Half Yearly Report

ALTERNATIVE ASSET OPPORTUNITIES PCC LIMITED

Half-Yearly Announcement of Results

For the period from 1 July 2014 to 31 December 2014

At a meeting of the Board of Directors held on 26 February 2014, the unaudited half yearly financial statements for the Company for the period from 1 July 2014 to 31 December 2014 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 2014 to 31 December 2014, but is derived from those accounts. Printed accounts for the period from 1 July 2014 to 31 December 2014 will be delivered to Shareholders during March 2015.

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 2015. 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 2014 to 31 December 2014.

Peter Ingram

Company Secretary

Telephone number: 020 7065 1467

199 Bishopsgate

London EC2M 3TY

27 February 2015

Investor Information

For the period from 1 July 2014 to 31 December 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 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 2014 to 31 December 2014 has not been audited or reviewed in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. The financial information for the year ended 30 June 2014 is derived from the financial statements delivered to the UK Listing Authority which do not constitute statutory accounts within the meaning of section 243 of The Companies (Guernsey) Law, 2008. The Auditors reported on these financial statements; 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").

FATCA

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

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

Directors

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

Charles Tracy, Chairman, (aged 69) 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 71) 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.

Tim Emmott (aged 62) 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 and of Alpha Insurance Analysts Ltd. 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 formed in 1990 and is an investment adviser for a range of specialist investment products.

The Manager

Allianz Global Investors GmbH, UK Branch, which is authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and which is subject to limited regulation by the Financial Conduct Authority, is manager of a number of closed-ended investment companies with approximately £1.2 billion of such assets under management in a range of investment companies and investment trusts as at 31 December 2014. The Manager is responsible for managing the cash and fixed interest holdings of the Fund.

Responsibility Statement

For the period from 1 July 2014 to 31 December 2014

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, give 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 Review and Manager's Review) 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 2015

Financial Highlights

For the period from 1 July 2014 to 31 December 2014

The half yearly financial reports have neither been audited nor reviewed by the Company's auditors. The financial information for the period ended 30 June 2014 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 2014 to 31 December 2014.

The Directors are making a distribution of 2 pence per share to be payable on 20 March 2015.

Chairman's Statement

For the period from 1 July 2014 to 31 December 2014

Summary

In my report a year ago I reported on a satisfactory cash position; six months ago I reported on the availability of sufficient cash to make a distribution to shareholders of 2 pence per share. As a result of recent maturities, the Board has now recommended a further distribution of 2 pence per share. This reflects a small number of maturities, but includes the largest policy in the portfolio by face value.

During the period, the Net Asset Value ("NAV") has advanced from 44.7 pence per share to 47.6 pence per share. Allowing for the distribution of 2 pence, this represents an increase of approximately 11%. It should however be noted that during the period there was a reduction in the NAV of 2.5 pence per share for the reasons explained on page 8 of the half year report and below. Ignoring this, the increase would have been in excess of 16%.

This is an appropriate place for me to record the Board's gratitude to Peter Ingram who has performed the role of Company Secretary to the Company on behalf of Allianz Global Investors GmbH, UK Branch since 1 September 2009. Peter's calm guidance during what has been a period of some complexity has been greatly appreciated and we wish him well on his forthcoming retirement. His post will be filled by Tracey Lago ACIS.

Portfolio developments

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

The realised gains on maturing policies in the last six months amounted to approximately US$8.0 million in the period, or 7.1 pence per share (compared with US$10.2 million, in the preceding 12 months and US$5 million, or 4.4p per share, in the corresponding period of 2013). Although the number of maturities was somewhat lower than in comparable periods, the maturities involved three large policies, including the largest policy in the portfolio, with a face value of US$6 million.

As at 31 December 2014 there were a total of 86 policies in the portfolio, representing 75 lives, with a face value of US$132.0 million and a valuation of US$45.5 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$4.2 million during the half year.

Since 31 December 2014, one policy maturity has been identified with a face value of US$0.4 million. Once recognised in the NAV, this maturity will result in an increase in NAV of approximately 0.2 pence per share.

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

Valuation

The current NAV as released to the market 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 or IRR). The key factors in the valuation therefore are: the policy face value and the premiums payable; the assumed life expectancy (LE) of the insured; the actuarial mortality table; and the discount rate.

