TIDMBHMG TIDMBHMG
BH Macro Limited
Interim Report and Unaudited Financial Statements 2023
LEI: 549300ZOFF0Z2CM87C29
(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)
The Company has today, in accordance with DTR 6.3.5, released its Interim Report
and Unaudited Financial Statements for the period ended 30 June 2023. The Report
will shortly be available from the Company's website: www.bhmacro.com.
Whilst it has been a rollercoaster start to the year for BH Macro Limited ("the
Company"), it has also been a period in which the core fundamentals have stood
out of how Brevan Howard Capital Management LP ("the Manager") manages the
assets of the Company and Brevan Howard Master Fund Limited ("the Master Fund")
and maintains robust risk management systems.
Towards the end of 2022, the Company's shares in both the Sterling and US Dollar
share classes were trading at a significant premium, despite continuous tap
issuance of new shares. Consequently, there were persistent requests from
Shareholders for a large placing of shares to enable many of our Shareholders in
the wealth management industry to rebalance their holdings across their client
base. Additionally, a number of investors were attracted by the notion of a 10
for 1 share sub-division in order to improve the liquidity of the individual
shares in both share classes.
The Company responded by negotiating a significant capacity agreement with the
Manager of the Company and the Master Fund subsequently raising US$381.6 million
through an offer for sale by way of an offer for subscription, a placing and an
intermediaries offer, resulting in the issuance of 72,378,000 shares of the
Sterling share class and 746,400 shares of the US Dollar share class at a
premium to NAV of two percent. The new shares were admitted to the market on 13
February 2023. As an aside, a number of Directors, including myself participated
in that share issue.
However, after this successful start, which was warmly welcomed by the majority
of Shareholders, March delivered an acute reversal of fortunes. You will all be
aware of the failures in the banking system in the US, most prominently, the
collapse of Silicon Valley Bank ("SVB"). The fear of a systemic problem amongst
the smaller banks in the US (numbering some 4,500 banks) led to an abrupt volte
face in the stance of the Federal Reserve and the sharpest reversal in interest
rate expectations for 50 years. The impact of this unprecedented movement in
interest rate expectations should not be underestimated, and it will be scant
consolation to Shareholders that the reversal in the Company's performance
represented "only" 4.29* percent of the NAV of Sterling shares in March. The
result was a significant divergence between the NAV performance of both the
Sterling and US Dollar share classes and the share price performance. Moreover,
since that date to the period end at 30 June, the portfolio saw little recovery,
although there has been some growth in NAV over the summer months.
In the run up to these events and in response to strong economic data and
hawkish United States Federal Reserve commentary throughout February and early
March, the Master Fund had positioned for higher US rates. As interest rate
markets rapidly pivoted to price a much more dovish Fed in response to the SVB
collapse, these directional positions were essentially eliminated within two
business days. This rapid action by the Manager in the face of loss making
positions, is a hallmark of Brevan Howard's risk management process and has
served investors well over the past 2 decades. Your Board was pleased by the
speed of this response as well as by other measures taken by the Manager's risk
management team to ensure the Master Fund was in a strong position to navigate
whatever scenario had ultimately played out in the banking system and markets
more widely.
The interim period to end 30 June also saw the announcement of a potential
merger between two of the Company's largest Shareholders, namely, Rathbones and
Investec Wealth, which would on combination result in a shareholding of 28% of
the Company across both share classes as at the 15 August 2023, the latest
practicable date for which the information is available. The Board is conscious
that this could create a potential issue of an overhang of stock should a
decision be taken by that new entity to reduce its holding in aggregate, despite
the impact that this might have at the individual client level. Whilst this
remains a possibility, your Board and its advisors have been in regular
discussion and continue to monitor the situation closely.
The overall result of the events in the period meant that the share price moved
from £4.49* to £3.68 for the Sterling share class and from US$4.52* to US$3.99
for the US Dollar share class, with a change from a premium of 7.39% to a
discount of 6.36% for the Sterling share class, and from a premium of 4.44% to a
discount of 2.21% for the US Dollar share class.
Your Board has not been complacent and monitors the Manager and the market
closely with the help of our advisors. We retain confidence in the Manager and
the strategy of the Company and its holding in the Master Fund. Conditions,
globally, remain uncertain, with significant risks at both the macroeconomic and
at the geopolitical level; we anticipate that markets are likely to remain
challenging for investors to navigate for the foreseeable future. Your Board is
very confident in the Manager and believes it is very well placed to profit from
these challenges and that the Company continues to represent a good diversifier
for portfolios.
I would like to take this opportunity to thank you all for your continuing
support.
Richard Horlick
Chair
13 September 2023
* For illustrative purposes, the share prices at the beginning of the period are
adjusted by a factor of 10 to reflect the 10 for 1 share sub-division on 7
February 2023.
Board Members
The Directors of the Company during the period and as at the date of signing,
all of whom are non-executive, are listed below:
Richard Horlick (Chair)
Richard Horlick is UK resident. He is currently the non-executive chairman of
CCLA Investment Management which manages assets for over 38,000 charities and
church and local authority funds. He has served on a number of closed-ended fund
boards. He has had a long and distinguished career in investment management
graduating from Cambridge University in 1980 with an MA in Modern History. After
3 years in the corporate finance department of Samuel Montagu he joined Newton
Investment Management in January 1984, where he became a Director and portfolio
manager. In 1994, he joined Fidelity International as President of their
institutional business outside the US and in 2001 became President and CEO of
Fidelity Management Trust Company in Boston which was the Trust Bank for the US
Fidelity Mutual fund range and responsible for their defined benefit pension
business. In 2003, he joined Schroders Plc as a main board Director and head of
investment worldwide. Mr. Horlick was appointed to the Board in May 2019 and was
appointed Chair in February 2021.
Caroline Chan
Caroline Chan is a Guernsey resident and has over 30 years' experience as a
corporate lawyer, having retired from private practice in 2020. After studying
law at Oxford University, Caroline qualified as an English solicitor with Allen
& Overy, working in their corporate teams in London and Hong Kong. On returning
to Guernsey in 1998, Caroline qualified as a Guernsey advocate and practised
locally, including as a partner with law firms Ogier and Mourant Ozannes. Since
retiring from private practice, Caroline has taken on non-executive directorship
roles and is Chair of the Board of Governors of The Ladies' College, Guernsey.
She has recently retired as a member of the Guernsey Competition and Regulatory
Authority. Ms. Chan was appointed to the Board in December 2022.
Julia Chapman
Julia Chapman is a Jersey resident and a solicitor qualified in England & Wales
and in Jersey with over 30 years' experience in the investment fund and capital
markets sector. After working at Simmons & Simmons in London, she moved to
Jersey and became a partner of Mourant du Feu & Jeune (now Mourant) in 1999. She
was then appointed general counsel to Mourant International Finance
Administration (the firm's fund administration division). Following its
acquisition by State Street in April 2010, Julia was appointed European Senior
Counsel for State Street's alternative investment business. In July 2012, Julia
left State Street to focus on the independent provision of directorship and
governance services to a small number of investment fund vehicles. Mrs. Chapman
was appointed to the Board in October 2021.
Bronwyn Curtis
Bronwyn Curtis is a UK resident and Senior Executive with 30 years leadership in
finance, commodities, consulting and the media. Her executive roles included
Head of Global Research at HSBC Plc, Managing Editor and Head of European
Broadcast at Bloomberg LP, Chief Economist of Nomura International, and Global
Head of Foreign Exchange and Fixed Income Strategy at Deutsche Bank. She has
also worked as a consultant for the World Bank and UNCTAD. Her other current
appointments include non-executive member of the Oversight Board of the UK
Office for Budget Responsibility, trustee of the Centre for Economic and Policy
Research, the Australia-UK Chamber of Commerce and The Times shadow MPC. She is
a graduate of the London School of Economics and La Trobe University in
Australia where she received a Doctor of Letters in 2017. Bronwyn was awarded an
OBE in 2008 for her services to business economics. Mrs. Curtis was appointed to
the Board in January 2020.
John Le Poidevin
John Le Poidevin is Guernsey resident and has over 30 years' business
experience. Mr. Le Poidevin is a graduate of Exeter University and Harvard
Business School, a Fellow of the Institute of Chartered Accountants in England
and Wales and a former partner of BDO LLP in London where, as Head of Consumer
Markets, he developed an extensive breadth of experience and knowledge of listed
businesses in the UK and overseas. He is an experienced non-executive who sits
on several Plc boards and chairs a number of Audit Committees. He therefore
brings a wealth of relevant experience in terms of corporate governance, audit,
risk management and financial reporting. Mr. Le Poidevin was appointed to the
Board in June 2016.
Claire Whittet
Claire Whittet is Guernsey resident and has over 40 years' experience in the
financial services industry. After obtaining a MA (Hons) in Geography from the
University of Edinburgh, Mrs. Whittet joined the Bank of Scotland for 19 years
and undertook a wide variety of roles. She moved to Guernsey in 1996 and was
Global Head of Private Client Credit for Bank of Bermuda before joining
Rothschild & Co Bank International Limited in 2003, initially as Director of
Lending and latterly as Managing Director and Co-Head until May 2016 when she
became a non-executive Director, until retiring in July 2023. She is an ACIB
member of the Chartered Institute of Bankers in Scotland, a Chartered Banker, a
member of the Chartered Insurance Institute and holds an IoD Director's Diploma
in Company Direction. She is an experienced non-executive director of a number
of listed investment and private equity funds. Until her recent retirement, and
after serving for 9 years, she chaired a listed fund and is Senior Independent
Director on others, including this Company. Mrs. Whittet was appointed to the
Board in June 2014 and will not be standing for re-election at the forthcoming
Annual General Meeting.
Disclosure of Directorships in Public Companies Listed on Recognised Stock
Exchanges
The following summarises the Directors' directorships in other public companies:
Exchange
Richard Horlick
Riverstone Energy Limited London
VH Global Sustainable Energy Opportunities Plc London
Caroline Chan
Round Hill Music Royalty Fund Limited London
Julia Chapman
GCP Infrastructure Investments Limited London
Henderson Far East Income Limited London
The International Stock Exchange Group Limited The International Stock Exchange
Bronwyn Curtis
Pershing Square Holdings Ltd London and Euronext Amsterdam
Scottish American Investment Company Plc London
TwentyFour Income Fund Limited London
John Le Poidevin
International Public Partnerships Limited London
Super Group (SGHC) Limited New York
TwentyFour Income Fund Limited London
Claire Whittet
Eurocastle Investment Limited Euronext Amsterdam
Riverstone Energy Limited London
Third Point Investors Limited London
Directors' Report
30 June 2023
The Directors submit their Interim Report together with the Company's Unaudited
Statement of Assets and Liabilities, Unaudited Statement of Operations,
Unaudited Statement of Changes in Net Assets, Unaudited Statement of Cash Flows
and the related notes for the period ended 30 June 2023. The Directors' Report
together with the Interim Unaudited Financial Statements and their related notes
(the "Financial Statements") give a true and fair view of the financial position
of the Company. They have been prepared in accordance with United States
Generally Accepted Accounting Principles ("US GAAP") and are in agreement with
the accounting records.
The Company
BH Macro Limited is a limited liability closed-ended investment company which
was incorporated in Guernsey on 17 January 2007 and then admitted to the
Official List of the London Stock Exchange ("LSE") later that year.
The Company's ordinary shares are issued in Sterling and US Dollars.
Investment Objective and Policy
The Company is organised as a feeder fund that invests all of its assets (net of
short-term working capital requirements) directly in the Master Fund, a hedge
fund in the form of a Cayman Islands open-ended investment company, which has as
its investment objective the generation of consistent long-term appreciation
through active leveraged trading and investment on a global basis. The Master
Fund is managed by Brevan Howard Capital Management LP, the Company's Manager.
The Master Fund has flexibility to invest in a wide range of instruments
including, but not limited to, debt securities and obligations (which may be
below investment grade), bank loans, listed and unlisted equities, other
collective investment schemes, currencies, commodities, digital assets, futures,
options, warrants, swaps and other derivative instruments. The underlying
philosophy is to construct strategies, often contingent in nature, with superior
risk/return profiles, whose outcome will often be crystallised by an expected
event occurring within a pre-determined period of time.
The Master Fund employs a combination of investment strategies that focus
primarily on economic change and monetary policy and market inefficiencies.
The Company may employ leverage for the purposes of financing share purchases or
buy backs, satisfying working capital requirements or financing further
investment into the Master Fund, subject to an aggregate borrowing limit of 20%
of the Company's NAV, calculated as at the time of borrowing. Borrowing by the
Company is in addition to leverage at the Master Fund level, which has no limit
on its own leverage.
Results and Dividends
The results for the year are set out in the Unaudited Statement of Operations.
The Directors do not recommend the payment of a dividend.
