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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549-1004

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 000-55783

Commission file number 000-55784

Life Partners Position Holder Trust

Life Partners IRA Holder Partnership, LLC

(Exact name of registrants as specified in their charters)

Texas

81-6950788

81-4644966

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Nos.)

2001 Bryan Street, Suite 1800, Dallas, TX		75201
(Address of principal executive offices)		(Zip Code)

214-560-5404

(Registrants’ telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, smaller reporting company filers, or emerging growth companies. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filers	☐	Accelerated filers	☐
Non-accelerated filers	☐	Smaller reporting companies	☒
		Emerging growth companies	☐

If emerging growth companies, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrants do not have any voting or non-voting equity securities.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrants have filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

LIFE PARTNERS POSITIONS HOLDERS TRUST

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Life Partners Position Holder Trust
		Page No.
Balance Sheets as of June 30, 2021 and December 31, 2020		3
Statements of Operations for the three and six months ended June 30, 2021 and 2020		4
Statements of Changes in Net Assets for the three and six months ended June 30, 2021 and 2020		5
Statements of Cash Flows for the six months ended June 30, 2021 and 2020		6
Notes to Financial Statements		7

Life Partners IRA Holder Partnership, LLC

Balance Sheets as of June 30, 2021 and December 31, 2020		18
Statements of Operations for the three and six months ended June 30, 2021 and 2020		19
Statements of Changes in Net Assets for the three and six months ended June 30, 2021 and 2020		20
Statements of Cash Flows for the six months ended June 30, 2021 and 2020		21
Notes to Financial Statements		22

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3. Quantitative and Qualitative Disclosures about Market Risk		33
Item 4. Controls and Procedures		34

PART II OTHER INFORMATION

Item 1. Legal Proceedings		35
Item 1.A Risk Factors		35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		35
Item 3. Defaults Upon Senior Securities		35
Item 4. Mine Safety Disclosures		35
Item 5. Other Information		35
Item 6. Exhibits		35

Table of Contents

LIFE PARTNERS POSITION HOLDER TRUST

BALANCE SHEETS

	June 30, 2021		December 31, 2020
	(Unaudited)		(Audited)
Assets
Cash	$	863,272	$	950,399
Maturities receivable		24,423,912		34,144,775
Prepaids and other assets		714,715		564,985
Restricted cash and cash equivalents		93,888,103		99,496,379
Life insurance policies		197,372,067		159,179,912

Total assets	$	317,262,069	$	294,336,450

Liabilities
Notes payable	$	16,138,211	$	16,138,211
Premium liability		24,507,239		30,708,458
Maturity liability		3,205,143		5,871,936
Accounts payable		416,990		479,922
Distributions payable		265,468		255,305
Accrued expenses		490,773		2,979,480

Commitments and Contingencies (Note 2)

Total liabilities		45,023,824		56,433,312

Net assets	$	272,238,245	$	237,903,138

See accompanying notes to financial statements

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LIFE PARTNERS POSITION HOLDER TRUST

STATEMENTS OF OPERATIONS

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Income
Change in fair value of life insurance policies	$	9,037,626		$	47,243,737		$	63,140,482		$	59,870,057
Other income		77,180			133,305			749,515			392,428

Total income		9,114,806			47,377,042			63,889,997			60,262,485

Expenses
Interest expense		121,040			186,612			242,990			399,923
Administrative and filing fees		5,934			277,510			265,934			536,260
Legal fees		176,757			393,208			474,591			1,204,320
Professional fees		1,474,442			1,427,749			3,071,385			2,929,859
Bad debt expense (recovery)		(237,156	)		(51,159	)		(238,927	)		(73,593	)
Other general and administrative		79,412			72,997			285,418			194,029

Total expenses		1,620,429			2,306,917			4,101,391			5,190,798

Increase in net assets resulting from operations	$	7,494,377		$	45,070,125		$	59,788,606		$	55,071,687

See accompanying notes to financial statements

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LIFE PARTNERS POSITION HOLDER TRUST

STATEMENTS OF CHANGES IN NET ASSETS

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Net assets, beginning of period	$	269,966,496		$	222,736,316		$	237,903,138		$	212,734,754
Distributions to unit holders		(5,000,005	)		(30,000,000	)		(25,000,005	)		(30,000,000	)
Redemption of units		(222,623	)		(134,895	)		(453,494	)		(134,895	)
Net increase in net assets resulting from operations		7,494,377			45,070,125			59,788,606			55,071,687

Net assets, end of period	$	272,238,245		$	237,671,546		$	272,238,245		$	237,671,546
Net asset value per unit:
Number of units		1,232,734,745			1,244,721,402			1,232,734,745			1,244,721,402
Net assets per unit	$	0.22		$	0.19		$	0.22		$	0.19

See accompanying notes to financial statements

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LIFE PARTNERS POSITION HOLDER TRUST

STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30,

	2021			2020
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net increase in net assets resulting from operations	$	59,788,606		$	55,071,687
Adjustments to reconcile net increase in net assets to net cash used in operations:
Change in fair value of life insurance policies		(63,140,482	)		(59,870,057	)
Change in assets and liabilities:
Prepaids and other assets		(149,730	)		(438,802	)
Premium liability		(6,201,219	)		(5,720,891	)
Maturity liability		(2,666,793	)		(505,885	)
Accounts payable		(62,932	)		16,291
Distributions payable		10,163			(199,000	)
Accrued expenses		(2,488,707	)		977,823
Net cash flows used in operating activities		(14,911,094	)		(10,668,834	)
Cash flows from investing activities:
Premiums paid on policies		(31,007,507	)		(30,894,181	)
Net proceeds from maturities of life policies		65,676,697			64,741,222
Net cash flows provided by investing activities		34,669,190			33,847,041
Cash flows from financing activities:
Payments on notes payable		—			(916,667	)
Redemption of Units		(453,494	)		(134,895	)
Distributions to unit holders		(25,000,005	)		—
Net cash flows used in financing activities		(25,453,499	)		(1,051,562	)

Net (decrease) increase in cash		(5,695,403	)		22,126,645

Cash and cash equivalents, beginning of period		100,446,778			80,762,180

Cash and cash equivalents, end of period	$	94,751,375		$	102,888,825

Supplemental cash flow information:
Cash	$	863,272		$	820,873
Restricted cash and cash equivalents		93,888,103			102,067,952

Total cash and cash equivalents	$	94,751,375		$	102,888,825

Cash paid for interest	$	—		$	26,796

See accompanying notes to financial statements

Table of Contents

LIFE PARTNERS POSITION HOLDER TRUST

NOTES TO FINANCIAL STATEMENTS

(unaudited)

Note 1 - Operations and Summary of Significant Accounting Policies

Operations

Life Partners Position Holder Trust (the “Position Holder Trust” or the “Trust”) was created on December 9, 2016, pursuant to the Revised Third Amended Joint Plan of Reorganization of Life Partners Holdings, Inc., et al., dated as of October 27, 2016, which we call the “Plan,” that was confirmed by order of the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division (“Bankruptcy Court”) on November 1, 2016, as amended. The Trust holds and manages individual insurance policies from third parties.

In connection with its formation and the inception of its activities on December 9, 2016, the Trust issued a total of 1,012,355,948 units of beneficial interest (the “Units”) to the fractional interest holders having claims in the Debtors bankruptcy pursuant to the Plan. Each fractional interest holder received a Unit for each dollar of expected death benefit such holder contributed to the Trust. As of June 30, 2021, and December 31, 2020, there were 6,632 and 6,497 holders of the 1,232,734,745 and 1,226,958,714 Units outstanding, respectively. The Trust owns a portfolio of life insurance policies; a portion of the policies is encumbered by the beneficial interest of continuing fractional interest holders. At June 30, 2021 and December 31, 2020, the Trust’s portion of the portfolio consists of positions in 2,663 and 2,739 life insurance policies, respectively with aggregate fair values of $197.4 million and $159.2 million and aggregate face values of approximately $1.0 billion. The fair value of the interests in the life insurance policies owned by continuing fractional interest holders are not reflected in the Trust’s financial statements.

The Bankruptcy Court organized the Trust and the Partnership in order to liquidate the assets of the Debtors in a manner calculated to conserve, protect and maximize the value of the assets, and to distribute the proceeds thereof to the Trust’s securities holders in accordance with the Plan. The Trust and IRA Partnership have no other business interests nor operations and will not acquire any additional life insurance policies in the future. The Trust’s beginning assets and liabilities were contributed pursuant to the Plan as of December 9, 2016.

