Boussard and Gavaudan : BGHL December 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

DECEMBER 2019 STATEMENT

Total value of the investments of BGHL	€349 million as of 31 December, 2019
based on the final NAV for the Euro & Sterling
ordinary shares1
NAV per share		Euro ordinary share		Sterling ordinary share
		€22.8994		£20.6363
		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		15,104,678		398,542
Shares held in treasury		300,000		-
Shares outstanding		14,804,678		398,542

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 continued to rally in December, with the Eurostoxx 50© up 1.1% for the month. Volatility increased with VStoxx© finishing the month at 14.0%, up from 13.2%. iTraxx Crossover (S32) © ended December at 207bps (14bps tighter for the month).

In this market context, BG Fund delivered a return of +0.82% in December (USD A share class), thanks to risk arbitrage in equity strategies.

For the full year 2019, BG Fund returned +5.91% (USD A share class).

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. Flows were limited in the secondary market. There was no primary issuance in December.

Convertible bond arbitrage

Convertible bond contribution (excl. mandatories) to the performance of the fund was negative in December. As was the case in prior months, global valuations drifted lower in a context of limited flows. The volume of primary issues was low (€0.8 bn) but not unusual for December.

Overall, in 2019, €17.3bn of convertibles were issued and €24.1bn were redeemed, including €9.6bn of conversions, recalls and takeovers, €7.0bn of maturities & put dates and €7.5bn of tender offers.

Volatility Trading

December realised volatility vs implied forward volatility at the end of November:

		30d Implied vol level			Realised vol over the			Difference
		on 29/11/19			month
US	12.62		7.76		-4.86
EUROPE	13.17		12.95		-0.22

Variation of implied volatilities during December:

		Jan. Vol Index Fut as			Jan. Vol Index Fut as			Vol move
		of 29/11/19			of 31/12/19
US	16.37		14.62		-1.75
Europe	14.95		14.35		-0.60

Volatility trading was marginally positive in December. The environment remained in a low volatility mode with both realised and implied volatility under pressure in all asset classes.

However, in this benign environment, we managed to offset most of our theta spend through some downside VIX exposure via options and from some volatility exposure on banks. The flat skew on the banking sector had provided a cheap structure to play limited upside and range bound spot. However, outside of these two trades, most of our other positions were marked down slightly as volatility drifted lower.

Warrant arbitrage

Warrant arbitrage contributed positively this month.

Equity strategies

In December, the equity portfolio returned a positive. The bulk of the performance came from risk arbitrage strategies.

Our position in Just Eat contributed positively to the performance. After Prosus twice raised its cash offer, Takeway.com finally looks set to win the takeover battle with significantly improved exchange terms and irrevocable commitments from more than 46% of the capital. This offer is very likely to be successful when the tender period closes on 10 January.

We benefited as well from our position in Cobham. The stock was trading at a discount of almost 5% to the Advent offer on worries that, in case of a Labour majority in Parliament, the offer was at risk of being blocked by the Secretary of State, even though the previous government had stated they wanted to approve it. Following the result of the UK General Election, the deal has been cleared and will close on 17 January.

The portfolio also benefited from a tightening of the discount of Allergan share price to the Abbvie offer, as the market is becoming more confident that Abbvie has proposed remedies which will clear the last regulatory hurdles: FTC in the US and EC in Europe.

On the negative side, Qiagen was a detractor as the share price finished the month down 21.6%. After receiving indicative bid offers in November, Qiagen announced that following their review of strategic alternatives, they have decided to focus on a stand-alone strategy.

Following the UK election and progresses in the US China trade talks, a number of our fundamental investments in cyclical sectors benefited from the risk-on environment. Financial positions performed particularly well across various trades.

Credit strategies

Capital Structure Arbitrage

Capital Structure arbitrage was flat in December. We did not add new positions.

Credit long / short

Credit long / short made a positive contribution this month.

Positive trends continued in the market in December, with outperformance of longer duration products and high-yield vs. investment grade. While the beginning of the month saw decent activity especially on the primary market, the market continued to grind higher with primary and secondary flows slowing dramatically from mid- December.

Limited idiosyncratic news flows impacted our portfolio, with the main outperformance coming from our financial positions.

Credit special situations

Credit special situations contributed positively in December.

Trading

Trading contributed positively, mainly driven by the Equity Quantitative Trading strategy which contributed positively this month despite a defensive positioning while the market moved up (Eurostoxx 50© up 1.1% on the month, S&P 500 up 2.9%). The market was largely driven by macro news flow: up to the UK vote, a risk-off mode with a strong performance of the strategy, at which point we took profit and reduced the exposure; a fairly strong risk-on move around the vote, and a less strong move during the second half of the month. The risk- on periods partially reduced the strategy's positive performance.

B. DIRECT INVESTMENTS OTHER THAN BG FUND

On top of its investment in BG Fund, BGHL has other investments. As of 31 December 2019, the net asset value of these investments represents about 1.30% 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.

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 2 January 2020, BG Fund assets under management are €2.52bn.

We would like to thank our investors for their trust this year and we wish you all a happy, healthy and prosperous New Year 2020.

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