BH Macro Limited - Interim Report and Unaudited Financial Statements 2024
Interim Report and Unaudited Financial Statements 2024
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
Chair’s Statement
Although we are far from alone in the closed-ended fund sector, 2024 remains a challenging year for
• Firstly, whilst investment returns have been within the expected range they remain slightly negative in the six month period to
• Secondly, whilst the discount in the prices of both the Sterling and US Dollar share classes to Net Asset Value (“NAV”) per share have narrowed compared to the discounts seen last year, the respective discounts remain at levels that the Board and of course shareholders (the “Shareholders”) would like to see narrow further. The Board has continued with its buyback programme and to liaise closely with our major shareholders, in particular the merged Rathbones-Investec entity. Earlier this year, the Company and the Manager agreed to increase the annual buyback allowance for buybacks and redemptions for the Sterling shares class (the “Annual Buyback Allowance”) for 2024. The usual 2024 Annual Buyback Allowance (being 5% of the issued Sterling shares at the end of 2023 (excluding treasury shares)) was increased by an amount equal to the Sterling share class’s unused 2023 Annual Buyback Allowance (i.e., approximately 16.3 million Sterling shares). This has increased the total amount available for Sterling share buybacks in 2024 before the Company incurs a fee of 2% (of the price paid by the Company), payable to the Manager, on any buybacks it makes in excess of the increased Annual Allowance.
• Thirdly, the entire closed-ended fund sector is subject to greater pressure than at any other time in my more than 40 years experience of it. The concentration of shareholder registers, the concentration of the wealth management market, the levels of discount to NAV per share and the regulatory pressure on fee disclosure have contributed to a very difficult background for the entire sector. As a Board, we are focusing on effective buybacks and working with Kepler and JP Morgan to expand the investor base, particularly in the retail market.
NAV per share performance in the six-month period to
The Board has maintained regular dialogue with the Manager in order to assure itself of the quality of the investment team and supporting systems, operations and infrastructure across the organisation. The Company and the Manager have continued to pursue an active programme of public communication and investor relations and have held investor webinars and meetings with many key shareholders in the period. Up-to-date performance information is provided through NAV per share data published monthly on a ‘final’ basis, after being published on an estimated basis in both weekly and monthly reports, and through monthly Shareholder performance reports. All these reports and further information about the Company are available on the Company’s website (www.bhmacro.com).
The Board remains wholly independent of the Brevan Howard group of companies. The Directors are very closely focused on safeguarding the interests of shareholders and believe that the Company observes high standards of corporate governance. The Board continues to operate well with a high level of engagement and a close working relationship between the diverse members of the Board. We are pleased to say that we remain in compliance with all current regulations and recommendations relating to board composition.
The geopolitical background remains particularly concerning. In the US,
The Board remains convinced of the value of the Company and its strategy and the quality of the Manager and look forward to delivering the highly diversifying positive returns, which the Company has delivered time and again over the past 17 years.
Chair
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:
Disclosure of Directorships in Public Companies Listed on Recognised Stock Exchanges
The following summarises the Directors’ current directorships in other public companies:
Exchange
Richard Horlick
Riverstone Energy Limited London
VH Global Sustainable Energy Opportunities Plc London
Caroline Chan
NextEnergy Solar 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 Limited London and Euronext Amsterdam
TwentyFour Income Fund Limited London John Le Poidevin
International Public Partnerships Limited London
Super Group (SGHC) Limited New York
TwentyFour Income Fund Limited London
Directors’ Report
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
The Company
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
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
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
On
On
On
At the Annual General Meeting held on
Since
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 on 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 economic volatility, recessionary risks and the ongoing conflicts in
In
The Directors have therefore concluded that there are no significant cash flow or other risks in relation to preparing the interim financial statements on a going concern basis.
