NBLS.L Regulatory News (NBLS)

NB GLOBAL FLOATING RATE INCOME FUND LIMITED

2019 Annual Report

Audited CONSOLIDATED Financial Statements

for the Year Ended 31 December 2019

COMPANY OVERVIEW | Features

Features

NB Global Floating Rate Income Fund Limited (the "Company")

The Company is a closed-ended investment company incorporated and registered in Guernsey on 10 March 2011 with registered number 53155. The Company is governed under the provisions of the Companies (Guernsey) Law, 2008 as amended (the "Law"), and the Registered Collective Investment Scheme Rules 2018 issued by the Guernsey Financial Services Commission. It is a non-cellular company limited by shares and has been declared by the Guernsey Financial Services Commission to be a registered closed-ended collective investment scheme. On 20 April 2011, the Company was admitted to the Official List of the UK Listing Authority with a premium listing trading on the Main Market of the London Stock Exchange ("LSE").

Alternative Investment Fund Manager ("AIFM") and Manager

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

Investment Objective

The Company's investment objective is to provide its shareholders with regular dividends, at levels that are sustainable, whilst preserving the capital value of its investment portfolio, utilising the investment skills of the Investment Manager.

Investment Policy and Strategy 

To pursue its investment objective, the Company invests mainly in senior secured floating rate loans issued in U.S. Dollars, Pound Sterling or Euros by primarily North American and European Union corporations, partnerships and other business issuers. These loans are at the time of investment often non-investment grade. The Company considers debt instruments to be non-investment grade if, at the time of investment, they are rated below the four highest categories (Aaa, Aa, A and Baa) by at least two independent credit ratings agencies or, if unrated, are deemed by the Investment Manager to be of comparable quality.

The coupon received when investing in floating rate loans varies with, and is periodically adjusted to reflect changes in, a generally recognised base interest rate such as LIBOR. The Company generally seeks to focus on loans of issuers that the Investment Manager believes have the ability to generate cash flow through a full business cycle, maintain adequate liquidity, possess an enterprise value in excess of senior debt and have access to both debt and equity capital.

The Company may also make investments in senior bonds on an opportunistic basis if the Investment Manager believes that such investments are attractively valued, up to a maximum in aggregate of 20% of the Net Asset Value ("NAV") at the time of investment, provided that no more than 10% of NAV may be invested in unsecured bonds at the time of investment.

The Company believes that strong senior floating rate loan investment results can be achieved through a proactive investment process of fundamental research, risk management and a strict discipline that seeks to avoid credit deterioration, selecting senior-secured securities whereby the yield is attractive on a relative value basis and by rotating across credit tiers and industry sectors. The Investment Manager will tend not to "reach" for yield without considering commensurate risk given the emphasis on avoiding credit deterioration. As a result, the portfolio has a higher concentration, on average, of higher quality, senior-secured, more liquid securities, predominantly in the U.S.

Capital Structure

As at 31 December 2019, the Company's share capital comprised 508,276,307 Sterling Ordinary Shares ("NBLS") of no par value (of which 75,000,000 were held in treasury) and 29,054,013 U.S. Dollar Ordinary Shares ("NBLU") of no par value (of which 1,342,627 were held in treasury).

The Company had established a wholly-owned Luxembourg incorporated subsidiary, NB Global Floating Rate Income Fund (Lux) 1 S.à.r.l., which in turn held a wholly-owned subsidiary, NB Global Floating Rate Income Fund (Lux) 2 S.à.r.l. The consolidated financial statements ("Financial Statements") comprise of the Company and its wholly owned subsidiary undertakings (the "Group") as at 31 December 2019. Part of the portfolio of the Company was held through NB Global Floating Rate Income Fund (Lux) 2 S.à.r.l.

During the year, the Board, having taken appropriate professional advice, reviewed the structure of the Group and decided to liquidate the Luxembourg subsidiaries. Due regard was given to the shareholders and service providers in so far as a number of options were presented and discussed and JTC Signes, as administrator to the subsidiaries, formed part of those discussions. It was ultimately agreed that, due to the operating cost and complexity of the subsidiaries and long-term risk from the changing tax and regulatory environment it was in the Company's best interests to transfer the business and assets of the subsidiaries to the Company and then liquidate them.

Effective 10 October 2019 the portfolio held in Lux 2 was transferred to the Company. On 18 December 2019, JTC Signes Services S.A. was appointed as the Liquidator for the subsidiaries and as of 31 December 2019 the subsidiaries were liquidated. Further detail is provided further down in this report.

Non-Mainstream Pooled Investments

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

The Company's shares are excluded from the FCA's restrictions, which apply to non-mainstream pooled investment products.

Dividends

Dividends are paid quarterly in respect of each calendar quarter. The Company's dividend policy is detailed further down in this report.

The rolling 12 month dividend yield (based on the previous four quarterly dividends declared and share price as at 31 December 2019) was:

· Sterling Ordinary Shares: 5.14%

· U.S. Dollar Ordinary Shares: 5.17%

COMPANY OVERVIEW | Business Model

Principal Activities and Structure

The principal activity of the Company is to carry out business as an investment company. The Directors do not envisage any changes in this activity for the foreseeable future.

The chart below sets out the ownership, organisational and investment structure of the Company.

INVESTMENT STRUCTURE OF THE COMPANY

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

* Further information on the Company's investment management arrangements can be found on further down in this report.

Diversification

The Investment Manager seeks to manage risk through in-depth credit research utilising proprietary analytic processes, diversifying across industries, companies and investment size and adjusting sector weightings based on economic and market analysis.

The Company's portfolio is intended to contain at least 100 investments across a minimum of 20 industries, with a focus on those industries regarded as defensive. Defensive industries are those the Investment Manager believes are less affected by changes in economic conditions and likely to demonstrate the strongest capital preservation.

Typically, at the time such investment is made, no industry will represent more than 15% of NAV and no single investment will represent more than 5% of NAV. The Board considers that it is not appropriate to make available a full portfolio listing to shareholders as the information is considered commercially sensitive, however the company makes available, on a monthly basis, a list of the issuers in the portfolio. As at 31 December 2019, the portfolio contained 206 issuers.

What Are Senior Secured Floating Rate Loans?

Senior secured floating rate loans, also known as floating rate secured loans or leveraged loans, are debt obligations originated and arranged by banks or other financial entities (also known as an arranger) on behalf of corporations, partnerships and other business issuers to finance activities such as mergers and acquisitions, leveraged buyouts, recapitalisations, refinancings, capital expenditure or for other general corporate purposes.

These will typically be syndicated to a pool of lenders that collaborate to provide financing for the borrower. Once the bank loan is issued, lenders have the option to hold their portion for the life of the loan or to sell it to other investors in the secondary market.

The senior secured floating rate loans that the Company invests in are generally non-investment grade, that is rated at or below Ba1 by Moody's Investors Service or at or below BB+ by Standard & Poor's or an equivalent rating by a third party rating agency.

The senior secured floating rate loans that comprise the portfolio 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.

The below chart shows the typical capital structure of a borrower:

SAMPLE CAPITAL STRUCTURE

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

Senior secured floating rate loans earn a variable rate of interest that includes a stated 'spread' (also known as the margin or coupon), which reflects issuer risk, over a widely accepted base rate such as the London Interbank Offered Rate ("LIBOR"). The floating rate on senior secured floating rate loans typically resets every 30 to 90 days in line with the prevailing rate of LIBOR and, because such loans reset on a regular basis, the yield is described as ''floating''.

The Investment Manager's experience is that LIBOR floors are a common feature of almost all new loan issues in the U.S. LIBOR floors guarantee a minimum level of LIBOR to investors irrespective of the prevailing interest rate. The Financial Conduct Authority announced in 2017 it would not compel or persuade panel banks to make LIBOR submissions after 2021. LIBOR is therefore expected to cease from the end of 2021 impacting trillions of USD financial instruments globally. Whilst there is no single agreed alternative at the present time, the Investment Manager is examining the implications of a transition on the Company and its portfolio and will manage the transition on behalf of the Company.

If LIBOR exceeds the floor then such loans pay the prevailing LIBOR as well as the credit spread. The return is generated by LIBOR or the LIBOR floor, the spread over LIBOR 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.

INDICATIVE BREAKDOWN OF SENIOR SECURED LOAN RETURNS

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

1 New issues are typically sold at a discount to par.

Investment Process

The Investment Manager focuses on experience-based, in-depth credit and industry analyses, disciplined portfolio construction and ongoing portfolio monitoring. The below diagram provides a high level overview of the Investment Manager's investment process.

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

The credit ratings noted above are those of Standard & Poor's. Ratings of BB+ and below are considered non-investment grade (junk bonds). Credit ratings are subject to change at any time. This material is intended as a broad overview of the Investment Manager's style; philosophy and investment process and is subject to change without notice. The Company's portfolio managers' views may differ from those of other portfolio managers as well as the views of Neuberger Berman.

Investment Discipline

The Investment Manager's investment discipline seeks to ensure, through its "credit best practices" checklist that it thoroughly understands the investment thesis for each investment and any underlying assumptions:

Top-Down Analysis

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

Bottom-Up Analysis

Issuer: Key Considerations 

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

Investment Philosophy and Selection Process

Investment Philosophy

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

Selection Process

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

Further information on the Company's investment strategy and process can be found in the Company's most recent prospectuses, which are available on the Company's website at www.nbgfrif.com under the "Investor Information" tab.

Hedging

As the Company's shares are denominated in Pound Sterling (Sterling Ordinary Shares) and U.S. Dollars (U.S. Dollar Ordinary Shares) and investments are denominated in U.S. Dollars, Euro or Pound 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, at their sole and absolute discretion.

A consequence of currency hedging is that the interest rate differential between the hedged share class currency (GBP) and the base currency (USD) (the "carry") is included in the return of the hedged share class. The objective of the foreign exchange hedge on Ordinary Sterling share class investors is to give a long exposure to GBP LIBOR and a short exposure to USD LIBOR. As a result, the interest rate differential has a marginal impact on dividend distributions for the holders of the Ordinary Sterling class shares. The costs of the interest rate differential will be borne by the NBLS NAV, and any narrowing of the USD / GBP LIBOR differential will reduce the size of this cost. The interest rate differential is a cost/benefit for all currency hedging arrangements and is not unique to the Company.

Gearing and Derivatives

The Company does not normally employ gearing or derivatives for investment purposes. The Company may, from time to time, use borrowings for share buybacks and short-term liquidity purposes. The Directors will restrict borrowing to an amount not exceeding 20% of the NAV at the time of drawdown. Derivatives are used for foreign exchange hedging purposes and the U.S. Dollar exposure for Sterling shareholders is explained in Note 2 of the financial statements.

