Life Settlemen Regulatory News (LSAA)

LIFE SETTLEMENT ASSETS PLC 

(the "Company" or "LSA") 

LEI: 2138003OL2VBXWG1BZ27 

Annual Results Announcement for the year ended 31 December 2021

STRATEGIC REPORT

Introduction

LSA, a closed-ended investment trust company which invests in, and manages, portfolios of whole and fractional interests in life settlement policies issued by life insurance companies operating predominantly in the United States, is pleased to announce its financial results for the year ended 31 December 2021. The annual financial report is being made available to be viewed on the Company's website at https://www.lsaplc.com/investor-relations/company-reports/ and will be submitted to and available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The well-established US life settlement market enables individuals to sell their Policies to investors at a higher cash value than they would otherwise receive from insurance companies if they were cancelled or surrendered at the date of sale. Certain of the investments by the Company in these life settlement assets have been made at a significantly discounted acquisition cost from distressed situations where the original purchaser of the Policy is in liquidation.

Corporate objective

The Company's objective is to generate long-term returns for investors by managing its portfolios of life settlement interests so that the realised value of the Policies at maturity exceeds the aggregate cost of acquiring the Policies, ongoing premiums, management fees and other operational costs.

Core competencies

Through the combination of its Board and its strategic partnerships with service providers, LSA has core competencies in the following areas:

• assessment of the underlying value of life settlement policy portfolios;

• access to investment opportunities, especially to portfolios of policies where the Company already has an interest;

• management of strategic partnerships with service providers providing investment management, actuarial, administration, company secretarial and tracking services to enable the efficient operation of its business; and

• cash flow management to balance returns to Shareholders with financing ongoing acquisition costs.

Through these competencies the Company has developed a successful track record of realising value for Shareholders.

STRATEGIC ISSUES AND REPORTING

The Strategic Report has been prepared to help Shareholders understand the operation of the Company and assess its performance.

Basis of preparation

The Strategic Report has been prepared in accordance with the requirements of Section 414A to 414D of the Companies Act 2006 (the "Act"). The Strategic Report also discloses the Company's risks and uncertainties as identified by the Board, the key performance indicators used by the Board to measure the Company's performance, the strategies used to implement the Company's objectives, the Company's environmental, social and ethical policy and the Company's anticipated future developments.

Section 172(1) Statement

Under Section 172 ("s172") of the Companies Act 2006 the directors of a company are required to act in the way they consider will most likely promote the success of the company for the benefit of its members as a whole. In doing this, section 172 requires directors to include these factors:

● likely consequences of any decisions in the long-term;

● interests of the company's employees;

● need to foster the company's business relationships with suppliers, customers and others;

● impact of the company's operations on the community and environment;

● desirability of the company maintaining a reputation for high standards of business conduct, and

● need to act fairly as between members of the company.

In discharging the s172 duties the Board has regard to the factors set out above, although it should be noted that the Company does not have any employees. It also has regard to other factors where relevant. It is acknowledged that every decision the Board makes will not necessarily result in a positive outcome for all stakeholders. By considering the Company's purpose and objectives together with its strategic priorities and having a process in place for decision-making, the Board does, however, aim to make sure that decisions are fully evaluated before implementation.

It is normal practice for Investment companies to delegate authority for day-to-day administration and management of the assets to third parties. At every Board meeting a review of financial and operational performance, as well as legal and regulatory compliance, is undertaken. The Board also review other areas over the course of the financial year including the Company's business strategy; key risks; stakeholder-related matters; diversity and inclusivity; environmental matters; corporate responsibility and governance, compliance and legal matters.

During the year, the Board received information to understand the interests and views of the Company's key stakeholders; Shareholders, the Administrator; Acheron as Investment Manager to the Trust, the Trust responsible for the portfolio and the Servicing Agents. Mr Edelstein, who was a Director of the Company until 31 December 2020, sits as trustee of the Trust and provides regular updates to the Board. This information was distributed in a range of different formats including reports and presentations on the Company's financial and operational performance, non-financial KPIs, risk and the outcomes of specific engagements with stakeholders. As a result, the Board have received useful feedback which allows them to understand the nature of any stakeholder concerns and to comply with the s172 duty to promote the success of the Company. The Board engages with the key stakeholders in a variety of ways, including the publication of Annual and Half-Yearly Reports and Accounts, monthly fact sheets, announcements of results, information provided on the Company's website and at the Annual General Meeting. Shareholders are invited to contact the Directors at any opportunity either via Acheron or through the Company Secretary.

During the year the Board has considered:

the distribution of cash through dividends to Shareholders and returned USD 5.1 million as shown in Note 17;

the retention of cash as working capital to meet the payment of ongoing premiums to service the portfolio of life policies;

the assessment of the valuation of the portfolio during the year including selecting an appropriate discount factor based on research available and the mix of policies in the portfolio;

the advantages and disadvantages of the merger of share classes A and B and concluding that the cost savings, strengthening of ownership of the underlying policies and improvement in the marketability of the Company's shares meant that the proposal should be put to a Shareholder vote at a General Meeting. This was subsequently passed by Shareholders on 26 May 2021. Further details are given in the Circular issued on 30 April 2021;

the purchase of additional policies from the ABC Trust for USD 11.1 million;

●the outcomes of meetings with the Trustees and Servicing Agents in the United States to protect the Company's interests in the Life Policies held in the Trust; and

●the impact of the continuing Covid-19 pandemic on the Company's operations, that of its service providers and on the valuation of its portfolio and concluding that the effect was expected to continue to be minimal. In making this assessment, the Board has noted that it has continued to receive all information as expected and has received confirmation from its service providers that operations are continuing as normal.

Employees

The Company has no employees as it engages third parties to provide all necessary services to the Company.

Community and Environment

As an investment trust, the Company outsources its activities to third parties, has no offices of its own nor any employees. Where possible, meetings are held electronically to reduce the Company's impact on the environment. The Company has minimal greenhouse gas emissions and is not required to report under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013 nor the Streamlined Energy & Carbon Reporting regulations. The Company does not make any political or charitable donations.

Service Providers

The Company engages a number of service providers who it regards as key to its ongoing business. The Board recognise that the continued engagement with these service providers is vital and the success of these service providers is synonymous with the success of the Company. It receives reports from providers and regularly monitors the contribution they make to the Company's operations. The Company Secretary and Investment Manager both attend Board Meetings. The Trustee of the underlying Trust and the Administrator provide regular updates to the Board during the year.

Investment Strategy

The Company seeks to generate long-term returns for investors by investing in the life settlement market. The Company aims to manage its investment in portfolios of life settlement products so that the realised value of the policy maturities exceeds the aggregate cost of acquiring the policies, ongoing premiums, management fees and other operational costs. The Company's investment Objective and Policy are stated on page 18 of the Annual Report.

