BH GLOBAL LTD USD
BH Global Limited
Interim Report and Unaudited Financial Statements 2015
30 June 2015
Chairman's Statement
Dear Shareholder,
The six months to 30 June 2015 unfolded as a continuum of the relatively
challenging trading conditions for macro orientated hedge funds as, for the
sixth year in succession, interest rates in developed markets remained close to
their all-time lows. The year had started strongly in January but the
subsequent five months proved more challenging and at the six month stage on 30
June 2015 the Net Asset Value ("NAV") per share of the US Dollar class had
appreciated by 1.50% and that of the larger Sterling class by 1.83%.
With effect from 1 September 2014 the Company has invested almost all of its
assets, save for working cash balances, in Brevan Howard Multi-Strategy Master
Fund Limited ("BHMS" or "Fund"). BHMS is an open-ended fund with assets at 30
June 2015 of US$3.115 billion. As at 30 June 2015, BH Global's investment in
BHMS amounted to US$680 million, being approximately 21.8% of the total Fund.
The Manager's Report sets out the detail of the Company's performance for the
six months and also the underlying allocation through BHMS to the various
underlying investments. Since 31 December 2014 the shape of BH Global's
underlying investments has changed significantly, with the number of funds
being reduced from six to four at 30 June 2015 and the Direct Investment
Portfolio ("DIP"), being assets allocated directly to a small number of senior
traders, has grown from 23.6% to 26.9% over the same period. As I wrote in
March, the DIP represents a significant differentiator for BH Global and the
Manager has advised that the DIP is expected to continue to represent a
material allocation of BHMS's assets and indeed that allocation may yet grow
further.
Share price performance and Discount Control
The Company once again performed its role as a risk controlled diversifier in
the construction of portfolios. Since early in 2014, the Company has undertaken
an active buyback policy designed to reduce volatility and to control the
discount to NAV at which the two classes of shares trade. On 16 April 2015 the
Company announced a partial capital return to shareholders and at the same time
announced that "the Company will continue to keep under active review its
buyback policy with the intention of further narrowing the level of discount to
NAV at which the two classes of shares trade in the market". That policy has
been actively implemented and during the six months the Company bought back
41,030 US Dollar shares at a cost of US$525,657 and 875,525 Sterling shares at
a cost of £11,401,609 (excluding broker commissions).
As at 30 June 2015 the shares were trading at discounts of 4.1% for the US
dollar class and 4.6% for the Sterling class respectively. This narrowing of
the discounts on the two classes is the product of a number of factors
including the structural improvements made to the Company over the past year
and has resulted in share price total return in excess of 5% for each class in
the six month period.
Since 30 June the discounts have widened on the back of weaker NAV performance.
However, I can confirm on behalf of the Board that the policy announced on 16
April remains unchanged and that the Board intends to continue to strive to
narrow the discounts at which the two classes of shares trade.
Dialogue with the Manager
The Board maintains an active dialogue with the Company's Manager both at
formal quarterly Board meetings and regularly in between. We are always
striving to ensure that aims and objectives are aligned with those of the
Shareholders. To that end, Shareholders will recall the restructuring and
simplification of the management fees that became effective on 1 September 2014
and which included the discontinuation of the 0.5% over-riding fee which had
been charged since the Company's inception.
Communication with Shareholders
In conjunction with BH Macro Limited, a conference was held for professional
shareholders and investors in London in April. This was very well attended and
presentations were made by a number of senior Brevan Howard professionals,
including Magnus Olsson, the portfolio manager of BHMS. I set the scene on
behalf of the Board and reminded the conference of the important role of the
independent Boards of directors in representing shareholders' interests.
Outlook
The events of recent days have reminded investors of the vulnerability of
equity markets to changes of expectations, especially where those markets have
in part been buoyed up by speculators using borrowed money. However, these
events serve to remind of the appropriateness within a portfolio of holding a
low volatility diversifier.
The amendment of Investment Policy took place on 1 September 2014, such that
the Company became a feeder fund for investment into BHMS. The Manager has
indicated that it expects more favourable trading opportunities as economies
diverge and interest rates rise in those countries where growth has been
strong. Both Manager and Board hope that such conditions will bring stronger
returns for Shareholders than has been the case in the last two years.
Meanwhile the Board will ensure that it continues to represent and further
Shareholders' interests.
Yours sincerely,
Sir Michael Bunbury
Chairman
26 August 2015
Manager's Report
Brevan Howard Capital Management LP ("BHCM") is the Manager of the Company. BH
Global Limited ("BHG" or the "Company") invests all its assets (net of
short-term working capital) in Brevan Howard Multi-Strategy Master Fund Limited
("BHMS" or the "Fund") a company also managed by BHCM. The Company maintained a
residual holding in Brevan Howard Global Opportunities Master Fund Limited
("BHGO") until July 2015, as BHGO went through the process of an orderly
liquidation.
Performance Summary
The NAV of the USD shares appreciated by 1.50% in the first half of 2015 and
the NAV of GBP shares appreciated by 1.83% in the first half of 2015.
The month-by-month NAV performance of each currency class of the Company 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) 1.50
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) 1.83
EUR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
2008 1.28* 0.25 0.29 (4.34) 1.15 3.01 0.44 1.93
2009 3.57 1.94 1.13 1.05 2.54 (0.21) 1.11 0.27 1.50 0.50 0.08 0.08 14.36
2010 0.37 (0.90) (0.35) 0.58 (0.02) 0.69 (0.81) 0.86 1.06 0.36 (0.14) 0.04 1.73
2011 0.06 0.43 0.35 1.30 0.27 (0.63) 1.78 3.77 (1.44) (0.14) 0.19 (0.91) 5.04
2012 1.21 1.01 (0.56) (0.12) (0.61) (1.45) 1.45 0.63 1.40 (0.76) 0.98 1.13 4.35
2013 1.25 0.58 0.27 1.49 (0.64) (1.91) (0.15) (0.89) 0.06 (0.14) 0.93 0.67 1.47
2014 (0.94) (0.21) (0.47) (0.51) 0.45 0.22 0.28 Closed August 2014 (1.19)
Source: BHMS NAV data is provided by the administrator of BHMS, International
Fund Services (Ireland) Limited. BHG NAV and NAV per Share data is provided by
BHG's administrator, 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).
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
Allocations and Investment Performance
The investment exposures of BHG as at 30 June 2015 were as follows:
Allocation as
Investment at 30 June
2015
(% NAV)
Brevan Howard Master Fund Limited ("BHMF") 44.7%
Brevan Howard Asia Master Fund Limited ("BHA") 10.7%
DW Catalyst Offshore Fund, Ltd. ("DWC")* 10.2%
Brevan Howard Systematic Trading Master Fund Limited ("BHST") 8.7%
Direct Investment Portfolio ("DIP") 26.9%
Cash and Other (1.2%)
Source: BHCM; figures rounded to one decimal place. Data may differ from those
published for BHMS, as BHG may hold cash for short-term working capital
purposes or obtain financing under a note purchase agreement.