Share Capital
As approved by the Shareholders at the Annual General Meeting held on 9
September 2022, the Directors had the power to issue further shares for cash on
a non-pre-emptive basis totalling 9,818,410 Sterling shares and 873,549 US
Dollar shares, respectively.
As noted below, this authority was superseded by a Shareholder resolution
adopted on 6 February 2023.
On 23 January 2023, the Board announced the commencement of its initial issue
(the"Initial Issue"), comprising of the initial placing (the "Placing"),
intermediaries offer (the "Intermediaries Offer") and offer for subscription
(the "Offer for Subscription"), together with an issuance programme for
subsequent issues, which remains open until 23 January 2024 (the "Issuance
Programme"), in respect of the issue of up to an aggregate of 220 million shares
(based on a 10:1 share sub-division); the issue of circular for an EGM, which
was held on 6 February 2023, in relation to the Initial Issue, Issuance
Programme and share sub-division; and details of amendments to the Management
Agreement, including terms of the Company's investment in the Master Fund, in
order to reflect the increased investment of the Company in the Master Fund as a
result of the Initial Issue and the Issuance Programme. Further details are
disclosed in note 5 to the Interim Unaudited Financial Statements.
On 6 February 2023, following the EGM, the Company announced that (i) the Board
was empowered to allot and issue, in aggregate, up to 220 million new shares of
no par value in the Company designated as Sterling shares or US Dollar shares,
as if the pre-emption provisions of the Company's articles of incorporation
("Articles") did not apply; and (ii) each existing share would be sub-divided
into 10 shares of the same currency class and with the same rights and subject
to the same restrictions as the then existing shares of the same currency class,
in the capital of the Company, with the sub-divided shares to be admitted to
listing the following day. These resolutions superseded the relevant resolutions
adopted at the 2022 Annual General Meeting.
On 13 February 2023, the completion of the Initial Issue was announced. A total
of 72,378,000 Sterling shares and 746,400 US Dollar shares were issued in the
Initial Issue at a price per share equal, respectively, to 431.5 pence per
Sterling share and US$4.47 per US Dollar share, raising gross proceeds of
approximately £312.3m for the Sterling share class and US$3.3m for the US Dollar
share class.
The number of shares in issue at the period end is disclosed in note 5 of the
Interim Unaudited Financial Statements.
Going Concern
The Directors, having considered the Principal and Emerging Risks and
Uncertainties to which the Company is exposed, which are listed in the
Directors' Report and on the assumption that these are managed or mitigated as
noted, are not aware of any material uncertainties which may cast significant
doubt upon the Company's ability to continue as a going concern and,
accordingly, consider that it is appropriate that the Company continues to adopt
the going concern basis of accounting for these Interim Unaudited Financial
Statements.
The Board continues to monitor the ongoing impact of various geopolitical
events, including elevated levels of global inflation, recessionary risks and
the ongoing war in Ukraine. The Board has concluded that the biggest threat to
the Company in relation to these geopolitical concerns remains the failure of a
key service provider to maintain business continuity and resiliency. The Board
has assessed the measures in place by key service providers to maintain business
continuity and, so far, has not identified any significant issues that affect
the Company. The financial position of the Company has not been negatively
impacted by these geopolitical events either. For these reasons, the Board is
confident that these events have not impacted the going concern assessment of
the Company.
The Board
The Board of Directors has overall responsibility for safeguarding the Company's
assets, for the determination of the investment policy of the Company, for
reviewing the performance of the service providers and for the Company's
activities. The Directors, all of whom are non-executive, are listed in the
Board Members section.
The Articles provide that, unless otherwise determined by ordinary resolution,
the number of Directors shall not be less than two.
The Board meets at least four times a year and between these formal meetings,
there is regular contact with the Manager, the Corporate Broker and the
Administrator. The Directors are kept fully informed of investment and financial
controls, and other matters that are relevant to the business of the Company are
brought to the attention of the Directors. The Directors also have access to the
Administrator and, where necessary in the furtherance of their duties, to
independent professional advice at the expense of the Company.
For each Director, the tables below set out the number of Board and Audit
Committee meetings they were entitled to attend during the period ended 30 June
2023 and the number of such meetings attended by each Director.
Scheduled Board Meetings Held Attended
Richard Horlick 2 2
Caroline Chan 2 2
Julia Chapman 2 2
Bronwyn Curtis 2 2
John Le Poidevin 2 2
Claire Whittet 2 2
Audit Committee Meetings Held Attended
John Le Poidevin 2 2
Caroline Chan 2 2
Julia Chapman 2 2
Bronwyn Curtis 2 2
Claire Whittet 2 2
In addition to these scheduled meetings, ten ad-hoc committee meetings were held
during the period ended 30 June 2023, which were attended by those Directors
available at the time.
The Board has reviewed the composition, structure and diversity of the Board,
succession planning, the independence of the Directors and whether each of the
Directors has sufficient time available to discharge their duties effectively.
The Board confirms that it believes that it has an appropriate mix of skills and
backgrounds, that all of the Directors are considered to be independent in
accordance with the provisions of the AIC Code and that all Directors have the
time available to discharge their duties effectively.
The Chair's and the Directors' tenures are limited to nine years, which is
consistent with the principles listed in the UK Corporate Governance Code.
Claire Whittet is not standing for re-election at the forthcoming Annual General
Meeting having served on the Board since June 2014.
Notwithstanding that some of the Directors sit on the boards of a number of
other listed investment companies, the Board notes that each appointment is non
-executive and that listed investment companies generally have a lower level of
complexity and time commitment than trading companies. Furthermore, the Board
notes that attendance of all Board and Committee meetings during the year is
high and that each Director has always shown the time commitment necessary to
discharge fully and effectively their duties as a Director.
Directors' Interests
The Directors had the following interests in the Company, held either directly
or beneficially:
Sterling Shares
30.06.23 31.12.22 30.06.22
Richard Horlick 200,000 20,000 20,000
Caroline Chan1 11,587 Nil N/A
Julia Chapman 6,260 626 626
Bronwyn Curtis 33,175 1,000 1,000
John Le Poidevin 75,620 5,482 5,482
Claire Whittet2 23,111 1,500 1,500
US Dollar Shares
30.06.23 31.12.22 30.06.22
Richard Horlick 20,000 Nil Nil
Caroline Chan1 Nil Nil N/A
Julia Chapman Nil Nil Nil
Bronwyn Curtis Nil Nil Nil
John Le Poidevin Nil Nil Nil
Claire Whittet Nil Nil Nil
1Caroline Chan was appointed to the Board on 6 December 2022.
2All units are held through a Retirement Annuity Trust Scheme, jointly owned by
Mrs Whittet and her husband.
During the 10:1 share sub-division, which was completed on 7 February 2023 (as
mentioned in the Directors' Report), the following changes were made to the
Directors' shareholdings in the Company:
Richard Horlick, 20,000 Sterling shares cancelled, 200,000 Sterling shares
issued;
Julia Chapman, 626 Sterling shares cancelled, 6,260 Sterling shares issued;
Bronwyn Curtis, 1,000 Sterling shares cancelled, 10,000 Sterling shares issued;
John Le Poidevin, 5,482 Sterling shares cancelled, 54,820 Sterling shares
issued;
Claire Whittet, 1,500 Sterling shares cancelled, 15,000 Sterling shares issued.
On 13 February 2023, the Board participated in the Initial Issue for the
following amounts:
Richard Horlick, US$89,400 of US Dollar shares (20,000 shares);
Caroline Chan, £50,000 of Sterling shares (11,587 shares);
Bronwyn Curtis, £100,000 of Sterling shares (23,175 shares);
John Le Poidevin, £90,000 of Sterling shares (20,800 shares); and
Claire Whittet, £35,000 of Sterling shares (8,111 shares).
Directors' Indemnity
Directors' and Officers' liability insurance cover is in place in respect of the
Directors.
The Directors entered into indemnity agreements with the Company which provide,
subject to the provisions of the Companies (Guernsey) Law, 2008, for an
indemnity for Directors in respect of costs which they may incur relating to the
defence of proceedings brought against them arising out of their positions as
Directors, in which they are acquitted, or judgement is given in their favour by
the Court. The agreement does not provide for any indemnification for liability
which attaches to the Directors in connection with any negligence, unfavourable
judgements and breach of duty or trust in relation to the Company.
Corporate Governance
To comply with the UK Listing Regime, the Company must comply with the
requirements of the UK Corporate Governance Code. The Company is also required
to comply with the Code of Corporate Governance issued by the Guernsey Financial
Services Commission.
The Company is a member of the AIC and by complying with the AIC Code it is
deemed to comply with both the UK Corporate Governance Code and the Guernsey
Code of Corporate Governance.
To ensure ongoing compliance with the principles and the recommendations of the
AIC Code, the Board receives and reviews a report from the Corporate Secretary,
at each quarterly meeting, identifying whether the Company is in compliance and
recommending any changes that are necessary.
The Company has complied with the requirements of the AIC Code and the relevant
provisions of the UK Corporate Governance Code, except as set out below.
The UK Corporate Governance Code includes provisions relating to:
· the role of the chief executive;
· executive directors' remuneration;
· the need for an internal audit function; and
· a whistle-blowing policy.
For the reasons explained in the UK Corporate Governance Code, the Board
considers these provisions are not relevant to the position of the Company as it
is an externally managed investment company with a Board formed exclusively of
non-executive Directors. The Company has therefore not reported further in
respect of these provisions. The Company does not have employees, hence no
whistle-blowing policy is necessary. However, the Directors have satisfied
themselves that the Company's service providers have appropriate whistle-blowing
policies and procedures and seek regular confirmation from the service providers
that nothing has arisen under those policies and procedures which should be
brought to the attention of the Board.
The Company has adopted a policy that the composition of the Board of Directors
is at all times such that (i) a majority of the Directors are independent of the
Manager and any company in the same group as the Manager (the "Manager's
Group"); (ii) the Chair of the Board of Directors is free from any conflicts of
interest and is independent of the Manager's Group; and (iii) no more than one
director, partner, employee or professional adviser to the Manager's Group may
be a Director of the Company at any one time.
The Company has adopted a Code of Directors' dealings in securities.
The Company's risk appetite and risk exposure and the effectiveness of its risk
management and internal control systems are reviewed by the Audit Committee and
by the Board at their meetings. The Board believes that the Company has adequate
and effective systems in place to identify, mitigate and manage the risks to
which it is exposed.
For new appointments to the Board, a specialist independent recruitment firm is
engaged as and when appropriate, nominations are sought from the Directors and
from other relevant parties and candidates are then interviewed by the
Directors. The current Board has a breadth of experience relevant to the
Company, and the Directors believe that any changes to the Board's composition
can be managed without undue disruption. An induction programme is provided for
newly-appointed Directors.
In line with the AIC Code, Article 21.3 of the Company's Articles requires all
Directors to retire at each Annual General Meeting. At the Annual General
Meeting of the Company on 9 September 2022, Shareholders re-elected all the then
incumbent Directors of the Company, except for Caroline Chan, who was appointed
on 6 December 2022.
The Board, through the Remuneration and Nomination Committee, regularly reviews
its composition and believes that the current appointments provide an
appropriate range of skill, experience and diversity. Having served nine years
as a Board member, Claire Whittet will not seek re-election at the forthcoming
Annual General Meeting of the Company.
Each of the Board, the Audit Committee, the Management Engagement Committee and
the Remuneration and Nomination Committee undertakes an evaluation of their own
performance and that of individual Directors on an annual basis. In order to
review their effectiveness, the Board and its Committees carry out a process of
formal self-appraisal. The Board and the Committees consider how they function
as a whole and also review the individual performance of their members. This
process is conducted by the Chair of each Committee reviewing the relevant
Directors' performance, contribution and commitment to the Company. Claire
Whittet has been Senior Independent Director since 20 June 2019 and takes the
lead in evaluating the performance of the Chair.
Board Performance
The performance of the Board and that of each individual Director is scheduled
for external evaluation every three years, the most recent of which was
completed in 2022.
The Board carries out an annual internal evaluation of its performance in years
when an external evaluation is not taking place. There were no matters of note
in the last annual internal evaluation.
The Board needs to ensure that the Interim Unaudited Financial Statements, taken
as a whole, are fair, balanced and understandable and provide the information
necessary for Shareholders to assess the Company's performance, business model
and strategy. In seeking to achieve this, the Directors have set out the
Company's investment objective and policy and have explained how the Board and
its delegated Committees operate and how the Directors review the risk
environment within which the Company operates and sets appropriate risk
controls. Furthermore, throughout the Interim Report, the Board has sought to
provide further information to enable Shareholders to better understand the
Company's business and financial performance.
Policy to Combat Fraud, Bribery and Corruption
The Board has adopted a formal policy to combat fraud, bribery and corruption.