Covid-19 Pandemic Update

The novel coronavirus (COVID-19) pandemic has not had a material adverse effect on the Trust’s operations during the six months ending June 30, 2021. The extent to which the Trust will be impacted by the outbreak will largely depend on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact, among other things.

COVID-19 has not impacted the Trust’s ability to realize maturity receivables and pay its premium obligations or other expenses. The Trust will continue to monitor the impact of risk associated with mortality experience, default on future premium obligations by the continuing fractional holders which would increase the Trust’s premium obligations and any risk associated with default on payment obligations by the insurance policy carriers.

Tender Offer

On June 24,2021, CFunds Life Settlement, LLC (“Contrarian”) made an offer to purchase up to 66,964,507 interests in the Life Partners Position Holder Trust (the “Trust Interests”) and up to 99,702,160 interests in Life Partners IRA Holder Partnership, LLC (the “Partnership Interests”) at a purchase price of $0.15 per Unit (the “Offer to Purchase”). The Trustee determined that the Offer to Purchase complies with the Plan, but the Trust and the IRA Partnership expressed no opinion as to whether any investor should accept or reject the Offer to Purchase. The Offer expires August 12, 2021.

Unit Redemption

On September 16, 2020, the U.S. Bankruptcy Court for the Northern District of Texas approved the Trustee’s Motion to Approve Redemption of Additional Units and Member Interests, granting the Trustee the authority to redeem Trust Units in the Life Partners Position Holder Trust and Member Interests in the Life Partners IRA Holder Partnership, LLC, at the discretion of the Trustee and Manager, when financially or administratively practicable. The Trust redeemed 1,420,990 Units for a total of $222.6 thousand and 749,417 units for a total of $134.9 thousand for three months ending June 30, 2021, and June 30, 2020, respectively.

Table of Contents

Included in the redemption total above for second quarter of 2021, the Trust redeemed 368,173 units for $70.2 thousand held by the Life Partners Creditors’ Trust.

The Life Partners Position Holder Trust and the Life Partners Creditors’ Trust share the same Trust Governing Board. The redemption was executed to reduce the administrative burden of the Life Partners Position Holder Trust and to facilitate the expected termination of the Life Partners Creditor’s Trust. The units were redeemed at the same price per unit as all other redemptions performed at the same or similar time and in line with the Motion approved by the U.S. Bankruptcy Court for the North District of Texas.

The Trust redeemed 2,636,103 Units for a total of $453.5 thousand and 749,417 units for a total of $134.9 thousand for six months ending June 30, 2021, and June 30, 2020, respectively.

Included in the redemption total above for six months ending June 30, 2021, the Trust redeemed 1,156,938 units for $220.1 thousand held by the Life Partners Creditors’ Trust.

Distributions

In the first quarter of 2021, the Trust's Governing Trust Board and Trustee approved a distribution of $20.0 million to the holders of Units in the Trust. In the second quarter of 2021, the Trust’s Governing Trust Board and Trustee approved an additional $5 million distribution.

On April 20,2021, the Trust paid the $25.0 million distribution, of which approximately $15.0 million was paid to the IRA Partnership, net of amounts owed by the Partnership to the Trust. The distribution was based on the number of Units held and deducting any unit holder obligations for unpaid premiums.

Summary of Significant Accounting Policies

Basis of Presentation

In the opinion of management, the financial statements of the Trust as of June 30, 2021, and for the three and six months ended June 30, 2021, and 2020 include all adjustments and accruals, consisting only of normal, recurring accrual adjustments, which are necessary for a fair presentation of the results for the interim periods. These interim results are not necessarily indicative of results for a full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ("GAAP") have been condensed in or omitted from this report pursuant to the rules and regulations of the United States Securities and Exchange Commission (the "SEC"). These financial statements should be read together with the consolidated financial statements and notes thereto included in the Trust's Annual Report on Form 10-K for the year ended December 31, 2020, and the Plan.

The Trust’s primary purpose is the liquidation of the Trust’s assets and the distribution of proceeds to its beneficial interest holders. The Trust expects that fulfilling its purpose requires a significant amount of time, and that the Trust will have significant ongoing operations during that period due to the nature of its assets and its plan to maximize the proceeds to its beneficiaries by maintaining the majority of its life insurance policies until maturity. As a result, the Trust has concluded that its liquidation is not imminent, in accordance with the definitions under accounting principles generally accepted in the United States of America and has not applied the liquidation basis of accounting in presenting its financial statements. The Trust will continue to evaluate its operations to determine when its liquidation becomes imminent, and the liquidation basis of accounting is required.

Investments in Life Insurance Policies

The Trust accounts for its interests in life insurance policies at fair value in accordance with ASC 325-30, Investments in Insurance Contracts. Any resulting changes in estimates are reflected in operations in the period the change becomes apparent.

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Fair Value of Life Insurance Policies

The Trust follows ASC 820, Fair Value Measurements and Disclosures, in estimating the fair value of its life insurance policies, which defines fair value as an exit price representing the amount that would be received if an asset were sold or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, the guidance establishes a three-level, fair value hierarchy that prioritizes the inputs used to measure fair value. Level 1 relates to quoted prices in active markets for identical assets or liabilities. Level 2 relates to observable inputs other than quoted prices included in Level 1. Level 3 relates to unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Trust’s investments in life insurance policies are considered to be Level 3 as there is currently no active market where the Trust is able to observe quoted prices for identical assets and the Trust’s valuation model incorporates significant inputs that are not observable.

The Trust’s valuation of life insurance policies is a critical estimate within the financial statements. The Trust currently uses a probabilistic method of valuing life insurance policies, which the Trust believes to be the preferred valuation method in its industry. The Trust calculates the assets’ fair value using a present value technique to estimate the fair value of the projected future cash flows. The most significant assumptions in estimating the fair value are the Trust’s estimate of the insureds’ longevity, anticipated future premium obligations and the discount rate. See Note 6, “Fair Value Measurements.”

Income Recognition

The Trust’s investments in life insurance policies are its primary source of income. Gain or loss is recognized from ongoing changes in the portfolio’s estimated fair value, including any gains or losses at maturity. Gains or losses from maturities are recognized on receipt of an insured party’s death notice or verified obituary and determined based on the difference between the death benefit and the policy’s estimated fair value at maturity.

Premiums Receivable

The Trust assumed the Debtors’ receivables related to life insurance policy premiums and service fees that were paid to the Debtors on behalf of fractional interest holders prior to the Trust’s effective date. After December 9, 2016, the policy premiums allocable to continuing fractional interest holders are those persons' obligations and not the Trust. If a continuing fractional interest holder defaults on future premium obligations, such position is deemed contributed to the Trust in exchange for the number of Units provided by the Plan.

The Trust maintains an allowance for doubtful accounts for estimated losses resulting from the inability to collect premiums and service fees receivable. Such estimates are based on the position holder’s payment history and other indications of potential uncollectability. After all attempts to collect a receivable have failed, receivables are written off against the allowance. At June 30, 2021 and December 31, 2020, the allowance for doubtful accounts was $0.5 million and $1.0 million respectively, which fully offset receivables assumed from the Debtors on the effective date. Outstanding receivable balances may be recoverable pursuant to the Trustee’s set-off rights under the Plan.

Maturities Receivable

Maturities receivable consist of the Trust’s portion of life insurance policy maturities that occurred, but payment was not yet received as of the end of the reporting period.

Premium Liability

Premium liabilities are funds in escrow on behalf of continuing fractional holders for future payment of their premium obligations. If such funds are not used for such continuing fractional holder’s premium payments, they are refunded to the respective continuing fractional holder.

Maturity Liability

Maturity liabilities are maturities collected on behalf of continuing fractional holders pending payment to those fractional holders, including a reserve for unallocated funds from the inception of Trust.

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Distributions Payable

Distributions payable are distributions declared by the Trust pending payment to Unit holders.

Income Taxes

No provision for state or federal income taxes from operations has been made as the liability for such taxes is attributable to the Unit holders rather than the Trust. The Trust is a grantor trust with taxable income or loss passing through to the Unit holders. In certain instances, however, the Trust may be required under applicable state laws to withhold amounts otherwise due to Unit holders and remit them directly to state or federal tax authorities. Such payments on behalf of the Unit holders are deemed distributions to them.

