BH Global Limited
Interim Report and Unaudited Financial Statements 2019
LEI: 549300BIIO4DTKEMXV14
(Classified Regulated Information, under DTR 6 Annex 1 section
1.2)
30 June
2019
The Company has today, in accordance with DTR 6.3.5, released
its Interim Report and Unaudited Financial Statements for the
period ended 30 June 2019. The Report
will shortly be available from the Company’s website:
www.bhglobal.com.
CHAIRMAN’S STATEMENT
Dear Shareholder,
The six months to 30 June 2019
delivered further strong performance for BH Global Limited (the
“Company” or “BH Global”). Over the six months the Net Asset Value
(“NAV”) per share of the smaller US Dollar class appreciated by
6.77% and that of the much larger Sterling class by 6.04% thus
delivering the strongest first half of a year since 2009 in the
more conducive environment for macro and foreign exchange
traders.
Further progress was made in narrowing, and indeed temporarily
eliminating, the discount to NAV at which the shares trade and
consequently the share price of the Sterling class appreciated by
11.0% over the six months. Whilst such appreciation is very
satisfactory, it must be noted that many equity markets around the
world delivered even stronger performance in what was an
extraordinarily favourable environment of strong GDP growth,
particularly in the United States,
and continued easy monetary conditions in many economies.
Nevertheless, shareholders should focus on the Company’s role as a
portfolio diversifier and its objective of delivering positive
returns that are generally uncorrelated to equity markets.
The Report of Brevan Howard Capital Management LP (the
“Manager”) follows this Statement and includes a detailed
performance review for the six-month period. Once again that
performance usefully exceeded that of the HFRI Macro Total
Index.
Assets
BH Global invests all of its assets, save for working cash
balances, in the Brevan Howard Multi-Strategy Master Fund (“BHMS”).
BH Global is the principal investor in BHMS and as at 30 June 2019 owned 74.96% of the fund. As at
30 June 2019, the Company’s total net
assets were $456.3 million,
significantly in excess of the $300
million threshold, agreed between Board and Manager that
would trigger a wind-up resolution to be put to shareholders.
On a look-through basis, over the six months the Company’s
allocation to the Brevan Howard Master Fund (“BHMF”) remained
effectively unchanged, ending the period at 46.5%. BHMF continued
its recent excellent performance and appreciated by 12.7% over the
six months. The allocation to the renamed Single Manager Portfolio
(previously called the Direct Investment Portfolio), which peaked
at over 60% in 2018 was further reduced from 44.14% to 40.6% and
the Investment Committee of the Manager made an allocation to the
Brevan Howard Alpha Strategies Master Fund, more details of which
are given in the Manager’s Report.
Discount and Discount Management
On the back of the excellent NAV performance, the discount to
NAV at which the Sterling shares traded was eliminated by
30 June 2019 and indeed at that date
they traded at a small premium of 0.9%. Although since that date a
small discount has returned, at present the Board is content to
watch the ebb and flow and does not anticipate making any further
buy backs unless the discount widens materially. No buy backs have
been undertaken since June 2018, and
thus the shareholder friendly concession by the Manager, in
relation to fee-free buy backs as reported in my Statement of
March 2019, has not been utilised
thus far in 2019 and indeed I hope will not have to be at all.
Board
After eleven years as a director and Chairman of the Management
Engagement Committee since its inception in 2010, Nicholas Moss retired at the AGM on 21 June 2019. On behalf of all shareholders I
thank Nick and pay tribute to his tireless dedication to promoting
shareholders’ interests.
In May we welcomed Andreas
Tautscher to the Board. Andreas qualified as a Chartered
Accountant with PricewaterhouseCoopers and had a distinguished
career with Deutsche Bank for 24 years from which he retired in
2018 having been Chief Executive of Deutsche’s Channel Island
business. Andreas has wide experience of financial organisations,
including platforms on which alternative assets, including hedge
funds, are administered.
Annual General Meeting and
Shareholders
I hold that companies are the property of their shareholders and
that shareholders should be encouraged to exercise their
proprietorship by voting at AGMs. I am pleased to report that the
votes cast at the Company’s AGM in June amounted to approximately
55.6% of the total register and that all resolutions were passed
with a 100% majority in favour, save for one resolution which
attracted 99.8% in favour. The Board and Manager are very
appreciative of such a strong showing of support from
shareholders.
Both the Manager and I maintain close contact with the Company’s
major shareholders and we are always ready to hear their
views. The improved trading environment has encouraged the
Manager, together with the Company’s advisors, to promote the
Brevan Howard managed companies and in conjunction with BH Macro
Limited (“BH Macro”), three well attended meetings were hosted in
May by JPMorgan Cazenove for shareholders and other interested
potential investors. Both the Chairman-elect of BH Macro and
I attended all three meetings where the Manager reviewed
performance and considered the outlook.
Corporate Brokers
Since 2013 the Company has retained JPMorgan Cazenove and
Canaccord Genuity as joint corporate brokers. In April 2019 Canaccord Genuity announced that, for
broader strategic reasons, it would no longer be pursuing its
investment companies’ business in London. Save for some individuals who opted to
retire, the entire Canaccord Genuity team moved to Investec Bank
plc (“Investec”) in June and BH Global has since appointed Investec
as joint broker to the Company to ensure continuity of advice from
the trusted teams of individuals at each of the two firms.
Conclusion
The financial and political worlds continue to be very
uncertain. In most developed countries interest rates, both nominal
and real, continue at what historically have been almost
unprecedentedly low levels. The exception until recently has been
the United States, although even
there rises in interest rates have now moved into reverse gear
despite an economy which has experienced robust growth in recent
years. Meanwhile the geo-political scene continues to demonstrate
considerable potential risk and the domestic political scene in
many countries, particularly at present in the United Kingdom, is highly uncertain. Indeed,
the only certainty looking forward is a continuation of uncertainty
which will surely lead to further volatility in many asset
markets.
Easy monetary conditions since the global financial crisis have
driven up the valuation of many asset classes, much to the benefit
of the owners of those assets and to those that track indices
rather than seek to generate alpha. However, looking forward it
feels as if fundamentals are re-asserting themselves as the primary
valuation driver.
Everything points towards future bouts of uncertainty and
volatility in markets and it is to be hoped that Brevan Howard, as
Manager of the Company, will continue to take advantage of that
volatility for the benefit of the shareholders in BH Global
and that the Company itself will continue to play its role for
shareholders as a diversifier of portfolio risk in these uncertain
times.
Yours sincerely,
Sir Michael Bunbury
Chairman
20 August 2019
GLOSSARY OF TERMS
BHAHMF |
Brevan Howard AH
Master Fund Limited |
BHALMF |
Brevan Howard Alpha
Strategies Master Fund Limited |
BHCM or the
Manager |
Brevan Howard Capital
Management LP |
BHDGST |
BH-DG Systematic
Trading Master Fund Limited |
BHG, BH Global or the
Company |
BH Global Limited |
BHGVMF |
Brevan Howard Global
Volatility Master Fund Limited |
BHMF |
Brevan Howard Master
Fund Limited |
BHMS or the Master
Fund |
Brevan Howard
Multi-Strategy Master Fund Limited |
SMP* |
Single Manager
Portfolio |
* Prior to 1 January 2019, the
Single Manager Portfolio ("SMP") was described as the Direct
Investment Portfolio ("DIP").
UNAUDITED SUPPLEMENTAL FINANCIAL STATEMENTS
In order to provide shareholders with further information
regarding the net asset value of each class of shares, coupled with
greater transparency as to the income, gains and expenses incurred
and the changes in net assets of the two classes, the results have
been presented in the tables below. These tables show the
allocation of all transactions in the currency of the respective
share class.
It should be noted that these tables have not been subject to
review by KPMG Channel Islands Limited whose report can be found in
below in the Independent Review Report to BH Global Limited.
UNAUDITED SUPPLEMENTAL STATEMENT OF ASSETS AND
LIABILITIES
As at 30 June 2019
|
|
|
|
|
US Dollar shares |
|
Sterling shares |
|
Company total |
|
|
|
|
|
|
US$'000 |
|
£'000 |
|
US$'000 |
Assets |
|
|
|
|
|
|
|
|
|
|
Investment
in BHMS |
|
|
|
|
44,326 |
|
326,648 |
|
460,068 |
Other
debtors |
|
|
|
|
1 |
|
15 |
|
20 |
Cash and
bank balances denominated in US Dollars |
190 |
|
- |
|
190 |
Cash and
bank balances denominated in Sterling |
|
- |
|
2,548 |
|
3,243 |
Total
assets |
|
|
|
|
44,517 |
|
329,211 |
|
463,521 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Management
fees |
|
|
|
|
33 |
|
263 |
|
368 |
Performance fees |
|
|
|
|
703 |
|
4,610 |
|
6,571 |
Accrued
expenses and other liabilities |
|
|
13 |
|
89 |
|
126 |
Directors'
fees and expenses |
|
|
|
|
9 |
|
70 |
|
99 |
Administration fees |
|
|
|
|
5 |
|
37 |
|
52 |
Total
liabilities |
|
|
|
|
763 |
|
5,069 |
|
7,216 |
|
|
|
|
|
|
|
|
|
|
|
Net
assets |
|
|
|
|
43,754 |
|
324,142 |
|
456,305 |
|
|
|
|
|
|
|
|
|
|
|
Number
of shares in issue |
|
|
|
|
2,641,472 |
|
19,886,259 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
Net
asset value per share |
|
|
|
|
US$16.56 |
|
£16.30 |
|
- |
UNAUDITED SUPPLEMENTAL STATEMENT OF OPERATIONS
For the period from 1 January 2019 to
30 June 2019
|
|
|
US Dollar shares |
Sterling shares |
|
Company total |
|
|
|
|
|
US$'000 |
|
£'000 |
|
US$'000 |
Net
investment loss allocated from BHMS |
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
64 |
|
460 |
|
658 |
Expenses |
|
|
|
|
(98) |
|
(709) |
|
(1,016) |
Net
investment loss allocated from BHMS |
|
|
|
(34) |
|
(249) |
|
(358) |
|
|
|
|
|
|
|
|
|
|
Company
income |
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
1 |
|
- |
|
1 |
Total Company
income |
|
|
|
|
1 |
|
- |
|
1 |
|
|
|
|
|
|
|
|
|
|
Company
expenses |
|
|
|
|
|
|
|
|
|
Management fees |
|
|
|
|
206 |
|
1,533 |
|
2,188 |
Performance fees |
|
|
|
|
703 |
|
4,610 |
|
6,667 |
Other expenses |
|
|
|
|
29 |
|
203 |
|
291 |
Directors' fees and
expenses |
|
|
|
|
20 |
|
153 |
|
218 |
Administration
fees |
|
|
|
|
8 |
|
54 |
|
78 |
Foreign
exchange (gains)/losses* |
|
|
|
(26) |
|
19 |
|
710 |
Total Company
expenses |
|
|
|
|
940 |
|
6,572 |
|
10,152 |
|
|
|
|
|
|
|
|
|
|
Net investment
loss |
|
|
|
|
(973) |
|
(6,821) |
|
(10,509) |
|
|
|
|
|
|
|
|
|
|
Net
realised and unrealised gains/(losses) on investments allocated
from BHMS |
|
|
|
|
|
Net
realised gain on investments |
|
|
|
432 |
|
3,099 |
|
4,441 |
Net
unrealised gain on investments |
|
|
|
3,355 |
|
24,969 |
|
35,656 |
Net
realised and unrealised foreign exchange loss |
|
|
|
|
|
|
|
|
-
on hedging |
|
|
|
|
- |
|
(2,805) |
|
(3,630) |
Net
realised and unrealised gains on investments allocated from
BHMS |
3,787 |
|
25,263 |
|
36,467 |
|
|
|
|
|
|
|
|
|
|
Net
increase in net assets resulting from operations |
2,814 |
|
18,442 |
|
25,958 |
*The Company total for foreign exchange (gains)/losses contains
the results of translating the Sterling share class into US
Dollars.
