TIDMHTCF
RNS Number : 2016A
Highbridge Tactical Credit Fund Ltd
25 September 2020
Highbridge Tactical Credit Fund Limited
(the "Company")
Registered in Guernsey - Number 44704
Registered Office:
Sarnia House, Le Truchot,
St Peter Port, Guernsey, GY1 1GR
25 September 2020
Half Yearly Financial Report
The Board of the Company is pleased to announce its results for
the period ended 30 June 2020.
In accordance with DTR 6.3.5(1) please find below the full text
of the half yearly report.
A copy of the Interim Report will be submitted to the National
Storage Mechanism and will shortly be available for inspection at
www.morningstar.co.uk/uk/NSM. The Circular will also be available
on the Company's website: https://www.highbridgemsfltd.co.uk .
For further information about this announcement contact:
Praxis Fund Services Limited
Company Secretary
Tel: +44 (0) 1481 737 600
LEI: 213800397SYHLYFH5961
OF ANNOUNCEMENT
Financial Highlights
Company Key Figures(1)
31 December
30 June 2020 2019
Sterling Share price increase/(decrease) 4.89% (10.79%)
NAV per share increase/(decrease) 6.38% (1.32%)
NAV per share increase/(decrease)
(since investment into Highbridge
Tactical Credit Master Fund L.P.
(2) ) 4.12% (2.13%)
Annualised Sterling NAV return
(since inception(3) ) 6.43% 6.17%
Underlying Fund Key Figures(4)
Sharpe Ratio 1.50 1.44
Beta to FTSE 100(5) 0.12 0.09
of the volatility of the FTSE
100(5) 1/3 1/3
Beta to Barclays Aggregate(6) 0.00 (0.26)
Beta to S&P 500(6) 0.14 0.09
Highbridge Tactical Credit Master Fund, L.P. (formerly: 1992
Tactical Credit Master Fund, L.P.) (the "Underlying Fund") was
launched in November 2013. The Underlying Fund's returns are net of
2% management fee, 20% incentive compensation, and actual fund
expenses. Inception to date performance statistics for the
Underlying Fund are: 50.63% cumulative net return, 6.34% annualised
net return, 5.22% annualised volatility, (9.44%) maximum drawdown
and 1.02 Sharpe Ratio.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
RESULTS. There can be no assurance that Highbridge Tactical Credit
Fund Limited's ("the Company") objectives will be realised or that
the Company will not experience losses.
1. Information is for the Company as at 30 June 2020.
2. NAV per share prior to investment into Highbridge Tactical Credit Master Fund L.P GBP2.1694.
3. This alternative performance measure ("APM") is provided for
shareholders information in addition to the Financial Statements.
Shareholders should base their assessment of the financial
performance of the Company on the information contained in the
Financial Statements. Data used (NAV at inception GBP1.00. Periods
since inception 14.1 years)
4. Information is for the Underlying Fund managed by Highbridge
Capital Management, LLC for the period between 1 March 2016 and 30
June 2020. The performance depicted is not solely the performance
of a standalone Highbridge Fund. The performance incorporates
numbers based on the trading P&L of the Convertible Credit
& Capital Structure Arbitrage Allocation within the Highbridge
Multi-Strategy Fund (the "Highbridge Multi-Strategy Fund
Allocation") from January 1, 2012 to October 31, 2013. To generate
the estimated returns, Highbridge has made assumptions on the
amount of capital that would be required to support the strategy in
a single strategy fund based on its view of the strategy's risk
profile. Pro forma returns are shown net of a 2% management and 20%
incentive compensation and 40 bps of estimated expenses. The
Underlying Fund is managed by the same team of professionals that
managed the Highbridge Multi-Strategy Fund Allocation, which
followed a substantially similar investment strategy. The
Underlying Fund was launched in November 2013. Actual Underlying
Fund returns are shown beginning on November 1, 2013. Underlying
Fund returns are presented net of a pro forma 2% management fee,
20% incentive compensation and 40bps of estimated fund expenses.
Certain recent performance estimated and unaudited.
5. Index Source: FTSE International Limited ("FTSE") (c) FTSE
2017. "FTSE (R)" is a trademark of the London Stock Exchange Group
companies and is used by FTSE International Limited under license.
All rights in the FTSE indices vest in FTSE and/or its licensors.
Neither FTSE nor its licensors accept any liability for any errors
or omissions in the FTSE indices or underlying data. No further
distribution of FTSE data is permitted without FTSE's express
written consent.
6. Index Source: Bloomberg
Note: All index performance information has been obtained from
third parties and should not be relied upon as being complete or
accurate. Indices are shown for comparison purpose only. While an
investor may invest in vehicles designed to track certain indices,
an investor cannot invest directly in an index. Indices are
unmanaged, do not charge fees or expenses, and do not employ
special investment techniques such as leverage or short
selling.
Chairman's Statement
As mentioned in the Annual Report, the emergence and subsequent
escalation of the outbreak of COVID-19 during the Company's
reporting period has had far-reaching consequences. Consumer needs
have certainly changed as a result of the pandemic. As we are all
aware there has been an abrupt halt to global travel, aside from
delaying personal trips and vacations, impacting businesses that
previously embraced travel as part of their culture. The knock-on
effects for airlines, hotels etc., have been far reaching and it
has marked the death knell for many businesses, which were reliant
on travel. Clearly, it is not just the travel sector which is
struggling, the global economy is witnessing the worst recession
since World War 2. On the plus side, there has been a move by many
businesses to increased automation and digitisation. In short, the
World as we knew it has changed and there remains uncertainty as to
what a new normal will look like and indeed how long we will have
to live with COVID-19, before effective medical remedies become
available.
Against that backdrop, how has your Company performed? From a
NAV perspective the Company has performed extremely well during the
6 months to 30 June 2020. The NAV/share has increased by 6.38% from
GBP2.1233 to GBP2.2587. This performance compares to a loss of 3.4%
for the HFRX Global Hedge Fund GBP Index which is a popular
sterling hedged benchmark for the hedge fund industry. Whilst on
the subject of hedges I am delighted to advise that despite the
extreme levels of FX market volatility in March 2020 that the TCF
Feeder fund in which your Company invests the majority of its
capital maintained a full USD hedge. However, that stellar
performance has not been reflected in the share price which
continues to trade at a discount to NAV of approximately 15%.
It was the intention of Highbridge Capital Management, LLC (the
"Investment Manager" or "Highbridge") to embark on an aggressive
marketing campaign based around face to face meetings starting in
March 2020 in the hope of attracting new investors. That campaign
had to be rethought in light of COVID-19 travel restrictions and a
different approach was deployed consisting of two webinars held in
May and July where Jon Segal (representing Highbridge) presented on
the performance of the Underlying Fund and answered questions from
investors. Those webinars were generally well received by those who
attended.
The Future
As you know, at the end of last year the Board embarked on an
aggressive cost reduction programme to mitigate the impact of the
reduced asset base on the Company's total expense ratio. The
Company also engaged finnCap Limited at that time, a broker which
specialises in promoting smaller companies. We have had a target to
rebuild the Company to GBP80 million before the end of 2020, but to
achieve that target we would have had to eliminate the current
share price discount to NAV, so we could justify the costs
associated with an equity raise.
Notwithstanding the valiant efforts made by finnCap to identify
new investors and the webinars mentioned earlier, at the time of
writing we have not been able to eliminate the share price
discount, and therefore we propose to hold an EGM before the end of
the year to provide shareholders with the opportunity for a
discontinuation vote on the Company's existence.
