BHGG.L Regulatory News (BHGG)

BH GLOBAL LIMITED

MONTHLY SHAREHOLDER REPORT:FEBRUARY 2015

YOUR ATTENTION IS DRAWN TO THE DISCLAIMER AT THE END OF THIS DOCUMENT

Administrator:

Northern Trust International Fund Administration Services (Guernsey) Limited ("Northern Trust")

Joint Corporate Brokers:

J.P. Morgan Cazenove

Canaccord Genuity Ltd.

Listings:

London Stock Exchange

(Premium Listing)

NASDAQ Dubai - USD Class (Secondary Listing)

Bermuda Stock Exchange (Secondary Listing)

BH Global Limited ("BHG") is a closed-ended investment company, registered and incorporated in Guernsey on 25 February 2008 (Registration Number: 48555).

Prior to 1 September 2014, BHG invested all its assets (net of short-term working capital) in Brevan Howard Global Opportunities Master Fund Limited ("BHGO"). With effect from 1 September 2014, BHG changed its investment policy to invest all its assets (net of short-term working capital) in Brevan Howard Multi-Strategy Master Fund Limited ("BHMS" or the "Fund") a company also managed by BHCM.

BHG was admitted to the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange on 29 May 2008.

1. Estimated as at 27 February 2015 by BHG's administrator, Northern Trust.

Source: BHMS NAV data is provided by the administrator of BHMS, International Fund Services (Ireland) Limited. BHG NAV and NAV per Share data is provided by BHG's administrator, Northern Trust. BHG NAV per Share % Monthly Change calculations are made by BHCM.

BHG NAV data is unaudited and net of all investment management and performance fees and all other fees and expenses payable by BHG. NAV performance is provided for information purposes only. Shares in BHG do not necessarily trade at a price equal to the prevailing NAV per Share.

* Performance is calculated from a base NAV per Share of 10 in each currency. The opening NAV in May 2008 was 9.9 (after deduction of the IPO costs borne by BHG).

** Estimated as at 27 February 2015.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

Unaudited Estimates as at 27 February 2015

Source: BHCM

* These estimates are unaudited and have been calculated by BHCM using the same methodology as that used in the most recent audited financial statements of the Fund. 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.

The information in this section has been provided to BHG by BHCM.

Monthly, quarterly and annual contribution (%) to the performance of BHG USD Shares (net of fees and expenses) by strategy group

Monthly, quarterly and annual figures are estimated by BHCM as at 27 February 2015, based on performance data for each period provided by BHG's administrator, Northern Trust. Figures rounded to two decimal places.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

Methodology and Definition of Monthly Contribution to Performance:

Attribution is approximate and has been derived by allocating each underlying trader book to a single category. In cases where a trader book has activity in more than one category, the most relevant category has been selected.

The above strategies are categorised as follows:

"Macro": multi-asset global markets, mainly directional (for BHG, the majority of risk in this category is in rates)

"Rates": developed interest rates markets

"FX": global FX forwards and options

"EMG": global emerging markets

"Equity": global equity markets including indices and other derivatives

"Commodity": liquid commodity futures and options

"Credit": corporate and asset-backed indices, bonds and CDS

"Systematic": rules-based futures trading

"Discount Management": buyback activity for discount management purposes

BHG Underlying Investment Exposures estimated as at 27 February 2015 (allocations subject to change):

Source: BHCM; figures rounded to one decimal place. Data may differ from those published for BHMS as BHG may hold cash for short-term working capital purposes.

*DW Catalyst Offshore Fund, Ltd is a feeder fund to DW Catalyst Master Fund, Ltd. DW Catalyst Offshore Fund, Ltd also has the ability to make other investments. Prior 1 January 2015, DW Catalyst Master Fund, Ltd was named Brevan Howard Credit Catalysts Master Fund Limited.

** Calculated using historical simulation based on a 1 day, 95% confidence interval.

Source: BHCM; figures rounded to the nearest whole number. Data may differ from those published for BHMS as BHG may hold cash for short-term working capital purposes.

