2016 - ci investments › orderform › pdf › semi_annuals › ddj_e.pdfa 2016 ddj high yield fund...

A

2 0 1 6

DDJ HIGH YIELD FUND

S E M I - A N N U A L F I N A N C I A L S T A T E M E N T S

a s a t J u n e 3 0 , 2 0 1 6

B

TABLE OF CONTENTS

Statements o f F inanc ia l Pos i t ion 1

Statements o f Comprehens ive Income 2

Statements o f Changes in Net Assets At t r ibutab le to Ho lders o f Redeemable Un i ts 3

Statements o f Cash F lows 4

Schedu le o f Investment Por t fo l io 5

Fund Spec i f i c Notes to F inanc ia l S ta tements 7

Notes to the F inanc ia l S ta tements 15

Lega l Not ice 20

CI Investments Inc., the Manager of the Fund, appoints independent auditors to audit the

Fund’s Annual Financial Statements. Under Canadian securities laws (National Instrument 81-106),

if an auditor has not reviewed the Semi-Annual Financial Statements, this must be disclosed

in an accompanying notice.

The Fund’s independent auditors have not performed a review of these Semi-Annual Financial

Statements in accordance with standards established by the Canadian Institute of Chartered

Accountants.

1

STATEMENTS OF FINANCIAL POSITION (unaudi ted)

D D J H I G H Y I E L D F U N D

Assets

Current assets

Investments*

Cash

Unrealized gain on futures and foreign currency forward contracts

Cash collateral received for securities on loan (Note 7)

Fees rebate receivable

Dividends receivable

Interest receivable

Other receivable (Note 2)

Securities lending revenue receivable (Note 7)

Receivable for investments sold

Receivable for unit subscriptions

Liabilities

Current liabilities

Unrealized loss on futures and foreign currency forward contracts

Payable for cash collateral under securities lending (Note 7)

Payable for investments purchased

Payable for unit redemptions

Distributions payable to holders of redeemable units

Performance fees payable

Management fees payable

Administration fees payable

Net assets attributable to holders of redeemable units

*Investments at cost

Net assets attributable to holders of redeemable units per unit:

Number of redeemable units outstanding:

as at as at Jun. 30, 2016 Dec. 31, 2015

24,400 25,459

4,836 5,271

196 18

- -

1 1

- -

309 338

- 39

- -

412 168

- -

30,154 31,294

159 1,596

- -

924 140

- -

583 587

- -

30 31

7 7

1,703 2,361

28,451 28,933

23,880 23,680

9.75 9.85

2,918,229 2,936,429

(in $000’s except for per unit amounts and units outstanding)

The accompanying notes are an integral part of these financial statements.

2

STATEMENTS OF COMPREHENSIVE INCOME (unaudi ted)


for the periods ended June 30 (in $000’s except for per unit amounts and number of units)

Income

Net gain (loss) on investments and derivatives

Dividends

Interest for distribution purposes

Net realized gain (loss) on sale of investments and derivatives

Change in unrealized appreciation (depreciation) in value of investments and derivatives

Total net gain (loss) on investments and derivatives

Other income

Foreign exchange gain (loss) on cash

Commitment fee income

Securities lending revenue (Note 7)

Gain (loss) on redemption

Total other income

Total income

Expenses

Management fees (Note 5)

Administration fees (Note 5)

Performance fees (Note 5)

Commissions and other portfolio transaction costs

Audit fees

Legal fees

Independent review committee fees

Withholding taxes

Harmonized sales tax

Total expenses

Increase (decrease) in net assets attributable to holders of redeemable units

Increase (decrease) in net assets attributable to holders of redeemable units per unit:

Weighted average number of units:

2016 2015

- -

1,112 1,381

(289) (1,390)

356 709

1,179 700

(118) 166

- -

- -

14 (21)

(104) 145

1,075 845

155 182

33 38

- -

1 8

1 3

- -

1 1

- -

20 24

211 256

864 589

0.30 0.20

2,924,142 2,950,306


3

STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS (unaudi ted)


Net assets attributable to holders of redeemable units at the beginning of period


Distributions to holders of redeemable units

From net investment income

From net realized gains

Return of capital

Total distributions to holders of redeemable units

Redeemable unit transactions

Proceeds from redeemable units issued

Reinvestment of distributions to holders of redeemable units

Redemption of redeemable units

Net increase (decrease) from redeemable unit transactions

Net increase (decrease) in net assets attributable to holders of redeemable units

Net assets attributable to holders of redeemable units at the end of period

2016 2015

28,933 33,144

864 589

(1,168) (1,128)

- -

- (49)

(1,168) (1,177)

- -

- -

(178) (261)

(178) (261)

(482) (849)

28,451 32,295

for the periods ended June 30 (in $000’s)


4

D D J H I G H Y I E L D F U N DSTATEMENTS OF CASH FLOWS (unaudi ted)

Cash flows from (used in) operating activities


Adjustments for:

Net realized (gain) loss on sale of investments and derivatives

Unrealized foreign exchange (gain) loss on cash

Commissions and other portfolio transaction costs

Change in unrealized (appreciation) depreciation in value of investments and derivatives

Proceeds from sale and maturity of investments and derivatives

Purchase of investments and derivatives

(Increase) decrease in dividends receivable

(Increase) decrease in interest receivable

(Increase) decrease in securities lending revenue receivable

Increase (decrease) in management fees payable

Increase (decrease) in administration fees payable

Increase (decrease) in performance fees payable

(Increase) decrease in other receivable

Net cash from (used in) operating activities

Cash flows from (used in) financing activities

Distributions paid to holders of redeemable units, net of reinvested distributions

Proceeds from issuance of redeemable units

Amounts paid on redemption of redeemable units

Net cash from (used in) financing activities

Unrealized foreign exchange gain (loss) on cash

Net increase (decrease) in cash

Cash (bank overdraft), beginning of period

Cash (bank overdraft), end of period

Supplementary Information:

Dividends received, net of withholding tax*

Interest received, net of withholding tax*Dividends paid*Interest paid*

2016 2015

864 589

289 1,390

210 (1)

1 8

(356) (709)

5,667 7,139

(5,617) (5,566)

- -

29 18

- -

(1) -

- -

- -

39 7

1,125 2,875

(1,172) (1,182)

- -

(178) (261)

(1,350) (1,443)

(210) 1

(225) 1,432

5,271 2,120

4,836 3,553

- -

1,141 1,399

- -

- -

for the periods ended June 30 (in $000’s)

*Dividends and interest received as well as dividends and interest paid relate to operating activities of the Fund. The accompanying notes are an integral part of these financial statements.

5

SCHEDULE OF INVESTMENT PORTFOLIO AS AT JUNE 30 , 2016 (unaudi ted)

*Denotes all or part of securities on loan.Percentages shown in brackets relate investments at fair value to net assets attributable to holders of redeemable units of the Fund.