The Financial Accounting Standards Board (the ”FASB”) has provided guidance for how uncertain tax positions should be recognized, measured, disclosed, and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Trust’s tax returns to determine whether the tax positions are more-likely-than-not of being sustained when challenged or when examined by the applicable taxing authority. The Trust has no material uncertain income tax positions as of June 30, 2021, and December 31, 2020.

Use of Estimates

The preparation of these financial statements, in conformity with GAAP, requires the Trust to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. Actual results could differ from these estimates and such differences could be material. The estimates related to the valuation of the life insurance policies represent significant estimates made by the Trust.

Risks and Uncertainties

The Trust encounters economic, legal, and longevity risk. The main components of economic risk potentially impacting the Trust are market risk, concentration of credit risk, and the increasing cost of insurance risk. The Trust’s market risks include interest rate risk and the risk of declines in valuation of the Trust’s life insurance policies, including declines caused by the selection of increased discount rates associated with the Trust’s fair value model. It is reasonably possible that future changes to estimates involved in valuing life insurance policies could change and materially affect future financial statements. Concentration of credit risk is the risk that an insurance carrier who has issued life insurance policies held by the Trust, does not remit the amount due under those policies due to the carrier’s deteriorating financial condition or otherwise. Another credit risk potentially impacting the Trust is the risk continuing fractional holders may default on their future premium obligations, increasing the Trust’s premium obligations. The increasing cost of insurance risk includes the carriers’ attempts to change a policy’s cost of insurance. While some cost of insurance increases are anticipated and taken into consideration in the Trust's forecasts, other cost of insurance increases are unilaterally imposed by the carrier.

The main components of legal risk are: (i) the risk that an insurer could successfully challenge its obligation to pay policy benefits at maturity; and (ii) that an insured’s family could successfully challenge the Trust’s entitlement to an insurance policy’s benefits. In either case, there is also risk that the Trust would be unable to recover the premiums it paid towards the insurance policy.

Longevity risk refers to the reasonable possibility that actual mortalities of insureds in the Trust’s portfolio extend over longer periods than are anticipated, resulting in the Trust paying more in premiums and delaying its collection of death benefits. Further, increased longevity may encourage additional continuing fractional holders to default on their premium obligations, increasing the Trust’s positions and its premium payment burden. The Trust management continues to evaluate any potential impact; however, such future revisions could have a material impact on the valuation.

The Trust maintains the majority of its cash in several accounts with a commercial bank. Balances on deposit are insured by the Federal Deposit Insurance Corporation (“FDIC”). However, from time to time the Trust's balances may exceed the FDIC insurable amounts.

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Accounting Guidance Not Yet Adopted

In June 2016, the FASB issued new guidance (ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments), effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. Notable amendments in this update will change the accounting for impairment of most financial assets and certain other instruments in the following ways:

	·	financial assets (or a group of financial assets) measured at amortized cost will be required to be presented at the net amount expected to be collected, with an allowance for credit losses deducted from the amortized cost basis, resulting in a net carrying value that reflects the amount the entity expects to collect on the financial asset at purchase

	·	credit losses relating to available-for-sale fixed maturity securities will be recorded through an allowance for credit losses, rather than reductions in the amortized cost of the securities. The allowance methodology recognizes that value may be realized either through collection of contractual cash flows or through the sale of the security. Therefore, the amount of the allowance for credit losses will be limited to the amount by which fair value is below amortized cost because the classification as available for sale is premised on an investment strategy that recognizes that the investment could be sold at fair value, if cash collection would result in the realization of an amount less than fair value

	·	the income statement will reflect the measurement of expected credit losses for newly recognized financial assets as well as the expected increases or decreases (including the reversal of previously recognized losses) of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount

	·	disclosures will be required to include information around how the credit loss allowance was developed, further details on information currently disclosed about credit quality of financing receivables and net investments in leases, and a rollforward of the allowance for credit losses for available-for-sale fixed maturity securities as well as an aging analysis for securities that are past due

The amendments in this ASU may be early adopted during any interim or annual period beginning after December 15, 2018. The Trust is currently evaluating the impact of this new accounting guidance on its financial statements and does not plan to early adopt.

Note 2 - Commitments and Contingencies

Litigation

In accordance with applicable accounting guidance, the Trust establishes an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, the Trust does not establish an accrued liability. As a litigation or regulatory matter develops, the Trust, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. Such matters will continue to be monitored for further developments.

Indemnification of Certain Persons

Under certain circumstances, the Trust may be required to indemnify certain persons performing services on behalf of the Trust for liability they may incur arising out of the indemnified persons' activities conducted on behalf of the Trust. There is no limitation on the maximum potential payments under these indemnification obligations and, due to the number and variety of events and circumstances under which these indemnification obligations could arise, the Trust is not able to estimate such maximum potential payments. The Trust has not made any payments under such indemnification obligations and no amount has been accrued in the accompanying financial statements for these indemnification obligations of the Trust. The Trust maintains insurance to mitigate its exposure to this contingency risk.

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Note 3 - Restricted Cash and Cash Equivalents

The Plan imposes restrictions on the Trust to maintain certain funds in segregated accounts. As of June 30, 2021, and December 31, 2020, the Trust has $93.9 million and $99.5 million, respectively, in restricted cash and cash equivalents. The restricted cash accounts are for: maturities, premium reserves, premium obligations, and collateral deposits.

Note 4 - Life Insurance Policies

As of June 30, 2021, the Trust owns an interest in 2,663 policies of which 384 are life settlement policies and 2,279 are viaticals (the “PHT Portfolio”). The PHT Portfolio’s aggregate face value is approximately $1.0 billion as of June 30, 2021, of which $0.8 billion is attributable to life settlements and $0.2 billion is attributable to viaticals. The PHT Portfolio’s aggregate fair value is $197.4 million as of June 30, 2021, of which $187.6 million is attributable to life settlements and $9.8 million is attributable to viaticals.

As of December 31, 2020, the Trust owned an interest in 2,739 policies of which 407 are life settlement policies and 2,332 are viaticals. The PHT Portfolio’s aggregate face value was approximately $1.0 billion as of December 31, 2020, of which $0.8 billion was attributable to life settlements and $0.2 billion was attributable to viaticals. The PHT Portfolio’s aggregate fair value was estimated at $159.2 million as of December 31, 2020, of which $153.7 million was attributable to life settlements and $5.5 million was attributable to viaticals.

Life expectancy reflects the probable number of years remaining in the life of a class of persons determined statistically, affected by such factors as heredity, physical condition, nutrition, and occupation. It is not an estimate or an indication of the actual expected maturity date or indication of the timing of expected cash flows from death benefits. See: Note 6 – Fair Value Measurements, below for a more detailed discussion of this change in estimating the insureds’ longevity. The following tables summarize the Trust's life insurance policies grouped by remaining life expectancy as of June 30, 2021, and December 31, 2020:

As of June 30, 2021:

Remaining Life Expectancy (Years)	Number of Life Insurance Policies		Face Value		Fair Value
0-1		—	$	—	$	—
1-2		1		46,395		37,259
2-3		2		2,096,047		1,450,023
3-4		64		97,769,967		30,937,537
4-5		164		343,622,154		87,764,786
Thereafter		2,432		509,511,837		77,182,462
		2,663	$	953,046,400	$	197,372,067

As of December 31, 2020:

Remaining Life Expectancy (Years)	Number of Life Insurance Policies		Face Value		Fair Value
0-1		—	$	—	$	—
1-2		1		46,395		34,398
2-3		6		7,221,086		2,249,751
3-4		93		154,462,044		37,115,382
4-5		200		426,793,251		84,401,748
Thereafter		2,439		408,906,636		35,378,633
		2,739	$	997,429,412	$	159,179,912

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Estimated premiums to be paid by the Trust for its portfolio during each of the five succeeding calendar years and thereafter as of June 30, 2021, are as follows:

2021	$	32,433,408
2022		64,015,649
2023		59,565,484
2024		51,997,816
2025		44,356,043
Thereafter		168,970,185

Total	$	421,338,585

The Trust is required to pay premiums to keep its portion of life insurance policies in force. The estimated total future premium payments could increase or decrease significantly to the extent that insurance carriers increase the cost of insurance on their issued policies or that actual mortalities of insureds differ from the estimated life expectancies. Additionally, as the continuing fractional holders default on their future premium obligations, the Trust’s premium liability will increase.

