Final Results

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Annual Financial Report Announcement

For the year ended 30 June 2014

The Directors announce the Annual Financial Report for the year ended 30 June 2014.

The Company has today, in accordance with DTR 6.3.5, submitted its Annual Financial Report for the year ended 30 June 2014 to the National Storage Mechanism and it will shortly be available for inspection at http://www.hemscott.com/nsm.do. The Annual Financial Report is available to be viewed on or downloaded from the Company's website at www.allianzgi.co.uk/TLI .

The financial information set out in this announcement does not constitute the Company's statutory accounts for the year ended 30 June 2014, but is derived from those accounts. Statutory accounts for the year ended 30 June 2014 will be delivered to Shareholders during September 2014. The auditors have reported on the accounts and their report was unqualified. The audit report draws attention to the inherent uncertainty in the valuation of the Company's Traded Life Interests.

The financial statements have been prepared in accordance with International Financial Reporting Standards. The Company will publish full financial statements that comply with International Financial Reporting Standards in September 2014. This announcement has been prepared using accounting policies consistent with those set out in the Company's annual report and financial statements for the year ended 30 June 2014.

The Annual General Meeting of the Company will be held on 12 November 2014.

Peter Ingram

Company Secretary

Telephone number: 020 7065 1467

Melissa Gallagher

Head of Investment Trusts, Allianz Global Investors

Telephone number: 020 7065 1539

15 September 2014

199 Bishopsgate

London

EC2M 3TY

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investor Information

For the year ended 30 June 2014

General information

Alternative Asset Opportunities PCC Limited (the "Company") was registered on 27 February 2004 in Guernsey, as a 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, 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. 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.

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 (terminating on 31 March 2012), to offering shareholders annual continuation votes from the Company's 2012 Annual General Meeting onward.

With effect from 1 September 2009, the Company has been managed with a view to being approved as an Investment Trust within the meaning of the Corporation Tax Act 2010, and has been resident in the UK for tax purposes from that date.

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 objective

The Company's objective in respect of the Fund is to provide investors with an attractive capital return through investment predominantly in a diversified portfolio of US Traded Life Interests ("TLIs").

Investment policy and strategy

The Company has 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 are Whole-Of-Life policies or Universal Life policies. No viatical policies (that is, a policy on the life of an insured who is terminally ill and with a life expectancy of less than 2 years) have been acquired.

The TLIs acquired are policies issued by a range of US life insurance companies. Each underlying life insurance company had an A.M. Best or a Standard & Poor's credit rating of at least "A" at the time of acquisition of the relevant policy. Page 38 discloses the current ratings against the Company' exposure based on year-end valuation. A.M. Best is a US credit rating agency which provides the most comprehensive coverage of the US life company sector. Not more than 15 per cent. of the gross assets of the Fund, at the time of purchase, have been invested in life policies issued by any single US life insurance company or group.

The Board has overall responsibility for the assets of the Fund, in accordance with the investment objective and policy, and subject to advice received from the Investment Manager. At present there is no intention to acquire further policies, but sales of policies may occasionally be made when appropriate. The Company has the ability to incur borrowings to be applied in meeting TLI acquisition costs, premium payments and expenses. The Company's borrowings as at 30 June 2014 were US$nil (£nil) (2013: US$5.9 million (£3.9 million)). The terms of these borrowings require the Company to utilise the net proceeds of maturing TLIs to repay borrowings, but, subject to any such covenants, the Company may return capital to shareholders either by means of the purchase of shares in the market as authorised by shareholders resolution or by return of capital in accordance with the Articles.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investor Information (continued)

For the year ended 30 June 2014

Pending the return of capital to shareholders, the cash proceeds of TLIs 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.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investor Information (continued)

For the year ended 30 June 2014

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investor Information (continued)

For the year ended 30 June 2014

Directors

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

Charles Tracy, Chairman, (aged 68) has over 30 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 (aged 70) is a former Chief Executive of Commercial Union Life Assurance Company and a former director of Liverpool Victoria Friendly Society. He is a director of The Equitable Life Assurance Society, and 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 61) has over 35 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 20 years and was formerly a director of Economic Lifestyle Property Investment Company Limited, a fund previously listed on the Channel Islands Stock Exchange. He is UK resident.

John Scott (aged 62) 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 for a range of specialist investment products.

The Manager

Allianz Global Investors Europe 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 £1.1 billion of such assets under management in a range of investment companies and investment trusts as at 30 June 2014. The Manager is responsible for managing the cash and fixed interest holdings of the Fund and foreign currency hedging.

