TIDMLSAA TIDMLSAB TIDMLSAD TIDMLSAE
RNS Number : 0168L
Life Settlement Assets PLC
27 April 2020
LIFE SETTLEMENT ASSETS PLC
(the "Company" or "LSA")
LEI: 2138003OL2VBXWG1BZ27
Annual Results Announcement for the year ended 31 December
2019
STRATEGIC REPORT
Introduction
LSA, a closed-ended investment trust company which invests in
and manages portfolios of whole and fractional interests in life
settlement policies issued by life insurance companies operating
predominantly in the United States, is pleased to announce its
financial results for the year ended 31 December 2019. The annual
financial report is being made available to be viewed on the
Company's website at
https://www.lsaplc.com/investor-relations/reports-company-literature/
and will be submitted to and available for inspection at
http://www.morningstar.co.uk/uk/nsm .
The well-established US life settlement market enables
individuals to sell their Policies to investors at a higher cash
value than they would otherwise receive from insurance companies
(if they were cancelled or surrendered at the date of sale) Certain
of the investments by the Company in these life settlement assets
have been made at a significantly discounted acquisition cost from
distressed situations where the original purchaser of the Policy is
in liquidation.
Corporate objective
The Company's objective is to generate long-term returns for
investors by managing its portfolios of life settlement interests
so that the realised value of the Policies at maturity exceeds the
aggregate cost of acquiring the Policies, ongoing premiums,
management fees and other operational costs The Company seeks to
achieve this for each of its separate Share Classes.
Core competencies
Through the combination of its Board and its strategic
partnerships with service providers, LSA has core competencies in
the following areas:
-- Assessment of the underlying value of life settlement policy
portfolios;
-- Access to investment opportunities, especially to portfolios
of policies where the Company already has an interest;
-- Management of strategic partnerships with service providers
providing investment management, actuarial, administration, company
secretarial and tracking services to enable the efficient operation
of its business; and
-- Cash flow management to balance returns to Shareholders with
financing ongoing acquisition costs
Through these competencies the Company has developed a
successful track record of realising value for Shareholders.
STRATEGIC ISSUES AND REPORTING
The Strategic Report has been prepared to help Shareholders
understand the operation of the Company and assess its
performance.
Basis of preparation
The Strategic Report has been prepared in accordance with the
requirements of Section 414A to 414D of the Companies Act 2006 (the
"Act") The Strategic Report also discloses the Company's risks and
uncertainties as identified by the Board, the key performance
indicators used by the Board to measure the Company's performance,
the strategies used to implement the Company's objectives, the
Company's environmental, social and ethical policy and the
Company's anticipated future developments.
Section 172(1) Statement
Under Section 172 ("s172") of the Companies Act 2006 the
directors of a company are required to act in the way they consider
will most likely promote the success of the company for the benefit
of its members as a whole. In doing this, section 172 requires
directors to include these factors:
-- likely consequences of any decisions in the long-term;
-- interests of the company's employees;
-- need to foster the company's business relationships with
suppliers, customers and others;
-- impact of the company's operations on the community and
environment;
-- desirability of the company maintaining a reputation for high
standards of business conduct, and
-- need to act fairly as between members of the company.
In discharging the s172 duties the Board have regard to the
factors set out above, although is should be noted that the Company
does not have any employees. It also has regard to other factors
where relevant. It is acknowledged that every decision the Board
make will not necessarily result in a positive outcome for all
stakeholders. By considering the Company's purpose and objectives
together with its strategic priorities and having a process in
place for decision-making, the Board do, however, aim to make sure
that decisions are consistent and predictable.
It is normal practice for Investment companies to delegate
authority for day-to-day administration and management of the
assets to third parties. At every Board meeting a review of
financial and operational performance, as well as legal and
regulatory compliance, is undertaken. The Board also review other
areas over the course of the financial year including the Company's
business strategy; key risks; stakeholder-related matters;
diversity and inclusivity; environmental matters; corporate
responsibility and governance, compliance and legal matters.
During the period Board received information to understand the
interests and views of the Company's key stakeholders;
Shareholders, the Administrator; Acheron as Investment Manager to
the Trusts, the four Trusts responsible for the portfolio of each
share class and the Servicing Agents. One of the Company's
Directors sits as trustee of these Trusts and provides regular
updates on each Trust. This information was distributed in a range
of different formats including reports and presentations on the
Company's financial and operational performance, non-financial
KPIs, risk and the outcomes of specific engagement's with
stakeholders. As a result, the Board have received useful feedback
which allows them to understand the nature of any stakeholder
concerns and to comply with the s172 duty to promote the success of
the Company. The Board engages with the key stakeholders in a
variety of ways, including the publication of Annual and
Half-Yearly Reports and Accounts, monthly fact sheets,
announcements of results, information provided on the Company's
website and at the Annual General Meeting. Shareholders are invited
to contact the Directors at any opportunity either via Acheron or
through the Company Secretary.
During the year the Board has considered:
--the distribution of cash through dividends to Shareholders and
returned $14.5 million across all share classes as shown in note
18;
--the retention of cash as working capital to meet the payment
of ongoing premiums to service the portfolio of life policies;
--the buyback of shares through the stock market and via a
tender offer. Full details are given in note 21 on page 76 of the
Annual Report;
--the assessment of the valuation of the portfolio during the
year including selecting an appropriate discount factor based on
research available and the mix of policies in the portfolio;
--the advantages and disadvantages of the proposal to merge
share classes A, D and E and concluding that the cost savings,
strengthening of ownership of the underlying policies and
improvement in the marketability of the Company's shares meant that
the proposal should being put to a Shareholder vote at a General
Meeting; and
--the outcomes of meetings with the Trustees and Servicing
Agents in the United States to protect the Company's interests in
the Life Policies held in each Trust.
Subsequent to the year end, the impact of the Covid-#19 pandemic
on the Company's operations, that of its service providers and on
the valuation of its portfolio and concluding that the effect was
expected to be minimal.
Employees
The Company has no employees as it engages third parties to
provide all necessary services to the Company.
Community and Environment
As an investment company with no offices of its own nor any
employees the Company has minimal carbon emissions. Where possible,
meetings are held by electronically to reduce the Company's impact
on the environment. The Company does not make any political or
charitable donations.
Service Providers
The Company engages a number of service providers who it regards
as key to its ongoing business, the Board recognise that the
continued engagement with these service providers is vital and the
success of these service providers is synonymous with the success
of the Company. It receives reports from providers and regularly
monitors the contribution they make to the Company's operations.
The Administrator, Company Secretary, Investment Manager and
Trustee of the underlying Trusts all attend Board Meetings.
Investment Strategy
The Company seeks to generate long-term returns for investors by
investing in the life settlement market, through each of the
separate Share Classes. The Company aims to manage its investment
in portfolios of life settlement products so that the realised
value of the policy maturities exceeds the aggregate cost of
acquiring the policies, ongoing premiums, management fees and other
operational costs. The Company's investment Objective and Policy
are stated on page 17 of the Annual Report.
Investments and underlying assets
As at 31 December 2019 each Share Class was invested in
underlying assets as follows:
-- Ordinary A Share Class ("LSAA") invests in life insurance
policies acquired from special or "distressed" situations, with
exposure to both HIV (average age mid to late 50s) and elderly
insureds (average age mid to late 80s). It is a widely diversified
portfolio by gender and the number of lives insured with circa
4,400 underlying policies, and exposure to whole and fractional
policies.
-- Ordinary B Share Class ("LSAB") invests in life insurance
policies exposed only to elderly insureds (average age mid to late
80s) with exposure to whole and fractional policies.
-- Ordinary D and E Share Classes ("LSAD" and "LSAE") - both
these Share Classes invest in separate portfolios comprising
predominantly fractional policies with exposure to both HIV and
elderly insureds, where the LSAA and/or LSAB Share Classes are
already fractional owners.
Comparative benchmarks and performance
Due to the lack of directly comparable companies investing in
the secondary market in life policies, the Company does not follow
a specific sector or geographic benchmark, although indirect
comparisons may be made from time to time with relevant market
indices
The life settlement market has a low correlation with
traditional equity and fixed income markets, as returns are
dependent on the actuarial and mortality rate assumptions used.
This, coupled with current low interest rates, can make this an
attractive alternative asset class.
The performance of the Company against its key performance
indicators is shown below.
Ongoing Charges
The Company's total annual costs (investment management fees and
other expenses) are 6 2% of net assets for the year to 31 December
2019.
Dividends/Distributions
During the period the Company paid special dividends to LSAA
Shareholders of 5.50 US cents per share (total USD 2.5 million),
LSAD Shareholders of 66.09 US cents per share (total USD 6.0
million) and LSAE Shareholders of 355.37 US cents per share (total
USD 6.0 million).
Chairman's Statement
It gives me great pleasure to present my first Annual Report as
Chairman of LSA and your Company`s second report since admission to
the London Stock Exchange in March 2018. However, I am also
conscious that I am writing at a time of great uncertainty for many
around the world due to the Coronavirus pandemic ("Covid-19").
Investment Overview
As shown in the financial highlights below, the year to 31
December 2019 proved to be a positive year for your Company.
The maturities received in the year were such that the Company
was able to make significant distributions to Shareholders by way
of special dividends of 5.50 US cents per A share, 66.09 US cents
per D share and 355.37 US cents per E share as shown in note
18.
In addition, the Company used the additional proceeds from
maturities to return USD 10.0 million to A Shareholders under a
tender offer in July 2019. The Company also repurchased 500,000 D
shares at a cost of USD 500,000 and 166,666 E shares at a cost of
USD 500,000. Further details are given in note 21 of the Annual
Report.
After the distributions and repurchases mentioned above, the
year-end NAV of class A increased by 10.4% whilst classes B, D and
E reduced by 8.1%, 33.6% and 52.9% respectively. When adding back
the dividends paid to Shareholders during the year, the NAV
increased by 13.5% per A share, 19 6% per D share and 21 8% per E
share. In contrast the NAV of class B declined by a just over 8.1%,
reflecting the very different composition of its portfolio when
compared to the other share classes.
I would draw your attention to the Investment Manager's Report
set out below where the underlying detail of this performance is
set out. As in previous years, given the nature of its asset base,
the Company has engaged Lewis and Ellis to provide an independent
actuarial valuation of the portfolio of life policies and they have
confirmed the approach taken by our Investment Manager is both
accurate and represents fair value. Further details can be found in
our Investment Manager`s report, and I would particularly draw your
attention to the comments regarding the changes we have made to the
Board's assessment of fair value for the HIV portfolio.
Retention of cash
In our Half Year Report published in September 2019 we drew
attention to certain factors which are likely to affect the future
management of our portfolios. Firstly, as stated in the Company's
announcement in January 2020, is the decision to retain more cash
in order to ensure the Company is in a position to take advantage
of any opportunity to consolidate our portfolios of fractional
policies with the purchase of additional fractions of those
policies. Currently two opportunities are being pursued by our
Investment Manager, which if concluded successfully, will add to
the longer-term value of our assets.
