DW Catalyst Fund Limited
Interim Report and Unaudited Financial Statements 2016
INTERIM REPORT AND UNAUDITED FINANCIAL STATEMENTS
30 JUNE 2016
CHAIR’S STATEMENT
Performance
The first half of 2016 continued in the volatile path of 2015,
with a steep decline in most markets early in the year followed by
a sharp rally which has largely continued into the second quarter.
Although the end of the first half of 2016 was dominated by the
macro event of Brexit and major market volatility globally, it
ultimately was concluded with a surprisingly strong rebound in US
equity and credit markets. Unlike the previous macro sell-offs of
2015 and 2016, global growth dominated concerns and led to sharp
declines in yields in the US and Europe. This in turn caused continued flows
into US credit markets as investors’ search for safe yield showed
no sign of abating. Structured finance instruments have generally
experienced less volatility than corporate bonds although there is
some bifurcation based on the quality and visibility of cash flows.
In particular, commercial mortgage backed securities issued since
the end of the financial crisis struggled in the first half of
2016, with some contagion experienced by pre-crisis issued
CMBS.
DW Catalyst Offshore Fund, Ltd. (the “Feeder Fund”) performance
improved towards the end of the first half of 2016. This is
particularly encouraging as it remains hedged to large fluctuations
in the credit markets. The Feeder Fund’s longstanding approach is
to isolate compelling credit opportunities while minimising general
market risk. This is achieved by rigorous analysis of specific
credits and credit-related assets. Given that the Fund hedges its
portfolio with higher rated “safer” securities that have rallied
significantly due to the “reach for yield” phenomenon described
above, I am pleased that the Fund has nevertheless managed to
generate better returns while sticking to its investment style and
believe it is well positioned for the future.
Thus, as we look forward to the second half of 2016, I see a
well-suited environment of ample opportunities for actively managed
credit funds. In the face of this thirst for cheap yield, the
credit markets that DW focuses on are quite compelling. In
particular, credits that involve some complexity, such as including
bankruptcies and restructurings, offer significantly more
attractive prospective returns than at any time in the last couple
of years. The Board believes that the investment team at DW
Partners, LP (“DW” or the “Manager”) is ideally placed to take
advantage of these opportunities.
In an environment in which beta has run up so much, I know that
there is a place in both my portfolio, and those of many investors,
for a hedged fund whose returns will not be strongly correlated
with market direction. Moreover, the return to a winning quarter
demonstrated the Fund’s solid foundations and strategy, and the
team in NY is extremely focused and well-equipped to achieve
further strong investments for the quarter ahead.
Discount management
During the period, the discount to NAV at which the Company’s
Ordinary Shares traded ranged from 4.62% to 14.70% and ended the
period at 10.91%. Nevertheless, the Board is committed to taking
action to improve the discount, as exhibited through the share
buyback programme. The Company bought back 458,715 Ordinary Shares
in the period at an average discount to NAV of 9.25%. The buybacks
enhanced the NAV per Ordinary Share by approximately 5.22 pence, equivalent to 0.43% of the NAV per
Ordinary Share at the period end. Further, we recently closed the
USD share class, folding all into the GBP share class, in order to
improve secondary liquidity.
Of course, the key factor in reducing the discount is continuing
to improve Net Asset Value (“NAV”) performance. The Board is
hopeful that the Fund’s improved performance, twinned with an
outlook of positive market opportunities, will lead to further
improvements in performance in the latter half of 2016.
Finally, investor communication is always important, but
especially so in periods of difficult markets, when discounts to
NAV expand or when NAV performance is challenging. The Board
remains committed to investor communication, and remains available
to shareholders whenever they wish.
Discount Trigger Meeting
In accordance with the Articles of Incorporation of the Company,
a Discount Trigger extraordinary general meeting (“Discount Trigger
Meeting”) will be held should the average discount to NAV over a
calendar year be beyond 5%. However, the Board strongly believes
that DW Catalyst Offshore Fund offers an attractive opportunity for
investors to obtain exposure to credit markets through a unique and
sophisticated investment profile with strong risk controls and
oversight. As always, the Board and the Manager remain committed to
investor communication and continue to have ongoing conversations
with shareholders.
DW Partners, LP appointed as
Investment Manager
On the operational side, DW is now fully independent from
Brevan Howard in all respects:
Operations, Finance, Valuation, Risk Management, Client Relations,
Cash Management and FX hedging, etc. DW had been fully independent
in many of these areas for some time, but used the last 18 months
to hire seasoned credit professionals, each of whom has verified
domain expertise. DW also used that time to build technology and
processes to allow their domain experts to work together to handle
the underlying investments. The DW operations team has managed this
transition in the background admirably, while David Warren and the investment teams have
focused on difficult markets.
Due to the change, the Board visited DW twice in 2015 meeting
with its key personnel. This included DW’s chief risk officer,
chief operating officer, the investment team, and the board of the
DW Catalyst Master Fund, Ltd (formerly known as Brevan Howard
Credit Catalysts Master Fund Limited, the “Master Fund”). The Board
is pleased to report that risk oversight and management has
remained strong, and that existing investment policy and processes
have been maintained since the change.
Board of Directors
The Board expresses its thanks for the continued support of the
Company’s shareholders.
Charlotte Valeur
Chair
27 September 2016
BOARD MEMBERS
The Directors of the Company, all of whom are non-executive, are
listed below:
Charlotte Valeur (Chair), age
52
Charlotte Valeur is the Managing
Director of GFG Ltd, a Governance consultancy, which she founded in
2011. Ms Valeur has in excess of 30 years’ experience in the
financial markets. Prior to GFG, Ms Valeur was the Managing Partner
at Brook Street Partners Ltd from January
2003. Prior to Brook Street Partners, she worked in the
City of London as a director in
Capital Markets with various international banks. She began her
career in Copenhagen in 1982 with
Nordea A/S. In 1991, she moved to the London office of Nordea A/S. Ms Valeur
currently serves as a non-executive director on boards and
committees of listed and unlisted companies including NED of
JPMorgan Global Convertibles Income Fund Limited, Renewable Energy
Generation Limited and NTR Plc. She is the Chair of Kennedy Wilson
Europe Real Estate Plc and of Blackstone/GSO Loan Financing
Limited. Ms Valeur is a member of the Institute of Directors and is
regulated by the Jersey Financial Services Commission in the
conduct of Trust Company business. She is a resident of Jersey. Ms
Valeur is the Chair of the Company’s Board of Directors. Ms Valeur
was appointed to the Board in 2010.
Keith Dorrian (Senior Independent
Director), age 70
Keith Dorrian has over 40 years’
experience in the offshore finance industry. Joining Manufacturers
Hanover in 1973, he moved to First National Bank of Chicago in 1984. In 1989, he joined
ANZ Bank (Guernsey) where as a director of the Bank and
Fund Management company he was closely involved in the banking and
fund management services of the ANZ group. He took up the position
of “Investment Manager - Corporate Clients” at the Bank of Bermuda
Guernsey in 1999 and was appointed local Head of Global Fund
Services, CEO and managing director of their fund administration
company in 2001, retiring on 31 December
2003. He is currently a Director of a number of fund and
fund management companies. He is a Director of the following listed
companies: AB Alternative Strategies PCC Limited, AB International
Fund PCC Limited, IIAB PCC Limited, Master Capital Fund Limited,
and Third Point Offshore Investors Limited. Mr Dorrian holds the
Institute of Directors Diploma in Company Direction. Mr Dorrian has
been elected a Fellow of the Institute of Directors. He is a
resident of Guernsey. Mr Dorrian
was appointed to the Board in 2010.
Patrick Firth (Chair of the Audit and Risk
Committee), age 54
Patrick Firth qualified as a
Chartered Accountant with KPMG in 1991 where he gained experience
of the audit of a variety of financial services companies and
investment funds. He joined Rothschild Asset Management (C.I.)
Limited in 1992, where he assumed responsibility for the fund
administration team. On the acquisition of the company by BISYS
Fund Services in February 1999, Mr
Firth became Head of Operations and subsequently Managing Director
before moving to become Managing Director of Butterfield Fund
Services (Guernsey) Limited
(subsequently Butterfield Fulcrum Group (Guernsey) Limited), a company providing third
party fund administration services, where he worked from
April 2002 until June 2009. He is a member of the Institute of
Chartered Accountants in England
and Wales and the Chartered
Institute for Securities and Investment. He is also a Director of a
number of offshore funds and management companies, including JZ
Capital Partners Limited, ICG-Longbow Senior Secured UK Property
Debt Investments Limited, Riverstone Energy Limited and NextEnergy
Solar Fund Limited. He is Chairman of GLI Finance Limited. He is a
resident of Guernsey. Mr Firth was
appointed to the Board in 2010.
Christopher Waldron, age
52
Christopher Waldron has extensive
experience in international asset management and is a Director of a
number of listed and unlisted companies, including GBD Limited,
Multi Investment Manager Investment Programmes PCC Limited, JZ
Capital Partners Limited and Crystal Amber Fund Limited. He is also
Chairman of UK Mortgages Limited and Ranger Direct Lending Fund Plc
and a member of the States of Guernsey’s Policy and Resources
Investment and Bond Management Sub-Committee. He began his career
with James Capel as a graduate in
1986, working initially as an institutional equity broker and later
specialising in equity derivatives. He subsequently held investment
management positions with Bank of Bermuda, the Jardine Matheson Group and Fortis
before joining the Edmond de Rothschild Group in Guernsey as Investment Director in 1999,
overseeing a team of Investment Managers specialising in fixed
income and alternative investment strategies. He was appointed
Managing Director of the Edmond de Rothschild companies in
Guernsey in 2008, a position he
held until 2013, when he stepped down to devote more time to
non-executive work and investment consultancy. He is a graduate of
London and Cranfield Universities
and a Fellow of the Chartered Institute for Securities and
Investment. He is a Guernsey
resident. Mr Waldron was appointed to the Board in 2010.
Andrew Rosenthal, age
57
Andrew Rosenthal was the Chief
Operating Officer of DW Partners, LP from January 2010 until his departure
in May
2016. Before joining DW, Andrew spent 13 years at Morgan
Stanley where most recently he was an Executive Director in the
Securitised Products Group in charge of principal investments in
distressed consumer credit (2005-2007). Prior, he served as the
Securitised Products Group’s Operations Officer and was a member of
the Global Large Loan Committee. From 1994 to 1999, Mr Rosenthal
was co-head of Morgan Stanley’s mortgage-backed derivatives trading
effort. Prior to joining Morgan Stanley, Mr Rosenthal spent six
years at Credit Suisse First Boston as head of mortgage-backed
derivatives trading (1988-1994) and four years at Bear Stearns
trading collateralized mortgage obligation residuals. He began his
career as an Analyst in Morgan Stanley’s Mergers and Acquisitions
Department (1980-1982). Mr Rosenthal has a BS in Economics, cum
laude, from the Wharton School of the University of Pennsylvania and an MBA from
Harvard University. He is a resident of
the United States of America. Mr
Rosenthal was appointed to the Board in 2015.
