The board BH Global Limited has announced that following discussion with the manager, they have agreed a reduction to the management fee from two per cent. to one per cent. of net asset value per annum. The board believes that the reduction in the management fee is a very positive enhancement for investors and a significant affirmation by the manager of its ongoing commitment to the company.
With retrospective effect from 1 April 2017:
The management fee payable under the Management Agreement will be reduced from two per cent. per annum to one per cent. per annum and, as announced on 19 October 2016, no management fee will be payable on any performance-related growth of the company.
Were the Management Agreement to be terminated by the company, the management fee would revert to two per cent. of the prevailing net asset value in respect of the notice period, or in respect of any payment in lieu of notice (as is currently the case).
The company may repurchase or redeem shares of either class in each calendar year, including pursuant to the class closure and annual partial capital return provisions contained in the company’s articles of incorporation, up to an aggregate number equal to five per cent. of the shares of that class in issue as at 31 December in the prior calendar year (the “Annual Buy Back Allowance”) without making any payment to the manager.
In the event that, in any calendar year, the aggregate number of shares repurchased or redeemed exceeds the Annual Buy Back Allowance for that class, the company will be required to pay the manager an amount equal to two per cent. of the repurchase price of any share that is repurchased or redeemed by the company in excess of the Annual Buy Back Allowance, including pursuant to the class closure and annual partial capital return provisions contained in the Articles.
In respect of the 2017 calendar year (and taking into account shares that have already been repurchased by the company since 1 January 2017), the Annual Buy Back Allowance for the company’s Sterling share class will be 806,282 Sterling shares and for the US Dollar share class will be 152,269 US Dollar shares.
The board has agreed with the Manager that if, on the last business day in March, June, September or December of any year, the net asset value of the company were to be below US$300 million (on the basis of the prevailing US Dollar/Sterling exchange rate), the Board would convene a general meeting of the company’s shareholders at which a special resolution proposing the liquidation of the company would be put forward. Were the resolution to be passed, the company would be liquidated and an amount equal to two per cent. of the company’s net asset value (subject to a deduction in respect of any amount of the Annual Buy Back Allowance for the relevant calendar year that remains unused) would be paid to the Manager in addition to any other fees due to the Manager up to the date of termination of the Management Agreement.
Commenting on the changes, the Chairman of BH Global, Sir Michael Bunbury, said:- “I am very pleased to be able to report agreement that, with effect from 1 April 2017, the annual management fee has been halved from two per cent. to one per cent. The annual management fee represents the largest regular expense for the Company, and the reduction will result in an annual saving of some US$4.5
million based on the current size of the Company.
The Company has agreed with the Manager that it may make a partial capital return or buy back up to five per cent. of each class of share in each calendar year free of a payment to the Manager. Beyond that five per cent., any reduction in the number of shares in each class will trigger a payment to the Manager of two per cent. of the repurchase price of such shares. The directors are not recommending any partial capital return in 2017 in respect of the 2016 NAV increase.
The directors are mindful of the discount to NAV at which the shares have been trading recently. The Board considers that the positive enhancement to shareholder returns which the reduction in the management fee will bring, coupled with the Board’s intention to maintain a proactive approach to share buybacks, should occasion a re-rating.
Overall the directors are unanimous in their view that this set of changes materially enhances the investment proposition for BH Global as a low volatility diversifier for portfolio construction. They look forward to the Manager building on the success of 2016 which, as reported in the recently published Annual Report, delivered growth of 6.60 per cent. in the NAV per share of the Sterling share class.”
BHGU / BHGG : Fees slashed on BH Global but read the small print!