Half Yearly Report

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Half-Yearly Announcement of Results

For the period from 1 July 2010 to 31 December 2010

At a meeting of the Board of Directors held on 21 February 2011, the unaudited half yearly accounts for the Company for the period from 1 July 2010 to 31 December 2010 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 2010 to 31 December 2010, but is derived from those accounts. Printed accounts for the period from 1 July 2010 to 31 December 2010 will be delivered to Shareholders during March 2011.

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 2011. 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 2010 to 31 December 2010.

P W I Ingram

Company Secretary

Telephone number: 020 7065 1467

155 Bishopsgate

London EC2M 3AD

23 February 2011

For the period from 1 July 2010 to 31 December 2010

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. Following a Special Resolution passed at an Extraordinary General Meeting on 28 August 2009, the Articles of Incorporation were amended such that the requirement to wind up the Fund on 31 March 2012 was replaced by an obligation to offer shareholders the opportunity to vote on the continuation of the Fund at the Annual General Meeting in 2012 and annually thereafter.

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 UK tax regime.

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 U.S. Traded Life Interests ("TLIs").

INVESTOR INFORMATION (CONTINUED)

For the period from 1 July 2010 to 31 December 2010

INVESTOR INFORMATION (CONTINUED)

For the period from 1 July 2010 to 31 December 2010

Directors

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

Charles Tracy, Chairman, (aged 65) 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, the President of the Guernsey Tax Tribunal and Chairman of the Board of the Guernsey Banking Deposit Compensation Scheme. He is a resident of Guernsey.

Ian Reynolds (aged 67) is a former Chief Executive of Commercial Union Life Assurance Company. He is a director of Liverpool Victoria Friendly Society and 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.

John Scott (aged 58) is currently a director of several UK investment trusts and is Chairman of Scottish Mortgage Investment Trust PLC and of Dunedin Income Growth 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 (43) is currently Managing Director, Head of Institutional and Corporate Solutions, Americas, of Standard Bank in New York. Mr Zein was 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.

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 £1.1 billion of such assets under management in a range of investment companies and investment trusts as at 31 December 2010.

The Manager is responsible for managing the cash and fixed interest holdings of the Fund, and foreign currency hedging.

RESPONSIBILITY STATEMENT

For the period from 1 July 2010 to 31 December 2010

We confirm to the best of our knowledge:

a. the half yearly report and unaudited condensed financial statements have been prepared in accordance with IAS 34;

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

21 February 2011

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 2010 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 2010 to 31 December 2010.

CHAIRMAN'S STATEMENT

For the period from 1 July 2010 to 31 December 2010

Introduction

This statement covers the six months from 1 July 2010. It has been a period of slow but steady progress. Specifically, it should be noted that net current assets have improved by some £3 million, reflecting a surplus of maturity proceeds over other outgoings. A significant balance of maturity proceeds was outstanding as at 31 December, but has been received since the period end.

Portfolio developments

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

During the six month period to 31 December 2010, 4 policy maturities were identified, with a total face value of US$ 9.8 million. This compares with 4 policies with a face value of US$ 10.7 million in the 10 month period to 30 June 2010, and 20 policies with a total face value of US$ 28.0 million, in the period from the Company's launch to 31 August 2009. While the number of maturities remains disappointing, some large policies matured during the period, with the result that proceeds substantially exceeded cash outflows for premiums.

The realised gains on maturing policies amounted to approximately US$2.4 million in the period, or 3.6p per share. The net effect of portfolio revaluations, allowing for the updated LEs as referred to below, and after adjustment for the reduced losses on foreign exchange contracts, was almost the same, resulting in a minimal change on capital account, as shown in the Condensed Statement of Comprehensive Income on page 14.

A maturity has been confirmed since 31 December 2010, but not yet formally certified, with a total face value of US$1.7 million.

As at 31 December 2010 there were a total of 131 policies in the portfolio, with a face value of US$ 208.0 million and a valuation of US$ 81.8 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$ 4.6 million during the half year.

The principal issues facing the Company, that is to say valuation, gearing and hedging are discussed below.

Valuation

The valuation remains the best estimate of the Board and the Investment Manager of the current value of the portfolio based on expected future cash flows. The three major components of the valuation are life expectancy (LE) assessments, the tables of predicted mortalities based on these life assessments and the discount rate (internal rate of return, or IRR) used to arrive at a present value of the resulting cash flow projections.

