LSAB.L Regulatory News (LSAB)

LIFE SETTLEMENT ASSETS PLC 

(the "Company" or "LSA") 

LEI: 2138003OL2VBXWG1BZ27 

Annual Results Announcement for the year ended 31 December 2019

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 2019. The annual financial report is being made available to be viewed on the Company's website at https://www.lsaplc.com/investor-relations/reports-company-literature/ and will be submitted to and available for inspection at http://www.morningstar.co.uk/uk/nsm.

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 The Company seeks to achieve this for each of its separate Share Classes.

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 have regard to the factors set out above, although is 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 make 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 do, however, aim to make sure that decisions are consistent and predictable.

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 period Board received information to understand the interests and views of the Company's key stakeholders; Shareholders, the Administrator; Acheron as Investment Manager to the Trusts, the four Trusts responsible for the portfolio of each share class and the Servicing Agents. One of the Company's Directors sits as trustee of these Trusts and provides regular updates on each Trust. 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 engagement's 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 $14.5 million across all share classes as shown in note 18;

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

●the buyback of shares through the stock market and via a tender offer. Full details are given in note 21 on page 76 of the Annual Report;

●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 proposal to merge share classes A, D and E 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 being put to a Shareholder vote at a General Meeting; and

●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 each Trust.

Subsequent to the year end, the impact of the 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 be minimal.

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 company with no offices of its own nor any employees the Company has minimal carbon emissions. Where possible, meetings are held by electronically to reduce the Company's impact on the environment. 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 Administrator, Company Secretary, Investment Manager and Trustee of the underlying Trusts all attend Board Meetings.

Investment Strategy

The Company seeks to generate long-term returns for investors by investing in the life settlement market, through each of the separate Share Classes. 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 17 of the Annual Report.

Investments and underlying assets

As at 31 December 2019 each 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). 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.

• Ordinary B Share Class ("LSAB") invests in life insurance policies exposed only to elderly insureds (average age mid to late 80s) with exposure to whole and fractional policies.

• Ordinary D and E Share Classes ("LSAD" and "LSAE") - both these Share Classes invest in separate portfolios comprising predominantly fractional policies with exposure to both HIV and elderly insureds, where the LSAA and/or LSAB Share Classes are already fractional owners.

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 6 2% of net assets for the year to 31 December 2019.

Dividends/Distributions

During the period the Company paid special dividends to LSAA Shareholders of 5.50 US cents per share (total USD 2.5 million), LSAD Shareholders of 66.09 US cents per share (total USD 6.0 million) and LSAE Shareholders of 355.37 US cents per share (total USD 6.0 million).

Chairman's Statement

It gives me great pleasure to present my first Annual Report as Chairman of LSA and your Company`s second report since admission to the London Stock Exchange in March 2018. However, I am also conscious that I am writing at a time of great uncertainty for many around the world due to the Coronavirus pandemic ("Covid-19").

Investment Overview

As shown in the financial highlights below, the year to 31 December 2019 proved to be a positive year for your Company.

The maturities received in the year were such that the Company was able to make significant distributions to Shareholders by way of special dividends of 5.50 US cents per A share, 66.09 US cents per D share and 355.37 US cents per E share as shown in note 18.

In addition, the Company used the additional proceeds from maturities to return USD 10.0 million to A Shareholders under a tender offer in July 2019. The Company also repurchased 500,000 D shares at a cost of USD 500,000 and 166,666 E shares at a cost of USD 500,000. Further details are given in note 21 of the Annual Report.

After the distributions and repurchases mentioned above, the year-end NAV of class A increased by 10.4% whilst classes B, D and E reduced by 8.1%, 33.6% and 52.9% respectively. When adding back the dividends paid to Shareholders during the year, the NAV increased by 13.5% per A share, 19 6% per D share and 21 8% per E share. In contrast the NAV of class B declined by a just over 8.1%, reflecting the very different composition of its portfolio when compared to the other share classes.

