Half Yearly Report

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Half-Yearly Announcement of Results

For the period from 1 July 2012 to 31 December 2012

At a meeting of the Board of Directors held on 27 February 2013, the unaudited half yearly accounts for the Company for the period from 1 July 2012 to 31 December 2012 were approved, details of which are attached.

The financial information set out in this announcement does not constitute the Company's statutory accounts for the period from 1 July 2012 to 31 December 2012, but is derived from those accounts. Printed accounts for the period from 1 July 2012 to 31 December 2012 will be delivered to Shareholders during March 2013.

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). Whilst the financial information included in this announcement has been computed in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Company will publish condensed financial statements that comply with IFRS in March 2013. This announcement has been prepared using accounting policies consistent with those set out in the Company's half yearly report and financial statements for the period from 1 July 2012 to 31 December 2012.

Peter Ingram

Company Secretary

Telephone number: 020 7065 1467

155 Bishopsgate

London EC2M 3AD

28 February 2013

INVESTOR INFORMATION

For the period from 1 July 2012 to 31 December 2012

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 Protected Cell Companies Ordinance, 1997 and The Companies (Guernsey) Law, 2008. 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.

The interim financial information for the period from 1 July 2012 to 31 December 2012 has not been audited or reviewed in accordance with International Standard on Review Engagement 2410 issued by the Auditing Practices Board. The financial information for the year ended 30 June 2012 is derived from the financial statements delivered to the UK Listing Authority and do not constitute statutory accounts within the meaning of section 243 of The Companies (Guernsey) Law, 2008. The Auditors reported on these accounts, their report was unqualified, although it included an emphasis of matter paragraph in connection with the valuation of traded life interests, but did not contain a statement under Section 263 (2) of The Companies (Guernsey) Law, 2008.

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").

INVESTOR INFORMATION (CONTINUED)

For the period from 1 July 2012 to 31 December 2012

INVESTOR INFORMATION (CONTINUED)

For the period from 1 July 2012 to 31 December 2012

Directors

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

Charles Tracy, Chairman, (aged 67) 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 Management Limited and Chairman of the Board of the Guernsey Banking Deposit Compensation Scheme. He is a resident of Guernsey.

Ian Reynolds (aged 69)is a former Chief Executive of Commercial Union Life Assurance Company. He is a director of The Equitable Life Assurance Society, a former director of Liverpool Victoria Friendly 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.

John Scott (aged 60)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.

Saad Zein (aged 45) resigned as a director on 20 February 2013. He was formerly Managing Director, Head of Institutional and Corporate Solutions, Americas, of Standard Bank in New York and formerly a Senior Managing Director of Aladdin Capital Management UK LLP. Prior to this, his career was spent as an investment banker with particular focus on credit markets and structured products, including US traded life interests. He was employed by Dresdner Kleinwort Wasserstein between 1999 and 2009, where he held a number of senior positions. He is US resident.

Timothy Emmott (aged 60) was appointed a Director on 20 February 2013. He 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 is currently a director of Economic Lifestyle Property Investment Company Limited, a fund listed on the Channel Islands Stock Exchange. 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 Services Authority, was formed in 1990 and is an investment adviser for a range of specialist investment products.

The Manager

RCM (UK) Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is manager of a number of closed-ended investment companies with approximately £977 million of such assets under management in a range of investment companies and investment trusts as at 31 December 2012. The Manager is responsible for managing the cash and fixed interest holdings of the Fund.

RESPONSIBILITY STATEMENT

For the period from 1 July 2012 to 31 December 2012

We confirm to the best of our knowledge:

a) the half yearly report and unaudited condensed financial statements which have been prepared in accordance with IAS 34, gives a true and fair view of the assets, liabilities, financial position and profit and loss of the Company;

b) the interim management report (contained in the Chairman's Statement, Investment Manager's Report and Manager's Report) includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months, and their impact on the financial statements, and a description of principal risks and uncertainties for the remaining six months of the year); and

c) the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

DIW Reynolds JPHS Scott

Director Director

27 February 2013

The half-yearly financial report has neither been audited nor reviewed by the Company's auditors. The financial information for the period ended 30 June 2012 has been extracted from the audited financial statements for that period.

Dividends

The Directors do not propose a dividend for the period from 1 July 2012 to 31 December 2012.

