Contents
Strategic Report
Introduction 4
History
4
Strategic Report Key Issues including Section 172(1) Statement
5
Chairman’s Statement
8
Company Structure
11
Company Performance
12
Key Performance Indicators (KPIs)
13
Investment Manager’s Report
14
Overview of Strategy and Investment Policy
18
Risks
21
Viability Statement and Other Disclosures
25
Governance
Board of Directors
28
Report of the Directors 29
Statement on Corporate Governance
33
Audit Committee Report
36
Directors’ Remuneration Report
38
Statement of Directors’ Responsibilities
43
Independent Auditor’s Report to the Members of
Life Settlement Assets PLC
44
Financial Statements
Statement of Comprehensive Income
54
Statement of Financial Position
55
Statement of Changes in Equity
56
Cash Flow Statement
57
Notes to the Financial Statements
58
Shareholder Information
Notice of Annual General Meeting 2023
80
Notes to the Notice of the AGM
82
Company Information
85
Glossary
86
Form of Proxy
87
Annual Report 2022
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Life Settlement Assets PLC
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1
Strategic
Report
History
Life Settlement Assets PLC (“LSA” or the “Company”)
is 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
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 Some of the
investments by the Company in these life settlement
assets have been made at a significantly discounted
acquisition cost from distressed situations where the
original purchaser of the Policy is in liquidation
Corporate Objective
The Company’s objective is to generate long-term
returns for investors by managing its portfolios of
life settlement interests so that the realised value
of the Policies at maturity exceeds the aggregate
cost of acquiring the Policies, ongoing premiums,
management fees and other operational costs
Core Competencies
Through the combination of its Board and its
strategic partnerships with service providers, LSA has
core competencies in the following areas:
•
assessment of the underlying value of life
settlement policy portfolios;
•
access to investment opportunities, especially to
portfolios of policies where the Company already
has an interest;
•
management of strategic partnerships with service
providers
providing
investment
management,
actuarial, administration, company secretarial and
tracking services to enable the efficient operation
of its business; and
•
cash flow management to balance returns to
Shareholders with financing ongoing costs.
Through these competencies the Company has
developed a successful track record of creating value
for Shareholders
The life settlement market in the USA has
developed since the 1980s and was estimated at
USD 34 billion in 2017
1
, and estimated to grow to
USD 200 billion by 2028
The underlying rationale for policyholders to
transact in the primary market for life settlement
policies is generally to release the value inherent
in their policies to address short term or alternative
financial requirements. This can be especially
important for medical costs where there is no state-
financed provision of healthcare.
The secondary market for life settlement policies
emerged from the consolidation or failure of
purchasers in the primary market. One of the first
participants in this secondary market was Acheron
Portfolio
Corporation,
the
forerunner
of
the
Company
By
supporting
a
secondary
market
for
life
settlement policies the Company provides a
source of liquidity for policies traded in the primary
market, and protects the value of these existing
assets, thereby indirectly underpinning confidence
in the life settlement market in the USA, which has
become an important source of capital for some
policyholders
Acheron Portfolio Corporation listed its portfolios
of assets in Luxembourg until acquisition by
the Company in 2018 The Company’s shares
were admitted to trading on the Specialist Fund
Segment of the Main Market of the London Stock
Exchange on 26 March 2018 The Company was
formed for the purposes of continuing the activities
of Acheron Portfolio Corporation (Luxembourg)
SA (the “Predecessor Company”) within the more
developed London market Life Settlement Assets
PLC acquired the entire beneficial ownership in each
of the four Trusts through which the Predecessor
Company’s portfolios of life settlement policies
were held, following which the Predecessor
Company delisted from the Luxembourg Stock
Exchange on 6 March 2018 The four Trusts were
merged into one Trust on 31 March 2020
1
Source: Conning & Co
Introduction
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Life Settlement Assets PLC
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Annual Report 2022
The Strategic Report section of this Annual 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, s172 requires
directors to include these factors:
•
likely consequences of any decisions in the long-
term;
•
interests of the company’s employees;
•
need to foster the company’s business relationships
with suppliers, customers and others;
•
impact
of
the
company’s
operations
on
the community and environment;
•
desirability
of
the
company
maintaining
a
reputation for high standards of business conduct;
and
•
need to act fairly as between members of
the company
In discharging the s172 duties the Board has regard to
the factors set out above, although it should be noted
that the Company does not have any employees It
also has regard to other factors where relevant It is
acknowledged that every decision the Board makes
will not necessarily result in a positive outcome for all
stakeholders By considering the Company’s purpose
and objectives together with its strategic priorities
and having a process in place for decision-making,
the Board does, however, aim to make sure that
decisions are fully evaluated before implementation
It is normal practice for Investment companies to
delegate authority for day-to-day administration
and management of the assets to third parties
At every Board meeting a review of financial and
operational performance, as well as legal and
regulatory compliance, is undertaken The Board also
reviews other areas over the course of the financial
year including the Company’s business strategy;
key
risks;
stakeholder-related
matters;
diversity
and inclusivity; environmental matters; corporate
responsibility and governance, compliance and legal
matters
During the year, the Board received information to
understand the interests and views of the Company’s
key stakeholders; Shareholders, the Administrator;
Acheron as Investment Manager to the Trust, the
Trust responsible for the portfolio and the Servicing
Agents The Trustee of the Trust also provides
regular updates to the Board This information was
distributed in a range of different formats including
reports and presentations on the Company’s financial
and operational performance, non-financial KPIs,
risk and the outcomes of specific engagements
with stakeholders As a result, the Board have
received useful feedback which allows them to
understand the nature of any stakeholder concerns
and to comply with the s172 duty to promote the
success of the Company The Board engages with
the key stakeholders in a variety of ways, including
the publication of Annual and Half–Yearly Reports
and Accounts, monthly fact sheets, announcements
of results, information provided on the Company’s
website
and
at
the Annual
General
Meeting
Shareholders are invited to contact the Directors at
any opportunity either via Acheron or through the
Company Secretary The Company produces a Key
Information Document (“KID”) and has engaged a third
party supplier to monitor and update this document
as necessary
Strategic Report Key Issues
including Section 172(1)
Statement
Annual Report 2022
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Life Settlement Assets PLC
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5
During the year the Board has considered:
Mutual Benefits Keep Policy Trust (“MBC”)
The Board has known for a number of years that
MBC, which holds fractional policies in the United
States, was approaching the end of its life and would
be seeking to dispose of the remaining life policies,
some in which the Company already held a partial
underlying interest The Company through the
Acheron Portfolio Trust engaged lawyers in the US to
protect its interests in the US Courts in the fractional
policies and if appropriate acquire further interests in
any policies held by MBC if made available when MBC
ceased The Board in association with the Acheron
Portfolio Trust and its Investment Manager, Acheron
Capital Limited, sought to ensure any outcome
protected the Company’s Stakeholders
In the second half of 2022, and through the US Courts
who were overseeing the winding down of MBC, a
sale process of all the MBC policies was instigated
Acheron Portfolio Trust actively participated in
this sale process to acquire the policies at a price
beneficially appropriate to the Company. During
2022, the Company sought to accumulate cash
reserves through taking out policy advances on its
wholly owned policies and suspending dividend
distributions. An offer was made for the policies in
the last quarter of 2022, which was overseen by and
subject to the approval of the US Courts As detailed
on page 8, the offer was approved by the Lower
Court on 26 January 2023 and by the Higher Court
on 2 March 2023 and the purchase was concluded
on 28 March 2023The transfer of policies will be
undertaken over the first half of the year.
Throughout the process the Board considered
that the acquisition of these polices, to make them
wholly owned rather than fractional policies, was
in the interests of all Stakeholders and protected
the Company’s interests in MBC held policies The
Company already held an average beneficial interest
of approximately 66% of the value in these policies
When the policies are transferred to the Acheron
Portfolio Trust the Company will have direct control of
those policies and in the engagement of a Servicing
Agent to administer those policies on the Company’s
behalf
Acheron Capital Performance Fee
During the year the Board reviewed the performance
fee arrangements for Acheron Capital Limited The
Board, in acknowledgement of the work undertaken
to resolve the MBC position, described above, sought
to revise the agreement once the MBC situation had
been successfully resolved It negotiated to reduce
the performance fee from 20% to 10% over the existing
hurdle rate from 31 January 2023 In consideration of
this reduction the Board agreed to release accrued
performance fees as at 31 January 2023 in excess of
USD 1 million as a one-off payment. USD 0.5 million
was advanced on 30 June 2022 with the balance
being paid following the successful conclusion of
the MBC position and the publication of the audited
accounts to 31 December 2022 The Board sought to
balance the needs of all Stakeholders in reaching this
agreement
Cash Retention
The retention of cash as working capital to meet the
payment of ongoing premiums required to service
the portfolio of life policies
Valuation of Portfolio
The assessment of the valuation of the portfolio
including selecting an appropriate discount factor
based on research available and the mix of policies
in the portfolio
Employees
The Company has no employees as it engages
third parties to provide all necessary services to the
Company
Community and Environment
As an investment trust, the Company outsources its
activities to third parties, has no offices of its own nor
any employees Where possible, meetings are held
electronically to reduce the Company’s impact on the
environment The Company has minimal greenhouse
gas emissions and is not required to report under the
Companies Act 2006 (Strategic Report and Directors’
Reports) Regulations 2013 nor the Streamlined Energy
& Carbon Reporting regulations The Company does
not make any political or charitable donations
Strategic Report Key Issues
continued
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Life Settlement Assets PLC
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Annual Report 2022
Service Providers
The Company engages a number of service providers
who it regards as key to its ongoing business The
Board recognise that the continued engagement
with these service providers is vital and the success
of these service providers is synonymous with the
success of the Company It receives reports from
providers and regularly monitors the contribution
they make to the Company’s operations The
Company Secretary and Investment Manager both
attend Board Meetings The Trustee of the underlying
Trust and the Administrator provide regular updates
to the Board during the year
Investment Strategy
The Company seeks to generate long-term returns
for investors by investing in the life settlement
market The Company aims to manage its investment
in portfolios of life settlement products so that the
realised value of the policy maturities exceeds the
aggregate cost of acquiring the policies, ongoing
premiums, management fees and other operational
costs The Company’s investment Objective and
Policy are stated on page 18
Investments and Underlying Assets
As at 31 December 2022, the Share Class was invested
in underlying assets as follows:
•
The Company invests in life insurance policies
acquired from special or “distressed” situations,
with exposure to both HIV (average age mid 60s)
and elderly insureds (average age late 80s) This
includes policies acquired from the mergers,
in April 2020 and May 2021, of share classes D, E
and B with share class A. It is a widely diversified
portfolio by gender and the number of lives insured
with circa 4,200 underlying policies, and exposure
to whole and fractional policies
Comparative Benchmarks and Performance
Due to the lack of directly comparable companies
investing
in
the
secondary
market
in
life
policies, the Company does not follow a specific
sector
or
geographic
benchmark,
although
indirect comparisons may be made from time to time
with other 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 can make this market an
attractive alternative asset class
The performance of the Company against its key
performance indicators is described on page 12
Ongoing Charges
The Company’s total annual costs (investment
management fees and other expenses) are 71%
(2021: 76%) of net assets for the year to 31 December
2022 Excluding the servicing and legal costs the ratio
would be 30%
Dividends/Distributions
As shown in Note 26 on page 78, the Company did
not make any dividend payments during the year
ended 31 December 2022
On 2 February 2023, the Company announced a
special dividend of 60209 cents per share, totalling
USD 30 million, which was paid on 24 February 2023
to Shareholders on the register at 10 February 2023
Annual Report 2022
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Life Settlement Assets PLC
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7
Chairman’s Statement
I am pleased to present my fourth Annual Report as
Chairman of LSA and your Company’s fifth report
since its admission to the London Stock Exchange
in March 2018 At the time of writing the continued
geopolitical uncertainty, and more recent volatility in
the global banking sector, reinforce the continuing
attraction of your Company’s asset class which is
uncorrelated to global financial markets.
Life insurance policies continue to be supplied into
the primary market, although overall sales in 2022
were some 10 percent down on the previous year,
reflecting a more cautious view on sales in the
post-COVID era However, the market is forecast to
continue to grow steadily to higher levels over the
medium term as policyholders seek more liquidity
or exposure to other asset classes which in turn is
expected to stimulate interest from investors seeking
alternative assets
Investment Portfolio Overview
As shown in the financial highlights on page 12,
income from maturities was encouraging overall, with
a strong performance in the non-HIV segment which
outperformed expectations, balanced by some
underperformance in the HIV segment The main
consequence of this will be that future performance
will increasingly reflect that the majority of portfolio
value is represented by HIV policies, which will place
more emphasis on the HIV mortality assumptions
underlying these policies as the core driver of value,
as advances in medical science continue to increase
life expectancies
Looking forward, the portfolio structure will be
considerably simplified from early 2023 as the
acquisition of the remaining policy interests previously
held by Mutual Benefits Keep Policy Trust (“MBC”) is
absorbed into the overall structure
NAV
The year-end NAV attributable to Shareholders
was USD 1099 million, representing an increase
of USD 06 million during the year (NAV results are
shown in the table on page 12) Further detail is
contained in the Investment Manager’s Report set
out in this Strategic Report on pages 14 to 17
Maturities
Maturities totalling USD 272 million were declared
during the year Of these, USD 213 million were non-
HIV policies, and USD 59 million were HIV policies
The results for the full year have continued the
trends identified in the first six months, which
reflected the nature of the asset base, where
the non-HIV policy component of the portfolio
experienced higher maturities than expected, while
the HIV policy component was somewhat lower
On an aggregated basis, this resulted in higher than
expected cash receipts with results close to net
asset value, reflecting the full internal valuation of the
policies that have matured in the period
Costs
The Company continues to manage its cost base
carefully The total ongoing charges ratio decreased
slightly from 76% to 71% of NAV in 2022 The ongoing
charges ratio, excluding policy servicing fees and
legal costs, decreased from 36% to 30% of NAV Work
continues to reduce the Company’s future cost base
including the revision to the Investment Manager’s
fees referred to below
MBC Action
I stated in your Company’s interim report published
on 27 September 2022 that the Board was focused
on seeking a successful conclusion to the litigation
being pursued to protect and enhance the value of
the Company’s portfolio
We were therefore pleased to announce the formal
acceptance on 2 March 2023 by the US Court of the
southern District of Florida, Miami Division, of the
motion of MBC to the Court to approve the sale of
a portfolio of life policies to Acheron Portfolio Trust
(“APT”), on behalf of the Company Completion of
the acquisition took place on 28 March 2023 The
proceeds of the sale, net of all transaction, legal
and wind down costs (which are anticipated by the
MBC trustee not to exceed USD 5 million) will be
distributed to MBC’s investors, including APT (as a
current investor)
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Annual Report 2022
Benefits from conclusion of the litigation
The successful conclusion of the litigation realises a
number of benefits for LSA:
•
It has mitigated a material operational risk with
fractional interests in policies now able to be
consolidated into policies 100% owned by APT
•
The Company’s operations will be more cost
effective with a significant reduction in future legal
costs
•
With the need to retain cash to support the possible
purchase of the MBC portfolio now concluded, a
resumption of dividends payable by the Company
has recently been implemented
Independent Actuarial Valuation
As in previous years, given the nature of its asset
base, the Company has engaged Lewis & Ellis Inc
to provide an independent actuarial valuation of
the portfolio of interests in life policies They have
confirmed that the approach taken by our Investment
Manager is both accurate and represents fair value,
although in the light of recent performance in the HIV
portfolio, some adjustments have been made to the
mortality assumptions for the future Further details
can be found in our Investment Manager’s Report
Dividends
Continuing the policy described at the time of
publication of the 2021 Annual Report in April 2022,
the Board resolved to defer any decision regarding
payment of a special dividend until the final MBC
auction had taken place, and the result was known
and fully assessed Accordingly, the Company made
no distributions to Shareholders by way of special
dividends during the financial year.
Shareholders will already be aware that, following
the initial indication of the ruling of the US Court,
your Company announced on 2 February 2023 that
the Board considered that the Company was in a
position to resume dividend payments, and therefore
declared a special dividend of 60209 cents per share
totalling approximately USD 30 million, which was
paid on 24 February 2023 to Shareholders on the
register on 10 February 2023
Revised Fee Arrangements with the
Investment Manager
One of the consequences of the simplification of the
share class structure has been to enable a review
of the fee structure between the Company and its
manager, Acheron Capital Limited (“ACL”) In line
with its aim of reducing its cost base over time, the
Company announced on 30 June 2022 that it was
re-negotiating the performance fee payable to ACL,
which was then defined as an amount equal to 20% of
the total distributions made by the Company over an
agreed hurdle rate Agreement was reached with ACL
that when the litigation process had been resolved,
the performance fee would be reduced from 20%
as described above to 10% over the existing hurdle
rate This rate will therefore apply from 1 February
2023 onwards In consideration of this reduction, and
as an acknowledgement of the workload associated
with the successful resolution of the MBC dispute,
it was also agreed that a limited proportion of the
accrued performance fees is being released as a
one-off payment. See above and Note 8 on page 67
for further details
Outlook
The outlook for the life settlement industry continues
to remain positive, with an increasing global interest
in the sector The two factors which have been
observed as trends having an increasing influence
on the overall market for life settlements continue
These are the increasing demand from investors who
are new to the life settlement market, and an ongoing
interest among the generation coming into retirement
for seeking new ways to increase retirement income
or pay for long term care These trends are expected
to stimulate activity in the life settlement market,
although in the longer-term margins obtainable for
new investments may be affected by a decrease in
the average face value of policies We also expect
that given the ongoing volatility in current global
financial markets, demand from investors to have
exposure to risk which is not correlated to equity
returns will increase
The successful conclusion of your Company’s long
running litigation against MBC marks a significant
development in our strategy of unlocking value for
Annual Report 2022
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Life Settlement Assets PLC
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9
Shareholders It removes an important area of risk, builds value,
and unlocks alternatives for the deployment of funds arising on
the maturity of policies It also means that the Board’s attention
can focus solely on the broader risk issues in the portfolio,
including that of HIV mortality
I would
like
to
express
the
Board’s
appreciation
for
the commitment of our Investment Manager, Acheron, of the
APT Trustee, and of our other advisers, to the work involved
in this litigation over a long period, and for securing a positive
outcome for your Company
The Board is acutely aware of the impact that last year’s cash
retention policy has had on the level of discount at which LSA’s
shares trade Therefore, in addition to the announcement
of a special dividend and a return to the previous approach
to dividend payments generally, the Board is actively
considering further options to reduce this discount, which will
be communicated to Shareholders at the appropriate time
Given that the non-HIV portfolio is now expected to mature
faster than the HIV portfolio, we will continue to closely monitor
research on mortality in general to guide future decisions The
past track record of assessing risk across the portfolio gives the
Board confidence that outcomes should be achieved which will
continue to underpin the value proposition for Shareholders
Michael Baines
Chairman
27 April 2023
Chairman’s Statement
continued
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Annual Report 2022
Company Structure
Life
Settlement
Assets
PLC
operates
through
its
Board,
and
strategic
partnerships with service providers covering investment management, actuarial,
administrative, company secretarial, and tracking services
Reflecting the development of the Company through the acquisition of portfolios of
interests in life settlement policies, the portfolio was placed into an asset trust, the
Acheron Portfolio Trust
Services Agreement
Investment
Management
Agreement
A Ordinary Shareholders
Beneficial interest
(attributable Ordinary Shares)
Acheron Portfolio Trust*
US Life Insurance Policies
Acheron Capital Ltd
The Company’s principal strategic partner relationship is with the Trust’s Investment
Manager, Acheron Capital Ltd, which provides investment management services
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11
Performance analysis is provided in the table below
A Shares
As at
31 December
2022
As at
31 December
2021
Percentage
change
(%)
Net assets attributable
to Shareholders (USD ‘000)
109,913
109,314
05
Shares in Issue
49,826,784
49,826,784
–
NAV per share (USD)
2.21
219
09
Closing share price (USD)
1.37
143
(42)
Discount to NAV (%)*
(38.0)
(347)
(33)
Total maturities (USD ‘000)*
27,197
38,510
(294)
Split of maturities
HIV (USD ‘000)*
6,334
8,418
(248)
non-HIV (USD ‘000)*
20,863
30,092
(307)
Total income from portfolio (USD ‘000)*
8,853
25,872
(658)
Profit for year (USD ‘000)
599
14,438
(959)
* Non-IFRS measures
The above tables display the key performance indicators that the Board uses as Alternative Performance
Measures (“APMs”) to measure the performance, thereby assisting Shareholders in assessing how the Company
is performing against its objective
Company Performance
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Annual Report 2022
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 on page 12 Although performance relative to the KPIs is
monitored over quarterly periods, it is success over the long-term that is viewed as
more important This is particularly important given the inherent volatility of maturities
and short-term investment returns
The Board has adopted the following KPIs which are summarised on page 12 and in
the Statement of Comprehensive Income on page 54
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
Discount to NAV
– as this measure
can be used to monitor the difference
between the underlying Net Asset Value
and the share price
Total maturities (USD)
– the value of
the total maturities in USD provides an
indicator of the underlying cash flow
that the Company receives from its main
source of income – policy maturities
There are factors which could impact the
outcome of this performance measure
including:
average
life
expectancy
and the age of the underlying policy
holders Please note that the Actual to
Expected (“A/E”) ratio, which is closely
linked to the total maturities KPI, is a
key method by which the Board seeks
to anticipate the level of maturities
The A/E ratio measures the declared
maturities compared to the projected
maturities
based
on
the
actuarial
models A ratio close to 100% indicates
maturities correspond exactly to the
model A percentage greater than 100%
means the maturities are more than
anticipated by the models and less than
100% the opposite is the case
Earnings per share
– this is a key measure
of financial performance used to assess
the fortunes of the Company over each
financial period.