U.S.A. (80.7%) (cont’d)

USD 1,650,000 Foresight Energy LLC/Foresight Energy Corp.,

7.875% 08/15/2021 1,693,587 1,471,063

USD 130,000 Forum Energy Technologies Inc.,

6.25% 10/01/2021 152,313 155,796

USD 110,000 Foundation Building Materials LLC, Term Loan,

Private Placement, variable rate, 10/09/2022 136,388 137,868

USD 400,000 FPC Holdings Inc., Term Loan, Private Placement,

variable rate, 05/27/2020 392,373 354,037

USD 100,000 Genoa a QoL Healthcare Co., LLC, Term Loan,


25,950 Haights Cross Communications Inc.,

Private Placement 10,100 -

USD 639,228 Haights Cross Operating Co., FRN,

Private Placement 16% 12/15/2017 623,074 -

USD 416,838 Haights Cross Operating Co.,

Private Placement 13% 09/15/2017 451,595 25,045

USD 218,126 HC Group Holdings III Inc., Term Loan B,


USD 400,000 Heartland Dental Care Inc., Term Loan,


USD 237,671 Heartland Dental Centre Inc., Term Loan,


USD 1,309,000 HRG Group Inc., 7.75% 01/15/2022 1,293,918 1,681,845

USD 243,000 HRG Group Inc., 7.875% 07/15/2019 252,312 329,288

USD 310,000 Joseph T Ryerson & Son Inc., 11% 05/15/2022 397,824 414,572

USD 145,300 Lightower Fiber, Term Loan 2nd Lien,


USD 190,000 Mercer International Inc., 7% 12/01/2019 214,682 247,955

USD 150,000 Mercer International Inc., 7.75% 12/01/2022 169,486 193,816

USD 90,652 Miami Valley Steel Services Inc., Term Loan,


USD 110,000 MPH Acquisition Holdings LLC

7.125% 06/01/2024 143,248 149,238

USD 90,000 Nautilus Merger Sub Inc., Term Loan,


USD 100,000 Needle Merger Sub Corp., 8.125% 03/15/2019 126,243 123,719

USD 30,000 Newfield Exploration Co., 5.375% 01/01/2026 33,444 37,697

USD 367,006 North Atlantic Trading Co., Inc., Term Loan,


USD 380,000 Nuance Communications Inc.,

5.375% 08/15/2020 414,092 499,593

USD 70,000 NVA Holdings Inc., Term Loan,


USD 60,000 Oasis Petroleum Inc., 6.875% 03/15/2022 70,890 71,615

USD 490,000 Opal Acquisition Inc., 8.875% 12/15/2021 568,277 485,929

USD 237,266 Opal Acquisition Inc., Term Loan B,


U.S.A. (80.7%)

USD 140,000 99 Cents Only Stores LLC 11% 12/15/2019 136,671 90,447

USD 119,388 99 Cents Only Stores LLC, Term Loan B2,


USD 30,000 Acadia Healthcare Co., Inc., 5.625% 02/15/2023 39,227 37,988

USD 570,000 Ancestry.com Inc., 11% 12/15/2020 560,681 788,056

USD 310,000 Ancestry.com Inc., 9.625% 10/15/2018 360,669 405,560

USD 108,894 Asurion LLC, Term Loan, Private Placement,

variable rate, 08/04/2022 140,481 139,050

USD 660,000 Asurion LLC, Term Loan, Private Placement,

variable rate, 03/03/2021 780,168 824,648

USD 220,000 Berlin Packaging LLC, Term Loan,


USD 146,489 BioScrip Inc., Term Loan B, Private Placement,

variable rate, 07/31/2020 176,348 181,708

USD 244,139 BioScrip Inc., Term Loan, Private Placement,

variable rate, 07/31/2020 293,904 302,836

USD 30,000 BJ’s Wholesale Club Inc., Term Loan,


USD 599,241 Bossier Casino Venture Holdco Inc.,

14% 02/09/2018 596,491 774,283

39,099 Bossier Casino Venture Holdco Inc.,

Private Placement 77,823 337,979

USD 234,579 CareCore National LLC, Term Loan,


USD 740,000 Century Aluminum Co., 7.5% 06/01/2021 750,681 860,543

USD 130,000 Cheniere Energy Inc., 7% 06/30/2024 166,829 172,489

USD 60,000 Clear Channel Worldwide Holdings Inc.,

6.5% 11/15/2022 63,465 74,619


Series A, 7.625% 03/15/2020 109,099 129,695


Series B, 7.625% 03/15/2020 280,692 282,771

USD 190,000 Cleaver-Brooks Inc., 8.75% 12/15/2019 202,402 243,659

- Clevelend Unlimited Inc., common 52,678 3,419

USD 190,000 Concentra Inc., Term Loan, Private Placement,

variable rate, 06/01/2023 230,129 243,045

USD 98,113 Connolly Corp., Term Loan, Private Placement,

variable rate, 05/09/2022 107,412 126,297

USD 50,000 Continental Resources Inc., 3.8% 06/01/2024* 53,260 56,368

USD 40,000 Continental Resources Inc., 4.5% 04/15/2023 37,671 48,196

USD 70,000 Continental Resources Inc., 5% 09/15/2022 67,133 88,412

USD 460,000 CPI Buyer LLC, Term Loan, Private Placement,

variable rate, 07/30/2022 497,999 564,651

USD 320,000 Delta 2 Lux S.a.r.l., 7.75% 07/29/2022 371,625 394,351

USD 750,000 Equinox Holdings Inc., Term Loan,



No. of Shares/ Par Value Description

AverageCost ($)

FairValue ($)


AverageCost ($)

FairValue ($)

6

SCHEDULE OF INVESTMENT PORTFOLIO AS AT JUNE 30 , 2016 (unaudi ted) (cont ’d)

U.S.A. (80.7%) (cont’d)

USD 50,000 Zayo Group LLC/Zayo Capital Inc.,

6% 04/01/2023 68,578 65,574

22,257,117 22,978,342

LUXEMBOURG (4.6%)

USD 490,000 ConvaTec Finance International S.A.,

8.25% 01/15/2019 641,021 621,261

USD 210,000 ConvaTec Healthcare E S.A., 10.5% 12/15/2018 304,698 277,448

USD 199,873 Evergreen Skills Lux S.a.r.l., Term Loan 1,


USD 310,000 Evergreen Skills Lux S.a.r.l., Term Loan 2,


1,506,767 1,294,932

CANADA (0.5%)

USD 100,000 Teine Energy Ltd., 6.875% 09/30/2022 115,980 126,626

Commissions and other

portfolio transaction costs (6)

Total Bonds & Equities (85.8%) 23,879,858 24,399,900

DERIVATIVE INSTRUMENTS

Foreign Currency Forward Contracts (0.1%)

(see Schedule A) 37,262

Total Investments (85.9%) 23,879,858 24,437,162

Other Net Assets (Liabilities) (14.1%) 4,013,433

Net Assets Attributable to

Holders of Redeemable Units (100.0%) 28,450,595

Principal amounts stated in:

USD U.S. Dollar

U.S.A. (80.7%) (cont’d)

