Life Settlemen Regulatory News (LSAA)

LIFE SETTLEMENT ASSETS PLC

LEI: 2138003OL2VBXWG1BZ27

(the "Company" or "LSA")

Half-Year Announcement

LSA, a closed-ended investment company which 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 unaudited half-year results for the period ended 30 June 2021.

Highlights:

· Total maturities during the period were USD $25.8 million (H1 2020 USD $12.2 million)

· Estimated AE ratio ("actual to expected ratio") of HIV segment of 106%, and of non-HIV segment of 219%, aggregating to 182%

· Completion of the merger of the B Shares into the A Shares on 31 May 2021

· Distribution of 17.813 capital US cents per B Share as part of the share class merger

· The Company's Net Asset Value ("NAV") as at 30 June 2021 increased by 5.7%

· Successful acquisition of small portfolios of fractional policies increasing the number of wholly owned policies by 13, with a face value of USD $2 million

· Successful conclusion of one litigation resulting in an improvement in the underlying quality of the portfolio

Michael Baines, Chairman, commented:

"The Life Settlement Market has been largely unaffected by the Covid-19 pandemic, and we have been encouraged by the first half results, which reflect a continuation of long-term trends in maturities. The strengthening of our portfolio through successful acquisitions of portfolios of fractional policies, and through protecting our interests where appropriate, have resulted in a continued improvement in the breadth and quality of our asset base. The completion of the share class merger also marks the final stage in the simplification of the share capital structure of the Company, positioning the business well for the second half of the financial year."

Enquiries:

For further information, please visit https://www.lsaplc.com/, or contact:

Acheron Capital Limited (Investment Manager) 

Jean-Michel Paul 

020 7258 5990 

Shore Capital (Financial Adviser and Broker) 

Robert Finlay

020 7408 4080

ISCA Administration Services Limited 

Company Secretary

Tel: 01392 487056

Company performance

Performance analysis by Share Class is provided in the tables below:

A Share Class

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

** As at 31 December 2020, there were 58,320,157 total shares in issue within Classes A and B. 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 price reflects the share price for Class A only.

\* This includes a contribution of USD 2,355,000 in respect of the B Share Class profit in the period before the merger.

Chairman's Statement

On behalf of the Board, I am pleased to present the Company's half year results for the period ended 30 June 2021. This year's statement is written against a somewhat brighter background than this time last year, although I suspect it is still somewhat premature to be making predictions on how world economies might settle down and normality resume.

Investment Overview

The financial highlights above show the results for the half year to 30 June 2021. Following completion of the merger of the B shares into A shares, the Company's reports now relate to the results for A shares, which in turn reflect the performance of all assets held by the Company.

This single remaining share class is listed on the Specialist Fund Segment of the London Stock Exchange, and the Company is the sole beneficiary of the Acheron Portfolio Trust which holds the portfolio.

Over the period the NAV of the Company increased by 5.7%, reflecting a higher level of maturities than anticipated. There were no distributions to holders of A shares, while there was a distribution of 17.813 US cents per B share as part of the share class merger arrangements. Further details on dividends paid is set out under the paragraph headed "Distributions" below.

The Company has continued with its declared policy of retaining a significant proportion of cash to provide funds for future investment opportunities, and to cover the costs of any legal expenses which may be required. The Board continues to monitor cash reserves carefully and reviews its cash retention decisions with its Investment Manager on a regular basis.

As previously reported in the Annual Report, the Company had been engaged in litigation with external trustees of fractional interests in policies in which the Company has an interest. One has been successfully concluded in the period resulting in an improvement in the underlying quality of the portfolio. The second remains ongoing but should be resolved in the near to medium-term.

The Life Settlement Market

The Life Settlement Market has been largely unaffected by the coronavirus ("COVID-19") pandemic. After some initial increase in mortality, particularly among patients in nursing homes, the insured lives underlying the policies in which the Company has an interest would appear not to have been significantly affected - as these insured lives were generally better protected from the crisis, benefitting at least initially from increased public health measures, less activity due to lockdowns, and restricted or controlled access to nursing homes.

In terms of correlation to broader financial markets, the secondary market did experience some requirement for liquidity and redemptions from open-end funds. In contrast, supply was reduced at the beginning of the pandemic as potential sellers waited to determine the effect of the pandemic on the market. These factors primarily resulted in increased volatility rather than steep losses which is evidenced by both the current steady market activity, and the continued performance of closed-end funds which are not prone to liquidity pressures and forced selling.

