____ •• 1""1\

Confidential Private Offering Memorandum

Copy Number: _

Delivered To: _

$20,000,000.00

Limited Liability Company Interests

January 15, 2005

This Confidential Private Offering Memorandum (this "Memorandum") is submitted hut __ LLC, a Delaware limited liability company (the "Fund"), on a confidential basis solely for the information of selected qualified potential investors in connection with the private placement of limited liability company interests in the Fund ("Interests").

To offer to purchase Interests, a potential investor must be an "accredited investor" as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"). No offering of Interests is being made pursuant to this Memorandum to any persons not determined by the Fund to be an accredited investor.

Each potential investor who wishes to purchase Interests must execute and deliver to the Fund a Subscription Agreement and Investor Questionnaire in the form included in a separate subscription package from the Fund. Once executed and returned to the Fund, the Subscription Agreement is irrevocable, although the Fund reserves the right to reject any subscription at its sole discretion.

1

THE INTERESTS OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND WILL BE OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE FUND AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE INTERESTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION, OR OTHER REGULATORY AUTHORITY; NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE INTERESTS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. INVESTORS SHOULD BE A WARE THAT THEY MAYBE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THERE IS NO PUBLIC OR OTHER MARKET FOR THE INTERESTS AND NO SUCH MARKET WILL DEVELOP.

THIS MEMORANDUM IS NOT AN OFFER TO SELL, NOR THE SOLICITATION OF AN OFFER TO BUY, INTERESTS IN ANY STATE OR JURISDICTION WHERE PROHffiITED BY LAW, OR TO ANY FIRM OR INDIVIDUAL TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER. THIS MEMORANDUM IS INTENDED ONLY FOR THE USE OF THE RECIPIENT HEREOF AND IS NOT TO BE REPRODUCED OR REDISTRIBUTED IN WHOLE OR IN PART.

NO REPRESENTATIONS OR WARRANTIES OF ANY KIND ARE INTENDED OR SHOULD BE INFERRED WITH RESPECT TO THE ECONOMIC RETURN OR THE TAX CONSEQUENCES FROM AN INVESTMENT IN THE FUND. NO ASSURANCE CAN BE GIVEN THAT EXISTING LAWS WILL NOT BE CHANGED OR INTERPRETED ADVERSELY TO THE FUND OR THE INVESTORS. PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THIS MEMORANDUM AS LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD CONSULT HIS / HER OWN COUNSEL AND ACCOUNTANT TO ADVICE CONCERNING THE VARIOUS LEGAL, TAX AND ECONOMIC CONSIDERATIONS RELATING TO HIS/HER INVESTMENT.

NO OFFERING LITERATURE OR ADVERTISING IN ANY FORM SHALL BE EMPLOYED IN THE OFFERING OF INTERESTS OTHER THAN THIS MEMORANDUM AND SALES MATERIALS PREPARED BY THE FUND'S AUTHORIZED REPRESENTATIVES. ANY INFORMATION NOT CONTAINED IN THIS MEMORANDUM OR SUCH SALES MATERIALS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND.

A PROSPECTIVE INVESTOR SHOULD NOT SUBSCRffiE FOR AN INTEREST UNLESS SATISFIED THAT SUCH PROSPECTIVE INVESTOR AND lOR SUCH PROSPECTIVE INVESTOR'S INVESTMENT REPRESENTATIVE HAVE ASKED FOR AND RECEIVED ALL INFORMATION WHICH WOULD ENABLE THE INVESTOR AND/OR ITS INVESTMENT REPRESENT A TIVE TO EV ALU ATE THE MERITS AND RISKS OF THE PROPOSED INVESTMENT.

AN INVESTMENT IN THE INTERESTS IS HIGHLY SPECULATIVE AND SHOULD ONLY BE PURCHASED BY INVESTORS ABLE TO LOSE THE ENTIRETY OF THEIR iNVESTMENT.

INVESTMENT IN THE INTERESTS INVOLVES SIGNIFICANT RISKS TO INVESTORS, INCLUDING: RISKS IN CONNECTION WITH THE ACQUISITION, FINANCING, LEASING AND OPERATION OF REAL PROPERTY; THE ENVIRONMENTAL CONDITION OF REAL PROPERTY; SIGNIFICANT LIMITATIONS ON THE TRANSFERABILITY OF THE INTERESTS; SIGNIFICANT PAYMENTS AND COMPENSATION TO THE MANAGER AND AFFILIATES; AND POTENTIAL CONFLICTS OF INTEREST BETWEEN INVESTORS AND THE MANAGER AND ITS AFFILIATES. SEE SECTION ENTITLED "RISK FACTORS" BELOW.

2

Table of Contents

'ill/)II, •••••••••••••••

Disclosure Regarding Forward-Looking Statements 4

Introduction 5

Executive Summary 6

Key Investment Considerations 10

Investment Strategy 11

Management 16

Corporate Entity Structure 18

Summary of Terms 19

Prior Transactions 23

Summary of the Operating Agreement 29

Tax Considerations 31

Risk Factors 36

Information Concerning the Offering and Subscription 39

3

Disclosure Regarding Forward-Looking Statements

This Memorandum includes forward-looking statements within the meaning of Section 27 A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this Memorandum including, without limitation, statements regarding projected financial performance, financial position and budgets, plans and objectives for future operations and performance are forward-looking statements. Although management believes that the expectations reflected in such forward-looking statements are reasonable, no assurances can be given that such expectations will prove to have been correct. Certain important factors that could cause actual results to differ materially from the management's expectations are disclosed in the section captioned "Risk Factors" and elsewhere in this Memorandum. All subsequent written and oral forward-looking statements attributable to the Fund or any person acting on its behalf are expressly qualified in their entirety by the Cautionary Statements.

4

Introduction

.111 ...... (the "Fund") is a newly formed Delaware limited liability company. _

the Manager and is responsible for and all investment decisions

The Manager is wholly-owned The duties

and obligations with respect to the investment activities of the Fund will be performed primarily b~

This Memorandum sets forth the investment objective and method of operation of the Fund, the principal terms of the Fund's Operating Agreement (available under separate cover) and certain other pertinent information. However, this Memorandum does not set forth all of the provisions and distinctions of the Operating Agreement that may be significant to a particular prospective Investor. Each prospective Investor should examine this Memorandum, the Operating Agreement, the Subscription Agreement and the Investor Questionnaire (the "Subscription Documents") in order to assure himself/herself that the terms of the Operating Agreement and the Fund's investment objectives and methods of operation are satisfactory to him/her.

Prospective Investors are invited to review any materials available to the Manager relating to the Fund, the operations of the Fund and any other matters regarding this Memorandum. All such materials will be made available at the office of the Fund at or such other place as the Manager may designate. The Manager will afford prospective Investors the opportunity to ask questions of and receive answers from its representative concerning the terms and conditions of the offering and to obtain any additional information to the extent that the Manager or the Fund possesses such information or can acquire it without unreasonable effort or expense.

Interests in the Fund are speculative investments and are not intended as a complete investment program. Investment in the Fund is designed only for sophisticated persons who are able to bear the entire loss of their investments in the Fund. The sale of Interests in the Fund is not open to the general public. Only persons who represent in the Subscription Agreement that they are "accredited investors" under Rule 501(a) of Regulation D of the Act will be admitted to the Fund. The Fund will not admit more than 99 Investors.

5

Executive Summary

Fund Overview .'~ ..... ;

(the "Fund") is being formed to continue applying the opportunistic, value

oriented, investment strategy of the real estate professionals of • • J, &with

the goal of generating a 15% return net of all fees and expenses. ..... .., ,

The Fund will target real estate related investments where 2 can improve the operating performance of the asset, increase value and exit the investment at the appropriate time to capture that value for our investors.

The Fund will seek to: 1) acquire commercial properties primarily located in the Northeast; 2) acquire performing, sub-performing or non-performing commercial mortgages nationwide; and 3) originate high yield commercial mortgages secured by properties primarily located in the Northeast. The Fund will not allocate a specific portion of funds to any of the foregoing investments, but instead will allocate funds among such investments based on the relative attractiveness of opportunities presented to the Fund.

The Fund is seeking up to $20,000,000 in capital commitments from a limited number of qualified investors. The Principals of the Fund will invest a minimum of $750,000. The Fund will not be capitalized with less than $4,000,000 in capital commitments.

,

The Opportunity

~elieves that that there are always inefficiencies in the real estate equity and debt markets created by poor operators, overleveraged properties and institutions making decisions for strategic rather than economic reasons. Moreover, as interest rates rise, we believe that many deals that have been surviving on low interest rates will become distressed.~tends to find those assets that can be bought at a price that reflects their current problems but also represents a discount to their long term intrinsic value. Additionally, financial institutions, due to their bureaucratic nature, present the opportunity for the Fund to originate real estate secured debt at attractive risk adjusted returns.

Investment Strategy

The Fund will seek to invest in both real estate equity and distressed debt opportunities where the Fund can enhance the value of the asset through proactive and creative management strategies. At the property level, these strategies include repositioning, curing deferred maintenance, implementing needed capital improvements, improving day to day management and implementing the proper leasing strategy. Distressed debt values will be realized by aggressively restructuring existing loans, structuring a discounted payoff or, if necessary, moving against the collateral. The Fund will also originate high yield commercial mortgages where the complexity of the deal or the speed at which the deal must be funded makes the borrower less interest rate sensitive, allowing the Fund to earn equity-like returns. The hold period of each of the Fund's investments - equity and debt - is generally expected to be 3 to 5 years.