I would draw your attention to the Investment Manager's Report set out below where the underlying detail of this performance is set out. As in previous years, given the nature of its asset base, the Company has engaged Lewis and Ellis to provide an independent actuarial valuation of the portfolio of life policies and they have confirmed the approach taken by our Investment Manager is both accurate and represents fair value. Further details can be found in our Investment Manager`s report, and I would particularly draw your attention to the comments regarding the changes we have made to the Board's assessment of fair value for the HIV portfolio.

Retention of cash

In our Half Year Report published in September 2019 we drew attention to certain factors which are likely to affect the future management of our portfolios. Firstly, as stated in the Company's announcement in January 2020, is the decision to retain more cash in order to ensure the Company is in a position to take advantage of any opportunity to consolidate our portfolios of fractional policies with the purchase of additional fractions of those policies. Currently two opportunities are being pursued by our Investment Manager, which if concluded successfully, will add to the longer-term value of our assets.

Structural changes

On 31 March 2020, the four Trusts through which the Company invests in the underlying assets of the Company were merged (the "Trusts Merger") in order to reduce annual operating costs and to reduce operational risks without creating cross liabilities. Following the Trusts Merger, the Company's life settlement assets are held by a single continuing trust, namely the Acheron Portfolio Trust, which is expected to achieve significant future cost savings.

Furthermore, proposals to merge the share classes A, D and E have been advanced since the year end with details of the Merger published in a Circular sent to Shareholders on 2 April 2020. Given the very different nature of the structure of Class B, with no exposure to HIV policies, the Board has decided after careful consideration not to propose the merger of class B at this stage, although this will be kept under review and may be considered at a later date depending on how the projected maturities develop.

Overall, the Board believes that the simplified share class structure resulting from the Merger should provide both improved liquidity for the holders of the merged Share Classes and also a clearer investment case for new investors in the future as well as the potential for nearer term cash flow enhancements to the existing A Ordinary Shareholders.

A general meeting has been convened on 28 April 2020 at which Shareholders have been invited to consider and, if thought fit, to pass the necessary resolutions to give effect to the Merger.

Board changes

The Company also announced in its Half Year Report that Jean Medernach had announced his intention to step down as a Director and Chairman of your Company. The Board would like to record its thanks to Jean for his guidance and skill in helping the Company with the transition from Luxembourg to the UK.

I am delighted to welcome Christopher Casey to the Board and as Chair of the Audit Committee. Chris brings with him a wealth of experience both as a board member of other Investment Trusts and also as a former partner of KPMG.

Change of Auditor

In September 2019, we were informed that Grant Thornton had decided that having performed a strategic review of their business, for commercial reasons, they would not continue as the Company's Auditors. After reviewing the various options available I am delighted that we were able to appoint BDO as replacement Auditors.

Company Secretary

Following a review of our service providers, during the second half of the year the Board decided that the Company would be better served if the functions of Company Secretary and Financial Controller were carried out by the same firm. As a result, the Board decided to terminate the contract with Maitland Administration Services Limited and concentrate both these roles with ISCA Administration Services Limited.

Covid-19

The Board has reviewed the implications of the global Covid-19 pandemic and has put in place robust measures to maintain the ongoing operation of its business, and to ensure continued compliance by the Company of its regulatory obligations. Whilst there can be no guarantee that there will be no business interruption, to date there has been no impact on the administration of the Company or its assets, and the Board has received details from its key service providers of the steps they are taking to protect their employees and operations.

The Board remains confident that all share classes offer our investors important defensive qualities, which remain highly decorrelated from equities and bonds and the current volatility of those markets.

As a result, the Board have concluded that the current pandemic is likely to have a minimal effect on the Company's operations and results. Further details can be found in the Viability Statement below.

Outlook

In the face of the many challenges and uncertainty facing global economies, communities and individuals, as they grapple with the impact of Covid-19, the Board believes that the investment opportunity offered by LSA, and the underpinning effect of its engagement with the life settlement market in the USA, will continue to offer value to all its direct and indirect stakeholders. With the various changes and streamlining actions described above being taken since the middle of last year, I believe that although many challenges lie ahead, the Company is now better positioned to attain its strategic objectives and move onto the next stage of its development.

