EFTA01185747.pdf

Strictly Private and Confidential BRAZILIAN CREDIT RIGHTS " Brazilian internal debt... at very high spreads over SELIC" EFTA01185747 Table of Contents ■ Introduction ■ Overview of the Credit Rights Market ■ Legal Framework ■ How to Access the Credit Rights ■ Disclaimer EFTA01185748 Brazilian Credit Rights Introduction In this presentation we would like to introduce an investment opportunity related to Brazil. In particular, we will discuss about credit rights issued by the Brazilian Federation, the State of Sao Paulo and their public entities/companies. These credits represent senior debts which have been originated from an irrevocable sentence of last instance with no further options to appeal. The credit rights stem from judicial proceedings against the Brazilian Federation, the Sao Paulo and their public entities/companies. Underlying We focus on a particular type of credits called "Precaterios". They can be grouped into two main Description categories: alimony precaterios (mainly public employees credits against governamental authorities and/or public companies) and non-alimony precaterios (non public employees credits against governamental authorities and/or public companies). These credits can be enforced with a court order by their respective owners against the public debtors. Until the sentence does not become enforceable and irrevocable, the government/public entity can avoid payment and finance its debt. These type of credit rights benefit from Federal constitution protection. In fact, the article 100 of the Brazilian Federal constitution regulates the repayments of precatorios. These credits have an expected IRR ranging in the region of [25%-30%]; Given the nature of the credit rights, investors bear the following risks: i) Default; ii) Timeliness of Risk/Return payments; iii) Legal risk and changes in the regulatory framework; iv) Liquidity; v) Currency. Proposition The case history is so wide that it is possible to define a standard for payments from governmental authorities or other public entities/companies. 3 EFTA01185749 Brazilian Credit Rights Where the Alpha is coming from 1. Very specialized market with high barriers to entry: Access to this type of credit rights is only possible to law firms with extensive local experience: An incorrect legal analysis of the credits would undermine any investment attractiveness: the credit payment depends on the outcome of judicial proceedings. We start the negotiation activity after the irrevocable sentence of last instance and the actual issuance of the credit (legal claim status with the registration in the state budget). A timely reporting of opportunities by law firms, the ability to verify the authenticity of the claims and the knowledge of all the legal steps to enforce the payment of the individual credit are all crucial factors in this market; To operate effectively, a law firm dealing with such credits must have: a strong presence in the region (in order to access a large universe of potential credit holders), credibility, reputation, recognized skills and strong bargaining power; The typical commission structure of the local law firms makes the sourcing, negotiation and management of such credits unprofitable in absence of significant economies of scale. 2. Reliable, direct and experienced channels to access this market are key elements to our investment process. The direct involvement and understanding of all the various phases of the life of a credit are also crucial in the portfolio construction. 3. Local access only: The credit rights market is easily accessible to local players only. We have identified a series of way to make these credits available to foreign investors. 4. "Non-sophisticated" counterparties and low competition: Credits are bought directly from the owners, which are usually non-professional players, via their legal representatives. Professionals such as funds and banks are only focusing on very large credits due to due diligence issues while we can focus on small credits where there is almost not competition. 