prolifico friends and family summary

PROL I F I CO FR I ENDS & FAM I LY BRAZ I L OPPORTUN I T Y FUND

Summary – August 2010 – Confidential 1

SUMMARY

August 2010

Introduction

IN A NUTSHELL: “A private fund set up in order to pool the resources of small investors wanting to invest in Brazil.Experienced managers identify, purchase and improve exceptional real estate assets in an economy with sustainable growth,expected to be the world’s 5th largest in 5 years.”

The partners of Prolifico Investments Ltd (“Prolifico”) are experienced real estate investors and developers whohave been operating in Brazil since 2003

Prolifico has worked with leading global institutions for many years including HSBC Deutsche Bank and BTG Prolifico has worked with leading global institutions for many years, including HSBC, Deutsche Bank and BTGPactual, on numerous and partly complex real estate transactions in Brazil, across the commercial, residentialand resort development space

For several years, the partners of Prolifico have been investing in real estate in Brazil on an individual basis or onbehalf of specific clients, realising returns of 100%–200% over 2–3 year periods

The Prolifico F&F Brazil Opportunity Fund (the “Fund”) has been set up as a result of numerous independentrequests from ex‐colleagues, friends and family (Friends & Family)

The aim of the Fund is to enable Friends & Family to invest in direct Brazilian real estate opportunities withrelatively small amounts of capital

The Fund’s effect is to pool those smaller investments in order to achieve purchasing power required to executeon the most attractive opportunities swiftly and on best possible terms A typical investment will range fromon the most attractive opportunities swiftly and on best possible terms. A typical investment will range fromUS$0.5 to 4 million

The Fund is a private vehicle and is limited to a maximum of 100 investors

Thi d t h ld f th i t t t it

Summary – August 2010 – Confidential

This document should serve as a summary of the investment opportunity

2

The Investment Opportunity Highlights

Real assets in Brazil Investment in real assets in a self‐sustaining, large and growing economy with a stablecurrency, driven by “real” growth factors such as internal demand and wealth creation

Early stage in the cycle – Currently very low levels of debt (mortgages at 2.5% of GDP)

– Young population: 15–64 age group to rise until 2045 (China to peak in 2015)

– Rental rates rising steadilyg y

– Traditionally high interest rates set to lower in the medium term

– Housing deficit (over 7 million units nationwide)

Management Experienced investment bankers and real estate experts who have been operatingthroughout Brazil since 2003

“Cherry Picking” On behalf of the Fund Prolifico will select acquire and improve specific assets meetingCherry Picking On behalf of the Fund, Prolifico will select, acquire and improve specific assets meetingits criteria for exceptional capital appreciation

Investments Residential and commercial real estate assets in and around major cities in Brazil with af S P l d Ri d J ifocus on Sao Paulo and Rio de Janeiro

Value creation Track record of improving assets and creating arbitrage opportunities via planningpermission and construction, with resale at 100 – 200% uplift over 2‐3 years


Rationale

Why Brazil?

US$ 250 billion in international reserves, resilient GDP growth with low debt (government & private) versushigh debt and sluggish growth in developed economies

Ongoing expansion of middle class wealth underpinned by newly affordable credit

Exports account for only 10% of GDP, ensuring relative insulation from the turmoil abroad

Why real estate?

Direct investment in hard assets at low leverage providing relative downside risk protection

Sector still in early stage and poised for a continuous growth over the next 5‐10 yearsSector still in early stage and poised for a continuous growth over the next 5 10 years

Why Prolifico?

