be the relevant percentage of the Shares registered in the names of
Shareholders on the record date of the redemption. Shareholders will receive
the redemption price per Share, being a value equal to the NAV per Share at
the Net Asset Value Date, in respect of each of their Shares redeemed
compulsorily.
The Board intends to maintain the Company's listing and the trading of its
Shares on the Main Market of the LSE for as long as the Directors believe to
be practicable during the Managed Wind-down period, subject to the ability of
the Company to continue to comply with its obligations under the Listing Rules
(including the obligation to ensure that a sufficient number of its Shares are
in public hands (as such phrase is used in current Listing Rule 6.1.19(3) R)).
There are, however, significant costs to the Company in maintaining the
listing. The cost efficiency of retaining the Company's listing will continue
to be monitored and reviewed by the Board on an ongoing basis. The Board may
propose a cancellation of the Company's listing before it ceases to comply
with the Listing Rules, although any such proposal will be subject to the
approval of Shareholders. In the event that the Company can no longer satisfy
the continuing obligations for listing set out in the Listing Rules (including
if the percentage of Shares held in public hands falls below 10 per cent. of
the total number of issued Shares), the Directors shall immediately notify the
UK FCA, which may suspend the listing of the Shares pursuant to Listing Rule
5. Following Shareholder approval, the listing would then be cancelled.
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.
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. (http://www.nb.com.)
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
(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
(http://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 2023 (2022 - none), nor does it have
responsibility for any other emissions producing sources.
Gender Metrics
The Board consists of two men and one woman (33% female representation) as at
31 December 2023. More information on the Board's consideration of diversity
is given in the Corporate Governance Report.
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 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. The Board respects and welcomes the views of all
stakeholders. Any queries or areas of concern regarding the Company's
operations can be raised via 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 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 ad hoc portfolio data to be provided to the Shareholders from
time-to-time during the Managed Wind-down period as appropriate.
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 the 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 is
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
16 April 2024
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
(http://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 2023, 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
2023):
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.
AUDIT AND RISK COMMITTEE Management Engagement Committee Remuneration and Nomination 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 governance over the appropriateness of the To review performance of all service providers (including the Investment To ensure the Board comprises individuals with the necessary skills, knowledge
Company's financial reporting including the adequacy of related disclosures, Manager but excluding the external auditor). and experience to ensure that the Board is effective in discharging its
the performance of the external auditor, and the management of the Company's
responsibilities and oversight of all matters relating to corporate
systems of internal financial and operating controls and business risks. governance, and to review the on-going appropriateness and relevance of the
remuneration policy.
More details further below.
More details further below.
More details further below.
Our Governance Framework
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 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.
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
2024 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, contribution and performance of each Director together with
results of the 2023 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 has sought to ensure that the Board is well balanced. The
Board has sought to encompass past and current experience of various areas
relevant to the Company's business.
The dates of appointment of all Directors are provided in the Directors'
Remuneration Report and a summary of shareholder elections is provided below.
Date first elected by shareholders Years from first election to 2024 AGM Considered to be independent by the Board
Rupert Dorey June 2015 9 Yes
David Staples May 2019 5 Yes
Laure Duhot June 2021 3 Yes
Succession
Over previous years, the Board have looked to balance the tenure of the
Directors. 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 has acted on the recommendations
of the Remuneration and Nomination Committee in relation to its composition on
an annual basis. As the Board is now focussed on the Managed Wind-down it does
not anticipate there will be any further changes to its composition whilst the
Company remains listed.
Re-election of Directors
Rupert Dorey, David Staples and Laure Duhot each submit themselves for
re-election at the AGM to be held on 31 May 2024. 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 2024
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 capabilities, skills
and experience which are relevant to the Company. While they acknowledge the
importance of gender and ethnic diversity and recognise the diversity targets
as set out by the Financial Conduct Authority of
at least 40% of individuals on its board of directors are women;
at least one of the following senior positions on its board of directors is
held by a woman:
(i) the chair,
(ii) the chief executive,
(iii) the senior independent director, and/or
(iv) the chief financial officer; and
at least one individual on its board of directors is from a minority ethnic
background.
The Board note that while they do not meet any of these targets, as a Board
of only 3 independent directors and as the Company is in a managed wind-down
working towards the appointment of a liquidator within the next nine months,
they do not consider it appropriate or practical to seek further recruitment
for the purpose of meeting the enhanced targets, nor to incur any additional
costs in seeking to do so.
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 the Managed Wind-down. The Investment
Manager takes decisions as to the realisation of individual investments during
the Managed Wind-down, 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 2023 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 2023 Board performance evaluation, the Board has agreed:
· That all Directors are considered independent;
· Rupert Dorey, David Staples and Laure Duhot are proposed for re-election at
the 2024 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 performance of the Chair. It was
agreed that the Chair had continued to lead the Board and had performed his
duties very well.
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, legal advisers 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 relevant changes. 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 are 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 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 year
ended 31 December 2023 or since.
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. 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 and portfolio data provided to
shareholders from time-to-time during the Managed Wind-down as appropriate 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 1 . 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 (http://www.nbgmif.com)
.
2024 AGM
The 2024 AGM is planned to be held in Guernsey on 31 May 2024. Any updates to
changes to the proceedings of the AGM will be published on the Company's
website www.nbgmif.com (http://www.nbgmif.com) and notified by the Company via
an RIS announcement. 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.
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.
Since the Company is now in Managed Wind-down, the Board's focus has moved to
reviewing with the Investment Manager the strategy for realising all of the
Company's investments in a timely manner and which will best preserve
shareholder value. The receipt of cash from this process and the
appropriateness of making returns of capital to shareholders through
compulsory redemption of shares are also key items. 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.
15 ad-hoc board meetings were held during the year.
Attendance at scheduled meetings of the Board and its committees in the 2023
financial year
Remuneration and Nomination Committee Management Engagement Committee
Audit and Risk Committee
Board
Number of meetings during the year 4 4 1 1
Rupert Dorey 4 4 1 1
Laure Duhot 4 4 1 1
David Staples 4 4 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 (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
16 April 2024
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.
Key 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 and advising the Board on the appropriateness of the Company's
financial controls, 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 and evaluating its
performance (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 (https://www.nbgmif.com)
.
At its four 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 issue How the Issue was Addressed
The valuation of the Company's investments held at net realisable value The Committee analysed the investment portfolio of the Company in terms of
investment mix, levelling 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.
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 2024 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 2023 and
there were no material deficiencies.
During the Board's visit to the Sub-administrator's office in 2022, the Board
received presentations from the IT, Compliance and Risk, Financial Reporting
and Fund Accounting teams. Each team covered the internal procedures and
controls that are in place to minimise the risk of errors or breaches while
carrying out all duties as sub-administrator of the fund. These procedures and
controls have not materially changed since.
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 2023 financial year the significant audit
risks identified were in relation to the risk of management override of
controls and the valuation of investments at net realisable value. 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 2022 financial year, the Committee
was satisfied that there had been appropriate focus and challenge on the
significant and other areas of audit risk. 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 2023 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 2024 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 £125,680 for services rendered in respect of the
financial year ended 2023. Of this amount, £92,000 was in relation to the
year-end audit and £33,680 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 discussed 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
16 April 2024
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;
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 2023 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 (https://www.nbgmif.com) .
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.
As a result of the 2023 annual review it is the opinion of the Directors to
continue with the appointment of the Investment Manager. The Board considers
that the Investment Manager has extensive investment management resources and
wide experience in managing and realising investments and is satisfied with
the quality and competitiveness of the fee arrangements of the Investment
Manager and the Company's other service providers. Please see fee section in
Note 3 for further details. In light of the change of strategy and subsequent
approval of the Wind Down, the agreements between the Company and its various
service providers were reviewed, amended or terminated, whenever relevant, to
continue to be in the best interests of the Company and its shareholders as a
whole during the Managed Wind-down.
Laure Duhot
On behalf of the Management Engagement Committee
16 April 2024
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;
· 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. Following the
EGM held on 27 January 2023, whereby shareholder approved the managed wind
down of the Company, the Directors noted their previous decision that they
would meet again to look again at the board succession planning and
replenishment, with a view to also take into consideration latest
recommendations in terms of gender and ethnic diversity on the board, but only
if shareholders voted against a winding down. Noting the Company's investors
approved both proposals put forward at the EGM, and that the Company's
investment objective is now to undertake a managed wind down of its portfolio,
it has been agreed that the status quo will remain, as there is no need to
plan any changes to Board composition, given the Company's strategy of
pursuing a managed wind down and returning capital to shareholders. 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 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 (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. As the Company is now in Managed
Wind-down, the Board considers that it would be inefficient to change the
composition of the Board, except in extenuating circumstances, until such time
as the Company ceases to be listed or a liquidator is appointed.
Diversity
The Board considers that its members have a balance of capabilities, skills
and experience which are relevant to the Company. While they acknowledge the
importance of gender and ethnic diversity and recognise the diversity targets
as set out by the Financial Conduct Authority of
· at least 40% of individuals on its board of directors are women;
· at least one of the following senior positions on its board of
directors is held by a woman:
o the chair,
o the chief executive,
o the senior independent director, and/or
o the chief financial officer; and
· at least one individual on its board of directors is from a
minority ethnic background.
The Board note that while they do not meet any of these targets, as a Board of
3 independent directors and as the Company is in a managed wind-down, they do
not consider it appropriate or practical to seek further recruitment for the
purpose of meeting the enhanced targets, nor to incur any additional costs in
seeking to do so.
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
16 April 2024
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 31 May 2024.
Directors' Fees
The Company paid the following fees to the Directors for the years ended 31
December 2023 and 31 December 2022:
ROLE Total BOARD FEES 2023 Total BOARD
US$ FEES 2022
US$
Rupert Dorey Chair $63,740 $61,873
Member of the Remuneration and Nomination Committee
Member of the Audit and Risk Committee
Member of the Management Engagement Committee
Laure Duhot Member of the Audit and Risk Committee $58,641 $56,923
Chair of the Remuneration and Nomination Committee
Chair of the Management Engagement Committee
David Staples Chair of the Audit and Risk Committee $62,465 $60,636
Member of the Remuneration and Nomination Committee
Member of the Management Engagement Committee
Senior Independent Director
Total $184,846 $179,432
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 $1,066 (31 December 2022: $2,939).
Please refer to Note 3 for more details on Directors' remuneration.
Changes to the Board
There have been no changes to the Board during the year.
