BH Macro Limited - Annual Report and Audited Financial Statements 2023
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
Chair’s Statement
In the interim report, I stated that 2023 had been a rollercoaster year to date for
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
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
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
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
On the political front,
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
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
Caroline Chan
Julia Chapman
Bronwyn Curtis
Bronwyn
Curtis
is
a
John Le
Poidevin
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
Disclosure of Directorships in Public Companies Listed on Recognised Stock Exchanges
The following summarises the Directors’ current directorships in other public companies:
Exchange RichardHorlick Riverstone Energy LimitedLondon VH Global Sustainable Energy Opportunities Plc London CarolineChan NextEnergy Solar Fund Limited*London JuliaChapman GCP Infrastructure Investments LimitedLondon Henderson Far East Income LimitedLondon The International Stock Exchange Group Limited The International Stock Exchange BronwynCurtis Pershing Square Holdings LimitedLondon and Euronext Amsterdam Scottish American Investment Company PlcLondon TwentyFour Income Fund LimitedLondon John LePoidevin International Public Partnerships LimitedLondon Super Group (SGHC) LimitedNew York TwentyFour Income Fund LimitedLondon
* 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
Sources of Cash and Liquidity Requirements
As the
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”) andComputershare 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 theUK Listing Authority or theGuernsey 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 inUkraine and theMiddle East have led to greater economic uncertainty, variability and volatility. Whilst theMaster Fund has no material direct exposure toRussia ,Ukraine orBelarus , the Board has also made enquiries of key service providers in respect of any impact from Russia’s invasion ofUkraine 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 underlyingMaster 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
Name GenderIdentity Ethnicity Richard Horlick Male White British Caroline Chan Female White Asian British Julia Chapman Female White British Bronwyn Curtis Female White European John Le Poidevin Male White British
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
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
The Administrator is a wholly-owned indirect subsidiary of Northern Trust Corporation, which has adopted the
POSITION AND PERFORMANCE
Packaged Retail and Insurance Based Investment Products (“PRIIPs”)
From
The Manager is the PRIIPs manufacturer for each KID and the Company is not responsible for the information contained in each KID. The process for calculating the risks, cost and potential returns is prescribed by regulation. The figures in the KID, relating to the relevant share class, may not reflect the expected returns for that share class of the Company and anticipated returns cannot be guaranteed.
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
1. NAV
The
Company’s
NAV
per share
has
appreciated
from
£1.00*
per
Sterling
share
and
*
The launch price is adjusted by
a factor of 10 to reflect the 10
for 1
share
sub-division, which occurred on 7
1. 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
1. 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
These calculations are based on the weighted average number of shares in issue for the year ended
Yearended31.12.23 Yearended31.12.22 '000 '000 Pershare Pershare Net total (loss)/gain (9.21p) (£32,535) 683.74p £195,693 for Sterling Shares Net total (loss)/gain (5.48c) (US$1,540 ) 708.91cUS$19,301 for US Dollar Shares
NAV
The NAV per Sterling share, as at
The NAV per US Dollar share, as at
* The NAV per share as of
Dividends
No dividends were paid during the year (2022: US$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
The Directors have assessed the viability of the Company over the three-year period to
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
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
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
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
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
Signed on behalf of the Board by:
Richard Horlick Chair
John Le Poidevin Director
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
The Company
BH
Macro
Limited
is
a
limited
liability
closed-ended
investment
company
which
was
incorporated
in
Guernsey
on
The Company’s ordinary shares are issued in Sterling and US Dollars.
Investment Objective and Policy
The
Company
is
organised
as
a
feeder
fund
that
invests
all
of
its
assets
(net
of
short-term
working
capital
requirements) directly in the
The Company may employ leverage for the purposes of financing share purchases or buy-backs, satisfying working capital
requirements
or
financing further
investment
into
the
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
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
On
On
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
In
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
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.
ScheduledBoardMeetings 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 AuditCommitteeMeetings Held Attended John Le Poidevin 4 4 Caroline Chan 4 4 Julia Chapman 4 4 Bronwyn Curtis 4 4 Claire Whittet* 3 3 RemunerationandNominationCommitteeMeetings 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 ManagementEngagementCommitteeMeetings 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
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
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:
SterlingShares 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 DollarShares 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.