Team of professionals with significant track record in the Brazilian real estate market Team of professionals with significant track record in the Brazilian real estate market

Proven abilities to:

Search and identify opportunities

Perform due diligence to international standards for international investment banks and clientsg

Obtain necessary planning permission effectively

Oversee development projects

Actively manage the assets to maximise short‐term yields during holding period (where applicable)


Vast local and international network put to use at each step of the investment process

4

Core Investment Themes

HOUSING STRUCTURAL OPPORTUNISTIC DEFICITGROWTHACQUISITIONS

HOUSINGDEFICDEFIC

Infra improvements Foreclosures Planning

Improvement

Lot or unit sales

Infra improvements

Expanding CBDs (1)

World Cup/ Olympics

Foreclosures

Undervalued

Retrofit & Resale

Yield and asset appreciation through physical and legal improvements on carefully selected properties


(1) Central Business Districts

properties

5

Core Investment Themes – Summary

1. Opportunistic Acquisitions

Strategic purchase of properties – distressed or in poor condition, in prime urban locations

Obtain of additional planning permissions / expansion of build area

Reconstruction / retrofit at suitable quality standards

Sale at higher market value (immediately or following medium term rental and appreciation)

2. Structural Growth

Selection of areas where structural improvements (infrastructure, logistics, government programs) are expected to result in exceptional asset appreciation

Selection of key properties in those areas best positioned to benefit from the above

Short‐term yield generation by exploiting assets with best possible use at lowest income : capex ratio

Where feasible, enter into profit sharing agreements with operating companies (e.g. self storage)p g g p g p ( g g )

Sale at higher market value

3. Housing Deficit

Selection of green‐field sites close to new industrial or residential areas with strong demand for housing

Obtain planning permissions for lot sales or full development (using government programs if applicable)

Implement basic infrastructure (electricity, water, roads), or full development (1)


Lot or unit sales to lower middle class families receiving government‐ or employer‐subsidised mortgages

6

(1) Developments undertaken with construction partners

Summary of Terms (1)

Structure: The Fund is an unregulated collective investment scheme in keeping with the InternationalMutual Fund Act, No. 22 of 2006 of Saint Lucia. (2) The Fund will invest into a Brazilian HoldingCompany via a wholly‐owned Florida LLC

I t t M P lifi I t t Ltd BVI li it dInvestment Manager: Prolifico Investments Ltd., a BVI limited company

Investment: Subscription of shares in the Fund; minimum investment US$ 100,000

Fund life: 5 Years (with up to 2 additional one‐year terms)

Currency: U.S. Dollar (US$) and Brazilian Real (R$)

Expected returns: 25%+ p.a. IRR

Target capital raise: US$ 20 million

Expected closing: September 2010

Distributions: The Fund may pay Dividends to shareholders throughout the Fund life at the discretion of theInvestment Manager (dividends expected from year 3 onwards)

Management fee: 2% of the Fund's net asset value (NAV), based on year‐end audited accounts (3)

Performance fee: (i) 20% of the annual increase in the NAV exceeding 8% but not exceeding 25% and(ii) 27.5% of the annual increase in NAV of the Fund exceeding 25%. The performance fee will bepayable to the Manager once each Investor will have received a return equivalent to such

(1) For additional information on terms see pages 42 et seq.(2) The shares are not insured or guaranteed by any governmental agency and no government agency passed upon the accuracy of the information contained in this

payable to the Manager once each Investor will have received a return equivalent to suchInvestor's initial investment in the Fund plus 8% per year.

Performance fee only payable on distributions of proceeds to investors.


( ) g y y g g y g g y p p yMemorandum.

(3) Yearly asset valuation conducted by BDO Brazil; audited financials by Terco Grant Thornton

7

Fund Structure & Governance

InvestorsReporting / Net NAV

Fund (St Lucia)

Offshore –St. Lucia and Florida

Director seat

Florida LLC

Admin agent

Brazil

Brazilian Holding

Accounting

Audit

Asset II

$

Asset I Asset III

$ $

Asset valuation


Asset II

8

Asset I Asset III

Brazil’s Macro Highlights

Politically stable democracy and higher transparency than Russia, India and China

8th largest economy in the world, predicted to be 5th largest by 2015 (The Economist, November 2009)

5th most populous country, with a young population: the prime 15‐to‐64‐year‐old age group is set to keep risinguntil 2045 (China’s forecasted peak in 2015,WSJ Feb 16, 2010)

5th largest country by land mass with vast natural resources (agriculture, oil, minerals) make Brazil one of thethree self‐sufficient countries in the world

