NBLS.L Regulatory News (NBLS)

Company Overview

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

The Company is a closed-ended investment company incorporated and registered in Guernsey with registered number 53155. It is a non-cellular company limited by shares and has been declared by the Guernsey Financial Services Commission to be a registered closed-ended collective investment scheme. On 20 April 2011 the Company was admitted to the Official List of the U.K. Listing Authority with a premium listing trading on the Main Market of the London Stock Exchange ("LSE"). The Company was admitted to the FTSE 250 in March 2012.

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 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

To pursue its investment objective, the Company invests mainly in floating rate senior secured loans issued in United States Dollars ("U.S. Dollars"), Pound Sterling and 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 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 at the time of investment. 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 Company will generally seek 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.

Capital Structure

As at 30 June 2016 the Company's share capital comprised 1,138,569,603 Sterling Ordinary Shares of no par value (of which 91,519,621 were held in treasury) and 45,139,393 U.S. Dollar Ordinary Shares of no par value (of which 2,972,627 were held in treasury).

For the purposes of efficient portfolio management, the Company has established a wholly-owned Luxembourg incorporated subsidiary, NB Global Floating Rate Income Fund (Lux) 1 S.à.r.l. which in turn holds a wholly-owned subsidiary, NB Global Floating Rate Income Fund (Lux) 2 S.à.r.l. Part of the portfolio of the Company is held through NB Global Floating Rate Income Fund (Lux) 2 S.à.r.l. All references to the Company in this document refer to the Company together with its wholly-owned Luxembourg subsidiaries.

Company Numbers

Sterling Ordinary Shares

LSE ISIN code: GG00B3KX4Q34

Bloomberg code: NBLS:LN

U.S. Dollar Ordinary Shares

LSE ISIN code: GG00B3P7S359

Bloomberg code: NBLU:LN

Dividends

Paid quarterly in respect of each calendar quarter.

Rolling 12 month dividend yield (based on the previous four quarterly dividends paid and share price as at 30 June 2016):

· Sterling Ordinary Shares - 4.39%

· U.S. Dollar Ordinary Shares - 4.40%

Website

www.nbgfrif.com

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 investment products because they are shares in an investment company, which if it were domiciled in the United Kingdom, would qualify as an investment trust.

Key Figures

* In the six months to 30 June 2016, the Company repurchased 157.0 million Sterling Ordinary Shares at a total U.S. Dollar equivalent cost of $200.0m and 3.3 million U.S. Dollar Shares at a total cost of $3.0m.

** The 30 June 2016 dividend yield is presented on an annual basis and calculated on the four quarterly dividends paid up to 30 June 2016. This is a change from prior years where the dividend yield to 30 June was previously presented on a half-year basis and calculated on the two quarterly dividends paid up to 30 June. The 2015 comparative relates to dividends paid during the year from 1 January 2015 to 31 December 2015.

*** 2016 figures relate to the period 1 January to 30 June 2016 while 2015 comparative relates to the year 1 January 2015 to 31 December 2015.The total return is the NAV return per share plus dividends paid during the period.

Chairman's Statement

Dear Shareholder,

It is my pleasure to present to you the Report of the Company for the six months ended 30 June 2016.

Background

The six months under review will be remembered by most for the United Kingdom's decision to leave the European Union ("Brexit"). One might therefore be forgiven for forgetting some of the preceding macroeconomic headwinds such as continued Chinese currency depreciation, weakening oil prices and further loosening of the Bank of Japan's monetary policy, all of which added to heightened volatility and general concern over the state of the global economy. Despite this political and macroeconomic backdrop, United States ("U.S.") and European senior secured floating rate loans performed well during the period. Fears over increasing default rates failed to materialise and the defaults that were seen in the market came in easily identifiable sectors, such as commodities, reinforcing floating rate loans' credentials as a stable and resilient asset class with attractive risk-adjusted return characteristics.

Portfolio and Company Performance

Your Board is pleased with the Investment Manager's performance during the period with the Company's net asset value ("NAV") per share rising modestly by 1.38% and 1.32% for the Sterling Ordinary Shares and U.S. Dollar Ordinary Shares respectively. With the inclusion of dividends declared during the period, the Company's total return per share was 3.62% for the Sterling Ordinary Shares and 3.54% for the U.S. Dollar Ordinary Shares. During the same period the Company's share price return was -0.76% per Sterling Ordinary Share and -1.08% per U.S. Dollar Share reflecting a widening of the Company's discount from 2.63% per Sterling Ordinary Share and 2.66% per U.S. Dollar Share to 4.68% per Sterling Ordinary Share and 4.96% per U.S. Dollar Share. This is disappointing given the underlying performance of the portfolio, although it is perhaps not surprising given the proximity of the period end to the U.K.'s referendum result. As at the latest practicable date prior to publication of this report the Company's Sterling Ordinary Shares and the U.S. Dollar Ordinary Shares trade at a discount of 4.84% and 2.09% respectively.

