TIDMHTCF
RNS Number : 8602K
Highbridge Tactical Credit Fund Ltd
27 April 2020
27 April 2020
Highbridge Tactical Credit Fund Limited
(the "Company")
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Company is pleased to announce the release of its annual
report and financial statements for the year ended 31 December 2019
(the "Annual Report").
In accordance with DTR 6.3.5(1) please see below the full text
of the Annual Report.
A copy of the Annual Report will be submitted to the National
Storage Mechanism and will shortly be available for inspection at
www.morningstar.co.uk/uk/NSM The Annual Report will also be posted
to shareholders and will be
available to view on the Company's website at: https://www.highbridgemsfltd.co.uk
For further information please contact:
Praxis Fund Services Limited
Company Secretary
Tel: +44 (0) 1481 737 600
LEI: 213800397SYHLYFH5961
J.P. Morgan Asset Management (UK), Investor Relations
Tel: 0207 742 3408
Financial Highlights
Company Key Figures(1)
31 December 31 December
2019 2018
Sterling Share price decrease (10.79%) (5.39%)
NAV per share decrease (1.32%) (2.01%)
NAV per share decrease
(since investment into Highbridge
Tactical Credit Master Fund L.P.
(2) ) (2.13%) n.a
Annualised Sterling NAV return
(since inception(3) ) 6.17% 6.84%
Underlying Fund Key Figures(4)
Sharpe Ratio 1.44 0.9
Beta to FTSE 100(5) 0.09 0.11
of the volatility of the FTSE
100(5) 1/3 1/4
Beta to Barclays Aggregate(6) (0.26) 0.04
Beta to S&P 500(6) 0.09 0.14
Inception to date performance statistics for the Company are:
38.36% cumulative net return, 5.41% annualised net return, 4.32%
annualised volatility, (9.44%) maximum drawdown and 1.03 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.
A glossary which explains the calculation of these statistics is
provided at the end of this report.
1. Information is for the Company as at 31 December 2019.
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 13.6 years)
4. Information is for the Highbridge Tactical Credit Master
Fund, L.P. (formerly: 1992 Tactical Credit Master Fund, L.P.) (the
"Underlying Fund") managed by Highbridge Capital Management, LLC
for the period between 1 March 2016 and 31 December 2019. 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 fund expenses. Certain recent performance estimated and
unaudited. Note: The Underlying Fund was launched in November 2013.
Underlying Fund returns are net of 2% management fee, 20% incentive
compensation, and actual fund expenses.
5. Index Source: FTSE International Limited ("FTSE") (c) FTSE
2017. "FTSE (R)" is a trade mark 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
It has been an extremely eventful year for the Company
illustrated by my statement in the Interim Report when there was
uncertainty as to the Company's continuing existence, since the
results of the second EGM were not known at the time the Interim
Report was finalised. It transpired there was sufficient support
for the Company to continue, hence I am pleased to have the
opportunity to address you once again.
Review of the year
The year began on a strong note as financial markets recovered
from fears of a global recession which led to a more favourable
trading environment for hedge funds. The Company's Net Asset Value
("NAV") enjoyed a strong rebound in the first quarter (+2.5%)
before posting a small loss (-0.4%) in the second quarter as weak
earnings data and concerns over the Italian budget deficit
triggered a flight to quality rally in fixed income and
expectations of additional fiscal stimulus. This performance was
not reflected in the Company's share price with (+2.2%) and (-0.7%)
returns leading to a widening of the discount in the first and
second quarters respectively. The Company resumed a share
repurchase program in the first quarter which used up the modest
cash balance so a redemption of GBP10m of the Highbridge
Multi-Strategy Fund Corporation (" MSF Corp") was instructed to
fund additional share repurchases in the second quarter. Shortly
after the redemption settled, the Board was made aware of
Highbridge Capital Management, LLC's (the "Investment Manager" or
"Highbridge") intention to restructure their business to focus on
Credit and Convertible bond based investment strategies. The Board
therefore suspended share repurchase activity whilst shareholders
were consulted on their preferences for the Company's future.
An extensive shareholder consultation programme during the
summer revealed limited appetite for a completely new manager
(other than Highbridge ) to be appointed, so the Board decided to
offer shareholders the opportunity to either receive cash
distributions from MSF Corp as it unwound or to re-invest into
Highbridge Tactical Credit Master Fund, L.P. (the "Underlying
Fund") via Highbridge Tactical Credit Fund, Ltd ("TCF Feeder")
.
Before approaching shareholders with the two options the Board
undertook a detailed due diligence review on the impact of the
change in investment strategy arising from the Company investing in
the Underlying Fund .
Our performance in the third quarter was dominated by the
process of unwinding the Multi-Strategy portfolio and our NAV fell
by 1.3% whereas our share price dropped by 3.7% as the Board were
unable to re-purchase shares whilst the future of the Company was
being determined.
The final quarter of the year saw the asset value of the Company
shrink from over GBP200m to approximately GBP50m as a significant
number of shareholders elected to exit. To avoid shareholders being
trapped in an illiquid sub-scale Company, the Board has committed
to hold a discontinuation vote to wind up the Company if the
Company's NAV is not above GBP80m by the end of 2020. The Company
was 72% invested in the Underlying Fund and 24% invested in
Highbridge Multi-Strategy Master Fund, L.P. ( the "HMS Master
Fund") at the start of the quarter as the most liquid assets in the
HMS Master Fund portfolio had been unwound. The quarter saw the
realisation of many of the less liquid positions in the HMS Master
Fund portfolio along with a large volume of year end selling by
activist investors of one of the Underlying Fund's largest holdings
which resulted in an overall loss for the quarter of 2%.
Discount Management
Despite offering two cash exit opportunities it was
disappointing to note that the Company's share price was subject to
selling pressure in the final quarter leading to a year end
discount to NAV of approximately 13%. It was also surprising that
exiting shareholders had voted against allowing the Company issuing
further shares. Preventing the Company from issuing further shares
reduces liquidity, prejudices the interests of continuing
shareholders who want the Company to grow and also increases the
likelihood of the Company winding up which would be to the
detriment of both continuing and exiting shareholders.
The Board do not intend to carry out any buying back of the
Company's shares before the results of the discontinuation vote at
the end of 2020 are known, or the Company has reached a NAV of
GBP80m, if earlier.
Future Prospects
Despite the turmoil of the last year, the future prospects for
the Company are encouraging. The Board implemented an aggressive
cost reduction programme to mitigate the impact of the reduced
asset base on the Company's total expense ratio. The cost
reductions involved reducing the size of the board and I am very
grateful to Sarita Keen both for volunteering to step down and for
her valuable contributions to the Company, not least during its
recent travails. The remaining Directors have also all waived a
proportion of their fees, our new Administrator (the
"Administrator", "Secretary" or "PraxisIFM") has also reduced its
fee from that it originally quoted, and various other cost
reduction initiatives have been implemented with the help of the
team at J.P. Morgan Asset Management and at PraxisIFM.
We have appointed a new broker, finnCap Limited, who specialise
in promoting smaller companies, and have tasked them with managing
a project to attempt to rebuild the Company to its target size of
GBP80m by the end of 2020. The Board were disappointed to note that
a significant number of portfolio valuation metrics in the
Underlying Fund were at or near all-time lows when they visited the
Investment Manager in December.
COVID-19
Since the reporting date, the emergence and subsequent
escalation of the outbreak of 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 the Company's NAV performance is
broadly flat for the 3 months to 31 March 2020, and therefore 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 Manager to commence an
aggressive marketing campaign as soon as the current COVID-19
restrictions are lifted sufficiently to enable them to do so. The
Investment Manager strongly believes that the Company now has an
extremely compelling investment portfolio which will deliver strong
performance over the rest of the year.
Further Extraordinary General Meeting (EGM)
The Board and its advisors believe that the future prospects for
the Company are positive, and so another EGM to allow the Board to
disapply pre-emption rights in certain circumstances was held in
February 2020. The shareholders approved both proposals to disapply
pre-emption rights on the issue of ordinary shares which should
allow the Company to grow as intended.
BlueCrest residual investments
During the year, a small amount of cash was received from the
liquidators of the AllBlue and AllBlue Leveraged funds into which
the Company was invested prior to February 2016. This has been
retained by the Company as to distribute it to creditors would not
be economical. The Board has no visibility as to when further cash
may be forthcoming from this source.
I would like to thank our shareholders for their ongoing support
and the Board hope you will see this support rewarded in 2020.
Vic Holmes
24 April 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.
In June 2019, Highbridge announced its decision to refocus its
business around its credit strategies, including the Underlying
Fund and certain other credit-focused funds. As part of this
refocus, Highbridge commenced winding down certain of its funds,
including MSF Corp in which the Company was invested. Investors in
MSF Corp were given the option to either transfer their investment,
in whole or in part, in MSF Corp to TCF Feeder or receive a return
of capital, over time. The Company, at the election of its
Shareholders, chose to transfer a portion of its investment in MSF
Corp to TCF Feeder over time. Because the Company will have an
investment in MSF Corp until it has been fully liquidated, this
commentary discusses both MSF Corp and TCF Feeder.
MSF Corp
In connection with the restructuring of Highbridge discussed
above, HMS Master Fund is being managed towards liquidation. We
have made meaningful progress managing down exposure in the HMS
Master Fund and returning investor capital. The vast majority of
HMS Master Fund's exposure across its global equity oriented books
was unwound very early in this process resulting in nominal
performance attribution from those strategies. During the fourth
quarter of 2019, we were able to sell a number of HMS Master Fund's
holdings as well as some of its credit positions at reasonable
price levels, in Highbridge's view, despite a more challenging
market environment for these types of securities. The majority of
credit positions still held by the HMS Master Fund consist of a
small group of Level 3 investments, most of which have expected
liquidity events over the coming months.
During the second half of 2019, HMS Master Fund's remaining
portfolio/positions negatively impacted performance (-3%). In
particular, the convertible credit & capital structure
arbitrage and distressed portfolios were impacted by the
underperformance of both less liquid, high-yield credits, and
reorganized public equity positions. The special purpose
acquisition company portfolio within equity capital markets
retraced some of its gains as the underlying equites sold-off
during the period. Moderate losses were also sustained in one of
HMS Master Fund's delta-hedge warrant positions.
TCF Feeder
Throughout the restructuring process, our primary goal has been
to protect the Underlying Fund's capital and guard its liquidity
profile. With the exception of a few Level 3 exposures, over the
second half of 2019 we effectively eliminated the overlapping
positions between the Underlying Fund and HMS Master Fund's pari
passu credit allocation. In addition, during this process, we
focused on managing the Underlying Fund's leverage profile and the
underlying liquidity of each of its investments. With the firm's
restructuring primarily behind us, we believe we are coming out as
a stronger and more nimble firm that is well positioned moving
forward. As an example, in Q3 2019, we re-entered the traditional
volatility universe to seek to enhance the Underlying Fund's
portfolio. We view this as an ongoing source of investment
opportunities and more diversified exposures. These exposures
contributed to performance in 2019. We are seeking to expand the
trading team to capitalize further on volatility opportunities. In
addition, given the changed market environment for reorganized
equity securities versus our historical experience, we recently
enhanced our risk framework around these types of positions.
Turning to 2019 performance, this was a challenging year for the
Underlying Fund, as well as for certain of our hedge fund peers.
These challenges were driven by several credit and multi-strategy
hedge fund closures that presented technical pressure on the prices
of certain positions held by the Underlying Fund, as well as by the
current market disdain for the less liquid credit risk that we
target. Other hurdles were specific to Highbridge such as pressure
on one of the Underlying Fund's largest positions as of 31 December
2019 and the technical pressure associated with the liquidation of
HMS Master Fund pari passu (to the Underlying Fund's) credit
allocation. The Underlying Fund delivered a negative return in 2019
- a first since the Underlying Fund's inception - with the Company
experiencing a negative return of -0.42% since its investment in
the Underlying Fund as of 1 October 2019. While disappointed to
have delivered a negative return for the year, we are pleased to
have provided some degree of capital protection over the course of
the full year in the face of these challenges.
Despite disappointing performance in 2019, we have had a strong
start to 2020 and our conviction in the go-forward opportunity set
is high. Looking forward, we are excited by the following:
-- Portfolio Implied Credit Spread : Today, the Underlying
Fund's portfolio is at its widest implied credit spread since
inception (excluding the new volatility strategy). Importantly, in
our view, this is not a function of negative credit developments
but rather broader market distaste for off-the-run risk and
redemption-driven technical pressure among peers.
-- Relative Value and Corporate Action Opportunities:
Highbridge-initiated corporate actions have always been a key part
of the Underlying Fund's investment strategy. In many of these
instances, we negotiate debt-for-debt or debt-for-equity exchanges
or other mutually beneficial ways for the Underlying Fund and an
issuer to unlock intrinsic value. We were very active in pursuing
corporate actions in Q4 2019 and, in fact, in 2020 we have already
executed one debt-for-equity exchange.
-- Catalysts: We believe that our portfolio is catalyst rich
today and that these events present alpha opportunities for the
Underlying Fund. In 2020, the Underlying Fund has already been
well-positioned for five company-specific catalysts. Such catalysts
include M&A, asset sales and capital market activities.
-- Reduced Competition : As mentioned above, a number of funds -
including several direct competitors - closed in 2019. We believe
that the reduced investment competition will inure to the
Underlying Fund's benefit, presenting more deployment opportunities
that offer a better risk-reward profile than historically.
-- Distressed Credit & Reorganized Equities : Investor
fatigue for many cyclical businesses has caused these businesses to
trade at lower and lower valuations. Capital formation around these
companies has clearly changed. The Underlying Fund seeks to
capitalize on this type of dislocation and has deployed capital to
select opportunities.
-- Volatility Strategies: We have re-entered the traditional
convertible arbitrage market. As of 1 February 2020, these
exposures represent eighteen percent of the Underlying Fund's long
market value. We believe this universe of securities will improve
the Underlying Fund's sector diversification and liquidity profile
while reducing the Underlying Fund's hedging expense.
We would like to thank you for your continued support.
Highbridge Capital Management, LLC
March 2020
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 GBP49
million.
2019 Changes to Corporate Structure
Following the notification received from Highbridge Capital
Management, LLC that the HMS Master Fund would be wound down, t he
Board of the Company held an Extraordinary General Meeting on the
16 August 2019 ("First EGM") to approve, subject to meeting certain
continuation conditions, a change to the Company's investment
policy. The resolution was passed but one condition was not met, so
the investment policy was not initially amended. A cash exit was
offered alongside the First EGM ("Initial Cash Exit Offer"), and
elections for the Initial Cash Exit Offer were received such that
the continuation condition in respect of the Company having a
minimum Net Asset Value of GBP100 million following implementation
of the Initial Cash Exit Offer had not been met.
The Board resolved that the Shares of those shareholders who
elected for the Initial Cash Exit Offer set out in the July
Circular would nevertheless be redeemed and these Shares cancelled
on 19 August 2019 (the "Initial Cash Exit Redemption Date").
The Board noted that the Net Asset Value attributable to those
Shares which were not elected for the Initial Cash Exit Offer (the
"Remaining Shareholders") amounted to approximately GBP73.5
million. In light of this significant number, the Board decided to
attempt to facilitate the wishes of those shareholders who had not
elected to exit the Company by offering them the opportunity to
continue in the Company with a revised continuation condition of a
minimum Net Asset Value of the Company of GBP50 million.
Accordingly, subsequent to the Initial Cash Exit Redemption
Date, the Board posted a further circular to the Remaining
Shareholders to convene a further Extraordinary General Meeting
held on the 17 September 2019 (the "Second EGM") to seek approval
to adopt, inter alia, the new Investment Policy and name as set out
in the July Circular to allow those Remaining Shareholders, who
wished to do so, the opportunity to remain invested in the Company
(the "Revised Proposals"). At the same time as seeking approval
from the Remaining Shareholders for the Revised Proposals, the
Company offered all Remaining Shareholders a further cash exit
opportunity (the "Subsequent Cash Exit Offer").
The resolutions put to shareholders at the Second EGM passed and
the revised continuation conditions were met, so the investment
objective of the Company was changed to seek to provide consistent
returns with low volatility through an investment policy of
investing substantially all of its assets in the Underlying
Fund.
