TIDMCAT
RNS Number : 1234K
CATCo Reinsurance Opps Fund Ltd
16 August 2012
16 August 2012
CATCo Reinsurance Opportunities Fund Ltd. ("the Company")
Interim Report
For the six months ended 30 June 2012
To: Specialist Fund Market, London Stock Exchange and Bermuda
Stock Exchange
CATCo Reinsurance Opportunities Fund Ltd. provides its
shareholders the opportunity to participate in the returns from
investments linked to catastrophe reinsurance risks, principally by
investing in fully collateralised reinsurance contracts and also
via a variety of insurance-based investments.
CHAIRMAN'S STATEMENT
During the first half of 2012 the Company's Net Asset Value
increased by approximately 5.3% from $339.8 million to $357.9
million. The performance reflects the gain on the 2012 investment
portfolio offset by the loss development of the catastrophic events
of the first half of 2011.
Deployment
At the beginning of the period, CATCo Investment Management
Ltd., the appointed investment manager, in conjunction with
CATCo-Re Ltd. ("CATCo"), a licensed Class 3 Reinsurance Company
through which the Company gains access to all of its reinsurance
risk exposures, agreed terms with more than 20 counterparties in
respect of reinsurance transactions. The counterparties deployed
all of the available assets under management as at 1 January
2012.
Contracts typically have a 12-month risk period commencing on 1
January 2012 and expiring on 31 December 2012. Although there is a
small portion of the portfolio written on a non-calendar basis. All
Reinsurance Agreements written by CATCo are fully collateralised
with liquid securities, namely, AAA-rated money market funds or
short term US Treasury Bills which reside in Reinsurance Trust
Accounts with the Bank of New York and whom act as Trustee.
Reinsurance Portfolio Diversification
CATCo's reinsurance portfolio contains a broad mix of 38 risk
pillars (as at 30 June 2012). This diversification ensures that
exposure to a single loss event, no matter the magnitude of the
event, results in no erosion of capital.
In addition, in the event of any single catastrophic loss event
CATCo's maximum exposure to such an event is completely
transparent.
Catastrophic Events
Costa Concordia Cruise Ship Disaster
On 13 January 2012, the Costa Concordia cruise ship ran aground
and keeled over off the west coast of Italy, near Giglio island,
only two hours into a week-long cruise of the Western
Mediterranean. There were over 4,200 passengers on the ship with 30
confirmed fatalities consisting of four crew members and 26
passengers. Two further bodies are yet to be found, one crew member
and one passenger. The final cost of this accident is still to be
determined by the insurance industry.
Current industry estimates suggest an insured loss of circa
USD1.050 billion. The CATCo Reinsurance Fund's investment portfolio
("the Master Fund"), which almost all of the Company's assets are
invested in, does not have any exposure to this marine event for
industry losses below USD1.25 billion.
At this level, the Costa Concordia event would have no impact on
the Company's 2012 investment portfolio. For illustrative purposes
only, the maximum exposure of the Offshore Marine risk pillar as at
30 April 2012 was 3%, providing a maximum annualised net return of
20% if there were to be a total loss to this pillar associated with
this event.
Christchurch (New Zealand) Earthquake and Tohoku (Japan)
The Company's Ordinary Shareholders are indirectly exposed to
potential losses arising from the New Zealand earthquake that
occurred on 22 February 2011 and the Japan earthquake that occurred
on 11 March 2011 through the Master Fund and ultimately through
CATCo-Re Ltd. The two retrocessional reinsurance counterparties
that represent the NZ and Japan Exposures have implemented a 100%
loss reserve on their respective balance sheets associated with
CATCo-Re's protections.
As a consequence, the Master Fund's Board of Directors has
resolved to include the same loss reserve provision in the Net
Asset Value calculation as at 30 June 2012, which has, in turn,
been reflected in the Company's Net Asset Value. Shareholders
should note that this is a loss reserve, and not a crystalised
loss, as CATCo-Re's protections are based on the actual paid
claims.
As explained in the subsequent events note, the Company has
merged the C Shares, which have no exposure to the NZ and Japanese
Exposures, with the Ordinary Shares.