The policy applies to the Company and to each of its Directors. Furthermore, the
policy is shared with each of the Company's service providers.
In respect of the UK Criminal Finances Act 2017, which introduced a new
corporate criminal offence of `failing to take reasonable steps to prevent the
facilitation of tax evasion', the Board confirms that it is committed to
preventing the facilitation of tax evasion and takes all reasonable steps to do
so.
Social and Environmental Issues
The Board also keeps under review developments involving other social and
environmental issues, such as modern slavery, and will report on those to the
extent they are considered relevant to the Company's operations. Further
explanation of these issues is detailed in the Directors' Report under 'Climate
Change and ESG Risks'.
Ongoing Charges
The ongoing charges (the "Ongoing Charges") represent the Company's management
fee and all other operating expenses, excluding finance costs, performance fees,
share issue or buyback costs and non-recurring legal and professional fees,
expressed as a percentage of the average of the daily net assets during the
year.
Ongoing Charges for the six-month period ended 30 June 2023, year ended 31
December 2022 and six-month period ended 30 June 2022 have been prepared in
accordance with the AIC's recommended methodology.
The following table presents the Ongoing Charges for each share class of the
Company for the six-month period ended 30 June 2023, year ended 31 December 2022
and six-month period ended 30 June 2022.
30.06.23
Sterling Shares US Dollar Shares
Company - Ongoing Charges 1.58% 1.58%
Master Fund - Ongoing Charges 0.55% 0.58%
Performance fees 0.00% 0.00%
Ongoing Charges plus performance fees 2.13% 2.16%
31.12.22
Sterling Shares US Dollar Shares
Company - Ongoing Charges 1.68% 1.74%
Master Fund - Ongoing Charges 0.20% 0.22%
Performance fees 4.23% 4.20%
Ongoing Charges plus performance fees 6.11% 6.16%
30.06.22
Sterling Shares US Dollar Shares
Company - Ongoing Charges 1.69% 1.81%
Master Fund - Ongoing Charges 0.33% 0.34%
Performance fees 3.17% 3.24%
Ongoing Charges plus performance fees 5.19% 5.39%
The Master Fund's ongoing charges represent the portion of the Master Fund's
operating expenses which have been allocated to the Company. The Company invests
substantially all of its investable assets in ordinary Sterling and US Dollar
-denominated Class B shares issued by the Master Fund. These shares are not
subject to management fees and performance fees within the Master Fund. The
Master Fund's operating expenses include an operational services fee payable to
the Manager of 1/12 of 0.5% per month of the prevailing Master Fund NAV
attributable to the Company's investment in the Master Fund.
Audit Committee
The Company's Audit Committee conducts formal meetings at least three times a
year for the purpose, amongst others, of considering the appointment,
independence and effectiveness of the audit and remuneration of the auditors,
and to review and recommend the annual statutory accounts and interim report to
the Board of Directors. It is chaired by John Le Poidevin and comprises Bronwyn
Curtis, Claire Whittet, Julia Chapman and Caroline Chan. The Terms of Reference
of the Audit Committee are available from the Administrator.
Management Engagement Committee
The Board has established a Management Engagement Committee with formal duties
and responsibilities. The Management Engagement Committee meets formally at
least once a year and comprises all members of the Board.
It has been chaired by Julia Chapman since 17 June 2022.
The function of the Management Engagement Committee is to ensure that the
Company's Management Agreement is competitive and reasonable for the
Shareholders, along with the Company's agreements with all other third-party
service providers (other than KPMG Channel Islands Limited (the "Independent
Auditor")). The Management Engagement Committee also monitors the performance of
all service providers on an annual basis and writes to each service provider
regarding their Business Continuity Plans. To date, all services have proved to
be robust and there has been no disruption to the Company. The Terms of
Reference of the Management Engagement Committee are available from the
Administrator.
The details of the Manager's fees and notice period are set out in note 4 to the
Interim Unaudited Financial Statements.
The Board continuously monitors the performance of the Manager and a review of
the Manager is conducted by the Management Engagement Committee annually.
The Manager has wide experience in managing and administering investment
companies and has access to extensive investment management resources.
At its meeting on 9 September 2022, the Management Engagement Committee
concluded that the continued appointment of each of the Manager, the
Administrator, the Company's UK and Guernsey legal advisers, the Registrar and
the Corporate Broker on the terms agreed was in the interests of the Company's
Shareholders as a whole. At the date of this report, the Board continues to be
of the same opinion.
Remuneration and Nomination Committee
The Board established a Remuneration and Nomination Committee on 17 June 2022
with formal duties and responsibilities. The Remuneration and Nomination
Committee meets formally at least once a year, is chaired by Bronwyn Curtis and
comprises all members of the Board.
The function of the Remuneration and Nomination Committee is to:
· regularly review the structure, size and composition of the Board and make
recommendations to the Board with regard to any changes that are deemed
necessary;
· identify, from a variety of sources, candidates to fill Board vacancies as
and when they arise with a continued focus on Board diversity;
· assess and articulate the time needed to fulfil the role of the Chair and of
a non-executive director, and undertake an annual performance evaluation to
ensure that all the members of the Board have devoted sufficient time to their
duties, and also to review their contribution to the work of the Board and the
breadth of experience of the Board as a whole; and
· annually review the levels of remuneration of the Chair of the Board, the
Chair of the Audit Committee and the Chair of each other Board committee and
other non-executive directors having regard to the maximum aggregate
remuneration that may be paid under the Company's Articles.
Internal Controls
Responsibility for the establishment and maintenance of an appropriate system of
internal control rests with the Board and to achieve this, a process has been
established which seeks to:
· review the risks faced by the Company and the controls in place to address
those risks;
· identify and report changes in the risk environment;
· identify and report changes in the operational controls;
· identify and report on the effectiveness of controls and errors arising; and
· ensure no override of controls by the Manager, the Administrator and its
other service providers.
A report is tabled and discussed at each Audit Committee meeting, and reviewed
at least once a year by the Board, setting out the Company's risk exposure and
the effectiveness of its risk management and internal control systems. The Board
believes that the Company has adequate and effective systems in place to
identify, mitigate and manage the risks to which it is exposed.
In order to recognise any new risks that could impact the Company and ensure
that appropriate controls are in place to manage those risks, the Audit
Committee undertakes a regular review of the Company's risk matrix. This review
took place on two occasions during the period.
The Board has delegated the management of the Company and the administration,
corporate secretarial and registrar functions, including the independent
calculation of the Company's NAV and the production of the Annual Report and
Audited Financial Statements, which are independently audited. Whilst the Board
delegates these functions, it remains responsible for the functions it delegates
and for the systems of internal control. Formal contractual agreements have been
put in place between the Company and the providers of these services. On an
ongoing basis, Board reports are provided at each quarterly Board meeting by the
Manager, the Corporate Broker, the Administrator and Corporate Secretary and the
Registrar. A representative from the Manager is asked to attend these meetings.
In common with most investment companies, the Company does not have an internal
audit function. All of the Company's management functions are delegated to the
Manager, the Administrator and Corporate Secretary and the Registrar which have
their own internal audit and risk assessment functions.
Further reports are received from the Administrator in respect of compliance,
LSE continuing obligations and other matters. The reports were reviewed by the
Board. No material adverse findings were identified in these reports.
Packaged Retail and Insurance Based Investment Products ("PRIIPs")
From 1 January 2021, the Company became subject to the UK version of Regulation
(EU) No 1286/2014 on key information documents for PRIIPs, which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018, as amended and
supplemented from time to time, including by the Packaged Retail and Insurance
-based Investment Products (Amendment) (EU Exit) Regulations 2019 (the "UK
PRIIPs Laws"), which superseded the EU regulation that previously applied to the
Company. In accordance with the requirements of the UK PRIIPs Laws, the Manager
published the latest standardised three-page Key Information Document (a "KID")
for the Company's Sterling shares and another for its US Dollar shares on 27
April 2023 (based on data as at 31 December 2022). Each KID is available on the
Company's website https://www.bhmacro.com/regulatory-disclosures/ and will be
updated at least every 12 months.
The Manager is the PRIIPs manufacturer for each KID and the Company is not
responsible for the information contained in each KID. The process for
calculating the risks, cost and potential returns is prescribed by regulation.
The figures in the KID, relating to the relevant share class, may not reflect
the expected returns for that share class of the Company and anticipated returns
cannot be guaranteed.
Principal and Emerging Risks and Uncertainties
The Board is responsible for the Company's system of internal controls and for
reviewing its effectiveness. The Board is satisfied that by using the Company's
risk matrix in establishing the Company's system of internal controls, while
monitoring the Company's investment objective and policy, the Board has carried
out a robust assessment of the principal and emerging risks and uncertainties
facing the Company. The principal and emerging risks and uncertainties which
have been identified and the steps which are taken by the Board to mitigate them
are as follows:
· Investment Risks: The Company is exposed to the risk that its portfolio
fails to perform in line with the Company's objectives if it is inappropriately
invested or markets move adversely. The Board reviews reports from the Manager,
which has total discretion over portfolio allocation, at each quarterly Board
meeting, paying particular attention to this allocation and to the performance
and volatility of underlying investments;
· Operational and Cyber Security Risks: The Company is exposed to the risks
arising from any failure of systems and controls in the operations of the
Manager, Northern Trust International Fund Administration Services (Guernsey)
Limited (the "Administrator") or Computershare Investor Services (Guernsey)
Limited (the "Registrar"), or from the unavailability of any of the Manager, the
Administrator or the Registrar for whatever reason, including those arising from
cyber security issues. The Board receives regular reports from each of those
parties on cyber security and annual independent third-party reporting on their
respective internal controls;
· Accounting, Legal and Regulatory Risks: The Company is exposed to risk if it
fails to comply with the regulations of the UK Listing Authority or the Guernsey
Financial Services Commission and/or any other applicable regulatory and
legislative matters, or if it fails to maintain accurate or timely accounting
records and published financial information. The Administrator provides the
Board with regular internal control and compliance reports and reports on
changes in regulations and accounting requirements;
· Financial Risks: The financial risks faced by the Company include market,
credit and liquidity risk. These risks and the controls in place to mitigate
them are reviewed at each quarterly Board meeting;
· Geopolitical Risk: Elevated levels of global inflation, recessionary risks
and the current war in Ukraine has led to greater economic uncertainty,
variability and volatility. Whilst the Master Fund has no material direct
exposure to Russia, Ukraine or Belarus, the Board has also made enquiries of key
service providers in respect of any impact from Russia's invasion of Ukraine and
the related instability in world markets and has been assured that none of the
service providers have operations in the region or are in any way impacted in
terms of their ability to continue to supply their services to the Company; and
· Climate Change and ESG Risks: The Company has no employees and does not own
any physical assets and is therefore not directly exposed to climate change
risk. The Manager monitors developments in this area and industry best practice
on behalf of the Board, where appropriate, and also regularly assesses the
trading activity of the underlying Master Fund and sub-funds to ascertain
whether environmental, social and governance ("ESG") factors are appropriate or
applicable to such funds. The Board has also made enquiries of key service
providers in respect of their assessment of how climate change and ESG risk
impacts their own operations and has been assured that this has no impact on
their ability to continue to supply their services to the Company.
Board Diversity
When appointing new directors and reviewing the Board composition, the Board
considers, amongst other factors, diversity, balance of skills, knowledge,
gender and experience. At 30 June 2023, the Board noted that it believed it
would be fully compliant in terms of Listing Rules LR 9.8.6R(9) and LR
14.3.33R(1) in relation to board diversity, which will be applicable to the
Company for the year ending 31 December 2023. There have been no changes to
board composition since that date. We have set out additional details in the
table below:
Name Gender Identity Ethnicity
Richard Horlick Male White British
Caroline Chan Female White Asian British
Julia Chapman Female White British
Bronwyn Curtis Female White European
John Le Poidevin Male White British
Claire Whittet Female White British
International Tax Reporting
For purposes of the US Foreign Account Tax Compliance Act, the Company
registered with the US Internal Revenue Services ("IRS") as a Guernsey reporting
Foreign Financial Institution ("FFI"), received a Global Intermediary
Identification Number (5QHZVI.99999.SL.831), and can be found on the IRS FFI
list.
The Common Reporting Standard ("CRS") is a global standard for the automatic
exchange of financial account information developed by the Organisation for
Economic Co-operation and Development ("OECD"). The Company made its latest
report for CRS to the Director of Income Tax on 30 June 2023.
Relations with Shareholders
The Board welcomes Shareholders' views and places great importance on
communication with the Company's Shareholders. The Board receives regular
reports on the views of Shareholders and the Chair and other Directors are
available to meet Shareholders, with a number of such meetings taking place
during the period. The Company provides weekly unaudited estimates of NAV, month
end unaudited estimates and unaudited final NAVs. The Company also provides a
monthly newsletter. These are published via RNS and are also available on the
Company's website. Risk reports of the Master Fund are also available on the
Company's website.