The trades carried out in the various underlying portfolios have
structures of varying complexity and inherent leverage. This can
result in situations where, at an individual trade level, interest
income or expense is offset by losses or gains on other investments
to achieve a net return. However, accounting conventions require
that all these elements are disclosed gross which can result in
separate reporting of what would otherwise be off-setting interest
income and expenses, realised gains and losses or unrealised gains
and losses.
UNAUDITED SUPPLEMENTAL STATEMENT OF CHANGES IN NET
ASSETS
For the period from 1 January 2019 to
30 June 2019
|
US
Dollar shares |
|
Sterling shares |
|
Company total |
|
US$'000 |
|
£'000 |
|
US$'000 |
Net increase in net
assets resulting from operations |
|
|
|
|
|
Net investment
loss |
(973) |
|
(6,821) |
|
(10,509) |
Net realised gain on
investments allocated from BHMS |
432 |
|
3,099 |
|
4,441 |
Net unrealised gain on
investments allocated from BHMS |
3,355 |
|
24,969 |
|
35,656 |
Net realised and
unrealised foreign exchange loss allocated from BHMS |
- |
|
(2,805) |
|
(3,630) |
|
2,814 |
|
18,442 |
|
25,958 |
|
|
|
|
|
|
Share capital
transactions |
|
|
|
|
|
Net share
conversions |
(1,577) |
|
1,233 |
|
- |
|
(1,577) |
|
1,233 |
|
- |
|
|
|
|
|
|
Net increase in net
assets |
1,237 |
|
19,675 |
|
25,958 |
Net assets at the
beginning of the period |
42,517 |
|
304,467 |
|
430,347 |
Net assets at the
end of the period |
43,754 |
|
324,142 |
|
456,305 |
MANAGER’S REPORT
Brevan Howard Capital Management LP (“BHCM” or the “Manager”) is
the Manager of BH Global Limited (“BHG” or the “Company”). BHG
invests all its assets (net of short-term working capital) in
Brevan Howard Multi-Strategy Master Fund Limited (“BHMS” or the
“Master Fund”) a company also managed by BHCM.
Performance Summary
The NAV per share of the USD shares appreciated by 6.77% during the
first half of 2019, while the NAV per share of the GBP shares
appreciated by 6.04%.
The month-by-month NAV performance of the USD and GBP currency
classes of BHG since it commenced operations in 2008 is set out
below:
USD |
Jan |
Feb |
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
YTD |
2008 |
- |
- |
- |
- |
- |
1.16* |
0.10 |
0.05 |
(3.89) |
1.13 |
2.74 |
0.38 |
1.55 |
2009 |
3.35 |
1.86 |
1.16 |
1.06 |
2.79 |
(0.21) |
1.07 |
0.27 |
1.49 |
0.54 |
0.11 |
0.04 |
14.31 |
2010 |
0.32 |
(0.85) |
(0.35) |
0.53 |
(0.06) |
0.60 |
(0.79) |
0.80 |
1.23 |
0.39 |
(0.21) |
(0.06) |
1.54 |
2011 |
0.09 |
0.42 |
0.34 |
1.20 |
0.19 |
(0.56) |
1.61 |
3.51 |
(1.29) |
(0.14) |
0.19 |
(0.88) |
4.69 |
2012 |
1.22 |
1.02 |
(0.54) |
(0.10) |
(0.65) |
(1.53) |
1.46 |
0.70 |
1.47 |
(0.72) |
0.81 |
1.26 |
4.44 |
2013 |
1.33 |
0.49 |
0.33 |
1.60 |
(0.62) |
(1.95) |
(0.14) |
(0.86) |
0.09 |
(0.13) |
0.95 |
0.75 |
1.79 |
2014 |
(0.98) |
(0.04) |
(0.26) |
(0.45) |
0.90 |
0.70 |
0.60 |
0.05 |
1.56 |
(0.75) |
0.71 |
0.44 |
2.49 |
2015 |
3.37 |
(0.41) |
0.35 |
(1.28) |
1.03 |
(1.49) |
(0.06) |
(1.56) |
(0.58) |
(0.67) |
3.06 |
(3.31) |
(1.73) |
2016 |
0.82 |
1.03 |
(0.83) |
(0.66) |
0.28 |
1.71 |
0.13 |
0.10 |
(0.23) |
0.47 |
3.62 |
0.82 |
7.42 |
2017 |
0.22 |
0.92 |
(0.99) |
(0.10) |
0.26 |
0.19 |
3.21 |
0.21 |
(0.44) |
(0.85) |
(0.02) |
0.03 |
2.59 |
2018 |
3.08 |
(0.89) |
(1.35) |
0.72 |
5.46 |
(1.12) |
0.30 |
(0.09) |
(0.29) |
0.22 |
(0.01) |
0.52 |
6.55 |
2019 |
0.17 |
(0.81) |
1.63 |
(1.15) |
3.79 |
3.06 |
|
|
|
|
|
|
6.77 |
GBP |
Jan |
Feb |
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
YTD |
2008 |
- |
- |
- |
- |
- |
1.40* |
0.33 |
0.40 |
(4.17) |
1.25 |
3.27 |
0.41 |
2.76 |
2009 |
3.52 |
1.94 |
1.03 |
0.68 |
2.85 |
(0.28) |
1.05 |
0.31 |
1.51 |
0.58 |
0.12 |
0.08 |
14.15 |
2010 |
0.35 |
(0.93) |
(0.32) |
0.58 |
(0.04) |
0.62 |
(0.81) |
0.84 |
1.17 |
0.37 |
(0.20) |
(0.03) |
1.61 |
2011 |
0.10 |
0.41 |
0.38 |
1.13 |
0.04 |
(0.59) |
1.69 |
3.67 |
(1.41) |
(0.15) |
0.21 |
(0.84) |
4.65 |
2012 |
1.23 |
1.05 |
(0.51) |
(0.08) |
(0.62) |
(1.51) |
1.50 |
0.70 |
1.44 |
(0.72) |
0.72 |
1.31 |
4.55 |
2013 |
1.36 |
0.56 |
0.36 |
1.63 |
(0.48) |
(1.91) |
(0.11) |
(0.84) |
0.14 |
(0.11) |
0.97 |
0.77 |
2.32 |
2014 |
(0.97) |
(0.14) |
(0.33) |
(0.30) |
0.56 |
0.48 |
0.42 |
0.03 |
1.85 |
(0.76) |
0.78 |
0.48 |
2.09 |
2015 |
3.48 |
(0.34) |
0.33 |
(1.26) |
1.18 |
(1.50) |
(0.03) |
(1.44) |
(0.64) |
(0.79) |
3.02 |
(3.16) |
(1.32) |
2016 |
0.91 |
1.08 |
(1.04) |
(0.65) |
0.24 |
1.46 |
0.13 |
(0.14) |
(0.34) |
0.59 |
3.28 |
0.96 |
6.60 |
2017 |
0.16 |
0.87 |
(1.15) |
(0.04) |
0.10 |
(0.21) |
3.12 |
0.24 |
(0.43) |
(0.75) |
(0.02) |
(0.11) |
1.75 |
2018 |
3.09 |
(0.99) |
(1.42) |
0.71 |
5.43 |
(1.21) |
0.20 |
(0.21) |
(0.38) |
0.06 |
(0.13) |
0.37 |
5.43 |
2019 |
0.04 |
(0.99) |
1.59 |
(1.36) |
3.88 |
2.85 |
|
|
|
|
|
|
6.04 |
Source: BHG NAV and NAV per Share data is provided by BHG’s
administrator, Northern Trust International Fund Administration
Services (Guernsey) Limited (“Northern Trust”). BHG NAV per Share %
Monthly Change calculations are made by BHCM.
BHG NAV data is unaudited and net of all investment management
fees and all other fees and expenses payable by BHG. NAV
performance is provided for information purposes only. Shares in
BHG do not necessarily trade at a price equal to the prevailing NAV
per Share.
* Performance is calculated from a base NAV per Share of 10 in
each currency. The opening NAV in May
2008 was 9.9 (after deduction of the IPO costs borne by
BHG).
Data as at 30 June 2019
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
Underlying allocation review
The Investment Committee (“IC”) of the Manager made the decision to
make an initial direct allocation of approximately 5% to BHALMF
with effect from 1 June 2019. BHALMF
is managed by a select set of traders, who typically employ
relative value or directional strategies with a low drawdown
tolerance in fixed income and FX markets. Prior to the direct
allocation, BHMS had gained exposure to BHALMF through BHMF only.
The move to increase the exposure to BHALMF was driven by a
perceived continued good opportunity set for BHALMF’s strategies.
The allocations to BHDGST, the SMP and BHGVMF were reduced
accordingly whereas the allocation to BHMF remained stable. At the
end of the period, the allocations to BHMF and SMP stood at
approximately 47% and 41% respectively.
The IC will continue to take advantage of the flexibility within
BHMS’s mandate in order to seek high risk-adjusted returns and keep
a healthy diversification across strategies, asset classes and
traders.
Performance Review
During the first half of 2019, the NAV per share of the USD and GBP
classes appreciated by 6.77% and 6.04% respectively, which compared
favourably to the HFRI Macro Total Index, which was up 4.83%.
The first half of the year proved to be relatively successful
for BHMS’s macro trading. The performance in the second quarter was
particularly strong generating one of the highest quarterly returns
since inception.