Running costs
– The Ongoing Charges
of the Company for the financial year
under review represented 7.1% (2021:
76%) of average net assets Excluding
the servicing and legal costs the ratio
would be 30% (2021: 36%)
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
Key Performance Indicators (KPIs)
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.
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13
The Life Settlement Market
In 2022 returns from life settlement assets stood in
sharp contrast to the double-digit losses in both the
bond and equity markets As an asset class, the life
settlements return remains inherently unaffected
by economic crisis and has minimal correlation with
other traditional investments. This diversification
attribute continuously attracts investors interested in
better portfolio allocation, including alternative assets
and more stable returns This has been especially
true considering the financial volatility of the last 12
months
The supply of life insurance policies has not waned
in recent years An important factor in growth is the
burgeoning cohort of aging boomers needing more
retirement income or means to pay for long-term
care Another expansion factor has been the growth
in
the
direct-to-consumer
market,
broadening
consumer access
In terms of market transactions, the life settlement
asset class broke its five-year winning streak in 2022
– down 9% compared to the previous year, a result
attributable to a delayed COVID impact According to
Conning’s annual market review of the market more
people chose to hold onto their policies partly because
of COVID concerns, reducing sales to USD 40 billion
from USD 44 billion in 2021 But researchers predict
a decade of higher sales ahead: the market will
bounce back to reach an average of USD 52 billion
over the next 10 years as COVID concern fade away
and investor demand for alternative assets remains
strong
Portfolio Overview
Portfolio Structure
The portfolio structure will considerably simplify in the
next year with the acquisition of all remaining policies
held by Mutual Benefits Keep Policy Trust (“MBC”).
A fully settled agreement was signed in December
2022. It was included in a formal motion filed to the
US Court of the Southern District of Florida, Miami
Division (the “Court”) At the time of writing, the sale
has been approved by the Court and the proceeds of
the sale, net of all transaction, legal and wind down
costs which are not expected to exceed USD 5 million,
will be distributed back to MBC’s investors This
includes APT, as a current investor Most importantly,
all policies will be wholly owned by APT, reducing
operational and legal risks going forward The long-
standing issue with MBC solved, we will now have a
less risky and more cost-efficient portfolio.
Policy Structure
LSA’s current portfolio is subdivided into policies
exposed to either HIV policy holders or non-HIV policy
holders Class A Shareholders had an aggregated
gross face value of USD 78 million for life settlements
(or non-HIV policies) and USD 380 million for HIV
policies
The face value-weighted average age for the
non-HIV segment is just below 90 years old This
typically translates into a life expectancy for a normal
population of 45 years for men and 55 years for
women
While the current face value-weighted average age
of the HIV population is about 63 years old, the life
expectancy is a difficult variable to assess. However,
actual mortality is higher than that of the biological age,
exhibiting characteristics of a population materially
older While life expectancy is lower than their non-
HIV peer/age group, great uncertainties remain, as a
‘race’ is taking place between the cumulative impact
of the retrovirus over time and medical advances
Overall, life expectancy of HIV policies, while lower
than normal, has been lengthening over the last
decades
Premiums and interests
The current total premiums and interests paid on
LSA’s portfolios is about USD 165 million annually
across all share classes For 2023, we have retained
USD 18 million as a basis for premium and interest
projections by taking into account the final settlement
acquisition of MBC policies and extra policy loans
taken in 2022 to finance the MBC policies acquisition.
Investment Manager’s Report
14
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Annual Report 2022
Fractional Interests
During 2022, investments were made in three small portfolios of fractional interests
in policies in which the Company is already a fractional owner for a total cost of
USD 132,000 Fractional policies are single life insurance policies initially purchased by
multiple investors, each of whom acquired a fractional beneficial interest. Fractional
beneficial ownership does not confer control of the policy, which is typically retained
by a trustee who is required to act for the benefit of all fractional owners. This type of
purchase has stopped with the final settlement and acquisition with MBC.
Valuations
The following table provides information on the Company’s policies by Share Class
and exposure to HIV positive insureds and non-HIV insureds, as of 31 December 2022
HIV and Non-HIV Exposed Policies (all values in USD)
LSAA
HIV
Non-HIV
Total
Number of policies
4,070
134
4,204
Total gross face value
379,892,668
78,174,738
458,067,406
Valuation
40,667,216
22,074,897
62,742,113
Percentage of face value
107%
282%
137%
The US actuary, Lewis & Ellis Inc, has provided valuations for all portfolios for the year
ended 31 December 2022 The valuations used were derived by adopting an actuarial
approach
A/E Ratio Trends
Lewis & Ellis performed a study into the actual over expected death ratio (“A/E ratio”)
for the period 2010-2022, based on historical data of the number of matured insureds
The HIV A/E results for 2022 were observed to have been low, so the actuaries
decided to revise and adjust the HIV mortality assumptions to achieve an overall A/E
ratio for the last five years at 100%. The mortality assumptions of non-HIV segment
remain the same as last year and the segment reached long-term A/E ratio at 102%
Annual Report 2022
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Life Settlement Assets PLC
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15
A/E trends are shown in graphs 1 and 2 below
Graph 1: HIV Actual to Expected Ratio
%
180
140
120
100
80
60
40
20
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2022
Actual to expected
5 year average
Mortality calibrated from 2018
160
2019
2020
2021
Graph 2: Non-HIV Actual to Expected Ratio
%
160
120
100
80
60
40
20
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2022
Actual to expected
12 year average
Mortality calibrated
from 2010
2019
2020
140
2021
Investment Manager’s Report
continued
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Annual Report 2022
Maturities
In the year to December 2022, the following maturities and A/E were declared:
Maturities (USD)
HIV
6,333,397
Non-HIV
20,863,204
Total
27,196,601
A/E*
Before
HIV mortality
revision
After
HIV mortality
revision
HIV
88%
90%
Non-HIV
134%
134%
*in the number of lives, from Lewis & Ellis Inc 2022 reports
The non-HIV segment outperformed the expectation by about 30% in both dollar
amount and the number of insureds 23 policies on 18 lives insured, matured in the
year, contributing a total of USD 209 million However, the ongoing reduction in the
size of non-HIV portfolio means the maturities will mechanically be more volatile and
irregular in the future
Going Forward
With the resolution of the MBC trust fractionals, the main risk of the portfolio now
becomes the HIV mortality The non-HIV portfolio will mature much faster than the
HIV portfolio which will leave the shares predominately exposed to HIV risk We will
continue to follow the recent research on mortality in general and on long-term HIV
patients. The HIV mortality in the portfolio will thus de facto be the most significant
factor that will affect the financial outcome of the Company. This will directly affect
cashflow, not only in terms of the maturities level, but also in terms of premiums paid.
Other factors, such as unexpected premium change or discount rate, would also
have effect on cashflow, and, within a reasonable range, some effect on valuation.
Acheron Capital
27 April 2023
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17
Investment Objective
The Company’s investment objective is to generate
long-term returns for investors by investing in the life
settlement market The Company has not established
target rates of return with respect to its investments
Investment Policy
The Company will seek to achieve the Company’s
Investment Objective in respect of the Share Class as
follows:
A Ordinary Share Class (LSAA)
The assets attributable to the A Ordinary Share Class
are predominantly invested in life insurance policies
acquired from special or “distressed” situations, with
exposure to both HIV and elderly insureds
The Company met the Investment Policy by acquiring
the entire beneficial interest in the Acheron Portfolio
Trust (“APT”) from the Predecessor Company shortly
after Admission
Source of Policies
In respect of the Share Class, such Policies will be
or have been obtained from a variety of sources,
primarily in the United States
Further Acquisitions
The Company has sought, where possible, to acquire
additional interests in life policies either through
additional fractional interests or to consolidate into a
wholly owned policy The Company has negotiated to
purchase all the remaining policy interests in the MBC
Trust Once this transaction is concluded it will review
its policy towards further acquisitions Any policy
towards the retention of cash from maturities will
also be set after this review The Board will carefully
balance the amount that should be distributed to
Shareholders and that which should be retained to
fund future potential investment opportunities
The Company may also raise additional capital
in the future to acquire further Policies that meet
the Investment Objective and Investment Policy
of the Share Class (or those of a Share Class to be
established in future) Such Policies will subsequently
be granted to APT
Investment Controls
Any transaction involving more than 10% of the Gross
Asset Value of the Company, directly or indirectly, will
require the prior approval of the Board in writing
Hedging and Use of Derivatives
The Company and/or the Trust may also hold
derivative or other financial instruments designed for
efficient portfolio management or to hedge interest
or inflation risks. The Trust may invest in liquidity
management products as deemed fit by the Trustee
or the Investment Manager, as well as mortality
hedging products as deemed fit by the Investment
Manager, including, but not limited to, mortality
related Insurance Linked Securities (“ILS”)
Dividend Policy
The Company has no stated dividend target The
Company aims to distribute a substantial portion of
its funds derived from its operations as dividends to
Shareholders There can be no assurance that the
Company will be able to achieve this aim
The Company will only pay dividends to the extent
that it has sufficient financial resources available for
that purpose
In accordance with regulation 19 of the Investment
Trust (Approved Company) (Tax) Regulations 2011, the
Company will not (except to the extent permitted by
those regulations) retain more than 15% of its income
(as calculated for UK tax purposes) in respect of any
accounting period
As there is a deficit on the Revenue Reserve, all
dividends are payable from the Special Reserve
Borrowing
As at the date of this Report, the Company as a small
registered Alternative Investment Fund (“AIF”) does
not intend to borrow due to the costs and regulatory
implications that this would entail However, the
Company reserves the right to borrow in the future
in appropriate circumstances and at the discretion of
the Board (or, subject to the terms of the applicable
Investment Management Agreement, the Investment
Manager if such borrowing is at Trust level), provided
Overview of Strategy and Investment Policy
18
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Annual Report 2022
that any such borrowing entered into, shall be limited
to a maximum of 10% of the Net Asset Value of the
Share Class (at the time the borrowing is incurred)
Policy Advances
The Company utilises policy advances to provide an
acceleration of the cash flow to the Company. A policy
advance refers to excess cash withdrawn from cash
reserves generated at the level of the life insurance
contracts Policy advances will be deducted from
any proceeds when the maturities are collected
These policy advances are also described in Note 34
of these accounts The Board is of the opinion that
these policy advances do not constitute borrowing
for the purposes of the Alternative Investment Fund
Managers Directive (“AIFMD”)
Cash Management
Pending reinvestment or distribution of cash receipts,
cash received by the Company and the Trust may be
held on deposit, in cash, cash equivalents, near cash
instruments, money market instruments and money
market funds and cash funds in line with the risk
appetite specified by the Board.
The Trust’s Investment Manager must ensure that the
Company’s and the Trust’s liabilities can be met as
they fall due
Corporate and Operational Structure
The Board retains responsibility for key elements of
the Company’s strategy, including the following:
•
the
Company’s
investment
policy
which
determines the diversity of the Company’s
portfolio The Board sets limits and restrictions
with the aim of reducing risk and maximising
returns; and
•
the appointment, amendment or removal of the
Company’s third-party service providers; and
ensuring an effective system of oversight over
the Company’s risk management and corporate
governance
In order to effectively undertake its duties, the Board
may seek expert legal advice It can also call upon
the advice of the Company Secretary
The Board acts in a way that it considers to be in
good faith and is most likely to promote the success
of the Company for the benefit of its Shareholders as
a whole, and in doing so have regard (amongst other
matters) to:
•
the likely consequences of any decision in the
long-term;
•
the impact of the Company’s operations on
the community and the environment;
•
the importance of the Company maintaining a
reputation for high standards of business conduct;
and
•
the need to act fairly to avoid conflicts between
the interests of the Directors and those of the
Company
The Company has outsourced operations to various
third-party service providers as detailed below:
•
Investment Management:
As it is an internally-
managed investment trust, the Company has not
appointed an investment manager to provide it
with investment managerial services However,
the Acheron Portfolio Trust, as the Trust holding
the policy assets on behalf of the Company,
has appointed Acheron Capital Limited as its
Investment
Manager
under
the
Investment
Management Agreement with effect from the
date of Admission The Investment Manager
is authorised and regulated by the FCA (under
reference number 443685) Further details of the
Investment Management Agreement are set out in
Part 6 of the Prospectus dated January 2018
•
The Trustee:
The Trustee of the Acheron Portfolio
Trust is Dr Robert Edelstein who served as a Director
of the Company until his retirement from the Board
on 31 December 2020 Robert has continued in his
role as Trustee and advises the Board directly, as
required
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19
•
The Registrar:
The City Partnership (UK) Limited was
appointed as the Company’s Registrar on 26 March 2021
•
Administrator:
Compagnie Européenne de Révision Sàrl has
been the Administrator to the Company since its formation
and was also the Administrator to the predecessor company
•
Company Secretary:
ISCA Administration Services Limited
was appointed as the Company Secretary in December
2019
•
Tracking and Servicing Agents:
The Trust has appointed a
Tracking and Servicing Agent to assess on a regular basis
if Consenting Individuals have passed away If Consenting
Individuals have passed away the Tracking and Servicing
Agent obtains respective death certificates and ensures that
they are delivered to the insurance company that issued
the relevant Policy so that applicable death benefits can be
claimed The Trust has entered into a servicing agreement
with the Tracking and Servicing Agent detailing the services
the Tracking and Servicing Agent will provide As at the date
of this Report, Litai Assets LLC, Fort Lauderdale and the Asset
Servicing Group, Oklahoma City, have both been appointed
by the Trust to service life settlement policy interests owned
by the Trust
•
Actuary:
The Company engages an independent actuary to
estimate the life expectancy of individuals insured under
particular Policies or portfolios of Policies Actuaries provide
life expectancy or valuation estimates based on a more
general set of assumptions and experience
Corporate and Operational Structure
continued
Overview of Strategy and Investment Policy
continued
20
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Annual Report 2022
Principal Risks
The Company is exposed to a number of potential risks and uncertainties These risks could have a material
impact on financial performance and position and could cause actual results to differ materially from expected
and historical results
The Company faces a number of risks in the normal course of its activities and as a result the management of
those risks the Company faces is essential The Board maintains the overall responsibility for risk management
but has delegated to the Audit Committee the task of regular and robust assessments of the Company’s
risks and controls The Audit Committee has accordingly established a robust process to identify and monitor
the risks faced by the Company. The process involves the maintenance of a risk register, which identifies the
principal and emerging risks facing the Company and assesses each risk on a scale, classifying the probability
of the risk and the potential impact that an occurrence of the risk could have on the Company A number of
day-to-day risk management functions of the Trust are undertaken by the Trust’s Investment Manager, who
regularly reports to the Audit Committee
Risk
Mitigation
HIV Mortality Risk
Changes in mortality rates may adversely affect the
performance of the Policies held by the Company
This is particularly so in respect of HIV mortality risk
where HIV policies going forward will be a larger
proportion of the portfolio
The Investment Manager regularly assesses HIV
mortality rates based on available information to
ensure no changes are required to the valuation
model
Premium Management Risk
Unanticipated volatility in mortality rates makes
liquidity management of premium reserves difficult,
as the Company (or the Trust) need to be able to
meet premiums and costs at all times Failure to pay
a premium may result in the relevant Policy lapsing
and the Company being unable to receive insured
sums as a result
Management monitors cash on an ongoing basis in
accordance with the practice and limits set by the
Board
Volatility Risk
The portfolio may be more volatile than expected
as a consequence of certain policies representing a
larger proportion of the portfolio than other policies
The Investment Manager seeks to ensure a
diversified portfolio of policies.
Fractional Premium Risk
The other parties in a fractional policy may not
renew the premium leading to the policy lapsing
The Investment Manager regularly has first refusal
in this event and will decide whether a policy is
worth retaining or whether it should be allowed
to lapse If it is considered the policy should be
retained, the Company will pay the premium that
remains unpaid by the other party The Company
is under no obligation to pay for a policy which it
considers is uneconomic
On completion of the MBC transaction to purchase
the remaining interests in those fractional policies,
going forward, the Company will not have any
fractional interests and the risk of holding fractional
policies will be eliminated unless the Company
decides to purchase further fractional interests
Risks
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21
Risk
Mitigation
Fractional Ownership Risk
Ownership of fractional policies in the US lies
with external trustees who act on behalf of the
underlying beneficiaries. Any breakdown in the
working relationship between the trustee and
beneficiary could jeopardise the interests of the
beneficiary.
Close monitoring of the operational procedures of
the trustee to ensure payments are made when due
Being prepared to take legal action to defend our
beneficial interests as more fully discussed in the
Chairman’s Statement
Ensuring sufficient cash is held along with the ability
to utilise policy loans to ensure beneficial interests
not already owned could be purchased when
offered for sale by the trustee.
During the year and at the year-end the Company
held a mix of fractional and wholly owned policies
On completion of the MBC transaction to purchase
the remaining interests in those fractional policies,
going forward, the Company will not have any
fractional interests and the risk of holding fractional
policies will be eliminated unless the Company
decides to purchase further fractional interests
Advance Age Mortality Risk
There is a lack of data to reliably determine general
or disease specific mortality at advanced ages, as
well as the date beyond which a Policy no longer has
value This makes the use of statistically unproven
assumptions necessary As a consequence, should
such assumptions prove to be incorrect, the
Company’s performance and that of the Ordinary
Shares may fall short of expectations
The Company has engaged an independent
Actuary to perform its own assessment of the value
of the portfolio of policies. Valuation differences
between the two models are investigated
Discount Rate Risk
The discount rate used for reporting or valuation
purposes may be on a portfolio basis or on a bottom
up Policy by Policy or Policy type by Policy type
basis, which can create material value differences.
Further,
there
is
no well-established
market
discount rate, which makes the use of specific
discount rates for actuarial purposes subjective
The discount rate applied is regularly assessed
by the Investment Manager and annually by
the Independent Actuary, based on available
information Changes in discount rate will only be
made once approved by the Board
Modelling Risk
The
Investment
Manager
uses
modelling
in
determining the investments to make; however, if
the assumptions made by the Investment Manager
in building these models are or were materially
incorrect, there could be a substantial adverse
effect on the Net Asset Value of the Ordinary
Shares participating in the relevant Policies and the
Company’s performance and that of the Ordinary
Shares may fall short of expectations
The Company has engaged an independent
Actuary to perform its own assessment of the value
of the portfolio of policies. Valuation differences
between the two models are investigated
Risks
continued
Principal Risks
continued
22
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Annual Report 2022
Risk
Mitigation
Tax
Any changes in the Company’s tax status or
in taxation legislation could affect the value of
investments held by the Company, affect the
Company’s ability to provide returns to Shareholders
and affect the tax treatment for Shareholders of
their investments in the Company The results of the
Company would also likely be adversely affected
if the Company were not eligible to claim benefits
under the current income tax treaty between
the United Kingdom and the United States In
conformity with the income tax treaty, 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 annually on a recognised stock exchange
Changes in taxation may also adversely affect the
results of the Company
The Company intends at all times to conduct its
affairs so as to enable it to qualify as an investment
trust for the purposes of Section 1158 of the
Corporation Tax Act 2010 Both the Board and the
Investment Manager are aware of the requirements
which are to be fulfilled in any accounting period
for the Company to maintain its investment trust
status The conditions required to satisfy the
investment trust criteria shall be monitored by
the compliance function of the Investment Manager
and performance of the same shall be reported to
the Board on a quarterly basis The Board monitors
the trading of the Shares regularly to assess the 6%
requirement This helps ensure that action could be
taken to encourage more trading and reduce the
likelihood of incurring a tax charge
Breach of Applicable Legislative Obligations
The Company and its third-party service providers
are subject to various legislative and regulatory
regimes Any breach of applicable legislative and/
or regulatory obligations could have a negative
impact on the Company and impact returns to
Shareholders
The Company engages only with third-party
service providers which hold the appropriate
regulatory approvals for the function they are to
perform and can demonstrate that they can adhere
to the regulatory standards required of them Each
appointment is governed by agreements which
contain the ability for the Company to terminate the
arrangements with each of these counterparties
with limited notice should such counterparty
continually or materially breach any of their
legislative obligations, or their obligations to the
Company more broadly Additionally, each of the
counterparties is subject to regular performance
and compliance monitoring by the Investment
Manager, as appropriate to their function, to ensure
that they are acting in accordance with applicable
regulations and are aware of any upcoming
regulatory changes which may affect the Company.