Michael Baines

Chairman

27 April 2020

Company Performance

Performance analysis by Share Class is provided in the tables below

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 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 6.2% (2018: 5.4%) of average net assets.

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 year ended 31 December 2019 was generally a good year for the life settlement market, which continues to attract increasing attention. Conning & Co, in its recent fourteenth Annual Life Settlement Report, explores the expansion of the life settlement industry relative to carrier performance, cost-of-insurance drivers, a surge in retiring baby boomers, and growing interest from investors.

Based on demographics and market dynamics, Conning foresees that the life settlement market could see double-digit expansion over the next ten years. The life settlement market would reach over USD 200 billion in cumulative life settlement transactions by 2028, supported by a continued healthy supply of investors, a stable regulatory environment and a large pool of policies to choose from. In addition, the tertiary market is expected to continue thriving, allowing the settlement market to maintain stable year-over-year growth. One point that will continue to require improvements is the viators medical assessment, with Life Expectancy playing a critical role in the valuation of life settlements.

Portfolio Overview

LSA's current portfolios in the Trusts is subdivided into portfolios exposed to either HIV policy holders or non-HIV policy holders. For Class A, D and E Shareholders, the respective sizes of these segments are USD 146 million for life settlements for non-HIV policy holders. For all share classes, the respective sizes of these segments are USD 381 million for HIV. The face-weighted average age for the non-HIV segment is about 89.2 years. This translates into a life expectancy for a normal population of five years for men and six years for women. Class B is not exposed to HIV.

HIV life expectancy is a difficult variable to assess. The current face-weighted average age of the HIV population is about 60.2 years old; however actual mortality is similar to a population of about 15 to 20 years older. Therefore, assuming the HIV policies have the life expectancy of the general male population aged 78, the average life expectancy for HIV policy holders could be around 15 years.

The current total premiums paid on this portfolio is about USD 20 million across all share classes. For 2020, we will retain USD 18m as a basis for premium projections. Premiums are reducing year on year as the large elderly policies in the portfolio progressively reach maturity.

During 2019, investments were made in four small portfolios of fractional policies in which the Company is already a fractional owner for a total face cost of USD 1.0m. Fractional policies are single life insurance policies initially purchased by multiple investors, each of whom acquired a fractional interest. These acquisitions are critical to ensure the premiums on fractional policies that LSA is exposed to continue to be paid and do not lapse. These policies are mainly held in the Acheron Portfolio Trust (LSAA) which is significantly exposed to such fractional policies.

The following table provides information on the Company's policies by Share Class and by exposure to HIV and non-HIV positive insureds, as at 31 December 2019.

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

The US actuary provided valuations for all portfolios for the year ended 31 December 2019. The valuations shown were derived by adopting an actuarial approach. The actuaries performed an 2010-2019 A/E Study based on the observed mortality occurrences. Some improvements to the HIV mortality assumptions were made based on 2012-2019 A/E ratio. HIV figures from 2010 and 2011 were removed as the A/E ratios were significantly higher. This ensures a more conservative set of estimates. As a result, both HIV and non-HIV segments reached long-term A/E ratio of circa 100% even excluding these outperforming years, as is shown in the graphs titled HIV and Non-HIV on page 15 of the Annual Report. In addition, none of the life expectancies from medical underwriters were used in the 2019 valuation. The Life Expectancy reports were not only out of date, but overall projections by medical underwriters had proven to be poor.

Maturities

The year saw declared maturities and A/E in the different Share Classes as follow:

*in the number of lives, from the US actuary reports

In the non-HIV segment, the two largest exposures matured in 2019, contributing USD 35 million across all Share Classes. Although Non-HIV A/E in the number of lives is 95%, those two maturities have pushed the non-HIV A/E in monetary terms to 177% across all the share classes and 209% in Class A. This is above our internal projection of one extra-large maturity for this year, but not a sufficient factor for a model revision. However, Class B only shared USD 1.7 million in those two exposures, leading to the lower A/E ratio and poorer performance in 2019.