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 on 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,
For each Director, the tables below set out the number of Board meetings and Audit Committee meetings they were entitled to attend during the six-month period ended
ScheduledBoardMeetings Held Attended Richard Horlick 2 2 Caroline Chan 2 2 Julia Chapman 2 2 Bronwyn Curtis 2 2 John Le Poidevin 2 2 AuditCommitteeMeetings Held Attended John Le Poidevin 2 2 Caroline Chan 2 2 Julia Chapman 2 2 Bronwyn Curtis 2 2
In addition to these scheduled meetings, ten ad-hoc committee meetings were held during the six-month period ended
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
The Chair’s and the other Directors’ tenures are limited to nine years, which is consistent with the principles listed in the
Notwithstanding that some of the Directors sit on the boards of a number of other listed 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 period 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:
SterlingShares
30.06.24 31.12.23 30.06.23
Richard Horlick 200,000 200,000 200,000
Caroline Chan 11,587 11,587 11,587
Julia Chapman 6,260 6,260 6,260
Bronwyn Curtis 33,174 33,174 33,174
John Le Poidevin 116,940 75,620 75,620
Claire Whittet N/A N/A 23,111
US DollarShares
30.06.24 31.12.23 30.06.23
Richard Horlick 20,000 20,000 20,000
Caroline Chan Nil Nil Nil
Julia Chapman Nil Nil Nil
Bronwyn Curtis Nil Nil Nil
John Le Poidevin Nil Nil Nil
Claire Whittet N/A N/A Nil
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
The Company is a member of the AIC and by complying with the AIC Code it is deemed to comply with both the
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
The
-- 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
All of the Directors are independent of the Manager and any company in the same group as the Manager (the “Manager’s Group”).
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, to source potential candidates who 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
The Board, through the
Each of the Board, the Audit Committee, the Management Engagement Committee and the
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 and confirmation from each of them is sought in relation to their own policies.
In respect of the
Social and Environmental Issues
The Board also keeps under review developments involving other social and environmental issues, such as modern slavery, and reports on those to the extent they are considered relevant to the Company’s operations. Further explanation of these issues is detailed on 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 period.
Ongoing Charges for each of the six-month period ended
The following table presents the Ongoing Charges for each share class of the Company for each of the six-month period ended
30.06.24 Sterling Shares US DollarShares
Company – Ongoing Charges 1.57% 1.57%
Master Fund – Ongoing Charges 0.61% 0.61%
Performance fees 0.00% 0.00%
Ongoing Charges plus performance fees 2.18% 2.18%
31.12.23 Sterling USDollar
Shares Shares
Company – Ongoing Charges 1.59% 1.56%
Master Fund – Ongoing Charges 0.57% 0.58%
Performance fees 0.00% 0.00%
Ongoing Charges plus performance fees 2.16% 2.14%
30.06.23
Sterling USDollar
Shares 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%
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
Performance Graphs
The graphs shown on Chair’s Statement detail the performance of the Company’s NAV and share prices over the period.
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
During the period the Audit Committee conducted a tender process for the position of external auditor. The tender process was initiated due to the current external auditor,
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, is chaired by
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 a review of the terms of the Company’s agreements with all other third-party service providers (other than
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 formal 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
The Board established a
The function of the
-- 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 each of the Chair of the
Board, the Chair of the Audit Committee, 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 the
Company’s 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.
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
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 receives
reports presented by 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
each of the Manager, the Administrator and 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. 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
discount at which the Company’s Sterling shares and US Dollar shares
have traded in relation to monthly NAV per share so far this year has
been approximately 12.66% for the Sterling share class and 12.63% for
the US Dollar share class. Consequently, whilst the Company and its
Corporate Broker have been in regular communication with Shareholders
during the relevant period and subsequently, the Board has no reason to
believe that there is any shareholder appetite to approve a class
closure vote and return capital to Shareholders, there remains a
residual risk that class closure votes will be held in early 2025 at
which Shareholders may vote to liquidate one or both classes of shares;
-- Geopolitical Risks: Economic volatility, recessionary risks and the
current conflicts in Ukraine and the Middle East have led to greater
global uncertainty. The Board has also made enquiries of key service
providers in respect of any impact from such conflicts 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. In the Annual Report for the year ended
Name GenderIdentity 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
International Tax Reporting
For the purposes of the US Foreign Account Tax Compliance Act, the Company registered with the US Internal Revenue Services (“IRS”) as a Guernsey reporting
The Common Reporting Standard (“CRS”) is a global standard for the automatic exchange of financial account information developed by the
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
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
In accordance with the AIC Code, 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
% holding
in class
Significant Shareholders
Sterling Shares Ferlim Nominees Limited 13.1%
Smith & Williamson Nominees Limited 9.2%
Rathbone Nominees Limited 7.9%
BH Macro Limited 5.8%
Nortrust Nominees Limited 5.8%
Cheviot Capital (Nominees) Ltd 5.1%
Lion Nominees Limited 4.8%
Vidacos Nominees Limited 4.5%
Pershing Nominees Limited 4.3%
Vestra Nominees Limited 3.6%
HSBC Global Custody Nominee (UK) Limited 3.3%
The Bank Of New York (Nominees) Limited 3.3%
Brewin Nominees Limited 3.0%
% holding
in class
Significant Shareholders
US Dollar Shares
Vidacos Nominees Limited 16.6%
Hero Nominees Limited 14.8%
Euroclear Nominees Limited 13.5%
Luna Nominees Limited 6.4%
Aurora Nominees Limited 5.5%
Lynchwood Nominees Limited 4.5%
CGWL Nominees Limited 4.0%
Rathbone Nominees Limited 3.2%
Signed on behalf of the Board by:
Chair
Director
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:
Chair
John Le Poidevin
Director
Manager’s Report
Performance Review
The NAV per share of the USD shares of the Company depreciated by -1.54% in the first half of 2024 and the NAV per share of the GBP shares depreciated by -1.10%.