During October 2019, the Company received its first
dividend-in-kind distribution of GBP35.7m of new shares in TCF
Feeder. This distribution represented approximately 75% of the
assets of the continuing Company.
During October 2019, the Company paid approximately GBP133.4m in
aggregate, equating to GBP1.62 per Share in respect of the 2019
Cash Exit Offers. Exit Creditors are reminded that they will
receive the redemption proceeds as a number of cash payments
following receipt by the Company of the redemption proceeds from
Highbridge Multi-Strategy Fund Corporation, and further
announcements will be made.
During July 2019, the Company received GBP1,096,760 of
redemption proceeds from AllBlue (GBP1,049,234 from the Sterling
Share Class and $47,526 from the US Dollar Share Class). Given the
relatively low value of the AllBlue proceeds compared to the number
of creditors, the Board of the Company has determined not to make
any payments of the AllBlue proceeds until such time that further
distributions are received in respect of the AllBlue Funds in order
to avoid an undue administrative burden and excessive costs,
including bank charges payable by each recipient of such
payments.
Structure diagram
Prior to the Second EGM 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 set out below.
The Company's new investment policy (the "Investment Policy") is
as follows:
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.
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.
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
multi-strategy hedge fund managers. Highbridge has approximately
US$1.2 billion in assets under management and staff of over 40
employees, including approximately 12 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 $2.2
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 the 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.
Board of Directors
At 31 December 2019 the Company had three directors (the
"Directors"), all of whom were non-executive. All directors held
office throughout the reporting year and held office at the date of
this report except as indicated. All directors were members of the
Audit, Risk, Nomination and Management and Remuneration
Committees.
Due to the Company reducing in size during 2019, the Board has
assumed the responsibilities previously delegated to the Management
and Remuneration Committee, Risk Committee and Nomination
Committee, and these Committees were disbanded with effect from 4
November 2019. All matters are still considered and discussed but
this now takes place at Board level. The remaining Committee is the
Audit Committee which will continue to be chaired by Steve Le
Page.
Vic Holmes, Chairman of the Board and the former Chairman of the
Nomination Committee, is an independent director of a diverse range
of companies involved in various aspects of the Finance Sector. He
was chief executive of Northern Trust's Channel Islands businesses
until he retired from full time employment in November 2011. He
held chief executive and chairman roles for a period of 21 years,
initially for a Baring Asset Management subsidiary in Ireland from
1990 to 2003, followed by a 2 year stint as chairman of all Baring
Asset Management fund administration companies in 5 jurisdictions.
He then worked as country head for Northern Trust in Ireland from
2005 to 2007 and then moved back to Guernsey in 2008 with Northern
Trust. He has extensive Board room experience which has been gained
first hand as a director of multiple finance-related companies over
a 30 year period. He is a fellow of the Association of Chartered
Certified Accountants and a resident of Guernsey.
Steve Le Page , Chairman of Audit Committee and former Chairman
of the Management and Remuneration Committee, retired from
partnership with PwC in the Channel Islands in September 2013 and
joined the Board in June 2014. His career at PwC spanned 33 years,
during which time he was partner in charge of their Assurance and
Advisory businesses for ten years and Senior Partner for five
years. In these executive positions he led considerable change and
growth in that firm and also helped fund Boards deal with
regulatory and reporting issues. His experience spans initial
listings, ongoing governance and reporting, continuation and going
concern and even winding up of listed and unlisted entities. He is
a Chartered Accountant and a Chartered Tax Advisor and he has a
number of non-executive roles. He is resident in Guernsey.
Paul Le Page , Senior Independent Director and former Chairman
of the Risk Committee. He was formerly employed as an executive
director of Man Group PLC's Guernsey Investment and Fund Management
subsidiaries where he was responsible for management of hedge fund
portfolios which span the full universe of hedge fund strategies.
This enables him to review and assess the performance and risk of
the Company in an independent objective manner. He has spent the
last 16 years acting as an independent non executive director of a
variety of LSE listed investment companies operating in the
alternative investment sector. He is resident in Guernsey.
Sarita Keen (resigned 31 October 2019) has significant
experience of fund administration of Guernsey companies. She was
employed by Kleinwort Benson (Channel Islands) Fund Services
(formerly Close Fund Services Limited), for over 25 years and prior
to that she worked for Hambros in Guernsey. She is an Approved
Person with the Guernsey Financial Services Commission and a Member
of the Institute of Directors. Sarita holds a number of
non-executive positions for various companies and, as part of this,
chairs or is a member of those companies' Audit, Risk and
Nominations Committees. Sarita Keen was appointed as a director on
3 June 2015 and is resident in Guernsey. Sarita resigned from the
Board on 31 October 2019.
Directors' Report
The Directors present their Annual Report and Audited Financial
Statements for the year ended 31 December 2019 (the "Financial
Year").
A description of important events which have occurred during the
Financial Year, their impact on the performance of the Company as
shown in the Financial Statements and a description of the
principal risks and uncertainties facing the Company, together with
an indication of important events that have occurred since the end
of the Financial Year and the Company's likely future development
is given in this Report, the Chairman's Statement and the notes to
the Financial Statements and are incorporated here by
reference.
Management of the Company
Investment Manager
On 29 February 2016, Highbridge was appointed as Investment
Manager to the Company. The principal responsibilities of the
Investment Manager under the Investment Management Agreement
are:
-- to provide portfolio and risk management services in respect
of the investments of the Company within the parameters of the
Company's investment policy; and
-- to effect or arrange and provide advice to the Company in relation to investments.
There is no compensation payable on termination of the
Investment Management Agreement, which is terminable on six months'
notice by either the Company or by the Investment Manager.
Pursuant to Listing Rule 15.6.2 (2), the Board of the Company
has concluded that the continuing appointment of the Investment
Manager on the terms agreed is in the best interest of the
Company's shareholders. The Board considers that the Investment
Manager has extensive investment management resources and wide
experience in managing investments.
Highbridge does not receive any direct management or performance
fees at the Company level for its appointment as investment manager
to the Company. Instead, Highbridge receives management fees and
incentive fees for its role as investment manager of the Underlying
Fund. Further information on these fees is disclosed in the
circular published by the Company on 28 August 2019.
The Board has agreed matters under which the Investment Manager
has discretion, and these are evidenced in the Investment
Management Agreement and a schedule of matters reserved by the
Board and delegated to service providers and committees. There are
no soft commissions paid and there is no requirement for voting
guidance due to the structure of the Company.
Secretary and Administrator
Praxis Fund Services Limited (the "Administrator", the
"Secretary" or "PraxisIFM") was appointed as administrator on 3
June 2019. The Administrator is a Guernsey incorporated company and
provides administration and secretarial services to the Company
pursuant to an Administration and Secretarial Agreement. In such
capacity, the Administrator is responsible for the general
secretarial functions required by the Law and provides advice and
support to the Board to assist the Company with compliance with its
continuing obligations as well as advising on the corporate
governance requirements and recommendations applicable to a company
listed on the premium segment of the Official List and admitted to
trading on the Main Market of the London Stock Exchange.
The Administrator is also responsible for the Company's general
administrative functions such as the calculation of the NAV of
Shares and the maintenance of accounting and statutory records.
The previous administrator and secretary JTC Fund Solutions
(Guernsey) Limited resigned on 3 June 2019.
The Company
Information on the Company including its Investment Objective
and Policies can be found within the Company and Investment
Overview section.
The Alternative Investment Fund Managers Directive ("AIFMD")
Highbridge is the Company's alternative investment fund manager
("AIFM"). For the purposes of AIFMD the Company is an alternative
investment fund ("AIF").
Directors
The Directors, all of whom are non-executive. No Director has a
contract of service with the Company, nor are any such contracts
proposed.
The following table details the interests of the Directors in
the Shares of the Company, both as at 31 December 2019 and as at 9
April 2020.
Director Number of Shares (9 Number of Shares (31
April 2020) December 2019)
Vic Holmes 79,000 Sterling Shares 79,000 Sterling Shares
----------------------- -----------------------
Steve Le Page None None
----------------------- -----------------------
Paul Le Page 10,000 Sterling Shares 10,000 Sterling Shares
----------------------- -----------------------
Director Indemnification and Insurance
An insurance policy is maintained by the Company which
indemnifies the Directors of the Company against certain
liabilities arising in the conduct of their duties. There is no
cover against fraudulent or dishonest actions.
Disclosure of Information to Auditor
The Directors who held office at the date of approval of this
Directors' Report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company's
auditor is unaware; and each Director has taken all the steps that
he ought to have taken as a Director to make himself aware of any
relevant audit information and to establish that the Company's
auditor is aware of that information.
Independent Auditor
PricewaterhouseCoopers CI LLP has indicated its willingness to
continue in office as auditor and a resolution proposing its
reappointment, and to authorise the Directors to determine its
remuneration for the ensuing year, will be put to shareholders at
the Annual General Meeting ("AGM").
Net Asset Value ("NAV")
The NAV per Sterling Share for accounting purposes, including
all distributable reserves, as at 31 December 2019 was GBP2.1233
(31 December 2018: GBP2.1518).
Results and Dividends
The results for the year are set out in the Statement of
Comprehensive Income. In accordance with the Investment Objective
the Directors did not declare any dividends during the year under
review and the Directors do not recommend the payment of a dividend
as at the date of this report.
Related Party Transactions
Other than the above-mentioned interests, none of the Directors,
nor any persons connected with them, had a material interest in any
of the Company's transactions.
There were no material related party transactions which took
place in the Financial Year, other than those disclosed in the
Directors' Report and at Note 7 to the Financial Statements.
Notifiable Interests in the Company's Voting Rights
At the year-end, the following had declared a notifiable
interest in the Company's voting rights:
Name Number of Voting Rights % of Voting Rights (as at 31 December 2019)
-------------------------- ----------------------- -------------------------------------------
Premier Miton Investors 4,944,463 21.41%
Tilney Group 2,189,983 9.48%
JPMorgan Asset Management 2,107,169 9.12%
Blankstone Sington 1,244,325 5.39%
At 31 March 2020, being the latest practicable date prior to
publication, the following had declared a notifiable interest in
the Company's voting rights:
Name Number of Voting Rights % of Voting Rights (as at 31 March 2020)
----------------------------- ----------------------- ----------------------------------------
Premier Miton Investors 4,920,469 21.21%
Mirabella Financial Services 3,888,789 16.84%
Tilney Group 1,842,725 7.98%
JPMorgan Asset Management 1,500,040 6.50%
No further changes to these holdings had been notified as at the
date of this report.
Listing Rule 9.8.4 R
Listing Rule 9.8.4 R requires that the Company include certain
information in a single identifiable section of the Annual Report
or a cross reference table indicating where the information is set
out. The Directors confirm that there are no disclosures to be made
in this regard.
Corporate Governance Statement
Statement of Compliance with the AIC Code of Corporate
Governance
In accordance with Listing Rule 9.8.7 the Company is required to
comply with the requirements of the UK Corporate Governance Code. A
copy of the UK Corporate Governance Code, 2018 is available for
download from the Financial Reporting Council's website (
www.frc.org.uk ).
The Board of the Company has considered the principles and
recommendations of the AIC Code of Corporate Governance, setting
out additional principles and recommendations on issues that are of
specific relevance to the Company.
The Board considers that reporting against the principles and
recommendations of the AIC Code, will provide better information to
shareholders.
The Company is also required to comply with the GFSC Code. As
the Company reports under the AIC Code it is deemed to meet the
requirements of the GFSC Code. The Board has undertaken to evaluate
its corporate governance compliance on an on-going basis.
The UK Corporate Governance Code includes provisions relating
to:
-- the role of the chief executive;
-- executive directors' remuneration;
-- the need for an internal audit function.
For the reasons set out in the AIC Code, and as explained in the
UK Corporate Governance Code, the Board considers that these
provisions are not relevant to the position of the Company. The
Company has therefore not reported further in respect of these
provisions. The Company has complied with all principles of the AIC
Code and conforms with all detailed recommendations subject to the
following explanations.
Board Composition
The Board comprises three non-executive Directors, all of whom
are considered to be independent (with the Chairman being
independent on appointment) for the purposes of the AIC Code and
Listing Rule 15.2.12A. As part of their examination of the
independence of the Board, the Board have concluded that Steve Le
Page, Vic Holmes and Paul Le Page remain independent under the
principles of the AIC Code.
Biographies of the Directors appear on under the Board of
Directors section, demonstrating the wide range of skills and
experience they bring to the Board and highlights of their specific
key skills and experience. In accordance with the AIC Code, below
is a list of all other public company directorships and employments
held by each Director. There are no shared directorships of any
commercial company held by two or more Directors at the date of
this report.
Vic Holmes
Next Energy Solar Fund Limited
Steve Le Page
Volta Finance Limited
Princess Private Equity Holding Limited
Channel Islands Property Fund Limited
Tufton Oceanic Assets Limited
Paul Le Page
Bluefield Solar Income Fund Limited
UK Mortgages Limited
RTW Venture Fund Limited
Board Meetings
The Board meets at least four times a year to consider the
business and affairs of the Company. Between these meetings the
Board keeps in contact by email and telephone as well as meeting to
consider specific matters of a transactional nature. Directors have
direct access to the Secretary and the Secretary is responsible for
ensuring that Board procedures are followed and that there are good
information flows both within the Board and between Committees and
the Board. The Directors are kept fully informed of investment and
financial controls and other matters that are relevant to the
business of the Company and should be brought to the attention of
the Directors. The Directors also have access, where necessary in
the furtherance of their duties, to professional advice at the
expense of the Company.
During the year under review twenty-six Board meetings took
place. Of those meetings, four were quarterly Board meetings and
the remainder were ad hoc meetings held at short notice to deal
with specific matters including investment into TCF Feeder, the
continuation of the Company, Company's buy-back programme, possible
tender offers, potential distributions to Cash Exit and Tender
Creditors, and developments relating to the underlying investments.
At quarterly Board meetings there is a focus on the investment
performance of the Company. Strategy and the Company's investment
objective are considered on a regular basis. Director attendance is
summarised below:-
Director Management and
Remuneration Nomination
Quarterly Board Ad-Hoc Board Audit Committee Committee Committee Risk Committee
Meetings Meetings Meetings Meetings Meetings Meetings
------------- --------------- ---------------- ---------------- --------------- --------------- ----------------
Vic Holmes 4 of 4 16 of 16 2 of 2 1 of 1 1 of 1 2 of 2
Steve Le Page 4 of 4 15 of 16 2 of 2 1 of 1 1 of 1 2 of 2
Paul Le Page 4 of 4 15 of 16 2 of 2 1 of 1 1 of 1 2 of 2
Sarita Keen* 4 of 4 4 of 5 2 of 2 1 of 1 1 of 1 2 of 2
* Sarita Keen resigned effective 31 October 2019.
Letters of appointment for non-executive Directors do not set
out a fixed time commitment for Board duties as the Board considers
that the time required by Directors may fluctuate depending on the
demands of the Company and other events. Therefore, it is required
that each Director will allocate sufficient time to the Company to
perform their duties effectively and it is also expected that each
Director will attend all quarterly Board meetings and meetings of
Committees of which they are a member. The Chairman has confirmed
that he considers the performance of each director to be
satisfactory and that each director demonstrates continued
commitment to their role.
Key Skills and Experience
A review of the skills and experience of the Board members, is
outlined below:
Director Key Skills and Experience
Vic Holmes (appointed to Board Wide knowledge of investment
3 June 2016) management as well as broad
experience of non-executive
Chairman directorships, chairmanships
and executive directorship in
quoted and unquoted companies.
----------------------------------------
Steve Le Page (appointed to Board Wide-ranging knowledge of audit,
3 June 2014) financial reporting, corporate
governance and internal controls
Chairman of the Audit Committee in the context of listed investment
and, from 1 January 2019 to 4 companies. Significant financial
November 2019, Chairman of the services, regulatory and non-executive
Management and Remuneration Committee director experience.
*
----------------------------------------
Paul Le Page (appointed to Board An experienced hedge fund portfolio
1 May 2018) manager with detailed knowledge
Chairman of the Risk Committee of asset allocation, fund selection
from 1 January 2019 to 4 November and financial risk management.
