TIDMLSAA TIDMLSAB
RNS Number : 2170A
Life Settlement Assets PLC
27 September 2020
LIFE SETTLEMENT ASSETS PLC
LEI: 2138003OL2VBXWG1BZ27
(the "Company" or "LSA")
Half-Year Announcement
LSA, a closed-ended investment company which 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 unaudited half-year
results for the period ended 30 June 2020.
Highlights
-- Distributions totalling USD 5.5 million made during the period
-- Total maturities for the first six months amounted to USD
12.2 million (HY2019: USD 33.9 million), generating gains from life
settlement portfolios of USD 0.6 million (HY2019: gains of USD 15.6
million)
-- Total net loss of USD 2.9 million (HY2019: profit of USD 9.2 million)
Company performance
Performance analysis by Share Class is provided in the tables
below:
A Share Class
As at As at Percentage
30 June 31 December Change
2020 2019 (%)
Net assets attributable
to Shareholders (USD '000) 92,639 89,108 (4.0)
----------- ------------- -----------
Shares in issue 43,724,059 39,891,391 9.6
----------- ------------- -----------
NAV per share (USD) 2.12 2.23 (4.9)
----------- ------------- -----------
Closing share price (USD) 1.95 1.78 9.6
----------- ------------- -----------
(Discount) to NAV (%) (8.0) (20.2) 12.2
----------- ------------- -----------
As at As at Percentage
30 June 30 June Change
2020 2019 (%)
Total maturities (USD '000) 8,862 23,981 (63.0)
--------- --------- -----------
Net income from portfolio
(USD '000) 1,004 13,207 (92.4)
--------- --------- -----------
(Loss)/profit for the period
(USD '000) (1,792) 8,036 (122.3)
--------- --------- -----------
This includes a contribution of USD 508,000 in respect of the D
& E share class profit in the period before the merger.
B Share Class
As at As at Percentage
30 June 31 December Change
2020 2019 (%)
Net assets attributable
to Shareholders (USD '000) 13,800 14,863 (7.1)
----------- ------------- -----------
Shares in issue 14,596,098 14,596,098 -
----------- ------------- -----------
NAV per share (USD) 0.95 1.02 (7.4)
----------- ------------- -----------
Closing share price (USD) 0.70 0.63 11.1
----------- ------------- -----------
(Discount) to NAV (%) (26.3) (38.2) 11.9
----------- ------------- -----------
As at As at Percentage
30 June 30 June Change
2020 2019 (%)
Total maturities (USD '000) 1,448 2,079 (30.3)
--------- --------- -----------
Net income from portfolio
(USD '000) (728) (872) 16.5
--------- --------- -----------
Loss for the period (USD
'000) (1,063) (1,248) 14.8
--------- --------- -----------
Enquiries:
Acheron Capital Limited (Investment Manager)
Jean-Michel Paul
020 7258 5990
Shore Capital (Financial Adviser and Broker)
Robert Finlay
020 7408 4080
ISCA Administration Services Limited
Company Secretary
Tel: 01392 487056
CHAIRMAN'S STATEMENT
On behalf of the Board, I am pleased to present the Company`s
half-year results for the period ended 30 June 2020. I am also very
conscious that I am writing against an uncertain economic
background as the world tries to deal with the ongoing Coronavirus
pandemic ("Covid-19").
Investment Overview
The financial highlights above show the results for the half
year to 30 June 2020.
The NAV of Class A decreased by 4.9% and the NAV of class Class
B decreased by 7.4% over the period both reflecting a lower than
anticipated level of maturities. The Class A NAV reduction also
reflects the distributions made during the period to Class A
Shareholders and the former holders of D and E Class shares. When
adding back the dividends paid to Shareholders during the period
and the effect of the merger with class D and E shares the NAV
decreased by 2.0% per A share. Further details on the dividends
paid are set out under the paragraph headed "Distributions"
below.
The Company has continued with its declared policy of retaining
a significant proportion of cash in class A against future
investment opportunities. The Board continues to monitor this
carefully and to review the decision with its Investment Manager on
a regular basis.
The Life Settlement Market
Over the past five years, the life settlement industry has grown
both in funds committed to the sector and consumer awareness. In
fact, a 2020 industry report showed a 11% increase in policies sold
in 2019 compared to 2018, while the face amount of life insurance
policies sold increased from USD 3.8 billion to USD 4.4 billion in
the same period.
It is somewhat premature to speculate how the Covid-19 Pandemic
will impact the Life Settlement Market. As regards the primary
market for life insurance policies, there may be an increase in
individuals needing to sell policies due to their financial
circumstances. Although LSA does not acquire policies directly from
the individual holders, there may be an increase in supply at a
time when there is greater competition elsewhere for capital in the
financial markets, potentially creating purchasing opportunities
for LSA in the secondary market.
