Highbridge Tactical - Half-year Report

Highbridge Tactical Credit Fund

25/09/2020 17:50

RNS Number : 2016A

Highbridge Tactical Credit Fund Ltd

25 September 2020

 

 

Highbridge Tactical Credit Fund Limited

(the "Company")

 

Registered in Guernsey - Number 44704

Registered Office:

Sarnia House, Le Truchot,

St Peter Port, Guernsey, GY1 1GR

 

25 September 2020

Half Yearly Financial Report 

The Board of the Company is pleased to announce its results for the period ended 30 June 2020.   

In accordance with DTR 6.3.5(1) please find below the full text of the half yearly report. 

A copy of the Interim Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM. The Circular will also be available on the Company's website: https://www.highbridgemsfltd.co.uk. 

For further information about this announcement contact:

 

 

Praxis Fund Services Limited

Company Secretary

 

Tel: +44 (0) 1481 737 600

LEI: 213800397SYHLYFH5961

END OF ANNOUNCEMENT

 

Financial Highlights

Company Key Figures1

30 June 2020
31 December 2019
Sterling Share price increase/(decrease)
4.89%
(10.79%)
NAV per share increase/(decrease)
6.38%
(1.32%)
NAV per share increase/(decrease)
(since investment into Highbridge Tactical Credit Master Fund L.P. 2)
4.12%
(2.13%)
Annualised Sterling NAV return (since inception3)
6.43%
6.17%
Underlying Fund Key Figures4
Sharpe Ratio
1.50
1.44
Beta to FTSE 1005
0.12
0.09
of the volatility of the FTSE 1005
1/3
1/3
Beta to Barclays Aggregate6
0.00
(0.26)
Beta to S&P 5006
0.14
0.09


 

Highbridge Tactical Credit Master Fund, L.P. (formerly: 1992 Tactical Credit Master Fund, L.P.)  (the "Underlying Fund") was launched in November 2013. The Underlying Fund's returns are net of 2% management fee, 20% incentive compensation, and actual fund expenses. Inception to date performance statistics for the Underlying Fund are: 50.63% cumulative net return, 6.34% annualised net return, 5.22% annualised volatility, (9.44%) maximum drawdown and 1.02 Sharpe Ratio.

 

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. There can be no assurance that Highbridge Tactical Credit Fund Limited's ("the Company") objectives will be realised or that the Company will not experience losses.

 

1.     Information is for the Company as at 30 June 2020.

2.     NAV per share prior to investment into Highbridge Tactical Credit Master Fund L.P £2.1694.

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 £1.00. Periods since inception 14.1 years)

4.     Information is for the Underlying Fund managed by Highbridge Capital Management, LLC for the period between 1 March 2016 and 30 June 2020. The performance depicted is not solely the performance of a standalone Highbridge Fund.  The performance incorporates numbers based on the trading P&L of the Convertible Credit & Capital Structure Arbitrage Allocation within the Highbridge Multi-Strategy Fund (the "Highbridge Multi-Strategy Fund Allocation") from January 1, 2012 to October 31, 2013.  To generate the estimated returns, Highbridge has made assumptions on the amount of capital that would be required to support the strategy in a single strategy fund based on its view of the strategy's risk profile.  Pro forma returns are shown net of a 2% management and 20% incentive compensation and 40 bps of estimated expenses. The Underlying Fund is managed by the same team of professionals that managed the Highbridge Multi-Strategy Fund Allocation, which followed a substantially similar investment strategy. The Underlying Fund was launched in November 2013. Actual Underlying Fund returns are shown beginning on November 1, 2013. Underlying Fund returns are presented net of a pro forma 2% management fee, 20% incentive compensation and 40bps of estimated fund expenses. Certain recent performance estimated and unaudited.

5.     Index Source: FTSE International Limited ("FTSE") © FTSE 2017. "FTSE ®" is a trademark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices or underlying data. No further distribution of FTSE data is permitted without FTSE's express written consent.

6.     Index Source: Bloomberg

 

Note: All index performance information has been obtained from third parties and should not be relied upon as being complete or accurate. Indices are shown for comparison purpose only. While an investor may invest in vehicles designed to track certain indices, an investor cannot invest directly in an index. Indices are unmanaged, do not charge fees or expenses, and do not employ special investment techniques such as leverage or short selling.

 

Chairman's Statement

As mentioned in the Annual Report, the emergence and subsequent escalation of the outbreak of COVID-19 during the Company's reporting period has had far-reaching consequences. Consumer needs have certainly changed as a result of the pandemic. As we are all aware there has been an abrupt halt to global travel, aside from delaying personal trips and vacations, impacting businesses that previously embraced travel as part of their culture. The knock-on effects for airlines, hotels etc., have been far reaching and it has marked the death knell for many businesses, which were reliant on travel. Clearly, it is not just the travel sector which is struggling, the global economy is witnessing the worst recession since World War 2. On the plus side, there has been a move by many businesses to increased automation and digitisation. In short, the World as we knew it has changed and there remains uncertainty as to what a new normal will look like and indeed how long we will have to live with COVID-19, before effective medical remedies become available.

 

Against that backdrop, how has your Company performed? From a NAV perspective the Company has performed extremely well during the 6 months to 30 June 2020. The NAV/share has increased by 6.38% from £2.1233 to £2.2587. This performance compares to a loss of 3.4% for the HFRX Global Hedge Fund GBP Index which is a popular sterling hedged benchmark for the hedge fund industry.  Whilst on the subject of hedges I am delighted to advise that despite the extreme levels of FX market volatility in March 2020 that the TCF Feeder fund in which your Company invests the majority of its capital maintained a full USD hedge. However, that stellar performance has not been reflected in the share price which continues to trade at a discount to NAV of approximately 15%.

 

It was the intention of Highbridge Capital Management, LLC (the "Investment Manager" or "Highbridge") to embark on an aggressive marketing campaign based around face to face meetings starting in March 2020 in the hope of attracting new investors. That campaign had to be rethought in light of COVID-19 travel restrictions and a different approach was deployed consisting of two webinars held in May and July where Jon Segal (representing Highbridge) presented on the performance of the Underlying Fund and answered questions from investors. Those webinars were generally well received by those who attended.

 

The Future

 

As you know, at the end of last year the Board embarked on an aggressive cost reduction programme to mitigate the impact of the reduced asset base on the Company's total expense ratio. The Company also engaged finnCap Limited at that time, a broker which specialises in promoting smaller companies. We have had a target to rebuild the Company to £80 million before the end of 2020, but to achieve that target we would have had to eliminate the current share price discount to NAV, so we could justify the costs associated with an equity raise.

 

Notwithstanding the valiant efforts made by finnCap to identify new investors and the webinars mentioned earlier, at the time of writing we have not been able to eliminate the share price discount, and therefore we propose to hold an EGM before the end of the year to provide shareholders with the opportunity for a discontinuation vote on the Company's existence.

 

In the meantime, we intend to place a redemption in the Underlying Fund at the next available opportunity so that shareholders are not disadvantaged from the EGM not taking place until the end of the year. Of course, should shareholders at the EGM vote to continue the life of the Company then we will seek to cancel the redemption request which we understand will be possible, or if that does not prove to be the case, we will immediately re-invest the redemption proceeds into the Underlying Fund.

