Monthly Shareholders Report

RNS Number : 2842W

BH Macro Limited

24 July 2009

 



BH Macro Limited Monthly Shareholder Report
30 June 2009	www.bhmacro.com
Disclaimer / Important information	BH Macro Limited (the 'Fund'), is a feeder fund investing in the Brevan Howard Master Fund Limited ('BHMF'). Brevan Howard Asset Management LLP ('BHAM') has supplied the following information regarding BHMF's June 2009 performance and outlook. BHAM is authorised and regulated by the Financial Services Authority. This material constitutes a financial promotion for the purposes of the Financial Services and Markets Act 2000 (the 'Act') and the handbook of rules and guidance issued from time to time by the FSA (the 'FSA Rules').  The material relating to the Fund and BHMF included in this report has been prepared by BHAM and is provided for information purposes only and does not constitute an invitation or offer to subscribe for or purchase shares in the Fund. This material is not intended to provide a sufficient basis on which to make an investment decision. Information and opinions presented in this material relating to the Fund and BHMF have been obtained or derived from sources believed by BHAM to be reliable, but BHAM makes no representation as to their accuracy or completeness. Estimated results, performance or achievements may materially differ from any actual results, performance or achievements. Except as required by applicable law, the Fund and BHAM expressly disclaim any obligations to update or revise such estimates to reflect any change in expectations, new information, subsequent events or otherwise. All investments are subject to risk. Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decisions.  Tax treatment depends on the individual circumstances of each investor in the Fund and may be subject to change in future. Returns may increase or decrease as a result of currency fluctuations.   You should note that, if you invest in the Fund, your capital will be at risk and you may therefore lose some or all of any amount that you choose to invest. This material is not intended to constitute, and should not be construed as, investment advice.  Potential investors in the Fund should seek their own independent financial advice. BHAM neither provides investment advice to, nor receives and transmits orders from, investors in the Fund nor does it carry on any other activities with or for such investors that constitute 'MiFID or equivalent third country business' for the purposes of the FSA Rules. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE RESULTS
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Summary information	BH Macro Limited NAVs per share (as at 30 June 2009) Shares Class NAV (USD mm) NAV per Share USD Shares 763.57 $16.18 EUR Shares 427.59 €16.25 GBP Shares 580.91 1663p BH Macro Limited NAV per Share*% Monthly Change USD Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2007 - - 0.10 0.90 0.15 2.29 2.56 3.11 5.92 0.03 2.96 0.75 20.27 2008 9.89 6.70 -2.79 -2.48 0.77 2.75 1.13 0.75 -3.13 2.76 3.75 -0.68 20.32 2009 5.06 2.78 1.17 0.13 3.14 -0.86 11.84 EUR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2007 - - 0.05 0.70 0.02 2.26 2.43 3.07 5.65 -0.08 2.85 0.69 18.95 2008 9.92 6.68 -2.62 -2.34 0.86 2.84 1.28 0.98 -3.30 2.79 3.91 -0.45 21.65 2009 5.38 2.67 1.32 0.14 3.12 -0.82 12.28 GBP Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2007 - - 0.11 0.83 0.17 2.28 2.55 3.26 5.92 0.04 3.08 0.89 20.67 2008 10.18 6.85 -2.61 -2.33 0.95 2.91 1.33 1.21 -2.99 2.84 4.23 -0.67 23.25 2009 5.19 2.86 1.18 0.05 3.03 -0.90 11.84 * NAV performance is provided for information purposes only. Shares in BH Macro Limited do not necessarily trade at a price equal to the prevailing NAV per Share.   Source: Underlying BHMF NAV data is provided by the Administrator of BHMF, International Fund Services (Ireland) Limited. BH Macro Limited NAV and NAV per Share data is provided by the Fund's Administrator, Northern Trust International Fund Administration Services (Guernsey) Limited. BH Macro Limited NAV per Share % Monthly Change calculations made by BHAM. BH Macro Limited NAV data is unaudited and net of all investment management fees (2% annual management fee and 20% performance fee) and all other fees and expenses payable by BH Macro Limited.  In addition, BHMF is subject to an operational services fee of 50bps per annum.  PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

