EEA Fund Management (Guernsey) Limited has issued the following update:

EEA Life Settlements Fund PCC Limited (the “Fund”)

Portfolio Update as at 30 September 2016

At 30 September 2016, the Fund held 148 life insurance policies with a total net death benefit of $497 million. The average policy size was approximately US$3.4 million. The portfolio covered 53 illnesses, 113 lives and 42 insurance companies. Based upon weighted net death benefit, over 93% of the portfolio was represented by insureds who were aged 80 or over, with an overall weighted average age of 90.57 years.

At the start of the year, the Fund’s independent valuation agent, Maple Life Analytics, projected portfolio maturities for 2016 of $102.7 million (but with a range of between $59.8 million and $159.5 million). In the quarter to the end of September 2016, there were 7 reported maturities with a total net death benefit of $45.3 million, taking the total since the start of the year to 30 September 2016 to 28 reported maturities with a total net death benefit of $90 million.

The Fund has recently confirmed that the cash required to pay future premiums on Current Underlying Investments for two years, on the conservative assumption that no maturities occur during this period, is $87.1 million. According to Maple Life Analytics, however, the cumulative premiums expected to be paid in the final quarter of 2016 is $9.2 million and, in 2017, is $29.2 million.

Despite the significant cash flow from maturities, the NAV per Share of the USD-denominated Cells decreased over the last quarter, ranging from -1.22% to -1.50% depending on the Cell. This decrease is predominately due to revised life expectancy (LE) estimates received during the quarter as part of the Fund’s ongoing programme of renewing the LE estimates for policies held by the Fund.

The effects of currency movements on the non USD-denominated Cells over the last quarter were on average 2.36% (GBP), -1.13% (EUR) and 1.20% (SEK), meaning that the overall NAV per share of the GBP-denominated Cells increased in the range of +0.45% to +1.05%, while the NAV of the EUR-denominated Cells (range -2.66% to -2.49%) and the SEK-denominated Cells (range -0.40% to -0.38%) decreased over the last quarter.

Since the end of the quarter, and as a result of the significant cash flows received from maturities during the quarter, the Fund was pleased to announce on 20 October 2016 that it was distributing in aggregate approximately $32.5 million (equating to approximately 15% of the 30 September 2016 NAV per Share of Run-Off Cells) to those persons registered as holders of Run-Off Shares as at 10 October 2016, by way of the compulsory redemption of a portion of each holder’s Run-Off Shares. In addition, the Fund has redeemed approximately $16 million of shares across all Continuing Cells in respect of the 3 October 2016 Redemption Day.

EEA Life Settlements Fund PCC Limited (the Fund) 

3 October 2016 Redemptions of Continuing Shares

The Fund has redeemed approximately $16 million of shares across all Continuing Cells in respect of the 3 October 2016 Redemption Day.

The aggregate Redemption Values of redemption requests has exceeded the level of Available Cash held as at 30 September 2016 for 11 of the 13 Continuing Cells. As a result, the Fund’s board of directors (the Board) has exercised its power to restrict redemptions of Shares in each of those 11 relevant Continuing Cells to the amount of Available Cash attributable to each such Continuing Cell.  In calculating the level of Available Cash, cash and receivables to pay future premiums on Current Underlying Investments for a specified period are excluded. The Board has determined that the appropriate period for such future premiums is two years, which on the conservative assumption that no maturities occur during this period means that $87.1m in aggregate has been excluded across all Cells when determining the levels of Available Cash.

In consequence, the redemption of a proportion of each Continuing Shareholder’s Shares in those 11 Continuing Cells has been postponed until the next Redemption Day (i.e. until the 3 January 2017 Redemption Day), subject to further postponement if, on that day, a Cell’s outstanding redemption requests have an aggregate Redemption Value which exceeds the Available Cash held by the Cell as at such Redemption Day.  Any such deferred redemptions will generally have priority over subsequent redemption requests, in accordance with the terms of the Fund’s Articles of Incorporation.