The Trust anticipates funding the estimated premium payments from maturities of life insurance policies. It also maintains premium reserves and access to lines of credit.

Note 5 - Notes Payable

To provide for short term capital needs of the Position Holders Trust, if any, effective January 30, 2019, the Position Holders Trust entered into a $15.0 million revolving credit facility with Veritex Community Bank of Dallas (“Veritex Credit Facility”), Texas. The Veritex Credit Facility, is secured by a lien on the Position Holder Trust’s assets, had an initial 2-year term and, as to any amounts drawn thereunder, bore interest at the rate of 6% per annum. Effective January 29, 2021, the Trust renewed the revolving credit facility for an additional 2-year term. As part of the renewal, the revolving credit facility was increased to $25.0 million and shall bear interest at the rate of 5% per annum. The Veritex Credit Facility will continue to be secured by a lien on the Position Holder Trust’s assets. There are no amounts outstanding as of June 30, 2021 and December 31, 2020.

In accordance with the Plan, the Trust issued New IRA notes of $35.9 million in December 2016 in exchange for claims against the Debtor’s estate and the incidental interests in life insurance policies. Those policies collateralize the Trust’s obligations under the notes. Interest accrues at 3% of outstanding balance and is paid annually in December. Principal is due in full on December 9, 2031. In accordance with the notes, beginning in December 2017, the Trust is required to make annual payments to a sinking fund for the principal payment due at maturity. Such fund is included in restricted cash on the accompanying balance sheet.

As of June 30, 2021, and December 31, 2020, the outstanding balances of the New IRA notes was $16.1 million. The sinking fund associated with these notes had balances of $5.3 million and $0.3 million at June 30, 2021 and December 31, 2020, respectively.

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Future scheduled principal payments on the long-term debt are as follows as of June 30, 2021:

Years Ending December 31,	Long-Term Debt
2021	$	—
2022		—
2023		—
2024		—
2025		—
Thereafter		16,138,211

Total	$	16,138,211

Note 6 - Fair Value Measurements

The Trust carries its life insurance policies at fair value. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are classified based on the following fair value hierarchy:

Level 1 - Valuation is based on unadjusted quoted prices in active markets for identical assets and liabilities that are accessible at the reporting date. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Level 2 - Valuation is determined from pricing inputs that are other than quoted prices in active markets that are either directly or indirectly observable as of the reporting date. Observable inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 - Valuation is based on inputs that are both significant to the fair value measurement and unobservable. Level 3 inputs include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value generally require significant management judgment or estimation.

The balances of the Trust's assets measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020, are as follows:

	As of June 30, 2021		As of December 31, 2020
Assets:
Investments in Life Insurance Policies
Level 1	$	—	$	—

Level 2	$	—	$	—

Level 3	$	197,372,067	$	159,179,912

Total Fair Value	$	197,372,067	$	159,179,912

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Quantitative Information about Level 3 Fair Value Measurements

Life insurance policies	June 30, 2021		December 31, 2020
Fair Value	$	197,372,067	$	159,179,912

Face Value	$	953,046,400	$	997,429,412

Valuation Techniques	Discounted cash flow		Discounted cash flow

Unobservable Inputs	Discount rate, Mortality assumptions		Discount rate, Mortality assumptions

Weighted average discount rates
Life Settlements		15.0%		26.7%
Viaticals		20.0%		27.3%

Mortality assumptions - 2015 VBT mortality multipliers:
Life Settlements		85% - 90%		90% - 100%
Viaticals		350%		350%

In assessing and determining the PHT Portfolio’s valuation, the Position Holder Trust retained Lewis & Ellis, Inc. as its principal actuaries.

The following is a summary of the methodology used to estimate the assets’ fair value measured on a recurring basis and within the above fair value hierarchy. The overall methodology did not change during the current or prior year.

The PHT Portfolio’s value was estimated using an actuarially based approach incorporating net cash flows and life expectancies as determined by a default mortality multiplier based on the 2015 Valuation Basic Table produced by the U.S. Society of Actuaries ("VBT") as opposed to specific life expectancies of insureds as the mortality multipliers from the VBT Ultimate table provide more accurate longevity projections across the portfolio. A default mortality multiplier for each insured was used to project the PHT Portfolio’s present value of net cash flows (death benefits less premium payments and servicing company compensation).

As of June 30, 2021, the default mortality multipliers used are 90% for the life settlement males, 85% for the life settlement females, and 350% for the viaticals regardless of gender. As of December 31, 2020, the default mortality multipliers used are 100% for the life settlement males, 90% for the life settlement females, and 350% for the viaticals regardless of gender. On a quarterly basis, the Trust compares actual mortalities to expected mortalities to refine its analysis.

The Trust continually evaluates and updates its forecasts of future premium obligations for individual policies. The Trust considers these potential changes to estimated future cash flows in its consideration of the discount rate.

The Trust also continues to monitor historical deaths on a quarterly basis. We will compare actual to expected mortalities to refine our mortality multipliers; such that they reasonably “validate” based on our analysis of trends.

The monthly net cash flows with interest and survivorship were discounted to arrive at the PHT Portfolio’s estimated value as of June 30, 2021 and December 31, 2020. Future changes in the longevity estimates and estimated cash flows could have a material effect on the PHT Portfolio’s fair value, and the Trust’s financial condition and results of operations.

Life expectancy sensitivity analysis

The table below reflects the effect on the PHT Portfolio’s fair value if the actual life expectancy experienced is 5% less or 5% more than is currently estimated. If the life expectancy estimate increases by 5% or decreases by 5%, the change in estimated fair value of the life insurance policies as of June 30, 2021 and December 31, 2020 would be as follows:

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As of June 30, 2021 As of Life Expectancy Months Adjustment		Weighted Average Life Expectancy	Fair Value		Change in Fair Value
	-5%		$	213,065,056	$	15,692,989
No change		5.1 years	$	197,372,067		—
	+5%		$	180,936,824	$	(16,435,243	)


As of December 31, 2020 As of Life Expectancy Months Adjustment		Weighted Average Life Expectancy	Fair Value		Change in Fair Value
	-5%		$	173,516,265	$	14,336,353
No change		4.7 years	$	159,179,912		—
	+5%		$	144,277,667	$	(14,902,245	)

Cost of Insurance

Over the past several years, various insurers have increased the cost of insurance tables used in certain of their policies. The PHT Portfolio has not been exempt from these increases. Because the cost of insurance affects the premiums paid, an increase in the cost of insurance negatively impacts the affected policies’ valuation. The fair value estimates take into account all known increases in the cost of insurance.

Discount rate

The discount rate is another significant input in the fair value determination. The Trust’s estimate incorporates market factors, the size of the portfolio, servicing cost and various policy specific quantitative and qualitative factors including known information about the underlying insurance policy, its economics, the insured and the insurer.

The effect of changes in the weighted average discount rate on the death benefit and premiums used to estimate the PHT Portfolio’s fair value has been analyzed. If the weighted average discount rate increased or decreased by 2 percentage points and the other assumptions used to estimate fair value remained the same, the change in estimated fair value as of June 30, 2021 and December 31, 2020 would be as follows:

As of June 30, 2021
Rate Adjustment		Fair Value		Change in Fair Value
	+2%	$	183,222,542	$	(14,149,525	)
	No change	$	197,372,067		—
	-2%	$	213,655,628	$	16,283,561

As of December 31, 2020
Rate Adjustment		Fair Value		Change in Fair Value
	+2%	$	151,012,859	$	(8,167,053	)
	No change	$	159,179,912		—
	-2%	$	168,255,950	$	9,076,038

Future changes in the discount rates used by the Trust to value life insurance policies could have a material effect on the Trust's fair value analysis, which could have a material adverse effect on the Trust’s financial condition and results of operations.

The Trust re-evaluates its discount rates at the end of every reporting period in order to estimate the discount rates that could reasonably be used by market participants in a transaction involving the Trust's life insurance policies. In doing so, the Trust engages third party consultants to corroborate its assessment, engages in discussions with other market participants and extrapolates the discount rate underlying actual sales of insurance policies.

