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THE DIVA SYNERGY FUND

An Event-Driven Equity Strategy Absolute Return Focus

www.divasynergy.com Bernheim, Dreyfus & Co. SAS 151 boulevard Haussmann 75008 Paris France Tel: +33 (0)1 72 25 66 22

Disclaimer
The information set forth herein has been obtained or derived from sources believed by Bernheim, Dreyfus & Co to be reliable. However, Bernheim, Dreyfus & Co does not make any representation or warranty, express or implied, as to the informations accuracy or completeness, nor can it accept any responsibility for errors appearing in this presentation. No liability whatsoever is accepted by Bernheim, Dreyfus & Co, its officers, employees or agents for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. The information contained in this presentation shall not be considered as legal, tax or other advise nor does Bernheim, Dreyfus & Co recommend that the attached serve as the basis of any investment decision. This document has been provided to you solely for information purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such. Any recipients of this presentation who intend to apply to shares are reminded that any such application may be made solely on the basis of the information contained in the offering memorandum (OM) of the relevant fund, which may be different from the information contained in this presentation. This document is being circulated by Bernheim, Dreyfus & Co on a confidential basis and is intended exclusively for the use of the person to whom it has been delivered by Bernheim, Dreyfus & Co and it is not to be copied, reproduced or redistributed, under any circumstances, to any other person in whole or in part. This document is subject to further review and revision. This document is for information purposes only and the provisions of the OM of the Funds are the only binding documents In the event of any inconsistency, between the descriptions or terms in this presentation and the OM the provisions of the OM shall prevail. All information in this presentation is subject to change without notice. The copyrights of this Presentation belongs to Bernheim, Dreyfus & Co.

Presentation of Diva Synergy Fund


About Bernheim, Dreyfus & Co.
Bernheim, Dreyfus & Co is a hedge fund management firm headquartered in Paris and registered with the AMF (Autorit des Marchs Financiers) under the identification GP-09000019. The share capital of the firm is held entirely by the its co-founders and their families. Bernheim, Dreyfus & Co. Is also a member of the Association Franaise de Gestion Financire (AFG). Bernheim, Dreyfus & Cos co-founders are Lionel Melka and Amit Shabi. Combined, our senior staff has over 40 years of experience in the asset management and investment banking industries, having held senior positions at some of the worlds leading financial institutions. What sets the firm apart is its dedication to: Competing on the basis of the firms intellectual (rather than financial) capital, which is personified by the firms team of highly skilled professionals. Demanding excellence and superior quality in all that they do. Cultivating long-term, senior-level relationships with investors through deep roots in local markets. Emphasizing the firms tradition of integrity in all its dealings.

Organization Chart
DIVA SYNERGY
Investment Committee
Lionel MELKA Amit SHABI Sebastien DETTMAR

PM & Head of Research


10 years of M&A experience (Lazard, Rothschild) in a large scope of situations: privatizations, friendly and hostile takeover bids, LBOs, asset disposals and IPOs. Executed more than 20 major M&A transactions totaling more than $50 billion. Teacher in the fields of corporate finance at University Dauphine in Paris, one of the leading academic institutions in Europe. Masters degree in Finance from the Dauphine University of Paris.

PM & Head of Trading


Ex-commander of an analyst team in a military intelligence unit of the Israel Defense Forces. 10-year experience in Capital Markets at LCF Rothschild Asset Management, MAN Group and Cantor Fitzgerald Masters Degree in Finance Paris I University (Sorbonne)

PM & Head of Risk Management


Former Head of Quantitative Research at LCF Rothschild Asset Management with 15 billion AuM. In charge of establishing the strategic direction, risk tolerance standards, and ethical culture for the asset management activities Predoctoral degree in Mathematics Algebraic Geometry University of Languedoc Roussillon.

Long Term Event Cycle


Event Cycle on MSCI World Chart
Growth Bull Correction Trough Recovery Growth

Buy backs M&As and LBOs Didivend hikes Operational and financial gearing Cap. Ex. cuts Corporate restructurings Rights issues Asset sales / Spin-offs Operational and financial gearing Minority squeez-outs Panic Selling IPOs Distressed debt LBOs M&A

IPOs

The climate for IPOs, M&A and LBOs gets even stronger throughout 2011

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Feb-11

Aug-11

Feb-12

M&A Climate in 2011


Savage cost cutting, capital raising and debt refinancing - strong enough balance sheets to be opportunistic if a deal is presented Attractive price of assets Buying growth through purchases may also be more attractive than trying to expand current businesses organically - given concerns about how fast the economies of Europe and the United States will recover this year. CEOs are generally looking for bolt-on acquisitions, not massive deals that transform their businesses. Growing pressure on firms to focus on core activities and spin off the rest Low interest rates Access to credit Market volatility Antitrust Lack of CEO confidence in some industries

DRIVERS / CATALYSTS

CONSTRAINTS

CONSEQUENCES

Due to lower equity market ratings and the constraints on credit greater proportion of stock to be used for M&A rather than cash in 2010 Need for a crystal clear strategic rationale More hostile bids Buyers with strong balance sheets likely to take advantage to snap up rivals at bargain prices Corporate activity will be focused on cost-cutting rather than the bull-market justification of buying growth Bad M&A is over: less leverage, fewer LBOs Creativity in sourcing cash and managing volatility in stock deals will be key differentiating factors

Strategy Guidelines
DIVA SYNERGY FUND
PRE-EVENT
Identification of targets Quantitative screening Fundamental experience Hedged through short positions in index futures to get a zero adjusted beta

MERGER ARBITRAGE
Announced deals Focus on high quality deals Hedged through short positions in the acquirer in stock-for-stock deals

Portfolio of 35/50 liquid equities Europe and North America Market Neutral

Pre Event Driven Portfolio


In our target universe of Europe and North America there are 1000 companies with a market capitalization between $1 and $10 billion. From this group we continuously work to extract 200300 companies, the figure depends on market conditions, most likely to become targets in the medium-term. The companies that are extracted are chosen by different criteria such as that it is operating in a highly consolidating market or that the company is a close peer to a recently announced target. Once a company has been acquired it is taken off the list. The radar has proven very efficient in identifying potential targets. As a second level in the investment process, to further narrow down this group, we conduct a daily analysis where we check for different quantitative characteristics such as volatility, abnormal returns, etc.
From a target universe of 1000 companies we narrow it down to 15-30 positions in our portfolio

The aim is to identify market movements in price worthy companies with a strong business model.

Pre Event Driven Portfolio


In addition to our quantitative tool we also conduct a fundamental analysis of potential targets as a 3-step investment process: First, we try to identify the most likely active sectors. Catalysts are the level of cash, regulatory changes or strategic issues (as aging product/patent portfolios for the pharmaceutical industry). Currently there are 3 hot sectors that we consider being especially interesting. These are healthcare, energy and technology. Second, we start searching for buyers that are companies with plenty of cash and a need for external strategic growth. Third, once these likely buyers are identified we look at which companies could be these acquirers most natural fit. Which companies could offer synergies and cost savings and/or unlock other value that could be interesting for the buyer and its CEO?

Target Universe

Under Our Radar

Hot Sectors
100 potential targets within the Pharmaceutical, Energy and Technology industries which are hot sectors with great M&A characteristics

Identifying Buyers

Portfolio

1000 companies of appropriate size in North America and Europe

200-300 potential targets under daily survailence

Identification of interested buyers with cash and a need for external growth

15-30 positions with a medium term time horizon

Pre Event Driven Portfolio


PORTFOLIO CONSTRUCTION
Trading Policy
The size of the position normally starts small and is built up when the stock price increase which we consider is an indication that the market aligns with our scenario.

