Annual Report • Jun 30, 2011
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BH Macro Limited
Interim Unaudited Financial Statements 2011
INTERIM UNAUDITED FINANCIAL STATEMENTS
30 June 2011
Chairman’s Statement
Financial markets have been subjected during 2011 to a sequence of shocks from different directions. Political unrest spreading across North Africa and the Middle East, natural disasters in Japan and elsewhere, intensified strains within the eurozone and political deadlock over fiscal policy and the debt ceiling in the US have impeded the recuperation of the global economy and engendered heightened levels of uncertainty. The result has been slower recovery in growth than might have been hoped in the major economies and continued volatility in financial markets.
Against this background, BH Macro Limited (the “Company”) achieved a gain in net asset value (NAV) of 2.5% (on the sterling shares) in the first half of 2011. This performance was in line with the Company’s aim of preserving shareholders’ capital and delivering a positive return uncorrelated with other markets and with low volatility. For the period since its launch in 2007 until 30 June 2011, the Company has achieved a cumulative gain in NAV of 76.5% and an annualised rate of return of 14.2%.
The result for the first half of 2011 reflects the more tactical approach being taken by the Brevan Howard Master Fund Limited (the “Master Fund”), in which, in line with its stated purpose, the Company invests all its assets (net of minimal working capital). The Master Fund’s stated objective has been, and remains, to seek to generate consistent long-term capital appreciation through active leveraged trading and investment on a global basis. In the uncertain economic environment currently prevailing, the Master Fund has focused on the themes of higher volatility and greater differentiation between economies, aiming to trade more tactically while maintaining long positions in volatility to capture the potential for more sustained trend movements. This approach achieved steady moderate gains in NAV in most months during the first half of 2011, at a time when the main markets have tended at best to move sideways with at times erratic adjustments in response to shifts in sentiment. More substantial gains in NAV have been achieved during the period of heightened market turbulence which emerged in the third quarter.
The Company remains a substantial fund, with NAV totalling $1.9 billion at the end of June 2011, making it the largest single-manager hedge fund listed on the London Stock Exchange. The Company’s shares have traded through the year generally at a small discount to NAV, with the sterling shares showing a rise of nearly 7.5% over the half year. In these circumstances, it has not proved necessary to undertake market purchases, authority for which was renewed at the Company’s AGM in June 2011; and the Board decided not to offer shareholders a partial return of capital in 2011, though the option to make such an offer, at the Board’s discretion, remains available for future years. The Board remains alert to the continuing need to be ready to undertake discount management actions where necessary so that as far as possible the share prices properly reflect the Company’s underlying performance. Trading in the shares continues to provide a liquid secondary market for investors. The shares have maintained their place in the FTSE 250 and the Company has maintained its listings in Dubai and Bermuda.
The Board has continued to maintain regular dialogue with the Company’s Manager, Brevan Howard Capital Management LP (the “Manager”), to review the Master Fund’s trading strategies and risk exposures and to satisfy itself that the Manager’s analytical, trading and risk management capabilities were being maintained to a high standard. From extended discussions with the Manager at each of its quarterly Board meetings and from additional meetings with the Manager at intervals during the period, the Board continues to believe that the Master Fund’s performance in all these areas remains of the highest standard.
The Company and its Manager have continued to focus on strengthening its communications and investor relations efforts. Regular communication is maintained with shareholders and presentations are made to keep analysts, financial journalists and the wider investment community informed of the Company’s progress. Up-to-date performance information is provided through NAV data published monthly on a definitive basis and weekly on an estimated basis, as well as through monthly risk reports and shareholder reports. All these reports and further information about the Company are available on its website (www.bhmacro.com).
The Directors take very seriously their responsibility for safeguarding the interests of shareholders and believe that the Company observes high standards of corporate governance. The Board, which is independent of the Brevan Howard group, holds quarterly scheduled meetings and meets ad hoc on other occasions as necessary. The work of the Board is assisted by the Audit Committee and the Management Engagement Committee. The Board remains committed to meeting all the provisions of the Association of Investment Companies’ Code of Corporate Governance that are relevant to a company that has no executive management: further details are described in the Directors’ Report.
It is far from clear how the economic and other stresses to which financial markets are currently subject will evolve. But the Board is confident that the Master Fund continues to have the capability to deliver profitable returns in the current uncertain environment and that the Company’s investment in the Master Fund offers the prospect for shareholders to achieve sustainable non-correlated returns while preserving capital.
Ian Plenderleith
Chairman
24 August 2011
Board Members
The Directors of the Company, all of whom are non-executive, are listed below:
Ian Plenderleith (Chairman), age 67
Ian Plenderleith retired at the end of 2005 after a three-year term as Deputy Governor of the South African Reserve Bank. He served on the Bank’s Monetary Policy Committee and was responsible for money, capital and foreign exchange market operations and for international banking relationships. He previously worked for over 35 years at the Bank of England in London, where he was most recently Executive Director responsible for the Bank’s financial market operations and a member of the Bank’s Monetary Policy Committee. He has also worked at the International Monetary Fund in Washington DC and served on the Board of the European Investment Bank and on various international committees at the Bank for International Settlements. Mr Plenderleith holds an MA from Christ Church, Oxford University, and an MBA from Columbia Business School, New York. Mr Plenderleith is a non-executive director of BMCE Bank International and Europe Arab Bank in London and of Sanlam in South Africa. He is also Chairman of the Governors of Reed’s School in Surrey and serves on the Council of the British Museum Friends. Mr Plenderleith has held the role of chairman since 2007.
Huw Evans, age 53
Huw Evans is Guernsey resident and qualified as a Chartered Accountant with KPMG (then Peat Marwick Mitchell) in 1983. He subsequently worked for three years in the Corporate Finance department of Schroders before joining Phoenix Securities Limited in 1986. Over the next twelve years he advised a wide range of companies in financial services and other sectors on mergers and acquisitions and more general corporate strategy. Since moving to Guernsey in 2005, he has acted as a professional non-executive Director of Guernsey-based funds. BH Macro Limited is the only quoted fund on whose Board he currently sits. He holds an MA in Biochemistry from Cambridge University. Mr Evans was appointed to the Board in 2010.
Anthony Hall, age 72
Anthony Hall is Guernsey resident and has 50 years experience in the financial services industry. He worked for Barclays Bank between 1955 and 1970 and between 1970 and 1976 he held positions with N.M. Rothschild, Guernsey; Bank of London & Montreal, Nassau; and Italian International Bank (CI) Limited, Guernsey. In 1976 he was appointed as Managing Director of Rea Brothers (Guernsey) Limited and between 1988 and 1995 he served as joint CEO and managing director of Rea Brothers Group Plc. He served as Chairman of Rea Brothers (Guernsey) Limited from 1995 to 1996. He was founder Deputy Chairman of the Guernsey International Banking Association and was Chairman of the Association of Guernsey Banks in 1994. In addition to being a director of the Company, Mr Hall is currently a director of a number of Guernsey based investment funds including amongst others Stratton Street PCC Limited. Mr Hall was appointed to the Board in 2007.
Christopher Legge, (Senior Independent Director), age 56
Christopher Legge is Guernsey resident and has over 25 years experience in the financial services industry. He qualified in London in 1980 with Pannell Kerr Forster and subsequently moved to Guernsey in 1983 to work for Ernst & Young, progressing from audit manager to Managing Partner in the Channel Islands. Mr Legge retired from Ernst & Young in 2003 and currently holds a number of directorships in the financial sector including, among others Ashmore Global Opportunities Limited, Goldman Sachs Dynamic Opportunities Limited and Third Point Offshore Investors Limited. Mr Legge is an FCA and holds a BA (Hons) in Economics from the University of Manchester. Mr Legge was appointed to the Board in 2007.