Your Board notes that recent market events have led to heightened volatility in the Company's discount and, for large periods in the year, both share classes have traded at a discount wider than the Board's previously stated target of 3% in normal market conditions. Throughout this period the Board has continued to address temporary imbalances between supply and demand for shares in the Company by proactively repurchasing such shares. In the six months to 30 June 2016, the Company repurchased 157.0 million Sterling Ordinary Shares at a total cost £140.0m and 3.3 million U.S. Dollar Shares at a total cost of $3.0m representing 13.1% and 6.2% of the share capital (less shares held in treasury) at the start of the period respectively. Since the period end and up to the latest practicable date prior to publication of this report, the Company has repurchased a further 15.8 million Sterling Ordinary Shares at £14.5m and 0.7 million U.S. Dollar Shares at $0.7m. Your Board maintains its target discount of 3% in normal conditions and will continue to seek to address any temporary imbalances of supply and demand through the use of further buybacks in line with this policy. Your Board is reassured that the Company is of sufficient size to pursue its buyback policy and weather these volatile periods of the cycle without being at risk of becoming subscale and making a material impact to the Company's total expense ratio.

As at the latest practicable date prior to publication of this report, the Company's current dividend yield is 4.37% and 4.22% per Sterling Ordinary Share and U.S. Dollar Share respectively (calculated as the last four quarterly dividends paid up to 30 June 2016 expressed as a percentage of the share price). Your Board believes this represents attractive value on both an absolute and a risk-adjusted basis given the current low interest rate environment and taking account of the prudent investment approach taken by the Investment Manager.

The Company's Sterling Ordinary Share class hedges all U.S. Dollar and Euro exposure back to Pound Sterling.

As previously announced, in anticipation of currency volatility following the U.K.'s referendum on the continued membership of the European Union, the Company renewed its foreign exchange hedges early in June with settlement in September. Accordingly, the Board does not expect the current volatility in the foreign exchange markets as a reaction to the U.K.'s referendum result to impact materially on the Company's NAV.

Outlook and Impact of Brexit

Your Board believes that Brexit has created considerable uncertainty and volatility across global markets and this is likely to continue for the foreseeable future. Such events may contribute to worsening economic conditions not only in the U.K., but also Europe and the rest of the world. Your Board notes, by way of example, the significant downward move in the U.K. ten year gilt rate since the U.K. referendum result. The downward shift in yields (the U.K. ten year gilt rate is 0.55% at the time of writing) reflects the attractive yield pick up offered by owning the Company's shares. At a portfolio level, your Board expects the impact of Brexit to be limited given the robust investment process the Investment Manager has always adopted and its positioning in better rated, performing issuers. At the Company level the impact could be felt more directly through continued volatility of the Company's share price; however, your Board will continue to address any imbalances in supply and demand through the use of further share buybacks in line with its stated policy.

Your Board believes the Company continues to offer an attractive risk-adjusted return, and is pleased with the Investment Manager's performance to date and with the strategy. The Investment Manager will continue to update you on the Company's progress by way of the quarterly fact sheets and Investment Manager updates.

I would like to close by thanking you for your commitment and support.

______________________

William Frewen

Chairman

15 August 2016

Investment Manager's Report

Market Environment

The U.S. loan market, as measured by the S&P/LSTA Leveraged Loan Index (the "Index"), gained 4.51% for the reporting period. The first two months of the year were certainly "risk off" with investors tempering global growth expectations and evidencing concern around volatile commodity prices. The year-to-date February return was actually -1.18%, but as sentiment improved from March onwards the Index rallied significantly as investors appeared to cast the macro doubts aside and focus on issuer fundamentals. From this slow start the result was made all the more impressive when we consider the Brexit outcome in the U.K. in the final week of the period although this really had a negligible impact in the U.S. market. From a demand perspective, collaterised loan obligation ("CLO") issuance started to improve post February with $22.3bn coming to market as opposed to $3.4bn in the first two months of the year. The $25.7bn total was still some way behind the $59.3bn we saw in the same period last year. Retail flows also slowed as the period progressed with $5.5bn of outflows in total of which 90% occurred in January and February. Supply was reasonable with $126.8bn of institutional issuance seen, about 10% down on last year, but when combined with repayments received by accounts, tipped the scales in favour of issuers in the final few weeks of the period which meant we saw some more opportunistic proposals.