CHAIRMAN'S STATEMENT (continued)

For the period from 1 July 2010 to 31 December 2010

Valuation (continued)

Past reports have described changing views on life expectancy from the main US life assessors. The Company has continued its stated practice of obtaining updated LE assessments on a portion of policies in the portfolio. To date a total of 47 policies have been re-assessed and the results have been incorporated into valuations. This practice will be continued. Although LEs have on average been increased for these policies, there remains no consistent trend in the LE outcomes.

In common with many funds in this sector, rates of mortality continue to be significantly below those originally assumed. This may be due to underestimation of LEs, but it may also be due to the particular characteristics of the portfolio. Experience in the development of mortality in portfolios of TLIs is not yet sufficiently extensive to explain what seems to be an industry-wide pattern in this respect.

The Company's current valuation policy combines swap yields, to represent market interest rates, with a risk premium to arrive at an overall IRR. Swap yields have stabilised, but there has been insufficient trading volume to give a reliable indicator of risk premiums. One particular problem is that there continue to be distressed sellers in the market who are prepared to make sales at discounted prices to maintain portfolio liquidity. There is little reliable evidence of prices for acquisitions on a non-distressed basis. Under these circumstances the Board has continued to use the same IRRs as at the beginning of the period for the portfolio, reflecting low swap yields and a high risk premium. The risk premium is currently 9.9% (weighted by value) which, given the generally high standing of the underlying insurers combined with the uncertainties about LEs, seems reasonable for this type of investment. The Board will keep this matter under review.

In my last Chairman's Statement, I noted that the valuation model at that time made no allowance for the possibility that policies could continue beyond the date of the final premium payment, which typically occurs at a fixed age, such as 100. The valuation model assumed that the policy was worthless one month beyond that date. However, for the majority of policies in the portfolio benefits do continue, or can be extended beyond this date. Although the probability of an individual policy reaching the final premium date is low, the ageing of the portfolio and the upward revision of LEs mean that there are now policies where the value of benefits after the premium end date is starting to become material. Having commissioned a detailed analysis of the portfolio, the Board concluded that it was appropriate to incorporate this factor into the valuation basis. The impact of this exercise was to increase the valuation of the portfolio overall by 1.3%.

CHAIRMAN'S STATEMENT (continued)

For the period from 1 July 2010 to 31 December 2010

Valuation (continued)

The table of predicted annual rates of return set out below, as before, gives shareholders the opportunity to see the effect on portfolio values of a wide range of mortality assumptions. The Board will continue actively to monitor market information and to keep the valuation assumptions under review.

Notes:

1. The central case (100%) assumes that claims experience matches the valuation basis in force at 31 December 2010. The other scenarios assume the mortality experience is lower.

2. This shows the effect of the mortality experience on the life expectation (in years) for an otherwise normal 80-year-old non-smoker.

3. The proportion of policies surviving to the specified date based on the portfolio as at 31 December 2010. No allowance has been made for the policies that have matured after this date.

4. The model assumes that shares are repurchased whenever excess cash beyond that required for premium reserves is available. This column represents the number of shares still in issue and not repurchased at the relevant date.

5. This shows how the return varies for a shareholder holding the shares between 31 December 2010 and the relevant date (31 December 2012 or 31 December 2016) based on the growth in the NAV per share. The NAV at 31 December 2010 was 81.5 pence per share.

6. Return based on growth in NAV per share assuming valuation at the relevant date using the valuation basis in force at 31 December 2010.

7. Return based on winding up at the relevant date assuming that the net realised proceeds of assets is 70% of the valuation calculated in accordance with the valuation basis in force at 31 December 2010.

In addition, the Board is providing similar information on two further bases (see the notes above for explanation of table headings):

A. Assume all lives are "normal" from the point of view of mortality expectations and ignore the implied relative health from medical underwriting. In common with the above figures, results are projected from the NAV per share as at 31 December 2010. Note: the figures on this basis provided in the annual report were projected from the NAV per share calculated using the revised assumptions and are thus not strictly comparable.

B. Calculate results on the 100% mortality assumption, but projected from the share price at 31 December 2010 of 49.5p per share.

