Nb Distres Red Regulatory News (NBDG)

NB DISTRESSED DEBT INVESTMENT FUND LIMITED

2020 Interim Report

Unaudited Consolidated Interim Financial Statements

For the six month period ended 30 June 2020

COMPANY OVERVIEW | Features

Features

NB Distressed Debt Investment Fund Limited (the "Company")

The Company is a closed-ended investment company incorporated and registered in Guernsey on 20 April 2010 with registration number 51774. The Company is governed under the provisions of the Companies (Guernsey) Law, 2008 (as amended) (the "Law"), and the Registered Collective Investment Scheme Rules 2018 issued by the Guernsey Financial Services Commission ("GFSC"). It is a non-cellular company limited by shares and has been declared by the GFSC to be a registered closed-ended collective investment scheme. The Company trades on the Specialist Fund Segment ("SFS") of the London Stock Exchange ("LSE").

The Company is a member of the Association of Investment Companies (the "AIC") and is classified within the Debt - Loans & Bonds Category.

Investment Objective

The Company's primary objective is to provide investors with attractive risk-adjusted returns through long-biased, opportunistic exposure to stressed, distressed and special situation credit-related investments while seeking to limit downside risk by, amongst other things, focusing on senior and senior secured debt with both collateral and structural protection.

Investment Policy

More information on the Company's investment policy is provided below of the Annual Report and Financial Statements for the year ended 31 December 2019.

Alternative Investment Fund Manager ("AIFM") and Manager

Investment management services are provided to the Company by Neuberger Berman Investment Advisers LLC (the "AIFM") and Neuberger Berman Europe Limited (the "Manager"), collectively the "Investment Manager". The AIFM is responsible for risk management and discretionary management of the Company's Portfolio and the Manager provides, amongst other things, certain administrative services to the Company.

Share Capital

At 30 June 2020 the Company's share capital comprised the following1:

Ordinary Share Class ("NBDD")

15,382,770 Ordinary Shares, none of which were held in treasury.

Extended Life Share Class ("NBDX")

82,495,074 Extended Life Shares, none of which were held in treasury.

New Global Share Class ("NBDG")

42,929,950 New Global Shares, none of which were held in treasury.

1 In addition the Company has two Class A Shares in issue. Further information is provided in the Capital Structure section of this report below.

For the purposes of efficient portfolio management, the Company has established a number of wholly-owned subsidiaries domiciled in the US, the Cayman Islands and Luxembourg. All references to the Company in this document refer to the Company together with its wholly-owned subsidiaries.

Non-Mainstream Pooled Investments

The Company currently conducts its affairs so that the shares issued by the Company can be recommended by Independent Financial Advisers to ordinary retail investors in accordance with the Financial Conduct Authority's ("FCA") rules in relation to non-mainstream pooled investment ("NMPI") products and intends to continue to do so for the foreseeable future.

The Company's shares are excluded from the FCA's restrictions which apply to NMPI products.

Company Numbers

Ordinary Shares

LSE ISIN code: GG00BDFZ6F78

Extended Life Shares

LSE ISIN code: GG00BMY71631

New Global Shares

LSE ISIN code: GG00BMY71748

Legal Entity Identifier

YRFO7WKOU3V511VFX790

Website

www.nbddif.com

Capital Structure 

The Company's share capital consists of three different share classes, all of which are in the harvest period: the Ordinary Share Class; the Extended Life Share Class; and the New Global Share Class. These share classes each have different capital return profiles and, in one instance a different geographical remit. In addition, the Company has two Class A Shares in issue. While the Company's share classes are all now in harvest, returning capital to shareholders, the Company's corporate umbrella itself has an indefinite life to allow for flexibility for the Company to add new share classes if demand, market opportunities and shareholder approval supported such a move, although the Company has no current plans to create new share classes. Each share class is considered in turn below.

Ordinary Share Class

NBDD was established at the Company's launch on 10 June 2010 with a remit to invest in the global distressed debt market with a focus on North America. The investment period of NBDD expired on 10 June 2013.

Voting rights: Yes

Denomination: US Dollars

Hedging: Portfolio hedged to US Dollars

Authorised share capital: Unlimited

Par value: Nil

Extended Life Share Class

A vote was held at a class meeting of NBDD shareholders on 8 April 2013 where the majority of shareholders voted in favour of a proposed extension.