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 £500,000 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 2023 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 (£)
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. 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 on 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
2023. 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
2023 Remuneration Report 68,123,211 172,902 34,051
Laure Duhot
On behalf of the Remuneration and Nomination Committee
16 April 2024
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
of America ("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;
· use the going concern basis of accounting unless liquidation is
imminent. As disclosed in Note 2, the financial statements have been prepared
on a basis other than going concern.
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
16 April 2024
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 net assets in
liquidation including the condensed schedule of investments in liquidation as
at 31 December 2023, the related statement of changes in net assets in
liquidation for the period from 28 January 2023 to 31 December 2023, the
statements of changes in net assets, operations and cash flows for the period
from 1 January 2023 to 27 January 2023, and notes, comprising significant
accounting policies and other explanatory information. These financial
statements have not been prepared on the going concern basis for the reason
set out in Note 2.
In our opinion, the accompanying financial statements:
· give a true and fair view of the net assets in liquidation of the
Company as at 31 December 2023, the changes in its assets in liquidation for
the period from 28 January 2023 to 31 December 2023 and of the Company's
financial performance and cash flows for the period from 1 January 2023 to 27
January 2023;
· are prepared in accordance 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.
Emphasis of matter - non-going concern basis of preparation
We draw attention to the disclosure made in note 2 of the financial statements
which explains that the shareholders of the Company approved a plan of
liquidation on 27 January 2023, and the Company determined liquidation is
imminent. As a result, the Company changed its basis of accounting on 28
January 2023 from the going concern basis of accounting to a liquidation basis
of accounting. Our opinion is not modified in respect of this matter.
Key audit matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgement, 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. In arriving at our audit opinion above, the key audit matter was as
follows (2022: valuation of investments at fair value and going concern):
The risk Our response
Valuation of Investments at net realisable value ("Investments") Basis: Our audit procedures included but were not limited to:
$34,130,365; (2022: Investments at fair value $193,977,821) The Company's investment portfolio represents the most significant balance on Internal Controls:
the statement of assets and liabilities in liquidation and is the principal
Refer to the Audit Committee Report, the Condensed Schedule of Investments in driver of the Company's net asset value in liquidation (2023: 83%; 2022: 92%). We assessed the design and implementation of the control in place over the
Liquidation and note 2 "Basis of preparation". valuation of unquoted investments.
Challenging managements' assumptions and inputs:
The Company's investment portfolio consists of private debt, special We performed inquiries with the Investment Manager to understand and assess
situations, global high yield bonds, equity investments and global floating the valuation methodology used to estimate the net realisable value of
rate loans, as disclosed in note 2(e). The net realisable value is estimated Investments and ensured these are in line with the Company's stated valuation
based on prices provided by a third party pricing source, in the absence of policies.
which, the Investment Manager's pricing committee will determine a net
realisable value as at year-end. The Investment Manager has determined that For Investments where price quotes were available, we obtained indicative
based upon the expected timing and manner of disposition of the Company's price quotes from independent sources and assessed their reliability in order
Investments, the fair value of investments approximates net realisable value. to derive an independent reference price. We compared our independent
reference prices to those utilised by the Company.
Risk:
For certain private debt positions and global high yield bonds, with the
The valuation of the Company's Investments is considered a significant area of support of our KPMG valuation specialist, we determined independent reference
our audit, given that it represents the majority of the net assets of the prices through the use of fundamental cash flow modelling, sourcing key inputs
Company and in view of the significance of estimates and judgements that may and assumptions used, such as indicative discount rates, from observable
be involved in the determination of their net realisable value. market data.
For one private equity position valued internally by the Investment Manager
with the support of our KPMG valuation specialist, we assessed and challenged
the key assumptions based on available market information and corroborated key
inputs to supporting documentation.
Considered market transactions in close proximity to the year-end and assessed
their appropriateness as being representative of net realisable value.
Assessing disclosures:
We also considered the Company's disclosures in relation to the basis of
preparation (Note 2), the use of estimates (Note 2(a)), the 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 $0.82m,
determined with reference to a benchmark of net assets of $41.2m, of which
it represents approximately 2.0% (2022: 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 approximately $0.62m. 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 $0.04m, 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.
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, we have nothing 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 on 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 theannual report and
financial statements taken as a whole is fair, balanced and understandable,
and provides the information necessary for shareholders to assess theCompany's
position and performance, business model and strategy;
· the section of theannual 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 theannual report that describes the review of the
effectiveness of theCompany'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, 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
(http://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
16 April 2024
FINANCIAL STATEMENTS | Statement of Assets and Liabilities
Statement of Net Assets (Liquidation Basis) as at 31 December 2023 and
Statement of Assets and Liabilities as at 31 December 2022
AS AT 31 DECEMBER 2023 AND 31 december 2022 31 DECEMBER 2023 31 december 2022
(Expressed in U.S. Dollars) Notes
Assets (Liiquidation basis)
Investments, at net realisable value (2022: at fair value) (2023: cost of 2 34,130,365 193,977,821
$42,799,496, 2022: cost of $232,486,076)
Derivative assets, at net realisable value (2022: at fair value) (2023: cost 2 (e) 1,740,166 13,315,197
of $Nil, 2022: cost of $Nil)
Cash and cash equivalents 2(c)
- Sterling (2023: cost of $3,855,083, 2022: cost of $66,907) 3,943,904 65,433
- Euro (2023: cost of $356,501, 2022: cost of $316,934) 368,873 329,874
- U.S. Dollar 2,314,428 3,708,825
Total cash and cash equivalents 6,627,205 4,104,132
42,497,736 211,397,150
Other assets
Receivables for investments sold - 1,800,911
Interest receivable 478,837 3,057,153
Other receivables and prepayments 76,568 247,252
Total other assets 555,405 5,105,316
Total assets 43,053,141 216,502,466
Liabilities
Payables for investments purchased - 1,890,980
Payables to Investment Manager and affiliates 3 81,905 389,749
Derivative liabilities, at fair value (2023: proceeds of $Nil, 2022: proceeds 2 (e) 599,028 1,142,190
of $Nil)
Dividend payable - 1,439,988
Estimated liquidation expenses payable 3 900,000 -
Accrued expenses and other liabilities 3 302,975 280,869
Total liabilities 1,883,908 5,143,776
Total assets less liabilities 41,169,233 211,358,690
Share capital 548,190,672 727,332,978
Accumulated reserves (507,021,439) (515,974,288)
Total net assets 41,169,233 211,358,690
Net Asset Value per share £0.7656 £0.7926
The Financial Statements for the period 28 January to 31 December 2023 are
prepared on a Liquidation basis, see Note 2 for further detail.
The Financial Statements were approved and authorised for issue by the Board
of Directors on 16 April 2024, and signed on its behalf by:
Rupert Dorey
Director
The accompanying notes on form an integral part of the Financial Statements
FINANCIAL STATEMENTS | Condensed Schedule of Investments in Liquidation
Condensed Schedule of Investments in Liquidation
As at 31 DECEMBER 2023 Cost Net Realisable Value Net realisable Value
(Expressed in U.S. Dollars) as % of Net Assets
Portfolio of investments
Financial investments
- Private Debt 26,106,948 20,884,215 50.73%
- Special Situations 8,856,974 6,975,551 16.94%
- Global High Yield Bonds 4,042,829 4,042,830 9.82%
- Global Floating Rate Loans 787,729 764,486 1.86%
- Equity 3,005,016 1,463,283 3.55%
Total financial investments 42,799,496 34,130,365 82.90%
Forward exchange contracts
- Euro to Sterling - (3,256) (0.01%)
- Euro to U.S. Dollar - 2,051 0.00%
- Sterling to U.S. Dollar - 3,995,239 9.70%
- U.S. Dollar to Euro - (153,551) (0.37%)
- U.S. Dollar to Sterling - (2,699,345) (6.55%)
- 1,141,138 2.77%
Cost Net Realisable Value Net Realisable Value as % of Net Assets
Geographic diversity of investment portfolio (domicile of issuer)
North America 39,486,375 31,289,390 76.00%
Europe 3,313,121 2,840,975 6.90%
42,799,496 34,130,365 82.90%
The accompanying notes form an integral part of the Financial Statements
Industry diversity of Investment Portfolio 31 december 2023
(Expressed in U.S. Dollars) Cost NET realisable Value
Business Equipment & Services 8,415,097 6,913,986
Building & Development 5,241,943 5,325,000
Chemicals & Plastics 1,979,080 883,750
Electronics/Electrical 12,515,814 9,746,518
Food Products 1,968,277 1,200,000
Food Service 338,326 275,676
Health Care 6,941,372 5,016,653
Insurance 645,773 612,325
Retailers (except food and drug) 2,974,794 2,565,300
Surface Transport 991,291 826,670
Utilities 787,729 764,487
42,799,496 34,130,365
The accompanying notes on form an integral part of the Financial Statements
As at 31 December 2023, investments with issuers which were greater than 1% of
NAV:
Securities Security Type Notional Quantity Country Industry NET REALISABLE Value % of NAV
(EXPRESSED IN U.S. DOLLARS)
Brock Holdings III Inc 5,377,971 13.06%
Brock Holdings Notes 15% 04/24/24 Global High Yield 4,042,830 United States Business Equipment & Services 4,042,830 9.82%
Brock Holdings III LLC Equity 148,349 United States Business Equipment & Services 1,335,141 3.24%
Chariot Buyer LLC 5,325,000 12.93%
Chariot Buyer LLC Private Debt 5,325,000 United States Building & Development 5,325,000 12.93%
Ivanti Software Inc 2,263,084 5.49%
Ivanti 1L TL-B 11/20 Special Situations 1,749,882 United States Electronics/Electrical 1,657,068 4.02%
Ivanti Software 1L TL-B 02/21 Special Situations 641,850 United States Business Equipment & Services 606,016 1.47%
EG Group Ltd 2,001,377 4.86%
EG Group Ltd Private Debt United Kingdom Retailers (except food and drug) 2,001,377 4.86%
Team Health Holdings Inc 1,770,203 4.30%
Team Health Holdings Inc Special Situations United States Health Care 1,770,203 4.30%
Constant Contact Inc 1,275,000 3.10%
Constant Contact Inc Private Debt United States Electronics/Electrical 1,275,000 3.10%
Woof Intermediate Inc 1,200,000 2.91%
Woof Intermediate Inc Private Debt United States Food Products 1,200,000 2.91%
Maverick Bidco Inc 1,150,000 2.79%
Maverick Bidco Inc Private Debt United States Electronics/Electrical 1,150,000 2.79%
Redstone Buyer LLC 1,497,648 3.64%
Redstone Buyer LLC Special Situations United States Electronics/Electrical 1,107,423 2.69%
Redstone Buyer LLC Private Debt United States Electronics/Electrical 390,225 0.95%
ConvergeOne Holdings Inc 1,151,284 2.80%
ConvergeOne 1L TL 01/19 Special Situations United States Electronics/Electrical 949,404 2.31%
ConvergeOne 2L TL 01/19 Private Debt United States Electronics/Electrical 201,880 0.49%
GTT Communications Inc 1,013,521 2.46%
GTT Communications Inc- Restructure OpCo Facility Special Situations United States Electronics/Electrical 553,038 1.34%
GTT Communications Inc -Restructure HoldCo Facility Special Situations United States Electronics/Electrical 332,399 0.81%
GTT Communications Inc Equity United States Electronics/Electrical 128,084 0.31%
Project Sky Merger Sub Inc 953,330 2.32%
Project Sky Merger Sub Inc Private Debt United States Electronics/Electrical 953,330 2.32%
Team Services Group LLC 930,000 2.26%
Team Services Group LLC Private Debt United States Health Care 930,000 2.26%
Foundational Education Group Inc 930,000 2.26%
Foundational Education Group Inc Private Debt United States Business Equipment & Services 930,000 2.26%
US Anesthesia Partners Inc 872,500 2.12%
US Anesthesia Partners Inc Private Debt United States Health Care 872,500 2.12%
Precisely Software Inc 863,512 2.10%
Precisely Software Inc Private Debt United States Electronics/Electrical 863,512 2.10%
Lasership Inc 826,670 2.01%
Lasership Inc Private Debt United States Surface Transport 826,670 2.01%
The accompanying notes form an integral part of the Financial Statements.
