Final Results

14 October 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED 

(THE "COMPANY")

Annual Financial Report Announcement

For the year ended 30 June 2016

The Directors announce the publication of the Company's annual financial report for the year ended 30 June 2016.  

The following comprises the Company's annual financial report for the year ended 30

June 2016. The annual financial report is being made available to be viewed on or downloaded from the Company's website at www.allianzgi.co.uk/TLI and it will shortly be submitted to and available for inspection at http://www.hemscott.com/nsm.do.

The financial information set out in this announcement does not constitute the Company's statutory accounts for the year ended 30 June 2016, but is derived from those accounts, which will be delivered to Shareholders during October 2016. The auditor has reported on the annual financial report and your attention is drawn to their 'Emphasis of Matter' and the 'Statement of Going Concern'.

The financial information for the year ended 30 June 2015 has been extracted from the statutory accounts for that year.

The financial statements have been prepared in accordance with International Financial Reporting

Standards. This announcement has been prepared using accounting policies consistent with those set out in the Company's annual financial report for the year ended 30 June 2016.

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.

Enquiries:

Tracey Lago

Company Secretary

Telephone number: 020 3246 7405

Melissa Gallagher

Head of Investment Trusts, Allianz Global Investors

Telephone number: 020 3246 7539

14 October 2016

199 Bishopsgate

London

EC2M 3TY

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investor Information

For the year ended 30 June 2016

Investment policy and strategy

The investment objective and policy of Alternative Asset Opportunities PCC Limited (the "Company") in respect of the US Traded Life Interests Fund has been to provide investors with an attractive capital return through investment predominantly in a diversified portfolio of US Traded Life Interests ("TLIs"). The Company invested the assets of the Fund in a range of TLIs on the lives of US citizens aged, at the time of acquisition, between 78 and 92 years. All TLIs acquired were Whole-Of-Life policies or Universal Life policies. No viatical policies (that is, a policy on the life of an insured who, at the time of policy acquisition, is terminally ill and with a life expectancy of less than 2 years) were acquired and not more than 15 per cent of the gross assets of the Fund, at the time of purchase, was invested in life policies issued by any single US life insurance company or group.

As detailed in the Circular to shareholders dated 13 September 2016, the Board proposed a change to the investment objective and policy to become:

"The investment objective and policy of the Company in respect of the Fund is to conduct a sale of its portfolio: (i) to Vida Longevity Fund, L.P for a total cash consideration of $40.0 million, subject to adjustment in respect of the value of policies excluded from the sale, on the terms set out in the Sale and Purchase Agreement which has been entered into between Vida Longevity Fund, L.P and the Company on 12 September 2016; and (ii) to other parties, both as described in the circular to Shareholders dated 13 September 2016. Thereafter the Company will return cash to Shareholders and proceed towards a members' voluntary winding-up, or other restructuring, subject to the further approval of Shareholders.

Pending the return of cash to Shareholders of the Fund, cash balances may be invested in a portfolio that may include US treasury bonds, UK gilts and Sterling-denominated corporate bonds with a minimum rating of AA by Standard & Poor's or an equivalent rating by another rating agency. The Company (in respect of the Fund) does not intend to use gearing.

At the extraordinary general meeting held on 10 October 2016 a resolution was passed by shareholders to approve the change which became effective immediately. The disposal of the portfolio has therefore commenced and is expected to be materially complete by early November 2016.

History

The Company was registered on 27 February 2004 in Guernsey, as a closed-ended protected cell company in accordance with the provisions of The Protected Cell Companies Ordinance, 1997 and The Companies (Guernsey) Law, 1994, and subsequently re-registered under the provisions of The Companies (Guernsey) Law, 2008, as amended. It was established with one Cell known as the US Traded Life Interests Fund (the "Fund") with a planned fixed life of approximately 8 years from the date of launch. By resolution of shareholders, on 28 August 2009, the Articles of Incorporation were amended to move from having a fixed life to offering shareholders annual continuation votes from the Company's 2012 Annual General Meeting onward.

The Company has been authorised by the Guernsey Financial Services Commission as an authorised closed-ended investment scheme under the Protection of Investors (Bailiwick of Guernsey) Law, 2008, as amended. With effect from 1 September 2009, the Company has been resident in the UK for tax purposes. In 2012 the Company applied for and was accepted as an approved investment trust under sections 1158 and 1159 of the Corporation Taxes Act 2010 and Part 2 Chapter 1 of Statutory Instrument 2011/2999. Approval related to accounting periods commencing on or after 1 December 2012. The Directors are of the opinion, having taken advice that the Company has continued to conduct its affairs so as to be able to retain such approval. As an investment trust the Financial Conduct Authority (FCA) rules in relation to non-mainstream pooled investment products do not apply to the Company. Accordingly, its shares can be recommended by IFAs to ordinary retail investors in accordance with the FCA's rules in relation to non-mainstream investment products.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investor Information (continued)

For the year ended 30 June 2016

History (continued)

The Company's redeemable participating preference shares (the "Shares") were admitted to the Main Market for Listed Securities Official List of the Financial Conduct Authority and commenced trading on the London Stock Exchange on 25 March 2004.

FATCA

The Company is registered with the Internal Revenue Service (IRS) as a Foreign Financial Institution for the purposes of the Foreign Tax Compliance Act (FATCA).

The Company's Global Intermediary Identification Number (GIIN) is 1L9EHP.99999.SL.826.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investor Information (continued)

For the year ended 30 June 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investor Information (continued)

For the year ended 30 June 2016

Directors

The Directors have been chosen for their investment and commercial experience and are listed below:

Charles Tracy, Chairman, (aged 70) has over 40 years' experience as a merchant banker, covering both the investment management and banking fields. On joining N.M. Rothschild & Sons in 1975 he was made responsible for Asian and commodity-related investments, working in Malaysia and Hong Kong before taking up the post of Managing Director of N.M. Rothschild & Sons (C.I.) Ltd. in 1981, and remaining in that position until 1998. During that period he was Chairman of the Association of Guernsey Banks and of the Guernsey International Business Association. He is currently non-executive Chairman of Louvre Fund Services Limited and Chairman of the Board of the Guernsey Banking Deposit Compensation Scheme. He is a resident of Guernsey.

Ian Reynolds, Chairman of the Audit Committee, (aged 73) is a former Chief Executive of Commercial Union Life Assurance Company and a former director of Liverpool Victoria Friendly Society. He was, until December 2014, a director of The Equitable Life Assurance Society, and is a former consultant actuary at Towers Perrin. Mr Reynolds is a Fellow of the Institute of Actuaries and a Chartered Director. He is UK resident.

Tim Emmott (aged 64) has 40 years' experience in banking and investment in a variety of analytical, trading and management roles. He has been involved in investing in distressed, illiquid and alternative financial assets for the past 25 years. He is UK resident.

John Scott (aged 64) is currently a director of several UK investment trusts and is Chairman of Scottish Mortgage Investment Trust PLC. Mr Scott held a number of senior appointments at Lazard Brothers & Co., Limited between 1981 and 2001. Prior to that, he worked at Jardine Matheson & Co., Limited. He is a Fellow of the Chartered Insurance Institute and of the Chartered Institute for Securities and Investment. He is UK resident.