DIRECTORS’ REPORT
The Directors submit their Interim Report together with the
Company’s Unaudited Statement of Assets and Liabilities, Unaudited
Statement of Operations and Performance Allocation, Unaudited
Statement of Changes in Net Assets, Unaudited Statement of Cash
Flows, and the related notes for the period ended 30 June 2016 (the “Unaudited Condensed Interim
Financial Statements”). These Unaudited Condensed Interim Financial
Statements have been prepared in conformity with United States
Generally Accepted Accounting Principles (“U.S. GAAP”) and are in
accordance with any relevant enactment for the time being in force
and are in agreement with the accounting records.
The Company
The Company is a registered closed-ended collective investment
scheme incorporated with limited liability in Guernsey on
19 October 2010, with registration
number 52520.
The Company was admitted to a Premium Listing on the Official
List of the London Stock Exchange (“LSE”) on
14 December 2010.
The Company offered multiple classes of ordinary shares, which
differed in terms of currency of issue. On 29 March 2016, the Company announced that as at
29 February 2016, the net asset value
of its US Dollar share class had declined below US$25 million. The Company determined with its
Articles of Incorporation, to convert the outstanding US Dollar
shares into Sterling shares by reference to the respective net
asset values of each class of shares as at 31 March 2016. The compulsory conversion of the
US Dollar shares into Sterling shares took place on 26 April 2016, following which the US Dollar
share class was closed. The Company now has only Sterling shares in
issue and the Company’s share class conversion facility was
withdrawn.
At the Extraordinary General Meeting held on 19 December 2014, shareholders approved the
Company’s new investment policy, new management agreement, name
change of the Company and amendments to the Company’s Articles of
Incorporation with effect from 1 January
2015.
The Company changed its name to DW Catalyst Fund Limited from BH
Credit Catalysts Limited and changed its Manager to DW Partners, LP
(“DW”) from Brevan Howard Capital Management LP (“BHCM”).
Full details were set out in the Circular dated 28 November 2014 which is available on the
Company’s website, www.dwcatalystltd.com.
Investment Policy
The Company’s investment objective is to seek to generate high
absolute returns through exposure to financial assets predominantly
in the corporate credit, mortgage-backed securities and
asset-backed securities markets.
Previously, the Company’s investment policy was to invest all of
its assets in Brevan Howard Credit Catalysts Master Fund Limited
(“BHCC”, now known as DW Catalyst Master Fund, Ltd. (the “Master
Fund”)), an open-ended investment company with limited liability
formed under the laws of the Cayman
Islands.
The Company’s current investment policy is to invest its assets
in the DW Catalyst Offshore Fund, Ltd. (the “Feeder Fund” and
together with the Master Fund the “Catalyst Fund”). The Feeder Fund
holds its investment in the Master Fund via an intermediate entity,
DW Catalyst Investments Ltd (the “Cayman Corporation”), a Cayman
corporation, which is wholly owned by the Feeder Fund. The Cayman
Corporation acts as a corporate blocker for US federal income tax
purposes and its only asset is its shareholding in the Master
Fund.
The Cayman Corporation is consolidated in the Financial
Statements of the Feeder Fund.
The Financial Statements of the Company should be read in
conjunction with the Consolidated Financial Statements of the
Master Fund and the Consolidated Financial Statements of the Feeder
Fund, which can be found on the Company’s website,
www.dwcatalystltd.com.
The Feeder Fund may also make one or more Specific Investments
(as defined below). DW is the Manager of the Feeder Fund, Master
Fund and the Cayman Corporation.
The Master Fund seeks to employ a multi-strategy approach to
investing in order to generate attractive risk-adjusted returns via
careful investment selection, portfolio construction, and risk
management. The Master Fund makes fundamental research-based
investments, opportunistically deploying capital across a broad
range of asset types and strategies including, but not limited to
the following: distressed; long/short credit and equity; event
driven and special situations; securitized and structured product
strategies involving a wide range of collateral including, but not
limited to residential mortgages, commercial mortgages, student
loans, corporate loans and derivatives, consumer loans, equipment
leases and other collateral types. The Master Fund invests
globally, taking positions in both developed and emerging markets.
Positions may be in the form of securities, derivatives, claims,
real assets or other asset types.
The Master Fund is permitted to acquire holdings in illiquid
investments for which there may be no immediate readily assessable
market value.
In instances in which the Investment Manager of the Feeder Fund
determines, in its sole and absolute discretion, that it would be
appropriate to do so for tax, regulatory, operational or other
reasons, the Feeder Fund may invest a portion of its assets in
investments that are held through specifically formed holding
entities (“Specific Investments”), rather than through the Master
Fund. Specific Investments are required to be consistent with the
Master Fund’s investment objective, strategy and approach.
The Feeder Fund, the Master Fund and the Cayman Corporation,
through their Investment Manager, DW, have agreed with the Company
that for so long as the Company is invested in the Feeder Fund, (a)
the Master Fund will hold at least 20 different investments and, at
the time of investment, no investment will represent more than 20
per cent. of its gross assets and (b) at the time of investment, no
more than 30 per cent. of the gross assets of the Feeder Fund will
be invested in Specific Investments with no one Specific Investment
(or, where a Specific Investment consists of a number of underlying
investments, no one such underlying investment) representing more
than 20 per cent. of the gross assets of the Feeder Fund. Neither
the Master Fund nor the Feeder Fund will be required to liquidate
any portion of its portfolio to remain within these diversification
requirements. In addition, in determining whether an investment in
an index complies with these diversification requirements,
compliance will be determined by reference to the index
constituents (by number and by weighting of the constituents) and
not by treating the index as a single investment or security.
The Company may not incur borrowings other than for the purpose
of financing share repurchases or redemptions or satisfying working
capital requirements, and subject to outstanding borrowings being
in compliance with the borrowing limit in its articles of
incorporation of 20 per cent. of the net asset value of the
Company, calculated as at the time of borrowing. The Master Fund
and the Feeder Fund are not subject to any limitations on their
ability to incur leverage.
The Manager
With effect from 1 January 2015,
the Company entered into a new management agreement with DW (the
“DW Management Agreement”) regarding the management of the Company
and terminated the existing management agreement between the
Company and BHCM (the “BH Management Agreement”).
Prior to 1 January 2015, BHCM was
the manager of the Company. BHCM is a Jersey limited partnership,
the sole general partner of which is Brevan Howard Capital
Management Limited, a Jersey limited company. Brevan Howard Capital
Management Limited is regulated in the conduct of fund services
business by the Jersey Financial Services Commission pursuant to
the Financial Services (Jersey) Law 1998 and the Orders made
thereunder.
Following the implementation of the DW Management Agreement, the
Company appointed DW as manager. Prior to 1
January 2015, DW served as investment manager for BHCC,
responsible for the underlying investment of the Company’s funds
since its inception. Since 1 January
2015, DW assumed management responsibilities for the
Company, the Feeder Fund, the Master Fund and the Cayman
Corporation.
DW is registered with the US Securities Exchange Commission as
an investment adviser under the United States Investment Advisers
Act of 1940, as amended. DW is also registered with the US
Commodities and Futures Trading Commission (“CFTC”) as a commodity
pool operator and is a member of the US National Futures Authority.
DW is exempt from registration with the CFTC as a commodity trading
advisor.
The general partner of DW is DW Investment Partners, LLC. For
the purposes of the third country marketing provisions of the
Alternative Investment Fund Managers Directive, DW is the
Alternative Investment Fund Manager (“AIFM”) of the Company for the
purposes of the European Union Alternative Investment Fund Manager
Directive (“AIFMD”).
Results and dividends
The results for the period are set out in the Unaudited
Statement of Operations and Performance Allocation. The Directors
do not recommend the payment of a dividend.
Share capital
The number of shares in issue at the period end is disclosed in
note 4 to the Financial Statements.
Going concern
After making enquiries and given the nature of the Company and
its investment, the Board is satisfied that it is appropriate to
continue to adopt the going concern basis in preparing these
Financial Statements and, after due consideration, the Board
considers that the Company is able to continue for the foreseeable
future. In reaching this conclusion the Board is mindful of the
nature of the assets that underlie its investment in the Feeder
Fund via the Master Fund, the Cayman Corporation and Specific
Investments, including the Feeder Fund’s liquidity and has
concluded that adverse investment performance will not have a
material impact on the Company’s ability to meet its liabilities as
they fall due on account of the liquidity of the investments in the
Master Fund.
In accordance with the Articles of Incorporation of the Company,
a Discount Trigger Meeting will be held should the average discount
to NAV over a calendar year be beyond 5%. With the level of
discount seen in the year to date, it is likely that the Company
will hold a Discount Trigger Meeting following year end where a
Discount Trigger Vote will take place. The Board has considered
whether the results of such a vote could reduce the Company’s size
to a level at which there would be no alternative to winding up the
Company and has concluded that the probability of such an outcome
is remote. Accordingly, the Board considers that the Company
continue as a going concern.
International Tax Reporting
For purposes of the US Foreign Account Tax Compliance Act
(“FATCA”), the Company registered with the US Internal Revenue
Services (“IRS”) as a Guernsey
reporting Foreign Financial Institution (“FFI”), received a Global
Intermediary Identification Number (KT2S8Y.9999.SL.831), and can be
found on the IRS FFI list.
The Common Reporting Standard (“CRS”) is a standard developed by
the Organisation for Economic Co-operation and Development (“OECD”)
and is a global approach to the automatic exchange of tax
information. Guernsey has now
adopted the CRS which came into effect on 1
January 2016. The CRS has replaced the UK Inter-Governmental
Agreement (“IGA”) from 1 January
2016. The first report for CRS will be made to the Director
of Income Tax by 30 June 2017.
The Company is subject to Guernsey regulations and guidance based on
reciprocal information sharing inter-governmental agreements which
Guernsey has entered into with the
United Kingdom and the United States of America. The Board will
take the necessary actions to ensure that the Company is compliant
with Guernsey regulations and
guidance in this regard.
Discount management programme
The Directors review the share price in relation to NAV on a
regular basis. For additional information, refer to note 7 of the
Financial Statements.
Shareholders with any queries in relation to the above should
contact the Administrator, whose contact details can be found on
the Company’s website, www.dwcatalystltd.com/contacts.