In the meantime, we intend to place a redemption in the
Underlying Fund at the next available opportunity so that
shareholders are not disadvantaged from the EGM not taking place
until the end of the year. Of course, should shareholders at the
EGM vote to continue the life of the Company then we will seek to
cancel the redemption request which we understand will be possible,
or if that does not prove to be the case, we will immediately
re-invest the redemption proceeds into the Underlying Fund.
In the event that shareholders vote to discontinue the Company,
the redemption process will be governed by the terms of the
Underlying Fund, in that the redemption proceeds will be paid in
four quarterly instalments and shareholders therefore will continue
to be exposed to the performance of the Company until the final
quarterly redemption occurs.
Other Matters
Highbridge Multi Strategy Fund limited - There was a further
small distribution from the Master Fund in July 2020 bringing the
total amount distributed to approximately 92%. The balance of
assets remaining in the Master Fund consists primarily of a few
less liquid credit exposures which are managed by Highbridge's
ongoing credit team. Given the recent market turmoil resulting from
COVID-19 the Highbridge credit team considered it to be prudent to
wait until markets normalised before seeking to liquidate the
remaining positions. Now that markets have improved the Credit Team
is actively seeking to liquidate the remaining positions. Your
board was recently advised to expect a further distribution of
approximately one third of the remaining position of the HMSF
Master Fund in early October and was advised further that it is
hoped that an additional distribution representing approximately
half could be made before the end of the calendar year, leaving a
balance of only about one sixth, consisting of two assets which are
expected to take a little longer to liquidate.
BlueCrest -AllBlue - There is nothing further to report, other
than to repeat that the Company continues to hold a small amount of
cash from this source which has not yet been distributed as it
would not be commercially economical to do so. I am afraid that the
board has no further information as to when the Liquidator of the
AllBlue funds will be in a position to make further
distributions.
On the basis it is possible that this may be my last Chairman's
Statement, my fellow board members and I would like to thank you
for your loyalty and support.
Vic Holmes
Chairman
25 September 2020
Investment Manager's Report
The commentary is not intended to constitute, and should not be
construed as, investment advice. Potential investors in the Company
should seek their own independent financial advice and may not rely
on this communication in evaluating the merits of investing in the
Company. The commentary is provided as a source of information for
shareholders of the Company but is not attributable to the
Company.
Highbridge Multi-Strategy Master Fund, L.P. ("HMSF")
As we continued the liquidation of the portfolio, in the first
half of 2020 the majority of the liquidity was generated by selling
a number of the HMSF's warrant and SPAC holdings. Since we began
the HMSF's liquidation process in mid-June 2019, approximately 92%
of the 30 September 2019 capital balance has been returned. As
previously mentioned, the vast majority of the remaining positions
in the HMSF consist of a small group of credit-oriented Level III
investments. Given the historic market turmoil in recent months, we
believed it most prudent to delay sourcing liquidity for these
positions. Now that markets have shown improvement, we are actively
focused on sourcing liquidity for the remainder of the portfolio.
Due to the nature of these investments, it is difficult to give an
exact estimate of the timing and size of subsequent distributions,
but we are working hard to efficiently return the balance of
capital in an orderly fashion. However, we remain cognizant of the
continued uncertainty presented by COVID-19 and its potential
impact on markets.
Highbridge Tactical Credit Master Fund, L.P.
We write this report against the backdrop of an outbreak of a
novel and highly contagious form of coronavirus ("COVID-19"), which
the World Health Organization formally declared in March 2020 to
constitute a global "pandemic." COVID-19 has not only altered the
trajectory of global economic growth but has also compromised the
general functioning of the global economy and upended normal social
interaction. The sell-off in risk assets has reverberated
throughout credit markets. Commercial paper rates have spiked; many
investment grade companies' credit curves have inverted, several
structured-credit markets have shown signs of dysfunction; and
negative basis has returned to the single name CDS/cash corporate
bond markets. Highbridge believes that the dislocations that
COVID-19 has caused also created investment opportunities as some
forced selling has occurred and relative value has been largely
ignored, in our view. Many multi-strategy, credit and distressed
hedge funds are facing significant pressure with numerous funds
witnessing a wave of redemptions, or shuttering completely,
creating opportunities for those who remain.
Highbridge launched the Underlying Fund in 2013, and since
inception, we have consistently highlighted several key attributes
of the Underlying Fund's exposures that reflect our investment
philosophy and approach to risk management. These generally
include: 1) a desire to focus on idiosyncratic return drivers, 2) a
preference for investments where a transaction or corporate action
may unlock intrinsic value, 3) focus on healthcare-related
investments, 4) a bias toward investing in mid-cap businesses where
we see less competition, 5) a healthy fear of commodity risk, and
6) a commitment to guard the Underlying Fund's financial
position.
As such, in the first half of 2020, when markets faced
substantial pressure, the Underlying Fund remained profitable.
Year-to-date, as of 30 June 2020, the Company's NAV appreciated
+6.38% net.
Throughout the first half the year, the Underlying Fund
crystallised certain idiosyncratic gains (increasing the liquidity
profile of the Underlying Fund's underlying investments) and
rotated risk to new opportunities. By the end of Q1, we grew the
financial position modestly, reflecting our view of a more
compelling risk-reward paradigm in the market. In Q2, while the
Underlying Fund's larger, more liquid exposures benefitted from the
second quarter's broad credit market normalisation, once again,
certain idiosyncratic events drove the vast majority of the
returns.
Recent market volatility, anticipated (and observed) credit
hedge fund peer redemption pressure, borrower's short-term
liquidity concerns, and a murky outlook for companies' future cash
flows have had a four-fold impact on the Underlying Fund's
opportunity set:
1) a substantially increased corporate need for capital,
demonstrated by substantial convertible debt issuance and numerous
rescue and term loan opportunities: To date, we know of no
management team or board that was prepared for the economic
standstill that began in March. In an environment with substantial
uncertainty, many managers and boards remain concerned about their
future capital needs. The result has been a demand for capital
where convertible debt has played an increasingly important
role.
2) a cheapening of secondary market valuations, illustrated by
the Underlying Fund's and the general convertible debt market's
widening implied credit spread: During Q1, we modestly increased
our exposure to mandatorily convertible instruments, which provide
the ability to short volatility at elevated levels. This universe
of instruments has become very dislocated, and the range of
positive profit outcomes is very wide, in our view. We have also
seen substantial mandatory issuance which has come from large
market capitalisation issuers that have relatively high credit
quality.
3) an increasing desire among borrowers to execute liability
management exercises and other corporate actions, reflected in
certain of the transactions that the Underlying Fund participated
in and the pipeline of future opportunities: The portfolio remains
catalyst-rich in our view. We are currently pursuing many corporate
actions, most of which we believe will be consummated this year. We
also have several exposures with potential near-term catalysts. We
commit to pursuing these opportunities as we believe that they have
the potential to be accretive to NAV and are uncorrelated with
market developments. Moreover, due to COVID-19 disruptions, we are
currently working with several issuers and pursuing loan
transactions that have presented themselves due to the closure of
equity markets and/or an absence of prior competition.
4) capital structure dislocations, shown by the Underlying
Fund's ability to make debt versus equity investments in former
investment grade credits (fallen angels) and to purchase
short-dated quasi investment grade (IG) bonds at wide implied
credit spreads: Beginning in mid-March, we capitalised on secondary
market spread widening, initiating or adding to long debt versus
short equity investments in well-capitalised convertible debt
issuers. For large-cap issuers, the Underlying Fund acquired these
instruments at L+650 bps (unlevered) implied credit spreads or
greater, and where substantial market capitalisation existed. For
mid-cap issuers, we have focused on issuers that we believe are
fundamentally well-positioned for this environment (e.g., certain
diagnostic and healthcare companies), have idiosyncratic events on
the foreseeable horizon, or where the issuer has little-to-no
secured indebtedness and where corporate actions may ultimately be
executed.