Managing Member

.... (the "Manager") will be the Managing Member of the Fund_' is the sole Member and Manager of the Manager and will be responsible for making all investment decisions on behalf of the Fund.

6

Management and Sponsorship

The Fund will be managed by the investment professionals ....... led by •

d 7' vho has over 20 years of experience in both real estate capital markets and property acquisitions, Prior to founding ••• . f ield senior positions a and ......... ' In these senior positions was responsible for committing capital for the purchase or

origination of commercial mortgages. While managing was active in the

both distressed debt and properties. will be a Special Advisor to the Fund. was a

where he was in charge of Mortgage Backed Securities and was responsible

for up to $10 billion of trading asset was originally recruited from to set up .....

ill be a Director of • Sand will be involved in all matters

related to the management of all investments of the Fund. £ •• will be a Director of, and

will be involved in all matters related to the investment and management of the Fund. Collectively, the management team has over 70 years of experience in all aspects of real estate. See "Management of the Fund" on page 16.

Currently,'_' owns and or manages over $35 million in assets located in Connecticut, New York, Massachusetts, New Hampshire and Ohio. Since 2002..-.has been responsible for investing capital for .............. in the acquisition of real estate and real estate secured investments.

Investors I Members

Interests will be offered only to financially experienced and sophisticated investors who are able to bear the risk of an investment in the Fund and who meet the requirements set forth herein. The Fund shall admit investors ("Investors"), as Members of the Fund. The Fund will not admit more than 99 Investors.

Interests may only be purchased by persons who are "accredited investors" under Rule 501(a) of Regulation D of the Securities Act.

Minimum Investment

The minimum capital commitment by an Investor is $250,000 for each Investor, although this minimum commitment may be waived by the Manager.

Investment Structure

The Fund intends to make investments primarily through Special Purpose Investment Vehicles (SPIV's) to insulate the Fund from liabilities related to specific investments. The Fund will seek to employ non-recourse debt, when possible, for investments that are leveraged through an associated SPIV. The amount of leverage that will be used by the Fund will vary depending on the nature of the particular investment. Certain investments may not be leveraged, while other investments may be highly leveraged. In each case, the Fund will look to employ the amount of leverage that will maximize returns to the Fund while maintaining a prudent risk profile.

Target Returns

._...., targeting a compounded return to Investors of 15% per annum after all fees and incentive compensation. However, no assurance can be given that Investors will experience any specific rate of return on a yearly or cumulative basis.

7

•••••••••••••••••• 1>1» 'I~l}i(Hii:

{i!!! .. I~:I •••••••••••••••••

Fees and Expenses

In consideration for the service to be provided to the Fund by a ; the Fund shall be obligated to pay _an annual management fee equal to 1.5% of the total capital committed by the Fund. Additional reasonable and customary fees may be charged from time to time for other services provided by __ to the Fund.

Incentive Compensation

The Manager will be entitled to 20% of the profits generated by the Fund after a 9% preferred return is paid to the Investors (see Summary of Terms as well as the Operating Agreement for a more comprehensive discussion of compensation to be paid to the Manager).

Offering and Organizational Expenses

The Fund will bear offering and organizational costs up to an amount equal to 1% of total capital commitments. "--will bear any offering and organizational costs over that amount.

Operating Expenses

The Fund will be responsible for all expenses incurred during the investigation, acquisition, management and disposition of assets. These expenses will include but not be limited to appraisals, due diligence expense, property management, loan servicing, legal, financial accounting, leasing and property brokerage.

Distributions

Subject to the Fund's limited ability to re-invest capital under specified circumstances, cash available for distribution from a particular investment will be distributed on at least a quarterly basis. See the section of this Memorandum entitled "Summary of Terms" for a description of how any such cash will be distributed.

Transfers

There is no public market for the Interests and one is not expected to develop. No transfer of Interests may be made other than with the prior written consent of the Manager.

Legal Matters

The Interests described herein are not registered under the Securities Act and must be acquired for investment purposes only and not with a view to the distribution thereof. In addition, the Fund is not being registered under the Investment Company Act of 1940, as amended. Offers of Interests will be made only to qualified recipients under applicable law.

Reports

Investors will receive financial statements of the Fund and information necessary for completion of Investors' U.S. federal tax returns within 90 days after the conclusion of its fiscal year. Investors will also receive quarterly updates within 60 days of the end of each quarter.

8

Fiscal Year

The fiscal year of the Fund will end on December 31 of each year.

Subscriptions

Any investor desiring to subscribe for an Interest should execute the Subscription Agreement, including the Investor Questionnaire in the form furnished under separate cover by the Fund. See "Information Concerning the Offering - Subscription Procedure."

Accountants

Counsel

9

Key Investment Considerations

• Experienced Management Team

• Over 70 years of collective experience in all aspects of real estate - including acquisition, financial restructuring, financing, leasing, management and rehabilitation

• Strong track record of success in both institutional and entrepreneurial environments

• Extensive knowledge of both the real estate property markets and the real estate capital markets

• Value Added Strategy

• Identify assets that are poorly managed, under capitalized, suffer from deferred maintenance or have high current vacancies and therefore sell at a discount to their intrinsic value

• Target assets that have recognizable upside that can be reasonably achieved within 3 to 5 years via the proper asset management, leasing and exit strategies

• Exploit inefficiencies in the capital markets through acquisition of distressed debt and origination of high yield commercial mortgages that do not fit neatly into institutional parameters and conventional pricing

•

Unique Deal Flow

• Strong relationships developed over the last 20-plus years with financial institutions, brokers and property owners will allow the Fund to source" off market" deals.

•

Capital Preservation and Risk Mitigation

• The Fund seeks to limit downside by performing rigorous due diligence, by observing pricing discipline during purchase negotiations, by acquiring assets that are readily marketable once the issues depressing the value have been remedied, and by being prudent in the use of leverage

• Alignment of Interests

• The Principals of the Fund are making a significant investment under the same terms and conditions as our Investors. Ide and the management team will contribute a combined minimum of $750,000 to the Fund.

10

_____ il1fiji

Investment Strategy

·~il~I:&I •••••••••••••

Selection of Investment Targets

The Fund will search for market and management inefficiencies that create investment opportunities. Specifically, the Fund will target "value added" commercial properties and distressed commercial mortgages and seek to originate commercial mortgage bridge loans that will generate our target return of 15% net of expenses and fees .

..... believes that the Fund can achieve excess risk adjusted returns by being highly selective in the opportunities it pursues, conducting thorough due diligence, patiently acquiring assets at the right price, adding value during the hold period and exiting at the appropriate time to maximize proceeds.

Often regulatory, market or senior management pressures force an institution to sell an asset when it cannot be priced to reflect its full value. Additionally, the Fund will look to invest in situations that due to timing, complexity, or the nature of the assets preclude other investors from competing for these assets.

Other assets that the Fund may invest in include residential mortgages, investment grade and non-investment grade Commercial and Residential Mortgage Backed Securities, asset backed securities, municipal bonds secured by real estate and short term investment grade money market instruments. The Fund may also seek to hedge its exposure to interest rates, or real estate credit via interest rate caps, interest rate swaps, real estate-related credit derivatives, short sales or futures.

Anticipated Deal Sources

___ as experience with and expects to see deal flow from the following types of sellers:

Opportunity Funds

• Funds nearing the end of their term looking to lock in returns are often aggressive, realistic sellers

.. Both and (Fund I assets) were bought from funds

that were winding down

Financial Institutions

• Financial Institutions looking to clean up their balance sheets are good sellers of non-performing loans ."_"'was a non-performing loan purchased by Fund I from a conduit

Corporate Real Estate Owners

• Identify owners who are selling real estate assets for strategic rather than economic reasons and may therefore be less price sensitive

Private owners

• The Fund will work its network of attorneys, lending officers and brokers to find deals where the seller is under financial pressure

11

]iiiliilli!jl~llr.·· _

Proposed Investment Criteria

The following criteria are general in nature and not strict guidelines for investment.

Direct Property Investment

Property Types Office, Industrial, Multifamily, Retail

Markets East Coast. Focus will be on CT /NY /NJ Metro Area and New England

Typical • Motivated sellers

Acquisition Profile • Property is well located with strong upside

• Reason property is underperforming is recognizable and curable & Undercapitalized asset or owners

• Poorly managed assets

• Needs repositioning

• High current vacancies

• Below market rents

• Short-term lease rollover risk

• Suffering from deferred maintenance

Transaction Size

$4 million and up

Real Estate Related Distressed Debt

Product Types Underlying Assets

Commercial mortgages

Commercial real estate (multi-family, office, industrial, retail, healthcare and residential), franchise and small business portfolios

--------------------- -----------------------------------------------------

Sources of Distressed Debt

Banks, insurance companies, conduit lenders, special servicers, finance companies

Markets National. Primary focus will be on major East Coast markets

Typical • Debt can be purchased at a discount to Edgewood's estimated value of underlying asset

Acquisition Profile • Underlying asset is readily marketable

• Total investment below replacement cost

• Motivated sellers

• Debt instruments with structural defects that can be cured.

