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
|
|
|
|
|
|
1 Caroline
Chan was appointed to the Board on 6
December 2022.
2 All
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
ReviewThe
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
Assets
|
Discount
Management
|
TOTAL
|
Q1
2023
|
-1.37
|
-0.71
|
-0.22
|
0.14
|
-1.25
|
0.19
|
0.04
|
-3.19
|
Q2
2023
|
-1.37
|
-0.54
|
-0.34
|
-0.07
|
-0.11
|
-0.14
|
0.00
|
-2.55
|
YTD
2023
|
-2.72
|
-1.24
|
-0.56
|
0.07
|
-1.35
|
0.04
|
0.04
|
-5.64
|
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
the financial
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 the financial
statements in the half-yearly financial report for
the period
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
month period
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.
The financial
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
the financial
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
SmithFor and on
behalf of KPMG Channel Islands LimitedChartered
AccountantsGuernsey 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
the Master Fund (note 3)
|
|
|
1,968,663
|
|
1,628,766
|
|
1,523,101
|
Master Fund
redemption proceeds receivable
|
|
|
4,073
|
|
70,411
|
|
-
|
Master Fund
subscription paid in advance
|
|
|
|
-
|
|
-
|
|
32,180
|
Prepaid
expenses
|
|
|
|
|
|
|
|
122
|
|
43
|
|
333
|
Cash and bank
balances denominated in Sterling
|
|
|
15,742
|
|
7,271
|
|
4,820
|
Cash and bank
balances denominated in US Dollars
|
|
|
736
|
|
639
|
|
334
|
Total
assets
|
|
|
|
|
|
|
|
1,989,336
|
|
1,707,130
|
|
1,560,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
fees payable (note 4)
|
|
|
|
|
2
|
|
62,261
|
|
43,130
|
Management fees
payable (note 4)
|
|
|
|
|
2,580
|
|
4,224
|
|
2,020
|
Accrued
expenses and other liabilities
|
|
|
|
|
132
|
|
117
|
|
227
|
Directors’ fees
payable
|
|
|
|
|
|
-
|
|
14
|
|
-
|
Administration
fees payable (note 4)
|
|
|
|
77
|
|
66
|
|
58
|
Total
liabilities
|
|
|
|
|
|
|
|
2,791
|
|
66,682
|
|
45,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets
|
|
|
|
|
|
|
|
1,986,545
|
|
1,640,448
|
|
1,515,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of shares in issue (note 5)
|
|
|
|
|
|
|
|
|
Sterling
shares
|
|
|
|
|
|
|
|
374,357,176
|
|
30,156,454*
|
|
29,300,836*
|
US
Dollar shares
|
|
|
|
|
|
|
|
28,840,946
|
|
2,858,135*
|
|
2,583,898*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value per share (notes 7 and 9)
|
|
|
|
|
|
|
|
|
Sterling
shares
|
|
|
|
|
|
|
|
£3.93
|
|
£41.81*
|
|
£39.63*
|
US
Dollar shares
|
|
|
|
|
|
|
|
US$4.08
|
|
US$43.28*
|
|
US$40.76*
|
See
accompanying
Notes
to the
Interim Unaudited Financial Statements.
Signed on
behalf
of
the
Board
by:
Richard
Horlick
Chair
John
Le Poidevin
Director
13 September 2023
* The Number of Shares In Issue and Net Asset Value Per Share as of
31 December 2022 and 30 June 2022 are not adjusted by a factor of 10
to reflect the 10 for 1 share sub-division on 7 February 2023.
