OFFERING MEMORANDUM OF GLOBAL HIGH INCOME FUND LTD. (A Cayman Islands Exempted Company, registered as an administered mutual fund with the Cayman Islands Monetary Authority) FEBRUARY 2017 RELATING TO THE OFFERING OF PARTICIPATING, NON-VOTING SHARES, OF US$0.001 PAR VALUE EACH, DESIGNATED INTO THE FOLLOWING CLASSES: CLASS A USD SHARES, CLASS A EUR SHARES, CLASS A GBP SHARES, CLASS A SGD SHARES, CLASS A HKD SHARES AND CLASS B USD SHARES, CLASS B EUR SHARES, CLASS B GBP SHARES, CLASS B SGD SHARES, CLASS B HKD SHARES AND CLASS C USD SHARES, CLASS C EUR SHARES, CLASS C GBP SHARES, CLASS C SGD SHARES, CLASS C HKD SHARES Investment Manager Hypa Asset Management Ltd Clifton House 75 Fort Street PO Box 1350 Grand Cayman KY1-1108 Cayman Islands THIS OFFERING MEMORANDUM (THIS “OFFERING MEMORANDUM”) IS SUBMITTED TO YOU ON A CONFIDENTIAL BASIS SOLELY IN CONNECTION WITH YOUR CONSIDERATION OF AN INVESTMENT IN GLOBAL HIGH INCOME FUND LTD. (THE “FUND”). BECAUSE OF THE CONFIDENTIAL NATURE OF THIS OFFERING MEMORANDUM, ITS USE FOR ANY OTHER PURPOSE MAY INVOLVE SERIOUS LEGAL CONSEQUENCES. THIS OFFERING MEMORANDUM MAY NOT BE REPRODUCED IN WHOLE OR IN PART, AND IT MAY NOT BE DELIVERED TO ANY PERSON WITHOUT THE PRIOR WRITTEN CONSENT OF THE BOARD OF DIRECTORS OF THE FUND.
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OFFERING MEMORANDUM
OF
GLOBAL HIGH INCOME FUND LTD.
(A Cayman Islands Exempted Company, registered as an administered mutual fund with
the Cayman Islands Monetary Authority)
FEBRUARY 2017
RELATING TO THE OFFERING OF PARTICIPATING, NON-VOTING SHARES, OF US$0.001 PAR
VALUE EACH, DESIGNATED INTO THE FOLLOWING CLASSES:
CLASS A USD SHARES, CLASS A EUR SHARES, CLASS A GBP SHARES, CLASS A SGD SHARES,
CLASS A HKD SHARES
AND
CLASS B USD SHARES, CLASS B EUR SHARES, CLASS B GBP SHARES, CLASS B SGD SHARES,
CLASS B HKD SHARES
AND
CLASS C USD SHARES, CLASS C EUR SHARES, CLASS C GBP SHARES, CLASS C SGD SHARES,
CLASS C HKD SHARES
Investment Manager Hypa Asset Management Ltd
Clifton House
75 Fort Street
PO Box 1350
Grand Cayman
KY1-1108
Cayman Islands
THIS OFFERING MEMORANDUM (THIS “OFFERING MEMORANDUM”) IS
SUBMITTED TO YOU ON A CONFIDENTIAL BASIS SOLELY IN CONNECTION
WITH YOUR CONSIDERATION OF AN INVESTMENT IN GLOBAL HIGH INCOME
FUND LTD. (THE “FUND”). BECAUSE OF THE CONFIDENTIAL NATURE OF THIS
OFFERING MEMORANDUM, ITS USE FOR ANY OTHER PURPOSE MAY INVOLVE
SERIOUS LEGAL CONSEQUENCES. THIS OFFERING MEMORANDUM MAY NOT
BE REPRODUCED IN WHOLE OR IN PART, AND IT MAY NOT BE DELIVERED TO
ANY PERSON WITHOUT THE PRIOR WRITTEN CONSENT OF THE BOARD OF
DIRECTORS OF THE FUND.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 2
GLOBAL HIGH INCOME FUND LTD. (the “Fund”) is a Cayman Islands exempted
company incorporated on 29 July 2014 to operate as an open ended investment fund. This
Offering Memorandum relates to the offering of participating, non-voting shares, of
US$0.001 par value each (the “Shares”), designated into the following classes of Shares
(each being referred to herein as a “Class”): Class A USD Shares, Class A EUR Shares,
Class A GBP Shares, Class A SGD Shares, Class A HKD Shares (“Class A Shares”) and
Class B USD Shares, Class B EUR Shares, Class B GBP Shares, Class B SGD Shares, Class
B HKD Shares (“Class B Shares”) and Class C USD Shares, Class C EUR Shares, Class C
GBP Shares, Class C SGD Shares and Class C HKD Shares (“Class C Shares”).
The Directors, whose names are set out in the directory below, and the Investment Manager
(as defined below) accept responsibility for the information contained in this Offering
Memorandum. To the best of the knowledge and belief of the Directors and the Investment
Manager (who have taken all reasonable care to ensure that such is the case) the information
contained in this Offering Memorandum is in accordance with the facts and does not omit
anything likely to affect the importance of such information.
The Fund is a mutual fund under the Cayman Islands Mutual Funds Law (as revised) (the
“Mutual Funds Law”). As a mutual fund, the Fund has been registered, as an administered
mutual fund under Section 4(1)(b) of the Mutual Funds Law, with and is subject to the
regulation and supervision of the Cayman Islands Monetary Authority (“Monetary
Authority”). The Monetary Authority has supervisory and enforcement powers to ensure
compliance with the Mutual Funds Law. Regulation under the Mutual Funds Law entails
the filing of prescribed details in respect of this Offering Memorandum and the filing of the
Fund's audited accounts annually with the Monetary Authority.
As a regulated mutual fund, the Monetary Authority may at any time instruct the Fund to
have its accounts audited (in addition to the mandatory annual audit) and to submit them to
the Monetary Authority within such time as the Monetary Authority specifies. In addition,
the Monetary Authority may ask the Directors of the Fund to give the Monetary Authority
such information or such explanation in respect of the Fund as the Monetary Authority may
reasonably require to enable it to carry out its duties under the Mutual Funds Law. Failure
to comply with these requests by the Monetary Authority may result in substantial fines
being imposed on the Directors of the Fund and may result in the Monetary Authority
applying to the court to have the Fund wound up.
The Fund will not, however, be subject to supervision in respect of its investment activities
or the constitution of the Fund's investment portfolio by the Monetary Authority or any other
governmental authority in the Cayman Islands, although the Authority does have power to
investigate the activities of the Fund in certain circumstances.
The Monetary Authority is prohibited by the Mutual Funds Law from disclosing any
information relating to the affairs of a mutual fund other than disclosure required for the
effective regulation of a mutual fund or when required or permitted to do so by law or by a
court.
Neither the Monetary Authority nor any other governmental authority in the Cayman Islands
has commented upon or approved the terms or merits of this Offering Document and makes
no warranty or representation as t o the suitability of the Fund for investment purposes.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 3
There is no investment compensation scheme available to investors in the Cayman Islands.
The Shares are offered solely on the basis of this Offering Memorandum and those
documents expressly incorporated by reference herein which shall include any supplement
to this Offering Memorandum and, when published, the most recent annual report and
accounts of the Fund and, if later, the half-yearly report and accounts.
Distribution of this Offering Memorandum without such report and accounts, where
available, is not authorised. Any information or representations not contained within this
Offering Memorandum may not be relied upon as having been authorised by the Fund or the
Directors and should be disregarded. This Offering Memorandum contains information in
relation to the Fund and the offering of Shares at the date hereof. It is subject to subsequent
changes in applicable law and neither the delivery of this Offering Memorandum nor the
allotment or issue of Shares shall create any implication whatsoever that there has been no
change in such law or the affairs of the Fund since the date hereof.
Prospective investors should carefully read this Offering Memorandum. However, the
contents of this Offering Memorandum should not be considered to be legal or tax advice,
and each prospective investor should consult with its own counsel and advisers as to all
matters concerning an investment in the Fund.
The base currency of the Fund is the US Dollar. As the Fund’s Net Asset Value (as defined
below) will be calculated in US Dollars, each holder of Shares, and not the Fund, will bear
the risk of any foreign currency exposure resulting from differences, if any, in the value of
the US Dollar relative to the Functional Currency of the Class of Share in which such
shareholder subscribes. Certain of the assets of the Fund may be held in securities and other
investments which are denominated in other currencies. The Fund, however, values its
investments and other assets in U.S. Dollars. Accordingly, the value of such assets may be
affected favourably or unfavourably by fluctuations (to the extent unhedged) in currency
rates. The Fund may, in its discretion, decide to prepare financial statements and report to its
shareholders in other currencies. The Fund will not pursue a currency hedging policy.
Prospective investors whose assets and liabilities are predominantly in other currencies
should also take into account the potential risk of loss arising from fluctuations in value
between the U.S. Dollar and such other currencies. Prospective investors should also note
that there can be no assurance that any hedges which are in place from time to time will be
effective.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 4
Restrictions on Distribution
The distribution of this Offering Memorandum and the offering of Shares in certain
jurisdictions is restricted. There will be no public offering of Shares and no offer to sell (or
solicitation of an offer to buy) is being made in any jurisdiction in which such offer or
solicitation would be unlawful. It is the responsibility of any recipient of this Offering
Memorandum to confirm and observe all applicable laws and regulations. The following
information is provided as a general guide only:
Cayman Islands: The Fund is prohibited from making any invitation to the public of the
Cayman Islands to subscribe for the shares. “Public” for these purposes shall have the same
meaning as ‘Public in the Islands’ as defined in the Mutual Funds Law. Non-resident or
exempted companies and certain other non-resident or exempted entities established in the
Cayman Islands and engaged in offshore business may however be permitted to subscribe.
European Members States: The Investment Manager does not currently intend to market
the Fund in any EEA jurisdiction. However, to the extent the Investment Manager does
decide to market the Fund in any EEA jurisdiction, the distribution of Shares will be
exclusively made to, and directed at, those persons in such EEA jurisdiction to whom the
Fund may be marketed in accordance with the local private placement rules of such
jurisdiction.
Whilst the Investment Manager may not be actively marketing the Fund in any EEA
jurisdiction, it is possible that investors domiciled in or with a registered office in such
jurisdiction may nevertheless contact the Investment Manager to request information about
the Fund (including, potentially, for a copy of this Offering Memorandum) at their own
initiative, without being asked or prompted by the Investment Manager to do so (a “Reverse
Solicitation Investor”). The Investment Manager may, in its discretion, decide to provide
such information about the Fund as requested by a Reverse Solicitation Investor, but always
only in accordance with any restrictions or conditions imposed by that jurisdiction.
