TIDMBCAI
RNS Number : 3521P
Blue Capital Alternative Income Fd
30 August 2017
Blue Capital Alternative Income Fund Limited
(the "Company")
(Incorporated in Bermuda)
Half Yearly Report
For the six months ended 30 June 2017
The Company has today, in accordance with DTR 6.3.5, released
its Half Yearly Report for the six month period ended 30 June 2017
("Period").
HIGHLIGHTS AND CORPORATE SUMMARY[1]
As at June 30, 2017
$187.6 million $198.0 million $1.1134
===================== ===================== =======================
Market Capitalisation Total Net Assets Net Asset Value per
Ordinary Shares Ordinary Share
===================== ===================== =======================
$1.1174 1.8%[2] 46.9%(2)
===================== ===================== =======================
Net Asset Value per Total Net Asset Value Total Net Asset Value
Redemption Share Return for Period Return since Inception
Ordinary Shares
===================== ===================== =======================
$1.055 $0.033 + 1,500[3]
===================== ===================== =======================
Ordinary Share Price, Dividends per Number of Positions
closing mid-price at Ordinary Share invested in
30 June 2017 Declared for Period
===================== ===================== =======================
COMPANY HIGHLIGHTS(2)
-- Historic portfolio outperformance versus other insurance linked securities ("ILS")[4]
-- Increase in net asset value ("NAV") of 1.8 per cent. for the
reported period and 46.9 per cent. since inception, representing an
annualized return of 8.9 per cent. per annum through 30 June
2017
-- Positive NAV return in 94.4 per cent. of months since inception
-- Consistently in top quartile in non-life ILS funds(4)
-- Achieved distribution target of $0.033 per Ordinary Share,
representing a dividend yield of LIBOR plus 6 per cent. for the
period ending 30 June 2017.
The Company
Blue Capital Alternative Income Fund Limited, formerly known as
Blue Capital Global Reinsurance Fund Limited (the "Company") is an
exempted closed-ended mutual fund company incorporated under the
laws of Bermuda and listed on the London Stock Exchange's
Specialist Fund Segment ("SFS") with a secondary listing on the
Bermuda Stock Exchange ("BSX"). Trading in the Company's shares
commenced on 6 December 2012. The Company provides investors with
access to the risk premia available from catastrophe reinsurance,
largely uncorrelated to financial markets.
[1] All currency references In this Half Year Report are in US
Dollars unless otherwise noted.
[2] Past performance is not necessarily indicative of future
results.
[3] Shareholders who invest in a single Ordinary Share enjoy the
benefit of investing in a share that is diversified by underlying
instruments of greater than 1,500 positions in catastrophe related
reinsurance contracts.
[4] As reported by Eurekahedge ILS Advisors Index "Eurekahedge".
Eurekahedge tracks the performance of participating Insurance
Linked Investment funds. It is the first benchmark that allows a
comparison between different insurance-linked securities fund
managers in the insurance-linked securities, reinsurance and
catastrophe bond investment space. The index is calculated and
maintained by Eurekahedge. The index includes funds that allocate
at least 70 per cent. of their assets to non-life risk.
Target Return[5]
The Company targets an annualised dividend yield of LIBOR plus 6
per cent. per annum on the original issue price of the Ordinary
Shares issued in December 2012. The Company's target net return
(comprised of dividends and other distributions to Shareholders
together with increases in the Company's NAV is LIBOR plus 8 per
cent. per annum, to be achieved over the longer term.
Summary of Investment Objective and Investment Policy
The investment objective of the Company is to generate
attractive returns from a sustainable annual dividend yield and
longer-term capital growth by investing substantially all of its
assets in shares linked to the segregated account identified as
Blue Capital Global Reinsurance SA-1 (the "Master Fund") within
Blue Water Master Fund Ltd., an exempted Bermuda mutual fund
segregated accounts company.
The Master Fund invests in a diversified portfolio of fully
collateralised reinsurance-linked contracts and other investments
carrying exposures to insured catastrophe event risks. The Master
Fund predominantly invests in fully collateralised
reinsurance-linked contracts through preference shares issued by
Blue Water Re Ltd. (the "Reinsurer"), a Bermuda special purpose
insurer which helps to support the Company's investment objective.
The Master Fund's investment in other reinsurance-linked
investments carrying exposure to insured catastrophe event risks
such as industry loss warranties ("ILWs"), 144A rated catastrophe
bonds ("Cat Bonds") and other insurance-linked instruments
("Insurance-Linked Instruments") may be made directly by the Master
Fund or indirectly via the Reinsurer.
CHAIRMAN'S STATEMENT
On behalf of the Board of Directors (the "Directors") of Blue
Capital Alternative Income Fund Limited (the "Company"), I am
pleased to present the Company's interim report for the six month
period ended 30 June 2017. During the period, the Company recorded
an increase in net assets from operations of $3.2 million,
repurchased shares totaling $0.9 million, redeemed $13.1 million
redemption shares, and distributed $8.9 million in dividends to
Shareholders, resulting in a decrease in the Company's net assets
to $207.1 million from $226.9 million at the beginning of the
year.
Performance
The Company's total NAV return on its Ordinary Shares for the
six-month period ending 30 June 2017 was 1.8 per cent. Since
inception the Company has provided a total NAV return per share of
46.9 per cent., representing an annualised return of 8.9 per cent
through 30 June 2017. Returns by month for the Company's operations
are shown in the table below.
Ordinary Share NAV Total Return
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Full
Year
===== ==== ==== ==== ====== ====== ==== ==== ==== ==== ====== ==== ==== =====
2017 0.7% 0.2% 0.1% 0.2% 0.2% 0.5% 1.8%
===== ==== ==== ==== ====== ====== ==== ==== ==== ==== ====== ==== ==== =====
2016 0.4% 0.3% 0.3% 0.2% (1.8)% 0.5% 1.1% 2.5% 2.8% (0.2)% 1.0% 0.9% 8.3%
===== ==== ==== ==== ====== ====== ==== ==== ==== ==== ====== ==== ==== =====
2015 0.3% 0.3% 0.3% 0.2% 0.2% 0.7% 0.7% 2.0% 2.0% 1.6% 0.5% 0.6% 9.6%
===== ==== ==== ==== ====== ====== ==== ==== ==== ==== ====== ==== ==== =====
2014 0.2% 0.3% 0.0% (0.1)% 0.3% 0.4% 1.3% 1.9% 2.4% 1.1% 0.3% 0.5% 8.8%
===== ==== ==== ==== ====== ====== ==== ==== ==== ==== ====== ==== ==== =====
2013 0.3% 0.4% 0.5% 0.7% 0.1% 0.8% 1.0% 2.4% 3.2% 1.9% 0.1% 0.0% 11.8%
===== ==== ==== ==== ====== ====== ==== ==== ==== ==== ====== ==== ==== =====
[5] These are targeted amounts and not profit forecasts. There
can be no assurance that these targets can or will be met or that
the Company will make any distributions at all and these should not
be viewed as an indication of the Company's expected or actual
results or returns.