Investments and underlying assets

As at 31 December 2021 the Share Class was invested in underlying assets as follows:

• Ordinary A Share Class ("LSAA") invests in life insurance policies acquired from special or "distressed" situations, with exposure to both HIV (average age mid to late 50s) and elderly insureds (average age mid to late 80s). This includes policies acquired from the merger, in April 2020, and May 2021 of share classes D, E and B with share class A. It is a widely diversified portfolio by gender and the number of lives insured with circa 4,400 underlying policies, and exposure to whole and fractional policies.

Comparative benchmarks and performance

Due to the lack of directly comparable companies investing in the secondary market in life policies, the Company does not follow a specific sector or geographic benchmark, although indirect comparisons may be made from time to time with relevant market indices

The life settlement market has a low correlation with traditional equity and fixed income markets, as returns are dependent on the actuarial and mortality rate assumptions used. This, coupled with current low interest rates, can make this an attractive alternative asset class.

The performance of the Company against its key performance indicators is shown below.

Ongoing Charges

The Company's total annual costs (investment management fees and other expenses) are 7.6% (2020: 7.1%) of net assets for the year to 31 December 2021. Excluding the servicing and legal costs the ratio would be 3.6%.

Dividends/Distributions

As shown in note 17, during the year the Company paid special dividends to LSAA Shareholders of 5.017 US cents per share (total USD 2.5 million), and to LSAB Shareholders of 17.813 US cents per share (total USD 2.6 million).

Chairman's Statement

I am pleased to present my third Annual Report as Chairman of LSA and your Company's fourth report since its admission to the London Stock Exchange in March 2018. At the time of writing, after more optimistic trends were beginning to signal a decline in the impact of the Coronavirus pandemic, the Russian invasion of Ukraine, although not impacting this Company, has brought new pressures on world markets, causing loss of life and disruption for many people.

Investment Portfolio Overview

As shown in the financial highlights below, income from maturities increased in the year to December 2021 to significantly higher levels than in 2020, with non-HIV maturities being above the long term expected mean. Our analysis shows that this was unrelated to Covid, but rather was an expression of the normal long-term cycle of the business. This has allowed the Company to develop a strong cash position, supporting the strategy of acquiring policies where attractive pricing can be achieved and then returning to paying higher dividends to Shareholders.

NAV

The year-end NAV attributable to Shareholders was USD 109.3 million, representing an uplift of USD 9.1 million during the year. After taking into account the distributions made to Shareholders totalling USD 5.1 million during the year, NAV increased by 14.2 per cent over the year (the NAV results are shown in the table below).

Further detail is contained in the Investment Manager's Report set out below.

Maturities

Maturities totalling USD 38.5 million were declared, continuing the strong start reported at the beginning of the year. Of these, USD 30.1 million were non-HIV policies, and USD 8.4 million were HIV policies.

Costs

The Company continues to manage its cost base carefully. Although the total ongoing charges ratio increased slightly from 7.1% to 7.6% of NAV in 2021 reflecting some inflation of third-party fees and an increase in the number of policies being serviced, the ongoing charges ratio excluding policy servicing fees and legal costs increased from 3.1% to 3.6% of NAV. Work continues to reduce the Company's future cost base including the revision to the Investment Manager's fees referred to below.

Legal Action

As reported previously, in order to protect the interests of the policy holders, legal action may from time to time be taken by holders of fractional interests against policy trustees in order to protect or enhance the value of existing investments. At the year-end LSA was a party to one such ongoing legal action, in which, although taking longer than originally expected, progress has nevertheless been made. The Board believes the matter should be resolved in the current year through a judicially approved sale process relating to the portfolio, in which the Company expects to have the opportunity to participate. Such participation is clearly in Shareholders' interests and with this in mind the Board has been working to build the Company's cash position.

Independent Actuarial Valuation

As in previous years, given the nature of its asset base, the Company has engaged Lewis & Ellis to provide an independent actuarial valuation of the portfolio of interests in life policies. They have confirmed that the approach taken by our Investment Manager is both accurate and represents fair value, although in the light of recent performance in the HIV portfolio, some adjustments have been made to the mortality assumptions for the future. Further details can be found in our Investment Manager's Report.

Dividends

During the year the Company made distributions to Shareholders by way of special dividends as follows:

• In June 2021, a special B dividend of USD 2.6 million (17.813 US cents per B Share) as part of the share class merger arrangements noted below.

• In November 2021, a special dividend of USD 2.5 million (5.017 US cents per A Share).

As referred to previously, the Board has acted to accumulate cash to enable participation in any court mandated sale to acquire fractions in policies in which we already hold interests. Once this process is completed, which we expect will be during the course of the current financial year, we will revisit our potential to pay a dividend and would anticipate distributing a larger proportion of earnings by way of dividends in future periods. The Board has noted with concern the discount to Net Asset Value at which the Company's shares presently trade but believe that the completion of any sale process together with a return to a greater level of dividend payments should result in a narrowing of the discount.

The Life Settlement Market

The outlook for the life settlement industry continues to remain positive with an increasing global interest in the sector. Two factors appeared to be having an increasing influence on the overall market for life settlements in 2021, which are discussed further in the Investment Manager's Report. There was increasing demand from Indian and southeast Asian investors, who are new to the life settlement market, seeking access to a non-correlated portfolio diversifier. Meanwhile, the generation coming into retirement are seeking new ways to increase retirement income or pay for long term care. These trends are expected to stimulate activity in the life settlement market from investors and secondary market participants alike, although in the longer-term margins obtainable for new investments may be affected by a decrease in the average face value of policies. Equally, given ongoing volatility in current world markets demand from investors to have exposure to risk which is not correlated to equity returns may well increase.

Structural Changes

Shareholders will remember that in 2020 the Board embarked on a simplification of its trusts and capital structure. In that year the four trusts through which the Company invests in its underlying assets were merged into a single continuing trust, the Acheron Portfolio Trust, and the merger of share Classes A, D and E was also approved by Shareholders. The Company did not include the B Ordinary Shares in these arrangements because the Board was aware that certain holders of B Ordinary Shares would not favour such a merger despite the benefits, due (in part) to the maturity profile of the B Ordinary Share portfolio.

By the beginning of 2021, however, the B Ordinary Share portfolio had seen significant maturities resulting in a change to the maturity profile, as well as changes to the constituents of the registered holders of the B Ordinary Shares. Accordingly in April 2021 the Board considered that it was appropriate to bring forward proposals for the merger of the remaining two share classes, which was approved by Shareholders on 26 May 2021.

With a single class of LSA shares, this outcome represents the final consolidation of LSA's share classes. The Board believes that the simplification of the Company's share structure now concluded will provide both improved liquidity for Shareholders, lower operating costs, and also a clearer investment case for the Company.

