BH
Macro Limited
Annual
Report and Audited Financial Statements 2023
LEI:
549300ZOFF0Z2CM87C29
(Classified
Regulated Information, under DTR 6 Annex 1 section 1.1)
The
Company has today, in accordance with DTR 6.3.5, released its
Annual Report and Audited financial statements for the year ended
31 December 2023. The Report will
shortly be available from the Company’s website:
www.bhmacro.com.
Chair’s
Statement
In the interim report, I stated
that 2023 had been a rollercoaster year to date for BH Macro
Limited (the “Company”) after the successful equity raising at the beginning of the year. During the first six months of the year, we experienced the greatest
reversal in interest rate expectations for 40 years, which had a
detrimental impact on the NAV per share performance
for
Brevan
Howard
Master
Fund
Limited
(the
“Master
Fund”).
The
period
also
saw
the
announcement
of the
merger
of
two
of
our
largest
shareholders,
namely,
Investec
and
Rathbones
creating
a
combined
entity
which held
voting rights of 26.08% of the Sterling Class shares and 0.92% of the US Dollar Class shares, as at 14
February 2024. The fear of a significant overhang of stock as a result of the merger contributed to the price of the Company’s shares moving
to a significant
discount during the year, having started the year at a large
premium.
The
second
half
of
the
year
saw
a
significant
reversal
in
the
first
half
year’s
disappointing
NAV
per
share
performance,
which at June had fallen by slightly more than 6%. Notwithstanding
the positive second half of the year in NAV per share
performance,
the
discount
on
the
Company’s
shares
persisted
throughout
the
remainder
of
the
financial
year.
No
doubt some
of
this
resulted
from
fears
by
some
investors
of
selling,
resulting
from
the
merger
referred
to
above,
but
it
is
worth remembering
the
words
of
President
Roosevelt
that
we
‘have
nothing
to
fear,
but
fear
itself’.
As
your Board,
we
retain absolute
confidence
in
Brevan
Howard
Capital
Management
LP
(the
“Manager”)
as
the
Company’s
manager,
and
we have
the
expectation
that
it
will
continue
to
deliver
the
good
returns
it
demonstrated
for
more
than
20
years.
In
these
circumstances and given the clearance that the Takeover Panel has
given that the combined Investec and Rathbones entity
is
not
under
any
obligation
to
make
sales
of
the
stock,
the
Company
is
anticipating
it
will
be
able
to
stand or fall
on its NAV per share performance and the relative attractiveness of
other investments. The increase in interest rates and the competing
attractiveness not just of cash, but other investment vehicles
means that it is a challenging environment for
macro
funds.
However,
this
difficult
and
volatile
environment
is
one
in
which
historically
the
Master Fund has
flourished.
Whilst the
overall return for the NAV per share during the financial year was
slightly negative, being -1.81% for the Sterling Class shares and
-1.33% for the US Dollar Class shares, the share price return for
the financial year was significantly different, being -18.26% for
the Sterling Class shares and -16.59% for the US Dollar Class
shares. This share price performance is obviously disappointing.
Your Board consequently initiated a share buyback programme
during
December
2023
and
the
discount
narrowed
from
13.12%
(as
at
30
November
2023)
to
10.71%
(as
at
31
December 2023)
for
the
Sterling
Class
shares,
and
similarly
from
11.90%
(as
at
30
November
2023)
to
11.71%
(as
at
31
December 2023) for
the
US
Dollar
Class
shares.
Your
Board
has
continued
to
implement
buybacks
subsequent
to
the
year
end
and
has
the
ability
to
buyback,
on
an
annual
basis,
5%
of
the
Company’s
shares
in
issue
(disregarding
shares
held
in
treasury) as
at
31
December
in
the
immediately
preceding
year
without
paying
any
additional
fees.
The
Company
is
far
from
being alone
in
standing
at
a
significant
discount.
Other closed-ended
investment
companies
saw
their
discount
widen
during the
course of the year, and for the reasons set out above the Company
was no exception.
Against
this
background,
your
Board
has
continued
its
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.
During
the
course of 2023, the Manager’s business continued to flourish with
assets under management growing from approximately
US$30.0
billion
to
approximately
US$36.6
billion
and
the
team
being
strengthened
both
at
the
portfolio
manager level and in terms of support staff.
Your
Board
has
remained
reassured
that
these
continuing
developments
in
the
Manager’s
operations
are
supportive
of
the Manager’s core activities and are positive for the services
which the Manager provides to the Company.
The
Company and its Manager have continued to pursue an active program
of public communication and investor
relations.
Up-to-date
performance
information
is
provided
through
NAV
per
share
data
published
monthly
on
a
definitive basis and
weekly on an estimated basis, as well as through monthly reports
and shareholder reports. All these reports and further information
about the Company are available on the Company's website
(www.bhmacro.com).
Your
Board
is
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.
During
the
course
of
the
year,
Claire
Whittet
retired
from
the
Board
and
as
Senior
Independent
Director
on
13
September
2023,
after
completing
9
years
of
service
and,
on
your
behalf,
we
thank
her
for
her
wise
counsel,
dedicated contribution
and
effective
engagement
with
her
fellow
Board
members.
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 are in compliance with all current regulations and
recommendations relating to Board composition.
The
geopolitical
and
economic
environment
remains
highly
uncertain.
The
conflict
in
Ukraine continues
unabated,
and
it is
unlikely
that any
solution will
be
seen in
the
near
term. In the
Middle
East,
the horrific
attack
by Hamas
on
Israel and the Israeli response has created
even more uncertainty and risk. This has been exacerbated by the
Houthi attacks on shipping
in
the
Gulf. For
the
first
time
in
history
a
naval
blockade
can
be
enforced
using
relatively
easily
available drone
technology rather than sophisticated and highly expensive naval or
air force equipment. It remains unknown what the impact longer term
might be on shipping costs and trading routes. At the same time, we
are seeing civil disobedience in Europe in relation to
the reduction
in farm
subsidies,
particularly
in
the
form
of
diesel fuel to
farmers
in Germany and
France. The
shift
of
return
from
capital
to
labour
looks
set
to
continue,
increasing
costs
for
companies and
potentially putting upward pressure on inflation.
On
the political front, Donald Trump
appears to be the leader for the Republican nomination for US
President and therefore what
seemed to be
the highly unlikely event of
a
rerun
of
a Biden-Trump election campaign now
appears to be a
near certainty for the US. This has also increased the uncertainty
for the global economy and political stability worldwide.
Meanwhile,
closer
to
home
in
Europe both
the
economic
and
political
outlook
are
cause
for
concern.
In
the
UK, the governing Conservative party remains deeply divided and
embroiled in internal conflicts despite the forthcoming General
Election.
In
these circumstances, your Board believes that the Company
represents an attractive diversifying investment uncorrelated to
both bond and equity markets.
Your
Board
will
continue
to
work
hard
in
conjunction
with
the
Manager
to
deliver
the
best
outcome
for
all
shareholders.
Richard
Horlick
Chair
27 March 2024
The
Directors of the Company during the year 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
was
a
member
of
the
Guernsey
Competition
and
Regulatory
Authority until
March 2023. 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
and
was
appointed
Senior
Independent
Director
on
13 September 2023.
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.
Director
who
retired
from
the
Board
during
the
year
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. Mrs. Whittet was
appointed to the Board in June 2014
and retired from the Board on 13 September
2023.
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
|
|
|
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
|
|
|
|
*
Effective
from
1
April
2024
Strategic
Report
For
the
year
ended
31
December
2023
The
Directors
submit to
the Shareholders
their Strategic Report of the Company for the year
ended 31
December
2023.
The
Strategic
Report
provides
a
review
of
the
business
for
the
financial
year
and
describes
how
risks
are
managed. In
addition, the report outlines key developments and the financial
performance of the Company during the financial year and the
position at the end of the year, and discusses the main factors
that could affect the future performance and financial position of
the Company.
BUSINESS
MODEL
AND
STRATEGY
Investment
Objective
and
Company
Structure
The
Company
is
organised
as
a
feeder
fund
that
invests
solely
in
the
ordinary
Sterling
and
US
Dollar-denominated
Class B shares issued by the Master Fund – 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. Further details on the Company’s
investment objective and policy can be found in the Directors’
Report.
Sources
of
Cash
and
Liquidity
Requirements
As
the Master Fund is not expected to pay dividends, the Company
expects that the primary source of its future liquidity will depend
on the periodic redemption of shares from the Master Fund and
borrowings in accordance with its leverage policies.
BUSINESS
ENVIRONMENT
Principal
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 the Master Fund’s 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”) and 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 Risks: Elevated
levels of global inflation, recessionary risks and the current
conflicts in Ukraine and the
Middle East have 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 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
31 December 2023, the Board believes
that it was fully compliant in terms of Listing Rules LR 9.8.6R(9)
and LR 14.3.33R(1) in relation to board diversity. 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
|
Environmental,
Social
and
Governance
(ESG)
Factors
The
Company does not have employees, it does not own physical assets
and its Board is formed exclusively of non-executive Directors. As
such, the Company does not undertake any material activity which
would directly affect the environment.
On
a regular basis, the Manager assesses the trading activity of the
investment funds it manages, including the Master Fund, to
ascertain whether ESG factors are appropriate or applicable to such
funds. Most ESG principles have been envisaged in the context of
equity or corporate fixed income investment and therefore are not
readily applicable to most types of instruments traded by the
Master Fund.
The
Manager
continues
to
monitor
developments
in
this
area
and
seeks
to
implement
industry
best
practice
where
applicable. The Manager is a signatory to the UN Principles for
Responsible Investment and on a regular basis, assesses the trading
activities of the Master Fund as to whether ESG, the UN principles
and sustainability risks under the EU Sustainable Finance
Disclosure Regulations are appropriate, relevant, or applicable to
the Master Fund, considering the structure of relevant Brevan Howard managed funds and the applicable
trading universe.
The
Administrator is a wholly-owned indirect subsidiary of Northern
Trust Corporation, which has adopted the UN Global
Compact
principles,
specifically:
implementing
a
precautionary
approach
to
addressing
environmental
issues through effective programmes, undertaking initiatives that
demonstrate the acknowledgement of environmental
responsibility,
promoting
and
using
environmentally
sustainable
technologies,
and
UN
Sustainable
Development Goals,
specifically:
using
only
energy
efficient
appliances
and
light
bulbs,
avoiding
unnecessary
use
and waste of water, implementing responsible consumption and
production, and taking action to reduce climate
change.
POSITION
AND
PERFORMANCE
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”).
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.
Performance
Key
Performance
Indicators
(“KPIs”)
At
each quarterly Board meeting, the Directors consider a number of
performance measures to assess the Company’s success
in
achieving
its
objectives.
Below
are
the
main
KPIs
which
have
been
identified
by
the
Board for
determining the progress of the Company:
-
NAV
The
Company’s
NAV
per share has
appreciated
from
£1.00*
per
Sterling
share
and
US$1.00* per
US
Dollar share
at
launch
to
£4.11
per
Sterling
share
and
US$4.27 per
US
Dollar
share
at
the
2023
financial
year
end.
This increase
in
NAV
per share is largely
attributable
to
the
Company’s
long-term
growth
strategy
and
returns.
The
Directors and
the Manager are confident that the current strategy will continue
to return positive levels of growth over the
long-term.
*
The
launch price is adjusted by a factor of 10
to reflect the 10 for 1
share
sub-division,
which occurred on 7 February 2023.
-
Share
Prices,
Discount/Premium
The
Company’s shares traded at an average discount of 3.27% and 2.46%
to NAV for its Sterling shares and US Dollar shares respectively
for the year ended 31 December
2023.