Securities Security Type Notional Quantity Country Industry NET REALISABLE Value % of NAV
(EXPRESSED IN U.S. DOLLARS)
Nautilus Power LLC - Term Loan B (04/23) - Assignment 764,487 1.86%
Nautilus Power LLC - Term Loan B (04/23) - Assignment Global Floating Rate Loans United States Utilities 764,487 1.86%
National Mentor Holdings Inc 746,670 1.81%
National Mentor Holdings Inc Private Debt United States Health Care 746,670 1.81%
Aveanna Healthcare LLC 657,000 1.60%
Aveanna Healthcare LLC Private Debt United States Health Care 657,000 1.60%
EG Finco Ltd 563,923 1.37%
EG Finco Ltd Private Debt United Kingdom Retailers (except food and drug) 563,923 1.37%
Nic Acquisition Corp 488,750 1.19%
NIC Acquisition Corp Private Debt United States Chemicals & Plastics 488,750 1.19%
Asurion LLC 612,326 1.49%
Asurion LLC Private Debt United States Insurance 612,326 1.49%
33,234,256 80.73%
The accompanying notes form an integral part of the Financial Statements
As at 31 December 2023, the below were the investments of the Company:
Securities Country Industry NET REALISABLE value $ %
(EXPRESSED IN U.S. DOLLARS)
Chariot Buyer LLC United States Building & Development 5,325,000 12.93%
Brock Holdings Notes 15% 04/24/24 United States Business Equipment & Services 4,042,830 9.82%
EG Group Ltd United Kingdom Retailers (except food and drug) 2,001,377 4.86%
Team Health Holdings Inc United States Health Care 1,770,203 4.30%
Ivanti Software Inc United States Electronics/Electrical 1,657,068 4.03%
Brock Holdings III LLC United States Business Equipment & Services 1,335,141 3.24%
Constant Contact Inc United States Electronics/Electrical 1,275,000 3.10%
Woof Intermediate Inc United States Food Products 1,200,000 2.91%
Maverick Bidco Inc United States Electronics/Electrical 1,150,000 2.79%
Redstone Buyer LLC United States Electronics/Electrical 1,107,423 2.69%
Project Sky Merger Sub Inc United States Electronics/Electrical 953,330 2.32%
ConvergeOne Holdings Inc United States Electronics/Electrical 949,404 2.31%
Team Services Group LLC United States Health Care 930,000 2.26%
Foundational Education Group Inc United States Business Equipment & Services 930,000 2.26%
US Anesthesia Partners Inc United States Health Care 872,500 2.12%
Precisely Software Inc United States Electronics/Electrical 863,512 2.10%
Lasership Inc United States Surface Transport 826,670 2.01%
Nautilus Power LLC - Term Loan B (04/23) - Assignment United States Utilities 764,487 1.86%
National Mentor Holdings Inc United States Health Care 746,670 1.81%
Aveanna Healthcare LLC United States Health Care 657,000 1.60%
Asurion LLC United States Insurance 612,326 1.49%
Ivanti Software Inc United States Business Equipment & Services 606,016 1.47%
EG Finco Ltd United Kingdom Retailers (except food and drug) 563,923 1.37%
GTT Communications Inc United States Electronics/Electrical 553,038 1.34%
NIC Acquisition Corp United States Chemicals & Plastics 488,750 1.19%
Valcour Packaging LLC United States Chemicals & Plastics 395,000 0.96%
Redstone Buyer LLC United States Electronics/Electrical 390,225 0.95%
GTT Communications Inc United States Electronics/Electrical 332,399 0.81%
CD&R Dock Bidco Ltd United Kingdom Food Service 275,676 0.67%
ConvergeOne Holdings Inc United States Electronics/Electrical 201,880 0.49%
Riverbed Technology Inc United States Electronics/Electrical 185,097 0.45%
GTT Communications Inc United States Electronics/Electrical 128,083 0.30%
Sound Inpatient Physicians Inc United States Health Care 40,279 0.09%
Riverbed Technology Inc United States Electronics/Electrical 58 0.00%
34,130,365 82.90%
The accompanying notes form an integral part of the Financial Statements
Condensed Schedule of Investments
As at 31 december 2022 Cost Fair Value Fair Value as %
(Expressed in U.S. Dollars) of Net Assets
Portfolio of investments
Financial investments
- Private Debt 58,866,585 48,995,511 23.18%
- Special Situations 32,663,128 21,781,078 10.31%
- CLO Debt Tranches 25,802,090 21,086,321 9.98%
- Global High Yield Bonds 55,122,809 47,757,640 22.60%
- Global Floating Rate Loans 56,756,793 52,867,206 25.01%
- Equity 3,274,671 1,490,065 0.70%
Total financial investments 232,486,076 193,977,821 91.78%
Forward exchange contracts
- Euro to Sterling - 19,477 0.01%
- Sterling to U.S. Dollar - 15,514,320 7.34%
- U.S. Dollar to Euro - (1,003,290) (0.47%)
- U.S. Dollar to Sterling - (2,357,500) (1.12%)
- 12,173,007 5.76%
Cost Fair Value Fair Value as %
of Net Assets
Geographic diversity of investment portfolio (domicile of issuer)
Australia/Oceania 3,206,983 1,110,182 0.53%
Caribbean 8,922,164 7,508,815 3.55%
North America 182,504,305 155,536,053 73.59%
Europe 37,852,624 29,822,771 14.11%
232,486,076 193,977,821 91.78%
The accompanying notes form an integral part of the Financial Statements
Industry diversity of Investment Portfolio 31 december 2022
(Expressed in U.S. Dollars) Cost Fair Value
Aerospace & Defence 2,043,195 1,882,157
Air Transport 5,375,763 5,014,192
Automotive 7,079,824 4,765,562
Broadcast Radio & Television 1,135,678 663,677
Brokers, Dealers & Investment Houses 1,017,505 687,265
Business Equipment & Services 22,594,249 18,884,361
Building & Development 19,296,469 17,020,351
Cable & Satellite Television 6,439,158 3,615,076
Chemicals & Plastics 4,801,871 3,830,361
Clothing & Textiles 3,593,350 3,437,482
Containers & Glass Products 2,549,486 2,185,687
Drugs 362,806 306,623
Electronics/Electrical 22,579,385 17,402,973
Equipment Leasing 2,524,952 2,043,229
Financial Intermediaries 33,720,708 27,477,262
Food Products 2,202,118 1,972,030
Food Service 3,136,450 2,562,555
Health Care 22,514,402 19,000,974
Industrial Equipment 13,634,769 12,507,808
Insurance 6,778,546 5,656,427
Leisure Goods/Activities/Movies 2,674,753 2,260,818
Nonferrous Metals & Minerals 2,179,328 2,162,813
Oil & Gas 10,572,843 10,015,444
Publishing 1,952,655 1,643,505
Retailers (except food and drug) 7,491,211 6,510,001
Steel 428,106 354,233
Surface Transport 4,504,697 3,714,474
Telecommunications/Cellular Communications 6,834,885 4,864,626
Utilities 12,466,914 11,535,855
232,486,076 193,977,821
The accompanying notes form an integral part of the Financial Statements
As at 31 December 2022, investments with issuers which were greater than 1% of
NAV (Excluding cash):
Securities Security Type Country Industry Fair Value % of NAV
(EXPRESSED IN U.S. DOLLARS)
Chariot Buyer LLC 5,005,500 2.37%
Chariot Buyer LLC Private Debt United States Building & Development 5,005,500 2.37%
Brock Holdings III Inc 4,833,532 2.29%
Brock Holdings Notes 15% 04/24/24 Global High Yield United States Business Equipment & Services 3,498,391 1.66%
Brock Holdings III Inc Equity United States Business Equipment & Services 1,335,141 0.63%
Phoenix Newco Inc 3,421,600 1.62%
Phoenix Newco Inc Private Debt United States Health Care 3,421,600 1.62%
EG Group Ltd 3,142,756 1.48%
EG Group Ltd 2L TL EUR 02/21 Private Debt United Kingdom Retailers (except food and drug) 1,842,558 0.88%
Optfin TL B 1L GBP Global Floating Rate Loans United Kingdom Retailers (except food and drug) 785,314 0.37%
Optfin TL B1 1L EUR Global Floating Rate Loans United Kingdom Retailers (except food and drug) 514,884 0.23%
Praire ECI Acquiror LP 2,856,981 1.35%
Praire ECI Acquiror LP Global Floating Rate Loans United States Oil & Gas 2,856,981 1.35%
First Brands Group LLC 2,751,630 1.30%
First Brands Group LLC 1L TL-B 03/21 Global Floating Rate Loans United States Automotive 1,854,960 0.88%
First Brands Group LLC 2L TL 03/21 Private Debt United States Automotive 896,670 0.42%
CD&R Dock Bidco Ltd 2,562,555 1.22%
CD&R Dock Bidco Ltd Global Floating Rate Loans United Kingdom Food Service 2,315,960 1.10%
CD&R Dock Bidco Ltd Private Debt United Kingdom Food Service 246,595 0.12%
Team Health Holdings Inc 2,379,410 1.12%
Team Health Holdings Inc Special Situations United States Health Care 1,783,002 0.85%
