TLI Alt. AO. Prfnpv

    ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

27 July 2007

Net Asset Value

The Board of Alternative Assets Opportunities PCC announces that it has decided
to adopt a new valuation methodology. The result of this new approach is that
the Net Asset Value ("NAV") per share as at 30 June 2007 is calculated as 117.8
pence compared to 96.3 pence on the old basis (equivalent to an NAV per share
uplift of 22.3%).

Both the new and old NAV figures as at 30 June 2007 reflect the fact that a
further policy has matured in June. The benefit of this maturity event amounts
to approximately 1.6 pence per share.

The Board has been considering a change in the valuation methodology for some
time, as referred to in previous statements. This has required a thorough and
time-consuming review in order to arrive at a basis which the Board is
confident has the same hallmarks of objectivity as the previous basis, while
more accurately reflecting the real value of the portfolio.

The arguments for change and the technical details of the basis now adopted are
given in greater detail below.

There is no universally agreed standard for valuation of Traded Life Interests
("TLIs") and the Board has hitherto adopted a conservative valuation
methodology. In essence this method:

  * took information from the Investment Manager's recent experience of policy
    purchases to indicate the current expected internal rate of return ("IRR")
    on which TLIs for varying maturities could be purchased;
   
  * used this IRR as a discount rate to arrive at a present value of the
    expected cash flow from the actual portfolio of policies; and
   
  * determined this cash flow by projecting the likely incidence of maturities,
    using a standard table of life expectancies adjusted for the assessed life
    expectancy of the policy holders at the dates of purchase of the respective
    policies.
   
Any method adopted for the valuation of life policies will have a subjective
element and the Board has examined alternative approaches in the light of
experience and the growing number of funds with similar portfolios. The
previous approach had two specific weaknesses:

  * policy purchases by the Investment Manager may not represent a
    statistically valid sample for the purposes of arriving at a reliable
    estimate of IRR; and
   
  * the use of a standard table of life expectancies does not make adequate
    provision for the `select' nature of the portfolio even though all lives
    were subject to medical assessment at purchase. (The term `select' refers
    to the fact that the policies acquired are selected for sale by the vendors
    and are thus not a random group.)
   
It is apparent that, in broad terms, policies with longer projected maturities
tend to sell on higher IRRs than policies with shorter maturities. This can be
expressed as a `yield curve', using market IRRs for the periods concerned plus
a `risk premium' to express, amongst other things, the uncertainty of final
maturity of the policy.

The Board wished to reflect in its valuation the likelihood that compared to a
random sample of the general population fewer policies in the Company's
portfolio would mature in the earlier years, more policies would mature at, or
close to, the predicted life expectancy and fewer in later years, i.e. the
shape of a `select' mortality curve differs from the shape of the population
mortality curve.

Having considered the above rationale and studied actual experience to date,
the Board has decided, following discussion with the Company's auditors, to
implement the changes set out below:

The new methodology, which will apply for all NAV calculations from and
including 30 June 2007, introduces two key changes:

  * The assumed IRRs are now to be based on the US$ swap curve plus an
    appropriate risk premium for each period. In this way, proper account is
    taken of the risks and uncertainties inherent in this process, not least
    over the timing and magnitude of maturities. By way of illustration, the
    current internal rates of return for the following periods are shown below:
   
3 years +8.82%

5 years +8.86%

8 years +9.46%

At quarterly intervals, based on its market knowledge, the Investment Manager
will inform the Board of any changes it thinks are pertinent to the risk
premiums on a portfolio-wide basis.

  * The likely pattern of mortalities is to be represented by use of a 24-month
    `select period' adjustment. This will assume that policies experience only
    5% of the standard Valuation Basic Table ("VBT") mortality in the first 12
    months after acquisition and 50% of the standard mortality in the following
    12 months and normal mortality thereafter. The VBT mortality applied is
    then adjusted for each policy to ensure that overall life expectancy
    matches the medically assessed expectancy for that policy.
   
It should be noted that the first of these changes will have only a limited
effect on the figures produced as at 30 June 2007 since the overall rates of
return will match broadly those chosen on the old method. In future, the rates
of return used will move automatically in line with underlying interest rate
movements; the market data to be provided will be more general in nature, not
taking account of price volatility in any one market segment. The use of the
24-month `select period' adjustment, however, has a more substantial effect on
the NAV.

Based on the new methodology, the NAV at 30 June 2007 is some 22.3% higher than
that calculated on the old methodology. It must be cautioned that this remains
only a Directors' valuation and may not be an accurate indication of the actual
prices currently obtainable in the market for all or part of the portfolio.

The Board has been particularly concerned to ensure that it is not adopting too
subjective an approach. There is insufficient published data available for this
type of portfolio to determine objectively the appropriate length of the
`select period' or the level of reduced mortality to be assumed in that `select
period' relative to the standard table. The Board draws comfort from the fact
that the Investment Manager has advised that the experience of the Company's
portfolio of few maturities to date corresponds closely to that of similar
portfolios in the market. Furthermore, the Investment Manager has indicated
that the principles of `selection' are widely acknowledged and other TLI
portfolios have adopted methods similar to the proposed approach.

The Board has also been keen to ensure that the original life expectancy
assessments remain reliable. In this regard, care has been taken in choosing
the firms providing life expectancy assessments and in selecting conservative
assessments where more than one assessment is offered. While only actual
experience can prove this beyond doubt, the Investment Manager has provided
comfort to the Board that, in its opinion, the life expectancies used by the
Company are reasonable.

Since the Board continues to rely on the life expectancy assessments for
valuations as a critical piece of information for this purpose, it will
continue to seek advice from the Investment Manager with regard to the quality
of these assessments.

The possibility of using independent valuers has been discussed, but the Board
has no evidence that any reliable firm exists which would have sufficient
impartiality and expertise; nor is it satisfied that the costs of such an
exercise would be justified.



END

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