Vida Capital Longevity Investment Options

Transcription

1 Vida Capital Longevity Investment Options

2 Vida Capital Executive Summary Alternative Asset Manager Vertically integrated longevity asset manager $2B + of policy face value under management 1 $700M + capital invested 1 Founded in 2009 by Jeff Serra and Austin Ventures, a $4B venture capital firm Life Settlements Market $2B-$3B annual secondary volume More than $100B total tertiary market size with $10-$20B expected to be actionable in near term 2 15%-25%+ gross unlevered expected IRR 3 Low volatility and low asset correlation to traditional asset classes Superior credit quality, with all carriers rated A- or better 7.6M head of households above the age of 65 with $1.5T of in force life insurance 4 Platform Differentiation Seasoned leadership and capital markets team with specialized life settlements experience Wholly-owned licensed Provider enables policy-level underwriting and servicing Extensive provider database of historical life settlement data Vertically integrated platform creates cost efficiencies and market intelligence Established Luxembourg tax infrastructure Note 1: Includes both Firm and RIA assets Note 2: Conning & Co. estimate Note 3: Vida market pricing intelligence, past performance is not indicative of future results refer to Important Disclosures Note 4: 2010 Insurance Fact Book 1

3 Seasoned Executive Team Jeff Serra brings deep competency and leadership in capital markets and trading (CEO Phibro Energy) Scott Crohn adds domain expertise as lender and principal investor in the sector (Dir. Longevity Assets, WestLB) Dan Young has significant life insurance and investment management experience (CEO, NY Life Securities) Name Title Years Relevant Experience Education Jeff Serra President & CEO 28 Founder, Life Assets Trust, SA Founder, Eyes of Texas Partners Founder, Re-NEW Energy CEO, Phibro Energy USA Master Teacher, Acton School of Business Purdue University, MS University of Virginia, BS Dan Young, CLU, ChFC General Counsel and President of Vida Capital Management 20 CEO, NY Life Securities, NPF Securities Former Director, Irish Life Settlement Fund Chairman of the Law Committee, Institutional Life Markets Association (ILMA) Cravath, Swaine & Moore Adjunct Professor, University of Texas Law University of Chicago, JD Stanford University, AB Scott Crohn VP of Asset Management and President of Magna Life Settlements, Inc. 7 Director-Longevity Assets, WestLB AG Director and Treasurer, Institutional Life Markets Association (ILMA) Analyst, Bear Stearns Northwestern University, BA Gunnar Teltow VP of International Operations and President of Vida Capital SARL 8 Co-Founder, Life Assets Trust, SA CFO, Serra Management Director, NetSpend Product Manager, American Express Lancaster University, MBA Otto Beisheim School, BA + MS Chris Munson Chief Financial Officer 10 CFO, Statewide Beverage CFO, Index Hospitality Manager, Accenture University of Notre Dame, BBA Acton School of Business, MBA 2

4 Company Timeline Jeff Serra invests personal funds and accumulates a life investment portfolio with over $700 million of face value Austin Ventures invests with Jeff Serra in Vida Capital Vida purchases a $700M face value portfolio Vida purchases a $250M face value physical/synthetic portfolio Vida seeds an Irish Qualified Investor Fund Vida launches a $20M side pocket to VLF Vida Capital* currently manages over $2.3 billion in face value and has invested over $730 million of capital and collected over $148 million in death benefits since inception 2007 I I 2009 I I 2010 I I 2011 I I 2012 I I 2013 I I Luxembourg structure is established Vida acquires Magna Life Settlements, Inc. Vida launches the Vida Longevity Fund ( VLF ), targeted towards high net worth investors Vida purchases a synthetic pool ($100M + face) Vida contributes assets worth $40M along with $20M of cash from an institutional investor to launch VSP II *Vida Capital includes both Firm and RIA managed assets 3