USD 410,000 Optima Speciality Steel Inc., 12.5% 12/15/2016 401,530 447,650

USD 160,000 Optimas OE Solutions Holding LLC/Optimas

OE Solutions Inc., 8.625% 06/01/2021 194,704 144,716

USD 40,000 PQ Corp., 6.75% 11/15/2022 50,482 53,881

USD 350,000 Sabine Pass Liquefaction LLC 5.625% 03/01/2025* 419,195 450,541

USD 20,000 Sabine Pass Liquefaction LLC 5.625% 04/15/2023 24,468 25,939

USD 40,000 SESI LLC 7.125% 12/15/2021 48,674 49,746

USD 420,000 Shale Holdings LLC/Shale Finance Corp.,

8.75% 11/15/2019 416,554 360,885

USD 30,000 Simmons Foods Inc., 7.875% 10/01/2021 35,325 35,275

USD 130,000 SolarWinds Inc., Term Loan, Private Placement,

variable rate, 02/01/2023 172,010 167,659

USD 170,000 Sprint Communications Inc., 8.375% 08/15/2017 228,555 224,952

USD 30,000 Sprint Communications Inc., 9.125% 03/01/2017 42,032 39,946

USD 20,000 Summit Midstream Holdings LLC/Summit

Midstream Finance Corp., 5.5% 08/15/2022 19,565 22,224

USD 170,000 Tenet Healthcare Corp., 6.75% 06/15/2023 206,811 210,323

USD 270,000 TransDigm Inc., 5.5% 10/15/2020 296,465 354,974

USD 170,000 TransDigm Inc., 6% 07/15/2022 185,258 220,796

USD 640,000 US Foods Inc., 8.5% 06/30/2019 759,823 845,224

USD 160,000 US Renal Care Inc., Term Loan,


USD 167,025 UTEX Industries Inc., Term Loan B,


USD 200,000 UTEX Industries Inc., Term Loan,


USD 270,000 Veritas US Inc., Term Loan, Private Placement,

variable rate, 01/27/2023 298,711 308,749

USD 400,000 Washington Inventory Service, Term Loan,


USD 150,000 WMG Acquisition Corp., 6.75% 04/15/2022 166,253 195,270

USD 280,000 WPX Energy Inc., 5.25% 01/15/2017 372,620 362,694



AverageCost ($)

FairValue ($)


AverageCost ($)

FairValue ($)

Schedule AForeign Currency Forward Contracts (0.1%)

Contracts CounterpartyCredit Rating of

the Counterparty‡Settlement

DateContracts

Rate Pay ReceiveUnrealized

Gain (Loss) ($)1 Royal Bank of Canada A-1+ 18-Jul-16 1.31 (2,862,000) US $ 3,737,715 Canadian $ 40,0621 Royal Bank of Canada A-1+ 25-Jul-16 0.79 (3,815,000) US $ 4,852,222 Canadian $ (76,436)1 Royal Bank of Canada A-1+ 7-Jul-16 1.31 (3,677,000) US $ 4,830,681 Canadian $ 79,7891 Royal Bank of Canada A-1+ 15-Aug-16 0.78 (4,958,000) US $ 6,322,516 Canadian $ (82,526)1 Royal Bank of Canada A-1+ 8-Aug-16 1.31 (5,786,000) US $ 7,551,297 Canadian $ 76,373Total Foreign Currency Forward Contracts Value 37,262

‡ Credit ratings are obtained from S&P Global Ratings, where available, otherwise ratings are obtained from: Moody’s Investors Service or Dominion Bond Rating Service.*Denotes all or part of securities on loan.Percentages shown in brackets relate investments at fair value to net assets attributable to holders of redeemable units of the Fund.

7

FUND SPECIFIC NOTES TO FINANCIAL STATEMENTS (unaudi ted)


Financial Instruments by Category (Note 2)

The following tables present the carrying amounts of the Fund’s financial instruments by category:


The following tables present the carrying amounts of the Fund’s financial instruments by category:

as at June 30, 2016

Held forTrading

Financial Assets/Liabilities as FVTPL

Designated at Inception Total

Financial Assets/Liabilities at

Amortized Cost Total

(in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s)

- 24,400 24,400 - 24,400

- - - 4,836 4,836

196 - 196 - 196

- - - - -

- - - 1 1

- - - - -

- - - 309 309

- - - - -

- - - - -

- - - 412 412

- - - - -

196 24,400 24,596 5,558 30,154

159 - 159 - 159

- - - - -

- - - 924 924

- - - - -

- - - 583 583

- - - - -

- - - 30 30

- - - 7 7

159 - 159 1,544 1,703

Assets

Investments

Cash


Cash collateral received for securities on loan



Interest receivableOther receivable

Securities lending revenue receivable



Liabilities


Payable for cash collateral under securities lending







8




Financial Instruments by Category (Note 2) (cont’d)

as at December 31, 2015

Held forTrading

Financial Assets/Liabilities as FVTPL

Designated at Inception Total

Financial Assets/Liabilities at

Amortized Cost Total

(in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s)

- 25,459 25,459 - 25,459

- - - 5,271 5,271

18 - 18 - 18

- - - - -

- - - 1 1

- - - - -

- - - 338 338 - - - 39 39

- - - - -

- - - 168 168

- - - - -

18 25,459 25,477 5,817 31,294

1,596 - 1,596 - 1,596

- - - - -

- - - 140 140

- - - - -

- - - 587 587

- - - - -

- - - 31 31

- - - 7 7 1,596 - 1,596 765 2,361

Assets

Investments

Cash


Cash collateral received for securities on loan



Interest receivable

Other receivable

Securities lending revenue receivable



Liabilities


Payable for cash collateral under securities lending







9



Net Gain (Loss) on Financial Instruments (Note 2) for the periods ended June 30 (in $000’s)

The following table presents the net gain (loss) on financial instruments at FVTPL by category.

2016 2015

Financial Instruments at FVTPL

Held for trading

Designated at fair value through profit or loss

Total

Offsetting of Financial Instruments (Note 2)

The following tables show the net impact on the Fund’s Statements of Financial Positon if all rights to offset were exercised.

as at June 30, 2016

Amounts Eligible for Offset

Gross Assets/(Liabilities)

FinancialInstruments

Collateral(Received)/Paid

NetExposure

(in $000’s) (in $000’s) (in $000’s) (in $000’s)

Derivative assets - Foreign currency forward contracts

Derivative assets - Swaps and swaptions

Total

Derivative liabilities - Foreign currency forward contracts

Derivative liabilities - Swaps and swaptions

Total


Amounts Eligible for Offset

Gross Assets/(Liabilities)

FinancialInstruments

Collateral(Received)/Paid

NetExposure

(in $000’s) (in $000’s) (in $000’s) (in $000’s)

Derivative assets - Foreign currency forward contracts

Derivative assets - Swaps and swaptions

Total

Derivative liabilities - Foreign currency forward contracts

Derivative liabilities - Swaps and swaptions

Total

1,717 (2,399)

(538) 3,099

1,179 700

196 (159) - 37

- - - -

196 (159) - 37

(159) 159 - -

- - - -

(159) 159 - -

18 (18) - -

- - - -

18 (18) - -

(1,596) 18 - (1,578)

- - - -

(1,596) 18 - (1,578)


10



†A portion of brokerage commissions paid was used to cover research and market data services, termed soft dollar commissions. This amount has been estimated by the Manager of the Fund. The accompanying notes are an integral part of these financial statements.

Commissions (Note 2) for the periods ended June 30 (in $000’s) 2016 2015Brokerage Commissions

Soft Dollar Commissions†

Redeemable Unit Transactions (Note 4) for the periods ended June 30 2016 2015

Number of redeemable units at the beginning of period

Redeemable units issued for cash

Redeemable units issued for reinvested distributions

Redeemable units redeemed

Number of redeemable units at the end of period

Securities Lending (Note 7) as at June 30 (in $000’s) 2016 2015LoanedCollateral (non-cash)

Securities Lending Revenue Reconciliation (Note 7) for the periods ended June 30 (in $000’s) 2016 2015Gross securities lending revenueChargesSecurities lending revenue

% of gross securities lending revenue

2,936,429 2,965,129

- -

- -

(18,200) (27,000)

2,918,229 2,938,129

111 - 117 -

1 7 - -

- -

- -

- -

- -

11



Financial Instruments Risks (Note 10)

Concentration RiskFor Concentration Risk as at June 30, 2016, refer to the Schedule of Investment Portfolio.

