NB Distressed Debt Investment Fund Limited

2022 ANNUAL REPORT

Audited Consolidated Financial Statements

For The Year Ended 31 December 2022

ANNUAL REPORT 20221

Table of Contents

PAGE

COMPANY OVERVIEW

Features 2

Capital Structure 3

Business Model 4

2022 PERFORMANCE REVIEW

Financial Highlights 8

Chairman’s Statement 10

Investment Manager’s Report 12

Portfolio Information 18

Ordinary Share Class 18

Extended Life Share Class 20

New Global Share Class 22

Strategic Report 24

GOVERNANCE

Directors 31

Directors’ Report 32

Corporate Governance Report 37

Audit Committee Report 46

Management Engagement Committee Report 50

Inside Information Committee Report 52

Remuneration Committee Report 53

Directors’ Remuneration Report 54

Directors’ Responsibilities Statement 57

Independent Auditor’s Report 58

FINANCIAL STATEMENTS

Consolidated Statement of Assets and Liabilities 64

Consolidated Statement of Operations 65

Consolidated Statement of Changes in Net Assets 66

Consolidated Statement of Cash Flows 67

Consolidated Condensed Schedule of Investments 68

Notes to the Consolidated Financial Statements 78

ADDITIONAL INFORMATION

Contact Details 96

NB DISTRESSED DEBT AR pp01-07.qxp_NB DISTRESSED DEBT AR pp01-07 27/04/2023 12:43 Page 1

COMPANY OVERVIEW | Features

2NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Features

NB Distressed Debt Investment Fund Limited (the

“Company”)

The Company is a closed-ended investment company incorporated and

registered in Guernsey on 20 April 2010 with registration number

51774. The Company is governed under the provisions of the

Companies (Guernsey) Law, 2008 (as amended) (the “Law”), and the

Registered Collective Investment Scheme Rules and Guidance 2021

issued by the Guernsey Financial Services Commission (“GFSC”). It is a

non-cellular company limited by shares and has been declared by the

GFSC to be a registered closed-ended collective investment scheme.

The Company trades on the Specialist Fund Segment (“SFS”) of the

London Stock Exchange (“LSE”).

The Company is a member of the Association of Investment Companies

(the “AIC”) and is classified within the Debt – Loans & Bonds Category.

Alternative Investment Fund Manager (“AIFM”) and

Manager

Investment management services are provided to the Company by

Neuberger Berman Investment Advisers LLC (the “AIFM”) and

Neuberger Berman Europe Limited (the “Manager”), collectively the

“Investment Manager”. The AIFM is responsible for risk management

and discretionary management of the Company’s Portfolio and the

Manager provides, amongst other things, certain administrative services

to the Company.

Share Capital

As at 31 December 2022 the Company’s share capital comprised the

following

1

:

Ordinary Share Class (“NBDD”)

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

Extended Life Share Class (“NBDX”)

60,116,016 Extended Life Shares, none of which were held in treasury.

New Global Share Class (“NBDG”)

31,023,609 New Global Shares, none of which were held in treasury.

For the purposes of efficient portfolio management, the Company has

established a number of wholly-owned subsidiaries domiciled in

Luxembourg. All references to the Company in this document refer to

the Company together with its wholly-owned subsidiaries.

1 In addition the Company has two Class A Shares in issue. Further information

is provided in the Capital Structure section of this report on page 3.

Non-Mainstream Pooled Investments

The Company currently conducts its affairs so that the shares issued by

the Company can be recommended by Independent Financial Advisers

to ordinary retail investors in accordance with the Financial Conduct

Authority’s (“FCA”) rules in relation to non-mainstream pooled

investment (“NMPI”) products and intends to continue to do so for the

foreseeable future.

The Company’s shares are excluded from the FCA’s restrictions which

apply to NMPI products.

Company Numbers

Ordinary Shares

LSE ISIN code: GG00BDFZ6F78

Bloomberg code: NBDD: LN

Extended Life Shares

LSE ISIN code: GG00BQWN6441

Bloomberg code: NBDX:LN

New Global Shares

LSE ISIN code: GG00BQWN6334

Bloomberg code: NBDG:LN

Legal Entity Identifier

YRFO7WKOU3V511VFX790

Website

www.nbddif.com

NB DISTRESSED DEBT AR pp01-07.qxp_NB DISTRESSED DEBT AR pp01-07 27/04/2023 12:43 Page 2

Capital Structure | COMPANY OVERVIEW

ANNUAL REPORT 20223

The Company’s share capital consists of three different share classes, all of which are in the harvest period: the Ordinary Share Class; the Extended

Life Share Class; and the New Global Share Class. These share classes each have different capital return profiles and, in one instance a different

geographical remit. In addition, the Company has two Class A Shares in issue. While the Company’s share classes are all now in harvest, returning

capital to shareholders, the Company’s corporate umbrella itself has an indefinite life to allow for flexibility for the Company to add new share

classes if demand, market opportunities and shareholder approval supported such a move, although the Company has no current plans to create

new share classes. Each share class is considered in turn below.

Ordinary Share Class

NBDD was established at the Company’s launch on 10 June 2010 with a remit to invest in the global distressed debt market with a focus on North

America. The investment period of NBDD expired on 10 June 2013.

Voting rights: Yes

Denomination: US Dollars

Hedging: Portfolio hedged to US Dollars

Authorised share capital: Unlimited

Par value: Nil

Extended Life Share Class

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

extension.

Following this meeting and with the NBDD shareholders’ approval of the extension, on 9 April 2013 a new Class, NBDX, was created and the

NBDX Shares were issued to 72% of initial NBDD investors who elected to convert their NBDD Shares to NBDX Shares. NBDX had a remit to invest

in the global distressed debt market with a focus on North America. The investment period of NBDX expired on 31 March 2015.

Voting rights: Yes

Denomination: US Dollars

Hedging: Portfolio hedged to US Dollars

Authorised share capital: Unlimited

Par value: Nil

New Global Share Class

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

investment period of NBDG expired on 31 March 2017.

Voting rights: Yes

Denomination: Pound Sterling

Hedging: Unhedged portfolio

Authorised share capital: Unlimited

Par value: Nil

Class A Shares

The Class A Shares are held by a trustee pursuant to a purpose trust established under Guernsey law. Under the terms of the Trust Deed the Trustee

holds the Class A Shares for the purpose of exercising the right to receive notice of general meetings of the Company but the Trustee shall only

have the right to attend and vote at general meetings of the Company when there are no other Shares of the Company in issue.

Voting rights: No

Denomination: US Dollars

Authorised share capital: 10,000 Class A Shares

Par value: US Dollar $1

Capital Structure

NB DISTRESSED DEBT AR pp01-07.qxp_NB DISTRESSED DEBT AR pp01-07 27/04/2023 12:43 Page 3

COMPANY OVERVIEW | Business Model

4NB DISTRESSED DEBT INVESTMENT FUND LIMITED

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

1 Further information on the Company’s capital structure can be found on page 3.

2 Further information on the Company’s investment management arrangements can be found on page 29.

Investment Objective

The Company’s primary objective is to provide investors with attractive risk-adjusted returns through long-biased, opportunistic exposure to

stressed, distressed and special situation credit-related investments while seeking to limit downside risk by, amongst other things, focusing on

senior and senior secured debt with both collateral and structural protection.

Investment Policy

The investment period of each share class has expired. During the investment period, the Investment Manager sought, in accordance with the

Investment Policy, to identify mis-priced or otherwise overlooked securities or assets that had the potential to produce attractive absolute returns

while seeking to limit downside risk through collateral and structured protection where possible.

The Ordinary Shares, Extended Life Shares and New Global Shares (collectively the “Portfolios”) are biased toward stressed and distressed debt

securities secured by hard asset collateral in accordance with the Investment Policy. When investing on behalf of the Company, the Investment

Manager focused on companies with significant tangible assets which were judged likely to maintain long-term value through a restructuring. The

Investment Manager avoided “asset-light” companies, as their values tend to depreciate in distressed scenarios, and also aimed to concentrate on

companies with stressed balance sheets whose low implied enterprise value multiples, often calculated using currently depressed cash flows,

offered a discount to comparable market valuations.

NBDD SHAREHOLDERS

1

Class A

Shares

1

ALTERNATIVE INVESTMENT

FUND MANAGER

2

(Neuberger Berman Investment

Advisers LLC)

TRUSTEE

1

MANAGER

2

(Neuberger Berman Europe Limited)

NBDX SHAREHOLDERS

1

NBDG SHAREHOLDERS

1

Company Portfolio attributable to

Ordinary Shares

Company Portfolio attributable to

Extended Life Shares

Company

(Guernsey domiciled

Alternative Investment Fund)

Company Portfolio attributable to

New Global Shares

Business Model

NB DISTRESSED DEBT AR pp01-07.qxp_NB DISTRESSED DEBT AR pp01-07 27/04/2023 12:43 Page 4

Business Model | COMPANY OVERVIEW

ANNUAL REPORT 20225

What is Distressed Debt?

Distressed debt generally refers to the financial obligations of a company that is either already in default, under bankruptcy protection, or in distress

and heading toward default. Distressed debt often trades at a significant discount to its par value and may present investors with compelling

opportunities to profit if there is a recovery in the business. Typically, when a company experiences financial distress or files for bankruptcy

protection, the original debt holders often sell their debt securities or claims to a new set of investors at a discount. These investors often try to

influence the process by which the issuer restructures its obligations or implements a plan to turn around its operations. These investors may also

inject new capital into a distressed company in the form of debt or equity in order to prevent the company from going into liquidation or to aid

the company in carrying out a restructuring plan. Investors in distressed debt typically must not only assess the issuer’s ability to improve its

operations but also whether the restructuring process is likely to result in a meaningful recovery to the investors’ class of claims.

Distressed debt can be performing or non-performing. Performing debt is defined as debt that maintains its contractual obligations relating to

interest and/or principal payments and can be debt that has yet to default or even debt that is under bankruptcy protection. Non-performing debt

is defined as debt that does not continue to meet its financial obligations.

There are several different strategies related to investing in distressed debt. These strategies differ mainly in the types of securities that investors

purchase, the life of a fund and its investment period, and a fund’s expected returns. Four strategic categories include: (i) senior/senior secured debt

strategies; (ii) control/private equity strategies; (iii) junior debt strategies; and (iv) capital structure arbitrage strategies. During the investment

periods of the Portfolios, the Investment Manager focused on implementing a senior/senior secured debt strategy in which it invested primarily in

secured debt with strong collateral value and structural protection. The Investment Manager has also invested in control positions and non-control

positions with the objective of acquiring a blocking position on behalf of the Portfolios.

Investing in secured debt at the top of the capital structure is, in the opinion of the Investment Manager, towards the more conservative end of the

distressed debt strategy risk spectrum due to the support from the value of the underlying collateral. Additionally, secured debt holders often have

the ability to foreclose on the assets securing their claim and to drive the restructuring process. The typical holding period for investments in this

type of strategy is at least six months and can be more than three years.

NB DISTRESSED DEBT AR pp01-07.qxp_NB DISTRESSED DEBT AR pp01-07 27/04/2023 12:43 Page 5

COMPANY OVERVIEW | Business Model

6NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Typical Life Cycle of a Distressed Debt Investment

Further information on the Company’s investment process can be found in the Company’s most recent prospectuses which are available on the

Company’s website at www.nbddif.com under the “Investor Information” tab.

1 Negotiations can take place within bankruptcy or creditors can negotiate with the company to agree on a pre-packaged bankruptcy whereby the plan of

reorganisation is negotiated before the company files for bankruptcy protection (this has become more common).

• Identify Senior Secureddebt securedby hard assetswhich maintain value during restructuring process

• Understand creditor group makeup and motivations ofdifferent constituencies

• Enternegotiations with various creditor classes

• Assess value allocation to various creditor classes

• Consider pre-packaged bankruptcies versus “Chapter 11” court-basedformal bankruptcy process

1

• Fund capital expendituresnecessary forfuture protability

• Optimise capital structure forreturn to protability

• Implement business model forreturn to protability

• Company returns to protability and creates value for equity

• Sale of the company to astrategic buyer

• Effect adividend recapitalisation

• Liquidate the company to recover the original investmen t

IDENTIFY DISTRESSED OPPORTUNITY AND INITIATE INVESTMENT

RESTRUCTURE COMPANY

COMPANY EMERGES FROM BANKRUPTCY

EXIT INVESTMENTS

Business Model (continued)

NB DISTRESSED DEBT AR pp01-07.qxp_NB DISTRESSED DEBT AR pp01-07 27/04/2023 12:43 Page 6

Business Model | COMPANY OVERVIEW

ANNUAL REPORT 20227

Distributions to Shareholders

Income

In order to benefit from an exemption to the United Kingdom (“UK”) offshore fund rules, all income from the Company’s Portfolio (after deduction

of reasonable expenses) must be paid to investors. To meet this requirement the Company will pay out by way of dividend, in respect of each share

class, all net income received on investments of the Company attributable to such share class, as appropriate.

It is not anticipated that income from the Portfolios will be material and therefore any income distributions by way of dividend will be on an ad-hoc

basis. However, the Company monitors the need to distribute such income annually (less allowable expenses under the NMPI rules) in order to

continue to be excluded from the FCA’s restrictions which apply to non-mainstream investment products. The exact amount of such income

distribution by way of dividend in respect of any class of shares will be variable depending on the amounts of income received by the Company

attributable to such share class and will only be paid in accordance with applicable law at the relevant time, including the Companies (Guernsey)

Law, 2008 (as amended) (the “Law”) and, in particular, will be subject to the Company passing the solvency test contained in the Law at the relevant

time. The amount of income distributions by way of dividend paid in respect of one class of shares may be different from that of another class.

Capital

Following the expiry of the Portfolios’ investment periods, the capital proceeds attributable to the corresponding share class as determined by the

Directors and in accordance with the articles of incorporation (the “Articles”), will, at such times and in such amounts as the Directors shall in their

absolute discretion determine, be distributed to shareholders of that class pro rata to their respective holdings of the relevant shares.

Any capital return will only be made by the Company in accordance with the Articles of the Company and applicable law at the relevant time,

including the Law (and, in particular, will be subject to the Company passing the solvency test contained in the Law at the relevant time).

Towards the end of the Portfolios’ respective harvest periods, a residual amount will be retained in accordance with regulatory requirements until

such time as the relevant share class may be liquidated or its assets otherwise disposed of at the discretion of the Board.

Gearing

The Company will not employ leverage or gearing for investment purposes. The Company may, from time to time, use borrowings for share

buybacks and short-term liquidity purposes, including bridging purposes, prior to the sale of investments. Save for such bridging borrowings the

Directors will restrict borrowing, with respect to each share class, to an amount not exceeding 10 percent of the NAV of the share class at the time

of drawdown.

The Company does not currently have any borrowings. Derivatives may be used for the purposes of efficient portfolio management and to hedge

risk within the Portfolios. In addition, from time to time the Company may also invest in such derivatives for investment purposes.

NB DISTRESSED DEBT AR pp01-07.qxp_NB DISTRESSED DEBT AR pp01-07 27/04/2023 12:43 Page 7

2022 PERFORMANCE REVIEW | Financial Highlights

8NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Key Figures

ORDINARY EXTENDED LIFE NEW GLOBAL

AT 31 DECEMBER 2022 SHARE CLASS SHARE CLASS SHARE CLASS

1

AGGREGATED

Net Asset Value (“NAV”) ($ millions) 11.9 58.5 24.8 95.2

NAV per Share ($) 0.7730 0.9728 0.7987 –

Share Price ($) 0.740 0.4800 0.4691 –

NAV per Share (£) – – 0.6640 –

Share Price (£) – – 0.39 –

Premium/(Discount) to NAV per Share (4.27%) (50.66%) (41.26%) –

Portfolio of Distressed Investments ($ millions) 7.3 42.5 24.0 73.8

Cash and Cash Equivalents ($ millions) 4.4 15.2 0.2 19.8

Total Expense Ratio (“TER”)

2

0.97% 0.99% 1.33% –

Ongoing Charges

3

0.95% 0.96% 1.29% –

ORDINARY EXTENDED LIFE NEW GLOBAL

AT 31 DECEMBER 2021 SHARE CLASS SHARE CLASS SHARE CLASS

1

AGGREGATED

Net Asset Value (“NAV”) ($ millions) 13.9 74.5 32.2 120.6

NAV per Share ($) 0.9028 0.9243 0.7835 –

Share Price ($) 0.745 0.6175 0.5486 –

NAV per Share (£) – – 0.5785 –

Share Price (£) – – 0.405 –

Premium/(Discount) to NAV per Share (17.48%) (33.19%) (29.99%) –

Portfolio of Distressed Investments ($ millions) 10.3 63.6 30.5 104.4

Cash and Cash Equivalents ($ millions) 3.7 10.4 1.2 15.3

Total Expense Ratio (“TER”)

2

1.52% 1.35% 1.64% –

Ongoing Charges

3

1.37% 1.24% 1.56% –

1 Stated in US Dollars, the £ price as at 31 December 2022 and 31 December 2021 converted to US Dollars using respective year end exchange rates.

2 The TERs represent the Company’s management fees and all other operating expenses, as required by US Generally Accepted Accounting Principles (“US GAAP”),

expressed as a percentage of average net assets.

3 In the year to 31 December 2022, the Company’s Ongoing Charges were 1.05%. This figure is based on an expense figure for the year to 31 December 2022 of

$1,233,264. This figure, which has been prepared in accordance with AIC guidance represents the Company’s operating expenses, excluding finance costs payable,

expressed as a percentage of average net assets. Effective 18 March 2021, the Investment Manager had waived its entitlement to all fees from the Company. The

Ongoing Charges by share class are disclosed above.

Financial Highlights

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 8

Financial Highlights | 2022 PERFORMANCE REVIEW

ANNUAL REPORT 20229

Summary of Value in Excess of Original Capital Invested

ORDINARY EXTENDED LIFE NEW GLOBAL

AT 31 DECEMBER 2022 SHARE CLASS ($) SHARE CLASS ($) SHARE CLASS (£)

Original Capital Invested (124,500,202) (359,359,794) (110,785,785)

Total Capital Distributions 129,627,394 278,812,413 49,279,634

Total Income Distributions

1

3,166,835 20,695,255 5,070,285

Distributions as % of Original Capital 107% 83% 49%

Total Buybacks – 12,112,379 10,924,963

NAV 11,890,321 58,477,990 20,598,910

Total of NAV Plus Capital and Income Returned (“Value”) 144,684,550 370,098,037 85,873,792

Value in Excess of Original Capital Invested 20,184,348 10,738,243 (24,911,993)

Value as % of Original Capital Invested 116% 103% 78%

ORDINARY EXTENDED LIFE NEW GLOBAL

AT 31 DECEMBER 2021 SHARE CLASS ($) SHARE CLASS ($) SHARE CLASS (£)

Original Capital Invested (124,500,202) (359,359,794) (110,785,785)

Total Capital Distributions 129,627,394 259,844,033 42,460,798

Total Income Distributions

1

3,166,835 14,896,010 2,685,521

Distributions as % of Original Capital 107% 76% 41%

Total Buybacks – 12,112,379 10,924,963

NAV 13,887,833 74,450,993 23,784,796

Total of NAV Plus Capital and Income Returned (“Value”) 146,682,062 361,303,415 79,856,078

Value in Excess of Original Capital Invested 22,181,860 1,943,621 (30,929,707)

Value as % of Original Capital Invested 118% 101% 72%

1 By way of dividend.

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 9

2022 PERFORMANCE REVIEW | Chairman’s Statement

10NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Chairman’s Statement

Dear Shareholder,

The year ending 2022 continued to see unprecedented economic and social disruption driven by Russia’s

invasion of Ukraine. With each share class in its harvest period, we continue to seek to balance the pace of

exits and the value achieved for shareholders as we return capital to our investors.

As a reminder, the Ordinary class shareholders will no longer receive capital distributions until such time as

all final assets attributable to them have been realised to ensure compliance with UK regulations.

Company Performance

As at 31 December 2022, the Company had returned a total of $132.8m or 106.7% of NBDD investors’ original capital of $124.5m, $311.6m or

86.7% of NBDX investors’ original capital of $359.4m and £65.3m or 58.9% of NBDG investors’ original capital of £110.8m.

Currently we are in what we hope to be the final stages of harvesting a number of investments and we will keep investors informed as they occur,

as appropriate when material. It is our intention to fully harvest NBDD during the next 12 months, subject to market conditions. The Board

continues to monitor all costs to ensure that they are appropriate as we are conscious that shareholders may be concerned about the impact of

costs on a reducing portfolio during the harvest period. We would therefore remind shareholders that with effect from 18 March 2021 our

investment manager agreed to waive all its fees.

Annual General Meeting (“AGM”) Results

We were pleased to see that shareholders voted overwhelmingly in favour of all resolutions proposed at our AGM held on 30 June 2022 with all

but two being passed unanimously. We appreciate that circumstances have adversely impacted the results the company has achieved and would

like to take the opportunity to thank you all for your votes and continued support. We would continue to highlight the importance of voting in the

AGM. We are always happy to receive any questions or concerns from shareholders ahead of the AGM so they can be addressed beforehand.

Board Composition, Independence and Diversity

Due to the unchanged status of the fund it has been agreed not to refresh the board at this time.

Distributions

During 2022, the Board was pleased to announce three income distributions which were paid in July, September and December.

In December asset realisations permitted the redemption of 20,429,058 NBDX shares at a price of $0.9285 per NBDX share and 10,093,008

NBDG shares at a price of £0.6756 per NBDG share. All shares redeemed were cancelled.

We will continue to put our income distribution policy to a shareholder vote at each annual general meeting. I would like to remind shareholders

that such distributions occur on an ad-hoc basis and are not expected to be either material or equal for each share class.

Following the receipt of proceeds from the previously announced realisation of a lodging & casino investment the Board resolved on 17 April 2023

to make distributions of $0.1356 and £0.0698 per share in respect of the NBDX and NBDG classes respectively. These distributions will be made

by a compulsory pro rata redemption of shares held as at 2 May 2023 with payment being made on 17 May 2023 and all shares redeemed will

be cancelled.

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 10

Chairman’s Statement | 2022 PERFORMANCE REVIEW

ANNUAL REPORT 202211

Outlook

As reported in the previous annual report the final distributions from each share class have been delayed. The Ordinary class of shares will be the

first to commence the final wind up process which is expected to be later this year, followed by the Extended share class and then the New Global

share class. As is normally the case with investment companies, as opposed to those with commercial undertakings, this does not currently have

any material impact on the Company’s ability to continue as a going concern or to remain viable. However, the whole process must be managed

in a way that ensures compliance with UK regulations. The Extended and Global classes will continue to distribute until their net assets are reduced

to approximately $37.0m and £8.6m respectively. In certain cases, the cash associated with these share classes will need to remain in underlying

corporate vehicles while tax and other matters relating to those vehicles are concluded. We will keep investors appraised of developments in

respect of the remaining assets.

For regulatory reasons, the final 10% of the total return (NAV plus cumulative distributions) in respect of any class of participating shares in

NBDDIF will be returned to shareholders with a final compulsory redemption of all of the outstanding shares of that class. As such, there will be

no further distribution for NBDD (ordinary share class) until the final distribution to investors and the wind-down of the share class. The investment

manager is evaluating options to wind down NBDD and will keep investors informed as there is more clarity.

On behalf of the Board, I would like to thank our longstanding shareholders for your support of our Company. We look forward to updating you

further on the company’s progress throughout the year.

John Hallam

Chairman

26 April 2023

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 11

Investment Manager’s Report

2022 PERFORMANCE REVIEW | Investment Manager’s Report

12NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Ordinary Share Class

Summary

The NAV per share decreased by 14.4% for the year ended 2022. Public markets were volatile as investors monitored multiple themes that could

impact global growth. Dominant themes include tightening fiscal and monetary conditions, persistently higher inflation, supply chain disruptions, a

tight labour market, and the ongoing Russian war in Ukraine. All could lead to elevated volatility over the next 12 months. Given these

circumstances, the timing and quantum of any financial impact on the portfolio remains very difficult to predict. Despite the uncertainty, the

Investment Manager is committed to realising the investments in a timely manner and winding down the share class as soon as practicable, but

there is one asset we are working through which will determine the final distribution date. We are in what we hope to be the final stages of

harvesting a number of investments and we will keep investors informed as they occur. It is our intention to fully harvest NBDD during the next

12months.

Portfolio Update

NBDD ended the year with a NAV per share of $0.7730 compared to $0.9028 at end of 2021. The NAV decrease was principally driven by a

decrease in market multiples which particularly impacted the value of a packaging company investment. At 31 December 2022, 55% of NBDD’s

NAV was invested in distressed assets, and $4M in US Government securities which represented a further 45% of NAV, with a minimal amount

cash net of payables (see table below). Cash balances will continue to increase as assets are realised, subject to variations in collateral cash, but

as noted previously cannot be distributed until the final liquidation of the share class. The portfolio consisted of 5 issuers across four sectors. The

largest sector concentrations were in surface transportation, containers & packaging and financial intermediaries.

CASH ANALYSIS

Balance Sheet – Cash $4.4m

Collateral cash ($3.1m)

Other payables ($0.0m)

Total available cash $1.3m

Notable events below describe activity in the investments during 2022:

• NBDD exited an investment in first lien senior bank debt secured by land in 2022. Cash received was $0.2 million and total return was

($0.4million), with IRR of (15.9%) and ROR of (68.9%) and a holding period of 148 months.

• In November of 2022, a financial intermediary investment made a distribution to its surplus note holders of approximately $20 million, of

which NBDD received $0.2mm.

Significant Price Movement during 2022 (more than 1% of NBDD NAV or approximately $120,000)

TOTAL RETURN

INDUSTRY INSTRUMENT (USD MILLIONS) COMMENT

Financial intermediaries Private Note 0.4 Increase in broker quote and distribution received

Containers & packaging Private Equity (2.3) Decrease in market multiples

Exits

During the year, we had one exit. The total number of exits since inception in NBDD is 51, with a total return of $35.4m.

Partial Realisations

The partial realisations have generated net realised gains of $7.3m over the life of the fund. Detailed descriptions of the partial realisations are at

the end of this report.