With regard to the returns of the underlying fund allocations,
BHMF was the main positive contributor on the back of solid gains
within interest rates trading. Both BHMF and BHMS continued to
benefit from the improved environment in interest rates trading
that has developed since early 2018. The SMP, BHALMF and BHDGST
added to the gains whereas BHGVMF was a modest detractor.
Looking across the trading areas, most of the gains arose in
interest rate trading where directional trading of US interest
rates was the main driver, particularly during the second quarter.
Directional and yield curve trading strategies in European as well
as across a range of smaller markets including SGD, KRW and MXN
also contributed to returns. In most of the markets BHMS was
positioned for lower interest rates through directional positions
across the curve. One of the dominant trading themes over the
period was positioning for lower interest rates globally on back of
a possible slowdown in global trade data leading to a more dovish
US Federal Reserve policy.
Trading in commodities generated additional gains mainly from
volatility strategies and tactical trading in oil. FX trading was a
detractor with most of the losses coming from Brexit-related
trades. Long GBP against EUR was one of the main negative
drivers.
Both credit and equity trading were small parts of BHMS’s risk
exposure during the period. Credit trading was effectively flat
whereas directional trading in equity indices generated a modest
loss.
Systematic trading generated solid gains with the bulk of the
profits from positioning for lower rates globally. Some of the
gains were offset by losses in FX, equity indices and commodities.
In FX, a long exposure to USD against a basket of other currencies
was a detractor. In commodities and equity, short exposures to
energy and equity indices at the start of the year were the main
detractors. BHDGST Class Z USD shares appreciated by 7.62% during
the first six months, which was a modest outperformance compared to
the performance of 7.43% of the SG Trend Index over the period.
As has been the case in each of the past three years, the SMP
was a positive contributor to BHMS’s performance. The SMP was up
5.66% net of fees and is the area of the portfolio whereby the IC
has the ability to allocate directly to trading books and funds
which are managed by an individual portfolio manager. At the end of
June 2019, the SMP had exposure to
six trading books and funds. The profits were broadly generated in
the same trading areas as described for BHMS overall.
Attribution Tables
In measuring the attribution of the underlying portfolios, the
Manager employs a number of metrics including the two set out in
the tables below.
All positions, regardless of which trading book holds them, are
allocated to an asset class and the attribution per asset class is
summarised in the first table below.
The second table summarises the attribution, but by reference to
the overall strategy classification of each trading book. It should
be noted that, as the second table indicates, there are some
strategy groups which at 30 June 2019
had been allocated no trading books.
Quarterly and semi-annual contribution
(%) to the performance of BHG USD Shares (net of fees and expenses)
by asset class*
|
Rates |
FX |
Commodity |
Credit |
Equity |
Discount Management |
TOTAL |
Q1 2019 |
2.14 |
-1.22 |
0.40 |
-0.07 |
-0.26 |
0.00 |
0.98 |
Q2 2019 |
7.91 |
-1.91 |
0.20 |
-0.04 |
-0.29 |
0.00 |
5.74 |
YTD 2019 |
10.22 |
-3.11 |
0.59 |
-0.11 |
-0.55 |
0.00 |
6.77 |
*Data as at 30 June 2019
Quarterly and semi-annual figures are calculated by BHCM as at
30 June 2019, based on performance
data for each period provided by BHG’s administrator, Northern
Trust. Figures rounded to two decimal places.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
Methodology and Definition of Contribution to
Performance:
Attribution by asset class is produced at the instrument level,
with adjustments made based on risk estimates.
The above asset classes are categorised as follows:
“Rates”: interest rates markets
“FX”: FX forwards and options
“Commodity”: commodity futures and options
“Credit”: corporate and asset-backed indices, bonds and
CDS
“Equity”: equity markets including indices and other
derivatives
“Discount Management”: buyback activity for discount
management purposes
Quarterly and semi-annual contribution
(%) to the performance of BHG USD Shares (net of fees and expenses)
by strategy group*
|
Macro |
Systematic |
Rates |
FX |
Equity |
Credit |
EMG |
Commodity |
Discount Management |
TOTAL |
Q1 2019 |
-0.35 |
0.04 |
1.01 |
-0.13 |
0.00 |
0.00 |
0.43 |
0.00 |
0.00 |
0.98 |
Q2 2019 |
3.20 |
0.43 |
2.13 |
-0.08 |
0.00 |
0.00 |
-0.01 |
-0.01 |
0.00 |
5.74 |
YTD 2019 |
2.84 |
0.47 |
3.16 |
-0.21 |
0.00 |
0.00 |
0.42 |
-0.01 |
0.00 |
6.77 |
*Data as at 30 June 2019
Quarterly and semi-annual figures are calculated by BHCM as at
30 June 2019, based on performance
data for each period provided by BHG’s administrator, Northern
Trust. Figures rounded to two decimal places.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
Methodology and Definition of Contribution to
Performance:
Strategy Group Attribution is approximate and has been derived by
allocating each underlying trader book to a single category. In
cases where a trader book has activity in more than one category,
the most relevant category has been selected.
The above strategies are categorised as follows:
“Macro”: multi-asset global markets, mainly directional (for
the Fund, the majority of risk in this category is in rates)
“Systematic”: rules-based futures trading
“Rates”: developed interest rates markets
“FX”: global FX forwards and options
“Equity”: global equity markets including indices and other
derivatives
“Credit”: corporate and asset-backed indices, bonds and
CDS
“EMG”: global emerging markets
“Commodity”: liquid commodity futures and options
“Discount Management”: buyback activity for discount
management purposes
Commentary and Outlook
At the beginning of 2019, investors were struggling to digest a
slowdown in the global economy, renewed trade tensions, and tighter
monetary policy in the US. Over the course of the first half of the
year, the global economy showed little improvement and trade
tensions intensified. Partly as a result, the Federal Reserve Board
pointed to the desirability of easier monetary policy in order to
address the increased downside risks.
Risk assets generally rallied on the promise of lower interest
rates, offering the prospect that the slowdown may be temporary.
Nevertheless, there are considerable challenges going forward.
Trade wars between the US and China do not appear like they will be resolved
anytime soon. Although the direct impact of the resulting tariffs
should be manageable, business sentiment, especially in
manufacturing, has suffered with uncertain prospects for
recovery.
Growth in the developed world was uneven with Germany and Italy recording declines in real GDP and
China slowing notably. The US
stood out in terms of headline real GDP growth, but that masked
declines in business fixed investment. Meanwhile inflation has been
weak almost everywhere. In the eleventh year of the expansion,
major economies like the US and Euro area have consistently failed
to achieve their inflation target. Policy makers at the Federal
Reserve Board and the European Central Bank appear more committed
to easing in order to extend the expansion and achieve their
inflation mandates. Investors look for rate cuts in the US and Euro
area in the second half of the year, and have already seen cuts in
various small open economies like Australia, New
Zealand, and South
Korea.
Brevan Howard wishes to thank shareholders once again for their
continued support.
Brevan Howard Capital Management, LP,
acting by its sole general partner,
Brevan Howard Capital Management Limited
20 August 2019
STATEMENT OF DIRECTORS’ RESPONSIBILITY
IN RESPECT OF THE INTERIM UNAUDITED FINANCIAL STATEMENTS
We confirm to the best of our knowledge that:
- these Interim Unaudited Financial Statements have been
prepared in conformity with United States Generally Accepted
Accounting Principles and give a true and fair view of the assets,
liabilities, financial position and profit or loss; and
- these Interim Unaudited Financial Statements include
information detailed in the Chairman's Statement, the Manager's
Report and the notes to the Interim Unaudited Financial Statements,
which provides a fair view of the information required by:-
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on these
Interim Unaudited Financial Statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the Company
during that period; and any changes in the related party
transactions described in the last Annual Audited Financial
Statements that could materially affect the financial position or
performance of the Company.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information include on the Company's
website, and for the preparation and dissemination of financial
statements. Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Signed on behalf of the Board by:
Sir Michael Bunbury
Chairman
Sally-Ann Farnon
Director
20 August 2019
INDEPENDENT REVIEW REPORT TO BH GLOBAL LIMITED
Conclusion
We have been engaged by BH Global Limited (the “Company”) to review
the Interim Unaudited Financial Statements included in the Interim
Report for the six months ended 30 June
2019 of the Company which comprises the Unaudited Statement
of Assets and Liabilities, the Unaudited Statement of Operations,
the Unaudited Statement of Changes in Net Assets, the Unaudited
Statement of Cash Flows and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the financial statements for the period
ended 30 June 2019 do not give a true
and fair view of the financial position of the Company as at
30 June 2019 and of its financial
performance and its cash flows for the six month period then ended
in conformity with U.S generally accepted accounting principles and
the Disclosure Guidance and Transparency Rules (the “DTR”) of the
UK’s Financial Conduct Authority (the “UK FCA”).
Scope of review
We conducted our review in accordance with International Standard
on Review Engagements (UK and Ireland) 2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity
issued by the Auditing Practices Board for use in the UK. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. We
read the other information contained in the Interim Report and
consider whether it contains any apparent misstatements or material
inconsistencies with the information in the unaudited interim
financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit
opinion.
Directors’ responsibilities
The Interim Report and Unaudited Financial Statements are the
responsibility of, and have been approved by, the directors. The
directors are responsible for preparing the Interim Report and
Unaudited Financial Statements in accordance with the DTR of the UK
FCA.
The Interim Unaudited Financial Statements included in this
Interim Report have been prepared in conformity with U.S generally
accepted accounting principles.
Our responsibility
Our responsibility is to express to the Company a conclusion on the
Interim Unaudited Financial Statements included in the Interim
Report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement letter to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Barry Ryan
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants, Guernsey
20 August 2019
UNAUDITED STATEMENT OF ASSETS AND LIABILITIES
As at 30 June 2019
|
|
|
|
|
|
|
30.06.19 |
|
31.12.18 |
|
30.06.18 |
|
|
|
|
|
|
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
|
|
|
|
|
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
Assets |
|
|
|
|
|
|
|
|
|
|
|
Investment
in BHMS |
|
|
|
|
|
460,068 |
|
427,547 |
|
443,747 |
Other
debtors |
|
|
|
|
|
20 |
|
50 |
|
18 |
Cash and
bank balances denominated in US Dollars |
|
190 |
|
936 |
|
240 |
Cash and
bank balances denominated in Sterling |
|
|
3,243 |
|
7,802 |
|
6,825 |
Total
assets |
|
|
|
|
|
463,521 |
|
436,335 |
|
450,830 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
Management
fees (note 4) |
|
|
|
|
|
368 |
|
387 |
|
369 |
Performance fees (note 4) |
|
|
|
|
|
6,571 |
|
5,466 |
|
5,668 |
Accrued
expenses and other liabilities |
|
|
|
126 |
|
96 |
|
202 |
Directors'
fees and expenses (note 5) |
|
|
|
99 |
|
- |
|
- |
Administration fees (note 4) |
|
|
|
|
|
52 |
|
39 |
|
27 |
Total
liabilities |
|
|
|
|
|
7,216 |
|
5,988 |
|
6,266 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets |
|
|
|
|
|
456,305 |
|
430,347 |
|
444,564 |
|
|
|
|
|
|
|
|
|
|
|
|
Number
of shares in issue (note 6) |
|
|
|
|
|
|
|
|
US Dollar
shares |
|
|
|
|
|
2,641,472 |
|
2,740,700 |
|
2,830,902 |
Sterling
shares |
|
|
|
|
|
19,886,259 |
|
19,807,562 |
|
19,737,930 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value per share (notes 8 and 11) |
|
|
|
|
|
|
|
|
US Dollar
shares |
|
|
|
|
|
US$16.56 |
|
US$15.51 |
|
US$15.41 |
Sterling
shares |
|
|
|
|
|
£16.30 |
|
£15.37 |
|
£15.39 |
See accompanying notes to the Interim Unaudited Financial
Statements.