4 EFTA01185750 Brazilian Credit Rights Distinctive elements We have an agreement with Innocenti Advogatos Associados, one of the Exclusive Access main expert in precatorios for the State of Sao Paulo and Brazil; Very specialized market with high barriers to entry. Institutional players Competitive Advantage focus mainly on large credits, while we can focus on small credits where there is almost not competition; Direct Sourcing Low sourcing costs: credits are bought directly from the owners via their legal representatives, there are no intermediaries; Constitutional Protection Art. 100 of the Federal Constitution establishes the payment rules for the precatorios; Interesting Risk/Return High returns are mainly due to sourcing activity and market access; No correlation with markets The investment is completely decorrelated from any market; Trasparency The investor is able to access the due diligence of the credit rights on-line. In addition, payments are published monthly by the relevant tribunal; 5 EFTA01185751 Brazilian Credit Rights High Revaluation Rates High Revaluation Rates • Credit Rights are revaluated every year by 6% or 12% as interest on late payments plus the adjustment for inflation (currently roughly 6%) on the notional value of the credit; • The lawsuit is clearly stating if a credit is going to be relavuated at 6% or 12%. Example: Real case I • Credit right: 39.10% Nominal value: R$ 813,530 10.00% Interest rate: 6% Inflation rate: 6% 3.50% 25.60% Purchase price: 40%, i.e. R$ 325,412 Paid after: almost 4 years • Repaid value: R$ 1,218,265 • Total return: 374% 1 I Brazil Risk • IRR: 39.1% I IRR Interbank Premium Difference I Rate Brazil 6 EFTA01185752 Table of Contents ■ Introduction ■ Overview of the Credit Rights Market ■ Legal Framework ■ How to Access the Credits ■ Disclaimer EFTA01185753 Overview of the Credit Rights Market Description ■ The precatorio market is mainly practiced by specialized law firms involved in lawsuits on behalf of clients which go to them offering their precatOrios for a huge discount. ■ In recent years, banks, mutual/hedge funds and other companies have identified a series of Background business opportunities in precatOrios, either holding them up to maturity or using them for tax compensation. ■ Players focused mainly on Federal Precatorios, but given the attractive return profile, they have also acquired State and Municipal PrecatOrios (especially from Sao Paulo) ■ Local and foreign Banks Main ■ Investment funds (FIDCs, Fundo de Investimentos em Direitos Creditorios), including onshore Players and offshore investors ■ Companies using for tax compensation (i.e. VAT and income tax) ■ It is estimated that the inventory of precatOrios in Brazil, including municipal, state and Market Union debts, is worth US$ 58 billion*; Size ■ The state of Sao Paulo has debts in already issued precatOrios of approximately US$ 9 billion, half of them are of alimony nature*. ■ We will only focus on: 1. Federal PrecatOrios; Focus 2. State Precatorios (only issued by the state of Sao Paulo); 3. Credit Rights issued by Public Companies. * Source: IAA. These data exclude credit rights issued by Public Companies 8 EFTA01185754 Overview of the Credit Rights Market Political Geography of Brazil to Understand Different Types of Precatorios Issued • The Brazilian Federation is divided into 26 states 1 (estados) and one federal district (distrito federal), which contains the capital city, Brasilia. • The states are subdivided into 5,564 municipalities (municipios). ra Rio Different type of Precatorios Grande jpNorte I iba co Federal Precat6rios States Precatorios Nerag L oas Sergipe I Distrito I Federal Federal District Municipal Precat6rios Precat6rios North s into Santo ■ North-East • All of them can be of alimony or non-alimony nature I • Center-West Santa Catarina Other Types of Credit Rights I ma I Rio mi South-East Grande Credit Rights issued • These are credits which stem do Sul from judicial proceedings South by Public Companies against public related I I companies (sociedade de L I economia mista) EFTA01185755 Table of Contents ■ Introduction ■ Overview of the Credit Rights Market ■ Legal Framework ■ How to Access the Credit Rights ■ Disclaimer 10 EFTA01185756 Legal Framework: Litigation Innocenti Advogados Associados Litigation INN'(lNi l Innocenti Advogados Associados originated from a strong expansion of the Professional activities of the former Advocacia Ricardo Innocenti, founded in the early 80's, and that focused on Administrative Law and Labor Relations. For over 30 years we have been conducting actions for legal entities Precatorios Commission and individuals, meeting their expectations through the daily efforts of a specialized team of professionals, which is committed to the oste—yate. 94..../ needs of each client. %Lisa OG.Sel 'Les ei This experience has allowed us to acquire the necessary knowledge rORTAIO A is MI6/2013 and feeling to transform legal matters in efficient ethical solutions, "a a Crmiale LiVesal dr ISIS. Soc. Pelene. 