Singapore: This Offering Memorandum does not relate to a collective investment scheme
which is authorized under Section 286 of the Securities and Futures Act, Chapter 289 of
Singapore (the “SFA”) or recognized under Section 287 of the SFA. The Fund is not
authorized or recognized by the Monetary Authority of Singapore (the “MAS”) and the
Shares are not allowed to be offered to the retail public in Singapore. This Offering
Memorandum and any other document or material issued in connection with the offer or sale
of the Shares is not a prospectus as defined in the SFA. Accordingly, statutory liability under
the SFA in relation to the content of prospectuses would not apply. Each Prospective
Investor should consider carefully whether the investment is suitable for the Prospective
Investor.
The recipient of this Offering Memorandum should note that the offering of Shares is subject
to the terms of this Offering Memorandum and the SFA. Pursuant to Section 305 of the
SFA, read with Regulation 32 and the Sixth Schedule to the Securities and Futures (Offers
of Investments) (Collective Investment Schemes) Regulations 2005 (the “Regulations”), the
MAS has been notified in relation to the offer of Shares in the Fund, and in accordance with
the SFA and the Regulations, the Fund has been entered into the list of restricted schemes
maintained by the MAS for the purposes of the offer of Shares in the Fund to accredited
investors and other relevant persons as defined in and pursuant to Section 305 of the SFA.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 5
Accordingly, the offer or invitation to subscribe for or purchase Shares in the Fund, which
is the subject of this Offering Memorandum, is an exempt offer made only: (i) to
“institutional investors” pursuant to Section 304 of Chapter 289 of the SFA (ii) to “relevant
persons” pursuant to Section 305(1) of the SFA, (iii) to persons who meet the requirements
of an offer made pursuant to Section 305(2) of the SFA, or (iv) pursuant to, and in
accordance with the conditions of, other applicable exemption provisions of the SFA. The
MAS assumes no responsibility for the contents of this Offering Memorandum.
No exempt offer of the Shares for subscription or purchase (or invitation to subscribe for or
purchase the Shares) may be made, and no document or other material (including this
Offering Memorandum) relating to the exempt offer of Shares may be circulated or
distributed, whether directly or indirectly, to any person in Singapore except in accordance
with the restrictions and conditions under the SFA. By subscribing for Shares pursuant to
the exempt offer under this Offering Memorandum, you are required to comply with
restrictions and conditions under the SFA in relation to your offer, holding and subsequent
transfer of Shares.
Save where Shares acquired are of the same class as (or, in the case of Shares acquired
pursuant to Section 304 of the SFA, can be converted into Shares of the same class as) other
Shares in the Fund an offer for which has previously been made in or accompanied by a
prospectus (as defined in Section 283 of the SFA) and which are listed for quotation on a
securities exchange (as defined in Section 2 of the SFA), any subsequent sale of the Shares
acquired pursuant to an initial offer made in reliance on an exemption under Section 304 or
Section 305 of the SFA may only be made pursuant to the requirements of Sections 304A
or 305A of the SFA, as the case may be, and Regulation 36 of the Regulations.
Further, save where Shares acquired are of the same class as other Shares in the Fund an
offer for which has previously been made in or accompanied by a prospectus (as defined in
Section 283 of the SFA) and which are listed for quotation on a securities exchange (as
defined in Section 2 of the SFA), where Shares are subscribed or purchased under Section
305 of the SFA by: (a) a corporation (which is not an accredited investor (as defined in
Section 4A of the SFA)) the sole business of which is to hold investments and the entire
share capital of which is owned by one or more individuals, each of whom is an accredited
investor (as defined in Section 4A of the SFA); or (b) a trust (where the trustee is not an
accredited investor (as defined in Section 4A of the SFA)) which sole purpose is to hold
investments and each beneficiary of the trust is an individual who is an accredited investor
(as defined in Section 4A of the SFA), securities (as defined in Section 2 of the SFA) of such
corporation or the beneficiaries’ rights and interest (howsoever described) in such trust shall
not be transferred within six (6) months after the corporation has acquired any Shares in the
Fund pursuant to an offer made in reliance on an exemption under Section 305 of the SFA
or Shares in the Fund are acquired for the trust pursuant to an offer made in reliance on an
exemption under Section 305 of the SFA, unless:
(i) that transfer is made only to an institutional investor (as defined in Section
4A of the SFA) or to a relevant person as defined in Section 305(5) of the SFA;
(ii) that transfer arises from an offer referred to in Section 275(1A) of the SFA
(in relation to securities of a corporation referred to in paragraph (a) above) or that
transfer arises from an offer that is made on terms that such rights or interest are
acquired at a consideration of not less than S$200,000 (or the equivalent thereof in
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 6
the applicable currency) for each transaction, whether such amount is to be paid for
in cash or by exchange of securities or other assets (in relation to a trust referred to
in paragraph (b) above);
(iii) no consideration is or will be given for the transfer; or
(iv) the transfer is by operation of law.
United Arab Emirates: The Shares offered hereby are not regulated under the laws of the
United Arab Emirates (“UAE”) relating to funds, investments or otherwise. Neither the Fund
nor this Offering Memorandum is licensed or approved by the UAE Central Bank, the
Emirates Securities Commodities Authority, the Dubai Financial Services Authority, or any
other relevant regulatory authority in the UAE. This Offering Memorandum is strictly
private and confidential and is being distributed to a limited number of
sophisticated/professional investors. This Offering Memorandum does not constitute a
public offer, or an advertisement or solicitation to the public, is intended only for the
individual recipients hereof to whom this Offering Memorandum is personally provided,
and may not be reproduced or used for any other purpose. The Shares may not be offered or
sold directly or indirectly to the public in the UAE.
United States: There will be no offering of Shares in the United States or to any US Person.
THE SHARES ARE SUITABLE FOR SOPHISTICATED INVESTORS, WHO DO NOT REQUIRE
IMMEDIATE LIQUIDITY FOR THEIR INVESTMENTS, FOR WHOM AN INVESTMENT IN THE FUND
DOES NOT CONSTITUTE A COMPLETE INVESTMENT PROGRAMME, AND WHO FULLY
UNDERSTAND AND ARE WILLING TO ASSUME THE RISKS INVOLVED IN THE FUND’S
INVESTMENT PROGRAMME. SUBSCRIBERS FOR SHARES MUST REPRESENT THAT THEY ARE
ACQUIRING THE SHARES FOR INVESTMENT.
OTHER THAN REGISTRATION WITH THE CAYMAN ISLANDS MONETARY AUTHORITY, THE
OFFERING OF SHARES HEREBY HAS NOT BEEN FILED WITH OR APPROVED OR DISAPPROVED
BY ANY REGULATORY AUTHORITY OF ANY COUNTRY OR JURISDICTION. NEITHER HAS THE
CAYMAN ISLANDS MONETARY AUTHORITY NOR ANY OTHER GOVERNMENTAL OR
REGULATORY AUTHORITY IN ANY SUCH OTHER COUNTRY OR JURISDICTION PASSED UPON
OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS
OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE
SHARES ARE NOT REGISTERED FOR SALE, AND THERE WILL BE NO PUBLIC OFFERING OF THE
SHARES.
THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES
DESCRIBED HEREIN IN ANY JURISDICTION TO ANY PERSON OR ENTITY TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SALE.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 7
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 8
GLOBAL HIGH INCOME FUND LTD.
DIRECTORY
DIRECTORS
Simon James Welsh
Margaret Thompson
INVESTMENT MANAGER
Hypa Asset Management Limited
Clifton House, 75 Fort Street,
P.O. Box 1350 Grand Cayman, KY1-1108
Cayman Islands
ADMINISTRATOR
Forbes Hare Fund Services
c/o Forbes Hare Trust Company Limited
Cassia Court
Camana Bay
Suite 716, 10 Market Street
Grand Cayman KY1-9006
Cayman Islands
AUDITORS
Crowe Horwath Cayman Ltd.
Grand Pavilion Commerce Centre PO Box 30851
Grand Cayman, KY1-1204
Cayman Islands
LEGAL ADVISERS TO THE FUND
As to matters of Cayman Islands law: Appleby (Cayman) Ltd.
Clifton House, 75 Fort Street
P.O. Box 190 Grand Cayman, KY1-1104
Cayman Islands
CUSTODIAN
Global Custodial Services Ltd.
The Old Barn, Oasts Business Village
Red Hill, Wateringbury
Kent, ME18 5NN, United Kingdom
REGISTERED OFFICE:
Global High Income Fund Ltd.
c/o Estera
Clifton House, 75 Fort Street
P.O. Box 1350 Grand Cayman, KY1-1108
Cayman Islands
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 9
SUMMARY OF TERMS
The following is a summary of certain information set forth more fully elsewhere in this
Offering Memorandum. This summary should be read in conjunction with and is qualified
in its entirety by, and potential investors should refer to, the more detailed information set
out in the corresponding sections of this Offering Memorandum, any supplements to this
Offering Memorandum, the Memorandum of Association and Articles of Association (the
“Articles”) of the Fund and the material contracts referred to herein.
Defined terms used herein are as described in the “Definitions” section of this Offering
Memorandum.
THE FUND:
The Fund is a Cayman Islands exempted company incorporated on 29 July 2014 to operate
as an open ended investment fund. The Fund was initially registered as a Section 4(3)
regulated mutual fund under the Mutual Funds Law with the Monetary Authority on 24 June
2015 and commenced its business activities on 1 April 2016. The Fund has previously offered
its Class A Shares and Class B Shares to investors. The Fund is now making Class C Shares
available for subscription, together with the Fund's existing Classes of Shares, on the terms
set out in this Offering Memorandum. Accordingly the Fund has been re-registered as an
administered mutual fund under Section 4(1)(b) of the Mutual Funds Law.
INVESTMENT PROGRAMME:
The Fund’s investment objective is to generate consistently high levels of income from a
diversified and international portfolio of asset-backed corporate bonds, debt and loan
instruments issued by small to medium sized companies. The Fund can invest in any
currency, country or sector to maximise risk adjusted returns and to pursue prudent
diversification. Issuer selection is controlled with both quantitative and qualitative analysis
with a focus on the identification and measurements of all risks, especially default risk. The
targeted income of the Fund is 10% per annum net of Fund fees.
There can be no assurance that the investment objective of the Fund will be achieved, and
certain investment practices to be employed by the Fund can, in some circumstances,
substantially increase any adverse impact on the Fund’s investment portfolio.
INVESTMENT MANAGER:
Hypa Asset Management Limited, a Cayman Islands exempted company, has been
appointed as investment manager of the Fund. The directors of the Investment Manager are
Simon James Welsh and Marc Hounsell. In addition, Mr. Welsh is the sole shareholder of
the Investment Manager. Biographies for Messrs Welsh and Hounsell are set out on pages 36
and 40 below.