The nation’s middle class has increased by 20 million to 53% of the population of 200 million, from 42% in 2002,Finance Minister Guido Mantega (April 2010)

World’s 3rd largest oil reserve recently discovered resulted in Petrobras announcing the world’s largest capitalexpenditure programme (US$ 174bn)

Investment grade status awarded by all major risk rating agencies (Moody’s, S&P, Fitch)

Consumer spending accounts for 60% of GDP vs China 35% (WSJ Feb 16, 2010)

Infrastructure spending via the Program of Accelerated Growth (PAC), a BRL504 billion 4‐year governmentprogram

Hosting the World Cup in 2014 and the Olympics in 2016 resulting in further infrastructure investment

Consumer confidence rose to pre‐recession levels during the fourth quarter 2009, reflecting greater optimismsupported by positive employment trends (Market Perspective, Prudential Real Estate Investors, Jan 2010 LatAmQ t l )


Quarterly)

9

Brazil – a Hedge Against Prolonged Global Recession / Slowdown

Global economy at risk of turbulent times ahead

Risk of Greek government debt crisis putting investors off government bonds resulting in similar crises inSpain Ireland Portugal Italy and Belgium and plunging the Euro region into prolonged recessionSpain, Ireland, Portugal, Italy and Belgium and plunging the Euro region into prolonged recession

Fiscal austerity, and expected tax increases required to bring debt under control, paint a bleak outlookfor the US, the UK and many other developed economies

Ageing populations in developed economies compounding the debt problems Ageing populations in developed economies compounding the debt problems

In China debt‐to‐GDP ratio of ~95%+ including local government liabilities may result in a crackdownthat may trigger an imminent slump in growth and regional recession within a decade, exacerbated bythe slowdown in demand from developed economies

“The Chinese government is desperately trying to cool down an overheating property market,” ChrisHogg, BBC, China, May 10 2010

Brazil’s economy in a global contextBrazil s economy in a global context

Brazil’s household debt accounts for only 13% of GDP (compared to 97% in the US)

Only 10% of GDP is exports (vs China 24%), whilst GDP growth is 86% domestically driven

Unlike many emerging economies domestic growth is based on wealth creation and consumer spendingby an emerging middle class in Rio and Sao Paulo which is now spreading across the country

Continued global slowdown to reduce inflationary pressure, allowing for further medium‐term interestd i hi h i ill b di d d d


rate reductions which in turn will boost credit and consumer demand

10

Photo gallery – Sao Paulo


Photo gallery – Rio de Janeiro


Disclaimer

No representation or warranty, expressed or implied, is given by Prolifico Investments Ltd, its respective advisers or anyof its respective partners directors or employees or any other person as to the accuracy or completeness of the contentsof its respective partners, directors or employees or any other person as to the accuracy or completeness of the contentsof this document. Neither this document nor any of the information contained in it shall form the basis of any offer,invitation or inducement to purchase or acquire any ownership interests in Prolifico F&F Brazil Opportunity Fund Inc., aninternational business company organized under the laws of Saint Lucia, whether directly or indirectly. You shouldcarefully review the information memorandum of Prolifico F&F Brazil Opportunity Fund Inc. dated June 2010 beforey pp ymaking any investment decision.


Contact

Peer [email protected]

[number]

Prolifico Investments (Brazil)

Al d J ú 1177 9th fl [number]

Henry [email protected]

[number]

Patrick Dumas

Alameda Jaú, 1177 – 9th floor

Jardins – Cerqueira Cesar

Sao Paulo CEP – 01420-001

+55 11 7621 4855

“Our enthusiasm for Brazil could not be higher you’ve got this local demand that’s unparalleled ”

Patrick [email protected]

[number]www.prolifico.com.br

“Our enthusiasm for Brazil could not be higher, you’ve got this local demand that’s unparalleled.”Gary Garrabrant, co‐founder of Equity International with real estate magnate Sam Zell (May 18 2010)


prolifico friends and family summary

Documents

exceptional real estate

commercial real estate

brazil investment

fund prolifico

real estate experts

real growth factors

turmoil abroadwhy real

operatingthroughout