Positions

15-30 different positions Each position is on average 1-3% of AuM

Hedging

Hedging by short selling index futures Zero-beta adjusted positions

Liquidity

80% invested in companies with market cap. of at least $500 million 80% should not exceed 20% of its average trading volume

Risk Controls

Stop-losses at 10% downside of the traded pair; long equity short index
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Pre Event Driven Portfolio


PAST TRADE EXAMPLES
Companies acquired while in our portfolio Holdings in our portfolio that were acquired

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Pre Event Driven Portfolio


CURRENT TRADE EXAMPLES
M&A Theme Identified Targets

Increasing exposure to emerging markets

Baby Oil being acquired by emerging players

Big Pharma facing patent expiration and looking to plug their pipeline holes

Underexploited iconic brands

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Pre Event Driven Portfolio Case Study 1


International Power (IPR LN)
Activity
Electricity production 4 million customers in UK Gas 60%; Coal 20%; Other 20% Revenue 2009: 3.5 billion Market capitalization: 4.7 billion EBITDA: 1.5 billion (42.8% margin) EV/EBITDA: 7x PER: 10x Yield: 4% GDF Suez: Discussions late 2010 that were stalled after: (1) price, (2) operational structure. Strong geographical completition to other players, IPR is present in UK and Middle East E.ON, Enel or Gas Natural The company represents a prime target in a deregulated country without protectionist barriers Complex decision process in France given the ownership of GDF (State, Albert Frre, ...) Very low valuation (plant replacement cost estimated to 380p) Return: 25% INTERNATIONAL POWER VS. EUROSTOXX50 - YTD
350 340 330 320 310 300 290 280 270 260 250

Key Figures

Valuation

Potential Acquirers

Catalysts / Upside

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Pre Event Driven Portfolio Case Study 2


Mobistar (MOBB BB)
Activity
Mobile Telecommunication 3 operators in Belgium: Proximus (41%), Mobistar (31%) and Base (28%) Main shareholder France Telecom with 52% Revenue 2009: 1.6 billion Market capitalization: 2.5 billion EBITDA: 500 million (33% margin) EV/EBITDA: 6x PER: 10x Yield: 7% France Telecom: the new management (Stphane Richard) is conducting a strategic review of investments The group suffered setbacks after M&A: Teliasonera, Egypt, Switzerland, ... Mobistar is a simple operation, readable, accretive and synergistic. Mature market for 3 operators Only mobile operator Limited capex costs High Yield pending buyout of minority Target price: 60/share (upside: 30%) MOBISTAR VS. EUROSTOXX50 - YTD
50 48 46 44 42 40 38

Key Figures

Valuation

Potential Acquirers

Catalysts / Upside

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Pre Event Driven Portfolio Case Study 3


Mead Johnson Nutrition (MJN US)
Activity
Baby food (the Enfamil brand) Former division of Bristol Myers Squibb (IPO in February 2009 spin-off in December 2009) 60% of sales in emerging markets Revenue 2009: $2.8 billion Market capitalization: $10.6 billion EBITDA: $771 million (7.3% margin) EV/EBITDA: 14x PER: 22x Yield: 1.7% Nestle (just to collect $ 28 billion from the sale of Alcon) Danone (turned down talks in 2009 - ideal for Numico) Unilever (diversification into higher-growth segment such as personal care) Heinz The stock has doubled since the IPO (results, growth) Unquestionably the finest assets in the industry with consumer exposure / fertility in developing countries Significant potential synergies for the purchaser (distribution networks, R & D, ...) Target price: $ 75/share (upside: 20%) MEAD JOHNSON VS. S&P500 - YTD
59 54 49 44 39 34

Key Figures

Valuation

Potential Acquirers

Catalysts / Upside

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Merger Arbitrage Portfolio


In our merger arbitrage portfolio we invest primarily in deals where the target has a market capitalization of at least $500 million and is located in either Europe or North America. We have a clear bias towards high quality transactions which we define as those where clear synergies are created, low financing and regulatory risk as well as that most often there is a large company acquiring a smaller one.

Different Merger Arbitrage Approaches

Sure Thing
Transactions where the market has reached a consensus for the value and the risk Very low risk

High Quality
Good transactions with clear synergies but with contrarian views by market players of value and risk

Chinese Deals
High risk transactions with regulatory uncertainties and/or questionable synergies

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Merger Arbitrage Portfolio


PORTFOLIO CONSTRUCTION
Usually we increase positions when spreads widen assuming our analysis has not changed

Trading Policy

Positions

15-30 different positions Each position is on average 3-5% of AuM

Hedging

Hedging is used in stock transactions by short selling the amount of the acquirers shares we will receive when deal close

Liquidity

80% invested in companies with market cap. of at least $500 million 80% of the portfolio positions should not exceed 20% of its average trading volume

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Merger Arbitrage Portfolio


Goal Tests Preference Obviate Hedging Positions Monitoring
Invest in announced transactions with good fundamentals where the risk of deal brake is mispriced by the markets Reward/risk ratio Focus on high reward/risk ratio deals Overlapping deal closure dates to optimize the portfolios events calendar Strategic deals with clear synergies, low financing and regulatory risks where both target and acquirer have strong business models and contrarian views by market players of value and risk Consensual and clustered transactions as well as deals with a great part of political and other unpredictable risks Positions in the Merger Arbitrage portfolio are hedged when the acquirer is paying, partly or fully, through stock for stock by going short in the acquirer in the same amount of shares that we will receive when the deal close

Ten complex trades and 20 rate-of-return trades - if probabilities are mispriced Keep track of portfolio events Frequent use of trading limits Continuous review the investment thesis
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Merger Arbitrage Portfolio Case Study 1


Oracle / Phase Forward (PFWD US)
Activity
Medical software for hospitals and clinical institutions $213 million turnover 300 clients and over 10,000 clinical trials Market capitalization: $700 million EBITDA: $30 million Price: $17.00 per share Break-up fee: 3.5% Strengthening the market for medical applications Should benefit from Obama s reform of the health system Funding: No risk (Oracle has $13 billion in cash) Antitrust: The deal is passed May 27 in second request to the United States. The risk focuses on the timing of review (the market is quite fragmented and dominated by Medidata) Shareholder vote (June 22): low risk (friendly deal with a 30% premium) Discount to offer price: 2.5% Timeframe: late August Return: 10% annualised PHASE FORWARD - YTD
18 17 16 15 14 13 12 11 10

Key Figures / Deal Terms

Rationals

Risks

Performance / Timetable

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Merger Arbitrage Portfolio Case Study 2


Apache / Mariner Energy (ME US)
Activity
Exploration and production of hydrocarbons (180m barrels of proven reserves) Offshore (85%) and Onshore (15%) 45% of sales in the Gulf of Mexico Market capitalization: $2.3 billion EBITDA: $571 million Price: $7.8 + 0.17 of stock in Apache for each Mariner Energy Break-up fee: 2.5% Single asset in deep drilling Geographical complementarities Funding: $ 800 million (Apache has 2 billion on its BS) Antitrust: HSR received May 3 Shareholder vote Mariner: very low risk given the premium (45%) and recent events MAC clause: very restrictive definition, excludes any particular event or change in legislation affecting the industry Discount to offer price: 6% Timeframe: late August (proxy filed May 19) Annualized return: 25% MARINER ENERGY - YTD
28 26 24 22 20 18 16 14 12 10

Key Figures / Deal Terms

Rationals

Risks

Performance / Timetable

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Merger Arbitrage Portfolio Case Study 3


Novartis / Alcon (ACL US)
Activity
World leader in eye care $6.5 billion turnover 300 clients and over 10,000 clinical trials Market capitalization: $44 billion EBITDA: $2.5 billion 2.8 of stock in Novartis for each Alcon (currently $136) Nestle will receive $180 per share for the block of 52% (25% were acquired at $143 is a weighted average price of $ 168) Novartis and Alcon have highly complementary product portfolios that cover more than 70% of the worldwide vision care: pharmaceuticals and surgical contact lenses Eye care have dynamic growth opportunities because of significant unmet needs of an aging population According to the Swiss stock exchange regulations it only requires the approval of a majority shareholder of Alcon (Nestle up to vote) Legally, Novartis is not forced to improve its offer, despite the different treatment of minorities However, we believe that Novartis will eventually raise its offer (employees hold 6% of capital + reputational risk) Discount to offer price: -8% (downside) Final bid-price: $168 per share Annualised return: 12% ALCON - YTD
165 160 155 150 145 140 135 130

Key Figures / Deal Terms

Rationals

Risks

Performance / Timetable

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Our Edge
Understanding Complex Transactions
Corriente Resources Apache/Mariner Hospira/Javelin Oracle/Sun Microsystems Intel/McAfee Tom Tom/Tele Atlas Nokia/Navteq Kraft/Cadbury Sanofi/Genzyme

Indepth Understanding of the EU Antitrust Process

Understanding the Dynamics of Hostile Transactions M&A Experience in identifying targets