Signed on behalf of the Board by:
Sir Michael Bunbury
Chairman
Sally-Ann Farnon
Director
20 August 2019
UNAUDITED STATEMENT OF OPERATIONS
For the period from 1 January 2019 to
30 June 2019
|
|
|
|
|
01.01.19 |
|
01.01.18 |
|
01.01.18 |
|
|
|
|
|
to
30.06.19 |
|
to
31.12.18 |
|
to
30.06.18 |
|
|
|
|
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
|
|
|
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
Net
investment (loss)/gain allocated from BHMS |
|
|
|
|
|
|
Interest income |
|
|
|
|
658 |
|
10,829 |
|
11,090 |
Expenses |
|
|
|
|
(1,016) |
|
(3,570) |
|
(3,379) |
|
|
|
|
|
|
|
|
|
|
Net
investment (loss)/gain allocated from BHMS |
|
(358) |
|
7,259 |
|
7,711 |
|
|
|
|
|
|
|
|
|
|
Company
income |
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
1 |
|
- |
|
- |
Total Company
income |
|
|
|
|
1 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
Company
expenses |
|
|
|
|
|
|
|
|
|
Management fees (note
4) |
|
|
|
|
2,188 |
|
4,483 |
|
2,260 |
Performance fees (note
4) |
|
|
|
|
6,667 |
|
5,679 |
|
5,846 |
Other expenses |
|
|
|
|
291 |
|
741 |
|
459 |
Directors'
fees and expenses (note 5) |
|
|
|
218 |
|
463 |
|
239 |
Administration fees
(note 4) |
|
|
|
|
78 |
|
158 |
|
79 |
Foreign
exchange losses (note 3) |
|
|
|
710 |
|
20,577 |
|
7,017 |
Total Company
expenses |
|
|
|
|
10,152 |
|
32,101 |
|
15,900 |
|
|
|
|
|
|
|
|
|
|
Net investment
loss |
|
|
|
|
(10,509) |
|
(24,842) |
|
(8,189) |
|
|
|
|
|
|
|
|
|
|
Net
realised and unrealised gains/(losses) on investments allocated
from BHMS |
|
|
|
|
|
Net
realised gain/(loss) on investments |
|
|
|
4,441 |
|
16,421 |
|
(5,412) |
Net
unrealised gain on investments |
|
|
|
35,656 |
|
17,037 |
|
32,736 |
Net
realised and unrealised foreign exchange loss |
|
|
|
|
|
|
-
on hedging |
|
|
|
|
(3,630) |
|
(6,429) |
|
(2,730) |
Net
realised and unrealised gains on investments allocated from
BHMS |
|
36,467 |
|
27,029 |
|
24,594 |
Net
increase in net assets resulting from operations |
25,958 |
|
2,187 |
|
16,405 |
See accompanying notes to the Interim Unaudited Financial
Statements.
UNAUDITED STATEMENT OF CHANGES IN NET ASSETS
For the period from 1 January 2019 to
30 June 2019
|
|
|
|
|
|
|
01.01.19 |
|
01.01.18 |
|
01.01.18 |
|
|
|
|
|
|
|
to
30.06.19 |
|
to
31.12.18 |
|
to
30.06.18 |
|
|
|
|
|
|
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
|
|
|
|
|
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
Net
increase in net assets resulting from operations |
|
|
|
|
|
|
|
Net
investment loss |
|
|
|
|
|
(10,509) |
|
(24,842) |
|
(8,189) |
Net
realised gain/(loss) on investments allocated from BHMS |
4,441 |
|
16,421 |
|
(5,412) |
Net
unrealised gain on investments allocated from BHMS |
|
|
35,656 |
|
17,037 |
|
32,736 |
Net
realised and unrealised foreign exchange loss allocated from
BHMS |
|
(3,630) |
|
(6,429) |
|
(2,730) |
|
|
|
|
|
|
|
25,958 |
|
2,187 |
|
16,405 |
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital transactions |
|
|
|
|
|
|
|
|
|
|
Purchase of own shares (note 6) |
|
|
|
|
|
|
|
|
|
Sterling
shares |
|
|
|
|
|
- |
|
(14,131) |
|
(14,132) |
|
|
|
|
|
|
|
- |
|
(14,131) |
|
(14,132) |
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in net assets |
|
|
|
25,958 |
|
(11,944) |
|
2,273 |
Net
assets at the beginning of the period/year |
|
|
|
430,347 |
|
442,291 |
|
442,291 |
Net
assets at the end of the period/year |
|
|
|
456,305 |
|
430,347 |
|
444,564 |
See accompanying notes to the Interim Unaudited Financial
Statements.
UNAUDITED STATEMENT OF CASH FLOWS
For the period from 1 January 2019 to
30 June 2019
|
|
|
01.01.19 |
|
01.01.18 |
|
01.01.18 |
|
|
|
to
30.06.19 |
|
to
31.12.18 |
|
to
30.06.18 |
|
|
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
|
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
Cash flows from
operating activities |
|
|
|
|
|
|
|
Net
increase in net assets resulting from operations |
|
25,958 |
|
2,187 |
|
16,405 |
Adjustments to reconcile net increase in net assets
resulting
operations to net cash provided by operating
activities |
|
|
|
|
|
Net
investment loss/(gain) allocated from BHMS |
|
358 |
|
(7,259) |
|
(7,711) |
Net
realised (gain)/loss on investments allocated from BHMS |
(4,441) |
|
(16,421) |
|
5,412 |
Net
unrealised gain on investments allocated from BHMS |
(35,656) |
|
(17,037) |
|
(32,736) |
Net
realised and unrealised foreign exchange loss |
|
|
|
|
|
|
allocated
from BHMS |
|
|
3,630 |
|
6,429 |
|
2,730 |
Purchase of investment
in BHMS |
|
|
- |
|
(8,474) |
|
(5,874) |
Proceeds
from sale of investment in BHMS |
|
2,776 |
|
25,450 |
|
18,131 |
Interest expense on
short term loan |
|
|
- |
|
7 |
|
7 |
Foreign exchange
losses |
|
|
710 |
|
20,577 |
|
7,017 |
Decrease/(increase) in
other debtors |
|
|
30 |
|
(21) |
|
11 |
(Decrease)/increase in
management fees |
|
|
(19) |
|
10 |
|
(8) |
Increase in
performance fees |
|
|
1,105 |
|
4,635 |
|
4,837 |
Increase/(decrease) in accrued expenses and other liabilities |
30 |
|
(71) |
|
35 |
Increase in Directors'
fees |
|
|
99 |
|
- |
|
- |
Increase/(decrease) in administration fees |
|
13 |
|
(2) |
|
(14) |
Net
cash (used in)/provided by operating activities |
|
(5,407) |
|
10,010 |
|
8,242 |
|
|
|
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
|
|
|
Purchase of own
shares |
|
|
- |
|
(14,131) |
|
(14,132) |
Proceeds
of borrowings from short term loan* |
|
- |
|
4,219 |
|
4,219 |
Repayment
of borrowings from short term loan* |
|
- |
|
(4,134) |
|
(4,134) |
Interest paid on short
term loan |
|
|
- |
|
(7) |
|
(7) |
Net cash used in
financing activities |
|
|
- |
|
(14,053) |
|
(14,054) |
|
|
|
|
|
|
|
|
Change in
cash |
|
|
(5,407) |
|
(4,043) |
|
(5,812) |
Cash, beginning of
the period/year |
|
|
8,738 |
|
13,035 |
|
13,035 |
Effect of exchange
rate fluctuations |
|
|
102 |
|
(254) |
|
(158) |
Cash, end of the
period/year |
|
|
3,433 |
|
8,738 |
|
7,065 |
|
|
|
|
|
|
|
|
Cash, end of the
period/year |
|
|
|
|
|
|
|
Cash and
bank balances denominated in US Dollars |
|
190 |
|
936 |
|
240 |
Cash and
bank balances denominated in Sterling1 |
|
3,243 |
|
7,802 |
|
6,825 |
|
|
|
3,433 |
|
8,738 |
|
7,065 |
1 Cash and bank balances in Sterling (GBP'000) |
|
2,548 |
|
6,125 |
|
5,169 |
*At 30 June 2019, 31 December 2018 and 30
June 2018 the short term borrowings had been repaid in full,
the difference between the proceeds and repayment was due to
foreign exchange movements on translating the Sterling transactions
to US Dollars.
See accompanying notes to the Interim Unaudited Financial
Statements.
NOTES TO THE INTERIM UNAUDITED FINANCIAL STATEMENTS
For the period from 1 January 2019
to 30 June 2019
1. The Company
BH Global Limited (the “Company”) is a limited liability
closed-ended investment company incorporated in Guernsey on
25 February 2008 for an unlimited
period, with registration number 48555.
The Company has a Premium Listing on the London Stock
Exchange.
The Company can offer multiple classes of ordinary shares, which
differ in terms of currency of issue with ordinary shares
denominated in US Dollar and Sterling currently being in issue.
2. Organisation
The Company’s investment objective is to seek to generate
consistent long-term capital appreciation through an investment
policy of investing all of its assets (net of funds required for
its short-term working capital requirements) in Brevan Howard
Multi-Strategy Master Fund Limited (“BHMS” or the “Master
Fund”).
The Company is organised as a feeder fund and invests
substantially all of its investable assets in the ordinary US
Dollar and Sterling denominated Class G shares issued by BHMS, and,
as such, the Company is directly and materially affected by the
performance and actions of BHMS.
As such the Interim Unaudited Financial Statements of the
Company should be read in conjunction with the Interim Unaudited
Financial Statements of BHMS, which can be found on the Company’s
website, www.bhglobal.com.
