1. SISCOSERV: Implications for Brazilian Private Equity Fund Managers September 20, 2012 Peter A. Furci

2. 23485339 2 Offshore Fund Structures Funds for international investors are typically structured as limited partnerships (Delaware, Cayman Islands or Canada) with investors as limited partners and sponsor as general partner –Sponsor generally entitled to 20% of profits as carried interest once investors receive capital back plus hurdle return –Governance of fund generally within sponsor control, with limited items referred to investor advisory committee –Fund will typically have both a general partner and an investment manager Brazil-focused international funds utilize this structure, but also typically utilize a “FIP” structure to make investments in Brazilian portfolio companies

3. 23485339 3 Brazil: FIP Basics Closed-end investment funds organized to invest primarily in shares of sociedades anonimas (target companies) IOF of 0% on investments in and outflows from FIPs –Rate fluctuated in 2009-11 between 0% and 6% FIP is not taxed on dividends or gains on sale of shares Distributions by the FIP to an offshore quotaholder are exempt from tax if –Quotaholder (individually or with related parties) owns less than 40% of the FIP quotas/economic interests –FIP does not own debt exceeding 5% of net equity (except convertible debentures, warrants and government bonds) –Quotaholder not domiciled in a tax haven jurisdiction FIP must be managed by an onshore investment manager licensed with the CVM

4. 23485339 4 FIP/Offshore Fund Structure GP of GP (LLC) General Partner (LP) Fund A (Cayman LP) Fund B (Cayman LP) Fund C (Cayman LP) Delaware LLC ADelaware LLC CDelaware LLC B FIP 1FIP 2FIP 3 Private Brazilian Portfolio Company Non-FIP Investments (Public and non- Brazilian Portfolio Companies) Offshore Manager Brazilian Manager Management contract with FIPs Management contract with Offshore Funds Sub-advisory contract with Offshore Manager

5. 23485339 5 Scope of Services Services covered by SISCOSERV include “financial services” such as “portfolio management and administrative services” –Includes “investment banking” services such as merger and acquisition, asset valuation, risk capital and corporate finance services –Also includes “other auxiliary services related to financial services not specifically classified” Advisory services provided by Brazilian based investment managers to funds organized outside Brazil would likely be covered under one of the above categories Reporting requirements for financial services begin February 1, 2013

6. 23485339 6 Reporting Requirements Information required to be provided by the Brazilian service provider includes the name and country of organization of the person or entity receiving the services and details regarding the service transaction Identity of service recipient will depend on fund structure –If there is no offshore manager, Brazilian manager will provide services to offshore funds and potentially the Delaware LLCs –If there is an offshore manager, Brazilian manager will provide services to FIPs and potentially to offshore manager via a sub- advisory agreement –If Brazilian manager only provides services to the FIPs, reporting would not appear to be required –Although the guidance is not detailed, identity of fund investors should not be required to be disclosed as there is no direct provision of services between Brazilian manager and the investors