The Investment Manager has a restricted licence, reference 1231532 issued by the Monetary
Authority on 24 June 2015, to carry out “securities investment business” as a “securities
manager and/or securities advisor” to the Fund, in compliance with the Securities Investment
Business Law (as revised) of the Cayman Islands. The Investment Manager is not otherwise
required to register, and is not registered, with any other regulator.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 10
The Investment Manager is the sole holder of the Founder Shares of the Fund.
MANAGEMENT FEE AND INCENTIVE FEE:
Pursuant to the Investment Management Agreement, the Fund pays to the Investment
Manager a monthly Management Fee in arrears equal to 0.0833% (1.00% annualised) of the
Net Asset Value per Share of the relevant Class as at the relevant monthly Valuation Day for
Class A Shares and Class B Shares. For Class C Shares the Fund pays to the Investment
Manager a monthly Management Fee in arrears equal to 0.0833% (1.00% annualised) of the
Net Asset Value per Share as at the relevant monthly Valuation Day. The Investment
Manager may in its sole discretion, increase, reduce or waive any Management Fees at any
time, including, in particular, during any wind-down of the Fund’s business.
The Fund may also pay to the Investment Manager an Incentive Fee that will be calculated
and accrued annually equal to 1/5th (20%) of the increase in the Net Asset Value per Share
of the relevant Class (other than Special Situation Shares as defined below) per calendar year
as compared to the hurdle adjusted High Watermark. The hurdle to achieve an incentive fee
is 10% per annum. Apart from the Incentive Fee that may be payable to the Investment
Manager the appreciation in Net Asset Value per Share is attributable to Fund investors.
The calculation of the Incentive Fee will include the Net Asset Value of any income
previously paid by the Fund to investors.
The Incentive Fee is calculated in arrears in respect of each Calculation Period and is payable
within 30 days of the end of each Calculation Period. The Fund may establish other Classes
of Shares which may differ in terms of the fees charged, among other things. The Investment
Manager may, at its sole discretion, rebate fees to shareholders or pay a portion of such fees
to a third party.
No Incentive Fee shall be paid with respect to any Special Situation Shares (as defined
below) until such time as the relevant Special Situation Investment (as defined below) is
disposed of or the Directors determine that it should no longer be classified as a Special
Situation Investment.
RISK FACTORS:
The investment programme of the Fund is speculative and entails substantial risks some of
which are detailed under “Certain Risk Factors”.
OTHER ACTIVITIES OF MANAGEMENT
CONFLICTS OF INTEREST:
Certain inherent conflicts of interest, actual and potential, arise from the fact that the
Investment Manager and/or its affiliates, including Hypa Management LLP, a UK
partnership of which Simon Welsh is a founding partner, authorised by the Financial
Conduct Authority to offer advisory services and the distribution of financial products,
provides investment advisory and structuring services to the Fund and the UK PLCs (as
defined below) in which the Fund invests and may carry on investment activities for other
clients, including other investment funds, client accounts and proprietary accounts in which
the Fund has no interest and whose respective investment programmes may or may not be
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 11
substantially similar. Simon Welsh is a Director of the Fund, the sole shareholder and a
director of the Investment Manager, a member of the Fund's Investment Committee and he
may also provide directorial and other services to various vehicles the Fund invests through
further to the Fund Strategy, as detailed on pages 12 and 13, including Bay Consultancy
Ltd., a Seychelles International Business Company, which has been appointed by Hypa
Management LLP as security trustee in relation to the underlying bonds, or other debt or
loan instruments, issued by the "underlying companies" (as defined below).
DIRECTORS:
Whilst the Directors are responsible for the overall management and control of the Fund,
they have delegated all day-to-day activities to service providers described herein. The
Directors intend to meet regularly to review and assess the investment policies and
performance of the Fund, and generally to supervise the conduct of its affairs. For this
purpose, the Directors will receive periodic reports from the Investment Manager detailing
the performance of the Fund and providing an analysis of its investment portfolio. The
Investment Manager will provide such other information as may from time to time be
reasonably required by the Directors for the purpose of such meetings.
ADMINISTRATOR:
Forbes Hare Fund Services, a division of Forbes Hare Trust Company Limited, a licensed
Mutual Fund Administrator under the Mutual Funds Law of the Cayman Islands, has been
retained by the Fund to perform certain administrative, accounting, investor and registrar
services.
The Administrator will also provide the principal office for the Fund in accordance with the
requirements of Section 4(1)(b) the Mutual Funds Law.
The Administrator’s principal place of business is located at:
Forbes Hare Fund Services
c/o Forbes Hare Trust Company Limited
Cassia Court
Camana Bay
Suite 716, 10 Market Street
Grand Cayman KY1-9006
Cayman Islands
CUSTODIAN:
Global Custodial Services Ltd. has been retained by the Fund to arrange custody for the
Fund’s bond investments.
THE SHARES:
The Fund has an authorised share capital of US$50,000 divided into ten (10) non-
participating voting Founder Shares, par value US$1.00, and 49,990,000 non-voting,
participating shares, par value US$0.001 per share (the “Shares”), which are available for
issue hereunder in the following classes (each being referred to herein as a “Class”): Class
A USD Shares, Class A EUR Shares, Class A GBP Shares, Class A SGD Shares, Class A
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 12
HKD Shares (Class A Shares) and Class B USD Shares, Class B EUR Shares, Class B GBP
Shares, Class B SGD Shares, Class B HKD Shares (Class B Shares) and Class C USD
Shares, Class C EUR Shares, Class C GBP Shares, Class C SGD Shares Class C HKD Shares
(Class C Shares). The Fund will also issue further Classes and or series of Shares and may
issue Shares which may have different rights, privileges and terms in the future and which
may be sold in other currencies.
OFFERING OF SHARES:
Class A Shares and Class B Shares were available for issue at an issue price of US$100 per
share for Class A/B USD Shares, EUR 100 per Share for Class A/B EUR Shares, GBP £100
per Share for Class A/B GBP Shares, SGD$100 per Share for Class A/B SGD Shares and
HKD$100 per Share for Class A/B HKD Shares during the Initial Offer Period. Thereafter,
Class A Shares and Class B Shares are available for subscription on Subscription Days at the
relevant Net Asset Value per Class A Share and/or Class B Share as at the Valuation Point
on that Subscription Day. Subscription Days are monthly, on the last Business Day of each
month.
Class C Shares are initially available for issue at an issue price of US$100 per Share for Class
C USD Share, EUR 100 per share for Class C EUR Shares, GBP £100 per share for Class C
GBP Shares, SGD$100 per Share for Class C SGD Shares and HKD$100 per Share for Class
C HKD Shares. Following the first issue of any such Classes of Shares, Class C Shares are
available for subscription on Subscription Days at the relevant Net Asset Value per Class C
Share, as at the Valuation Point on that Subscription Day. Subscription Days are monthly,
on the last Business Day of each month.
The Fund reserves the right to charge a sales charge, which is deducted from an investor’s
subscription, and to pay such charge to the relevant intermediary. The sales charge is
negotiated with intermediaries and investors on a case by case basis.
MINIMUM SUBSCRIPTION:
Unless otherwise determined by the Directors, the minimum initial subscription for Class A
Shares and Class B Shares is US$100,000 or its equivalent in another currency and thereafter,
the minimum subscription for additional Class A Shares and Class B Shares is US$50,000
or its equivalent in another currency.
The minimum initial subscription for Class C Shares is US$10,000 or its equivalent in
another currency and thereafter, the minimum subscription for additional Class C Shares is
US$5,000 or its equivalent in another currency.
SALE AND TRANSFER RESTRICTIONS:
Shares may only be offered, sold and transferred to Qualifying Investors. The Fund will not
register the transfer of any Shares, except with the prior written consent of the board of
Directors (or its designee), which consent may be granted or withheld by the board of
Directors (or its designee) in its sole discretion. In general, the only means of disposing of
Shares will be by tendering such Shares to the Fund for redemption pursuant to the terms
described herein. The board of Directors, in its discretion, may require that all costs and
expenses incurred in connection with the transfer of Shares, including, but not limited to, the
legal fees of the Fund, shall be paid by the transferees.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 13
REDEMPTIONS:
Subject to the restrictions described herein, Shares may generally be redeemed on each
Redemption Day, defined as quarterly on the last Business Day of March, June, September
and December each year. Written notice of Redemption must generally be received by the
Administrator at least 90 days’ prior to the Redemption Day. The redemption of Shares will
be suspended whenever the calculation of the Net Asset Value is suspended. The Directors
or their designees may waive notice or redemption fee requirements or permit redemptions
under such other circumstances and on such conditions as they, in their sole and absolute
discretion, deem appropriate.
In order to facilitate the investment process, it is recommended Shares should be held for at
least 5 years. Where Shares have been acquired on more than one date, they will be redeemed
on a “first in, first out” basis.
Partial redemptions may be refused at the discretion of the Directors if, immediately
following such redemption, the value of such shareholders Shares would be less than the
Minimum Holding. Shares will be redeemed at a per Share price based on the Net Asset
Value per Share of the relevant Class (less payment of any charges, including, without
limitation, the Incentive Fee, with respect to the redeemed Shares) as at the Valuation Point
on the applicable Redemption Day.
Payment of the redemption proceeds for redeemed Shares will be made as soon as possible
and the Fund will use its best endeavours to pay redemption proceeds within 15 Business
Days of the Redemption Day.
In circumstances where the Fund is unable to liquidate assets in an orderly manner in order
to fund redemptions, or where the value of the assets and liabilities of the Fund cannot
reasonably be determined, the Fund may take longer than the time period mentioned above
to effect settlements of redemptions, may effectuate only a portion of a requested redemption
or may even suspend redemptions and, as such, the Fund will only settle payment of
redemptions upon realization of sufficient assets to meet such payments on a case by case
basis.
The Fund may also suspend redemptions of the Shares of any Class in such other
circumstances in which the Directors, deem it to be in the interests of the Fund to do so,
including in circumstances in which the determination of the Net Asset Value of the relevant
Class has not been suspended. In the discretion of the Directors, the Fund may extend the
length of the redemption notice period if the Directors deem such an extension as being in
the best interest of the Fund and the non-redeeming shareholders.
Shares held by or for the account of anyone who is not a Qualifying Investor or where the
value of the Shares is below the Minimum Holding may be subject to compulsory
redemption. Shares may also be compulsorily redeemed at par value only in order to give
effect to the Incentive Fee provisions and the sales charge provisions. The Fund Directors
also reserve the right to execute a compulsory redemption at par value at any time for any
investor.