Significant shareholders
Shareholders with holdings of more than 3.0% of the Shares of
the Company at 30 June 2016 were as
follows:
| Significant Shareholders |
Total shares
held |
% holdings in
class |
| Sterling shares |
|
|
|
|
|
| Nortrust Nominees Limited |
1,539,864 |
15.49% |
| Vidacos Nominees Limited |
1,509,828 |
15.19% |
| The Bank Of New York
(Nominees) Limited |
994,446 |
10.00% |
| Roy Nominees Limited |
903,950 |
9.09% |
| State Street Nominees
Limited |
550,910 |
5.54% |
| HSBC Global Custody Nominee
(UK) Limited |
479,166 |
4.82% |
| CGWL Nominees Limited |
396,410 |
3.99% |
| Harewood Nominees Limited |
383,301 |
3.86% |
| Luna Nominees Limited |
309,302 |
3.11% |
Statement of Directors’ Responsibility
in Respect of the Unaudited Condensed Interim Report and Financial
Statements
We confirm to the best of our knowledge that:
- these Unaudited Condensed Interim Financial Statements have
been prepared in conformity with United States Generally Accepted
Accounting Principles and have been properly prepared in all
material respects.
- these Unaudited Condensed Interim Financial Statements include
information detailed in the Chair’s Statement, and the Directors’
Report, which provides a fair view of the information required
by:
a) DTR 4.2.7R of the Disclosure 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 these Unaudited Condensed Interim Financial
Statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure and
Transparency Rules, being related party transactions that have
taken place in the first six months of the current financial year
and that have materially affected the financial position or
performance of the Company during that period; and any changes in
the related party transactions described in the last Annual Audited
Financial Statements that could materially affect the financial
position or performance of the Company.
Signed on behalf of the Board by:
Patrick Firth
Director
27 September 2016
INVESTMENT MANAGER’S REPORT
DW (hereinafter “we” or “us”) is the Manager of the Company, DW
Catalyst Master Fund, Ltd. (the “Master Fund”) (formerly Brevan
Howard Credit Catalysts Master Fund Limited), DW Catalyst
Investment, Ltd. (the “Cayman Corporation”) and DW Catalyst
Offshore Fund, Ltd. (the “Feeder Fund”, a feeder fund to the Cayman
Corporation, which is a feeder to the Master Fund).
DW has been responsible for the underlying investment decisions
of the Company’s funds since its inception, and following a vote of
shareholders on 19 December 2014, DW
assumed the corresponding management responsibilities for the
Company, the Master Fund, the Cayman Corporation and the Feeder
Fund effective from 1 January
2015.
Net asset value summary
The NAV per share of the Company’s USD and GBP currency classes
depreciated by 4.34% and 2.21%, respectively, in the first half of
2016. The month-by-month performance of each currency class is
stated below:
| USD |
Jan |
Feb |
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
YTD |
| 2012* |
0.64 |
1.15 |
2.36 |
1.51 |
1.17 |
(0.10) |
1.38 |
1.39 |
1.65 |
0.8 |
0.73 |
1.26 |
14.83 |
| 2013 |
1.73 |
0.24 |
1.19 |
1.07 |
1.74 |
(0.52) |
0.16 |
1.07 |
1.18 |
1.68 |
1.7 |
1.52 |
13.5 |
| 2014 |
1.07 |
1.43 |
0.49 |
1.51 |
0.85 |
1.47 |
0.58 |
(1.00) |
(0.76) |
(0.72) |
0.04 |
0.35 |
5.39 |
| 2015 |
(0.04) |
0.48 |
0.31 |
1.23 |
(0.10) |
(0.76) |
(2.60) |
(0.97) |
(1.42) |
(2.08) |
(2.92) |
(1.00) |
(9.52) |
| 2016** |
(2.07) |
(0.89) |
(1.45) |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(4.34) |
| GBP |
Jan |
Feb |
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
YTD |
| 2012 |
0.64 |
1.15 |
2.40 |
1.5 |
1.22 |
(0.06) |
1.40 |
1.36 |
1.62 |
0.81 |
0.75 |
1.26 |
14.95 |
| 2013 |
1.76 |
0.27 |
1.20 |
1.05 |
1.81 |
(0.52) |
0.18 |
1.06 |
1.13 |
1.71 |
1.68 |
1.54 |
13.62 |
| 2014 |
1.08 |
1.43 |
0.53 |
1.51 |
0.88 |
1.48 |
0.63 |
(1.01) |
(0.77) |
(0.71) |
0.03 |
0.38 |
5.55 |
| 2015 |
(0.02) |
0.48 |
0.34 |
1.23 |
(0.11) |
(0.74) |
(2.58) |
(0.96) |
(1.41) |
(2.05) |
(2.94) |
(1.08) |
(9.48) |
| 2016 |
(2.23) |
(0.89) |
(1.40) |
1.73 |
0.33 |
0.28 |
- |
- |
- |
- |
- |
- |
(2.21) |
Source: The Company’s NAV data is provided by the Administrator.
Monthly NAV data is unaudited and net of all fees and expenses
payable by the Company. Shares in the Company do not necessarily
trade at a price equal to the prevailing NAV per Share.
Past performance is not indicative of future results.
* December 2011 is 1% lower than
these figures due to the deduction of the expenses of the initial
public offering borne by the Company in December 2010. See financial highlights in note
8.
** On 26 April 2016, all of the
Company’s US Dollar shares were converted into Sterling shares,
based on 31 March 2016 NAV, following
which the US Dollar share class was closed.
Investment profile
The evolution of the strategy profile* of the Feeder Fund, as
measured as a percentage of total Market Value**, is summarised
below:
| Strategy |
30 June 2016 |
|
31 December 2015 |
|
Long
(%) |
Short (%) |
|
Long
(%) |
Short (%) |
| Corporate
Performing |
30 |
(68) |
|
44 |
(71) |
| Corporate
Distressed |
23 |
(7) |
|
14 |
(12) |
| Corporate
Structured |
7 |
(12) |
|
8 |
(4) |
| Residential Real
Estate |
24 |
(37) |
|
38 |
(65) |
| Commercial Real
Estate |
42 |
(42) |
|
32 |
(45) |
| Agency MBS*** |
1 |
- |
|
22 |
(8) |
| Other Structured
Finance |
17 |
(18) |
|
10 |
(13) |
| Total |
144 |
(184) |
|
168 |
(218) |
* Strategy profile is subject to change.
** Market Values are shown as a percentage of Feeder Fund NAV,
excluding positions in US Treasuries. Market Value for derivatives
is calculated in bond-equivalent terms, as underlying notional less
current replacement cost. For example, a $100m notional credit default swap trading at 5
points upfront creates $95m of Market
Value.
*** The “Agency MBS” strategy includes 5% long market value in
Agency Tranche positions.
Performance Review
The NAV of the Company declined by approximately 2.21% over the
first half 2016. Gains in Corporate Distressed, Corporate
Structured and Residential Real Estate were offset by weakness in
the Catalyst Fund’s Corporate Performing Strategy.
Portfolio Overview
The Catalyst Fund’s performance for the first half of 2016 was
marked by a difficult first quarter, where idiosyncratic bonds
traded off as more “beta-oriented” assets rallied, followed by a
much better second quarter for the Catalyst Fund where Corporate
strategies outperformed. Despite the difficult start to the year,
it has been rewarding to see the Catalyst Fund’s Corporate
Distressed positions, which had a difficult 2015, recover and
perform more in line with expectations. The Catalyst Fund’s
structured finance portfolio has been modestly positive, with gains
in our Residential Mortgage-Backed Security (“RMBS”) outpacing
losses in our Commercial Mortgage-Backed Security (“CMBS”)
portfolio.
The Catalyst Fund’s Corporate portfolio had a mixed start to the
year – distressed debt positions in Energy companies have done
well, even as single-name Energy short positions have rallied with
the rise in commodity prices. We remain focused on managing our
exposure to commodity prices, and the volatility in the sector this
year has provided opportunities to trade around positions both long
and short. The Catalyst Fund also had positive performance on some
of the higher-in-the-capital-structure securities in several
industrial companies, which we added to the portfolio at
substantial discounts to par in Q4 2015. Similar to what we have
seen in some of our distressed names, these previously oversold
bonds are once again trading on fundamentals, and as the market
wakes up to these stories, we are taking profits and moving on to
other misunderstood capital structures. Our largest detractors for
the Catalyst Fund in the first half of the year came from our
Corporate Performing strategies, which had a difficult first
quarter and did not see as strong of a rebound as our Distressed
Corporate positions.
Within our Structured Finance portfolio, we continued to sell
RMBS, often with gains as other managers bid up these now-safer
bonds to lower and lower yield levels. In addition, we received a
long-expected payout in June from the Bank of America / Countrywide
settlement. While it was long expected, the market traded these
bonds at some risk premium to that payment coming through, so the
realisation of the cash flow did lead to gains in June. In
aggregate, we have experienced small losses in CMBS positions this
year.
We have seen strong event-driven gains from a number of our CMBS
positions, either where realised cash flows have been strong or
where there has been positive news on underlying loans, but these
gains have been offset by markdowns on other CMBS where the
catalysts are still in the near future. Other investors have been
selling legacy CMBS positions, and prices have fallen even in the
face of improving fundamentals. We believe we have a good amount of
“embedded” profits in our CMBS portfolio that should be realised
over the next year or so.
Opportunity Set
We think that this is one of the most fascinating moments that I
have observed in the past 30 years of Wall Street. We are calling
it a critical moment because the actions we take as investors, the
choices we make, can now have a dramatic impact on our portfolio
values looking ahead over the next two, five and ten years. We have
seen very significant market fragmentation and bifurcation on the
back of unprecedented central bank stimulus. There is an insatiable
demand for securities that are regarded as ‘safe’ – not just
government bonds but investment grade and BB high yield corporates
as well as defensive large cap stocks. At the same time, there is
often insufficient capital for complex or distressed situations
where banks are not willing or able to provide capital and the
investment cannot be structured as public equity or rated
credit.
What is DW’s reaction to this new normal? We are focusing on
what we have always done: investing in stressed securities, long
and short, some with a fair amount of complexity, and definitely
not the type of investing that I would call ever-richer safe yield.
We have run the Catalyst Fund for seven years and for seven years
we’ve been saying there are better returns, even better
risk-adjusted returns investing in the “not-so-safe” securities vs.
plowing all the capital into safe, modest yielding instruments that
have greater downside than upside if the world really goes
wrong.