There were no changes to the Board composition during the year.

Revised Fee Arrangements with the Investment Manager

One of the consequences of the simplification of the share class structure has been to enable a review of the fee structure between the Company and its manager, Acheron Capital. In line with its aim of reducing its cost base over time, the Company is in discussions with a view to streamlining these arrangements and reducing fees.

Covid-19

The Board wishes to thank the management and staff of Acheron Capital and all our service providers who served the Company's interests throughout the year, in spite of the challenges imposed by the Covid-19 pandemic.

Outlook

The overall performance of the Company in 2021 was encouraging, with satisfactory cash resources at the year end. The Company continues to balance carefully the wish to make distributions to Shareholders while retaining sufficient cash resources to take advantage of opportunities to consolidate our portfolios of fractional policies at appropriate valuations.

At a time of great uncertainty around the world, the Board is reinforced in its belief that the Company's position as an alternative component in investment strategy, being uncorrelated to equity and bond markets, offers value to investors.

Michael Baines

Chairman

22 April 2022

Company Performance

Performance analysis by Share Class is provided in the tables below

* To aid comparison these figures have been restated to include the Class B share figures as at 31 December 2020.

** As at 31 December 2020, there were 58,320,157 total shares in issue. To aid comparison, the post-merger shares in issue of 49,826,784 has been used for 31 December 2020.

*** The 31 December 2020 closing share price reflects the share price of Class A only.

**** Non IFRS measures

Key Performance Indicators (KPIs)

The Board monitors success in implementing the Company's strategy against a range of Key Performance Indicators ("KPIs"), which are viewed as significant measures of success over the longer term. These key indicators are those provided in the performance tables above. Although performance relative to the KPIs is monitored over quarterly periods, it is success over the long-term that is viewed as more important. This is particularly important given the inherent volatility of maturities and short-term investment returns.

The Board has adopted the following KPIs which are summarised above:

Share Price - a key measure for Shareholders to show the most likely realisable value of this investment if it was sold. Changes in the share price are closely monitored by the Board.

NAV per share - as this is the primary indicator of the underlying value attributable to each share.

Premium/(discount) to NAV - as this measure can be used to monitor the difference between the underlying Net Asset Value and share price.

Total maturities (USD) - the value of the total maturities in USD provides an indicator of the underlying cash flow that the Company receives from its main source of income - policy maturities. There are factors which could impact the outcome of this performance measure including: average life expectancy and the age of the underlying policy holders. Please note that the Actual to Expected ("A/E") ratio, which is closely linked to the total maturities KPI, is a key method by which the Board seeks to anticipate the level of maturities. The A/E ratio measures the declared maturities compared to the projected maturities based on the actuarial models. A ratio close to 100% indicates maturities correspond exactly to the model. A percentage greater than 100% means the maturities are more than anticipated by the models and less than 100% the opposite is the case.

Earnings per share - this is a key measure of financial performance used to assess the fortunes of the Company over each financial period.

Running Costs - The Ongoing Charges of the Company for the financial year under review represented 7.6% (2020: 7.1%) of average net assets. Excluding the service and legal costs the ratio would be 3.6%.

Shareholders should note that this ratio has been calculated in accordance with the Association of Investment Companies' ("AIC") recommended methodology, published in May 2012. This figure indicates the annual percentage reduction in Shareholder returns as a result of recurring operational expenses. Although the Ongoing Charges figure is based on historic information, it does provide Shareholders with a guide to the level of costs that may be incurred by the Company in the future.

Please Note: The Company regularly uses performance measures to present its financial performance. These measures may not be comparable to similar measures used by other companies, nor do they correspond to IFRS standards or other accounting principles.

Investment Manager's Report

The Life Settlement Market

The US life settlement market slowed in 2020 due to Covid, but policy flow increased again in in 2021. Looking ahead, many market participants expressed guarded optimism about market growth, yields and the enduring appeal of life settlements as a non-correlated diversifier. The positive market forecasts reflect several key drivers. From the demand side, the financial crisis and the Covid pandemic ten years later have reminded investors to add assets to their portfolio that do not behave in line with equity markets. Increased demand was coming from regions unfamiliar with life settlements as an asset class, particularly in India and southeast Asia. As the trend of Asian investors seeking non-correlated returns has begun, there is potential for international capital to flow into the life settlement space and support demand.

The increased demand from investors is complemented with the increasing number of retiring Baby Boomers seeking ways to increase their retirement income or pay for long-term care. The increased consumer awareness and the growth in direct-to-consumer settlements will lead to an increase in the number of policies, along with a decrease in average face value as the industry further develops its mass marketing capabilities. The challenge with this factor is that it is difficult to quantify the impact of mass marketing on the gross market potential.

To summarise, the gross market potential for the life settlement industry continues to increase. That increase reflects demographics as more Baby Boomers enter the life settlement age range. The increase also reflects a shift within the industry of a wider range of policies and ages an investor is willing to consider. Adding to that shift is the development of a life settlement mass market.

Portfolio Overview

Portfolio Structure

The portfolio structure was considerably simplified in 2021, with two events. First, the merger of all share classes was finalised, tilting the profile of the portfolio towards the elderly while reducing costs. Second, the ABC portfolio (ABC is a portfolio of around 700 policies, overwhelmingly HIV) was acquired for USD 11.1 million, resulting in complete control of those policies. Again that resulted in superior cash flow in the following years as well as a reduction of costs associated with these policies.

Policy Structure

LSA's current portfolio is subdivided into policies exposed to either HIV policy holders or non-HIV policy holders. Following the merger of Class A and B, Shareholders had an aggregated gross face value of USD 101 million for life settlements (or non-HIV policies) and USD 386 million for HIV policies at the year end. The face value-weighted average age for the non-HIV segment is just below 90 years old. This typically translates into a life expectancy for a normal population of 4.5 years for men and 5.5 years for women.

HIV life expectancy is a difficult variable to assess. The current face value-weighted average age of the HIV population is about 62 years old. However actual mortality is typically higher than the biological age, exhibiting characteristics of a population materially older. Therefore, life expectancy is lower than their non-HIV peer/age group. Nevertheless, great uncertainties remain, as a 'race' is taking place between the cumulative impact of the retrovirus over time and medical advances. Overall, life expectancy of HIV policies, while lower than non-HIV, has been increasing over the last decades.

Premiums

The current total premiums paid on LSA's portfolios is about USD 16 million annually. We estimate the next year's premiums will be USD 14 million, notwithstanding any additional purchases of policies, as premiums should be reducing as policies in the portfolio progressively mature.