Kraft/Danone/Numico International Power/GDF Suez

Nimble Approach to Risk

BHP Billiton/Potash BASF/CIBA

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Portfolio Allocation
The structure of the portfolio and the allocation between the two strategies Pre-Event Driven and Merger Arbitrage depends mainly on the level of volatility in the market. Higher market volatility results in higher risks which gives larger spreads and therefore makes the Merger Arbitrage strategy more profitable than the Event Driven. As visualized below there is a clear correlation between the structure of our portfolio and the market volatility. In the end of 2008 when volatility in terms of the VIX index was above 40 more than 90% of our portfolio was invested in the Merger Arbitrage strategy.
Pre-Event Driven Portfolio 100% 90% Structure of Portfolio 80% 70% 60% 50% 40% 30% 20% 10% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 0 23 20 10 30 50 40 Market Volatility Merger Arbitrage Portfolio VIX 60

Risk Management
Regulatory Framework
Authorized and regulated by the AMF (Autorit des marchs financiers) Outsourced compliance review by 2AM

Position Sizing

Sizing is determined by liquidity, the ability to hedge undesired risks and the downside risk High conviction trades are typically 3%-5% of NAV Most other positions are around 1%-2% We aim to avoid crowded trades with no hard event The team has real time access to exposures by sub-strategy, geography, currency and other exogenous or macro factors often difficult to predict Crowded, illiquid or high-risk trades, when available, are segregated and very closely monitored, and they tend to have very tight market and single stock related stop loss

Internal Risk Monitoring

Stress-Testing

Risk manager frequently runs stress scenarios on the portfolio and its sub-books and also ensures that our strict guidelines are respected Monthly Risk Committee meetings address potential risk areas and raise early warning signals

Frequent Reporting

Monthly final NAVs and reporting

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Risk Management Tools

Data Feed & Analytics


Bloomberg: - Yield curves - Market prices - Currency rates - Data and other statistics Fimatrix: - Value at risk - Stress testing

Front Tool

Daily Risk Reporting

Real time position keeping and exposure updates Real time profit and loss calculation Cross asset class risk consolidation What-if analysis Scenario analysis

Fimatrix In house reports

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Appendix
I
Fund Performance

II

Summary of Terms

III

Key Personal Biographies

IV

Contact Information

Fund Performance Master Class A


1 350 1 250 1 150 1 050 950 850 750

1,255.97 1,115.09

935.48

Diva Synergy
$ Class 2006 2007 2008 2009 2010 2011 Class 2007 2008 2009 2010 2011 Jan 2.43% (1.62%) (3.76%) 1.29% (0.19%) Feb (1.80%) 1.64% (0.40%) 0.12% 0.12% Mar 2.47% (3.75%) 3.16% 0.27% (0.15%) Apr 1.85% 1.38% 3.04% 0.53% 1.29% Jan 2.60% (1.51%) (3.87%) 1.28% (0.25%) Feb (1.68%) 1.77% (0.48%) 0.11% 0.07% Mar 2.79% (3.88%) 3.10% 0.26% (0.21%) Apr 0.91% 1.25% 3.00% 0.52% 1.20%

EURIBOR 3 Months
May 0.47% 2.15% 1.46% (0.86%) Jun (1.07%) (0.63%) (0.41%) 2.04% Jul 2.80% (2.24%) 1.01% 1.38%

HFRX Global Hedge Fund Index


Aug 0.50% (1.12%) 1.02% 1.03% Sep (0.60%) (3.32%) 0.30% 3.05% Oct 4.90% 0.02% (1.73%) 0.09% Nov 1.01% (1.48%) 1.71% 0.89% (0.01%) Dec 1.48% 1.02% 1.58% 0.94% 0.24% YTD 2.50% 11.61% (4.37%) 5.13% 9.43% 0.81%

May 0.33% 2.32% 1.51% (0.86%)

Jun (1.41%) (0.46%) (0.37%) 2.04%

Jul 2.60% (2.07%) 1.03% 1.40%

Aug 0.30% (0.95%) 1.04% 1.06%

Sep (0.63%) (3.21%) 0.32% 3.08%

Oct 4.77% 0.16% (1.75%) 0.14%

Nov (1.46%) 1.85% 0.90% 0.03%

Dec 0.99% 1.76% 0.96% 0.28%

YTD 10.70% (3.15%) 5.62% 9.75% 1.07%

Fund Performance Enhanced Class D


1 350 1 250 1 150 1 050 950 850 750

1,370.76

1,055.15

924.11

Diva Synergy Enhanced


$ Class Enhanced Jan 2008 2009 (12.03%) 2010 3.62% 2011 (0.91%) Class Enhanced Jan 2008 2009 (11.71%) 2010 3.57% 2011 (0.91%)

EURIBOR 3 Months

HFRX Global Hedge Fund Index

Feb (1.85%) 0.11% 0.04%

Mar 8.99% 0.58% (0.81%)

Apr 8.71% 1.35% 3.44%

May 5.59% 4.09% (2.80%)

Jun (2.77%) (1.49%) 5.88%

Jul (5.05%) 2.79% 3.89%

Aug (4.24%) 2.83% 2.90%

Sep (10.92%) 0.70% 8.98%

Oct (0.82%) (5.41%) 0.11%

Nov 4.39% 2.44% (0.22%)

Dec 4.18% 2.62% 0.54%

YTD (10.32%) 11.04% 27.35% 1.71%

Feb (1.58%) 0.16% 0.09%

Mar 9.15% 0.62% (0.75%)

Apr 8.84% 1.39% 3.53%

May 6.09% 4.25% (2.78%)

Jun (2.28%) (1.37%) 5.91%

Jul (4.29%) 2.86% 3.97%

Aug (3.74%) 2.89% 2.93%

Sep (10.60%) 0.74% 9.01%

Oct (0.41%) (5.45%) 0.21%

Nov 4.81% 2.50% (0.17%)

Dec 4.72% 2.68% 0.58%

YTD (6.66%) 12.61% 27.91% 1.96%

Fund Terms
Fund Style Investment universe Management Fee Performance Fee Base Curreny Liquidity Redemption Notice Minimum Subscription NAV Valuation Domicilie Fund Administration Prime Broker Auditor Minimum Managed Account UCITS3 Daily Event Driven Europe and North America 2% per annum 20% subject to high water mark USD for class B and C, Euro for class A and D Monthly with 30 days notice Each month, until 10 business days before the end of the month. $100.000 / 100.000 Monthly (calculated by the Fund Administrator) British Virgin Islands International Fund Administration (IFA) Newedge Baker Tilly $10,000,000 Will be launched in May 2011
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The Team Investment Managers


Lionel Melka Co-Manager & Head of Research Lionel started his career in 1998 with Lazard Frres, where he undertook numerous M&A advisory engagements for blue chip clients (LVMH, Saint-Gobain, Casino, France Telecom, Thomson, Air Liquide, Kingfisher) in a large scope of situations: privatizations, friendly and hostile takeover bids, LBOs, asset disposals and IPOs Then he joined the M&A Department of Calyon, where he worked on various advisory assignments in the TMT-Defence team and LCF Rothschild in 2005 where he led many M&A cross-border assignments in various industry sectors. He is also a teacher at the University of Paris Dauphine, one of the leading academic institutions in Europe, in the fields of corporate finance, asset allocation and alternative investments. Amit is an ex-commander of an analyst team in a military intelligence unit of the Israel Defense Forces. After completing 3 years of army service, Amit moved to Paris to pursue his studies and obtained a Masters degree in Finance from Sorbonne University. Amit Started his career in the strategy department of LCF Rothschild Asset Management. After this experience in traditional asset management, Amit worked in the Capital Markets divisions of MAN Group and Cantor Fitzgerald as a sales of sophisticated financial instruments for hedge funds, institutional and HNWI investors. Sebastien started his career as research assistant in the Algebraic Geometry Laboratory of the Montpellier University of Science. He developed several models on the resolution of the singularities based on the works of Alexander Grothendieck. In 2001, Sebastien joined LCF Rothschild Asset Management as Risk Manager (15bn AuM) where he established the strategic direction, risk tolerance standards, and ethical culture for the asset management activities. After three years spent as Risk Manager of the company, Sebastien became Head of Quantitative Research.
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Amit Shabi Co-Manager & Head of Trading

Sebastien Dettmar Co-Manager & Head of Risk Management

Contact Information
Contact Person Address Telephone Fax Email
Amit Shabi Investment Manager

Bernheim, Dreyfus & Co. SAS 151 boulevard Haussmann, 75008 Paris

+33-1-72-25-66-22

+33-1-76-73-28-10

diva@b-dreyfus.com EURO CLASS A / VGG2890W1196 USD CLASS B / VGG2890W1014 USD CLASS C (3x leveraged) / VGG 2890W1279 EURO CLASS D (3x leveraged) / VGG2890W1352