On the other hand, the HIV segment performed under expectations by 17% in the year under review. Compared to previous years, the HIV mortality rate seems lower in younger age ranges but much higher in above 70-year-old range. It means that the observed mortality curve in 2019 is steeper than before. An internal exercise was performed to study the possible impact on valuation from the change in the curve. By applying last year's best fit mortality curve to the portfolio, rather than the model currently in use, the valuation of the whole HIV portfolio for Class A would decrease by USD 0.6 million, or about 2%.

After the realisation of two largest exposures, the HIV face value concentration increased by 5% to 80% in Class A. The increased exposure to HIV only is increasing not only the risk concentration of the portfolio, but also reducing cash flow in the coming years. In order to adjust the portfolio risk return ratio for this steady increase in concentration, the discount rate applied to HIV was increased from 11% to 12% in July 2019.

Going forward

The mortality of the insureds in the portfolio will continue to be the most significant factor that will affect the financial results for the Company. This will have a direct impact on cash flow, not only due to the maturities that will or will not be collected, but also in terms of premiums that will have to be paid or not. We will continue to follow the recent research on mortality in general and especially on long-term HIV trends. The steepening of this year's HIV mortality curve is a potential validation of our view that HIV sufferers' health conditions worsen much more rapidly than the general population as they age. This results in long-term patients having a worse medical status that is different from patients of the same age that only recently contracted the disease.

Acheron Capital

27 April 2020

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

B Ordinary Share Class (LSAB)

The assets attributable to the B Ordinary Share Class are predominantly invested in life insurance policies exposed only to elderly insureds.

The Company met this Investment Policy by acquiring the entire beneficial interest in the Lorenzo Tonti 2006 Portfolio Trust from the Predecessor Company shortly after Admission.

D Ordinary Share Class and E Ordinary Share Class (LSAD and LSAE)

The assets attributable to the D and E Ordinary Share Classes are invested predominantly in Fractional Policies with exposure to both HIV and elderly insureds, where the A and/or B Share Classes are already fractional owners.

The Company met these Investment Policies by acquiring the entire beneficial interest in: a) the Avernus Portfolio Trust, in respect of the D Ordinary Share Class; and b) the Styx Portfolio Trust, in respect of the E Ordinary Share Class, from the Predecessor Company shortly after Admission.

Source of Policies

In respect of each 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 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 were 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 was 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 relevant Share Class (or those of a Share Class to be established in future). Such Policies will subsequently be granted to the relevant 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 Trusts may also hold derivative or other financial instruments designed for efficient portfolio management or to hedge interest or inflation risks. The Trusts 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 in respect of a Share Class as dividends to Shareholders of that share class. 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.

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 in respect of, or attributable to, a Share Class shall be limited to a maximum of 10% of the Net Asset Value of such Share Class (at the time the borrowing is incurred).

In addition, the Board (or the Investment Manager, subject to any limits imposed by the Board) has discretion to make short-term loans out of the assets attributable to one Share Class to another Share Class where the Board or the Investment Manager (as the case may be) considers it necessary in order to fully or partially remedy a cash-flow shortfall in respect of that other Share Class.

Policy Advances

The Company does utilise 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 Trusts 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 Trusts' Investment Manager must ensure that the Company's and each 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;

- 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 desirability 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, each of the Trusts have appointed the Investment Manager, Acheron Capital Limited as their investment manager under the Investment Management Agreements with effect from the date of Admission. The Investment Manager is authorised and regulated by the FCA (under reference number 443685). Further details of Investment Management Agreements are set out in Part 6 of the Prospectus dated January 2018.

- The Trustee: The Trustee of each of the Trusts is Dr Robert Edelstein who is also a Director of the Company.

- The Registrar: Link Market Services Limited has been appointed as the Company's Registrar.

- Administrator: The Company has appointed Compagnie Européenne de Révision Sàrl as its Administrator.

