Brevan Howard Master Fund Limited Annual Audited Consolidated Financial Statements 2015 (with Independent Auditors Report thereon)

Transcription

1 Brevan Howard Master Fund Limited Annual Audited Consolidated Financial Statements 2015 (with Independent Auditors Report thereon) ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 Brevan Howard Capital Management LP, the commodity pool operator of Brevan Howard Master Fund Limited, has filed a claim of exemption with the Commodity Futures Trading Commission ( CFTC ) in respect of Brevan Howard Master Fund Limited pursuant to Section 4.7 of the CFTC regulations.

2 Contents 01 Independent Auditors Report 02 Consolidated Statement of Assets and Liabilities 03 Consolidated Condensed Schedule of Investments 16 Consolidated Statement of Operations 17 Consolidated Statement of Changes in Net Assets 18 Consolidated Statement of Cash Flows 19 Notes to the Consolidated Financial Statements 38 Affirmation of the Commodity Pool Operator IBC Management and Administration

3 INDEPENDENT AUDITORS REPORT ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS Independent Auditors Report to the Directors and Shareholders on the Consolidated Financial Statements of Brevan Howard Master Fund Limited We have audited the accompanying consolidated financial statements of Brevan Howard Master Fund Limited (the Master Fund ), which comprise the consolidated statement of assets and liabilities, including the consolidated condensed schedule of investments as of 31 December 2015, and the related consolidated statements of operations, changes in net assets, and cash flows for the year then ended, and the related notes to the financial statements. This report is made solely to the Directors and Shareholders, as a body, in accordance with the terms of our engagement. Our audit work has been undertaken so that we might state to the Directors and Shareholders those matters we are required to state to them in an auditors report and for no other purpose. We do not accept or assume responsibility to anyone other than the Directors and Shareholders, for our audit work, for this report, or for the opinions we have formed. Opinion In our opinion, the consolidated financial statements referred to above present fairly in all material respects, the consolidated financial position of the Master Fund as of 31 December 2015, and the results of its consolidated operations, the changes in its consolidated net assets and its consolidated cash flows for the year then ended in accordance with U.S. generally accepted accounting principles. 18 March 2016 Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

4 2 CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2015 Consolidated Statement of Assets and Liabilities 31 December US$ 000 Assets Investments at fair value (cost: US$27,247,456) (Note 3,5) 29,600,990 Cash (Note 2) 35,557 Investments purchased under agreements to resell (cost: US$4,823,469) (Note 7) 4,895,760 Redemptions receivable from investment funds 134,428 Dividends and interest receivable 60,916 Due from broker (Note 2) 4,954,339 Long-term interest-bearing subscriptions receivable (Note 14) 90,070 Other assets 1,650 Total assets 39,773,710 Liabilities Investments sold short at fair value (proceeds: US$9,488,185) (Note 3) 11,655,756 Investments sold under agreements to repurchase (proceeds: US$5,450,626) (Note 7) 5,466,765 Accounts payable and accrued expenses (Note 4,5,6) 9,485 Dividends and interest payable 48,990 Redemptions payable 521,844 Subscriptions in advance 2,926 Due to broker (Note 2) 3,462,070 Performance fee payable (Note 5) 35,654 Total liabilities 21,203,490 Net assets (Note 8,13) 18,570,220 Net asset value per share US Dollar Class A US$4, US Dollar L.P. Class A US$4, Euro Class A 4, Sterling Class A 5, Yen Class A 15, Australian Dollar Class A AUD 1, Brazilian Real Class A BRL 2, Canadian Dollar Class A CAD 1, Norwegian Krone Class A NOK 1, Gold Class A XAU US Dollar Class B US$2, Euro Class B 2, Sterling Class B 2, US Dollar Class Z US$ Euro Class Z Sterling Class Z Yen Class Z 14, Cost and proceeds are presented in US$ 000. See accompanying notes to the Consolidated Financial Statements. Signed on behalf of the Board: Karla Bodden Director 18 March 2016 Dennis Hunter Director

5 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS Consolidated Condensed Schedule of Investments 31 December 2015 Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio Equities Canada (cost US$2,812) Industrial 2, Jersey (cost US$1,804) Energy Switzerland (cost US$512) Industrial United States (cost US$92,283) Basic Materials 2, Communications Consumer, Cyclical 8, Consumer, Non-Cyclical 13, Energy 45, Financial 11, Industrial 4, Technology 2, , Total equities (cost US$97,411) 94, Fixed income securities Angola (cost US$8,737) Government 8, Argentina (cost US$2,894) Government 3, Bermuda (cost US$3,064) Energy 1, Brazil (cost US$68,791) Government 67, Cameroon (cost US$10,250) Government 9, Cayman Islands (cost US$147,541) Asset Backed Securities 114, Basic Materials 9, Financial 2, Mortgage Backed Securities ,

6 4 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2015 Consolidated Condensed Schedule of Investments continued 31 December 2015 Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) Fixed income securities (continued) Chile (cost US$3,765) Basic Materials 3, Egypt (cost US$3,349) Government 3, Ethiopia (cost US$5,396) Government 5, France (cost US$158,103) Government 152, Germany (cost US$88,949) Government 89, Ghana (cost US$9,288) Government 9, Hungary (cost US$132,657) Government 133, Indonesia (cost US$13,485) Energy 13, Iraq (cost US$11,645) Government 11, Ireland (cost US$101,468) Asset Backed Securities 69, Mortgage Backed Securities 4, , Italy (cost US$388,011) Government 390,