Counterparty Risk
If an insurance company that has issued a Policy in
which the Company invests defaults, the Company
may not receive one or more payments owing to it
Insurance companies are required to separate
their operations between General Insurance and
Life Insurance, meaning the effect on the assets
and the risk on Life Settlement policies would be
ring-fenced in the event of significant business
difficulties. The HIV policies are protected by a
State Guarantee up to USD 150k – USD 200k per
policy which covers a significant proportion of these
policies Non-HIV policies tend to be of a higher
value than that covered by the State Guarantee
and involve some risk, but the insurance industry
spreads their risk through re-insurance in many
asset backed companies across the world
Principal Risks
continued
Annual Report 2022
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Life Settlement Assets PLC
/
23
Secondary Risks Specific to the Company
As described on pages 34 and 35, the Board and Audit Committee have an ongoing process of monitoring and
reviewing risks and internal controls The principal risks and mitigations are highlighted above
Litigation Risk:
The assignment of life insurance
policies can be a contentious matter and the sector
has historically been subject to high levels of litigation
Premium Assumptions Risk:
Changes in the amount of
premiums charged by the insurance company that
has issued a Policy may increase the costs borne by
the Company and adversely affect its performance.
Reliance on Key Individuals:
The Company relies on
key individuals to manage the day-to-day affairs
of the Company There can be no assurance as
to the continued service of these key individuals
The departure of key individuals without adequate
replacement may have a material adverse effect on
the Company’s prospects and results Accordingly,
the ability of the Company to achieve its investment
objective depends heavily on the experience of the
Investment Manager’s team, and more generally, on
the ability of the Investment Manager to attract and
retain suitable staff.
Fluctuations in the Market Price of the Company’s
Shares:
The market price of the Company’s shares
may not reflect the Net Asset Value and may fluctuate
widely in response to different factors. There can
be no assurance that the Company’s shares will be
repurchased by the Company even if they trade
materially below their Net Asset Value Similarly, the
shares may trade at a premium to Net Asset Value
whereby the shares can trade on the open market at
a price that is higher than the value of the underlying
assets There can be no assurance, express or implied,
that Shareholders will receive back the amount of
their investment in the Company’s shares
Third-Party Service Providers:
The Company has
no employees and the Directors have all been
appointed on a non-executive basis Whilst the
Company has taken all reasonable steps to establish
and maintain adequate procedures, systems and
controls to enable it to comply with its obligations,
the Company relies upon the performance of third-
party service providers for its executive function In
particular, the Investment Manager, Administrator,
Registrar and Company Secretary The termination
of service provision by any service provider, or failure
by any service provider to carry out its obligations
to the Company, or to carry out its obligations to
the Company in accordance with the terms of its
appointment, could have a material adverse effect
on the Company’s operations and its ability to meet
its investment objective
Achievement of the Investment Objective:
There can be
no assurance that the Company will be successful in
implementing the Investment Objective
Climate Change:
The Company is aware of the impact
of Climate Change across the business world and has
sought to assess the impact this could have on the
Company either directly or indirectly The Company
is managed and operated through a number of third-
party suppliers and does not undertake any activities
directly nor does it have any offices. The nature of its
investments in life assurance policies is not directly
impacted by Climate Change, any long-term change
in climate is unlikely to have a detrimental impact on
the valuation of those policies Long-term climate
change could have an impact on the ability of third-
party suppliers to continue to service the Company
and impact the insurance industry as a whole and its
ability to meet all claims, including the maturity of life
assurance policies when they are payable The Board
has sought to reduce its carbon impact through the
use of conference and video calls for meetings where
possible and encourages the Company’s third-party
suppliers to assess their own carbon impact
For a detailed description of the Company’s financial risks, please refer to Note 4 of the Financial Statements.
Risks
continued
24
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Annual Report 2022
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 US 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
on pages 18 and 19
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
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 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
Viability Statement and Other Disclosures
Annual Report 2022
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Life Settlement Assets PLC
/
25
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 2023 and signed on its behalf by:
Michael Baines
27 April 2023
Viability Statement and Other Disclosures
continued
26
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Annual Report 2022
Governance
Board of Directors
The following were Directors of the Company at the year end
Michael Baines, Chairman
Michael Baines is a graduate
of the University of Oxford and
The
Royal
Military
Academy
Sandhurst
and
has
previously
held high-level positions such as
the Head of Risk Management
and Deputy Chairman of Robert
Fleming Securities and Managing
Director at Atlas Capital Mr Baines
is currently Chairman of Church
House Investment Management
Guner Turkmen
Guner Turkmen is an accomplished
investment
professional
with
years of experience in the finance
industry He began his career in
finance working
in
investment
banking,
and
later
served
as
the head of Alternative Asset
Management and Fixed Income at
Union Capital Group SA However,
his vision for sustainable and low-
risk
investment
strategies
led
him to found his own investment
firm,
Lake
Geneva
Investment
Partners (LGIP), in 2008 From
the
beginning,
Mr
Turkmen
deemed transparency and robust
execution to be indispensable,
which led him to build a solid
wealth management team His
strategy is to invest in assets with
sustainable growth to maximize
investment returns, rather than
seeking an absolute performance
LGIP’s objective is to generate
performance for its clients by
limiting long-term volatility and
potential losses in their funds in
order to preserve their capital
Christopher Casey,
Audit Committee Chairman
Christopher Casey has extensive
experience as a non-executive
director
and
audit
committee
chairman of public companies,
in particular investment trusts
His other current appointments
include The European Smaller
Companies Trust plc, CQS Natural
Resources Growth and Income plc
and Mobius Investment Trust plc
Christopher’s career spans over
40 years and he was previously a
partner at KPMG He graduated
from Oxford University in 1977 with
a degree in Politics, Philosophy
and Economics
28
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Life Settlement Assets PLC
/
Annual Report 2022
The Directors present the Annual Report and
Financial Statements of the Company for the year
ended 31 December 2022 The Financial Statements
have been prepared in accordance with International
Accounting Standards and in accordance with the
requirements of the Companies Act 2006
Legal Form
The Company was incorporated on 16 August
2017 in England and Wales with company number
10918785 under the Companies Act 2006 as a
private company limited by shares It is a closed-
ended investment company and is an investment
trust for the purposes of section 1158 of the
Corporation Tax Act 2010 The Company was re-
registered as a public company limited by shares
and an investment company under section 833 of the
Companies Act 2006 on 24 January 2018
Regulatory Status
The Company is not a collective investment scheme
and therefore is not regulated as such by the FCA
However, it is subject to the FCA’s Disclosure
Guidance and Transparency Rules, Market Abuse
Regulation (“MAR”), and Prospectus Rules
The Company is registered by the FCA as a “small
registered UK AIFM” pursuant to regulation 10(2) of
the AIFM Rules on the basis that it is a small internally
managed AIF
The Directors intend, at all times, to conduct the
affairs of the Company so as to enable it to qualify as
an investment trust for the purposes of section 1158
of the Corporation Tax Act 2010
The Company’s shares are listed on the Specialist
Fund Segment of the London Stock Exchange
In the opinion of the Directors, the Company has
conducted its affairs during the period under
review, and subsequently, so as to qualify as an
investment trust for the purposes of section 1158
of the Corporation Tax Act 2010 (as amended) The
Company has applied to, and obtained approval
from, HMRC as an investment trust company subject
to continuing to meet the eligibility requirements
Directors
The names and biographical details of the Board
members as at the year end can be found on page 28.
Directors’ retirements are subject to the Company’s
Articles of Association (the “Articles”) The Articles
provide that the Company may appoint a person
who is willing to act as a director, and any director
so appointed is required to retire at the next AGM
after his or her appointment and is eligible for re-
appointment
Mr Baines, Mr Casey and Mr Turkmen will be subject to
re-election at the forthcoming AGM on 14 June 2023
None of the Directors have a service contract with the
Company or is entitled to compensation for loss of
office on the takeover of the Company.
The powers of the Directors are set out in
the
Statement
on
Corporate
Governance
on
pages 33 to 35
Community and Environment
The Company does not make any political or
charitable donations
Share Capital
Following the merger of share classes undertaken in
prior years, the Company has one class of share, the A
Ordinary share At the year-end there were 49,826,784
A Ordinary shares of USD 001 each in issue All shares
are listed on the Specialist Fund Segment of the main
market of the London Stock Exchange
Risks
The principal risks of the Company are shown on
pages 21 to 24 and in Note 4 on pages 63 to 66
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 Further
details are shown in the Viability Statement on
page 25 The Directors believe that it is appropriate
to prepare the Financial Statements on a going
Report of the Directors
Annual Report 2022
/
Life Settlement Assets PLC
/
29
Going Concern
continued
concern basis and that the Company has adequate
resources to continue in operational existence for
a period of at least 12 months from the date of the
approval of the Financial Statements The Company
is able to meet, from its assets, all of its liabilities
including annual premiums and its ongoing charges
Corporate Governance
A Statement on Corporate Governance is provided
on pages 33 to 35
Management Agreements
The Company has not appointed an investment
manager to provide it with investment managerial
services However, the Trust has appointed Acheron
Capital Limited as their Investment Manager under
the Investment Management Agreement signed from
the date of admission to trading on the London Stock
Exchange A Services Agreement has been entered
into between the Company and the Investment
Manager whereby the Investment Manager has
agreed to assist the Board in the management of the
day-to-day activities of the Company The Company
will reimburse the Investment Manager for certain
expenses related to carrying out the day-to-day
activities of the Company The Investment Manager
will be remunerated under the agreement with the
Trust but will not be paid fees in connection to the
Services Agreement Further details of the agreement
with Acheron Capital are provided in Note 8
The Trustee of the Acheron Portfolio Trust is Dr Robert
Edelstein who was a Director of the Company until his
retirement from the Board on 31 December 2020
The Company has appointed Compagnie Européenne
de Révision Sàrl as its Administrator They have been
retained by the Company to calculate its Net Asset
Value and to provide certain other services
The Company has appointed Lewis & Ellis Inc as an
actuary to provide a valuation of the policies
It is the Directors’ opinion that the continuing
appointment of these key suppliers is in the best
interests of the Company and its Shareholders The
Directors are satisfied that these suppliers have the
required skill and expertise to continue to manage
the Company’s assets successfully
Dividends
As shown in Note 26 on page 78, the Company did not
make any dividend payments during the year ended
31 December 2022 On 2 February 2023, the Company
announced a special dividend of 60209 cents per
share, totalling USD 30 million, which was paid on
24 February 2023 to Shareholders on the register at
10 February 2023. No final dividend in respect of the
year ending 31 December 2022 is proposed
Substantial Shareholdings
The Directors have been informed of the following notifiable interests in the voting shares of the Company at
31 December 2022:
Notification From
Number of
shares
% of voting
rights
Tomson Pte Limited
4,651,152
933
Metage Capital Limited
3,475,756
698
Premier Miton Group Plc
1,525,000
306
On 24 February 2023, Metage Capital Limited notified the Company that its interest in the voting shares of the
Company had changed to 2,099,584 shares being 421% of the Company’s voting rights
There were no other changes to the above holdings between 31 December 2022 and the date of this report
Report of the Directors
continued
30
/
Life Settlement Assets PLC
/
Annual Report 2022
Annual General Meeting
The Company will be holding its AGM on Wednesday,
14 June 2023 Full details of the meeting, the
resolutions to be proposed and how to vote are set
out in the Notice of Meeting on pages 80 to 84 A
summary of some of the resolutions being proposed
is set out below
Ordinary Business at the Annual General Meeting
Re-election of Directors
The notice of the meeting includes resolutions to
re-elect each of the Company’s Directors Biographies
of each Director are shown on page 28 of this Report
The Board believes that they bring valuable skill,
experience and expertise to the Company and
recommends that Shareholders vote in favour of the
resolutions relating to their re-election
Reappointment of Auditors
Resolution 6 proposes the reappointment of BDO
LLP as the Company’s External Auditor for the
forthcoming year and the authority proposed under
Resolution 7 will authorise the Directors to determine
the Auditor’s remuneration
Special Business at the Annual General Meeting
Allotment of Shares
The authority proposed under Resolution 8 will
authorise the Directors to allot shares or grant rights
to subscribe for shares in the Company generally, in
accordance with section 551 of the Companies Act
2006 (the “Act”), up to an aggregate nominal amount
of 10% of the Ordinary Share Class, as of the date of
this Notice (excluding treasury shares)
Disapplication of Pre-emption Rights
Resolution 9 will give Directors the general authority
to allot Ordinary Shares for cash without first
offering the securities to existing Shareholders in
certain circumstances The resolution proposes
that the disapplication of such pre-emption rights
be sanctioned in respect of the allotment of equity
securities with an aggregate 10% of the issued share
capital of the Ordinary Share Class as at the date of
this report No allotment of shares from treasury may
be made at a price below the prevailing estimated
Net Asset Value
Authority for the Company to Purchase its Own Shares
Resolution 10 authorises the Company to purchase
up to 1499% of the Company’s shares in issue at the
date of the Annual General Meeting Purchases will
be made on the open market for cash at prices in
accordance with the terms laid out in the Resolution
Shares will be purchased only in circumstances where
the Board believes that it is in the best interests of
Shareholders generally Furthermore, purchases will
only be made if the Board believes that they would
result in an increase in NAV per share and earnings
per share The Board currently intends to cancel those
shares purchased
The authority for each of the above resolutions under
special business will expire on the date falling 15
months after the passing of the resolution or, if earlier,
at the conclusion of the Annual General Meeting to
be held in 2024
Shareholder Meeting and Proxy voting
There are currently no restrictions on public meetings
such as the Company’s Annual General Meeting
However, the Board is mindful that not all Shareholders
may wish to attend and vote in person To ensure
that all votes are counted for the resolutions being
put to the meeting a Poll will be called Shareholders
are encouraged to submit their proxy votes ahead of
the meeting to ensure that their votes count towards
deciding each resolution Appointing the Chair of the
meeting rather than a named person will ensure that
the vote will count
Notice of the Annual General Meeting is on pages
80 to 84 of this report Shareholders are requested
to return a proxy vote (described above) as early
as possible – if you appoint the Chairman of the
Shareholder Meetings as your proxy, this will ensure
your votes are cast in accordance with your wishes
and avoids the need for another person to attend as
a proxy in your place
Annual Report 2022
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Life Settlement Assets PLC
/
31
If Shareholders have any questions that they would
like to raise at the Annual General Meeting, these
should be submitted in advance to the following
email address:
lsa@iscaadmin.co.uk
You should
also continue to monitor the Company’s website
and announcements for any updates in relation
to the meeting arrangements that may need to be
provided If the Board believes that it becomes
necessary
or
appropriate
to
make
alternative
arrangements for the holding of the Shareholder
Meetings, we will ensure that Shareholders are given
as much notice as possible Further information will
be made available through
www.lsaplc.com/investor-
relations/company-reports
Recommendation
The Board considers the Resolutions to be proposed
at the AGM are in the best interests of Shareholders
as a whole and the Company and, accordingly,
recommends that Shareholders vote in favour of each
Resolution, as the Directors intend to do in respect of
their own shareholdings
Company Information
The following information is disclosed in accordance
with the Companies Act 2006:
•
The Company’s capital structure and voting rights
are summarised on page 75
•
Details of the substantial Shareholders in the
Company are listed on page 30
•
The rules concerning the appointment and
replacement of Directors are contained in the
Company’s Articles of Association
•
The Articles of Association can be amended by the
passing of a Special Resolution of the members in
a General Meeting
•
Amendment of the Articles of Association and
the giving of powers to issue or buy back the
Company’s shares require the relevant Resolution
to be passed by Shareholders
•
There are no restrictions concerning the transfer of
securities in the Company; no restrictions on voting
rights; no special rights with regard to control
attached to securities; no agreements between
holders of securities regarding their transfer known
to the Company; and no agreements which the
Company is party to that might affect its control
following a successful takeover bid
•
Consideration of likely future developments is
detailed in the Strategic Report
Auditor
The Auditor, BDO LLP, has indicated its willingness to
act as the Company’s External Auditor and Resolutions
6 and 7 proposing its appointment and authorising
the Directors to determine its remuneration for the
ensuing year will be submitted at the AGM
The Directors who were in office on the date of
approval
of
these
Financial
Statements
have
confirmed, as far as they are each aware, that there
is no relevant audit information of which the Auditor
is unaware. Each of the Directors has confirmed that
they have taken all the steps that they ought to have
taken as Directors in order to make themselves aware
of any relevant audit information and to establish that
it has been communicated to the Auditor
On behalf of the Board
Michael Baines
27 April 2023
Report of the Directors
continued
32
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Life Settlement Assets PLC
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Annual Report 2022
Statement on Corporate Governance
The Company is committed to maintaining high
standards of corporate governance and the Directors
are accountable to Shareholders for the governance
of the Company’s affairs. A high-level description of
the Company’s corporate governance structure is
provided below
The Company is not obliged to and does not currently
intend to comply with the UK Corporate Governance
Code issued by the Financial Reporting Council
or the corporate governance code issued by the
Association of Investment Companies
Responsibilities of the Board
The Board is responsible for the effective stewardship
of the Company’s affairs and determines the strategic
direction of the Company The Board meets at
least four times a year and reviews the Company’s
investment
policy,
performance
and
financial
position There is an agreed procedure for Directors,
in the furtherance of their duties, to take independent
professional advice at the Company’s expense
The Chairman is responsible for leading the Board
and ensuring that it continues to deal effectively
with all aspects of its role In particular, he ensures
that Acheron Capital and the Administrator provide
the Directors, in a timely manner, with management,
regulatory and financial information that is clear,
accurate and relevant Representatives of the third-
party service providers attend each Board meeting,
enabling the Directors to seek clarification on specific
issues or to probe further on matters of concern
At the year end, the Board comprises three male
Directors all of whom are non-executive and
independent of the Investment Manager In the light
of the small size of the Board, it has been decided
not to appoint a formal Nominations Committee and
appointments of any new directors are considered by
the Board as a whole
Diversity
The Directors are aware of the need to have a
Board which, as a whole, comprises an appropriate
balance of skills, experience and diversity Upcoming
regulation applicable from April 2023 will require
a Company to report on a comply or explain basis
against three key indicators 40% of the Board should
be comprised of women, one senior board position
should be by a woman and one Director should be
from an ethnic minority background The Board
currently and throughout the year consists of three
male directors of Caucasian ethnic background and
therefore does not meet these requirements The
Board has agreed that it will be mindful of these
regulations in any future recruitment process it might
undertake providing a suitable candidate possesses
the key skills and experience required for the position
Powers of the Directors
The powers of the Directors are set out in the Articles
of Association which are publicly available from
Companies House Except as otherwise provided
by regulation and legislation, the Directors may
exercise all of the ordinary powers usually conferred
on directors to manage the affairs of a company and
to delegate such of those powers to committees,
agents or individuals as they consider appropriate
The Directors may authorise the Company to borrow;
to pay fees, expenses, salaries and make other
payments to directors, executives and employees;
and to provide pensions or other benefits for directors,
executives and employees; but have not exercised
these powers except for the payment of fees to non-
executive directors
Annual Report 2022
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Life Settlement Assets PLC
/
33
Performance Evaluations
The performance of the Company is considered in
detail at each Board meeting
As part of the Board evaluation discussions, each of
the Directors assessed the overall time commitment
of their external appointments and it was concluded
that all Directors have sufficient time to discharge
their duties This conclusion was reached on the basis
that most external appointments are non-executive
roles which are far less time-consuming than full-
time executive positions in a trading company
In addition to being a non-executive Director of LSA,
and as set out on page 28, Mr Casey is a non-executive
director of three other investment trusts Investment
trusts generally only require time for quarterly board
meetings, committee meetings, which usually take
place on the same day as board meetings, and for
reviewing documents such as board papers, annual
and half yearly reports Mr Casey has made himself
available for all meetings of the Company and, in
his capacity as Audit Committee Chairman, has also
held several meetings and conference calls with
the Company’s Auditors In between scheduled
meetings and calls, he also makes himself available
to the Manager and the Company Secretary as and
when his expertise and opinion are required
Internal Controls
The
Board
has
overall
responsibility
for
the
establishment of the Company’s systems of internal
control and for reviewing their effectiveness. Internal
control systems are designed to meet the particular
requirements of the Company and to manage
rather than eliminate the risks of failure to achieve
its objectives The systems by their very nature
provide reasonable but not absolute assurance
against material misstatement or loss The Board has
reviewed the effectiveness of the Company’s internal
control systems including the financial, operational
and compliance controls and risk management
processes for the year
The key procedures which have been established
with a view to providing effective internal control are
as follows:
•
Throughout the year under review, there has been
an ongoing process for identifying, evaluating
and managing the significant risks faced by the
Company, which accords with the guidance in the
FRC’s Guidance on Risk Management, Internal
Control and Related Financial and Business
Reporting The process involves reports from the
Company’s Administrator, Cerlux, the Trustee,
Professor R Edelstein, Company Secretary and
Statement on Corporate Governance
continued
Board Attendance
Attendance at the main Board and Audit Committee meetings held during the reporting period is shown
below In addition, ad hoc meetings are held where necessary Meetings were held either face-to-face or
electronically
Board
meetings
Audit
committee
meetings
Michael Baines
5/5
3/3
Christopher Casey
5/5
3/3
Guner Turkmen
5/5
n/a
34
/
Life Settlement Assets PLC
/
Annual Report 2022
Investment Manager Discussions are held with
each party to assess the overall operations of
the Company to identify ongoing and new risks
being, or likely to be faced by the Company These
are taken in conjunction with the Investment
Manager’s regular report which covers investment
performance In addition, the Company Secretary
and Investment Manager report on the overall
control environment at the Company’s third-party
service providers Internal control statements from
third party service providers are also reviewed by
the Audit Committee
•
The duties relating to investment management,
accounting and custody of assets are segregated
and the procedures of the individual parties are
designed to complement one another
•
The Board is responsible for setting the overall
Investment Policy and monitors the activities of
the Investment Manager at its regular meetings
The responsibilities of the Investment Manager
are included in the Investment Management
Agreement between the Trust and Acheron
Capital Acheron is authorised and regulated by
the Financial Conduct Authority
•
Administration
and
accounting
duties
are
performed by Compagnie Euopéenne de Révision
Sàrl
•
Company secretarial duties are performed by an
external Company Secretary, ISCA Administration
Services Limited
•
Authorisation and exposure limits are set by the
Board
•
The Company clearly defines the duties and
responsibilities
of
its
agents
through
their
contracts The appointment of agents and advisers
is conducted by the Board after consideration of
the quality of parties involved; the Board monitors
their
on-going
performance
and
contractual
arrangements.