Beginning in mid-2019, we de-emphasised commodity-linked
investment opportunities and the reorganised equity universe.
Instead, we focused on stressed opportunities that both allowed for
intra-capital structure positioning and where we identified a
catalyst to drive potential NAV appreciation. During Q1 2020, in
response to credit market dislocation, we accelerated this risk
rotation, growing the Underlying Fund's financial position in
March, while directing capital to the Underlying Funds U.S. &
European Mid-Cap Convertible Credit and Event Credit sub-strategies
and further reducing the Underlying Fund's Distressed and Income
verticals. We focused on mid-cap convertible opportunities for
several reasons: we identified technical selling pressure among
mid-cap convertible securities driven by redemptions from certain
market participants, which caused substantial spread widening (this
phenomenon still persists), we favour more hedged exposures (versus
directional investments) in a period of significant market
uncertainty, we gravitate to the idiosyncratic nature of many of
these businesses, especially those that are healthcare exposed
and
less GDP-sensitive and we acknowledge the relative simplicity of
many of these issuers' capital structures, which often have limited
secured debt when compared to larger businesses with more complex
organizational and capital structures.
We also want to highlight how we rotated risk intra-quarter
within the Underlying Fund's U.S. & European Mid-Cap
Convertible sub-strategy. During April, several consumer
discretionary companies accessed the convertible debt market. Many
of these companies had just experienced a ninety-day period of
nearly zero revenue and their management teams and boards opted to
enhance liquidity. We found the risk-reward profile for these
investments to be compelling and deployed capital to certain of
these businesses. By June, some of these instruments experienced a
high degree of spread tightening. At the same time, we saw other
securities cheapen, generally, instruments where the issuers' cash
flows were less exposed to government-mandated closures. In turn,
we realised profits from many of the consumer discretionary
investments that we made in April and redeployed to wider spread
opportunities where the issuer is less exposed to COVID-19
disruption, in our view.
We believe that these risk rotations have benefitted the
Underlying Fund. During Q2 particularly, the Underlying Fund's U.S.
& European Mid-Cap Convertible Credit and Event Credit
sub-strategies contributed meaningfully to profit or loss whilst
the Distressed Credit & Reorganised Equity sub-strategy was
only marginally positive. While we will continue to assess
distressed opportunities, we have shied away from energy, commodity
and retail directional investments. However, we are now pursuing
several term loans, driven by mid-cap companies' financing needs.
All of these potential investments have been proprietarily sourced,
and generally leverage the Underlying Fund's incumbent position in
the issuer's capital structure.
In periods of market stress, access to liquidity is important.
We want to highlight that many of the Underlying Fund's exposures
proved liquid during the first and second quarter and in
particular, during March's volatility. We continue to be focused on
guarding the Underlying Fund's financial position. In addition, the
Underlying Fund has seen meaningful AUM growth year-to-date.
As the U.S. economy commenced its reopening, equity markets have
rallied and we have witnessed euphoric purchasing patterns for
certain COVID-19 related risk. We will not engage in this euphoric
buying, but instead maintain our discipline in taking advantage of
market opportunities. We have and intend to be measured and prudent
in our management of the Underlying Fund's financial position and
the nature of the Underlying Fund's exposures (e.g., sector
allocation). As always, we will maintain our underwriting process,
with an acute eye towards an issuer's liquidity and its wherewithal
to manage through sustained COVID-19 related disruptions. We see
several potential events on the horizon, including identified
corporate actions, known tangible events among certain positions,
new money financing opportunities, a robust convertible debt
issuance calendar, which provides a source of new ideas and caps
secondary market valuations, and relative value and volatility
opportunities. We believe that the combination of our focus on
idiosyncrasy and the diversity of investment structures positions
us well for today's changed market environment. As we look forward,
we maintain a high level of conviction in the Underlying Fund.
We would like to thank you for your continued support.
Highbridge Capital Management, LLC
25 September 2020
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
RESULTS. There can be no assurance that the Underlying Fund's
objectives will be realised or that the Underlying Fund will not
experience losses. Subsequent factors, including but not limited
to, changes in market conditions, interest rates and other
economic, political or financial developments, including those
related to COVID-19, will impact future performance, possibly
significantly. The Underlying Fund is an actively managed
portfolio; holdings, sector weightings, allocations and leverage
are subject to change. This material is provided for illustrative
purposes only and represents subjective opinions and views as of
the date hereof subject to change depending on market environment.
Certain of the information provided has been based on or derived
from information provided by independent third party sources. These
sources are considered reliable; however, the Underlying Fund
cannot guarantee the accuracy of and has not independently verified
such information. The information is not intended to provide and
should not be relied on for legal, accounting or tax advice.
The Company may be required to propose a resolution by 31 March
2021, if its NAV falls below GBP80 million as at 31 December 2020
the Board must put a discontinuation vote to shareholders. In the
event the resolution is passed, the Company may not continue in its
current form or may be liquidated, with capital being returned to
investors over time.
Company and Investment Overview
The Company is a Guernsey domiciled closed-ended investment
company listed on the Premium Segment of the Official List of the
Financial Conduct Authority and traded on the Main Market of the
London Stock Exchange with net assets of approximately GBP52
million.
Prior to the EGM held on 17 September 2019 the Company's
investment policy reflected its investment in Highbridge
Multi-Strategy Fund Corporation ("MSF Corp"). Consequently, on the
17 September 2019, the Board received Shareholder approval for the
new investment policy (the "Investment Policy") set out below.
Investment Objective and Policy
The Company's investment objective is to seek to provide
positive returns with low volatility through an investment policy
of investing predominantly in the Underlying Fund through the TCF
Feeder or any successor vehicle of TCF Feeder. Accordingly, the
Company's published investment policy is consistent with that of
the Underlying Fund. In the event that the Underlying Fund or TCF
Feeder changes its investment policy, the Directors will take
appropriate action to amend the Company's investment policy or will
consider removing the Company's assets from TCF Feeder so that the
Company is not in breach of any applicable regulation.
The Company shall continue to have investment exposure to MSF
Corp until such time as such investment has been fully realised and
redeployed within the Underlying Fund.
Benefits of the Company
The Company has one class of shares in issue, the Sterling
class. The Company seeks to provide shareholders with the following
key benefits:
-- Attractive returns which are not beholden to the direction of
asset markets, created by focusing on relative value and
idiosyncratic opportunities, which has allowed TCF Feeder to
produce uncorrelated returns with low volatility historically.
-- Strong capital preservation characteristics reflecting robust
risk management and expert blending of various assets across
discretionary and systematic strategies.
-- Good liquidity occasioned by active trading in the Company's
shares on the Main Market of the London Stock Exchange.
[1] As of 30 June 2020 net of all applicable fees and expenses.
Returns are estimated and unaudited for 2020. Shareholders should
note that past performance is not necessarily indicative of future
results and that there can be no assurance that the Company's
and/or the Underlying Fund's return objectives will be realised or
that the Company and/or the Underlying Fund will not experience
losses.
About the Underlying Fund
The Underlying Fund is a private, multi-strategy credit
investment fund managed by Highbridge Capital Management, LLC. The
principal investment objective of the Underlying Fund is to achieve
a positive return on capital. The investment team seeks to achieve
this objective by applying fundamental credit research combined
with intra-capital structure hedging strategies to select
credit-sensitive investment opportunities. The Underlying Fund
invests in convertible securities, non-convertible bonds and loans,
preferred and common equity securities, and warrants, options, and
other derivatives as well as other instruments. The Underlying Fund
invests in global markets with a focus on North America and Europe.