Non Mainstream Pooled Investments

The Company is an investment trust and therefore its shares are not subject to the Financial Conduct Authority's (FCA) rules relating to the restrictions on the retail distribution of unregulated collective investment schemes and close substitutes which came into effect on 1 January 2014. 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

Financial Highlights

For the period from 1 July 2013 to 30 June 2014

Dividends

The Directors do not propose a dividend for the year ended 30 June 2014 (2013: nil).

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Chairman's Statement

For the year ended 30 June 2014

Introduction

The twelve months to 30 June 2014 have transformed the outlook for the Company. The placing and open offer in October 2012, coupled with the rate of policy maturities since that date have at last enabled the Board to start to return money to shareholders by means of a B Share issue and redemption, approved at an Extraordinary General Meeting in July 2014 and resulting in a distribution in August of 2p per share. This in turn has depended on a renegotiation of our borrowing arrangements with AIB Group to enable distributions, within a facility which now runs to March 2016. Not only has the rate of maturities been satisfactory, the Board has also undertaken a very thorough re-evaluation of life expectancies. This should enable shareholders to have an enhanced level of confidence in valuations of the policies that remain in the portfolio. The major negative factor in the year has been the strength of sterling, which appreciated by 12.7%, although as at the time of writing the rate had fallen back somewhat to show a gain of approximately 6.7%.

This report and accounts contains for the first time a new section entitled 'Strategic Report' which contains information required by the UK Code of Corporate Governance and the UK Listing Authority's Disclosure and Transparency Rules.

Portfolio developments

A summary of portfolio maturities since inception is given in the following table:

During the year to 30 June 2014, 13 policy maturities were identified, with a total face value of US$ 17.4 million. This compares with 7 policies with a face value of US$5.7 million in the year to 30 June 2013, and 38 policies with a face value of US$68.1 million in the period from the Company's launch to 30 June 2012. Unlike the preceding year, maturity proceeds significantly exceeded cash outflows for premiums, although it should be noted that the average size of the maturing policies in the year (US1.3 million) was considerably less than in the year to 30 June 2012 (US$2.1 million). There has been one policy maturity since the year end, with a face value of US$2.5 million, proceeds of which are awaited.

The realised gains on maturing policies amounted to approximately US$10.2 million in the year, or 8.7p per share. Allowing for premiums paid, policy re-valuations and overheads the net assets per share would at fixed exchange rates have risen by 1.9p, but because of the large movement in the £/$ rate, the overall result for the year was a reduction in net assets per share of 3.78p.

As at 30 June 2014 there were a total of 89 policies (78 lives) in the portfolio, with a face value of US$142.5 million and a valuation of US$50.2 million. There have been no policy acquisitions since completion of the original policy purchase programme, but premiums continue to be paid on policies in force, amounting to US$8.4 million during the year.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Chairman's Statement (continued)

For the year ended 30 June 2014

Portfolio developments (continued)

Following a very satisfactory flow of funds from policy maturities and given greater flexibility to make capital distributions with the new revolving credit facility agreement with AIB Group (UK) PLC signed on 31 March 2014, shareholder approval was given at an EGM held on 24 July 2014 to an amendment to the Articles of Incorporation. This has permitted the issue and redemption of 72 million B Shares, amounting to a capital distribution of 2p per share, on 8 August 2014.

The principal issues facing the Company, that is to say valuation, credit risk, gearing and hedging are discussed below. The topic of gearing is dealt with first.

Gearing

The Board's policy has been to pay down borrowings whenever possible; in previous years the level of borrowings and our loan covenants have provided us with no alternative to this. During the year the Company's total borrowings decreased from US$5,939,000 to nil and a cash surplus has since enabled a distribution of 2p per share within the terms of our new lending covenants. This was as a result of the policy maturity receipts totalling US$17.4 million.

On 31 March 2014, the Company agreed a new revolving credit facility of up to US$10 million with AIB Group (UK) PLC which provides financing for the period to 31 March 2016.

Since the year end, and allowing for the distribution of 2p per share, the receipt of cash from policy maturities has resulted in a net positive cash position of US$0.9 million as at 31 August 2014.

Valuation

The current Net Asset Value as released to the market is a Directors' valuation, prepared with the assistance of the Investment Manager, which uses estimates of life expectancy to arrive at a table 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.

