Alpha Protection Innovative Life Settlements Structures To Innovative Life Settlements Structures To...

Alpha ProtectionAlpha Protection Innovative Life Settlements Structures To Innovative Life Settlements Structures To

De-Risk “Active Alpha” InvestmentsDe-Risk “Active Alpha” Investments

Managed by Alternative Asset Management Limited

Authorised & Regulated by the FSA

AA22MLMLA new direction for financial solutionsA new direction for financial solutions

ContentsContents

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Investor Concerns 3Investor Solutions – Life Settlements 4Life Settlements – Value 5A2ML Alpha Ingredient 6Alpha on Alpha 7Life Settlements – Perfect of Interests 8LS Fund Typical 3rd-Party 9A2M Lion Fund 10, 11, 12What this Means 13Hybrid Structure at Work 14Important Legal Disclaimer 15


Investors ConcernsInvestors Concerns

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Passivity or Inactivity in this market is a natural but incorrect reaction to opportunitiesPassivity or Inactivity in this market is a natural but incorrect reaction to opportunities

Paralysis caused by global investor fear of further lossParalysis caused by global investor fear of further loss

Great opportunities missed by over exaggeration of riskGreat opportunities missed by over exaggeration of risk

It is now vital to de-risk alpha playsIt is now vital to de-risk alpha plays

Accept lower but assured returnsAccept lower but assured returns


Investor Solutions – Life SettlementsInvestor Solutions – Life Settlements

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Life settlement market - the sale or surrender by insured individuals of their life insurance Life settlement market - the sale or surrender by insured individuals of their life insurance policiespolicies

US individuals selling US issued policies beyond into a secondary market.US individuals selling US issued policies beyond into a secondary market.

The sale and purchase of life insurance policies has developed very rapidly in theThe sale and purchase of life insurance policies has developed very rapidly in thelast few yearslast few years

Now well regulated market - sophisticated players with enormous potentialNow well regulated market - sophisticated players with enormous potential• Buying life settlement policies at correct purchase price is keyBuying life settlement policies at correct purchase price is key• Involves understanding of and evaluation of the insured risk, origination processes, underwriting Involves understanding of and evaluation of the insured risk, origination processes, underwriting

criteria, documentation and client service procedurescriteria, documentation and client service procedures

Institutional capital has brought regulatory control and accredited ‘Perfection of Interest’ Institutional capital has brought regulatory control and accredited ‘Perfection of Interest’ proceduresprocedures

AA22ML has access to whole market and proprietary modelling and valuation ML has access to whole market and proprietary modelling and valuation techniquestechniques

Global credit crunch provides proven need for collateralised financing productsGlobal credit crunch provides proven need for collateralised financing products


Life Settlements - ValueLife Settlements - Value

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The value line remains undiminishedThe value line remains undiminished

Opportunities exist to purchase seasoned portfoliosOpportunities exist to purchase seasoned portfolios

Non-correlation was never more requiredNon-correlation was never more required

‘‘Open Market’ sales of portfolios represent value to buyers not inadequacy of assetOpen Market’ sales of portfolios represent value to buyers not inadequacy of asset

Capital protection over time never more neededCapital protection over time never more needed

Management skills and knowledge at a premiumManagement skills and knowledge at a premium


AA22ML Alpha IngredientML Alpha Ingredient

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Experienced Quant and Structuring teams in Europe and UKExperienced Quant and Structuring teams in Europe and UK

Proprietary Optimising skills drive higher unlevered returns out of LS portfolioProprietary Optimising skills drive higher unlevered returns out of LS portfolio

Non correlation now proven “under fire”Non correlation now proven “under fire”

Investors need ASSURANCE that their principal shall be protectedInvestors need ASSURANCE that their principal shall be protected


Alpha on AlphaAlpha on Alpha

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LS portfolio cannot enhance a poor business modelLS portfolio cannot enhance a poor business model

Non correlation and low volatility provide balance and de risk solution to innovative Non correlation and low volatility provide balance and de risk solution to innovative Alpha managers and their investorsAlpha managers and their investors

Overall returns are reduced in return for peace of mindOverall returns are reduced in return for peace of mind

Collateral Asset is itself a value – add instrument driving above average returns overCollateral Asset is itself a value – add instrument driving above average returns over timetime

Possibility of blended yields and indeed of driving base yield out of LSPPossibility of blended yields and indeed of driving base yield out of LSP

At most simple, Hybrid structure provides c55% of capital raised to Alpha managerAt most simple, Hybrid structure provides c55% of capital raised to Alpha manager


Life Settlements – Perfection of InterestsLife Settlements – Perfection of Interests

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Increased regulatory overview a consequence of Institutional involvementIncreased regulatory overview a consequence of Institutional involvement

DD and “perfection of interest” process now de rigeurDD and “perfection of interest” process now de rigeur