The month-by-month NAV performance of each currency class of the Company since it commenced operations in 2007 is set out below.
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
USD Jan
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 0.92 0.34 1.08 0.88 -0.40 1.69 -1.33
2024 0.24 -3.13 0.86 -1.05 0.73 0.87 -1.54
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
GBP
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 0.15 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 0.90 0.34 1.12 0.86 -0.42 1.69 -1.81
2024 0.36 -3.08 0.98 -0.98 0.76 0.91 -1.10
Source: Master Fund NAV data is provided by the administrator of the
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
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
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
Quarterly and Annual contribution (%) to the performance of the NAV per Share of the Company’s USD Shares (net of fees and expenses) by asset class*
This information is given in USD ($)
_____________________________________________________________________________ | |Rates|FX |Commodities|Credit|Equity|Digital Assets|Discount |TOTAL| | | | | | | | |Management| | |________|_____|____|___________|______|______|______________|__________|_____| |Q1 2024 |-3.73|0.36|0.04 |0.01 |0.19 |1.06 |0.00 |-2.07| |________|_____|____|___________|______|______|______________|__________|_____| |Q2 2024 |0.27 |0.77|0.13 |0.04 |-0.25 |-0.42 |0.00 |0.54 | |________|_____|____|___________|______|______|______________|__________|_____| |YTD 2024|-3.46|1.11|0.17 |0.05 |-0.06 |0.65 |0.00 |-1.54| |________|_____|____|___________|______|______|______________|__________|_____|
Data as at
Quarterly and YTD figures are calculated by BHCM as at
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
Quarterly and Annual contribution (%) to the performance of the NAV per Share of the Company’s GBP Shares (net of fees and expenses) by asset class*
This information is given in GBP (£)
_____________________________________________________________________________ | |Rates|FX |Commodities|Credit|Equity|Digital Assets|Discount |TOTAL| | | | | | | | |Management| | |________|_____|____|___________|______|______|______________|__________|_____| |Q1 2024 |-3.79|0.34|0.04 |0.01 |0.17 |1.07 |0.39 |-1.78| |________|_____|____|___________|______|______|______________|__________|_____| |Q2 2024 |0.25 |0.74|0.13 |0.04 |-0.26 |-0.42 |0.21 |0.68 | |________|_____|____|___________|______|______|______________|__________|_____| |YTD 2024|-3.55|1.07|0.17 |0.05 |-0.08 |0.65 |0.60 |-1.10| |________|_____|____|___________|______|______|______________|__________|_____|
Data as at
Quarterly and YTD figures are calculated by BHCM as at
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
“
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 2024, we looked for slowing US growth, better balance between supply and demand in the labour market, and continued moderation in wage and price inflation. In the event, growth and the labour market did slow as the first half of the year unfolded, but there was a widespread surge in inflation in Q1. Higher inflation pushed back the Federal Reserve’s plans to dial back the degree of monetary policy restraint.
With the
After the first quarter’s inflation shock in the US, inflation slowed noticeably across the board in Q2. Core Personal Consumption Expenditures (“PCE”) inflation is on track to fall faster during the rest of the year than the Fed anticipated in its June Federal Open Market Committee (“FOMC”) Summary of Economic Projections. The labour market is weakening by more than the Fed anticipated as well, with the unemployment rate currently at 4.1% compared with the Fed’s median projection of 4.0% in Q4. Finally, growth is slowing from the torrid pace set last year to a trend-like pace.