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;
John Le Poidevin, 5,482 Sterling shares cancelled, 54,820 Sterling shares issued; and
On 13 February 2023, the Board participated in the Initial Issue for the following amounts:
Curtis, £100,000 of Sterling shares (23,174 shares);
John Le Poidevin, £90,000 of Sterling shares (20,800 shares); and
Directors’ Indemnity
Directors’ and Officers’ liability insurance cover is in place in respect of the Directors.
The Directors entered into indemnity agreements with the Company which provide, subject to the provisions of the Companies (Guernsey) Law, 2008, for an indemnity for Directors in respect of costs which they may incur relating to the defence of proceedings brought against them arising out of their positions as Directors, in which they are acquitted, or judgement is given in their favour by the Court. The agreement does not provide for any indemnification for liability which attaches to the Directors in connection with any negligence, unfavourable judgements and breach of duty or trust in relation to the Company.
Corporate Governance
To comply with the
The
Company
is
a
member
of
the
AIC
and
by
complying
with
the
AIC
Code
it
is
deemed
to
comply
with
both
the
To ensure ongoing compliance with the principles and the recommendations of the AIC Code, the Board receives and reviews a report from the Corporate Secretary, at each quarterly meeting, identifying whether the Company is in compliance and recommending any changes that are necessary.
The Company has complied
with the requirements of the
AIC Code and
the relevant provisions
of the
The
-- the role of the chief executive; -- executive directors’ remuneration; -- the need for an internal audit function; and -- a whistle-blowing policy.
For
the
reasons
explained
in
the
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
The Senior Independent Director takes the lead in evaluating the performance of the Chair. Prior to her retirement from the Board on
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
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
The following table presents the Ongoing Charges for each share class of the Company for the years ended
31.12.23 Sterling USDollar 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 USDollar 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
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
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
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
Remuneration and Nomination Committee
The Board established a
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
The Common Reporting Standard (“CRS”) is a global standard for the automatic exchange of financial account information developed by the
Relations with Shareholders
The Board welcomes Shareholders’ views and places great importance on communication with the Company’s Shareholders. The Board receives regular reports on the views of Shareholders and the Chair and other Directors are available
to
meet
Shareholders,
with
a
number
of
such
meetings
taking
place
during
the
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
The Manager maintains regular dialogue with institutional Shareholders, the feedback from which is reported to the Board. Shareholders who wish to communicate with the Board should contact the Administrator in the first instance.
Having reviewed the Financial Conduct Authority’s restrictions on the retail distribution of non-mainstream pooled investments, the Company, after taking legal advice, announced on
In accordance with the AIC Code, when 20 per cent or more of Shareholder votes have been cast against a Board recommendation for a resolution, the Company should explain, when announcing voting results, what actions it intends to take to consult Shareholders in order to understand the reasons behind the result. An update on the views received from Shareholders and actions taken should be published no later than six months after the Shareholder meeting. The Board should then provide a final summary in the Annual Report and, if applicable, in the explanatory notes to resolutions at the next Shareholders’ meeting, on what impact the feedback has had on the decisions the Board has taken and any actions or resolutions now proposed. During the year, no resolution recommended by the Board received 20 per cent or more votes against it.
Significant Shareholders
As
at
% holding in class Significant ShareholdersSterling 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 SharesHero 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
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 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
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
Remuneration policy
A
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
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
The annual Directors’ fees from 1 July 2022 have been:
Fee per annum Role £ Board Chair 90,000 Audit Committee Chair 65,000 Management Engagement Committee Chair 55,000 Remuneration and Nomination Committee Chair 55,000 Senior Independent Director 55,000 All other Directors 50,000
The annual aggregate limit of fees payable to Directors is £800,000 per annum.
The
fees
payable
by
the
Company
in
respect
of
each
of the
Directors
who
served
during
the
year
ended
31
Year Year ended 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.
**
Caroline Chan
Remuneration and Nomination Committee Chair
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
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.
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
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
-- 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.
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
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
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
Year Year ended 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
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
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
Manager’s Report
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
(
The Company’s NAV per Share % Monthly Change is calculated by BHCM.