CHAIRMAN'S STATEMENT (continued)

For the period from 1 July 2010 to 31 December 2010

Gearing  

During the six month period the Company's total borrowings rose from US$24,048,000 to US$27,048,000. Following the subsequent repayment of maturity proceeds of US$6,755,000 to Allied Irish Banks plc, borrowings had been reduced to US$20,293,000 as at 31 January 2011. The Company's borrowing agreement with Allied Irish Banks plc has been extended until 31 July 2011, and this provides the Company with the ability to borrow up to a further US$6,000,000.

Hedging

As at 31 December 2010 the Company had sold forward net US$71,000,000 to March 2012. Since the period end the Company has bought back US$5,000,000 to the same date, reducing the net position to US$66,000,000. This is consistent with projected dollar cash flows. The unrealised loss on these contracts fell by £1.76 million in the period as Sterling strengthened against the US Dollar.

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 period ended 30 June 2010.

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 period ended 30 June 2010. The Company's principal risks and uncertainties have not changed since the date of that report.

Outlook

The present state of the TLI market reinforces the Board's belief that the best approach is to hold policies in its high quality portfolio to maturity rather than seek early liquidation.

CPG Tracy

Chairman

21 February 2011

INVESTMENT MANAGER'S REVIEW

For the period from 1 July 2010 to 31 December 2010

Market Review

We had expected more buoyant market conditions in the second half of 2010, but in the event the recovery in the market was only modest. Although we believe that the life settlement market continues to offer attractive opportunities, investors have tended to favour better-understood traditional investment classes. In addition, the supply of bank credit has not yet recovered to the levels seen prior to 2008. This has resulted in a difficult environment in which to raise new capital.

A large proportion of transactions during 2010 were therefore trades in the tertiary market, as existing holders of Life Settlement policies looked to raise liquidity to fund future premium commitments. Based on known offers, achievable yields remained at similar levels to those at the start of 2010. High quality policies traded in the 14-16% range with the less desirable policies (larger cases, those issued by lower rated carriers and those on lives with longer life expectancies) trading at IRRs in the high teens or low twenties. There has been improved sentiment expressed by certain market participants, especially in the wake of recent Private Equity activity in the market; however we have no evidence to support this in the form of improved bids or activity. There remains almost no market for premium finance or beneficial interest policies at present.

None of the constituents of the AAO portfolio are premium financed nor are any involved in a beneficial interest programme.

The credit ratings of US life companies remain robust, with no life company rating changes affecting AAO during the period. 99% of the portfolio is split across life companies currently possessing an A.M. Best rating of A or higher. This figure has not changed significantly for some time. The investments in the AAO portfolio were carefully selected in accordance with the Company's Investment Objective and Policy ensuring a high quality portfolio composition.

Investment Portfolio Review

During the six-month period from 1 July 2010 to 31 December 2010 four policy maturities (all male) were confirmed, releasing $9.8m in death benefits. As at 31 December 2010, 131 policies were in the Fund's portfolio secured on 110 individual lives.

From inception to 31 December 2010, there have been 28 policy maturities in respect of 24 lives. Proceeds from these maturities total $48.7m, realising a $23.6m gain.

The expected cost of premiums for the remaining six months of the period ending 30 June 2010 is $4.1m and in the following accounting year ending 30 June 2012 $9.4m, assuming no maturities during this time.

Portfolio Summary

Averages weighted by Death Benefits

INVESTMENT MANAGER'S REVIEW

For the period from 1 July 2010 to 31 December 2010

Life Group (Parent Company) Distribution (Top 5)

Credit Quality Distribution by Holding Life Company

Minimum rating in portfolio: B+

Outlook

The global credit crisis, the changes to LE underwriter mortality tables and negative media coverage have served to dramatically alter the profile of the average investor in this asset class. Some of the investment banks that previously had a large presence in the market have reduced the size of their operations, in many cases placing them into a run-off mode. In their place a wide range of private equity firms, hedge funds and smaller investment vehicles are starting to appear.

In addition, it is likely that the market will see more investment from Asia and the Middle East. Historically, most of the capital invested into this asset class has come from the US and Europe. But in recent months many of the major players have increased their marketing efforts further afield and these should produce results in the coming months.