ISIN

Bloomberg

DIVAMMA VI , DIVAMMB VI, DIVAMMC VI and DIVAMMD VI


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DIVA SYNERGY UCITS FUND


An Event-Driven Equity Strategy Targeting Absolute Returns

www.b-dreyfus.com Bernheim, Dreyfus & Co. SAS 45 rue de Courcelles 75008 Paris France Tel: +33 (0)1 72 25 66 22

Disclaimer

The information set forth herein has been obtained or derived from sources believed by Bernheim, Dreyfus & Co to be reliable. However, Bernheim, Dreyfus & Co does not make any representation or warranty, express or implied, as to the informations accuracy or completeness, nor can it accept any responsibility for errors appearing in this presentation. No liability whatsoever is accepted by Bernheim, Dreyfus & Co, its officers, employees or agents for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. The information contained in this presentation shall not be considered as legal, tax or other advise nor does Bernheim, Dreyfus & Co recommend that the attached serve as the basis of any investment decision. This document has been provided to you solely for information purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such. Any recipients of this presentation who intend to apply to shares are reminded that any such application may be made solely on the basis of the information contained in the offering memorandum (OM) of the relevant fund, which may be different from the information contained in this presentation. This document is being circulated by Bernheim, Dreyfus & Co on a confidential basis and is intended exclusively for the use of the person to whom it has been delivered by Bernheim, Dreyfus & Co and it is not to be copied, reproduced or redistributed, under any circumstances, to any other person in whole or in part. This document is subject to further review and revision. This document is for information purposes only and the provisions of the OM of the Funds are the only binding documents. In the event of any inconsistency, between the descriptions or terms in this presentation and the OM the provisions of the OM shall prevail. All information in this presentation is subject to change without notice. The copyrights of this Presentation belongs to Bernheim, Dreyfus & Co. Warning: Past performances are not a guarantee of future performances. The value of the units may decrease as well as increase. Any investment may generate losses or gains.

Table of Contents

Introduction to Diva Synergy UCITS


Overview of Diva Synergy UCITS Investment Strategy Risk Management Competitive Advantage Risk Profile 1 2 6 8 9

Appendices
M&A Market in 2011 Merger Arbitrage Portfolio Case Studies Pre-Event Driven Portfolio Case Studies Fund Terms and Conditions Portfolio Managers Contact 10 11 12 13 14 15

Introduction to Diva Synergy UCITS

Overview of Diva Synergy UCITS


Diva Synergy is a UCITS III compliant Event Driven hedge fund investing in M&A situations in Western Europe and North America.
Key Facts
Management Company Structure Bernheim, Dreyfus & Co. UCITS III compliant The fund's strategy focuses on M&A situations The capital is deployed in two substrategies: Merger Arbitrage (announced deals) Pre-Event Merger Arbitrage (anticipated deals) 40 to 50 stocks listed in Western Europe and North America, usually with a 1 to 10 billions euros market capitalization Market neutral with market fluctuations covered through a zero beta adjustment Highly liquid portfolio with on average 80% of positions smaller than 20% of daily average trading volume Absolute performance 3 5 % annually

About Bernheim, Dreyfus & Co.


Bernheim, Dreyfus & Co. is an independent asset management company specializing in absolute return strategies, in which the team has strong expertise. The objective of Bernheim, Dreyfus & Co., with regards to the Diva Synergy (UCITS) fund, is to offer investors a stable performance regardless of variations in markets with a combination of rigorous fundamental analysis and trading expertise. The Portfolio Managers, Sebastien Dettmar, Lionel Melka and Amit Shabi bring together complementary skills and have over 40 years experience in trading, asset management and investment banking(1).

Strategy

Portfolio Composition

Bernheim, Dreyfus & Co.s capital being wholly owned by its founders ensures independence.

Target Return Target Volatility

(1) As at 1/6/2011. www.b-dreyfus.com

1. Merger Arbitrage Announced Deals


The Merger Arbitrage strategy revolves around acquiring shares in listed companies subject to mergers and acquisitions. The objective is to capture the value gap (spread) between the share price after the announcement and the price offered by the acquirer.
Different Merger Arbitrage Approaches
" Sure Thing " Transactions whose probability of success is seen as virtually certain: the market has reached a consensus for the value and the risk Very low risk " Probable " Transactions whose probability of success is seen as probable Transactions with clear synergies but with contrarian views by market players of value and risk " Doubtful " Transactions whose probability of success is seen as doubtful High risk transactions with regulatory uncertainties and/or questionable synergies

Preference: Strategic deals with clear synergies, low financing and regulatory risks, where both target and acquirer have strong business models and with contrarian views by market players of value and risk

PORTFOLIO CONSTRUCTION
Trading Policy: Usually we increase positions when spreads widen assuming our analysis has not changed Hedging: Hedging is used in stock transactions by short selling the amount of the acquirers shares we will receive when deal close

Liquidity: Over 80% of the portfolio is invested in companies with a market capitalization of at least $500 million.
Tests: Reward/risk ratio Focus on high reward/risk ratio deals. Overlapping deal closure dates to optimize the portfolios events calendar Monitoring : Keep track of portfolio events Frequent use of trading limits Continuous review the investment thesis 2

2. Pre-Event Merger Arbitrage Anticipated Deals


The Pre-Event strategy consists of identifying potential M&A targets through a rigorous investment process
Investment Process
Target Universe

Comments
Investment criteria: Companies listed in Western Europe and North America, usually with a $1 to $10 billions market capitalization The selection criteria are both fundamental (consolidation within an industry, strategic or regulatory pressure, similar to a target of recent mergers and acquisitions ...) and technical (abnormal returns, unusual volume / volatility) Currently we anticipate strong M&A in the pharmaceutical, energy and technology industries among others, Identification of potential buyers is based on criteria such as: Level of cash on balance sheet, need for external strategic growth, etc. Companies that could generate synergies and cost savings and/or unlock other value

1000 companies of appropriate size in North America and Europe

Under Our Radar

300-400 potential targets under daily monitoring

Hot Sectors

100 potential targets within the sectors identified for a potentially high degree of M&A activity

Identifying Buyers

Identification of interested buyers with cash and a need for external growth

Portfolio

Hedged against market risk Mainly companies whose market capitalization is between 1 and 10 billion euros

Trading Policy: the size of the position normally starts small and is built up when the stock price increases, which we consider as an indication that the market aligns with our scenario. Hedging: the positions are covered by short selling index futures to obtain a zero beta adjustment (ie, "market neutral"). Liquidity: over 80% of the portfolio is invested in companies with a market capitalization of at least $500 million. Risk Controls: stop-losses at 10% downside of the traded pair (long equity short index)

2. Pre-Event Merger Arbitrage Anticipated Deals


Examples of potential investments based on current M&A themes
Investment Theme Potential Targets

Increasing exposure to emerging markets

Baby Oil being acquired by emerging players

Big Pharma facing patent expiration and looking to plug their pipeline holes

Underexploited iconic brands

Investment Strategy
The investment strategy revolves around two pillars: Announced Merger Arbitrage (announced deals) and Pre-Event Merger Arbitrage (anticipated deals)
Portfolio Structure
1. Announced Merger Arbitrage
Announced M&A Deals

Portfolio Allocation
2. Pre-Event Merger Arbitrage
Identify potential M&A targets

To achieve the target return and volatility, the allocation between the two strategies is adjusted depending on the economic cycle and market conditions 40 to 50 stocks listed in Western Europe and North America Market fluctuations systematically covered (Market-Neutral)

The structure of the portfolio and the allocation between the two strategies Pre-Event Merger Arbitrage and Announced Merger Arbitrage depends mainly on the level of volatility in the market. Higher market volatility results in higher risks which gives larger spreads and therefore makes the Announced Merger Arbitrage strategy more profitable than the Pre-Event Merger Arbitrage . As illustrated below there is a clear correlation between the structure of our portfolio and the market volatility. At the end of 2008 when volatility in terms of the VIX (1) index was above 40 more than 90% of the portfolio (managed by the same team, applying the same strategy) was invested in the Merger Arbitrage strategy.

Historical Portfolio Allocation - (managed by the same team, applying the same strategy)
Market Volatility Pre-Event Driven Portfolio 100% 80% 60% 40% 20% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011
(1) An indicator of U.S. financial markets volatility. The index is calculated by averaging the volatilities on put and call options on the S&P500.