As a result, the redemption requests for each Continuing Cell were dealt with as follows:

Continuing Cell Proportion of redemption requests deferred from the 31 December 2015 Redemption Day redeemed on 3 October 2016 Proportion of redemption requests deferred from the 31 March 2016 Redemption Day redeemed on 3 October 2016 Proportion of redemption requests deferred from the 1 July 2016 Redemption Day redeemed on 3 October 2016 Proportion of 3 October 2016 redemption requests redeemed on 3 October 2016
USD Fund Class X Cell n/a 100.00% 85.34% 0.00%
USD Fund Dist Cell n/a 30.45% 0.00% 0.00%
USD Fund Acc Cell 82.35% 0.00% 0.00% 0.00%
Swedish Krona Fund Class X Cell n/a n/a n/a 100.00%
Euro Fund Class X Cell 100.00% 97.39% 0.00% 0.00%
Euro Fund Dist Cell n/a 17.20% 0.00% 0.00%
Euro Fund Acc Cell 17.62% 0.00% 0.00% 0.00%
Sterling Fund Class X Cell 100.00% 100.00% 55.09% 0.00%
Sterling Fund Dist Cell 100.00% 9.74% 0.00% 0.00%
Sterling Fund Acc Cell 100.00% 37.55% 0.00% 0.00%
Meteor Senior Life Settlements Sterling Fund 68.88% 0.00% 0.00% 0.00%
Meteor Senior Life Settlements Sterling Fund II 55.23% 0.00% 0.00% 0.00%
WAY Life Settlements Fund Cell n/a n/a n/a n/a

Where a redemption has been made, the actual number of a relevant holder’s Continuing Shares that have been redeemed and the redemption proceeds that are payable will be confirmed on a contract note to be mailed to the relevant Continuing Shareholder in due course.  Payment of redemption proceeds will be made as soon as practicable, subject to receipt of any requested original paperwork.

Following the 3 October 2016 redemptions the outstanding redemption requests for each Continuing Cell are as follows:

Continuing Cell Proportion of shares in issue, the redemption of which has been deferred from the 31 December 2015 Redemption Day Proportion of shares in issue, the redemption of which has been deferred from the 31 March 2016 Redemption Day Proportion of shares in issue, the redemption of which has been deferred from the 1 July 2016 Redemption Day Proportion of shares in issue, the redemption of which has been deferred from the 3 October 2016 Redemption Day
USD Fund Class X Cell 0.00% 0.00% 1.36% 7.09%
USD Fund Dist Cell 0.00% 29.71% 7.66% 12.47%
USD Fund Acc Cell 2.79% 0.53% 22.82% 17.37%
Swedish Krona Fund Class X Cell 0.00% 0.00% 0.00% 0.00%
Euro Fund Class X Cell 0.00% 0.34% 11.51% 15.45%
Euro Fund Dist Cell 0.00% 61.46% 1.57% 2.43%
Euro Fund Acc Cell 60.30% 17.64% 5.26% 3.86%
Sterling Fund Class X Cell 0.00% 0.00% 2.80% 7.72%
Sterling Fund Dist Cell 0.00% 11.93% 8.93% 1.00%
Sterling Fund Acc Cell 0.00% 4.55% 11.17% 3.50%
Meteor Senior Life Settlements Sterling Fund 5.68% 2.46% 4.72% 4.06%
Meteor Senior Life Settlements Sterling Fund II 10.18% 4.28% 4.85% 3.75%
WAY Life Settlements Fund Cell 0.00% 0.00% 0.00% 0.00%

 

EEA Life Settlements Fund PCC Limited (the Fund)

Further to the announcement of 5 October 2016, the Fund is pleased to announce that it is distributing in aggregate approximately $32.5 million (equating to approximately 15% of the 30 September 2016 NAV per Share of Run-Off Cells) to those persons registered as holders of Run-Off Shares as at 10 October 2016, by way of compulsory redemption of a portion of each holder’s Run-Off Shares.

