Monthly Shareholder Report - October 2014

BH GLOBAL LIMITED

MONTHLY SHAREHOLDER REPORT:OCTOBER 2014

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 31 October 2014 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).

** Estimated as at 31 October 2014.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

Unaudited Estimates as at 31 October 2014

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 31 October 2014, 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

BHG Underlying Investment Exposures estimated as at 31 October 2014* (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.

* Inclusive of subscriptions\redemptions in underlying funds for 31 October 2014.

** 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 0.80% and the NAV per share of GBP depreciated by an estimated 0.81% in October.

As detailed below, losses were generated from BHMS's investments in BHMF, BHCC and BEL. These losses were partially offset by gains made in the rest of the BHMS portfolio and BHG's discount management activities during October.

Given its diversification benefits, increased flexibility and positive contribution to BHMS performance year to date, the Investment Committee ("IC") of BHCM has determined to further increase the Fund's exposure to the DIP. The IC has placed full redemptions for the Fund's remaining holdings in BHCS and BEL to facilitate the increased allocation to the DIP.

* 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 BHMFL Class Z USD Shares depreciated by an estimated 1.81% (net of fees) in October.

During the month, BHMF suffered losses mainly in USD interest rate and to a lesser extent in EUR interest rate trading. Equity macro and FX trading were also moderately negative. Small gains were made in rates trading in currencies other than USD and EUR.

Brevan Howard Asia Master Fund Limited ("BHA")

The NAV per Share of BHA Ordinary USD Shares appreciated by an estimated 0.67% (net of fees) in October.

In October, BHA made gains in FX trading, predominately from the appreciation of the Chinese Renminbi against the USD and JPY as well as to a lesser degree a basket of shorts in other Asian currencies. Interest rate trading strategies were overall flat for the month.

The NAV per Share of BHCC Ordinary USD Shares depreciated by an estimated 0.74% (net of fees) in October.

Many of BHCC strategies lost money for the month, with the largest losses in the performing corporate long/short strategy. These losses were partially offset by gains in residential mortgage-backed securities strategy and corporate structured credit strategy.

The NAV per Share of BHCS Ordinary USD Shares appreciated by an estimated 4.27% (net of fees) in October.

BHCS generated positive returns in October as a result of bearish positioning in oil.

The NAV per Share of BHST Class Z USD Shares appreciated by an estimated 0.80% (net of fees) in October.

During the month, BHST made gains in all sectors with the exception of equity index futures and agricultural commodity futures

Brevan Howard Emerging Markets Local Fixed Income Leveraged Master Fund Limited ("BEL")

The NAV per Share of BEL Class A USD Shares depreciated by an estimated 1.17% (net of fees) in October.

During October, BEL further reduced positioning, with a small net long in FX and a net short in emerging markets interest rates. BEL generated modest losses in both interest rate and FX positions.

Brevan Howard Credit Value Master Fund Limited ("BHCV")

The NAV per Share of BHCV Class Y USD Shares appreciated by an estimated 0.71% (net of fees) in October.

In October, the two largest contributors to performance were corporate fundamental investments and residential mortgage-backed holdings, with each contributing approximately equal to monthly returns.

Direct Investment Portfolio ("DIP")

The Direct Investment Portfolio depreciated by an estimated 0.11% in October.

The DIP generated gains in credit and FX, mainly being long USD versus EUR. These gains were offset by losses in USD and EUR interest rate trading as well as minor losses in tactical equity trading in Europe.

Manager's Market Review and Outlook

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

Market Commentary

US

Markets went on a wild ride in October, but the economic news in the US reinforced the assessment that growth is sturdy, the labour market is solid, and inflation is muted. The first estimate of third-quarter GDP growth was 3.5% (annual rate), cementing the assessment that growth averaged approximately 4% in the middle two quarters of the year. However, the third quarter ended on a soft note for retail sales and capital spending indicators, so the economy's momentum appears to have slowed entering the fourth quarter. Nevertheless, with fundamentals for consumption and investment holding up at high levels, the best assumption is that private demand will advance at a moderate clip in the coming months.