Structural Changes

The proposals to merge the B shares with the A shares as set out in the Circular published by the Company on 30 April 2021 were approved by Shareholders at the class meetings held on 26 May 2021, and the merger was completed on 31 May 2021. As a result of this final step in the simplification of the Company's share capital, the 14,596,098 B shares were re-designated as 6,102,725 A shares, which is now the only continuing class of shares.

Portfolio

The overall asset portfolio is subdivided into portfolios exposed to either HIV-positive policy holders or non-HIV positive policy holders. The following table provides information on the Company's policies, shown by exposure to HIV and non-HIV positive insureds as at 30 June 2021.

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

 In the first half of 2021 small portfolios of fractional policies to which the trusts were already materially exposed were acquired, resulting in the number of wholly owned policies held by the Acheron Portfolio Trust increasing by 13, with a face value of USD2.0 million. The increase in HIV valuation as a percentage of face value 16.2% (December 2020: 13.1%) is due to unique features of the ABC portfolio, which as referred to above, has now been aggregated, rather than as a result of any increase in mortality, which has been steady.

Maturities in the period to 30 June 2021 can be seen in the table below.

*Maturities until April 2021 in B shares

In the period under review, the HIV segment of the portfolio has an estimated AE ratio ("Actual to Expected" ratio) of 106%. The Non-HIV elderly segment of the portfolio experienced high levels of maturities, resulting in an estimated AE ratio of 219% in the period, reflecting a return to long term trends, as well as the inherent volatility within the smaller overall group.

* in maturity dollar amounts, estimated until June 2021

As at 30 June 2021, the A shares reported a NAV of USD2.1260 per share, the NAV performance history being shown in the table below.

The NAV performance of the B shares up to the time of the merger of the share classes is also shown in the table below.

The increase in the NAV on an overall Company basis is 5.7% as shown in the Company performance above.

Portfolio Composition

Further information on the composition of the portfolio underlying the A shares as at 30 June 2021 can be found on our website https://www.lsaplc.com/investor-relations/ 

Distributions

No distributions were made to holders of A shares in the period.

Following the approval of the merger between A shares and B shares, as set out in the circular to Shareholders dated 30 April 2021, a special dividend of 17.813 US cents per share (totalling USD 2.6 million) was paid to holders of B shares.

Outlook

The mortality of the insureds which underly the policies held in the portfolio will continue to be the most significant factor that affects the financial results of the Company. Accordingly, we continue to follow the recent research on mortality in general, and especially on long term HIV trends, and this is reflected in our actuarial valuations. Alongside this, the Board is implementing an active risk management strategy to protect and, where possible, improve the quality of the investment portfolio. The Board continues to believe that the investment opportunity offered by LSA, and its specialist engagement with the life settlement market in the USA, will continue to offer value to Shareholders.

Michael Baines

Chairman

24 September 2021

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:

· 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 monitors 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.

· Profit/(loss) for the period - this is a key measure of financial performance used to assess the fortunes of the Company over each financial period.

Please Note: The Company regularly uses alternative 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.

 Directors' Statement of Principal Risks and Uncertainties

The important events that have occurred during the period under review and the key factors influencing the financial statements are set out in the Chairman's Statement above.

In accordance with DTR 4.2.7, the Directors consider that the principal risks and uncertainties facing the Company have not materially changed since the publication of the Annual Report and Accounts for the year ended 31 December 2020.

The principal risks faced by the Company include, but are not limited to:

· Mortality risk

· Premium management risk

· Volatility risk

· Fractional premium risk

· Fractional ownership risk

· Advance age mortality risk

· Discount rate risk

· Modelling risk

· Tax

· Breach of applicable legislative obligations

· Counterparty risk

A more detailed explanation of these risks and the way in which they are managed can be found in the Strategic Report on pages 22 to 25 and in Note 4 to the Financial Statements on pages 65 to 67 of the 2020 Annual Report and Accounts - copies can be found via the Company's website, www.lsaplc.com.

There have been no significant changes in the related party disclosures set out in the Annual Report.