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 12

Investment Manager’s Report | 2022 PERFORMANCE REVIEW

ANNUAL REPORT 202213

Distributions

To date, $132.8m or 107% of original capital has been distributed to investors in the form of capital distributions via redemptions and income

dividends. Total value to investors including NAV and all distributions paid is $144.7m (116% of original capital). For regulatory reasons, the final

10% of the total return (NAV plus cumulative distributions) in respect of any class of participating shares in NBDDIF will be returned to

shareholders with a final compulsory redemption of all of the outstanding shares of that class. The next distribution for NBDD will be the final

distribution to shareholders and will wind down the share class. Our current expectation is to wind down the share class in 2023, assuming

supportive market conditions. We will continue to update investors as we gain clarity on the realisations.

Extended Life Share Class

Summary

The NAV per share increased by 5.2% for the year ended 2022. Public markets were volatile as investors monitored multiple themes that could

impact global growth. Dominant themes include tightening fiscal and monetary conditions, persistently higher inflation, supply chain disruptions, a

tight labour market, and the ongoing Russian war in Ukraine. All could lead to elevated volatility over the next 12 months. Given these

circumstances, the timing and quantum of any financial impact on the portfolio remains very difficult to predict. Despite the uncertainty, the

Investment Manager is committed to realising the investments in a timely manner and winding down the share class as soon as practicable.

Currently we are in what we hope to be the final stages of harvesting a number of investments and we will keep investors informed as they occur.

It is our intention to fully harvest NBDX during the next 12 months.

Portfolio Update

NBDX ended the year with a NAV per share of $0.9728 compared to $0.9243 at end of 2021. At 31 December 2022, 84% of NBDX’s NAV was

invested in distressed assets, and $1.9M in US Government securities which represented a further 16% of NAV with a minimal amount of cash net

of payables (see table below). Cash balances will continue to increase as assets are realised, subject to variations in collateral cash, but as noted

previously not all can be distributed until the final liquidation of the share class. The NAV per share increase during the year was principally driven

an increase in value and distribution received from a financial intermediary investment, the exit of a shipping investment and the increase in value

of an oil & gas investment which is exploring a sale, offset by a decline in a packaging investment due to declining market multiples. The NBDX

portfolio consists of 10 issuers across 7 sectors. The largest sector concentrations were in surface transportation, financial intermediaries, oil & gas,

containers & packaging, lodging & casinos.

CASH ANALYSIS

Balance Sheet – Cash $15.2m

Collateral cash ($8.0m)

Other payables ($0.1m)

Total available cash $7.0m

Notable events below describe activity in the investments during 2022:

• NBDX exited an investment in first lien senior bank debt secured by land in September 2022. Cash received was $0.4 million and total

return was ($1.0 million), with IRR of (15.9%) and ROR of (69.0%) and a holding period of 148 months.

• NBDX exited an investment in first lien debt secured by three 35k dead weight ton, dry bulk shipping vessels in September 2022. All vessels

were sold in 2022 and NBDX received total proceeds of $22.2 million of which $0.2 was received in 2023. The IRR is 2% and ROR is 15%

with a 108 month holding period.

• In October of 2022, a lodging & casinos investment made a partial payment to its creditors of approximately $33.5 million, of which NBDX

received $2.6 million.

• In November of 2022, a financial intermediary investment made a distribution to its surplus note holders of approximately $20 million, of

which NBDX received $2.5mm.

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 13

Investment Manager’s Report (continued)

2022 PERFORMANCE REVIEW | Investment Manager’s Report

14NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Extended Life Share Class (continued)

Significant Price Movements during 2022 (approximately 1% of NBDX NAV or $580,000)

TOTAL RETURN

INDUSTRY INSTRUMENT (USD MILLIONS) COMMENT

Financial Intermediaries Private Note 5.5 Increase in broker quote and distribution received

Shipping Bank Debt Investments 3.1 Sold all vessels in 2022

Oil & Gas Private Equity 1.3 Company exploring a sale

Containers & Packaging Private Equity (5.9) Decrease in market multiples and cost inflation

Exits

In 2022 we had two exits. The total number of exits since inception in NBDX is 69 with a total return of $65.7m.

Partial Realisations

The partial realisations generated net realised gains of $18.8m over the life of the Company. Detailed descriptions of the partial realisations are at

the end of this report.

Distributions

During 2022 NBDX made distributions totalling $24.8m. The total distributions to date (dividends, redemptions and buy-backs) amount to

$311.6m or 87% of original capital. Total value to investors including NAV and all distributions paid is $370.1m or 103% of original capital. For

regulatory reasons, the final 10% of total return in respect of any class of participating shares in NBDDIF will be returned to shareholders with the

final compulsory redemption of all of the outstanding shares of that class. The investment manager has undertaken a review of all the investments

in the light of a changed market. Our current expectation is to wind down the share class in 2023, assuming supportive market conditions. We will

continue to update investors as we gain clarity on the realisations.

New Global Share Class

Summary

The NAV per share increased by 14.8%. Public markets were volatile as investors monitored multiple themes that could impact global growth.

Dominant themes include tightening fiscal and monetary conditions, persistently higher inflation, supply chain disruptions, a tight labour market,

and the ongoing Russian war in Ukraine. All could lead to elevated volatility over the next 12 months. Given these circumstances, the timing and

quantum of any financial impact on the portfolio remains very difficult to predict. Despite the uncertainty, the Investment Manager is committed to

realising the investments in a timely manner and winding down the share class as soon as practicable. Currently we are in what we hope to be

the final stages of harvesting a number of investments and we will keep investors informed as they occur. It is our intention to fully harvest NBDG

during the next 12 months.

Portfolio Update

NBDG ended 2022 with a NAV per share of £0.6640 compared to £0.5785 at the end of 2021. At 31 December 2022, 99% of NBDG’s NAV was

invested in distressed assets and 1% of NAV with a minimal amount of cash net of payables (see table below). NAV per share increased during

the year principally due to improving metrics for the lodging & casino investments and an oil & gas investment which is exploring a sale. The

portfolio consisted of 6 issuers across 5 sectors. The largest sector concentrations were in lodging & casinos, commercial mortgage, surface

transportation and oil & gas.

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 14

Investment Manager’s Report | 2022 PERFORMANCE REVIEW

ANNUAL REPORT 202215

CASH ANALYSIS

Balance Sheet – Cash $0.2m

Other payables ($0.1m)

Total available cash $0.2m

Notable events involving NBDG’s investments during 2022 are below:

• NBDG exited an investment in first lien debt secured by three 35k dead weight ton, dry bulk shipping vessels in September 2022. All vessels

were sold in 2022 and NBDG received total proceeds of £7.2 million of which £0.2 was received in 2023. The IRR is 5% and ROR is 45%

with a holding period of 108 months.

• In October of 2022, a lodging & casinos investment made a partial payment to its creditors of approximately £24.0 million, of which NBDG

received £1.0 million.

Significant Price Movements during 2022 (approximately 1% of NBDG NAV or £210,000)

TOTAL RETURN

INDUSTRY INSTRUMENT (£ MILLIONS) COMMENT

Lodging & Casinos Private Note 1.3 Improving hotel metrics

Lodging & Casinos Bank Debt Investments 0.7 Partial distribution received

Oil & Gas Private Equity 0.3 Company exploring a sale

Commercial Mortgage Bank Debt Investments 0.3 Improving leasing metrics

Surface Transport Bank Debt Investments 0.3 Progress in arbitration

Exits

During 2022 there was one exit. The total number of exits since inception is 31 with a total return of £ (4.9m). Detailed descriptions of the exits

are at the end of this report.

Partial Realisations

There were no partial realisations in NBDG during 2022.

Distributions

During 2022, there were distributions made totalling £6.8m. The total distributions to date (dividends, redemptions, and buy-backs) are £65.3m or

59% of original capital. Total value to investors including NAV and all distributions paid is £85.9m or 78% of original capital. For regulatory

reasons, the final 10% of total return in respect of any class of participating shares in NBDDIF will be returned to shareholders with the final

compulsory redemption of all the outstanding shares of that class. The investment manager has undertaken a review of all the investments in the

light of a changed market and we have updated the distribution schedule for the investments based on current expectations. Our current

expectation is to wind down the share class in 2023, assuming supportive market conditions. We will continue to update investors as we gain

clarity on the realisations.

Summary of Exits across all Share Classes

Exits experienced from inception to date were as follows

NBDD 51 exits with a total return of $35.4m, IRR of 10% and ROR of 19%

NBDX 69 exits with a total return of $65.7m, IRR of 5% and ROR of 11%

NBDG 31 exits with a total return of –£4.9m, IRR of –4% and ROR of –4%

The annualised internal rate of return (“IRR”) is computed based on the actual dates of the cash flows of the security (purchases, sales, interest

and principal pay downs), calculated in the base currency of each portfolio. The Rate of Return (“ROR”) represents the change in value of the

security (capital appreciation, depreciation, and income) as a percentage of the purchase amount. The purchase amount can include multiple

purchases. Total Return represents the inception to date gain/loss on an investment.

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 15

Investment Manager’s Report (continued)

2022 PERFORMANCE REVIEW | Investment Manager’s Report

16NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Exit Y (Exit 51 for NBDD and Exit 68 for NBDX)

CASH CASH TOTAL

INVESTED RECEIVED RETURN MONTHS

EXIT Y EXIT (MILLIONS) (MILLIONS) (MILLIONS) IRR ROR HELD

NBDD 51 $0.6 $0.2 ($0.4) (15.9)% (69.1)% 148

NBDX 68 $1.4 $0.4 ($1.0) (15.9)% (69.1)% 148

Exit Z (Exit 31 for NBDG and Exit 69 for NBDX)

CASH CASH TOTAL

INVESTED RECEIVED RETURN MONTHS

EXIT Z EXIT (MILLIONS) (MILLIONS) (MILLIONS) IRR ROR HELD

NBDX 69 $19.3 $22.2 $2.9 1.9% 15.4% 108

NBDG 31 £5.1 £7.4 £2.3 5.2% 44.8% 108

Summary of Partial Realisations across all Share Classes

All partial realisations currently in the portfolio are reported as at 31 December 2022 and it should be noted that their IRR and ROR are likely to

be different at the time of the final exit. These were the following partial realisations:

• NBDD – Two

• NBDX – Two

• NBDG – None

Partial Realisation B: NBDD and NBDX

NBDD and NBDX invested $7.1m to purchase first lien secured bank debt with attached private equity of an international packaging company. The

debt was repaid in full shortly after the purchase with the receipt of $5.8m and the Company retained the equity, receiving dividends of $1.7m

during the holding period. During the second quarter of 2017 the company’s sale to a complementary packaging company was announced. NBDX

and NBDD elected to receive sale proceeds in cash and newly created shares in the acquirer for a combined value of $4.0m. In the third quarter

of 2017, the Company received $1.5m cash as part of the sale proceeds from the disposal completed at the end of the second quarter of 2017

and $1.0m for partial redemption of new shares received in the acquirer. The company’s operating performance declined due to raw material price

increases. The current value of the private equity position is $1.1m generating a total return of $4.0m as of 31 December 2022. IRR was 25% and

ROR was 57% with a holding period of 122 months at 31 December 2022.

CASH VALUE OF

CASH RECEIVED RESIDUAL TOTAL

EFFECTIVE INVESTED TO DATE INVESTMENT RETURN MONTHS

B PERIOD (MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS) IRR ROR HELD

NBDD H1 2017 $2.0 $2.8 $0.3 $1.1 25% 57% 122

NBDX H1 2017 $5.1 $7.2 $0.8 $2.9 25% 57% 122

IRR as at 31 December 2022

25%

ROR as at 31 December 2022

57%

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 16

Investment Manager’s Report | 2022 PERFORMANCE REVIEW

ANNUAL REPORT 202217

Partial Realisation C: NBDD and NBDX

NBDD and NBDX invested $9.2m in preferred equity certificates (“PECs”) and private equity of a European packaging company. The PECs were

retired in full in 2015 and the company paid dividends on the equity during the holding period. Cash received to date is $23.2m. The current value

of the private equity position is $8.1m, generating a total return of $22.1m as at 31 December 2022. IRR was 52% and ROR was 240% with a

holding period of 125 months at 31 December 2022.

CASH VALUE OF

CASH RECEIVED RESIDUAL TOTAL

EFFECTIVE INVESTED TO DATE INVESTMENT RETURN MONTHS

C PERIOD (MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS) IRR ROR HELD

NBDD H1 2017 $2.6 $6.5 $2.3 $6.2 52% 240% 125

NBDX H1 2017 $6.6 $16.7 $5.8 $15.9 52% 240% 125

Neuberger Berman Investment Advisers LLC Neuberger Berman Europe Limited

26 April 2023 26 April 2023

IRR as at 31 December 2022

52%

ROR as at 31 December 2022

240%

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 17

Portfolio Information

2022 PERFORMANCE REVIEW | Portfolio Information

18NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Ordinary Share Class

TOP 4

1

HOLDINGS AT 31 DECEMBER 2022

PURCHASED % OF

HOLDING SECTOR INSTRUMENT STATUS COUNTRY NAV PRIMARY ASSET

1 Surface Transport Trade Claim Defaulted Brazil 29% Municipal Claim

2 Specialty Packaging Post-Reorg Equity Post-Reorg Luxembourg 19% Manufacturing Plant and Equipment

3 Financial Intermediaries Secured Notes Post-Reorg US 5% Cash & Securities

4 Specialty Packaging Post-Reorg Equity Post-Reorg Luxembourg 3% Manufacturing Plant and Equipment

Total 56%

Sector Breakdown

3

1 Ordinary Share Class holds four investments by issuer

2 As at 31 December 2022 collateral pledged is included in the Surface Transport Market Value.

3 Categorisations determined by Neuberger Berman; percentages determined by Neuberger Berman and U.S Bank Global Fund Services (Guernsey) Limited/U.S. Bank

Global Fund Services (Ireland) Limited as Administrator/Sub-Administrator to the Company.

0

5

10

15

20

25

30

35

40

Sector

31 December 2022 31 December 2021

Portfolio Weight (%)

Financial Intermediaries

Auto Components

Containers and Packaging

Building & Development

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 18

Portfolio Information | 2022 PERFORMANCE REVIEW

ANNUAL REPORT 202219

Country Breakdown

4,5

31 DECEMBER 2022 31 DECEMBER 2021

4 Categorisations determined by Neuberger Berman and percentages determined by the Administrator, as a percentage of the net asset values as at 31 December

2022 and 31 December 2021.

5 As at 31 December 2022 collateral pledged is included in the Brazil Market Value.

Luxembourg

Brazil

US

Luxembourg

Brazil

US

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 19

Portfolio Information (continued)

2022 PERFORMANCE REVIEW | Portfolio Information

20NB DISTRESSED DEBT INVESTMENT FUND LIMITED

1 As at 31 December 2022 collateral pledged is included in the Surface Transport Market Value.

2 Categorisations determined by Neuberger Berman; percentages determined by Neuberger Berman and U.S Bank Global Fund Services (Guernsey) Limited/U.S. Bank

Global Fund Services (Ireland) as Administrator/Sub-Administrator to the Company.

Extended Life Share Class

TOP 10 HOLDINGS AT 31 DECEMBER 2022

PURCHASED % OF

HOLDING SECTOR INSTRUMENT STATUS COUNTRY NAV PRIMARY ASSET

1 Surface Transport Trade Claim Defaulted Brazil 15% Municipal Claim

2 Oil & Gas Post-Reorg Equity Post-Reorg US 13% Ethanol Plant

3 Financial Intermediaries Secured Notes Defaulted US 13% Cash and Securities

4 Specialty Packaging Post-Reorg Equity Post-Reorg Luxembourg 10% Manufacturing Plant and Equipment

5 Lodging & Casinos Secured Notes Post-Reorg US 9% Hotel/Lodging Real Estate and Casino

6 Commercial Mortgage Secured Loan Defaulted Netherlands 8% Commercial Real Estate

7 Surface Transport Secured Loan Defaulted Spain 7% Concession

9 Auto Components Secured Loan Post-Reorg US 4% Manufacturing Plant and Equipment

8 Lodging & Casinos Secured Loan Defaulted US 4% Hotel/Lodging Real Estate and Casino

10 Specialty Packaging Post-Reorg Equity Post-Reorg Luxembourg 1% Manufacturing Plant and Equipment

Total 84%

Sector Breakdown

2

0

5

10

15

20

25

Sector

31 December 2022 31 December 2021

Portfolio Weight (%)

Lodging & Casinos

Containers and Packaging

Oil & Gas

Commercial Mortgage

Financial Intermediaries

Auto Components

Shipping

Building & Development

Surface Transport

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 20

Portfolio Information | 2022 PERFORMANCE REVIEW

ANNUAL REPORT 202221

Country Breakdown

3,4

31 DECEMBER 2022 31 DECEMBER 2021

US

Marshall Islands

Luxembourg

Brazil

Spain

Netherlands

US

Luxembourg

Brazil

Spain

Netherlands

3 Categorisations determined by Neuberger Berman and percentages determined by the Administrator, as a percentage of the net asset values as at 31 December

2022 and 31 December 2021.

4 As at 31 December 2022 collateral pledged is included in the Brazil Market Value.

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 21

Portfolio Information (continued)

2022 PERFORMANCE REVIEW | Portfolio Information

22NB DISTRESSED DEBT INVESTMENT FUND LIMITED

New Global Share Class

TOP 6

1

HOLDINGS AT 31 DECEMBER 2022

PURCHASED % OF

HOLDING SECTOR INSTRUMENT STATUS COUNTRY NAV PRIMARY ASSET

1 Lodging & Casino Secured Loan/ Current Spain 31% Hotel/Casino

Private Equity

2 Commercial Mortgage Secured Loan Defaulted Netherlands 24% Commercial Real Estate

3 Surface Transportation Secured Loan Defaulted Spain 15% Legal Claim

4 Oil & Gas Private Equity Post-Reorg US 13% Ethanol Plant

5 Lodging & Casino Secured Notes Defaulted US 10% Hotel/Casino

6 Auto Components Secured Loan Post-Reorg US 4% Manufacturing Plant

Total 97%

Sector Breakdown

2

0

5

10

15

20

25

30

35

40

45

Shipping

Auto Components

Oil & Gas

Surface Transport

Commercial Mortgage

Lodging & Casinos

Sector

Portfolio Weight (%)

31 December 2022 31 December 2021

1 Global Share Class holds six investments by issuer.

2 Categorisations determined by Neuberger Berman; percentages determined by Neuberger Berman and U.S Bank Global Fund Services (Guernsey) Limited/U.S. Bank

Global Fund Services (Ireland) Limited as Administrator/Sub-Administrator to the Company.

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 22

Portfolio Information | 2022 PERFORMANCE REVIEW

ANNUAL REPORT 202223

Country Breakdown

3

31 DECEMBER 2022 31 DECEMBER 2021

Spain

Netherlands

US

Marshall Islands

Spain

Netherlands

US

3 Categorisations determined by Neuberger Berman and percentages determined by the Administrator, as a percentage of the net asset values as at 31 December

2022 and 31 December 2021.

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 23

Strategic Report

Since 31 March 2017, the Portfolios have all been in their respective harvest period. As such this strategic report is presented in the context of the

current positioning of the Portfolios in their lifecycle. The Company’s corporate umbrella itself has an indefinite life to allow for flexibility for the

Company to add new share classes if demand, market opportunities and shareholder approval supported such a move, although the Company has

no current plans to create new share classes.

Principal and Emerging 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 uses the

Company’s risk matrix as its core element in establishing the Company’s system of internal financial and reporting controls. The Board has carried out a

robust assessment of the Company’s emerging and principal risks and uncertainties including those that would threaten its business model, future

performance, solvency or liquidity. The principal risks, which have been identified, and the steps taken by the Board to mitigate these areas are as follows:

RISK MITIGATION

Investment Activity and Performance

The Board has managed these risks by ensuring a diversification of

investments, although the level of diversification will diminish as the

respective Portfolios liquidate their positions during their harvest

periods. Please see “Principal Risks Specific to Harvest Periods” below.

The Investment Manager operates in accordance with the investment

limits and restrictions policy set out in the Company’s Investment Policy

and Objectives and as further determined by the Board. The Directors

review the limits and restrictions on a regular basis and the

Administrator monitors adherence to the limits and restrictions every

month and will notify any breaches to the Board. The Investment

Manager provides the Board with management information including

performance data and reports, and the Corporate Broker provides

shareholder analyses. The Directors monitor the implementation and

results of the investment process with the Investment Manager at each

Board meeting and monitor risk factors in respect of the Portfolios.

Investment strategy is reviewed at each meeting.

Principal Risks Associated with Harvest Periods

The Board has ensured that the Investment Manager has operated in

accordance with the investment limits and restrictions policy set out in

the Company’s Investment Policy and Objectives, although it

acknowledges that the diversification of Portfolio investments will

diminish as the Portfolios liquidate their positions and return capital to

shareholders. The Board also receives regular updates on the status of

the Portfolios’ investments and anticipated realisation dates.

The Board monitors the Company’s expenses on a regular basis and

ensures that contracts with the Investment Manager and other service

providers are at competitive rates. The Board also notes that the

Company’s key expenses, the management fee, was waived with effect

from 18 March 2021.

The Company retains the services of its broker, Jefferies International

Limited to, amongst other things, enhance liquidity in the underlying

shares.

There can be a significant period between the date the Company

makes an investment and the date that any gain or loss on such

investment is realised. Further, towards the end of the Portfolios’

respective harvest periods, a residual amount is required to be retained

for each share class in accordance with regulatory requirements until

such time that all assets can be liquidated and returned to

shareholders.

As capital is returned through compulsory partial redemptions and

buybacks, the number of assets and shares in a Portfolio will diminish

which in turn may lead to an increased TER and reduced liquidity in a

Portfolio’s shares.

An unsuccessful investment strategy may result in underperformance

against the Company’s objectives. This might be due to the skills of the

Investment Manager falling short in its selection of sectors or issues in

which to invest and its management of the restructurings/

reorganisations which can ensure their success.

2022 PERFORMANCE REVIEW | Strategic Report

24NB DISTRESSED DEBT INVESTMENT FUND LIMITED

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 24

RISK MITIGATION

Level of Premium or Discount

While the Directors may seek to mitigate any discount or premium to

NAV per share through discount management mechanisms, such as

buybacks or share issuance, there can be no guarantee that they will

do so or that such mechanisms will be successful and the Directors

accept no responsibility for any failure of any such strategy to effect a

reduction in any discount or premium. Buy backs have been ceased

with the focus moving to returning capital to shareholders via

compulsory redemptions.

Market Price Risk

The Board has, over the Investment Periods of the various share

classes, ensured that the Investment Manager has operated in

accordance with the Company’s investment guidelines. The Directors

monitor the status of the Portfolio investments with the Investment

Manager at each quarterly Board meeting and monitor risk factors in

respect of the Portfolios.

Fair Valuation of Illiquid Assets

With respect to investments held in the Company’s Portfolios that do

not have a readily available market quotation, such as unquoted

investments or investments which are listed but deemed to be illiquid,

the Investment Manager values such investments at fair value on each

NAV calculation date in accordance with its customary valuation

methods, policies and procedures. Further information on the

Company’s valuation process can be found in Note 2(g) under

“Investment transactions, investment income/expenses and valuation”,

and Note 2(f), “Fair Value of Financial Instruments”, of the Audited

Consolidated Financial Statements (the “Financial Statements”).

The Board monitors, reviews and challenges the Company’s fair valued

assets on a regular basis to ensure compliance with the agreed

methodology. The Board reviews the Investment Manager’s internal

review process.

Accounting, Legal and Regulatory

The Board relies on the Company Secretary and the Company’s

advisers to ensure adherence to the Guernsey legislation and the DTRs.

The Investment Manager, Company Secretary and the Administrator,

are contracted to provide investment, company secretarial,

administration and accounting services through qualified professionals.

Operational

Details of how the Board monitors the services provided by the

Investment Manager and the Administrator, and the key elements

designed to provide effective internal controls are explained further in

the internal controls section of the Corporate Governance Report

which is set out on pages 37 to 45.

A discount or premium to NAV can occur for a variety of reasons,

including market conditions and the extent to which investors

undervalue the management activities of the Investment Manager or

discount its valuation methodology and judgement.

Market price risk is the potential for changes in the value of an

investment or Portfolio. The market value of investments may vary

because of a number of factors including, but not limited to, the

financial condition of the underlying borrowers, the industry in which a

borrower operates, general economic or political conditions, interest

rates, the condition of the debt trading markets and certain other

financial markets, developments or trends in any particular industry

and changes in prevailing interest rates.

Further details on market price risk are provided in Note 4 on page 89.

With respect to investments that do not have a readily ascertainable

market quotation in an active market, the Investment Manager will

value such investments at fair value and such valuations will be

inherently uncertain. Because of the inherent uncertainty and

subjectivity in determining the fair value of investments that do not

have a readily ascertainable market quotation in an active market, the

fair value of the Company’s investments as determined in good faith by

the Investment Manager may differ significantly from the values that

would have been used had a ready market existed for such

investments. The reliability of the NAV calculations published by the

Company will be impacted accordingly.

The Company must comply with the provisions of the Law, and since

its shares trade on the SFS, the Company is required to comply with

the FCA’s Disclosure Guidance and Transparency Rules (“DTRs”).

A breach of the legislation could result in the Company and/or the

Directors being fined or subject to criminal proceedings and the

suspension of the Company’s shares to trading on the SFS.

Disruption to, or the failure of, either the Investment Manager’s or the

Administrator’s accounting, dealings or payment systems, or the

records of the custodian could lead to a loss of assets and prevent the

accurate reporting or monitoring of the Company’s financial position.

Strategic Report | 2022 PERFORMANCE REVIEW

ANNUAL REPORT 202225

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 25

Strategic Report (continued)

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 as relevant to those emerging risks.

Examples of emerging risks that have been identified over the course of the past three years included the continuing effects of COVID-19, climate

related risks and the issuance of new regulations, new risks associated with the Brexit trade deal. 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. Whilst COVID-19 was identified as an emerging risk in 2020, it has been

discussed on a quarterly basis as a continued risk, it is no longer considered one by the board.