*DW Catalyst Offshore Fund, Ltd invests indirectly into DW Catalyst Master
Fund, Ltd. DW Catalyst Offshore Fund, Ltd also has the ability to make other
investments. Prior 1 January 2015, DW Catalyst Master Fund, Ltd was named
Brevan Howard Credit Catalysts Master Fund Limited.
Performance Review
The USD share class posted a gain of 1.50% in the first half of 2015. The
majority of gains were generated in the first quarter of 2015, as detailed
below.
The NAV of the USD share class appreciated by 3.31% (net of fees and expenses)
in the first quarter of 2015. All of the underlying allocations were positive
for the first quarter with BHMF, BHST and the DIP being the main contributors.
The gains made by discretionary trading arose from FX trading, in particular
long exposure to the USD against a basket of other currencies including EUR and
JPY. Additional gains were generated in equity index and credit trading. Some
of these gains were offset by losses in USD interest rates trading. Systematic
trading had a strong first quarter driven by long exposures to the USD against
a large number of other currencies, as well as long exposure to global bond
markets and equity indices.
In the second quarter of 2015, the NAV per USD share class depreciated by
-1.75% (net of fees and expenses). Discretionary FX trading in BHMF and the DIP
was one of the main detractors. Short exposures to currencies including EUR and
JPY against the USD generated further losses. Additional losses arose from long
exposures to equity indices in Asia and Europe.
BHST had a difficult period, with most asset classes generating losses over the
second quarter of 2015. The losses were driven by sharp reversals in the USD
against a number of currencies, as well as in selected bond markets in the
earlier part of the second quarter. In addition, a sharp sell-off in equity
markets and irregular market conditions in FX and fixed income towards the end
of the second quarter also contributed to losses.
The losses in discretionary and systematic trading were partly offset by gains
in discretionary interest rates trading, where trading in Europe generated most
of the gains. Other interest rate markets, including Korea, generated
additional gains. Credit trading including corporate long/short and agency
mortgages generated small additional gains in the second quarter.
A summary of the contribution to NAV performance broken down by trading
strategy and share buybacks is detailed below:
Quarterly and semi-annual contribution (%) to the performance of BHG USD Shares
(net of fees and expenses) by strategy group
Share
Macro Rates FX EMG Equity Commodity Credit Systematic buyback TOTAL
Q1 2015 1.97 0.36 0.08 (0.12) 0.02 0.0 0.32 0.68 0.01 3.31
Q2 2015 (1.24) 0.06 0.04 (0.05) 0.00 0.0 0.10 (0.69) 0.04 (1.75)
2015 YTD 0.71 0.42 0.12 (0.18) 0.01 0.0 0.42 (0.02) 0.05 1.50
Quarterly and semi-annual figures are calculated by BHCM as at 30 June 2015,
based on performance data for each period provided by the BHG's administrator,
Northern Trust. Figures rounded to two decimal places.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
Methodology and Definition of Monthly Contribution to Performance:
Attribution is approximate and has been derived by allocating each underlying
trader book in each Underlying Fund 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 BHG, the majority
of risk in this category is in rates)
"Rates": developed interest rates markets
"FX": global FX forwards and options
"EMG": global emerging markets
"Equity": global equity markets including indices and other derivatives
"Commodity": liquid commodity futures and options
"Credit": corporate and asset-backed indices, bonds and CDS
"Systematic": rules-based futures trading
"Share buyback": buyback activity for discount management purposes
Allocation Review
During the first half of 2015, no material allocation changes were made to the
portfolio of BHG.
The IC further increased the Fund's exposure to the DIP from 23.6% on 31
December 2014 to 26.9% as at the end of June 2015. The IC believe that
increasing the Fund's exposure to DIP (which provides direct exposure to the
trading of underlying traders of Brevan Howard's global investment managers)
will continue to benefit the return profile of the Fund.
Other allocation changes during the reporting period included small allocation
increases to BHA and BHST of 2% and 1% respectively and reduced allocations to
BHMF and DWC of 1% and 3% respectively.
Commentary and Outlook
In the US, the Federal Reserve ("Fed") spent the first half of the year
preparing the markets for the start of monetary policy normalisation by the end
of the year. The two sides of the dual mandate for full employment and price
stability have been sending mixed messages. On the one hand, the labour market
is close to full employment, with the unemployment rate in the middle of the
year at 5.3% and broader measures of labour market slack showing even faster
improvement, along with tentative signs of stronger wage gains. On the other
hand, inflation trends have been subdued owing to the sharp drop in oil and
import prices. Given these cross-currents, the Manager expects the Fed to raise
rates off their emergency low but remove accommodation only gradually. Although
the policy divergence compared with the rest of the world will be small in
magnitude, the commencement of policy normalisation in the US will potentially
open up another round of currency adjustments.
Incremental progress on growth and inflation in the Eurozone in the first half
of the year were overshadowed by the deepening crisis in Greece. With the acute
phase of the crisis passing and negotiations begun for reforms and another
bailout, attention will return to the overall macro outlook. Despite some
progress, the economic fundamentals are daunting with huge amounts of slack in
most countries and very low inflation everywhere. The ECB will complete its
ambitious asset purchase program in September 2016 and the likelihood is that
there will be justification to do more. Countries around the Eurozone periphery
will likely continue to struggle with currency appreciation and sluggish
growth, making them candidates for further nontraditional policy actions like
further rate cuts into negative territory.
Japan presents interesting opportunities for investors. The economy is also
sending mixed signals, with choppy growth and too-low inflation. However, the
Bank of Japan is firmly committed to reflation and the government is backing a
broad range of efforts to boost the stock market. The same is true in China,
but the outcome has been more volatile. Chinese stocks soared and then suffered
stunning setbacks. On the surface, Chinese growth looks fine but there are
doubts about whether the official data are accurately tracking underlying
developments. More broadly, emerging markets are a mixed bag, ranging from
deepening problems in Brazil to more promising structural developments in
India. Economies geared to Chinese growth and commodities more broadly are
poised to suffer through lacklustre global growth and the trend appreciation in
the US Dollar. But countries that can separate themselves from those
developments have brighter potential.
Brevan Howard Capital Management, LP,
acting by its sole general partner,
Brevan Howard Capital Management Limited
26 August 2015
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 review 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.
Signed on behalf of the Board by:
Sir Michael Bunbury
Chairman
John Hallam
Director
26 August 2015
Independent Review Report to BH Global Limited
We have been engaged by the Company to review the Interim Unaudited Financial
Statements included in the Interim Report for the six month period to 30 June
2015 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. We have read the other information contained in the Interim Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the Interim Unaudited Financial
Statements.
