Brevan Howard Master Fund Limited Annual Audited Consolidated Financial Statements 2016 (with Independent Auditors Report thereon)

Transcription

1 Brevan Howard Master Fund Limited Annual Audited Consolidated Financial Statements 2016 (with Independent Auditors Report thereon) ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 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 14 Consolidated Statement of Operations 15 Consolidated Statement of Changes in Net Assets 16 Consolidated Statement of Cash Flows 17 Notes to the Consolidated Financial Statements 36 Affirmation of the Commodity Pool Operator IBC Management and Administration

3 INDEPENDENT AUDITORS REPORT 1 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 December 31, 2016, 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 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 December 31, 2016, 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. 20 March 2017 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.

4 2 CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES Consolidated Statement of Assets and Liabilities 31 December US$ 000 Assets Investments at fair value (cost: US$29,587,227 (Note 3,5) 31,197,569 Cash (Note 2) 564 Investments purchased under agreements to resell (cost: US$19,294,821) (Note 7) 18,792,078 Dividends and interest receivable 64,746 Due from broker (Note 2) 3,176,311 Long-term interest-bearing subscriptions receivable (Note 14) 80,938 Other assets 3,805 Total assets 53,316,011 Liabilities Investments sold short at fair value (proceeds: US$19,300,792) (Note 3) 20,713,305 Investments sold under agreements to repurchase (proceeds: US$18,372,491) (Note 7) 17,983,312 Accounts payable and accrued expenses (Note 4,5,6) 6,629 Dividends and interest payable 147,494 Redemptions payable 1,032,948 Due to broker (Note 2) 2,581,196 Total liabilities 42,464,884 Net assets (Note 8,12) 10,851,127 Net asset value per share US Dollar Class A US$5, US Dollar L.P. Class A US$4, Euro Class A 4, Sterling Class A 5, Yen Class A 16, Australian Dollar Class A AUD 1, Brazilian Real Class A BRL 2, Canadian Dollar Class A CAD 1, Norwegian Krone Class A NOK 1, Swedish Krona Class A SEK 1, US Dollar Class B US$2, Euro Class B 2, Sterling Class B 3, US Dollar Class W US$1, US Dollar L.P. Class W US$1, Sterling Class W 1, US Dollar Class Z US$ 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 Dennis Hunter Director 20 March 2017

5 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS 3 Consolidated Condensed Schedule of Investments 31 December 2016 Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio Equities United States (cost US$24,322) Financial 13, Funds 19, , Total equities (cost US$24,322) 32, Fixed income securities Argentina (cost US$35,954) Government 31, Austria (cost US$37,294) Government 37, Bahrain (cost US$6,008) Government 6, Belgium (cost US$64,524) Government 63, Bermuda (cost US$8,988) Energy 8, Cayman Islands (cost US$162,794) Asset Backed Securities 141, Financial 2, Industrial Mortgage Backed Securities 8, , France (cost US$934,535) Government 100,000 BTF 0.0% 02/01/ , ,000 BTF 0.0% 02/08/ , ,000 BTF 0.0% 02/15/ , ,000 BTF 0.0% 02/22/ , ,800 FRTR 0.5% 05/25/ , ,