Typically, The Underlying Fund purchases convertible bonds,
non-convertible bonds or loans, or other securities along with one
or more other instruments, including any of the following, as a
hedge: stocks, options, bonds, credit derivatives, interest rate
swaps, treasuries and interest rate futures.
It currently invests across six sub-strategies which include:
(i) Volatility strategies; (ii) US & European Mid-Cap
convertible credit; (iii) capital structure arbitrage; (iv) event
credit; (v) income investments and (vi) distressed credit and
reorganised equities. The Underlying Fund will invest in at least
three sub-strategies at any given time.
In particular, the Underlying Fund seeks to generate positive
absolute returns from idiosyncratic, company-specific opportunities
while systematically hedging interest rate exposure, with a target
duration of zero, and limiting the impact of broad, directional
moves in credit and equity markets and aiming to maintain low
volatility.
Key Features of the Underlying Fund
Strong Track Record
* Strong absolute returns with low volatility and low
beta to broad markets
* Demonstrated ability to preserve capital
Multi-Strategy Approach
- Dynamically Invest * Allocate across six distinct sub-strategies,
Across Multiple Opportunity including relative value, income, distressed, and
Sets event investments
* Combine relative value investing with an appreciation
for fundamental credit underwriting and transaction
and process experience
* Relative value investments are frequently hedged
intra-capital structure, driven by the investment
team's fundamental view
* Positioned to navigate a company's life-cycle and
market cycles
* Diversified industry sectors, investing primarily,
across North America and Europe
Focus On Underserved
& Inefficient Public * Target a less competitive investment universe,
Company Credit Markets leveraging nimble size
* Differentiated healthcare exposure, focused on credit
underwriting and not 'science risk'
Corporate Actions Focus
* Target securities that are, in Highbridge's view,
ripe for corporate actions, with the goal of driving
alpha
* Examples include: debt buy-backs, exchanges, rights
offerings, mergers and acquisitions, restructurings,
etc
* Corporate actions are a key driver of returns
historically
Disciplined Risk Management
* Seeks to hedge unwanted credit, equity, rates and
commodity exposures
* Dedicated analytical support
About Highbridge
Highbridge was founded in 1992 as one of the industry's first
hedge fund managers. Highbridge has approximately US$2.2 billion in
assets under management and staff of approximately 40 employees,
including 11 investment professionals, with an office in New York
and a research presence in London. Highbridge established a
strategic partnership with J.P. Morgan Asset Management Limited
("JPMAM") in 2004. Highbridge is a subsidiary of JPMAM, which is
itself a subsidiary of JPMorgan Chase & Co. (together with its
affiliates, "JPM"). JPMAM is a leading investment and wealth
management firm, operating across the Americas, EMEA (Europe,
Middle East and Africa), and Asia in more than 30 countries, with
assets under management of $2.5 trillion.
Highbridge is solely responsible for all investment, capital
allocation and risk management decisions for the Underlying Fund
which are independent of JPMAM. Highbridge is registered as an
investment adviser under the U.S. Investment Advisers Act of 1940,
as amended.
In addition to managing the Underlying Fund, Highbridge has also
been appointed as the investment manager of the Company. As part of
these investment management arrangements, JPMAM provides certain
support services to the Company as a delegate of Highbridge,
including the provision of shareholder relations, public relations
and Board support. Neither Highbridge nor JPMAM receives a fee
directly from the Company in relation to these services.
AllBlue
The Company was informed on 1 December 2015 that, effective 4
January 2016, AllBlue and AllBlue Leveraged were being redeemed
from their seven underlying funds and were compulsorily redeeming
the holdings of all investors, including the Company. The Company
retains a creditor interest equivalent to the value of its
outstanding holding in AllBlue and AllBlue Leveraged. This is
measured by reference to the valuation statements received from the
administrator and more recently the Liquidators of AllBlue and
AllBlue Leveraged, although it should be noted that the latest
financial figures available are the audited financial statements as
at 31 July 2018. The Board received an updated Liquidators' report
for AllBlue and AllBlue Leveraged dated 10 October 2019. The report
cites that there are no distributions planned for the foreseeable
future. Future distributions are dependent upon the successful
realisation of the remaining assets held by AllBlue and AllBlue
Leveraged. Due to the uncertainties surrounding the assets, there
is no estimate of the timing or amount of potential future
distributions, or the expected timing of the conclusion of the
liquidations. Further information about the proceeds returned to
the Company is available in Note 8 to the Financial Statements.
Financial Statements
INTERIM MANAGEMENT REPORT
A description of the important events that have occurred during
the first six months of the financial year and their impact on the
performance of the Company as shown in the Financial Statements is
given in the Chairman's Statement and the Notes to the Financial
Statements, and are incorporated here by reference.
Statement of Principal Risks and Uncertainties
The principal risks and uncertainties facing the Company for the
period 1 January 2020 to 30 June 2020 are unchanged, from those
disclosed in the Company's most recent Annual Financial Report,
which is available at www.highbridgemsfltd.co.uk . These principal
risks and uncertainties are: operational, investment, share price
discount, concentration, leverage, counterparty, credit and
regulatory risk. A detailed explanation of the risks, and how the
Company seeks to mitigate them can be found within the Annual
Financial Report for the year ended 31 December 2019.
The Board monitors the Company's risk management systems on an
ongoing basis. Shareholders' attention is also drawn to the
Company's risk disclosure document (which can be found on the
Company's website).
Related Party Transactions
There were no material related party transactions during the
first six months of the financial year, other than those disclosed
at Note 7 to the Financial Statements.
Interim Report is Unaudited
This Interim Report has not been audited or reviewed by auditors
pursuant to the Auditing Practices Board guidance on Review of
Interim Financial Information.
Going Concern
The Company now invests the majority of its assets into the
Underlying Fund. The Directors have a reasonable expectation that
positive returns will be made in the future and that therefore
shareholders will wish to continue their investment in the Company.
In addition, at the date of publication of this report, the Company
holds a cash balance which exceeds normal operating expenditure
anticipated during the next 12 months. The Directors believe that
it is appropriate to adopt the going concern basis in preparing the
Financial Statements.
In considering the financial position of the Company, the
Directors have noted that if the net assets of the Company are not
at least GBP80 million by the end of 2020, they must put a
discontinuation vote to shareholders. Elimination of the discount
to NAV at which the shares trade is a prerequisite to share
issuance by the Company and thus to growth. However, the recent
market fall caused by the COVID- 19 pandemic has resulted in the
Company's shares trading at a considerable discount to NAV. As a
result, there is considerable uncertainty around the Company's
future - the size of the Company at the end of 2020 cannot be
predicted, and neither can the outcome of any shareholder
discontinuation vote.
At the EGM held on 20 February 2020, the shareholders approved
both proposals to disapply pre- emption rights on the issue of
ordinary shares which would allow the Company to grow as intended.
However, although the Company's NAV in 2020 to date has increased
substantially, widespread market falls initiated by the COVID-19
pandemic have led to the Company's shares trading at a significant
discount to NAV. Existing shareholders appear to have decided to
hold their shares, pending either the discount narrowing or the
Company winding up. In the event that shareholders vote to
discontinue the Company, rendering the going concern basis
inappropriate, the Directors do not believe that any resulting
adjustments to these Financial Statements would be material to
shareholders.
After making suitable enquiries, the Directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the next 12 months. Accordingly, they
continue to adopt the going concern basis in the preparation of
this financial report.
COVID-19
The COVID-19 strain of coronavirus has had a significant
negative impact on global markets, and consequently on some of the
companies held within the Underlying Fund's portfolio. As of the
date of approval of these financial statements, the assessment of
this situation continues to evolve and it may be some time before
there is clarity around the full economic impact.