The Investment Manager

The Investment Manager, SL Investment Management Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, was incorporated in 1990 and is an Investment Manager and Investment Advisor for a range of specialist investment products.

The Manager

Allianz Global Investors GmbH, UK Branch, which is authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and which is subject to limited regulation by the Financial Conduct Authority, is manager of a number of closed-ended investment companies with approximately £1.2 billion of assets under management in a range of investment companies and investment trusts as at 30 September 2016. The Manager is responsible for managing the cash and borrowing facilities of the Fund and providing Company Secretarial services to the Company.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Financial Highlights

For the period from 1 July 2015 to 30 June 2016

Dividends and Capital Distributions

The Directors did not declare a dividend for the year ended 30 June 2016 (2015: nil).

In the financial year to 30 June 2015 two capital distributions were made to shareholders each of 2.0 pence per share, amounting in aggregate to £2.88m. No capital or other distributions were made to shareholders in the financial year to 30 June 2016 and none have been proposed or made since the year end to the date of this report.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Chairman's Statement

For the year ended 30 June 2016

Introduction

Several new factors have influenced the Board's policy in recent months. The first and most visible was the continuing slow rate of maturities in the portfolio, with only four in the financial year to 30 June 2016 and two since the year end; the second was the unwelcome and unexpected imposition of Cost of Insurance ("COI") increases on the premiums for some policies, while a third was the fact that, despite these uncertainties, demand for policies in the tertiary market remained strong. Finally, we were mindful of the fact that each maturity reduces the size of the Company, with the result that our running costs, many of which are fixed, have to be spread over an ever-smaller asset base. The Board decided that there might be an opportunity to dispose of the portfolio on attractive terms.

On 23 June 2016 the Board announced that it was exploring opportunities in the tertiary market for a sale of the portfolio. Further to this, and following a competitive sales process which produced a healthy number of bids, on 13 September 2016, it was announced that the Company had secured a purchaser, Vida Longevity Fund L.P ("Vida") for 71 of the 80 policies in the portfolio. On 26 September 2016 it was announced that Vida had further contracted to purchase 6 of the remaining 9 polices and Life Equity had contracted to purchase the final 3 policies in the portfolio. The sale of the 3 small policies to Life Equity was carried out in the ordinary course of business while the disposal of the 77 policies in the portfolio to Vida was subject to shareholder approval at an Extraordinary General Meeting ("EGM") held on 10 October 2016. At the EGM a Resolution was approved to change the investment objective and policy of the Company in order to facilitate the disposal.

The terms of the three agreements for the sale of the policies provided for the full purchase price to be placed in escrow, together with a sum equating to expected premiums due while the purchase is completed. These sums have been duly placed and as policies are transferred, the sale proceeds will be released from the associated escrow accounts. Final completion is envisaged during November 2016 and a second EGM will then be held to place the Company into voluntary liquidation; shareholders will be consulted on detailed plans for this by a further Circular. It should be noted that the risk transfer date of the policies within the agreements was 12 September 2016; all premium obligations and maturity proceeds from such date are therefore to the account of the respective purchasers.

The rest of my report contains a formal summary of the year but has, of course, been largely overtaken by events referred to above.

Portfolio developments

The financial year to 30 June 2016 saw another period of few maturities with only four occurring in the year with a total face value of USD$14m (2015: four policies face value total USD$10.9m) taking the total number of maturities since the Company's launch in 2004 to 68 policies at the date of writing.

Fortunately, those policies which did mature were again larger ones and the maturity proceeds exceeded the premiums and expenses for the year of US$9.2 million. Realised gains on the book value of maturing policies amounted to approximately US$7.7 million in the year, or 7.2 pence per share (2015: US$8.2 million, or 7.3 pence per share).

As at 30 June 2016 there were a total of 81 policies (70 lives) in the portfolio, with a face value of US$117.6 million and a valuation of US$42.6 million. Premiums continue to be paid on policies in force, amounting to US$8.0 million during the year (2015:US$8.4 million).

Since the 30 June 2016 the Company has been notified of two further maturities with a face value in aggregate of USD$3.2m. The first maturity, of USD$1.2, was verified and the uplift of 0.5 pence per share was recognised in the September net asset value ("NAV"); the second maturity of USD$2.0m occurred after the risk transfer date of 12 September 2016.

The Board felt that the low level of maturities in the period merited a cautious approach to distributions, despite the significant cash balances held at various times, and decided not to make any capital distributions in the year to 30 June 2016 (2015: 4 pence per share distributed).

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Chairman's Statement (continued)

For the year ended 30 June 2016

Portfolio developments (continued)

The NAV per share at the end of year was 51.1 pence, which is an increase of 16.4% on the NAV per share at the end of the last financial year of 43.9 pence. The mid-market share price at the year end of 38.5 pence was 2.5% down on the share price at the previous financial year end of 39.5 pence. Since the year end, and partly as a result of the portfolio disposal, the share price rose to 52.75p as at close of 11 October 2016.

The portfolio has gained significantly from the relative strength of the US$ dollar during the year, boosting the NAV per share by 8.0 pence.

Valuation of Investments

The NAV is a Directors' valuation, prepared with the assistance of the Investment Manager, utilising estimates of life expectancy to arrive at a series of cash flows, based on actuarial principles discounted to present value using a discount rate (or internal rate of return, IRR). The key factors in the valuation are therefore: the policy face value and the premiums payable; the assumed life expectancy (LE) of the insured; the actuarial mortality table; and the discount rate.

The portfolio is split into three parts: policies with routinely updated LEs, accounting for 78% of the portfolio by face value; small policies (face value under US$500,000) where the cost of regular review is deemed uneconomic; and policies for which it is not possible to obtain updated medical records. The Investment Manager has continued to carry out a regular programme of LE Updates during the year, with the latest review in progress at year end.

The Board continues to apply a 12% discount rate as explained and supported by note 20 on page 55, 'Market and longevity risk'.

The agreed price for the disposal of the portfolio is marginally above NAV.

Cost of Insurance increases

As announced during the year, some insurance companies have imposed COI increases on premiums on specific policies. The effects of these have all been included in the valuation and regularly notified by way of formal Stock Exchange announcements. While the Board feels that current litigation (to which the Company is not a party) may have some success in eventually mitigating such increases, the time frame for this is lengthy and the outcome uncertain. This has certainly been a factor in the Board's decision to proceed with the disposal of the

portfolio referred to above. Furthermore, during the sale negotiation the Board was informed of new COI increases on six policies, resulting in their withdrawal from the original sale agreement (although they were subsequently agreed to be sold).

Credit and Foreign Currency Risk

As the Investment Manager's report explains, there has been a re-rating of some of the insurance companies which issue the policies in the portfolio. As a result, at the year end 100% of the Company's policies by value were issued by companies with an AM Best rating of 'A-' or better (93.6% with a rating of 'A' or better) (2015: 96.4%).

The Company has operated on an unhedged currency basis since the change in investment policy in September 2011 and there is no current intention to initiate any new currency hedges.

During the year the £/US$ exchange rate moved from 1.5727 on 30 June 2015 to 1.3368 on 30 June 2016.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Chairman's Statement (continued)

For the year ended 30 June 2016

Outlook

Following the resolution which was passed at the EGM held on 10 October 2016, the transfers of the policies to the buyers is now underway and it is envisaged that this process will be substantially complete by early November 2016. Shareholders will shortly thereafter receive a second Circular calling a further EGM at which a proposal to voluntarily wind-up the Company and appoint a liquidator will be put to shareholders.

