Discount required by Section 5.05(c) of the Plan

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The Plan requires that the Continuing Fractional Holders (CFHs) pay premium calls within 60 days of the day the PHT sends an invoice. The failure of a CFH to timely pay a premium call on a position results in a premium default on that position. Upon a premium default, the CFH is deemed to have contributed its position to the PHT in exchange for PHT units. Per Section 12.09(c) of the Plan, the PHT is to issue PHT units to the CFH “representing a beneficial interest in the Position Holder Trust calculated as provided in Section 5.05(c) of this Plan.” Section 5.05(c) requires that the number of PHT units received upon a premium default be reduced by two factors: (a) by 20% – the subsection (c)(i) discount; and (b) to exclude income received by the PHT before the default – the subsection (c)(ii) discount. In April 2017 at the request of the PHT Trustee, the Court temporarily stayed the imposition of the Section 5.05(c) discounts. The Court-ordered stay is over for most positions and the PHT must now impose the discounts.

Because Section 5.05(c) requires that the number of units to be received upon a default be reduced by the PHT’s pre-default income, the discount will vary each month. Funds that are distributed by the PHT to its unit holders will not be included in the calculation of pre-default income. This will have the effect of reducing the amount of pre-default income.

The Trustee will post each month’s Section 5.05(c) discount after it is calculated.

Please note that the Section 5.05(c) discount applies to defaults on the second bill on a position sent after December 31, 2016. Thus, not every default going forward will incur the Section 5.05(c) discount.