5 Vertically Integrated Asset Management Platform Specialized Senior Management Team Technology Specialized software and workflows for pricing, asset management and investor reporting CEO formerly built a trading / capital markets platform Deep life settlements domain knowledge in lending and capital markets Senior executives hold key posts with the Institutional Life Markets Assoc. (ILMA) Tax Structure Luxembourg securitization vehicle Asset Management Warehouse 2,000+ life empirical data points for pricing Sophisticated investment policy and risk policy Transaction structuring capabilities from long-only to synthetic transactions Secondary market trading platform Opportunistic single policy / small bulk portfolio acquisitions Magna Life Settlements Captive provider origination platform Sourcing: in 2012 received over 2,900 policy submissions from over 100 sources aggregating to over $7B in face value State licenses covering 90% of population Single policy re-underwriting to identify occurrence of fraud, invalid data, review of loan records Track lives and update life expectancies Death benefit collection 4

6 Investment Highlights Investment Thesis and Opportunity: The implementation of increased regulation by states coupled with a convergence of life expectancy methodologies of the major medical underwriters has dramatically reduced the perceived risks of the life settlement asset class. Additionally, yield compression for most credit related investment assets has not yet crept into the longevity asset marketplace, while the supply of assets continues to grow as the US population ages, creating a unique relative risk adjusted return expectation. This is an ideal time to allocate to longevity assets which offer low correlation, relatively high yields, and very high credit quality (A-rated U.S. insurance carriers). Our Advantage: Vida Capital, as a licensed life settlement Provider, active buyer/asset manager, and SEC registered investment adviser, is in a unique position to originate individual policies in the secondary market and small pools in the tertiary market with high expected yields. We can quickly value and diligence longevity assets and have a very deep team of experienced industry experts at all levels of the organization (full vertical integration). *Past performance is not indicative of future results refer to Important Disclosures *SEC registration is not an endorsement and does not imply any level of skill or training 5

7 Market Opportunity: Attractive Entry Point 25.0% Life Settlement Spread 1 to Highly Rated Insurance Carrier Debt 2 Adjusted for changes in AVS/21 st LE underwriting over time Easy Credit Credit Crisis/ LE Extension 20.0% 15.0% 10.0% Market Opportunity 5.0% Median IRR Carrier Debt Effective Yield 0.0% Sources: 1 AVS/21 st actuals through November 2012 reflecting Gross IRR Returns 2 - Average Corporate Debt Yields of Metlife, Inc, Pacific Life Insurance Co, General American Life Insurance Co, John Hancock Life Insurance Co, & Metropolitan Life Insurance Co Important Disclosures Regarding Calculations of Target and Actual Returns and Multiples, Hypothetical and Past Performance, Projections and other Financial Matters and Legal Notices are located at the end of this presentation. Past performance is not indicative of future results 6

8 Trend Toward Greater Certainty and Acceptance of Settlements The implementation of increased regulation by states coupled with a convergence of life expectancy methodologies of the major medical underwriters has dramatically reduced the perceived risks of the life settlement asset class. Forty-five (45) states have adopted specific life settlement regulation. Challenges to the transfer of insurance policies in courts have largely favored the settlement industry and provided clarity on the timeframe for contesting such policies. The volume of such cases has decreased dramatically over the past year as these issues have been clarified. Consumer groups and state governments have recognized the value of the life settlement industry. Insurance companies in several states are now required by law to inform consumers who are lapsing policies about the existence of the secondary market, and states have passed or are considering legislation to allow settlements to help fund long term care requirements for those applying for Medicaid. Life Expectancy underwriters have recently extended estimates and converged on a conservative methodology with a high degree of accuracy in actual-to-expected analyses. *Past performance is not indicative of future results refer to Important Disclosures *SEC registration is not an endorsement and does not imply any level of skill or training 7

9 Options for Investment Option 1 Invest in the existing Vida Longevity Fund, LP ( VLF ). Option 2 Invest in Vida Side Pocket II, LP ( VSP ), which is a joint venture with Vida and institutional investors with $60 million in assets and another $30 million committed for investment. Option 3 Create the a Fund of One to purchase individual policies into a tax efficient vehicle through Vida s wholly owned provider, Magna Life Settlements, Inc. ( Magna ), and service to maturity. 8

10 Vida Group Structure 9

11 Option 1 VLF (Page 10 Green Box) Annualized Annualized Sharpe Return Volatility Ratio Correlation Vida Longevity Fund 10.44% 2.69% ML AA-Corporate Index 4.72% 3.62% ML High Yield Index 9.57% 7.07% Global Hedge Fund Index 0.22% 4.56% S&P 500 Index 12.63% 14.49% Information current as of June 30, Performance is net of fees and expenses since inception, 4/1/10. Past performance is not indicative of future results refer to Important Disclosures 10

