beijing capital growth fund - ppm

CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM

BEIJING CAPITAL GROWTH FUND, L.P.

BURNHAMSECURITIES INC.BURNHAMSECURITIES INC.

June 2010

BEIJING CAPITAL GROWTH FUND 北京首创成长基金

Private Placement Memorandum Beijing Capital Growth Fund

BURNHAMSECURITIES INC.BURNHAMSECURITIES INC. i CONFIDENTIAL

CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM BEIJING CAPITAL GROWTH FUND, L.P.

$100,000,000 OF LIMITED PARTNERSHIP INTERESTS

THIS CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM (THIS “MEMORANDUM”) IS BEING PROVIDED BY BEIJING CAPITAL INVESTMENT MANAGEMENT COMPANY (THE “FUND MANAGER”), ON A CONFIDENTIAL BASIS TO A LIMITED NUMBER OF SOPHISTICATED INVESTORS FOR THE PURPOSE OF PROVIDING CERTAIN INFORMATION REGARDING THE OFFER OF LIMITED PARTNERSHIP INTERESTS (THE “INTERESTS”) IN BEIJING CAPITAL GROWTH FUND, L.P. (TOGETHER WITH ANY FEEDER VEHICLES AND INTERMEDIARY ENTITIES, COLLECTIVELY, THE “FUND”).

THIS MEMORANDUM IS BEING FURNISHED SOLELY FOR THE INFORMATION OF THE PERSONS TO WHOM IT HAS BEEN DELIVERED FOR PURPOSES OF THEIR EVALUATION OF AN INVESTMENT IN THE FUND. THE INFORMATION IN THIS MEMORANDUM MUST BE TREATED IN A CONFIDENTIAL MANNER AND MAY NOT BE REPRODUCED OR DISTRIBUTED TO ANY OTHER PERSON, IN WHOLE OR IN PART, NOR MAY ITS CONTENTS BE USED FOR ANY OTHER PURPOSE, IN EACH CASE WITHOUT THE PRIOR WRITTEN CONSENT OF THE FUND MANAGER OR BEIJING CAPITAL INVESTMENT CO., LTD. (“BEIJING CAPITAL” AND TOGETHER WITH THE FUND MANAGER, COLLECTIVELY, THE “FIRM”). EACH PERSON RECEIVING THIS MEMORANDUM HEREBY AGREES TO THE FOREGOING AND TO RETURN THIS MEMORANDUM TO THE FIRM PROMPTLY UPON REQUEST. THE FUND MANAGER RESERVES THE RIGHT TO MODIFY ANY OF THE TERMS OF THE OFFERING AND THE INTERESTS DESCRIBED HEREIN AND TO SUPPLEMENT OR REVISE AND REISSUE THIS MEMORANDUM.

THIS MEMORANDUM DESCRIBES THE TERMS OF THE LIMITED PARTNERSHIP AGREEMENTS (OR EQUIVALENT THEREOF) OF THE FUND (AS AMENDED FROM TIME TO TIME, THE “PARTNERSHIP AGREEMENT”), THE PRINCIPAL DOCUMENTS GOVERNING THE RIGHTS AND OBLIGATIONS OF THE FUND MANAGER AND THE FUND’S LIMITED PARTNERS. ANY SUCH DESCRIPTION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PARTNERSHIP AGREEMENT AND THE SUBSCRIPTION AGREEMENT BETWEEN THE FUND AND EACH LIMITED PARTNER. THE FUND MANAGER OR ITS AFFILIATES RESERVE THE RIGHT TO MODIFY THE PARTNERSHIP AGREEMENT AND/OR ANY OF THE TERMS OF THE OFFERING AND THE INTERESTS PRIOR TO THE INITIAL CLOSING OF THE FUND. IN ADDITION, THE FUND MANAGER OR ITS AFFILIATES RESERVE THE RIGHT TO REJECT ANY SUBSCRIPTION IN WHOLE OR IN PART.

THE FUND AND THE FUND MANAGER ARE SPONSORED IN PART BY BEIJING CAPITAL, THE PRIVATE EQUITY ARM OF BEIJING CAPITAL GROUP CO., LTD., THE INVESTMENT CONGLOMERATE OF THE BEIJING MUNICIPAL GOVERNMENT. NOTWITHSTANDING SUCH SPONSORSHIP, THIS MEMORANDUM HAS NOT BEEN REVIEWED BY REPRESENTATIVES OF THE BEIJING MUNICIPAL GOVERNMENT OR ANY OTHER STATE OR MUNICIPAL GOVERNMENT AGENCY. ALL STATEMENTS MADE IN THIS MEMORANDUM ARE SOLELY THOSE OF THE FUND


BURNHAMSECURITIES INC.BURNHAMSECURITIES INC. ii CONFIDENTIAL

MANAGER AND NO STATEMENT MADE IN THIS MEMORANDUM SHOULD BE CONSTRUED AS HAVING BEEN APPROVED BY ANY STATE OR MUNICIPAL GOVERNMENT AGENCY IN THE PEOPLE’S REPUBLIC OF CHINA (“PRC” OR “CHINA”), NOR SHOULD ANY STATEMENT BE CONSIDERED TO CONSTITUTE OR REFLECT ANY OFFICIAL OR UNOFFICIAL PRC STATE OR LOCAL GOVERNMENT POLICY.

THE INTERESTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) OR ANY STATE OR OTHER SECURITIES COMMISSION OR REGULATORY AUTHORITY, NOR HAS THE SEC OR ANY SUCH COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE INTERESTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION, NOR IS SUCH REGISTRATION CONTEMPLATED. THE INTERESTS ARE BEING OFFERED AND SOLD UNDER THE EXEMPTIONS PROVIDED BY SECTION 4(2) OF THE SECURITIES ACT, REGULATIONS S AND D PROMULGATED THEREUNDER, AND OTHER EXEMPTIONS OF SIMILAR IMPORT UNDER THE LAWS OF THE STATES AND JURISDICTIONS WHERE THE OFFERING WILL BE MADE. THE FUND WILL NOT BE REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE “INVESTMENT COMPANY ACT”). CONSEQUENTLY, INVESTORS WILL NOT BE AFFORDED THE PROTECTIONS OF THE INVESTMENT COMPANY ACT.

THERE IS NO PUBLIC MARKET FOR THE INTERESTS AND NO SUCH MARKET IS EXPECTED TO DEVELOP IN THE FUTURE. THE INTERESTS MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND ANY APPLICABLE NON‐U.S. SECURITIES LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. AS MORE FULLY DESCRIBED IN THIS MEMORANDUM, THE TRANSFERABILITY OF THE INTERESTS WILL BE FURTHER RESTRICTED BY THE TERMS OF THE PARTNERSHIP AGREEMENT. IN MAKING AN INVESTMENT IN THE FUND, PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF SUCH INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

REPRESENTATIVES OF THE FIRM WILL MAKE THEMSELVES AVAILABLE TO PROSPECTIVE INVESTORS FOR THE PURPOSE OF ANSWERING QUESTIONS REGARDING THE FUND AND THE OFFERING CONTEMPLATED HEREBY. HOWEVER, IN MAKING THE DECISION TO INVEST IN THE FUND, A PROSPECTIVE INVESTOR MUST RELY ON ITS OWN EXAMINATION OF THE FUND AND THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED AND THE LEGAL AND TAX CONSEQUENCES OF SUCH AN INVESTMENT. PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM, OR ANY SUPPLEMENTAL INFORMATION PROVIDED TO INVESTORS, AS LEGAL, TAX, REGULATORY, INVESTMENT OR ACCOUNTING ADVICE, AND EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT WITH ITS OWN ADVISORS WITH RESPECT TO THE LEGAL, TAX, REGULATORY, FINANCIAL AND ACCOUNTING CONSEQUENCES OF ITS INVESTMENT IN THE FUND.


BURNHAMSECURITIES INC.BURNHAMSECURITIES INC. iii CONFIDENTIAL

AN INVESTMENT IN THE FUND INVOLVES A HIGH DEGREE OF RISK DUE TO, AMONG OTHER THINGS, THE NATURE OF THE FUND’S INVESTMENTS. PROSPECTIVE INVESTORS SHOULD PAY PARTICULAR ATTENTION TO THE INFORMATION IN PART V OF THIS MEMORANDUM, ENTITLED “RISK FACTORS AND POTENTIAL CONFLICTS OF INTEREST”. AN INVESTMENT IN THE FUND IS SUITABLE ONLY FOR SOPHISTICATED INVESTORS AND REQUIRES THE FINANCIAL ABILITY AND WILLINGNESS TO ACCEPT THE HIGH RISKS AND LACK OF LIQUIDITY INHERENT IN AN INVESTMENT OF THIS TYPE. NO ASSURANCE CAN BE GIVEN THAT THE FUND’S INVESTMENT OBJECTIVES WILL BE ACHIEVED AND AN INVESTOR MUST BE PREPARED TO BEAR CAPITAL LOSSES THAT MIGHT RESULT FROM SUCH INVESTMENT.

IN CONSIDERING THE PRIOR PERFORMANCE INFORMATION CONTAINED HEREIN, PROSPECTIVE INVESTORS SHOULD BEAR IN MIND THAT PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL ACHIEVE COMPARABLE RESULTS OR THAT INVESTORS WILL RECEIVE A RETURN OF THEIR CAPITAL. IN ADDITION, THERE CAN BE NO ASSURANCE THAT UNREALIZED INVESTMENTS WILL BE REALIZED AT THE VALUATIONS SHOWN. ACTUAL REALIZED RETURNS WILL DEPEND ON, AMONG OTHER FACTORS, FUTURE OPERATING RESULTS, THE VALUE OF THE ASSETS AND MARKET CONDITIONS AT THE TIME OF DISPOSITION, ANY RELATED TRANSACTION COSTS, AND THE TIMING AND MANNER OF SALE, ALL OF WHICH MAY DIFFERENT FROM THE ASSUMPTIONS ON WHICH THE VALUATIONS CONTAINED HEREIN ARE BASED. NOTHING CONTAINED HEREIN SHOULD BE DEEMED TO BE A PREDICTION OR PROJECTION OF FUTURE PERFORMANCE OF THE FUND.

CERTAIN INFORMATION CONTAINED IN THIS MEMORANDUM CONSTITUTES “FORWARD‐LOOKING STATEMENTS,” WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD‐LOOKING TERMINOLOGY SUCH AS “MAY,” “WILL,” “SHOULD,” “EXPECT,” “ANTICIPATE,” “TARGET,” “PROJECT,” “ESTIMATE,” “INTEND,” “CONTINUE” OR “BELIEVE,” OR THE NEGATIVES THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. DUE TO VARIOUS RISKS AND UNCERTAINTIES, ACTUAL EVENTS OR RESULTS OR THE ACTUAL PERFORMANCE OF THE FUND MAY DIFFER MATERIALLY FROM THOSE REFLECTED OR CONTEMPLATED IN SUCH FORWARD‐LOOKING STATEMENTS.

CERTAIN INFORMATION CONTAINED HEREIN CONCERNING ECONOMIC TRENDS AND PERFORMANCE ARE BASED ON, OR DERIVED FROM, INFORMATION PROVIDED BY INDEPENDENT THIRD PARTY SOURCES. THE FUND MANAGER BELIEVES THAT SUCH INFORMATION IS ACCURATE AND THAT THE SOURCES FROM WHICH IT HAS BEEN OBTAINED ARE RELIABLE. THE FUND MANAGER CANNOT GUARANTEE THE ACCURACY OF SUCH INFORMATION, HOWEVER, AND HAS NOT INDEPENDENTLY VERIFIED THE ASSUMPTIONS ON WHICH SUCH INFORMATION IS BASED. STATEMENTS CONTAINED IN THIS MEMORANDUM (INCLUDING THOSE RELATING TO CURRENT AND FUTURE ECONOMIC OR MARKET CONDITIONS AND TRENDS IN RESPECT THEREOF) THAT ARE NOT HISTORICAL FACTS ARE BASED ON CURRENT EXPECTATIONS, ESTIMATES, PROJECTIONS, OPINIONS AND/OR BELIEFS OF THE FUND MANAGER. SUCH STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS, AND UNDUE RELIANCE SHOULD NOT BE PLACED THEREON.


BURNHAMSECURITIES INC.BURNHAMSECURITIES INC. iv CONFIDENTIAL

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS MEMORANDUM, AND ANY REPRESENTATION OR INFORMATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND, THE FIRM OR ANY OF THEIR RESPECTIVE AFFILIATES. STATEMENTS IN THIS MEMORANDUM ARE MADE AS OF THE DATE HEREOF, UNLESS STATED OTHERWISE, AND NEITHER THE DELIVERY OF THIS MEMORANDUM AT ANY TIME, NOR ANY SALE HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO SUCH DATE(S) OR CREATE ANY OBLIGATION TO UPDATE THIS MEMORANDUM.

THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR OTHER JURISDICTION TO ANY PERSON OR ENTITY TO WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH STATE OR JURISDICTION. THE INTERESTS ARE OFFERED SUBJECT TO THE RIGHT OF THE FUND MANAGER TO REJECT ANY SUBSCRIPTION IN WHOLE OR IN PART.

IT IS THE RESPONSIBILITY OF ANY PERSONS WISHING TO SUBSCRIBE FOR INTERESTS TO INFORM THEMSELVES OF AND TO OBSERVE ALL APPLICABLE LAWS AND REGULATIONS OF ANY RELEVANT JURISDICTIONS. PROSPECTIVE INVESTORS SHOULD INFORM THEMSELVES AS TO THE LEGAL REQUIREMENTS AND TAX CONSEQUENCES WITHIN THE COUNTRIES OF THEIR CITIZENSHIP, RESIDENCE, DOMICILE AND PLACE OF BUSINESS WITH RESPECT TO THE ACQUISITION, HOLDING OR DISPOSAL OF INTERESTS, AND ANY NON‐U.S. EXCHANGE RESTRICTIONS THAT MAY BE RELEVANT THERETO.

TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230, PROSPECTIVE INVESTORS ARE HEREBY NOTIFIED THAT ANY DISCUSSION OF TAX MATTERS IN THIS MEMORANDUM WAS WRITTEN IN CONNECTION WITH THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN AND IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY ANY PROSPECTIVE INVESTOR, FOR THE PURPOSE OF AVOIDING TAX‐RELATED PENALTIES UNDER FEDERAL, STATE OR LOCAL TAX LAW. EACH PROSPECTIVE INVESTOR SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.


BURNHAMSECURITIES INC.BURNHAMSECURITIES INC. v CONFIDENTIAL

Prospective investors having inquiries with respect to the Fund may contact the following persons:

Beijing Capital Investment Management Company China Arsenal Tower 69 Zizhu Yuan, Suite 1808 Haidian, Beijing 100089, PRC Attn: Omer Ozden Telephone: +8610‐6896‐4806 Facsimile: +8610‐6896‐4810 [email protected]

Burnham Securities Inc. 1325 Avenue of the Americas 26th Floor New York, NY 10019 Attn: Joel B. Gardner Telephone: +1‐212‐333‐9605 Facsimile: +1‐212‐603‐7566 [email protected]


BURNHAMSECURITIES INC.BURNHAMSECURITIES INC. CONFIDENTIAL

CONVENTIONS USED IN THIS MEMORANDUM

Unless the context otherwise requires, in this Memorandum:

“BCG” refers to Beijing Capital Group Co., Ltd., the investment conglomerate of the Beijing Government, established under the State‐Owned Assets Supervision and Administration Commission of the Beijing Government.

“Beijing Capital” refers to Beijing Capital Investment Co., Ltd., the private equity subsidiary of BCG.

The “Beijing Government” refers to the Beijing Municipal Government, PRC.

“China” or the “PRC” refers to the People’s Republic of China, excluding, for the purposes of this Memorandum only, Taiwan, Hong Kong and Macau.

The “Firm” refers to Beijing Capital and the Fund Manager, collectively.

The “Fund” refers collectively to the Partnership, and any feeder vehicles and intermediary entities.

The “Fund Manager” refers to Beijing Capital Investment Management Company, the management company of the Fund.

The “Partnership” refers to Beijing Capital Growth Fund, L.P.

“RMB” refers to the legal currency of China.

“$” or “U.S. dollars” refers to the legal currency of the United States.



TABLE OF CONTENTS

I. EXECUTIVE SUMMARY ..............................................................................1

A. Competitive Advantages ....................................................................................... 5

B. Investment Strategy .............................................................................................. 8

C. Investment Decision Process ............................................................................... 10

D. Foreign Invested Private Equity Sector in China................................................... 13

II. MANAGEMENT TEAM .............................................................................16

A. Managing Partners .............................................................................................. 16 B. Key Professionals ................................................................................................ 17

III. TRACK RECORD AND SELECTED TRANSACTION SUMMARIES ...................19

A. Track Record ....................................................................................................... 20

B. Case Studies ‐ Performance History .................................................................... 22 1. New Jialian Electronics Co., Ltd. (SZSE:002188) .........................................................................22

2. Fulida Fibre Co., Ltd. ................................................................................................................23

3. Dali Technology Co. Ltd. (SZSE:002214) ....................................................................................24

4. Jinqiao Real Estate Development, Limited ................................................................................25

5. North Glass Technology Co. Ltd. (Recently Approved For Listing by the CSRC)...........................26

6. Sunwoda Electronics (Swoda Electronics) .................................................................................27

7. ZhongJi Concrete Piles..............................................................................................................28

C. Case Studies ‐ Additional Investments ................................................................ 29 1. Cnlight Corporation Limited (SZSE:002076)...............................................................................30

2. Sunvim Group Co. Limited (SZSE: 002083) ................................................................................30

3. NHU Company Limited (SZSE: 002001)......................................................................................31

IV. SUMMARY OF PARTNERSHIP TERMS.......................................................32

V. RISK FACTORS AND POTENTIAL CONFLICTS OF INTEREST ........................51

A. Potential Risks at the Fund Level.............................................................................. 51 B. Potential Risks at the Investment Level ................................................................... 57 C. Risks Relating to the Fund’s Investment Focus........................................................ 60 D. Potential Risks Associated with Investing in the PRC.............................................. 61



E. Potential Conflicts of Interest................................................................................... 68

VI. LEGAL AND TAX MATTERS.......................................................................71

A. Securities Law Considerations .................................................................................. 72 B. Certain Cayman Islands Partnership Law Matters................................................... 72 C. ERISA Considerations ................................................................................................ 72 D. Summary of PRC Tax Considerations ....................................................................... 75 E. Certain U.S. Federal Income Tax Considerations ..................................................... 78

VII. CERTAIN OFFERING LEGENDS ..................................................................86


BURNHAMSECURITIES INC.BURNHAMSECURITIES INC. 1 CONFIDENTIAL

I. Executive Summary

Beijing Capital Investment Co., Ltd. (“Beijing Capital”), the private equity arm of the Beijing Government’s investment conglomerate, Beijing Capital Group Co., Ltd. (“BCG”), is seeking to raise up to $60 million from investors outside of the PRC (“Offshore Investors”) in order to establish Beijing Capital Growth Fund, L.P. (the “Partnership” and together with any feeder vehicles and intermediary entities, collectively, the “Fund”). The Fund is Beijing Capital’s fourth private equity fund, and its first fund open to Offshore Investors. Beijing Capital and limited partners in the PRC from Beijing Capital’s three previous funds will invest up to an additional $40 million in the Fund (for a total Fund size of up to $100 million) alongside Offshore Investors.

The Fund’s strategy is to make minority investments in high growth, profitable companies located throughout China that operate in sectors that have strong macro trends and will benefit directly from government policies. The Firm believes these companies are the best candidates for initial public offering (“IPO”) on the domestic stock exchanges in China. The Firm has identified Clean Energy, Agriculture Technology and Food Processing, Information Technology, Industrial Technology and Biological Science and Pharmaceuticals as the primary sectors that fit these criteria, although it may invest in high growth, profitable companies in other sectors as well.

These high growth, pre‐IPO companies are also likely to benefit the most from Beijing Capital’s access to BCG’s substantial resources, relationships and infrastructure, including easier access to debt and public equity capital via BCG’s in‐house debt guarantee institutions, investment bank and partner banks. As the investment arm of the Beijing Government, BCG is among the largest conglomerates in China, spanning real estate, water/environmental infrastructure projects, information technology, financial services and private equity. BCG has over $10 billion of assets under management, a network of subsidiaries (six of which are publicly listed, including Beijing Capital Co., Ltd. (SHSE:600008), HIT Capital Technology Co., Ltd. (SHSE:600857) and Beijing Capital Land Ltd. (SEHK:2868)) and approximately 6,200 employees across its offices in 32 cities in China, giving Beijing Capital, as the private equity arm of BCG, enormous reach into the public and private sectors throughout China.

Strategic Partners

China Development

Bank

Cinda SecuritiesFirstCapital Everbright

Securities

Banks

Guarantors

Security Companies

XiangcaiSecurities

China MerchantsSecurities

Bank of Beijing Shanghai Pudong Development Bank Minsheng Bank

Zhongguancun GuarantyBCIG

Industry Focus

Clean Energy

Biological Science and Pharmaceuticals

Information Technology

Agriculture Technology and Food Processing

Industrial Technology Other High-Growth Industries

Industry Focus

Clean Energy




Industrial Technology Other High-Growth Industries

Industry Focus

Clean Energy




Industry Focus

Clean Energy

Industry FocusIndustry Focus

Clean EnergyClean Energy



Information TechnologyInformation Technology



Industrial TechnologyIndustrial TechnologyIndustrial Technology Other High-Growth Industries

Other High-Growth Industries

Other High-Growth Industries



Beijing Capital utilizes BCG’s infrastructure and strategic partners to provide substantial additional value to its portfolio companies, particularly with respect to nurturing the growth of portfolio companies and ushering them through the domestic IPO process. Entrepreneurs and investment banks advising portfolio companies actively seek investments by Beijing Capital in order to engage a partner that can provide more certainty to a liquidity event and other value creation beyond just invested capital.

The Fund has a highly differentiating advantage of combining four major elements that the Firm believes are critical for success in China’s private equity sector:

Local Market Acumen;

Nationwide Deal Infrastructure;

International Expertise; and

Governmental Support.

The Fund’s unique depth in all four of these areas provides it with proprietary deal flow and execution, international best practices for disciplined and conservative investing, and the ability to nurture and drive investment exits. The Firm believes that this array of local advantages combined with its international expertise represents a progressive and compelling management platform for the Fund, and for any successor funds managed by the Firm in the future.

Successful Track Record

Beijing Capital and its team of investment professionals have been pioneers in China’s RMB private equity market since 1998. Beijing Capital has managed three RMB funds and has advised notable foreign funds such as Walden Capital and ING China on their China investments. Beijing Capital’s three funds have a gross IRR of approximately 59%1 for exited transactions. Beijing Capital believes that its pioneering history and successful track record in RMB private equity investing in China provides it with a unique early‐mover advantage, given that RMB private equity investing is a relatively recent phenomenon in China.