0'rRaccoiosl c suited to each situation. Our attorneys' and advisors' job is not Emden, Jesse *I mantes. limited to representing our clients' legal interests, but also to offer 0 Prepense do Ceeselho Federal dm ()nice des *drones, de Rost so ow doe was atnbuicate 1c 0. c recubintelses. do .cads ern a Pee smenio them a concrete and customized picture of results. .11S/2007. RESOLVE Structure alai a ConeRao Especial de Detest des Credence PAM.... (PSivandos)o Meow as mashes.: Marra Asbale hieeitoti (SP) Pesiecatc Ramada fades Araelo de Pairs (AL) - VleGPrtnelente. IAA team consists of approximately 100 professionals. Met In Jose de Seas Waste (SP) Sean $o; Amen! Minden Garda (SPS Eilearde de Seam Geeverla POE IAA have attorneys that represent the office in the main Brazilian Froictice Aeimste Mem de Oehein. Valnelit (GO): litter M.pSdee Larva (RO). cities, as well as a legal team based in the Federal District, which Ricerde Lebo Caveltead de Allmeecreee (MR Telma Ricardo Abridise Scharr 01M allows for better follow-up of our clients' judicial proceedings Time Meade Welsher (AP) Past literkpn Triaad•frelda (melees (SRO Membee Consuhoi brought before superior courts. ISsir ceSso c rcerstsse Marco Antonio Innocenti is currently the president of the Beisekill*. .11.0 Lk 2013.. Precatorios Commission in Brasilia. Marais Vialelm PROS Coale President 11 EFTA01185757 Legal Framework: Brazilian Federal Constitution - Art. 100 Payment of Credit Rights Article IOU. Payments owed by the federal. state. Federal District, or municipal the amount under execution — so that the provision of Paragraph 3 may be applied to treasuries, by virtue of a court decision, shall be made exclusively in chronological a portion of the total amount — are forbidden. order of submission of court orders and charged to the respective credits, it being Paragraph 9. At the time a court order is issued, irrespective of the relevant forbidden to designate cases or persons in the budgetary appropriations and in the regulation, there shall be deducted from such court order. for the purpose ofa set-off. additional credits opened for such purpose. (CA No. 20. 1998: CA No. 30.2000: CA an amount corresponding to clear legal debits, either registered or not under debts No. 37, 2002: CA No. 62, 2009) in execution and attributed to the original creditor by the Treasury in debt, including Paragraph I. Support-related debts include those arising from wages. salaries. future accruing installments of parcclings, save for those whose execution has been pay, pensions, and their supplementations, social security benefits and compensation stayed by virtue of administrative or judicial challenge. for death and disability. such compensation being based on civil liability, by virtue of a final and unappealable judicial decision, and shall be paid before any other debts, Paragraph 10. Be fore a court order is issued the relevant court shall request that except those referred to in Paragraph 2 of this article. the Treasury in debt must provide, within 30 (thirty) days, otherwise subject to loss of the right to offset. information on the debits which meet the conditions stipulated Paragraph 2. Support-related debts owed to pawns aged 60 (sixty) or over on the in Paragraph 9, for the purposes set forth in said Paragraph. date the respective court order is issued, or to persons with serious diseases, as defined by law, shall be paid before any other debts. up to an amount equivalent to three times Paragraph I I. In accordance with legislation of the federating unit in debt, a the amount stipulated by law for the purposes of Paragraph 3 of this article, parceling creditor may employ court order credits to purchase public property belonging to the for such end being permitted whereas the remaining amount shall be paid according respective federating unit. to the chronological order of submission of respective court order. Paragraph 12. As from the date Constitutional Amendment no. 62 is enacted, the Paragraph 3. The provision contained in the head paragraph of this article. amounts stated in court orders, after such court orders arc