Structural changes
The proposals to merge the share classes A, D and E as set out
in the Circular published by the Company on 2 April 2020, were
approved by Shareholders at the class meetings held on 29 April
2020 and the merger was completed on 5 May 2020. Given the very
different nature of the structure of Class B, with no exposure to
HIV policies, the Board decided not to propose the merger of class
B at this stage, although this will be kept under review. As a
result of the reconstruction the 8,792,561 D shares and 1,566,603 E
shares were re-designated as 2,700,812 and 1,131,856 A shares
respectively. The Company now has two classes of shares being A and
B shares.
Merging the relatively small D and E Share Classes provided a
helpful simplification of the Company's structure. In addition, the
A Ordinary Shareholders have already benefitted from improved cash
flows which should continue over the next few years. Other benefits
include a reduced focus on HIV-related maturities arising from the
inclusion of the D and E Ordinary Share Class portfolios together
with the benefit through consolidation of the underlying fractional
policies into the larger portfolio.
Furthermore, as mentioned in the Annual Report, on 31 March
2020, the four trusts through which the Company invests in the
underlying assets of the Company were merged into a single trust in
order to reduce annual operating costs and operational risks.
Portfolio
The overall portfolio is subdivided into portfolios exposed to
either HIV-positive policy holders or non-HIV positive policy
holders. 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 30 June 2020.
HIV and Non-HIV Exposed Policies (all values in USD)
Share Class A HIV Non-HIV Total
Number of policies 4,329 173 4,502
---------- --------- ----------
Total face value
(USD '000) 372,435 93,297 465,732
---------- --------- ----------
Valuation
(USD '000) 50,000 19,996 69,996
---------- --------- ----------
Percentage of
face 13.4% 21.4% 15.0%
---------- --------- ----------
Share Class B
---------- --------- ----------
Number of policies N/A 93 93
---------- --------- ----------
Total face value
(USD '000) N/A 44,108 44,108
---------- --------- ----------
Valuation
(USD'000) N/A 10,722 10,722
---------- --------- ----------
Percentage of
face N/A 24.3% 24.3%
---------- --------- ----------
During the first half of 2020 small lots of fractional policies
to which the trusts were already exposed totalling 49 fractions in
all with a face value of $2.2 million, were added to the
portfolio.
Maturities
Maturities in the six months ended 30 June 2020, can be seen in
the table below.
Class A Class B Class D* Class E*
HIV Maturities
(USD '000) 3,609 N/A - -
-------- -------- --------- ---------
Non-HIV Maturities
(USD '000) 5 253 1,448 1,308 584
-------- -------- --------- ---------
Total Maturities
(USD '000) 8,862 1,448 1,308 584
-------- -------- --------- ---------
*Maturities to 29 February 2020 in Class D and E
While the impact of Covid-19`s first wave has been very
significant in terms of cases in the US, the impact observed on the
Company's portfolio has been small. This may reflect the fact that
the estimated number of resulting deaths in the US of between 150k
to 200k, whilst a multiple of the yearly influenza casualties, is
only a small fraction of total deaths observed; a specific
geographical distribution not matching the portfolio (concentration
of casualties in the north east); and the concentrated nature of
the portfolio being non representative. Either way, the mortality
observed for the first half of the year has not seen a surge and
remains in line with pre-Covid-19 model expectations.
In the period under review, the HIV segment of the portfolio had
an estimated AE ("Actual to Expected") of close to 100%. While the
HIV portfolio has performed to expectations, the elderly segment of
the Share Class B portfolio has shown fewer maturities than had
been expected. The elderly segment in Class A was, however, close
to 100% of expectation.
AE* All classes
HIV 94%
------------
Non-HIV 83%
------------
* in maturity dollar amounts, estimated until June
Portfolio Composition
Further information on the composition of the portfolio of each
Share Class as at 30 June 2020 can be found on our website
https://www.lsaplc.com/investor-relations/reports-company-literature
Distributions
The maturities received in the period were such that the Company
was able to make distributions to Shareholders by way of special
dividends on 3 April 2020 as follows:
- for A Ordinary Shareholders, a special dividend of 6.267 cents
per share totalling USD 2.5 million.
- for D Ordinary Shareholders, a special dividend of 15.922
cents per share totalling USD 1.4 million.
- for E Ordinary Shareholders, a special dividend of 38.299
cents per share totalling USD 0.6 million.
In addition, as part of the restructuring discussed above the
following dividends were paid on 30 June 2020.
- for D Ordinary Shareholders, a special dividend of 4.94932
cents per share totalling USD 0.4 million.
- for E Ordinary Shareholders, a special dividend of 35.99451
cents per share totalling USD 0.6 million.
