Propfund 2 Brochure

Income Generating Fund 2

SHARE IN GERMANY’S NO.1 RESIDENTIAL PROPERTY PORTFOLIO

WHY PUT ALL YOUR MONEY INTO ONE PROPERTY when you can join together with like minded investors and purchase the whole building at a lower price with higher returns.

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CONTENTS INTRODUCTION

5

INVESTMENT STRATEGY

6

PROPFUND’S ROLE

8

WAYS TO INVEST

9

ACQUIRED PROPERTIES 2011

11

HOW IT WORKS

13

PROPERTY CRITERIA

15

THE EURIX GROUP

17

WHY GERMANY

20

GETTING STARTED

22

INCOME GENERATING FUND 2

PAGE 3

As an investor in Propfund Germany you will benefit from a forecasted dividend of 7-10% PER YEAR. Over a period of 10 years, investors can expect to earn up to 170% RETURN over and above their initial investment.

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PROPFUND GERMANY, THE IDEA IS SIMPLE… Following the success of “Income Generating Fund 1” in 2011, Propfund Germany is continuing to take advantage of global economic conditions by acquiring high-yielding, tenanted residential property at lowprices.

“The idea behind Propfund is very simple”, says David Healy, Marketing Director. “Where an individual could purchase one apartment in Germany for €140,000 with a rental yield of 5.5% and with a 60% mortgage, Propfund Germany would bring all these investors together to purchase the entire building resulting in the same apartment being purchased for €100,000 with a rental yield of 8% with an 80% mortgage. With this model our investors make a lot more money with little or no involvement compared to investing privately themselves.”

Propfund Germany’s Income Generating Fund 2 is currently inviting up to 200 individual investors to share in the returns of approximately 500 properties, benefitting from economies of scale through buying property portfolios in Berlin and neighbouring cities.

Propfund Germany has put together a tailored fund that can source and quickly acquire smaller high yielding portfolios delivering greater value

INCOME GENERATING FUND 2

to its investors. Either through a SIPP or as a cash investor, there is an opportunity to share in a highly profitable self-financing portfolio of up to 500 properties worth over €30,000,000.

An investment spread across so many different properties minimises investor exposure to the performance of an individual property thus significantly reducing the overall risk.

An investment into Propfund Germany starts from €30,000.

Returns from the fund will be paid to investors each year as an annual dividend payment.

As an investor in Propfund Germany you will benefit from a forecasted dividend of 7-10% per year. Over a period of 10 years, investors can expect to earn up to 170% return over and above their initial investment.

This return is quite simply achieved through the renting out and resale of the properties within the portfolio.

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Returns paid to investors yearly forecast 7%-10% PER ANNUM.

INVESTMENT STRATEGY The already successful strategy is based upon acquiring off-market small to medium sized residential portfolios of, on average, 30 properties in one building. Each fund is forecast to generate a minimum of a 7% dividend for investors each year including strong prospects of capital growth.

Annual dividends are generated from surplus rent, leftover after all operation and finance costs. Propfund does not rely on capital appreciation and speculation, but generates returns using surplus rents generated from the strong rental market in Germany.

The acquisitions are made using a combination of private investment from International investors, SIPPs and bank financing from a mixture of German banks including HypoVereinsbank, Commerzbank and DKB. Propfund Germany is governed by strict acquisition criteria, each portfolio has to be approved by more than 50% of the investors before it can be acquired. The properties

PAGE 6

that are acquired are always of high build quality with no renovation requirements. Before a portfolio can be presented to investors that portfolio must deliver rental yields of above 7%+ and the occupancy has to be a minimum of 80%. Properties are valued as a multiple of the annual rental yield, typically on the open market an investor would purchase a similar individual property for more than 17.5 times the rental yield. Propfund Germany only builds portfolios if the average price is below 13 times the rental yield. This strategy ensures strong rental performance from the outset and in-built discount of at least 25% for its investors.

