BHGG.L Regulatory News (BHGG)

BH GLOBAL LIMITED

MONTHLY SHAREHOLDER REPORT:JANUARY 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. As at 30 January 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 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).

As at 30 January 2015.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

Unaudited Estimates as at 30 January 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 calculated by BHCM as at 30 January 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 as at 30 January 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. Prior 1 January 2015, DW Catalyst Master Fund, Ltd was named Brevan Howard Credit Catalysts Master Fund Limited.

Note: BHMS is invested in DW Catalyst Offshore Fund, Ltd. - a feeder to DW Catalyst Master Fund, Ltd. DW Catalyst Offshore Fund, Ltd also has the ability to make other investments.

** 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 appreciated by 3.37% and the NAV per share of GBP appreciated by 3.48% in January.

* 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 appreciated by 3.91% (net of fees) in January.

During January, BHMF made gains mainly in FX trading and, to a lesser extent, in equity macro and EUR interest rates trading, the latter mainly in asset swap trading. BHMF suffered small losses in USD interest rates trading.

Brevan Howard Asia Master Fund Limited ("BHA")

The NAV per Share of BHA Ordinary USD Shares appreciated by 1.07% (net of fees) in January.

BHA made gains from FX trading, primarily from the appreciation of the US dollar versus the Euro and the Australian dollar. Interest rate strategies were overall slightly negative for the month.

The NAV per Share of DWC Glass G USD Shares appreciated by 0.19% (net of fees) in January.

January reflects positive performance from residential real estate related strategies, commercial real estate and other structured finance positions. Corporate structured positions were flat on the month, while distressed and performing long / short corporate credit detracted from performance.

The NAV per Share of BHST Class Z USD Shares appreciated by 8.91% (net of fees) in January.

During January, BHST made gains in all strategies with the exception of equity index futures and agricultural commodity trading.

Direct Investment Portfolio ("DIP")

The Direct Investment Portfolio appreciated by 6.65% in January. FX trading was the main positive contributor. Gains also came from equity index and EUR interest rates trading.

Manager's Market Review and Outlook

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

Market Commentary

US

The data in January accentuated the cross-currents facing the US economy. The labour market powered ahead. Combined with upward revisions to prior months, more than 1 million jobs were added in the last three months. Given the strength in hiring, it was not surprising that more people returned to the labour force to actively search for jobs as well. That increase in searchers pushed up the unemployment rate to 5.7%, but is an otherwise healthy sign. Finally, the peculiar drop in average hourly earnings reported in December was more than reversed in January. Over the last three months, earnings rose 2.6% annualised, a small but noticeable improvement in wage growth.

By contrast, inflation is moving down. Headline consumer prices fell in January, pulling the year-over-year change below 1%. Given the decline in gasoline and other energy prices already seen, the year-over-year change in headline inflation may turn negative in the coming months. Core inflation is also edging down because of the pass-through of lower energy and import prices. For the second consecutive month, core prices were flat. In the midst of such sharp changes in energy prices and the exchange rate, it will take a few quarters before the underlying trend in inflation becomes clearer. In the meanwhile, readings on inflation expectations and wages will take on even more importance.

Growth slowed in the fourth quarter and is likely to be revised down further still. GDP growth was held down by a decline in Government spending and net exports. However, the key parts of GDP were positive, paced by strong consumption outlays. GDP growth is expected to be well maintained in the current quarter.

Putting the pieces together, the conflicting signals about unemployment and inflation make the Fed's job difficult. Clearly, the economy has improved significantly. But, cautious policy makers want to be confident that such gains are sustainable. With inflation moving down, there is an argument to wait and see. However, with the unemployment rate perhaps a few months away from full employment, the Federal Open Market Committee has to be forward looking. This debate is unlikely to be settled in the next few months, making for an interesting summer when the launch pad for lift-off appears to have narrowed to between June and September.

EMU

Business confidence and private consumption seems to have improved at the start of 2015, thanks to the combined impact of low oil prices and the loose monetary conditions, fuelled first by the expectation, and then the announcement, of the ECB bond buying plan. Both the EMU Composite PMI (to 52.6, still moderate, but the highest in 6 months) and the German IFO increased. The French INSEE stood stable, while Belgian business confidence deteriorated. Importantly, the improvement in business surveys was solely attributable to domestic components, as global demand dynamics remain moderate. At a country level, the PMI indicates that the improvement is more pronounced in Spain, where the Composite PMI was by far the highest of the area and the most elevated since 2007. In February, early indications on business confidence stemming from the Sentix index indicate a renewed surge, with the pan-EMU index getting close to the recent highs recorded in April 2014 (the all-time high was in June 2007). As to actual data, retail sales accelerated at the end of 2014, sealing the strongest quarterly increase, in Q4 2014, since 2006, boosted by lower energy prices. Industrial production was more moderate, undershooting consensus expectations and was flat in December, following a modest 0.2% m/m increase in November. The strength in December German industrial orders, however, bodes well for production at the beginning of 2015. Prices continue to fall: the euro area HICP annual inflation dropped to -0.6% y/y in January, due primarily, but not only, to a further fall in energy prices, as core inflation hit a new all-time low. The annual growth rate of EMU broad money supply M3 picked up further, rising to 3.6% y/y in December from 3.1% y/y in November. The sharp increase was mainly due to a base effect, but the underlying trend also clearly points upward. The ECB's preferred measure for growth rate of lending to the private sector recovered further, turning positive for the first time since July 2012 (to 0.1% y/y in December from -0.2% y/y in November).