7 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) Fixed income securities (continued) Japan (cost US$6,359,751) Government 60,000,000 JTDB 0.0% 01/12/ , ,000,000 JTDB 0.0% 01/18/ , ,000,000 JTDB 0.0% 02/22/ , ,000,000 JTDB 0.0% 03/22/ , ,000,000 JTDB 0.0% 04/11/ , ,000,000 JTDB 0.0% 04/20/ , ,000,000 JTDB 0.0% 05/20/ , ,000,000 JTDB 0.0% 06/10/ , ,000,000 JTDB 0.0% 06/22/ , ,000,000 JTDB 0.0% 07/20/ , ,000,000 JTDB 0.0% 08/22/ , ,000,000 JTDB 0.0% 09/20/ , ,000,000 JTDB 0.0% 10/20/ , ,000,000 JTDB 0.0% 11/21/ , ,387, Jersey (cost US$1,545) Asset Backed Securities 5, Kazakhstan (cost US$13,763) Government 12, Industrial , Luxembourg (cost US$13,776) Asset Backed Securities 1, Consumer, Non-Cyclical Mortgage Backed Securities 2, , Macedonia (cost US$1,579) Government 1, Marshall Islands (cost US$2,185) Industrial 1, Mexico (cost US$503) Mortgage Backed Securities 0.00 Netherlands (cost US$794,984) Asset Backed Securities 58, Energy 17, Government 697, Industrial 1, Mortgage Backed Securities ,

8 6 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2015 Consolidated Condensed Schedule of Investments continued 31 December 2015 Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) Fixed income securities (continued) Norway (cost US$149,448) Government 140, South Africa (cost US$46,821) Government 31, Utilities 16, , Spain (cost US$82,497) Government 83, Mortgage Backed Securities , Sri Lanka (cost US$21,046) Government 20, United Arab Emirates (cost US$47,889) Government 34, Industrial 13, , United Kingdom (cost US$272,696) Asset Backed Securities Financial 61, Government 151, Mortgage Backed Securities 29, , United States (cost US$14,872,286) Asset Backed Securities 281, Basic Materials 16, Communications 13, Consumer, Cyclical 23, Consumer, Non-Cyclical 2, Energy 13,

9 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) Fixed income securities (continued) United States (cost US$14,872,286) (continued) Government 10,000 B 0.0% 01/21/ , ,000 B 0.0% 02/11/ , ,000 B 0.0% 02/18/ , ,500,000 B 0.0% 03/31/2016 1,499, ,000 B 0.0% 04/28/ , ,250,000 B 0.0% 05/26/2016 1,248, ,000 B 0.0% 07/21/ , ,000 B 0.0% 04/28/ , ,675,000 B 0.0% 06/23/2016 1,671, ,200,000 B 0.0% 08/18/2016 1,196, ,450,000 B 0.0% 09/15/2016 1,445, ,000 B 0.0% 10/13/ , ,000 S 0.0% 02/15/ , ,000 T 0.5% 08/31/ , ,000 T 1.3% 12/15/ , ,000 T 1.5% 05/31/ , ,400 T 1.6% 06/30/ , ,000 T 1.8% 12/31/ , ,000 T 2.1% 08/31/ , ,400 T 2.3% 11/15/2025 1, ,700 T 2.9% 08/15/ , ,000 T 3.0% 11/15/ , ,000 TF 0.3% 07/31/ , Other 9, Industrial 5, Mortgage Backed Securities 2,876, Technology 2, Utilities 8, ,880, Venezuela (cost US$3,663) Energy 3, Zambia (cost US$1,240) Government 1, Total fixed income securities (cost US$23,843,065) 23,761,

10 8 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2015 Consolidated Condensed Schedule of Investments continued 31 December 2015 Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) Private placement Cyprus (cost US$42,364) Property 2, Israel (cost US$2,500) Technology 0.00 Italy (cost US$4,415) Financial 0.00 United States (cost US$949) Consumer, Cyclical 0.00 Total private placement (cost US$50,228) 2, Interest rate guarantee options (cost US$254,171) EUR termination dates through June , GBP termination dates through April , USD termination dates through February , , Forward rate agreements CZK termination dates through May EUR termination dates through March , HUF termination dates through December ILS termination dates through July NOK termination dates through June USD termination dates through March , ZAR termination dates through December , , Cross currency swaps AUD/USD termination dates through January GBP/USD termination dates through December , JPY/USD termination dates through September MXN/USD termination dates through June TRY/USD termination dates through March , ,

11 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) Interest rate swaps AUD termination dates through December , BRL termination dates through January , CLP termination dates through October COP termination dates through January CZK termination dates through December , EUR termination dates through September , GBP termination dates through October , HUF termination dates through October , ILS termination dates through July , JPY termination dates through June , KRW termination dates through November , MXN termination dates through March , MYR termination dates through December NOK termination dates through June , NZD termination dates through December PLN termination dates through September , SEK termination dates through November , SGD termination dates through February , TWD termination dates through July USD termination dates through June , ZAR termination dates through December , , Credit default swaps (cost US$48,914) EUR termination dates through December , USD termination dates through May , , Swaptions (cost US$1,444,376) AUD termination dates through June EUR termination dates through August , GBP termination dates through October , ILS termination dates through January JPY termination dates through October , KRW termination dates through June , USD termination dates through January , ZAR termination dates through February ,660,