BHMS is an open-ended investment company incorporated with
limited liability in the Cayman
Islands on 21 January 2008.
BHMS’s underlying investments in funds at 30 June 2019 and the percentage that BHMS’s
investment represented of the underlying fund’s Net Asset Value
(“NAV”) are as follows:
Brevan Howard AH Master Fund Limited* |
|
1.97% |
Brevan Howard Alpha Strategies
Master Fund Limited |
|
2.02% |
Brevan Howard AS Macro Master Fund
Limited* |
|
5.91% |
Brevan Howard FG Macro Master Fund
Limited* |
|
8.98% |
Brevan Howard Global Volatility
Master Fund Limited |
|
7.79% |
Brevan Howard Master Fund
Limited |
|
10.88% |
Brevan Howard MB Macro Master Fund
Limited* |
|
4.88% |
BH-DG Systematic Trading Master Fund
Limited |
|
7.09% |
*Investment is made through the SMP (previously known as DIP until
31 December 2018). |
|
|
BHMS has flexibility to invest in a wide range of instruments
including, but not limited to, debt securities and obligations
(which may be below investment grade), bank loans, listed and
unlisted equities, other collective investment schemes or vehicles
(which may be open-ended or closed-ended, listed or unlisted,
regulated or unregulated and may employ leverage (each an
“Investment Fund”)), currencies, commodities, futures, options,
warrants, swaps and other derivative instruments. Derivative
instruments may be exchange traded or OTC. BHMS may engage in short
sales. BHMS may retain amounts in cash or cash equivalents
(including money market funds) pending reinvestment, for use as
collateral or if this is considered appropriate to the investment
objective.
Subject to the investment restrictions and investment approach
disclosed in any prospectus for BHMS that may be published from
time to time and subsequent BHMS Directors’ resolutions, BHMS
employs an investment process which empowers the Manager to
allocate assets to both Investment Funds and directly to the
investment managers of BHMS from time to time on an opportunistic
basis.
At the date of these Interim Unaudited Financial Statements,
there were two other feeder funds in operation in addition to the
Company that invest all of their assets (net of working capital) in
BHMS.
Off-balance sheet, market and credit risks of BHMS’s investments
and activities are discussed in the notes to the Interim Unaudited
Financial Statements of BHMS. The Company’s investment in BHMS
exposes it to various types of risk, which are associated with the
financial instruments and markets in which the Brevan Howard funds
invest. Market risk represents the potential loss in value of
financial instruments caused by movements in market factors
including, but not limited to, market liquidity, investor sentiment
and foreign exchange rates.
The Manager
Brevan Howard Capital Management LP (the “Manager”) is the manager
of the Company. The Manager is a Jersey limited partnership, the
sole general partner of which is Brevan Howard Capital Management
Limited, a Jersey limited company (the “General Partner”). The
General Partner is regulated in the conduct of fund services
business by the Jersey Financial Services Commission pursuant to
the Financial Services (Jersey) Law, 1998 and the Orders made
thereunder and is the Alternative Investment Fund Manager (“AIFM”)
of the Company for the purposes of the European Union Alternative
Investment Fund Manager Directive (“AIFMD”).
The Manager also manages BHMS.
3. Significant Accounting Policies
The Annual Audited Financial Statements, which give a true and
fair view, are prepared in conformity with United States Generally
Accepted Accounting Principles and comply with the Companies
(Guernsey) Law, 2008. The Interim Unaudited Financial Statements
have been prepared following the same accounting policies and
methods of computation as the most recent Annual Audited Financial
Statements. The functional and reporting currency of the Company is
US Dollars.
The Company is an Investment Entity which has applied the
provisions of Accounting Standards Codification (“ASC”) 946.
Going concern
After making enquiries and given the nature of the Company and its
investment, the Directors are satisfied that it is appropriate to
continue to adopt the going concern basis in preparing these
Interim Unaudited Financial Statements and, after due
consideration, the Directors consider that the Company is able to
continue for the foreseeable future and at least twelve months from
the date of this report. In reaching this conclusion the Board is
mindful of the nature of the assets that underlie its investment in
BHMS, including BHMS’s liquidity profile and has concluded that
moderate adverse investment performance will not have a material
impact on the Company’s ability to meet its liabilities as they
fall due.
The following are significant accounting policies adopted by the
Company:
Valuation of investments
The Company records its investment in the Class G shares of BHMS as
the Company’s proportionate share of BHMS’s net assets which
approximates fair value. At 30 June
2019, the Company’s US Dollar and Sterling capital account
represents 7.22% and 67.73% (31 December
2018: 7.30% and 66.45%; 30 June
2018: 6.38% and 57.82%) respectively of BHMS’s capital. The
net asset value of BHMS is used as a measure of fair value as this
is the price at which the Company may redeem its investment.
Fair value measurement
ASC Topic 820 defines fair value as the price that the Company
would receive upon selling a security in an orderly transaction to
an independent buyer in the principal or most advantageous market
of the security.
The valuation and classification of securities held by BHMS is
discussed in the notes to its Interim Unaudited Financial
Statements which are available on the Company’s website,
www.bhglobal.com.
Income and expenses
The Company records monthly its proportionate share of BHMS’s
income, expenses and realised and unrealised gains and losses. In
addition, the Company accrues its own income and expenses.
Use of estimates
The preparation of Financial Statements in conformity with United
States Generally Accepted Accounting Principles requires the Board
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of those Financial Statements and the
reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ
from those estimates.
Foreign exchange
Investment securities and other assets and liabilities of the
Sterling share class are translated into US Dollars, the Company’s
reporting currency, using exchange rates at the reporting date.
Transactions reported in the Unaudited Statement of Operations are
translated into US Dollar amounts at the date of such transactions.
The share capital and other capital reserve accounts are translated
at the historic rate ruling at the date of the transaction.
Exchange differences arising on translation are included in the
Unaudited Statement of Operations. This foreign exchange adjustment
has no effect on the value of net assets allocated to the
individual share classes.
Cash and bank balances
Cash and bank balances comprise cash on hand and demand
deposits.
Treasury shares
Where the Company purchases its own share capital, the
consideration paid, which includes any directly attributable costs,
is recognised as a deduction from equity Shareholders’ funds
through the Share capital account. When such shares are
subsequently sold or reissued to the market, any consideration
received, net of any directly attributable incremental transaction
costs, is recognised as an increase in equity Shareholders’ funds
through the Share capital account. Where the Company cancels
treasury shares, no further adjustment is required to the share
capital account of the Company at the time of cancellation. Shares
held in Treasury are excluded from calculations when determining
NAV per share as detailed in note 8 and in the Financial Highlights
in note 11.
Allocation of results of BHMS
Net realised and unrealised gains/losses of BHMS are allocated to
the Company’s share classes based upon the percentage ownership of
the equivalent BHMS class.
Loan notes payable
Loans are classified in the Interim Unaudited Statement of Assets
and Liabilities as loan notes payable and are accounted for at
amortised cost using the effective interest method.
Under a Note Purchase Agreement (note 10), the Company is
obliged to pay back the total outstanding amount and any relevant
fees and expenses, reimbursements and indemnities by the stated
maturity date, unless the Note is previously terminated. Interest
shall accrue daily on each Note at the applicable rate. The
Company’s obligations under the Agreement are secured by charges
over a portion of its shares in BHMS. The purpose of the Note
Purchase Agreement is to permit the Company to draw funds to
finance the acquisition of the Company’s own shares and for other
working capital purposes.
4. Management, Performance, and
Administration Agreements
Management fee
The Company has entered into a management agreement with the
Manager to manage the Company’s investment portfolio.
With effect from 3 October 2016,
the Manager does not charge the Company a management fee in respect
of any increase in the NAV of each class of shares of the Company.
The management fee is calculated on the basis of the lower of the
NAV of the relevant share class and the Base NAV, as defined in the
Amended and Restated Management Agreement dated 4 July 2017, of that share class (adjusted for
certain changes in shares in issue).
With effect from 1 April 2017 the
management fee was reduced from 2% to 1% per annum.
The Company may repurchase or redeem shares of either class in
each calendar year, including pursuant to the class closure and
annual partial capital return provisions contained in the Company’s
articles of incorporation (the “Articles”), in respect of the 2018
calendar year and all subsequent years, up to an aggregate number
equal to 5% of the shares of that class in issue as at 31 December
in the prior calendar year (the “Annual Buy Back Allowance”)
without making any payment to the Manager.
In the event that, in any calendar year, the aggregate number of
shares repurchased or redeemed by the Company exceeds the Annual
Buy Back Allowance for that class, the Company will be required to
pay the Manager an amount equal to 2% of the repurchase price of
any share that is repurchased or redeemed by the Company in excess
of the Annual Buy Back Allowance, including pursuant to the class
closure and annual partial capital return provisions contained in
the Articles.
The Board has agreed with the Manager that if, on the last
business day in March, June, September or December of any year, the
net asset value of the Company were to be below US$300 million (on the basis of the prevailing US
Dollar/Sterling exchange rate), the Board would convene a general
meeting of the Company’s shareholders at which a special resolution
proposing the liquidation of the Company would be put forward. Were
the resolution to be passed, the Company would be liquidated and an
amount equal to 2% of the Company’s net asset value (subject to a
deduction in respect of any amount of the Annual Buy Back Allowance
for the relevant calendar year that remains unused) would be paid
to the Manager in addition to any other fees due to the Manager up
to the date of termination of the management agreement.
In respect of 2019, the Annual Buy Back Allowance for the
Company’s Sterling share class is 990,378 Sterling shares and for
the US Dollar share class is 137,035 US
Dollar shares. In respect of 2018, the Annual Buy Back
Allowance for the Company’s Sterling share class was 1,017,344
Sterling shares and for the US Dollar share class was 150,222 US Dollar shares.
Between 1 January 2019 and
30 June 2019, the Company did not
repurchase any Sterling or US Dollar shares (between 1 January 2018 and 31
December 2018: 735,475 Sterling shares and: nil US Dollar
shares, between 1 January 2018 and
30 June 2018: 735,475 Sterling shares
and: nil US Dollar shares).
During the period ended 30 June
2019 and throughout 2018, US$nil was charged by the Manager
due to the Annual Buy Back Allowance not being exceeded.
As at 31 December 2018, the
Company had 281,869 Sterling shares and 150,222 US Dollar shares remaining from the 2018
Annual Buy Back Allowance. The Manager has agreed to roll forward
such unused Buy Back Allowance for use in 2019, and as such the
Company can repurchase 1,272,247 Sterling shares and 287,257 US Dollar shares without payment to the
Manager during 2019.
There are no fees charged by the Manager at the level of BHMS on
the G Class into which the Company is invested. There are also no
fees charged by the Manager in relation to BHMS’s investment into
underlying funds managed by the Manager.