-
Ongoing
Charges
The
Company’s
ongoing
charges
ratio
for
the
financial
year
ended
2023
as
compared
to
the
ongoing
charges
ratio for the
financial year ended 2022 has decreased from 6.11% to 2.16% on the
Sterling shares and decreased from 6.16% to
2.14%
on
the
US
Dollar
shares,
primarily
due
to
changes
in
the
level
of
the
Manager’s
performance
fee
as a result of relative performance.
The
Company
reports
an
aggregated
view
of
the
charges
for
both
the
Sterling
shares
and
US
Dollar
shares.
Further details
are in the Directors’ Report.
(Loss)/Gain
per
Share
Total
(loss)/gain per share is based on the net total loss on ordinary
activities after tax of £32,535,028 for the Sterling share class
and a net loss of US$1,540,012
for the US Dollar share class (2022: gains of £195,693,403 and
US$ 19,301,255
respectively).
These calculations are based on
the weighted average number of shares in issue for the year ended
31 December 2023, resulting in 353,094,861 Sterling shares and 28,097,148 US Dollar shares (2022: Sterling shares: 28,620,989 and
US
Dollar
shares:
2,722,649).
The
10
for
1
share
sub-division
approved
at
the
EGM
held
on
6
February
2023 has been
applied throughout the year for the 2023 weighted average share
figures, but not for the 2022 weighted average share
figures.
|
|
Year
ended
31.12.23
Per
share
|
'000
|
Year
ended
31.12.22
Per
share
|
'000
|
|
Net
total
(loss)/gain
for
Sterling
Shares
|
(9.21p)
|
(£32,535)
|
683.74p
|
£195,693
|
|
Net
total
(loss)/gain
for
US
Dollar
Shares
|
(5.48c)
|
(US$1,540)
|
708.91c
|
US$19,301
|
NAV
The
NAV per Sterling share, as at 31 December
2023 was £4.11 based on net assets of £1,527,458,326,
divided by the number of Sterling shares in issue of 372,024,149
(2022: £41.81*).
The
NAV per US Dollar share, as at 31 December
2023 was US$4.27 based on net
assets of US$127,481,611 divided by
the number of US Dollar shares in issue of 29,856,472 (2022:
US$43.28*).
*
The NAV per share as of 31 December
2022 is not adjusted by a factor of 10 to reflect the 10 for
1 share sub- division, which occurred on 7
February 2023.
Dividends
No
dividends
were
paid
during
the
year
(2022:
US$Nil).
Viability
Statement
The
investment
objective
of
the
Company
is
to
seek
to
generate
consistent
long-term
capital
appreciation
through an
investment policy of investing all of its assets (net of funds
required for its short-term working capital) in the Master
Fund.
The
Directors have assessed the viability of the Company over the
three-year period to 31 December
2026. The Viability Statement covers a period of three
years, which the Directors consider sufficient given the inherent
uncertainty of the investment world and the specific risks to which
the Company is exposed.
The
continuation
of
the
Company
in
its
present
form
is
largely
dependent
on
the
management
agreement
between
the Company
and
the
Manager
(the
“Management
Agreement”)
remaining
in
place.
The
Management
Agreement
was, as
at
the
2022
financial
year
end,
generally
terminable
on
three
months’
notice
by
either
party
save
for
certain
exceptions. This was
changed in January 2023 to a twelve
month notice period save for certain exceptions. To ensure
that
the
Company
maintains
a
constructive
and
informed
relationship
with
the
Manager,
the
Directors
meet
regularly with
the
Manager
to
review
the
Master
Fund’s
performance,
and
through
the
Management
Engagement
Committee, the Directors review the Company’s relationship with the
Manager and the Manager’s performance and effectiveness.
The
Directors
currently
know
of
no
reason
why
either
the
Company
or
the
Manager
might
serve notice of
termination of the Management Agreement over the period of this
Viability Statement.
The
Company’s
assets
exceed
its
liabilities
by
a
considerable
margin.
Furthermore,
the
majority
of
the
Company’s
most significant
expenses,
being
the
fees
owing
to
the
Manager
and
to
the
Administrator,
fluctuate
by
reference
to
the Company’s
investment
performance
and
NAV.
The
Company
is
able
to
meet
its
expenses
by
redeeming
shares
in the
Master
Fund
as
necessary,
as
and
when
required
to
enable
the
Company
to
meet
its
ordinary
course
operating
expenses.
The
Company’s investment performance depends upon the performance of
the Master Fund and the Manager as manager of the
Master
Fund. The
Directors,
in
assessing the viability of the Company, pay
particular
attention to the risks facing the Master Fund. The Manager operates
a risk management framework, which is intended to identify,
measure, monitor, report and, where appropriate, mitigate key risks
identified by it or its affiliates in respect of the Master
Fund.
The
Company’s shares largely traded
at a
premium
up
until
the middle
of
2023, since
when, in
common with
the
broader investment
trust
sector,
the
shares
have
traded
at
a
discount.
In
the
event
of
any
downward
pressure
on
the
Company’s share
prices,
the
Company
is
able
to
consider
resuming
active
discount
management
actions,
including share
buybacks, so that as far as possible the share prices would more
closely reflect the Company’s underlying performance; such actions
should help to mitigate the risk of class closure resolutions being
triggered after that date. Share buybacks commenced during
December 2023 and have continued
through into 2024. The Company
is able
to
meet
the
costs
of
share
buybacks
by
redeeming
shares
in
the
Master
Fund.
Pursuant
to
the
Management
Agreement, there
are
restrictions
on
the
amount
of
Master
Fund
shares
which
the
Company
may
redeem
in
a
given
period; and
the
Company
may
incur
fees
to
the
Manager
in
certain
circumstances.
The
Company
is
also
subject
to
the Shareholders’
authority for
Share purchases
in
the
market
approved at
the
AGM
held
in
September
2023.
The
Company may
redeem
up
to
five
per
cent
of
the
Company’s
holding
of
Master
Fund
shares
on
a
monthly
basis to
fund its
on-market
share
buybacks;
and
it
may,
no
more
than
once
a
year,
on
three
months’
notice,
redeem
part
of
its interest in the Master Fund representing up to 10 per cent of
each class of the Company’s shares held in the Master
Fund,
to
the
extent
required
to
enable
the
Company
to
make
an
annual
redemption
offer
(as
defined
in
the
Articles). Refer to notes 2 and 8 in the Audited Financial
Statements for details of the Company’s discount management
mechanisms.
The
Directors
have
carried
out
a
robust
assessment
of
the
risks
and,
on
the
assumption
that
the
risks
are
managed or
mitigated in the ways noted above, the Directors have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the three-year
period of their assessment.
Section
172,
Companies
Act
2006
Although the
Company is domiciled and resident in Guernsey, the Board has
considered the guidance set out in the Association
of
Investment
Companies
(the
“AIC”)
Code
in
relation
to
Section
172
of
the
Companies
Act
2006 in the UK.
Section 172 of the Companies Act requires that the Directors of the
Company act in the way they consider, in good faith, is most likely
to promote the success of the Company for the benefit of all
stakeholders, including suppliers, customers and
Shareholders.
Key
Service
Providers
The
Company does not have any employees and, as such, the Board
delegates responsibility for its day-to-day operations to a number
of key service providers. The activities of each service provider
are closely monitored by the Board and they are required to report
to the Board at set intervals.
In
addition, a formal review of the performance of each service
provider is carried out once a year by the Management Engagement
Committee.
The
Manager
The
Manager is a
leading and well-established hedge
fund
manager.
In
exchange for its
services, a
fee
is payable as detailed in note 4 to the Audited Financial
Statements.
The
Board considers that, under the Company’s current investment
objective, the interests of Shareholders, as a whole, are best
served by the ongoing appointment of the Manager.
Administrator
and
Corporate
Secretary
Northern Trust
International Fund Administration Services (Guernsey) Limited is
the Administrator and the Company’s corporate
secretary
(the
“Corporate
Secretary”).
Further
details
on
fee
structure
are
included
in
note
4
to the Audited Financial Statements.
Signed
on
behalf
of
the
Board
by:
Richard
Horlick
Chair
John
Le
Poidevin
Director
27 March 2024
Directors’
Report
31
December
2023
The Directors submit their Report
together
with the
Company’s
Audited
Statement
of
Assets
and
Liabilities,
Audited Statement of Operations, Audited Statement of Changes in
Net Assets, Audited Statement of Cash Flows and the related notes
for the year ended 31 December 2023.
The Directors’ Report together with the Audited 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
Audited
Statement
of
Operations.
The
Directors
do
not
recommend the
payment of a dividend.
Share
Capital
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
remained
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
notes 2 and 5 to the Audited 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.
At
the
Annual
General
Meeting
held
on
13
September
2023,
Shareholders approved an Ordinary
Resolution to allow the Directors
to
have
the
power
to
issue
further
shares
totalling 124,568,816
Sterling
shares
and 9,862,449
US
Dollar shares,
respectively. Shareholders at the Annual General Meeting also
approved a Special Resolution that authorised the maximum number of
shares that may be purchased on-market by the Company until the
next Annual General Meeting, being 56,024,199 Sterling shares and
4,435,587 US Dollar
shares.
In
December 2023, the Company bought
back 1,504,277 Sterling shares on the London Stock Exchange with
prices ranging from £3.48 to £3.67 per share. The Company did not
buy-back any US Dollar class shares. The purchased shares were then
held in Treasury.
The number of shares in issue at the year end is disclosed in note 5 of the Audited Financial Statements.
Going
Concern
The
Directors, having considered the Principal and Emerging Risks and
Uncertainties to which the Company is exposed 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 Audited 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 conflicts in Ukraine and the Middle East. The Board has concluded that the
biggest threat to the Company 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
meetings and Audit Committee meetings they were entitled
to
attend
during
the
year
ended
31
December
2023
and
the
number
of
such
meetings
attended
by
each
Director.
|
Scheduled
Board
Meetings
|
Held
|
Attended
|
|
|
|
Richard
Horlick
|
4
|
4
|
|
|
|
Caroline
Chan
|
4
|
4
|
|
|
|
Julia
Chapman
|
4
|
4
|
|
|
|
Bronwyn
Curtis
|
4
|
4
|
|
|
|
John
Le
Poidevin
|
4
|
4
|
|
|
|
Claire
Whittet*
|
3
|
3
|
|
|
|
Audit
Committee
Meetings
|
Held
|
Attended
|
|
John
Le
Poidevin
|
4
|
4
|
|
|
|
Caroline
Chan
|
4
|
4
|
|
|
|
Julia
Chapman
|
4
|
4
|
|
|
|
Bronwyn
Curtis
|
4
|
4
|
|
|
|
Claire
Whittet*
|
3
|
3
|
|
|
|
Remuneration
and
Nomination
Committee
Meetings
|
Held
|
Attended
|
|
Caroline
Chan
|
1
|
1
|
|
|
|
Julia
Chapman
|
1
|
1
|
|
|
|
Bronwyn
Curtis
|
1
|
1
|
|
|
|
Richard
Horlick
|
1
|
1
|
|
|
|
John
Le
Poidevin
|
1
|
1
|
|
|
|
Claire
Whittet*
|
N/A
|
N/A
|
|
|
|
Management
Engagement
Committee
Meetings
|
Held
|
Attended
|
|
|
Julia
Chapman
|
1
|
1
|
|
|
|
Caroline
Chan
|
1
|
1
|
|
|
|
Bronwyn
Curtis
|
1
|
1
|
|
|
|
Richard
Horlick
|
1
|
1
|
|
|
|
John
Le
Poidevin
|
1
|
1
|
|
|
|
Claire
Whittet*
|
N/A
|
N/A
|
|
|
|
|
|
|
|
*Claire
Whittet
retired
from
the
Board
on
13 September
2023.
In
addition
to
these
scheduled
meetings,
16
ad-hoc
committee
meetings
were
held
during
the
year
ended
31
December 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.