Since the rights issue in November 2012 of 32 million shares at 32p per share the Company has distributed to date 4 pence per share and - subject to exchange rates - shareholders now stand to receive final distributions totalling in the region of 53 pence per share.

Following some very testing moments in the history of this Company, I am relieved to have achieved this, notwithstanding the considerable headwind of COI increases, which have proved such a threat to the value of your Company since the issue appeared at the end of 2015. I take this opportunity to thank both our team of advisers and my fellow Board members for their diligence and considerable support through an often challenging experience.

Charles Tracy

Chairman

14 October 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investment Manager's Review

For the year ended 30 June 2016

Portfolio Overview

During the twelve month period from 1 July 2015 to 30 June 2016 there were 4 confirmed policy maturities with a total face amount of US$14.0m. The 4 maturities related to 4 individual lives, 3 of which were male and 1 female. As at 30 June 2016, 81 policies remained within the portfolio with exposure to 70 individual lives.

Cumulatively, as of 30 June 2016, there have been 66 policy maturities across 57 lives since inception. Proceeds received from all maturities total US$117.1m. As at 30 June 2016, thirteen policies had been sold since inception of the Company, generating proceeds of US$11.2m.

No policies were sold during the reporting period. However as referenced in the Chairman's Statement, the Company has recently conducted a portfolio sales process and subsequently agreed a sale price which will result in the disposal of the whole portfolio at a premium to reported valuation. For the avoidance of doubt, all of the portfolio statistics referenced in this report relate to the reported valuation at 30 June 2016 and therefore do not take into account the portfolio sale price agreed post year end.

Two further maturities (one male, one female) have been identified since the year end. One policy with a death benefit of $1.2m which was formally certified in August added 0.5 pence to the NAV and the second, with a death benefit of $2.0m, the benefit of which once formally certified will accrue to the purchaser on disposal.

Full Portfolio Summary

Credit Quality Distribution by Holding Life Company

In May 2016, three policies transferred from Athene Annuity and Life Company to Accordia Life and Annuity Company (both companies are rated A-). This completes the transfer agreed when Athene acquired Aviva's US life insurance annuity business in March 2014. As Athene was primarily interested in the annuity business, the life business was sold to Global Atlantic who set up Accordia to administer the policies. The three policies have a total face value of US$4.3m, representing 3.6% of the portfolio face value.

There were no AM Best rating changes during the period that affected the portfolio. As at the reporting date 93.6% of the Company's policies (by valuation) were issued by life companies with an AM Best rating of 'A' or better.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investment Manager's Review (continued)

For the year ended 30 June 2016

Life Group (Parent Company) Distribution (Top 5)

Distribution of Life Expectancy Estimates

The following table shows the distribution of the policies in the portfolio by LE band. Policies are grouped by 12 month LE bands and the table shows the number of lives, the total death benefit and valuation in each group. The LEs are the valuation LEs used for the 30 June 2016 valuation.

Note that the LE is an average of the estimated future lifetime for an individual with a given age and health status. The table is not, therefore, a prediction of when actual maturities will occur and is thus not a cash flow forecast. This has been demonstrated by the fact that, one year ago, there were no policies with a LE of less than one year; and yet maturities totalling US$14.0m of face value were realised during the year.

The current average LE is 4.2 years.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investment Manager's Review (continued)

For the year ended 30 June 2016

Cost of Insurance (COI) increases

As discussed in detail in the interim statement, a number of US life insurance companies have announced increases to their COI rates on specific classes of policies. To date, this has resulted in increased future premium commitments for 21 policies with an aggregate face value of US$28.6m in the portfolio, which has had a significant impact on the valuation of these policies.

The life insurance groups which have imposed COI increases on certain policy types are: AXA S.A (AXA Equitable), Aegon N.V (Transamerica Life), Voya Financial (Voya Life and Annuity and Relia Star Life), Legal & General America (Banner Life), Prudential plc (Jackson National) and Lincoln National Corporation (Lincoln National Life).

During the 12 month reporting period, COI increases were incorporated into the valuation for 13 policies in the portfolio, representing a total face value of $15.3m. The impact of the COI increases was a reduction in valuation of the affected policies of $2.0m, equivalent to 2.0 pence per share.

Since the year end, COI increases have been confirmed for an additional 8 policies representing a total face value of $13.3m. The impact of these COI increases was a reduction in valuation of the affected policies of $2.4m, equivalent to 2.5 pence per share.

Premium Payments

Consequent to the conditional asset sale agreements coming into effect, the Company's responsibility for the payment of premiums ceased with effect from the risk transfer date of 12 September 2016. Had the agreements not come into effect the expected cost of premiums for the twelve months to 30 June 2017 would have been approximately US$10.0 million, assuming no further COI increases and no maturities.

Policy Expiry Date Analysis

Written into the contract for some policies is an expiry date after which no more premiums will be accepted by the life office and the death benefit will no longer be payable upon death. Where applicable, this usually coincides with the policy anniversary closest to the insured's 100th birthday. There are 41 such policies in the portfolio. The earliest expiry date is May 2020.

There are 6 policies with extension options to age 115, and 1 policy with a 'partial' extension - whereby the policy term is extended until death, but on a reduced death benefit after age 100.

33 policies in the portfolio have no expiry date.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investment Manager's Review (continued)

For the year ended 30 June 2016

Policy Expiry Date Analysis (Continued)

A summary of the policies in the portfolio as at 30 June 2016 is as follows:

For policies with an expiry date, the key metrics are as follows:

The table below summarises the distribution of the time intervals between the LE and the expiry date:

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investment Manager's Review (continued)

For the year ended 30 June 2016

Period Review and Outlook

This reporting period witnessed a similar volume of maturities compared with the previous 12 months; 4 lives (4 policies) totalling $14m this year, versus 4 lives (4 policies) totalling $10.9m in 2014/15. The average

face value of the 4 policy maturities during the period was $3.5m, which is notably higher than the $1.7m average face value for each life insured in the portfolio as a whole.

There remains considerable variation in the size of individual face amounts remaining in the portfolio. The table below illustrates the distribution of the 70 lives in the portfolio by face value as at 30 June 2016.

Despite some of the larger policies in the portfolio (by face value) maturing during the period, a significant proportion of the total death benefit remains linked to a relatively small proportion of lives. 15 lives (21% of total lives) account for 53% of the total face value and 54% of the reported valuation.

Life Expectancy Updates

With life expectancy assumptions so critical to the pricing and valuation of policies, LEs remain a key focus of the life settlement industry. None of the major LE underwriters made any significant adjustments to their life expectancy assessments during the period.

The Board has continued with the regular programme of LE updating throughout the year, with new LEs obtained for policies representing $18.4m in face value during the period (16% of the total portfolio). The LEs updated during the reporting period were 7 months shorter on average than the prevailing valuation LEs. Incorporating this new LE data resulted in an increase in the valuation equivalent to 1.8 pence per share.