CHAIRMAN'S STATEMENT

For the period from 1 July 2012 to 31 December 2012

Introduction

This statement covers the six months from 1 July 2012. In my last statement I referred to the two longer-term issues of financing and valuations. At that time the level of borrowing stood at US$29.2 million and financing had only been secured to 31 March 2013. It is therefore particularly pleasing to report that as a result of policy maturities, the successful raising of funds through an Open Offer and Placing and completion of negotiations with our bankers, the level of borrowing as 31 December 2012 had fallen to US$2.2 million and financing has been secured until March 2014. Further details are given below, together with commentary on valuation issues. It has thus been a period of significant progress as regards funding, and much work has been done to improve the Company's longer term outlook.

Portfolio developments

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

During the six month period to 31 December 2012, 3 policy maturities were identified relating to 2 lives, with a total face value of US$3.4 million. This compares with 8 policies with a face value of US$16.9 million in the 12 month period to 30 June 2012, and 30 policies with a total face value of US$51.1 million in the period from the Company's launch to 30 June 2011. The Board's actions with regard to funding are discussed below.

The realised gains on maturing policies amounted to approximately $1.1 million in the period, or 0.9p per share. The Net Asset Value per Share as at 31 October 2012 (the closest month-end date to the issue of new shares following the Open Offer and Placing) was 76.5p, compared to 81.2p as at 30 June 2012. Adjusted for the Offer proceeds as detailed below, the adjusted Net Asset Value per Share as at 31 October would have been 55.6p. The Net Asset Value per Share as at 31 December 2012 was 54.3p. See, however, my comment on Currency below: the strength of sterling had a material adverse effect during the period, although this has been reversed since the year end.

As at 31 December 2012 there were a total of 106 policies in the portfolio, with a face value of US$162.2 million and a valuation of US$64.1 million. There have been no policy acquisitions since completion of the original policy purchase programme, but premiums continued to be payable on existing holdings, totalling US$4.1 million during the half year.

CHAIRMAN'S STATEMENT (continued)

For the period from 1 July 2012 to 31 December 2012

Negotiations regarding the bank facility; the Open Offer and Placement

The Loan Facility Agreement with Allied Irish Banks, which was due to expire on 28 September 2012, was renewed until 28 March 2013 providing a maximum facility of US$23.2 million. Due to the short term nature of this renewal, the Board continued to negotiate with Allied Irish Banks, in addition to potential new lenders, with a view to the Company entering into a finance arrangement of a longer duration.

The Company successfully negotiated an amendment to the Facility Agreement for an eighteen month period through to 31 March 2014. Pursuant to the Conditional Amendment Letter, Allied Irish Banks confirmed that they had sanctioned new bank facilities for the Fund of a maximum of US$24.2 million for the period to 31 March 2014, subject to the Fund raising at least US$10 million (net of expenses) from shareholders and the proceeds being used to reduce the borrowings of the Fund.

The proposals for an Open Offer and Placing were approved by shareholders at an Extraordinary General Meeting on 1 November 2012. The Open Offer of four new shares for five existing shares held at a subscription price of 32 pence per share was taken up by 89.5% of existing shareholders representing 28,631,937 new shares. The balance of 3,368,063 new shares was placed with institutional investors, and on 5 November 2012 32,000,000 new Redeemable Participating Preference Shares were issued. The net issue proceeds totalled £9.7 million, thus satisfying the Conditional Amendment Letter from Allied Irish Banks.

The bulk of the work concerning the issue was undertaken by the Company's new brokers Westhouse Securities (appointed in April 2012). I should like to take this opportunity to thank Westhouse for their excellent service over this period, reflected in the full take-up of the issue shares.

As a result of the share issue and the policy maturities referred to above, US$32.9million of debt has been repaid during the six month period and the current balance on the Loan Facility is now US$4.2million, with a further US$11 million available.

The following paragraphs cover the other principal issues facing the Company, including the valuation of policies.

Valuation

The current Net Asset Value is a Directors' valuation, prepared with assistance from 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 market-based discount rate (or internal rate of return, IRR). The key factors in the valuation therefore are: the policy face value and the premiums payable; the assumed life expectancy of the insured; the actuarial mortality table; and the discount rate. The Directors have recently commissioned an independent actuary to prepare a report on valuation methodology which concluded that the current process is reasonable and appropriate.

No new LE assessments were obtained in the six month period. A total of 22 policies within the portfolio have been re-assessed within the last 12 months, with the results incorporated into recent valuations. Given the significant number of re-assessments, the Board will keep under review its policy in relation to further re-assessments. The table overleaf allows

CHAIRMAN'S STATEMENT (continued)

For the period from 1 July 2012 to 31 December 2012

investors to consider the effects of differing LE assumptions, although the number of recent

re-assessments and the generally positive outcome provide significant confidence to the LEs currently used for valuation.