Team Health Holdings Inc 6.375% 02/01/25 Special Situations United States Health Care 596,408 0.28%
Tecta America 2,360,638 1.12%
Tecta America Corp TL 2L 03/21 Private Debt United States Building & Development 1,417,500 0.67%
Tecta America Corp 1L 2L 03/21 Global Floating Rate Loans United States Building & Development 943,138 0.45%
Cova Holdings LLC 2,162,813 1.02%
Cova Holdings LLC Global Floating Rate Loans United States Nonferrous Metals & Minerals 2,162,813 1.02%
Asurion LLC 2,147,553 1.02%
Asurion LLC 2L TL-B4 07/21 Private Debt United States Insurance 1,398,877 0.66%
Asurion LLC Private Debt United States Insurance 748,676 0.36%
Genesis Energy 2,118,380 1.00%
Genesis Energy LP/FIN 8.000% 01/15/27 Global High Yield United States Oil & Gas 1,220,822 0.58%
Genesis Energy LP/FIN 6.500% 10/01/25 Global High Yield United States Oil & Gas 897,558 0.42%
35,743,348 16.91%
The accompanying notes form an integral part of the Financial Statements
As at 31 December 2022, the below were the largest 50 investments based on the
NAV:
Securities Country Industry Fair value $ %
(EXPRESSED IN U.S. DOLLARS)
Chariot Buyer LLC United States Building & Development 5,005,500 2.37%
Brock Holdings Notes 15% 04/24/24 United States Business Equipment & Services 3,498,391 1.66%
Phoenix Newco Inc United States Health Care 3,421,600 1.62%
Prairie ECI Acquiror LP United States Oil & Gas 2,856,981 1.35%
CD&R Dock Bidco Ltd United Kingdom Food Service 2,315,960 1.10%
Covia Holdings LLC United States Nonferrous Metals & Minerals 2,162,813 1.02%
Varsity Brands Holding Co Inc United States Clothing & Textiles 2,006,804 0.95%
Kestrel Acquisition LLC United States Utilities 1,936,124 0.92%
Waterbridge Midstream Op United States Oil & Gas 1,905,812 0.90%
First Brands Group LLC 1L TL-B 03/21 United States Automotive 1,854,960 0.88%
EG Group Ltd 2L TL EUR 02/21 United Kingdom Retailers (except food and drug) 1,842,558 0.87%
American Airlines United States Air Transport 1,807,391 0.86%
Woof Intermediate Inc United States Food Products 1,800,000 0.85%
Vistajet Malta 6.375% 02/01/30 Malta Air Transport 1,789,810 0.85%
Team Health Holdings Inc United States Health Care 1,783,002 0.84%
FCG Acquisitions Inc United States Industrial Equipment 1,706,375 0.81%
MHI Holdings LLC United States Industrial Equipment 1,677,153 0.79%
Quantum Health Inc United States Health Care 1,654,800 0.78%
Redstone Buyer LLC United States Electronics/Electrical 1,637,854 0.77%
Summit Midstream Holdings LLC United States Utilities 1,608,657 0.76%
CSC holdings LLC United States Cable & Satellite Television 1,601,732 0.76%
The Edelman Financial Group Inc United States Financial Intermediaries 1,586,363 0.75%
Assuredpartners Inc United States Insurance 1,559,650 0.74%
Global Aircraft Leasing Co Ltd United States Equipment Leasing 1,503,987 0.71%
AA Bond Co Ltd United States Financial Intermediaries 1,470,651 0.70%
Springleaf Finance Corporation United States Financial Intermediaries 1,426,320 0.67%
Tecta America Corp TL 2L 03/21 United States Building & Development 1,417,500 0.67%
Asurion LLC 2L TL-B4 07/21 United States Insurance 1,398,877 0.66%
Ivanti Software Inc United States Electronics/Electrical 1,393,525 0.66%
Camelot Return Merger United States Building & Development 1,376,445 0.65%
Trnts 2019-10x ER FLT 01/15/35 United States Financial Intermediaries 1,343,223 0.64%
Brock Holdings III Inc United States Business Equipment & Services 1,335,141 0.63%
Realogy Group/Co-Issuer 5.250% 04/15/30 United States Building & Development 1,309,470 0.62%
Redwood Star Merger Sub 8.750% 04/01/30 United States Industrial Equipment 1,309,176 0.62%
Syncsort Incorporated (clearlake) United States Electronics/Electrical 1,305,080 0.62%
PPM CLO 3 Ltd United States Financial Intermediaries 1,231,366 0.58%
Genesis Energy LP United States Oil & Gas 1,220,822 0.58%
522 Funding CLO Ltd Morgn_20-6X Cayman Islands Financial Intermediaries 1,214,708 0.57%
Ascent Resources Utica Holdings/ARU Finance Corp United States Oil & Gas 1,210,546 0.57%
Post CLO Ltd Post_18-1A United States Financial Intermediaries 1,185,046 0.56%
Maverick Bidco Inc United States Electronics/Electrical 1,156,250 0.55%
Constant Contact Inc United States Electronics/Electrical 1,129,995 0.53%
Pro Mach 1L Tl-B 08/21 United States Industrial Equipment 1,120,219 0.53%
Constellation Automotive Ltd New Zealand Automotive 1,110,182 0.53%
Sophia LP United States Electronics/Electrical 1,091,750 0.52%
SRS Distribution Inc United States Building & Development 1,079,374 0.51%
Paymentsense Ltd United Kingdom Financial Intermediaries 1,063,063 0.50%
Webhelp Inc France Business Equipment & Services 1,057,191 0.50%
Altice France Holding SA France Cable & Satellite Television 1,056,622 0.50%
Vaco Holdings 1L Tl 01/22 United States Business Equipment & Services 1,055,856 0.50%
82,592,675 39.08%
The accompanying notes form an integral part of the Financial Statements
FINANCIAL STATEMENTS | Statement of Changes in net Assets (Liquidation Basis)
Statement of Changes in Net Assets (Liquidation Basis)
FOR THE Period 28 January 2023 to 31 December 2023 Notes VALUE
(Expressed in U.S. Dollars)
Net assets as at 28 January 2023 222,964,807
Adjustment for liquidation provisions 3 (2,875,608)
Net assets in liquidation as at 28 January 2023 220,089,199
Changes in estimated proceeds upon sale of investments 2 9,354,913
Recognition of other income earned in liquidation 34,167
Changes in realised and unrealised gain on foreign currency 2 1,209,375
Dividends paid in liquidation 2 (10,376,115)
Tender offer redemptions in liquidation (179,142,306)
Net assets in liquidation at 31 December 2023 41,169,233
The Financial Statements for the period 28 January to 31 December 2023 are
prepared on a Liquidation basis, see Note 2 for further detail.
Statement of Changes in Net Assets
FOR THE Period 1 January 2023 to 27 January 2023 VALUE
(Expressed in U.S. Dollars)
Net assets as at 1 January 2023 211,358,690
Dividends 2 (1,500,501)
Tender offer redemptions -
Net increase in net assets resulting from operations 13,106,618
Net assets as at 27 January 2023 222,964,807
FOR THE year 1 January 2022 to 31 december 2022 VALUE
(Expressed in U.S. Dollars)
Net assets as at 1 January 2022 315,681,147
Dividends (16,471,128)
Tender offer redemptions (24,688,583)
Net decrease in net assets resulting from operations (63,162,746)
Net assets as at 31 December 2022 211,358,690
The accompanying notes form an integral part of the Financial Statements
FINANCIAL STATEMENTS | Statement of Operations
Statement of Operations
(Expressed in U.S. Dollars) Notes 1 January 2023 to 1 January 2022 to
27 january 2023 31 December 2022
Income
Interest income net of withholding taxes (2023: $199,426 2022:$12,968) 2(b), 2(h) 1,642,623 21,273,763
Other income from investments - 178,795
Total income 1,642,623 21,452,558
Expenses
Investment management and services 3 125,363 1,896,668
Administration and professional fees 3 61,721 973,924
Directors' fees and travel expenses 3 54,453 185,614
Total expenses 241,537 3,056,206
Net investment income 1,401,086 18,396,352
Realised and unrealised gains and losses
Net realised loss on investments 2(e) (4,777) (14,715,411)
Net realised gain/(loss) on derivatives 2(e) 12,140,635 (45,057,681)
Total net realised gain/(loss) 12,135,858 (59,773,092)
Net change in unrealised appreciation/(depreciation) on investments 2(e) 6,534,694 (34,906,051)
Net change in unrealised (depreciation)/appreciation on derivatives 2(e) (7,006,669) 13,756,108
Total net unrealised depreciation (471,975) (21,149,943)
Realised and unrealised gain/(loss) on foreign currency 2(e) 41,649 (636,063)
Net realised and unrealised gain/(loss) 11,705,532 (81,559,098)
Net increase/(decrease) in net assets resulting from operations 13,106,618 (63,162,746)
Earnings per share(1) £0.0484 (£0.2185)
(1)Comparative Earnings per share of (£0.2185) is for the full year. Earnings
per share of £0.0484 is for only 27 days.