Supply side increasingly efficient and transparentSupply side increasingly efficient and transparent

Asset supply continues to growAsset supply continues to grow

Low volatility and non correlation never more appositeLow volatility and non correlation never more apposite

Supply volume increasing annuallySupply volume increasing annually

Deployment of investment capital assuredDeployment of investment capital assured


Life Settlements Fund Typical 3Life Settlements Fund Typical 3rdrd-Party-Party

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Asset Manager: Alternative Asset Management Asset Manager: Alternative Asset Management www.altasset.comwww.altasset.com

Sub Advisor tba (with specialist Irish QIF structure)Sub Advisor tba (with specialist Irish QIF structure)

The Fund will engage The Fund will engage Tillinghast, Dominion FundTillinghast, Dominion Fund to advise on the pricing, model and the to advise on the pricing, model and the purchasing matrixpurchasing matrix

The Fund will employ Lewis& Ellis/Tillinghast as consultant actuariesThe Fund will employ Lewis& Ellis/Tillinghast as consultant actuaries

The Fund will engage The Fund will engage HSBC/Soc Gen* HSBC/Soc Gen* (AA) for the following roles: Trustee, Premium Paying (AA) for the following roles: Trustee, Premium Paying Agent, Registrar, Custodian, Securities Intermediary and Escrow AgentAgent, Registrar, Custodian, Securities Intermediary and Escrow Agent

The Servicer and Tracking Agent will be The Servicer and Tracking Agent will be Old Republic Title CompanyOld Republic Title Company (AA-) (AA-)

Strook & Strook NY / Rosenblatts LondonStrook & Strook NY / Rosenblatts London will monitor the activities and advise on ongoing will monitor the activities and advise on ongoing regulatory and legal developments regulatory and legal developments

The Funds will engage The Funds will engage KPMG/Deloitte’s KPMG/Deloitte’s to monitor the activities of the Servicer, Pricing Model, to monitor the activities of the Servicer, Pricing Model, Tracker, Trustee and Escrow Bank through periodic reviews Tracker, Trustee and Escrow Bank through periodic reviews

* These are amongst a number of Best of Breed options that can be varied to suit* These are amongst a number of Best of Breed options that can be varied to suit


AA22M Lion FundM Lion Fund

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The Lion FundLion Fund is a multi-strategy fund providing diversification through combining the non-correlated strengths of both the foreign exchange and equity futures markets. Active risk management and sector constraints are applied to maintain a limited market exposure in all environments.

The Fund maintains a broad equity and foreign exchange market presence. Capital is allocated and active Risk Management is applied such that the fund generates absolute returns. The Fund currently invests in the following strategies that use highly liquid exchange traded instruments: Statistical Arbitrage, Multi Factor Models, Active Long-Short.

The Lion Fund’s investment objective is to produce low volatility absolute returns through a diversified portfolio. The Fund will have exposure to the FX and Equities markets through tried and tested strategies producing consistent and superior low volatility returns over time.

The Fund’s managers have many years of experience in trading and managing assets in both FX and Equities futures and derivatives. Careful consideration is given to the track record of returns, with a specific focus on low volatility returns and broad exposure within each asset class so as to diversify and reduce risk wherever possible.

The underlying trading strategies have been carefully analyzed and stress tested to ensure a high degree of confidence in achieving the desired returns demanded by investors in today’s volatile and challenging investment climate. As the assets under management grow it is possible that we will increase diversification through asset allocation to more strategies with a similar profile of returns.


A2M Lion Fund Performance AnalysisA2M Lion Fund Performance Analysis

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FX Equities Lion Fund

Average Annual Return 19.99% 18.87% 18.01%Average Monthly Return 1.67% 1.57% 1.50%Highest Monthly Return 11.32% 10.34% 6.01%Lowest Monthly Return -9.01% -4.44% -3.37%Average gain 1.67% 1.57% 1.50%Cumulative Gain 77.07% 75.74% 76.96%Correlation with S&P 500 0.44 -0.43 0.21Standard Deviation 4.80% 2.81% 2.35%Worst Consecutive Drawdown -8.97% -0.91% -1.52%Duration of Drawdown 3 Months 3 Months 2 MonthsRecover Period 5 Months 5 Months 3 MonthsSharpe Ratio 1.97 1.73 1.97Excess Return (RFR) 17.99% 16.87% 16.01%

J an Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD

2009 1.69% 0.27% 0.77% 1.37% 2.13% 1.73% 0.31% 0.39% -0.54% 1.28% - - 9.77%

2008 -1.10% 3.41% 2.71% 0.83% -2.36% 2.68% 0.70% 0.55% -0.74% 1.19% 2.51% 0.80% 11.61%

2007 4.03% -0.04% -1.48% 5.11% 5.09% 0.75% 0.23% -3.02% 6.01% 4.97% -3.37% 1.67% 21.16%

2006 - - - - - - - 1.35% 5.00% 4.81% 1.15% 5.68% 19.22%

Monthly Returns


A2M Lion Fund LiquidityA2M Lion Fund Liquidity

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Many hedge funds impose stringentrestrictions on how investors may withdrawtheir capital. The A2M Lion Fund makesthings less difficult by allowing investorsto withdraw any portion of their capital ona monthly basis.