Propfund Germany is raising approximately €10,000,000 from private investors with a further €20,000,000 borrowed from German banks on pre-approved and fixed terms. The interest rate of the mortgage is fixed, meaning there is no fluctuation throughout the term of the investment, and capital repayments

will be made throughout that term reducing the overall borrowing. At no point will investors be liable for this mortgage debt as these loans are on a ‘non-recourse’ basis to investors.

Propfund Germany will manage the property portfolios for a period of 10 years, focusing on increasing the rental income and value of the portfolios. Upon reaching the 10 year exit point the intention of the fund is to sell all the properties either individually or as small portfolios, pay off the balance of the mortgage loans and distribute the profits between the investors. Propfund Germany shares in the profits at the end of the term and so are fully aligned with investor interests.

Returns paid to investors yearly – forecast 7%-10% per annum.

PORTFOLIO DESCRIPTION • • • • • • •

Residential apartment blocks Over 500 units worth over €30 mil 7%+ rental yields minimum Low purchase prices – 13 times the annual rent No renovation required All buildings tenanted Immediate income generating portfolios

INVESTMENT FEATURES • • • • • • •

INCOME GENERATING FUND 2

Invest via a SIPP or as a Private investor Invest from €30,000 German Federal Financial Authority approved €10 mil in Private Equity and €20 mil in bank financing Returns paid to investors yearly – forecast 7%-10% per annum Investors can expect to earn 170% ROI over 10 years Safe and secure investment

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WHAT IS PROPFUND’S ROLE To set up the legal construction to enable multiple investors to invest together.

To manage all the properties and collect the rent each month

To obtain approval from the German regulator to offer the fund

To co-ordinate any maintenance or refurbishment required

To raise the private equity from multiple private investors and SIPPs

To perform annual tenant reviews and increase the income from the portfolio each year.

To source, negotiate, and purchase the properties

To sell all the properties on completion of the fund

To complete all the due diligence and organise the bank financing

To pay annual dividends and profits from the sale of the portfolio after 10 years to investors.

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WAYS TO INVEST...

Depending on your stage in life and the amount you have available to invest, your Propfund returns could be ideal to increase your pension or as a way of producing extra money for a future family investment such as a planned potential move to a bigger home or to be better prepared for your children’s future needs.

You can invest in Propfund as a Private Investor, through a SIPP or through a limited company.

INCOME GENERATING FUND 2

A Self-Invested Personal Pension (SIPP) is the name given to the type of government approved personal pension scheme, which allows individuals to make their own investment decisions from the full range of approved investments.

Arguably the most prominent pension success story in recent years has been the popularity of the SIPP. This is a personal pension in which the person investing for retirement decides where their pension fund is invested. Propfund has been SIPP approved by multiple pension trustees in Ireland, the UK and the UAE.

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PROPERTIES ACQUIRED IN 2011 With the equity Propfund 1 raised in 2011 we acquired 6 portfolios totaling 240 units, bringing the total acquisitions to €12,737,500 with an exciting rental yield of 9.3%.

240 properties & 27 car spaces Portfolios purchased for €12,737,500 Current portfolio value (12.5) €14,800,000 Acquired 20% below current market value External bank financing – 84% LTV Average apartment price €53,072 (€744/sqm) Rental income – €1,184,439 Rental yield – 9.3% Rental Occupancy 98% Cash surplus pa – €266,701 Profit 7.4% pa equity invested

Propfund Germany has a proven track record in building profitable portfolios for syndicates and investment groups since 1996.

In 2011, over 80 investors joined together in the Propfund – Income Generating Fund 1 with over €4,5mil in private equity to purchase 240 apartments worth over €12,7mil.

The investors funds were pooled

INCOME GENERATING FUND 2

together with bank financing from German banks to purchase the properties. The portfolio is currently generating a rental income of over €1,1mil per annum which is a rental yield of 9.3%. By investing an average of €50,000 and pooling the funds together, each investor is getting a much higher return than if they were to invest in a single property.