The Fund’s investments were concentrated in the following segments:


Categories Net Assets (%)

U.S.A. 82.9

Other Net Assets (Liabilities) 17.5

Canada 2.9

Luxembourg 2.2

Foreign Currency Forward Contracts (5.5)

During the six-month period ended June 30, 2016, the Fund’s credit risk, other price risk, currency risk and fair value hierarchy exposure changed significantly as disclosed in the section below. For details relating

to interest rate risk, refer to the audited annual financial statements as at December 31, 2015, as the Fund’s exposure to interest rate risk remains unchanged.


Credit Risk As at June 30, 2016 and December 31, 2015, the Fund was exposed to credit risk as substantially all of its assets were invested in fixed income securities that have below investment grade credit ratings or

similar risk characteristics. All fixed income securities rated BB/Ba/B+ or lower are considered below investment grade and have a higher credit risk than investment grade bonds.

The Fund was invested in fixed income securities, preferred securities and derivative instruments, if any, with the following credit ratings, as per the tables below.

as at June 30, 2016 Credit Rating^* Net Assets (%)

AAA/Aaa/A++ 0.7

BBB/Baa/B++ 1.0

BB/Ba/B+ 8.3

B 24.6

CCC/Caa/C++ 32.6

Not Rated 18.0

Total 85.2

as at December 31, 2015 Credit Rating^* Net Assets (%)

AAA/Aaa/A++ 0.1

BB/Ba/B+ 4.7

B 18.8

CCC/Caa/C++ 42.5

Not Rated 22.1

Total 88.2

^Credit ratings are obtained from S&P Global Ratings, where available, otherwise ratings are obtained from: Moody’s Investors Service or Dominion Bond Rating Service, respectively.

*Refer to Note 10 for Credit Rating Chart reference.

12



Currency Risk

As at June 30, 2016, the Fund’s exposure to currency risk was insignificant.

The table below summarizes the Fund’s exposure to currency risk.

as at December 31, 2015~

Currency

Financial InstrumentsExposure Derivatives Net Exposure

NetAssets

(%)(in $000’s) (in $000’s) (in $000’s)

US Dollar 30,706 (30,418) 288 1.0

Total 30,706 (30,418) 288 1.0

~Includes monetary and non-monetary instruments.

As at June 30, 2016, had the Canadian dollar strengthened or weakened by 10% (December 31, 2015 - 10%) in relation to all other foreign currencies held in the Fund, with all other variables held constant,

net assets attributable to holders of redeemable units of the Fund would have decreased or increased, respectively, by approximately a nominal amount (December 31, 2015 - $29,000). In practice, the actual

results may differ from this analysis and the difference may be material.


Other Price RiskAs at June 30, 2016 and December 31, 2015, the Fund was exposed to other price risk as it was invested in a diversified portfolio of U.S. bonds and equities. As a result, the Fund was sensitive to changes

in general economic conditions in the United States.

As at June 30, 2016, had the U.S. markets increased or decreased by 10% (December 31, 2015 - 10%), with all other variables held constant, net assets attributable to holders of redeemable units of the Fund

would have increased or decreased, respectively, by approximately $34,000 (December 31, 2015 - a nominal amount). In practice, actual results may differ from this analysis and the difference may be material.

Fair Value Hierarchy

The tables below summarize the inputs used by the Fund in valuing the Fund’s investments and derivatives carried at fair value.

Long Positions at fair value as at June 30, 2016

Level 1 Level 2 Level 3 Total

(in $000’s) (in $000’s) (in $000’s) (in $000’s)Equities - - 341 341 Bonds - 22,577 1,482 24,059 Foreign currency forward contracts, net - 37 - 37 Total - 22,614 1,823 24,437

Long Positions at fair value as at December 31, 2015

Level 1 Level 2 Level 3 Total

(in $000’s) (in $000’s) (in $000’s) (in $000’s)Equities - - 4 4 Bonds - 24,491 964 25,455 Foreign currency forward contracts, net - (1,578) - (1,578) Total - 22,913 968 23,881

There were no transfers between Level 1 and 3 and Level 1 and 2 during the period ended June 30, 2016 and the year ended December 31, 2015.

13




Level 3 ReconciliationThe tables below summarize the movement in Level 3 financial instruments at fair value using unobservable inputs.

for the period ended June 30, 2016 Balance at

Dec. 31, 2015 Purchases SalesTransfers

InTransfers

(Out)Realized Gain

(Loss)Unrealized Gain

(Loss)*Balance at

Jun. 30, 2016(in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s)

Long Positions/Assets:

Equities 4 - - - - - 337 341 Bonds 964 161 (35) 614 - 9 (231) 1,482 Total 968 161 (35) 614 - 9 106 1,823

*Change in unrealized gain (loss) related to investments held at June 30, 2016 was $221,037.

During the period ended June 30, 2016, investments with a fair value of $614,000 were transferred out of Level 2 into Level 3 as observable market inputs were no longer available for these investments.

for the year ended December 31, 2015 Balance at

Dec. 31, 2014 Purchases SalesTransfers

InTransfers

(Out)Realized Gain

(Loss)Unrealized Gain

(Loss)**Balance at

Dec. 31, 2015(in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s)

Long Positions/Assets:Equities 3 - - - - - 1 4 Bonds 3,646 319 (3,822) 560 - 652 (391) 964 Total 3,649 319 (3,822) 560 - 652 (390) 968

**Change in unrealized gain (loss) related to investments held at December 31, 2015 was ($224,045).

During the year ended December 31, 2015, investments with a fair value of $560,000 were transferred out of Level 2 into Level 3 as observable market inputs were no longer available for these investments.

The tables below summarize the significant unobservable inputs used in the fair value measurement of the Level 3 investments and the impact to the valuation of a reasonably possible change to the significant unobservable inputs.

as at June 30, 2016 Change in Change in Fair Value Valuation + Valuation -Description (in $000’s) Valuation Technique Unobservable Inputs (in $000’s) (in $000’s) Bossier Casino Venture Holdco Inc., 14% 02/09/2018 774 Discounted Cash Flows Discounted rate - 100 bps on the credit spread 27 (24) Bossier Casino Venture Holdco Inc., Private Placement 338 Earnings Multiple EV/EBITDA 1/4x - - Clevelend Unlimited Inc., common 4 Earnings Multiple EV/EBITDA 1/4x - - CPI Buyer LLC, Term Loan, Private Placement, variable rate, 07/30/2022 565 Discounted Cash Flows Discounted rate - 100 bps on the credit spread - - Haights Cross Communications Inc., Private Placement - Earnings Multiple EV/EBITDA 1/4x - - Haights Cross Operating Co., FRN, Private Placement 16% 12/15/2017 - Discounted Cash Flows Discounted rate - 100 bps on the credit spread - - Haights Cross Operating Co., Private Placement 13% 09/15/2017 25 Discounted Cash Flows Discounted rate - 100 bps on the credit spread - - Miami Valley Steel Services Inc., Term Loan, Private Placement, variable rate, 06/28/2018 117 Discounted Cash Flows Discounted rate - 100 bps on the credit spread 2 (2) Total 1,823 29 (26)