The Manager maintains regular dialogue with institutional Shareholders, the
feedback from which is reported to the Board. Shareholders who wish to
communicate with the Board should contact the Administrator in the first
instance.
Having reviewed the Financial Conduct Authority's restrictions on the retail
distribution of non-mainstream pooled investments, the Company, after taking
legal advice, announced on 15 January 2014 that it is outside the scope of those
restrictions, so that its shares can continue to be recommended by UK authorised
persons to ordinary retail investors.
Following the publication of the updated AIC Code in February 2019, when 20 per
cent or more of Shareholder votes have been cast against a Board recommendation
for a resolution, the Company should explain, when announcing voting results,
what actions it intends to take to consult Shareholders in order to understand
the reasons behind the result. An update on the views received from Shareholders
and actions taken should be published no later than six months after the
Shareholder meeting. The Board should then provide a final summary in the Annual
Report and, if applicable, in the explanatory notes to resolutions at the next
Shareholders' meeting, on what impact the feedback has had on the decisions the
Board has taken and any actions or resolutions now proposed. During the period,
no resolution recommended by the Board received 20 per cent or more votes
against it.
Significant Shareholders
As at 15 August 2023, the following Shareholders had significant shareholdings
in the Company:
% holding
in class
Significant Shareholders
Sterling Shares
Ferlim Nominees Limited 19.5%
Rathbone Nominees Limited 10.1%
Smith & Williamson Nominees Limited 7.1%
Cheviot Capital (Nominees) Limited 6.4%
Vidacos Nominees Limited 4.3%
Lion Nominees Limited 4.3%
Vestra Nominees Limited 4.3%
Pershing Nominees Limited 4.2%
Brewin Nominees Limited 3.4%
HSBC Global Custody Nominee (UK) Limited 3.2%
% holding
in class
Significant Shareholders
US Dollar Shares
Hero Nominees Limited 15.8%
Euroclear Nominees 12.8%
Vidacos Nominees Limited 12.6%
Luna Nominees Limited 4.6%
CGWL Nominees Limited 4.2%
Rathbone Nominees Limited 3.2%
Vistra Wealth (Jersey) Nominees Limited 3.0%
Signed on behalf of the Board by:
Richard Horlick
Chair
John Le Poidevin
Director
13 September 2023
Statement of Directors' Responsibility in respect of the Interim Report and
Unaudited Financial Statements
We confirm to the best of our knowledge that:
· these Interim Unaudited Financial Statements have been prepared in
accordance with United States Generally Accepted Accounting Principles and give
a true and fair view of the assets, liabilities, financial position and profit
or loss; and
· these Interim Unaudited Financial Statements include information detailed
in the Chair's Statement, the Directors' Report, the Manager's Report and the
Notes to the Interim Unaudited Financial Statements, which provides a fair
review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months of
the financial year and their impact on these Interim Unaudited Financial
Statements and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related
-party transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the Company during that period and any changes in the related
-party transactions described in the last Annual Audited Financial Statements
that could materially affect the financial position or performance of the
Company.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website and for the
preparation and dissemination of financial statements. Legislation in Guernsey
governing the preparation and dissemination of the financial statements may
differ from legislation in other jurisdictions.
Signed on behalf of the Board by:
Richard Horlick
Chair
John Le Poidevin
Director
13 September 2023
Manager's Report
Brevan Howard Capital Management LP ("BHCM" or the "Manager") is the manager of
BH Macro Limited (the "Company") and of Brevan Howard Master Fund Limited (the
"Master Fund"). The Company invests all of its assets (net of short-term working
capital) in the ordinary shares of the Master Fund.
Performance Review
The NAV per share of the USD shares of the Company has depreciated by -5.65%
during the first half of 2023 and the NAV per share of the GBP shares
depreciated by -6.09%.
The month-by-month NAV performance of each currency class of the Company since
it commenced operations in 2007 is set out below
GBP Jan Feb Mar Apr May Jun Jul Aug Sep
Oct Nov Dec YTD
2007 - - 0.11 0.83 0.17 2.28 2.55 3.26 5.92
0.04 3.08 0.89 20.67
2008 10.18 6.85 (2.61) (2.33) 0.95 2.91 1.33 1.21 (2.99)
2.84 4.23 (0.67) 23.25
2009 5.19 2.86 1.18 0.05 3.03 (0.90) 1.36 0.66 1.55
1.02 0.40 0.40 18.00
2010 (0.23) (1.54) 0.06 1.45 0.36 1.39 (1.96) 1.23 1.42
(0.35) (0.30) (0.45) 1.03
2011 0.66 0.52 0.78 0.51 0.59 (0.56) 2.22 6.24 0.39
(0.73) 1.71 (0.46) 12.34
2012 0.90 0.27 (0.37) (0.41) (1.80) (2.19) 2.38 1.01 1.95
(0.35) 0.94 1.66 3.94
2013 1.03 2.43 0.40 3.42 (0.08) (2.95) (0.80) (1.51) 0.06
(0.55) 1.36 0.41 3.09
2014 (1.35) (1.10) (0.34) (0.91) (0.18) (0.09) 0.82 0.04 4.29
(1.70) 0.96 (0.04) 0.26
2015 3.26 (0.58) 0.38 (1.20) 0.97 (0.93) 0.37 (0.74) (0.63)
(0.49) 2.27 (3.39) (0.86)
2016 0.60 0.70 (1.78) (0.82) (0.30) 3.31 (0.99) (0.10) (0.68)
0.80 5.05 0.05 5.79
2017 (1.54) 1.86 (2.95) 0.59 (0.68) (1.48) 1.47 0.09 (0.79)
(0.96) 0.09 (0.06) (4.35)
2018 2.36 (0.51) (1.68) 1.01 8.19 (0.66) 0.82 0.79 0.04
1.17 0.26 0.31 12.43
2019 0.52 (0.88) 2.43 (0.60) 3.53 3.82 (0.78) 1.00 (1.94)
0.47 (1.22) 1.52 7.98
2020 (1.42) 5.49 18.31 0.19 (0.85) (0.53) 1.74 0.94 (1.16)
(0.02) 0.75 3.04 28.09
2021 1.20 0.32 0.81 0.15 0.25 (1.50) (0.49) 0.87 0.40
0.27 0.00 0.47 2.76
2022 0.94 1.79 5.39 3.86 1.66 1.05 1.15 2.84 2.12
(0.40) (1.15) 1.88 21.91
2023 1.20 (0.28) (4.29) (0.93) (1.61) (0.25)
(6.09)
USD Jan Feb Mar Apr May Jun Jul Aug Sep
Oct Nov Dec YTD
2007 - - 0.10 0.90 0.15 2.29 2.56 3.11 5.92
0.03 2.96 0.75 20.27
2008 9.89 6.70 (2.79) (2.48) 0.77 2.75 1.13 0.75 (3.13)
2.76 3.75 (0.68) 20.32
2009 5.06 2.78 1.17 0.13 3.14 (0.86) 1.36 0.71 1.55
1.07 0.37 0.37 18.04
2010 (0.27) (1.50) 0.04 1.45 0.32 1.38 (2.01) 1.21 1.50
(0.33) (0.33) (0.49) 0.91
2011 0.65 0.53 0.75 0.49 0.55 (0.58) 2.19 6.18 0.40
(0.76) 1.68 (0.47) 12.04
2012 0.90 0.25 (0.40) (0.43) (1.77) (2.23) 2.36 1.02 1.99
(0.36) 0.92 1.66 3.86
2013 1.01 2.32 0.34 3.45 (0.10) (3.05) (0.83) (1.55) 0.03
(0.55) 1.35 0.40 2.70
2014 (1.36) (1.10) (0.40) (0.81) (0.08) (0.06) 0.85 0.01 3.96
(1.73) 1.00 (0.05) 0.11
2015 3.14 (0.60) 0.36 (1.28) 0.93 (1.01) 0.32 (0.78) (0.64)
(0.59) 2.36 (3.48) (1.42)
2016 0.71 0.73 (1.77) (0.82) (0.28) 3.61 (0.99) (0.17) (0.37)
0.77 5.02 0.19 6.63
2017 (1.47) 1.91 (2.84) 3.84 (0.60) (1.39) 1.54 0.19 (0.78)
(0.84) 0.20 0.11 (0.30)
2018 2.54 (0.38) (1.54) 1.07 8.41 (0.57) 0.91 0.90 0.14
1.32 0.38 0.47 14.16
2019 0.67 (0.70) 2.45 (0.49) 3.55 3.97 (0.66) 1.12 (1.89)
0.65 (1.17) 1.68 9.38
2020 (1.25) 5.39 18.40 0.34 (0.82) (0.54) 1.84 0.97 (1.11)
(0.01) 0.76 3.15 28.89
2021 1.21 0.31 0.85 0.16 0.26 (1.47) (0.47) 0.86 0.31
0.14 (0.09) 0.59 2.67
2022 0.74 1.77 5.27 3.80 1.09 0.76 0.12 3.11 2.46
(0.50) (1.09) 2.01 21.17
2023 1.26 (0.30) (4.11) (0.88) (1.54) (0.15)
(5.65)
Source: Master Fund NAV data is provided by the administrator of the Master
Fund, State Street Fund Services (Ireland) Limited. The Company's NAV and NAV
per Share data is provided by the Company's administrator, Northern Trust
International Fund Administration Services (Guernsey) Limited.
The Company's NAV per Share % Monthly Change is calculated by BHCM.
The Company's NAV data is unaudited and net of all investment management and
performance fees and all other fees and expenses payable by the Company. In
addition, the Company's investment in the Master Fund is subject to an
operational services fee.
NAV performance is provided for information purposes only. Shares in the Company
do not necessarily trade at a price equal to the prevailing NAV per Share.
Data as at 30 June 2023.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
Quarterly and Annual contribution (%) to the performance of the Company's USD
Shares (net of fees and expenses) by asset class*
The information (below) is given in US$ only, consistent with monthly
shareholder reporting for the underlying US$ denominated Master Fund.
+----+-----+-----+-----------+------+------+-------+-------------------+-----+
| |Rates|FX |Commodities|Credit|Equity|Digital|Discount Management|TOTAL|
| | | | | | |Assets | | |
+----+-----+-----+-----------+------+------+-------+-------------------+-----+
|Q1 |-1.37|-0.71|-0.22 |0.14 |-1.25 |0.19 |0.04 |-3.19|
|2023| | | | | | | | |
+----+-----+-----+-----------+------+------+-------+-------------------+-----+
|Q2 |-1.37|-0.54|-0.34 |-0.07 |-0.11 |-0.14 |0.00 |-2.55|
|2023| | | | | | | | |
+----+-----+-----+-----------+------+------+-------+-------------------+-----+
|YTD |-2.72|-1.24|-0.56 |0.07 |-1.35 |0.04 |0.04 |-5.64|
|2023| | | | | | | | |
+----+-----+-----+-----------+------+------+-------+-------------------+-----+
Data as at 30 June 2023.
Quarterly and YTD figures are calculated by BHCM as at 30 June 2023, based on
performance data for each period provided by the Company's administrator,
Northern Trust. Figures rounded to two decimal places.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
Methodology and Definition of Contribution to Performance:
Attribution by asset class is produced at the instrument level, with adjustments
made based on risk estimates.
*The above asset classes are categorised as follows:
"Rates": interest rates markets
"FX": FX forwards and options
"Commodities": commodity futures and options on commodities including mining
indices
"Credit": corporate and asset-backed indices, bonds and CDS
"Equity": equity markets including indices and other derivatives
"Digital Assets": crypto-currencies including derivatives
"Discount Management": buyback activity or shares from treasury
Performance and Economic Outlook Commentary
Entering 2023, soft inflation readings from late 2022 had led markets to price
in a lower path for the Federal Reserve ("Fed") funds rate. During this period
of late 2022 and January 2023, the Fed slowed the pace of its rate increases to
25 bps per meeting from the previous 75 bps. As the economic data surged, the
market's complacency over inflation was dispelled early in the year. US job
growth was exceptionally strong in January and measures of inflation firmed.
This led the market to adjust its expectations to include additional Fed rate
hikes. Chairman Powell's testimony to Congress in early March further implied
that the Fed might resume hiking at a pace of 50 bps per meeting.
In response to the surging US economic data and the increasingly hawkish Fed
commentary throughout February and into early March, the Master Fund increased
positioning for higher policy rates, in particular in the US. However, the
sudden failure of Silicon Valley Bank in March, triggered one of the largest
rallies in short dated yields over the past 50 years. As markets rapidly pivoted
back to expecting fewer hikes, the Master Fund's interest rate positions
incurred losses. Immediate action was taken to cut these positions, which were
quickly and very substantially reduced.