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
|
|
|
|
|
|
31.12.23
|
31.12.22
|
|
|
Richard
Horlick
|
|
200,000
|
20,000
|
|
|
Caroline
Chan
|
|
11,587
|
Nil
|
|
|
Julia
Chapman
|
|
6,260
|
626
|
|
|
Bronwyn
Curtis
|
|
33,174
|
1,000
|
|
|
John
Le Poidevin
|
|
75,620
|
5,482
|
|
|
Claire
Whittet1
|
|
N/A
|
1,500
|
|
|
|
|
|
|
|
|
US
Dollar Shares
|
|
|
|
31.12.23
|
31.12.22
|
|
Richard
Horlick
|
|
20,000
|
Nil
|
|
Caroline
Chan
|
|
Nil
|
Nil
|
|
Julia
Chapman
|
|
Nil
|
Nil
|
|
Bronwyn
Curtis
|
|
Nil
|
Nil
|
|
John
Le Poidevin
|
|
Nil
|
Nil
|
|
Claire
Whittet1
|
|
N/A
|
Nil
|
|
|
|
|
|
|
|
|
|
1 All
units
are
held
through
a
Retirement
Annuity
Trust
Scheme,
jointly
owned
by
Mrs
Whittet
and
her
husband. Mrs
Whittet retired from the Board on 13
September 2023.
Due
to
the
10:1
share
sub-division,
which
was
approved
at
the
EGM
held
on
6
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;
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 (23,174 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 13 September 2023, Shareholders
re-elected
all the
then
incumbent
Directors
of
the
Company,
except
for
Claire
Whittet,
who
retired
from
the
Board
and
did
not
seek re-election on
the same date.
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.
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
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.
The
Senior Independent Director takes the lead in evaluating the
performance of the Chair. Prior to her retirement from the Board on
13 September 2023, Claire Whittet served as Senior Independent
Director. Bronwyn Curtis was
appointed Senior Independent Director on the same date.
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 Audited 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
Annual 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 Strategic 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 years ended 31 December 2023
and 31 December 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 years ended 31
December 2023 and 31 December
2022.
|
31.12.23
|
|
|
|
Sterling
|
US
Dollar
|
|
|
|
Shares
|
Shares
|
|
|
Company
–
Ongoing
Charges
|
1.59%
|
1.56%
|
|
|
Master
Fund
–
Ongoing
Charges
|
0.57%
|
0.58%
|
|
|
Performance
fees
|
-
|
-
|
|
|
Ongoing
Charges
plus
performance
fees
|
2.16%
|
2.14%
|
|
|
31.12.22
|
|
|
|
|
Sterling
|
US
Dollar
|
|
|
|
Shares
|
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%
|
|
|
|
|
|
|
|
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, Julia
Chapman and Caroline Chan.
Claire Whittet also served on the
Audit Committee until her retirement from the Board on 13 September 2023. The Terms of Reference of the
Audit Committee are available on the Company’s website
(www.bhmacro.com)
or 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,
is
chaired
by
Julia
Chapman
and
comprises all
members of the Board.
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
Audited
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 13 September 2023, 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.
It
was
chaired
by
Bronwyn Curtis
until
13
September
2023,
after
which,
Caroline
Chan
became
Chair,
and
the
Committee
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 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. This review took place on two occasions
during the year.
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.
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
year.
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.
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
year,
no
resolution
recommended
by
the
Board
received 20 per
cent or more votes against it.
Significant
Shareholders
As
at
21 March 2024, the
following
Shareholders
had
significant
shareholdings
in
the
Company:
|
|
|
|
%
holding
|
|
|
|
in
class
|
|
Significant
Shareholders
|
|
|
|
Sterling
Shares
|
|
|
|
|
Ferlim Nominees
Limited
|
|
|
15.7%
|
|
Rathbone
Nominees Limited
|
|
|
8.9%
|
|
Smith &
Williamson Nominees Limited
|
|
|
8.0%
|
|
Cheviot Capital
(Nominees) Limited
|
|
|
6.1%
|
|
Lion Nominees
Limited
|
|
|
4.8%
|
|
Vidacos
Nominees Limited
|
|
|
4.5%
|
|
Pershing
Nominees Limited
|
|
|
4.3%
|
|
Vestra Nominees
Limited
|
|
|
3.7%
|
|
Nortrust
Nominees Limited
|
|
|
3.4%
|
|
Brewin Nominees
Limited
|
|
|
3.2%
|
|
HSBC Global
Custody Nominee (UK) Limited
|
|
|
3.2%
|
|
|
|
|
|
|
|
|
|
%
holding
|
|
|
|
in
class
|
|
Significant
Shareholders
|
|
|
|
US
Dollar Shares
|
|
|
|
Hero Nominees
Limited
|
|
|
14.5%
|
|
Euroclear
Nominees
|
|
|
12.8%
|
|
Vidacos
Nominees
|
|
|
11.8%
|
|
Luna Nominees
Limited
|
|
|
4.6%
|
|
CGWL Nominees
Limited
|
|
|
3.8%
|
|
Aurora Nominees
Limited
|
|
|
3.4%
|
|
Lynchwood
Nominees Limited
|
|
|
3.0%
|
|
Rathbone
Nominees Limited
|
|
|
3.0%
|
Signed on
behalf of the Board by:
Richard
Horlick
Chair
John Le
Poidevin
Director
27 March 2024
Statement of
Directors’ Responsibility in respect of the Annual Report and
Audited Financial Statements
The Directors are responsible
for preparing the Annual Report and Audited Financial Statements in
accordance with applicable law and regulations.
The
Companies (Guernsey) Law, 2008 requires the Directors to prepare
financial statements for each financial year. They
have
resolved
to
prepare
the
financial
statements
in
accordance
with
accounting
principles
generally
accepted
in
the United States of
America.
The
Directors,
by
law,
must
not
approve
the
financial
statements
unless
they
are
satisfied
that
they
give
a
true
and
fair
view of
the
state
of
affairs
of
the
Company
and
of
its
profit
or
loss
for
that
year.
In
preparing
these
financial
statements, the
Directors are required to:
-
select suitable accounting
policies and then apply them consistently;
-
make judgements and estimates
that are reasonable, relevant and reliable;
-
state whether applicable
accounting standards have been followed, subject to any material
departures disclosed and explained in the financial
statements;
-
assess the Company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to the going concern basis; and
-
use the going concern basis of
accounting unless liquidation is imminent.
The
Directors are responsible for keeping proper accounting records
that are sufficient to show and explain the Company’s
transactions
and
disclose
with
reasonable
accuracy
at
any
time
the
financial
position
of
the
Company
and
enable them to ensure that its financial statements comply with the
Companies (Guernsey) Law, 2008. They are responsible for such
internal control as they determine is necessary to enable the
preparation of financial statements that are
free
from
material
misstatement,
whether
due
to
fraud
or
error,
and
have
general
responsibility
for
taking
such
steps as
are
reasonably
open
to
them
to
safeguard
the
assets
of
the
Company
and
to
prevent
and
detect
fraud
and
other
irregularities.
The
Directors
are
responsible
for
the
maintenance
and
integrity
of
the
corporate
and
financial
information
included
on
the Company’s
website.
Legislation
in
Guernsey
governing
the
preparation
and
dissemination
of
financial
statements may
differ from legislation in other jurisdictions.
RESPONSIBILITY
STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL
FINANCIAL
REPORT
We
confirm
that
to
the best
of
our
knowledge:
-
so far as each of the Directors
is aware, there is no relevant audit information of which the
Company’s Independent Auditor is unaware, and each has taken all
the steps they ought to have taken as a Director to make themselves
aware of any relevant information and to establish that the
Company’s Independent Auditor is aware of that
information;
-
the financial statements,
prepared in accordance with the applicable set of accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company;
and
-
each of the Chair’s Statement,
the Strategic Report, the Directors’ Report and the Manager’s
Report includes a fair review of the development and performance of
the business and the position of the Company, together with a
description of the principal risks and uncertainties that it
faces.
We
consider the Annual Report and Audited Financial Statements, taken
as a whole, are fair, balanced and understandable and provide the
information necessary for Shareholders to assess the Company’s
position and performance, business model and strategy.
Signed
on
behalf
of
the
Board
by:
Richard
Horlick
Chair
John
Le
Poidevin
Director
27 March 2024
Directors’
Remuneration
Report
31
December
2023
Introduction
An
ordinary resolution for the approval of the Directors’ Remuneration
Report in the Company’s annual audited financial statements for the
year ended 31 December 2022, was
passed by the Shareholders at the Annual General Meeting held on
13 September 2023.
Remuneration
policy
A
Remuneration and Nomination Committee was established on
17 June 2022. Prior to this, the
Board as a whole considered matters
relating
to
the
Directors’
remuneration.
No
advice
or
services
were
provided
by
any
external
person in
respect of its consideration of the Directors’
remuneration.
The
Company’s policy is that the fees payable to the Directors should
reflect the time spent by the Directors on the Company’s affairs
and the responsibilities borne by the Directors and be sufficient
to attract, retain and motivate Directors of a quality required to
run the Company successfully. The Chair of the Board is paid a
higher fee in recognition of his additional responsibilities, as
are the Chairs of the various Board committees and the Senior
Independent Director.
The
policy
is
to
review
fee
rates
periodically,
although
such
a
review
will
not
necessarily
result in any
changes to the rates, and account is taken of fees paid to
Directors of comparable companies.
There
are
no
long-term
incentive
schemes
provided
by
the
Company
and
no
performance
fees
are
paid
to
Directors.
No
Director
has
a
service
contract
with
the
Company
but
each
of
the
Directors
is
appointed
by
a
letter
of
appointment
which sets out the main terms of their appointment. The Directors
were appointed to the Board for an initial term of three
years
and
Article
21.3
of
the
Company’s
Articles requires, as
does
the
AIC
Code, that all of
the Directors
retire
at each
Annual
General
Meeting.
At
the
Annual
General
Meeting
of
the
Company
on
13
September
2023,
Shareholders
re-elected all
the
Directors,
except
for
Claire
Whittet,
who
retired
from
the
Board
and
did
not
seek
re-election.
Director
appointments can also be terminated in accordance with the
Articles. Should Shareholders vote against a Director
standing for
re-election,
the
Director
affected
will
not
be
entitled
to
any
compensation.
There
are
no
set
notice
periods and a
Director may resign by notice in writing to the Board at any
time.
Directors
are
remunerated
in
the
form
of
fees,
payable
quarterly
in
arrears,
to
the
Director
personally.
No
other remuneration or
compensation was paid or payable by the Company during the year to
any of the Directors apart from the reimbursement of allowable
expenses.
Directors’
fees
Until
30
June
2022,
the
Company’s
Articles
limited
the
fees
payable
to
Directors
in
aggregate
to
£400,000
per
annum. The
annual Directors’ fees
were: £70,000 for Richard Horlick, the
Chair; £55,000 for John Le Poidevin,
the Chair of the Audit
Committee;
£50,000
for
Claire
Whittet,
as
Chair
of
the
Management
Engagement
Committee
and
the
Senior
Independent Director and £45,000 for all other
Directors.
The
annual
Directors’
fees
from
1
July
2022
have
been:
|
Role
|
Fee per annum
£
|
|
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
annual aggregate limit of fees payable to Directors is £800,000 per
annum. The Remuneration and Nomination Committee carried out a
review of the fees at the most recent meeting, held on 7 December 2023, where it was concluded that no
changes should be made.
The
fees
payable
by
the
Company
in
respect
of
each
of
the Directors
who
served
during
the
year
ended
31
December 2023 and the year ended 31 December 2022 were as follows:
|
|
Year
ended
|
Year
ended
|
|
31.12.23
£
|
31.12.22
£
|
|
Richard
Horlick
|
90,000
|
80,000
|
|
Caroline Chan*
|
51,586
|
3,562
|
|
Julia
Chapman
|
55,000
|
50,000
|
|
Bronwyn
Curtis
|
55,000
|
50,000
|
|
John
Le
Poidevin
|
65,000
|
60,000
|
|
Claire
Whittet**
|
38,801
|
52,500
|
|
Total
|
355,387
|
296,062
|
* Caroline
Chan
was
appointed
to
the
Board
on
6
December
2022
at
a
fee
of
£50,000
p.a.
