A Timely & Compelling

Investment Opportunity

April 2010

The California Distressed Land Assets Fund Ltd

Executive Summary

• CDLAF will take advantage of unprecedented opportunities in buying Distressed USNon-Performing Real Property and First Charge Mortgages at discounted valuationsof up to 50%.

• The Fund’s Sponsor and the Managers individually bring 25+ years experience ofreal property management in the U.S. totaling more than $7bn of successfulprojects in over 300 past partnerships. CDLAF gains access to this long termstrategic network of local managers who provide access to distressed assets usingsuperior knowledge and local execution capabilities.

• The Fund will invest the majority of capital in 2010-2012 through acquisitions thatconcentrate on core gateway cities with the strongest prospects for recovery withproperties that require value-added strategies.

• Acquisitions are screened in order to meet the Fund’s objectives of short termholding periods, known clean exits, which still meet the objectives of the fundthrough strategies focused on downside protection yet offering substantial upsideopportunity.

• Full transparency on all assets with third-party administrators, auditors and externalfund controls to inform and protect the investor’s interests.

• The Fund seeks USD155 million of committed capital to be funded in split tax yearswith initial closing on June 30, 2010. Minimum subscription USD 2 million.

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Market Opportunity

Range of Assets

• Mortgage pools via the FDIC structured loan programme

• REO via local managers, loan service advisors and local/community banks

• Short term refurbishment/resale properties via local managers and

local/community banks

• Mortgage pools are a mixture of various failed banks’ assets

• Investment Committee of 5 senior industry leaders, each with 25+ years of industry

experience

• Investment Committee reviews all potential asset purchases and decides on what

assets are bought

• Segregation of assets between LLC’s according to portfolio managers area of

expertise

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Mortgage Pools

Selection Criteria

• Seek out pools that have average loan balances well within affordable price

ranges

• Select pools that have a high percentage of loans in areas of lower

unemployment

• Choose housing with a first charge mortgage where the borrowers put down a

mortgage deposit

• May have leverage, in that some pools are structured that way

• Pools must be more than 50% currently performing and not filtered with loans

that have been previously rejected by others

• Review any modifications in the FNMA/FHA plans prior to bidding

Due Diligence on Pool

• Test a minimum of 25% of the portfolio with direct underwriting using Brokers

opinion of values, Zillow, Case-Shiller and information in the borrowers files

• Assume 20% of the performing loans will become non-performing

• Assume that the average home has lost 35% of value and, if the owner put down

a deposit, the average deductions will be 20-25% of the principal of the loan

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Mortgage Pools – Exit Plan

Exit Plan

• Predetermine during the bid process the best method to exit from each loan type

• Price all foreclosed properties owned by financial institutions in bulk at roughly 20%-

25% of the original loan balance and sell on to specialist funds

• Based on the assumption that 10% unemployment will result in 20% of the loans not

being able to qualify for modifications they will therefore need to be sold at

roughly 25%-35% of the loan balance to specialist funds

• Risk offset as mortgage owners are subsidised by the Govt to prevent foreclosure

• Sell re-performing loans back to FNMA/FHA/GNMA at approximately 75 – 80% of

original loan balance via the “Making It Affordable” Obama programme, having been

purchased at 50 -60% of original loan balance

• Exit planned within 18 – 24 months

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REO – Residential Apartments/Housing

Selection Criteria

• Locations of assets well known and reviewed by Investment Committee

• Choose gateway cities with lower unemployment and good job formation patterns

• Demonstrates clear ability to deliver value to end consumer in either rental rates or

sale price

Due Diligence on REO

• Selection of substantially completed assets with no major impairments which would

prevent accomplishing the business plan

• Acquisition substantially below replacement costs

• Affordable end of the market allowing for majority of average incomes to qualify to

rent or purchase

Exit Plan

• Value added elements such as refurbishments are well within the team’s skill-set, and

achievable within a short time frame

• Clear justification required for assets held beyond 24 months

• Clean and supportable exit reflective of the Fund’s yield objectives via rental or sale

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Short Term Refurbishment/resale Programme

Selection Criteria

• Focus on limited geographical area in job based central core markets with significant

population within a 5 mile radius with limited housing inventories of less than 6

months supply.

• Acquisitions must be roughly 25% lower than normal market level unless some form

of leverage is available.

• Buying newer homes in the affordable range requiring very little in repairs with

average budgets of under 5k for market ready housing.

• Focus on pricing in the affordable range only.

Exit Plan

• Work with local operators who have proven track records and previously

demonstrated the ability to quickly turn around the inventory efficiently for resale

• Ensure operators have equity invested which is subordinated to Funds capital return

and a large hurdle rate

• Minimum capacity of 50 homes a year to move forward with local operators

• Exit from asset planned within 12 – 18 months

• Complete transparency with all funds moving through escrow or fund control

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Why U.S. Real Estate?

• US real estate values have fallen more than 35% from peak values.