In respect of the period ended 30 June
2019, the Manager charged the Company a total of
US$2,187,474 (31 December 2018: US$4,482,603, 30 June
2018: US$2,260,001) under the
terms of the management agreement. At 30
June 2019, US$367,556
(31 December 2018: US$387,008, 30 June
2018: US$369,303) of the fee
remained outstanding.
Performance fee
The Manager is entitled to an annual performance fee for each share
class accrued monthly in arrears. The performance fee is equal to
20% of the appreciation in the NAV per share (adjusted for any
increase or decrease in NAV arising from issues (including the sale
or re-issue of Shares held in treasury), repurchases or redemptions
of Shares and calculated before deduction of the performance fee in
respect of the relevant period) which is above the performance fee
Base NAV per share of that class multiplied by the number of shares
of such class at the end of the relevant period.
The performance fee Base NAV per share is the greater of (a) the
NAV per share of the relevant class as at 31 December 2016 and
(b) the highest NAV per share of the relevant class of shares
achieved as at the final BHMS NAV calculation date as at the end of
any calculation period after the calculation period ending on
31 December 2016.
The Manager is not entitled to any performance fee in respect of
any increase in NAV (whether in respect of a class of shares as a
whole or on a per share basis) arising to the remaining shares of
the relevant class from any repurchase, redemption or cancellation
of any share, provided that any performance fee due to the Manager
shall not be reduced below zero.
Any accrued performance fee in respect of shares which are
converted into another share class prior to the date on which the
performance fee would otherwise have become payable in respect of
those Shares will crystallise and become payable on the date of
such conversion. The performance fee is accrued on an on-going
basis and is reflected in the Company’s published NAV.
On the business day preceding the last business day of each
period in respect of which a performance fee is payable, the
Company shall pay an estimated performance fee to the Manager in
respect of that period. The estimated fee shall be the performance
fee payable to the Manager in respect of that period as estimated
by the Company’s administrator on the basis of the estimated NAV of
each class of Shares as at the close of business on the second
Friday of December in each year. The difference between the
estimated fee paid in respect of any period and the actual
performance fee payable in respect of that period shall be paid to
the Manager within 5 business days of the publication of the final
NAV of each class of Shares as at the end of the period, provided
that if the difference is a negative amount then it shall be repaid
by the Manager to the Company at such time.
During the period ended 30 June
2019, US$6,667,446
(31 December 2018: US$5,678,864, 30 June
2018: US$5,846,295) was
charged as performance fees of which, US$6,571,200 (31 December
2018: US$5,466,380,
30 June 2018: US$5,667,723) remained accrued at period end. The
total performance fee charged during the period includes fees
crystallised upon conversion and upon buyback of shares at points
when the NAV per share of the shares exceeded their performance fee
Base NAV per share (being £15.37 (Sterling shares) and US$15.51 (US dollar shares)).
Of the total crystallised performance fee charged for the
period, US$9,482 (31 December 2018: US$34,230, 30 June 2018: US$13,828) related to share conversions and
US$nil (31 December 2018:
US$40,640, 30
June 2018: US$41,870) related
to the buyback of shares.
In establishing the parameters for the execution of buybacks,
account is taken of the impact of any performance fees that would
become payable so as to ensure that such buy backs are still
accretive to net asset value.
The Management Agreement can be terminated by either the Company
or the Manager on the giving of 12 months’ written notice to the
other party, or alternatively the Company may terminate the
Management Agreement on 90 days’ notice by payment to the Manager
of an amount equal to the aggregate of the Management Fee during
such twelve month period. The Company may terminate the management
agreement forthwith by notice in the event of specified acts of
default by the Manager without payment of compensation.
Were the Management Agreement to be terminated by the Company,
the management fee would revert to 2% of the prevailing net asset
value in respect of the notice period, or in respect of any payment
in lieu of notice.
Administration fee
The Company has appointed Northern Trust International Fund
Administration Services (Guernsey) Limited as Administrator and
Corporate Secretary. The Administrator is paid fees based on the
NAV of the Company, payable monthly in arrears. The fee is at a
rate of 0.03% of the first US$1
billion of net assets of the Company and then 0.01% per
annum thereafter, subject to a minimum fee of £115,000 per annum.
In addition to the NAV based fee the Administrator is also entitled
to an annual fee of £6,000 (2018: £6,000) for certain additional
administration services. The Administrator is entitled to be
reimbursed out-of-pocket expenses incurred in the course of
carrying out its duties as Administrator.
During the period ended 30 June
2019, US$77,639 (31 December 2018: US$157,680, 30 June
2018: US$78,661) was earned by
the Administrator as administration fees. At 30 June 2019, US$51,521 (31 December
2018: US$38,856, 30 June
2018: US$26,709) of the fee remained
outstanding.
5. Directors' fees
The Company’s Articles limit the fees payable to Directors in
aggregate to £500,000 per annum.
During the period the Chairman was entitled to a fee of £150,000
per annum. Sally-Ann Farnon, as
Chairman of the Audit Committee, and Graham
Harrison as Senior Independent Director were entitled to
fees of £50,000 and £43,000 respectively. Until his retirement from
the Board on 21 June 2019,
Nicholas Moss as Chairman of the
Management Engagement Committee was entitled to fees of £43,000 per
annum. On 21 June 2019 Julia Chapman
was elected as Chairman of the Management Engagement Committee and
is entitled to the same fee. Andreas
Tautscher is entitled to a fee of £40,000 per annum.
6. Share Capital
Issued and authorised share capital
The Company's Articles permit the issuance of an unlimited number
of ordinary shares with no par value which may be divided into at
least two classes denominated in US Dollars and Sterling. The
treasury shares have arisen as a result of the discount management
programme as described in note 9.
|
|
|
US
Dollar shares |
|
Sterling shares |
|
|
Number
of Ordinary Shares |
|
|
|
|
|
|
In
issue at 1 January 2019 |
|
2,740,700 |
|
19,807,562 |
|
|
Share conversions |
|
|
(99,228) |
|
78,697 |
|
|
In
issue at 30 June 2019 |
|
2,641,472 |
|
19,886,259 |
|
|
|
|
|
|
|
|
|
|
Number
of Treasury Shares |
|
|
|
|
|
|
In
issue at 1 January 2019 |
|
267,443 |
|
1,667,180 |
|
|
In
issue at 30 June 2019 |
|
267,443 |
|
1,667,180 |
|
|
Total
shares in issue |
|
2,908,915 |
|
21,553,439 |
|
|
Percentage of class held as Treasury Shares |
9.19% |
|
7.74% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Total |
Share
capital account |
|
US$'000 |
|
£'000 |
|
US$'000 |
At 1 January
2019 |
|
|
- |
|
164,596 |
|
373,793 |
Share conversions |
|
|
(1,577) |
|
1,233 |
|
- |
Transfer
from realised investment reserve |
1,577 |
|
- |
|
1,577 |
At 30 June
2019 |
|
|
- |
|
165,829 |
|
375,370 |
|
|
|
US
Dollar shares |
|
Sterling shares |
|
|
Number
of Ordinary Shares |
|
|
|
|
|
|
In
issue at 1 January 2018 |
|
3,004,442 |
|
20,346,871 |
|
|
Share conversions |
|
|
(263,742) |
|
196,166 |
|
|
Purchase
of own Shares into Treasury |
- |
|
(735,475) |
|
|
In
issue at 31 December 2018 |
|
2,740,700 |
|
19,807,562 |
|
|
|
|
|
|
|
|
|
|
Number
of Treasury Shares |
|
|
|
|
|
|
In
issue at 1 January 2018 |
|
267,443 |
|
1,921,705 |
|
|
Shares
purchased and held in Treasury during the year: |
|
|
|
|
|
-
On market purchases |
|
- |
|
735,475 |
|
|
Shares cancelled |
|
|
- |
|
(990,000) |
|
|
In
issue at 31 December 2018 |
|
267,443 |
|
1,667,180 |
|
|
Total shares in
issue |
|
|
3,008,143 |
|
21,474,742 |
|
|
Percentage of class held as Treasury Shares |
8.89% |
|
7.76% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Total |
Share capital
account |
|
|
US$'000 |
|
£'000 |
|
US$'000 |
At 1 January
2018 |
|
|
- |
|
171,800 |
|
383,950 |
Share conversions |
|
|
(3,974) |
|
2,954 |
|
- |
Purchase
of own shares into Treasury |
|
- |
|
(10,158) |
|
(14,131) |
Transfer
from realised investment reserve |
|
3,974 |
|
- |
|
3,974 |
At 31 December
2018 |
|
|
- |
|
164,596 |
|
373,793 |
|
|
|
US
Dollar shares |
|
Sterling shares |
|
|
Number
of Ordinary Shares |
|
|
|
|
|
|
In
issue at 1 January 2018 |
|
3,004,442 |
|
20,346,871 |
|
|
Share conversions |
|
|
(173,540) |
|
126,534 |
|
|
Purchase
of own shares into Treasury |
|
- |
|
(735,475) |
|
|
In
issue at 30 June 2018 |
|
2,830,902 |
|
19,737,930 |
|
|
|
|
|
|
|
|
|
|
Number
of Treasury Shares |
|
|
|
|
|
|
In
issue at 1 January 2018 |
|
267,443 |
|
1,921,705 |
|
|
Shares
purchased and held in Treasury during the period: |
|
|
|
|
|
- On market
purchases |
|
|
- |
|
735,475 |
|
|
Shares cancelled |
|
|
- |
|
(990,000) |
|
|
In
issue at 30 June 2018 |
|
267,443 |
|
1,667,180 |
|
|
Total shares in
issue |
|
|
3,098,345 |
|
21,405,110 |
|
|
Percentage of class held as Treasury Shares |
8.63% |
|
7.79% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Total |
Share capital
account |
|
|
US$'000 |
|
£'000 |
|
US$'000 |
At 1 January
2018 |
|
|
- |
|
171,800 |
|
383,951 |
Share conversions |
|
|
(2,582) |
|
1,884 |
|
- |
Purchase
of own shares into Treasury |
|
- |
|
(10,158) |
|
(14,132) |
Transfer
from realised investment reserve |
2,582 |
|
- |
|
2,582 |
At 30 June
2018 |
|
|
- |
|
163,526 |
|
372,401 |
Share classes
In respect of each class of shares a separate class account has
been established in the books of the Company. An amount equal to
the aggregate proceeds of issue of each share class has been
credited to the relevant class account. Any increase or decrease in
the NAVs of each of the share classes in the Master Fund as
calculated by BHMS are allocated to the relevant class account in
the Company. Each class account is allocated those costs, pre-paid
expenses, losses, dividends, profits, gains and income which the
Directors determine in their sole discretion relate to a particular
class.