At the reporting date, 51% of total portfolio face value is valued with reference to LEs obtained within the previous 24 months, with a further 28% obtained in the previous 36 months. The remaining 21% of the portfolio is valued using LEs calculated with reference to the 2015 Valuation Basic Table (VBT), which is the latest version of the table currently available.

Since the reporting date, updated LEs have been received for a further 14 lives representing $23.6m face value (20% of the portfolio). These updated LEs were 7 months shorter on average than the prevailing valuation LEs, adding a further 1.8 pence to the NAV per share.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investment Manager's Review (continued)

For the year ended 30 June 2016

Outlook

The Cost of Insurance (COI) rate increases implemented by a number of the major life companies in the past year have been an unexpected and unwelcome development for the life settlement industry. Class action lawsuits have been brought against Transamerica, AXA, Banner Life and John Hancock in response to the COI increases; each suit cites a variety of arguments as to why the increases are inappropriate. However the reality is that the legal challenges are likely to be long drawn out processes with no conclusions reached for a number of years. The risk that further life companies impose COI increases over the coming months therefore remains a distinct possibility and a cause for concern amongst existing life settlement investors.

Under these circumstances SL Investment Management is supportive of the Board's decision to sell the portfolio and is pleased to note that this has been achieved at a premium to NAV.

SL Investment Management Limited

14 October 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Manager's Review

For the year ended 30 June 2016

Borrowings and investments

A resolution was passed by shareholders at the EGM held on 10 October 2016 to change the investment objective and policy of the Company to effect a total disposal of the portfolio. The revolving credit facility with AIB Group (UK) PLC entered into on 31 March 2014 and extended to expire on 31 March 2018 will therefore be cancelled. As at 30 June 2016, there was a nil balance (30 June 2015: nil) on the US$10 million available under the facility.

The terms of the facility provided flexibility for the Company to make capital distributions to shareholders, subject to the availability of sufficient surplus cash. As a result, and following receipt of proceeds from maturities, the Company was able to make two capital distributions, each of 2.0 pence per share in the year to 30 June 2015, totalling in aggregate £2.88 million. No capital or other distributions were made in the year under review.

US dollar exposure

The Company no longer hedges its US dollar exposure; the Company is therefore fully exposed to the effect of exchange rates upon its net US dollar positions.

Allianz Global Investors GmbH, UK Branch

14 October 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Strategic Report

For the year ended 30 June 2016

History and Status

The Company was incorporated in and is a Guernsey registered closed-ended protected cell company in accordance with the provisions of The Companies (Guernsey) Law, 1994, and subsequently re- registered under the provisions of The Companies (Guernsey) Law, 2008 ("the law"), as amended. It was established with one Cell known as the US Traded Life Interests Fund (the "Fund") which had a planned life of approximately 8 years from the date of launch. Following a Special Resolution passed at an Extraordinary General Meeting on 28 August 2009, the Articles of Incorporation were amended to move from having a fixed life in respect of the Company's Cell, US Traded Life Interests Fund, to offering Shareholders annual continuation votes from the Company's 2012 Annual General Meeting onward.

Principal Activities, Business Review and Regulatory Environment

The Company is regulated by the Guernsey Financial Services Commission as an authorised fund under the Protection of Investors (Bailiwick of Guernsey) Law, 2008, as amended.

The principal activity of the Company is to carry on business as an investment trust within the meaning of section 1158 of the Corporation Tax Act 2010 ("s1158 of the CT Act"). With effect from 1 September 2009, the Company has been resident in the UK for tax purposes. The Company has obtained approval of its status as an investment trust under s1158 of the CT Act and the Directors are of the opinion that the Company has continued to act in accordance with such. The Company's redeemable participating preference shares (the "Shares") were admitted to the Official List of the UK Listing Authority and commenced trading on the London Stock Exchange on 25 March 2004.

Investment trusts are collective investment vehicles constituted as closed-ended public limited companies. The Company is managed by a board of non-executive Directors and the management of the Company's investments is delegated to the Investment Manager.

This Strategic Report provides information about:

· the Company's strategy and business objectives,

· its performance and results for the year,

· the information and measures which the Directors use to assess, direct and oversee SL Investment Management Limited (the "Investment Manager") and Allianz Global Investors GmbH, UK Branch (the " Manager")

Investment objective, policy and strategy

As detailed within the Chairman's Statement a resolution to change the Company's objective and policy was proposed and passed at an EGM of shareholders held on 10 October 2016. The Company's investment objective and policy with effect from such date is:

The investment objective and policy of the Company in respect of the Fund is to conduct a sale of its portfolio: (i) to Vida Longevity Fund, L.P for a total cash consideration of $40.0 million, subject to adjustment in respect of the value of policies excluded from the sale, on the terms set out in the Sale and Purchase Agreement which has been entered into between Vida Longevity Fund, L.P and the Company on 12 September 2016; and (ii) to other parties, both as described in the circular to Shareholders dated 13 September 2016. Thereafter the Company will return cash to Shareholders and proceed towards a members' voluntary winding-up, or other restructuring, subject to the further approval of Shareholders.

Pending the return of cash to Shareholders of the Fund, cash balances may be invested in a portfolio that may include US treasury bonds, UK gilts and Sterling-denominated corporate bonds with a minimum rating of AA by Standard & Poor's or an equivalent rating by another rating agency. The Company (in respect of the Fund) does not intend to use gearing.

The Company has previously invested the assets of the Fund in a range of traded life interests on the lives of US citizens aged, at the time of acquisition, between 78 and 92 years. All TLIs acquired were Whole-Of-Life policies or Universal Life policies.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Strategic Report (continued)

For the year ended 30 June 2016

Investment objective, policy and strategy (continued)

No viatical policies (that is, a policy on the life of an insured who was terminally ill and with a life expectancy of less than 2 years) were acquired. Subsequent to the change of investment objective the Company has now commenced the process of transferring the policies to the buyers. A second Circular will soon be sent to shareholders giving notice of a second EGM at which a resolution to voluntarily wind-up the Company will be proposed.

Performance

The portfolio of investments at the year end is set out on pages 42 to 43 and more information is set out in the Investment Manager's Review on pages 10 to 15. In the year ended 30 June 2016, the Company's net asset total return per share was 7.21p. Details of trends and factors impacting the performance of the Company are included in the Chairman's Statement and the Investment Manager's Review.

Results, Dividends and Capital Distributions

Details of the Company's results are shown in the Financial Highlights on page 6. The revenue reserve remains in deficit, and accordingly no dividend is proposed in respect of the year ended 30 June 2016 (2015- nil).

Following a Special Resolution passed by shareholders at an Extraordinary General Meeting on 24 July 2014 the Company's Articles of Incorporation were amended to permit the capitalisation of any part of the amount for the time being standing to the credit of the Share Premium Account and accordingly that such sums be set free for distribution amongst shareholders. In the year to 30 June 2015, two such capital distributions were made and paid pro rata to Shareholders through the issue and redemption of 72,000,000 B Shares paid up out of the Company's Share Premium Account. Each distribution was of 2.0 pence per Share, totalling £1,440,000 in aggregate on each distribution. No capital distributions have been made in the year under review to 30 June 2016.

