Boussard & Gavaudan Holding Limited A closed-ended investment company incorporated with limited liability under the laws of Guernsey, with registration number 45582. Interim Management Statement For the Quarter ended 31 March 2015 I. PRINCIPAL ACTIVITIES Boussard & Gavaudan Holding Limited ( BGHL or the Company ), a closed-ended investment company incorporated under the laws of Guernsey, announces its interim management statement for the period from 1 January to 31 March 2015 ( the period ). The Company is registered with the Dutch Authority for Financial Markets and is listed on the NYSE Euronext Amsterdam, and the London Stock Exchange. During the period, BGHL has invested indirectly in BG Master Fund Plc ( BG Fund or the Fund ), a Europe-focused multi-strategy hedge fund established in Ireland and authorised by the Central Bank as a Qualified Investor Fund (QIF), through a dedicated share class of the feeder fund, BG Umbrella Fund Plc. The Fund aims primarily at arbitraging instruments with linear or non-linear pay-offs on equities and credit markets. The overall investment objective of the Fund is to provide investors with consistent absolute returns, primarily through investing and trading in financial instruments of companies incorporated in, or whose principal operations are, in Europe. In addition, a proportion of the net assets of BGHL may be invested in other hedge funds and/or other financial assets. Boussard & Gavaudan Investment Management LLP ( BGIM or the Investment Manager ) is the Investment Manager for both the Company and the Fund. II. HIGHLIGHTS 31-Mar-15 31-Dec-14 Assets under management ( m) 612 596 Market capitalisation ( m) 475 473 Shares outstanding 32,876,541 33,296,954 NAV per Share Share price* Discount to NAV shares shares shares shares shares shares 31-Mar-15 18.53 16.42 14.39 12.69-22.36% -22.74% 31-Dec-14 17.86 15.86 14.19 12.33-20.54% -22.29% Performance 3.78% 3.55% 1.41% 2.96% 1
III. PERFORMANCE The Eurostoxx 50 was up 17.5% this quarter and stock market volatility decreased: the VDAX ended at 18.6%, down from 19.5% and the VStoxx at 21.1%, down from 26.2%. The Crossover Series 22 finished at 262bps, tightening by 83bps over the quarter. 1. BG Fund As at 1 April 2014, the Company had approximately 102% of its assets invested in BG Fund. BGHL maximum exposure to BG Fund is 110% of its net asset value. From 31 December 2014 to 31 March 2015, BG Fund (Euro A share class) posted a +2.88% performance. All strategies performed positively this quarter. Equity strategies were the best performer, followed by volatility strategies, credit strategies and trading. 1.1 Volatility Strategies Convertible Bond Arbitrage Convertible bond arbitrage contributed positively this quarter. GFI Informatique and Theolia convertible bonds drove the performance. The position in Marine Harvest also contributed positively thanks to the corporate s incentive to convert the bond maturing in 2018 and from long only funds keen to purchase the 2019 one in order to keep exposure on the name. Some profits were taken on this investment. Total issues amounted to 5.4bn this quarter whilst recalls, redemptions and incentives to convert amounted to 2.5bn. During this period investment grade names and those with mixed delta (30% to 75%) were even more expensive from an arbitrage standpoint. At the other extreme, oil related names with high leverage were still at a low level. Nevertheless, the Investment Manager started to identify some opportunities. For instance, some positions were initiated on high delta names when the convertible bonds traded under parity. Mandatory Convertible Bond Arbitrage Mandatory convertible bond arbitrage contributed positively this quarter, driven equally by the Volkswagen and the Telefonica mandatories. There was no specific flow and no primary issuance this quarter. Gamma Trading Over the first quarter, the book has been long Eurozone and UK tail risk and mostly long put (or put spreads) equities vs short volatility. The Eurozone tail risk has contributed positively on the FX side and on hybrids but negatively on equities mostly post QE. The long UK tail risk, expressed through short GBP vs EUR and USD via options, has not performed as the uncertainty generated by the UK election did not weigh much on the Pound. The short equities / short volatility positions have generated some returns, especially in March, mostly thanks to the S&P500, which had enough drawdown to lock in some profits on the downside exposure. 2