The
Board
reviews
financial
information produced by the Investment Manager,
Administrator and the Company Secretary on a
regular basis
The risk management process and systems of internal
control are designed to manage rather than eliminate
the risk of failure to achieve the Company’s objectives
It should be recognised that such systems can only
provide reasonable, rather than absolute, assurance
against material misstatement or loss. No significant
failings or weaknesses have been identified.
Accountability and Relationship with Investment
Manager
The Statement of Directors’ Responsibilities in
respect of the accounts is set out on page 43 The
responsibilities of the Independent Auditor are set out
on pages 44 to 51 The Directors’ Report states that
the Company is a going concern and confirmation of
the Directors consideration on viability is on page 25
The Board has delegated contractually to external
third parties day to day accounting, company
secretarial and administration duties, and registration
services Each of these contracts was entered into
after consideration by the Board of the quality and
cost of the services offered. The Board receives
regular formal reports from Acheron Capital and ad
hoc information as required
Conflicts of Interest
The Board has put in place a framework for Directors
to report conflicts of interest or potential conflicts of
interest, which it believes works effectively. Directors
are aware that they have a continuing obligation to
notify the Company Secretary of all existing, new
and potential situations or interests which do or
could conflict with the interests of the Company. All
disclosed situations and interests are reviewed by
the Board at its meetings and, where appropriate,
authorised It is the Board’s intention to continue to
review all notified situations on a regular basis.
Annual Report 2022
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Life Settlement Assets PLC
/
35
The Audit Committee was chaired, throughout the
year, by Christopher Casey
At the year end and at the date of this report,
the Committee comprised of Christopher Casey
(Chairman) and Michael Baines The Committee
members
have
recent
and
relevant
financial
experience and have competence relevant to the
sector in which the Company is operating
Role of the Committee
The Audit Committee (‘the Committee’) is responsible
for monitoring the process of production and ensuring
the integrity of the Company’s Financial Statements
The other primary responsibilities of the Committee
are:
•
to consider the Financial Statements of the
Company and make recommendations to the
Board;
•
to monitor adherence to best practice in financial
reporting and corporate governance;
•
to review the effectiveness of the internal control
and
risk
management
environment
of
the
Company;
•
to receive compliance reports from service
providers;
•
to consider the accounting policies of the
Company;
•
to consider the valuation process of the life
settlement assets;
•
to make recommendations to the Board in relation
to the appointment of the Auditor, the terms of
their engagement and remuneration;
•
to review and monitor the Auditor’s independence
and objectivity and the effectiveness of the audit
process; and
•
to review the cyber security procedures as
appropriate
Matters Considered in the Year
The Committee met three times during the financial
year to consider the Financial Statements and to
review the internal control systems The principal
matters considered by the Committee were the
valuation of the Company’s assets, proof of ownership
of its investments and cash, and the maintenance of
its approval as an investment trust
The Manager and Administrator have reported to
the Committee to confirm continuing compliance
with their individual regulatory requirements and for
maintaining the Company’s investment trust status
The Committee liaised with Acheron Capital Limited,
throughout the year, and received reports on their
legal compliance A risk assessment and review of the
Internal Controls document maintained by the Board
was considered in detail and amended as necessary
Internal Audit
The Company does not have an internal audit function,
as all of its day-to-day operations are delegated
to third parties, all of whom have their own internal
control
procedures
The
Committee
discussed
whether it would be appropriate to establish an
internal audit function, and agreed that the existing
system of monitoring and reporting by third parties
remains appropriate and sufficient. The need for an
internal audit function is reviewed annually
External Audit
The Audit Committee monitors and reviews the
effectiveness of the external third-party service
providers, audit process for the publication of the
Annual Report and makes recommendations to the
Board on the re-appointment, remuneration and
terms of engagement of the Auditors
Prior to each Annual Report being published, the
Committee considers the appropriateness of the
scope of the audit plan, the terms under which
the audit is to be conducted, as well as the matter
of remuneration, with a view to ensuring the best
interests of the Company are promoted
Audit Committee Report
36
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Life Settlement Assets PLC
/
Annual Report 2022
Audit fees are computed on the basis of the time
spent on the Company’s affairs by the Audit partners
and staff and on the levels of skill and responsibility
of those involved
Following its review, the Committee considers
that, individually and collectively, the Auditor is
appropriately experienced to fulfil the role required,
and has recommended its re-appointment to the
Board A resolution for its re-appointment will be
proposed at the forthcoming Annual General Meeting
The Committee has considered the independence
and objectivity of the Auditor and it is satisfied in
these respects that BDO LLP can fulfil its obligations
to the Company and its Shareholders
BDO LLP do not provide any non-audit services to
the Company
Christopher Casey
Audit Committee Chairman
27 April 2023
Annual Report 2022
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Life Settlement Assets PLC
/
37
The Board presents the Directors’ Remuneration Report for the year ending 31 December 2022 An Ordinary
resolution for the approval of this report will be put to Shareholders at the forthcoming AGM
As the Company has no employees and all of the Directors are non-executive, the Board has not established
a separate Remuneration Committee Directors’ remuneration is determined by the Board as a whole, at its
discretion within an aggregate ceiling of £200,000 per annum Each Director abstains from voting on their own
individual remuneration The Board has reviewed its existing remuneration levels and has agreed to increase
Directors’ fees from 1 January 2023 as shown on page 40
The Company’s Remuneration Policy is set out below This Policy was approved by Shareholders at the AGM
on 23 June 2022 The votes cast on the resolution approving the Remuneration Policy were as below and it is
the intention that this Policy will apply for three years
Number of votes
% of votes cast
For
31,217,262
975
Against
794,690
25
At Chairman’s discretion
–
–
Total votes cast
32,011,952
1000
Number of votes withheld
–
–
A separate resolution to adopt the Remuneration report was advisory only and not binding on the Company
The votes cast at the 2022 AGM on the advisory resolution were:
Number of votes
% of votes cast
For
31,217,262
975
Against
794,690
25
At Chairman’s discretion
–
–
Total votes cast
32,011,952
1000
Number of votes withheld
–
–
Directors’ Remuneration Report
38
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Life Settlement Assets PLC
/
Annual Report 2022
Policy Table
Fixed Fee Element
Remuneration consists of a fixed fee each year and the Directors of the
Company are entitled to such rates of annual fees as the Board at its
discretion determines
Discretionary Element
In accordance with the Company’s Articles of Association, if a Director
is requested to perform extra or special services, they will be entitled to
receive such additional remuneration as the Board considers appropriate
Taxable Benefits
In accordance with the Company’s Articles of Association the Directors
are also entitled to be reimbursed for out-of-pocket expenses and any
other reasonable expenses incurred in the proper performance of their
duties. Travel and other expenses may be considered as taxable benefits
for Directors Where applicable, the associated tax liability will be settled
by the Company
Purpose and Link to Strategy
Directors’ fees are set to: be sufficient to attract and retain individuals
of a high calibre with suitable knowledge and experience to promote
the long-term success of the Company; reflect the time spent by the
Directors on the Company’s affairs; reflect the responsibilities borne by
the Directors; and recognise the more onerous roles of the Chairman of
the Board and the Chairman of the Audit Committee through the payment
of higher fees
Operation
Fees payable to the Directors will be reviewed annually A number of
factors will be considered to ensure that the fees are set at an appropriate
level. These will include: the average rate of inflation during the period
since the last fee increase; the level of Directors’ remuneration for other
investment trusts of a similar size; and the complexity of the Directors’
responsibilities
Maximum
Total remuneration paid to the non-executive Directors is subject to an
annual aggregate limit of £200,000 in accordance with the Company’s
Articles of Association Any changes to this limit will require Shareholder
approval by ordinary resolution
There are no performance related elements to the Directors’ fees
Directors do not receive bonus payments or pension contributions from the Company or any option to acquire
shares. There is no entitlement to exit payments or compensation on loss of office. None of the Directors has a
service contract with the Company and their terms of appointment are set out in a letter provided when they
join the Board. These letters are available for inspection at the Company’s registered office.
Consideration of Shareholders’ Views
Shareholder approval for the Remuneration Report will be sought at the AGM held in 2023 and Shareholders
will also have the opportunity to express their views and raise any queries on the policy ahead of this meeting
through
lsa@iscaadmin.co.uk
Annual Report 2022
/
Life Settlement Assets PLC
/
39
Directors’ Emoluments (Audited Information)
The Directors who served during the year received the following emoluments in the form of fees:
Year ended
31 December
2022
Year ended
31 December
2021
Year ended
31 December
2020
Director
Total
USD ‘000
%
Change
Total
USD ‘000
%
Change
Total
USD ‘000
Michael Baines
65
(58)
69
78
64
Christopher Casey
50
–
50
(20)
51
Guner Turkmen
10
–
10
–
10
Subtotal
125
129
125
Others now retired
–
–
–
(1000)
33
Total
125
129
158
As the Company has no employees the table above sets out the total remuneration costs and benefits paid
by the Company
In total USD nil (2021: USD nil) was reimbursed to Directors during the year for their expenses There are no other
Directors’ expenses to report
The annual fees for each Director for the twelve months commencing 1 January 2023 are expected to be:
•
Michael Baines, Chairman – £65,000
•
Christopher Casey, Audit Committee Chairman – £50,000
•
Guner Turkmen – USD 15,000
Directors’ and Officers’ liability insurance cover is maintained by the Company on behalf of the Directors.
Directors’ Remuneration Report
continued
40
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Life Settlement Assets PLC
/
Annual Report 2022
Relative Importance of Spend on Remuneration
The following table shows the proportion of the Company’s income spent on remuneration during the year
ended 31 December 2022
2022
USD ‘000
2021
USD ‘000
%
change
Directors’ remuneration paid
125
129
(31)
Dividends paid (Note 26)
–
5,100
(1000)
Total Shareholder Return
The Company does not have a specific benchmark against which performance is measured. The graph
below compares the Company’s NAV and share price on a total return basis with the total return on an
equivalent investment in the HFRI Fund Weighted Composite Index during the period. This index reflecting
the performance of an investment in Hedge Funds has been selected as the most relevant to the Company
Company’s Performance Graph
%
160
140
130
120
110
100
90
Dec.
2018
Dec.
2019
HFRI*
Class A
Dec.
2022
80
Annual Performance of
Ordinary Shares vs. HFRI Index
Dec.
2020
150
Dec.
2021
* The HFRI Fund Weighted Composite Index is a global, equal-weighted index of single manager funds that
report to HFR Database Constituent funds report monthly net of all fees performance in US Dollars and have
a minimum of USD 50 million under management or USD 10 million under management and a twelve (12)
month track record of active performance The HFRI Fund Weighted Composite Index does not include Funds
of Hedge Funds. As an index that is not correlated to any specific market, the Board considers that this is the
most appropriate index on which to compare the Company’s performance
Annual Report 2022
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Life Settlement Assets PLC
/
41
Directors’ Interests in Shares (Audited Information)
There are no requirements for the Directors to own shares in
the Company
The Directors interests and those of their connected persons
in the shares of the Company are set out in the table below All
of the holdings are beneficial and all of the Directors held office
during the period under review
Director
31 December
2022
31 December
2021
Michael Baines
50,000
50,000
Christopher Casey
–
–
Guner Turkmen
–
–
No other changes to these holdings had been notified up to
the date of this report
The Directors’ Remuneration Report was approved by the
Board on 27 April 2023
For and on behalf of the Board
Michael Baines
Chairman
27 April 2023
Directors’ Remuneration Report
continued
42
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Life Settlement Assets PLC
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Annual Report 2022
The Directors are responsible for preparing the Annual
Report and the Financial Statements in accordance
with UK adopted international accounting standards
and applicable law and regulations
Company law requires the Directors to prepare
Financial Statements for each financial year. Under
that law the Directors are required to prepare the
Financial Statements in accordance with UK adopted
international accounting standards Under company
law the Directors must not approve the Financial
Statements unless they are satisfied that they give
a true and fair view of the state of affairs of the
Company and of the profit or loss for the Company
for that period
In preparing these Financial Statements, the Directors
are required to:
•
select suitable accounting policies and then apply
them consistently;
•
make judgements and accounting estimates that
are reasonable and prudent;
•
state whether they have been prepared in
accordance
with
UK
adopted
international
accounting standards, subject to any material
departures disclosed and explained in the Financial
Statements;
•
prepare the Financial Statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business; and
•
prepare a Directors’ Report, a Strategic Report and
Directors’ Remuneration Report which comply with
the requirements of the Companies Act 2006
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Company and enable them to ensure that the
Financial Statements comply with the Companies Act
2006
They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and
other irregularities The Directors are responsible for
ensuring that the Annual Report and accounts, taken
as a whole, are fair, balanced, and understandable and
provides the information necessary for Shareholders
to assess the Company’s performance, business
model and strategy
Website Publication
The Directors are responsible for ensuring the Annual
Report and the Financial Statements are made
available on a website Financial Statements are
published on the Company’s website in accordance
with legislation in the United Kingdom governing
the preparation and dissemination of Financial
Statements, which may vary from legislation in
other jurisdictions The maintenance and integrity of
the Company’s website is the responsibility of the
Directors The Directors’ responsibility also extends
to the ongoing integrity of the Financial Statements
contained therein
Directors’ Responsibilities Pursuant to DTR4
The Directors confirm to the best of their knowledge:
•
The Financial Statements have been prepared in
accordance with the applicable set of Accounting
Standards, give a true and fair view of the assets,
liabilities, financial position and profit and loss of
the Company
•
The Annual Report includes a fair review of the
development and performance of the business
and the financial position of the Company, together
with a description of the principal risks and
uncertainties that they face
Michael Baines
Chairman
27 April 2023
Statement of Directors’ Responsibilities
Annual Report 2022
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Life Settlement Assets PLC
/
43
Independent Auditor’s Report to the Members of
Life Settlement Assets PLC
Opinion on the Financial Statements
In our opinion the Financial Statements:
•
give a true and fair view of the state of the
Company’s affairs as at 31 December 2022 and of
its profit for the year then ended;
•
have been properly prepared in accordance with
UK adopted international accounting standards;
and
•
have been prepared in accordance with the
requirements of the Companies Act 2006
We have audited the Financial Statements of Life
Settlement Assets plc (the ‘Company’) for the year
ended 31 December 2022 which comprise the
Statement of Comprehensive Income, the Statement
of Financial Position, the Statement of Changes
in Equity, the Cash Flow Statement and Notes to
the Financial Statements, including a summary of
significant accounting policies. The financial reporting
framework that has been applied in their preparation
is applicable law and UK adopted international
accounting standards
Basis for opinion
We
conducted
our
audit
in
accordance with
International Standards on Auditing (UK) (ISAs (UK))
and applicable law Our responsibilities under those
standards are further described in the Auditor’s
responsibilities
for
the
audit
of
the
Financial
Statements section of our report We believe that
the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion Our
audit opinion is consistent with the additional report
to the Audit Committee
Independence
Following
the
recommendation
of
the
Audit
Committee, we were appointed by the Board of
Directors on 21 November 2019 to audit the financial
statements for the year ended 31 December 2019
and subsequent financial periods. The period of total
uninterrupted engagement including retenders and
reappointments is 4 years, covering the years ended
31 December 2019 to 31 December 2022 We remain
independent of the Company in accordance with the
ethical requirements that are relevant to our audit
of the financial statements in the UK, including the
FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these
requirements The non-audit services prohibited by
that standard were not provided to the Company
Conclusions relating to going concern
In auditing the Financial Statements, we have
concluded that the Directors’ use of the going
concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of
the Directors’ assessment of the Company’s ability
to continue to adopt the going concern basis of
accounting included:
•
reviewing the appropriateness of the forecasted
cash flow calculated by performing a sensitivity
analysis on the expected receipt of cash from
maturities, future expenditure and the cash outflow
arising from premium payments and dividend
payments to Shareholders;
•
challenging
the
Directors’
assumptions
and
judgements
made
by
assessing
them
for
reasonableness
through
comparing
forecasts
to historical figures and assessing the Directors’
historical
ability
to
forecast
accurately
by comparing budgeted 2022 figures to actual
2022 results;
•
understanding the business model, objectives,
strategies and related business risk, the Directors
measurement and review of the Company’s
financial performance including forecasting and
budgeting processes and the Company’s risk
assessment process;
•
checking the mathematical accuracy of the
forecasts;
•
calculating
and
reviewing
financial
ratios
to
ascertain the financial health of the Company; and
•
evaluating the adequacy and appropriateness
of disclosures in the financial statements with
reference
to
the
Directors
going
concern
assessment
44
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Life Settlement Assets PLC
/
Annual Report 2022
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Company’s ability to continue as a going concern for a period
of at least twelve months from when the Financial Statements
are authorised for issue
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report
Overview
2022
2021
Key Audit Matters
Valuation of investments
P
P
Revenue recognition
P
P
Materiality
Financial Statements as a whole
USD 125 million (2021: USD 174 million)
based on 2% (2021: 2%) of total life
settlement investments at fair value
Annual Report 2022
/
Life Settlement Assets PLC
/
45
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its environment, including the
Company’s system of internal control, and assessing the risks of material misstatement in the Financial
Statements We also addressed the risk of management override of internal controls, including assessing
whether there was evidence of bias by the Directors that may have represented a risk of material misstatement
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on:
the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement
team These matters were addressed in the context of our audit of the Financial Statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters
Key Audit Matter
How the scope of our audit addressed the
Key Audit Matter
Valuation of investments
(Notes 3.3, 4.3, 13 and 14 to the Financial Statements)
The
life
settlement
portfolio
at
the
year-
end comprised of ‘level 3’ (unobservable inputs)
financial assets held at fair value through profit or loss,
as their performance is evaluated on a fair value basis,
valued at USD 627 million (2021: USD 880 million)
Management’s
actuarial
expert
performs
the
valuation
of
investments
which
are
reviewed
and approved by the Board The valuations are,
however, complex and there is a high level of
estimation uncertainty involved in determining the
life settlement investment valuations It is based on
assumptions such as mortality rates, discount rates
and projected premiums, all of which can vary over
time, and may significantly impact the fair value of
the portfolio
We considered the valuation of investments to be
the key area of focus as investments represent the
most significant balance in the financial statements
and underpin the principal activity of the Company
For this reason and the reasons set out above we
considered this to be a key audit matter
We responded to this matter by performing the
following procedures:
•
We obtained an understanding of the process of
fair valuation of life settlement portfolios including
the policy acquisition, realisation and valuation
processes and controls
•
With
the
assistance
of
our
own
external
independent
actuarial
expert
we
assessed
the appropriateness of the assumptions and
methodology
undertaken
by
management’s
actuarial expert We reviewed and challenged
their findings through discussions in relation to key
assumptions and confirmed possible sensitivities
were within an appropriate range
•
We
assessed
the
independence,
objectivity
and competence of our external expert We
also
performed
procedures
to
assess
the
independence,
objectivity
and
competence
of
management’s
actuarial
expert
including
reviewing service agreements, evaluating financial
interests in the company, business or personal
relationships and whether other services are