It will be seen from the Investment Manager's report that 21st Services, one of the two providers used by the Company for estimating LEs, has recently announced a revision to its underwriting methodology. In the general case, this revision would result in the extension of life expectancies and therefore a reduction in policy values, but its impact will vary according to a number of factors, including age and gender.

The valuation model currently uses an average IRR of 12%. Given that interest rates are low, and are likely to remain stable, this implies a significant risk premium above current interest rates. There is some evidence that distressed sellers are no longer the main factor in the market, and that there is some genuine new money being invested in TLIs.

Information on market trades is closely guarded and the volume of trades noted by the Investment Manager, particularly for policies with shorter LEs as in our portfolio, is insufficient to give a representative sample of trades on a non-distressed basis. The Board continues to believe that the 12% IRR assumption remains appropriate, but, as before, is providing information on the effect of differing IRRs in the table below.

The tables below therefore aim to give investors an appreciation of the effects on valuation of different 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 January 2011) or, for the remaining 34% of the portfolio by face value (the 'non-updated policies'), either the original LE at the time of purchase or an LE updated before 31 December 2010. The average LE is shown for reference (4.6 years). NAV is then shown at four different discount rates, ranging from 10% to 20%. This shows the effect of IRR on current value, but it also allows investors to assess the effects of forced sales.

- The second line uses the assumption that updated LEs obtained for the non-updated policies would broadly follow those already obtained for other policies, resulting in an LE increase of 10% on the non-updated policies. In practice, the LE changes exhibited by actual revised assessments vary widely and the Board does not feel it is necessarily correct to extrapolate the changes for the non-updated policies. The overall effect is to increase average LE by 0.2 years.

- The third line assumes an increase in LE of 20% on the non-updated policies. The effect on NAV is proportionate to that shown in the second line, with an incremental increase in LE of 0.2 years.

- Finally, the fourth line shows the outcome of assuming LEs are simply based on the current table of life expectancies for the general population, the 2008 Valuation Basic Table i.e. ignoring medical assessments. The Board does not suggest that this is a realistic assumption, but it gives a measure of the degree to which the portfolio is dependent on assessed LEs being shorter than for the population as a whole.

CHAIRMAN'S STATEMENT (continued)

For the period from 1 July 2012 to 31 December 2012

Sensitivity Matrix

Net Asset Value in pence per share on various assumptions as at 31 December 2012

Policies and extension options

In earlier reports (as at 30 June and 31 December 2010) I referred to the fact that some policies lapsed after the final premium was paid (typically at age 100), but that for a large proportion of policies in the portfolio benefits continued to be payable. I refer to these latter policies as policies with an extension option.

The original context of my comments was that the valuation used at that time did not allow for these extension options; in December 2010 I reported that the policy portfolio value had been increased by 1.3% as a result of the inclusion of extension options in the valuation process. The overall effect was modest because the likelihood of this becoming relevant is itself quite small and the potential benefits are significantly discounted given that the exercise dates are some years away. As it is now some time since I commented on this aspect of the portfolio, I thought that this might be an appropriate opportunity to provide some more detail as, with the passage of time, the probability of some policies expiring increases. This information is included in the Investment Manager's Review.

As the portfolio of policies continues to age, the overall valuation will become gradually more sensitive to the mortality experience for policies without extension options, so it is the Board's intention to provide periodic updates as appropriate.

Gearing

During the six month period to 31 December 2012 the Company's total borrowings fell from US$29,210,000 to US$2,239,000. The Company's loan facility with Allied Irish Banks plc ("AIB")has been extended until 31 March 2014, and the funds available under this facility should cover the Company's requirements during that period, even assuming no policy maturities.

Currency

From 30 March 2012, the date the Company settled its forward currency contracts, the Company has operated on an unhedged basis.

At 31 December 2012, the Company's net US dollar exposure amounted to US$63,654,000, being the value of policies, US$64,139,000, plus certain US$ balances less the loan outstanding of US$2,239,000.

CHAIRMAN'S STATEMENT (continued)

For the period from 1 July 2012 to 31 December 2012

In the period under review, the strength of sterling during the six months has had an adverse effect on the Net Asset Value per Share. On 30 June 2012 the exchange rate was 1.5707, but by 31 December 2012 the rate had moved to 1.6255, a change of 3.4%. As at 26 February 2013, this gain had been reversed with the rate standing at 1.5150.