Talmai Morgan, age 58
Talmai Morgan is Guernsey resident and qualified as a barrister in 1976. He moved to Guernsey in 1988 where he worked for Barings and then for the Bank of Bermuda as Managing Director of Bermuda Trust (Guernsey) Limited. From January 1999 to June 2004, he was Director of Fiduciary Services and Enforcement at the Guernsey Financial Services Commission (Guernsey’s financial regulatory agency) where he was responsible for the design and subsequent implementation of Guernsey’s law relating to the regulation of fiduciaries, administration businesses and company directors. He was also involved in the international working groups of the Financial Action Task Force and the Offshore Group of Banking Supervisors. From July 2004 to May 2005, he was Chief Executive of Guernsey Finance which is the official body for the promotion of the Guernsey finance industry. Mr Morgan holds a MA in Economics and Law from Cambridge University. Mr. Morgan is Chairman of the Listed Hedge Fund Forum of the Association of Investment Companies. In addition to being a director of the Company, Mr Morgan is a Director of a number of listed investment funds including, amongst others, BH Global Limited, Goldman Sachs Dynamic Opportunities Limited, John Laing Infrastructure Fund Limited, NB Distressed Debt Investment Fund Limited, NB Private Equity Partners Limited, Real Estate Credit Investments Limited, Signet Global Fixed Income Strategies Limited and Sherborne Investors (Guernsey) A Limited. Mr. Morgan was appointed to the Board in 2007.
Stephen Stonberg, age 43
Stephen Stonberg is a Managing Director of Credit Suisse Asset Management in New York. Prior to January 2011, Mr Stonberg worked for Brevan Howard entities in both London and New York. He joined Brevan Howard Asset Management LLP in London in September 2006 as Head of Business Development and subsequently became a Partner in April 2007. In February 2009 he relocated from London to New York to run North American marketing for Brevan Howard US Asset Management LP. From January to December 2010 he was the CEO of Brevan Howard US LLC, a member of the Financial Industry Regulatory Authority, Inc (FINRA). Prior to joining Brevan Howard, Mr Stonberg worked for JPMorgan (2001-2006) as managing director and Global Head of Strategy and Business Development for the Investment Banking Division (2003-2006) and as managing director and Head of Credit Derivative Marketing EMEA (2001-2003). Previously, Mr Stonberg worked at Deutsche Bank (1996-2001) as managing director of Global Credit Derivatives. Mr Stonberg holds an MBA from Harvard Business School (1994) and a Bachelor’s Degree in Economics from Columbia University (1989). He is currently a non-executive director of Coalition Development Limited. Mr Stonberg is a non-executive director of BH Global Limited a FTSE 250 listed company and BH Credit Catalysts Limited. He is a resident of the United States. Mr Stonberg was appointed to the Board in 2007.
Directors’ Report
30 June 2011
The Directors submit their 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 six month period ended 30 June 2011. The Directors’ Report together with the Unaudited Interim Financial Statements (the “Financial Statements”) and their related notes give a true and fair view of the financial position of the Company. They have been prepared properly, in conformity with accounting principles generally accepted in the United States of America (US GAAP), are in accordance with any relevant enactment for the time being in force and are in agreement with the accounting records.
The Company
The Company is a limited liability closed-ended investment company incorporated in Guernsey on 17 January 2007.
The Company was admitted to a Secondary Listing (Chapter 14) on the Official List of the London Stock Exchange on 14 March 2007. On 11 March 2008, the Company migrated from the Secondary Listing to a Primary Listing pursuant to Chapter 15 of the Listing Rules of the UK Listing Authority. As a result of changes to the UK Listing Regime, the Company’s Primary Listing became a Premium Listing with effect from 6 April 2010.
As of 20 October 2008 the Company obtained a Secondary Listing on the Bermuda Stock Exchange and with effect from 11 November 2008, the US Dollar Shares of the Company were admitted to a Secondary Listing on NASDAQ Dubai.
The proceeds from the original issue of shares on listing amounted to approximately US$1.1 billion. On 26 October 2007 the Company issued further shares in a cash placing amounting to approximately US$0.1 billion.
The Company is a member of the Association of Investment Companies.
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 managed by the Brevan Howard group, 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 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, 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 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 net asset value, 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 period are set out in the Unaudited Statement of Operations. The Directors do not recommend the payment of a dividend.
Share capital
The number of shares in issue at the period end is disclosed in Note 5 to the Financial Statements.
Going concern
After making enquiries and given the nature of the Company and its investment, the Directors are satisfied that it is appropriate to continue to adopt the going concern basis in preparing these Financial Statements and, after due consideration, the Directors consider that the Company is able to continue for the foreseeable future.
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 the inside back cover. The board has considered the independence of each Director. Stephen Stonberg and Talmai Morgan are not independent of the Manager for the purposes of LR15.2.12.
The Articles provide that, unless otherwise determined by ordinary resolution, the number of Directors shall not be less than two. The Company’s policy on Directors’ Remuneration, together with details of the remuneration of each Director who served during the period, is detailed in the Directors’ Remuneration Report.
The Board meets at least four times a year and between these formal meetings there is regular contact with the Manager and the Secretary. The Directors are kept fully informed of investment and financial controls, and other matters that are relevant to the business of the Company and should be 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.
Directors
For each Director, the tables below set out the number of Board and Audit Committee meetings they were entitled to attend during the six month period ended 30 June 2011 and the number of such meetings attended by each Director.
Scheduled Board Meetings
Held
Attended
Ian Plenderleith
2
2
Huw Evans
2
2
Anthony Hall
2
2
Christopher Legge
2
2
Talmai Morgan
2
2
Stephen Stonberg
2
2
Audit Committee Meetings
Held
Attended
Huw Evans
2
2
Anthony Hall
2
2
Christopher Legge
2
2
Management Engagement Committee Meetings
The Management Engagement Committee held its last meeting on 22 September 2010 and will meet again later this year.
Directors’ interests
During 2010 Stephen Stonberg was a partner of Brevan Howard Asset Management LLP and CEO of Brevan Howard US LLC. As of 1 January 2011 Stephen Stonberg resigned from these positions, but will remain as a Director of the Company.
Talmai Morgan and Stephen Stonberg are both non-executive Directors of BH Global Limited which was incorporated on 25 February 2008 and started trading on the London Stock Exchange on 23 May 2008. BH Global Limited is managed by Brevan Howard Capital Management LP, the Company’s Manager, and is a feeder fund for the Brevan Howard Global Opportunities Master Fund Limited which invests, amongst other investments, in the Master Fund.
Stephen Stonberg is also a non-executive Director of BH Credit Catalysts Limited which was incorporated on 19 October 2010 and started trading on the London Stock Exchange on 14 December 2010. BH Credit Catalysts Limited is managed by Brevan Howard Capital Management LP, the Company’s Manager, and is a feeder fund for the Brevan Howard Credit Catalysts Master Fund Limited into which the Company’s Master Fund invests.
The Directors had the following interests in the Company, held either directly or beneficially:
US Dollar shares
30.06.11
31.12.10
30.06.10
Ian Plenderleith
Nil
Nil
Nil
Huw Evans
Nil
Nil
N/A
Anthony Hall
Nil
Nil
Nil
Christopher Legge
Nil
Nil
Nil
Talmai Morgan
Nil
Nil
Nil
Stephen Stonberg
Nil
Nil
Nil
Euro shares
30.06.11
31.12.10
30.06.10
Ian Plenderleith
Nil
Nil
Nil
Huw Evans
Nil
Nil
N/A
Anthony Hall
6,500
6,500
6,500
Christopher Legge
Nil
Nil
Nil
Talmai Morgan
Nil
Nil
Nil
Stephen Stonberg
Nil
Nil
Nil
Sterling shares
30.06.11
31.12.10
30.06.10
Ian Plenderleith
Nil
Nil
Nil
Huw Evans
710
710
N/A
Anthony Hall
10,000
10,000
10,000
Christopher Legge
Nil
Nil
Nil
Talmai Morgan
Nil
Nil
Nil
Stephen Stonberg
5,676
5,676
5,676
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 for, subject to the provisions of The Companies (Guernsey) Law, 2008, 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, breach of duty or trust in relation to the Company.