The foundation for Fed rate cuts is being rebuilt on more solid ground.
In summary, all three parts of the US macro outlook are moving in a consistent direction. Looking forward, this ‘cross-validation’ reinforces our confidence about the outlook. After several years of one-sided inflation risks, the risks to growth and inflation have moved into balance. That is a major strategic change in the macro landscape which necessitates a similarly major change in US monetary policy strategy with global implications.
acting by its sole general partner,
Independent Review Report to BH Macro Limited
Conclusion
We have been engaged by
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
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (
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 (
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
The financial statements included in this interim report have been prepared in accordance with
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
For and on behalf of
Chartered Accountants
Guernsey
Unaudited Statement of Assets and Liabilities
As at
30.06.24 31.12.23 30.06.23
(Unaudited) (Audited) (Unaudited)
US$'000 US$ '000 US$ '000
Assets
Investment in the Master Fund (note 3) 1,900,791 2,038,614 1,968,663
Master Fund redemption proceeds receivable 23,073 20,697 4,073
Prepaid expenses 99 47 122
Cash and bank balances denominated in Sterling 26,497 18,367 15,742
Cash and bank balances denominated in US 2,172 1,284 736
Dollars
Totalassets 1,952,632 2,079,009 1,989,336
Liabilities Performance fees payable (note 4) - 2 2 Management fees payable (note 4) 2,522 2,771 2,580 Repurchases in respect of the tender offer - 1,477 - payable Accrued expenses and other liabilities 181 148 132 Directors' fees payable 103 - - Administration fees payable (note 4) 151 80 77 Totalliabilities 2,957 4,478 2,791 Netassets 1,949,675 2,074,531 1,986,545 Numberofshares inissue(note5) Sterling shares 356,434,651 372,024,149374,357,176 US Dollar shares 28,506,709 29,856,472 28,840,946 Netassetvaluepershare(notes7and9) Sterling shares £4.06 £4.11 £3.93 US Dollar sharesUS$4.20 US$4.27 US$4.08
See accompanying Notes to the Interim Unaudited Financial Statements .
Signed on behalf of the Board by:
Richard Horlick
Chair
John Le Poidevin
Director
Unaudited Statement of Operations
For
the
period from
01.01.24 01.01.23 01.01.23
to30.06.24 to31.12.23 to30.06.23
(Unaudited)US$'000 (Audited)US$'000 (Unaudited)US$'000
NetinvestmentgainallocatedfromtheMasterFund
Interest income 56,146 99,983 39,647
Dividend and other income (net of withholding tax:
30 June 2024: US$11,911 ; 31 December 2023: US$94,653 ; 306 5,176 862
30 June 2023 : US$16,182 )
Expenses (39,288) (91,827) (31,170)
NetinvestmentgainallocatedfromtheMasterFund 17,164 13,332 9,339
Companyincome
Bank interest income 274 792 496
Foreign exchange gains (note 3) - 108,508 100,563
TotalCompanyincome 274 109,300 101,059
Companyexpenses
Performance fees (note 4) - 2 2
Management fees (note 4) 14,705 29,579 14,393
Other expenses 324 969 314
Directors' fees 202 442 228
Administration fees (note 4) 151 303 148
Foreign exchange losses (note 3) 15,801 - -
TotalCompanyexpenses 31,183 31,295 15,085
Netinvestment(loss)/gain (13,745) 91,337 95,313
Netrealisedandunrealisedgain/
(loss)oninvestmentsallocatedfromtheMasterFund
Net realised gain/(loss) on investments 3,641 188,681 (14,667)
Net unrealised loss on investments (40,069) (213,524) (109,132)
Netrealisedandunrealisedlosson (36,428) (24,843) (123,799)
investmentsallocatedfromtheMasterFund
Net (50,173) 66,494 (28,486)
(decrease)/increaseinnetassetsresultingfromoperations
See accompanying Notes to the Interim Unaudited Financial Statements.
