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Overview of the Fund

Blue Capital Alternative Income Fund Limited is a London-listed closed-end fund (LSE:BCAI) launched in 2012. The fund provides qualified institutional and retail investors with the opportunity to access the global catastrophe reinsurance market, and to invest in an alternative asset class whose historical returns have been largely uncorrelated to those of other asset classes including global equities, bonds and hedge funds.

Summary of the Investment Objective and Policy The investment objective of the Company is to generate attractive returns from a sustainable annual dividend yield and longer-term capital growth. The Company targets an annualized dividend yield of LIBOR plus 6 per cent per annum on the Issue Price of the Ordinary Shares and a net return to Shareholders (comprised of dividends and other distributions to Shareholders together with increases in the Company's Net Asset Value) of LIBOR plus 8 per cent per annum to be achieved over the longer term, net of fees.1

Our strategy is to invest substantially all of the assets in shares linked to the segregated account identified as Blue Capital Global Reinsurance SA-1 (the "Master Fund") within Blue Water Master Fund Ltd., an exempted Bermuda mutual fund segregated accounts company.

The Master Fund invests in a diversified portfolio of fully collateralized reinsurance-linked contracts and other investments carrying exposures to insured catastrophe event risks. The Master Fund predominantly invests in fully collateralized reinsurance-linked contracts through preference shares issued by Blue Water Re Ltd. ("Blue Water Re") which is an exempted company incorporated in Bermuda licensed and regulated by the Bermuda Monetary Authority as a special purpose insurer. The Master Fund's investment in other reinsurance-linked investments carrying exposure to insured catastrophe event risks such as industry loss warranties, 144A rated catastrophe bonds and other insurance-linked instruments may be made directly by the Master Fund or indirectly via Blue Water Re.

The Company's investment policy, including investment restrictions, is set out in full in the 2016 Annual Report.