2019* Significant financial services,
governance and investment company
sector experience.
----------------------------------------
Sarita Keen (appointed to Board Extensive experience of Guernsey
3 June 2015) investment company administration
and regulation.
Resigned on 31 October 2019
----------------------------------------
* Due to the Company reducing in size during 2019, the Board has
assumed the responsibilities previously delegated to the Management
and Remuneration Committee, Risk Committee and Nomination
Committee, and these Committees were disbanded with effect from 4
November 2019.
Tenure
All Directors seeking to continue on the Board after the AGM
will put themselves forward for re-election at each AGM. The Board
approves the nomination for re-election of such directors on an
annual basis. The above table summarises the rationale for that
approval. On 2 August 2019, the date of the most recent AGM,
shareholders re-elected Vic Holmes, Sarita Keen, Steve Le Page and
Paul Le Page.
The Board believes that changes to its composition, including
succession planning for directors, can be managed without undue
disruption to the Company's operations. Directors are able and
encouraged to provide statements to the Board of their concerns and
ensure that any items of concern are recorded in the Board minutes
and the Chairman encourages all Directors to present their views on
matters in an open forum. The Board is also scheduled to consider
the tenure of Directors once any Director has been appointed to the
Board for a continuous period of nine years.
Board Committees
The Board delegated certain responsibilities and functions to
Committees. Details of the membership of these Committees are shown
with the Directors' biographies. Details of the activities of each
of the Committees are set out below.
Due to the Company reducing in size during 2019, the Board has
assumed the responsibilities previously delegated to the Management
and Remuneration Committee, Risk Committee and Nomination
Committee, and these Committees were disbanded with effect from 4
November 2019. All matters will still be considered and discussed
but this will take place at Board level. The remaining Committee is
the Audit Committee which will continue to be chaired by Steve Le
Page.
Audit Committee
In accordance with the AIC Code, an Audit Committee has been
established and its terms of reference are available on the
Company's website . All Board members are members of the Audit
Committee. In the opinion of the Board, the constitution, terms of
reference and activities of the Audit Committee fulfil all the
relevant requirements of the AIC Code. The Company does not
maintain an internal audit function, and the Chair of the Board is
a member of the Committee.
The Board sought to ensure that all areas of risk and control
were addressed by either the Risk Committee or the Audit Committee.
Consequently, the terms of reference of each Committee made the
division of responsibilities between them clear. The Audit
Committee is responsible for monitoring the effectiveness of the
controls and systems in place to address, inter alia, the risks of
loss or misappropriation of assets, misstatement of liabilities or
failure of financial reporting systems or processes, including
valuation reporting and processes.
The Audit Committee monitors the performance of the auditor, and
also examines the remuneration and engagement of the auditor, as
well as its independence and any non-audit services provided by it.
The current auditor was appointed after a tender process in 2016
and so their tenure is not currently an area of consideration for
the Audit Committee. As a result, the Company does not intend to
tender the audit service in the near future. The Audit Committee
will continue to monitor the performance of the auditor with the
aim of ensuring a high quality and effective audit.
Each year the Board examines the Audit Committee's performance
and effectiveness, and ensures that its tasks and processes remain
appropriate. The chairmanship of the Audit Committee is reviewed by
the Chairman on an annual basis. Key areas covered include the
clarity of the Audit Committee's role and responsibilities, the
balance of skills among its members and the effectiveness of
reporting of its work to the Board. The Board is satisfied that all
members of the Audit Committee have relevant financial experience
and knowledge and ensure that such knowledge remains up to date.
Overall the Board considered the Audit Committee had the right
composition in terms of expertise and has effectively undertaken
its activities and reported them to the Board during the year.
Management and Remuneration Committee
In accordance with the AIC Code, a Management and Remuneration
Committee was established . All Board members were members of the
Management and Remuneration Committee and it was chaired by Steve
Le Page during 2019 until it was disbanded on 4 November 2019. The
function of the Management and Remuneration Committee was:
-- to ensure that the Company's contracts of engagement with the
Administrator, the Investment Manager and other service providers
are operating satisfactorily so as to ensure the safe and accurate
management and administration of the Company's affairs and
business, and are competitive and reasonable for the shareholders
and to make appropriate recommendations to the Board;
-- to monitor and assess the appropriate levels of remuneration for all Directors; and
-- to ensure that the Company complies to the best of its
ability with applicable laws and regulations relating to engagement
with service providers and director remuneration and adheres to the
tenet of generally accepted codes of conduct.
During the year under review the Management and Remuneration
Committee met once.
Each Director's performance is assessed annually by the Chairman
and the performance of the Chairman is assessed by the Senior
Independent Director together with the remaining Directors.
The remuneration of the Directors is reviewed on an annual basis
and compared with the level of remuneration for directorships of
other similar investment companies. All Directors receive an annual
fee and there are no share options or other performance related
benefits available to them.
The Board is committed to an evaluation of its performance being
carried out every year. In accordance with the AIC Code the Board
has carried out a rigorous review of its own effectiveness during
February 2020 and has concluded that it maintains a good balance of
skills, experience, independence, diversity and knowledge of the
Company and therefore remains effective.
In light of the reduced size of the Company, the Board has taken
measures to reduce the ongoing costs of running the Company. The
Board has decided that a meaningful cost saving would be achieved
by the number of directors being reduced from four to three. As a
result of that decision Sarita Keen volunteered to step down as a
director with effect from 31 October 2019. The three continuing
Directors have also volunteered to reduce their fees with effect
from 1 October 2019. The Directors' fees are disclosed below.
Amount per annum Amount per annum
With effect from 31 December
1 October 2019 2018
Vic Holmes GBP50,000 GBP60,000
Steve Le Page GBP42,000 GBP50,000
Paul Le Page GBP40,000 GBP48,000
Sarita Keen, resigned on 31
October 2019 - GBP42,000
------------------ -----------------
With effect from 4 November 2019, the Board does not have a
separate Management and Remuneration Committee. The Board as a
whole fulfils the function of a Management and Remuneration
Committee.
Nomination Committee
In accordance with the AIC Code, a Nomination Committee had been
established . All Board members were members of the Nomination
Committee. Vic Holmes had been appointed as Chairman of this
Committee, except when the Committee considered any matter in
connection with the Chairmanship in which case the Committee would
have elected another Chairman. Given that the Board consists solely
of non-executive directors, each of whom is a member of the
Committee, the Board does not consider the Chairman being a member
of the Committee to be inappropriate.
The function of the Nomination Committee was to ensure that the
Company went through a formal process of reviewing the balance,
independence and effectiveness of the Board, identifying the
experience and skills which may have been needed and those
individuals who might have been best to provide them and to ensure
that the individual had sufficient available time to undertake the
tasks required. When considering the composition of the Board,
Directors will be mindful of diversity, inclusiveness and
meritocracy. The outside directorships and broader commitments of
Directors were also monitored by the Nomination Committee.
In February 2019 the Nomination Committee undertook the
aforementioned formal review of the balance, independence and
effectiveness of the Board for the year under review and concluded
it did not have any objection to the current commitments of its
members and that no changes to the composition of the Board were
required.
The Company supports the AIC Code provision that Boards should
consider the benefits of diversity, including gender, when making
appointments and is committed to ensuring it receives information
from the widest range of perspectives and backgrounds. The
Company's aim as regards the composition of the Board is that it
should have a balance of experience, skills and knowledge to enable
each Director and the Board as a whole to discharge their duties
effectively. Whilst the Board of the Company agrees that it is
entirely appropriate that it should seek diversity, it does not
consider that this can be best achieved by establishing specific
quotas and targets and appointments will continue to be made based
wholly on merit. Accordingly when changes to the Board are
required, the Board has regard to the Board's diversity policy and
to a comparative analysis of candidates' qualifications and
experience. A pre-established, clear, neutrally formulated and
unambiguous set of criteria are utilised to determine the most
suitable candidate for the specific position sought. Once
appointed, the successful candidate receives a formal and tailored
induction.
With effect from 4 November 2019 the Board does not have a
separate Nomination Committee. The Board as a whole fulfils the
function of a Nomination Committee. Any proposal for a new Director
will be discussed and approved by the Board.
Risk Committee
The Risk Committee was established in 2014 .
The Committee's primary focus was around investment risk in its
broadest sense, including elements such as counterparty risk and
credit risk. The Committee's work was focused on two levels:
-- the direct exposures of the Company itself, for instance to
the Underlying Fund, HMS Master Fund, AllBlue, AllBlue Leveraged
and cash counterparties; and
-- the exposures embedded within the Underlying Fund and HMS
Master Fund, its investment characteristics and the risks
associated with investing in the Underlying Fund and HMS Master
Fund.
Over the course of the year under review, the Risk Committee
spent time considering the scope and mandate of its operations,
reviewing key documentation, regularly reviewing key reporting and
interacting with Highbridge and the Administrator to examine and
understand the risks that the Company is exposed to at both levels,
agreeing a reporting framework with Highbridge in order to monitor
the risk metrics of the Company's investments.
With effect from 4 November 2019 the Board does not have a
separate Risk Committee. The Board as a whole fulfils the function
of a Risk Committee.
Further information relating to the work of the Risk Committee
is explained in the Risk Committee report.
Diversity
Following the significant reduction in the size of the Company,
the Board has reviewed all associated Company costs, and accepted
the resignation of Sarita Keen, being mindful of the Board's focus
on its experience and skill sets. In the best interests of
shareholders, the remaining Board members also agreed to waive part
of their fees. Assuming that the campaign to grow the Company is
successful, the Board expects to be able to increase the number of
its members in line with its diversity policy.
Terms of Reference
The Terms of Reference for all constituted committees are
available for inspection on request at the Company's registered
office and are also available on the Company's website.
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. T he 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 which may be required.
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.
In addition, the Company's NAV in 2020 to date has remained fairly
constant, despite widespread market falls, and so it is logical to
expect that shareholders would vote for continuation.
In the event that a vote is required and 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.
The Company's financial risk management objectives and policies,
details of its financial instruments and its exposures to market
price risk, credit risk, liquidity risk and interest rate risk are
set out at note 14 to the Financial Statements. After making
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 annual financial
report.
Shareholder Communication
All holders of Shares in the Company have the right to receive
notice of, and attend, all general meetings of the Company, during
which the Directors are available to discuss issues affecting the
Company, and the Directors also meet periodically with major
shareholders. The Directors are always available to enter into
dialogue with shareholders and make themselves available for such
purpose whenever required. The Chairman and the Senior Independent
Director can also be contacted by shareholders via the Secretary if
they have any concerns.
Both Highbridge and JPMAM meet regularly with the Company's
major shareholders and reports are provided at least quarterly to
the Board on those shareholders' views about the Company and any
issues or concerns they have raised. The Board regularly reviews
the Company's share register at its formal meetings to monitor the
shareholder profile and the Board has implemented measures to
ensure that information is presented to its shareholders in a fair,
balanced and understandable manner.
The Company announces the confirmed NAV of its shares on a
monthly basis. During the year under review a commentary on the
investment performance of the Company's investments in the
Underlying Fund and HMS Master Fund was provided in the Company's
monthly factsheet. The estimated net asset value of the Company's
shares is, and will continue to be, announced weekly via a
Regulatory Information Service. The daily market closing prices of
Shares are available on Reuters, Bloomberg, in the Financial Times
and the Daily Telegraph.
All Shares may be dealt in directly through a stockbroker or
professional adviser acting on shareholder's behalf. The buying and
selling of Shares may be settled through CREST.
The Company's register of shareholders is maintained by Anson
Registrars Limited in Guernsey and they can be contacted on +44
(0)1481 702400.
Stakeholders and Section 172
Whilst directly applicable to U.K. incorporated companies, the
intention of the AIC Code is that the matters set out in section
172 of the Companies Act, 2006 are reported on. The Board considers
the view of the Company's other key stakeholders as part of its
discussions and decision making process. As an investment company
the Company does not have any employees and conducts its core
activities through third-party service providers. Each provider has
an established track record and, through regulatory oversight and
control, are required to have in place suitable policies to ensure
they maintain high standards of business conduct, treat customers
fairly, and employ corporate governance best practice.
The Board's commitment to maintaining the high-standards of
corporate governance recommended in the AIC Code, combined with the
Directors' duties enshrined in Company law, the constitutional
documents, the Disclosure and Transparency Rules and the Market
Abuse Regulation, ensures that shareholders are provided with
frequent and comprehensive information concerning the Company and
its activities. Whilst the primary duty of the Directors is owed to
the Company as a whole, the Board considers as part of its decision
making process the interests of all stakeholders. Particular
consideration being given to the continued alignment between the
activities of the Company and those that contribute to delivering
the Board's strategy, which include the Investment Manager and the
Administrator. The Board respects and welcomes the views of all
stakeholders. Any queries or areas of concern regarding the
Company's operations can be raised with the Board via the
Secretary.
The Company is an externally managed investment company, has no
employees, and as such is operationally quite simple. The Board
does not believe that the Company has any material stakeholders
other than those set out in the following table.
Stakeholder
Investors Service providers Community and environment
------------- -----------------------
Issues that Performance Reputation of the Compliance with Law
matter to of the shares Company and Regulation
them
Growth of the Compliance with Impact of the Company
Company Law and Regulation and its activities
Liquidity of on third parties
the shares Remuneration
----------------------- ----------------------------- ----------------------------
Engagement Annual General The main two service The Company itself
process Meeting providers - Highbridge has only a very small
and Praxis IFM - footprint in the
Frequent meetings engage with the local community and
with investors Board in face to only a very small
by brokers and face meetings quarterly, impact on the environment.
the Investment giving them direct
Manager and input to Board discussions. However, the Board
subsequent reports acknowledges that
to the Board All service providers it is imperative
are asked to complete that everyone contributes
Monthly factsheets a questionnaire to local and global
annually which includes sustainability.
feedback on their
interaction with
the Company, and
the Board undertakes
an annual visit
to Highbridge either
in London or New
York.
----------------------- ----------------------------- ----------------------------
Rationale Clearly investors The Company relies The nature of the
and example are the most on service providers Company's investment
outcomes important stakeholder entirely as it has is such that it does
for the Company. no systems or employees not provide a direct
Most of our of its own. The route to influence
engagement with major decisions investees in ESG
investors is made by the Board matters in many areas,
about "business which effected service but the Board and
as usual" matters, providers in the the Investment Manager
but has also year were to change work together to
included discussions the administrator ensure that such
about the change and to change the factors are carefully
of investment investment policy. considered and reflected
policy and the These were only in investment decisions,
discount of made after due consultation as outlined elsewhere
the share price of those impacted, in the document.
to the NAV. although the change Board members do
The major decisions of investment policy travel on Company
arising from was driven by shareholders. business, including
this have been The Board always for the annual due
for the Board seeks to act fairly diligence visit to
to seek to continue and transparently Highbridge. The Board
the Company with all service considers this essential
to allow shareholders providers, and this in overseeing service
to access the includes such aspects providers and safeguarding
underlying fund as prompt payment stakeholder interests.
and to seek of invoices. Otherwise, the Board
the dis-application seeks to minimise
of pre-emption travel by the use
rights on shares of conference calls
issued at or whenever good governance
above NAV to permits.
allow the Company
to grow.
----------------------- ----------------------------- ----------------------------
Engagement processes are kept under regular review. Shareholders
and other interested parties are encouraged to contact the Company
via +44 (0)1481 727600 on these or any other matters.
Anti-Bribery
The Directors have undertaken to operate the business of the
Company in an honest and ethical manner and accordingly take a
zero-tolerance approach to bribery and corruption. The key
components of this approach are implemented as follows:
-- The Board is committed to acting professionally, fairly and
with integrity in all its business dealings and relationships;
-- The Company will implement and enforce effective procedures to counter bribery; and
-- The Company requires all its service providers and advisors
to adopt equivalent or similar principles.
UK Criminal Finance Act 2017
Following the entry into force of the UK Criminal Finance Act
2017, the Board has reaffirmed its zero tolerance policy towards
the facilitation of corporate tax evasion.