Unaudited Statement of
Operations
For
the
period from 1 January 2023 to
30 June 2023
|
|
|
|
|
|
|
|
|
01.01.23
|
|
01.01.22
|
|
01.01.22
|
|
|
|
|
|
|
|
|
|
to
30.06.23
|
to
31.12.22
|
|
to
30.06.22
|
|
|
|
|
|
|
|
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
US$'000
|
|
US$'000
|
|
US$'000
|
Net
investment gain/(loss) allocated from Master
Fund
|
|
|
|
|
|
|
Interest
income
|
|
|
|
|
|
|
|
39,647
|
|
14,309
|
|
7,473
|
Dividend income
and other income (net of withholding tax 30 June 2023:
US$16,182;
|
|
|
|
|
|
|
|
|
31
December 2022: US$127,840;
30
June 2022: US$59,896
|
|
|
862
|
|
6,166
|
|
333
|
Expenses
|
|
|
|
|
|
|
|
(39,170)
|
|
(24,561)
|
|
(13,094)
|
Net
investment gain/(loss) allocated from Master
Fund
|
|
|
9,339
|
|
(4,086)
|
|
(5,288)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
income
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank interest
income
|
|
|
|
|
|
|
|
496
|
|
32
|
|
3
|
Foreign
exchange gains (note 3)
|
|
|
|
|
|
100,563
|
|
-
|
|
-
|
Total
Company income
|
|
|
|
|
|
|
101,059
|
|
32
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
fees (note 4)
|
|
|
|
|
|
|
2
|
|
63,844
|
|
45,802
|
Management fees
(note 4)
|
|
|
|
|
|
|
14,393
|
|
23,776
|
|
11,427
|
Other
expenses
|
|
|
|
|
|
|
|
314
|
|
1,063
|
|
389
|
Directors'
fees
|
|
|
|
|
|
|
|
228
|
|
366
|
|
172
|
Administration
fees (note 4)
|
|
|
|
|
|
148
|
|
241
|
|
113
|
Foreign
exchange losses (note 3)
|
|
|
|
|
|
-
|
|
149,089
|
|
144,433
|
Total
Company expenses
|
|
|
|
|
|
15,085
|
|
238,379
|
|
202,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment gain/(loss)
|
|
|
|
|
|
95,313
|
|
(242,433)
|
|
(207,621)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realised and unrealised (loss)/gain on investments allocated from
the Master Fund
|
|
|
|
|
|
|
Net
realised (loss)/gain on investments
|
|
|
|
(14,667)
|
|
118,371
|
|
46,061
|
Net
unrealised (loss)/gain on investments
|
|
|
|
(109,132)
|
|
236,140
|
|
203,762
|
Net
realised and unrealised (loss)/gain on investments allocated from
the
|
|
|
|
|
|
|
|
Master
Fund
|
|
|
|
|
|
|
(123,799)
|
|
354,511
|
|
249,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(decrease)/increase in net assets resulting from
operations
|
|
|
|
(28,486)
|
|
112,078
|
|
42,202
|
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
31.12.22
|
|
to
30.06.22
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
(Audited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
US$'000
|
|
US$'000
|
|
US$'000
|
Net
(decrease)/increase in net assets resulting from
operations
|
|
|
|
|
|
|
Net
investment gain/(loss)
|
|
|
|
|
|
95,313
|
|
(242,433)
|
|
(207,621)
|
Net
realised (loss)/gain on investments allocated from the Master
Fund
|
|
(14,667)
|
|
118,371
|
|
46,061
|
Net
unrealised (loss)/gain on investments allocated from the Master
Fund
|
|
(109,132)
|
|
236,140
|
|
203,762
|
|
|
|
|
|
|
|
|
|
(28,486)
|
|
112,078
|
|
42,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue
of new shares
|
|
|
|
|
|
|
|
|
|
|
|
Sterling
shares
|
|
|
|
|
|
|
|
379,021
|
|
218,027
|
|
175,403
|
US
Dollar shares
|
|
|
|
|
|
|
|
3,336
|
|
12,615
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
issue costs
|
|
|
|
|
|
|
|
|
|
|
|
|
Sterling
shares
|
|
|
|
|
|
|
|
(7,707)
|
|
-
|
|
-
|
US
Dollar shares
|
|
|
|
|
|
|
|
(67)
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
share capital transactions
|
|
|
|
|
|
374,583
|
|
230,642
|
|
175,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in net assets
|
|
|
|
|
|
346,097
|
|
342,720
|
|
217,605
|
Net
assets at the beginning of the period/year
|
|
|
|
|
1,640,448
|
|
1,297,728
|
|
1,297,728
|
Net
assets at the end of the period/year
|
|
|
|
|
1,986,545
|
|
1,640,448
|
|
1,515,333
|
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