12 Option 1 VLF (Page 10 Green Box) 1 Information current as of June 30, Performance is net of fees and expenses since inception, 4/1/10. Past performance is not indicative of future results refer to Important Disclosures 11

13 Option 2 VSP (Page 10 Orange Box) As of June 30, 2013 Value # of Lives Average Age Cash 1 $18,479,671 Average Life Expectancy (yrs) Average Death Benefit Longevity Synthetic 2 $13,694, $551,250 Physical Life Settlement Policies 3 $55,369, $2,963,163 Longevity Synthetic Short 4 ($28,108,407) ($1,378,470) Total/Weighted Average $59,435, $889,852 1) Excess cash is currently being deployed to acquire additional physical policies 2) Synthetic with 197 reference lives. Each life represents $550K of death benefit 3) Pool of 95 life settlement policies with $273M of death benefit 4) A synthetic short was sold to another large European investment bank against 89 of the 95 physical policies. The terms include this counterparty paying 33% of the ongoing premium obligation and receiving 50% of the death benefit (equating to $122M). The value of the synthetic obligations is netted against the asset values. 12

14 Option 2 VSP (Page 10 Orange Box) (Current $60 million in assets with another $30 million committed and scaled up to $250 million) Projected Returns ($000s) Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Cumulative Investment Acquisitions 1 $ (172,498) $ (62,502) $ (36,954) $ (36,627) $ - $ - $ - $ - $ - $ - $ (308,581) Premiums Paid (37,347) (51,840) (55,976) (58,837) (54,130) (49,365) (44,274) (39,275) (34,725) (30,512) (456,284) Maturity Income 55, ,394 92, , , , , , ,161 89,938 1,052,380 Residual Value , ,905 Cash Flows (154,415) (9,948) 31 13,678 75,561 84,186 79,298 73,263 66, , ,420 Administrative Fee 3 (2,270) (2,836) (2,964) (3,163) (2,870) (2,531) (2,209) (1,913) (1,645) (1,405) (23,804) Sponsor Carry 4 (974) (2,023) (1,908) (2,187) (2,553) (2,684) (2,487) (2,267) (2,039) (5,793) (24,914) Operating Expenses (250) (200) (200) (200) (200) (200) (200) (200) (200) (200) (2,050) Cash Flows (net of opex) (157,908) (15,007) (5,041) 8,128 69,938 78,771 74,403 68,883 62, , ,652 Distributions of Excess Cash Reserves ,301 3,577 11,728 2,625 9,029 1,672 12,112 Distributions to Investors $ 39,429 $ 73,515 $ 90,499 $ 77,027 $ 77,912 $ 64,224 $ 256,044 $ 678,652 Cash Reserves at Year End 5-18,098 72,043 40,742 37,165 25,438 22,813 13,784 12, Net Investor IRR % Multiple of Invested Capital 0.0x 0.0x 0.0x 0.2x 0.5x 0.8x 1.1x 1.4x 1.7x 2.7x Summary Investor Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Cumulative Unfunded Commitment 92,092 58, Capital Drawn 157,908 33,106 58, ,000 Cumulative Capital Drawn 157, , , , , , , , , ,000 NA Distributions ,429 73,515 90,499 77,027 77,912 64, , ,652 Cumulative Distributions , , , , , , ,652 NA Note 1: Total capital outlays for portfolio acquisitions (net of financing). Note 2: Residual value is equal to the net present value of all cash flows beyond year 10, calculated using an IRR of 13% for synthetics, 13% for distressed and levered portfolios, and 16% for individual high face policies. Note 3: The admin/servicing fee is.25% per annum on the total face value under management. Note 4: The Sponsor carry is 2% of proceeds from policy maturities and sales. Note 5: Cash reserves maintained to support premium payments. Total remaining capital commitment is funded into cash reserves at end of Year 3 to support future premium payments. Note 6: Cash flows presented above are summary annual cash flows. Investment IRR is calculated based on forecast of monthly cash flows. *Based on Vida Capital internal estimates. Targeted IRR s reflect returns net of fees and expenses. Past Performance is not indicative of future results. Refer to Important Disclosures for additional information. 13