Unaudited Statement of Changes in Net Assets
For
the
period from
01.01.24 01.01.23 01.01.23
to30.06.24 to31.12.23 toto30.06.23
(Unaudited)
(Unaudited) (Audited)
US$'000
US$'000 US$ '000
Net
(decrease)/increaseinnetassetsresultingfromoperations
Net investment (loss)/gain (13,745) 91,337 95,313
Net realised gain/(loss) on investments allocated 3,641 188,681 (14,667)
from the Master Fund
Net unrealised loss on investments allocated from the (40,069) (213,524) (109,132)
Master Fund
(50,173) 66,494 (28,486)
Sharecapitaltransactions
Issueofnewshares
Sterling shares - 379,021 379,021
US Dollar shares - 3,336 3,336
Shareissuecosts
Sterling shares - (7,761) (7,707)
US Dollar shares - (67) (67)
Purchaseofsharesintotreasury
Sterling shares (74,683) (6,940) -
US Dollar shares - - -
Totalsharecapitaltransactions (74,683) 367,589 374,583
Net(decrease)/increaseinnetassets (124,856) 434,083 346,097 Netassetsatthe beginningofthe period/year 2,074,531 1,640,448 1,640,448 Netassetsattheendoftheperiod/year 1,949,675 2,074,531 1,986,545
See accompanying Notes to the Interim Unaudited Financial Statements.
Unaudited Statement of Cash Flows
For
the
period from
01.01.24 01.01.23 01.01.23
to30.06.24 to31.12.23 to30.06.23
(Unaudited) (Audited) (Unaudited)
US$'000 US$ '000 US$ '000
Cashflows fromoperatingactivities
Net (decrease)/increase in net assets resulting (50,173) 66,494 (28,486)
from operations
Adjustments to reconcile net (decrease)/increase in net assets resulting from
operations to net cash generated from/(used in) operating activities:
Net investment gain allocated from the Master Fund (17,164) (13,332) (9,339)
Net realised (gain)/loss on investments allocated (3,641) (188,681) 14,667
from the Master Fund
Net unrealised loss on investments allocated from 40,069 213,524 109,132
the Master Fund
Purchase of investment in the Master Fund - (365,214) (365,214)
Proceeds from sale of investment in the Master Fund 100,668 101,862 77,711
Foreign exchange losses/(gains) 15,801 (108,508) (100,563)
Increase in prepaid expenses (52) (4) (79)
Decrease in performance fees payable (2) (62,259) (62,259)
Decrease in management fees payable (249) (1,453) (1,644)
Increase/(decrease) in accrued expenses and other 33 (68) (81)
liabilities
Increase/(decrease) in Directors' fees payable 103 (14) (14)
Increase in administration fees payable 71 14 11
Netcashgeneratedfrom/(usedin) operatingactivities 85,464 (357,639) (366,158)
Cashflowsfromfinancingactivities
Purchase of own shares into treasury (76,160) (5,463) -
Proceeds from share issue - 382,357 382,357
Share issue costs - (7,828) (7,773)
Netcash(usedin)/generatedfromfinancingactivities (76,160) 369,066 374,584
Changeincash 9,304 11,427 8,426
Cash,beginningoftheperiod/year 19,651 7,910 7,910
Effect of exchange rate fluctuations (286) 314 142
Cash,endoftheperiod/year 28,669 19,651 16,478
Cash,endoftheperiod/year
Cash and bank balances denominated in Sterling 1 26,497 18,367 15,742
Cash and bank balances denominated in US Dollars 2,172 1,284 736
28,669 19,651 16,478
Supplementaldisclosureofnon-cashfinancingactivities
1 Cash and bank balances in Sterling (GBP'000) 20,958 14,408 12,383
See accompanying Notes to the Interim Unaudited Financial Statements.
Notes to the Interim Unaudited Financial Statement s
For
the
period from
1. The Company
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
As such, the Interim Unaudited Financial Statements of the Company should be read in conjunction with the Interim Unaudited Financial Statements of the
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
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
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
The Manager also manages the
In order to reflect the increased investment of the Company in the
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. As such, 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.
In other changes to the Management Agreement, 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 includes certain "cause" events affecting the Manager, in which case the Company would be entitled to terminate the Management Agreement on 90 days' notice and redeem its investment in the Master Fund on three months' notice.
The annual buy-back allowance fee arrangements introduced in 2021 will continue to apply in respect of repurchases and redemptions by the Company of its shares of each class in excess of a number equal to five per cent of shares in issue of the relevant class at the end of the prior calendar year. Notwithstanding this fact, on 14 June 2024 , the Company and Manager agreed that for the calendar year of 2024 only, the Management Agreement shall be treated as amended to provide that the annual buy-back allowance in respect of the Sterling share class for the calendar year ending 31 December 2024 shall be equal in aggregate to 32,175,157 Sterling shares, being equal to 8.65 per cent of the number of Sterling shares in issue at 31 December 2023 , disregarding any shares held in treasury. The parties also agreed that the foregoing does not alter the annual buy-back allowance in respect of the Sterling share class for any subsequent calendar year.