Dividend
Commencing with the first quarter of 2017, the Company moved to
quarterly dividends. On 30 March 2017, the Company declared a
dividend covering the period from 1 January 2017 to 31 March 2017
of $0.0165 per Ordinary Share. This dividend was paid on 8 May
2017. Then, on 19 July 2017, the Company declared its second
quarterly dividend in respect of the three months ended 30 June
2017 of US$0.0165 per Ordinary Share to Shareholders on the
register on 28 July 2017. This dividend was paid on 24 August
2017.
The combined dividends declared to date in respect of the half
yearly period to 30 June 2017 were in line with the Company's
dividend target.
Tender Offer
On 2 September 2016, the Company announced that its Ordinary
Shares had traded at an average discount of more than 5 per cent.
to the NAV per Ordinary Share calculated over the three month
period ended 31 August 2016 which triggered the Board of Directors
to offer Shareholders the opportunity to tender Ordinary Shares in
accordance with the Company's discount management policy (the
"Tender Offer"). Under the Tender Offer, the Company offered to
repurchase up to 10 per cent. of the Ordinary Shares in issue. Each
Ordinary Share tendered was converted into one Redemption Share, a
new unlisted class of shares in the capital of the Company.
Redemption Shares continue to participate in an indirect pro rata
share of each underlying reinsurance-linked investment in the
Company's portfolio as at the date of their issue, and will be
redeemed for cash as and when these investments are realised.
Conversion of 19,855,391 tendered Ordinary Shares into Redemption
Shares under the Tender Offer was completed on 30 December 2016
(representing 10 per cent. of the Ordinary Shares in issue at that
time).
On 30 April 2017, the Company distributed an amount equal to
US$13.1 million to Shareholders of the Company who participated in
the Tender Offer in consideration for the first partial redemption
of Redemption Shares. This represented a distribution of 58% of the
initial value of the total Redemption Shares issued under the
Tender Offer.
On 26 July 2017, the Company announced that on or before 30
September 2017, an amount equal to US$8.1 million was expected to
be distributed to Shareholders of the Company who participated in
the Tender Offer in consideration for the second partial redemption
of Redemption Shares. Such amount will be distributed to
Shareholders pro rata to their holdings of Redemption Shares, and
their holdings of Redemption Shares will be reduced accordingly
following such redemption. The second partial redemption represents
a distribution of approximately 36% of the initial value of the
total Redemption Shares issued under the Tender Offer.
Assuming that no additional loss events occur in respect of the
portfolio attributable to the Redemption Shares, the Company
anticipates (but can provide no assurances) that all outstanding
Redemption Shares will be redeemed and proceeds will be distributed
to Shareholders no later than 31 January 2018.
The unaudited net asset value of all the Redemption Shares in
issue at 30 June 2017 was US$9.1 million.
Share Repurchase Programme
On 25 May 2017, the Company announced that it has engaged Stifel
Nicolaus Europe Limited to effect share buy backs on its behalf. As
of 30 June 2017, 0.9 million Ordinary Shares had been repurchased.
As of 29 August 2017, 2.95 million shares have been repurchased and
are held in Treasury by the Company.
Capital Deployment
The Company's investment in Blue Capital Global Reinsurance SA-I
(the "Master Fund") at 30 June 2017, including amounts allocated to
Redemption Shares, was US$201.9 million, representing all of the
Company's capital excluding that retained for working capital
purposes.
As at 30 June 2017, The Master Fund has invested substantially
all of its assets in: (i) preferred shares of Blue Water Re Ltd.
and (ii) industry loss warranty ("ILW") derivatives. The combined
investments represent the deployment of US$165.3 million across 98
different positions and 40 different clients generating US$41.1
million of net insurance premium written and fixed ILW payments,
which is an increase of US$0.4 million from the previous year.
Outlook
The Company has maintained a consistent strategy of providing
investors with access to attractive, largely uncorrelated,
investment returns of the traditional reinsurance and insurance
linked securities market. The Company's preferred access to risk,
its proprietary methodology of portfolio construction and its
conservative approach to reserving allow the Company to continue to
deliver superior portfolio returns.
The January to June 2017 underwriting period saw promising signs
in market pricing, although conditions remained competitive during
this renewal period. The Reinsurer observed reductions in risk
adjusted pricing beginning to moderate at approximately 3 per cent.
compared with more significant reductions during previous renewal
periods.
Despite such pricing pressure, Blue Capital Management Ltd. (the
"Investment Manager") successfully executed its renewal strategy.
We remain confident that we can deliver attractive returns for our
Shareholders in spite of the current insurance market cycle and the
pro forma modelled return expectations for the portfolio
constructed are consistent with the Company's target return.
In April 2017, the Company announced the appointment of Stifel
Nicolaus Europe Limited as sole broker and Michael J. McGuire as
Chief Executive Officer of the Investment Manager. Mr. McGuire has
served as the Chief Financial Officer of Endurance Specialty
Holdings Ltd. ("Endurance") since January of 2006. Endurance, the
Company's largest shareholder, was acquired by Sompo Holdings, Inc.
in March of 2017.
The Board continues to monitor the effects of the Tender Offer
and share repurchase programme on the Company's Ordinary Share
trading price compared with the Company's net asset value per
Ordinary Share. The Board, in conjunction with the Investment
Manager, continuously reviews matters relating to the Company with
a view to ensuring the Company is best placed to meet its
investment objectives and generate returns for Shareholders. To
that end, the Board has made a number of corporate changes during
the period. Following Shareholder approval, the Board changed the
name of the Company from Blue Capital Global Reinsurance Fund
Limited to Blue Capital Alternative Income Fund Limited. The
Company also moved to quarterly dividends to provide more regular
distributions to Shareholders.
At its annual general meeting of Shareholders held on 9 May
2017, all of the resolutions that were presented to the
Shareholders were duly approved.
We expect the Company's Ordinary Shares will have traded at an
average discount of more than 5 per cent. to the NAV per Ordinary
Share over the three month period ending on 31 August 2017. As a
result, the Board is considering various options and will put to
Shareholders a proposed course of action in due course. The Board
continues to consider ways to improve the Company's profitability,
market valuation and to monitor fees and overall expenses in
relation to the Company.