The various obstacles to launching new funds in acceptable domiciles are leading to delays but a large number will likely receive approval and start buying in the near future. This increased number of investors should lead to healthy competition for policies as the year progresses with market prices likely to rise as a result.

The Company continues to update Life Expectancies (LEs) for policies in the portfolio. During the period, updated LEs were received for lives affecting 7 policies in the portfolio.

 To date a total of 47 policies have been re-assessed and the results have been incorporated into the valuation. 4 of the policies have subsequently exited the portfolio. The 31 December 2010 valuation of the remaining 43 policies with updated LEs is US$40.3m, which represents 49.3% of the 31 December 2010 total policy valuation. The LE update programme will continue during 2011.

SL Investment Management Limited

21 February 2011

MANAGER'S REVIEW

For the period from 1 July 2010 to 31 December 2010

Borrowings and Investments

As at the period end, 31 December 2010, the Company had drawn down US$23,156,000 under the amortising term loan facility with Allied Irish Banks and US$3,891,662 under the revolving credit facility, resulting in total borrowings of US$27,047,662. Since the period end, the Company has repaid a total of US$6,755,000 from maturing policies.

As announced on 19 January 2011, the Company's loan agreement with Allied Irish Banks has been extended to 31 July 2011. This initially provided the Company with further funding of US$6 million.

The primary covenant under the loan agreement obliges the Company to maintain cover (i.e. asset value, subject to certain adjustments, divided by borrowings) above 2.5 times. As at 31 December 2010 cover was 3.0 times.

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

Currency Hedging

The Company hedges its US dollar exposure by means of forward sales of US dollars. As at 31 December 2010 US$71 million, net, had been sold for 30 March 2012. Since then, in order to maintain broad consistency with expected cash flows, this had been reduced to a net forward sale of US$66 million.

As at 31 December 2010 the outstanding loss on the net forward position, marked to market, amounted to £7,742,573.

RCM (UK) Limited

21 February 2011

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

For the period from 1 July 2010 to 31 December 2010

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 19 to 25 are an integral part of these condensed financial statements.

CONDENSED STATEMENT OF FINANCIAL POSITION

As at 31 December 2010

These financial statements were approved by the Board of Directors on 21 February 2011.

Signed on behalf of the Board.

DIW Reynolds JPHS Scott

Director Director

The notes on pages 19 to 25 are an integral part of these condensed financial statements.

CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS

For the period from 1 July 2010 to 31 December 2010

The notes on pages 19 to 25 are an integral part of these condensed financial statements.

CONDENSED STATEMENT OF CASH FLOWS

For the period from 1 July 2010 to 31 December 2010

The notes on pages 19 to 25 are an integral part of these condensed financial statements.

PORTFOLIO OF INVESTMENTS

As at 31 December 2010

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the period from 1 July 2010 to 31 December 2010

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 U.S. Traded Life Interests ("TLIs").

2 Principal Accounting Policies

(a) Basis of Preparation

The condensed financial information for the six months ended 31 December 2010 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 period ended 30 June 2010, 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 period ended 30 June 2010, as described in those financial statements.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that 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

The Company invests in US Traded Life Interests ("TLIs") which it intends to hold to maturity or until the end of the life of the Fund. All investments are classified as fair value through profit and loss.

Recognition and basis of measurement

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

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED)

For the period from 1 July 2010 to 31 December 2010

2 Principal Accounting Policies

(b) Valuation of investments (continued)

Valuation

The methodology adopted by the Directors is designed to reflect the fair value of the policies and uses a discounted cash flow method.

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

·; Death benefit payable under the policy;

·; Premiums due under the policy;

·; Mortality using the 2008 Valuation Basic Table (Ultimate) as adjusted by third party life expectancy assessments and using a 24-month ''select period' adjustment; and

·; A discount rate derived by the Investment Manager based on the US$ swap curve plus an appropriate risk premium for each period.

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.

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.

(c) Going concern

The condensed financial statements have been prepared on the going concern basis. The Directors believe that this basis is appropriate as the Company has net assets significantly in excess of its liabilities. The bank loan (see note 12) was extended to 31 July 2011 on 10 January 2011. If the bank loan was not renewed or extended the Directors believe that the Company could realise sufficient assets over time in order to repay the loan, albeit at prices that would differ from their current value.