Manager
The Board, and in particular the Management Engagement Committee, considers the arrangements for the provision of management and other services to the Company on an ongoing basis. The principal contents of the agreement with the Manager are as described in note 4 to the 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 fund vehicles and has access to extensive investment management resources. The Board considers that the continued appointment of the Manager on the terms agreed would be in the interests of the Company’s shareholders as a whole. At the date of this report the Board continued to be of the same opinion.
Auditor’s remuneration
The tables below summarise the remuneration paid to KPMG Channel Islands Limited and to other KPMG affiliates for audit and non-audit services during the six month period ended 30 June 2011, the year ended 31 December 2010, and the six month period ended 30 June 2010.
Period ended
Year ended
Period ended
30.06.11
31.12.10
30.06.10
KPMG Channel Islands Limited
– Annual audit
–
£20,600
–
– Auditor’s interim review
£8,500
£8,240
£8,240
Other KPMG affiliates
– German tax services
–
£17,544
–
– US tax services
–
£11,696
–
The Audit Committee has established pre-approval policies and procedures for the engagement of KPMG to provide audit, assurance and tax services.
Corporate governance
To comply with the UK Listing Regime the Company must comply with the requirements of the UK Corporate Governance Code. There is no published corporate governance regime equivalent to the UK Corporate Governance Code in Guernsey.
The Board of the Company has considered the principles and recommendations of the AIC Code of Corporate Governance by reference to the AIC Corporate Governance Guide for Investment Companies (AIC Guide). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.
The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Corporate Governance Code), will provide better information to shareholders.
The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Corporate Governance Code, except as set out below.
The UK Corporate Governance Code includes provisions relating to:
the role of the chief executive
executive directors’ remuneration
the need for an internal audit function
For the reasons set out in the AIC Guide, and as explained in the UK Corporate Governance Code, the Board considers these provisions are not relevant to the position of the Company, being an externally managed investment company. The Company has therefore not reported further in respect of these provisions.
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; (ii) the Chairman of the Board of Directors is free from any conflicts of interest and is independent of the Manager and of any company in the same group as the Manager; and (iii) no more than one director, partner, employee or professional adviser to the Manager or any company in the same group as the Manager may be a Director of the Company at any one time.
The Company has also adopted a Code of Directors’ dealings in shares, which is based on the Model Code for Directors’ dealings contained in the London Stock Exchange’s Listing Rules.
The Company has disclosed total expense ratios for each class of share in note 9 to the Financial Statements.
The Company’s risk exposure and the effectiveness of its risk management and internal control systems are reviewed by the Audit Committee at its meetings and annually by the Board. 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 view of its non-executive and independent nature, the Board considers that it is not appropriate for there to be a Nomination Committee or a Remuneration Committee as anticipated by the AIC Code. The Board as a whole fulfils the functions of the Nomination and Remuneration Committees, although the Board has included a separate Remuneration Report on these in the Financial Statements. For new appointments to the Board, nominations are sought from the Directors and from other relevant parties and candidates are then interviewed by an ad hoc committee of independent Directors. The Directors were appointed for an initial term of three years and Section 20.3 of the Company’s Articles require one third of the Directors to retire by rotation at each Annual General Meeting. As the Company is a FTSE 250 listed Company in line with the AIC Code each Director will put themselves up for re-election at each Annual General Meeting. On 20 June 2011, the Annual General Meeting of the Company, Shareholders
re-elected all the Directors of the Company.
The Board, of which Ian Plenderleith is Chairman, consists solely of non-executive Directors. Christopher Legge is the Senior Independent Director of the Board. As at 30 June 2011, all the Directors, except Stephen Stonberg and Talmai Morgan, are considered by the Board to be independent of the Company’s Manager.
The 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 has been prepared for any future Director appointments.
The Board, Audit Committee and Management Engagement Committee undertake an evaluation of their own performance and that of individual Directors on an annual basis. In order to review their effectiveness, the Board and its Committees carry out a process of formal self-appraisal. The Board and Committees consider how they function as a whole and also review the individual performance of their members. This process is conducted by the respective Chairman reviewing the Directors’ performance, contribution and commitment to the Company. Christopher Legge as Senior Independent Director takes the lead in reviewing the performance of the Chairman. The Chairman also has responsibility for assessing the individual Board members’ training requirements. The Board intends to implement the new provision in the AIC Code for external evaluation of the Board every three years.
The Terms of Reference of both the Audit Committee and Management Engagement Committee are available from the Administrator.
Audit Committee
The Company has established an Audit Committee with formal duties and responsibilities. This Committee meets formally at least twice a year and each meeting is attended by the independent Auditor. The Audit Committee comprises Huw Evans, Anthony Hall and Christopher Legge. Christopher Legge is the Chairman of the Audit Committee.
The Audit Committee reviews and recommends to the Board the Financial Statements of the Company and is the forum through which the independent Auditor reports to the Board of Directors. The objectivity of the independent Auditor is reviewed by the Audit Committee which also reviews the terms under which the independent Auditor is appointed to perform non-audit services. The Committee reviews the scope and results of the audit, its cost effectiveness and the independence and objectivity of the independent Auditor, with particular regard to non-audit fees. The Audit Committee considers KPMG Channel Islands Limited to be independent of the Company.
The Audit Committee has reviewed the need for an internal audit function. The Audit Committee considers the systems and procedures employed by the Manager and the Administrator, including their internal audit functions, 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.
Appointment to the Audit Committee is for a period up to three years which may be extended for two further three year periods provided that the majority of the Audit Committee remain independent of the Manager. Anthony Hall and Christopher Legge are currently serving their second term of three years. Huw Evans is currently serving his first term.
A member of the Audit Committee is available to attend each Annual General Meeting to respond to any shareholder questions on the activities of the Audit Committee.
Management Engagement Committee
The Board has established a Management Engagement Committee with formal duties and responsibilities. These duties and responsibilities include the regular review of the performance of and contractual arrangements with the Manager and the preparation of the Committee’s annual opinion as to the Manager’s services.
Detailed terms of the Manager’s contract and notice period are contained in note 4 to the Financial Statements.
The Management Engagement Committee meets formally at least once a year and comprises Ian Plenderleith, Anthony Hall and Christopher Legge. Anthony Hall is the Chairman of the Management Engagement Committee.
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 Chairman and other Directors are available to meet shareholders if required. The Annual General Meeting of the Company provides a forum for shareholders to meet and discuss issues with the Directors of the Company. The Manager provides weekly estimates of NAV and a month end NAV, and the Manager provides a monthly newsletter and a risk report. These are published via RNS and are also available on the Company’s website.
The Manager maintains regular dialogue with institutional shareholders, the feedback from which is reported to the Board. In addition, Board members are available to respond to shareholders’ questions at Annual General Meetings. Shareholders who wish to communicate with the Board should contact the Administrator in the first instance, whose contact details can be found on the Company’s website.
Significant shareholders
As at 30 June 2011, the following had significant shareholdings in the Company:
Total
shares held
% holding
in class
Significant shareholders
US Dollar shares
Vidacos Nominees Limited
4,219,420
13.50
HSBC Global Custody Nominee (UK) Limited
4,116,533
13.17
Goldman Sachs Securities (Nominees) Limited
3,385,626
10.83
Lynchwood Nominees Limited
3,131,383
10.02
Nortrust Nominees Limited
2,720,008
8.70
Chase Nominees Limited
1,928,552
6.17
Morston Nominees Limited
1,843,432
5.90
Enhanced Investing Corporation (Cayman) II Limited
1,745,030
5.58
State Street Nominees Limited
1,340,028
4.29
Euroclear Nominees Limited
1,311,504
4.20
BNY (Nominees) Limited
1,286,853
4.12
Euro shares
Nordea Bank Danmark A/S
3,308,050
25.91
Securities Services Nominees Limited
2,689,132
21.06
HSBC Global Custody Nominee (UK) Limited
1,124,432
8.81
Euroclear Nominees Limited
1,117,200
8.75
Lynchwood Nominees Limited
975,100
7.64
BNY (Nominees) Limited
583,285
4.57
Vidacos Nominees Limited
547,430
4.29
Sterling shares
Chase Nominees Limited
8,322,824
22.91
HSBC Global Custody Nominee (UK) Limited
3,969,307
10.93
Nutraco Nominees Limited
3,054,261
8.41
Lynchwood Nominees Limited
2,677,992
7.37
Nortrust Nominees Limited
2,128,802
5.86
State Street Nominees Limited
1,746,281
4.81
Pershing Nominees Limited
1,466,703
4.04
BNY (OCS) Nominees Limited
1,247,356
3.43
Signed on behalf of the Board by:
Ian Plenderleith
Chairman
Christopher Legge
Director
24 August 2011
Statement of Directors’ Responsibility in Respect of the Interim Unaudited Financial Statements
We confirm to the best of our knowledge that:
these Interim Unaudited Financial Statements have been prepared in conformity with Accounting Principles Generally Accepted in the United States of America; and
these Interim Unaudited Financial Statements include information detailed in the Chairman’s Statement, the Directors’ Report, the Manager’s Report and the notes to the Interim Unaudited Financial Statements, which provides a fair view of the information required by:-
(a) DTR 4.2.7 of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on these Interim Unaudited Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8 of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last Annual Audited Financial Statements that could materially affect the financial position or performance of the Company.