Structural changes
On 31 March 2020, the four Trusts through which the Company
invests in the underlying assets of the Company were merged (the
"Trusts Merger") in order to reduce annual operating costs and to
reduce operational risks without creating cross liabilities.
Following the Trusts Merger, the Company's life settlement assets
are held by a single continuing trust, namely the Acheron Portfolio
Trust, which is expected to achieve significant future cost
savings.
Furthermore, proposals to merge the share classes A, D and E
have been advanced since the year end with details of the Merger
published in a Circular sent to Shareholders on 2 April 2020. Given
the very different nature of the structure of Class B, with no
exposure to HIV policies, the Board has decided after careful
consideration not to propose the merger of class B at this stage,
although this will be kept under review and may be considered at a
later date depending on how the projected maturities develop.
Overall, the Board believes that the simplified share class
structure resulting from the Merger should provide both improved
liquidity for the holders of the merged Share Classes and also a
clearer investment case for new investors in the future as well as
the potential for nearer term cash flow enhancements to the
existing A Ordinary Shareholders.
A general meeting has been convened on 28 April 2020 at which
Shareholders have been invited to consider and, if thought fit, to
pass the necessary resolutions to give effect to the Merger.
Board changes
The Company also announced in its Half Year Report that Jean
Medernach had announced his intention to step down as a Director
and Chairman of your Company. The Board would like to record its
thanks to Jean for his guidance and skill in helping the Company
with the transition from Luxembourg to the UK.
I am delighted to welcome Christopher Casey to the Board and as
Chair of the Audit Committee. Chris brings with him a wealth of
experience both as a board member of other Investment Trusts and
also as a former partner of KPMG.
Change of Auditor
In September 2019, we were informed that Grant Thornton had
decided that having performed a strategic review of their business,
for commercial reasons, they would not continue as the Company's
Auditors. After reviewing the various options available I am
delighted that we were able to appoint BDO as replacement
Auditors.
Company Secretary
Following a review of our service providers, during the second
half of the year the Board decided that the Company would be better
served if the functions of Company Secretary and Financial
Controller were carried out by the same firm. As a result, the
Board decided to terminate the contract with Maitland
Administration Services Limited and concentrate both these roles
with ISCA Administration Services Limited.
Covid-19
The Board has reviewed the implications of the global Covid-19
pandemic and has put in place robust measures to maintain the
ongoing operation of its business, and to ensure continued
compliance by the Company of its regulatory obligations. Whilst
there can be no guarantee that there will be no business
interruption, to date there has been no impact on the
administration of the Company or its assets, and the Board has
received details from its key service providers of the steps they
are taking to protect their employees and operations.
The Board remains confident that all share classes offer our
investors important defensive qualities, which remain highly
decorrelated from equities and bonds and the current volatility of
those markets.
As a result, the Board have concluded that the current pandemic
is likely to have a minimal effect on the Company's operations and
results. Further details can be found in the Viability Statement
below.
Outlook
In the face of the many challenges and uncertainty facing global
economies, communities and individuals, as they grapple with the
impact of Covid-19, the Board believes that the investment
opportunity offered by LSA, and the underpinning effect of its
engagement with the life settlement market in the USA, will
continue to offer value to all its direct and indirect
stakeholders. With the various changes and streamlining actions
described above being taken since the middle of last year, I
believe that although many challenges lie ahead, the Company is now
better positioned to attain its strategic objectives and move onto
the next stage of its development.
Michael Baines
Chairman
27 April 2020
Company Performance
Performance analysis by Share Class is provided in the tables
below
As at As at Percentage
31 December 31 December change
LSAA 2019 2018 (%)
---------------------------------------------------- ------------- ------------- -----------
Net assets attributable to
Shareholders (USD '000) 89,108 91,649 (2.8)
Shares in Issue 39,891,391 45,446,946 (12.2)
NAV per share (USD) 2.23 2.02 10.4
Closing share price (USD) 1.78 1.45 22.8
Discount to NAV (%) (20.2) (28.1) 7.9
Total Maturities (USD '000) 41,742 20,826 100.4
Split of maturities - HIV (USD
'000) 5,985 14,008 (57.3)
- non-HIV (USD '000) 35,757 6,818 424.4
Net income from portfolio (USD
'000) 19,427 2,446 694.2
Profit/(loss) before tax (USD
'000) 10,140 (3,811) 366.1
---------------------------------------------------- ------------- ------------- -----------
As at As at Percentage
31 December 31 December change
LSAB 2019 2018 (%)
---------------------------------------------------- ------------- ------------- -----------
Net assets attributable to
Shareholders (USD '000) 14,863 16,150 (8.0)
Shares in Issue 14,596,098 14,596,098 -
NAV per share (USD) 1.02 1.11 (8.1)
Closing share price (USD) 0.63 0.60 5.0
Discount to NAV (%) (38.2) (45.8) 7.6
Total Maturities (USD '000) 3,410 5,242 (34.9)
Split of maturities - HIV (USD n/a n/a -
'000)
- non-HIV (USD '000) 3,410 5,242 (34.9)
Net income from portfolio (USD
'000) (608) (1,765) 65.6
(Loss) before tax (USD '000) (1,286) (2,455) 47.6
---------------------------------------------------- ------------- ------------- -----------
As at As at Percentage
31 December 31 December change
LSAD 2019 2018 (%)
---------------------------------------------------- ------------- ------------- -----------
Net assets attributable to
Shareholders (USD '000) 7,310 11,591 (36.9)
Shares in Issue 8,792,561 9,262,561 (5.4)
NAV per share (USD) 0.83 1.25 (33.6)
Closing share price (USD) 0.85 0.60 41.7
Premium/(discount) to NAV (%) 2.4 (51.9) 54.3
Total Maturities (USD '000) 7,949 3,719 113.7
Split of maturities - HIV (USD
'000) 431 466 (7.5)
- non-HIV (USD '000) 7,518 3,253 131.1
Net income from portfolio (USD
'000) 3,557 569 525.1
Profit/(loss) before tax (USD
'000) 2,220 (70) 3,271.4
---------------------------------------------------- ------------- ------------- -----------
As at As at Percentage
31 December 31 December change
LSAE 2019 2018 (%)
---------------------------------------------------- ------------- ------------- -----------
Net assets attributable to
Shareholders (USD '000) 3,512 8,247 (57.4)
Shares in Issue 1,566,603 1,733,269 (9.6)
NAV per share (USD) 2.24 4.76 (52.9)
Closing share price (USD) 1.90 1.70 11.8
Discount to NAV (%) (15.2) (64.3) 49.1
Total Maturities (USD '000) 5,625 2,989 88.2
Split of maturities - HIV (USD
'000) 145 226 (35.8)
- non-HIV (USD '000) 5,480 2,763 98.3
Net income from portfolio (USD
'000) 2,797 761 267.5
Profit before tax (USD '000) 1,767 249 609.6
---------------------------------------------------- ------------- ------------- -----------
Key Performance Indicators (KPIs)
The Board monitors success in implementing the Company's
strategy against a range of Key Performance Indicators ("KPIs"),
which are viewed as significant measures of success over the longer
term. These key indicators are those provided in the performance
tables above. Although performance relative to the KPIs is
monitored over quarterly periods, it is success over the long-term
that is viewed as more important. This is particularly important
given the inherent volatility of maturities and short-term
investment returns.
The Board has adopted the following KPIs:
Share Price - a key measure for Shareholders to show the most
likely realisable value of this investment if it was sold. Changes
in the share price are closely monitored by the Board.
NAV per share - as this is the primary indicator of the
underlying value attributable to each share.
Premium/(discount) to NAV - as this measure can be used to
monitor the difference between the underlying Net Asset Value and
share price.
Total maturities (USD) - the value of the total maturities in
USD provides an indicator of the underlying cash flow that the
Company receives from its main source of income - policy
maturities. There are factors which could impact the outcome of
this performance measure including: average life expectancy and the
age of the underlying policy holders. Please note that the Actual
to Expected ("A/E") ratio, which is closely linked to the total
maturities KPI, is a key method by which the Board seeks to
anticipate the level of maturities. The A/E ratio measures the
declared maturities compared to the projected maturities based on
the actuarial models. A ratio close to 100% indicates maturities
correspond exactly to the model. A percentage greater than 100%
means the maturities are more than anticipated by the models and
less than 100% the opposite is the case.
Earnings per share - this is a key measure of financial
performance used to assess the fortunes of the Company over each
financial period.
Running Costs - The Ongoing Charges of the Company for the
financial year under review represented 6.2% (2018: 5.4%) of
average net assets.
Shareholders should note that this ratio has been calculated in
accordance with the Association of Investment Companies' ("AIC")
recommended methodology, published in May 2012. This figure
indicates the annual percentage reduction in Shareholder returns as
a result of recurring operational expenses. Although the Ongoing
Charges figure is based on historic information, it does provide
Shareholders with a guide to the level of costs that may be
incurred by the Company in the future.
Please Note: The Company regularly uses performance measures to
present its financial performance. These measures may not be
comparable to similar measures used by other companies, nor do they
correspond to IFRS standards or other accounting principles .
Investment Manager's Report
The Life Settlement Market
The year ended 31 December 2019 was generally a good year for
the life settlement market, which continues to attract increasing
attention. Conning & Co, in its recent fourteenth Annual Life
Settlement Report, explores the expansion of the life settlement
industry relative to carrier performance, cost-of-insurance
drivers, a surge in retiring baby boomers, and growing interest
from investors.
Based on demographics and market dynamics, Conning foresees that
the life settlement market could see double-digit expansion over
the next ten years. The life settlement market would reach over USD
200 billion in cumulative life settlement transactions by 2028,
supported by a continued healthy supply of investors, a stable
regulatory environment and a large pool of policies to choose from.
In addition, the tertiary market is expected to continue thriving,
allowing the settlement market to maintain stable year-over-year
growth. One point that will continue to require improvements is the
viators medical assessment, with Life Expectancy playing a critical
role in the valuation of life settlements.
Portfolio Overview
LSA's current portfolios in the Trusts is subdivided into
portfolios exposed to either HIV policy holders or non-HIV policy
holders. For Class A, D and E Shareholders, the respective sizes of
these segments are USD 146 million for life settlements for non-HIV
policy holders. For all share classes, the respective sizes of
these segments are USD 381 million for HIV. The face-weighted
average age for the non-HIV segment is about 89.2 years. This
translates into a life expectancy for a normal population of five
years for men and six years for women. Class B is not exposed to
HIV.
HIV life expectancy is a difficult variable to assess. The
current face-weighted average age of the HIV population is about
60.2 years old; however actual mortality is similar to a population
of about 15 to 20 years older. Therefore, assuming the HIV policies
have the life expectancy of the general male population aged 78,
the average life expectancy for HIV policy holders could be around
15 years.