The labour market is making impressive strides. The unemployment rate fell to 5.8% in the latest release. In light of the rapid decline in the headline unemployment rate and broader measures of labour market underutilisation, full employment appears within sight over the next year. Indeed, some observers have characterised the improvement in the labour market as "gradual". However, with the unemployment rate falling 1.4 percentage points over the last year, the drop is anything but gradual-it is a faster decline than seen in either of the prior two expansions dating back to the early 1980s. In the last year, payroll employment has had average monthly gains of 220,000, a similarly impressive track record.

Earlier in the year, wages were weak because there was still ample slack in the labour market. With slack getting taken up over the middle two quarters of the year, wages have begun to accelerate somewhat. In the latest comprehensive assessment of wages, the Employment Cost Index posted a second-consecutive sizable increase, so that private wages and salaries increased 3% (annual rate) in the middle two quarters of the year, putting the year-over-year change at 2.2%. Price inflation is, however, quite muted. After moving up in the second quarter, core inflation settled back down in the latest print to 1.5%, well below the Federal Reserve's 2% target. With lower energy and import prices promising to pass-through to core inflation over the next year, it is anticipated that there will be only a very gradual acceleration in prices.

The Federal Reserve ended quantitative easing in October, as widely anticipated. They also laid down markers indicating that they are planning to normalise policy and raise interest rates sometime next year. Although forward guidance still describes lift-off as a "considerable time" from now, that language has been so qualified that it is essentially a pledge to be data-dependent. In addition, the Committee upgraded its assessment of the labour market while hinting at some worries about low inflation.

EMU

After a string of disappointing data during the summer, economic news in the euro area has been more mixed over the past weeks. In October, the euro area Composite PMI stabilised at 52.1 and the European Commission surveys improved after declining for two months, but the IFO Business Climate fell by another 1.5 points. Actual data referring to the month of September were still weak, as euro area industrial production rebounded only partially (0.6% m/m) after the August dip (-1.4% m/m) and retail sales plunged, more than offsetting the August bounce. Inflation inched up slightly to 0.4% y/y, thus remaining dangerously close to deflation territory and significantly below the ECB definition of price stability. Additionally, the European Central Bank (ECB) successfully brought to an end the comprehensive asset quality review and stress test exercise. Consequently, on 4 November the ECB formally took over the supervisory responsibilities of the largest euro area banks.

Against this backdrop, in its penultimate policy meeting of the year, the ECB did not take any additional monetary policy measures, but delivered a more dovish message than had been expected. In particular, ECB President Draghi managed to put in the ECB introductory statement an expectation for ECB balance sheet expansion "towards" the dimensions of early 2012, thanks to the measures (T-LTRO, ABS and covered bond purchases) taken thus far. As Draghi made clear in the Q&A, the ECB Governing Council was unanimous in expressing this expectation. Moreover, the ECB statement added that the "Governing Council has tasked the ECB staff and the relevant Eurosystem committees with ensuring the timely preparation of further measures to be implemented, if needed." However, in the Q&A, Draghi did not give the full list of measures that would be studied. On that point, Draghi set out two triggers for further ECB action: disappointment in growth and inflation data and an insufficient balance sheet expansion from the existing measures. The eyes are now on the last policy meeting of the year on 4 December and the second unconditional TLTRO tender to be allotted on 11 December.

UK

Over the past month there has been further evidence of a slowing in UK growth momentum and a rather sharp slowing in the housing market, which is likely to have knock-on effects on growth in the coming quarters. Manufacturing growth has also slowed sharply, while services and construction continues to hold up, but nevertheless slowing as well. The 10% FX appreciation over the past year and a half, as well as the renewed slowing in Eurozone growth, seem to be taking a toll. Housing market activity has been slowing sharply for several months, and with the usual lag, there is now also a loss in price momentum. Average prices for the whole country are approximately stagnating now, after a period of 10% annualised growth. Prices in London are already falling. The main cause of the housing market slowdown seems to be the macro-prudential tightening by the Bank of England (BoE) earlier in the year. This has had a larger effect than intended, as banks seem to have tightened conditions to remain well inside the BoE guidance. Fear of future property tax changes after the 2015 election is also acting as a drag on the housing market. The labour market continues to show a puzzling mix of rapid declines in the unemployment rate, but also very weak wage growth, suggesting there is ample slack in the labour market. The unemployment rate is likely to fall below 6% in the coming months, once again falling faster than the BoE forecast. But against that, wage growth remains very weak, and shows little sign of picking up significantly, falling short of BoE forecast. Moreover, there are some early signs that employment growth is starting to slow, a development that is expected to continue in response to an overall slowdown in economic growth. Inflation has moved further below target, the combined result of muted core inflation, and falling energy and food prices. A backdrop of slowing growth with weak wage and price inflation does not require urgent rate hikes. While the BoE contemplated the possibility of a November hike at some point in the early summer, the policy debate has evolved towards delaying the first hike in response to disappointing data. The first rate hike is expected in the second half of 2015 at the earliest.

