BH Macro Limited

Interim Report and Unaudited Financial Statements 2024LEI: 549300ZOFF0Z2CM87C29

(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)

The Company has today, in accordance with DTR 6.3.5, released its Interim Report and Unaudited Financial Statements for the period ended 30 June 2024. The Report will shortly be available from the Company’s website: www.bhmacro.com.

Although we are far from alone in the closed-ended fund sector, 2024 remains a challenging year for BH Macro Limited (the “Company”) on three fronts:

• Firstly, whilst investment returns have been within the expected range they remain slightly negative in the six month period to 30 June 2024 and this has been magnified by the relative returns of other assets until very recently. The Board retains the utmost confidence in Brevan Howard Capital Management LP (the “Manager”) and the strategy of Brevan Howard Master Fund Limited (the “Master Fund”), both of which the Board continues to monitor closely.

• Secondly, whilst the discount in the prices of both the Sterling and US Dollar share classes to Net Asset Value (“NAV”) per share have narrowed compared to the discounts seen last year, the respective discounts remain at levels that the Board and of course shareholders (the “Shareholders”) would like to see narrow further. The Board has continued with its buyback programme and to liaise closely with our major shareholders, in particular the merged Rathbones-Investec entity. Earlier this year, the Company and the Manager agreed to increase the annual buyback allowance for buybacks and redemptions for the Sterling shares class (the “Annual Buyback Allowance”) for 2024. The usual 2024 Annual Buyback Allowance (being 5% of the issued Sterling shares at the end of 2023 (excluding treasury shares)) was increased by an amount equal to the Sterling share class’s unused 2023 Annual Buyback Allowance (i.e., approximately 16.3 million Sterling shares). This has increased the total amount available for Sterling share buybacks in 2024 before the Company incurs a fee of 2% (of the price paid by the Company), payable to the Manager, on any buybacks it makes in excess of the increased Annual Allowance.

• Thirdly, the entire closed-ended fund sector is subject to greater pressure than at any other time in my more than 40 years experience of it. The concentration of shareholder registers, the concentration of the wealth management market, the levels of discount to NAV per share and the regulatory pressure on fee disclosure have contributed to a very difficult background for the entire sector. As a Board, we are focusing on effective buybacks and working with Kepler and JP Morgan to expand the investor base, particularly in the retail market.

NAV per share performance in the six-month period to 30 June 2024 has been slightly negative, being -1.10% for the Sterling share class and -1.54% for the US Dollar share class. The discount at which the Company’s two share classes traded to NAV continued to narrow during the period to 30 June 2024, assisted by the Company’s share buyback programme that was initiated in December 2023.  The discount narrowed from 10.71% (as at 31 December 2023) to 8.62% (as at 30 June 2024) for the Sterling share class, and similarly from 11.71% (as at 31 December 2023) to 9.29% (as at 30 June 2024) for the US Dollar share class.

The Board has maintained regular dialogue with the Manager in order to assure itself of the quality of the investment team and supporting systems, operations and infrastructure across the organisation.  The Company and the Manager have continued to pursue an active programme of public communication and investor relations and have held investor webinars and meetings with many key shareholders in the period. Up-to-date performance information is provided through NAV per share data published monthly on a ‘final’ basis, after being published on an estimated basis in both weekly and monthly reports, and through monthly Shareholder performance reports. All these reports and further information about the Company are available on the Company’s website (www.bhmacro.com).

The Board remains wholly independent of the Brevan Howard group of companies. The Directors are very closely focused on safeguarding the interests of shareholders and believe that the Company observes high standards of corporate governance. The Board continues to operate well with a high level of engagement and a close working relationship between the diverse members of the Board. We are pleased to say that we remain in compliance with all current regulations and recommendations relating to board composition.