Signed on behalf of the Board by:
Ian Plenderleith
Chairman
Christopher Legge
Director
24 August 2011
Directors’ Remuneration Report
30 June 2011
Introduction
An ordinary resolution for the approval of the annual remuneration report will be put to the shareholders at the Annual General Meeting to be held in 2012.
Remuneration policy
All Directors are non-executive and a Remuneration Committee has not been established. The Board as a whole considers matters relating to the Directors’ remuneration. No advice or services were provided by any external person in respect of its consideration of the Directors’ remuneration.
The Company’s policy is that the fees payable to the Directors should reflect the time spent by the Directors on the Company’s affairs and the responsibilities borne by the Directors and be sufficient to attract, retain and motivate directors of a quality required to run the Company successfully. The Chairman of the Board is paid a higher fee in recognition of his additional responsibilities, as are the Chairmen of the Audit Committee and the Management Engagement Committee. 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. Directors hold office until they retire by rotation or cease to be a director in accordance with the Articles of Incorporation, by operation of law or until they resign. The Directors were appointed for an initial term of three years and Section 20.3 of the Company’s Articles require one third of the Directors to retire by rotation at each Annual General Meeting. As the Company is a FTSE 250 listed Company, in line with the AIC Code each Director will put themselves up for re-election at each Annual General Meeting. On 20 June 2011, the Annual General Meeting of the Company, shareholders re-elected all the Directors. Director appointments can also be terminated in accordance with the Articles. Should shareholders vote against a Director standing for re-election, the Director affected will not be entitled to any compensation. There are no set notice periods and a Director may resign by notice in writing to the Board at any time.
Directors are remunerated in the form of fees, payable quarterly in arrears, to the Director personally. No other remuneration or compensation was paid or payable by the Company during the period to any of the Directors apart from the reimbursement of allowable expenses.
Directors’ fees
The Company’s Articles limit the fees payable to Directors in aggregate to £400,000 per annum as amended at the Annual General Meeting on 20 June 2011. The annual fees were last increased on 1 April 2010, and are £150,000 for the Chairman, £33,000 for Chairmen of both the Audit Committee and the Management Engagement Committee and £30,000 for all other Directors. On 21 March 2011 the Board agreed not to seek to increase fees during 2011.
The fees payable by the Company in respect of each of the Directors who served during the six month period ended 30 June 2011, the year ended 31 December 2010 and the six month period ended 30 June 2010, were as follows:
Period ended
Year ended
Period ended
30.06.11
31.12.10
30.06.10
£
£
£
Ian Plenderleith
75,000
147,500
72,500
Huw Evans
15,000
10,377
–
Anthony Hall
16,500
31,000
14,500
Christopher Legge
16,500
31,625
15,125
Talmai Morgan
15,000
28,750
13,750
Stephen Stonberg*
15,000
–
–
Total
153,000
249,252
115,875
Signed on behalf of the Board by:
Ian Plenderleith
Chairman
Christopher Legge
Director
24 August 2011
Manager’s Report
Brevan Howard Capital Management LP is the Manager of the Company and of the Master Fund.
Performance review
The Company’s NAV per share gained 2.41% for the US Dollar shares, 2.77% for the Euro shares and 2.52% for the Sterling shares during the first half of 2011.
The NAV performance of each currency class of the Company on a month-by-month basis during 2007, 2008, 2009, 2010 and 2011 is set out below:
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)
2.41
EUR
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
YTD
2007
–
–
0.05
0.70
0.02
2.26
2.43
3.07
5.65
(0.08)
2.85
0.69
18.95
2008
9.92
6.68
(2.62)
(2.34)
0.86
2.84
1.28
0.98
(3.30)
2.79
3.91
(0.45)
21.65
2009
5.38
2.67
1.32
0.14
3.12
(0.82)
1.33
0.71
1.48
1.05
0.35
0.40
18.36
2010
(0.30)
(1.52)
0.03
1.48
0.37
1.39
(1.93)
1.25
1.38
(0.35)
(0.34)
(0.46)
0.93
2011
0.71
0.57
0.78
0.52
0.65
(0.49)
2.77
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)
2.52
Important note – shares in the Company do not necessarily trade at a price equal to the prevailing NAV per share.
Source: Company NAV per share % monthly change calculations made by Brevan Howard Capital Management LP and/or affiliated entities (“Brevan Howard”). NAV data is unaudited and net of all investment management fees (2% annual management fee and 20% performance fee) and all other fees and expenses payable by the Company.
Past performance is not indicative of future results.
The majority of the Master Fund’s performance in the first half of 2011 came from gains made in directional and yield curve trading strategies in the US and European interest rate markets. Additional performance came from gains in swap spread and interest rate volatility strategies. The remainder of the performance came mostly from credit and commodity trading. Losses were predominately incurred in FX directional strategies and to a lesser extent in equity trading.
In the first half of 2011 there were significant movements in interest rate markets. US interest rates persistently declined throughout most of the first half of 2011. European interest rates initially rose in the first quarter, after responding to the hawkish sentiment of the ECB and the start of a rate hiking cycle. In the second quarter European interest rates declined as focus shifted towards slowing growth and increasing concerns about the European sovereign debt situation. This led to trading opportunities in interest rates by taking views on the timing and scale of future monetary policy action.
The investment profile by strategy group (% of capital allocation) of the Master Fund as at 30 June 2011 is set out below:
Commentary and Outlook
In the first half of 2011 the expansion in the global economy slowed, with declining activity in China, the US and Europe all occurring in a fairly synchronised manner.
Markets became increasingly focussed on the European sovereign debt situation and the discussions by policymakers regarding potential measures to try and address the problems in the periphery, whilst attempting to create a fire-break to prevent contagion to the larger European economies such as Italy and Spain.
At the same time, political brinksmanship in the US pushed negotiations over an increase to the debt ceiling right to the deadline, risking the need for the US Treasury to prioritise payments, or in the extreme, to potentially miss a coupon date, further increasing market uncertainty.
This uncertain macro environment led the Master Fund’s investment managers to continue to focus on the themes of higher volatility and greater differentiation between economies in 2011. Additionally, the investment managers’ aim to trade more tactically in 2011, whilst maintaining long positions in volatility in order to capture potential breakout moves, has worked as intended.
The trading outlook for the remainder of 2011 remains fertile, given the continued high levels of macroeconomic uncertainty and market volatility.
Brevan Howard wishes to thank shareholders once again for their continued support.
Gunther Thumann
Brevan Howard Capital Management LP,
acting by its sole general partner,
Brevan Howard Capital Management Limited.
24 August 2011
Independent Review Report to the Members of BH Macro Limited
We have been engaged by the Company to review the Interim Unaudited Financial Statements included in the Interim Report for the period to 30 June 2011 which comprises the Unaudited Statement of Assets and Liabilities, the Unaudited Statement of Operations, the Unaudited Statement of Changes in Net Assets, the Unaudited Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the Interim Unaudited Financial Statements.