31.12.22
|
to
30.06.22
|
|
|
|
|
|
|
|
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
US$'000
|
US$'000
|
|
US$'000
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
Net
(decrease)/increase in net assets used in operations
|
|
|
|
(28,486)
|
112,078
|
|
42,202
|
Adjustments to
reconcile net (decrease)/increase in net assets
resulting from
operations to net cash used in operating activities:
|
|
|
|
|
|
Net
investment (gain)/loss allocated from the Master Fund
|
|
|
|
(9,339)
|
|
4,086
|
|
5,288
|
Net
realised loss/(gain) on investments allocated from the Master
Fund
|
|
14,667
|
(118,371)
|
|
(46,061)
|
Net
unrealised loss/(gain) on investments allocated from the Master
Fund
|
|
109,132
|
(236,140)
|
(203,762)
|
Purchase of
investment in the Master Fund
|
|
|
|
|
(365,214)
|
(221,798)
|
(142,989)
|
Proceeds from
sale of investment in the Master Fund
|
|
|
|
77,711
|
|
11,008
|
|
7,261
|
Increase in
Master Fund subscription paid in advance
|
|
|
|
-
|
|
-
|
|
(32,180)
|
Foreign
exchange (gains)/losses
|
|
|
|
|
|
(100,563)
|
149,089
|
|
144,433
|
(Increase)/decrease
in prepaid expenses
|
|
|
|
|
|
(79)
|
|
251
|
|
(39)
|
(Decrease)/increase
in performance fees payable
|
|
|
|
|
|
(62,259)
|
|
56,056
|
|
36,925
|
(Decrease)/increase
in management fees payable
|
|
|
|
|
|
(1,644)
|
|
972
|
|
(1,232)
|
Decrease in
accrued expenses and other liabilities
|
|
|
|
|
|
(81)
|
|
(137)
|
|
(27)
|
(Decrease)/increase
in Directors' fees payable
|
|
|
|
|
|
(14)
|
|
14
|
|
-
|
Decrease in
combination fees receivable
|
|
|
|
|
|
-
|
|
1,749
|
|
1,749
|
Increase in
administration fees payable
|
|
|
|
|
|
11
|
|
15
|
|
7
|
Net
cash used in operating activities
|
|
|
|
|
(366,158)
|
(241,128)
|
(188,425)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
share issue
|
|
|
|
|
|
|
382,357
|
230,642
|
|
175,403
|
Share issue
costs
|
|
|
|
|
|
|
|
(7,773)
|
|
-
|
|
-
|
Net
cash generated from financing activities
|
|
|
|
374,584
|
230,642
|
|
175,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in cash
|
|
|
|
|
|
|
|
8,426
|
(10,486)
|
|
(13,022)
|
Cash,
beginning of the period/year
|
|
|
|
|
|
7,910
|
|
16,430
|
|
16,430
|
Effect of
exchange rate fluctuations
|
|
|
|
|
|
142
|
|
1,966
|
|
1,746
|
Cash,
end of the period/year
|
|
|
|
|
|
16,478
|
|
7,910
|
|
5,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of the period/year
|
|
|
|
|
|
|
|
|
|
|
Cash and bank
balances denominated in Sterling1
|
|
|
|
|
15,742
|
|
7,271
|
|
4,820
|
Cash and bank
balances denominated in US Dollars
|
|
|
|
|
736
|
|
639
|
|
334
|
|
|
|
|
|
|
|
|
|
16,478
|
|
7,910
|
|
5,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. Cash and bank
balances in Sterling (GBP'000)
|
|
|
|
|
|
12,383
|
|
6,045
|
|
3,969
|
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 of
|
Shares
held
in the
Master
Fund
|
NAV
per
Share
|
Investment
in
Master
Fund
|
Investment
in
Master
Fund
|
Master
Fund's capital
|
(class
B)
|
(class
B)
|
CCY
'000
|
US$'000
|
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
|
188,704
|
£1,252,014
|
1,506,049
|
US
Dollar
|
1.22%
|
US$6,606.92
|
18,573
|
US$122,717
|
122,717
|
|
|
|
|
|
1,628,766
|
30
June
2022
|
|
|
|
|
|
Sterling
|
14.41%
|
£6,185.20
|
188,158
|
£1,163,801
|
1,413,264
|
US
Dollar
|
1.12%
|
US$6,150.35
|
17,859
|
US$109,837
|
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
(31 December
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
January
2023
to
30
June
2023
|
Sterling
shares
|
US
Dollar
shares
|
Number
of
ordinary
shares
|
|
|
In
issue
at
1
January
2023
|
30,156,454
|
2,858,135
|
Share
conversions
|
110,756
|
(131,449)
|
Net
issue
of
new
shares
from
Share
Sub-Division
|
271,711,966
|
25,367,860
|
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