Following this meeting and with the NBDD shareholders' approval of the extension, on 9 April 2013 a new Class, NBDX, was created and the NBDX Shares were issued to 72% of initial NBDD investors who elected to convert their NBDD Shares to NBDX Shares. NBDX had a remit to invest in the global distressed debt market with a focus on North America. The investment period of NBDX expired on 31 March 2015.

Voting rights: Yes

Denomination: US Dollars

Hedging: Portfolio hedged to US Dollars

Authorised share capital: Unlimited

Par value: Nil

New Global Share Class

NBDG was created on 4 March 2014 and had a remit to invest in the global distressed market with a focus on Europe and North America. The investment period of NBDG expired on 31 March 2017.

Voting rights: Yes

Denomination: Pound Sterling

Hedging: Unhedged portfolio

Authorised share capital: Unlimited

Par value: Nil

Class A Shares

The Class A Shares are held by a trustee pursuant to a purpose trust established under Guernsey law. Under the terms of the Trust Deed the Trustee holds the Class A Shares for the purpose of exercising the right to receive notice of general meetings of the Company but the Trustee shall only have the right to attend and vote at general meetings of the Company when there are no other Shares of the Company in issue.

Voting rights: No

Denomination: US Dollars

Authorised share capital: 10,000 Class A Shares

Par value: US Dollar $1

Financial Highlights

Key Figures

1 Stated in US Dollars, the £ price as at 30 June 2020 and 31 December 2019 converted to US Dollars using respective period/year end exchange rates.

2 The TERs represent the Company's management fees and all other operating expenses, as required by US Generally Accepted Accounting Principles ("US GAAP"), expressed as a percentage of average net assets.

3 In the year to 30 June 2020, the Company's annualised Ongoing Charges were 2.15%. This figure is based on an expense figure for the year to 30 June 2020 of $1,771,494. This figure, which has been prepared in accordance with AIC guidance represents the Company's management fees and all other operating expenses, excluding finance costs payable, expressed as a percentage of average net assets. No performance fees were payable as at 30 June 2020. The Ongoing Charges by share class are disclosed above.

Summary of Value in Excess of Original Capital Invested

1 By way of dividend

A detailed breakdown of the Company's distributions is provided on the Company's website at www.nbddif.com under "Investor Information", "Capital Activity".

2020 INTERIM PERFORMANCE REVIEW | Chairman's Statement

Chairman's Statement

Dear Shareholder,

The six-month period ended 30 June 2020 was one of near unprecedented economic and social disruption but, notwithstanding, the Company delivered further capital distributions to the shareholders of the NBDX and NBDG share classes consistent with the now well-established and orderly realisation of the portfolios. With each share class in its harvest period, we continue to seek to balance the pace of exits and the value achieved for shareholders as we return capital to our investors. As a reminder the Ordinary class shareholders will no longer receive capital distributions until such time as all final assets attributable to them have been realised to ensure compliance with UK regulations.

Company Performance

By the 30 June 2020, the Company had returned a total of $132.8m or 106.7% of NBDD investors' original capital of $124.5m, $251.7m or 70.06% of NBDX investors' original capital of $359.4m and £27.1m or 24.52% of NBDG investors' original capital of £110.8m. Additionally, $0.05m was spent on buying back NBDX shares and £11.5m was spent on buying back NBDG shares in a manner accretive to net asset value ("NAV"). The Board continually reviews the most appropriate means to return capital to shareholders to maximise the benefit to shareholders and we look forward to reporting further realisations in the coming quarters and the subsequent distribution of those proceeds on the receipt of the funds.

On 17 June 2020, we announced a further capital distribution of $10.5m to our NBDX shareholders and £10.5m to our NBDG shareholders which was paid to the NBDX and NBDG shareholders on 10 July 2020.

Securing the balance between the pace of exits and the value for shareholders is an active exercise. In many instances, assets will need intense management to realise their full potential. In response to the market improvements post the March lows the Investment Manager realised all the remaining holdings of listed equities so as to safeguard against any further market declines. The Board continues to monitor all costs to ensure that they are appropriate as we are conscious that shareholders may be concerned about the impact of costs on a reducing portfolio during the harvest period.