Related Party Transactions

There have been no changes to the related party arrangements or transactions as reported in the statutory Annual Financial Report for the year ended 30 June 2012 and in the Prospectus dated 5 October 2012.

Statement of Principal Risks and Uncertainties

The Company's assets consist mainly of US Traded Life Interests and its principal risks are market and longevity risk, currency risk, interest rate risk and credit risk. These risks, and the way they are managed, are described in more detail within the Directors' Report in the Company's Annual Financial Report for the year ended 30 June 2012. The Company's principal risks and uncertainties have not changed since the date of that report. The credit rating of the underlying insurance companies issuing the TLI policies in the portfolio remains good with 94.4% rated A or better by AM Best: see Investment Manager's Review for more information on this.

Board Membership

Saad Zein, who joined the Board in September 2009, has taken up residence in the United States and has left the Board with effect from 20 February 2013. Saad has been a valuable contributor to the Board's understanding of the TLI marketplace and has been of great help in exploring financing options in recent months. I would like to express the Board's thanks for his support. I am pleased to be able to report that Tim Emmott has agreed to join the Board in his place. Tim has had a long-standing interest in the Company and has considerable experience in the field of alternative investments.

This year there has been significantly more work for the Directors in light of on-going discussions about financing arrangements and the subsequent Placing and Open Offer. As a result it was agreed to make one off additional payments of £5,000 per director to reflect the considerable additional work entailed this year in relation to the share issue and related matters. It was also agreed to increase my fees as Chairman to £22,500 per annum with effect from 1 January 2013. Directors' fees remain unchanged at £15,000 per annum.

Outlook

The significant improvement in the Company's funding position removes short term pressure to sell policies to maintain liquidity, and increases the likelihood that the Company will be able to hold policies to maturity. It has always been the Directors' view that this will result in the best outcome for shareholders, but returns, and any on-going requirement for funding, will still in the end depend principally on the rate of maturities - which has improved in recent years, but will continue to fluctuate given the limited number of policies held.

CPG Tracy

Chairman

27 February 2013

INVESTMENT MANAGER'S REVIEW

For the period from 1 July 2012 to 31 December 2012

Market Review

As the global capital markets began to show signs of recovery in the latter half of 2012, the life settlement market also witnessed increased activity. Competition for policies increased following a number of new market entrants and the return of some historical participants with new capital to deploy.

During the period there were two or three larger buyers with sustained investment programmes, and also a number of more sporadic buyers including family offices and smaller dedicated life settlement funds. Although the large private equity houses remain in the market, they continued to concentrate the majority of their efforts on obtaining large tertiary portfolios. There was no indication that any of the large investment banks re-entered the market during the period.

The two largest trades reported in the tertiary market were the sale of the $1 bn Mizuho portfolio which was purchased by the reinsurer Wilton Re, and the $320m ARM portfolio which was purchased by private equity group Apollo.

In 2012, the number of Stranger Originated Life Insurance (STOLI) court cases initiated by life insurance companies dropped when compared with the previous year. This is likely due to recent court hearings ruling in favour of investors, stating that carriers have had ample time since policy issuance to recognise a lack of an insurable interest and, crucially, have continued to accept premium payments during this time. The reduction in court cases is a sign of the maturing market and should provide confidence to both current and future participants that insurers will honour claims.

On 22 January 2013 major life expectancy assessment firm, 21st Services, announced a revision to its underwriting methodology. The changes to individual assessments will vary significantly depending on the attributes of the life insured, in particular age, gender and lifestyle. The firm has stated that the average affect will be a lengthening of its estimated life expectancy (LE) estimates.

However, 21st Services has also stated that for insured lives over age 90, the average impact is a shortening of LEs. At this stage, it is not possible to evaluate the impact policy by policy and therefore estimate what the implications might be for the valuation of the Company's portfolio as a whole. However, given that the average age of lives assured is approaching 90, it would appear that the overall effect is likely to be limited.

It remains to be seen how the market reacts to the announcement. Given that 21st Services' LEs have tended to be shorter on average than the other major LE assessment firms, it is expected that this adjustment will bring 21st Services more in line with the other assessors. More consistent life expectancy estimates can be viewed as a positive development for the market in the long term.

Investment Portfolio Review

During the six-month period from 1 July 2012 to 31 December 2012 three policy maturities (two lives) were confirmed, releasing $3.4m in death benefits. As at 31 December 2012, 106 policies were in the Fund's portfolio secured on 93 individual lives.