Japan

Policy makers in Japan made two long-awaited, major announcements at the end of the month that will have significant ramifications for markets and the economy over the next year. The Bank of Japan (BoJ) announced an increase in the pace of bond buying by about 60% and approximately tripled the pace of purchases of ETFs and J-REITs from the previous policy. In the case of JGB purchases, the average remaining maturity of the purchase will be extended to about 7-10 years (an extension of three years). In addition, the Government Pension Investment Fund announced that it would reduce its holdings of domestic bonds from about 60% to 35%, while doubling the share of its holdings in domestic and international stocks. In the days following the announcement, the Nikkei ran up more than unwinding its October decline, long-term interest rates fell, and the yen depreciated steeply, especially against the dollar.

The BoJ cited fears that under the weight of crude oil price declines and some slippage in aggregate demand due to the consumption tax hike, there could be some backsliding in inflation expectations. The recent weakness in the real economy is a threat to the reflationary project. Real GDP fell -7.1% q/q in the second quarter (annualised rate). Industrial production is down -0.8% over the last twelve months, notwithstanding some improvement in September output. Recent moves in some surveys have been mixed of late, but various measures including the Shoko-Chukin survey of small and medium-sized enterprises, consumer confidence, and the Economy Watchers' survey remain noticeably below levels seen at the start of the year. Japan's core rate had been supporting core inflation in the first half of the year but has recently turned down. Fossil fuel prices are putting downward pressure on consumer petroleum products, such as gasoline and natural gas, notwithstanding the yen's depreciation against the dollar, and will likely weigh on the aggregate inflation rate in the coming months. But, electricity prices have also been an important element in inflation dynamics. The near 10% increase in electricity prices from June 2013 to June 2014 added 0.3 pp to core inflation, but it was never the case that this inflationary impetus could be sustained over the medium term. Indeed, over the last three months electricity prices have reduced core inflation by -0.1 pp (annual rate). More important for the long-term project, however, the pace of inflation excluding food and energy, the so-called western core price index, has been weak. The seasonally adjusted index, which had been averaging only 0.5 pp (annual rate) excluding the effects of the consumption tax hike, edged down 0.1 pp in August and was flat in September. So, even in the absence of a drag from energy prices, some additional boost to the reflationary project was already called for.

China

Economic data have continued to slow since August, although at a moderate pace. In October, the manufacturing HSBC PMI rose by 0.2 points, to 50.4, while the official PMI declined by 0.3 points, to 50.8. Details were a bit less encouraging, as the ratio of new orders to inventory fell, while the price index continued to flag disinflationary pressures. Consistently, actual activity data continued to show moderation in October, falling short of market expectations, with the exclusion of real estate data which are showing stabilisation, albeit possibly temporary. In particular, industrial production showed renewed moderation following the temporary bounce in September: the y/y growth rate fell back from 8.0% to 7.7%, undershooting consensus forecasts of a stable outcome. On the external side, China recorded in October another strong trade surplus of US$45bn, due to both improved export growth and weaker import values.

So far, there is no "open" policy reaction to the recent deterioration in data, but the People's Bank of China (PBoC) admitted in its third quarter report that it is trying to regain control over monetary conditions. The report acknowledged that the PBoC rolled out a new lending facility and used this facility to inject a large amount of liquidity at a low interest rate (3.5%). The main purpose of this injection was to likely "neutralise" the impact of slower foreign inflows. In addition, the PBoC have also lowered the interest rate on pledged supplementary lending, a targeted facility to finance urban development, in addition to lowering the required reserve ratio for individual banks that meet certain credit allocation requirements.

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