Redemption Offer

As set out in the Company's Articles of Incorporation (the "Articles"), under redemption offer, if, as at 31 December in any calendar year, the shares of a particular class have, on average over the last three calendar months of the relevant calendar year, traded on the LSE at a discount in excess of 5% to the NAV per share of that class, the Directors will, subject to any legal or regulatory requirements, implement a redemption offer pursuant to which each holder of shares of the relevant class shall be offered the opportunity to redeem up to 50% of their shares of such class. This provision was not triggered at 31 December 2019.

Continuation Vote

As set out in the Company's Articles of Incorporation (the "Articles"), under Article 51, the continuation resolution, the Directors shall propose an ordinary resolution that the Company continues its business as a closed-ended investment company at each annual general meeting from 2018 onwards. If a continuation vote is not passed, the Directors shall put proposals to shareholders for restructuring or reorganisation of the Company. Further details on the assumptions relating to this provision are provided on further down in this report.

STRATEGIC REVIEW | Financial Highlights

Financial Highlights

Key Figures

1 In the year ended 31 December 2019, the Company re-purchased 312.19m Sterling Ordinary Shares at a total U.S. Dollar equivalent cost of $357.7m and 11.47m U.S. Dollar Ordinary Shares at a total cost of $10.61m.

2  Further explanation and definitions of the calculation is continued in the section "Alternative Performance Measures" further down in this report

Financial Review

At 31 December 2019, the Net Assets of the Company amounted to $578,032,783 (2018: $911,886,137). The NAV attributable to the U.S. Dollar Ordinary Shares amounted to $27,357,649 (2018: $54,847,645) and the NAV per U.S. Dollar Ordinary Share was $0.9872 (2018: $0.9468). The NAV attributable to the Sterling Ordinary Shares amounted to £415,682,305 ($550,675,134) (2018: £672,925,952 ($857,038,492)) and the NAV per Sterling Ordinary Share was £0.9594 (2018: £0.9215).

STRATEGIC REVIEW | Chairman's Statement

Chairman's Statement

Dear Shareholder,

It is with pleasure that I present to you the Annual Report of NB Global Floating Rate Income Fund Limited for the year ended 31 December 2019.

Performance

Over the year, the Company's share price total return was 10.62% per Sterling Ordinary Share and 8.03% per U.S. Dollar Ordinary Share. The Company's Net Asset Value ("NAV") total return per share for the year was 9.27% for the Sterling Ordinary Shares and 9.43% for the U.S. Dollar Ordinary Shares. Excluding the benefit of our share buybacks during the year, these returns were 6.59% and 8.06% respectively the latter compares with the relevant benchmark, the S&P / LSTA Leveraged Loan Index (the "Index"), which had a total return of 8.64% in U.S. dollar terms. The underperformance of the Company (using the "excluding buybacks" returns) was the result of holding additional cash to conduct the share buyback program during a year where total returns for the loan market were strong.

Dividends per share fluctuated in a narrow range in 2019 between £0.013 and £0.010, due to declining LIBOR and lower volatility in credit spreads, with the Company's dividend yield at year end being 5.14% and 5.17% per Sterling Share and U.S. Dollar Share respectively (calculated as the last four quarterly dividends expressed as a percentage of the share price as at 31 December 2019). The Company continues to meet its broad objective of providing regular and sustainable dividends.

As at 31 December 2019, the Portfolio's current yield was 5.31%, and the yield to maturity was 5.71%. This was some 29bps and 41bps below the Index respectively, being a consequence of the quality bias in the portfolio, which was reflected in the weighted average price of the loans in the portfolio of around 51bps higher than the market.

The gently rising rate trajectory that we expected during H1 2019 has come to a halt and has now reversed in Q1 2020 as slower growth is evident globally and the impact of the COVID-19 pandemic takes hold. The recent interest rate cuts by the US Federal Reserve and the Bank of England have been replicated more widely amongst other advanced economies, meaning that the previously held expectations of rising interest rates are unlikely to be realised for some while.

Dividends

As at 31 December 2019, the annualised dividend based on the previous four quarterly dividends paid was 4.77 pence per share for the Sterling Ordinary Shares and 4.91 cents per share for the U.S. Dollar Ordinary Shares up from 4.02 pence and 4.13 cents per share, respectively as at 31 December 2018. Your Board believes that the dividend yield, 7% (USD Class) and 6.82% (GBP Class) as at 3 April 2020, on the stock at the current share price is attractive on a risk-adjusted basis given the current low interest rate environment and taking account of the prudent investment approach taken by the Investment Manager.

Portfolio Construction

The portfolio continues to be highly diversified, with 206 issuers, and 259 investments as at 31 December 2019. In terms of rating by credit quality, as at year end the portfolio was underweight CCC-rated loans, which constituted about 5% of the US market, compared to the portfolio weighting of 3.79%. The portfolio was overweight in the BB to B+ rating buckets. In 2019, we saw opportunities in both primary and secondary markets to increase exposure to BB/B+ rated loans, as many of those issues have passed the Investment Manager's portfolio screening process. From a sector perspective, as at year end, the portfolio had a 6% underweight in the electronics sector, the most underweight sector allocation in the portfolio. During 2017 and early 2018, the electronics sector grew in size due to new issue activity from software companies with either aggressive terms or un-proven business models, and the Investment Manager's avoidance of these deals has been the primary driver of the underweight to the electronics sector. The U.S. loan market ended the year with a par-weighted default rate of just 1.39% which is lower than the long-term average of just over 3%, based on annual default rates back to 1998. The LTM default rate within the European loan market remained at 0% at year end.

The portfolio's European weight has reduced in recent quarters, as better value in US loan markets offered an attractive opportunity to sell higher priced European tranches of debt and buy the USD equivalent at a discount.

Discount Management

During the year ended 31 December 2019, the Company's discount ranged between 2.92% and 6.43% per Sterling Ordinary Share and 3.23% and 6.45% per U.S. Dollar Ordinary Share finishing the year near to our target of 3%, achieved through the Board's willingness for the Company to buy back its own shares in significant volume. The Board has continued to seek to address imbalances between supply and demand in the Company's shares by proactively repurchasing shares. During the year, the Company repurchased 312,188,347 Sterling Ordinary Shares at a total cost of £280,214,300 and 11,468,782 U.S. Dollar Ordinary Shares at a total cost of $10,614,548 representing 42.75% of the Sterling Ordinary Shares in issue and 19.80% of the U.S. Dollar Ordinary Shares in issue, at 1 January 2019. The weighted average discount of the buyback was 5% for the Sterling Ordinary Shares and 5.23% for the U.S. Dollar Ordinary Shares with an accretion to the NAV of each share class of 2.80% and 1.38% respectively.

On 7 May 2019,12 August 2019, 4 November 2019, and on 3 March 2020 we sought shareholder approval to renew the authority for the Company to make market purchases of its own Shares, which was duly granted. The Board will seek to renew this authority, as required, to give us the flexibility to continue to buy back shares to help satisfy demand for market liquidity whilst increasing NAV per share, as part of our discount control mechanism and we will continue to remain vigilant in our approach to discount management on behalf of shareholders.

The Board continues to support its existing policy of aiming to maintain the discount to NAV at 3% or less in normal market conditions using appropriate discount management controls. As a result of the Company's buyback programme, the Company's market capitalisation declined to the extent that with effect from 20 December 2019, the Company was no longer a constituent of the FTSE 250 but remains in the FTSE All Share Index.

Continuation Vote

In accordance with the Company's Articles of Incorporation (the "Articles"), at the Annual General Meeting held on 7 May 2019 the Company proposed a resolution to consider the Company's continuation as a closed-ended investment company. I am pleased to report that shareholders voted overwhelmingly in favour of the Company's continuation at this meeting. The next continuation vote will be proposed at the 2020 AGM, and annually thereafter. The Board remains of the view that the Company provides investors with a means to readily access a desirable and diverse portfolio of senior secured and other loans with an attractive yield and so urges shareholders to vote in favour of the Company's continuation at the 2020 AGM.

Shareholder Engagement

During the year, I have had the pleasure in meeting with a significant number of our major shareholders on a one-to-one basis to discuss the Company and to understand their views on governance and performance. I remain at the disposal of our shareholders should you wish to discuss any aspect of the Company. Further details on how the Board has considered its stakeholders as a whole can be found on further down in this report.

In January 2020, we advised that we would cease the quarterly update calls with the Investment Manager as the way in which we engage with shareholders has evolved with an increase in bilateral meetings and declining attendance on the webinars. The Investment Manager and Broker continue to offer to meet with shareholders on a periodic one-to-one basis and the Investment Manager will continue to keep all shareholders updated on the Company's progress by way of the monthly fact sheets.

Costs

We are pleased with the substantial cost savings achieved during the year. At the start of the year, we welcomed Numis as Broker and in the second quarter, we welcomed Praxis Fund Services as Company Secretary. Further, we were pleased to announce, effective from 1 October 2019, that the Investment Manager reduced its fee by 10 basis points to 0.65% demonstrating the commitment of the Investment Manager to our Company, as well as to provide "best in class" value in the sector. Finally, we are pleased to announce effective 1 January 2020 the Administrator and Custodian reduced their fees. We believe that these changes demonstrate the Board's efforts to lowering the Ongoing Charges of the Company and the desire to remain commercially competitive. In aggregate we believe that we have reduced annual expenditure by some $650,000.

Structure

The Board regularly reviews the Company's' structure and in reviewing the fast changing global fiscal landscape, the Board decided it was no longer optimal to maintain the Luxembourg subsidiaries of the Company. The Board is of the view the annual cost savings from winding up the two subsidiaries will compensate the Company for the increased irrecoverable withholding taxes in certain territories that the Company will bear. We agreed this was in the best interests of the Company and stakeholders as a whole and are pleased with the associated cost savings this will achieve in future as well as simplifying the corporate structure.

Board Composition and Succession Planning

During the year, the Board continued to develop its succession plan, which was outlined in the 2018 Annual Report. As reported in the 2018 Annual Report, on 1 January 2019, David Staples took over from Richard Battey as Chairman of the Audit and Risk Committee. Richard will not put himself forward for re-election at the 2020 AGM and will therefore retire from the Board. We thank Richard for his tenure and leadership as Audit and Risk Committee Chairman, for his significant contribution to the Company since inception, his role as Senior Independent Director and his thought leadership.

We consider that the recent board changes will maintain diversity of tenure and responsibilities and with Richard's departure, the Board will have 33% female representation in line with the expectations of the Hampton-Alexander review, the aims of which the Board support. We will continue to assess independence and replenish the Board over the coming years. Further detail on the Board's succession plan and diversity policy can be found in the Corporate Governance Report further down in this report and the Report of the Remuneration and Nomination Committee further down in this report.

Brexit

The United Kingdom entered the transition period for leaving the European Union on 31 January 2020. We will continue to assess the possible impact of the European Union (Withdrawal Agreement) Act, although as previously reported, a disorderly Brexit situation would not impact our operations in any material manner. Having reviewed the portfolio extensively, we do not believe there would be any significant impact from a disorderly Brexit, following the transition period.