Fractional Interests

During 2021, investments were made in eight small portfolios of fractional interests in policies in which the Company is already a fractional owner for a total cost of USD 0.18 million. Fractional policies are single life insurance policies initially purchased by multiple investors, each of whom acquired a fractional beneficial interest. Fractional beneficial ownership does not confer control of the policy, which is typically retained by a trustee who is required to act for the benefit of all fractional owners. In some cases, to protect the interests of the policyholders, action (which may include legal action) may be taken by holders of fractional interests to regulate the performance of the relevant trustee so that opportunities for maximising the value of their investments are taken, including (for example) ensuring the premiums on fractional policies continue to be paid and avoiding lapsing. In the case of certain of its fractional interests), LSA is party to such legal proceedings against a trustee with a view to protecting the value of its investments.

Valuations

The following table provides information on the Company's policies and exposure to HIV positive insureds and non-HIV insureds, as of 31 December 2021.

HIV and Non-HIV Exposed Policies (all values in USD)

The US actuary, Lewis & Ellis Inc., has provided valuations for all portfolios for the year ended 31 December 2021. The valuations used were derived by adopting an actuarial approach.

New information being made available on existing policies contributed to a valuation gain of USD 6.4 million as at the year end.

A/E Ratio Trends

Lewis & Ellis performed a study into the actual over expected death ratio ("A/E ratio") for the period 2010-2021, based on historical data of the number of matured insureds. The actuaries then performed a new A/E study based on historical data available and proceeded with some adjustments to the mortality assumptions. In particular, the HIV A/E results for 2019-2021 were observed to have been low as shown in the table below, so that the actuaries decided to be more conservative in HIV portfolio valuation and adjust the HIV mortality assumptions to have an overall A/E ratio for the last five years at 100%.

To be noted, even though non-HIV mortality was found to be well in excess of model, the mortality assumptions of non-HIV segment remain the same as last year because the long-term A/E ratio remained at 100%.

Maturities

In the year to December 2021, the following maturities and A/E were declared:

The resulting A/E performance was:

*in the number of lives, from Lewis & Ellis Inc 2021 reports.

The non-HIV segment outperformed the expectation by above 50% in both dollar amount and the number of insureds. 41 policies of 30 insureds matured, contributing USD 30.5 million to the segment. In comparison, only 31 policies of 22 insureds matured during 2020, contributing USD 13.7 million to the segment. Further, the ongoing reduction in the size of non-HIV portfolio means the maturities will be more volatile and irregular in the future.

On the other hand, the HIV segment performed under expectations by 15% in the number of lives or 13% in monetary terms in the year under review. The A/E results had already been low for the past three years, leading to a revision of the mortality assumption. Mortality assumptions were adjusted such that overall A/E ratio for the last five years is 100%.

Company Structure

On 3 June 2021, the original Class B Ordinary Shares were merged into the Class A Ordinary Shares and the assets and liabilities attributable to Class B Ordinary Shares were attributed to the resulting enlarged group of Class A Ordinary Shareholders. Merging the relatively small B Ordinary Share Class provided a helpful simplification of the Company's structure. This structural simplification was a long-standing objective of the Board that will allow cost savings, economies of scale and a better cash flow profile. Also, the A Ordinary Shareholders will now benefit from a reduced concentration on HIV segment arising from the inclusion of the B Ordinary Share Class non-HIV only portfolio.

Going Forward

In the next few years, the non-HIV portfolio will mature much faster than the HIV portfolio, which will leave the shares predominately invested in HIV policies. We will continue to follow the recent research on mortality in general and on long-term HIV patients. The HIV mortality in the portfolio will be the most significant factor that will affect the financial outcome of the Company in the future. This will directly affect cashflow, not only in terms of the maturities level, but also in terms of premiums paid. Other factors, such as unexpected premium change or discount rate, would also have effect on cashflow, and, within a reasonable range, some effect on valuation.

Acheron Capital

22 April 2022

Overview of Strategy and Investment Policy

Investment Objective

The Company's investment objective is to generate long-term returns for investors by investing in the life settlement market. The Company has not established target rates of return with respect to its investments.

Investment Policy

The Company will seek to achieve the Company's Investment Objective in respect of the Share Class as follows:

A Ordinary Share Class (LSAA)

The assets attributable to the A Ordinary Share Class are predominantly invested in life insurance policies acquired from special or "distressed" situations, with exposure to both HIV and elderly insureds.

The Company met the Investment Policy by acquiring the entire beneficial interest in the Acheron Portfolio Trust from the Predecessor Company shortly after Admission.

As stated above the B Ordinary Share Class was merged into the A Ordinary Share Class on 3 June 2021.

Source of Policies

In respect of the Share Class, such Policies will be or have been obtained from a variety of sources, primarily in the United States.

Further Acquisitions

The Company has previously announced that it intends to retain a larger proportion of cash receipts from policy maturities in order to be in a position to fund potential investment opportunities through the acquisition and consolidation of the remaining fractions or participations of certain of the US trusts and conservatorships in which the Company was already indirectly invested. These opportunities are expected to arise over the forthcoming years as a result of the ageing (and therefore reducing size) of the underlying portfolios in which the Company is invested and as a result of the Investment Manager's proactive steps to protect and maximise the value of the assets. Accordingly, as surplus cash accumulates from policy maturities, the Board will carefully balance the amount that should be distributed to Shareholders and that which should be retained to fund future potential investment opportunities.

The Company may also raise additional capital in the future to acquire further Policies that meet the Investment Objective and Investment Policy of the Share Class (or those of a Share Class to be established in future). Such Policies will subsequently be granted to the Trust.

Investment Controls

Any transaction involving more than 10% of the Gross Asset Value of the Company, directly or indirectly, will require the prior approval of the Board in writing.

Hedging and use of derivatives

The Company and/or the Trust may also hold derivative or other financial instruments designed for efficient portfolio management or to hedge interest or inflation risks. The Trust may invest in liquidity management products as deemed fit by the Trustee or the Investment Manager, as well as mortality hedging products as deemed fit by the Investment Manager, including, but not limited to, mortality related Insurance Linked Securities ("ILS").

Dividend Policy

The Company has no stated dividend target. The Company aims to distribute a substantial portion of its funds derived from its operations as dividends to Shareholders. There can be no assurance that the Company will be able to achieve this aim.

The Company will only pay dividends on the Ordinary shares to the extent that it has sufficient financial resources available for that purpose.

In accordance with regulation 19 of the Investment Trust (Approved Company) (Tax) Regulations 2011, the Company will not (except to the extent permitted by those regulations) retain more than 15% of its income (as calculated for UK tax purposes) in respect of any accounting period.

As there is a deficit on the Revenue Reserve, all dividends are payable from the Special Reserve.

