8300 North Hayden Road
Suite 207
Scottsdale, Arizona 85258
Tel 480.296.0133
Fax 480.296.0166
Toll Free 888.309.7455
www.amerifunds.us
AmeriFunds
Secured Income Fund I, LLC
Most FAQ’s
To be used in conjunction with the
Confidential Private
Placement Memorandum
Dated May 17, 2004
Q. What is the objective of the Fund?
A. The Fund objective is to provide investors with a high level of monthly
income, primarily by investing in Mortgage Notes secured by real estate. See
“Investment Objective”.
Q. Who can invest in the Fund?
A. Only accredited investors, as defined in the Memorandum, may invest. See
“Suitability”.
Q. What is the minimum investment?
The minimum initial investment is $25,000. Additional investments may
be made in $10,000 increments. See “Minimum Investment” and “Additional Investments.
Q. How does an investor earn money?
A. The investment is placed in the Fund, which purchases Mortgage Notes
secured by real estate. As interest is paid on the Notes each month, it is either paid to you proportionately, or at your choice, reinvested in the Fund. Additionally, since the Notes are purchased at a discount, as they are paid down, the principal is credited to the Fund for reinvestment. If a Note pays off early, 90% of the difference between the amount of principal paid and the cost basis to the Fund will be credited to you, again in proportion to the amount you have invested. See “Primary Investment Strategy” and “Members’ Return on Investment”.
Q. How much of an annual return should investors expect?
A. As a result of our ability to purchase Notes at a discount to their
actual value, we expect that the yield on notes will exceed 8% annually.
See “the Funds Investments”.
Q. What is the historical Internal Rate of Return (IRR) for the Fund?
A. Since inception through June 30, 2005, the Fund has earned a total annualized return
of 16.21%, including interest and principal appreciation, and after deducting any fees
paid to the Investment Manager.
Q. What is the security for an investor in the Fund?
A. You are investing in the Fund, which in turn invests in a managed portfolio of
Mortgage Notes purchased at a discount and collateralized by a first position in real
estate. The average Loan-to-Value of Notes purchased in the Fund is less than 60%. See “Description of the Fund”.
Q. What criteria does the Fund use for purchasing the Notes?
A. A primary objective of the Fund is preservation of capital. As such, the
following criteria is strictly followed when purchasing Notes:
1) We first determine the current value of the real estate to be used for collateral
(the Fund portfolio Investment to Value is currently under 55%).
2) The credit worthiness of the borrower is determined (borrowers credit must be
above average).
3) The Note must be seasoned (at least 6 payments must have been made
as per the terms of the Note).
4) We only purchase Notes at a discount to the amount currently owed. See
“Evaluation and Acquisition by ADF”.
Q. Who will make the decisions related to underwriting, pricing and
servicing the Notes, and managing the business of the Fund?
A. The Fund’s Investment Manager is AmeriFunds Diversified Funding, LLC.
(“ADF” or the “Investment Manager”). ADF will make all decisions related
to underwriting and purchasing the Notes. The Fund itself, under the direction
of the Manager, will be responsible for collecting the payments from the
borrowers and paying the appropriate amount of interest due to you. See
“Investment Manager” and “ADF”.
Q. How is the Investment Manager compensated for managing the business
of the Fund?
A. The Manager receives a fee for organizing, offering and managing the Fund, and a
transaction fee for finding, underwriting and purchasing Notes on behalf of the Fund.
The Manager is responsible for all of its’ own expenses, including commissions, if any
as well as those of the Fund. The yield on Notes paid to the investor is expected to
be more than 8% annually. After deducting all Manager fees, the total annualized
return in the Fund since inception through June 30, 2005 was 16.21%. See
“Compensation to the Investment Manager”.
Q. What is the current average Investment to Value of Notes purchased by the
Fund?
A. The current average Investment to Value of Notes purchased by the Fund is less than
55%.
Q. What is the average size of a Note purchased by the Fund?
A. To date, the average price for a Note purchased by the Fund is approximately
$65,000.