COVID-19

The coronavirus (COVID-19) outbreak and related uncertainties have increased risk to the global economy. At this stage we cannot predict with any great degree of confidence the longer term impact on the operating results of the majority of issuers in our portfolios (aside from near-term impacts from commodity price volatility). We note that the economic impact of the 2003 SARS outbreak was manageable overall and short-term in nature but acknowledge it is too early to predict the full extent of the current outbreak with high confidence. As such, we will continue to monitor the effectiveness of efforts to contain the spread of the virus and the implications for economic activity.

Climate Change

During the year, the Board identified activism relating to climate change as an emerging risk. We are conscious of our own impact on the environment, despite being an investment company with no employees, The Board have committed to offset its carbon-emissions arising from air travel relating to the members of the Board undertaking Company related business. In addition, the Board makes extensive use of video conferencing facilities, limiting the amount of travel, all board papers are produced and hosted digitally via a dedicated board portal and makes relevant enquiries to its key service providers during face-to-face meetings about their initiatives and attitudes to climate change. Finally, the Board has moved toward electronic communication with our shareholders. A letter will accompany this report asking for your agreement to receive electronic communications only from us going forward. We hope that you agree, which will assist us in reducing our paper usage and impact on the environment.

Outlook

Your Board is pleased that dividends per share have increased in 2019 from 2018. We believe the Company continues to offer a favourable risk-adjusted total return and is confident with the Investment Manager's performance to date in executing its strategy.

The outlook for 2020 has shifted over the past several weeks due to the impact from mandated closures and social distancing efforts to "flatten the curve" of the COVID-19 pandemic. Yields in the loan market are likely pricing in severe scenarios for global GDP, but given the nature of the catalyst, it could prove to be transitory. Yield levels are pricing in default rate scenarios that are likely to be in excess of actuals, which has historically been the case. The Investment Manager believes yields are compensating investors for an above average but moderate rise in default rates from very low levels. As we continue to be vigilant to the developments of COVID-19, our primary goal remains one of avoiding default risk. While uncertainty around the duration and severity of the health crisis as well geopolitical event risk can result in heightened short-term volatility, the Investment Manager believes the Company is well positioned.

The Investment Manager's more defensive and strategic positioning together with the attractive, fully covered dividend continue to make the Company a sound risk adjusted investment proposition.

Thank you for your continued support.

Rupert Dorey

Chairman

8 April 2020

STRATEGIC REVIEW | Investment Manager's Report

Investment Manager's Report

Market Environment

The leveraged loan market was supported by a number of market, fundamental and technical factors in 2019, including a "dovish pivot" by the US Federal Reserve ("Fed"), as it lowered interest rates three times during the period. While falling interest rates can create a technically challenging environment for the floating rate loan market, the backdrop of a more accommodative Fed was supportive of issuer fundamentals and positive investor risk sentiment. Later in the year, the Fed signalled that rate cuts could be on hold in the near term which is a more supportive environment for floating rate loans. The global economy was relatively resilient in the face of geopolitical risks and corporate profits of most issuers often exceeded reduced expectations. Late in the year, there was also progress in US/China trade negotiations with the announcement of a "phase-one" trade deal, which caused a shift in investor expectations fuelling a "risk-on" rally in December where lower quality loans saw better returns. For the full year, however, high quality loans outperformed lower quality loans. For the 12 months ended December 31, 2019, securities rated BB and B in the leveraged loan Index returned 9.3% and 9.0%, respectively, whereas CCC-rated securities returned 3.4%.

There was an increasing dispersion among loan issuers throughout 2019, but the majority saw relatively favourable operating performance. That said, there were signs of stress in some parts of the market. Despite this pocket of idiosyncratic risk, most of the loan market was supported by relatively constructive fundamentals: low-but-positive revenue growth, earnings that were generally in-line with expectations, good interest coverage at an average of nearly five times and only a modest increase in leverage which was driven primarily by a subset of stressed issuers in the loan universe. Among the higher-quality loans, fundamentals remain relatively solid. Evidence of this bifurcation can be seen in the distress ratio which is the percentage of performing loans priced below $80. As at December 2019, the percentage of performing loans trading below $80 was 3.7%, down from a short-lived spike in November 2019 that reached 5.9%. For context, the historical average share of performing loans trading below $80 (or 20% below par) is 6.2%, based on monthly data back to 1997 according to S&P/LSTA.

Demand for loans was positive for the majority of the year, as an increasing number of collateralised loan obligation (CLO) managers arranged a total of $118 billion of new CLOs in 2019, down just 8% from the record levels reached in 2018. However, retail fund investors continued to retreat from the loan market as total outflows from November 2018 to December 2019 were a negative $42.9 billion, according to Lipper. The fund investor share of overall allocations declined to 15% in 2019, the lowest level since 2010 while the institutional share of overall allocations rose to 71% in 2019, up from 68% in 2018.

The par amount outstanding of the S&P Leveraged Loan Index stood at $1.19 trillion, having ended 2018 at $1.15 trillion. The end of year average bid price was $96.72 as compared to year end 2018 at $93.84. By principal amount, the trailing 12 month US default rate was 1.39% at the end of December 2019, 24 bps lower than the closing figure for 2018, and still comfortably below the 3.1% historical annual average based on data back to 1998.

The S&P European Leveraged Loan Index ("ELLI") returned 4.50% (in Euro terms) for 2019 (all numbers excluding currency) and the average bid finished at €98.28, up from €97.33 as of the end of 2018. The market gained momentum near the end of the year after the UK election in mid-December and after the US and China agreed to a "phase" one trade deal. Demand was strong and CLO issuance totalled €29.8 billion for the year, a new post crisis high for the European market, up 9% from a strong 2018.

The par amount outstanding of the ELLI ended the year at €214 billion, an increase of €33 billion from the prior year. By principal amount, the trailing 12 month default for the ELLI was 0.44% at the end of December, up slightly from 0.11% at the end of 2018.

We believe that loans continue to offer an attractive yield with limited duration risk where loans have little price sensitivity to changes in term interest rates:

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

1 Source: (H0A0), ICE BofA European Currency High Yield Index (HP00) USD Hedged, Bloomberg Barclays US Treasury Bellwethers Composite Index, Bloomberg Barclays US Credit Index, Bloomberg Barclays European Credit Index, and ICE BofA 0-5 Year BB-B US High Yield Constrained Index (H4CD), Bloomberg Barclays German Treasury Index, Bloomberg Barclays UK Gilts Index Returns USD Hedged unless noted. Yield shown in USD Hedged Terms.

2 Returns in Euro terms, excluding currency fluctuations.

Portfolio Management

During 2019, the portfolio remained significantly weighted towards U.S. Dollar issuance, which accounted for 93.5% of the portfolio at the end of the year. The bond allocation was well within the 20% of NAV permitted, at 6.1%, as we remained focused on keeping duration low and limiting potential areas of volatility. We continued to allocate to better rated assets and our share of BBB/BB credits ended the year at 30.1%, which is down from year end 2018, at 39.5%. The shift was based on relative value considerations and individual credit selection.

During the year, the portfolio showed a lower volatility profile than its benchmark, with the exception of March 2019. Despite this, it performed in line with the index during the first quarter and broadly outperformed the index to the end of the year. We continue to evidence that in times of increased volatility (e.g. August 2015 to October 2016), our portfolio is significantly less volatile than the index, but delivers a very similar return to the index over a long period.

Volatility versus Return

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

Covid-19 Pandemic

The senior floating rate loan market has experienced significant volatility in the first quarter of 2020 due to the worldwide spread of COVID-19 and its impact on global economic activity from business closures, travel restrictions, closed borders and shelter-in-place orders, as well as an oil price war made worse by demand destruction. The weighted average loan price of the S&P Leveraged Loan Index started 2020 at $96.72, recently hit a near-term low of $76.23 on 23 March 2020 and on 31 March closed at $82.85. For context, the all-time low of $60.33 was reached on 17 December 2008 during the 2008 Financial Crisis.

In contrast to the last large drawdown in 2008, the current episode of market dislocation is being caused by a global health crisis with mandated shutdowns of parts of the economy. Social distancing and closures intended to mitigate the spread of the virus will also likely cause large, temporary declines in GDP. The experience of China and South Korea suggests that activity will eventually resume, however, the timing is uncertain. Given this uncertainty, the Investment Manager would expect volatility to remain a reality until there is greater clarity on when businesses can begin to reopen.

Central banks around the world are taking extraordinary measures to provide liquidity to ensure the proper functioning of capital markets and to ensure that credit channels are open to businesses and households during this health crisis. Additionally, very large fiscal stimulus packages are being rolled out to shore up both businesses and consumers while many non-essential activities have been shut down in an effort to "flatten the curve" of the virus.

Over the past several weeks, the loan market has experienced above-average trading volumes and has been in price discovery mode pushing the bid-ask spread to wider than normal levels. Volatility in both directions and higher trading costs are likely to persist in the near-term as market participants continue to digest new information on both the coronavirusCOVID-19 impacts and oil market developments.

In light of the prospective negative impacts from COVID-19, the Investment Manager's research team has stress-tested all the issuers in the Company based on (a) potential length of closures/disruptions, (b) ability to cut costs and defer capital expenditures, (c) near-term liquidity, (d) available bank lines and (e) the timing of upcoming maturities to evaluate an issuer's expected ability to manage through this period. The conclusion of this analysis suggests that the median issuer in the Company can withstand a several month period of zero or minimal revenues. The Investment Manager's research team has also assessed loan sectors by risk or impact to COVID-19 disruptions and generally, the Company is underweight in those sectors with the greatest risk or most direct impact, such as airlines, travel and leisure.

While loan default rates were well below long-term averages as recent as February 2020 at just 1.83%, the Investment Manager expects default rates to increase toward the 5 - 7% range. The unusual nature of the current "mandated" economic stall and uncertainty as to the timing of restarting activity, make it difficult to forecast in the near term. That said, the Investment Manager can look to what is implied in current spreads and valuations in the loans universe. While the Investment Manager expects default rates to increase from low levels, loan markets have historically overestimated actual default rates. In the past six episodes since 2000 where the loan market saw distressed levels, the implied market default rate exceeded that of the actual default rates five out of six times. The view of the Investment Manager is that what is implied in current valuations could likely far exceed actual default rates.

It is also important to consider recovery rates assuming an increase in defaults. A recent study conducted by S&P based on 410 defaulted leveraged syndicated term loans concluded that the historical average recovery rate is 80 cents on the dollar for first-lien loans. Given the unusual nature of this current health crisis and the inherent uncertainty, anticipating future recovery rates is challenging. That said, the Investment Manager's investment process of fundamentally-driven credit research with a focus on avoiding default risk, positions the Company to navigate the volatility ahead.