The Company remains pleased with the diversified portfolio that
the Investment Manager has created, which has attractive risk
adjusted return characteristics, consistent with the Company's
investment objectives. I am pleased with the performance achieved
by this portfolio, and I would like to thank our Shareholders for
their support. If you have any questions regarding your Company,
please do not hesitate to contact the Company or the Investment
Manager.
John R. Weale
INVESTMENT MANAGER'S REPORT
The Company continues to benefit from a strong reception from
insurance brokers and clients. The Company has successfully
targeted heavily regulated regional insurance companies who
purchase traditional reinsurance programmes. These companies, in
the Investment Manager's opinion, tend to be more persistent buyers
of reinsurance and generally have a superior risk adjusted expected
return. The Investment Manager views each of these relationships as
the basis for a longer-term relationship which we hope to grow over
time, subject to satisfactory terms and conditions.
The Company focuses on traditional reinsurance, which provides
customised protection to insurance clients in bespoke indemnity
programmes. Traditional reinsurance, which is most commonly
provided in the rated (as opposed to collateralised) reinsurance
market, represents the bulk of the more than $375 billion of limits
purchased annually. The advantage of establishing relationships
with longer-term reinsurance buyers is that consistency of
counterparties, service quality and claims-paying history are
important considerations for these buyers of reinsurance.
Loss Events Impacting the Company
The first half of 2017 was characterized by a relatively low
level of insured losses from large natural catastrophes. The most
significant event was Cyclone Debbie which struck the Queensland
coast as a Category 4 storm in late March 2017. It has also been an
active first half within the United States due to a high frequency
of tornado and hail events. The Company employed its normal
post-event procedures to estimate the losses from Cyclone Debbie
and other events and determined the losses did not have a material
impact on the Company.
On 25 August 2017, Hurricane Harvey made landfall near Corpus
Christi, Texas as a Category 4 hurricane with winds of 130 miles
per hour followed by substantial rainfall and flooding. The
Investment Manager has now commenced its normal post-event
procedures to estimate any loss to the Company from Hurricane
Harvey, and continues to monitor this event for potential material
impact to the Company.
Portfolio Overview
Portfolio Overview as of June 30, 2017
Investment Type % Occurrence Type % Geography %
---------------------------- ---- -------------------------- ---- -------------------- ----
Property Cat - First Int'l Global/Pan
Quota Share Retrocessional 35% Event 73% Regional 49%
---------------------------- ---- -------------------------- ---- -------------------- ----
Property Cat - Subsequent
Indemnity Reinsurance 31% Event 7% U.S. Single State 25%
---------------------------- ---- -------------------------- ---- -------------------- ----
Indemnity Retrocession 16% Property Cat - Aggregate 2% U.S. Nationwide 5%
---------------------------- ---- -------------------------- ---- -------------------- ----
Industry Loss Warranties 4% ILW - Subsequent Event 3% U.S. Regional 9%
---------------------------- ---- -------------------------- ---- -------------------- ----
Retrocessional Hedging 2% Retrocessional Hedging 2% Int'l Regional 0%
---------------------------- ---- -------------------------- ---- -------------------- ----
Other Non-Property
Catastrophe 0% ILW - First Event 1% Cash for Deployment 2%
---------------------------- ---- -------------------------- ---- -------------------- ----
Non-deployable
Catastrophe Bond 0% ILW - Aggregate 0% cash* 10%
---------------------------- ---- -------------------------- ---- -------------------- ----
Cash for Deployment 2% Cash for Deployment 2%
---------------------------- ---- -------------------------- ----
Non-deployable cash* 10% Non-deployable cash* 10%
---------------------------- ---- -------------------------- ----
*Consists of cash held for future expenses, share repurchases
and dividend payments.
DIRECTORS' REPORT
30 June 2017
The Directors present their report and the unaudited financial
statements of the Company for the half-year period ended 30 June
2017.
Principal Activity
The Company was incorporated with limited liability in Bermuda
as a closed-ended mutual fund company on 8 October 2012. The
Ordinary Shares were listed on the SFS and admitted to trading on
the London Stock Exchange, with a secondary listing on the BSX, on
6 December 2012.
Investment Objective and Policy
The Company seeks to achieve its investment objective by
investing all of its assets (other than cash or near cash pending
distribution to Shareholders or investment in the Master Fund or
any funds required for short-term working capital purposes) in the
Master Fund. The Master Fund invests in a diversified portfolio of
fully collateralised reinsurance-linked contracts and other
investments carrying exposures to insured catastrophe event
risks.
The Company's published investment policy is consistent with
that of the Master Fund. Blue Water Master Fund Ltd. has agreed
pursuant to the control agreement that it will not amend the Master
Fund's investment policy without the consent of the Company. Any
material change to the investment policy of the Company will be
made only with the approval of Shareholders.
The Company may not borrow for investment purposes. However,
borrowings may be used for the purposes of funding repurchases of
Ordinary Shares or managing other working capital requirements. In
each of these circumstances, the Company is limited to borrowing an
amount equivalent to a maximum of 20 per cent. of its NAV at the
time of draw down.
On 16 May 2016, the Company entered into a credit facility (the
"2016 Credit Facility") with Endurance Investment Holdings Ltd.
(the "Lender"), a wholly-owned subsidiary of Endurance. The 2016
Credit Facility provides the Company with an unsecured $20.0
million revolving credit facility for working capital and general
corporate purposes and expires on 30 September 2018. The 2016
Credit Facility replaces the 364-day $20.0 million revolving credit
facility which expired on 12 May 2016. Borrowings under the 2016
Credit Facility bear interest, set at the time of the borrowing, at
a rate equal to the applicable LIBOR rate plus 150 basis points.
The 2016 Credit Facility contains covenants that limit the
Company's ability, among other things, to grant liens on its
assets, sell assets, merge or consolidate, or incur debt. If the
Company fails to comply with any of these covenants, the Lender
could revoke the facility and exercise remedies against the
Company. As of 30 June 2017, the Company was in compliance with all
of its respective covenants associated with the 2016 Credit
Facility. There were no borrowings from the 2016 Credit Facility as
of 30 June 2017.
Principal Risks and Uncertainties
The Board regularly reviews the principal risks facing the
Company and, for the purposes of this Half Yearly Report, has
carried out an assessment of the principal risks facing the
Company, including those that would threaten its business model,
future performance, solvency or liquidity. The Investment Manager
maintains risk management systems to manage risks the Company
faces. Key risks relating to the Company's portfolio and borrowing
are managed by the Investment Manager applying Endurance's
proprietary risk modeling approaches, various third-party vendor
models and underwriting judgment, and by application of the
Company's investment policy and restrictions.