6 4 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS Consolidated Condensed Schedule of Investments continued 31 December 2016 Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) Fixed income securities (continued) Germany (cost US$8,169,750) Government 250,000 BKO 0.0% 03/10/ , ,250,000 BKO 0.0% 09/15/2017 2,375, ,400,000 BKO 0.0% 12/15/2017 1,480, ,000 BKO 0.0% 03/16/ , ,950 DBR 1.5% 02/15/ , ,671 DBR 3.3% 01/04/ , ,940 DBR 3.3% 07/04/ , ,731 DBR 4.0% 01/04/ , ,667 DBR 4.8% 07/04/ , ,000 OBL 0.3% 10/11/ , ,000 OBL 0.3% 10/16/ , ,000 OBL 0.5% 04/07/ , ,250,000 OBL 0.5% 10/13/2017 1,324, ,964, Indonesia (cost US$2,205) Government 2, Ireland (cost US$56,207) Asset Backed Securities 1, Government 31, Mortgage Backed Securities , Italy (cost US$3,116,223) Government Japan (cost US$3,842,152) Government 474,763 BTPS 0.7% 10/15/ , ,047,540 BTPS 1.7% 03/01/2032 1,035, ,173,605 BTPS 2.7% 03/01/2047 1,189, ,250 BTPS 2.8% 03/01/ , ,691 BTPS 4.3% 03/01/ , ,959 BTPS 5.0% 03/01/ , ,027, ,000,000 JTDB 0.0% 01/11/ , ,000,000 JTDB 0.0% 01/16/ , ,000,000 JTDB 0.0% 02/20/ , ,000,000 JTDB 0.0% 03/21/ , ,000,000 JTDB 0.0% 03/21/ , ,000,000 JTDB 0.0% 04/06/ , ,000,000 JTDB 0.0% 05/12/ , ,000,000 JTDB 0.0% 05/22/ , ,000,000 JTDB 0.0% 06/20/ , ,000,000 JTDB 0.0% 08/21/ , ,000,000 JTDB 0.0% 09/20/ , ,000,000 JTDB 0.0% 10/20/ , ,491,

7 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS 5 Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) Fixed income securities (continued) Jersey (cost US$71) Asset Backed Securities Jordan (cost US$7,149) Government 7, Kazakhstan (cost US$9,543) Energy 8, Industrial 1, , Lebanon (cost US$14,661) Government 14, Luxembourg (cost US$11,272) Asset Backed Securities Mortgage Backed Securities , Mexico (cost US$5,167) Government 4, Mortgage Backed Securities Mozambique (cost US$794) Government Netherlands (cost US$12,911) Financial 4, Industrial Mortgage Backed Securities , Norway (cost US$48,337) Government 45, South Africa (cost US$22,045) Government 14, Utilities 7, , Spain (cost US$68,520) Government 65, Turkey (cost US$38,068) Financial 18, Government 19, , United Arab Emirates (cost US$19,834) Financial 3, Government 15, , United Kingdom (cost US$28,078) Mortgage Backed Securities

8 6 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS Consolidated Condensed Schedule of Investments continued 31 December 2016 Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) Fixed income securities (continued) United States (cost US$9,519,939) Asset Backed Securities 96, Government 250,000 B 0.0% 01/05/ , ,000 B 0.0% 01/12/ , ,000 B 0.0% 02/02/ , ,000 B 0.0% 03/09/ , ,000 B 0.0% 03/30/ , ,000 B 0.0% 04/27/ , ,000 B 0.0% 05/25/ , ,200,000 B 0.0% 06/23/2017 1,196, ,000 B 0.0% 08/17/ , ,000,000 B 0.0% 09/14/ , ,250 T 1.1% 07/31/2021 1, ,000 T 1.3% 03/31/ , ,000 T 1.4% 08/31/ , ,000 T 1.8% 02/28/ , ,000 T 2.0% 12/31/ , T 2.3% 07/31/ ,000 T 2.3% 11/15/ , ,000 T 2.3% 12/31/ , ,000 T 3.0% 11/15/ , ,000 T 3.4% 05/15/ , ,000 TF 0.7% 07/31/ , ,021,000 TII 0.1% 04/15/2017 1,089, ,000 TII 0.1% 07/15/ , Mortgage Backed Securities 771, ,448, Total fixed income securities (cost US$26,243,023) 25,428, Private placement Israel (cost US$2,500) Technology Italy (cost US$4,415) Financial Total private placement (cost US$6,915) Interest rate guarantee options (cost US$189,896) EUR termination dates through May , USD termination dates through December , ,