• Distressed/poorly managed/poorly leased/under capitalized underlying assets

• Current or anticipated bankruptcy issues

• Non-performing loans

• Sub-performing loans with low current debt service coverage ratios or anticipated problems at maturity

Transaction Size

• Individual loan ($1 million and up)

• Loan Portfolio ($3 million and up)

12

••••••••••••••• <il~Jj$IIi!i!i

Jill illlil~I"<' •••••••••••••••

Opportunistic Lending

Program The Fund will lend money where its ability to provide fast, flexible funding will allow it to earn a

Description coupon, fees and in some cases a profit participation that will generate a leveraged return above 15%

-----

Security

Mortgage(s) on real property, a pledge of Fund interest or an assignment of an existing loan and its security documents

Property Types

Multi-family, office, industrial, retail, hotel, healthcare and residential

LTV

Generally up to 65%

Markets

Major East Coast Markets. Focus will be on the CT INY INJ Metro Area and New England

Lien Position

First, subordinate or mezzanine

Interest Rate

8-16% plus points or profit participation

Loan Term

1-3 years; Typical deal will be 1 year with I-year extension

Transaction Size

$1 million and up

Invest at a Discount to Intrinsic Value

The Fund aims to make investments where assets can be acquired at a discount to their intrinsic or underlying value. The real estate market and the distressed debt markets are highly inefficient due to the complexity and uncertainty surrounding each asset. By performing rigorous due diligence, the Fund can exploit these inefficiencies. Also, by being both creative and very responsive in select situations, the Fund may be able to make investments that meet the seller's non-price-related needs, thereby making the seller less price sensitive.

Identify the Optimal Exit Strategy

For each prospective investment, prior to acquisition, the Fund will devise a management and exit strategy for each asset to enhance value. The typical hold period for the Fund's investment will be 3 to 5 years.

Properties that are acquired directly or through foreclosure will be intensively managed to increase operating cash flow. The Fund will develop a business plan for each asset to maximize the disposition value of the asset. Value enhancement strategies will include improving the quality of the property management, implementing an aggressive leasing program, remediating deferred maintenance, implementing appropriate capital improvement programs, repositioning or redeveloping the property.

In a typical loan portfolio acquisition, loans will be stratified according to performance status with performing loans sold to banks or into a securitization. Value will be realized for sub and non-performing assets through discounted payoffs, loan restructuring and subsequent sale, targeted loan sales, securitizations and liquidation of the collateral. In cases where the Fund takes title to the property through foreclosure, the Fund will employ the same value enhancement strategies as employed with direct property acquisitions.

In their careers, members of the Fund's management team have acquired and resolved 120 loans representing over $300 million of principal by pursuing one of the appropriate strategies outlined above.

13

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Capital Preservation and Risk Mitigation

While seeking to achieve its overall return objectives, the Fund will seek to achieve capital preservation and risk mitigation through the following tactics:

• Quantify the downside risks for each prospective investment, prior to acquisition

• Acquire each investment through a Special Purpose Investment Vehicle (SPIV) set up specifically for that acquisition. Opportunistic loans that are made by the Fund will be made through a single LLC set up for that purpose

• Acquire debt at a discount to both face and realizable value

• Acquire properties at a discount to both current market values and replacement cost

• Obtain non-recourse financing at the SPIV entity level whenever possible

• Invest no more than 25% of total capital commitments in any single asset or portfolio purchase

• Build a portfolio of investments that is diversified by property type, geography, asset type (properties and debt) and performance status (in the case of loans; performing, sub-performing and non-performing)

14

ieii:I;lfuIIJ!!IW'I· ••••••••••••••••••••

Investment Process

• Opportunity • Preliminary • Prepare • Assign legal • Discuss and
Funds Screening Investment counsel finalize leasing
Memo strategy with
• Banks • Financial • Review of legal agent
/Sensitivity • Discussion of and financial
• Conduits Analysis asset quality documentation • Select property
• Insurance vendors
• Competitive • Detailed cash • Formulate
Companies Property/Market flow analysis specific strategy • Frequent review of
• Corporate Real Analysis and discussion for the asset operating numbers
Estate Owners • Property • Discussion of • Review of • Frequent review of
• Private Sellers Inspection financing lender term capital improvements
options sheets as needed
• Initial Bid
formulation • Final bid • Select lender • Investor Reporting
discussion
• Initial deposit • Close supervision of
• Final funding loan performance 15

Management

CVJS.w ------

'_'is the Managing Partner of' I and will have complete responsibility for all investment, financing and disposition decisions. has extensive experience in all aspects of real estate including acquisition, rehabilitation, management, leasing and investment. Throughout his career , has been a principal on over $1 billion of real estate transactions including loan originations, loan purchases and direct equity investments. He has been directly involved with over $10 billion of real estate transactions as an agent. Under his management, Fund I has made 4 major investments. is also a General Partner in other real estate transactions with over 200,000 square feet of residential and commercial space. has been in the real estate business for his entire career either through direct ownership of properties and mortgages or through senior real estate

capital markets positions he has held and .

•••• S ••• sold founded in 1991, 1998. In all of his senior positions,

'_was responsible for committing capital for the purchase or origination of commercial

•••• ;.:II~r.e~c:ei:v~ed=h:is:A:.~B~. ~fr~o;m.u & I md his MBA from the

• currently serves on the Boards of

andthej •••••••

.-.

~ is an Investor and a Special Advisor to the Fund. He will provide guidance on overall investment

strategy, as well as general advice regarding acquisition, financing, management and disposition. Currently, • 7 is a Principal of _ I and serves as an advisor to a private real estate

value-added fund. He has over 20 years of experience as a senior real estate executive. Previously, was a

Managing Director and Board Member at (the investment banking subsidiary of ., where he

was in charge of Mortgage-Backed Securities and was responsible for up to $10 billion in trading assets._' was originally recruited to start 7. 2 which handled more than $6 billion in real estate equity and debt transactions through offices in New York, Chicago, Los Angeles, London, Paris and Tokyo. Prior to

-....... was a Vice President in Real Estate Finance at I • eceived a B.S. in Civil

Engineering fro~and a Masters in Urban Systems Analysis at th

• •

a Director of ._. i~ble for overseeing the asset management, development and

leasing of Edgewood's assets. Prior to joining'_'" • Lwas with in Manhattan, where she oversaw the management of 6,000 residential units ($370 million) and one million square feet ($185 million) of office space, specializing in value-added and opportunistic real estate assets. From 1995 to 1999~as

with ~ in responsible for a portfolio of approximately 500,000 square feet of historic

rehabilitation office in the financial district as well the surrounding suburbs. From 1992 to 1995, she was

with as a Property Manager. From 1989 to 1992, she was with _ as a

Tenant Coordinator in their Northwest Regional office graduated from . May 1989 with a BA in Economics.

16

•••••••••••••••••• ,.$.r~

-

~s a Director of •••• ~ He is responsible for risk/return analysis and underwriting of all of the

Fund's acquisitions, dispositions, joint ventures and development acquisitions. Additionally, Mr. has a central role in the day-to-day management of over 30 million dollars o~s real estate assets; he writes the quarterly investor reports and works closely with both legal counsel and lenders for all financings. He joined 7 as an Associate in 2002 and has helped source, negotiate, and underwrite over $18.5 million of commercial real estate that is currently in Fund I's Portfolio. Over his career, Mr. has reviewed and analyzed several hundred million dollars of real estate in the Northeast. He has extensive experience in property level financial analysis (budgets, balance sheets, P&Ls, lease files, etc.) and developed an extensive personal network of brokers and

lenders in the Northeast region. Prior to joining Mr 2 worked with 's CMBS Group

at ~ where he supported t~e purchase of over $120 million in whole loans. received a ~A

in government fro~

•

__ is a Vice presiden:' of ~ i; the ~e~l Estate Accounting Manager ~f

••••••• she is responsible for the oversight of all accounting and financial reporting for the Company's Fund's real estate transactions and investment activities. Specifically, she is in charge of the review and analysis of financial statements and reporting; including the Fund's GAAP compliance, cash flows, income tax reporting and other property specific reporting. 2 nanages all investors' activities including capital contributions, distributions and tax filings. Additionally she is responsible for preparing global financial models for the Fund's investments, overseeing the accounts receivable/payable, lease administration, budget preparation and estimates and variance analysis. Prior to joining? 5 01, ? i a held a senior accounting positiona •••••• in

• ; V I graduated from ith an MBA in Real Estate and Finance .

..

17

Corporate Entity Structure

"'\~.: ----

Opportunistic Lending

Loan Porttolio

Loan Acquisrtron

Real Estate Acquisition

Real [state Acquisition 1

Loan Acquisition 2

Loan Acquisition 3

Loan Acquisition I

Real [state Acquisition 3

Real [state Acquisition 2

18

Summary of Terms

The following is a summary of the principal terms of the Fund and is qualified in its entirety by the more detailed discussions found elsewhere in this Memorandum and in the Operating Agreement, which will be delivered under separate cover. Prospective Investors are advised to read the Summary of Terms in conjunction with the section herein entitled "Risk Factors."