Monthly Performance Review for BHG

The NAV per share of BHG's USD shares depreciated by an estimated 0.43% and the NAV per share of GBP depreciated by an estimated 0.36% in February.

* The USD currency class of each fund is used as a proxy for the performance of each of the funds; BHMS also invests in the EUR, GBP and JPY classes of the funds .

Source: Underlying data for the funds in which BHMS invests in is provided by their respective administrators, calculations by BHCM.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

Brevan Howard Master Fund Limited ("BHMF")

The NAV per Share of BHMF Class Z USD Shares depreciated by an estimated 0.56% (net of fees) in February.

During February, BHMF suffered some losses in FX macro trading which were partially offset by gains in equity macro trading.

Brevan Howard Asia Master Fund Limited ("BHA")

The NAV per Share of BHA Ordinary USD Shares appreciated by an estimated 0.15% (net of fees) in February.

BHA made small gains from interest rate strategies in the Australian dollar. These gains were partly offset by small losses in FX trading in the Chinese renminbi.

The NAV per Share of DWC Glass G USD Shares appreciated by an estimated 0.77% (net of fees) in February.

DWC made gains in performing long/short credit strategies in February. Distressed positions also generated positive returns. Structured finance detracted from performance, as short hedge positions rallied more than idiosyncratic long positions in residential and commercial mortgages.

The NAV per Share of BHST Class Z USD Shares appreciated by an estimated 0.42% (net of fees) in February.

During February, BHST made gains in equity index futures but recorded losses in all other sectors.

Direct Investment Portfolio ("DIP")

The Direct Investment Portfolio depreciated by an estimated 0.96% in February.

The DIP made small gains in both interest rates trading and agency trading. The gains were offset by losses in FX trading. Additional minor losses were generated in tactical equity index trading and precious metals.

Manager's Market Review and Outlook

The information in this section has been provided to BHG by BHCM. 

Market Commentary

US

Recent trends were generally confirmed by the incoming indicators in February. The labour market continues to impress, with another large gain in payroll employment and a decline in the unemployment rate to 5.5%. The unemployment rate now stands at the upper-end of the range of estimates for full employment with no sign that its rate of descent has slowed. As a comparison, the Federal Reserve began the last rate-hiking cycle in June 2004 when the unemployment rate was 5.6%.

Nominal outlays by households have been subdued by the sharp fall in consumer energy prices. However, real outlays were robust in the fourth quarter and have been moderate in the current quarter, a slowdown partly owing to another harsh winter. Investment spending has been choppy in recent months. Orders for core capital goods ticked up, high-tech spending appears to be moving forward, and business structures were mixed. The oil sector is pulling back on capital spending but other sectors like hotels, offices, and manufacturing are adding capacity. Housing has suffered through the harsh winter as well.

Some of the most interesting developments have been with price and wage inflation. Core CPI inflation surprised on the upside in January. At the same time, changes in legislation held down medical prices at the start of the calendar year. Combining these two forces, the key price index for core personal consumption expenditures rose a muted 1.3% over the last year. Wages have shown some evidence of firming so the announcement by Wal-Mart (the country's largest private employer) that it is planning to increase wages across the board confirmed what is beginning to be seen in the various official data sources.

In her Congressional testimony, Chair Yellen laid out the next milestone in the Fed's plan for monetary policy normalisation. She indicated that policy makers would have to be "reasonably confident" that inflation would return to its 2% mandate-consistent rate in the medium run in order to lift-off. Reasonable confidence over the medium run is not an excessively high bar, but it is also a subjective one. A number of her colleagues echoed that sentiment and pointed to lift-off in the June-September period, with the exact choice depending on how the data develops.