In September 2014, 21st Services LLC, one of the firms that provide the Company with LE assessments, announced a major revision to its mortality assumptions, resulting in significant upward revision of many LEs. Initially, a total of 15 recent LEs were revised based on this new information, resulting in a reduction in the NAV as at 30 September 2014 of 0.5 pence per share. Given the materiality of this update, the Board commissioned LE updates from 21st Services on the remaining policies in the portfolio for which LEs from this firm are used. A further reduction in the NAV per share of 2.0 pence per share as at 30 November 2014 was made as result of these updates. When the Board decided to use three underwriters, the LEs provided by 21st Services were rather shorter than others, so these updates make the valuation basis more conservative than hitherto. Note particularly that the sensitivity matrix now shows the NAV per share based on the Valuation Basic Table ("VBT") is now about 4% higher than the current published NAV per share; as at 31 December 2013 the VBT-based NAV per share was actually lower than the published figure.

Updated life expectancy assessments were obtained for two other lives during the period, representing 2% of the total portfolio face amount. 81% of the portfolio (by face) is valued with reference to LEs obtained within the past 2 years. The remaining 19% of the portfolio (small and uncooperative policies) are valued using the 2008 VBT table.

The valuation model currently uses an IRR of 12%, intended to reflect market pricing in an admittedly thin market. Given that interest rates are low, and are likely to remain stable, this implies a substantial risk premium above current interest rates. Historical sales of policies by the Company have also given support to the use of a 12% IRR, but it must be cautioned that information on market trades is sparse. The Board thus continues to believe that the 12% IRR assumption remains appropriate but, as before, is providing information on the effect of differing IRRs and LEs in the table below.

- 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 VBT. The average LE is shown for reference (4.7 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 LEs are based on the current table of life expectancies for the general population, the 2008 VBT 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 31 December 2014

Gearing

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.

During the period the continuing positive flow of maturities enabled the Company to make a distribution of 2p per share on 8 August 2014 within the terms of the lending covenants. US$1 million had been drawn on the facility as at 31 December 2014, but this has subsequently been repaid. As at 31 January 2015 the Company had net cash balances of US$7.4 million with a further US$0.4 million in relation to the maturity announced in January 2015 expected to be received shortly. Accordingly, the stated distribution can be made within the facility covenants.

Credit Risk

Following the acquisition of Lincoln Benefit Life Company by Resolution Life Holdings, Inc., A.M. Best downgraded the financial strength rating of Lincoln Benefit Life Company from A+ to A- during the period. The Company holds one policy from this life company with a face value of US$2m, representing 1.5% of the portfolio face value.

There were no other A.M. Best rating changes during the period that affected the portfolio. As at the reporting date 96.1% of the Company's policies by value were issued by companies with an A.M. Best rating of 'A' or better. We continue to monitor the ratings and any that fall lower than 'A' are reviewed and continue to be held on satisfaction of creditworthiness of the relevant life company.

Policies and extension options

In keeping with earlier reports I have updated below the information on policies with an extension option. The recent maturity of two large policies, one with no extension and one with a reduced death benefit on extension, has significantly improved the balance of the portfolio: policies with no expiry date now account for 44% of the portfolio compared with 41.7% a year ago.

Policies and extension options (continued)

For the 42 policies without an extension option, the average age of the insured is currently 91.0 years, while the policy expiry dates are at an average age of 100.3 years, giving an average time to expiry of 9.3 years. According to the latest LE data, the average LE for these insureds is 4.7 years, so policy holders would on average have to live for approximately twice as long as expected for these policies to expire. Within this range of policies, of course, there are some which are more likely to expire than others. This new table below summarises the distribution of the time intervals between the LE and the expiry date:

** - all 7 of these policies have extension options to either age 114 or age 115

Policies and extension options (continued)

It should be noted that no policies will expire before May 2020 and that there are no policies where the current average LE is beyond the expiry date.

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 new currency hedges.

At 31 December 2014, the Company's net US dollar exposure amounted to US$45,670,000, being the value of policies of US$45,460,000, plus certain USUS$ balances totalling US$210,000.

Sterling improved against the US Dollar by 9.2% in the six months to 31 December 2013 and by a further 3.2% in the six months to 30 June 2014. By contrast, Sterling has been weak in the last six months, falling by 8.7%. This has had a positive impact on the Net Asset Value of approximately 4.1 pence per share.