issued up until effective regarding the issuance of court orders, does not apply to obligations defined by law payment, irrespective of their nature, shall be adjusted according to the official rate as small amounts, which must be paid by the treasuries herein referred to by virtue applied to savings accounts, whereas, for the purpose of compensation ofdelay in the of a final and unappcalable court decision. payment, simple interest will be applied at the same percentage of interest applied to savings accounts, the employment of compensatory interest being excluded. Paragraph 4. For the purposes of the provision ofParagraph 3. different amounts may be stipulated for the federating units through their own legislation and according Paragraph 13. Creditors may assign their court order credits, in whole or in part. to their various economic capabilities, whereas the minimum amount shall be equal to third parties. irrespective ofconsent by the debtor, and the provisions ofParagraphs to the amount of the highest benefit paid by the general Social Security scheme. 2 and 3 shall not be applied to the assignee. Paragraph 5. It is mandatory for the budgets of the federating units to include Paragraph 14. Assignment of court order credits shall only produce effects after the funds required for payment of debts arising from final and unappealable judicial communication to the court of origin and to the federating unit in debt by filing a decisions, stated in court orders submitted until or on July I. and payment shall be relevant petition. made before the close of the subsequent fiscal year. on which date their amounts shall Paragraph 15. Without prejudice to the provisions ofthis article, a supplementary be adjusted for inflation. law to this Federal Constitution may establish a special regime for the payment of Paragraph 6. The budgetary allocations and the credits opened shall be assigned court-ordered debts owed by States, the Federal District, and Municipalities, providing to the Judicial Power, it being within the competence of the Presiding Judge of the for earmarked net current revenues and for payment tam and methods. Court which rendered the decision of execution to determine full payment and to authorize — upon petition of a creditor and exclusively in the event that his right of Paragraph 16. The Federal Government may, at its own discretion and under the precedence is not respected or that the amount necessary to satisfy the debt has not terms ofrelevant law, take on debts resulting from cowl orders issued against a State. been set aside — attachment of the respective amount. the Federal District, or a Municipality, and refinance them directly. Paragraph 7. The Presiding Judge of the appropriate Court who, by means of an act or omission, delays or attempts to frustrate the regular payment ofa court-ordered debt shall be liable to crime of malversation and shall also appear before the National Council of Justice. Paragraph 8. The issuance ofa court order as a supplementation to or in addition to an amount already paid as well as the parceling, apportionment. or reduction of 12 EFTA01185758 Legal Framework Illustration of Precatorio Timeline Theoretical Sequence in a Lawsuit Resulting in the Issuance of a Precatorio Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Filing of the Final and Award Enforcement Precat6rio Rescissory Lawsuit Unappealable Calculation Claim Issuance Claim Decision Compensation for In case of appeal in Required to After a final After issuance of an Even after issuance, damages and losses a first level court calculate the decision is oficio requisitorio, a the possibility of a caused by direct or decision, a second amount of the rendered in the precatO'da will be final appeal indirect (through level decision is award. Usually award calculation issued. (rescisOria) remains governmental entity) required (sometimes involves the phase, plaintiff can after 2 years actions from the a third level is issuance of an request the Govemment required up to the s expert report and inclusion of the Supreme/Superior " needs ratification amount for Courts — STF/STJ) in court (can be payment in the appealed by both annual budget parties) Single installment for both Alimony and Non-Alimony Precat6rios as a result of the EC n.62/2009* (1) Precatorios issued until June 30 of a determined year (y) must be paid until December 31 of the following