The
Company’s
NAV
data
is
unaudited
and
net
of
all
investment
management
and
performance
fees
and
all
other
fees
and
expenses payable
by
the
Company. In addition, the Company’s investment in the
NAV performance is provided for information purposes only. Shares in the Company do not necessarily trade at a price equal to the prevailing NAV per Share.
Data as at 29 December 2023.
PAST
PERFORMANCE
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 DigitalAssets DiscountManagement TOTAL Q12023 (1.37) (0.71) (0.22) 0.14 (1.25) 0.19 0.04 (3.19) Q22023 (1.37) (0.54) (0.34) (0.07) (0.11) (0.14) 0.00 (2.55) Q32023 2.25 0.03 0.07 (0.07) 0.20 (0.14) 0.00 2.36 Q42023 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
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
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.
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
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,
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.
Independent Auditor’s Report to the Members of BH Macro Limited
Our opinion is unmodified
We have audited
the financial statements
of
In our opinion, the accompanying financial statements:
-- give a true and fair view of the financial position of the Company as at31 December 2023 , and of the Company’s financial performance and cash flows for the year then ended; -- are prepared in accordance withU.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 (
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 Our audit procedures included, but were not limited to: Obtained an independent confirmation from the Basis: administrator of the Master Fund detailing the The Company, which is a net asset value per share multi-class feeder fund, for both the US Dollar and had invested 98.27% (2022: Sterling Class B shares 99.29%) of its net assets and reconciled these to at 31 December 2023 into the net asset values used the ordinary US Dollar and in the valuation of the Sterling denominated Class investment in the Master B Shares issued by the Fund; Valuation of Investment inMaster Fund , which is an Brevan Howard Master Fund open-ended investment Assessed the audit work Limited (the “Master company. performed by the auditor Fund”) of the Master Fund by The Company’s investment gaining insight over the$2,038,614,000 holdings in the Master work performed on the Fund are valued using the significant elements of (2022:$1,628,766,000 ) respective net asset value the Master Fund’s net per share class as asset value and by holding Refer to the Report of the provided by the Master discussions on key audit Audit Committee and note 3 Fund’s independent findings with the auditor accounting policy administrator. of the Master Fund; and Risk: Examined the Master Fund’s coterminous audited The valuation of the financial statements to Company’s investment in corroborate the net asset the Master Fund, given value per share of both that it represents the the US Dollar and Sterling majority of the net assets Class B shares. of the Company, is a significant area of our We also considered the audit. 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
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
We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding
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
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 (
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 Smith
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
Audited Statement of Assets and Liabilities
As at
31.12.23 31.12.22 US$'000 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 inUS Dollars 1,284 639 Totalassets 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 Totalliabilities 4,478 66,682 Netassets 2,074,531 1,640,448 Numberofsharesinissue(note5) Sterling shares 372,024,149 30,156,454* US Dollar shares 29,856,472 2,858,135* Netassetvaluepershare(notes7and9) Sterling shares £4.11 £41.81* US Dollar sharesUS$4.27 US$43.28 *
See accompanying Notes to the Audited Financial Statements .
Signed on behalf of the Board by:
Richard Horlick
Chair
John Le Poidevin
Director
* The Number of Shares In Issue and Net Asset Value Per Share as of
Audited Statement of Operations
For
the
year ended
01.01.23 01.01.22 to31.12.23US$'000 to31.12.22US$'000 Netinvestmentgain/(loss)allocatedfromtheMasterFund Interest income 99,983 14,309 Dividend and other income (net of withholding tax: 31 December 2023:US$94,653 ; 31 December 2022: 5,176 6,166US$127,840 ) Expenses (91,827) (24,561) Netinvestmentgain/(loss)allocatedfromtheMasterFund 13,332 (4,086) Companyincome Bank interest income 792 32 Foreign exchange gains (note 3) 108,508 - TotalCompany income 109,300 32 Companyexpenses Performance fees (note 4) 2 63,844 Management fees (note 4) 29,579 23,776 Other expenses 969 1,063 Directors' fees 442 366 Administration fees (note 4) 303 241 Foreign exchange losses (note 3) - 149,089 TotalCompany expenses 31,295 238,379 Netinvestmentgain/(loss) 91,337 (242,433) Netrealisedandunrealised (loss)/gainoninvestmentsallocatedfromtheMasterFund Net realised gain on investments 188,681 118,371 Net unrealised (loss)/gain on investments (213,524) 236,140 Netrealisedandunrealised (24,843) 354,511 (loss)/gainoninvestmentsallocatedfromtheMasterFund Netincreaseinnetassetsresultingfromoperations 66,494 112,078
See accompanying Notes to the Audited Financial Statements.