FAS 157 Asset Valuation Categorisation	Brevan Howard Master Fund Limited Unaudited Estimates as at 30 June 2009 % of NAV (Gross Market Value) Level 1 54% Level 2 46% Level 3 0% Source: BHAM The estimates set out above are unaudited and have been calculated by BHAM using the same methodology as that used for the 2008 audited financial statements of BHMF. These estimates are subject to change.  Level 1: this represents the level of assets in the portfolio which are priced using unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: this represents the level of assets in the portfolio which are priced using either (i) quoted prices that are identical or similar in markets that are not active or (ii) model-derived valuations for which all significant inputs are observable, either directly or indirectly in active markets;  Level 3: this represents the level of assets in the portfolio which are priced or valued using inputs that are both significant to the fair value measurement and are not observable directly or indirectly in an active market.
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June 2009 Performance Review	Brevan Howard Master Fund Limited (the 'Master Fund') suffered losses in FX directional trades and interest rate volatility trades during the month. The performance of the Master Fund's other asset class exposures was broadly flat for the month.  Monthly contribution (%) to basic performance by asset class , i.e. excluding the impact of shareholder activity (e.g. tender offer or market buybacks) for BH Macro Limited (USD): Total Interest Rates FX Equity Commodity Credit June 2009 -0.86 -0.34 -0.81 0.04 -0.05 0.30 Source: BHAM Please note: trading in BHMF is managed on a strategy basis rather than on an asset class basis. The data in the table above does not make this distinction and instead reflects approximate gains and losses of the asset classes that comprise BHMF's strategies. Investors should therefore be circumspect as to any inferences that they draw from this data regarding the manner in which trading in BHMF is managed. For example, the December 2008 Shareholder Report shows a loss in FX for 2008 when, in fact, dedicated FX strategies were profitable. The overall loss attributed to FX was due to losses from FX exposures used to hedge certain rates positions in other macro strategies.
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Outlook	The following is a report from Brevan Howard Asset Management LLP, the investment manager of Brevan Howard Master Fund Limited: US Leading indicators improved in June while lagging indicators suggested the contraction in activity levels has continued, albeit at a slower pace.  In terms of financial indicators, private borrowing rates and spreads fell noticeably during the month, a development which suggests that the credit channel is opening up again.  If history is a guide, a normalization of spreads helps spur activity with a lag of about a year.   In the real economy, new orders in the ISM survey rose for the first time since November 2007 and orders for non-defence capital goods also jumped.  In fact, firms have liquidated inventories so aggressively in the last few quarters that they have set themselves up for a burst of activity just by slowing the rate of de-stocking - a so-called inventory cycle.  In the labour market, initial and continuing claims for unemployment insurance ticked down which means the pace of job destruction is slowing. Despite improvements in the financial sector and certain leading indicators, the recession is likely to continue into the summer.  Consumption spending has been broadly flat despite the boost to income provided by tax cuts.   Housing continued to bounce along the bottom - a disappointing response to historically low mortgage rates.  In fact, now that mortgage rates have ticked back up, hopes for a recovery in housing have been pushed back further still.  Going forward, we see the tailwind from fiscal stimulus fighting against the headwinds posed by weak labour income, credit constraints and declines in wealth.  We expect a small decline in real GDP in Q2 to give way to a modest increase in Q3.  Although major parts of final demand will remain soft, we believe the inventory cycle combined with fiscal stimulus and some improvement in financial markets point to an end of the recession during the summer.
	Europe Further signs of stabilization emerged in June across the EMU economy. Business surveys posted their third consecutive monthly improvement as the pace of contraction in activity levels subsided. The overhang of inventories is currently a drag for industrial production across the EMU. Nonetheless, the industrial sector is starting to see through this and business expectations are recovering. These improvements are occurring as a result of huge international monetary and fiscal stimuli. Households' spending dynamics continue to be supported by both fiscal measures (e.g. tax rebates and 'scrappage' incentives for car purchases) and lower inflation. Nevertheless, the resilience of EMU consumers is likely to be negatively impacted by the ongoing deterioration of the labour market. The unemployment rate has already reached its highest level since the launch of the euro and is poised to increase further.  The ECB's macroeconomic projections published in early June endorse such a dire outlook. After reducing the main policy rate to 1% in May, the ECB has focused on its credit-enhancing program, which aims to support EMU banks with their funding needs. One component of this programme is the provision of unlimited funding to banks at a fixed rate with maturities of up to one year; the first of these operations was conducted in the second half of June and was highly subscribed by EMU banks. The other part of the ECB programme is the purchase of up to EUR60bn of covered bonds which will start in early July. Until the impact of these programmes becomes clearer, the ECB will likely maintain its 'wait and see' stance.
	UK The UK's transition from a period of economic disruption to a period of stabilisation continued in June as activity surveys and data on the labour market and housing market improved. However, not all the data improved. In particular, retail sales and wage growth were weak and confidence to spend remained near the lows. This mixed picture serves as a reminder that the improvement in the data does not necessarily herald a typical cyclical recovery. While the economy is benefiting from very strong stimuli from fiscal and monetary policies, as well as from the weak exchange rate of sterling, substantial medium-term downward forces are persisting as banks, firms and households continue to repair their balance sheets.  Inflation is on a downward trajectory and, given the substantial amount of slack in the economy, further downward pressure remains. The economy is broadly evolving in line with the Bank of England's expectations. This implies that, while the existing policy stimulus is likely to remain in place for some time, it is not clear whether additional monetary policy stimulus will be utilised at this stage.
	Japan The Japanese economy continues its rebound following the drastic loss of output recorded in the second half of 2008 and the beginning of 2009. Recent indications suggest that consumer spending increased in May for the third month in a row. Moreover, June surveys geared towards domestic spending activity - for instance, the Economic Watchers and the Small Business surveys - surged further in June, indicating that the big fiscal stimulus plan is having a positive impact on households. In May, Japan industrial production also increased strongly, boosted by a rebound of exports, especially to the rest of Asia. Further, surveys such as the PMI suggest a continuation of the positive trend in the manufacturing sector. However, data on capital good orders, which are available until May, indicate that the appetite to invest remains very low, both for domestic firms and overseas clients. Still, the scale of the loss of output is so large that is highly unlikely that there will be a sustained recovery in the short-term.
Enquiries	Northern Trust International Fund Administration Services (Guernsey) Limited Harry Rouillard [phone]
Your attention is drawn to the Disclaimer set out at the beginning of this document.      BH Macro Limited is a closed-ended investment company registered and incorporated in Guernsey on 17 January 2007 (Registration Number: 46235) with its registered office at Trafalgar Court, Les Banques, St. Peter Port, Guernsey GYI 3QL, Channel Islands. © Brevan Howard Asset Management LLP (2009). All rights reserved. Brevan Howard Asset Management LLP is authorised and regulated by the Financial Services Authority Registered in England, No. OC302636   ADV01682

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