year (y+1). Precatorios issued in the second semester of a determined year must be paid until December 31 of the year following the subsequent year (y+2). * Non-Alimony federal precatorios are still paid in instalments 13 EFTA01185759 Legal Framework Main Changes Introduced by Constitutional Amendment n.62/2009* Main changes and characteristics of the new regime ■ Effectiveness: Immediate effectiveness, encompassing all outstanding precatorios and derived lawsuits ■ Special Regimes: States and municipalities have 2 alternatives to pay precatorios debts ("Special Regimes"): - (A) Mandatory annual deposits of amounts equivalent to certain fixed percentages of current revenues - (B) Linear yearly amortizations in order to zero the inventory in up to 15 years ■ Chronological order: At least 50% of precatorios shall still be paid according to chronological order of issuance (within each year alimony precatorios have priority over the non-alimony ones) ■ Auction: Residual 50% shall be paid using an auction mechanism (3 options are available to Public Debtors) ■ 1st Priority: Alimony precatorios for holders with at least 60 years old or which are seriously ill (in some specific cases established by law), regardless of the year of issuance, will have first priority over any other precaterio up to a value established by law. ■ Instalments: following Constitutional Amendment n.62/2009 the non-alimony precatorios, except for the federal ones, will not be paid in instalments anymore, but with a bullet payment as per alimony precatorios ■ Seizure remedy: Seizure route limited to breach of mandatory payments established in (A) or (B), but the President of the Court which causes delay to the regular payment of precatorios can incur in criminal responsibility. ■ Discretional Union refinancing: The Union, at its sole discretion, can decide to refinance precatorios of other public entities; ■ Tax compensation: Possibility of tax compensation for precaterio holders ■ Adjustment Rates: Precaterios, including the federal ones, shall be adjusted by official rates applicable over savings deposit accounts, as opposed to inflation rates + interest rates, which were previously in force ■ Incentive to avoid insolvency: as long as Public Debtor is in the default, the entity a) may not contract a foreign or domestic loan; b) cannot receive voluntary transfers; ■ Fungibility with Public Real Estate: following EC n.62/2009, creditors have the possibility to purchase public properties using precatorios of same public entity *Amendment No. 62, of 9 December 2009, which modify art. n.100 of the Federal Constitution and art. 97 of the Transitory Constitutional 14 Provisions Act EFTA01185760 Legal Framework Payment Mechanism for Precatorios following EC n.62/2009 • In principle, federal precatorios are not affected by EC n.62/2009, so they will still be paid in installments; they will Federal follow chronological order with no annual budget limit and without any priority or exception; Precatorios • Only the interest rates calculations have been affected; from 2011 they shall be adjusted by official rates applicable over savings deposit accounts, as opposed to inflation rates + interest rates, which were previously in force; 50% in chronological order: All precaterios will be paid within 15 (1) 1st Priority, independently of the year of the inclusion in years, the budget (only breach of chronological order allowed): allocating a - Creditors over 60-yrs holders capped at a pro rata predetermined amount** annual amount - Sick/ill creditors, in specific cases established by law, capped at a predetermined amount** (2) For each year, alimony precaterios will have preference with respect to non-alimony of the same year States*. '): 1.5% to 2.0% of annual net 50% residual, debtors have 3 options: revenues Municipalities*: a) Reverse Auction under CVM or Central Bank Supervision 1.0% to 1.5% of b) Size Ordero) annual net revenues c) Direct agreement with the creditors Annual Amount Allocated to Pay Precaterios * According to the geographical location of the state or municipality •* Each state can choose a threshold 15 (1) The State of Sat Paulo has adopted this regime (link: http://www.tj.sp.gov.br/Depre/Pagamentos/Estaduais/Default.aspx) EFTA01185761  Legal Framework: Latest News Declarations of unconstitutionality Federal Supreme Court In 2013 the Emenda Constitutional EC 62/2009 has been declared unconstitutional • Two are the main changes that have been declared unconstitutional: The credit rights market has be fully repaid in tepee* 77coo 507 15 years; STF L INPRINSA Rosa re Cocreehrat Beton NObCillS finefinre. I 4 It -*Co * 0: J ArSO4 SIT *pa parceeksente inaostiblemelemesda 40e pretatonoa The revaluation of the credit rights has to be ellSo IAN* [WO* free Aped.