Merger Arbitrage Portfolio

VIX 60 40 20 0

Structure of Portfolio

Risk Management
A Robust Risk Management System
Regulatory environment The Fund is under French law and complies with the European UCITS III regulations The Fund is eligible for life insurance

Position Sizing

Sizing is determined by liquidity, the downside risk and the ability to hedge undesired risks We aim to avoid crowded trades We systematically cover all risks (currency, interest rate, ...) other than those inherent to the strategy (mainly the nonoccurrence of an anticipated event)

Internal Risk Monitoring

The team has real time access to exposures by sub-strategy, geography, currency and other exogenous or macro factors often difficult to predict Crowded, illiquid or high-risk trades (when any), are segregated and very closely monitored Strict stop-loss policy

Stress-Tests

Risk manager frequently runs stress scenarios on the portfolio and its sub-books and also ensures that our strict guidelines are respected Monthly Risk Committee meetings address potential risk areas and raise early warning signals

Frequent Reporting

Daily NAV and monthly reporting

Risk Management

Risk Management Tools

DATA FEED & ANALYTICS

FRONT TOOL

DAILY RISK REPORTING

Bloomberg: - Yield curves - Market prices - Currency rates - Data and other statistics Fimatrix: - Value at risk - Stress testing

Real time position tracking and exposure updates Real time profit and loss calculation Cross asset class risk consolidation What-if analysis Scenario analysis

Fimatrix

In house reports

Competitive Advantage

Unique Portfolio Construction Experienced Management Team A Focus on Discipline Tactical Flexibility

Dynamic optimization of the portfolio allocation between the two strategies (Merger Arbitrage and Pre-Event Driven) to achieve the target return and volatility regardless of the business cycle and market conditions

Complementary profiles in mergers and acquisitions, trading and asset management A thorough knowledge of several industries An extensive network of contacts established over the years A rigorous investment process Strict buying and selling policies Ongoing monitoring of performance indicators and portfolio risk The team's expertise in fundamental analysis, trading and investment behavior, allows it to make a quick reading of the market and adjust the portfolio accordingly A good understanding of complex transactions Corriente/Resources; Apache/Mariner; Hospira/Javelin An indepth understanding of the EU Antitrust process Oracle/Sun Microsystems; Intel/McAfee; Tom Tom/Tele Atlas; Nokia/Navteq A good understanding of the dynamics of hostile transactions Kraft/Cadbury; Sanofi/Genzyme A solid track-record of identifying potential M&A targets Solvay/Rhodia; International Power/GDF Suez; Rio Tinto/Alcan Nimble Approach to Risk BHP Billiton/Potash; BASF/CIBA

Proven experience

Diva Synergy (Ucits) Risk Profile


The Fund may be exposed to the following main types of risks. Any of these risks may cause a significant fall of the Funds Net Asset Value.
Risk of capital loss: Investors are warned that the capital they invest is not guaranteed and therefore they may not receive back the full amount invested. Risk of non-occurrence of the announced or anticipated merger or acquisition: Merger arbitrage consists of taking advantage of the difference between the current stock price of the target and the price offered by the acquirer (the spread). If the transaction is completed, a gain consisting of the spread is realised. However, if the transaction fails to complete, a loss is likely to be incurred as the anticipated control premium usually paid to the target shareholders by the acquirer is lost. Risk of not achieving the Funds objective - discretionary management risk: The Fund relies on the managers ability to assess the value of companies and determine the outcome of mergers and acquisitions situations. There is a risk that the Fund may not be invested in the bestperforming situations at any given time. Counterparty risk: In the case of products traded over the counter (OTC), the Fund may have to bear additional risks related to counterparty exposure. This risk measure the losses incurred by the Fund in respect of commitments entered into with a counterparty. The default of the counterparty may cause a significant decrease in the net asset value (NAV) of the Fund. In general, these transactions are entered into in line with regulatory requirements such as collaterals and margin calls. Foreign exchange risk: The Fund buys and sells securities denominated in currencies other than the Funds currency. In spite of its policy of hedging the invested assets, the Funds net asset value may be adversely impacted if changes in the foreign exchange markets negatively affect gains generated over two hedging periods. Interest rate risk: The Fund may be up to 100% exposed to short-term interest rate risk via debt securities and money market instruments. Interest rate risk is the risk associated with a rise in interest rates, which can trigger a fall in the price of certain debt securities and money market instruments, and thereby a fall in the net asset value of the Fund Credit risk: The risk of a downgrade in the credit rating of an issuer, or of that issuer defaulting. The value of the debt instruments in which the Fund is invested may fall, which could result in a fall in the net asset value. High-yield risk: There is also a high-yield risk arising from the fact that the Fund may invest in high-yield bonds (rated at least B- by Standard & Poors or Caa1 by Moodys). These securities carry a significant risk of default.

Appendices

M&A Market in 2011


Positive market outlook for mergers and acquisitions (+55% in Q1 2011)

DRIVERS / CATALYSTS

Savage cost cutting, capital raising and debt refinancing , strong balance sheets to be opportunistic if a deal is presented Attractive price of assets Buying growth through acquisition may be more attractive than organic growth - given concerns about the pace of recovery of Europe and the United States Growing pressure on firms to focus on core activities and spin off the rest Low interest rates Access to credit Market volatility Antitrust Due to lower equity market ratings and the constraints on credit greater proportion of stock to be used for M&A rather than cash Need for a crystal clear strategic rationale More hostile bids Buyers with strong balance sheets likely to take advantage to snap up rivals at bargain prices Corporate activity will be focused on cost-cutting rather than the bull-market justification of buying growth Creativity in structuring transactions and managing volatility in stock deals will be key differentiating factors 10

CONSTRAINTS

CONSEQUENCES

Merger Arbitrage Portfolio Case Studies


Oracle / Phase Forward (PFWD US)
Activity Medical software for hospitals and clinical institutions $213 million turnover 300 clients and over 10,000 clinical trials Market capitalization: $700 million EBITDA: $30 million Price: $17.00 per share Break-up fee: 3.5%

Apache / Mariner Energy (ME US)


Exploration and production of hydrocarbons (180m barrels of proven reserves) Offshore (85%) and Onshore (15%) 45% of sales in the Gulf of Mexico Market capitalization: $2.3 billion EBITDA: $571 million Price: $7.8 + 0.17 of stock in Apache for each Mariner Energy Break-up fee: 2.5%

Novartis / Alcon (ACL US)


World leader in eye care $6.5 billion turnover 300 clients and over 10,000 clinical trials Market capitalization: $44 billion 2.8 of stock in Novartis for each Alcon Nestle will receive $180 per share for the block of 52% (25% were acquired at $143 is a weighted average price of $ 168) Novartis and Alcon have highly complementary product portfolios that cover more than 70% of the worldwide vision care: pharmaceuticals and surgical contact lenses Eye care is a growing market because of significant needs of an aging population According to the Swiss stock exchange regulations it only requires the approval of a majority shareholder (Nestle up to vote) Legally, Novartis is not forced to improve its offer, despite the different treatment of minorities However, we believe that Novartis will eventually raise its offer (employees hold 6% of capital + reputational risk) Beginning of April 2011 Discount to offer price: -8% (downside) Final bid-price: $168 per share Annualized return: 12%

Key Figures / Deal Terms

Rationals Strengthening the market for medical applications Should benefit from Obama s reform of the health system Single asset in deep drilling Geographical complementarities

Risks Closing Date Performance

Funding: No risk (Oracle has $13 billion in cash) Antitrust: The deal is passed May 27 in second request to the United States. The risk focuses on the timing of review (the market is quite fragmented and dominated by Medidata) Shareholder vote (June 22): low risk (friendly deal with a 30% premium) Late of August 2010 Discount to offer price: 2.5% Return: 10% annualised

Funding: $ 800 million (Apache has 2 billion on its BS) Antitrust: HSR received May 3 Shareholder vote Mariner: very low risk given the premium (45%) and recent events MAC clause: very restrictive definition, excludes any particular event or change in legislation affecting the industry Late of August 2010 Discount to offer price: 6% Annualized return: 25%

11

Pre Event Driven Portfolio Case Studies


International Power (IPR LN )
Electricity production 4 million customers in UK Gas 60%; Coal 20%; Other 20% Revenue 2009: 3.5 billion Market capitalization: 4.7 billion EBITDA: 1.5 billion (42.8% margin) EV/EBITDA: 7x PER: 10x Yield: 4%

Mobistar (MOBB BB)