This Report is made solely to the Company in accordance with the terms of our engagement letter dated 20 June 2011 to assist the Company in meeting the requirements of the Disclosure and Transparency Rules (“the DTR”) of the UK’s Financial Services Authority (“the UK FSA”). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this Report, or for the conclusions we have reached.
Directors’ responsibilities
The Interim Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the DTR of the UK FSA.
As disclosed in note 3, the Annual Audited Financial Statements of the Company are to be prepared in conformity with accounting principles generally accepted in the United States of America and applicable law.
Our responsibility
Our responsibility is to express to the Company a conclusion on the Interim Unaudited Financial Statements included in the Interim Report based on our review.
Scope of review
Our review shall be conducted in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practice Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the Interim Unaudited Financial Statements included in the Interim Report for the six month period to 30 June 2011 are not prepared, in all material respects, in conformity with accounting principles generally accepted in the United States of America and the DTR of the UK FSA.
Deborah J. Smith
For and on behalf of KPMG Channel Islands Limited Chartered Accountants and Recognised Auditors
24 August 2011
Unaudited Statement of Assets and Liabilities
As at 30 June 2011
30.06.11
(Unaudited)
US$’000
31.12.10
(Audited)
US$’000
30.06.10
(Unaudited)
US$’000
Assets
Investment in the Master Fund
(cost 30 June 2011: US$763,894,411; 31 December 2010: US$782,946,618; 30 June 2010: US$800,342,404)
1,951,510
1,823,934
1,784,564
Amounts due from the Master Fund
2,254
–
1,782
Prepaid expenses
107
36
118
Cash and bank balances denominated in US Dollars
1,015
1,052
1,055
Cash and bank balances denominated in Euro
88
689
52
Cash and bank balances denominated in Sterling
142
1,595
73
Total assets
1,955,116
1,827,306
1,787,644
Liabilities
Performance fees payable (note 4)
11,090
547
3,896
Management fees payable (note 4)
2,932
2,784
2,629
Accrued expenses and other liabilities
106
108
99
Directors’ fees payable
120
106
91
Administration fees payable (note 4)
88
83
78
Total liabilities
14,336
3,628
6,793
Net assets
1,940,780
1,823,678
1,780,851
Number of shares in issue (note 5)
US Dollar shares
31,255,686
31,841,026
36,818,663
Euro shares
12,767,685
14,780,360
16,547,210
Sterling shares
36,330,595
34,283,784
29,698,944
Net asset value per share (notes 7 and 9)
US Dollar shares
US$17.65
US$17.24
US$17.32
Euro shares
€17.76
€17.29
€17.37
Sterling shares
£18.18
£17.73
£17.81
See accompanying notes to the Interim Unaudited Financial Statements.
Signed on behalf of the Board by:
Ian Plenderleith
Chairman
Christopher Legge
Director
24 August 2011
Unaudited Statement of Operations
For the period from 1 January 2011 to 30 June 2011
01.01.11
to 30.06.11
(Unaudited)
US$’000
01.01.10
to 31.12.10
(Audited) US$’000
01.01.10
to 30.06.10
(Unaudited) US$’000
Net investment (expense)/income allocated from the Master Fund
Interest
31,541
51,532
24,122
Dividend income (net of withholding tax of: 30 June 2011: US$13,522; 31 December 2010: US$91,595; 30 June 2010: US$46,328)
207
598
411
Expenses
(32,108)
(37,759)
(14,319)
Net investment (expense)/income allocated from the Master Fund
(360)
14,371
10,214
Company income
Foreign exchange gains (note 3)
69,426
–
–
Total Company income
69,426
–
–
Company expenses
Performance fees (note 4)
11,295
548
4,000
Management fees (note 4)
17,355
32,604
15,995
Other expenses
339
902
551
Directors’ fees
243
386
176
Administration fees (note 4)
173
330
162
Foreign exchange losses (note 3)
–
57,417
108,632
Total Company expenses
29,405
92,187
129,516
Net investment gain/(loss)
39,661
(77,816)
(119,302)
Net realised and unrealised gain on investments allocated from the Master Fund
Net realised gain on investments
112,616
176,269
152,487
Net unrealised loss on investments
(35,175)
(138,626)
(116,185)
Net realised and unrealised gain on investments allocated from the Master Fund
77,441
37,643
36,302
Net increase/(decrease) in net assets resulting from operations
117,102
(40,173)
(83,000)
See accompanying notes to the Interim Unaudited Financial Statements.
Unaudited Statement of Changes in Net Assets
For the period from 1 January 2011 to 30 June 2011
30.06.11
(Unaudited)
US$’000
31.12.10
(Audited)
US$’000
30.06.10
(Unaudited)
US$’000
Net increase/(decrease) in net assets resulting from operations
Net investment gain/(loss)
39,661
(77,816)
(119,302)
Net realised gain on investments allocated from the Master Fund
112,616
176,269
152,487
Net unrealised loss on investments allocated from the Master Fund
(35,175)
(138,626)
(116,185)
117,102
(40,173)
(83,000)
Share capital transactions
Proceeds on issue of shares from treasury
US Dollar shares
–
–
–
Euro shares
–
–
–
Sterling shares
–
4,200
4,200
Net increase/(decrease) in net assets
117,102
(35,973)
(78,800)
Net assets at the beginning of the period
1,823,678
1,859,651
1,859,651
Net assets at the end of the period
1,940,780
1,823,678
1,780,851
See accompanying notes to the Interim Unaudited Financial Statements.
Unaudited Statement of Cash Flows
For the period from 1 January 2011 to 30 June 2011
30.06.11
(Unaudited)
US$’000
31.12.10
(Audited)
US$’000
30.06.10
(Unaudited)
US$’000
Cash flows from operating activities
Net increase/(decrease) in net assets resulting from operations
117,102
(40,173)
(83,000)
Adjustments to reconcile net income to net cash used in operating activities:
Net investment expense/(income) allocated from the Master Fund
360
(14,371)
(10,214)
Net realised gain on investments allocated from the Master Fund
(112,616)
(176,269)
(152,487)
Net unrealised loss on investments allocated from the Master Fund
35,175
138,626
116,185
Purchase of investment in the Master Fund
–
(3,066)
(3,082)
Proceeds from sale of investment in the Master Fund
16,677
30,375
11,266
Foreign exchange (gains)/losses
(69,426)
57,417
108,632
Increase in prepaid expenses
(71)
(13)
(95)
Increase in performance fees payable
10,543
626
3,975
Increase/(decrease) in management fees payable
148
(173)
(328)
Decrease in accrued expenses and other liabilities
(2)
(269)
(278)
Increase in directors’ fees payable
14
18
3
Increase/(decrease) in administration fees payable
5
(4)
(9)
Net cash used in operating activities
(2,091)
(7,276)
(9,432)
Cash flows from financing activities
Proceeds on issue of shares from treasury
–
4,200
4,200
Net cash provided by financing activities
–
4,200
4,200
Change in cash
(2,091)
(3,076)
(5,232)
Cash, beginning of the period
3,336
6,412
6,412
Cash, end of the period
1,245
3,336
1,180
Cash, end of the period
Cash and bank balances denominated in US Dollars
1,015
1,052
1,055
Cash and bank balances denominated in Euro
88
689
52
Cash and bank balances denominated in Sterling
142
1,595
73
1,245
3,336
1,180
See accompanying notes to the Interim Unaudited Financial Statements.
Notes to the Interim Unaudited Financial Statements
For the period from 1 January 2011 to 30 June 2011
1. The Company
The Company is a limited liability closed-ended investment company incorporated in Guernsey on 17 January 2007 for an unlimited period, with registration number 46235.
The Company was admitted to a Secondary Listing (Chapter 14) on the Official List of the London Stock Exchange on 14 March 2007. On 11 March 2008, the Company migrated from the Secondary Listing to a Primary Listing pursuant to Chapter 15 of the Listing Rules of the UK Listing Authority. As a result of changes to the UK Listing Regime, the Company’s Primary Listing became a Premium Listing with effect from 6 April 2010.