Over the course of Q2 2023, these more muted expectations for Fed rate hikes
slowly reverted to an anticipation of further tightening. This culminated in a
surprise signal from the Fed in June that it expected to raise rates twice more
in 2023, which was more than the market expected, especially as the Fed kept its
own funds rate unchanged at one of its meetings for the first time since early
2022.
During this period, the Master Fund's overall risk levels remained lower.
Various smaller losses were incurred across UK rates, developed market FX,
inflation and commodity trading, while modest gains were generated in US
interest rates and emerging market FX.
In aggregate, expectations for interest rates shifted back and forth repeatedly
in the first half of 2023, creating a difficult trading environment for our core
macro strategies. Overall, US inflation and economic growth slowed in the first
half of 2023 but both remain above the Fed's target and what would be consistent
with stable 2% inflation.
There is potential for a further slowing of both economic data and inflation in
the US during the second half of this year, culminating in a US recession in
early 2024 and a focus in 2024 on Fed rate cuts.
Moving to the rest of the world; in the Eurozone, the European Central Bank
("ECB") has raised policy rates by 400 bps in the year to June 2023 and is
likely to add to that further. So far, there has not been any major fallout from
that hiking cycle in terms of financial stability in the Eurozone. With headline
inflation falling since late 2022, real interest rates have become less
negative, further reducing the tailwind to the economy. Core inflation on the
other hand, has been stubborn in Europe and remains far above target as the
monetary tightening feeds only gradually into the economy.
As the energy price shock related to the Russian invasion in Ukraine has started
to fade, the associated fiscal support provided may slowly disappear and, if
there was to be sustained fiscal consolidation over the next few years, this
could help the ECB in its attempt to bring underlying inflation lower.
In Japan, inflation has risen this year to levels not seen since the early
1980s, with the inflation picture increasingly mirroring that of other developed
market countries, albeit with a lag of over a year.Under Kazuo Ueda, who in
April became governor of the Bank of Japan ("BOJ") following a decade of
leadership under Haruhiko Kuroda, the BOJ modified its yield curve control
("YCC") on 28 July. The new YCC scheme, while complex, could in practice allow
the yield of 10y Japanese Government Bonds ("JGBs") to rise as high as 1%,
double the previous limit of 0.50%, a change that is significantly reducing the
impact of YCC while technically maintaining most of the framework. This can be
seen as a major first step in the slow normalisation of Japanese monetary
policy, with the possibility of the BOJ further paring back YCC and raising its
negative policy rate.Perhaps more interesting will be whether the BOJ will have
to take even stronger steps to bring inflation back down to its 2% target.
Further, in Latin America, where real interest rates are at historical highs and
with inflation showing a clear downtrend, albeit with still elevated core
inflation levels, there could be a gradual start to rate cuts.
Brevan Howard wishes to thank shareholders once again for their continued
support.
Brevan Howard Capital Management LP,
acting by its sole general partner,
Brevan Howard Capital Management Limited.
13 September 2023
Independent Review Report to BH Macro Limited
Conclusion
We have been engaged by BH Macro Limited (the "Company") to review thefinancial
statements in the half-yearly financial report for the six months ended 30 June
2023 of the Company, which comprises the unaudited statement of assets and
liabilities, the unaudited statement of operations, the unaudited statement of
changes in net assets, the unaudited statement of cash flows and the related
explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe
that thefinancial statements in the half-yearly financial report for theperiod
ended 30 June 2023 do not give a true and fair view of the financial position of
the Company as at 30 June 2023 and of its financial performance and its cash
flows for the six monthperiod then ended, in accordance with U.S. generally
accepted accounting principles and the Disclosure Guidance and Transparency
Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued by the Financial
Reporting Council for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. We read
the other information contained in the half-yearly financial report and consider
whether it contains any apparent misstatements or material inconsistencies with
the information in the financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed in
an audit as described in the Scope of review section of this report, nothing has
come to our attention to suggest that the directors have inappropriately adopted
the going concern basis of accounting or that the directors have identified
material uncertainties relating to going concern that are not appropriately
disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However future events or conditions may cause the Company to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Company will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the interim
financial report in accordance with the DTR of the UK FCA.
Thefinancial statements included in this interim report have been prepared in
accordance with U.S. generally accepted accounting principles.
In preparing the half-yearly financial report, the directors are responsible for
assessing the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless liquidation is imminent.
Our responsibility
Our responsibility is to express to the Company a conclusion on thefinancial
statements in the half-yearly financial report based on our review.Our
conclusion, including our conclusions relating to going concern, are based on
procedures that are less extensive than audit procedures, as described in the
scope of review paragraph of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement letter to assist the Company in meeting the requirements of the DTR
of the UK FCA. Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work, for
this report, or for the conclusions we have reached.
Deborah Smith
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants
Guernsey
13 September 2023
Unaudited Statement of Assets and Liabilities
As at 30 June 2023
30.06.23 31.12.22 30.06.22
(Unaudited) (Audited) (Unaudited)
US$'000 US$'000 US$'000
Assets
Investment in 1,968,663 1,628,766 1,523,101
the Master
Fund (note 3)
Master Fund 4,073 70,411 -
redemption
proceeds
receivable
Master Fund - - 32,180
subscription
paid in
advance
Prepaid 122 43 333
expenses
Cash and bank 15,742 7,271 4,820
balances
denominated in
Sterling
Cash and bank 736 639 334
balances
denominated in
US Dollars
Total assets 1,989,336 1,707,130 1,560,768
Liabilities
Performance 2 62,261 43,130
fees payable
(note 4)
Management 2,580 4,224 2,020
fees payable
(note 4)
Accrued 132 117 227
expenses and
other
liabilities
Directors' - 14 -
fees payable
Administration 77 66 58
fees payable
(note 4)
Total 2,791 66,682 45,435
liabilities
Net assets 1,986,545 1,640,448 1,515,333
Number of
shares in
issue (note 5)
Sterling 374,357,176 30,156,454* 29,300,836*
shares
US Dollar 28,840,946 2,858,135* 2,583,898*
shares
Net asset
value per
share (notes 7
and 9)
Sterling £3.93 £41.81* £39.63*
shares
US Dollar US$4.08 US$43.28* US$40.76*
shares
See accompanying Notes to the Interim Unaudited Financial Statements.
Signed on behalf of the Board by:
Richard Horlick
Chair
John Le Poidevin
Director
13 September 2023
* The Number of Shares In Issue and Net Asset Value Per Share as of 31 December
2022 and 30 June 2022 are not adjusted by a factor of 10 to reflect the 10 for 1
share sub-division on 7 February 2023.
Unaudited Statement of Operations
For the period from 1 January 2023 to 30 June 2023
01.01.23 01.01.22 01.01.22
to to to
30.06.23 31.12.22 30.06.22
(Unaudited) (Audited) (Unaudited)
US$'000 US$'000 US$'000
Net investment
gain/(loss)
allocated from
Master Fund
Interest 39,647 14,309 7,473
income
Dividend
income and
other income
(net of
withholding
tax 30 June
2023:
US$16,182;
31 December 862 6,166 333
2022:
US$127,840;
30 June 2022:
US$59,896
Expenses (39,170) (24,561) (13,094)
Net investment 9,339 (4,086) (5,288)
gain/(loss)
allocated from
Master Fund
Company income
Bank interest 496 32 3
income
Foreign 100,563 - -
exchange gains
(note 3)
Total Company 101,059 32 3
income
Company
expenses
Performance 2 63,844 45,802
fees (note 4)
Management 14,393 23,776 11,427
fees (note 4)
Other expenses 314 1,063 389
Directors' 228 366 172
fees
Administration 148 241 113
fees (note 4)
Foreign - 149,089 144,433
exchange
losses (note
3)
Total Company 15,085 238,379 202,336
expenses
Net investment 95,313 (242,433) (207,621)
gain/(loss)
Net realised
and unrealised
(loss)/gain on
investments
allocated from
the Master
Fund
Net realised (14,667) 118,371 46,061
(loss)/gain on
investments
Net unrealised (109,132) 236,140 203,762
(loss)/gain on
investments
Net realised
and unrealised
(loss)/gain on
investments
allocated from
the
Master Fund (123,799) 354,511 249,823
Net (28,486) 112,078 42,202
(decrease)/incr
ease in net
assets
resulting from
operations
See accompanying Notes to the Interim Unaudited Financial Statements.
Unaudited Statement of Changes in Net Assets
For the period from 1 January 2023 to 30 June 2023
01.01.23 01.01.22 01.01.22
to 30.06.23 to to 30.06.22
31.12.22
(Unaudited) (Audited) (Unaudited)
US$'000 US$'000 US$'000
Net
(decrease)/in
crease in
net assets
resulting
from
operations
Net 95,313 (242,433) (207,621)
investment
gain/(loss)
Net realised (14,667) 118,371 46,061
(loss)/gain
on
investments
allocated
from the
Master Fund
Net (109,132) 236,140 203,762
unrealised
(loss)/gain
on
investments
allocated
from the
Master Fund
(28,486) 112,078 42,202
Issue of new
shares
Sterling 379,021 218,027 175,403
shares
US Dollar 3,336 12,615 -
shares
Share issue
costs
Sterling (7,707) - -
shares
US Dollar (67) - -
shares
Total share 374,583 230,642 175,403
capital
transactions
Net increase 346,097 342,720 217,605
in net
assets
Net assets 1,640,448 1,297,728 1,297,728
at the
beginning of
the
period/year
Net assets 1,986,545 1,640,448 1,515,333
at the end
of the
period/year
See accompanying Notes to the Interim Unaudited Financial Statements.
Unaudited Statement of Cash Flows
For the period from 1 January 2023 to 30 June 2023
01.01.23 01.01.22 01.01.22
to 30.06.23 to to 30.06.22
31.12.22
(Unaudited) (Audited) (Unaudited)
US$'000 US$'000 US$'000
Cash flows
from operating
activities
Net (28,486) 112,078 42,202
(decrease)/incr
ease in net
assets used in
operations
Adjustments to
reconcile net
(decrease)/incr
ease in net
assets
resulting from
operations to
net cash used
in operating
activities:
Net investment (9,339) 4,086 5,288
(gain)/loss
allocated from
the Master
Fund
Net realised 14,667 (118,371) (46,061)
loss/(gain) on
investments
allocated from
the Master
Fund
Net unrealised 109,132 (236,140) (203,762)
loss/(gain) on
investments
allocated from
the Master
Fund
Purchase of (365,214) (221,798) (142,989)
investment in
the Master
Fund
Proceeds from 77,711 11,008 7,261
sale of
investment in
the Master
Fund
Increase in - - (32,180)
Master Fund
subscription
paid in
advance
Foreign (100,563) 149,089 144,433
exchange
(gains)/losses
(Increase)/decr (79) 251 (39)
ease in
prepaid
expenses
(Decrease)/incr (62,259) 56,056 36,925
ease in
performance
fees payable
(Decrease)/incr (1,644) 972 (1,232)
ease in
management
fees payable
Decrease in (81) (137) (27)
accrued
expenses and
other
liabilities
(Decrease)/incr (14) 14 -
ease in
Directors'
fees payable
Decrease in - 1,749 1,749
combination
fees
receivable
Increase in 11 15 7
administration
fees payable
Net cash used (366,158) (241,128) (188,425)
in operating
activities
Cash flows
from financing
activities
Proceeds from 382,357 230,642 175,403
share issue
Share issue (7,773) - -
costs
Net cash 374,584 230,642 175,403
generated from
financing
activities
Change in cash 8,426 (10,486) (13,022)
Cash, 7,910 16,430 16,430
beginning of
the
period/year
Effect of 142 1,966 1,746
exchange rate
fluctuations
Cash, end of 16,478 7,910 5,154
the
period/year
Cash, end of
the
period/year
Cash and bank 15,742 7,271 4,820
balances
denominated in
Sterling1
Cash and bank 736 639 334
balances
denominated in
US Dollars
16,478 7,910 5,154
Supplemental
disclosure of
non-cash
financing
activities
1. Cash and 12,383 6,045 3,969
bank balances
in Sterling
(GBP'000)
See accompanying Notes to the Interim Unaudited Financial Statements.
Notes to the Interim Unaudited Financial Statements
For the period from 1 January 2023 to 30 June 2023
1. The Company
BH Macro Limited (the "Company") is a limited liability closed-ended investment
company which was incorporated in Guernsey on 17 January 2007 and then admitted
to the Official List of the London Stock Exchange ("LSE") later that year.
The Company's ordinary shares are issued in Sterling and US Dollars.
2. Organisation
The Company is organised as a feeder fund and seeks to achieve its investment
objective by investing all of its investable assets, net of short-term working
capital requirements, in the ordinary Sterling and US Dollar-denominated class B
shares issued by Brevan Howard Master Fund Limited (the "Master Fund") and, as
such, the Company is directly and materially affected by the performance and
actions of the Master Fund.