In 2019, the Board identified activism relating to climate change as an emerging risk and since then has closely monitored regulatory and other

developments in this area. The UN’s latest Intergovernmental Panel on Climate Change (IPCC) report will be considered by the Board when

undertaking Company related business.

Going Concern

The Company’s principal activities are set out on page 4. The financial position of the Company is set out on page 64. In addition, note 4 to the

Financial Statements includes the Company’s objectives, policies and processes for managing its capital, its financial risk management and its

exposures to credit risk and liquidity risk.

The Directors have undertaken a rigorous review of the Company’s ability to continue as a going concern including reviewing the on-going cash

flows and the level of cash balances, the likely liquidity of investments and any income deriving from those investments as of the reporting date

as well as taking into consideration the impact of emerging risks and have determined that the Company has adequate financial resources to meet

its liabilities as they fall due. The Directors therefore have a reasonable expectation that the Company has adequate resources to continue in

operational existence for the twelve months from the date these accounts are signed and the foreseeable future. Thus, they continue to adopt the

going concern basis of accounting in preparing the Financial Statements and confirm that they have been prepared in accordance with Guidance

on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks, published by the FRC.

The going concern statement required by the 2019 AIC Code of Corporate Governance (the “AIC Code”) is set out in the “Directors’

Responsibilities Statement” on page 57.

Viability Statement

In accordance with provision 8.2 paragraph 36 of the AIC Code of Corporate Governance, published in February 2019 (the “AIC Code”), the

Directors have assessed the future prospects of the Company. In making their assessment the Directors have considered the Company’s status as

an investment entity, its investment objectives, the principal and emerging risks it faces, its current position and the time period over which its

assets are likely to be realised.

In their assessment of the viability of the Company over the forthcoming twelve months, being the expected time to realisation of the final assets

of the share classes of the Company, the Directors have carried out a robust assessment of the emerging risks, principal risks and uncertainties the

Company faces, as detailed on pages 24 and 25. These risks include the timing of asset realisations during the Portfolios’ harvest periods, the

Company’s income and expenditure projections, and the expected cash flows arising in particular from capital distributions to shareholders. The

Directors noted that such distributions may be restricted if the interest and dividend income generated in the Portfolios is not sufficient to meet

operational expenses.

As part of their review, the Directors carried out a series of stress tests under different scenarios which assumed a significant fall in income and

asset levels and a corresponding increase in expenses and were satisfied with the results of this analysis. 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

can be expected to be sold, within a reasonable timeframe, to meet future 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 70% fall

in income and no reduction in expenses, and were satisfied that the Company would continue to be viable financially.

2022 PERFORMANCE REVIEW | Strategic Report

26NB DISTRESSED DEBT INVESTMENT FUND LIMITED

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 26

The Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities

as they fall due over the remaining life of each of its three share classes, which the Directors consider to be the twelve month period from the

signing date of these financial statements. However, the Directors noted that the prospects for the Company, which has an indefinite life, are

subject to change should the Company add new share classes to its structure before the existing Portfolios’ assets are fully realised.

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 – At each meeting the Board reviews the NAV, income and share price of each share class. To assist in this review the

Board considers formal reports from both the Investment Manager and brokers which assess the performance of the asset class and look at

trading activity. The Investment Manager also provides an in-depth analysis of the holdings within the Portfolios;

• Discount/premium to NAV – At each Board meeting, the Board monitors the level of the Company’s discount or premium to NAV per share

class and reviews the average discount/premium for other debt-orientated investment companies. The Company publishes a NAV per share

on a daily basis through the official newswire of the London Stock Exchange.

• Ongoing Charges – In the year to 31 December 2022, the Company’s Ongoing Charges were 1.05%. This figure is based on an annual

expense figure for the year of $1,233,264. This figure, which has been prepared in accordance with AIC guidance represents the Company’s

management fees and all other operating expenses, excluding finance costs payable, expressed as a percentage of average net assets. No

performance fees were payable as at 31 December 2022. The Ongoing Charges by share class are disclosed on page 8.

• Total Expense Ratio (“TER”) – In the year to 31 December 2022, the Company’s TER was 1.08%. This figure is based on an annual expense

figure for the year of $1,276,392. This figure which has been prepared in accordance with the US Generally Accepted Accounting Principles

(“US GAAP”) methodology, represents the annual percentage reduction in shareholder returns as a result of recurring operational expenses

including any performance fee. No performance fees were payable as at 31 December 2022. The TERs by share class are disclosed on

page8.

Alternative Performance Measures (“APMs”)

Alternative Performance Measures (“APMs”) included in the Annual Financial Report and Financial Statements which require further clarification

have been considered by the Board. An APM is defined as a financial measure of historical or future financial performance, financial position, or

cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. APMs may not have a standard

meaning prescribed by US GAAP and therefore may not be comparable to similar measures presented by other entities. APMs included in the

Annual Report and Financial Statements are deemed to be as follows:

ALTERNATIVE

PERFORMANCE

MEASURES PURPOSE AND/OR DESCRIPTION CALCULATION

The IRR is calculated by first calculating the net present

value (NPV), being (Today’s value of the expected future

cash flows) – (Today’s value of invested cash). The IRR is a

determination of what discount rate would cause the net

present value (NPV) of an investment to be $0.

Internal Rate of Return

(“IRR”)

It is calculated by taking the difference

between the current (or expected) value and

original value, divided by original value and

multiplied by 100.

Opening NAV per share (A)

Closing NAV per share (B)

Rate of Return = (B–A)/A

The RoR is the net gain or loss on an investment over a

specified time period, expressed as a percentage of the

investment’s initial cost.

Rate of Return (“ROR”)

Strategic Report | 2022 PERFORMANCE REVIEW

ANNUAL REPORT 202227

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 27

Strategic Report (continued)

ALTERNATIVE

PERFORMANCE

MEASURES PURPOSE AND/OR DESCRIPTION CALCULATION

Annualised charges (A)

Average undiluted net asset value in the

period (B)

Total Expense Ratio (%) = (A)/(B)

The TER is Management fees and all other operating

expenses expressed as a percentage of average net assets

during the year.

Total Expense Ratio (“TER”)

Ongoing charges (%) = (A)/(B)

Annualised ongoing charges (A)

Average undiluted net asset value in the

period (B)

On-going Charges are calculated to the AIC Methodology,

which is a measure, expressed as a percentage of NAV, of

the regular, recurring costs of the Company. “On-going

charges are those expenses of a type which are likely to

recur in the foreseeable future, whether charged to capital

or revenue, and which relate to the operation of Company,

excluding the costs of acquisition/disposal of investments,

financing charges and gains/losses arising on investments.

Ongoing charges are based on costs incurred in the year as

being the best estimate of future costs”.

On-going charges

The NAV per share represents the net assets attributable to

equity shareholders divided by the number of shares in issue,

excluding any shares held in treasury.

The NAV per Ordinary Share is published daily. This APM

relates to past performance and is used to assess

performance.

Net Asset Value per share

(“NAV”)

Original Investment cost (A)

Current Investments value (B)

Total Return = (B–A)/A

Total return is expressed as a percentage of the amount

invested and represents the amount of value our investors

earn from a security over a specific period.

Total Return

Total Capital Distributions (A)

Total Income Distributions (B)

Total Buybacks (C)

Current NAV (D)

Total of NAV Plus Capital Returned, where

(E)= A+B+C+D

Original Capital Invested (F)

Ratio of Total Value to original capital

(%)=E/F

Ratio of Total Value to original capital is a total of NAV plus

capital returned to investors expressed as a percentage of

the original amount invested since inception.

Ratio of Total Value to

original capital

2022 PERFORMANCE REVIEW | Strategic Report

28NB DISTRESSED DEBT INVESTMENT FUND LIMITED

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 28

ALTERNATIVE

PERFORMANCE

MEASURES PURPOSE AND/OR DESCRIPTION CALCULATION

Management Arrangements

Investment Management Agreement

On 17 July 2014, the Company, the Manager and the AIFM made certain classificatory amendments to their contractual arrangements for the

purposes of compliance with 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. The IMA was further amended and restated on 31 December 2017. 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 6 on page 92 for details of fee

entitlement.

The IMA can be terminated either by the Company on one hand or the Investment Manager on the other, 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. Effective 1 October 2020 the Investment Manager waived its fee on cash in relation to the

NBDD share class. Effective 18 March 2021, the Investment Manager waived its entitlement to all fees from the Company.

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 (“USBG”) and U.S. Bank Global Fund Services (Ireland) Limited (“USBI”) a wholly-owned subsidiary of USBG. Under the terms

of the agreement, Sub-Administration services are delegated to USBI (the “Sub-Administrator”). US Bank National Association (the “Custodian”)

was appointed custodian to the Company effective 1 March 2015. See Note 6 on pages 92 and 93 for details of fee entitlement.

On 1 June 2018 the Company entered into an Amendment to the Administration and Sub-Administration agreement to reflect the requirements of

the General Data Protection Regulation (EU) 2016/679 (“GDPR”) and the Data Protection (Bailiwick of Guernsey) Law, 2017, as amended from

time to time.

Company Secretarial and Registrar Arrangements

Effective 20 June 2017, company secretarial services are provided by Carey Commercial Limited. Registrar services are provided by Link Market

Services (Guernsey) Limited.

See Note 6 on page 92 for details of fee entitlement.

NAV per share (NBDD) (A)

Share price per share (NBDD) (B)

NBDD (Discount) or Premium = (B–A)/A

NAV per share (NBDX) (A)

Share price per share (NBDX) (B)

NBDX (Discount) or Premium = (B–A)/A

NAV per share (NBDG) (A)

Share price per share (NBDG) (B)

NBDG (Discount) or Premium = (B–A)/A

The share price of an Investment Company is derived from

buyers and sellers trading their shares on the stock market.

This price is not identical to the NAV. If the share price is

lower than the NAV per share, the shares are trading at a

discount. This could indicate that there are more sellers than

buyers. Shares trading at a price above the NAV per share,

are said to be at a premium. This is expressed as a

percentage.

(Discount) or Premium to

NAV

Strategic Report | 2022 PERFORMANCE REVIEW

ANNUAL REPORT 202229

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 29

Strategic Report (continued)

Related Party Transactions

The relationships with the Investment Manager and Directors are the only related party transactions currently in place. Other than fees payable in

the ordinary course of business there have been no material transactions with these related parties which have affected the financial position or

performance of the Company in the financial year.

For information on performance fees and Directors’ fees please refer to Note 6 on page 92.

For and on behalf of the Board,

John Hallam Christopher Legge

Chairman Director

26 April 2023 26 April 2023

2022 PERFORMANCE REVIEW | Strategic Report

30NB DISTRESSED DEBT INVESTMENT FUND LIMITED

NB DISTRESSED DEBT AR pp08-30.qxp 27/04/2023 12:43 Page 30

ANNUAL REPORT 202231

Directors

Directors | GOVERNANCE

John Hallam (Chairman)

John Hallam is a fellow of the Institute of Chartered Accountants in England and Wales and qualified as an accountant

in 1971. Previously, Mr Hallam was a partner at PricewaterhouseCoopers and retired in 1999 after 27 years with the firm

in Guernsey and in other countries. He is a director of Real Estate Credit Investment Limited and a number of other

financial services companies, some of which are listed on recognised exchanges. Mr Hallam served for many years as a

member and latterly chairman of the GFSC, from which he retired in 2006.

Michael J. Holmberg

Michael J. Holmberg, Managing Director of Neuberger Berman, joined the NB Group in 2009. Mr Holmberg is the head

of distressed portfolio management. Prior to joining NB Group, Mr Holmberg founded Newberry Capital Management

LLC in 2006 and before that he founded and managed Ritchie Capital Management’s Special Credit Opportunities Group.

He was also a managing director at Strategic Value Partners and Moore Strategic Value Partners. He began investing in

distressed and credit-oriented strategies as a portfolio manager at Continental Bank/Bank of America, where he

established the bank’s global proprietary capital account. Mr Holmberg received a BA in economics from Kenyon College

and an MBA from the University of Chicago.

Christopher Legge (Chairman of the Audit Committee)

Chris Legge is a Guernsey resident and worked for Ernst & Young in Guernsey from 1983 to 2003. Having joined the firm

as an audit manager in 1983, he was appointed a partner in 1986 and managing partner in 1998. From 1990 to 1998,

he was head of Audit and Accountancy and was responsible for the audits of a number of banking, insurance, investment

fund, property fund and other financial services clients. He also had responsibility for the firm’s training, quality control

and compliance functions. He was appointed managing partner for the Channel Islands region in 2000 and merged the

business with Ernst & Young LLP in the United Kingdom. He retired from Ernst & Young in 2003. Chris currently holds a

number of non-executive directorships in the financial services sector including two Guernsey investment companies

which are listed in the UK and where he also chairs the Audit Committee. He is an FCA and holds a BA (Hons) in

Economics from the University of Manchester.

Stephen Vakil (Chairman of the Management Engagement Committee and Chairman of the Remuneration Committee and Senior

Independent Director)

After graduating with a BSc in economics from Bath University in 1983, Stephen Vakil joined L Messel & Co and moved

to Chase Manhattan in 1987 to focus on private client portfolio management. In 1989, he left to join Foster &

Braithwaite where he established the research function and subsequently became a director. Following Foster &

Braithwaite’s merger with Quilter Goodison to form Quilter & Co in 1996, Mr Vakil was given responsibility for the

London investment teams, the research department and marketing function. He was made a managing director in 2001.

Having played a key role in a number of corporate transactions, Mr Vakil left Quilter Cheviot in 2013. He is an Associate

of the Society of Investment Professionals.

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 31

32NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Directors’ Report

GOVERNANCE | Directors’ Report

The Directors present their report and Financial Statements of the Company and their report for the year ended 31 December 2022.

Share Capital

The number of shares in issue at 31 December 2022 was as follows:

Class A Shares 2

Ordinary Shares 15,382,770

Extended Life Shares 60,116,016

New Global Shares 31,023,609

Share Buybacks

At the Annual General Meeting (“AGM”) of the Company held on 29 June 2022, the Directors were granted the general authority to purchase in

the market up to 14.99% of the Ordinary Shares, 14.99% of the Extended Life Shares and 14.99% of the New Global Shares in issue (as at

29June 2022). The latest authority will expire at the AGM to be held on 28 June 2023. Pursuant to this authority, and subject to the Law and the

discretion of the Directors, the Company may purchase shares of any of its classes in the market on an ongoing basis with a view to addressing

any imbalance between the supply of and demand for such shares, thereby increasing the NAV per share of the shares and assisting in controlling

the share price discount to NAV per share.

There were no buybacks of the Company’s Shares in 2022 as on 16 November 2020 the Company announced in its quarterly Factsheet that the

share buyback programme had been discontinued. The buyback programme was intended to narrow the discount, if any, during the investment

period. At this point of the harvest period, the priority, based on investor feedback, is the return of capital. The Directors intend to seek annual

renewal of this authority from Shareholders to retain flexibility.

Distributions

The Company will, from time to time, pay out income distributions by way of dividend in respect of each share class in accordance with the

Company’s dividend policy as set out below. In addition, any capital proceeds attributable to a share class (as determined by the Directors in

accordance with the Articles), will, at such times and in such amounts as the Directors shall in their absolute discretion determine, be distributed

to shareholders of that class pro rata to their respective holdings of the relevant shares. Further information on the Company’s income and capital

distribution policies can be found on page 33.

Dividend Policy

As set out in the Company’s Prospectus, the Company will pay out in respect of each class of shares an income distribution by way of dividend,

comprising all net income received on investments of the Company attributable to such class of shares. It is not anticipated that income from the

portfolio will be material and therefore any dividends may be on an ad-hoc basis. It is a requirement of an exception to the United Kingdom

offshore fund rules that all income from the Company’s Portfolio (after deduction of reasonable expenses) is to be paid to investors. This policy

should ensure that this requirement will be met. The exact amount of such dividend in respect of any class of Shares will be variable depending on

the amounts of income received by the Company attributable to such class of Shares and will only be made available in accordance with applicable

law at the relevant time, including the Law (and, in particular, will be subject to the Company passing the solvency test contained in the Law at

the relevant time). Furthermore, the amount of dividends paid in respect of one class of shares may be different from that of another class. This

policy will be put to a shareholder vote by way of separate resolution at the 2023 AGM.

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 32

ANNUAL REPORT 202233

Directors’ Report | GOVERNANCE

Distributions made during the year

The following distributions were made:

Income distribution by way of dividend

ORDINARY SHARE CLASS EXTENDED LIFE SHARE CLASS NEW GLOBAL SHARE CLASS

PER SHARE PER SHARE PER SHARE

DATE AMOUNT AMOUNT AMOUNT

30 June 2022 – $0.041 £0.033

08 September 2022 – $0.031 £0.025

Capital distributions by way of a compulsory partial redemption

ORDINARY SHARE CLASS EXTENDED LIFE SHARE CLASS NEW GLOBAL SHARE CLASS

DISTRI- DISTRI- DISTRI-

BUTION NUMBER PER SHARE BUTION NUMBER PER SHARE BUTION NUMBER PER SHARE

DATE AMOUNT OF SHARES AMOUNT AMOUNT OF SHARES AMOUNT AMOUNT OF SHARES AMOUNT

21 November 2022 – – – 18,968,380 20,429,058 $0.9285 6,818,836 10,093,008 £0.6756

Substantial Share Interests

Based upon information deemed to be reliable as provided by the Company’s registrar as at 26 April 2023, the following shareholders owned 5%

or more of the issued shares of the Company.

PERCENTAGE

NO. OF ORDINARY NO. OF EXTENDED NO. OF NEW OF SHARE

SUBSTANTIAL SHAREHOLDERS SHARES LIFE SHARES GLOBAL SHARES CLASS (%)

Harewood Nominees Limited 4046320 ACCT 13,007,692 – – 84.56

Prudential Client HSBC GIS Nominee (UK) 9,286,929 29.94

Limited PAC ACCT – 9,873,065 16.42

Nortrust Nominees Limited GSYA ACCT 5,658,949 18.24

– 8,335,009 13.86

State Street Nominees Limited OM04 ACCT 4,239,873 13.67

– 3,576,470 5.95

CITIBANK Nominees (IRELAND) Designated

Activity Company CLRLUX ACCT – 5,428,371 – 9.03

HSBC Global Custody Nominee (UK) Limited 898873 ACCT – – 2,686,107 8.66

J P Morgan Securities LLC CLIENTSK ACCT – 4,962,875 – 8.26

BNY (OCS) Nominees Limited – 4,877,385 – 8.11

Lynchwood Nominees Limited 2006420 ACCT – 4,512,712 – 7.51

Roy Nominees Limited 802644 ACCT – – 2,156,633 6.95

Note: shareholdings may be greater than 5% in the share class but may not be 5% in aggregate of the Company’s issued share capital.

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 33

34NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Directors’ Report (continued)

GOVERNANCE | Directors’ Report

Notifications of Shareholdings

In the year to 31 December 2022 the Company has been 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%. Class A shares do not hold voting rights.

PERCENTAGE OF TOTAL

SHAREHOLDER

1

NUMBER OF SHARES VOTING RIGHTS (%)

Armstrong Investments Limited 6,000,000 NBDD 7.45%

Armstrong Investments Limited 10,725,000 NBDX

7,400,000 NBDG 13.23%

M&G Plc 12,590,755 NBDX

9,286,602 NBDG 20.54%

Witan Investment Trust Plc 13,007,692 NBDD 12.2%

Since the year end at the date of this report, there have been no notifications received by the Company.

Directorship in Public Companies (as at 26 April 2023)

COMPANY NAMES EXCHANGE(S)

Mr John Hallam

NB Distressed Debt Investment Fund Limited SFS, London

Real Estate Credit Investments Limited London

Ruffer Multi Strategies Fund Limited The International Stock Exchange (“TISE”)

Ruffer Illiquid Multi Strategies Fund 2015 Limited TISE

Mr Michael Holmberg

NB Distressed Debt Investment Fund Limited SFS, London

Mr Christopher Legge

NB Distressed Debt Investment Fund Limited SFS, London

Sherborne Investors (Guernsey) C Limited SFS, London

Mr Stephen Vakil

NB Distressed Debt Investment Fund Limited SFS, London

Portfolio REIT PLC TISE

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 them or for the Company. The Investment Manager

has also adopted a zero-tolerance approach to instances of bribery and corruption.

The Board insists on strict observance with these same standards by its service providers in their activities for the Company and continues to refine

its process in this regard. The Company’s policy is available on its website at www.nbddif.com/corporate_governance.html

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 34

ANNUAL REPORT 202235

Directors’ Report | GOVERNANCE

Climate Change

In 2019, the Board identified concerns relating to climate change as an emerging risk and since then has closely monitored regulatory and other

developments in this area. The Board is conscious of its own impact on the environment, despite being an investment company with no employees,

and has committed, on a going forward basis, to offset its carbon-emissions arising from the air travel by the members of the Board undertaking

Company related business. In addition, the Board makes extensive use of teleconferencing facilities thus limiting the amount of travel, all board

papers are produced and hosted digitally via a dedicated board web-portal and the Company makes relevant enquiries to our key service providers

during face-to-face meetings about their initiatives and attitudes to climate change.

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. The Company’s policy is

available on its website at www.nbddif.com/corporate_governance.html.

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.

Employees and Socially Responsible Investment

The Company has a management contract with the Investment Manager. It 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. The Company’s main

activities are carried out by Neuberger Berman, which is a signatory of the Principles of Responsible Investment and has an ongoing commitment

to strengthening and refining its environmental, social and governance approach. An overview of Neuberger Berman’s Principles for Responsible

Investment is detailed on its website at www.nb.com/pages/public/en-gb/principles-for-responsible-investment.aspx.

Gender Metrics

The current Board members are male. More information on the Board’s consideration of diversity is given in the Corporate Governance Report on

page 40.

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.nbddif.com/pdf/NB_Privacy_Notice_2021.pdf.

Global Greenhouse Gas Emissions

The Company has no significant greenhouse gas emissions to report from its operations for the year to 31 December 2022 and 31 December 2021,

nor does it have responsibility for any other emissions producing sources.

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 35

Directors’ Report (continued)

36NB DISTRESSED DEBT INVESTMENT FUND LIMITED

GOVERNANCE | Directors’ 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. The MSA of the Investment Manager is available

on its website at NB.com.

Disclosure of Information to Auditors

The Directors who were members of the Board at the time of approving this report are listed on pages 34 and 40. 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 auditors are

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 auditors are aware of that information.

For and on behalf of the Board

John Hallam Christopher Legge

Chairman Director

26 April 2023 26 April 2023

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 36

ANNUAL REPORT 202237

Corporate Governance Report | GOVERNANCE

Applicable Corporate Governance Codes

As the Company is listed on the SFS it is only required to follow the GFSC code of corporate governance (the “Code”), applicable to Guernsey

companies. However, the Board has chosen to follow the AIC Code of Corporate Governance published in February 2013 and last amended in

February 2019 (the “AIC Code”). The AIC Code addresses all the principles set out in the Code as well as setting out additional principles and

recommendations on issues that are of specific relevance to the Company.

On 1 January 2012, the GFSC’s “Finance Sector Code of Corporate Governance” came into effect and was amended in February 2016, and again

in June 2021 to amend Principle 5 for boards to consider climate change (5.2.1). The GFSC has stated in its Code that companies which report

against the UK Corporate Governance Code (the “UK Code”) or the AIC Code are deemed to meet their Code, and need take no further action.

The Board of the Company has considered the principles and recommendations of the 2019 AIC Code.

The Board considers that reporting against the principles and recommendations of the AIC Code will provide more relevant information to

shareholders. Copies of the AIC Code can be found at www.theaic.co.uk.

Corporate Governance Statement

Throughout the year ended 31 December 2022 the Company has complied with the recommendations of the AIC Code, except where explanations

have been provided.

The Directors believe that this Annual Report and Audited Financial Statements, 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 DTRs by virtue of the information included in

the Corporate Governance section of the Annual Report together with information contained in the Strategic Report and the Directors’ Report.

Our Governance Framework

Chairman: John Hallam

Responsibilities:

The leadership, operation and governance of the Board, ensuring effectiveness, and setting the agenda for the Board.

More details are provided on pages 38 to 45.

Senior Independent Director: Stephen Vakil

Responsibilities:

The Senior Independent Director’s (“SID”) role is to work closely with the chairman, acting as a sounding board and providing support, acting as

an intermediary for other directors as and when necessary. The SID is available to shareholders and other non-executives to address any concerns

or issues they feel have not been adequately dealt with through the usual channels of communication (i.e. through the chairman, other directors

or Investment Management executives). The SID is also responsible, along with the non-executive Directors, for review of the chairman’s

performance and carrying out succession planning for the chairman’s role as deemed appropriate. The SID is available to attend meetings with all

shareholders to obtain a balanced understanding of their issues and concerns. A memo is available on the Company’s website

https://www.nbddif.com/pdf/Memorandum_on_the_Duties_of_the_26_August_2020.pdf.

Corporate Governance Report

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 37

38NB DISTRESSED DEBT INVESTMENT FUND LIMITED

GOVERNANCE | Corporate Governance Report

Corporate Governance Report (continued)

Our Governance Framework (continued)

The Board members of NB Distressed Debt Investment Fund Limited

John Hallam (Chairman) – independent non-executive Director

Christopher Legge and Stephen Vakil – independent non-executive Directors

Michael Holmberg – non-executive Director

Responsibilities:

Overall conduct of the Company’s business and setting the Company’s strategy.

More details are provided below.

AUDIT COMMITTEE MANAGEMENT ENGAGEMENT COMMITTEE

Members:

Christopher Legge (Chairman)

Stephen Vakil

Responsibilities:

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 controls and

business risks.

More details are provided on pages 46 to 49.

Members:

Stephen Vakil (Chairman)

John Hallam

Christopher Legge

Responsibilities:

To review the performance of all service providers (including the

Investment Manager)

More details are provided on pages 50 to 51.

REMUNERATION COMMITTEE INSIDE INFORMATION COMMITTEE

Members:

Stephen Vakil (Chairman)

John Hallam

Christopher Legge

Responsibilities:

To review the on-going appropriateness and relevance of the

remuneration policy.

More details are provided on page 53.