 

In the event that shareholders vote to discontinue the Company, the redemption process will be governed by the terms of the Underlying Fund, in that the redemption proceeds will be paid in four quarterly instalments and shareholders therefore will continue to be exposed to the performance of the Company until the final quarterly redemption occurs.

 

Other Matters

 

Highbridge Multi Strategy Fund limited - There was a further small distribution from the Master Fund in July 2020 bringing the total amount distributed to approximately 92%. The balance of assets remaining in the Master Fund consists primarily of a few less liquid credit exposures which are managed by Highbridge's ongoing credit team. Given the recent market turmoil resulting from COVID-19 the Highbridge credit team considered it to be prudent to wait until markets normalised before seeking to liquidate the remaining positions. Now that markets have improved the Credit Team is actively seeking to liquidate the remaining positions. Your board was recently advised to expect a further distribution of approximately one third of the remaining position of the HMSF Master Fund in early October and was advised further that it is hoped that an additional distribution representing approximately half could be made before the end of the calendar year, leaving a balance of only about one sixth, consisting of two assets which are expected to take a little longer to liquidate.

 

BlueCrest -AllBlue - There is nothing further to report, other than to repeat that the Company continues to hold a small amount of cash from this source which has not yet been distributed as it would not be commercially economical to do so. I am afraid that the board has no further information as to when the Liquidator of the AllBlue funds will be in a position to make further distributions.

 

On the basis it is possible that this may be my last Chairman's Statement, my fellow board members and I would like to thank you for your loyalty and support.

 

Vic Holmes

Chairman

25 September 2020

 

 

Investment Manager's Report

 

The commentary is not intended to constitute, and should not be construed as, investment advice. Potential investors in the Company should seek their own independent financial advice and may not rely on this communication in evaluating the merits of investing in the Company. The commentary is provided as a source of information for shareholders of the Company but is not attributable to the Company.

 

Highbridge Multi-Strategy Master Fund, L.P. ("HMSF")

 

As we continued the liquidation of the portfolio, in the first half of 2020 the majority of the liquidity was generated by selling a number of the HMSF's warrant and SPAC holdings. Since we began the HMSF's liquidation process in mid-June 2019, approximately 92% of the 30 September 2019 capital balance has been returned. As previously mentioned, the vast majority of the remaining positions in the HMSF consist of a small group of credit-oriented Level III investments. Given the historic market turmoil in recent months, we believed it most prudent to delay sourcing liquidity for these positions. Now that markets have shown improvement, we are actively focused on sourcing liquidity for the remainder of the portfolio. Due to the nature of these investments, it is difficult to give an exact estimate of the timing and size of subsequent distributions, but we are working hard to efficiently return the balance of capital in an orderly fashion. However, we remain cognizant of the continued uncertainty presented by COVID-19 and its potential impact on markets.

 

Highbridge Tactical Credit Master Fund, L.P.

 

We write this report against the backdrop of an outbreak of a novel and highly contagious form of coronavirus ("COVID-19"), which the World Health Organization formally declared in March 2020 to constitute a global "pandemic." COVID-19 has not only altered the trajectory of global economic growth but has also compromised the general functioning of the global economy and upended normal social interaction. The sell-off in risk assets has reverberated throughout credit markets. Commercial paper rates have spiked; many investment grade companies' credit curves have inverted, several structured-credit markets have shown signs of dysfunction; and negative basis has returned to the single name CDS/cash corporate bond markets. Highbridge believes that the dislocations that COVID-19 has caused also created investment opportunities as some forced selling has occurred and relative value has been largely ignored, in our view. Many multi-strategy, credit and distressed hedge funds are facing significant pressure with numerous funds witnessing a wave of redemptions, or shuttering completely, creating opportunities for those who remain.

 

Highbridge launched the Underlying Fund in 2013, and since inception, we have consistently highlighted several key attributes of the Underlying Fund's exposures that reflect our investment philosophy and approach to risk management. These generally include: 1) a desire to focus on idiosyncratic return drivers, 2) a preference for investments where a transaction or corporate action may unlock intrinsic value, 3) focus on healthcare-related investments, 4) a bias toward investing in mid-cap businesses where we see less competition, 5) a healthy fear of commodity risk, and 6) a commitment to guard the Underlying Fund's financial position.

 

As such, in the first half of 2020, when markets faced substantial pressure, the Underlying Fund remained profitable. Year-to-date, as of 30 June 2020, the Company's NAV appreciated +6.38% net.

 

Throughout the first half the year, the Underlying Fund crystallised certain idiosyncratic gains (increasing the liquidity profile of the Underlying Fund's underlying investments) and rotated risk to new opportunities. By the end of Q1, we grew the financial position modestly, reflecting our view of a more compelling risk-reward paradigm in the market. In Q2, while the Underlying Fund's larger, more liquid exposures benefitted from the second quarter's broad credit market normalisation, once again, certain idiosyncratic events drove the vast majority of the returns.

 

Recent market volatility, anticipated (and observed) credit hedge fund peer redemption pressure, borrower's short-term liquidity concerns, and a murky outlook for companies' future cash flows have had a four-fold impact on the Underlying Fund's opportunity set:

 

1)   a substantially increased corporate need for capital, demonstrated by substantial convertible debt issuance and numerous rescue and term loan opportunities: To date, we know of no management team or board that was prepared for the economic standstill that began in March. In an environment with substantial uncertainty, many managers and boards remain concerned about their future capital needs. The result has been a demand for capital where convertible debt has played an increasingly important role.

 

2)   a cheapening of secondary market valuations, illustrated by the Underlying Fund's and the general convertible debt market's widening implied credit spread: During Q1, we modestly increased our exposure to mandatorily convertible instruments, which provide the ability to short volatility at elevated levels. This universe of instruments has become very dislocated, and the range of positive profit outcomes is very wide, in our view. We have also seen substantial mandatory issuance which has come from large market capitalisation issuers that have relatively high credit quality.

 

3)   an increasing desire among borrowers to execute liability management exercises and other corporate actions, reflected in certain of the transactions that the Underlying Fund participated in and the  pipeline of future opportunities: The portfolio remains catalyst-rich in our view. We are currently pursuing many corporate actions, most of which we believe will be consummated this year. We also have several exposures with potential near-term catalysts. We commit to pursuing these opportunities as we believe that they have the potential to be accretive to NAV and are uncorrelated with market developments. Moreover, due to COVID-19 disruptions, we are currently working with several issuers and pursuing loan transactions that have presented themselves due to the closure of equity markets and/or an absence of prior competition.

 

4)   capital structure dislocations, shown by the Underlying Fund's ability to make debt versus equity investments in former investment grade credits (fallen angels) and to purchase short-dated quasi investment grade (IG) bonds at wide implied credit spreads: Beginning in mid-March, we capitalised on secondary market spread widening, initiating or adding to long debt versus short equity investments in well-capitalised convertible debt issuers. For large-cap issuers, the Underlying Fund acquired these instruments at L+650 bps (unlevered) implied credit spreads or greater, and where substantial market capitalisation existed. For mid-cap issuers, we have focused on issuers that we believe are fundamentally well-positioned for this environment (e.g., certain diagnostic and healthcare companies), have idiosyncratic events on the foreseeable horizon, or where the issuer has little-to-no secured indebtedness and where corporate actions may ultimately be executed. 