Data Protection
The Company has implemented measures designed to ensure its
compliance with the EU General Data Protection Regulation (EU)
2016/679 and associated legislation in Guernsey and in other
jurisdictions. The Company has also issued a privacy notice which
sets out how personal data is collected, processed and disclosed.
This notice is available for review and download at the Company's
website.
Risk Management and Internal Control
The Board is responsible for the Company's system of internal
control and for reviewing its effectiveness. The Board confirms
that there is an on-going process for identifying, evaluating and
monitoring the significant risks faced by the Company.
The Audit Committee, on behalf of the Board, carries out an
annual review of the internal financial controls of the Company. In
addition, ISAE 3402 (or equivalent) reports have been obtained from
the relevant service providers where available to verify these
reviews. The Management and Remuneration Committee also conducted
regular reviews of the Company's service providers. The internal
controls are designed to meet the Company's particular needs and
the foreseeable risks to which it is exposed. Accordingly, the
internal control systems are designed to manage rather than
eliminate the risk of failure to achieve business objectives and by
their nature can only provide reasonable and not absolute assurance
against misstatement and loss.
The Company has put in place arrangements with Highbridge for
the Company to receive monthly NAVs in relation to HMS Master Fund
and the Underlying Fund and estimated weekly NAVs in relation to
the Underlying Fund electronically as soon as they are released,
together with certain factsheets produced on each fund and other
administrative information and reports. The purpose of these
arrangements is to ensure that the Directors have sufficient
information to enable them to monitor the Company's investments.
The liquidators of AllBlue and AllBlue Leveraged have been unable
to supply any monthly NAV information since that provided as at 31
July 2018, but given that these holdings represents 0.4% of the
Company's NAV the Directors are content that this does not
constitute a serious failure of process. 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. More details are provided in
Note 2.
The Board has assumed the responsibilities of the Risk Committee
and meets to review risk reporting information and consider the
Company's investment risk management systems, including
consideration of a risk matrix which covers various areas of risk
including corporate strategy, accuracy of published information,
compliance with laws and regulations, relationships with service
providers and investment and business activities. The Board
considers that the Company has adequate and effective systems in
place to identify, mitigate and manage the primary risks to which
the Company is exposed. Highbridge is the investment manager of TCF
Feeder and MSF Corp and acts as investment manager of the Company.
BlueCrest is the investment manager of AllBlue and AllBlue
Leveraged. Administration and Secretarial duties for the Company
are performed by Praxis Fund Services Limited. The Board considers
that the systems and procedures employed by the Administrator and
other service providers provide sufficient assurance that a sound
system of internal controls is in place.
The Directors of the Company clearly define the duties and
responsibilities of their agents and advisors. The appointment of
agents and advisors is conducted by the Board after consideration
of the quality of the parties involved and the Board monitored
their on-going performance and contractual arrangements. The Board
has also specified which matters are reserved for a decision by the
Board and which matters may be delegated to its agents and
advisers.
Specific matters reserved exclusively for the decision of the
Board include the approval and variation of terms on which any
overdraft or credit facility is used to finance operating costs and
the invocation of any premium or discount control mechanisms.
Principal Risks and Uncertainties
The principal risks associated with the Company are:
Operational risk. The Board is ultimately responsible for all
operational facets of performance including cash management, asset
management, regulatory and listing obligations. The Company has no
employees and so enters into legal agreements with a series of
service providers to ensure both operational performance and
regulatory obligations are met. The Company uses well established,
reputable and experienced service providers and their continued
appointment is assessed at least annually.
Investment risk. The Board is responsible for the investment
policy but, given that the investment objective of the Company is
to invest substantially all of its assets in TCF Feeder, the Board
has little discretion in such management. The success of the
Company depends on the diligence and skill of the Investment
Manager of the Company's primary investment, the Underlying Fund.
There is a risk that any underperformance of funds in which the
Company's capital is invested would lead to a reduction of the net
asset value or of the share price rating. The Board formally
monitors the investment performance each quarter, and meets with
the Investment Manager on a regular basis.
Share price discount risk. The share price is continually
monitored and, if appropriate, the Board have the discretion to
make a quarterly tender offer to shareholders. Furthermore, the
Board also consider whether any additional control measures need to
be implemented, including the implementation of a buyback
programme.
Concentration risk: The Company's principal exposure is to the
Underlying Fund, with additional exposure to HMS Master Fund,
AllBlue and AllBlue Leveraged through its creditor interests in
these funds and, therefore, the Company is exposed to concentration
risk. The Board considers that the Company is effectively highly
diversified in its exposures, given the range of individual
positions and exposures of the Underlying Fund. The Board believes
that this mitigates the concentration risk. The Board actively
monitors the exposures to the Underlying Fund, HMS Master Fund,
AllBlue and AllBlue Leveraged.
Regulatory risk: The Company is required to comply with the
Listing Rules and the Disclosure Guidance and Transparency Rules of
the UK Listing Authority and the requirements imposed by the
Guernsey Financial Services Commission. Any failure to comply could
lead to criminal or civil proceedings. Although responsibility
ultimately lies with the Board, the Secretary and finnCap Limited
(the "Corporate Brokers") also monitor compliance with regulatory
requirements.
Shareholders' attention is also drawn to the Company's risk
disclosure document (which can be found on the Company's website)
which sets out information on certain risks and other aspects of
the Company's investment in the Underlying Fund.
Emerging Risks
The Board ongoingly monitor emerging risk areas relevant to the
performance of the Company including those that would threaten its
business model, future performance, solvency and liquidity on a
ongoing basis.
COVID-19: The Board has reviewed the positioning of the
Company's portfolio and the Investment Manager's business
continuity arrangements which include the ability for all key
employees to work from home and a comprehensive review of their
underlying service providers' business continuity arrangements.
The Board has also discussed the potential impact of the
pandemic and their response to it with its service providers.
As a result, whilst there has been a considerable fall in the
Company's share price in line with other listed investment
companies, the Board has concluded that there should be little
impact upon to day-to-day operations and valuation processes of
both the Company and the Underlying Fund.
Viability Statement
The investment objective of the Company is currently to seek to
provide consistent returns with low volatility through an
investment policy of investing substantially all of its assets in
the Underlying Fund. Prior to the First EGM, it was to seek to
provide consistent long-term capital growth through an investment
policy of investing substantially all of its assets in MSF Corp or
any successor vehicle of MSF Corp. However, in considering the
Company's viability, the Directors have only given consideration to
the current objective.
Since October 2019 the Company's investment performance has
largely depended upon the performance of its underlying investment
into the TCF Feeder which is also managed by Highbridge, the
Company's investment manager. The Directors, in assessing the
viability of the Company have paid particular attention to the
principal risks faced by the Company in seeking to achieve its
stated objective. The Board has established a risk management
framework which is intended to identify, measure, monitor, report
and where appropriate, mitigate the risks to the Company's
investment objective.
The Directors confirm that their assessment of the principal
risks facing the Company was robust and that in doing so they have
considered models projecting future cash flows during the three
years to 31 December 2022. These models assume that the Company
will be able to meet any requirements for cash from redemption
proceeds from its investment in TCF Feeder. The Board considers
these assumptions to be reasonable, having regard to the
information received by the Company to date. These models also
assume that future performance will reflect the actual performance
of TCF Feeder during the last few years. These models have then
been flexed to reflect the impact of some plausible but severe
scenarios similar to those experienced by investment markets in the
past. The viability assessment covers a period of three years
because the Directors are of the opinion that given the Company's
recent change of investment policy it would be imprudent for them
to attempt to assess any longer period. The Directors also consider
this period to be sufficient given the inherent uncertainty of the
investment world.
The continuation of the Company in its present form is dependent
on the Investment Management Agreement with Highbridge remaining in
place. The Directors note that the Investment Management Agreement
with the Investment Manager is terminable on six months' written
notice by either party. The Directors have no current reason to
assume that either the Company or Highbridge would serve notice of
termination of the Investment Management Agreement during the three
year period covered by this viability statement.
In considering the viability 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. 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. However, the Company has performed in line
with its objective during the market volatility in 2020 to date,
and so the Board and its advisors believe that the Company will be
able to grow sufficiently to render a vote unnecessary.
Consequently, for the purposes of assessing the Company's viability
over the next three years, the Directors have assumed that the
Company has grown to at least GBP80 million by the end of 2020. In
the event that this assumption proves incorrect, the Directors
believe that the Company's shares will not be materially
impacted.
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 should allow the Company to grow as
intended.
The Directors, having duly considered the principal risks facing
the Company, their mitigation and the cash flow modelling, have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the three
year period of their assessment.
By order of the Board
Vic Holmes , Director
24 April 2020
Risk Committee Report
At the start of 2019 the main concern of the Risk Committee and
the Board was ensuring that the Company had sufficient working
capital to resume an active programme of share buy-backs following
a very poor year for financial markets and hedge fund performance,
whilst trying to keep the Company as fully invested as possible in
the HMS Master Fund. The search for a competitively priced,
external credit facility was accelerated with the help of external
brokers and JPM and the Company was in the process of negotiating
final terms on a facility when our Investment Manager advised us
that they were going to re-focus their business to invest in
Credit.
The change in investment strategy required the Committee to
undertake a due diligence exercise which involved analysing the
track records of the component strategies in the HMS Master Fund
and Underlying Fund, reviewing the investor reports and financial
statements since the inception of the Underlying Fund and
interviewing key members of the Investment and Risk teams at
Highbridge. This was followed up by a site visit to London at the
end of the year, where the Board met the Chief Operations Officer
in person and members of the Investment, Risk, IT and Compliance
teams via a video conference link.
The Risk Committee reviewed the Investment Manager's policy on
position sizing following losses in an activist position during the
final quarter and took comfort from the fact that positions in
names that are widely held by the hedge fund community will be
subject to more rigorous sizing limits.
The Risk Committee concluded that Highbridge's decision to focus
exclusively on Credit and Convertible bonds was a sensible
strategy, given the track record of the team and that the firm had
retained key staff in the operations, compliance and IT teams.
The Risk Committee was discontinued in the final quarter of 2019
as the Board decided to merge the meetings of the Committee into
the main board meetings of the Company as part of a cost reduction
programme following a reduction in the Company's asset base. As all
the Board members were also members of the Committee the Company
will enjoy the same level of oversight but without the expense of
holding separate committee meetings and with a reduced fixed cost
due to a smaller Board whose members have all agreed to waive part
of their annual fees until the Company achieves its target
size.
Paul Le Page
Director
24 April 2020
Audit Committee Report
In accordance with the AIC Code, an Audit Committee has been
established and its membership and terms of reference are available
on the Company's website. In the opinion of the Board, the
constitution, terms of reference and activities of the Audit
Committee meet all the requirements of the AIC Code, save that the
Company does not maintain an internal audit function, and that the
Chairman of the Company was a member of the Committee as the Board
considers that he was independent on appointment and remains so. He
is a qualified accountant, has considerable experience gained in
other roles of financial reporting and control for investment
funds, and is consequently a valuable member of the Committee.
The Board sought to ensure that all areas of risk and control
were addressed by either that Committee or the Audit Committee.
Consequently, the terms of reference of each Committee made the
division of responsibilities between them clear. The Audit
Committee is responsible for monitoring the effectiveness of the
controls and systems in place to address, inter alia, the risks of
loss or misappropriation of assets, misstatement of liabilities or
failure of financial reporting systems or processes, including
valuation reporting and processes.
The Audit Committee also examines the remuneration and
engagement of the auditor, PricewaterhouseCoopers CI LLP ("PwC"),
as well as assessing their independence and any non-audit services
provided by them. The external audit contract was last tendered in
2016 (being ten years from the initial appointment of the previous
auditor), at which time PwC were first appointed. As a result, the
Company does not intend to tender the audit service in the near
future. The Audit Committee will continue to monitor the
performance of the auditor with the aim of ensuring a high quality
and effective audit.
Each year the Board examines the Audit Committee's performance
and effectiveness, and also ensures that its tasks and processes
remain appropriate. Key areas covered include the clarity of the
Audit Committee's role and responsibilities, the balance of skills
among its members and the effectiveness of the reporting of its
work to the Board. The Board is satisfied that all members of the
Audit Committee have relevant financial experience and knowledge
and that such knowledge remains up to date. Overall the Board
considered the Audit Committee had the right composition in terms
of expertise and has effectively undertaken its activities and
reported them to the Board during the year.
Membership
The current Chairman of the Audit Committee is Steve Le Page,
who became Chairman on his appointment to the Board on 3 June 2014.
As a result of the 2018 FRC code of Corporate Governance, Vic
Holmes resigned from the Audit Committee during 2018, but re-joined
it when the AIC persuaded the FRC that chairmen of investment
companies could continue to be members of Audit Committees. Paul Le
Page joined the Committee on 1 May 2018. Sarita Keen resigned from
the Board on 31 October 2019. The Committee remains of the view
that its reduced membership remains adequate in both number and
skills to fulfil its responsibilities.
Key Activities of the Audit Committee
In the period since the last Audit Committee report, the key
activities of the Committee have been -
-- Monitoring and assessing the financial systems and controls
operated by the Company's key service providers;
-- Overseeing the preparation and publication of, and giving
appropriate advice to the Board in respect of, the interim report
for the six months ended 30 June 2019 and the current annual report
for the year ended 31 December 2019; and
-- Monitoring and assessing the external auditor.
Each of these key activities is covered in more detail in the
following sections.
Financial Systems and Controls Operated by Service Providers
In common with most investment funds, the Company is reliant on
the systems, processes and controls operated by its service
providers. Throughout the year, the Committee is alert to any
indication that service providers may not be performing as
expected, such as inaccurate or delayed information, shareholder
feedback and the level and standard of interaction between service
providers. In so doing the Committee uses its collective knowledge
of how other entities are serviced as well as their own experience
from previous roles and with other service providers.
In addition, the Committee has reviewed the third party controls
reports (ISAE 3402 or equivalent) provided by both the current and
previous administrator of the Company and the administrator of HMS
Master Fund and the Underlying Fund. At the time of selection and
change of administrator the Committee Chair was closely involved in
assessing the systems and controls of the selected
administrator.
In December 2019, the Board visited Highbridge in London, to
discuss, inter alia, their investment processes and activities and
their possible impact on the Company, as well as the processes and
controls around the Underlying Fund and the winding up of MSF Corp.
The Chief Operating Officer of Highbridge was in London from New
York at the time, and other senior Highbridge personnel from New
York were interviewed by the Board via videoconference. Of
particular relevance to the activities of this Committee were the
discussions concerning the monitoring, by the boards of HMS Master
Fund and the Underlying Fund, of the performance and effectiveness
of their auditor and of the valuation systems operated by their
administrator.
On the basis of the ongoing monitoring of the Company's service
providers described above, the Committee is satisfied that the
Company's reliance on service providers during 2019 was not
misplaced and that the systems of internal control operated on the
Company's behalf, both during the calendar year 2019 and currently,
should reasonably prevent material error or misstatement of
financial information.
Preparation of Interim and Annual Reports
Prior to each reporting period end, the Committee met with the
Secretary and Administrator, and also with the auditor prior to the
annual reporting date. As Chairman, I also met with each of these
parties separately. The primary purpose of all of these meetings
was to consider the timetable for production of the reports, to
review the proposed scope of the external audit of the annual
report, and the arrangements for cooperation between the Company's
service providers. The Company's key risks, principal accounting
policies and significant areas of judgment or estimation (all as
disclosed elsewhere in this annual report) were also considered for
appropriateness and completeness. As a result of these meetings the
Committee was able to conclude that the annual report production
process had been properly prepared for and planned.
The Committee reviewed the draft interim and annual reports, in
detail, for compliance with International Financial Reporting
Standards (as adopted by the European Union) and applicable laws,
regulations, and corporate governance requirements, and also
reconsidered the key risks, principal accounting policies and
significant areas of judgment or estimation to ensure the
disclosure of these items and their application in the reports
remained appropriate. This review and reconsideration included
further meetings with the auditor and the Secretary and
Administrator. It also included certain activities connected with
the review of service providers, as detailed above.
The significant issues which the Committee considered in
relation to these Financial Statements, in addition to those set
out elsewhere in this section, were the existence and valuation of
the Company's investment holdings. Existence was verified by
obtaining direct confirmation of the holdings. The price at which
each investment is valued was also confirmed directly in this way.