Outlook

The Board is delighted to be able to report a further distribution of 2 pence per share to be payable on 20 March 2015. The ex-dividend date for this distribution will be 12 March 2015 and the associated record date will be 13 March 2015.

Generation of cash within the portfolio depends both on mortality experience and on the size of policies maturing, as has been well demonstrated by recent experience. The Board will continue to decide on future distributions based on maturities and subject to the availability of credit facilities.

The Company holds a well-diversified portfolio of 75 lives (86 policies) with an average life insured age of 91.0 years. With US$132 million of death benefits, compared with a carrying value of US$45 million, combined with a strong liquidity position, the Board intends to continue to hold policies to maturity, but will not ignore opportunities for policy sales on attractive terms.

CPG Tracy

Chairman

27 February 2015

Investment Manager's Review

For the period from 1 July 2014 to 31 December 2014

Investment Portfolio Review

During the six month period from 1 July 2014 to 31 December 2014 there were three policy maturities with a total death benefit of US$10.5m. The three maturities related to three individual lives, two males and one female. As of 31 December 2014, 86 policies remained within the portfolio with exposure to 75 individual lives.

Cumulatively, as of 31 December 2014 there have been 61 policy maturities across 52 lives since inception. Death benefits from all maturities totalled US$101.6m, realising a US$45.0m gain.

Since 31 December 2014, one further maturity has been identified, with a death benefit of US$0.4m.

Portfolio Summary

Premium Payments

The expected cost of premiums for the six month period ending 30 June 2015 is US$4.2m. In the following 12-month accounting period ending 30 June 2016, scheduled premium commitments are US$9.0m, assuming no maturities during this time. SL Investment Management continues the ongoing review of all policy statements to identify any scope for further optimisation of the premium payment schedules.

Life Expectancy Estimates

InSeptember 2014, 21st Services released details of changes to their senior mortality database and mortality tables. 21st Services conducted an analysis of their database (which contains over 90,000 lives), resulting in the decision to adjust their mortality tables to allow for their experience to date.

The changes primarily affected lives over 90 years old, with mortality rates reducing in this range of the table. As a consequence of the reduction in mortality rates, life expectancies produced by 21st Services are now notably longer on average than those produced using the previous table. Additionally, 21st Services made adjustments to their treatment of lives with multiple impairments, which again resulted in longer life expectancy estimates on average.

Following these changes, AAO obtained revised versions of all 21st Services LEs received since April 2013. The updated LEs were not based upon new underwriting or medical information; they were simply reissued using 21st Services' current methodology. On average, the revised 21st Services LEs were 18% longer. Allowing for the fact that we used three different LE providers, this resulted in an overall 5.8% reduction in the November portfolio valuation.

Following the LE update programme undertaken during 2014, 81% of the portfolio by death benefit is valued using LE assessments obtained in the past two years. The Board is expected to continue to operate a rolling LE update programme during 2015.

The following table shows the distribution by death benefit of the policies in the portfolio by LE band. Policies are grouped by 6 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 31 December 2014 valuation.

It is important to stress 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.

At 31 December 2014:

Life Group (Parent Company) Distribution (Top 5)

Credit Quality Distribution by Holding Life Company

Following the acquisition of Lincoln Benefit Life Company by Resolution Life Holdings, Inc., which completed in April 2014, A.M. Best downgraded the financial strength rating of Lincoln Benefit Life Company from A+ to A-. Resolution Life considers Lincoln Benefit a core operating subsidiary and plans to continue to operate the company as a run-off block of business.

A.M. Best stated that the rating of Lincoln Benefit Life Company is reflective of a run-off company that is expected to maintain a strong capitalisation profile. A.M. Best also stated that an upward rating movement is unlikely in the near term.

This affected one policy in the portfolio with a face value of US$2.0m equating to 1.5% of the portfolio. Overall, 96.1% of the portfolio by valuation has an A.M. Best rating of A or higher.

Period Review

This six month reporting period witnessed three maturities compared to seven in the previous six months. However, in terms of total death benefit realised, this period has improved compared with the previous period; US$10.5m this period versus US$7.6m in the previous six months. This reaffirms the fact that short term performance is driven not just by the frequency of maturities, but also the size of the policy maturities.