So this moment that has been painful, that we are calling
critical, is also the moment of greatest opportunity, as those who
stay the course, who find off-the-beaten-path sources of alpha, are
going to outperform the most, and do it without much outright
market risk. That’s what we did in the second quarter in the
Catalyst Fund, generating gross returns of 3%, even while we were
selling securities and reducing gross exposures to produce all the
cash and risk reduction we need to meet upcoming redemptions. As
we’ve said for years, one of the advantages of Catalyst Fund is
that from quarter to quarter, year to year, credit returns will
come from different sources. Last year’s giant winner may be this
year’s laggard, and last year’s problem can be this year’s
opportunity. So, after a very difficult period for Corporate
Distressed, it was fulfilling to see our strongest returns driven
by Corporate Distressed positions, with plenty of upside to come.
We have a substantial amount of capital invested in legacy CMBS,
and we have made strong returns over the years in structured
finance securities. We will find out in the next 12-24 months how
these securities actually cash flow, and we are optimistic.
David Warren
Chief Investment Officer
DW Partners, LP
INDEPENDENT REVIEW REPORT TO DW
CATALYST FUND LIMITED
Introduction
We have been engaged by the Company to review the Unaudited
Condensed Interim Financial Statements in the Unaudited Condensed
Interim Report for the six months ended 30
June 2016 which comprise the Unaudited Statement of Assets
and Liabilities, Unaudited Statement of Operations and Performance
Allocation, Unaudited Statement of Changes in Net Assets, Unaudited
Statement of Cash Flows and the related notes 1 to 10. We have read
the other information in the Unaudited Condensed Interim Report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the Unaudited
Condensed Interim Financial Statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
(UK and Ireland) 2410, “Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity” issued by the Auditing Practices Board. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our work, for
this report, or for the conclusions we have formed.
Directors’ responsibilities
The interim financial report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the Unaudited Condensed Interim Report, in accordance
with the Disclosure and Transparency Rules of the United Kingdom’s
Financial Conduct Authority. As disclosed in note 2, the Unaudited
Condensed Interim Financial Statements of the Company are prepared
in accordance with accounting principles generally accepted in
the United States.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the Unaudited Condensed Interim Financial Statements in the
Unaudited Condensed Interim Report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, “Review of Interim Financial
Information Performed by the Independent Auditor of the Entity”
issued by the Auditing Practices Board for use in the United Kingdom. A review on the interim
financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance
with International Standards on Audited (UK and Ireland) and consequently does not enable us
to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the Unaudited Condensed Interim Financial
Statements in the Unaudited Condensed Interim Report for the six
months ended 30 June 2016 are not
prepared, in all material respects, in accordance with accounting
principles generally accepted in the
United States and the Disclosure and Transparency Rules of
the United Kingdom’s Financial Conduct Authority.
Ernst & Young LLP
Guernsey, Channel Islands
27 September 2016
1. The maintenance and integrity of the DW Catalyst Fund
Limited website is the responsibility of the Directors; the work
carried out by the auditor does not involve consideration of these
matters and, accordingly, the auditor accepts no responsibility for
any changes that may have occurred to the financial statements
since they were initially presented on the website.
2. Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
UNAUDITED STATEMENT OF ASSETS AND
LIABILITIES
As at 30 June 2016
(Expressed in ‘000 US Dollars)
|
|
30.06.16 |
|
31.12.15 |
|
30.06.15 |
|
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
|
Assets |
|
|
|
|
|
| Investment
in the Feeder Fund (Cost in '000s: US$208,777; |
|
|
|
|
|
| 31
December 2015: US$218,792; 30 June 2015: US$219,311) |
160,199 |
|
190,317 |
|
224,653 |
| Prepaid
expenses |
- |
|
19 |
|
- |
| Cash and
bank balances denominated in Sterling |
2,635 |
|
164 |
|
182 |
| Cash and
bank balances denominated in US Dollars |
- |
|
43 |
|
26 |
| Total
assets |
162,834 |
|
190,543 |
|
224,861 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Redemptions in respect of buybacks payable |
104 |
|
- |
|
- |
| Directors'
fees and expenses payable |
58 |
|
65 |
|
68 |
| Accrued
expenses and other liabilities |
42 |
|
42 |
|
123 |
|
Administration fees payable (note 3) |
32 |
|
33 |
|
34 |
| Registrar
fees payable (note 3) |
10 |
|
5 |
|
1 |
| Total
liabilities |
246 |
|
145 |
|
226 |
|
|
|
|
|
|
|
| Net
assets |
162,588 |
|
190,398 |
|
224,635 |
|
|
|
|
|
|
|
| Number
of shares in issue (note 4) |
|
|
|
|
|
| US Dollar
shares |
- |
|
2,211,203 |
|
2,779,230 |
| Sterling
shares |
9,935,317 |
|
8,856,566 |
|
8,492,733 |
|
|
|
|
|
|
|
| Net
asset value per share (notes 6 and 8) |
|
|
|
|
|
| US Dollar
shares |
- |
|
US$12.40 |
|
US$13.86 |
| Sterling shares |
|
£12.19 |
|
£12.47 |
|
£13.93 |
The financial statements were approved by the Board of Directors
on 27 September 2016 and signed on
its behalf by:
Patrick Firth
Director
See accompanying notes to the
Unaudited Condensed Interim Financial Statements.
UNAUDITED STATEMENT OF OPERATIONS AND PERFORMANCE
ALLOCATION
For the period from 1 January 2016 to
30 June 2016
(Expressed in ‘000 US Dollars)
|
|
|
01.01.16 |
|
01.01.15 |
|
01.01.15 |
|
|
|
to
30.06.16 |
|
to
31.12.15 |
|
to
30.06.15 |
|
|
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
|
Investment gain allocated from the Feeder Fund |
|
|
|
|
|
|
| Interest |
|
|
13,441 |
|
35,041 |
|
12,351 |
| Dividend
income (net of withholding tax of: US$126,866) |
|
269 |
|
100 |
|
31 |
| Other income |
|
|
155 |
|
- |
|
- |
| Expenses |
|
|
(2,641) |
|
(4,576) |
|
(5,079) |
| Management fees (note
3) |
|
|
(1,721) |
|
(4,254) |
|
- |
| Investment gain
allocated from the Feeder Fund |
|
|
9,503 |
|
26,311 |
|
7,303 |
|
|
|
|
|
|
|
|
| Company
income |
|
|
|
|
|
|
|
| Foreign exchange gains
(note 2) |
|
|
- |
|
2 |
|
3 |
| Total Company
income |
|
|
- |
|
2 |
|
3 |
|
|
|
|
|
|
|
|
| Company
expenses |
|
|
|
|
|
|
|
| Other expenses |
|
|
288 |
|
663 |
|
503 |
| Directors' fees and
expenses |
|
|
121 |
|
264 |
|
132 |
| Administration fees
(note 3) |
|
|
100 |
|
200 |
|
99 |
| Registrar fees (note
3) |
|
|
20 |
|
32 |
|
15 |
| Foreign exchange
losses (note 2) |
|
|
19 |
|
- |
|
- |
| Total Company
expenses |
|
|
548 |
|
1,159 |
|
749 |
|
|
|
|
|
|
|
|
| Net investment
gain |
|
|
8,955 |
|
25,154 |
|
6,557 |
|
|
|
|
|
|
|
|
| Net
realised loss and change in unrealised depreciation on investments
allocated from the Feeder Fund |
|
|
|
|
|
|
| Net realised loss on
investments |
|
|
(11,562) |
|
(10,909) |
|
(3,792) |
| Net
unrealised depreciation on investments |
|
(1,939) |
|
(35,117) |
|
(424) |
| Net
(loss)/gain on foreign currency hedges (note 2) |
|
(15,917) |
|
(8,746) |
|
2,278 |
| Net
realised loss and unrealised depreciation |
|
|
|
|
|
|
|
on investments allocated from the Feeder Fund |
|
(29,418) |
|
(54,772) |
|
(1,938) |
|
|
|
|
|
|
|
|
| Net
(decrease)/increase in net assets resulting from operations after
performance allocation |
(20,463) |
|
(29,618) |
|
4,619 |
|
|
|
|
|
|
|
|
|
See accompanying notes to the
Unaudited Condensed Interim Financial Statements.
UNAUDITED STATEMENT OF CHANGES IN NET ASSETS
For the period from 1 January 2016 to
30 June 2016
(Expressed in ‘000 US Dollars)
|
|
|
|
|
01.01.16 |
|
01.01.15 |
|
01.01.15 |
|
|
|
|
|
to
30.06.16 |
|
to
31.12.15 |
|
to
30.06.15 |
|
|
|
|
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
| Net
(decrease)/increase in net assets resulting from
operations |
|
|
|
|
|
| Net
investment gain |
|
|
|
8,955 |
|
25,154 |
|
6,557 |
| Net
realised loss on investments allocated from |
|
|
|
|
|
|
| the
Feeder Fund |
|
|
|
(11,562) |
|
(10,909) |
|
(3,792) |
| Net change
in unrealised depreciation on investments |
|
|
|
|
|
| allocated
from the Feeder Fund |
|
|
|
(1,939) |
|
(35,117) |
|
(424) |
| Net
(loss)/gain on foreign currency hedges allocated from the Feeder
Fund |
|
(15,917) |
|
(8,746) |
|
2,278 |
|
|
|
|
|
(20,463) |
|
(29,618) |
|
4,619 |
|
|
|
|
|
|
|
|
|
|
| Share
capital transactions |
|
|
|
|
|
|
|
|
| Purchase
of own shares into treasury (note 4) |
|
(7,347) |
|
- |
|
- |
|
|
|
|
|
(7,347) |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
| Net
(decrease)/increase in net assets |
|
(27,810) |
|
(29,618) |
|
4,619 |
| Net
assets at the beginning of the period/year |
|
190,398 |
|
220,016 |
|
220,016 |
| Net
assets at the end of the period/year |
|
162,588 |
|
190,398 |
|
224,635 |
See accompanying notes to the
Unaudited Condensed Interim Financial Statements.