The geopolitical background remains particularly concerning. In the US, President Biden withdrawing from the 2024 presidential election race and the assassination attempt on (former) President Trump appear to have amplified already deep divisions. The situation in the Middle East shows no signs of abating and, despite the prisoner exchange with Russia, tensions remain high in Europe. It remains difficult to see how the war in the Ukraine can be satisfactorily concluded. In the UK, Labour won a huge electoral majority in terms of seats and the early days of the new UK government have heralded the announcement of an “unexpected black hole” in public finances, which may be used to justify a range of potential tax increases coupled with significant settlements in public sector pay. Whether this paves the way for the foundations of a growth economy as claimed or merely increases inflation with continued slowing of productivity in the public sector remains to be seen. However, all these factors and many others contribute to a time of volatility and uncertainty.

The Board remains convinced of the value of the Company and its strategy and the quality of the Manager and look forward to delivering the highly diversifying positive returns, which the Company has delivered time and again over the past 17 years.

Richard Horlick

Chair

13 September 2024

The Directors of the Company during the period and as at the date of signing, all of whom are non-executive, are listed below:

Richard Horlick (Chair)

Richard Horlick is UK resident. He is currently the non-executive chairman of CCLA Investment Management which manages assets for over 38,000 charities and church and local authority funds. He has served on a number of closed-ended fund boards. He has had a long and distinguished career in investment management graduating from Cambridge University in 1980 with an MA in Modern History. After 3 years in the corporate finance department of Samuel Montagu he joined Newton Investment Management in January 1984, where he became a Director and portfolio manager. In 1994, he joined Fidelity International as President of their institutional business outside the US and in 2001 became President and CEO of Fidelity Management Trust Company in Boston which was the Trust Bank for the US Fidelity Mutual fund range and responsible for their defined benefit pension business. In 2003, he joined Schroders Plc as a main board Director and head of investment worldwide. Mr. Horlick was appointed to the Board in May 2019 and was appointed Chair in February 2021.

Caroline Chan

Caroline Chan is a Guernsey resident and has over 30 years’ experience as a corporate lawyer, having retired from private practice in 2020. After studying law at Oxford University, Caroline qualified as an English solicitor with Allen & Overy, working in their corporate teams in London and Hong Kong. On returning to Guernsey in 1998, Caroline qualified as a Guernsey advocate and practised locally, including as a partner with law firms Ogier and Mourant Ozannes. Since retiring from private practice, Caroline has taken on non-executive directorship roles and is Chair of the Board of Governors of The Ladies’ College, Guernsey. She was a member of the Guernsey Competition and Regulatory Authority until March 2023. Ms. Chan was appointed to the Board in December 2022.

Julia Chapman

Julia Chapman is a Jersey resident and a solicitor qualified in England & Wales and in Jersey with over 30 years’ experience in the investment fund and capital markets sector. After working at Simmons & Simmons in London, she moved to Jersey and became a partner of Mourant du Feu & Jeune (now Mourant) in 1999. She was then appointed general counsel to Mourant International Finance Administration (the firm’s fund administration division). Following its acquisition by State Street in April 2010, Julia was appointed European Senior Counsel for State Street’s alternative investment business. In July 2012, Julia left State Street to focus on the independent provision of directorship and governance services to a small number of investment fund vehicles. Mrs. Chapman was appointed to the Board in October 2021.

Bronwyn Curtis

Bronwyn Curtis is a UK resident and Senior Executive with 30 years leadership in finance, commodities, consulting and the media. Her executive roles included Head of Global Research at HSBC Plc, Managing Editor and Head of European Broadcast at Bloomberg LP, Chief Economist of Nomura International, and Global Head of Foreign Exchange and Fixed Income Strategy at Deutsche Bank. She has also worked as a consultant for the World Bank and UNCTAD. Her other current appointments include non-executive member of the Oversight Board of the UK Office for Budget Responsibility, trustee of the Centre for Economic and Policy Research, the Australia-UK Chamber of Commerce and The Times shadow MPC. She is a graduate of the London School of Economics and La Trobe University in Australia where she received a Doctor of Letters in 2017. Bronwyn was awarded an OBE in 2008 for her services to business economics. Mrs. Curtis was appointed to the Board in January 2020 and was appointed Senior Independent Director on 13 September 2023.