In Europe, the loan market, as measured by the S&P European Leveraged Loan Index ("ELLI"), gained 1.89% during the reporting period. Similar to the U.S., the first two months were weak, with -1.10% recorded. Not surprisingly, Brexit had more of an impact on performance and the ELLI lost 0.60% in June. CLO issuance improved post February with €8.1bn recorded for the period, marginally ahead of the first half of 2015. From an issuance perspective, this has been steady and, at €21bn, was almost exactly in line with the same period last year.

Default activity remains low, below historical annual averages and in identifiable sectors. At the end of the six-month period, the U.S. trailing 12-month default rate was 1.97% and 2.22% by amount and issuer respectively. These defaults were concentrated in commodities with 9 out of the 15 filings year to date coming from these sectors. With regards to Europe, the default rates were 2.54% and 2.39% by amount and issuers, respectively. The largest component was the default of Solocal, a legacy Yellow Pages issuer that defaulted in June and accounted for 88bp of the amount.

Portfolio

During the period the portfolio has remained very much weighted towards U.S. issuers, which accounted for 93.43% (all numbers excluding cash) of NAV as at the end of June. Our bond allocation continued to remain low at 4.14% against the 20% of NAV allowable within the Company's investment limits, as we focused on keeping duration low and limiting potential areas of volatility. The key movement was in the portfolio allocation by rating where we continue to allocate to better rated assets. As such, the BBB/BB weighting increased from 48.18% of NAV at the end of December 2015 to 54.17% as at the period end, which should mean the portfolio remains more defensive.

Market Outlook

Our outlook for the loan market remains positive. Generally we feel that issuers are performing steadily, leverage is being controlled and cash cover metrics are strong.

As at the end of July, the market is pricing in a default rate of around 4%, which is well beyond our 2016 expectations of 2-3%. We believe that U.S. GDP growth will continue in its recent range. In the absence of rate rises we continue to believe that loans are attractive given the returns on offer, the expected low volatility compared to other risk asset classes and their senior secured nature.

Portfolio Analyses

Top 10 Issuers as at 30 June 2016

Top 10 S&P Sector Breakdown (ex Cash)

Key Statistics as at 30 June 2016

\* 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.

Currency Breakdown

Rating Breakdown

Security Breakdown

Interim Management Report and Responsibility Statement

Principal Risks and Uncertainties

The principal risks faced by the Company fall into the following broad categories: credit risk, liquidity risk, fund performance, level of discount or premium, operational risk and switch of administrator. The Board reported on each of these principal risks and uncertainties in the Strategic Report of the Company's latest annual report and audited financial statement for the year ended 31 December 2015, which can be found on the Company's website at www.nbgfrif.com under "Investor Information" then "Fund Documents". The Board's view is that these risks remain appropriate for the remainder of 2016, save the risk of the switch of administrator, which the Board no longer deems to be a principal risk of the Company due to the tenor of the existing administrator exceeding twelve months. In addition, the Board has considered the specific risks and uncertainties faced by the Company as a result of Brexit and its conclusions are outlined in the Outlook section of the Chairman's Statement .

Going Concern

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

Related Party Transactions

Other than fees payable in the ordinary course of business, there have been no material transactions with related parties, which have affected the financial position or performance of the Company in the six month financial period to 30 June 2016. Additional related party disclosures are given in Note 3.

Directors' Responsibilities Statement

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

The Financial Statements, which have been prepared in conformity with United States generally accepted accounting principles ("US GAAP") and the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 270' "Interim Reporting", gives a true and fair view of the assets, liabilities, financial position and profits/(losses) of the Company, as required by DTR 4.2.4R of the Disclosure and Transparency Rules ("DTR") of the U.K.'s Financial Conduct Authority ("FCA").