US Hurricane Season
The US hurricane season officially begins every year on 1 June.
44% of the Company's distribution is in North America and the
Caribbean with a large proportion of the exposure being associated
to catastrophic wind events.
To date there have been no hurricane events in this region that
would have any impact on the Company's portfolio. During this
period the Company benefits from increased levels of premium
demonstrating the seasonality of global catastrophic events and
incomes received.
Investor Presentation 21 September 2012
On 21 September 2012 the Company and its Manager will be hosting
a presentation to shareholders about its investment strategy,
expected returns and a review of the retrocessional re-insurance
industry. A number of guest speakers will also be present. To
attend this event please contact mark.way@catcoim.com.
Outlook
The global retrocessional pricing for the Company's protection
remains favourable given the appetite from reinsurance
counterparties. Being fully asset backed, the predicted industry
retrocessional capacity erosion experienced during the year from
other collateralised reinsurers has created significant advantages
for the Company.
The Board is pleased with the progress during the first half of
the year with the Company remaining focused on low frequency
high-severity exposure profile. The Board remains committed to
ensuring that the investment targeted returns are achieved.
Anthony Taylor
Chairman
DIRECTORS' REPORT
Risks and Uncertainties
The Board of Directors has identified a number of key risks that
affect the Company's business. The principal risks are:
Reinsurance risk
The objective of the Company and of the Master Fund is to give
its Shareholders the opportunity to participate in the returns from
investments linked to catastrophe reinsurance risks, principally by
investing in fully collateralised Reinsurance Agreements accessed
by investments in preferred shares of the Reinsurer, CATCo Re Ltd.
The Master Fund spreads investment risk by seeking exposure to
multiple non-correlated risk categories so as to endeavour to limit
the amount of capital at risk with respect to a single catastrophic
event. The Company's Annual Report 2011, at page 18, explains in
detail as to how the Company and the Master Fund ensure that
appropriate diversification is achieved.
Risks related to the Company's investment activities
These risks include market price, interest rate, liquidity and
credit risk. Such key risks relating to investment and strategy
including for example, inappropriate asset allocation or borrowing
are managed through investment policy guidelines and restrictions,
and by the process of oversight at each Board meeting outlined
above. Operational disruption, accounting and legal risks are also
covered annually, and regulatory compliance is reviewed at each
Board meeting.
Directors' Responsibility Statement
The Directors are responsible for preparing the Half-Yearly
Financial 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 Financial Report has been prepared in accordance with
the applicable accounting standards.
2. The Chairman's Statement, the Financial Highlights and the
notes to the unaudited financial statements provides a fair review
of the information required by rule 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 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 during the first
six months of the financial year 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.)
Going Concern Status
The Company's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chairman's statement.
In accordance with the Financial Reporting Council's guidance on
going concern and liquidity risk issued in October 2009, the Board
of Directors have undertaken a rigorous review of the Company's
ability to continue as a
going concern.
The Company's assets consist of cash and a diverse portfolio of
retrocessional reinsurance investments which, in most
circumstances, are fully liquid at the end of their contractual
term. The Board of Directors have reviewed forecasts and they
believe that the Company has adequate financial resources to
continue its operational existence for the foreseeable future.
Accordingly, the Directors continue to adopt the going concern
basis in preparing these accounts.