The average death benefit associated with each life insured in the portfolio is US$1.8m, but there is considerable variation in the size of individual death benefit amounts. The table below illustrates the distribution of the 75 lives in the portfolio by death benefit as at 31 December 2014. Where a life insured represents more than one policy in the portfolio, the life is categorised according to the total death benefit relating to that life:

Although the largest policy in the portfolio (by face value) matured during the period, a large proportion of the total death benefit remains linked to a relatively small proportion of lives. 19 lives (25% of total lives) account for 58% of the total death benefit and 59% of the reported valuation.

Market Review

With the high levels of volatility prevailing in the traditional capital markets, institutional investors are searching for alternative assets that are not highly correlated to the equity or bond markets. As a result, the second half of 2014 resulted in further investment capital entering the life settlement market. Demand for policies therefore remains high as investors look to deploy their capital quickly to minimise cash drag. This competition for suitable policies is supporting market prices and prices are expected to remain at current levels for the foreseeable future.

With Life Expectancy assumptions so critical to the pricing and valuation of policies, LEs remain a key focus of the life settlement industry. The adjustment to LEs announced by 21st Services in September has reduced the disparity between the LEs provided by the major assessment firms. The convergence of LE estimates is likely to give investors more comfort, and attentions now turn to the forthcoming release of the 2014 Valuation Basic Table (VBT) mortality table.

The Society of Actuaries has released preliminary 2014 VBT mortality tables for comment from the Life Insurance industry, but has not yet published the final tables. Life settlement investors are monitoring the situation closely due to the significant impact the release of the last mortality table (2008 VBT) had on LE assessments. The release of the 2008 VBT resulted in significant lengthening of LEs as the underwriters rebased their mortality tables with the new population data.

However, the consensus in the life settlement market is that the release of the 2014 VBT will not have as significant an impact on the LE assessments provided by the LE underwriters. This is due to the fact that the LE underwriters have now built up significantly more of their own mortality data and therefore do not rely on the wider insured population data to the extent that they used to. All three of the LE underwriters used by AAO have indicated that they do not expect to make changes to their LE assessments as a direct result of the release of the 2014 VBT.

Outlook

The life settlement market is likely to remain competitive in 2015 as demand for policies continues to outweigh supply. Large investors will continue to look to the tertiary market in an attempt to source blocks of policies from existing portfolio holders. Market conditions will continue to be monitored closely to identify favourable sales opportunities should they arise.

SL Investment Management Limited

27 February 2015

Manager's Review

For the period from 1 July 2014 to 31 December 2014

Borrowings

A new Revolving Credit Facility of US$10 million was signed for a period of two years with AIB Group (UK) PLC until 31 March 2016. As at 31 December 2014, US$1,000,000 was drawn down under this facility. This compared to a nil balance drawn down as at 30 June 2014.

Since the period-end, the Company has repaid US$1,000,000 from matured policies and has not drawn down any further amounts. The loan balance at the date of this report stands at nil.

Under the terms of the Revolving Credit Facility, the Company is required to maintain asset cover (i.e. asset value divided by borrowing) of at least 3 times. As at 31 December 2014, the asset cover was 46.7 times.

FATCA

During the period the Company was registered with the IRS as a Foreign Financial Institution for the purposes of the Foreign Account Tax Compliance Act (FATCA).

Change of Name of Manager

On 28 November 2014 Allianz Global Investors Europe GmbH changed its name to Allianz Global Investors GmbH. The contractual arrangements with its UK Branch remain unchanged.

US dollar exposure

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

Allianz Global Investors GmbH, UK Branch

27 February 2015

Condensed Statement of Comprehensive Income

For the period from 1 July 2014 to 31 December 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 22 to 32 of the half year report and below are an integral part of these condensed financial statements.

Condensed Statement of Financial Position

As at 31 December 2014

These condensed financial statements were approved by the Board of Directors on 27 February 2015.

Signed on behalf of the Board.

Director Director

27 February 2015

The notes on pages 22 to 32 of the half year report and below are an integral part of these condensed financial statements.

Condensed Statement of Changes in Redeemable Participating Preference Shareholders' Funds

For the period from 1 July 2014 to 31 December 2014

The notes on pages 22 to 32 of the half year report and below are an integral part of these condensed financial statements.

Condensed Statement of Cash Flows

For the period from 1 July 2014 to 31 December 2014

The notes on pages 22 to 32 of the half year report and below are an integral part of these condensed financial statements.