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Starting in the first quarter of 2021, the Trust’s actuarial firm, Lewis and Ellis, modified the discount rate used to value the portfolio and applied a consistent discount rate in the second quarter of 2021. This change had a material impact on the fair value of the Trust’s portfolio. These changes were made as a result of i) The full on-boarding by NorthStar of the Trust’s portfolio, which produced more clarity into premium streams, the Trust’s ability to track insureds and thus deaths. ii) The majority of premium streams have been fully optimized. This not only improves clarity into the Trust’s payment obligations, it also resulted in cost savings for the Trust. iii) The importance of having specific LEs for the senior life settlement portion of the portfolio has been diminished by the fact that the average age of the insureds has now surpassed the age of 90, and iv) the Trust has now exited bankruptcy which increases the marketability of the Trust’s portfolio.

Credit Exposure to Insurance Companies

The following table provides information about the life insurance issuer concentrations that exceed 10% of total death benefit or 10% of total fair value of the Trust's life insurance policies as of June 30, 2021:

Carrier	Percentage of Face Value			Percentage of Fair Value			Carrier Rating
Transamerica Financial Life Insurance		10.5	%		14.0	%	A+
The Lincoln National Life Insurance		8.9	%		10.2	%	A+

Carrier

Percentage of Face Value

Percentage of Fair Value

Carrier Rating

Transamerica Financial Life Insurance

10.2

13.5

The Lincoln National Life Insurance

10.0

11.5

A+

Changes in Fair Value

The following table provides a roll-forward of the fair value of life insurance policies for the three months ended June 30, 2021 and 2020:

	2021			2020
Balance at April 1,	$	200,436,921		$	178,822,344
Realized gain on matured policies		20,959,867			61,223,914
Unrealized loss on assets held		(11,922,241	)		(13,980,177	)
Change in estimated fair value		9,037,626			47,243,737
Matured policies, net of fees		(28,146,887	)		(74,545,261	)
Premiums paid		16,044,407			15,367,195
Balance at June 30,	$	197,372,067		$	166,888,015

The following table provides a roll-forward of the fair value of life insurance policies for the six months ended June 30, 2021 and 2020:

	2021			2020
Balance at January 1,	$	159,179,912		$	172,242,734
Realized gain on matured policies		44,781,048			79,469,615
Unrealized gain (loss) on assets held		18,359,434			(19,599,558	)
Change in estimated fair value		63,140,482			59,870,057
Matured policies, net of fees		(55,955,834	)		(96,118,957	)
Premiums paid		31,007,507			30,894,181
Balance at June 30,	$	197,372,067		$	166,888,015

Other Fair Value Considerations - All assets and liabilities except for the life insurance policies, which includes cash, maturities and premium receivable, notes payable and premium and maturity liability, are accounted for at their carrying value which approximates fair value.

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LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC

BALANCE SHEETS

	June 30, 2021		December 31, 2020
	(Unaudited)		(Audited)
Assets
Investment in Life Partners Position Holder Trust	$	162,740,833	$	143,078,791
Total assets	$	162,740,833	$	143,078,791
Liabilities
Distributions payable	$	90,370	$	109,934
Due to the Life Partners Position Holder Trust		345,200		254,047
Total liabilities	$	435,570	$	363,981
Net assets	$	162,305,263	$	142,714,810

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LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC

STATEMENTS OF OPERATIONS

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Income
Equity income from Life Partners Position Holder Trust	$	4,330,767	$	26,736,973	$	34,795,129	$	31,887,520
Expenses
Professional fees		4,000		4,000		17,000		17,700
State and local taxes		54,589		49,249		54,589		49,249
Increase in net assets resulting from operations	$	4,272,178	$	26,683,724	$	34,723,540	$	31,820,571

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LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC

STATEMENTS OF CHANGES IN NET ASSETS

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net assets, beginning of period	$	161,120,468		$	133,290,269		$	142,714,810		$	128,153,422
Distribution to Partnership member interest holders		(2,991,068	)		(17,965,280	)		(14,955,327	)		(17,965,280	)
Redemption of Member Interests		(96,315	)		(36,838	)		(177,760	)		(36,838	)
Increase in net assets		4,272,178			26,683,724			34,723,540			31,820,571
Net assets, end of period	$	162,305,263		$	141,971,875		$	162,305,263		$	141,971,875
Net asset value per unit:
Number of units		736,914,422			745,392,290			736,914,422			745,392,290
Net assets per unit	$	0.22		$	0.19		$	0.22		$	0.19

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LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC

STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30,

	2021			2020
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net increase in net assets resulting from operations	$	34,723,540		$	31,820,571
Adjustments to reconcile net increase in net assets to net cash used in operations:
Equity income from Life Partners Position Holder Trust		(34,795,129	)		(31,887,520	)
Change in assets and liabilities:
Due to the Life Partners Position Holder Trust		91,153			301,241
Net cash provided by operating activities		19,564			234,292

Cash flows from investing activities:
Redemption of units by Life Partners Position Holder Trust		177,760			36,838
Net cash flows provided by investing activities		177,760			36,838

Cash flows from financing activities:
Distributions to IRA Partnership Member Interest holders		(19,564	)		(234,292	)
Redemption of Partnership Member Interests		(177,760	)		(36,838	)
Net cash flows used in financing activities		(197,324	)		(271,130	)

Net change in cash		—			—
Cash, beginning of period		—			—
Cash end of period	$	—		$	—

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LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC

NOTES TO FINANCIAL STATEMENTS

(unaudited)

Note 1 - Operations

The Life Partners IRA Holder Partnership, LLC (the “IRA Partnership” or “Partnership”) was created on December 9, 2016, pursuant to the Revised Third Amended Joint Plan of Reorganization of Life Partners Holdings, Inc., et al. (the “Debtors”), dated as of October 27, 2016, which we call the “Plan,” that was confirmed by order of the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division (“Bankruptcy Court”) on November 1, 2016.

In connection with its formation and the inception of its activities on December 9, 2016, the Partnership issued limited liability company interests (“Member Interests”) in satisfaction of claims against the Debtors. The only assets of the Partnership are beneficial interest units of the Life Partners Position Holder Trust. The Partnership held 736,914,422 and 737,912,834 units as of June 30, 2021, and December 31, 2020, respectively, of the Trust’s outstanding units totaling 1,232,734,745 and 1,226,958,714 as of June 30, 2021, and December 31, 2020, respectively. The sole purpose of the Partnership is to hold Trust interests to permit holders of Member Interests to participate in distributions of the proceeds of the liquidation of the Trust. The Partnership was created to allow IRA holders to hold an interest in an entity classified as a partnership for federal tax purposes, rather than the assets of a grantor trust, such as the Trust. The Partnership’s sole asset is its investment in the Trust, and it engages in no other business activity.

Covid-19 Pandemic Update

The Partnership's only investment is in the Life Partners Position Holder's Trust. As such, the Partnership's income is largely dependent on the Trust's operations and the Partnership would be significantly impacted by any adverse effects of the novel coronavirus (COVID-19) pandemic on the Trust's operations.

Tender Offer

Member Interest Redemption

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In second quarter of 2021, the Trust redeemed 506,922 Units held by the Partnership for a total of $96.3 thousand. In turn, the Partnership redeemed member interest of $96.3 thousand in the second quarter of 2021. In second quarter of 2020, the Trust redeemed 204,653 Units held by the Partnership for a total of $36.8 thousand. In turn, the Partnership redeemed member interest of $36.8 thousand in the second quarter of 2020.

Included in the redemption total above for second quarter of 2021, the Trust redeemed 237,060 units for $45.0 thousand held by the Life Partners Creditors’ Trust.

For the six months ended June 30, 2021, the Trust redeemed 935,579 Units held by the Partnership for a total of $177.8 thousand. In turn, the Partnership redeemed member interest of $177.8 thousand in the six months ended June 30, 2021. For the six months ending June 30, 2020, the Trust redeemed 204,653 Units held by the Partnership for a total of $36.8 thousand. In turn, the Partnership redeemed member interest of $36.8 thousand in the six months ended June 30, 2020.

Included in the redemption total above for six months ended June 30, 2021, the Trust redeemed 627,686 units for $119.3 thousand held by the Life Partners Creditors’ Trust.

Distributions

Note 2 - Significant Accounting Policies

Equity Method Accounting

The Partnership accounts for its investment in the Trust using the equity method of accounting in accordance with Accounting Standards Codification (ASC) 323, Investments – Equity Method and Joint Ventures. The Partnership and the Trust are closely connected, with a common trustee and common management. As a result of this common oversight and control, as well as the Partnership’s position as the majority holder of the Trust’s beneficial interest units, the Partnership is considered to have significant influence under the provisions of ASC 323, resulting in the application by the Partnership of the equity method of accounting.