INVESTMENT MANAGER'S REVIEW

For the period from 1 July 2012 to 31 December 2012

Investment Portfolio Review (continued)

Portfolio Summary

Averages weighted by Death Benefits

From inception to 31 December 2012, there have been 41 policy maturities across 34 lives. Proceeds from these maturities total $72.3m, realising a $33.5m gain.

The expected cost of premiums for the remaining six months of the year ending 30 June 2013 is $4.2m. In the following 12-month accounting period ending 30 June 2014, scheduled premium commitments are $9.1m, assuming no maturities during this time. SL Investment Management continues the on-going review of all policy statements to identify any scope for further optimisation of the premium payment schedules.

No new life expectancy reports were obtained during the period. As at 31 December 2012, policies equating to 66% of the total net death benefit are valued using life expectancy assessments from 1 January 2011 onwards.

During the period the A.M. Best ratings of three holding life companies were downgraded from A to A-. This affected 7 policies with a total face value of just over $8m equating to 4.9% of the portfolio.

The three companies downgraded were: Aviva Life and Annuity Company of NY, Aviva Life and Annuity Company (both subsidiaries of Aviva USA Corporation) and Sun Life Assurance Company of CA (a subsidiary of Sun Life Financial Inc). All three subsidiary companies are in the process of being sold, and the revised ratings reflect A.M. Best's view that the change of ownership could impact future growth prospects.

Overall, 94.4% of the portfolio by face value has an A.M. Best rating of A or higher.

Credit Quality Distribution by Holding Life Company

Minimum rating in portfolio: A-

INVESTMENT MANAGER'S REVIEW

For the period from 1 July 2012 to 31 December 2012

Life Group (Parent Company) Distribution (Top 5)

Policies with extension options or an expiry date

Policies can be grouped into four categories:

i) Policies with no expiry date and which therefore can be taken to realise their face value on the death of the insured, provided the premiums continue to be paid;

ii) Policies which have an expiry date at age 115 or 120 and which therefore, for all practical purposes, can be taken to realise their face value on the death of the insured;

iii) Policies where at a certain time (generally when the age of the insured reaches approximately 100) the face value reduces to a lower fixed amount;

iv) Policies where at a certain time (generally when the age of the insured reaches approximately 100) the policy expires and the face value can be assumed to reduce to approximately zero.

Distribution of policies by category

As the above table shows, out of the current portfolio of 106 policies with a face value of US$ 162.2 million, 56 policies with a face value of US$ 91.1 million either have no expiry date, an extension option to age 115 or 120 or an extension option beyond 100 but with reduced death benefit. This leaves a balance of 50 policies with a face value of US$ 71.1 million which do not have extension options, accounting for 42% of the portfolio by value.

INVESTMENT MANAGER'S REVIEW

For the period from 1 July 2012 to 31 December 2012

Distribution of policies by category (continued)

For these 50 policies, the average age of the insured is currently 89.4 years, while the policy expiry dates are at an average age of 100.3 years, giving an average time to expiry of 10.9 years. According to the latest LE data we have on record, the average LE for these insureds is 4.8 years, so policy holders would on average have to live for twice as long as expected for these policies to expire.

No policies in the portfolio currently have an estimated LE beyond the expiry date of the policy. The median expiry date for the 50 policies with expiry dates is June 2023. Within this range of policies, of course, there are some which are more likely to expire than others. Four policies, for example, have an interval of less than three years between their expected maturity and the expiry date. It is possible to calculate the actuarial probability of the insured being alive at the expiry date. This probability will depend upon the LE of the insured and the underlying mortality table. As at 31 December 2012, 19 policies have an actuarial probability of expiring of over 10%. Only two policies have a probability of expiring of over 20%, of which the earlier is not due to expire until November 2017.

All of this information is, of course, factored into the valuation for each policy (and was incorporated into the purchase price calculations). In addition, such policies tend to have lower premiums. In actuarial terms, they simply have a slightly different risk profile to the policies with no expiry dates or extension options. All policies carry a risk: in the case of those with no expiry date, the main risk is that the insured will live beyond their expected LE, resulting in premium payments for a longer period and a delay in the receipt of maturity proceeds. The advantage of holding a portfolio of policies is that such risks are mitigated by a spread of lives and policy types.