UNAUDITED STATEMENT OF ASSETS AND LIABILITIES
(Expressed in United States 30 June 2012 30 June 2011 31 December
Dollars) 2011
---------------------------------- --------------------------------------------- -------------- --------------
Assets
---------------------------------- --------------------------------------------- -------------- --------------
Investment in CATCo Reinsurance
Fund Ltd.-
CATCo Diversified Fund, at
fair value 356,966,811 212,037,571 227,981,444
---------------------------------- --------------------------------------------- -------------- --------------
Cash and cash equivalents 1,197,126 45,686,267 123,194,026
---------------------------------- --------------------------------------------- -------------- --------------
Other assets 55,364 28,960 7,260
---------------------------------- --------------------------------------------- -------------- --------------
Total assets 358,219,301 257,752,798 351,182,730
---------------------------------- --------------------------------------------- -------------- --------------
Liabilities
---------------------------------- --------------------------------------------- -------------- --------------
Dividend payable - - 10,859,876
---------------------------------- --------------------------------------------- -------------- --------------
Accrued expenses and other
liabilities 295,922 572,779 456,858
---------------------------------- --------------------------------------------- -------------- --------------
Management fee payable 1,196 1,207 72,184
---------------------------------- --------------------------------------------- -------------- --------------
Amounts due to CATCo Reinsurance
Fund Ltd. -Diversified Fund - 44,176,633 -
---------------------------------- --------------------------------------------- -------------- --------------
Total liabilities 297,118 44,750,619 11,388,918
---------------------------------- --------------------------------------------- -------------- --------------
Net assets $ 357,922,183 $213,002,179 $ 339,793,812
---------------------------------- --------------------------------------------- -------------- --------------
See accompanying notes
UNAUDITED STATEMENT OF OPERATIONS
(Expressed in United States 6 months Period Period
Dollars) to 30 June 20 December 20 December
2012 2010 to 2010 to
30 June 31 December
2011 2011
----------------------------------- -------------- -------------- --------------
Net investment loss allocated
from
CATCo Reinsurance Fund Ltd.
- CATCo Diversified Fund
----------------------------------- -------------- -------------- --------------
Management fee (2,602,795) (819,876) (2,537,082)
----------------------------------- -------------- -------------- --------------
Performance fee (1,708,594) (622,498) (2,739,375)
----------------------------------- -------------- -------------- --------------
Administrative fee (165,898) (61,070) (177,249)
----------------------------------- -------------- -------------- --------------
Professional fees and other (106,672) (97,740) (185,807)
----------------------------------- -------------- -------------- --------------
Miscellaneous expenses (14,601) (23,626) (48,469)
----------------------------------- -------------- -------------- --------------
Total net investment loss
allocated from
CATCo Reinsurance Fund Ltd.
-- CATCo Diversified Fund (4,598,560) (1,624,810) (5,687,982)
----------------------------------- -------------- -------------- --------------
Fund investment income
----------------------------------- -------------- -------------- --------------
Interest - - 515
----------------------------------- -------------- -------------- --------------
Fund expenses
----------------------------------- -------------- -------------- --------------
Professional fees and other (321,638) (292,883) (617,174)
----------------------------------- -------------- -------------- --------------
Administrative fee (27,000) (16,500) (33,000)
----------------------------------- -------------- -------------- --------------
Management fee (8,358) (68,952) (145,142)
----------------------------------- -------------- -------------- --------------
Total Fund expenses (356,996) (378,335) (795,316)
----------------------------------- -------------- -------------- --------------
Net investment loss (4,955,556) (2,003,145) (6,482,783)
----------------------------------- -------------- -------------- --------------
Net realised and net change
in unrealised gain on securities
allocated from CATCo Reinsurance
Fund Ltd. -- CATCo Diversified
Fund
----------------------------------- -------------- -------------- --------------
Net realised gain (loss) 19,425,984 - -
on securities
----------------------------------- -------------- -------------- --------------
Net change in unrealised
gain on securities 3,657,943 7,227,292 27,234,336
----------------------------------- -------------- -------------- --------------
Net gain on investments 23,083,927 7,227,292 27,234,336
----------------------------------- -------------- -------------- --------------
Net increase in net assets
resulting from operations $ 18,128,371 $ 5,224,147 $ 20,751,553
----------------------------------- -------------- -------------- --------------
See accompanying notes
UNAUDITED STATEMENT OF CHANGES IN NET ASSETS
(Expressed in United States Dollars) 6 months to Period 20 Period 20
30 June 2012 December December 2010
2010 to to 31 December
30 June 2011
2011
---------------------------------------- -------------- ------------- ----------------
Operations
---------------------------------------- -------------- ------------- ----------------
Net investment loss (4,955,556) (2,003,145) (6,482,783)
---------------------------------------- -------------- ------------- ----------------
