THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
BH Global Limited (the “Company”)
(a closed-ended collective investment scheme established as a company with limited liability under the laws of Guernsey with registered number 48555)
12 March 2021
Publication of Shareholder Circular
Further to its announcement of 16 February, the Board of Directors of BH Global Limited announces that it has today published a shareholder circular giving notice of an Extraordinary General Meeting (the “EGM”). At the EGM shareholders will be asked to consider and, if thought appropriate, approve a proposal to amend the Company’s management fee arrangements in conjunction with an undertaking by the Board to facilitate an exit for those Shareholders who do not wish to remain invested in the Company on the new fee basis. Further details of the EGM, which will be held on 25 March 2021 at 3.30 p.m., are set out below.
On 22 January 2021, the Company received a letter (the “BH Letter”) from its Manager, Brevan Howard Capital Management LP, proposing an increase in the Manager’s fees for managing the Company and requesting that the Board should take certain steps by 17 February 2021, failing which the Manager advised that it would be serving notice to terminate the Management Agreement. The Company forthwith released the entire text of the BH Letter by way of an announcement on 22 January 2021.
The Board has made, in good faith, various proposals regarding alternative fee arrangements to the Manager and the Manager has been unwilling to adopt any Board-proposed alternative to the fee structure set out in the BH Letter. Consequently, the Board has decided that Shareholders, as a whole, should determine whether the new fee arrangements should be put in place. At the same time, the Board is conscious that some Shareholders may not want to remain invested in the Company if the new fee arrangements are implemented. Accordingly, the Board intends to facilitate an exit for such Shareholders by means of a tender offer prior to any change in the management fee taking effect. The Board is therefore convening an Extraordinary General Meeting to allow Shareholders to vote on this proposal as a whole (the “Proposal”).
Amendments to the management fee arrangements
The Current Management Fee
Pursuant to the Management Agreement, the Manager currently receives the following fees from the Company in respect of its services to the Company:
- a fee equal to 1/12 of 1.0 per cent per month of the “Reference Net Asset Value” of each class of Shares (before deduction of that month’s management fee and before making any deduction for any accrued Performance Fees). The “Reference Net Asset Value” is defined as the lower of:
(A) the Net Asset Value for the relevant class of Shares; and
(B) the “Base NAV” for that class of Shares, being the Net Asset Value for that class of Shares as at 3 October 2016, adjusted for any increases or decreases in the Net Asset
Value arising from issues, repurchases, redemptions, cancellations or conversions between currency classes of Shares,
(the “Current Management Fee”); and
- a performance fee (the “Performance Fee”) calculated by reference to the increase (if any) in the Net Asset Value per Share of each class of Shares since the end of the Calculation Period in respect of which a Performance Fee was last earned. The Performance Fee in respect of each class of Shares is equal to (A) 20 per cent of the extent to which (if any) the Net Asset Value per Share of the relevant class of Shares as at the final Brevan Howard Multi-Strategy Master Fund NAV Calculation Date in that Calculation Period (adjusted for any increases or decreases in the Net Asset Value arising from issues, repurchases, redemptions, cancellations or conversions between currency classes of Shares) exceeds the “Base Net Asset Value per Share” of the relevant class of Shares multiplied by (B) the number of Shares of such class in issue on the final date of such Calculation Period and calculated before deduction of the Performance Fee in respect of that Calculation Period. The “Base Net Asset Value per Share” is the greater of (a) the Net Asset Value per Share of the relevant class as at 31 December 2016 and (b) the highest Net Asset Value per Share of the relevant class of Shares achieved as at the final Brevan Howard Multi-Strategy Master Fund NAV Calculation Date as at the end of any Calculation Period after the Calculation Period ending on 31 December 2016.
These fee arrangements were agreed with the Manager in the Management Agreement that was entered into on 4 July 2017. For the avoidance of doubt, the Company is invested in a share class in the Master Fund to which no management or performance fees are charged to the Company by the Manager nor any affiliate of the Manager.
In respect of the Current Management Fee, the Base NAV calculation does not take into account an increase in the Net Asset Value of a class of Shares by reason of an increase in the value of the Master Fund through positive performance alone. This means that, in effect, the Company paid the Manager a management fee equivalent to:
(A) 0.82 per cent. of Net Asset Value in the financial year ended 31 December 2020 in respect of the US Dollar Share class; and
(B) 0.88 per cent. of Net Asset Value in the financial year ended 31 December 2020 in respect of the Sterling Share class.