9 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS 7 Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) Forward rate agreements EUR termination dates through September , HUF termination dates through June ILS termination dates through June USD termination dates through March , ZAR termination dates through September , Cross currency swaps CAD/USD termination dates through March EUR/USD termination dates through September , GBP/USD termination dates through December , JPY/USD termination dates through March RUB/USD termination dates through September , Interest rate swaps AUD termination dates through June , BRL termination dates through July , CAD termination dates through October CHF termination dates through January , CZK termination dates through November EUR termination dates through December , GBP termination dates through December , HUF termination dates through June , ILS termination dates through November , JPY termination dates through November , KRW termination dates through October , MXN termination dates through November NOK termination dates through March , NZD termination dates through May PLN termination dates through December , SEK termination dates through December SGD termination dates through March , USD termination dates through November , ZAR termination dates through December , , Credit default swaps (cost US$52,487) USD termination dates through May , Swaptions (cost US$843,479) EUR termination dates through December , GBP termination dates through October , ILS termination dates through December JPY termination dates through June , USD termination dates through December , ZAR termination dates through June , ,

10 8 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS Consolidated Condensed Schedule of Investments continued 31 December 2016 Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) FX contracts AUD/JPY termination dates through December , CHF/USD termination dates through March , CNH/USD termination dates through March , EUR/GBP termination dates through March , EUR/JPY termination dates through March , EUR/USD termination dates through October , GBP/USD termination dates through November , ILS/USD termination dates through July , JPY/USD termination dates through December , KRW/USD termination dates through September , MXN/USD termination dates through December , RUB/USD termination dates through June , SGD/USD termination dates through November , TRY/USD termination dates through December , ZAR/USD termination dates through March , Other termination dates through December , , Exchange traded futures Crude Oil termination dates through November , Euribor termination dates through December , Euro termination dates through March , Eurodollar termination dates through December , S&P 500 termination dates through March , Short Sterling termination dates through March , US Treasury Note termination dates through March , Other termination dates through November , , Exchange traded options (cost US$327,587) BTPS termination dates through August , Euro termination dates through September , Eurodollar termination dates through December , Libor 3M termination dates through March , SPGB termination dates through September , Sterling termination dates through June , US Treasury Note termination dates through February , Other termination dates through September , , Commodity options (cost US$45,852) Natural Gas termination dates through November , Silver termination dates through November ,

11 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS 9 Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Long portfolio (continued) Equity options (cost US$302,227) DJ EURO Stoxx Index termination dates through August , NIKKEI 225 Index termination dates through December , S&P 500 termination dates through June , SPDR termination dates through March , Other termination dates through December , , FX options (cost US$1,347,668) AUD/JPY termination dates through April , AUD/USD termination dates through June , EUR/BSK termination dates through November , EUR/CHF termination dates through October , EUR/GBP termination dates through November , EUR/JPY termination dates through May , EUR/SEK termination dates through September , EUR/TRY termination dates through March , EUR/USD termination dates through December ,026, GBP/USD termination dates through October , USD/BRL termination dates through May , USD/BSK termination dates through September , USD/CAD termination dates through August , USD/CHF termination dates through September , USD/CNH termination dates through December , USD/JPY termination dates through February , USD/KRW termination dates through June , USD/MXN termination dates through December , USD/NZD termination dates through November , USD/RUB termination dates through February , USD/SAR termination dates through June , USD/SGD termination dates through November , USD/TRY termination dates through December , Other termination dates through June , ,954, Investments in Affiliated Funds (cost US$203,771) Brevan Howard Emerging Markets Strategies Master Fund Limited Brevan Howard Equity Strategies Master Fund Limited 3, Brevan Howard Liquid Portfolio Strategies - Diversified Strategies Fund 100, Brevan Howard Liquid Portfolio Strategies - Dynamic Global Investment Fund 46, Brevan Howard Liquid Portfolio Strategies - Dynamic US Investment Fund 49, Brevan Howard Strategic Opportunities Fund Limited 3, , Variance swaps 10, Volatility swaps 2, Total investments at fair value (cost US$29,587,227) 31,197,