- Company Secretary: With effect from 1 December 2019, ISCA Administration Services Limited has been appointed as Company Secretary.

- Tracking and Servicing Agents: The Trusts have 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. Each 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 Trusts to service life settlement policy interests owned by the Trusts.

- Actuaries: The Company engages actuaries 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.

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 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 Trusts are undertaken by the Trusts' Investment Manager, who regularly reports to the Audit Committee.

Other risks specific to the Company

As described on page 34 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 of each Share Class 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.

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 Company believes that the "Brexit" process will not materially affect 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 current 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, buybacks and a tender offer. 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 27 April 2020 and signed on its behalf by:

Michael Baines

27 April 2020

GOVERNANCE

Extract from Report of the Directors

Share Capital

At the year-end there were 39,891,391 A Ordinary Shares of $0.01 each, 14,596,098 B Ordinary Shares of $0.01 each, 8,792,561 D Ordinary Shares of $0.01 each and 1,566,603 E Ordinary Shares of $0.01 each, none of which are held in Treasury. The buybacks of the Company's shares during the year are shown in note 21 of the Annual Report. 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 current pandemic. Further details are shown in the Viability Statement above. The Directors believe that this 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 the foreseeable future and is financially sound. 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 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 International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 of 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 IFRSs as adopted by the European Union, 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 and, as regards the financial statements, Article 4 of the IAS Regulation. 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 International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit 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

27 April 2020

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2019 or 31 December 2018 but is derived from those accounts. Statutory accounts for the year ended 31 December 2018 have been delivered to the Registrar of Companies and statutory accounts for the year ended 31 December 2019 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 2019

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 October 2019.

* For the period 16 August 2017 to 31 December 2018.

The notes form part of these financial statements.

Life Settlement Assets PLC

Statement of Financial Position

as at 31 December 2019

These financial statements were approved by the Board of Directors on 27 April 2020 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 2019

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 2019

Included in cash flow used in operating activities is interest paid, USD 1,201,000 (2018: USD 1,296,000); dividends and interest received, USD 887,000 (2018: USD 581,000).

* For the period 16 August 2017 to 31 December 2018.

The notes form part of these financial statements.

Life Settlement Assets PLC

Notes to the Financial Statements

for the year ended 31 December 2019

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 four classes of Ordinary Shares in issue, namely A, B, D and E, each of 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 has been attributed to the ordinary A shares;

- 100% of the interest in the Lorenzo Tonti 2006 Portfolio Trust has been attributed to the ordinary B

shares;

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

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

- 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 corresponds to the existing class of shares in APC to which such cash and other net assets are 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. These financial statements include all transactions performed on the life insurance policies as from 1 January 2018, being the valuation point at which the assets were acquired.

Statement of compliance with IFRS

The Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Boards (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.

 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 IFRS that are in effect at the end of the reporting period or which have been adopted early. 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 in the Strategic Report above. 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 above. The Company's wholly owned subsidiary was put into liquidation on 18 December 2017 and this process was completed in May 2019. It did not have any active operations and, therefore, the Company has elected not to prepare consolidated financial statements for the year ended 31 December 2019 and the comparative information for December 2018 shows the standalone Company financial statements.

The comparative financial statements report on the activity for the period from inception on 16 August 2017 until 31 December 2018.

For the purpose of the Cash Flow Statement, the acquisition by the Company of Net Assets from the Predecessor Company under the Acquisition agreement mentioned in Note 1 for a total amount of USD 133,724,000 and the allotment of 71,068,874 shares to the Predecessor Company is a non-cash transaction that is not shown in the Cash Flow Statement except for the net cash contribution of USD 18,833,000.

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 2019. 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 57 to 61 of the Annual Report.

4. 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.

5. GAINS 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 period is reflected as a deduction of income from life settlement portfolios. The amount of premiums paid in advance amounted to USD 9,231,000 (2018: USD 13,328,000) as at 31 December 2019.