 

Beginning in mid-2019, we de-emphasised commodity-linked investment opportunities and the reorganised equity universe. Instead, we focused on stressed opportunities that both allowed for intra-capital structure positioning and where we identified a catalyst to drive potential NAV appreciation. During Q1 2020, in response to credit market dislocation, we accelerated this risk rotation, growing the Underlying Fund's financial position in March, while directing capital to the Underlying Funds U.S. & European Mid-Cap Convertible Credit and Event Credit sub-strategies and further reducing the Underlying Fund's Distressed and Income verticals. We focused on mid-cap convertible opportunities for several reasons: we identified technical selling pressure among mid-cap convertible securities driven by redemptions from certain market participants, which caused substantial spread widening (this phenomenon still persists), we favour more hedged exposures (versus directional investments) in a period of significant market uncertainty, we gravitate to the idiosyncratic nature of many of these businesses, especially those that are healthcare exposed and less GDP-sensitive and we acknowledge the relative simplicity of many of these issuers' capital structures, which often have limited secured debt when compared to larger businesses with more complex organizational and capital structures.

 

We also want to highlight how we rotated risk intra-quarter within the Underlying Fund's U.S. & European Mid-Cap Convertible sub-strategy. During April, several consumer discretionary companies accessed the convertible debt market. Many of these companies had just experienced a ninety-day period of nearly zero revenue and their management teams and boards opted to enhance liquidity. We found the risk-reward profile for these investments to be compelling and deployed capital to certain of these businesses. By June, some of these instruments experienced a high degree of spread tightening. At the same time, we saw other securities cheapen, generally, instruments where the issuers' cash flows were less exposed to government-mandated closures. In turn, we realised profits from many of the consumer discretionary investments that we made in April and redeployed to wider spread opportunities where the issuer is less exposed to COVID-19 disruption, in our view.

 

We believe that these risk rotations have benefitted the Underlying Fund. During Q2 particularly, the Underlying Fund's U.S. & European Mid-Cap Convertible Credit and Event Credit sub-strategies contributed meaningfully to profit or loss whilst the Distressed Credit & Reorganised Equity sub-strategy was only marginally positive.  While we will continue to assess distressed opportunities, we have shied away from energy, commodity and retail directional investments. However, we are now pursuing several term loans, driven by mid-cap companies' financing needs. All of these potential investments have been proprietarily sourced, and generally leverage the Underlying Fund's incumbent position in the issuer's capital structure.

 

In periods of market stress, access to liquidity is important. We want to highlight that many of the Underlying Fund's exposures proved liquid during the first and second quarter and in particular, during March's volatility. We continue to be focused on guarding the Underlying Fund's financial position. In addition, the Underlying Fund has seen meaningful AUM growth year-to-date.

 

As the U.S. economy commenced its reopening, equity markets have rallied and we have witnessed euphoric purchasing patterns for certain COVID-19 related risk. We will not engage in this euphoric buying, but instead maintain our discipline in taking advantage of market opportunities. We have and intend to be measured and prudent in our management of the Underlying Fund's financial position and the nature of the Underlying Fund's exposures (e.g., sector allocation). As always, we will maintain our underwriting process, with an acute eye towards an issuer's liquidity and its wherewithal to manage through sustained COVID-19 related disruptions. We see several potential events on the horizon, including identified corporate actions, known tangible events among certain positions, new money financing opportunities, a robust convertible debt issuance calendar, which provides a source of new ideas and caps secondary market valuations, and relative value and volatility opportunities. We believe that the combination of our focus on idiosyncrasy and the diversity of investment structures positions us well for today's changed market environment. As we look forward, we maintain a high level of conviction in the Underlying Fund.

 

We would like to thank you for your continued support.

 

Highbridge Capital Management, LLC

25 September 2020

 

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.  There can be no assurance that the Underlying Fund's objectives will be realised or that the Underlying Fund will not experience losses. Subsequent factors, including but not limited to, changes in market conditions, interest rates and other economic, political or financial developments, including those related to COVID-19, will impact future performance, possibly significantly. The Underlying Fund is an actively managed portfolio; holdings, sector weightings, allocations and leverage are subject to change. This material is provided for illustrative purposes only and represents subjective opinions and views as of the date hereof subject to change depending on market environment. Certain of the information provided has been based on or derived from information provided by independent third party sources. These sources are considered reliable; however, the Underlying Fund cannot guarantee the accuracy of and has not independently verified such information. The information is not intended to provide and should not be relied on for legal, accounting or tax advice.

 

The Company may be required to propose a resolution by 31 March 2021, if its NAV falls below £80 million as at 31 December 2020 the Board must put a discontinuation vote to shareholders. In the event the resolution is passed, the Company may not continue in its current form or may be liquidated, with capital being returned to investors over time.

 

 

Company and Investment Overview

 

The Company is a Guernsey domiciled closed-ended investment company listed on the Premium Segment of the Official List of the Financial Conduct Authority and traded on the Main Market of the London Stock Exchange with net assets of approximately £52 million.

 

Prior to the EGM held on 17 September 2019 the Company's investment policy reflected its investment in Highbridge Multi-Strategy Fund Corporation ("MSF Corp"). Consequently, on the 17 September 2019, the Board received Shareholder approval for the new investment policy (the "Investment Policy") set out below.

Investment Objective and Policy

The Company's investment objective is to seek to provide positive returns with low volatility through an investment policy of investing predominantly in the Underlying Fund through the TCF Feeder or any successor vehicle of TCF Feeder. Accordingly, the Company's published investment policy is consistent with that of the Underlying Fund. In the event that the Underlying Fund or TCF Feeder changes its investment policy, the Directors will take appropriate action to amend the Company's investment policy or will consider removing the Company's assets from TCF Feeder so that the Company is not in breach of any applicable regulation.

 

The Company shall continue to have investment exposure to MSF Corp until such time as such investment has been fully realised and redeployed within the Underlying Fund.

Benefits of the Company

The Company has one class of shares in issue, the Sterling class. The Company seeks to provide shareholders with the following key benefits:

 

• Attractive returns which are not beholden to the direction of asset markets, created by focusing on relative value and idiosyncratic opportunities, which has allowed TCF Feeder to produce uncorrelated returns with low volatility historically.

• Strong capital preservation characteristics reflecting robust risk management and expert blending of various assets across discretionary and systematic strategies.

• Good liquidity occasioned by active trading in the Company's shares on the Main Market of the London Stock Exchange.

 

[1] As of 30 June 2020 net of all applicable fees and expenses. Returns are estimated and unaudited for 2020. Shareholders should note that past performance is not necessarily indicative of future results and that there can be no assurance that the Company's and/or the Underlying Fund's return objectives will be realised or that the Company and/or the Underlying Fund will not experience losses.