SPECIAL SITUATION INVESTMENTS
The Directors may on the advice of the Investment Manager designate an existing or
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 14
prospective investment made by the Fund as a Special Situation Investment. If this happens,
each shareholder will have a pro rata proportion of their Shares converted into Special
Situation Shares by way of compulsory redemption of their existing Shares and use of the
redemption proceeds by the Fund to subscribe for the Special Situation Shares. The Directors
may on the advice of the Investment Manager determine that a Special Situation Investment
should no longer be classified as a Special Situation Investment. Upon such determination
or on any disposal of a Special Situation Investment, all Special Situation Shares in the
applicable Class will be automatically converted on a pro rata basis (by way of compulsory
redemption and the use of the redemption proceeds to subscribe for Shares of the relevant
Class) into Shares of the Class which the holders of such Special Situation Shares initially
held (or, in the event that the relevant shareholder is no longer holding Shares of that initial
Class, into such Classes as may be determined by the Directors). If the Shares of any
shareholder have been previously redeemed (other than its Special Situation Shares), the
Fund may compulsorily redeem such shareholder’s Special Situation Shares rather than
convert those Special Situation Shares into Shares of another Class.
For purposes of calculating the Management Fee with respect to Special Situation Shares,
the investments that are allocated to such Special Situation Shares will be valued at the lower
of cost (or carrying value as of the date such investment was allocated to the Special Situation
Shares) or fair value. The Management Fee will accrue on Special Situation Shares held by
such shareholder and be paid, during the relevant period, upon the conversion of the relevant
Special Situation Shares to another Class of Shares or until the relevant Special Situation
Shares are redeemed and the proceeds returned to the relevant shareholder (as the case may
be).
NET ASSET VALUE:
The Net Asset Value of the Fund will be equal to its total assets less its total liabilities as of
any Valuation Day. The Net Asset Value per Share is generally determined by first allocating
any increase or decrease in the Net Asset Value of the Fund for the period of calculation
among all of the issued Shares of the Fund pro rata in accordance with their Net Asset Value
at the beginning of such period. Any Incentive Fee or Management Fee determined with
respect to a particular Share will be debited against the Net Asset Value of such Share.
OTHER FEES AND EXPENSES:
The Administrator receives from the Fund on a monthly basis a fee equal to a percentage of
the Net Asset Value of the Fund (subject to a minimum monthly fee). The Administrator is
also reimbursed for all out-of-pocket expenses as agreed with the Fund.
The Fund is responsible for its own initial organisational costs and expenses, and its on-
going operating costs and expenses.
TAXATION:
On the basis of current Cayman Islands law and practice, the Fund should not be liable to
taxation in the Cayman Islands. In the event any Shares are transferred, such transferring
shareholder may be liable for stamp duty in the receiving jurisdiction. Potential investors
should consult their own advisors regarding tax treatment by the jurisdiction applicable to
them. Investors should rely only upon advice received from their own tax advisors based
upon their own individual circumstances and the laws applicable to them.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 15
REGULATORY MATTERS:
The Fund falls within the definition of a “mutual fund” in terms of the Mutual Funds Law
and accordingly is subject to regulation under that law. As a mutual fund, the Fund has been
registered, as an administered mutual fund under Section 4(1)(b) of the Mutual Funds Law,
with and is subject to the regulation and supervision of the Monetary Authority. The
Directors may, in their sole discretion, make such regulatory filings with respect to the Fund,
in such countries as the directors may determine although it is not anticipated that the Fund
will be qualified for public sale in any country. The Investment Manager has a restricted
licence, reference 1231532 issued by the Monetary Authority on 24 June 2015, to carry out
“securities investment business” as a “securities manager and/or securities advisor” to the
Fund, in compliance with the Securities Investment Business Law (as revised) of the Cayman
Islands. The Investment Manager is not otherwise required to register, and is not registered,
with any other regulator.
INCOME:
The Fund has a targeted income of 10% per annum, net of Fund fees. The income is not
guaranteed and may be changed at the discretion of the Directors, in consultation with the
Investment Manager.
FISCAL YEAR:
The Fund’s full fiscal year ends on 31 December of each year. The first fiscal year of the
Fund will end on 31 December 2016.
AUDITORS; REPORTS TO SHAREHOLDERS:
Crowe Horwath Cayman Ltd. has been retained as the independent auditor of the Fund. An annual report and audited financial statements will be sent to shareholders as soon as
practicable or at the latest within six months of the end of each fiscal year. Shareholders will also receive a half- yearly report prepared by an accountant on behalf of the Investment
Manager, incorporating unaudited financial statements and a quarterly performance report,
prepared by the Investment Manager.
LEGAL COUNSEL:
Appleby (Cayman) Ltd. acts as legal adviser to the Fund as to Cayman Islands law in
connection with the offering of Shares. Appleby (Cayman) Ltd. also acts as counsel to the
Investment Manager. In connection with the offering of Shares and on-going advice to the
Fund, the Investment Manager and its affiliates, Appleby (Cayman) Ltd. will not be
representing shareholders of the Fund. No independent legal adviser has been retained to
represent shareholders of the Fund.
SUBSCRIPTION FOR SHARES:
Persons interested in subscribing for Shares will be required to complete, execute and return
to the Administrator, an application form and any additional documentation necessary to
complete the application.
THE FUND
The Fund is an exempted company incorporated in the Cayman Islands on 29 July 2014
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 16
under the provisions of the Companies Law (as revised) of the Cayman Islands with
registration number 290290. Its objects, as set out in its Memorandum of Association, are
unrestricted subject to compliance with Cayman Islands law.
The Fund commenced its business activities on 1 April, 2016. The Fund has previously
offered its Class A Shares and Class B Shares to investors. The Fund is now making Class C
Shares available for subscription, together with the Fund's existing Classes of Shares, on the
terms set out in this Offering Memorandum.
INVESTMENT PROGRAMME:
The Fund’s investment objective is to generate consistently high levels of income from a
diversified and international portfolio of asset-backed corporate bonds, debt and loan
instruments issued by small to medium sized companies and also referred to in this Offering
Memorandum as underlying companies. The Fund can invest in any currency, country or
sector to maximise risk adjusted returns and to pursue prudent diversification. Issuer
selection is controlled with both quantitative and qualitative analysis with a focus on the
identification and measurements of all risks, especially default risk. The Fund's targeted
income is 10% per annum, net of Fund fees.
Fund Summary
Diversified Fund investing in asset-backed corporate bonds, debt or loan
instruments.
Focused on small to medium sized companies with strong near-term cash flow
generation.
Fund's targeted income is 10% per annum, net of Fund fees.
Thorough investment process including country, sector and company research and
financial ratio analysis.
Open ended Fund with a recommended 5 year plus investment term.
Following the Initial Offer Period the Fund allows monthly subscriptions on each
Subscription Day.
Quarterly redemption facility with 90 days’ notice on each Redemption Day of
March, June, September and December each year.
Fund Strategy
The Fund specialises in lending indirectly to small to medium sized companies (“underlying
companies”) generally via UK PLCs (defined below) in loan packages free of complex
clauses, options and other features.
The Fund will invest in the underlying companies through the UK PLCs which will issue
bonds to the Fund and, in turn, the UK PLCs will hold the underlying bonds, or other debt
or loan instruments, issued by the underlying companies from inception to redemption thus
avoiding the potential realisation of a loss on a bond sale due to interest rate movements and
other factors during the life of the loan. This ‘buy and hold’ strategy also reduces the Fund
costs via the absence of trading fees.
The Investment Manager and its affiliate's appraise the underlying companies and the bonds,
or other debt or loan instruments, to be issued by the underlying companies very carefully,
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 17
selecting firms that are predicted to generate high levels of cash-flow in the near term and
through the duration of the bond, or other debt or loan instrument. To further protect the
interests of the Fund, only asset-backed bonds, or other debt or loan instruments, secured on
the assets and equity of the underlying companies will be considered.
UK PLCs
The Fund will generally invest in secured asset-backed bonds, issued by UK Public Limited
Companies (“UK PLCs”), which UK PLCs will be independently audited by PKF Littlejohn
LLP. The Fund, as the bondholder, will take a debenture security over the assets of each UK
PLC, which debenture security will be held on the Fund’s behalf by Bay Consultancy Ltd.,
a Seychelles International Business Company, as security trustee to protect the interests of
the Fund and its investors in the event of default.
Capital raised by the Fund through the offering of its Shares will be used to make loans to
the UK PLCs, by way of the Fund purchasing asset back bonds issued by the UK PLCs,
which bonds will carry a fixed interest rate over a prescribed term. The UK PLCs will in
turn lend the proceeds of their bond issuances to pre-vetted underlying companies, whose
business strategies and ability to meet their debt obligations have been examined and
undergone extensive due diligence by a specialist due diligence company, currently Bay
Consultancy Ltd. Hypa Management LLP will advise the Investment Manager, the Fund and
UK PLCs on the structuring of these bond and loan arrangements with the underlying
companies.
Global Custodial Services Ltd has been retained by the Fund to take physical custody of the
bond instruments once issued by the UK PLCs to the Fund. Global Custodial Services Ltd
is also the custodian and payment agent for the UK PLCs.
The UK PLCs bond’s offering documents are subject to legal due diligence and review by
Lewis Silkin LLL, a City of London based law firm.
Hypa Management LLP receives a fee of 1% per annum from the UK PLCs in relation to
advisory services provided in connection with the structuring of the bonds acquired by the
Fund.
The underlying companies will utilise the capital borrowed from the UK PLCs in accordance
with the terms of the loan or debt instruments entered into with the UK PLCs, for investment
in a variety of asset classes and jurisdictions. To date however, all such investments have
been completed within the United Kingdom. The loan or debt instruments will be structured
to ensure that the underlying companies pay a fixed interest rate over a prescribed term, with
interest payment dates ranging from every 3 months to every 12 months, to meet the UK
PLCs obligations under the bonds acquired the Fund. The term of the bonds, and
consequently that of the underlying loan or debt instruments, will typically range from 12
months to 5 years with interest payments on the bonds being aligned to meet the Fund's
targeted income of 10% per annum, net of Fund fees.
The Fund, as the bondholder, will take a debenture security over the assets of each UK PLC,
which debenture security will be held on the Fund’s behalf by Bay Consultancy Ltd. as
security trustee. In turn, each UK PLC will take a security interest, as deemed necessary by
the Investment Committee and Investment Manager, over the contractual rights and or other
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 18
assets of the underlying companies to fully protect the interests of the UK PLC and indirectly
those of the Fund and its investors.