As explained elsewhere (see Note 2), at the time of approving the
Financial Statements the most recently available NAV for AllBlue
and AllBlue Leveraged was as at 31 July 2018, which, in the absence
of any other information, the Directors have chosen to use the 31
July 2018 NAV less any distributions received as their best
estimate of the fair value of those interests (refer to note 8 for
further information on distributions). 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.
In addition, the Committee considered the results of the service
provider monitoring referred to above and also reviewed the cash
and valuation movements post year end. In the case of the
investment into TCF Feeder and MSF Corp, this includes coterminous
audited financial statements. The Committee concluded that the
investments existed and were properly valued in accordance with the
accounting policy of the Company.
Having carried out the activities set out above the Committee
concluded that the Financial Statements were fairly stated. The
Committee then read the entire annual report for consistency both
internally and with their detailed knowledge of the Company
throughout the year, and also considered whether it was as clear
and as concise as possible. We then considered the information
needs of the likely users of the annual report and whether they
were met. Our conclusion was that, taken as a whole, the annual
report is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's
performance, business model and strategy.
Finally, in respect of the annual report, the Committee
considered the regular monitoring of the Company's cash position
carried out by the Board, together with a cash forecast for the
period until 30 April 2021. The principal uncertainty involved in
the forecasting of the Company's cash requirements is the level at
which cash will be utilised in support of any on market buyback of
Shares or any quarterly tender offer to shareholders, which may be
proposed by the Directors in their sole discretion. The Committee
considers that the uncertainty created by the requirement to hold a
discontinuation vote if the Company does not have at least GBP80
million in net assets by 31 December 2020 would not have a material
impact on the Company's financial position if it were to
crystallise. The Committee is satisfied that with the level of cash
held, the regular monitoring by the Board and the liquidity of the
Company's investments, it is appropriate to prepare the Financial
Statements on a going concern basis.
External Auditor
As noted above members of the Committee have met with the
auditor on several occasions and this has given us the opportunity
to assess the quality of the people involved in our audit and of
the content and relevance of their presentations. During our
meetings with them we considered their risk assessment, planned
responses and general approach as well as their actual delivery
against plan, and we separately discussed with our Administrator
the degree of challenge they experienced from the auditor. The
Committee notes that the majority of the Company's investments are
also audited by a separate PwC network firm and in the Committee's
opinion this enhances the effectiveness of the audit. We concluded
that the external audit process was appropriate to the Company's
circumstances and likely to prove effective.
The auditor does not provide any regular non-audit services to
the Company, and it is the Committee's expectation that this
situation will continue. The Committee has a formal policy
concerning non-audit services, detailed on the Company's website,
should the need arise.
The Committee has also considered all the other aspects of
auditor independence set out in the AIC Code and in the Ethical
Standards applicable to our auditor, at both the planning and final
delivery stages of the audit. We note that PwC is also the auditor
to TCF Feeder and MSF Corp and to certain other structures managed
or advised by Highbridge and/or JPMAM. We have carefully considered
whether these other audit relationships might impinge upon the
independence of our auditor and have concluded that any perceived
risk in this respect is adequately safeguarded against.
The Committee having concluded that the external audit is
effective and that the auditor is independent and competent has
recommended to the Board that a resolution to reappoint
PricewaterhouseCoopers CI LLP be put to the forthcoming AGM of the
Company.
Steve Le Page
Chairman of the Audit Committee
24 April 2020
Statement of Directors' Responsibilities
The Directors are required to prepare Financial Statements for
each Financial Year which give a true and fair view of the state of
affairs of the Company as at the end of the Financial Year and of
the profit or loss for that year. In preparing those Financial
Statements, the Directors are required to:
-- Ensure that the Financial Statements, taken as a whole, are
fair, balanced and understandable and provide the information
necessary for a shareholder to assess the Company's performance,
business model and strategy;
-- Select suitable accounting policies and apply them consistently;
-- Make judgements and estimates that are reasonable and prudent;
-- State whether applicable accounting standards have been
followed subject to any material departures discussed and explained
in the Annual Report and Audited Financial Statements; and
-- Prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and to enable them to ensure that
the Financial Statements have been properly prepared in accordance
with the Law. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the Annual
Report and Audited Financial Statements include the information
required by the Listing Rules and the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority (together
"the Rules"). They are also responsible for ensuring that the
Company complies with the provisions of the Rules which, with
regard to corporate governance, require the Company to disclose how
it has applied the principles, and complied with the provisions, of
the corporate governance code applicable to the Company.
Responsibility Statement
The Board of Directors, jointly and severally confirm that, to
the best of their knowledge:
-- This report includes a fair review of the development and
performance of the business and the position of the Company
together with a description of the principal risks and
uncertainties that the Company faces;
-- The Financial Statements, prepared in accordance with
International Financial Reporting Standards as adopted by the EU,
give a true and fair view of the financial position and profits of
the Company;
-- The Annual Report and Audited Financial Statements taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy; and
-- The Annual Report and Audited Financial Statements include
the information required by the UK Listing Authority for ensuring
that the Company complies with the provisions of the Listing Rules
and the Disclosure Guidance and Transparency Rules of the UK
Listing Authority, with regard to corporate governance, require the
Company to disclose how it has applied the principles, and complied
with the provisions, of the corporate governance code applicable to
the Company.
By order of the Board
Vic Holmes
Director
24 April 2020
Independent Auditor's Report
Independent Auditor's Report to the Members of Highbridge
Tactical Credit Fund Limited (Formerly known as Highbridge
Multi-Strategy Fund Limited)
Report on the audit of the financial statements
_________________________________________________________________________
Our opinion
In our opinion, the financial statements give a true and fair
view of the financial position of Highbridge Tactical Credit Fund
Limited (the "Company") as at 31 December 2019, and of its
financial performance and its cash flows for the year then ended in
accordance with International Financial Reporting Standards as
adopted by the European Union and have been properly prepared in
accordance with the requirements of The Companies (Guernsey) Law,
2008.
What we have audited
The Company's financial statements comprise:
-- the statement of financial position as at 31 December 2019;
-- the statement of comprehensive income for the year then ended;
-- the statement of changes in shareholders' equity for the year then ended;
-- the statement of cash flows for the year then ended; and
-- the notes to the financial statements, which include a
description of the significant accounting policies.
_________________________________________________________________________
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing ("ISAs"). Our responsibilities under those
standards are further described in the Auditor's responsibilities
for the audit of the financial statements section of our
report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements of the Company, as required by the Crown Dependencies'
Audit Rules and Guidance , and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We are also
independent in accordance with SEC Independence Rules.
_________________________________________________________________________
Material uncertainty related to going concern
We draw attention to the going concern disclosures in the
Corporate Governance Statement and to the basis of preparation
disclosures in note 1 to the financial statements. These
disclosures confirm that if the Company's published unaudited net
asset value as at 31 December 2020 is less than GBP80 million, the
directors are required to put a discontinuance resolution to
shareholders proposing that the Company ceases to continue in its
current form. If the discontinuance resolution is passed, the
directors are required to commence proceedings to enter the Company
into a managed wind down in accordance with the terms set out in
its Articles. Therefore, a material uncertainty exists that may
cast significant doubt on the Company's ability to continue as a
going concern. Our opinion is not modified in respect of this
matter.
Our audit approach
Overview
Materiality
* Overall Company materiality was GBP0.5 million (2018:
GBP2.3 million) which represents 1% of net assets.
-----------------------------------------------------------------------
Audit scope
* The Company is a standalone investment fund based in
Guernsey which engages Highbridge Capital Management
LLC (the "Investment Manager") to manage its assets.
* We conducted our audit of the financial statements
from information provided by Praxis Fund Services
Limited (the "Administrator") to whom the board of
directors has delegated the provision of certain
administrative functions.
* We conducted our audit work in Guernsey.
-----------------------------------------------------------------------
Key audit matters
* Valuation of investments
* Material uncertainty related to going concern
* Directors' consideration of the potential impact of
COVID-19
-----------------------------------------------------------------------
Audit scope
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we considered where the directors made
subjective judgements; for example, in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all
of our audits, we also addressed the risk of management override of
internal controls, including among other matters, consideration of
whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
We tailored the scope of our audit in order to perform
sufficient work to enable us to provide an opinion on the financial
statements as a whole, taking into account the structure of the
Company, the accounting processes and controls, and the industry in
which the Company operates.
Materiality
The scope of our audit was influenced by our application of
materiality. An audit is designed to obtain reasonable assurance
whether the financial statements are free from material
misstatement. Misstatements may arise due to fraud or error. They
are considered material if individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements.
Based on our professional judgement, we determined certain
quantitative thresholds for materiality, including the overall
Company materiality for the financial statements as a whole as set
out in the table below. These, together with qualitative
considerations, helped us to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to
evaluate the effect of misstatements, both individually and in
aggregate on the financial statements as a whole.
Overall Company materiality GBP0.5 million (2018: GBP2.3
million)
How we determined it 1% of net assets (2018: 1% of
net assets)
--------------------------------
Rationale for the materiality We believe that net assets is
benchmark the most appropriate benchmark
because this is the key metric
of interest to investors. It
is also a generally accepted
measure used for companies in
this industry.
--------------------------------
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above GBP24,500 (2018:
GBP113,000), as well as misstatements below that amount that, in
our view, warranted reporting for qualitative reasons.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in
the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
In addition to the matters described in the material uncertainty
related to going concern section, we have determined the matters
described below to be the key audit matters to be communicated in
our report.
Key audit matter How our audit addressed the Key
audit matter
----------------------------------------- ------------------------------------------------------------------
Valuation of investments
The investment portfolio at the * The internal control environment at the Administrator
year end was valued at GBP65.3 over the valuation of the investment portfolio and
million (2018: GBP228.6 million) the production of the net asset value for the Company
and principally comprised the was understood and evaluated through the examination
investments in Highbridge Tactical of a controls report opined upon by an independent
Credit Fund, Ltd. of GBP35.6 audit firm.
million (2018: GBPnil) and the
remaining investment in Highbridge
Multi-Strategy Fund Corporation
of GBP26.3 million (2018: GBP224.1 * We assessed the accounting policy for investment
million) together with the legacy valuation for compliance with accounting standards,
investment in the AllBlue Funds performed testing to check that the investment
of GBP3.4 million (2018: GBP4.5 valuation had been accounted for in accordance with
million). Please see note 8 to the stated accounting policy and determined that the
the financial statements. accounting policy complied with accounting standards
We focussed on the valuation and had been consistently applied.
of the investment portfolio because
investments represent the principal
element of the net asset value
as disclosed on the statement * We audited management's reconciliation of the
of financial position. Company's valuation of the investment in Highbridge
The AllBlue Funds are categorised Tactical Credit Fund, Ltd. to the audited financial
as level 3 investments under statements of Highbridge Tactical Credit Fund, Ltd.
the IFRS 13 fair value hierarchy as at 31 December 2019.
and as such we identified an
increased level of inherent uncertainty
associated with their valuation.
As disclosed in the Audit Committee * We audited management's reconciliation of the
Report and in notes 2 and 8 to Company's valuation of the investment in Highbridge
the financial statements, co-terminus Multi-Strategy Fund Corporation to the audited
capital statement information financial statements of Highbridge Multi-Strategy
has not been made available by Fund Corporation as at 31 December 2019.
Deloitte, as liquidators, pertaining
to the Company's investment in
the AllBlue Funds as at 31 December
2019. The directors have therefore * No co-terminus financial information was available as
elected to present the year end at 31 December 2019 for the positions held in the
valuation of the AllBlue Funds AllBlue Funds, therefore our audit work focused on
on the basis of an internally the judgements exercised by the directors to value
generated directors' valuation, these positions as at the year end. We considered the
utilising the latest reported GBP0.2 million net exposure of the Company to the
audited financial statement information AllBlue Funds in the context of our overall
for the AllBlue Funds as at 31 materiality of GBP0.5 million and examined the most
July 2018 less proceeds received recently available information in respect of the
during the year. AllBlue Funds issued on 10 October 2019 for the
period to 10 July 2019 which we independently
received from Deloitte as the Liquidators.
No misstatements were identified
which required reporting to those
charged with governance.
----------------------------------------- ------------------------------------------------------------------
Key audit matter How our audit addressed the Key
audit matter
--------------------------------------- -----------------------------------------------------------------------------
Directors' consideration of the In assessing the directors' consideration
potential impact of COVID-19 of the potential impact of COVID-19,
The directors have considered we have undertaken the following
the potential impact of the audit procedures:
non-adjusting * We obtained from the directors their latest
post balance sheet events that documentation that supports their assessments and
have been caused by the pandemic, conclusions with respect to the statements of going
COVID-19, on the current and concern and viability respectively.
future operations of the Company.
In doing so, the directors have
made estimates and judgements * We discussed with the directors their critical
that are critical to the outcomes estimates and judgements applied in their latest
of these considerations with documentation so we could understand and challenge
a focus on the Company's ability the rationale for the factors incorporated and the
to continue as a going concern sensitivities applied as a result of COVID-19.
for a period of at least 12 months
from the date of approval of
these financial statements. * We inspected the latest documentation provided to
As a result of the impact of evaluate the consistency with our understanding of
COVID-19 on the wider financial the operations of the Company, the investment
markets and the Company's share portfolio and with any market commentary already made
price, we have determined the by the Investment Manager.
directors' consideration of the
potential impact of COVID-19
(including their associated estimates * We performed stress testing to confirm the directors
and judgements) to be a key audit had considered adverse circumstances in their
matter. documentation of the potential impact of COVID-19 on
the Company.
* In discussing, challenging and evaluating the
estimates and judgements made by the directors in
their impact assessments, we noted the following
factors that were considered to be fundamental in
their consideration of the potential impact of
COVID-19 on the current and future operations of the
Company and which support the statements of going
concern and viability respectively:
o The Company is not leveraged,
and there are currently no plans
to enter into any borrowing facilities;
o The directors have analysed
and are satisfied with the business
continuity plans of all key service
providers as part of their COVID-19
operational resilience review;
--------------------------------------- -----------------------------------------------------------------------------
Key audit matter How our audit addressed the Key
audit matter
--------------------------------------- -----------------------------------------------------------------------------
Directors' consideration of o The Company operates as a feeder
the potential impact of COVID-19 fund and whilst some industry
sectors invested into via Highbridge
Tactical Credit Fund, Ltd and
its subsequent investment as
a feeder fund into Highbridge
Tactical Credit Master Fund.
L.P. will have a higher degree
of impact relative to other industry
sectors, the investment portfolio
held by Highbridge Tactical Credit
Master Fund, L.P. is considered
to be diverse; and
o Subsequent to the year end
and since the outbreak of COVID-19,
the Company has received further
distributions from Highbridge
Multi-Strategy Fund Corporation
of GBP5.2 million, which reduces
the level of legacy investment
exposure which is subject to
current market volatility as
this investment position is progressively
reduced.
* We considered the appropriateness of the disclosures
by the directors in respect of the potential impact
of COVID-19, a non-adjusting post balance sheet
event.
Based on our procedures and the
information available at the
time of the approval of the financial
statements, we have not identified
any matters to report with respect
to the directors' consideration
of the impact of COVID-19 on
the current and future operations
of the Company.
--------------------------------------- -----------------------------------------------------------------------------
Other information
The directors are responsible for the other information. The
other information comprises all the information included in the
Annual Report and Financial Statements (the "Annual Report") but
does not include the financial statements and our auditor's report
thereon.
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon. In connection with our audit of the financial statements,
our responsibility is to read the other information identified
above and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
________________________________________________________________________________
Responsibilities of the directors for the financial
statements
The directors are responsible for the preparation of financial
statements that give a true and fair view in accordance with
International Financial Reporting Standards as adopted by the
European Union, the requirements of Guernsey law and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
________________________________________________________________________________
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
-- Conclude on the appropriateness of the directors' use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company's
ability to continue as a going concern over a period of at least
twelve months from the date of approval of the financial
statements. If we conclude that a material uncertainty exists, we
are required to draw attention in our auditor's report to the
related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our
auditor's report. However, future events or conditions may cause
the Company to cease to continue as a going concern.
-- Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We describe
these matters in our auditor's report unless law or regulation
precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
________________________________________________________________________________
Use of this report
This independent auditor's report, including the opinions, has
been prepared for and only for the members as a body in accordance
with Section 262 of The Companies (Guernsey) Law, 2008 and for no
other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
________________________________________________________________________________
Report on other legal and regulatory requirements
_________________________________________________________________________
Company Law exception reporting
Under The Companies (Guernsey) Law, 2008 we are required to
report to you if, in our opinion:
-- we have not received all the information and explanations we require for our audit;
-- proper accounting records have not been kept; or
-- the financial statements are not in agreement with the accounting records.
We have no exceptions to report arising from this
responsibility.
Listing Rules of the Financial Conduct Authority (FCA)
The Company has reported compliance against the 2019 AIC Code of
Corporate Governance (the "Code") which has been endorsed by the UK
Financial Reporting Council as being consistent with the UK
Corporate Governance Code for the purposes of meeting the Company's
obligations, as an investment company, under the Listing Rules of
the FCA.
Aside from the impact of the matters disclosed in the material
uncertainty related to going concern section, we have nothing
material to add or draw attention to in respect of the following
matters which we have reviewed based on the requirements of the
Listing Rules of the FCA:
-- The directors' confirmation that they have carried out a
robust assessment of the principal and emerging risks facing the
Company.
-- The disclosures that describe those risks and explain how
they are being managed or mitigated.
-- The directors' explanation as to how they have assessed the
prospects of the Company, over what period they have done so and
why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any
necessary qualifications or assumptions.
We have nothing to report having performed a review of the
directors' statement that they have carried out a robust assessment
of the principal and emerging risks facing the Company and the
directors' statement in relation to the longer-term viability of
the Company. Our review was substantially less in scope than an
audit and only consisted of making inquiries and considering the
directors' process supporting their statements; checking that the
statements are in alignment with the relevant provisions of the
Code; and considering whether the statements are consistent with
the knowledge and understanding of the Company and its environment
obtained in the course of the audit.
Additionally, we have nothing to report in respect of our
responsibility to report when:
-- The directors' statement relating to Going Concern in
accordance with Listing Rule 9.8.6R(3) is materially inconsistent
with our knowledge obtained in the audit.
-- The statement given by the directors that they consider the
Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the
members to assess the Company's position and performance, business
model and strategy is materially inconsistent with our knowledge of
the Company obtained in the course of performing our audit.
-- The section of the Annual Report describing the work of the
Audit Committee does not appropriately address matters communicated
by us to the Audit Committee.
-- The directors' statement relating to the Company's compliance
with the Code does not properly disclose a departure from a
relevant provision of the Code specified, under the Listing Rules,
for review by the auditors.
John Roche
For and on behalf of PricewaterhouseCoopers CI LLP
Chartered Accountants and Recognised Auditor
Guernsey, Channel Islands
24 April 2020
a. The maintenance and integrity of the Highbridge Tactical
Credit Fund Limited website is the responsibility of the directors;
the work carried out by the auditors does not involve consideration
of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the
financial statements since they were initially presented on the
website.
b. Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Statement of Comprehensive Income
FOR THE YEARED 31 DECEMBER 2019
31 December 2019 31 December 2018
Notes GBP GBP
---------------- ----------------
Net losses on non-current financial assets at fair value through profit
or loss 8 (150,626) (4,784,583)
Net (losses)/gains on current financial assets at fair value through
profit or loss 8 (1,806,608) 884,640
Net gains/(losses) on current financial liabilities at fair value through
profit or loss 9 3,085,373 (698,916)
Interest income received 6,782 70,710
(Losses)/gains on foreign exchange (92,374) 13,849
Operating expenses 4 (595,326) (643,988)
---------------- ----------------
Profit/(loss) and total comprehensive income/(loss) for the year 447,221 (5,158,288)
---------------- ----------------
Pence (GBP) Pence (GBP)
Earning/(loss) per share - basic and diluted 6 0.59 (5.05)
In arriving at the results for the Financial Year, all amounts
above relate to continuing operations.
There is no other comprehensive income for the year other than
as disclosed above.
The notes form an integral part of these Financial
Statements.
Statement of Financial Position
31 December 31 December
AS AT 31 DECEMBER 2019 2019 2018
Non-current assets Notes GBP GBP
---------------- -----------------
Unquoted financial assets designated
as at fair value through profit
or loss 8 35,581,874 224,077,752
Current assets
Unquoted financial assets designated
as at fair value through profit
or loss 8 29,758,245 4,510,312
Investment distribution receivable 10 26,354,386 -
Cash and cash equivalents 2,425,359 1,783,224
Prepayments and receivables 240,037 29,802
---------------- -----------------
58,778,027 6,323,338
Current liabilities
Unquoted financial liabilities
designated as at fair value through
profit or loss 9 44,431,149 3,315,422
Due to redeemed shareholders 803,781 -
Sundry accruals and payables 90,534 304,740
---------------- -----------------
45,325,464 3,620,162
Net assets 49,034,437 226,780,928
---------------- -----------------
Equity
Share Capital 11 - -
Reserves 12&13 49,034,437 226,780,928
---------------- -----------------
Shareholders' equity 13 49,034,437 226,780,928
---------------- -----------------
Shares in issue 11 23,093,530 105,391,869
NAV per share 15 GBP2.1233 GBP2.1518
The Financial Statements and accompanying notes were approved
and authorised for issue by the Board of Directors on 24 April 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.
Statement of Changes in Shareholders' Equity
FOR THE YEARED 31 DECEMBER 2019
Share Capital Reserves Total
Note GBP GBP GBP
-------------- -------------- --------------
Opening balance - 226,780,928 226,780,928
Sales of Shares from Treasury 12 - 3,250,000 3,250,000
On-market purchase of ordinary
shares 12 - (3,060,668) (3,060,668)
Share redemptions - (178,383,044) (178,383,044)
Profit and total comprehensive
income for the year - 447,221 447,221
-------------- -------------- --------------
Balance at 31 December
2019 - 49,034,437 49,034,437
-------------- -------------- --------------
FOR THE YEARED 31 DECEMBER 2018
Share Capital Reserves Total
Note GBP GBP GBP
-------------- ------------ ------------
Opening balance - 214,156,099 214,156,099
Sales of Shares from Treasury 12 - 18,814,352 18,814,352
On-market purchase of ordinary
shares 12 - (1,031,235) (1,031,235)
Loss and total comprehensive
income for the year - (5,158,288) (5,158,288)
-------------- ------------ ------------
Balance at 31 December
2018 - 226,780,928 226,780,928
-------------- ------------ ------------
The notes form an integral part of these Financial
Statements.
Statement of Cash flows
FOR THE YEARED 31 DECEMBER 2019 31 December 31 December
2019 2018
Note GBP GBP
------------------------------------------ ---- ------------- ------------
Cash flows from operating activities
Profit/(loss) and total comprehensive
income for the year 447,221 (5,158,288)
Unrealised losses on financial assets
at fair value through profit or
loss 8 2,915,738 5,565,696
Unrealised gains on financial liabilities
at fair value through profit or
loss 9 (3,085,373) (96,956)
Realised losses on sales of financial
liabilities at fair value through
profit or loss 9 - 795,872
Realised gains on sales of financial
assets at fair value through profit
or loss 8 (958,504) (1,665,753)
Purchase of financial assets - (25,300,000)
Proceeds from sale of financial
assets 138,186,326 3,786,982
Interest income (6,782) (70,710)
(Decrease)/increase in sundry accruals
and payables (124,008) 230,445
Increase in prepayments and receivables (210,235) (3,837)
AllBlue cost reallocation (33,198) -
Net cash flow generated from/(used
in) operating activities 137,131,185 (21,916,549)
------------- ------------
Cash flows from investing activities
Interest received 6,782 70,710
------------- ------------
Net cashflow generated from investing
activities 6,782 70,710
------------- ------------
Cash flows from financing activities
Sales of Shares from Treasury - 18,814,352
On-market purchase of shares 12 (3,060,668) (1,031,235)
Payments to redeemed shareholders (133,435,164) (17,793,656)
------------- ------------
Net cashflow used in financing activities (136,495,832) (10,539)
------------- ------------
Cash and cash equivalents at beginning
of year 1,783,224 23,639,602
Increase/(decrease) in cash and
cash equivalents 642,135 (21,856,378)
------------- ------------
Cash and cash equivalents at end
of year 2,425,359 1,783,224
The notes form an integral part of these Financial
Statements.
Notes to the Financial Statements
1. Accounting policies
(a) Basis of preparation
The Financial Statements have been prepared in conformity with
International Financial Reporting Standards as adopted by the
European Union ("IFRS") and applicable Guernsey law. The Financial
Statements have been prepared on historical cost basis except for
the measurement at fair value of financial assets and financial
liabilities designated at fair value through profit or loss.
For a detailed discussion about the Company's performance and
financial position please refer to the Chairman's Report and
Investment Manager's Report.
Items included in the Financial Statements are measured using
the currency of the primary economic environment in which the
Company operates (the "Functional Currency"). The functional
currency is Sterling, The Company has also adopted Sterling as its
presentation currency.
The principle accounting policies applied in the preparation of
these Financial Statements are set out below. These policies have
been consistently applied to all years presented, unless otherwise
stated.
Assets and liabilities are classified as current if they are
expected to be realised within 12 months of the Statement of
Financial Position date. Those not expected to be realised within
12 months of the Statement of Financial Position date will be
classified as non-current.
(b) Going concern
The Board has assessed the Company's financial position as at 31
December 2019 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.
(c) Taxation
The Company has been granted exemption under the Income Tax
(Exempt Bodies) (Guernsey) Ordinance, 1989 from Guernsey Income
Tax, and is charged an annual fee of GBP1,200.
(d) Expenses
All expenses are accounted for on an accruals basis.
(e) Interest income
Interest income is accounted for on an accruals basis.
(f) Cash and cash equivalents
Cash and cash equivalents are defined as call deposits, money
market funds, short dated bonds, short term deposits and
investments have a maximum three month maturity period and subject
to insignificant risk of changes in value, together with bank
overdrafts. For the purposes of the Statement of Cash Flows, cash
and cash equivalents consists of cash, deposits and investments
held in JPMorgan Liquidity funds.
(g) Foreign currency translation
The Financial Statements are presented in Sterling, which is the
Company's functional and presentation currency. Operating expenses
in foreign currencies are initially recorded at the functional
currency rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are
translated at the functional currency rate of exchange ruling at
the reporting date. All differences on these foreign currency
translations are taken to the Statement of Comprehensive
Income.
(h) Segment information
For management purposes, the Company is organised into one
business unit, and hence no separate segment information has been
presented.
(i) Shares
The Shares are initially recognised on the date of issue at the
net of issue proceeds and share issue costs. The Shares are
classified and accounted for as equity, with all payments for share
buybacks, or receipts from share issues, being taken to
Reserves.
(j) Financial Assets
The classification depends on the purpose for which the
investments were acquired. The Company's financial assets consist
of unquoted financial assets held at fair value through profit or
loss and receivables. Unquoted financial assets include the
investments from which the Company is in the process of redeeming.
Please refer to Note 1 (k) for further detail.
Classification of financial assets
The Company classified financial assets into the following
categories.
Financial assets at amortised cost:
Cash and cash equivalents
Prepayments and receivables
Investment distributions receivable
Financial assets at fair value through profit or loss:
Unquoted financial assets.
IFRS 9 Financial Instruments requires the Company to measure and
recognise impairment on financial assets at amortised cost based on
Expected Credit Losses ("ECL").
The ECL impairment model requires the Company to account for
expected credit losses at initial recognition and changes to
expected credit losses at each reporting date to reflect changes in
credit risk since initial recognition.
At 31 December 2019, the Company had recognised no expected
credit impairment provisions (31 December 2018: none).
The Investment distribution receivable on the Statement of
Financial Position as at 31 December 2019 was held at the initial
transaction price. The Investment distribution receivable was
received in full on 8 January 2020.
Purchases and sales of financial assets are recognised on the
trade-date, the date on which the Company commits to purchase or
sell the asset. Financial assets are derecognised when the rights
to receive cash flows from the financial assets have expired or
have been transferred and the Company has transferred substantially
all the risks and rewards of ownership. Financial assets (quoted
and unquoted) at fair value through profit or loss are initially
recognised at fair value. Subsequent to initial recognition,
financial assets at fair value through profit or loss are measured
at fair value. Gains and losses arising from changes in the fair
value of the 'financial assets at fair value through profit or
loss' category are presented in the Statement of Comprehensive
Income within net changes in fair value of financial assets at fair
value through profit or loss in the period in which they arise.
(k) Financial Liabilities (Redemption Liability)
Classification - The classification of financial liabilities at
initial recognition depends on the purpose for which the financial
liability was issued and its characteristics. The Company's
financial liabilities consist of either financial liabilities
measured at amortised cost (trade payables and other short-term
monetary liabilities) or financial liabilities measured at fair
value through profit or loss (the liabilities payable to previous
shareholders who have elected to exit the Company ("Redemption
Liability")). These latter liabilities are due to:
- Shareholders who elected to exit from the Company at the
original cash exit opportunity offered when Highbridge were
appointed Investment Manager in 2016;
- Persons who tendered their shares back to the Company at the
time of the Tender offer in October 2016;
- Persons who elected to exit from the Company at the First EGM on 16 August 2019;
- Persons who elected to exit from the Company at the Second EGM on 17 September 2019.
Please refer to Note 9 for further information. These
liabilities meet the following classification criteria of IFRS 9
for Fair Value Through Profit or Loss (FVTPL):
- Where designation as at FVTPL eliminates or significantly
reduces a measurement or recognition inconsistency ("accounting
mismatch") that would otherwise arise from measuring assets or
liabilities or recognising the gains and losses on them on
different bases.
These liabilities are not a static amount, but change as the
fair value (NAV) of the creditor interests in MSF Corp, AllBlue
Limited and AllBlue Leveraged funds change. Thus there would be a
mismatch if the liability is recorded at amortised cost whilst the
"matching" investment is at fair value.
Recognition and measurement - financial liabilities at fair
value through profit or loss are initially recognised at fair
value. Subsequent to initial recognition, financial liabilities at
fair value through profit or loss are measured at fair value. Gains
and losses arising from changes in the fair value of the 'financial
liabilities at fair value through profit or loss' category are
presented in the Statement of Comprehensive Income within net
changes in fair value of financial liabilities at fair value
through profit or loss in the period in which they arise.
2. Critical Accounting Judgements and Key Sources of Estimation
Uncertainty
In the application of the Company's accounting policies, the
Directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
The following are the critical judgements that the Directors have
made in the process of applying the Company's accounting policies
and that have the most significant effect on the amounts recognised
in the Financial Statements.
Fair value hierarchy classification
In determining the level within the fair value of financial
assets and financial liabilities hierarchy, set out in IFRS 13, the
Directors consider whether inputs to a fair value measurement are
observable, and significant to its measurement. This requires
judgement based on the facts and circumstances around the published
NAV of the underlying funds. The Directors consider the
availability of the NAV, at the reporting date, and whether
holdings would be redeemable at such a NAV with evidence of
redemptions at reporting date. They also consider whether
unobservable adjustments, such as liquidity discounts, have been
made by the Company. In the event there is any change in the above
factors, a transfer between fair value hierarchy levels will be
deemed to have occurred at the end of the period and would be
disclosed in Note 8.
The following are the critical estimates that the Directors have
made in the process of applying the Company's accounting policies
and that have the most significant effect on the amounts recognised
in the Financial Statements.
Valuation of investments
In order to assess the fair value of the unquoted non-current
and current investments, the NAV of the underlying investments in
the Underlying Fund, HMS Master Fund, AllBlue and AllBlue Leveraged
is taken into consideration. The Directors have considered the
circumstances surrounding the compulsory redemption of the
Company's investments in HMS Master Fund, AllBlue and AllBlue
Leveraged. The administrator of HMS Master Fund provides monthly
NAV updates. As explained elsewhere (see Note 8), as at the time of
preparation of these Financial Statements the most recently
available NAV for AllBlue and AllBlue Leveraged was as at 31 July
2018. The Directors have chosen to use the 31 July 2018 NAV less
any distributions received as their best estimate of the fair value
of those interests. The AllBlue and AllBlue Leveraged interests
attributable to the shareholders of the Company comprise a net
exposure of 0.45% of the Company's NAV, and the Company has
received back 99.55% of the published net asset value of its
holding in AllBlue and AllBlue Leveraged as at the 31 July
2018.