As of 20 October 2008 the Company obtained a Secondary Listing on the Bermuda Stock Exchange and with effect from 11 November 2008, the US Dollar shares of the Company were admitted to a Secondary Listing on NASDAQ Dubai.
The Company offers multiple classes of ordinary shares, which differ in terms of currency of issue. To date, ordinary shares have been issued in US Dollar, Euro and Sterling.
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 US Dollar, Euro and Sterling denominated Class B shares issued by the Master Fund.
The Master Fund is an open-ended investment company with limited liability formed under the laws of the Cayman Islands on 22 January 2003. The investment objective of the Master Fund is to generate consistent long-term appreciation through active leveraged trading and investment on a global basis. The Master Fund employs a combination of investment strategies that focus primarily on economic change and monetary policy and market inefficiencies. The underlying philosophy is to construct strategies, often contingent in nature with superior risk/return profiles, whose outcome will often be crystallised by an expected event occurring within a pre-determined period of time. New trading strategies will be added as investment opportunities present themselves.
At the date of these Financial Statements, there were two other feeder funds in operation in addition to the Company that invest all of their assets (net of working capital) in the Master Fund.
The Interim Unaudited Financial Statements of the Master Fund should be read alongside the Company’s Financial Statements.
The Manager
Brevan Howard Capital Management LP (the “Manager”) is the Manager of the Company. The Manager is a Jersey limited partnership, the general partner of which is Brevan Howard Capital Management Limited, a Jersey limited company (the “General Partner”). The General Partner is regulated in the conduct of fund services business by the Jersey Financial Services Commission pursuant to the Collective Investment Funds (Jersey) Law, 1988 and the Orders made thereunder.
The Manager also manages the Master Fund and in that capacity, as at the date of these 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 (Israel) Limited, Brevan Howard Investments Products Limited and DW Investment Management LP.
The Annual Audited Financial Statements, which give a true and fair view, are prepared in conformity with accounting principles generally accepted in the United States of America and comply with The Companies (Guernsey) Law, 2008. The accompanying Interim Unaudited Financial Statements have been prepared following the same accounting policies and methods of computation as the most recent Annual Audited Financial Statements. The reporting currency of the Company is US Dollars.
The following are the significant accounting policies adopted by the Company:
Valuation of investments
The Company records its investment in the Master Fund at fair value. At 30 June 2011 the Company’s US Dollar, Euro and Sterling capital accounts represented 2.28%, 1.35% and 4.50% respectively of the Master Fund’s capital (at 31 December 2010: 2.54%, 1.56% and 4.40% and at 30 June 2010: 2.61%, 1.44% and 3.23%).
Fair value measurement
Accounting Standards Codification (“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.
ASC 820 establishes a three-level hierarchy to maximise the use of observable market data and minimise the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity.
Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgement.
Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgement by the Company’s Directors. The Directors consider observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The categorisation of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the Directors’ perceived risk of that instrument.
Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Directors’ own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Directors use prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.
The valuation and classification of securities held by the Master Fund is discussed in the notes to the Master Fund’s Financial Statements which are available on the Company’s website, www.bhmacro.com.
Income and expenses
The Company records monthly its proportionate share of the Master Fund’s income, expenses and realised and unrealised gains and losses. In addition, the Company accrues its own income and expenses.
Use of estimates
The preparation of Financial Statements in conformity with accounting principles generally accepted in the United States of America 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 those 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.
Share issue expenses
During 2007, share issue expenses of US$42,220,026 (the “Offer Costs”) were borne by the Manager and are payable by the Company to the Manager should the management agreement terminate for certain grounds in whole or with respect to any class of share during the period ending on the seventh anniversary of admission, being 14 March 2014.
Pursuant to the terms of the Management Agreement dated 13 February 2009, the Company must repay to the Manager a fraction of these Offer Costs for every US Dollar by which repurchases, redemptions or cancellations of the Company’s shares reduce the Current US Dollar NAV of the Company below its NAV at the time of the Company’s listing, being US$1,080,740,459. The Current US Dollar NAV is calculated using the exchange rates ruling at the time of the Company’s listing.
The amount of these Offer Costs to be repaid for every US Dollar by which the Company’s NAV is reduced will be US$0.0391, being the figure obtained by dividing the Offer Costs by the NAV of the Company at the time of its listing.
The Directors consider the likelihood of this contingent liability crystallising as remote and hence no provision has been made within these Financial Statements.
The Directors confirm there are no other contingent liabilities that require disclosure or provision.
Leverage
The Manager has discretion, subject to the prior approval of a majority of the independent Directors, to employ leverage for and on behalf of the Company by way of borrowings to effect share purchases or share buy-backs, to satisfy working capital requirements and to finance further investments in the Master Fund.
The Company may borrow up to 20% of its NAV, calculated as at the time of borrowing. Additional borrowing over 20% of NAV may only occur if approved by an ordinary resolution of the shareholders.
Foreign exchange
Investment securities and other assets and liabilities of the Sterling and Euro share classes are translated into US Dollars, the Company’s reporting currency, using exchange rates at the reporting date. Transactions reported in the Unaudited Statement of Operations are translated into US Dollar amounts at the date of such transactions. The share capital and other capital reserve accounts are translated at the historic rate ruling at the date of the transaction. Exchange differences arising on translation are included in the Statement of Operations. This adjustment has no effect on the value of net assets allocated to the individual share classes.
Treasury shares
Where the Company purchases its own share capital, the consideration paid, which includes any directly attributable costs, is recognised as a deduction from equity shareholders’ funds through the Company’s reserves.
When such shares are 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. Shares held in treasury are excluded from calculations when determining NAV per share as detailed in note 7 or in the Financial Highlights in note 9.
Management and performance fee
The Company has entered into a management agreement with the Manager to manage the Company’s investment portfolio. The Manager receives a management fee of 1/12 of 2% (or a pro rata proportion thereof) per month of the closing NAV (before deduction of that month’s management fee and before making any deduction for any accrued performance fee) as at the last valuation day in each month, payable monthly in arrears. The investment in the Class B shares of the Master Fund is not subject to management fees. During the period ended 30 June 2011, US$17,355,262 (31 December 2010: US$32,604,496 and 30 June 2010: US$15,995,030) was charged by the Manager as management fees. At 30 June 2011, US$2,931,759 (31 December 2010: US$2,783,815 and 30 June 2010: US$2,628,883) of the fee remained outstanding.
The Manager is also entitled to an annual performance fee for each share class. 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. 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 last day of the calculation period. Within 15 business days following 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. The investment in the Class B shares of the Master Fund is not subject to performance fees.
The portion of any performance fee accrued in respect of a class of shares that relates to the portion of shares of the relevant class which are redeemed, repurchased, converted into another class of shares or cancelled during the calculation period will crystallise and shall be paid to the Manager at the same time as any performance fees in respect of the entire relevant calculation period. During the period ended 30 June 2011, US$11,295,357 (31 December 2010: US$548,097 and 30 June 2010: US$3,999,625) was charged by the Manager as performance fees. At 30 June 2011 US$11,090,174 (31 December 2010: US$546,948 and 30 June 2010: US$3,895,738) of the fee remained outstanding.
The Master Fund may hold investments in other funds managed by the Manager. To ensure that shareholders of the Company are not subject to two tiers of fees, the fees paid to the Manager as outlined above are reduced by the Company’s share of any fees paid to the Manager by the underlying Master Fund investments, managed by the Manager.
The management agreement may be terminated by either party giving the other party not less than 24 months written notice. In certain circumstances the Company will be obliged to pay compensation to the Manager of the aggregate management fees which would otherwise have been payable during the 24 months following the date of such notice and the aggregate of any accrued performance fee in respect of the current Calculation Period. Compensation is not payable if more than 24 months notice of termination is given.
Administration fee
The Company has appointed Northern Trust International Fund Administration Services (Guernsey) Limited as Administrator, Registrar and Corporate Secretary. The Administrator is paid fees based on the NAV of the Company, payable quarterly. The fee is at a rate of 0.015% of the average month end NAV of the Company, subject to a minimum fee of £67,500 per annum. In addition to the NAV based fee the Administrator is also entitled to an annual fee of £36,000 for certain additional administration services. The Administrator is entitled to be reimbursed out-of-pocket expenses incurred in the course of carrying out its duties as Administrator.