As highlighted above and detailed in the Chairman's Statement, shareholder approval has been given to change the investment objective of the Company and to dispose of the portfolio to third party purchasers, further to the disposal the Company will propose to shareholders the appointment of a liquidator and the voluntary winding-up of the Company. If approved, the appointed liquidator will effect the winding-up of the Company and capital will be returned to shareholders in accordance with the terms set out in the Circular to shareholders which will detail the proposal to wind up. It is expected that the Circular proposing the winding-up will be sent to shareholders in early November 2016.

Principal Risks and Uncertainties

At least twice per year the Board has reviewed an in-depth Risk Matrix detailing the risks faced by the Company and what actions are taken or put in place to mitigate such. At every Board meeting the Directors consider a number of performance measures, including the below Key Performance Indicators ("KPIs") to assess the Company's success in achieving its investment objective, performance measures are considered over various time periods. Following approval of shareholders at the EGM held on 10 October 2016 to change the investment objective and effect the disposal of the portfolio the KPIs have been re-assessed and the principal risks amended.

The KPIs shown below have been identified by the Directors as being of relevance to the Company in its traditional form. Financial comparatives are disclosed in the Financial Highlights on page 6:

· Net asset value (total return);

· Share price (capital return); and

· Premium or discount to net asset value.

Other KPIs such as LE's, Sensitivity Matrix and Mortality levels experienced, as compared with that expected by a standard mortality table adjusted for regularly assessed life expectancies of policyholders, are also reviewed at every Board meeting and are detailed within the Chairman's Statement and Investment Manager's Review.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Strategic Report (continued)

For the year ended 30 June 2016

Principal Risks and Uncertainties (continued)

The principal risks identified by the Board are set out below, together with information about the actions taken to mitigate these risks.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Strategic Report (continued)

For the year ended 30 June 2016

Principal Risks and Uncertainties (continued)

Viability Statement

For the first time this year under the revised Corporate Governance provisions the Company is required to make a forward looking (longer term) Viability Statement in addition to the statement of going concern on page 23. However, further to the passing of the resolution by shareholders at the EGM held on 10 October 2016, the Board confirms that policy transfers are in process and the intention is to propose to shareholders the voluntary winding-up of the Company. The Board do not therefore believe it appropriate to make a statement beyond the date of the next EGM which is likely to be held in early December 2016. In the event that the resolution to appoint a liquidator and enter voluntary liquidation is not passed, the Board will consider the options and propose an alternative conclusion to shareholders.

Social, Community, Employee Responsibilities and Environmental Policy

As an investment trust, the Company has no direct social, community, employee or environmental responsibilities. Its principal responsibility to shareholders is to ensure that the investment portfolio is properly managed and invested. The Company has no employees and accordingly no requirement to report separately in this area as the management of the portfolio has been delegated to the Investment Manager. In light of the nature of the Company's business there are no relevant human rights issues and the Company does not have a human rights policy.

On behalf of the Board

Charles Tracy

Chairman

14 October 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Directors' Report

For the year ended 30 June 2016

The Directors have pleasure in submitting their Annual Financial Report for the year ended 30 June 2016 with comparatives for the year ended 30 June 2015. Information pertaining to the business review is now included in the Strategic Report on pages 17 to 20.

Revenue, capital and dividends

The Statement of Comprehensive Income set out on page 38 shows a revenue deficit for the year amounting to £724,022 (2015: revenue deficit for the year £717,625). There was a capital surplus for the year amounting to £5,913,333 (2015: capital surplus for the year £3,030,997). The Directors have not paid an interim dividend (2015: nil) and do not propose the payment of a final dividend for the year (2015: nil).

Assets

At the year end the net assets attributable to the Shares were £36,808,942 (2015: £31,619,631). Based on this figure the net asset value per Share in the Fund was 51.1p (2015: 43.9p).

Share capital

During the year no Shares were issued or repurchased. Total capital distributions through the issue and redemption of B shares in accordance with the Articles of Incorporation, during the year amounted to £Nil (2015: £2,880,000).

Substantial shareholdings in the Fund

As at the date of this report, the following companies had declared a notifiable interest in the Company's voting rights in accordance with Chapter 5 of the Disclosure and Transparency Rules ("DTR"):

At the date of approval of this report, there have been no further notifiable interest in the Company's voting rights reported to the Company.

Crest registration

Shareholders may hold Shares in either certificated or uncertificated form.

The Board

The Board currently consists of a non-executive Chairman, Charles Tracy, and three other non-executive Directors. The names and biographies of those Directors who held office at 30 June 2016 and at the date of this Report appear on page 5 and indicate their range of investment, industrial, commercial and professional experience. As the Company is an investment trust, all of its operational activities are outsourced and it does not have any employees.

The Directors serving on the Board during the year, together with their beneficial interests and those of their families at 30 June 2016, were as follows:

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Directors' Report (continued)

For the year ended 30 June 2016

Emoluments of the Directors

In the year to 30 June 2016 Directors were paid at the rate of £15,000 (2015: £15,000) per annum with the Chairman of the Board receiving an extra £7,500 (2015: £15,000) per annum and the Chairman of the Audit Committee an extra £2,500 (2015: £15,000) per annum. Per note 6 to the financial statements the Directors' fees and expenses of £71,454 (2015: £76,188) included allowable expenditure of £3,032 (2015: £4,549) and employers' national insurance.

The Board continues to believe that all directors are committed to their roles and are independent of the Company irrespective of tenure. Each of the directors has taken an active part in the decision to propose the change of investment objective and the recommendation of such to shareholders and fully supports the resolution passed at the EGM on 10 October 2016 and the intention to further propose to shareholders the voluntary winding-up of the Company in due course.

The Board has agreed that the directors shall receive an additional fee in relation to the considerable amount of work involved in the lead up to and through the change of investment objective and the continued additional work required to move the Company through to eventual voluntary winding-up. Each director will therefore receive an additional 50% of annual remuneration, totalling £35,000 in aggregate. Such payment will be made upon entering liquidation, whereupon no further fees will be paid.

Conflicts of Interest

The Board has a formal system in place for Directors to declare actual or potential conflicts of interest which are then considered and authorised by the rest of the Board as appropriate. Where a Director is deemed to have an interest in a matter to be discussed or determined by the Board, such director is excluded from all discussion and decision on the matter of interest.

Related Party Transactions

With the exception of the receipt of remuneration by the Directors from the Company there are no other related parties. The appointment of the Investment Manager and the Manager are deemed to be significant contracts. Unless required within the liquidation process, all service provider contracts will terminate immediately on liquidation of the Company.

Relations with shareholders

The Board regularly monitors the shareholder profile of the Company. It aims to provide shareholders with a full understanding of the Company's activities and performance, and reports formally to shareholders twice a year by way of the Annual Financial Report and the half yearly Financial Report. This is supplemented by the monthly publication, through the London Stock Exchange, of the net asset value of the Company's shares and other ad hoc announcements.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Directors' Report (continued)

For the year ended 30 June 2016

Accountability and audit

a) Statement of going concern

Further to the passing by shareholders of the resolution to change the investment objective of the Company to enable the total disposal of the portfolio, the intention is that a further resolution will be recommended to shareholders to propose the appointment of a liquidator and the voluntary winding- up of the Company.