Mobile Telecommunication 3 operators in Belgium: Proximus (41%), Mobistar (31%) and Base (28%) Main shareholder France Telecom with 52% Revenue 2010: 1.7 billion Market capitalization: 3 billion EBITDA: 550 million (32% margin) EV/EBITDA: 6x PER: 12x Yield: 6%

Mead Johnson Nutrition (MJN US)


Baby food (the Enfamil brand) Former division of Bristol Myers Squibb (IPO in February 2009 spin-off in December 2009) 60% of sales in emerging markets Revenue 2010: $3.1 billion Market capitalization: $13.5 billion EBITDA: $780 million (7.3% margin) EV/EBITDA: 14x PER: 29x Yield: 1.6%

Activity

Key Figures

Valuation

Potential Acquirers

GDF Suez: Discussions late 2010 that were stalled after: (1) price (2) operational structure Strong geographical completion to other players, IPR is present in UK and Middle East E.ON, Enel or Gas Natural
The company represents a prime target in a deregulated country without protectionist barriers Complex decision process in France given the ownership of GDF (State, Albert Frre, ...) Very low valuation (plant replacement cost estimated to 380p) Return on Investment: 25%

France Telecom: the new management (Stphane Richard) is conducting a strategic review of investments The group suffered setbacks after M&A: Teliasonera, Egypt, Switzerland, ... Mobistar is a simple operation, readable, accretive and synergistic.

Nestle (just to collect $ 28 billion from the sale of Alcon) Danone (turned down talks in 2009 - ideal for Numico) Unilever (diversification into higher-growth segment such as personal care) Heinz
The stock has doubled since the IPO (results, growth) Unquestionably the finest assets in the industry with consumer exposure / fertility in developing countries Significant potential synergies for the purchaser (distribution networks, R & D, ...) Target price: $ 85/share (upside: 30%)

Catalysts

Mature market for 3 operators Only mobile operator Limited capex costs High Yield pending buyout of minority

Upside

Target price: 60/share (upside: 30%)

12

Fund Terms and Conditions

Classification ISIN Code Inception Date Type Investment universe Minimum Subscription Subscription Fee Redemption Fee Management Fee Performance Fee

UCITS III compliant fund Class A (EUR) : FR0011042514; Class E (EUR) : FR0011042472 Class B (USD) : FR0011042316; Class M (USD) : FR0011042498 1/06/2011 Event Driven Europe and North America Classes A (EUR) , B (USD) : 100 k / 100 k$ Classes E (EUR) , M (USD) : 100 / 100$ 2% maximum 0% Classes A (EUR), B (USD) : 2.0% Classes E (EUR), M (USD) : 2.5% 20% above capitalized (EONIA)

Liquidity
Recommended Investment Horizon Life Insurance eligibility Custodian Auditor

Daily
3 years Yes RBC Dexia Investor Services Bank France KPMG

13

Portfolio Managers (as at June 1st 2011)


Solid and complementary experience in mergers and acquisitions, trading and asset management

Lionel Melka Co-Manager & Head of Research

Lionel started his career in 1998 with Lazard Frres, where he undertook numerous M&A advisory engagements for blue chip clients (LVMH, Saint-Gobain, Casino, France Telecom, Thomson, Air Liquide, Kingfisher) in a large scope of situations: privatizations, friendly and hostile takeover bids, LBOs, asset disposals and IPOs Then he joined the M&A Department of Calyon, where he worked on various advisory assignments in the TMT-Defence team and LCF Rothschild in 2005 where he led many M&A cross-border assignments in various industry sectors. Lionel is also a teacher at the University of Paris Dauphine, one of the leading academic institutions in Europe, in the fields of corporate finance, asset allocation and alternative investments.

Amit Shabi Co-Manager & Head of Trading

Amit is an ex-commander of an analyst team in a military intelligence unit of the Israel Defense Forces. After completing 3 years of army service, Amit moved to Paris to pursue his studies and obtained a Masters degree in Finance from Sorbonne University. Amit Started his career in the strategy department of LCF Rothschild Asset Management. After this experience in traditional asset management, Amit worked in the Capital Markets divisions of MAN Group and Cantor Fitzgerald as a sales of sophisticated financial instruments for hedge funds, institutional and HNWI investors.

Sebastien Dettmar Co-Manager & Head of Risk Management

Sebastien started his career as research assistant in the Algebraic Geometry Laboratory of the Montpellier University of Science. He developed several models on the resolution of the singularities based on the works of Alexander Grothendieck. In 2001, Sebastien joined LCF Rothschild Asset Management as Risk Manager (15bn AuM) where he established the strategic direction, risk tolerance standards, and ethical culture for the asset management activities. After three years spent as Risk Manager of the company, Sebastien became Head of Quantitative Research.

www.b-dreyfus.com

14

Contact

Contact Amit Shabi Bernheim, Dreyfus & Co. SAS 45 rue de Courcelles 75008 Paris Tel: +33-1-72-25-66-22 Fax: +33-1-76-73-28-10 Email: diva@b-dreyfus.com

ISIN

Class A (EUR) : FR0011042514 Class E (EUR) : FR0011042472 Class B (USD) : FR0011042316 Class M (USD) : FR0011042498

Bloomberg

Class A (EUR) : DIVASYA FP Class E (EUR) : DIVASYBE FP Class B (USD) : DIVASYB FP Class M (USD) : DIVASYM FP

15

DIVA SYNERGY UCITS FUND


An Event-Driven Equity Strategy Targeting Absolute Returns

www.b-dreyfus.com Bernheim, Dreyfus & Co. SAS 45 rue de Courcelles 75008 Paris France Tel: +33 (0)1 72 25 66 22

Disclaimer

The information set forth herein has been obtained or derived from sources believed by Bernheim, Dreyfus & Co to be reliable. However, Bernheim, Dreyfus & Co does not make any representation or warranty, express or implied, as to the informations accuracy or completeness, nor can it accept any responsibility for errors appearing in this presentation. No liability whatsoever is accepted by Bernheim, Dreyfus & Co, its officers, employees or agents for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. The information contained in this presentation shall not be considered as legal, tax or other advise nor does Bernheim, Dreyfus & Co recommend that the attached serve as the basis of any investment decision. This document has been provided to you solely for information purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such. Any recipients of this presentation who intend to apply to shares are reminded that any such application may be made solely on the basis of the information contained in the offering memorandum (OM) of the relevant fund, which may be different from the information contained in this presentation. This document is being circulated by Bernheim, Dreyfus & Co on a confidential basis and is intended exclusively for the use of the person to whom it has been delivered by Bernheim, Dreyfus & Co and it is not to be copied, reproduced or redistributed, under any circumstances, to any other person in whole or in part. This document is subject to further review and revision. This document is for information purposes only and the provisions of the OM of the Funds are the only binding documents. In the event of any inconsistency, between the descriptions or terms in this presentation and the OM the provisions of the OM shall prevail. All information in this presentation is subject to change without notice. The copyrights of this Presentation belongs to Bernheim, Dreyfus & Co. Warning: Past performances are not a guarantee of future performances. The value of the units may decrease as well as increase. Any investment may generate losses or gains.

Overview of Diva Synergy UCITS


Diva Synergy is a UCITS III compliant Event Driven hedge fund investing in M&A situations in Western Europe and North America.
Key Facts
Management Company Structure Bernheim, Dreyfus & Co. UCITS III compliant The fund's strategy focuses on M&A situations The capital is deployed in two substrategies: Merger Arbitrage (announced deals) Pre-Event Merger Arbitrage (anticipated deals) 40 to 50 stocks listed in Western Europe and North America, usually with a 1 to 10 billions euros market capitalization Market neutral with market fluctuations covered through a zero beta adjustment Highly liquid portfolio with on average 80% of positions smaller than 20% of daily average trading volume Absolute performance

About Bernheim, Dreyfus & Co.


Bernheim, Dreyfus & Co. is a Paris-based, independent asset management company specializing in absolute return strategies, in which the team has strong expertise. The objective of Bernheim, Dreyfus & Co., with regards to the Diva Synergy (UCITS) fund, is to offer investors a stable performance regardless of variations in markets with a combination of rigorous fundamental analysis and trading expertise. The Portfolio Managers, Sebastien Dettmar, Lionel Melka and Amit Shabi bring together complementary skills and have over 40 years experience in trading, asset management and investment banking. Bernheim, Dreyfus & Co.s capital being wholly owned by its founders ensures independence.