-'-'"--,,,-,---

Form of Organization

"Fund") will be organized as a

Delaware Limited Liability Company.

Manager

Advisor

will be the advisor to the Fund . ........ 11 be responsible for the management and investments of the

Fund. ill be the Managing Partner 0 3 • ; a

¥ ill be a to the Fund. will be a Director

of $15 r nd will be involved in all matters related to the management of

all investments of the Fund. • mine will be a Director of

...... 'nd will be involved in all matters related to the investment and

management of the Fund. will be a Vice President and

responsible for all matters related to accounting and financial reporting for

the Fund. s the sole manager and member of ••••••••

Objective

The Fund is being formed to continue applying the opportunistic, value oriented,

investment strategies of the real estate associated with the

management three types of

investments that the Fund will target are: 1) acquisition of properties on a direct basis primarily located in the Northeast; 2) acquisition of performing, sub performing or non performing commercial mortgages nationwide; and 3) origination of high yield commercial mortgages secured by properties primarily located in the Northeast.

Targeted Returns

The Fund is seeking to achieve an overall pretax return to the Investors, net of all compensation to the management, of 15%. However, no assurance can be given that Investors will experience any return on a yearly or cumulative basis.

Size of the Offering

The Fund is seeking to raise up to $20 million of Capital Commitments.

Capital Commitments By the Principals

Principals and the management team associated with the Fund will contribute a minimum of $750,000.

Diversification

Not more than 25% of the aggregate capital raised by the Fund will be invested in any single transaction.

19

Leverage

The Fund intends to make investments primarily through Special Purpose Investment Vehicles (SPIV's), although at the Manager's discretion certain investments, such as short-term loans, will be done directly by the Fund. The Fund will, whenever possible, secure all financing at the SPIV level to insulate the Fund from liabilities related to the debt used to acquire investments. The Fund expects to obtain financing for most acquisitions. Certain investments may not be leveraged, while other investments may be highly leveraged.

~-'-'--',--,-,-------------------------------------,----,--------,-,--,---

Minimum Commitment

The minimum Capital Commitment for each Investor shall be $250,000. This minimum commitment may be waived by the Manager at any time.

--------------------------------------------

Term

The term of the Fund will e4)ire ten (10) years after formation, subject to up to three one-year extensions at the option of the Manager.

First Closing

The Fund may have a First Closing at any time after Investors have made capital commitments of at least $4 million. At the First Closing, each Investor will contribute at closing an amount equal to the greater of (a) 5% of such Investor's total capital commitment, or (b) an amount the Manager anticipates to be needed for investments then contemplated. Subscription proceeds will be

held in escrow escrow agent, until the First

Closing. The First Closing is expected to be in the 1st Quarter of 2005.

Subsequent Closings

The Fund may have subsequent closings with Investors up to six months after the First Closing, as subscriptions are received by the Fund. In the event that one or more additional Investors or an existing Investor makes an additional investment in the Fund subsequent to the First Closing, that Investor will be responsible for its pro rata share of Offering and Or~lmizational Costs and will pay the Fund a rate of the prime rate plus 2% on the amount of its pro rata capital contribution on any investments made prior to its investment in the Fund.

Capital Calls

Capital Contributions will be called by the Manager as needed to fund investments or to pay Fund expenses. Capital call notices will be sent to Investors not later than 5 business days before the funding date.

Investment Period

The Investment Period will extend to two years from the date of the First Closing.

Reinvestment

Funds received by the Fund prior to the third (3rd) anniversary of the First Closing representing a return of capital on an investment may be reinvested prior to such date.

Management Fees

The Fund will be required to pay to'_an asset management fee of 1.5% of the total capital invested by the Fund. Other reasonable and customary fees will be paid to"_"y the SPIV's from time to time for various services provided to the Fund b~

20

U~jill_'.", ••••••••••••••••••

Expenses

The Fund will be responsible for all expenses incurred during the acquisition, investigation, management and disposition of assets. These expenses will include but not be limited to appraisals, due diligence expense, property management, loan servicing, legal, financial accounting, leasing and property brokerage .

Advisor's Expenses

••••• h:s an advisor to the Fund, will be responsible for all normal overhead expenses incurred while running the day-to-day operations of the Fund, including compensation for employees, rent, expense for office equipment and supplies and professional services.

Distribution of Investment Proceeds

All cash available for distribution from a particular investment will be distributed on at least a quarterly basis as set forth below. For purposes of applying the following provisions, all assets acquired as part of a single portfolio shall together be deemed a single "Investment" and the capital allocated to any investment shall be deemed to include an allocable share of all management fees and any capital contributions used to Fund expenses not directly related to a particular investment.

(1) First, 100% pro rata to the Investors until the Investors have received a 9% compounded cumulative annual return on their total capital allocable to such investment calculated from the time of such investment;

(2) Second, 100% pro rata to the Investors until they receive a return of their total capital allocable to such investment;

(3) Third, 100% pro rata to the Investors until they receive any shortfalls in the amounts described in (1) and (2) above relating to investments or portions thereof that have been disposed of;

(4) Fourth, subject to the deferral of a portion of the Manager's distributions as described below, 60% to the Manager and 40% to the Investors until the Manager has received 20% of the total amount distributed to all members of the Fund (excluding amounts distributed as a return of capital) in respect of such investment or any investment or portion that has been disposed of; and

(5) Fifth, subject to the deferral of a portion of the Manager's distributions as described below, 80% to the Investors and 20% to the Manager.

Notwithstanding the foregoing provisions, at any time that the Investors shall not have received aggregate distributions sufficient to return all their capital contributions plus a 9% annualized return thereon, 50% of all amounts otherwise distributable to the Manager pursuant to paragraphs (4) and (5) above (the "Deferred Distributions") will instead be distributed to the Investors. At any time that the Investors have received aggregate distributions sufficient to return all their capital plus a 9% annualized return thereon, all amounts otherwise distributable to the Investors pursuant to paragraphs (1) through (5) above will be distributed to the Manager until the Manager shall have recouped the Deferred Distributions.

21

••••••••••••••••••• :'F.!f

Offering and Organizational Expenses

Reporting

The Fund will bear up to 1% of the total capital raised for offering and organizational expenses. The Manager will bear any offering or organizational costs above this amount.

Investors will receive financial statements of the Fund and information necessary for completion of Investors' U.S. federal tax returns within 90 days after the conclusion of its fiscal year, which shall be December 31. Investors will also receive quarterly updates within 60 days of the end of each quarter.

Use of Special Purpose Investment Vehicle

The Fund will make investments either directly or indirectly, through Special Purpose Investment Vehicles ("SPIV's"), at the discretion of the Manager. For certain investments, such as short term loans, the Manager may choose for the Fund to make such investments directly. When used, SPIV's will serve to insulate the Fund from liabilities related to specific investments, facilitate securitized transactions, minimize tax liabilities in certain cases or facilitate the co-investment of Funds with outside entities.

Co-investment

Indemnification

The Fund expects to co-invest with both institutional and private entities in various transactions. These entities mayor may not be sponsored by Edgewood.

The Fund will indemni~d the Manager, their employees, agents and affiliates against all losses, liabilities, damages and liability insurance expense incurred in connection with any claim or proceeding arising from their services for or relating to the Fund except to the extent such claims arise out of willful misconduct, bad faith or gross negligence.

Amendments And Waivers

Transaction and Asset Management Fees to be Paid by the SPIV's to the Advisor

Provisions of the Operating Agreement may be waived by the Manager with consent of the majority in interest of the Investors. No amendment to the Operating Agreement may increase the capital contributions or the liability of an Investor, unless such Investor has consented to such amendment.

The SPIV's will pay to'_ reasonable and customary fees for acquisition, management and disposition of acquired assets.

Other Expenses Incurred by the SPIV's

The SPIV's may also incur third party expenses including but not limited to servicing, asset management, appraisals, disposition fees, brokerage fees and leasing expense.

22

Prior Transactions

-N%frl~- •••••••••••••••

Investment Portfolio of Fund I

" •••••••••••• ("Fund I") completed its first closing on July 27, 2003. Total capital commitments for Fund I totaled over $6.5 million. Fund I has made five investments to fully invest all of the equity raised by Fund I.

Fund I currently owns two office properties totaling 179,915 square feet, a 51,500 square foot self storage facility, a 140 unit multifamily property, and a small minority investment in a redevelopment project.*

The overall portfolio has a leverage ratio of 75% based on original purchase price and a weighted average cost of debt of 4.9%.**

Through the 3rd Quarter of 2004, Fund I has returned an annualized yield from property cash flow of 4.73% on average equity outstanding.

As of June 30, 2004, the investments made by Fund I have projected IRRs between 9% and 34% (based on total equity invested).

Equity Projected
Date Property Total Cost Invested °/~ IRR***
Acquired Investment Type Location (in millions) (in millions) Debt Strategy (thru 1212006)
34.0%

9.1
6/27/2003 Apartment £ 3.2 1.6 60 Redevelopment 23.4

(thru 12120(8)
5/14/2004 -- Office -- 7.3 1.8 75 Leasing 19.1 * Fund I has made a $100,000 investment in a redevelopment project being undertaken by to convert a former Brewery into 79 residential units. Commonwealth has stated that they will recapitalize the project in early 2005 and buy back Fund I's position at cost.