12 10 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2015 Consolidated Condensed Schedule of Investments continued 31 December 2015 Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) FX contracts AUD/JPY termination dates through November , AUD/USD termination dates through December , BRL/USD termination dates through March , CHF/USD termination dates through July , CNH/USD termination dates through October , CNY/USD termination dates through November , CZK/USD termination dates through December , EUR/AUD termination dates through March , EUR/CHF termination dates through August , EUR/GBP termination dates through July , EUR/USD termination dates through June , GBP/USD termination dates through November , HUF/USD termination dates through April , JPY/USD termination dates through March , KRW/USD termination dates through October , MXN/USD termination dates through August , MYR/USD termination dates through July , RUB/USD termination dates through October , SAR/USD termination dates through June , TRY/USD termination dates through March , ZAR/USD termination dates through January , Other termination dates through December , ,440, Exchange traded futures Crude Oil termination dates through November , Eurodollar termination dates through September , Euribor termination dates through December , Other termination dates through June , , Exchange traded options (cost US$170,942) Euro termination dates through June , Eurodollar termination dates through September , Libor 3M termination dates through December , Other termination dates through March , , Commodity options (cost US$86,421) Gold termination dates through January Crude Oil termination dates through November Natural Gas termination dates through November , ,

13 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) Equity options (cost US$164,885) DJ EURO Stoxx Index termination dates through June , Hang Seng Index termination dates through December , NIKKEI 225 Index termination dates through December , Other termination dates through December , , FX options (cost US$963,733) AUD/JPY termination dates through November , AUD/USD termination dates through October , EUR/BSK termination dates through May , EUR/SEK termination dates through November , EUR/USD termination dates through December , GBP/SEK termination dates through April , GBP/USD termination dates through November , JPY/KRW termination dates through August , USD/BRL termination dates through December , USD/CAD termination dates through December , USD/CNH termination dates through January , USD/CNY termination dates through October , USD/ILS termination dates through March , USD/JPY termination dates through February , USD/RUB termination dates through December , USD/SAR termination dates through June , USD/SGD termination dates through December , USD/TRY termination dates through May , Other termination dates through November , , Investment Funds (cost US$16,917) DW Value Offshore Fund, Ltd. 27, Investments in Affiliated Funds (cost US$106,393) Brevan Howard Emerging Markets Strategies Master Fund Limited Brevan Howard Equity Strategies Master Fund Limited 3, Brevan Howard Strategic Opportunities Fund Limited 15, Brevan Howard Liquid Portfolio Strategies Dynamic Global Investment Fund 49, Brevan Howard Liquid Portfolio Strategies Dynamic US Investment Fund 49, , Equity Swaps Variance Swaps 54, Volatility Swaps 8, Total investments at fair value (cost US$27,247,456) 29,600,

14 12 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2015 Consolidated Condensed Schedule of Investments continued 31 December 2015 Fair Value % of Net Proceeds are presented in US$ 000 US$ 000 Assets Short portfolio Equities Sweden (proceeds (US$2,036)) Industrial (2,015) (0.01) Switzerland (proceeds (US$5,636)) Energy (1,819) (0.01) United Kingdom (proceeds (US$8,286)) Energy (2,623) (0.01) United States (proceeds (US$217,477)) Communications (1,861) (0.01) Consumer, Non-Cyclical (3,851) (0.02) Energy (119,385) (0.64) Funds (66,312) (0.36) Industrial (3,108) (0.02) Technology (3,594) (0.02) (198,111) (1.07) Total equities (proceeds (US$233,435)) (204,568) (1.10) Fixed income securities France (proceeds (US$169,753)) Government (163,643) (0.88) Germany (proceeds (US$2,424,479)) Government 400,000 DBR 1.5% 02/15/2023 (475,436) (2.56) 400,000 DBR 1.5% 05/15/2023 (475,610) (2.56) 500,000 DBR 1.5% 09/04/2022 (593,927) (3.20) 100,000 DBR 1.8% 07/04/2022 (120,438) (0.65) 100,000 DBR 2.0% 01/04/2022 (121,598) (0.66) 400,000 DBR 2.0% 08/15/2023 (492,403) (2.65) 75,000 DBR 2.5% 08/15/2046 (102,430) (0.55) (2,381,842) (12.83) Italy (proceeds (US$421,221)) Government (422,569) (2.28) Netherlands (proceeds (US$701,191)) Government (692,041) (3.73) Spain (proceeds (US$77,963)) Government (78,246) (0.42) Sweden (proceeds (US$58,304)) Government (57,826) (0.31)