The current total premiums paid on this portfolio is about USD
20 million across all share classes. For 2020, we will retain USD
18m as a basis for premium projections. Premiums are reducing year
on year as the large elderly policies in the portfolio
progressively reach maturity.
During 2019, investments were made in four small portfolios of
fractional policies in which the Company is already a fractional
owner for a total face cost of USD 1.0m. Fractional policies are
single life insurance policies initially purchased by multiple
investors, each of whom acquired a fractional interest. These
acquisitions are critical to ensure the premiums on fractional
policies that LSA is exposed to continue to be paid and do not
lapse. These policies are mainly held in the Acheron Portfolio
Trust (LSAA) which is significantly exposed to such fractional
policies.
The following table provides information on the Company's
policies by Share Class and by exposure to HIV and non-HIV positive
insureds, as at 31 December 2019.
HIV and Non-HIV Exposed Policies (all values in USD)
LSAA HIV Non-HIV Total
Number of policies 4,233 182 4,415
Total face value (net of
advances on policies) 358,298,484 75,535,147 433,833,631
Valuation 42,380,000 15,751,000 58,131,000
Percentage of net face
value 11.8% 20.9% 13.4%
LSAB HIV Non-HIV Total
Number of policies n/a 96 96
Total face value n/a 45,504,840 45,504,840
Valuation n/a 10,739,000 10,739,000
Percentage of face value n/a 23.6% 23.6%
LSAD HIV Non-HIV Total
Number of policies 367 76 443
Total face value 15,966,447 16,306,527 32,272,974
Valuation 1,916,000 4,527,000 6,443,000
Percentage of face value 12.0% 27.8% 20.0%
LSAE HIV Non-HIV Total
Number of policies 161 56 217
Total face value 6,679,096 8,183,789 14,862,885
Valuation 887,000 1,841,000 2,728,000
Percentage of face value 13.3% 22.5% 18.4%
The US actuary provided valuations for all portfolios for the
year ended 31 December 2019. The valuations shown were derived by
adopting an actuarial approach. The actuaries performed an
2010-2019 A/E Study based on the observed mortality occurrences.
Some improvements to the HIV mortality assumptions were made based
on 2012-2019 A/E ratio. HIV figures from 2010 and 2011 were removed
as the A/E ratios were significantly higher. This ensures a more
conservative set of estimates. As a result, both HIV and non-HIV
segments reached long-term A/E ratio of circa 100% even excluding
these outperforming years, as is shown in the graphs titled HIV and
Non-HIV on page 15 of the Annual Report. In addition, none of the
life expectancies from medical underwriters were used in the 2019
valuation. The Life Expectancy reports were not only out of date,
but overall projections by medical underwriters had proven to be
poor.
Maturities
The year saw declared maturities and A/E in the different Share
Classes as follow:
Maturities (USD) Class A Class B Class D Class E
HIV 5,984,541 - 431,125 144,846
Non-HIV 35,757,459 3,409,601 7,517,875 5,480,154
Total 41,742,000 3,409,601 7,949,000 5,625,000
A/E* All classes
HIV 83%
Non-HIV 95%
* in the number of lives, from the US actuary reports
In the non-HIV segment, the two largest exposures matured in
2019, contributing USD 35 million across all Share Classes.
Although Non-HIV A/E in the number of lives is 95%, those two
maturities have pushed the non-HIV A/E in monetary terms to 177%
across all the share classes and 209% in Class A. This is above our
internal projection of one extra-large maturity for this year, but
not a sufficient factor for a model revision. However, Class B only
shared USD 1.7 million in those two exposures, leading to the lower
A/E ratio and poorer performance in 2019.
On the other hand, the HIV segment performed under expectations
by 17% in the year under review. Compared to previous years, the
HIV mortality rate seems lower in younger age ranges but much
higher in above 70-year-old range. It means that the observed
mortality curve in 2019 is steeper than before. An internal
exercise was performed to study the possible impact on valuation
from the change in the curve. By applying last year's best fit
mortality curve to the portfolio, rather than the model currently
in use, the valuation of the whole HIV portfolio for Class A would
decrease by USD 0.6 million, or about 2%.
After the realisation of two largest exposures, the HIV face
value concentration increased by 5% to 80% in Class A. The
increased exposure to HIV only is increasing not only the risk
concentration of the portfolio, but also reducing cash flow in the
coming years. In order to adjust the portfolio risk return ratio
for this steady increase in concentration, the discount rate
applied to HIV was increased from 11% to 12% in July 2019.
Going forward
The mortality of the insureds in the portfolio will continue to
be the most significant factor that will affect the financial
results for the Company. This will have a direct impact on cash
flow, not only due to the maturities that will or will not be
collected, but also in terms of premiums that will have to be paid
or not. We will continue to follow the recent research on mortality
in general and especially on long-term HIV trends. The steepening
of this year's HIV mortality curve is a potential validation of our
view that HIV sufferers' health conditions worsen much more rapidly
than the general population as they age. This results in long-term
patients having a worse medical status that is different from
patients of the same age that only recently contracted the
disease.
Acheron Capital
27 April 2020
Overview of Strategy and Investment Policy
Investment Objective
The Company's investment objective is to generate long-term
returns for investors by investing in the life settlement market.
The Company has not established target rates of return with respect
to its investments.
Investment Policy
The Company will seek to achieve the Company's Investment
Objective in respect of each Share Class as follows:
A Ordinary Share Class (LSAA)
The assets attributable to the A Ordinary Share Class are
predominantly invested in life insurance policies acquired from
special or "distressed" situations, with exposure to both HIV and
elderly insureds.
The Company met this Investment Policy by acquiring the entire
beneficial interest in the Acheron Portfolio Trust from the
Predecessor Company shortly after Admission.
B Ordinary Share Class (LSAB)
The assets attributable to the B Ordinary Share Class are
predominantly invested in life insurance policies exposed only to
elderly insureds.
The Company met this Investment Policy by acquiring the entire
beneficial interest in the Lorenzo Tonti 2006 Portfolio Trust from
the Predecessor Company shortly after Admission.
D Ordinary Share Class and E Ordinary Share Class (LSAD and
LSAE)
The assets attributable to the D and E Ordinary Share Classes
are invested predominantly in Fractional Policies with exposure to
both HIV and elderly insureds, where the A and/or B Share Classes
are already fractional owners.
The Company met these Investment Policies by acquiring the
entire beneficial interest in: a) the Avernus Portfolio Trust, in
respect of the D Ordinary Share Class; and b) the Styx Portfolio
Trust, in respect of the E Ordinary Share Class, from the
Predecessor Company shortly after Admission.
Source of Policies
In respect of each Share Class, such Policies will be or have
been obtained from a variety of sources, primarily in the United
States.
Further acquisitions
The Company has announced that it intends to retain a larger
proportion of cash receipts from policy maturities in order to be
in a position to fund potential investment opportunities through
the acquisition and consolidation of the remaining fractions or
participations of certain of the US trusts and conservatorships in
which the Company was already indirectly invested. These
opportunities were expected to arise over the forthcoming years as
a result of the ageing (and therefore reducing size) of the
underlying portfolios in which the Company was invested and as a
result of the Investment Manager's proactive steps to protect and
maximise the value of the assets. Accordingly, as surplus cash
accumulates from policy maturities, the Board will carefully
balance the amount that should be distributed to Shareholders and
that which should be retained to fund future potential investment
opportunities.
The Company may also raise additional capital in the future to
acquire further Policies that meet the Investment Objective and
Investment Policy of the relevant Share Class (or those of a Share
Class to be established in future). Such Policies will subsequently
be granted to the relevant Trust.
Investment Controls
Any transaction involving more than 10% of the Gross Asset Value
of the Company, directly or indirectly, will require the prior
approval of the Board in writing.
Hedging and use of derivatives
The Company and/or the Trusts may also hold derivative or other
financial instruments designed for efficient portfolio management
or to hedge interest or inflation risks. The Trusts may invest in
liquidity management products as deemed fit by the Trustee or the
Investment Manager, as well as mortality hedging products as deemed
fit by the Investment Manager, including, but not limited to,
mortality related Insurance Linked Securities ("ILS").
Dividend Policy
The Company has no stated dividend target. The Company aims to
distribute a substantial portion of its funds derived from its
operations in respect of a Share Class as dividends to Shareholders
of that share class. There can be no assurance that the Company
will be able to achieve this aim.
The Company will only pay dividends on the Ordinary shares to
the extent that it has sufficient financial resources available for
that purpose.
In accordance with regulation 19 of the Investment Trust
(Approved Company) (Tax) Regulations 2011, the Company will not
(except to the extent permitted by those regulations) retain more
than 15% of its income (as calculated for UK tax purposes) in
respect of any accounting period.
Borrowing
As at the date of this Report, the Company as a small registered
Alternative Investment Fund ("AIF") does not intend to borrow due
to the costs and regulatory implications that this would entail.
However, the Company reserves the right to borrow in the future in
appropriate circumstances and at the discretion of the Board (or,
subject to the terms of the applicable Investment Management
Agreement, the Investment Manager if such borrowing is at Trust
level), provided that any such borrowing entered into in respect
of, or attributable to, a Share Class shall be limited to a maximum
of 10% of the Net Asset Value of such Share Class (at the time the
borrowing is incurred).
In addition, the Board (or the Investment Manager, subject to
any limits imposed by the Board) has discretion to make short-term
loans out of the assets attributable to one Share Class to another
Share Class where the Board or the Investment Manager (as the case
may be) considers it necessary in order to fully or partially
remedy a cash-flow shortfall in respect of that other Share
Class.
Policy Advances
The Company does utilise policy advances to provide an
acceleration of the cash flow to the Company. A policy advance
refers to excess cash withdrawn from cash reserves generated at the
level of the life insurance contracts. Policy advances will be
deducted from any proceeds when the maturities are collected. These
policy advances are also described in Note 3.4 of the Annual
Report. The Board is of the opinion that these policy advances do
not constitute borrowing for the purposes of the Alternative
Investment Fund Managers Directive ("AIFMD").
Cash Management
Pending reinvestment or distribution of cash receipts, cash
received by the Company and the Trusts may be held on deposit, in
cash, cash equivalents, near cash instruments, money market
instruments and money market funds and cash funds in line with the
risk appetite specified by the Board.
The Trusts' Investment Manager must ensure that the Company's
and each Trust's liabilities can be met as they fall due.
Corporate and Operational Structure
The Board retains responsibility for key elements of the
Company's strategy, including the following:
- the Company's investment policy which determines the diversity
of the Company's portfolio. The Board sets limits and restrictions
with the aim of reducing risk and maximising returns;
- the appointment, amendment or removal of the Company's
third-party service providers; and ensuring an effective system of
oversight over the Company's risk management and corporate
governance.
In order to effectively undertake its duties, the Board may seek
expert legal advice. It can also call upon the advice of the
Company Secretary.