• Strong market impetus created where jobs and home prices have the best

affordability since 1981.

• The US has seen a greater alignment of income levels and house prices than most

developed markets.http://www.housingwire.com/2010/03/09/economists-find-us-house-prices-are-undervalued-globally/

• Recent trends are highly correlated to the best affordability in 20 years.http://www.nuwireinvestor.com/articles/home-affordability-increases-to-near-record-level-54754.aspx

• US home foreclosures are forecast to taper off strongly by the 2nd Qtr of 2011,

exhibited in the Rate Resets chart.

• Sales of new and existing homes, now at more than twice the level of foreclosures,

have been accelerating over the past six months.

• With inventories falling by half, markets are now exhibiting price stability as the

forces of supply and demand start to balance in many cities.

• The government is active in strongly supporting the housing market through

purchase schemes and relaxed rules supporting homeownership.

http://blogs.wsj.com/developments/2010/01/14/ubss-10-predictions-for-housing-in-2010/tab/article/

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8

Local Managers and Joint Venture Partners

David Michelson

• Experience

• 25 years experience in developing and managing residential projects with his Joint

Venture Partners & LLC.

• Track Record

17 partnerships between 1994 and 2005 including both single family and multiple

family developments along with land entitlements, all in California.

• Capital Commitment

• David Michelson will invest USD 1 million on the same terms as the fund’s

investors

• Role within Fund

• David Michelson organized the European Fund and is the Sponsor of CDLAF.

• Michelson Family Partners Inc, will be the Advisor to the Three Arch Investment

Corp I and its sister companies, the Delaware corporations holding the Fund’s

assets.

• Mr Michelson will be a member of the Investment Committee.

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Local Managers and Joint Venture Partners

Spring Asset Management, LLC - Eugene, Oregon. Manager of Three Arch Investment Corp I

• Experience

• Private investment office with over 30 years of developing and managing over $ 2bn real estate.

• Investments comprised of more than 5,000 residential lots/houses, 1,500 hotels rooms and

1,500,000 square feet of commercial projects.

• Spring Asset Management, LLC’s (SAM) affiliates currently own and manage over $500 million

of real property assets.

• Track record

• Over the past decade, SCG has achieved average annual *ROI over 20% on its project

portfolios with some exceeding 100%.

• Capital Commitment

• All portfolio managers are required to invest a minimum of 10% of all required equity

• Role within Fund

• SAM will both be a portfolio manager as well as a direct manager of REO assets.

• SAM shall also serve as the management office for Three Arch Investment Corp 1 and will be

responsible for tax reporting, compliance and all investor reporting. SAM will provide two

members to the investment committee and be a portfolio manager.

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Local Managers and Joint Venture Partners

Strand Corporation - Vancouver, B.C - Associate Office in California

• Experience

• Active in real estate organization since 1976.

• Their past portfolios have a combined value of over USD 4 billion, the key

segments of which are developing, acquiring and managing more than 13,540

multifamily units, 1,448,000 sq feet of office buildings and providing more than

USD 3 billion of equity financing.

• Track Record

• Completed over 145 past equity offerings, using previously 16 strategic managers

which resulted in 132 of the 145 projects producing a total profit of greater than

USD 500 million.

• Capital Commitment

• Strand Corporation has allocated USD 50 million to US assets and will provide

capital for many of the fund investments on a shared capital basis.

• Role within Fund

• Strand Corporation will be an active co-investment partner and will bring a

significant benefit to the fund with their past strategic alliances with financially

motivated local operating partners that provide high-margin opportunities.

• Strand Corporation will provide two members to the investment committee.

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How The Investment Works

• A series of 3 baskets holding different assets which are designed to be deployed at various points

throughout the changing real estate cycle. Basket A shall hold the short term cash. Basket B shall

start out as a primary acquisition in 2010, with Basket C quickly becoming the primarily asset type,

once the cycle moves from distressed to stability and recovery.

• Investment opportunities are presented to the investment committee by local managers, which are

reviewed by senior managers of Spring Asset Management and Strand Corporation. This ensures

that seasoned successful real estate and investment professionals review all opportunities.

• Each real property investment requires a minimum of 10% in aggregate equity, from non CDLAF

sources thus having “skin in the game”.

• Full transparency, with third party administration and independent audit controls and third party

fund controls, which allows the Fund to meet institutional standards in supervisory and regulatory

controls through its infrastructure with regard to investment strategy, risk management and client

services.

• Upon the sale of major assets, funds remaining after reserves are disbursed back to the investors,

in a tax efficient manner.

• Alignment of interest, between sponsor and managers who need to meet minimum hurdles of 8%

but have additional rewards when they individually achieve 25% returns or greater for the

Delaware Corporation.

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Portfolio Composition 13

Investments allocated across 3 baskets

The above performance is based on an investment of USD 2,000,000 and assumes a

return pre US-Tax, and is using a combination of non-leverage and leverage in the

assumptions.

