Boussard and Gavaudan : BGHL July 2019 Monthly statement

BOUSSARD & GAVAUDAN HOLDING LIMITED

A closed-ended investment company incorporated with limited liability under the laws of Guernsey

with registration number 45582

JULY 2019 STATEMENT

Total value of the investments of BGHL	€664 million as of 31 July, 2019
based on the final NAV for the Euro & Sterling
ordinary shares1
NAV per share		Euro ordinary share		Sterling ordinary share
		€22.6106		£20.3433
		The proceeds of the initial and secondary public offerings have been
BGHL's portfolio		invested into the Sark Fund (net of a certain amount retained by BGHL for
		working capital requirements and other requirements). Since 1 November
		2010, BGHL is invested into the BG Fund (formerly known as Boussard &
		Gavaudan Fund). In addition to having substantially 100% of its assets
		under management invested into the BG Fund, BGHL has other
		investments.
		Euro Shares			Sterling Shares
Shares issued		28,782,231		608,712
Shares held in treasury		-		-
Shares outstanding		28,782,231		608,712

A. BG FUND

Note that trade examples detailed in each strategy below are among the best and worst performances of the month.



COMMENTARY AND HIGHLIGHTS

European markets were slightly negative in July, with the Eurostoxx 50© down -0.2% for the month. Volatility increased with VStoxx© finishing the month at 14.4%, slightly up from 13.7%. iTraxx Crossover (S31) © ended July at 253bps (2bps tighter).

BG Fund delivered a return of +1.73% in July (USD A share class) driven primarily by equity strategies and trading.

1 The total value of the investments of BGHL is based on the final NAV for the euro and sterling shares and the currency exchange rate for the Sterling vs. Euro.

Volatility Strategies

Mandatory convertible bond arbitrage

Mandatory convertible bonds contributed positively this month. The Volcano-into-Anglo-American mandatories have been recalled and contributed +4bps. We will receive a make-whole amount and the current ratio of shares. In addition, it is worth highlighting that Volcano also sold some Anglo American via an accelerated book building. After this transaction, Volcano has no more interest in Anglo American. There were no primary issues in July.

Convertible bond arbitrage

Convertible bond contribution (excl. mandatories) to the performance of the fund was positive in July. The primary market saw two deals totaling €0.8bn. Both issues seemed expensive and had long-dated maturities. The secondary market was lackluster with few opportunities.

Volatility Trading

Realised volatility vs implied at the end of June:

		30d Implied vol level			Realised vol over the			Difference
		on 30/06/19			month
US	13.66		8.51		-5.15
EUROPE	14.30		9.42		-4.88

Variation of implied volatilities during July:

		Aug. Vol Index Fut as			Aug. Vol Index Fut as			Vol move
		of 30/06/19			of 31/07/19
US	14.59		14.40		-0.19
Europe	15.15		14.05		-1.10

Volatility trading contributed negatively to the performance of the fund in July.

The global mood remained very dovish during July, mainly driven by central bank easing policies and projections. As a consequence, volatility was hit hard across the term structure, in both equities and FX, and negative carry from our long gamma positions remained a drag on performance.

During the last few days of the month, there was a marginal risk off tone to markets, mainly due to a more mixed global growth picture. This slight shift was fueled by renewed concerns about a US/China trade war, disappointing macroeconomic data, hard Brexit fears and the Fed's 'ability to deliver'. Despite these worries, implied volatilities remained subdued.

Despite the tough volatility environment, on the equity side we managed to offset most of the negative carry by actively trading around positions and we saw a positive contribution from dispersion trades. In FX, we suffered on gamma trading especially on the USDBRL pair, where implied volatility collapsed dramatically after pension reforms passed the first hurdle in Congress without any change in realised vols.

On the fixed Income side, long-term volatility increased as Euro rates reached new lows. The portfolio benefited from that move higher in vol while capturing also some of the move lower in rates.

Equity strategies

July was a solid month for the equity book, with a positive performance. This was distributed across various sub- strategies.

On the fundamental side, the portfolio enjoyed a good H1 earnings season. Shares were fairly volatile on earnings releases, due partly to the uncertain economic outlook and we witnessed many moves north of 5%. Our portfolio benefited from good positioning going into the numbers, with our long gamma bias proving particularly efficient on this occasion.

We also benefited from the strong rebound of some of our telecom positions, at the forefront of which was Vodafone. Results publication carried two important positive news items: i) initiation of better portfolio monetisation through tower disposal; ii) guidance for improved future top-line going forward following a beat on the current period expectations.

The performance of Orange Belgium is also worth highlighting. A favourable regulatory ruling increased the prospects of future profitability, firstly giving a boost to share performance, which should be followed by the conclusion of an accretive network sharing deal with incumbent Proximus, enabling a further upward rerating.

Corporate activity remained buoyant during the month with a flurry of deals announced, though still on the smaller end of the spectrum in Europe. In this environment, the Risk Arbitrage and Special Situation strategies continued to deliver positive performance.

The exposure of the equity portfolio has increased, in line with our comments from the beginning of the year (February and March newsletters). With the economic and geopolitical uncertainty, we are keeping the portfolio as well hedged as possible, with convexity from our long gamma positions.

Credit strategies

Capital Structure Arbitrage

Capital structure arbitrage performance was flat this month. Once again, both asset classes evolved in an orderly fashion. We are not seeing appealing discrepancies between asset classes and we consequently remain lightly positioned in this sub-strategy.

