SUND Company Profile

We do not purchase or hold life insurance policies but, rather, hold a contractual right to receive the net insurance benefits, or NIBs, from a portfolio of life insurance policies held by a third party. These NIBs represent an indirect, residual ownership interest in a portfolio of individual life insurance policies and they allow us to receive a portion of the settlement proceeds from such policies, after expenses related to the acquisition, financing, insuring and servicing of the policies underlying our NIBs have been paid.

NIBs are generally sold by an entity that holds the underlying life insurance policies, either directly or indirectly through a subsidiary, such an entity being referred to herein as a “Holder.” A Holder, either directly or through a wholly owned subsidiary, purchases life insurance policies either from the insured or on the secondary market and aggregates them into a portfolio of policies. At the time of purchase, the Holder generally also (i) contracts with a service provider to manage the servicing of the policies until maturity, (ii) purchases mortality re-insurance, or MRI, coverage under which payments will be made to the Holder in the event the life insurance policies do not mature according to actuarial life expectancies, and (iii) arranges financing to cover the initial purchase of the life insurance policies, the servicing of the life insurance policies until maturity and the payment of the MRI premiums. The financing obtained by the Holder for a portfolio of life insurance policies is secured by the insurance policies for which the financing was obtained. After a Holder purchases policies, aggregates them into a portfolio and arranges for the servicing, MRI coverage and financing, the Holder contracts to sell NIBs related to the policies. The NIBs grant the holder of the NIBs the right to receive the proceeds from the settlement of the life insurance policies after all of the expenses related to such policies incurred by the Holder have been paid. The Company is not responsible for maintaining premiums or other expenses related to maintaining the life insurance policies underlying NIBs. Such obligations remain with the Holder.

When an insurance policy underlying our NIBs comes to maturity, the insurance proceeds are first used by the Holder to pay related debt and expenses associated with such policy. Once all of the expenses have been paid, the Holder will retain a small percentage of the proceeds and then will pay the remaining insurance proceeds to us in satisfaction of our related NIB.

There are a number of reasons a policy owner may choose to sell his or her life insurance policy. The policy owner may no longer need or want his or her policy, he or she may wish to purchase a different kind of insurance policy, premium payments may no longer be affordable or the policy owner may need cash to fund healthcare or other expenses. In particular, policy holders 65 years of age and older and their families are faced with a variety of challenges as they seek to address their post-retirement financial needs and selling one’s life insurance policy may provide a unique and valuable financial solution to such challenges.

Predictability of future cash flows is one of the biggest challenges facing companies engaged in the life settlements industry. If a Holder is not able to adequately predict future cash flows and does not continually have enough cash to make a policy portfolio’s premium payments, the policies in the portfolio may lapse and we may lose our right to receive the proceeds from the settlement of the policies at maturity. Prediction of future cash flow requires the use of financial models, which rely on various assumptions. These assumptions include the amount and timing of projected net cash receipts, expected maturity events, counter party performance risk, changes to applicable regulation of the investment, shortage of funds needed to maintain the asset until maturity, changes in discount rates, life expectancy estimates and their relation to premiums, interest, and other costs incurred, among other items. These uncertainties and contingencies are difficult to predict and are subject to future events that may impact our estimates and interest income. As a result, actual results could differ significantly from those estimates. If projections of life expectancies are wrong, Holders may be obligated to service the related insurance policies for longer than expected, thereby increasing their costs and reducing the net insurance benefit available to us. Other than the NIBs initially acquired from Del Mar Financial S.a.r.l., we have mitigated some of this risk by only holding NIBs where the Holders of the insurance policies underlying such NIBs have (i) financed a portion of the purchase price of the policy portfolio underlying the NIBs and (ii) financed the policy portfolio’s premium payments and obtained MRI coverage for the policy portfolio.