The combination of the Chairman's Statement, the Investment Manager's Report and this Interim Management Report meet the requirements of an Interim Management Report, and include a fair review of the information required by:

1. DTR 4.2.7R of the DTR, of the U.K.'s FCA, being an indication of important events that have occurred during the first six months of the year and their impact on the set of Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

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

William Frewen Richard Battey

Chairman Director

15 August 2016 15 August 2016

Independent Review Report to the Directors of NB Global Floating Rate Income Fund Limited

Introduction

We have been engaged by the Company to review the interim financial statements in the half-yearly financial report for the six months ended 30 June 2016, which comprises the Unaudited Consolidated Statement of Assets and Liabilities as at 30 June 2016 and the Unaudited Consolidated Statement of Operations, the Unaudited Consolidated Statement of Changes in Net Assets, the Unaudited Condensed Consolidated Schedule of Investments, Unaudited Consolidated Statement of Cash flows for the period then ended and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America. The interim financial statements included in this half-yearly financial report have been prepared in accordance with the Financial Accounting Standards Board Accounting Standards Codification 270, "Interim Reporting".

Our responsibility

Our responsibility is to express to the Company a conclusion on the interim financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Conduct Authority and for no other purpose. We do not, in producing this report, 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.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the International Auditing and Assurance Standards Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the unaudited consolidated interim financial statements in the half-yearly financial report for the six months ended 30 June 2016 are not prepared, in all material respects, in accordance with Financial Accounting Standards Board Accounting Standards Codification 270, "Interim Reporting" and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

PricewaterhouseCoopers CI LLPChartered Accountants, Guernsey, Channel Islands15 August 2016  

Unaudited Consolidated Statement of Assets and Liabilities

As at 30 June 2016 and 31 December 2015

(Expressed in U.S. Dollars)

The Financial Statements were approved and authorised for issue by the Board of Directors on 15 August 2016, and signed on its behalf by:

________________ _________________

William Frewen Richard Battey

Chairman Director

The accompanying notes form an integral part of the Financial Statements

Consolidated Condensed Schedule of Investments

As at 30 June 2016 (Unaudited)

(Expressed in U.S. Dollars)

The accompanying notes form an integral part of the Financial Statements

As at 31 December 2015 (audited)

(Expressed in U.S. Dollars)

The accompanying notes form an integral part of the Financial Statements

As at 30 June 2016 (Unaudited)

 (Expressed in U.S. Dollars)

The accompanying notes form an integral part of the Financial Statements

As at 30 June 2016 (Unaudited)

 (Expressed in U.S. Dollars)

As at 30 June 2016, issuers with the following investments comprised of greater than 1% of NAV:

The accompanying notes form an integral part of the Financial Statements

As at 31 December 2015 (audited)

(Expressed in U.S. Dollars)

As at 31 December 2015, issuers with the following investments comprised of greater than 1% of NAV:

The accompanying notes form an integral part of the Financial Statements

As at 30 June 2016 (unaudited), the largest 50 investments based on the NAV were:

(Expressed in U.S. Dollars)

The accompanying notes form an integral part of the Financial Statements

As at 31 December 2015 (audited), the largest 50 investments based on the NAV were:

(Expressed in U.S. Dollars)

The accompanying notes form an integral part of the Financial Statements

Unaudited Consolidated Statement of Operations

For the six months ended 30 June 2016

(Expressed in U.S. Dollars)

The accompanying notes form an integral part of the Financial Statements

Unaudited Consolidated Statement of Changes in Net Assets

For the six months ended 30 June 2016

(Expressed in U.S. Dollars)

30 June 2016

31 December 2015

The accompanying notes form an integral part of the Financial Statements

Unaudited Consolidated Statement of Cash Flows

For the six months ended 30 June 2016

(Expressed in U.S. Dollars)

The accompanying notes form an integral part of the Financial Statements

Notes to the Unaudited Consolidated Interim Financial Statements

For the period ended 30 June 2016

NOTE 1 - DESCRIPTION OF BUSINESS

The Company is a closed-ended investment company incorporated and registered in Guernsey with registered number 53155. It is a non-cellular company limited by shares and has been declared by the Guernsey Financial Services Commission to be a registered closed-ended collective investment scheme. On 20 April 2011 the Company was admitted to the Official List of the U.K. Listing Authority with a premium listing trading on the Main Market of the LSE.