EMU

In the first quarter of 2015, the EMU is consolidating the cyclical recovery which started at end of the last quarter of 2014 - when GDP expanded at a 1.3% q/q annualised pace - on the back of the drop in prices, the improvement in bank credit conditions and the impulse stemming from the anticipation and then the announcement of the European Central Bank's quantitative easing (QE). In January, the EMU unemployment rate fell to 11.2%, the third consecutive monthly decline; retail sales bounced, by a strong 1.1% m/m. Car sales and construction were strong too. Industrial production was, however, more moderate, increasing only slightly, as demand from investments and external demand was more subdued. In February, consumer confidence surged further. Business confidence was boosted by business services and construction, while manufacturing and retail did not improve. On the inflation side, the HICP yearly growth rate recovered to -0.3% y/y in February from its cycle low of -0.6% y/y in January. The rise in headline inflation in February was mainly due to the non-core components, energy and food, while core inflation held steady at a low 0.6% y/y. The annual growth rate of EMU broad money supply M3 picked up further, rising to 4.1% y/y in January, as did net lending, although still at low levels.

In its second policy meeting of the year, the ECB provided further details of its QE programme. Purchases of Government bonds started on 9 March, and will proceed until September 2016 or later, once inflation has reached a path consistent with the definition of price stability. The ECB clarified several implementation aspects. Most importantly, it was stated that the purchases of assets with negative yields is permissible and ECB President Draghi also clarified that no assets with a yield below the current deposit facility rate of -0.20% will be bought. Some large national central banks have expressed their reservations towards large scale purchases of negative-yielding assets. The published legal documentation supporting QE revealed that the ECB is taking the potential implementation risks seriously. These risks arise from the fact that the ECB is conducting purchases under negative interest rates and shrinking net supply from the euro area Governments. The national central banks which will carry out most of the purchases will have leeway in adjusting their purchases according to availability of bonds and the prevailing yields. The ECB also published updated staff macro projections in its meeting. These were revised up sharply, with growth expected to firm to just above 1.5% y/y in 2015, from 1.0% back in December, and to then settle at a 2% annualised pace through to 2017. Inflation is expected to rise rapidly from 0% y/y this year (revised down from 0.7% y/y in the December projections) to 1.4% in 2016 and up to 1.8% y/y in 2017, thus very close to the ECB definition of price stability.

The Greek financing problems continued to unsettle the political landscape in the euro zone. After the Eurogroup and the Greek Government reached an agreement of a four-month extension to the ongoing second bailout progamme, the focus shifted to the implementation of the conditions underlying the agreement. The left wing of the ruling Syriza party staged a revolt against the agreement and Prime Minister Tsipras did not put the agreement to a vote in the Parliament. Meanwhile the cash situation of the Greek Government is deteriorating quickly as tax collection is lagging behind and important debt redemptions to the IMF need to be serviced, which are putting strain on available resources, questioning the possibility that all payments can be made until the end of the programme extension in June. Meanwhile the ECB has firmly refused to provide any assistance to Greece beyond what is necessary to prevent insolvency of the banking sector.

UK

Recent growth indicators have started to stabilise or pick-up slightly after a decline from their peak last summer. This is consistent with the view that UK growth has transitioned from a strong pace in excess of 3% to a more moderate pace of 2-2.5%, but is not slowing any further. Housing market activity looks to be stabilising. Housing market activity had been declining for most of 2014 due to macro-prudential tightening and speculation of interest rate hikes. With no additional macro-prudential tightening since May 2014, and a reduction in market interest rates, there is now room for stabilisation and even some modest improvement ahead. With the usual lags, that should mean that house price inflation should stabilise as well, after a marked slowing last year.

Business investment growth is unlikely to accelerate from the solid pace in 2014, and is more likely to ease off a little. An appreciation of around 4% in the trade-weighted exchange rate will also be a headwind. Uncertainty ahead of and in all likelihood immediately after the general election in May is likely to weigh on business investment as well. Heightened turmoil in Greece remains an important downside tail-risk even for the UK, via both confidence and financial contagion channels.