John Le Poidevin

John Le Poidevin is Guernsey resident and has over 30 years’ business experience. Mr. Le Poidevin is a graduate of Exeter University and Harvard Business School, a Fellow of the Institute of Chartered Accountants in England and Wales and a former partner of BDO LLP in London where, as Head of Consumer Markets, he developed an extensive breadth of experience and knowledge of listed businesses in the UK and overseas. He is an experienced non-executive who sits on several Plc boards and chairs a number of Audit Committees. He therefore brings a wealth of relevant experience in terms of corporate governance, audit, risk management and financial reporting. Mr. Le Poidevin was appointed to the Board in June 2016.

The following summarises the Directors’ current directorships in other public companies:

Exchange

Richard Horlick

Riverstone Energy Limited

London

VH Global Sustainable Energy Opportunities Plc

London

Caroline Chan

NextEnergy Solar Fund Limited

London

Julia Chapman

GCP Infrastructure Investments Limited

London

Henderson Far East Income Limited

London

The International Stock Exchange Group Limited

The International Stock Exchange

Bronwyn Curtis

Pershing Square Holdings Limited

London and Euronext Amsterdam

TwentyFour Income Fund Limited

London

John Le Poidevin 

International Public Partnerships Limited

London

Super Group (SGHC) Limited

New York

TwentyFour Income Fund Limited

London

30 June 2024

The Directors submit their Interim Report together with the Company’s Unaudited Statement of Assets and Liabilities, Unaudited Statement of Operations, Unaudited Statement of Changes in Net Assets, Unaudited Statement of Cash Flows and the related notes for the period ended 30 June 2024. The Directors’ Report together with the Interim Unaudited Financial Statements and their related notes (the “Financial Statements”) give a true and fair view of the financial position of the Company. They have been prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”) and are in agreement with the accounting records.

The Company

BH Macro Limited is a limited liability closed-ended investment company which was incorporated in Guernsey on 17 January 2007 and then admitted to the Official List of the London Stock Exchange ("LSE") later that year.

The Company’s ordinary shares are issued in Sterling and US Dollars.

Investment Objective and Policy

The Company is organised as a feeder fund that invests all of its assets (net of short-term working capital requirements) directly in the Master Fund, a hedge fund in the form of a Cayman Islands open-ended investment company, which has as its investment objective the generation of consistent long-term appreciation through active leveraged trading and investment on a global basis. The Master Fund is managed by Brevan Howard Capital Management LP, the Company’s Manager.

The Master Fund has flexibility to invest in a wide range of instruments including, but not limited to, debt securities and obligations (which may be below investment grade), bank loans, listed and unlisted equities, other collective investment schemes, currencies, commodities, digital assets, futures, options, warrants, swaps and other derivative instruments. The underlying philosophy is to construct strategies, often contingent in nature, with superior risk/return profiles, whose outcome will often be crystallised by an expected event occurring within a pre-determined period of time.

The Master Fund employs a combination of investment strategies that focus primarily on economic change and monetary policy and market inefficiencies.

The Company may employ leverage for the purposes of financing share purchases or buy-backs, satisfying working capital requirements or financing further investment into the Master Fund, subject to an aggregate borrowing limit of 20% of the Company’s NAV, calculated as at the time of borrowing. Borrowing by the Company is in addition to leverage at the Master Fund level, which has no limit on its own leverage.

Results and Dividends

The results for the year are set out in the Unaudited Statement of Operations. The Directors do not recommend the payment of a dividend.

Share Capital

On 23 January 2023, the Board announced the commencement of its initial issue (the “Initial Issue”), comprising of the initial placing (the “Placing”), intermediaries offer (the “Intermediaries Offer”) and offer for subscription (the “Offer for Subscription”), together with an issuance programme for subsequent issues, which remained open until 23 January 2024 (the “Issuance Programme”), in respect of the issue of up to an aggregate of 220 million shares (based on a 10:1 share sub-division); the issue of circular for an EGM, which was held on 6 February 2023, in relation to the Initial Issue, Issuance Programme and share sub-division; and details of amendments to the Management Agreement, including terms of the Company's investment in the Master Fund, in order to reflect the increased investment of the Company in the Master Fund as a result of the Initial Issue and the Issuance Programme. Further details are disclosed in note 5 of these Interim Unaudited Financial Statements.