Following
her
appointment as
Chair
of
the
Remuneration
and
Nomination
Committee,
her
fee
was
increased
to
£55,000
p.a.
** Claire
Whittet retired from the Board on 13
September 2023.
Caroline
Chan
Remuneration
and
Nomination
Committee
Chair
27 March 2024
Report
of
the
Audit
Committee
31
December
2023
We
present the Audit Committee’s (the “Committee”) Report for 2023,
setting out the Committee’s structure and composition, principal
duties and key activities during the year. As in previous years,
the Committee has reviewed the Company’s financial reporting, the
independence and effectiveness of the Independent Auditor and the
internal control and risk management systems of the service
providers.
Structure
and
Composition
The
Committee
is
chaired
by
John
Le
Poidevin
and
its
other
members
are
Bronwyn
Curtis,
Julia Chapman
and
Caroline Chan. Claire
Whittet served on the Audit Committee until her retirement
from the Board on 13 September
2023.
Appointment to
the Committee is for a period of up to three years which may be
extended for two further three-year periods, provided that the
majority of the Committee remains independent of the Manager.
John Le Poidevin is currently
serving
his
third
term,
Bronwyn
Curtis
is
serving
her
second
term
and
Julia
Chapman
and
Caroline
Chan
are
serving their first terms.
The
Committee conducts formal meetings at least three times a year. The
table in the Directors’ Report sets out the number of Committee
meetings held during the year ended 31
December 2023 and the number of such meetings
attended
by
each committee member. The Independent
Auditor is
invited to attend those meetings at which
the annual
and
interim
reports
are
considered.
The
Independent
Auditor
and
the
Committee
will
meet
together
without
representatives of either the Administrator or the Manager being
present if the Committee considers this to be
necessary.
Principal
Duties
The
role
of
the
Committee
includes:
-
monitoring the integrity of the
published Financial Statements of the Company;
-
reviewing and reporting to the
Board on the significant issues and judgements made in the
preparation of the Company’s published Financial Statements (having
regard to matters communicated by the Independent Auditor),
significant financial returns to regulators and other financial
information;
-
monitoring and reviewing the
quality and effectiveness of the Independent Auditor and their
independence;
-
considering and making
recommendations to the Board on the appointment, reappointment,
replacement and remuneration to the Company’s Independent Auditor;
and
-
monitoring and reviewing the
internal control and risk management systems of the service
providers.
-
The complete details of the
Committee’s formal duties and responsibilities are set out in the
Committee’s Terms of Reference, which can be obtained from the
Company’s Administrator.
The
independence
and
objectivity
of
the
Independent
Auditor
is
reviewed
by
the
Committee,
which also
reviews
the
terms under
which
the
Independent
Auditor
is
appointed
to
perform
non-audit
services,
which
includes
consideration
of the Financial Reporting Council (“FRC”) Revised Ethical Standard
2019. The Committee has also established policies and procedures
for the engagement of the
Company’s auditor to provide audit, assurance and other services.
The services which
the Independent Auditor may not provide are any
which:
-
places them in
a position to audit their own work;
-
creates a
mutuality of interest;
-
results in the
Independent Auditor functioning as a manager or employee of the
Company; or
-
puts the
Independent Auditor in the role of advocate of the
Company.
Independent
Auditor
The
audit and any non-audit fees proposed by the Independent Auditor
each year are reviewed by the Committee taking into account the
Company’s structure, operations and other requirements during the
year and the Committee makes recommendations to the
Board.
KPMG Channel
Islands Limited (“KPMG CI”) has been the Company’s Independent
Auditor from the date of the initial listing on the London Stock
Exchange. The external audit was most recently tendered for the
year ended 31 December 2016, where
KPMG CI was re-appointed as auditor following the completion of the
tender process.
Key
Activities
in
2023
The
following
sections
discuss
the
assessment
made
by
the
Committee
during
the
year:
Significant
Financial
Statement
Issues
The
Committee’s
review
of
the
annual
Audited
Financial
Statements
focused
on
the
following
area:
The
Company’s investment in the Master Fund had a fair value of
US$2,038.6 million as at 31 December 2023 and represents substantially all
the net assets of the Company. The valuation of the investment is
determined in accordance with the Accounting Policies set out in
note 3 to the Audited Financial Statements. The Financial
Statements of the Master Fund for the year ended 31 December 2023 were audited by KPMG Cayman who
issued an unqualified audit opinion dated 26
March 2024. The Audit Committee has reviewed the Financial
Statements of the Master Fund and the accounting policies and
determined the fair value of the investment as at 31 December 2023 is reasonable.
This matter was
discussed during the planning and final stage of the audit and
there was no significant divergence of views between the Committee
and the Independent Auditor.
The
Committee has carried out a robust assessment of the
risks to
the Company in the context of making the Viability Statement in
these Audited Financial Statements. Furthermore, the Committee has
concluded it appropriate to continue to prepare the Audited
Financial Statements on the going concern basis of
accounting.
Effectiveness
of
the
Audit
The
Committee held formal meetings with KPMG CI during the course of
the year: 1) before the start of the audit to discuss formal
planning and to discuss any potential issues and to agree the scope
that would be covered; and 2) after the audit work was concluded,
to discuss the significant issues including those stated
above.
The
Committee considered the effectiveness and independence of KPMG CI
by using a number of measures, including but not limited
to:
-
reviewing
the
audit
plan
presented to
them
before
the
start
of
the
audit;
-
reviewing
and
challenging
the
audit
findings
report
including
variations
from
the
original
plan;
-
reviewing
any
changes
in
audit
personnel;
and
-
requesting
feedback
from
both
the
Manager
and
the
Administrator.
Further to the
above, during the year ended 31 December
2023, the Committee performed a specific evaluation of the
performance of the Independent Auditor. This was supported by the
results of questionnaires completed by the Committee covering areas
such as the quality of the audit team, business understanding,
audit approach and management. There were no significant adverse
findings from the 2023 evaluation.
Audit
Fees
and
Safeguards
on
Non-Audit
Services
The
table below summarises the remuneration paid by the Company to KPMG
CI for audit and non-audit services during the years ended
31 December 2023 and 31 December 2022.
|
|
Year
ended
|
Year
ended
|
|
31.12.23
£
|
31.12.22
£
|
|
Annual
audit
|
70,200
|
65,000
|
|
Interim
review
|
35,500
|
33,000
|
The
Audit Committee has examined the scope and results of the external
audit, its cost effectiveness and the
independence
and
objectivity
of
the
Independent
Auditor,
with
particular
regard
to
non-audit
fees,
and
considers
KPMG CI, as
Independent Auditor, to be independent of the Company. Further, the
Committee has obtained KPMG CI’s confirmation that
the
services
provided
by
other
KPMG
member
firms
to
the
wider
Brevan
Howard
organisation
do
not
prejudice its independence.
FRC
Audit
Committees
and
External
Audit
Minimum
Standard
During the year
the Audit Committee conducted an assessment of compliance with the
FRC Audit Committees and
External
Audit
Minimum
Standard,
published
in
May
2023.
The
Audit
Committee
was
satisfied
that
its
current
processes achieved a high
level of adherence and where relevant these standards have been
incorporated into its Terms of
Reference.
Internal
Control
The
Audit
Committee
has
also
reviewed
the
need
for
an
internal
audit
function.
The
Committee
has
concluded
that
the
systems and
procedures
employed
by
the
Manager
and
the
Administrator,
including
their
own
internal
audit
functions,
currently provide
sufficient
assurance
that
a
sound
system
of
internal
control,
which
safeguards
the
Company’s
assets, is
maintained. An internal audit function specific to the Company is
therefore considered unnecessary.
The
Committee
examined
externally
prepared
assessments
of
the
control
environment
in
place
at
the
Manager
and
the
Administrator,
with the
Manager providing an International
Standard
on
Assurance
Engagements (“ISAE
3402”)
report and the
Administrator providing a Service Organisation Control (“SOC1”)
report. No significant findings have been noted during the
year.
Conclusion
and
Recommendation
After
reviewing
various
reports
such
as
the
operational
and
risk
management
framework
and
performance
reports
from the
Manager
and
the
Administrator,
consulting
where
necessary
with
KPMG
CI,
and
assessing
the
significant
Audited
Financial Statements’ issues noted in the Report of the Audit
Committee, the Committee is satisfied that the Audited Financial
Statements appropriately address the critical judgements and key
estimates (both in respect of the amounts reported
and
the
disclosures).
The
Committee
is
also
satisfied
that
the
significant
assumptions
used
for
determining
the
value of assets and liabilities have been appropriately scrutinised
and challenged and are sufficiently robust. At the request of the
Board, the Audit Committee considered and was satisfied that the
2023 Annual Report and Audited Financial Statements
are
fair,
balanced
and
understandable
and
provide
the
necessary
information
for
Shareholders
to
assess the Company’s performance, business model and
strategy.
The
Independent
Auditor
reported
to
the
Committee
that
no
unadjusted
material
misstatements
were
found
in
the
course of
its
work.
Furthermore,
both
the
Manager
and
the
Administrator
confirmed
to
the
Committee that
they
were
not
aware of any
unadjusted material misstatements including matters relating to the
presentation of the Audited Financial Statements. The Committee
confirms that it is satisfied that the Independent Auditor has
fulfilled its responsibilities with diligence and professional
scepticism.
Consequent
to
the review
process on
the
effectiveness
of
the
independent
audit
and
the
review
of audit
and
non-audit
services, the Committee has recommended that KPMG CI be reappointed
for the coming financial year.
For
any
questions
on
the
activities
of
the
Committee
not
addressed
in
the
foregoing,
a
member
of
the
Audit
Committee
remains available to attend each Annual General Meeting to respond
to such questions.
John
Le
Poidevin
Audit
Committee
Chair
27 March 2024
Manager’s
Report
Brevan Howard
Capital Management LP (“BHCM” or the “Manager”) is the manager of
BH Macro Limited (the “Company”) and
of
Brevan
Howard
Master
Fund
Limited
(the
“Master
Fund”).
The
Company
invests
all
of
its
assets (net of
short-term working capital) in the ordinary shares of the Master
Fund.
Performance
Review
The
NAV
per
share
of
the
USD
shares
of
the
Company
depreciated
by
-1.33%
during
2023
and
the
NAV
per
share
of
the GBP shares depreciated by -1.81%.
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
|
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)
|
|
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)
|
0.92
|
0.34
|
1.08
|
0.88
|
(0.40)
|
1.69
|
(1.33)
|
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
29
December
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*
This
information
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)
|
|
Q3
2023
|
2.25
|
0.03
|
0.07
|
(0.07)
|
0.20
|
(0.14)
|
0.00
|
2.36
|
|
Q4
2023
|
2.30
|
(0.47)
|
(0.03)
|
0.23
|
(0.52)
|
0.69
|
0.00
|
2.18
|
|
2023
|
1.75
|
(1.68)
|
(0.52)
|
0.23
|
(1.67)
|
0.60
|
0.04
|
(1.33)
|
Data
as
at
29
December
2023.
Quarterly
and
YTD
figures
are
calculated
by
BHCM
as
at
29
December
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
“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
The
environment for macro trading in the past year was very different
to 2022, which was, in terms of performance, one of the best years
in our more than 20-year history with the NAV per share of the GBP
shares of the Company increasing by
21.91%.
This
year
saw
significant
challenges
and
there
was
a
decline
in
the NAV
per
share
of
the
GBP
shares of the Company of -1.81%.
Macro trading
in the first quarter was influenced by the surprising strength of
the US economy against a background of widespread
recession
fears.
