Boussard & Gavaudan Ord : BGHL May 2015 Monthly statement

A closed-ended investment company incorporated with limited liability under the laws of Guernsey with registration number 45582

A. BG FUND

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

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COMMENTARY AND HIGHLIGHTS

The Eurostoxx 50® ended May down -1.2% and stock market volatility was rangy: the VDAX finished at 22.8%, up from 20.7% and the VStoxx® at 23.5%, down from 24.2%. The Crossover Series 23 ended at 287ps (15bps of widening).

Convertible Bond Arbitrage

Convertible bonds (excl. mandatories) contributed positively to the performance of the fund, mostly driven by the position in GFI Informatique. Other positions were almost flat. Very few opportunities arose in May. We built a position in Deutsche Post following a strong fall of the implied volatility. As the stock rallied, long only funds took profit on the name and created this opportunity.

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.

Primary issuance in May amounted to €4.55bn with one large exchangeable issue from American Movil into KPN. There were three issues with zero coupon and high premium. Year-to-date issuance amounted to €9.5bn with 16 issues (to be compared with €7.2bn in 28 issues last year). Redemptions (maturities, tenders, soft calls) amounted to €7.3bn (equivalent to last year).
Three facts can be highlighted. There are:
- more issues from investment grade names with zero coupon and high premium,
- larger deals (above €1bn),
- more exchangeable issues (€6bn versus €1.7bn last year),

Name Amount Premium Runner CDS Vol Delta

Unibail 0% 2022 500 37.0% BNP 50 bps 24.0 30
Salvepar 1.625% 2022 150 37.5% BNP 150 bps 18.0 15

Tikehau 1.3% 2022 200 35.0% BNP 175 bps n/a 20
Haniel / Metro 0% 2020 500 37.0% SG 125 bps 31.0 40

Maurel 2.75% 2021 100 37.0% Natixis 500 bps 35.0 40
Am Mov / KPN 0% 2020 3,000 45.0% DB, Barclays 50 bps 26.0 30
Ablynx 3.25% 2020 100 26.5% JPM, ML 750 bps 28.0 60

Mandatory Convertible Bond Arbitrage

Mandatory convertible bonds contributed positively this month.
The Volkswagen mandatory bond contributed positively. The bond converged towards its fair value as the maturity approached. Also, on the Dufry mandatory, we benefited from an early redemption incentive of the issuer.
There was no specific flow and no primary issue.

Gamma Trading

Gamma trading contributed positively in May. The beginning of the month was finally marked by some small gains due to the impact of the uncertainty over the UK election on the market following some losses over the previous months. The rest of the month was split between some carry and convexity successfully captured on the European markets while the US and Japanese equity market rallies did not offer any strong correction enabling to offset the time decay on the short exposures.

In a volatile month, mainly driven by news flow around Greece, the Eurostoxx 50® finished -1.2%. The equity portfolio was concentrated, well hedged with a long gamma bias. It returned positively.
We benefited from the bounce back of Alcatel stock which finished up 16% this month . The equity rallied after reassuring Q1 earnings. Investors started being more positive about the prospect of the merger with Nokia.
Vodafone finished the month up 11% following comments by John Malone (Liberty Global Chairman), stating that a combination with some parts of Vodafone would make strategic sense.
On Generali, both Q1 results and the subsequent investor day provided welcome reassurance on capital and comfort on the dividend growth potential.
Finally Lloyds rallied 13% this month, benefiting both from a very positive earnings release (with positive comments on margin outlook and dividend prospects) and from the outcome of the UK election.
We believe the market will stay volatile in the coming months with risks around Greece, the Spanish election, and the rates increase in the US. We shall keep using options extensively to express our views.

Credit Long / Short

Credit long / short strategies contributed positively this month. Main market drivers this month were the sharp moves observed in the rates market and the on-going negotiations talks in Greece. Flows were rather limited this month even if the primary market activity and asset class inflows picked up towards the end of the month following a stabilisation in rates. The Crossover Series 23 index widened by 15bps over the month, closing at
287bps. The SubFin S23 contract widened by 13bps, to close at 157bps by month-end.
Our portfolio remained concentrated on special situations which contributed positively this month. The main contributor in financials was our long position in Austrian retail bank Bawag's Lower Tier 2 bonds. Q1 2015 results published on 12 May confirmed the continued strength reported in previous quarters, putting the company on track to outperform 2015 targets. In addition main shareholder Cerberus is increasingly reported to be exploring exit options for its majority stake, which would be a positive catalyst for the position.
In the corporates, we were involved in the debt of French aeronautical listed company Latecoere which performed strongly following the announcement on 30 April of an agreement between the company and its creditors in relation to the financial restructuring of its debt. Finally, USD denominated bonds of French geophysical services company CGG continued to outperform alongside the US HY Energy sector on the back of stabilisation in oil levels and the re-opening of the US primary market in the sector.

Capital Structure Arbitrage

Capital structure Arbitrage posted positively this month. Credit and equities moved along the month with no real direction, showing at month-end a slight outperformance of equities. Price actions of the two asset classes were mainly driven by the news flow around Greece debt negotiations which caused some intraday volatility on FX and rates. These local daily discrepancies enabled us to generate this positive performance by active trading around existing positions. However, no new major opportunities appeared as both asset classes are still evolving in a tight range.

Trading contributed positively this month.

B. DIRECT INVESTMENTS OTHER THAN BG FUND

On top of its investment in BG Fund, BGHL has other investments. As of 29 May 2015, the net asset value of these investments represents approximately 8% of the net asset value of BGHL.

BGHL invested USD 10 million in RLI's shares. The EUR/USD exposure is hedged by an FX forward which is rolled
on a 3 month basis.
RLI is a Malta-based holding company structured as a private equity fund in terms of fees and organisation, dedicated to investing in land, hotels and high-end resort developments in Mexico. RLI's initial business was, soon after launch, affected by several adverse events which have changed the exit solution and the time schedule considered initially. RLI has mitigated the risk of running out of cash by selling a stake in one of its land projects to a large Mexican institutional Pension Fund and raising USD 80 million with the National Infrastructure Fund. RLI also acquired the Four Seasons hotel in Mexico in May 2013 and is exploring to acquire additional
operating hotel, which complements the land portfolio with cash generating assets. The listing of RLI's hotel subsidiary on Mexico's exchange is the more likely exit option currently envisaged by RLI. The listing of the subsidiary could be followed by the listing of RLI.

BGHL owns GFI listed shares as well as bonds issued by Infofin secured by, and exchangeable into GFI shares. BGHL hold a directional exposure which is not hedged.
BGHL signed on 7 June 2013 a shareholders' agreement in order to act in concert with the two main shareholders of GFI. GFI is one of the leading IT services firms in France and Southern Europe. In compliance with applicable regulations, the concert through Infofin (an entity created for this purpose) filed a mandatory public tender offer with the French Autorité des Marchés Financiers (AMF) for all of the outstanding shares and bonds giving access to GFI's share capital or voting rights not yet held by the concert. Under the shareholders' agreement BGHL agreed to invest - after completion of the public offer - in bonds to be issued by Infofin and exchangeable into GFI shares. On 29 August 2013, BGHL subscribed to the Infofin exchangeable bonds for an amount of
€20,364,030.72.
BGHL's direct equity investment in GFI Informatique (FR0004038099) represented approximately €10.6 million
as of 29 May 2015.

C. BOUSSARD & GAVAUDAN INVESTMENT MANAGEMENT UPDATE

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.

As of 1 June 2015, BG Group assets under management are at €2.55bn.
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

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