12 10 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS Consolidated Condensed Schedule of Investments continued 31 December 2016 Fair Value % of Net Proceeds are presented in US$ 000 US$ 000 Assets Short portfolio Fixed income securities Austria (proceeds (US$190,044)) Government (178,457) (1.64) Belgium (proceeds (US$79,006)) Government (77,245) (0.71) Denmark (proceeds (US$83,046)) Government (82,354) (0.76) Finland (proceeds (US$11,325)) Government (11,288) (0.10) France (proceeds (US$6,284,391)) Government 1,000,000 FRTR 0.0% 05/25/2021 (1,064,070) (9.81) 691,802 FRTR 0.5% 11/25/2019 (748,976) (6.90) 20,000 FRTR 1.5% 05/25/2031 (22,349) (0.21) 500,000 FRTR 2.3% 10/25/2022 (596,505) (5.50) 1,009,000 FRTR 2.5% 10/25/2020 (1,178,857) (10.86) 500,000 FRTR 3.0% 04/25/2022 (614,036) (5.66) 500,000 FRTR 3.3% 10/25/2021 (614,361) (5.66) 500,000 FRTR 3.5% 04/25/2020 (595,173) (5.48) 100,000 FRTR 3.5% 04/25/2026 (133,176) (1.23) 250,000 FRTR 3.8% 04/25/2021 (309,199) (2.85) 287,000 FRTR 3.8% 10/25/2019 (338,357) (3.12) (6,215,059) (57.28) Ireland (proceeds (US$23,084)) Government (22,702) (0.21) Italy (proceeds (US$7,881,705)) Government 422,554 BTPS 0.5% 06/01/2021 (443,033) (4.08) 40,000 BTPS 2.3% 09/01/2036 (40,945) (0.38) 159,273 BTPS 3.8% 03/01/2021 (190,357) (1.75) 544,086 BTPS 3.8% 05/01/2021 (650,755) (6.00) 973,814 BTPS 4.5% 03/01/2026 (1,261,023) (11.62) 443,400 BTPS 4.5% 05/01/2023 (563,012) (5.19) 1,145,086 BTPS 4.8% 09/01/2028 (1,547,102) (14.26) 1,080,650 BTPS 4.8% 09/01/2044 (1,543,501) (14.23) 41,000 BTPS 5.0% 08/01/2039 (60,074) (0.55) 400,000 BTPS 6.5% 11/01/2027 (607,771) (5.60) 491,000 BTPS 7.3% 11/01/2026 (770,278) (7.10) (7,677,851) (70.76)

13 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS 11 Fair Value % of Net Proceeds are presented in US$ 000 US$ 000 Assets Short portfolio (continued) Fixed income securities (continued) Netherlands (proceeds (US$682,106)) Government 15,600 NETHER 2.5% 01/15/2033 (21,029) (0.19) 42 NETHER 3.3% 07/15/2021 (52) (0.00) 118,200 NETHER 3.8% 01/15/2023 (154,671) (1.43) 261,389 NETHER 3.8% 01/15/2042 (454,019) (4.18) (629,771) (5.80) Spain (proceeds (US$82,194)) Government (78,142) (0.72) United States (proceeds (US$1,434,672)) Government 1,250 T 1.1% 07/31/2021 (1,205) (0.01) 348,500 T 1.4% 12/15/2019 (347,248) (3.20) 22,400 T 1.5% 08/15/2026 (20,496) (0.19) 335,000 T 2.0% 11/15/2026 (320,763) (2.96) 238,500 T 2.1% 11/30/2023 (236,040) (2.18) 529 T 2.3% 07/31/2021 (536) (0.00) 109,000 T 2.3% 08/15/2046 (91,083) (0.84) 20,000 T 2.9% 11/15/2046 (19,184) (0.18) Mortgage Backed Securities (395,628) (3.64) (1,432,183) (13.20) Total fixed income securities (proceeds (US$16,751,573)) (16,405,052) (151.18) Interest rate guarantee options (proceeds (US$149,255)) EUR termination dates through November 2020 (158,183) (1.46) USD termination dates through December 2017 (1,388) (0.01) (159,571) (1.47) Forward rate agreements EUR termination dates through December 2018 (2,255) (0.02) HUF termination dates through June 2017 (8) (0.00) PLN termination dates through September 2017 (79) (0.00) USD termination dates through September 2017 (16,782) (0.16) ZAR termination dates through June 2018 (311) (0.00) (19,435) (0.18)