Outlook

Non investment credit markets continue to experience volatility due to the spread of COVID-19 and its impact on global economic activity. Yields in the loan market are likely pricing in some rather severe scenarios, but given the nature of the catalyst, it could likely prove to be transitory. Yield levels are pricing in implied default rates that are likely to be in excess of actuals which has historically been the case. The Investment Manager believes yields are compensating investors for an above-average but moderate rise in default rates from very low levels, with the secularly-challenged, idiosyncratic risk credits impacted by supply disruptions and demand declines in certain industries the most affected. As we continue to be vigilant to the developments of COVID-19, our primary goal remains one of avoiding default risk. While uncertainty around the duration and severity of the health crisis as well geopolitical event risk can result in heightened short-term volatility, the Investment Manager believes the portfolio, which has a higher-quality bias than the benchmark, is well-positioned to provide downside protection. We will look to tactically take advantage of the increased volatility to add to credits with stable fundamentals and those which will likely get through this challenging period given better liquidity profiles.

Neuberger Berman Investment Advisers LLC Neuberger Berman Europe Limited

8 April 2020 8 April 2020

STRATEGIC REVIEW | Portfolio Information 

Portfolio Information

Top 10 Issuers as at 31 December 2019 (excluding cash)

Top 10 S&P Sector Breakdown

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

Key Statistics as at 31 December 2019

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, fund 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 the realised distribution rate for each share class.

STRATEGIC REVIEW | Strategic Report

Strategic Report

Investment Objective and Business Model

The Company's investment objective and business model have been discussed further back in this report.

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 that 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 Company's 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:

Macroeconomic Conditions

Credit Risk

Liquidity Risk

Fund Performance

Level of Discount or Premium

Operational Risk

Heat Map of Principal Risks

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

Principal Risks' Expected Direction of Change

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 will discuss and agree appropriate mitigation or management of emerging risks. Such examples of emerging risks identified in the year include, new risks associated with a disorderly Brexit, the result of the UK general election, activism, the media spotlight on climate change as it relates to the ESG policies of the Investment Manager and the impact on portfolio issuers and more recently the COVID-19 pandemic. 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 potential impact on the Company, appropriate mitigating measures and controls are agreed. Three of our emerging risks are discussed further in the section "Chairman's Statement" further back in this report.

Going Concern

The Directors considered it appropriate to prepare the Financial Statements on the going concern basis, as explained in the basis of preparation paragraph in Note 2 to the Financial Statements. In making this statement, the Directors have considered the levels of working capital available to the Company, the closed-ended nature of the Company and the tradable and comparatively liquid nature of the investment portfolio held. The Directors have made the assumption that the annual continuation vote to be held in June 2020 will be passed and that the Redemption Offer for the year ended 31 December 2020 will not be triggered. However, the Directors acknowledge that there is some uncertainty regarding this assumption and refer readers to the section headed "Material uncertainty related to going concern" in the Auditor's report on further down in this report.

Viability Statement

The Directors have assessed the prospects of the Company over the three year period to 31 December 2022 in accordance with provision 40 of the AIC Code of Corporate Governance, published in February 2019 (the " AIC Code"). The Board conducted this review for a period of 3 years, a period that was selected for the following reasons: 

· The nature of the loan investments held by the Company have an average maturity of approximately three years which allows the investment cash flows, recycling of investments, and expenditure commitments of the Company to be reasonably forecast over this timeframe.

· The impacts on the Company of other factors can be reasonably assessed within this timeframe. Beyond a three year timeframe, the impact of external forces, such as changes to legislation, market forces or other unknown factors, becomes less able to be predicted or assessed in analysing the viability of the company.

The three year review considers the Company's cash flow, cash distributions and other key financial ratios over the year. The three year review also makes certain assumptions about the normal level of expenditure likely to occur and considers whether financing facilities will be required. Furthermore, the three year review period to 31 December 2022 makes assumptions that the Company's annual continuation vote will be passed based on discussions with key shareholders, and that the annual Redemption Offer will not be triggered. The Directors note that the annual Redemption Offer will be triggered if, in the last three months of any calendar year, the Company's Ordinary Shares trade at an average discount to NAV in excess of 5%.

In their assessment of the viability of the Company, the Directors have carried out a robust assessment of the Company's emerging and principal risks detailed further down in this report and in particular the impact of a significant fall in the income from the Company's investment portfolio. The Directors have performed a quantitative and qualitative analysis that included the Company's income and expenditure projections and the fact that the Company's investments mainly comprise realisable securities which can be expected to be sold to meet funding requirements if necessary. As part of this assessment, the Directors reviewed a series of stress test scenarios carried out by the Investment Manager, which included an assumption of a significant (60%) fall in income and no reduction in expenses, and were satisfied that the Company would continue to be viable financially. The Directors consider it highly likely that, in such a scenario, expenses would fall rather than remain at current levels as the main expense, the Investment Manager's fee, is driven by the NAV which would be expected to fall. A risk to the analysis however is the possibility that the cost of hedging, which is cash settled quarterly, is extreme for a particular quarter at a time when liquidity in the credit markets is severely impacted. The Investment Manager reviews the hedging positions daily and considers it highly unlikely that such a situation would arise and cause the Company not to be able to settle its liabilities as they fall due. The Directors have made the assumption therefore that this would not happen.

The Company has been shrinking rapidly over the last 2 to 2.5 years and the Board considers it a possibility that if this were to continue over the 3 year period, the ongoing costs for running the strategy would likely adversely impact its dividend yield, further reducing the attractiveness of the Company. It could be deemed no longer wise or viable to continue the Company. This is not a scenario the Board is working towards but it is a possibility. It is an assumption that this will not come to pass.

Based on the Company's processes for monitoring operating costs, the Investment Manager's compliance with the investment objective, asset allocation, the portfolio risk profile, liquidity risk and financial controls, assuming stressed market conditions and the assumptions referred to above, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 December 2022.

Performance Measurement and Key Performance Indicators

In order to measure the success of the Company in meeting its objectives 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 for both share classes 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 quarterly and consider the yield of the portfolio and the amount available for distribution; and

· The Board considers the peer group performance of other comparable income funds at each quarterly Board meeting.

Alternative Performance Measures (APM)

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:

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 further down in this report 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. Effective 1 October 2019, the IMA was amended to reflect a reduction in the Investment Manager's fee to 0.65% of NAV.

The IMA can be terminated either by the Company or the Investment Manager, but in certain circumstances, the Company would be required to pay compensation to the Investment Manager of six months' management charges. No compensation is payable if notice of termination of more than six months is given.

Administration and Custody Agreement

Effective 1 March 2015, the Company entered into an Administration and Sub-Administration Agreement with U.S. Bank Global Fund Services (Guernsey) Limited and U.S. Bank Global Fund Services (Ireland) Limited, a wholly-owned subsidiary of U.S. Bank Global Fund Services (Guernsey) Limited. Under the terms of the agreement, Sub-Administration services are delegated to U.S. Bank Global Fund Services (Ireland) Limited (the "Sub-Administrator"). U.S. Bank National Association (the "Custodian") was appointed custodian to the Company effective 1 March 2015. On 4 June 2018, the Company entered into an Amendment to the Administration and Sub-Administration Agreement in respect of the requirements of relevant data protection regulations. On 5 February 2020, the Company entered into an amendment to the fee schedule to both the Custodian Agreement and Administration and Sub-Administration Agreement to reflect a reduction in fees charged by the Administrator and Custodian.

See Note 3 further down in this report for details of fee entitlement.

Company Secretarial and Registrar Arrangements

Company secretarial services were provided by Carey Commercial Limited at the beginning of 2019. Effective 22 April 2019, company secretarial services are provided by Praxis Fund Services Limited. Registrar services are provided by Link Market Services (Guernsey) Limited.

See Note 3 further down in this report for details of fee entitlement.

GOVERNANCE | Directors

Directors

Rupert Dorey (Chairman)

Rupert Dorey is a resident of Guernsey and has 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.

Richard Battey (Senior Independent Director)

Richard Battey is a resident of Guernsey and is a non-executive Director of Better Capital PCC Limited, Pershing Square Holdings Limited and Princess Private Equity Holding Limited. He is a Fellow of the Institute of Chartered Accountants in England and Wales having qualified with Baker Sutton & Co. in London in 1977. Richard has been a non-executive Director of a number of investment companies and funds since leaving CanArgo Energy Corporation in 2006 where he was Chief Financial Officer. Prior to that role, he spent 27 years with the Schroder Group. Richard was a Director of Schroders (C.I.) Limited in Guernsey from April 1994 to December 2004 where he served as Finance Director and Chief Operating Officer. He was a Director of a number of the Schroder Group's Guernsey companies covering banking, investment management, trusts, insurance and private equity administration, retiring from his last Schroder Directorship in December 2008.

Sandra Platts (Chairman of the Management Engagement Committee and the Remuneration and Nomination Committee)

Sandra Platts is a resident of Guernsey and is a non-executive Director of Investec Bank (C.I.) Limited, UK Commercial Property REIT Ltd, Sequoia Economic Infrastructure Income Fund Limited, Marble Point Loan Financing Ltd and a number of other non-listed companies. Sandra was Managing Director of Kleinwort Benson in Guernsey and Chief Operating Officer for Kleinwort Benson Private Banking Group (UK and Channel Islands). She also held Directorships of the Kleinwort Benson Trust Company and Operating Boards, retiring from Kleinwort Benson boards in 2010. Sandra holds a Master's in Business Administration and The Certificate in Company Direction from the Institute of Directors.

David Staples (Chairman of the Audit and Risk Committee)

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 MedicX Fund Limited and Duet Real Estate Finance Limited as chairman of both. He is currently a director and audit committee chairman of two other listed companies, Ruffer Investment Company Limited and Baker Steel Resources Trust Limited. His other appointments are of the general partners of the main global private equity funds advised by Apax Partners.

GOVERNANCE | Directors' Report

Directors' Report

Share Capital

The share capital of the Company consists of: (a) an unlimited number of shares which upon issue the Directors may classify as U.S. Dollar Shares, Sterling Shares or Euro Shares or as shares of such other classes as the Directors may determine; (b) an unlimited number of B Shares which upon issue the Directors may classify as B Shares of such classes denominated in such currencies as the Directors may determine; (c) an unlimited number of C Shares which upon issue the Directors may classify as C Shares of such classes denominated in such currencies as the Directors may determine.

The number of shares in issue at 31 December 2019 was as follows:

Sterling Ordinary Shares 508,276,3071

U.S. Dollar Ordinary Shares 29,054,0132

1 of which 75,000,000 were held in treasury

2 of which 1,342,627 were held in treasury

The number of shares in issue at 31 December 2018 was as follows:

Sterling Ordinary Shares 805,289,9443

U.S. Dollar Ordinary Shares 59,271,9774

3 of which 75,000,000 were held in treasury

4 of which 1,342,627 were held in treasury

The number of shares in issue as at 3 April 2020, being the latest practicable date prior to publication of this report, was as follows:

Sterling Ordinary Shares 470,583,4785

U.S. Dollar Ordinary Shares 27,529,5226

5 of which 75,000,000 are held in treasury

6 of which 1,342,627 are held in treasury

Share Repurchases

The Directors operate an active discount control mechanism using share buy backs. At the Annual General Meeting ("AGM") of the Company held on 7 May 2019, the Directors were granted the general authority to purchase in the market up to 14.99% of each class of shares. This authority was renewed at the Extraordinary General Meetings ("EGMs") held on 12 August 2019 and 4 November 2019 in order to provide further flexibility to continue to buy back shares to help satisfy demand for liquidity whilst increasing NAV per share and as part of the Company's discount control mechanisms.