The Master Fund is an open-ended investment company with limited liability
formed under the laws of the Cayman Islands on 22 January 2003. The investment
objective of the Master Fund is to generate consistent long-term appreciation
through active leveraged trading and investment on a global basis. The Master
Fund employs a combination of investment strategies that focus primarily on
economic change and monetary policy and market inefficiencies. The underlying
philosophy is to construct strategies, often contingent in nature with superior
risk/return profiles, whose outcome will often be crystallised by an expected
event occurring within a pre-determined period of time. New trading strategies
will be added as investment opportunities present themselves.
As such, the Interim Unaudited Financial Statements of the Company should be
read in conjunction with the Interim Unaudited Financial Statements of the
Master Fund which can be found on the Company's website, www.bhmacro.com.
At the date of these Interim Unaudited Financial Statements, there were four
other feeder funds in operation in addition to the Company that invest all of
their assets (net of working capital) in the Master Fund. Furthermore, other
funds managed by the Manager invest some of their assets in the Master Fund as
at the date of these Interim Unaudited Financial Statements.
Off-Balance Sheet, market and credit risks of the Master Fund's investments and
activities are discussed in the notes to the Master Fund's Interim Unaudited
Financial Statements. The Company's investment in the Master Fund exposes it to
various types of risk, which are associated with the financial instruments and
markets in which the Brevan Howard underlying funds invest.
Market risk represents the potential loss in value of financial instruments
caused by movements in market factors including, but not limited to, market
liquidity, investor sentiment and foreign exchange rates.
The Manager
Brevan Howard Capital Management LP (the "Manager") is the manager of the
Company. The Manager is a Jersey limited partnership, the general partner of
which is Brevan Howard Capital Management Limited, a Jersey limited company (the
"General Partner"). The General Partner is regulated in the conduct of fund
services business by the Jersey Financial Services Commission pursuant to the
Financial Services (Jersey) Law, 1998 and the Orders made thereunder.
The Manager also manages the Master Fund and in that capacity, as at the date of
these Interim Unaudited Financial Statements, has delegated the function of
investment management of the Master Fund to Brevan Howard Asset Management LLP,
Brevan Howard (Hong Kong) Limited, Brevan Howard Investment Products Limited,
Brevan Howard US Investment Management LP, Brevan Howard Private Limited, Brevan
Howard (Tel Aviv) Limited and BH-DG Systematic Trading LLP.
On 23 January 2023, the Company announced the commencement of an offer of new
ordinary shares (the "Initial Issue"), comprising a placing, an intermediaries
offer and an offer for subscription, together with an issuance programme for
subsequent issues, which remains open until 23 January 2024 (the "Issuance
Programme"). The Company also announced the issue of a new prospectus and a
circular to Shareholders (the "Circular"), in connection with the Issuance
Programme.
In order to reflect the increased investment of the Company in the Master Fund,
the Company and the Manager agreed to a number of amendments to the Management
Agreement and the terms on which the Company's investment in the Master Fund
could be redeemed in order to provide the Manager with more operational
certainty regarding the Company's investment in the Master Fund. These changes,
which did not require Shareholder approval, were as follows:
· The Company will ordinarily be required to provide 12 months' notice of the
redemption of all or some of its investment in the Master Fund, except as may be
required to fund the Company's specific working capital requirements and, up to
a maximum amount equal to five per cent. of each class of the Company's holding
of Master Fund shares every month, to finance on-market share buy backs. Any
redemption of all or part of the Company's investment in the Master Fund on a
winding up of the Company or to finance a tender offer or a class closure
resolution will be required to be on 12 months' notice. In those cases, the
Company would only receive the proceeds of redemption from the Master Fund (and,
therefore, Shareholders would only receive payment from the Company) after the
redemption date at the end of the 12 month notice period and the Company (and,
therefore, Shareholders) would remain exposed to the investment performance of
the Master Fund in the intervening period to that redemption date.
· The circumstances in which the Company can terminate the Management
Agreement and redeem its investment in the Master Fund on less than 12 months'
notice are limited to certain "cause" events affecting the Manager, in which
case the Company would be entitled to terminate the Management Agreement and
redeem its investment in the Master Fund on three months' notice.
· In addition, the annual buy back allowance arrangements introduced in 2021
will continue to apply in respect of repurchases and redemptions of shares of
each class in excess of five per cent. of the relevant class in any calendar
year.
3. Significant accounting policies
These Interim Unaudited Financial Statements, which give a true and fair view,
are prepared in accordance with United States Generally Accepted Accounting
Principles and comply with the Companies (Guernsey) Law, 2008. The functional
and reporting currency of the Company is US Dollars.
As further described in the Directors' Report, these Interim Unaudited Financial
Statements have been prepared using the going concern basis of accounting.
The Company is an investment company which has applied the provisions of
Accounting Standards Codification ("ASC") 946.
The following are the significant accounting policies adopted by the Company:
Valuation of investments
The Company records its investment in the Master Fund at fair value. Fair value
is determined as the Company's proportionate share of the Master Fund's capital,
which approximates fair value. At 30 June 2023, the Company was the sole
investor in the Master Fund's ordinary Sterling and US Dollar class B shares as
disclosed in the table below. Within the table below, the Company's investment
in each share class in the Master Fund is included, with the overall total
investment shown in the Unaudited Statement of Assets and Liabilities.
Percentage Shares held in NAV per Investment Investment in
of the Master Fund Share in
Master Fund
Master
Fund
Master (class B) (class B) CCY US$'000
Fund's '000
capital
30 June
2023
Sterling 15.70% £6,274.95 232,123 £1,456,562 1,851,727
US Dollar 0.99% US$6,279.06 18,622 US$116,936 116,936
1,968,663
31
December
2022
Sterling 15.03% £6,634.79 1,506,049
188,704 £1,252,014
US Dollar 1.22% US$6,606.92 18,573 122,717
US$122,717
1,628,766
30 June
2022
Sterling 14.41% £6,185.20 1,413,264
188,158 £1,163,801
US Dollar 1.12% US$6,150.35 109,837
17,859 US$109,837
1,523,101
ASC Topic 820 defines fair value as the price that the Company would receive
upon selling a security in an orderly transaction to an independent buyer in the
principal or most advantageous market of the security.
The valuation and classification of securities held by the Master Fund is
discussed in the notes to the Master Fund's Interim Unaudited Financial
Statements which are available on the Company's website, www.bhmacro.com.
Income and expenses
The Company records monthly its proportionate share of the Master Fund's income,
expenses and realised and unrealised gains and losses. In addition, the Company
accrues its own income and expenses.
Use of estimates
The preparation of Financial Statements in accordance with United States
Generally Accepted Accounting Principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of these Interim
Unaudited Financial Statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
Leverage
The Manager has discretion, subject to the prior approval of a majority of the
independent Directors, to employ leverage for and on behalf of the Company by
way of borrowings to effect share purchases or share buy-backs, to satisfy
working capital requirements and to finance further investments in the Master
Fund.
The Company may borrow up to 20% of its NAV, calculated as at the time of
borrowing. Additional borrowing over 20% of NAV may only occur if approved by an
ordinary resolution of the Shareholders.
Foreign exchange
Transactions reported in the Unaudited Statement of Operations are translated
into US Dollar amounts at the date of such transactions. Assets and liabilities
denominated in foreign currencies are translated into US Dollars at the exchange
rate at the reporting date. The share capital and other capital reserves are
translated at the historic ruling at the date of the transaction.
Investment securities and other assets and liabilities of the Sterling share
class are translated into US Dollars, the Company's reporting currency, using
exchange rates at the reporting date. The Unaudited Statement of Operations'
items of the Sterling share class are converted into US Dollars using the
average exchange rate. Exchange differences arising on translation are included
in foreign exchange losses in the Unaudited Statement of Operations. This
foreign exchange adjustment has no effect on the value of net assets allocated
to the individual share classes.
Cash and bank balances
Cash and bank balances comprise demand deposits.
Allocation of results of the Master Fund
Net realised and unrealised gains/losses of the Master Fund are allocated to the
Company's share classes based upon the percentage ownership of the equivalent
Master Fund class.
Treasury shares
Where the Company has purchased its own share capital, the consideration paid,
which includes any directly attributable costs, has been recognised as a
deduction from equity Shareholders' funds through the Company's reserves.
Where such shares have been subsequently sold or reissued to the market, any
consideration received, net of any directly attributable incremental transaction
costs, is recognised as an increase in equity Shareholders' funds through the
share capital account. Where the Company cancels treasury shares, no further
adjustment is required to the share capital account of the Company at the time
of cancellation. Shares held in treasury are excluded from calculations when
determining NAV per share as detailed in note 7 and in the `Financial
highlights' in note 9.
Refer to note 8 for details of sales of shares from treasury or purchases by the
Company of its share capital.
4. Management Agreement and administration agreement
Management fee and performance fee
The Company has entered into the Management Agreement with the Manager to manage
the Company's investment portfolio. The Management Fee charged to the Company is
reduced by the Company's share of management fees incurred by the Master Fund
through any underlying investments of the Master Fund that share the same
manager as the Company. Effective from 1 July 2021, the Management Fee charged
was changed to 1/12 of 1.5% per month of the NAV. The investment in the Class B
shares of the Master Fund is not subject to management fees, but is subject to
an operational services fee payable to the Manager of 1/12 of 0.5% per month of
the NAV. On 23 January 2023, the Management Agreement between the Company and
the Manager was amended.
During the six-month period ended 30 June 2023, US$14,392,938 (year ended 31
December 2022: US$23,776,341; six-month period ended 30 June 2022:US$11,426,798)
was earned by the Manager as net Management Fees. At 30 June 2023, US$2,579,511
(31December 2022: US$4,224,444; 30 June 2022: US$2,020,089) of the Management
Fee remained outstanding.
The Manager is also entitled to an annual performance fee for both share
classes. The performance fee is equal to 20% of the appreciation in the NAV per
share of that class during that calculation period which is above the base NAV
per Share of that class, other than that arising to the remaining shares of the
relevant class from any repurchase, redemption or cancellation of any share in
the calculation period. The base NAV per share is the greater of the NAV per
Share of the relevant class at the time of issue of such share and the highest
NAV per share achieved as at the end of any previous calculation period.
The Manager will be paid an estimated performance fee on the business day
preceding the last business day of each calculation period. Within 5 business
days of the publication of the final NAV of each class of shares as at the end
of the calculation period, any difference between the actual performance fee and
the estimated amount will be paid to or refunded by the Manager, as appropriate.
Any accrued performance fee in respect of shares which are converted into
another share class prior to the date on which the performance fee would
otherwise have become payable in respect of those shares will crystallise and
become payable on the date of such conversion. The performance fee is accrued on
an ongoing basis and is reflected in the Company's published NAV. During the six
-month period ended 30 June 2023, US$2,322 (year ended 31 December 2022:
US$63,843,904; six-month period 30 June 2022: US$45,801,636) was earned by the
Manager as performance fees. At 30 June 2023, US$2,339 (31 December 2022:
US$62,261,207; 30 June 2022: US$43,130,012) of the fee remained outstanding.
The Master Fund may hold investments in other funds managed by the Manager. To
ensure that Shareholders of the Company are not subject to two tiers of fees,
the fees paid to the Manager as outlined above are reduced by the Company's
share of any fees paid to the Manager by the underlying Master Fund investments,
managed by the Manager.
The notice period for termination of the Management Agreement without cause by
either the Company or the Manager was previously 12 months until 23 January
2023, when the Management Agreement between the Company and the Manager was
amended. See note 2 for further details.
Administration fee
The Company has appointed Northern Trust International Fund Administration
Services (Guernsey) Limited as its administrator and corporate secretary (the
"Administrator" and "Corporate Secretary") pursuant to an administration
agreement. The Administrator is paid fees based on the NAV of the Company,
payable quarterly in arrears. The fee is at a rate of 0.015% of the average
month-end NAV of the Company, subject to a minimum fee of £67,500 per annum. In
addition to the NAV-based fee, the Administrator is also entitled to an annual
fee of £6,000 (31 December 2022 and 30 June 2023: £6,000) for certain additional
administration services. The Administrator is entitled to be reimbursed for out
-of-pocket expenses incurred in the course of carrying out its duties as
Administrator. During the six-month period ended 30 June 2023, US$147,658 (year
ended 31 December 2022: US$240,727; six-month period ended 30 June 2022:
US$113,453) was earned by the Administrator as administration fees. The amounts
outstanding are disclosed on the Unaudited Statement of Assets and Liabilities.
