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LPI Position Holder Trust Newsletter

Inside this issue

The Trustee’s Corner .... 1

Upcoming Events .......... 1

Action Items ................. 2

Trust Update ............... 3-5

New Website ................. 3

Litigation over Policy 77250 ................... 3

PHT pays interest on the New IRA Notes (NIRANs) ......................... 3-4

Year-End Tax Documents .............. 4 Valuation of IRA Partnership Interests ........................ 4-5

Podcast Available ........... 5

Portfolio at Glance ....... 6

FAQ……………………………..7-8

How to Contact Us ....... 9

Upcoming Events

• JANUARY 15th: January 2018 LPI PHT Newsletter to be pub-lished

• JANUARY 17th: 1st Quarter LPI PHT In-vestor Podcast available for download

• FEBRUARY 12th: February 2018 LPI PHT Newsletter to be pub-lished

The Trustee’s Corner

Welcome to the December 2017 issue of the Life Partners Position Holder Trust (PHT) investor newsletter. In the articles that follow, I’m pleased to share with you some updates that should be of interest to you and any pro-fessional advisors who may be assisting you with your investments. Meanwhile, as we close the chapter on 2017 and look ahead to a new year, I’d like to offer you a preview of some of our goals for 2018. One thing we are intent on doing early in the year is to issue promissory notes to all New IRA Note (NIRAN) holders (investors who held IRA notes were required to exchange them for “new” IRA notes following the bank-ruptcy). If you are an investor with a NIRAN interest, we will be sending you a new promissory note from the PHT no later than the end of the year. If the NIRAN is held in your IRA, we will send the NIRAN to your Custodian. Another goal for the year ahead is to continue making aggressive payments on the exit facility until it has been paid off entirely. This credit facility bears interest at 11% so it’s in all of our interests to pay it down as fast as possi-ble. Moreover, as you will recall, the PHT is unable to make cash distribu-tions to the PHT unit holders and to the IRA Partnership (for distribution to its members) until we have paid off that $55 million bankruptcy exit loan and reserved sufficient funds to pay the premiums owed on policies in the portfolio. One more goal for 2018 is that we want to clean up our contact databases once and for all so that every investor is receiving every important commu-nication from us. You can help us achieve this by making sure that Magna Servicing has your current email and physical address. We’ve made it easy for you to change your contact information yourself by going to www.magnaservicing.com, or you can send an email to custsrv@magnaservicing.com. As the year progresses, I will keep you apprised of our progress on these and other goals for 2018. I hope that you will find the articles in this newsletter to be informative. Thank you for your interest. I wish you a very happy holiday season and a joyful new year!

Sincerely, LPI Position Holder Trust Eduardo S. Espinosa Trustee

December 2017 Issue

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Action Items

What we need from you?

• Please pay the premiums on the policies you own as reflected in any invoices you received. Please do not send a partial payment and please do not delay beyond the 60-day payment window you will be provided. As a reminder, the PHT must receive your check by the 60th day. Please do not wait until the last minute to send your check.

• Please access the PHT investor portal (www.magnaservicing.com), review your account statements, read the e-mails we send and check the PHT website from time to time. The PHT Trustee uses these tools to provide important infor-mation about your investment to you. We know that you were inundated with mail during the bankruptcy proceedings and we value your time, so we’ve made a real effort to provide the im-portant information to you in a concise, clear and timely manner.

• Please update your contact information. We are still having a number of mails and emails returned as undeliverable. You can change your contact information through the investor portal (www.magnaservicing.com) or by contacting Customer Service (custsrv@magnaservicing.com).

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Trust Update

New Website I know that many of you have already visited the new website that we launched last month for investors (www.LPI-PHT.com). Thank you very much for the ex-cellent feedback and the suggestions for how to make it more useful to you. We’ve already implemented some of these suggestions. Now that we have a user-friendly site in place, we’re going to make this our principal destination for you to obtain timely updates related to the PHT in general, and recently matured life insurance policies in particu-lar. Please bookmark the website and visit it frequent-ly in order to stay abreast of important developments. Of course, we will continue to provide highlights from the previous month in these monthly newsletters. If you have any comments about the site or sugges-tions for enhancements, please share them directly with our communications consultant, Daryn Teague, dteague@teaguecommunications.com. Please send only newsletter or website comments to Daryn, he cannot answer your questions about the PHT nor your individual account.