The Board considers the following to be the principal risks
facing the Company:
Institutional Credit Risk
In the event of the insolvency of the institutions, including
brokerage firms, banks and custodians, with which the Master Fund
and the Reinsurer may do business, or to which assets have been
entrusted, the Master Fund and the Reinsurer may be temporarily or
permanently deprived of the assets held by or entrusted to that
institution, which will affect the performance of the Master Fund
and the Reinsurer and, in turn, the performance of the Company.
For example, the Reinsurer may pay amounts owed on claims under
fully collateralised reinsurance-linked contracts entered into in
respect of the Master Fund to reinsurance brokers, and these
brokers, in turn, may pay these amounts over to the ceding
companies that have reinsured a portion of their liabilities with
the Reinsurer. In some jurisdictions, if a broker fails to make
such a payment, the Reinsurer might remain liable to the ceding
company for the deficiency. Conversely, in certain jurisdictions
when the ceding company pays premiums in respect of reinsurance
contracts to reinsurance brokers for payment over to the Reinsurer,
these premiums are considered to have been paid and the ceding
company will no longer be liable to the Reinsurer for those
amounts, whether or not the Reinsurer has actually received the
premiums. Consequently, consistent with industry practice, the
Reinsurer assumes a degree of credit risk associated with
brokers.
Furthermore, while the Master Fund invests predominantly in
fully-collateralised reinsurance-linked contracts by subscribing
for preference shares issued by the Reinsurer, it may, in
accordance with its investment policy and when the Investment
Manager identifies suitable investment opportunities, also invest
in other reinsurance-linked investments and such investments may
form a material part of its investment portfolio from time to time.
Where the Master Fund invests in certain Insurance-Linked
Instruments, a broker may trade with an exchange as a principal on
behalf of the Master Fund, in a "debtor/creditor" relationship,
unlike other clearing broker relationships where the broker is
merely a facilitator of the transaction. That broker could,
therefore, have title to all of the assets of the Master Fund (for
example, the transactions which the broker has entered as principal
as well as the margin payments that the Master Fund provides). In
the event of the broker's insolvency, the transactions which the
broker has entered into as principal could default and the Master
Fund's assets could become part of the insolvent broker's estate,
resulting in the Master Fund's rights being limited to that of an
unsecured creditor.
Illiquidity of Insurance-Linked Instruments
Insurance-Linked Instruments have a limited or, in some cases,
no secondary market. Fully collateralised reinsurance-linked
contracts of the type that the Reinsurer enters into in respect of
the Master Fund typically cover annual periods. Cat Bonds and
investments in sidecars may have market quotes, but the trading
volume may be low and pricing correspondingly ineffective. ILWs
have even less liquidity and pricing transparency, and bilateral
insurance contracts currently have no secondary market.
The liquidity of Insurance-Linked Instruments may also be
affected by a number of other factors, such as whether a covered
event has occurred or whether a catastrophe season has passed. It
is anticipated that the Master Fund and/or the Reinsurer will
retain their respective exposures for the duration of the
Insurance-Linked Instruments, gradually recognising income as the
likelihood of a covered event occurring in respect of one or more
Insurance-Linked Instruments.
While these Insurance-Linked Instruments generally can be sold
at a price, they are largely "buy and hold" instruments, and it may
require substantial time to enter into or exit a position and the
amount that could be recognised upon liquidation may be materially
less than its theoretical fair value. Consequently, the Master Fund
may need to realise assets at below fair value and the Master Fund
may need to borrow to meet its financing needs, each of which will
have an impact on the returns to Shareholders. Further, the
illiquidity of Insurance-Linked Instruments means that the Master
Fund's portfolio is more likely to be mis-valued as the valuation
ascribed to an Insurance-Linked Instrument may differ significantly
from the price at which it may ultimately be realised. In turn, any
mis-valuation is likely to have an impact on the trading price of
the Ordinary Shares, which may be adverse to Shareholders, as well
as on the fees based on such valuations.
Portfolio invested in Insurance-Linked Instruments
The Master Fund predominantly invests in a diversified portfolio
of fully collateralised reinsurance-linked contracts, through
preference shares issued by the Reinsurer, but also invests in
other investments carrying exposures to insured catastrophe event
risks, such as ILWs and Cat Bonds. The Master Fund's portfolio is
therefore concentrated in Insurance-Linked Instruments.
Insurance-Linked Instruments are particularly exposed to sudden
substantial or total loss due to, among other things, natural
catastrophes or other covered risks, which together with other
factors, can cause sudden and significant price movements in
Insurance-Linked Instruments. The Master Fund's, and hence the
Company's, portfolio is more exposed to such risks, than it would
be if it were diversified across other asset classes in addition to
Insurance-Linked Instruments.
Currency Risk
The Master Fund's and the Reinsurer's functional currency is the
US dollar, but a portion of their respective businesses will
receive premiums and hold collateral in currencies other than US
dollars. The Master Fund and the Reinsurer may use currency hedges
for balances held in non-US currencies. Therefore, they can choose
(but are not obliged) to manage currency fluctuation exposure. The
Master Fund and the Reinsurer may experience foreign exchange
losses to the extent their respective foreign currency exposure is
not hedged, which in turn would adversely affect their respective
financial condition and that of the Company.
Counterparty Risk; Counterparty Credit Risk
Where the Master Fund invests other than in fully collateralised
reinsurance-linked contracts, a number of the investment techniques
that may be utilised by the Master Fund, and a number of markets in
which the Master Fund may invest, will expose it to counterparty
risk, which is the risk that arises due to uncertainty in a
counterparty's ability to meet its obligations. Non-performance by
counterparties for financial or other reasons could expose the
Master Fund, and therefore Shareholders, to losses.
GOING CONCERN STATUS
In accordance with the Financial Reporting Council's guidance on
going concern and liquidity risk issued in October 2009, the Board
of Directors has reviewed the Company's ability to continue as a
going concern.
The Company's assets consist of cash and a diverse portfolio of
fully collateralised reinsurance-linked contracts (held indirectly
through investments in preference shares of the Reinsurer) and
other Insurance-Linked Instruments. The Board has considered the
Company's assets and reviewed forecasts and has determined that the
Company has sufficient financial resources to continue as a going
concern. Accordingly, the Directors have adopted the going concern
basis in preparing the financial statements for the six month
period ended 30 June 2017.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Half Yearly
Report in accordance with applicable law and regulations. The
Directors confirm that, to the best of their knowledge:
1. The condensed set of financial statements contained within
the Half Yearly Report has been prepared in accordance with the
applicable accounting standards and gives a true and fair view of
the assets, liabilities, financial position and profit or loss of
the Company.