Members:

John Hallam (Chairman)

Michael Holmberg

Christopher Legge

Stephen Vakil

Responsibilities:

To identify inside information and monitor the disclosure and control of

inside information.

More details are provided on page 52.

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 38

ANNUAL REPORT 202239

Corporate Governance Report | GOVERNANCE

Board Independence and Composition

The biographical details of the Directors holding office at the date of this report are listed on page 31 and demonstrate a breadth of investment,

accounting and professional experience.

As of April 2023 John Hallam had served on the Board for over twelve years, the Board remains satisfied that John Hallam continues to exercise

independent judgement, and that retaining the depth of knowledge of the Company held by John is in the best interests of the Company as a

whole, given the current position of the Company. Mr Hallam was re-elected to the Board at the 2022 AGM with 95% of the votes cast being in

favour and expects to stand for re-election at the next AGM.

John Hallam, Christopher Legge and Stephen Vakil are considered independent from the Investment Manager. Michael Holmberg is deemed not

independent as he is employed by a Neuberger Berman group company.

The Board believes that Mr Holmberg brings a significant amount of experience and expertise to the Board; however, as a non-independent

Director, Mr Holmberg does not sit on the Audit Committee, Remuneration Committee or the Management Engagement Committee and is not

involved in any matters discussed by the Board concerning the evaluation of the performance of the Investment Manager.

The Directors review their independence annually.

The Company Secretary through its representative acts as Secretary to the Board and Committees and in doing so it:

• assists the Chairman in ensuring that all Directors have full and timely access to all relevant documentation;

• will organise induction of new Directors; and

• is responsible for ensuring that the correct Board procedures are followed and advises the Board on corporate governance matters.

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 2023 AGM. The length of service of each Director is shown in the

Directors’ Remuneration Report on pages 54 to 56. Any Director may resign in writing to the Board at any time.

The Board has formal, rigorous and transparent procedures for the appointment of additional directors. Candidates are identified and selected on

merit against objective criteria and with due regard to the benefits of diversity on the Board, including gender. The Board undertakes a broad search

which includes obtaining lists of potential candidates from a variety of sources leading to agreed short-lists. Interviews are then held with potential

candidates. The skills, experience and time availability of each candidate is considered by the Board with due regard to the skills and experience

necessary to replace those lost by retirements or otherwise considered desirable to strengthen the Board. Short-listed candidates are invited to

meet the Chairman and the Investment Manager and feedback is provided to the Board prior to selection.

In accordance with the AIC Code all current Directors will offer themselves for re-election at the 2023 AGM of the Company; John Hallam,

MichaelHolmberg, Christopher Legge and Stephen Vakil were re-elected as Directors at the AGM on 29 June 2022. The names and biographies of

the Directors holding office at the date of this report are listed on page 31.

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:59 Page 39

40NB DISTRESSED DEBT INVESTMENT FUND LIMITED

GOVERNANCE | Corporate Governance Report

Corporate Governance Report (continued)

Tenure of Non-Executive Directors

The Board has adopted a policy on tenure that is considered appropriate for an investment company. Mr Hallam has served as a director of the

Company for over twelve years. 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 has sought to appoint Directors with past and current experience of various

areas relevant to the Company’s business. The Board agreed to adopt an amended tenure and succession policy in February 2018 which is reflective

of the Board’s belief that it is not in the best interests of shareholders to replenish the Board at the current time when the long-term outlook of

the umbrella of the Company is unknown, save for the appointment of directors to fill a key vacant position with due regard to the skills and

experience necessary to replace those lost by Directors’ retirements.

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.

Re-election of Directors

John Hallam, Michael Holmberg, Christopher Legge and Stephen Vakil have confirmed their intention to submit themselves for re-election at the

next AGM to be held on 28 June 2023.

The Board recognises that the Portfolios are now in their harvest periods and, as such, it believes that it is in the best interests of shareholders and

the Company to maintain the current Board composition for the time being in order to benefit from the Directors’ technical knowledge and

experience of managing the Company’s affairs as the assets continue to wind down. The Board confirmed that the contributions made by the

Directors offering themselves for re-election at the AGM on 28 June 2023 continue to be effective and that the Company should support their

re-election.

The dates of appointment of all Directors are provided in the Directors’ Remuneration Committee Report on page 56.

Board Diversity

The Board considers that its members have a balance of skills and experience which are relevant to the Company. The Board notes the Davies

Report, Hampton-Alexander Review and the Parker Review, and believes in the value and importance of diversity in the boardroom but it does not

consider it is appropriate or in the interests of the Company and its shareholders particularly given current circumstances to set prescriptive targets

for gender, ethnicity, nationality or any other criterion of representation on the Board. At 31 December 2022, the Board members were male. 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 enhances the Board but has no current plans to refresh the Board.

Board Responsibilities

The Board reviews all aspects of the Company’s affairs including the setting and monitoring of investment strategy and the review of investment

performance. With the Portfolios now in their harvest periods, the Investment Manager takes decisions as to the sale of individual investments, in

line with the investment policy and strategy set by the Board. The Investment Manager together with the Company Secretary and 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 the Directors to question any

matters of concern or seek clarification on certain issues. Matters specifically reserved for decision by the full Board have been defined and a

procedure adopted for Directors in the furtherance of their duties to take independent professional advice at the expense of the Company. This is

available on the Company’s website www.nbddif.com.

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 40

ANNUAL REPORT 202241

Corporate Governance Report | GOVERNANCE

Conflict of Interests

Directors are required to disclose all actual and potential conflicts of interest to the Board as they arise 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 advise the Chairman and the Company Secretary in advance of any proposed external appointment.

None of the Directors had a material interest in any contract, which is significant to the Company’s business during the year ended 31 December

2022, except Michael Holmberg, being an employee of the Neuberger Berman Group of which the Investment Manager is a part.

The Directors’ Remuneration Report on pages 54 to 56 provides information on the remuneration and interests of the Directors.

Performance Evaluation

The performance of the Board, its Committees and the Directors, including the Chairman, was reviewed by the Board on 18 November 2022, by

means of an internal questionnaire. The Company Secretary collated the results of the questionnaires and the consolidated results were reviewed

and discussed by the Board and by the Remuneration Committee. The Chairman reviewed each individual Director’s contribution.

The 2022 evaluation concluded that:

• the performance of the Board, its committees, the Chairman and each of the Directors continues to be effective;

• Mr Hallam, Mr Legge and Mr Vakil are unanimously considered independent;

• all current Directors should be proposed for re-election at the 2023 AGM; and

• the Board was considered to have an appropriate mix of skills and experience.

The Board intends to conduct another internal board evaluation in November 2023, and will continue to review its procedures, its effectiveness

and development in the year ahead.

The Directors noted that all three share classes were currently in harvest phase and agreed that, due to the position of the Company, it was not

beneficial or necessary to incur the costs of an externally facilitated external evaluation. The Directors agreed that if the Company’s life were

extended, further consideration would be given to an externally facilitated evaluation and therefore agreed to keep this position under review.

The Remuneration Committee (excluding John Hallam) led by the Chairman of the Remuneration Committee reviewed the Chairman. It was agreed

that the Chairman was well-regarded by the other Board members and that he provided excellent depth of knowledge of the Company. In addition,

the Chairman has actively offered himself to meet with shareholders over the year.

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 advised to the Board as they arise along with changes to best practice

by, amongst others, the 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 continually to refresh their skills and knowledge

and keep up with changes within the investment company industry. The Chairman reviewed the training and development needs of each Director

during the annual Board evaluation process. The Chairman confirmed that all directors actively kept up to date with industry developments and

issues.

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 41

42NB DISTRESSED DEBT INVESTMENT FUND LIMITED

GOVERNANCE | Corporate Governance Report

Corporate Governance Report (continued)

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 is set out in the Directors’ letters of appointment to enable them to do so.

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 and Officers under a Directors’ and Officers’ liability insurance policy.

Relationship with the Investment Manager, Company Secretary, Administrator and Sub-Administrator

All of the Company’s management and administration functions are delegated to external parties including the management of the investment

Portfolios, 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, including the control systems in operation in so far as they relate to the affairs of the Company. The Management

Engagement Committee is responsible for the oversight of service providers.

The Board receives and considers reports regularly from the Investment Manager and ad hoc reports and information are supplied to the Board as

required. With the Portfolios now in their harvest periods, the Investment Manager takes decisions as to the sale of individual investments. The

Investment Manager, Company Secretary, Administrator and Sub-Administrator also ensure that all Directors receive, in a timely manner, all relevant

management, regulatory and financial information. Representatives of the Investment Manager, Administrator and Sub-Administrator attend each

Board meeting enabling the Directors to probe further into matters of concern.

The Directors have access to the advice and service of the corporate Company Secretary through its appointed representative who is responsible

to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. The Board, the

Investment Manager, Company Secretary, the Administrator and Sub-Administrator operate in a supportive, co-operative and open environment.

Shareholder Engagement

The Board believes that the maintenance of good relations with shareholders is important for the long-term prospects of the Company. It has, since

admission, sought engagement with investors. Where appropriate, the Chairman, and other Directors are available for discussion about governance

and strategy with major shareholders and the Chairman ensures communication of shareholders’ views to the Board. The Board receives feedback

on the views of shareholders from its Corporate Broker (“Broker”) and the Investment Manager, and shareholders are welcome to contact the

Directors at any time via the Company Secretary by email at: NB.Distressed@wearecarey.com.

The Directors believe that the AGM provides an appropriate forum for shareholders to communicate with the Board and encourages participation.

There is an opportunity for individual shareholders to question the Chairman of the Board, the Audit Committee, Management Engagement

Committee, Remuneration Committee and Inside Information Committee at the AGM. The Board also welcomes the opportunity to meet with

investors on a one-to-one basis, upon request.

The Board assesses the results of AGMs and will consider whether there is a significant number of votes not lodged in favour of a resolution. Where

the Board considers that a significant number of votes have not been lodged in favour of a resolution, an immediate announcement will be made

and further disclosures will be made in the next Annual Report. The Broker and the Investment Manager will seek feedback from investors. In

addition to this the Broker and the Investment Manager will provide the Board with feedback that has been received from investors about the

performance of the Company and the Investment Manager.

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 42

ANNUAL REPORT 202243

Corporate Governance Report | GOVERNANCE

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

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, including the control systems

in operation in so far as they relate to the affairs of the Company.

The Board continues to have regular face-to-face meetings with all key service providers.

Stakeholders and Section 172

Whilst only directly applicable to UK domiciled companies, the intention of the AIC Code is that matters set out in section 172 of the UK Companies

Act, 2006 are reported. The following disclosures offer some insight into how the Board uses its meetings as a mechanism for discharging its duties

under Provision 5 of the AIC Code, including the breadth of matters it discussed and debated during the year and the key stakeholder groups that

were central to those discussions. The Board’s commitment to maintaining the high-standards of corporate governance recommended in the AIC

Code, combined with the directors’ duties enshrined in Company law, the constitutive documents, the Disclosure Guidance and Transparency Rules,

and Market Abuse Regulation, ensures that shareholders are provided with frequent and comprehensive information concerning the Company and

its activities via the Company’s website and Regulatory Information Service (“RIS”) announcements on the London Stock Exchange such as 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 the Administrator, market update from the Broker, portfolio performance from the

Investment Manager, with regulatory and governance updates from the Company Secretary and where required, a detailed deep dive into an area

of particular strategic importance or concern. Through oversight and control, 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 decision-making process the

interests of all stakeholders. Particular consideration being given to the continued alignment between the activities of the Company and those that

contribute to delivering the Board’s strategy, which include the Investment Manager, Administrator, and the Company Secretary.

The Annual Report, Key Information Documents and quarterly fact sheets 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 via a Regulatory Information Service

of the net asset value of the Company’s Ordinary Shares, Extended Life Shares and New Global Shares. All documents issued by the Company can

be viewed on the Company’s website at www.nbddif.com.

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.

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 43

44NB DISTRESSED DEBT INVESTMENT FUND LIMITED

GOVERNANCE | Corporate Governance Report

Corporate Governance Report (continued)

2023 AGM

The 2023 AGM will be held in Guernsey on 28 June 2023. The notice for the AGM will set out the ordinary and special resolutions to be proposed

at the meeting. Separate resolutions are proposed for each substantive issue. 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 address given on page 96.

Voting on all resolutions at the AGM will be 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 Company’s website and announced via a Regulatory Information Service. Where a significant

number of votes have been lodged against a proposed resolution (being greater than 20%), in accordance with the AIC Code published in February

2019, it is the Board’s policy that the Board will identify those shareholders and further understand their views to address the concerns of the

Company’s shareholders. No significant votes were cast against the resolutions proposed at the 2022 AGM.

Board Meetings

The Board meets at least four times a year. Certain matters are considered at all Board meetings including Portfolio composition and asset

realisation strategy, capital repayments and income distributions by way of dividend, NAV and share price performance 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, where applicable reports are received from Board committees.

Directors unable to attend a board meeting are provided with the board papers and can discuss issues arising in an informal meeting with the

Chairman or another non-executive Director.

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 shareholder engagement and the reports produced by each key service provider, the

Directors are satisfied that sufficient information is provided so as to ensure such matters are taken into consideration as part of the Board’s

decision-making process.

Attendance at scheduled meetings of the Board and its committees in the 2022 financial year

MANAGEMENT INSIDE

AUDIT ENGAGEMENT REMUNERATION INFORMATION

BOARD COMMITTEE COMMITTEE COMMITTEE COMMITTEE

Number of meetings during the year 4 4 1 1 1

John Hallam 4 1 1 1

Christopher Legge 4 4 1 1 1

Michael Holmberg 4 1

Stephen Vakil 4 4 1 1 1

In addition to these meetings, 2 ad-hoc board and board committee meetings were held during the year for various matters, primarily of an

administrative nature. These meetings were attended by those Directors available at the time.

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 44

ANNUAL REPORT 202245

Corporate Governance Report | GOVERNANCE

Board Committees

The Board has established an Audit Committee, Management Engagement Committee, Remuneration Committee and an Inside Information

Committee with defined terms of reference and duties. Further details of these committees can be found in their reports on pages 46 to 52. The

terms of reference for each committee can be found on the Company’s website at www.nbddif.com.

The Board feels that due to the size and structure of the Company, establishing a Nomination Committee is unnecessary and that the Board as

awhole will consider matters relating to appointment of Directors.

For and on behalf of the Board

John Hallam Christopher Legge

Chairman Director

26 April 2023 26 April 2023

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 13:00 Page 45

46NB DISTRESSED DEBT INVESTMENT FUND LIMITED

GOVERNANCE | Audit Committee Report

Membership

Christopher Legge – Chairman (Independent non-executive Director)

Stephen Vakil (Senior Independent non-executive Director)

Key Objectives

The Audit Committee aims to ensure 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 controls and business

risks.

Responsibilities

• reviewing the Company’s financial results announcements and 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 and

practices;

• advising the Board on whether the Audit Committee believes the Annual Report and Financial Statements, taken as a whole, is fair, balanced

and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and

strategy;

• overseeing the relationship with the external auditor;

• considering the financial and other implications of the independence of the auditors arising from any non-audit services to be provided by

the auditor;

• reviewing the effectiveness of the Company’s risk management framework, taking into account the reports on the internal controls of the

Company’s service providers;

• considering the nature and extent of the significant risks the Company faces in achieving its strategic objectives; and

• compiling a report on the Audit Committee’s activities to be included in the Company’s Annual Report.

Audit Committee Meetings

The Audit Committee meets at least three times a year with only its members and the Audit Committee Secretary having the right to attend.

However, other Directors and representatives of the Investment Manager and Administrator will be invited to attend such meetings on a regular

basis and other non-members may be invited to attend all or part of the meeting as and when appropriate and necessary. The Company’s

independent auditor, KPMG Channel Islands Limited (“KPMG”), is also invited on a regular basis.

The Audit Committee determines, in conjunction with KPMG, whether it is necessary for it to meet the auditors without the Investment Manager

or other service providers being present.

Main Activities during the year

The Audit Committee assisted the Board in carrying out its responsibilities in relation to financial reporting requirements, risk management and the

assessment of internal controls. It also manages the Company’s relationship with the external auditor. Meetings of the Committee generally take

place prior to a Company Board meeting. The Audit Committee reports to the Board as part of a separate agenda item on its activities and matters

of particular relevance to Board members in the conduct of their work.

Audit Committee Report

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 46

ANNUAL REPORT 202247

Audit Committee Report | GOVERNANCE

The Board requested that the Audit 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 and

the Audit Committee confirmed this to be the case.

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

At its four meetings during the year, the Committee focused on:

Financial Reporting

The primary role of the Audit Committee in relation to financial reporting is to review with the Investment Manager, Administrator and the external

auditor the appropriateness of the 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 have been applied or there has been discussion with the external auditor;

• the viability of the Company, taking into account the principal and emerging risks it faces;

• whether the Annual Report and Financial Statements, 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 financial reporting.

To aid its review, the Audit Committee considered reports from the Investment Manager, Administrator, Sub-Administrator, Company Secretary and

also reports from the external auditor on the outcomes of their half-year review and annual audit.

The members of the Audit Committee had meetings with KPMG, where their findings in respect of both the Interim Review and the Annual Audit

were reported.

Significant Issues

In relation to the Annual Report and Financial Statements for the year ended 31 December 2022, the significant issue considered by the Audit

Committee was the valuation of the Company’s investments.

The Committee received a report from the Investment Manager on the valuation of the Portfolios and on the assumptions used in valuing the

Portfolios. It analysed the investment Portfolios of the Company in terms of investment mix, fair value hierarchy and valuation and held detailed

discussions with the Investment Manager regarding the methodology and procedures used in valuing the Portfolios.

The Committee discussed in depth with KPMG their approach to testing the appropriateness and robustness of the valuation methodology applied

by the Investment Manager to the Company’s Portfolios. KPMG did not report any significant differences between the valuations used by the

Company and the results of the work performed during their testing process. Based on their above review and analysis the Audit Committee

confirmed that it is satisfied with the valuation of the investments.

Internal Controls and Risk Management

The Audit Committee has established a process for identifying, evaluating and managing any major risks faced by the Company. The process is

subject to regular review by the Board and accords with the AIC Code.

The Audit Committee has overall responsibility for the Company’s system of internal financial and operating controls and for reviewing its

effectiveness. However, such a 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 Board has undertaken a full review of the Company’s business risks, which have been analysed and recorded in a risk matrix, which is updated

regularly and is formally reviewed at each quarterly Board meeting. The Board receives, each quarter, a formal report from the Investment Manager

which details the steps taken to monitor and manage 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.

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 47

48NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Main Activities during the Year (continued)

Internal Controls and Risk Management (continued)

The Company itself does not have an internal audit function, but instead relies on the internal audit functions and departments of the Investment

Manager. The Committee was satisfied that this function provided significant control to help mitigate the risks to the Company.

In addition, the Audit Committee annually receives and reviews Internal Controls reports from independent sources, in respect of the Administrator,

Sub-Administrator, Registrar, Custodian and Investment Manager.

The Investment Manager has established an internal control framework to provide reasonable but not absolute assurance on the effectiveness of

the internal controls operated on behalf of its clients. The effectiveness of the internal controls is assessed by the Investment Manager’s compliance

and risk department on an ongoing basis.

The Board’s assessment of the Company’s principal risks is set out on pages 24 to 25.

By means of the procedures set out above, the Audit Committee confirms that it has reviewed the effectiveness of the Company’s system of internal

controls for the year ended 31 December 2022 and to the date of approval of this Annual Report and that no concerns have been noted.

External Audit

The effectiveness of the external audit process is dependent on appropriate audit risk identification at the start of the audit cycle. The Audit

Committee received a detailed audit plan from KPMG, identifying their assessment of these significant risks. For the 2022 financial year the

significant risk identified was in relation to the valuation of investments. This risk is tracked through the year and the Committee has considered

the work done by the auditor to challenge management’s assumptions and estimates around these areas. The Committee has assessed the

effectiveness of the audit process in addressing these matters through the reports received from KPMG at both the half-year and year end. In

addition, the Committee has sought feedback from the Investment Manager, the Administrator and Sub-administrator on the effectiveness of the

audit process. For the 2022 financial year the Committee is satisfied that there had been appropriate focus and challenge on the primary areas of

audit risk and assessed the quality of the audit process to be appropriate.

The Audit Committee considers the re-appointment of the external auditor, including the rotation of the audit partner, and assesses their

independence on an annual basis. The external auditor is required to rotate the audit partner responsible for the Company audit every five years.

The Company’s current audit partner, Barry Ryan, took over the role as lead audit engagement partner in 2019.

KPMG has been the Company’s external auditor since its stock exchange listing in 2010 (12 years). The Company has not formally tendered the

audit since then. The Audit Committee would normally consider putting the Company’s audit out to tender at least every ten years (with the

maximum duration of a continuous audit engagement being twenty years) and has given consideration to doing so this coming year. However it

concluded that, given the current expectation of the wind down of the Company share classes, it was not in the best interests of the Company to

do so.

In its assessment of the independence of the auditor, the Audit Committee receives details of any relationships between the Company and KPMG

that may have a bearing on their independence and receives confirmation from them that they are independent of the Company.

The Audit Committee approved the fees for audit services for 2022 after a review of the level and nature of work to be performed. The Board was

satisfied 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 from becoming compromised, the Audit Committee has a policy governing

the engagement of the external auditor to provide non-audit services. The Committee made amendments to this policy in April 2023 and follows

the certain provisions of the FRC’s Revised Ethical Standard 2019 relating to non-audit services as it applies to public interest entities. The Audit

Committee must be advised by the commissioning entity/person, and by the audit firm, of all assignments undertaken by the external auditors that

fall within the pre-approved categories as soon as practicable.

All non-audit services require prior approval by the Audit Committee. In respect of each calendar year the Audit Committee monitors the provision

of non-audit services by receiving at least half yearly a list of the non-audit services provided (and expected to be provided) by the external auditor

in that calendar year, and the fees involved, so that the Audit Committee can consider the impact on auditors’ objectivity. The Audit Committee’s

policy on the Independence of External Auditor (including the provision of non-audit services) is available on its website at www.nbddif.com.

GOVERNANCE | Audit Committee Report

Audit Committee Report (continued)

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 48

ANNUAL REPORT 202249

Auditor’s Remuneration

31 DECEMBER 2022

£

Audit (Guernsey) 183,300

Audit related services (review of interim report) (Guernsey) 37,500

Total 220,800

Appointment and Independence

The Audit Committee has therefore recommended to the Board that KPMG be reappointed as external auditor for the year ended 31 December

2023, and to authorise the Directors to determine their remuneration. Accordingly, a resolution proposing the reappointment of KPMG as the

Company’s auditor will be put to the shareholders at the 2023 AGM on 28 June 2023.

There are no contractual obligations restricting the Committee’s choice of external auditor and the Company does not indemnify the external

auditor.

The Committee’s activities formed part of the Board evaluation performed in the year. Details of this process can be found under “Performance

evaluation” on page 41. The Committee was satisfied that it had undertaken its duties efficiently and effectively.

Christopher Legge

On behalf of the Audit Committee

26 April 2023

Audit Committee Report | GOVERNANCE

NB DISTRESSED DEBT AR pp31-49.qxp 27/04/2023 12:43 Page 49

GOVERNANCE | Management Engagement Committee Report

50NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Management Engagement Committee Report

Membership

Stephen Vakil – Chairman (Senior Independent non-executive Director)

John Hallam (Chairman of the Company and Independent non-executive Director)

Christopher Legge (Independent non-executive Director)

Key Objectives

To review performance of all service providers (including the Investment Manager).

Responsibilities

• To review annually 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 Manager Agreement (“IMA”);

• To review the performance of, and contractual arrangements with the Investment Manager including:

– Monitor and evaluate the Investment Manager’s performance and, if necessary, provide appropriate guidance;

– To consider whether an independent appraisal of the Investment Manager’s services should be made;

– To review the level and method of remuneration and notice period, using peer group comparisons (where available); and

– To ensure that the Investment Manager has a sound system of risk management and internal controls and that these are maintained

to safeguard shareholders’ investment and the Company’s assets.

Committee Meetings

Only members of the Management Engagement Committee and the Secretary have the right to attend Committee meetings. However,

representatives of the Investment Manager and Administrator may be invited by the Committee to attend meetings as and when appropriate.

Main Activities during the year

The Management Engagement Committee met once during the year and reviewed performance, standard and value for money of the Company’s

service providers and the Investment Manager. The Management Engagement Committee reviewed the contractual terms, disaster recovery and

business continuity arrangements, information security arrangements, details of anti-bribery and corruption policies, anti-facilitation of tax evasion

policies, and the level of professional indemnity insurance of all service providers as at 15 November 2022, including the Investment Manager.

The Management Engagement Committee reviewed the Terms of Reference for the Committee and considered that they remained appropriate.

Continued Appointment of the Investment Manager and Other Service Providers

The Board reviews investment performance at each Board meeting and the performance of the Company’s service providers are reviewed annually

as part of the Management Engagement Committee’s annual review.

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 50

Management Engagement Committee Report | GOVERNANCE

Taking into consideration supplementary guidance issued by the AIC in 2020 which described certain measures by which investment companies

may assess the relationship with the manager, in November 2022 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.

As a result of the 2022 annual review it is the opinion of the Directors that the continued appointment of the current service providers, including

the Investment Manager, on the terms agreed is in the best interests of the Company’s shareholders as a whole. The Investment Manager has

extensive investment management resources and wide experience in managing portfolios of distressed investments.

Stephen Vakil

On behalf of the Management Engagement Committee

26 April 2023

ANNUAL REPORT 202251

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 51

52NB DISTRESSED DEBT INVESTMENT FUND LIMITED

GOVERNANCE | Inside Information Committee Report

Inside Information Committee Report

Membership

John Hallam (Chairman of the Company and Independent non-executive Director)

Michael Holmberg (non-executive Director)

Christopher Legge (Independent non-executive Director)

Stephen Vakil (Senior Independent non-executive Director)

Key Objectives

To identify inside information and monitor the disclosure and control of inside information.

Responsibilities

• Identify inside information as it arises;

• Review and prepare project insider lists as required; and

• Consider the need to announce or to delay the announcement of inside information.