5. Share capital
Issued and authorised share capital
The Company has the power to issue an unlimited number of ordinary shares with
no-par value and an unlimited number of shares with a par value. Shares may be
divided into at least two classes denominated in Sterling and US Dollars.
Further issues of shares may be made in accordance with the Articles of
Incorporation (the "Articles"). Shares may be issued in differing currency
classes of ordinary redeemable shares including C shares. The following tables
show the movement in ordinary shares.
For the period from 1 Sterling shares US Dollar shares
January 2023 to 30 June
2023
Number of ordinary shares
In issue at 1 January 30,156,454 2,858,135
2023
Share conversions 110,756 (131,449)
Net issue of new shares 271,711,966 25,367,860
from Share Sub-Division
Issue of new shares 72,378,000 746,400
In issue at 30 June 2023 374,357,176 28,840,946
For the year ended 31 Sterling shares US Dollar shares
December 2022
Number of ordinary shares
In issue at 1 January 25,864,663 2,689,547
2022
Share conversions 90,641 (110,772)
Issue of new shares 4,201,150 279,360
In issue at 31 December 30,156,454 2,858,135
2022
For the period from 1 Sterling shares US Dollar shares
January 2022 to 30 June
2022
Number of ordinary shares
In issue at 1 January 25,864,663 2,689,547
2022
Share conversions 82,678 (105,649)
Issue of new shares 3,353,495 -
In issue at 30 June 2022 29,300,836 2,583,898
Share classes
In respect of each class of shares, a separate class account has been
established in the books of the Company. An amount equal to the aggregate
proceeds of issue of each share class has been credited to the relevant class
account. Any increase or decrease in the NAV of the Master Fund US Dollar shares
and Master Fund Sterling shares as calculated by the Master Fund is allocated to
the relevant class account in the Company. Each class account is allocated those
costs, prepaid expenses, losses, dividends, profits, gains and income which the
Directors determine in their sole discretion relate to a particular class.
Voting rights of shares
Ordinary shares carry the right to vote at general meetings of the Company and
to receive any dividends attributable to the ordinary shares as a class declared
by the Company and, in a winding-up will be entitled to receive, by way of
capital, any surplus assets of the Company attributable to the ordinary shares
as a class in proportion to their holdings remaining after settlement of any
outstanding liabilities of the Company.
As prescribed in the Company's Articles, the different classes of ordinary
shares have different values attributable to their votes. The attributed values
have been calculated on the basis of the Weighted Voting Calculation (as
described in the Articles) which takes into account the prevailing exchange
rates on the date of initial issue of ordinary shares. On a vote, a single US
Dollar ordinary share has 0.7606 votes and a single Sterling ordinary share has
1.4710 votes.
Repurchase of ordinary shares
Under the Company's Articles, Shareholders of a class of shares have the ability
to call for repurchase of that class of shares in certain circumstances. See
note 8 for further details.
Further issue of shares
As approved by the Shareholders at the Annual General Meeting held on 9
September 2022, the Directors had the power to issue further shares for cash on
a non-pre-emptive basis totalling 9,818,410 Sterling shares and 873,549 US
Dollar shares, respectively. This power was due to expire fifteen months after
the passing of the resolution or on the conclusion of the next Annual General
Meeting of the Company, whichever was earlier, unless such power was varied,
revoked or renewed prior to that Meeting by a resolution of the Company in
general meeting.
On 23 January 2023, the Board announced the commencement of its Initial Issue,
comprising a placing, an intermediaries offer and an offer for subscription of
new ordinary shares of no par value in the capital of the Company, together with
the Issuance Programme for subsequent issues, which remains open until 23
January 2024, which could be denominated as Sterling shares or US Dollar shares,
at a price per share of the relevant class equal to the latest estimated net
asset value per share of the relevant class as at the closing date of the
Initial Issue, of the latest estimated NAV per share, plus a premium of two per
cent.
At an EGM held on 6 February 2023, resolutions were passed to approve the grant
of authority to issue new shares and dis-apply pre-emption rights in respect of
shares issued pursuant to the Initial Issue and the Issuance Programme and to
sub-divide the Company's shares, so that each existing share was replaced by ten
shares of the same currency class, in order to assist in liquidity of the shares
(the "Share Sub-Division"), together with the terms of the Company's investment
in the Master Fund, in order to reflect the increased investment of the Company
in the Master Fund, as a result of the Initial Issue and the Issuance Programme.
These resolutions superseded the September 2022 AGM authorities to issue shares
and dis-apply pre-emption rights in respect of the shares issued.
On 7 February 2023, dealings commenced in the shares arising from the Share Sub
-Division. The price per share for the Initial Issue was announced, being 431.5
pence for the Sterling class shares and US$4.47 for US Dollar class shares.
On 13 February 2023, the completion of the Initial Issue was announced. A total
of 72,378,000 Sterling shares and 746,400 US Dollar shares were issued in the
Initial Issue at a price per share equal, respectively, to 431.5 pence per
Sterling share and US$4.47 per US Dollar share, raising gross proceeds of
approximately £315 million (based on a US Dollar/Sterling FX spot rate of 1.2113
being the prevailing rate as at 3.00 p.m. on 10 February 2023). Costs attributed
to the Initial Issue and Share Sub-Division were US$7,773,233.
Distributions
The Master Fund has not previously paid dividends to its investors. This does
not prevent the Directors of the Company from declaring a dividend at any time
in the future if the Directors consider payment of a dividend to be appropriate
in the circumstances. If the Directors declare a dividend, such dividend will be
paid on a per class basis.
As announced on 15 January 2014, the Company intends to be operated in such a
manner to ensure that its shares are not categorised as non-mainstream pooled
investments. This may mean that the Company may pay dividends in respect of any
income that it receives or is deemed to receive for UK tax purposes so that it
would qualify as an investment trust if it were UK tax-resident.
Further, the Company will first apply any such income in payment of its
Management Fee and performance fees.
Treasury shares are not entitled to distributions. There were no Treasury shares
held by the Company throughout the period ended 30 June 2023 and year ended 31
December 2022.
Share conversion scheme
The Company has implemented a share conversion scheme. The scheme provides
Shareholders with the ability to convert some or all of their ordinary shares in
the Company of one class into ordinary shares of the other class. Shareholders
are able to convert ordinary shares on the last business day of every month.
Each conversion will be based on the NAV (note 7) of the shares of the class to
be converted.
6. Taxation
Overview
The Company is exempt from taxation in Guernsey under the provisions of the
Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989.
Uncertain tax positions
The Company recognises the tax benefits of uncertain tax positions only where
the position is more-likely-than- not (i.e. greater than 50%), to be sustained
assuming examination by a tax authority based on the technical merits of the
position. In evaluating whether a tax position has met the recognition
threshold, the Company must presume that the position will be examined by the
appropriate taxing authority that has full knowledge of all relevant
information. A tax position that meets the more-likely-than-not recognition
threshold is measured to determine the amount of benefit to recognise in the
Company's Interim Unaudited Financial Statements. Income tax and related
interest and penalties would be recognised by the Company as tax expenses in the
Unaudited Statement of Operations if the tax positions were deemed not to meet
the more-likely-than-not threshold.
The Company analyses all open tax years for all major taxing jurisdictions. Open
tax years are those that are open for examination by taxing authorities, as
defined by the statute of limitations in each jurisdiction. The Company
identifies its major tax jurisdictions as: Guernsey; the Cayman Islands; and
foreign jurisdictions where the Company makes significant investments. The
Company has no examinations by tax authorities in progress.
The Directors have analysed the Company's tax positions and have concluded that
no liability for unrecognised tax benefits should be recorded related to
uncertain tax positions. Further, the Directors are not aware of any tax
positions for which it is reasonably possible that the total amounts of
unrecognised tax benefits will significantly change in the remainder of the
year.
7. Publication and calculation of the Company's Net Asset Value ("NAV")
The NAV of the Company is equal to the value of its total assets less its total
liabilities. The NAV per share of each class will be calculated by dividing the
NAV of the relevant class account by the number of shares of the relevant class
in issue on that day.
The Company publishes the NAV per share for each class of shares as calculated
by the Administrator based in part on information provided by the Master Fund,
monthly in arrears, as at each month-end.
The Company also publishes an estimate of the NAV per share for each class of
shares as calculated by the Administrator based in part on information provided
by the Master Fund, weekly in arrears.
8. Discount management programme
The Company has previously implemented a number of methods in order to seek to
manage any discount to NAV at which the Company's shares trade.
Market purchases
Until October 2016, the Company regularly utilised its ability to make market
purchases of its shares as part of the discount management programme, funded by
the Company redeeming underlying shares in the Master Fund. As a condition of
the April 2017 Tender Offer, this was suspended until 1 April 2017 and for much
of the period since that date, the Company's shares have traded at a premium or
minimal discount to NAV. However, if the Company's shares were again to trade at
wide or volatile discounts to NAV in the future, it is the Board's intention to
keep any resumption of market purchases of shares under review.
On 23 January 2023, the Board announced the commencement of its Initial Issue of
new ordinary shares of no par value in the capital of the Company, together with
the Issuance Programme for subsequent issues, which remains open until 23
January 2024. See note 5 for further details.
Annual offer of partial return of capital
Under the Company's Articles, once in every calendar year, the Directors have
discretion to determine that the Company make an offer of a partial return of
capital in respect of such number of shares of the Company in issue as they
determine, provided that the maximum amount distributed does not exceed 100% of
the increase in NAV of the Company in the prior calendar year.
The Directors have discretion to determine the particular class or classes of
shares in respect of which a partial return of capital would be made, the
timetable for that partial return of capital and the price at which the shares
of each relevant class are to be returned.
The Company is entitled to redeem upon three months' notice, no more than once
per year, a portion of its interest in the Master Fund representing up to 10 per
cent of each class of the Company's holding of Master Fund shares as at the date
of the relevant redemption request in connection with any such offer of a
partial capital return of capital which is approved by the Directors.
The decision to make a partial return of capital in any particular year and the
amount of the return depend, among other things, on prevailing market
conditions, the ability of the Company to liquidate its investments to fund the
capital return, the success of prior capital returns and applicable legal,
regulatory and tax considerations.
Class closure resolutions
If any class of shares trades at an average discount at or in excess of 8% of
the monthly NAV in any year from 1 January to 31 December, the Company will hold
a class closure vote of the relevant class.
The average premiums to NAV for the Sterling shares and US Dollar Shares for the
year ended 31 December 2022 were 10.61% and 11.08% respectively and
consequently, no closure vote will be held in 2023.
The average premiums to NAV for the Sterling Shares and US Dollar Shares for the
six-month period ended 30 June 2023 were 4.48% and 5.07% respectively.
The arrangements are described more fully in the Company's principal documents
which were approved at the EGM on 24 February 2017.
9. Financial highlights
The following tables include selected data for a single ordinary share of each
of the ordinary share classes in issue at 30 June 2023 and other performance
information derived from the Interim Unaudited Financial Statements.
The per share amounts and ratios which are shown reflect the income and expenses
of the Company for each class of ordinary share.
30.06.23 30.06.23
Sterling shares US Dollar shares
£ US$
Per share operating
performance
Net asset value at 4.18 4.33
beginning of the
period1
Income from investment
operations
Net investment loss 2 (0.01) (0.01)
Net realised and (0.24) (0.18)
unrealised loss on
investment
Other capital items 3 - (0.06)
Total loss (0.25) (0.25)
Net asset value, end of 3.93 4.08
the period
Total loss before (6.09%) (5.65%)
performance fees
Performance fees - -
Total loss after (6.09%) (5.65%)
performance fees
An individual Shareholder's return may vary from these returns based on the
timing of their purchase or sale of shares. All figures contained herein in
respect of the period ended 30 June 2023 are not annualised.
30.06.23 30.06.23
Sterling shares US Dollar shares
£'000 US$'000
Supplemental data
Net asset value, end of the period 1,469,990 117,749
Average net asset value for the period 1,468,214 121,222
30.06.23 30.06.23
Sterling shares US Dollar shares
Ratio to average net assets
Operating expenses
Company expenses 4 0.78% 0.78%
Master Fund expenses 5 0.41% 0.42%
Master Fund interest expenses 6 1.20% 1.23%
Performance fees 0.00% 0.00%
2.39% 2.43%
Net investment loss before performance fees 2 (0.27%) (0.23%)
Net investment loss after performance fees 2 (0.27%) (0.23%)
31.12.22 31.12.22
Sterling shares US Dollar shares
£ US$
Per share operating
performance
Net asset value at 34.30 35.71
beginning of the year1
Income from investment
operations
Net investment loss 2 (2.44) (2.50)
Net realised and 8.87 9.22
unrealised gain on
investment
Other capital items 3 1.08 0.85
Total gain 7.51 7.57
Net asset value, end of 41.81 43.28
the year1
Total gain before 26.78% 25.93%
performance fees
Performance fees (4.87%) (4.76%)
Total gain after 21.91% 21.17%
performance fees
Total gain reflects the net return for an investment made at the beginning of
the year and is calculated as the change in the NAV per ordinary share during
the year from 1 January 2022 to 31 December 2022. An individual Shareholder's
return may vary from these returns based on the timing of their purchase or sale
of shares.