Audited Statement of Changes in Net Assets
For
the
year ended
01.01.23 01.01.22 to31.12.23US$'000 to31.12.22US$'000 Netincreaseinnetassetsresultingfromoperations Net investment gain/(loss) 91,337 (242,433) Net realised gain on investments allocated 188,681 118,371 from theMaster Fund Net unrealised (loss)/gain on investments (213,524) 236,140 allocated from theMaster Fund 66,494 112,078 Issueofnewshares Sterling shares 379,021218,027 US Dollar shares 3,336 12,615 Shareissuecosts Sterling shares (7,761) - US Dollar shares (67) - Purchaseofsharesintotreasury Sterling shares (6,940) - US Dollar shares - - Totalsharecapitaltransactions 367,589 230,642 Net increaseinnetassets 434,083 342,720 Netassetsatthebeginningoftheyear 1,640,448 1,297,728 Netassetsattheendoftheyear 2,074,531 1,640,448
See accompanying Notes to the Audited Financial Statements.
Audited Statement of Cash Flows
For
the
year ended
01.01.23 01.01.22 to31.12.23US$'000 to31.12.22US$'000 Cashflowsfromoperatingactivities Net increase in net assets resulting from 66,494 112,078 operations 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 (13,332) 4,086 Master Fund Net realised gain on investments allocated from the (188,681) (118,371) Master Fund Net unrealised loss/(gain) on investments allocated 213,524 (236,140) from theMaster Fund 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 Netcashusedinoperatingactivities (357,639) (241,128) Cashflowsfromfinancingactivities Purchase of own shares into treasury (5,463) - Proceeds from share issue 382,357 230,642 Share issue costs (7,828) - Netcashgeneratedfromfinancingactivities 369,066 230,642 Changeincash 11,427 (10,486) Cash,beginningoftheyear 7,910 16,430 Effect of exchange rate fluctuations 314 1,966 Cash,endoftheyear 19,651 7,910 Cash,endoftheyear Cash and bank balances denominated in Sterling 1 18,367 7,271 Cash and bank balances denominated inUS Dollars 1,284 639 19,651 7,910 Supplementaldisclosureofnon-cashfinancingactivities 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 Statement s
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
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
As such, the Audited Financial
Statements of the
Company
should
be
read in
conjunction with
the Audited Financial Statements of the
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
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
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
On
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
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
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
The Company is an investment company which has applied the provisions of Accounting Standards Codification (“ASC”) 946.
The following are the significant accounting policies adopted by the Company:
Valuation of investments
The Company records its investment in the
Sharesheldin Investmentin Investmentin Percentageof NAVperShare theMasterFund MasterFund MasterFund MasterFund's (ClassB) (ClassB) CCY'000 US$ '000 capital 31December2023 Sterling 15.58% £6,614.07 226,847 £1,500,3861,912,542 US Dollar 1.03%US$6,620.65 19,041US$126,072 126,072 2,038,614 31December2022 Sterling 15.03% £6,634.79 188,704 £1,252,0141,506,049 US Dollar 1.22%US$6,606.92 18,573US$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
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
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 Fund
Net realised and unrealised gains/losses of the Master Fund are allocated to the Company’s share classes based upon the percentage ownership of the equivalent Master Fund class.
Treasury
shares
Where the Company has purchased its own share capital, the consideration paid, which includes any directly attributable costs, has been recognised as a deduction from equity Shareholders’ funds through the Company’s reserves.
Where such shares have been subsequently sold or reissued to the market, any consideration received, net of any directly attributable incremental transaction costs, is recognised as an increase in equity Shareholders’ funds through the share capital account. Where the Company cancels treasury shares, no further adjustment is required to the share capital account of the Company at the time of cancellation. Shares held in treasury are excluded from calculations when determining NAV per share as detailed in note 7 and in the ‘Financial highlights’ in note 9.