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HOW IT WORKS Stage 1 Purchase the portfolio

Stag Manage th

Rent: €640/apt./month

2%-3% increase i

1

2

3

4

5

10 annual payouts of generated from the

3 SIMPLE STAGES Stage 1: Purchase the property Apartment block for sale – €1,000,000 (10 apartments at €100,000/apt) If purchased individually – €140,000/apt Annual rental income: €76,900 (13 times annual rent) Investment based on a purchase price of €1,000,000 plus 10% closing costs.

80% bank financing 20% private equity

Purchase Factor 13

Stage 2: Manage the portfolio each year Collect the annual rent: €76,000 (increase by approx 2%-3% per annum) Manage all the annual costs: €59,000 Generate the annual rent surplus: €21,000 (grows as rent increases per annum) Shareholder payout each year : €21,000 =7% of the €300,000 private equity

7% ROI each year

Stage 3: Resell the property after 10 years 2%-3% increase in rent pa = 20%-30% increase in Property value over 10 years Mortgage balance reduced by approx. 20% over 10 years Property resale value: €1,300,000 Profit from sale of the portfolio: €300,000 after all closing costs

100% ROI in 10 years

€210,000 over 10 years = 70% ROI + €300,000 = 100% ROI = €510,000 = 170% ROI

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ge 2 e portfolio

Stage 3 Resell the portfolio

Private Investors €600,000

6

7

8

9

Rent: €833/apt./month

n rent per annum

10

f 7% - 10% per annum e annual rent surplus

PROPFUND INVESTMENT LEVELS AND PROJECTED RETURNS Equity Invested

€30,000

€50,000

€100,000

€250,000

Investment Period

10 years

10 years

10 years

10 years

Total Annual Payments (70%)

€21,000

€35,000

€70,000

€175,000

(Assumes 7% per annum)

(€2,100 pa)

(€3,500 pa)

(€7,000 pa)

(€17,500 pa)

Profit from the property sales (100%)

€30,000

€50,000

€100,000

€250,000

Total profit over 10 years (170%)

€51,600

€85,000

€170,000

€425,000

€81,000

€135,000

€270,000

€675,000

(Excluding initial equity)

Total returns over 11 years (270%) (Including initial equity)

EXPLANATORY NOTES FOR ILLUSTRATION ABOVE: • Equity invested: Invest from €30,000 • Investment period: 10 years. Early exit options available.

• Total Annual Payments (70%): Rent surplus generated each year from the rental income, assumes 10 years at 7% per annum.

• Profit in year 10 (100%): Proceeds from the sale of the portfolio in year 11 will be returned to the investors.

Estimated profit – 100% of the initial equity invested.

• Total profit over 10 years (170%): Combined profit including annual dividend (70%) and the proceeds from the sale of the portfolio (100%).

• Total returns over 10 years (270%): Combined profit including initial equity invested in the fund.

INCOME GENERATING FUND 2

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2012 PROPERTY ACQUISITIONS EXAMPLES BERLIN, GERMANY Purchase price: Rental income (pa): Rental yield:

€2,750,000 €227,170 8,2%

DRESDEN, GERMANY Purchase Price:

€6,500,000

Current Rental income: €477,727 Rental Yield:

7,34%

MINDEN, GERMANY Purchase Price:

€3,500,000

Current Rental income: €282,605 Rental Yield:

Rouven Zinke Acquisitions Manager PAGE 14

8,07%

“My acquisition team has very strict criteria when sourcing suitable portfolios.

This ensures the fund can maintain its forecasted annual dividend payments and achieve its return on investment at the end of the term. The majority of the projects we purchase are off-market and sourced through banks, auctions and specialist real estate companies.” says Rouven Zinke, Acquisitions Manager. “Most of the projects are fully rented, in excellent condition and have strong prospects for growth over the next few years. We are very excited about 2012 as there are still some great offers on the market, interest rates are lowering and a lot more private equity is now becoming available”.

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PROPERTY CRITERIA Propfund Germany 2 will acquire over 500 properties in prime locations in Berlin and other cities of interest.