This
caused
the
Fed
to
pivot
hawkishly
and
hint
at
further
hikes.
Notably,
Chair
Powell in his
March testimony to Congress suggested that interest
rates needed to
be increased at a faster pace, suggesting a return to
50-basis-point rate increases.
Our
macro
portfolio
managers
leaned
into
this
view
with
a
range
of
positions
to
benefit
from
an
acceleration
of
further
tightening. In the event, the shock triggered two of the largest
bank failures in history. Silicon Valley Bank failed almost
immediately
and
Credit
Suisse
was
resolved
just
a
week
later.
The
dramatic
reversal
—
especially
in
short-term
interest rates, which staged some of their biggest one-day rallies
in history — caused these positions to incur losses. Our
well-established risk discipline ensured that the positions most
affected were cut immediately. The Master Fund was placed in a
strong position given the increased uncertainty about the strength
of banks more generally and the possibility of a knock-on effect on
financial markets.
Over
the
subsequent
quarter,
it
was
unclear
whether
the
US
and
Euro
areas
would
continue
to
power
ahead
or
suffer
a
credit crunch. The interplay between strong economic data with the
potential for an ongoing wave of bank failures made
for
choppy,
trendless
markets
during
which
our
risk
levels
remained
muted.
Market
liquidity
was
weak
and
this,
combined with
concerns
about
the
financial
sector,
made
us
particularly
sensitive
to
tail
risks
especially
those
relating to
leverage across the wider market. This risk discipline had a
material dampening impact on our macro directional risk-taking
through to the fourth quarter of the year.
In
parallel with this, we conducted a review to seek to ensure that
the Master Fund remains optimally positioned to execute
on
its
key
objective:
that
of
continuing
the
exceptional
long-term
track
record
produced
for
investors.
As
part of this
process, we assembled a dedicated team to carry out a
comprehensive, critical assessment of the capital
allocations within
the
fund.
The
team
examined
a
broad
range
of
factors
that
drives
performance,
including
the
unique return
and downside characteristics of the underlying trading strategies,
and how they interact together. They also scrutinized individual
portfolio managers’ performance profiles, their ability to
structure convexity and the extent to which they contribute to
diversification. This work led to a series of improvements to
capital allocations across strategies and portfolio managers,
improvements to several trading mandates and the closure of
underperforming trading books.
At
a
high
level,
the
aim
of
these
adjustments
is
to
seek
to
enhance
the
Master
Fund’s
ability
to
generate
highly
convex and
uncorrelated returns through an improved focus on monetising macro
opportunities while protecting the unique return characteristics
that distinguish the Fund.
Looking
forward,
the
opportunity
set
for
macro
trading
looks
set
to
be
extremely
interesting
and
macro
considerations
are likely
to
matter
more
than
ever
to
every
investor.
While
it
is
hard
to
identify
paradigm
shifts
in
real
time,
the
secular
stagnation era may have ended. There are three factors that may
drive the shift towards structurally higher interest rates and more
economic volatility than occurred in the post-Global Financial
Crisis period.
First,
fiscal
and
monetary
policy
are
no
longer
a
“free
lunch”.
Public
debt
soared
in
the
wake
of
the
pandemic,
limiting
fiscal space
going
forward.
Central banks
suffered
reputational damage
from
missing their
inflation mandates, which is
likely
to
make
them
reluctant
to
embrace
unconventional
monetary
policy
in
response
to
financial
market
volatility.
Second,
China plans to emphasize state-led
growth, common prosperity, and national security — a sharp
departure from the last 40
years
when
their free-wheeling
economic growth
powered
the global
economy.
China’s
contribution to reducing
global
inflation
through
unfettered
trade
in
recent
decades
is
also
likely
to
diminish,
and
structurally
slower growth
in China should result in fewer of
its financial reserves being recycled into international
markets.
Finally,
there
are
ongoing
wars
with
the
prospect
looming
for
further
great
power
conflict.
A
new
landscape
of
greater
geopolitical tension
and
competition
will
mean
bigger
budget
deficits,
higher
inflation,
and
greater
uncertainty.
In
this
kind of
future,
investors
will
have
to
operate
in
a
more
volatile
economic
environment
without
the
comfort
of
a
fiscal or
monetary safety net.
For
all
of
these
reasons,
a
focus
on
macro
factors
within
portfolios
will
be
essential
and
the
opportunity
set
for
macro trading
is likely to be very rich. Brevan
Howard is well-positioned to navigate this environment in
service to our clients. 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.
27 March 2024
Independent
Auditor’s
Report
to
the
Members
of
BH
Macro
Limited
Our opinion
is unmodified
We
have audited the
financial statements of
BH Macro Limited (the
“Company”), which comprise the Audited Statement of Assets and
Liabilities as at 31 December
2023, the
Audited Statements of Operations, Changes in Net Assets and Cash
Flows for the year then ended, and notes, comprising significant
accounting policies and other explanatory information.
In our
opinion, the accompanying financial statements:
-
give a true and fair view of
the financial position of the Company as at 31 December 2023, and of the Company’s financial
performance and cash flows for the year then
ended;
-
are prepared in accordance
with U.S. generally accepted
accounting principles; and
-
comply with the Companies
(Guernsey) Law, 2008.
Basis for
opinion
We
conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of
the Company
in accordance with, UK ethical requirements including the FRC
Ethical Standard as required by the Crown Dependencies’ Audit Rules
and Guidance. We believe that the audit evidence we have obtained
is a sufficient and appropriate basis for our opinion.
Key audit
matters: our assessment of the risks of material
misstatement
Key
audit matters are those matters that, in our professional judgment,
were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these
matters.
In
arriving at our audit opinion above, the key
audit matter
was as follows (unchanged from 2022):
|
|
The risk
|
Our response
|
|
|
|
|
|
Valuation of
Investment in Brevan Howard Master Fund Limited (the “Master
Fund”)
$2,038,614,000
(2022:
$1,628,766,000)
Refer to the
Report of the Audit Committee and note 3 accounting
policy
|
Basis:
The
Company, which is a multi-class feeder fund, had invested 98.27%
(2022: 99.29%) of its net assets at 31 December 2023 into the
ordinary US Dollar and Sterling denominated Class B Shares issued
by the Master Fund, which is an open-ended investment
company.
The
Company’s investment holdings in the Master Fund are valued using
the respective net asset value per share class as provided by the
Master Fund’s independent administrator.
Risk:
The
valuation of the Company’s investment in the Master Fund, given
that it represents the majority of the net assets of the Company,
is a significant area of our audit.
|
Our audit
procedures included, but were not limited to:
Obtained an
independent confirmation from the administrator of the Master Fund
detailing the net asset value per share for both the US Dollar and
Sterling Class B shares and reconciled these to the net asset
values used in the valuation of the investment in the Master
Fund;
Assessed the
audit work performed by the auditor of the Master Fund by gaining
insight over the work performed on the significant elements of the
Master Fund’s net asset value and by holding discussions on key
audit findings with the auditor of the Master Fund; and
Examined the
Master Fund’s coterminous audited financial statements to
corroborate the net asset value per share of both the US Dollar and
Sterling Class B shares.
We
also considered the Company’s investment valuation policies as
disclosed in note 3 to the financial statements for conformity with
U.S. generally accepted accounting principles.
|
Our
application of materiality and an overview of the scope of our
audit
Materiality for
the financial
statements as a whole was set at £29,700,000, determined with
reference to a benchmark of net
assets of
$2,074,531,000, of which it
represents approximately 1.5% (2022: 1.5%).
In
line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole. Performance
materiality for the Company was set at 75% (2022: 75%) of
materiality for the financial statements as a whole, which equates
to $22,200,000. We applied this
percentage in our determination of performance materiality because
we did not identify any factors indicating an elevated level of
risk.
We
reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding $1,485,000, in addition to other identified
misstatements that warranted reporting on qualitative
grounds.
Our
audit of the Company was
undertaken to the materiality level specified above, which has
informed our identification of significant risks of material
misstatement and the associated audit procedures performed in those
areas as detailed above.
Going
concern
The
directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Company or to
cease its operations, and as they have concluded that the Company’s
financial position means that this is realistic. They have also
concluded that there are no material uncertainties that could have
cast significant doubt over its ability to continue as a going
concern for at least a year from the date of approval of the
financial statements (the “going concern period”).
In
our evaluation of the directors’ conclusions, we considered the
inherent risks to the Company’s business model and analysed how
those risks might affect the Company’s financial resources or
ability to continue operations over the going concern
period. The
risks that we considered most likely to affect the Company’s
financial resources or ability to continue operations over this
period were:
-
Availability of capital to meet
operating costs and other financial commitments;
and
-
The likelihood of a share class
closure or liquidation resolution votes being
triggered.
We
considered whether these risks could plausibly affect the liquidity
in the going concern period by comparing severe, but plausible
downside scenarios that could arise from these risks individually
and collectively against the level of available financial resources
indicated by the Company’s financial forecasts.
We
considered whether the going concern disclosure in note 3 to the
financial statements gives a full and accurate description of the
directors' assessment of going concern.
Our
conclusions based on this work:
-
we consider that the directors'
use of the going concern basis of accounting in the preparation of
the financial statements is appropriate;
-
we have not identified, and
concur with the directors' assessment that there is not, a material
uncertainty related to events or conditions that, individually or
collectively, may cast significant doubt on the Company's ability
to continue as a going concern for the going concern period;
and
-
we have nothing material to add
or draw attention to in relation to the directors' statement in the
notes to the financial statements on the use of the going concern
basis of accounting with no material uncertainties that may cast
significant doubt over the Company's use of that basis for the
going concern period, and that statement is materially consistent
with the financial statements and our audit
knowledge.
However, as we
cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the above
conclusions are not a guarantee that the Company will continue in
operation.
Fraud and
breaches of laws and regulations – ability to
detect
Identifying
and responding to risks of material misstatement due to
fraud
To
identify risks of material misstatement due to fraud (“fraud
risks”) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. Our risk assessment procedures included:
-
enquiring of management as to
the Company’s policies and procedures to prevent and detect fraud
as well as enquiring whether management have knowledge of any
actual, suspected or alleged fraud;
-
reading minutes of meetings of
those charged with governance; and
-
using analytical procedures to
identify any unusual or unexpected
relationships.
As
required by auditing standards, we perform procedures to address
the risk of management override of controls, in particular the risk
that management may be in a position to make inappropriate
accounting entries. On this audit we do not believe there is a
fraud risk related to revenue recognition because the Company’s
revenue streams are simple in nature with respect to accounting
policy choice, and are easily verifiable to external data sources
or agreements with little or no requirement for estimation from
management. We did not identify any additional fraud
risks.
We
performed procedures including
-
Identifying journal entries and
other adjustments to test based on risk criteria and comparing any
identified entries to supporting documentation;
and
-
incorporating an element of
unpredictability in our audit procedures.
Identifying
and responding to risks of material misstatement due to
non-compliance with laws and regulations
We
identified areas of laws and regulations that could reasonably be
expected to have a material effect on the financial statements from
our sector experience and through discussion with management (as
required by auditing standards), and from inspection of the
Company’s regulatory and legal correspondence, if any, and
discussed with management the policies and procedures regarding
compliance with laws and regulations. As the Company is regulated,
our assessment of risks involved gaining an understanding of the
control environment including the entity’s procedures for complying
with regulatory requirements.
The
Company is subject to laws and regulations that directly affect the
financial statements including financial reporting legislation and
taxation legislation and we assessed the extent of compliance with
these laws and regulations as part of our procedures on the related
financial statement items.
The
Company is subject to other laws and regulations where the
consequences of non-compliance could have a material effect on
amounts or disclosures in the financial statements, for instance
through the imposition of fines or litigation or impacts on the
Company’s ability to operate. We identified financial services
regulation as being the area most likely to have such an effect,
recognising the regulated nature of the Company’s activities and
its legal form. Auditing standards limit the required audit
procedures to identify non-compliance with these laws and
regulations to enquiry of management and inspection of regulatory
and legal correspondence, if any. Therefore if a breach of
operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that
breach.