The amount which will effectively be distributed on a per Run-Off Share basis is as follows:

Run-Off Cell Effective distribution per Run-Off Share
Euro Fund Acc Run-Off Cell €11.51
Euro Fund Class X Run-Off Cell €16.37
Euro Fund Class Y Run-Off Cell €10.80
Euro Fund Dist Run-Off Cell €11.18
Meteor Senior Life Sett GBP Run-Off Cell £16.13
Meteor Senior Life Sett GBP Run-Off Fund II £14.44
Sterling Fund Acc Run-Off Cell £17.52
Sterling Fund Class X Run-Off Cell £15.55
Sterling Fund Dist Run-Off Cell £11.67
Swedish Krona Fund Class X Run-Off Cell SEK12.28
USD Fund Acc Run-Off Cell $11.80
USD Fund Class I Run-Off Cell $12.80
USD Fund Class X Run-Off Cell $15.64
USD Fund Dist Run-Off Cell $9.93
WAY Life Settlements Fund Run-Off Cell £13.95

The exact amount that will be paid to any particular Run-Off Shareholder, and the number of Run-Off Shares that have been redeemed, will be confirmed on a contract note to be mailed to each Run-Off Shareholder in due course.  Payment of proceeds will be made as soon as practicable, subject to receipt of any requested original paperwork.

EEA Life Settlements Fund PCC Limited (the Fund)

Due to significant cash flows received from maturities during August and September 2016, the Fund’s board of directors has declared a Redemption Day of 10 October 2016 in order to distribute Available Cash to those persons registered as holders of Run-Off Shares on 10 October 2016.

In order to effect the distribution, a relevant portion of each holder’s Run-Off Shares will be compulsorily redeemed on 10 October 2016 using the 30 September 2016 valuations.

The exact amount that will be paid to any particular Run-Off Shareholder, and the number of Run-Off Shares that will have been redeemed, will be confirmed on a contract note to be issued to each Run-Off Shareholder in due course following the Redemption Day.

Final details in relation to this distribution, together with an update in relation to the October 2016 Redemption Day for Continuing Shares, are anticipated towards the end of October 2016.

EEA Life Settlements Fund PCC Limited (the Fund)

Further to the announcement on 4 August 2016, a relevant portion of each holder’s Run-Off Shares were compulsorily redeemed on 5 August 2016 in order to effect distributions of Available Cash.  The Fund is required to redeem Run-Off Shares based on the prevailing valuations at the time of redemption.  Accordingly, while our estimate as to the Available Cash which would be distributed was based on the 30 June 2016 valuations, in light of the date of redemption we are required to redeem based on the 29 July 2016 valuations.

The Fund has finalised the Available Cash calculations based on the 29 July 2016 valuations and will be distributing in aggregate $15,486,062.24 to Run-Off Shareholders (equating to approximately 6.7% of the 29 July 2016 NAV per Share of Run-Off Cells).  This is less than the amount anticipated in our last announcement as the Available Cash for the Run-Off Cells has fallen during July 2016, due to the lack of reported maturities.

The redemption proceeds are expected to be paid by the end of August 2016 to those persons registered as holders of Run-Off Shares on 5 August 2016, subject to receipt of all requested original paperwork.  The amount which will effectively be distributed on a per Run-Off Share basis is as follows:

Run-Off Cell Effective distribution per Run-Off Share
Euro Fund Acc Run-Off Cell € 6.20
Euro Fund Class X Run-Off Cell € 8.33
Euro Fund Class Y Run-Off Cell € 5.64
Euro Fund Dist Run-Off Cell € 5.78
Meteor Senior Life Sett GBP   Run-Off Cell £6.85
Meteor Senior Life Sett GBP   Run-Off Fund II £6.12
Sterling Fund Acc Run-Off Cell £7.37
Sterling Fund Class X Run-Off Cell £6.53
Sterling Fund Dist Run-Off Cell £4.89
Swedish Krona Fund Class X Run-Off   Cell SEK 5.66
USD Fund Acc Run-Off Cell $6.26
USD Fund Class I Run-Off Cell $6.23
USD Fund Class X Run-Off Cell $8.07
USD Fund Dist Run-Off Cell $5.15
WAY Life Settlements Fund Run-Off   Cell £6.14

The exact amount that will be distributed to any particular Run-Off Shareholder, and the number of Run-Off Shares redeemed, will be confirmed on a contract note to be issued to each Run-Off Shareholder by 26 August 2016.