The Company's holdings in the Underlying Fund are realisable at
their NAV on quarterly dealing days. The Company has some practical
experience of realising such holdings, and the Directors have
considered carefully the circumstances of the Underlying Fund and
its history of meeting requests for realisations from other
investors and have judged that the NAV provided by the independent
administrator of the Underlying Fund is a fair estimation of the
fair value of the Company's holdings.
The Company's NAV is based on valuations of unquoted
investments. As described above, in calculating the NAV and the NAV
per Share of the Company, the Administrator relies on the NAVs
supplied by the administrators of the Underlying Fund, HMS Master
Fund and the liquidators of AllBlue and AllBlue Leveraged
investments. Those NAVs are themselves based on the NAV of the
various investments held by the Underlying Fund, HMS Master Fund,
AllBlue and AllBlue Leveraged.
Impairment of financial assets
IFRS 9 Financial Instruments requires the Company to measure and
recognise impairment on financial assets at amortised cost based on
Expected Credit Losses, replacing IAS 39's incurred loss model. See
note 14 on the assessment of impairment of financial assets.
3. Segmental Reporting
The Board has considered the requirements of IFRS 8 - "Operating
Segments". The Company has entered into an Investment Management
Agreement with the Investment Manager under which the Investment
Manager is responsible for the management of the Company's
investment portfolio, subject to the overall supervision of the
Board of Directors. The Board retains full responsibility to ensure
that the Investment Manager adheres to its mandate. Moreover, the
Board is fully responsible for the appointment and/or removal of
the Investment Manager. Accordingly, the Board is deemed to be the
"Chief Operating Decision Maker" of the Company. 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
31 December 31 December
2019 2018
GBP GBP
------------ ------------
Administration fees 130,942 112,967
Directors' remuneration (note 5) 186,881 228,000
Directors insurance 27,271 26,150
Registration fees 28,804 32,057
Audit fees 50,196 35,131
Legal and Professional fees 17,608 26,609
Other operating expenses 153,624 183,074
Total expenses for the year 595,326 643,988
5. Directors' Remuneration
31 December 31 December
2019 2018
GBP GBP
------------ ------------
Vic Holmes, Chairman 57,500 60,000
Steve Le Page 48,000 50,000
Paul Le Page (appointed 1 May 2018) 46,000 28,000
Sarita Keen (resigned 31 October
2019) 35,381 42,000
Paul Meader (resigned 31 December
2018) - 48,000
186,881 228,000
6. Earning/(loss) per Share
31 December 31 December
2019 2018
Profit/(loss) and total comprehensive
income for the year 447,221 (5,158,288)
The weighted average number of shares
in issue during the year 75,572,708 102,101,247
Pence (GBP) Pence (GBP)
------------------------ ------------------------
Earning/(loss) per share 0.59 (5.05)
7. 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 the other party in making financial or operational
decisions.
Transactions with related parties are made on terms equivalent
to those that prevail in an arm's length transaction.
In September 2019, JPMorgan Asset Management International
Limited ("JPMAM") an affiliate of Highbridge Capital Management,
LLC, subscribed for Shares totalling GBP3,250,000. The Company
issued out of treasury 1,500,046 new ordinary Sterling shares of no
par value in the Company at a price of 216.66 pence per Share to
JPMAM. This represents a total investment of GBP3,250,000, in
consideration for shares in MSF Corp, which later converted into
Class F Sterling shares of the TCF Feeder.
During the year, the Investment Manager reimbursed the Company
GBP241,563 in relation to costs for the First EGM and the Second
EGM.
Directors' remuneration is disclosed in Note 5.
8. Investments Designated at Fair Value through Profit or
Loss
31 December 31 December
2019 2018
GBP GBP
------------ ------------
Unquoted Financial Assets
Portfolio cost carried forward 52,650,677 212,969,637
Unrealised gains on financial assets
at fair value through profit or loss 12,689,442 15,618,427
------------ ------------
Valuation carried forward 65,340,119 228,588,064
Realised gains on sales and conversions
on current assets 958,504 1,665,753
Unrealised losses on non-current
assets (150,626) (4,784,583)
Unrealised losses on current assets (2,765,112) (781,113)
Net losses on financial assets at
fair value through profit or loss (1,957,234) (3,899,943)
------------ ------------
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 31
December 2019 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:
31 December 31 December
2019 2018
GBP GBP
------------ ------------
Financial assets at fair value
through profit or loss
Level 1 - -
Level 2 61,931,489 224,077,752
Level 3 3,408,630 4,510,312
------------ ------------
65,340,119 228,588,064
------------ ------------
31 December 31 December
2019 2018
GBP GBP
------------- ------------
Financial liabilities at fair
value through profit or loss
Level 1 - -
Level 2 (41,243,224) -
Level 3 (3,187,925) (3,315,422)
------------- ------------
(44,431,149) (3,315,422)
------------- ------------
Movements in the Company's Level 3 financial instruments during
the year were as follows:
Financial Assets Level 3 reconciliation 31 December 31 December
2019 2018
GBP GBP
------------ ------------
Balance at beginning of the year 4,510,312 7,365,264
Disposals (1,096,761) (3,786,982)
Net realised gains on valuation
for the year - 1,665,753
Movement in unrealised losses
on valuation (4,921) (733,723)
Balance at end of year 3,408,630 4,510,312
------------ ------------
Financial Liabilities Level 3 31 December 31 December
reconciliation 2019 2018
GBP GBP
------------ -------------
Balance at beginning of the year (3,315,422) (20,410,162)
Repayments 134,394 17,793,656
Net realised losses on valuation
for the year - (795,872)
Movement in unrealised (losses)/gains
on valuation (6,897) 96,956
( 3,315,422
Balance at end of year (3,187,925) )
------------ -------------
Return of Capital from MSF Corp
During the year, Highbridge Capital Management LLC, the
Investment Manager to the HMS Master Fund announced that the HMS
Master Fund would be wound down.
From the start of the program to 31 December 2019, the Company
has received redemption proceeds from the MSF Corp totalling
GBP137,089,564.
During January 2020, the Company received a further
GBP20,570,509 of redemption proceeds from MSF Corp.
Return of Capital from AllBlue and AllBlue Leveraged
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. GBP1,096,760 of redemption proceeds were received
during the year (GBP1,049,234 from the Sterling Share Class and
$47,526 from the US Dollar Share Class).
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 31 December
2019 2018
GBP GBP
-------------- -------------
Designated at fair value through
profit or loss at inception:
Balance at beginning of the year (3,315,422) (20,410,162)
Repayments 134,181,944 17,793,656
Realised losses on repayments - (795,872)
MSF Corp cash exit (178,383,044) -
Change in unrealised gains 3,085,373 96,956
-------------- -------------
(44,431,149) (3,315,422)
Other net changes in fair value
on financial liabilities at fair
value through profit or loss:
Realised losses - (795,872)
Change in unrealised gains 3,085,373 96,956
-------------- -------------
Total gains/(losses) 3,085,373 (698,916)
-------------- -------------
These liabilities represent the Redemption Liability, as defined
in Note 1 (k), and are designated as at fair value through profit
or loss for the reason explained in that note.
Please refer to Note 8 for the IFRS 13 Level 3
reconciliation.
10. Investment Distribution Receivable
As at 31 December 2019, redemption proceeds from MSF Corp of
GBP26,354,386 were due to the Company. During January 2020, the
Company received GBP20,570,509 in cash and during February 2020,
the Company received GBP5,783,876 of shares in TCF Feeder.
11. 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 2018 97,500,119
Purchase of own shares (497,000)
Sales of Shares from Treasury 8,388,750
Number of shares in issue (excluding Treasury Shares)
at 31 December 2018 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
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 31 December 2019 was
49,260,348 (2018: 131,627,733), of which 26,166,818 (2018:
26,235,864) Shares were held in treasury, and the total number of
shares in issue excluding treasury shares was 23,093,530 (2018:
105,391,869).
12. 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.
Note 31 December 31 December 2018
2019
GBP GBP
------------- -----------------
Capital and Reserves
Share capital 11 - -
Treasury shares (52,533,286) (52,722,618)
Reserves 13 101,567,723 279,503,546
Closing balance 49,034,437 226,780,928
------------- -----------------
31 December 31 December 2018
2019
GBP GBP
------------ -----------------
Treasury shares
Opening balance 52,722,618 70,505,735
Acquired during the year 3,060,668 1,031,235
Cancelled during the year (3,250,000) (18,814,352)
Closing balance 52,533,286 52,722,618
------------ -----------------
During the year ended 31 December 2019, the Company issued
1,500,046 shares (31 December 2018: 8,388,750) and the Company
bought back 1,431,000 sterling shares, at an average price of
GBP2.1388 (31 December 2018:497,000 sterling shares at an average
price of GBP2.0745).
13. Reserves
31 December
2019 31 December 2018
GBP GBP
-------------- -----------------
Opening balance 279,503,546 284,661,834
Comprehensive income/(loss)
attributable to shareholders 447,221 (5,158,288)
On-market purchase of ordinary (178,383,044) -
shares
Closing balance 101,567,723 279,503,546
-------------- -----------------
14. Financial Risk Management Objectives and Policies
The main risks arising from the Company's financial instruments
concern its holding in TCF Feeder as well as the investments in HMS
Master Fund, AllBlue and AllBlue Leveraged. The main risks
attaching to those investments are market risk, credit risk and
liquidity risk.
So far as the Company is concerned, the only risk over which the
Board can exert direct control is liquidity risk through its
ability to issue shares or to exercise redemption rights in TCF
Feeder for the purpose of meeting share buy backs and ongoing
expenses of the Company. However, redemptions are restricted to 25%
of the Company's holding in TCF Feeder on any quarterly redemption
date and there are various circumstances under which TCF Feeder can
further restrict redemptions. In addition, the Directors may only
issue shares if they are trading at a premium to NAV and to satisfy
market demand. Accordingly, since the change of investment policy
and the appointment of Highbridge as Investment Manager, the
Company has held a modest cash reserve to cover its running costs.
Additionally, proceeds available from its money market investments,
HMS Master Fund and the AllBlue and AllBlue Leveraged funds as well
as the possibility of redeeming from TCF Feeder enable the Company
to meet its liabilities as they fall due. Thereafter the Board
recognises that the Company has, via its holding of shares in TCF
Feeder an indirect exposure to the risks summarised below.
It must also be noted that there is little or nothing which the
Board can do to manage each of the following risks within TCF
Feeder or the investments in which TCF Feeder invests under the
current investment objective of the Company. With regard to the
recoverability of the investment in respect of the MSF Corp the
Company will remain a shareholder until all of the assets of the
HMS Master Fund have been liquidated. In respect to AllBlue and
AllBlue Leveraged funds, the Company is now reliant on the
liquidators of the BlueCrest funds to return the remaining capital
to investors.
Details of the Company's investment objective and policy are
given in Note 14 to the Financial Statements.
Market Risk
Price Risk
The success of the Company's activities will be affected by
general economic and market conditions, such as interest rates,
availability of credit, inflation rates, economic uncertainty,
changes in laws, trade barriers, currency exchange controls and
national and international political circumstances. These factors
may affect the level and volatility of securities' prices and the
liquidity of the TCF Feeder's investments. Volatility or
illiquidity could impair the TCF Feeder's profitability or result
in losses.
Price sensitivity
The Company invests substantially all its assets in TCF Feeder
and does not undertake any structural borrowing or hedging activity
at the Company level. Its performance, therefore, is principally
directly linked to the NAV of TCF Feeder, which invests solely in
the Underlying Fund. The Company also has a residual exposure of
approximately GBP6.0m to MSF Corp which is in the process of
winding up and a de-minimus exposure of approximately GBP0.2m to
AllBlue entities.
At 31 December 2019, if the NAV of the underlying investments
had been 10% higher/lower with all the other variables held
constant, the shareholders' equity as at 31 December 2019 would
have increased/decreased by GBP4.1m (31 December 2018:
increase/decrease of GBP22.5m) This change arises due to the net
increase/ decrease in the fair value of financial assets and
financial liabilities at fair value through profit or loss.
Currency Risk
The Company is not exposed directly to material foreign exchange
risk as the Company has a sterling functional currency and is
directly invested in sterling shares of TCF Feeder.
Interest Rate Risk
The prices of securities tend to be sensitive to interest rate
fluctuations. Unexpected fluctuations in interest rates could cause
the corresponding prices of long positions and short positions
adopted to move in directions which were not originally
anticipated. Generally, an increase in interest rates will increase
the carrying values of investments. However, the Company's
investments and liabilities designated as at fair value through
profit or loss are non interest bearing, and therefore are not
directly exposed to interest rate risk.
The Company's own cash balances are not materially exposed to
interest rate risk as cash and cash equivalents are held on
floating interest rate terms and the Company does not rely on
income from bank interest to meet day to day expenses.
Credit Risk
Credit risk is the risk that financial losses arise from the
failure of a customer or counterparty to meet its obligations under
a contract. Direct credit risk arises from cash and cash
equivalents which consists of cash held at banks and money market
accounts, money market funds, securities sold receivables (where
applicable) and other receivables. The Company only deposits money
with appropriately rated counterparties.
The nature of commercial arrangements made in the normal course
of business between many prime brokers and custodians means that in
the case of any one prime broker or custodian defaulting on its
obligations to the Underlying Fund, the effects of such a default
may have negative effects on other prime brokers with whom the
Underlying Fund deals. TCF Feeder and the Company may, therefore,
be exposed to systemic risk when the Underlying Fund deals with
prime brokers and custodians whose creditworthiness may be
interlinked.
The assets of the TCF Feeder may be pledged as margin with prime
brokers or other counterparties or held with prime brokers or
banks. In the event of the default of any of these prime brokers,
banks or counterparties, the Underlying Fund may not receive back
all or any of the assets pledged or held with the defaulting
party.
The Company measures credit risk and expected credit losses
using probability of default, exposure at default and loss given
default. The Board consider both historical analysis and forward
looking information in determining any expected credit loss. At 31
December 2019 and 31 December 2018, all other receivables
(excluding HMS Master Fund, AllBlue and AllBlue Leveraged), amounts
due from brokers, cash and short-term deposits are held with
counterparties with a credit rating of AA/Aa or higher and are due
to be settled within 1 week.
During January 2020, the Company received its second
dividend-in-kind distribution of GBP5.78m of new shares in TCF
Feeder and a further GBP20,570,509 of redemption proceeds from MSF
Corp.
The Board consider the probability of default to be close to
zero as the counterparties have a strong capacity to meet their
contractual obligations in the near term. As a result, no loss
allowance has been recognised based on 12-month expected credit
losses as any such impairment would be wholly insignificant to the
Company.
The maximum exposure to credit risk, excluding any credit
exposures in the HMS Master Fund, AllBlue and AllBlue Leveraged
before any credit enhancements at 31 December 2019 is the carrying
amount of the financial assets as set out below:
31 December 2019 31 December 2018
GBP GBP
----------------- -----------------
Cash at bank 2,309,078 219,977
Cash held in money market
fund 116,281 1,563,247
Investment distribution receivable 26,354,386 -
28,779,745 1,783,224
----------------- -----------------
Liquidity Risk
In order to realise its investment in TCF Feeder, the Company
generally may, as of any calendar quarter-end, upon at least 65
days' prior written notice to the administrator of TCF Feeder,
redeem up to, but not exceeding, 25% of the number of TCF Feeder
shares issued to the Company upon each subscription. Redemption
proceeds may be paid in cash or, at the discretion of TCF Feeder,
in kind.