On 30 September 2011, the Company raised an additional $187 million by means of a Placing and Offer for Subscription of C Shares and were admitted to trading on the Main Market of the LSE on 5 October 2011. On 21 March 2013 and 24 October 2013 the Company raised an additional $550 million and $705 million by means of a Placing and Offer for Subscription of C Shares that were admitted to trading on the Main Market of the LSE on 26 March 2013 and 29 October 2013 respectively. On 22 July 2013, through a tap issue, the Company raised gross proceeds of $69 million. The Sterling C Shares issued on 21 March 2013 were converted into 360,521,605 Sterling Ordinary Shares on 16 July 2013 and the Sterling Ordinary Shares issued on 24 October 2013 were converted into 421,103,481 Sterling Ordinary Shares on 21 January 2014.

At the Annual General Meeting ("AGM") of the Company held in June 2016, the Directors were granted the general authority to purchase in the market up to 14.99% of the Ordinary Shares of each class in issue (as at 15 June 2016). This authority will expire at the next AGM in 2017. Pursuant to this authority, and subject to the Companies (Guernsey) Law, 2008 and the discretion of the Directors, the Company may purchase shares of any of its classes in the market on an on-going basis with a view to addressing any imbalance between the supply of and demand for such shares and thereby increasing the NAV per share of the shares and assisting in managing the discount to NAV per share of the shares in relation to the price at which the shares of such class may be trading.

The Company re-purchased 156,976,848 Sterling Ordinary Shares in 116 tranches between 1 January 2016 and 30 June 2016, 16,090,000 of which were repurchased for cancellation and 140,886,848 were held in treasury. The Company also re-purchased 3,305,000 U.S. Dollar Ordinary Shares in 47 tranches between 1 January 2016 and 30 June 2016, of which 335,000 were repurchased for cancellation and 2,970,000 were held in treasury.

On the 9 March 2016, the Company cancelled 58,609,241 Sterling Ordinary Shares held in treasury. On 11 April 2016 the Company cancelled 43,111,620 Sterling Ordinary Shares held in treasury. This represented approximately 4.73% and 3.64% of the Company's issued Sterling Ordinary Shares respectively.

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 to pursue its investment objective. The Company invests mainly in floating rate senior secured loans issued in U.S. Dollars, Pound Sterling and Euros by primarily North American and European Union corporations, partnerships and other business issuers. These loans will at the time of investment often be 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 rating agencies or, if unrated, are deemed by the Investment Manager to be of comparable quality.

For the purposes of efficient portfolio management, the Company has established a wholly-owned Luxembourg incorporated subsidiary, NB Global Floating Rate Income Fund (Lux) 1 S.à.r.l. which in turn holds a wholly-owned subsidiary, NB Global Floating Rate Income Fund (Lux) 2 S.à.r.l. All references to the Company in this document refer to the Company and its wholly owned Luxembourg subsidiaries. The directors of these companies are unrelated to the Directors of the Company.

The Company's share capital is denominated in Pound Sterling and U.S. Dollars and consists of Sterling Ordinary Shares and U.S Dollar Ordinary Shares as at 30 June 2016.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The accompanying Financial Statements have been presented on a going concern basis and on the accrual basis of accounting in conformity with US GAAP. The Company is regarded as an Investment Company and it follows the accounting and reporting requirements of the FASB ASC 946. The Board believes that the underlying assumptions are appropriate and that the Company's Financial Statements therefore present a true and fair financial position.

Basis of consolidation

The Financial Statements comprise the financial statements of the Company and its wholly owned subsidiary undertakings as at 30 June 2016. The Company and all its wholly owned subsidiaries have U.S. Dollars as their functional and reporting currency. The results of the subsidiary undertakings are included in the Unaudited Consolidated Interim Statement of Operations.

All intra-group balances, transactions, income and expenses are eliminated in full.

Use of estimates

The preparation of Financial Statements in conformity with US GAAP requires that the Directors make estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Such estimates and associated assumptions are generally based on historical experience and various other factors that are believed to be reasonable under the circumstances, and form the basis of making the judgments about attributing values of assets and liabilities that are not readily apparent from other sources. Actual results may vary from such accounting estimates in amounts that may have a material impact on the financial information of the Company.

Revenue recognition

Interest earned on debt instruments is accounted for net of applicable withholding taxes and is recognised as income over the terms of the loans. Discounts received or premiums paid in connection with the acquisition of loans are amortised into interest income using the effective interest method over the contractual life of the related loan. If a loan pays off prior to maturity, the recognition of the fees and costs is accelerated as appropriate. The Company raises a provision when the collection of interest is deemed doubtful.