The balance between capital distributions and buybacks is nuanced. Our policy continues to be to try to monitor and manage the share price discount to NAV in a way that is accretive to those shareholders who do not wish to sell.

Annual General Meeting ("AGM") Results

We were pleased to see that shareholders voted overwhelming in favour of all resolutions proposed at our AGM held on 25 June 2020 and would like to take the opportunity to thank you all for your votes and support.

Brexit

As previously reported in our annual report, Brexit has not impacted our operations in any material manner and having reviewed the portfolio extensively, we do not believe there is any significant impact from Brexit at the end of the transition period. Shareholders are reminded that the NBDD and NBDX Portfolios are US Dollar denominated and any non-US exposure is hedged back to the US Dollars. However, the outcome of Brexit has not had a material direct impact on these Portfolios. NBDG, on the other hand, is a Pound Sterling denominated, but unhedged, share class with a broader geographic remit than the other two share classes and the Board expects some continued volatility in the currency markets, which in turn would translate into volatility in the value of NBDG's non-Sterling assets. At the time of writing, uncertainty remains around the future relationship between the United Kingdom and the European Union.

COVID-19

As reported at the time of our Annual Report, the world has experienced unprecedented times as a result of the COVID-19 pandemic and the value of many of our assets have been negatively affected. I am pleased to be able to report that our key service providers have continued to provide services to the Company throughout the pandemic and thank them for their efforts.

The various valuation methodologies we use to value your portfolio's holdings have been reviewed and we consider that they remain appropriate for determining values at any given point in time. However, the timing of the orderly realisation of these assets is less certain and the quantum of the proceeds therefrom is difficult to predict. Our objectives will remain the same; to maximise the benefit to investors during this harvest period and to continue to provide updated information regarding asset values.

Outlook

As reported in the annual report the Ordinary class of shares will be the first to commence the final wind up process, followed by the Extended share class and then the New Global share class. As is normally the case with investment companies, as opposed to those with commercial undertakings, this does not currently have any material impact on the Company's ability to continue as a going concern or remain viable. However, the whole process must be managed in a way that ensures compliance with UK regulations.

The Extended and Global classes will continue to distribute until their net assets are reduced to approximately $34.4m and £8.1m respectively. In certain cases, the cash associated with these share classes will need to remain in underlying corporate vehicles while tax and other matters relating to those vehicles are concluded. We will keep investors appraised of developments in respect of the remaining assets.

We had previously indicated that we expect the final distribution of the Ordinary share class to be made during the course of this year and that remains the case. The wind up of the other two classes will take a little longer but we hope to complete the realisation process in the next couple of years. As noted earlier, upheaval in financial markets and global trade uncertainty may impact these timings and we will keep shareholders updated via the quarterly fact sheets.

We have announced that with effect from 13 September 2020 Jefferies International Limited will replace Stifel Nicolaus Europe Limited ("Stifel") as sole broker and financial adviser to the Company and I would like to take this opportunity to thank Stifel for their services.

On behalf of the Board, I would like to thank our longstanding shareholders for your support of our Company. We look forward to updating you further on investment realisations throughout the remainder of the year.

John Hallam

Chairman

26 August 2020

2020 INTERIM PERFORMANCE REVIEW | Investment Manager's Report

Investment Manager's Report

Ordinary Share Class

Summary

During the first half of 2020 the NAV per share decreased by 24.7%. We continued to see significant volatility in the markets due to the spread of COVID-19 and its impact on global growth expectations. The long term effects of COVID-19 on the global economy remain unknown at this time. With the sale of the public equities in the first half of the year, the remaining investments await realisation events. The Investment Manager is committed to realising the investments in a timely manner and winding down the share class as soon as practicable, but there is one asset we are working through which will determine the final distribution date. The Investment Manager is evaluating options to wind down the share class. For regulatory reasons, the final 10% of the total return (NAV plus cumulative distributions) in respect of any class of participating shares in NB Distressed Debt Investment Fund Limited ("NBDDIF") will be returned to shareholders with a final compulsory redemption of all of the outstanding shares of that class. As such, there will be no further distribution for NBDD until the final distribution to investors and the wind-down of the share class.