15 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS Fair Value % of Net Proceeds are presented in US$ 000 US$ 000 Assets Short portfolio (continued) Fixed income securities (continued) United States (proceeds (US$2,543,608)) Energy (1,834) (0.01) Government (624,461) (3.36) Mortgage Backed Securities (1,907,070) (10.27) Utilities (944) (0.01) (2,534,309) (13.65) Total fixed income securities (proceeds (US$6,396,519)) (6,330,476) (34.10) Interest rate guarantee options (proceeds (US$400,711)) EUR termination dates through June 2028 (105,233) (0.57) GBP termination dates through April 2017 (6,484) (0.03) USD termination dates through February 2027 (116,619) (0.63) (228,336) (1.23) Forward rate agreements CZK termination dates through June 2016 (37) (0.00) EUR termination dates through March 2017 (2,270) (0.01) HUF termination dates through September 2016 (267) (0.00) PLN termination dates through July 2016 (224) (0.00) USD termination dates through September 2017 (15,450) (0.09) ZAR termination dates through May 2017 (5,340) (0.03) (23,588) (0.13) Cross currency swaps AUD/USD termination dates through January 2026 (519) (0.00) EUR/USD termination dates through June 2016 (389) (0.00) JPY/USD termination dates through September 2018 (19,881) (0.11) MXN/USD termination dates through June 2020 (210) (0.00) TRY/USD termination dates through March 2021 (3,280) (0.02) (24,279) (0.13) Interest rate swaps AUD termination dates through December 2025 (3,042) (0.02) BRL termination dates through January 2025 (85,403) (0.46) CAD termination dates through January 2016 (197) (0.00) CLP termination dates through August 2016 (330) (0.00) CNY termination dates through December 2017 (34) (0.00) COP termination dates through December 2017 (43) (0.00) CZK termination dates through December 2022 (876) (0.00) EUR termination dates through September 2050 (226,294) (1.22) GBP termination dates through January 2063 (247,154) (1.34) HUF termination dates through June 2020 (2,547) (0.01) ILS termination dates through June 2022 (2,633) (0.01) INR termination dates through September 2020 (528) (0.00) JPY termination dates through November 2037 (115,362) (0.62) KRW termination dates through March 2036 (18,251) (0.10) MXN termination dates through March 2026 (2,501) (0.01)

16 14 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2015 Consolidated Condensed Schedule of Investments continued 31 December 2015 Fair Value % of Net Proceeds are presented in US$ 000 US$ 000 Assets Short portfolio (continued) Interest rate swaps (continued) MYR termination dates through September 2024 (128) (0.00) NOK termination dates through June 2025 (6,721) (0.04) NZD termination dates through June 2017 (270) (0.00) PLN termination dates through December 2025 (8,269) (0.04) SEK termination dates through November 2026 (2,744) (0.02) SGD termination dates through February 2025 (3,278) (0.02) USD termination dates through May 2050 (465,957) (2.51) ZAR termination dates through December 2025 (2,204) (0.01) (1,194,766) (6.43) Credit default swaps (proceeds (US$724,229)) EUR termination dates through December 2020 (17,445) (0.09) USD termination dates through May 2063 (628,692) (3.39) (646,137) (3.48) Swaptions (proceeds (US$747,238)) EUR termination dates through August 2033 (71,241) (0.38) GBP termination dates through February 2017 (16,929) (0.09) ILS termination dates through January 2016 (16) (0.00) JPY termination dates through March 2020 (127,684) (0.69) PLN termination dates through March 2016 (466) (0.00) USD termination dates through September 2023 (348,371) (1.88) ZAR termination dates through February 2016 (15) (0.00) (564,722) (3.04) FX contracts AUD/USD termination dates through December 2016 (7,959) (0.05) BRL/USD termination dates through March 2018 (37,401) (0.20) CHF/USD termination dates through July 2018 (84,024) (0.46) CNH/USD termination dates through November 2017 (377,794) (2.04) CNY/USD termination dates through November 2016 (120,118) (0.65) CZK/USD termination dates through December 2016 (13,371) (0.07) EUR/AUD termination dates through March 2016 (5,423) (0.03) EUR/CHF termination dates through August 2017 (13,379) (0.07) EUR/CZK termination dates through March 2017 (5,722) (0.03) EUR/GBP termination dates through August 2016 (5,460) (0.03) EUR/USD termination dates through June 2027 (111,528) (0.60) GBP/USD termination dates through November 2016 (62,185) (0.33) HUF/USD termination dates through March 2016 (14,290) (0.08) JPY/USD termination dates through March 2018 (140,030) (0.75) MXN/USD termination dates through August 2016 (290,981) (1.57) MYR/USD termination dates through July 2016 (19,328) (0.10) RUB/USD termination dates through October 2016 (31,480) (0.17) SAR/USD termination dates through June 2018 (17,453) (0.09) TRY/USD termination dates through March 2016 (35,813) (0.19) ZAR/USD termination dates through January 2017 (14,384) (0.08) Other termination dates through December 2018 (33,958) (0.18) (1,442,081) (7.77)