Q. What is the default rate of the Notes purchased by the Fund?
A. The national average for defaults on mortgages is approximately 3%, including those
that are originated as well as those purchased in the secondary market. Since the
Fund only purchases Notes that; 1) have equity in the underlying real estate; 2) are
purchased at a discount to the current balance; 3) are seasoned (at least six payments
must have been made on time); and 4) in which the maker is a credit worthy borrower (a current credit check on the borrower is made prior to the Note purchase), the Fund anticipates a very low default rate. As of June 30, 2005, no notes purchased by the Fund have been in default.
Q. What happens in the event of a default?
A. Since the Fund consists of a portfolio of diversified Notes, the default of a small
percentage of Notes would have negligible effect. In the event of a default, the Fund
will immediately foreclose on the underlying property, conduct a “quick sale” and
reinvest the proceeds back into the Fund.
Q. How would fluctuating interest rates effect an investment in the Fund?
A. Fluctuating interest rates would have little or no effect on the existing portfolio of the
Fund. Since we are usually one to two years ahead of the market (we only buy
seasoned Notes), we are able to anticipate interest rate fluctuations. In a negotiable
market, as rates decline, we would reduce the amount we would be willing to pay for a
Note. As rates increase, we would be able to increase the amount we would be willing
to pay. In any event, Notes are always purchased at a discount from their current
balance.
Q. What is the effect on an investment in the Fund if the value of the underlying
real estate declines?
A. All Notes purchased by the Fund must meet the following criteria: 1) there must be equity in the underlying real estate, supported by a current market valuation; 2) Notes are purchased at a discount to the current balance; 3) the Fund is in the first position; 4) borrowers must have above average credit scores; and 5) all Notes purchased by the Fund are seasoned (at least six payments made on time). In the event of a reduction in real estate values, the obligation of the borrower remains the same. The potential for fluctuating real estate values was a consideration in developing the above criteria. Management feels that ample precaution is taken to mitigate any potential loss to the Fund in the event of a reduction in real estate values. However, if the borrower were to default, the Fund would foreclose and “quick sale” the underlying property.
Q. When do investors start to earn interest on their investment?
A. You will start to earn interest on your investment beginning 15 days after receipt of
your funds. The maximum period of time before we commence distributions on your
interests will be 60 days after receipt of the funds. See “Distributions” and
“Fund’s Investments”.
Q. How often is interest paid to investors?
A. Distributions of interest received will be paid monthly. If you so elect, interest earned
can also be reinvested in the Fund. Principle payments received will be retained and
reinvested in purchasing additional Notes. See “Distributions” and “Members’
Return on Investment”.
Q. Does an investment in the Fund qualify for IRA’s or other retirement
plans?
A. Yes. The Fund is fully compliant with the Employee Retirement Income
Security Act and the Internal Revenue Code. See “ERISA Considerations”.
Q. Can investors elect to reinvest their interest back into the Fund?
A. Yes. You can elect to have the interest that would have otherwise been paid to you
reinvested in lieu of monthly disbursements. See “Members’ Return on Investment”.
Q. How long do investors have to wait in order to withdraw from the Fund?
A. You may withdraw or partially withdraw from the Fund after one year from the date
of your investment in the Fund. See “Withdrawals” and “Repurchase of
Interests”.
Q. How frequently will investors be provided with an accounting of my investment?
A. Statements of your account are provided at the end of each month for activity
that occurs during the previous month. Statements of the financial condition of
the Fund are provided annually. See “Annual Financial Statements”.
Q. What is the procedure if multiple investors want their investment returned at
the same time?
A. You may withdraw, or partially withdraw, from the Fund after one year and
obtain the return of all or part of your capital account on 45 days written notice.
Withdrawals will be paid on a “first come-first serve” basis to the extent that
cash funds are available. See “Repurchase of Interests, Withdrawal from
the Fund”
Disclaimer
Past performance is not a guarantee or indicator of future results. All funds have varying degrees of risk, depending upon the securities they invest in. Please read the Memorandum carefully to be sure you understand the principal risks and strategies associated with the Fund.
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