The New Management Fee
In respect of the Current Management Fee, the Manager is proposing to:
(A) increase the applicable percentage rate from 1.0 per cent. to 2.0 per cent.; and
(B) apply the increased rate to the Net Asset Value of the relevant class of Shares, removing the concepts of Reference Net Asset Value and Base NAV from the calculation.
Accordingly, the new management fee would be equal to 1/12 of 2.0 per cent. per month of the Net Asset Value for the relevant class of Shares (the “New Management Fee”). The New Management Fee would apply from 1 July 2021 by which time it is expected that the proposed tender offer shall have been completed.
The New Management Fee would equate to more than double the Current Management Fee payable in respect of the financial year ended 31 December 2020.
No changes have been proposed by the Manager to the Performance Fee.
The Manager is a related party of the Company for the purposes of the Listing Rules. While the amendments made pursuant to the Proposal only constitute a smaller related party transaction between the Company and the Manager for the purposes of Listing Rule 11.1.10R, Shareholders will be asked to vote on the Proposal as the Board believes it appropriate in the circumstances for Shareholders to have the opportunity to opine on the amendments as part of the Proposal. The changes to the management fee will therefore only take effect if Shareholders approve the Proposal at the EGM.
Planned Tender Offer
As noted above, the Board believes it appropriate as part of the Proposal to provide an exit opportunity for those Shareholders who do not wish to remain invested in the Company in the event that the amendments to the fee arrangements are implemented. The provisions of the Management Agreement do not prevent the Board considering, and implementing, a return of capital to Shareholders should it wish to do so following the EGM. However, any return of capital would be subject to the provisions of the Management Agreement; in particular, if the Net Asset Value of either class of the Company’s Shares were to be reduced by a return of capital, the Company would be required to pay to the Manager an amount equal to 2 per cent. of the amount by which the Net Asset Value of that class is reduced (save to the extent that the Annual Buyback Allowance in respect of that Share class was being utilised for the relevant calendar year).
The Board has however reached agreement with the Manager that, provided that a return of capital as part of the Proposal is effected by way of a tender offer limited to no greater than 40 per cent. of each Share class, and that the pricing of such tender offer represents the prevailing Net Asset Value per Share less 2 per cent. plus the associated costs of the tender, the Manager will waive its right under the Management Agreement to receive 2 per cent. of the amount by which the Net Asset Value of either class is reduced in excess of the Annual Buyback Allowance; and that such sum will instead accrue to the benefit of the Company’s continuing Shareholders.
Accordingly, the Board currently intends to undertake a tender offer to Shareholders on these terms in the weeks following the EGM if the Proposal is approved. The precise form in which the exit will be effected will be determined by the Board following the EGM, with a further shareholder circular to be published, if required.
The implementation of the Proposal requires the approval of Shareholders at the EGM. The EGM has been convened for 25 March 2021 at 3.30 p.m. at 7 New Street, St Peter Port, Guernsey GY1 2PF. At the EGM, Shareholders will be asked to consider and, if thought fit, pass an ordinary resolution to approve the Proposal. The majority required for the passing of the Resolution to be proposed at the EGM is a simple majority of the voting rights cast (in person or by proxy) on that Resolution at the EGM.
If Guernsey’s existing restrictions to address the COVID-19 pandemic remain in place at the relevant time, physical attendance at the EGM will not be possible. Accordingly, attendance at the EGM is expected to be limited to the minimum necessary quorum of two Shareholders entitled to vote and attending in person or by proxy. All votes on the resolutions contained in the Notice of EGM will be held by poll, so that all proxy votes will be counted.
Neither the Manager nor any of its associates (as such term is defined in the Listing Rules) own any Shares in the Company. The Manager will not vote on the Resolution and has taken all reasonable steps to ensure that none of its associates (as such term is defined in the Listing Rules) will vote on the relevant resolution.
In addition, Alan Howard, who is the co-founder of Brevan Howard and indirect majority owner of the Manager, has agreed to procure that any Shares in which he has a beneficial interest will not be voted on the Resolution.
Defined terms in this announcement will have the same meaning as defined in the Company’s shareholder circular dated 12 March 2021. A copy of the circular will be available shortly on the Company’s website www.bhglobal.com.
Sir Michael Bunbury
Investec Bank plc
Tel: +44 (0)20 7597 5970