15 Option 3 $100 Million Fund of One (Page 10 Blue Box) Client would have its own new compartment in Luxembourg and purchase longevity assets originated, tracked and serviced by Magna. Client would receive cash distributions and control reinvestment and exit options. 14

16 Considerations of Options 1-3 Option Consideration Option 1 VLF Mature portfolio (>$100MM existing AUM) Statistically significant number of lives Large manager co-investment Quarterly liquidity after two years Option 2 - VSP Mature portfolio ($60MM existing AUM) Statistically significant number of lives Large manager co-investment Flexible buying parameters Ability to utilize leverage Tax efficiency Partner with large insurance company Moderate control over major decisions Option 3 Fund of One Statistically significant number of lives Flexible buying parameters Ability to utilize leverage Tax efficiency Total control over major decisions 15

17 Current Market Estimate Vida has identified over 25,000 policies currently owned by investors with approximately $108 billion of net death benefits. $MM Estimated Full Available Estimated Origination Estimated Full Available Estimated Origination Current Owner Face Amount for Purchase # Policies Strategy Current Owner Face Amount for Purchase # Policies Strategy Reinsurer A $ 17,700 No 2,000 LS Specialty Finance Company B $ 1,500 No 500 LS Private Equity A 8,000 No 800 LS/PF Private Equity C 1,400 No 400 LS Private Equity B 6,500 No 500 LS/PF Vida Various (non WLB) 1,350 Some 800 LS European Bank B 4,750 Yes 400 BI Various German Funds 1,300 Some 400 LS European Bank A 4,500 Some 1,500 Finance Line Asset Manager B 1,200 No 500 LS European Bank C 4,000 No 200 SPIA linked PF Family Office 1,200 Yes 650 LS Various Small LS Funds 3,300 Yes 1,000 LS/PF Private Equity D 1,000 No 200 PF Australian Fund 3,000 No 1,000 LS European Fund B 1,000 Yes 600 LS US Bank C 2,600 No 250 LS Hedge Fund C 1,000 Yes 500 LS Specialty Finance Company A 2,500 Yes 300 LS/PF Private Equity F 1,000 Yes 675 LS US Pension Fund 2,400 No 400 BI Private Equity G 1,000 Some 425 LS Fixed Income Investor 2,400 No 380 BI/PF Private Equity H 1,000 No 300 LS Corporate Pension Fund A 2,300 No 400 PF Asset Manager E 900 Some 500 LS Reinsurer C 2,200 Yes 800 LS Asset Manager C 750 Yes 200 LS Reinsurer B 2,100 No 200 PF Asset Manager D 750 Yes 350 LS European Fund A 2,000 Yes 600 LS Private Equity E 700 No 20 LS/BI US Bank A 2,000 No 400 LS Hedge Fund D 700 No 175 LS European Bank D 2,000 Yes 500 LS Hedge Fund E 700 Yes 250 LS Hedge Fund A 2,000 Yes 250 BI Hedge Fund F 600 Yes 300 LS Receivership A 2,000 No 300 LS European Fund C 600 Some 275 LS European Notes 2,000 No 600 LS Canadian Receiver 550 No 300 LS US Bank B 2,000 No 500 LS Asset Manager F 500 No 350 LS US BI Fund 2,000 Yes 750 BI Receivership B 150 No 60 LS Fractional Life Settlements 2,000 No 2,000 Fractional Total $ 108,600 25,160 Hedge Fund B 1,500 No 400 BI and PF Available for Purchase # Policies Face Amount ($MM) Yes 8,125 $27,750 Some 3,900 $9,650 No 13,135 $71,200 Total 25,160 $108,600 16