14 12 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS Consolidated Condensed Schedule of Investments continued 31 December 2016 Fair Value % of Net Proceeds are presented in US$ 000 US$ 000 Assets Short portfolio (continued) Interest rate swaps AUD termination dates through June 2019 (2,257) (0.02) BRL termination dates through January 2019 (5,313) (0.05) CAD termination dates through September 2019 (8,072) (0.07) CHF termination dates through January 2026 (3,311) (0.03) CZK termination dates through August 2020 (796) (0.01) EUR termination dates through June 2046 (163,659) (1.51) GBP termination dates through October 2067 (105,336) (0.97) HUF termination dates through December 2026 (3,215) (0.03) ILS termination dates through July 2022 (756) (0.01) JPY termination dates through February 2041 (29,458) (0.27) KRW termination dates through December 2026 (4,046) (0.04) MXN termination dates through August 2026 (2,719) (0.03) MYR termination dates through August 2019 (459) (0.00) NOK termination dates through March 2027 (839) (0.01) NZD termination dates through September 2018 (1,196) (0.01) PLN termination dates through December 2026 (2,705) (0.02) SEK termination dates through March 2027 (326) (0.00) SGD termination dates through March 2024 (1,160) (0.01) USD termination dates through August 2047 (325,067) (3.00) ZAR termination dates through September 2026 (11,092) (0.10) (671,782) (6.19) Credit default swaps (proceeds (US$644,702)) USD termination dates through October 2057 (422,387) (3.89) Swaptions (proceeds (US$260,642)) EUR termination dates through November 2026 (59,225) (0.54) GBP termination dates through October 2017 (1,725) (0.02) ILS termination dates through December 2017 (754) (0.01) JPY termination dates through February 2021 (51,047) (0.47) USD termination dates through December 2021 (285,626) (2.63) ZAR termination dates through June 2017 (1,325) (0.01) (399,702) (3.68) FX contracts AUD/USD termination dates through March 2017 (3,314) (0.03) CHF/USD termination dates through July 2018 (4,822) (0.05) CNH/USD termination dates through March 2018 (50,302) (0.46) EUR/HUF termination dates through October 2017 (4,396) (0.04) EUR/USD termination dates through June 2027 (20,685) (0.19) GBP/USD termination dates through October 2017 (104,944) (0.97) HUF/USD termination dates through July 2017 (3,433) (0.03) ILS/USD termination dates through April 2017 (4,838) (0.05) JPY/USD termination dates through March 2018 (106,698) (0.98) KRW/USD termination dates through August 2017 (9,574) (0.09) MXN/USD termination dates through November 2017 (97,686) (0.90) RUB/USD termination dates through September 2017 (14,377) (0.13) SGD/USD termination dates through October 2017 (4,277) (0.04) TRY/USD termination dates through December 2017 (99,478) (0.92) Other termination dates through June 2018 (20,925) (0.19) (549,749) (5.07)