Portfolio Update

NBDD ended the first half of 2020 with a NAV per share of $0.6845 compared to $0.9086 at end of 2019. The NAV decrease was principally driven by lower prices in the investments in light of the COVID-19 crisis and realised losses in exits of public equities. At 30 June 2020, 93% of NBDD's NAV was invested in distressed assets (including cash, receivables and net payables) with 7% held in cash net of payables (see table below). Cash continues to build as assets are realised. The portfolio consisted of 7 issuers across 6 sectors. The largest sector concentrations were in surface transportation, financial intermediaries and packaging.

Notable events below describe activity in the investments during the first six months of 2020:

· During the period, Exide Technologies filed for Chapter 11 bankruptcy due to the global shutdown and COVID-19. The company does not expect to reorganise and has begun a sales process for the various business units. The valuation impact was a ($1.1m) unrealised loss. The magnitude of the unrealised loss is due to the decline in business operations as well as the decision to not reorganise and sell off the business units.

· The Company completed the exit of all public equities.

Significant Price Movement during first half of 2020 (approximately 1% of NBDD NAV or $100,000)

Exits

During the first half of the year, we saw four exits, which generated a total return of $(3.4m). This brings the total number of exits since inception in NBDD to 49, with total return of $40.2m. Detailed descriptions of the exits are at the end of this report.

Partial Realisations

The partial realisations generated a total return of $(0.5m) as of 30 June 2020. Detailed descriptions of the partial realisations are at the end of this report.

Distributions

To date, $132.8m or 107% of original capital has been distributed to investors in the form of capital distributions via redemptions and income dividends. Total value available to investors including NAV and all distributions paid is $143.3m (115% of original capital). As explained above, for regulatory reasons, the final 10% of the total return (NAV plus cumulative distributions) in respect of any class of participating shares in NBDDIF will be returned to shareholders with a final compulsory redemption of all of the outstanding shares of that class. The next distribution for NBDD will be the final distribution to investors and will wind down the share class. Our current expectation is to wind down the share class as soon as practicable. However there is one asset we are working through which will determine the final distribution date. We will continue to update investors as we gain clarity on the realisations.

Extended Life Share Class

Summary

During the first six months, the NAV per share decreased by 23.5%. We continued to see significant volatility in the markets due to the spread of COVID-19 and its impact on global growth expectations and economic recovery. The effects of COVID-19 on the global economy remain unknown at this time. With the sale of the public equities in the first half of the year, the remaining investments await realisation events. The Investment Manager is committed to realising the investments in a timely manner and winding down the share class as soon as practicable.

Portfolio Update

NBDX ended the first half of the year with a NAV per share of $0.7087 compared to $0.9266 at end of 2019. At 30 June 2020, 98% of NBDX's NAV was invested in distressed assets (including cash receivables and net payables held in subsidiaries) with 2% held in cash (see table below). At 30 June 2020, NAV decreased 23.5% during the period principally due to losses in public equities and unrealised losses in the existing portfolio with the impact of COVID-19. With the exit of the public equities, the NBDX portfolio consisted of 13 issuers across 10 sectors. The largest sector concentrations were in surface transportation, shipping, lodging & casinos, and financial intermediaries.

Notable events below describe activity in the investments during first half of 2020:

· During the period, Exide Technologies filed for Chapter 11 bankruptcy due to the global shutdown and COVID-19. The company does not expect to reorganise and has begun a sales process for the various business units. The valuation impact was a ($9.7m) unrealised loss. The magnitude of the unrealised loss is due to the decline in business operations as well as the decision to not reorganise and sell off the business units.

· The Company completed the exit of all public equities.

· Non Ferrous Metals investment - The sale of the company was completed and private shares tendered for cash.

Significant Price Movements during first half of 2020 (approximately 1% of NBDX NAV or $600,000)

Exits

During the first half of the year, we saw nine exits for NBDX, which generated a total return of $(37.7m). This brings the total number of exits since inception in NBDX to 66 with total return of $77.7m. Detailed descriptions of the exits are at the end of this report.

Partial Realisations

The partial realisations generated a net gain of $(1.2m) in the first half of the year and $15.4m over the life of the Company. Detailed descriptions of the partial realisations are at the end of this report.