However, it is noteworthy that in the Company's NAV performance
was broadly flat for the 3 months to 31 March 2020, and increased
thereafter. As a result, your Board has been surprised and
disappointed at the current relatively high level of share price
discount being of the order of 15%.
It is our intention for the investment managers to continue
their marketing campaign and to intensify it as soon as the current
COVID-19 restrictions are lifted sufficiently to enable them to do
so. The investment managers strongly believe that the Company now
has an extremely compelling investment portfolio which will deliver
strong performance over the rest of the year.
Responsibility Statement
We confirm that to the best of our knowledge that:
-- the Condensed Unaudited Interim Financial Statements have
been prepared in accordance with International Accounting Standard
34 'Interim Financial Reporting'; as required by Disclosure
Guidance & Transparency Rule ("DTR") 4.2.4R of the UK's
Financial Conduct Agency ("FCA"); and
-- the Interim Management report includes 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 the
condensed set of 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 entity during
that period; and any changes in the related party transactions
described in the last Annual Report that could do so.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website, and for the preparation and dissemination of
financial statements. Legislation in Guernsey governing the
preparation and dissemination of financial statement may differ
from legislation in other jurisdictions.
By order of the Board
Steve Le Page, Director
25 September 2020
CONDENSED UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIODED 30 JUNE 2020
30 June 2020 30 June 2019
(unaudited) (unaudited)
Notes GBP GBP
------------- -------------
Revenue
Net gains on non-current assets
at fair value through profit or
loss 8 3,367,665 5,133,838
Net gains on current assets at fair
value through profit or loss 8 110,279 912
Net losses on current liabilities
at fair value through profit or
loss 9 (106,739) (697)
Interest income received 361 2,565
Operating expenses 4 (244,250) (306,695)
Profit and total comprehensive income
for the period 3,127,316 4,829,923
============= =============
Pence (GBP) Pence (GBP)
Earnings per share for the period
- basic and diluted 6 13.54 4.63
In arriving at the results for the period, all amounts above
relate to continuing operations.
There is no other Comprehensive Income for the period other than
as disclosed above.
The Notes form an integral part of these Financial
Statements.
CONDENSED UNAUDITED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
31 December
30 June 2020 2019
(unaudited) (audited)
Notes GBP GBP
------------- ------------
Non current assets
Unquoted financial assets
designed at fair value through
profit or loss 8 46,185,444 35,581,874
Current assets
Unquoted financial assets
designed at fair value through
profit or loss 8 21,270,054 29,758,245
Investment distribution receivable 1,982,265 26,354,386
Cash and cash equivalents 2,116,048 2,425,359
Prepayments and receivables 275,067 240,037
------------- ------------
25,643,434 58,778,027
Current liabilities
Unquoted financial assets
designed at fair value through
profit or loss 9 17,209,670 44,431,149
Due to redeemed shareholders 2,353,374 803,781
Other payables 104,081 90,534
------------- ------------
19,667,125 45,325,464
Net assets 52,161,753 49,034,437
============= ============
Equity
Share capital 10 - -
11 &
Reserves 12 52,161,753 49,034,437
------------- ------------
Shareholders' equity 52,161,753 49,034,437
============= ============
Shares in issue 10 23,093,530 23,093,530
NAV per share GBP2.2587 GBP2.1233
The Financial Statements and accompanying Notes were approved
and authorised for issue by the Board of Directors on 25 September
2020 and are signed on its behalf by:
Vic Holmes Steve Le Page
Chairman Chairman of the Audit Committee
The Notes form an integral part of these Financial
Statements.
CONDENSED UNAUDITED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIODED 30 JUNE 2020
Share Capital Reserves Total
(unaudited) (unaudited) (unaudited)
Note GBP GBP GBP
--------------- ------------ ------------
Opening balance - 49,034,437 49,034,437
Profit and total comprehensive
income for the period - 3,127,316 3,127,316
-------------- ------------ ------------
Balance at 30 June 2020 - 52,161,753 52,161,753
============== ============ ============
FOR THE SIX MONTH PERIODED 30 JUNE 2019
Share Capital Reserves Total
(unaudited) (unaudited) (unaudited)
Note GBP GBP GBP
--------------- ------------ ------------
Opening balance - 226,780,928 226,780,928
On-market purchase of ordinary
shares - (3,060,668) (3,060,668)
Profit and total comprehensive
income for the period - 4,829,923 4,829,923
-------------- ------------ ------------
Balance at 30 June 2019 - 228,550,183 228,550,183
============== ============ ============
The Notes form an integral part of these Financial
Statements.
CONDENSED UNAUDITED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIODED 30 JUNE 2020
30 June 2020 30 June 2019
(unaudited) (unaudited)
Note GBP GBP
------------- -------------
Cash flows from operating activities
Profit and total comprehensive income
for the period 3,127,316 4,829,923
Unrealised gains on financial assets
at fair value through profit or loss 8 (3,477,944) (4,192,619)
Unrealised losses on financial liabilities
at fair value through profit or loss 9 106,739 697
Realised gains on sales of financial
assets at fair value through profit
or loss 8 - (942,131)
Proceeds from sale of financial assets 5,164,177 10,000,000
Proceeds from unsettled trades 20,570,509 -
Interest income (361) (2,565)
Increase/(decrease) in other payables 15,914 (237,600)
Increase in prepayments and receivables (35,030) (8,999)
------------- -------------
Net cash flow generated from operating
activities 25,471,320 9,446,706
------------- -------------
Cash flows from investing activities
Interest received 361 2,565
------------- -------------
Net cashflow generated from investing
activities 361 2,565
------------- -------------
Cash flows from financing activities
On-market purchase of shares 11 - (3,060,668)
Payments to redeemed shareholders (25,780,992) -
Net outflow used in financing activities (25,780,992) (3,060,668)
------------- -------------
Cash and cash equivalents at beginning
of period 2,425,359 1,783,224
(Decrease)/increase in cash and cash
equivalents (309,311) 6,388,603
------------- -------------
Cash and cash equivalents at end of
period 2,116,048 8,171,827
============= =============
The Notes form an integral part of these Financial
Statements.
Notes to the Financial Statements
1. ACCOUNTING POLICIES
Basis of accounting
These Unaudited Condensed Financial Statements ("Financial
Statements") have been prepared in accordance with International
Accounting Standard ("IAS") 34 'Interim Financial Reporting' as
required by DTR 4.2.4R, the Listing Rules of the London Stock
Exchange and applicable legal and regulatory requirements. They do
not include all the information and disclosures required in Annual
Financial Statements and should be read in conjunction with the
Company's last Annual Report and Audited Consolidated Financial
Statements for the year ended 31 December 2019.
The same accounting policies and methods of computation are
followed in the Interim Financial Report as compared with the most
recent Annual Financial Statements (31 December 2019). This report
should be read in conjunction with the latest Annual Financial
Report (31 December 2019).
2. SIGNIFICANT JUDGEMENTS AND ESTIMATES
There have been no changes to the significant accounting
judgements, estimates and assumptions from those applied in the
Company's Audited Annual Financial Statements for the year ended 31
December 2019, with the exception of the going concern assumption
as follows.
Going concern
In considering the financial position of the Company, the
Directors have noted that if the net assets of the Company are not
at least GBP80 million by the end of 2020, they must put a
discontinuation vote to shareholders. Elimination of the discount
to NAV at which the shares trade is a prerequisite to share
issuance by the Company and thus to growth. However, the recent
market fall caused by the COVID- 19 pandemic has resulted in the
Company's shares trading at a considerable discount to NAV. As a
result, there is considerable uncertainty around the Company's
future - the size of the Company at the end of 2020 cannot be
predicted, and neither can the outcome of any shareholder
discontinuation vote.