14




Level 3 Reconciliation (cont’d)

as at December 31, 2015 Change in Change in Fair Value Valuation + Valuation -Description (in $000’s) Valuation Technique Unobservable Inputs (in $000’s) (in $000’s) Bossier Casino Venture Holdco Inc., 14% 02/09/2018 742 Discounted Cash Flows Discounted rate - 100 bps on the credit spread 40 (40)Bossier Casino Venture Holdco Inc., Private Placement - Earnings Multiple EV/EBITDA 1/4x - - Clevelend Unlimited Inc., common 4 Earnings Multiple EV/EBITDA 1/4x - - Haights Cross Operating Co., FRN, Private Placement 16% 06/15/2016 - Discounted Cash Flows Discounted rate - 100 bps on the credit spread - - Haights Cross Operating Co., Private Placement 13% 03/15/2016 60 Discounted Cash Flows Discounted rate - 100 bps on the credit spread - - Haights Cross Communications Inc., Private Placement - Earnings Multiple EV/EBITDA 1/4x - - Miami Valley Steel Services Inc., Term Loan, Private Placement, variable rate, 06/28/2018 162 Discounted Cash Flows Discounted rate - 100 bps on the credit spread 3 (3) Total 968 43 (43)

15

NOTES TO THE FINANCIAL STATEMENTS (unaudi ted)

1. THE FUND DDJ High Yield Fund (the “Fund”) is a closed-end investment trust established under the

laws of the Province of Ontario pursuant to a Trust Agreement dated August 15, 1997, as amended on October 11, 2005. The Fund commenced operations on August 28, 1997. The Fund is listed on The Toronto Stock Exchange (“TSX”), under the symbol HYB.UN for the trust units. CI Investments Inc. is the Manager and the Trustee (the “Manager” and the “Trustee”) of the Fund. The Manager has retained DDJ Capital Management, LLC (the ‘‘Investment Advisor’’) to provide investment advisory and portfolio management services to the Fund.

The primary investment objective of the Fund is to provide investors with a high level of current income distributed quarterly over the life of the Fund while preserving capital for distribution to unitholders upon termination of the Fund. The Fund will also seek capital appreciation through investing in securities with potential for appreciation.

The Fund’s assets are invested in a diversified portfolio consisting primarily of high yield debt securities. The Fund’s investments may include publicly traded and privately placed debt, preferred shares, convertible securities, warrants, loan participations, assignments and common shares. The Fund may seek capital gains by investing in securities that have the potential for ratings upgrade and in defaulted or distressed securities that the Investment Advisor believes have significant capital appreciation potential.

The address of the Fund’s registered office is 2 Queen Street East, Twentieth Floor,

M5C 3G7, Toronto, Ontario. These financial statements are authorized for issue by the Manager on August 15, 2016. CI Investments Inc. is a subsidiary of CI Financial Corp. RBC Investor Services Trust is the custodian (the “Custodian”) of the Fund.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared in accordance with International

Financial Reporting Standards (“IFRS”) as published by the International Accounting Standards Board (“IASB”). The following is a summary of the significant accounting policies of the Fund:

a) Classification and recognition of financial instruments The Fund recognizes financial instruments at fair value upon initial recognition,

inclusive of transaction costs in the case of financial instruments not measured at FVTPL. Purchases and sales of financial assets are recognized at their trade date. The Fund’s investments and derivative assets and liabilities are measured at fair value through profit or loss (“FVTPL”). The Fund’s obligations for net assets attributable to holders of redeemable units are presented at the redemption amount, which approximates their fair value. All other financial assets and liabilities are measured at amortized cost, which approximates their fair value. Under this method, financial assets and liabilities reflect the amount required to be received or paid, discounted, when appropriate, at the effective rate of interest.

Financial assets and liabilities are offset and the net amount is presented in the Statements of Financial Position when, and only when, the Fund has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. In the normal course of business, the Fund enters into various master netting agreements or similar agreements that do not meet the criteria for offsetting in the Statements of Financial Position, but still allow for the related amounts to be offset in certain circumstances, such as bankruptcy or termination of the contracts.

b) Fair valuation of financial investments At the financial reporting date, listed securities are valued based on the last traded

market price for financial assets and financial liabilities where the last traded price falls within the day’s bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager determines the point within the bid-ask spread that is most representative of fair value based on the existing market conditions. Unlisted securities are valued based on price quotations from recognized

investment dealers, or failing that, their fair value is determined by the Manager on the basis of the latest reported information available. Unlisted warrants, if any, are valued based on a pricing model which considers factors such as the market value of the underlying security, strike price, and terms of the warrant. Fixed income securities, debentures and other debt instruments, including short-term investments, are valued at the quotation from recognized investment dealers.

The fair value of private placements and other securities where there are significant unobservable inputs is determined by using valuation models that may be based, in part, on assumptions that are not supported by observable market inputs. These methods and procedures may include, but are not limited to, performing comparisons with prices of comparable or similar securities, obtaining valuation related information from issuers and/or other analytical data relating to the investment and using other available indications of value. These values are independently assessed by the Manager to ensure that they are reasonable. However, because of the inherent uncertainty of valuation, the estimated fair values for these securities may be materially different from the values that would have been used had a ready market for the investment existed. The fair values of private placements are affected by the perceived credit risks of the issuer, predictability of cash flows and the length of time to maturity.

c) Financial assets and liabilities at fair value The Fund classifies its investments in equity, fixed income securities and derivatives

as financial assets or financial liabilities at fair value through profit or loss.

This category has two sub-categories: financial assets or financial liabilities held for trading and those designated at fair value through profit or loss at inception.

Financial assets or financial liabilities held for trading A financial asset or financial liability is classified as held for trading (“HFT”) if it

is acquired or incurred principally for the purpose of selling or repurchasing in the near term or if on initial recognition is part of a portfolio of identifiable financial investments that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking. The Fund’s derivative instruments and warrants are also categorized as HFT.

Financial assets or financial liabilities designated at fair value through profit or loss at inception

Financial assets and financial liabilities designated at fair value through profit or loss at inception are financial instruments that are not classified as HFT, but are managed and their performance is evaluated on a fair value basis in accordance with the Fund’s documented investment strategy. The Fund’s investments excluding derivative instruments and warrants are designated as FVTPL.

d) Cash Cash is comprised of cash on deposit.

e) Cost of investments Cost of investments represents the amount paid for each security and is determined

on an average cost basis excluding commissions and other portfolio transaction costs. Average cost does not include amortization of premiums or discounts on fixed income securities with the exception of zero coupon bonds.

f) Investment transactions and income recognition Investment transactions are recorded on the trade date – the date on which the Fund

commits to purchase or sell the investment. The “Interest for distribution purposes” shown on the Statements of Comprehensive Income represents the coupon interest received by the Fund and is accounted for on an accrual basis. The Fund does not amortize premiums paid or discounts received on the purchase of fixed income securities except for zero coupon bonds, which are amortized on a straight line basis.

as at June 30, 2016

16

NOTES TO THE FINANCIAL STATEMENTS (unaudi ted) (cont ’d)

Dividends and distributions from investments are recognized on the ex-dividend/ex-distribution date.