15 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS 13 Fair Value % of Net Cost is presented in US$ 000 US$ 000 Assets Short portfolio (continued) Exchange traded futures Canadian 3M termination dates through December 2018 (2,816) (0.03) Crude Oil termination dates through May 2017 (47,775) (0.44) Euro termination dates through March 2017 (8,637) (0.08) Oat termination dates through March 2017 (52,034) (0.48) Other termination dates through September 2020 (8,313) (0.07) (119,575) (1.10) Exchange traded options (proceeds (US$286,076)) Euro termination dates through September 2017 (188,648) (1.74) Eurodollar termination dates through December 2017 (32,467) (0.30) Libor 3M termination dates through March 2017 (3,892) (0.04) Sterling termination dates through June 2017 (5,753) (0.05) US Treasury Note termination dates through February 2017 (13,028) (0.12) Other termination dates through September 2017 (4,379) (0.04) (248,167) (2.29) Equity options (proceeds (US$202,894)) DJ EURO Stoxx Index termination dates through April 2017 (11,433) (0.11) S&P 500 termination dates through June 2017 (150,435) (1.39) SPDR termination dates through March 2017 (18,270) (0.17) Other termination dates through December 2019 (3,771) (0.03) (183,909) (1.70) FX options (proceeds (US$1,005,650)) AUD/JPY termination dates through April 2017 (6,858) (0.06) EUR/CHF termination dates through October 2017 (18,878) (0.17) EUR/GBP termination dates through April 2017 (10,359) (0.10) EUR/JPY termination dates through June 2017 (10,862) (0.10) EUR/SEK termination dates through September 2017 (11,445) (0.11) EUR/USD termination dates through December 2017 (850,137) (7.83) GBP/USD termination dates through October 2017 (25,968) (0.24) JPY/KRW termination dates through August 2017 (10,984) (0.10) USD/BRL termination dates through March 2017 (5,211) (0.05) USD/CAD termination dates through June 2017 (12,173) (0.11) USD/CNH termination dates through December 2017 (47,215) (0.44) USD/JPY termination dates through February 2024 (409,382) (3.77) USD/KRW termination dates through June 2017 (11,345) (0.10) USD/RUB termination dates through March 2017 (16,614) (0.15) USD/SAR termination dates through June 2018 (14,960) (0.14) USD/SGD termination dates through November 2017 (18,002) (0.17) USD/TRY termination dates through July 2017 (17,453) (0.16) USD/ZAR termination dates through August 2017 (15,389) (0.14) Other termination dates through March 2018 (9,123) (0.09) (1,522,358) (14.03) Cross currency swaps (86) (0.00) Variance swaps (10,402) (0.10) Volatility swaps (1,130) (0.01) Total investments sold short at fair value (proceeds (US$19,300,792)) 20,713,305 (190.89)

16 14 CONSOLIDATED STATEMENT OF OPERATIONS Consolidated Statement of Operations For the year ended 31 December US$ 000 Investment income Interest income 278,791 Dividend income (net of withholding tax of US$348) 1,035 Total income 279,826 Expenses Interest expense 136,462 Professional fees and other 4,573 Operational services fee (Note 4) 73,009 Management fee (Note 5) 7,702 Administration fee (Note 6) 19,433 Commissions on futures and options 55,488 Dividend expense on investments sold short 1,340 Total expenses 298,007 Net investment loss (18,181) Net realised and unrealised gain/(loss) on investments Net realised gain on investments (Note 2) 213,056 Net change in unrealised depreciation on investments (Note 2) (95,410) Net realised and unrealised gain on investments 117,646 Net increase in net assets resulting from operations 99,465 Withholding tax is presented in US$ 000. See accompanying notes to the Consolidated Financial Statements.

17 CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS 15 Consolidated Statement of Changes in Net Assets For the year ended 31 December US$ 000 Net increase in net assets resulting from operations Net investment loss (18,181) Net realised gain on investments 213,056 Net change in unrealised depreciation on investments (95,410) 99,465 Share Capital Transactions Issue of shares US Dollar Class A 217,641 US Dollar L.P. Class A 21,088 Euro Class A 3,731 Sterling Class A 325,295 Yen Class A 1,427 Australian Dollar Class A 8 Brazilian Real Class A 7 Canadian Dollar Class A 24,674 Norwegian Krone Class A 5,085 Swedish Krona Class A 20,619 Gold Class A 3 US Dollar Class B 17,244 Euro Class B 121 Sterling Class B 55,909 US Dollar Class W 39,580 US Dollar L.P. Class W 550 Sterling Class W 32,494 US Dollar Class Z 103,516 Sterling Class Z 120,571 Redemption of shares US Dollar Class A (4,775,065) US Dollar L.P. Class A (972,368) Euro Class A (306,060) Sterling Class A (594,480) Yen Class A (525,669) Australian Dollar Class A (295) Brazilian Real Class A (12,164) Canadian Dollar Class A (7,311) Norwegian Krone Class A (1,066) Gold Class A (5,097) US Dollar Class B (148,131) Euro Class B (52,715) Sterling Class B (350,588) US Dollar Class Z (525,845) Euro Class Z (420) Sterling Class Z (510,430) Yen Class Z (20,417) Net decrease in net assets (7,719,093) Net assets beginning of year 18,570,220 Net assets end of year 10,851,127 See accompanying notes to the Consolidated Financial Statements.