Firms providing LEs to investors have in recent years significantly reappraised their methodology, generally resulting in more conservative (i.e. longer) LE estimates. As explained in a previous report, the Board has also decided to use three LE assessors and to adopt the average of the three LEs; the new assessor is typically more conservative in its assessments. Coupled with this, the Board has now completed a thorough review of all LEs, the details of which are set out below. Recent maturities broadly correspond to these new LEs. On this basis, the Board has considerable confidence in the reliability of the LEs used in the June valuation.

The portfolio has now been split into three parts: policies with routinely updated LEs, accounting for 80% of the portfolio by face value; small policies (face value under US$600,000) which are not economic to value; and policies for which it is not possible to obtain updated medical records.

The programme of updating life expectancy assessments for the first group of policies continued throughout the year. The LE update programme was used to derive an LE adjustment factor for policies without a recent LE in 2013, however further LE assessments have been obtained for 24 lives, representing 30 policies and US$42m in face value. Within the first group, as at the reporting date 29% of the portfolio was valued using LEs obtained during 2014 and 49% using LEs obtained during 2013. The final 2% of the portfolio had not received up to date LEs as at 30 June 2014, although these have subsequently been

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Chairman's Statement (continued)

For the year ended 30 June 2014

Valuation (continued)

received and incorporated into the valuation. On average the updated LEs were in line with the estimated LEs based upon the 2013 adjustment factor, which has now served its purpose and is no longer used. 

For the remaining two groups of policies, as already announced, the Board decided to change the basis of the valuation LEs to those obtained from the Valuation Basic Table (VBT), the standard population mortality table in the US. Together these policies had a face value of US$28.2 million, representing 20% of the total portfolio. The impact of the change in valuation was a write-down at the end of May 2014 NAV of US$0.58 million, being the equivalent of 0.5 pence per share.

Previous reports have commented on the choice of a 12% discount rate (IRR) used in arriving at valuations, intended to correspond to the IRR for similar policies in the market on a willing buyer/willing seller basis. While data on comparable sales is still difficult to obtain, the Board has conducted two exercises with independent market participants, firstly to obtain bids on a representative selection of policies and secondly to test the viability of selling the entire portfolio. These exercises suggest that the Board's valuations correspond closely to market prices and confirm that policies such as the Company holds are attractive to other market participants.

As in previous periods, the tables below aim to give investors an appreciation of the effects on valuation of differing assumptions as to both LE and IRR.

- The first line of NAVs in the table uses the 'Latest LE' assumption, that is to say either an LE based on a recently updated assessment (obtained on or after 1 April 2013), or for the remaining policies an LE based on the 2008 Valuation Basic Table. The average LE, is shown for reference (4.8 years). NAV is then shown at four different discount rates, ranging from 10% to 20%.

- The second line shows the effect of an increase of one year in the valuation LEs.

- The third line shows the effect of a decrease of one year in the valuation LEs.

- Finally, the fourth line shows the outcome of assuming all LEs are based on the current table of life expectancies for the general population, the 2008 Valuation Basic Table, i.e. ignoring LE assessments. This shows that the portfolio LEs are now marginally longer than the general population.

Sensitivity Matrix

Net Asset Value in pence per share on various assumptions as at 30 June 2014:

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Chairman's Statement (continued)

For the year ended 30 June 2014

Valuation (continued)

Credit Risk

As previously reported in the half-year statement, AM Best downgraded Aviva Life and Annuity Company and its wholly owned subsidiary Aviva Life and Annuity Company of New York. Both companies were downgraded from A- to B++ during the period. At year end the Company held three Aviva policies with a total face value of $4.3m equating to 3.0% of the portfolio.

There were no other AM Best rating changes during the period that affected the portfolio.

As at the year end 96.8 % of the Company's policies by value were issued by companies with an AM Best rating of 'A' or better. This figure has not changed significantly for some time.

Hedging

The Company's original Investment Policy stated that it was the intention to hedge the US dollar exposure. Following the removal of this statement as part of the changes to the policy adopted in September 2011, the Company's outstanding foreign exchange positions were closed out.

From 30 March 2012, the Company has operated on an unhedged basis, and there is no current intention to initiate any further currency hedges.

During the year, the £/US$ exchange rate strengthened from 1.5167 as at 30 June 2013 to 1.7098 as at 30 June 2014. As the bulk of the portfolio assets are denominated in US$, this resulted in a net loss for the portfolio of 12.7% or approximately 5.7p per share.

Outlook

The Board is delighted that it has been able to return some funds to shareholders. On current LE projections such distributions should now become a routine feature in the future. The Board will decide, based on the level of maturities and the availability of credit facilities, when and in what amount distributions can be made.