Commitment fee income is accounted for on an accrual basis on the term of the commitment.

g) Foreign exchange The Fund’s functional and presentation currency is Canadian dollar. Foreign currency

amounts are translated into the functional currency as follows: fair value of investments, foreign currency forward contracts and other assets and liabilities at the closing rate of exchange on each business day; income and expenses, purchases and sales and settlements of investments at the rate of exchange prevailing on the respective dates of such transactions. Foreign exchange gains (losses) relating to cash are presented as “Foreign exchange gain (loss) on cash” and those relating to investments and derivatives are presented within “Net realized gain (loss) on sale of investments and derivatives” and “Change in unrealized appreciation (depreciation) in value of investments and derivatives” in the Statements of Comprehensive Income.

h) Unit valuation Net asset value (“NAV”) per unit is calculated at the end of each day on which the

Toronto Stock Exchange is open for business by dividing the total NAV by outstanding units.

As at June 30, 2016, December 31, 2015 and June 30, 2015, there were no differences between the NAV used for transactions with unitholders and the net assets attributable to holders of redeemable units used for reporting purposes under IFRS.

i) Classification of units The units of the Fund have been classified as liabilities, because the Fund has a fixed

termination date.

j) Commissions and other portfolio transaction costs Transaction costs, such as brokerage commissions, incurred in the purchase and sale

of securities, are included in “Commissions and other portfolio transaction costs” in the Statements of Comprehensive Income.

k) Increase (decrease) in net assets attributable to holders of redeemable units per unit

“Increase (decrease) in net assets attributable to holders of redeemable units per unit” in the Statements of Comprehensive Income is calculated by dividing the increase (decrease) in net assets attributable to holders of redeemable units by the weighted average number of units outstanding during the period.

l) Other receivable Other receivables are escrow receivables, a portion of sales proceeds are placed in

an escrow account and earmarked to be released at a future date subject to specific events. Forms of amounts held in escrow may be (1) sales proceeds holdbacks, (2) legal and other professional fees, (3) claims (environmental or otherwise), (4) indemnities, (5) tax escheatment, or (6) for working capital adjustments. Each form of escrow has its own release date and event terms. The Manager will determine a recovery percentage with respect to each escrow as well as a discount rate to account for the time value of money before such escrow is expected to be released. Each of these factors is based on the Manager’s knowledge of the sales transaction, its terms and elated expectations of recovery. The escrow amounts are disclosed in “Other receivable” in the Statements of Financial Position.

m) Foreign currency forward contracts The Fund may, from time to time, enter into foreign currency forward contracts.

Foreign currency forward contracts are valued on each valuation day, based on

the difference between the contract rate and the current forward rate at the measurement date applied to the contract’s notional amount and adjusted for counterparty risk. All unrealized gains (losses) arising from foreign currency forward contracts are recorded as part of “Change in unrealized appreciation (depreciation) in value of investments and derivatives” in the Statements of Comprehensive Income and “Unrealized gain (loss) on futures and foreign currency forward contracts” in the Statements of Financial Position until the contracts are closed out or expire, at which time the gains (losses) are realized and reported as “Net realized gain (loss) on sale of investments and derivatives” in the Statements of Comprehensive Income.

n) Offsetting of financial instruments The disclosures set out in the Offsetting of Financial Instruments tables in the Fund

Specific Notes to Financial Statements include foreign currency forward contracts assets and liabilities that are subject to an enforceable master netting arrangement. Transactions with individual counterparties are governed by separate master netting agreements. Each agreement allows for net settlement of certain open contracts where the Fund and respective counterparty both elect to settle on a net basis. In the absence of such an election, contracts will be settled on a gross basis. However, each party to the master netting agreement will have the option to settle all open contracts on a net basis in the event of default of the other party.

International Swaps and Derivatives Association Inc. Master Agreements (“ISDA Master Agreements”) govern OTC financial derivative transactions entered into by the Fund and select counterparties. The ISDA Master Agreements maintain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to terminate early could be material to the financial statements. The fair value of OTC financial derivative transactions net of collateral received or pledged by a counterparty as at period end is disclosed in the Fund Specific Notes to Financial Statements.

The Fund may be subject to various Master Agreements or netting arrangements, with select counterparties. These Master Agreements reduce the counterparty risk associated with relevant transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Since different types of transactions have different mechanics and are sometimes traded out to different legal entities of a particular counterparty organization, each type of transaction may be covered by a different Master Agreement resulting in the need for multiple agreements with a single counterparty. As the Master Agreements are specific to unique operations of different asset types, they allow the Fund to close out and net its total exposure to a counterparty in the event of a default with respect to the transactions governed under a single agreement with a counterparty.

o) Investments in associates, joint ventures, subsidiaries and structured entities

Subsidiaries are entities, including investments in other investment entities, over which a Fund has control. A Fund controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity, and has the ability to affect those returns through its power over the entity. Associates and joint ventures are investments over which a Fund has significant influence or joint control. A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factors in deciding, who controls the entity, or when voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. As at June 30, 2016 and December 31, 2015, the Fund has immaterial interest in the following unconsolidated structured entities: Bossier Casino, Cleveland and Haights Crossing.

as at June 30, 2016

17


p) Withholding taxes The Fund may, from time to time, incur withholding taxes imposed by certain

countries on investment income and capital gains. Such income and gains are recorded on a gross basis and the related withholding taxes are shown separately in the Statements of Comprehensive Income.

q) Harmonized sales tax Certain provinces including Ontario, Prince Edward Island, Nova Scotia, New

Brunswick and Newfoundland and Labrador (each a Participating Tax Jurisdiction) have harmonized their provincial sales tax (“PST”) with the federal goods and services tax (“GST”). The Harmonized Sales Tax (“HST”) combines the federal GST rate of 5% with the PST rate of the participating province. The province of Quebec also applies the Quebec sales tax (“QST”) of 9.975%. The Provincial HST liability or refund is calculated using the residency of unitholders and the value of their interest in the Fund as at specific times, rather than the physical location of the Fund. The effective sales tax rate charged to the Fund is based on the unitholders’ proportionate investments by province, using each province’s HST rate, GST rate in the case of non-participating provinces and/or QST rate. All amounts are presented as “Harmonized sales tax” in the Statements of Comprehensive Income.

Any HST refund receivable at period-end is presented as “Fees rebate receivable” in the Statements of Financial Position.

r) Accounting standards issued but not yet adopted IFRS 9, Financial Instruments The final version of IFRS 9, Financial Instruments, was issued by the IASB in July

2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces a model for classification and measurement, a single, forward-looking ‘expected loss’ impairment model and a substantially reformed approach to hedge accounting. The new single, principle based approach for determining the classification of financial assets is driven by cash flow characteristics and the business model in which an asset is held. The new model also results in a single impairment model being applied to all financial instruments, which will require more timely recognition of expected credit losses. It also includes changes in respect of own credit risk in measuring liabilities elected to be measured at fair value, so that gains caused by the deterioration of an entity’s own credit risk on such liabilities are no longer recognized in profit or loss. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, however it is available for early adoption. In addition, the own credit changes can be early applied in isolation without otherwise changing the accounting for financial instruments. The Fund’s Manager is in the process of assessing the impact of IFRS 9 on the Fund and has not yet determined when it will adopt the new standard.

3. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES The preparation of financial statements in accordance with IFRS requires

management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities at the reporting date and the reported amounts of income and expenses during the reporting period. The following discusses the most significant accounting judgments and estimates that the Fund has made in preparing its financial statements:

Fair value measurement of investments and derivatives not quoted in active market

The Fund may, from time to time, hold financial instruments that are not quoted in active markets, such as unlisted securities, private securities or derivatives. Unlisted securities are valued based on price quotations from recognized investment dealers, or failing that, their fair value is determined by the Manager on the basis of the latest reported information available. The fair value of private securities is determined by using valuation models that may be based, in part, on assumptions that are not supported by observable market inputs. These methods and procedures may include, but are not limited to, performing comparisons with prices of comparable

or similar securities, obtaining valuation related information from issuers and/or other analytical data relating to the investment and using other available indications of value. These values are independently assessed by the Manager to ensure that they are reasonable. However, because of the inherent uncertainty of valuation, the estimated fair values for these securities may be materially different from the values that would have been used had a ready market for the investment existed. The fair values of private securities are affected by the perceived credit risks of the issuer, predictability of cash flows and the length of time to maturity.

Valuation models use observable data, to the extent practicable. However, areas such as credit risk (both own and counterparty); volatilities and correlations require the Manager to make estimates. Changes in assumptions about these factors could affect the reported fair values of financial instruments.

The Fund considers observable data to be market data that is readily available, regularly distributed and updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market.

Classification and measurement of investments and application of the fair value option

In classifying and measuring financial instruments held by the Fund, the Manager is required to make significant judgments about whether or not the business of the Fund is to invest on a total return basis for the purpose of applying the fair value option for the financial assets under IAS 39 Financial Instruments: Recognition and Measurement. The most significant judgment made includes the determination that the fair value option can be applied to those investments that are not HFT.

4. REDEEMABLE UNITS Redeemable units issued and outstanding represent the capital of the Fund.

The Fund is authorized to issue an unlimited number of units of each class. Unitholders are entitled to redeem their units monthly. Units will be redeemed at the net asset value per unit on such date. Subscriptions and redemptions of the Fund units are disclosed in the Statements of Changes in Net Assets Attributable to Holders of Redeemable Units. In accordance with the objectives and risk management policies outlined in Note 1 and 10, the Fund endeavors to invest subscriptions received in appropriate investments while maintaining sufficient liquidity to meet redemptions through utilizing a short-term borrowing facility or partial settlement of the Purchase Forward Agreement when necessary.

On February 2, 2009, the Fund announced its distribution policy. The Fund pays $0.20 per quarter for an annual total of $0.80 for 2016.

Redeemable unit transactions information appears in the Fund Specific Notes to

Financial Statements.

When units of the Fund are redeemed at a price per unit which is (greater) or lower than the NAV per unit, the difference is included in “Gain (loss) on redemption” in the Statements of Comprehensive Income.

5. FEES AND OTHER EXPENSES Management fees The Fund pays to the Manager an annual fee (the “Management Fee”) plus

applicable taxes equal to 1.10% of the NAV of the Fund calculated and paid monthly in arrears.

Administrative fees The Fund is also responsible for all its expenses, plus applicable taxes, incurred in

connection with its operations and administration (fees shown as administration fees

as at June 30, 2016

TO BE UPDATED

18


Income tax on net realized capital gains not paid or payable will generally be recoverable by virtue of refunding provisions contained in the Income Tax Act (Canada) and provincial income tax legislation, as redemptions occur. Occasionally, the Fund may distribute more than it earns. This excess distribution is a return of capital and is not taxable to unitholders.

9. REINVESTMENT OF DISTRIBUTIONS When the Fund pays a distribution to a unitholder, it will be paid in the same

currency in which the units are held. Distributions due to those unitholders (the “Plan Participants”) who participate in the Reinvestment Plan will be applied to the purchase of trust units on behalf of Plan Participants. The Manager may change the distribution policy at its sole discretion.

10. FINANCIAL INSTRUMENTS RISK Risk management The Fund is exposed to a variety of financial instruments risks: credit risk, liquidity

risk and market risk (including other price risk, currency risk and interest rate risk). The level of risk to which the Fund is exposed to depends on the investment objective and the type of investments the Fund holds. The value of investments within a portfolio can fluctuate daily as a result of changes in prevailing interest rates, economic and market conditions and company specific news related to investments held by the Fund.

The Manager of the Fund may minimize potential adverse effects of these risks on the Fund’s performance by, but not limited to, regular monitoring of the Fund’s positions and market events, diversification of the investment portfolio by asset type, country, sector, term to maturity within the constraints of the stated objective and through the usage of derivatives to hedge certain risk exposures.

Concentration risk Concentration risk arises as a result of the concentration of exposures within the

same category, whether it is a geographical allocation, product type, industry sector or counterparty.

Details of the Fund’s exposure to concentration risk are available in the Fund Specific Notes to Financial Statements.

Credit risk Credit risk is the risk that a security issuer or counterparty to a financial instrument

will fail to meet its financial obligations. The fair value of a debt instrument includes consideration for the credit worthiness of the debt issuer. The fair value of debt instruments as shown on the Schedule of Investment Portfolio represents the credit risk exposure of the Fund. Credit risk exposure for derivative instruments is based on the Fund’s unrealized gain on the contractual obligations with the counterparty, as at the reporting date. The credit rating of a counterparty to a derivative instrument is disclosed in the Schedule of Investment Portfolio or in the Fund Specific Notes to Financial Statements. The credit risk exposure of the Fund’s other assets is represented by their carrying amount as disclosed in the Statements of Financial Position.

Credit ratings for debt securities, preferred securities and derivative instruments

are obtained from S&P Global Ratings, where available, otherwise ratings are obtained from: Moody’s Investors Service or Dominion Bond Rating Service, respectively. Credit ratings can be either long-term or short-term. Short-term credit ratings are generally assigned to those obligations and derivative instruments considered short-term in nature.

as at June 30, 2016

include: trustee fees, transfer agency, custody and accounting fees). Audit fees, legal fees and independent review committee fees are disclosed separately.

Performance fees In addition, the Manager will receive an annual performance fee (the “Performance

Fee”) equal to 20% of the amount by which the percentage increase in NAV of the Fund exceeds an annualized threshold increase of 8%. To the extent that the increase in NAV of the Fund does not exceed the threshold, then the amount by which such increase falls below the threshold will be carried forward on a cumulative basis and deducted from the amount of any increase in NAV of the Fund on which the performance fee is calculated in subsequent years. The performance fee will be accrued weekly and is payable within ten days after the last day of each fiscal year of the Fund. No performance fee has been earned or paid since inception of the Fund.

Advisory fees A portion of the management fees and all of the performance fees payable to the

Manager will be paid to the Investment Advisor by the Manager.

6. MARKET PURCHASE PROGRAM In accordance with the Fund’s prospectus and to enhance liquidity and to provide

support to the units, the Fund has a mandatory market purchase program. The Fund may purchase any units offered in the market at the then prevailing market price up to a maximum amount in any year of 5% of the number of units outstanding at the beginning of the calendar year. Units that have been purchased by the Fund will be cancelled.

The Fund filed a notice of intention to make a normal course issuer bid on December 3, 2015. The issuer bid commenced on December 9, 2015 and will terminate on the earliest of the following: the date on which the maximum number of units have been purchased, the date the Fund provides notice of termination, or December 8, 2016. The maximum number of units that may be acquired is 297,743 units. Under its previous normal course issuer bid commencing December 4, 2014 and terminating December 8, 2015, the Fund purchased 38,900 units. Unitholders may obtain a copy of the notice of intention to make a normal course issuer bid by contacting the Manager. For the period ended June 30, 2016, $172,262 units have been purchased under the current normal course issuer bid at a total cost of 19,200 (36,200 units at cost of $398,674 for June 30, 2015).

