EREC 02

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-02 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 that consists of 14 single-family homes (8 of them are already sold to final customers), located in Torrelodones, Madrid region, Spain. Construction started in October 2025 and is expected to finish by Q3 2027. 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: €281,126

• Fund contribution: ≥70,581.50€ (25%)
• Investors contribution: ≤210,844.50€ (75%)
• Maximum contribution per investor – 100,000€ (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 September 2027, 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 75% of the project’s future income for 210,844.50€.
• Investor Baseline Expectation – 9% return (≈+15.8% over 21 months)
• If the project’s total profitability 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. 1. Realistic: 9 – 15% p.a.: Fund retains 25% of investors’ incremental profit (in addition to its own project-related profit)
   2. Optimistic: >15% p.a.: Fund retains 50% 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 its term, 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 1.5+ 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

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.