UNAUDITED STATEMENT OF CASH FLOWS
For the period from 1 January 2016 to
30 June 2016
(Expressed in ‘000 US Dollars)
|
|
|
01.01.16 |
|
01.01.15 |
|
01.01.15 |
|
|
|
to
30.06.16 |
|
to
31.12.15 |
|
to
30.06.15 |
|
|
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
| Cash flows from
operating activities |
|
|
|
|
|
|
|
| Net
(decrease)/increase in net assets resulting from operations |
|
(20,463) |
|
(29,618) |
|
4,619 |
|
Adjustments to reconcile net increase in net assets |
|
|
|
|
|
|
|
resulting from operations to net cash generated from
operating activities |
|
|
|
|
|
| Net
investment gain allocated from the Feeder Fund |
|
(9,503) |
|
(26,311) |
|
(7,303) |
| Net
realised loss on investments allocated from the Feeder Fund |
|
11,562 |
|
10,909 |
|
3,792 |
| Net change
in unrealised depreciation on investments |
|
|
|
|
|
|
| allocated from
the Feeder Fund |
|
|
1,939 |
|
35,117 |
|
424 |
| Net
proceeds from sale of investment in the Feeder Fund |
|
10,203 |
|
4,545 |
|
4,035 |
| Net
loss/(gain) on foreign currency hedges allocated |
|
|
|
|
|
|
| from
the Feeder Fund |
|
15,917 |
|
8,746 |
|
(2,278) |
| Decrease/(increase) in
prepaid expenses |
|
|
19 |
|
(19) |
|
- |
| Decrease in
performance fees payable |
|
|
- |
|
(2,856) |
|
(2,856) |
| Decrease in management
fees payable |
|
|
- |
|
(379) |
|
(379) |
|
(Decrease)/increase in Directors' fees and expenses payable |
|
(7) |
|
(2) |
|
1 |
| Increase
in accrued expenses and other liabilities |
|
- |
|
11 |
|
92 |
|
(Decrease)/increase in administration fees payable |
|
(1) |
|
- |
|
1 |
|
Increase/(decrease) in registrar fees payable |
|
5 |
|
(6) |
|
(10) |
| Net
cash generated from operating activities |
|
9,671 |
|
137 |
|
138 |
|
|
|
|
|
|
|
|
| Cash flows from
financing activities |
|
|
|
|
|
|
|
| Purchase of own
shares |
|
|
(7,243) |
|
- |
|
- |
| Net cash used in
financing activities |
|
|
(7,243) |
|
- |
|
- |
|
|
|
|
|
|
|
|
| Change in
cash |
|
|
2,428 |
|
137 |
|
138 |
| Cash, beginning of
the period/year |
|
|
207 |
|
70 |
|
70 |
| Cash, end of the
period/year |
|
|
2,635 |
|
207 |
|
208 |
|
|
|
|
|
|
|
|
| Cash, end of the
period/year |
|
|
|
|
|
|
|
| Cash and
bank balances denominated in Sterling |
|
2,635 |
|
164 |
|
182 |
| Cash and
bank balances denominated in US Dollars |
|
- |
|
43 |
|
26 |
|
|
|
2,635 |
|
207 |
|
208 |
| Supplemental
disclosure of non-cash financing activities: |
|
|
|
|
|
|
| In specie divestment
from the Master Fund (note 9) |
|
- |
|
220,828 |
|
- |
| In specie investment
in the Feeder Fund (note 9) |
|
- |
|
(220,828) |
|
- |
See accompanying notes to the
Unaudited Condensed Interim Financial Statements.
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL
STATEMENTS
For the period from 1 January 2016 to
30 June 2016
1. The Company and Organisation
Details of the Company and its organisation are set out in the
Directors’ Report.
2. Significant accounting policies
Basis of Presentation
The Annual Report and Audited Financial Statements, which give a
true and fair view, are prepared in conformity with United States
Generally Accepted Accounting Principles and comply with the
Companies (Guernsey) Law, 2008.
The accompanying Unaudited Condensed Interim Financial Statements
have been prepared following the same accounting policies and
methods of computation as the most recent Annual Audited Financial
Statements. Prior to the US Dollar share class closure on
26 April 2016, the functional and
reporting currency of the Company was US Dollar. With effect from
26 April 2016, the Company’s
functional currency changed to Sterling (see page 19). The
presentation currency of the Company is United States Dollar.
The Company is an Investment Entity which has applied the
provisions of ASC 946. U.S. GAAP requires investments of an
investment company to be recorded at their estimated fair value.
The unrealised gains and/or losses in the investment's fair value
need to be recognised on a current basis in the Unaudited Statement
of Operations and Performance Allocation. The carrying value of all
other assets and liabilities approximates fair value.
Going Concern
Having reassessed the principal risks; the Directors considered
it appropriate to adopt the going concern basis of accounting in
preparing the Unaudited Condensed Interim Report and Financial
Statements.
In accordance with the Articles of Incorporation of the Company,
a Discount Trigger Meeting will be held should the average discount
to NAV over a calendar year be beyond 5%. With the level of
discount seen in the year to date, it is likely that the Company
will hold a Discount Trigger Meeting following year end where a
Discount Trigger Vote will take place. The Board has considered
whether the results of such a vote could reduce the Company’s size
to a level at which there would be no alternative to winding up the
Company and has concluded that the probability of such an outcome
is remote. Accordingly, the Board considers that the Company
continue as a going concern.
The following are significant accounting policies adopted by the
Company:
Valuation of investments
The Company records its investment in Class A shares of the
Feeder Fund at fair value. Fair value is determined as the
Company’s proportionate share of the Feeder Fund’s net assets. In
accordance with Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 820 “Fair Value
Measurement”, fair value is defined as the price the Company would
receive upon selling a security in a timely transaction to an
independent buyer in the principal or most advantageous market of
the security. At 30 June 2016 the
Company’s US Dollar and Sterling capital accounts represented 0.00%
and 9.67% (31 December 2015: 1.29%
and 7.69%; 30 June 2015: 1.39% and
6.74%) respectively of the Feeder Fund’s capital.
The Company’s investment in the Master Fund via the Feeder Fund
and the Cayman Corporation is determined as the Company’s
proportionate share of the Master Fund’s net assets. At
30 June 2016 the Company’s US Dollar
and Sterling capital account represented 0.00% and 6.11%
(31 December 2015: 0.82% and 4.85%;
30 June 2015: 1.39% and 6.74%)
respectively of the Master Fund’s capital.
The valuation and classification of securities held by the
Master Fund, Feeder Fund and Cayman Corporation are discussed in
the notes to the Unaudited Condensed Financial Statements of the
Master and Feeder Funds which are available on the Company’s
website, www.dwcatalystltd.com.
Fair value measurement
ASC 820 establishes a three-level hierarchy to maximise the use
of observable market data and minimise the use of unobservable
inputs and to establish classification of fair value measurements
for disclosure purposes. Inputs refer broadly to the assumptions
that market participants would use in pricing the asset or
liability, including assumptions about risk, for example, the risk
inherent in a particular valuation technique used to measure fair
value including such a pricing model and/or the risk inherent in
the inputs to the valuation technique. Inputs may be observable or
unobservable.
As a result of the changes in ASC 820 “Fair Value Measurements”,
the Company is using the practical expedient and therefore is not
using fair value hierarchy.
Income and expenses
The Company records monthly its proportionate share of the
Feeder Fund’s income, expenses and realised and unrealised gains
and losses, which in turn records its proportionate share of the
Master Fund’s income, expenses and realised and unrealised gains
and losses. In addition, the Company accrues its own income and
expenses. Prior to the closure of USD share class, the Company
expenses were allocated proportionately to the US Dollar and
Sterling share classes based on their respective Net Asset Values
(“NAVs”).
Use of estimates
The preparation of Financial Statements in conformity with U.S.
GAAP requires management 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
those Financial Statements and the reported amounts of increases
and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
Change in functional currency
As a consequence of the closure of the US dollar share class, a
decision was made by the Directors to change the functional
currency from US Dollar to Sterling. It is acknowledged that the
Company’s price quotation on the LSE is now only Sterling and
performance is reported in Sterling. The Company invests in a
single investment through a Sterling Share class, and substantially
all of the Company’s cash flows are now in Sterling. The
presentation currency remains unchanged as US Dollar.
Foreign exchange
Purchases and sales of investments and income and expense items
denominated in foreign currencies are translated into Sterling, the
Company's functional currency, at the date of such transactions.
Exchange differences arising on translation are included in the
Unaudited Statement of Operations and Performance Allocation.
Investment securities and other assets and liabilities are
translated into US Dollars, the Company's reporting currency, using
exchange rates at the reporting date. Transactions reported
in the Unaudited Statement of Operations and Performance Allocation
are translated into US Dollar amounts at the average exchange rate
for the period. The share capital and other capital reserve
accounts are translated at the historic rate ruling at the date of
the transaction. Exchange differences arising on translation
into the reporting currency are offset against exchange differences
arising on translation into the functional currency. Certain
comparative figures have been reclassified in the Unaudited
Statement of Operations and Performance Allocation to conform with
the current year presentation.
Cash and bank balances
Cash and cash equivalents comprise of cash in bank and demand
deposits with original maturities of less than 90 days.
Treasury shares
Where the Company may purchase its own share capital, the
consideration paid, which includes any directly attributable costs,
is recognised as a deduction from equity shareholders’ funds
through the share capital account. When such shares are
subsequently sold or reissued to the market, any consideration
received, net of any directly attributable incremental transaction
costs, is recognised as an increase in equity shareholders’ funds
through the share capital account. Where the Company cancels
treasury shares, no further adjustment is required to the share
capital account of the Company at the time of cancellation. Shares
held in treasury are excluded from calculations when determining
NAV per share as detailed in note 6 or in the Financial Highlights
in note 8.
Allocation of results of the Feeder
and Master Funds
Net realised and unrealised gains/losses of the Feeder Fund and
Master Fund are allocated to the Company’s share classes based upon
the percentage ownership of the equivalent Feeder Fund and Master
Fund class.
Leverage
The Company, subject to Board approval, may not incur leverage
other than for the purpose of financing share repurchases or
satisfying working capital requirements, and subject to outstanding
borrowings being in compliance with the borrowing limit in the
Articles of 20% of the NAV of the Company, calculated as at the
time of borrowing.
Recent Standards and
Pronouncements
In January 2016, the FASB issued
Accounting Standards Update No. 2016-01 (ASU 2016-01) "Financial
Instruments-Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities." ASU 2016-01 amends
various aspects of the recognition, measurement, presentation, and
disclosure for financial instruments. ASU 2016-01 is effective for
annual reporting periods, and interim periods within those years
beginning after 15 December 2017. The Board does not
expect that this standard will have a material effect on the
Company’s financial statements.
In August 2014, the FASB issued
ASU 2014-15 – Presentation of Financial Statements – Going
Concern (Subtopic 205-40)(“ASU 2014-15”). The pronouncement
defined management’s responsibility regarding the assessment of the
Company’s ability to continue as a going concern, even if the
Company’s liquidation is not imminent. Currently, no similar
guidance exists for management representation of going concern.
Under this guidance, during each period on which financial
statements are prepared, management needs to evaluate whether there
are conditions or events that, in the aggregate, raise substantial
doubt about the Company’s ability to continue as a going concern
within one year after the date the financial statements are issued.
Substantial doubt exists if these conditions or events indicate
that the Company will be unable to meet its obligations as they
become due. If such conditions or events exist, management should
develop a plan to mitigate or alleviate these conditions or events.