Borrowing

As at the date of this Report, the Company as a small registered Alternative Investment Fund ("AIF") does not intend to borrow due to the costs and regulatory implications that this would entail. However, the Company reserves the right to borrow in the future in appropriate circumstances and at the discretion of the Board (or, subject to the terms of the applicable Investment Management Agreement, the Investment Manager if such borrowing is at Trust level), provided that any such borrowing entered into shall be limited to a maximum of 10% of the Net Asset Value of the Share Class (at the time the borrowing is incurred).

Policy Advances

The Company utilises policy advances to provide an acceleration of the cash flow to the Company. A policy advance refers to excess cash withdrawn from cash reserves generated at the level of the life insurance contracts. Policy advances will be deducted from any proceeds when the maturities are collected. These policy advances are also described in Note 3.4 of the Annual Report. The Board is of the opinion that these policy advances do not constitute borrowing for the purposes of the Alternative Investment Fund Managers Directive ("AIFMD").

Cash Management

Pending reinvestment or distribution of cash receipts, cash received by the Company and the Trust may be held on deposit, in cash, cash equivalents, near cash instruments, money market instruments and money market funds and cash funds in line with the risk appetite specified by the Board.

The Trust's Investment Manager must ensure that the Company's and the Trust's liabilities can be met as they fall due.

Corporate and Operational Structure

The Board retains responsibility for key elements of the Company's strategy, including the following:

- the Company's investment policy which determines the diversity of the Company's portfolio. The Board sets limits and restrictions with the aim of reducing risk and maximising returns; and

- the appointment, amendment or removal of the Company's third-party service providers; and ensuring an effective system of oversight over the Company's risk management and corporate governance.

In order to effectively undertake its duties, the Board may seek expert legal advice. It can also call upon the advice of the Company Secretary.

The Board act in a way that they consider to be in good faith and is most likely to promote the success of the Company for the benefit of its Shareholders as a whole, and in doing so have regard (amongst other matters) to:

- the likely consequences of any decision in the long-term;

- the impact of the Company's operations on the community and the environment;

- the importance of the Company maintaining a reputation for high standards of business conduct; and

- the need to act fairly to avoid conflicts between the interests of the Directors and those of the Company.

The Company has outsourced various operations to various third-party service providers as detailed below:

- Investment Management: As it is an internally managed investment trust, the Company has not appointed an investment manager to provide it with investment managerial services. However, the Acheron Portfolio Trust, as the Trust holding the policy assets on behalf of the Company, has appointed the Investment Manager, Acheron Capital Limited as its investment manager under the Investment Management Agreement with effect from the date of Admission. The Investment Manager is authorised and regulated by the FCA (under reference number 443685). Further details of the Investment Management Agreement are set out in Part 6 of the Prospectus dated January 2018.

- The Trustee: The Trustee of the Acheron Portfolio Trust is Dr Robert Edelstein who served as a Director of the Company until his retirement from the Board on 31 December 2020. Robert has continued in his role as Trustee and advises the Board directly as required.

- The Registrar: The City Partnership (UK) Limited was appointed as the Company's Registrar on 26 March 2021.

- Administrator: Compagnie Européenne de Révision Sàrl has been the Administrator to the Company since its formation and was also the Administrator to the predecessor company.

- Company Secretary: ISCA Administration Services Limited was appointed as Company Secretary in December 2019.

- Tracking and Servicing Agents: The Trust has appointed a Tracking and Servicing Agent to assess on a regular basis if Consenting Individuals have passed away. If Consenting Individuals have passed away the Tracking and Servicing Agent obtains respective death certificates and ensures that they are delivered to the insurance company that issued the relevant Policy so that applicable death benefits can be claimed. The Trust has entered into a servicing agreement with the Tracking and Servicing Agent detailing the services the Tracking and Servicing Agent will provide. As at the date of this Report, Litai Assets LLC, Fort Lauderdale and the Asset Servicing Group, Oklahoma City, have both been appointed by the Trust to service life settlement policy interests owned by the Trust.

- Actuary: The Company engages an actuary to estimate the life expectancy of individuals insured under particular Policies or portfolios of Policies. Actuaries provide life expectancy or valuation estimates based on a more general set of assumptions and experience.

Risks

Principal risks

The Company is exposed to a number of potential risks and uncertainties. These risks could have a material impact on financial performance and position and could cause actual results to differ materially from expected and historical results.

The Company faces a number of risks in the normal course of its activities and as a result the management of those risks the Company faces is essential. The Board maintains the overall responsibility for risk management but has delegated to the Audit Committee the task of regular and robust assessments of the Company's risks and controls. The Audit Committee has accordingly established a robust process to identify and monitor the risks faced by the Company. The process involves the maintenance of a risk register, which identifies the principal and emerging risks facing the Company and assesses each risk on a scale, classifying the probability of the risk and the potential impact that an occurrence of the risk could have on the Company. A number of day-to-day risk management functions of the Trust are undertaken by the Trust's Investment Manager, who regularly reports to the Audit Committee.

Secondary risks specific to the Company

As described on pages 34 and 35 of the Annual Report, the Board and Audit Committee have an ongoing process of monitoring and reviewing risks and internal controls. The principal risks and mitigations are highlighted above.

Litigation risk: The assignment of life insurance policies can be a contentious matter and the sector has historically been subject to high levels of litigation.

Premium assumptions risk: Changes in the amount of premiums charged by the insurance company that has issued a Policy may increase the costs borne by the Company and adversely affect its performance.

Reliance on key individuals: The Company relies on key individuals to manage the day-to-day affairs of the Company. There can be no assurance as to the continued service of these key individuals. The departure of key individuals without adequate replacement may have a material adverse effect on the Company's prospects and results. Accordingly, the ability of the Company to achieve its investment objective depends heavily on the experience of the Investment Manager's team, and more generally, on the ability of the Investment Manager to attract and retain suitable staff.

Fluctuations in the market price of the Company's shares: The market price of the Company's shares may not reflect the Net Asset Value and may fluctuate widely in response to different factors. There can be no assurance that the Company's shares will be repurchased by the Company even if they trade materially below their Net Asset Value. Similarly, the shares may trade at a premium to Net Asset Value whereby the shares can trade on the open market at a price that is higher than the value of the underlying assets. There can be no assurance, express or implied, that Shareholders will receive back the amount of their investment in the Company's shares.

Third-Party Service Providers: The Company has no employees and the Directors have all been appointed on a non-executive basis. Whilst the Company has taken all reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations, the Company relies upon the performance of third-party service providers for its executive function. In particular, the Investment Manager, Administrator, Registrar and Company Secretary. The termination of service provision by any service provider, or failure by any service provider to carry out its obligations to the Company, or to carry out its obligations to the Company in accordance with the terms of its appointment, could have a material adverse effect on the Company's operations and its ability to meet its investment objective.

Achievement of the Investment Objective: There can be no assurance that the Company will be successful in implementing the Investment Objective.