Issued and authorised share capital
The Company was incorporated with the authority to issue an unlimited number of ordinary shares with no par value which may be divided into at least three classes denominated in US Dollars, Euros and Sterling. The treasury shares have arisen as a result of the discount management programme as described in note 8.
For the period from 1 January 2011 to 30 June 2011
US Dollar shares
Euro shares
Sterling shares
Number of ordinary shares
In issue at 1 January 2011
31,841,026
14,780,360
34,283,784
Share conversions
(585,340)
(2,012,675)
2,046,811
In issue at 30 June 2011
31,255,686
12,767,685
36,330,595
Number of treasury shares
In issue at 1 January 2011
3,438,476
1,572,013
877,595
Shares cancelled
–
(350,000)
–
In issue at 30 June 2011
3,438,476
1,222,013
877,595
Percentage of class
9.91%
8.74%
2.36%
For the year from 1 January 2010 to 31 December 2010
US Dollar shares
Euro shares
Sterling shares
Number of ordinary shares
In issue at 1 January 2010
40,728,777
17,280,342
26,356,443
Share conversions
(8,887,751)
(2,499,982)
7,777,341
Sale of treasury shares
–
–
150,000
In issue at 31 December 2010
31,841,026
14,780,360
34,283,784
Number of treasury shares
In issue at 1 January 2010
4,438,476
1,572,013
1,027,595
Sale of treasury shares
–
–
(150,000)
Shares cancelled
(1,000,000)
–
–
In issue at 31 December 2010
3,438,476
1,572,013
877,595
Percentage of class
9.75%
9.61%
2.50%
For the period from 1 January 2010 to 30 June 2010
US Dollar shares
Euro shares
Sterling shares
Number of ordinary shares
In issue at 1 January 2010
40,728,777
17,280,342
26,356,443
Share conversions
(3,910,114)
(733,132)
3,192,501
Sale of treasury shares
–
–
150,000
In issue at 30 June 2010
36,818,663
16,547,210
29,698,944
Number of treasury shares
In issue at 1 January 2010
4,438,476
1,572,013
1,027,595
Sale of treasury shares
–
–
(150,000)
Shares cancelled
(1,000,000)
–
–
In issue at 30 June 2010
3,438,476
1,572,013
877,595
Percentage of class
8.54%
8.68%
2.87%
US Dollar shares
Euro shares
Sterling shares
Company Total
Share capital account
US$’000
€’000
£’000
US$’000
At 31 December 2010
53,883
31,754
17,188
133,549
At 30 June 2011
53,883
31,754
17,188
133,549
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, Master Fund Euro shares and Master Fund Sterling shares as calculated by the Master Fund is allocated to the relevant class account in the Company. Each class account is allocated those costs, pre-paid expenses, losses, dividends, profits, gains and income which the Directors determine in their sole discretion relate to a particular class.
Voting rights of shares
Ordinary shares carry the right to vote at general meetings of the Company and to receive any dividends, attributable to the ordinary shares as a class, declared by the Company and, in a winding-up will be entitled to receive, by way of capital, any surplus assets of the Company attributable to the ordinary shares as a class in proportion to their holdings remaining after settlement of any outstanding liabilities of the Company.
As prescribed in the Company’s Articles, the different classes of ordinary shares have different values attributable to their votes. The attributed values have been calculated on the basis of the Weighted Voting Calculation (as described in the Articles) which takes into account the prevailing exchange rates on the date of initial issue of ordinary shares. Currently, on a vote, a single US Dollar ordinary share has 0.7606 votes, a single Euro ordinary share has one vote and a single Sterling ordinary share has 1.4710 votes.
Treasury shares do not have any voting rights.
Repurchase of ordinary shares
The Directors have been granted authority to purchase in the market up to 14.99% of each class of shares and they intend to seek annual renewal of this authority from shareholders which was last granted on 20 June 2011. The Directors may, at their discretion, utilise this share repurchase authority to address any imbalance between the supply of and demand for shares.
Under the Company’s Articles, shareholders of a class of shares also have the ability to call for repurchase of that class of shares in certain circumstances. See note 8 for further details.
Further issue of shares
As approved by the shareholders at the Annual General Meeting held on 20 June 2011, the Directors have the power to issue further shares on a non pre-emptive basis for cash in respect of 3,501,983 US Dollar shares, 1,441,278 Euro shares and 3,665,355 Sterling shares respectively. This power expires on the conclusion of the next Annual General Meeting of the Company unless such power is varied, revoked or renewed prior to that Meeting by a special resolution of the Company in general meeting.
Distributions
The Master Fund has not previously paid dividends to its investors and does not expect to do so in the future. Therefore, the Directors of the Company do not expect to declare any dividends. 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.
Treasury shares are not entitled to distributions.
Annual redemption offer
Once in every calendar year the Directors may, in their absolute discretion, determine that the Company shall make an offer to redeem such number of shares of the Company in issue as they may 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 shall, in their absolute discretion, determine the particular class or classes of shares in respect of which an Annual Redemption Offer will be made, the timetable for that Annual Redemption Offer and the price at which the shares of each relevant class will be redeemed.
Whether a partial return of capital is made in any particular year and, if so, the amount of the return, may 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.
The Directors determined not to make an Annual Redemption Offer during 2011.
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 another 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 Financial Statements. Income tax and related interest and penalties would be recognised by the Company as tax expense in the 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 the Cayman Islands and foreign jurisdictions where the Company makes significant investments. The Company has no examinations by tax authorities in progress.
The Directors have analysed the Company’s tax positions, and have concluded that no liability for unrecognised tax benefits should be recorded related to uncertain tax positions. Further, the Directors are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognised tax benefits will significantly change in the next twelve months.
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.
The Company’s discount management programme includes the ability to make market purchases of shares and the obligation to propose class closure resolutions if, in any fixed discount management period (1 January to 31 December each year), the average daily closing market price of the relevant class of shares during such period is 10% or more below the average NAV per share of the relevant class taken over the 12 monthly NAV Determination Dates in that fixed discount management period, as described more fully in the Company’s principal documents.
In the event a class closure resolution is proposed, shareholders in that class have the following options available to them:
(i) to redeem all or some of their shares at NAV per share less the costs and expenses of the class closure vote and other outstanding costs and expenses of the Company attributable to the relevant class (including any redemption fees and repayment of Offer Costs as described in note 3);
(ii) subject to certain limitations, to convert all or some of their shares into shares of another class, assuming that other class does not also pass a class closure resolution; or
(iii) subject to the class continuing, to remain in the class.
These provisions are disclosed in more detail in the Company’s Articles.
The Annual Redemption Offer described in note 5 which enables a partial return of capital is also part of the discount management programme.
The discount management measures will be funded by partial redemptions of the Company’s investment in the Master Fund.
During the period the Company did not make use of its ability to make market purchases of its shares.
The total number of shares held in treasury at 30 June 2011 are as disclosed in note 5.
The following tables include selected data for a single ordinary share of each of the ordinary share classes in issue at the period end and other performance information derived from the Financial Statements.
The per share amounts and ratios which are shown reflect the income and expenses of the Company for each class of ordinary share.
30.06.11
30.06.11
30.06.11
US Dollar shares
Euro shares
Sterling shares
US$
€
£
Per share operating performance
Net asset value at beginning of the period
17.24
17.29
17.73
Income from investment operations
Net investment loss*
(0.28)
(0.30)
(0.27)
Net realised and unrealised gain on investment
0.69
0.81
0.71
Other capital items**
–
(0.04)
0.01
Total return*
0.41
0.47
0.45
Net asset value, end of the period
17.65
17.76
18.18
Total return before performance fee
2.92%
3.33%
3.15%
Performance fee
(0.54%)
(0.61%)
(0.61%)
Total return after performance fee
2.38%
2.72%
2.54%
Total return reflects the net return for an investment made at the beginning of the period and is calculated as the change in the NAV per ordinary share during the period from 1 January 2011 to 30 June 2011. An individual shareholder’s return may vary from these returns based on the timing of their purchase or sale of shares.