On 6 February 2023, following the EGM, the Company announced that (i) the Board was empowered to allot and issue, in aggregate, up to 220 million new shares of no par value in the Company designated as Sterling shares or US Dollar shares, as if the pre-emption provisions of the Company’s articles of incorporation (“Articles”) did not apply; and (ii) each existing share would be sub-divided into 10 shares of the same currency class and with the same rights and subject to the same restrictions as the then existing shares of the same currency class, in the capital of the Company, with the sub-divided shares to be admitted to listing the following day. These resolutions superseded the relevant resolutions adopted at the 2022 Annual General Meeting.

On 13 February 2023, the completion of the Initial Issue saw a total of 72,378,000 Sterling shares and 746,400 US Dollar shares issued at a price per share equal, respectively, to 431.5 pence per Sterling share and US$4.47 per US Dollar share, raising gross proceeds of approximately £312.3m for the Sterling share class and US$3.3m for the US Dollar share class.

At the Annual General Meeting held on 5 June 2024, Shareholders approved an Ordinary Resolution to allow the Directors to have the power to issue further shares totalling 119,634,098 Sterling shares and 9,820,829 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 53,804,834 Sterling shares and 4,416,869 US Dollar shares.

Since 13 December 2023 to 30 June 2024, the Company has bought back 18,208,099 Sterling class shares on the London Stock Exchange with prices ranging from £3.28 to £3.68 per share. The Company did not buy-back any US Dollar class shares in the period. The repurchased shares are held in Treasury.

The number of shares in issue at the period end is disclosed in note 5 of the Interim Unaudited Financial Statements.

Going Concern

The Directors, having considered the Principal and Emerging Risks and Uncertainties to which the Company is exposed, which are listed on Directors’ Report and on the assumption that these are managed or mitigated as noted, are not aware of any material uncertainties which may cast significant doubt upon the Company’s ability to continue as a going concern and, accordingly, consider that it is appropriate that the Company continues to adopt the going concern basis of accounting for these Interim Unaudited Financial Statements.

The Board continues to monitor the ongoing impact of various geopolitical events, including economic volatility, recessionary risks and the ongoing conflicts in Ukraine and the Middle East. The Board has concluded that the biggest threat to the Company remains the failure of a key service provider to maintain business continuity and resiliency. The Board has assessed the measures in place by key service providers to maintain business continuity and, so far, has not identified any significant issues that affect the Company. The financial position of the Company has not been negatively impacted by geopolitical events either and the Board is confident that these events have not impacted the going concern assessment of the Company.

In December 2023 the Board commenced a share buy-back programme to manage any excess mis-match between buyers and sellers of the Company’s shares in the public markets and this has led to a narrowing of the discount at which the Company’s shares traded during the period. All share buy backs have been and will continue to be funded by specific cash allocated to them through the redemption of shares in the Master Fund and there is therefore no impact on the cash available to cover the Company’s central operating costs. As announced on 17 June 2024, the Manager has temporarily waived the redemption fee on buy-backs that would normally apply above a certain level (by increasing the 2024 buyback allowance by 16,308,970 this being the unused Sterling Shares buyback allowance for 2023) and so there are no additional charges for effecting these buy backs other than the transaction fees paid to the Company’s brokers.

The Directors have therefore concluded that there are no significant cash flow or other risks in relation to preparing the interim financial statements on a going concern basis.

The Board

The Board of Directors has overall responsibility for safeguarding the Company’s assets, for the determination of the investment policy of the Company, for reviewing the performance of the service providers and for the Company’s activities. The Directors, all of whom are non-executive, are listed on Board Members section.

The Articles provide that, unless otherwise determined by ordinary resolution, the number of Directors shall not be less than two. 

The Board meets at least four times a year and between these formal meetings, there is regular contact with the Manager, JPMorgan Cazenove (the “Corporate Broker”) and the Northern Trust International Fund Administration Services (Guernsey) Limited (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 six-month period ended 30 June 2024 and the number of such meetings attended by each Director.

Scheduled Board Meetings

Held

Attended

Richard Horlick

2