** The "weighted cost of debt" excludes the cost of amortizing the principal of the first mortgage loans.

*** IRRs shown are projected IRRs assuming disposition oj R December 31, 2008 and all other assets on December 31, 2006. Prospective investors should note that the projected returns shown herein are based on cash flow projections and assumptions which the Manager believes to be reasonable, but there can be no assurance that such returns will actually be realized.

Acquired: 1/9/2003

located in '_-is a 52,906 square foot Class A office building. The exterior of the building is very attractive incorporating

brick and white limestone. The building offers its tenants the convenience of its proximity t as

well as the scenic views 0 The building is 100% occupied by eight tenants.

Major Tenants:

;2::: :==r 2 u.

Description:

23

•••••••••••••••••• I"I_,iliJIii'

Hiii •• :" --------_.

Investment Rationale:

• Strong going in yield of 9.3% on existing NOI of $456,000

• Limited lease rollover through long term leases executed at the building

• Purchased at a discount to replacement at $92/psf

• 84% occupancy created upside via additional leasing

• Additional upside through the ability to build a 37,000 square foot building on the site Value Added and Current Status:

• Increased NOI 36% from $456,000 to $620,000 in eighteen months

• Raised occupancy from 84% to 100% in eighteen months through two expansions of existing tenants and two new tenants

Projected IRR: 34.0%

* IRR assumes a sale at the end of 2006 at a 9.2% Capitalization Rate

Acquired: 1/14/2003 Description:

_ated ~ directly off exit 25 of 1-84, is a 51,500 square foot 448 unit facility. The facility sits on 4.7 acres and has additional

room to construct more units. During 2003, econfigured the property and added 64 climate

controlled units to the existing 384 dry units.

Investment Rationale:

• Strong going in yield of 9.7% on existing NOI of $300,000

• Historically high occupancy of approximately 90%

• The best located and best maintained self storage facility in the market

• Upside through reconfiguring largest unit type to create additional units Value Added and Current Status:

• Reconfigured 17 large, inefficient units into 81 smaller, climate controlled units to increase the unit count by 64 units

• The new units added over $65,000 of additional potential rent per year

• Improved upon existing marketing efforts by increasing frequency of direct mailing, increased size of Yellow Pages Ad (accounts for 80% of rentals) and new more prominent signage

• Adopted a more diligent, aggressive approach with delinquent renters to realize more revenue

• Despite improvements to the property the performance has lagged our original business plan Projected IRR: 9.1%

* IRR assumes a sale at the end of 2006 at a 9.5% Capitalization Rate

Acquired: 6/27/2003 Description:

rchased a $4.4 million non-performing loan on a 140 unit multifamily property in June 2003 for $3.125 million. The property consists of an existing 140 unit class B apartment community of seven buildings on two separate land parcels totaling 5.5 acres At the time of the note purchase the property was 43% occupied with over 30% of the existing tenants delinquent on rent.

24

•••••••••••••••••• '< •.• '.'1).

Investment Rationale:

• Purchased at a significant discount to intrinsic value

• Property appraised at $5.7 million in Sep. 2002

• Projected stabilized value over $4.5 million

• Located in the fastest growing town it F $

• Monroe recently established its own school district and has built brand new schools

• The property is located less than one mile from 1-75, which is the major interchange between

__ .nd ••

• s approximately 20 miles from both •••• ll.n.tlI ••• and is clearly in the path of growth

Value Added and Current Status:

• Successful in the foreclosure proceeding taking legal title on April 9, 2004

• Completely repositioned the property through the renovation of over 85 units including all common areas

• Increased the economic occupancy from 40 units to over 120 or 85.7%

• Over $350,000 of NOI projected for Fiscal Year 2005

• Drastically improved the properties perception and attractiveness with tenants and within the community Projected IRR: 23.4%

* IRR assumes a sale at the end of 2006 at a 9.0% Capitalization Rate

Acquired: 5/15/2004 Description:

The property consists of an eight story office tower which is 76% leased to eleven tenants. The adjoining building is a 24,000 sf bank branch built in 1900 and net leased to~ough 2008. The two buildings are located ori .t in downtown •••••

approximately one block from th . The property was recently renovated with a new

lobby, entrance and common areas.

Major Tenants:

.? - ..... ---- __ .r:_---

Investment Rationale:

• Strong going in yield of 8.3% on existing NOI of $600,000

• The purchase price of $57.87 per square foot is a significant discount to replacement cost

• Additional upside through the leasing of 21,859 square feet

• Located directly across the street from the redevelopment of the which will bring

luxury residential units and national retail tenants to the area

• Average leases in the building are 10%-15% below the average rents for the market Value Added and Current Status:

• On June 3, 20~4::~5=!:a:nniounced a commitment of $180 mm to redevelop the

is located. This commitment will help fund the building of

and the demolition of th The proposed

project for th site will include a hotel, conference center, the new home of thel •• 2 ••••

•••• nd 280 residential units.

• Several market rate residential projects totaling over 400 units, most of which are adjacent t~ ••••• , have been completed and are successfully leasing up

Projected IRR: 19.1%

* IRR assumes a sale at the end of 2008 at a 9.5% Capitalization Rate

25

!i'I~ .•••••••••••••••••••

Transactions Prior to Fund I

••••••• transaction experience extends well beyond the Fund I investments. Summarized below are other selected transactions where he was a general partner or principal in the deal and was responsible for sourcing, underwriting, acquisition, value creation and exit strategy. Throughout his career, he has been able to identify investments where the acquisition price was significantly below the realizable value and through entrepreneurial, creative management and re-leasing strategies he has been able to generate superior returns for investors, often exceeding both stated goals and competitive investment alternatives.

Investment

Property! Asset Type

Equity

Total Cost Invested

(in millions) (in millions)

Strategy

Status

Equity IRR'

Location

Loans

$21.2 .36

Restructure

Realized

84.0%

Trading

$21.2

Loans

.7

Realized

74.0

Flex

5.5

.55

Redevelopment

Owned

34.0

In contract

62.1

Multifamily

.25

Restructure

s

......................................... _-_ _--_ _ .. _ _-_ _ _-_ _--_._._._---_ _-_._--_._. __ ._._. __ ._ .. _._ __ ._._ __ ._ _ _._-_. __ .

&

40.0

1.65

Realized

17.4

Multifamily

.375

Leasing

Realized

Realized

182

1.75

* IRRs are actual for investments that have been realized and projected for assets still owned. Prospective investors should note that the projected returns shown herein are based on cash flow projections and assumptions whic,..IIi •• lieves to be reasonable, but there can be no assurance that such returns will actually be realized.

Loans

Trading

225

225

Com. Mtgs

375

As founder and Managing Director of the Commercial Mortgage Backed Securitization Group at was responsible for the origination of $375 million in loans in 2001. These loans were all bifurcated into an A/B structure and the A-notes were securitized either

in the $848 million CMBS transaction or the

$687 million transaction.

Additionally, traded over $225 million of commercial

mortgage whole loans at significant profitability for the Bank.

In December 1993, purchased a non-performing blanket mortgage secured by 300,000 square feet of warehouse/flex space located

in for $4 million. _

negotiated a deed in lieu of foreclosure, then sold 200,000 square feet to pay down the $3,500,000 acquisition loan to $1,900,000. The remaining 100,000 square feet were the most desirable properties and are still owned by Millwood. The remaining properties are located ~

de The properties, which are

100% occupied, generate a Net Operating Income of $532,302. At a Capitalization rate of 10%, the properties are valued at $5,323,020. The properties have been refinanced and the original investment of $502,000 was distributed to the partners at the time of the refinance.

26

In November 1995, used the equity in the warehouse portfolio as the down

payment in the purchase of a 29,440 square foot six story office building in th

7

a submarket The property is generating a Net Operating Income of

$407,038. The property was purchased for $1,450,000, which is $49.25 per square foot. In the current market, this property is worth between $150 to $180 per square foot placing the value of the property between $4,400,000 and $5,300,000.

If all the properties were sold in 2004 at the lower range of their valuations, they would generate an IRR of 30.8%.

In December of 1994,

dollar underlying mortgage on a co-op knl(o;w.n.;ais::::::::::'~in

••••••••• for $1,250,000 from'

The mortgage was secured by 84 of the complex's 96 units. en acquired the remaining 12 units from the owners and converted the complex back into a rental. The total cost to buy the underlying note and the remaining 12 units was approximately $1,650,000. The investors have received a full return of capital and received distributions of approximately $250,000 per year. The property is under contract for $7.3 million.

In 1995 purchased a note with a face amount of $9,000,000 for $5,100,000. The note was secured by mortgages on 160 multifamily units in several different buildings and locations. Rescue took ownership of the units through a friendly foreclosure and sold off all but 73 units that are known as

........ The cost basis 0 was $1,750,000. The property was sold in

April of 2004 for $3.9 million and the realized IRR was 17.4%

In April of 1993, urchased two non-performing loans with a face amount of $10,400,000 secured by cross-collateralized mortgages on a 180,000 square foot shopping center in and a 210,000 square foot shopping center in for a total cost of $1,946,000. This acquisition had 88% financing, requiring only $226,000 of equity to close. An additional $75,000 was invested to buyout the lender's equity participation. In September of 1994, ~ceived a paydown of $3,700,000 and through August of 1999 an additional $1,240,110 for total payments of $4,940,110. Total profitability on the deal was $2,994,110. This represents over a lOx return on capital invested. This transaction generated an IRR of 182%.