Context of
the ability of the audit to detect fraud or breaches of law or
regulation
Owing to the
inherent limitations of an audit, there is an unavoidable risk that
we may not have detected some material misstatements in the
financial statements, even though we have properly planned and
performed our audit in accordance with auditing standards. For
example, the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the
financial statements, the less likely the inherently limited
procedures required by auditing standards would identify
it.
In
addition, as with any audit, there remains a higher risk of
non-detection of fraud, as this may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
Other
information
The
directors are
responsible for the other information. The other information
comprises the information included in the annual
report but
does not include the
financial statements and our auditor's report thereon. Our opinion
on the financial statements does not cover the other information
and we do not express an audit opinion or any form of assurance
conclusion thereon.
In
connection with our audit of the financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the financial
statements or
our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If,
based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to
report that fact. We have nothing to report in this
regard.
Disclosures
of emerging and principal risks and longer term
viability
We
are required to perform procedures to identify whether there is a
material inconsistency between the directors’ disclosures in
respect of emerging and principal risks and the viability
statement, and the financial statements and our
audit knowledge. we have nothing material to add or draw attention
to in relation to:
-
the directors’ confirmation
within the Viability Statement that they have carried out a robust
assessment of the emerging and principal risks facing the Company,
including those that would threaten its business model, future
performance, solvency or liquidity;
-
the emerging and principal
risks disclosures describing these risks and explaining how they
are being managed or mitigated;
-
the directors’ explanation in
the Viability Statement as to how
they have assessed the prospects of the Company, over what period
they have done so and why they consider that period to be
appropriate, and their statement as to whether they have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or
assumptions.
We
are also required to review the Viability Statement, under the
Listing Rules. Based
on the above procedures, we have concluded that the above
disclosures are materially consistent with the financial statements
and our audit knowledge.
Corporate
governance disclosures
We
are required to perform procedures to identify whether there is a
material inconsistency between the directors’ corporate governance
disclosures and the financial statements and our audit
knowledge.
Based on those
procedures, we have concluded that each of the following is
materially consistent with the financial statements and our audit
knowledge:
-
the directors’ statement that
they consider that the annual report and financial statements taken
as a whole is fair, balanced and understandable, and provides the
information necessary for shareholders to assess the Company’s
position and performance, business model and
strategy;
-
the section of the annual
report describing the work of the Audit Committee, including the
significant issues that the audit committee considered in relation
to the financial statements, and how these issues were addressed;
and
-
the section of the annual
report that describes the review of the effectiveness of the
Company’s risk management and internal control
systems.
We
are required to review the part of Corporate Governance
Statement
relating to the
Company’s compliance with the provisions of the UK Corporate
Governance Code specified by the Listing Rules for our review. We
have nothing to report in this respect.
We have
nothing to report on other matters on which we are required to
report by exception
We
have nothing to report in respect of the following matters where
the Companies (Guernsey) Law, 2008 requires us to report to you if,
in our opinion:
-
the Company has not kept proper
accounting records; or
-
the financial statements are not in
agreement with the accounting records; or
-
we have not received all the
information and explanations, which to the best of our knowledge
and belief are necessary for the purpose of our
audit.
Respective
responsibilities
Directors'
responsibilities
As
explained more fully in their statement, the directors
are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error; 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.
Auditor's
responsibilities
Our
objectives are to obtain reasonable assurance about whether
the financial
statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue our opinion in an auditor’s
report. Reasonable assurance is a high level of assurance, but does
not guarantee that an audit conducted in accordance with ISAs (UK)
will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the
basis of the financial statements.
A
fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.
The purpose
of this report and restrictions on its use by persons other than
the Company's members as a body
This report is
made solely to the Company’s members, as a body, in accordance with
section 262 of the Companies (Guernsey) Law,
2008.
Our
audit work has been undertaken so that we might state to the
Company’s members
those matters we are required to state to them in an auditor’s
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 and
the Company’s members, as a body, for our audit work, for this
report, or for the opinions we have formed.
Deborah
SmithFor and on
behalf of KPMG Channel Islands LimitedChartered
Accountants and Recognised AuditorsGuernsey
27 March 2024
Audited
Statement of Assets and Liabilities
As
at 31 December 2023
|
|
31.12.23
US$'000
|
31.12.22
US$'000
|
|
Assets
|
|
|
|
Investment
in
the
Master
Fund
(note
3)
|
2,038,614
|
1,628,766
|
|
Master
Fund
redemption
proceeds
receivable
|
20,697
|
70,411
|
|
Prepaid
expenses
|
47
|
43
|
|
Cash
and
bank
balances
denominated
in
Sterling
|
18,367
|
7,271
|
|
Cash
and
bank
balances
denominated
in
US
Dollars
|
1,284
|
639
|
|
Total
assets
|
2,079,009
|
1,707,130
|
|
Liabilities
|
|
|
|
Performance
fees
payable
(note
4)
|
2
|
62,261
|
|
Management
fees
payable
(note
4)
|
2,771
|
4,224
|
|
Purchase
of
shares
into
treasury
payable
|
1,477
|
-
|
|
Accrued
expenses
and
other
liabilities
|
148
|
117
|
|
Directors'
fees
payable
|
-
|
14
|
|
Administration
fees
payable
(note
4)
|
80
|
66
|
|
Total
liabilities
|
4,478
|
66,682
|
|
Net
assets
|
2,074,531
|
1,640,448
|
|
Number
of
shares
in
issue
(note
5)
|
|
|
|
Sterling
shares
|
372,024,149
|
30,156,454*
|
|
US
Dollar
shares
|
29,856,472
|
2,858,135*
|
|
Net
asset
value
per
share
(notes
7
and
9)
|
|
|
|
Sterling
shares
|
£4.11
|
£41.81*
|
|
US
Dollar
shares
|
US$4.27
|
US$43.28*
|
See
accompanying
Notes
to the
Audited Financial Statements.
Signed on
behalf
of
the
Board
by:
Richard
Horlick
Chair
John
Le Poidevin
Director
27 March 2024
* The Number of Shares In Issue and Net Asset Value Per Share as of
31 December 2022 are not adjusted by
a factor of 10 to reflect the 10 for 1 share sub-division approved
at the EGM held on 6 February
2023.
Audited Statement of
Operations
For
the
year ended 31 December
2023
|
|
01.01.23
to
31.12.23
US$'000
|
01.01.22
to
31.12.22
US$'000
|
|
Net
investment
gain/(loss)
allocated
from
the
Master
Fund
|
|
|
|
Interest
income
|
99,983
|
14,309
|
|
Dividend
and
other
income
(net
of withholding
tax:
|
|
|
|
31
December
2023:
US$94,653;
31 December
2022:
US$127,840)
|
5,176
|
6,166
|
|
Expenses
|
(91,827)
|
(24,561)
|
|
Net
investment
gain/(loss)
allocated
from
the
Master
Fund
|
13,332
|
(4,086)
|
|
Company
income
|
|
|
|
Bank
interest
income
|
792
|
32
|
|
Foreign
exchange
gains
(note
3)
|
108,508
|
-
|
|
Total
Company income
|
109,300
|
32
|
|
Company
expenses
|
|
|
|
Performance
fees
(note
4)
|
2
|
63,844
|
|
Management
fees
(note
4)
|
29,579
|
23,776
|
|
Other
expenses
|
969
|
1,063
|
|
Directors'
fees
|
442
|
366
|
|
Administration
fees (note
4)
|
303
|
241
|
|
Foreign
exchange
losses
(note
3)
|
-
|
149,089
|
|
Total
Company expenses
|
31,295
|
238,379
|
|
Net
investment
gain/(loss)
|
91,337
|
(242,433)
|
|
Net
realised
and
unrealised
(loss)/gain
on
investments
allocated
from
the
Master
Fund
|
|
|
|
Net
realised
gain
on
investments
|
188,681
|
118,371
|
|
Net
unrealised
(loss)/gain
on
investments
|
(213,524)
|
236,140
|
|
Net
realised
and
unrealised
(loss)/gain
on
investments
allocated
from
the
Master
Fund
|
(24,843)
|
354,511
|
|
Net
increase
in
net
assets
resulting
from
operations
|
66,494
|
112,078
|
|
|
|
|
See
accompanying Notes to the Audited Financial
Statements.
Audited
Statement of
Changes in
Net
Assets
For
the
year ended 31 December
2023
|
|
01.01.23
to
31.12.23
US$'000
|
01.01.22
to
31.12.22
US$'000
|
|
Net
increase
in
net
assets
resulting
from
operations
|
|
|
|
Net
investment
gain/(loss)
|
91,337
|
(242,433)
|
|
Net
realised
gain
on
investments
allocated
from
the
Master
Fund
|
188,681
|
118,371
|
|
Net
unrealised
(loss)/gain
on
investments
allocated
from
the
Master
Fund
|
(213,524)
|
236,140
|
|
|
66,494
|
112,078
|
|
|
|
|
|
Issue
of
new
shares
|
|
|
|
Sterling
shares
|
379,021
|
218,027
|
|
US
Dollar
shares
|
3,336
|
12,615
|
|
|
|
|
|
Share
issue
costs
|
|
|
|
Sterling
shares
|
(7,761)
|
-
|
|
US
Dollar
shares
|
(67)
|
-
|
|
|
|
|
|
Purchase
of
shares
into
treasury
|
|
|
|
Sterling
shares
|
(6,940)
|
-
|
|
US
Dollar
shares
|
-
|
-
|
|
|
|
|
|
Total
share
capital
transactions
|
367,589
|
230,642
|
|
|
|
|
|
Net
increase in
net
assets
|
434,083
|
342,720
|
|
Net
assets
at
the
beginning
of
the
year
|
1,640,448
|
1,297,728
|
|
Net
assets
at
the
end
of
the
year
|
2,074,531
|
1,640,448
|
See
accompanying Notes to the Audited Financial
Statements.
Audited Statement of Cash Flows
For
the
year ended 31 December
2023
|
|
01.01.23
to
31.12.23
US$'000
|
01.01.22
to
31.12.22
US$'000
|
|
Cash
flows
from
operating
activities
|
|
|
|
Net
increase
in
net
assets
resulting
from
operations
|
66,494
|
112,078
|
|
Adjustments
to
reconcile
net
increase
in
net
assets
resulting
from
operations
to
net
cash
used
in
operating
activities:
|
|
|
|
Net
investment
(gain)/loss
allocated
from
the
Master
Fund
|
(13,332)
|
4,086
|
|
Net
realised
gain
on
investments
allocated
from
the
Master
Fund
|
(188,681)
|
(118,371)
|
|
Net
unrealised
loss/(gain)
on
investments
allocated
from
the
Master
Fund
|
213,524
|
(236,140)
|
|
Purchase
of
investment
in
the
Master
Fund
|
(365,214)
|
(221,798)
|
|
Proceeds
from
sale
of
investment
in
the
Master
Fund
|
101,862
|
11,008
|
|
Foreign
exchange
(gains)/losses
|
(108,508)
|
149,089
|
|
(Increase)/decrease
in
prepaid
expenses
|
(4)
|
251
|
|
(Decrease)/increase
in
performance
fees
payable
|
(62,259)
|
56,056
|
|
(Decrease)/increase
in
management
fees
payable
|
(1,453)
|
972
|
|
Decrease
in
accrued
expenses
and
other
liabilities
|
(68)
|
(137)
|
|
(Decrease)/increase
in
Directors'
fees
payable
|
(14)
|
14
|
|
Decrease
in
combination
fees
receivable
|
-
|
1,749
|
|
Increase
in
administration
fees
payable
|
14
|
15
|
|
Net
cash
used
in
operating
activities
|
(357,639)
|
(241,128)
|
|
Cash
flows
from
financing
activities
|
|
|
|
Purchase
of
own
shares
into
treasury
|
(5,463)
|
-
|
|
Proceeds
from
share
issue
|
382,357
|
230,642
|
|
Share
issue
costs
|
(7,828)
|
-
|
|
Net
cash
generated
from
financing
activities
|
369,066
|
230,642
|
|
|
|
|
|
Change
in
cash
|
11,427
|
(10,486)
|
|
Cash,
beginning
of
the
year
|
7,910
|
16,430
|
|
Effect
of
exchange
rate
fluctuations
|
314
|
1,966
|
|
Cash,
end
of
the
year
|
19,651
|
7,910
|
|
|
|
|
|
Cash,
end
of
the
year
|
|
|
|
Cash
and
bank
balances denominated
in
Sterling
1
|
18,367
|
7,271
|
|
Cash
and
bank
balances
denominated
in
US
Dollars
|
1,284
|
639
|
|
|
19,651
|
7,910
|
|
Supplemental
disclosure
of
non-cash
financing
activities
|
|
|
|
1. Cash
and
bank
balances
in
Sterling
(GBP'000)
|
14,408
|
6,045
|
|
|
|
|
See
accompanying Notes to the Audited Financial
Statements.