Subsequent to the period end, the Company has declared a further
interim dividend of 4.5741 cents per Class A share totalling USD
2.0 million. The dividend will be paid on 29 October 2020 to all
class A Shareholders on the register on 9 October 2020.
Board Changes
After serving on the Board (and predecessor Company) for a
number of years, Frank Mathe, has expressed his intention to step
down from the Board at the end of September. Frank has been a
strong supporter of the Company and the Board wishes to record its
thanks to him for the valuable advice and guidance he has
given.
Separately the Board is currently giving consideration to its
current composition. At the time LSA listed on the London Stock
Exchange in March 2018, the Board's membership largely reflected
that of its predecessor company listed in Luxembourg. Accordingly,
the Board believes that it is now appropriate to consider the
future shape of the Board taking into account the standards and
norms applicable to London listed companies. Further announcements
in this regard will be made in due course.
Outlook
As stated in the Annual Report, the mortality of the insureds in
the portfolio will continue to be the most significant factor that
will affect the financial results of the Company. We will continue
to follow the recent research on mortality in general and
especially on long-term HIV trends.
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 Shareholders.
The Board remains confident that both share classes offer our
investors important defensive qualities, which remain highly
decorrelated from equities and bonds and the current volatility of
those markets.
Michael Baines
Chairman
25 September 2020
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 chosen 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 monitors 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.
-- Profit/(loss) for the period - this is a key measure of
financial performance used to assess the fortunes of the Company
over each financial period.
Please Note: The Company regularly uses alternative 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.
Directors' Statement of Principal Risks and Uncertainties
The important events that have occurred during the period under
review and the key factors influencing the financial statements are
set out in the Chairman's Statement above.
In accordance with DTR 4.2.7, the Directors consider that the
principal risks and uncertainties facing the Company have not
materially changed since the publication of the Annual Report and
Accounts for the year ended 31 December 2019.
The principal risks faced by the Company include, but are not
limited to:
-- Mortality risk
-- Premium management risk
-- Volatility risk
-- Fractional premium risk
-- Advance age mortality risk
-- Discount rate risk
-- Modelling risk
-- Tax
-- Breach of applicable legislative obligations
-- Counterparty risk
A more detailed explanation of these risks and the way in which
they are managed can be found in the Strategic Report on pages 20
to 23 and in Note 4 to the Financial Statements on pages 62 to 64
of the 2019 Annual Report and Accounts - copies can be found via
the Company's website, www.lsaplc.com .
There have been no significant changes in the related party
disclosures set out in the Annual Report.
Directors' Statement of Responsibilities in Respect of the
Financial Statements
In accordance with Disclosure and Transparency Rule (DTR) 4.2.10
Michael Baines (Chairman), Christopher Casey (Chairman of the Audit
Committee), Robert Edelstein, Franck Mathe, Yves Mertz and Guner
Turkmen, the Directors, confirm that to the best of their
knowledge:
-- The condensed set of financial statements contained within
this Half-Yearly financial report have been prepared in accordance
with International Accounting Standard ("IAS") 34 'Interim
Financial Reporting' as adopted by the European Union and gives a
true and fair view of the assets, liabilities, financial position
and loss of the Company; and
-- The Half-Yearly financial report includes a fair review of
the information required by the FCA's Disclosure and Transparency
Rule 4.2.7R being disclosure of important events that have occurred
during the first six months of the financial year, their impact on
the condensed set of financial statements and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
-- The Half Yearly financial report includes a fair review of
the information required by the FCA's Disclosure and Transparency
Rule 4.2.8R being disclosure of related party transactions during
the first six months of the financial year, how they have
materially affected the financial position of the Company during
the period and any changes therein.