2. The Chairman's Statement, the Investment Manager's Report,
the Directors' Report and the notes to the unaudited financial
statements provides a fair review of the information required by
rule 4.2.7R of the Disclosure Guidance and Transparency Rules
(being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements and a description of the
principal risks and uncertainties for the remaining six months of
the financial year) and rule 4.2.8R (being related party
transactions that have taken place since commencement of operations
and that have materially affected the financial position of the
Company during that period; and any changes in the related party
transaction described in the last annual report that could do
so).
The unaudited financial statements were approved by the
Investment Manager and the Directors and available for issuance on
29 August 2017. Subsequent events have been evaluated through this
date.
Signed by John R. Weale for and on behalf of the Board of
Directors on this 29(th) day of August 2017:
John R. Weale
BLUE CAPITAL ALTERNATIVE INCOME FUND LIMITED
Unaudited Statements of Assets and Liabilities
(expressed in thousands of U.S. dollars, except shares and per
share amounts)
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
----------- ----------- ------------
Assets
Investments in Master Fund at fair
value (cost 30 June 2017 - $139,638;
30 June 2016 - $164,730; 31 December
2016 - $155,467) $ 201,933 $ 216,207 $ 221,283
Cash and cash equivalents 5,274 4,706 5,482
Amounts due from related parties
(Note 6) - 1,202 -
Other assets 116 115 158
----------- ----------- ------------
Total assets 207,323 222,230 226,923
----------- ----------- ------------
Liabilities
Proceeds from the redemption of
investments received
in advance - 6,000 -
Share repurchase payable 53 - -
Accrued expenses and other liabilities 173 125 64
----------- -----------
Total liabilities 226 6,125 64
----------- ----------- ------------
Net assets $ 207,097 $ 216,105 $ 226,859
----------- ----------- ------------
Ordinary Shares in issue 177,798,523 198,783,914 178,698,523
----------- ----------- ------------
Net asset value per Ordinary Share 1.1134 $ 1.0871 1.1434
----------- ----------- ------------
Redemption Shares in issue 8,183,916 - 19,855,391
----------- ----------- ------------
Net asset value per Redemption Share $ 1.1174 $ - $ 1.1351
----------- ----------- ------------
See accompanying notes to the Unaudited Financial Statements
BLUE CAPITAL ALTERNATIVE INCOME FUND LIMITED
Unaudited Statements of Operations
(expressed in thousands of U.S. dollars)
Unaudited
Unaudited For the six Audited
For the six month period For the year
month period ended ended 31
ended 30 June December
30 June 2017 2016 2016
------------- ------------- -------------
Net investment loss allocated
from
Master Fund $ (1,681) $ (1,692) $ (4,267)
------------- ------------- -------------
Expenses
Professional fees (434) (376) (895)
Other fees (29) (105) (93)
Administration fees (29) (34) (69)
------------- ------------- -------------
Total expenses (492) (515) (1,057)
-------------
Net investment loss (2,173) (2,207) (5,324)
------------- ------------- -------------
Realized and unrealized gain on
investments allocated from Master
Fund:
Net realized gain on investments
in securities 20,640 28,203 29,182
Net change in unrealized (depreciation)
on
investments in securities (15,309) (26,334) (6,662)
-------------
Net gain on investments 5,331 1,869 22,520
------------- ------------- -------------
Net increase (decrease) in net
assets resulting
from operations $ 3,158 $ (338) $ 17,196
------------- ------------- -------------
See accompanying notes to the Unaudited Financial Statements
BLUE CAPITAL ALTERNATIVE INCOME FUND LIMITED
Unaudited Statements of Changes in Net Assets
(expressed in thousands of U.S. dollars)
Unaudited
Unaudited For the six Audited
For the six month period For the year
month period ended ended 31
ended 30 June December
30 June 2017 2016 2016
------------- ------------- --------------
(Decrease) Increase in net assets
From operations
Net investment loss $ (2,173) $ (2,207) $ (5,324)
Net realized gain on investments
in securities 20,640 28,203 29,182
Net change in unrealized (depreciation)
on
investments in securities (15,309) (26,334) (6,662)
------------- ------------- --------------
Net increase (decrease) in net
assets resulting
from operations 3,158 (338) 17,196
------------- ------------- --------------
From capital share transactions
Issuance of shares - 4 -
Share repurchases of ordinary
shares (935) (326) (555)
Redemption of redemption shares (13,139) - -
Dividends declared (8,846) (6,571) (13,118)
-------------
Net decrease in net assets resulting
from capital transactions (22,920) (6,893) (13,673)
------------- ------------- --------------
(Decrease) Increase in net assets (19,762) (7,231) 3,523
------------- ------------- --------------
Net assets - Beginning of period 226,859 223,336 223,336
------------- ------------- --------------
Net assets - End of period $ 207,097 $ 216,105 $ 226,859
------------- ------------- --------------
See accompanying notes to the Unaudited Financial Statements
BLUE CAPITAL ALTERNATIVE INCOME FUND LIMITED
Unaudited Statements of Cash Flows
(expressed in thousands of U.S. dollars)
Unaudited
Unaudited For the six Audited
For the six month period For the year
month period ended ended 31
ended 30 June December
30 June 2017 2016 2016
------------- ------------- --------------
Cash flows from operating activities
Net increase (decrease) in net
assets resulting from
operations $ 3,158 $ (338) $ 17,196
Adjustments to reconcile to net
cash and cash equivalents provided
by operations:
Proceeds from sales (purchases)
of investments in Master Fund
and net investment loss, net realized
gain on investments in securities
and net change in unrealized appreciation
on investments in securities allocated
from Master Fund 19,350 19,073 7,997
Net change in other assets and
liabilities:
(Increase) decrease in amounts
due from related parties - (1,202) -
Decrease in other assets 42 59 16
Increase (decrease) in accrued
expenses and other liabilities 109 (9) (70)
------------- ------------- --------------
Net cash provided by operating
activities 22,659 17,583 25,139
------------- ------------- --------------
Cash flows from financing activities
Repayments to credit facility - (6,000) (6,000)
Share repurchases of ordinary
shares (882) (326) (555)
Redemption of redemption shares (13,139) - -
Dividends paid (8,846) (6,567) (13,118)
Net cash used in financing activities (22,867) (12,893) (19,673)
------------- ------------- --------------
Net (decrease) increase in cash
and cash equivalents (208) 4,690 5,466
Cash and cash equivalents - Beginning
of period 5,482 16 16
------------- ------------- --------------
Cash and cash equivalents - End
of period $ 5,274 $ 4,706 $ 5,482
------------- ------------- --------------
See accompanying notes to the Unaudited Financial Statements
BLUE CAPITAL ALTERNATIVE INCOME FUND LIMITED
Unaudited Notes to the Financial Statements
30 June 2017
(expressed in thousands of U.S. dollars, except shares and per
share amounts)
1. Nature of operations
Blue Capital Alternative Income Fund Limited, formerly Blue
Capital Global Reinsurance Fund Limited, (the "Company") is a
closed-ended exempted mutual fund company of unlimited duration
incorporated under the laws of Bermuda on 8 October 2012 which
commenced operations on 6 December 2012. The Company invests
substantially all of its assets through a "master/feeder" structure
in Blue Capital Global Reinsurance SA-I (the "Master Fund"). The
Master Fund is a segregated account of Blue Water Master Fund Ltd.,
a mutual fund company incorporated under the laws of Bermuda on 12
December 2011, and registered as a segregated account company under
the Segregated Accounts Company Act 2000. The investment objective
of the Company is to generate attractive returns from a sustainable
annual dividend yield and longer-term capital growth through its
investment in the Master Fund. The Company is the only investor in
the Master Fund.