* aop tete Perim do %aro 7, 0,00 ffledni reera aµv poweberebr proordren se Ade• 01,24. ee done at savings deposit accounts rather than Yieraetu:CeaKe67 44.Wi 4357e 4425 On *drat a netesOLOceoldee de tel. ca fr etlaCcesaboanal /gni. In Atitrai Aida I :AtalS05 smai, a.. new. o nen rap., neead b peewee° d• mesa Can • Salo. kw ,, *dub* a reOre0h.cenel .510*Auce NW 100 at CON012.03 aides!. M nob 'ego pets Na peobios. I 6% or 12% plus inflation; fog Sett mantrarta-slo rev I 7* AS am Paco:Kt. co-at-coral tweesial (ADM. pa*, • trae‘tstas ter* eiVe0* de peterrtOL Qom.* Aid* Sre I01tailpf 0 fore refteui rank*** eC Cm -ern 74. Sock d• mete. de ON lee.••••0 di IS Wt• I. detts. m no hoer t.'Rbla*a re** OJe *sena oticela env.% cot Ms 2% Zo mama* crates e ertrtmos Wald tones .wtod eduoopo•noseirerito*peem*ot 50% sic earn om AO pecrents CW010041.104 , woree Pm-netts 3 tat istan•afiecceena paorte*t pr (tom await* re a or -co or Yin co as scot dr400%COACIPS.witt %a ten& *Its asee la. e ewe doSe007007•CCeorteu 0 feLsta. msto Ara erne (70VieltSce. • rowan* 0 attkp 07* ACC no:nate:oral per afro deaser Can.. awe a Of p.a+ua ArAIAO A Acta. a rdecereas owe as Poetic e vo e vox< p***CredonYWearc:60. Titre us: Iva, nee.* 04 One,. franc (Aso to,revere ao Ma'n or • t ro:U.:10 doe .&t •te,$00* • pd** occno es eszr:Las C gnaw% orexaorrca colas eft.= 01erce00 %be wecearrcreac en an, e Pegnee -eal:seeetob • *Into do fleet% What happened as a result of the Declarations of unconstitutionality? • Credit rights are now revaluated again at 6% or 12% plus inflation; • In order to repay the full stock of credits the president of the precatorios commission, Marco Antonio Innocenti and the government minister Luiz Fux are discussing the possibility of a "Modulacao" , i.e. how to repay the credits within a maximum of 5 years. Link: http://stfjus.briportal/cms/verNoticiaDetalhe.asp?idConteudo=233520 16 EFTA01185762 Legal Framework: Latest News Press Article: "Modulação" "Modulação" Ministro do STF Luiz Fux propõe que precatórios sejam pagos até 2018 a A dívida dos Estados e municípios com precatórios deve ser paga até 2018, conforme proposta apresentada pelo ministro Luiz Fux, nesta quinta-feira. Em breve, o Supremo Tribunal Federal (STF) terá de decidir como os débitos, que somam cerca de R$ 90 bilhões, serão pagos. a Em março 2013, a Corte considerou inconstitucional a emenda que permitia o parcelamento dos precatórios em até 15 anos e previa a realização de leilões de títulos. a Em 25 março 2015, o Supremo Tribunal Federal (STF) decidiou que Estados e minicipios devem quitar seu estoque de precatorios até o fim de 2020. Link: precatorios-ate-2020-decide-stf.shtml 17 EFTA01185763 Legal Framework: Latest News "Estados e municípios devem quitar precatórios até 2020, decide STF" Ministro do STF Luiz Fux propõe que precatórios sejam pagos até 2018 O STF (Supremo Tribunal Federal) decidiu nesta A decisão da corte ainda mantém a obrigação de Estados e municípios quarta-feira (25) que Estados e municípios devem destinarem o mínimo de i% a 2% de suas receitas correntes liquidas até 2020 quitar seu estoque de precatórios —dívidas do poder para o pagamento dos precatórios. Aqueles que descumprirem a regra ficam público reconhecidas pela Justiça— até o fim de sujeitos a sanções. 2020. A estimativa do CNJ (Conselho Nacional de Justiça) é que o montante esteja na casa dos R$ 94 Durante o julgamento, o único ministro a se manifestar contrariamente às bilhões. regras definidas foi Marco Aurélio Mello. De acordo com ele, caberia ao Si? somente dizer se a emenda que tratava de precatórios era ou não O tema estava sendo discutido pelo Supremo desde constitucional, sendo inviável se criar mecanismos para futuros pagamentos, 2013, quando a corte derrubou uma emenda constitucional de 2009 que o que só poderia ser feito pelo Legislativo. instituía um sistema de parcelamento dos pagamentos em até 1,5 anos. "Estamos a substituir o Congresso Nacional. Estamos a reescrever a A legislação ainda fixava a TR (Taxa Referencial) como índice