SFO Merrill Lynch

A group led by Western Investment Hedged Partners LP has filed a preliminary proxy statement in opposition to the proposed merger of Sunset Financial Resources, Inc. (NYSE: SFO) with Alesco Financial Trust. The Western group will solicit the votes of Sunset's stockholders against the proposed merger. Sunset and Alesco announced that they had signed a merger agreement on April 27, 2006. The Western group, which owns 1,022,300, or approximately 9.7%, of Sunset's outstanding shares, also announced that it intends to nominate directors for election to the Sunset Board at Sunset's 2006 annual meeting of stockholders. As more fully described in its preliminary proxy materials, the Western group believes that the Alesco merger should be rejected because, among other things, the Western group believes: -- The proposed exchange ratio of 1.26 Sunset shares for each Alesco share is highly dilutive and unfair to Sunset's stockholders. -- Sunset has potentially more favorable alternatives than the proposed merger, including remaining a standalone company. -- The estimated transaction costs in the merger transaction of approximately $9 million are excessive. -- The proposed merger represents a fundamental change in investment strategy that has not been justified to stockholders. We believe this change in strategy and merger involve substantial credit and other risks, and that it is the wrong time in the business cycle to be taking these significant risks. Speaking on behalf of the Western group, Art Lipson said, "We believe that the proposed merger is not in the best interests of Sunset's stockholders. We have confidence in Sunset, and believe the right management and board will be able to maximize value for all of Sunset's stockholders. We intend to nominate directors for election to the Sunset Board, which will give Sunset's stockholders the opportunity to elect a new, highly qualified board of directors whose interests are aligned with stockholders and who are committed to maximizing stockholder value. We call upon Sunset to hold its 2006 annual meeting of stockholders, which we believe is long overdue, concurrently with the special meeting currently planned to vote upon the merger proposals, and to permit the election of directors at that meeting." The Western group urges all Sunset stockholders to demonstrate their opposition to the proposed merger by promptly voting the GREEN proxy card as soon as it becomes available. The Western group has retained Innisfree M&A Incorporated to assist with the solicitation of proxies. Stockholders can call Innisfree M&A Incorporated toll-free at (888) 750-5834 with questions or assistance in voting their shares. CERTAIN INFORMATION CONCERNING PARTICIPANTS On June 30, 2006, Western Investment Hedged Partners LP, together with the other Participants (as defined below), made a preliminary filing with the Securities and Exchange Commission (the "SEC") of a proxy statement and accompanying proxy card to be used to solicit votes against proposals related to a proposed merger involving Sunset Financial Resources, Inc. (the "Company") and Alesco Financial Trust to be submitted to a vote of the stockholders of the Company at a special meeting of stockholders to be called by the Company (the "Special Meeting"). The Western group expects to prepare and file a definitive proxy statement in connection with the Special Meeting. THE WESTERN GROUP STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS ARE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THE SOLICITATION WILL PROVIDE COPIES OF DEFINITIVE PROXY MATERIALS, WITHOUT CHARGE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR, INNISFREE M&A INCORPORATED, AT ITS TOLL-FREE NUMBER: (888) 750-5834. THE PARTICIPANTS IN THE SOLICITATION ARE WESTERN INVESTMENT HEDGED PARTNERS LP, WESTERN INVESTMENT LLC, WESTERN INVESTMENT INSTITUTIONAL PARTNERS LLC, WESTERN INVESTMENT ACTIVISM PARTNERS LLC, ARTHUR D. LIPSON, MATTHEW S. CROUSE, JAMES S. SCHALLHEIM, D. JAMES DARAS, MARSHALL W. COBURN AND GERALD HELLERMAN (THE "PARTICIPANTS"). INFORMATION REGARDING THE PARTICIPANTS AND THEIR DIRECT OR INDIRECT INTERESTS IS AVAILABLE IN THEIR PRELIMINARY PROXY STATEMENT FILED WITH THE SEC ON JUNE 30, 2006.