The bonds held by the Fund, and the loan or debt instruments entered into by the UK PLCs
with the underlying companies, will be formally reviewed on a monthly basis by the
Investment Manager to ensure that the issuing companies, in each case, remain able to meet
their repayment obligations on an ongoing basis. The boards of directors of the UK PLCs,
pursuant to the terms of the bonds, will be required to immediately advise the Fund if a
material event has occurred that may impact the UK PLCs or the relevant underlying
company's ability to meet its payment obligations going forward.
Corporate Bonds
There are a number of risks associated with investing in corporate bonds including, but not
limited to; default risk, market risk, company specific risk, interest rate risk and credit rating
risk. The Investment Manager believes its investment philosophy, bond selection process
and attention to detail minimises these risks and that Fund's investors are rewarded with high
levels of income potential and a high degree of capital protection to compensate them for
the risks that remain.
The Investment Manager’s approach to limiting the impact of risks on the Fund
includes:
Diversification across companies, sectors, countries, rating and bond duration.
A preference for companies with strong cash flow generation.
Asset backed securitised lending only.
Avoidance of high risk company ‘recovery’ scenarios.
Use of financial ratio analysis including short term liquidity analysis (cash ratio)
and longer term solvency testing (interest coverage and debt to equity).
Comprehensive due-diligence, risk analysis and stress testing.
A focus on bond issuers with a clean corporate history of prior borrowing and
repayments.
A policy of buy at inception and hold until redemption.
A Fund portfolio of clean and simple loans, avoiding complex bond options.
Investment Restrictions
The policy of the Fund is to maintain a diversified corporate bond, debt and loan portfolio so
as to spread the investment risk. The Investment Manager, in consultation with the Directors
of the Fund, has adopted the following investment restrictions and guidelines with regards
to the Fund. By the 3rd anniversary of the Fund launch the Fund will not:
(A) invest more than 20% of its gross assets in a single company, bond, debt or loan;
(B) invest more than 20% of gross assets in long term instruments with a remaining
duration of more than 5 years;
(C) invest less than 25% of gross assets in shorter term instruments realisable in less than
2 years duration;
(D) invest more than 35% of gross assets in a single country;
(E) invest less than a minimum of 10% of gross assets in liquid instruments which may
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 19
include, but are not limited to cash or iShares Corporate Bonds;
Except where specified to the contrary, the above restrictions apply as at the date of the
relevant transaction or commitment to invest. Changes in the investment portfolio of the
Fund will not have to be effected merely because any of the limits contained in such
restrictions would be breached as a result of any appreciation or depreciation in value, or by
reason of the receipt of any right, bonus or benefit in the nature of capital or of any scheme
or arrangement for amalgamation, reconstruction or exchange or by reason of any other
action affecting every holder of the relevant investment. However, no further relevant
securities will be acquired until the limits are again complied with.
Neither the Administrator nor the Custodian is responsible for monitoring adherence to the
investment restrictions of the Fund.
The Investment Manager, in consultation with the Directors of the Fund, reserve the right to
amend any of the above restrictions, and also to add further restrictions, from time to time
without the consent of, or notice to the shareholders.
The investment programme of the Fund is speculative and may entail substantial risks.
Since market risks are inherent in all securities investments to varying degrees, there
can be no assurance that the investment objective of the Fund will be achieved. In fact,
certain investment practices described above can, in some circumstances, potentially
increase the adverse impact on the Fund’s investment portfolio. (See “Certain Risk
Factors”).
THE INVESTMENT MANAGER
Hypa Asset Management Limited, an exempted company incorporated in the Cayman
Islands on 29 July 2014, has been appointed as Investment Manager to the Fund. The
directors of the Investment Manager are Simon James Welsh and Marc Hounsell. In addition,
Mr. Welsh is the sole shareholder of the Investment Manager. Biographies for Messrs Welsh,
and Hounsell are set out on pages 36 and 40 below.
Whilst the Directors have ultimate authority over the management and administration of the
Fund, they have delegated the day-to-day investment management of the Fund's assets to
the Investment Manager and certain administrative responsibilities to the Administrator.
Accordingly, the Investment Manager is responsible for investing and managing the assets
of the Fund in accordance with the terms of the Investment Management Agreement with the
Fund. The Investment Manager may further sub-delegate any or all of its duties pursuant to
the Investment Management Agreement.
The Investment Manager has a restricted licence, reference 1231532 issued by the Monetary
Authority on 24 June 2015, to carry out “securities investment business” as a “securities
manager and/or securities advisor” to the Fund, in compliance with the Securities Investment
Business Law (as revised) of the Cayman Islands. The Investment Manager is not otherwise
required to register, and is not registered, with any other regulator.
The Investment Manager and its affiliates (including its and their partners, directors, officers,
members and employees) may subscribe directly or indirectly for Shares and may invest a
proportion of the Incentive Fee into the Fund.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 20
The Investment Manager was appointed pursuant to an Investment Management Agreement
with the Fund. Under the Investment Management Agreement, the Investment Manager has
full discretion, to invest the assets of the Fund in a manner consistent with the investment
objective, policies and restrictions described in this Offering Memorandum.
The Investment Manager is entitled to receive a Management Fee and may receive an
Incentive Fee as detailed under “Management Fee and Incentive Fee” below.
The Investment Management Agreement will continue to be in force until terminated by any
party upon 90 days’ notice in writing to the other party. It may be terminated forthwith by
any party on immediate written notice if any other party commits any material breach of its
obligations and fails to remedy the breach within 30 days of receipt of written notice
requiring the same, or if the other party is dissolved or otherwise is unable to pay its debts,
becomes insolvent or enters into insolvency proceedings.
Neither the Investment Manager, its members or the directors, shareholders, officers,
employees or members of their respective affiliates, nor their respective legal representatives
(each an “Indemnified Party”) shall be liable to the Fund or its shareholders for any loss
arising in connection with the performance by the Investment Manager of its obligations
except those resulting from the wilful default, actual fraud or Gross Negligence of or any
material breach of the Investment Management Agreement by the Indemnified Party. The
Fund has agreed to indemnify and hold harmless each Indemnified Party from and against
any and all losses, liabilities, damages, expenses or costs suffered, incurred or sustained by
such Indemnified Party, except those resulting from such Indemnified Party’s wilful default
,fraud or Gross Negligence or any material breach of the Investment Management
Agreement by such Indemnified Party.
MANAGEMENT FEE AND INCENTIVE FEE
Pursuant to the Investment Management Agreement, the Fund pays to the Investment
Manager a monthly Management Fee in arrears equal to 0.0833% (1.00% annualised) of the
Net Asset Value per Share of the relevant Class as at the relevant monthly Valuation Day for
Class A Shares and Class B Shares. For Class C Shares the Fund pays to the Investment
Manager a monthly Management Fee in arrears equal to 0.0833% (1.00% annualised) of the
Net Asset Value per Share as at the relevant monthly Valuation Day.
The Investment Manager may in its sole discretion, reduce or waive any Management Fees
at any time, including, in particular, during any wind-down of the Fund’s business.
For purposes of calculating the Management Fee with respect to Special Situation Shares,
Special Situation Investments will be valued at the lower of cost (or carrying value as of the
date on which the Special Situation Investment was designated as such) or fair value. The
Management Fee will accrue on Special Situation Shares held by such shareholder and be
paid, during the relevant period, upon the conversion of the relevant Special Situation Shares
to another Class of Shares or until the relevant Special Situation Shares are redeemed and
the proceeds returned to the relevant shareholder (as the case may be).
The Fund may also pay to the Investment Manager an Incentive Fee that will be calculated
and accrue annually equal to 1/5th (20%) of the increase in the Net Asset Value per Share
(other than Special Situation Shares as defined below) per calendar year as compared to the
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 21
hurdle adjusted High Watermark. The hurdle to achieve an incentive fee is 10% per annum.
Apart from the Incentive fee that maybe payable to the investment manager the appreciation
in Net Asset Value per Share is attributable to Fund investors.
The calculation of the Incentive Fee will include the Net Asset Value of any income
previously paid by the Fund to investors.
The Incentive Fee is calculated in arrears in respect of each Calculation Period and is payable
within 30 days of the end of each Calculation Period. The Fund may establish other classes
of shares which may differ in terms of the fees charged, among other things. The Investment
Manager may, at its sole discretion, rebate fees to shareholders or pay a portion of such fees
to a third party.
No Incentive Fee will be paid unless the Net Asset Value per Share exceeds the hurdle
adjusted High Watermark. Where Shares are redeemed other than at the end of a Calculation
Period, any Incentive Fee accrued in respect of those Shares shall crystallise and become
due and charged in the normal manner described above. If the Investment Management
Agreement is terminated other than at the end of a Calculation Period, the date of termination
will be deemed to be the end of the then-current Calculation Period and the Management
Fee and Incentive Fee will be calculated to such date and payable within 30 days of such
date.
The Investment Manager may, at its sole discretion, rebate fees to shareholders and any such
rebate may be used to subscribe for additional Shares. The Investment Manager may, at its
sole discretion, pay a portion of the Management Fee and/or the Incentive Fee to
intermediaries, placement agents or other third parties.
The Fund may establish other Classes of Shares which may differ in terms of the fees
charged, among other things.
The Management Fee and Incentive Fee are based in part upon unrealised gains (as well as
unrealised losses) and that such unrealised gains and/or losses may never be realised.
OTHER FEES
Hypa Management LLP, a UK partnership authorised by the Financial Conduct Authority
to offer advisory services and the distribution of financial products, provides investment
management services to the Fund and the UK PLCs in which the Fund invests. Simon Welsh
is a founding partner of Hypa Management LLP. Hypa Management LLP receives a fee of
1% per annum from the UK PLCs in relation to advisory services provided in connection
with the structuring of the bonds acquired by the Fund.
EQUALISATION
If an investor subscribes for Shares at a time when the Net Asset Value per Share of that
Class is other than the hurdle adjusted High Watermark of the relevant Class, certain
adjustments will be made to reduce inequities that could otherwise result to the subscriber or
to the Investment Manager.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 22
(A) If Shares are subscribed for at a time when the Net Asset Value per Share is less
than the hurdle adjusted High Watermark of the relevant Class, the investor will be
required to pay an Incentive Fee with respect to any subsequent appreciation in the
value of those Shares. With respect to any appreciation in the value of those Shares
from the Net Asset Value per Share of that Class at the date of subscription up to
the hurdle adjusted High Watermark of that Class, the Incentive Fee will be charged
at the end of each Calculation Period by redeeming at par value such number of the
investor’s Shares of that Class as have an aggregate Net Asset Value (after accrual
for any Incentive Fee) equal to 20% of any such appreciation (a “Incentive Fee
Redemption”). The aggregate Net Asset Value of the Shares of that Class so
redeemed (less the aggregate par value which will be retained by the Fund) will be
paid to the Investment Manager as an Incentive Fee. Incentive Fee Redemptions
are employed to ensure that the Fund maintains a uniform Net Asset Value per
Share of each Class. As regards the investor’s remaining Shares of that class, any
appreciation in the Net Asset Value per Share of those Shares above the hurdle
adjusted High Watermark of the relevant Class will be charged an Incentive Fee in
the normal manner described above.