Net realised gain (loss) on securities 19,425,984 - -
---------------------------------------- -------------- ------------- ----------------
Net change in unrealised gain on
securities 3,657,943 7,227,292 27,234,336
---------------------------------------- -------------- ------------- ----------------
Net increase in net assets resulting
from operations 18,128,371 5,224,147 20,751,553
---------------------------------------- -------------- ------------- ----------------
Capital share transactions
---------------------------------------- -------------- ------------- ----------------
Issuance of shares - 213,047,487 338,047,487
---------------------------------------- -------------- ------------- ----------------
Dividend declared - - (10,859,876)
---------------------------------------- -------------- ------------- ----------------
Offering costs - (5,269,455) (8,145,352)
---------------------------------------- -------------- ------------- ----------------
Net change in net assets resulting
from capital share transactions - 207,778,032 319,042,259
---------------------------------------- -------------- ------------- ----------------
Net change in net assets 18,128,371 213,002,179 339,793,812
---------------------------------------- -------------- ------------- ----------------
Net assets, beginning of period 339,793,812 - -
---------------------------------------- -------------- ------------- ----------------
Net assets, end of period $ 357,922,183 213,002,179 339,793,812
---------------------------------------- -------------- ------------- ----------------
See accompanying notes
UNAUDITED STATEMENT OF CASH FLOWS
(Expressed in United States 6 months to Period 20 Period 20 December
Dollars) 30 June 2012 December 2010 to 31 December
2010 to 30 2011
June 2011
--------------------------------------------- ----------------- -------------- ---------------------
Cash flows from operating activities
--------------------------------------------- ----------------- -------------- ---------------------
Net increase in net assets
resulting from operations 18,128,371 5,224,147 20,751,553
--------------------------------------------- ----------------- -------------- ---------------------
Adjustments to reconcile net
increase in net assets resulting
from operations to net cash
used in operating activities:
--------------------------------------------- ----------------- -------------- ---------------------
Net investment loss, net realised
gain (loss) and net change
in unrealised gain on securities
allocated from CATCo Reinsurance
Fund Ltd. - CATCo Diversified
Fund (18,485,367) (5,602,482) (21,546,354)
--------------------------------------------- ----------------- -------------- ---------------------
Changes in operating assets
and liabilities:
--------------------------------------------- ----------------- -------------- ---------------------
Purchase of investment in CATCo
Reinsurance Fund Ltd.- CATCo
Diversified Fund (110,500,000) (206,435,089) (206,435,090)
--------------------------------------------- ----------------- -------------- ---------------------
Other assets (48,104) (28,960) (7,260)
--------------------------------------------- ----------------- -------------- ---------------------
Amounts due to CATCo Reinsurance
Fund Ltd. -Diversified Fund - 44,176,633 -
--------------------------------------------- ----------------- -------------- ---------------------
Accrued expenses and other
liabilities (160,936) 572,779 456,858
--------------------------------------------- ----------------- -------------- ---------------------
Management fee payable (70,988) 1,207 72,184
--------------------------------------------- ----------------- -------------- ---------------------
Net cash used in operating
activities (111,137,024) (162,091,765) (206,708,109)
--------------------------------------------- ----------------- -------------- ---------------------
Cash flows from financing activities
--------------------------------------------- ----------------- -------------- ---------------------
Proceeds from issuance of shares - 213,047,487 338,047,487
--------------------------------------------- ----------------- -------------- ---------------------
Dividends paid (10,859,876) - -
--------------------------------------------- ----------------- -------------- ---------------------
Offering costs - (5,269,455) (8,145,352)
--------------------------------------------- ----------------- -------------- ---------------------
Net cash provided by financing
activities (10,859,876) 207,778,032 329,902,135
--------------------------------------------- ----------------- -------------- ---------------------
Net change in cash (121,996,900) 45,686,267 123,194,026
--------------------------------------------- ----------------- -------------- ---------------------
Cash, beginning of period 123,194,026 - -
--------------------------------------------- ----------------- -------------- ---------------------
Cash, end of period $ 1,197,126 $ 45,686,267 $ 123,194,026
--------------------------------------------- ----------------- -------------- ---------------------
See accompanying notes
1. Nature of operations and summary of significant accounting policies
Nature of Operations
CATCo Reinsurance Opportunities Fund Ltd. (the "Fund") is a
closed-ended fund, registered and incorporated as an exempted
mutual fund company in Bermuda on 30 November 2010 and commenced
operations on 20 December 2010. The Fund was organized as a feeder
fund to invest substantially all of its assets in CATCo Diversified
Fund (the "Master Fund"). The Master Fund is a segregated account
of CATCo Reinsurance Fund Ltd. a mutual fund company incorporated
in Bermuda and registered as a segregated account company under the
Segregated Accounts Company Act 2000, as amended (the "SAC Act").
