NATURE OF OPERATIONS

Resource America, Inc. (the "Company") (NASDAQ: REXI) is a specialized asset management company that uses industry specific expertise to evaluate, originate, service and manage investment opportunities through its real estate, financial fund management, and commercial finance operating segments. As a specialized asset manager, the Company seeks to develop investment funds for outside investors for which the Company provides asset management services, typically under long-term management and operating arrangements either through a contract with, or as the manager or general partner of, the sponsored fund. The Company limits its investment funds to investment areas where it owns existing operating companies or has specific expertise. The Company manages assets on behalf of institutional and individual investors and Resource Capital Corp. (“RSO”) (NYSE: RSO), a diversified real estate finance company that qualifies as a real estate investment trust (“REIT”). RSO has been reflected on a consolidated basis with our financial statements for the years ended December 31, 2013, 2012 and 2011 (see Note 23).

The Company conducts real estate operations through the following subsidiaries:


•	Resource Real Estate Advisor, LLC. manages the activities of Resource Real Estate Opportunity REIT ("RRE Opportunity REIT I"), a public non-traded REIT;


•	Resource Capital Partners, Inc. acts as the general partner and provides asset management services to the Company's eight real estate investment partnerships and six tenant-in-common ("TIC") programs;


•	Resource Real Estate Management, Inc. (“Resource Residential”) provides property management services to the entire multifamily apartment portfolio, including fund assets, distressed assets and joint venture assets;


•	Resource Real Estate Funding, Inc., on behalf of RSO, manages the commercial real estate debt portfolio comprised principally of A notes, whole mortgage loans, mortgage participations, B notes, mezzanine debt and related commercial real estate securities. In addition, it manages a separate portfolio of discounted real estate and real estate loans; and


•	Resource Real Estate, Inc. manages loans, owned assets and ventures, which are collectively referred to as the “legacy portfolio.”

The Company conducts its financial fund management operations primarily through the following operating entities:

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CVC Credit Partners, L.P. ("CVC Credit Partners"), a joint venture between the Company and an unrelated third-party, finances, structures and manages investments in bank loans, high yield bonds and equity investments through issuers of collateralized loan obligations (“CLOs”), managed accounts and a credit opportunities fund. Prior to April 17, 2012, the Company conducted these operations through Apidos Capital Management, LLC. ("Apidos") and subsequent to the formation of the joint venture, this entity is referred to as Apidos-CVC;

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Trapeza Capital Management, LLC (“TCM”), a joint venture between the Company and an unrelated third-party, originates, structures, finances and manages investments in trust preferred securities and senior debt securities of banks, bank holding companies, insurance companies and other financial companies through collateralized debt obligations ("CDOs") issuers and related partnerships. TCM together with the Trapeza CDO issuers and Trapeza partnerships, are collectively referred to as Trapeza;


•	Resource Financial Institutions Group, Inc. (“RFIG”), serves as the general partner for seven company-sponsored affiliated partnerships which invest in financial institutions;


•	Ischus Capital Management, LLC (“Ischus”), finances, structures and manages investments in asset-backed securities (“ABS”) including residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”);


•	Resource Capital Markets, Inc., through the Company's registered broker-dealer subsidiary, Resource Securities, Inc. (formerly Chadwick Securities, Inc., or “Resource Securities”), acts as an agent in the primary and secondary markets for structured finance securities and manages accounts for institutional investors; and


•	Resource Capital Manager, Inc. (“RCM”), an indirect wholly-owned subsidiary, provides investment management and administrative services to RSO under a management agreement between RCM and RSO.

The Company conducts its commercial finance operations through LEAF Commercial Capital, Inc. (“LEAF”) and LEAF Financial Corporation (“LEAF Financial”). LEAF Financial sponsored and manages four publicly-held investment entities as the general and limited partner or managing member and originated and acts as the servicer of the leases and loans sold to those entities.

LEAF. In January 2011, the Company formed LEAF to conduct its equipment lease origination and servicing operations and to obtain outside equity and debt financing sources. LEAF Financial retained the management of the four equipment leasing partnerships, which are sub-serviced by LEAF. On November 16, 2011, the Company and LEAF, together with RSO, entered into a stock purchase agreement and related agreements (collectively the “November 2011 LEAF Transaction”) with Eos Partners, L.P., a private investment firm, and its affiliates (“Eos”). Pursuant to the November 2011 LEAF Transaction, Eos invested $50.0 million in cash in LEAF in exchange for 50,000 shares of newly-issued 12% Series A Participating Preferred Stock (the “Series A Preferred Stock”) and warrants to purchase 2,954 shares of LEAF common stock for an exercise price of $0.01 per share, collectively representing, on a fully-diluted basis, a 45.1% interest in LEAF. In exchange for its prior interest in LEAF, RSO received 31,341 shares of Series A Preferred Stock, 4,872 shares of newly-issued 8% Series B Redeemable Preferred Stock and 2,364 shares of newly-issued Series D Redeemable Preferred Stock, collectively representing, on a fully-diluted basis, a 26.7% interest in LEAF. The Company retained 18,414 shares of LEAF common stock, representing a fully-diluted interest of 15.7%, and senior management of LEAF maintained a 10% fully-diluted interest. Additional investments by Eos and RSO as well as warrants that were provided to LEAF's lender in accordance with a financing agreement reduced the Company's investment to 12.6% on a fully-diluted basis as of December 31, 2013. As a result of the November 2011 LEAF Transaction, the Company deconsolidated LEAF (see Note 4) and has accounted for its investment in LEAF on the equity method beginning on November 17, 2011 which was reduced to zero in 2012. In conjunction with the transaction and resulting deconsolidation of LEAF, the Company recorded a gain of $8.7 million in 2011.

Apidos. On April 17, 2012, the Company sold all of its common equity interests in Apidos to CVC Capital Partners SICAV-FIS, S.A., a private equity firm (“CVC”). Pursuant to the sale and purchase agreement and related agreements between the Company and CVC dated as of December 29, 2011, the Company sold Apidos in exchange for (i) $25.0 million in cash, (ii) a 33% limited partner interest in CVC Credit Partners, a Cayman Islands limited partnership jointly owned by the Company and CVC, and (iii) a 33% interest in CVC Credit Partners' general partner, a Jersey corporation. Prior to the closing, CVC contributed its credit management subsidiary to CVC Credit Partners. The Company also retained a preferred equity interest in Apidos-CVC, which entitles it to receive distributions from CVC Credit Partners equal to 75% of the incentive management fees from the legacy Apidos portfolios. The Company recorded a $54.5 million net gain on the sale of Apidos, including the investments in CVC Credit Partners and Apidos-CVC preferred equity at their fair value totaling $34.8 million during 2012. At December 31, 2013, these investments were reflected as Investments in Unconsolidated Loan Manager on the consolidated balance sheets.