18 Tertiary Transaction Pipeline Increased supply in portfolios with need of liquidity and tail liquidation being factored into tertiary transaction yields. Trade Counterparty Status Face $MM Equity Inv. $MM Structure Expected IRR* Expected Cash Multiple* CS Combo 1 European Investment Bank Purchased $ $ 13.2 Physical/Synthetic Short 25% X DB Synthetic 1 European Investment Bank Purchased Synthetic 20% X A&O Pool Receivership Purchased Physical Portfolio 51% X Physical Portfolio German Loventry Fund Tail Purchased Physical Policies 19% X Physical Portfolio UK Longevity Fund Tail Purchased Physical Policies 21% X Physical Portfolio German Loventry Fund Tail Purchased Physical Policies 23% X Physical Portfolio US Longevity Fund Purchased Physical Policies 19% X Multiple Individual Purcahses 7 Life Settlement Counterparties Purchased Physical Policies 25% X Centurian Portfolio UK Longevity Fund Purchased Revolving Credit Facility 18% X Receivership Portfolio Receivership Hold Revolving Credit Facility 18%-25% X Terrytown Portfolio Private Investor Traded Physical Portfolio 25% X Caldwell Portfolio Hedge Fund Wind Down Traded 2, Distressed Portfolio 20%-30% X KGAL European Closed End Fund Traded Physical Portfolio 22% X Distressed Pool Purchase Longevity Fund Traded Physical Portfolio 24% X LifeMark Receivership Auction Traded Physical Policies 22%-25% X Mizuho Bank Traded 1, Physical Policies 18%-22% X Physical Portfolio Auction Bid Physical Policies 30%-45% X Physical Portfolio German Longevity Fund Tail Evaluation Physical Policies 18%-25% X Premium Finance European Investment Bank Evaluation Physical Portfolio 22%-27% X Physical Portfolio German Longevity Fund Tail Evaluation Physical Policies 18%-25% X Jumbo Policies Secondary Market Evaluation Physical Policies 22%-25% X Nonrecourse Premium Finance Premium Finance Lender Evaluation Physical Policies 25%-30% X Physical Portfolio Longevity Fund Tail Evaluation Physical Policies 18%-25% X Asset Based Loan Investment Company Evaluation 2, Revolving Credit Facility 18%-22% X Full Recourse Premium Finance US Premium Finace Fund Evaluation 1, Physical Policies 25%-30% X Physical Portfolio Longevity Fund Evaluation Physical Policies 17%-21% X LATSA Portfolio Luxembourg Securitization Vehicle Evaluation Participatory Notes 21%-23% X Physical Portfolio Auction Evaluation Physical Policies 18%-25% X Portfolio Management Portfolio Equity Owner Evaluation 1, Participatory Notes 25%-30% X Physical Portfolio German Longevity Fund Tail Evaluation Physical Policies 23%-25% X Total $ 12,025.3 $ Purchased $ $ % X Actionable $ 7,047.0 $ % X *Based on Vida Capital internal estimates. Expected IRR s or Discount Rates are based on internal methodologies and acquired market intelligence based on estimates of transaction pricing. Expected IRR s reflect Gross Returns. Past Performance is not indicative of future results. 17

19 Magna Secondary Volume 2012 Magna s consistent presence in the market has provided a robust source of secondary market policies. Overall market submissions have fallen mainly due to files with questionable origination no longer entering the market and a greater focus on actionable policy criteria. 2,901 Unique Files $7.4 billion NDB 821 Files Evaluated $2.4 billion NDB - ~$300M of Capital 307 Files Received Offers $537 million NDB - $86M of Capital 18

20 Contact Information Austin, TX 805 Las Cimas Parkway Suite 230 Austin, TX (512) New York, NY 805 3rd Avenue 21st Floor New York, NY (646) Luxembourg 26, Boulevard Royal L-2449 Luxembourg Luxembourg +352 (20)