This Half-Yearly Report was approved by the Board of Directors
on 25 September 2020 and the above responsibility statement was
signed on its behalf by:
Michael Baines
Chairman
25 September 2020
Life Settlement Assets Plc
Condensed Statement of Comprehensive Income
for the six months ended 30 June 2020
______________________________________________
Six months ended Six months ended Year ended
30 June 2020 30 June 2019 31 December 2019
(unaudited) (unaudited) (audited)
Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Income
Income from life
settlement
portfolios 450 - 450 435 - 435 868 - 868
Gains from life
settlement
portfolios 3 - 555 555 - 15,604 15,604 - 23,381 23,381
Other income 56 - 56 74 - 74 941 - 941
Net foreign exchange
loss (6) - (6) (12) - (12) (17) - (17)
______ ______ ______ ______ ______ ______ _______ _______ ______
Total income 500 555 1,055 497 15,604 16,101 1,792 23,381 25,173
Operating expenses
Investment management
fees 4 (855) 647 (208) (978) (2,066) (3,044) (1,852) (3,285) (5,137)
Other expenses (3,101) - (3,101) (3,104) - (3,104) (5,994) - (5,994)
______ ______ ______ ______ ______ ______ _______ _______ _____
(Loss)/profit
before finance
costs and taxation (3,456) 1,202 (2,254) (3,585) 13,538 9,953 (6,054) 20,096 14,042
Finance costs
Interest payable (617) - (617) (639) - (639) (1,201) - (1,201)
______ ______ ______ ______ ______ ______ _______ _______ _____
(Loss)/profit/before
taxation (4,073) 1,202 (2,871) (4,224) 13,538 9,314 (7,255) 20,096 12,841
Taxation 16 - 16 - (70) (70) (130) - (130)
______ ______ ______ ______ ______ ______ _______ _______ _____
(Loss)/profit
for the period (4,057) 1,202 (2,855) (4,224) 13,468 9,244 (7,385) 20,096 12,711
====== ===== ====== ====== ===== ====== ======= ====== =====
Return per class
A share USD 6 (0.092) 0.048 (0.044) (0.070) 0.247 0.177 (0.135) 0.369 0.234
Return per class
B share USD 6 (0.019) (0.054) (0.073) (0.024) (0.062) (0.086) (0.036) (0.052) (0.088)
Return per class
D share USD 6 n/a n/a n/a (0.042) 0.189 0.147 (0.069) 0.313 0.244
Return per class
E share USD 6 n/a n/a n/a (0.160) 0.788 0.628 (0.271) 1.328 1.057
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 loss for the period and therefore the loss for the
period is also the total comprehensive income for the period.
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.
The notes form part of these financial statements.
Life Settlement Assets Plc
Condensed Statement of Financial Position
as at 30 June 2020
As at As at As at
30 June 30 June 31 December
2020 2019
(unaudited) 2019 (audited)
Note (unaudited)
USD'000 USD'000 USD'000
Non-current assets
Financial assets at fair value through
profit or loss:
- Life settlement investments 8 80,718 83,798 78,041
_______ _______ _______
80,718 83,798 78,041
Current assets
Maturities receivable 11,110 11,709 3,867
Trade and other receivables 600 1,060 697
Premiums paid in advance 9,552 11,089 9,231
Cash and cash equivalents 14,421 36,564 28,992
_______ _______ _______
35,683 60,422 42,787
_______ _______ _______
Total assets 116,401 144,220 120,828
_______ _______ _______
Current liabilities
Other payables (5,555) (2,460) (981)
Provision for performance
fees (4,407) (4,879) (5,054)
_______ _______ _______
Total liabilities (9,962) (7,339) (6,035)
_______ _______ _______
Net assets 106,439 136,881 114,793
====== ====== ======
Represented by
Capital and reserves
Share capital 9 583 711 648
Special reserve 10 101,959 133,013 107,458
Capital redemption reserve 128 - 63
Capital reserve 22,712 14,882 21,510
Revenue reserve (18,943) (11,725) (14,886)
_______ _______ _______
Total equity attributable
to ordinary shareholders of 106,439 136,881 114,793
the Company ====== ====== ======
Net Asset Value per share
basic and diluted
Class A shares 11 2.119 2.194 2.234
Class B shares 11 0.945 1.021 1.018
Class D shares 11 n/a 1.394 0.831
Class E shares 11 n/a 5.386 2.242
The notes form part of these financial statements.
Registered in England and Wales with Company Registration
number: 10918785
Condensed Statement of Changes in Equity
for the six months ended 30 June 2020
________________________________________________________
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
Six months ended 30 June
2020
Balance as at 1 January
2020 648 - 107,458 63 21,510 (14,886) 114,793
Comprehensive income for
the period - - - - 1,202 (4,057) (2,855)
Conversion of D shares
to A shares (61) - - 61 - - -
Conversion of E shares
to A shares (4) - - 4 - - -
Contributions by and
distributions
to owners
Dividends paid in the period - - (5,499) - - - (5,499)
_____ ______ _______ _______ ______ _______ _______
Balance as at 30 June 2020 583 - 101,959 128 22,712 (18,943) 106,439
===== ====== ======= ======= ====== ======= =======
Of which:
Realised gains 17,492
Unrealised gains 5,220
Six months to 30 June 2019
Balance as at 1 January
2019 711 133,013 - - 1,414 (7,501) 127,637
Comprehensive income for
the period - - - - 13,468 (4,224) 9,244
Contributions by and
distributions
to owners
Cancellation of share premium
account (note 10) - (133,013) 133,013 - - - -
____ _______ _______ _______ ______ _______ _______
Balance as at 30 June 2019 711 - 133,013 - 14,882 (11,725) 136,881
==== ======= ====== ======= ====== ======= =======
Of which:
Realised gains 15,937
Unrealised losses (1,055)
Period ended 31 December
2019
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
C ancellation of share
premium account (note 10) - (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
The notes form part of these financial statements.
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.