The following table presents summary financial information for the Trust:

Balance Sheet Data

	June 30, 2021		December 31, 2020
	(Unaudited)		(Audited)
Investment in life insurance policies	$	197,372,067	$	159,179,912
All other assets		119,890,002		135,156,538
Total assets	$	317,262,069	$	294,336,450
Total liabilities	$	45,023,824	$	56,433,312
Net assets	$	272,238,245	$	237,903,138

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Income Statement Data

	Three Months Ended June 30, 2021		Three Months Ended June 30, 2020		Six Months Ended June 30, 2021		Six Months Ended June 30, 2020
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Change in fair value of life insurance policies	$	9,037,626	$	47,243,737	$	63,140,482	$	59,870,057
Other income		77,180		133,305	$	749,515	$	392,428
Total income	$	9,114,806	$	47,377,042	$	63,889,997	$	60,262,485
Total expenses	$	1,620,429	$	2,306,917	$	4,101,391	$	5,190,798
Net increase in net assets resulting from operations	$	7,494,377	$	45,070,125	$	59,788,606	$	55,071,687

Distributions Payable

Distributions payable are distributions declared by the IRA Partnership pending payment.

Due to Life Partners Position Holders Trust

The Partnership does not have its own cash accounts, and its operating expenses and distributions to its Unit holders are paid on behalf of the Partnership by the Trust. The Partnership settles its liabilities to the Trust through reduction of the funds it receives from distributions made by the Trust.

Income Taxes

No provision for state or Federal income taxes has been made as the liability for such taxes is attributable to the members rather than the Partnership. In certain instances, however, the Partnership may be required under applicable state laws to remit directly to state tax authorities amounts otherwise due to members prior to any distributions. Such payments on behalf of the members are deemed distributions to them. The Partnership currently includes franchise taxes as part of the state and local tax expense.

The Financial Accounting Standards Board (the “FASB”) has provided guidance for how uncertain tax positions should be recognized, measured, disclosed, and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnership’s tax returns to determine whether the tax positions are more-likely-than-not of being sustained when challenged or when examined by the applicable taxing authority. The Partnership has no material uncertain income tax positions as of June 30, 2021, nor December 31, 2020.

Use of Estimates

The preparation of these financial statements, in conformity with generally accepted accounting principles in the United States of America (“GAAP”), requires the Partnership to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. Actual results could differ from these estimates and such differences could be material.

Risks and Uncertainties

The Partnership, due to the nature of its assets and operations, is subject to significant risks and uncertainties affecting the Trust which encounters economic risk. The two main components of economic risk potentially impacting the Partnership’s interest in the Trust are market risk and concentration of credit risk. The market risks include interest rate risk and the risk of declines in valuation of the Trust’s life insurance policies, including declines caused by the selection of increased discount rates associated with the Trust’s fair value model and changes in other assumptions to the Trust’s fair value model. Concentration of credit risk is the risk that an insurance carrier who has issued life insurance policies held by the Trust, does not remit the amount due under those policies due to the deteriorating financial condition of the carrier or otherwise. It is reasonably possible that future changes to estimates involved in valuing life insurance policies could result in material effects to the Partnership’s financial position and results of operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion in conjunction with the financial statements and accompanying notes as well as the financial statements and the notes to those statements in our 2020 Form 10K. The statements in this discussion and analysis concerning expectations regarding Life Partners Position Holder Trust’s (“Position Holder Trust” or “Trust”) and the Life Partners IRA Holder Partnership, LLC’s (“IRA Partnership” or “Partnership”) future performance, liquidity and capital resources, as well as other non-historical statements in this discussion and analysis, are forward-looking statements. The actual results of the Trust and Partnership could differ materially from those suggested or implied by any forward-looking statements.

Business Overview

The Position Holder Trust was created on December 9, 2016, pursuant to the Revised Third Amended Joint Plan of Reorganization of Life Partners Holdings, Inc., et al., dated as of October 27, 2016, which we call the “Plan,” that was confirmed by order of the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division (“Bankruptcy Court”) on November 1, 2016, as amended. The Plan became effective on December 9, 2016.

As of June 30, 2021, and December 31, 2020, there were 6,632 and 6,497 holders of the 1,232,734,745 and 1,226,958,714 units outstanding, respectively. The Trust owns a portfolio of life insurance policies; a portion of the policies is encumbered by the beneficial interest of continuing fractional interest holders. The Trust’s portion of the portfolio consists of positions in 2,663 and 2,739 life insurance policies, with aggregate fair values of $197.4 million and $159.2 million and an aggregate face values of approximately $1.0 billion at June 30, 2021, and December 31, 2020. The fair value of the interests in the life insurance policies owned by continuing fractional interest holders are not reflected in the Trust’s financial statements.

Continuing Operations

While the Position Holder Trust is a liquidating trust with no intent to continue or to engage in a trade or business, the nature of the life insurance policies assets being liquidated are such that it is not practical or advantageous to simply liquidate the Policies by disposing of them. In this regard, there is no viable secondary market for the Policies, nor is there another practical means of disposing of them or monetizing them in the near term.

The Position Holder Trust expects that fulfilling its liquidating purpose will require a significant amount of time. As such, the Trust will have significant ongoing operations during that period due to the nature of its assets and its plan to maximize the proceeds to its beneficiaries by maintaining the majority of its Policies until maturity. As a result, the Trust has concluded that its liquidation is not imminent, in accordance with the definitions under accounting principles generally accepted in the United States and has not applied the liquidation basis of accounting in presenting its financial statements. The Trust will continue to evaluate its operations to determine when its liquidation becomes imminent and the liquidation basis of accounting is required.

The Plan requires that the continuing fractional holders pay premium calls within 60 days of the day the Trust sends an invoice. The failure of a continuing fractional holder to timely pay a premium call on a position results in a premium default with respect to that position. Upon a premium default, the continuing fractional holder is deemed to have contributed its position to the Trust in exchange for Units. Section 5.05(c) of the Plan requires that the Trust reduce the number of Units issued upon a default by 20% – the subsection (c)(i) discount.

The Partnership operations consist entirely of its interests in the operations of the Trust and will continue as long as the Trust is liquidating its assets. The Partnership utilizes the equity method of accounting for its interests in the Trust and recognizes its proportionate interest in the results of the Trust’s continuing operations accordingly.

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Covid-19 Pandemic Update

Tender Offer

Unit Redemption

The Trust redeemed 1,420,990 Units for a total of $222.6 thousand and 749,417 units for a total of $134.9 thousand for three months ending June 30, 2021, and June 30, 2020, respectively.

Included in the redemption total above for second quarter of 2021, the Trust redeemed 368,173 units for $70.2 thousand held by the Life Partners Creditors’ Trust.

The Trust redeemed 2,628,103 Units for a total of $453.5 thousand and 749,417 units for a total of $134.9 thousand for six months ending June 30, 2021, and June 30, 2020, respectively.

Included in the redemption total above for six months ending June 30, 2021, the Trust redeemed 1,156,938 units for $220.1 thousand held by the Life Partners Creditors’ Trust.

Distributions

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Critical Accounting Policies

Position Holder Trust

Investments in Life Insurance Policies

Fair Value of Life Insurance Policies

As a basis for considering such assumptions, the guidance establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. Level 1 relates to quoted prices in active markets for identical assets or liabilities. Level 2 relates to observable inputs other than quoted prices included in Level 1. Level 3 relates to unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Trust’s investments in life insurance policies are considered to be Level 3 as there is currently no active market where the Trust is able to observe quoted prices for identical assets and the Trust’s valuation model incorporates significant inputs that are not observable.

Income Recognition

The Trust’s investments in life insurance policies are its primary source of income. Gain or loss is recognized from ongoing changes in the portfolio’s estimated fair value, including any gains or losses at maturity. Gains or losses from maturities are recognized at receipt of a death notice or verified obituary for an insured party and determined based on the difference between the death benefit and the estimated fair value of the policy at maturity.

Income Taxes

No provision for state or federal income taxes has been made as the liability for such taxes is attributable to the Unit holders rather than the Trust. The Trust is a grantor trust with taxable income or loss passing through to the Unit holders. In certain instances, however, the Trust may be required under applicable state laws to remit directly to state tax authorities amounts otherwise due to Unit holders. Such payments on behalf of the Unit holders are deemed distributions to them.