The accompanying notes form an integral part of the Financial Statements
FINANCIAL STATEMENTS | Statement of Cash Flows
Statement of Cash Flows
(Expressed in U.S. Dollars) 1 January 2023 to 1 January 2022 to
27 January 2023 31 DECEMBER 2022
Cash flows from operating activities:
Net increase/(decrease) in net assets resulting from operations 13,106,618 (63,162,746)
Adjustment to reconcile net increase/(decrease) in net assets resulting from
operations to net cash generated from operating activities:
Net realised loss on investments 4,777 14,715,411
Net realised (gain)/loss on derivatives (12,140,635) 45,057,681
Net change in unrealised depreciation on investments and derivatives 471,975 21,149,943
Net change in unrealised loss on translation of assets and liabilities (4,225) (154,511)
Amortisation of discounts/premiums (72,338) (700,261)
Changes in receivables for investments sold 1,800,911 1,163,547
Changes in interest receivable(1) (30,165) (255,025)
Changes in other receivables and prepayments (9,361) (18,164)
Changes in payables for investments purchased (1,326,056) (3,638,970)
Changes in payables to Investment Manager and affiliates 125,363 (209,386)
Changes in accrued expenses and other liabilities 110,789 (42,649)
Purchase of investments(2) 1,374 (75,042,216)
Realisation of investments(2) 1,303,777 139,502,148
Proceeds from settlements of derivatives 12,140,635 (45,057,681)
Net cash generated from operating activities 15,483,439 33,307,121
Cash flows from financing activities:
Tender offer redemptions paid - (24,688,583)
Dividends paid (1,461,176) (16,336,860)
Net cash used in financing activities (1,461,176) (41,025,443)
Effect of exchange rate changes on cash 4,225 154,511
Net increase/(decrease) in cash and cash equivalents 14,026,488 (7,563,811)
Cash and cash equivalents at beginning of the period/year 4,104,132 11,667,943
Cash and cash equivalents at end of the period/year 18,130,620 4,104,132
(1) Interest received for the period ended 27 January 2023 totalled $1,612,458
(year ended 31 December 2022 totalled $21,018,738).
(2) Included in these figures 2023 is Nil (2022: $4,662,223) non-cash
transactions. These arose due to the restructuring of certain investments
during the year.
The accompanying notes form an integral part of the Financial Statements
FINANCIAL STATEMENTS | Notes to the Financial Statements in Liquidation
For the year ended 31 December 2023
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 London
Stock Exchange ("LSE").
As previously required under Article 51 of the Company's Articles of
Incorporation (applicable at the time), at the Annual General Meeting ("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 Extraordinary General Meeting ("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. On 16
June 2022 the Board issued to Shareholders the EGM Circular setting out a Cash
Exit Facility Offer. The Cash Exit Facility Offer gave Shareholders the
opportunity to tender up to 25 per cent. of their Shares at a discount of 2
per cent. to Net Asset Value ("NAV") per Share on 30 June 2022.
Elections to participate in the Cash Exit Facility Offer were received with
respect to 25,500,417 Shares, equivalent to 10.32 per cent. of the 247,185,038
Shares in issue (excluding 76,083,114 treasury shares). The Directors and any
funds managed by Neuberger Berman did not participate in the Cash Exit
Facility Offer in respect of those Shares held by them. Following faster than
anticipated settlement of trades and in combination with the timing of other
cash receipts, the Company had sufficient cash available to fund the
Redemption Proceeds in full and a single Redemption Proceeds payment was made
to eligible Shareholders on 8 August 2022.
Following the passing of shareholder resolutions at the Company's
extraordinary general meeting held on 27 January 2023, the Company's
investment objective is to realise all existing assets in the Company's
portfolio in an orderly manner ("Managed Wind-down"). Details of the Company's
investment objective and investment policy can be found on the Company's
website, www.nbgmif.com (http://www.nbgmif.com) .
The Company is pursuing its investment objective by effecting an orderly
realisation of its assets and making timely returns of capital to
Shareholders, by way of several capital distributions. The Company will aim to
effect the sale of its remaining assets, including both liquid and less liquid
assets, in a manner that will maintain Shareholder value. The Company will
cease to make any new investments or to undertake capital expenditure except
where, in the opinion of the Board and the Investment Manager:
· the investment is a follow-on investment made in connection with
an existing asset in order to comply with the Company's pre-existing
obligations; or
· failure to make the follow-on investment may result in a breach
of contract or applicable law or regulation by the Company; or
· the investment is considered necessary to protect or enhance the
value of any existing investments or to facilitate orderly disposals.
Any cash received by the Company as part of the realisation process, but prior
to its distribution to shareholders, will be held by the Company as cash on
deposit and/or as cash equivalents.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The accompanying Financial Statements of the Company for the period from 1
January 2023 to 27 January 2023, which give a true and fair view, have been
prepared on a going concern basis and in accordance with U.S. generally
accepted accounting principles ("US GAAP").
As a result of the approval of the managed wind down by shareholders, the
Directors have determined that on 27 January 2023, liquidation has become
imminent. Accordingly, the accompanying Financial Statements which give a true
and fair view, have been prepared on a liquidation basis of accounting
effective 28 January 2023, following the accounting and reporting guidance in
the Financial Accounting Standards Board ("FASB") Accounting Standards
Codification ("ASC") Topic 946, Financial Services - Investment Companies
("ASC 946"), including liquidation basis adjustments required by Subtopic
205-30, Liquidation Basis of Accounting. 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. 28
January 2023 is used as a convenience date for this change because any
activity between 27 January 2023 and 28 January 2023 would not be materially
different under the liquidation basis of accounting.
The liquidation basis of accounting differs significantly from the going
concern basis. Under the liquidation basis of accounting, the statement of
assets and liabilities, statements of operations, changes in equity and cash
flows are no longer presented. Instead, the liquidation basis of accounting
requires a Statement of Net Assets in Liquidation and a Statement of Changes
in Net Assets in Liquidation. The liquidation basis of accounting is applied
prospectively from the day liquidation becomes imminent and the initial
statement of changes in net assets in liquidation may present only changes in
net assets that occurred during the period since that date.
Under the liquidation basis of accounting, assets are stated at their net
realisable values, liabilities are recognised in accordance with the
measurement and recognition provisions of US GAAP applicable for going-concern
entities and will not be reduced to expected settlement values prior to
settlement, income expected to be earned through the end of the Company's
liquidation has been accrued for, and expenses include all estimated costs to
be incurred in connection with the liquidation of the Company. The Investment
Manager has determined that based upon the expected timing and manner of
disposition and extinguishment of the Company's assets and liabilities,
respectively, the fair value and carrying amounts of such assets and
liabilities approximate net realisable value and settlement amounts,
respectively.
Net assets in liquidation represents the estimated liquidation value to
shareholders. However, the dissolution process and the amount and timing of
future distributions to shareholders involves risks and uncertainties.
Accordingly, it is not possible to predict the timing or aggregate amount,
which will be ultimately distributed to shareholders and no assurance can be
given that the distributions will equal or exceed the estimate of net assets
presented in the Statement of Net Assets in Liquidation. All estimates by
nature involve a large degree of judgment and sensitivity to the underlying
assumptions and may be subject to change based on the actual timing of sale
and market conditions. These estimates will be periodically reviewed and
adjusted as appropriate.
After making enquiries of the Investment Manager and the Sub-Administrator,
the Directors are satisfied that the Company has adequate resources to
discharge its liabilities as they fall due for at least until liquidation from
the date these Financial Statements were approved.
Net realisable value is estimated using the same approach as estimating fair
value as at 31 December 2022, refer to Note 2(e) Fair value of financial
instruments and derivatives. Unless otherwise discussed above, all other
accounting policies as disclosed below remain appropriate.
(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 the realisation of the entire portfolio as at 27(th) January
2023 under the Managed Wind-down pursuant to its 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.
Prior to the move to the liquidation basis of accounting the Company would
raise a provision when the collection of interest is deemed doubtful.
(c) Cash and cash equivalents
The Company's cash and cash equivalents comprise cash including cash
denominated in US Dollar and non-US Dollar currencies represent cash on hand
and demand deposits held at financial institutions 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. At 31 December 2023, the Company's has cash balances in various
currencies equating to $6,627,205 (31 December 2022: $ 4,104,132) of cash with
U.S. Bank. Cash equivalents are held for the purpose of meeting short-term
liquidity requirements, rather than for investment purposes. Cash and cash
equivalents are subject to credit risk to the extent those balances exceed
applicable Securities Investor Protection Corporation ("SIPC") or Federal
Deposit Insurance Corporation ("FDIC") limitations.
(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 2023
were 1.27480 USD: 1GBP and 1.10465 USD: 1EUR (31 December 2022 were 1.20290
USD: 1GBP and 1.06720 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 ASC Topic 825, Fair Value Measurements ("ASC
825"), 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.
All references to fair value throughout this document refers to approximate
net realisable value.
The following estimates and assumptions were used at 31 December 2023 and 31
December 2022 to estimate the fair value of each class of financial
instruments:
- Valuation of financial investments - The special situations, CLO
debt tranches, global floating rate loans 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 carrying value is a reasonable
estimate of fair value due to the short-term nature of these instruments.
- 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.
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 guidance of the fair value hierarchy under FASB ASC Topic 820-10-35-39 to
55 establishes three levels of fair value hierarchy. They are 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.
(e) Realisable and fair value of financial instruments and derivatives
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 2023 the AIFM designated Nil (31 December 2022: 10) of its Global
Floating Rate loans, 5 (31 December 2022: 14) of its Private Debt positions,
Nil (31 December 2022: Nil) of its Special Situations, 1 (31 December 2022:
Nil) of its Global High Yield Bonds, 2 of its Private Equities (31 December
2022: 2) and Nil (31 December 2022: 6) CLO Debt Tranches as Level 3. With
respect to the level 3 Private Equity position, the Investment Manager's
Investment Committee has derived the fair value, based on comparable companies
in similar industries.
The following table details the Company's financial instruments that were
accounted for at net realisable value as at 31 December 2023.
Financial Instruments at NET realisable Value as at 31 DECEMBER 2023
Financial investments Level 1 ($) Level 2 ($) Level 3 ($) Total ($)
Private Debt - 12,273,539 8,610,676 20,884,215
Special Situations - 6,975,551 - 6,975,551
Global High Yield - - 4,042,830 4,042,830
Global Floating Rate Loans - 764,486 - 764,486
Equity - 128,084 1,335,199 1,463,283
Total financial investments - 20,141,660 13,988,705 34,130,365
The following is a reconciliation of opening and closing balances of Company's
investments measured at net realisable value at 31 December 2023.
Level 1 ($) Level 2 ($) Level 3 ($) Total ($)
Balance at start of the year 154,867 158,349,031 35,473,923 193,977,821
Purchases during the year (1) - 1,678,083 544,437 2,222,520
Sales during the year (1) (154,867) (146,878,024) (20,488,620) (167,521,511)
Realised loss on investments - (23,575,332) (1,466,811) (25,042,143)
Unrealised gain on revaluation - 27,758,773 2,080,351 29,839,124
Amortisation - 654,554 - 654,554
Transfer from Level 3 to Level 2 - 4,497,420 (4,497,420) -
Transfer from Level 2 to Level 3 - (2,342,845) 2,342,845 -
Balance at end of the year - 20,141,660 13,988,705 34,130,365
(1) Included in these figures is $Nil of non-cash transactions. These arose
due to the repricing and restructuring of certain investments during the year.