There is a greater level of TLI market activity and thus, although it remains the intention of the Board to hold the majority of policies to maturity, the possibility of policy sales will continue to be kept under review.

Charles Tracy

Chairman

12 September 2014

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investment Manager's Review

For the year ended 30 June 2014

Portfolio Overview

During the twelve month period from 1 July 2013 to 30 June 2014 there were 13 confirmed policy maturities with a total face amount of $17.4m. The 13 maturities related to 12 individual lives, 5 of which were male and 7 were female. As at 30 June 2014, 89 policies remained within the fund's portfolio with exposure to 78 individual lives.

Cumulatively, as of 30 June 2014 there have been 58 policy maturities across 49 lives since inception. Proceeds received from all maturities total $92.1m, realising a $40.2m gain. Thirteen policies have been sold since inception of the Company, generating proceeds of $11.2m, realising a $3.9m loss. No policies were sold during the reporting period.

One further maturity (a male life insured) has been identified since the year end. This policy has a death befit of $2.5m, and will add approximately 1.3p to the NAV per share once formally certified.

Portfolio Summary

Life Group (Parent Company) Distribution (Top 5)

Credit Quality Distribution by Holding Life Company

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investment Manager's Review (continued)

For the year ended 30 June 2014

Distribution of Life Expectancy Estimates

The following table shows the distribution by death benefit 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 and the total death benefit in each group. The LEs are the valuation LEs used for the 30 June 2014 valuation.

It is important to note that the LE is an average of the estimated length of 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 $17.4m of face value were realised during the year.

Premium Payments

Premiums remain the largest draw on the Company's cash. As a result, it is important that premium streams are optimised such that AAO pays the minimum premium required to meet the cost of insurance required by the life company. SL Investment Management continues the ongoing review of all policy statements to identify any scope for further optimisation of the premium payment schedules. Without further maturities, the expected cost of premiums for the twelve months to 30 June 2015 is approximately $8.7m.

Policy Expiry Date Analysis

Written into the contract for some policies is an expiry date (a 'term out' 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 43 such policies in the portfolio. The earliest expiry date is May 2020.

There are 7 policies with extension options to age 115, and 3 policies with 'partial' extensions - whereby the policy term is extended until death, but on a reduced death benefit after age 100.

36 policies in the portfolio have no expiry date.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investment Manager's Review (continued)

For the year ended 30 June 2014

Policy Expiry Date Analysis (continued)

A summary of the policies in the portfolio as at 30 June 2014 is as follows:

For the 43 policies with an expiry date, the key metrics are as follows:

Period Review and Outlook

This period witnessed the highest volume of maturities recorded in any reporting period since the inception of the Company. The average face value of the 13 policy maturities during the period was $1.3m; which is slightly lower than the $1.6m average face value for the portfolio as a whole.

There remains considerable variation in the size of individual face amounts remaining in the portfolio. Therefore short term performance will be driven not just by the frequency of maturities, but also the size of the policy maturities. The table below illustrates the distribution of the 78 lives in the portfolio by face value as at 30 June 2014. Where a life insured represents more than one policy in the portfolio, the life is categorised according to the total face amount relating to that life:

Note: NDB = Net Death Benefit

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Investment Manager's Review (continued)

For the year ended 30 June 2014

Period Review and Outlook (continued)

It can be seen that a significant proportion of the total death benefit is represented by a relatively small proportion of lives. 20 lives (26% of total lives) account for 57% of the total face value and 58% of the reported valuation.

None of the major LE underwriters made significant adjustments to their life expectancy assessments during the period. Nevertheless, the Board has continued with a programme of LE updating throughout the year, with new LEs obtained for policies representing $42m in face value during the period. At the reporting date, policies representing 75% of total face value had LEs obtained within the previous 12 months.

As expected, new investment capital entered the market during the year, resulting in increased trading activity in both the secondary and tertiary markets. An annual survey compiled from information obtained through public records shows that the number of secondary market life settlement transactions increased year on year, for the first time since the financial crisis. The face amount traded in 2013 was $2.57bn compared to $2.13bn in 2012. Note that these figures do not include tertiary transactions, which are not reported publicly.

The increased demand has put downward pressure on market IRRs and prices have increased as a result. There are now indications that buyers are starting to widen their purchasing parameters in the hope that this will improve their bid success rate. Policies where the insured age is below 70 and the life expectancies longer than 10 years are now being considered as purchasers look to deploy their capital more quickly to avoid cash drag in their funds.