Regardless of management’s plan to mitigate, certain disclosures
must be made in the financial statements. ASU 2014-15 is effective
for annual periods ending after 15 December
2016, however early adoption is permitted. The Board is
currently evaluating the impact the update will have on the
Company’s financial statements.
In May 2015, the FASB issued ASU
2015-07, Disclosures for Investments in Certain Entities that
Calculate Net Asset Value per Share (or Its Equivalent)
(“ASU 2015-07”), in which certain investments measured at fair
value using the net asset value per share method (or its
equivalent) as a practical expedient are not required to be
categorized in the fair value hierarchy. This guidance is effective
for annual reporting periods, including interim periods, beginning
after 15 December 2015. The Company
has adopted ASU 2015-07 and accordingly has not leveled applicable
positions.
3. Management, Performance,
Administration and Registrar fees
Management and Performance fees
Per the DW Management Agreement, the Manager is entitled to a
management fee and performance allocation at the level of the
Master Fund and the holding entities of Specific Investments but
not payment of management and performance fees by the Company.
Instead, the Company will indirectly bear a portion of the
management fee and performance allocation charged by the Manager to
the Master Fund and to any holding entity of a Specific
Investment.
The DW Management Agreement may be terminated by either party
giving the other party not less than 24 months written notice. In
certain circumstances the Company will be obliged to pay
compensation to the Investment Manager of the aggregate management
fees which would otherwise have been payable on the Company’s
indirect interests in the Master Fund and the Specified Investments
during the 24 months following the date of such notice and the
Company will be obliged to pay any other related costs.
Compensation is not payable if more than 24 months notice of
termination is given. In certain circumstances, the management
agreement may be terminated by the Company giving the Investment
Manager not less than 30 days’ or 90 days’ notice.
Administration fee
The Company has appointed Northern Trust International Fund
Administration Services (Guernsey)
Limited as Administrator and Corporate Secretary. The Administrator
is paid fees based on the NAV of the Company, payable quarterly in
arrears. The fee is at a rate of 0.025% per annum of the first
US$750 million of net assets of the
Company and then 0.015% per annum thereafter, subject to a minimum
fee of US$200,000 per annum.
The Administrator is entitled to be reimbursed out-of-pocket
expenses incurred in the course of carrying out its duties. The fee
will be reviewed on an annual basis.
During the period ended 30 June
2016, US$100,000 (31 December 2015: US$200,000, 30 June
2015: US$99,195) was earned by
the Administrator as administration fees. At 30 June 2016, US$32,103 (31 December
2015, US$33,155,
30 June 2015: US$33,844) of the fee remained outstanding.
Registrar fee
The Company appointed Computershare Investor Services
(Guernsey) Limited as Registrar,
with effect from
19 November 2010. The Registrar is paid fees according to the
agreement, subject to a minimum fee of £6,000 per annum, payable
quarterly in arrears. During the period ended 30 June 2016, US$19,996 (31 December
2015: US$32,344,
30 June 2015: US$15,029) were charged by the Registrar. At
30 June 2016: US$9,525 (31 December
2015: US$5,184,
30 June 2015: US$746) of the fee remained outstanding.
4. Share capital
Issued and authorised share
capital
The Company was incorporated with the authority to issue up to
one billion shares of no par value in each class, which authority
expired on 19 October 2015. As
approved by the shareholders at the AGM held on 22 June 2016, the Directors have the power to
issue 3,464,332 Sterling shares. Such power expires fifteen months
after the passing of the resolution or on the conclusion of the
next AGM of the Company, whichever is earlier. The Articles require
any further issues of shares for cash to be made on a pre-emptive
basis to holders of shares of the same class, except to the extent
that such pre-emption rights have been disapplied by shareholders
in general meeting. The shares may be issued in differing currency
classes of ordinary redeemable shares including C shares
(described in the Company’s Prospectus) at the discretion of the
Board. At 30 June 2016, 31 December 2015 and 30
June 2015, no C shares were in issue.
For the period from 1 January 2016 to 30 June
2016
|
|
US
Dollar shares |
|
Sterling shares |
|
|
| Number
of ordinary shares |
|
|
|
|
|
| In issue
at 1 January 2016 |
2,211,203 |
|
8,856,566 |
|
|
| Share
conversions from US Dollar shares to Sterling shares |
(2,211,203) |
|
1,537,466 |
|
|
| Purchase
of own shares into treasury |
- |
|
(458,715) |
|
|
| In
issue at 30 June 2016 |
- |
|
9,935,317 |
|
|
|
|
|
|
|
|
|
| Number
of treasury shares |
|
|
|
|
|
| In issue
at 1 January 2016 |
- |
|
- |
|
|
| Shares
purchased and held in treasury during the period: |
|
|
|
|
|
| -
On market purchases |
- |
|
458,715 |
|
|
| In
issue at 30 June 2016 |
- |
|
458,715 |
|
|
|
Percentage of class |
- |
|
4.41% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Total |
|
|
US$'000 |
|
£'000 |
|
US$'000 |
| Share
capital account |
|
|
|
|
|
| At 1 January 2016 |
|
12,346 |
|
93,762 |
|
157,615 |
| Share
conversions from US Dollar shares to Sterling shares |
(12,346) |
|
18,345 |
* |
- |
| Purchase of own shares
into treasury |
|
- |
|
(5,098) |
|
(7,347) |
| At 30
June 2016 |
- |
|
107,009 |
|
150,268 |
*including cumulative gains on US Dollar shares converted to
Sterling shares.
For the year ended 31 December
2015
|
|
US
Dollar shares |
|
Sterling shares |
|
|
| Number
of ordinary shares |
|
|
|
|
|
| In issue
at 1 January 2015 |
3,024,729 |
|
8,332,877 |
|
|
| Share
conversions from US Dollar shares to Sterling shares |
(910,568) |
|
586,303 |
|
|
| Share
conversions from Sterling shares to US Dollar shares |
97,042 |
|
(62,614) |
|
|
| In
issue at 31 December 2015 |
2,211,203 |
|
8,856,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Total |
|
|
US$'000 |
|
£'000 |
|
US$'000 |
| Share
capital account |
|
|
|
|
|
| At 1
January 2015 |
23,360 |
|
86,635 |
|
157,615 |
| Share
conversions from US Dollar shares to Sterling shares |
(12,335) |
|
7,984 |
|
- |
| Share
conversions from Sterling shares to US Dollar shares |
1,321 |
|
(857) |
|
- |
| At 31
December 2015 |
12,346 |
|
93,762 |
|
157,615 |
For the period from 1 January 2015 to 30 June
2015
|
|
US
Dollar shares |
|
Sterling shares |
|
|
| Number
of ordinary shares |
|
|
|
|
|
| In issue 1
January 2015 |
3,024,729 |
|
8,332,877 |
|
|
| Share
conversions from US Dollar shares to Sterling shares |
(304,159) |
|
197,669 |
|
|
| Share
conversions from Sterling shares to US Dollar shares |
58,660 |
|
(37,813) |
|
|
| In
issue at 30 June 2015 |
2,779,230 |
|
8,492,733 |
|
|
|
|
|
|
|
|
Company Total |
|
|
US$'000 |
|
£'000 |
|
US$'000 |
| Share
capital account |
|
|
|
|
|
| At 1
January 2015 |
23,360 |
|
86,635 |
|
157,615 |
| Share
conversions from US Dollar shares to Sterling shares |
(4,238) |
|
2,767 |
|
|
| Share
conversions from Sterling shares to US Dollar shares |
808 |
|
(523) |
|
- |
| In
issue at 30 June 2015 |
19,930 |
|
88,879 |
|
157,615 |
Share classes
On 26 April 2016, all of the
Company’s US Dollar shares were converted into Sterling shares,
based on 31 March 2016 NAV, following
which the US Dollar share class was closed. The Company now has
only Sterling shares in issue. Any increase or decrease in the NAV
of the Feeder Fund is allocated in full to the Sterling Share
class.
Prior to the compulsory US Dollar share conversion, a separate
class account was established in the books of the Company in
respect of each class of shares. An amount equal to the aggregate
proceeds of issue of each share class was credited to the relevant
class account. Any increase or decrease in the NAV of the Feeder
Fund’s US Dollars shares and the Feeder Fund’s Sterling shares as
calculated by the Feeder Fund was allocated to the relevant class
account in the Company.
Share issue expenses
Share issue expenses of US$1,592,065 were borne by the Company and were
charged against the share capital account at launch (the “Offer”).
In accordance with the Placing Agreement dated 19 November 2010, BHCM paid the costs and
expenses of, and incidental to, the Offer (including all costs
related to the establishment of the Company) (the “Offer Costs”)
which were in excess of 1% of the gross proceeds of the Offer. The
Offer Costs paid by BHCM amounted to US$3,261,054. The DW Management Agreement
replicates the provisions in the BH Management Agreement regarding
repayment of BHCM’s outstanding costs incurred in connection with
the Company’s IPO.
Pursuant to the terms of the DW Management Agreement, the
Company must repay to DW a fraction of these Offer Costs for every
US Dollar by which repurchases, redemptions or cancellations of the
Company’s shares reduce the current US Dollar NAV of the Company
below its NAV at the time of the Company’s listing, being
US$157,614,394. The current US Dollar
NAV is calculated using the exchange rates ruling at the time of
the Company’s listing and at 30 June 2016 stood at
US$191,036,311.
The amount of these Offer Costs to be repaid for every US Dollar
by which the Company’s NAV is reduced will be up to 2.07 cents (or such lower amount as may result
from any reduction in the Offer Costs actually paid by the
Investment Manager), being the figure obtained by dividing the
Offer Costs by the NAV of the Company at the time of its
listing.
In addition, if the DW Management Agreement were to be
terminated for certain reasons before the seventh anniversary of
admission to the London Stock Exchange, being 14 December 2017, the Company will be required to
reimburse the Investment Manager in respect of the offer costs
borne by the Investment Manager. The Directors consider the
likelihood of the DW Management Agreement terminating and as a
consequence the contingent liability described above arising as
remote and therefore no provision has been made within these
Financial Statements.
The Directors confirm that there are no other contingent
liabilities that require disclosure or provision.
Voting rights
Ordinary redeemable shares carry the right to vote at general
meetings of the Company and to receive any dividends, attributable
to the ordinary shares as a class, declared by the Company and, in
a winding-up will be entitled to receive, by way of capital, any
surplus assets of the Company attributable to the ordinary shares
as a class in proportion to their holdings after settlement of any
outstanding liabilities of the Company.
Each shareholder shall have one vote for each share denominated
in the base class held by them. As prescribed in the Company’s
Articles, the different classes of ordinary shares have different
values attributable to their votes. The attributed values have been
calculated on the basis of the Weighted Voting Calculation (as
described in the Articles) which takes into account the prevailing
exchange rates on the date of initial issue of ordinary shares.