Credit long / short

Credit long / short delivered a good contribution this month.

Credit markets reported a positive month overall. This was particularly true in Europe with rate rallies and central bankers hinting at further dovish action including, inter-alia: the possibility of revisiting a corporate bond purchase program as well as measures to mitigate the impact of negative rates for financial institutions.

The primary market remained active despite the traditional summer season slow down, especially in the corporate space. Primary deals were well received overall and benefited from the continued inflows in the asset class. This activity created trading opportunities, not only on new deals but also on secondaries. We took advantage of the market strength to reduce our trading book in corporate high yield and set up some hedges ahead of August.

On the idiosyncratic side, our long position in Deutsche Bank senior credit outperformed hedges following the announcement of the restructuring of its investment bank. The plan, if delivered, will be positive for Deutsche's credit profile with reduced capital and funding requirements. The plan was welcomed by both regulators and rating agencies.

Credit special situations

Credit special situations contributed positively in July.

Trading

Trading strategies returned positively this month. The decline in rates remained a key driver for the market however, contrary to June, European equity indices were flat. This combination was beneficial to the defensive positioning of the Equity Quantitative strategy and to the Trend-following strategy which was profitable across all asset classes. While most of the Trend-following strategy gains came from rates, the currencies side delivered a good performance as well. In particular, the strategy was well positioned on the British Pound and on the Euro.

B. DIRECT INVESTMENTS OTHER THAN BG FUND

On top of its investment in BG Fund, BGHL has other investments. As of 28 June 2019, the net asset value of these investments represents about 1% of the net asset value of BGHL.

Rasaland Investors ("RLI")

RLI is a Malta-based holding company structured as a private equity fund in terms of fees and organisation and managed by BK Partners. RLI is dedicated to investing in land, hotels and high-end resort developments in Mexico.

RLI main asset is a majority interest in ACTUR its private subsidiary. ACTUR's other shareholders are Mexican public institutions. ACTUR owns land developing assets (Mandarina and Xala projects) and a minority interest in the publicly-traded company RLH Properties (ticker: RLHA:MM). RLH Properties owns majority interests in the Four Seasons hotel in Mexico City and in four hotels in Cancun (Fairmont hotel, Rosewood hotel, Banyan Tree and the Hyatt Andaz hotels and the Camaleon PGA Golf Course) and RLH Properties owns land lots in the Mandarina area on which the One & Only hotel and the Rosewood hotel are being developed.

Based on recent indications that BGHL would only be able to exit at a material discount to RLI's NAV, BGHL decided to mark down the position by -50% in May 2017. The position is valued at 50% of the NAV calculated by RLI's administrator.

In July 2017, BGHL purchased 9,075,135 shares of Rasaland. BGHL currently holds 19,075,103 shares which represents approximately 10.1% of the share capital of RLI.

1. BOUSSARD & GAVAUDAN INVESTMENT MANAGEMENT UPDATE

TRANSACTION IN THE COMPANY'S SECURITIES

Please note that transactions in the Company's securities that have been performed by officers, directors and persons referred to in the section 5:60 of the Financial Supervision Act ("Wft") are reported:

• directly on the AFM website: www.afm.nl(professionals > registers > notifications > insider- transactions 5:60 wft);
• on the Company's website through a link to the AFM notification: www.bgholdingltd.com(Investment

Manager > Regulatory information).

Transactions in the Company's own securities are also reported on:

• the AFM website: www.afm.nl(professionals > registers > notifications > price-sensitive press releases);
• the Company's website: www.bgholdingltd.com(Investor Relations > Financial announcements).

BGIM'S AUM

As of 1 August 2019, BG Fund assets under management are €2.88bn.

E. Boussard & E. Gavaudan

Contact information

Boussard & Gavaudan Investment Management, LLP

1 Vine Street, London W1J 0AH - United Kingdom

Disclaimer

The Company is established as a closed-ended investment company domiciled in Guernsey. The Company has received the necessary approval of the Guernsey Financial Services Commission and the States of Guernsey Policy Council. The Company is registered with the Dutch Authority for the Financial Markets as a collective investment scheme pursuant to article 2:73 in conjunction with 2:66 of the Dutch Financial Supervision Act (Wet op het financieel toezicht). The shares of the Company (the "Shares") are listed on Euronext Amsterdam. The Shares are also listed on the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange plc's main market for listed securities.

This is not an offer to sell or a solicitation of any offer to buy any securities in the United States or in any other jurisdiction. This announcement is not intended to and does not constitute, or form part of, any offer or invitation to purchase any securities or the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of the securities referred to in this announcement in any jurisdiction in contravention of applicable law.

Neither the Company nor BG Fund has been, and neither will be, registered under the US Investment Company Act of 1940, as amended (the "Investment Company Act"). In addition, the securities referenced in this announcement have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"). Consequently, any such securities may not be offered, sold or otherwise transferred within the United States or to, or for the account or benefit of, US persons except in accordance with the Securities Act or an exemption therefrom and under circumstances which will not require the issuer of such securities to register under the Investment Company Act. No public offering of any securities will be made in the United States.

You should always bear in mind that:

• all investment is subject to risk;
• results in the past are no guarantee of future results;
• the investment performance of BGHL may go down as well as up. You may not get back all of your original investment; and
• if you are in any doubt about the contents of this communication or if you consider making an investment decision, you are advised to seek expert financial advice.

This communication is for information purposes only and the information contained in this communication should not be relied upon as a substitute for financial or other professional advice.

VC 06.02.12.03