(B) If Shares are subscribed for a time when the Net Asset Value per Share of that Class
is greater than the hurdle adjusted High Watermark of the relevant Class, the
investor will be required to pay an amount in excess of the then current Net Asset
Value per Share of that Class equal to 20% of the difference between the then
current Net Asset Value per Share of that Class (before accrual for the Incentive
Fee) and the hurdle adjusted High Watermark of that Class (an “Equalisation
Credit”). The Equalisation Credit ensures that all holders of Shares of the same
Class in the Fund have the same amount of capital at risk per Share.
The additional amount invested as the Equalisation Credit will be at risk in the Fund and will
therefore appreciate or depreciate based on the performance of the Shares subsequent to the
issue of the relevant Shares. In the event of a decline as at any Valuation Day in the Net
Asset Value per Share of those Shares, the Equalisation Credit will also be reduced by an
amount equal to 20% of the difference between the Net Asset Value per Share of that class
(before accrual for the Incentive Fee) at the date of issue and as at that Valuation Day. Any
subsequent appreciation in the Net Asset Value per Share of that Class will result in the
recapture of any reduction in the Equalisation Credit.
At the end of each Calculation Period, if the Net Asset Value per Share (before accrual for
the Incentive Fee) exceeds the hurdle adjusted High Watermark of the relevant Class, that
portion of the Equalisation Credit equal to 20% of the excess, multiplied by the number of
Shares of that Class subscribed for by the shareholder, will be applied to subscribe for
additional Shares of that Class for the shareholder. Additional Shares of that Class will
continue to be so subscribed for at the end of each Calculation Period until the Equalisation
Credit, as it may have appreciated or depreciated in the Fund after the original subscription
for Shares of that Class was made, has been fully applied. If the Shares of a shareholder are
redeemed by the Fund before the Equalisation Credit has been fully applied, the shareholder
will receive additional redemption proceeds equal to the Equalisation Credit then remaining
multiplied by a fraction, the numerator of which is the number of Shares of that Class being
redeemed and the denominator of which is the number of Shares of that Class held by the
shareholder immediately prior to the redemption in respect of which an Equalisation Credit
was paid on subscription.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 23
CERTAIN RISK FACTORS
An investment in the Fund involves a high degree of risk, including the risk that the
entire amount invested may be lost. The Fund invests in strategies and investment
techniques with significant risk characteristics, including the risks arising from the volatility
of currency markets.
No guarantee or representation is made that the investment programme will be successful or
that the Fund’s returns will exhibit low correlation with an investor’s other investments.
Prospective investors should consider the following additional factors in determining
whether an investment in the Fund is a suitable investment.
Limited Operating History
There is a limited operating history upon which prospective investors may base an evaluation
of the likely performance of the Fund. The past performance of the Investment Manager
may not be indicative of the future performance of the Fund.
Dependence on the Investment Manager
The success of the Fund depends upon the ability of the Investment Manager to develop and
implement investment strategies that achieve the Fund's investment objective. If the
Investment Manager were to become unable to participate in the management of the Fund,
the consequence to the Fund could be material and adverse and could lead to the premature
termination of the Fund.
General Risks of Investing in Debt Securities
Generally, debt securities will decrease in value when interest rates rise and increase in value
when interest rates decline. The Net Asset Value of the Fund will fluctuate with interest rate
changes and the corresponding changes in the value of the securities in the Fund. The value
of debt securities is also affected by the risk of default in the payment of interest and principal
and price changes due to such factors as general economic conditions and the issuer’s
creditworthiness. Corporate debt securities may not pay interest or their issuers may default
on their obligations to pay interest and/or principal amounts. Certain of the debt securities
that may be included in the Fund from time to time may be unsecured, which will increase
the risk of loss in case of default or insolvency of the issuer. Global financial markets have
experienced a significant re-pricing beginning in 2008 that has contributed to a reduction in
liquidity and the availability of credit, enhancing the likelihood of default by some issuers
due to diminishing profitability or an inability to refinance existing debt.
Fixed Income Securities
The Fund may invest in bonds or other fixed income securities, including, without limitation,
commercial paper and “higher yielding” (including non-investment grade) (and, therefore,
higher risk) debt securities. The Fund will therefore be subject to credit, liquidity and interest
rate risks. Higher-yielding debt securities are generally unsecured and may be subordinated
to certain other outstanding securities and obligations of the issuer, which may be secured
on substantially all of the issuer's assets. The lower rating of debt obligations in the higher-
yielding sector reflects a greater probability that adverse changes in the financial condition
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 24
of the issuer or in general economic conditions or both may impair the ability of the issuer
to make payments of principal and interest. Non-investment grade debt securities may not
be protected by financial covenants or limitations on additional indebtedness. In addition
evaluating credit risk for debt securities involves uncertainty because credit rating agencies
throughout the world have different standards, making comparison across countries difficult.
Also, the market for credit spreads is often inefficient and illiquid, making it difficult to
accurately calculate discounting spreads for valuing financial instruments. It is likely that a
major economic recession could disrupt severely the market for such securities and may
have an adverse impact on the value of such securities. In addition, it is likely that any such
economic downturn could adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon and increase the incidence of default for such
securities.
Default Risk
There is a risk that the issuer, being the UK PLC or the underlying companies, will be unable
to return all or some of the capital and interest payments. In the bond markets this is known
as a default. The equivalent in the equity market would be a company going bankrupt or
falling into administration. If an investor takes advantage of a diversified bond Fund that
invests in many bonds, a default in one bond won’t jeopardise all of the investor’s money.
Fund managers usually place limits on how much of the Fund’s capital can be invested in
one bond, company, sector or country to control exposure to default risk.
In instances where the Fund or the UK PLC has security over the borrowed capital and the
issuer (being the UK PLC or the underlying company) defaults, the Fund or the UK PLC
may be able to recover all or some of the debt in the event of default by taking ownership of
the secured assets. The Fund’s or the UK PLC’s ability take ownership of the assets and to
realise the return of capital is dependent on parties including the security trustee, assigned
to protect the interests of the Fund, as well as the directors of the UK PLCs.
Interest Rate Risk
Fixed-income securities, which include bonds, treasury bills and commercial paper, pay a
fixed rate of interest. The value of fixed-income securities will rise and fall as interest rates
change. For example, when interest rates fall the value of an existing bond will rise because
the coupon rate on that bond is greater than prevailing interest rates. Conversely, if interest
rates rise, the value of an existing bond will fall.
Liquidity Risk
Liquidity is an indicator of how easily an investment may be converted into cash. An
investment may be less liquid if it is not widely traded or if there are restrictions on the
exchange where the trading takes place. Certain securities in which the Fund invests may be
unlisted, distressed or otherwise illiquid. The valuation of these securities is subject to a
significant amount of subjectivity and discretion and there is no guarantee that fair value will
be realized by the Fund on the sale of these securities. Investments with low liquidity can
have significant changes in market value.
Allocation of Liabilities among Classes of Shares – Cross-Class Liability
The Fund has the power to issue Shares in Classes or series. The Articles provide for the
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 25
manner in which the liabilities are to be attributed across the various Classes or series
(liabilities are to be attributed to the specific Class or series in respect of which the liability
was incurred). However, the Fund is a single legal entity and there is no limited recourse
protection for any Class or series. Accordingly, all of the assets of the Fund will be available
to meet all of its liabilities regardless of the class or series to which such assets or liabilities
are attributable. In practice, cross class liability will usually only arise where any separate
Class of Shares becomes insolvent and is unable to meet all of its liabilities. In this case, all
of the assets of the Fund attributable to other separate Classes of Shares may be applied to
cover the liabilities of the insolvent Classes of Shares. The Fund may seek to limit such
cross-class liability contractually by including language limiting recourse to assets
attributable to a particular Class in contracts with service providers, counterparties and other
third parties with whom the Fund contracts but there can be no assurance given that such
contractual limitation will be available or enforceable.
Illiquid Instruments
The Fund may invest a significant portion of its assets in illiquid investments. The Fund 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.
An investment in the Fund is suitable only for certain sophisticated investors who do not
require immediate liquidity for their investments. Where appropriate, positions in the Fund's
investment portfolio that are illiquid and do not actively trade will be marked to market,
taking into account actual market prices, market prices of comparable investments and/or
such other factors (e.g., the tenor of the respective instrument) as may be appropriate. To the
extent that marking an illiquid investment to market is not practicable, an investment will
be carried at fair value, as reasonably determined by the Directors or their delegate. There is
no guarantee that fair value will represent the value that will be realised by the Fund on the
eventual disposition of the investment or that would, in fact, be realised upon an immediate
disposition of the investment.
Illiquidity of Shares
Transfers of Shares are restricted; there is no market for Shares and Shares are not
redeemable at the option of the shareholder. Under certain circumstances redemptions may
be suspended, or the payment of redemption proceeds may be substantially delayed, as
described elsewhere in this Offering Memorandum. The Fund may invest part of its assets
in illiquid investments (usually through Special Situation Shares). The Fund may not be
able to readily dispose of such illiquid investments and, in some cases, may be contractually
prohibited from disposing of such securities for a specified period of time. For the avoidance
of any doubt, Special Situation Shares may not be redeemed by a shareholder.
Variation of Share Rights
The Articles provide that all or any of the special rights attached to any Class of Shares
(unless otherwise provided by the terms of issue of those Shares) may be varied or abrogated
in a materially adverse manner by the Directors with the consent in writing of at least 70%
of the holders of that Class of Shares or with the sanction of a resolution passed by the
holders of not less than 70% of that Class of Shares as, being entitled to do so, vote in person
or by proxy at a separate meeting of the holders of such Shares.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 26
Income/Redemptions in Cash or Kind
Whilst the Fund is not required to distribute cash or other property to the shareholders on a
regular basis the Fund’s target income is 10% per annum. The proposed income is not
guaranteed and is dependent on the income yielding potential of Fund investments.
Notwithstanding the foregoing, the Directors may settle redemptions in specie or in kind.
The Directors, in consultation with the Investment Manager, will determine which assets of
the Fund will be used to settle redemptions in kind and these assets will be either distributed
to redeeming shareholders or transferred to a special purpose vehicle set up specifically for
that purpose and securities in that vehicle will be transferred to redeeming shareholders. By
investing in the Fund, prospective investors will be deemed to have agreed to be registered
as the holder of securities in these special purpose vehicles. Redeemed shareholders
receiving their redemption payment in kind will be responsible for all custody and other
costs involved in changing the ownership of the relevant assets from the Fund to the
redeeming shareholder and all on-going custody costs in respect of such securities or assets.