This authority will expire at the AGM to be held on 11 June 2020. Pursuant to this authority, and subject to the Law and the discretion of the Directors, the Company may purchase Ordinary Shares of a particular class in the market on an ongoing basis with a view to addressing any imbalance between the supply of and demand for Ordinary Shares of such class, thereby increasing the NAV per Ordinary Share of that class and assisting in managing the discount to NAV per Ordinary Share of that class in relation to the price at which the Ordinary Shares of such class may be trading. The Directors intend to seek annual renewal of this authority from shareholders.

NBLS Cumulative Share Buybacks 1 January 2016 - 31 December 2019

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

Source: U.S. Bank Global Fund Services (Guernsey) Limited and Bloomberg. Data is as at 31 December 2019

To support the share price and provide liquidity in the Shares and accretion to NAV per Share for ongoing shareholders, the Board has proactively repurchased over 815 million Ordinary shares to date.

During the year to 31 December 2019, the Company repurchased and cancelled 312,188,347 Sterling Ordinary Shares and 11,468,782 U.S. Dollar Ordinary Shares representing 61.42% of the Sterling Ordinary Shares in issue and 39.47% of the U.S. Dollar Ordinary Shares in issue, at 1 January 2019 with a respective accretion to NAV of 2.80% and 1.38%.

Since the year end and up to the 3 April 2020, being the latest practicable date prior to publication of this report, the Company has repurchased 37,537,281 Sterling Ordinary Shares and 1,717,000 U.S. Dollar Ordinary Shares for cancellation. 

Share Conversions

The Company offers a monthly conversion facility pursuant to which shareholders may elect to convert some or all of their shares of a class into shares of any other class. During the year to 31 December 2019, shareholders elected to convert 3,485,182 Sterling Ordinary Shares into U.S. Dollar Ordinary Shares and 23,143,233 U.S. Dollar Ordinary Shares into Sterling Ordinary Shares. Since the year end and up to 3 April 2020, being the latest practicable date prior to publication of this report, shareholders have elected to convert 204,298 Sterling Ordinary Shares into U.S. Dollar Ordinary Shares and 62,473 U.S. Dollar Ordinary Shares into Sterling Ordinary Shares.

Dividends and Dividend Policy

The Company seeks to pay dividends to shareholders equal to the cash income it receives less its running costs paid in that year, subject to the solvency test prescribed by the Law. Dividends are declared with respect to each calendar quarter and are paid in the currency of the class of shares in respect of which the dividend was declared.

The Articles also permit the Directors, in their absolute discretion, to offer a scrip dividend alternative to shareholders from time to time when a cash dividend is declared. The Directors' intention is not to offer a scrip dividend at any time that the shares trade at a material discount to the NAV per Share. On 21 December 2015, due to the prevailing discount at that time, the Board decided to replace the scrip dividend alternative with a Dividend Re-Investment Plan ("DRIP"), whereby shareholders have the option to re-invest their cash dividend in the Company's shares on an efficient basis.

The below table sets out the quarterly dividends paid by the Company that were declared in respect of 2019:

The below chart sets out the quarterly dividends per share paid by the Company since inception:

Dividends per Share (NBLS(£))

http://www.rns-pdf.londonstockexchange.com/rns/2882J_1-2020-4-8.pdf

Source: U.S. Bank Global Fund Services (Guernsey) Limited. Past performance is not indicative of future returns. Please refer to the dividend policy, which is available in the fund's prospectus, and can be found on www.nbgfrif.com.The first dividend covered a five month period.Q4 2019 dividend payable February 28, 2020. Annual dividend based on the four previous quarterly dividends paid and the share price as of the most recent quarter in that period.

Substantial Share Interests

Based upon information deemed reliable as provided by the Company's registrar, as at 3 April 2020, the following shareholders owned 5% or more of the issued shares of the Company.

1 Certain shareholdings within the U.S. Dollar Ordinary Share Class are greater than 5% of the U.S. Dollar Ordinary shares in issue but do not have 5% in aggregate of the Company's issued share capital.

Notifications of Shareholdings

In the year to 31 December 2019 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.

1 Calculated at time of announcement

Since the year end, seven TR-1 notifications were received by the Company. When more than one notification has been received from any shareholder, only the latest notification is shown.

1 Calculated at time of announcement

Directorship Disclosures in Public Companies Listed on a Stock Exchange 

Life of the Company

The Company does not have a fixed life. However, as required under Article 51 of the Articles, the Directors are 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, is proposed annually at the annual general meeting, and was duly passed in May 2019, and will next be proposed at the AGM on 11 June 2020.

If a continuation resolution is not passed, the Directors are required to put proposals to shareholders for the restructuring or reorganisation of the Company. There is a material uncertainty as to the outcome of this continuation resolution that may cast significant doubt on the Company's ability to continue as a going concern. The Directors have made the assumption that the continuation resolution proposed at the AGM in June 2020 will be passed. The Directors are satisfied that at the time of approving the Financial Statements no other material uncertainties exist that may cast a significant doubt concerning the Company's ability to continue for the 12 months after approval of the Financial Statements.

Anti-Bribery and Corruption Policy

The Board of the Company has a zero tolerance approach to instances of bribery and corruption. Accordingly, it expressly prohibits any Director or associated persons, when acting on behalf of the Company, from accepting, soliciting, paying, offering or promising to pay or authorise any payment, public or private, in the United Kingdom or abroad to secure any improper benefit for themselves or for the Company. The Investment Manager has also adopted a zero tolerance approach to instances of bribery and corruption. The Board insists on strict observance with these same standards by its service providers in their activities for the Company and continues to refine its process in this regard.

Criminal Facilitation of Tax Evasion Policy

The Board of the Company has a zero tolerance commitment to preventing persons associated with it from engaging in criminal facilitation of tax evasion. The Board has satisfied itself in relation to its key service providers that they have reasonable provisions

in place to prevent the criminal facilitation of tax evasion by their own associated persons and will not work with service providers who do not demonstrate the same zero tolerance commitment to preventing persons associated with it from engaging in criminal facilitation of tax evasion.

General Data Protection Regulation

The Company takes privacy and security of your information seriously and will only use such personal information as set out in the Company's privacy notice which can be found on the Company's website at https://www.nbgfrif.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 activities are carried out by Neuberger Berman, which is a signatory to the Principles of Responsible Investment and has an ongoing commitment to strengthening and refining its environmental, social and governance ("ESG") approach, see the Investment Manager's website for further details at https://www.nb.com/en/global/esg/philosophy.

The Investment Manager incorporates an ESG assessment into its internal credit ratings for non-investment grade credit. Its approach is to consider the valuation implications of ESG risks and opportunities alongside traditional factors in the investment process and to focus on companies or themes which are judged to be 'better' according to environmental, social and governance characteristics. Further details of Neuberger Berman's Principles for Responsible Investment is given on its website at www.nb.com/pages/public/en-gb/principles-for-responsible-investment.aspx

Global Greenhouse Gas Emissions

The Company has no significant greenhouse gas emissions to report from its operations for the year to 31 December 2019 (2018 - none), nor does it have responsibility for any other emissions producing sources. During 2019, the Board's travel which included a visit to the Investment Manager in London, incurred approximately 0.59 tonnes of CO2 (2018: 6.46 tonnes of CO2). From 2020, the Board intend to offset carbon emissions arising from its air travel.

Gender Metrics

The Board consists of three men and one woman. More information on the Board's consideration of diversity is given in the Corporate Governance Report further down in this report.

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.

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 our shareholders.

Service Providers

As an investment company the Company does not have any employees and conducts its core activities through third-party service providers. Our service providers' relationships are vital to our overall success, so as a Board we carefully consider the selection of, and engagement and continued relationship with our key service providers being the Investment Manager, Administrator, Custodian, Broker, Legal Advisers, Registrar, Auditor and Company Secretary

The Board recognises the benefits of fostering strong business relationships with its key service providers and seeks to ensure each is committed to the performance of their respective duties to a high standard and, where practicable, that each provider is motivated to adding value within their sphere of activity.

The Board has delegated various duties to external parties including the management of the investment portfolio, the custodial services (including the safeguarding of assets), the registration services and the day-to-day company secretarial, administration and accounting services. Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost of services offered. Each provider has an established track record and, through regulatory oversight and control, are required to have in place suitable policies to ensure they maintain high standards of business conduct, treat customers fairly, and employ corporate governance best practice.

The Company continues to have regular two-way face-to-face meetings with all key service providers. The Board respects and welcomes the views of all stakeholders. Any queries or areas of concern regarding the Company's operations can be raised with the Company Secretary.

Stakeholders and Section 172

Whilst directly applicable to UK registered companies, the intention of the AIC Code is that matters set out in section 172 of the UK Companies Act, 2006 are reported. The following disclosures offer some insight into how the Board uses its meetings as a mechanism for discharging its duties under Provision 5 of the AIC Code, including the breadth of matters it discussed and debated during the year and the key stakeholder groups that were central to those discussions. The Board's commitment to maintaining the high-standards of corporate governance recommended in the AIC Code, combined with the directors' duties of enshrined in Company law, the constitutive documents, the Disclosure Guidance and Transparency Rules, and Market Abuse Regulation, ensures that shareholders are provided with frequent and comprehensive information concerning the Company and its activities via the Company's website and Regulatory Information Service ("RIS") announcements on the London Stock Exchange such as the quarterly factsheets.

Each Board meeting follows a carefully tailored agenda agreed in advance by the Board and Company Secretary. A typical meeting will comprise reports on current financial and operational performance from Administrator, market update from the Broker, portfolio performance from the Investment Manager, with regulatory and governance updates from the Company Secretary and where required, a detailed deep dive into an area of particular strategic importance or concern. Through oversight and control, we have in place suitable policies to ensure the Company maintains high standards of business conduct, treats customers fairly, and employ high standards of corporate governance.

Whilst the primary duty of the Directors is owed to the Company as a whole, the Board considers as part of its discussions and decision making process the interests of all key stakeholder groups as identified above. Particular consideration being given to the continued alignment between the activities of the Company and those that contribute to delivering the Board's strategy.

During the year, the Board, having taken appropriate professional advice, reviewed the structure of the Group and decided to liquidate the Luxembourg subsidiaries. Due regard was given to the shareholders and service providers in so far as a number of options were presented and discussed and JTC Signes, as administrator to the subsidiaries, formed part of those discussions. It was ultimately agreed that, due to the cost and complexity of the subsidiaries and long-term risk from the changing tax and regulatory environment it was in the Company's best interests to transfer the business and assets of subsidiaries to the Company and then liquidate them.