Litigation over Policy 77250 The PHT is unable to distribute the proceeds of Policy 77250 at this time, due to a lawsuit filed in New York late last month. In the lawsuit, Shea Ostreicher claims that the sale of this policy to LPI in 2012 was invalid and that he is the actual owner of the policy. We will vigorously fight this suit. This is not the first time that Mr. Ostreicher has raised this claim. He initially raised it in 2012. At that time, a Texas state court entered a judgment finding that LPI was the rightful owner of the policy. He raised his claim again in the bankruptcy. Earlier this year, Judge Nelms entered judgment in LPI’s favor finding (once again) that LPI was the rightful owner of the policy. We believe that, based on these prior rulings, the PHT will ultimately prevail in this latest suit by Mr. Ostrei-cher.

As events warrant, we will post updates regarding the case on the website. Please do not contact Magna or the Trustee’s office for further infor-mation regarding this suit or when the proceeds of Policy 77250 will be distributed. All of the infor-mation that we can provide to you will be provided through the website.

PHT pays interest on the New IRA Notes (NIRANs) Earlier this month, the PHT paid interest on the NIRANs. Since most holders of NIRANs hold the note in their IRAs, the PHT sent checks to the IRA custodians, along with a statement showing how the funds should be credited. Those who hold NI-RANs outside of IRAs will receive a check directly. The annual interest rate is 3%, computed on a 360-day year of twelve 30-day months, beginning on December 1 and continuing until November 30 of the following year. What this means is that we assume there are only 360 days from December 1 to November 30 and that each month has exactly 30 days. This is a standard accounting method that was devised in the days before computers and has stuck around. For this year, we will pay interest for 351 days be-cause the NIRANs were not issued until the Effec-tive Date of the Plan, December 9, 2016, which is nine days after November 30. Next year, we will pay a full 360 days.

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Trust Update

Year-End Tax Documents The official IRS tax documents for 2017 are being prepared now and will be going out in early-2018:

• Continuing Fractional Holder investors will receive 1099s

• IRA investors will receive K-1s

• Other PHT investors will receive Grantor Trust Statements

A K-1 is a tax document showing each investor’s share of the IRA Partnership’s income and expens-es. A grantor trust statement is a tax document showing each investor’s share of the PHT’s income and expenses. We sent these same forms for the 2016 tax year.

Once you receive your tax documents, you should review them with your tax professional and dis-cuss their implications for your 2017 returns. For example, you may want to talk to your accountant about the implications of exchanging your bank-ruptcy claim for a new security in the PHT, as you might be able to claim a tax loss for 2016 or 2017. Also, you may want to advise your accountant that the PHT could potentially show a taxable gain for 2017, in which case the board may declare a cash distribution to investors in early-2018 to offset those tax liabilities. More details about these documents will follow in next month’s newsletter.

Valuation of IRA Partnership Interests Many of you have recently contacted Magna con-cerned about the value of your IRA Partnership units. We understand that following the filing of the IRA Partnership’s registration statement with the SEC, several of the IRA custodians began reval-uing the Partnership units. Until recently, the IRA custodians maintained the value of your LPI securi-ties at cost, i.e. the price you paid for them, re-gardless of their actual current fair value. The Part-nership’s quarterly and annual securities filings provide the custodians with a reasonable approxi-mation of the units’ current fair value. These filings are publicly available on the PHT’s website under

