Please provide an example of how the Option 2 waterfall would operate.

Why are there restrictions on the self-financing Option 2?

What is my cost to participate in Option 2?

Please provide an example of how the Option 2 waterfall would operate.

For example, assume that the face value of the Matured Policy is $100,000, and there are five investors. Investors A and B who initially invested $40,000 elect Option 2 and the other three investors, who initially invested $10,000 each, elect Option 1. If the reimbursable expenses on the Matured Policy are $10,000 (and the amount of expenses will vary with the Maturity Date), then the waterfall distribution would operate as follows:

• The expenses totaling $10,000 would be reimbursed

• The Option 2 investors would receive $57,142 which represents their original percentage interest ($40,000/$70,000) times the face value of the policy

• The Option 1 investors would receive a return of their principal investment totaling $30,000, and

• The Funder would receive the $2,857 balance.

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Why are there restrictions on the self-financing Option 2?

Because the self financing option is expensive to administer, there must be a minimum number of investors who are willing to self-finance the policy in order for the option to be feasible. If Option 1 is approved, Option 2 may be used for a particular policy if investors with interests representing at least 40% of the face value of the policy have expressed interest in Option 2.

For example, assume the face value of the policy is $100,000 and there five investors with equal 20% interests. If Option 1 is approved and two of these investors have expressed interest in Option 2, those investors will be allowed to self finance the premiums. If only one investor expresses interest in Option 2, there will be no self-financing Option implemented with respect to that policy.

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What is my cost to participate in Option 2?

The Option 2 administrator, Lifetrade Management Company, N.V., an affiliate of the Funder, will set a reserve requirement for your policy. The Option 2 administrator will pay premiums and expenses out of the reserve which must be replenished periodically until the policy matures. The Option 2 administrator also will reimburse the Funder for the premiums that it paid for you and related Funder and Policyowner expenses before Option 2 was implemented. Your share of the reserve funding obligation will be based on your Original Percentage Interest for that policy. A non-binding, initial Option 2 reserve estimate for your policy(ies) is included with our letter.

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