Due to the Board's intention to place the Company into liquidation, the financial statements have been prepared on a basis other than that of a going concern. The Board however confirms that there are adequate liquid resources in place to continue in operation throughout the disposal of the portfolio process and to the date of the proposed liquidation.

b) Internal control

The Directors acknowledge that they are responsible for establishing and maintaining the Company's system of internal control and reviewing its effectiveness. Internal control systems are designed to manage rather than eliminate the failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. They have therefore established an ongoing process designed to meet the particular needs of the Company in managing the risks to which it is exposed, consistent with the guidance provided by the Financial Reporting Council. Such review procedures have been in place throughout the full financial year and up to the date of the approval of the financial statements and the Board is satisfied with their effectiveness.

This process involves a review and robust assessment by the Board of the Company's internal control report and risk matrix and review of the control environment of the Company's service providers to ensure that the Company's requirements are met. Such review and assessment has been carried out throughout the year under review and the Directors continually assess the risks and environment to which the Company is exposed.

The Company does not have an internal audit function. The Board has considered the need for an internal audit function but has decided to place reliance on the systems and internal audit procedures of the Administrator, the Manager, the Investment Manager and the Custodian.

These systems are designed to ensure effectiveness and efficient operations, internal control and compliance with laws and regulations. In establishing the systems of internal control regard is paid to the materiality of relevant risks, the likelihood of costs being incurred and costs of control. It follows therefore that the systems of internal control can only provide reasonable but not absolute assurance against the risk of material misstatement or loss.

The effectiveness of the internal control systems is reviewed annually by the Board and the Audit Committee.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Directors' Report (continued)

For the year ended 30 June 2016

Continuation of the Company

The Company was incorporated in 2004 with a fixed life and an expected winding-up date of 31 March 2012. At an EGM of the Company held on 28 August 2009, a Special Resolution was passed to provide shareholders the right to vote at the Annual General Meeting to be held in 2014 and at every Annual General Meeting thereafter, on whether to continue the business of the US Traded Life Interests Fund of the Company.

The Directors wish to confirm that, as mentioned above, subsequent to the passing of a resolution at the EGM held on 10 October 2016, the Company will shortly be proposing to shareholders the appointment of a liquidator and the voluntary winding-up of the Company.

Auditor

At the date of approval of the financial statements the Directors confirm that:

· so far as each Director is aware, there is no relevant audit information of which the Company's Auditor is unaware; and

· the Directors have taken all steps they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of Section 249 of The Companies (Guernsey) Law, 2008, as amended.

By order of the Board.

CPG Tracy DIW Reynolds

Director Director

14 October 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Corporate Governance Report

For the year ended 30 June 2016

Introduction

The Board is accountable to the Company's shareholders for high standards of corporate governance and this statement describes how the Company applies the main principles identified in the UK Corporate Governance Code ("the UK Code") issued in September 2014. The Governance Code is available from the website of the Financial Reporting Council ("the FRC") at www.frc.org.uk. The Association of Investment Companies ("the AIC") has published its own Code on Corporate Governance ("the AIC Code"), by reference to the AIC Corporate Governance Guide for Investment Companies ("the AIC Guide"), both revised in February 2015, which provide a comprehensive guide to best practice in certain areas of governance where the specific characteristics of investment trusts suggest alternative approaches to those set out in the Governance Code. Both the AIC Code and AIC Guide are available from the AIC website at www.theaic.co.uk and have been endorsed by the FRC which has confirmed that following of the AIC Guide by investment companies should fully meet the obligations under the Governance Code.

This Statement of Corporate Governance forms part of the Directors' Report. All companies with a Premium Listing of equity shares, regardless of whether they are incorporated in the UK or elsewhere (which includes the Company), are required to "comply or explain" against the Code. The day-to-day running of the Company is delegated to various third parties; the overall governance of the Company however remains the responsibility of the Board.

As detailed within the Chairman's Statement and the Directors' Report at the EGM held on 10 October 2016, shareholders voted to change the investment objective and policy of the Company in order to effect a total disposal of the portfolio with the intention thereafter of proposing the voluntary winding-up of the Company. The following corporate governance statement is therefore provided in relation to the financial year under review to 30 June 2016 and for the operations of the Company to the expected date of entering liquidation.

Corporate Governance Statement

Throughout the year ended 30 June 2016 the Company has been in compliance with the Main Principles of the UK Code, and has also complied with the detailed provisions set out in Section 1 of the UK Code, except as set out below.

The UK Code includes provisions relating to:

· The role of chief executive

· Executive remuneration, including the remuneration of executive directors

· Appointment of a senior independent director

As permitted in the preamble to the UK Code, the Board considers these provisions are not relevant to the position of the Company. The Company is an externally managed investment company without executive staff; a senior independent director has not been appointed given that all Directors are independent of the Company and of the key service providers.

On 30 September 2011, the Guernsey Financial Services Commission ("GFSC") issued a Code of Corporate Governance (the "Guernsey Code") which came into effect on 1 January 2012. The GFSC have stated that companies which report against the UK Code or the AIC Code of Corporate Governance (the "AIC Code") are deemed to meet compliance with the Guernsey Code.

The Directors believe the Company to be compliant with the requirements of the UK Listing Authority Listing Rules as regards corporate governance. The Company complies with the corporate governance statement requirements pursuant to the FCA's Disclosure and Transparency Rules by virtue of the information included in the Corporate Governance section of the annual report together with information contained in the Strategic Report and the Directors' Report.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Corporate Governance Report (continued)

For the year ended 30 June 2016

The Board

The Company is overseen by a Board, chaired by Charles Tracy, which comprises 4 non-executive Directors, all of whom have wide experience and are considered to be independent. The Board believes that it is in the shareholders' best interests for the Chairman to be the point of contact for all matters relating to the governance of the Company and as such has not appointed a Senior Independent Director for the purpose of the Code.

The Board meets regularly, normally quarterly, and more frequently as necessary, and retains full responsibility for the direction and control of the Company. The Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that the Board procedures are followed and that applicable rules and regulations are complied with.

The Board is responsible for approval of the Annual and Half-Yearly Financial Results and all other public documents ensuring a balanced and fair approach is adopted which enables shareholders to understand and assess the performance of the Company.

Appointment

The appointment of Directors is considered by the Board as a whole which carries out the functions of the Nominations Committee. The Board regularly reviews its structure, size and composition giving full consideration to succession planning for Directors and keeping under review the leadership needs of the Company.

The Board believes that, as a whole, it comprises an appropriate balance of skills, experience and knowledge. The Board also believes that diversity of experience and approach amongst members is of great importance and it is the Company's policy to give careful consideration to issues of board balance and diversity, including gender diversity, when making new appointments. On appointment, the Manager and the Company Secretary provide all Directors with induction training.

The Articles of Incorporation require that one third, or the number nearest to but not exceeding one third, of the existing Directors must retire and may offer themselves for re-appointment at every Annual General Meeting and that every newly appointed Director must stand for appointment by shareholders at the Annual General Meeting following their appointment. In accordance with the UK Code non-executive directors who have served longer than nine years are also subject to annual re-election. The Board does not consider tenure to determine the independence of a Director and value the experience and knowledge gained through long service. The Board therefore continues to determine that all current directors are independent in character and judgement. In the event that a resolution is passed by shareholders before the end of the calendar year 2016 to place the Company into liquidation, there will not be a requirement to hold an Annual General Meeting in 2016.