Committee Meetings

Only members of the Inside Information Committee and the Secretary have the right to attend Inside Information Committee meetings. However,

representatives of the Investment Manager and Administrator may be invited by the Inside Information Committee to attend meetings as and when

appropriate.

Main Activities During the year

The Inside Information Committee met on 24 February 2022 and the Inside Information Committee reviewed its Terms of Reference, the Company’s

policies and procedures for inside information and personal dealing. There was no update made on the Inside Information Committee’s terms of

reference in 2022 and it was agreed that the policies and procedures remained relevant and accurate.

There were no delays to the disclosure of information during the year.

John Hallam

On behalf of the Inside Information Committee

26 April 2023

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 52

ANNUAL REPORT 202253

Remuneration Committee Report | GOVERNANCE

Remuneration Committee Report

Membership

Stephen Vakil – Chairman (Senior Independent non-executive Director)

John Hallam (Chairman of the Company and Independent non-executive Director)

Christopher Legge (Independent non-executive Director)

Key Objectives

To review the ongoing appropriateness and relevance of the Company’s remuneration policy.

Responsibilities

• Determine the remuneration of the Directors;

• Prepare an Annual Report on Directors’ remuneration;

• Consider the need to appoint external remuneration consultants; and

• Oversee the performance evaluation of the Board; its committees and individual directors.

Committee Meetings

Only members of the Remuneration Committee and the Secretary have the right to attend Remuneration Committee meetings. However,

representatives of the Investment Manager and Administrator may be invited by the Remuneration Committee to attend meetings as and when

appropriate.

Main Activities During the year

The Remuneration Committee met once during the year and reviewed the Directors’ remuneration. The Remuneration Committee’s terms of

reference were updated during the year and can be found on the Company’s website www.nbddif.com.

The Remuneration Committee considered the Directors’ Remuneration and agreed that the current policy remained appropriate.

A detailed Directors’ Remuneration report to shareholders from the Remuneration Committee is contained on pages 54 to 56.

Stephen Vakil

On behalf of the Remuneration Committee

26 April 2023

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 53

54NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Directors’ Remuneration Report

GOVERNANCE | Directors’ Remuneration Report

Annual Statement

The following report describes how the Board has applied the principles relating to Directors’ remuneration. An ordinary resolution to ratify this

report will be proposed at the AGM to be held on 28 June 2023.

Directors’ Fees

The Company paid the following fees to the Directors for the year ended 31 December 2022: These fees have remained unchanged since 2014.

TOTAL BOARD FEES TOTAL BOARD FEES

ROLE ($) (£)

John Hallam Chairman 60,000 10,000

Michael Holmberg

1

non-executive Director – –

Christopher Legge non-executive Director and Chairman of the Audit Committee 50,000 10,000

Stephen Vakil non-executive Director, Chairman of the Remuneration Committee

and Chairman of Management Engagement Committee 45,000 10,000

Total 155,000 30,000

The Company paid the following fees to the Directors for the year ended 31 December 2021:

TOTAL BOARD FEES TOTAL BOARD FEES

ROLE ($) (£)

John Hallam Chairman 60,000 10,000

Michael Holmberg

1

non-executive Director – –

Christopher Legge non-executive Director and Chairman of the Audit Committee 50,000 10,000

Stephen Vakil non-executive Director, Chairman of the Remuneration Committee

and Chairman of Management Engagement Committee 45,000 10,000

Total 155,000 30,000

1 Michael Holmberg has waived his right to Director fees.

No other remuneration was paid or payable by the Company during the year to any of the Directors (2021: $Nil).

Remuneration Policy

The determination of the Directors’ fees is a matter dealt with by the Board. The Board considers the remuneration policy annually to ensure that

it remains appropriately positioned. The Board reviewed the fees paid to the boards of similar investment companies. No Director is involved in

decisions relating to his or her own remuneration.

No Director has a service contract with the Company and Director appointments may be terminated at any time 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.

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 54

ANNUAL REPORT 202255

Directors’ Remuneration Report | GOVERNANCE

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 spent by the Board on the Company’s affairs and the responsibilities borne by the

Directors and should be sufficient to enable high calibre candidates to be recruited. The policy is for the Chairman of the Board and Chairman of

the Audit Committee to be paid a higher fee than the other Directors in recognition of their more onerous roles and additional time spent

performing their duties. The Board may amend the level of remuneration paid within the limits of the Company’s Articles. In 2017, the remuneration

policy needed to be reviewed by attributing the company as a whole to the individual share classes. The aggregate remuneration for each director

has not changed since 2014.

The remuneration policy reflects the changing status of the Company as the existing Portfolios are realised as follows:

COMPANY FEE NBDD FEE NBDX FEE NBDG FEE TOTAL TOTAL

(USD) (USD) (USD) (GBP) (USD) (GBP)

Chairman 40,000 10,000 10,000 10,000 60,000 10,000

Audit Committee Chairman 30,000 10,000 10,000 10,000 50,000 10,000

Other Directors 25,000 10,000 10,000 10,000 45,000 10,000

Directors’ Fees Policy

MAXIMUM POTENTIAL PERFORMANCE

OBJECTIVE OPERATION VALUE METRICS USED

Service Contracts and Policy on Payment of Loss of Office

The Directors’ appointments are not subject to any duration or limitation. Any Director may resign in writing at any time. 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.

As detailed on page 39, all of the independent non-executive Directors are re-elected at the first AGM after their appointment and are then subject

to annual re-election. The names and biographies of the Directors holding offices at the date of this report are listed on page 31.

To recognise time spent and the

responsibilities borne and to

attract high calibre candidates

who have the necessary

experience and skills.

Directors’ fees are set by the

Board.

Annual fees are paid quarterly in

arrears.

Fees are reviewed annually and

against those for Directors in

companies of similar scale and

complexity.

Fees were last reviewed on

15November 2022.

Directors do not receive benefits

and do not participate in any

incentive or pension plans.

Current fee levels are shown in

the remuneration report.

Directors are not remunerated

based on performance and are

not eligible to participate in any

performance related arrangements.

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 55

56NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Directors’ Remuneration Report (continued)

GOVERNANCE | Directors’ Remuneration Report

Dates of Directors’ Letters of Appointment

Copies of the Directors’ letters of appointment are available for inspection by shareholders at the Company’s Registered Office and will be available

at the AGM. The dates of their letter of appointments are shown below.

DATE OF LETTER OF APPOINTMENT

John Hallam 20 April 2010 (amended on 8 May 2018)

Michael Holmberg 20 April 2010 (amended on 22 August 2018)

Stephen Vakil 5 February 2016 (amended on 8 May 2018)

Christopher Legge 12 April 2018

Directors’ Interests

The Company has not set any requirements or guidelines for Directors to own shares in the Company. The beneficial interests of the Directors and

their connected persons in the Company’s shares at 31 March 2023 are shown in the table below:

NO. OF ORDINARY NO. OF EXTENDED NO. OF NEW TOTAL NO.

DIRECTOR SHARES LIFE SHARES GLOBAL SHARES OF SHARES

John Hallam – 55,048 37,312 92,360

Michael Holmberg – 24,304 39,008 63,312

Christopher Legge – – – –

Stephen Vakil – – 20,353 20,353

Advisors to the Remuneration Committee

The Remuneration Committee has not sought the paid advice or professional services by any outside person in respect of its consideration of the

Directors’ remuneration. The Remuneration Committee sought input from Neuberger Berman Europe Limited (“NBEL”) and the Brokers during its

deliberations of the remuneration policy.

Stephen Vakil

On behalf of the Remuneration Committee

26 April 2023

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 56

ANNUAL REPORT 202257

Statement of Directors’ responsibilities in respect of the Annual Report

and the Financial Statements

Directors’ Responsibilities Statement | GOVERNANCE

The directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the

financial statements in accordance with accounting principles generally accepted in the United States of America and applicable law.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state

of affairs of the Company and of its profit or loss for that period. In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable, relevant and reliable;

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the

financial statements;

• assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

• use the going concern basis of accounting unless liquidation is imminent.

The directors confirm that they have complied with the above requirements in preparing the financial statements.

The directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company’s transactions and disclose

with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with

the Companies (Guernsey) Law, 2008. They are responsible for such internal control as they determine is necessary to enable the preparation of

financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps

as are reasonably open to them to safeguard the assets of the Company and to prevent and detect 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 2022

as the parent of the Group in accordance with Section 244(5) of the Law.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.

Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The

directors who hold office at the date of approval of this Director’s Report confirm that so far as they are aware, there is no relevant audit

information of which the Company’s auditor is unaware, and that each Director has taken all the steps they ought to have taken as a director to

make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.

Responsibility statement of the directors in respect of the Annual Report

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,

liabilities, financial position and profit or loss of the Group; and

• the Annual Report includes a fair review of the development and performance of the business and the position of the issuer, together with

a description of the principal risks and uncertainties that they face.

We consider the Annual Report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for

shareholders to assess the Company’s position and performance, business model and strategy.

John Hallam Christopher Legge

Chairman Director

26 April 2023 26 April 2023

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 57

58NB DISTRESSED DEBT INVESTMENT FUND LIMITED

GOVERNANCE | Independent Auditor’s Report

Independent Auditor’s Report

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Our opinion is unmodified

We have audited the consolidated financial statements of NB Distressed Debt Investment Fund Limited (the “Company”) and its subsidiaries

(together, the “Group”), which comprise the consolidated statement of assets and liabilities including the consolidated condensed schedule of

investments as at 31 December 2022, the consolidated statements of operations, changes in net assets and cash flows for the year then ended,

and notes, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements:

• give a true and fair view of the financial position of the Group as at 31 December 2022, and of the Group’s financial performance and cash

flows for the year then ended;

• are prepared in accordance with U.S. generally accepted accounting principles; and

• comply with the Companies (Guernsey) Law, 2008.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are

described below. We have fulfilled our ethical responsibilities under, and are independent of the Company and Group in accordance with, UK

ethical requirements including the FRC Ethical Standard as required by the Crown Dependencies’ Audit Rules and Guidance. We believe that the

audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

Key audit matters: our assessment of the risks of material misstatement

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated financial

statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those

which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement

team. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion

thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matter was as follows

(unchanged from 2021):

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 58

ANNUAL REPORT 202259

Independent Auditor’s Report | GOVERNANCE

The risk Our response

Valuation of Investments at fair

value (“Investments”)

$73,743,616; (2021 $104,424,384)

Refer to the Audit Committee Report

(page 47), the Consolidated Condensed

Schedule of Investments on page 68, Note 2

Summary of Accounting Policies and note 2(f)

Fair Value of Financial Instruments.

Basis:

The Group’s investment portfolio is carried at

fair value in accordance with US generally

accepted accounting principles. It represents a

significant proportion (78% (2021; 87%)), and

is the principal driver, of the Group’s net asset

value.

The Group’s holdings in quoted and unquoted

equity and debt investments, representing

37% of the fair value of investments, are

valued at their bid price using broker quotes

(including use of single broker quotes) or third

party pricing service providers (the “Price

Quotes”).

Where no Price Quotes are available or they

may not be representative of fair value, the

Group will utilise the resources of the

Investment Manager to augment its own fair

value analysis to determine the most

appropriate fair value for such investments

(the “Internally Generated Valuations”).

63% of the fair value of Investments were

valued using Internally Generated Valuations.

Risk:

The valuation of the Group’s investments is

considered a significant area of our audit,

given that it represents the majority of the net

assets of the Group.

The valuation risk for both the Internally

Generated Valuations and single broker

quoted investment valuations incorporate both

a risk of fraud and error given the significance

of estimates and judgments that may be

involved in the determination of fair value.

Our audit procedures included:

Control evaluation:

We assessed the design and implementation

of the control in place over the valuation of

Investments.

Challenging managements’

assumptions and inputs including use

of KPMG valuation specialists:

For Investments where market quotes were

available, we obtained prices from third party

data sources and pricing vendors. We assessed

their reliability through checking the frequency

of the pricing, the number of independent

quotes available and the range of the quoted

prices, in order to derive an independent

reference price.

For Internally Generated Valuations and single

broker quoted investments, we performed, as

applicable, the following procedures with the

support of our KPMG valuation specialists:

• We assessed the appropriateness of the

valuation approach and methodology

applied to each investment and where

relevant, derived an independent

reference price;

• We compared the assumptions used in

the valuation to observable market

data or supporting documentation;

• We corroborated significant inputs used

to supporting documentation; and

• We assessed the effect of the investee

entity’s financial performance upon the

fair value.

Assessing disclosures:

We also considered the Group’s disclosures

(Note 2(b)) in relation to the use of estimates,

the Group’s valuation of investments policies

(Note 2(f)) and fair value of financial

instruments (Note 2(f)) for compliance with

USgenerally accepted accounting principles.

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 59

60NB DISTRESSED DEBT INVESTMENT FUND LIMITED

GOVERNANCE | Independent Auditor’s Report

Independent Auditor’s Report (continued)

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF NB DISTRESSED DEBT INVESTMENT FUND LIMITED

(CONTINUED)

Our application of materiality and an overview of the scope of our audit

Materiality for the consolidated financial statements as a whole was set at $1,900,000, determined with reference to a benchmark of group net

assets of $95,146,739, of which it represents approximately 2.0% (2021: 2.0%).

In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold,

performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances

add up to a material amount across the financial statements as a whole. Performance materiality for the Group was set at 75% (2021: 75%) of

materiality for the financial statements as a whole, which equates to $1,425,000. We applied this percentage in our determination of performance

materiality because we did not identify any factors indicating an elevated level of risk.

We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding $95,000, in addition to other identified

misstatements that warranted reporting on qualitative grounds.

Our audit of the Group was undertaken to the materiality level specified above, which has informed our identification of significant risks of material

misstatement and the associated audit procedures performed in those areas as detailed above.

The group team performed the audit of the Group as if it was a single aggregated set of financial information. The audit was performed using the

materiality level set out above and covered 100% of total Group net increase in net assets resulting from operations and total Group assets and

liabilities.

Going concern

The directors have prepared the consolidated financial statements on the going concern basis as they do not intend to liquidate the Group or the

Company or to cease their operations, and as they have concluded that the Group and the Company’s financial position means that this is realistic.

They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going

concern for at least a year from the date of approval of the consolidated financial statements (the “going concern period”).

In our evaluation of the directors’ conclusions, we considered the inherent risks to the Group and the Company’s business model and analysed how

those risks might affect the Group and the Company’s financial resources or ability to continue operations over the going concern period. The risks

that we considered most likely to affect the Group and the Company’s financial resources or ability to continue operations over this period was

availability of capital to meet operating costs and other financial commitments.

We considered whether this risk could plausibly affect the liquidity in the going concern period by comparing severe, but plausible downside

scenarios that could arise from this risk against the level of available financial resources indicated by the Company’s financial forecasts.

We considered whether the going concern disclosure in note 2(a) to the financial statements gives a full and accurate description of the directors’

assessment of going concern.

Our conclusions based on this work:

• we consider that the directors’ use of the going concern basis of accounting in the preparation of the consolidated financial statements is

appropriate;

• we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions

that, individually or collectively, may cast significant doubt on the Group and the Company’s ability to continue as a going concern for the

going concern period; and

• we found the going concern disclosure in the notes to the consolidated financial statements to be acceptable.

However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with

judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group and the Company will

continue in operation.

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 60

ANNUAL REPORT 202261

Independent Auditor’s Report | GOVERNANCE

Fraud and breaches of laws and regulations – ability to detect

Identifying and responding to risks of material misstatement due to fraud

To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure

to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:

• enquiring of management as to the Group’s policies and procedures to prevent and detect fraud as well as enquiring whether management

have knowledge of any actual, suspected or alleged fraud;

• reading minutes of meetings of those charged with governance; and

• using analytical procedures to identify any unusual or unexpected relationships.

As required by auditing standards, and taking into account possible incentives or pressures to misstate performance and our overall knowledge of

the control environment, we perform procedures to address the risk of management override of controls, in particular the risk that management

may be in a position to make inappropriate accounting entries, and the risk of bias in accounting estimates such as valuation of single broker

quoted investments and Internally Generated Valuations.

On this audit we do not believe there is a fraud risk related to revenue recognition because the Group’s revenue streams are simple in nature with

respect to accounting policy choice, and are easily verifiable to external data sources or agreements with little or no requirement for estimation

from management. We did not identify any additional fraud risks.

We performed procedures including:

• identifying journal entries and other adjustments to test based on risk criteria and comparing any identified entries to supporting

documentation;

• incorporating an element of unpredictability in our audit procedures; and

• assessing significant accounting estimates for bias.

Further detail in respect of valuation of single broker quoted investments and Internally Generated Valuations is set out in the key audit matter

section of in this report.

Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the consolidated financial statements

from our general commercial and sector experience and through discussion with management (as required by auditing standards), and from

inspection of the Group’s regulatory and legal correspondence, and discussed with management the policies and procedures regarding compliance

with laws and regulations. As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment

including the entity’s procedures for complying with regulatory requirements.

The Group is subject to laws and regulations that directly affect the consolidated financial statements including financial reporting legislation and

taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial

statement items.

The Group is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or

disclosures in the consolidated financial statements, for instance through the imposition of fines or litigation or impacts on the Group and the

Company’s ability to operate. We identified financial services regulation as being the area most likely to have such an effect, recognising the

regulated nature of the Group’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with

these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of

operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 61

62NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Independent Auditor’s Report (continued)

GOVERNANCE | Independent Auditor’s Report

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF NB DISTRESSED DEBT INVESTMENT FUND LIMITED

(CONTINUED)

Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the

consolidated financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For

example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the consolidated financial

statements, the less likely the inherently limited procedures required by auditing standards would identify it.

In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions,

misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible

for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report but does not

include the 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 an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information 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.

We have nothing to report on other matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our

opinion:

• the Company has not kept proper accounting records; or

• the consolidated financial statements are not in agreement with the accounting records; or

• we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of

our audit.

Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page 57, the directors are responsible for: the preparation of the consolidated financial

statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the

preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and

Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis

of accounting unless liquidation is imminent.

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 62

ANNUAL REPORT 202263

Independent Auditor’s Report | GOVERNANCE

Auditor’s responsibilities

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 our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but

does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements

can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the

economic decisions of users taken on the basis of the consolidated financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

The purpose of this report and restrictions on its use by persons other than the Company’s members, as a body

This report is made solely to the Company’s members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008. Our

audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s

report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the

Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Barry Ryan

For and on behalf of KPMG Channel Islands Limited

Chartered Accountants and Recognised Auditors

Guernsey

26 April 2023

NB DISTRESSED DEBT AR pp50-63.qxp 27/04/2023 12:43 Page 63

FINANCIAL STATEMENTS | Consolidated Statement of Assets and Liabilities

64NB DISTRESSED DEBT INVESTMENT FUND LIMITED

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

Consolidated Statement of Assets and Liabilities

AS AT 31 DECEMBER 2022 AND 31 DECEMBER 2021

(EXPRESSED IN US DOLLARS EXCEPT WHERE STATED OTHERWISE) 31 DECEMBER 2022 31 DECEMBER 2021

Assets

Investments at fair value (2022: cost of $103,009,846; 2021: cost of $134,070,747) 73,743,616 104,424,384

Forward currency contracts 12,018 496,027

Total Return Swaps (2022: cost of $Nil, 2021: cost of $Nil) 1,558,420 –

Cash and cash equivalents 8,733,589 4,370,854

Restricted Cash:

Forward currency contracts Collateral 90,000 –

Total return swap Collateral 10,970,000 10,970,000

95,107,643 120,261,265

Other assets

Interest receivables 596,024 671,859

Receivables for investments sold 498,514 340,974

Other receivables and prepayments 72,304 75,818

Withholding tax receivable 445,762 445,762

Total assets 96,720,247 121,795,678

Liabilities

Credit default swap (2022: cost of $16,821; 2021: cost of $37,783) 21,494 33,603

Total return swap (2022: cost of $Nil: 2021: cost of $Nil) – 875,121

Forward currency contracts 1,269,365 86,200

Accrued expenses and other liabilities 282,649 246,609

Total liabilities 1,573,508 1,241,533

Net assets 95,146,739 120,554,145

Net assets attributable to Ordinary Shares (shares 2022: 15,382,770;

2021: 15,382,770) 11,890,321 13,887,833

Net asset value per Ordinary Share 0.7730 0.9028

Net assets attributable to Extended Life Shares (shares 2022: 60,116,016;

2021: 80,545,074) 58,477,990 74,450,993

Net asset value per Extended Life Share 0.9728 0.9243

Net assets attributable to New Global Shares (shares 2022: 31,023,609;

2021: 41,116,617) £20,598,909 £23,784,798

Net asset value per New Global Share £0.6640 £0.5785

Net assets attributable to New Global Shares (USD equivalent) 24,778,428 32,215,319

Net asset value per New Global Share (USD equivalent) 0.7987 0.7835

The Financial Statements were approved and authorised for issue by the Board of Directors on 26 April 2023, and signed on its behalf by:

John Hallam Christopher Legge

Chairman Director

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 64

Consolidated Statement of Operations | FINANCIAL STATEMENTS

ANNUAL REPORT 202265

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

Consolidated Statement of Operations

FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021

(EXPRESSED IN US DOLLARS) 31 DECEMBER 2022 31 DECEMBER 2021

Income

Interest income 8,496,913 5,374,256

Dividend income net of withholding tax (2022: $Nil; 2021: $15,600) – 157,227

8,496,913 5,531,483

Expenses

Investment management fee – 342,338

Professional and other expenses 965,699 1,047,333

Administration fee 97,879 105,576

Loan administration and custody fees 24,726 36,919

Directors’ fees and expenses 188,088 196,364

1,276,392 1,728,530

Net investment income 7,220,521 3,802,953

Realised and unrealised gain(loss) from investments and foreign exchange

Net realised (loss)/gain on investments, credit default swap, total return swap and

forward currency transactions 1,585,726 1,924,643

Net change in unrealised gain on investments, credit default swap, total return swap

and forward currency transactions 1,419,108 6,444,590

Income tax expense from net realised/unrealised gain on investments – (47,900)

Realised and unrealised gain from investments and foreign exchange 3,004,834 8,321,333

Net increase in net assets resulting from operations 10,225,355 12,124,286

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 65

FINANCIAL STATEMENTS | Consolidated Statement of Changes in Net Assets

66NB DISTRESSED DEBT INVESTMENT FUND LIMITED

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

31 DECEMBER 31 DECEMBER 31 DECEMBER

2022 2022 2022 31 DECEMBER

FOR THE YEAR ENDED 31 DECEMBER 2022 ORDINARY EXTENDED LIFE NEW GLOBAL 2022

(EXPRESSED IN US DOLLARS) SHARES SHARES SHARES AGGREGATED

Net assets at the beginning of the year 13,887,833 74,450,993 32,215,319 120,554,145

Net investment gain 22,330 4,750,004 2,448,187 7,220,521

Net realised loss on investments, credit default swap and

forward currency transactions (117,445) 2,424,254 (721,083) 1,585,726

Net change in unrealised (loss)/gain on investments, credit

default swap and forward currency transactions (1,902,397) 1,620,364 1,701,141 1,419,108

Dividends – (5,799,245) (2,828,797) (8,628,042)

Shares redeemed during the year – (18,968,380) (8,036,339) (27,004,719)

Net assets at the end of the year 11,890,321 58,477,990 24,778,428 95,146,739

31 DECEMBER 31 DECEMBER 31 DECEMBER

2021 2021 2021 31 DECEMBER

FOR THE YEAR ENDED 31 DECEMBER 2021 ORDINARY EXTENDED LIFE NEW GLOBAL 2021

(EXPRESSED IN US DOLLARS) SHARES SHARES SHARES AGGREGATED

Net assets at the beginning of the year 12,952,965 63,540,650 31,936,244 108,429,859

Net investment (loss)/income (173,210) 2,490,273 1,485,890 3,802,953

Net realised gain on investments, credit default swap and

forward currency transactions 207,422 1,359,269 357,952 1,924,643

Net change in unrealised gain/(loss) on investments, credit

default swap and forward currency transactions 947,129 7,061,760 (1,564,299) 6,444,590

Income taxes from net realised/unrealised gain on investments (46,473) (959) (468) (47,900)

Net assets at the end of the year 13,887,833 74,450,993 32,215,319 120,554,145

Consolidated Statement of Changes in Net Assets

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 66

ANNUAL REPORT 202267

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

Consolidated Statement of Cash Flows | FINANCIAL STATEMENTS

Consolidated Statement of Cash Flows

FOR THE YEAR ENDED 31 DECEMBER 2022 AND 31 DECEMBER 2021

(EXPRESSED IN US DOLLARS) 31 DECEMBER 2022 31 DECEMBER 2021

Cash flows from operating activities:

Net increase in net assets resulting from operations 10,225,355 12,124,286

Adjustment to reconcile net increase/(decrease) in net assets resulting from

operations to net cash flow provided by operations:

Net realised loss/(gain) on investments, credit default swap, total return swap

and forward currency transactions (1,585,726) (1,924,643)

Net change in unrealised gain on investments, credit default swap, total return

wap and forward currency transactions (1,419,108) (6,444,590)

Accretion of discount on loans and bonds 145,689 60,158

Changes in interest receivable 75,835 (412,946)

Changes in receivables for investments sold (157,540) 442,790

Changes in other receivables and prepayments 3,514 (41,946)

Changes in withholding tax receivable – (23,974)

Changes in payables, accrued expenses and other liabilities 36,040 (136,817)

Cash received on settled forward currency contracts and spot currency contracts 1,962,633 727,745

Capitalised payment in kind (2,736,347) (4,387,268)

Purchase of investments

2

(205,537) (569,206)

Sale of investments

2

32,240,146 1,531,900

Sale of short term investments

1

1,606,375 803,247

Net cash provided by operating activities 40,191,329 1,748,736

Cash flows from financing activities:

Shares redeemed during the year (27,004,719) –

Dividend paid (8,628,042) –

Net cash used in financing activities (35,632,761) –

Net increase in cash, cash equivalents and restricted cash 4,558,568 1,748,736

Cash and cash equivalents at the beginning of the year 4,370,854 2,035,320

Restricted cash at the beginning of the year 10,970,000 11,600,000

Effect of exchange rate changes on cash and cash equivalents (105,833) (43,202)

Cash and cash equivalents at the end of the year 8,733,589 4,370,854

Restricted cash at the end of the year 11,060,000 10,970,000

Supplemental cash flow information

There were no reorganisations requiring disclosure in the year to 31 December 2022 (31 December 2021: None).