The Company's shares are admitted to trading on the Specialist
Fund Segment of the London Stock Exchange's main market (symbol
BCAI LN) (formerly BCGR LN). The Company's shares are listed on the
Bermuda Stock Exchange (symbol BCAI BH) (formerly BCGR BH).
The investment objective of the Master Fund is to generate
attractive returns by investing in a diversified portfolio of fully
collateralised reinsurance-linked instruments ("RLI") and other
investments carrying exposures to insured catastrophe event risks.
The Master Fund invests predominantly in fully collateralised RLIs
through non-voting redeemable preference shares issued by Blue
Water Re Ltd. (the "Reinsurer") which in turn writes reinsurance
contracts with ceding companies. Each non-voting redeemable
preference share of the Reinsurer corresponds to a specific
reinsurance contract entered into by the Reinsurer. The Master
Fund's investments in other reinsurance-linked investments which
carry exposure to insured catastrophe event risks such as industry
loss warranties, catastrophe bonds and other reinsurance-linked
instruments are made directly by the Master Fund. The Investment
Manager to the Master Fund is Blue Capital Management Ltd. (the
"Investment Manager"). The Investment Manager is licensed in
Bermuda to carry on investment business under the Investment
Business Act 2003, as amended, and as an agent and Investment
Manager under the Bermuda Insurance Act 1978. The Investment
Manager is a wholly-owned subsidiary of Endurance Specialty
Holdings Ltd. ("Endurance"), a recognized global specialty provider
of property and casualty insurance and reinsurance whose ordinary
shares were formerly listed on the New York Stock Exchange (symbol
ENH). On 28 March 2017, Sompo Holdings, Inc. ("Sompo") completed
its acquisition (the "Merger") of Endurance. Upon closing the
Merger, Sompo became the ultimate parent holding company of the
Investment Manager.
The Reinsurer is an exempted limited liability company
incorporated on 12 December 2011 under the laws of Bermuda and is
licensed by the Bermuda Monetary Authority as a special purpose
insurer with an underwriting plan focused on fully collateralised
reinsurance protection of the property catastrophe insurance and
reinsurance market. The Investment Manager also acts as the
Reinsurer's insurance manager and insurance agent.
2. Summary of significant accounting policies
The financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of
America ("US GAAP"). The Company is an investment company and is
therefore applying the specialized accounting and reporting
requirements of ASC Topic 946, Financial Services - Investment
Companies.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the year/period.
Actual results could differ from those estimates.
Investment in Master Fund
The Company records its investment in the Master Fund at fair
value, determined as the value of the net assets of the Master
Fund.
Investment transactions
The Company records its participation in the Master Fund's
income, expenses, and realized and change in unrealized gains and
losses within the Statements of Operations. The Company records its
investment transactions on a trade date basis. Realized gains and
losses on disposals of investments are calculated using the
first-in, first-out (FIFO) method. In addition, the Company records
its own income and expenses on the accrual basis of accounting.
Cash and cash equivalents
Cash and cash equivalents include short-term, highly liquid
investments, such as money market funds, that are readily
convertible to known amounts of cash and have original maturities
of three months or less.
Offering costs
Offering costs are costs directly incurred in connection with
the registration and distribution of the Company's shares at each
capital raise and are recorded as a reduction in proceeds from the
issuance of shares.
3. Fair value measurements
In accordance with the authoritative guidance on fair value
measurements and disclosures under US GAAP, the Company discloses
the fair value of its investments in a hierarchy that prioritizes
the inputs to valuation techniques used to measure the fair value.
The hierarchy gives the highest priority to valuations based upon
unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurement) and the lowest priority to
valuations based upon unobservable inputs that are significant to
the valuation (Level 3 measurements). The guidance establishes
three levels of the fair value hierarchy as follows:
Level 1 - Inputs that reflect unadjusted quoted prices in active
markets for identical assets or liabilities that the Company has
the ability to access at the measurement date;
Level 2 - Inputs other than quoted prices that are observable
for the asset or liability either directly or indirectly, including
inputs in markets that are not considered to be active; and
Level 3 - Inputs that are unobservable.
The investment in the Master Fund is carried at fair value and
has been estimated using the Net Asset Value ("NAV"). FASB guidance
provides for the use of NAV as a "Practical Expedient" for
estimating fair value of alternative investments. The Company uses
the "market approach" valuation technique to value its investment
in the Master Fund. As the Directors' valuation of the Company's
investment in the Master Fund has been based upon observable inputs
such as ongoing redemption and subscription activity, the Company's
investment in the Master Fund has been classified as Level 2. The
determination of what constitutes "observable" requires significant
judgment by the Directors. The categorization within the hierarchy
does not necessarily correspond to the Directors' perceived risk of
an investment in the Master Fund, nor the level of the investments
held within the Master Fund.
4. Losses and reserves
The reserve for unpaid losses and loss adjustment expenses
recorded by the Reinsurer includes estimates for losses incurred
but not reported as well as losses pending settlement.
The Reinsurer makes a provision for losses on contracts only
when an event that is covered by the contract has occurred. When a
potential loss event has occurred, the Reinsurer obtains and uses
assessments from counterparties as a baseline, incorporating its
own models and historical data regarding loss development, to
determine the level of reserves required.
Future adjustments to the amounts recorded as of period-end,
resulting from the continual review process, as well as differences
between estimates and ultimate settlements, will be reflected in
the Reinsurer's statement of operations in future periods when such
adjustments become known. Future developments may result in losses
and loss expenses materially greater or less than the reserve
provided.