December
2022
|
Sterling
shares
|
US
Dollar
shares
|
Number
of
ordinary
shares
|
|
|
In
issue
at
1
January
2022
|
25,864,663
|
2,689,547
|
Share
conversions
|
90,641
|
(110,772)
|
Issue
of
new
shares
|
4,201,150
|
279,360
|
In
issue
at
31
December
2022
|
30,156,454
|
2,858,135
|
For
the
period
from
1
January
2022
to
30
June
2022
|
Sterling
shares
|
US
Dollar
shares
|
Number
of
ordinary
shares
|
|
|
In
issue
at
1
January
2022
|
25,864,663
|
2,689,547
|
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
beginning
of
the
period1
|
4.18
|
4.33
|
Income
from
investment
operations
|
|
|
Net
investment
loss
2
|
(0.01)
|
(0.01)
|
Net
realised
and
unrealised
loss
on
investment
|
(0.24)
|
(0.18)
|
Other
capital
items
3
|
-
|
(0.06)
|
Total
loss
|
(0.25)
|
(0.25)
|
|
|
|
Net
asset
value,
end
of
the
period
|
3.93
|
4.08
|
|
|
|
Total
loss
before
performance
fees
|
(6.09%)
|
(5.65%)
|
Performance
fees
|
-
|
-
|
Total
loss
after
performance
fees
|
(6.09%)
|
(5.65%)
|
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
Sterling
shares
£'000
|
30.06.23
US
Dollar
shares
US$'000
|
Supplemental
data
|
|
|
Net
asset
value,
end
of
the
period
|
1,469,990
|
117,749
|
Average
net
asset
value
for
the
period
|
1,468,214
|
121,222
|
|
30.06.23
Sterling
shares
|
30.06.23
US
Dollar
shares
|
Ratio
to
average
net
assets
|
|
|
Operating
expenses
|
|
|
Company
expenses
4
|
0.78%
|
0.78%
|
Master
Fund
expenses
5
|
0.41%
|
0.42%
|
Master
Fund
interest
expenses
6
|
1.20%
|
1.23%
|
Performance
fees
|
0.00%
|
0.00%
|
|
2.39%
|
2.43%
|
Net
investment
loss
before
performance
fees
2
|
(0.27%)
|
(0.23%)
|
Net
investment
loss
after
performance
fees
2
|
(0.27%)
|
(0.23%)
|
|
31.12.22
|
31.12.22
|
|
Sterling
shares
|
US
Dollar
shares
|
|
£
|
US$
|
Per
share
operating
performance
|
|
|
Net
asset
value
at
beginning
of
the
year1
|
34.30
|
35.71
|
Income
from
investment
operations
|
|
|
Net
investment
loss
2
|
(2.44)
|
(2.50)
|
Net
realised
and
unrealised
gain
on
investment
|
8.87
|
9.22
|
Other
capital
items
3
|
1.08
|
0.85
|
Total
gain
|
7.51
|
7.57
|
Net
asset
value,
end
of
the
year1
|
41.81
|
43.28
|
|
|
|
Total
gain
before
performance
fees
|
26.78%
|
25.93%
|
Performance
fees
|
(4.87%)
|
(4.76%)
|
Total
gain
after
performance
fees
|
21.91%
|
21.17%
|
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
Sterling
shares
£'000
|
31.12.22
US
Dollar
shares
US$'000
|
Supplemental
data
|
|
|
Net
asset
value,
end
of
the
year
|
1,260,923
|
123,686
|
Average
net
asset
value
for
the
year
|
1,132,773
|
110,421
|
|
31.12.22
Sterling
shares
|
31.12.22
US
Dollar
shares
|
Ratio
to
average
net
assets
|
|
|
Operating
expenses
|
|
|
Company
expenses
4
|
1.68%
|
1.74%
|
Master
Fund
expenses
5
|
0.41%
|
0.41%
|
Master
Fund
interest
expenses
6
|
1.22%
|
1.18%
|
Performance
fees
|
4.23%
|
4.20%
|
|
7.54%
|
7.53%
|
Net
investment
loss
before
performance
fees
2
|
(1.95%)
|
(1.98%
)
|
Net
investment
loss
after
performance
fees
2
|
(6.18%
)
|
(6.18%
)
|
|
30.06.22
|
30.06.22
|
|
Sterling
shares
|
US
Dollar
shares
|
|
£
|
US$
|
Per
share
operating
performance
|
|
|
Net
asset
value
at
beginning
of
the
period1
|
34.30
|
35.71
|
Income
from
investment
operations
|
|
|
Net
investment
loss
2
|
(1.65)
|
(1.74)
|
Net
realised
and
unrealised
gain
on
investment
|
6.16
|
6.87
|
Other
capital
items
3
|
0.82
|
(0.08)
|
Total
gain
|
5.33
|
5.05
|
Net
asset
value,
end
of
the
period
|
39.63
|
40.76
|
|
|
|
Total
gain
before
performance
fees
|
19.03%
|
17.61%
|
Performance
fees
|
(3.50%)
|
(3.50%)
|
Total
gain
after
performance
fees
|
15.53%
|
14.11%
|
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
Sterling
shares
£'000
|
30.06.22
US
Dollar
shares
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
Sterling
shares
|
30.06.22
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.
