REG-BH Macro Limited: Interim Report and Unaudited Financial Statements 2023
14/09/2023 07:15
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 Chan 1 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 Whittet 2 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 Chan 1 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 Sterling 1 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 period 1 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 year 1 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 year 1 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 period 1 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:
(A-B)
B
Where:
* ‘A’ is the average closing market price of a share of the relevant share
class as derived from the trading price on the London Stock Exchange,
calculated as the sum of all the closing market prices per share of that class
as at each London Stock Exchange trading day during a calendar year, divided
by the number of such trading days in such period; and
* ‘B’ is the average NAV per share of the shares of the relevant share
class taken over the 6 month-end NAV Calculation Dates in the year ended 30
June 2023 calculated as the sum of the final NAV of the share class as at each
month-end NAV Calculation Date during the period ended 30 June 2023, divided
by 6.
(Discount)/Premium
If the share price of an investment is lower than the NAV per share, the
shares are said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per share of the
relevant share class and is usually expressed as a percentage of the NAV per
share. If the share price is higher than the NAV per share, the shares are
said to be trading at a premium. The Board monitors the level of discount or
premium and consideration is given to ways in which share price performance
may be enhanced, including the effectiveness of marketing and share buy-backs,
where appropriate. The (discount)/premium is shown below.
Sterling Shares US Dollar Shares
30.06.23 31.12.22 30.06.23 31.12.22
Share Price at Year End (A) £3.68 £44.90* US$3.99 US$45.20*
NAV per Share (B) £3.93 £41.81* US$4.08 US$43.28*
Premium to NAV (A- B)/B (6.36%) 7.39% (2.21%) 4.44%
* Share Prices and NAV per Share as of 31 December 2022 are not adjusted by a
factor of 10 to reflect the 10 for 1 share sub-division.
Ongoing Charges
The Ongoing Charges are calculated using the AIC Ongoing Charges methodology,
which was last updated in April 2022 and is available on the AIC website
(theaic.co.uk). The Ongoing Charges represent the Company’s Management Fee
and all other operating expenses, excluding finance costs, performance fees,
share issue or buyback costs and non-recurring legal and professional fees and
are expressed as a percentage of the average of the daily net assets during
the year (see the Directors’ Report). The Board continues to be conscious of
expenses and works hard to maintain a sensible balance between good quality
service and cost. The Ongoing Charges calculation is shown below:
Period ended 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 255
Trafalgar Court Les Banques
St Peter Port Guernsey
Channel Islands GY1 3QL
Manager
Brevan Howard Capital Management LP
6th Floor
37 Esplanade
St Helier
Jersey
Channel Islands JE2 3QA
Administrator and Corporate Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
Channel Islands GY1 3QL
Independent Auditor
KPMG Channel Islands Limited Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
Channel Islands GY1 1WR
Registrar and CREST Service Provider
Computershare Investor Services (Guernsey) Limited
1st Floor
Tudor House
Le Bordage
St Peter Port
Guernsey GY1 1DB
Legal Advisor (Guernsey Law)
Carey Olsen
Carey House
Les Banques
St Peter Port
Guernsey
Channel Islands GY1 4BZ
Legal Advisor (UK Law)
Hogan Lovells International LLP
Atlantic House
Holborn Viaduct
London EC1A 2FG
Corporate Broker
JPMorgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Tax Adviser
Deloitte LLP
PO Box 137
Regency Court
Glategny Esplanade
St Peter Port
Guernsey
Channel Islands GY1 3HW
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