Refer to note 8 for details of sales of shares from treasury or purchases by the Company of its share capital.
4. Management Agreement and administration agreement
Management fee and performance fee
The Company has entered into the Management Agreement with the Manager to manage the Company’s investment
portfolio. The Management Fee charged to the Company is reduced by the Company’s share of management fees incurred by the
During
the
year
ended
31
December
2023,
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,
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
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
Numberofordinaryshares Inissueat1January2023 30,156,454 2,858,135 Share conversions (717,994) 884,077 Net issue of new shares from Share 271,711,966 25,367,860 Sub-Division Issue of new shares 72,378,000 746,400 Purchase of shares into Treasury (1,504,277) - Inissueat31December2023 372,024,149 29,856,472 Numberoftreasuryshares Inissueat1January2023 - - On market purchases* 1,504,277 - Inissueat31December2023 1,504,277 - Percentageofclass 0.40% - *On market purchases for the year ended 31 December 2023 Numberof Cost Cost shares Treasuryshares purchased (US$) (incurrency) US Dollar shares - - - Sterling shares 1,504,277 6,939,943 £5,457,432 Fortheyearended31December2022 Sterlingshares USDollarshares Numberofordinaryshares Inissueat1January2022 25,864,663 2,689,547 Share conversions 90,641 (110,772) Issue of new shares 4,201,150 279,360 Inissueat31December2022 30,156,454 2,858,135 Numberoftreasuryshares Inissueat1January2022andat31December2022 - - Percentageofclass - -
Share
classes
In
respect
of
each
class
of
shares,
a
separate
class
account
has
been
established
in
the
books
of
the
Company.
An
amount
equal
to
the
aggregate
proceeds
of
issue
of
each
share
class
has
been
credited
to
the
relevant
class
account.
Any
increase or decrease in the NAV of the Master Fund US Dollar shares and
Voting rights of shares
Ordinary shares carry the right to vote at general meetings of the Company and to receive any dividends attributable to the ordinary shares as a class declared by the Company and, in a winding-up will be entitled to receive, by way of capital, any surplus assets of the Company attributable to the ordinary shares as a class in proportion to their holdings remaining after settlement of any outstanding liabilities of the Company.
As prescribed in the Company’s Articles, the different classes of ordinary shares have different values attributable to their votes. The attributed values have been calculated on the basis of the Weighted Voting Calculation (as described in the Articles) which takes into account the prevailing exchange rates on the date of initial issue of ordinary shares. On a vote, a single US Dollar ordinary share has 0.7606 votes and a single Sterling ordinary share has 1.4710 votes.
Repurchase of ordinary shares
Under the Company’s Articles, Shareholders of a class of shares have the ability to call for repurchase of that class of shares in certain circumstances. At the Annual General Meeting held on 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
Further, the Company will first apply any such income in payment of its Management Fee and performance fees.
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
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
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
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 31.12.23 Sterlingshares USDollarshares £ US$ Pershareoperatingperformance Netassetvalueatbeginningoftheyear1 4.18 4.33 Incomefrominvestmentoperations Net investment loss 2 (0.04) (0.01) Net realised and unrealised (loss)/gain on (0.08) 0.01 investment Other capital items 3 0.05 (0.06) Totalloss (0.07) (0.06) Netassetvalue,endoftheyear 4.11 4.27 Total loss before performance fees (1.81%) (1.33%) Performance fees - - Total lossafterperformancefees (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 31.12.23 Sterlingshares USDollarshares £'000 US$'000 Supplementaldata Netassetvalue,endoftheyear 1,527,458 127,482 Averagenetassetvaluefortheyear 1,485,598 122,970 31.12.23 31.12.23 Sterlingshares USDollarshares Ratiotoaveragenetassets Operating expenses Company expenses 4 1.59% 1.57% Master Fund expenses 5 1.41% 0.83% Master Fund interest expenses 6 3.28% 3.32% Performance fees - - 6.28% 5.73% Netinvestmentlossbeforeperformancefees2 (0.91%) (0.22%) Netinvestmentlossafterperformancefees2 (0.91%) (0.22%)