The Directors have reviewed the cash flow and projected income and expenses over the next twelve months and deemed that the Company has adequate financial resources to meet its obligations.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED)

For the period from 1 July 2010 to 31 December 2010

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.

Since 1 September 2009 the fee payable to the Investment Manager has been 0.475% per annum of the Company's net assets attributable to the Fund. With effect from 1 April 2012 the fee will be reduced to 0.4% per annum of the Company's net assets attributable to the Fund.

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 the agreement.

Since 1 September 2009 the fee payable to the Manager has been 0.425% per annum of the Company's net assets attributable to the Fund. With effect from 1 April 2012 the fee will be reduced to 0.4% per annum of the Company's net assets attributable to the Fund. 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.

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

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED)

For the period from 1 July 2010 to 31 December 2010

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. Accordingly, no UK tax has been provided for.

7 (Deficit) /Return per Share

Revenue deficit per Share is based on the net deficit attributable to the Shares of £554,774 (February 2010: deficit £555,494, June 2010: deficit £912,972) and on the average number of Shares in issue of 40,000,000. Capital return per Share is based on the net capital return attributable to the Shares of £98,880 (February 2010: deficit £3,109,863, June 2010: deficit £3,102,254) and on the average number of Shares in issue of 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 £32,593,476 (February 2010: £33,399,239, June 2010: £33,049,370) and on the 40,000,000 Shares in issue at the period end.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED)

For the period from 1 July 2010 to 31 December 2010

9. Investments (continued)

12 Loan facility

The Company entered into a loan agreement on 24 February 2010 with Allied Irish Banks plc. Under this agreement, the Company had borrowings as at 31 December 2010 as follows:- an amortising term loan of US$23,156,000 (28 February 2010: US$23,156,000, 30 June 2010: US$23,156,000), and US$3,891,662 (28 February 2010: US$2,000,000, 30 June 2010: US$891,662) under a revolving credit facility. The Company had fully utilised the borrowing then available under the agreement, which expired on 31 January 2011. Interest was payable at LIBOR plus 2% on the amortising term loan and at LIBOR plus 2.5% in respect of the revolving credit facility.

On 10 January 2011, the loan agreement was renewed, and the Company's current borrowings are US$20,293,000 under the amortising term loan. There is a further US$6,000,000 available to the Company under the revolving credit facility, and the present agreement expires on 31 July 2011. The margin in respect of both the revolving credit facility and the term loan facility is now 2.5% over LIBOR per annum.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED)

For the period from 1 July 2010 to 31 December 2010

12. Loan facility (continued)

It is the Company's intention to repay all loans with proceeds from the maturity of TLIs but, were it necessary, the Company could sell TLIs in order to repay these loans. It is noted that the valuation methodology does not assume sales of TLIs, rather that they would be held to maturity. In the event of a sale in current market conditions, the proceeds are likely to be lower than the valuation.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED)

For the period from 1 July 2010 to 31 December 2010

14 Related party transactions

Fees earned by the Directors of the Company during the period were £38,486 of which £18,395 was outstanding at the period end (February 2010: £31,397 of which £10,538 was outstanding at the period end, June 2010: (10 months): £54,094 of which £2,714 was outstanding at the period end).

15 Forward currency contracts

The forward foreign exchange contracts in place have resulted in a balance of unrealised foreign exchange loss of £7,742,573 at the period end (February 2010: £8,720,808 loss, June 2010: £9,511,081 loss). As a result, the movement in unrealised currency loss on forward contracts during the period was a gain of £1,768,508 (February 2010: £3,000,191 loss, June 2010: £3,790,464 loss), which is included under 'Other foreign exchange gains / (losses)' on the face of the Condensed Statement of Comprehensive Income.

The Company also incurred currency foreign exchange gains during the period of £595,108 (February 2010: £767,575 loss, June 2010 £956,498 loss). These gains arose predominantly on the revaluation of the Company's US$ denominated borrowings (see Note 12) and are also included under 'Other foreign exchange gains/ (losses)' on the face of the Condensed Statement of Comprehensive Income.

In total, the Company incurred foreign exchange losses of £2,363,616 (February 2010: £3,767,766 loss, June 2010: £4,746,962 loss). These gains broadly equate to the foreign exchange loss implicit in the valuation of the underlying portfolio of TLI policies.