Life Settlement Assets Plc
Condensed Cash Flow Statement
for the six months ended 30 June 2020
____________________________________________________
Six Six
months ended months ended Year ended
30 June 2020 30 June 2019 31 December
2019
(unaudited) (unaudited) (audited)
USD'000 USD'000 USD'000
Cash flows (used in)/from operating
activities
(Loss)/profit for the period (2,855) 9,244 12,711
Non-cash adjustment
* movement on portfolios 1,980 7,379 15,989
* value adjustment on shares in subsidiary - - (360)
Investment in life settlement
portfolios (58) (1,077) (1,167)
Movements in "policy advances" (4,599) (286) (3,050)
-
Changes in operating assets
and liabilities
Changes in maturities receivables (7,243) 6,088 13,930
Changes in trade and other receivables 97 (120) 243
Changes in premiums paid in
advance (321) 2,239 4,097
Changes in other payables 4,574 2,510 (1,034)
Changes in performance fee provision (647) - 2,241
Changes in liabilities to subsidiary - - 360
______ ______ ______
Net cash (outflows)/inflows
(used in)/from operating activities (9,072) 25,977 43,960
Cash flow used in financing
activities
Dividends paid (5,499) - (14,500)
Tender Offer and buybacks for
cancellation - - (11,055)
_____ ______ ______
Net cash flows used in financing
activities (5,499) - (25,555)
______ ______ ______
Net changes in cash and cash
equivalents (14,571) 25,977 18,405
Cash balance at the beginning
of the period 28,992 10,587 10,587
______ ______ ______
Cash balance at the end of the
period 14,421 36,564 28,992
====== ====== ======
The notes form part of these financial statements.
Life Settlement Assets Plc
Notes to the Condensed Financial Statements
for the six months ended 30 June 2020
Note 1 General information
Life Settlement Assets ("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 two classes of Ordinary Shares in
issue, namely A and B, 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.
The Ordinary Share classes D and E were cancelled following the
merger of Ordinary Share Classes A, D and E on 5 May 2020.
Note 2 IFRS accounting policies
2.1 Basis of preparation
These condensed interim financial statements have been prepared
using the same accounting policies and methods of computation as in
the 2019 annual financial statements.
The condensed financial statements, which comprise the unaudited
results of the Company have been prepared in accordance with
International Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board ("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. The
accounting policies are as set out in the Report and Accounts for
the period ended 31 December 2019.
The half-year financial statements have been prepared in
accordance with IAS 34 "Interim Financial Reporting".
The financial information contained in this Half-Yearly
financial report does not constitute statutory accounts as defined
by the Companies Act 2006.The financial information for the periods
ended 30 June 2020 and 30 June 2019 have not been audited or
reviewed by the Company's Auditor. The figures and financial
information for the year ended 31 December 2019 are an extract from
the latest published audited statements and do not constitute the
statutory accounts for that year. Those accounts have been
delivered to the Registrar of Companies and include a report of the
Auditor, which was unqualified and did not contain a statement
under either Section 498(2) or 498(3) of the Companies Act
2006.
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 2020. The Directors do not expect the adoption of the
following new standard to have a significant impact on the
financial statements of the Company in future periods.
IFRS 17 "Insurance contracts" applies to insurance contracts,
including reinsurance contracts issued by an entity; reinsurance
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 it will
have no impact on the Company's financial statements.
Going concern
The Directors have made an assessment of the Company's ability
to continue as a going concern and are satisfied that the Company
has adequate resources to continue in operational existence for the
foreseeable future (being a period of 12 months from the date these
financial statements were approved). Furthermore, the Directors are
not aware of any material uncertainties that may cast significant
doubt upon the Company's ability to continue as a going concern,
having taken into account the liquidity of the Company's investment
portfolio and the Company's financial position in respect of its
cash flows, liabilities from its assets and the ongoing charges,
including annual premiums which are approximately 16% of net
assets. Therefore, the financial statements have been prepared on
the going concern basis and on the basis that approval as an
investment trust will continue to be met.
Note 3 Gains from life settlement portfolios
30 June 30 June 31 December
2020 2019 2019
USD'000 USD'000 USD'000
Realised gains:
* Maturities 12,202 33,948 58,725
* Acquisition cost of maturities and fair value
movement (3,309) (6,323) (17,218)
______ ______ ______
Sub total 8,893 27,625 41,507
Incurred premiums (9,667) (10,966) (19,355)
Unrealised gains/(losses)
* Fair value adjustments 1,329 (1,055) 1,229
______ ______ ______
555 15,604 23,381
====== ====== ======
When a maturity is declared, a realised capital gain 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 9,552,000 as at
30 June 2020 (30 June 2019: USD 11,089,000, 31 December 2019: USD
9,231,000).