During the six-month period ended 30 June 2017, the Reinsurer
incurred $3,738 of losses and loss adjustment expenses. For the
six-month period to 30 June 2017, the Reinsurer had paid claims of
$3,896.
5. Administration fees
SS&C Fund Services (Bermuda) Ltd, formerly Prime Management
Limited, (the "Administrator"), a division of SS&C GlobeOp,
serves as the administrator for the Company and the Master Fund.
The Administrator receives a monthly fee based on the NAV of the
Company and the Master Fund, subject to a monthly minimum fee.
Administration fees relating to the Master Fund are charged to the
Master Fund and flow through to the Company as part of the expenses
allocated from the Master Fund in the Statements of Operations.
6. Related party transactions
As of 30 June 2017, Endurance Specialty Insurance Ltd.
("Endurance Bermuda") owned 28% (31 December, 2016 - 28%) of the
voting rights of the Ordinary Shares issued by the Company.
Endurance Bermuda and the
Investment Manager are 100% owned by Endurance. Through its
ownership of Endurance, Sompo indirectly holds 28% of the Ordinary
Shares of the Company.
Management and performance fees are charged to the Master Fund
and flow through to the Company as part of the expenses allocated
from the Master Fund in the Statements of Operations.
Management fees
Pursuant to the Investment Management Agreement dated 27
November 2012, the Investment Manager is empowered to formulate the
overall investment strategy to be carried out by the Master Fund
and to exercise full discretion in the management of the trading,
investment transactions and related borrowing activities of the
Master Fund in order to implement such strategy. The Investment
Manager is entitled to a management fee, calculated and payable
monthly in arrears equal to (a) 1/12 of 1.5% of the month-end NAV
(prior to accrual of the performance fee, as defined below) of all
redeemable preference shares of the Master Fund ("Offered Shares")
held by the Company, up to a NAV of $300,000 and (b) 1/12 of 1.25%
of the month-end NAV (prior to accrual of the performance fee, as
defined below) of all Offered Shares held by the Company, above a
NAV of $300,000.
Performance fees
The Investment Manager is entitled to a performance fee, payable
by the Master Fund on an annual basis, which will generally be
equal to 15% of the aggregate increase in NAV of the Master Fund
over the previous High Water Mark (as defined below) of all series
of shares (except for Special Memorandum Account shares) held by
the Company, minus the Performance Hurdle (as defined below). The
"High Water Mark" for a holder of Offered Shares at the end of any
period is equal to (i) where there is New Net Profit (as defined
below) in such period, the then current NAV of such Offered Shares,
or (ii) where there is no New Net Profit in such period, the
previous High Water Mark. The initial High Water Mark for any
holder of Offered Shares is equal to the initial subscription
amount of such Offered Shares. Appropriate adjustments will be made
to account for subscriptions, redemptions and distributions, if
any. "New Net Profit" for any series of Offered Shares for any
period is the appreciation of the NAV of such series for such
period ("Profit") after deducting any depreciation in NAV of such
series in any prior period that has not been previously eliminated
by Profit in prior periods.
The performance trigger in respect of a Performance Period
("Performance Trigger") is reached when New Net Profit, if any, in
respect of the Company's Offered Shares at the end of such
Performance Period exceeds the sum of: (i) the NAV of the Company's
Offered Shares as of the beginning of the Performance Period
multiplied by the average of the one-month U.S. Dollar LIBOR on the
last Business Day of each month during such Performance Period and
(ii) 8% of the NAV of the Company's Offered Shares as at the
beginning of the Performance Period. The Performance Trigger is
calculated on an annual basis. If a Performance Period is a partial
calendar year, the Performance Trigger will be adjusted
proportionately. The Performance Trigger is not cumulative and
resets at the beginning of each Fiscal Year. Shortfalls or
outperformance of the Performance Trigger in a given year has no
effect on the Performance Fee calculated with respect to any other
year. The Performance Trigger may be further equitably adjusted to
reflect subscriptions which are made during a Performance Period or
partial redemptions or distributions of the Company's Offered
Shares.
The performance hurdle in respect of a Performance Period
("Performance Hurdle") is the amount of New Net Profit, if any, in
respect of an investor's Offered Shares at the end of such
Performance Period which equals the sum of: (i) the NAV of such
investor's Offered Shares as of the beginning of the Performance
Period multiplied by the average of the LIBOR on the last Business
Day of each month during such Performance Period and (ii) 5% of the
NAV of such investor's Offered Shares as at the beginning of the
Performance Period. The Performance Hurdle is calculated on an
annual basis. If a Performance Period is a partial calendar year,
the Performance Hurdle will be adjusted proportionately. The
Performance Hurdle is not cumulative and resets at the beginning of
each Fiscal Year. Shortfalls or outperformance of the Performance
Hurdle in a given year has no effect on the Performance Fee
calculated with respect to any other year. The Performance Hurdle
may be further equitably adjusted to reflect subscriptions which
are made during a Performance Period or partial redemptions or
distributions of an investor's Offered Shares.
Performance fees for shares in the capital of the Master Fund
issued in respect of the Tender Offer shall be calculated in the
same manner as other Offered Shares. Accordingly, such fees shall
be determined separately for such shares and other Offered Shares
so that the performance of one class does not impact the
performance fee paid in respect of the other, and performance fees
will only be payable in respect of such shares at the end of each
fiscal year and/or the date on which the last such share is
redeemed.
7. Financial instruments
The Company's investment activities expose it to various types
of risk, which are associated with the securities and markets in
which it invests. As the majority of the Company's assets are
invested in the Master Fund, they are primarily exposed to the
risks faced by the Master Fund. Due to the nature of the
"master/feeder" structure, the Company could be materially affected
by subscriptions or redemptions in the Master Fund by other feeder
funds. However, as the Master Fund was established solely for the
Company to invest in, the Company is the only feeder fund of the
Master Fund.
8. Credit agreement
On 16 May 2016, the Company entered into a credit facility (the
"2016 Credit Facility") with Endurance Investment Holdings Ltd.
(the "Lender"), a wholly-owned subsidiary of Endurance. The 2016
Credit Facility provides the Company with an unsecured $20,000
revolving credit facility for working capital and general corporate
purposes and expires on 30 September 2018. The 2016 Credit Facility
replaces the 364-day $20,000 revolving credit facility which
expired on 12 May 2016. Borrowings under the 2016 Credit Facility
bear interest, set at the time of the borrowing, at a rate equal to
the applicable LIBOR rate plus 150 basis points. The 2016 Credit
Facility contains covenants that limit the Company's ability, among
other things, to grant liens on its assets, sell assets, merge or
consolidate, or incur debt. If the Company fails to comply with any
these covenants, the Lender could revoke the facility and exercise
remedies against the Company. As of June 30, 2017, the Company was
in compliance with all of its respective covenants associated with
the 2016 Credit Facility. There were no borrowings from the 2016
Credit Facility as of 30 June 2017.