The total death benefit of the policies held in the portfolio is $142.5m, versus a prevailing valuation of $50.2m. The potential for investment gains by allowing policies to mature is therefore evident. The magnitude and timing of gains will ultimately depend on the actual mortality experience realised over the coming years. With a comfortable liquidity position, the Company is well placed to deal with any short-term lulls in maturities without becoming a forced seller of policies.

However market conditions will continue to be monitored closely to identify any favourable sales opportunities, should they arise. The average life insured age for policies seen in the market is approximately 83 years. Therefore with an average life insured age of over 90 years, the Company holds something of a unique portfolio compared with what is generally available in the market. To build a portfolio from scratch that resembled the age and LE profile seen in AAO would take an investor a significant amount of time and effort. Therefore the portfolio could be attractive to a potential investor that is specifically targeting policies of older lives with the shorter LEs associated with such lives.

SL Investment Management Limited

12 September 2014

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Manager's Review

For the year ended 30 June 2014

Borrowings and investments

The previous loan facility with Allied Irish Banks expired on 31 March 2014. A new revolving credit facility agreement has been signed for a period of two years with AIB Group (UK) PLC until 31 March 2016. As at 30 June 2014, the Company had a nil balance on the US$10 million available under this new facility. This compared to the balance of US$5,939,000 drawn down as at 30 June 2013.

The terms of the new facility have provided more flexibility for the Company to make capital distributions to shareholders, subject to the availability of sufficient surplus cash. As a result, the Company was able to make a capital distribution of 2p per share to Shareholders on 8 August 2014 (see Note 15 for further details).

During the year, the Company drew down US$6,000,000 under the previous facility with AIB and repaid US$12,065,000 as a result of policy maturities.

US dollar exposure

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

Allianz Global Investors Europe GmbH, UK Branch

12 September 2014

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Strategic Report

For the year ended 30 June 2014

Principal Activities and Business Review

The principal activity of the Company is to carry on business as an investment trust. 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 Europe GmbH, UK Branch (the " Manager")

Investment Objective

The Company's investment objective is to provide shareholders with an attractive capital return through investment predominantly in a diversified portfolio of US Traded Life Interests ("TLIs").

Performance

The portfolio of investments at the year end is set out on page 38 and more information is set out in the Investment Manager's Review on pages 10 to 13. In the year ended 30 June 2014, the Company's net asset total return was -7.83%. Further details on future trends and factors that may impact on the future performance of the Company are included in the Chairman's Statement and the Investment Manager's Review.

Results and Dividends

Details of the Company's results are shown in the Financial Highlights on page 5. The revenue reserve remains in deficit, and accordingly no dividend is proposed in respect of the year ended 30 June 2014 (2013-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. On 8 August 2014 the Company made a capital distribution 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, amounting to a sum of 2.0p per Share and totalling £1,440,000 in aggregate.

Monitoring Performance-Key Performance Indicators

The key performance indicators (KPIs) shown below have been identified by the Directors to determine the progress of the Company and a record of the measures, with comparatives, is disclosed in the Financial Highlights on page 5:

· Net asset value total return

· Share price (capital return)

· Premium or discount to net asset value

· Mortality experienced compared with that expected by a standard mortality table adjusted for regularly assessed life expectancies of policyholders.

At each Board meeting, the Directors consider a number of performance measures, including the KPIs to assess the Company's success in achieving its investment objective.

The Board considers the performance measures over various time periods.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Strategic Report (continued)

For the year ended 30 June 2014

Principal Risks and Uncertainties

The principal risks identified by the Board are set out below, together with information about the actions taken to mitigate these risks. A full set of risks is reviewed by the Board at least twice a year.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Strategic Report (continued)

For the year ended 30 June 2014

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

12 September 2014

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Directors' Report

For the year ended 30 June 2014

The Directors have pleasure in submitting their Annual Financial Report for the year ended 30 June 2014 with comparatives for the year ended 30 June 2013. Information pertaining to the business review is now included in the Strategic Report on pages 15 to 17.

Revenue, capital and dividends

The Statement of Comprehensive Income set out on page 34 shows a revenue deficit for the year amounting to £774,514 (2013: revenue deficit for the year £1,127,775). There was a capital deficit for the year amounting to £1,946,705 (2013: capital deficit for the year £6,179,778). The Directors have not paid an interim dividend (2013: nil) and do not propose the payment of a final dividend for the year (2013: nil).