The Board act in a way that they consider to be in good faith
and is most likely to promote the success of the Company for the
benefit of its Shareholders as a whole, and in doing so have regard
(amongst other matters) to:
- the likely consequences of any decision in the long-term;
- the impact of the Company's operations on the community and
the environment;
- the desirability of the Company maintaining a reputation for
high standards of business conduct; and
- the need to act fairly to avoid conflicts between the
interests of the Directors and those of the Company.
The Company has outsourced various operations to various
third-party service providers as detailed below:
- Investment Management: As it is an internally managed
investment trust, the Company has not appointed an investment
manager to provide it with investment managerial services. However,
each of the Trusts have appointed the Investment Manager, Acheron
Capital Limited as their investment manager under the Investment
Management Agreements with effect from the date of Admission. The
Investment Manager is authorised and regulated by the FCA (under
reference number 443685). Further details of Investment Management
Agreements are set out in Part 6 of the Prospectus dated January
2018.
- The Trustee: The Trustee of each of the Trusts is Dr Robert
Edelstein who is also a Director of the Company.
- The Registrar: Link Market Services Limited has been appointed
as the Company's Registrar.
- Administrator: The Company has appointed Compagnie Européenne
de Révision Sàrl as its Administrator.
- Company Secretary: With effect from 1 December 2019, ISCA
Administration Services Limited has been appointed as Company
Secretary.
- Tracking and Servicing Agents: The Trusts have appointed a
Tracking and Servicing Agent to assess on a regular basis if
Consenting Individuals have passed away. If Consenting Individuals
have passed away the Tracking and Servicing Agent obtains
respective death certificates and ensures that they are delivered
to the insurance company that issued the relevant Policy so that
applicable death benefits can be claimed. Each Trust has entered
into a servicing agreement with the Tracking and Servicing Agent
detailing the services the Tracking and Servicing Agent will
provide. As at the date of this Report, Litai Assets LLC, Fort
Lauderdale and the Asset Servicing Group, Oklahoma City, have both
been appointed by the Trusts to service life settlement policy
interests owned by the Trusts.
- Actuaries: The Company engages actuaries to estimate the life
expectancy of individuals insured under particular Policies or
portfolios of Policies. Actuaries provide life expectancy or
valuation estimates based on a more general set of assumptions and
experience.
Principal Risks
The Company is exposed to a number of potential risks and
uncertainties. These risks could have a material impact on
financial performance and position and could cause actual results
to differ materially from expected and historical results.
The Company faces a number of risks in the normal course of its
activities and as a result the management of those risks the
Company faces is essential. The Board maintains the overall
responsibility for risk management but has delegated to the Audit
Committee the task of regular and robust assessments of the
Company's risks and controls. The Audit Committee has accordingly
established a robust process to identify and monitor the risks
faced by the Company. The process involves the maintenance of a
risk register, which identifies the risks facing the Company and
assesses each risk on a scale, classifying the probability of the
risk and the potential impact that an occurrence of the risk could
have on the Company. A number of day-to-day risk management
functions of the Trusts are undertaken by the Trusts' Investment
Manager, who regularly reports to the Audit Committee.
Risk Mitigation
Mortality risk
Changes in mortality rates may The Investment Manager regularly
adversely affect the performance assesses mortality rates based
of the Policies held by the on available information.
Company in respect of a Share
Class.
-------------------------------------------
Premium management risk
Unanticipated volatility in Management monitors cash on
mortality rates makes liquidity an ongoing basis in accordance
management of premium reserves with the practice and limits
difficult, as the Company (or set by the Board.
the Trusts) need to be able
to meet premiums and costs at
all times. Failure to pay a
premium may result in the relevant
Policy lapsing and the Company
being unable to receive insured
sums as a result.
-------------------------------------------
Volatility risk
The portfolio of each Share The Investment Manager seeks
Class may be more volatile than to ensure a diversified portfolio
expected as a consequence of of policies.
certain policies representing
a larger proportion of the portfolio
than other policies.
-------------------------------------------
Fractional premium risk
The other parties in a fractional The Investment Manager regularly
policy may not renew the premium has first refusal in this event
leading to the policy lapsing. and will decide whether a policy
is worth retaining or whether
it should be allowed to lapse.
If it is considered the policy
should be retained the Company
will pay the premium that remains
unpaid by the other party. The
Company is under no obligation
to pay for a policy which it
considers is uneconomic.
-------------------------------------------
Advance age mortality risk
There is a lack of data to reliably The Company has engaged an independent
determine general or disease Actuary to perform its own assessment
specific mortality at advanced of the value of the portfolio
ages, as well as the date beyond of policies. Valuation differences
which a Policy no longer has between the two models are investigated.
value. This makes the use of
statistically unproven assumptions
necessary. As a consequence,
should such assumptions prove
to be incorrect, the Company's
performance and that of the
Ordinary Shares may fall short
of expectations.
-------------------------------------------
Discount rate risk
The discount rate used for reporting The discount rate applied is
or valuation purposes may be regularly assessed by the Investment
on a portfolio basis or on a Manager based on available information.
bottom up Policy by Policy or Changes in discount rate will
Policy type by Policy type basis, only be made once approved by
which can create material value the Board.
differences. Further, there
is no well-established market
discount rate, which makes the
use of specific discount rates
for actuarial purposes subjective.
-------------------------------------------
Modelling risk
The Investment Manager uses The Company has engaged an independent
modelling in determining the Actuary to perform its own assessment
investments to make; however, of the value of the portfolio
if the assumptions made by the of policies. Valuation differences
Investment Manager in building between the two models are investigated.
these models are or were materially
incorrect, there could be a
substantial adverse effect on
the Net Asset Value of the Ordinary
Shares participating in the
relevant Policies and the Company's
performance and that of the
Ordinary Shares may fall short
of expectations.
-------------------------------------------
Tax
Any changes in the Company's The Company intends at all times
tax status or to conduct its affairs so as
in taxation legislation could to enable it to qualify as an
affect the value of investments investment trust for the purposes
held by the Company, affect of Section 1158 of the Corporation
the Company's ability to provide Tax Act 2010. Both the Board
returns to Shareholders and and the Investment Manager are
affect the tax treatment for aware of the requirements which
Shareholders of their investments are to be fulfilled in any accounting
in the Company. The results period for the Company to maintain
of the Company would also likely its investment trust status.
be adversely affected if the The conditions required to satisfy
Company were not eligible to the investment trust criteria
claim benefits under the current shall be monitored by the compliance
income tax treaty between the function of the Investment Manager
United Kingdom and the United and performance of the same
States. In conformity with the shall be reported to the Board
income tax treaty, withholding on a quarterly basis. The Board
tax on matured policies is not monitors the trading of the
due if at least 6% of the average main class of Shares regularly
capital stock of the main class to assess the 6% requirement.
of Shares is traded annually This helps ensure that action
on a recognised stock exchange. could be taken to encourage
Changes in taxation may also more trading and reduce the
adversely affect the results likelihood of incurring a tax
of the Company. charge.
-------------------------------------------
Breach of applicable legislative
obligations The Company engages only with
The Company and its third-party third-party service providers
service providers are subject which hold the appropriate regulatory
to various legislative and regulatory approvals for the function they
regimes. Any breach of applicable are to perform and can demonstrate
legislative and/or regulatory that they can adhere to the
obligations could have a negative regulatory standards required
impact on the Company and impact of them. Each appointment is
returns to Shareholders. governed by agreements which
contain the ability for the
Company to terminate the arrangements
with each of these counterparties
with limited notice should such
counterparty continually or
materially breach any of their
legislative obligations, or
their obligations to the Company
more broadly. Additionally,
each of the counterparties is
subject to regular performance
and compliance monitoring by
the Investment Manager, as appropriate
to their function, to ensure
that they are acting in accordance
with applicable regulations
and are aware of any upcoming
regulatory changes which may
affect the Company.
-------------------------------------------
Counterparty risk
If an insurance company that Insurance companies are required
has issued a Policy in which to separate their operations
the Company invests defaults, between General Insurance and
the Company may not receive Life Insurance, meaning the
one or more payments owing to effect on the assets and the
it. risk on Life Settlement policies
would be ring fenced in the
event of significant business
difficulties. The HIV policies
are protected by a State Guarantee
up to USD150k-USD200k per policy
which covers a significant proportion
of these policies. Non-HIV policies
tend to be of a higher value
than that covered by the State
Guarantee and involve some risk,
but the insurance industry spreads
their risk through re-insurance
in many asset backed companies
across the world.
-------------------------------------------
Other risks specific to the Company
As described on page 34 of the Annual Report, the Board and
Audit Committee have an ongoing process of monitoring and reviewing
risks and internal controls. The principal risks and mitigations
are highlighted above.
Litigation risk: The assignment of life insurance policies can
be a contentious matter and the sector has historically been
subject to high levels of litigation.
Premium assumptions risk: Changes in the amount of premiums
charged by the insurance company that has issued a Policy may
increase the costs borne by the Company and adversely affect its
performance.
Reliance on key individuals: The Company relies on key
individuals to manage the day-to-day affairs of the Company. There
can be no assurance as to the continued service of these key
individuals. The departure of key individuals without adequate
replacement may have a material adverse effect on the Company's
prospects and results. Accordingly, the ability of the Company to
achieve its investment objective depends heavily on the experience
of the Investment Manager's team, and more generally, on the
ability of the Investment Manager to attract and retain suitable
staff.
Fluctuations in the market price of the Company's shares: The
market price of the Company's shares may not reflect the Net Asset
Value of each Share Class and may fluctuate widely in response to
different factors. There can be no assurance that the Company's
shares will be repurchased by the Company even if they trade
materially below their Net Asset Value. Similarly, the shares may
trade at a premium to Net Asset Value whereby the shares can trade
on the open market at a price that is higher than the value of the
underlying assets. There can be no assurance, express or implied,
that Shareholders will receive back the amount of their investment
in the Company's shares.
Third-Party Service Providers: The Company has no employees and
the Directors have all been appointed on a non-executive basis.
Whilst the Company has taken all reasonable steps to establish and
maintain adequate procedures, systems and controls to enable it to
comply with its obligations, the Company relies upon the
performance of third-party service providers for its executive
function. In particular, the Investment Manager, Administrator,
Registrar and Company Secretary. The termination of service
provision by any service provider, or failure by any service
provider to carry out its obligations to the Company, or to carry
out its obligations to the Company in accordance with the terms of
its appointment, could have a material adverse effect on the
Company's operations and its ability to meet its investment
objective.
Achievement of the Investment Objective: There can be no
assurance that the Company will be successful in implementing the
Investment Objective.
For a detailed description of the Company's financial risks,
please refer to note 4 of the Annual Report.
Viability Statement and Other Disclosures
The Directors have assessed the prospects of the Company over a
longer period than the 12 months referred to in the 'Going Concern'
guidelines.
The Board conducted this review focusing on a period of three
years. This period was selected as it is aligned with the Company's
strategic planning. In making this assessment the Board also
considered the Company's principal risks.