Fiscal policy is likely to turn contractionary again, after austerity has been more or less paused over the past two years. The medium-term fiscal path will depend greatly on the outcome of the election, but it seems the first year spending plans will be maintained by the main opposition party. Wage inflation has improved slightly in recent months, along with productivity growth. But wage pressure remains subdued relative to the rapid decline in the unemployment rate. Strong actual and potential labour supply increases from immigration, increased participation of younger workers and longer participation of older workers are likely to keep wage growth low relative to the pre-crisis period. Inflation is expected to be much weaker than in 2014. Lower oil prices play a big role of course, but core inflation is subdued as well. Headline inflation is anticipated to be skating closer to zero and expected to remain well below the Bank of England's target in 2015. The modest pick-up in wage growth to date, as well as the fall in inflation, does mean that consumption can be supported by some real income growth rather than a reduction in savings. This is a positive development, in the sense that it puts the consumption recovery on a sounder footing. Against a background of decent but not booming growth, combined with weak inflationary pressure, there is no urgency for the Bank of England to hike rates.

Japan

The economic picture in Japan has not changed much in the past month. On the one hand, so called hard-data came in particularly strong for January, continuing the pattern seen in the past few months. Industrial production, real manufacturing shipments and exports all posted notable seasonally adjusted gains. Real GDP for the fourth quarter recorded a 2.25% annualised rate increase, which signals an end to the short, "technical" recession. Private domestic demand lagged behind though, as GDP was boosted by strong exports. On the other hand, survey data, such as consumer confidence and the economy watchers survey, have mostly continued to move sideways at levels well below those that prevailed before the consumption tax hike. The one exception is the Shoko-Chukin Survey of small and medium-sized firms, which improved in January. The news on inflation was also mixed. Core inflation (according to the Bank of Japan's definition) declined for Japan on a seasonally adjusted basis in January, held down by a drop in energy prices. Tokyo inflation data for February point to a higher outcome in the upcoming report. Based on some recent Government moves to reform the agricultural sector, including some concessions in recent talks, optimism over prospects for a final deal on the Trans-Pacific trade pact has improved. Concluding a deal, however, requires the U.S. Congress to grant the President trade promotion authority. Legislative prospects, however, have dimmed somewhat as a coalition of conservative politicians have come out against granting such authority. Hence, the US President needs more support from his own party. Such support may require language on currency manipulation, which would add a new complication to the talks.

China

Despite some marginal improvement, activity in China has not shown any clear signs of a turnaround in February or March. The PMIs, referring to both manufacturing and other sectors, produced by both Markit (HSBC) and the National Bureau of Statistics somewhat improved in February, and the synthetic HSBC Composite PMI increased from 51 to 51.8. Some details of the surveys were more subdued than the headlines, especially the inventory cycle. Moreover, and most importantly, disinflationary pressures intensified, as did the deterioration of the unemployment picture.

Real activity indicators including industrial production, fixed-asset investment, and retail sales in January and February disappointed against the market's expectation. In particular, industrial production growth slowed to 6.8%, the worst since the 2008 financial crisis. CPI yearly inflation increased from 0.8% y/y in January to 1.4% y/y in February, above the 1% consensus. PPI inflation fell again. Such low inflation provides room for more policy easing. According to trade data in February, the trade balance hit another historical high of USD 60bn, although partly explained by the effect of a late Chinese New Year. However details of the report were not encouraging, as imports have continued to fall in both value and quantity terms.

The People's Bank of China (PBoC) cut its benchmark interest rate again on 28 February. It is another asymmetric cut with the benchmark deposit rate lowered by only 5 bps but the benchmark lending rate lowered by 25bps. The PBoC stated that this cut aimed to lower financing cost in real terms in a low-inflation environment. In addition, it mentioned that the cut in November 2014 was effective in bringing down the average lending rate. Following this benchmark interest rate cut, the PBoC also lowered its open market operation rates by about 10 bps, while the 7-day fixing repo rate stayed at an elevated level. The market expects further policy easing, including cuts in both the required reserve ratio and in official interest rates.

Enquiries