17 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS Fair Value % of Net Proceeds are presented in US$ 000 US$ 000 Assets Short portfolio (continued) Exchange traded futures Crude Oil termination dates through November 2018 (16,663) (0.09) Euribor termination dates through December 2019 (10,918) (0.06) Euro termination dates through March 2016 (15,969) (0.09) Euroschatz termination dates through March 2016 (13,542) (0.07) Short Sterling termination dates through December 2018 (5,603) (0.03) Other termination dates through March 2020 (18,103) (0.10) (80,798) (0.44) Exchange traded options (proceeds (US$143,010)) Euribor termination dates through June 2017 (45,031) (0.24) Euro termination dates through September 2016 (35,269) (0.19) Eurodollar termination dates through June 2018 (79,229) (0.43) Libor 3M termination dates through December 2016 (19,787) (0.11) Other termination dates through September 2016 (6,440) (0.03) (185,756) (1.00) Commodity options (proceeds (US$7,363)) Crude Oil termination dates through November 2016 (2,276) (0.01) Equity options (proceeds (US$166,581)) DJ EURO Stoxx Index termination dates through June 2016 (26,953) (0.15) Hang Seng Index termination dates through December 2016 (14,923) (0.08) NIKKEI 225 Index termination dates through December 2016 (10,013) (0.05) S&P 500 E termination dates through June 2016 (42,880) (0.23) Other termination dates through March 2016 (82) (0.00) (94,851) (0.51) FX options (proceeds (US$669,099)) AUD/JPY termination dates through November 2018 (8,833) (0.05) AUD/USD termination dates through June 2016 (9,780) (0.06) EUR/SEK termination dates through November 2016 (23,795) (0.13) EUR/USD termination dates through September 2017 (167,091) (0.90) GBP/USD termination dates through November 2016 (19,490) (0.10) USD/BRL termination dates through December 2016 (23,987) (0.13) USD/CAD termination dates through December 2016 (113,899) (0.61) USD/CNH termination dates through December 2016 (89,871) (0.48) USD/JPY termination dates through February 2024 (83,865) (0.45) USD/RUB termination dates through February 2016 (9,251) (0.05) USD/SAR termination dates through June 2018 (54,485) (0.29) Other termination dates through November 2017 (22,074) (0.12) (626,421) (3.37) Variance Swaps (4,490) (0.02) Volatility Swaps (2,211) (0.01) Total investments sold short at fair value (proceeds (US$9,488,185)) (11,655,756) (62.77) See accompanying notes to the Consolidated Financial Statements.

18 16 CONSOLIDATED STATEMENT OF OPERATIONS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2015 Consolidated Statement of Operations For the year ended 31 December US$ 000 Investment income Interest income 442,186 Dividend income (net of withholding tax of US$753) 3,086 Total income 445,272 Expenses Interest expense 221,091 Professional fees and other 5,921 Operational services fee (Note 4) 98,537 Management fee (Note 5) 25,777 Administration fee (Note 6) 24,349 Commissions on futures and options 58,867 Dividend expense on investments sold short 5,612 Performance fee (Note 5) 35,654 Total expenses 475,808 Net investment loss (30,536) Net realised and unrealised gain/(loss) on investments Net realised gain on investments (Note 2) 477,689 Net change in unrealised depreciation on investments (Note 2) (637,550) Net realised and unrealised loss on investments (159,861) Net decrease in net assets resulting from operations (190,397) Withholding tax is presented in US$ 000. See accompanying notes to the Consolidated Financial Statements.

19 CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statement of Changes in Net Assets For the year ended 31 December US$ 000 Net decrease in net assets resulting from operations Net investment loss (30,536) Net realised gain on investments 477,689 Net change in unrealised depreciation on investments (637,550) (190,397) Share Capital Transactions Issue of shares US Dollar Class A 943,353 US Dollar L.P. Class A 288,453 Euro Class A 77,818 Sterling Class A 487,715 Yen Class A 50,755 Australian Dollar Class A 330 Brazilian Real Class A 5,298 Canadian Dollar Class A 12 Norwegian Krone Class A 24 Singapore Dollar Class A 5 Gold Class A 7 US Dollar Class B 23,380 Euro Class B 5,573 Sterling Class B 22,412 US Dollar Class Z 202,451 Sterling Class Z 258,495 Redemption of shares US Dollar Class A (2,954,997) US Dollar L.P. Class A (618,558) Euro Class A (230,728) Sterling Class A (462,259) Yen Class A (203,101) Australian Dollar Class A (39,009) Brazilian Real Class A (815) Canadian Dollar Class A (37,116) Norwegian Krone Class A (40,971) Singapore Dollar Class A (35,600) Gold Class A (795) US Dollar Class B (59,431) Euro Class B (30,227) Sterling Class B (196,952) US Dollar Class Z (576,132) Euro Class Z (1,611) Sterling Class Z (427,224) Yen Class Z (24,660) Net decrease in net assets (3,764,502) Net assets beginning of year 22,334,722 Net assets end of year 18,570,220 See accompanying notes to the Consolidated Financial Statements.