This Report is made solely to the Company in accordance with the terms of our
engagement letter dated 9 June 2015 to assist the Company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's
Financial Conduct Authority ("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.
Directors' responsibilities
The Interim Report is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the Interim Report in
accordance with the DTR of the UK FCA.
As disclosed in note 3, the Annual Audited Financial Statements of the Company
are prepared in conformity with United States Generally Accepted Accounting
Principles and applicable law.
Our responsibility
Our responsibility is to express to the Company a conclusion on the Interim
Report and Unaudited Financial Statements included in the Interim Report based
on our review.
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. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently does
not enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the Interim Unaudited Financial Statements included in the Interim
Report for the six month period to 30 June 2015 do not give a true and fair
view of the financial position of the Company as at 30 June 2015 and of its
financial performance and its cash flows for the six month period then ended,
in conformity with United States Generally Accepted Accounting Principles and
the DTR of the UK FCA.
Lee C Clark
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
26 August 2015
Unaudited Statement of Assets and Liabilities
As at 30 June 2015
30.06.15 31.12.14 30.06.14
(Unaudited) (Audited) (Unaudited)
US$'000 US$'000 US$'000
Assets
Investment in BHMS 680,003 673,396 -
Investment in BHGO 188 197 984,163
Amounts due from BHGO - - 3,479
Other debtors 97 86 123
Cash and bank balances denominated in US Dollars 4,682 3,276 3,555
Cash and bank balances denominated in Euro - - 139
Cash and bank balances denominated in Sterling 10,591 5,739 9,734
Total assets 695,561 682,694 1,001,193
Liabilities
Cash and bank balances denominated in Euro - 1 -
Loan notes payable (notes 3 and 10) 19,301 6,668 32,938
Redemptions in respect of buybacks payable 640 1,584 1,354
Management fees payable (note 4) 1,109 1,145 397
Performance fees payable (note 4) 1,737 - -
Accrued expenses and other liabilities 451 234 599
Directors' fees and expenses payable 113 112 124
Administration fees payable (note 4) 65 43 59
Total liabilities 23,416 9,787 35,471
Net assets 672,145 672,907 965,722
Number of shares in issue (note 6)
US Dollar shares 5,096,470 6,994,093 6,867,652
Euro shares - - 12,456,014
Sterling shares 27,624,277 27,313,033 28,877,578
Net asset value per share (notes 8 and 11)
US Dollar shares US$13.65 US$13.44 US$13.10
Euro shares - - €13.00
Sterling shares £13.87 £13.62 £13.25
See accompanying notes to the Interim Unaudited Financial Statements.
Signed on behalf of the Board by:
Sir Michael Bunbury
Chairman
John Hallam
Director
26 August 2015
Unaudited Statement of Operations
For the period from 1 January 2015 to 30 June 2015
01.01.15 01.01.14 01.01.14
to 30.06.15 to to 30.06.14
31.12.14
(Unaudited) (Audited) (Unaudited)
US$'000 US$'000 US$'000
Net investment gain allocated from BHMS
Interest 5,492 2,620 -
Expenses (574) (230) -
Net investment gain allocated from BHMS 4,918 2,390 -
Net investment loss allocated from BHGO
Interest - 3 5
Expenses (10) (202) (106)
Net investment loss allocated from BHGO (10) (199) (101)
Company income
Foreign exchange gains (note 3) 6,664 - 20,346
Total Company income 6,664 - 20,346
Company expenses
Management fees (note 4) 6,699 7,809 2,443
Performance fees (note 4) 1,692 - -
Other expenses 819 2,317 1,158
Directors' fees and expenses 220 587 257
Administration fees (note 4) 128 315 176
Foreign exchange losses (note 3) - 46,164 -
Total Company expenses 9,558 57,192 4,034
Net investment gain/(loss) 2,014 (55,001) 16,211
Net realised and unrealised gains on investments
allocated from BHMS
Net realised gain on investments 60,738 22,743 -
Net unrealised loss on investments (45,586) (5,048) -
Net realised and unrealised foreign exchange gain -
- on hedging 622 603 -
Net realised and unrealised gains on investments 15,774 18,298 -
allocated from BHMS
Net realised and unrealised losses on investments
allocated from BHGO
Net realised (loss)/gain on investments - (10,760) 13,858
Net unrealised loss on investments - - (4,715)
Net realised and unrealised foreign exchange gain/(loss)
- on hedging - 530 651
- on capital (note 3) (1) 4,171 (19,847)
Net realised and unrealised losses on investments (1) (6,059) (10,053)
allocated from BHGO
Net increase/(decrease) in net assets resulting from 17,787 (42,762) 6,158
operations
See accompanying notes to the Interim Unaudited Financial Statements.
Unaudited Statement of Changes in Net Assets
For the period from 1 January 2015 to 30 June 2015
01.01.15 01.01.14 01.01.14
to 30.06.15 to to 30.06.14
31.12.14
(Unaudited) (Audited) (Unaudited)
US$'000 US$'000 US$'000
Net increase/(decrease) in net assets resulting from
operations
Net investment gain/(loss) 2,014 (55,001) 16,211
Net realised gain on investments allocated from BHGO and 60,738 11,983 13,858
BHMS
Net unrealised loss on investments allocated from BHGO (45,586) (5,048) (4,715)
and BHMS
Net realised and unrealised foreign exchange gain/(loss) 621 5,304 (19,196)
allocated from BHGO and BHMS
17,787 (42,762) 6,158
Share capital transactions
Purchase of own shares (note 6)
US Dollar shares (527) (18,021) (11,669)
Sterling shares (17,630) (65,529) (42,241)
(18,157) (83,550) (53,910)
Repayment of Offer Costs
US Dollar shares (6) (47) -
Euro shares - (6,031) -
Sterling shares (386) (400) -
(392) (6,478) -
Redemption of Euro share class - (207,777) -
Net decrease in net assets (762) (340,567) (47,752)
Net assets at the beginning of the period/year 672,907 1,013,474 1,013,474
Net assets at the end of the period/year 672,145 672,907 965,722
See accompanying notes to the Interim Unaudited Financial Statements.