Voting rights
Ordinary shares carry the right to vote at general meetings of the
Company and to receive any dividends, attributable to the ordinary
shares as a class, declared by the Company and, in a winding-up
will be entitled to receive, by way of capital, any surplus assets
of the Company attributable to the ordinary shares as a class in
proportion to their holdings remaining after settlement of any
outstanding liabilities of the Company.
As prescribed in the Company’s Articles, the different classes
of ordinary shares have different values attributable to their
votes. The attributed values have been calculated on the basis of
the Weighted Voting Calculation (as described in the Articles)
which takes into account the prevailing exchange rates on the date
of initial issue of ordinary shares. Currently, on a vote, a single
US Dollar ordinary share has one vote and a single Sterling
ordinary share has 1.97950 votes.
Treasury shares do not have any voting rights.
Repurchase of ordinary shares
The Directors have been granted authority to purchase in the market
up to 408,247 US Dollar shares, and
2,971,155 Sterling shares respectively and they intend to seek
annual renewal of this authority from shareholders which was last
granted on 21 June 2019. The
Directors may, at their discretion, utilise this share repurchase
authority to address any imbalance between the supply of and demand
for shares.
Under the Company’s Articles, the Directors are required to
convene a shareholders’ meeting to consider the redemption of a
class of shares in certain circumstances.
See note 9 for further details.
Further issue of shares
As approved by the shareholders at the Annual General Meeting held
on 21 June 2019 (the “AGM”), the
Directors have the power to issue further shares on a
non-pre-emptive basis for cash in respect of 272,346 US Dollar shares, and 1,982,091 Sterling
shares respectively.
This power expires on the date falling fifteen months after the
date of the AGM or the conclusion of the next Annual General
Meeting of the Company, whichever is the earlier.
Distributions
BHMS has not previously paid dividends to its investors. Therefore,
the Directors of the Company do not expect to declare any
dividends. This does not prevent the Directors of the Company from
declaring a dividend at any time in the future if the Directors
consider payment of a dividend to be appropriate in the
circumstances. If the Directors declare a dividend, such dividend
will be paid on a per class basis.
The Company operates in such a manner that its shares are not
categorised as non-mainstream pooled investments. This may mean
that the Company pays dividends in respect of any income that it
receives or is deemed to receive for UK tax purposes so that it
would qualify as an investment trust if it were UK
tax-resident.
However, the Company will first apply any such income in payment
of its management and performance fees.
Treasury shares are not entitled to distributions.
Annual redemption offer
Each calendar year the Directors may, in their absolute discretion,
determine that the Company should make an offer to redeem such
number of shares of the Company in issue as they may determine
provided that the maximum amount distributed does not exceed 100%
of the increase in the NAV of the Company in the prior calendar
year.
The Directors shall, in their absolute discretion, determine the
particular class or classes of shares in respect of which an Annual
Redemption Offer will be made, the timetable for that Annual
Redemption Offer and the price at which the shares of each relevant
class will be redeemed.
Whether a return of capital is made in any particular year and,
if so, the amount of the return, may depend, among other things, on
prevailing market conditions, the ability of the Company to
liquidate its investments to fund the capital return, the success
of prior capital returns and applicable legal, regulatory and tax
considerations.
Share conversion scheme
The Company has implemented a Share Conversion Scheme which
provides shareholders with the ability to convert some or all of
their ordinary shares in the Company of one class into ordinary
shares of the other class on the last business day of every month.
Each conversion will be based on the NAV (note 8) of the share
classes to be converted.
7. Taxation
Overview
The Company is exempt from taxation in Guernsey under the Income
Tax (Exempt Bodies) (Guernsey) Ordinance 1989. Accordingly, no
provision for Guernsey income taxes is included in these Financial
Statements.
Uncertain tax positions
The Company recognises the tax benefits of uncertain tax positions
only where the position is more-likely-than-not (i.e. greater than
50-percent) to be sustained assuming examination by a tax authority
based on the technical merits of the position. In evaluating
whether a tax position has met the recognition threshold, the
Company must presume that the position will be examined by the
appropriate taxing authority that has full knowledge of all
relevant information. A tax position that meets the
more-likely-than-not recognition threshold is measured to determine
the amount of benefit to recognise in the Company’s Financial
Statements. Income tax and related interest and penalties would be
recognised by the Company as a tax expense in the Statement of
Operations if the tax positions were deemed to not meet the
more-likely-than-not threshold.
The Company analyses all open tax years for all major tax
jurisdictions. Open tax years are those that are open for
examination by taxing authorities, as defined by the Statute of
Limitations in each jurisdiction.
The Company identifies its major tax jurisdictions as the
Guernsey, Cayman Islands and
foreign jurisdictions where the Company makes significant
investments. The Company has no examinations by tax authorities in
progress.
The Board received advice in respect of the Company’s tax
positions and is advised that no liability for unrecognised tax
benefits should be recorded related to uncertain tax positions.
Further, the Board is not aware of any tax positions for which it
is reasonably possible that the total amounts of unrecognised tax
benefits will significantly change in the next twelve months.
International tax reporting
For the purposes of the US Foreign Account Tax Compliance Act, the
Company registered with the US Internal Revenue Services (“IRS”) as
a Guernsey reporting Foreign Financial Institution (“FFI”),
received a Global Intermediary Identification Number
(U2S6ID.99999.SL.831), and can be found on the IRS FFI list.
The Common Reporting Standard (“CRS”) is a global standard for
the automatic exchange of financial account information developed
by the Organisation for Economic Co-operation and Development
(“OECD”), which has been adopted by Guernsey and which came into
effect on 1 January 2016.
The Board has taken the necessary action to ensure that the
Company is compliant with Guernsey regulations and guidance in this
regard.
8. Publication and Calculation of Net
Asset Value
The NAV of the Company is equal to the value of its total assets
less its total liabilities. The NAV per share of each class will be
calculated by dividing the NAV of the relevant share class by the
number of shares of the relevant class in issue on that day.
The Company publishes the NAV per share for each class of shares
as calculated by the Administrator based in part on information
provided by BHMS, monthly in arrears, as at each month end.
The Company also publishes an estimate of the NAV per share for
each class of shares as calculated by the Administrator based in
part on information provided by BHMS, weekly in arrears.
9. Discount Management Programme
The Company’s discount management programme includes the ability
to make market purchases of shares and the obligation to propose
class closure resolutions if, in any fixed discount management
period (1 January to 31 December each year), the average daily
closing market price of the relevant class of shares during such
period is 10% or more below the average NAV per share of the
relevant class taken over the 12 monthly NAV Determination Dates
(generally the last business day of each month) in that fixed
discount management period, as described more fully in the
Company’s principal documents, which are available from the
Administrator on request.
In the event a class closure resolution is passed, Shareholders
in a class have the following options available to them:
a) to redeem all
or some of their shares at NAV per share less the costs and
expenses of the Class Closure vote and other outstanding costs and
expenses of the Company, attributable to the relevant class
(including any redemption fees); or
b) subject to
certain limitations, to convert all or some of their shares into
shares of another class; or
c) subject to
the class continuing and remaining viable, to remain in the
class.
The Annual Redemption Offer described in note 6 which enables a
partial return of capital is also part of the discount management
programme.
The discount management measures are and will be funded by
partial redemptions of the Company’s investment in BHMS.
During the period to 30 June 2019,
the Company recorded an average discount to NAV of 4.71% and 4.14%
for US Dollar shares and Sterling shares respectively (year to
31 December 2018: 6.08% and 5.59% for
US Dollar shares, and Sterling shares respectively and period to
30 June 2018: 7.48% and 7.42% for US
Dollar shares, and Sterling shares respectively).
10. Note Purchase Agreement
The Company is party to a Note Purchase Agreement with JP Morgan
Chase Bank, pursuant to which the Company may obtain financing, of
up to US$2 million (31 December 2018: US$2
million, 30 June 2018:
US$5 million) and £15 million
(31 December 2018: £15 million,
30 June 2018: £30 million), if
required, to finance (inter alia) share buybacks pending receipt of
the proceeds of redemption from its underlying investments. As at
30 June 2019, 31 December 2018, and 30
June 2018 there were no amounts outstanding under the Note
Purchase Agreement, neither was any interest payable.
11. Financial Highlights
The following tables include selected data for a single ordinary
share of each of the ordinary share classes in issue at the period
end and other performance information derived from the Financial
Statements.
The per share amounts and ratios which are shown reflect the
income and expenses of the Company for each class of ordinary
share.
|
|
|
|
|
01.01.19 |
|
01.01.19 |
|
|
|
|
|
to
30.06.19 |
|
to
30.06.19 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
|
|
|
|
|
US$ |
|
£ |
Per
share operating performance |
|
|
|
|
|
|
Net
asset value at beginning of the period |
|
|
|
15.51 |
|
15.37 |
|
|
|
|
|
|
|
|
Income
from investment operations |
|
|
|
|
|
|
Net
investment loss1 (excluding net realised and unrealised gains and
losses on investments allocated from BHMS) |
(0.36) |
|
(0.34) |
Net
realised and unrealised gain on investment |
|
|
1.42 |
|
1.27 |
Other capital
items2 |
|
|
|
|
(0.01) |
|
- |
Total
return |
|
|
|
|
1.05 |
|
0.93 |
Net
asset value, end of the period |
|
|
|
16.56 |
|
16.30 |
|
|
|
|
|
|
|
|
Total
return before performance fees |
|
|
|
8.45% |
|
7.55% |
Performance fees |
|
|
|
|
(1.68%) |
|
(1.51%) |
Total
return after performance fees |
|
|
|
6.77% |
|
6.04% |
|
|
|
|
|
|
|
|
|
Total return reflects the net return for an investment made at
the beginning of the period and is calculated as the change in the
NAV per ordinary share during the period ended 1 January 2019 to 30 June
2019. An individual shareholder’s return may vary from these
returns based on their timing of purchases and sales of Shares.