However, the improving outlook is clouded by uncertainty about Greece. Having achieved a landslide election victory the left-wing Syriza party moved quickly to form a new Government and announced a series of measures which seemed in conflict with the international bailout programmes. The current European support programme which was due to expire at the end of February has been conditionally extended for four months and the Greek Government entered difficult talks with its creditors about the future. The main differences in views are concentrated on parts of the labour market reforms implemented by the previous Government, as well as the future primary surpluses required to keep the Greek public debt sustainable. If the negotiations do not result in an agreement, the Greek Government and the Greek banks will face a difficult funding situation. The prospect of a forced exit of Greece from the EMU, though still remote, could have a serious adverse impact on the otherwise improving business and consumer sentiment in the euro area.

UK

Recent growth indicators have started to stabilise after a decline from their peak last summer. This is consistent with the view that UK growth is transitioning from a strong pace in excess of 3% to a more moderate pace of 2-2.5%. The housing market has been slowing, for nearly a year now, but is likely to stabilise at some point during the course of 2015 as long as there is no additional drag from macro-prudential tightening, and lower interest rates and the improvement in real incomes (from lower oil prices) provide some tailwinds. But house prices are not expected to restart on a strong upward path, so any consumption growth will be limited to the pace of real income growth, with no further reduction in savings. Wage inflation has improved slightly in recent months, along with productivity growth. Unit labour cost growth therefore remains weak, but the fact that consumption can be supported by some real income growth rather than a reduction in savings is a positive development, in the sense that it puts the consumption recovery on a sounder footing. Business investment growth is unlikely to accelerate from the solid pace in 2014 and is more likely to ease off a little. Export growth is likely to remain subdued as Eurozone growth remains subdued, even if somewhat improved over the last year thanks to ECB quantitative easing. Uncertainty ahead of and shortly after the general election 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 more contractionary again, after austerity has been more or less paused in the past two years. The medium-term fiscal path will depend greatly on the outcome of the election, but it is anticipated the first year spending plans would be maintained by the main opposition party as well. Inflation is expected to be much weaker than in 2014. Lower oil prices play a big role of course, but core inflation is subdued too. The UK is anticipated to be skating closer to zero on headline inflation, and expected to spend the entire year well below the target. Against a background of only modest growth and weak inflationary pressure, there is no urgency at all for the Bank of England to hike rates. Rate hikes are likely to become a serious issue for discussion only towards the end of 2015 at the earliest.

Japan

Japan is recovering from its mid-2014 technical recession, though there is a dichotomy between so-called hard measures and survey data. Direct measures of activity, such as industrial production, trade and retail sales moved up in the latter half of 2014. In the case of trade, the yen depreciation over the first half of 2014 is now showing through to external demand. Exports rose notably in the second half of 2014, while imports have moved sideways. On the other hand, survey data does not show the same improvement. In the last six months the Shoko-Chukin survey of small and medium-sized businesses is little changed. The Economy Watchers' survey is down a couple points, as is consumer confidence. The latest inflation data have shown some improvement of late. The core measure, which includes energy costs, has been held back of late by declines in oil prices and is expected to decrease in the near term. Excluding food and energy, national prices have ticked up the last two months on a seasonally adjusted basis. That is better than the flat run seen in the middle of 2014, though prices need to accelerate further if the Bank of Japan is going to reach its goals. It is notable that Tokyo measures have been at best flat over the last half of 2014.

The Abe Government made a stir recently when it was reported that Yasushi Harada, a strong supporter of the reflationist agenda, will be appointed to the BoJ. That has led to speculation of another round of monetary easing. Easing is not expected to be imminent but the BoJ continues to monitor activity data. The latest median expectation for core inflation for fiscal year 2016 is a little above its 2% target. That might be regarded as optimistic as inflation would need to be close to a 2% annual rate by the middle of 2015 to meet that expectation. The plunge in oil prices and its pass through to even western core prices is anticipated to cloud trends in the near term.

China

Activity in China remained relatively subdued at the beginning of 2015. The PMIs, referring to both manufacturing and other sectors, produced by both Markit (HSBC) and the NBS remained soft. Indeed, the synthetic HSBC Composite PMI fell from 51.4 to a low 51.0. Other indicators have carried similar trends, including intensified disinflationary pressure, ongoing destocking process, and rising unemployment pressures. Indeed, CPI yearly inflation fell in January from 1.5% to 0.8%, below the 1% consensus. PPI inflation deepened. Such low inflation provides room for more policy easing. According to trade data in January, the trade balance hit another historical high of USD 60bn. Details of the report, however, were not encouraging, as both exports and imports fell on a sequential basis.

The People's Bank of China (PBoC) cut the reserve requirement ratio (RRR) on 4 February. The overall package encompassed: a 50 bps RRR cut for all the financial institutions; an additional cut by 50 bps (i.e., 100 bps in total) for those banks lending to sectors considered as priority (i.e. small and medium enterprises and agricultural firms); and an additional 400 bps RRR cut for the Agricultural Development Bank of China. These measures are expected to inject approximately RMB 600-670bn liquidity into the system. The timing of this RRR cut came earlier than expected as most took the recent re-introduction of reverse repo as a signal of the PBoC's reluctance to cut the broad RRR. The nature of this RRR cut can be viewed as neutral, as it is aimed at offsetting the impact of rising capital outflows since mid-2014. Indeed, the PBoC kept the reverse repo rate unchanged at 4.8% the day following the announcement of the RRR cut. However, market expectations of further easing have now risen.

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