27

• •••••••••••••••••. ·.·!.llli

•••• working jointly with. , purchased 23 loans representing $21,226,142 in unpaid principal

balance from the RTC in July 1992 for a dollar price of 76 and retraded the loans in September for a dollar price of $86.97. This represents a $2,286,766 profit in a 95 day hold period. Assuming all equity, this transaction generated an 84% annualized IRR.

..-.

In November of 1992, purchased a $700,000 non-performing mortgage on a.IIIJI ••••

• etail property triple net leased t for $360,000. The mortgage was restructured, all the

past due interest was paid and the mortgage was sold to the •••• ... for 95% of the face value of the note. Total profit on the deal was $407,000. This generated an annualized IRR of 74%.

28

Summary of the Operating Agreement

The following is a summary of the principal terms of the Fund's Limited liability Company Agreement (the "Operating Agreement") which is available under separate cover. Prospective Investors should read this section in conjunction with the full Operating Agreement and the section of this Memorandum entitled "Summary of Terms."

Term of the Fund

Unless dissolved or terminated as provided in the Operating Agreement, the Fund will continue until the tenth (lOth) anniversary of the Closing Date. The Manager may, in its sole discretion, extend the term of the Fund for up to three (3) consecutive one-year periods in order to facilitate the orderly liquidation of the Fund's assets.

Distributions and Withdrawals

The Fund intends to make quarterly distributions to the extent funds are available.

Investors will not be permitted to voluntarily withdraw from the Fund. If the Manager determines that: (i) an Investor has transferred its Interest in violation of the Operating Agreement, (ii) the continued ownership of an Interest by a particular Investor would cause an undue risk of adverse tax or other consequences to the Fund or any of its other Investors, (iii) ownership of an Interest by a particular Investor will cause the Fund to be in violation of the securities laws of the United State or any state or other relevant jurisdiction or shall threaten the availability to the Fund of the exemption provided by Section 3(c)(1) of the Investment Company Act of 1940, as amended, or (iv) any of the representations or warranties made by a particular Investor to the Fund were not true when made, or have ceased to be true, the Manager may, upon not less than ten (10) days' prior written notice, require such Investor to withdraw from the Fund.

Additional Investors

The Manager may, in its discretion, admit additional Investors to the Fund without the consent of the other Investors. The Fund will not admit more than 99 Investors.

Liability of Investors and Indemnification of the Manager,~nd Others

Except as required by law, and as otherwise provided in the Operating Agreement, the debts, obligations and liabilities of the Fund, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Fund. No Investor shall be obligated personally for any such debt, obligation or liability of the Fund solely by reason of being an Investor and Member of the Fund, and the Manager shall not be personally liability for any such debt, obligation or liability of Fund solely by reason of being the Manager of the Fund.

Each of the Manager and ~and their respective officers, members, managers, employees, agents, legal representatives and a~lectively, the "Indemnified Persons") will not be liable to the fund, an Investor or any other party for any loss arising out of or in connection with any activity undertaken or to be undertakes) in connection with the Fund, except for any liability caused by such person's fraud, willful misconduct or gross negligence.

The Fund will, to the fullest extent legally permissible under the laws of the State of Delaware, indemnify, defend and hold harmless the Indemnified Persons against any and all loss, liability, damage, cost or expense incurred or suffered (including, but not limited to, legal costs and expenses) in connection with the performance of their responsibilities to the Fund as described in the Operating Agreement.

29

_______ ~'i;;.J;;

--:;;,-,,1'ikI5~ •••••••••••••••••

Assignability of Interests

Neither the Interest of any Investor in the Fund nor any beneficial interest therein is assignable, in whole or in part, without the prior written consent of the Manager, which consent may be given, withheld or conditioned in the Manager's sole discretion.

Power of Attorney

Pursuant to the Operating Agreement and the Subscription Agreement, the Investors will grant to the Manager an irrevocable power of attorney to sign, on behalf of each Investor, the Operating Agreement, and any amendments thereto or termination thereof, as well as any documents required by reason of the dissolution of the fund, or in order to effectuate any change in the membership in the Fund, in the capital contributions of the Investors, any change in the allocations as provided for in the Operating Agreement and any ministerial matters, or any documents required to be submitted by the Fund to any governmental or administrative agency, to any securities exchange or association, board of trade, clearing corporation or association or to any self-regulatory organization or trade association or as otherwise set forth in the Operating Agreement.

30

••••••••••••••• ,.1"

Tax Considerations

The following discussion is a summary of certain federal income tax consequences relevant to an investment in the Fund as an Investor but does not purport to be a comprehensive description of all of the tax considerations relevant to a decision to invest in the Fund. The following discussion deals only with a beneficial owner of an Interest in the Fund that is: (i) a citizen or resident of the United States or any State thereof, (ii) a corporation (or other entity that is treated as a corporation for U.S. federal tax purposes) created or organized in or under the laws of the United States or any State thereof (including the District of Columbia), (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust if a court within the United States is able to exercise primary supervision over its administration and one or more United States persons is able to control all of its substantial decisions.

An individual may, subject to certain exceptions, be deemed to be a resident of the United States by reason of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year (counting for such purposes all of the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year).

If a partnership (including for this purpose any entity treated as a partnership for U.S. federal tax purposes) is a beneficial owner of an Interest, the treatment of a partner in the partnership will generally depend upon the status of the partner and upon the activities of the partnership. A prospective investor that is a partnership and partners in such a partnership should consult their tax advisors about the U.S. federal income tax consequences of investment in an Interest.

This summary is based on interpretations of the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury regulations issued thereunder, and rulings and decisions currently in effect (or in some cases proposed), all of which are subject to change. Any such change may be applied retroactively and may adversely affect the federal income tax consequences described herein. Due to the lack of definitive judicial or administrative authority in a number of areas, substantial uncertainty may exist with respect to some of the tax consequences described below. No rulings have been or will be requested or received from the Internal Revenue Service ("IRS") with respect to any of the matters discussed herein. No tax opinions have been or will be requested or received from the Fund's tax advisors with respect to any of the matters discussed herein.

This summary deals only with Investors that acquired an Interest at initial issuance, and hold the Interest they receive as capital assets. Unless otherwise stated, this summary does not discuss all of the tax consequences that may be relevant to Investors that are subject to special treatment under the federal income tax laws (such as banks, tax-exempt entities, foreign persons (including foreign persons who invest in a domestic partnership that invests in the Fund) Subchapter S corporations, insurance companies, retirement plans, regulated investment companies, securities dealers, and investors whose functional currency is not the U.S. dollar). Consequently, such Investors may be subject to special rules not discussed below.

THE FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE FUND ARE COMPLEX. EACH POTENTIAL INVESTOR SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF INVESTING IN THE FUND, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY CHANGE IN APPLICABLE TAX LAWS.

31

II~, --.

Characterization of the Fund

The Manager believes that the Fund will be characterized as a partnership for federal income tax purposes, so long as the Fund is not taxable as a corporation under Section 7704 of the Code, relating to "publicly traded partnerships." The Fund will not be taxable as a corporation under Section 7704 if either (i) for all years of the Fund at least 90% of its gross income consists of interest, dividends, capital gains and certain other "qualifying income" (the "gross income test") or (ii) the Fund is not considered a "publicly traded partnership" within the meaning of Section 7704 of the Code. Applicable Treasury regulations under Section 7704 contain safe harbors for avoiding publicly traded status. The Manager intends to ensure that the Fund will meet the gross income test in each year or that it will not be treated as publicly traded.

If it were determined that the Fund should be treated as an association (or a publicly traded partnership) taxable as a corporation for federal income tax purposes, the taxable income of the Fund would be subject to corporate income tax when recognized by the Fund; distributions of such income, other than in certain withdrawals of Interests, would be treated as dividend income when received by the Investors to the extent of the current or accumulated earnings and profits of the Fund; and Investors would not be entitled to report profits or losses realized by the Fund. The balance of this summary assumes that the Fund is a partnership for federal income tax purposes.

Treatment of the Fund

General. As an entity treated as a partnership for tax purposes, the Fund itself will not be subject to federal income tax. The Fund will file an annual partnership information return which will report the results of its operations. Each Investor will be required to report separately on his/her federal income tax return and will be taxed on his/her distributive share of each item of the Fund's income, gains, losses, deductions and credits for each Fund taxable year ending with or within such Investor's taxable year, whether or not the Fund makes any distributions to such Investor. Each item will generally have the same character to an Investor, and will generally have the same source (either U.S. or foreign), as if the Investor realized the item directly. If the Fund does not make cash distributions to the Investors, the Investors must satisfy their tax obligations with respect to their distributive share of Fund income from other sources. As soon as practicable after the end of each taxable year the Fund will provide each Investor with a statement of the amounts and types of income, gain, loss, deduction, and credit allocated to the Investor during the taxable year.