EEA Life Settlements Fund PCC Limited (the Fund)

The Fund announced on 2 August 2016 that it will be distributing in aggregate approximately $18.3 million to Run-Off Shareholders (equating to approximately 7.9% of the 30 June 2016 NAV per Share of Run-Off Cells).

In order to effect the distribution, a relevant portion of each holder’s Run-Off Shares will be compulsorily redeemed on 5 August 2016 using the 31 July 2016 valuations.  The redemption proceeds are expected to be paid by the end of August 2016 to those persons registered as holders of Run-Off Shares on 5 August 2016, subject to receipt of all requested original paperwork.

The exact amount that will be paid to any particular Run-Off Shareholder, and the number of Run-Off Shares that will have been redeemed, will be confirmed on a contract note to be issued to each Run-Off Shareholder by 26 August 2016.

EEA Life Settlements Fund PCC Limited (the Fund)

The Manager has updated the Q&A document that addresses some questions that we and advisers have received about the Fund.  It can be found at http://www.eeafmg.gg/eea-life-settlements-fund/.  We have also issued the following portfolio update:

Portfolio Update as at 30 June 2016 

The Fund holds 156 life insurance policies with a total net death benefit of $552.2 million. The average policy size is around US$3.5 million. The portfolio covers 53 illnesses, 121 lives and 43 insurance companies.  Based upon weighted net death benefit, over 90% of the portfolio is represented by insureds who are aged 80 or over, with an overall weighted average age of 90.29 years.

The Fund’s independent valuation agent, Maple Life, has projected portfolio maturities of $102.7 (but with a range of between $59.8 million and $159.5 million) over the course of 2016.  In the quarter to the end of June 2016, there were 9 reported maturities with a total net death benefit of $4.2 million, taking the total since the start of the year to 30 June 2016 to 20 reported maturities with a total net death benefit of $34.5 million.  During the last quarter, the Manager and the Fund’s board (the Board) took the decision to lapse two policies (i.e. to stop paying the premiums and reduce the value to nil) with a total, combined net death benefit of $1.9m.  It was concluded that the cost of premium payments on these policies, based on the latest assessments of the underlying insured’s condition and life expectancy, was very likely to outweigh the benefit on maturity of these policies.  One further policy, with a net death benefit of $1.5m, expired due to the underlying insured reaching the age at which their policy automatically terminates.

The Fund has recently confirmed that the cash required to pay future premiums on Current Underlying Investments for two years, on the conservative assumption that no maturities occur during this period, is $94.5m.  According to Maple Life, the cumulative premiums expected to be paid in the second half of 2016 is $17.8m and, in 2017, is $34.8m.

The aggregate NAV of the Fund has fallen over the quarter and as at 30 June 2016 was $378.6 million, which included cash and net receivables of $109.1 million.

The decline since my last commentary is partly explained by the $9.4 million of redemption payments made to Continuing Shareholders in relation to the redemption of Continuing Shares on the 31 March Redemption Day, but also by the level of maturities being below the overall premium costs during the quarter to 30 June 2016.

Additionally, just over two years’ ago the Fund began a programme of renewing the life expectancy (LE) estimates of the circa 450 policies then held by the Fund.  The first round of updates is nearly completed, with 32 LE estimates being updated during April 2016 and around a further 50 to be updated in the next few months. The LE updates in April have had a negative impact on the NAV, with the majority of that impact attributable to LE updates on two lives covering 8 of those policies with an aggregate net death benefit of $46m.

As a consequence of the Fund’s recent experience, Maple Life has also adjusted some of its assumptions regarding the shorter LE policies.

Finally, the premium cost of policies issued by some of the insurance providers has recently risen, resulting in a minor downwards adjustment in the valuation of some policies.

As a result of the above, the NAV per Share of the USD-denominated Cells decreased over the last quarter, ranging from -6.72% to -6.10% depending on the Cell. The effects of currency movements on the non USD-denominated Cells over the last quarter were on average +7.5% (GBP), +2.4% (EUR) and +3.9% (SEK), meaning that the NAV per share of the GBP-denominated Cells moved in the range of -0.13% to +0.34%, while the NAV of the EUR-denominated Cells (range -4.45% to -4.20%) and the SEK-denominated Cells (range -3.13% to -2.91%) decreased over the last quarter.