Currently, a single Sterling ordinary share has 1.5774 votes. A
single US Dollar share had 1 vote until the US Dollar share class
was closed.
Treasury shares do not have any voting rights.
Repurchase of shares
The Directors have been granted authority to purchase in the
market up to 1,558,066 of Sterling shares and they intend to seek
annual renewal of this authority from shareholders which was last
granted on 22 June 2016. The
Directors may, at their discretion, utilise this share repurchase
authority to address any imbalance between the supply of and demand
for shares.
Distributions
The Directors may from time to time authorise dividends and
distributions to be paid to Shareholders on a class by class
basis.
The amount of such dividends or distributions paid in respect of
one class may be different from that of another class.
The Feeder Fund does not expect to pay dividends to its
investors. Therefore, the Directors of the Company do not expect to
declare any dividends. This does not prevent the Directors of the
Company from declaring a dividend at any time in the future if the
Directors consider payment of a dividend to be appropriate in the
circumstances.
As announced on 15 January 2014,
the Company intends to be operated in such a manner to ensure that
its shares are not categorised as non-mainstream pooled
investments. This may mean that the Company may pay dividends in
support of any income that it receives or is deemed to receive for
UK tax purposes so that it would qualify as an investment trust if
it were UK tax-resident.
Treasury shares are not entitled to distributions.
Deferred share
The Company has issued one, non-participating, non voting, non
redeemable deferred share having the right to the payment of £1 on
liquidation of the Company. The deferred share was issued on
19 October 2010 and has a right to
vote only if there are no other classes of voting share in
issue.
Annual partial capital return
offer
Commencing on or after 1 January
2012, for each calendar year the Directors may, in their
absolute discretion, determine that the Company should make an
offer to redeem such number or value of shares as they may
determine provided that the minimum amount distributed shall not be
less than 33% and not more than 100% of the increase in the NAV of
the Company in the prior calendar year.
The Directors shall, in their absolute discretion, determine the
particular class or classes of shares in respect of which an Annual
Partial Capital Return Offer will be made, the timetable for that
Annual Partial Capital Return Offer and the price at which the
shares of each relevant class will be redeemed.
Whether a return of capital is made in any particular year and,
if so, the amount of the return, may depend, among other things, on
prevailing market conditions, the ability of the Company to
liquidate its investment to fund the capital return, the success of
prior capital returns and applicable legal, regulatory and tax
considerations.
The Directors determined that the Company would not offer an
annual partial capital return during 2016.
Share conversion scheme
Previously, the Company implemented a Share Conversion Scheme.
The scheme provided shareholders with the ability to convert some
or all of their shares in the Company of one class into shares of
another class. Shareholders, at the discretion of the Board, were
able to convert ordinary shares on the last business day of every
month. Each conversion was based on NAV (note 6) of the share
classes converted. Following the closure of the US Dollar share
class, on 26 April 2016, the share
conversion scheme was withdrawn.
5. Taxation
Overview
The Company is exempt from taxation in Guernsey under the provisions of the Income
Tax (Exempt Bodies) (Guernsey)
Ordinance 1989 and pays an annual fee of £1,200 (2015: £1,200).
Accordingly, no provision for Guernsey income tax is included in these
Unaudited Financial Statements.
Uncertain tax positions
The Company recognises the tax benefits of uncertain tax
positions only where the position is more likely than not (i.e. the
likelihood is greater than 50 per cent) to be sustained assuming
examination by a tax authority based on the technical merits of the
position. In evaluating whether a tax position has met the
recognition threshold, the Company must presume that the position
will be examined by the appropriate taxing authority that has full
knowledge of all relevant information. A tax position that meets
the more-likely-than-not recognition threshold is measured to
determine the amount of benefit to recognise in the Company’s
Audited Financial Statements. Income tax and related interest and
penalties would be recognised by the Company as tax expense in the
Consolidated Statement of Operations and Performance Allocation if
the tax positions were deemed not to meet the 50% likelihood
threshold.
The Company analyses all open tax years for all major taxing
jurisdictions. Open tax years are those that are open for
examination by taxing authorities, as defined by the Statute of
Limitations in each jurisdiction. The Company identifies its major
tax jurisdictions as the Cayman
Islands and foreign jurisdictions where the Company makes
significant investments. The Company has no examinations by tax
authorities in progress.
The Directors have analysed the Company’s tax positions, and has
concluded that no liability for unrecognised tax benefits should be
recorded related to uncertain tax positions. Further, the Directors
are not aware of any tax positions for which it is reasonably
possible that the total amounts of unrecognised tax benefits will
significantly change in the next twelve months.
6. Publication and calculation of net
asset value
The NAV of the Company is equal to the value of its total assets
less its total liabilities. The NAV per share of each class is
calculated by dividing the NAV of the relevant share class by the
number of shares of the relevant class in issue on that day.
The Company publishes the NAV per share for each class of shares
as calculated by the Administrator based in part on information
provided by the Feeder Fund, monthly in arrears, as at each month
end.
The Company also publishes an estimate of the NAV per share for
each class of shares as calculated by the Administrator based in
part on information provided by the Feeder Fund, weekly in
arrears.
7. Discount management programme
The Company has a discount management programme which includes
the ability to make market purchases of shares and the obligation
to convene an Extraordinary General Meeting of the Company (a
“Discount Trigger EGM”) if, in any fixed discount management period
(1 January to 31 December each year), the average daily closing
market price of the relevant class of shares during such period is
less than 95% of the average NAV per share of the relevant class
taken over the 12 monthly NAV Determination Dates in that fixed
discount management period, as described more fully in the
Company’s Articles.
The discount management measures will be funded by and subject
to the Company’s ability to make partial redemptions of the
Company’s investment in the Feeder Fund.
In the event of the relevant conditions being met, the Board
will hold a Discount Trigger EGM and propose an ordinary
resolution, which, if approved, will require the Company to
compulsorily redeem the shares which voted in favour of the
resolution.
The price at which the shares will be redeemed will be based on
the NAV per share of the relevant class, less:
- any costs and expenses (including redemption fees) incurred in
relation to the Discount Trigger EGM; and
- a fractional share of any Offer Costs paid by the Investment
Manager (note 4).
Shareholders voting in favour of the resolution will have their
shares redeemed in four quarterly instalments.
The Annual Partial Capital Return Offer described in note 4
which enables a partial return of capital also forms part of the
discount management programme.
During the period ended 30 June
2016, the Company recorded an average discount to NAV of
11.95% and 10.85% for US Dollar shares and Sterling shares
respectively (year to 31 December
2015: 4.70% and 4.73%, six month period ended 30 June 2015: 2.96% and 2.95%).The Company
utilised its ability to buy back shares during the period, buying
back 458,715 Sterling shares at a cost of £5,098,300 with an
average discount to NAV of 9.25%.
At the date of this report, the discount on the Sterling shares
had moved to 10.91%. The estimated NAV per share stood at £12.19
for the Sterling shares.
8. Financial highlights
The following tables include selected data for a single ordinary
share of each of the ordinary share classes in issue at the period
end and other performance information derived from the Unaudited
Condensed Interim Financial Statements.
The per share amounts and ratios which are shown reflect the
income and expenses of the Company for each class of ordinary
share.
|
|
|
|
|
01.01.16 to |
|
01.01.16 to |
|
|
|
|
|
30.06.16 |
|
30.06.16 |
|
|
|
|
|
US
Dollar shares |
^ |
Sterling shares |
|
|
|
|
|
US$ |
|
£ |
| Per
share operating performance |
|
|
|
|
|
|
| Net
asset value at beginning of the period |
|
|
|
12.40 |
|
12.47 |
|
|
|
|
|
|
|
|
| Income
from investment operations |
|
|
|
|
|
|
| Net
investment gain 1 |
|
|
|
0.25 |
|
0.63 |
| Net
realised loss and unrealised depreciation on investment* |
|
|
|
(0.79) |
|
(0.88) |
| Other
capital items 2 |
|
|
|
- |
|
(0.02) |
| Total loss |
|
|
|
|
(0.54) |
|
(0.27) |
|
|
|
|
|
|
|
|
| Conversion
of US Dollar shares to Sterling shares |
|
|
|
(11.86) |
|
- |
|
|
|
|
|
|
|
|
| Net
asset value, end of the period |
|
|
|
- |
|
12.19 |
|
|
|
|
|
|
|
|
| Total loss |
|
|
|
|
(4.34%) |
|
(2.21%) |
^ Returns of the US Dollar share class have been calculated up
to 31 March 2016.
*Foreign exchange hedge gain allocated from the Feeder Fund and
currency translation loss arising due to translation of USD
allocations to GBP functional currency each amounted to £1.19 per
share.
Total return reflects the net return for an investment made at
the beginning of the year and is calculated as the change in the
NAV per ordinary share during the period from 1 January 2016 to 30 June
2016 and is not annualised. An individual shareholder’s
return may vary from these returns based on the timing and entry
price of their purchase or sale of shares.
|
|
|
|
|
01.01.16 to |
|
01.01.16 to |
|
|
|
|
|
30.06.16 |
|
30.06.16 |
|
|
|
|
|
US
Dollar shares |
^^ |
Sterling shares |
|
|
|
|
|
US$ |
|
£ |
|
Supplemental data |
|
|
|
|
|
|
| Net
asset value, beginning of the period |
|
|
|
27,425 |
|
110,397 |
| Net
asset value, prior to final share conversion |
|
|
|
23,238 |
|
107,621 |
| Net
asset value, end of the period |
|
|
|
- |
|
121,108 |
| Average
net asset value for the period |
|
|
|
25,884 |
|
115,040 |
^^ The US Dollar share class NAV at the end of the period is the
NAV as at the 31 March 2016.The average US Dollar share class NAV
for the period is calculated based on published NAVs from the start
of the period to 31 March 2016.
|
|
|
|
|
01.01.16 to |
|
01.01.16 to |
|
|
|
|
|
30.06.16 |
|
30.06.16 |
|
|
|
|
|
US
Dollar shares |
^^^ |
Sterling shares |
|
|
|
|
|
US$ |
|
£ |
| Ratio
to average net assets |
|
|
|
|
|
|
|
Operating expense |
|
|
|
|
|
|
| Company
expenses 3 |
|
|
|
0.10% |
|
0.31% |
| Feeder
Fund expenses 4 |
|
|
|
0.57% |
|
1.25% |
| Feeder
Fund interest expenses 5 |
|
|
|
0.64% |
|
1.23% |
|
|
|
|
|
1.31% |
|
2.79% |
|
|
|
|
|
|
|
|
| Net investment gain 1 |
|
|
|
|
|
|
|
2.10% |
|
5.16% |
^^^Ratio to average net assets for the US Dollar share class is
calculated from the start of the period to 31 March 2016.