Due to changes in observable inputs and volumes of trading, the Company
transferred securities from Level 2 to Level 3 and from Level 3 to Level 2 of
the fair value hierarchy. Certain of the Fund's Level 3 investments have been
valued using unadjusted inputs that have not been internally developed by the
Fund, including third-party transactions and indicative broker quotations. As
a result, fair value assets of approximately $1,396,000 and fair value
liabilities of approximately $1,838,000 have been excluded from the preceding
table. Any transfers are deemed to have taken place at year ended 31 December
2023.
DERIVATIVES at NET realisable Value as at 31 December 2023
Financial assets No. of contracts NOTIONAL AMOUNTS Level 1 ($) Level 2 ($) Level 3 ($) Total ($)
Derivatives (for hedging purposes only) 7 97,585,336 - 1,740,166 - 1,740,166
Financial LIABILITIES, at fair value
Derivatives (for hedging purposes only) 15 (77,120,527) - (599,028) - (599,028)
Total 22 20,464,809 - 1,141,138 - 1,141,138
The Company considers the notional amounts as at 31 December 2023 to be
representative of the volume of its derivative activities during the year
ended 31 December 2023.
The following table details the Company's financial instruments that were
accounted for at fair value as at 31 December 2022.
Financial Instruments at Fair Value as at 31 DECEMBER 2022
Financial investments Level 1 ($) Level 2 ($) Level 3 ($) Total ($)
Private Debt - 32,459,104 16,536,407 48,995,511
Special Situations - 21,781,078 - 21,781,078
CLO Debt Tranches - 16,700,354 4,385,967 21,086,321
Global High Yield - 44,259,249 3,498,391 47,757,640
Global Floating Rate Loans - 43,149,246 9,717,960 52,867,206
Equity 154,867 - 1,335,198 1,490,065
Total financial investments 154,867 158,349,031 35,473,923 193,977,821
The following is a reconciliation of opening and closing balances of Company's
financial instruments measured at fair value at 31 December 2022.
Level 1 ($) Level 2 ($) Level 3 ($) Total ($)
Balance at start of the year 532,417 264,560,590 42,265,947 307,358,954
Purchases during the year (1) - 70,156,444 4,885,772 75,042,216
Sales during the year (1) - (125,630,923) (13,871,225) (139,502,148)
Realised loss on investments - (13,476,006) (1,239,405) (14,715,411)
Unrealised loss on revaluation (377,550) (29,037,615) (5,490,886) (34,906,051)
Amortisation - 700,261 - 700,261
Transfer from Level 3 to Level 2 - 15,860,570 (15,860,570) -
Transfer from Level 2 to Level 3 - (24,784,290) 24,784,290 -
Balance at end of the year 154,867 158,349,031 35,473,923 193,977,821
(1) Included in these figures is $4,662,223 of non-cash transactions. These
arose due to the repricing and restructuring of certain investments during the
year.
Due to changes in observable inputs, the Company transferred securities from
Level 2 to Level 3 and from Level 3 to Level 2 of the fair value hierarchy.
Level 3 assets are valued using single broker quotes or valuation models.
DERIVATIVES at Fair Value as at 31 DECEMBER 2022
Financial assets No. of contracts NOTIONAL AMOUNTS Level 1 ($) Level 2 ($) Level 3 ($) Total ($)
Derivatives (for hedging purposes only) 12 255,213,341 - 13,315,197 - 13,315,197
Financial liabilities
Derivatives (for hedging purposes only) 12 (22,378,444) - (1,142,190) - (1,142,190)
Total 24 232,834,897 - 12,173,007 - 12,173,007
The Company considers the notional amounts as at 31 December 2022 to be
representative of the volume of its derivative activities during the year
ended 31 December 2022.
The following tables summarise the significant unobservable inputs the Company
used to value its investments categorised within Level 3 at 31 December 2023.
The tables are not intended to be all-inclusive but instead capture the
significant unobservable inputs relevant to the determination of fair values.
Unobservable Inputs as at 31 December 2023
Financial instruments Fair Value ($) Primary Valuation Technique SIGNIFICANT UNOBSERVABLE INPUTS* Range / INPUT** Weighted Average
Private Debt 3,285,676 Market Approach Unadjusted Broker Quote 86.5-100 96.99
Private Debt 5,325,000 Market Approach Broker Pricing Model N/A N/A
Global High Yield 4,042,830 Income Approach Credit Yield Spread 15.5% 15.5%
Equity 58 Market Approach Unadjusted Broker Quote 0.01 0.01
Equity 1,335,141 Market Approach Enterprise value/EBITDA multiple(c) (EV/EBITDA) 9.0x 9.0x
Total 13,988,705
*Certain of the Fund's Level 3 investments have been valued using unadjusted
inputs that have not been internally developed by the Company, including
third-party transactions and indicative broker quotations. As a result, fair
value assets of approximately $1,396,000 and fair value liabilities of
approximately $1,838,000 have been excluded from the preceding table.
** Debt Investments with a single broker quote result in Level 3
classification. Unobservable inputs from the broker quote were not included
because the Company does not develop the quantitative inputs and they are not
readily available. The EBITDA multiple increase/(decrease) results in an
increase/(decrease) in the valuation of the equity.
Unobservable Inputs as at 31 DECEMBER 2022
Financial Instruments Fair Value ($) Primary Valuation Technique Significant unobservable Inputs Range / INPUT* Weighted Average
Private Debt 16,536,407 Vendor Pricing Unadjusted Broker Quote 1 N/A
CLO Debt Tranches 4,385,967 Vendor Pricing Unadjusted Broker Quote 1 N/A
Global High Yield 3,498,391 Market Approach Second Lien Quotations 100 N/A
Global Floating Rate Loans 9,717,960 Vendor Pricing Unadjusted Broker Quote 1 N/A
Equity 1,335,198 Market Comparable EBITDA multiple 4-18 N/A
Total 35,473,923
* 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 2023, there were 5 counterparties for the forward contracts (31
December 2022: 5). The Company is subject to enforceable master netting
agreements with its counterparties of foreign currency exchange contracts with
Royal Bank of Canada of $1,736,140 (31 December 2022: $248,225), State Street
of ($422,984) (31 December 2022: ($930,462)), Westpac of ($175,538) (31
December 2022: ($42,789)), Goldman Sachs of ($506) (31 December 2022:
($168,940)) and UBS AG of $4,026 (31 December 2022: $13,066,972). These
agreements govern the terms of certain transactions and reduce the
counterparty risk associated with relevant transactions by specifying
offsetting mechanisms.
The following table, at 31 December 2023, show the gross and net derivatives
assets and liabilities by contract type and amount for those derivatives
contracts for which netting is permissible.
NET AMOUNTS OF RECOGNISED ASSETS PRESENTED IN THE STATEMENT OF ASSETS AND
LIABILITIES ($)
GROSS AMOUNTS OFFSET IN THE STATEMENTS OF ASSETS AND LIABILITIES ($)
DESCRIPTION GROSS AMOUNTS OF RECOGNISED ASSETS ($)
Forward currency contracts 3,998,611 (2,258,445) 1,740,166
Total 3,998,611 (2,258,445) 1,740,166
Description Gross Amounts of Recognised Liabilities ($) Gross Amounts Offset in the Statements of Assets and Liabilities ($) Net Amounts of Recognised LIABILITIES Presented in the Statement of Assets and
Liabilities ($)
Forward currency contracts (2,857,473) 2,258,445 (599,028)
Total (2,857,473) 2,258,445 (599,028)
There is no collateral for forward contracts.
The following table, at 31 December 2022, show the gross and net derivatives
assets and liabilities by contract type and amount for those derivatives
contracts for which netting is permissible.
NET AMOUNTS OF RECOGNISED ASSETS PRESENTED IN THE STATEMENT OF ASSETS AND
LIABILITIES ($)
GROSS AMOUNTS OFFSET IN THE STATEMENTS OF ASSETS AND LIABILITIES ($)
DESCRIPTION GROSS AMOUNTS OF RECOGNISED ASSETS ($)
Forward currency contracts 15,549,556 (2,234,359) 13,315,197
Total 15,549,556 (2,234,359) 13,315,197
Description Gross Amounts of Recognised Liabilities ($) Gross Amounts Offset in the Statements of Assets and Liabilities ($) Net Amounts of Recognised LIABILITIES Presented in the Statement of Assets and
Liabilities ($)
Forward currency contracts (3,376,549) 2,234,359 (1,142,190)
Total (3,376,549) 2,234,359 (1,142,190)
There is no collateral for forward contracts.
The following table presents the impact of derivative instruments on the
Statement of Operations in conformity with US GAAP.
For the period
1 january 2023 to For the period FOR THE year ENDED
27 January 2023 ($) 28 january 2023 to 31 December 2022 ($)
31 December 2023 ($) FOR THE year ENDED
31 December 2023 ($)
Net realised gain/(loss) on derivatives 12,140,635 4,229,409 16,370,044 (45,057,681)
Net change in unrealised (depreciation)/appreciation on derivatives (7,006,670) (4,025,199) (11,031,869) 13,756,108
Total 5,133,965 204,210 5,338,175 (31,301,573)
Primary underlying risks (credit risk, liquidity risk and market risk)
associated with the derivatives are explained in Note 4.
The Company presents the gain or loss on derivatives in the Statement of
Operations.
The net realised and unrealised gain/(loss) on investments shown in the
Statement of Operations for the period from 1 January 2023 to
27 January 2023 and for the year ended 31 December 2023 by type of investment
is as follows:
(EXPRESSED IN U.S. DOLLARS) 1 January 2023 to 28 January 2023 to FOR THE year ENDED
27 january 2023 ($) 31 December 2023 ($) 31 December 2023 ($)
Realised gain on investments 10,312 521,882 532,194
Realised loss on investments (15,089) (25,559,248) (25,574,337)
(4,777) (25,037,366) (25,042,143)
Realised gain on derivatives 23,399,166 20,245,774 43,644,940
Realised loss on derivatives (11,258,531) (16,016,365) (27,274,896)
12,140,635 4,229,409 16,370,044
Unrealised gain on investments 6,959,289 25,246,999 32,206,288
Unrealised loss on investments (424,595) (1,942,569) (2,367,164)
6,534,694 23,304,430 29,839,124
Unrealised gain on derivatives 9,236,051 (1,846,337) 7,389,714
Unrealised loss on derivatives (16,242,720) (2,178,863) (18,421,583)
(7,006,669) (4,025,200) (11,031,869)
Realised and unrealised gain on foreign currency transactions 74,022 1,979,946 2,053,968
Realised and unrealised loss on foreign currency transactions (32,373) (770,571) (802,944)
41,649 1,209,375 1,251,024
Changes in estimated proceeds upon sale of investments for non-going concern
period included in Statement of Changes in Net Assets in Liquidation. The
table below details the breakdown of the changes in estimated proceeds upon
sale of investments.