Extensive Support Infrastructure

The Firm’s three Managing Partners are supported by 13 additional investment professionals in Beijing, including portfolio managers, due diligence analysts and sector experts dedicated to the Fund’s operations around China. The Firm plans to open an office in Shanghai after the closing of the Fund for closer access to deals in the Yangtze River Delta region. Beijing Capital is also supported by BCG’s resources and infrastructure, including deal sourcing from BCG’s 32 offices throughout China as well as professionals trained by Beijing Capital in six cities in BCG’s offices and external advisory firms assisting Beijing Capital with in‐depth due diligence and deal

1 See infra note 6 on page 19.



execution at a local level. These professionals are employees of BCG or the external advisory firms and they are not compensated by Beijing Capital unless the transaction successfully closes, providing Beijing Capital with a relatively large private equity deal team across the country, without the operational costs required to develop and support such an expansive infrastructure. Beijing Capital also utilizes the expertise of BCG’s investment banking subsidiary, First Capital Securities, and strategic partners to determine the viability of a portfolio company’s IPO prospects and assist it through the IPO process. Thus, the Fund has a proprietary and comprehensive sourcing to nurturing to liquidity event IPO infrastructure. Additional support is provided by 15 external advisory companies, and industry experts selected for their significant experience in the targeted industries, a nationwide network of consultants and economic development groups, and leaders of state‐owned and private industrial enterprises who can assist the Firm and the Fund’s portfolio companies with deal execution, business operations and exit opportunities.

Seasoned Management Team

The Firm’s three Managing Partners are leading private equity professionals in the PRC, with complementary skill sets and combined experience on over 300 transactions. Mr. Shaojun Wang, a pioneer of China’s RMB private equity industry, helped the PRC State Council draft its private equity policies, and founded Beijing Capital in 1998 as the Beijing Government’s private equity arm. Mr. Wang has led Beijing Capital’s private equity investment operations, including its three prior funds, since that time. Dr. Gary Gang Ke has 25 years experience as a high level governmental economic policy advisor, investor, entrepreneur and venture capitalist in China specializing in incubating high growth companies and has upgraded Beijing Capital to operate at international standards since 2006. Mr. Omer Ozden was formerly a partner at Baker & McKenzie LLP’s New York City office leading their China capital markets team, and brings with him expertise in Western‐style securities law compliance as well as 14 years of experience in Mainland China’s venture capital and private equity markets as an investor, entrepreneur and private practice attorney.

Strong Commitment to Transparency and Governance

The Firm is committed to transparency and good governance on behalf of the Fund’s investors and in order to maintain the reputation of the Beijing Government. The Fund Manager has retained Covington & Burling LLP as its U.S. legal counsel, Gaungsheng & Partners as its PRC legal counsel and Bernstein & Pinchuk LLP (a BDO Seidman Alliance firm) as its external independent auditor.

Additional protection is also offered to the Fund’s Offshore Investors. All investment and disposition decisions require the approval of the non‐PRC Managing Partners on the Firm’s investment committee.

Furthermore, the Firm believes the inclusion of Mr. Ozden, a Mandarin‐speaking U.S. securities lawyer with experience in capital market and corporate governance matters, in the Fund’s



management and investment decision process is a key differentiator between it and other RMB funds.

About BCG

BCG is a large scale state‐owned enterprise under the State Owned Assets Supervision and Administrative Commission (SASAC) of the Beijing Government. Since its 1995 asset reorganization, BCG has established three core businesses: (i) financial services and investments, particularly focusing on investment banking, private equity and mergers and acquisitions, (ii) urban infrastructure development, particularly with respect to water treatment, environmental infrastructure and highway construction, and (iii) real estate, particularly with respect to urban residential development and construction. With over $10 billion assets under management, BCG’s resource allocation has traditionally been 20% in financial services, 50% in infrastructure and 30% in real estate. BCG is an influential conglomerate with outstanding brand recognition throughout China. Among its various subsidiaries and business groups, BCG has six publicly listed subsidiaries on the Hong Kong, Shanghai and Shenzhen stock exchanges, in addition to the various portfolio companies of Beijing Capital that have publicly listed. As BCG’s private equity arm, Beijing Capital was established in 1998 and was among the pioneers in China’s onshore RMB private equity sector. Over the past decade, Beijing Capital has produced some of BCG’s most attractive and consistent returns amongst its various business groups. The Fund represents the first time that Beijing Capital is opening its investment opportunities to Offshore Investors and is the Beijing Government’s foray into developing relationships with international investors through its private equity group. BCG believes that by developing relationships with the foreign investment community, there is the opportunity to import international capital market and investment management expertise, share with foreign investors BCG’s various investment opportunities in China, including establishing future funds, and over the long term, forge relationships with the international

BCG Offices



community that may expand to investment opportunities and partnerships beyond China. The Fund is a first step towards Offshore Investors entering a premier investment circle in China.

A. Competitive Advantages

The Firm believes that it is particularly well‐positioned, through the Beijing Government, BCG’s resources and its own relationships and experience, to provide the Fund with significant advantages in originating compelling investment opportunities, enhancing the value of portfolio companies and supporting their exit events. For specific examples of Beijing Capital’s competitive advantages, see III. Track Record and Selected Transaction Summaries.

Proprietary Deal Sourcing Network

Beijing Capital sources a substantial volume of quality deal flow, historically thousands of opportunities each year, from a network of government and private relationships that span first, second and third tier cities throughout China. These sources are largely proprietary to Beijing Capital and produce deal flow that other funds do not see. These sources include:

BCG’s 32 offices throughout China with established incentives for BCG’s employees to actively drive proprietary investment opportunities to Beijing Capital.

BCG’s in‐house investment bank, First Capital Securities Co., Ltd. (“First Capital”), which is well regarded for its capital raising capabilities for small to medium‐sized enterprises, and which provides Beijing Capital with preferential access to its clients and transactions. In addition, Beijing Capital has a strong working relationship with other investment banks in China, namely, Cinda Securities, Xiangcai Securities, Everbright Securities and China Merchants Securities. These relationships develop investment opportunities in later stage companies that are typically well packaged and fairly advanced in the pre‐IPO process.

Government agencies and economic/high‐tech development zones around China. This includes the ZhongGuanCun (“ZGC”) Tech Zone, known as China’s Silicon Valley, and ZGC Technology Incubator, one of China’s leading technology incubators of which Beijing Capital is a shareholder, and which has committed to open its pool of companies as a source of deal flow to the Fund. ZGC Technology Incubator and

Government Agencies

Economic/High-tech Development Zones

BCG’s 32 Offices Throughout China

Investment Banks, Accounting Firms and

Law Offices

Source of Investment Targets

State-Owned and Private Industry

Partners

Partner Banks and In-House Securities Firm and Guarantee Houses

Government Agencies




Law Offices



Partners


Government Agencies




Law Offices


Government Agencies




Law Offices

Government Agencies

Government Agencies

Government Agencies

Economic/High-tech Development ZonesEconomic/High-tech Development ZonesEconomic/High-tech Development Zones

BCG’s 32 Offices Throughout ChinaBCG’s 32 Offices Throughout ChinaBCG’s 32 Offices Throughout China


Law Offices


Law Offices


Law Offices



Partners


Partners





other government supported incubators provide the Fund with early access to “hidden gems.”

Agreements with 15 advisory companies throughout China actively driving transaction opportunities to Beijing Capital.

Partnerships with large state‐owned enterprises and private enterprises in numerous sectors around the country.

The Fund already has a considerable pipeline of potential deals, differentiating itself from other funds. As of the date of this Memorandum, the Fund has 15 investment opportunities in China under advanced negotiation awaiting investment. These deals were sourced through Beijing Capital’s network after meticulous review of hundreds of opportunities during the fourth quarter of 2009 and first quarter of 2010 by the Firm’s deal team. The companies all have multiple years of profits, high revenue and net income growth rates, and the Firm believes are strong candidates for domestic public listing. The companies are in such sectors as Clean Energy, Agricultural Technology and Industrial Technology. There is no assurance the Fund will consummate all or any of these transactions. However, given these potential investment opportunities, Beijing Capital’s established deal team, track record and deal sourcing and IPO infrastructure, the Firm believes that it presents investors with a fund that is ready to quickly deploy, something highly unique for onshore RMB funds in China.

Enhancing Portfolio Company Growth and Profitability

Beijing Capital provides direct and substantial assistance to enhance the growth and profitability of its portfolio companies. This assistance can be provided by BCG’s in‐house guarantee houses, securities company, and partner banks which can significantly ease a portfolio company’s access to debt and equity capital to fuel growth. Beijing Capital can help portfolio companies navigate through government agencies in their efforts to obtain lower tax rates and subsidies. In addition, its relationships with state‐owned enterprises and leading companies in private industry in a broad spectrum of sectors can help deliver new sales contracts, and margin‐increasing sourcing opportunities for Beijing Capital’s portfolio companies, as well as joint venture and research and development partnerships.

Expedited Path to Exit

One of Beijing Capital’s major strengths is its ability to facilitate IPOs for its portfolio companies. The Firm has a complete IPO support infrastructure consisting of internal capital markets experts among its 13 investment professionals, access to external capital markets experts and support through its subsidiary securities house. The challenge for many pre‐IPO companies in China is that successful listing on local stock exchanges is not always a function of the quality and future prospects of the company, but also the company’s ability to obtain government approvals to publicly list through a highly discretionary local listing process. Beijing Capital’s



working relationships and experience can help it guide portfolio companies efficiently through the regulatory public listing approval process.

When reviewing investment opportunities, Beijing Capital places significant emphasis on the opinion of its internal capital markets team and outside capital markets advisors to determine the likelihood of a successful public listing exit. Beijing Capital, with its internal capital markets experts, close investment banking relationships, and governmental connections, provides more than just growth capital, but a proprietary and comprehensive IPO infrastructure to its portfolio companies. Beijing Capital believes it has traditionally been able to negotiate investments at lower multiples because it offers entrepreneurs more certainty towards a liquidity event. In addition, BCG’s relationships with a broad spectrum of state‐owned and privately owned enterprises can also assist with trade sales and other merger and acquisition opportunities for its portfolio companies.

Unique Blend of Local Market, International and Governmental Expertise

The Fund has the highly differentiating advantage of combining four major elements that the Firm believes are critical for success in China’s private equity sector:

Local market acumen;

Nationwide deal infrastructure;

International expertise; and

Governmental support.

While other funds may possess one or two of these important qualities, the Fund presents a unique mix of all four of these critical elements.

The Firm’s Managing Partners have combined experience in China on over 300 transactions involving venture capital and private equity investments, initial public offerings, debt offerings and mergers and acquisitions with local entrepreneurs in China. The Firm’s management and investment professionals understand due diligence, establishing rapport and trust with local entrepreneurs, and deal negotiation and execution at a purely local level.

Meanwhile, over the past 12 years, Beijing Capital has developed a nationwide infrastructure that, on a cost‐effective basis, encompasses the entire nation resulting in proprietary local deal flow, due diligence capabilities and deal execution throughout first, second and third tier cities. Such a foundation would require other fund managers considerable expenditures in time and capital to establish.

Critical Success Drivers

Local Market Acumen

Governmental Support

International Expertise

Nationwide Deal InfrastructureBeijing

CapitalPortfolio

Investments


Local Market Acumen




CapitalPortfolio

Investments


Local Market Acumen



Nationwide Deal Infrastructure


Local Market Acumen

Critical Success DriversCritical Success Drivers

Local Market AcumenLocal Market Acumen





Nationwide Deal Infrastructure


CapitalBeijing Capital

Portfolio Investments

Portfolio Investments



Thirdly, the Firm has developed a highly disciplined investment decision process through its conservative investment approach and international expertise. In addition to Beijing Capital’s stringent investment decision process and responsibility to produce returns for the Beijing Government that have been developed over the past 12 years, Dr. Gary Gang Ke has over the past four years upgraded Beijing Capital’s management to execute transactions based on international standards. In addition, Mr. Omer Ozden brings his experience working with top private equity funds and issuers in China as a U.S. securities attorney, helping to institute best practice investment decision making, corporate governance and transparency.

Finally, the Fund has the direct support of the government, something that is vital to flourish in China’s onshore private equity sector. This significantly helps to facilitate foreign investment, currency exchange and repatriation, tax breaks for portfolio companies and most importantly, a complete infrastructure for public listing on the domestic stock exchanges through China’s highly discretionary listing approval process.

The Firm believes that its government support helps buttress its ability to enforce contractual obligations of its portfolio companies and also tends to deter any potential fraud that a portfolio company in the PRC may seek to engage in against the Firm, providing an additional layer of security for those seeking to invest into China.

The Fund represents a unique blend of qualities among private equity funds in China and another pioneering step by Beijing Capital in China’s private equity sector. The Firm believes that it is the only private equity fund in China sponsored by a government affiliated enterprise that has non‐PRC managers holding major investment decision authority. This reflects the confidence of the Firm in its ability to adopt international best practices as well as its commitment to high standards for the protection of limited partners and for the protection of the reputation of the Beijing Government, an upmost driver of the Firm’s disciplined and conservative investment approach. The Firm has a distinct ‘home field advantage’ while recognizing the importance of importing international practices and capital management technology from foreign investors and managers, providing limited partners with a progressive and compelling management platform in China with respect to the Fund, and with respect to any successor funds managed by the Firm in the future.

B. Investment Strategy

Investment Criteria

The Fund’s investment criteria is similar to that of Beijing Capital’s prior funds. It intends to acquire a portfolio of minority investments in China‐based companies that:

Demonstrate at least three years of profits and high growth;



Operate in sectors that benefit from strong macroeconomic trends and government policies (Beijing Capital has identified Clean Energy, Agriculture Technology and Food Processing, Information Technology, Industrial Technology, and Biological Science and Pharmaceuticals as such sectors of interest);

Have strong management with the proven ability to lead a successful, growing company;

Can benefit from Beijing Capital’s post investment support; and

High likelihood of listing on domestic public markets.

The Firm believes companies fitting these criteria present a strong intersection of relative safety and value creation opportunities.

Investment Safety

The Firm takes a responsible and conservative approach to its investment decisions by focusing primarily on safety. The Firm does not need to ‘swing for the fences’ in order to provide its limited partners with attractive returns. The safety of its investments is attributable to (i) the portfolio company’s historically proven ability to generate positive net income even while supporting growth, (ii) China’s strong macro‐economic factors, (iii) Beijing Capital’s deep understanding and relationships in the targeted industries, and (iv) the propensity of Beijing Capital’s portfolio companies to publicly list. The combination of these factors of providing a higher probability of growth and exit means that the Fund can take a more conservative approach to investing, and seek investments that will provide modest returns on a more consistent basis, instead of aiming for higher returns on a scattered basis, in order to provide healthy returns to its investors.

Value Creation

The Fund focuses on companies that can benefit from its infrastructure. Beijing Capital has the potential to help these companies create value in a number of ways, including access to large state‐owned enterprises and private companies that may serve as potential customers, suppliers or R&D partners, assistance with government agencies and programs that may support the company’s expansion and reduce tax rates, and support through the public listing approval process.

Beijing Capital believes that the ability to provide this post‐investment support is an attractive and influential consideration for potential portfolio companies, and as a result, often allows Beijing Capital to negotiate favorable investment terms that may not be available to other funds.



Strong Proprietary Deal Flow

Beijing Capital has a broad deal sourcing network, including BCG and its own external relationships, which generates a significant number of investment opportunities that meet these investment criteria. Beijing Capital generally sees two types of portfolio companies: (i) companies that are earlier in their pre‐IPO process through its network of BCG offices, relationships with high tech zones, government agencies, and state owned enterprises, for which Beijing Capital typically pays relatively lower multiples, and (ii) companies that are well packaged and much more advanced in the pre‐IPO process through BCG’s subsidiary investment bank, First Capital, its strong relationships with certain other local investment banks, and its network of 15 advisory companies through out the nation that offer Beijing Capital an opportunity to invest closer to the date of an anticipated public listing, for which Beijing Capital typically pays relatively higher multiples. Beijing Capital’s deal flow is highly proprietary, and stems from very different sources than those of typical private and offshore funds operating in China.

C. Investment Decision Process

When reviewing investment opportunities, the Firm’s core principles are:

Safety first – Due diligence is of principal importance and investment decisions are made on verifiable facts concerning a portfolio company’s operations, financial performance, management and on a thorough understanding of the underlying risks to the company and industry. The Firm utilizes its internal professionals, external professionals that Beijing Capital has trained in six cities in BCG’s offices and external advisory firms, and its relationships with state‐owned enterprises around China, as well as paid external experts from the industry under review to assist with due diligence. Due diligence does not end until the investment is exited.

Exit feasibility – Investments are only made when there is strong confidence in a specific exit plan. The Firm puts particular weight on this aspect of its investment criteria, employing its own internal capital markets experts as well as the advice of external capital markets experts, particularly from BCG’s subsidiary investment bank, First Capital.

Discipline – The full, documented investment decision process consists of multiple steps involving advice and decisions from various parties. The process involves three major areas: analysis of the company’s performance and industry, analysis of the company’s viability for listing, and post investment monitoring and support.

These conservative principles derive from 12 years of experience in China’s private equity sector, responsibility to preserve and grow the Beijing Government’s wealth, and the adoption of international standards over the past several years.



Beijing Capital has applied a sophisticated, multi‐step investment decision process that incorporates substantial due diligence, including document review, management interviews, industry market research and use of outside experts.

Step 1: Opportunity Origination and Review

Beijing Capital reviews thousands of potential deals each year. Typically, potential deals will be reviewed by our associates and portfolio managers, which utilize information provided by government agencies, BCG’s offices, and advisory companies and investment banks to determine if a company is of further interest.

When Beijing Capital identifies a company of further interest, it assigns a deal team, typically consisting of two Beijing Capital professionals, at least one of which is a Portfolio Manager, and one or two external industry experts, to review the opportunity and any pre‐packaged information about the company’s operations, management, prospects and financials, which are frequently already audited. During this stage, it is Beijing Capital’s professionals who analyze the candidate in terms of industry, region, stage of development, financial information and capital required. Based on the information provided, opportunities are rejected or selected for further investigation.

Step 2: Site Visits and Initial Diligence

The two Beijing Capital professionals on the deal team conduct on site interviews with management of the company, which usually includes meetings with the company’s chairman, chief executive officer, chief financial officer and technical officers. The deal team also tours the company’s facilities to review the production process, products and quality control standards. The deal team’s investigation can be supported by professionals that Beijing Capital has trained in six cities in BCG’s local offices and external advisory firms to collect initial due diligence documents, review materials and follow up with inquiries. The deal team determines the company’s core competency, growth potential, and Beijing Capital’s ability to create value in the company. In the event the deal team determines to pursue the transaction, a letter of intent will typically be signed with the candidate company.



Step 3: Deal Quality Analysis

Beijing Capital supports its financial analysis of the investment opportunity by consulting a team of internal and external industry experts and consultants and utilizing its relationships at relevant state‐owned and private enterprises. At this point in time, Beijing Capital engages one or two external industry experts to assist with analysis of the deal’s quality. The deal team also utilizes experts in state‐owned enterprises to determine the viability of the company’s business and standing it its sector. Among the factors considered is the company’s reputation in its industry and whether it is competitively positioned to expand its market share in a growing industry.

Step 4: Public Listing Feasibility Analysis

Beijing Capital’s internal capital markets team works with external capital markets experts at BCG’s subsidiary investment bank, First Capital, and one or more of the other four investment banks with which Beijing Capital has a strong relationship, in order to determine whether the company is a strong candidate for future public listing on a domestic stock exchange. Beijing Capital places a great deal of emphasis on this phase of the investment decision process as the likelihood of a candidate company’s listing on a public exchange is a major factor for Beijing Capital when considering an investment opportunity.

Step 5: In‐Depth Due Diligence

If a candidate company passes both the Deal Quality Analysis, and the Public Listing Feasibility Analysis, the deal team provides a term sheet to the candidate company, which is negotiated by the Portfolio Manager and one of the Managing Partners.

Upon signing of the term sheet, Beijing Capital moves forward with in‐depth due diligence. The deal team, along with other professionals from Beijing Capital, conduct a comprehensive review of the company’s internal documents, contracts, operations and assets. Beijing Capital is able to utilize BCG’s internal corporate legal counsel as well its accounting staff for this stage. Also, external lawyers, and if necessary, external accountants, are hired by Beijing Capital to assist with due diligence and with drafting of deal documentation. The deal team also surveys suppliers and customers, utilizing as needed the assistance of BCG’s offices and external advisors and industry experts. The full Due Diligence Report, and the Investment Proposal which includes the Deal Quality and Public Listing Feasibility Analysis, are then submitted to a Managing Partner for review.

Step 6: Investment Committee Review

The reviewing Managing Partner, if satisfied with the Due Diligence Report and Investment Proposal, submits the report and proposal to the Investment Committee. The Investment Committee consists of all of the Managing Partners, the Portfolio Manager that led the deal team and the Capital Markets team member. The Investment Committee is also joined by the external industry experts hired to analyze the deal. An investment decision requires majority



approval by the Investment Committee members, including unanimous support by all of the Managing Partners. Although the decision of the external industry experts are not counted as a part of the investment decision, their opinions are a part of the decision making process and noted in the records of the Investment Committee, providing a level of external independent review and oversight for the decision making process by those with expertise in the candidate company’s industry. Upon approval of an investment, an Investment Monitoring Team is appointed, led by the Portfolio Manager, which is given specific investment monitoring guidelines provided by the Investment Committee. Share purchase agreements are finalized and the deal team, along with the external lawyers, executes the transaction.

Step 7: Post‐Investment Monitoring

Upon closing of the investment, the Portfolio Manager and a member of the Capital Markets team are assigned to actively monitor and report to the Managing Partners on the Fund’s investment. This post‐investment monitoring includes financial reporting and use of proceeds, equity structure, industry and market trends and management changes. Beijing Capital also provides regular consultation to the company for their intended IPO, and utilizes its internal capital markets team to determine an optimal time for the Fund to exit the investment.

D. Foreign Invested Private Equity Sector in China

Current Regulatory Landscape: Offshore to Onshore

Since the advent of venture capital and private equity investing in China in the mid 1990s, foreign investors have traditionally been limited to investing in China through offshore funds. These funds structured their investments using special purpose vehicles established in offshore jurisdictions, and investing under offshore law, in U.S. dollars, and with a view to public listings and other exits in offshore markets such as the NASDAQ or Hong Kong Stock Exchange. Such structures are commonly known as “round trip investments.” In September 2006, the Ministry of Commerce in China (“MOFCOM”) enacted regulations, widely referred to in the industry as “MOFCOM Circular 10” or the “Foreign M&A Rules”,2 significantly limiting the availability of the round trip investment structure as well as offshore listings. Since 2006, virtually no approvals for round trip investment structures have been granted, and many foreign investors have started structuring their investments onshore, and investing under PRC law, in RMB, and with a view to public listing on the exchanges in Shanghai and Shenzhen. Although offshore private equity funds have increasingly structured their investments onshore, such structures are generally not considered to be as efficient as similar investments made by onshore private equity funds, particularly with respect to corporate structuring, foreign currency conversion and offshore repatriation of investment returns.