Further, the Board reviewed how its shareholders preferred to be communicated to and how this had evolved over time. With a preference for regular face-to-face meetings and decline in attendance at the quarterly update calls, following the fourth quarter call in January 2020, the Company agreed to cease providing quarterly update calls, instead offering more face-to-face meetings.

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 further down in this report. Each of those Directors confirms that:

· to the best of his or her knowledge and belief, there is no information relevant to the preparation of their report of which the auditor is unaware; and

· 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

Chairman

8 April 2020

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 all the principles and provisions set out in the UK Code of Corporate Governance 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 will provide more relevant information to shareholders. Copies of the AIC Code can be found at www.theaic.co.uk.

The Company has complied with the principles and provisions of the AIC Code.

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 (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 2019, the Company has complied with the recommendations of the AIC, except where explanations have been provided.

The Directors believe that this Annual Report and Consolidated 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

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 four non-executive Directors. The biographical details of the Directors holding office at the date of this report are listed further down in this report, and demonstrate a breadth of investment, accounting and professional experience. Richard Battey is currently the appointed Senior Independent Director and will be replaced by David Staples when he steps down at the 2020 AGM. However, 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 down in this report.

Board Independence and Composition

The Chairman and all Directors are considered independent of the Company's Investment Manager, the Company Secretary, the Administrator and Sub-Administrator. The Directors consider that there are no factors, as set out in the AIC Code, which compromise the Directors' independence and 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 Chairman of the Company.

In March 2020 Mrs Platts will have served on the Board for nine years. Notwithstanding, the Board remains satisfied that Mrs Platts continues to exercise independent judgement and provides relevant skills, experience and diversity to ensure the continued balance and effectiveness of the Board. In order to avoid undue disruption from multiple changes arising from the execution of the succession plan, it is expected that Mrs Platts will remain a director and that the Board will comprise three members following Richard Battey's departure.

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 2020 AGM. Richard Battey and Sandra Platts have served since incorporation of the Company. Rupert Dorey has served since 1 March 2015 and David Staples has served since 14 June 2018. Directors may resign at any time by giving one month's written notice to the Board.

In accordance with the AIC Code all Directors are subject to re-election annually by shareholders. The Remuneration and Nomination Committee reviewed the independence, contributions and performance of each Director together with results of the 2019 internal Board Evaluation, and have determined that it is in the best interests of the Company that Rupert Dorey, David Staples and Sandra Platts should stand for re-election. Noting the appointment of David Staples in 2018 as part of the Board's orderly succession planning arrangements, Richard Battey will not put himself forward for re-election and will stand down on the date of the 2020 AGM.

Tenure of Non-Executive Directors

The Board has adopted a policy on tenure that it considers appropriate for an investment company. The Board does not believe that length of service, by itself, leads to a closer relationship with the Investment Manager or necessarily affects a Director's independence. The Board's tenure and succession policy seeks to ensure that the Board is well balanced and will be refreshed by the appointment of new Directors with the skills and experience necessary to replace those lost by Directors' retirements or as identified to assist in the formulation and delivery of the strategy of the Company. The Board seeks to encompass past and current experience of various areas relevant to the Company's business.

Directors are expected to devote such time as is necessary to enable them to discharge their duties. Other business relationships, including those that conflict or may potentially conflict with the interests of the Company, are taken into account when appointing Board members and are monitored on a regular basis.

The dates of appointment of all Directors are provided in the Directors' Remuneration Report and a summary of shareholder elections is provided below.

Succession

The Board acknowledges that some market participants believe that the Directors should not be considered independent after 9 years of service. The Board have looked to balance the tenure of the Directors on the Board and during 2019 continued to realise its succession plan to replenish the key positions on the Board. This process has ensured a smooth transfer of knowledge and ensured diversity in length of tenure on the Board. Given the nature of the Company, being an externally managed investment company with no employees and no executives, the Board believes it is not in the best interests of the Company to replace Richard Battey, thus reducing the Board size and overall cost of the Board.

Re-election of Directors

Rupert Dorey, Sandra Platts and David Staples each submit themselves for re-election at the AGM to be held on 11 June 2020. The Remuneration and Nomination Committee confirmed to the Board that the contributions made by the Directors offering themselves for re-election at the 2020 AGM continue to be effective and that the shareholders should support their re-election.

Board Diversity

The Board considers that its members have a balance of skills and experience which are relevant to the Company. The Board supports the recommendations of the Davies Report and notes the recommendations of the Parker Review into ethnic diversity and the Hampton-Alexander Review on gender balance in FTSE leadership. The Board believes in the value and importance of diversity in the boardroom and the Board agreed to meet a target of at least 33% female representation on the Board. At the date of this Report, the Board, comprised four directors, with 25% female representation. However, after Richard Battey steps down at the 2020 AGM, the female representation on the Board will reach the target of 33%. The Board continues to encourage diversity and recognises that directors with diverse skills sets, capabilities and experience gained from different backgrounds appropriate to the company enhance the Board.

Board Responsibilities

The Board meets at least four times each year and deals with the important aspects of the Company's affairs including the setting and monitoring of investment strategy, and the review of investment performance. The Investment Manager takes decisions as to the purchase and sale of individual investments, in line with the investment policy and strategy set by the Board. The Investment Manager together with the Company Secretary, Administrator and Sub-Administrator also ensures that all Directors receive, in a timely manner, all relevant management, regulatory and financial information relating to the Company and its portfolio of investments. Representatives of the Investment Manager attend each Board meeting, enabling Directors to question on any matters of concern or seek clarification on certain issues. Matters specifically reserved for decision by the Board have been defined and a procedure set out in their respective appointment letters for Directors in the furtherance of their duties to take independent professional advice at the expense of the Company.

Conflict of Interests

Directors are required to disclose all actual and potential conflicts of interest to the Board as they arise for consideration and the Board may impose restrictions or refuse to authorise conflicts if deemed appropriate. The Directors have undertaken to notify the Company Secretary as soon as they become aware of any new potential conflicts of interest that would need to be approved by the Board. Only Directors who have no material interest in the matter being considered will be able to participate in the Board approval process. It has also been agreed that the Directors will seek prior approval from the Board in advance of any proposed external appointments.

None of the Directors had a material interest in any contract, which is significant to the Company's business. The Directors' Remuneration Report further down in this report provides information on the remuneration and interests of the Directors. Further down in this report 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 2019 by means of an internal questionnaire. The Company Secretary collated the resuts of the questionnaires and the consolidated results were reviewed by and discussed by the Remuneration and Nomination Committee, whose Chairman reported to the Board. No material areas of concern were raised.

As a result of the 2019 Board performance evaluation, the Board has agreed:

· That all Directors are considered independent;

· Rupert Dorey, David Staples and Sandra Platts should be proposed for re-election at the 2020 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 Chairman of the Remuneration and Nomination Committee reviewed the Chairman. It was agreed that the Chairman had settled into his role and was well-regarded by the other Board members. In addition, the Chairman had been actively engaged with shareholders over the year. All Directors are members of the Remuneration and Nomination Committee and as such it is not considered necessary for the SID to lead the discussions, as all Directors participate.

The Board will continue to review its procedures, its effectiveness and development in the year ahead.

Induction/Information and Professional Development

Directors are provided, on a regular basis, with key information on the Company's policies, regulatory requirements and its internal controls. Regulatory and legislative changes affecting Directors' responsibilities are put to the Board as they arise along with changes to best practice from, amongst others, the Investment Manager, Company Secretary and the Auditor. Advisers to the Company also prepare reports for the Board from time to time on relevant topics and issues. In addition, Directors attend relevant seminars and events to allow them to continually refresh their skills and knowledge and keep up with changes within the investment company industry for which each Director maintains a log, provided to the Company Secretary on at least annual basis as a record of his/her continued professional development. The Chairman reviewed the training and development needs of each Director during the annual Board evaluation process and is satisfied that all Directors actively keep up to date with industry developments and issues.

When new Directors are appointed to the Board, they will be provided with all relevant information regarding the Company and their duties and responsibilities as Directors. In addition, a new Director will also spend time with representatives of the Investment Manager, and other service providers as may be appropriate, in order to learn more about their processes and procedures.

The Chairman met with each of the directors individually as recommended by the new AIC Code. The range of those discussions was diverse and included topics such as director development, succession, board dynamics, business risks, strategy, regulation, investors, capital markets, and competition. Each of the meetings was informal and unstructured and permitted a free flow of topical discussion relevant to the Company.

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 Chairman, and other Directors are available for discussion about governance and strategy with shareholders and the Chairman 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 Chairman, Senior Independent Director or any other Director at any time via the Company Secretary.

During the year the Company continued its quarterly investor update calls, which can be accessed via conference call or WebEx, details are published via an RIS. The update calls are also made available on the Company's website at www.nbgfrif.com. The Company ceased these quarterly calls effective January 2020 as the way in which the Company communicates with key investors has evolved with a preference by our investors for regular face-to-face meetings. Furthermore, the whole Board, including the committee chairmen, welcome the opportunity to meet with investors on a one-to-one basis, upon request. The Chairman has had discussions with a number of investors on a one-to-one basis during the year.

The Chairman of the Remuneration and Nomination Committee will consult with shareholders should it be proposed to increase the current aggregate limit of annual Directors' fees as set out in the Company's Articles.

The Board believes that the AGM provides an appropriate forum for shareholders to communicate with the Board, and encourages participation. All Directors will attend the 2020 AGM. There is an opportunity for individual shareholders to question the Chairman of the Board, the Senior Independent Director, and the Chairman of each of the Audit and Risk Committee, the Management Engagement Committee and the Remuneration and Nomination Committee at the AGM.

The Annual Reports, Key Information Documents, monthly fact sheets and monthly holdings are available to provide shareholders with a clear understanding of the Company's activities and its results. This information is supplemented by the daily calculation and publication on the London Stock Exchange of the NAV of the Company's Ordinary Shares. The Board is informed of relevant promotional documents issued by the Investment Manager. All documents issued by the Company can be viewed on the website, www.nbgfrif.com.

2020 AGM

The 2020 AGM will be held in Guernsey on 11 June 2020. The Notice for the AGM sets out the ordinary and special resolutions to be proposed at the meeting. Separate resolutions are proposed for each substantive issue.

It is the intention of the Board that the Notice of AGM be issued to shareholders so as to provide at least twenty working days' notice of the meeting. Shareholders wishing to lodge questions in advance of the meeting and specifically related to the resolutions proposed are invited to do so by writing to the Company Secretary at the registered office address given further down in this report.