Unaudited Statement of Cash Flows
For the period from 1 January 2015 to 30 June 2015
01.01.15 01.01.14 01.01.14
to 30.06.15 to to 30.06.14
31.12.14
(Unaudited) (Audited) (Unaudited)
US$'000 US$'000 US$'000
Cash flows from operating activities
Net increase/(decrease) in net assets resulting from 17,787 (42,762) 6,158
operations
Adjustments to reconcile net increase/(decrease) in net
assets resulting from operations to net cash provided by
operating activities:
Net investment (gain)/loss allocated from BHGO and BHMS (4,908) (2,191) 101
Net realised gain on investments allocated from BHGO and (60,738) (11,983) (13,858)
BHMS
Net unrealised loss on investments allocated from BHGO 45,586 5,048 4,715
and BHMS
Net realised and unrealised foreign exchange (gain)/loss (621) (5,304) 19,196
allocated from BHGO and BHMS
Purchase of investment in BHGO and BHMS - (26,212) -
Proceeds from sale of investment in BHGO and BHMS 21,227 331,205 33,674
Interest expense on short term loan 185 241 100
Foreign exchange (gains)/losses (6,664) 46,164 (20,346)
(Increase)/decrease in other debtors (11) 31 (6)
(Decrease)/increase in management fees payable (36) 697 (51)
Increase in performance fees payable 1,737 - -
Increase in accrued expenses and other liabilities 27 58 327
Increase/(decrease) in Directors' fees payable 1 (21) (9)
Increase/(decrease) in administration fees payable 22 (17) (1)
Net cash provided by operating activities 13,594 294,954 30,000
Cash flows from financing activities
Purchase of own shares (19,101) (81,967) (52,555)
Proceeds of borrowings from short term loan 12,175 48,849 32,938
Repayment of borrowings from short term loan - (41,363) -
Interest earned/(paid) on short term loan 5 (236) -
Repayment of Offer Costs (392) (6,478) -
Redemption of euro share class - (207,777) -
Net cash used in financing activities (7,313) (288,972) (19,617)
Change in cash 6,281 5,982 10,383
Cash, beginning of the period/year 9,014 3,045 3,045
Effect of exchange rate fluctuations (22) (13) -
Cash, end of the period/year 15,273 9,014 13,428
Cash, end of the period/year
Cash and bank balances denominated in US Dollars 4,682 3,276 3,555
Cash and bank balances denominated in Euro1 - (1) 139
Cash and bank balances denominated in Sterling2 10,591 5,739 9,734
15,273 9,014 13,428
1Cash and bank balances denominated in Sterling - (1) 102
2Cash and bank balances denominated in Euro 6,734 3,687 5,693
Supplemental disclosure of non-cash financing
activities:
In specie divestment in BHGO (note 12) - 666,408 -
In specie investment in BHMS (note 12) - (666,408) -
See accompanying notes to the Interim Unaudited Financial Statements.
Notes to the Interim Unaudited Financial Statements
For the period from 1 January 2015 to 30 June 2015
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 was admitted to a Primary Listing on the Official List of the
London Stock Exchange on 29 May 2008. As a result of changes to the UK Listing
Regime, the Company's Primary Listing became a Premium Listing with effect from
6 April 2010.
As of 20 October 2008 the Company obtained a Secondary Listing on the Bermuda
Stock Exchange and with effect from 11 November 2008, the US Dollar shares of
the Company were admitted to a Secondary Listing on NASDAQ Dubai.
The Company offers multiple classes of ordinary shares, which differ in terms
of currency of issue. To date, ordinary shares have been issued in US Dollar,
Euro and Sterling.
On 27 February 2014 the Shareholders of the Euro Share Class voted in favour of
the Class Closure Resolution and closure of the Euro Share Class which was
completed in August 2014, as discussed in note 9.
2. Organisation
Prior to 1 September 2014, the Company's investment objective was to seek to
generate consistent long-term capital appreciation through an investment policy
of investing all of its assets (net of those expenses of the initial public
offering borne by the Company and funds required for its short-term working
capital requirements) in Brevan Howard Global Opportunities Master Fund Limited
("BHGO"). The Company maintained a residual holding in BHGO until July 2015, as
BHGO went through the process of an orderly liquidation. The assets held by
BHGO at 30 June 2015 consisted solely of cash and deposits held with broker.
For additional information refer to note 13.
On 28 August 2014 the Shareholders voted in favour of changing the investment
policy and effective 1 September 2014, 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").
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 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 as at 30 June 2015 and the percentage BHMS's
investment represented of the underlying fund's NAV are as follows:
Brevan Howard Master Fund Limited 6.25%
Brevan Howard Asia Master Fund Limited 12.86%
DW Catalyst Offshore Fund, Ltd. 11.85%
Brevan Howard Systematic Trading Master Fund Limited 60.21%
BHMS's allocation between these vehicles is disclosed in the Manager's Report.
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 underlying 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, BHGO and the Brevan Howard underlying funds.
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 ASC
946-10-50.
Going concern
Having reassessed the principal risks, the Directors considered it appropriate
to adopt the going concern basis of accounting in preparing the interim
financial information.
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 at fair value.
Fair value is determined as the Company's proportionate share of BHMS's net
assets. At 30 June 2015, the Company's US Dollar, and Sterling capital account
represents 2.09%, and 18.46% 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. The Company maintained a residual
holding in BHGO until July 2015, as BHGO went through the process of an orderly
liquidation. The net assets held by BHGO only included cash and deposits held
with broker. For additional information refer to note 13.
Fair value measurement
Accounting Standards Codification ("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.
ASC 820 establishes a three-level hierarchy to maximise the use of observable
market data and minimise the use of unobservable inputs and to establish
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, for example, the risk
inherent in a particular valuation technique used to measure fair value
including such a pricing model and/or the risk inherent in the inputs to the
valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity.
Unobservable inputs are inputs that reflect the reporting entity's own
assumptions about the assumptions market participants would use in pricing the
asset or liability developed based on the best information available in the
circumstances.
Level 1 - Valuations based on unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to access.
Valuation adjustments and block discounts are not applied to Level 1
securities. Since valuations are based on quoted prices that are readily and
regularly available in an active market, valuation of these securities does not
entail a significant degree of judgement.
Level 2 - Valuations based on quoted prices in markets that are not active or
for which all significant inputs are observable, either directly or indirectly.
Level 3 - Valuations based on inputs that are unobservable and significant to
the overall fair value measurement.
Inputs are used in applying the various valuation techniques and broadly refer
to the assumptions that market participants use to make valuation decisions,
including assumptions about risk. Inputs may include price information,
volatility statistics, specific and broad credit data, liquidity statistics,
and other factors.
A financial instrument's level within the fair value hierarchy is based on the
lowest level of any input that is significant to the fair value measurement.
However, the determination of what constitutes "observable" requires
significant judgement by the Company's Directors (the "Board"). After
consultation with the Administrator and Manager, the Board considers observable
data to be that market data which is readily available, regularly distributed
or updated, reliable and verifiable, not proprietary, and provided by
independent sources that are actively involved in the relevant market.
The categorisation of a financial instrument within the hierarchy is based upon
the pricing transparency of the instrument and does not necessarily correspond
to the Board's perceived risk of that instrument.
Fair value is a market-based measure considered from the perspective of a
market participant rather than an entity-specific measure. Therefore, even when
market assumptions are not readily available, the Board's own assumptions are
set to reflect those that market participants would use in pricing the asset or
liability at the measurement date.