7. SECURITIES LENDING The Fund has entered into a securities lending program with its Custodian.

The aggregate market value of all securities loaned by the Fund cannot exceed 50% of the assets of the Fund. The Fund will receive collateral of at least 102% of the value of securities on loan. Collateral will generally be comprised of cash and obligations of or guaranteed by the Government of Canada or a province thereof, or by the United States government or its agencies, but may include obligations of other governments with appropriate credit ratings. The amounts for securities loaned and the collateral received as well as reconciliation between gross securities lending revenue and securities lending revenue received by the Fund appear in the Fund Specific Notes to Financial Statements. Revenue from securities lending is included in “Securities lending revenue” in the Statements of Comprehensive Income and any cash collateral received or cash collateral payable is included in the Statements of Financial Position in “Cash collateral received for securities on loan” or “Payable for cash collateral under securities lending”.

8. TAXATION The Fund qualifies as a mutual fund trust under the Income Tax Act (Canada). All of

the Fund’s net income for tax purposes and sufficient net capital gains realized in any year are required to be distributed to unitholders such that no income tax is payable by the Fund. As a result, the Fund does not record income taxes. Since the Fund does not record income taxes, the tax benefit of capital and non-capital losses has not been reflected in the Statements of Financial Position as a deferred income tax asset.

19


as at June 30, 2016

Currency Risk Currency risk arises from financial instruments that are denominated in a currency

other than the Canadian dollar, the functional currency of the Fund. As a result, the Fund may be exposed to the risk that the value of securities denominated in other currencies will fluctuate due to changes in exchange rates. The Schedule of Investment Portfolio identifies all bonds and derivative instruments denominated in foreign currencies. Equities traded in foreign markets are exposed to currency risk as the prices denominated in foreign currencies are converted to the Fund’s functional currency to determine their fair value.

Interest Rate Risk Interest rate risk is the risk that the fair value of interest-bearing investments and

interest rate derivative instruments will fluctuate due to changes in prevailing levels of market interest rates. As a result, the value of the Fund that invests in debt securities and/or income trusts will be affected by changes in applicable interest rates. If interest rates fall, the fair value of existing debt securities may increase due to increase in yield. Alternatively, if interest rates rise, the yield of existing debt securities may decrease which may then lead to a decrease in their fair value. The magnitude of the decline will generally be greater for long-term debt securities than for short-term debt securities.

Interest rate risk also applies to a Fund that invests in convertible securities. The fair value of these securities varies inversely with interest rates, similar to other debt securities. However, since they may be converted into common shares, convertible securities are generally less affected by interest rate fluctuations than other debt securities.

Fair Value Hierarchy The Fund is required to classify financial instruments measured at fair value using a

fair value hierarchy. Investments whose values are based on quoted market prices in active markets are classified as Level 1. This level may include publicly traded equities, exchange traded and retail mutual funds, exchange traded warrants, futures contracts, traded options, American depositary receipts (“ADRs”) and Global depositary receipts (“GDRs”).

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified as Level 2. These may include fixed income securities, mortgage backed securities (“MBS”), short-term instruments, non-traded warrants, over-the-counter options, structured notes of indexed securities, foreign currency forward contracts and swap instruments.

Investments classified as Level 3 have significant unobservable inputs. Level 3 instruments may include private equities, private term loans, private equity funds and certain derivatives. As observable prices are not available for these securities, the Fund may use a variety of valuation techniques to derive their fair value.

The Fund’s policy is to recognize transfers into and out of the fair value hierarchy levels as of the date of the event or change in circumstances giving rise to the transfer.

During the six-month period the Fund’s exposure to financial instruments risks including credit risk, other price risk, currency risk and fair value hierarchy classification changed significantly as per details disclosed in the Fund Specific Notes to Financial Statements. For details relating to interest rate risk refer to the audited annual financial statements as at December 31, 2015, as the Fund’s exposure to interest rate risk remained the same throughout the period.

The table below provides a cross-reference between the long-term credit ratings disclosed in the Credit Rating table inclusive of the short-term credit ratings disclosed in the derivatives schedules in the Schedule of Investment Portfolio.

Credit Rating as per Credit Rating as per Credit Risk table derivatives scheduleAAA/Aaa/A++ A-1+AA/Aa/A+ A-1, A-2, A-3A B, B-1BBB/Baa/B++ B-2BB/Ba/B+ B-3B CCCC/Caa/C++ -CC/Ca/C+ -C and Lower DNot Rated WR

Cash balances as disclosed in the Statements of Financial Position are maintained by the Custodian. The Manager monitors the credit worthiness of the Custodian on a regular basis. The credit rating of the Custodian as at June 30, 2016 was AA- (December 31, 2015 - AA-).

All transactions executed by the Fund in listed securities are settled / paid for upon delivery using approved brokers. The risk of default is considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is made on a purchase once the securities have been received by the broker. The trade will fail if either party fails to meet its obligation.

Liquidity risk Liquidity risk is the risk that the Fund may not be able to settle or meet its obligations,

on time or at a reasonable price.

The Fund’s exposure to liquidity risk is moderate, as some of the Fund’s assets are in private investments such as term loans, which are not traded in an organized market and may experience periods of low liquidity. Similarly, there may be circumstances where the supply or demand for a particular bond issue may be limited as well. However, the Fund is closed-ended and does not require high levels of liquidity to meet potential redemption requests. The Manager believes that the Fund’s liquidity is sufficient to meet quarterly distributions and monthly redemptions either from income or asset disposition. All financial liabilities are due within three months.

Market risk The Fund’s investments are subject to market risk which is the risk that the fair value

of future cash flows of a financial instrument will fluctuate due to changes in market conditions.

Other Price Risk Other price risk is the risk that the value of financial instruments will fluctuate as

a result of changes in market prices (other than those arising from currency risk or interest rate risk). The value of each investment is influenced by the outlook of the issuer and by general economic and political conditions, as well as industry and market trends. All securities present a risk of loss of capital. Except for options written, future contracts and investments sold short, the maximum risk resulting from financial instruments is equivalent to their fair value. On written call options, short future positions and on equity and debt sold short, the maximum loss of capital can be unlimited.

Other assets and liabilities are monetary items that are short-term in nature and therefore are not subject to other price risk.

20

LEGAL NOTICE

Certain names, words, phrases, graphics or designs in this document may constitute trade names, registered or unregistered trademarks or service marks of CI Investments Inc. ®CI Financial, CI Investments and the CI Investments design are registered trademarks of CI Investments Inc.

You can get additional copies of these Financial Statements at your request, and at

no cost, by calling 1-800-792-9374, by emailing [email protected], or by asking your representative.

This document, and other information about the fund, is available at the

CI Investments Inc. website at www.ci.com, or at www.sedar.com.

21

Advisor of the Fund

DDJ Capital Management, LLC130 Turner Street, Building 3, Suite 600

Wellesley, MA 02453 USA

Tel: 781-283-8500www.ddjcap.com

Manager of the Fund

CI Investments Inc.2 Queen Street East, Twentieth Floor

Toronto, Ontario M5C 3G7Tel: 416-364-1145

Toll Free: 1-800-268-9374www.ci.com

®CI Investments and the CI Investments design are registered trademarks of CI Investments Inc.For more information on the Fund, visit us online at www.ci.com DDJ-SA-08/2016

2016 - ci investments › orderform › pdf › semi_annuals › ddj_e.pdfa 2016 ddj high yield fund...

Documents