Board Meetings

The Board meets at least quarterly. Certain matters are considered at all Board Meetings including the performance of the investments, the LE and policy maturity rates, NAV and share price and associated matters such as asset allocation, risks, strategy, investor relations and industry issues. Consideration is also given to administration and corporate governance matters, and where applicable, reports are received from the Board Committees.

The number of formal meetings of the Board and the Audit Committee held during the financial year and the attendance of individual directors and members of the Audit Committee are shown below:

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Corporate Governance Report (continued)

For the year ended 30 June 2016

Board Meetings (continued)

All Directors of the Company are non-executive. The Board as a whole fulfils the function of the Remuneration Committee and carries out periodic reviews of Directors' fees, after seeking independent advice.

Board Committees

The Board has established a separate Audit Committee. The Board has decided not to establish separate Nominations, Remuneration and Management Engagement Committees as these functions are carried out by the Board as a whole. This includes an annual review of the contracts with the Manager and the Investment Manager and whether they are in the best interests of shareholders.

Performance

The Board reviews its performance and composition on an annual basis in order to assess the effectiveness of the Board, the Audit Committee and the individual Directors. The latest formal process was carried out in late 2014 which incorporated the appraisal of the Chairman which was carried out by the Board as a whole under the leadership of the Chairman of the Audit Committee. While no formal process was adopted in 2015, the Board continually monitors their actions and effectiveness and continues to consider that the performance of all Directors individually, collectively as a Board and collectively as the formally appointed Audit Committee is effective and confirms that each has demonstrated commitment to their roles.

Internal Control

The Board is responsible for establishing, maintaining and monitoring the effectiveness of the Company's system of internal, financial and other controls. The internal financial controls operated by the Board include the authorisation of the investment strategy and regular reviews of the financial results and investment performance. The system of internal financial controls can provide only reasonable, and not absolute, assurance against material misstatement or loss. The Board regularly reviews and evaluates the risks faced by the Company and has put in place mitigating factors where possible. The Company's Investment Manager and Manager have established systems of internal control and provide assurance to the Board that adequate systems are in place in relation to the services provided to the Company.

Significant Contracts

The Board has contractually delegated to SL Investment Management Limited the investment management of the Fund's investments and to Allianz Global Investors GmbH, UK Branch the management of the cash and borrowings. The safe custody of the Fund's investments is managed by Kleinwort Benson (Guernsey) Limited. Wells Fargo Bank in the USA acts as sub-custodian. JTC Fund Solutions (Guernsey) Limited (JTC) bought the fund administration service from Kleinwort Benson in 2015 and took over as service provider to the Company, JTC are therefore contracted to provide the Company's administration and accounting functions and Capita Registrars (Guernsey) Limited its registration function. Since 1 September 2009 the secretarial function has been carried out by Allianz Global Investors GmbH, UK Branch. A summary of the terms of the agreements with SL Investment Management Limited and Allianz Global Investors GmbH, UK Branch are set out in note 5 to the financial statements.

After due consideration of the resources and reputation of each of SL Investment Management Limited and Allianz Global Investors GmbH, UK Branch, the Board believes it is in the interests of shareholders to retain both contracts until such time as the Company enters the liquidation process as detailed in the Chairman's Statement and Directors' Report. The main reasons for this opinion are the extensive knowledge of the US traded life interest market and its valuation, together with the complex financial and investment modelling related thereto and the extensive investment management resources of the Manager and its experience in managing and administering investment trust companies respectively. Upon entering liquidation all current contracts will be terminated.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Corporate Governance Report (continued)

For the year ended 30 June 2016

Independent Advice

The Board recognises that there may be occasions when one or more of the Directors feels it is necessary to take independent legal advice at the Company's expense. The Company has a procedure whereby the Directors are entitled to obtain independent advice where relevant.

Indemnities

To the extent permitted by Guernsey law, the Company's Articles of Incorporation provide an indemnity for the Directors against any liability except such (if any) as they shall incur by or through their own breach of trust, breach of duty or negligence.

During the year the Company has maintained Directors' and Officers' liability insurance which provides insurance cover for Directors against certain personal liabilities which they may incur by reason of their duties as Directors. Upon entering liquidation the Directors' and Officers' liability insurance cover will be converted to a become a 'run-off' policy for the recommended period of six years.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Directors' Responsibilities Statement

For the year ended 30 June 2016

The Directors are responsible for preparing the Annual Financial 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 have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB). 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, International Accounting Standard 1 requires that Directors:

• properly select and apply accounting policies;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

• provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

• make an assessment of the Company's ability to continue as a going concern.

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 (Guernsey) Law, 2008, as amended. 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 the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Guernsey and the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

Each Director confirms to the best of his knowledge that:

· the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company.

· the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties the Company faces.

· the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary to assess the Company's performance, business model and strategy.

By order of the Board.

CPG Tracy DIW Reynolds

Director Director

14 October 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Audit Committee Report

For the year ended 30 June 2016

The principal role of the Audit Committee is to assist the Board in relation to the reporting of financial information, the review of financial controls and the management of risk. The Committee has defined terms of reference and duties and the terms of reference are published on the Company's website, www.allianzgi.co.uk/TLI. The terms include responsibility for the review of the Annual Financial Report and the Half Yearly Report, the nature and scope of the external audit and the findings therefrom and the terms of appointment of the Auditors, including their remuneration and the provision of any non-audit services by them. Where requested by the Board, the Audit Committee provides advice on whether the Annual Financial Report, taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

The Audit Committee is also responsible for considering those matters that have enabled the Board of Directors to make its statement on Going Concern on page 23.

On 10 October 2016 shareholders resolved to the change the investment objective and policy to effect the disposal of the portfolio, the Company will therefore propose in due course the voluntary winding-up of the Company. The following report on the activities of the Audit Committee is therefore provided in relation to the financial year under review to 30 June 2016 and for the operations of the Audit Committee to the future date of entering liquidation.

Composition

The Board reviews the composition of the Audit Committee and considers that collectively the Committee members have sufficient recent and relevant financial experience to discharge fully their responsibilities. As this is a small company, the Committee comprises all the directors of the Company. I am the Chairman of the Committee, and as you will see from my biography on page 5, I am a Fellow of the Institute of Actuaries and was formerly Chief Executive of a major life assurance company. The biographies of the other members of the Audit Committee can also be found on page 5.

Role

The Audit Committee determined that the significant issues to be considered were the valuation of the Company's portfolio of TLIs and its cash flow requirements. The valuation of the Company's portfolio of TLIs is regularly reviewed by the Board in conjunction with the Investment Manager and, where appropriate, recommendations in relation to the basis of valuation are made to the Board. The risk of cash flow difficulties was significantly reduced by the extension of the revolving credit facility of up to US$10,000,000 with AIB Group (UK) PLC to 31 March 2018.

More details on the valuation can be found in the Chairman's Statement and the Investment Manager's Review. The external auditors explained the results of their review of the valuations. On the basis of their audit work there were no adjustments that were material in the context of the financial statements as a whole.