The Board uses prices and inputs that are current as of the measurement date,
including periods of market dislocation. In periods of market dislocation, the
observability of prices and inputs may be reduced for many securities. This
condition could cause a security to be reclassified to a lower level within the
fair value hierarchy.
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 and BHGO'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 Interim Unaudited 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 Interim Unaudited 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.
Share issue expenses
Share issue expenses of US$10,552,146 were borne by the Company and were
charged against the Share capital account at launch.
In accordance with the Placing Agreement dated 28 April 2008, the Manager paid
the costs and expenses of, and incidental to, the Offer (including all costs
related to the establishment of the Company) (the "Offer Costs") which were in
excess of 1% of the gross proceeds of the Offer. The Offer Costs paid by the
Manager amounted to US$26,559,274.
Pursuant to the terms of the Management Agreement, the Company was required to
repay to the Manager a fraction of these Offer Costs for every US Dollar by
which repurchases, redemptions or cancellations of the Company's shares reduced
the current US Dollar NAV of the Company below its NAV at the time of the
Company's listing, being US$1,044,631,308.
The amount of these Offer Costs repaid was 2.55 cents for every US Dollar by
which the Company's NAV was reduced, being the figure obtained by dividing the
Offer Costs by the NAV of the Company at the time of its listing.
During the period ended 30 June 2015, US$391,626 (31 December 2014:
US$6,478,122, 30 June 2014: US$Nil) was repayable to the Manager as Offer
Costs. At 30 June 2015, US$Nil (31 December 2014: US$105,003, 30 June 2014:
US$Nil) of the Offer Cost reclaim remained outstanding.
In addition, the Management Agreement required the Company to pay the Manager
an amount equal to all or part of the Offer Costs in the following
circumstances: (i) payment was required in full if the Company was wound up on
or before 29 May 2015, or (ii) in part if shares are redeemed as a result of a
Class Closure Resolution passed on or before 29 May 2015 (with the percentage
of the Offer Costs that were repayable being equal to the percentage that the
number of shares redeemed represented of the total number of the Company's
shares in issue).
Any repurchases, redemptions or cancellations were priced to take into account
any fractional Offer Cost repayments and therefore ensured that continuing
shareholders were not prejudiced.
These provisions expired on 29 May 2015.
In respect of the Euro Class closure, the Articles of the Company required that
(i) the Company deducted from the NAV per share payable on redemption of the
Euro Class shares a fractional amount of the costs of the Euro Class Closure
Meeting and (ii) the amount payable to the Manager in partial reimbursement of
the Offer Costs which are attributable to the shares that were redeemed. This
meant that the redemption price received by redeeming Euro Class shareholders
was 97.12% of the 31 July 2014 NAV per share on redemption.
Foreign exchange
For the purposes of an aggregated Interim Unaudited Statement of Assets and
Liabilities, investment securities and other assets and liabilities denominated
in foreign currencies are translated into US Dollars using exchange rates at
the reporting date. Share capital denominated in foreign currencies is
translated into US Dollars using exchange rates on the date of issue. The
resulting presentational foreign exchange gains or losses are included in the
Interim Unaudited Statement of Operations.
Transactions denominated in foreign currencies are translated into US Dollars
using exchange rates at the date of such transactions.
All currency gains and losses are included in the Interim Unaudited Statement
of Operations.
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 or in the Financial Highlights
in note 11.
Allocation of results of BHGO and BHMS
Net realised and unrealised gains/losses of BHGO and BHMS are allocated to the
Company's share classes based upon the percentage ownership of the equivalent
BHGO and 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 all 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 and Performance fees
The Company has entered into a management agreement with the Manager to manage
the Company's investment portfolio. Prior to 1 September 2014, the Manager
received a management fee of 1/12 of 0.50% (or a pro rata proportion thereof)
per month of the NAV of each share class (before deduction of that month's
management fee) as at the last business day in each month, payable monthly in
arrears.
As a result of the change in investment policy, the Company's Management
Agreement was amended to provide for the management fee and performance fee to
be paid to the Manager as follows. Effective 1 September 2014, the Manager
receives a management fee of 1/12 of 2% (or a pro rata proportion thereof) per
month of the NAV of each share class (before deduction of that month's
management fee and before making any deduction for any accrued performance fee)
calculated as at the last business day in each month and payable monthly in
arrears.
BHGO itself was not subject to management fees, however BHGO's investments were
subject to management fees and operational services fees ranging in aggregate
from 1% to 2.5% per annum; in addition to performance fees in certain of the
underlying investments.
There are no fees charged by the Manager at the level of BHMS or any of its
underlying funds.
During the period ended 30 June 2015, US$6,699,493 (31 December 2014:
US$7,808,551, 30 June 2014: US$2,442,508) was charged by the Manager as
management fees to the Company. At 30 June 2015, US$1,109,255 (31 December
2014: US$1,145,005, 30 June 2014: US$397,047) of the fee remained outstanding.
Effective 1 September 2014, the Manager is also entitled to a semi annual
performance fee for each share class, accrued in arrears on a monthly basis.
The performance fee is equal to 20% of the appreciation in the NAV per share
(adjusted for any increases or decreases 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 base NAV per share of that class. The base
NAV per share is the greater of the NAV per share of the relevant class at 1
September 2014 and the highest NAV per share achieved as at the end of any
previous calculation period. However, for the purposes of calculating the
performance fee payable to the Manager following reinvestment of the Company
into BHMS, the base NAV per share of the Company's Sterling and US Dollar
shares as at 1 September 2014 were set at £13.69 and $13.56 respectively to
take into account the extent to which any of the Company's underlying
investments were performing below existing high water marks immediately prior
to their contribution to BHMS.
Any accrued performance fee in respect of Shares which are repurchased,
redeemed or cancelled 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 repurchase, redemption or cancellation. 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 tenth business day
in June and 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 15 business days of 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 2015, US$1,691,891 (31 December 2014: US$Nil,
30 June 2014: US$Nil) was charged as performance fees of which, US$1,737,444
(31 December 2014: US$Nil, 30 June 2014: US$Nil) remained payable at period
end.
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.
The Company is also entitled to terminate the management agreement without
payment of compensation if a resolution is passed to wind up the Company in
accordance with its discount control mechanism or if the net asset value of
BHMS is more than 25 per cent lower than the average net asset value of BHMS
over the previous twelve month period.
Prior to 1 September 2014, the management agreement could be terminated by
either party on not less than 24 months' notice without payment of
compensation, although the Company would have been required to reimburse the
Offer Costs if termination were to have occurred before 29 May 2015. The
Company could have terminated the management agreement forthwith by notice in
the event of specified acts of default by the Manager without payment of
compensation.
The Company was also entitled to terminate the management agreement without
payment of compensation if a resolution was passed to wind up the Company in
accordance with its discount control mechanism or if the net asset value of
BHGO was more than 25 per cent lower than the average net asset value of BHGO
over the previous twelve month period, although the Company would have been
required to reimburse the Offer Costs if termination in those circumstances
were to have occurred before 29 May 2015.
