Background - FDL

• Fresh Developments (UK) Ltd (FDL) was set up in 2005 to develop property in the South of England, with developments undertaken during the first 5 years being financed by the Directors themselves.
• In late 2009, a strategic decision was taken to seek other sources of equity and mezzanine funding in order to be able to undertake more investments, as further development opportunities arose.
• FDL1LLP - a limited liability partnership - was established in early 2010. The vehicle has currently approximately £1.5m in equity capital invested at this date. Returns of 16% to investors have been achieved in the first 18 months; on present projections, the return on schemes in progress in currently anticipated to be in excess of 25%. This will provide an overall IRR for FDL1LLP in excess of 20% p.a over the fund´s life.
• The fund is currently fully invested.

Background - FDL2LLP

• FDL now has a pipeline of further development opportunities, and is proposing to establish a second Limited Liability Partnership - FDL2LLP - in which to undertake these projects.
• It is intended to raise between £1m and £5m of new investor funds within FDL2LLP. Presently, there are commitments from current and new investors of c. £500,000. It will operate for a defined period of 3 years; profits from completed projects within the 3 year period will be distributed, and capital returned once projects are completed after the 3 year period.
• There is a good local and investor demand for quality new-build housing. There are presently not many competing developments scheduled for completion, and we anticipate that with the on-going shortage of bank funding, this will continue to be the case over the next 2 to 3 years.
• The Fund is intended to provide a spread of risk in the Dorset and Hampshire residential markets across varying configurations - flats, houses and bungalows.
• As a result of in-depth analysis of each opportunity, some projects will be pre-sold and some will be developed and sold on the open market.
• Uninvested funds will be held in a deposit account until invested in projects. Interest generated will be distributed to members on a quarterly basis.
• Returns will be paid gross of tax and members will need to declare income on their own personal tax returns.
• Debt finance will be raised on each project in order to maximise the profitability of projects. Typically bank debt will be obtained for 55% of the costs of the project.
• Returns on funds will vary depending on the stage at which projects are sold:
  - Developments - Sales on Completion. These projects will receive a priority return of 20% per annum on the money invested with a further variable return calculated as 20% of the residual profit generated from the project.
  - Developments - Pre-sold before Construction. These projects will receive a priority return of 12% reflecting that the market risk has been removed from the project.
• The priority return is calculated from the date that the equity is invested in a project until it is returned to the Uninvested Funds deposit account, once the developed units have been sold.
• The Fund will only invest in areas where Fresh Developments (UK) Ltd has experience - residential developments in Dorset and Hampshire.
• Projects must be financially attractive - broadly this implies that projected profit will exceed 20% on cost.
• As the investors receive a priority return, market values would need to fall, on average, by more than 10% before the 20% return is eroded. There is a further margin of 10%, on average, before there is any risk of losing equity invested in any one project.
• Projects will be undertaken directly by the Fund and therefore will not be payable to FDL over the construction period as costs are incurred.