Distributions

During the first six months of 2020, NBDX approved distributions of $23m. The company made a $12.5m capital distribution via redemption of shares which, when combined with a further distribution of $10.5m approved in the second quarter and paid in July 2020, gives total distributions (dividends, redemptions and buy-backs) of $286.1m or 80% of original capital. Total value available to investors including NAV and all distributions paid is $344.4m or 96% of original capital. With the uncertainty as to how long the economic downturn will last, certain realisations in NBDX have been delayed. For regulatory reasons, the final 10% of total return in respect of any class of participating shares in NBDDIF will be returned to shareholders with the final compulsory redemption of all of the outstanding shares of that class. The Investment Manager is committed to realising the investments in a timely manner to distribute cash to investors as soon as possible.

Share Buybacks

During the first six months of 2020, NBDX purchased 1.7m of its own shares under the buyback programme at a cost of $1m and weighted average discount of (27.97%). The shares have been cancelled.

New Global Share Class

Summary

During the first six months, the NAV per share decreased by 26.5%. We continued to see significant volatility in the markets due to the spread of COVID-19 and its impact on global growth expectations and economic recovery. The effects of COVID-19 on the global economy remain unknown at this time. With the sale of the public equities in the first half of the year, the remaining investments await realisation events. The Investment Manager is committed to realising the investments in a timely manner and winding down the share class as soon as practicable.

Portfolio Update

NBDG ended the first half of 2020 with a NAV per share of £0.6125 compared to £0.8339 at the end of 2019. At 30 June 2020, 94% of NBDG's NAV was invested in distressed assets (including cash receivables and net payables held in subsidiaries) with 6% held in cash (see table below). NAV decreased 26.5% during the quarter principally due to losses in public equities and unrealised losses in the existing portfolio with the impact of COVID-19. With the exit of the public equity investments, the portfolio consisted of 13 issuers across 7 sectors. The largest sector concentrations were in lodging & casinos, commercial mortgage, surface transportation and shipping.

Notable events involving NBDG's investments during the first half of 2020 are below:

· During the period, Exide Technologies filed for Chapter 11 bankruptcy due to the global shutdown and COVID-19. The company does not expect to reorganise and has begun a sales process for the various business units. The valuation impact was a (£4.0m) unrealised loss. The magnitude of the unrealised loss is due to the decline in business operations as well as the decision to not reorganise and sell off the business units.

· The Company completed the exit of all public equities.

· Non Ferrous Metals investment - The sale of the company was completed and private shares tendered for cash.

Significant Price Movements during first half of 2020 (approximately 1% of NBDG NAV or £300,000)

Exits

During the first six months of 2020, we saw ten exits, which generated a total return of £(14.4m). This brought the total number of exits since inception to 29 with a total return of £(5.5m). Detailed descriptions of the exits are at the end of this report.

Partial Realisations

There were no partial realisations in NBDG during the first six months of 2020.

Distributions

During the first six months of 2020, the company made a £7.5m capital distribution via redemption of shares which, when combined with a further distribution of £10.5m approved in the second quarter and paid in July 2020, gives total distributions (dividends, redemptions and buy-backs) of £55.2m or 50% of original capital. Total value available to investors including NAV and all distributions paid is £81.5m or 74% of original capital. With the uncertainty as to how long the economic downturn will last, certain realisations in NBDG have been delayed. For regulatory reasons, the final 10% of total return in respect of any class of participating shares in NBDDIF will be returned to shareholders with the final compulsory redemption of all of the outstanding shares of that class. The Investment Manager is committed to realising the investments in a timely manner to distribute cash to investors as soon as possible.

Share Buybacks

During the first six months, NBDG purchased 1.2m shares under the buyback programme at a cost of £0.7m and weighted average discount of (17.45%). The shares have been cancelled.

Summary of Exits across all Share Classes

The total exits during the first half of 2020 can be summarised as follows:

· NBDD - Four exits

· NBDX - Nine exits

· NBDG - Ten exits

Exits experienced from inception to date were as follows:

NBDD 49 exits with a total return of $40.2m, IRR of 12% and ROR of 22%

NBDX 66 exits with a total return of $77.5m, IRR of 7% and ROR of 13%

NBDG 29 exits with a total return of (£5.5m), IRR of (4)% and ROR of (5)%

The annualised internal rate of return ("IRR") is computed based on the actual dates of the cash flows of the security (purchases, sales, interest and principal pay downs), calculated in the base currency of each portfolio. The Rate of Return ("ROR") represents the change in value of the security (capital appreciation, depreciation and income) as a percentage of the purchase amount. The purchase amount can include multiple purchases.