THE A2M LION FUND STRATEGY OPERATES EXCLUSIVELY ON

HIGHLY LIQUID, EXCHANGE-TRADED INSTRUMENTS

Liquid markets are at the core of the strategy.We are only interested in instruments whichconsistently show at least 1,000 tradesper day.

This allows the fund to quickly enter andwithdraw from any position within a veryshort time frame and ensures that theportfolio can always be marked-to-marketat realistic prices.

Due to the highly liquid nature of theportfolio, investors can rest assured thattheir capital will not incur any undueliquidation losses should they desire towithdraw their investment.

We are only interested in instruments which consistently show at least 1,000 trades per day.


What This MeansWhat This Means

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Investors are paying greater fees for 100% PROTECTION - effectively Alpha Investors are paying greater fees for 100% PROTECTION - effectively Alpha manager and LS managermanager and LS manager

Investor is assured that principal capital will be returned in full regardless of the Investor is assured that principal capital will be returned in full regardless of the skills/markets that obtain for alpha managerskills/markets that obtain for alpha manager

Investor must be lead by attraction of Alpha playInvestor must be lead by attraction of Alpha play

* 3* 3rdrd party professional advisors are best of breed in both funds party professional advisors are best of breed in both funds

LS manager reports / valuations via alpha manager to investors in usual formatLS manager reports / valuations via alpha manager to investors in usual format


Hybrid Structure At WorkHybrid Structure At Work

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Investors are drawn to the inherent attractions of (e.g.) the Investors are drawn to the inherent attractions of (e.g.) the AA22M Lion FundM Lion Fund strategy strategy

In this instance they are made aware that the $ shall be segregated at source In this instance they are made aware that the $ shall be segregated at source (escrow)(escrow)

55 cents shall be deployed in the 55 cents shall be deployed in the AA22M Lion FundM Lion Fund alpha play alpha play

45 cents shall be deployed in the collateral LS Fund45 cents shall be deployed in the collateral LS Fund

AA22M Lion FundM Lion Fund delivers returns as alpha stratagem works in the usual way delivers returns as alpha stratagem works in the usual way

Collateral fund shall deliver 100 cents in the $ principal over a 10 year time lineCollateral fund shall deliver 100 cents in the $ principal over a 10 year time line


Legal DisclaimerLegal Disclaimer

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Alternative Asset Management Limited ("A2ML"), is the issuer of this document. It does not, nor is it intended to, constitute an offer to acquire, or solicit an offer to acquire any securities. Any person who subsequently acquires the securities mentioned herein must only rely on the terms of the definitive Offering Memorandum to be issued in connection herewith, on the basis of which alone subscriptions for the securities may be made.

This document does not constitute a prospectus and is not intended to provide the sole basis for any evaluation of the transaction or securities mentioned herein. Although the information in this document has been obtained from sources which A2ML believes to be reliable, A2ML does not represent or warrant its accuracy and such information may be incomplete or condensed.

Any person who receives this document agrees that the merits or suitability of any such transaction or securities to such person’s particular situation will be independently determined by such person, including consideration of the legal, tax, accounting, regulatory, financial and other related aspects thereof. In particular, A2ML owes no duty to any person who receives this document (except as required by law or regulation) to exercise any judgement on such person’s behalf as to the merits or suitability of any such transaction or securities.

All estimates and opinions included in this document constitute the judgement of A2ML as of the date of the document and may be subject to change without notice. A2ML and its affiliates may, from time to time, effect or have effected an own account transaction in, or make a market or deal as principal in or for, the securities mentioned herein, or in options, futures and other derivative instruments based thereon and may, to the extent permitted by law, have acted upon or used the information herein contained, or the research or analysis upon which it is based, before its publication. A2ML will not be responsible for the consequences of reliance upon any opinion or statement contained herein or for any omission. This document is confidential and is being submitted to selected recipients only. It may not be reproduced (in whole or in part) or delivered to any other person without the prior written permission of A2ML.

This document is prepared for professional investors and is not intended for Private Customers as defined in the FSA Rules and should not be passed on to any such persons. The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended. Any U.S. person receiving this document and wishing to effect a transaction in any security discussed herein must do so through a U.S. registered broker dealer.

By accepting this document you agree to be bound by the foregoing limitations.

© A2ML (2004). All rights reservedAlternative Asset Management Limited (“A2ML”)

New Broad Street House, 35 New Broad Street, London EC2M 1NH United Kingdom+44 (0) 800 0612 556 [email protected] www.altasset.com


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