provided to the company
•
Reconciled the data provided by independent
third party service providers with the data used by
management’s actuarial expert to gain assurance
that the data used in the valuation is complete
and accurate and reconciles to the Financial
Statements
Key observations:
Based on our procedures performed we did not
identify any matters to suggest that the valuation of
investments was not appropriate
Independent Auditor’s Report to the Members of
Life Settlement Assets PLC
continued
46
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Life Settlement Assets PLC
/
Annual Report 2022
Key Audit Matter
How the scope of our audit addressed the
Key Audit Matter
Revenue recognition
(Notes 3.10, 6 and 7 to the Financial Statements
Revenue arises predominantly from death benefits
received on matured life settlement policies and is
a key factor in demonstrating the performance of the
portfolio
There is a risk that the policy maturities are not
accurately accounted for due to manual error
There is a risk around timing of the servicing agent
finding out about the death, as well as them notifying
the Investment Manager of this policy maturing,
which could result in revenue being recognised in
the incorrect period
There is also a risk that the classification of income
between revenue and capital is not in accordance
with the Company’s accounting policies Incorrect
classification of income between revenue and capital
could result in the material misstatement of the
income tax expense and liability
For
these
reasons,
we
considered
revenue
recognition to be a key audit matter
We responded to this matter by performing the
following procedures:
•
Obtained
an
understanding
of
the
design
and implementation of controls in place over
the completeness and validity in relation to revenue
recognition, specifically, the controls in place at
the servicing agents over the timely identification
of maturities and the controls in place at the
Investment Manager and Administrator in respect
of recognition of maturities
•
Evaluated the Company’s accounting policies
for
revenue
recognition
in
accordance with
the requirements of UK adopted International
Accounting Standards and in accordance with
the Statement of recommended Practice (‘SORP’)
issued by Association of Investment Companies
(AIC)
•
Tested the occurrence of investment income by
selecting a sample of maturities of life settlement
portfolio from the portfolio trust report provided
by the administrator and checking the associated
income to third party sources, including tracing
a sample of matured policies back to servicing
agent’s initial notice of death
•
Gained assurance over the completeness of
maturities by obtaining a confirmation of all
active policies as at the year end date from the
independent servicing agents and comparing this
listing against the active policies per the portfolio
trust report to identify any maturities which had
not been recognised Additionally, we obtained a
sample of maturities declared in 2023, agreeing
these maturities to source documentation and
identifying whether the maturities were recorded
in the correct accounting period
•
For both revenue and capital income, we selected
a sample and agreed to supporting documentation
to assess whether the items were appropriately
classified and presented in the financial statements
in accordance with the Company’s accounting
policies
Key observations:
Based on our procedures performed we did not
identify any matters to suggest that revenue
recognition was not appropriate
Annual Report 2022
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Life Settlement Assets PLC
/
47
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements We consider materiality to be the magnitude by which misstatements, including omissions,
could influence the economic decisions of reasonable users that are taken on the basis of the Financial
Statements
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we
use a lower materiality level, performance materiality, to determine the extent of testing needed Importantly,
misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of
the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating
their effect on the Financial Statements as a whole.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole and
performance materiality as follows:
2022
2021
Materiality
USD 1,250,000
USD 1,740,000
Basis for determining
materiality
2% of total life settlement
investments at fair value
2% of total life settlement
investments at fair value
Rationale for the
benchmark applied
Given that the Company’s
portfolio is comprised of unquoted
investments which would typically
have a wider spread of reasonable
alternative possible valuations, we
have applied a percentage of 2% of
invested assets (USD 62742 million)
Given that the Company’s
portfolio is comprised of unquoted
investments which would typically
have a wider spread of reasonable
alternative possible valuations, we
have applied a percentage of 2% of
invested assets (USD 88024 million)
Performance materiality
USD 940,000
USD 1,310,000
Basis for determining
performance materiality
75% of materiality
75% of materiality
Rationale for the
percentage applied for
performance materiality
The level of performance materiality
applied was set after having
considered a number of factors
including the expected total value of
known and likely misstatements and
the level of transactions in the year
The level of performance materiality
applied was set after having
considered a number of factors
including the expected total value of
known and likely misstatements and
the level of transactions in the year
Specific materiality
We also determined that for Revenue return before tax, a misstatement of less than materiality for the Financial
Statements as a whole, specific materiality, could influence the economic decisions of users as it is a measure
of the Company’s performance of income generated from its investments after expenses As a result, we
determined materiality for these items to be USD 430,000 (2021: USD 480,000), based on 5% of expenditure
(2021: 5% of expenditure). We further applied a performance materiality level of 75% (2021: 75%) of specific
materiality to ensure that the risk of errors exceeding specific materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of
USD 60,000 (2021: USD 90,000). We also agreed to report differences below this threshold that, in our view,
warranted reporting on qualitative grounds
Independent Auditor’s Report to the Members of
Life Settlement Assets PLC
continued
48
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Life Settlement Assets PLC
/
Annual Report 2022
Other information
The Directors are responsible for the other information The other information comprises the information
included in the Annual Report other than the Financial Statements and our Auditor’s Report thereon Our opinion
on the Financial Statements does not cover the other information and, except to the extent otherwise explicitly
stated in our Report, we do not express any form of assurance conclusion thereon Our responsibility is to
read the other information and, in doing so, consider whether the other information is materially inconsistent
with the Financial Statements or our knowledge obtained in the course of the audit, or otherwise appears
to be materially misstated If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether this gives rise to a material misstatement in the Financial Statements
themselves If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact
We have nothing to report in this regard
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are
required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described
below
Strategic Report and
Directors’ Report
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic Report and the Directors’ Report for the
financial year for which the Financial Statements are prepared is consistent with
the Financial Statements; and
•
the Strategic Report and the Directors’ Report have been prepared in accordance
with applicable legal requirements
In the light of the knowledge and understanding of the Company and its environment
obtained in the course of the audit, we have not identified material misstatements in
the Strategic Report or the Directors’ Report
Directors’
Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has
been properly prepared in accordance with the Companies Act 2006
Matters on which we
are required to report
by exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept, or returns adequate for our
audit have not been received from branches not visited by us; or
•
the Financial Statements and the part of the Directors’ Remuneration Report to
be audited are not in agreement with the accounting records and returns; or
•
certain disclosures of Directors’ Remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit
Annual Report 2022
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Life Settlement Assets PLC
/
49
Responsibilities of Directors
As explained more fully in the Statement of Directors’
Responsibilities, the Directors are responsible for
the preparation of the Financial Statements and for
being satisfied that they give a true and fair view, and
for such internal control as the Directors determine
is necessary to enable the preparation of Financial
Statements that are free from material misstatement,
whether due to fraud or error
In preparing the Financial Statements, the Directors
are responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as
applicable, matters related to going concern and
using the going concern basis of accounting unless
the Directors either intend to liquidate the Company
or to cease operations, or have no realistic alternative
but to do so
Auditor’s responsibilities for the audit of the
Financial Statements
Our objectives are to obtain reasonable assurance
about whether the Financial Statements as a whole
are free from material misstatement, whether due to
fraud or error, and to issue an Auditor’s Report that
includes our opinion Reasonable assurance is a
high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK)
will always detect a material misstatement when it
exists Misstatements can arise from fraud or error
and are considered material if, individually or in the
aggregate, they could reasonably be expected to
influence the economic decisions of users taken on
the basis of these Financial Statements
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities,
including
fraud,
are
instances
of
non-compliance with laws and regulations We
design procedures in line with our responsibilities,
outlined above, to detect material misstatements in
respect of irregularities, including fraud The extent
to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
Non-compliance with laws and regulations
Based on:
•
our understanding of the Company and the
industry in which it operates;
•
discussion with management and those charged
with governance; and
•
obtaining and understanding of the Company’s
policies and procedures regarding compliance
with laws and regulations,
we considered the significant laws and regulations
to be Companies Act 2006, UK adopted international
accounting standards, the FCA listing and DTR rules,
industry practice represented by the AIC SORP and
the Company’s qualification as an Investment Trust
under UK tax legislation as any non-compliance
of this would lead to the Company losing various
deductions and exemptions from corporation tax
Our procedures in respect of the above included:
•
agreement of the Financial Statement disclosures
to underlying supporting documentation;
•
enquiries of management and those charged
with governance relating to the existence of any
non-compliance with laws and regulations;
•
review of minutes of board meetings throughout
the
period,
legal
correspondence
and
correspondence with the relevant authorities
for instances of non-compliance with laws and
regulations; and
•
reviewing
the
Company’s
Investment
Trust compliance to check that the Company was
meeting its requirements to retain their Investment
Trust Status
Fraud
We assessed the susceptibility of the Financial
Statements to material misstatement including fraud
Independent Auditor’s Report to the Members of
Life Settlement Assets PLC
continued
50
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Life Settlement Assets PLC
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Annual Report 2022
Our risk assessment procedures included:
•
enquiry with management and those charged with
governance regarding any known or suspected
instances of fraud;
•
obtaining an understanding of the Company’s
policies and procedures relating to:
»
detecting and responding to the risks of fraud;
and
»
internal controls established to mitigate risks
related to fraud
•
review of minutes of meeting of those charged with
governance for any known or suspected instances
of fraud; and
•
discussion with our internal forensics experts
as to where fraud might occur in the Financial
Statements
Based on our risk assessment, we considered the
areas most susceptible to be the classification
of income between revenue and capital and
management override of controls
Our procedures in respect of the above included:
•
in response to the risk of fraud in the classification
of income, the procedures set out in the Key Audit
Matters section of the report;
•
assessing
significant
estimates
made
by
management for bias as set out in the Key Audit
Matters section of the report; and
•
testing journals which met a defined risk criteria
by agreeing to supporting documentation and
evaluating whether there was evidence of bias
by the Investment Manager and Directors that
represented a risk of material misstatement due to
fraud
We also communicated relevant identified laws
and regulations and potential fraud risks to all
engagement team members who were all deemed
to have appropriate competence and capabilities
and remained alert to any indications of fraud
or
non-compliance
with
laws
and
regulations
throughout the audit
Our audit procedures were designed to respond
to risks of material misstatement in the Financial
Statements, recognising that the risk of not detecting
a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by,
for example, forgery, misrepresentations or through
collusion There are inherent limitations in the audit
procedures performed and the further removed
non-compliance with laws and regulations is from
the events and transactions reflected in the Financial
Statements, the less likely we are to become aware
of it
A further description of our responsibilities is
available
on
the
Financial
Reporting
Council’s
website at:
www.frc.org.uk/auditorsresponsibilities
This description forms part of our Auditor’s Report
Use of our Report
This Report is made solely to the Company’s
members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006 Our audit work
has been undertaken so that we might state to the
Company’s members those matters we are required
to state to them in an Auditor’s Report and for no other
purpose To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other
than the Company and the Company’s members as
a body, for our audit work, for this Report, or for the
opinions we have formed
Vanessa-Jayne Bradley (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
27 April 2023
BDO LLP is a limited liability partnership registered
in England and Wales (with registered number
OC305127)
Annual Report 2022
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Life Settlement Assets PLC
/
51
Financial
Statements
Statement of Comprehensive Income
for the year ended 31 December 2022
Notes
Revenue
USD ‘000
2022
Capital
USD ‘000
Total
USD ‘000
Revenue
USD ‘000
2021
Capital
USD ‘000
Total
USD ‘000
Income
Gains/(losses) from life
settlement portfolios
5
Realised gains:
Maturities
–
27,197
27,197
–
38,510
38,510
Acquisition cost of maturities
and fair value movement
–
(10,220)
(10,220)
–
(7,443)
(7,443)
Sub total
–
16,977
16,977
–
31,067
31,067
Incurred premiums paid in
year on all policies
–
(15,551)
(15,551)
–
(15,434)
(15,434)
Unrealised gains:
Fair value adjustments
–
6,795
6,795
–
9,199
9,199
Income from life settlement
portfolios
6
623
–
623
942
–
942
Other income
7
9
–
9
107
–
107
Net foreign exchange loss
–
–
–
(9)
–
(9)
Total income
632
8,221
8,853
1,040
24,832
25,872
Operating expenses
Investment management fees
8
(1,640)
409
(1,231)
(1,547)
(2,509)
(4,056)
Other expenses
9
(6,051)
–
(6,051)
(6,545)
–
(6,545)
(Loss)/profit before finance
costs and taxation
(7,059)
8,630
1,571
(7,052)
22,323
15,271
Finance costs
Interest payable
10
(972)
–
(972)
(732)
–
(732)
(Loss)/profit before taxation
(8,031)
8,630
599
(7,784)
22,323
14,539
Taxation
11
–
–
–
(101)
–
(101)
(Loss)/profit for the year
(8,031)
8,630
599
(7,885)
22,323
14,438
Basic and diluted returns per share
Return per class A share USD
12
(0.161)
0.173
0.012
(0167)
0472
0305
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 July 2022
The notes on pages 58 to 78 form part of these Financial Statements
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Annual Report 2022
Statement of Financial Position
as at 31 December 2022
Notes
2022
USD‘000
2021
USD‘000
Non-current assets
Financial assets at fair value through profit or loss
– Life settlement investments
13,14
62,742
88,024
62,742
88,024
Current assets
Maturities receivable
15
7,410
6,205
Trade and other receivables
2,051
330
Premiums paid in advance
16
5,264
6,525
Cash and cash equivalents
17
35,907
12,026
50,632
25,086
Total
assets
113,374
113,110
Current liabilities
Other payables
18
(1,522)
(948)
Provision for performance fees
19
(1,939)
(2,848)
Total liabilities
(3,461)
(3,796)
Net assets
109,913
109,314
Represented by
Capital and reserves
Share capital
20
498
498
Special reserve
94,290
94,290
Capital redemption reserve
213
213
Capital reserve
53,354
44,724
Revenue reserve
(38,442)
(30,411)
Total equity attributable to ordinary Shareholders of the
Company
42
109,913
109,314
Net Asset Value per share basic and diluted
Class A shares USD
22
2.21
219
These Financial Statements were approved by the Board of Directors on 27 April 2023 and signed on its behalf
by:
Michael Baines, Chairman
Registered in England and Wales with Company Registration number: 10918785
The notes on pages 58 to 78 form part of these Financial Statements
Annual Report 2022
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Life Settlement Assets PLC
/
55
Statement of Changes in Equity
for the year ended 31 December 2022
Share
capital
USD ‘000
Special
reserve
USD ‘000
Capital
redemption
reserve
USD ‘000
Capital
reserve
USD ‘000
Revenue
reserve
USD ‘000
Total
USD ‘000
Balance as at 31 December 2021
498
94,290
213
44,724
(30,411)
109,314
Comprehensive income/(loss)
for the year
–
–
–
8,630
(8,031)
599
Contributions by and distributions
to owners
Dividends paid in year
–
–
–
–
–
–
Balance as at 31 December 2022
498
94,290
213
53,354
(38,442)
109,913
Of which:
– Realised gains
40,500
– Unrealised gains
12,854
Share
capital
USD ‘000
Special
reserve
USD ‘000
Capital
redemption
reserve
USD ‘000
Capital
reserve
USD ‘000
Revenue
reserve
USD ‘000
Total
USD ‘000
Balance as at 31 December 2020
583
99,614
128
22,401
(22,526)
100,200
Comprehensive income/(loss)
for the year
–
–
–
22,323
(7,885)
14,438
Contributions by and distributions
to owners
Merger B class
(85)
–
85
–
–
–
Costs of B class merger
–
(224)
–
–
–
(224)
Dividends paid in year
–
(5,100)
–
–
–
(5,100)
Balance as at 31 December 2021
498
94,290
213
44,724
(30,411)
109,314
Of which:
– Realised gains
34,582
– Unrealised gains
10,142
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 on pages 58 to 78 form part of these Financial Statements
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Annual Report 2022
Cash Flow Statement
for the year ended 31 December 2022
Notes
2022
USD ‘000
2021
USD ‘000
Cash flow generated from operating activities
Profit for the year
599
14,438
Non-cash adjustment
– movement on portfolios
3,650
(1,756)
Investment in life settlement portfolios
14
(132)
(11,282)
Movements in “policy advances”
14
21,764
2,657
Interest paid
972
732
Changes in operating assets and liabilities
(Increase)/decrease in maturities receivables
(1,205)
3,073
(Increase)/decrease in trade and other receivables
(1,721)
121
Decrease in premiums paid in advance
1,261
1,829
Increase/(decrease) in other payables
574
(64)
(Decrease)/increase in performance fee provision
(909)
2,509
Net cash inflows generated from operating activities
24,853
12,257
Cash flow used in financing activities
Dividends paid
26
–
(5,100)
Costs of A & B class merger
–
(224)
Interest paid
(972)
(732)
Net cash flows used in financing activities
(972)
(6,056)
Net increase in cash and cash equivalents
23,881
6,201
Cash balance at the beginning of the year
12,026
5,825
Cash balance at the end of the year
35,907
12,026
Included in cash flow used in operating activities is interest paid, USD 972,000 (2021: USD 732,000); dividends
and interest received, USD 632,000 (2021: USD 947,000)
The notes on pages 58 to 78 form part of these Financial Statements
Annual Report 2022
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Life Settlement Assets PLC
/
57
Notes to the Financial Statements
for the year ended 31 December 2022
1.
GENERAL INFORMATION
Life Settlement Assets PLC (“Life Settlement Assets” or the “Company”) is a public company limited by shares
and an investment company under section 833 of the Companies Act 2006 It was incorporated in England
and Wales on 16 August 2017 with a registration number of 10918785. The registered office of the Company is
115 Park Street, 4th Floor, London W1K 7AP
The principal activity of Life Settlement Assets is to manage investments in whole and partial interests in life
settlement policies issued by life insurance companies operating predominantly in the United States
In May 2018, the Company received confirmation from HM Revenue & Customs of its approval as an Investment
Trust for tax accounting periods commencing on or after 26 March 2018, subject to the Company continuing
to meet the eligibility conditions contained in section 1158 of the Corporation Tax Act 2010 and the ongoing
requirements in Chapter 3 of Part 2 of the Investment Trust (Approved Company) (Tax) Regulations 2011
(Statutory Instrument 2011/2999)
The Company currently has one class of Ordinary Shares in issue, the A Shares, which principally participates
in a 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 were transferred to the Company as an in specie subscription
for ordinary shares. More specifically:
•
100% of the interest in the Acheron Portfolio Trust was attributed to the ordinary A shares;
•
100% of the interest in the Lorenzo Tonti 2006 Portfolio Trust was attributed to the ordinary B shares;
•
100% of the interest in the Avernus Portfolio Trust was attributed to the ordinary D shares;
•
100% of the interest in the Styx Portfolio Trust was attributed to the ordinary E shares; and
•
any cash and other net assets were recorded in the books of the Company as being attributable to the class
of ordinary shares which corresponded to the existing class of shares in APC to which such cash and other
net assets were attributable
Net assets acquired from the Predecessor Company were valued for the purpose of Section 593 of the
Companies Act by Mazars LLP as at 31 December 2017, based on the net asset values as at that date less any
distributions to shareholders of the Predecessor Company prior to the date of acquisition
The D Ordinary Share Class and E Ordinary Share Class were merged into the A Ordinary Share Class on
30 April 2020 and the B Ordinary Share Class merged into the A Ordinary Share Class on 3 June 2021
Statement of compliance with IFRS
The Company’s Financial Statements have been prepared in accordance with UK adopted International
Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies
reporting under these standards They have also been prepared in accordance with the SORP for
investment companies issued by the AIC in July 2022, except to the extent that it conflicts with International
Accounting Standards
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Annual Report 2022
2.