para a correção Constituição Federal (...) quando o STF avança e extravasa limites lança um dos títulos e abria a possibilidade dos chamados leilões inversos, quando o bumerangue que pode voltar å respvdiva testa", disse. credor que oferecesse o maior desconto ao Estado teria preferência para o recebimento. O ministro Gilmar Mendes, por sua vez, ponderou que uma vez derrubada a emenda constitucional, que de uma forma ou de outra havia permitido a De acordo com a decisão do STF desta quarta, todos os precatórios devem ser retomada do pagamento de precatórios, era preciso que se criassem regras de quitados até 2020. A partir daí, as dividas reconhecidas até julho terão de transição. entrar no orçamento do ano seguinte, o que evitaria novo acúmulo de débitos. "Se só declarássemos a nulidade as consequências também seria desastrosas." Os ministros ainda definiram que, até esta quarta, as títulos serão corrigidos pela TR, mas, a partir desta quinta, passa a valer um índice de preços, o IPCA- E. Para evitar futuros questionamentos na Justiça, os ministros validaram todos os pagamentos já realizados, inclusive os feitos através de leilões inversos, que passam a ser proibidos. Apesar disso, até 2020 os credores poderão fazer negociações diretas com o Estado para tentar furar a fila de pagamentos, mas o desconto máximo permitido será de 4o% sobre o valor da dívida. 18 EFTA01185764 Table of Contents ■ Introduction ■ Overview of the Credit Rights Market ■ Legal Framework ■ How to Access the Credit Rights ■ Disclaimer 19 EFTA01185765 Structuring How to Repackage the Credit Rights Available Vehicles ■ In order to invest in these credit rights we can offer two types of vehicles: ■ Issued in Luxembourg by a German Issuer with very good reputation; ■ Daily valuation; ■ Listed on the Frankfurt Stock Exchange; ■ Bahamas Fund with quarterly NAV; Fund ■ Audited Fund; 20 EFTA01185766 Note - Terms and Conditions C Chartered Nair Opus Instrument Note Name 7Y USD Enhanced Brazilian Credit Linked Bonds 2014(21) Issuer Opus - Chartered Issuances S.A. - Luxembourg ISIN DE000A13TYW2 Global Custody Clearstream Banking AG, Frankfurt Listing Frankfurt Stock Exchange (Open Market) with daily quotation Maturity Date 7 Years Currency USD Minimum Denomination 50'000 USD Minimum trading amount 250'000 USD Issue Price 100% Governing Law German 21 EFTA01185767 Fund - Terms and Conditions EQUITY Fund Denomination Enhanced High Yield Fixed Income Fund Investment Manager Prudentia Group Ltd Administration Agent Equity Bank And Trust Bahamas Limited Structure Lux Open-ended Fund Investors Qualified Investors ISIN Code BSP3720H1081 Class of Share USD Minimum Investment Euro 125k Redemption Quarterly NAV Quarterly Mgmt Fees 1% Performance Fee 0% 22 EFTA01185768 Table of Contents ■ Introduction ■ Overview of the Credit Rights Market ■ Legal Framework ■ How to Access the Credit Rights ■ Disclaimer 23 EFTA01185769 Disclaimer ■ The material provided herein is for informational purposes only. It does not constitute an offer to sell or a solicitation of an offer to buy any securities relating to any of the products referenced herein, notwithstanding that any such securities may be currently being offered to others. ■ This presentation does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. ■ It is the responsibility of any person or persons in possession of this material to inform themselves of and to observe all applicable laws and regulations of any relevant jurisdiction. Prospective investors should inform themselves and take appropriate advice as to any applicable legal requirements and any applicable taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might be relevant to the subscription, purchase, holding, exchange, redemption or disposal of any investments. ■ The given material is subject to change and, although based upon information which we consider reliable, it is not guaranteed as to accuracy or completeness. ■ Past performance is not a guide to future performance and the value of investments and the income derived from those investments can go down as well as up. Future returns are not guaranteed and a loss of principal may occur. Opinions expressed are current opinions as of the date appearing in this material only. No part of this material may be i) copied, photocopied or duplicated in any form, by any means; or ii) redistributed without prior written consent. 24 EFTA01185770