See also note 8 for further details relating to redemptions from the Master Fund for discount management mechanisms.
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
Sharesheldin Investmentin Investmentin
Percentageof NAVperShare
theMasterFund MasterFund MasterFund
MasterFund'scapital (ClassB) (ClassB) CCY'000 US$ '000
30June2024
Sterling 15.19% £6,553.19 215,368 £1,411,349 1,784,368
US Dollar 0.99% US$6,568.75 17,723 US$116,423 116,423
1,900,791
31December2023
Sterling 15.58% £6,614.07 226,847 £1,500,386 1,912,542
US Dollar 1.03% US$6,620.65 19,041 US$126,072 126,072
2,038,614
30June2023
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
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
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 the Interim Unaudited 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
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 rate 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 gains or 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 or losses of the
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 5 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
During the six month period ended
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
The notice period for termination of the Management Agreement without cause by either the Company or the Manager is 12 months. The Management Agreement was amended on
Administration fee
The Company has appointed
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. The following tables show the movement in ordinary shares.
For the period from 1 January 2024 to 30 June 2024
Sterlingshares USDollarshares
Numberofordinaryshares
Inissueat1January2024 372,024,149 29,856,472
Share conversions 1,114,324 (1,349,763)
Purchase of shares into Treasury (16,703,822) -
Inissueat30June2024 356,434,651 28,506,709
Numberoftreasuryshares
Inissueat1January2024 1,504,277 -
Shares purchased and held in Treasury during the
period:
On market purchases* 16,703,822 -
Inissueat30June2024 18,208,099 -
Percentageofclass 4.86% -
*On market purchases for the period ended
Numberof
Cost
shares
Treasuryshares purchased Cost(US$) (incurrency)
US Dollar shares - - -
Sterling shares 16,703,822 74,683,493 £59,062,940
For the year ended 31 December 2023
Sterlingshares USDollarshares
Numberofordinaryshares
Inissueat1January2023 30,156,454 2,858,135
Share conversions (717,994) 884,077
Net issue of new shares from Share Sub-Division 271,711,966 25,367,860
Issue of new shares 72,378,000 746,400
Purchase of shares into treasury (1,504,277) -
Inissueat31December2023 372,024,149 29,856,472
Numberoftreasuryshares
Inissueat1January2023 - -
On market purchases* 1,504,277 -
Inissueat31December2023 1,504,277 -
Percentageofclass 0.40% -
*On market purchases in the year ended 31 December 2023.
Number of
Cost (in
Treasuryshares shares Cost(US$)
currency)
purchased
US Dollar shares - - -
Sterling shares 1,504,277 6,939,943 £5,457,432
For the period from 1 January 2023 to 30 June 2023
Sterling shares US Dollar
shares
Numberofordinaryshares
Inissueat1January2023 30,156,454 2,858,135
Share conversions 110,756 (131,449)
Net issue of new shares from Share Sub-Division 271,711,966 25,367,860
Issue of new shares 72,378,000 746,400
Inissueat30June2023 374,357,176 28,840,946
Numberof
shares Cost(in
Treasuryshares Cost(US$)
purchased currency)
US Dollar shares - - -
Sterling shares - - -
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
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. At the Annual General Meeting held on
Further issue of shares
As described in the Directors’ Report, on
As approved by the Shareholders at the Annual General Meeting held on
Distributions
As announced on
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. During the period ended 30 June 2024 , the Company purchased 16,703,822 (31 December 2023 : 1,504,277) Sterling share class to be held in Treasury . No shares were held in Treasury throughout the period ended 30 June 2023 .
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
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
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
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. See note 2 for further details regarding the Company’s annual buy-back allowance and the 2024 arrangements agreed with the Manager.
Market purchases
Until
Under the terms of the Management Agreement, the Company may, on one month’s notice, redeem up to 5 per cent of its shares of each class in the
Please see note 5 for details of shares purchased and held in
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
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 discount to NAV for the Sterling shares and US Dollar shares for the period ended
The average discount to NAV for the Sterling shares and US Dollar shares for the year ended
The arrangements are described more fully in the Company’s principal documents which were approved at the EGM on
9. Financial highlights
The following tables include selected data for a single ordinary share of each of the ordinary share classes in issue at
The per share amounts and ratios which are shown reflect the income and expenses of the Company for each class of ordinary share.