2 Provisions on the Merger and Acquisition of Domestic Enterprises by Foreign Investors, August 2006



Recent Offshore Liberalization

The government in China at the national and provincial levels recently took three major steps in 2009 and 2010 to liberalize and set a dynamic landscape for China’s onshore private equity industry. First, in June of 2009, it allowed foreign managers to form domestic fund management companies in Shanghai and Beijing.3 Second, in August 2009, it released rules for the establishment of foreign invested partnerships (“FIPs”), effective March 1, 2010, a form of limited partnership in China that permits a traditional investment fund structure and permits limited partnership interests held by both onshore and offshore investors in the same entity.4 Third, in October of 2009, it opened the ChiNext, a “Nasdaq‐style” exchange for high growth small to medium sized companies (“SMEs”), providing a new exit avenue in addition to China’s other stock exchanges in Shanghai and Shenzhen. Venture and private equity backed high growth SMEs, which previously faced challenges listing on the traditional domestic stock exchanges that cater primarily to large and state‐owned enterprises, now have a more viable path for public exits in China.

Since June 2009, certain foreign fund sponsors have taken advantage of these liberalized policies by teaming up with local governments to raise and manage purely domestic RMB funds. These funds are larger than foreign invested onshore RMB funds and are limited strictly to onshore investors. For example, in January 2010, Carlyle announced a RMB 5 billion ($732 million) buyout fund that is exclusive to onshore PRC investors.

Additionally, the authorization of FIPs is expected to provide a more efficient vehicle through which foreign investors may invest in RMB denominated funds. In 2003, the government authorized foreign invested venture capital investment enterprises (“FIVCIEs”), which allow for onshore and foreign investors to participate in a single investment enterprise .5 Due to certain tax and regulatory issues, however, including a limited scope of permissible investments, FIVCIEs have their limitations. The FIPs represent the first time in China that foreign investors are permitted to establish actual “funds” with typical fund structures and utilize the term “fund” in their corporate names, as opposed to investment enterprises as permitted under the 2003 FIVCIE rules. FIPs are expected to benefit from a general partner/limited partner structure, transparent tax status, and the ability to invest in the entire scope of private companies available to foreign investors in China. They are also expected to provide foreign investors with a more efficient means to invest in onshore companies, exit these investments through listings on domestic exchanges in RMB, convert RMB back into foreign currency, and

3 Measures for Establishing Foreign Invested Equity Investment Management Enterprises in Pudong New District of Shanghai, June 2009, and Circular for Establishing Foreign Invested Equity Invested Private Equity Investment Fund Management Enterprises in Beijing, January 2010, among other regulations

4 Draft of the Measures on the Administration of the Establishment of Partnership Enterprises in the PRC by Foreign Enterprises and Individuals, August 2009 5 Administrative Measures on Foreign Invested Venture Capital Investment Enterprise, March 2003



repatriate investment proceeds. Contributions by Offshore Investors to the Fund, and ultimately the distributions from the Fund to Offshore Investors, will be made in U.S. dollars, while the Partnership’s allocations and distributions will be calculated in RMB. Distributions of capital by FIPs follow the FIVCIE rules and procedures, which permit repatriation on each investment exit, and for which the process for currency conversion from RMB back to U.S. dollars under normal circumstances typically takes 30 to 60 days.

Domestic IPOs

The PRC government is also encouraging a dynamic private equity market through the opening of the ChiNext exchange for smaller high growth companies in China. High growth companies now have the avenue of listing on the Shenzhen SME stock exchange, which has been trading in April 2010 at approximately a 43 price to earnings multiple, with a high of 55 in 2010, and since October 2009, also listing on the new ChiNext stock exchange, which has been trading in April 2010 at approximately a 67 price to earnings multiple, with a high of 106 in 2010.

In China, there is currently a high level of capital and demand seeking to invest in only a limited number of publicly listed companies. Consequently, the PRC government has been allowing more public listings to increase the number of companies available on domestic exchanges for domestic public market investors, particularly, it is expected, with respect to smaller high growth companies. Indeed, during the first quarter of 2010, the exchanges in Shenzhen and Shanghai represented the most active IPO markets around the globe, and since its debut in October 2009, over 82 mostly smaller, high growth companies have listed on the ChiNext. As more companies list on domestic exchanges, price to earnings multiples are expected to generally decrease. The challenge for most Chinese companies however, is that successful listing on local exchanges is not always based on the quality and future prospects of the company, but also the company’s ability to obtain government approvals to publicly list through a highly discretionary local listing approval process.

Summary

China’s private equity market presents a compelling opportunity for foreign investors. While foreign investors have historically entered the private equity market in China through offshore funds and round trip investments, the PRC government has stipulated a regulatory landscape over the past several years that directs investments to be conducted onshore and in RMB, and public exits to be conducted on domestic exchanges. In addition, over the past year, the PRC government has significantly liberalized regulations to allow foreign investors to participate in the onshore private equity market by authorizing FIPs, permitting joint Sino‐foreign management of FIPs, and encouraging public listings of onshore high growth companies on PRC exchanges.



II. Management Team

The Firm is managed by three leading private equity professionals with complementary skill sets and combined experience on over 300 transactions in the PRC. These Managing Partners are currently supported by 13 additional professionals dedicated to the Fund (the “Key Professionals”). These 13 Key Professionals include experienced portfolio managers, capital markets experts, due diligence analysts and sector experts.

A. Managing Partners

Mr. Shaojun Wang, Senior Managing Partner

Mr. Wang is a pioneer of China’s RMB private equity industry, with a background in technology and finance and deep relationships with government and technological development zones throughout China. He was appointed in 1992 to the first research group commissioned by the State government to develop policy for China’s private equity industry. Since that time he has made significant contributions towards private equity policy and regulatory changes by China’s

State Council. In the early and mid 1990s, he was director of ZhongGuanCun High‐Tech Zone (ZGC Tech Zone), the Silicon Valley of China located in Beijing’s University district where he was responsible for the incubation of small and medium sized technology enterprises. In 1995, Mr. Wang joined BCG and was responsible for its group corporate restructuring, investments throughout China and transactions with international investment banks. In 1998, he founded Beijing Capital to manage BCG’s private equity investments and has been manager for three funds since then, the Beijing Capital Fund, the Shenzhen Capital Growth Fund and the Xinrong Fund. He has been an investment advisor to Walden and ING Fund and has led notable transactions such as Guangxi Huwei and Beijing Capital Water. Mr. Wang holds a Master’s degree from Renmin University of China and a Bachelor’s of Engineering degree from Naval Aeronautical Engineering Institute.

Mr. Omer Ozden, Managing Partner

Mr. Ozden is a Mandarin‐speaking New York attorney with 14 years of experience in Mainland China’s venture capital and private equity markets. Mr. Ozden is among the few individuals who can merge an entrepreneurial background in China with expertise in U.S. securities laws compliance, private equity and fund formations and in‐depth experience with Sino‐Foreign direct investment laws. He was formerly a Partner with Baker & McKenzie leading their New York office’s China capital markets transactions, and was previously an

associate with Morrison & Foerster in Hong Kong. Mr. Ozden has represented notable funds investing in China, including Goldman Sachs Asia, Carlyle, Softbank, Equity International, DragonTech and New Margin, as well as various companies including NetEase, Baidu, Alibaba and Xinyuan.



Prior to private practice, Mr. Ozden was an investor and entrepreneur, co‐founding two businesses in the ZGC Tech Zone: one a business and legal consulting company advising technology start ups and investors; the other, China E‐Vision, a seed investor and incubator for technology companies founded by local and foreign investors.

Mr. Ozden has a Bachelor of Commerce in Finance (Honors) from the University of Toronto and a Juris Doctor and LL.B. from the University of Detroit, Michigan and University of Windsor, Ontario, undertaking law degrees in the United States and Canada concurrently. He also studied Mandarin on international scholarship at National Taiwan Normal University in Taipei.

Dr. Gary Gang Ke, Managing Partner

Dr. Ke has 25 years experience as a high level governmental economic policy advisor, entrepreneur and venture capitalist. Dr. Ke is BCG’s associate engaged in overseas joint venture projects, and domestically works with Beijing Capital on their domestic A‐Share listings since 2006. He is the founder of Sinosphere Capital Group which advises high growth companies in China seeking offshore listings.

Dr. Ke formerly served as a member of the China central government policy think tank and is now Senior Advisor to several central government economic policy and international business development institutions. He has testified before U.S. Congress on several occasions regarding U.S. economic policies towards China.

He co‐founded China E‐Vision in the ZGC Tech Zone in 1998, which was among the first incubators in China to package and invest seed money in a portfolio of start‐up technology companies. Dr. Ke also co‐founded a media company together with former U.S. television executives, navigating through challenging PRC regulatory approval hurdles to establish and operate a China TV local syndication network that grew to 76 local television stations.

Dr. Ke holds a Ph.D. in International Economy and an M.A. in International Relations from the University of Maryland and a B.A. in Political Economy from the Chinese Academy of Social Sciences in Beijing.

B. Key Professionals

Mr. Luke Wenyi Lu, Vice President

Mr. Lu joined Beijing Capital in 2002 and is responsible for reviewing investment opportunities, due diligence, deal negotiations, investment monitoring and deal team oversight.

Mr. Lu has 13 years of management and investment management experience. He has been involved in the launch of several private equity funds and fund



management firms and is the General Manager of the Shenzhen Capital Growth Fund. He is also the Vice Chairman of the ZGC Technology Incubator. Mr. Lu has generated impressive returns through good and bad markets, demonstrating his ability to identify, operate and exit the portfolio company investments.

Mr. Lu has a Bachelor’s degree in physics from ShaanXi Normal University and a Master’s degree in Economics from Xi’an Jiaotong University.

Ms. Hongying Wang, General Manager of Capital Markets

Ms. Wang joined Beijing Capital in 2002 and is responsible for investment analysis and monitoring, securities research and capital markets analysis.

Ms. Wang helped establish Beijing Capital’s Xinrong Fund and currently serves as its General Manager. In that capacity, Ms. Wang works closely with the Shenzhen Stock Exchange and securities firms to manage the exit strategy for

Beijing Capital’s portfolio companies and drive their IPO process.

Ms. Wang has a Bachelor’s degree in literature and Master’s degree in history from Beijing Normal University.

Mr. Gang Zhou, General Manager of Equity Investments

Mr. Zhou joined Beijing Capital in 1998 and is responsible for investment opportunity reviews and managing portfolio investments, with a focus on preparing companies for public market exits.

He has twelve years of experience making and managing private equity investments. He has been involved in the investment and operation of Beijing

Capital’s three predecessor funds and has been a critical part of Beijing Capital’s strong track record.

Mr. Zhou has substantial experience with China’s capital markets and a deep understanding of the clean tech and advanced manufacturing industries, with five years of operations management experience.

Mr. Zhou has a Master of Accounting from Central University of Finance and Economics and a Bachelor of Engineering from Beijing Institute of Technology.



III. Track Record and Selected Transaction Summaries

Beijing Capital has sponsored three prior RMB investment funds, Beijing Capital Fund (“Fund I”), Shenzhen Capital Fund and Xinrong Fund (collectively, the “Predecessor Funds”).

Included below is an exhibit of five investments that have been made and exited by the Predecessor Funds (“Five Exited Investments”). The Five Exited Investments were each realized at a profit, with a combined IRR of approximately 59%.6 Four of these Five Exited Investments are described in more detail in III. Track Record and Selected Transaction Summaries ‐ B. Case Studies – Performance History.

The Predecessor Funds also currently hold seven investments that have not been exited (“Seven Current Investments”). These Seven Current Investments are listed in the exhibit below and three of these Seven Current Investments are described in more detail in III. Track Record and Selected Transaction Summaries ‐ B. Case Studies – Performance History.

In addition to the Five Exited Investments and Seven Current Investments, there are four investments (“Four Additional Investments”) that have been made and exited by Beijing Capital. Beijing Capital has determined that these Four Additional Investments are not appropriate to be included in its track record and return calculations because the investment and exit strategy used for these companies is no longer available due to certain regulatory changes affecting publicly listed companies in China. If the Four Additional Investments were included with the Five Exited Investments, Beijing Capital’s track record and return calculations would result in a

6 All IRR and multiple of cost returns presented in this Memorandum are presented on a gross, realized basis, and do not reflect any taxes, carried interest, management fees, and other expenses of the type that are typically borne by an investment fund, all of which would reduce the returns actually received by investors participating in such investments. All IRRs presented in this Memorandum reflect the annual, compounded, gross internal rates of return on the specified investments calculated based on the net annual inflows and outflows of capital with respect to the Five Exited Investments for each year from 2001 through 2009. Prospective investors are encouraged to contact representatives of the Fund Manager to discuss the procedures and methodologies used to calculate the investment returns presented in this Memorandum. The Predecessor Funds are currently valuing each of the Seven Current Investments at cost. Consequently, the Fund Manager has determined not to present a combined realized and unrealized IRR. Prospective investors are encouraged to discuss such unrealized investments with representatives of the Fund Manager. There can be no assurance as to the actual valuation at which unrealized investments will be realized. Actual realized returns will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs, and the timing and manner of sale, all of which may differ from the assumptions on which such valuations are based. In considering the performance information presented in this Memorandum, prospective investors should bear in mind that past performance is not indicative of future results, and there can be no assurance that the Fund will achieve comparable results.



slightly higher combined IRR of approximately 60%. Three of the Four Additional Investments are detailed below in III. Track Record and Selected Transaction Summaries ‐ C. Case Studies – Additional Investments.

A. Track Record7

Below is an exhibit providing summary information about the Five Exited Investments, which Beijing Capital believes are appropriate for inclusion in its track record and return calculations.

Five Exited Investments(RMB in Millions)

Year of Cash Flows 2001 2002 2003 2004 2005 2006 2007 2008 2009 Gross IRR

Beijing Storage Battery (battery technology, M&A exit)Cash Investment (23.7)Cash Return 2.0 28.2 49.9Net Cash Flow (23.7) 2.0 28.2 49.9 62%

Dali Technology Co. Ltd. (SZSE:002214) (thermal imaging technology, public listing exit)Cash Investment (5.0)Cash Return 24.1Net Cash Flow (5.0) 0.0 0.0 0.0 24.1 48%

New Jialian Electronics Co., Ltd. (SZSE:002188) (electro‐acoustic communication products, public listing exit)Cash Investment (9.1)Cash Return 17.0Net Cash Flow (9.1) 0.0 17.0 37%

Jinqiao Real Estate Development, Limited (real estate, share redemption exit)Cash Investment (11.4)Cash Return 13.1Net Cash Flow (11.4) 0.0 13.1 7%

Fulida Fibre Co., Ltd. (textiles, share redemption exit)Cash Investment (17.6)Cash Return 20.8Net Cash Flow (17.6) 20.8 18%

Combined Net Cash Flow (23.7) 2.0 28.2 49.9 (5.0) (9.1) (11.4) (0.6) 57.9 59%

7 The Five Exited Investments, Seven Current Investments and Four Additional Investments comprise all of the investments made by the Predecessor Funds since the beginning of 2001. The Fund Manager has determined to exclude investments by Fund I made prior to 2001 from its track record determinations (i) because the regulatory framework for onshore private equity investing prior to that time differed materially from the current framework, particularly with respect to investment structures available to SOEs investing in private companies and exit strategies available with respect to investments in companies prior to their public listings, and (ii) due to subsequent changes to Beijing Capital’s investment team.



Below is an exhibit providing summary information about the Seven Current Investments not yet realized.

Seven Current Investments

Company Industry StatusBest Precision Co., Ltd. Industrial technology Not exitedKingold Jewelry, Inc. (OTCBB:KGJI) Jewelry Not exited, publicly tradingLu‐Hai Environmental Protection Industry Development Environmental Not exitedNorth Glass Technology Co. Ltd. Industrial technology Approved for public listingSino Selen Hi‐Tech Co., Ltd. Industrial technology Not exitedSunwoda Electronics (Swoda Electronics) Electronics Not exitedZhongJi Concrete Piles Construction materials Filed for public listing

Below is an exhibit providing summary information about the Four Additional Investments not included in Beijing Capital’s track record and return calculations.

Four Additional Investments

Cnlight Corporation Limited (SZSE:002076) (public listing exit)Industry: Electronics RMB (millions)Cash Investment (April 2004) 3.2Cash Return (June 2008) 26.7

Hangmin Limited (SZSE:600987) (public listing exit)Industry: TextilesCash Investment (June 2003) 4.0Cash Return (August 2005) 7.3

NHU Company Limited (SZSE:002001) (public listing exit)Industry: PharmaceuticalsCash Investment (April 2003) 4.2Cash Return (June 2005) 9.4

Sunvim Group Co. Limited (SZSE:002083) (public listing exit)Industry: TextilesCash Investment (October 2005) 4.2Cash Return (March 2008) 32.8



B. Case Studies ‐ Performance History

Below are more detailed descriptions of seven investments selected from the Five Exited Investments and Seven Current Investments.

1. New Jialian Electronics Co., Ltd. (SZSE:002188)

Investment Status: Fully exited – Shenzhen Exchange

Business Description: New Jialian Electronics Co., Ltd. (“ZNJ Electronics”) develops and manufactures high‐performance electro‐acoustic communication systems for OEMs including SIEMENS, Panasonic, Woori, V‐Tech and NEC.

Industry: Electronics

Location:

Investment Thesis:

Jiashan County, Zhejiang Province

As an early market participant in the electro‐acoustic industry, ZNJ Electronics demonstrated clear leadership in both technology, with higher fidelity than its competition, and market share, which was in excess of 50% domestically. ZNJ Electronics was also a likely candidate for public listing on the Shenzhen exchange.

Source of Transaction: BCG’s investment banking subsidiary, First Capital Securities, introduced Beijing Capital to ZNJ Electronics, who wanted a strategic shareholder to facilitate an IPO. ZNJ Electronics recognized that Beijing Capital’s reputation and value‐added relationships with the government, regulatory agencies and industry made them an attractive investor.

Investment History: In November 2006, Beijing Capital, through Fund I, invested RMB 9.07 million for 3.6% of ZNJ Electronics’ stock. On November 8, 2007, with support from Beijing Capital, ZNJ Electronics went public on the Shenzhen SME board. After the one year lockup period mandated by the Shenzhen exchange, Beijing Capital began divesting its shares in ZNJ Electronics. Beijing Capital began to sell its shares in November 2008 for a total return of RMB 17.03 million, despite a weak stock market in late 2008.

Co‐Investors: ZhengJiang Technology Venture Capital (Beijing Capital was the lead investor)



Beijing Capital’s Addition to Value:

Beijing Capital assisted ZNJ Electronics with its approval as a high‐tech R&D enterprise, qualifying the company for a reduced tax rate

Beijing Capital introduced ZNJ Electronics to one of China’s largest telecom equipment companies, leading to the ZNJ Electronics launching new, successful mobile phone products

Beijing Capital introduced ZNJ Electronics to Foxconn (SEHK:2038), leading to new sales through Foxconn to Motorola

Beijing Capital helped ZNJ Electronics enter the TFT module market through the establishment of a joint venture in Taiwan

2. Fulida Fibre Co., Ltd.

Investment Status: Fully exited – Redemption

Business Description: Fulida Fibre Co., Ltd. (“Fulida Fibre”) is the largest producer of new and recycled viscose fiber in China. The company’s margins have been higher than industry standards due to aggressive upstream integration and investments in modern and large‐scale production facilities.

Industry:

Location:

Textiles

Hangzhou, Zhejiang Province

Investment Thesis: Fulida Fibre is a leader in the viscose fiber industry in China, with strong management and a compelling plan to further improve margins and capture market share.

Source of Transaction: BCG’s investment banking subsidiary, First Capital Securities, introduced Beijing Capital to Fulida Fibre.

Investment History: In April 2008, Beijing Capital, through Shenzhen Capital Fund, invested RMB 17.6 million for 0.7% of the Fulida Fibre’s stock. Subsequent weakness in the financial and consumer markets in 2008 and 2009 led Beijing Capital to exercise its redemption right, selling its investment back to Fulida Fibre in April 2009 for RMB 20.8 million.

Co‐Investors: RongSheng Capital (Beijing Capital was the lead investor)




Beijing Capital provided business contacts, political support and debt guarantees to assist Fulida Fibre with the acquisition of a major material supply operation in the Xinjiang Province that reduced the cost of inputs.

Beijing Capital introduced several new customers to Fulida Fibre.

The appeal of Beijing Capital’s reputation and relationships allowed it to negotiate favorable investment terms with Fulida Fibre, preserving a gain in the investment despite weakness in the market during 2008.

3. Dali Technology Co. Ltd. (SZSE:002214)


Business Description: Dali Technology Co. Ltd. (“D‐Tech”) develops and manufactures thermal imaging and security surveillance technology.

Industry:

Location:

Security

Hangzhou, Zhejiang Province

Investment Thesis: D‐Tech was the largest company of its kind in China, with a sophisticated infrastructure that included advanced production and R&D capabilities and a well‐established sales network in the PRC and internationally. Management also demonstrated their ability to manage rapid growth while maintaining strong profitability and financial stability. D‐Tech was also positioned to win new contracts from the PRC.

Source of Transaction: The Beijing Government introduced D‐Tech to BCG and Beijing Capital.

Investment History: In August 2005, Beijing Capital, through Fund I, invested RMB 5 million for 2% of D‐Tech’s stock. With Beijing Capital’s assistance, D‐Tech grew rapidly and was publicly listed on the Shenzhen exchange on January 18, 2008. After the one year lockup period mandated by the Shenzhen exchange, Beijing Capital began divesting its shares in D‐Tech. Beijing Capital sold the last of its shares in February 2009 for a total return of RMB 24.1 million.



Co‐Investors: ZhengJiang Technology Venture Capital (Beijing Capital was the lead investor)


D‐Tech won several major government contracts with the assistance of BCG’s reputation, relationships and ability to provide financial guarantees

Beijing Capital supported and expedited D‐Tech’s public listing on the Shenzhen exchange

4. Jinqiao Real Estate Development, Limited

Investment Status: Fully exited – Redemption

Business Description: Jinqiao Real Estate Development Limited (“Jinqiao Real Estate”) is a developer of commercial and residential real estate in JiangSu Province. Jinqiao Real Estate is one of the fastest growing real estate companies in the province, in terms of land bank and sales.

Industry:

Location:

Real estate

Changzhou, Jiangsu Province

Investment Thesis: BCG’s real estate division confirmed that Jinqiao’s land bank was valuable and well‐positioned for appreciation. Most of the property Jinqiao Real Estate was developing was subject to government buyback programs, making the projects particularly low risk.

Source of Transaction: BCG’s investment banking subsidiary, First Capital Securities, introduced Beijing Capital to Jinqiao Real Estate.

Investment History: In December 2007, Beijing Capital, through Shenzhen Capital Fund, invested RMB 11.37 million for 1.5% of Jinqiao Real Estate’s stock. Subsequent weakness in the financial and real estate markets in 2008 led Beijing Capital to exercise its redemption right, selling its investment back to Jinqiao Real Estate in September 2009 for RMB 13.1 million.

Co‐Investors: RongSheng Capital




Beijing Capital helped secure government buybacks of Jinqiao Real Estate’s development projects

BCG helped Jinqiao Real Estate win several long‐term national real estate projects

5. North Glass Technology Co. Ltd. (Recently Approved For Listing by the CSRC)

Investment Status: Current portfolio company

Business Description: North Glass Technology Co. Ltd. (“North Glass”) develops and manufactures advanced equipment for intensive glass processing and also produces industrial and architectural glass products.

Industry:

Location:

Capital equipment and industrial goods

Luoyang, Henan Province

Investment Thesis: North Glass is the largest producer of intensive glass processing machinery in China, with modern and efficient operations (development, manufacturing and distribution), and strong financial health. North Glass was positioned for strong growth through government contracts, capturing additional market share and the industry’s organic growth.

Source of Transaction: BCG introduced North Glass to Beijing Capital

Investment History: In December 2007, Beijing Capital, through Shenzhen Capital Fund, invested RMB 28.4 million for 2% of North Glass’s stock. The China Securities Regulatory Commission (“CSRC”) has recently granted approval for a public listing and Beijing Capital expects to be eligible to sell its stock in North Glass in mid‐2011.

Co‐Investors: RongSheng Capital (Beijing Capital was the lead investor)

Financials, current (LTM):

Revenue: RMB 614 million

EBITDA: RMB 118 million


BCG helped North Glass win several major national projects, including construction projects for the 2008 Beijing Olympics



BCG’s relationships with private industry helped North Glass improve its supply chain efficiency and, as a result, gross margins

BCG helped North Glass with CSRC approval for public listing and is helping to expedite the company’s public offering

6. Sunwoda Electronics (Swoda Electronics)


Business Description: SUNWODA Electronics (“SUNWODA”) produces OEM power supply solutions, including batteries, for automobiles and mobile products such as cell phones, power tools and digital cameras.

Industry:

Location:

Electronics

Shenzhen, Guangdong

Investment Thesis: SUNWODA’s strong management, financial strength and proprietary technologies allowed it to secure large contracts with OEMs including Lenovo and Haier. SUNWODA’s R&D had also made compelling progress towards the development of energy‐saving batteries.

Source of Transaction: The Shenzhen city government introduced SUNWODA to BCG’s Shenzhen office, which referred the opportunity to Beijing Capital.

Investment History: In August 2008, Beijing Capital, through Shenzhen Capital Fund, invested RMB 6.75 million for 3% of SUNWODA’s stock. Beijing Capital is currently supporting XWD Technology’s application with the CSRC for public listing approval.

Co‐Investors: None





BCG helped SUNWODA secure direct financial support from the Shenzhen city government

BCG introduced a large auto manufacturer to SUNWODA,



resulting in an R&D partnership

BCG is actively supporting SUNWODA’s application for public listing

7. ZhongJi Concrete Piles


Business Description: ZhongJi Concrete Piles (“ZhongJi Concrete”) produces and distributes centrifugal concrete piles and stubs for buildings and infrastructure

Industry:

Location:

Construction materials

Shanghai

Investment Thesis: ZhongJi Concrete is the largest centrifugal concrete pile production company in China, with unique intellectual property and strong operational and financial management. This has let to significant growth – more than 100% growth per year for each of the last two years.

Source of Transaction: BCG’s Shanghai office introduced ZhongJi Concrete to Beijing Capital

Investment History: In August 2008, Beijing Capital invested RMB 24 million for 10% of ZhongJi Concrete’s stock. Beijing Capital is currently supporting ZhongJi Concrete’s application with the CSRC for public listing approval.

Co‐Investors: LianTong Venture Capital (Beijing Capital was the lead investor)





BCG helped ZhongJi Concrete win contracts for three national construction projects

BCG has supported ZhongJi Concrete’s growth by directly providing bank lines, debt guarantees and equipment leasing

BCG is actively supporting ZhongJi Concrete’s application for public listing



C. Case Studies ‐ Additional Investments

Prior to 2005, companies listed publicly in China had segregated Nontradable Shares and Tradable Shares. Tradable Shares were issued pursuant to public offerings and were a part of the tradable float. Nontradable Shares were not permitted to be publicly traded, even if they were issued by a company that eventually was publicly listed, resulting in wide pricing disparities between Nontradable Shares and Tradable Shares. Investors in a private company, such as private equity investors, generally held Nontradable Shares and consequently had limited domestic public exit opportunities, until the domestic markets were reformed to eliminate segregated shares. In January 2004, China’s State Council announced certain reforms allowing for the public float of Nontradable Shares (the “Nontradable Share Reforms”).8 In 2005, the CSRC initiated a pilot program with 46 companies to transform Nontradable Shares into Tradable Shares. After the successful pilot implementation of the Nontradable Share Reforms, the CSRC encouraged all publicly listed companies in China convert Nontradable Shares into Tradable Shares and stated that reform‐compliant companies would be given priority to raise new capital. By the end of 2007, 98% of all listed companies in China had completed the Nontradable Share Reforms. The Four Additional Investments involve situations where Beijing Capital purchased Nontradable Shares, which were subsequently transformed into Tradable Shares of public companiesunder the Nontradable Share Reforms. These cases are: Cnlight Corporation Limited (SZSE:002076), Sunvim Group Co. Limited (SZSE: 002083), NHU Company Limited (SZSE:002001) and Hangmin Limited (SZSE: 600987). Due to the implementation of the Nontradable Share Reforms, Beijing Capital benefited from a substantial increase in the valuation of its shares in these companies, as they were purchased at lower valuations afforded to Nontradable Shares, but eventually converted to Tradable Shares, which were afforded significantly higher valuations.

If the Four Additional Investments were included with the Five Exited Investments, Beijing Capital’s IRR would be approximately 60%. Beijing Capital does not believe that the performance of these investments is appropriate to include in its track record and return calculations because returns were partially derived from significant changes to China’s regulatory framework related to publicly listed companies, which are no longer relevant in China. However, Beijing Capital believes that the investments are indicative of its ability to source, identify and invest in attractive companies and exit those investments on public capital markets. The following are brief summaries of three of the Four Additional Investments, all of which have been exited.

8 Opinions on Promoting the Reform, Opening and Steady Growth of Capital Markets, State Council January 2004.



1. Cnlight Corporation Limited (SZSE:002076)


Business Description: Cnlight Corporation Limited (“Cnlight”) develops and manufactures optoelectronic lights and lighting systems using energy saving LED and SMD technology.

Industry: Electronics

Investment Thesis: Cnlight was a proven leader in both technology and market share in China for the environmentally friendly and fast growing LED and SMD lighting sector. Cnlight Corp.’s Center for Special Light Source Engineering and Development of Cnlight Corp. was nationally recognized and certified as a key R&D institution. Cnlight had also begun generating substantial sales to the US, Japan and European countries.

Investment History: In April 2004, Beijing Capital invested RMB 3.2 million and in June 2008 Beijing Capital sold its Cnlight holdings for a total return of RMB 26.7 million, an IRR of 70.0%.

2. Sunvim Group Co. Limited (SZSE: 002083)


Business Description: Sunvim Group Co. Limited (“Sunvim Group”) is a large conglomerate specializing in the production and distribution of high end household fabrics. Sunvim Group sold its products throughout the world. The company also owns and operates chemical and thermoelectric plants.

Industry: Textiles

Investment Thesis: Sunvim Group was the largest modern household textile enterprise in China, in terms of production and sales of high end towels, beddings and decorative fabrics. The company was a world leader in advanced manufacturing systems.

Sunvim Group had demonstrated stable growth history and great creativity in product development. The company also enjoyed the tax advantages as an export‐oriented business.



Investment History: In October 2005 Beijing Capital invested RMB 4.2 million and in March 2008, Beijing Capital sold its Sunvim Group holdings for a total return of RMB 32.8 million, an IRR of 98.5%.

3. NHU Company Limited (SZSE: 002001)


Business Description: NHU Company Limited (“NHU Company”) develops, produces and distributes biomedicines, nutritional products, medical raw materials and food additives.

Industry: Pharmaceuticals

Investment Thesis: NHU Company was a leader in the sector with a broad spectrum of products and patents, and large market shares in China. The company’s management demonstrated its ability to generate fast, sustainable growth.

Investment History: In April 2003 Beijing Capital invested RMB 4.2 million and in June 2005 Beijing Capital sold its NHU Company holdings for a total return of RMB 9.4 million, an IRR of 49.3%.


Beijing Capital helped NHU Company become listed in the National Torch Program, earning it preferential business treatments including government funding, contracts and tax breaks

Beijing Capital helped NHU Company earn local and national government funding for its R&D programs

Beijing Capital provided NHU Company with legal and IP expertise to protect company’s intellectual property rights



Summary of Partnership Terms

The following is a summary of certain information about the Fund and an investment in limited partnership interests therein (the “Interests”). This summary (and terms of the Fund described elsewhere in this Memorandum) is not complete and is subject to and qualified in its entirety by reference to the more complete and detailed terms and information set forth in the limited partnership agreements (or equivalent thereof) of the Fund entities (collectively, the “Partnership Agreement”), in the Fund’s subscription agreements (the “Subscription Agreements”) and in other agreements described herein, as each such document may be amended, restated or supplemented from time to time. In the event of a conflict between this summary and the aforementioned documents, such documents shall control.

Fund: Beijing Capital Growth Fund, L.P. (the “Partnership” and

together with any Feeders, Intermediaries or Alternative Vehicles (each as defined below), collectively, the “Fund”) will be organized as a foreign invested partnership established pursuant to the Administrative Measures for Establishment of Partnership Enterprises within China by Foreign Enterprises or Individuals and the Partnership Enterprise Laws (collectively, the “Partnership Laws”) of the People’s Republic of China (the “PRC”). The rights and obligations of the Partners will be in accordance with the terms of the Partnership Agreement as well as the mandatory requirements of the Partnership Laws. The Fund Manager (defined below) will also organize one or more offshore partnerships or other vehicles (each, a “Feeder”) in a jurisdiction other than the PRC (all such jurisdictions, including Hong Kong, Macau and Taiwan, “Offshore”), which will invest, directly or indirectly through an intermediary entity (each, an “Intermediary”) established in an Offshore jurisdiction, in the Fund. The sole purpose of such Feeders will be to invest in the Partnership. It is anticipated that investors from the PRC (“PRC Investors”) will invest directly into the Partnership and non PRC investors (“Offshore Investors”) will invest in the Partnership through a Feeder/Intermediary structure. It is further anticipated that PRC Investors will comprise 40% of the Fund’s aggregate capital commitments and Offshore Investors will comprise 60% of the Fund’s aggregate capital



commitments (“Capital Commitments”), adjusted to reflect a 1% Capital Commitment by the Fund Manager, although such ratios may be adjusted by the Fund Manager in its sole discretion. All Capital Commitments will be funded in cash. Each of the PRC Investors and Offshore Investors are referred to herein as a “Limited Partner” and collectively as the “Limited Partners”, and together with the Fund Manager, in its capacity as executive/managing partner of the Partnership, as the “Partners”).

Purpose: The purpose of the Partnership is to carry on the business of investing in accordance with the provisions of the Partnership Agreement and, in particular, of identifying, negotiating, making, monitoring the progress of and realizing, exchanging or distributing investments which will include the purchase, subscription, acquisition, sale and disposal of investments with the principal objective of providing Partners with a return by means of income and/or long‐term capital appreciation.

Investment Focus: The Fund will focus principally on making investments in high growth pre‐IPO companies in the PRC, typically with at least three years of profitability, and a focus in, but not limited to, the following sectors: Clean and Renewable Energy; Agritech and Food Processing; Information Technology; Industrial Technology; and Biological Science and Pharmaceuticals.

Sponsor: Beijing Capital Investments Co., Ltd. (“Beijing Capital”), the private equity arm of Beijing Capital Group Co., Ltd. (“BCG”), the investment conglomerate of the Beijing Municipal Government, PRC (the “Beijing Government”).

Fund Manager: Beijing Capital Investment Management Company, a Sino‐foreign equity joint venture company, or an affiliate (the “Fund Manager” and together with Beijing Capital, collectively, the “Firm”), will serve as the “executive/managing partner” of the Partnership and will have full control over the business and affairs of the Fund,



including responsibility for making all investment and divestment decisions. In exchange for such services, the Fund Manager will receive the management fee described below (the “Management Fee”). The Fund Manager may engage affiliates or third parties, including Beijing Capital or its affiliates, to provide management and investment advisory services to the Fund, either directly to the Fund or as a sub‐advisor to the Fund Manger. Although Beijing Capital serves as the private equity arm of BCG, for purposes of the Fund, including, without limitation, determinations with respect to conflicts of interest, fee income allocation, and any implied duty of care or loyalty, none of BCG, the Beijing Government, nor any of their affiliates will be considered to be an affiliate of the Fund, the Fund Manager or Beijing Capital.

Offering Overview: Target Size. The target size of the Fund will be between $75 million and $100 million in Capital Commitments. The Fund Manager reserves the right to accept total subscriptions below or above the target amount. All amounts stated herein are in U.S. dollars, unless otherwise indicated. Minimum Commitment. The minimum Capital Commitment of each Limited Partner is $5 million. The Fund Manager reserves the right to accept subscriptions of lesser amounts. First Closing. The first closing of the Fund (the “First Closing”) will occur on the date selected by the Fund Manager (the “First Closing Date”). Initial Capital Contribution. Each Partner will be required to make a capital contribution to the Partnership in an amount determined by the Fund Manager on the tenth day following the First Closing Date (or such later date as determined by the Fund Manager in its sole discretion). Initial capital contributions will not be less than 30% of the aggregate Capital Contributions, unless otherwise determined by the Fund Manager in its sole discretion.



Subsequent Closings/Final Closing. From time to time after the First Closing, the Fund Manager may schedule additional closings as necessary to accommodate the admission of additional Limited Partners (each, a “Closing”). The final Closing of the Fund (the “Final Closing”) will occur no later than 18 months following the First Closing Date (the date of such Final Closing is herein referred to as the “Final Closing Date”). Limited Partners admitted to the Fund after the First Closing will be required to contribute to the Fund an amount equal to their proportionate share of all Capital Commitments funded by previously‐admitted Partners, plus interest thereon at 8% per annum. The amount contributed by such newly‐admitted Limited Partners (other than amounts attributable to the Management Fee, which will be paid to the Fund Manager) will be distributed to the previously‐admitted Partners in proportion to their funded Capital Commitments and, other than the interest component, will be added back to such previously‐admitted Limited Partners’ unfunded Capital Commitments and will be subject to being drawn down again by the Fund. For this purpose, investments will be valued at cost, unless the Fund Manager determines that there has been a material change in the value of the Fund’s assets that would justify a different valuation.

Investment Period: The Fund may make new investments during the period (the “Investment Period”) commencing on the First Closing Date and ending on the third anniversary of the First Closing Date. Following the end of the Investment Period, capital may not be drawn down from the Partners for the purpose of making investments other than to (i) complete investments that were committed to prior to the end of the Investment Period and (ii) to make follow‐on investments in existing portfolio companies in an aggregate amount not exceeding 20% of total Capital Commitments.

Term of the Fund: The term of the Fund will be five years from the First Closing Date. The Fund Manager may extend the term of the Fund for up to three additional one‐year periods, subject to the approval of the Limited Partner Advisory Committee (as described in greater detail below, the “L.P.



Advisory Committee”), in order to provide for the orderly liquidation of the Fund.

Investment Limitations: Without the consent of the L.P. Advisory Committee, the Fund will not be permitted to make the following investments:

• an investment in any single portfolio company (or group of affiliated portfolio companies operated as a common business) that exceeds 20% of the total Capital Commitments, except as provided in “Bridge Investments” below;

• an investment in publicly traded securities

purchased in an open market transaction;

• an investment in a “blind pool” investment vehicle;

• an investment in an entity that provides for the payment by the Fund of “carried interest” or management fees to any person other than management of a portfolio company unless the Fund Manager neutralizes the additional cost to the Fund of such carried interest and management fees by reducing the Fund carried interest associated with such investment and/or the Management Fee paid at the Fund level;

• an investment in a portfolio company owned by

Beijing Capital Fund, Shenzhen Capital Fund and Xinrong Fund (the “Predecessor Funds”) unless (i) the Fund Manager has reasonably determined that the terms of such investment are fair and reasonable to the Fund, or (ii) the Fund is purchasing a portion of such Predecessor Fund’s investment in such portfolio company at fair market value (as determined by the Fund Manager in its reasonable discretion); or

• an investment in hedges or derivative securities

(other than for the purpose of hedging currency or other risks of a portfolio investment by the Fund).



Bridge Investments: The Fund may provide interim financing (a “Bridge

Investment”) to a Fund portfolio company in connection with the Fund’s investment therein. The total investment by the Fund, including any Bridge Investment, in such portfolio company may not exceed 25% of total Capital Commitments.

Investment Structuring: The Fund Manager may form an alternative investment vehicle (an “Alternative Vehicle”) for the purpose of making all or any portion of an investment if it determines that such structuring is desirable or necessary for legal, tax, regulatory or other reasons. Any such Alternative Vehicle will invest alongside (or in lieu of) the Partnership with respect to such investment.

Borrowings: The Fund may (i) borrow money to pay reasonable expenses of the Fund, to provide short‐term bridge financing (through a bank) to a portfolio company (or prospective portfolio company) or to provide interim financings to the extent necessary to consummate the purchase of a portfolio company prior to the Fund’s receipt of capital contributions and (ii) guarantee the obligations of portfolio companies and their affiliates, provided that the aggregate outstanding amount of such borrowings and guarantees may not exceed 15% of total Capital Commitments. Non‐recourse guarantees of the obligations of a portfolio company and its affiliates secured solely by the Fund’s investment in such portfolio company will not be included in the 15% limitation.

Management Fee: The Partnership will pay the Fund Manager an annual Management Fee equal to 2.5% of the aggregate Capital Commitments of the Limited Partners. The Management Fee will be payable quarterly in advance and may be paid from capital called from the Limited Partners or from amounts otherwise available for distribution to the Limited Partners. The Fund Manager will not pay Management Fees.

Portfolio Company Fees: BCG and its affiliates may receive monitoring fees, directors’ fees, transaction fees, break‐up fees and other



fees from portfolio companies or prospective portfolio companies of the Fund (“Fee Income”). Such fees will be for the account of BCG and such affiliates. In the event the Firm or its affiliates receives Fee Income, such Fee Income will be allocated among the Fund and any other entities managed or advised by the Firm based on their relative amounts invested in (or proposed to be invested in) such portfolio company. The Fund’s allocable share of such Fee Income will be used to reduce future Management Fees payable to the Fund Manager.

Expenses: Fund Manager Expenses. The Firm will be responsible for the payment of its normal operating overhead, including but not limited to the salaries of its employees and office rental, secretarial, clerical and bookkeeping expenses. Organizational Expenses. The Fund will bear up to $475,000 of legal and other expenses incurred by the Firm (and its affiliates) in connection with the organization of the Fund (the “Organizational Expenses”). Organizational Expenses in excess of this amount will be paid by the Fund but borne by the Fund Manager through a 100% offset against the Management Fee. Other Fund Expenses. The Fund will also be responsible for the payment of all placement fees and costs, expenses and liabilities relating to its operations, including, but not limited to: (i) the Management Fee; (ii) accounting, counsel, consulting and other out‐of‐pocket fees, costs and expenses relating to the actual or proposed acquisition, holding or disposition of securities (including, without limitation, broken deal expenses of the Fund, brokerage and custody costs and hedging costs charged to the Fund); (iii) indemnification amounts payable to persons entitled to indemnification under the Partnership Agreement; (iv) all taxes imposed on the Fund and all litigation expenses (and any judgments or settlements paid in connection therewith) and other extraordinary expenses; (v) the costs of forming and maintaining any Alternative Vehicle; (vi) insurance costs; (vii) commitment fees payable in connection with credit facilities; (viii) the reasonable out‐of‐



pocket expenses of the members of the L.P. Advisory Committee in connection with their services; (ix) the costs of the annual meetings of Limited Partners; (x) ongoing expenses of any Feeder or Intermediary; and (xi) audit and Fund accounting expenses and all other costs incurred in connection with the administration of the Fund (including the costs of third party fund administrators retained by the Firm) or that are authorized by the Partnership Agreement or approved by a majority in interest of the Limited Partners or the L.P. Advisory Committee (these costs, expenses and liabilities, together with Organizational Expenses, are collectively referred to herein as “Fund Expenses”).

Capital Contributions and Fund Investments:

Foreign exchange laws and policies, and currency preferences of portfolio companies may change over the term of the Fund. The Fund Manager will have the discretion to determine and manage currency exchanges by the Fund and the currency with which it invests as it reasonably determines appropriate taking into account the interests of all Partners. Subject to the foregoing, it is anticipated that Onshore Investors will make capital contributions to the Partnership in RMB and PRC Investors will make capital contributions to the Partnership in U.S. dollars. All allocations and distributions by the Partnership, however, will be calculated in RMB. The Fund Manager will calculate each Offshore Investor’s capital contribution to the Partnership in RMB based on the average of the purchase and sale rates published by the head office of the People’s Bank of China for RMB/ U.S. dollar exchanges as of the date the drawdown notice for such capital contribution is sent to the Partners. After distributions are calculated in accordance with the distribution priorities outlined under “Distributions,” the Fund Manager will calculate each Offshore Investor’s allocable share of such distributions in U.S. dollars based on the actual rates of exchange obtained by the Fund, or, if the Fund makes such distributions from funds held by the Partnership denominated in U.S. dollars, calculated based on the average of the purchase and sale rates published by the head office of the People’s Bank of



China for RMB/ U.S. dollar exchanges as of the date such distribution determinations are made by the Partnership. Allocations and distributions at the Feeder and Intermediary levels are expected to be calculated in U.S. dollars. Notwithstanding the foregoing, it is expected that the Partnership will not exchange all capital contributions made by Offshore Investors to RMB, and may make investments in RMB, U.S. dollars or a combination of both currencies. It is expected that investment proceeds received by the Partnership will be in RMB, but it is possible that the Partnership may receive investment proceeds in other currencies. As described above, all allocations and distributions by the Partnership will be calculated in RMB, and the Partners will directly bear any gain or loss as a result of currency exchange rates.

Distributions: After the payment of all Fund Expenses (including taxes), and the establishment of statutory reserves as required by the laws of the PRC and appropriate reserves for reasonably anticipated liabilities, obligations and commitments of the Fund, proceeds (“Proceeds”) from any Fund investment will be apportioned among the Partners (including the Fund Manager) according to the capital contributions made by them to fund such investment. The amount apportioned to each Limited Partner will be distributed to such Limited Partner and the Carry Partner (defined below) as follows:

(i) Return of Capital and Fund Expenses: First, 100% to such Limited Partner until it has received distributions equal to (a) its capital contributions with respect to all disposed investments, plus its pro rata share of all net unrealized losses on writedowns with respect to the Fund’s other investments and (b) its capital contributions with respect to all Fund Expenses that have been allocated to disposed investments;



(ii) 15% Preferred Return: Second, 100% to such Limited Partner until it has achieved cumulative distributions equal to a 15% per annum rate of return, compounded annually (the “Preferred Return”), on the amounts distributed to it pursuant to clause (i) above, calculated from the date such contributed capital is invested (or expended) by the Fund to the date the Fund receives Proceeds representing a return of such contributed capital;

(iii) Fund Manager Catch‐Up: Third, 100% to the Carry

Partner as a Carried Interest distribution until cumulative distributions to the Carry Partner under this clause (iii) equal 20% of the aggregate amount distributed pursuant to clause (ii) above and this clause (iii);

(iv) 80/20 Split: Fourth, 20% to the Carry Partner as a

Carried Interest distribution and 80% to such Limited Partner until such Limited Partner has received cumulative distributions equal to a 30% per annum rate of return, compounded annually, on the amounts distributed to it pursuant to clause (i) above, calculated from the date such contributed capital is invested (or expended) by the Fund to the date the Fund receives Proceeds representing a return of such contributed capital; and

(v) Fifth, 40% to the Carry Partner as a Carried Interest

distribution and 60% to such Limited Partner. The Fund Manager may receive Carried Interest distributions in respect of its interest as “executive/managing partner” of the Partnership, or may designate one or more affiliates of the Fund Manager, the Managing Partners (defined below) or Beijing Capital to receive all or a portion of the Carried Interest distributions through a special limited partnership interest in the Partnership (the recipients of Carried Interest distributions, collectively, the “Carry Partner”).



If the Fund disposes of only a portion of its investment in a portfolio company, the portion sold will be treated as a separate investment from the portion retained for purposes of distributing the proceeds of such disposition as described above. The Fund may make distributions, as cash advances against regular distributions, to the Carry Partner (to the extent of available cash) in amounts necessary to permit the Carry Partner to satisfy its tax liability (or the tax liability of its partners) with respect to its proportionate share of the Fund’s taxable net income. The Fund will use its best efforts not to distribute securities in kind unless they are marketable securities or such distribution is in connection with the liquidation of the Fund. If the receipt of such securities by a Limited Partner would violate law applicable to a Limited Partner or if a Limited Partner has advised the Fund in writing in advance of its admission to the Fund that it does not wish to receive distributions in kind, then, subject to applicable contractual and legal limitations, the Fund Manager will use commercially reasonable efforts to sell such securities on behalf of an electing Limited Partner, in which case such Limited Partner will bear the risk of any loss or gain on such sale.

Reinvestment of Proceeds:

Distributions in respect of the capital portion of any investment (including any Bridge Investment) disposed (or partially disposed) within 18 months of the date such investment was made may, in the sole discretion of the Fund Manager, be added back to the Fund’s unfunded Capital Commitments and may be drawn down again by the Fund.

Allocations of Profits and Losses:

Profits and losses of the Fund will be allocated among Partners in a manner consistent with the foregoing distribution provisions and the requirements of the Partnership Laws

Carry Partner Clawback: If, following the dissolution of the Fund, (a) the Carry Partner has received Carried Interest distributions with



respect to a Limited Partner that exceed the sum of (i) 20% of the Fund’s cumulative net profits attributable to such Limited Partner up to an amount equal to 30%, compounded annually, on such Limited Partner’s contributed capital, calculated from the date such contributed capital is invested (or expended) by the Fund to the date the Fund receives Proceeds representing a return of such contributed capital, and (ii) 40% of the Fund’s cumulative net profits attributable to such Limited Partner in excess of the cumulative net profits described in clause (i), calculated from the date such contributed capital is invested (or expended) by the Fund to the date the Fund receives Proceeds representing a return of such contributed capital (the amounts exceeding the sum of clauses (i) and (ii), collectively, the “Excess Carried Interest Distributions”), or (b) the distributions received by a Limited Partner are not sufficient to provide such Limited Partner with a return of its contributed capital plus a 15% per annum return thereof (the “Priority Return Shortfall Amount”); then the Carry Partner will contribute to the Fund for distribution to such Limited Partner the greater of the Excess Carried Interest Distributions and the Priority Return Shortfall Amount with respect to such Limited Partner, provided that the amount required to be so contributed may not exceed the amount of Carried Interest distributions received by the Carry Partner with respect to such Limited Partner, reduced by the taxes paid or payable by the Carry Partner (or its beneficial owners) with respect to such Carried Interest distributions and increased by the amount of any tax benefits utilized by the Carry Partner (or its beneficial owners) as a result of such payment in the year of payment (in each case based on an assumed tax rate).

All Partner Giveback: The Fund Manager may require the Partners to return certain distributions for the purpose of satisfying the Fund’s indemnification obligations and other Fund obligations, subject to the limitations set forth in the Partnership Agreement.

Co‐Investment Policy: The Fund Manager may (but is not obligated to) offer available co‐investment opportunities to Limited Partners.



L.P. Advisory Committee: The L.P. Advisory Committee will consist of at least five

Limited Partner representatives, at least two of which will be representatives of the PRC Investors, and at least three of which will be representatives of the Offshore Investors. The L.P. Advisory Committee will have the authority to: (i) approve any investment contemplated above under “Investment Limitations”; (ii) review, and approve or disapprove, any potential conflicts of interest transactions between the Fund, on the one hand, and the Firm and its affiliates, on the other hand; and (iii) review, and approve or disapprove, any other matter permitted or required to be submitted to the L.P. Advisory Committee as set forth in the Partnership Agreement. L.P. Advisory Committee approvals will require the approval of a majority of the members then serving (not including any recusing members). As discussed under “Sponsor” above, neither BCG nor the Beijing Government (or their affiliates) will be considered affiliates of the Fund or the Firm. The Fund will indemnify the members of the L.P. Advisory Committee for their services as such and will reimburse the members for their reasonable out‐of‐pocket expenses in connection with such services. The Fund Manager will be entitled to rely exclusively on the L.P. Advisory Committee’s determination that a potential conflict of interest transaction or matter should be waived on behalf of the Fund.

Limited Partner Remedies:

Key Person. A “Key Person Event” will occur if any two of Shaojun Wang (“Wang”), Omer Ozden (“Ozden”) and Dr. Gary Gang Ke (“Ke” and together with Wang and Ozden, collectively, the “Managing Partners”) are no longer actively involved in the business of the Fund. Upon such occurrence, the Investment Period will be suspended for 180 days, during which time no investments may be made by the Fund other than follow‐on investments (in an amount not exceeding 20% of total Capital Commitments) and investments committed to prior to the commencement of the suspension period. A majority in interest of the Limited Partners may elect in writing prior to the end of such 180‐day period to reinstate the Investment Period or,



in the alternative, to make the suspension period permanent and to terminate the Investment Period. In the absence of any such election, the suspension period will terminate (and the Investment Period will be automatically reinstated) at the end of such 180‐day period. Cause Removal. The Fund Manager may be removed for “Cause” with the unanimous written consent of the Limited Partners. “Cause” will include the following: (i) the willful breach by the Fund Manager of any material obligation it has under the Partnership Agreement (ii) the misconduct or gross negligence of the Fund Manager in connection with activities relating to the Fund, which misconduct or gross negligence has, or is reasonably likely to have, a material adverse effect on the business of the Fund; (iii) revocation of the Fund Manager’s business license, and the mandatory closure, the bankruptcy or insolvency of the Fund Manager; (v) Fund Manager’s failure to qualify as a partner under the Partnership Laws; or (vi) forfeiture by a PRC court of all of the Fund Manager’s interest in the Partnership. The determination of whether Cause has occurred will take into account curative actions taken by the Fund Manager.

Successor Funds: In the event the Firm forms a private equity investment fund with investment objectives that are substantially similar to the Fund’s investment objectives (a “Successor Fund”), other than an Alternative Vehicle, and less than 70% of the total Capital Commitments of the Fund have been drawn down, committed for investments or reserved for follow‐on investments and expenses, the Fund will co‐invest with such Successor Fund in any investment consistent with the investment criteria of the Fund. Any co‐investment by the Fund and a Successor Fund will be made pro rata in accordance with capital commitments to the Fund or the Successor Fund, as applicable, subject to reasonable adjustments by the Fund Manager to take into account factors such as the Fund’s aggregate undrawn Capital Commitments, reserves for follow‐on investments and operating expenses, statutory reserve requirements, the likely holding period of such investment and such other factors as the Fund Manager reasonably determines are relevant.



Time and Attention: Each of the Managing Partners and investment

professionals designated by the Firm as “Key Professionals” will be required to refer to the Fund for investment consideration any private equity investment opportunity that comes to his or her attention that is consistent with the investment criteria of the Fund. For purposes of clarity, a company planning a public listing of its securities outside of the PRC is not within the Fund’s investment criteria. Mr. Wang will devote substantially all of his business time and attention to the affairs of the Fund, the Predecessor Funds and any additional funds sponsored or managed by the Firm (“Other Funds”). Dr. Ke and Mr. Ozden will devote such time as is reasonably required to fulfill their duties to the Fund, the Predecessor Funds and the Other Funds, which is expected to constitute a majority of their business time and attention. Other business activities of Dr. Ke and Mr. Ozden may include advising private or publicly listed companies, including those that might be seeking capital, and advising other private equity funds, including private equity funds that may compete with the Fund for investments. In the event the Firm forms a Successor Fund, the Firm anticipates that Messrs. Ke and Ozden will reduce the time devoted to other business activities and increase the time devoted to funds sponsored and managed by the Firm. The terms and conditions of such anticipated transition will be determined at such time.

Indemnification: Neither the Fund Manager, Beijing Capital, nor any partner, member, director, officer, employee or agent of the Fund Manager or Beijing Capital will be liable to the Fund or to any Partner for, and each such person will be entitled to indemnification by the Fund for, costs and expenses incurred in connection with any action, suit or proceeding as a result of such person’s actions on behalf of the Fund or otherwise arising out of or in connection with the Fund and its portfolio companies unless such relevant conduct constituted gross negligence or willful misconduct. The Fund will pay the expenses incurred by any such



indemnified person in defending a civil or criminal action in advance of the final disposition of such action, provided that such defendant undertakes to repay such expenses if it, he or she is adjudicated not to be entitled to indemnification.

Capital Calls; Defaults; Opt‐Outs and Exclusions:

Capital Calls. It is anticipated that, on or immediately following the First Closing Date, Limited Partners will be required to make capital contributions to the Fund in respect of their pro rata share of Fund Expenses (including Management Fees for the first quarter) and Organizational Expenses, and (ii) the purchase price of any investment that the Fund expects to acquire within ninety business days of the First Closing. Subsequent capital contributions will be made upon not less than ten business days’ notice in increments necessary to fund investments and to pay Management Fees, other Fund Expenses and additional organizational Expenses. Limited Partners will not be required to make capital contributions that exceed their capital commitment except as required by law and except as otherwise described herein or in the Partnership Agreement. Capital Call Defaults. The Fund will be entitled to enforce the obligations of each Limited Partner to make its required capital contributions to the Fund. At the option of the Fund Manager, if a Limited Partner fails to make any required capital contribution and such default continues for five business days after written notice thereof, the Fund Manager may elect, among other remedies, (i) to declare 50% of the interest (or any portion thereof) of such Limited Partner in the Fund forfeited (with any such forfeited interest to be reallocated among the other Partners pro rata according to their respective interests in such investment) and/or (ii) cause the Limited Partner to assign its interest in the Fund (or any portion thereof) to any person at a price equal to 50% of the aggregate amount of the capital contributions by such Limited Partner (or the allocable portion thereof) less any expenses, deductions or losses (including write downs) allocated to such Limited Partner. The Fund Manager also has the right to terminate the capital commitment of a defaulting Limited Partner and



has certain other remedies available to it, as more fully described in the Partnership Agreement. Opt‐Outs/Exclusions. Subject to the terms of the Partnership Agreement, Limited Partners will be permitted and/or required to opt out of a particular investment if their participation in such investment would constitute a breach of applicable law or if the Partnership Agreement otherwise permits or requires such opt out. In any such event, the other Limited Partners will be obligated, subject to certain limitations, to make additional capital contributions, pro rata based on their capital commitments, to cover the shortfall caused by such opting out Limited Partner(s).

Transfers and Withdrawals:

Limited Partners may not sell, transfer or pledge their interest in the Fund, except with the prior written consent of the Fund Manager (which consent may be withheld in the Fund Manager’s sole discretion). No assignee of an Interest may be admitted as a successor Limited Partner without the prior written consent of the Fund Manager (which consent may be withheld in the Fund Manager’s sole discretion). Any sale, transfer or pledge of a Limited Partner’s interest in the Fund will be subject to compliance with the other terms and conditions set forth in the Partnership Agreement. Limited Partners may not withdraw from the Fund. The Fund Manager will not have the right to withdraw from the Fund or transfer its interest as a Fund Manager without the prior approval of eighty percent (80%) in interest of the Limited Partners or as otherwise provided in the Partnership Agreement.

Termination/Dissolution of the Partnership:

The Partnership will terminate upon happening of any of the following events and the consent of two‐thirds in interest of the Limited Partners: (i) at any time after the expiration of the Investment Period, upon determination by the Fund Manager in its sole discretion, provided that all investments have been realized; (ii) the occurrence of a liquidation event as set forth in the Partnership Agreement;



(iii) upon a resolution by all Partners in respect of the termination or dissolution of the Partnership; (iv) the number of the Partners is less than the number as required by the Partnership Laws, and such situation has lasted for a period of thirty (30) days; (v) the purpose of the Partnership has been achieved or is not able to be achieved; (vi) revocation of the Partnership’s business license or a notice by the competent government entities to close the Partnership; (vii) the bankruptcy, insolvency, expulsion, dissolution, liquidation, removal or withdrawal of the Fund Manager; (viii) the election of such termination by the Partners upon an event of Cause with respect to the Fund Manager pursuant to the Partnership Agreement; or (ix) as otherwise required by the relevant PRC laws.

Liquidation: Upon termination of the Partnership, the Fund Manager will act as the liquidating trustee unless otherwise provided in the Partnership Agreement, under which circumstances the Limited Partners may designate another person(s) who has due skill and authority to act as a liquidating trustee(s). The proceeds of the liquidation, including all available cash of the Partnership at the time of liquidation, and any remaining distributable Partnership assets will be distributed pursuant to the Partnership Agreement after payment of the liquidation expenses, employee salaries, social security payments, statutory compensation and the outstanding taxes payable pursuant to the Partnership Laws.

Reports: Audited annual financial statements, unaudited quarterly reports and annual tax information will be provided to each Limited Partner. The quarterly reports will include a summary of investments made by the Fund during such quarterly period and a statement of the Partner’s consolidated capital accounts.

Annual Meetings: The Fund will hold annual meetings to provide Limited Partners with the opportunity to review and discuss with the Fund Manager and its representatives the Fund’s investment activities and portfolio.



Amendments: In general, consent by the Fund Manager and a majority in interest of the Limited Partners in the Fund will be required for amendments to the Partnership Agreement. Certain amendments will require the consent of each Limited Partner that is adversely affected.

ERISA Considerations: Investment in the Fund is generally open to individual retirement accounts and annuities (IRAs), pension, profit‐sharing or stock bonus plans, governmental and church plans, and other “employee benefit plans” within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Fund Manager will, however, limit the participation of benefit plan investors in the Fund so that such participation is not “significant” within the meaning of the Department of Labor regulations, as qualified by Section 3(42) of ERISA so that the assets of the Fund will not be considered “plan assets” of plans subject to Title I of ERISA or Section 4975 of the U.S. Internal Revenue Code, as amended, that invest in the Fund. Investors will be required to make certain representations or to provide assurances so that the Fund Manager may monitor compliance with such policy. Investors subject to Title I of ERISA should carefully review the “ERISA Considerations” section contained in Part VI of this Memorandum below and consult with their own adviser as to the effect of ERISA on an investment in the Fund.

Legal Counsel: Guangsheng & Partners will act as PRC legal counsel to the Fund and the Fund Manager. Covington & Burling LLP will act as U.S. legal counsel to the Fund and the Fund Manager.

Auditors: Bernstein & Pinchuk LLP/BDO Seidman Alliance



IV. Risk Factors and Potential Conflicts of Interest An investment in the Fund involves a high degree of risk. The possibility of partial or total loss of capital exists and Limited Partners must be prepared to bear capital losses that could result from Fund investments. In addition, there may be occasions when the Firm and its affiliates may encounter potential conflicts of interest transactions or situations involving the Fund. Before investing in the Fund, prospective investors should carefully consider the risks of an investment of the type being offered hereby, including, but not limited to, the risk factors described below.

Certain of the risk factors described below have been identified by the Fund Manager as risks an investor may face (i) in connection with an investment in a limited partnership formed in the PRC and (ii) in connection with investments by the Fund in companies located in the PRC. Such risk factors have been identified by the Fund Manager without consultation with BCG or the Beijing Government. None of the risk factors described below should be construed as having been approved by any state or municipal government agency in the PRC, nor should they be considered to constitute or reflect any official or unofficial PRC government policy.

A. Potential Risks at the Fund Level

No Operating History

Although the Managing Partners and Key Professionals have experience investing in the private equity market (including through the Predecessor Funds), the Fund and the Fund Manager are newly formed with no operating history upon which to evaluate likely performance.

Competition for Investment Opportunities

The business of identifying and structuring transactions of the nature contemplated by the Fund is highly competitive and involves a high degree of uncertainty. The availability of investment opportunities generally will be subject to market conditions as well as the prevailing regulatory or political climate. The Fund will be competing for investments with other private equity investment vehicles, as well as other institutional and strategic investors, many of which have been in business for a significant period of time and have greater management and financial resources than the Fund or the Firm. Furthermore, it is expected that an increasing number of investment funds will be formed in the PRC by both domestic and international sponsors, thereby increasing competition for investment opportunities. There can be no assurance that the Fund will be able to locate suitable investment opportunities, acquire them for an appropriate level of consideration, achieve its investment objective, or fully invest its committed capital.

Concentration of Investments

Although the Partnership Agreement limits the amount of capital that the Fund may invest in a single portfolio company, the Fund may only make a limited number of investments. As a



consequence, the aggregate return of the Fund may be substantially adversely affected by the unfavorable performance of even a single investment. In addition, to the extent the Fund concentrates investments in a particular geographic region within the PRC, security, or investment sector, investments may become more susceptible to fluctuations in value resulting from adverse economic or business conditions applicable to such region, type of security or investment sector.

Risk of Loss of Capital

There can be no assurance that (i) the Fund Manager will be able to choose, make and realize investments on behalf of the Fund in any particular company or portfolio of companies, (ii) the Fund will be able to generate returns for its Partners or that the returns will be commensurate with the risks of investing in the type of companies and transactions described herein or (iii) a Partner will receive any distributions from the Fund. Accordingly, an investment in the Fund should only be considered by persons who can afford a loss of their entire investment.

Restrictions on Transfers; No Market for Interests

The Interests are subject to substantial restrictions on transferability. In general, the Interests generally may not be transferred without the prior written consent of the Fund Manager. In addition, the Interests will not be registered under the Securities Act, or the securities laws of any states or any other jurisdictions and, therefore, cannot be resold unless they are subsequently registered under such laws or registration thereunder is not required pursuant to an exemption from such registration or otherwise. It is not contemplated that registration of the Interests under the Securities Act or other securities laws will ever be effected. There is no public market for the Interests and one is not expected to develop. The Interests are not redeemable and Limited Partners will not have the right to withdraw their capital except in the extremely limited circumstances provided for in the Partnership Agreement. Limited Partners must be prepared to bear the risk of owning Interests for an indefinite period of time.

It is anticipated that certain Limited Partners will make their investments in the Fund directly into the Partnership, while others will make their investments indirectly through aggregating feeder and other intermediary entities. A transferee of a Limited Partner will generally be required to hold its interest in the Fund through the same investment structure as the transferring Limited Partner, which in certain cases may not be the optimal method for such prospective transferee of holding an investment in the Fund for tax and other regulatory reasons. Consequently, Limited Partners may be further limited from transferring their Interests to potential transferees for whom the investment structure through which such Limited Partner made its investment in the Fund is less than optimal.

Reliance on Investment Professionals of the Firm

The success of the Fund depends, in substantial part, upon the skill and expertise of the Firm’s investment professionals and their ability to identify and consummate suitable investments, to improve the operating performance of portfolio companies and to dispose of investments at a



profit. There can be no assurance that these investment professionals will continue to be associated with the Firm throughout the life of the Fund, although the participation by these professionals in the Carried Interest should tend to discourage them from withdrawing from participation in the Fund’s investment activities. The loss of key personnel could have a material adverse effect on the Fund.

No Control by Limited Partners

In order to maintain their limited liability status under applicable law with respect to the liabilities and obligations of the Fund, Limited Partners will have no right or power to take part in the management or control of the Fund and will have no opportunity to participate in investment and disposition decisions. Accordingly, no person should purchase Interests in the Fund unless such person is willing to entrust all aspects of the management of the Fund to the Fund Manager.

Reliance on Portfolio Company Management

Although the Firm will monitor the performance of each investment, it will be primarily the responsibility of portfolio company‐level management to operate the portfolio companies of the Fund on a day‐to‐day basis. Although the Fund Manager intends for the Fund to invest in portfolio companies operated by strong management teams, there can be no assurance that the existing management team of a portfolio company, or any new team, will be able to successfully operate a Fund portfolio company. Some portfolio companies will depend for their success on the management talents and efforts of one person or a small group of persons whose death, disability or resignation would adversely affect their businesses.