Note 4 Management fees and performance fees
30 June 30 June 31 December
2020 2019 2019
USD'000 USD'000 USD'000
Acheron Capital management
fees 855 978 1,852
Performance fees (647) 2,066 3,285
______ _____ _____
208 3,044 5,137
===== ===== =====
Under an agreement dated 26 March 2018, the Investment Manager
is entitled to a management fee payable by the Trust at an annual
rate of no more than 1.5% of the Net Asset Value for classes A and
B. Previously, until the merger of classes A, D and E on 5 May
2020, an annual rate of no more than 1.5% of the Net Asset Value
was payable in respect of classes A, B and D and 2% in respect of
class E. Management fees paid in the period amounted to USD 855,000
(30 June 2019: USD 978,000, 31 December 2019:USD 1,852,000).
The Performance fee in respect of the Trust 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 Trust, 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 prior to 5 May 2020, 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 30 June 2020), reduced by an amount equal to any
distributions paid to the Predecessor Company's shareholders of the
relevant share class prior to the Acquisition.
Note 5 Taxation
The Company has an effective UK tax rate of 0% for the year
ending 31 December 2020. The estimated effective tax rate is 0% as
investment gains are exempt from tax owing to the Company's status
as an investment trust and there is expected to be an excess of
management expenses over taxable income.
The company suffers US withholding tax on income received
dividends and interest. The tax credit for the period amounted to
USD 16,000.
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 has fulfilled this
requirement.
Note 6 Return per share
As stated in Note 9, the share capital of the Company comprises
58,320,157 shares represented by 43,724,059 A Shares and 14,596,098
B Shares. Share Classes D and E were cancelled following the merger
of Share Classes A,D and E on 5 May 2020. 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:
Six months ended 30 Class A Class Class Class
June 2020 B D E
Earnings per share:
Revenue return (USD'000) (3,776) (283) n/a n/a
Capital return (USD'000) 1,984 (780) n/a n/a
Total return (USD'000) (1,792) (1,063) n/a n/a
Weighted average number
of shares in the period 41,070,674 14,596,098 n/a n/a
Income return per share
(USD) (0.092) (0.019) n/a n/a
Capital return per share
(USD) 0.048 (0.054) n/a n/a
Basic and diluted total
earnings per share (USD) (0.044) (0.073) n/a n/a
Six months ended 30 Class A Class Class Class
June 2019 B D E
Earnings per share:
Revenue return (USD'000) (3,207) (349) (391) (276)
Capital return (USD'000) 11,243 (899) 1,757 1,366
Total return (USD'000) 8,036 (1,248) 1,366 1,090
Weighted average number
of shares in the period 45,446,946 14,596,098 9,292,561 1,733,269
Income return per share
(USD) (0.070) (0.024) (0.042) (0.160)
Capital return per share
(USD) 0.247 (0.062) 0.189 0.788
Basic and diluted total
earnings per share (USD) 0.177 (0.086) 0.147 0.628
Period ended 31 December Class A Class Class Class
2019 B 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 in 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
Note 7 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 80,718,000 (30 June 2019:
USD 83,798,000, 31 December 2019: USD 78,041,000) are all
classified as level 3.
Note 8 Financial assets held at fair value through profit or
loss: Life Settlement Portfolios
Movements for the period are as follows:
As at 30 As at 30 As at 31
June June December
2020 2019 2019
USD'000 USD'000 USD'000
Opening valuation 78,041 89,813 89,813
Acquisitions during the period 58 1,077 1,167
Proceeds from matured policies (12,202) (33,948) (58,725)
Net realised gains on policies 8,893 27,625 41,507
Movements in cash from policy
advances 4,599 286 3,050
Movements in unrealised valuation 1,329 (1,055) 1,229
_______ _______ ______
Closing valuation 80,718 83,798 78,041
======= ======= ======
Details at period end: USD'000 USD'000 USD'000
Acquisition value 90,113 104,169 93,364
Unrealised capital gains 5,220 1,607 3,891
Policy advances (14,615) (21,978) (19,214)
_______ _______ _______
Closing valuation 80,718 83,798 78,041
======= ======= =======
Distribution of the portfolio by class of Shares and by type of
risk:
30 June 2020 Class Class B Class Class Total
A D E
USD'000 USD'000 USD'000 USD'000 USD'000
Elderly life insurance
(non-HIV) portfolio 19,996 10,722 - (-) 30,718
HIV portfolio 50,000 - - (-) 50,000
(______) (_____) (_____) (_____) (______)
Balance as at
30 June 2020 69,996 10,722 - (-) 80,718
====== ===== ===== ===== ======
Fair market value reflects the view of Acheron Capital Ltd, the
Investment Manager of the trust in which the policies of Class A
and B are kept.