Investment trusts in the UK operate in a well-established and
robust regulatory environment and the Directors have assumed
that:
-- Investors will continue to want to invest in closed-end
investment trusts because the fixed capitalisation structure is
suited to pursuing the current investment strategy; and
-- the Company's remit of investing in life settlement assets
predominantly in the U.S. will continue to be attractive to
investors.
The Company's primary source of income is from policy
maturities. As the timing of these maturities is not entirely
predictable the Board sometimes will need to take advantage of
policy advances. The Company can utilise policy advances in order
for premiums to be maintained active. A policy advance refers in
this case to excess cash withdrawn from cash reserves generated at
the level of the life insurance contracts. Policy advances are
deducted from any proceeds when the maturities are collected.
In the unlikely event that maturities and policy advances are
insufficient to meet ongoing cash and policy premium obligations,
the Directors have the authority to make short-term borrowing
arrangements with financial institutions. These borrowing options
are explained in more detail in the Strategic Report above.
As with all investment vehicles, there is a risk that the
performance of individual investments will vary and that capital
may be lost, but this is not regarded as a threat to the viability
of the Company. Operationally, the Company retains title to all
assets including the life settlement assets and cash.
The closed-end nature of the Company means that, unlike an
open-ended fund, it does not need to liquidate positions when
Shareholders wish to sell their shares, the expenses of the Company
are predictable and modest in comparison with the assets and there
are no capital commitments currently foreseen which would alter
that position. Taking these factors into account, the Directors
confirm that they have a reasonable expectation that the Company
will continue to operate and meet its expenses as they fall due
over the next three years.
The Company's portfolio consists primarily of U.S. investments,
accordingly, the Company believes that the "Brexit" process will
not materially affect the prospects for the Company, but the Board
will continue to keep developments under review.
In assessing the viability of the Company, the Board has fully
considered the risks of the current Covid-19 pandemic and the
effect any additional maturities may have on insurance companies
within the life settlement market. The potential risk to the
Company and the mitigation is shown above under Counterparty risk.
The Board has considered the position of the Company in the
unlikely event that maturities are not paid out in full. Over the
last year the Company has returned cash received from large
maturities to Shareholders in the form of dividends, buybacks and a
tender offer. It should be noted that such payments are not fixed
and are at the Board's discretion based on the cash available at
the time.
The Board have concluded that the effect of the current pandemic
on the Company's asset valuation and its ability to service those
assets through the payment of premiums is likely to be minimal.
Donations
The Company made no political or charitable donations during the
year under review.
Environment, human rights, employee, social and community
issues
The Company is required by law to provide details of
environmental matters (including the impact of the Company on the
environment), employee, human rights, social and community issues
(including information about any policies it has in relation to
these matters and the effectiveness of those policies). The Company
does not have any employees and the Board is composed of
independent non-executive Directors. As an investment trust, the
Company has a minimal impact on the environment. The Company aims
to minimise any detrimental effect that its actions may have by
adhering to applicable social legislation, and as a result does not
maintain specific policies in relation to these matters.
The Company has no internal operations and therefore no
greenhouse gas emissions to report nor does it have responsibility
for any other emissions producing sources, including those within
its underlying investment portfolio.
In carrying out its investment activities and in relationships
with suppliers, the Company aims to conduct itself responsibly,
ethically and fairly.
Modern Slavery Act
The Company is not within the scope of the Modern Slavery Act
2015 because it has insufficient turnover and is therefore not
obliged to make a human trafficking statement.
Approval
The Strategic Report was approved by the Board of Directors on
27 April 2020 and signed on its behalf by:
Michael Baines
27 April 2020
GOVERNANCE
Extract from Report of the Directors
Share Capital
At the year-end there were 39,891,391 A Ordinary Shares of $0.01
each, 14,596,098 B Ordinary Shares of $0.01 each, 8,792,561 D
Ordinary Shares of $0.01 each and 1,566,603 E Ordinary Shares of
$0.01 each, none of which are held in Treasury. The buybacks of the
Company's shares during the year are shown in note 21 of the Annual
Report. All shares are listed on the Specialist Fund Segment of the
main market of the London Stock Exchange.
Going Concern
The financial statements of the Company have been prepared on a
going concern basis. The forecast
projections and actual performance are reviewed on a regular
basis throughout the period. In assessing the Company's ability to
continue as a going concern the Board has fully considered the
effect of the current pandemic. Further details are shown in the
Viability Statement above. The Directors believe that this is
appropriate to prepare the financial statements on a going concern
basis and that the Company has adequate resources to continue in
operational existence for the foreseeable future and is financially
sound. The Company is able to meet from its assets, all of its
liabilities including annual premiums and its ongoing charges.
The full Annual Report and Accounts contains the following
statement regarding responsibility for the Financial
Statements:
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. Under company law the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that
period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and accounting estimates that are reasonable
and prudent;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
-- prepare a Directors' Report, a Strategic Report and
Directors' Remuneration Report which comply with the requirements
of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006 and, as
regards the financial statements, Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities. The Directors are
responsible for ensuring that the Annual Report and accounts, taken
as a whole, are fair, balanced, and understandable and provides the
information necessary for Shareholders to assess the Company's
performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the Annual Report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Directors' responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
-- The financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRSs) as adopted
by the European Union and Article 4 of the IAS Regulation and give
a true and fair view of the assets, liabilities, financial position
and profit of the Company.
-- The Annual Report includes a fair review of the development
and performance of the business and the financial position of the
Company, together with a description of the principal risks and
uncertainties that they face.
Michael Baines
Chairman
27 April 2020
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 31 December 2019
or 31 December 2018 but is derived from those accounts. Statutory
accounts for the year ended 31 December 2018 have been delivered to
the Registrar of Companies and statutory accounts for the year
ended 31 December 2019 will be delivered to the Registrar of
Companies in due course. The Auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include
a reference to any matters to which the Auditor drew attention by
way of emphasis without qualifying their report and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies
Act 2006. The text of the Auditor's reports can be found in the
Company's full Annual Report and Accounts at www.lsaplc.com
Life Settlement Assets PLC
Statement of Comprehensive Income
for the year ended 31 December 2019
2019 2018*
Revenue Capital Total Revenue Capital Total
Notes USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Income
Income from life
settlement portfolios 4 868 - 868 566 - 566
Gains from life settlement
portfolios 5 - 23,381 23,381 - 1,339 1,339
Other income 6 941 - 941 133 - 133
Net foreign exchange
loss (17) - (17) (27) - (27)
Total income 1,792 23,381 25,173 672 1,339 2,011
Operating expenses
Investment management
fees 7 (1,852) (3,285) (5,137) (2,101) 75 (2,026)
Other expenses (5,994) - (5,994) (4,776) - (4,776)
(Loss)/profit before
finance costs and
taxation (6,054) 20,096 14,042 (6,205) 1,414 (4,791)
Finance costs
Interest payable (1,201) - (1,201) (1,296) - (1,296)
(Loss)/profit before
taxation (7,255) 20,096 12,841 (7,501) 1,414 (6,087)
Taxation 8 (130) - (130) - - -
(Loss)/profit for
the year (7,385) 20,096 12,711 (7,501) 1,414 (6,087)
-------- -------- -------- -------- -------- --------
Basic and diluted
returns per share (USD) (USD) (USD) (USD) (USD) (USD)
Return per class
A share 9 (0.135) 0.369 0.234 (0.125) 0.041 (0.084)
Return per class
B share 9 (0.036) (0.052) (0.088) (0.045) (0.123) (0.168)
Return per class
D share 9 (0.069) 0.313 0.244 (0.073) 0.065 (0.008)
Return per class
E share 9 (0.271) 1.328 1.057 (0.270) 0.414 0.144
All revenue and capital items in the above statement derive from
continuing operations of the Company.
The Company does not have any income or expense that is not
included in the profit for the year and therefore the profit for
the year is also the total comprehensive income for the year.
The total column of this statement is the Statement of Total
Comprehensive Income of the Company. The supplementary revenue and
capital columns are prepared in accordance with the Statement of
Recommended Practice ("SORP") issued by the Association of
Investment Companies ("AIC") in October 2019.
* For the period 16 August 2017 to 31 December 2018.
The notes form part of these financial statements.
Life Settlement Assets PLC
Statement of Financial Position
as at 31 December 2019
2019 2018
Note USD'000 USD'000
------------------------------------- ------ --------- ---------
Non-current assets
Financial assets at fair value
through profit or loss
- Life settlement investments 10,11 78,041 89,813
- Shares in subsidiary - 25,232
--------- ---------
78,041 115,045
Current assets
Maturities receivable 3,867 17,797
Trade and other receivables 697 940
Premiums paid in advance 9,231 13,328
Cash and cash equivalents 28,992 10,587
--------- ---------
42,787 42,652
--------- ---------
Total assets 120,828 157,697
--------- ---------
Current liabilities
Other payables (981) (2,015)
Provision for performance fees 12 (5,054) (2,813)
Liabilities to subsidiary 13 - (25,232)
--------- ---------
Total liabilities (6,035) (30,060)
--------- ---------
Net assets 114,793 127,637
--------- ---------
Represented by
Capital and reserves
Share capital 648 711
Share premium - 133,013
Special reserve 107,458 -
Capital redemption reserve 63 -
Capital reserve 21,510 1,414
Revenue reserve (14,886) (7,501)
--------- ---------
Total equity attributable to
ordinary shareholders of the
Company
SSshareholders of the shareholders
of the Company 114,793 127,637
--------- ---------
Net Asset Value per share basic
and diluted
Class A shares USD 14 2.234 2,017
Class B shares USD 14 1.018 1,107
Class D shares USD 14 0.831 1,247
Class E shares USD 14 2.242 4,758
These financial statements were approved by the Board of
Directors on 27 April 2020 and signed on its behalf by:
Michael Baines, Chairman
Registered in England and Wales with Company Registration
number: 10918785
The notes form part of these financial statements.