FOR THE YEAR ENDED 31 DECEMBER 2022
(EXPRESSED IN U.S. DOLLARS)
Interest income net of withholding taxes 10,883,640
Net realised loss on investments (25,037,366)
Net realised gain on derivatives 4,229,409
Net change in unrealised appreciation on investments 23,304,430
Net change in unrealised depreciation on derivatives (4,025,200)
Changes in estimated proceeds upon sale of investments 9,354,913
The net realised and unrealised gain/(loss) on investments shown in the
Statement of Operations for the year ended 31 December 2022 by type of
investment is as follows:
FOR THE YEAR ENDED 31 DECEMBER 2022
(EXPRESSED IN U.S. DOLLARS)
Realised gain on investments 683,752
Realised loss on investments (15,399,163)
(14,715,411)
Realised gain on derivatives 13,561,878
Realised loss on derivatives (58,619,559)
(45,057,681)
Unrealised gain on investments 2,797,952
Unrealised loss on investments (37,704,003)
(34,906,051)
Unrealised gain on derivatives 17,878,465
Unrealised loss on derivatives (4,122,357)
13,756,108
Realised and unrealised gain on foreign currency transactions 3,107,221
Realised and unrealised loss on foreign currency transactions (3,743,284)
(636,063)
(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.
As disclosed in Note 2 Under the liquidation basis of accounting, assets as at
31 December 2023 are stated at their net realisable values. The Investment
Manager has determined that based upon the expected timing and manner of
disposition and extinguishment of the Company's assets and liabilities,
respectively, the fair value and carrying amounts of such assets and
liabilities approximate net realisable value and settlement amounts,
respectively.
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. Upon
adoption of the liquidation basis of accounting, derivative assets are
measured at net realisable value with changes in realisable value recognised
within the Statement of Changes in Net Assets in Liquidation. The Investment
Manager has determined that the fair value and carrying amounts approximate
net realisable value and settlement amounts respectively.
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 to support efficient portfolio management.
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 its 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 2023, the
Company suffered withholding taxes of $199,426 (31 December 2022: $12,968). As
of 31 December 2023, withholding taxes receivable (reclaimable) totalled $nil
(31 December 2022: $148,850).
The changes to the Company's discount control policy approved by shareholders
at the Extraordinary General Meeting held on 8 September 2020 ("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", if any, 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 2023, 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 2022: Nil)
(i) Dividends
Dividends are recognised in the Statement of Changes in Net Assets and
Statement of Changes in Net Assets (Liquidation Basis) in the period in which
the dividends are declared.
The below table sets out the dividends paid by the Company that were declared
in respect of the period 28 January 2023 to 31 December 2023:
Period ex-dividend date PAYMENT DATE Per Share Amount Distribution Amount
31 MARCH 2023 21 APRIL 2023 23 MAY 2023 £0.0148 £2,653,360.73
30 JUNE 2023 18 JULY 2023 16 AUGUST 2023 £0.023 £2,214,430.33
30 SEPTEMBER 25 OCTOBER 2023 22 NOVEMBER 2023 £0.021 £1,497,839.36
Total (£6,365,630.42)
The below table sets out the dividends paid by the Company that were declared
in respect of the period 1 January 2023 to 27 January 2023:
Period ex-dividend date PAYMENT DATE Per Share Amount Distribution Amount
31 JANUARY 2023 19 JANUARY 2023 14 FEBRUARY 2023 £0.0054 (£1,500,501)
Total (£1,500,501)
(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 as a result of a share buyback and/or 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 Net Assets and Statement of Changes in Net Assets
(Liquidation Basis). 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
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.
The Board is responsible for managing the business affairs of the Company but
delegates certain functions to the Investment Manager an amended and restated
Investment Management Agreement (the "Agreement") dated 18 March 2011, as
amended ("IMA").
The Manager is a related party of the AIFM, each of the AIFM and the Manager
are indirectly wholly owned subsidiaries of Neuberger Berman Group LLC. On 17
July 2014, the Company, the Manager and Neuberger Berman Investment Advisers
LLC (which had acted as Sub-Investment Manager) made certain classification
amendments to an original Investment Management Agreement dated 18 March 2011
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 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 effective 8 September 2020 and effective 27
January 2023 to reflect further changes to the Investment Manager's fee. The
IMA was amended by way of a side letter dated 23 February 2023, which was
effective 27 January 2023, to reflect changes to fees. The IMA was also
amended effective 30 January 2023, to reflect changes for GDPR.
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 submit and generally will not submit individual investment or
divestment 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 was entitled to the following rates per
annum of the Company's NAV:
On first £500m of the NAV
0.75%
On £500m - £750m of the
NAV
0.70%
On 750m - £1bn of the
NAV
0.65%
Any amount greater than £1bn of the
NAV 0.60%
Effective 27 January 2023 the IMA was further amended to reflect a reduction
in the Investment Manager's applicable fee above by 7.5 basis points until 50%
of the Company's assets by market value held as at the date of the EGM have
been realised and thereafter a reduction to the applicable fee above by a
further 7.5 basis points until all of the Company's assets have been realised.
Any existing asset held by the Company will be deemed to have been realised at
the date at which the contract for the sale of the asset is entered into, as
opposed to the date at which the Company receives the proceeds from the sale
of the asset.
For the year ended 31 December 2023, the management fee expense was $844,025
(31 December 2022: $1,896,668), of which $81,905 (31 December 2022: $389,749)
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 £40,000 per annum each (£50,000 for the Chair). The Chair of the
Audit and Risk Committee receives an additional £6,000 for services in this
role. The Chair of the Management Engagement Committee and the Chair of the
Remuneration and Nomination Committee receive an additional £3,000 each per
annum and the Senior Independent Director receives an additional £3,000 per
annum. For the year ended 31 December 2023, the Directors' fees and travel
expenses amounted to $179,744 (31 December 2022: $185,614). Of these, $Nil
were prepaid at the year-end (31 December 2022: $Nil).
As at 31 December 2023, Mr Dorey (inc. spouse) and Mr Staples held 46,746 and
8,563 Sterling Ordinary Shares in the Company respectively (31 December 2022:
Mr Dorey (inc. spouse) and Mr Staples held 245,671 and 45,000 Sterling
Ordinary Shares in the Company respectively).
Ms. Duhot did not hold any shares in the Company at 31 December 2023 (31
December 2022: Nil). As at 31 December 2023 Mr Dorey's wife held 15,350
Sterling Ordinary Shares (31 December 2022: 80,671 Sterling Ordinary Shares).
During the year ended 31 December 2023, the Directors received the following
dividend payments on their shares held: Mr Dorey £8,000 (2022: £9,469); Mr
Staples £2,182 (2022: £2,583) and Mr Dorey's wife received £3,912 (2022:
£4,630).
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 2023, the administration fee was $113,180 (31
December 2022: $133,708) of which $10,975 (31 December 2022: $9,945) 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 £80,000 plus out of
pocket expenses. For the year ended 31 December 2023, the secretarial fees
were $116,896 (31 December 2022: $114,138), $87,378 (31 December 2022:
$115,628) 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 2023 were $26,673 (31 December 2022: $49,790) and the amount owing to
them was $4,446 (31 December 2022: $10,487).
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.
Registrar's Agreement
Link Market Services (Guernsey) Limited is the appointed registrar of the
Company. For the year ended 31 December 2023, the Registrar's fees amounted to
$195,544 (31 December 2022: $20,040). Of these, $5,869 (31 December 2022:
$4,721) 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 2023
Numis Securities Limited are entitled to an annual retainer fee of £50,000
p.a. For the year ended 31 December 2023, the Corporate Broker and Financial
Advisors' fees amounted to $62,179 (31 December 2022: $60,299). Of these, $Nil
(31 December 2022: $nil) were unpaid at the year end.
Professional fees
Professional fees during the year were $678,904 (31 December 2022: $595,951).
Provision for Liquidation expenses
Liquidation costs include estimated liquidation fees expected to be incurred
by the Company until the Company is wound up. For the year ended 31 December
2023, the Company accrued liquidation costs of $900,000, which are included in
Adjustment for liquidation provisions in the Statement of Changes in Net
Assets (Liquidation Basis). This amount remained payable as of 31 December
2023 and is included in Statement of Assets and Liabilities (Liquidation
Basis).
The table below details the adjustment for liquidation provisions as at 31
December 2023 and 28 January 2023:
31 December 2023 28 January 2023
Opening at 28 January 2023/ 1 January 2023 2,875,608 -
Accrual of liquidation provision 2,875,608
Actual expenses incurred to date:
Investment management and services (718,662) -
Administration and professional fees (1,131,655) -
Directors' fees and travel expenses (125,291) -
Closing at 31 December 2023/ 28 January 2023 900,000 2,875,608
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 e.g. its replacement SOFR in the US and SONIA in the UK, for loans
issued after 2021) 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 (or SOFR/SONIA/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's portfolio comprises predominantly 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 the Company does not believe there to be any material
valuation risk as a result of the shift to a new reference rate
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 has invested 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
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.
Concentration Risks
The Company has invested a relatively large percentage of its assets in
issuers located in the USA. As a result, the Company's performance may be
closely aligned with the market, currency or economic, political or regulatory
conditions and developments in the USA and could be more volatile than the
performance of more geographically diversified investments.
Following the entering of the Managed Wind-down of the Company, the
realisation of the underlying positions over time has led and will continue to
lead to the remaining portfolio becoming less liquid and more concentrated in
fewer issuers.
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) hold assignments; 2) act
as a participant in primary lending syndicates; or 3) hold participations. If
the Company holds a participation of a senior loan interest, the Company would
typically in a contractual agreement with the lender or other third party
seller of 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 seller of the participation or other persons positioned between the
Company and the borrower. As of 31 December 2023, 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 Managed Wind-down. The effect of any future regulatory
change on the Company could be substantial and adverse.