Assets

At the year end the net assets attributable to the Shares were £32,186,259 (2013: £34,907,478). Based on this figure the net asset value per Share in the Fund was 44.7p (2013: 48.5p).

Share capital

During the year no Shares were issued or repurchased.

The new provisions in the Company's Articles of Incorporation enable the Directors of the Company to distribute cash to Shareholders through the issue and redemption of B Shares. Each time the Board resolves to make such a distribution, the Company is able to announce a bonus issue of B Shares on a pro rata basis. Immediately upon being issued, deemed fully paid, the B Shares can be redeemed for the amount deemed paid up and cash proceeds then be paid to Shareholders.

On 8 August 2014 72,000,000 B Shares were issued 1 for 1 pro rata to Shareholders and redeemed for the amount deemed paid up and the cash proceeds were paid to Shareholders amounting to £1,440,000.

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:

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

Crest registration

Shareholders may hold Shares in either certificated or uncertificated form.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Directors' Report (continued)

For the year ended 30 June 2014

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 2014 and at the date of this Report appear on page 4 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 2014, were as follows:

*235,000 shares are non-beneficial interest

Both Mr C P G Tracy and Mr D I W Reynolds have served as Directors for over nine years. Under the provisions of the Code the Board considers that Mr C P G Tracy and Mr D I W Reynolds remain independent, notwithstanding the fact that both have served as Directors over nine years. Thus both Mr C P G Tracy and Mr D I W Reynolds are retiring at the Annual General Meeting and offer themselves for annual re-election as Directors.

The Board believes that Mr C P G Tracy and Mr D I W Reynolds, who have both served for over nine years, are both committed to their roles as non-executive Directors and that their re-election would be in the interests of the Company.

The emoluments of the Directors for the year were as follows:

*Includes one-off additional payments of £5,000 per Director to reflect the extra work done during the year in relation to the share issue and related matters.

The figures above represent emoluments earned as Directors during the relevant financial year. The Directors receive no remuneration or benefits from the Company other than the fees stated above.

In the year to 30 June 2014 Directors were paid at the rate of £15,000 per annum with the Chairman of the Board receiving an extra £7,500 per annum and the Chairman of the Audit Committee an extra £2,500 per annum. Per note 6 to the financial statements the Directors' fees and expenses of £83,991 (2013: £92,948) included allowable expenditure of £2,796 (2013: £4,236) and employers' national insurance.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Directors' Report (continued)

For the year ended 30 June 2014

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 the publication twice yearly of Interim Management Statements.

All shareholders are encouraged to participate in the Company's Annual General Meeting, which is being held this year on 12 November at 1.00pm. All Directors normally attend the Annual General Meeting, at which shareholders have the opportunity to ask questions and discuss matters with the Directors, the Manager and the Investment Manager.

Accountability and audit

a) Statement of going concern

The Board considered carefully the issue of 'going concern', specifically in relation to the availability of funding. On 31 March 2014, the Company signed a new revolving credit facility agreement of up to US$10 million with AIB Group (UK) PLC up to 31 March 2016, which will cover the Company's cash flow requirements at least until 1 October 2015.

Total drawn borrowings under the new revolving credit facility agreement with AIB Group (UK) PLC decreased to nil as at 30 June 2014 from circa US$5.9 million as at 30 June 2013. Since there was a nil balance drawn down as at 30 June 2014 the asset cover was not applicable but the equivalent figure as at 30 June 2013 was 9.4 times.

The Board has considered the position should AIB Group (UK) PLC not renew the agreement beyond 31 March 2016. Acknowledging that this might involve the forced sale of policies in an illiquid market, the Board is nevertheless confident that the sales required to cover outstanding borrowings could be completed. To the extent that the prices achieved did not match those in the valuation, the net asset value of the Company could be adversely affected, but the Company would remain a going concern. The Board has further considered the effect of the continuation vote in their assessment.

Accordingly, the Directors have adopted the going concern basis for the preparation of these financial statements.

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 Turnbull Committee. 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 by the Board of the Company's internal control report and review of the control environment within the Company's service providers to ensure that the Company's requirements are met.

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 Administrator's, Manager's, Investment Manager's and Custodian's systems and internal audit procedures.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Directors' Report (continued)

For the year ended 30 June 2014

Accountability and audit (continued)

b) Internal control (continued)

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.