1 Short term investments are typically sold or converted to cash within 3 to 12 months.

2 Included in these figures is $2,678 (2021: $Nil) of non-cash transactions. These arose due to the repricing and restructuring of certain investments during the

period.

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 67

FINANCIAL STATEMENTS | Consolidated Condensed Schedule of Investments

68NB DISTRESSED DEBT INVESTMENT FUND LIMITED

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

NEW

ORDINARY EXTENDED GLOBAL TOTAL

AS AT 31 DECEMBER 2022 SHARES LIFE SHARES SHARES COMPANY

(EXPRESSED IN US DOLLARS) COST FAIR VALUE (%)

1

(%)

1

(%)

1

(%)

1

Portfolio of Distressed Investments

Bank Debt Investments 45,738,879 27,358,457 – 18.82 65.99 28.75

Private Equity 17,788,092 24,502,057 21.86 28.64 20.81 25.76

Private Note 32,100,083 15,923,291 5.21 21.86 10.17 16.74

Short term Investments

US Treasury Bills 7,382,792 5,959,811 33.95 3.29 – 6.26

Total Investments 103,009,846 73,743,616 61.02 72.61 96.97 77.51

Ordinary Shares 7,085,668 7,255,206 61.02 – – 7.63

Extended Life Shares 59,089,019 42,461,578 – 72.61 – 44.63

New Global Shares 36,835,159 24,026,832 – – 96.97 25.25

103,009,846 73,743,616 61.02 72.61 96.97 77.51

Credit Default Swap

Ordinary Shares (4,715) (6,025) (0.05) – – (0.01)

Extended Life Shares (12,106) (15,469) - (0.03) – (0.02)

(16,821) (21,494) (0.05) (0.03) – (0.03)

Forward Currency Contracts

Assets

Ordinary Shares – 3,953 0.03 – – –

Extended Life Shares – 8,065 – 0.01 – 0.01

– 12,018 0.03 0.01 – 0.01

Liabilities

Ordinary Shares – (231,261) (1.94) – – (0.24)

Extended Life Shares – (1,038,104) – (1.78) – (1.09)

– (1,269,365) (1.94) (1.78) – (1.33)

Total Return Swap

2

Ordinary Shares – 435,022 3.66 – – 0.46

Extended Life Shares – 1,123,398 – 1.91 – 1.18

– 1,558,420 3.66 1.91 – 1.64

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

2 The trade claim was structured through a fully funded total return swap with a major US financial institution. See Note 3.

Consolidated Condensed Schedule of Investments (by financial

instrument)

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 68

Consolidated Condensed Schedule of Investments | FINANCIAL STATEMENTS

ANNUAL REPORT 202269

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

NEW

ORDINARY EXTENDED GLOBAL TOTAL

AS AT 31 DECEMBER 2021 SHARES LIFE SHARES SHARES COMPANY

(EXPRESSED IN US DOLLARS) COST FAIR VALUE (%)

1

(%)

1

(%)

1

(%)

1

Portfolio of Distressed Investments

Bank Debt Investments 73,082,730 50,920,944 0.54 38.05 69.90 42.23

Private Equity 18,791,896 30,956,324 35.15 29.25 13.33 25.68

Private Note 32,766,007 13,642,841 3.54 14.53 7.24 11.32

Short term Investments

US Treasury Bills 9,430,114 8,904,275 35.14 3.59 4.22 7.39

Total Investments 134,070,747 104,424,384 74.37 85.42 94.69 86.62

Ordinary Shares 7,848,086 10,328,077 74.37 – – 8.57

Extended Life Shares 81,311,745 63,592,945 – 85.42 – 52.75

New Global Shares 44,910,916 30,503,362 – – 94.69 25.30

134,070,747 104,424,384 74.37 85.42 94.69 86.62

Credit Default Swap

Ordinary Shares (10,686) (9,504) (0.07) – – –

Extended Life Shares (27,097) (24,099) – (0.03) – (0.02)

(37,783) (33,603) (0.07) (0.03) – (0.02)

Forward Currency Contracts

Assets

Ordinary Shares – 98,226 0.71 – – 0.08

Extended Life Shares – 397,801 – 0.53 – 0.33

– 496,027 0.71 0.53 – 0.41

Liabilities

Ordinary Shares – (22,985) (0.17) – – (0.02)

Extended Life Shares – (63,215) – (0.08) – (0.05)

– (86,200) (0.17) (0.08) – (0.07)

Total Return Swap

2

Ordinary Shares – (244,356) (1.76) – – (0.20)

Extended Life Shares – (630,765) – (0.86) – (0.52)

– (875,121) (1.76) (0.86) – (0.72)

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

2 The trade claim was structured through a fully funded total return swap with a major US financial institution. See Note 3.

Consolidated Condensed Schedule of Investments (by financial

instrument)

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 69

FINANCIAL STATEMENTS | Consolidated Condensed Schedule of Investments

70NB DISTRESSED DEBT INVESTMENT FUND LIMITED

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

Consolidated Condensed Schedule of Investments

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

EXTENDED NEW

31 DECEMBER 2022 ORDINARY LIFE GLOBAL TOTAL

(EXPRESSED IN

FAIR SHARES SHARES SHARES COMPANY

US DOLLARS)

COUNTRY INDUSTRY NOMINAL COST VALUE

(%)

1

(%)

1

(%)

1

(%)

1

Investments at fair value

Package Holdings 1 Luxembourg Containers 11,108,610 – 8,103,345 19.04 9.99 – 8.52

(Private Note) and Packaging

Package Holdings 6 Luxembourg Containers 2,948,481 1,893,980 1,123,710 2.64 1.38 – 1.18

(Private Note) and Packaging

AB Zwolle T/L EUR Netherlands Commercial 19,200,256 14,043,835 10,671,960 – 8.09 23.98 11.22

05/31/2023 (Bank Debt Mortgage

Investments)

US Treasury N/B United United 6,975,000 7,382,792 5,959,811 33.95 3.29 – 6.26

1.500% 02/15/30 States States

(US Treasury Bills)

Buffalo Thunder Dev United Lodging & 14,001,965 11,641,233 7,561,061 – 8.62 10.17 7.95

Auth 11.00% 12/09/29 States Casinos

SR: Regs

(Private Note)

TP Ferro Concesionaria Spain Surface 18,787,735 18,531,522 4,010,242 – 3.44 8.06 4.21

T/L 1L 31/03/2016 Transport

(Bank Debt Investments)

TP Ferro Concesionaria Spain Surface 2,309,778 2,309,778 2,309,778 – 1.97 4.66 2.43

TP Ferro T/L-A (First-Lien) Transport

(Bank Debt Investments)

TP Ferro PIK 5B 7/22 Spain Surface 234,516 234,516 234,516 – 0.20 0.47 0.25

(Bank Debt Investments) Transport

TP Ferro Concesionaria Spain Surface 465,056 527,661 496,331 – 0.42 1.00 0.52

TP Ferro 1L T/L-B EUR Transport

(First-Lien) EUR

(Bank Debt Investments)

TP Ferro PIK 5A 4/20 Spain Surface 409,581 409,581 409,581 – 0.35 0.83 0.43

(Bank Debt Investments) Transport

TP Ferro Concesionaria Spain Surface 201,179 201,179 201,179 – 0.17 0.41 0.21

TP Ferro 1L T/L-C Transport

(First-Lien)

(Bank Debt Investments)

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 70

Consolidated Condensed Schedule of Investments

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

EXTENDED NEW

AS AT 31 DECEMBER 2022 ORDINARY LIFE GLOBAL TOTAL

(EXPRESSED IN

FAIR SHARES SHARES SHARES COMPANY

US DOLLARS)

COUNTRY INDUSTRY NOMINAL COST VALUE

(%)

1

(%)

1

(%)

1

(%)

1

Investments at fair value

White Energy Holding United Oil & Gas 367 9,174,989 11,010,000 – 13.44 12.71 11.57

Company LLC States

(Private Equity)

ACA Fin Guaranty United Financial 66,659,722 10,617,941 4,332,882 5.21 6.35 – 4.55

Corp 12-12/31/2025 Frn States Intermediaries

(Private Note)

ACA Fin Gur Sur Non United Financial 61,989,978 9,840,909 4,029,349 – 6.89 – 4.23

Vt 12-12/31/2025 Frn States Intermediaries

(Private Note)

Hotel Puerta America Spain Lodging & 3,643,760 4,017,977 3,888,803 – – 15.69 4.09

PIK T/L EUR Casinos

(Bank Debt Investments)

Hotel Puerta America Spain Lodging & 934 3,013,332 1,110,956 – – 4.48 1.18

(Private Equity) Casinos

Hotel Puerta America Spain Lodging & 1,090,003 1,281,898 1,163,306 – – 4.69 1.22

PIK PPL EUR Casinos

(Bank Debt Investments)

Hotel Puerta America Spain Lodging & 1,438,272 1,566,706 1,534,996 – – 6.19 1.61

PIK Addon EUR Casinos

(Bank Debt Investments)

96,689,829 68,151,806 60.84 64.60 93.34 71.63

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

2 Floating Rate Note (FRN) – variable coupon rate during the period as per contract notice.

Consolidated Condensed Schedule of Investments | FINANCIAL STATEMENTS

ANNUAL REPORT 202271

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 71

FINANCIAL STATEMENTS | Consolidated Condensed Schedule of Investments

72NB DISTRESSED DEBT INVESTMENT FUND LIMITED

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

Consolidated Condensed Schedule of Investments

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

31 DECEMBER 2021 EXTENDED NEW

(AUDITED) ORDINARY LIFE GLOBAL TOTAL

(EXPRESSED IN

FAIR SHARES SHARES SHARES COMPANY

US DOLLARS)

COUNTRY INDUSTRY NOMINAL COST VALUE

(%)

1

(%)

1

(%)

1

(%)

1

Investments at fair value

Dumas Shipping TL B Marshall Shipping 23,237,002 23,044,736 20,332,376 – 19.48 18.10 16.87

15.00% 31/08/2022 Islands

(Bank Debt Investments)

Dumas Shipping TL A Marshall Shipping 2,755,139 2,755,139 2,410,746 – 2.31 2.15 2.00

15.00% 31/08/2022 Islands

(Bank Debt Investments)

Package Holdings 1 Luxembourg Containers 11,108,610 – 15,261,579 30.71 12.45 – 12.66

(Private Equity) and Packaging

Package Holdings 6 Luxembourg Containers 2,948,481 1,893,980 2,116,422 4.26 2.05 – 1.76

(Private Equity) and Packaging

AB Zwolle T/L EUR Netherlands Commercial 18,823,096 13,840,967 10,552,973 – 6.28 18.24 8.75

31/05/2022 FRN

2

Mortgage

(Bank Debt Investments)

US Treasury N/B 1.500% United United 8,850,000 9,430,114 8,904,275 35.14 3.58 4.22 7.39

15/02/2030 States States

(US Treasury Bills)

Buffalo Thunder United Lodging & 14,001,965 11,641,233 7,000,982 – 6.27 7.24 5.81

Dev Auth 11.00% States Casinos

12/09/22 SR: Regs

(Private Note)

TP Ferro Concesionaria Spain Surface 18,787,735 18,531,522 4,273,082 – 2.88 6.61 3.54

T/L 1L 31/03/2016 Transport

(Bank Debt Investments)

TP Ferro Concesionaria Spain Surface 1,812,476 1,812,476 1,812,476 – 1.64 2.81 1.50

TP Ferro TL-A (First-Lien) Transport

25.00% 01/06/2022

(Bank Debt Investments)

TP Ferro Concesionaria Spain Surface 364,913 423,341 414,979 – 1.64 0.64 0.34

TP Ferro 1L TL-B EUR Transport

(First-Lien) 25.00%

01/06/2022

(Bank Debt Investments)

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 72

Consolidated Condensed Schedule of Investments | FINANCIAL STATEMENTS

ANNUAL REPORT 202273

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

Consolidated Condensed Schedule of Investments

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

EXTENDED NEW

31 DECEMBER 2021 ORDINARY LIFE GLOBAL TOTAL

(EXPRESSED IN

FAIR SHARES SHARES SHARES COMPANY

US DOLLARS)

COUNTRY INDUSTRY NOMINAL COST VALUE

(%)

1

(%)

1

(%)

1

(%)

1

Investments at fair value

TP Ferro PIK 5A 4/20 Spain Surface 321,178 321,178 321,178 – 0.22 0.50 0.27

25.00% 01/06/2022 Transport

(Bank Debt Investments)

TP Ferro Concesionaria Spain Surface 157,864 157,864 157,864 – 0.11 0.25 0.13

TP Ferro 1L T/L-C Transport

(First-Lien)

(Bank Debt Investments)

White Energy Holding United Oil & Gas 367 9,174,989 9,119,950 – 8.74 8.10 7.57

Company LLC States

(Private Equity)

ACA Fin Guaranty Corp United Financial 68,829,452 10,963,549 3,441,473 3.54 3.96 – 2.85

12-31/12/2022 Frn States Intermediaries

(Private Note)

ACA Fin Gur Sur Non Vt United Financial 64,007,712 10,161,224 3,200,386 – 4.30 – 2.64

12-31/12/2022 Frn States Intermediaries

(Private Note)

Hotel Puerta America PIK Spain Lodging & 3,730,680 4,067,188 4,242,530 – – 13.17 3.52

TL EUR 7.25% Casinos

09/01/2022

(Bank Debt Investments)

Hotel Puerta America Spain Lodging & 934 3,013,332 587,355 – – 1.82 0.49

(Private Equity) Casinos

Hotel Puerta America PIK Spain Lodging & 2,105,563 2,350,434 2,394,446 – – 7.43 1.99

Addon EUR 7.25% Casinos

09/01/2022

(Bank Debt Investments)

123,583,266 96,545,072 73.65 75.91 91.28 80.08

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

2 Floating Rate Note (FRN) – variable coupon rate during the period as per contract notice

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 73

FINANCIAL STATEMENTS | Consolidated Condensed Schedule of Investments

74NB DISTRESSED DEBT INVESTMENT FUND LIMITED

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

Consolidated Condensed Schedule of Investments (by geography)

NEW

ORDINARY EXTENDED GLOBAL TOTAL

AS AT 31 DECEMBER 2022 SHARES LIFE SHARES SHARES COMPANY

(EXPRESSED IN US DOLLARS) COST FAIR VALUE (%)

1

(%)

1

(%)

1

(%)

1

Geographic diversity of Portfolios

Portfolio of Distressed Investments

Luxembourg 1,893,980 9,227,056 21.69 11.37 – 9.70

Netherlands 14,043,835 10,671,960 – 8.09 23.98 11.22

Spain 32,094,148 15,359,687 – 6.56 46.50 16.14

United States 47,595,091 32,525,102 5.38 43.30 26.49 34.19

Short term Investments (US Treasury Bills)

United States 7,382,792 5,959,811 33.95 3.29 – 6.26

103,009,846 73,743,616 61.02 72.61 96.97 77.51

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

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 74

Consolidated Condensed Schedule of Investments | FINANCIAL STATEMENTS

ANNUAL REPORT 202275

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

Consolidated Condensed Schedule of Investments (by geography)

NEW

ORDINARY EXTENDED GLOBAL TOTAL

AS AT 31 DECEMBER 2021 SHARES LIFE SHARES SHARES COMPANY

(EXPRESSED IN US DOLLARS) COST FAIR VALUE (%)

1

(%)

1

(%)

1

(%)

1

Geographic diversity of Portfolios

Portfolio of Distressed Investments

Luxembourg 1,893,980 17,378,000 34.97 16.82 – 14.42

Marshall Islands 26,803,677 22,743,123 – 21.79 20.25 18.87

Netherlands 13,840,967 10,552,973 – 6.28 18.24 8.75

Spain 30,677,336 14,203,911 – 4.70 33.23 11.78

United States 51,424,673 30,642,102 4.26 32.25 18.75 25.41

Short term Investments

US Treasury Bills 9,430,114 8,904,275 35.14 3.58 4.22 7.39

134,070,747 104,424,384 74.37 85.42 94.69 86.62

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

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 75

FINANCIAL STATEMENTS | Consolidated Condensed Schedule of Investments

76NB DISTRESSED DEBT INVESTMENT FUND LIMITED

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

Consolidated Condensed Schedule of Investments (by sector)

NEW

ORDINARY EXTENDED GLOBAL TOTAL

AS AT 31 DECEMBER 2022 SHARES LIFE SHARES SHARES COMPANY

(EXPRESSED IN US DOLLARS) COST FAIR VALUE (%)

1

(%)

1

(%)

1

(%)

1

Industry diversity of Portfolios

Portfolio of Distressed Investments

Auto Components 3,705,793 3,154,044 0.17 3.83 3.61 3.31

Commercial Mortgage 14,043,835 10,671,960 – 8.09 23.98 11.22

Containers and Packaging 1,893,980 9,227,056 21.69 11.37 – 9.70

Financial Intermediaries 20,458,849 8,362,230 5.21 13.24 – 8.79

Lodging & Casinos 24,135,372 17,696,890 – 12.79 41.24 18.60

Oil & Gas 9,174,989 11,010,000 – 13.44 12.71 11.58

Surface Transport 22,214,236 7,661,625 – 6.56 15.43 8.05

Short term Investments

US Treasury Bills 7,382,792 5,959,811 33.95 3.29 – 6.26

103,009,846 73,743,616 61.02 72.61 96.97 77.51

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

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 76

Consolidated Condensed Schedule of Investments | FINANCIAL STATEMENTS

ANNUAL REPORT 202277

The accompanying notes on pages 78 to 95 are an integral part of the Financial Statements

Consolidated Condensed Schedule of Investments (by sector)

NEW

ORDINARY EXTENDED GLOBAL TOTAL

AS AT 31 DECEMBER 2021 (AUDITED) SHARES LIFE SHARES SHARES COMPANY

(EXPRESSED IN US DOLLARS) COST FAIR VALUE (%)

1

(%)

1

(%)

1

(%)

1

Industry diversity of Portfolios

Portfolio of Distressed Investments

Auto Components 3,705,793 3,871,018 0.18 3.69 3.41 3.21

Building & Development 1,934,272 269,330 0.54 0.26 – 0.22

Commercial Mortgage 13,840,967 10,552,973 – 6.28 18.24 8.75

Containers and Packaging 1,893,980 17,378,000 34.97 16.82 – 14.42

Financial Intermediaries 21,124,773 6,641,859 3.54 8.26 – 5.51

Lodging & Casinos 24,915,800 17,964,276 – 11.29 29.67 14.90

Oil & Gas 9,174,989 9,119,950 – 8.74 8.10 7.57

Shipping 26,803,676 22,743,123 – 21.80 20.25 18.86

Surface Transport 21,246,383 6,979,580 – 4.70 10.80 5.79

Short term Investments

US Treasury Bills 9,430,114 8,904,275 35.14 3.58 4.22 7.39

134,070,747 104,424,384 74.37 85.42 94.69 86.62

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

NB DISTRESSED DEBT AR pp64-77.qxp 27/04/2023 12:42 Page 77

NOTE 1 – ORGANISATION AND DESCRIPTION OF BUSINESS

NB Distressed Debt Investment Fund Limited (the “Company”) is a closed-ended investment company registered and incorporated in

Guernsey under the provisions of the Companies (Guernsey) Law, 2008 (as amended) (the “Companies Law”) with registration number

51774. The Company’s shares are traded on the Specialist Fund Segment (“SFS”) of the London Stock Exchange (“LSE”). All share classes

are in the harvest period.

The Company’s objective is to provide investors with attractive risk-adjusted returns through long-biased, opportunistic stressed, distressed

and special situation credit-related investments while seeking to limit downside risk by, amongst other things, focusing on senior and senior

secured debt with both collateral and structural protection.

The Company’s share capital is denominated in US Dollars for Ordinary Shares and Extended Life Shares and Pounds Sterling for New Global

Shares.

NOTE 2 – SUMMARY OF ACCOUNTING POLICIES

(a) Basis of Preparation

The accompanying Consolidated Financial Statements (“Financial Statements”) give a true and fair view of the assets, liabilities, financial

position and return and have been prepared in conformity with accounting principles generally accepted in the United States of America

(“US GAAP”) and Companies Law and are expressed in US Dollars. All adjustments considered necessary for the fair presentation of the

financial statements, for the year presented, have been included.

The Company is regarded as an Investment Company and follows the accounting and reporting guidance in FASB Accounting Standards

Codification (“ASC”) Topic 946. Accordingly, the Company reflects its investments on the Consolidated Statement of Assets and Liabilities at

their estimated fair values, with unrealised gains and losses resulting from changes in fair value reflected in net change in unrealised

gain/(loss) on investments, credit default swap, total return swap and forward currency transactions in the Consolidated Statement of

Operations.

The Board recognises that the Portfolios (the Ordinary Share Class; the Extended Life Share Class; and the New Global Share Class) are now

in their harvest periods. The Directors have a reasonable expectation that the Company has adequate resources to continue in operational

existence for the twelve months from the date these accounts are signed and the foreseeable future. Thus, they continue to prepare the

Financial Statements in accordance with U.S. generally accepted accounting principles, as liquidation is not imminent.

The Financial Statements include the results of the Company and its wholly-owned and partially-owned subsidiaries, whose accounting

policies are consistent with those of the Company. The Financial Statements include full consolidation of any owned subsidiaries, except

where the effect on the Company’s financial position and results of operations are immaterial. Transactions between the Company and the

subsidiaries have been eliminated on consolidation.

Wholly-owned subsidiaries, London Lux Masterco 1 S.a.r.l., London Lux Debtco 1 S.a.r.l. and London Lux Propco 1 S.a.r.l. are incorporated in

Luxembourg.

London Wabash LLC and London Wabash (Global) LLC were dissolved on 23 May 2022. Chicago Aircraft Fund LLC was dissolved on

23 August 2022. NB Distressed Debt Aggregating Inc. was dissolved on 1 November 2022. London Lake Michigan LP and London Lake

Michigan (Global) LP were dissolved on 12 December 2022.

(b) Use of Estimates

The preparation of these Financial Statements in conformity with US GAAP requires that the Directors make estimates and assumptions (as

mentioned in detail on note 2 (f) below) that affect the reported amounts of assets and liabilities at the date of the financial statements and

reported amounts of income and expenses during the reporting year.

Actual results could differ significantly from these estimates.

Notes to the Consolidated Financial Statements

FINANCIAL STATEMENTS | Notes to the Consolidated Financial Statements

78NB DISTRESSED DEBT INVESTMENT FUND LIMITED

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 78

Notes to the Consolidated Financial Statements | FINANCIAL STATEMENTS

ANNUAL REPORT 202279

(c) Cash and Cash Equivalents and Restricted Cash

The Company holds cash and cash equivalents in US Dollar and non-US Dollar denominated currencies 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 an insignificant risk of change

in value to be cash equivalents. As at 31 December 2022, the Company has cash balances in various currencies equating to $19,793,589

(Cost: $19,641,661) (31 December 2021: $15,340,854 (Cost: $15,349,417)) including cash and cash equivalents of $8,733,589

(31 December 2021: $4,370,854) as well as restricted cash of $11,060,000 (31 December 2021: $10,970,000). Restricted cash of

$10,970,000 (31 December 2021: $10,970,000) is collateral for the total return swap positions and restricted cash of $90,000 (31 December

2021: $Nil) is collateral for forward currency contracts.

(d) Payables/Receivables on Investments Purchased/Sold

At 31 December 2022, the amount payable/receivable on investments purchased/sold represents amounts due for investments

purchased/sold that have been contracted for but not settled on the Consolidated Statement of Assets and Liabilities date.

(e) Foreign Currency Translation

Assets and liabilities denominated in foreign currency are translated into US Dollars at the currency exchange rates on the date of valuation.

On initial recognition, foreign currency sales and purchases transactions are recorded and translated at the spot exchange rate at the

transaction date and for all other transactions, the average rate is applied. Non-monetary assets and liabilities are translated at the historic

exchange rate.

The Company does not separate the changes relating to currency exchange rates from those relating to changes in fair value of the

investments. These fluctuations are included in the net realised gain and net change in unrealised gain/(loss) on investments, credit default

swap, total return swap and forward currency transactions in the Consolidated Statements of Operations.

(f) Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities that qualify as financial instruments under FASB ASC 825, Financial Instruments,

approximate the carrying amounts presented in the Consolidated Statement of Assets and Liabilities.

Fair value prices are estimates made at a discrete point in time, based on relevant market data, information about the financial instruments,

and other factors.

Fair value is 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

judgement. Accordingly, fair values are not necessarily indicative of the amounts that will be realised on disposal 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 as at 31 December 2022 and 31 December 2021 to estimate the fair value of each class

of financial instruments:

• Cash and cash equivalents – The carrying value reasonably approximates fair value due to the short-term nature of these instruments.

• Receivables for investments sold – The carrying value reasonably approximates fair value as it reflects the value at which investments

are sold to a willing buyer and the settlement period on their balances is short term.

• Interest receivables and other receivables and prepayments – The carrying value reasonably approximates fair value.

• Quoted investments are valued according to their bid price 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. 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.

• 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 (e.g. level 3 investments included overleaf), the Investment Manager

determines the valuation based on its fair valuation policy. Further information on valuations is provided in Note 2 (g), “Investment

transactions, investment income/expenses and valuation”, on pages 83 and 84.

• Forward currency contracts are revalued using the forward exchange rate prevailing at the Consolidated Statement of Assets and

Liabilities date.

• Total Return Swaps are priced using Mark to market prices provided by a third party broker.

• Credit Return Swaps are priced using a pricing service provided by Markit Partners.

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 79

NOTE 2 – SUMMARY OF ACCOUNTING POLICIES (continued)

(f) Fair Value of Financial Instruments (continued)

The Company follows guidance in ASC 820, Fair Value Measurement (“ASC 820”), where fair value is defined as 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. Fair

value measurements are determined within a framework that establishes a three-tier hierarchy which maximises the use of observable market

data and minimises the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes.

Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk,

such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the

inputs for the valuation technique. Inputs may be observable or unobservable.

Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from

sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions about the assumptions market

participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets

or liabilities may not be an indication of the risks associated with investing in those assets or liabilities.

ASC 820 classifies the inputs used to measure these fair values into the following hierarchy:

Level 1: Quoted prices are available in active markets for identical investments as of the reporting date.

Level 2: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting

date, and fair value is determined through the use of models or other valuation methodologies.

Level 3: Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the

investment. The inputs used in the determination of the fair value require significant management judgement or estimation.

In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on

the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input

to the fair value measurement in its entirety requires judgement and considers factors specific to each investment.

The following is a summary of the levels within the fair value hierarchy in which the Company invests:

FAIR VALUE OF FINANCIAL INSTRUMENTS AS AT 31 DECEMBER 2022

(EXPRESSED IN US DOLLARS) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL

Bank Debt Investments – – 27,358,457 27,358,457

Private Equity – 11,010,000 13,492,057 24,502,057

Private Note – 7,561,061 8,362,230 15,923,291

US Treasury Bills 5,959,811 – – 5,959,811

Investments at fair value 5,959,811 18,571,061 49,212,744 73,743,616

Credit Default Swap – (21,494) – (21,494)

Total Return Swap – – 1,558,420 1,558,420

Forward Currency Contracts – Assets – 12,018 – 12,018

Forward Currency Contracts – Liabilities – (1,269,365) – (1,269,365)

Total investments that are accounted for at fair value 5,959,811 17,292,220 50,771,164 74,023,195

FINANCIAL STATEMENTS | Notes to the Consolidated Financial Statements

80NB DISTRESSED DEBT INVESTMENT FUND LIMITED

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 80

Notes to the Consolidated Financial Statements | FINANCIAL STATEMENTS

ANNUAL REPORT 202281

FAIR VALUE OF FINANCIAL INSTRUMENTS AT 31 DECEMBER 2021

(EXPRESSED IN US DOLLARS) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL

Bank Debt Investments – 3,738,963 47,181,981 50,920,944

Private Equity – 9,119,950 21,836,374 30,956,324

Private Note – 7,000,983 6,641,858 13,642,841

US Treasury Bills 8,904,275 – – 8,904,275

Investments at fair value 8,904,275 19,859,896 75,660,213 104,424,384

Credit Default Swap – (33,603) – (33,603)

Total Return Swap – – (875,121) (875,121)

Forward Currency Contracts – Assets – 496,027 – 496,027

Forward Currency Contracts – Liabilities – (86,200) – (86,200)

Total investments that are accounted for at fair value 8,904,275 20,236,120 74,785,092 103,925,487

The following table summarises the significant unobservable inputs the Company used to value its investments categorised within Level 3 as

at 31 December 2022. The table is not intended to be all-inclusive but instead captures the significant unobservable inputs relevant to our

determination of fair values.

PRIMARY SIGNIFICANT

FAIR VALUE VALUATION UNOBSERVABLE

TYPE SECTOR ($) TECHNIQUE INPUTS RANGE INPUT

Bank Debt Investments Commercial Mortgage 10,671,960 Market Comparatives Discount Rate 10%

Bank Debt Investments Lodging & Casinos 6,587,107 Market Comparatives Discount Rate 15%

Bank Debt Investments Lodging & Casinos 2,437,766 Market Information Unadjusted Broker Quote N/A

Bank Debt Investments Surface Transport 7,661,625 Market Information Unadjusted Broker Quote N/A

Private Equity Auto Components 3,154,044 Market Information EBITDA Multiple 4-5X

Private Equity Containers and Packaging 9,227,056 Market Comparatives EBITDA Multiple 11X

Private Equity Lodging & Casinos 1,110,956 Market Comparatives Discount Rate 15%

Private Note Financial Intermediaries 8,362,230 Market Comparatives Discount Rate 25%

Total Return Swap Surface Transport 1,558,420 Market Information Unadjusted Broker Quote N/A

Total 50,771,164

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 81

NOTE 2 – SUMMARY OF ACCOUNTING POLICIES (continued)

(f) Fair Value of Financial Instruments (continued)

The following table summarises the significant unobservable inputs the Company used to value its investments categorised within Level 3 as

at 31 December 2021. The table is not intended to be all-inclusive but instead captures the significant unobservable inputs relevant to our

determination of fair values.

PRIMARY SIGNIFICANT

FAIR VALUE VALUATION UNOBSERVABLE

TYPE SECTOR ($) TECHNIQUE INPUTS RANGE INPUT

Bank Debt Investments Commercial Mortgage 10,552,973 Market Comparatives Discount Rate 10%

Bank Debt Investments Lodging & Casinos 6,636,976 Market Comparatives Discount Rate 15%

Bank Debt Investments Shipping 22,743,123 Market Information Value Per Vessel $13.5 million per vessel

Bank Debt Investments Building & Development 269,329 Market Information Unadjusted Broker Quote N/A

Bank Debt Investments Surface Transport 6,979,580 Market Information Unadjusted Broker Quote N/A

Private Equity Auto Components 3,871,019 Market Information EBITDA Multiple 4-5X

Private Equity Containers and Packaging 17,378,000 Market Comparatives EBITDA Multiple 11.75X

Private Equity Lodging & Casinos 587,355 Market Comparatives Discount Rate 15%

Private Note Financial Intermediaries 6,641,858 Market Information Unadjusted Broker Quote N/A

Total Return Swap Surface Transport (875,121) Market Information Unadjusted Broker Quote N/A

Total 74,785,092

Changes in any of the above inputs may positively or adversely impact the fair value of the relevant investments.

Level 3 assets are valued using single bid-side broker quotes or by good faith methods of the Investment Manager. For single broker quotes

the Investment Manager uses unobservable inputs to assess the reasonableness of the broker quote. For good faith valuations, the

Investment Manager directly uses unobservable inputs to produce valuations. The significant unobservable inputs used in Level 3 assets as at

31 December 2022 and 31 December 2021 are outlined in the tables above.

These inputs vary by asset class. For example, real estate asset valuations may utilise discounted cash flow models using an average value per

square foot and appropriate discount rate. Other assets may be valued based on analysis of the liquidation of the underlying assets. In

general, increases/(decreases) to per unit valuation inputs such as value per square foot, will result in increases/(decreases) to investment

value.

Similarly, increases/(decreases) of asset realisation inputs (liquidation estimate, letter of intent, etc.) will also result in increases/(decreases) in

value. In situations where discounted cash flow models are used, increasing/(decreasing) discount rates or increasing/(decreasing) weighted

average life, in isolation, will generally result in (decreased)/increased valuations.

FINANCIAL STATEMENTS | Notes to the Consolidated Financial Statements

82NB DISTRESSED DEBT INVESTMENT FUND LIMITED

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 82

Notes to the Consolidated Financial Statements | FINANCIAL STATEMENTS

ANNUAL REPORT 202283

The following is a reconciliation of opening and closing balances of assets and liabilities measured at fair value on a recurring basis using

Level 3 inputs:

FOR THE YEAR ENDED

31 DECEMBER 2022 BANK DEBT PRIVATE TRADE PRIVATE

(EXPRESSED IN US DOLLARS) INVESTMENTS EQUITY CLAIM NOTE TOTAL

Balance, 31 December 2021 47,181,981 21,836,374 (875,121) 6,641,858 74,785,092

Purchases (includes purchases-in-kind) 4,240,602––– 4,240,602

Sales and distributions (28,047,566) – – (4,187,464) (32,235,030)

Realised (loss)/gain on sale of investments (2,239,259) (1,003,803) – 3,521,541 278,479

Unrealised gain/(loss) on investments 3,766,473 (7,340,514) 2,433,541 2,386,295 1,245,795

Transfers from Level 2 into Level 3 2,456,226––– 2,456,226

Balance, 31 December 2022 27,358,457 13,492,057 1,558,420 8,362,230 50,771,164

Change in unrealised gain/(loss) on

investments included in Audited Consolidated

Statement of Operation for Level 3

investments held as at 31 December 2022 (867,184) (8,344,317) 2,433,541 2,386,295 (4,391,665)

The Company’s policy is to recognise transfers into and out of Level 3 as of the actual date of the event or change in circumstances that

caused the transfer. During the year the Company had no transfers out of Level 3 into Level 2 of fair value amounting to $Nil. The Company

had one transfer out of Level 2 into Level 3 of fair value amounting to $2,456,226 on 28 December 2022, due to a lack of observable inputs

into the valuation.

The following is a reconciliation of opening and closing balances of assets and liabilities measured at fair value on a recurring basis using

Level 3 inputs:

FOR THE YEAR ENDED

31 DECEMBER 2021 BANK DEBT PRIVATE TRADE PRIVATE

(EXPRESSED IN US DOLLARS) INVESTMENTS EQUITY CLAIM NOTE TOTAL

Balance, 31 December 2020 40,145,844 20,425,758 (1,222,546) 8,059,382 67,408,438

Purchases (includes purchases-in-kind) 5,128,408––– 5,128,408

Sales and distributions – – – (236,294) (236,294)

Realised gain on sale of investments 463––– 463

Unrealised gain/(loss) on investments 1,637,937 1,410,616 347,425 (1,181,230) 2,214,748

Transfers from level 2 into Level 3 269,329––– 269,329

Balance, 31 December 2021 47,181,981 21,836,374 (875,121) 6,641,858 74,785,092

Change in unrealised gain/(loss) on

investments included in Consolidated

Statement of Operation for Level 3

investments held as of

31 December 2021 1,638,400 1,410,616 347,425 (1,181,230) 2,215,211

The Company’s policy is to recognise transfers into and out of Level 3 as of the actual date of the event or change in circumstances that

caused the transfer. During the year the Company had no transfers out of Level 3 into Level 2 of fair value amounting to $Nil. The Company

had two transfers out of Level 2 into Level 3 of fair value amounting to $269,329 as no quoted prices were observable.

(g) Investment transactions, investment income/expenses and valuation

Investment transactions are accounted for 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. All

transactions relating to the restructuring of current investments are recorded at the date of such restructuring. The difference between the

fair value of the new consideration received and the cost of the original investment is recognised as a realised gain or loss. Unrealised gains

and losses on an investment are the difference between the cost if purchased during the year or fair value at the previous year end and the

fair value at the current year end. Unrealised gains and losses are included in the Consolidated Statement of Operations.

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 83

NOTE 2 – SUMMARY OF ACCOUNTING POLICIES (continued)

(g) Investment transactions, investment income/expenses and valuation (continued)

Operating expenses are recognised on an accruals basis. Operating expenses include amounts directly or indirectly incurred by the Company

as part of its operations. Each share class will bear its respective pro-rata share based on its respective NAVs of the ongoing costs and

expenses of the Company. Each share class will also bear all costs and expenses of the Company determined by the Directors to be

attributable solely to it. Any costs incurred by a share buyback are charged to that share class.

For the year ended 31 December 2022, $145,689 (31 December 2021: $60,158) was recorded to reflect accretion of discount on loans and

bonds during the year.

Interest earned on debt instruments is accounted for, net of applicable withholding taxes and it is recognised as income over the terms of

the loans and bonds. Discounts received or premiums paid in connection with the acquisition of loans and bonds are amortised into interest

income using the effective interest method over the contractual life of the related loan and bond. If a loan is repaid 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. Dividend income is recognised on the ex-dividend date net of withholding tax.

Capitalised payment-in-kind (“PIK”) interest is computed at the contractual rate specified in the loan agreement for any portion of the

interest which may be added to the principal balance of a loan rather than paid in cash by the obligator on the scheduled interest payment

date. PIK interest is periodically added to the principal balance of the loan and recorded as interest income. The Investment Manager places

a receivable on non-accrual status when the collection of principal or interest is deemed doubtful. The amount of interest income recorded,

plus initial costs of underlying PIK interest is reviewed periodically to ensure that these do not exceed fair value of those assets.

The Company carries investments on its Consolidated Statement of Assets and Liabilities at fair value in accordance with US GAAP, with

changes in fair value recognised in the Consolidated Statement of Operations in each reporting period. Fair value is defined as the price that

would be received on the sale of an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market

participants at the measurement date.

Quoted investments are valued according to their bid price 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.

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 Administrator will value such investments with the input of the Investment Manager

who will determine the valuation based on its fair valuation policy. As part of the investment fair valuation policy, the Investment Manager

prepares a fair valuation memorandum for each such investment presenting the methodology and assumptions used to derive the price. This

analysis is presented to the Investment Manager’s Valuation Committee for approval.

The following criteria are considered when applicable:

• The valuation of other securities by the same issuer for which market quotations are available;

• The reasons for absence of market quotations;

• The soundness of the security, its interest yield, the date of maturity, the credit standing of the issue and the current general interest

rates;

• Any recent sales prices and/or bid and ask quotations for the security;

• The value of similar securities of issuers in the same or similar industries for which market quotations are available;

• The economic outlook of the industry;

• The issuer’s position in the industry;

• The financial statements of the issuer; and

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

(h) Derivative Contracts

The Company may, from time to time, hold derivative financial instruments for the purposes of managing foreign currency exposure and to

provide a measure of protection against defaults of corporate or sovereign issuers. These derivatives are measured at fair value in conformity

with US GAAP with changes in fair value recognised in the Consolidated Statement of Operations in each reporting period.

As part of the Company’s investment strategy, the Company enters into over-the-counter (“OTC”) derivative contracts which may include

forward currency contracts, credit default swaps and total return swaps.

FINANCIAL STATEMENTS | Notes to the Consolidated Financial Statements

84NB DISTRESSED DEBT INVESTMENT FUND LIMITED

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 84

Notes to the Consolidated Financial Statements | FINANCIAL STATEMENTS

ANNUAL REPORT 202285

Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies on the reporting date and the

value recorded in the financial statements represents net unrealised gain and loss on forwards as at 31 December. Forward contracts are

generally categorised in Level 2 of the fair value hierarchy.

The credit default swap has been entered into on the OTC market. The fair value of the credit default swap contract is derived using a pricing

service provided by Markit Partners. Markit Partners use a pricing model that is widely accepted by marketplace participants. Their pricing

model takes into account multiple inputs including specific contract terms, interest rate yield curves, interest rates, credit curves, recovery

rates, and current credit spreads obtained from swap counterparties and other market participants. Many inputs into the model do not

require material subjectivity as they are observable in the marketplace or set per the contract. Other than the contract terms, valuation is

mainly determined by the difference between the contract spread and the current market spread. The contract spread (or rate) is generally

fixed and the market spread is determined by the credit risk of the underlying debt or reference entity. If the underlying debt is liquid and

the OTC market for the current spread is active, credit default swaps are categorised in Level 2 of the fair value hierarchy. If the underlying

debt is illiquid and the OTC market for the current spread is not active, credit default swaps are categorised in Level 3 of the fair value

hierarchy.

The total return swap is valued using a mark to market prices provided by a third-party broker.

(i) Taxation

The Company is not subject to income taxes in Guernsey; however, it may be subject to taxes imposed by other countries on income it

derives from investments.

Such taxes are reflected in the Consolidated Statement of Operations. In accordance with US GAAP, management is required to determine

whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including

resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognised is

measured as the largest amount of benefit that is greater than fifty percent likely of being realised upon ultimate settlement. De-recognition

of a tax benefit previously recognised could result in the Company recording a tax liability that would reduce net assets. US GAAP also

provides guidance on thresholds, measurement, de-recognition, classification, interest and penalties, accounting in interim periods,

disclosure, and transition that is intended to provide better financial statement comparability among different entities.

There were no uncertain tax positions as at 31 December 2022 or 31 December 2021. The Company files its tax returns as prescribed by the

tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and

certain state, local, and foreign tax regulators. State, local and foreign tax returns, if applicable, are generally subject to audit according to

varying limitations dependent upon the jurisdiction. As of 31 December 2022, the Company’s U.S. federal income tax returns are subject to

examination under the three-year statute of limitations.

During the year ended 31 December 2022, the Company recorded current income tax expense $Nil (31 December 2021 income tax expense:

$47,900). Deferred taxes are recorded to reflect the tax consequences of future years’ differences between the tax basis of assets and their

financial reporting basis. The deferred tax benefit recorded for the year ended 31 December 2022 was $Nil (31 December 2021 deferred tax

benefit: $Nil). The net total income tax benefit/expense from realised/unrealised gains/(losses) on investments for the year ended

31December 2022 was $Nil (31 December 2021 income tax expense: $47,900).

NOTE 3 – DERIVATIVES

In the normal course of business, the Company uses derivative contracts in connection with its proprietary trading activities. Investments in

derivative contracts are subject to additional risks that can result in a loss of all or part of the derivative investment. The Company’s derivative

activities and exposure to derivative contracts are classified by the following primary underlying risks: foreign currency exchange rate, credit,

and equity price. In addition to its primary underlying risks, the Company is also subject to additional counterparty risk due to inability of its

counterparties to meet the terms of their contracts.

Forward Currency Contracts

The Company enters into forwards for the purposes of managing foreign currency exposure.

Credit Default Swap

The Company uses credit default swap agreements on corporate or sovereign issues to provide a measure of protection against defaults of

the issuers (i.e., to reduce risk where a Company owns or has exposure to the referenced obligation) from time to time.

There was one credit default swap position (Brazilian Government) held as at 31 December 2022 (31 December 2021: one).

Total Return Swap

The Company entered into two fully funded total return swaps on 2 May 2011 and 18 April 2012. These swaps matured on 25 February

2020 and rolled over into a new swap agreement. New ISDA regulations enacted in 2019 require booking the total return swaps with cash

collateral maintained vs fully funded swaps.

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 85

NOTE 3 – DERIVATIVES (continued)

Total Return Swap (continued)

The new swap rolls on an annual basis. The swap was booked on 02 March 2021 and matured on 01 February 2022. A realised event

occurred on the value of the swap as at 01 February 2022 ($123,624). The next maturity will occur on 01 February 2023. The value of the

swap, exclusive of related cash collateral, as at 31 December 2022 is $1,558,420 (31 December 2021: ($875,121)) representing a change in

market value of $1,682,044 in the period since the 01 February 2022 maturity.

As at 31 December 2022 the net value of the swap and related cash collateral was $12,528,420 (31 December 2021: $10,094,879)

(comprised of restricted cash collateral of $ 10,970,000 (31 December 2021: $10,970,000) and total return swap asset of $1,558,420

(31December 2021: swap liability of ($875,121)), as reflected in the Consolidated Statement of Assets and Liabilities. The underlying asset

of the swaps is denominated in Brazilian Real and the foreign exchange exposure is hedged to offset any change in value in underlying asset

due to the FX movements.

Derivative activity

For the year ended 31 December 2022 and 31 December 2021 the volume of the Company’s derivative activities based on their notional

amounts and number of contracts, categorised by primary underlying risk, are as follows:

31 DECEMBER 2022 LONG EXPOSURE SHORT EXPOSURE

NOTIONAL NUMBER OF NOTIONAL NUMBER OF

PRIMARY UNDERLYING RISK AMOUNTS CONTRACTS AMOUNTS CONTRACTS

Foreign exchange risk

Forward currency contracts $131,688,489 61 $107,370,134 64

Credit risk

Credit default swap $9,971,000 1 – –

Total return swap – – $10,960,348 2

31 DECEMBER 2021 LONG EXPOSURE SHORT EXPOSURE

NOTIONAL NUMBER OF NOTIONAL NUMBER OF

PRIMARY UNDERLYING RISK AMOUNTS CONTRACTS AMOUNTS CONTRACTS

Foreign exchange risk

Forward currency contracts $151,749,141 29 $147,352,146 20

Credit risk

Credit default swap $9,900,000 1 – –

Total return swap – – $10,960,348 2

The following tables show, as at 31 December 2022 and 31 December 2021, the fair value amounts of derivative contracts included in the

Consolidated Statement of Assets and Liabilities, categorised by primary underlying risk. Balances are presented on a gross basis prior to

application of the impact of counterparty and collateral netting. Total derivative assets and liabilities are adjusted on an aggregate basis to

take into account the effects of master netting arrangements and, where applicable, have been adjusted by the application of cash collateral

receivables and payables with its counterparties. The tables also identify, as at 31 December 2022 and 31 December 2021, the realised and

unrealised gain and loss amounts included in the Consolidated Statement of Operations, categorised by primary underlying risk:

NET CHANGE IN

DERIVATIVE DERIVATIVE REALISED UNREALISED

31 DECEMBER 2022 ASSETS LIABILITIES GAIN (LOSS) GAIN (LOSS)

PRIMARY UNDERLYING RISK ($) ($) ($) ($)

Foreign currency exchange rate

Forward currency contracts 12,018 (1,269,365) 1,963,445 (1,667,174)

Credit

Purchased protection

Credit default swap – (21,494) 37,783 (8,853)

Total return swap 1,558,420 – – 2,433,541

FINANCIAL STATEMENTS | Notes to the Consolidated Financial Statements

86NB DISTRESSED DEBT INVESTMENT FUND LIMITED

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 86

Notes to the Consolidated Financial Statements | FINANCIAL STATEMENTS

ANNUAL REPORT 202287

NET CHANGE IN

DERIVATIVE DERIVATIVE REALISED UNREALISED

31 DECEMBER 2021 ASSETS LIABILITIES GAIN (LOSS) GAIN (LOSS)

PRIMARY UNDERLYING RISK ($) ($) ($) ($)

Foreign currency exchange rate

Forward currency contracts 496,027 (86,200) 725,170 1,736,467

Credit

Purchased protection

Credit default swap – (33,603) 67,076 125,562

Total return swap – (875,121) – 347,425

Offsetting assets and liabilities

Amounts due from and to brokers are presented on a net basis, by counterparty, to the extent the Company has the legal right to offset the

recognised amounts and intends to settle on a net basis.

The Company presents on a net basis the fair value amounts recognised for OTC derivatives executed with the same counterparty under the

same master netting agreement.

The Company is required to disclose the impact of offsetting assets and liabilities presented in the Consolidated Statement of Assets and

Liabilities to enable users of the Financial Statements to evaluate the effect or potential effect of netting arrangements on its financial

position for recognised assets and liabilities.

These recognised assets and liabilities include financial instruments and derivative contracts that are either subject to an enforceable master

netting arrangement or similar agreement or meet the following right of set off criteria:

• each of the two parties owes the other determinable amounts;

• the Company has the right to set off the amounts owed with the amounts owed by the other party;

• the Company intends to set off; and

• the Company’s right of set off is enforceable at law.

The Company is subject to enforceable master netting agreements with its counterparties of credit default swap, the total return swaps and

foreign currency exchange contracts. These agreements govern the terms of certain transactions and reduce the counterparty risk associated

with relevant transactions by specifying offsetting mechanisms and collateral posting arrangements at pre‑arranged exposure levels.

Derivative activity

The following tables, as at 31 December 2022 and 31 December 2021, show the gross and net derivatives assets and liabilities by contract

type and amount for those derivatives contracts for which netting is permissible.

31 DECEMBER 2022

(EXPRESSED IN US DOLLARS) NET AMOUNTS

OF RECOGNISED AMOUNTS NOT OFFSET IN THE

GROSS ASSETS CONSOLIDATED STATEMENT OF

AMOUNTS PRESENTED ASSETS AND LIABILITIES

OFFSET IN THE IN THE

GROSS CONSOLIDATED CONSOLIDATED FINANCIAL

AMOUNTS OF STATEMENTS OF STATEMENT OF INSTRUMENTS FINANCIAL

RECOGNISED ASSETS AND ASSETS AND (POLICY COLLATERAL

DESCRIPTION ASSETS LIABILITIES LIABILITIES ELECTION) RECEIVED

1

NET AMOUNT

Forward currency

contracts 12,018 – 12,018 (12,018) – –

Total return swaps 1,558,420 – 1,558,420 – – 1,558,420

Total 1,570,438 – 1,570,438 (12,018) – 1,558,420

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 87

NOTE 3 – DERIVATIVES (continued)

Derivative activity (continued)

NET AMOUNTS

OF RECOGNISED AMOUNTS NOT OFFSET IN THE

GROSS ASSETS CONSOLIDATED STATEMENT OF

AMOUNTS PRESENTED ASSETS AND LIABILITIES

OFFSET IN THE IN THE

GROSS CONSOLIDATED CONSOLIDATED FINANCIAL

AMOUNTS OF STATEMENTS OF STATEMENT OF INSTRUMENTS FINANCIAL

RECOGNISED ASSETS AND ASSETS AND (POLICY COLLATERAL

DESCRIPTION LIABILITIES LIABILITIES LIABILITIES ELECTION) RECEIVED

1

NET AMOUNT

Forward currency

contracts (1,269,365) – (1,269,365) 12,018 – (1,257,347)

Total return swaps (21,494) – (21,494) – – (21,494)

Total (1,290,859) – (1,290,859) 12,018 – (1,278,841)

1 The amount netted off is a portion of the total collateral as per the Consolidated Statement of Assets and Liabilities.

The following table, as at 31 December 2021, show the gross and net derivatives assets and liabilities by contract type and amount for those

derivatives contracts for which netting is permissible.

31 DECEMBER 2021

(EXPRESSED IN US DOLLARS) NET AMOUNTS

OF RECOGNISED AMOUNTS NOT OFFSET IN THE

GROSS ASSETS CONSOLIDATED STATEMENT OF

AMOUNTS PRESENTED ASSETS AND LIABILITIES

OFFSET IN THE IN THE

GROSS CONSOLIDATED CONSOLIDATED FINANCIAL

AMOUNTS OF STATEMENTS OF STATEMENT OF INSTRUMENTS FINANCIAL

RECOGNISED ASSETS AND ASSETS AND (POLICY COLLATERAL

DESCRIPTION ASSETS LIABILITIES LIABILITIES ELECTION) RECEIVED

1

NET AMOUNT

Forward Currency

Contracts 496,027 – 496,027 (86,200) – 409,827

Total 496,027 – 496,027 (86,200) – 409,827

NET AMOUNTS

OF RECOGNISED AMOUNTS NOT OFFSET IN THE

GROSS ASSETS CONSOLIDATED STATEMENT OF

AMOUNTS PRESENTED ASSETS AND LIABILITIES

OFFSET IN THE IN THE

GROSS CONSOLIDATED CONSOLIDATED FINANCIAL

AMOUNTS OF STATEMENTS OF STATEMENT OF INSTRUMENTS FINANCIAL

RECOGNISED ASSETS AND ASSETS AND (POLICY COLLATERAL

DESCRIPTION LIABILITIES LIABILITIES LIABILITIES ELECTION) RECEIVED

1

NET AMOUNT

Forward Currency

Contracts (86,200) – (86,200) 86,200 – –

Credit Default Swap (33,603) – (33,603) – – (33,603)

Total Return Swaps (875,121) – (875,121) – 875,121 –

Total (994,924) – (994,924) 86,200 875,121 (33,603)

1 The amount netted off is a portion of the total collateral as per the Consolidated Statement of Assets and Liabilities.