The redemption in specie terms and conditions do not apply to Class B Shares which are only
available to investors with the prior approval of the Fund Directors.
Side Letters
The Fund or the Investment Manager may enter into “side letter” agreements with certain
shareholders pursuant to which they may give one or more shareholders different fee terms
and access to more frequent and/or more detailed information regarding the Fund’s securities
positions, performance and finances. As a result, certain shareholders may be better able to
assess the prospects and performance of the Fund than other shareholders. Subject to
applicable law, the Fund does not intend to disclose the terms of such side letter agreements
and does not intend to disclose the identities of the shareholders that have entered into such
agreements with the Fund or the Investment Manager.
Access to Information
The Fund will generally provide shareholders with half yearly unaudited information,
prepared by an accountant on behalf of the Investment Manager, regarding the Fund’s
performance. To the extent permitted by applicable laws, the Fund, however, may give one
or more shareholders access to more frequent and/or more detailed information regarding
the Fund’s securities positions, performance and finances than it provides to all shareholders
generally. As a result, certain shareholders may be better able to assess the prospects and
performance of the Fund than other shareholders. The Fund may enter into separate letter
agreements with particular shareholders in respect of any such matters.
Investments in Unlisted Securities
The Fund may invest in unlisted debt securities. Because of the absence of any trading
market for these investments, it may take longer to liquidate, or it may not be possible to
liquidate these positions than would be the case for publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices realised on these
sales could be less than those originally paid by the Fund. Further, companies whose
securities are not publicly traded will generally not be subject to public disclosure and other
investor protection requirements applicable to publicly traded securities.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 27
Risk of Event Driven Investing
Event driven investing requires the Investment Manager to make predictions about (i) the
likelihood that an event will occur and (ii) the impact such event will have on the value of a
company's securities. If the event fails to occur or it does not have the effect foreseen, losses
can result. For example, the adoption of new business strategies or completion of asset
dispositions or debt reduction programs by a company may not be valued as highly by the
market as the Investment Manager had anticipated, resulting in losses. In addition, a
company may announce a plan of restructuring which promises to enhance value and fail to
implement it, resulting in losses to investors. In liquidations and other forms of corporate
reorganisations, the risk exists that the reorganisation either will be unsuccessful, will be
delayed or will result in a distribution of cash or a new security, the value of which will be
less than the purchase price to the Fund of the security in respect of which such distribution
was made.
The consummation of mergers and tender and exchange offers can be prevented or delayed
by a variety of factors, including: (i) opposition of the management or shareholders of the
target company, which will often result in litigation to enjoin the proposed transaction; (ii)
intervention of a governmental or other regulatory agency; (iii) efforts by the target company
to pursue a “defensive” strategy, including a merger with, or a friendly tender offer by, a
company other than the offeror; (iv) in the case of a merger, failure to obtain the necessary
shareholder approvals; (v) market conditions resulting in material changes in securities
prices; (vi) compliance with any applicable securities laws; and (vii) inability to obtain
adequate financing. Because of the inherently speculative nature of event driven investing,
the results of the Fund's operations may be expected to fluctuate from period to period.
Accordingly, investors should understand that the results of a particular period will not
necessarily be indicative of results that may be expected in future periods.
Global Economic and Market Conditions
The Fund may invest in currencies and debt securities traded in various markets throughout
the world, including in emerging or developing markets, some of which are highly controlled
by governmental authorities. Such investments require consideration of certain risks
typically not associated with investing in currencies or securities of developed markets. Such
risks include, among other things, trade balances and imbalances and related economic
policies, unfavourable currency exchange rate fluctuations, imposition of exchange control
regulation by governments, withholding taxes, limitations on the removal of funds or other
assets, policies of governments with respect to possible nationalization of their industries,
political difficulties, including expropriation of assets, confiscatory taxation and social,
economic or political instability in foreign nations. These factors may affect the level and
volatility of securities prices and the liquidity of the Fund's investments.
Unexpected volatility or illiquidity could impair the Fund's profitability or result in losses.
The economies of countries differ in such respects as growth of gross domestic product, rate
of inflation, currency depreciation, asset reinvestment, resource self-sufficiency and balance
of payments position. Further, certain economies are heavily dependent upon international
trade and, accordingly, have been and may continue to be adversely affected by trade
barriers, exchange controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they trade. The
economies of certain countries may be based, predominantly, on only a few industries and
may be vulnerable to changes in trade conditions and may have higher levels of debt or
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 28
inflation.
During 2008 and particularly during the third quarter the global financial services industry
and securities markets experienced significant and adverse conditions including substantially
increased volatility, losses resulting from declining asset values, defaults on securities and
reduced liquidity. These events have resulted in the failure of certain financial services firms
and led other firms to seek mergers with commercial banks. While uncertainty surrounding
the credit crisis and expectations for economic contraction has, in the short term, led to an
increase in overall market volatility and increased trading volume in certain markets, this
trend may not continue. Accordingly, any reduction in trading volumes or market liquidity
could adversely affect the Fund's investments in a material fashion.
Legal Risk
Many of the laws that govern private and foreign investment, debt securities transactions and
other contractual relationships in certain countries, particularly in developing countries, are
new and largely untested. As a result, the Fund may be subject to a number of unusual risks,
including inadequate investor protection, contradictory legislation, incomplete, unclear and
changing laws, ignorance or breaches of regulations on the part of other market participants,
lack of established or effective avenues for legal redress, lack of standard practices and
confidentiality customs characteristic of developed markets and lack of enforcement of
existing regulations.
Furthermore, it may be difficult to obtain and enforce a judgment in certain countries in
which assets of the Fund are invested. There can be no assurance that this difficulty in
protecting and enforcing rights will not have a material adverse effect on the Fund and its
operations. In addition, the income and gains of the Fund may be subject to withholding
taxes imposed by foreign governments for which shareholders may not receive a full foreign
tax credit. Furthermore, it may be difficult to obtain and enforce a judgment in a court outside
of the Cayman Islands.
Regulatory controls and corporate governance of companies in some developing countries
may confer little protection on minority shareholders. Anti-fraud and anti-insider trading
legislation is often rudimentary. The concept of fiduciary duty to shareholders by officers
and directors is also limited when compared to such concepts in Western markets. In certain
instances management may take significant actions without the consent of shareholders and
anti-dilution protection also may be limited.
Availability of investment strategies
The success of the Fund’s investment activities will depend on the Investment Manager’s
ability to identify investment opportunities as well as to assess the import of news and events
that may affect the financial markets. Identification and exploitation of the investment
strategies to be pursued by the Fund involves a high degree of uncertainty. No assurance can
be given that the Investment Manager will be able to locate suitable investment opportunities
in which to deploy all of the Fund’s assets or to exploit discrepancies in the currency,
securities and derivatives markets.
Incentive Fee
The Investment Manager receives an Incentive Fee from the Fund, based upon the
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 29
appreciation, if any, in the net assets of the Fund. The Incentive Fee theoretically may create
an incentive to make investments that are riskier or more speculative than would be the case
if such arrangement were not in effect. In addition, because the Incentive Fee is calculated
on a basis which includes unrealised appreciation, it may be greater than if such
compensation were based solely on realised gains.
Concentration of investments
Although it is the policy of the Fund to diversify its investment portfolio, the Fund may at
certain times hold relatively few investments. The Fund could be subject to significant losses
if it holds a large position in a particular investment that declines in value or is otherwise
adversely affected, including default of the issuer, subject to the limitations imposed in the
“Investment Restrictions” above.
Leverage and financing risk
The Fund may invest in instruments such as bonds relating to companies that are leveraged.
While leverage presents opportunities for increasing a company’s and therefore the Fund’s
total return, it has the effect of potentially increasing losses as well. Accordingly, any event
which adversely affects the value of an investment by the Fund would be magnified to the
extent the company is leveraged.
Derivatives
The Fund may utilise both exchange-traded and over the counter derivative contracts, such
as futures, options and currency swaps for hedging purposes. These instruments are highly
volatile and expose investors to a high risk of loss. The low initial margin deposits normally
required to establish a position in such instruments permit a high degree of leverage. As a
result, depending on the type of instrument, a relatively small movement in the price of a
contract may result in a profit or a loss which is high in proportion to the amount of funds
actually placed as initial margin and may result in unquantifiable further loss exceeding any
margin deposited.
Transactions in over-the-counter contracts may involve additional risk as there is no
exchange market on which to close out an open position. It may be impossible to liquidate
an existing position, to assess the value of a position or to assess the exposure to risk. To the
extent that the Fund writes uncovered options on investments, it could incur an unlimited
loss.
Highly Volatile Markets
The prices of financial instruments in which the Fund may invest can be highly volatile. Price
movements of forward and other derivative contracts in which the Fund’s assets may be
invested are influenced by, among other things, interest rates, changing supply and demand
relationships, trade, fiscal, monetary and exchange control programs and policies of
governments, and national and international political and economic events and policies. The
Fund is subject to the risk of failure of any of the exchanges on which its positions trade or
of its clearinghouses.
Counterparty Risk
Some of the markets in which the Fund may effect transactions are “over-the-counter” or
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 30
“interdealer” markets. The participants in such markets, although regulated, are typically not
subject to credit evaluation and the same regulatory oversight as are members of “exchange-
based” markets. Exchange members normally settle through the exchange and not
bilaterally. This exposes the Fund to the risk that a counterparty will not settle a transaction
in accordance with its terms and conditions because of a dispute over the terms of the
contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing
the Fund to suffer a loss.
Amortisation of Organisational Costs and Valuation of Investments
The policies adopted in relation to the amortisation of organisational costs and the valuation
of investments may not be in accordance with the International Financial Reporting
Standards (“IFRS”). Where this is the case and the difference is material, the financial
statements, which utilise IFRS, will be prepared on a different basis to that used in the
calculation of the Net Asset Value. Any such difference will not impact on the calculation
of the Net Asset Value for the purposes of subscriptions, redemption or relevant fees.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 58
name, address, tax identification number (if any), social security number (if any) and
certain information relating to the investor’s investment;
2 the TIA may be required to automatically exchange information as outlined above
with the IRS, HMRC and other foreign fiscal authorities located in Future Reporting
Jurisdictions;
3 the Fund (or its agent) may be required to disclose to the IRS, HMRC and other
foreign fiscal authorities located in Future Reporting Jurisdictions certain
confidential information when registering with such authorities and if such
authorities contact the Fund (or its agent directly) with further enquiries;
4 the Fund may require the investor to provide additional information and/or
documentation that the Fund may be required to disclose to the TIA, IRS, HMRC or
other foreign fiscal authorities located in Future Reporting Jurisdictions;
5 in the event an investor fails to provide the requested information and/or
documentation, whether or not such failure actually leads to compliance failures by
the Fund, or a risk of the Fund or its investors being subject to withholding tax under
the relevant legislative or inter-governmental regime, the Fund reserves the right to
take any action and/or pursue all remedies at its disposal including, without
limitation, compulsory redemption or withdrawal of the investor concerned; and
6 no investor affected by any such action or remedy shall have any claim against the
Fund (or its agent) for any form of damages or liability as a result of actions taken
or remedies pursued by or on behalf of the Fund in order to comply with any of the
US IGA, the UK IGA or the MCAA, or any of the relevant underlying legislation.