Investor Relations and on SEC.gov. Accordingly, many of the custodians have changed these as-sets’ value on their records from your cost to “book value,” i.e., each unit’s pro-rata share of the Partnership’s net worth. Many of you have objected to what appears to be a drastic change in the value of your investment. It is not. Each unit continues to represent the right to participate pro-rata in future distributions from the Partnership and the Partnership’s value has remained relatively steady. The units did not sig-nificantly change from last week, last month, last quarter or from when they were issued. Rather, the IRA custodians now have publicly available information that they can use to value the invest-ments as opposed to simply assuming that the value continues to be what was paid for the initial investment. Is “book value” the unit’s value? Book value is “a” value, not necessarily “the” value. Book value is not the only way that the units can be valued. Accountants, financial/tax advisors, or valuation experts may make a good case for a higher or low-er valuation. But, book value is readily available as it is based on information provided by the Part-nership in its quarterly and annual securities fil-ings. How is the Partnership’s book value determined? The IRA Partnership units are practically equiva-lent to and have the same value as PHT units. The Partnership’s sole assets are units in the PHT. The Partnership issued one Partnership unit to an IRA Holder for each PHT unit the Partnership owns. Thus, for right now, a Partnership unit and a PHT Unit are roughly the same. That may change in the future if the Partnership were to have its own expenses, such as taxes or tax preparation costs. To determine the value of a Partnership unit, we must first determine the value of a PHT unit. The formula is a simple one: Divide the PHT’s net worth (assets minus liabilities) by the number of units outstanding. According to the most recent quarterly report (dated September 30, 2017), the PHT had a net worth of $240,194,687 and 1,154,518,519 units outstanding. Doing the math results in a value of $0.208/unit for PHT and IRA Partnership units. As explained below, the value of your units is not a cap on what you will be paid.

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The value of the PHT’s assets was $393,516,178 as of September 30, 2017. The PHT’s assets are primarily cash and its share of the life insurance portfolio. The value of the portfolio is calculated every quarter by the PHT’s actuaries. Stated simply, the valuation esti-mates the net present value of expected death bene-fits of the policies less the premiums required to maintain the policies. The important factors in the valuation are (i) the estimated life span of each in-sured; (ii) estimated future premiums and (iii) a dis-count rate to take into account the risks in the portfo-lio. The most recent Form 10/A registration state-ment, on the PHT’s and SEC’s websites, explains the valuation process in detail. The PHT’s liabilities were $153,321,491 as of Septem-ber 30, 2017. The PHT’s liabilities include such things as the money it owes for premiums, death benefits owed to investors on litigation hold and funding for the Creditors’ Trust required by the Plan. The most significant liabilities, however, are the Exit Facility and the New IRA Notes. Subtracting $153,321,491 in lia-bilities from $393,516,178 in assets results in a net worth of $240,194,687. The PHT and IRA Partnership will file reports with the SEC every quarter showing the change in net worth from one quarter to the next. Why is the book value so different than my policies’ face value? To begin with, you do not hold a position in any particular policies. You own an interest in a limited liability company, and it owns an interest in a Trust that has both assets (including insurance poli-cies) and liabilities. There is no direct correlation be-tween your interest in the IRA Partnership and any particular policy. The positions never had a present value approximating their face value. The position’s present value would discount the projected death benefit by how far in the future the maturity is likely to occur and further reduce that death benefit by the cost of maintaining the policy until maturity. The IRA Partnership units also take the time value of money into consideration. As the debtor made clear during the Plan solicitation process, IRA Partnership unit holders should expect to recover about 85% of their investment (total investments are roughly 60% of face value) over the course of thirty years. Your in-vestment has a current book value equal to your share of the IRA Partnership’s net worth as stated in the Partnership’s most recent securities filing. You

can expect that the book value of the units – assets minus liabilities divided by the total outstanding units – to change every quarter. You can track these chang-es by reading the Partnership’s quarterly and annual statements on the PHT’s website or on SEC.gov. Why does the value of the IRA Partnership units matter? IRA Holders who are 70 1/2 years old have to take a required minimum distribution (RMD). RMDs are calculated based on the value of the assets within the IRA. So, IRA holders subject to RMD distributions must have a reasonable basis for the value of their IRA Partnership units in order to determine the amount that must be distributed. Is the book value all that I will ever get from this? The unit’s book value does not determine how much you will receive. It is not a cap on, nor does it other-wise limit, your participation in future distributions. You own units in a limited liability company. Those units entitle you to a pro rata share of distributions made by the IRA Partnership, whatever they may be and whenever they may occur. The IRA Partnership will pay any distributions to the unit’s owner, in this case your IRA.

Podcast Available The Trustee’s Fourth Quarter podcast provides you

and your advisors with a deeper dive into the status

of the portfolio, the timing of distributions and other

issues of interest. You can play the recording at your

convenience directly from our website (www.LPI-

PHT.com).