Exit L (Exit 20 for NBDG and Exit 58 for NBDD)

Exit M (Exit 21 for NBDG and Exit 59 for NBDD)

Exit N (Exit 46 for NBDD and Exit 60 for NBDX)

Exit O (Exit 22 for NBDG and 61 for NBDX)

Exit P (Exit 23 for NBDG, Exit 47 for NBDD and Exit 62 for NBDX)

Exit Q (Exit 24 for NBDG and Exit 63 for NBDX)

Exit R (Exit 25 for NBDG)

Exit S (Exit 26 for NBDG and Exit 64 for NBDX)

Exit T (Exit 27 for NBDG and Exit 65 for NBDX)

Exit U (Exit 28 for NBDG, Exit 48 for NBDD and Exit 66 for NBDX)

Exit V (Exit 29 for NBDG and Exit 49 for NBDD)

 Summary of Partial Realisations across all Share Classes

All partial realisations currently in the portfolio are reported as at 30 June 2020 and it should be noted that their IRR and ROR are likely to be different at the time of the final exit. These were the following partial realisations:

· NBDD - Two

· NBDX - Two

· NBDG - None

Partial Realisation B: NBDD and NBDX

NBDD and NBDX invested $7.1m to purchase first lien secured bank debt with attached private equity of an international packaging company. The debt was repaid in full shortly after the purchase with the receipt of $5.8m and the Company retained the equity, receiving dividends of $1.7m during the holding period. During the second quarter the company's sale to a complementary packaging company was announced. NBDX and NBDD elected to receive sale proceeds in cash and newly created shares in the acquirer for a combined value of $4.0m. In the third quarter of 2017, the Company received $1.5m cash as part of the sale proceeds from the disposal completed at the end of the second quarter of 2017 and $1.0m for partial redemption of new shares received in the acquirer. The company's operating performance declined due to raw material price increases. The current value of the private equity position is $0.5m generating a total return of $3.4m as of 30 June 2020. IRR was 25% and ROR was 48% with a holding period of 92 months at 30 June 2020.

Partial Realisation C: NBDD and NBDX

NBDD and NBDX invested $9.2m in preferred equity certificates ("PECs") and private equity of a European packaging company. The PECs were retired in full in 2015 and the company paid dividends on the equity during the holding period. Cash received to date is $23.2m. In the second quarter, the company announced it was purchasing another complementary packaging company (Partial Realisation B, above) and completing a recapitalisation to refinance existing debt, provide cash for the acquisition and pay a dividend to shareholders. The company's operating performance declined due to raw material price increases. The current value of the private equity position is $3.8m, generating a total return of $17.8m as at 30 June 2020. IRR was 52% and ROR was 193% with a holding period of 94 months at 30 June 2020.

Neuberger Berman Investment Advisers LLC Neuberger Berman Europe Limited

26 August 2020 26 August 2020

2020 INTERIM PERFORMANCE REVIEW | Portfolio Information

Portfolio Information

Ordinary Share Class

Top 71 Holdings at 30 June 2020

Sector Breakdown3

For Sector and Country breakdown, click on, or paste the following link into your web browser, to view page 1 in the associated PDF document.

 http://www.rns-pdf.londonstockexchange.com/rns/2637X_1-2020-8-26.pdf 

1 Ordinary Share Class holds seven investments by issuer.

2 As at 30 June collateral pledged is included in the Surface Transport Market Value.

3 Categorisations determined by Neuberger Berman; percentages determined by Neuberger Berman and U.S Bank Global Fund Services (Guernsey) Limited / U.S. Bank Global Fund Services (Ireland) Limited as Administrator / Sub-Administrator to the Company. Please note that irrespective of the "sector" in which an investment is made, the underlying assets constituting the collateral for the investment comprise real estate assets in a majority of cases. As a result, NBDD's overall exposure to the real estate sector may be more than its actual direct exposure to that sector.

Country Breakdown4

For Sector and Country breakdown, click on, or paste the following link into your web browser, to view page 2 in the associated PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/2637X_1-2020-8-26.pdf

4 Categorisations determined by Neuberger Berman and percentages determined by the Administrator, based on market values at 30 June 2020 and 31 December 2019.