30.06.24 30.06.24
Sterlingshares USDollarshares
£ US$
Per share operatingperformance
Netassetvalueatbeginningoftheperiod 4.11 4.27
Incomefrominvestmentoperations
Net investment loss 2 - -
Net realised and unrealised loss on investment (0.08) (0.08)
Other capital items 3 0.03 0.01
Totalloss (0.05) (0.07)
Netassetvalue,endoftheperiod 4.06 4.20
Total loss before performance fees (1.10%) (1.54%)
Performance fees - -
Totallossafterperformancefees (1.10%) (1.54%)
Total loss reflects the net loss for an investment made at the beginning of the year and is calculated as the change in the NAV per ordinary share during the period from
30.06.24 30.06.24
Sterlingshares USDollarshares
£'000 US$ '000
Supplementaldata
Netassetvalue,endoftheperiod 1,447,320 119,832
Averagenetassetvaluefortheperiod 1,458,512 122,078
30.06.24 30.06.24
Sterlingshares USDollarshares
Ratiotoaveragenetassets
Operating expenses
Company expenses 4 0.78% 0.78%
Master Fund expenses 5 0.45% 0.44%
Master Fund interest expenses 6 1.55% 1.54%
Performance fees - -
2.78% 2.76%
Netinvestmentgainbeforeperformancefees2 0.10% 0.10% Netinvestmentgainafterperformancefees2 0.10% 0.10%
31.12.23 31.12.23
Sterlingshares USDollarshares
£ US$
Pershareoperatingperformance
Netassetvalueatbeginningoftheyear1 4.18 4.33
Incomefrominvestmentoperations
Net investment loss 2 (0.04) (0.01)
Net realised and unrealised (loss)/gain on (0.08) 0.01
investment
Other capital items 3 0.05 (0.06)
Totalloss (0.07) (0.06)
Netasset value,endof theyear 4.11 4.27
Total loss before performance fees (1.81%) (1.33%)
Performance fees - -
Totallossafterperformancefees (1.81%) (1.33%)
Total loss 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
31.12.23 31.12.23
Sterlingshares USDollarshares
£'000 US$ '000
Supplementaldata
Netassetvalue,endoftheyear 1,527,458 127,482
Averagenetassetvaluefortheyear 1,485,598 122,970
31.12.23 31.12.23
Sterlingshares USDollarshares
Ratiotoaveragenetassets
Operating expenses
Company expenses 4 1.59% 1.57%
Master Fund expenses 5 1.41% 0.83%
Master Fund interest expenses 6 3.28% 3.32%
Performance fees - -
6.28% 5.72%
Netinvestmentlossbeforeperformancefees2 (0.91%) (0.22%)
Netinvestmentlossafterperformancefees2 (0.91%) (0.22%)
Total loss reflects the net loss for an investment made at the beginning of the year and is calculated as the change in the NAV per ordinary share during the period from
30.06.23
30.06.23
Sterlingshares USDollarshares
£ US$
Per share operatingperformance
Netassetvalueatbeginningoftheperiod1 4.18 4.33
Incomefrominvestmentoperations 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) Totalloss (0.25) (0.25) Netassetvalue,endoftheperiod1 3.93 4.08 Total loss before performance fees (6.09%) (5.65%) Performance fees - - Totallossafterperformancefees (6.09%) (5.65%)
30.06.23 30.06.23
Sterlingshares USDollarshares
£'000 US$ '000
Supplementaldata
Netassetvalue,endoftheperiod 1,469,990 117,749
Averagenetassetvaluefortheperiod 1,468,214 121,222
30.06.23 30.06.23
Sterlingshares USDollarshares
Ratiotoaveragenetassets
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 - -
2.39% 2.43%
Netinvestmentlossbeforeperformancefee2 (0.27%) (0.23%)
Netinvestmentlossafterperformancefees2 (0.27%) (0.23%)
Notes
1
For illustrative purposes, the Net Asset Value at the beginning of 2023 is adjusted by a factor of 10 to reflect the 10 for 1 share sub-division, which was approved at the EGM held on
2
The net investment loss figures disclosed above do not include net realised and unrealised gains/losses on investments allocated from the
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 gains/losses.