The Master Fund will establish a separate account for each class of
shares comprised in each segregated account (each, an "account").
Each account is a separate individually managed pool of assets
constituting, in effect, a separate fund with its own investment
objective and policies and overseen by the Investment Manager.
Pursuant to an investment management agreement, the Fund is managed
by CATCo Investment Management Ltd. (the "Investment Manager").
Refer to the Fund's prospectus for more information.
The Fund's Shares are listed and traded on the Specialist Fund
Market ("SFM"), a market operated by the London Stock Exchange. The
Fund's Shares are also listed on the Bermuda Stock Exchange
following the Secondary Listing on 20 May 2011.
The objective of the Master Fund is to give the shareholders the
opportunity to participate in the investment returns of various
insurance-based instruments, including preferred shares through
which the Master Fund would be exposed to reinsurance risk,
insurance-linked securities (such as notes, swaps and other
derivatives), and other financial instruments. All of the Master
Fund's exposure to reinsurance risk is obtained through its
investment (via preferred shares) in CATCo-Re Ltd. (the
"Reinsurer").
The Reinsurer is a Bermuda licensed Class 3 reinsurance company,
registered as a segregated accounts company under the SAC Act,
through which the Master Fund accesses all of its reinsurance risk
exposure. The Reinsurer will form a segregated account that
corresponds solely to the Master Fund's investment in the Reinsurer
with respect to each particular reinsurance agreement.
The Reinsurer focuses primarily on property catastrophe
insurance and may be exposed to losses arising from hurricanes,
earthquakes, typhoons, hailstorms, floods, tsunamis, tornados,
windstorms, extreme temperatures, aviation accidents, fires,
explosions, marine accidents and other perils.
Basis of Presentation
The unaudited financial statements are expressed in United
States dollars and have been prepared in conformity with accounting
principles generally accepted in the United States of America
("GAAP") as detailed in the Financial Accounting Standards Board's
Accounting Standards Codification.
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.
Valuation of Investment in the Master Fund
The fund records its investment in the Master Fund at fair value
based upon an estimate made by the Investment Manager, in good
faith and in consultation or coordination with the Administrator
where practicable, using what the Investment Manager believes in
its discretion are appropriate techniques consistent with market
practices for the relevant type of investment. Fair valuation in
this context depends on the facts and circumstances of the
particular investment, including but not limited to prevailing
market and other relevant conditions, and refers to the amount for
which a financial instrument could be exchanged between
knowledgeable, willing parties in an arm's length transaction. Fair
value is not the amount that an entity would receive or pay in a
forced transaction or involuntary transaction.
Financial Instruments
The fair values of the Fund's assets and liabilities, which
qualify as financial instruments under ASC 825, Financial
Instruments, approximate the carrying amounts presented in the
statement of assets and liabilities.
Investment Transactions and Related Investment Income and
Expense
The Fund records its proportionate share of the Master Fund's
income, expenses, and realized and changes in unrealized gains and
losses on a monthly basis. In addition, the Fund incurs and accrues
its own income and expenses.
Investment transactions of the Master Fund are accounted for on
a trade-date basis. Realized gains or losses on the sale of
investments are calculated using the specific identification method
of accounting. Interest is recognized on the accrual basis.
