EREC 03 - IC Realty – Alternative Investment Fund Manager

EREC-3 X AGÂRA 2

Investor Information Letter – EREC Performance-Linked Cash Flow Rights

Introduction

This letter sets out a brief description of the terms and structure for the sale of performance-linked cash flow rights under the EREC-03 Net Cash Flow Rights Sale Agreement between BF Diversified Real Assets Fund (the “Issuer” or the Fund”), IC Realty Ltd (the “Manager”), and the Investor.

Key Parties and Project Overview

Issuer: BF Diversified Real Assets Fund, managed by its External Alternative Investment Fund Management Company – IC Realty Ltd
Developer: Circular Capital L2C S.L.

The Fund owns part of the real-asset project – Agara 2 that consists of 11 single-family homes, located in Torrelodones, Madrid region, Spain. Construction is expected to start in March 2026 and finish by Q2 2028. The Fund intends to raise capital through the issuance of performance-linked cash-flow rights entitling investors to a contractual share of the Project’s final Net Cash proceeds.

Capital Structure

Total Invested Capital: €300,099

Fund contribution: ≥150,049.50€ (50%)
Investors contribution: ≤150,049.50€ (50%)
Maximum contribution per investor – 75,000€ (allocation can be limited in case of oversubscription)

Investment Horizon

Single entry at project start (Closing Date: 22 December 2025 (commitments due), Execution Date: 31 December 2025 (Payments due))
Expected end Date – 30 June 2028, unless extended. No interest or partial repayments are expected during the investment term; proceeds are distributed only once the project has been fully realized.
The investor may exit early by selling their Cash Flow Rights back to the Fund at the prevailing market price. In case the project finishes earlier all proceeds will be distributed in 10 working days, leading to higher IRR of investors.

Performance-Linked Sale of Cash Flow Rights

EREC Investors buy 50% of the project’s future income for €150,049.50.
Investor Baseline Expectation – 9% return (≈+22.5% over 2.5 years)
If the project’s total IRR falls below 9%, the Fund reallocates part of its profit to ensure investors reach the 9% target, up to the limit of its own profits.
Once investors achieve their baseline, profit sharing follows a two-
level waterfall:

1. Realistic: 9 – 15% p.a.: Fund retains 50% of investors’ incremental profit (in addition to its own project-related profit)
2. Optimistic: >15% p.a.: Fund retains 75% of investors’ incremental profit(in addition to its own project-related profit)
3. Loss: If final proceeds are below invested capital, losses are shared pro rata. Maximum investor exposure is limited to the Allocated Purchase Price.

If the Project extends beyond two years, the 9% annual baseline continues to be accrued. For example, a 3-year duration requires a 27% minimum investor return before the Fund participates in profits.

Economic Rationale

Investors obtain equity-like returns with downside protection: receiving a priority yield of 9% per annum before the Fund shares in profits. The Fund retains liquidity and capital efficiency, while its upside accelerates once investor baselines are met.

Summary

The EREC 2.5+ year model offers a balanced structure with expected profit of 9% yearly, based on the high quality Real Estate Development project, where investors receive a secured baseline return with upside potential, while investing alongside with the professional and experienced Investment Fund.

Annex – Potential Scenarios

Scenario	Project IRR (p.a.)	Investor Total Return (2.5 years)	Fund Total Return (2.5 years)	Comment
Stress	–5%	–12.5% (-5% p.a)	–12.5% (-5% p.a)	Shared loss; no profit to redistribute.
Below target	5%	+22.5% (9% p.a)	+2.5% (1.0% p.a)	The Fund transfers nearly all profit to meet the 9% investor target.
Base / Balanced	14%	+28.8% (11.5% p.a)	+41.3% (16.5% p.a)	Investors gain steady double-digit return; Fund rewarded for performance.
Success	20%	+33.1% (13.3% p.a)	+66.9% (26.8% p.a)	Strong project lifts both sides; Fund gains enhanced carry.

Disclaimer. This memorandum is not an offer or recommendation to invest. All binding terms of the Sale of the Cash Flow Rights are contained exclusively in the main agreement. Neither profit nor return of investment is guaranteed by the issuer or manager. KYC and AML checks must be completed and verified before acceptance of any funds.