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.
Under the Managed Wind-down, the return of cash to Shareholders will be
affected through the compulsory redemptions of Ordinary Shares in volumes and
on dates to be determined at the Directors' sole discretion. Shares will be
redeemed from all Ordinary Shareholders pro rata to their existing holdings of
Ordinary Shares on the relevant record date for any given Redemption Date. The
Directors are authorised to make such redemptions under the Articles.
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 2023 or as at 31 December 2022.
As at 31 December 2023, the Company's share capital comprised 42,182,147
Sterling Ordinary Shares ("NBMI") of no par value (of which nil were held in
treasury). On 24 April 2023, 76,083,114 Sterling Ordinary Shares, being all
the shares held in treasury were cancelled. As detailed in Note 1, effective 6
July 2022, following the closing of the first Cash Exit Facility Offer on 30
June 2022, 25,500,417 Ordinary Shares were validly tendered, redeemed and
cancelled on 7 July 2022.
FROM 1 JANUARY 2023 to 31 December 2023 Sterling
Ordinary Shares
Balance as at 1 January 2023 221,684,621
Cancelled following tender offers (179,502,474)
Balance as at 31 December 2023 (1) 42,182,147
(1) Balance of issued shares (less Treasury shares) used to calculate NAV
per share.
( )
FROM 1 JANUARY 2022 to 31 December 2022 Sterling
Ordinary Shares
Balance as at 1 January 2022 247,185,038
Cancelled following tender offers (25,500,417)
Balance as at 31 December 2022 (1) 221,684,621
(1) Balance of issued shares (less Treasury shares) used to calculate NAV
per share.
( )
Treasury Shares
As at 31 December 2023, the Company held the following shares in treasury.
31 December 2023 31 December 2022
Sterling Ordinary Treasury Shares
Opening number of shares 76,083,114 76,083,114
Shares bought into Treasury - -
Shares sold or cancelled from Treasury (76,083,114) -
Closing number of shares - 76,083,114
(1) The Company has shareholder approval to be able to buy back shares and may
elect to buy back 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. No shares were bought back during the years ended 31 December
2023 or 31 December 2022.
The Computation for earnings per share for the years ended 31 December 2023
and 31 December 2022 were as follows:
31 December 2023 31 December 2022
Net increase/(decrease) in net assets resulting from operations 16,757,393 (£51,270,818)
Divided by weighted average shares outstanding for 128,645,393 234,679,354
Sterling Ordinary Shares
Earnings per share for Sterling Ordinary Shares £0.1303 (£0.2185)
Note 7 - FINANCIAL HIGHLIGHTS
Sterling
31 December 2023 Ordinary ShareS as at
31 December 2023 (GBP)
Per share operating performance
NAV per share at the beginning of the year 0.7926
Income from investment operations ((a))
Net income per share for the year 0.0591
Net realised and unrealised gain from investments 0.0634
Foreign currency translation loss (0.0752)
Total gain from operations 0.0473
Distributions per share during the year (0.0743)
NAV per share at the end of the year 0.7656
NAV Total return (1, (b)) 5.86%
Ratios to average net assets ((b))
Net investment income 7.40%
On-Going Charges (2.44%)
(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
31 DeCEMBER 2022 Ordinary ShareS as at
31 DECEMBER 2022 (GBP)
Per share operating performance
NAV per share at the beginning of the year 0.9429
Income from investment operations ((a))
Net income per share for the year 0.0637
Net realised and unrealised loss from investments (0.2800)
Foreign currency translation gain 0.1230
Total loss from operations (0.0933)
Distributions per share during the year (0.0570)
NAV per share at the end of the year 0.7926
NAV Total return (1, (b)) (10.09%)
Ratios to average net assets ((b))
Net investment income 7.34%
On-Going Charges (1.22%)
(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 - SUBSEQUENT EVENT
On 20 February 2024, a compulsory redemption for £23,038,365 was announced at
a price of 79.04 pence per share, and a redemption date of 19 March 2024.
APPENDIX | FUND 3.3 Disclosure Addendum to the 2023 Annual Report (unaudited)
FUND 3.3 Disclosure Addendum to the 2023 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.
Other than the change to the investment objective described in the "Features"
part of the "Company Overview", there here have been no material changes
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 31 December 2023
is disclosed below:
Leverage calculated pursuant to the gross methodology:
2.55
Leverage calculated pursuant to the commitment methodology: 2.72
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 31 December 2023 are
listed in the table here below:
< 5 yrs 5 - 15 yrs > 15 yrs Risk measure description
Net DV01 USD 8,37 0 0 Change of 1 bps of rate
Net CS01 USD 6,507 0 0 Change of 1 bps for spread
The expected annual investment return / IRR in normal market conditions (in %) 0
Historical Simulation Monte Carlo Simulation Parametric
Simulation
VAR(1) 2.78%
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 14. 33
Second counterparty exposure Brock Holdings 13.06
Third counterparty exposure CHAMBERLAIN GROUP 2L TL 10/21 12.93
Fourth counterparty exposure Ivanti 5.50
Fifth counterparty exposure EG GROUP 2L TL EUR 02/21 4.86
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 State Street 1.03
Second counterparty exposure Westpac 0.43
Third counterparty exposure Goldman Sachs 0.00
Fourth counterparty exposure
Fifth counterparty exposure
Liquidity Profile
(a) Portfolio Liquidity Profile
In current market conditions the portfolio can be realised as follows:
44% within one day or less
34% within 2 to 7 days
22% within 8 to 30 days
The Fund had USD6,761,199 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:
100 % within one day or less
(c) Investor Redemption
Does the Fund provide investors with withdrawal / redemption rights in the No
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 $127,101 representing $31,895 of fixed compensation and $95,206
of variable compensation. There were 1,026 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 2023 was
$352,046,073 in relation to senior management and $836,987 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
16 April 2024
APPENDIX | 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 performance measures PURPOSE and/or description CalculatioN
Net Asset Value ("NAV") total return The total return is the % of change in NAV per share from the start of the Opening NAV per share (A)
year. It assumes that dividends paid to shareholders are reinvested at NAV at
the time the shares are quoted ex-dividend. Closing NAV per share (B)
Daily NAV Movement (C) = (B-A/A)
Dividend to date(1) = D
Reinvested Dividend (E) = (1+C)*D
NAV Total Return = ((B+E)-A)/A
(1) Monthly dividends added on ex-date.
(Discount) or Premium to NAV The share price of an Investment Company is derived from buyers and sellers NAV per share(2) (A)
trading the company's shares on the stock market. This price is not identical
to the NAV. If the share price is lower than the NAV per share, the shares are Quoted Share price per share(2) (B)
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.
(Discount) or Premium = (B-A)/A
(2) As at 31 December 2023
Alternative performance measures PURPOSE and/or description CalculatioN
On-going charges On-going Charges (formerly known as Total Expense Ratio TER ) are calculated Annualised ongoing charges (A)
using the AIC Methodology, which is a measure, expressed as a percentage of
NAV, of the regular, recurring costs of the Company. "On-going charges are Average undiluted net asset value in the period (B)
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 Ongoing charges (%) = (A)/(B)
costs incurred in the year as being the best estimate of future costs".
Current Gross Portfolio Yield The Company's Current Gross Portfolio Yield is a market-value weighted average Coupon (A)
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 Current security price (B)
not take into account any fees, Company's expenses or sales charges paid,
which would reduce the results. Relative weight of security = security market value/portfolio market value =
(C)
Current Gross Portfolio Yield = ∑ (A/B)*C
12 month rolling dividend yield The rolling 12-month dividend yield is based on the dividends declared in Sum of Monthly Dividends (A)
respect of the 12 months to 31 December 2023 and share price as at 31 December
2023. Share price 31 December 2023 (B)
Rolling Dividend Yield = (A) / (B)
Yield to Maturity The Company's Current Yield to Maturity (YTM) is a market-value weighted Number of years to maturity of security (n)
average of the current yields of the holdings in the portfolio, The YTM is the
annual return rate anticipated on a security if held until it matures. Coupon (A)
Current security price (B)
Face value, security market value or par value (C)
Relative weight of security = security market value/portfolio market value =
(D)
YTM= ∑[(A +C-B)*D]
n
C+B
2
Share Price Total Return The share price total return is the % of change in Share Price from the start Opening Share Price per share (A)
of the year until the end of the year. It assumes that dividends paid to
shareholders are reinvested at the share price at the time the shares are Closing Share Price per share (B)
quoted ex-dividend.
Daily Share Price Movement (C) = (B-A/A)
Dividend to date(1) = D
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
Contact Details
Directors
Designated Administrator Registrar
Rupert Dorey - Chair
Laure Duhot U.S. Bank Global Fund Services (Guernsey) Limited Link Market Services (Guernsey) Limited
David Staples
Custodian and Principal Bankers UK Transfer Agent
All c/o the Company's registered office.
US Bank National Association Link Asset Services
Registered Office 34 Beckenham Road
Sub-Administrator Beckenham
1 Royal Plaza Kent
Royal Avenue U.S. Bank Global Fund Services (Ireland) Limited BR3 4TU
St Peter Port United Kingdom
Guernsey Financial Adviser and Corporate Broker
GY1 2HL Shareholders holding shares directly and not through a broker, saving scheme
or ISA and have queries in relation to their shareholdings should contact the
Numis Securities Limited 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
Company Secretary 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
Alternative Investment Fund Manager details via Link's website:
Sanne Fund Services (Guernsey) Limited www.signalshares.com
Neuberger Berman Investment Advisers LLC
Solicitors to the Company (as to English law and U.S. securities law)
Manager
Herbert Smith Freehills LLP
Neuberger Berman Europe Limited
Advocates to the Company (as to Guernsey law)
Carey Olsen
Full contact details of the Company's advisers and Manager can be found on the
Company's website.
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 (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. Note the Board intends to keep under review
the daily publication of the NAV of the Company's Ordinary Shares in light of
the diminishing size of the Company during the Managed Wind-down and the costs
of preparing such daily NAV publications.
Company Numbers
Sterling Ordinary Shares
LSE ISIN code: GG00BNNJMX19
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).
1 The Board intends to keep under review the daily publication of the NAV of
the Company's Ordinary Shares in light of the diminishing size of the Company
during the Managed Wind-down and the costs of preparing such daily NAV
publications.
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