The Board has assessed the Company's financial position as at 30
June 2020 and the factors that may impact its performance and is of
the opinion that it is appropriate to prepare these Financial
Statements on a going concern basis as the Company has adequate
financial resources to meet its liabilities as they fall due over a
period of 12 months from the approval of these Financial
Statements.
3. SEGMENTAL REPORTING
The Board has considered the requirements of IFRS 8 - "Operating
Segments". In the Board of Directors' opinion, the Company is
engaged in a single segment of business, being investment in a
portfolio of funds, funds of funds and other similar assets.
Segment information is measured on the same basis as that used
in the preparation of the Company's Financial Statements.
The Company receives no revenues from external customers, nor
holds any non-current assets, in any geographical area other than
Guernsey or Cayman Islands.
4. OPERATING EXPENSES
30 June 2020 30 June 2019
(unaudited) (unaudited)
GBP GBP
------------- -------------
Administrator's fee 45,036 63,854
Directors' remuneration (Note 5) 66,000 100,000
Registration fees 16,233 13,585
Audit fees 24,863 17,149
Legal and professional fees - 10,598
Gain on exchange (176) (10)
Other operating expenses 92,294 101,519
Total expenses for the period 244,250 306,695
------------- -------------
5. DIRECTORS' REMUNERATION
30 June 2020 30 June 2019
(unaudited) (unaudited)
GBP GBP
------------- -------------
Vic Holmes, Chairman 25,000 30,000
Steve Le Page, Audit Committee Chairman 21,000 25,000
Paul Le Page 20,000 24,000
Sarita Keen (resigned 31 October
2019) - 21,000
Total Director remuneration 66,000 100,000
------------- -------------
6. EARNINGS PER SHARE
30 June 2020 30 June 2019
(unaudited) (unaudited)
Pence GBP Pence GBP
------------- -------------
Profit and total comprehensive income
for the period 3,127,316 4,829,923
The weighted average number of shares
in issue during the period 23,093,530 104,209,040
Earnings per share 13.54 4.63
------------- -------------
7. RELATED PARTY TRANSACTIONS
Transactions with related parties are made on terms equivalent
to those that prevail in an arm's length transaction. Directors'
remuneration is disclosed in Note 5.
8. INVESTMENTS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
31 December
30 June 2020 2019 30 June 2019
(unaudited) (audited) (unaudited)
Unquoted financial assets GBP GBP GBP
------------- ------------ -------------
Portfolio cost carried forward 51,317,548 52,650,677 203,925,014
Unrealised gain on financial
assets at fair value through
profit or loss 16,137,950 12,689,442 19,797,800
------------- ------------ -------------
Valuation carried forward 67,455,498 65,340,119 223,722,814
------------- ------------ -------------
Realised gains on sales
on non-current assets - - 942,131
Realised gains on sales
on current assets - 958,504 -
Unrealised gains/(losses)
on non-current assets 3,367,665 (150,626) 4,191,707
Unrealised gains/(losses)
on current assets 110,279 (2,765,112) 912
------------- ------------ -------------
Net gains/(losses) on financial
assets at fair value through
profit or loss 3,477,944 (1,957,234) 5,134,750
------------- ------------ -------------
IFRS 13 requires fair value to be disclosed by the source of
inputs, using a three-level hierarchy.
-- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (Level 1);
-- Inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (as prices)
or indirectly (derived from prices) (Level 2); and
-- Inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (Level 3).
The fair values of the unquoted investments held by the Company
are based on the published NAV of the TCF Feeder, and the most
recently available NAV of MSF Corp, AllBlue and AllBlue Leveraged.
On the basis that the significant inputs to the fair value of the
TCF Feeder and MSF Corp are observable and no significant
unobservable adjustments are made to the valuations, the Company
categorises the TCF Feeder and HMS Master Fund as Level 2. As the
fair value determination for AllBlue and AllBlue Leveraged as at 30
June 2020 is unobservable, these have been categorised as Level
3.
Details of the value of the classifications are listed in the
table below. Values are based on the fair value of the investments
as at the reporting date:
Financial assets at fair value through 31 December
profit or loss 30 June 2020 2019
(unaudited) (audited)
GBP GBP
------------- ------------
Level 1 - -
Level 2 64,036,711 61,931,489
Level 3 3,418,787 3,408,630
Total 67,455,498 65,340,119
------------- ------------
Financial liabilities at fair value 31 December
through profit or loss 30 June 2020 2019
(unaudited) (audited)
GBP GBP
------------- -------------
Level 1 - -
Level 2 (14,012,190) (41,243,224)
Level 3 (3,197,480) (3,187,925)
Total (17,209,670) (44,431,149)
------------- -------------
There have been no transfers between levels of the fair value
hierarchy during the period. Transfers between levels of the fair
value hierarchy are recognised at the end of the reporting period
during which the change has occurred.
Movements in the Company's Level 3 financial instruments during
the period/year were as follows:
Financial Assets Level 3 reconciliation 31 December
30 June 2020 2019
(unaudited) (audited)
GBP GBP
------------- ------------
Balance at beginning of the period/year 3,408,630 4,510,312
Disposals - (1,096,761)
Movement in unrealised gain/(loss)
on valuation 10,157 (4,921)
Balance at end of period/year 3,418,787 3,408,630
------------- ------------
Financial Liabilities Level 3 reconciliation 31 December
30 June 2020 2019
(unaudited) (audited)
GBP GBP
------------- ------------
Balance at beginning of the period/year (3,187,925) (3,315,422)
Repayments - 134,394
Movement in unrealised losses on valuation (9,555) (6,897)
Balance at end of period/year (3,197,480) (3,187,925)
------------- ------------
Return of Capital from MSF Corp
During 2019, Highbridge Capital Management LLC, the Investment
Manager to the HMS Master Fund announced that the HMS Master Fund
would be wound down with effect from 1 October 2019.
From that date to 30 June 2020, the Company has received
redemption proceeds from the MSF Corp totalling GBP142,253,741
(GBP5,164,177 received during the period ended 30 June 2020).
Return of Capital from AllBlue and AllBlue Leveraged ("the
BlueCrest funds")
On 1 December 2015, BlueCrest, the Investment Manager to the
BlueCrest suite of funds, and the Board of Directors of each of the
relevant BlueCrest funds (or General Partner, where appropriate)
announced that the BlueCrest funds would embark upon a programme to
return the capital managed in these funds to investors.
From the start of the program, the Company has received
redemption proceeds from the AllBlue funds totalling GBP712,213,318
from the Sterling Share Class and $42,684,695 from the US Dollar
Share Class. No redemption proceeds were received during the
period.
The Company was notified in August 2018 that the BlueCrest funds
had appointed liquidators on 11 July 2018. The appointment of
BlueCrest as investment manager to the BlueCrest Funds terminated
on 11 July 2018, although BlueCrest will continue to assist the
liquidators during the liquidation process as required. The
liquidators advised that the completion of the liquidation and
future distributions to investors would be dependent upon the
successful realisation of the assets held by the BlueCrest funds.
No further distributions are planned at this time, and the
possibility of interim distributions resulting from the future sale
of the investments held by the BlueCrest funds will be considered
by the liquidators as investments are realised by the BlueCrest
funds.
9. FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
31 December 30 June
30 June 2020 2019 2019
(unaudited) (audited) (unaudited)
GBP GBP GBP
------------- -------------- ------------
Designated at fair value through
profit and loss at inception:
Balance at beginning of the
period/year (44,431,149) (3,315,422) (3,315,422)
Repayments 61,747,558 134,181,944 -
MSF Corp cash exit - (178,383,044) -
Change in unrealised (losses)/gains (106,739) 3,085,373 (697)
------------- -------------- ------------
(17,209,670) (44,431,149) (3,316,119)
Other net changes in fair value
on financial liabilities at
fair value through profit or
loss:
Change in unrealised (losses)/gains (106,739) 3,085,373 (697)
Total (losses)/gains (106,739) 3,085,373 (697)
------------- -------------- ------------
These balances represent the liabilities payable to -
-- cash exit creditors, being former shareholders of the Company
that opted to exit the Company and not remain as Shareholders
following the appointment of Highbridge as Investment Manager and
the Investment into MSF Corp (the "Redemption Liability");
-- tender offer creditors, being those former shareholders who
elected to avail of the Tender Offer (the "Repurchase Portfolio");
and
-- 2019 exit creditors, being those former shareholders' who
elected to exit the Company at one of the EGM's held in 2019.
Each of these liabilities meet the classification criteria of
IAS 32 for treatment at Fair Value Through Profit and Loss. Please
refer to Note 8 for the IFRS 13 Level 3 reconciliation.
10. SHARE CAPITAL
Authorised Share Capital
An unlimited number of Ordinary shares of no par value each.
Issued Total
Number
-------------
Number of shares in issue (excluding Treasury Shares)
at 1 January 2019 105,391,869
Purchase of own shares (1,431,000)
Sales of Shares from Treasury 1,500,046
Share redemptions (82,367,385)
Number of shares in issue (excluding Treasury Shares)
at 31 December 2019 23,093,530
Purchase of own shares -
Number of shares in issue (excluding Treasury Shares)
at 30 June 2020 23,093,530
-------------
Pursuant to Section 276 of the Law, a share in the Company
confers on the shareholder the right to vote on resolutions of the
Company, the right to an equal share in dividends authorised by the
Board of Directors, and the right to an equal share in the
distribution of the surplus assets of the Company.
The total number of Shares in issue, as at 30 June 2020 was
49,260,348 (31 December 2019: 49,260,348), of which 26,166,818
Shares were held in treasury (31 December 2019: 26,166,818), and
the total number of shares in issue excluding treasury shares was
23,093,530 (31 December 2019: 23,093,530).
11. TREASURY SHARES
The Capital and Reserves disclosure below is intended to
highlight the legal nature, under applicable Company Law, of the
amounts attributable to shareholders and also the existence and
effect of the Treasury shares held by the Company. This is a
supplemental disclosure and not required under IFRS.
During the six month period ended 30 June 2020, the Company sold
no treasury shares (31 December 2019: 1,500,046 Shares at an
average price of GBP2.166) and the Company bought back no shares
during the period (31 December 2019: 1,431,000 Shares at an average
price of GBP2.1388).
The Treasury Shares hold no voting rights or rights to
dividends.
31 December
30 June 2020 2019
(unaudited) (audited)
Capital and reserves Note GBP GBP
------------- -------------
Share capital 10 - -
Treasury shares (52,533,286) (52,533,286)
Reserves 12 104,695,039 101,567,723
Closing balance 52,161,753 49,034,437
------------- -------------
31 December
30 June 2020 2019
(unaudited) (audited)
Treasury shares GBP GBP
------------- ------------
Opening balance 52,533,286 52,722,618
Acquired during period/year - 3,060,668
Cancelled during period/year - (3,250,000)
Closing balance 52,533,286 52,533,286
------------- ------------
12. RESERVES
31 December
30 June 2020 2019
(unaudited) (audited)
GBP GBP
------------- --------------
Opening balance 101,567,723 279,503,546
Comprehensive income attributable to
Shareholders 3,127,316 447,221
On-market purchase of ordinary shares - (178,383,044)
Closing balance 104,695,039 101,567,723
------------- --------------
13. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company's financial risk management objectives and policies
are consistent with those disclosed in the Company's Audited Annual
Financial Statements for the year ended 31 December 2019.
14. EVENTS AFTER THE REPORTING PERIOD
During July 2020, the Company received a further
dividend-in-kind distribution of GBP435,039 of new shares in TCF
Feeder and a cash distribution of GBP1,547,226 from MSF Corp was
received by the Company, this represents the entire investment
distribution receivable on the Statement of Financial Position as
at 30 June 2020. A distribution of the cash received was made on 7
August 2020.
There have been no other significant events since the period end
which would require revision of the figures or disclosures in these
Financial Statements.
Schedule of Investments
Unaudited Schedule of Investments as at 30 June 2020
Valuation Total
Nominal source Valuation net assets
Investment assets holdings currency GBP %
------------------------------------ ---------- --------------- ----------- ------------
Highbridge Tactical Credit Fund,
Ltd 43,016 GBP 46,185,444 46,185,444 88.54%
* Highbridge Multi-Strategy Fund
Corporation - Class F - Series
N - RF/Mar 16 175,346 GBP1,567,767 1,567,767 3.01%
* Highbridge Multi-Strategy Fund
Corporation - Class F - Series
N - RF/Apr 18 12,890 GBP8,153,871 8,153,871 15.63%
* Highbridge Multi-Strategy Fund
Corporation - Class F- Series
N - RF/Jun 18 990 GBP617,684 617,684 1.18%
* Highbridge Multi-Strategy Fund
Corporation - Class F - Series
N - RF/Jul 18 5,370 GBP3,373,274 3,373,274 6.47%
* Highbridge Multi-Strategy Fund
Corporation - Class F -Series
N - RF/Aug 18 2,400 GBP1,513,385 1,513,385 2.90%
* Highbridge Multi-Strategy Fund
Corporation - Class F - RF/Dec
18 3,650 GBP2,360,203 2,360,203 4.52%
* Highbridge Multi-Strategy Fund
Corporation - Class F - RF/Sept
19 3,250 GBP265,083 265,083 0.52%
----------- ------------
17,851,267 34.23%
**AllBlue Limited Sterling Share 11,144 GBP2,662,225 2,662,225 5.10%
**AllBlue Limited US Dollar Shares 809 $195,068 157,301 0.30%
**AllBlue Leveraged Feeder Limited
Sterling Shares 2,040 GBP599,261 599,261 1.15%
----------- ------------
3,418,787 6.55%
67,455,498 129.32%
----------- ------------
*Highbridge decided to aggregate the different investment series
into the main (original) series that was bought into originally
(Highbridge Multi Strategy Fund Class F Series N -RF/Mar 16) on the
1 January 2017. Highbridge Multi-Strategy Fund Corporation
(formerly: 1992 Multi-Strategy Fund Corporation).
**The above AllBlue valuations are based on gross assets only.
If offset against the liability the exposure of the Company's net
assets in AllBlue is 0.42%.
Glossary
Unless the context suggests otherwise, references within this
report to:
'AIFM' means Alternative Investment Fund Manager.
'AllBlue Leveraged' means AllBlue Leveraged Feeder Limited.
'AllBlue' means AllBlue Limited.
Barclays Aggregate Bond Index ('Barclays Aggregate') represents
securities that are U.S. domestic, taxable and dollar denominated.
The index covers the U.S. investment grade fixed rate bond market,
with index components for government and corporate securities,
mortgage pass-through securities, and asset-backed securities.
These major sectors are subdivided into more specific indices that
are calculated and reported on a regular basis. The index is USD
denominated. The Products are not sponsored, endorsed, sold or
promoted by Barclays Capital, and Barclays Capital makes no
warranty, express or implied, as to the results to be obtained by
any person or entity from the use of any index, any opening,
intra-day or closing value therefor, or any data included therein
or relating thereto, in connection with any Fund or for any other
purpose. Barclays Capital's only relationship to the Licensee with
respect to the Products is the licensing of certain trademarks and
trade names of Barclays Capital and the Barclays Capital indexes
that are determined, composed and calculated by Barclays Capital
without regard to Licensee or the Products.