Voting on all resolutions at the AGM is on a poll. The proxy votes cast, including details of votes withheld are disclosed to those in attendance at the meeting and the results are published on the website and announced via a RIS Service. Where a significant number of votes have been lodged against a proposed resolution (being greater than 20%), the Board intends to identify those shareholders and further understand their views to address their concerns. An update on the views and actions taken will be published no later than six months after the shareholder meeting. The Board notes that any resolution which receives a high percentage of votes against it will be included in the Investment Association's Public Register. The Public Register is an aggregated list of publicly available information regarding meetings of companies in the FTSE All-Share who have received significant shareholder opposition to proposed resolutions or have withdrawn a resolution prior to the shareholder vote.

Board Meetings

The Board meets at least quarterly. Certain matters are considered at all quarterly board meetings including the performance of the investments, NAV and share price and associated matters such as asset allocation, risks, strategy, marketing and investor relations, peer group information and industry issues. Consideration is also given to administration and corporate governance matters, and where applicable, reports are received from the Board committees.

The Chairman 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 Chairman or another non-executive Director.

Attendance at scheduled meetings of the Board and its committees in the 2019 financial year

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 down in this report. The terms of reference for each committee can be found on the Company's website www.nbgfrif.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 EU Market Abuse Regulations.

For and on behalf of the Board

Rupert Dorey

Chairman

8 April 2020

GOVERNANCE | Audit and Risk Committee Report 

Audit and Risk Committee Report

Membership

David Staples - Chairman (Independent non-executive Director)

Sandra Platts (Independent non-executive Director)

Richard Battey (Independent non-executive Director)

Rupert Dorey1 (Company Chairman and independent non-executive Director)

1 The Board believes it is appropriate for the Company Chairman 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 Chairman's financial background and experience of the asset class is valuable to the Committee.

Key Objectives

The provision of effective governance over the appropriateness of the Company's financial reporting including the adequacy of related disclosures, the performance of the external auditor, and the management of the Company's systems of internal financial and operating controls and business risks.

Responsibilities

· Monitoring and reviewing the Company's financial results announcements, Annual and Half-Yearly Financial Statements and monitoring compliance with relevant statutory and listing requirements;

· Reporting to the Board on the appropriateness of the Company's accounting policies and practices including critical accounting policies, judgements, estimates, and practices;

· Advising the Board on whether the Committee believes the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy;

· Overseeing the relationship with the external auditor (please refer to the Terms of Reference which are available on the Company's website for further detail on the responsbilities in relation to the external auditor);

· Considering the financial and other implications on the independence of the auditor arising from any non-audit services to be provided by the auditor;

· 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 Chairman 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, PricewaterhouseCoopers CI LLP ("PwC") is invited to each meeting. The Chairman of the Committee also met separately with PwC 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 regularly reviews the Company's structure and in reviewing the fast changing global fiscal landscape, the Audit Committee recommended to the Board that it was no longer optimal to maintain the Luxembourg subsidiaries of the Company. The annual cost savings from winding up the two subsidiaries will compensate the Company for the increased irrecoverable withholding taxes in certain territories that the Company will bear. The Committee considered this was in the best interests of the Company and stakeholders as a whole. The Board adopted the Committee's recommendations.

The Committee's terms of reference were updated during the year and can be found on the Company's website www.nbgfrif.com.

At its three 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 PwC 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 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 the external auditor 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:

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 and subsidiaries' 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 2019 and there were no deficiencies.

The Committee receives reports from the Investment Manager on the Company's risk evaluation process and reviews changes to significant risks identified. The Committee has undertaken a full review of the Company's business risks, which have been analysed and recorded in a risk report, which is reviewed and updated regularly. The Board receives each quarter from the Investment Manager a formal report which details the steps taken to monitor the areas of risk including those that are not directly the responsibility of the Investment Manager and which reports the details of any known internal control failures.

The Board's assessment of the Company's principal risks and uncertainties is set out further back in this report.

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 PwC identifying their assessment of the significant audit risks. For the 2019 financial year the significant audit risks identified were in relation to the risk of management override of controls and the valuation of investments. The Committee challenged the work performed by the auditor to test these significant risks. The Committee assessed the effectiveness of the half-year review and year end audit process in addressing these matters through the reporting received from PwC 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 2019 financial year, the Committee was satisfied that there had been appropriate focus and challenge on the significant and other areas of audit risk and assessed the quality of the audit process to be good.

During the year, the Committee performed its annual review of the independence, effectiveness and objectivity of the external auditor. The Committee concluded that the effectiveness of the external auditor and the audit process were satisfactory and recommended to the Board that it proposes at the 2020 AGM the reappointment of PwC as external auditor for the 2020 financial year and to authorise the Directors to determine their remuneration. The auditor, PwC, has indicated willingness to continue in office.

Appointment and Independence

The Committee considers the reappointment of PwC, including the rotation of the audit partner, and assesses their independence on an annual basis. PwC is required under applicable Ethical Standards to rotate the audit partner responsible for the audit every five years. 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 Company is guided by the EU Audit Regulations and EU Audit Directive to put the external audit out to tender at least every ten years. As 2019 is the ninth annual audit completed by PwC, the Committee and the Board are presently minded that it will complete such a tender process in respect of the audit of the financial statements for the year ending 31 December 2021. There are no contractual obligations restricting the Committee's choice of external auditor and we do not indemnify our external auditor.

In its assessment of the independence of the external auditor, the Committee received confirmation that there were no relationships between the Company and PwC which may have compromised PwC's independence and that PwC had completed all relevant checks to be able to confirm this.

The Committee approved the fees for audit services for 2019 after a review of the level and nature of work to be performed, and after being satisfied by PwC that the fees were appropriate for the scope of the work required.

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. During the year the policy was removed from the Terms of Reference to now be a stand-alone document and has recently been updated to reflect the FRC's Revised Ethical Standard published on 17 December 2019. 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.

PwC was remunerated £161,411 for services rendered in 2019. Of this amount, £94,970 was in relation to the year-end audit, £27,605 for procedures performed in respect to the half-year review and £38,836 for agreed-upon procedures relating to the accounts of the Luxembourg subsidiaries. No other non-audit services were undertaken by PwC for the Company during the year. 

Committee Evaluation

The Committee's activities formed part of the Board evaluation performed in the year. Details of this process can be found under "Performance evaluation" further down in this report. The Committee was satisfied that it had undertaken its duties efficiently and effectively.

David Staples

On behalf of the Audit and Risk Committee

8 April 2020

GOVERNANCE | Management Engagement Committee Report

Management Engagement Committee ("MEC") Report

Membership

Sandra Platts - Chairman (Independent non-executive Director)

Richard Battey (Independent non-executive Director)

Rupert Dorey (Company Chairman and independent non-executive Director)

David Staples (Independent non-executive Director)

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.

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 as at 14 November 2019 including the Investment Manager. The MEC reviewed the terms of reference for the MEC and recommended to the Board that revised Terms of Reference be adopted. The current Terms of Reference are available on the Company's website www.nbgfrif.com. Furthermore, the MEC reviewed the approaches to cyber security by its service providers.

The MEC considered that the changes made during the year to the Company Secretary and Broker had been effective and that the Company had benefited from significant cost savings on an on-going basis as a result.

In March 2019, the Board undertook a due diligence visit to the Investment Manager's offices in London to meet a number of personnel, review the performance of the Investment Manager and consider the strategy of the Company. In addition to the site visit and taking into consideration the supplementary guidance issued by the AIC in 2019 which described certain measures by which investment companies may assess the relationship with the manager, in November 2019 the Board undertook an enhanced qualitative assessment of the performance of the Investment Manager. The feedback from this assessment confirmed that the Investment Manager's focus remained on the performance of their core duties, and that there existed a high level of congruence between the duties of the Investment Manager and the objectives of the Company. The Board does not consider it necessary to obtain an independent appraisal of the Investment Manager's services.

In order to strengthen the competitive position of the Company relative to peers and as part of the Board's ongoing review of, and drive to reduce, costs, effective 1 October 2019, the Company entered into an amendment to the IMA reducing the Investment Manager's fee to 0.65% of NAV from 0.75% on the first £1bn of the NAV, 0.70% on £1bn to £2bn of the NAV and 0.65% on any amount greater than £2bn of the NAV .

In 2019 a due-diligence visit was carried out at the offices of the Registrar and UK Transfer Agent by the Investment Manager and no concerns were raised with respect to their operations, controls or processes. In addition, a due diligence visit was carried out by the Investment Manager on behalf of the Company with U.S. Bank Global Fund Services (Ireland) Limited and no concerns were raised with respect to their operations, controls or processes.

Continued Appointment of the Investment Manager and other Service Providers

The Board reviews investment performance at each Board meeting and a formal review of all service providers is conducted annually by the MEC. The annual third-party service provider review process includes two-way feedback, which provides the Board with an opportunity to understand the views, experiences and any significant issues encountered by service providers during the year. As part of the Board's annual performance evaluation, feedback is received on the quality of service and the effectiveness of the working relationships with each of the Company's key service providers. Resulting from the 2018 review were the following actions:

· The MEC carried out a tender process of the company secretarial services and made a recommendation to the Board that Praxis Fund Services Limited be appointed the Company Secretary in place of Carey Commercial Limited with effect from 22 April 2019.

· On 1 January 2019, Numis Securities were appointed as sole corporate broker and financial adviser on the recommendation of the MEC.

As a result of the 2019 annual review it is the opinion of the Directors that the continued appointment of the Investment Manager and the other current service providers on the terms agreed is in the interest of the Company's shareholders as a whole. The Board considers that the Investment Manager has extensive investment management resources and wide experience in managing investments and is satisfied with the quality and competitiveness of the fee arrangements of the Investment Manager and the Company's other service providers.

Sandra Platts

On behalf of the Management Engagement Committee

8 April 2020

GOVERNANCE | Remuneration and Nomination Committee Report

Remuneration and Nomination Committee ("RNC") Report

Membership

Sandra Platts - Chairman (Independent non-executive Director)

Richard Battey (Independent non-executive Director)

Rupert Dorey (Company Chairman and independent non-executive Director)

David Staples (Independent non-executive Director)

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 oversight of all matters relating to corporate governance, 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 of the Directors;

· Prepare an annual report on Directors' remuneration;

· Considers the need to appoint external remuneration consultants;

· Regularly review and make recommendations in relation to the structure, size and composition of the Board including the diversity and balance of skills, knowledge and experience, and the independence of the non-executive Directors;

· Oversees the performance evaluation of the Board, its committees and individual Directors (see further back in this report);

· 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;

· Makes recommendations to the Board on the composition of the Board's committees; and

· Is responsible for the oversight of all matters relating to corporate governance, bringing any issues to the attention of the Board.

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 Chairman.

Main Activities during the year

The RNC met once during the year and considered succession planning and replenishment of the Board and reviewed Directors' remuneration. The RNC also reviewed the results of the annual evaluation of the performance of the Board and its committees, the Chairman and individual directors which was carried out by way of internal evaluation questionnaire and discussion. The RNC considered that the results provided confirmed the continued appropriateness of the balance of skills, experience, independence and knowledge of the Company and that the activities of the Board continued to be effective in promoting the strategy, and the long-term sustainable success of the Company.