Basket C

Foreclosed real property assets

(REO) and equity loans to local

operators

Basket A

Short term cash

management

Basket B

Highly discounted non-performing

mortgages and pools of toxic assets

from the failed banks

Projected Returns 14

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Portfolio Return Contributions

Gross Net

43.57% 23.66%

37.49% 20.42%

Return on Fund 35.99% 19.60%

Return on Capital Employed

Return on Portfolio

Performance Summary

The above performance is based on an investment of USD 2,000,000. The

gross figure assumes a return pre US Tax, and is using a combination of

non-leverage and leverage in the assumptions. The net return is based on

current tax law which may change over the life of the fund.

CDLAF Master Feeder Structure 15

For Illustrative Purposes Only

C alifo rn ia D istressed

Land A sset Fund

D elaw are

C orporation

LLC

A dvisor

Portfolio

M anager

1

Voting

Shares

M em bership

InterestM em bership

Interest

Nonvoting Shares

and Portfo lio Debt

Advisory

Agreem ent

Portfolio

Investm ent

Sponsor

Sponsor

Agreem ent

M em bership

Interest

Fund Terms

Investment On subscription To be drawn

USD 2MM = 20 shares 1MM 1MM

USD 10MM = 100 shares 4MM 6MM

USD 15MM = 150 shares 5MM 10MM

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• Minimum subscription USD 2,000,000* (USD 100,000 per share).

• Fund opening: April 30th 2010.

• Initial closing: June 30th 2010 requiring USD 25 million or when fund fully subscribed.

• Initial liquidity event after 18 months ( Basket B) after acquisition.

• Distribution of cash flow income (net of management fees and reserves) every 6 months to

investors via the Jersey fund provided the amount exceeds USD 1 million.

• No requirement for re-investment ; re-investment will not be charged new establishment fees.

• Subscriptions require 40% at time of commitment, subject to a minimum of USD 1 million.

• For investors with an income tax treaty between their country of residence and the United

States, the Sponsor may create an alternative investment structure to invest on a side by side

basis with the Jersey company. For example, if it is more tax efficient to do so, companies

resident in Canada, the United Kingdom or Germany may invest in the Fund through the voting

shares and debt securities of a single Delaware corporation, which in turn may invest in every

LLC holding one of the Fund’s portfolios.

* Subscriptions open to non-US investors only for the Jersey Fund.

Fund Terms and Service Providers 17

Fund Name The California Distressed Land Assets Fund Ltd

Domicile Jersey, Channel Islands

US Administration / Custody First American Fund Control (Fortune 500 company)

Fund Documentation Specialist Document Risk Solutions

Counsel for US Tax Katten Muchin Rosenman LLP

Jersey Counsel Howard Law

Auditors Deloitte & Touche LLP

Administrator Jersey

Administrator US

Vistra Fund Services Limited

Strand Corporation

Bank RBSI Jersey

Management Fees to Sponsor and Portfolio Managers The Sponsor and the Portfolio Manager, Spring Asset Management, will be paid

1% of all assets other than the money market funds (subject to a USD 50,000

month min. distribution).

The Advisor will also get paid 1% of all assets other than the money market funds,

but half of his fee will be deferred until the return of all of CDLAF invested capital

(subject to a USD 200,000 annual distribution).

Performance fees paid for each asset portfolio Fees at the project level are withheld until a 8% hurdle has been earned, thereafter

hurdles up to 13% are at a 90% distribution to investors, with a makeup equal to

the standard 20% of profits thereafter. If any manager earns greater than a simple

25% per annum return the distributions are thereafter revised to 65% to the

investor, providing incentives to our portfolio and local managers.

Conclusion

• Focused micro-oriented real estate fund utilising experienced local managers to take advantage of

the opportunities in the distressed US real properties market.

• Buys first charge residential mortgages and foreclosed properties which need to be liquidated by

the failed banks resulting in motivated sellers and thus risk-adjusted acquisitions.

• Skillful managers who will seek to repeat their prior success of over 25 years by acquiring

distressed real property assets, as well as capital for managers who have opportunities in their

local markets.

• Alignment of interest given managers and sponsors high hurdle rate, co-investments and third

party controls and supervisions. Open access via web to investment committee meetings. Full

access to all financial obligations and accounting.

• Clear trends that suggest lower inventories despite foreclosures and accelerating demand as a

result of economic stability. Strong governmental support and long term programme intended to

make homeownership compelling.

• Distribution of all revenues, net of reserves back to the investors with the first liquidity event within

18 months after acquisition. Investors may reinvest these funds back to CDLAF, net of

establishment fees.

• Targeting high teen to mid twenty returns, prior to US taxes using a tax efficient structure built for

EU Corporations, Pension Plans, Insurance Company and high net worth individuals.

• Cut off for new investments on December 31, 2013.

• Winding up objective of 6 years, unless extended by approval of the shareholders.

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