31.12.22 31.12.22 Sterlingshares USDollarshares £ US$ Pershareoperatingperformance Netassetvalueatbeginningoftheyear1 34.30 35.71 Incomefrominvestmentoperations 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 Totalgain 7.51 7.57 Netassetvalue,endoftheyear1 41.81 43.28 Total gain before performance fees 26.78% 25.93% Performance fees (4.87%) (4.76%) Totalgainafterperformancefees 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 31.12.22 Sterlingshares USDollarshares £'000 US$'000 Supplementaldata Netassetvalue,endoftheyear 1,260,923 123,686 Averagenetassetvaluefortheyear 1,132,773 110,421 31.12.22 31.12.22 Sterlingshares USDollarshares Ratiotoaveragenetassets 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% Netinvestmentlossbeforeperformancefees2 (1.95%) (1.98%) Netinvestmentlossafterperformancefees2 (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: Fee per annum Role £ Board Chair 90,000 Audit Committee Chair 65,000 Management Engagement Committee Chair 55,000 Remuneration and Nomination Committee Chair 55,000 Senior Independent Director 55,000 All other Directors 50,000 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;
John Le Poidevin, 5,482 Sterling shares cancelled, 54,820 Sterling shares issued; and
On
13
February
2023,
the
Board
participated
in
the
Initial
Issue
for
the
following
amounts:
John Le Poidevin, £90,000 of Sterling shares (20,800 shares); and
At year end 31 December 2023 the Directors had the following interests in the Company, held either directly or beneficially:
SterlingShares 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 DollarShares 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
Sterling Class shares Month Number of Highest Price point Lowest Price point shares bought £ £ 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 31.12.22 31.12.21 31.12.20 31.12.19 US$'000 US$'000 US$'000 US$'000 US$'000 Net increase in net 66,494 112,078 12,010 181,533 59,462 assetsresultingfromoperations Totalassets 2,079,009 1,707,130 1,307,490 802,224 570,779 Totalliabilities (4,478) (66,682) (9,762) (41,055) (11,014) Netassets 2,074,531 1,640,448 1,297,728 761,169 559,765 Number ofsharesinissue 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* Netassetvaluepershare 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.
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
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.
Yearended31.12.23 Yearended31.12.22 '000 '000 Pershare Pershare Net total (loss)/gain (9.21p) (£32,535) 683.74p £195,693 for Sterling Shares Net total (loss)/gain (5.48c) (US$1,540) 708.91c US$19,301 for US Dollar Shares
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:
SterlingShares US Dollar Shares Yearended Yearended Yearended Yearended 31.12.23 31.12.22 31.12.23 31.12.22 Average NAV for the £1,485,598,348 £1,132,773,154 US$122,970,362 US$110,421,043 year (A) Management Fee £22,297,675 £17,787,437 US$1,846,781 US$1,792,074 Other Company £1,309,986 £1,248,572 US$84,979 US$127,701 expenses TotalCompanyExpenses £23,607,661 £19,036,009 US$1,931,760 US$1,919,775 Expenses allocated £8,445,240 £2,325,281 US$703,225 US$238,666 from the Master Fund Performance Fee £471 £47,900,303 US$1,740 US$4,641,933 TotalExpenses(B) £32,053,372 £69,261,593 US$2,636,725 US$6,800,374 OngoingCharges(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)
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
6 th Floor
37 Esplanade
St Helier
Jersey
Channel Islands JE2 3QA
Administrator and Corporate Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port Guernsey
Channel Islands GY1 3QL
Independent Auditor
Glategny Court
Glategny Esplanade
Guernsey
Channel Islands GY1 1WR
Registrar and CREST Service Provider
Computershare Investor Services (Guernsey) Limited
1st Floor
Tudor House
Le Bordage
St Peter Port
Guernsey GY1 1DB
Legal Advisor (Guernsey Law)
Carey Olsen Carey House
Les Banques
St Peter Port
Guernsey
Channel Islands GY1 4BZ
Legal Advisor (
Hogan Lovells International LLP
Corporate Broker
JPMorgan Cazenove
25
Canary Wharf
Tax Adviser
Deloitte LLP
PO Box 137
Regency Court
Glategny Esplanade
Guernsey
Channel Islands GY1 3HW
For the latest information