The FASB has provided guidance for how uncertain tax positions should be recognized, measured, disclosed, and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Trust’s tax returns to determine whether the tax positions are more-likely-than-not of being sustained when challenged or when examined by the applicable taxing authority. The Trust has no material uncertain income tax positions as of June 30, 2021, or December 31, 2020.

Use of Estimates

The preparation of these financial statements, in conformity with generally accepted accounting principles in the United States of America (“GAAP”), requires the Trust to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. Actual results could differ from these estimates and such differences could be material. The estimates related to the valuation of the life insurance policies represent significant estimates made by the Trust.

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Risks and Uncertainties

Longevity risk refers to the reasonable possibility that actual mortalities of insureds in the Trust’s portfolio extend over longer periods than are anticipated, resulting in the Trust paying more in premiums and delaying its collection of death benefits. Further, increased longevity may encourage additional continuing fraction holders to default on their premium obligations, increasing the Trust’s positions and its premium payment burden. The Trust management continues to evaluate any potential impact; however, such future revisions could have a material impact on the valuation

IRA Partnership

Equity Method Accounting

The Partnership accounts for its investment in the Trust using the equity method of accounting in accordance with Accounting Standards Codification (ASC) 323, Investments – Equity Method and Joint Ventures. The Partnership and the Trust are closely connected, with a common trustee and common management. Due to this common oversight and control, as well as the Partnership’s position as the majority holder of the Trust’s beneficial interest units, the Partnership is considered to have significant influence under the provisions of ASC 323, resulting in the application by the Partnership of the equity method of accounting.

Due to Life Partners Position Holders Trust

Income Taxes

No provision for state or federal income taxes has been made as the liability for such taxes is attributable to the members rather than the Partnership. The Partnership is a limited liability company with taxable income or loss passing through to the members. In certain instances, however, the Partnership may be required under applicable laws to remit amounts otherwise due to members, directly to state or federal tax authorities. Such payments on behalf of the members are deemed distributions to them. The Partnership currently includes franchise taxes as part of the state and local tax expense.

FASB has provided guidance for how uncertain tax positions should be recognized, measured, disclosed, and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnership’s tax returns to determine whether the tax positions are more-likely-than-not of being sustained when challenged or when examined by the applicable taxing authority. The Partnership has no material uncertain income tax positions as of June 30, 2021, nor December 31, 2020.

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Risks and Uncertainties

The Partnership, due to the nature of its assets and operations, is subject to significant risks and uncertainties affecting the Trust. The two main components of economic risk potentially impacting the Partnership’s interest in the Trust are market risk and concentration of credit risk. The market risks include interest rate risk and the risk of declines in valuation of the Trust’s life insurance policies, including declines caused by the selection of increased discount rates associated with the Trust’s fair value model. Concentration of credit risk is the risk that an insurance carrier who has issued life insurance policies held by the Trust, does not remit the amount due under those policies due to the deteriorating financial condition of the carrier or otherwise. It is reasonably possible that future changes to estimates involved in valuing life insurance policies could change and result in material effects to the Partnership’s financial position and results of operations.

Results of Continuing Operations

The Policies were valued as of June 30, 2021, with a distinctions between life settlement and viatical policies and whether the Policies are whole life, convertible term or non-convertible term policies and with discount rate of 15% for life settlements and 20% for viaticals. See, Note 6, “Fair Value Measurements” to the accompanying financial statements.

The Policies were valued as of December 31, 2020, using a base or foundational discount rate of 12% to 14%, with further valuation adjustments based upon the size of the insured pool, life expectancy data, distinctions between life settlement and viatical policies and whether the Policies are whole life, convertible term or non-convertible term policies and with a post-adjustment weighted average discount rate of 26.7% for life settlements and 27.3% for viaticals. See, Note 6, “Fair Value Measurements” to the accompanying financial statements.

Three Months Ended June 30, 2021, Compared to Three Months Ended June 30, 2020

Results of Operations for the Trust

Net increase in net assets for the three months ended June 30, 2021, was $7.5 million as compared to a net increase in net assets of $45.1 million for the same period last year. The following are the components of net change in net assets resulting from operations for the three months ended June 30, 2021, and 2020:

	Three Months Ended June 30,
	2021		2020		Change			% Change
Income	$	9,114,806		47,377,042	$	(38,262,236	)		(81	)%
Expenses		1,620,429		2,306,917		(686,488	)		(30	)%

Increase in net assets	$	7,494,377	$	45,070,125	$	(37,575,748	)		(83	)%

The Trust recognizes income on its respective portion of the Policies primarily from changes in their aggregate fair value as described in Note 6 "Fair Value Measurements" in the accompanying financial statements. The primary decrease in income is due to a decrease in maturities of policies resulting in a decrease in realized gains from the investment portfolio of life insurance policies as described in Note 6 “Fair Value Measurements” in the accompanying financial statements.

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The following table provides a roll-forward of the fair value of life insurance policies for the three months ended June 30, 2021 and 2020:

	2021			2020
Balance at April 1	$	200,436,921		$	178,822,344
Realized gain on matured policies		20,959,867			61,223,914
Unrealized loss on assets held		(11,922,241	)		(13,980,177	)
Change in estimated fair value		9,037,626			47,243,737

Matured policies, net of fees		(28,146,887	)		(74,545,261	)
Premiums paid		16,044,407			15,367,195
Balance at June 30,	$	197,372,067		$	166,888,015

The change in estimated fair value of the Trust’s life insurance Policies includes realized gains on matured policies in addition to unrealized losses on policies which is affected by changes in valuation assumptions, including mortality, and discount rates. On a quarterly basis, management compares actual maturities to projected maturities to refine and validate its analysis. See, Note 6, “Fair Value Measurements” to the accompanying consolidated financial statements.

Expenses

	Three Months Ended June 30,
	2021			2020			Change			% Change
Interest	$	121,040			186,612		$	(65,572	)		(35	)%
Administrative and filing fees		5,934			277,510			(271,576	)		(98	)%
Legal fees		176,757			393,208			(216,451	)		(55	)%
Professional fees		1,474,442			1,427,749			46,693			3	%
Bad debt expense (recovery)		(237,156	)		(51,159	)		(185,997	)		364	%
Other general and administrative		79,412			72,997			6,415			9	%
Total expenses	$	1,620,429		$	2,306,917		$	(686,488	)		(30	)%

The Trust had a decrease of $0.7 million in expenses for the three months ended June 30, 2021, versus three months ended June 30, 2020. The decrease in expenses is driven by decrease in interest expense due to the pay down of the notes payable balance, decreases in administrative and filings fees due to termination of bankruptcy, decrease in legal fees due to termination of Sunlife case in 2020, and an increase in recovery of bad debt led by recovery of past due funds during distributions. The decrease in expenses is offset by an increase in professional fees associated with servicing fees with the servicing fees expensed instead of netted against maturity proceeds as it was in prior periods.

Results of Operations for the Partnership

The net increase in net assets for the three months ended June 30, 2021, was $4.3 million as compared to a net increase in net assets of $26.7 million for the same period in the last year.

The Partnership recognizes income on its respective portion of the Trust which is controlled by its investment in the Trust’s life insurance Policies and the changes in their aggregate fair value. The primary increase in income and net assets is due to the change in valuation of the investment portfolio as described above in the section related to the Trust.

Six Months Ended June 30, 2021, Compared to Six Months Ended June 30, 2020

Results of Operations for the Trust

Net increase in net assets for the six months ended June 30, 2021, was $59.8 million as compared to a net increase in net assets of $55.1 million for the same period last year. The following are the components of net change in net assets resulting from operations for the six months ended June 30, 2021, and 2020:

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	Six Months Ended June 30,
	2021		2020		Change			% Change
Income	$	63,889,997	$	60,262,485	$	3,627,512			6	%
Expenses		4,101,391		5,190,798		(1,089,407	)		(21	)%
Increase in net assets	$	59,788,606	$	55,071,687	$	4,716,919			9	%

The Trust recognizes income on its respective portion of the Policies primarily from changes in their aggregate fair value as described in Note 6 "Fair Value Measurements" in the accompanying financial statements. The primary increase in income is due to the change in valuation of the investment portfolio as described in Note 6 “Fair Value Measurements” in the accompanying financial statements.