 

About the Underlying Fund

The Underlying Fund is a private, multi-strategy credit investment fund managed by Highbridge Capital Management, LLC. The principal investment objective of the Underlying Fund is to achieve a positive return on capital. The investment team seeks to achieve this objective by applying fundamental credit research combined with intra-capital structure hedging strategies to select credit-sensitive investment opportunities. The Underlying Fund invests in convertible securities, non-convertible bonds and loans, preferred and common equity securities, and warrants, options, and other derivatives as well as other instruments. The Underlying Fund invests in global markets with a focus on North America and Europe. Typically, The Underlying Fund purchases convertible bonds, non-convertible bonds or loans, or other securities along with one or more other instruments, including any of the following, as a hedge: stocks, options, bonds, credit derivatives, interest rate swaps, treasuries and interest rate futures. 

 

It currently invests across six sub-strategies which include: (i) Volatility strategies; (ii) US & European Mid-Cap convertible credit; (iii) capital structure arbitrage; (iv) event credit; (v) income investments and (vi) distressed credit and reorganised equities. The Underlying Fund will invest in at least three sub-strategies at any given time. 

 

In particular, the Underlying Fund seeks to generate positive absolute returns from idiosyncratic, company-specific opportunities while systematically hedging interest rate exposure, with a target duration of zero, and limiting the impact of broad, directional moves in credit and equity markets and aiming to maintain low volatility.

 

Key Features of the Underlying Fund

 

Strong Track Record
· Strong absolute returns with low volatility and low beta to broad markets
· Demonstrated ability to preserve capital
Multi-Strategy Approach - Dynamically Invest Across Multiple Opportunity Sets
· Allocate across six distinct sub-strategies, including relative value, income, distressed, and 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 Company Credit Markets
· Target a less competitive investment universe, leveraging nimble size
· Differentiated healthcare exposure, focused on credit underwriting and not 'science risk'
Corporate Actions Focus
· Target securities that are, in Highbridge's view, ripe for corporate actions, with the goal of driving alpha
· Examples include: debt buy-backs, exchanges, rights offerings, mergers and acquisitions, restructurings, etc
· Corporate actions are a key driver of returns historically
Disciplined Risk Management
· Seeks to hedge unwanted credit, equity, rates and commodity exposures
· Dedicated analytical support

 

About Highbridge

 

Highbridge was founded in 1992 as one of the industry's first hedge fund managers. Highbridge has approximately US$2.2 billion in assets under management and staff of approximately 40 employees, including 11 investment professionals, with an office in New York and a research presence in London. Highbridge established a strategic partnership with J.P. Morgan Asset Management Limited ("JPMAM") in 2004. Highbridge is a subsidiary of JPMAM, which is itself a subsidiary of JPMorgan Chase & Co. (together with its affiliates, "JPM"). JPMAM is a leading investment and wealth management firm, operating across the Americas, EMEA (Europe, Middle East and Africa), and Asia in more than 30 countries, with assets under management of $2.5 trillion.

 

Highbridge is solely responsible for all investment, capital allocation and risk management decisions for the Underlying Fund which are independent of JPMAM. Highbridge is registered as an investment adviser under the U.S. Investment Advisers Act of 1940, as amended.

 

In addition to managing the Underlying Fund, Highbridge has also been appointed as the investment manager of the Company. As part of these investment management arrangements, JPMAM provides certain support services to the Company as a delegate of Highbridge, including the provision of shareholder relations, public relations and Board support. Neither Highbridge nor JPMAM receives a fee directly from the Company in relation to these services.

 

AllBlue

 

The Company was informed on 1 December 2015 that, effective 4 January 2016, AllBlue and AllBlue Leveraged were being redeemed from their seven underlying funds and were compulsorily redeeming the holdings of all investors, including the Company. The Company retains a creditor interest equivalent to the value of its outstanding holding in AllBlue and AllBlue Leveraged. This is measured by reference to the valuation statements received from the administrator and more recently the Liquidators of AllBlue and AllBlue Leveraged, although it should be noted that the latest financial figures available are the audited financial statements as at 31 July 2018. The Board received an updated Liquidators' report for AllBlue and AllBlue Leveraged dated 10 October 2019. The report cites that there are no distributions planned for the foreseeable future. Future distributions are dependent upon the successful realisation of the remaining assets held by AllBlue and AllBlue Leveraged. Due to the uncertainties surrounding the assets, there is no estimate of the timing or amount of potential future distributions, or the expected timing of the conclusion of the liquidations. Further information about the proceeds returned to the Company is available in Note 8 to the Financial Statements.

 

Financial Statements

 

 

 

INTERIM MANAGEMENT REPORT

 

A description of the important events that have occurred during the first six months of the financial year and their impact on the performance of the Company as shown in the Financial Statements is given in the Chairman's Statement and the Notes to the Financial Statements, and are incorporated here by reference.

 

Statement of Principal Risks and Uncertainties             

The principal risks and uncertainties facing the Company for the period 1 January 2020 to 30 June 2020 are unchanged, from those disclosed in the Company's most recent Annual Financial Report, which is available at www.highbridgemsfltd.co.uk. These principal risks and uncertainties are: operational, investment, share price discount, concentration, leverage, counterparty, credit and regulatory risk. A detailed explanation of the risks, and how the Company seeks to mitigate them can be found within the Annual Financial Report for the year ended 31 December 2019.

 

The Board monitors the Company's risk management systems on an ongoing basis. Shareholders' attention is also drawn to the Company's risk disclosure document (which can be found on the Company's website).

 

Related Party Transactions

There were no material related party transactions during the first six months of the financial year, other than those disclosed at Note 7 to the Financial Statements.

 

Interim Report is Unaudited

This Interim Report has not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

 

Going Concern

The Company now invests the majority of its assets into the Underlying Fund. The Directors have a reasonable expectation that positive returns will be made in the future and that therefore shareholders will wish to continue their investment in the Company. In addition, at the date of publication of this report, the Company holds a cash balance which exceeds normal operating expenditure anticipated during the next 12 months. The Directors believe that it is appropriate to adopt the going concern basis in preparing the Financial Statements.

In considering the financial position of the Company, the Directors have noted that if the net assets of the Company are not at least £80 million by the end of 2020, they must put a discontinuation vote to shareholders. Elimination of the discount to NAV at which the shares trade is a prerequisite to share issuance by the Company and thus to growth. However, the recent market fall caused by the COVID- 19 pandemic has resulted in the Company's shares trading at a considerable discount to NAV.  As a result, there is considerable uncertainty around the Company's future - the size of the Company at the end of 2020 cannot be predicted, and neither can the outcome of any shareholder discontinuation vote.

At the EGM held on 20 February 2020, the shareholders approved both proposals to disapply pre- emption rights on the issue of ordinary shares which would allow the Company to grow as intended. However, although the Company's NAV in 2020 to date has increased substantially, widespread market falls initiated by the COVID-19 pandemic have led to the Company's shares trading at a significant discount to NAV.  Existing shareholders appear to have decided to hold their shares, pending either the discount narrowing or the Company winding up. In the event that shareholders vote to discontinue the Company, rendering the going concern basis inappropriate, the Directors do not believe that any resulting adjustments to these Financial Statements would be material to shareholders.

After making suitable enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the next 12 months. Accordingly, they continue to adopt the going concern basis in the preparation of this financial report.