30 June 2019 Class A Class Class Class Total
B D E
USD'000 USD'000 USD'000 USD'000 USD'000
Elderly life insurance
(non-HIV) portfolio 20,715 9,832 5,200 2,757 38,504
HIV portfolio 41,773 - 2,484 1,037 45,294
(_____) (_____) (_____) (_____) (_____)
Balance as at
30 June 2019 62,488 9,832 7,684 3,794 83,798
===== ===== ===== ==== =====
31 December 2019 Class A Class Class Class Total
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 as at
31 December 2019 58,131 10,739 6,443 2,728 78,041
====== ===== ===== ===== ======
Note 9 Share Capital
At the 30 June 2020, (the Company's share capital amounts to USD
583,202 (30 June 2019: USD 710,689, 31 December 2019: 648,467) and
is represented by 58,320,157 ordinary shares of USD 0.01 each.
Share classes D and E were cancelled on 5 May 2020 following the
merger of Share Classes A, D and E.
Class Class Class Class Total
A B D E
USD'000 USD'000 USD'000 USD'000 USD'000
Balance as at
31 December 2018 455 146 93 17 711
Buybacks and
Tender Offer
in the year (56) - (5) (2) (63)
_____ _____ _____ _____ _____
Balance as at
31 December 2019 399 146 88 15 648
_____ _____ _____ _____ _____
Capital reorganisation
on 5 May 2020 38 - (88) (15) (65)
(_____) (_____) (_____) (____) (_____)
Balance as at
30 June 2020 437 146 - - 583
_____ _____ _____ ____ _____
The issued and fully paid share capital is comprised of
43,724,059 Class A shares, and 14,596,098 Class B shares.
Class A and Class B shares relate to specific investments
determined by the Board of Directors or as the case may be, by a
general meeting of Shareholders. Each investment is undertaken for
the exclusive benefit and risk of the relevant class of shares. All
shares have equal voting rights.
As announced on 4 May 2020, the Company undertook a capital
reorganisation whereby the shares of Classes D and E were merged
into class A shares. A total of 8,792,561 D shares and 1,566,603 E
shares were redesignated as 3,832,668 A shares.
Note 10 Special reserve
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.
Note 11 Net assets and net asset value per Share Class
The Net Asset Value (NAV) for each Share Class is shown
below.
30 June 2020 Class A Class B Class Class Total
D E
Net assets (USD'000) 92,639 13,800 n/a n/a 106,439
Number of shares 43,724,059 14,596,098 n/a n/a 58,320,157
NAV per share
(USD) 2.119 0.945 n/a n/a
30 June 2019 Class A Class B Class Class Total
D E
Net assets (USD'000) 99,687 14,901 12,957 9,336 136,881
Number of shares 45,446,946 14,596,098 9,292,561 1,733,269 71,068,874
NAV per share
(USD) 2.194 1.021 1.394 5.386
31 December 2019 Class A Class B Class Class Total
D E
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
Note 12 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 trust who is also a member of the Board of
Directors.
30 June
2020
USD'000
Per income statement:
Trustee fees 62
Compagnie Européenne de Révision
S.à r.l. 115
Directors' fees 78
Amounts payable per balance sheet:
Compagnie Européenne de Révision
S.à r.l. 50
Directors' fees 23
=====
Shares held by related parties (Directors and
companies under their control) - Michael Baines
75,000 B shares
All transactions with related parties are undertaken at arm's
length.
Note 13 Post balance sheet events
Subsequent to the period end, the Company has declared an
interim dividend of 4.5741 cents per Class A share totalling USD
2.0 million. Further details are given in the Chairman's
statement.
ADDITIONAL INFORMATION
Additional information of exhibits I and II do not form part of
the condensed financial statements.