The following table provides a roll-forward of the fair value of life insurance policies for the six months ended June 30, 2021 and 2020:

	2021			2020
Balance at January 1,	$	159,179,912		$	172,242,734
Realized gain on matured policies		44,781,048			79,469,615
Unrealized gain (loss) on assets held		18,359,434			(19,599,558	)
Change in estimated fair value		63,140,482			59,870,057

Matured policies, net of fees		(55,955,834	)		(96,118,957	)
Premiums paid		31,007,507			30,894,181
Balance at June 30,	$	197,372,067		$	166,888,015

The change in estimated fair value of the Trust’s life insurance Policies includes realized gains on matured policies in addition to unrealized gain (losses) on policies which is affected by changes in valuation assumptions, including mortality and discount rates. On a quarterly basis, management compares actual maturities to projected maturities to refine and validate its analysis. See, Note 6, “Fair Value Measurements” to the accompanying consolidated financial statements.

Expenses

	Six Months Ended June 30,
	2021			2020			$ Change			% Change
Interest		242,990			399,923			(156,933	)		(39	)%
Administrative and filing fees		265,934			536,260			(270,326	)		50	%
Legal fees		474,591			1,204,320			(729,729	)		(61	)%
Professional fees		3,071,385			2,929,859			141,526			5	%
Bad debt expense (recovery)		(238,418	)		(73,593	)		(164,825	)		(224	)%
Other general and administrative		285,418			194,029			91,389			47	%
Total expenses		4,101,391			5,190,798			(1,089,407	)		(21	)%

The Trust had a decrease of $1.1 million in expenses for the six months ended June 30, 2021, versus six months ended June 30, 2020. The decrease in expenses is driven by decrease in interest expense due to the pay down of the notes payable balance, decreases in administrative and filings fees due to termination of bankruptcy, decrease in legal fees due to termination of Sunlife case in 2020, and an increase in bad debt recovery led by recovery of past due funds during distributions. The decrease in expenses is offset by an increase in professional fees associated with servicing fee with the servicing fee expensed instead of netted against maturity proceeds as it was in prior periods and an increase in other general and administrative expenses associated with renewal fees for the Veritex line of credit.

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Results of Operations for the Partnership

The net increase in net assets for the six months ended June 30, 2021, was $34.7 million as compared to a net increase in net assets of $31.8 million for the same period in the last year.

Liquidity and Capital Resources

Overview and Cash Flow

The principal source of the Trust’s operating liquidity is the Trust’s share of the death benefits from the maturity of life insurance policies, dividend income and recovery of premiums paid on behalf of others. The principal uses of that liquidity include payment of premiums on policies, liquidation of existing debt, payment of general and administrative expenses and distribution to the Unit holders, if any.

The primary needs for working capital are to pay premiums and servicing fees on Policies and expenses relating to the administration of the Trust and its assets. The Trust is authorized for the use of collected death benefits, called the “Maturity Funds Facility,” from which the Trustee may borrow on a short-term revolving basis to fund its premium reserves. The Trust is also entitled to access the cash surrender value included in the beneficial ownership registered in its name to use for any purpose permitted by the Position Holder Trust Agreement, including to satisfy its share of the premium obligations relating to the Policies. If any such use results in a decrease in the death benefit payable under the related Policy, the decrease will be taken out of the Position Holder Trust’s share of the maturity proceeds of the Policy or, if the Trust’s share is insufficient, the Trust must make up the difference. Fees for servicing the Policies will be paid out of the death benefits paid on Policies. The Trust believes that these financial resources, in addition to proceeds from maturities, line of credit, and Maturity Funds Facility, are sufficient for it to continue its operations and to issue funds, as necessary, throughout the twelve months after the date of this report.

Capital

Loan Facilities

The Plan authorizes the Trustee to use the Maturity Funds Facility to borrow on a short-term revolving basis to fund its premium reserves. The Position Holder Trust is also entitled to access the cash surrender value included in the beneficial ownership registered in its name from time to time to use for any purpose permitted by the Position Holder Trust Agreement, including to satisfy its share of the premium obligations relating to the Policies. If any such use results in a decrease in the death benefit payable under the related Policy, the decrease will reduce the Trust’s share of the maturity proceeds of the Policy, or if the Trust’s share is insufficient, it must make up the difference.

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New IRA Notes

Liquidity and Financial Condition

At June 30, 2021, the Position Holder Trust had $94.8 million of cash primarily consisting of $54.9 million held to pay Policy premiums on behalf of Trust and the continuing fractional holders, $1.4 million held to pay maturities collected and owed to current fractional holders, $37.6 million held as collateral deposits on debt, policy premiums, and distributions, and $0.9 million was available to pay for operating expenses of the Trust.

At December 31, 2020, the Position Holder Trust had $100.4 million of cash primarily consisting of $61.2 million held to pay Policy premiums on behalf of the Trust and the continuing fractional holders, $6.3 million held to pay maturities collected and owed to current fractional holders, $31.9 million held as collateral deposits on debt, and $1.0 million was available to pay for operating expenses of the Trust.

The Trust’s maturities receivable decreased by $9.7 million from $34.1 million at December 31, 2020, to $24.4 million at June 30, 2021. The decrease was mainly attributable to the decrease in and timing of maturities of insurance contracts, settlement of insurance contracts, and improvements in timing of collection of death certificates during the six-month period.

The Trust’s total outstanding liabilities decreased by $11.4 million from $56.4 million at December 31, 2020, to $45.0 million at June 30, 2021. The decrease was attributable to decrease in accrued expenses due to paydown of US Trustee fees and decrease in both maturity and premium liabilities.

During the six months ended June 30, 2021, and 2020, the Position Holder Trust paid premiums on Policies totaling $31.0 million and $30.9 million, respectively on the PHT Portfolio. Also, for the six months ended June 30, 2021, and 2020, there were net proceeds from maturities of $65.7 million and $64.7 million, respectively.

The Trust has a liquidity risk associated with the payment of premiums by the continuing fractional interest holders. Under the Plan, the Trust bills continuing fractional interest holders for their share of premiums due over the coming twelve months. If a continuing fractional interest holder fails to pay its share of the premiums on a position, the continuing fractional interest holder defaults and the position is deemed to have been contributed to the Trust in exchange for Units. The Trust is then responsible for the premium payments related to the defaulted interest. Therefore, a significant increase in the non-payment by continuing fractional interest holders may adversely affect the liquidity of the Trust.

Off-Balance Sheet Arrangements

As of June 30, 2021, and December 31, 2020, the Trust and Partnership had no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market risk is the risk of potential economic loss principally arising from adverse changes in the fair value of financial instruments. The major components of market risk are credit risk and interest rate risk. As of June 30, 2021, we did not hold a material amount of financial instruments for trading purposes.

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Credit Risk

Credit risk consists primarily of the potential loss arising from adverse changes in the financial condition of the issuers of the life insurance policies that we own.

The following table provides information about the life insurance issuer concentrations that exceed 10% of total death benefit and 10% of total fair value of our life settlements as of June 30, 2021.

Carrier

Percentage of Face Value

Percentage of Fair Value

Carrier Rating

Transamerica Financial Life Insurance

10.5

14.0

A+

The Lincoln National Life Insurance

8.9

10.2

A+

Interest Rate Risk

The revolving line of credit with Veritex was established at a fixed interest rate. Accordingly, fluctuations in interest rates during the period ending June 30, 2021, did not impact the Trust’s operations.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our trustee and chief financial officer, conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on this evaluation, our trustee and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Limitations on Controls

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures or our internal controls over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based on certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Trust or Partnership have been detected.

Changes in Internal Control Over Financial Reporting

No changes were made to our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

There have been no material changes to any litigation matters during the three months ended June 30, 2021.

Item 1A. Risk Factors.

Not required for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None

Item 6. Exhibits.

Exhibit No.		Description

31.1		Rule 13a-14(a) Certification
31.2		Rule 13a-14(a) Certification
32.1		Section 1350 Certification
32.2		Section 1350 Certification

101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

Dated: August 12, 2021

	LIFE PARTNERS POSITION HOLDER TRUST

	By:	/s/ Michael J. Quilling
		Michael J. Quilling, Trustee

	LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC

	By:	/s/ Michael J. Quilling
		Michael J. Quilling, Manager

Life Partners Position Holder Trust 10-Q