COVID-19

The COVID-19 strain of coronavirus has had a significant negative impact on global markets, and consequently on some of the companies held within the Underlying Fund's portfolio. As of the date of approval of these financial statements, the assessment of this situation continues to evolve and it may be some time before there is clarity around the full economic impact.

 

However, it is noteworthy that in the Company's NAV performance was broadly flat for the 3 months to 31 March 2020, and increased thereafter.  As a result, your Board has been surprised and disappointed at the current relatively high level of share price discount being of the order of 15%.

 

It is our intention for the investment managers to continue their marketing campaign and to intensify it as soon as the current COVID-19 restrictions are lifted sufficiently to enable them to do so. The investment managers strongly believe that the Company now has an extremely compelling investment portfolio which will deliver strong performance over the rest of the year.

 

Responsibility Statement

We confirm that to the best of our knowledge that:

 

·      the Condensed Unaudited Interim Financial Statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'; as required by Disclosure Guidance & Transparency Rule ("DTR") 4.2.4R of the UK's Financial Conduct Agency ("FCA"); and

·      the Interim Management report includes a fair review of the information required by:

 

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website, and for the preparation and dissemination of financial statements. Legislation in Guernsey governing the preparation and dissemination of financial statement may differ from legislation in other jurisdictions.

 

 

 

By order of the Board

Steve Le Page, Director

25 September 2020

 

CONDENSED UNAUDITED STATEMENT OF COMPREHENSIVE INCOME                     

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2020

30 June 2020
30 June 2019
(unaudited)
(unaudited)
Notes
£
£
Revenue
Net gains on non-current assets at fair value through profit or loss
8
3,367,665
5,133,838
Net gains on current assets at fair value through profit or loss
8
110,279
912
Net losses on current liabilities at fair value through profit or loss
9
(106,739)
(697)
Interest income received
361
2,565
Operating expenses
4
(244,250)
(306,695)
Profit and total comprehensive income for the period
3,127,316
4,829,923
Pence (£)
Pence (£)
Earnings per share for the period - basic and diluted
6
13.54
4.63

 

In arriving at the results for the period, all amounts above relate to continuing operations.

 

There is no other Comprehensive Income for the period other than as disclosed above.

 

The Notes form an integral part of these Financial Statements.

 

 

CONDENSED UNAUDITED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2020

30 June 2020
31 December 2019
(unaudited)
(audited)
Notes
£
£
Non current assets
Unquoted financial assets designed at fair value through profit or loss
8
46,185,444
35,581,874
Current assets
Unquoted financial assets designed at fair value through profit or loss
8
21,270,054
29,758,245
Investment distribution receivable
1,982,265
26,354,386
Cash and cash equivalents
2,116,048
2,425,359
Prepayments and receivables
275,067
240,037
25,643,434
58,778,027
Current liabilities
Unquoted financial assets designed at fair value through profit or loss
9
17,209,670
44,431,149
Due to redeemed shareholders
2,353,374
803,781
Other payables
104,081
90,534
19,667,125
45,325,464
Net assets
52,161,753
49,034,437
Equity
Share capital
10
-
-
Reserves
11 & 12
52,161,753
49,034,437
Shareholders' equity
52,161,753
49,034,437
Shares in issue
10
23,093,530
23,093,530
NAV per share
£2.2587
£2.1233

 

The Financial Statements and accompanying Notes were approved and authorised for issue by the Board of Directors on 25 September 2020 and are signed on its behalf by:

 

 

 

 

 

Vic Holmes
Steve Le Page
Chairman
Chairman of the Audit Committee

 

 

The Notes form an integral part of these Financial Statements.

 

CONDENSED UNAUDITED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2020

Share Capital
Reserves
Total
(unaudited)
(unaudited)
(unaudited)
Note
£
£
£
Opening balance
-
49,034,437
49,034,437
Profit and total comprehensive income for the period
-
3,127,316
3,127,316
Balance at 30 June 2020
-
52,161,753
52,161,753

 

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2019

Share Capital
Reserves
Total
(unaudited)
(unaudited)
(unaudited)
Note
£
£
£
Opening balance
-
226,780,928
226,780,928
On-market purchase of ordinary shares
-
(3,060,668)
(3,060,668)
Profit and total comprehensive income for the period
-
4,829,923
4,829,923
Balance at 30 June 2019
-
228,550,183
228,550,183

 

The Notes form an integral part of these Financial Statements.

 

CONDENSED UNAUDITED STATEMENT OF CASH FLOWS

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2020

30 June 2020
30 June 2019
(unaudited)
(unaudited)
Note
£
£
Cash flows from operating activities
Profit and total comprehensive income for the period
3,127,316
4,829,923
Unrealised gains on financial assets at fair value through profit or loss
8
(3,477,944)
(4,192,619)
Unrealised losses on financial liabilities at fair value through profit or loss
9
106,739
697
Realised gains on sales of financial assets at fair value through profit or loss
8
-
(942,131)
Proceeds from sale of financial assets
5,164,177
10,000,000
Proceeds from unsettled trades
20,570,509
-
Interest income
(361)
(2,565)
Increase/(decrease) in other payables
15,914
(237,600)
Increase in prepayments and receivables
(35,030)
(8,999)
Net cash flow generated from operating activities
25,471,320
9,446,706
Cash flows from investing activities
Interest received
361
2,565
Net cashflow generated from investing activities
361
2,565
Cash flows from financing activities
On-market purchase of shares
11
-
(3,060,668)
Payments to redeemed shareholders
(25,780,992)
-
Net outflow used in financing activities
(25,780,992)
(3,060,668)
Cash and cash equivalents at beginning of period
2,425,359
1,783,224
(Decrease)/increase in cash and cash equivalents
(309,311)
6,388,603
Cash and cash equivalents at end of period
2,116,048
8,171,827


 

 

The Notes form an integral part of these Financial Statements.

Notes to the Financial Statements

1.    ACCOUNTING POLICIES

                          

Basis of accounting

These Unaudited Condensed Financial Statements ("Financial Statements") have been prepared in accordance with International Accounting Standard ("IAS") 34 'Interim Financial Reporting' as required by DTR 4.2.4R, the Listing Rules of the London Stock Exchange and applicable legal and regulatory requirements. They do not include all the information and disclosures required in Annual Financial Statements and should be read in conjunction with the Company's last Annual Report and Audited Consolidated Financial Statements for the year ended 31 December 2019.

 

The same accounting policies and methods of computation are followed in the Interim Financial Report as compared with the most recent Annual Financial Statements (31 December 2019). This report should be read in conjunction with the latest Annual Financial Report (31 December 2019).

 

2.    SIGNIFICANT JUDGEMENTS AND ESTIMATES

 

There have been no changes to the significant accounting judgements, estimates and assumptions from those applied in the Company's Audited Annual Financial Statements for the year ended 31 December 2019, with the exception of the going concern assumption as follows.

 

Going concern

In considering the financial position of the Company, the Directors have noted that if the net assets of the Company are not at least £80 million by the end of 2020, they must put a discontinuation vote to shareholders. Elimination of the discount to NAV at which the shares trade is a prerequisite to share issuance by the Company and thus to growth. However, the recent market fall caused by the COVID- 19 pandemic has resulted in the Company's shares trading at a considerable discount to NAV.  As a result, there is considerable uncertainty around the Company's future - the size of the Company at the end of 2020 cannot be predicted, and neither can the outcome of any shareholder discontinuation vote.