Translation of Foreign Currency
Assets and liabilities denominated in foreign currencies are
translated into United States dollar amounts at the period-end
exchange rates. Transactions denominated in foreign currencies,
including purchases and sales of investments, and income and
expenses, are translated into United States dollar amounts on the
transaction date. Adjustments arising from foreign currency
transactions are reflected in the statement of operations.
The Fund does not isolate the portion of the results of
operations arising from the effect of changes in foreign exchange
rates on investments from fluctuations arising from changes in
market prices of investments held. Such fluctuations are included
in net gain (loss) on investments in the statement of
operations.
Income Taxes
Under the laws of Bermuda, the Fund is generally not subject to
income taxes, until 31 March 2035. However, certain United States
dividend income and interest income may be subject to a 30%
withholding tax. Further, certain United States dividend income may
be subject to a tax at prevailing treaty or standard withholding
rates with the applicable country or local jurisdiction.
The Fund is required to determine whether its tax positions are
more likely than not to be sustained upon examination by the
applicable taxing authority, including resolution of any related
appeals or litigation processes, based on the technical merits of
the position. The tax benefit recognized is measured as the largest
amount of benefit that has a greater than fifty percent likelihood
of being realized upon ultimate settlement with the relevant taxing
authority. De-recognition of a tax benefit previously recognized
results in the Fund recording a tax liability that reduces ending
net assets. Based on its analysis, the Fund has determined that it
has not incurred any liability for unrecognized tax benefits as of
30 June 2012. However, the Fund's conclusions may be subject to
review and adjustment at a later date based on factors including,
but not limited to, on-going analyses of and changes to tax laws,
regulations and interpretations thereof.
The Fund recognizes interest and penalties related to
unrecognized tax benefits in interest expense and other expenses,
respectively. No interest expense or penalties have been recognized
as of and for the period ended 30 June 2012.
Generally, the Fund is subject to income tax examinations by
major taxing authorities for all tax years since its inception.
The Fund may be subject to potential examination by U.S. federal
or foreign jurisdiction authorities in the areas of income taxes.
These potential examinations may include questioning the timing and
amount of deductions, the nexus of income among various tax
jurisdictions and compliance with U.S. federal or foreign tax
laws.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires the Fund's management to make estimates and
assumptions that affect the amounts disclosed in the financial
statements and accompany notes. Actual results could differ from
those estimates.
Offering costs
The costs associated with each capital raise are expensed as
incurred.
2. Concentration of credit risk
In the normal course of business, the Fund maintains its cash
balances in financial institutions, which at times may exceed
federally insured limits. The Fund is subject to credit risk to the
extent any financial institution with which it conducts business is
unable to fulfill contractual obligations on its behalf. Management
monitors the financial condition of such financial institutions and
does not anticipate any losses from these counterparties. At 30
June 2012 cash is held with HSBC Bank Bermuda Ltd. which has a
credit rating of A+.
3. Loss reserves
The reserve for unpaid losses and loss 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 2011 and in the six months to 30 June 2012, the Reinsurer
paid claims of $5,625,000 net of additional loss premium of
$1,875,000 pertaining to the Tohoku, Japan earthquake in March
2011. At 30 June 2012, the Reinsurer established gross and net
reserves of $23,877,400 associated with the 2011 earthquakes in
Christchurch, New Zealand and Tohoku, Japan.
4. Capital share transactions
As of 30 June 2012, the Fund has authorized capital stock of
500,000,000 unclassified shares of par value $0.0001 per share.
The Fund had an initial placing which closed on 20 December 2010
raising $80,392,000 through the issuance of 80,392,000 Ordinary
Shares. On 31 March 2011 a further $7,358,750 was raised through an
additional issuance of 7,250,000 Ordinary Shares. The Fund had a
further placing opening on 18 May 2011 resulting in $124,446,737
being raised through the issuance of 124,446,737 C Shares on 20 May
2011 and $850,000 being raised through the issuance of 850,000 C
Shares on 23 May 2011. A further $125,000,000 was raised through an
additional issuance of 118,821,292 C Shares on 16 December
2011.