21 Important Disclosures Regarding Calculations of Target and Actual Returns and Multiples, Hypothetical and Past Performance, Projections and other Financial Matters THE INTERNAL RATE OF RETURN ( IRR ) IS THE DISCOUNT RATE THAT EQUATES THE GROSS PURCHASE PRICE OF THE POLICY TO THE NET PRESENT VALUE OF THE EXPECTED CASH FLOWS CALCULATED USING AN INDUSTRY STANDARD PROBABILISTIC PRICING MODEL WITH THE INPUTS COMPRISED OF 1) THE MINIMUM REQUIRED PREMIUMS NEEDED TO KEEP THE POLICY IN FORCE, 2) THE PROBABILITY WEIGHTED SURVIVORSHIP CURVE GENERATED USING THE LIFE EXPECTANCY AS PROVIDED BY AT LEAST TWO INDEPENDENT MEDICAL UNDERWRITERS AND APPLIED TO THE 2008 VBT ALB ACTUARIAL TABLE, AND 3) THE NET DEATH BENEFIT OF THE POLICY. IRRS SHOWN FOR ILLUSTRATIVE PURPOSES TO ILLUSTRATE PROJECTED YIELD DIFFERENCES AND DO NOT REFLECT ACTUAL OR PROJECTED PERFORMANCE NUMBERS. PAST PERFORMANCE IS NOT AN INDICATION OR PREDICTION OF FUTURE RESULTS. THERE CAN BE NO ASSURANCE THAT THESE OR ANY PROJECTIONS WILL BE MET. THE PERFORMANCE RESULTS INCLUDED IN THIS PRESENTATION ARE COMBINATION OF ACTUAL AND HYPOTHETICAL RETURNS WHICH HAVE BEEN COMPILED BY VIDA CAPITAL MANAGEMENT, LLC ( VIDA CAPITAL ). THE HYPOTHETICAL PERFORMANCE RESULTS INCLUDE THE REINVESTMENT OF ALL EARNINGS AND DIVIDENDS, BUT DO NOT REFLECT THE DEDUCTION OF VIDA CAPITAL S INVESTMENT MANAGEMENT FEES AND RETAINED INTEREST. THUS, AN INVESTOR S ACTUAL RETURN WILL BE REDUCED BY THE MANAGEMENT FEES AND RETAINED INTEREST AND ANY OTHER EXPENSES WHICH MAY BE INCURRED IN THE MANAGEMENT OF THE FUND. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. ALL INVESTMENTS INVOLVE RISK INCLUDING THE LOSS OF PRINCIPAL. THE HYPOTHETICAL RESULTS DO NOT REPRESENT ACTUAL RECOMMENDATIONS OR INVESTING AND THEY MAY NOT REFLECT THE IMPACT THAT MATERIAL ECONOMIC AND MARKET FACTORS MIGHT HAVE HAD ON VIDA CAPITAL S DECISION-MAKING IF VIDA CAPITAL WERE ACTUALLY MANAGING THE FUND. HYPOTHETICAL PERFORMANCE RESULTS MAY HAVE INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT THE FUND WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL INVESTING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL INVESTING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK ASSOCIATED WITH ACTUAL INVESTING. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL AND TO THE IMPLEMENTATION OF ANY SPECIFIC INVESTING STRATEGY WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL INVESTING RESULTS. ALL PROJECTED INTERNAL RATES OF RETURN ARE SHOWN PRIOR TO THE DEDUCTION OF MANAGEMENT FEES AND OTHER EXPENSES UNLESS OTHERWISE NOTED, ARE CALCULATED ON THE BASIS OF THE ACTUAL TIMING OF DAILY INVESTMENT INFLOWS AND OUTFLOWS AND THE RETURN IS ANNUALIZED AS ADJUSTED FOR UNREALIZED GAINS RELATING TO ASSETS WHICH HAVE BEEN ACQUIRED BUT WITH RESPECT TO WHICH NO DISPOSITIONS HAVE OCCURRED ( GROSS IRR ). AN INVESTOR S RETURN WILL BE REDUCED BY THE MANAGEMENT FEES AND OTHER EXPENSES THE FUND MAY INCUR. THE CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM, AVAILABLE UPON REQUEST, CONTAINS ALL TERMS AND CONDITIONS OF THIS OFFERING.. PROJECTED IRRS ARE PRESENTED IN THIS PRESENTATION, BASED ON A NUMBER OF FACTORS, INCLUDING BUT NOT LIMITED TO (I) ASSUMPTIONS WITH RESPECT TO CASH FLOWS INCLUDING GROWTH OF SUCH CASH FLOWS; (II) CURRENT AND ESTIMATED MARKET CONDITIONS; AND (III) THE PROPOSED STRUCTURE OF EACH INVESTMENT. PROJECTED CASH FLOWS FOR INVESTMENTS ARE DETERMINED AT ONE POINT IN TIME AND CAN NOT BE ANTICIPATED TO STAY CONSTANT. ADDITIONALLY, VIDA CAPITAL BELIEVES THAT THE PROJECTED IRRS REFLECT IN PART A MEASURE OF RISK THE FUND WILL BE TAKING WITH RESPECT TO THE INVESTMENTS IT MAKES. IMPORTANT RISK FACTORS ARE SET FORTH IN THE CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM AND SHOULD BE CONSIDERED CAREFULLY BY PROSPECTIVE INVESTORS. PAST PERFORMANCE IS NOT AN INDICATION OR PREDICTION OF FUTURE RESULTS. THERE CAN BE NO ASSURANCE THAT THESE OR ANY PROJECTIONS WILL BE MET. THE TARGETED RATES OF RETURN INCLUDED IN THIS PRESENTATION ARE A COMBINATION OF ACTUAL AND HYPOTHETICAL RETURNS, AND ARE FOR ILLUSTRATIVE PURPOSES ONLY. ACCORDINGLY, NO ASSUMPTIONS OR COMPARISONS SHOULD BE MADE BASED UPON THESE RETURNS. THE TARGETED RETURNS ARE BASED ON RESEARCH CONDUCTED BY VIDA CAPITAL AND THE CONCLUSIONS ARE VIDA CAPITAL S OPINIONS BASED ON ITS OWN INDEPENDENT STUDY. TARGETED RETURNS ARE SUBJECT TO INHERENT LIMITATIONS. ONE LIMITATION IS THAT THE RETURNS DO NOT TAKE INTO ACCOUNT THE IMPACT THAT MARKET AND ECONOMIC RISKS, SUCH AS REINVESTMENT RATES, MAY HAVE ON ACTUAL INVESTING. IN ADDITION, TARGET RETURNS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT MAY CHANGE AT ANY TIME, AND, THEREFORE, OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE WE EXPECTED. IN NO CIRCUMSTANCES SHOULD THE TARGETED RETURNS BE REGARDED AS A REPRESENTATION, WARRANTY OR PREDICTION THAT THE FUND WILL REFLECT ANY PARTICULAR PERFORMANCE OR THAT IT WILL ACHIEVE OR IS LIKELY TO ACHIEVE ANY PARTICULAR RESULT OR THAT INVESTORS WILL BE ABLE TO AVOID LOSSES, INCLUDING TOTAL LOSSES OF THEIR INVESTMENT. INHERENT IN ANY INVESTMENT IS THE POTENTIAL FOR LOSS. WHILE WE BELIEVE THAT OUR ASSUMPTIONS ARE REASONABLE, WE CAUTION THAT IT IS VERY DIFFICULT TO PREDICT THE IMPACT OF KNOWN FACTORS, AND, OF COURSE, IT IS IMPOSSIBLE FOR US TO ANTICIPATE ALL FACTORS THAT COULD AFFECT OUR ACTUAL RESULTS. THE PERFORMANCE OF THE INDICES PRESENTED MAY BE MATERIALLY DIFFERENT FROM THAT OF THE FUND. IN ADDITION, THE FUND S HOLDINGS MAY DIFFER SIGNIFICANTLY FROM THE SECURITIES THAT COMPRISE THE INDICES. THE INDICES HAVE NOT BEEN SELECTED TO REPRESENT AN APPROPRIATE BENCHMARK TO COMPARE VIDA CAPITAL S VOLATILITY, CORRELATION, OR PERFORMANCE, BUT RATHER IS DISCLOSED TO ALLOW FOR COMPARISON OF WELL-KNOWN AND WIDELY RECOGNIZED INDICES. THE S&P 500 INDEX IS A MARKET-CAPITALIZATION WEIGHTED INDEX CONTAINING THE 500 MOST WIDELY HELD COMPANIES (400 INDUSTRIAL, 20 TRANSPORTATION, 