Directors' Statement of Responsibilities in Respect of the Financial Statements

In accordance with Disclosure and Transparency Rule (DTR) 4.2.10 Michael Baines (Chairman), Christopher Casey (Audit Committee Chairman) and Guner Turkmen, the Directors, confirm that to the best of their knowledge:

· The condensed set of financial statements contained within this Half-Yearly financial report have been prepared in accordance with International Accounting Standard ("IAS") 34 'Interim Financial Reporting' as adopted by the European Union and gives a true and fair view of the assets, liabilities, financial position and profit of the Company; and

· The Half-Yearly financial report includes a fair review of the information required by the FCA's Disclosure and Transparency Rule 4.2.7R being disclosure of important events that have occurred during the first six months of the financial year, their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the year; and

· The Half Yearly financial report includes a fair review of the information required by the FCA's Disclosure and Transparency Rule 4.2.8R being disclosure of related party transactions during the first six months of the financial year, how they have materially affected the financial position of the Company during the period and any changes therein.

This Half-Yearly Report was approved by the Board of Directors on 24 September 2021 and the above responsibility statement was signed on its behalf by:

Michael Baines

Chairman

24 September 2021

Condensed Statement of Comprehensive Income

for the six months ended 30 June 2021

_____________________________________________

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 period and therefore the profit for the period is also the total comprehensive income for the period.

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 October 2019.

The notes form part of these financial statements.

Condensed Statement of Financial Position

as at 30 June 2021

Registered in England and Wales with Company Registration number: 10918785

The notes form part of these financial statements.

Condensed Statement of Changes in Equity

for the six months ended 30 June 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.

Condensed Cash Flow Statement

for the six months ended 30 June 2021

____________________________________________________

The notes form part of these financial statements.

Notes to the Condensed Financial Statements

for the six months ended 30 June 2021

Note 1 General information

Life Settlement Assets ("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, namely 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.

The Ordinary B Share class was cancelled following the merger of Ordinary Share Classes A and B on 31 May 2021.

The Ordinary Share classes D and E were cancelled following the merger of Ordinary Share Classes A, D and E on 30 April 2020.

Note 2 IFRS accounting policies

2.1 Basis of preparation

These condensed interim financial statements have been prepared using the same accounting policies and methods of computation as in the 2020 annual financial statements.

The condensed financial statements, which comprise the unaudited results of the Company have been prepared in accordance with International Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), as adopted by the European Union. They have also been prepared in accordance with the SORP for investment companies issued by the AIC in October 2019, except to the extent that it conflicts with IFRS. The accounting policies are as set out in the Report and Accounts for the period ended 31 December 2020.

The half-year financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting".

The financial information contained in this Half-Yearly financial report does not constitute statutory accounts as defined by the Companies Act 2006.The financial information for the periods ended 30 June 2021 and 30 June 2020 have not been audited or reviewed by the Company's Auditor. The figures and financial information for the year ended 31 December 2020 are an extract from the latest published audited statements and do not constitute the statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and include a report of the Auditor, which was unqualified and did not contain a statement under either Section 498(2) or 498(3) of the Companies Act 2006.

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 to have a significant impact on the financial statements of the Company in future periods.

IFRS 17 "Insurance contracts" applies to insurance contracts, including reinsurance contracts issued by an entity; reinsurance 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 it will have no impact on the Company's financial statements.

Going concern

The Directors have made an assessment of the Company's ability to continue as a going concern and are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future (being a period of 12 months from the date these financial statements were approved). Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt upon the Company's ability to continue as a going concern, having taken into account the liquidity of the Company's investment portfolio and the Company's financial position in respect of its cash flows, liabilities from its assets and the ongoing charges, including annual premiums. Therefore, the financial statements have been prepared on the going concern basis and on the basis that approval as an investment trust will continue to be met.

Note 3 Gains from life settlement portfolios

When a maturity is declared, a realised capital gain 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 period is reflected as a deduction of income from life settlement portfolios. The amount of premiums paid in advance as at 30 June 2021 amounted to USD 7,301,000 (30 June 2020: USD 9,552,000, 31 December 2020: USD 8,354,000).

Note 4 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. Previously, until the merger of classes A, D and E on 30 April 2020 and the A and B on 31 May 2021 an annual rate of no more than 1.5% of the Net Asset Value was payable in respect of class A, B and D and 2% in respect of class E. Management fees paid in the period amounted to USD 758,000 (30 June 2020: USD 855,000, 31 December 2019: 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, 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 30 June 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.