As of 30 June 2012, the Fund has issued 87,642,000 Class 1
Ordinary Shares and 244,118,029 Class 2 C Shares (collectively the
"Shares").
Transactions in Shares during the period, and the Shares
outstanding and the net asset value ("NAV") per Share as of 30 June
2012 is as follows:
Beginning Shares Shares Ending
Shares Issued Redeemed Shares
-------------------- ------------ -------- ---------- ------------
Class 1 - Ordinary
shares 87,642,000 - - 87,642,000
Class 2 - C Shares 244,118,029 - - 244,118,029
Beginning Amounts Amounts Ending Ending NAV
Shares Issued Redeemed Net Assets Per Share
---------------------- -------------- -------- ---------- ------------- -----------
Class 1 - Ordinary
shares $ 87,750,750 $ - $ - $84,826,055 $0.9679
Class 2 - C Shares $ 250,296,737 $ - $ - $273,096,128 $1.1187
The Fund has been established as a closed-ended fund and, as
such, shareholders do not have the right to redeem their Shares.
The Shares are held in trust by Capita IRG Trustees Limited (the
"Depository") in accordance with the Depository Agreement between
the Fund and the Depository. The Depository holds the Shares and in
turn issues depository interests in respect of the underlying
Shares which have the same rights and characteristics of the
Shares.
The Board of Directors of the Fund (the "Board") has the ability
to issue C Shares during any period when the Master Fund has
designated one or more investments as "Side Pocket Investments".
This typically will happen if a covered or other pre-determined
event has recently occurred or seems likely to occur under an
Insurance- Linked Instrument. In such circumstances, only those
Shareholders on the date that the investment has been designated as
a Side Pocket Investment will participate in the potential losses
and premiums attributable to such Side Pocket investment. Any
shares issued when side pockets exist will be as C Shares that will
participate in all of the Master Fund's portfolio other than in
respect of potential losses and premiums attributable to any Side
Pocket Investments in existence at the time of issue. If no Side
Pocket Investments are in existence at the time of proposed issue,
it is expected that the Fund will issue further Ordinary
Shares.
The Reinsurer has entered into fully collateralized reinsurance
contracts under which it is potentially exposed to losses arising
from the New Zealand earthquake on 22 February 2011 and the Japan
earthquake on 11 March 2011 (respectively, "NZ Exposures" and
"Japan Exposures"). Due to the uncertainty in valuing these
investments and the tenure of these contracts, the Master Fund's
Board has designated the Master Fund's potential NZ Exposures and
Japan Exposures as a Side Pocket Investment, represented by a new
Class of shares ("SP Shares"). Accordingly, SP Shares have been
issued as at 1 April 2011 to each Master Fund Shareholder by way of
the conversion of a pro rata proportion of their Master Fund Class
A, B and C Shares into SP Shares. In this way, Master Fund shares
that are issued to Master Fund shareholders after 31 March 2011
will participate fully in the Master Fund's portfolio, except that
they will not have any NZ Exposures or Japan Exposures for the
events that have already occurred and will accordingly not
participate in any losses or premiums attributable to such
exposures.
Once the loss position in respect of the NZ and Japan Exposures
is clarified, the Side Pocket Investment will be realised and the
SP Shares will be exchanged for Master Fund Class A, B and C
Shares.
Following the realization of the Side Pocket Investment in such
circumstances, it is expected that any Class C Shares which have
been issued will be converted into Ordinary Shares and will
accordingly participate in any losses or premiums attributable to
such Ordinary Shares.
5. Investment management agreement
Pursuant to the Investment Management Agreement dated 16
December 2010, the Investment Manager is empowered to formulate the
overall investment strategy to be carried out by the Fund and to
exercise full discretion in the management of the trading,
investment transactions and related borrowing activities of the
Fund in order to implement such strategy.
6. Related party transactions
The Investment Manager of the Fund is also the Investment
Manager of the Master Fund and the Reinsurer. The Investment
Manager is entitled to a management fee, calculated and payable
monthly in arrears equal to 1/12 of 1.5% of the net asset value of
the Fund which is not attributable to the Fund's investment in the
Master Fund Shares as at the last calendar day of each calendar
month. Performance fees are charged in the Master Fund.