The acquisition team have very strict criteria when sourcing properties for their residential property fund. In order to generate a minimum of 170% return on equity for their investors, only high yielding properties will be purchased into the fund.

Prime Residential Buildings - Fund Criteria High rental income Low purchase prices

Minimum 7% €1,000/sqm

Tenant occupancy Minimum

80%

Bank financing Up to 85%

LTV

Annual Profit Minimum

7%

Rental Yields – average 7.5% Only blocks of apartments generating an average of 7.5% rental yield at the time of purchase will be acquired into the fund. This ensures the fund only acquires high income portfolios with a proven tenancy track record.

Purchase Prices – Maximum 13 times the annual rent Institutional investors will calculate the purchase price of a property as a multiple of the rental yield. This means German property prices are generally much lower than other cities in Europe. Propfund will pay an average of 13 times the annual rent which is known as the “purchase factor”. By applying this low purchase factor, investors can be assured that all the properties in Propfund have been purchased at the lowest possible price ensuring maximum potential for capital appreciation.

INCOME GENERATING FUND 2

Occupancy – Min 80% rented at time of purchase Propfund does not acquire development sites or projects in need of renovation. They only acquire apartments blocks which are already 80% occupied with tenants, avoiding the risk of vacancy rates or additional capital investment for renovations. All tenant contracts are reviewed prior to purchase ensuring that the monthly rental income is secure and will continue to generate a minimum of a 7.5% rental yield.

Bank Financing – Up to 85% LTV This portfolio will be financed from €10,000,000 in private equity and a minimum of €20,000,000 in bank financing. Banks value property based on a multiple of the rental income.

Because Propfund is committed to purchasing only very high yielding property we have agreed preferential bank financing terms with leading German financial institutions.

Specific terms include: • 30 year term – capital and interest repayments • Interest fixed for 10 years (term of the fund) • Non-recourse to investors • Up to 85% loan to value Profit on Equity – Minimum 7% Each building in the fund will generate a minimum cash surplus of between 7% – 10% pa. This will ensure that the fund pays annual dividends to investors as outlined in our forecasts.

Cash surplus is calculated by deducting all the annual expenses for the mortgage, property management and maintenance and the cost of managing the fund from the rental income. Due to the high income that the portfolio generates from the rental income each year, there will always be a cash surplus which will be distributed to investors as a percentage of the equity they invested.

PAGE 15

EURIX HOLDINGS – GERMAN REAL ESTATE EXPERTS Since its foundation in 1996, EURIX has emerged as one of the market leaders in Real Estate, Property Management & Lettings in Berlin, Germany. The Group is made up of experienced multi-lingual staff, each of them expert in either property investment & asset management, property management, lettings, renovations, finance or insurance.

Since 1996, the founders of the EURIX Group, Marco Knoblauch and Detlef Martin, have completed over 1000 property deals for themselves and joint venture partners and helped hundreds of other investors to buy quality income generating properties, making EURIX one of the most respected investment brokers and managers in the Berlin property market.

Through building Income producing assets, they have built up multi million euro portfolios which produce positive cashlow incomes. This success has only been possible because they structured their business and investment strategies to stay firm to the key principles of creating wealth through Property Investing.

The EURIX Group of companies is the driving force behind each property fund. The Asset Management team at Propfund Germany are responsible for: • Setting up the legal construction to enable multiple investors invest together.

• Obtaining approval from the German regulator to offer the fund • Raise the private equity from multiple private investors and SIPPs • Sourcing, negotiating, and purchasing the properties • Completing all the due diligence and organise the bank financing • Managing all the properties and collecting the rent each month • Co-ordinating any maintenance or refurbishment required • Performing annual tenant reviews and increasing the income from the portfolio each year.

• Sell all the properties on completion of the fund • Paying annual dividends to investors and profits from the sale of the portfolio after 10 years.