9. Capital share transactions
As at 30 June 2017, the Company is authorized to issue up to
990,000,000 Ordinary Shares of par value $0.00001 per share.
As of 30 June 2017, the Company has issued 177,798,523 Ordinary
Shares and 8,183,916 Redemption Shares.
Transactions in Ordinary Shares and Redemption Shares during the
six-month period ended 30 June 2017 and the Ordinary Shares and
Redemption Shares outstanding and the NAV per share as of 30 June
are as follows:
Beginning Shares Shares Repurchased/ Ending Shares
Shares Issued Redeemed 30-Jun-17
1-Jan-17
------------ -------- -------------------- --------------
Ordinary shares 178,698,523 - (900,000) 177,798,523
------------ -------- -------------------- --------------
Redemption shares 19,855,391 - (11,671,475) 8,183,916
------------ -------- -------------------- --------------
On 19 January 2017, the Company declared a dividend covering the
period from 1 July 2016 to 31 December 2016 of $0.033 per Ordinary
Share. On 21 February 2017, a cash dividend of $5,897 was paid.
On 30 March 2017, the Company declared a dividend covering the
period from 1 January 2017 to 31 March 2017 of $0.0165 per Ordinary
Share. On 2 May 2017, a cash dividend of $2,949 was paid.
On 25 May 2017, the Company announced that it has engaged Stifel
Nicolaus Europe Limited to effect share buy backs on its behalf. As
of 30 June 2017, 900,000 Ordinary Shares have been repurchased and
subsequently held in Treasury by the Company.
The Company has been established as a closed-ended mutual fund
and, as such, shareholders do not have the right to redeem their
shares.
10. Taxes
At the present time, no income, profit, capital transfer or
capital gains taxes are levied in Bermuda and accordingly, no
provision for such taxes has been recorded by the Company. The
Company has received an undertaking from the Minister of Finance of
Bermuda, under the Exempted Undertakings Tax Protection Act 1966
exempting the Company from income, profit, capital transfer or
capital taxes, should such taxes be enacted, until 31 March
2035.
The Investment Manager assesses uncertain tax positions by
determining whether a tax position of the Company is more likely
than not to be sustained upon examination, including resolution of
any related appeals or litigation processes, based on the technical
merits of the position. For tax positions meeting the more likely
than not threshold, the tax amount recognized in the financial
information is reduced by the largest benefit that has a greater
than fifty percent likelihood of being realized upon ultimate
settlement with the relevant taxing authority.
The Investment Manager has not identified any uncertain tax
positions in the Company arising in this or any preceding period.
However, the Investment Manager's conclusions may be subject to
review and adjustment at a later date based on factors including,
but not limited to, on-going analysis of changes to tax laws,
regulations and interpretations thereof. The Investment Manager has
determined that there are no reserves for uncertain tax positions
necessary for any of the Company's open tax years.
11. Financial highlights
Financial highlights for the six month period ended 30 June 2017
are as follows:
Ordinary Redemption
Shares Shares
--------- -----------
Per share operating performance
Net asset value, beginning of period $1.1434 $1.1351
Gain (Loss) from investment operations 0.0195 (0.0177)
Dividend payment per share (0.0495) -
--------- -----------
Net asset value, end of period $1.1134 $1.1174
--------- -----------
Total return
Total return before performance fee 1.71% (1.56%)
Dividend paid (4.33%) -
Performance fee* - -
--------- -----------
Total return after performance fee** (2.62%) (1.56%)
--------- -----------
Ratios to average net assets
Expenses other than performance fee (1.06%) (0.90%)
Performance fee* - -
--------- -----------
Total expenses after performance fee (1.06%) (0.90%)
--------- -----------
Net investment loss before performance fee (1.01%) (0.85%)
--------- -----------
* The performance fee and management fee are charged in the
Master Fund.
** The total return for the period ended 30 June 2017 before the
dividends declared on 19 January 2017 and 30 March 2017 for
Ordinary Shares is computed as 1.75% and for Redemption Shares is
computed as -1.56%.
Financial highlights are calculated for each permanent,
non-managing class or series of Ordinary Share and Redemption
Shares. An individual shareholder's return and ratios may vary
based on different performance fee and/or management fee
arrangements, and the timing of capital share transactions. The
ratios include effects of allocations of net investment income from
the Master Fund.
Per share operating performance is computed on the basis of
average shares outstanding during the period.
Total return is calculated based on the percentage movement in
NAV per share. The expense ratio is calculated based on the
expenses of the Company and the proportionate share of net expenses
allocated from the Master Fund over the average NAV per share in
the year. The net investment loss ratio is based on the net loss
per share from investment operations of the Company and the
proportionate share of net loss allocated from the Master Fund over
the average NAV per share in the year.
12. Commitments and contingencies
In the normal course of business, the Company may enter into
contracts or agreements that contain indemnifications or
warranties. The Company's exposure under these arrangements is
unknown, as this would involve future claims that may be made
against the Company that have not yet occurred. However, based on
experience, management expects the risk of loss to be remote.
13. Subsequent events
Subsequent to 30 June 2017, an additional 2,050,000 Ordinary
Shares were repurchased by the Company.
The Company declared an interim dividend in respect of the three
months ended 30 June 2017 of $0.0165 per Ordinary Share to
shareholders on the register on 28 July 2017 which was paid on 24
August 2017.
On 25 August 2017, Hurricane Harvey made landfall near Corpus
Christi, Texas as a Category 4 hurricane with winds of 130 miles
per hour followed by substantial rainfall and flooding. The
Investment Manager has now commenced its normal post-event
procedures to estimate any loss to the Company from Hurricane
Harvey, and continues to monitor this event for potential material
impact to the Company.
These financial statements were approved by the Investment
Manager and the Directors and were made available for issuance on
29 August 2017. Subsequent events have been evaluated through this
date.
For further information please contact:
Blue Capital Management Ltd.
Michael J. McGuire +1 441 278 0988
Email: investorrelations@Sompo-Intl.com
Stifel Nicolaus Europe Limited +44 (0)20 7710 7600
Neil Winward
Mark Bloomfield
Tunga Chigovanyika
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR WGUQARUPMGAU
(END) Dow Jones Newswires
August 30, 2017 12:02 ET (16:02 GMT)
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