40 UTILITY AND 40 FINANCIAL COMPANIES) CHOSEN WITH RESPECT TO MARKET SIZE, LIQUIDITY, AND INDUSTRY. THE INDEX IS CALCULATED ON A TOTAL RETURN BASIS WITH DIVIDENDS REINVESTED. THE BOFA MERRILL LYNCH US CORPORATE & YANKEES INDEX TRACKS THE PERFORMANCE OF US DOLLAR DENOMINATED INVESTMENT GRADE DEBT PUBLICLY ISSUED IN THE US DOMESTIC MARKET BY US AND NON-US CORPORATIONS AND NON-US QUASI-GOVERNMENTS. QUALIFYING SECURITIES MUST HAVE AN INVESTMENT GRADE RATING (BASED ON AN AVERAGE OF MOODY S, S&P AND FITCH) AND AN INVESTMENT GRADE RATED COUNTRY OF RISK (BASED ON AN AVERAGE OF MOODY S, S&P AND FITCH FOREIGN CURRENCY LONG TERM SOVEREIGN DEBT RATINGS). IN ADDITION, QUALIFYING SECURITIES MUST HAVE AT LEAST ONE YEAR REMAINING TERM TO FINAL MATURITY, A FIXED COUPON SCHEDULE AND A MINIMUM AMOUNT OUTSTANDING OF $250 MILLION. ORIGINAL ISSUE ZERO COUPON BONDS, "GLOBAL SECURITIES (DEBT ISSUED SIMULTANEOUSLY IN THE EUROBOND AND US DOMESTIC BOND MARKETS), 144A SECURITIES, CORPORATE PAY-INKIND SECURITIES, INCLUDING TOGGLE NOTES, QUALIFY FOR INCLUSION IN THE INDEX. CALLABLE PERPETUAL SECURITIES QUALIFY PROVIDED THEY ARE AT LEAST ONE YEAR FROM THE FIRST CALL DATE. FIXED-TO-FLOATING RATE SECURITIES ALSO QUALIFY PROVIDED THEY ARE CALLABLE WITHIN THE FIXED RATE PERIOD AND ARE AT LEAST ONE YEAR FROM THE LAST CALL PRIOR TO THE DATE THE BOND TRANSITIONS FROM A FIXED TO A FLOATING RATE SECURITY. DRD-ELIGIBLE AND DEFAULTED SECURITIES ARE EXCLUDED FROM THE INDEX. THE BOFA MERRILL LYNCH AA US CORPORATE & YANKEES INDEX IS A SUBSET OF THE BOFA MERRILL LYNCH US CORPORATE & YANKEES INDEX INCLUDING ALL SECURITIES RATED AA1 THROUGH AA3, INCLUSIVE. THIS MATERIAL HAS BEEN PREPARED OR IS DISTRIBUTED FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SOLICITATION OR AN OFFER TO BUY ANY SECURITY OR INSTRUMENT OR TO PARTICIPATE IN ANY INVESTING STRATEGY. ALL INFORMATION CONTAINED IN THIS MATERIAL IS PROVIDED AS OF THE DATE OF THE MATERIAL (OR THE EARLIER DATE, IF ANY, SET FORTH IN THIS MATERIAL), AND IS SUBJECT TO CHANGE WITHOUT NOTICE. OPINIONS EXPRESSED HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE AND ANY INVESTMENT VIEWS EXPRESSED HEREIN REPRESENT VIEWS AS OF THE DATE OF PREPARATION OF THIS MATERIAL ONLY AND NOT AS OF ANY FUTURE DATE. THE INFORMATION PROVIDED IN THIS MATERIAL DOES NOT IDENTIFY OR INCLUDE ANY RISK OR EXPOSURES, OF WHICH MAY OR MAY NOT BE AWARE, AND THAT WOULD MATERIALLY ADVERSELY AFFECT THE PERFORMANCE OR RISK OF THE FUNDS. IN ADDITION, INVESTMENT STRATEGIES EMPLOYED BY THE FUNDS MAY INVOLVE, AMONG OTHER TECHNIQUES, LEVERAGE, SHORT SELLING AND VARIOUS DERIVATIVES, EACH OF WHICH ENTAILS SEPARATE AND DISTINCT RISKS. MORE GENERALLY, THIS MATERIAL DOES NOT, AND IS NOT INTENDED TO, PROVIDE A DISCUSSION OF THE RISK FACTORS TO WHICH THE FUNDS ARE SUBJECT. NEITHER THIS MATERIAL NOR ANY PART OF THIS MATERIAL MAY BE MODIFIED, MANIPULATED, REPRODUCED, OR DISTRIBUTED WITHOUT THE PRIOR WRITTEN AUTHORIZATION OF VIDA CAPITAL. 20