Climate Change: The Company is aware of the impact of Climate Change across the business world and has sought to assess the impact this could have on the Company either directly or indirectly. The Company is managed and operated through a number of third-party suppliers and does not undertake any activities directly nor does it have any offices. The nature of its investments in life assurance policies is not directly impacted by Climate Change, any long-term change in climate is unlikely to have a detrimental impact on the valuation of those policies. Long-term climate change could have an impact on the ability of third-party suppliers to continue to service the Company and impact the insurance industry as a whole and its ability to meet all claims, including the maturity of life assurance policies when they are payable. The Board has sought to reduce its carbon impact through the use of conference and video calls for meetings where possible and encourages the Company's third-party suppliers to assess their own carbon impact.

For a detailed description of the Company's financial risks, please refer to Note 4 of the Annual Report.

Viability Statement and Other Disclosures

The Directors have assessed the prospects of the Company over a longer period than the 12 months referred to in the 'Going Concern' guidelines.

The Board conducted this review focusing on a period of three years. This period was selected as it is aligned with the Company's strategic planning. In making this assessment the Board also considered the Company's principal risks.

Investment trusts in the UK operate in a well-established and robust regulatory environment and the Directors have assumed that:

• investors will continue to want to invest in closed-end investment trusts because the fixed capitalisation structure is suited to pursuing the current investment strategy; and

• the Company's remit of investing in life settlement assets predominantly in the U.S. will continue to be attractive to investors.

The Company's primary source of income is from policy maturities. As the timing of these maturities is not entirely predictable the Board sometimes will need to take advantage of policy advances. The Company can utilise policy advances in order for premiums to be maintained active. A policy advance refers in this case to excess cash withdrawn from cash reserves generated at the level of the life insurance contracts. Policy advances are deducted from any proceeds when the maturities are collected.

In the unlikely event that maturities and policy advances are insufficient to meet ongoing cash and policy premium obligations, the Directors have the authority to make short-term borrowing arrangements with financial institutions. These borrowing options are explained in more detail in the Strategic Report above.

As with all investment vehicles, there is a risk that the performance of individual investments will vary and that capital may be lost but this is not regarded as a threat to the viability of the Company. Operationally, the Company retains title to all assets including the life settlement assets and cash.

The closed-end nature of the Company means that, unlike an open-ended fund, it does not need to liquidate positions when Shareholders wish to sell their shares, the expenses of the Company are predictable and modest in comparison with the assets and there are no capital commitments currently foreseen which would alter that position. Taking these factors into account, the Directors confirm that they have a reasonable expectation that the Company will continue to operate and meet its expenses as they fall due over the next three years.

The Company's portfolio consists primarily of U.S. investments, accordingly, the UK's withdrawal from the European Union on 31 December 2020 has not materially affected the prospects for the Company, but the Board will continue to keep developments under review.

In assessing the viability of the Company, the Board has fully considered the risks of the ongoing Covid-19 pandemic and the effect any additional maturities may have on insurance companies within the Life Settlement Market. The potential risk to the Company and the mitigation is shown above under Counterparty risk. The Board has considered the position of the Company in the unlikely event that maturities are not paid out in full. Over the last year the Company has returned cash received from large maturities to Shareholders in the form of dividends. It should be noted that such payments are not fixed and are at the Board's discretion based on the cash available at the time.

The Board have concluded that the effect of the current pandemic on the Company's asset valuation and its ability to service those assets through the payment of premiums is likely to be minimal.

Donations

The Company made no political or charitable donations during the year under review.

Environment, human rights, employee, social and community issues

The Company is required by law to provide details of environmental matters (including the impact of the Company on the environment), employee, human rights, social and community issues (including information about any policies it has in relation to these matters and the effectiveness of those policies). The Company does not have any employees and the Board is composed of independent non-executive Directors. As an investment trust, the Company has a minimal impact on the environment. The Company aims to minimise any detrimental effect that its actions may have by adhering to applicable social legislation, and as a result does not maintain specific policies in relation to these matters.

The Company has no internal operations and therefore no greenhouse gas emissions to report nor does it have responsibility for any other emissions producing sources, including those within its underlying investment portfolio.

In carrying out its investment activities and in relationships with suppliers, the Company aims to conduct itself responsibly, ethically and fairly.

Modern Slavery Act

The Company is not within the scope of the Modern Slavery Act 2015 because it has insufficient turnover and is therefore not obliged to make a human trafficking statement.

Approval

The Strategic Report was approved by the Board of Directors on 22 April 2022 and signed on its behalf by:

Michael Baines

22 April 2022

GOVERNANCE

Extract from Report of the Directors

Share Capital

Following Shareholder approval at the general meeting and class meetings held on 26 May 2021, the Company converted 14,596,098 B Ordinary shares of USD 0.01 into 6,102,725 A Ordinary shares. The remaining 8,493,373 B shares were designated as Deferred Shares and subsequently cancelled. At the year-end there were 49,826,784 A Ordinary shares of USD 0.01 each in issue. All shares are listed on the Specialist Fund Segment of the main market of the London Stock Exchange.

Going Concern

The Financial Statements of the Company have been prepared on a going concern basis. The forecast projections and actual performance are reviewed on a regular basis throughout the period. In assessing the Company's ability to continue as a going concern the Board has fully considered the effect of the ongoing pandemic. Further details are shown in the Viability Statement on page 25 of the Annual Report. The Directors believe that it is appropriate to prepare the Financial Statements on a going concern basis and that the Company has adequate resources to continue in operational existence for a period of at least 12 months from the date of the approval of the Financial Statements. The Company is able to meet, from its assets, all of its liabilities including annual premiums and its ongoing charges.

The full Annual Report and Accounts contains the following statement regarding responsibility for the Financial Statements:

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with UK adopted international accounting standards and applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors are required to prepare the Financial Statements in accordance with UK adopted international accounting standards. Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that period.

In preparing these Financial Statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with UK adopted international accounting standards, subject to any material departures disclosed and explained in the Financial Statements;

• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and

• prepare a Directors' Report, a Strategic Report and Directors' Remuneration Report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the Annual Report and accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for Shareholders to assess the Company's performance, business model and strategy.

Website Publication

The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.

Directors' Responsibilities Pursuant to DTR4

The Directors confirm to the best of their knowledge:

• The Financial Statements have been prepared in accordance with the applicable set of Accounting Standards, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company.

• The Annual Report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that they face.

Michael Baines

Chairman

22 April 2022

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2021 or 31 December 2020 but is derived from those accounts. Statutory accounts for the year ended 31 December 2020 have been delivered to the Registrar of Companies and statutory accounts for the year ended 31 December 2021 will be delivered to the Registrar of Companies in due course. The Auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's reports can be found in the Company's full Annual Report and Accounts at www.lsaplc.com

Life Settlement Assets PLC

Statement of Comprehensive Income

for the year ended 31 December 2021

\* The returns per share for the previous year have been restated to reflect the merger of share classes A and B.