2 The
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.
4 Company
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, the year
ended 31 December 2022 and the period
ended 30 June
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$89,400 of US Dollar shares (20,000
shares);
Caroline Chan, £50,000 of Sterling shares (11,587 shares);
Bronwyn Curtis, £100,000 of Sterling shares (23,175 shares);
John Le Poidevin, £90,000 of Sterling shares (20,800 shares); and
Claire Whittet, £35,000 of Sterling shares (8,111 shares).
11.
Subsequent
events
On
3 August 2023, the Company completed
the share conversion for the 30 June
2023 share conversion date, issuing 749,363 US Dollar Shares and cancelling 613,351
Sterling Shares.
On
4 September 2023, the Company
completed the share conversion for the 31
July 2023 share conversion date, issuing 17,120 US Dollar Shares and cancelling 13,874
Sterling Shares.
The
Directors have evaluated subsequent events up to 13 September 2023, which is the date that the
Interim Unaudited Financial Statements were approved and available
to be issued and have concluded there are no further items that
require disclosure or adjustment to the Interim Unaudited Financial
Statements.
Historic Performance Summary
As at 30 June 2023
|
30.06.23
US$’000
|
31.12.22
US$’000
|
31.12.21
US$’000
|
31.12.20
US$’000
|
31.12.19
US$’000
|
Net
(decrease)/increase
in
net
assets
resulting from operations
|
(28,486)
|
112,078
|
12,010
|
181,533
|
59,462
|
Total
assets
|
1,989,336
|
1,707,130
|
1,307,490
|
802,224
|
570,779
|
Total
liabilities
|
(2,791)
|
(66,682)
|
(9,762)
|
(41,055)
|
(11,014)
|
Net
assets
|
1,986,545
|
1,640,448
|
1,297,728
|
761,169
|
559,765
|
Number
of shares
in
issue
|
|
|
|
|
|
Sterling
shares
|
374,357,176
|
30,156,454*
|
25,864,663*
|
15,009,868*
|
14,310,040*
|
US
Dollar
shares
|
28,840,946
|
2,858,135*
|
2,689,547*
|
2,191,379*
|
2,442,057*
|
Net
asset
value
per
share
|
|
|
|
|
|
Sterling
shares
|
£3.93
|
£41.81*
|
£34.30*
|
£33.38*
|
£26.06*
|
US
Dollar
shares
|
US$4.08
|
US$43.28*
|
US$35.71*
|
US$34.78*
|
US$26.99*
|
* 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:
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
30.06.23
|
Year
ended
31.12.22
|
Period
ended
30.06.23
|
Year
ended
31.12.22
|
Average
NAV
for
the
year
(A)
|
£1,468,214,020
|
£1,132,773,154
|
US$121,221,866
|
US$110,421,043
|
Management
Fee*
|
£22,026,772
|
£17,787,437
|
US$1,820,832
|
US$1,792,074
|
Other
Company
expenses*
|
£1,049,000
|
£1,248,572
|
US$93,635
|
US$127,701
|
Total
Company
Expenses*
|
£23,075,772
|
£19,036,009
|
US$1,914,467
|
US$1,919,775
|
Expenses
allocated
from
the
Master
Fund*
|
£8,187,679
|
£2,325,281
|
US$697,090
|
US$238,666
|
Performance
Fee
|
£471
|
£47,900,303
|
US$1,740
|
US$4,641,933
|
Total
Expenses
(B)
|
£31,263,922
|
£69,261,593
|
US$2,613,297
|
US$6,800,374
|
Ongoing
Charges
(B/A)
|
2.13%
|
6.11%
|
2.16%
|
6.16%
|
|
|
|
|
|
|
*
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
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Channel Islands
GY1
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