Statement of Changes in Equity
for the year ended 31 December 2019
Capital
Share Share Special redemption Capital Revenue
capital premium reserve reserve reserve reserve Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
--------- ---------- --------- ------------ --------- --------- ---------
Balance as at 31
December 2018 711 133,013 - - 1,414 (7,501) 127,637
Comprehensive income
for the year - - - - 20,096 (7,385) 12,711
Contributions by
and distributions
to owners
Cancellation of
Share premium account - (133,013) 133,013 - - - -
Tender offer July
2019 (56) - (10,050) 56 - - (10,050)
Share buybacks
for
cancellation (7) - (1,005) 7 - - (1,005)
Dividends paid
in year - - (14,500) - - - (14,500)
Balance as at
31 December 2019 648 - 107,458 63 21,510 (14,886) 114,793
--------- ---------- --------- ------------ --------- --------- ---------
Of which:
Realised gains 17,619
Unrealised gains 3,891
Capital
Share Share Special redemption Capital Revenue
capital premium reserve reserve reserve reserve Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
--------- ---------- --------- ------------ --------- --------- ---------
Balance as at 16
August 2017 - - - - - - -
Comprehensive income
for the period - - - - 1,414 (7,501) (6,087)
Contributions by
and distributions
to owners
Shares issued on
incorporation 67 - - - - - 67
Additional Shares
issued on 26 March
2018 711 133,013 - - - - 133,724
Redemption of redeemable
shares (67) - - - - - (67)
Balance as at 31
December 2018 711 133,013 - - 1,414 (7,501) 127,637
--------- ---------- --------- ------------ --------- --------- ---------
Of which:
- Realised (loss) (1,248)
- Unrealised gains 2,662
The Special reserve was created as a result of the cancellation
of the Share premium account following a court order issued on 18
June 2019. The Special reserve is distributable and may be used to
fund purchases of the Company's own shares and to make
distributions to Shareholders.
The revenue and realised capital reserves are also distributable
reserves.
The notes form part of these financial statements.
Life Settlement Assets PLC
Cash Flow Statement
for the year ended 31 December 2019
Notes 2019 2018*
USD'000 USD'000
------------------------------------------------- ------ --------- --------
Cash flow used in operating activities
Cash flow used in operating activities
Profit/(loss) for the year 12,711 (6,087)
Non-cash adjustment
- movement on portfolios 15,989 8,700
* value adjustment on shares in subsidiary (360) (5)
Investment in life settlement portfolios 11 (1,167) (1,272)
Movements in "policy advances" 11 (3,050) (233)
Changes in operating assets and liabilities
Changes in maturities receivables 13,930 (3,927)
Changes in trade and other receivables 243 (363)
Changes in premiums paid in advance 4,097 561
Changes in other payables (1,034) (5,625)
Changes in performance provision 2,241 -
Changes in liabilities to subsidiary 360 5
--------- --------
Net cash inflows/(outflows) from/ used
in operating activities 43,960 (8,246)
Cash flow from investing activities
Cash acquired from Predecessor Company 2.1 - 18,833
--------- --------
Net cash inflows from investing activities - 18,833
Cash flow from financing activities
Dividends paid 18 (14,500) -
Tender offer and share buybacks for (11,055) -
cancellation
--------- --------
Net cash flows used in financing activities (25,555) -
--------- --------
Net changes in cash and cash equivalents 18,405 10,587
Cash balance at the beginning of the 10,587 -
year
--------- --------
Cash balance at the end of the year 28,992 10,587
--------- --------
Included in cash flow used in operating activities is interest
paid, USD 1,201,000 (2018: USD 1,296,000); dividends and interest
received, USD 887,000 (2018: USD 581,000).
* For the period 16 August 2017 to 31 December 2018.
The notes form part of these financial statements.
Life Settlement Assets PLC
Notes to the Financial Statements
for the year ended 31 December 2019
1. GENERAL INFORMATION
Life Settlement Assets PLC ("Life Settlement Assets" or the
"Company") is a public company limited by shares and an investment
company under section 833 of the Companies Act 2006. It was
incorporated in England and Wales on 16 August 2017 with a
registration number of 10918785. The registered office of the
Company is 115 Park Street, 4th Floor, London W1K 7AP.
The principal activity of Life Settlement Assets is to manage
investments in whole and partial interests in life settlement
policies issued by life insurance companies operating predominantly
in the United States.
In May 2018, the Company received confirmation from HM Revenue
& Customs of its approval as an investment trust for tax
accounting periods commencing on or after 26 March 2018, subject to
the Company continuing to meet the eligibility conditions contained
in section 1158 of the Corporation Tax Act 2010 and the ongoing
requirements in Chapter 3 of Part 2 of the Investment Trust
(Approved Company) (Tax) Regulations 2011 (Statutory Instrument
2011/2999).
The Company currently has four classes of Ordinary Shares in
issue, namely A, B, D and E, each of which principally participates
in a separate portfolio of life settlement assets and associated
liabilities, which were acquired from Acheron Portfolio Corporation
(Luxembourg) SA ("APC" or the "Predecessor Company") on 26 March
2018.
On that date, the Company entered into an Acquisition agreement
with the Predecessor Company. Following the agreement, all assets
and liabilities of APC have been transferred to the Company as an
in specie subscription for ordinary shares. More specifically:
- 100% of the interest in the Acheron Portfolio Trust has been
attributed to the ordinary A shares;
- 100% of the interest in the Lorenzo Tonti 2006 Portfolio Trust
has been attributed to the ordinary B
shares;
- 100% of the interest in the Avernus Portfolio Trust has been
attributed to the ordinary D shares;
- 100% of the interest in the Styx Portfolio Trust has been
attributed to the ordinary E shares;
- Any cash and other net assets have been recorded in the books
of the Company as being attributable to the class of ordinary
shares which corresponds to the existing class of shares in APC to
which such cash and other net assets are attributable.
Net assets acquired from the Predecessor Company have been
valued for the purpose of Section 593 of the Companies Act by
Mazars LLP as at 31 December 2017, based on the net asset values as
at that date less any distributions to shareholders of the
Predecessor Company prior to the date of acquisition. These
financial statements include all transactions performed on the life
insurance policies as from 1 January 2018, being the valuation
point at which the assets were acquired.
Statement of compliance with IFRS
The Company financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Boards (IASB)
as adopted by the European Union. They have also been prepared in
accordance with the SORP for investment companies issued by the AIC
in October 2019, except to the extent that it conflicts with
IFRS.
2. IFRS ACCOUNTING POLICIES
2.1 Basis of preparation
The financial statements have been prepared using the accounting
policies specified below and in accordance with IFRS that are in
effect at the end of the reporting period or which have been
adopted early. The financial statements have been prepared on a
going concern basis under the historical cost convention except for
the measurement at fair value of investments held at fair value
through profit or loss. The going concern statement can be found in
the Strategic Report above. The Company's activities, together with
the material risk factors likely to affect its future development
and performance, as well as the Board of Directors' "Viability
Statement" are set out in the Strategic Report above. The Company's
wholly owned subsidiary was put into liquidation on 18 December
2017 and this process was completed in May 2019. It did not have
any active operations and, therefore, the Company has elected not
to prepare consolidated financial statements for the year ended 31
December 2019 and the comparative information for December 2018
shows the standalone Company financial statements.
The comparative financial statements report on the activity for
the period from inception on 16 August 2017 until 31 December
2018.
For the purpose of the Cash Flow Statement, the acquisition by
the Company of Net Assets from the Predecessor Company under the
Acquisition agreement mentioned in Note 1 for a total amount of USD
133,724,000 and the allotment of 71,068,874 shares to the
Predecessor Company is a non-cash transaction that is not shown in
the Cash Flow Statement except for the net cash contribution of USD
18,833,000.
2.2 Changes in accounting policy and disclosures
Standards and amendments to existing standards that are not yet
effective and have not been early adopted by the Company
The following new standard has been published but is not
effective for the Company's accounting period beginning on 1
January 2019. The Directors do not expect the adoption of the
following new standard, amended standard or interpretation to have
a significant impact on the financial statements of the Company in
future periods.
IFRS 17 "Insurance contracts" applies to insurance contracts,
including re-insurance contracts issued by an entity; re-insurance
contracts held by an entity; and investment contracts with
discretionary participation features issued by an entity that
issues insurance contracts. IFRS 17 will be effective for reporting
periods beginning on or after 1 January 2023. As IFRS 17 is not
relevant to the life settlement market, it is expected that IFRS 17
will have no impact on the Company's financial statements.
3. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies, all of which have been
applied consistently throughout the year, are set out on pages 57
to 61 of the Annual Report.
4. INCOME FROM LIFE SETTLEMENT PORTFOLIOS
31 December 31 December
2019 2018
USD'000 USD'000
Life settlement portfolio
----------------------------- ------------ ------------
Dividends 339 341
Interest 529 225
------------ ------------
868 566
------------ ------------
A number of policies in which the Company invests have an
embedded entitlement to dividends and interest as shown above.
5. GAINS FROM LIFE SETTLEMENT PORTFOLIOS
31 December 31 December
2019 2018
USD'000 USD'000
Life settlement portfolio
------------------------------------ ------------ ------------
Realised gains:
Maturities 58,725 33,371
Acquisition cost of maturities and
fair value movement (17,218) (11,362)
------------ ------------
Sub total 41,507 22,009
Incurred premiums (19,355) (23,332)
Unrealised gains:
Fair value adjustments 1,229 2,662
------------ ------------
23,381 1,339
------------ ------------
When a maturity is declared, a realised capital income or loss
is recognised on the investment in the policy, calculated by
deducting from the value of the maturity the initial acquisition
cost and the previously unrealised fair value adjustments.
The amount of premiums incurred during the period is reflected
as a deduction of income from life settlement portfolios. The
amount of premiums paid in advance amounted to USD 9,231,000 (2018:
USD 13,328,000) as at 31 December 2019.
6. OTHER INCOME
Other income comprises:
31 December 31 December
2019 2018
USD'000 USD'000
Life settlement portfolio
----------------------------- ------------ ------------
Other operating income 923 118
Interest income 18 15
------------ ------------
941 133
------------ ------------
Other operating income mainly refers to reversal of accrued
expenses made by the Predecessor Company and where incurred
expenses by the Company were lower.
7. MANAGEMENT FEES AND PERFORMANCE FEES
31 December 31 December
2019 2018
USD'000 USD'000
Life settlement portfolio
--------------------------------- ------------ ------------
Acheron Capital management fees 1,852 2,101
Performance fees 3,285 (75)
------------ ------------
5,137 2,026
------------ ------------
Under an agreement dated 26 March 2018, the Investment Manager
is entitled to a management fee payable by the Trusts at an annual
rate of no more than 1.5% of the Net Asset Value for classes A, B
and D, and 2% for class E. Management fees paid during the year
amounted to USD 1,852,000 (2018: USD 2,101,000).
The Performance fee in respect of the Trusts shall be an amount
equal to 25% of the sum of the distributions made to the holders of
the Shares in the Company corresponding to the Trusts, in excess of
the Performance Hurdle (assessed at the time of each
distribution).
The "Performance Hurdle" is met when (from time to time) the
aggregate distributions (in excess of the Catch-Up Amount) made to
the holders of the corresponding Ordinary Shares compounded at 3%
per annum for classes A and B, and 5% for classes D and E (from the
date of each distribution) equal the aggregate investment made by
the Ordinary Shares in the Company (from time to time) compounded
at 3% and 5% respectively.
The "Catch-Up Amount" is an amount equal to the distributions
that would have been required to be made to the Predecessor
Company's shareholders of the corresponding share class in order
for the Accrued Performance Distributions (less, where applicable,
any clawback of such Accrued Performance Distributions) to be paid
(determined as at 31 December 2019), reduced by an amount equal to
any distributions paid to the Predecessor Company's shareholders of
the relevant share class prior to the Acquisition.