Notes
to
the
Audited
Financial
Statements
For
the
year
ended
31
December
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
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 Audited Financial Statements of
the Company
should
be
read in
conjunction
with the Audited
Financial Statements of the Master Fund which can be found on the
Company’s website, www.bhmacro.com.
At
the date of these Audited 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 Audited 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
Audited
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
Audited 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 remained 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,
including
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.
Certain
of
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. 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.
See
also
note
8
for
further
details
relating
to
redemptions
from
the
Master
Fund
for
discount
management
mechanisms.
3.
Significant
accounting
policies
These Audited
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
Audited
Financial
Statements
have
been
prepared
using
the
going concern
basis of accounting.
The
Board
continues
to
monitor
the
ongoing
impact
of
various
geopolitical
events,
including
elevated
levels
of
global
inflation, recessionary risks and the ongoing
conflicts in Ukraine and
the Middle East. The Board has concluded that
the biggest
threat
to
the
Company
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.
For
these
reasons,
the
Board is confident that these events have not impacted the going
concern assessment of the Company.
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
31
December
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 Audited Statement of Assets
and Liabilities.
|
|
Percentage
of
|
NAV
per
Share
|
Shares
held
in
the
Master
Fund
|
Investment
in
Master
Fund
|
Investment
in
Master
Fund
|
|
Master
Fund's capital
|
(Class
B)
|
(Class
B)
|
CCY
'000
|
US$'000
|
|
31
December
2023
|
|
|
|
|
|
|
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
|
|
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
|
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 Audited 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
the
Audited
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 Audited 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
Audited
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
Audited
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/losses in the
Audited 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
FundNet
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
has
been
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. Please
see note 2 for further
information.
During
the
year
ended
31
December
2023,
US$29,579,495 (year
ended
31
December
2022:
US$23,776,341) was
earned
by
the
Manager
as
net
Management
Fees.
At
31 December
2023,
US$2,770,618 (31 December 2022: US$4,224,444) 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
year
ended
31
December
2023,
US$2,326 (year ended 31
December 2022: US$63,843,904)
was earned by the Manager as performance fees. At 31 December 2023, US$2,340 (31 December
2022: US$62,261,207) 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 is 12
months. The Management Agreement was amended on 23 January 2023. 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: £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
year
ended
31
December
2023,
US$303,372
(year
ended
31
December
2022:
US$240,727)
was
earned
by
the
Administrator
as
administration
fees.
The amounts
outstanding are disclosed on the Audited Statement of Assets and
Liabilities.
5.
Share
capital
Issued
and
authorised
share
capital
The
Company
has
the
power
to
issue
an
unlimited
number
of
ordinary
shares
with
no-par
value
and
an
unlimited
number of shares with
a par value. Shares may be divided into at least two classes
denominated in Sterling and US Dollars. Further issues
of
shares
may
be
made
in
accordance
with
the
Articles
of
Incorporation
(the
“Articles”).
Shares
may
be
issued in differing
currency classes of ordinary
redeemable
shares
including C shares. The following tables show the movement in
ordinary shares.
For the
year
ended
31
December
2023
Sterling
shares
US
Dollar
shares
|
Number
of
ordinary
shares
|
|
|
In
issue
at
1
January
2023
|
|
30,156,454
|
2,858,135
|
|
Share
conversions
|
|
(717,994)
|
884,077
|
|
Net
issue
of
new
shares
from
Share
Sub-Division
|
|
271,711,966
|
25,367,860
|
|
Issue
of
new
shares
|
|
72,378,000
|
746,400
|
|
Purchase
of
shares
into
Treasury
|
|
(1,504,277)
|
-
|
|
In
issue
at
31
December
2023
|
|
372,024,149
|
29,856,472
|
|
Number
of
treasury
shares
|
|
|
|
|
In
issue
at
1
January
2023
|
|
-
|
-
|
|
On
market
purchases*
|
|
1,504,277
|
-
|
|
In
issue
at
31
December
2023
|
|
1,504,277
|
-
|
|
Percentage
of
class
|
|
0.40%
|
-
|
|
*On
market
purchases
for
the
year
ended
31
December
2023
|
|
|
|
|
|
Number
of
shares
|
Cost
|
Cost
|
|
Treasury
shares
|
purchased
|
(US$)
|
(in
currency)
|
|
US
Dollar
shares
|
-
|
-
|
-
|
|
Sterling
shares
|
1,504,277
|
6,939,943
|
£5,457,432
|
|
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
|
|
Number
of
treasury
shares
|
|
|
|
|
In
issue
at
1
January
2022
and
at
31
December
2022
|
|
-
|
-
|
|
Percentage
of
class
|
|
-
|
-
|
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.
At
the
Annual
General
Meeting
held
on
13
September
2023,
Shareholders
approved
a
Special Resolution
that
authorised
the
maximum
number
of
shares
that
may
be
purchased
on-market
by
the
Company
until the
next
Annual
General
Meeting,
being
56,024,199
Sterling
shares and
4,435,587
US
Dollar
shares.
See note
8
for further details.
Further
issue
of
shares
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
remained
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.
As
approved by the Shareholders at the Annual General Meeting held on
13 September 2023, the Directors have
the power to issue further shares totalling 124,568,816 Sterling
shares and 9,862,449 US Dollar
shares, respectively. This power is 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 is earlier, unless such power was varied, revoked or
renewed prior to that Meeting by a resolution of the Company in
general meeting.
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. During the year ended
31 December 2023, the Company
purchased 1,504,277 Sterling
Class
shares
to
be
held
in
Treasury.
No shares
were
held
in
Treasury
throughout
the
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 Audited Financial Statements. Income tax and related
interest and penalties would be recognised by the
Company
as
tax
expenses
in
the
Audited
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 2019 and
for
much
of
the
period
since
that
date, the
Company’s
shares
have
traded
at
a
premium
or
minimal
discount
to
NAV.
Subject
to
the
authority
granted
by
Shareholders at the
2023
AGM
(see
note
5),
from
December 2023, market
purchases
by the
Company of
the Sterling Class
shares resumed, due to the class trading at a discount.
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 Master Fund, in order to fund
buybacks.
Please
see
note
5
for
details
of
shares
purchased
and
held
in
Treasury.
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
remained
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
discounts
to
NAV
for
the
Sterling
shares
and
US
Dollar
Shares
for
the
year
ended
31
December
2023
were 3.27% and
2.46% respectively and consequently, no closure vote will be held
in 2024.
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
31 December 2023 and other performance
information derived from the Audited 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.
|
|
31.12.23
Sterling
shares
£
|
31.12.23
US
Dollar
shares
US$
|
|
Per
share
operating
performance
|
|
|
|
Net
asset
value
at
beginning
of
the
year1
|
4.18
|
4.33
|
|
Income
from
investment
operations
|
|
|
|
Net
investment
loss
2
|
(0.04)
|
(0.01)
|
|
Net
realised
and
unrealised
(loss)/gain
on
investment
|
(0.08)
|
0.01
|
|
Other
capital
items
3
|
0.05
|
(0.06)
|
|
Total
loss
|
(0.07)
|
(0.06)
|
|
Net
asset
value,
end
of
the
year
|
4.11
|
4.27
|
|
|
|
|
|
Total
loss
before
performance
fees
|
(1.81%)
|
(1.33%)
|
|
Performance
fees
|
-
|
-
|
|
Total loss
after
performance
fees
|
(1.81%
)
|
(1.33%
)
|
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
year
from
1
January
2023
to
31
December
2023.
An
individual
Shareholder’s
loss may vary
from these losses based on the timing of their purchase or sale of
shares.
|
|
31.12.23
Sterling
shares
£'000
|
31.12.23
US
Dollar
shares
US$'000
|
|
Supplemental
data
|
|
|
|
Net
asset
value,
end
of
the
year
|
1,527,458
|
127,482
|
|
Average
net
asset
value
for
the
year
|
1,485,598
|
122,970
|
|
|
31.12.23
Sterling
shares
|
31.12.23
US
Dollar
shares
|
|
Ratio
to
average
net
assets
|
|
|
|
Operating
expenses
|
|
|
|
Company
expenses
4
|
1.59%
|
1.57%
|
|
Master
Fund
expenses
5
|
1.41%
|
0.83%
|
|
Master
Fund
interest
expenses
6
|
3.28%
|
3.32%
|
|
Performance
fees
|
-
|
-
|
|
|
6.28%
|
5.73%
|
|
Net
investment
loss
before
performance
fees
2
|
(0.91%
)
|
(0.22%
)
|
|
Net
investment
loss
after
performance
fees
2
|
(0.91%
)
|
(0.22%
)
|
|
|
31.12.22
Sterling
shares
£
|
31.12.22
US
Dollar
shares
US$
|
|
Per
share
operating
performance
|
|
|
|
Net
asset
value
at
beginning
of
the
year1
|
34.30
|
35.71
|
|
Income
from
investment
operations
|
|
|
|
Net
investment
loss
2
|
(2.44)
|
(2.50)
|
|
Net
realised
and
unrealised
gain
on
investment
|
8.87
|
9.22
|
|
Other
capital
items
3
|
1.08
|
0.85
|
|
Total
gain
|
7.51
|
7.57
|
|
Net
asset
value,
end
of
the
year1
|
41.81
|
43.28
|
|
|
|
|
|
Total
gain
before
performance
fees
|
26.78%
|
25.93%
|
|
Performance
fees
|
(4.87%)
|
(4.76%)
|
|
Total
gain
after
performance
fees
|
21.91%
|
21.17%
|
Total
gain
reflects
the
net
return
for
an
investment
made
at
the
beginning
of
the
year
and
is
calculated
as
the
change
in
the NAV per
ordinary share during
the
year
from
1
January 2022 to
31 December 2022. An
individual Shareholder’s
return may vary from these returns based on the timing of their
purchase or sale of shares.
|
|
31.12.22
Sterling
shares
£'000
|
31.12.22
US
Dollar
shares
US$'000
|
|
Supplemental
data
|
|
|
|
Net
asset
value,
end
of
the
year
|
1,260,923
|
123,686
|
|
Average
net
asset
value
for
the
year
|
1,132,773
|
110,421
|
|
|
31.12.22
Sterling
shares
|
31.12.22
US
Dollar
shares
|
|
Ratio
to
average
net
assets
|
|
|
|
Operating
expenses
|
|
|
|
Company
expenses
4
|
1.68%
|
1.74%
|
|
Master
Fund
expenses
5
|
0.41%
|
0.41%
|
|
Master
Fund
interest
expenses
6
|
1.22%
|
1.18%
|
|
Performance
fees
|
4.23%
|
4.20%
|
|
|
7.54%
|
7.53%
|
|
Net
investment
loss
before
performance
fees
2
|
(1.95%
)
|
(1.98%
)
|
|
Net
investment
loss
after
performance
fees
2
|
(6.18%
)
|
(6.18%
)
|
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
6 February 2023, with dealings
commencing 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
do
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 as
compared to the NAV per share at the beginning of the
year.
