INTERIM ACCOUNTS ANNOUNCEMENT
Chairman's Statement
Review
The major event since my last review has been the acquisition of two small
`bulk' portfolios of policies,
As at 31 December 2005, the cost of policies acquired was US$50.0 million. As
at the end of February 2006, the figure had risen to US$64.0 million, with a
total of US$11.2 million in the process of completion, including the second
portfolio referred to above , making a total of US$75.2 million . In addition,
a total of US$113 million of active bids are still outstanding, with the
intention of completing a total portfolio at cost of around US$85 million ,
utilising the Company's target gearing as referred to below.
This progress has been assisted, as indicated, by the acquisition of two small
portfolios of policies, but the marketplace for TLIs has generally been less
fren etic in recent months and the occurrences of "gazumping" less frequent.
This has aided the process of conversion of the pipeline of policies in the
course of acquisition into actual policies in portfolio.
As at the end of February, the total number of policies in portfolio was 127
representing 106 separate lives. The average age of the insured lives is 82.4
years and the average life expectancy is 7.45 years.
In addition, as at the same date, the Company had a further 27 policies where
the purchase process was close to completion. This amounts to 154 policies on
132 lives in total which is significantly in excess of the Company's minimum
target of 130 policies , representing in excess of 100 separate insured lives.
One further policy has matured during the period under review.
Valuation
I commented in my last report on the adoption of a market related policy
valuation method. This has now been in operation for some months. As at the end
of January 2006 , the published net asset value per share of the Fund on this
revised basis was 108.3 pence.
Gearing
I also mentioned in my last report the possibility of seeking an increase in
the committed amount of the Company's gearing facility with Allied Irish Banks.
It is now our intention to seek an increase to US$20 million from the original
US$15 million.
This will allow the Company to achieve its target gearing level at the time of
full investment of 20 per cent. of the net asset value of the Company, as well
as providing additional headroom which may be utilised, to the extent
necessary, principally to meet premium payments.
Foreign Exchange
The report of the Manager describes the arrangements for hedging the Company's
net US dollar exposure. Although it is the Company's expectation to hold the
positions to maturity, it is necessary to mark them to market both in the
accounts and in the monthly valuations. This can have a positive or negative
short-term effect on the Company's net asset value. As at 31 January 2006 there
was a positive impact of approximately 1.3 pence per share compared with a
positive impact of 2.1 pence per share as at 31 December 2005.
INTERIM ACCOUNTS ANNOUNCEMENT (continued)
Chairman's Statement (continued)
Total Return projections
The table of total return projections , as at the end of December, is set out
below. The anticipated return profile is similar to the table produced at the
time of the full year report. Further updates will be released to the market on
a quarterly basis and the most recent update will be included in the annual
accounts..
Mortality Proportion Exit -10c -5c At Exit +5c +10c
Assumption Surviving Price % % Price % % %
-18 months 39 43.11 9.8 10.4 10.9 11.5 12.0
-6 months 46.8 43.35 7.4 8.2 8.9 9.7 10.4
Central 50 43.43 6.3 7.2 8.1 8.9 9.7
+6 months 53.4 43.51 5.0 6.1 7.1 8.0 8.9
+18 months 59.5 43.65 2.5 3.8 5.1 6.2 7.3
Note 1 Note 2 Note 3
End December 2005 projections
Notes
1. The central case assumes that claims experience precisely matches the
medical assessment of the policy lives insured. The changes as shown illustrate
the effect of actual life expectancies varying from the medically assessed life
expectancies by the stated number of months.
2. This shows the percentage of policy lives insured assumed to survive
throughout the life of the Fund.
3. This shows the assumed average realisation values per US$1 of TLI policy
face value in respect of the policies of the surviving lives insured at the end
of life of the Fund, by reference to the different mortality assumptions as
stated. The central case corresponds to the market value assumptions used in
arriving at the end-December NAV.
Sub-Custodian
As indicated in my last review, we have now transferred custody of the
portfolio to Wells Fargo Bank Northwest, NA . The process of transferring the
policies in the portfolio to the new custodian is now nearing completion.
Outlook
The Fund remains on target to deliver shareholders an attractive rate of return
from an asset class largely uncorrelated to the performance of the broader
equity and bond markets.