In addition, the Company could have terminated the management agreement on less
than 24 months' notice without cause, but the Company would have had to pay
compensation to the Manager equivalent to the aggregate management fees that
would otherwise directly or indirectly have been paid by the Company during the
24 months following notice of termination. The Company would also have been
required to reimburse the Offer Costs if termination in those circumstances
were to have occurred before 29 May 2015.
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 £36,000 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 2015, US$127,755 (31 December 2014: US$314,716,
30 June 2014: US$176,357) was earned by the Administrator as administration
fees. At 30 June 2015, US$65,388 (31 December 2014: US$43,159, 30 June 2014:
US$59,113) of the fee remained outstanding.
5. Directors' fees
The Chairman is entitled to a fee of £150,000 per annum. John Hallam, as
Chairman of the Audit Committee, and Nicholas Moss, as Chairman of the
Management Engagement Committee, are entitled to a fee of £36,000 per annum.
All other Directors receive £33,000 per annum. The Directors are also entitled
to be reimbursed for expenses properly incurred in the performance of their
duties as Directors.
6. Share capital
Issued and authorised share capital
The Company was incorporated with the authority to issue an unlimited number of
ordinary shares with no par value which may be divided into at least two
classes denominated in US Dollars and Sterling. The treasury shares have arisen
as a result of the discount management programme as described in note 9.
For the period from 1 January 2015 to 30 June 2015
US Dollar Sterling
shares shares
Number of ordinary shares
In issue at 1 January 2015 6,994,093 27,313,033
Share conversions (1,856,593) 1,186,769
Purchase of own shares into Treasury (41,030) (875,525)
In issue at 30 June 2015 5,096,470 27,624,277
Number of treasury shares
In issue at 1 January 2015 570,806 2,535,319
Shares purchased and held in Treasury during the
period:
- On market purchases 41,030 875,525
Shares cancelled (150,000) (700,000)
In issue at 30 June 2015 461,836 2,710,844
Percentage of class 8.31% 8.94%
Company
Total
US$'000 £'000 US$'000
Share capital account
At 1 January 2015 20,575 259,998 528,816
Share conversions (25,674) 16,655 -
Purchase of own shares into Treasury (527) (11,422) (18,157)
Repayment of offer costs (6) (253) (392)
Transfer from realised investment reserve 5,632 - 5,632
At 30 June 2015 - 264,978 515,899
For the year 1 January 2014 to 31 December 2014
US Dollar Euro shares Sterling
shares shares
Number of ordinary shares
In issue at 1 January 2014 11,447,780 8,987,596 31,727,417
Share conversions (2,926,987) 3,468,418 (1,149,243)
Purchase of own shares into Treasury (1,526,700) - (3,265,141)
Redemption of Euro class - (12,456,014) -
In issue at 31 December 2014 6,994,093 - 27,313,033
Number of treasury shares
In issue at 1 January 2014 1,209,106 197,180 2,770,178
Shares purchased and held in treasury during the
year:
- On market purchases 1,526,700 - 3,265,141
Shares cancelled (2,165,000) (197,180) (3,500,000)
In issue at 31 December 2014 570,806 - 2,535,319
Percentage of class 7.55% 0.00% 8.49%
Company
Total
US$'000 €'000 £'000 US$'000
Share capital account
At 1 January 2014 76,833 98,647 314,987 832,528
Share conversions (38,190) 45,909 (15,527) -
Purchase of own shares into (18,021) - (39,219) (83,550)
Treasury
Repayment of offer costs (47) (4,574) (243) (6,478)
Redemption of Euro Class - (139,982) - (183,131)
Foreign exchange loss on Euro Class - - - (30,553)
closure
At 31 December 2014 20,575 - 259,998 528,816
For the period from 1 January 2014 to 30 June 2014
US Dollar Euro shares Sterling
shares shares
Number of ordinary shares
In issue at 1 January 2014 11,447,780 8,987,596 31,727,417
Share conversions (3,584,462) 3,468,418 (752,116)
Purchase of own shares into (995,666) - (2,097,723)
Treasury
In issue at 30 June 2014 6,867,652 12,456,014 28,877,578
Number of treasury shares
In issue at 1 January 2014 1,209,106 197,180 2,770,178
Shares purchased and held in treasury
during the period:
- On market purchases 995,666 - 2,097,723
Shares cancelled (1,475,000) - (2,150,000)
In issue at 30 June 2014 729,772 197,180 2,717,901
Percentage of class 9.61% 1.56% 8.60%
Company
Total
US$'000 €'000 £'000 US$'000
Share capital account
At 1 January 2014 76,833 98,647 314,987 832,528
Share conversions (46,909) 45,909 (10,204) -
Purchase of own shares into (11,669) - (25,122) (53,910)
Treasury
At 30 June 2014 18,255 144,556 279,661 778,618
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
either Master Fund as calculated by BHMS or BHGO 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 shares
The Directors have been granted authority to purchase in the market up to
811,701 US Dollar shares, and 4,183,520 Sterling shares respectively and they
intend to seek annual renewal of this authority from shareholders which was
last granted on 29 June 2015. 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 repurchase 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 29 June
2015 (the "AGM"), the Directors have the power to issue further shares on a non
pre-emptive basis for cash in respect of 541,495 US Dollar shares, and
2,790,874 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 and BHGO have 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.
As announced on 15 January 2014, the Company intends to be operated in such a
manner that its shares are not categorised as non-mainstream pooled
investments. This may require the Company to pay dividends in respect of any
income that it receives or would, for UK tax purposes, be deemed to have
received so that it would qualify as an investment trust if it were UK
tax-resident.
Further, the Company will first apply any such income in payment of its
management fees 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. Details of the 2015 redemption offer are set
out in note 13.
Share conversion scheme
The Company has implemented a Share Conversion Scheme. The scheme 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. From
31 October 2008 shareholders at the discretion of the Board have been able to
convert ordinary shares on the last business day of every month. Each
conversion will be based on NAV (note 8) of the share classes to be converted.
The Company announced on 13 December 2013, that in light of the Class Closure
Resolution process, the Share Conversion Scheme would be suspended following
the December 2013 conversion date. After the completion of the Class Closure
Resolution process, the Share Conversion Scheme was reinstated for the March
2014 conversion date for the US Dollar and Sterling Shares.
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 tax expense in the Interim Unaudited
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 Cayman Islands and
foreign jurisdictions where the Company makes significant investments. The
Company has no examinations by tax authorities in progress.
The Board has analysed the Company's tax positions, and has concluded 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.
Foreign Account Tax Compliance Act
For 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 Company is subject to Guernsey regulations and guidance based on reciprocal
information sharing inter-governmental agreements which Guernsey has entered
into with the United Kingdom and the United States of America. The Board will
take the necessary actions 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 and BHGO,
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 and BHGO, 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.
