Major Risks Of Participation In The Sugarloaf Fund

Market Risks
Given that the Brazilian economy is volatile at present and given the nature of the Receivables, it is entirely possible that the Receivables could lose value or become completely uncollectible. Additionally, while you have the benefit of knowing all the terms and conditions of the Trust’s initial investment before deciding to invest therein, you will not have such information with respect to subsequent Trust investments. The Trustee has the authority to make decisions on how to invest the proceeds of the Receivables (or collections) distributed to Trust as well as the proceeds from the sale of any subsequent investments. These investments may be more or less risky than the investment in the Receivables, but, given the investment strategy of the Trust (investment in Brazilian distressed assets), the investment is certain to carry significantly more than average investment risk. You must therefore be willing to lose your entire investment and to bear the economic consequence of this.

Currency Risks
In order for the Trustee or its agents to convert the collections from the Receivables to U.S. Dollars and remit such amounts to a bank account established by the Trust pursuant to the terms of the Servicing Agreement, it must obtain prior approval from Brazil’s Central Bank. If such approval is not obtained (and it certainly will not be obtained prior to your contribution into the Trust), you will not be able to convert the collections into U.S. Dollars and transfer such amounts to a bank account outside of Brazil.

Management Risks
This summary has focused on the substantial amount of control that is vested in the Trustee. The Trust is a newly formed entity with not established operating history of investing in Brazil’s distressed assets. Even if your entire investment is lost, you are unlikely to have effective recourse against the Trustee as long as it acts in a reasonable manner (given the Trust’s investment mandate). Therefore, you must also be prepared to lose your entire investment as a result of mismanagement. While your management risks are somewhat mitigated by your power to remove and replace Sugarloaf, LLC as Trustee, your entire investment could possibly be lost before you realize a need to act.

Legal Risks
It is possible that the Receivables are burdened by liens or other encumbrances unknown at the time of contribution. It is possible that PPI and/or the Trustee lacked authority to enter into these transactions or that there were Brazil regulatory restraints impairing or prohibiting this transaction that were not disclosed. It is also important to note the possibility that statements made about the outstanding principal balance of the receivable and history that permit a calculation of the Trust’s post-contribution basis in the Receivables could prove untrue and that, consequently, the Trust would have a lower original cost basis in the Receivables than is anticipated.

Enforcement Risks
The risks discussed above are in large measure enforcement risks and should also be viewed in that context. While the transaction documents and the Trustee are governed by Delaware law, the Trustee may not have any assets in the United States that you could easily reach to enforce any judgment obtained. Therefore, you should assume that any litigation against the Trustee will ultimately result in legal action having to be taken in Brazil and will be subject to the different rules of that judicial system.