Portfolio of Investments

As at 31 December 2014

Notes to the condensed financial statements

For the period from 1 July 2014 to 31 December 2014

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 preference shares (the "shares") in the Company have been admitted to the Official List of the UK Listing Authority with a premium listing and to trading on the London Stock Exchange's main market for listed securities. The Company's objective in respect of the Fund is to provide investors with an attractive capital return through holding to maturity (or until the end of the life of the Fund), a diversified portfolio of US Traded Life Interests ("TLIs"), notwithstanding the Company may make sales of selected policies from time to time.

2 Principal Accounting Policies

(a) Basis of preparation

 Statement of compliance

The condensed financial information for the six months ended 31 December 2014 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 2014, 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 2014, 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, as detailed below under note 2(b).

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

Functional and Presentational Currency

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

Critical accounting judgements and key sources of estimation uncertainty

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

Adoption of new and revised standards

In the current year, the Company has adopted IFRS13 "Fair Value Measurement" but this

has not had a material impact on the financial statements.

 (b) 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. 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 on initial recognition.

Recognition and basis of measurement

The ongoing payment of premiums on TLIs are recognised on a paid basis and are initially held at cost, being the consideration given.

Valuation

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 third party LE underwriters, the Investment Manager (or the Directors, where stated):

· Death benefit payable under the policy;

· Mortality using the 2008 Valuation Basic Table (Ultimate) and the most recent life expectancy for each policy;

· Premiums payable under the policy; and

· An estimate of a market based discount rate derived by the Directors.

There is inherent uncertainty within the valuation such that the valuation may be materially different from either the value on maturity or the realisable sale value of these investments.

The significant unobservable inputs used in the valuation of the Company's assets, Life Settlement policies, are the Life Expectancy (LE) and the discount rate.

The LE for each insured has been sourced from the major recognised providers of LE assessments that are used in the Life Settlement market or, where these are not available, standard US population mortality tables have been used to derive the LE. The LE for each insured as at 31 December 2014 lies in the range of 2.3 years to 8.2 years.

The Company has adopted a discount rate of 12% for each policy.

The valuation basis of the portfolio is specified by the Board and the Investment Manager computes the portfolio valuation monthly. Analysis is provided to the Board, on a monthly basis, of the change in value of the portfolio over this period.

The Board receives regular updates from the Investment Manager on market activity and has periodically submitted policies to market, to compare the individual computed policy valuations to indicative market values.

(b) Investments (continued)

The impacts on the portfolio of varying the LE and varying the discount rate are as indicated in the sensitivity matrix included in the Chairman's Statement.

Typically, an increase in the LE will reduce the value of a policy and conversely a reduction in the LE will increase the value of a policy.

Typically, an increase in the discount rate will reduce the value of a policy and conversely a reduction in the discount rate will increase the value of a policy.

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 a policy is sold.

(c) 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 increased from nil as at 30 June 2014 to US$1,000,000 (£641,334) as at 31 December 2014. The asset cover as at 31 December 2014 was 46.7 times (30 June 2014: n/a. At the date of this report borrowings were nil).

The Board has considered the position should AIB Group (UK) PLC not renew the agreement beyond 31 March 2016 and should alternative credit facilities not be available. Acknowledging that if combined with a drought in maturities, 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.

A continuation vote will be put to the Shareholders at the 2015 Annual General Meeting. While the Directors cannot be certain what the result of this vote will be, the financial statements are prepared on a going concern basis supported by the Directors' current assessment of the Company's ability to continue in existence for the foreseeable future and shareholder interest in the continuation of the Company. Based on the above, the Directors have 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 in preparing the financial statements.

(d) Interest income

Bank deposit interest is accounted for on an accruals basis.

(e) Expenses

Expenses are accounted for on an accruals basis and all amounts have been allocated to the Statement of Comprehensive Income - revenue account.

(f) Foreign exchange

Foreign currency monetary assets and liabilities are translated into sterling at the rate of exchange ruling at the reporting date. Transactions in foreign currencies are translated into sterling at the rate ruling at the date of the transaction. Realised and unrealised foreign exchange gains and losses are recognised in the Statement of Comprehensive Income and in the capital reserve - realised, and capital reserve - unrealised, respectively.

(g) Bank borrowings

Interest bearing bank loans and overdrafts are recorded when the proceeds are received. Interest payments are recognised in the Statement of Comprehensive Income in the period in which they are incurred.