During the period to 30 June 2015 the Company recorded an average discount to
NAV of 7.04% and 7.21% for US Dollar shares and Sterling shares respectively
(year to 31 December 2014: 9.52%, and 9.70% for US dollar shares, and Sterling
shares respectively and period to 30 June 2014: 9.60%, and 9.31% for US dollar
shares, and Sterling shares respectively).
Due to the discounts of each share class exceeding the 10% threshold in 2013,
the Company convened a meeting of the shareholders of each class to vote on the
Class Closure Resolutions. The resolution in respect of the Euro class was
passed whereas those for the Sterling and Dollar classes were not.
Following the Class Closure Resolution vote, the Company under the Articles of
Incorporation was required to make the following Class Closure Options
available to the shareholders of the Euro class:
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 and repayment of Offer Costs as described in note 3 to the Financial
Statements);
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.
A notice of election for these Class Closure Options was sent to shareholders
of the Euro class on 12 March 2014 requiring a response by 25 April 2014.
Further to the decision to close the Company's Euro share class and the
additional notice sent to holders of Euro shares on 13 May 2014, a total of
12,456,014 Euro shares were elected to be redeemed; 249,178 Euro shares were
elected to be converted into Sterling shares and 57,867 Euro shares were
elected to be converted into US dollar shares.
The remaining 388,017 Euro shares in respect of which an election was not
received were converted into Sterling shares.
The Euro shares elected for redemption were redeemed following the announcement
of the Euro redemption price as at 31 July 2014 on 22 August 2014, with payment
of the redemption proceeds on 2 September 2014.
Euro shares that were elected to be converted into shares of another class on
or before 25 April 2014 were converted with effect from 27 May 2014.
Euro shares that were elected to be converted into shares of another class
after 25 April 2014 or in respect of which no election was received were
converted with effect from 30 June 2014.
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 will be funded by partial redemptions of the
Company's investment in BHMS.
10. Note Purchase Agreement
The Company is party to a Note Purchase Agreement with JP Morgan Chase Bank
dated 17 August 2012, amended and restated on 1 September 2014, pursuant to
which the Company may obtain financing of up to US$11 million and £39 million,
if required inter alia, to finance share buybacks pending receipt of the
proceeds of redemption from its underlying investments. As at 30 June 2015, an
amount equivalent to US$19,300,800 (31 December 2014: US$6,668,149, 30 June
2014: US$32,937,900) was used under the Note Purchase Agreement, with
US$194,672 (31 December 2014: US$4,812, 30 June 2014: US$99,065) of loan
interest payable at the period end.
11. Financial Highlights
The following tables include selected data for a single ordinary share of each
of the ordinary share classes in issue at the period end and other performance
information derived from the Interim Unaudited Financial Statements.
The per share amounts and ratios which are shown reflect the income and
expenses of the Company for each class of ordinary share.
01.01.15 01.01.15
to 30.06.15 to 30.06.15
US Dollar Sterling
shares shares
US$ £
Per share operating performance
Net asset value at beginning of the period 13.44 13.62
Income from investment operations
Net investment loss* (0.11) (0.10)
Net realised and unrealised gain on investment 0.46 0.32
Other capital items** (0.14) 0.03
Total return 0.21 0.25
Net asset value, end of the period 13.65 13.87
Total return before performance fees 1.74% 2.10%
Performance fees (0.24%) (0.27%)
Total return after performance fees 1.50% 1.83%
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 from 1 January 2015 to 30 June 2015. The figures contained herein
and below for the period ended 30 June 2015 are not annualised.
01.01.15 01.01.15
to 30.06.15 to 30.06.15
US Dollar Sterling
shares shares
US$'000 £'000
Supplemental data
Net asset value, end of the period 69,550 383,135
Average net asset value for the period 80,641 386,547
01.01.15 01.01.15
to 30.06.15 to 30.06.15
US Dollar Sterling
shares shares
Ratio to average net assets
Operating expense
Company expenses*** 1.19% 1.17%
Master Fund expenses**** 0.08% 0.09%
Performance fees 0.20% 0.26%
1.47% 1.52%
Net investment loss* (0.68%) (0.70%)
01.01.14 01.01.14 01.01.14
to 31.12.14 to 31.12.14^ to 31.12.14
US Dollar Euro shares Sterling
shares shares
US$ € £
Per share operating performance
Net asset value at beginning of the year 13.12 13.19 13.34
Income from investment operations
Net investment loss* (0.16) (0.07) (0.15)
Net realised and unrealised gain/(loss) on 0.17 (0.11) 0.29
investment
Other capital items** 0.31 (0.35) 0.14
Total return 0.32 (0.53) 0.28
Redemption of Euro Share Class - 12.66 -
Net asset value, end of the year 13.44 - 13.62
Total return 2.49% (4.02%) 2.09%
^ Returns of the Euro Share Class have been calculated up to the
date of the final redemption.
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 2014.
01.01.14 01.01.14 01.01.14
to 31.12.14 to 31.12.14^^ to 31.12.14
US Dollar Euro shares Sterling
shares shares
US$'000 €'000 £'000
Supplemental data
Net asset value, end of the year 94,033 - 372,016
Average net asset value for the year 95,752 168,194 381,539
^^ The average Euro Share Class net asset value for the period is
calculated based on published NAVs from the start of the period up to 31 July
2014.
01.01.14 01.01.14 01.01.14
to 31.12.14 to 31.12.14^^ to 31.12.14
^
US Dollar Euro shares Sterling
shares shares
Ratio to average net assets
Operating expense
Company expenses*** 1.45% 0.70% 1.39%
Master Fund expenses**** 0.05% 0.03% 0.05%
1.50% 0.73% 1.44%
Net investment loss* (1.17%) (0.49%) (1.06%)
^^^ Ratios of the Euro Share Class
have been annualised.
01.01.14 01.01.14 01.01.14
to 30.06.14 to 30.06.14 to 30.06.14
US Dollar Euro shares Sterling
shares shares
US$ € £
Per share operating performance
Net asset value at beginning of the period 13.12 13.19 13.34
Income from investment operations
Net investment loss* (0.07) (0.05) (0.06)
Net realised and unrealised loss on investment (0.17) (0.15) (0.12)
Other capital items** 0.22 0.01 0.09
Total return (0.02) (0.19) (0.09)
Net asset value, end of the period 13.10 13.00 13.25
Total return (0.14%) (1.46%) (0.70%)
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 from 1 January 2014 to 30 June 2014. The figures contained herein
and below for the period ended 30 June 2014 are not annualised.
