BH Macro Limited Announces Interim Report and Unaudited Financial Statements 2014

“Macroeconomic influences on markets in the first half of 2014 have followed an unexpected pattern. At the end of 2013, there was good evidence that global economic activity was gaining traction, and good reasons to expect the process of recovery to continue, and even accelerate. Thus far in 2014, these expectations have been at least partially frustrated, with growth flat in the US (perhaps principally reflecting bad weather in the first quarter) and subdued in the Eurozone and Japan, and with some emerging market economies facing adverse headwinds.

As a result, market expectations that there might be more definitive action by the monetary authorities in the US and the UK towards restraint as growth accelerated, and per contra by the authorities in the Eurozone and Japan towards greater accommodation, proved largely premature. Financial markets in consequence remained range-bound and directionless, with equities marking time close to recent highs, bond yields falling and volatility at an historical low.

Against this background, BH Macro Limited (the “Company”) recorded a fall in net asset value (“NAV”) in the first half of 2014 of 3.92% (on its sterling shares). This disappointing performance reflects the unfavourable environment described above, which has not provided opportunities for macro funds to achieve positive performance. The Company’s NAV did benefit from gains on relative-value trading in credit instruments in the first quarter,  and from the European Central Bank’s moderate move to ease monetary conditions in the second quarter. But there were no opportunities for more substantial macro-directional trading and the focus was necessarily, and rightly, on protection of capital while waiting on developments. It remains the case that better opportunities may emerge later in the year if there are more substantial moves towards policy tightening in the US and the UK and towards further easing in the Eurozone and Japan.

In line with its stated purpose, the Company invests all of its assets (net of minimal working capital) in Brevan Howard Master Fund Limited (the “Master Fund”). The Master Fund’s stated objective has been, and remains, to seek to generate consistent long-term capital appreciation through active leveraged trading and investment on a global basis. The report by the Company’s manager, Brevan Howard Capital Management LP (the “Manager”), later in this Interim Report describes the Master Fund’s performance in more detail.

On a longer perspective, the Company has a track record of preserving Shareholders’ capital and achieving a positive return, uncorrelated with other markets and with low volatility. Over the seven years since its launch in 2007, the Company has more than doubled its NAV (a gain of 105% on the sterling shares) and has achieved an annualised rate of return of 10.18% with an annualised Sharpe ratio of 1.58.

The Company’s assets remain substantial, with NAV totalling $2.03 billion at end-June 2014, making it the largest single-manager hedge fund listed on the London Stock Exchange. The weaker NAV performance in the first half of 2014 was accompanied by a widening of the discount on the Company’s shares. In response, in February the Board initiated market purchases of the Company’s shares in order to moderate the discount. By end-June 2014, the equivalent of approximately $180 million of shares had been repurchased, with the result that the discount has stabilised in recent months at around 5% (sterling shares). Authority for market purchases was renewed at the Company’s AGM in June 2014. The Board will continue to be ready to undertake discount management actions where necessary so that as far as possible the share prices properly reflect the Company’s underlying performance and prospects.

The listing of the Company’s shares on the Main Market of the London Stock Exchange continues to provide an active secondary market for Shareholders to trade shares. The Sterling shares have maintained their place in the FTSE 250 and the Company has also maintained its listings in Dubai and Bermuda. Having reviewed the Financial Conduct Authority’s new restrictions on the retail distribution of non-mainstream pooled investments, the Company after taking legal advice announced on 15 January 2014 that it is outside the scope of those restrictions, so that its shares can continue to be recommended by UK authorised persons to ordinary retail investors.

The Board maintains regular dialogue with the Company’s Manager, to review the Master Fund’s trading strategies and risk exposures and to satisfy itself that the Manager’s analytical, trading and risk management capabilities are being maintained to a high standard. The Board holds extended discussions with the Manager at each of its quarterly Board meetings, supplemented by additional contacts with the Manager at intervals during the year. One Board meeting a year is held in Brevan Howard’s head office in Jersey in order to maintain first-hand contact with the Manager’s team there. Briefings are also held with Brevan Howard’s global trading team. From all these contacts, the Board continues to believe that the Master Fund’s performance remains of a very high standard.

The Company and its Manager have continued to pursue an active programme for public communication and investor relations. Regular communication is maintained with Shareholders and presentations are made to keep analysts, financial journalists and the wider investment community informed of the Company’s progress. Up-to-date performance information is provided through NAV data published monthly on a definitive basis and weekly on an estimated basis, as well as through monthly risk reports and shareholder reports. All of these reports and further information about the Company are available on its website (www.bhmacro.com).

The Directors are very closely focused on safeguarding the interests of Shareholders and believe that the Company observes high standards of corporate governance. The Board, the majority of which is independent of the Brevan Howard group, holds quarterly scheduled meetings and meets ad hoc on other occasions as necessary. The work of the Board is assisted by the Audit Committee and the Management Engagement Committee. The Board continues to meet all of the provisions of the Association of Investment Companies’ Code of Corporate Governance that are relevant to a company that has no executive management; the details are described below in the Directors’ Report. The Board has also implemented the recommendations of the Davies Report on women on boards.

Stephen Stonberg retired from the Board on 31 March 2014. The Board greatly appreciated his lead role in establishing the Company and the experience and support he contributed to its subsequent development. In his place, the Board appointed David Barton, Head of Legal at the Company’s Manager. The Board believes that, since the Company’s purpose is to invest solely in Brevan Howard Master Fund Limited, there is positive advantage to Shareholders in maintaining a direct link to Brevan Howard in this one seat on the Board.

Anthony Hall retired from the Board at the Company’s AGM on 16 June 2014 after seven years’ distinguished service as a Director. The Board has benefited immensely from the wisdom and insights he brought to its work and has greatly valued his significant contribution to the success of the Company from its inception. In his place, the Directors have been delighted to appoint Claire Whittet, who brings to the Board extensive experience of a career at senior level in banking.

With the retirement of Anthony Hall, Huw Evans has succeeded him as Chairman of the Management Engagement Committee.

Despite the disappointment of the first half of 2014, it remains the case that the recovery in the global economy will at some point down the road require policy adjustments by monetary authorities, quite possibly in different directions in different countries. This situation should generate more fertile opportunities for macro funds, from which the Master Fund is well equipped to benefit. In this environment, the Board believes that the Master Fund has the capability to continue to deliver positive performance over time and that the Company’s investment in the Master Fund offers good prospects for Shareholders to achieve sustainable returns while preserving capital.

Ian Plenderleith

Chairman

21 August 2014

For the latest information and the Annual Report and Audited Financial Statements of BH Macro Limited and the Annual Audited Financial Statements of Brevan Howard Master Fund Limited visit BH Macro’s website www.bhmacro.com

Enquiries:

Richard Murray, Brevan Howard           +44 (0)207 022 6256