IFRS ACCOUNTING POLICIES
2.1.
Basis of preparation
The Financial Statements have been prepared using the accounting policies specified below and in accordance
with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006
as applicable to companies reporting under those standards The Financial Statements have been prepared
on a going concern basis under the historical cost convention except for the measurement at fair value of
investments held at fair value through profit or loss. The going concern statement can be found on pages 29
and 30. The Company’s activities, together with the material risk factors likely to affect its future development
and performance, as well as the Board of Directors’ “Viability Statement” are set out in the Strategic Report on
pages 18 to 25
The significant accounting policies that have been applied in the preparation of these Financial Statements
are summarised below
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 Further details
are shown in the Viability Statement on page 25 The Directors believe that it is appropriate to prepare the
Financial Statements on a going concern basis and that the Company has adequate resources to continue
in operational existence for a period of at least 12 months from the date of the approval of the Financial
Statements The Company is able to meet, from its assets, all of its liabilities including annual premiums and
its ongoing charges
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 standards have been published but are not effective for the Company’s accounting period
beginning on 1 January 2022 The Directors do not expect the adoption of the following new standards,
amended standards or interpretations to have a significant impact on the Financial Statements of the Company
in future periods
Amendments to IAS 1: Presentation of Financial Statements regarding classification of liabilities as current or
non-current
Amendments to IAS 8: Changes in Accounting Estimates and Error to distinguish between accounting policies
and accounting estimates
Amendments to IAS 1 and IFRS Practice Statement 2: Presentation of Financial Statements regarding the
disclosure of Accounting Policies
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
3.1.
Foreign currency translation
The Financial Statements are presented in United States Dollars (USD), which is also the functional currency
of the Company
Foreign currency transactions are translated into the functional currency of the Company, using the exchange
rates prevailing at the date of the transaction (spot exchange rates) Foreign exchange gains and losses
resulting from the settlement of such transactions are recognised in profit or loss.
Annual Report 2022
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Life Settlement Assets PLC
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59
3.
SIGNIFICANT ACCOUNTING POLICIES
continued
3.2.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting used by the Company’s
management The Company’s management, who are responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of Directors that makes strategic
decisions
Segment information
The Company’s management makes the strategic resource allocations on behalf of the Company The
Company’s management has identified that the insurance portfolios or portfolio rights acquired can all be
classified as life settlement activities all of which are located in the United States of America. As such, there is
a single operating segment
The asset allocation decisions are based on a single, integrated investment strategy, and the Company’s
performance is evaluated on an overall basis The investment objective of the Company is medium-term
capital growth An analysis of the investment portfolio is given in Note 14 of the Financial Statements
The internal reporting provided to Management for the Company’s assets, liabilities and performance is
prepared on a consistent basis with the measurement and recognition principles of IAS
All of the Company’s income is generated on the life settlement portfolios in the USA
3.3.
Life settlement portfolios
Being the final and exclusive beneficiary of the Acheron Portfolio Trust, the Company reflects all the transactions
performed on these life insurance portfolios in its own Financial Statements Investments in transactions to
support the acquisition of life settlement assets by the Trust are considered as having been undertaken by the
Company for its own account
Insurance policies which are acquired are recognised initially at fair value (the transaction price) If a life
insurance policy matures, is surrendered or is sold, the related purchase price is deducted from the proceeds
in calculating the gains from the policy Cash advanced on life insurance policies is deducted from the value
of the relevant policy
The value of insurance contracts is usually recovered upon the death of the insured policyholder However,
the Company may from time-to-time decide to dispose of an individual life insurance contract
Insurance portfolios are measured at fair value with changes in fair value recognised in profit or loss and
allocated to capital
The life settlement portfolios are classified as non-current assets.
3.4.
Policy advances
Certain type of life settlement policies (‘whole life’) accumulate over time a cash surrender value reflecting
fixed premiums paid in excess of the cost of insurance (‘COI’). The Trusts can access this excess cash reserve
on its policies in the form of advances on each individual policy from the insurance company The Trusts can
pay back these “policy advances” in whole or in part at any time before the death of the insured The interest
due on the advance accrues on the cash advance and after the death of the insured, the outstanding balance
will be deducted from any proceeds when the maturity is collected If the Trusts decide to lapse the policy, any
remaining cash in the policy in excess of the advance is paid to the Trust as the owner of the policy In practice,
the advances work as an accelerated death benefit on the policy and its impact is fully accounted for in the
policy valuation
The Company has included the policy advances within the investments in life settlement portfolios
Please refer to Note 14 for the gross amounts of policy advances and life settlement policies
Financial assets and liabilities are offset and the net amounts presented in the Financial Statements when
there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net
basis or to realise the asset and settle the liability simultaneously
Notes to the Financial Statements
continued
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Annual Report 2022
3.
SIGNIFICANT ACCOUNTING POLICIES
continued
3.5.
Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual
provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the
cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are
transferred
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Financial assets and financial liabilities are measured initially at fair value plus transaction costs, except for
financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially
at fair value
Financial assets and financial liabilities are measured subsequently as described below.
Financial assets
For the purpose of subsequent measurement, financial assets are classified into the following categories upon
initial recognition:
•
financial assets at amortised cost; and
•
financial assets held at fair value through profit or loss.
All financial assets, except for those held at fair value through profit or loss, are subject to review for impairment
at least at each reporting date
Financial assets at amortised cost
Financial assets at amortised cost include receivables and cash
At 31 December 2022, trade and other receivables included an amount of USD 2,034,000 in relation to the
purchase of life policies from Mutual Benefits Keep Policy Trust (“MBC”). This amount was paid on account
pending approval of the transaction by the US Court of Florida Further details are given in Note 25 on pages
77 and 78
Financial assets held at fair value through profit or loss
The life settlement investments are classified as financial assets held at fair value through profit or loss.
Assets in this category are measured at fair value, with gains or losses recognised in profit or loss.
Financial liabilities
The Company’s financial liabilities are only constituted by trade and other payables.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method.
3.6.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on call with banks and other short-term, highly
liquid investments with original maturities of three months or fewer
3.7. Taxation
The current income tax charge is calculated on the basis of the local tax laws enacted or substantively
enacted at the balance sheet date in the countries where the companies operate and generate taxable
income Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation It establishes provisions, where appropriate, on the basis
of the amounts expected to be paid to the tax authorities
Annual Report 2022
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Life Settlement Assets PLC
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61
3.
SIGNIFICANT ACCOUNTING POLICIES
continued
Deferred income tax, if any, is recognised, using the liability method, on temporary differences arising between
the tax basis of the Company’s assets and liabilities and their carrying amounts in the Financial Statements
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted
by the balance sheet date and are expected to apply when the related deferred income tax asset is realised
or the deferred income tax liability is settled
Due to the Company’s status as an investment trust, and its intention to continue to meet the conditions
required to maintain approval under Section 1158 of the Corporation Act Tax 2010, the Company has not
accounted for any deferred tax on its losses
3.8.
Equity and reserves
Share capital represents the nominal value of the Shares that have been issued
Capital redemption reserve represents the nominal value of shares purchased and cancelled
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
Capital reserve represents realised and unrealised capital gains and losses on the disposal and revaluation of
investments
Revenue reserve represents retained gains/(losses) from the revenue derived from holding investment assets
less the costs associated with running the Company
All transactions with owners of the Company are recorded separately within equity
3.9.
Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required to settle the obligation, and the amount of
the obligation can be reliably estimated
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation
using a pre-tax rate that reflects the current market assessment of the time value of money and the risks specific
to the obligation The increase in the provision due to the passage of time is recognised as an interest expense
3.10.
Income and expense recognition
3.10.1.
Capital and revenue
The Capital column comprises the fair value of the consideration received in relation to maturities or to the
surrender or sale (if any) of life settlement policies Maturities are recognised when the Company is formally
aware of the maturity of a life insurance policy Net gains from life settlement portfolios represents the overall
net gain and derives from the maturity or the sale of insurance policies less their original acquisition value and
the change in the valuation of the fair market value of the remaining policies Acquisition costs of matured
policies as well as premiums incurred are deducted for determining net gains/(losses) from life settlement
policies
The Revenue column comprises dividends and interest income generated on invested cash in the life
settlement policies as well as other operational income (reversal of excess accrued expenses by the
Predecessor Company)
3.10.2. Premiums
Premiums are expensed when paid However, only the portion of the premiums that relates to the insurance
coverage period up to 31 December of each financial period is recognised as an expense in determining the
net gains/(losses) from life settlement policies The remaining amount is shown as premiums paid in advance
on the balance sheet
Notes to the Financial Statements
continued
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Annual Report 2022
3.
SIGNIFICANT ACCOUNTING POLICIES
continued
3.10.3.
Interest income
Interest income is recognised on a proportional basis using the effective interest method.
3.11.
Significant estimates
The preparation of these Financial Statements in conformity with International Accounting Standards requires the
use of certain critical accounting estimates. Critical accounting estimates are reflective of significant judgements
and uncertainties and potentially yield materially different results under different assumptions or conditions.
The areas where assumptions and estimates are significant to the Financial Statements and involve a higher
degree of judgement or complexity relate mainly to the valuation of the investment portfolios
The life settlement (LS) and HIV portfolio values are modelled by management and valued annually by
qualified external professional actuaries in the United States, Lewis & Ellis. The key assumptions used by the
actuary for factors such as mortality, projected premiums and discount rates are further explained in Note
141 The results from a sensitivity analysis around these factors are shown in Note 143 Risk factors related to
actuarial assumptions are further described in Note 41
Using these values, Acheron Capital Ltd (the Investment Manager of the trust in which the policies are kept)
resets its internal model at beginning of each year, if necessary It then produces regular monthly valuations
using its internal model
3.12.
Expenses
All operating expenses and the management fee are accounted for on an accruals basis and are allocated
wholly to revenue The performance fee paid to the Investment Manager is allocated wholly to capital
3.13.
Expected Credit Loss Provision
The Company applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime
expected credit loss provision for trade receivables To measure expected credit losses on a collective basis,
trade receivables are grouped based on similar credit risk and ageing The expected loss rates are based on
the Company’s historical credit losses experienced over the three-year period prior to the period end The
historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors
affecting the life settlement market sector. The Company has identified the gross domestic product (GDP),
unemployment rate and inflation rate as the key macroeconomic factors in the country where the Company
operates
The main factors considered by the Board in determining the lifetime expected credit losses are that the debts
are 6 months or more past due and there is currently uncertainty over whether the maturity will be paid
4.
FINANCIAL RISK MANAGEMENT
4.1.
Financial risk factors
The Company’s overall risk management program focuses on the unpredictability of financial markets and
seeks to minimise the potential adverse effects on the Company’s financial performance. Risk management
is carried out by the Board of Directors Note 143 on page 73 also provides details of the sensitivity analysis to
significant risk factors undertaken by L&E.
Foreign Exchange Risk
Assets, income and most transactions are denominated in USD Only part of the Company’s current expenses
is denominated in USD and other parts are denominated in Euros and Pound Sterling and are paid as incurred
Consequently, the Company believes that it does not have a significant foreign exchange risk and therefore
no sensitivity analysis is required
Annual Report 2022
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Life Settlement Assets PLC
/
63
4.
FINANCIAL RISK MANAGEMENT
continued
Interest Rate Risk
Apart from cash and cash equivalents, the assets of the Company are mainly composed of portfolios of life
settlement policies Life settlement policies are uncorrelated with traditional capital markets Changes in the
level of interest rates (other than extraordinary moves) are not a major factor in the valuation of such assets
Mortality projections and premium payment projections are the major factors that affect the valuation of the
Company’s assets
The Company has no significant interest-bearing assets, The Company pays interest on so called “policy
advances” (Note 3.4). The interest rate is either fixed or variable depending on each policy contract. A change
of one percent in the interest rate has no significant impact on the Company’s financial situation. Therefore the
Company’s income and operating cash flows are not substantially dependent on changes in market interest
rates and no sensitivity analysis is required
Market Risk
The Company invests in life settlement policies, generally acquired in the secondary market Markets for these
investments are not active markets, and transactions happen more often when there is a forced seller The
Board is of the opinion that, although a secondary market exists, the market risk is not relevant because the
valuation of the portfolio is based on an actuarial model and not on market values
Credit Risk
The primary credit risk faced by the Company relates to solvency of the insurance companies that underwrite
the insurance policies, which are the main assets of the Company It should be noted that in addition to the
creditworthiness of the insurance company issuing the life insurance policy, most of the policies also benefit
from legal guarantees at a state level in the event that the insurance company that issued the policy becomes
insolvent
Credit risk is also mitigated by owning life insurance policies issued by a wide range of insurance companies
and through not having an excessive exposure to any one company
Available cash is deposited with reputable banks
Therefore the Board believe that Expected Credit Loss calculated under IFRS 9 is nil
The Company’s maximum exposure to credit risk at the Balance Sheet date was as follows:
31 December
2022
USD ‘000
31 December
2021
USD ‘000
Life settlement portfolio
62,742
88,024
Maturities and other receivables
9,461
6,535
Cash and cash equivalents
35,907
12,026
108,110
106,585
The maximum credit exposure represents the carrying amount. There is no material impairment of financial
assets carried at amortised cost
Liquidity risk
Prudent liquidity risk management requires the Company to maintain sufficient cash for the Company’s
operational requirements such as operating expenses and on-going premium payments
Notes to the Financial Statements
continued
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Annual Report 2022
4.
FINANCIAL RISK MANAGEMENT
continued
Life settlement policies are long term investments maturing on the death of the insured person Therefore,
investments in life settlement policies will not generate immediate income and are highly illiquid by nature
At the year end, a proportion of the Company’s investments were in fractional life insurance policies Fractional
life insurance policies are where a number of different investors own interests in a single underlying life
insurance policy
There is a risk that other investors in a given life insurance policy may decide not to continue to pay the
premiums associated with their interest and may allow their investment to lapse In this situation the Company
must retain sufficient additional liquidity to buy out the lapsing investors’ fractional interests and to bear the
associated increase in premium payments in order to ensure that the underlying life insurance policy does
not lapse
Management monitors cash and cash equivalents on an ongoing basis This is carried out in accordance with
the practice and limits set by the Board of Directors
Risks associated with actuarial assumptions
Mortality tables are used in the valuation processes of the Company in order to simulate the cash flow expected
from the policies Past mortality experience may not be an absolute accurate indicator of future mortality rates
Individuals with specific life expectancies may experience a lower mortality rate in the future than experienced
by persons with the same traits in the past. Changes in the mortality tables may have an adverse effect on the
Company’s operations and the Net Asset Value of the Shares
Individuals may live longer than expected by the Company when the respective policies were purchased
In this case, the value of the policy decreases The Company will be required to pay additional life insurance
premium payments on the policy until its maturity. This may result in delayed cash flow to the Company, which
may have an adverse effect on the return per share.
The Company has often acquired policies by auction without having obtained all available information
concerning such policies The valuation leading to these acquisitions is thus, based on assumptions that may,
in fact, be incorrect or may never be validated
The valuation methods used by different actuaries may vary. The methods used by an actuary may thus
produce different results for the same insured person from those used by other actuaries.
Advances in medical science and disease treatment, particularly those related to HIV and AIDS, may increase
the life expectancy of individuals or viators Although an actuary will attempt to account for such advances,
one or more unexpected breakthroughs in medical treatment, or a cure for a previously incurable illness,
could further increase the life expectancy of the insured
In some cases, the Company will depend on life expectancy estimate of doctors, disease specific medical
mortality models or actuaries From time to time, the Company may seek the opinion of any such persons or
rely on such a model to determine life expectancies
The valuation is thus dependent on these estimations or mortality profiles accurately modelling life
expectancies. The valuation of the policies is inherently difficult due to a number of assumptions that have to
be made in this process. Any change in one of these assumptions may result in substantially different values.
Whilst the Investment Manager and the Valuation Agent attempt to provide reasonable valuations for the
policies held by the Trust, there is no guarantee that these valuations will correspond to the realisable value
of the policies
A more detailed description of the key risks is included in the Strategic Report on pages 21 to 24
Annual Report 2022
/
Life Settlement Assets PLC
/
65
4.
FINANCIAL RISK MANAGEMENT
continued
4.2.
Capital risk management
The Company’s objectives in managing capital are to safeguard the Company’s ability to continue as a going
concern and to maintain an optimal capital structure in order to minimise the Company’s cost of capital
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to
Shareholders, return capital to Shareholders or issue new Shares
The Company’s capital at 31 December 2022 comprises:
31 December
2022
USD ‘000
31 December
2021
USD ‘000
Share capital
498
498
Special reserve
94,290
94,290
Capital redemption reserve
213
213
Capital reserve
53,354
44,724
Revenue reserve
(38,442)
(30,411)
109,913
109,314
4.3.
Fair value estimation
The fair value of life settlement portfolios (which are not traded in an active market) is determined by using
valuation techniques The Company uses a variety of methods and makes assumptions that are based on the
market conditions that exist at each balance sheet date Valuation policies are further explained in Note 14
5.
GAINS/(LOSSES) FROM LIFE SETTLEMENT PORTFOLIOS
When a maturity is declared, a realised capital income or loss is recognised on the investment in the policy,
calculated by deducting from the value of the maturity the initial acquisition cost and the previously unrealised
fair value adjustments
The amount of premiums incurred during the year is reflected as a deduction of income from life settlement
portfolios The amount of premiums paid in advance amounted to USD 5,264,000 (2021: USD 6,525,000) as at
31 December 2022
6.
INCOME FROM LIFE SETTLEMENT PORTFOLIOS
31 December
2022
USD ‘000
31 December
2021
USD ‘000
Dividends
392
578
Interest
231
364
623
942
A number of the policies in which the Company invests have an embedded entitlement to dividends and
interest as shown above
Notes to the Financial Statements
continued
66
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Life Settlement Assets PLC
/
Annual Report 2022
7.
OTHER INCOME
Other income comprises:
31 December
2022
USD ‘000
31 December
2021
USD ‘000
Other operating income
–
102
Interest income
9
5
9
107
Other operating income in the previous year mainly refers to reversal of accrued expenses made by the
Predecessor Company and where incurred expenses by the Company were lower
8.
MANAGEMENT FEES AND PERFORMANCE FEES
31 December
2022
USD ‘000
31 December
2021
USD ‘000
Acheron Capital management fees
1,640
1,547
Performance fees
(409)
2,509
1,231
4,056
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 15% of the Net Asset Value Management fees paid during the
year amounted to USD 1,640,000 (2021: USD 1,547,000)
The Performance fee in respect of the Trust shall be an amount equal to 20% 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 the
share class (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%
The “Catch-Up Amount” is an amount equal to the distributions that would have been required to be made
to the Predecessor Company’s shareholders of the corresponding share class in order for the Accrued
Performance Distributions (less, where applicable, any clawback of such Accrued Performance Distributions)
to be paid (determined as at 31 December 2021), reduced by an amount equal to any distributions paid to the
Predecessor Company’s shareholders of the relevant share class prior to the Acquisition
The accrued performance fees (Note 19) include an amount of USD 339,000 (2021: USD 339,000) assumed
from the Predecessor Company The performance fee provision has been decreased by USD 409,000 in
relation to the performance for the year ended 31 December 2022
On 30 June 2022 the Company announced that after discussions with Acheron Capital Limited (“ACL”) an
agreement had been reached with ACL that once the current litigation process with one of the policy trustees
has been resolved, the performance fee will be reduced from 20% as described above to 10% over the existing
hurdle rate
In consideration of this reduction the Board agreed to release any accrued performance fees payable to ACL
held by the Company in excess of USD 1 million, as calculated at 31 January 2023, as a one-off payment. In
acknowledgement of the significant work that ACL has had to perform with regard to the legal dispute over a
long period, the Directors of LSA agreed to make an advance to ACL on 30 June 2022, subject to an agreed
clawback mechanism, of USD 05 million, which will be credited against any amount to be paid under the
above arrangement, following the publication of the 2022 financial results.
Annual Report 2022
/
Life Settlement Assets PLC
/
67
9.
OTHER EXPENSES
31 December
2022
USD ‘000
31 December
2021
USD ‘000
Policies servicing fees (including trustees fees)
3,508
2,948
Audit fees payable to the Company’s auditor
217
196
Legal and financial advisors fees
1,629
2,662
Administration management
181
151
Accounting fees and NAV calculation
123
207
Actuarial fees
54
101
Directors’ fees*
125
129
Directors liability insurance
87
32
Travelling expenses
19
21
Other expenses
108
98
6,051
6,545
* Details of the Directors’ fees are disclosed in the Directors’ Remuneration Report on pages 38 to 42 An
amount of USD nil (2021: USD nil) remains payable at 31 December 2022
Details of Directors who are key management personnel are given on page 28
10.