01.01.14 01.01.14 01.01.14
to 30.06.14 to 30.06.14 to 30.06.14
US Dollar Euro shares Sterling
shares shares
US$'000 €'000 £'000
Supplemental data
Net asset value, end of the period 89,967 161,903 382,559
Average net asset value for the period 101,017 169,167 388,712
01.01.14 01.01.14 01.01.14
to 30.06.14 to 30.06.14 to 30.06.14
US Dollar Euro shares Sterling
shares shares
Ratio to average net assets
Operating expense
Company expenses*** 0.44% 0.38% 0.41%
BHGO expenses**** 0.01% 0.01% 0.01%
0.45% 0.39% 0.42%
Net investment loss* (0.47%) (0.40%) (0.42%)
* The net investment loss figure shown above does not include net
realised and unrealised gains and losses on investments allocated from BHGO and
BHMS.
** Included in other capital items are the discounts and premiums on
conversions between share classes during the period, share buybacks and partial
capital returns, as compared to the NAV per share at the beginning of the
period.
*** Company expenses are as disclosed in the Interim Unaudited Statement
of Operations, excluding performance fees and foreign exchange losses on
aggregation.
**** Master Fund expenses are the operating expenses of BHGO and BHMS.
12. Related Party Transactions
Parties are considered to be related if one party has the ability to control
the other party or exercise significant influence over that party in making
financial or operational decisions.
On 1 September 2014, BHGO transferred underlying portfolio funds of $75,305,070
and £355,935,974 to BHMS in exchange for shares in that company. In addition,
on 1 September 2014, the Company redeemed, in specie, $77,334,645 of the US
Dollar shares and £354,713,853 of the Sterling shares it held in BHGO and in
return received Ordinary Shares of BHMS (a company managed by the Manager).
The Directors are responsible for the determination of the investment policy of
the Company and have overall responsibility for the Company's activities.
The Company is managed by the Manager.
The Company and the Manager have entered into a Management Agreement dated 21
June 2010, amended and restated 18 July 2014, under which the Manager has been
given responsibility for the day-to-day discretionary management of the
Company's assets (including uninvested cash) in accordance with the Company's
investment objective and policy, subject to the overall supervision of the
Directors and in accordance with the investment restrictions in the Management
Agreement and the Articles of Incorporation. Details of the management and
performance fees to which the Manager is entitled are in note 4.
The Company has five non-executive Directors, all of whom are now independent
of the Manager. Talmai Morgan was a non-executive Director of BH Macro Limited
until 25 June 2015. BH Macro Limited is managed by the Company's Manager, and
is a feeder fund for Brevan Howard Master Fund Limited into which BHMS invests.
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 2015:
US Dollar Sterling
Shares Shares
Sir Michael Bunbury Nil 4,000
John Hallam 5,000 Nil
Graham Harrison Nil 1,500
Talmai Morgan 5,000 Nil
Nicholas Moss Nil 839
13. Subsequent Events
Management have evaluated subsequent events up to 26 August 2015, which is the
date that the Interim Unaudited Financial Statements were available to be
issued.
Subsequent to the period end and up to the date of this report, the Company
purchased the following shares of the Company to be held as treasury shares:
Number of Cost
Treasury shares shares Cost (US$) (in currency)
purchased
US Dollar shares 26,473 343,499 $343,499
Sterling shares 278,917 5,682,635 £3,642,547
On 3 July 2015 the following number of each class of shares were redeemed and
cancelled pursuant to the 2015 redemption offer:
135,544 US Dollar shares at a redemption price of US$13.5749, equalling a gross
redemption of US$1,839,996.
529,868 Sterling Shares at a redemption price of £13.7770. equalling a gross
redemption of £7,299,991.
In addition to the above 650,000 Sterling Treasury shares were also cancelled.
Following the purchase and cancellation of shares, the Company has 4,934,453 US
Dollar, and 26,815,492 Sterling ordinary shares in issue.
On 17 July 2015, the Company realised its residual holding in BHGO, during its
orderly liquidation, for US$186,297.
No further subsequent events have occurred.
Historic Performance Summary
As at 30 June 2015
30.06.2015* 31.12.14 31.12.13 31.12.12 31.12.11
(Unaudited) (Audited) (Audited) (Audited) (Audited)
US$'000 US$'000 US$'000 US$'000 US$'000
Net increase/(decrease) in net 17,787 (42,762) 35,409 81,252 39,147
assets resulting from operations
Total assets 695,561 682,694 1,014,286 1,038,961 1,000,993
Total liabilities (23,416) (9,787) (812) (7,766) (628)
Net assets 672,145 672,907 1,013,474 1,031,195 1,000,365
Number of shares in issue
US Dollar shares 5,096,470 6,994,093 11,447,780 13,171,761 15,185,614
Euro shares - - 8,987,596 2,298,992 2,919,762
Sterling shares 27,624,277 27,313,033 31,727,417 39,018,709 39,910,912
Net asset value per share
US Dollar shares US$13.65 US$13.44 US$13.12 US$12.89 US$12.34
Euro shares - - €13.19 €13.00 €12.46
Sterling shares £13.87 £13.62 £13.34 £13.04 £12.47
* Covers the period from 1 January 2015 to 30 June 2015.
Glossary of Acronyms
Detailed below are the underlying funds and their acronyms used within this
report:
BHGO Brevan Howard Global Opportunities Master Fund Limited
BHMS Brevan Howard Multi-Strategy Master Fund Limited
BHMF Brevan Howard Master Fund Limited
BHA Brevan Howard Asia Master Fund Limited
BHST Brevan Howard Systematic Trading Master Fund Limited
DWC DW Catalyst Offshore Fund, Ltd.
Notes
Management and Administration
Directors
Sir Michael Bunbury* (Chairman)
(appointed 1 January 2013)
John Hallam* (Senior Independent Director)
(appointed 28 February 2008)
Graham Harrison*
(appointed 17 March 2010)
Talmai Morgan*
(appointed 25 February 2008)
Nicholas Moss*
(appointed 28 February 2008)
(All Directors are non-executive)
* These Directors 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 (Guernsey) Limited
3rd Floor
Natwest House
Le Truchot
St Peter Port
Guernsey
GY1 1WD
Legal Advisors (Guernsey Law)
Carey Olsen
Carey House
Les Banques
St. Peter Port
Guernsey
GY1 4BZ
Legal Advisors (UK Law)
Freshfields Bruckhaus Deringer
65 Fleet Street
London
EC4Y 1HS
Corporate Brokers
JPMorgan Cazenove
25 Bank Street
Canary Wharf
London
E14 5JP
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
For the latest information
www.bhglobal.com
The Interim Report and Unaudited Financial Statements of BH Global Limited and
the Interim Unaudited Financial Statements of Brevan Howard Multi-Strategy
Master Fund Limited will shortly be available on the Company's website
www.bhglobal.com.
BH GLOBAL : Interim Report and Unaudited Financial Statements 2015
August 26, 2015 at 12:23 pm EDT
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