18 16 CONSOLIDATED STATEMENT OF CASH FLOWS Consolidated Statement of Cash Flows For the year ended 31 December US$ 000 Cash flows from operating activities: Net increase in net assets resulting from operations 99,465 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by in operating activities: Increase in investments at fair value (1,596,579) Decrease in redemptions receivable from investment funds 134,428 Increase in dividends and interest receivable (3,830) Increase in other assets (2,155) Decrease in due from broker 1,778,028 Increase in investments sold short at fair value 9,057,549 Decrease in due to broker (880,874) Decrease in accounts payable and accrued expenses (2,856) Increase in dividends and interest payable 98,504 Decrease in performance fee payable (35,654) Net cash provided by operating activities 8,646,026 Cash flows from financing activities Proceeds on issue of shares 995,769 Payment on redemption of shares (8,297,017) Increase in investments purchased under agreements to resell (13,896,318) Increase in investments sold under agreements to repurchase 12,516,547 Net cash used in financing activities (8,681,019) Net decrease in cash (34,993) Cash beginning of year 35,557 Cash end of year 564 Non-cash financing activities not included herein consist of: Movement in long-term interest-bearing subscriptions receivable of (US$9,131,397) Movement in redemptions payable of US$511,104,193 Movement in subscriptions received in advance of US$2,926,425 See accompanying notes to the Consolidated Financial Statements.

19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17 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) Ltd; (v) DW Partners, LP; (vi) BH-DG Systematic Trading LLP; (vii) Brevan Howard US Investment Management, LP and (viii) Brevan Howard Private Limited (appointed 11 November 2016) 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 period over and above the normal course of business. Standards and amendments to existing standards effective in the year beginning 1 January 2016 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 15 December 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 such adoption did not affect the Master Fund s financial condition, results of operations, or cash flows. In December 2016, the FASB issued ASU No , Technical Corrections and Improvements. Included in ASU No is an amendment to Topic 820, Fair Value Measurement (ASC 820), which clarifies the difference between a valuation approach and a valuation technique. The amendment to the Topic also requires an entity to disclose when there has been a change in either or both a valuation approach and/or a valuation technique. The Master Fund is required to apply ASU No for fiscal years beginning after 15 December 2016 and interim periods within those fiscal years. The Manager is currently evaluating the impact of ASU No Basis of consolidation In accordance with the accounting guidance in ASC , and , 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 2016: 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. 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

20 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 31 December Significant accounting policies (continued) 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-ofday 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. Income and expense recognition Interest income and expense including prime broker and International Swaps and Derivatives Association ( ISDA )/ International Security Market Association ( 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 assetbacked 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. 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.

21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Significant accounting policies (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. 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. 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.

22 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 31 December Significant accounting policies (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 2016 in accordance with Derivatives and Hedging (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 66 18,880 3,266 50,772 49,007 Credit contracts 198 1,381 2,846 51, ,387 Equity contracts ,000 30, , ,469 Foreign exchange contracts 4,339 95,311 74,811 2,759,461 2,073,334 Interest rate contracts 2, ,073 36,545 2,409,504 1,569,056 Gross fair value of derivative contracts 5,533,398 4,308,253 * 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$91,844,034. Total VaR for the Master Fund and its Subsidiaries, including derivatives, non-derivatives and investments in affiliated entities, is US$102,644,993. The following table sets forth by certain risk types the Master Fund and its Subsidiaries gains/(losses) related to derivative activities for the year ended 31 December 2016 in accordance with ASC 815. These gains/(losses) should be considered in the context that derivative contracts may have been executed to economically hedge certain securities and accordingly, certain gains or losses on derivative contracts may offset certain gains or losses attributable to securities. These gains/(losses) are included in net realised and unrealised gain on investments in the Consolidated Statement of Operations. Change in Unrealised Realised Appreciation/ Gains/(Losses) (Depreciation) Year Ended Year Ended 31 December December 2016 Derivative contracts for trading activities US$ 000 US$ 000 Commodity contracts (45,454) 45,314 Credit contracts (84,406) 79,107 Equity contracts (212,554) (28,660) Foreign exchange contracts (1,320,936) 407,917 Interest rate contracts 648,719 (39,581) Total (1,014,631) 464,097 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.