31.12.22 31.12.22
Sterling shares US Dollar shares
£'000 US$'000
Supplemental data
Net asset value, end of the year 1,260,923 123,686
Average net asset value for the year 1,132,773 110,421
31.12.22 31.12.22
Sterling shares US Dollar shares
Ratio to average net assets
Operating expenses
Company expenses 4 1.68% 1.74%
Master Fund expenses 5 0.41% 0.41%
Master Fund interest expenses 6 1.22% 1.18%
Performance fees 4.23% 4.20%
7.54% 7.53%
Net investment loss before performance fees 2 (1.95%) (1.98% )
Net investment loss after performance fees 2 (6.18% ) (6.18% )
30.06.22 30.06.22
Sterling shares US Dollar shares
£ US$
Per share operating
performance
Net asset value at 34.30 35.71
beginning of the
period1
Income from investment
operations
Net investment loss 2 (1.65) (1.74)
Net realised and 6.16 6.87
unrealised gain on
investment
Other capital items 3 0.82 (0.08)
Total gain 5.33 5.05
Net asset value, end of 39.63 40.76
the period
Total gain before 19.03% 17.61%
performance fees
Performance fees (3.50%) (3.50%)
Total gain after 15.53% 14.11%
performance fees
An individual Shareholder's return may vary from these returns based on the
timing of their purchase or sale of shares. All figures contained herein in
respect of the period ended 30 June 2022 are not annualised.
30.06.22 30.06.22
Sterling shares US Dollar shares
£'000 US$'000
Supplemental data
Net asset value, end of the period 1,161,139 105,307
Average net asset value for the period 1,035,217 101,791
30.06.22 30.06.22
Sterling shares US Dollar shares
Ratio to average net assets
Operating expenses
Company expenses 4 0.83% 0.90%
Master Fund expenses 5 0.29% 0.30%
Master Fund interest expenses 6 0.62% 0.61%
Performance fees 3.16% 3.25%
4.90% 5.06%
Net investment loss before performance fees 2 (1.20% ) (1.26% )
Net investment loss after performance fees 2 (4.36% ) (4.51% )
Notes
1 For illustrative purposes, the Net Asset Value at the beginning of the period
is adjusted by a factor of 10 to reflect the 10 for 1 share sub-division, which
took effect on 7 February 2023. The rest of Net Asset Values for 2022 are not
adjusted by a factor of 10 reflect in order to reflect the factual numbers
audited in previous financial statements.
2The net investment loss figures disclosed above, does not include net realised
and unrealised gains/losses on investments allocated from the Master Fund.
3 Included in other capital items are the discounts and premiums on conversions
between share classes and on the sale of treasury shares as well as any partial
capital return effected in the relevant year or period as compared to the NAV
per share at the beginning of the year/period.
4Company expenses are as disclosed in the Unaudited Statement of Operations
excluding the performance fee and foreign exchange losses/gains.
5 Master Fund expenses are the operating expenses of the Master Fund excluding
the interest and dividend expenses of the Master Fund.
6 Master Fund interest expenses include interest and dividend expenses on
investments sold short.
10. Related-party transactions
Parties are considered to be related if one party has the ability to control the
other party or exercise significant influence over the party in making financial
or operational decisions.
The management fees, performance fees and administration fees are disclosed in
note 4. Details of the amended Management Agreement can be found in Note 2.
The annual Directors' fees from 1 July 2022 have been:
Fee per annum
Role £
Board Chair 90,000
Audit Committee Chair 65,000
Management Engagement Committee Chair 55,000
Remuneration and Nomination Committee Chair 55,000
Senior Independent Director 55,000
All other Directors 50,000
At the Annual General Meeting, held on 9 September 2022, Shareholders approved
an increase in the annual aggregate limit of fees payable to Directors from
£400,000 per annum to £800,000 per annum.
The fees payable by the Company in respect of each of the Directors who served
during the period ended 30 June 2023, theyear ended 31 December 2022 and the
period ended 30June 2022, were as follows:
Period Year Period
ended ended ended
30.06.23 31.12.22 30.06.22
£ £ £
Richard Horlick 45,000 80,000 35,000
Caroline Chan* 25,000 3,562 N/A
Julia Chapman** 27,500 50,000 22,500
Bronwyn Curtis 27,500 50,000 22,500
John Le Poidevin 32,500 60,000 27,500
Claire Whittet 27,500 52,500 25,000
Total 185,000 296,062 132,500
*Caroline Chan was appointed to the Board on 6 December 2022 at a fee of £50,000
p.a.
**Julia Chapman was paid a fee of £45,000 p.a. until 30 June 2022. From 1 July
2022, she was paid £55,000 per annum as Chair of the Management Engagement
Committee.
During the 10:1 share sub-division, which was completed on 7 February 2023 (as
mentioned in notes 2 and 5), the following changes were made to the Directors'
shareholdings in the Company:
Richard Horlick, 20,000 Sterling shares cancelled, 200,000 Sterling shares
issued;
Julia Chapman, 626 Sterling shares cancelled, 6,260 Sterling shares issued;
Bronwyn Curtis, 1,000 Sterling shares cancelled, 10,000 Sterling shares issued;
John Le Poidevin, 5,482 Sterling shares cancelled, 54,820 Sterling shares
issued; and
Claire Whittet, 1,500 Sterling shares cancelled, 15,000 Sterling shares issued.
On 13 February 2023, the Board participated in the Initial Issue for the
following amounts:
Richard Horlick, US$89,400 of US Dollar shares (20,000 shares);
Caroline Chan, £50,000 of Sterling shares (11,587 shares);
Bronwyn Curtis, £100,000 of Sterling shares (23,175 shares);
John Le Poidevin, £90,000 of Sterling shares (20,800 shares); and
Claire Whittet, £35,000 of Sterling shares (8,111 shares).
11. Subsequent events
On 3 August 2023, the Company completed the share conversion for the 30 June
2023 share conversion date, issuing 749,363 US Dollar Shares and cancelling
613,351 Sterling Shares.
On 4 September 2023, the Company completed the share conversion for the 31 July
2023 share conversion date, issuing 17,120 US Dollar Shares and cancelling
13,874 Sterling Shares.
The Directors have evaluated subsequent events up to 13 September 2023, which is
the date that the Interim Unaudited Financial Statements were approved and
available to be issued and have concluded there are no further items that
require disclosure or adjustment to the Interim Unaudited Financial Statements.
Historic Performance Summary
As at 30 June 2023
30.06.23 31.12.22 31.12.21 31.12.20 31.12.19
US$'000 US$'000 US$'000 US$'000 US$'000
Net (28,486) 112,078 12,010 181,533 59,462
(decrease)/i
ncre
ase in net
assets
resulting
from
operations
Total 1,989,336 1,707,130 1,307,490 802,224 570,779
assets
Total (2,791) (66,682) (9,762) (41,055) (11,014)
liabilities
Net assets 1,986,545 1,640,448 1,297,728 761,169 559,765
Number of
shares in
issue
Sterling 374,357,176 30,156,454* 25,864,663* 15,009,868* 14,310,040*
shares
US Dollar 28,840,946 2,858,135* 2,689,547* 2,191,379* 2,442,057*
shares
Net asset
value
per share
Sterling £3.93 £41.81* £34.30* £33.38* £26.06*
shares
US Dollar US$4.08 US$43.28* US$35.71* US$34.78* US$26.99*
shares
* The Number of Shares In Issue and Net Asset Value Per Share prior to 30 June
2023 are not adjusted by a factor of 10 to reflect the 10 for 1 share sub
-division on 7 February 2023.
Glossary of Terms and Alternative Performance Measures
Alternative Performance Measures ("APMs")
We assess our performance using a variety of measures that are not specifically
defined under US GAAP and therefore termed APMs. The APMs that we use may not be
directly comparable with those used by other companies.
Average Premium to NAV
The average premium to NAV of the whole period/year is calculated for each share
class by using the following formula:
(A-B)
B
Where:
· `A' is the average closing market price of a share of the relevant share
class as derived from the trading price on the London Stock Exchange, calculated
as the sum of all the closing market prices per share of that class as at each
London Stock Exchange trading day during a calendar year, divided by the number
of such trading days in such period; and
· `B' is the average NAV per share of the shares of the relevant share class
taken over the 6 month-end NAV Calculation Dates in the year ended 30 June 2023
calculated as the sum of the final NAV of the share class as at each month-end
NAV Calculation Date during the period ended 30 June 2023, divided by 6.
(Discount)/Premium
If the share price of an investment is lower than the NAV per share, the shares
are said to be trading at a discount. The size of the discount is calculated by
subtracting the share price from the NAV per share of the relevant share class
and is usually expressed as a percentage of the NAV per share. If the share
price is higher than the NAV per share, the shares are said to be trading at a
premium. The Board monitors the level of discount or premium and consideration
is given to ways in which share price performance may be enhanced, including the
effectiveness of marketing and share buy-backs, where appropriate. The
(discount)/premium is shown below.
Sterling Shares US Dollar Shares
30.06.23 31.12.22 30.06.23 31.12.22
Share Price at Year End (A) £3.68 £44.90* US$3.99 US$45.20*
NAV per Share (B) £3.93 £41.81* US$4.08 US$43.28*
Premium to NAV (A-B)/B (6.36%) 7.39% (2.21%) 4.44%
* Share Prices and NAV per Share as of 31 December 2022 are not adjusted by a
factor of 10 to reflect the 10 for 1 share sub-division.
Ongoing Charges
The Ongoing Charges are calculated using the AIC Ongoing Charges methodology,
which was last updated in April 2022 and is available on the AIC website
(theaic.co.uk). The Ongoing Charges represent the Company's Management Fee and
all other operating expenses, excluding finance costs, performance fees, share
issue or buyback costs and non-recurring legal and professional fees and are
expressed as a percentage of the average of the daily net assets during the year
(see the Directors' Report). The Board continues to be conscious of expenses and
works hard to maintain a sensible balance between good quality service and cost.
The Ongoing Charges calculation is shown below:
Period ended Year ended Period ended Year ended
30.06.23 31.12.22 30.06.23 31.12.22
Average NAV £1,468,214,020 £1,132,773,154 US$121,221,866 US$110,421,043
for the
year (A)
Management £22,026,772 £17,787,437 US$1,820,832 US$1,792,074
Fee*
Other £1,049,000 £1,248,572 US$93,635 US$127,701
Company
expenses*
Total £23,075,772 £19,036,009 US$1,914,467 US$1,919,775
Company
Expenses*
Expenses £8,187,679 £2,325,281 US$697,090 US$238,666
allocated
from the
Master
Fund*
Performance £471 £47,900,303 US$1,740 US$4,641,933
Fee
Total £31,263,922 £69,261,593 US$2,613,297 US$6,800,374
Expenses
(B)
Ongoing 2.13% 6.11% 2.16% 6.16%
Charges
(B/A)
* For comparative purposes, the expenses for the period ended 30 June 2023 have
been annualised.
The NAV
The NAV is the net assets of the Company attributable to Shareholders, that is,
total assets less total liabilities, expressed as an amount per individual share
of the relevant class of shares.
Company Information
Directors
Richard Horlick (Chair)
Caroline Chan
Julia Chapman
Bronwyn Curtis
John Le Poidevin
Claire Whittet
(All Directors are non-executive and independent for the purpose of Listing Rule
15.2.12-A)
Registered Office
PO Box 255
Trafalgar Court Les Banques
St Peter Port Guernsey
Channel Islands GY1 3QL
Manager
Brevan Howard Capital Management LP
6th Floor
37 Esplanade
St Helier
Jersey
Channel Islands JE2 3QA
Administrator and Corporate Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
Channel Islands GY1 3QL
Independent Auditor
KPMG Channel Islands Limited Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
Channel Islands GY1 1WR
Registrar and CREST Service Provider
Computershare Investor Services (Guernsey) Limited
1st Floor
Tudor House
Le Bordage
St Peter Port
Guernsey GY1 1DB
Legal Advisor (Guernsey Law)
Carey Olsen
Carey House
Les Banques
St Peter Port
Guernsey
Channel Islands GY1 4BZ
Legal Advisor (UK Law)
Hogan Lovells International LLP
Atlantic House
Holborn Viaduct
London EC1A 2FG
Corporate Broker
JPMorgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Tax Adviser
Deloitte LLP
PO Box 137
Regency Court
Glategny Esplanade
St Peter Port
Guernsey
Channel Islands GY1 3HW
For the latest information
www.bhmacro.com
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