Outlook

The life settlement market has taken a number of positive steps forward in 2012. Regulation and transparency continue to improve, life company litigation has reduced and investment capital has started to return to the market. Industry bodies such as LISA (Life Assurance Settlement Association) and ELSA (European Life Settlement Association) continue to promote the understanding of Life Settlements to allow the investments to become a more widely accepted and established asset class.

Like all life settlement investors entering the market pre 2008, AAO has experienced lower levels of mortality than originally expected. However, unlike many other vehicles, AAO has managed liquidity such that distressed sales have not been required.

The Company holds a well diversified seasoned portfolio of 106 policies with an average life insured age of over 89 years. With $162m of death benefit compared with a carrying value of $64m, AAO is in a strong position to hold its portfolio and realise investment gains over the coming years as maturities occur.

SL Investment Management Limited

27 February 2013

MANAGER'S REVIEW

For the period from 1 July 2012 to 31 December 2012

Borrowings and investments

During the period the Company renegotiated the terms of its loan agreement with Allied Irish Banks. As part of this renegotiation, Allied Irish Banks issued a Conditional Facility Letter, dated 30 October 2012, the terms of which summarised in the Chairman's Statement. In short, Allied Irish Banks made available to the Company a further US$15 million, on top of existing balances, for the period to 31 March 2014.

Between 30 June 2012 and 31 December 2012 the total balance on the Company's loan account with Allied Irish Banks fell from US$29,210,000 to US$2,239,000. Of this reduction, total receipts from matured policies came to a total of US$17,360,000, while the net proceeds from the Open Offer and Placing, as described in the Chairman's Statement, amounted to US$15,601,000.

The above balance of US$2,239,000, as of 31 December 2012, takes account of a US$2 million drawdown under the facility, and since 31 December 2012, the Company has drawn a further US$2 million. Of the US$15 million, referred to above, US$11 million therefore remains available, and, on the basis of current assumptions, this will meet the Company's funding requirement to 31 March 2014.

Under the above Conditional Facility Letter, the Company is required to maintain asset cover (i.e. asset value divided by borrowing) of at least 2.5 times. As at 31 December 2012, cover was 29.6 times.

The Company has retained its £100,000 holding of UK Treasury 4% 2016.

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 US dollar positions.

RCM (UK) Limited

27 February 2013

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

For the period from 1 July 2012 to 31 December 2012

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 22 to 30 are an integral part of these condensed financial statements.

CONDENSED STATEMENT OF FINANCIAL POSITION

As at 31 December 2012

These condensed financial statements were approved by the Board of Directors on 27 February 2013.

Signed on behalf of the Board.

DIW Reynolds JPHS Scott

Director Director

27 February 2013

The notes on pages 22 to 30 are an integral part of these condensed financial statements.

CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS

For the period from 1 July 2012 to 31 December 2012

The notes on pages 22 to 30 are an integral part of these condensed financial statements.

CONDENSED STATEMENT OF CASH FLOWS

For the period from 1 July 2012 to 31 December 2012

The notes on pages 22 to 30 are an integral part of these condensed financial statements.

PORTFOLIO OF INVESTMENTS

As at 31 December 2012

*As at the date of this report

** On 9 January 2013, AM Best announced that they had withdrawn the rating of Reassure America, following its legal merger into its parent, Jackson National Life Insurance Company. The AM Best rating for Jackson National remained at A+ 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the period from 1 July 2012 to 31 December 2012

1 Principal activity

The Company is a Guernsey registered closed-ended protected cell company established with one Cell known as the US Traded Life Interests Fund (the "Fund" or "Cell"). The redeemable participating preference shares (the "Shares") in the Company are listed on the London Stock Exchange. 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").

2 Principal Accounting Policies

(a) Basis of preparation

Statement of compliance

The condensed financial information for the six months ended 31 December 2012 has been prepared in accordance with IAS 34 'Interim Financial Reporting'. The condensed interim financial information should be read in conjunction with the annual financial statements for the year ended 30 June 2012, which have been prepared in accordance with International Financial Reporting Standards.

The accounting policies applied in the condensed financial statements are consistent with those of the annual financial statements for the year ended 30 June 2012, as described in those financial statements.

Basis of measurement

The financial statements have been prepared under the historical cost convention as modified by the revaluation of investments and derivatives, as detailed above.

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. The exchange rate used for these financial statements was 1.6255 (June 2012: 1.5685, December 2011:1.5543).

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.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the period from 1 July 2012 to 31 December 2012

2 Principal Accounting Policies (continued)

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Where such judgements are made they are discussed below.