Strategy

Partners
Lionel Melka, Portfolio Manager Former investment banker (Lazard, Calyon, LCF Rothschild) specialized in mergers and acquisitions. Advised numerous corporates on a large scope of situations: M&A, privatizations, IPOs Amit Shabi, Portfolio Manager Previously worked in sales at LCF Rothschild and as an OTC derivatives sales at MAN Group and BGC Cantor Fitzgerald. Sebastien Dettmar, COO Former Risk Manager and Head of Quantitative Research at LCF Rothschild Asset Management. 1

Portfolio Composition

Target Return

Target Volatility

3 5 % annually

The Diva Synergy Team


BERNHEIM, DREYFUS & CO
Portfolio Manager Lionel Melka Portfolio Manager Amit Shabi COO Sbastien Dettmar

Regulator

Fundamental Research

Risk Controller Antoine Chenevier

Compliance

Bndicte Provost Franois Bourriguen Vinh-Thang Hoang

Legal

DIVA SYNERGY

Administrator / Custodian

Auditor

Prime Brokers

Distribution Europe

Investment Strategy
The investment strategy revolves around two pillars: Announced Merger Arbitrage (announced deals) and Pre-Event Merger Arbitrage (anticipated deals)
Portfolio Structure
1. Announced Merger Arbitrage Announced M&A Deals 2. Pre-Event Merger Arbitrage Identify potential M&A targets

Portfolio Allocation
The structure of the portfolio and the allocation between the two strategies Pre-Event Merger Arbitrage and Announced Merger Arbitrage depends mainly on the level of volatility in the market. Higher market volatility results in higher risks which gives larger spreads and therefore makes the Announced Merger Arbitrage strategy more profitable than the Pre-Event Merger Arbitrage . As illustrated below there is a clear correlation between the structure of our portfolio and the market volatility. At the end of 2008 when volatility in terms of the VIX index was above 40 more than 90% of the portfolio (managed by the same team, applying the same strategy) was invested in the Merger Arbitrage strategy.

To achieve the target return and volatility, the allocation between the two strategies is adjusted depending on the economic cycle and market conditions 40 to 50 stocks listed in Western Europe and North America Market fluctuations systematically covered (Market-Neutral)

Historical Portfolio Allocation


Pre-Event Driven Portfolio Merger Arbitrage Portfolio VIX

Structure of Portfolio

80% 60% 40% 20% 0%


Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012

50 40 30 20 10 0

Market Volatility

100%

60

Performance & Awards


The managers have received multiple awards from industry specialists:

Nominated in the Merger Arbitrage category

Nominated for the Best new Alternative Ucits Fund & Best Nondirectional Hedge Fund over 3 years.

Return since Inception 3-yr rolling ann. Return

30.08% 5.22% 3.06%


Ma r A pr 1 ,8 5 % Ma y 0,3 3 % Ju n

Sharpe Ratio Beta vs. Eurostoxx50

1.70 0.09 69%


Oct Nov Dec YT D

Best Absolute Return Fund

3-yr rolling Volatility


Ja n 2007 2008 2009 2010 2011 2012 Feb

Positive Months (%)


Ju l Aug Sep

2 ,4 3 % (1 ,8 0%) 2 ,4 7 % (1 ,6 2 %)

(1 ,4 1 %) 2 ,6 0%

0,3 0% (0,6 3 %) 4 ,7 7 % (1 ,4 6 %) 0,9 9 % 1 0,7 0% 1 ,8 5 % 1 ,7 6 % (3 ,1 5 %) 0,9 6 % 0,2 8 % 0,8 7 % 5 ,6 2 % 9 ,7 5 % 2 ,6 3 % 1 ,2 9 %

1 ,6 4 % (3 ,7 5 %) 1 ,3 8 % 3 ,04 %

2 ,3 2 % (0,4 6 %) (2 ,07 %) (0,9 5 %) (3 ,2 1 %) 0,1 6 % 1 ,5 1 % (0,3 7 %) 1 ,03 % 1 ,4 0% 1 ,04 % 1 ,06 %

(3 ,7 6 %) (0,4 0%) 3 ,1 6 % 1 ,2 9 % (0,1 9 %) 0,1 3 % 0,1 2 % 0,2 7 %

0,3 2 % (1 ,7 5 %) 0,9 0% 3 ,08 % 0,1 4 % 0,03 % 0,8 6 %

0,5 3 % (0,8 6 %) 2 ,04 % 0,2 0% 0,00%

0,1 2 % (0,1 5 %) 1 ,2 9 % 1 ,01 % 0,05 % 0,09 %

0,04 % (0,3 5 %) (0,3 8 %) (0,9 6 %) 1 ,2 8 %

The performance figures contained in the previous table and graph are those of the Diva Synergy UCITS A-Class EUR. If necessary, missing figures are based on performances of another fund (Diva Synergy) managed by Bernheim, Dreyfus & Co. with the same performance objectives and the same investment process, or a combination of the two funds. Diva Synergy UCITS fund launch date: June 1, 2011.

Merger Arbitrage Announced Deals


The Merger Arbitrage strategy revolves around acquiring shares in listed companies subject to mergers and acquisitions. The objective is to capture the value gap (spread) between the share price after the announcement and the price offered by the acquirer.
Different Merger Arbitrage Approaches
" Sure Thing " Transactions whose probability of success is seen as virtually certain: the market has reached a consensus for the value and the risk Very low risk " Probable " Transactions whose probability of success is seen as probable Transactions with clear synergies but with contrarian views by market players of value and risk

" Doubtful "


Transactions whose probability of success is seen as doubtful High risk transactions with regulatory uncertainties and/or questionable synergies

Preference: Strategic deals with clear synergies, low financing and regulatory risks, where both target and acquirer have strong business models and with contrarian views by market players of value and risk

PORTFOLIO CONSTRUCTION
Trading Policy: Usually we increase positions when spreads widen assuming our analysis has not changed Hedging: Hedging is used in stock transactions by short selling the amount of the acquirers shares we will receive when deal close Liquidity: Over 80% of the portfolio is invested in companies with a market capitalization of at least $500 million. Tests: Reward/risk ratio Focus on high reward/risk ratio deals. Overlapping deal closure dates to optimize the portfolios events calendar Monitoring : Keep track of portfolio events Frequent use of trading limits Continuous review the investment thesis 5

Merger Arbitrage Trading Strategies


The arbitrage spread evolves as a result of each transactions unique features. However, its evolution broadly belongs to one of 5 categories, each creating spot-on investment opportunities.
Global Industries: Tight spread since annoucenement
Few opportunities to trade around the position. S p r e a d Spread tightens even more with financing announcement, antitrust or shareholders approvals. Transform 10% spread into 8% due to position construction. S p r e a d

Bulgari: Spread convergences towards offer


Many opportunities to trade around due to spread fluctuations. Enhance 10% annualized spread into 12% annualized.

Time since announcement

Time since announcement

Pharmasset: Tight spread widening


Concerns about a clause in the merger agreement

Medco: Wide spread tightening


Antitrust concerns and plaints from consumer groups

Grande Cache Coal: Accident

S p r e a d

S p r e a d

S p r e a d

Publication by a short seller accusing the acquirer of fraud

Time since announcement

Time since announcement

Time since announcement

Many opportunities to trade around and add/remove to position. Enhance 10% annualized spread into 12% annualized.
6

Merger Arbitrage Trade Medco


Deal Description
July 21st 2011: Medco agrees to be acquired by Express Scripts for approx. $30bn in cash and stock. Medco is a healthcare company which provides clinically-driven services for private and public employers in the United-States and internationally. Express Scripts is a provider of pharmacy benefit management (PBM) services in North America. Conditions: Majority approval of both companies shareholders Successful antitrust application (HSR review) According to the Merger Agreement, no compensation was due by any party to the other one in case the deal failed to obtained antitrust approval. The antitrust approval immediately became the deals main challenge.
35,0%
30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% 21/07/2011

Spread Evolution


21/09/2011 21/11/2011 21/01/2012 21/03/2012

Deal Rationale
The logic behind the transaction was the realization of significant cost savings and synergies, greater efficiency in the supply chain and optimizing the response to the changing healthcare environment. Shareholders approval was never an issue as it would benefit both companies.

Trading Strategy
Xs on the graph represent moments where we added to our long/shot position. We initiated a very small position soon after the announcement of the transaction. We then added to our position: In August 2011: spread widening due to market volatility Late september: after reception of HSR 2nd request We regularly added to the long/short position afterwards, as market confirmed our thesis and the spread tightened. The position gained approx. 15% or above 20% annualized.