'Beta' is a measure of how sensitive the price of an investment
is to movements in a reference index. The Underlying Fund's Beta is
determined by calculating the slope of a regression line of a
scatter plot of the fund's return to the FTSE 100 index's return,
based on monthly observations.
'BlueCrest' means BlueCrest Capital Management Limited.
'Board' means the Board of Directors of the Company.
'CDS bond basis' - the difference in credit spreads between a
CDS and the underlying reference bond. A negative basis implies
that an arbitrage trader can derive a profit by buying a bond and
insuring its credit risk by buying a credit default swap and vice
versa. Negative basis occurs in periods of market stress when
investors become concerned about the creditworthiness of CDS
counterparties and will therefore reduce the insurance premium that
they are prepared to pay to compensate for the risk of counterparty
failure.
'Company' means Highbridge Tactical Credit Fund Limited.
'Credit curve inversion' - this defines a situation where short
term bonds pay higher yields than long-term bonds. This is the
inverse of normal market behavior where buyers of longer-term paper
normally demand higher yields to compensate for the increased risk
of default over a longer horizon. Curve inversions are typically
associated with periods of short-term stress in credit markets.
'Credit Fund' The Tactical Credit Fund is a multi-strategy
credit fund that seeks to generate returns from relative value and
idiosyncratic opportunities. The Tactical Credit Fund, which
launched in November 2013, currently invests in six credit focused
sub-strategies: (i) mid-cap convertible credit; (ii) European
convertible credit; (iii) capital structure arbitrage; (iv) event
credit; (v) income investments and (vi) distressed credit and
reorganised equities.
'FTSE 100' is a capitalisation weighted performance index of the
100 companies listed on the London Stock Exchange with the highest
market capitalisation. Ticker: UKX Index (Currency GBP). The index
is GBP denominated.
'Funds underlying AllBlue' means the seven underlying funds of
AllBlue comprising BlueCrest Capital International Limited,
BlueTrend 2x Leveraged Fund Limited (with effect from 1 July 2015,
BlueTrend Fund Limited prior to 1 July 2015), BlueCrest Multi
Strategy Credit Fund Limited, BlueCrest Emerging Markets Fund
Limited, BlueCrest Mercantile Fund Limited, BlueCrest Equity
Strategies Fund Limited and BlueCrest Quantitative Equity Fund
Limited (together, including the master funds into which such funds
invest).
'GFSC Code' means the Guernsey Financial Services Commission
Financial Sector Code of Corporate Governance.
'Highbridge' means Highbridge Capital Management, LLC (the
"Investment Manager").
'HMS Master Fund' means Highbridge Multi-Strategy Master Fund,
L.P. (formerly: 1992 Multi-Strategy Master Fund, L.P.), the
multi-strategy fund managed by Highbridge into which the Company
invests substantially all of its assets, via its investment in
Class F shares of Highbridge Multi-Strategy Fund Corporation
(formerly: 1992 Multi-Strategy Fund Corporation).
'MSF Corp' means Highbridge Multi-Strategy Fund Corporation
(formerly: 1992 Multi-Strategy Fund Corporation), an exempted
company incorporated with limited liability in the Cayman
Islands.
'IFRS' means the International Financial Reporting Standards as
adopted by the European Union.
The 'Secretary' or the 'Administrator' means Praxis Fund
Services Limited.
'Law' means the Companies (Guernsey) Law 2008 (as amended).
The S&P 500 Index ('S&P 500') consists of 500 stocks
chosen for market size, liquidity and industry group
representation. It is a market value weighted index (stock price
times number of shares outstanding), with each stock's weight in
the Index proportionate to its market value. Ticker: SPX Index
(Currency USD). The index is USD denominated
'Mandatory Convertible' - these are convertible bonds that
automatically convert to equity on a future date. They will
typically pay a higher coupon to compensate the holder for the
additional risk that this carries and the dividends that they could
receive by holding the underlying stock. Mandatory convertibles are
effectively a deferred form of equity issuance and are a popular
way of raising capital for high growth companies when ipo markets
are closed or the company does not wish to dilute its share
capital.
'Multi-Strat Creditors' refers to shareholders who elected to
redeem their shares following the First EGM and Second EGM.
'Shares' means the sterling Shares of the Company in issue.
'SPACs' - ('Special Purpose Acquisition Companies'). These are
stock exchange listed companies that raise capital to acquire
private companies which are not typically identified in advance.
They are more commonly known as shell companies in the UK.
'Sharpe Ratio' means the average return earned in excess of the
risk-free rate per unit of volatility or total risk. The Sharpe
measure was developed by Nobel Laureate William Sharpe. Return (the
numerator) is defined as the incremental average monthly return of
an investment over the risk free rate. Risk (the denominator) is
defined as the standard deviation of the monthly investment returns
less the risk free rate. The values for the risk free rate for the
calculations are those of the 90 Day U.S. Treasury Bill. Values are
presented in annualized terms; annualized Sharpe Ratios are
calculated by multiplying the monthly Sharpe Ratio by the square
root of twelve.
'Underlying Fund' means Highbridge Tactical Credit Master Fund,
L.P. (formerly: 1992 Tactical Credit Master Fund, L.P.), the
tactical credit fund managed by Highbridge into which the Company
invests substantially all of its assets, via its investment in
Class F shares of Highbridge Tactical Credit Fund, Ltd (formerly:
1992 Tactical Credit Fund Corporation).
'Annualised Volatility' measures the dispersal or uncertainty in
a random variable. It measures the degree of variation of monthly
net returns around the average monthly net return. For this reason,
volatility is often used as a measure of investment risk. Values
are calculated by applying the traditional sample standard
deviation formula to monthly return data, and then annualised by
multiplying the result by the square root of twelve.
'Website' means the Company's website,
https://www.highbridgemsfltd.co.uk
Directors and Service Providers
-------------------------------------------------------------------------
Directors Registered Office of the Company
Vic Holmes Sarnia House
Steve Le Page Le Truchot
Paul Le Page St Peter Port
Guernsey GY1 1GR
Administrator and Secretary Auditor
Praxis Fund Services Limited PricewaterhouseCoopers CI LLP
Sarnia House Royal Bank Place
Le Truchot 1 Glategny Esplanade
St Peter Port St Peter Port
Guernsey GY1 1GR Guernsey GY1 4ND
Registrar, Paying Agent and Transfer UK Transfer Agent
Agent Anson Registrars (UK) Limited
Anson Registrars Limited The Scalpel
Ground Floor 18th Floor
Dorey Court Lime Street
St Peter Port London
Guernsey GY1 4EU England
EC3M 7AF
Investor and Public Relations Investment Manager and AIFM
J.P. Morgan Asset Management Highbridge Capital Management
60 Victoria Embankment LLC
London 40 West 57th Street - 32nd Floor
England EC4Y 0JP New York
NY10019
Corporate Brokers Advocates to the Company as to
finnCap Limited Guernsey Law
60 New Broad Street Carey Olsen LLP
London P.O. Box 98
England EC2M 1JJ Carey House, Les Banques
St Peter Port
Guernsey GY1 4BZ
Solicitors to the Company as Advocates to the Company as to
to English Law Guernsey Law
Herbert Smith Freehills LLP Mourant Ozannes
Exchange House PO Box 186
Primrose Street Royal Chambers
London St Julian's Avenue
England EC2A 2EG St Peter Port
Guernsey GY1 4HP
Registered company number: 44704
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END
IR QELFLBKLBBBF
(END) Dow Jones Newswires
September 25, 2020 12:50 ET (16:50 GMT)
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