TIDMTLI
RNS Number : 7467S
Alternative Asset Opps PCC Ltd
24 November 2011
24 November 2011
Alternative Asset Opportunities PCC Limited
(the "Company")
Interim Management Statement
This interim management statement relates to the period from 1
July 2011 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 Guernsey 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 US Traded
Life Interests ("TLIs").
Financial position and performance
Over the period to 31 October 2011, the Company's net asset
value per share decreased by 7.0% to 71.8 pence. As at 31 October
2011, the shares were trading at a 38.0% discount to net asset
value.
Two policy maturities on a single life were identified during
the period, and policy maturity proceeds were received during
October 2011 adding circa 1.8 pence to the NAV per share. There
will then have been, in aggregate, 32 policy maturities since the
Fund's inception.
The Company's loan agreement with Allied Irish Banks plc ("AIB")
expired on 31 July 2011, and pending the necessary approvals, AIB
switched the loan to "repayment on demand", allowing the Company to
continue fulfilling its obligations, including the payment of
premiums. Following all the necessary approvals from AIB and the
Central Bank of Ireland the loan agreement was renewed to cover the
necessary funding up to the end of March 2012. As at 31 October
2011, total borrowings under the agreement amounted to
US$23,192,000.
At an Extraordinary General Meeting on 20 September 2011 it was
resolved to change the Company's investment policy to remove the
requirement to hedge the currency exposure of the assets of the
Fund into Sterling. Following agreement with AIB, the Directors
have subsequently closed out its existing forward sale contracts of
the remaining US$66 million, realising a loss of GBP7,388,291 to be
settled at the end of March 2012.
At the same Extraordinary General Meeting on 20 September 2011
it was also resolved to amend the Company's Articles of
Incorporation to increase the Company's borrowing limit from 50% to
75% of the Fund's NAV. This was as a result of the losses referred
to above and the resulting requirement of an increase in the
Company's borrowings, which would in the absence of policy
maturities or policy sales, result in a ratio of approximately
65%.
The Board is not aware of any other material events during the
period from 1 July 2011 to 31 October 2011, or in the period from 1
November 2011 to the date of this announcement, which would have
had a material impact on the financial position of the Company.
In previous reports, the Board has attempted to give investors
an appreciation of the effects on valuation of differing
assumptions as to both LE and IRR. These tables have tended to
become quite complex, and the Board has been considering how best
to improve them. The new, simplified illustrative 'Sensitivity
Matrix' set out below is, in the first place, now expressed in
terms of NAV per share, an easier concept to understand than that
previously used (based on IRR to an assumed maturity date).
Secondly, the tables now enable the Board to show the effect of
differing market IRR assumptions.
- The first line of NAVs in the new table uses the 'Latest LE'
assumption, that is to say either an LE based on a recently updated
assessment or, for the remaining 34% of the portfolio by face value
(the 'non-updated policies'), based on the original LE assessed at
the time of purchase. The average LE (weighted by policy value) is
shown for reference (4.75 years). NAV is then shown at four
different discount rates, ranging from 10% to 20%. This shows the
effect of IRR on current value, but it also allows investors to
assess the effects of forced sales if, for example, the portfolio
was to be liquidated before 31 December 2016.
- The second line uses the assumption that updated LEs obtained
for the non-updated polices would broadly follow those already
obtained for other policies, resulting in an LE increase of 20% on
the non-updated policies. In practice, the LE changes exhibited by
actual revised assessments vary widely and the Board does not feel
it is necessarily correct to extrapolate the changes for the
non-updated policies. The overall effect is to increase average LE
by 0.21 years.
- The third line assumes an increase in LE of 40% on the
non-updated policies. The effect on NAV is roughly proportionate to
that shown in the second line, but the increase in LE is only 0.1
years because of the fact that policies are weighted by value -
such an extension to LE of course has significant impact on the
values of some of these policies.
- Finally, the fourth line shows the outcome of assuming LEs are
simply based on the current table of life expectancies for the
general population, the 2008 Valuation Basic Table (Ultimate), i.e.
ignoring LE assessments. The Board does not suggest that this is a
realistic assumption, but it gives a measure of the degree to which
the portfolio is dependent on assessed LEs being shorter than for
the population as a whole.
Sensitivity Matrix
Net Asset Value in pence per share on various assumptions as at
31 October 2011
Mortality Assumptions Weighted Discount Rates applied to cash flows
Average
LE*
----------------------- --------- -------------------------------------------
10% Current (12%) 16% 20%
----------------------- --------- ------- ------------------ ------ ------
Latest LE 4.7 79.1 71.5 59.6 49.9
----------------------- --------- ------- ------------------ ------ ------
+20% for LE
dates before
01/11/2008 5.0 70.3 63.1 51.6 42.5
----------------------- --------- ------- ------------------ ------ ------
+40% for LE
dates before
01/11/2008 5.0 62.7 55.9 44.9 36.4
----------------------- --------- ------- ------------------ ------ ------
No underwriting 5.7 60.7 53.1 41.3 32.0
----------------------- --------- ------- ------------------ ------ ------
* The weighted average LE (in years) is calculated by reference
to the policy values obtained.
Source: SL Investment Management Limited
Top ten holdings
By reference to the most recent portfolio valuation of the
Company as at 31 October 2011, the largest ten investments held by
the Company, measured by life office exposure, were as follows:
% of total
assets as
at
Number 31 October
Issuer of policies 2011
American General Life Insurance Company (TX) 13 17.54%
---------------------------------------------- -------------
Transamerica Life Insurance Company 21 14.47%
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Lincoln National Life Insurance Co 16 14.46%
---------------------------------------------- -------------
Massachusetts Mutual Life Insurance Co 9 9.85%
---------------------------------------------- -------------
John Hancock Life Insurance Company 11 8.24%
---------------------------------------------- -------------
Aviva Life and Annuity Company 5 4.89%
---------------------------------------------- -------------
MetLife Insurance Company of Connecticut 8 4.71%
---------------------------------------------- -------------
New York Life Insurance and Annuity Corp 6 3.87%
---------------------------------------------- -------------
Security Life of Denver Insurance Co 1 3.46%
---------------------------------------------- -------------
National Western Life Insurance Company 1 2.62%
---------------------------------------------- -------------
Company Information
Launch date 25 March 2004
EPIC TLI
Year end 30 June (from 2010 onwards)
Report & Accounts 2011 Annual Report posted October, Interim posted February
AGM November
Price Information Financial Times (under INVESTMENT COMPANIES, listed as 'AltAstsOpps.')
Investor Information
The latest available portfolio information included in the
interim and annual report and accounts can be accessed via
http://www.rcm.com/investmenttrusts/investors_tlif.php (under the
Professional Investors section).
By order of the Board
Alternative Asset Opportunities PCC Limited
Enquiries:
Peter Ingram
Company Secretary Tel: 020 7065 1467
This information is provided by RNS
The company news service from the London Stock Exchange
END
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