INTEREST EXPENSES
Interest expenses amount to USD 972,000 (2021: USD 732,000) and includes interest on “policy advances” of
USD 963,000 (2021: USD 715,000) (Notes 14 and 21)
11.
TAXATION
31 December
2022
USD ‘000
31 December
2021
USD ‘000
Profit before taxation
599
14,539
Tax at UK Corporation Tax rate of 19% (2021: 19%)
114
2,762
Effects of:
Non-taxable capital gain
(1,562)
(4,718)
US withholding tax suffered/(recovered)
–
101
Excess management expenses and tax losses carried forward
1,448
1,956
Actual tax charge
–
101
As at 31 December 2022, the Company has tax losses and excess management expenses of USD 30,724,000
(2021: USD 23,102,000 restated) that are available to offset future taxable profits. A deferred tax asset has not
been recognised in respect of those losses as due to the Company’s status as an investment trust it is not
expected to generate taxable income in the future against which such losses can be utilised There is no expiry
date to these losses
Notes to the Financial Statements
continued
68
/
Life Settlement Assets PLC
/
Annual Report 2022
11. TAXATION
continued
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 year
ended 31 December 2022 the Company fulfilled this requirement.
12.
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.
Class A
2022
2021
Earnings per share:
Revenue return (USD ‘000)
(8,031)
(7,885)
Capital return (USD ‘000)
8,630
22,323
Total return (USD ‘000)
599
14,438
Weighted average number of shares during the year
49,826,784
47,251,936
Income return per share (USD)
(0.161)
(0167)
Capital return per share (USD)
0.173
0472
Basic and diluted total earnings per share (USD)
0.012
0305
13.
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 (ie as prices) or indirectly (ie derived from prices); and
•
level 3: inputs for the assets or liabilities that are not based on observable market data (unobservable inputs)
Annual Report 2022
/
Life Settlement Assets PLC
/
69
13.
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
continued
The life settlement portfolios of USD 62,742,000 (2021: USD 88,024,000) are classified as level 3. At the year
end, these portfolios were valued by the external actuary using an actuarial model as discussed in Note 14
2022
(Book and fair value)
USD‘000
2021
(Book and fair value)
USD‘000
Assets at fair value through profit or loss
Life settlement investments
62,742
88,024
Maturities receivable
7,410
6,205
Premiums paid in advance
5,264
6,525
Loans and other receivables
Trade and other receivables
2,051
330
Cash at bank
35,907
12,026
Liabilities at amortised cost or equivalent
Other payables
(1,522)
(948)
Provision for performance fee
(1,939)
(2,848)
Total for financial instruments
109,913
109,314
Total net assets
109,913
109,314
14.
FINANCIAL ASSETS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS: LIFE SETTLEMENT
PORTFOLIOS
31 December
2022
USD ‘000
31 December
2021
USD ‘000
Movements of the year are as follows:
Opening valuation
88,024
77,643
Acquisitions during the year
132
11,282
Proceeds from matured policies
(27,197)
(38,510)
Net realised gains on policies
16,977
31,067
Movements in cash from policy loans
(21,764)
(2,657)
Movements in unrealised valuation
6,795
9,199
Escrow rebate
(225)
–
Closing valuation
62,742
88,024
Detail at year end
Acquisition value
88,770
95,000
Unrealised capital gains
12,854
10,142
Policy advances
(38,882)
(17,118)
Closing valuation
62,742
88,024
Notes to the Financial Statements
continued
70
/
Life Settlement Assets PLC
/
Annual Report 2022
14.
FINANCIAL ASSETS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS: LIFE SETTLEMENT
PORTFOLIOS
continued
Distribution of the portfolio by class of Shares and by type of risk:
Class A
USD ‘000
Elderly life insurance (non HIV) portfolio
22,075
HIV portfolio
40,667
Balance as at 31 December 2022
62,742
Class A
USD ‘000
Elderly life insurance (non HIV) portfolio
57,950
HIV portfolio
30,074
Balance as at 31 December 2021
88,024
Fair market value reflects the view of the US actuary. The Investment Manager of the Trust in which the policies
are kept (Acheron Capital) has also set up an internal actuarial model to value the policies and produces
monthly valuations
14.1.
Main assumptions used to determine the fair value
a) Mortality/Life expectancy
Lewis & Ellis Inc (“L&E”) has built its own proprietary general population mortality table It has done so by utilising
insurance industry and other data available, including the underlying data that went into the construction of
the Valuation Basic Table, which has been commonly utilised within the life settlement industry The mortality
is adjusted for several factors, such as demographic shifts in the population, improvements in mortality,
pharmaceutical advances and volatility in the mortality experienced as measured against the baseline curves
chosen for valuation The table includes an assumption of continuing mortality improvement each year The
retained table is used in connection with each insured age, gender and smoking status
L&E also considers the most recent life expectancy reports, when available Life expectancy reports are
medical opinions from specialised companies, based on the latest medical updates of each individual, giving
their specific mortality profile and life expectancy. When life expectancy reports from more than one external
provider are available, L&E uses an average When only ‘stale’ life expectancy reports are available, the life
expectancy is used but adjusted materially upwards using a formula dependent upon the medical underwriter
that issued the report L&E uses the retained or computed life expectancy with the adjusted mortality table to
derive a probability of death for each insured for every month over the next 35 years
The Actual to Expected ratio is a measure of how well the model has behaved compared to experience This
ratio was computed for the life settlement portfolios underlying Class A Shares A key issue with this exercise is
the concentration of the death benefit in certain policies with larger face values. This generates an imbedded
volatility in the actual maturity outcomes compared to statistical projections To circumvent this imbalance, the
actuaries have calculated the Actual to Expected ratio to measure the model’s performance while limiting the
maximum exposure of the portfolio to any life insurance policy The A/E on this basis was 100% over the last
5 years for the HIV portfolio
L&E report an actual to expect of 134% for Life Settlement and 90% for HIV in 2022 for the share class
The base case has been increased to reflect lower mortality for the younger HIV and retain an A/E of 100%
over the last 5 years
Annual Report 2022
/
Life Settlement Assets PLC
/
71
14.
FINANCIAL ASSETS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS: LIFE SETTLEMENT
PORTFOLIOS
continued
b) Projected Premiums
Whenever an illustration is available, L&E uses this data for premium projections. An illustration is an official
document from the insurance company that specifies what premiums are due to be paid in the following years
for a life insurance policy An illustration can be used to compute what is the likely minimum payment that
can be made for each year until the life insurance policy expires. The process of moving from paying a fixed
premium to paying the minimum contractual premium is known as optimisation
Premium projection has been more challenging given the unilateral increases in Cost of Insurance (“COI”)
made by a few insurance companies Whenever information on such COI increases has been available, it has
been directly incorporated
When no illustration is available or is deemed unsuitable to be used, for instance because it does not project
sufficiently into the future, L&E takes the last observed premium payment and applies an annual increase of
8% per year which L&E has determined by observing the upper band of the premium increases on non-fixed
policies (whole life) over a prolonged period of time
c) Discount rate
The discount rate reflects the time value of money and a risk component. The risk component reflects the
uncertainties attached to each individual life insurance policy, such as its mortality risk, premium risk and
counterparty risk
HIV/AIDS Portfolios
In determining the discount rate for the HIV/AIDS portfolios, it should be noted that there is no readily
observable market for these policies As a result L&E used their experience in the life settlement market, on
the basis that life settlement portfolios are comparable assets
A discount rate of 12% (2021: 12%) is used for the HIV/AIDS portfolios To assess the discount rate, the following
reasoning has been used, starting with a base rate:
•
assuming a sufficiently large portfolio, the base rate must be consistent with the discount rate determined for
a situation where the mortality assumptions and policy specifics are well defined. Specifically, the mortality
is defined so that actual experience is expected to track well with the defined mortality assumptions.
Life Settlement Portfolios (Non-HIV/Non-AIDS)
In determining the discount rate for the life settlement portfolios, it has been considered that complete policy
information was not always available For most life settlement valuations, premium schedules and at least two
recent life expectancy opinions are usually provided For these valuations, premium schedules were estimated
for some of the policies and mortality assumptions were developed using an actuarial approach Given this,
the discount rate is subjective but based on the actuary’s experience in the life settlement market
In determining the portfolio values, a portfolio-wide discount rate assumption equal to 12% for non-HIV has
been used, which is consistent with past valuations, and 12% for HIV with effect from July 2019. Some buy/sale
observations were considered where the effective discount rate was between 12% and 14%, although effective
discount rates in the competitive market were probably between 10% and 12% Other well documented
portfolios have been valued at between 7% and 11% in their Financial Statements It is estimated that the actual-
to-expected mortality ratios for most of these portfolios are lower than 70%, materially below the rates of
experience by our portfolios Given this, a discount rate of 12% has been used for the current period, considering
the actual performance compared to other portfolios in the market, and considering a risk premium related to
the quality of the documentation
Notes to the Financial Statements
continued
72
/
Life Settlement Assets PLC
/
Annual Report 2022
14.
FINANCIAL ASSETS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS: LIFE SETTLEMENT
PORTFOLIOS
continued
14.2.
Precision and changes in actuarial parameters/data
As per the market standard, the servicing, management and holding entities expenses are not taken into
account in deriving the valuation of the life settlement portfolios The actuaries, following industry standards,
are solely discounting the probabilistic projections of death benefits minus premiums, “policy loans” and
interest thereon
14.3.
Sensitivity analysis
L&E conducted various sensitivity analyses which are summarised as follows:
a) Class A
a.1) Discount rate sensitivity
Discount rate – non HIV portfolio
10%
11%
12%
13%
Value of portfolio (USD)
23,417,000
22,725,000
22,075,000
21,464,000
% of total face amount
300%
291%
282%
275%
Discount rate – HIV portfolio
10%
11%
12%
13%
Value of portfolio (USD)
44,250,000
42,344,000
40,667,000
39,184,000
% of total face amount
116%
111%
107%
103%
a.2) Premium assumption sensitivity
Value based on 12% discount rate
– non HIV portfolio
Annual premium increase at
8%
9%
Value of portfolio (USD)
22,075,000
21,898,000
% of total face amount
282%
280%
Value based on 12% discount rate
– HIV portfolio
Annual premium increase at
8%
9%
Value of portfolio (USD)
40,667,000
39,498,000
% of total face amount
107%
104%
a.3) Mortality sensitivity
Value based on 12% discount rate
– non HIV portfolio
USD
% of face
amount
Value of portfolio as reported
22,075,000
282%
Value at 90% of current mortality assumption*
19,316,000
247%
Value at 80% of current mortality assumption
16,554,000
212%
Value based on 12% discount rate
– HIV portfolio
USD
% of face
amount
Value of portfolio as reported
40,667,000
107%
Value at 90% of current mortality assumption*
36,470,000
96%
Value at 80% of current mortality assumption
32,421,000
85%
* Assumption that mortality is only 90% of expected mortality
Annual Report 2022
/
Life Settlement Assets PLC
/
73
15.
MATURITIES RECEIVABLE
Maturities receivable of USD 7,410,000 (2021: USD 6,205,000) are declared maturities that have not yet been
paid Maturities receivable are due within one year
16.
PREMIUMS PAID IN ADVANCE
Premiums paid in advance of USD 5,264,000 (2021: USD 6,525,000) consist of premiums on life insurance
policies paid as at 31 December 2022 that relate to the period following the balance sheet date
17.
CASH AND CASH EQUIVALENTS
As at 31 December 2022, cash and cash equivalents consist solely of cash held on deposit and on current
accounts with banks
18.
OTHER PAYABLES
31 December
2022
USD ‘000
31 December
2021
USD ‘000
Trade and other payables
873
343
Other creditors and accruals
649
605
1,522
948
19.
PROVISION FOR PERFORMANCE FEES
31 December
2022
USD ‘000
31 December
2021
USD ‘000
Provision brought forward
2,848
339
(Reduction)/increase in provision during the year (Note 8)
(409)
2,509
Performance fee paid during the year
(500)
–
Provision at the year end
1,939
2,848
The Performance fee does not have a fixed date for payment 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 8 on page 67, once the 2022 Annual Report is approved, the Company will release to the
Investment Manager the performance fees accrued at 31 January 2023 in excess of USD 1 million as a one-off
payment USD 500,000 of this amount was advanced on 30 June 2022 as shown in the table above The above
calculation does not include any performance fee due as a result of the post balance sheet event in Note 25
As a result the Performance fee has been treated as a current liability
Notes to the Financial Statements
continued
74
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Life Settlement Assets PLC
/
Annual Report 2022
20.
SHARE CAPITAL
At the 31 December 2022 the Company’s share capital amounts to USD 498,268 (2021: USD 498,268), and is
represented by 49,826,784 ordinary shares of USD 001 each The movement in the share capital is as follows:
A Shares
USD ‘000
B Shares
USD ‘000
Total
USD ‘000
Balance as at 31 December 2021
498
–
498
Balance as at 31 December 2022
498
–
498
A Shares
USD ‘000
B Shares
USD ‘000
Total
USD ‘000
Balance as at 31 December 2020
437
146
583
Share class merger
61
(146)
(85)
Balance as at 31 December 2021
498
–
498
As announced on 2 June 2021 the Company undertook a capital reorganisation whereby the Class B shares
were merged into Class A shares A total of 14,596,098 B shares were redesignated as 6,102,725 A shares The
remaining 8,493,373 B shares were designated as Deferred Shares and subsequently cancelled
As at 31 December 2022, the issued and fully paid share capital is comprised of 49,826,784 Class A shares
(31 December 2021: 49,826,784 Class A shares) All shares have equal voting rights
21.
CAPITAL MANAGEMENT POLICIES
The Company’s capital management objectives are:
•
to ensure it will be able to continue as a going concern;
•
to maximise the long-term revenue and capital return to its Shareholders by returning cash generated from
maturities to Shareholders, taking into consideration cash requirements needed to fund operations and
premium payments. To this effect the Board of Directors has set policies of the level of cash to be held at
any point in time; and
•
to realise capital returns to Shareholders by way of dividend distributions, distributions of capital reserves
and share buybacks or tender offers.
The Board of Directors, with the assistance of the Investment Manager of the Trust, monitors the capital
requirements and possibilities of realising capital returns to Shareholders on a regular basis
The capital structure of the Company consists of share capital, special reserve, capital redemption reserve,
capital and revenue reserves as disclosed on the Statement of Financial Position
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 capital structure of the Company does not include debt financing.
The Company uses policy advances to borrow from the cash surrender value accumulated on some life
settlement policies The Company’s policy is to potentially withdraw that cash from time to time
Considering the volatility of collected maturities and in some Share Classes the dependence on a reduced
number of large life settlement policies, the use of gearing cannot be excluded
Annual Report 2022
/
Life Settlement Assets PLC
/
75
22.
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
31 December 2022
Class A
Net assets (USD ‘000)
109,913
Number of shares
49,826,784
NAV per share (USD)
2.21
31 December 2021
Class A
Net assets (USD ‘000)
109,314
Number of shares
49,826,784
NAV per share (USD)
219
23.
CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
At the year end, the Company has no (2021: 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 Note 25 explains the situation in respect of the purchase of fractional policies from
the MBC Trust
At the year end, the Company has no (2021: nil) contingent liabilities
24.
RELATED PARTY TRANSACTIONS
Related parties to the Company are the members of the Board of Directors of the Company, Compagnie
Européenne de Révision Sà rl as Administrator who, until 31 December 2020, had a member on the Board of
Directors and the Trustee of the US trust who was also a member of the Board of Directors until 31 December
2020
Note
31 December
2022
USD ‘000
31 December
2021
USD ‘000
Per income statement:
Trustee fees
153
147
Compagnie Européenne de Révision Sà rl
123
207
Directors’ fees
9
125
129
Amounts payable per balance sheet:
Compagnie Européenne de Révision Sà rl
86
1
Directors’ fees
4
–
All transactions with related parties are undertaken at arm’s length
Notes to the Financial Statements
continued
76
/
Life Settlement Assets PLC
/
Annual Report 2022
25.
POST BALANCE SHEET EVENTS
On 30 December 2022 the Company announced the formal filing with the US Court of the Southern District
of Florida, Miami Division (the “Court”) by Mutual Benefits Keep Policy Trust (“MBC”) of its motion to the Court
to approve the sale of a portfolio of life policies (the “Portfolio”) to Acheron Portfolio Trust (“APT”) (on behalf
of LSA) for a gross consideration of USD 24 million (subject to adjustment for changes in the Portfolio such
as maturities) If approved by the Court the proceeds of the sale, net of all transaction, legal and wind down
costs which are anticipated by the MBC trustee to be USD 5 million, would be distributed to MBC’s investors,
including APT (as a current investor) As at 1 December 2022 the face value attributed to the Portfolio was
USD 167 million, of which approximately 63% is attributable to APT’s interests The motion, which included a
settlement agreement with APT, was expected to be heard by the Court on 26 January 2023
On 27 January 2023 the Company announced that the court hearing in relation to Mutual Benefits Keep Policy
Trust had commenced on 26 January 2023, as scheduled and the court magistrate was preparing a report to
be sent to the federal district court judge for a formal decision
On 6 March 2023 the Company announced that US federal district court judge had received, affirmed and
adopted the magistrate’s report and, accordingly, the sale of the portfolio of life policies (“the Portfolio”) to
Acheron Portfolio Trust (“APT”) (on behalf of LSA) had been approved
On 5 April 2023 the Company made the following announcement:
“That the acquisition (the “Acquisition”) of the portfolio of life policies (the “Portfolio”) by Acheron
Portfolio Trust (“APT”) (on behalf of LSA) from Mutual Benefits Keep Policy Trust (“MBC”) had now
been completed.The Acquisition, included the successful resolution of the dispute with MBC,
realises several benefits for LSA:
•
mitigation of a significant operational risk with fractional interests in policies now able to be
consolidated into policies 100% owned by APT together with an element of uplift in valuation;
•
a significant future reduction in ongoing legal costs incurred by the Company; and
•
the resumption of dividend payments, as already demonstrated by the payment of the special
dividend on 24 February 2023.
Maturities
The Company’s portfolio has experienced a number of sizeable maturities since the start of the
year with an aggregate value of USD 6.6 million.
Increase to NAV
The Board expects these developments to add a total USD 4.3 million to the NAV which will be
reflected in the NAV for the Company as at 31 January 2023 which will be released to the market
in due course.”
Whilst a preliminary agreement was signed on 23 December 2022, this was subject to court approval which
was not received until 2 March 2023 At the Company’s year end these policies were not owned or in the control
of the Company and therefore the transaction has not been reflected in the Company’s financial statements
to 31 December 2022
On 2 February 2023, the Company announced a special dividend of 60209 cents per share, totalling
USD 30 million, which was paid on 24 February 2023 to Shareholders on the register at 10 February 2023
Annual Report 2022
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77
26.
DIVIDENDS
The Company did not pay a dividend during the year
The dividends paid in the previous year were as follows:
2021
USD ‘000
Special capital dividend of 17813 cents per B share paid on 18 June 2021
2,600
Special capital dividend of 5017 cents per A share paid on 22 November 2021
2,500
5,100
The Company paid a a special dividend of 60209 cents per share, totalling USD 30 million, which was paid on
24 February 2023 to Shareholders on the register at 10 February 2023
No final dividend in respect of the year ended 31 December 2022 will be paid.
Notes to the Financial Statements
continued
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Shareholder
Information
Notice of Annual General Meeting 2023
LIFE SETTLEMENT ASSETS PLC (THE “COMPANY”)
Notice is hereby given that the 2023 Annual General Meeting (the “AGM”) of the Company will be held at the
offices of Acheron Capital Limited, 115 Park Street, Fourth Floor, London w1K 7AP on Wednesday, 14 June 2023
at 2pm for the following purposes:
1
To receive and adopt the audited Annual Report and Accounts of the Company for the year ended
31 December 2022 together with the Directors’ Report and Auditor’s Report thereon
2
To approve the Directors’ Remuneration Report as set out in the Annual Report
3
To re-elect Michael Baines as a Director of the Company
4
To re-elect Christopher Casey as a Director of the Company
5
To re-elect Guner Turkmen as a Director of the Company
6
To re-appoint BDO LLP as Auditors to the Company until the conclusion of the next AGM
7
To authorise the Directors’ to determine BDO LLP’s remuneration as Auditor to the Company
Special Business
To consider the following resolutions:
Authority to allot new shares – Ordinary Resolution
8
THAT, in substitution for any existing authorities pursuant to section 551 of the Companies Act 2006,(the
“Act”) the Directors of the Company are generally and unconditionally authorised to exercise any power
of the Company to allot shares and relevant securities (as described in that section) in the Company, and
to grant rights to subscribe for, or to convert any security into, shares in the Company, up to an amount
representing 10% of the issued Ordinary A Shares (excluding treasury shares) as at the date of the notice
convening the meeting at which this resolution is proposed, provided that the price at which each such
Ordinary Share may be allotted will be above the then prevailing estimated Net Asset Value per Ordinary
Share (as determined by the Board of Directors in their reasonable discretion) and that this authority shall
expire at the conclusion of the Annual General Meeting of the Company to be held in 2024 (unless renewed
at a general meeting prior to such time), save that the Company may before such expiry make offers or
agreements which would or might require shares and relevant securities to be allotted, or rights to be
granted after such expiry and so the Directors of the Company may allot shares and relevant securities or
grant rights in pursuance of such offers or agreements as if the authority conferred hereby had not expired.