The terms of reference for the RNC were reviewed and the Board adopted revised terms of reference for the RNC. The revised terms of reference are available on the Company's website at www.nbgfrif.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. The Board supports the recommendations of the Davies Report and Hampton-Alexander Review, notes the recommendations of the Parker Review and believes in and values the importance of diversity, including gender, to the effective functioning of the Board. At 31 December 2019, the Board had 25% female representation, however after Richard Battey steps down at the 2020 AGM, this figure will be 33% during 2020 as pledged. The Board continues to focus on encouraging diversity of business skills and experience, recognising that Directors with diverse skills sets, capabilities and experience gained from different backgrounds enhance the Board. The RNC will continue to recommend the appointment of female directors as appropriate but not to the exclusion of all other considerations such as the specialist skill set relevant to the Company's investment activities and merit.

It was recommended to the Board that David Staples fill the role of the SID following Richard Battey's departure at the 2020 AGM. The Board approved this recommendation.

In recognition of the Directors' desire to support greater gender diversity, the Board volunteered to take on a female "apprentice director", in October 2018 as part of her board training process. The candidate shadowed the Board and fully observed in all Board activities for a period of one year, but had no voting rights and no legal responsibilities. The Directors feel strongly that they have a duty to foster the skills of the next generation of board directors, and are pleased to play their part in achieving greater gender representation.

The RNC reviewed the fees paid to the Board of Directors and proposed to retain the current levels. In recognition of the additional time commitment and responsibility of David Staples in restructuring the Group, the RNC (excluding David Staples) recommended to the Board to award him a one off payment of £5,000. 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 down in this report..

Sandra Platts

On behalf of the Remuneration and Nomination Committee

8 April 2020

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 11 June 2020.

Directors' Fees

The Company paid the following fees to the Directors for the years ended 31 December 2019 and 31 December 2018:

1 William Frewen resigned as a Director of the Company on 30 September 2018.

2 David Staples was appointed a Director of the Company on 14 June 2018.

In addition to his annual fee, David Staples was paid a one off sum of £5,000 in recognition of the additional time commitment and responsibility spent in relation to the restructure of the Group. 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 $2,846 (31 December 2018: $25,581).

Directors' fees for the Luxembourg subsidiaries are included within the subsidiaries' Administration fees. None of the Company's Directors were directors of the Luxembourg subsidiaries.

Please refer to Note 3 for more details on Directors' remuneration.

Changes to the Board

There were 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.

The Company's policy is for the Directors to be remunerated in the form of fees, payable quarterly in arrears. No Director has any entitlement to a pension, and the Company has not awarded any share options or long-term performance incentives to any of the Directors. No element of the Directors' remuneration is performance related.

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 payable to the Directors 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. During the year ended 2019, the policy was for the Chairman of the Board and Chairman of the other Committees to be 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 Chairman of the RNC may consult with principal shareholders of the Company should it be proposed to exceed the aggregate limit.

Directors' Fees Policy

Statement by the Chairman of the RNC

In accordance with the Directors' remuneration policy, the Directors' fees were reviewed by the RNC during its meeting in November 2019 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.

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. Richard Battey and Sandra Platts have served since incorporation of the Company. Rupert Dorey was appointed on 1 March 2015 and David Staples was appointed on 14 June 2018. 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.

No Director has a service contract with the Company. Directors have agreed letters of appointment with the Company.

In accordance with the AIC Code Rupert Dorey, Sandra Platts and David Staples will offer themselves for re-election by shareholders at the AGM to be held on 11 June 2020. Mr Battey will not put himself for re-election and will stand down at the 2020 AGM. The names and biographies of the Directors holding office at the date of this report are listed further back in this report. All of the Directors are subject to annual re-election.

Dates of Directors' Letters of Appointment

Richard Battey and Sandra Platts were appointed as Directors on 10 March 2011, Rupert Dorey was appointed a Director on 1 March 2015 and David Staples was appointed on 14 June 2018. Each Director was elected (in the case of David Staples) or re-elected at the AGM held on 7 May 2019.

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 in the table 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 2019. 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:

Sandra Platts

On behalf of the Remuneration and Nomination Committee

8 April 2020

GOVERNANCE | Directors' Responsibility Statement

Directors' Responsibility Statement

The Directors are responsible for preparing the Financial Statements for each financial year, which give a true and fair view, in accordance with applicable Guernsey Law and accounting principles generally accepted in the United States ("US GAAP"), of the state of affairs of the Company and of the profit or loss for the year. In preparing those Financial Statements, the Directors are required to:

· Select suitable accounting policies and apply them consistently;

· Make judgements and estimates that are reasonable and prudent;

· State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; and

· Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

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.

The Directors of the Company have elected to prepare consolidated financial statements for the Company for the year ended 31 December 2019 as the parent in accordance with Section 244(5) of the Law. They are not required to prepare individual financial statements for NB Global Floating Rate Income Fund Limited in accordance with Section 243 of the Law for the financial year.

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 loss of the Company, and the undertakings included in the consolidation taken as a whole 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 consolidated financial statements may differ from legislation in other jurisdictions.

By order of the Board

Rupert Dorey

Chairman

8 April 2020

GOVERNANCE | Independent Auditor's Report

Independent Auditor's Report to the members of NB Global Floating Rate Income Fund Limited

Report on the audit of the consolidated financial statements

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Our opinion

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of NB Global Floating Rate Income Fund Limited (the "company") and its subsidiaries (together "the group") as at 31 December 2019, and of their consolidated financial performance and their consolidated cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America and have been properly prepared in accordance with the requirements of The Companies (Guernsey) Law, 2008.

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What we have audited

The group's consolidated financial statements comprise:

● the consolidated statement of assets and liabilities as at 31 December 2019;

● the consolidated condensed schedule of investments as at 31 December 2019;

● the consolidated statement of operations for the year then ended;

● the consolidated statement of changes in net assets for the year then ended;

● the consolidated statement of cash flows for the year then ended; and

● the notes to the consolidated financial statements, which include a description of the significant accounting policies.

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Basis for opinion

We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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Independence

We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements of the group, as required by the Crown Dependencies' Audit Rules and Guidance. We have fulfilled our other ethical responsibilities in accordance with these requirements.

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Material uncertainty related to going concern

We draw attention to the going concern disclosures in the Strategic Report, the life of the company disclosures in the Directors' Report and the basis of preparation disclosures in note 2 to the consolidated financial statements. These disclosures note that the directors are required to propose an ordinary resolution that the company continues its business as a closed-ended investment company (a "continuation resolution") at the June 2020 Annual General Meeting. If a continuation resolution is not passed, the directors shall put proposals to the shareholders for restructuring or reorganisation of the company. There is a material uncertainty as to the outcome of this continuation resolution that may cast significant doubt on the company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

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Our audit approach

Overview

Audit scope

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the group, the accounting processes and controls, and the industry in which the group operates.

Materiality 

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They 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 consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the consolidated financial statements as a whole.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above $434,000, as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

o The directors have analysed and are satisfied with the business continuity plans of all key service providers as part of their COVID-19 operational resilience review.

· We considered the appropriateness of the disclosures made by management and the board in respect of the potential impact of COVID-19, a non-adjusting post balance sheet event.

Based on our procedures and the information available at the time of the directors' approval of the financial statements, we have not identified any matters to report with respect to both management's and the board's consideration of the impact of COVID-19 on the current and future operations of the company.

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Other information

The directors are responsible for the other information. The other information comprises all the information included in the 2019 Annual Report (the "Annual Report") but does not include the consolidated financial statements and our auditor's report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated 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.

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Responsibilities of the directors for the consolidated financial statements

The directors are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with accounting principles generally accepted in the United States of America, the requirements of Guernsey law and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for 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 the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

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Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs 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 these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

● Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

● Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group's internal control.

● Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

● Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern over a period of at least twelve months from the date of approval of the financial statements. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the company to cease to continue as a going concern.

● Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

● Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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Use of this report

This independent auditor's report, including the opinions, has been prepared for and only for the members as a body in accordance with Section 262 of The Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

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Report on other legal and regulatory requirements

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Company Law exception reporting

Under The Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:

● we have not received all the information and explanations we require for our audit;

● proper accounting records have not been kept; or

● the consolidated financial statements are not in agreement with the accounting records.

We have no exceptions to report arising from this responsibility.

Listing Rules of the Financial Conduct Authority (FCA)

The company has reported compliance against the 2019 AIC Code of Corporate Governance (the "Code") which has been endorsed by the UK Financial Reporting Council as being consistent with the UK Corporate Governance Code for the purposes of meeting the company's obligations, as an investment company, under the Listing Rules of the FCA.

Aside from the impact of the matters disclosed in the material uncertainty related to going concern section, we have nothing material to add or draw attention to in respect of the following matters which we have reviewed based on the requirements of the Listing Rules of the FCA: 

● The directors' confirmation that they have carried out a robust assessment of the principal and emerging risks facing the company, including a description of the principal risks, what procedures are in place to identify emerging risks, and an explanation of how those risks are being managed or mitigated.

● The directors' explanation 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 have nothing to report having performed a review of the directors' statement that they have carried out a robust assessment of the principal and emerging risks facing the company and the directors' statement in relation to the longer-term viability of the company. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the directors' process supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering whether the statements are consistent with the knowledge and understanding of the company and its environment obtained in the course of the audit.

Additionally, we have nothing to report in respect of our responsibility to report when:

● The directors' statement relating to Going Concern in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.

● The statement given by the directors that they consider the Annual Report taken as a whole to be fair, balanced and understandable, and provides the information necessary for the members to assess the group's position and performance, business model and strategy is materially inconsistent with our knowledge of the group obtained in the course of performing our audit.

● The section of the Annual Report describing the work of the Audit and Risk Committee does not appropriately address matters communicated by us to the Audit and Risk Committee.

● The directors' statement relating to the company's compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified, under the Listing Rules, for review by the auditors.

Evelyn Brady

For and on behalf of PricewaterhouseCoopers CI LLP

Chartered Accountants and Recognised Auditor

Guernsey, Channel Islands

8 April 2020

FINANCIAL STATEMENTS | Consolidated Statement of Assets and Liabilities

Consolidated Statement of Assets and Liabilities

The Consolidated Financial Statements further down in this report were approved and authorised for issue by the Board of Directors on 8 April 2020, and signed on its behalf by:

FINANCIAL STATEMENTS | Consolidated Condensed Schedule of Investments

Consolidated Condensed Schedule of Investments

As at 31 December 2019, issuers with the following investments comprised of greater than 1% of NAV (Excluding cash):

As at 31 December 2018, issuers with the following investments comprised of greater than 1% of NAV (Excluding cash): 

As at 31 December 2019, the below were the largest 50 investments based on the NAV: