Risk Factors

Notwithstanding DXA's diligence in implementing the divestment policy outlined in the Managed Portfolio Agreement ("Portfolio"), the assets comprising the selected Portfolio are, by their nature, subject to typical market fluctuations, credit risk, adverse liquidity conditions, even if DXA acts diligently in the management of the assets and the Investee Companies and maintains risk management routines and procedures, there is no guarantee of complete elimination of the possibility of losses for the CONTRACTORS of the Portfolio. DXA cannot be held responsible for any depreciation of the assets that make up the Portfolio or losses, and CONTRACTORS assume the risks inherent to these types of investments. There is no guarantee that the objectives of the investments that make up the portfolio will be achieved.

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§1º. The funds that are part of the PORTFOLIO are subject to the following risk factors, in a non-exhaustive manner:

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(i) Liquidity and Secondary Market Risk: The Assets comprising the Portfolio are composed of shares, subscription warrants, debentures and other securities convertible or exchangeable into shares of closely-held companies ("Investee Company"), which, by their nature, are illiquid assets that present peculiarities in relation to the usual investments of most of the assets comprising the Brazilian investment system, since there is no secondary market with guaranteed liquidity in Brazil. The funds invested in the PORTFOLIO must remain available during the entire term of the investment, with no possibility of redemption, amortization or transfer, unless expressly authorized by DXA or approved divestment.

(ii) Market Risk: consists of the risk of fluctuations in the prices and profitability of the assets that make up the portfolio, which are affected by various market factors, such as liquidity, credit, political, economic and tax changes. This constant price oscillation may cause certain assets to be valued at different values than those of their issue and/or accounting, which may cause portfolio volatility and losses to CONTRACTORS.

(iii) Concentration Risk: The risk associated with the PORTFOLIO is directly proportional to the concentration of investments. The greater the concentration of investments of the PORTFOLIO in a single Invested Company that issues shares and/or bonds, the greater the vulnerability of the PORTFOLIO in relation to the risk of such issuer. The CONTRACTOR may invest up to 100% (one hundred percent) of its resources in only one Invested Company that suits its Investment Thesis, without restrictions as for economic, operational, regulatory or strategic conditions.

(iv) Risk Related to Macroeconomic Factors and Governmental Policy: The assets that integrate the Portfolio may also be subject to other risks arising from reasons alien or exogenous to the MANAGER's control, such as the occurrence, in Brazil or abroad, of extraordinary facts or special market situations or, further, events of a political nature, economic or financial events that modify the current order and significantly influence the Brazilian financial and/or capital markets, including interest rate variations, currency devaluation events and legislative changes, may result in (a) loss of liquidity of the assets that make up the portfolio, (b) default by the issuers of the assets. Such facts may result in losses to the CONTRACTING PARTIES and delays in the divestments planned for the assets of the PORTFOLIO. Notwithstanding, the Invested Companies will develop their activities in the Brazilian market, being subject, therefore, to the effects of the economic policy practiced by the Federal Government. Occasionally, the Brazilian Government intervenes in the economy making relevant changes to its policies. The Brazilian government's measures to control inflation and implement economic and monetary policies have involved, in the recent past, changes in interest rates, currency devaluation, exchange controls and increases in public tariffs, among other measures. These policies, as well as other macroeconomic conditions, have significantly impacted the economy and the domestic capital market. The adoption of measures that may result in currency fluctuation, indexation of the economy, price instability, increase in interest rates or influence the fiscal policy in force may impact the business, the financial conditions, the operational results of the Invested Companies and the consequent profitability of the PORTFOLIO. Negative impacts on the economy, such as recession, loss of purchasing power of the currency and exaggerated increase in interest rates resulting from internal policies or external factors may influence the results of the assets that make up the Portfolio.

(v) Risks Related to Invested Companies: The assets that make up the PORTFOLIO are considered long-term and the return on investment may not be consistent with that expected by the CONTRACTOR. The PORTFOLIO will be concentrated in shares and/or securities convertible into shares issued by the Invested Companies. Although the PORTFOLIO MANAGER will always participate in the decision making process of the respective Invested Companies, there are no guarantees of (i) good performance of any of the Invested Companies, (ii) solvency of the Invested Companies and (iii) continuity of the activities of the Invested Companies. Such risks, if materialized, may negatively and significantly impact the results of the Portfolio and the value of the assets. Notwithstanding the diligence and care of the MANAGER, payments related to shares and/or securities convertible into shares issued by the Invested Companies, such as dividends, interest and other forms of remuneration may be frustrated due to insolvency, bankruptcy, poor operational performance of the respective Invested Company, or other factors. In such occurrences, CONTRACTORS may experience losses, and there is no guarantee or certainty as to the possibility of elimination of such risks.

(vi) Risks Related to the Invested Companies' Sectors of Activity: The purpose of the Portfolio is to make investments in Invested Companies subject to characteristic and individual risks of the distinct segments in which they operate, which are not necessarily related among themselves, and which may directly or indirectly negatively influence the value of the Portfolio.

(vi) Negative Equity Risk: The eventual equity losses of CONTRACTORS are limited to the amount of the committed capital, in case of liquidation, judicial reorganization or bankruptcy.

(viii) Credit Risk: Consists in the risk of the issuers of securities that integrate the PORTFOLIO not complying with their obligations to pay both the principal and interest of their debts to the CONTRACTORS.

(ix) Exchange Risk Related to the Invested Companies: The exchange rate variation may negatively impact the income of the Invested Companies, especially, regarding the acquisition and financing of equipment and machinery pegged to foreign currency. Eventual reductions in the Invested Companies' income may also impact the Portfolio's results.

(x) No Guarantee of Profitability: The verification of past profitability in any Portfolio and/or Invested Company does not represent a guarantee of future profitability. Additionally, the investment of the PORTFOLIO's resources in the Invested Companies, in case it presents risks related to the capacity of income generation and payment of its obligations, does not allow any safe profitability parameter to be determined for the PORTFOLIO. Furthermore, the capital committed by the CONTRACTOR in the PORTFOLIO does not count on the guarantee of the MANAGER, of any insurance mechanism, and the total loss of the invested capital may occur.

(xi) Other Risks: The assets may also be subject to other risks arising from reasons beyond or out of the MANAGER's control, such as moratorium, payment default, change in the rules applicable to the financial assets, changes imposed on the financial assets, change in monetary policy.