Cash and cash equivalents

The Company's cash and cash equivalents comprise cash in hand and demand deposits and highly liquid investments with original maturities of less than 90 days that are both readily convertible to known amounts of cash and so near maturity that they represent insignificant risk of changes in value.

Valuation of investments

The Company carries investments on its Unaudited Consolidated Statement of Assets and Liabilities at fair value in accordance with US GAAP, with changes in fair value recognised within the Unaudited Consolidated Statement of Operations in each reporting period. Quoted investments are valued according to their bid price as at the close of the relevant reporting date. Investments in private securities are priced at the bid price using a pricing service for private loans. Asset backed securities are valued according to their bid price. If a price cannot be ascertained from the above sources, the Company will seek bid prices from third party broker/dealer quotes for the investments. The Investment Manager believes that bid price is the best estimate of fair value and is in line with the valuation policy adopted by the Company.

In cases where no third party price is available, or where the Investment Manager determines that the provided price is not an accurate representation of the fair value of the investment, the Investment Manager determines the valuation based on the Investment Manager's fair valuation policy. The overall criterion for fair value is a price at which the securities involved would change hands in a transaction between a willing buyer and a willing seller, neither being under compulsion to buy or sell and both having the same knowledge of the relevant facts.

Consistent with the above criterion, the following criteria is considered when applicable:

· Valuation of other securities by the same issuer for which market quotations are available;

· Reasons for absence of market quotations;

· The credit quality of the issuer and the related economics;

· Recent sales prices and/or bid and ask quotations for the security;

· Value of similar securities of issuers in the same or similar industries for which market quotations are available;

· Economic outlook of the industry;

· Issuer's position in the industry;

· The financial information of the issuer; and

· The nature and duration of any restriction on disposition of the security.

Derivative financial instruments

The Company may, from time to time, hold derivative financial instruments for the purposes of hedging foreign currency exposure. These derivatives are measured at fair value in accordance with US GAAP, with changes in fair value recognised within the Unaudited Consolidated Statement of Operations in each reporting period.

Depending on the product and the terms of the transaction, the fair value of the OTC derivative products, such as foreign exchange contracts, can be modelled taking into account the counterparties' credit worthiness and using a series of techniques, including simulation models.

Many pricing models do not entail material subjectivity because the methodologies employed do not necessitate significant judgments and the pricing inputs are observed from actively quoted markets. The forward exchange contracts valued by the Company using pricing models fall into this category and are categorised within level 2 of the fair value hierarchy.

As shares are denominated in U.S. Dollars and Pound Sterling 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, in their sole and absolute discretion.

Note 5 details the gross and net derivative asset and liability position by contract type and the amount for those derivative contracts for which netting is permissible under US GAAP. The derivative assets and liabilities have been netted where an enforceable master netting arrangement is in place.

Realised gains and losses on investments

All investment transactions are recorded on a trade date basis. Upon sale or maturity, the difference between the consideration received and the cost of the investment is recognised as a realised gain or loss. The cost is determined based on the average cost method.

Operating expenses

Operating expenses are recognised on an accruals basis. Operating expenses include amounts directly or indirectly incurred by the Company as part of its operations.

Buyback costs

Any costs incurred as a result of a share buyback will be allocated to the relevant share class.

Currency translation

Monetary assets and liabilities denominated in a currency other than U.S. Dollars are translated into U.S. Dollar equivalents using spot rates as at the reporting period end date. On initial recognition, a foreign currency transaction is recorded and translated at the spot exchange rate at the transaction date. Non-monetary assets and liabilities are translated at the historic exchange rate. There were no non-monetary assets held during the period. Transactions during the period, including purchases and sales of securities, income and expenses, are translated at the rate of exchange prevailing on the date of the transaction. The rates of exchange against U.S. Dollars at 30 June 2016 were 1.33680 USD: 1 GBP and 1.11095 USD: 1 EUR (31 December 2015 1.47390 USD: 1 GBP and 1.08630 USD: 1EUR).

NOTE 3 - AGREEMENTS AND RELATED PARTIES

Investment Management Agreement

The Board is responsible for managing the business affairs of the Company but delegated certain functions to the Investment Manager under the Investment Management Agreement ("the Agreement") dated 18 March 2011.

The Manager of the Company is Neuberger Berman Europe Limited (which is a related party), an indirectly wholly owned subsidiary of NB Group. On 17 July 2014, the Company, the Manager and Neuberger Berman Investment Advisers LLC (which was the Sub Investment Manager) made certain classificatory amendments to the Agreement for the purposes of the AIFM Directive.

