Brazilian Property Fund

1. P R O L I F I C O F R I E N D S & FA M I LY B R A Z I L O P P O R T U N I T Y F U N D
SUMMARY
August 2010
Summary – August 2010 – Confidential 1

2. 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 who
have been operating in Brazil since 2003
 Prolifico has worked with leading global institutions for many years including HSBC Deutsche Bank and BTG
years, HSBC,
Pactual, on numerous and partly complex real estate transactions in Brazil, across the commercial, residential
and resort development space
 For several years, the partners of Prolifico have been investing in real estate in Brazil on an individual basis or on
behalf 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 independent
requests 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 with
relatively small amounts of capital
 The Fund’s effect is to pool those smaller investments in order to achieve purchasing power required to execute
on the most attractive opportunities swiftly and on best possible terms A typical investment will range from
terms.
US$0.5 to 4 million
 The Fund is a private vehicle and is limited to a maximum of 100 investors
 Thi d
This document should serve as a summary of th i
t h ld f the investment opportunity
t t t it
Summary – August 2010 – Confidential 2

3. The Investment Opportunity Highlights
Real assets in Brazil Investment in real assets in a self‐sustaining, large and growing economy with a stable
currency, 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 steadily
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– 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 operating
throughout Brazil since 2003
“Cherry Picking”
Cherry Picking On behalf of the Fund Prolifico will select acquire and improve specific assets meeting
Fund, select,
its criteria for exceptional capital appreciation
Investments Residential and commercial real estate assets in and around major cities in Brazil with a
focus on S P l and Ri d J
f Sao Paulo d Rio de Janeiro
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Value creation Track record of improving assets and creating arbitrage opportunities via planning
permission and construction, with resale at 100 – 200% uplift over 2‐3 years
Summary – August 2010 – Confidential 3

4. Rationale
Why Brazil?
 US$ 250 billion in international reserves, resilient GDP growth with low debt (government & private) versus
high 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 years
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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 clients
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 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
Summary – August 2010 – Confidential 4

5. Core Investment Themes
OPPORTUNISTIC STRUCTURAL HOUSING
ACQUISITIONS GROWTH DEFICIT
HOUSING
DEFIC
 Foreclosures  Infra improvements
Infra improvements  Planning
 Undervalued  Expanding CBDs (1)  Improvement
 Retrofit & Resale  World Cup/ Olympics  Lot or unit sales
 Yield and asset appreciation through physical and legal improvements on carefully selected
properties
(1) Central Business Districts
Summary – August 2010 – Confidential 5

6. 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
(1) Developments undertaken with construction partners
Summary – August 2010 – Confidential 6

7. Summary of Terms (1)
Structure: The Fund is an unregulated collective investment scheme in keeping with the International
Mutual Fund Act, No. 22 of 2006 of Saint Lucia. (2) The Fund will invest into a Brazilian Holding
Company via a wholly‐owned Florida LLC
Investment M
I t t Manager: Prolifico Investments Ltd a BVI li it d company
P lifi I t t Ltd., limited
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 the
Investment 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 be
payable to the Manager once each Investor will have received a return equivalent to such
Investor's initial investment in the Fund plus 8% per year.
Performance fee only payable on distributions of proceeds to investors.
(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
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Memorandum.
(3) Yearly asset valuation conducted by BDO Brazil; audited financials by Terco Grant Thornton
Summary – August 2010 – Confidential 7

8. Fund Structure & Governance
Reporting / Net NAV Investors
Offshore –
St. Lucia and Florida
Director seat Fund (St Lucia)
Admin agent
Florida LLC
Brazil
Audit
Brazilian Holding
Accounting
$ $ $
Asset valuation Asset I Asset II Asset III
Summary – August 2010 – Confidential 8

9. 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 rising
until 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 the
three 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 capital
expenditure 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 government
program
 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 optimism
supported by positive employment trends (Market Perspective, Prudential Real Estate Investors, Jan 2010 LatAm
Quarterly)
Q t l )
Summary – August 2010 – Confidential 9

10. 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 in
Spain, Ireland, Portugal,
Spain 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 outlook
for the US, the UK and many other developed economies
 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 crackdown
that may trigger an imminent slump in growth and regional recession within a decade, exacerbated by
the slowdown in demand from developed economies
 “The Chinese government is desperately trying to cool down an overheating property market,” Chris
Hogg, BBC, China, May 10 2010
Brazil s
Brazil’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 spending
by 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 interest
rate reductions which i turn will b
d i hi h in ill boost credit and consumer d
di d demand
d
Summary – August 2010 – Confidential 10

11. Photo gallery – Sao Paulo
Summary – August 2010 – Confidential 11

12. Photo gallery – Rio de Janeiro
Summary – August 2010 – Confidential 12

13. Disclaimer
No representation or warranty, expressed or implied, is given by Prolifico Investments Ltd, its respective advisers or any
of its respective partners directors or employees or any other person as to the accuracy or completeness of the contents
partners,
of 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., an
international business company organized under the laws of Saint Lucia, whether directly or indirectly. You should
carefully review the information memorandum of Prolifico F&F Brazil Opportunity Fund Inc. dated June 2010 before
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making any investment decision.
Summary – August 2010 – Confidential

14. Contact
Prolifico Investments (Brazil) Peer Buergin
peer.buergin@prolifico.com.br
[number]
Alameda J ú 1177 – 9th fl
Al d Jaú, floor
Jardins – Cerqueira Cesar Henry Madden
henry.madden@prolifico.com.br
Sao Paulo CEP – 01420-001 [number]
+55 11 7621 4855 Patrick Dumas
Patrick Dumas
patrick.dumas@prolifico.com.br
www.prolifico.com.br
[number]
“Our enthusiasm for Brazil could not be higher, you’ve got this local demand that’s unparalleled.”
“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)
Summary – August 2010 – Confidential 14