Authority to disapply pre–emption rights on allotment or sale of relevant securities – Special Resolution
9
THAT, subject to the passing of Resolution 8 set out in this notice, in substitution of all existing authorities
the Directors of the Company be and hereby are empowered pursuant to sections 570 and 573 of the Act
to allot or make agreements to allot equity securities (within the meaning of section 560 of that Act) for
cash pursuant to the authority conferred on them by Resolution 8 set out in this notice or by way of a sale
of treasury shares as if section 561(1) of the Act did not apply to any such allotment or sale provided that
this power shall be limited to:
(a)
the allotment or equity securities and/or sale of equity securities held in treasury for cash up to
an aggregate number of equity securities of each Share Class as represents 10% of the number of
Ordinary Shares of that Share Class (excluding treasury shares) as at the date of the notice convening
the meeting at which this resolution is proposed; this power shall expire (unless previously renewed,
varied or revoked) upon the expiry of the general authority conferred by Resolution 8 above;
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(b)
before this power expires, the Directors may make offers or agreements which would or might require
equity securities to be allotted (and treasury shares sold) after such expiry and the Directors are entitled
to allot or sell equity securities pursuant to any such offer or agreement as if this power had not expired;
(c)
this power is in substitution of all unexercised powers given for the purposes of section 570 of that Act;
and
(d)
no allotment of securities shall be made which would result in equity securities being issued or sold
from treasury at a price which is equal to or less than the then prevailing estimated Net Asset Value per
Ordinary A Shares as determined by the Board of Directors in their reasonable discretion
Authority to repurchase the Company’s shares – Special Resolution
10
THAT the Company be and hereby is generally and unconditionally authorised for the purposes of section
701 of the Act to make one or more market purchases (as defined in section 693(4) of the Act) of its issued
Ordinary Shares of any class, in the capital of the Company, on such terms and in such manner as the
Directors may from time to time determine, provided that:
(a)
the maximum number of Ordinary Shares hereby authorised to be purchased is the number of Ordinary
A Shares (excluding treasury shares) that represents 1499% of the issued Ordinary Share capital as at
the date of passing this resolution;
(b)
the minimum price (exclusive of expenses) which may be paid for an Ordinary A Share is the nominal
amount of that share;
(c)
the maximum price (exclusive of expenses) which may be paid for an Ordinary A Share is the higher of:
i
an amount equal to 5% above the average of the middle market quotations for an Ordinary Share
as derived from the Daily Official List of the London Stock Exchange plc for the five business days
immediately preceding the day on which that Ordinary Share is contracted to be purchased; and
ii
an amount equal to the higher of the price of the last independent trade and the highest current
independent bid on the trading venues where the purchase is carried out at the relevant time;
(d)
any purchase of shares will be made in the market for cash at prices below the latest estimated monthly
net asset value per share (as determined by the Directors);
(e)
the authority conferred by this resolution shall (unless previously renewed or revoked in general
meeting) expire on the date falling 15 months after the passing of this resolution or, if earlier, at the
conclusion of the Annual General Meeting of the Company to be held in 2024; and
(f)
the Company may make a contract to purchase Shares under the authority hereby conferred prior to
the expiry of such authority which contract will or may be executed wholly or partly after the expiry of
such authority and may make a purchase of shares pursuant to any such contract as if the authority
conferred hereby had not expired
By order of the Board
Registered Office
Company Secretary
4th Floor
ISCA Administration Services Limited
115 Park Street
Suite 8, Bridge House
London W1K 7AP
Courtenay Street
Newton Abbot TQ12 2QS
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81
Notes to the Notice of the AGM
1
Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, entitlement to attend and vote
at the meeting (and the number of votes that may be cast thereat), will be determined by reference to the
Register of Members of the Company at the close of business on the day which is two days before the day
of the meeting or of the adjourned meeting Changes to the Register of Members of the Company after
the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at
the meeting
2
A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend,
speak and vote on his or her behalf A proxy need not also be a member but must attend the meeting
to represent you Details of how to appoint the chairman of the meeting or another person as your proxy
using the form of proxy are set out in the notes on the form of proxy If you wish your proxy to speak on
your behalf at the meeting you will need to appoint your own choice of proxy (not the chairman) and give
your instructions directly to them
3
You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to
different shares. You may not appoint more than one proxy to exercise rights attached to any one share.
To appoint more than one proxy, you may copy the proxy form, clearly stating on each copy the shares to
which the proxy relates, or to request additional copies of the proxy form contact the Company’s Registrars,
The City Partnership (UK) Limited, on +44 (0) 1484 240 910 (lines are open between 900 am and 530 pm
Monday to Friday, calls are charged at standard geographic rates and will vary by provider) Calls outside
the United Kingdom will be charged at applicable international rates. Different charges may apply to calls
from mobile telephones and calls may be recorded and randomly monitored for security and training
purposes For legal reasons The City Partnership (UK) Limited will be unable to give advice on the merits
of the proposals or provide financial, legal, tax or investment advice. Please indicate in the box next to the
proxy holder’s name the number of shares in relation to which they are authorised to act as your proxy
Please also indicate by ticking the box provided if the proxy instruction is one of multiple instructions being
given All forms must be signed and returned together in the same envelope
4
The statement of the rights of members in relation to the appointment of proxies in paragraphs (2) and
(3) above does not apply to Nominated Persons The rights described in these paragraphs can only be
exercised by members of the Company
5
Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act
2006 (the “Act”) to enjoy information rights (a “Nominated Person”) may, under an agreement between him/
her and the member by whom he/she was nominated, have a right to be appointed (or to have someone
else appointed) as a proxy for the meeting If a Nominated Person has no such proxy appointment right or
does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to
the Shareholder as to the exercise of voting rights
6
If you have been nominated to receive general shareholder communications directly from the Company,
it is important to remember that your main contact in terms of your investment remains as it was (so the
registered shareholder, or perhaps custodian or broker, who administers the investment on your behalf)
Therefore any changes or queries relating to your personal details and holding (including any administration
thereof) must continue to be directed to your existing contact at your investment manager or custodian
The Company cannot guarantee dealing with matters that are directed to us in error The only exception
to this is where the Company, in exercising one of its powers under the Act, writes to you directly for a
response
7
A personal reply paid form of proxy is enclosed with this document To be valid, the enclosed form of proxy
for the meeting, together with the power of attorney or other authority, if any, under which it is signed or a
notarially certified or office copy thereof, must be deposited at the offices of the Company’s Registrar, The
City Partnership (UK) Limited, The Mending Rooms, Park Valley House, Meltham Road, Huddersfield HD4
7BH, so as to be received not later than 2pm on Monday, 12 June 2023 or 48 hours (excluding non-business
days) before the time appointed for any adjourned meeting or, in the case of a poll taken subsequent to
the date of the meeting or adjourned meeting, so as to be received no later than 24 hours before the time
appointed for taking the poll
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8
If you prefer, you may return the proxy form to The City Partnership (UK) Limited in an envelope addressed
to The City Partnership (UK) Limited, The Mending Rooms, Park Valley House, Meltham Road, Huddersfield
HD4 7BH
9
Please note that you can vote your shares electronically at
https://proxy-lsa-agm.cpip.io/
10
Appointment of a proxy or CREST proxy instruction will not preclude a member from subsequently
attending and voting at the meeting should he or she subsequently decide to do so You can only appoint
a proxy using the procedure set out in these notes and the notes to the form of proxy
11
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment
service may do so by using the procedures described in the CREST Manual CREST personal members or
other CREST sponsored members, and those CREST members who have appointed a service provider(s),
should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate
action on their behalf
12
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate
CREST message (a ‘CREST Proxy Instruction’) must be properly authenticated in accordance with Euroclear
UK & Ireland Limited’s specifications, and must contain the information required for such instruction, as
described in the CREST Manual The message, regardless of whether it constitutes the appointment of a
proxy or is an amendment to the instruction given to a previously appointed proxy must in order to be valid,
be transmitted so as to be received by the issuer’s agent (ID 8RA57) by 2pm on Monday, 12 June 2023 For
this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to
the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the message
by enquiry to CREST in the manner prescribed by CREST After this time any change of instructions to
proxies appointed through CREST should be communicated to the appointee through other means
13
CREST members and, where applicable, their CREST sponsors, or voting service providers should note
that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular
message Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy
Instructions It is the responsibility of the CREST member concerned to take (or, if the CREST member is a
CREST personal member, or sponsored member, or has appointed a voting service provider, to procure
that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any particular time In this connection,
CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in
particular, to those sections of the CREST Manual concerning practical limitations of the CREST system
and timings
14
As at 26 April 2023 (being the last business day prior to the publication of this notice), the Company’s issued
share capital comprised 49,826,784 Class A shares Therefore, the total voting rights in the Company as at
26 April 2023 was 49,826,784
15
The Directors’ appointment letters will be available for inspection at the Company’s registered office during
normal business hours on any weekday (excluding Saturdays, Sunday and public holidays) and shall be
available for inspection at the place of the Annual General Meeting for at least fifteen minutes prior to and
during the meeting
16
If a corporate shareholder has appointed a corporate representative, the corporate representative will
have the same powers as the corporation could exercise if it were an individual member of the Company If
more than one corporate representative has been appointed, on a vote on a show of hands on a resolution,
each representative will have the same voting rights as the corporation would be entitled to If more than
one authorised person seeks to exercise a power in respect of the same shares, if they purport to exercise
the power in the same way, the power is treated as exercised; if they do not purport to exercise the power
in the same way, the power is treated as not exercised
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83
Notes to the Notice of the AGM
continued
17
Under section 527 of the Act, members meeting the threshold requirements set out in that section have
the right to require the Company to publish on a website a statement setting out any matter relating to:
(i) the audit of the Company’s accounts (including the Auditor’s Report and the conduct of the audit) that
are to be laid before the AGM; or (ii) any circumstance connected with an auditor of the Company ceasing
to hold office since the previous meeting at which annual accounts and reports were laid in accordance
with section 437 of the Act The Company may not require the Shareholders requesting any such website
publication to pay its expenses in complying with sections 527 or 528 of the Act Where the Company is
required to place a statement on a website under section 527 of the Act, it must forward the statement to
the Company’s Auditor no later than the time when it makes the statement available on the website The
business which may be dealt with at the AGM includes any statement that the Company has been required
under section 527 of the Act to publish on a website
18
At the meeting Shareholders have the right to ask questions relating to the business of the meeting and
the Company is obliged under section 319A of the Act to answer such questions, unless; a) to do so would
interfere unduly with the conduct of the meeting or would involve the disclosure of confidential information,
b) the information has been given on the Company’s website,
www.lsaplc.com
in the form of an answer
to a question, or c) it is undesirable in the interests of the Company or the good order of the meeting that
the question be answered
19
Further information, including the information required by section 311A of the Act, regarding the meeting is
available on the Company’s website,
www.lsaplc.com
20
Members satisfying the thresholds in section 338A of the Companies Act 2006 may request the Company
to include in the business to be dealt with at the Annual General Meeting any matter (other than a proposed
resolution) which may properly be included in the business at the Annual General Meeting A matter may
properly be included in the business at the Annual General Meeting unless (i) it is defamatory of any person
or (ii) it is frivolous or vexatious A request made pursuant to this right may be in hard copy or electronic
form, must identify the matter to be included in the business, must be accompanied by a statement
setting out the grounds for the request, must be authenticated by the person(s) making it and must be
received by the Company not later than six weeks before the date of the Annual General Meeting
21
This notice, together with information about the total number of shares in the Company in respect of
which members are entitled to exercise voting rights at the meeting at 26 April 2023 (the business day
prior to the approval of this Notice) and, if applicable, any members’ statements, members’ resolutions or
members’ matter of business received by the Company after the date of this Notice, will be available on
the Company’s website:
www.lsaplc.com
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DIRECTORS
Michael Baines –
Chairman
Christopher Casey
Guner Turkmen
REGISTERED OFFICE
115 Park Street
4th Floor
London W1K 7AP
REGISTRARS
The City Partnership (UK) Limited
The Mending Rooms
Park Valley House
Meltham Road
Huddersfield
HD4 7BH
AUDITOR
BDO LLP
55 Baker Street
London
W1U 7EU
BROKERS
Shore Capital and Corporate Limited
Cassini House
57 St James’s Street
London
SW1A 1LD
TRUST’S INVESTMENT MANAGER
Acheron Capital Limited
115 Park Street
4th Floor
London W1K 7AP
COMPANY SECRETARY
ISCA Administration Services Limited
Suite 8, Bridge House
Courtenay Street
Newton Abbot TQ12 2QS
Email: lsa@iscaadmincouk
Telephone: 01392 487056
FINANCIAL CALENDAR
Company year end
Annual results announced
Annual General Meeting
Company half-year end
Half-year results announced
31 December 2022
April 2023
14 June 2023
30 June 2023
September 2023
LEI
2138003OL2VBXWG1BZ27
WEBSITE
www.lsaplc.com
Company Information
Annual Report 2022
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85
Glossary
The following definitions apply throughout this Annual Report, unless stated otherwise:
“A Ordinary Shares”
means the shares with a nominal
value of USD 001 in the capital of the Company issued
and designated as A Ordinary Shares and having the
rights described in the Articles
“Act”
means the Companies Act 2006, as amended
“Administrator”
means Compagnie Européenne de
Révision Sàrl
“Board”
or
“Directors”
means the board of directors
of the Company
“Consenting Individuals”
means the individuals
whose lives are insured under the Policies and
who have sold their interest in the Policies in
accordance with the life settlements laws of the
United States – such Consenting Individuals, having
been compensated for ceding their interest in the
Policies, explicitly agreeing to such transaction and
having full knowledge that they no longer will benefit
from said Policies
“COI”
means cost of insurance
“Company”
means Life Settlement Assets PLC
“FCA”
means the UK Financial Conduct Authority
“Fractional interests”
means partial interests in life
policies arising after sale in the Primary Market
“Investment Manager”
means Acheron Capital
Limited
“NAV”
or
“Net Asset Value”
means:
a
the Net Asset Value of the Company as a whole
on the relevant date calculated in accordance with
the Company’s normal accounting policies; and
b
in relation to an Ordinary Share, the Net Asset
Value of the Company on the relevant date
calculated in accordance with the Company’s
normal accounting policies divided by the total
number of Ordinary Shares in issue (excluding, for
the avoidance of doubt, any Ordinary Shares held
in treasury)
“Ordinary Shares”
means any class of ordinary shares
issued from time to time
“Policy”
or
“Policies”
means an individual or set of life
settlement or mortality-related contracts
“Predecessor
Company”
Acheron
Portfolio
Corporation, a company previously registered in
Luxembourg
“Primary Market”
means the market in which the
holder of a life policy transacts that policy for the first
time to a purchaser, consenting to cede their total
interest in the policy to the purchaser
“Secondary Market”
means the market in which
policies acquired in the Primary Market are transacted
again with secondary purchasers
“Shareholder”
means a holder of Ordinary Shares
“Share Class”
means a class of Ordinary Share in the
Company
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Life Settlement Assets Plc – Annual General Meeting
You may submit your proxy electronically using the Proxy Voting Application:
https://proxy-lsa-agm.cpip.io/
To be held at:
The offices of Acheron Capital Limited, 115 Park Street, Fourth Floor, London w1K 7AP on Wednesday, 14 June
2023 at 2pm
Form of Proxy
Life Settlement Assets Plc – Annual General Meeting
I/We being a member of the Company hereby
appoint the Chairman of the meeting or (see note 1)
Signature
Number and class of shares
proxy appointed over
Access Code:
CIN:
as my/our proxy to vote on my/our behalf at the Annual General Meeting of the Company to be held at 2pm on Wednesday, 14 June 2023
and at any adjournment thereof I have indicated with a ‘
’ how I/we wish my/our votes to be cast on the following resolutions:
If you wish to appoint multiple proxies please see note 1 over Please also tick here if you are appointing more than one proxy
Date
RESOLUTIONS
Please mark ‘
’ to indicate
how you wish to vote
For
Against
Vote
Withheld
1.
To receive and adopt the audited Annual Report
and Accounts.
2.
To approve the Directors’ Remuneration report.
3.
To re-elect Michael Baines as a Director.
4.
To re-elect Christopher Casey as a Director.
5.
To re-elect Guner Turkmen as a Director.
RESOLUTIONS
Please mark ‘
’ to indicate
how you wish to vote
For
Against
Vote
Withheld
6.
To re-appoint BDO LLP as Auditor.
7.
To authorise the Directors to determine
BDO LLP’s remuneration as Auditor.
8.
To authorise the Directors to allot equity securities.
9.
To authorise the Directors to disapply
pre-emption rights (Special Resolution).
10.
To authorise the Company to make market purchases
of the Company’s own shares (Special Resolution).
Name of proxy
Name of Shareholder(s):
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87
Notes
1.
Every holder has the right to appoint some other person(s) of their
choice, who need not be a Shareholder as his or her proxy to exercise
all or any of his or her rights, to attend, speak and vote on their behalf at
the meeting If you wish to appoint a person other than the Chairman,
please insert the name of your chosen proxy holder in the space
provided (see over) If the proxy is being appointed in relation to less
than your full voting entitlement, please enter the number of shares in
relation to which they are authorised to act as your proxy If left blank
your proxy will be deemed to be authorised in respect of your full
voting entitlement (or if this proxy form has been issued in respect of
a designated account for a shareholder, the full voting entitlement for
that designated account)
2.
To appoint more than one proxy you may photocopy this form
Please indicate the proxy holder’s name and the number of shares
in relation to which they are authorised to act as your proxy (which,
in aggregate, should not exceed the number of shares held by
you) Please also indicate if the proxy instruction is one of multiple
instructions being given All forms must be signed and should be
returned together in the same envelope
3.
The right to appoint a proxy does not apply to persons whose
shares are held on their behalf by another person and who have
been nominated to receive communication from the Company in
accordance with section 146 of the Companies Act 2006 (“nominated
persons”) Nominated persons may have a right under an agreement
with the registered Shareholder who holds shares on their behalf
to be appointed (or to have someone else appointed) as a proxy
Alternatively, if nominated persons do not have such a right, or do not
wish to exercise it, they may have a right under such an agreement to
give instructions to the person holding the shares as to the exercise of
voting rights
4.
The ‘Vote Withheld’ option is provided to enable you to abstain
on any particular resolution However, it should be noted that a ‘Vote
Withheld is not a vote in law and will not be counted in the calculation
of the proportion of the votes ‘For’ and ‘Against’ a resolution If this form
is returned without any indication as to how the person appointed
proxy shall vote, he/she will exercise his/her discretion as to how he/
she votes or whether he/she abstains from voting
5.
Entitlement to attend and vote at the meeting (and the number of
votes that may be cast thereat), will be determined by reference to the
Register of Members of the Company at the close of business on the
day which is two days before the day of the meeting or of the adjourned
meeting Changes to the Register of Members of the Company after
the relevant deadline shall be disregarded in determining the rights of
any person to attend and vote at the meeting
6.
Shares held in uncertificated form (i.e. in CREST) may be voted
through the CREST Proxy Voting Service in accordance with the
procedures set out in the CREST manual
7.
To be effective, all forms of Proxy must be completed, signed
and lodged not less 48 hours before the time of the meeting at the
office of The City Partnership (UK) Limited at: The City Partnership (UK)
Limited, The Mending Rooms, Park Valley Housem Meltham Road,
Huddersfield HD4 7BH. Alternatively, you may vote through the Proxy
Voting App at
https://proxy-lsa-agm.cpip.io/
8.
If you prefer, you may return the proxy form to The City Partnership
in an envelope addressed to The City Partnership (UK) Limited, The
Mending Rooms, Park Valley Housem Meltham Road, Huddersfield
HD4 7BH
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