Investment Rationale & Antitrust Case


On August 29th, the buyer entered into a credit agreement with Credit Suisse and Citibank for avoir $20bn, hence securing the whole transaction financing. Although many different parties expressed concerns over the competitive prospect of the transaction, we remained convinced that the parties would receive approval: Arguments against cited a possible raise in prices since the combined group would represent a 40% market share. We believe in the cost efficiency theory: the combined group would be perfectly positionned to realized significant cost synergies and therefore offer lower prices. As anticipated, the deal receive antitrust approval on April 2nd and close shortly after.

Pre-Event Merger Arbitrage Anticipated Deals


The Pre-Event strategy consists of identifying potential M&A targets through a rigorous investment process
Investment Process
Target Universe 1000 companies of appropriate size in North America and Europe

Comments
Investment criteria: Companies listed in Western Europe and North America, usually with a $1 to $10 billions market capitalization The selection criteria are both fundamental (consolidation within an industry, strategic or regulatory pressure, similar to a target of recent mergers and acquisitions ...) and technical (abnormal returns, unusual volume / volatility) Currently we anticipate strong M&A in the pharmaceutical, energy and technology industries among others, Identification of potential buyers is based on criteria such as: Level of cash on balance sheet, need for external strategic growth, etc. Companies that could generate synergies and cost savings and/or unlock other value

Under Our Radar

300-400 potential targets under daily monitoring

Hot Sectors

100 potential targets within the sectors identified for a potentially high degree of M&A activity

Identifying Buyers

Identification of interested buyers with cash and a need for external growth

Portfolio

Hedged against market risk Mainly companies whose market capitalization is between 1 and 10 billion euros

Trading Policy: the size of the position normally starts small and is built up when the stock price increases, which we consider as an indication that the market aligns with our scenario. Hedging: the positions are covered by short selling index futures to obtain a zero beta adjustment (ie, "market neutral"). Liquidity: over 80% of the portfolio is invested in companies with a market capitalization of at least $500 million. Risk Controls: stop-losses at 10% downside of the traded pair (long equity short index)

Pre-Event Trade SonoSite


Company Description
SonoSite is medical equipment company based in Seattle (United States) It is the global leader in point-of-care ultrasound devices, a new kind of medical equipment far smaller than traditional ultrasound systems. The company went public in 1998 after being spun off from ATL Ultrasound, subsequently acquired by the Dutch manufacturer, Philips Medical Systems The company counts more than 60,000 systems installed worldwide and its devices are used in over 20 different medical specialties: from anesthesiology, to cardiology, orthopedic surgery or sports medicine. SonoSite grew to being a company with around $250m in annual sales along 4 international divisions. It has operations in 20 different segments, among which unique partnerships with the U.S. Army in field medicine or major professional sports events.
60 55 50 45

SonoSite

40
35 30 25 20 03/10/2011


position construction

SonoSite
Offer

03/11/2011

03/12/2011

03/01/2012

03/02/2012

03/03/2012

Investment Rationale: a groundbreaking proprietary technology in an industry dominated by heavyweights


SonoSite offered everything of a potential takeover: scarce assets, strong potential and big potential buyers: High-growth market both in the U.S. and internationally as the companys proprietary technology and products are progressively adopted by physicians. It had recently launched a new product and was expected to present a complete new product cycle over the next 18 months. The company had also boosted its sales force. Favorable industry trends: ageing population also played in favor of SonoSites products (number of 60 year-old and over expected to 3x over the next 40 years). With its cost-cutting technology and products, SonoSite was also perfectly positioned to benefit from budget constraints in the medical industry. A sound financial position: high growth, Capex driven by tactical marketing spending to increase reach and higher expected margins due to product cycle enhancement and integration of recent acquisition. Many potential buyers: the medical imaging industry is dominated by several huge players such as GE Healthcare, Philips, Samsung, Siemens or even the Chinese maker of medical equipment Mindray. All of them could benefit from acquiring SonoSites technology and had the power to do so. We believed that SonoSite could attract offers between $50 and $60 per share (we entered around $40).

On December 15th, the Japanese FUJIFILM announced a $54 per share offer for SonoSite (at the middle of our expected range). With the subsequent arbitrage (very tight spread due to the premium and the quality of the buyer), the position generated a 30%+ return over 4 months.
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Risk Management
Position Sizing Sizing is determined by liquidity, the downside risk and the ability to hedge undesired risks We aim to avoid crowded trades We systematically cover all risks (currency, interest rate, ...) other than those inherent to the strategy (mainly the nonoccurrence of an anticipated event) The team has real time access to exposures by sub-strategy, geography, currency and other exogenous or macro factors often difficult to predict Crowded, illiquid or high-risk trades (when any), are segregated and very closely monitored Strict stop-loss policy Bloomberg, Finmatrix Robust proprietary risk management tools (real time position tracking management tools, real-time profit and loss calculation, cross asset class risk consolidation, scenario analysis, etc.)

Internal Risk Monitoring Risk Management Tools

Complete suite of proprietary tools (positions, internal limits, regulatory ratios, reconciliation, expositions, etc.):

Ratio d'engagement
Ratio d'engagement limit 100% 45,6%

Ratio d'exposition
Ratio d'exposition limit 200% 91,5%

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Competitive Advantage
Unique Portfolio Construction Experienced Management Team A Focus on Discipline Tactical Flexibility Dynamic optimization of the portfolio allocation between the two strategies (Merger Arbitrage and Pre-Event Driven) to achieve the target return and volatility regardless of the business cycle and market conditions Complementary profiles in mergers and acquisitions, trading and asset management A thorough knowledge of several industries An extensive network of contacts established over the years A rigorous investment process Strict buying and selling policies Ongoing monitoring of performance indicators and portfolio risk The team's expertise in fundamental analysis, trading and investment behavior, allows it to make a quick reading of the market and adjust the portfolio accordingly A good understanding of complex transactions Corriente/Resources; Apache/Mariner; Hospira/Javelin An in-depth understanding of the EU Antitrust process Oracle/Sun Microsystems; Intel/McAfee; Tom Tom/Tele Atlas; Nokia/Navteq A good understanding of the dynamics of hostile transactions Kraft/Cadbury; Sanofi/Genzyme A solid track-record of identifying potential M&A targets Solvay/Rhodia; International Power/GDF Suez; Rio Tinto/Alcan Nimble Approach to Risk BHP Billiton/Potash; BASF/CIBA Corporate balance sheets are flushed with cash (approx. $2.2 trillion in the U.S. and $1.1 trillion in Europe) Private Equity is sitting on massive amounts of capital ready to be deployed and levered multiple times (about $500bn) Interest rates remain low and friendly as to M&A transactions financing Public companies valuations are reasonable across the markets, the European situation is providing plenty of opportunities for interested acquirers Companies ability to grow organically remain challenged and external growth in the current environment is cheaper and faster The macroeconomic uncertainties remain the last hurdle for a pick-up in M&A activity. However, the new class of leaders in Europe and the rest of the world seem now committed to finding a quick solution. 11

Proven experience

An Uptick in M&A Activity

Fund Terms and Conditions


Classification
ISIN Code Bloomberg Ticker Inception Date Type Investment universe Minimum Subscription Subscription / Redemption Fees Management Fee

UCITS III compliant fund


Class A (EUR) : FR0011042514; Class E (EUR) : FR0011042472 Class B (USD) : FR0011042316; Class M (USD) : FR0011042498 Class A (EUR) : DIVASYA FP ; Class E (EUR) : DIVASYE FP Class B (USD) : DIVASYB FP ; Class M (USD) : DIVASYM FP June 1st, 2011 Event Driven Europe and North America Classes A (EUR) , B (USD) : 100 k / 100 k$ Classes E (EUR) , M (USD) : 100 / 100$ 2% maximum / 0% Classes A (EUR), B (USD) : 2.0% Classes E (EUR), M (USD) : 2.5%

Performance Fee
Liquidity

20% above capitalized EONIA


Daily

Recommended Investment Horizon


Life Insurance eligibility Administrator / Custodian

3 years
Yes RBC Dexia Investor Services Bank France

Auditor
Prime Brokers Contact Information

KPMG
Newedge / Bank of America Merrill Lynch Bernheim, Dreyfus & Co | 45, rue de Courcelles, 75008 Paris, France Tel: +33-1-72-25-66-22 | Email: diva@b-dreyfus.com 12