FINANCIAL STATEMENTS | Notes to the Consolidated Financial Statements

88NB DISTRESSED DEBT INVESTMENT FUND LIMITED

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 88

Notes to the Consolidated Financial Statements | FINANCIAL STATEMENTS

ANNUAL REPORT 202289

NOTE 4 – RISK FACTORS

The Company’s investments are subject to various risk factors including market and credit risk, interest rate and foreign exchange risk, and

the risks associated with investing in private securities. Investments in private securities and partnerships are illiquid, and there can be no

assurances that the Company will be able to realise the value of such investments in a timely manner. Additionally, the Company’s

investments may be highly concentrated in certain industries. Non-U.S. dollar denominated investments may result in foreign exchange losses

caused by devaluations and exchange rate fluctuations. In addition, consequences of political, social, economic, diplomatic changes or public

health condition may have disruptive effects on market prices or fair valuations of foreign investments.

Market Risk

Market risk is the potential for changes in the value of investments. Categories of market risk include, but are not limited to, interest rates.

Interest rate risks primarily result from exposures to changes in the level, slope and curvature of the yield curve, the volatility of interest rates

and credit spreads. Details of the Company’s investment Portfolio as at 31 December 2022 and 31 December 2021 are disclosed in the

Consolidated Condensed Schedule of Investments. Each separate investment exceeding 5% of net assets is disclosed separately.

Credit Risk

The Company may invest in a range of corporate and other bonds and other credit sensitive securities. Until such investments are sold or are

paid in full at maturity, the Company is exposed to credit risk relating to whether the issuer will meet its obligations when the securities fall

due. Distressed debt securities by nature are securities in companies which are in default or are heading into default and will expose the

Company to a higher than normal amount of credit risk.

The Company may invest a relatively large percentage of its assets in issuers located in a single country, a small number of countries, or a

particular geographic region. As a result, the Company’s performance may be closely aligned with the market, currency or economic, political

or regulatory conditions and developments in those countries or that region, and could be more volatile than the performance of more

geographically diversified investments. Refer to the Consolidated Condensed Schedules of Investments on pages 68 to 77 for concentration

of credit risk.

The Company maintains positions in a variety of securities, derivative financial instruments and cash and cash equivalents in accordance with

its investment strategy and guidelines. The Company’s trading activities expose the Company to counterparty credit risk from brokers, dealers

and other financial institutions (collectively, “counterparties”) with which it transacts business. “Counterparty credit risk” is the risk that a

counterparty to a trade will fail to meet an obligation that it has entered into with the Company, resulting in a financial loss to the Company.

The Company’s policy with respect to counterparty credit risk is to minimise its exposure to counterparties with perceived higher risk of

default by dealing only with counterparties that meet the credit standards set out by the Investment Manager.

All the Company’s cash and investment assets other than derivative financial instruments are held by the Custodian. The Custodian

segregates the assets of the Company from the Custodian’s assets and other Custodian clients. Management believes the risk is low with

respect to any losses as a result of this concentration. The Company conducts its trading activities with respect to non-derivative positions

with a number of counterparties. Counterparty credit risk borne by these transactions is mitigated by trading with multiple counterparties.

In addition, the Company may trade in OTC derivative instruments and in derivative instruments which trade on exchanges with generally a

limited number of counterparties and as a consequence the Company is subject to counterparty credit risk related to the potential inability

of counterparties to these derivative transactions to perform their obligations to the Company. The Company’s exposure to counterparty

credit risk associated with counterparty non-performance is generally limited to the fair value (derivative assets and liabilities) of OTC

derivatives reported as net assets, net of collateral received or paid, pursuant to agreements with each counterparty. The Investment

Manager attempts to reduce the counterparty credit risk of the Company by establishing certain credit terms in its International Swaps and

Derivatives Association (ISDA) Master Agreements (with netting terms) with counterparties, and through credit policies and monitoring

procedures. Under ISDA Master Agreements in certain circumstances (e.g. when a credit event such as a default occurs) all outstanding

transactions under the agreement are terminated, the termination value is assessed and only a single net amount is due or payable in

settlement of all transactions. The Company receives and gives collateral in the form of cash and marketable securities and it is subject to

the ISDA Master Agreement Credit Support Annex. This means that securities received/given as collateral can be pledged or sold during the

term of the transaction. The terms also give each party the right to terminate the related transactions on the other party’s failure to post

collateral. Exchange-traded derivatives generally involve less counterparty exposure because of the margin requirements of the individual

exchanges.

Generally, these contracts can be closed out at the discretion of the Investment Manager and are governed by the futures and options

clearing agreements signed with the future commission merchants (“FCMs”). FCMs have capital requirements intended to assure that they

have sufficient capital to protect their customers in the event of any inadequacy in customer funds arising from the default of one or more

customers, adverse market conditions, or for any other reason.

The credit risk relating to derivatives is detailed further in Note 3.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as and when these fall due.

Liquidity risk is managed by the Investment Manager so as to ensure that the Company maintains sufficient working capital in cash or near

cash form so as to be able to meet the Company’s ongoing requirements as these are budgeted for.

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 89

NOTE 4 – RISK FACTORS (continued)

Other Risks

The outbreak of the novel coronavirus in many countries has, among other things, disrupted global travel and supply chains, and adversely

impacted global commercial activity, the transportation industry and commodity prices in the energy sector. The impact of this virus has

negatively affected and may continue to affect the economies of many nations, individual companies and the global securities and

commodities markets, including liquidity and volatility. The development and fluidity of this situation precludes any prediction as to its

ultimate impact, which may have a continued adverse effect on global economic and market conditions. Such conditions (which may be

across industries, sectors or geographies) have impacted and may continue to impact certain issuers of the securities held by the Company

and in turn, may impact the financial performance of the Company.

The invasion of Ukraine is of concern and the Company has considered its potential impact on asset values, and while no direct impact has

been identified, values are affected by its impact on the global economy.

The UN’s latest Intergovernmental Panel on Climate Change (IPCC) report will be considered by the Board when undertaking Company

related business.

Legal, tax and regulatory changes could occur during the term of the Company that may adversely affect the Company. The regulatory

environment for alternative investment vehicles is evolving, and changes in the regulation of alternative investment vehicles may adversely

affect the value of investments held by the Company or the ability of the Company to pursue its trading strategies.

The impact of these risks can have a substantial impact on the valuation and ultimately the realisation of assets.

Market disruptions associated with current geopolitical events have had a global impact, and uncertainty exists as to their implications. Such

disruptions can potentially adversely affect the assets, and thus the performance, of the Company. The Board continues to monitor this

situation.

NOTE 5 – SHARE CAPITAL

The Company’s authorised share capital consists of:

10,000 Class A Shares authorised, of par value $1 each (which carry no voting rights); and, an unlimited number of shares of no par value

which may, upon issue, be designated as Ordinary Shares, Extended Life Shares or New Global Shares and Subscription Shares (each of which

carry voting rights) or Capital Distribution Shares.

The issued share capital of the Company consists of Ordinary Shares, Class A Shares and Extended Life Shares, all denominated in USdollars,

and New Global Shares denominated in Pounds Sterling. Shareholders of Ordinary Shares, Extended Life Shares and New Global Shares have

the right to attend and vote at any general meeting of the Company. Class A shareholders do not have the right to attend and vote at a

general meeting of the Company save where there are no other shares of the Company in issue.

The Class A Shares are held by Carey Trustees Limited (the “Trustee”), pursuant to a purpose trust established under Guernsey law. Under

the terms of the NBDDIF Purpose Trust Deed, the Trustee holds the Class A Shares for the purpose of exercising the right to receive notice

of general meetings of the Company but the Trustee shall only have the right to attend and vote at general meetings of the Company when

there are no other shares of the Company in issue.

The original investment period expired on 10 June 2013 and a proposal was made to Ordinary Shareholders to extend the investment period

by 21 months to 31 March 2015. A vote was held at a class meeting of shareholders on 8 April 2013 where the majority of shareholders

voted in favour of the proposed extension.

Following this meeting and with the Ordinary Shareholders approval of the extension, a new class, the Extended Life Shares, was created

and the Extended Life Shares were issued to 72% of initial Investors who elected to convert their Ordinary Shares to Extended Life Shares.

The rest of investors remain invested on the basis of the existing investment period.

The New Global Share Class was created in March 2014 and its investment period ended on 31 March 2017.

As at 31 December 2022, the Company had the following number of shares in issue:

Issued and fully paid up 31 DECEMBER 2022 31 DECEMBER 2021

Class A Shares 2 2

Ordinary Share Class of no par value (Nil in treasury; 2021: Nil) 15,382,770 15,382,770

Extended Life Share Class of no par value (Nil in treasury; 2021: Nil) 60,116,016 80,545,074

New Global Share Class of no par value (Nil in treasury; 2021: Nil) 31,023,609 41,116,617

FINANCIAL STATEMENTS | Notes to the Consolidated Financial Statements

90NB DISTRESSED DEBT INVESTMENT FUND LIMITED

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 90

Notes to the Consolidated Financial Statements | FINANCIAL STATEMENTS

ANNUAL REPORT 202291

Reconciliation of the number of shares in issue in each class (excluding Class A) as at 31 December 2022:

ORDINARY EXTENDED NEW GLOBAL

SHARES LIFE SHARES SHARES TOTAL

Balance as at 31 December 2021 15,382,770 80,545,074 41,116,617 137,044,461

Shares redeemed during the year – (20,429,058) (10,093,008) (30,522,066)

Buybacks (Shares repurchased) ––––

Balance at 31 December 2022

1

15,382,770 60,116,016 31,023,609 106,522,395

1 Balance of issued shares used to calculate NAV.

Reconciliation of the number of shares in issue in each class (excluding Class A) at 31 December 2021:

ORDINARY EXTENDED NEW GLOBAL

SHARES LIFE SHARES SHARES TOTAL

Balance as at 31 December 2020 15,382,770 80,545,074 41,116,617 137,044,461

Buybacks (Shares repurchased) ––––

Balance at 31 December 2021

1

15,382,770 80,545,074 41,116,617 137,044,461

1 Balance of issued shares used to calculate NAV.

Distributions

Set out below are details of the capital returns by way of compulsory partial redemptions approved during the year ended 31 December

2022.

ORDINARY SHARE CLASS EXTENDED LIFE SHARE CLASS NEW GLOBAL SHARE CLASS

DISTRI- DISTRI- DISTRI-

BUTION NUMBER PER SHARE BUTION NUMBER PER SHARE BUTION NUMBER PER SHARE

AMOUNT OF SHARES AMOUNT AMOUNT OF SHARES AMOUNT AMOUNT OF SHARES AMOUNT

21 November 2022 – – – $18,968,380 20,429,058 $0.9285 $8,036,339 10,093,008 $0.7962

– – – $18,968,380 20,429,058 – $8,036,339 10,093,008 –

There were no compulsory partial redemptions during the year ended 31 December 2021.

Buybacks

There were no shares repurchased and cancelled by the Company during the year ended 31 December 2022 and 31 December 2021.

NOTE 6 – MATERIAL AGREEMENTS AND RELATED PARTY TRANSACTIONS

Investment Management Agreement (“IMA”)

The Board is responsible for managing the business affairs of the Company but delegates certain functions to the Investment Manager under

an IMA dated 9 June 2010 (as amended).

On 17 July 2014, the Company, the Manager and the AIFM made certain classificatory amendments to their contractual arrangements for

the purposes of the AIFM Directive. The Sub-Investment Management Agreement was terminated on 17 July 2014 and Neuberger Berman

Investment Advisers LLC (formerly Neuberger Berman Fixed Income LLC), which was the Sub-Investment Manager, was appointed as the

AIFM per the amended and restated 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 uninvested 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. On 31 December 2017 the

Company entered into an Amendment Agreement amending the IMA. On the 30 January 2023 the Company entered into an Amendment

Agreement amending the IMA for data protection purposes to note the obligation on the recipient UK investment manager to comply with

the new SCCs in transferring personal data to the US AIFM.

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 91

NOTE 6 – MATERIAL AGREEMENTS AND RELATED PARTY TRANSACTIONS (continued)

Investment Management Agreement (“IMA”) (continued)

Per the IMA and in relation to the Ordinary Shares and Extended Life Shares, the Manager is entitled to a management fee, which shall

accrue daily, and be payable monthly in arrears, at a rate of 0.125% per month of the respective NAVs of the Ordinary Share and Extended

Life Share classes. Soft commissions are not used.

Per the IMA and in relation to the New Global Shares, the Manager was entitled to a management fee, which accrues daily, and is payable

monthly in arrears, at a rate of 0.125% per month of the NAV of the New Global Share Class (excluding, until such time as the New Global

Share Class is 85% invested, any cash balances (or cash equivalents)). The 85% threshold was crossed on 16 June 2015 and the Company

is charged 0.125% per month on the NAV of the New Global Share Class.

Effective 18 March 2021, the Investment Manager had waived its entitlement to all fees from the Company.

For the year ended 31 December 2022, the management fee expense was $Nil (31 December 2021: $342,338). At 31 December 2022, the

management fee payable was $Nil (31 December 2021: $Nil).

Performance Fee

Effective 18 March 2021, the Investment Manager had waived its entitlement to a performance fee. The performance fee for Ordinary

Shares, Extended Life Shares and New Global Shares (collectively the “Shares”) only became payable once the Company had made

aggregate distributions in cash to the shareholders of the Shares (which included the aggregate price of all Shares repurchased or redeemed

by the Company) equal to the aggregate gross proceeds from issuing Shares (the “Contributed Capital”) plus such amounts as resulted in

the shareholders having received a realised (cash-paid) IRR in respect of the Contributed Capital equal to Preferred Return, following which

there would be a 100% catch up payable to the Manager until the Manager had received 20% of all amounts in excess of Contributed

Capital distributed to the shareholders and paid to the Manager as a performance fee with, thereafter, all amounts distributed by the

Company 20:80 between the Manager’s performance fee and the cash distributed to shareholders.

The preferred rate of return for Ordinary Shares was an annualised 6%, for Extended Life Shares was an annualised 6% from 2010 to April

2013 and was 8% from April 2013 to date and for New Global Shares was an annualised 8%. For the purposes of financial reporting, the

performance fee was recognised on an accrual basis.

No performance fees were paid or payable in respect of any of the classes for the year ended 31 December 2022 or 31 December 2021,

nor would any be paid if the Company were to realise all of its assets at their carrying values at the year end.

Soft commissions are not used to pay for services used by the Investment Manager.

Administration, Company Secretarial and Custody Agreements

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. Bancorp (the

“Administration Agreement”). Under the terms of the Administration Agreement, Sub-Administration services are delegated to U.S. Bank

Global Fund Services (Ireland) Limited (the “Sub-Administrator”). The Sub-Administration Service Level Agreement was amended and

approved on 21 February 2018.

The Sub-Administrator is responsible for the day-to-day administration of the Company (including but not limited to the calculation and

publication of the estimated daily NAV).

Under the terms of the Administration Agreement, the Sub-Administrator is entitled to a fee of 0.09% for the first $500m of net asset value,

0.08% for the next $500m and 0.07% for any remaining balance, accrued daily and paid monthly in arrears and subject to an annual

minimum of $100,000.

Effective 28 February 2015, the Company entered into a Custody Agreement with U.S. Bank National Association (the “Custodian”) to

provide loan administration and custody services to the Company. Under the terms of the Custody Agreement the Custodian is entitled to

an annual fee of 0.025% of net asset value with a minimum annual fee of $25,000.

Effective 20 June 2017, Carey Commercial Limited was appointed the Company Secretary. The Company Secretary is entitled to an annual

fee of £68,000 plus fees for ad-hoc board meetings and additional services.

For the year ended 31 December 2022, the administration fee expense was $97,879 (31 December 2021: $105,576), the secretarial fee was

$109,316

1

of which $Nil

1

was in relation to the administration of the ongoing buyback programme, (31 December 2021: $92,082

1

) and the

loan administration and custody fee expense was $24,726 (31 December 2021: $36,919). At 31 December 2022, the administration fee

payable is $5,955

2

(31 December 2021: $8,482

2

), the secretarial fee payable is $24,559

2

(31 December 2021: $28,986

2

) and the loan

administration and custody fee payable is $3,344

2

(31 December 2021: $11,000

2

).

1 Amount is included under Professional and other expenses in the Consolidated Statement of Operations.

2 Amounts are included under Accrued expenses and other liabilities in the Consolidated Statement of Assets and Liabilities and Consolidated Statement of

Operations.

FINANCIAL STATEMENTS | Notes to the Consolidated Financial Statements

92NB DISTRESSED DEBT INVESTMENT FUND LIMITED

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 92

Notes to the Consolidated Financial Statements | FINANCIAL STATEMENTS

ANNUAL REPORT 202293

Directors’ Remuneration and Other Interests

The Directors are related parties and are remunerated for their services at a fee of $45,000 plus £10,000 each per annum ($60,000 plus

£10,000 for the Chairman, $50,000 plus £10,000 for the Chairman of the Audit Committee). For the year ended 31 December 2022, the

Directors’ fees and travel expenses amounted to $188,088 (31 December 2021: $196,364). Michael J. Holmberg, the non-independent

Director, has waived the fees for his services as a Director. There were no other related interests for the year ended 31 December 2022.

The Company has not set any requirements or guidelines for Directors to own shares in the Company. The beneficial interests of the Directors

and their connected persons in the Company’s shares as at 31 December 2022 are shown in the table below (no change from prior year):

NO. OF ORDINARY NO. OF EXTENDED NO. OF NEW TOTAL NO. OF

DIRECTOR SHARES LIFE SHARES GLOBAL SHARES SHARES

John Hallam – 55,048 37,312 92,360

Michael Holmberg – 24,304 39,008 63,312

Christopher Legge – – – –

Stephen Vakil – – 20,353 20,353

NOTE 7 – FINANCIAL HIGHLIGHTS

ORDINARY EXTENDED NEW GLOBAL ORDINARY EXTENDED LIFE NEW GLOBAL

SHARES LIFE SHARES SHARES SHARES SHARES SHARES

($) ($) (£) ($) ($) (£)

PER SHARE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED

OPERATING 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER

PERFORMANCE 2022 2022 2022 2021 2021 2021

Net asset value per share

at beginning of the year 0.9028 0.9243 0.5785 0.8420 0.7889 0.5682

Impact of share buybacks ––––––

Impact of dividend distribution – 0.0025 (0.0052) – – –

Income/(loss) from

investment operations

1

Net investment income/(loss) 0.0015 0.0605 0.0531 (0.0113) 0.0309 0.0265

Net realised and unrealised

(loss)/gain from investments

and foreign exchange (0.1313) (0.0145) 0.0376 0.0721 0.1045 (0.0162)

(Loss)/gain from investment

operations (0.1298) 0.0459 0.0897 0.0608 0.1354 0.0103

Net asset value per share

at end of the year

2

0.7730 0.9728 0.6640 0.9028 0.9243 0.5785

1 Weighted average number of shares outstanding was used for calculation.

2 Each share classes net assets includes the underlying assets and liabilities directly attributable to the respective share class.

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 93

NOTE 7 – FINANCIAL HIGHLIGHTS (continued)

ORDINARY EXTENDED NEW GLOBAL ORDINARY EXTENDED LIFE NEW GLOBAL

SHARES LIFE SHARES SHARES SHARES SHARES SHARES

($) ($) (£) ($) ($) (£)

YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED

NAV TOTAL 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER

RETURN

1,2

2022 2022 2022 2021 2021 2021

NAV Total Return before

performance fee (14.38%) 5.25% 14.78% 7.22% 17.16% 1.81%

Performance fee ––––––

NAV Total Return after

performance fee including

an income distribution

by way of dividend (14.38%) 5.25% 14.78% 7.22% 17.16% 1.81%

1 NAV Total Return is calculated for the Ordinary Shares, Extended Life Shares and New Global Shares only and is calculated based on movement in the NAV and

does not reflect any movement in the market value of the shares. A shareholder’s return may vary from these returns based on participation in new issues, the

timing of capital transactions etc. It assumes that all income distributions of the Company, paid by way of dividend, were reinvested, without transaction costs.

Class A shares are not presented as they are not profit participating shares.

2 An individual shareholder’s return may vary from these returns based on the timing of the shareholder’s subscriptions.

ORDINARY EXTENDED NEW GLOBAL ORDINARY EXTENDED LIFE NEW GLOBAL

SHARES LIFE SHARES SHARES SHARES SHARES SHARES

($) ($) (£) ($) ($) (£)

RATIOS TO YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED

AVERAGE NET 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER

ASSETS 2022 2022 2022 2021 2021 2021

Net investment

income/(loss) before

and after performance fees 0.17% 6.46% 8.36% (1.25%) 3.45% 4.51%

Total expenses after

performance fee (0.97%) (0.99%) (1.33%) (1.52%) (1.35%) (1.64%)

NOTE 8 – RECONCILIATION OF NET ASSET VALUE TO PUBLISHED NAV

In preparing the Financial Statements, there were adjustments relating to investment valuations. The impact of these adjustments on the NAV

per Ordinary Share, Extended Life Share and New Global Share is detailed below:

ORDINARY EXTENDED LIFE NEW GLOBAL

ORDINARY SHARE CLASS EXTENDED LIFE SHARE CLASS NEW GLOBAL SHARE CLASS

SHARE CLASS NAV PER SHARE CLASS NAV PER SHARE CLASS NAV PER

NET ASSETS SHARE NET ASSETS SHARE NET ASSETS SHARE

($) ($) ($) ($) (£) (£)

Published net assets as at

31 December 2022 11,930,152 0.7756 58,517,599 0.9734 20,524,544 0.6616

Valuation adjustments (39,831) (0.0026) (39,609) (0.0006) 74,365 0.0024

Net assets per Consolidated

Financial Statements 11,890,321 0.7730 58,477,990 0.9728 20,598,909 0.6640

FINANCIAL STATEMENTS | Notes to the Consolidated Financial Statements

94NB DISTRESSED DEBT INVESTMENT FUND LIMITED

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 94

Notes to the Consolidated Financial Statements | FINANCIAL STATEMENTS

ANNUAL REPORT 202295

ORDINARY EXTENDED LIFE NEW GLOBAL

ORDINARY SHARE CLASS EXTENDED LIFE SHARE CLASS NEW GLOBAL SHARE CLASS

SHARE CLASS NAV PER SHARE CLASS NAV PER SHARE CLASS NAV PER

NET ASSETS SHARE NET ASSETS SHARE NET ASSETS SHARE

($) ($) ($) ($) (£) (£)

Published net assets at

31 December 2021 13,887,833 0.9028 74,450,993 0.9243 23,784,796 0.5785

Valuation adjustments ––––––

Net assets per Consolidated

Financial Statements 13,887,833 0.9028 74,450,993 0.9243 23,784,796 0.5785

NOTE 9 – SUBSEQUENT EVENTS

The Directors have evaluated subsequent events up to 26 April 2023, which is the date that the Financial Statements were available to be

issued.

After the exit of a lodging & casino investment proceeds, the amount of $6.44m in the case of NBDX and $3.22m for NBDG, were received

on March 31, 2023. Following the receipt of these proceeds the Board resolved on April 17, 2023 to make distributions of $0.1356 and

£0.0698 per share in respect of the NBDX and NBDG classes respectively. The Board intends that these distributions will be made by a

compulsory pro rata redemption of shares held as at May 2, 2023 with payment being made on May 17, 2023 and all shares redeemed will

be cancelled.

There are no further items that require disclosure or adjustment to Financial Statements.

NB DISTRESSED DEBT AR pp78-95.qxp 27/04/2023 12:42 Page 95

Contact Details

ADDITIONAL INFORMATION | Contact Details

96NB DISTRESSED DEBT INVESTMENT FUND LIMITED

Directors

John Hallam (Chairman)

Michael Holmberg

Christopher Legge

Stephen Vakil

All c/o the Company’s registered office.

Registered Office

1st & 2nd Floors, Elizabeth House

Les Ruettes Brayes

St Peter Port

Guernsey

GY1 1EW

Company Secretary

Carey Commercial Limited

Alternative Investment Fund Manager

Neuberger Berman Investment Advisers LLC

Manager

Neuberger Berman Europe Limited

Custodian and Principal Bankers

US Bank National Association

Designated Administrator

U.S. Bank Global Fund Services (Guernsey) Limited

Independent Auditor

KPMG Channel Islands Limited

Sub-Administrator

U.S. Bank Global Fund Services (Ireland) Limited

Financial Adviser and Corporate Broker

Jefferies International Limited

Solicitors to the Company (as to English law and

U.S.securities law)

Herbert Smith Freehills LLP

Advocates to the Company (as to Guernsey law)

Carey Olsen

Registrar

Link Market Services (Guernsey) Limited

UK Transfer Agent

Link Group

Central Square

29 Wellington Street

Leeds

LS1 4DL

United Kingdom

Shareholders holding shares directly and not through a broker, saving

scheme or ISA and have queries in relation to their shareholdings

should contact the Registrar on +44 (0)371 664 0445. (Calls are

charged at the standard geographic rate and will vary by provider. Calls

outside the United Kingdom will be charged at the applicable

international rate. Lines are open between 9 a.m. to 5:30 p.m.

(excluding bank holidays)). Shareholders can also access their details

via the Registrar’s website:

www.signalshares.com.

Full contact details of the Company’s advisers and

Manager can be found on the Company’s website.

NB DISTRESSED DEBT AR pp96.qxp 27/04/2023 12:42 Page 96