The accrued performance fees (Note 12) include an amount of USD
2,813,000 (2018: USD 2,888,000) assumed from the Predecessor
Company. That amount has been increased by USD 3,285,000 in
relation to the performance of the portfolio for the year ended 31
December 2019 and reduced by the performance fee paid of USD
1,044,000.
8. TAXATION
31 December 31 December
2019 2018
USD'000 USD'000
Life settlement portfolio
------------------------------------------- ------------ ------------
Profit/(loss) before taxation 12,841 (6,087)
Theoretical tax at UK Corporation Tax
rate of 19% (2018: 19%) 2,440 (1,157)
Effects of:
Non-taxable capital gain (4,442) (254)
Non-taxable income (340) (108)
US withholding tax suffered 130 -
Excess management expenses and tax losses
carried forward 2,342 1,519
130 -
------------ ------------
As at 31 December 2019, the Company has tax losses and excess
management expenses of USD 19,006,000 (2018: USD 6,680,000) that
are available to offset future taxable profits. A deferred tax
asset has not been recognised in respect of those losses as due to
the Company's status as an investment trust it is not expected to
generate taxable income in the future against which such losses can
be utilised.
Provided the Company maintains its status as an investment
trust, then any capital gains will remain exempt from Corporation
Tax.
The Company suffers US withholding tax on income received from
dividends and interest.
Withholding tax on matured policies
In accordance with the taxation treaty between the United States
of America and the United Kingdom, withholding tax on matured
policies is not due if at least 6% of the average capital stock of
the main class of Shares is traded during the previous year on a
recognised stock exchange. The Board believes that in the period
ended 31 December 2019 the Company fulfilled this requirement.
9. RETURN PER SHARE
Basic and diluted earnings per share is total earnings after
taxation divided by the weighted average number of shares in issue
during the year. All Shares are fully paid. Neither unpaid shares
nor any kind of option are outstanding, so the basic (loss)/profit
per share is also the diluted (loss)/profit per share.
As the different classes of Shares have specific rights in
relation to their investments, the net (loss)/profit per share is
given for each Share Class.
2019 Class A Class B Class Class
D E
----------------------------------- ----------- ----------- ---------- ----------
Earnings per share:
Revenue return (USD'000) (5,768) (531) (632) (454)
Capital return (USD'000) 15,778 (755) 2,852 2,221
Total Return (USD'000) 10,010 (1,286) 2,220 1,767
Weighted average number of shares
the year 42,691,999 14,596,098 9,106,812 1,672,113
Income return per share (USD) (0.135) (0.036) (0.069) (0.271)
Capital return per share (USD) 0.369 (0.052) 0.313 1.328
Basic and diluted total earnings
per share (USD) 0.234 (0.088) 0.244 1.057
----------------------------------- ----------- ----------- ---------- ----------
2018 Class A Class B Class Class
D E
----------------------------------- ----------- ----------- ---------- ----------
Earnings per share:
Revenue return (USD'000) (5,700) (658) (674) (469)
Capital return (USD'000) 1,889 (1,797) 604 718
Total Return (USD'000) (3,811) (2,455) (70) 249
Weighted average number of shares
the year 45,446,946 14,596,098 9,292,561 1,733,269
Income return per share (USD) (0.125) (0.045) (0.073) (0.270)
Capital return per share (USD) 0.041 (0.123) 0.065 0.414
Basic and diluted total earnings
per share (USD) (0.084) (0.168) (0.008) 0.144
----------------------------------- ----------- ----------- ---------- ----------
10. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
The life settlement portfolios have been classified as financial
assets held at fair value through profit or loss as their
performance is evaluated on a fair value basis.
The fair value hierarchy set out in IFRS 13 groups financial
assets and liabilities into three levels based on the significant
inputs used in measuring the fair value of the financial assets and
liabilities.
The fair value hierarchy has the following levels:
- level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
- level 2: inputs other than quoted prices included within level
1 that are observable for the assets or liabilities, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
- level 3: inputs for the assets or liabilities that are not
based on observable market data (unobservable inputs).
The life settlement portfolios of USD 78,041,000 (2018: USD
89,813,000) are classified as level 3. At the year end, these
portfolios were valued by the external actuaries using an actuarial
model as discussed in note 14 on pages 69 and 70 of the Annual
Report.
11. FINANCIAL ASSETS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS:
LIFE SETTLEMENT PORTFOLIOS
31 December 31 December
2019 2018
USD'000 USD'000
Life settlement portfolio
---------------------------------------- ------------ ------------
Movements of the year are as follows:
Opening valuation (2018: acquired from
the Predecessor Company) 89,813 97,008
Acquisitions during the year 1,167 1,272
Proceeds from matured policies (58,725) (33,371)
Net realised gains on policies 41,507 22,009
Movements in cash from policy loans 3,050 233
Movements in unrealised valuation 1,229 2,662
------------ ------------
Closing valuation 78,041 89,813
------------ ------------
Detail at year end:
Acquisition value 93,364 109,415
Unrealised capital gains 3,891 2,662
Policy advances (19,214) (22,264)
------------ ------------
Closing valuation 78,041 89,813
------------ ------------
Distribution of the portfolio by class of Shares and by type of
risk:
Class Class Class Class Total
A B D E
USD'000 USD'000 USD'000 USD'000 USD'000
------------------------ -------- -------- -------- -------- --------
Elderly life insurance
(non HIV) portfolio 15,751 10,739 4,527 1,841 32,858
HIV portfolio 42,380 - 1,916 887 45,183
-------- -------- -------- -------- --------
Balance at 31 December
2019 58,131 10,739 6,443 2,728 78,041
-------- -------- -------- -------- --------
Class Class Class Class Total
A B D E
USD'000 USD'000 USD'000 USD'000 USD'000
------------------------ -------- -------- -------- -------- --------
Elderly life insurance
(non HIV) portfolio 23,889 10,645 7,092 3,722 45,348
HIV portfolio 41,204 - 2,232 1,029 44,465
-------- -------- -------- -------- --------
Balance at 31 December
2018 65,093 10,645 9,324 4,751 89,813
-------- -------- -------- -------- --------
Fair market value reflects the view of the US actuary. The
Investment Manager of the trusts in which the policies of Class A,
B, D and E are kept (Acheron Capital) has also set up an internal
actuarial model to value the policies and produces monthly
valuations.
12. PROVISION FOR PERFORMANCE FEES
31 December 31 December
2019 2018
USD'000 USD'000
Provision brought forward 2,813 2,888
Increase/(reduction) in provision during
the year (note 7) 3,285 (75)
Performance fee paid during the year (1,044) -
------------ ------------
Provision at the year end 5,054 2,813
------------ ------------
The Performance fee does not have a fixed date for repayment but
can become payable immediately in the event that:
a. a crystallisation event as set out in the Investment
Management Agreement occurs; or
b. distributions to Shareholders exceed the Performance Hurdle
as described in note 7.
As a result, the Performance fee has been treated as a current
liability.
13. LIABILITIES TO SUBSIDIARY
The liabilities to the subsidiary at 31 December 2018 were
interest free loans which were reimbursed in May 2019 when the
liquidation of the subsidiary was completed.
14. NET ASSETS AND NET ASSET VALUE PER CLASS OF SHARES
The net assets and net asset value (NAV) for each class of
Shares are shown below.
Class Class Class Class
31 December 2019 A B D E Total
---------------------- ----------- ----------- ---------- ---------- -----------
Net assets (USD'000) 89,108 14,863 7,310 3,512 114,793
Number of shares 39,891,391 14,596,098 8,792,561 1,566,603 64,846,653
NAV per share (USD) 2.234 1.018 0.831 2.242
Class
31 December 2018 Class A Class B Class D E Total
---------------------- ----------- ----------- ---------- ---------- -----------
Net assets (USD'000) 91,649 16,150 11,591 8,247 127,637
Number of shares 45,446,946 14,596,098 9,292,561 1,733,269 71,068,874
NAV per share (USD) 2.017 1.107 1.247 4.758
15. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
At the year end, the Company has no (2018: nil) capital
commitments in respect of life settlement portfolios. Life
settlements portfolios do require continued payments of insurance
premiums unless the Company decides not to renew the policies.
At the year end, the Company has no (2018: nil) contingent
liabilities.
16. RELATED PARTY TRANSACTIONS
Related parties to the Company are the members of the Board of
Directors of the Company, Compagnie
Européenne de Révision S.à r.l. as Administrator who has a
member on the Board of Directors and the Trustee of the US trusts
who is also a member of the Board of Directors.
31 December 31 December
2019 2018
USD'000 USD'000
Per income statement:
Trustee fees* 124 125
Compagnie Européenne de Révision
S.à r.l. 220 244
Directors' fees* 203 175
Amounts payable per balance sheet:
Compagnie Européenne de Révision
S.à r.l. 85 177
Directors' fees 45 57
Michael Baines purchased 75,000 of the Company's Ordinary B
shares on 4 July 2019, for a total cost of USD 54,000. No other
Directors hold any shares in the Company.
All transactions with related parties are undertaken at arm's
length.
* Includes within the total non-recurring fees comprising USD
50,000 (2018: USD 50,000) in relation to Trustee fees and USD
64,000 (2018: USD 35,000) in relation to Directors' fees.
17. POST BALANCE SHEET EVENTS
On 23 March 2020, the Board announced an interim dividend of
6.267 cents per A Share totalling USD 2.5 million, 15.922 cents per
D share totalling USD 1.4 million and 38.299 cents per E share
totalling USD 600,000. These dividends will be paid on 28 April
2020 to Shareholders on the register at 3 April 2020.
On 2 April 2020, the Board released a circular proposing the
merger of share classes A, D and E. Full details of the proposed
merger and the reasons behind it are included in the circular, in
the Chairman's Statement above and on page 31 of the Annual
Report.
Although it is generally accepted as a non-adjusting post
balance sheet event, since 31 December 2019, the scale of the
Covid-19 pandemic has severely affected the world at large. As
stated in the Chairman's statement above the Company's assets are
highly decorrelated from equities and bonds and the Board have
concluded that the effect on the Company's results is expected to
be minimal.
18. DIVIDS
The Company has paid the following dividends during the
year:
31 December 31 December
2019 2018
USD'000 USD'000
Interim capital dividend of 5.50 cents 2,500 -
per A share
Interim capital dividend of 37.66 cents 3,500 -
per D share
Interim capital dividend of 28.43 cents 2,500 -
per D share
Interim capital dividend of 259.62 4,500 -
cents per E share
Interim capital dividend of 95.75 cents 1,500 -
per E share
------------ ------------
14,500 -
------------ ------------
No final dividend in respect of the year ended 31 December 2019
will be paid.