Qatar Insurance Company, an affiliate of the Investment Manager,
holds 31.4% of voting rights of the Ordinary Shares issued in the
Fund. In addition, the Directors of the Fund are also Shareholders
of the Fund.
7. Administrative Fee
Prime Management Limited (the "Administrator") serves as the
Fund's Administrator and performs certain administrative and
clerical services on behalf of the Fund. For the provision of the
service under the Administration Agreement, the Administrator
receives an annual flat fee.
8. Financial highlights
Financial highlights for the Ordinary Shares are for the period
1 January 2012 to 30 June 2012 are as follows:
Class 1 Class 2
Ordinary Shares C Shares
United States Dollar United States Dollar
Per share operating performance
Net asset value, beginning of
period 0.9999 1.0329
Offering costs - -
Income (loss) from investment
operations:
Net investment loss (0.0013) (0.0198)
Net gain on investments (0.0307) 0.1056
Total from investment operations (0.0320) 0.0858
Premium - -
Dividend - -
Net asset value, end of period 0.9679 1.1187
Total return
Total return before performance
fee (3.94)% 9.23%
Performance fee* 0.74 (0.93)
Total return after performance
fee (3.20)% 8.30%
Ratio to average net assets
Expenses other than performance
fee (0.85)% (0.43)%
Performance fee* 0.72 (0.40)
Total expenses after performance
fee (0.13)% (0.83)%
Net investment loss (0.13)% (1.91)%
The ratios to weighted average net assets are calculated for
each Class of Share taken as a whole. An individual shareholder's
return and ratios to weighted average net assets may vary from
these amounts based on the timing
of capital transactions. Returns and ratios shown above are for
the period ended 30 June 2012 and have not been annualized.
* The performance fee is charged in the Master Fund.
9. Indemnifications or warranties
In the ordinary course of its business, the Fund may enter into
contracts or agreements that contain indemnifications or
warranties. Future events could occur that lead to the execution of
these provisions against the Fund. Based on its history and
experience, management believes that the likelihood of such an
event is remote.
10. Subsequent events
On 2 August 2012 the Board of the Fund announced that it has
declared a distribution (the "Distribution") to Ordinary
Shareholders of any proceeds it receives in connection with that
part of its investment in the Master Fund which is exposed to
potential losses arising from the Master Fund's investment in
reinsurance contracts linked to the New Zealand earthquake that
occurred on 22 February 2011 and the Japan earthquake that occurred
on 11 March 2011 (together, the "NZ and Japan Exposures").
The Distribution will be made to Ordinary Shareholders on its
register of members on 10 August 2012 (the "Record Date") pro rata
to the number of Ordinary Shares held on the Record Date, as soon
as practicable following receipt of any proceeds from the Master
Fund.
Subsequent to the declaration of the Distribution the Board
announced on 8 August 2012 that the Master Fund in which the Fund
invests has closed its side pocket associated with the NZ and Japan
Exposures by way of the compulsory redemption of the shares issued
in respect of such side pocket, including those held by the Fund,
on 1 August 2012. As described in the Prospectus, this triggers the
conversion of C Shares into Ordinary Shares. The conversion of C
Shares into Ordinary Shares was effective close of business 10
August 2012 with the admission for the new Ordinary shares
effective 13 August 2012.
The unaudited financial statements were approved by management
and Board of Directors and available for issuance on 16 August
2012. Subsequent events have been evaluated through this date.
For further information, please
contact:
CATCo Investment Management Ltd
Jason Bibb, Director
Telephone: +1 441 531 2227
Email: jason.bibb@catcoim.com
Mark Way, Corporate Communications
Telephone: +44 7786 116991
Email: mark.way@catcoim.com
Numis Securities Limited
David Benda / Hugh Jonathan
Telephone: +44 (0) 20 7260 1000
Prime Management Ltd
Matthew Charleson / John Whiley
Tel: +1 (441) 295 0329
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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