30.06.11
30.06.11
30.06.11
US Dollar shares
Euro shares
Sterling shares
US$’000
€’000
£’000
Supplemental data
Net asset value, end of the period
551,732
226,810
660,353
Average net asset value for the period
552,284
239,577
639,442
30.06.11
30.06.11
30.06.11
US Dollar shares
Euro shares
Sterling shares
Ratio to average net assets
Operating expenses
Company expenses***
0.94%
0.92%
0.95%
Master Fund expenses****
0.62%
0.60%
0.62%
Master Fund interest expense*
1.06%
1.03%
1.06%
Performance fee
0.54%
0.61%
0.61%
3.16%
3.16%
3.24%
Net investment loss before performance fees*
(0.96%)
(0.94%)
(0.96%)
Net investment loss after performance fees*
(1.50%)
(1.55%)
(1.57%)
31.12.10
31.12.10
31.12.10
US Dollar shares
Euro shares
Sterling shares
US$
€
£
Per share operating performance
Net asset value at beginning of the year
17.08
17.13
17.55
Income from investment operations
Net investment loss*
(0.20)
(0.20)
(0.18)
Net realised and unrealised gain on investment
0.37
0.38
0.35
Other capital items**
(0.01)
(0.02)
0.01
Total return*
0.16
0.16
0.18
Net asset value, end of the year
17.24
17.29
17.73
Total return before performance fee
0.93%
0.95%
1.07%
Performance fee
(0.02%)
(0.02%)
(0.04%)
Total return after performance fee
0.91%
0.93%
1.03%
Total return 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 2010 to 31 December 2010. An individual shareholder’s return may vary from these returns based on the timing of their purchase or sale of shares.
31.12.10
31.12.10
31.12.10
US Dollar shares
Euro
shares
Sterling shares
US$’000
€’000
£’000
Supplemental data
Net asset value, end of the year
548,841
255,494
607,867
Average net asset value for the year
624,310
274,587
533,871
31.12.10
31.12.10
31.12.10
US Dollar shares
Euro
shares
Sterling shares
Ratio to average net assets
Operating expenses
Company expenses***
1.86%
1.85%
1.92%
Master Fund expenses****
0.80%
0.81%
0.84%
Master Fund interest expense*
1.22%
1.24%
1.30%
Performance fee
0.02%
0.02%
0.04%
3.90%
3.92%
4.10%
Net investment loss before performance fees*
(1.06%)
(1.08%)
(1.11%)
Net investment loss after performance fees*
(1.08%)
(1.10%)
(1.15%)
30.06.10
US Dollar
shares
US$
30.06.10
Euro
shares
€
30.06.10
Sterling
shares
£
Per share operating performance
Net asset value at beginning of the period
17.08
17.13
17.55
Income from investment operations
Net investment loss*
(0.10)
(0.10)
(0.09)
Net realised and unrealised gain on investment
0.33
0.32
0.37
Other capital items**
0.01
0.02
(0.02)
Total return*
0.24
0.24
0.26
Net asset value, end of the period
17.32
17.37
17.81
Total return before performance fee
1.64%
1.63%
1.71%
Performance fee
(0.23%)
(0.23%)
(0.23%)
Total return after performance fee
1.41%
1.40%
1.48%
Total return reflects the net return for an investment made at the beginning of the period and is calculated as the change in the NAV per ordinary share during the period from 1 January 2010 to 30 June 2010. Total return is not annualised. An individual shareholder’s return may vary from these returns based on the timing of their purchase or sale of shares.
30.06.10
US Dollar shares US$’000
30.06.10
Euro shares €’000
30.06.10
Sterling shares £’000
Supplemental data
Net asset value, end of the period
637,813
287,406
528,850
Average net asset value for the period
667,745
281,367
491,319
30.06.10
30.06.10
30.06.10
US Dollar shares
Euro shares
Sterling shares
Ratio to average net assets
Operating expenses
Company expenses***
0.93%
0.92%
0.96%
Master Fund expenses****
0.35%
0.35%
0.35%
Master Fund interest expense*
0.44%
0.45%
0.46%
Performance fee
0.20%
0.22%
0.24%
1.92%
1.94%
2.01%
Net investment loss before performance fees*
(0.37%)
(0.36%)
(0.35%)
Net investment loss after performance fees*
(0.57%)
(0.58%)
(0.59%)
Notes:
* The net investment loss figures disclosed above, in the Directors’ opinion and in accordance with the Company’s investment objectives, do not reflect the Company’s overall performance. Considering the investment objectives of the Company, the Directors consider that the total return of the Company is a true reflection of the Company’s overall performance during the period.
** Included in other capital items are the discounts and premiums on conversions between share classes and on the sale of treasury shares as compared to the NAV per share at the beginning of the period.
*** Company expenses are as disclosed in the Unaudited Statement of Operations excluding the performance fee.
**** Master Fund expenses are the operating expenses of the Master Fund excluding the interest and dividend expenses of the Master Fund.
* Master Fund interest expense includes interest and dividend expenses on investments sold short.
Management and performance fees are disclosed in note 4.
Directors’ fees are disclosed in the Directors’ Remuneration Report.
Directors’ interests are disclosed in the Directors’ Report and also the Board Members section.
The Directors have evaluated subsequent events up to 24 August 2011, which is the date that the Financial Statements were available to be issued, and have concluded there are no further items that require disclosure or adjustment to the Financial Statements.
Historic Performance Summary
As at 30 June 2011
30.06.11 US$’000
31.12.10 US$’000
31.12.09 US$’000
31.12.08 US$’000
31.12.07* US$’000
Net increase/(decrease) in net assets resulting from operations
117,102
(40,173)
342,882
152,032
277,999
Total assets
1,955,116
1,827,306
1,863,160
1,643,056
1,492,920
Total liabilities
(14,336)
(3,628)
(3,509)
(2,936)
(4,832)
Net assets
1,940,780
1,823,678
1,859,651
1,640,120
1,488,088
Number of shares in issue
US Dollar shares
31,255,686
31,841,026
40,728,777
54,992,632
53,877,466
Euro shares
12,767,685
14,780,360
17,280,342
21,470,815
28,736,067
Sterling shares
36,330,595
34,283,784
26,356,443
19,075,361
13,958,236
Net asset value per share
US Dollar shares
US$17.65
US$17.24
US$17.08
US$14.47
US$12.03
Euro shares
€17.76
€17.29
€17.13
€14.47
€11.89
Sterling shares
£18.18
£17.73
£17.55
£14.87
£12.07
Company Information
Directors
Ian Plenderleith (Chairman)*
Huw Evans*
Anthony Hall*
Christopher Legge (Senior Independent Director)*
Talmai Morgan
Stephen Stonberg
All Directors are non-executive.
Registered Office
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
Channel Islands GY1 3QL
Manager
Brevan Howard Capital Management LP
4th Floor
One Esplanade
St. Helier
Jersey
Channel Islands JE2 3QA
Administrator, Registrar and Corporate Secretary
Northern Trust International Fund
Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
Guernsey
Channel Islands GY1 3QL
Independent Auditor
KPMG Channel Islands Limited
20 New Street
St Peter Port
Guernsey
Channel Islands GY1 4AN
CREST Service Provider
Computershare Investor Services (Channel Islands) Limited
Ordnance House
31 Pier Road
St Helier
Jersey
Channel Islands JE4 8PW
Legal Advisors (Guernsey Law)
Carey Olsen
Carey House
Les Banques
St. Peter Port
Guernsey
Channel Islands GY1 4BZ
Legal Advisors (UK and US Law)
Freshfields Bruckhaus Deringer
65 Fleet Street
London EC4Y 1HS
Corporate Broker
J.P. Morgan Securities Limited
125 London Wall
London EC2y 5AJ
For the latest information www.bhmacro.com
The Interim Unaudited Financial Statements of BH Macro Limited and the Interim Unaudited Financial Statements of Brevan Howard Master Fund Limited will shortly be available on BH Macro’s website www.bhmacro.com
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