Charles Tracy
Chairman
14th March 2006
INTERIM ACCOUNTS ANNOUNCEMENT (continued)
Statement of Total Return
for the period from 1 July 2005 to 31 December 2005
Revenue Capital Total
� � �
Net gains on investments - 3,770,775 3.770,775
Other capital losses on currency - (3,396) (3,396)
movements
Income 215,825 - 215,825
Management fee (156,236) - (156,236)
Investment adviser's fee (99,862) - (99,862)
Custodian fee (8,723) - (8,723)
Other expenses (179,502) - (179,502)
Net return before finance costs (228,498) 3,767,379 3,538,881
Interest payable (218) - (218)
Total return for the financial period (228,716) 3,767,379 3,538,663
Return per redeemable share (0.57)p 9.42p 8.85p
Balance Sheet
At 31 December 2005
Assets �
Investments 33,391,304
Debtors 9,152
Unrealised gain on forward
foreign exchange contracts -
Cash on fixed deposit 3,035,241
Cash at bank 8,181,902
Total assets 44,617,599
Liabilities (excluding net assets attributable
to shareholders)
Creditors 209,782
Unrealised loss on forward
foreign exchange contracts 650,795
860,577
Net assets attributable to redeemable participating
preference shareholders 43,757,022
Management shares -
Total liabilities 44,617,599
INTERIM ACCOUNTS ANNOUNCEMENT (continued)
Cash Flow Statement
for the period from 1 July 2005 to 31 December 2005
�
Operating activities
Net revenue before finance costs (228,716)
Decrease in debtors 63,095
Decrease in creditors (129,013)
Net cash outflow from operating activities (294,634)
Financing activities
Exchange movements 488,074
Net cash inflow from financing activities 488,074
Investing activities
Purchases of investments (13,779,858)
Sales of investments 700,397
Net cash outflow from investing activities (13,079,461)
Net cash outflow before use of liquid resources (12,886,021)
Management of liquid resources
Net cash released from short term deposit 14,484,989
Increase in cash in the period 1,598,968
Reconciliation of net cash flow to movement in
net funds
Increase in cash in the period 1,598,968
Net cash inflow from management of liquid (14,484,989)
resources
Decrease in net funds in the period (12,886,021)
Opening net funds 24,103,164
Closing net funds 11,217,143
This interim statement has been neither audited nor reviewed by the Company's
auditors.
INTERIM ACCOUNTS ANNOUNCEMENT (continued)
Statement of Total Return
for the period from 27 February 2004 to 31 December 2004
Revenue Capital Total
� � �
Net losses on investments - (608,054) (608,054)
Other capital gains on currency - 207,767 207,767
movements
Income 1,183,509 - 1,183,509
Management fee (301,440) - (301,440)
Investment adviser's fee (186,963) - (186,963)
Custodian fee (15,073) - (15,073)
Other expenses (256,107) - (256,107)
Net return before finance costs 423,926 (400,287) 23,639
Interest payable (39,866) - (39,866)
Total return for the financial period 384,060 (400,287) (16,227)
Return per redeemable share 0.96p (1.00)p (0.04)p
Balance Sheet
At 31 December 2004
Assets �
Investments 8,370,361
Debtors 8,403
Unrealised gain on forward
foreign exchange contracts 445,562
Cash on fixed deposit 28,238,137
Cash at bank 2,373,326
Total assets 39,435,789
Liabilities (excluding net assets attributable
to shareholders)
Creditors 283,780
Unrealised loss on forward
foreign exchange contracts -
283,780
Net assets attributable to redeemable participating
preference shareholders 39,152,009
Management shares -
Total liabilities 39,435,789
INTERIM ACCOUNTS ANNOUNCEMENT (continued)
Cash Flow Statement
for the period from 27 February 2004 to 31 December 2004
�
Operating activities
Net revenue before finance costs 384,060
Increase in debtors (8,403)
Increase in creditors 283,780
Net cash inflow from operating activities 659,437
Financing activities
Issue of shares 40,000,000
Issue costs paid (831,764)
Exchange movements (237,795)
Net cash inflow from financing activities 38,930,441
Investing activities
Purchases of investments (8,978,415)
Sales of investments -
Net cash outflow from investing activities (8,978,415)
Net cash inflow before use of liquid resources 30,611,463
Management of liquid resources
Net cash placed on short term deposit (28,238,137)
Increase in cash in the period 2,373,326
Reconciliation of net cash flow to movement in
net funds
Increase in cash in the period 2,373,326
Net cash outflow from management of liquid 28,238,137
resources
Increase in net funds in the period 30,611,463
Opening net funds -
Closing net funds 30,611,463
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