|
|
|
|
|
01.01.15 to |
|
01.01.15 to |
|
|
|
|
|
31.12.15 |
|
31.12.15 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
|
|
|
|
|
US$ |
|
£ |
| Per
share operating performance |
|
|
|
|
|
|
| Net
asset value at beginning of the year |
|
|
|
13.71 |
|
13.77 |
|
|
|
|
|
|
|
|
| Income
from investment operations |
|
|
|
|
|
|
| Net
investment gain 1 |
|
|
|
1.47 |
|
1.63 |
| Net
realised loss and unrealised depreciation on investment* |
|
|
|
(2.83) |
|
(2.92) |
| Other
capital items 2 |
|
|
|
0.05 |
|
(0.01) |
| Total loss |
|
|
|
|
(1.31) |
|
(1.30) |
|
|
|
|
|
|
|
|
| Net
asset value, end of the year |
|
|
|
12.40 |
|
12.47 |
|
|
|
|
|
|
|
|
| Total loss |
|
|
|
|
(9.52%) |
|
(9.48%) |
* Foreign exchange hedge loss allocated from the Feeder Fund and
currency translation gain arising due to translation of USD
allocations to GBP functional currency each amounted to £0.67 per
share.
|
|
|
|
|
01.01.15 to |
|
01.01.15 to |
|
|
|
|
|
31.12.15 |
|
31.12.15 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
|
|
|
|
|
US$ |
|
£ |
|
Supplemental data |
|
|
|
|
|
|
| Net
asset value, beginning of the year |
|
|
|
41,462 |
|
114,748 |
| Net
asset value, end of the year |
|
|
|
27,425 |
|
110,397 |
| Average
net asset value for the year |
|
|
|
36,688 |
|
115,109 |
|
|
|
|
|
01.01.15 to |
|
01.01.15 to |
|
|
|
|
|
31.12.15 |
|
31.12.15 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
|
|
|
|
|
US$ |
|
£ |
| Ratio
to average net assets |
|
|
|
|
|
|
|
Operating expense |
|
|
|
|
|
|
| Company
expenses 3 |
|
|
|
0.55% |
|
0.54% |
| Feeder
Fund expenses 4 |
|
|
|
2.33% |
|
2.36% |
| Feeder
Fund interest expenses 5 |
|
|
|
1.75% |
|
1.82% |
|
|
|
|
|
4.63% |
|
4.72% |
|
|
|
|
|
|
|
|
| Net
investment gain 1 |
|
|
|
10.91% |
|
12.05% |
|
|
|
|
|
01.01.15 to |
|
01.01.15 to |
|
|
|
|
|
30.06.15 |
|
30.06.15 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
|
|
|
|
|
US$ |
|
£ |
| Per
share operating performance |
|
|
|
|
|
|
| Net
asset value at beginning of the period |
|
|
|
13.71 |
|
13.77 |
|
|
|
|
|
|
|
|
| Income
from investment operations |
|
|
|
|
|
|
| Net
investment gain 1 |
|
|
|
0.41 |
|
0.42 |
| Net
realised loss and unrealised depreciation on investment* |
|
|
|
(0.24) |
|
(0.27) |
| Other
capital items 2 |
|
|
|
(0.02) |
|
0.01 |
| Total
return |
|
|
|
|
0.15 |
|
0.16 |
|
|
|
|
|
|
|
|
| Net
asset value, end of the period |
|
|
|
13.86 |
|
13.93 |
|
|
|
|
|
|
|
|
| Total
return |
|
|
|
|
1.11% |
|
1.18% |
* Foreign exchange hedge gain allocated from the Feeder Fund and
currency translation gain arising due to translation of USD
allocations to GBP functional currency each amounted to £0.18 per
share.
Total return reflects the net return for an investment made at
the beginning of the year and is calculated as the change in the
NAV per ordinary share during the period from 1 January 2015 to 30 June
2015 and is not annualised. An individual shareholder’s
return may vary from these returns based on the timing and entry
price of their purchase or sale of shares.
|
|
|
|
|
01.01.15 to |
|
01.01.15 to |
|
|
|
|
|
30.06.15 |
|
30.06.15 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
|
|
|
|
|
US$ |
|
£ |
|
Supplemental data |
|
|
|
|
|
|
| Net
asset value, beginning of the period |
|
|
|
41,462 |
|
114,748 |
| Net
asset value, end of the period |
|
|
|
38,520 |
|
118,333 |
| Average
net asset value for the period |
|
|
|
41,293 |
|
116,114 |
|
|
|
|
|
01.01.15 to |
|
01.01.15 to |
|
|
|
|
|
30.06.15 |
|
30.06.15 |
|
|
|
|
|
US
Dollar shares |
|
Sterling shares |
|
|
|
|
|
US$ |
|
£ |
| Ratio
to average net assets |
|
|
|
|
|
|
|
Operating expense |
|
|
|
|
|
|
| Company
expenses 3 |
|
|
|
0.34% |
|
0.34% |
| Feeder
Fund expenses 4 |
|
|
|
1.56% |
|
1.56% |
| Feeder
Fund interest expenses 5 |
|
|
|
0.76% |
|
0.76% |
|
|
|
|
|
2.66% |
|
2.66% |
|
|
|
|
|
|
|
|
| Net
investment gain 1 |
|
|
2.97% |
|
3.01% |
1) The net investment gain figures disclosed above
do not include net realised and unrealised gains/losses on
investments allocated from the Feeder Fund and Master Fund.
2) Included in other capital items are share issue
costs and the discounts and premiums on conversions between share
classes during the period as compared to the NAV per share at the
beginning of the year.
3) Company expenses are as disclosed in the
Statement of Operations, excluding the performance fees.
4) The Feeder and Master Fund’s expenses are the
operating expenses of the Feeder and Master Fund respectively.
5) Feeder and Master Fund interest expense includes
interest and dividend expenses on investments sold short.
9. Related party transactions
Parties are considered to be related if one party has the
ability to control the other party in making financial or
operational decisions.
On 1 January 2015, the Company
redeemed, in specie, $41,646,556 of
the US Dollar shares and £115,151,649 of the Sterling shares it
held in BHCC, amounting to an equivalent amount of US$220,828,279, and in return received Class A
shares of the Feeder Fund (a company managed by the Investment
Manager) in US Dollar and Sterling
classes in proportions matching the relative number of US Dollar
and Sterling shares of the Company in issue at the time.
Management fees are disclosed in note 3.
Directors’ fees charged during the period/year were as
follows:
|
|
|
|
|
01.01.16 to |
|
01.01.15 to |
|
01.01.15 to |
|
|
|
|
|
30.06.16 |
|
31.12.15 |
|
30.06.15 |
|
|
|
|
|
£ |
|
£ |
|
£ |
| Charlotte Valeur |
|
|
|
|
33,000 |
|
66,000 |
|
33,000 |
| Keith Dorrian |
|
|
|
|
16,500 |
|
33,000 |
|
16,500 |
| Partick Firth |
|
|
|
|
20,000 |
|
40,000 |
|
20,000 |
|
Christopher Waldron |
|
|
|
16,500 |
|
33,000 |
|
16,500 |
| Andrew
Rosenthal* |
|
|
|
- |
|
- |
|
- |
|
|
|
|
|
86,000 |
|
172,000 |
|
86,000 |
*Andrew Rosenthal has waived his
right to receive a Director fee.
The Company shares held by the Directors at period/year end were
as follows:
|
|
|
|
|
|
|
|
|
Sterling shares |
|
|
|
|
|
30.06.16 |
|
31.12.15 |
|
30.06.15 |
| Charlotte
Valeur |
|
|
|
4,236 |
|
4,236 |
|
4,236 |
| Keith Dorrian |
|
|
|
|
Nil |
|
Nil |
|
Nil |
| Partick Firth |
|
|
|
|
500 |
|
500 |
|
500 |
|
Christopher Waldron |
|
|
|
500 |
|
500 |
|
500 |
| Andrew
Rosenthal |
|
|
|
Nil |
|
Nil |
|
Nil |
At 30 June 2016, David Warren - the Chief Investment Officer of
DW – held 173,257 Sterling shares (31
December 2015: 52,270 US
Dollar shares and 135,512 Sterling shares) in the
Company.
10. Subsequent events
The Financial Statements were approved for issuance by the
Directors on 27 September 2016.
Subsequent events have been evaluated up to this date.
Subsequent to the period end and up to the date of this report,
the Company purchased the following shares of the Company to be
held as treasury shares:
|
|
|
Number of shares |
|
Cost |
|
Cost |
| Treasury
shares |
|
purchased |
|
£ |
|
US$ |
| Sterling shares |
|
|
252,500 |
|
2,770,237 |
|
3,636,678 |
Following the purchase of shares, the Company has 9,682,817
Sterling shares in issue.
No further subsequent events have occurred.
COMPANY INFORMATION
Directors
Charlotte Valeur* (Chair)
(appointed 31 October
2010)
Keith Dorrian* (Senior
Independent Director)
(appointed 31 October
2010)
Patrick Firth* (Chair of Audit
and Risk Committee)
(appointed 31 October
2010)
Christopher Waldron*
(appointed 31 October
2010)
Andrew Rosenthal
(appointed 8 April 2015)
(All Directors are non-executive)
* These Directors are independent for the purpose of
LR15.2.12-A.
Registered Office
PO Box 255
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
GY1 3QL
Investment Manager
DW Partners, LP
590 Madison Avenue
13th Floor
New York
NT 10022
Administrator and Corporate Secretary
Northern Trust International Fund
Administration Services (Guernsey)
Limited
PO Box 255
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
GY1 3QL
Independent Auditor
Ernst & Young LLP
PO Box 9, Royal Chambers
St Julian’s Avenue
St Peter Port
Guernsey
GY1 4AF
Registrar and CREST Service Provider
Computershare Investor Services (Guernsey) Limited
3rd Floor, Natwest House
Le Truchot
St. Peter Port
Guernsey
GY1 1WD
Legal Advisors (Guernsey Law)
Carey Olsen
Carey House
Les Banques
St. Peter Port
Guernsey
GY1 4BZ
Legal Advisors (UK Law)
Freshfields Bruckhaus Deringer LLP
65 Fleet Street
London
EC4Y 1HS
Corporate Brokers
JPMorgan Cazenove
25 Bank Street
London
E14 5JP
Fidante Capital (formerly Dexion Capital Plc)
1 Tudor Street
London
EC4Y 0AH
For the latest information www.dwcatalystltd.com