Given the lower than projected level of maturities during the last quarter, there has not been a further build up of Available Cash after the redemption payments made in respect of the 31 March 2016 Redemption Day.  In consequence, there have been no redemptions of shares in any of the Continuing Cells in respect of the 30 June Redemption Day.  For more information please refer to the 1 August 2016 announcement at www.eeafmg.gg.

With respect to Run-Off Shares, the Fund has announced that it will be distributing in aggregate approximately $18.3 million to Run-Off Shares as at 30 June 2016 (equating to approximately 7.9% of the 30 June 2016 NAV per Share of Run-Off Cells).  For more information please refer to the 2 August 2016 announcement at www.eeafmg.gg.

EEA Life Settlements Fund PCC Limited (the Fund)

The Fund is pleased to announce that it will be distributing in aggregate approximately $18.3 million to Run-Off Shareholders (equating to approximately 7.9% of the 30 June 2016 NAV per Share of Run-Off Cells).

The distribution is to be effected by the redemption of a relevant portion of each holder’s Run-Off Shares.  The distribution amount  is expected to be paid by the end of August 2016, subject to receipt of all requested original paperwork.  The amount which will effectively be distributed on a per Run-Off Share basis is as follows:

Run-Off Cell Effective distribution per Run-Off Share
Euro Fund Acc Run-Off Cell €7.06
Euro Fund Class X Run-Off Cell €9.55
Euro Fund Class Y Run-Off Cell €6.45
Euro Fund Dist Run-Off Cell €6.62
Meteor Senior Life Sett GBP Run-Off Cell £8.12
Meteor Senior Life Sett GBP Run-Off Fund   II £7.26
Sterling Fund Acc Run-Off Cell £8.75
Sterling Fund Class X Run-Off Cell £7.75
Sterling Fund Dist Run-Off Cell £5.82
Swedish Krona Fund Class X Run-Off Cell SEK 6.65
USD Fund Acc Run-Off Cell $7.16
USD Fund Class I Run-Off Cell $7.20
USD Fund Class X Run-Off Cell $9.26
USD Fund Dist Run-Off Cell $5.91
WAY Life Settlements Fund Run-Off Cell £7.27

The exact amount that will be distributed to any particular Run-Off Shareholder, and the number of Run-Off Shares redeemed, will be confirmed on a contract note to be issued to each Run-Off Shareholder in due course.

The Chairman of the EEA Life Settlements Fund PCC Limited has issued the following letter to Shareholders today.

Dear Investor

EEA Life Settlements Fund PCC Limited – Reporting Fund Tax Information

Each of the cells included in the financial statements for the year ended 31 December 2015 has been accepted by HM Revenue & Customs as a ‘reporting fund’ under the UK offshore fund rules. Each cell, since launch, has always been in the reporting fund regime (and the earlier distributor status regime for the cells in existence at that time).

In order to successfully maintain reporting fund status, each cell must provide investors with certain information for each accounting period, which is set out below. This note provides that information for the benefit of UK investors.

Whilst the fund is required to provide the information contained below, we have also commented to assist you in the completion of your UK tax returns. Please note these comments do not constitute tax advice and you should consult your professional tax adviser.

The amount of reportable income from your investments in the cells for the accounting period ended 31 December 2015 should be declared on your 2016/17 UK tax return.

However as stated below, this is nil.

Tax Information

  • The reportable income for each of the cells in the accounting period is nil.
  • There were no income amounts actually distributed to investors.
  • Therefore there is also no excess of reportable income over the amount actually distributed to investors.
  • The fund distribution date is deemed to be 30 June 2016.
  • Each of the cells included in the financial statements for the year ended 31 December 2015 remains a reporting fund at the date this report was made available to investors.

If you have any queries regarding this letter, please contact your independent financial adviser.

Yours faithfully

Mark Colton
Director