(b) Valuation of investments

US Traded Life Interest Investments

The Company primarily invests in US Traded Life Interests ("TLIs") which it intends to hold to maturity or until the end of the life of the Fund, unless sales are required to meet cash flow demands. The Company has only invested in Whole of Life and Universal Life policies. All TLI investments are classified as fair value through profit and loss

Recognition and basis of measurement

Purchases of investments are recognised on a trade date basis and are initially measured at cost, being the consideration given.

Valuation

As the market for TLIs is thin, and there is little published information on these investments, there are no reliable market prices. The TLIs are valued monthly at the Directors' discretion. The methodology adopted by the Directors intends to reflect the fair value of the policies. This methodology uses a discounted cash flow method.

The value of a TLI policy is the present value of its net expected future cash flows. The calculation uses the following data and assumptions provided by the Investment Manager:

·; Death benefit payable under the policy;

·; Premiums due under the policy;

·; The most recently obtained life expectancy rolled forward according to the 2008 Valuation Basic Table (Ultimate); and

·; An estimate of a market based discount rate derived by the Investment Manager.

There is inherent uncertainty within this basis of valuation that this valuation will differ from the realisable value of these investments were the TLIs to be sold at the reporting date.

United Kingdom Gilts

The Company has also invested in a United Kingdom Gilt ("UK Gilt"), which is classified as fair value through profit and loss.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the period from 1 July 2012 to 31 December 2012

2 Principal Accounting Policies (continued)

Recognition and basis of measurement

Purchases of UK Gilts are recognised on a trade date basis and are initially held at cost, being the consideration given.

Valuation

The UK Gilt is valued monthly at the clean bid market price available for the stock at each valuation date. Accrued interest is included within sundry debtors.

De-recognition

The Company de-recognises a financial asset when the contractual rights to cash flows from the financial asset expire. A financial liability is de-recognised when the obligation specified in the contract is discharged, cancelled or expired. TLI investments are de-recognised on the date of death of the insured or on the trade date if the policy is sold.

 (c) Going concern

The Board considered carefully the issue of 'going concern', specifically in relation to the availability of funding. The loan agreement with Allied Irish banks was renewed on 30 October 2012, and it provides funding for the Company until 31 March 2014, more than twelve months after the reporting date for these accounts.

As at 31 December 2012, total borrowings stood at c. US$2.2 million, and under the terms of the renewal AIB has provided a revolving credit facility that will enable the Company to borrow a further US$13 million during the period to 31 March 2014 to cover its expenses.

Based on the above, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, and they continue to adopt the going concern basis.

3 Interest and similar income

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the period from 1 July 2012 to 31 December 2012

4 Investment management and management fees

SL Investment Management Limited, the Investment Manager, was appointed under an agreement with the Company and other parties dated 16 March 2004, as amended and restated on 20 July 2004. The agreement may be terminated by either party giving not less than 12 months' notice or shorter notice as the parties may agree to accept.

From 1 April 2012 the fee payable to the Investment Manager is 0.4% per annum of the Company's Net Asset Value.

RCM (UK) Limited, the Manager, was appointed under an agreement with the Company dated 16 March 2004 to manage the fixed interest and near cash assets of the Company in accordance with the investment policy and to implement the currency hedging facility from time to time approved by the Directors. Either party giving not less than 12 months' notice may terminate this agreement.

From 1 April 2012 the fee payable to the Manager is 0.4% per annum of the Company's Net Asset Value. With effect from 1 September 2009 a separate Agreement was signed between the Company and the Manager for the provision of Administration and Secretarial Services at a fixed fee of £20,000 per annum.

With effect from 1 September 2009 the Administration Agreement between the Company and Kleinwort Benson (Channel Islands) Fund Services Limited (formerly Kleinwort Benson (Guernsey) Fund Services Limited) dated 16 March 2004 was amended to a fixed fee of £50,000 per annum.

5 Other expenses

* Sundry expenses include mailing services, tax exempt fees, stock exchange fees, bank charges and other sundry costs.

** Directors' fees for the six months ended 31 December 2012 include one off additional payments of £5,000 per director to reflect all the extra work done during the year in relation to the share issue and related matters.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED)

For the period from 1 July 2012 to 31 December 2012

6 Taxation

The Company is exempt from Guernsey Income Tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and 1992 and is charged an annual exemption fee of £600 included in sundry expenses.