19. STATUTORY INFORMATION
These are not full accounts in terms of section 434 of the
Companies Act 2006. The Annual Report for the year to 31 December
2019 will be sent to Shareholders shortly and will then be
available for inspection at Suite 8, Bridge House, Courtenay
Street, Newton Abbot TQ12 2QS, the office of the Company Secretary.
Copies of the Annual Report will shortly be available on the
Company's website, www.lsaplc.com. Statutory accounts will be
delivered to the Registrar of Companies after the Annual General
Meeting. The audited accounts for the year ended 31 December 2018
contain an unqualified audit report.
20. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held on
Wednesday, 17 June 2020 at 12.00 p.m. at the offices of Acheron
Capital Limited, 4th Floor, 115 Park Street, London W1K 7AP.
ADDITIONAL INFORMATION
Additional information of exhibits I to IV do not form part of
the financial statements.
EXHIBIT I (unaudited)
Life Settlement Assets PLC
Class A
Statement of Comprehensive Income for the year ended 31 December
2019
2019 2018
Revenue Capital Total Revenue Capital Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Income
Income from life settlement
portfolios 752 - 752 515 - 515
Gains from life settlement
portfolios - 18,091 18,091 - 1,889 1,889
Other income 601 - 601 68 - 68
Net foreign exchange
loss (17) - (17) (26) - (26)
Total income 1,336 18,091 19,427 557 1,889 2,446
Operating expenses
Investment management
fees (1,342) (2,313) (3,655) (1,440) - (1,440)
Other expenses (4,447) - (4,447) (3,538) - (3,538)
(Loss)/profit before
finance costs and
taxation (4,453) 15,778 11,325 (4,421) 1,889 (2,532)
Finance costs
Interest payable (1,185) - (1,185) (1,279) - (1,279)
(Loss)/profit before
taxation (5,638) 15,778 10,140 (5,700) 1,889 (3,811)
Taxation (130) - (130) - - -
(Loss)/profit for
the year (5,768) 15,778 10,010 (5,700) 1,889 (3,811)
-------- -------- -------- -------- -------- --------
Additional information of exhibits I to IV do not form part of
the financial statements.
EXHIBIT I (unaudited)
Life Settlement Assets PLC
Class A
Statement of Financial Position as at 31 December 2019
2019 2018
USD'000 USD'000
---------------------------------------- --------- --------
Assets
Non-current assets
Financial assets at fair value through
profit or loss
- Life settlement investments 58,131 65,093
---------
58,131 65,093
Current assets
Maturities receivable 2,822 10,508
Trade and other receivables 377 644
Premiums paid in advance 6,536 9,402
Cash and cash equivalents 23,995 7,085
Inter class receivables 219 234
--------- --------
33,949 27,873
--------- --------
Total assets 92,080 92,966
--------- --------
Current liabilities
Other payables (659) (1,317)
Provision for performance fees (2,313) -
Total liabilities (2,972) (1,317)
--------- --------
Net Assets 89,108 91,649
--------- --------
Represented by
Capital and reserves
Share capital 399 455
Share premium - 95,005
Special reserve 82,454 -
Capital redemption reserve 56 -
Capital reserve 17,667 1,889
Revenue reserve (11,468) (5,700)
--------- --------
Total equity attributable to ordinary
shareholders of the Company
SSshareholders of the shareholders
of the Company 89,108 91,649
--------- --------
Additional information of exhibits I to IV do not form part of
the financial statements.
EXHIBIT II (unaudited)
Life Settlement Assets PLC
Class B
Statement of Comprehensive Income for the year ended 31 December
2019
2019 2018
Revenue Capital Total Revenue Capital Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Income
Income from life settlement
portfolios 31 - 31 9 - 9
Losses from life settlement
portfolios - (755) (755) - (1,797) (1,797)
Other income 116 - 116 23 - 23
Total income 147 (755) (608) 32 (1,797) (1,765)
Operating expenses
Investment management
fees (242) - (242) (279) - (279)
Other expenses (432) - (432) (407) - (407)
Loss before finance
costs and taxation (527) (755) (1,282) (654) (1,797) (2,451)
Finance costs
Interest payable (4) - (4) (4) - (4)
Loss before taxation (531) (755) (1,286) (658) (1,797) (2,455)
Taxation - - - - - -
Loss for the year (531) (755) (1,286) (658) (1,797) (2,455)
-------- -------- -------- -------- -------- --------
Additional information of exhibits I to IV do not form part of
the financial statements.
EXHIBIT II (unaudited)
Life Settlement Assets PLC
Class B
Statement of Financial Position as at 31 December 2019
2019 2018
USD'000 USD'000
---------------------------------------- -------- ---------
Assets
Non-current assets
Financial assets at fair value through
profit or loss
- Life settlement investments 10,739 10,645
- Shares in subsidiary - 17,632
--------
10,739 28,277
Current assets
Maturities receivable 513 2,819
Trade and other receivables 113 93
Premiums paid in advance 1,385 1,469
Cash and cash equivalents 2,269 1,510
4,280 5,891
-------- ---------
Total assets 15,019 34,168
-------- ---------
Current liabilities
Other payables (122) (263)
Liabilities to subsidiary - (17,632)
Inter class payables (34) (123)
Total liabilities (156) (18,018)
-------- ---------
Net assets 14,863 16,150
-------- ---------
Represented by
Capital and reserves
Share capital 146 146
Share premium - 18,459
Special reserve 18,458 -
Capital reserve (2,552) (1,797)
Revenue reserve (1,189) (658)
-------- ---------
Total equity attributable to ordinary
shareholders of the Company
SSshareholders of the shareholders
of the Company 14,863 16,150
-------- ---------
Additional information of exhibits I to IV do not form part of
the financial statements.
EXHIBIT III (unaudited)
Life Settlement Assets PLC
Class D
Statement of Comprehensive Income for the year ended 31 December
2019
2019 2018
Revenue Capital Total Revenue Capital Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Income
Income from life settlement
portfolios 50 - 50 20 - 20
Gains from life settlement
portfolios - 3,396 3,396 - 526 526
Other income 111 - 111 23 - 23
Total income 161 3,396 3,557 43 526 569
Operating expenses
Investment management
fees (148) (544) (692) (203) 78 (125)
Other expenses (638) - (638) (506) - (506)
(Loss)/profit before
finance costs and
taxation (625) 2,852 2,227 (666) 604 (62)
Finance costs
Interest payable (7) - (7) (8) - (8)
(Loss)/profit before
taxation (632) 2,852 2,220 (674) 604 (70)
Taxation - - - - - -
(Loss)/profit for
the year (632) 2,852 2,220 (674) 604 (70)
-------- -------- -------- -------- -------- --------
Additional information of exhibits I to IV do not form part of
the financial statements.
EXHIBIT III (unaudited)
Life Settlement Assets PLC
Class D
Statement of Financial Position as at 31 December 2019
2019 2018
USD'000 USD'000
---------------------------------------- -------- --------
Assets
Non-current assets
Financial assets at fair value through
profit or loss
- Life settlement investments 6,443 9,324
- Shares in subsidiary - 7,600
--------
6,443 16,924
Current assets
Maturities receivable 532 2,328
Trade and other receivables 110 91
Premiums paid in advance 812 1,298
Cash and cash equivalents 1,481 704
2,935 4,421
-------- --------
Total assets 9,378 21,345
-------- --------
Current liabilities
Other payables (112) (208)
Provision for performance fees (1,845) (1,884)
Liabilities to subsidiary - (7,600)
Inter class payables (111) (62)
Total liabilities (2,068) (9,754)
-------- --------
Net assets 7,310 11,591
-------- --------
Represented by
Capital and reserves
Share capital 88 93
Share premium - 11,568
Special reserve 5,067 -
Capital redemption reserve 5 -
Capital reserve 3,456 604
Revenue reserve (1,306) (674)
-------- --------
Total equity attributable to ordinary
shareholders of the Company
SSshareholders of the shareholders
of the Company 7,310 11,591
-------- --------
Additional information of exhibits I to IV do not form part of
the financial statements.
EXHIBIT IV (unaudited)
Life Settlement Assets PLC
Class E
Statement of Comprehensive Income for the year ended 31 December
2019
2019 2018
Revenue Capital Total Revenue Capital Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Income
Income from life settlement
portfolios 35 - 35 22 - 22
Gains from life settlement
portfolios - 2,649 2,649 - 721 721
Other income 113 - 113 19 - 19
Net foreign exchange
loss - - - (1) - (1)
Total income 148 2,649 2,797 40 721 761
Operating expenses
Investment management
fees (120) (428) (548) (179) (3) (182)
Other expenses (477) - (477) (325) - (325)
(Loss)/profit before
finance costs and
taxation (449) 2,221 1,772 (464) 718 254
Finance costs
Interest payable (5) - (5) (5) - (5)
(Loss)/profit before
taxation (454) 2,221 1,767 (469) 718 249
Taxation - - - - - -
(Loss)/profit for
the year (454) 2,221 1,767 (469) 718 249
-------- -------- -------- -------- -------- --------
Additional information of exhibits I to IV do not form part of
the financial statements.
EXHIBIT IV (unaudited)
Life Settlement Assets PLC
Class E
Statement of Financial Position as at 31 December 2019
2019 2018
USD'000 USD'000
---------------------------------------- -------- --------
Assets
Non-current assets
Financial assets at fair value through
profit or loss
- Life settlement investments 2,728 4,751
2,728 4,751
Current assets
Maturities receivable - 2,142
Trade and other receivables 97 112
Premiums paid in advance 498 1,159
Cash and cash equivalents 1,247 1,288
1,842 4,701
-------- --------
Total assets 4,570 9,452
-------- --------
Current liabilities
Other payables (88) (227)
Provision for performance fees (896) (929)
Inter class payables (74) (49)
Total liabilities (1,058) (1,205)
-------- --------
Net assets 3,512 8,247
-------- --------
Represented by
Capital and reserves
Share capital 15 17
Share premium - 7,981
Special reserve 1,479 -
Capital redemption reserve 2 -
Capital reserve 2,939 718
Revenue reserve (923) (469)
-------- --------
Total equity attributable to ordinary
shareholders of the Company
SSshareholders of the shareholders
of the Company 3,512 8,247
-------- --------
Contact details for further enquiries:
Jean-Michel Paul of Acheron Capital Limited (the Investment
Manager), on 020 7258 5990.
ISCA Administration Services Limited (the Company Secretary) on
01392 487056 or by e-mail LSA@iscaadmin.co.uk
DISCLAIMER
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
NATIONAL STORAGE MECHANISM
A copy of the 2019 Annual Report and Accounts will be submitted
shortly to the National Storage Mechanism ("NSM") and will be
available for inspection at the NSM, which is situated at:
www.morningstar.co.uk/uk/NSM.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EALLXAAFEEFA
(END) Dow Jones Newswires
April 27, 2020 10:26 ET (14:26 GMT)
Grafico Azioni Life Settlement Assets (LSE:LSAA)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Life Settlement Assets (LSE:LSAA)
Storico
Da Apr 2023 a Apr 2024