20 18 CONSOLIDATED STATEMENT OF CASH FLOWS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2015 Consolidated Statement of Cash Flows For the year ended 31 December US$ 000 Cash flows from operating activities: Net decrease in net assets resulting from operations (190,397) Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: Decrease in investments at fair value 15,648,814 Decrease in investments purchased under agreements to resell 293,001 Increase in redemptions receivable from investment funds (134,428) Decrease in dividends and interest receivable 42,865 Decrease in other assets 1,153 Decrease in due from broker 231,056 Decrease in investments sold short at fair value (4,976,644) Decrease in due to broker (2,433,127) Increase in accounts payable and accrued expenses 2,774 Decrease in dividends and interest payable (14,666) Decrease in performance fee payable (7,751) Net cash provided by operating activities 8,462,650 Cash flows from financing activities Proceeds on issue of shares 2,368,089 Payments on redemption of shares (6,705,911) Decrease in investments purchased under agreements to resell 1,473,990 Decrease in investments sold under agreements to repurchase (5,563,547) Net cash used in financing activities (8,427,379) Net increase in cash 35,271 Cash beginning of year 286 Cash end of year 35,557 Non-cash financing activities not included herein consist of: Movement in long-term interest-bearing subscriptions receivable of US$788,851. Movement in redemptions payable of US$(765,724,990). See accompanying notes to the Consolidated Financial Statements.

21 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements 31 December Organisation Brevan Howard Master Fund Limited (the Master Fund ) is an exempted limited liability company which was incorporated under the Companies Law of the Cayman Islands on 22 January 2003 and commenced trading on 1 April The Master Fund registered under the Mutual Funds Law of the Cayman Islands on 4 March The Master Fund seeks to generate consistent long-term appreciation through active leveraged trading and investment on a global basis. The Master Fund s investment strategy is comprised of global investment strategies and a number of long and short strategies that may have directional risk. Brevan Howard Capital Management LP (the Manager ), acting through its sole general partner, Brevan Howard Capital Management Limited, is the Manager of the Master Fund. The Manager has registered as a Commodity Pool Operator with the United States Commodity Futures Trading Commission with effect from 1 January 2013 in respect of the Master Fund. The Manager has appointed each of: (i) Brevan Howard Asset Management LLP ( BHAM ); (ii) Brevan Howard Investment Products Limited ( BHIPL ); (iii) Brevan Howard (Hong Kong) Limited; (iv) Brevan Howard (Israel) Limited; (v) DW Partners, LP (formerly DW Investment Management, LP); (vi) BH-DG Systematic Trading LLP; and (vii) Brevan Howard US Investment Management, LP as Investment Managers (the Investment Managers ), of the Master Fund s assets, in each case subject to risk oversight and treasury management by BHIPL and/ or BHAM. The Manager may in future appoint additional Investment Managers provided that they are affiliates of the Manager and subject to risk oversight by the Manager or one of its affiliates. The Manager and the Investment Managers (and/ or their members, Directors, employees, related entities and connected persons and their respective members, Directors and employees) may subscribe, directly or indirectly, for shares and/ or interests in the Master Fund s feeder funds. The feeder funds comprise of Brevan Howard Fund Limited, Brevan Howard L.P. and BH Macro Limited (together the Feeder Funds ). The registered office of the Master Fund is at M&C Corporate Services Limited, P.O. Box 309, George Town, Grand Cayman KY1-1104, Cayman Islands. 2. Significant accounting policies Basis of preparation The accompanying Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America ( US GAAP ). The Consolidated Financial Statements are presented in United States Dollars ( US$ or US Dollar ). For financial statement reporting purposes, the Master Fund is an investment company and follows Financial Services Investment Companies (ASC 946). The Master Fund did not provide financial support to any related parties or investee entities during the current year over and above the normal course of business. Standards and amendments to existing standards effective in the year beginning 1 January 2015 In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update ( ASU ) No , Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. ASU No changes the accounting for repurchase- and resale-to-maturity agreements by requiring that such agreements be recognised as financing arrangements, and requires that a transfer of a financial asset and a repurchase agreement entered into contemporaneously be accounted for separately. ASU No also requires additional disclosures about certain transferred financial assets accounted for as sales and certain securities financing transactions. The accounting changes and additional disclosures were effective and required for annual reporting periods beginning after December 15, The quantitative and qualitative disclosures required under the standard are set out in notes 7 and 10 respectively. Adoption did not affect the Master Fund s financial condition, results of operations, or cash flows. In May 2015, the Financial Accounting Standards Board issued Accounting Standards Update ( ASU ) No , Fair Value Measurement (Topic 820) Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). ASU No requires that investments for which the fair value is measured at NAV using the practical expedient (investments in funds measured at NAV) under Fair Value Measurements and Disclosures (Topic 820) be excluded from the fair value hierarchy. ASU No is effective for interim and annual reporting periods beginning after December 15, ASU No is required to be applied retrospectively to all periods presented beginning in the period of adoption. The Master Fund early adopted ASU No , and adoption did not affect the Master Fund s financial condition, results of operations, or cash flows. Basis of consolidation In accordance with the accounting guidance in the AICPA Audit and Accounting Guide (2015); Investment Companies (the Guide ), as an Investment Company, the Master Fund carries all investments at fair value, with the exception of the investments detailed in the paragraph below. The Master Fund has consolidated the following entities (together the Subsidiaries ) as at 31 December 2015: BHMF Investments II Limited, a company incorporated with limited liability on 7 May 2010 under the laws of the Cayman Islands; and WCG Strategies Fund Limited ( WCG ), a company incorporated with limited liability on 27 October 2008 under the laws of the Cayman Islands.