The Company adopted UK tax residency from 1 September 2009 onwards. Since that date the Company has been managed in such a way as to meet the conditions for approval as an investment trust under Section 1158 of the Corporation Tax Act 2010. As an investment trust, the Company is subject to corporation tax on its income, but no corporation tax is provided in these accounts, as the Company has significant unutilised tax losses which are not deemed to be recoverable. The Company was approved by HM Revenue & Customs as an investment trust in accordance with Section 1158 of the Corporation Tax Act 2010 for the period 1 July 2010 to 30 June 2011.

Under the new investment trust regime rules affecting accounting periods commencing on or after 1 January 2012 an initial application must be submitted to HM Revenue & Customs for entry into the regime and the Company must therefore demonstrate annually compliance with the regulations. In December 2012 the Company received confirmation from HM Revenue & Customs as an approved investment trust for accounting periods commencing on or after 1 July 2012 subject to the Company continuing to meet the eligibility conditions at Section 1158 Corporation Tax Act 2010 and the on-going requirements for approved companies in Chapter 3 of Part 2 Investment Trust (Approved Company) Tax Regulations 2011 (Statutory Instrument 2011/2999).

7 Return per share

Revenue deficit per Share is based on the net deficit attributable to the Shares of £678,042 (December 2011: deficit £513,921, June 2012: deficit £1,156,807) and on the average number of Shares in issue of 49,739,130 (December 2011 and June 2012: 40,000,000). Capital return per Share is based on the net capital deficit attributable to the Shares of £2,429,551 (December 2011: deficit £126,054, June 2012: return £2,754,640) and on the average number of Shares in issue of 49,739,130 (December 2011 and June 2012: 40,000,000).

8 Net Asset Value per Share

The diluted and undiluted net asset value per Share is based on net assets attributable to the Shares of £39,107,438 (December 2011: £30,230,491, June 2012: £32,468,299) and on the 72,000,000 Shares in issue at the period end (December 2011 and June 2012: 40,000,000).

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED)

For the period from 1 July 2012 to 31 December 2012

9 Investments

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED)

For the period from 1 July 2012 to 31 December 2012

10 Other receivables

11 Other payables

12 Loan facility

As at 31 December 2012, under the terms of an agreement with Allied Irish Banks, the Company had an amortising term loan of US$238,906 (31 December 2011: US$23,092,662, 30 June 2012:US$27,510,276) and had drawn down US$2,000,000 (31 December 2011: US$2,100,000, 30 June 2012: US$1,700,000) under a revolving credit facility, making a total loan balance of US$2,238,906 (£1,377,364) (31 December 2011: US$25,192,662 (£16,208,366), 30 June 2012: US$29,210,276) (£18,623,654). Under the revolving credit facility a further US$13 million (31 December 2011: US$1,900,000, 30 June 2012: US$4,000,000) remained available.

The loan agreement provides funding for the Company until 31 March 2014, subject to the Company maintaining cover (i.e. asset value divided by borrowing) at above 2.5 times. It remains the Company's intention to repay all loans with proceeds receivable from the maturity of TLIs.

13 Share capital and share premium

The share capital of the Company is two Management Shares of no par value and an unlimited number of Redeemable Participating Preference Shares (the "Shares") of no par value.

The two Management Shares were issued at £1 each fully paid and are beneficially owned by the Manager. The Management Shares do not carry any rights to dividends and holders of Management Shares are only entitled to participate in the non-cellular assets of the Company on a winding-up.

40,000,000 Shares were issued in the Fund at £1 per Share on 25 March 2004. A further 32,000,000 shares were issued on 5 November 2012. The issue costs incurred of £493,268 were debited against the share premium account to leave net proceeds of the share issue of £9,746,732.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED)

For the period from 1 July 2012 to 31 December 2012

13 Share capital and share premium (continued)

The holders of Shares attributable to the Fund will only be entitled to participate in the income, profits and assets attributable to that fund. On winding up the holders of Shares are only entitled to participate in the assets of the Fund and have no entitlement to participate in the distribution of any assets attributable to any other cell. Holders of Shares are entitled to attend and vote at general meetings of the Company. At an Extraordinary General Meeting held on 28 August 2009 the Articles of Incorporation were amended so that the US Traded Life Interests Fund now has an unlimited life, subject to regular continuation votes from 2012 onward. Following a vote by shareholders in 2012 there will be an opportunity to vote on the continuation of the Fund at the Annual General Meeting in 2013 and annually thereafter.

14 Net assets attributable to shareholders

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED)

For the period from 1 July 2012 to 31 December 2012

14 Net assets attributable to shareholders (continued)