INCOME GENERATING FUND 2

Complete Turnkey investment solutions: 1. Property acquisitions 2. Finance & Insurance 3. Property rentals 4. Property management 5. Exit & resales

PAGE 17

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“The EURIX Group is a proud member of IVD which is an association of German Real Estate Professionals whose key values include quality and professionalism”. www.ivd.net The German Real Estate Professional Association

PAGE 18

“Over the last 15 years, myself and my partners have helped hundreds of local and International investors to create wealth from property investments. We have completed over 1000 property deals for ourselves and joint venture partners making EURIX one of the most respected investment brokers and managers in the Berlin property market.�

Marco Knoblauch Fund Manager

GERMANY

A VERY DIFFERENT RESIDENTIAL MARKET Unlike the British, the German population are not infatuated with home ownership; in fact Germany has the highest proportion of rented property in Europe averaging 57.4%, in Berlin this leaps to an average of 84%, nearly three times the average in the UK. Furthermore the German market is characterised by long rental terms of typically 10-15 years compared with less than 3 years in the UK. Berlin is currently seeing a net increase of residents with many governmental and large corporations relocating staff there from other German cities; this influx is driving rental demand and rents upwards.

RENTAL YIELDS ARE RISING Berlin is one of the fastest growing capital cities in Europe, however it still has one of the lowest prices for rental, averaging €5.71 per square metre.

Already attracting substantial inward investment, the rents in Berlin are widely expected to increase significantly over the next 10 years.

Bringing Berlin more in line with the rest of Germany, this alignment in the market signifies a real buying opportunity with strong fundamentals supporting the rise in rental yields.

PAGE 20

Tenancy Rates in Europe

14.5%

SPA IRL

17.7%

ITA

24.6%

UK

29.5%

FRA

37.5%

NL

45%

GER

57.4%

A POPULATION OF TENANTS

BERLIN

Germany - Rental Index (Monthly Euro/sq.m)

€12 €10 €8 €6 €4 en

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t t n g ln orf W -E ar fur ur on g b k Kö eld t lin B n ut ran am rli Ber s t s e S F H ü B D

84%

GERMANY – THE WORLD’S MOST STABLE PROPERTY ECONOMY German Real estate market is very active with institutional investors 2010/11 – Strongest economic growth since re-unification.

Very strong export economy – 2nd largest outside of China Europe’s largest Economic engine with the third largest economy in the World International businesses continue to be attracted to Germany Unemployment levels are falling Investor confidence very strong

JOIN NOW • Invest in a portfolio of tenanted buildings in Berlin and other cities of interest at heavily discounted prices • 170% ROI forecast over the 10 year term of the investment • Investors receive a return of between 7% – 10% each year • Invest from just €30,000 • Capital appreciation returned to investors once fund portfolio is sold at end of 10 year period • Fully managed fund with English-speaking trustee structure in place • Propfund has been approved by the German Financial Regulator

GETTING STARTED The process for joining the fund is very straightforward. Please follow the steps below and if you have any questions, don’t hesitate to contact your Advisor who can guide you through the process.

1. Read a copy of the investment prospectus. Decide the amount you would like to invest.

2. Complete the Investment Instruction and return this to your advisor.

3. The Trustee signs the necessary documents and returns copies of these to the investor.

4. Once you have received the documents you need to transfer the funds to the Propfund bank account.

5. Receipt of funds is first confirmed by email. Once the 14 days “cooling off period” has expired, confirmation of funds along with a share certificate is sent to you by post. This completes the investment process.

PAGE 22

DISCLAIMER:

This information serves only as an announcement of the closed property fund Propfund Germany limited company and is NOT a public offer according to German law, ยง 9 (VerkProspG) for a sales prospectus. This document has been produced from known data and information and is accurate to the best of our knowledge. Any decision to invest should be made only after careful consideration of the investment prospectus.

Propfund Germany 2, GmbH & Co. KG. FriedrichstraĂ&#x;e 82, 10117 Berlin-Mitte T: +49 (30) 499 05 09 50 E: info@propfund.com

www.propfund.com

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