There is a risk that individuals employed by or associated with the Fund, its portfolio investments, their affiliates, partners and service providers may engage in the fraudulent misappropriation of the assts of the Fund or its portfolio companies. Adverse employee relationships and inadequate internal control over assets may increase the possibility of misappropriation of such assets, and such risks may be more significant in the PRC compared with more developed economies. Such misappropriations may be difficult to identify in a timely manner and, once identified, adequate legal remedies may not be available, or may be ineffective if the assets or proceeds in question are not recoverable.

Consequences of a Limited Partner’s Failure to Make Capital Contributions

Each Limited Partner is required to make capital contributions to the Fund upon notice from the Fund Manager. If a Limited Partner fails to make a required capital contribution to the Fund, the Fund Manager may pursue certain remedies available to it under the Partnership Agreement against the defaulting Limited Partner. In addition, if a Limited Partner fails to make a required capital contribution to the Fund, and the capital contributions made by non‐defaulting Limited Partners and borrowings by the Fund are inadequate to cover the defaulted capital contribution, the Fund may be unable to consummate a pending investment or pay its obligations when due, which could materially adversely affect non‐defaulting Limited Partners.



Recourse to the Fund’s Assets

The Fund’s assets, including any investments made by the Fund and any cash, cash equivalents and other funds held by the Fund, are available to satisfy all liabilities and other obligations of the Fund, including, but not limited to, the indemnification obligations of the Fund to the Firm and each other indemnitee provided for under the Partnership Agreement. The amount of such liabilities and obligations may be material in amount. If the Fund becomes subject to a liability, parties seeking to have the liability satisfied may have recourse to the Fund’s assets generally and not be limited to any particular asset, such as the asset representing the investment giving rise to the liability. As a result, investors could find their interests in the Fund’s assets adversely affected by a liability arising out of an investment in which they did not participate.

Requirement to Return Distributions

Subject to the terms and conditions of the Partnership Agreement, the Fund Manager may require each Partner to return distributions previously made to such Partner for the purpose of funding such Partner’s pro rata share of certain liabilities or obligations of the Fund (including, without limitation, Fund indemnification obligations).

Reinvestment of Distributed Amounts

Distributions in respect of the capital portion of any investment (including any Bridge Investment) disposed (or partially disposed) within 18 months of the date such investment was made may in the sole discretion of the Fund Manager be added back to the Fund’s unfunded Capital Commitments and may be either drawn down again by the Fund or retained and reinvested by the Fund. Accordingly, during the term of the Fund, a Partner may be required to make capital contributions in excess of its capital commitment and, to the extent such recalled or retained amounts are reinvested in investments, a Partner will remain subject to investment and other risks associated with such investments.

Insufficient Capital for Follow‐On Investments

Following its initial investment in a portfolio company, the Fund may have the opportunity to increase its investment in successful operations or may be asked to provide additional funds to such portfolio company. Although the Fund Manager intends to establish sufficient reserves for Fund follow‐on activities, there can be no assurance that the Fund will have sufficient undrawn capital to make such follow‐on investments. The Fund’s inability to make a follow‐on investment may result in a missed opportunity to participate in an attractive investment or it may have a substantial negative impact on a portfolio company in need of such investment.

Dilution from Subsequent Closings

In general, Limited Partners subscribing for Interests at subsequent closings after the First Closing will participate in existing investments of the Fund, diluting the interest of existing Limited Partners therein. Although such Limited Partners will contribute their pro rata share of



previously made capital contributions (plus interest thereon at a rate of 8% per annum), there can be no assurance that this payment will reflect the fair value of the Fund’s existing investments at the time such additional Limited Partners subscribe for Interests.

Distributions in Kind

Although the Fund intends to make distributions in cash, it is possible that under certain circumstances (including the liquidation of the Fund), distributions may be made in kind and could consist of securities for which there is no readily available public market. Limited Partners therefore must be prepared to bear the risks of owning such securities for an indefinite period of time.

Limitations on Potential Investors Resulting from ERISA Considerations

The Fund intends to permit participation of “benefit plan investors” in the Fund such that their participation will not be “significant” within the meaning of the Plan Assets Regulations (defined below). If benefit plan investor participation is significant and no exemption is available, the Fund’s assets may constitute “plan assets” within the meaning of the Plan Assets Regulations, which could have significant adverse consequences for the Fund and the Limited Partners. See Part VI of this Memorandum, “Legal and Tax Matters ‐ ERISA Considerations.”

Certain Tax Risks

General Risks

Certain risks and other information related to tax matters are discussed in Section VI of this Memorandum, “Legal and Tax Matters ‐ Summary of Tax Consequences for Limited Partners,” which prospective investors are requested to read carefully. Prospective investors are urged to consult their own tax advisors with respect to the effects of a Fund investment in the context of their own tax situation. There can be no assurance that the structure of the Fund or any investments by the Fund will be tax‐efficient for any particular investor. There can also be no assurance that the Fund will distribute sufficient cash to cover the full tax liabilities of a particular partner’s pro rata share of the taxable income of the Fund. In general, tax laws, rules and procedures are extremely complex and are subject to change, which in some cases may have retroactive effect.

Withholding Taxes

To the extent that the Fund is required to withhold and pay certain amounts to taxing authorities on behalf of or with respect to its Partners, (i) if the amount required to be withheld or paid by the Fund on behalf of or with respect to a Partner exceeds the amount available for distribution to such Partner, such Partner will be required to pay such amount to the Fund and (ii) each Limited Partner will indemnify the Fund and the Fund Manager, and hold them each harmless, for any liability with respect to taxes, penalties or interest required to be withheld or paid to any taxing authority by the Fund or the Fund Manager.



Audit Risk

Taxing authorities may audit the Fund and challenge any of the positions taken in regard to its formation, its investments or operations, and such audit may result in an audit of a Partner’s own tax returns and possibly adjustments to the tax liability reflected thereon.

PRC Tax Law

Tax laws and practice in the PRC are at an early stage of development and are not as clearly established as in Western nations. The taxation system in the PRC may be subject to varying interpretations, frequent changes and inconsistent enforcement at the federal, regional and local levels, and as a result, the tax burden in the PRC may be higher than anticipated. The PRC government continues to revise its tax laws, and it is reported to be renegotiating certain tax treaties. Consequently, there may be changes in PRC or other tax laws, treaties and regulations, or interpretations of such laws, treaties and regulations that are adverse to the Fund or its Partners. There can be no assurance that the structure of the Fund or any investments by the Fund will be tax‐efficient for any particular investor. Prospective investors are urged to consult their own tax advisors with reference to their specific tax situations.

Compliance with Anti‐Money Laundering Requirements

In response to increased regulatory concerns with respect to the sources of funds used in investments activities, the Fund Manager may request Limited Partners to provide additional documentation verifying, among other things, such Limited Partners’ identity and source of funds used to purchase Interests. The Fund Manager may decline to accept a subscription if this information is not provided or on the basis of information so provided. Requests for documentation and additional information may be made at any time during which a Limited Partner holds an Interest. The Fund Manager may be required to provide this information to appropriate governmental authorities, in certain circumstances without notifying the Limited Partners that the information has been provided. The Fund Manager will take such steps as it determines to be necessary to comply with applicable law, regulations, orders, directives or special measures. Governmental authorities are continuing to consider appropriate measures to implement and at this point it is unclear what steps the Fund Manager may be required to take; however, these steps may include prohibiting a Limited Partner from making further contributions of capital to the Fund, depositing distributions to which a Limited Partner would otherwise be entitled in an escrow account or causing the withdrawal of a Limited Partner from the Fund.

Possible Exclusion from Participation in Certain Investments

The Fund Manager may reduce or prohibit a Limited Partner’s participation in any one or more investments to be made by the Fund under certain circumstances, which could have an adverse affect on such Limited Partner.



B. Potential Risks at the Investment Level

Uncertain Nature of Investments

The Fund may enter into high‐risk investment opportunities. Companies in which the Fund invests may not achieve their expected operational objectives and might experience substantial fluctuations in their operating results. In all such cases, the Fund will be subject to the risks associated with the underlying businesses engaged in by portfolio companies, including market conditions, changes in regulatory environment, general economic and political conditions, the loss of key management personnel and other factors. Interest rates, general levels of economic activity, the price of securities and participation by other investors in the financial markets may affect the value and number of investments made by the Fund or considered for prospective investment. Potential investors should realize that the Fund Manager may determine to delay realization events to the Limited Partners as a result of general economic and market conditions, illiquidity of portfolio investments, contractual prohibitions or other reasons mentioned herein. While under normal circumstances distributions will be made in cash, it is possible that certain distributions to the Partners may be made in kind and could constitute securities for which there is no readily available public market and with respect to which there are substantial transfer restrictions.

Illiquid and Long‐Term Investments

Although investments by the Fund occasionally may generate some current income, the return of capital and the realization of gains, if any, from an investment generally will occur only upon the partial or complete disposition of such investment. In general, the Fund Manager expects the Fund to hold its investments for an extended period of time after their initial acquisition, which means that dispositions of Fund investments are not likely to occur until the later years of the Fund’s term. In many (if not most) cases, it is unlikely that there will initially be a public market for the securities acquired by the Fund, and such securities may require a substantial length of time to liquidate. The Fund generally will not be able to sell these securities publicly unless their sale is registered under, or exempt from, applicable securities laws. In many cases the Fund will be legally or contractually prohibited from selling such securities even after their registration or may otherwise be restricted from disposing of such securities.

Practical limitations may inhibit the Fund’s ability to liquidate certain of its investments in portfolio companies since the portfolio company will be privately held and, in many instances, the Fund may own a relatively large percentage of the portfolio company’s equity securities. Sales may also be limited by market conditions, which may be unfavorable for sales of securities of particular companies in particular industries. The above limitations on liquidity of the Fund’s investments could prevent a successful sale thereof, result in delay of any sale, or reduce the amount or proceeds that might otherwise be realized.



Inflation

Inflation and rapid fluctuations in inflation rates could have negative effects on portfolio companies and securities markets. There can be no assurance that inflation will not become a serious problem in the future and thus have an adverse impact on the Fund’s returns.

Current Economic Crisis

The global economies are in the midst of a severe economic crisis which may be the worst economic crisis that the world has experienced in decades. The current economic downturn could continue well into 2010 and beyond. This crisis presents enormous challenges to all businesses, including companies in which the Fund may invest. Among other things, companies are facing significant global recessionary pressures that may adversely affect their businesses and future prospects (including, without limitation, by adversely affecting demand for their goods or services and their ability to access working capital and other credit on reasonable terms).

Financial Market Fluctuations.

General fluctuations in the market prices of securities may affect the value of the investments held by the Fund. Instability in the securities markets may also increase the risks inherent in the Fund investments.

Co‐Investments With Third Parties

The Fund may co‐invest with third parties through partnerships, joint ventures, or other pooled investment vehicles. Such investments may involve risks not present in investments where a third party is not involved, including the possibility that a third party investor may have economic or business interests or goals that are inconsistent with those of the Fund, or may be in a position to take (or block) action in a manner that is contrary to the Fund’s investment objectives. In addition, the Fund may in certain circumstances be liable for actions of its third party co‐investors. In those circumstances where such third parties involve a management group, such third parties may receive compensation arrangements relating to such investments, including incentive compensation arrangements.

Minority Investments

The Fund will generally make minority investments, and there is the possibility that the portfolio company in which the Fund investment is made may have economic or business interests or goals that are inconsistent with those of the Fund, and the Fund may not be in a position to limit or otherwise protect the value of the Fund’s investment in such portfolio company.

Bridge Financings

From time to time, and to the extent permitted under PRC laws, the Fund may lend (directly or in collaboration with a bank) to portfolio companies on a short‐term, unsecured basis or



otherwise invest on an interim basis in portfolio companies in anticipation of a future issuance of equity or long‐term debt securities or other refinancing or syndication. However, convertible debt to equity arrangements are not typical for foreign invested entities in China, and for reasons not always in the Fund’s control, such long‐term securities issuance or other refinancing or syndication may not occur and such bridge loans and interim investments may remain outstanding. In such event, the interest rate on such loans or the terms of such interim investments may not adequately reflect the risk associated with the position taken by the Fund.

Troubled Company Investments

The Fund may make new investments or follow‐on investments in non‐performing or other troubled companies that involve a high degree of risk.

Risk of Early‐Stage Investments

Although investments in early‐stage companies offer the opportunity for significant gains, such investments also involve a high degree of business and financial risk and can result in substantial losses. Among these risks are the general risks involved with investing in companies at an early‐stage of development with little or no operating history, companies operating at a loss or with substantial variations in operating results from period to period, and companies with the need for substantial capital to support expansion or to achieve and maintain a competitive position. Such companies may face intense competition, including competition from companies with greater financial resources, more extensive development, marketing and service capabilities and a larger number of qualified managerial and technical personnel. Early‐stage companies often experience unexpected problems in the areas of product development, marketing, financing, and general management which, in some cases, cannot be adequately solved. The risk of investing in early‐stage companies is much greater than is customarily associated with investment in larger, more established companies, ventures, and businesses.

Leveraged Investment Risks

The Fund does not intend to use substantial financial leverage. However, to the extent that any investment is made in a company with a leveraged capital structure, such investment will be subject to increased exposure to adverse economic factors such as a significant rise in interest rates, a severe downturn in the economy or deterioration in the condition of such company or its industry. In the event that such a company is unable to generate sufficient cash flow to meet principal and interest payments on its indebtedness, the value of the Fund’s investment in such portfolio company could be significantly reduced or even eliminated.

Investments Longer than Term

The Fund may make investments that may not be advantageously disposed of prior to the date the Fund is required to be dissolved, either by expiration of the Fund’s term or otherwise. Although the Fund Manager expects that Fund investments will be disposed of prior to dissolution or will be suitable for in‐kind distribution at dissolution, the Fund may have to sell,



distribute or otherwise dispose of investments at a disadvantageous time as a result of dissolution.

Possible Hedging Activities

The Fund Manager or the Fund may, but is not required to, use certain hedging strategies in order to minimize the risk of a decrease in the value of one or more investments. The use of hedging strategies is a highly specialized activity and there can be no assurance that their use will achieve the intended result. These hedging strategies may limit the ability of the Fund to profit from the increase in the value of an investment above a certain price. While such hedging transactions may reduce certain risks, such transactions themselves may entail certain other risks, including (but not limited to) counterparty credit risk and market liquidity risk. In addition, if judgments made with respect to future stock prices, exchange rates, market conditions or trends are not correct, these hedging strategies could result in losses to the Fund.

Contingent Liabilities on Dispositions of Investments

In connection with the disposition of an investment in a portfolio company, the Fund may be required to make representations about the business and financial affairs of such portfolio company typical of those made in connection with the sale of a business or may be responsible for the contents of disclosure documents under applicable securities laws. The Fund may also be required to indemnify the purchasers of such investment to the extent that any such representations turn out to be inaccurate or misleading. These arrangements may result in the incurrence of contingent liabilities for which the Fund Manager may establish reserves or escrows. In that regard, Limited Partners may be required to return amounts distributed to them to satisfy the obligations of the Fund, subject to the limitations set forth in the Partnership Agreement.

Changes in the Regulatory and Legal Environment

Legal, tax and regulatory changes could occur during the term of the Fund that may adversely affect the Fund’s investment activities.

C. Risks Relating to the Fund’s Investment Focus

Focused Investment Strategy

The Fund will be focused primarily on investments in the Renewable Energy, Agritech/Food Processing, Information Technology, Industrial Technology and Biological Science and Pharmaceutical sectors in the PRC, and may not enjoy the reduced risks of a broadly diversified portfolio. A specific investment focus is inherently more risky and could cause the Fund’s investments to be more susceptible to particular economic, political, regulatory, regional, technological or industry conditions or occurrences compared with a fund, or a portfolio of funds, that is more diversified or has a broader focus.



D. Potential Risks Associated with Investing in the PRC

The Fund Manager expects that all of the Fund’s assets will consist of investments in companies located in the PRC. In general, the PRC’s economic, political and legal structure differs in significant ways from those of most developed countries and other emerging markets, and these differences present a variety of risks that could adversely affect the Fund’s ability to achieve its investment objectives. These risks include, among other risks: (i) currency exchange risks, controls on, and changes in controls on, foreign investment and limitations on repatriation of invested capital and on the Fund’s ability to exchange RMB and U.S. dollars; (ii) differences between PRC securities markets and those in the U.S. , including potential price volatility in and relative illiquidity of some securities markets, (iii) changes in tax treaties; and (iv) the possible imposition of PRC taxes on income and gains recognized with respect to Fund investments. Additionally, investors should consider the risk factors described below.

None of the risk factors described below should be construed as having been reviewed or approved by any state or municipal government agency in the PRC, nor should they be considered to constitute or reflect any official or unofficial PRC government policy.

Economic Factors

General economic conditions may affect the Fund’s activities. Interest rates, general levels of economic activity, the price of securities and participation by other investors in the Fund’s markets may affect the value and number of investments made by the Fund or considered for prospective investment.

The economy of the PRC may perform favorably or unfavorably compared with more developed economies in such respects as growth of gross domestic product, rate of inflation, currency controls, currency appreciation or depreciation, capital reinvestment, resource self‐sufficiency and balance of payments. The economy of the PRC generally is heavily dependent upon international trade and, accordingly, may be affected adversely by protective trade barriers and economic conditions in the countries with which they trade. In addition, the PRC’s economy is vulnerable to fluctuations of worldwide commodity prices.

More specifically, a portfolio company, particularly early or growth stage enterprises, may be adversely impacted by the violation of law by certain other enterprise(s) in the same or related industry, which may lead to a significant change of market conditions or regulatory environment in response to such violations.

Continued State Involvement in the PRC Economy

In the past, the PRC’s economy was a planned economy subject to one‐ and five‐year state plans adopted by the central PRC government authorities and implemented, to a large extent, by provincial and local authorities, which set out production and development targets. Beginning in the late 1970s, the PRC has been transitioning itself from a state‐controlled economy to a market‐driven economy. Over this period, the PRC government has implemented



measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises. However, despite these measures, a substantial portion of the productive assets in the PRC are still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating commercial development by imposing commercial policies. The PRC government also exercises significant control over the PRC’s economic growth through taxation, the allocation of resources, controlling payment of foreign currency denominated obligations, setting monetary policy, imposing credit policy for commercial banks and providing preferential treatment to particular industries or companies.

While the PRC economy has experienced significant growth in the past twenty years, this growth has been uneven, both geographically and among various sectors of the economy. There can be no assurance that such growth will continue or that dislocations resulting from economic growth will not have negative effects on businesses in which the Fund invests. Many of the reform‐oriented policies and measures implemented by the PRC government are unprecedented or experimental and are expected to be refined and improved over time, and there can be no assurance that these reforms will not lead to fiscal deficits, inflation, or other economic imbalances. Some of these reforms or measures benefit the overall PRC economy, but may also have a negative effect on the Fund’s investments in the PRC. For example, the financial condition and results of operations of the Fund’s investments in the PRC may be adversely affected by changes in legal and tax regulations that are applicable to those investments.

The current or future political leadership of the PRC may not continue to pursue the current course of reform. The government may modify, suspend, delay or reverse any of the measures that it implements. For example, the PRC government may implement policies that seek to restrain the rate of economic growth, control inflation or otherwise regulate economic expansion. Factors that may cause the government to modify, suspend, delay or reverse the implementation of existing market‐oriented reform measures include political changes, social unrest, diplomatic developments, international disputes (including war), and such economic factors as changes in rates of national and regional economic growth, unemployment and inflation.

Expected assistance of BCG and the Beijing Government to the Fund

As discussed in the Executive Summary, the Firm believes that the Fund will benefit from and be able to access resources available to BCG and the Beijing Government. There is no guarantee that this will be the case. Neither BCG nor the Beijing Government will have any obligation, contractual or otherwise, to provide assistance to the Firm or the Fund. Many factors including, but not limited to, changes in political leadership, economic policies, national and local priorities, laws and regulations, and international relations could have an impact on any decision by BCG or the Beijing Government to provide the support and resources to the Fund contemplated by the Firm in this Memorandum.



Developing Nature of PRC’s Legal System

The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. The PRC’s legal system is relatively new, and the government is still in the process of developing a comprehensive system of laws, a process that has been ongoing since 1979.

The overall effect of legislation over the past 30 years has enhanced the protections afforded to various forms of foreign investment in the PRC. However, the Fund may be adversely affected by new laws, frequent changes to existing laws (or interpretations thereof) and preemption of provincial or local regulations by national laws or regulations. Moreover, the administrative and judicial interpretation and implementation of laws and the resolution of commercial disputes may be subject to the exercise of considerable discretion by both administrative and judicial officials and may be influenced by external forces unrelated to the legal merits of a particular matter or dispute.

These uncertainties could limit the legal protections available to the Fund and its portfolio companies in the PRC. In addition, it is difficult to predict the effect of future developments in the PRC legal system, particularly with regard to equity and equity‐related investments by foreign investors, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. Even where adequate laws exist and contractual terms are clearly stated, there can be no assurance of a swift and equitable enforcement of the Fund’s legal rights.

Bankruptcy

The enactment in August 2006 of a new Bankruptcy Law of the PRC expanded the scope of PRC bankruptcy law from state‐owned enterprises to include private companies, as well as gave priority to the rights of secured creditors in the foreclosure of secured assets. However, despite these advances, PRC bankruptcy law remains underdeveloped as compared to the United States and other member countries of the Organization for Economic Co‐operation and Development. These factors, together with the lack of transparency in judicial system of the PRC and local protectionism, may prevent the Fund from accurately anticipating the outcome of any bankruptcy proceedings in the PRC.

New Form of Ownership Structure

The “foreign invested partnership” (“FIP”) structure that the Fund will adopt is a new ownership structure promulgated with effect under the “Provisions on the Administration of the Foreign‐Invested Partnership Registration” on March 1, 2010. While there are significant advantages to the FIP structure, such as permitting onshore and offshore investors to invest in the same fund vehicle and not needing to obtain investment‐by‐investment approval (as is the case with an offshore fund), the parameters of the FIP structure are not yet clearly defined and significant legal ambiguity exists at this stage. For example, the ability of a FIP to convert foreign currency to RMB is less clear than under other ownership structures. The time required to convert RMB



to foreign currency may also vary. FIPs are also subject to some of the same investment restrictions that offshore funds are limited by, such as limitations on investment in certain industries and a prohibition on investment in public securities. FIPs are also limited to making investments in the PRC.

Although the Fund expects to benefit from the FIP structure and certain regulations and policies issued by local governments, including government sponsorship and tax preference granted by the Beijing Government, there can be no assurance as to such policies that the PRC government or the Beijing Government may pursue in the future.

In addition, as more and more fund sponsors establish FIPs and other private equity fund structures in the PRC, increased scrutiny from national and local regulators alike is expected and there can be no assurance that the rules and regulations that are developed down the line will be favorable to the Fund and its operational structure.