Trust Update Continued

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Portfolio at a Glance

November was a poor month for maturities. So far, we have discovered only $1.6 million in maturities that oc-curred in November. Because there is a delay between the date an insured dies and the date that we discover the death, we do expect that we will discover additional maturities that occurred in November. Barring the dis-covery of a maturity in a large policy, however, we do not expect that the November maturities will meet or ex-ceed expectations. Overall maturities are still within the range of outcomes projected by our statistical model. Nevertheless, they are lower than anticipated. This chart illustrates the challenge of predicting PHT income on a monthly basis. As you can see, there can be a wide variance for any given 30-day period, which requires us to be very cautious in our projections. On average, we are collecting on claims within 54 days of learning of the maturity and 32 days of obtaining a death certificate.

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Q: Please explain how the principal of the New IRA Note was calculated? A: The principal amount of each New IRA Note is equal to 32% of the dollar amount of the death benefits associated with the position contributed in exchange for the note. The Court set the prin-cipal amount at 32% to take into account a varie-ty of factors relating to the cost to the PHT to maintain the policies securing the New IRA Notes; to pay interest on the notes; and to pay taxes related to the notes.

For example, if your old IRA note (or position) had a face value of $10,000, your New IRA Note would have a principal balance of $3,200. You would be entitled to $96 (3% of $3,200) per year in interest.

Q: When should I contact the Trustee to address a problem? A: You should always start by addressing your questions or concerns about your investments to the customer service team at Magna Servicing. The professionals on that team are highly skilled and well informed about all facets of the PHT. The fastest way to get a response from them is to send an email to custsrv@magnaservicing.com. If you are unable to contact them by email with your specific question, you may try calling them at (800) 368-5569. If you have a question specifically related to the administration of the LPI Plan of Reorganization, you may want to try contacting the Trustee (Eduardo Espinosa) by sending an email to trus-tee@lpi-pht.com. His team will do their best to respond to you as soon as possible.

Frequently Asked Questions

Here are brief answers to some of the frequently asked questions (FAQs) we’ve received in the past month:

Q: Can you explain the different components of my invoice? A: In last month’s newsletter, we discussed how the escrow accounts work post-bankruptcy. To recap: 1) The PHT bills continuing holders for premi-

ums once a year for each policy. These funds are used to pay premiums for the following policy year and are placed in escrow until needed;

2) For most policies, the PHT pays premiums to the insurance company every three months;

3) Because the PHT pays premiums over time, not all of the money that is shown in a con-tinuing holder’s escrow is available to pay future premiums. Some money is needed to pay this year’s premiums.

The invoices show this calculation. (See Next Page)

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Frequently Asked Questions Continued

The first line of the invoice, the Current Invoice Amount, is the continuing holder’s share of the estimated premiums for the next policy year. The second line, Pending Premiums Due to Carrier, is the continuing holder’s share of premiums that remain to be paid to the insurer for this policy year. Please note that this amount may be more than the amount that remains in escrow because the actual premiums may have been higher than originally estimated.

The third line, Less Available Escrow Balance, is the amount of money held on escrow for that position on the day that the invoice was issued. You should ignore the minus sign. It doesn’t mean that your escrow balance is negative; it just means that you subtract the escrow to get to the amount that you owe. To determine the amount that you need to pay, the Net Amount Due: Add the Current Invoice Amount to the Pending Premiums Due to Carrier and subtract Available Escrow Balance.

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Questions and Updates

We routinely post updates

and new information on

www.LPI-PHT.com. Moreo-

ver, prior communications

including copies of this

newsletter and the Trus-

tee’s prior webinars are

available for download on

the news page. We encour-

age you to access the web-

site as a primary reference

source.

We’re happy to answer any

additional questions you

may have. Please note that

it’s likely you will receive a

faster response if you con-

tact us by email.

For questions regarding your individual account, please contact:

Magna Servicing

P.O. Box 23226

Waco, TX 76702

Phone: 800-368-5569

Email: custsrv@magnaservicing.com

For questions regarding the administration of the Plan of Reorganization, please contact:

Eduardo Espinosa, LPI PHT Trustee

1717 Main Street, Suite 4200

Dallas, Texas 75201

Phone: 214-698-7893

Email: trustee@lpi-pht.com

How to Contact Us