Interim Management Statement
November 14 2008 - 11:53AM
UK Regulatory
14 November 2008
Alternative Asset Opportunities PCC Limited
(the "Company")
Interim Management Statement
This interim management statement relates to the period from 1 July 2008 to the
date of publication of this statement and has been prepared solely to provide
additional information in order to meet the relevant requirement of the UK
Listing Authority's Disclosure and Transparency Rules, and should not be relied
on by Shareholders, or any other party, for any other purpose.
The Company is a closed-ended protected cell company with one cell known as the
US Traded Life Interests Fund (the "Fund").
Investment objective
The Company's investment objective in respect of the Fund is to provide
investors with an attractive capital return through investment predominantly in
a diversified portfolio of U.S. Traded Life Interests ("TLIs").
Financial position and performance
Over the period to 30 September 2008, the Company's net asset value increased
by 2.5% to 98.3 pence. As at 30 September 2008, the shares were trading at a
26.2% discount to net asset value.
One mortality has been recorded in the period representing a face value of US$1
million, bringing the total policy maturities to 14 since the Fund's inception.
The benefit of this maturity amounts to approximately 0.7 pence per share.
In view of the Company's ongoing cash needs, a standby facility has been
arranged with Allied Irish Banks, in addition to the existing facility of $30
million, which is fully drawn down. The maximum amount that may be drawn down
under this additional facility is $5 million, which should cover the Company's
cash flow requirements until March 2009, when the current borrowing
arrangements expire and will have to be renegotiated.
As at 30 September 2008, the level of gearing, was 48.2% of net assets, of
which 42.6% represented borrowing and 5.5% was the unrealised loss on the
forward foreign exchange contracts. Subsequent sterling weakness will have
increased the latter figure.. The Board continues to look at alternative ways
of funding policy holdings in the absence of policy maturities.
As stated in the Annual Report, the Board keeps the foreign exchange positions
under review and on 30 October 2008, the March 2009 position was closed out by
means of a forward purchase of $10,500,000. As a result the only remaining open
forward position is a forward sale of $78,500,000 for March 2012. This
compares with a net value of approximately $75,780,000 for the Company's USD
assets as at 30 September 2008.
Other than described above, the Board is not aware of any material events
during the period from 1 July 2008 to 30 September 2008, or in the period from
1 October to the date of this announcement, which would have had a material
impact on the financial position of the Company.
Illustrative predicted yields
As stated in the annual report, the Board has adopted a revised table of
predicted yields which provides for a wider range of mortality assumptions. The
table below sets out the range of illustrative predicted yields over the
remaining life of the Company, with reference to the 30 September 2008 NAV of
98.3 pence.
Variation Impact Proportion Valuation IRR based on exit price range5:
in on 80yr surviving3 of
mortality1 old surviving
male policies4
non
smoker2 -10c -5c 0c +5c +10c
125% -1.01 52% 42.0c 9.76% 11.77% 13.69% 15.53% 17.30%
110% -0.45 56% 42.4c 7.05% 9.34% 11.51% 13.59% 15.57%
100% 0.00 59% 42.6c 5.01% 7.53% 9.90% 12.16% 14.30%
80% +1.13 65% 43.1c 0.21% 3.31% 6.19% 8.89% 11.43%
50% +3.91 76% 43.8c -9.81% -5.22% -1.12% 2.59% 5.99%
Notes
1. The central case (100%) assumes that claims experience matches the valuation
basis in force at 30 September 2008. The other scenarios assume mortality
experience is higher (e.g. 110%) or lower (e.g. 80%).
2. This shows the effect of the selected mortality experiences on the life
expectation (in years) for an otherwise normal 80-year-old male non-smoker.
3. This shows the percentage of the lives assured which are assumed to survive
throughout the life of the company.
4. This shows the assumed average realisation values (per US$1 of TLI policy
face value) for the surviving lives at the end of the Company's life. The
central case (42.6c) corresponds to the valuation assumptions used in arriving
at the end-September NAV.
5. This shows how returns might be expected to vary should realisation values
differ from those shown in column 4 by the margins shown.
Source: Surrenda-link Limited
Top ten holdings
By reference to the most recent portfolio valuation of the Company as at 30
September 2008, the largest ten investments held by the Company, measured by
life office exposure, were as follows:
Life Office Number of % of total
policies assets as at
30 September
2008
Lincoln National Life Insurance Co 19 16.2%
American General Life Insurance Company 13 14.8%
Transamerica Life Insurance Co 21 11.1%
John Hancock Life Insurance Company 15 9.1%
Massachusetts Mutual Life Insurance Company 11 8.9%
Pacific Life Insurance Company 6 5.8%
Indianapolis Life Insurance Company 7 5.8%
MetLife Insurance Company of Connecticut 8 3.5%
New York Life Insurance and Annuity Corp 6 3.1%
John Hancock Variable Life Insurance Co 3 2.7%
Company Information
Launch date 25 March 2004
EPIC TLI
Year end 30 June
Report & Accounts Final posted October, Interim posted February
AGM December
Price Information Financial Times (under INVESTMENT COMPANIES, listed as `Alt
Asts Rd P.')
Investor Information
The latest available portfolio information included in the interim and annual
report and accounts can be accessed via www.allianzgi.co.uk/agi/literature/
04_ifa.
By order of the Board
Alternative Asset Opportunities PCC Limited
Enquiries:
Lynette Le Prevost Tel: 01481 752 515
Kleinwort Benson (Channel Islands) Fund Services Limited
END
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