Continuation of the Company

The Company was incorporated in 2004 with a fixed life with an expected winding up date of 31 March 2012. At an Extraordinary General Meeting of the Company held on 28 August 2009, a Special Resolution was passed by shareholders to adopt a new Memorandum and Articles of Incorporation. As a result, Article 44.1 of the Company's Articles of Incorporation now gives 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 draw Shareholders' attention to Resolution 6 in the Notice of Annual General Meeting, which proposes that the business of the US Traded Life Interests Fund of the Company be continued until the Annual General Meeting to be held in 2015. The Directors have no reason to believe that the continuation vote will not be passed at the forthcoming Annual General Meeting.

Auditor

A resolution to re-appoint Deloitte LLP as Auditor will be proposed at the next Annual General Meeting.

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.

JPHS Scott DIW Reynolds

Director Director

12 September 2014

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Corporate Governance Report

For the year ended 30 June 2014

Applicable Corporate Governance Codes

The UK Corporate Governance Code ("the Code") was revised and published in September 2012 and applies to accounting periods commencing on or after 1 October 2012. 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.

Throughout the year ended 30 June 2014 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 Code or the AIC Code of Corporate Governance (the "AIC Code") are deemed to meet compliance with the Guernsey Code.

Corporate Governance Statement

The Directors believe that the Company has complied throughout the year with the Main Principles of the UK Code where appropriate, and that it has also complied with the detailed provisions of the UK Code, except in so far as they relate to the role of the chief executive, the remuneration of executive staff and the appointment of a senior independent director; it has explained the reasons for non-compliance above. On that basis 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.

The Board

The Board meets regularly, normally quarterly, and more frequently if necessary, and retains full responsibility for the direction and control of the Company.

The Company is overseen by a Board comprising four 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 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 appointment of Directors is considered by the Board which carries out the functions of the Nominations Committee. One third, or the number nearest to but not exceeding one third, of the Directors must retire and offer themselves for re-appointment at each subsequent Annual General Meeting.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Corporate Governance Report (continued)

For the year ended 30 June 2014

The Board (Continued)

On appointment, the Manager and the Company Secretary provide all Directors with induction training.

The Board reviewed its performance and composition during the year, and was satisfied on both counts. In addition, it is considered that the performance of all Directors continues to be effective and that they have demonstrated commitment to their roles.

In order to review the effectiveness of the Board, the Committees and the individual Directors, the Chairman carried out a thorough appraisal process in 2014 in respect of the year under review. The appraisal of the Chairman was carried out by the Board as a whole under the leadership of the Chairman of the Audit Committee.

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 has contractually delegated to SL Investment Management Limited the investment management of the Fund's investments and to Allianz Global Investors Europe 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. Kleinwort Benson (Channel Islands) Fund Services Limited are 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 Europe GmbH, UK Branch.

A summary of the terms of the agreements with SL Investment Management Limited and Allianz Global Investors Europe GmbH, UK Branch are set out in note 5 to the financial statements. After due consideration of the resources and reputation of SL Investment Management Limited, the Board believes it is in the interests of shareholders to retain the services of SL Investment Management Limited for the foreseeable future. The main reasons for this opinion are their extensive knowledge of the US traded life interest market and their valuation together with the complex financial and investment modelling related thereto.

After due consideration of the resources and reputation of Allianz Global Investors Europe GmbH, UK Branch, the Board believes it is in the interests of shareholders to retain the services of Allianz Global Investors Europe GmbH, UK Branch, for the foreseeable future. The main reasons for this opinion are the extensive investment management resources of the Manager and its experience in managing and administering investment trust companies.

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.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Corporate Governance Report (continued)

For the year ended 30 June 2014

Board Meetings

The Board meets at least quarterly. Certain matters are considered at all Board Meetings including the performance of the investments, 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:

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 an Audit Committee. The Board as a whole fulfils the functions of the Management Engagement, Remuneration and Nominations Committees.

The Board carries out the functions of a Nominations Committee and makes recommendations on the appointment of new Directors. The Committee meets at least annually to ensure that the Board has a balance of skills to carry out its fiduciary duties and to select and appoint suitable candidates for appointment when necessary. A variety of sources, including the use of external search consultants, may be used to ensure that a wide range of candidates is considered. The Nominations Committee will meet not less than once a year pursuant to its terms of reference which are available on the Company's website.

Pursuant to its terms of reference, the Nominations Committee's remit is to review regularly the structure, size and composition of the Board; to give full consideration to succession planning for Directors; to keep under review the leadership needs of the Company and be responsible for identifying and nominating, for the approval of the Board, candidates to fill Board vacancies as and when they arise.