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

The Company does not have any income or expense that is not included in the profit for the year and therefore the profit for the year is also the total comprehensive income for the year.

The total column of this statement is the Statement of Total Comprehensive Income of the Company. The supplementary revenue and capital columns are prepared in accordance with the Statement of Recommended Practice ("SORP") issued by the Association of Investment Companies ("AIC") in April 2021.

The notes form part of these Financial Statements.

Life Settlement Assets PLC

Statement of Financial Position

as at 31 December 2021

\* To aid comparison these figures have been restated to show only one class of share at 31 December 2020.

These financial statements were approved by the Board of Directors on 22 April 2022 and signed on its behalf by:

Michael Baines, Chairman

Registered in England and Wales with Company Registration number: 10918785

The notes form part of these Financial Statements.

Statement of Changes in Equity

for the year ended 31 December 2021

The Special Reserve was created as a result of the cancellation of the Share Premium Account following a court order issued on 18 June 2019. The Special Reserve is distributable and may be used to fund purchases of the Company's own shares and to make distributions to Shareholders.

The Revenue and Realised Capital Reserves are also distributable reserves.

The notes form part of these Financial Statements.

Life Settlement Assets PLC

Cash Flow Statement

for the year ended 31 December 2021

Included in cash flow used in operating activities is interest paid, USD 732,000 (2020: USD 964,000); dividends and interest received, USD 947,000 (2020: USD 818,000).

The notes form part of these Financial Statements.

Life Settlement Assets PLC

Notes to the Financial Statements

for the year ended 31 December 2021

1. GENERAL INFORMATION

Life Settlement Assets PLC ("Life Settlement Assets" or the "Company") is a public company limited by shares and an investment company under section 833 of the Companies Act 2006. It was incorporated in England and Wales on 16 August 2017 with a registration number of 10918785. The registered office of the Company is 115 Park Street, 4th Floor, London W1K 7AP.

The principal activity of Life Settlement Assets is to manage investments in whole and partial interests in life settlement policies issued by life insurance companies operating predominantly in the United States.

In May 2018, the Company received confirmation from HM Revenue & Customs of its approval as an Investment Trust for tax accounting periods commencing on or after 26 March 2018, subject to the Company continuing to meet the eligibility conditions contained in section 1158 of the Corporation Tax Act 2010 and the ongoing requirements in Chapter 3 of Part 2 of the Investment Trust (Approved Company) (Tax) Regulations 2011 (Statutory Instrument 2011/2999).

The Company currently has one class of Ordinary Shares in issue, the A Shares, which principally participates in a separate portfolio of life settlement assets and associated liabilities, which were acquired from Acheron Portfolio Corporation (Luxembourg) SA ("APC" or the "Predecessor Company") on 26 March 2018.

On that date, the Company entered into an Acquisition agreement with the Predecessor Company. Following the agreement, all assets and liabilities of APC have been transferred to the Company as an in-specie subscription for ordinary shares. More specifically:

- 100% of the interest in the Acheron Portfolio Trust was attributed to the ordinary A shares;

- 100% of the interest in the Lorenzo Tonti 2006 Portfolio Trust was attributed to the ordinary B shares;

- 100% of the interest in the Avernus Portfolio Trust was attributed to the ordinary D shares;

- 100% of the interest in the Styx Portfolio Trust was attributed to the ordinary E shares; and

- any cash and other net assets have been recorded in the books of the Company as being attributable to the class of ordinary shares which corresponded to the existing class of shares in APC to which such cash and other net assets were attributable.

Net assets acquired from the Predecessor Company have been valued for the purpose of Section 593 of the Companies Act by Mazars LLP as at 31 December 2017, based on the net asset values as at that date less any distributions to shareholders of the Predecessor Company prior to the date of acquisition.

The D Ordinary Share Class and E Ordinary Share Class were merged into the A Ordinary Share class on 30 April 2020 and the B Ordinary Share Class merged into the A Ordinary Share Class on 3 June 2021.

Statement of compliance with IFRS

The Company's Financial Statements have been prepared in accordance with UK adopted International Accounting Standards and with the requirements of the Companies Act 2006. as applicable to companies reporting under those standards. They have also been prepared in accordance with the SORP for investment companies issued by the AIC in April 2021, except to the extent that it conflicts with International Accounting Standards.

 2. IFRS ACCOUNTING POLICIES

2.1 Basis of preparation

The Financial Statements have been prepared using the accounting policies specified below and in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. On 31 December 2020, IFRS as adopted by the European Union at that date was brought into the UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. The Company transitioned to UK-adopted International Accounting Standards in its Financial Statements on 1 January 2021.There was no impact or changes in accounting from the transition. The Financial Statements have been prepared on a going concern basis under the historical cost convention except for the measurement at fair value of investments held at fair value through profit or loss. The going concern statement can be found on pages 29 and 30 of the Annual Report. The Company's activities, together with the material risk factors likely to affect its future development and performance, as well as the Board of Directors' "Viability Statement" are set out in the Strategic Report on page 25 of the Annual Report. The Board have fully considered the impact of the Covid-19 pandemic in making this assessment.

2.2 Changes in accounting policy and disclosures

Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Company

The following new standard has been published but is not effective for the Company's accounting period beginning on 1 January 2021. The Directors do not expect the adoption of the following new standard, amended standard or interpretation to have a significant impact on the Financial Statements of the Company in future periods.

IFRS 17 "Insurance contracts" applies to insurance contracts, including re-insurance contracts issued by an entity; re-insurance contracts held by an entity; and investment contracts with discretionary participation features issued by an entity that issues insurance contracts. IFRS 17 will be effective for reporting periods beginning on or after 1 January 2023. As IFRS 17 is not relevant to the life settlement market, it is expected that IFRS 17 will have no impact on the Company's Financial Statements.

3. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies, all of which have been applied consistently throughout the year, are set out on pages 59 to 63 of the Annual Report.

4.GAINS/(LOSSES)/ FROM LIFE SETTLEMENT PORTFOLIOS

When a maturity is declared, a realised capital income or loss is recognised on the investment in the policy, calculated by deducting from the value of the maturity the initial acquisition cost and the previously unrealised fair value adjustments.

The amount of premiums incurred during the year is reflected as a deduction of income from life settlement portfolios. The amount of premiums paid in advance amounted to USD 6,525,000 (2020: USD 8,354,000) as at 31 December 2021.

5. INCOME FROM LIFE SETTLEMENT PORTFOLIOS

A number of policies in which the Company invests have an embedded entitlement to dividends and interest as shown above.

6. OTHER INCOME

Other income comprises:

Other operating income mainly refers to reversal of accrued expenses made by the Predecessor Company and where incurred expenses by the Company were lower.