5 As at 30 June collateral pledged is included in the Brazil Market Value.

Extended Life Share Class

Top 10 Holdings at 30 June 2020

Sector Breakdown2

For Sector and Country breakdown, click on, or paste the following link into your web browser, to view page 3 in the associated PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/2637X_1-2020-8-26.pdf

1 As at 30 June collateral pledged is included in the Surface Transport Market Value.

2 Categorisations determined by Neuberger Berman; percentages determined by Neuberger Berman and U.S Bank Global Fund Services (Guernsey) Limited / U.S. Bank Global Fund Services (Ireland) as Administrator / Sub-Administrator to the Company. Please note that irrespective of the "sector" in which an investment is made, the underlying assets constituting the collateral for the investment comprise real estate assets in a majority of cases. As a result, NBDX's overall exposure to the real estate sector may be more than its actual direct exposure to that sector.

Country Breakdown3

For Sector and Country breakdown, click on, or paste the following link into your web browser, to view page 4 in the associated PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/2637X_1-2020-8-26.pdf

 3 Categorisations determined by Neuberger Berman and percentages determined by the Administrator, based on market values at 30 June 2020 and 31 December 2019.

4 As at 30 June collateral pledged is included in the Brazil Market Value.

New Global Share Class

Top 81 Holdings at 30 June 2020

Sector Breakdown2

For Sector and Country breakdown, click on, or paste the following link into your web browser, to view page 5 in the associated PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/2637X_1-2020-8-26.pdf

1 Global Share Class holds eight investments by issuer

2 Categorisations determined by Neuberger Berman; percentages determined by Neuberger Berman and U.S Bank Global Fund Services (Guernsey) Limited / U.S. Bank Global Fund Services (Ireland) Limited as Administrator / Sub-Administrator to the Company. Please note that irrespective of the "sector" in which an investment is made, the underlying assets constituting the collateral for the investment comprise real estate assets in a majority of cases. As a result, NBDG's overall exposure to the real estate sector may be more than its actual direct exposure to that sector.

Country Breakdown3

For Sector and Country breakdown, click on, or paste the following link into your web browser, to view page 6 in the associated PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/2637X_1-2020-8-26.pdf

3 Categorisations determined by Neuberger Berman and percentages determined by the Administrator, based on market values at 30 June 2020 and 31 December 2019.

GOVERNANCE | Interim Management Report and Directors' Responsibility Statement

Interim Management Report and Directors' Responsibility Statement

Principal Risks and Uncertainties

The principal risks of the Company are in the following areas:

· investment activity and performance;

· principal risks associated to harvest periods;

· level of premium or discount;

· market price risk;

· fair valuation of illiquid assets;

· accounting, legal and regulatory risk; and

· operational risk.

These risks, and the way in which they are managed, are described in more detail in the Strategic Report on pages 27 to 29 of the Company's latest annual report and audited financial statements for the year ended 31 December 2019, which can be found on the Company's website at www.nbddif.com/pdf/annual_report_nbddif_2019.pdf. The Board's view is that these risks remain appropriately identified for the remainder of 2020.

In addition to the Principal Risks, there remains uncertainty of the full and long term impacts of the global novel coronavirus ("COVID-19") pandemic. The Board considers downside risk to global growth and delay in global economic recovery and market liquidity arising from the COVID-19 pandemic could potentially result in a risk of the reduction in portfolio performance and delays to realisation of assets. The Investment Manager reviews the portfolio on a regular basis for impact of COVID-19 on underlying assets, performance etc. To manage this risk further, the Investment Manager reviews time to realisation quarterly to ensure balance between timing and value. In addition to its usual quarterly risk review, the Board will monitor the impact of the COVID-19 outbreak as the pandemic develops and further information becomes available.

Going Concern

Having reassessed the principal risks, the Directors consider it appropriate to prepare the Unaudited Consolidated Interim Financial Statements (the "Financial Statements") on a going concern basis.

Related Party Transactions

The contracts with the Investment Manager and Directors are the only related party transactions currently in place. Other than fees payable in the ordinary course of business, there have been no material transactions with related parties, which have affected the financial position or performance of the Company in the six month period ended 30 June 2020. Additional related party disclosures are given in Note 6 below.