Financing a portion of the purchase price of a policy portfolio allows the Holder to leverage its investment and create a larger and diversified policy portfolio. When making an investment in a portfolio of life insurance policies, a Holder utilizes actuarial tables to determine when the policies in the portfolio can be expected to come to maturity. However, the Holder assumes the risk that the policies in the portfolio will come to maturity later than was predicted by the actuarial tables used at the time of purchase. The life expectancies provided by the actuarial tables are based on actual death rates in large populations of individuals with similar demographic characteristics. Thus, the more policies underlying a policy portfolio, the more reliable the use of actuarial tables becomes. In other words, the larger the policy portfolio, the more closely the underlying insureds would be expected to, on average, follow actuarial predictions and the lower the risk associated with future cash flows will be. Because we want predictability and stability in the cash flows generated by our NIBs, we have only purchased NIBs where the Holder of the underlying policy portfolio has maximized its investment in the policy portfolios by financing a portion of the purchase price.

Financing premium payments. Holding NIBs where the Holder of the policy portfolio has ensured its ability to pay policy premiums by financing such premium payments and ensured the predictability of future cash flows by obtaining MRI provides us with a more stable cash position and enables us to focus on long term growth.

MRI Coverage. Because of the uncertainty of maturity of insurance policies, the Holders have contracted with an insurance provider for MRI coverage. We do not have a contract with the MRI provider and the MRI provider does not provide any insurance to us but, rather, provides MRI coverage to the various Holders of life insurance policies underlying our NIBs. MRI coverage typically provides guaranteed cash flow based on the expected death benefits of the pool of policies being insured calculated at the issuance of the coverage and thereby provides credit enhancement to any bank providing financing to a Holder. The term of the MRI policies is usually 15 years. Any claims paid by the MRI to the Holder must be paid back to the MRI provider out of death benefit proceeds from the pool of policies being insured when such death benefit proceeds are eventually received. This enables the Holder to receive a smoother cash flow from a pool of policies over time and avoid “lumpiness” in the cash flows that would otherwise be more pronounced in the absence of the MRI coverage. Any claim payment balances would accrue interest, typically at a spread of 250 basis points over LIBOR, to the extent they remain outstanding. The MRI coverage is obtained by paying an MRI premium, typically at equal to 2% of the cumulative death benefit of the covered life insurance policies, at the outset of the coverage and, depending on the specific terms of the MRI policy, possibly an additional premium amount at a predetermined time during the effective coverage period (the “Commitment Fee”), which is typically 1% of the cumulative death benefits of the covered policies. The insurer under the MRI policy typically must approve the sale of any life insurance policies covered by the MRI policy if such sale does not result in the full repayment of any outstanding recovery amounts. It is our understanding that there is only one MRI Provider. While the MRI coverage is relatively expensive, we believe that insurance policies underlying NIBs that are covered by MRI have less volatility, are more liquid and should achieve higher values for purposes of financing and secondary market sales.

Our objective is to acquire NIBs based on insurance policy portfolios that will produce returns in excess of the purchase, financing, servicing and insuring costs incurred by the Holder and hold those NIBs to maturity. The guidelines we generally follow regarding the purchase of NIBs include:

the insured is 75 years old or older;

all NIBs relate to U.S. Universal Life Insurance policies;

all underlying insurance policies have qualified for financing that will cover at least four years of premiums following the date on which we acquire the NIBs;

each policy must first be reviewed by the legal due diligence team of the lender providing financing for the acquisition and servicing of the life insurance policies, second by

the MRI company’s due diligence team and then finally approved by our due diligence processes;

all policies must qualify for MRI; and

the projected proceeds payable on each life insurance policy upon the death of the underlying insured are projected to exceed the costs to service the life insurance

policies, amounts due to creditors secured by such life insurance policy, such as the Holders’ Lender or the MRI provider, other costs and fees incurred by the Holder

and the percentage of the remaining insurance benefit retained by the Holder before payment is made to us in satisfaction of our NIBs.