Risk Assessment and Significant Financial Statement Issues

The Company's risk assessment process and the way in which significant business risks are managed is a key area of focus for the Committee. The work of the Audit Committee is driven primarily by the Company's assessment of its principal risks and uncertainties as set out on page 18 of the Strategic Report, and it receives regular reports from the Investment Manager and the Manager on the Company's risk evaluation process and reviews changes to significant risks identified.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Audit Committee Report (continued)

For the year ended 30 June 2016

Risk Assessment and Significant Financial Statement Issues (continued)

Prior to effecting the disposal of the portfolio, the principal risks to the Company's valuation and financial statement were mortality and cost of insurance increases. However, it was accepted that mortality risk was fundamental to the nature of the investments and that such had been the case since launch. The Audit Committee reviews LE expectations and mortality tables on a regular basis and is confident in the valuations recommended to and approved by the Board. The principal risk to the Company during the disposal process is the financial stability of the purchasers, this risk has however been mitigated as far as possible by the sale proceeds being placed in escrow accounts which will be transferred to the Company on the transfer of the policies to the purchasers.

The Audit Committee continued to consider the process for managing the risk of the Company and its service providers. Risk management procedures for the Company, as detailed in the Company's risk matrix, were reviewed and approved by the Audit Committee.

Audit Process

The Audit Committee continues to consider that the Company does not require an internal audit function as it delegates its day-to-day operations to third parties from whom it receives internal control reports. Such reports from third party auditors on the internal controls maintained on behalf of the Company by the Manager or directly to the Company were reviewed during the year.

The Audit Committee reviewed the performance of the auditors and its independence and tenure. Deloitte LL.P's first year of audit was for the period ended 30 June 2005. In 2014, the Company put the audit out to tender. Following presentations from a number of international auditing firms, including the Company's present auditors, the Board, following a recommendation from the Audit Committee, decided to retain Deloitte LL.P as the Company's auditors. The Company will in due course propose to shareholders the voluntary winding-up of the Company and if this is supported a further audit will not be required.

The Audit Committee has adopted a formal framework in its review of the effectiveness of the external audit process and audit quality which includes the following areas: the audit partners with particular focus on the lead audit engagement partner; the audit team; planning and scope of the audit and identification of areas of audit risk; the execution of the audit; the role of management in an effective audit process; communications by the auditor with the Audit Committee; how the auditor supports the work of the Audit Committee; how the audit contributes insights and added value; a review of independence and objectivity of the audit firm and the quality of the formal audit report to shareholders.

To assess the effectiveness of the external audit process the Audit Committee will review:

· the Auditor's fulfilment of the agreed audit plan and variations from it;

· discussions or reports highlighting the major issues that arose during the course of the audit;

· feedback from other service providers evaluating the performance of the audit team;

· arrangements for ensuring independence and objectivity; and

· robustness of the Auditor in handling key accounting and audit judgements.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Audit Committee Report (continued)

For the year ended 30 June 2016

Non-Audit Services

The Audit Committee reviews the need for non-audit services and authorises such on a case-by-case basis, having regards to the cost effectiveness of the services and the independence and objectivity of the Auditors. There were no non-audit fees incurred in the year under review (2015: nil)

The Audit Committee considers Deloitte LL.P to be independent of the Company.

Whistleblowing

As the Company has no employees it does not have a formal policy concerning the raising, in confidence, of any concerns about possible improprieties, whether in matters of financial reporting or otherwise, for appropriate independent investigation. The Audit Committee has, however, reviewed and noted the Manager's and Investment Manager's policy on this matter.

Year ended 30 June 2016

In finalising the Annual Financial Report for recommendation to the Board for approval, the Audit Committee has satisfied itself that the Annual Financial Report taken as a whole is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

The Company's external auditors attended the meeting of the Audit Committee at which the Annual Financial Report was reviewed and they reported on their audit approach and work undertaken, the quality and effectiveness of the Company's accounting records and their findings in relation to the Company's statutory audit.

The Audit Committee reviewed and approved the performance of the Auditors at this meeting.

D I W Reynolds

Chairman of the Audit Committee

14 October 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Independent Auditor's Report to the Members of

Alternative Asset Opportunities PCC Limited

For the year ended 30 June 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Independent Auditor's Report to the Members of

Alternative Asset Opportunities PCC Limited (continued)

For the year ended 30 June 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Independent Auditor's Report to the Members of

Alternative Asset Opportunities PCC Limited (continued)

For the year ended 30 June 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Independent Auditor's Report to the Members of

Alternative Asset Opportunities PCC Limited (continued)

For the year ended 30 June 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Independent Auditor's Report to the Members of

Alternative Asset Opportunities PCC Limited (continued)

For the year ended 30 June 2016

David Becker

for and on behalf of Deloitte LLP

Chartered Accountants and Recognised Auditor

St. Peter Port, Guernsey

14 October 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Statement of Comprehensive Income

For the year ended 30 June 2016

The revenue column of this statement is the revenue account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

The notes on pages 44 to 58 are an integral part of these financial statements.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Statement of Financial Position

As at 30 June 2016

These financial statements were approved by the Board of Directors on 14 October 2016.

Signed on behalf of the Board.

CPG Tracy DIW Reynolds

Director Director

14 October 2016

The notes on pages 44 to 58 are an integral part of these financial statements.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Statement of Changes in Redeemable Participating Preference Shareholders' Funds

For the year ended 30 June 2016

The notes on pages 44 to 58 are an integral part of these financial statements.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Statement of Cash Flows

For the year ended 30 June 2016

The notes on pages 44 to 58 are an integral part of these financial statements.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Portfolio of Investments

As at 30 June 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Portfolio of Investments (continued)

As at 30 June 2016

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Notes to the Financial Statements

For the year ended 30 June 2016

1 Principal activity

The Company was registered in Guernsey on 27 February 2004 as a closed-ended protected cell company established with one cell known as the US Traded Life Interests Fund (the "Fund" or "Cell"). The Company has been authorised by the Guernsey Financial Services Commission as an authorised closed-ended investment scheme. The redeemable preference shares (the "shares") in the Company have been admitted to the Official List of the Financial Conduct Authority with a premium listing and to trading on the London Stock Exchange's Main Market for Listed Securities.

The Company's original objective in respect of the Fund was to provide investors with an attractive capital return through holding to maturity (or until the end of the life of the Fund) a diversified portfolio of US Traded Life Interests ("TLIs"); as approved by Shareholders on 10 October 2016, the new investment objective is, in summary, to conduct a sale of its portfolio and thereafter to return cash to Shareholders through a members' voluntary winding-up, or other restructuring, subject to the further approval of Shareholders.

2 Principal Accounting Policies

(a) Basis of preparation

Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (SORP) issued in January 2009 by the Association of Investment Companies.

Basis of measurement

The financial statements have been prepared under the historical cost convention as modified by the revaluation of investments, as detailed below under note 2(b).

The financial statements have been prepared on a total company basis and not on a cell-by-cell basis as there is currently only one cell. The only non-cellular assets and liabilities are in respect of the two management shares of no par value issued at £1 each fully paid represented by cash at bank. As they are immaterial they have been excluded from the financial statements.

Functional and Presentational Currency

The financial information shown in the financial statements is shown in sterling, being the Company's functional and presentational currency.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years. Such judgements and key sources of estimation uncertainty include the valuation of investments and the going concern assumption, which are discussed in note 2(b) and 2(c) respectively.