The Sub-Investment Management Agreement was terminated on 17 July 2014 and the Sub-Investment Manager was appointed as the AIFM per the amended and restated IMA dated 17 July 2014. The Manager, Neuberger Berman Europe Limited, was appointed under the same agreement. In accordance with the terms of the IMA, the Manager shall pay a fee to the AIFM out of the Investment Management fee received from the Company. The Company does not pay any fees to the AIFM.

The AIFM is responsible for risk management and the discretionary management of the assets held in the Company's portfolio and will conduct the day-to-day management of the Company's assets (including un-invested cash).The AIFM is not required to and generally will not submit individual investment decisions for approval by the Board. The Manager provides certain administrative services to the Company.

As per the IMA dated 17 July 2014, the Manager is entitled to a management fee, which shall accrue daily, and be payable quarterly in arrears, at the following rate per annum of the Company's NAV:

On first £1bn of the NAV 0.75%

On £1bn - £2bn of the NAV 0.70%

Any amount greater than £2bn of the NAV 0.65%

For the period ended 30 June 2016, the management fee expense was $5,755,932 (31 December 2015: $13,959,247), of which $2,804,551 (31 December 2015: $3,378,212) was unpaid at the period-end.

The Manager is not entitled to a performance fee.

Administration, Custody and Company Secretary Agreement

BNP Paribas Securities Services S.C.A., Guernsey Branch ("BNPP") was the Administrator, Custodian and Designated Manager until 28 February 2015. Effective 1 March 2015, the Company entered into an Administration and Sub-Administrator agreement with U.S. Bancorp Fund Services (Guernsey) Limited ("Administrator") and Quintillion Limited ("Sub-Administrator"), both wholly owned subsidiaries of U.S. Bancorp. Under the terms of the agreement, Sub-Administration services are delegated to Quintillion Limited.

The Sub-Administrator is responsible, amongst other things, for the day-to-day administration of the Company (including but not limited to the calculation and publication of the estimated daily NAV).

For the period from 1 January 2015 to 28 February 2015, BNPP was entitled to an annual fee, accrued daily and paid monthly in arrears, in accordance with the schedule below and subject to an annual minimum of £100,000.

On first $100m of the NAV 0.08%

On $100m - $250m of the NAV 0.06%

On $250m - $500m of the NAV 0.03%

Any amount greater than $500m of the NAV 0.015%

From 1 March 2015, the Administrator is entitled to an annual fee, accrued daily and paid monthly in arrears, in accordance with the schedule below and subject to an annual minimum of $75,000.

On first $250m of the NAV 0.05%

On $250m - $500m of the NAV 0.04%

On $500m - $1bn of the NAV 0.03%

Any amount greater than $1bn of the NAV 0.02%

For the period ended 30 June 2016, the administration fee was $282,206 (31 December 2015: $617,740) of which $45,011 (31 December 2015: $50,529) was unpaid at the period end.

C.L. Secretaries Limited, a wholly owned subsidiary of Carey Commercial Limited, as Company Secretary is entitled to an annual fee of £63,300 plus out of pocket expenses.

For the period ended 30 June 2016, the secretarial fee was $92,720, of which $46,650 related to administration of the on-going programme of buybacks, (31 December 2015: $42,745) of which $21,039 (31 December 2015: $1,014) was prepaid at the period-end.

For the period from 1 January 2015 to 28 February 2015, BNPP was entitled to a custodian fee of 0.02 per cent of the market value of the portfolio and a fee of 0.045% per annum on the market value of the loan assets (adjusted to 0.035% per annum if assets exceeded $500m), with a minimum annual fee of £50,000 in respect of portfolio and loan administration.

Effective 1 March 2015, US Bank National Association ("Custodian") became the Custodian of the Company

For the period from 1 March 2015 to 31 December 2015, the Custodian is entitled to a fee of 0.025 per cent of the Market Value of the portfolio per annum, with a minimum annual fee of $25,000 in respect of portfolio and loan administration.

For the six months ended 30 June 2016, the custodian fee was $197,872 (31 December 2015: $411,704) of which $56,597 (31 December 2015: $190,090) was unpaid, all of which was due to US Bank National Association at the period end.