|
|
|
|
|
01.01.19 |
|
01.01.19 |
|
|
|
|
|
to
30.06.19 |
|
to
30.06.19 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
|
|
|
|
|
US$'000 |
|
£'000 |
Supplemental
data |
|
|
|
|
|
|
|
Net
asset value, end of the period |
|
|
|
43,754 |
|
324,142 |
Average
net asset value for the period |
|
|
|
42,880 |
|
308,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
01.01.19 |
|
01.01.19 |
|
|
|
|
|
to
30.06.19 |
|
to
30.06.19 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
Ratio
to average net assets |
|
|
|
|
|
|
Operating
expense |
|
|
|
|
|
|
|
Company
expenses3 |
|
|
|
0.61% |
|
0.63% |
Master
Fund expenses4 |
|
|
|
0.23% |
|
0.23% |
Performance
fees |
|
|
|
|
1.64% |
|
1.49% |
Total
operating expense |
|
|
|
2.48% |
|
2.35% |
|
|
|
|
|
|
|
|
Net
investment loss1 |
|
|
|
(2.27%) |
|
(2.21%) |
|
|
|
|
|
01.01.18 |
|
01.01.18 |
|
|
|
|
|
to
31.12.18 |
|
to
31.12.18 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
Per
share operating performance |
|
|
|
|
|
|
Net
asset value at beginning of the year |
|
|
|
14.56 |
|
14.58 |
|
|
|
|
|
|
|
|
Income
from investment operations |
|
|
|
|
|
|
Net
investment loss1 (excluding net realised and unrealised gains and
losses on investments allocated from BHMS) |
(0.18) |
|
(0.14) |
Net
realised and unrealised gain on investment |
|
|
1.18 |
|
0.90 |
Other capital
items2 |
|
|
|
|
(0.05) |
|
0.03 |
Total
return |
|
|
|
|
0.95 |
|
0.79 |
Net
asset value, end of the year |
|
|
|
15.51 |
|
15.37 |
|
|
|
|
|
|
|
|
Total
return before performance fees |
|
|
|
8.22% |
|
6.73% |
Performance fees |
|
|
|
|
(1.67%) |
|
(1.30%) |
Total
return after performance fees |
|
|
|
6.55% |
|
5.43% |
|
|
|
|
|
|
|
|
|
Total return reflects the net return for an investment made at
the beginning of the year and is calculated as the change in the
NAV per ordinary share during the year ended 31 December 2018. An individual shareholder’s
return may vary from these returns based on the timing of their
purchases and sales of Shares.
|
|
|
|
|
01.01.18 |
|
01.01.18 |
|
|
|
|
|
to
31.12.18 |
|
to
31.12.18 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
|
|
|
|
|
US$'000 |
|
£'000 |
Supplemental
data |
|
|
|
|
|
|
|
Net
asset value, end of the year |
|
|
|
42,517 |
|
304,467 |
Average
net asset value for the year |
|
|
|
43,187 |
|
301,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01.01.18 |
|
01.01.18 |
|
|
|
|
|
to
31.12.18 |
|
to
31.12.18 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
Ratio
to average net assets |
|
|
|
|
|
|
Operating
expense |
|
|
|
|
|
|
|
Company expenses3 |
|
|
|
|
1.32% |
|
1.32% |
Master Fund
expenses4 |
|
|
|
|
0.82% |
|
0.80% |
Performance fees |
|
|
|
|
1.59% |
|
1.24% |
|
|
|
|
|
3.73% |
|
3.36% |
|
|
|
|
|
|
|
|
Net investment
loss1 |
|
|
|
|
(1.22%) |
|
(0.93%) |
|
|
|
|
|
01.01.18 |
|
01.01.18 |
|
|
|
|
|
to 30.06.18 |
|
to
30.06.18 |
|
|
|
|
|
US Dollar shares |
|
Sterling shares |
|
|
|
|
|
US$ |
|
£ |
Per
share operating performance |
|
|
|
|
|
|
Net
asset value at beginning of the period |
|
|
|
14.56 |
|
14.58 |
|
|
|
|
|
|
|
|
Income
from investment operations |
|
|
|
|
|
|
Net
investment loss1 (excluding net realised and unrealised gains and
losses on investments allocated from BHMS) |
(0.05) |
|
(0.04) |
Net
realised and unrealised gain on investment |
|
|
0.92 |
|
0.82 |
Other capital
items2 |
|
|
|
|
(0.02) |
|
0.03 |
Total
return |
|
|
|
|
0.85 |
|
0.81 |
|
|
|
|
|
|
|
|
Net
asset value, end of the period |
|
|
|
15.41 |
|
15.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01.01.18 |
|
01.01.18 |
|
|
|
|
|
to 30.06.18 |
|
to
30.06.18 |
|
|
|
|
|
US Dollar shares |
|
Sterling shares |
|
|
|
|
|
|
|
|
Total
return before performance fees |
|
|
|
7.35% |
|
6.87% |
Performance fees |
|
|
|
|
(1.50%) |
|
(1.34%) |
Total
return after performance fees |
|
|
|
5.85% |
|
5.53% |
|
|
|
|
|
|
|
|
|
Total return reflects the net return for an investment made at
the beginning of the period and is calculated as the change in the
NAV per ordinary share during the period ended 1 January 2018 to 30 June
2018. An individual shareholder’s return may vary from these
returns based on their timing of purchases and sales of Shares.
|
|
|
|
|
01.01.18 |
|
01.01.18 |
|
|
|
|
|
to
30.06.18 |
|
to
30.06.18 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
|
|
|
|
|
US$'000 |
|
£'000 |
Supplemental
data |
|
|
|
|
|
|
|
Net
asset value, end of the period |
|
|
|
43,630 |
|
303,680 |
Average
net asset value for the period |
|
|
|
43,629 |
|
299,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
01.01.18 |
|
01.01.18 |
|
|
|
|
|
to
30.06.18 |
|
to
30.06.18 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
Ratio
to average net assets |
|
|
|
|
|
|
Operating
expense |
|
|
|
|
|
|
|
Company expenses3 |
|
|
|
|
0.68% |
|
0.67% |
Master
Fund expenses4 |
|
|
|
0.75% |
|
0.75% |
Performance fees |
|
|
|
|
1.41% |
|
1.28% |
|
|
|
|
|
2.84% |
|
2.70% |
|
|
|
|
|
|
|
|
Net investment
loss1 |
|
|
|
|
(0.37%) |
|
(0.25%) |
1
The net investment loss figure shown above does not include net
realised and unrealised gains and losses on investments allocated
from BHMS.
2
Included in other capital items are the discounts and premiums on
conversions between share classes during the period/year, share
buybacks and partial capital returns, as compared to the NAV per
share at the beginning of the period/year.
3
Company expenses are as disclosed in the Interim Unaudited
Statement of Operations, excluding performance fees and foreign
exchange gains and losses on aggregation.
4
Master Fund expenses are the allocated operating expenses of
BHMS.
12. Related Party Transactions
As at 30 June 2019, the Company
had five non-executive Directors, all of whom are independent of
the Manager.
Details of Directors’ fees to which the Directors are entitled
are disclosed in note 5.
The Directors had the following interests in the Company, held
either directly or beneficially at 30 June
2019:
|
US Dollar
Shares |
Sterling
Shares |
Sir Michael Bunbury |
- |
7,000 |
Graham Harrison |
- |
1,500 |
Sally-Ann Farnon |
- |
1,700 |
Julia Chapman |
- |
1,081 |
Andreas Tautscher |
- |
- |
13. Foreign Exchange
The following foreign exchange rates were used to translate the
Sterling share class into US Dollars, being the Company’s reporting
currency.
|
|
|
01.01.19 |
|
01.01.18 |
|
01.01.18 |
|
|
|
to
30.06.19 |
|
to
31.12.18 |
|
to
30.06.18 |
Period/year end
rate |
|
|
1.2728 |
|
1.2738 |
|
1.3202 |
Average
rate for the period/year |
|
1.2936 |
|
1.3305 |
|
1.3670 |
14. Subsequent Events
Management has evaluated subsequent events up to 20 August 2019, which is the date that the
Financial Statements were available to be issued.
A deed of amendment to the Note Purchase Agreement described in
note 10 above was entered into between the Company and JPMorgan
Chase Bank on 31 July 2019, which
implemented minor updates to the previous agreement.
No other subsequent events have occurred.
HISTORICAL PERFORMANCE SUMMARY
As at 30 June 2019
|
|
|
|
30.06.19* |
|
31.12.18 |
|
31.12.17 |
|
31.12.16 |
|
|
|
|
(Unaudited) |
|
(Audited) |
|
(Audited) |
|
(Audited) |
|
|
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
Net
increase/(decrease) in net assets |
|
|
|
|
|
|
|
|
resulting from operations |
|
|
25,958 |
|
2,187 |
|
41,032 |
|
(57,387) |
Total
assets |
|
|
463,521 |
|
436,335 |
|
443,707 |
|
457,647 |
Total
liabilities |
|
|
(7,216) |
|
(5,988) |
|
(1,416) |
|
(4,596) |
Net
assets |
|
|
456,305 |
|
430,347 |
|
442,291 |
|
453,051 |
|
|
|
|
|
|
|
|
|
|
|
Number
of shares in issue |
|
|
|
|
|
|
|
|
|
US Dollar
shares |
|
|
2,641,472 |
|
2,740,700 |
|
3,004,442 |
|
4,186,219 |
Sterling
shares |
|
|
19,886,259 |
|
19,807,562 |
|
20,346,871 |
|
22,471,006 |
|
|
|
|
|
|
|
|
|
|
|
Net
asset value per share |
|
|
|
|
|
|
|
|
|
US Dollar
shares |
|
|
US$16.56 |
|
US$15.51 |
|
US$14.56 |
|
US$14.19 |
Sterling
shares |
|
|
£16.30 |
|
£15.37 |
|
£14.58 |
|
£14.33 |
* Covers the period from 1 January
2019 to 30 June 2019.
MANAGEMENT AND ADMINISTRATION
Directors
Sir Michael Bunbury (Chairman)
(appointed 1 January 2013)
Julia Chapman
(appointed on 16 January
2017)
Sally-Ann (“Susie”) Farnon
(appointed 13 March 2018)
Graham Harrison (Senior
Independent Director)
(appointed 17 March 2010)
Nicholas Moss
(retired 21 May 2019)
Andreas Tautscher
(appointed 1 May 2019)
(All Directors are non-executive and are independent
for the purpose of LR15.2.12-A)
Registered Office
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Manager
Brevan Howard Capital Management LP
6th Floor
37 Esplanade
St Helier
Jersey
JE2 3QA
Administrator and Corporate Secretary
Northern Trust International Fund
Administration Services (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Independent Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1 WR
Registrar and CREST Service Provider
Computershare Investor Services
1st Floor
Tudor House
Le Bordage
Guernsey
GY1 1DB
Legal Advisors (Guernsey Law)
Carey Olsen
Carey House
Les Banques
St. Peter Port
Guernsey
GY1 4BZ
Legal Advisors (UK Law)
Hogan Lovells International LLP
Atlantic House
Holborn Viaduct
London EC1A 2FG
Corporate Brokers
JPMorgan Cazenove
25 Bank Street
Canary Wharf
London
E14 5JP
Canaccord Genuity Limited (resigned 22
June 2019)
88 Wood Street
London
EC2V 7QR
Investec Bank plc (appointed 22 June
2019)
30 Gresham Street
London
EC2V 7QP
For the latest information
www.bhglobal.com