1.2 Equity Strategies Equity strategies contributed positively to the performance of the Fund. The year started with concerns around Greek elections and falling oil price. But very quickly, the European equity market rallied following the announcement that the ECB would start a largescale Quantitative Easing in March and continuing inflows into Europe from global asset allocators. During this quarter, the EUR continued to weaken against the USD and the Fund benefited from investments in companies exposed to the USD. On some of these investments, profits were taken as catalysts played out. The Fund also benefited from its investment in Theolia. The stock was under pressure following last November s rights issue and recovered in February. It rallied 33% during the month. Infrastructure assets benefited from lower long term rates and the Investment Manager s investment case remained very strong. The financials book also performed well. In particular, the Fund profited from the re-rating of Italian popolari banks after the Government issued a decree forcing their de-mutualisation: this is expected to trigger the long-awaited consolidation of the Italian banking sector. In this market environment, the Investment Manager remained focused on conviction trades and felt compelled to use options in order to express his fundamental views. The combination of volatilities and fundamental drivers makes it very efficient. On the corporate activity front, while M&A deals announced in the US were up 28% this quarter hitting their 15-year high, European activity was disappointing and remained globally flattish. The secondary market in Europe, through accelerated book buildings, was much more active, reaching almost its high ( 35bn, +70% compared to last year). Shareholders, private equity funds and corporates took advantage of a strong equity market to reduce some of their stakes. These placements have been well absorbed by the market as investors used those liquidity events to reposition themselves in the equity market. 1.3 Credit Strategies Credit Long / Short Credit long / short strategies contributed positively this quarter. During the period, the European credit markets benefited form the ECB-proposed unconventional measures. Inflows in the asset class have been continuing at a strong pace since the ECB s announcement. In particular, more yielding credit asset classes such as European high yield and hybrid financials, which underperformed investment grades in H2 2014, benefited from strong demand. The primary activity picked up as usual in January but was rather skewed to the second half of the month as most of the market s participants were waiting for the ECB announcement before becoming really engaged. Primary market was very active in February. In particular European banks continued to build their Additional Tier 1s regulatory capital requirement bucket. The European high yield market was also very active. However, the period also saw calls, refinancing and maturities, leading to a net supply in EUR high yield marginally into negative territory in February. Hence, all-in-all, the asset class was experiencing very strong technicals with large and positive net inflows. It is worth noting that more and more US companies have been seeking to issue in the Euro market in order to take advantage of rates differential and better conditions created by the ECB Quantitative Easing. During the period, most of the performance was driven by investments in French and Italian media corporates, as well as in the French geophysical services company CGG. In financials, the largest contributor was the long position in French insurer Groupama s subordinated bonds. Groupama published positive full-year 2014 results underlying a continued focus in improving the credit profile of the company. These strong results could trigger an upgrade at Fitch, to bring notches closer to Investment Grade (current bond ratings: BB at Fitch, positive outlook) whereas the bonds still trade at a higher discount to comparable companies. 3
Capital Structure Arbitrage Capital structure arbitrage contributed negatively to the performance of the Fund, driven by a long equity, short credit trade on ArcelorMittal. With the actions of different central banks (ECB, SNB), the usual correlations between credit and equity were broken. In this environment, the Investment Manager decided to reduce the existing positions. He continues to monitor this sub-strategy and, going forward, given this environment mostly driven by the Quantitative Easing effect, he will focus much more on strong, fundamental, idiosyncratic catalysts. 1.4 Trading Trading contributed marginally positively this quarter. 2. Investments Other Than BG Fund As at 31 March 2015, the net asset value of the other investments outside BG Fund represented approximately 8% of the net asset value of BGHL. The investments other than BG Fund contributed positively during the period, mainly due to GFI Informatique whose market price rose by 12% during the quarter. 2.1. Rasaland 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. 2.2 GFI Informatique 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 10.2 million as of 31 March 2015. 4
IV. OUTLOOK Financial prospects for the coming months will be linked to the level of opportunity created across the Company's strategies in the European corporate environment. The Investment Manager continues to be fully committed to the strategies of the Company. As of 1 April 2015, BG Group assets under management are at 2.45bn. For further information contact: Boussard & Gavaudan Investment Management LLP Emmanuel Gavaudan (London) +44 (0)20 3751 5389 François-Xavier Baud (London) +44 (0)20 3751 5395 5
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 01.05.15.01 6