Note 5 Taxation

The Company has an effective UK tax rate of 0% for the year ending 31 December 2021. The estimated effective tax rate is 0% as investment gains are exempt from tax owing to the Company's status as an investment trust and there is expected to be an excess of management expenses over taxable income.

The Company suffers US withholding tax on income received dividends and interest. The tax charge for the period amounted to USD 102,000.

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 2020 the Company has fulfilled this requirement.

Note 6 Return per share

As stated in Note 9, the share capital of the Company comprises 49,826,784 A shares. The B shares were cancelled following the merger of share classes A and B on 31 May 2021 and Share Classes D and E were cancelled following the merger of Share Classes A, D and E on 30 April 2020. All Shares are fully paid. Neither unpaid shares nor any kind of option are outstanding, so the basic profit/(loss) per share is also the diluted profit/(loss) per share.

As the different classes of Shares had specific rights in relation to their investments, the net profit/(loss) per share is given for each Share Class:

Note 7 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 85,095,000 (30 June 2020: USD 80,718,000, 31 December 2020: USD 77,643,000) are all classified as level 3.

Note 8 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 Acheron Capital Limited, the Investment Manager of the trust in which the policies of Class A are kept.

Note 9 Share Capital

At the 30 June 2021, (the Company's share capital amounts to USD 498,267 (30 June 2020: USD 583,202, 31 December 2020: 583,202) and is represented by 49,826,784 Ordinary A shares of USD 0.01 each. Share class B was cancelled following the merger of Share classes A and B on 31 May 2021 and Share Classes D and E were cancelled following the merger of Share Classes A, D and E on 30 April 2020.

The issued and fully paid share capital at 30 June 2021 is comprised of 49,826,784 Class A shares.

Class A shares relate to specific investments determined by the Board of Directors or as the case may be, by a general meeting of Shareholders. Each investment is undertaken for the exclusive benefit and risk of the relevant class of shares. All shares have equal voting rights.

As announced on 4 May 2020, the Company undertook a capital reorganisation whereby the shares of Classes D and E were merged into class A shares. A total of 8,792,561 D shares and 1,566,603 E shares were redesignated as 3,832,668 A shares. The remaining 6,526,496 D and E shares were designated as Deferred Shares and subsequently cancelled.

As announced on 2 June 2021, the Company undertook a Capital Reorganisation whereby the shares of Class B were merged into Class A shares. A total of 14,596,098 B shares were redesignated as 6,102,725 A shares.

Note 10 Special reserve

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.

Note 11 Net assets and net asset value per Share Class

The Net Asset Value (NAV) for each Share Class is shown below.

Note 12 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 previously had a member on the Board of Directors and the Trustee of the US trust who was also previously a member of the Board of Directors.

Note 13 Post balance sheet events

There are no post balance sheets events to disclose.

ADDITIONAL INFORMATION

Additional information of exhibits I and II do not form part of the condensed financial statements.

EXHIBIT I

Class A Shares

Statement of Comprehensive Income

for the six months ended 30 June 2021

EXHIBIT I

Class A Shares

 Statement of Financial Position

as at 30 June 2021

EXHIBIT II

Class B Shares

Statement of Comprehensive Income

 for the four months ended 30 April 2021

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COMPANY INFORMATION

Directors

Michael Baines Chairman

Christopher Casey

Guner Turkmen

Registered Office

115 Park Street

4th Floor

London W1K 7AP

Auditors

BDO LLP

55 Baker Street

London

W1U 7EU

Trust's Investment Manager

Acheron Capital Limited

115 Park Street

4th Floor

London W1K 7AP

Registrars

The City Partnership (UK) Limited

The Mending Rooms

Park Valley Mills

Meltham Road

Huddersfield

HD4 7BH

Brokers

Shore Capital

Cassini House

57 St James Street

London

SW1A 1LD

Company Secretary

ISCA Administration Services Limited

Suite 8,

Bridge House

Courtenay Street

Newton Abbot

TQ12 2QS

Email: lsa@iscaadmin.co.uk

Telephone: 01392 487056

LEI: 2138003OL2VBXWG1BZ27

Website - https://www.lsaplc.com

Registered in England and Wales with Company Registration number: 10918785

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