Limitation on State‐Owned Enterprise Acting as General Partner

The Partnership Law issued by the PRC government on August 27, 2006 prohibits a state‐owned enterprise (“SOE”) from acting as the general partner of a partnership. Circular of the Opinions Regarding the Development of Equity Investment Fund issued by the Beijing Government on January 19, 2009 interprets the Partnership Law to permit a private company, the equity interests of which are partially held by a SOE to act as the general partner of a partnership fund. Beijing Capital, as a SOE and the sponsor of the Fund, intends to hold less than 50% of the ownership in the General Partner. Beijing Capital has obtained endorsement from BCG in respect of its position in the General Partner, while such ownership is subject to certain further approvals from, and registration with, the relevant Beijing Government authorities.

Industry Investment Limitations

The PRC places certain limits and restrictions, and in certain cases prohibitions, on investments by offshore investors in certain industries. The State Administration for Industry and Commerce recently issued regulations that apply such foreign investment restrictions to FIPs. Consequently, the Fund may be restricted from making certain investments that would otherwise fit within its investment focus. Additionally, there is no guarantee that the PRC government will not modify the industry investment restrictions in a manner adverse to the Fund.

Currency Exchange

The FIP rules generally require that foreign exchange matters related to a FIP comply with other relevant laws, regulations and administrative rules of the PRC. Currently, however, there exists no detailed provision either in the FIP rules or in other government regulations indicating which law, regulation or administrative rule that a FIP can follow with respect to the conversion and repatriation of its foreign exchange capital. Additionally, the State Administration for Foreign Exchange has been silent on the issue. Consequently, matters related to a FIP, opening foreign



currency accounts, settlement of foreign capital contributions and repatriation of proceeds to overseas investor, including the timing required to complete these steps, remain uncertain.

Contributions by Offshore Investors to the Fund, and ultimately the distributions from the Fund to Offshore Investors, will be made in U.S. dollars. The Partnership’s allocations and distributions, however, will be calculated in RMB, and hence the value of such investments will depend in part on the relative strength of the U.S. dollar compared to the RMB, as well as the transaction costs associated with currency conversion. The Fund and its investors may be affected favorably or unfavorably by exchange control regulations or changes in the exchange rate between the RMB and the U.S. dollar. Changes in foreign currency exchange rates may also affect the value of dividends and interest earned, and the level of gains and losses realized on the sale of such investments. See Part IV of this Memorandum, “Summary of Principal Fund Terms ‐ Capital Contributions and Fund Investments.”

The recent policy of the People’s Bank of China (the “Bank”) has been to set the RMB exchange rate against a basket of currencies (the Japanese yen, the Korean won, the U.S. dollar and the euro), generally permitting a 0.3% fluctuation up or down on any given day. Nevertheless, under the PRC’s current exchange rate regime, the RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. There remains significant international pressure on the PRC government to adopt a substantial liberalization of its currency policy, which could result in a further and more significant appreciation in the value of the RMB against the U.S. dollar. As a result, there remains considerable uncertainty about whether the exchange rate for the RMB will change significantly in the near term. Portfolio companies in the PRC may incur costs, earn profits or secure financing in RMB and other currencies. Consequently, changes in the value of the RMB may have an impact on the results of such portfolio companies and the Fund.

Market Conditions

The marketability and exit strategies of the Fund’s investments will be subject to market conditions in the PRC and abroad. Although there is an expectation that economic growth in the PRC and abroad will lead to greater demand in the sectors in which the Fund will invest, it is not possible to predict with certainty that such growth in demand will occur and at the pace that is anticipated by the Fund. Further, social, political, economic legal and other factors may affect the growth of demand in these areas. For example, subsidies or other incentives directed at types of technology or innovation not favored by the Fund’s portfolio companies could leave them at a competitive disadvantage financially and operationally, as well as from an exit strategy perspective.

The Fund’s performance may also be materially and adversely affected by local conditions in the markets targeted for investment by the Fund including, but not limited to, the local economic climate (including a decline in business growth that adversely affects the targeted industries); an adverse change in local governmental policies or procedures (including those



impacting tax or other investment incentives, ability to consummate transactions or environmental liabilities); availability and cost of financing (including limitations on the amount and timing of financing); natural disasters; and perceptions by prospective buyers of the convenience and attractiveness of holding assets in the PRC.

Potential Price to Earnings Ratio Volatility

Private equity investments are often priced based on a ratio of such price to a prospective portfolio company's earnings. In more developed markets such price to earnings ratios typically fluctuate within a range of accepted pricing based on factors including, but not limited to, industry, projected growth and investor demand. In the PRC, there is more volatility in price to earnings ratios for a variety of reasons, and the Firm expects such volatility to continue. For example, as more investors penetrate the PRC private equity market, the Firm expects to see increased demand, and thus increased competition, for investments. In such case, price to earnings ratios would be expected to increase and the Fund may find it difficult to invest at prices similar to those historically paid by the Predecessor Funds. Additionally, if PRC state policy were to become less investor favorable, prices relative to earnings could fall as a result of decreased investor competition, making it difficult for the Fund to exit investments at price to earnings ratios similar to those applicable at the time it made such investments. Prospective investors should carefully consider pricing volatility the Fund may encounter with respect to both investments and exits.

Securities Markets and Exit Strategies

With respect to the Fund’s anticipated exit strategies, initial public offerings on PRC stock exchanges are relatively untested, and there is no assurance that the Fund will be able to successfully exit from its investments via these avenues. Conditions on PRC stock exchanges and international financial markets may impact the ability of companies to successfully list their securities on a stock exchange or for investors to find strategic buyers to purchase such securities in a private transaction. The Fund may not be able to successfully exit its investments in portfolio companies through PRC stock exchanges until such time as the portfolio company lists publicly and after the expiration of any lock‐up periods required by relevant PRC regulations. Trading activity on PRC exchanges may vary in substantial ways from operations on larger, more international public markets, and may be less liquid and more volatile. This may affect the Fund’s ability to dispose of securities at favorable prices and timing. The ChiNext is anticipated to be one of the major exit avenues for investments made by the Fund. However, the ChiNext was established only recently, in October 2009, and has experienced highly volatile trading activity since its inception. Although stocks trading on the ChiNext have generally been priced at relatively high price to earnings ratios, it is expected that these valuations will decrease over time as more companies list on that exchange. In addition, certain securities markets in the PRC may be susceptible to the influence of large investors trading significant blocks of securities. Commissions for trading on stock exchanges in the PRC can be higher than commissions for trading on stock exchanges in certain other economies.



The PRC Company Law requires there be only one class of shares in the public market in the PRC. Consequently, the Fund will not be permitted to hold preferred shares in a portfolio company at the time of its public offering in the PRC.

In addition to their smaller size, reduced liquidity and less rigorous disclosure standards, the individual securities markets of the PRC are, to varying degrees, influenced by economic and market conditions in other securities markets in Asia generally. Although economic conditions are different in each country, investors’ reaction to developments in one country can affect the securities of issuers in other countries in Asia. There can be no assurance that individual securities markets will not continue to be affected negatively by events elsewhere, or that such event will not adversely affect the value of the Fund’s investments.

PRC Banking System

The banking system of the PRC is subject to a variety of risks including: the insolvency of banks due to concentrated debtor risk; a high rate of non‐performing loans and poor credit‐risk analysis; a general lack of commercially profitable lines of business that are not dependent on inefficiencies in the local economies; and the effect of inefficiency and fraud on bank transfers. In addition, banks have not developed the infrastructure to channel domestic savings to entities in need of finance. Such entities thereby experience difficulty in obtaining working capital. Any disruption or other adverse development in the PRC’s banking system could have a negative impact on the Fund’s portfolio companies.

PRC Accounting and Disclosure Standards

Accounting, auditing, financial, and other reporting standards, practices and disclosure requirements in the PRC are not equivalent to those in the United States and certain Western European countries and may differ in fundamental ways. The assets and profits appearing on the financial statements of a company in the PRC may not reflect its financial position or results of operations in the way they would be reflected had such financial statements been prepared in accordance with U.S. generally accepted accounting principles. Accordingly, information available to the Fund, including both general economic and commercial information and information concerning specific enterprises or assets, may be less reliable, less detailed and less accurate than information available in more economically sophisticated countries.

In addition, in certain instances, the Fund may not have access to all available information to determine fully the origination, credit appraisal and underwriting practices utilized with respect to the investments or the manner in which the investments have been serviced and/or operated. As a result, the Firm’s due diligence activities may provide less information than due diligence reviews conducted in more developed countries. The lower standards of due diligence in the PRC will increase the risk related to the investments in these countries. Although the Fund will endeavor to conduct appropriate due diligence in connection with each investment, no guarantee can be given that they will obtain the information or assurances that



an investor in a more sophisticated economy would obtain before proceeding with an investment.

Impact of Natural Disasters

The development of infrastructure, disaster management planning agencies, disaster response and relief sources, organized public funding for natural emergencies, and natural disaster early warning technology may be immature and unbalanced among different regions within the PRC. Consequently, the natural disaster toll on an individual portfolio company or the broader local economy may be significant. Prolonged periods may pass before essential communications, electricity and other power sources are restored and operations of the portfolio company can be resumed. Additionally, the managers and employees of an affected portfolio company could also be at greater personal risk in the event of a natural disaster.

E. Potential Conflicts of Interest

Investors should be aware that there will be occasions when the Firm and its affiliates may encounter potential conflicts of interest in connection with the Fund’s activities. By acquiring an Interest in the Fund, each Limited Partner will be deemed to have acknowledged the existence of any such actual or potential conflicts of interest and to have waived any claim with respect to any liability arising from the existence of any such conflict of interest. The following discussion describes certain potential conflicts of interest that should be carefully evaluated before making an investment in the Fund.

Effect of Carried Interest

The existence of Carried Interest may create an incentive for the Fund Manager to make more speculative investments on behalf of the Fund than it would otherwise make in the absence of such performance‐based compensation, although the substantial Capital Commitment of the Fund Manager and Beijing Capital and, and the Carry Partner clawback, should tend to reduce this incentive.

Diverse Limited Partner Group

The Limited Partners, which are expected to include U.S. taxable and tax‐exempt entities, high net worth individuals and institutions in the PRC, may have conflicting investment, tax and other interests with respect to their investments in the Fund. The conflicting interests of Limited Partners may relate to or arise from, among other things, the nature of investments made by the Fund, the structuring or the acquisition of investments and the timing of dispositions of investments. As a consequence, conflicts of interest may arise in connection with decisions made by the Fund Manager, including with respect to the nature or structuring of investments that may be more beneficial for one investor in the Fund than for another investor in the Fund, especially with respect to an investor’s individual tax situation. In selecting and structuring investments appropriate for the Fund, the Fund Manager will consider



the investment objectives of the Fund and the Partners as a whole, and will not be obligated to consider the investment, tax or other objectives of any particular Limited Partner.

Allocation of Personnel

Certain employees of the Firm may spend a portion of their business time on activities other than the Fund and Fund portfolio companies. This may result in a conflict of interest arising concerning the allocation of time, services and functions between the Firm and the Fund, and such other funds and companies.

Beijing Government

Beijing Capital is sponsoring and will provide management and other services to the Fund. Although Beijing Capital functions as the private equity arm of BCG, the investment conglomerate of the Beijing Government, neither BCG nor the Beijing Government (or any of their affiliates) will be considered affiliates of the Fund or the Firm. BCG and the Beijing Government may engage in activities adverse to and in direct competition with the Fund and/or the Firm, including sponsoring other private equity funds.

To the extent that the Beijing Government is required to provide regulatory approval in connection with an investment by the Fund, or to the extent the Beijing Government or BCG is aware of a potential investment that would meet the investment criteria of the Fund, BCG, the Beijing Government and their affiliates will have the discretion to take into account their own interests, interests of other funds they sponsor, and any other interests that may conflict with the interests of the Fund and its Partners.

It is expected that the Fund and the Firm will enter into arrangements with BCG, the Beijing Government and their affiliates. In connection with such arrangements, it is expected that BCG, the Beijing Government and their affiliates will take their own interests into account and not the interests of the Fund or the Firm. Although the interests of BCG, the Beijing Government and their affiliates may conflict with the interests of the Fund and the Firm in such cases, neither the Fund nor the Firm will be restricted from entering into such arrangements.

Material Non‐Public Information

By reason of their responsibilities in connection with other activities of the Firm and its affiliates, certain employees of the Firm may acquire confidential or material non‐public information or be restricted from initiating transactions in certain securities. The Fund will not be free to act upon any such information. Due to these restrictions, the Fund may not be able to initiate a transaction that it otherwise might have initiated and may not be able to sell an investment that it otherwise might have sold.

Conflicting Investment Interests

The Fund may invest or propose to invest in a portfolio company of a Predecessor Fund or Other Fund. Such investments may be made in the same or similar securities as those held by



such fund, but may be acquired at different times at lower or higher prices. Such investments may also be in securities that differ significantly from the securities held by such fund, including with respect to seniority, dividends, voting rights and participation in liquidation proceeds. The different prices paid for, or terms of, securities held by such investors may create conflicts of interest. Such investors will be acting in their own interest, and may take actions that are adverse to the interests of the Fund.

Management Fee Payable Regardless of Fund Performance

The Management Fee is required to be paid to the Fund Manager even if the Fund experiences net losses in a particular year or over the term of the Fund and even if the Fund Manager is unable to source and close investments over some period of time (or source and close enough investments to fully deploy the Fund’s investable capital).

Formation of Successor Funds

Each of the Fund Manager and Beijing Capital is permitted to establish other private equity funds which may compete with the Fund for investment opportunities, including Successor Funds. See Part IV of this Memorandum, “Summary of Principal Fund Terms ‐ Successor Funds.” There can be no assurance that the creation of such additional funds will not give rise to conflicts of interest between the limited partners of the respective funds. In the event the Fund Manager raises another private equity fund other than a Successor Fund, and an investment opportunity may be appropriate for such fund and the Fund, the allocation of such investment opportunity will be made by the Fund Manager or Beijing Capital, as applicable, in a manner that it determines to be equitable under the circumstances.



V. Legal and Tax Matters

A. Securities Law Considerations

Securities Act

THE INTERESTS WILL NOT BE REGISTERED UNDER THE SECURITIES ACT, OR ANY OTHER SECURITIES LAW, INCLUDING STATE SECURITIES OR BLUE SKY LAWS. INTERESTS WILL BE OFFERED AND SOLD WITHOUT REGISTRATION IN RELIANCE UPON THE SECURITIES ACT EXEMPTION FOR TRANSACTIONS NOT INVOLVING A PUBLIC OFFERING, INCLUDING REGULATION S AND REGULATION D PROMULGATED UNDER THE SECURITIES ACT, AND GENERALLY WILL BE SOLD IN THE U.S. ONLY TO ACCREDITED INVESTORS, AS DEFINED IN REGULATION D.

Each investor will be required to make customary private placement representations, including that such investor is acquiring an Interest for its own account for investment and not with a view to resale or distribution. Furthermore, each investor must be prepared to bear the economic risk of the investment in the Interests for an indefinite period of time, since the Interests cannot be transferred or resold except as permitted under the Securities Act and any applicable state or non‐U.S. securities laws pursuant to registration or an exemption therefrom. It is extremely unlikely that the Interests will ever be registered under the Securities Act.

Investment Company Act

It is anticipated that the Fund will be exempt from the registration requirements of the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Fund intends to rely on the exemptions contained in Sections 3(c)(1) and/or 3(c)(7) of the Investment Company Act. Section 3(c)(1) exempts issuers whose outstanding securities are beneficially owned by not more than 100 persons who meet the conditions with respect to beneficial ownership contained in Section 3(c)(1). Section 3(c)(7) exempts issuers whose outstanding securities are owned exclusively by “qualified purchasers,” as defined under the Investment Company Act. The Fund will obtain appropriate representations and undertakings from prospective investors in order to ensure that the conditions of the applicable exemptions are met.

Securities Exchange Act of 1934

It is not expected that any of the Fund entities will be required to register their limited partnership interests or any other security of the Fund entities under the Securities Exchange Act of 1934 (“Exchange Act”). As a result, the Fund entities would not be subject to the periodic reporting and related requirements of the Exchange Act and Limited Partners should only expect to receive the information and reports required to be delivered pursuant to the Partnership Agreement.



B. Certain Cayman Islands Partnership Law Matters

Certain Feeders and Intermediaries established in connection with the Fund may be organized and registered as exempted limited partnerships in accordance with the provisions of the Exempted Limited Partnership Law (2003 Revision) of the Cayman Islands (the “Partnership Law”). Under Cayman Islands law, as a general matter, a limited partner’s liability for debts and obligations of an exempted limited partnership will be limited in whatever manner the relevant partnership agreement specifies, which in the case of the Fund means to the extent of a Limited Partner’s capital contributions, unless (i) it becomes involved in the management of the Fund’s business, or (ii) it is obligated pursuant to section 14(1) of the Partnership Law to return a contribution where the Fund is insolvent, or (iii) it is obligated to return distributions as further described above.

C. ERISA Considerations

The following is a summary discussion of certain considerations associated with an investment in the Fund by a pension, profit‐sharing or other employee benefit plan subject to Title I of ERISA, a plan subject to Section 4975 of the U.S. Internal Revenue Code, as amended (the “Code”), including tax‐qualified retirement plans described in Section 401(a) of the Code, tax‐qualified annuity plans described in Section 403(b) of the Code and individual retirement accounts or individual retirement annuities described in Section 408 of the Code (each such “employee benefit plan” under ERISA or “plan” under Section 4975, a “Plan”) and any entity whose underlying assets include plan assets by reason of a Plan’s investment in such entity pursuant to the Plan Assets Regulations as defined below) (together, “Benefit Plan Investors”). Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA), church plans (as defined in Section 3(33) of ERISA), and non‐U.S. plans (as described in Section 4(b)(4) of ERISA) are not subject to Title I of ERISA and Section 4975 of the Code, but may be subject to other laws that impose restrictions on their investments.

This discussion is necessarily general and does not address all aspects of issues that may arise under ERISA or the Code. No assurance can be given that future legislation, administrative rulings, court decisions or regulatory action will not modify the conclusions set forth in this discussion.

General Fiduciary Matters

ERISA imposes certain duties on persons who are fiduciaries of a Plan. In general, under ERISA, any person who exercises any discretionary authority or discretionary control over the administration of a Plan, any authority or control over the management or disposition of the assets of a Plan or Benefit Plan Investor, or who renders investment advice to the Plan for a fee or other compensation, is generally considered to be a fiduciary of the Plan.

Particularly in light of the risks and lack of liquidity inherent in an investment in the Fund, before purchasing Fund Interests with the assets of a Benefit Plan Investor, a fiduciary of any



Benefit Plan Investor should consider, among other factors, (i) whether an investment in the Fund satisfies the prudence, diversification and other requirements of ERISA; (ii) whether the investment is in accordance with the Plan’s investment policies and governing documents, (iii) the role that investment in the Fund will play in the Benefit Plan Investor’s overall investment portfolio, and (iv) whether the Fund will hold plan assets subject to ERISA or Section 4975 of the Code pursuant to the U.S. Department of Labor Regulation 29 C.F.R. 2510.3‐101, as modified by Section 3(42) of ERISA (the “Plan Assets Regulations”). A fiduciary of any Benefit Plan Investor should also consider whether the purchase or ownership of Fund Interests would constitute or give rise to a prohibited transaction under ERISA or the Code, as discussed below. In particular, the fiduciary must make an independent investment decision with respect to the Benefit Plan Investor’s investment in the Fund and must not rely on the Fund, the Firm or their affiliates for investment advice regarding this investment. A fiduciary can be personally liable for losses incurred by a Benefit Plan Investor resulting from a breach of its fiduciary duties and for certain breaches by co‐fiduciaries.

Prohibited Transactions

Certain provisions of ERISA and Section 4975 of the Code prohibit specific transactions involving the assets of a Plan and persons who have certain specified relationships to the Plan (“parties in interest” under ERISA and “disqualified persons” under Section 4975 of the Code). Any party in interest (including a fiduciary) that has engaged in a prohibited transaction would be required to (i) restore to the Plan any profit realized on the transaction, and (ii) reimburse the Plan for any losses suffered by the Plan as a result of such transaction. The party in interest would also be required to pay an excise tax equal to 15% of the amount involved in the prohibited transaction for each year, and could be required to pay an excise tax equal to 100% of the amount involved if the transaction is not corrected within a certain time period.

The Fund Manager or another entity involved in this offering of Fund Interests, or their respective affiliates, may be a fiduciary, a “party in interest” or a “disqualified person” with respect to Plans that purchase, or whose assets are used to purchase, Fund Interests. Fiduciaries of Benefit Plan Investors should consult their own legal advisors to determine whether such purchases could result in liability for breaches of fiduciary duty or prohibited transactions under ERISA or the Code.

Plan Assets

Benefit Plan Investors that are considering an investment in the Fund should also consider whether an investment in the Fund Interests will cause the underlying assets of the Fund to be deemed “plan assets” within the meaning of the Plan Assets Regulations. If the underlying assets of the Fund were deemed to be “plan assets,” among other consequences, the prudence and other fiduciary standards of ERISA would apply to investments made by such entities, and certain transactions that such entity might enter into in the ordinary course of business and operation might constitute “prohibited transactions” under ERISA and the Code.



ERISA and the Code do not define “plan assets.” The Plan Assets Regulations generally provide that when a Benefit Plan Investor acquires an equity interest in an entity that is neither a “publicly‐offered security” nor a security issued by an investment company registered under the Investment Company Act, the Benefit Plan Investor’s assets include both the equity interest and an undivided interest in each of the underlying assets of the entity. Exceptions to this “look‐through” rule apply if (i) equity participation in the entity by Benefit Plan Investors is not “significant,” (ii) the entity is an “operating company,” as defined in the Plan Assets Regulations, or (iii) another exception applies. Under the Plan Assets Regulations, equity participation in an entity is not “significant” if less than 25% of the value of each class of equity interests in the entity is held by Benefit Plan Investors, disregarding equity interests held by persons (other than Benefit Plan Investors) with discretionary authority or discretionary control over the assets of the entity or who provide investment advice for a fee (direct or indirect) with respect to such assets, and any affiliates thereof. In determining whether participation by Benefit Plan Investors is “significant,” only the portion of a Benefit Plan Investor’s equity interest that constitutes “plan assets” will be taken into account.

The Fund Manager intends to limit participation by Benefit Plan Investors to less than 25% of the value of each class of equity interests in the Fund (excluding interests in the Fund held by the Fund Manager and its affiliates (other than Plans)). If investment in the Fund by Benefit Plan Investors is “significant” (as defined in the Plan Assets Regulations), and no other exception applies, Benefit Plan Investors that invest in the Fund would be deemed to have as “plan assets” both their Fund Interests and undivided interests in the Fund’s assets.