Directors' Responsibilities Statement

The Board of Directors confirms that, to the best of its knowledge:

· The Financial Statements have been prepared in conformity with US generally accepted accounting principles ("US GAAP"), give a true and fair view of the assets, liabilities, financial position and the return of the undertakings included in the consolidation as a whole as required by DTR 4.2.4R of the Disclosure Guidance and Transparency Rules ("DTR") of the UK's Financial Conduct Authority (the "UK FCA"); and

· The combination of the Chairman's Statement, the Investment Manager's Report, this Interim Management Report and the notes to the Financial Statements meet the requirements of an interim management report, and include a fair view of the information required by:

1. DTR 4.2.7R, being an indication of important events that have occurred during the first six months of the current financial year and their impact on the set of financial statements together with a description of the principal risks and uncertainties for the remaining six months of the year; and

2. DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last annual report that could do so.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website and for the preparation and dissemination of Financial Statements. Legislation in Guernsey governing the preparation and dissemination of the Financial Statements may differ from legislation in other jurisdictions.

These Interim Report and Financial Statements have been reviewed by the Company's auditor and their report is set out below.

By order of the Board

John Hallam Christopher Legge

Chairman Director

26 August 2020 26 August 2020

Independent Review Report to NB Distressed Debt Investment Fund Limited

Conclusion

We have been engaged by NB Distressed Debt Investment Fund Limited (the "Company") to review the consolidated financial statements (the "financial statements") in the half-yearly financial report for the six months ended 30 June 2020 of the Company and its subsidiaries (together the "Group") which comprises the unaudited consolidated statement of assets and liabilities, unaudited consolidated statement of operations, unaudited consolidated statement of changes in net assets, unaudited consolidated statement of cash flows, unaudited consolidated condensed schedule of investments and the related explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the financial statements for the period ended 30 June 2020 do not give a true and fair view of the financial position of the Company as at 30 June 2020 and of its financial performance and its cash flows for the six month period then ended in conformity with U.S generally accepted accounting principles and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

The financial statements included in this interim report have been prepared in conformity with U.S generally accepted accounting principles.

Our responsibility

Our responsibility is to express to the Company a conclusion on the financial statements in the half-yearly financial report based on our review.

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the Company in accordance with the terms of our engagement letter to assist the Company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Barry Ryan

For and on behalf of KPMG Channel Islands Limited

Chartered Accountants, Guernsey

26 August 2020

FINANCIAL STATEMENTS | Unaudited Consolidated Statement of Assets and Liabilities

Unaudited Consolidated Statement of Assets and Liabilities

The Financial Statements were approved and authorised for issue by the Board of Directors on 26 August 2020, and signed on its behalf by:

John Hallam Christopher Legge

Chairman Director

The accompanying notes on below are an integral part of the Interim Financial Statements.

Unaudited Consolidated Statement of Operations

The accompanying notes on below are an integral part of the Interim Financial Statements.

Unaudited Consolidated Statement of Changes in Net Assets

The accompanying notes on below are an integral part of the Interim Financial Statements.

FINANCIAL STATEMENTS | Unaudited Consolidated Statement of Cash Flows

Unaudited Consolidated Statement of Cash Flows

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2020 AND 30 JUNE 2019

The accompanying notes on below are an integral part of the Interim Financial Statements.

FINANCIAL STATEMENTS | Unaudited Consolidated Condensed Schedule of Investments

Unaudited Consolidated Condensed Schedule of Investments (by financial instrument)

1 This is the Fair Value expressed as a percentage of total Company NAV, Ordinary Share NAV, Extended Life Share NAV and New Global Share NAV.

2 The Trade Claim held as per the 2019 comparative has been structured into a fully funded Total Return Swap with a major US financial institution. See Note 3 below.

The accompanying notes on below are an integral part of the Interim Financial Statements.

FINANCIAL STATEMENTS | Unaudited Consolidated Condensed Schedule of Investments

1 This is the Fair Value expressed as a percentage of total Company NAV, Ordinary Share NAV, Extended Life Share NAV and New Global Share NAV.

2 The trade claim was structured through a fully funded total return swap with a major US financial institution.

The accompanying notes on below are an integral part of the Interim Financial Statements.

FINANCIAL STATEMENTS | Unaudited Consolidated Condensed Schedule of Investments

Unaudited Consolidated Condensed Schedule of Investments

Investments with the following issuers comprised greater than 5% of Total Company NAV