 

The Board has assessed the Company's financial position as at 30 June 2020 and the factors that may impact its performance and is of the opinion that it is appropriate to prepare these Financial Statements on a going concern basis as the Company has adequate financial resources to meet its liabilities as they fall due over a period of 12 months from the approval of these Financial Statements.

 

3.    SEGMENTAL REPORTING

 

The Board has considered the requirements of IFRS 8 - "Operating Segments". In the Board of Directors' opinion, the Company is engaged in a single segment of business, being investment in a portfolio of funds, funds of funds and other similar assets.

 

Segment information is measured on the same basis as that used in the preparation of the Company's Financial Statements.

 

The Company receives no revenues from external customers, nor holds any non-current assets, in any geographical area other than Guernsey or Cayman Islands.

 

4.    OPERATING EXPENSES

30 June 2020
30 June 2019
(unaudited)
(unaudited)
£
£
Administrator's fee
45,036
63,854
Directors' remuneration (Note 5)
66,000
100,000
Registration fees
16,233
13,585
Audit fees
24,863
17,149
Legal and professional fees
-
10,598
Gain on exchange
(176)
(10)
Other operating expenses
92,294
101,519
Total expenses for the period
244,250
306,695


5.    DIRECTORS' REMUNERATION

 

30 June 2020
30 June 2019
(unaudited)
(unaudited)
£
£
Vic Holmes, Chairman
25,000
30,000
Steve Le Page, Audit Committee Chairman
21,000
25,000
Paul Le Page
20,000
24,000
Sarita Keen (resigned 31 October 2019)
-
21,000
Total Director remuneration
66,000
100,000

 

6.    EARNINGS PER SHARE

 

30 June 2020
30 June 2019
(unaudited)
(unaudited)
Pence £
Pence £
Profit and total comprehensive income for the period
3,127,316
4,829,923
The weighted average number of shares in issue during the period
23,093,530
104,209,040
Earnings per share
13.54
4.63

 

7.      RELATED PARTY TRANSACTIONS

 

Transactions with related parties are made on terms equivalent to those that prevail in an arm's length transaction. Directors' remuneration is disclosed in Note 5.

 

8.      INVESTMENTS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

 

30 June 2020
31 December 2019
30 June 2019
(unaudited)
(audited)
(unaudited)
Unquoted financial assets
£
£
£
Portfolio cost carried forward
51,317,548
52,650,677
203,925,014
Unrealised gain on financial assets at fair value through profit or loss
16,137,950
12,689,442
19,797,800
Valuation carried forward
67,455,498
65,340,119
223,722,814
Realised gains on sales on non-current assets
-
-
942,131
Realised gains on sales on current assets
-
958,504
-
Unrealised gains/(losses) on non-current assets
3,367,665
(150,626)
4,191,707
Unrealised gains/(losses) on current assets
110,279
(2,765,112)
912
Net gains/(losses) on financial assets at fair value through profit or loss
3,477,944
(1,957,234)
5,134,750

 

IFRS 13 requires fair value to be disclosed by the source of inputs, using a three-level hierarchy.

 

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

• Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and

• Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

 

The fair values of the unquoted investments held by the Company are based on the published NAV of the TCF Feeder, and the most recently available NAV of MSF Corp, AllBlue and AllBlue Leveraged. On the basis that the significant inputs to the fair value of the TCF Feeder and MSF Corp are observable and no significant unobservable adjustments are made to the valuations, the Company categorises the TCF Feeder and HMS Master Fund as Level 2. As the fair value determination for AllBlue and AllBlue Leveraged as at 30 June 2020 is unobservable, these have been categorised as Level 3.

 

Details of the value of the classifications are listed in the table below. Values are based on the fair value of the investments as at the reporting date:

 

Financial assets at fair value through profit or loss
30 June 2020
31 December 2019
(unaudited)
(audited)
£
£
Level 1
-
-
Level 2
64,036,711
61,931,489
Level 3
3,418,787
3,408,630
Total
67,455,498
65,340,119

 

Financial liabilities at fair value through profit or loss
30 June 2020
31 December 2019
(unaudited)
(audited)
£
£
Level 1
-
-
Level 2
(14,012,190)
(41,243,224)
Level 3
(3,197,480)
(3,187,925)
Total
(17,209,670)
(44,431,149)

 

 

There have been no transfers between levels of the fair value hierarchy during the period. Transfers between levels of the fair value hierarchy are recognised at the end of the reporting period during which the change has occurred.

 

Movements in the Company's Level 3 financial instruments during the period/year were as follows:

 

Financial Assets Level 3 reconciliation
30 June 2020
31 December 2019
(unaudited)
(audited)
£
£
Balance at beginning of the period/year
3,408,630
4,510,312
Disposals
-
(1,096,761)
Movement in unrealised gain/(loss) on valuation
10,157
(4,921)
Balance at end of period/year
3,418,787
3,408,630

 

 

 

Financial Liabilities Level 3 reconciliation
30 June 2020
31 December 2019
(unaudited)
(audited)
£
£
Balance at beginning of the period/year
(3,187,925)
(3,315,422)
Repayments
-
134,394
Movement in unrealised losses on valuation
(9,555)
(6,897)
Balance at end of period/year
(3,197,480)
(3,187,925)

 

Return of Capital from MSF Corp

During 2019, Highbridge Capital Management LLC, the Investment Manager to the HMS Master Fund announced that the HMS Master Fund would be wound down with effect from 1 October 2019.

                   

From that date to 30 June 2020, the Company has received redemption proceeds from the MSF Corp totalling £142,253,741 (£5,164,177 received during the period ended 30 June 2020).

 

Return of Capital from AllBlue and AllBlue Leveraged ("the BlueCrest funds")

On 1 December 2015, BlueCrest, the Investment Manager to the BlueCrest suite of funds, and the Board of Directors of each of the relevant BlueCrest funds (or General Partner, where appropriate) announced that the BlueCrest funds would embark upon a programme to return the capital managed in these funds to investors.

 

From the start of the program, the Company has received redemption proceeds from the AllBlue funds totalling £712,213,318 from the Sterling Share Class and $42,684,695 from the US Dollar Share Class. No redemption proceeds were received during the period.

 

The Company was notified in August 2018 that the BlueCrest funds had appointed liquidators on 11 July 2018. The appointment of BlueCrest as investment manager to the BlueCrest Funds terminated on 11 July 2018, although BlueCrest will continue to assist the liquidators during the liquidation process as required. The liquidators advised that the completion of the liquidation and future distributions to investors would be dependent upon the successful realisation of the assets held by the BlueCrest funds. No further distributions are planned at this time, and the possibility of interim distributions resulting from the future sale of the investments held by the BlueCrest funds will be considered by the liquidators as investments are realised by the BlueCrest funds.