There can be no assurance that the liquidity of the Underlying
Fund's investments will always be sufficient to meet redemption
requests as, and when, made. Any such lack of liquidity may affect
the ability of the Company to realise its shares in its investments
and the value of Shares in the Company. Redemption requests may be
deferred in exceptional circumstances including if a lack of
liquidity may result in difficulties in determining the Underlying
Fund's NAV or NAV per share. This in turn would limit the ability
of the Directors to realise the Company's investments should they
consider it appropriate to do so and may result in difficulties in
determining the NAV of a Share in the Company. The market prices,
if any, for such illiquid investments tend to be volatile and may
not be readily ascertainable and the Underlying Fund may not be
able to sell them when it desires to do so or to realise what it
perceives to be their fair value in the event of a sale. The size
of the Underlying Fund's positions may magnify the effect of a
decrease in market liquidity for such instruments. Changes in
overall market leverage, deleveraging as a consequence of a
decision by the counterparties with which the Underlying Fund
enters into repurchase/reverse repurchase agreements or derivative
transactions, to reduce the level of leveraging, or the liquidation
by other market participants of the same or similar positions, may
also adversely affect the Underlying Fund's portfolio.
In some circumstances, investments held by the Underlying Fund
may be relatively illiquid making it difficult to acquire or
dispose of them at the prices quoted for them on the various
exchanges. Accordingly, the ability of the manager of the
Underlying Fund to respond to market movements may be impaired and,
consequently, they may experience adverse price movements upon
liquidation of their investments which may in turn affect the value
of the Company's investment. Settlement of transactions may be
subject to delay and administrative formalities.
The sale of restricted and illiquid securities often requires
more time and results in higher brokerage charges or dealer
discounts and other selling expenses than does the sale of
securities eligible for trading on national securities exchanges or
in the over-the-counter markets.
TCF Feeder may not be able to readily dispose of such illiquid
investments and, in some cases, may be contractually prohibited
from disposing of such investments for a specified period of time.
Restricted securities may sell at a price lower than similar
securities that are not subject to restrictions on resale.
The Company will continue to be a shareholder of the MSF Corp
until all of the assets of the HMS Master Fund have been
liquidated. The Company has received approximately 75% of the
assets of the HMS Master Fund to date.
The residual investments in AllBlue and AllBlue Leveraged funds
are known to be mostly concentrated in a single illiquid bond
position which BlueCrest was attempting to sell. In 2019, the bond
position remained unsold and a liquidator is managing the wind down
of both funds. Valuations of the BlueCrest funds are provided at
the discretion of the liquidator. The valuation movements may be
substantial but the impact on the NAV of the Company's shares will
be mitigated by the fact that the Company has only 0.45% of its net
asset value exposed to the BlueCrest funds.
The investment in TCF Feeder is treated as realisable within 12
months because the Company has the right to redeem its holding,
although it has no intention to do so. MSF Corp is treated as
realisable within 12 months as the Company is expecting to receive
the sale proceeds within the next 12 months. The creditor interests
in the AllBlue funds are treated as not realisable in 12 months as
the liquidators have indicated that repayment of these amounts in
unlikely in that time period.
The table below details the residual maturities of financial
assets and liabilities:
1-3 Months 3-12 Months More than 1 year Total
GBP GBP GBP GBP
As at 31 December 2019
-------------------------------------------------------- ------------- ------------- ---------------- ------------
Assets
Unquoted Financial assets designated at fair value
through profit or loss - 61,931,488 3,408,631 65,340,119
Cash and cash equivalents 2,425,359 - - 2,425,359
Investment distribution receivable 26,354,386 - - 26,354,386
Other receivables (excluding prepayments) 221,470 - - 221,470
Liabilities
Unquoted Financial liabilities designated at fair value
through profit or loss - (41,243,224) (3,187,925) (44,431,149)
Due to redeeming shareholders (803,781) - - (803,781)
Accrued expenses (90,534) - - (90,534)
1-3 Months 3-12 Months More than 1 year Total
GBP GBP GBP GBP
As at 31 December 2018
--------------------------------------------------------- ------------- ------------- ---------------- -----------
Assets
Unquoted Financial assets designated at fair value
through profit or loss - 224,077,752 4,510,312 228,588,064
Cash and cash equivalents 1,783,224 - - 1,783,224
Liabilities
Unquoted Financial liabilities designated at fair value
through profit or loss - (3,315,422) - (3,315,422)
Security purchased payable (239,824) - - (239,824)
Accrued expenses (64,916) - - (64,916)
Leverage by Underlying Fund
The Underlying Fund may also invest with leverage, may borrow
and engage in margin transactions. Such leverage may take a variety
of forms, including margin loans by Underlying Fund's prime brokers
for the purchase or sale of securities, from total return and
credit default swaps and, implicitly, as a result of the low margin
requirements with respect to futures contracts and other derivative
investments.
Assets and Liabilities not carried at fair value but for which
fair value is disclosed
The following table analyses the Company's assets and
liabilities (by class) not measured at fair value at 31 December
2019 and 2018 but for which fair value is disclosed.
31 December 31 December
2019 2018
Assets GBP GBP
------------ ------------
Prepayments and Receivables 240,037 29,802
Cash and Cash Equivalents 2,425,359 1,783,224
Investment distribution receivable 26,354,386 -
------------ ------------
29,019,782 1,813,026
Liabilities
Sundry accruals and payables 90,534 304,740
Due to redeeming shareholders 803,781 -
------------ ------------
894,315 304,740
The assets and liabilities included in the above table are
carried at amortised cost; their carrying values are a reasonable
approximation of fair value.
Capital Management
As the Company's Ordinary Shares are of no par value,
distributions are not paid and the Law does not require the
maintenance of a Share premium account, the Directors regard the
otherwise distributable reserves of the Company to be its capital
for the purposes of this disclosure. Capital for the reporting year
under review is summarised in Note 11 to these Financial
Statements.
At the last AGM held pursuant to section 199 of the Law, the
Directors were granted authority to buy back up to 14.99% of the
Ordinary Shares in issue. The Company's authority to make purchases
of its own issued Ordinary Shares will expire at the conclusion of
the next AGM of the Company to be held pursuant to section 199 of
the Law and renewal of such authority will be sought at the next
AGM. The timing of any purchases will be decided by the Board.
The Directors intend that purchases will only be made pursuant
to this authority through the market, for cash, at prices below the
prevailing NAV per Share where the Directors reasonably believe
such purchases will be of material benefit to the Company.
The Company's authorised share capital is such that further
issues of new Ordinary Shares could be made, subject to waiver of
pre-emption rights. Subject to prevailing market conditions, the
Board may decide to make one or more further such issues or
reissues of Ordinary Shares for cash from time to time. Any further
issues of new Ordinary Shares or reissues of Ordinary Shares held
in treasury will rank pari passu with Ordinary Shares in issue.
There are no provisions of the Law which confer rights of
pre-emption in respect of the allotment of Shares but there are
pre-emption rights contained in the Articles. The Directors have,
however, been granted the power to issue up to 10.076 million
further Shares on a non pre-emptive basis for a period concluding
on 31 December 2019, by a special resolution of shareholders passed
on 2 August 2018, unless such power is previously revoked by the
Company's shareholders in a general meeting pursuant to section 199
of the Law. The Directors intend to request that the authority to
allot Shares on a non-pre-emptive basis is renewed at each AGM of
the Company.
Unless authorised by shareholders, the Company will not issue
further Ordinary Shares or reissue Ordinary Shares out of treasury
for cash at a price below the prevailing NAV per Share unless they
are first offered pro rata to existing shareholders.
15. Net Asset Value per Share
The NAV per share per the Financial Statements is equal to the
published NAV per share in the current year. The published NAV per
share for sterling share class was GBP2.1233 at 31 December 2019
(31 December 2018: GBP2.1518) which represents the NAV per share
attributable to shareholders in accordance with the Prospectus.
16. Events After the Year End
During January 2020, the Company received a further
dividend-in-kind distribution of GBP5.78m of new shares in TCF
Feeder and a distribution of GBP20,570,509 from MSF Corp was
received by the Company, this represents the entire investment
distribution receivable on the Statement of Financial Position as
at 31 December 2019. Accordingly, on 17 January 2020, approximately
GBP20,570,509, was paid to shareholders who elected to redeem their
shares following the First EGM and Second EGM, equating to GBP0.25
per Share in respect of the 2019 Cash Exit Offers.
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 should allow the Company to grow as
intended.
On 8 April 2020, the Company received GBP5,164,177 from MSF Corp
. Accordingly, on 21 April 2020, approximately GBP5,189,145, was
paid to shareholders who elected to redeem their shares following
the First EGM and Second EGM , equating to GBP0.063 per Share in
respect of the 2019 Cash Exit Offers.
Since the reporting date, the emergence and subsequent
escalation of the outbreak of 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 the Company's
unaudited NAV performance is broadly flat for the 3 months to 31
March 2020, (unaudited NAV per share as at 31 March 2020
GBP2.096).
There have been no other significant events since the year end
which would require revision of the figures or disclosures in these
Financial Statements
Schedule of Investments
Unaudited Schedule of Investments as at 31 December 2019
Valuation Total
Nominal source Valuation net assets
Investment assets holdings currency GBP %
------------------------------------ ---------- -------------- ----------- ------------
Highbridge Tactical Credit Fund,
Ltd 35,733 GBP35,581,873 35,581,874 72.57%
*Highbridge Multi-Strategy Fund
Corporation - Class F -Series
N - RF/Mar 16 175,346 GBP2,314,109 2,314,109 4.72%
* Highbridge Multi-Strategy Fund
Corporation - Class F - Series
N - RF/Apr 18 12,890 GBP12,035,644 12,035,644 24.55%
* Highbridge Multi-Strategy Fund
Corporation - Class F- Series
N - RF/Jun 18 990 GBP911,743 911,743 1.86%
* Highbridge Multi-Strategy Fund
Corporation - Class F - Series
N - RF/Jul 18 5,370 GBP4,979,172 4,979,171 10.15%
* Highbridge Multi-Strategy Fund
Corporation - Class F -Series
N - RF/Aug 18 2,400 GBP2,233,855 2,233,855 4.56%
* Highbridge Multi-Strategy Fund
Corporation - Class F - RF/Dec
18 3,650 GBP3,483,813 3,483,813 7.10%
* Highbridge Multi-Strategy Fund
Corporation - Class F - RF/Sept
19 3,250 GBP391,279 391,279 0.80%
----------- ------------
26,349,614 53.74%
**AllBlue Limited Sterling Share 11,144 GBP2,662,226 2,662,226 5.43%
**AllBlue Limited US Dollar Shares 809 $195,068 147,144 0.30%
**AllBlue Leveraged Feeder Limited
Sterling Shares 2,040 GBP599,261 599,261 1.22%
----------- ------------
3,408,631 6.95%
65,340,119 133.26%
----------- ------------
*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 0.45%.
Notice of Annual General Meeting
HIGHBRIDGE TACTICAL CREDIT FUND LIMITED
(the "Company")
(a closed-ended company incorporated in Guernsey with
registration number 44704)
NOTICE
NOTICE IS HEREBY GIVEN THAT an Annual General Meeting of
Shareholders of Highbridge Tactical Credit Fund Limited will be
held at Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 1GR
on Wednesday 5 August 2020 at 1000hrs for the purpose of
considering and, if thought fit, passing the following
Resolutions:
ORDINARY BUSINESS
To consider and if thought fit, pass resolutions 1-8 as ordinary
resolutions:
1. THAT the Annual Report and Audited Financial Statements for
the year ended 31 December 2019 be received and adopted.
2. THAT the Directors' Remuneration Report for the year ended 31
December 2019 be received and approved.
3. THAT the Directors' Remuneration Policy be received and approved.
4. THAT Pricewaterhousecoopers CI LLP be re-appointed as
auditors of the Company until the conclusion of the next Annual
General Meeting of the Company.
5. THAT the Directors be and are hereby authorised to fix the
remuneration of the Company's auditor for their next period of
office.
6. THAT Mr Vic Holmes be re-elected as a Director of the Company.
7. THAT Mr Steve Le Page be re-elected as a Director of the Company.
8. THAT Mr Paul Le Page be re-elected as a Director of the Company.
By order of the Board
Praxis Fund Services Limited
Company Secretary
Date: 27 April 2020
Registered office: Sarnia House, Le Truchot, St Peter Port,
Guernsey, GY1 1GR Channel Islands.
Notes:
1. A member entitled to attend and vote at the AGM is entitled
to appoint one or more proxies to speak and vote instead of them. A
proxy need not be a member of the Company. Completion and return of
the Form of Proxy will not preclude member from attending or voting
at the AGM if they wish so.
2. More than one proxy may be appointed provided each proxy is
appointed to exercise the rights to attached to different
shares.
3. It should be noted that a vote withheld is not a vote in law
and will not be counted in the calculation of the proportion of the
votes for and against each resolution.
4. A form of Proxy is enclosed for use at the AGM. To be valid,
the Form of Proxy, together with the power of attorney or other
authority, if any, under which it is signed, or a notarially
certified copy of such power or authority, must reach the Company's
registrar, Anson Registrars Limited, PO Box 156, Ground Floor,
Dorey Court, Admiral Park, St Peter Port, Guernsey, GY1 4EU not
less than 48 hours before the time for holding the AGM.
5. All persons recorded on the register of shareholders as
holding shares in the Company at 1000hrs on Monday 3 August 2020 or
if the AGM is adjourned as at 48 hours before the time of any
adjourned AGM (excluding any day which is not a business day),
shall be entitled to attend and vote (either in person or by proxy)
at the AGM and, on a poll, shall be entitled to one vote per share
held.
6. The quorum of the AGM shall be two or more Shareholders
present in person or represented by proxy representing not less
than 1/20(th) of the Shares in issue.
7. If the AGM falls to be adjourned because it is not quorate,
it will be adjourned to 1000hrs on Wednesday 12 August 2020
whereupon those shareholders then present in person or by proxy
shall form the quorum. In the event of any such adjournment, the
Company will announce the adjournment via a regulatory information
service, but no separate notification will be sent to
shareholders.
8. Where there are joint registered holders of any shares, such
persons shall elect one of their number to represent them and to
vote whether in person or by proxy in their name. In default of
such election, the person whose name stands senior on the register
of shareholder shall alone be entitled to vote.
9. On a poll votes may be given either personally or by proxy
and a shareholder entitled to more than one vote need not use all
his votes or cast all the votes he uses in the same way.
10. Any corporation which is a shareholder may by resolution of
its board of directors or other governing body authorise such
person as it thinks fit to act as its representative at the AGM.
Any person so authorised shall be entitled to exercise on behalf of
the corporation which he represents the same powers (other than to
appoint a proxy) as that corporation could exercise if it were an
individual shareholder.
11. None of the directors has a contract service with the Company.
12. Holders of shares with the ISIN GBOOB13YVW48 have the right
to attend, speak and vote at the AGM.
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.
'Company' means Highbridge Tactical Credit Fund Limited.
'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
'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 (appointed 1 May St Peter Port
2018) Guernsey GY1 1GR
Sarita Keen (resigned 31 October
2019)
Paul Meader (resigned 31 December
2018)
Administrator and Secretary Previous Administrator and Secretary
(appointed 3 June 2019) (resigned 3 June 2019)
Praxis Fund Services Limited JTC Fund Solutions (Guernsey)
Sarnia House Limited
Le Truchot Ground Floor
St Peter Port Dorey Court
Guernsey GY1 1GR St Peter Port
Guernsey GY1 2HT
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
Auditor Investment Manager and AIFM
PricewaterhouseCoopers CI LLP Highbridge Capital Management
Royal Bank Place LLC
1 Glategny Esplanade 40 West 57th Street - 32nd Floor
St Peter Port New York
Guernsey GY1 4ND NY10019
Investor and Public Relations Corporate Brokers
J.P. Morgan Asset Management (appointed 15 November 2019)
60 Victoria Embankment finnCap Limited
London 60 New Broad Street
England EC4Y 0JP London
England EC2M 1JJ
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
Advocates to the Company as to
Guernsey Law
Carey Olsen LLP
P.O. Box 98
Carey House, Les Banques
St Peter Port
Guernsey GY1 4BZ
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SELFUMESSELL
(END) Dow Jones Newswires
April 27, 2020 02:00 ET (06:00 GMT)
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