Distributions of cash from the Fund to an Investor will reduce the adjusted basis of the Investor's Interest by the amount of such cash distribution. To the extent distributions exceed the adjusted basis of an Investor's Interest, an Investor will be treated as having recognized gain from the sale or exchange of such Interest. For this purpose, a distribution of marketable securities may in certain circumstances be treated as a distribution of cash. Distributions (other than liquidating distributions) of property other than cash (or marketable securities that are treated as cash for tax purposes) will reduce the adjusted basis (but not below zero) of an Investor's Interest by the amount of the Fund's adjusted basis in such property immediately before its distribution but will not result in the realization of taxable income to the Investor.

Allocations

For federal income tax purposes, an Investor's allocable share of the Fund's items of income, gain, loss, deduction and credit will be governed by the Operating Agreement if such allocations have" substantial economic effect" or are determined to be in accordance with such Investor's interest in the Fund. Under the Operating Agreement, items of income, gain, loss, deduction and credit will be allocated among the Investors in a manner such that if the Fund were dissolved and a liquidating distribution made in accordance with the capital account balances of the Investors, the liquidating distribution would, as nearly as possible, be consistent with the distribution provisions of the Operating

32

••••••••••••••••••• <¥~~~tlgj~)t;h

Agreement. Nonetheless, it is possible that the IRS could assert that, for federal income tax purposes, such allocations should not be given effect. If the allocations that are made pursuant to the Operating Agreement were successfully challenged by the IRS, the redetermination of the allocations to a particular Investor for federal income tax purposes may be less favorable than the allocations set forth in the Operating Agreement.

Sale or Exchange of an Investor's Interest in the Fund

An Investor that sells or exchanges an Interest in the Fund generally will recognize gain or loss equal to the difference, if any, between the adjusted basis of the Interest and the amount realized from the sale or exchange. The amount realized from the sale or exchange will include the Investor's share of the Fund's liabilities outstanding at the time of the sale or exchange. Gain or loss will generally be capital gain or loss and will be long-term capital gain or loss if the Interest was held for more than one year on the date of such sale or exchange. However, an Investor will recognize ordinary income upon the sale or liquidation of his/her Interest in the Fund to the extent such Investor's distributable share of the Fund's "unrealized receivables" and "inventory items" exceeds the Investor's basis in such items (as determined pursuant to the Treasury Regulations). For these purposes, unrealized receivables will include accrued but untaxed market discount, if any, on securities held by the Fund and certain depreciation recapture on real or personal property.

Liquidation of the Fund or of an Investor's Interest in the Fund

Upon liquidation of the Fund or complete liquidation of an Investor's Interest in the Fund, the Investor will generally recognize gain or loss to the extent the cash distributed exceeds or is less than his/her adjusted tax basis in the Interest.

Fund Tax Elections; Returns; Audits

Pursuant to the Operating Agreement, the Manager is permitted, but not required, with respect to the Fund to elect under Section 754 of the Code to adjust the basis of its assets after a transfer of an Interest by sale or as a result of the death of an Investor (and in the event of certain distributions to Investors). Such an election could affect the amount of an Investors distributive share of the gain or loss recognized by the Fund upon the disposition of its assets.

All Investors are required under the Code to treat Fund items on the Fund's tax return consistently on their own returns unless they file a statement with the IRS disclosing the inconsistency.

The income tax returns of the Fund may be audited by the IRS. In general, in the event of an IRS audit, the tax treatment of all Investors items will be determined in a unified Fund audit rather than in audits of the individual Investors. The Manager, as the "tax matters partner," will have considerable authority to make decisions affecting the tax treatment and procedural rights of all of the Partners. For example, the Manager will decide how to report all "partnership items" on the Fund's tax returns, and all Partners will be required to treat these items consistently on their own returns, unless they file a statement with the IRS disclosing the inconsistency. In addition, the Manager will have the right on behalf of all Partners to extend the statute of limitations with respect to the Partners' tax liability on the Fund items.

An audit of the Fund may result in the disallowance, reallocation or deferral of deductions claimed by the Fund, as well as the acceleration or deferral of income of the Fund. The audit may also result in transactions being treated as taxable which the Fund treated as nontaxable or in the treatment of ordinary income or as short-term capital gain of items which the Fund reported as long-term capital gain. Any such change may cause a Partner to be required to pay additional tax, interest and possibly penalties.

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If the IRS audits the Fund's tax returns, an audit of the Partners' own returns may result, as a result of which adjustments may be made to items reported on the Partners' tax returns, including items unrelated to the Fund. The legal and accounting costs incurred in connection with any audit of the Fund's tax return will be borne by the Fund. The cost incurred in connection with any resulting audit of a Partner's tax return will be the sole obligation of the Partner.

Limitations on Deductions

Adjusted Tax Basis of an Interest. Any net loss for a year allocated by the Fund to an Investor for tax purposes may be deducted by that Investor only to the extent of the "adjusted tax basis" of his Interest. Generally, an Investor's adjusted tax basis for its Interest will equal the Investor's initial Capital Contribution, increased by (i) any subsequent Capital Contributions the Investor makes to the Fund and (ii) the Investor's distributive share of Fund income and gain for tax purposes. An Investor's adjusted tax basis for his Interest in the Fund will be decreased (but not below zero) by (i) distributions to such Investor from the Fund and (ii) his distributive share of Fund losses and deductions for tax purposes. Losses in excess of an Investor's adjusted tax basis may be carried over to succeeding taxable years, subject to certain limitations. The "at-risk" rules of the Code could also have an adverse impact on an Investor in connection with the deductibility of losses from the Fund.

Limitation on Capital Losses

Capital losses may only be deducted to the extent of capital gains in the case of a corporation and to the extent of capital gains plus $3,000 (per annum) in the case of an individual. Accordingly, if the Fund incurs capital losses in excess of capital gains in any taxable year, until the Investor realizes a capital loss on sale or complete liquidation of its Interest, a corporation could not deduct its share of net capital loss to the extent it exceeded its net capital gains from other sources and an individual Investor could not deduct his/her share of such a net capital loss to the extent it exceeded his/her net capital gains from other sources plus $3,000 (subject to reduction by net capital losses from other sources). An individual Investor will generally be entitled to carry forward any unused capital loss to any succeeding taxable year and a corporate Investor will generally be entitled to a three-year carryback and a five-year carryforward of any unused capital loss.

Passive Activity Loss Rule

Under the passive activity loss limitation rules of the Code, non-corporate taxpayers, personal service corporations and certain other closely held corporations generally can deduct "passive activity losses" in any year only to the extent of its passive activity income for that year. Passive activities are generally trade or business activities of a partnership in which the taxpayer does not materially participate. Generally, a limited partner cannot materially participate in the activities of a limited partnership. Thus, any passive activity losses of the Fund will not be available to offset portfolio income (e.g., interest or dividends) or compensation or other active income. Excess passive activity losses for a year are suspended and carried forward indefinitely to offset passive activity income in future years and may be deducted in full when a taxpayer disposes of his/her entire interest in the passive activity in a fully taxable transaction with an unrelated party.

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"At-Risk" Rules

The ability of Investors to utilize any tax losses generated by the Fund may be restricted under the "at-risk" limitation in Code Section 465. Generally, this provision operates to postpone an Investor's loss deductions that are financed by the Fund (or Investor) indebtedness for which the Investor is not personally liable. Amounts disallowed under the "at-risk" rules may be carried forward and deducted in any subsequent taxable year that the Investor's at-risk limitation increases (as a result of additional contributions to the Fund, personal assumption or amortization of Fund debt or otherwise).

Management Expenses

To the extent that in any taxable year the Fund has certain miscellaneous itemized nontrade or business deductions, the distributive share of such itemized deductions allocable to an Investor who is an individual, a trust or an estate will be deductible by such Investor only to the extent that they exceed two percent (2%) of the adjusted gross income of such Investor pursuant to Section 67 of the Code (the "TwoPercent Limitation"). Also, pursuant to Section 68 of the Code, a portion of certain itemized nontrade or business deductions of an individual whose adjusted gross income exceeds a certain threshold amount will be disallowed. (Section 68 will be applied after Section 67 of the Code has been applied). Moreover, such investment expenses are miscellaneous itemized deductions which are not deductible by a non-corporate taxpayer in calculating his/her alternative minimum tax liability.

Investment Interest Expenses

Under the "investment interest" expense rules of the Code, which apply to individuals and other non-corporate taxpayers, investment interest expense may be applied only to offset "net investment income." Investment interest includes interest paid or accrued on indebtedness incurred or continued to purchase or carry property held for investment and short sale expenses. Interest expense incurred by an Investor to acquire or carry his/her Interest generally will be investment interest and may only be deducted against investment income. In addition, investment interest expense may include an Investor's allocable share of any interest (including short sale expense) deduction allowable to the Fund with respect to property held for investment. Accordingly, in some circumstances, an Investor may not be able to currently deduct his/her share of the Fund's interest (and/or short sale) expense. In general, net investment income is the excess of investment income over investment expenses. Investment income generally means gross income from property held from investment (e.g., dividends and interest), but does not include long-term capital gains from property held for investment except to the extent that the taxpayer elects to pay tax on such amount at ordinary income tax rates. Any amount not allowed as a deduction for a taxable year will be treated as investment interest of the taxpayer in the succeeding taxable year.