 

9.      FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

 

30 June 2020
31 December 2019
30 June 2019
(unaudited)
(audited)
(unaudited)
£
£
£
Designated at fair value through profit and loss at inception:
Balance at beginning of the period/year
(44,431,149)
(3,315,422)
(3,315,422)
Repayments
61,747,558
134,181,944
-
MSF Corp cash exit
-
(178,383,044)
-
Change in unrealised (losses)/gains
(106,739)
3,085,373
(697)
(17,209,670)
(44,431,149)
(3,316,119)
Other net changes in fair value on financial liabilities at fair value through profit or loss:
Change in unrealised (losses)/gains
(106,739)
3,085,373
(697)
Total (losses)/gains
(106,739)
3,085,373
(697)

 

These balances represent the liabilities payable to -

·   cash exit creditors, being former shareholders of the Company that opted to exit the Company and not remain as Shareholders following the appointment of Highbridge as Investment Manager and the Investment into MSF Corp (the "Redemption Liability");

·      tender offer creditors, being those former shareholders who elected to avail of the Tender Offer (the "Repurchase Portfolio"); and

·      2019 exit creditors, being those former shareholders' who elected to exit the Company at one of the EGM's held in 2019.

 

Each of these liabilities meet the classification criteria of IAS 32 for treatment at Fair Value Through Profit and Loss. Please refer to Note 8 for the IFRS 13 Level 3 reconciliation.

 

10.     SHARE CAPITAL

 

Authorised Share Capital

An unlimited number of Ordinary shares of no par value each.

 

Issued
Total
Number
Number of shares in issue (excluding Treasury Shares) at 1 January 2019
105,391,869
Purchase of own shares
(1,431,000)
Sales of Shares from Treasury
1,500,046
Share redemptions
(82,367,385)
Number of shares in issue (excluding Treasury Shares) at 31 December 2019
23,093,530
Purchase of own shares
-
Number of shares in issue (excluding Treasury Shares) at 30 June 2020
23,093,530

 

Pursuant to Section 276 of the Law, a share in the Company confers on the shareholder the right to vote on resolutions of the Company, the right to an equal share in dividends authorised by the Board of Directors, and the right to an equal share in the distribution of the surplus assets of the Company.

 

 

The total number of Shares in issue, as at 30 June 2020 was 49,260,348 (31 December 2019: 49,260,348), of which 26,166,818 Shares were held in treasury (31 December 2019: 26,166,818), and the total number of shares in issue excluding treasury shares was 23,093,530 (31 December 2019: 23,093,530).

 

11.     TREASURY SHARES

 

The Capital and Reserves disclosure below is intended to highlight the legal nature, under applicable Company Law, of the amounts attributable to shareholders and also the existence and effect of the Treasury shares held by the Company. This is a supplemental disclosure and not required under IFRS.

 

During the six month period ended 30 June 2020, the Company sold no treasury shares (31 December 2019: 1,500,046 Shares at an average price of £2.166) and the Company bought back no shares during the period (31 December 2019: 1,431,000 Shares at an average price of £2.1388).

 

The Treasury Shares hold no voting rights or rights to dividends.

 

30 June 2020
31 December 2019
(unaudited)
(audited)
Capital and reserves
Note
£
£
Share capital
10
-
-
Treasury shares
(52,533,286)
(52,533,286)
Reserves
12
104,695,039
101,567,723
Closing balance
52,161,753
49,034,437

 

30 June 2020
31 December 2019
(unaudited)
(audited)
Treasury shares
£
£
Opening balance
52,533,286
52,722,618
Acquired during period/year
-
3,060,668
Cancelled during period/year
-
(3,250,000)
Closing balance
52,533,286
52,533,286

 

12.     RESERVES

 

30 June 2020
31 December 2019
(unaudited)
(audited)
£
£
Opening balance
101,567,723
279,503,546
Comprehensive income attributable to Shareholders
3,127,316
447,221
On-market purchase of ordinary shares
-
(178,383,044)
Closing balance
104,695,039
101,567,723

 

13.     FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

 

The Company's financial risk management objectives and policies are consistent with those disclosed in the Company's Audited Annual Financial Statements for the year ended 31 December 2019.

 

14.     EVENTS AFTER THE REPORTING PERIOD

 

During July 2020, the Company received a further dividend-in-kind distribution of £435,039 of new shares in TCF Feeder and a cash distribution of £1,547,226 from MSF Corp was received by the Company, this represents the entire investment distribution receivable on the Statement of Financial Position as at 30 June 2020.  A distribution of the cash received was made on 7 August 2020.

 

There have been no other significant events since the period end which would require revision of the figures or disclosures in these Financial Statements. 

Schedule of Investments

 

 

Unaudited Schedule of Investments as at 30 June 2020

 

 

Investment assets
Nominal holdings
Valuation source currency
Valuation £
Total net assets %
Highbridge Tactical Credit Fund, Ltd
43,016
£46,185,444
46,185,444
88.54%
* Highbridge Multi-Strategy Fund Corporation - Class F - Series N - RF/Mar 16
175,346
£1,567,767
1,567,767
3.01%
* Highbridge Multi-Strategy Fund Corporation - Class F - Series N - RF/Apr 18
12,890
£8,153,871
8,153,871
15.63%
* Highbridge Multi-Strategy Fund Corporation - Class F- Series N - RF/Jun 18
990
£617,684
617,684
1.18%
* Highbridge Multi-Strategy Fund Corporation - Class F - Series N - RF/Jul 18
5,370
£3,373,274
3,373,274
6.47%
* Highbridge Multi-Strategy Fund Corporation - Class F -Series N - RF/Aug 18
2,400
£1,513,385
1,513,385
2.90%
* Highbridge Multi-Strategy Fund Corporation - Class F - RF/Dec 18
3,650
£2,360,203
2,360,203
4.52%
* Highbridge Multi-Strategy Fund Corporation - Class F - RF/Sept 19
3,250
£265,083
265,083
0.52%
17,851,267
34.23%
**AllBlue Limited Sterling Share
11,144
£2,662,225
2,662,225
5.10%
**AllBlue Limited US Dollar Shares
809
$195,068
157,301
0.30%
**AllBlue Leveraged Feeder Limited Sterling Shares
2,040
£599,261
599,261
1.15%
3,418,787
6.55%
67,455,498
129.32%

 

 

 

*Highbridge decided to aggregate the different investment series into the main (original) series that was bought into originally (Highbridge Multi Strategy Fund Class F Series N -RF/Mar 16) on the 1 January 2017. Highbridge Multi-Strategy Fund Corporation (formerly: 1992 Multi-Strategy Fund Corporation).

 

**The above AllBlue valuations are based on gross assets only. If offset against the liability the exposure of the Company's net assets in AllBlue is 0.42%.

Glossary

Unless the context suggests otherwise, references within this report to:

 

'AIFM' means Alternative Investment Fund Manager.

 

'AllBlue Leveraged' means AllBlue Leveraged Feeder Limited.

 

'AllBlue' means AllBlue Limited.

 

Barclays Aggregate Bond Index ('Barclays Aggregate') represents securities that are U.S. domestic, taxable and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. The index is USD denominated. The Products are not sponsored, endorsed, sold or promoted by Barclays Capital, and Barclays Capital makes no warranty, express or implied, as to the results to be obtained by any person or entity from the use of any index, any opening, intra-day or closing value therefor, or any data included therein or relating thereto, in connection with any Fund or for any other purpose. Barclays Capital's only relationship to the Licensee with respect to the Products is the licensing of certain trademarks and trade names of Barclays Capital and the Barclays Capital indexes that are determined, composed and calculated by Barclays Capital without regard to Licensee or the Products.