The Fund will pass on the costs of non-compliance to the Shareholder. Ultimately the Fund
may compulsorily redeem a Shareholder’s entire interest in the Fund.
Shareholders are encouraged to consult with their own tax advisers regarding their tax status
and the applicability of this legislation on their investment in the Fund.
Changes in Law
All laws, including laws relating to taxation in the Cayman Islands and other jurisdictions
are subject to change without notice.
The summary above does not address tax considerations that may be applicable to certain
Shareholders under the laws of jurisdictions other than the Cayman Islands. The Fund has
no present plans to apply for any certifications or registrations, or to take any other actions
under the laws of any jurisdictions that would afford the relief to local investors therein from
the normal tax regime otherwise applicable to an investment in the Shares. It is the
responsibility of all persons interested in purchasing the Shares to inform themselves as to
any income or other tax consequences arising in the jurisdictions in which they are resident
or domiciled for tax purposes, as well as any foreign exchange or other fiscal or legal
restrictions relevant to their particular circumstances in connection with the acquisition,
holding, or disposition of the Shares. The value of the Fund’s investments may also be
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 59
affected by repatriation and exchange control regulations.
ANTI-MONEY LAUNDERING REGULATIONS
As part of the Fund's responsibility for the prevention of money laundering, the Fund and its
delegates, including the Investment Manager and the Administrator (including their
respective affiliates, subsidiaries or associates) will require a detailed verification of the
applicant's identity and the source of payment(s).
The Fund, the Investment Manager and the Administrator reserve the right to request such
information as is necessary to verify the identity of an applicant, and the application form
contains a full list of the documentation and information required in order to verify identity.
In the event of delay or failure by the applicant to produce any information required for
verification purposes, the Fund or the Investment Manager or the Administrator will refuse
to accept the application and the subscription monies relating thereto.
If any person who is resident in the Cayman Islands has a suspicion that a payment to the
Fund (by way of subscription or otherwise) contains the proceeds of criminal conduct that
person is required to report such suspicion pursuant to applicable anti-money laundering
legislation.
The Fund, or any directors or agents domiciled in the Cayman Islands, may be compelled to
provide information, subject to a request for information made by a regulatory or
governmental authority or agency under applicable law; e.g. by the Cayman Islands Monetary
Authority, either for itself or for a recognised overseas regulatory authority, under the
Monetary Authority Law (as revised), or by the Tax Information Authority, under the Tax
Information Authority Law (as revised) or Reporting of Savings Income Information
(European Union) Law (as revised) and associated regulations, agreements, arrangements
and memoranda of understanding. Disclosure of confidential information under such laws
shall not be regarded as a breach of any duty of confidentiality and, in certain circumstances,
the Fund, director or agent, may be prohibited from disclosing that the request has been made.
By subscribing, applicants consent to the disclosure by the Fund, the Investment Manager
and the Administrator of any information about them to regulators and others upon request
in connection with anti-money laundering and similar matters in the Cayman Islands and in
other jurisdictions.
The Fund may impose additional requirements from time to time to comply with all
applicable anti-money laundering laws and regulations, including the USA Patriot Act if
relevant.
In addition, many jurisdictions are in the process of changing or creating anti-money
laundering, embargo and trade sanctions, or similar laws, regulations, requirements (whether
or not with force of law) or regulatory policies and many financial intermediaries are in the
process of changing or creating responsive disclosure and compliance policies (collectively
"Requirements") and the Fund could be requested or required to obtain certain assurances
from applicants subscribing for Shares, disclose information pertaining to them to
governmental, regulatory or other authorities or to financial intermediaries or engage in due
diligence or take other related actions in the future.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 60
It is the Fund's policy to comply with Requirements to which it is or may become subject to
and to interpret them broadly in favour of disclosure. Each applicant will be required to agree
in the application form, and will be deemed to have agreed by reason of owning any Shares,
that it will provide additional information or take such other actions as may be necessary or
advisable for the Fund (in the sole judgment of the Fund and/or Administrator) to comply
with any Requirements, related legal process or appropriate requests (whether formal or
informal) or otherwise. Each applicant by executing the application form consents, and by
owning Shares is deemed to have consented, to disclosure by the Fund and its agents to
relevant third parties of information pertaining to it in respect of Requirements or
information requests related thereto. Failure to honour any such request may result in
redemption by the Fund or a forced sale to another investor of such applicant's Shares.
The Fund is subject to laws which restrict it from dealing with persons that are located or
domiciled in sanctioned jurisdictions. Accordingly, the Fund will require investors to
represent that they are not named on a list of prohibited entities and individuals maintained
by the US Treasury Department's Office of Foreign Assets Control (“OFAC”) or under the
European Union (“EU”) and United Kingdom (“UK”) Regulations (as extended to the
Cayman Islands by statutory instrument), and is not operationally based or domiciled in a
country or territory in relation to which current sanctions have been issued by the United
Nations, EU or UK (collectively “Sanctions Lists”). Where an investor is on a Sanctions
List, the Fund may be required to cease any further dealings with the investor's interest in
the Fund, until such sanctions are lifted or a licence is sought under applicable law to
continue dealings.
FISCAL YEAR
The Fund’s fiscal year ends on 31 December of each year. The first fiscal year of the Fund
will end on 31 December 2016.
LEGAL COUNSEL
Appleby (Cayman) Ltd. acts as legal advisers to the Fund as to Cayman Islands law in
connection with the offering of Shares. Appleby (Cayman) Ltd. also acts as legal advisers to
the Investment Manager and its affiliates. In connection with the offering of Shares and on-
going advice to the Fund, the Investment Manager and its affiliates, Appleby (Cayman) Ltd.
will not be representing shareholders of the Fund. No independent legal advisers have been
retained to represent shareholders of the Fund.
INDEPENDENT PUBLIC AUDITORS; REPORTS
Crowe Horwath Cayman Ltd. have been retained as the independent auditor of the Fund. An annual report and audited financial statements of the Fund, prepared in accordance with
IFRS, will be sent to shareholders as soon as practicable or at the latest within six months of the end of each fiscal year. Half yearly unaudited interim reports of the Fund, incorporating
unaudited accounts, prepared by an accountant on behalf of the Investment Manager, will also be sent to shareholders within four months of the end of the period to which they relate.
Since the date of incorporation, the Fund has not commenced operations, no accounts have
been prepared and no dividends or income have been paid. Copies of the Fund’s constitutional documents and annual and periodic reports of the Fund may be inspected and
obtained at the registered office of the Fund. The Investment Manager will also provide quarterly performance reports to Fund investors.
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 61
MISCELLANEOUS
There are no legal, arbitration or other proceedings pending or threatened against the Fund
nor have there been since its incorporation.
As at the date of this Offering Memorandum, the Fund has no loan capital (including term
loans) outstanding or created but unissued, and no outstanding mortgages, charges,
debentures or other borrowings, including bank overdrafts and liabilities under acceptances
or acceptance credits, hire purchase or finance lease commitments, guarantees or other
contingent liabilities.
Copies of the following documents are available for inspection by Shareholders of the Fund,
during normal business hours, at the registered office of the Investment Manager:
(A) the Amended and Restated Memorandum and Articles of Association of the Fund;
(B) the material contracts referred to herein; and
(C) the Companies Law (as revised) of the Cayman Islands.
The annual audited financial statements of the Fund will be sent to shareholders and
prospective investors on request.
DEFINITIONS
“Administration Agreement” the administration agreement between the Fund and the
Administrator (as amended and/or restated from time to time)
“Administrator” Forbes Hare Fund Services, a division of Forbes Hare Trust Company
Limited, or any additional, successor or replacement administrator and registrar
“Articles” the Amended and Restated Memorandum and of Association and Articles of
Association of the Fund, as amended from time to time
“Business Day” any day other than Saturday or Sunday on which banks in the Cayman
Islands are open for normal banking business or such other day as the Directors may
determine from time to time as a Business Day
“Calculation Period” a period of 12 months ending on the last Business Day of a calendar
year, with the first Calculation Period commencing on the date hereof or such shorter or
longer period as the Directors may in their sole discretion determine
“Class” a class of shares of the Fund
“Class Account” a separate account established in the books of the Fund in respect of each
Class
“Class A Shares” the Class A USD Shares, Class A EUR Shares, Class A GBP Shares, Class
A SGD Shares and Class A HKD Shares as the case may be
“Class B Shares” the Class B USD Shares, Class B EUR Shares, Class B GBP Shares, Class
B SGD Shares and Class B HKD Shares as the case may be
GLOBAL HIGH INCOME FUND LTD. – OFFERING MEMORANDUM – PAGE 62
“Class C Shares” the Class C USD Shares, Class C EUR Shares, Class C GBP Shares, Class
C SGD Shares and Class C HKD Shares as the case may be
“Custodian” Global Custodial Services Ltd or any additional, successor or replacement
custodian
“Custodian Agreement” the custodian agreement between the Fund and the Custodian (as
amended and/or restated from time to time)
“Directors” the directors of the Fund from time to time including any duly constituted
committee thereof
“Founder Shares” voting shares of par value US$1.00 in the Fund
“Fund” Global High Income Fund Ltd.
“Gross Negligence” means a standard of misconduct beyond negligence whereby a person
acts with reckless disregard for the consequences of his action or inaction
“High Watermark” the higher of the subscription price and the highest Net Asset Value per
Share as at the end of any subsequent Calculation Period
“IFRS” International Financial Reporting Standards
“Incentive Fee” the incentive fee payable by the Fund to the Investment Manager
“Indemnified Party” each of the Investment Manager, its members and the directors,
shareholders, officers, employees and members of their respective affiliates, and their
respective legal representatives
“Initial Offer Period” means the period during which the Shares were first offered for
subscription at a fixed price which commenced on or about 9.00 am (Cayman Islands time)
on 23 January 2015 and closed at 5.00 pm (Cayman Islands time) on 29 April 2016
“Investment Management Agreement” the investment management agreement between the
Fund and the Investment Manager (as amended and/or restated from time to time)