EXHIBIT I (unaudited)
Life Settlement Assets Plc
Class A Shares
Statement of Comprehensive Income
for the six months ended 30 June 2020
Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
(unaudited) (unaudited) (audited)
USD'000 USD'000 USD'000
Income
Income from life settlement
portfolios 399 372 752
Gains from life settlement
portfolios 605 12,800 18,091
Other income 6 47 601
Net foreign exchange loss (6) (12) (17)
______ ______ ______
Total income 1,004 13,207 19,427
Operating expenses
Investment management fees 53 (2,174) (3,655)
Other expenses (2,758) (2,295) (4,447)
______ ______ ______
(Loss)/profit before finance
costs and taxation (1,701) 8,738 11,325
Finance costs
Interest payable (615) (632) (1,185)
______ ______ ______
(Loss)/profit before taxation (2,316) 8,106 10,140
Taxation 16 (70) (130)
______ ______ ______
(Loss)/profit for the period (2,300) 8,036 10,010
Contribution from merger
of Share Classes D & E 508 - -
______ ______ ______
(Loss)/profit for the period (1,792) 8,036 10,010
====== ====== ======
EXHIBIT I (unaudited)
Life Settlement Assets Plc
Class A Shares
Statement of Financial Position
as at 30 June 2020
As at As at As at
30 June 30 June 31 December
2019
2020 2019 (audited)
(unaudited) (unaudited) USD'000
USD'000 USD'000
ASSETS
Non-current assets
Financial assets at fair
value through profit or
loss:
- Life settlement investments 69,996 62,488 58,131
______ ______ ______
69,996 62,488 58,131
Current assets
Maturities receivables 10,569 8,099 2,822
Trade and other receivables 491 702 377
Premiums paid in advance 8,151 7,359 6,536
Cash and cash equivalents 13,096 23,263 23,995
Inter-class receivables 208 842 219
______ ______ ______
32,515 40,265 33,949
______ ______ ______
Total assets 102,511 102,753 92,080
______ _______ ______
Current liabilities
Other payables (5,465) (1,580) (659)
Provision for performance
fees (4,407) (1,486) (2,313)
______ ______ ______
Total liabilities (9,872) (3,066) (2,972)
______ ______ ______
Net assets 92,639 99,687 89,108
====== ====== ======
Represented by
Capital and reserves
Share capital 437 455 399
Special reserve 83,501 95,006 82,454
Capital redemption reserve 128 - 56
Capital reserve 26,044 13,132 17,667
Revenue reserve (17,471) (8,906) (11,468)
______ ______ ______
Total equity attributable
to ordinary shareholders 92,639 99,687 89,108
of the Company ====== ====== ======
EXHIBIT II (unaudited)
Life Settlement Assets Plc
Class B Shares
Statement of Comprehensive Income
for the six months ended 30 June 2020
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2019 2019
2020
(unaudited) (unaudited) (audited)
USD'000 USD'000 USD'000
Income
Income from life settlement portfolios 6 19 31
Losses from life settlement portfolios (783) (899) (755)
Other income 49 8 116
______ _____ ______
Total income (728) (872) (608)
Operating expenses
Investment management fees (111) (121) (242)
Other expenses (223) (253) (432)
______ _____ ______
Loss before finance costs and
taxation (1,062) (1,246) (1,282)
Finance costs
Interest payable (1) (2) (4)
______ _____ ______
Loss before taxation (1,063) (1,248) (1,286)
Taxation - - -
______ _____ ______
Loss for the period (1,063) (1,248) (1,286)
===== ==== =====
EXHIBIT II (unaudited)
Life Settlement Assets Plc
Class B Shares
Statement of Financial Position
as at 30 June 2020
As at As at As at
30 June 30 June 31 December
2020 2019 2019
(unaudited) (unaudited) (audited)
USD'000 USD'000 USD'000
ASSETS
Non-current assets
Financial assets at fair
value through profit or
loss:
Life settlement investments 10,722 9,832 10,739
______ ______ _______
10,722 9,832 10,739
Current assets
Maturities receivables 541 1,169 513
Trade and other receivables 109 114 113
Premiums paid in advance 1,401 1,828 1,385
Cash and cash equivalents 1,325 2,781 2,269
______ ______ _______
3,376 5,892 4,280
______ ______ _______
Total assets 14,098 15,724 15,019
______ ______ _______
Current liabilities
Other payables (90) (482) (122)
Inter class payables (208) (341) (34)
______ ______ _______
Total liabilities (298) (823) (156)
______ ______ _______
Net assets 13,800 14,901 14,863
===== ===== ======
Represented by
Capital and reserves
Share capital 146 146 146
Special reserve 18,458 18,459 18,458
Capital reserve (3,332) (2,696) (2,552)
Revenue reserve (1,472) (1,008) (1,189)
______ ______ _______
Total equity attributable 13,800 14,901 14,863
to ordinary shareholders ====== ====== ======
of the Company
COMPANY INFO RMATION
Directors
Michael Baines Chairman
Christopher Casey
Robert Edelstein
Franck Mathé
Yves Metz
Guner Turkman
Registered Office
115 Park Street
4th Floor
London W1K 7AP
Auditors
BDO LLP
55 Baker Street
London
W1U 7EU
Trust's Investment Manager
Acheron Capital Limited
115 Park Street
4th Floor
London W1K 7AP
Share Registrars
Link Asset Services
34 Beckenham Road
Beckenham
Kent BR3 4TU
Brokers
Shore Capital
Cassini House
57 St James Street
London
SW1A 1LD
Company Secretary
ISCA Administration Services Limited
Suite 8,
Bridge House
Courtenay Street
Newton Abbot
TQ12 2QS
Email: lsa@iscaadmin.co.uk
Telephone: 01392 487056
LEI: 2138003OL2VBXWG1BZ27
Website - https://www.lsaplc.com
Registered in England and Wales with Company Registration
number: 10918785
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IR UBANRROUKUAR
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September 28, 2020 02:00 ET (06:00 GMT)
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