22 20 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2015 Notes to the Consolidated Financial Statements continued 31 December Significant accounting policies (continued) Basis of consolidation (continued) The Master Fund owns 100% of BHMF Investments II Limited and 100% of WCG as at 31 December The Consolidated Financial Statements include full consolidation of wholly owned subsidiaries, except where the effect on the Master Fund s financial position and results of operations are immaterial. Transactions between the Master Fund and the Subsidiaries have been eliminated on consolidation. Security transactions and valuation Security transactions are accounted for on a trade date basis. Most positions of the Master Fund and its Subsidiaries are priced at the same time each day. This provides reliable comparative pricing of positions which are traded in different markets. A snapshot of all markets (excluding Pacific Rim and Australasia) is made at 4:00 p.m. GMT. Pacific Rim and Australasia positions are generally priced as at the local end-of-day mid market levels. Instruments with directly observable prices are priced to independent external data sources (e.g. exchange traded futures, options, equities, government and corporate debt securities). Fair value estimates for financial instruments for which no or limited observable market data is available are based on judgments regarding current economic conditions, liquidity discounts, currency, credit, and interest rate risks, loss experience and other factors. These estimates involve significant uncertainties and judgments and cannot be determined with precision. As a result, such calculated fair value estimates may not be realisable in a current sale or immediate settlement of the instrument. In addition, changes in the underlying assumptions used in the fair value measurement technique, including discount rates, liquidity risks and estimates of future cash flows, could significantly affect these fair value estimates. Estimates of the fair value of Level 3 assets and liabilities as defined by the ASC 820 of the Master Fund and its Subsidiaries financial instruments are disclosed in Note 3. Investments in other funds are valued at the latest available reported Net Asset Value ( NAV ) of the respective fund received from that fund s administrator. In some cases these may be unaudited NAVs. Some instruments may be priced using models in which some or all parameters are not directly driven by market observable levels (e.g. unlisted securities, multifactored options or private placements). Over the counter ( OTC ) swap, forward and option values are determined based on relevant market information on the underlying reference assets which may include credit spreads, credit event probabilities, index values, individual security values, forward interest rates, variable interest rates, volatility measures and forward currency rates. Realised gains and losses on investments are calculated using the highest in first out method. Realised and unrealised gains and losses are recorded at the reporting date in the Consolidated Statement of Operations. Income and expense recognition Interest income and expense including prime broker and ISDA/ ISMA interest is recognised in the Consolidated Statement of Operations on an accruals basis. Interest income and expense includes the amortisation of any discount or premium or other differences between the initial carrying amount of an interest-bearing instrument and its amount at maturity calculated on an effective interest rate basis. Dividend income on long positions is recognised on the ex-dividend date and dividends declared on short positions existing on the record date are recognised on the ex-dividend date as an expense in the Consolidated Statement of Operations. Investments purchased under agreements to resell and investments sold under agreements to repurchase The Master Fund and its Subsidiaries enter into investment purchases under agreements to resell and investment sales under agreements to repurchase. These agreements are accounted for as collateralised financing transactions and are recorded at their contracted resell or repurchase amounts, which approximate fair value. The Investment Managers monitor the market value of the Master Fund and its Subsidiaries underlying contract amounts, including accrued interest, and requests or provides additional collateral where deemed appropriate. Interest on investments purchased under agreements to resell and investments sold under agreements to repurchase is accrued on a daily basis, and are recorded as interest expense and interest income, respectively, in the Consolidated Statement of Operations. Asset-Backed Securities The Master Fund and its Subsidiaries may invest in asset-backed securities. These securities include mortgage backed securities, collateralised debt obligations ( CDOs ) and other asset-backed securities representing interests in pools of loans or other receivables. Mortgage backed securities are created from pools of residential or commercial mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. Asset-backed securities are created from many types of assets, including auto loans, credit card receivables, home equity loans, and student loans. The rate of pre-payments on underlying assets will affect the price and volatility of an asset backed security, and may have the effect of shortening or extending the effective duration of the security relative to what was anticipated at the time of purchase.