State, Local and Foreign Taxes

In addition to the federal income tax consequences described above, prospective investors should consider and discuss with their own tax advisors the potential state, local and foreign tax consequences of an investment in the Fund.

THE PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN OF THE TAX IMPLICATIONS OF AN INVESTMENT IN THE FUND. PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS PRIOR TO INVESTING TO DETERMINE THE TAX IMPLICATIONS OF SUCH INVESTMENT IN LIGHT OF EACH SUCH INVESTOR'S PARTICULAR CIRCUMSTANCES.

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Risk Factors

The purchase of Interests entails a substantial degree of risk. Prospective Investors should carefully evaluate the following risks before making an investment in the Fund.

Nature of the Investment

There can be no assurances that the Fund's investment return objectives will be realized, or that significant capital losses will not occur. Only Investors able to lose the entirety of their investments should purchase Interests.

Future Investments not Identified -

Reliance on the Manager As of the date of this offering, none of the have been identified. Investors will be relying on the Manager and 0 make suitable investments for the Fund. Investors will also be relying on the General Partner to manage the operations of the Fund and make decisions regarding financing, management and disposition of investments.

Absence of Regulatory Oversight

While the Fund may be considered similar to an investment company, it does not intend to register as such under the Investment Company Act of 1940, as amended (in reliance upon an exemption available to privately offered investment companies), and, accordingly, the provisions of the Investment Company Act of 1940, as amended (which, among other matters, require investment companies to have a majority of disinterested directors, require securities held in custody to at all times be individually segregated from the securities of any other person and marked to clearly identify such securities as the property of such investment company and regulate the relationship between the adviser and the investment company) will not be applicable.

Dependence on Key Individuals

Investment decisions by the Fund rely to a large extent on the knowledge, judgment and experience o~

• z:s If were to die or become disabled, or otherwise cease to be affiliated with •••• ,

such event may have an adverse effect on the business of the Fund.

Illiquidity of Investments

Most of the investments to be made by the Fund will be relatively illiquid. As a result, there can be no assurance that investments can be liquidated in a timely fashion. Disposition of investments may require a protracted period of time during which the strength of the economy or the interest rate environment may change affecting the value of the investment.

Restrictions on the Transferability of the Fund Interests

The Interests will not be transferable without the written consent of the Manager (which consent will not be unreasonably withheld), and will be affected by restrictions on resales imposed under Federal and state securities laws. In addition, there is no public market for the Interests, and it is highly unlikely that one will develop. Interests should only be acquired by investors able to commit their Funds for an indefinite period of time.

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Lack of Diversification

The Fund's investments will be concentrated in a relatively small number of investments. Poor performance by a few of the investments could severely affect the total returns to the Investors.

Use of Leverage

The Fund expects to use a substantial amount of leverage in its investments. Although the use of leverage may enhance returns and diversification, it may also increase the risk of a loss of capital.

Identifying Suitable Investments

There is significant competition to purchase the assets that the Fund is targeting. The Fund may be unable to identify and close a sufficient number of attractive opportunities to meet the investment objectives of the Fund.

Investing in Distressed Debt

The Fund intends to invest a substantial amount of its capital in distressed debt situations. This asset class has a number of significant risks including: lack of sufficient disclosure by the seller that is not covered by representations and warranties, deterioration of the performance of the underlying assets before the Fund is able to gain control of that asset, borrowers lengthening the workout process through legal maneuvering, including the filing of bankruptcy, borrowers making claims against the holder of the note for lender liability, the possibility of documentation defects, adverse legal rulings and the impact of other factors not currently identified. The Fund intends to invest in distressed debt primarily through Special Purpose Vehicles for each investment as a method of attempting to insulate the Fund and the other investments from liability and to limit the amount of capital at risk to the amount put into that specific investment. There can be no assurance, however, that such methods will be successful in limiting such liabilities.

Risks of Real Estate Investments

Investments in real estate are subject to various risks, including: adverse changes in general economic conditions, adverse local market conditions, the financial condition of tenants, buyers and sellers of properties, environmental laws and regulations, zoning laws and other governmental rules, environmental claims arising from real estate acquired with undisclosed or unknown environmental problems, uninsurable losses, acts of God and other factors beyond the control of the Fund. Accordingly, only investors able to lose the entirety of their investments should purchase Interests.

Risks of Making Loans

The Fund intends to make loans through a special purpose LLC specifically set up for this purpose and secured by first mortgages and subordinate mortgages on real estate, pledges of Fund interests and other collateral that the Manager believes is sufficient to secure the interests of the Fund. The risks of making loans include: the borrower may cease to make payments, there may be defects in the loan documents to prevent the LLC from moving against the collateral and/or borrower, the deterioration in the credit of the borrower and/ or the collateral, environmental claims that are not sufficiently reserved for that diminish the value of the collateral and the impact of other factors not currently identified.

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Mandatory Withdrawal

The Manager may require an Investor to withdraw from the Fund under certain circumstances upon written notice to such Investor. Such mandatory withdrawal may create adverse tax and/ or economic consequences to the Investor depending on the timing thereof.

Conflicts of Interest

The interests of the Fund and/ or the Investors may be inconsistent in some respects with the interests of the Manager and/o However, the fiduciary obligations of the Manager require that it exercises good faith and integrity in resolving any conflicts of interest.

The Manager and_' and/ or their affiliates may act as investment managers for others and may become associated WIth other investment entities. Except to the extent necessary to perform its obligations under the Operating Agreement, the Manager, and/ or their affiliates are not limited or restricted from engaging in or devoting time and attention to the management of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other corporation, firm, individual or association. As a result, the Manager, ~nd/ or their affiliates and other clients may hold substantial positions in securities and otfier mvestments that are owned by the Fund. If the Manager, ~d/or their affiliates and/or other clients hold a substantial position in an issuer, liquidity and concentration considerations may limit the ability of the Manager to add to the position on behalf of the Fund or to readily dispose of the position. The Operating Agreement specifically provides that no member (including the manager and the Investors) nor any of their respective officers, directors or affiliates, shall have any obligation to disclose or defer any investment opportunity, but, rather, may refer such investment opportunities to any other party or keep such opportunities for their own benefit.

Tax Considerations

For a discussion of certain tax related risk factors and general tax aspects regarding the purchase of the Interests please see "Tax Considerations". Further, each prospective Investor is urged to consult such investor's own counsel regarding the tax consequences of purchasing an Interest.

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Information Concerning the Offering and Subscription

Interests in the Fund are offered hereby pursuant to this Memorandum, the Operating Agreement, the Subscription Agreement and the Investor Questionnaire. These Interests are not being registered under the Securities Act or any other securities laws, including state securities laws or "Blue Sky" laws. Interests in the Fund will be offered without registration in reliance upon an exemption for transactions not involving a public offering. Investors will be required to make certain representations to the Fund, including that they are acquiring an Interest solely for their own account, for investment purposes only and not with an intent to resell or distribute all or any part of such Interest. The Interests will be offered by the Fund with no selling commissions or other remuneration. The Fund may, in its sole discretion, utilize brokers, finders, securities dealers or other persons or entities in connection with the offer and sale of the Interests; provided, however, that any fees or commissions which may be payable as a consequence thereof shall be paid out of the Funds of the Manager and will not be paid out of the funds of the Fund.

Prospective Investors are invited to review any materials available to the Manager relating to the Fund, the proposed operations of the Fund and any other matters regarding this Memorandum. All such materials will be made available at the offices of the Manager, a The Manager will afford Investors the opportunity to ask questions and receive answers regarding the terms and conditions of this offering and to obtain any additional information to the extent that the Manager possesses such information or can acquire it without unreasonable effort or expense.

Investor Qualifications

Investors shall be admitted as Members of the Fund. Admission as a Member is not open to the general public. No individual, legal representative, corporation, partnership, trust, committee or other entity shall be admitted as a Member unless such person is specifically selected by the Manager. Each Investor must qualify as an "accredited investor" within the meaning of Rule S01(a) of Regulation D under the Securities Act. Purchase of an Interest may be deemed to be a speculative investment and is not intended as a complete investment program. Investment in the Fund is designed only for persons who are able to bear a substantial loss of their capital contributions to the Fund and who are sophisticated in connection with business and financial matters or who are represented by such a sophisticated person in connection with their investment in the Fund.

Subscription Procedure

In order to acquire an Interest and be admitted as a Member, a prospective Investor must complete the Subscription Agreement and the Investor Questionnaire, separately provided, following the instructions included therein, and return the Subscription Agreement, Investor Questionnaire and signature pages to:

Capital Contributions will be made by check or wire transfer as set forth in the cover page of the Subscription Agreement.

The Subscription Agreement contains the Investor's agreement to indemnify and hold harmless the Fund, the Manager and~gainst any loss, liability, cost or expense (including attorneys' fees, taxes and penalties) which may result, directly or indirectly, from any misrepresentation or breach of any warranty, condition, covenant or agreement set forth therein or in any other document delivered by an Investor to the Fund.

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This page is intentionally left blank.

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