7. MANAGEMENT FEES AND PERFORMANCE FEES

Under an agreement dated 26 March 2018, the Investment Manager is entitled to a management fee payable by the Trust at an annual rate of no more than 1.5% of the Net Asset Value for class A and the previous class B and 1.5% and 2% for class D and E respectively until the date of the merger on 30 April 2020. Management fees paid during the year amounted to USD 1,547,000 (2020: USD 1,674,000).

The Performance fee in respect of the Trust shall be an amount equal to 25% of the sum of the distributions made to the holders of the Shares in the Company corresponding to the Trust, in excess of the Performance Hurdle (assessed at the time of each distribution).

The "Performance Hurdle" is met when (from time to time) the aggregate distributions (in excess of the Catch-Up Amount) made to the holders of the corresponding Ordinary Shares compounded at 3% per annum for classes A and B prior to 3 June 2021, and, prior to 30 April 2020, 5% for classes D and E (from the date of each distribution) equal the aggregate investment made by the Ordinary Shares in the Company (from time to time) compounded at 3% and 5% respectively.

The "Catch-Up Amount" is an amount equal to the distributions that would have been required to be made to the Predecessor Company's shareholders of the corresponding share class in order for the Accrued Performance Distributions (less, where applicable, any clawback of such Accrued Performance Distributions) to be paid (determined as at 31 December 2021), reduced by an amount equal to any distributions paid to the Predecessor Company's shareholders of the relevant share class prior to the Acquisition.

The accrued performance fees (Note 12) include an amount of USD 339,000 (2020: USD 339,000) assumed from the Predecessor Company. The performance fee provision has been increased by USD 2,509,000 in relation to the performance of the portfolio for the year ended 31 December 2021.

8. TAXATION

As at 31 December 2021, the Company has tax losses and excess management expenses of USD 32,958,000 (2020: USD 22,665,000) that are available to offset future taxable profits. A deferred tax asset has not been recognised in respect of those losses as due to the Company's status as an investment trust it is not expected to generate taxable income in the future against which such losses can be utilised. There is no expiry date to these losses.

Provided the Company maintains its status as an investment trust, then any capital gains will remain exempt from Corporation Tax.

The Company suffers US withholding tax on income received from dividends and interest.

Withholding tax on matured policies

In accordance with the taxation treaty between the United States of America and the United Kingdom, withholding tax on matured policies is not due if at least 6% of the average capital stock of the main class of Shares is traded during the previous year on a recognised stock exchange. The Board believes that in the period ended 31 December 2021 the Company fulfilled this requirement.

9. RETURN PER SHARE

Basic and diluted earnings per share is total earnings after taxation divided by the weighted average number of shares in issue during the year. All Shares are fully paid. Neither unpaid shares nor any kind of option are outstanding, so the basic (loss)/profit per share is also the diluted (loss)/profit per share.

* Restated to reflect the merger of share class B with share class A.

10. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

The life settlement portfolios have been classified as financial assets held at fair value through profit or loss as their performance is evaluated on a fair value basis.

The fair value hierarchy set out in IFRS 13 groups financial assets and liabilities into three levels based on the significant inputs used in measuring the fair value of the financial assets and liabilities.

The fair value hierarchy has the following levels:

- level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

- level 2: inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

- level 3: inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The life settlement portfolios of USD 88,024,000 (2020: USD 77,643,000) are classified as level 3. At the year end, these portfolios were valued by the external actuaries using an actuarial model as discussed in Note 14 of the Annual Report.

11. FINANCIAL ASSETS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS: LIFE SETTLEMENT PORTFOLIOS

Distribution of the portfolio by class of Shares and by type of risk:

Fair market value reflects the view of the US actuary. The Investment Manager of the Trust in which the policies are kept (Acheron Capital) has also set up an internal actuarial model to value the policies and produces monthly valuations.

Under the terms of the A/B share class merger, as fully documented in the Circular published on 30 April 2021, and in note 20 on page 76 of the Annual Report, the B shares were redesignated as A shares on 3 June 2021.

12. PROVISION FOR PERFORMANCE FEES

The Performance fee does not have a fixed date for repayment but can become payable immediately in the event that:

a. a crystallisation event as set out in the Investment Management Agreement occurs; or

b. distributions to Shareholders exceed the Performance Hurdle as described in Note 7.

As a result, the Performance fee has been treated as a current liability.

The merger of class D and E shares with class A shares in April 2020 was a crystallisation event as set out in the Investment Manager Agreement and, as such, the performance fees for class D and E became payable. As a result, performance fees of USD 2,868,000 (class D: USD 1,944,000 and class E: USD 924,000) were paid in the previous year.

13. NET ASSETS AND NET ASSET VALUE PER CLASS OF SHARES

The net assets and net asset value (NAV) for each class of Shares are shown below.

To aid comparison the figures to 31 December 2020 have been restated to show one share class.

14. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

At the year end, the Company has no (2020: nil) capital commitments in respect of life settlement portfolios. Life settlements portfolios do require continued payments of insurance premiums unless the Company decides not to renew the policies.

15. RELATED PARTY TRANSACTIONS

Related parties to the Company are the members of the Board of Directors of the Company, Compagnie

Européenne de Révision S.à r.l. as Administrator who, until 31 December 2020, had a member on the Board of Directors and the Trustee of the US trust who was also a member of the Board of Directors until 31 December 2020.

All transactions with related parties are undertaken at arm's length.

16. POST BALANCE SHEET EVENTS

There are no post balance sheet events to report.

17. DIVIDENDS

The Company has paid the following dividends during the year:

No final dividend in respect of the year ended 31 December 2021 will be paid.

18. STATUTORY INFORMATION

These are not full accounts in terms of section 434 of the Companies Act 2006. The Annual Report for the year to 31 December 2021 will be sent to Shareholders shortly and will then be available for inspection at Suite 8, Bridge House, Courtenay Street, Newton Abbot TQ12 2QS, the office of the Company Secretary. Copies of the Annual Report will shortly be available on the Company's website, www.lsaplc.com. Statutory accounts will be delivered to the Registrar of Companies after the Annual General Meeting.

19. ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held on Thursday, 23 June 2022 at 2.30 p.m. at the offices of Acheron Capital Limited, 115 Park Street, Fourth Floor, London W1K7AP.

Contact details for further enquiries:

Jean-Michel Paul of Acheron Capital Limited (the Investment Manager), on 020 7258 5990.

ISCA Administration Services Limited (the Company Secretary) on 01392 487056 or by e-mail lsa@iscaadmin.co.uk

DISCLAIMER

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

NATIONAL STORAGE MECHANISM

A copy of the 2021 Annual Report and Accounts will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at:

https://data.fca.org.uk/#/nsm/nationalstoragemechanism