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 Trusts at an annual rate of no more than 1.5% of the Net Asset Value for classes A, B and D, and 2% for class E. Management fees paid during the year amounted to USD 1,852,000 (2018: USD 2,101,000).

The Performance fee in respect of the Trusts 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 Trusts, 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 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 2019), 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 2,813,000 (2018: USD 2,888,000) assumed from the Predecessor Company. That amount has been increased by USD 3,285,000 in relation to the performance of the portfolio for the year ended 31 December 2019 and reduced by the performance fee paid of USD 1,044,000.

8. TAXATION

As at 31 December 2019, the Company has tax losses and excess management expenses of USD 19,006,000 (2018: USD 6,680,000) 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.

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 2019 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.

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

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 78,041,000 (2018: USD 89,813,000) 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 on pages 69 and 70 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 trusts in which the policies of Class A, B, D and E are kept (Acheron Capital) has also set up an internal actuarial model to value the policies and produces monthly valuations.

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.

13. LIABILITIES TO SUBSIDIARY

The liabilities to the subsidiary at 31 December 2018 were interest free loans which were reimbursed in May 2019 when the liquidation of the subsidiary was completed.

14. 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.

15. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

At the year end, the Company has no (2018: 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.

At the year end, the Company has no (2018: nil) contingent liabilities.

16. 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 has a member on the Board of Directors and the Trustee of the US trusts who is also a member of the Board of Directors.

Michael Baines purchased 75,000 of the Company's Ordinary B shares on 4 July 2019, for a total cost of USD 54,000. No other Directors hold any shares in the Company.

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

* Includes within the total non-recurring fees comprising USD 50,000 (2018: USD 50,000) in relation to Trustee fees and USD 64,000 (2018: USD 35,000) in relation to Directors' fees.

17. POST BALANCE SHEET EVENTS

On 23 March 2020, the Board announced an interim dividend of 6.267 cents per A Share totalling USD 2.5 million, 15.922 cents per D share totalling USD 1.4 million and 38.299 cents per E share totalling USD 600,000. These dividends will be paid on 28 April 2020 to Shareholders on the register at 3 April 2020.

On 2 April 2020, the Board released a circular proposing the merger of share classes A, D and E. Full details of the proposed merger and the reasons behind it are included in the circular, in the Chairman's Statement above and on page 31 of the Annual Report.

Although it is generally accepted as a non-adjusting post balance sheet event, since 31 December 2019, the scale of the Covid-19 pandemic has severely affected the world at large. As stated in the Chairman's statement above the Company's assets are highly decorrelated from equities and bonds and the Board have concluded that the effect on the Company's results is expected to be minimal.

18. DIVIDENDS

The Company has paid the following dividends during the year:

No final dividend in respect of the year ended 31 December 2019 will be paid.

19. 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 2019 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. The audited accounts for the year ended 31 December 2018 contain an unqualified audit report.

20. ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held on Wednesday, 17 June 2020 at 12.00 p.m. at the offices of Acheron Capital Limited, 4th Floor, 115 Park Street, London W1K 7AP.

ADDITIONAL INFORMATION

Additional information of exhibits I to IV do not form part of the financial statements.

EXHIBIT I (unaudited)

Life Settlement Assets PLC

Class A

Statement of Comprehensive Income for the year ended 31 December 2019

Additional information of exhibits I to IV do not form part of the financial statements.

EXHIBIT I (unaudited)

Life Settlement Assets PLC

Class A

Statement of Financial Position as at 31 December 2019

Additional information of exhibits I to IV do not form part of the financial statements.

EXHIBIT II (unaudited)

Life Settlement Assets PLC

Class B

Statement of Comprehensive Income for the year ended 31 December 2019

Additional information of exhibits I to IV do not form part of the financial statements.

EXHIBIT II (unaudited)

Life Settlement Assets PLC

Class B

Statement of Financial Position as at 31 December 2019

Additional information of exhibits I to IV do not form part of the financial statements.

EXHIBIT III (unaudited)

Life Settlement Assets PLC

Class D

Statement of Comprehensive Income for the year ended 31 December 2019