3 Interest and similar income

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 Gross Assets.

Allianz Global Investors GmbH, UK Branch, 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.

The original fee payable to the Manager was 0.4% per annum of the Company's Gross Assets. With effect from 1 July 2013 the fee payable to the Manager was reduced to 0.3% per annum of the Company's Gross Assets. These fees are shown in the Statement of Comprehensive Income.

Prior to 1 July 2013 the fixed fee payable was £20,000 per annum for the provision of Administration and Secretarial Services. From the same date the fixed fee for the provision of Administration and Secretarial Services was increased from £20,000 to £30,000 per annum. These fees are shown under Other Expenses in the table in Note 5.

With effect from 1 September 2009 the fixed fee payable under Administration Agreement between the Company and Kleinwort Benson (Channel Islands) Fund Services Limited (formerly Kleinwort Benson (Guernsey) Fund Services Limited) is £50,000 per annum.

5 Other expenses

*In previous periods sundry expenses included various legal and professional fees in addition to mailing services, tax exempt fees, stock exchange fees and other sundry costs. For this and future periods legal and professional fees have been recategorised accordingly.

6 Taxation

The Company is exempt from Guernsey Income Tax under the local Income Tax (Exempt Bodies) (Guernsey) Ordinances and is charged an annual exemption fee of £600 which is 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 for in these accounts, as the Company has significant unutilised tax losses which are not deemed to be recoverable.

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 ongoing requirements in Chapter 3 of Part 2 Investment Trust (Approved Company) Tax Regulations 2011 (Statutory Instrument 2011/2999).

In the opinion of the Directors, the Company has conducted its affairs in such a manner that it continues to meet these eligibility conditions.

7 Return per share

Revenue deficit per share is based on the net deficit attributable to the shares of £371,749 (December 2013: deficit £438,716, June 2014: deficit £774,514) and on the average number of shares in issue of 72,000,000 (December 2013 and June 2014: 72,000,000). Capital return per share is based on the net capital increase attributable to the shares of £3,918,611 (December 2013: deficit £1,431,768, June 2014: deficit £1,946,705) and on the average number of shares in issue of 72,000,000 (December 2013 and June 2014: 72,000,000).

8 Net Asset Value per share

The net asset value per share is based on net assets attributable to the shares of £34,293,122 (December 2013: £33,036,994, June 2014: £32,186,259) and on the 72,000,000 shares in issue at the period end (December 2013 and June 2014: 72,000,000).

9 Investments

10 Other receivables and maturity proceeds receivable

11 Other payables

12 Loan facility

On 31 March 2014 the Company signed a new revolving credit facility agreement with AIB Group (UK) PLC ("the Lender") for up to USUS$10 million expiring on 31 March 2016. This is designed to allow the Company to continue fulfilling its financial obligations, including the payment of premiums until that date. As at 31 December 2014 the Company's drawings under this new agreement were USUS$1,000,000 (£641,334) (30 June 2014: USUS$nil).

Interest on the new revolving credit facility agreement is payable at LIBOR plus 3.25% (30 June 2014: 3.25%). Under the new revolving credit facility agreement the primary covenant obliges the Company to maintain cover (i.e. asset value, subject to certain adjustments, divided by borrowings) above 3 times. The asset cover as at 31 December 2014 was 46.7 times (30 June 2014: n/a).

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. The Management shares shall only have the right to vote when there are no Participating shares of any cell in issue.

40,000,000 Shares were issued in the Fund at £1 per share on 25 March 2004. The issue costs incurred of £831,764 were debited against the share premium account to leave net proceeds of the share issue of £39,168,236.

Following a Placing and Open Offer 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 proceeds of the share issue of £9,746,732.

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.

The holders of shares attributable to the Fund will be entitled to participate only in the income, profits and assets attributable to that fund. On winding up the holders of shares are entitled to participate only 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. Shareholders shall be offered the opportunity to vote on the continuation of the Fund at the Annual General Meeting in 2015 and annually thereafter.

On 8 August 2014 72,000,000 B shares were issued 1 for 1 pro rata to Shareholders and redeemed for the amount paid up and the cash proceeds, representing a capital distribution of 2p per share, were paid to Shareholders amounting to £1,440,000.

14 Net assets attributable to shareholders