Registrar's Agreement

Capita Registrars (Guernsey) Limited has been appointed as registrar of the Company. The fee charged is at a rate of £2.00 per holder of shares appearing on the registry during the fee period, with a minimum charge per annum of £9,000. For the period ended 30 June 2016, the Registrars fees amounted to $41,302. Of these, $12,682 was unpaid at the period end.

NOTE 4 - RELATED PARTY TRANSACTIONS

Directors

The Directors are related parties and are remunerated for their services at a fee of £35,000 per annum (£45,000 for the Chairman). In addition, the Chairman of the Audit and Risk Committee receives an additional £5,000 for his services in this role. The Chairman of the Management Engagement Committee and the Chairman of the Remuneration Committee receive an additional £2,500 each per annum. The Directors' fee for the two Luxembourg subsidiaries, whose Directors are unrelated to the Guernsey Board members, amounts to €14,700 per annum per subsidiary. Of these, $22,745 were payable at the period end. For the period ended 30 June 2016, the Guernsey Directors' fees and travel expenses amounted to $114,331 (31 December 2015: $273,850). Of these, $nil were prepaid at the period end (31 December 2015: $2,074 was prepaid). As at 30 June 2016, Mr Battey, Mrs Platts, Mr Dorey and Mr Frewen had 30,077, 10,069, 20,000 and 9,895 Sterling Ordinary Shares in the Company respectively (31 December 2015: Mr Battey, Mrs Platts, Mr Dorey and Mr Frewen 30,077, 10,069, 20,000 and 9,895 Sterling Ordinary Shares in the Company respectively)

Neuberger Berman Europe Limited and Neuberger Berman Investment Advisers LLC.

The contracts with Neuberger Berman Europe Limited and Neuberger Berman Investment Advisers LLC are classified as related party transactions. Other than fees payable in the ordinary course of business and the additional fees disclosed in Note 3, there have been no material transactions with related parties, which have affected the financial position or performance of the Company in the financial period.

NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS

A financial instrument is defined by FASB ASC 825, Disclosures about Fair Value of Financial Instruments, as cash, evidence of an ownership interest in an entity, or a contract that creates a contractual obligation or right to deliver to or receive cash or another financial instrument from a second entity on potentially favourable terms. Fair value estimates are made at a discrete point in time, based on relevant market data, information about the financial instruments, and other factors.

Fair value was determined using available market information and appropriate valuation methodologies. Estimates of fair value of financial instruments without quoted market prices are subjective in nature and involve various assumptions and estimates that are matters of judgment. Accordingly, fair values are not necessarily indicative of the amounts realised on disposition of financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value amounts.

The following estimates and assumptions were used at 30 June 2016 to estimate the fair value of each class of financial instruments:

§ Valuation of financial investments - The loans and bonds are valued at bid price. The Investment Manager believes that bid price is the best estimate of fair value and is in line with the valuation policy adopted by the Company.

§ Cash and cash equivalents - The carrying value is a reasonable estimate of fair value due to the short-term nature of these instruments.

§ Receivables for investments sold - The carrying value reasonably approximates fair value as they reflect the value at which investments are sold to a willing buyer and settlement period on their balances is short term.

§ Interest receivables - The carrying value reasonably approximates fair value

§ Other receivables and prepayments - The carrying value reasonably approximates fair value.

§ Derivatives - The Company estimates fair values of derivatives based on the latest available forward exchange rates.

§ Payables for investments purchased - The carrying value reasonably approximates fair value as they reflect the value at which investments are purchased from a willing seller and settlement period on their balances is short term.

§ Payables to the Investment Manager and affiliates - The carrying value reasonably approximates fair value.

§ Accrued expenses and other liabilities - The carrying value reasonably approximates fair value.

A fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value is established under FASB ASC Topic 820. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accordingly, the fair value hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3). The levels of the fair value hierarchy under FASB ASC Topic 820-10-35-39 to 55 are as follows:

The guidance establishes three levels of the fair value hierarchy as follows:

Level 1: price quotations in active markets/exchanges for identical securities;

Level 2: other observable inputs (including but not limited to: quoted prices for similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs); and

Level 3: unobservable inputs based on the best information available in the circumstance, to the extent observable inputs are not available (including the Company's own assumption used in determining the fair value of investments).

The Company has adopted the authoritative guidance contained in FASB ASC 820-10, Fair Value Measurements and Disclosures, for estimating the fair value of the financial instruments that have calculated NAV per share in accordance with FASB ASC 946-10.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following table details the Company's financial instruments that were accounted for at fair value as at 30 June 2016.