23 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS Significant accounting policies (continued) Asset-Backed Securities (continued) CDOs include Collateralised Bond Obligations, Collateralised Loan Obligations and other similarly structured securities. The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which the Master Fund and its Subsidiaries invest. CDOs carry additional risks including, but not limited to, (i) the possibility that distributions from collateral securities will not be sufficient to make interest or other payments, (ii) the quality of the collateral may decline in value or default, (iii) the Master Fund and its Subsidiaries may invest in CDOs that are subordinate to other classes, and (iv) the complex structure of the security may result in disputes with the issuer or unexpected investment results. Asset-backed securities with directly observable prices are priced to independent external data sources, where such market prices are not readily available, fair values will be determined using commercial products which utilise valuation models that are consistent with market pricing models. The valuation models use discounted cash flow analysis which incorporate both observable and non-observable inputs disclosed in Note 3. Paydown gains and losses on asset-backed securities, If any, are recorded as interest income in the Consolidated Statement of Operations. Derivative financial instruments The Master Fund and its Subsidiaries use derivative financial instruments such as foreign exchange contracts, options, futures contracts, forward rate agreements and swaps, which are recorded at fair value at the reporting date. Realised and unrealised changes in fair values are included in realised and unrealised gains and losses on investments in the Consolidated Statement of Operations in the period in which the changes occur. The fair value of derivative financial instruments at the reporting date generally reflects the amount that the Master Fund and its Subsidiaries would receive or pay to terminate the contract at the reporting date. Many derivative financial instruments are exchange traded or are traded in the OTC market where market values are normally readily obtainable. Where such market prices are not readily available, fair values will be determined using commercial products which utilise valuation models that are consistent with market pricing methods. If a call option is exercised, the premium is added to the cost of purchase of the underlying security or currency in determining whether the Master Fund and its Subsidiaries has realised a gain or loss. If a put option is exercised, the premium reduces the proceeds of the securities sold by the Master Fund and its Subsidiaries. Unrealised gains or losses on open foreign exchange contracts and forward rate agreements represent the Master Fund and its Subsidiaries net equity therein and is calculated as the present value of the difference between the contract date rate and the applicable forward rate at the reporting date, applied to the face amount of the forward contract. The unrealised gain or loss at the reporting date is included in the Consolidated Statement of Assets and Liabilities. Unrealised gains or losses on open futures contracts are calculated as the difference between the contract price at trade date and the contract s revaluation price. Any payments made to satisfy initial and variation margin are reflected as due to and due from broker balances on the Consolidated Statement of Assets and Liabilities. Unrealised gains or losses on swap agreements represent the cumulative fair value change since the last reporting date and are calculated as the present value of the future net cash flows to be received and paid under the agreement. When the Master Fund and its Subsidiaries purchase a put or call option, an amount, equal to the premium paid by the Master Fund and its Subsidiaries, is recorded as an investment and is subsequently adjusted to the current fair value of the option purchased on the reporting date. Premiums paid for purchasing options that expire unexercised are treated by the Master Fund and its Subsidiaries on the expiration date as realised losses on investments. The difference between the premium and the amount received on writing an option to effect a closing transaction, including brokerage commissions, is also treated as a realised loss, or, if the premium is less than the amount received from the closing transaction, as a realised gain.

24 22 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2015 Notes to the Consolidated Financial Statements continued 31 December Significant accounting policies (continued) Derivative financial instruments (continued) The following table sets forth the fair value of the Master Fund and its Subsidiaries derivative contracts by certain risk types as of 31 December 2015 in accordance with ASC 815. The values in the table below exclude the effects of cash received or posted pursuant to derivative contracts, and therefore are not representative of the Master Fund and its Subsidiaries net exposure. The derivative assets and derivative liabilities are included in Investments at fair value and Investments sold short at fair value, respectively, in the Consolidated Statement of Assets and Liabilities. Derivative Derivative Open Positions Transactions VAR* Assets Liabilities Derivative contracts for trading activities at year end during year US$ 000 US$ 000 US$ 000 Commodity contracts ,231 3,468 16,306 22,407 Credit contracts , , ,136 Equity contracts ,429 8, , ,551 Foreign exchange contracts 4, ,516 24,458 2,322,317 2,095,729 Interest rate contracts 3, ,207 33,286 3,051,548 2,250,889 Gross fair value of derivative contracts 5,597,000 5,120,712 * VaR calculated using a two year historical simulation, based on a one day time horizon, at a 95% confidence interval. The VaR shown in the table above is for derivatives only, excluding treasury positions. Total VaR for the derivatives contracts above is US$47,363,908. Total VaR for the Master Fund and its Subsidiaries, including derivatives, non-derivatives and investments in affiliated entities, is US$45,779,633. The following table sets forth by certain risk types the Master Fund and its Subsidiaries gains/ (losses) related to derivative activities for the year ended 31 December 2015 in accordance with ASC 815. These gains/ (losses) should be considered in the context that derivative contracts may have been executed to economically hedge certain securities and accordingly, certain gains or losses on derivative contracts may offset certain gains or losses attributable to securities. These gains/ (losses) are included in net realised and unrealised loss on investments in the Consolidated Statement of Operations. Change in Unrealised Realised Appreciation/ Gains/(Losses) (Depreciation) Year Ended Year Ended 31 December December 2015 Derivative contracts for trading activities US$ 000 US$ 000 Commodity contracts (99,980) 12,819 Credit contracts (33,365) 24,160 Equity contracts (153,236) 12,590 Foreign exchange contracts 1,313,974 (1,125,118) Interest rate contracts 109,937 (72,371) Total 1,137,330 (1,147,920) Foreign exchange contracts include foreign exchange futures, forwards, swaps, options and any other derivative contract in which the reference asset is a foreign exchange rate. Commodity contracts include commodity futures and options and any other derivative contract in which the reference asset is a commodity price or index. Credit contracts include credit default swaps, credit index options and any other derivative contract in which the reference asset is a credit event or other credit risk on an underlying entity, financial asset or a credit index. Equity contracts include equity futures, forwards, options, swaps, contracts for difference and any other derivative contract in which the reference asset is an equity price or index. Interest rate contracts include interest rate futures, forwards, swaps, options, caps and floors, swaptions, forward rate agreements and any other derivative contract in which the reference asset is an interest rate or debt security. The Master Fund and its Subsidiaries enter into derivative contracts that meet the definition of a credit derivative as defined by ASC 815. These contracts are primarily written and purchased credit default swaps on single issuers, asset-backed securities, credit indices and index or CDO tranches.