5
6
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
Fee perannum
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
The fees payable by the Company in respect of each of the Directors who served during the period ended 30 June 2024 , the year ended 31 December 2023 and the period ended 30 June 2023 , were as follows:
Period Year Period
ended ended ended
30.06.24 31.12.23 30.06.23
£ £ £
Richard Horlick 45,000 90,000 45,000
Caroline Chan* 27,500 51,586 25,000
Julia Chapman 27,500 55,000 27,500
Bronwyn Curtis 27,500 55,000 27,500
John Le Poidevin 32,500 65,000 32,500
Claire Whittet** - 38,801 27,500
Total 160,000 355,387 185,000
*
**
The annual aggregate limit of fees payable to Directors is £800,000 per annum.
11. Subsequent events
On
On
On
The Company purchased the following shares into
SterlingClassshares
Numberof
Month sharesbought HighestPricepoint LowestPricepoint
£ £
July 2024 965,746 3.71 3.63
August 2024 2,036,946 3.83 3.63
September 2024 923,431 3.68 3.56
Total 3,926,123
There were no purchases of US Dollar Class ordinary shares after the period end.
The Directors have evaluated subsequent events up to
Historic Performance Summary
As at 30 June 2024
30.06.24 31.12.23 31.12.22 31.12.21 31.12.20
US$'000 US$ '000 US$ '000 US$ '000 US$ '000
Net
(decrease)/increaseinnetassets (50,173) 66,494 112,078 12,010 181,533
resulting fromoperations
Totalassets 1,952,632 2,079,009 1,707,130 1,307,490 802,224
Totalliabilities (2,957) (4,478) (66,682) (9,762) (41,055)
Netassets 1,949,675 2,074,531 1,640,448 1,297,728 761,169
Numberofsharesinissue
Sterling shares 356,434,651 372,024,149 30,156,454* 25,864,663* 15,009,868*
US Dollar shares 28,506,709 29,856,472 2,858,135* 2,689,547* 2,191,379*
Netassetvaluepershare
Sterling shares £4.06 £4.11 £41.81* £34.30* £33.38*
US Dollar shares US$4.20 US$4.27 US$43.28 * US$35.71 * US$34.78 *
*
The Number of Shares In Issue and Net Asset Value Per Share prior to
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 Discount to NAV
The average Discount 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 period
ended 30 June 2024 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 2024 , 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 is shown below.
SterlingShares US Dollar Shares
31.12.23 31.12.23
30.06.24 30.06.24
Share Price at Period/Year End £3.71 £3.67 US$3.81 US$3.77
(A)
NAV per Share (B) £4.06 £4.11 US$4.20 US$4.27
Discount to NAV (A-B)/B (8.62%) (10.71%) (9.29%) (11.71%)
(Loss)/Gain Per Share
(Loss)/gain per share is calculated using the net loss/gain on ordinary activities after finance costs and taxation (period ended
Periodended30.06.24 Yearended31.12.23
'000 '000
Pershare Pershare
Net total loss for (6.78p) (£25,542) (9.21p) (£32,535)
Sterling shares
Net total loss for (6.98c) (US$2,039 ) (5.48c) (US$1,540)
US Dollar shares
Ongoing Charges
The Ongoing Charges are calculated using the AIC Ongoing Charges methodology, which was last updated in
Periodended Yearended Periodended Yearended
30.06.24 31.12.23 30.06.24 31.12.23
Average NAV for the £1,458,512,256 £1,485,598,348 US$122,077,677 US$122,970,362
period/year (A)
Management Fee* £21,842,252 £22,297,675 US$1,828,066 US$1,846,781
Other Company £1,001,206 £1,309,986 US$86,556 US$84,979
expenses*
TotalCompanyExpenses* £22,843,458 £23,607,661 US$1,914,622 US$1,931,760
Expenses allocated £8,912,097 £8,445,240 US$740,777 US$703,225
from the Master Fund*
Performance Fee - £471 - US$1,740
TotalExpenses(B) £31,755,555 £32,053,372 US$2,655,399 US$2,636,725
OngoingCharges(B/A) 2.18% 2.16% 2.18% 2.14%
*For comparative purposes, the expenses for the period ended
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
(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
Glategny Court
Glategny Esplanad e
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
(
Hogan
Corporate Broker
JPMorgan Cazenove
25 Bank Street
Canary Wharf
Tax Adviser
Deloitte LLP
PO Box 137
Regency Court
Glategny Esplanade
St Peter Port
Guernsey
Channel Islands GY1 3HW
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