 

'Beta' is a measure of how sensitive the price of an investment is to movements in a reference index. The Underlying Fund's Beta is determined by calculating the slope of a regression line of a scatter plot of the fund's return to the FTSE 100 index's return, based on monthly observations.

 

'BlueCrest' means BlueCrest Capital Management Limited.

 

'Board' means the Board of Directors of the Company.

 

'CDS bond basis' - the difference in credit spreads between a CDS and the underlying reference bond. A negative basis implies that an arbitrage trader can derive a profit by buying a bond and insuring its credit risk by buying a credit default swap and vice versa. Negative basis occurs in periods of market stress when investors become concerned about the creditworthiness of CDS counterparties and will therefore reduce the insurance premium that they are prepared to pay to compensate for the risk of counterparty failure.

 

'Company' means Highbridge Tactical Credit Fund Limited.

 

'Credit curve inversion' - this defines a situation where short term bonds pay higher yields than long-term bonds. This is the inverse of normal market behavior where buyers of longer-term paper normally demand higher yields to compensate for the increased risk of default over a longer horizon. Curve inversions are typically associated with periods of short-term stress in credit markets.

 

'Credit Fund' The Tactical Credit Fund is a multi-strategy credit fund that seeks to generate returns from relative value and idiosyncratic opportunities. The Tactical Credit Fund, which launched in November 2013, currently invests in six credit focused sub-strategies: (i) mid-cap convertible credit; (ii) European convertible credit; (iii) capital structure arbitrage; (iv) event credit; (v) income investments and (vi) distressed credit and reorganised equities.

 

'FTSE 100' is a capitalisation weighted performance index of the 100 companies listed on the London Stock Exchange with the highest market capitalisation. Ticker: UKX Index (Currency GBP). The index is GBP denominated.

 

'Funds underlying AllBlue' means the seven underlying funds of AllBlue comprising BlueCrest Capital International Limited, BlueTrend 2x Leveraged Fund Limited (with effect from 1 July 2015, BlueTrend Fund Limited prior to 1 July 2015), BlueCrest Multi Strategy Credit Fund Limited, BlueCrest Emerging Markets Fund Limited, BlueCrest Mercantile Fund Limited, BlueCrest Equity Strategies Fund Limited and BlueCrest Quantitative Equity Fund Limited (together, including the master funds into which such funds invest).

 

'GFSC Code' means the Guernsey Financial Services Commission Financial Sector Code of Corporate Governance.

 

'Highbridge' means Highbridge Capital Management, LLC (the "Investment Manager").

 

'HMS Master Fund' means Highbridge Multi-Strategy Master Fund, L.P. (formerly: 1992 Multi-Strategy Master Fund, L.P.), the multi-strategy fund managed by Highbridge into which the Company invests substantially all of its assets, via its investment in Class F shares of Highbridge Multi-Strategy Fund Corporation (formerly: 1992 Multi-Strategy Fund Corporation).

 

'MSF Corp' means Highbridge Multi-Strategy Fund Corporation (formerly: 1992 Multi-Strategy Fund Corporation), an exempted company incorporated with limited liability in the Cayman Islands.

 

'IFRS' means the International Financial Reporting Standards as adopted by the European Union.

 

The 'Secretary' or the 'Administrator' means Praxis Fund Services Limited.

 

'Law' means the Companies (Guernsey) Law 2008 (as amended).

 

The S&P 500 Index ('S&P 500') consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index (stock price times number of shares outstanding), with each stock's weight in the Index proportionate to its market value. Ticker: SPX Index (Currency USD). The index is USD denominated

 

'Mandatory Convertible' - these are convertible bonds that automatically convert to equity on a future date.  They will typically pay a higher coupon to compensate the holder for the additional risk that this carries and the dividends that they could receive by holding the underlying stock.  Mandatory convertibles are effectively a deferred form of equity issuance and are a popular way of raising capital for high growth companies when ipo markets are closed or the company does not wish to dilute its share capital.

 

'Multi-Strat Creditors' refers to shareholders who elected to redeem their shares following the First EGM and Second EGM.

 

'Shares' means the sterling Shares of the Company in issue.

 

'SPACs' - ('Special Purpose Acquisition Companies'). These are stock exchange listed companies that raise capital to acquire private companies which are not typically identified in advance. They are more commonly known as shell companies in the UK.

 

'Sharpe Ratio' means the average return earned in excess of the risk-free rate per unit of volatility or total risk. The Sharpe measure was developed by Nobel Laureate William Sharpe. Return (the numerator) is defined as the incremental average monthly return of an investment over the risk free rate. Risk (the denominator) is defined as the standard deviation of the monthly investment returns less the risk free rate. The values for the risk free rate for the calculations are those of the 90 Day U.S. Treasury Bill. Values are presented in annualized terms; annualized Sharpe Ratios are calculated by multiplying the monthly Sharpe Ratio by the square root of twelve.

 

'Underlying Fund' means Highbridge Tactical Credit Master Fund, L.P. (formerly: 1992 Tactical Credit Master Fund, L.P.), the tactical credit fund managed by Highbridge into which the Company invests substantially all of its assets, via its investment in Class F shares of Highbridge Tactical Credit Fund, Ltd (formerly: 1992 Tactical Credit Fund Corporation).

 

'Annualised Volatility' measures the dispersal or uncertainty in a random variable. It measures the degree of variation of monthly net returns around the average monthly net return. For this reason, volatility is often used as a measure of investment risk. Values are calculated by applying the traditional sample standard deviation formula to monthly return data, and then annualised by multiplying the result by the square root of twelve.

 

'Website' means the Company's website, https://www.highbridgemsfltd.co.uk

Directors and Service Providers
Directors
Vic Holmes
Steve Le Page
Paul Le Page
Registered Office of the Company
Sarnia House
Le Truchot
St Peter Port
Guernsey GY1 1GR
Administrator and Secretary
Praxis Fund Services Limited
Sarnia House
Le Truchot
St Peter Port
Guernsey GY1 1GR
Auditor
PricewaterhouseCoopers CI LLP
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey GY1 4ND
Registrar, Paying Agent and Transfer Agent
Anson Registrars Limited
Ground Floor
Dorey Court
St Peter Port
Guernsey GY1 4EU
UK Transfer Agent
Anson Registrars (UK) Limited
The Scalpel
18th Floor
Lime Street
London
England
EC3M 7AF
Investor and Public Relations
J.P. Morgan Asset Management
60 Victoria Embankment
London
England EC4Y 0JP
Investment Manager and AIFM
Highbridge Capital Management LLC
40 West 57th Street - 32nd Floor
New York
NY10019
Corporate Brokers
finnCap Limited
60 New Broad Street
London
England EC2M 1JJ
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
Solicitors to the Company as to English Law
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London
England EC2A 2EG
Advocates to the Company as to Guernsey Law
Mourant Ozannes
PO Box 186
Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey GY1 4HP
Registered company number: 44704


 

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