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, including gender diversity, amongst members is of great importance and it is the Company's policy to give careful consideration to issues of board balance and diversity when making new appointments. With any new Director appointment to the Board, induction training will be provided.

The Board has decided not to establish Remuneration and Management Engagement Committees as these functions are carried out by the Board. 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.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Directors' Responsibilities Statement

For the year ended 30 June 2014

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 accounts 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

The Directors each confirm to the best of their 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.

JPHS Scott DIW Reynolds

Director Director

12 September 2014

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Audit Committee Report

For the year ended 30 June 2014

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. These 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 20.

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 4, 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 4.

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 was significantly reduced by the agreement of a new revolving credit facility of up to US$10,000,000 with AIB Group (UK) PLC to 31 March 2016. This will provide financing for the Company until that date.

More details on the valuation can be found in the Chairman's Statement on pages 7 and 8. The external auditors explained the results of their review of the valuations, including their challenge of the Board's underlying cash flow projections, produced in conjunction with the Investment Manager, the LE assessments and discount rates, to the Audit Committee. On the basis of their audit work there were no adjustments that were material in the context of the financial statements as a whole.

The Directors and the Investment Manager have adopted IFRS13: Fair Value Measurement. This standard defines fair value and sets out in a single IFRS a framework for measuring fair value. The external auditors have considered the accounting treatment assumed and the definition of "Fair Value Measurement" and have accepted this treatment.

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 16 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.

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.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Audit Committee Report (continued)

For the year ended 30 June 2014

During the year the Committee met twice during which the Annual Financial Report and the Half Yearly Report respectively were reviewed in detail. The Committee also meets with representatives of the Manager and Administrator and receives reports on the effectiveness of the Company's internal controls.

The Audit Committee continues to believe that the Company does not require an internal audit function of its own 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 LLP's first year of audit was for the period ended 30 June 2005. During the year 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 LLP as the Company's auditors.

On 16 June 2014 the EU Directive on Statutory Audits of Annual and Consolidated Accounts (the "Directive") came into force. Member States have two years after the Directive comes into force to adopt and publish the provisions in national law. The Directive includes further provisions on audit firm rotation. The Audit Committee will keep this matter under review.

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.

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. The non-audit fees, being fees for reporting accountant services in respect of the Placing and Open Offer in 2012, amounted to £nil (2013:£50,000) compared with audit fees of £40,967 (2013:£23,933). The higher audit fees in the current year were mainly due to the additional work required in relation to the revision to the TLI portfolio valuation. In order to maintain auditor independence, Deloitte LLP ensured the following safeguards were in place:

· the use of review partners from outside the core audit team to ensure professional scepticism was applied appropriately; and

· Second Partner and Independent Partner reviews, together with a quality assurance review were undertaken as part of the reporting accountant work and the final audit stage.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Audit Committee Report (continued)

For the year ended 30 June 2014

Notwithstanding such services, the Audit Committee considers Deloitte LLP to be independent of the Company and that the provision of such non-audit services is not a threat to the objectivity and independence of the conduct of the audit as appropriate safeguards are in place.

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.

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 the performance of the Auditors at this meeting and recommended to the Board that Deloitte LLP be reappointed as auditor for the year ending 30 June 2015. A resolution will be put to the 2014 AGM for the reappointment of Deloitte LLP as independent external auditor.

The Chairman of the Audit Committee will be available at the Annual General Meeting to answer any questions about the work of the Committee.

D I W Reynolds

Chairman of the Audit Committee

12 September 2014

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Independent Auditor's Report to the Members of Alternative Asset Opportunities PCC Limited

For the year ended 30 June 2014

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 2014

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 2014

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 2014

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 2014

David Becker

for and on behalf of Deloitte LLP

Chartered Accountants and Recognised Auditor

St. Peter Port, Guernsey

12 September 2014

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Statement of Comprehensive Income

For the year ended 30 June 2014

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 39 to 55 are an integral part of these financial statements.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Statement of Financial Position

As at 30 June 2014

These financial statements were approved by the Board of Directors on 12 September 2014.

Signed on behalf of the Board.

JPHS Scott DIW Reynolds

Director Director

12 September 2014

The notes on pages 39 to 55 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 2014

The notes on pages 39 to 55 are an integral part of these financial statements.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Statement of Cash Flows

For the year ended 30 June 2014

The notes on pages 39 to 55 are an integral part of these financial statements.

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Portfolio of Investments

As at 30 June 2014