4 Company
expenses
are
as
disclosed
in
the
Audited
Statement
of
Operations
excluding
the
performance
fee
and
foreign
exchange gains/losses.
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:
|
|
|
Role
|
Fee per annum
£
|
|
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
annual
aggregate
limit
of
fees
payable
to
Directors
is £800,000
per
annum.
|
|
During the 10:1
share sub-division, which was approved at the EGM held on
6 February 2023, with dealings
commencing 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
(23,174 shares);
John
Le
Poidevin,
£90,000
of
Sterling
shares
(20,800
shares);
and
Claire Whittet, £35,000 of Sterling shares
(8,111 shares).
At
year
end
31
December
2023
the
Directors
had
the
following
interests
in
the
Company,
held
either
directly
or
beneficially:
|
|
Sterling
Shares
|
|
|
|
31.12.23
|
31.12.22
|
|
Richard
Horlick
|
|
200,000
|
20,000
|
|
Caroline
Chan
|
|
11,587
|
Nil
|
|
Julia
Chapman
|
|
6,260
|
626
|
|
Bronwyn
Curtis
|
|
33,174
|
1,000
|
|
John
Le Poidevin
|
|
75,620
|
5,482
|
|
Claire
Whittet1
|
|
N/A
|
1,500
|
|
|
|
|
|
US
Dollar Shares
|
|
|
|
31.12.23
|
31.12.22
|
|
Richard
Horlick
|
|
20,000
|
Nil
|
|
Caroline
Chan
|
|
Nil
|
Nil
|
|
Julia
Chapman
|
|
Nil
|
Nil
|
|
Bronwyn
Curtis
|
|
Nil
|
Nil
|
|
John
Le Poidevin
|
|
Nil
|
Nil
|
|
Claire
Whittet1
|
|
N/A
|
Nil
|
|
|
|
|
|
11.
Subsequent events
On
3 January 2024, the Company completed
the share conversion for the 30 November
2023 share conversion date, issuing 1,481 Sterling shares
and cancelling 1,800 US Dollar
shares.
On
8
January
2024
John
Le
Poidevin
purchased
41,230
Sterling
shares
at
a
price of
£3.63
per
ordinary
share.
On
1 February
2024, the
Company completed the share conversion for
the 31
December 2023
share
conversion date, issuing
74,953 Sterling shares and cancelling 91,760
US Dollar shares.
On
4
March
2024,
the
Company
completed
the
share
conversion
for
the
31
January
2024
share
conversion
date,
issuing 2,679
Sterling shares and cancelling 3,274 US
Dollar shares.
The
Company
made
the
following
purchases
of
ordinary
shares
to
be
held
in
Treasury:
|
|
Sterling
Class shares
|
|
|
|
|
|
|
Month
|
Number of
shares bought
|
Highest
Price point
|
Lowest
Price point
|
|
|
|
£
|
£
|
|
January
2024
|
4,322,827
|
3.68
|
3.54
|
|
February
2024
|
3,390,937
|
3.64
|
3.48
|
|
March
2024*
|
2,143,363
|
3.50
|
3.30
|
|
Total
|
9,857,127
|
|
|
*Until
21 March 2024.
There
were
no
purchases
of
US
Dollar Class
ordinary
shares after
year
end.
The
Directors have evaluated subsequent events up to 27 March 2024, which is the date that the Audited
Financial Statements were approved and available to be issued and
have concluded there are no further items that require disclosure
or adjustment to the Audited Financial Statements.
Historic
Performance
Summary
As
at
31
December
2023
|
|
31.12.23
US$'000
|
31.12.22
US$'000
|
31.12.21
US$'000
|
31.12.20
US$'000
|
31.12.19
US$'000
|
|
Net
increase in net assets
resulting
from
operations
|
66,494
|
112,078
|
12,010
|
181,533
|
59,462
|
|
Total
assets
|
2,079,009
|
1,707,130
|
1,307,490
|
802,224
|
570,779
|
|
Total
liabilities
|
(4,478)
|
(66,682)
|
(9,762)
|
(41,055)
|
(11,014)
|
|
Net
assets
|
2,074,531
|
1,640,448
|
1,297,728
|
761,169
|
559,765
|
|
Number
of shares
in
issue
|
|
|
|
|
|
|
Sterling
shares
|
372,024,149
|
30,156,454*
|
25,864,663*
|
15,009,868*
|
14,310,040*
|
|
US
Dollar
shares
|
29,856,472
|
2,858,135*
|
2,689,547*
|
2,191,379*
|
2,442,057*
|
|
Net
asset
value
per
share
|
|
|
|
|
|
|
Sterling
shares
|
£4.11
|
£41.81*
|
£34.30*
|
£33.38*
|
£26.06*
|
|
US
Dollar
shares
|
US$4.27
|
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
31
December
2023
are
not
adjusted
by
a
factor
of
10
to
reflect
the
10
for
1
share
sub-division
approved
at
the
EGM
held
on
6
February
2023.
Affirmation
of
the
Commodity
Pool
Operator
As
at
31
December
2023
To
the
best
of
my
knowledge
and
belief,
the
information
detailed
in
this
Annual
Report
and
these
Audited
Financial
Statements is accurate and complete.
Name:
Jonathan
Hughes
Title:
Director
and
Authorised
Signatory
Brevan
Howard
Capital
Management
Limited
as
general
partner
of
Brevan
Howard
Capital
Management
LP,
the
manager and commodity pool operator of BH Macro Limited
27 March 2024
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
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 12 month-end NAV Calculation
Dates
in
the
year
ended
31
December
2023
calculated
as
the
sum
of
the
final
NAV
of
the
share
class
as
at
each month-end NAV Calculation Date during the year ended
31 December 2023, divided by
12.
(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
|
|
31.12.23
|
31.12.22
|
31.12.23
|
31.12.22
|
|
Share
Price
at
Year
End
(A)
|
£3.67
|
£44.90*
|
US$3.77
|
US$45.20*
|
|
NAV
per
Share
(B)
|
£4.11
|
£41.81*
|
US$4.27
|
US$43.28*
|
|
(Discount)/Premium
to
NAV
(A-B)/B
|
(10.71%)
|
7.39%
|
(11.71%)
|
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 approved at the EGM held on
6 February 2023.
(Loss)/Gain
Per
Share
(Loss)/gain per
share is calculated using the net loss/gain on ordinary activities
after tax, divided by the weighted average number of shares in
issue (year ended 31 December 2023:
353,094,861 Sterling shares and 28,097,148
US Dollar shares,
year
ended
31
December
2022:
28,620,989
Sterling
shares
and
2,722,649
US
Dollar
shares).
The
10
for
1 share
sub-division
approved
at
the
EGM
held
on
6
February
2023
has
been
applied
throughout
the
year
for
the
2023 weighted
average share figures, but not for the 2022 weighted average share
figures.
The
Directors
also
regard
(loss)/gain
per
share
to
be
a
key
indicator
of
performance.
The
(loss)/gain
per
share
is
shown in the
Strategic Report.
|
|
Year
ended
31.12.23
Per
share
|
'000
|
Year
ended
31.12.22
Per
share
|
'000
|
|
Net
total
(loss)/gain
for
Sterling
Shares
|
(9.21p)
|
(£32,535)
|
683.74p
|
£195,693
|
|
Net
total
(loss)/gain
for
US
Dollar
Shares
|
(5.48c)
|
(US$1,540)
|
708.91c
|
US$19,301
|
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. 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:
|
|
Sterling
Shares
|
US Dollar Shares
|
|
|
Year
ended
|
Year
ended
|
Year
ended
|
Year
ended
|
|
31.12.23
|
31.12.22
|
31.12.23
|
31.12.22
|
|
Average
NAV
for
the
year
(A)
|
£1,485,598,348
|
£1,132,773,154
|
US$122,970,362
|
US$110,421,043
|
|
Management
Fee
|
£22,297,675
|
£17,787,437
|
US$1,846,781
|
US$1,792,074
|
|
Other
Company
expenses
|
£1,309,986
|
£1,248,572
|
US$84,979
|
US$127,701
|
|
Total
Company
Expenses
|
£23,607,661
|
£19,036,009
|
US$1,931,760
|
US$1,919,775
|
|
Expenses
allocated
from
the
Master
Fund
|
£8,445,240
|
£2,325,281
|
US$703,225
|
US$238,666
|
|
Performance
Fee
|
£471
|
£47,900,303
|
US$1,740
|
US$4,641,933
|
|
Total
Expenses
(B)
|
£32,053,372
|
£69,261,593
|
US$2,636,725
|
US$6,800,374
|
|
Ongoing
Charges
(B/A)
|
2.16%
|
6.11%
|
2.14%
|
6.16%
|
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.
(Loss)/gain
per
share
(Loss)/gain per
share is calculated using the net loss/gain on ordinary activities
after finance costs and taxation (year ended 31 December 2023: a loss of £32,535,028 and a
loss of US$1,540,012; year ended
31 December 2022: a gain of
£195,693,403
and
a
gain
of
US$19,301,255), divided
by
the
weighted
average
number
of
shares
in
issue
(year
ended
31 December 2023: 353,094,861
Sterling shares and 28,097,148 US
Dollar shares; year ended 31 December
2022: 28,620,989 Sterling shares and 2,722,649 US Dollar shares). The Directors also
regard (loss)/gain per share to be a key indicator of performance.
The (loss)/gain per share is shown in the Strategic
Report.
The
10 for 1 share sub-division approved at the EGM held on
6 February 2023 has been applied
throughout the year for the 2023 weighted average share figures,
but not for the 2022 weighted average share figures.
Company
Information
Directors
Richard
Horlick
(Chair)
Caroline Chan
Julia Chapman
Bronwyn Curtis
John
Le
Poidevin
Claire
Whittet
(retired
from
the
Board
on
13
September
2023)
(All
Directors
are
non-executive
and
independent
for
the
purpose
of
Listing
Rule
15.2.12-A)
Registered
Office
PO
Box
255
Trafalgar
Court
Les
Banques
St
Peter
Port
Guernsey
Channel
Islands
GY1
3QL
Manager
Brevan
Howard
Capital
Management
LP
6th
Floor
37
Esplanade
St
Helier
Jersey
Channel
Islands
JE2
3QA
Administrator
and Corporate Secretary
Northern Trust
International Fund
Administration
Services (Guernsey)
Limited
PO
Box 255
Trafalgar
Court
Les
Banques
St
Peter
Port
Guernsey
Channel
Islands
GY1
3QL
Independent
Auditor
KPMG
Channel
Islands
Limited
Glategny
Court
Glategny
Esplanade
St
Peter Port
Guernsey
Channel
Islands
GY1
1WR
Registrar
and CREST Service Provider
Computershare
Investor
Services
(Guernsey)
Limited
1st
Floor
Tudor
House
Le
Bordage
St
Peter
Port
Guernsey
GY1
1DB
Legal
Advisor
(Guernsey
Law)
Carey
Olsen
Carey
House
Les
Banques
St
Peter
Port
Guernsey
Channel
Islands
GY1
4BZ
Legal
Advisor (UK Law)
Hogan
Lovells
International
LLP
Atlantic
House
Holborn
Viaduct
London
EC1A
2FG
Corporate
Broker
JPMorgan
Cazenove
25
Bank Street
Canary
Wharf
London E14 5JP
Tax
Adviser
Deloitte
LLP
PO
Box 137
Regency
Court
Glategny
Esplanade
St
Peter Port
Guernsey
Channel
Islands
GY1
3HW
For
the
latest
information
www.bhmacro.com