If the assets of the Fund, were to be deemed to be plan assets, then the prohibited transaction restrictions on the operation and administration of the Fund, and the duties, obligations and liabilities imposed on fiduciaries by ERISA, as discussed above, could apply to transactions entered into by the Fund as though such transactions were directly entered into by Benefit Plan Investors. This could result in, among other consequences, (i) the application of the prudence and other fiduciary responsibility standards of ERISA to investments made by the Fund, and (ii) the possibility that certain transactions in which the Fund might seek to engage could constitute “prohibited transactions” under ERISA and the Code. Fiduciaries of Benefit Plan Investors that decide to invest in the Fund could, under certain circumstances, be liable for prohibited transactions or other violations as a result of their investment in the Fund, or as co‐fiduciaries for actions taken by or on behalf of the Fund. With respect to an individual retirement account (“IRA”) that invests in the Fund, the occurrence of a prohibited transaction involving the individual who established the IRA, or his or her beneficiaries, could cause the IRA to lose its tax‐exempt status.

Each Plan fiduciary should consult its own legal advisor regarding the considerations discussed above before purchasing Fund Interests.



D. Summary of PRC Tax Considerations

The following general guidance is based on the Fund Manager’s understanding of relevant Chinese taxation law and practice as at the date of this Memorandum. Taxation law or its interpretation or application may change after the date of this Memorandum and this may affect an investor’s position.

This Section: SUMMARY OF PRC TAX CONSIDERATIONS is set out as follows, with each section below providing general guidance on the tax treatment of the Fund and of the investors in the Fund:

1. Principal Rules in connection with Income Tax

2. Foreign Invested Partnership (“FIP”) as a Tax Payer

3. Income Tax of a Foreign Partner of a FIP

4. Income Tax in connection with Transfer of FIP Partnership Interest by a Foreign Partner

This Memorandum is not intended to provide a comprehensive guide to the taxation treatment of investors. All investors, and in particular those from jurisdictions other than PRC referred to below or of classifications not referred to below, should seek guidance from their own tax advisers on the tax implications for them of investing, holding and disposing of a partnership interest and receiving distributions from the Fund. Neither the Fund nor any of its advisers can take any responsibility in this regard.

Principal Rules in connection with Income Tax

According to the Enterprise Income Tax (“EIT”) Law of China (“EITL”) and its implementing rules, an enterprise or an organization (collectively referred to as “enterprises” under the EITL) may be subject to EIT in China. However a domestic partnership enterprise is not subject to the EITL. In 2008, the Ministry of Finance (“the MOF”) and the State Administration of Taxation (the “SAT”) jointly issued the Notice on the Income Tax of a Partner of a Partnership Enterprise (Cai Shui [2008] No. 159) (“Circular 159”). Circular 159 provides that each partner (enterprise or natural person) of a partnership enterprise shall be a taxpayer.

According to the EITL, in order to determine EIT, a tax authority shall first determine whether an enterprise is a resident enterprise (“RE”) or a non‐resident enterprise (“NRE”) and whether such an enterprise has set up a permanent establishment (“PE”) in China. RE means an enterprise that is established within the territory of China or established under the law of a foreign country or region whose actual office of management is located inside China. NRE refers to an enterprise that is established under the law of a foreign country or region and its actual institution of management is not located inside China, but has a PE inside China or derives incomes from sources in China even though it has no PE in China.



An RE shall pay EIT on its incomes derived both from within and outside China. For a NRE having a PE in China, it shall be subject to EIT on the PE’s incomes derived from China as well as incomes derived outside China but which have actual connection with its PE in China. The EIT rate is a flat rate of 25%. In comparison, for a NRE having no PE in China, it shall pay EIT on its incomes derived from sources in China, for instance, dividend, interest, rental and royalty. The tax rate is 10% unless specifically exempt or reduced by the PRC State Council or a bilateral treaty.

As for individual income tax (“IIT”), according to the Individual Income Tax Law (“IITL”) and its implementing rules, an individual, who is domiciled within China or is not domiciled but has resided within China for at least one year, is a resident taxpayer and shall pay IIT on incomes derived from sources within and outside China. An individual, who is neither domiciled nor resides in China or is not domiciled and has resided in China for less than one year, is non‐resident taxpayer. Such a non‐resident taxpayer shall only pay IIT on income derived from sources within China.

FIP as a Tax Payer

According to Circular 159, each partner (enterprise or natural person) of a partnership enterprise shall be a taxpayer in China. If a partner of a partnership enterprise is a natural person, this partner may be subject to IIT. If a partner of a partnership enterprise is an enterprise or any other organization (collectively referred to as “enterprises” under Chinese law), this partner may be subject to EIT. For example, any Intermediary through which a Feeder invests in the Partnership may be subject to EIT. A FIP itself is not subject to EIT.

In the course of business, a FIP may need to pay BT, stamp duty, property tax, deed tax and so forth in connection with its operation in China although a FIP is not subject to EIT. In this regard, a FIP, as a Chinese enterprise, is no different from any other Chinese enterprises.

Income Tax of a Foreign Partner of a FIP

According to Circular 159, regardless of whether a partnership enterprise distributes its profits to partners or not, partners should pay income tax. The taxable income of a partner shall be based on its sharing percentage of the partnership income according to the partnership agreement executed by the partners.

EIT of a Foreign Enterprise as a Partner of a FIP

Foreign Enterprise as the LP of a FIP – According to the above‐mentioned rules, a FE, acting as the limited partner (“LP”) of a FIP, shall pay EIT at a rate of 25% if it is deemed as an RE or a NRE but with a PE within China. If it is a NRE without a PE within China, the EIT rate shall be 10%.

Additionally, according to the PEL of China, a LP does not have the power and right to run the business of a FIP and is not allowed to represent a FIP. General practice is that a LP only invests into a FIP and its income from a FIP is passive income. Therefore, a LP shall not be regarded as



having a PE within China just because of its investment into a FIP.

Accordingly, an Intermediary through which a Feeder invests in the Partnership as an LP will be subject to EIT at a rate of 10%.

Individual Income Tax of a Foreign Individual as a Partner of a FIP

According to the IITL, its implementation rules and other relevant regulations and rules, for a foreign individual (“FI”), regardless of his/her resident status or his/her responsibility as a GP or LP in a FIP, his/her dividend income from a FIP is deemed as income originating from China, which shall be subject to IIT.

In 2001, the SAT issued the Regulation for the Imposition of IIT upon Investors in Sole Proprietorships and Partnerships (No. 84 [2001] of the SAT). According to this regulation, dividends obtained by a partnership enterprise from its investments in portfolio companies shall not be included in the income of this partnership enterprise, but shall instead be treated separately as dividends obtained by individual investors in this partnership enterprise. An individual investor shall pay IIT at a rate of 20% for obtained dividends.

Other than the investment profits from portfolio companies, a FIP may also obtain income which comes from non‐investment activities such as production proceeds and other income. According to the Regulation for the Imposition of IIT upon Investors in Sole Proprietorships and Partnerships (Cai Shui [2000] No. 91) which is jointly issued by the SAT and the MOF, post deduction of costs and expenses, net income of a FIP from non‐investments shall be deemed as production and operation income of an individual partner. Such income is treated akin to income derived from the production and operation by sole proprietors of industry and commerce and shall be taxed at progressive rates ranging from 5% to 35%. For instance, income over RMB 50,000 will be taxed at a rate of 35%.

It can be seen that the SAT and the MOF believe that the tax rate should be determined by the nature of the income obtained by an individual partner from a partnership enterprise. Whether an individual partner is a GP or LP does not affect the tax rate in connection with the income obtained from a partnership enterprise.

The Fund anticipates that all non‐PRC investors will invest through a Feeder and Intermediary. As a result, no non‐PRC individual will be a direct partner in the Partnership and thus will not be subject to IIT. Instead, the Feeder or Intermediary through which the investor invests in the Partnership will be subject to EIT as summarized above.

Income Tax in connection with Transferring FIP Interests

Based on the current views, if a foreign partner transfers its partnership interests in a FIP, it shall be deemed as transferring its property rights. If the transferring partner is a FI, income from transferring partnership interests shall be subject to IIT at a rate of 20%. As for a FE, if it transfers its partnership interests in a FIP, it shall be shall be subject to EIT. Again, the EIT rate



will depend on whether this FE is an RE or a NRE and whether or not this FE has a PE within China. The EIT rate shall be either 25% or 10%.

E. Certain U.S. Federal Income Tax Considerations

To ensure compliance with Internal Revenue Service Circular 230, you are hereby notified that any discussion of tax matters set forth in this Memorandum was written in connection with the promotion or marketing of the transactions or matters addressed herein and was not intended or written to be used, and cannot be used by any prospective investor, for the purpose of avoiding tax‐related penalties under federal, state or local tax law. Each prospective investor should seek advice based on its particular circumstances from an independent tax advisor.

General

The following is a discussion of certain of the anticipated U.S. federal income tax considerations relevant to a prospective investor in the Fund arising from the purchase, ownership, and disposition of Interests. Unless specified otherwise, this discussion applies only to a prospective Limited Partner that is a U.S. Person. A U.S. Person is either (i) a citizen or resident of the U.S., (ii) a corporation or other entity treated as a corporation for U.S. federal income tax purposes created or organized in or under the laws of the U.S. or any political subdivision thereof, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust if (a) a court within the U.S. is able to exercise primary supervision over the administration of the trust and (b) 1 or more U.S. Persons have the authority to control all substantial decisions of the trust. If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds Interests, then the tax treatment of a partner in such partnership generally will depend upon the status of the partner and the activities of the partnership. Such a partner or partnership should consult its own tax advisor as to the tax consequences of holding Interests.

Prospective investors should consult their tax advisors to determine this discussion’s application to their own particular circumstances. The discussion is based on provisions of the Code, on the regulations promulgated thereunder and on published administrative rulings and judicial decisions now in effect, all of which are subject to change or different interpretations.

In view of the number of different jurisdictions where local laws may apply to Limited Partners of the Fund, the discussion below does not address the local tax consequences to potential investors of the purchase, ownership, and disposition of Interests. Prospective investors are urged to consult their own advisors in determining the possible tax, exchange control or other consequences to them under the laws of the jurisdictions of which they are citizens, residents, domiciliaries or in which they conduct business.

Income or gains from securities held by the Fund may be subject to withholding taxes or other taxes.



The following discussion assumes that the expected tax treatment of the Partnership and any Feeder and Intermediary, and any tax elections made by such entities or tax positions taken by the Fund, are respected for U.S. federal income tax purposes. The Internal Revenue Service (the “Service”), however, could disagree with the tax positions taken by the Fund or otherwise fail to respect the structure. If this were to occur, the tax consequences of owning an Interest in the Fund could be materially different than those described below. The remainder of this discussion assumes that the structure described herein and the tax positions taken by the Fund will be respected for U.S. federal income tax purposes.

Each prospective investor is urged to consult its own tax advisor with respect to the U.S. federal, state, local and foreign tax consequences of the purchase and ownership of Interests.

Classification of the Partnership, Feeders and Intermediaries

Subject to the discussion of “publicly traded partnerships” and “check‐the‐box” elections set forth below, an entity, such as the Partnership and each Feeder, will, in the absence of an election to the contrary, be treated as a partnership for U.S. federal income tax purposes. The classification of an entity as a partnership for U.S. federal income tax purposes may not be respected for state or local tax purposes.

An entity that would otherwise be classified as a partnership for U.S. federal income tax purposes may nonetheless be classified as an association taxable as a corporation if it is a “publicly traded partnership.” The Fund Manager intends to operate any Feeder and the Partnership so no such entity will be treated as a publicly traded partnership. An entity that is classified as a partnership for U.S. federal income tax purposes is not subject to U.S. federal income tax itself, although it must file an annual information return.

The Fund Manager may, depending on the tax considerations relevant to certain potential investors, establish a Feeder that will elect to be classified as a corporation for U.S. federal income tax purposes (a so called “check‐the‐box” election). It is currently anticipated that the Fund Manager will establish at least one Feeder that will be classified as a partnership for U.S. federal income tax purposes regardless of whether a corporate Feeder is established.

Any Intermediary established through which a Feeder will make investments in the Partnership will, either by default or by making a “check‐the‐box” election, be classified as either an entity disregarded as separate from its owner (if the Intermediary has only one Feeder as its owner) or as a partnership (if the Intermediary has multiple owners) for U.S. federal income tax purposes.

It is intended that each Feeder’s, each Intermediary’s and the Partnership’s affairs will be conducted such that income realized by the Fund will not generally be effectively connected with the conduct of a U.S. trade or business or otherwise subject to regular U.S. federal income taxation on a net basis, although no assurance can be given in this regard. Thus, it is intended that Non‐U.S. Investors who are not currently subject to regular U.S. federal income taxation



will not be subject to regular U.S. federal income taxation solely by reason of an investment in the Fund, although no assurances can be given in this regard.

For these purposes the term “Non‐U.S. Investor” means any person (other than a partnership) that is not a “U.S. Person” for federal income tax purposes, as defined above.

The remainder of this discussion assumes (i) the Partnership and Feeders are treated as partnerships for U.S. federal income tax purposes, (ii) any Intermediary will be treated as a disregarded entity or partnership for U.S. federal income tax purposes and (iii) no income realized by the Fund will be effectively connected with the conduct of a U.S. trade or business or otherwise subject to regular U.S. federal income taxation on a net basis.

Tax Treatment of U.S. Limited Partners

For U.S. federal income tax purposes, a Limited Partner’s allocable share of items of income, gain, loss, deduction, or credit of the Partnership will be governed by the Partnership Agreement if such allocations have “substantial economic effect” or are determined to be in accordance with such Partner’s interest in the Partnership. The Partnership believes that, for U.S. federal income tax purposes, such allocations should be given effect, and the Fund Manager intends to prepare tax returns, if any, based on such allocations. If the Service successfully challenged the allocations made pursuant to the Partnership Agreement, the resulting allocations to a particular Limited Partner for U.S. federal income tax purposes may be less favorable than the allocations set forth in the Partnership Agreement.

Each Limited Partner will (subject to certain limits discussed below) be entitled to deduct its allocable share of the Partnership’s losses to the extent of its tax basis in its Interest at the end of the tax year of the Partnership in which such losses are recognized. A Limited Partner’s tax basis in its Interest in the Partnership is, in general, equal to the amount of cash the Partner has contributed to the Partnership, increased by the Partner’s proportionate share of income and liabilities of the Partnership, and decreased by the Partner’s proportionate share of reductions in such liabilities, distributions, and losses.

If cash distributed (including in certain circumstances distributions of certain “marketable securities” treated as cash distributions) to a Limited Partner in any year, including for this purpose any reduction in that Partner’s share of the liabilities of the Partnership, exceeds that Partner’s share of the taxable income of the Partnership for that year, the excess will reduce the tax basis of that Partner’s Interest and any distribution in excess of such basis will result in taxable gain. In general, distributions (other than liquidating distributions) of property other than cash will reduce the basis (but not below zero) of a Limited Partner’s Interest by the amount of the Partnership’s basis in such property immediately before its distribution but will not result in the realization of taxable income to the Partner.



Restrictions on Deductibility of Expenses

It is anticipated that the Partnership’s expenses will be investment expenses or, to the extent allocable to the Partnership’s investments in operating partnerships and the Management Fee paid by the Partnership to the Fund Manager, passive activity losses. In the case of investment expenses, any individual who is a Limited Partner (directly or through a partnership or other pass‐through entity) will be entitled to deduct such individual’s share of such expenses only to the extent that such share, together with such individual’s other miscellaneous itemized deductions, exceeds 2% of such individual’s adjusted gross income. In addition, in the case of an individual Limited Partner whose adjusted gross income exceeds a certain threshold amount, otherwise allocable itemized deductions will be reduced, but not more than 80%, by an amount equal to 3% of the excess of such Limited Partner’s adjusted gross income over the threshold amount. This additional overall limitation has been phased‐out as of 2010, but is scheduled to be fully reinstated in 2011. In the case of individual Limited Partners subject to the alternative minimum tax, no deduction is allowed for miscellaneous itemized deductions in computing alternative minimum taxable income.

If the Partnership invests in operating partnerships, the “passive loss” and “at‐risk” rules could limit the deductibility of expenses allocable to such investments. In addition, a Limited Partner’s allocable share of the Management Fee paid by the Partnership to the Fund Manager is a trade or business expense that could be limited by the “passive loss” and “at risk” rules. Expenses subject to allocation include Management Fees, interest paid by a Limited Partner (directly or through a partnership or other pass‐through entity) on indebtedness incurred to finance such Limited Partner’s investment in the Partnership, and such Limited Partner’s share of the Partnership’s expenses allocable to the operating partnerships and the expenses of the operating partnerships. Under the “passive loss” rules, a noncorporate taxpayer’s losses, credits and deductions from “passive activities” are limited to the taxpayer’s “passive income.” “Passive income” generally includes income from any business activity, or gain from the disposition of an interest in a business activity, in which the taxpayer does not materially participate. Under the “at‐risk” rules, noncorporate and certain corporate taxpayers may deduct losses from a business activity only to the extent they are “at‐risk” with respect to the activity at the end of the taxable year. A taxpayer is generally “at‐risk” to the extent the taxpayer contributes money to an activity or is personally liable for amounts borrowed with respect to the activity.

Special Limitation on Deductibility of Interest

A noncorporate taxpayer is not permitted to deduct “investment interest” in excess of “net investment income.” “Net investment income” generally includes all gross income of the taxpayer from property held for investment and, under certain circumstances, net gain attributable to the disposition of property held for investment. This limitation could apply to limit the deductibility of interest paid by a noncorporate person that is a Limited Partner (directly or through a partnership or other pass‐through entity) on indebtedness incurred to



finance such person’s investment in the Partnership or the deductibility of such person’s share of interest expense (if any) of the Partnership.

Foreign Tax Credit

Any PRC or other non‐U.S. taxes withheld from allocations or distributions to a Limited Partner or paid by an Intermediary or Feeder will be eligible for a foreign tax credit, subject to generally applicable limitations depending on the Limited Partner’s own circumstances. Income, gain, loss and deductions of the Fund may be “passive income” or “general category” income for foreign tax credit purposes.

Sale or Disposition of Limited Partner Interests

A Limited Partner that sells or otherwise disposes of an Interest in the Partnership in a taxable transaction generally will recognize gain or loss equal to the difference, if any, between the adjusted basis of the Interest and the amount realized from the sale or exchange. The amount realized from the sale or exchange will include the Partner’s share of the Partnership’s liabilities outstanding at the time of the sale or exchange. Gain or loss will generally be capital gain or loss and will be long‐term capital gain or loss if the Interest was held for more than 1 year on the date of such sale or exchange.

Controlled Foreign Corporations and Passive Foreign Investment Companies

The Partnership will be investing in entities organized outside the United States. If the Partnership invests in a foreign corporation, the corporation may be treated as a controlled foreign corporation (“CFC”) or a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. If the Partnership invests in a CFC or PFIC, a Limited Partner’s allocable share of income, gain, loss and deduction attributable to the investment may be affected by the CFC or PFIC anti‐deferral regimes. Limited Partners should consult their own tax advisors with respect to the CFC and PFIC rules.

Taxation of Non‐U.S Investors

For U.S. federal income tax purposes, under current law an Investor in the Fund who is a Non‐U.S. Investor will not be subject to U.S. federal income taxation on distributions paid by the Fund in respect of the Interests or gains recognized on the sale, exchange or redemption of Interests, provided, that the distributions or gains are not attributable to an office or fixed place of business maintained by the Limited Partner in the United States or otherwise effectively connected with the conduct of a trade or business by the Limited Partner in the United States.

Special rules may apply in the case of Non‐U.S. Investors (i) that have an office or fixed place of business in the United States to which dividends or gain in respect of the Interests are attributable, (ii) that have a “tax home” in the United States or (iii) that are former citizens of the United States, “controlled foreign corporations,” non‐U.S. insurance companies that hold Interests in connection with their U.S. business, passive foreign investment companies or



corporations which accumulate earnings to avoid U.S. federal income tax. Such persons are urged to consult their U.S. tax advisors before investing in the Partnership.

In the case of Interests held in the United States by a custodian or nominee for a Non‐U.S. Investor, U.S. “backup” withholding taxes may apply to dividends in respect of Interests realized by such Investor unless such Investor properly certifies as to its non‐U.S. status or otherwise establishes an exemption from “backup” withholding.

Certain Considerations for Tax‐Exempt Limited Partners

Organizations that are otherwise exempt from U.S. federal income tax under Section 501 of the Code, including ERISA plans, are subject to tax on their “unrelated business taxable income” (“UBTI”).

UBTI is generally defined as gross income from any unrelated trade or business regularly carried on by a tax exempt entity less any deductions attributable thereto. An unrelated trade or business consists of any trade or business the conduct of which is not substantially related to the organization’s exempt purpose or function. UBTI generally does not include dividends, interest, royalties or capital gains. UBTI also includes unrelated debt‐financed income (“UDFI”). UDFI includes income derived from debt‐financed property during the taxable year and may include income derived from a sale or other disposition of debt‐financed property if there was acquisition indebtedness outstanding with respect to such property during the 12‐month period ending with the date of sale or other disposition. Acquisition indebtedness generally includes any debt incurred directly or indirectly to purchase such property.

If UBTI were earned by the Partnership (for example, by reason of investments in entities that are treated as partnerships for U.S. federal income tax purposes), a tax‐exempt Limited Partner’s allocable share of such income generally would be subject to federal income tax. The Partnership may also generate UDFI if it borrows funds, including in respect of certain short‐term borrowings. In addition, if a tax‐exempt Limited Partner borrows to fund its Capital Commitment, some or all of its distributive share of income from the Partnership could be UBTI, which would be taxable to such tax‐exempt Limited Partner.

Any break‐up fees or transaction or advisory fees from portfolio companies will be paid directly to the Fund Manager, which will in turn be an offset to Management Fees. There is a risk that the Service might take the position that the Partnership did receive a portion of such fees and that each tax‐exempt Limited Partner’s share of such fees should be treated as UBTI. Tax‐exempt Limited Partners are urged to consult with their own tax advisors concerning the U.S. tax consequences of an investment in the Partnership.

Certain Reporting Requirements

U.S. Persons may be subject to substantial penalties if they fail to comply with special information reporting requirements with respect to their investment in a non‐U.S. partnership



such as the Partnership or any Feeder. For example, recently enacted legislation imposes new reporting requirements on the holding of certain foreign financial assets if the aggregate value of all of these assets exceeds $50,000. Interests are expected to constitute foreign financial assets subject to these requirements unless the Interests are held in an account at a domestic financial institution. U.S. Persons should consult their tax advisors regarding the application of this legislation. In addition, U.S. Persons that own stock in foreign corporations, including CFCs and PFICs, may be subject to special information reporting requirements. Taxpayers engaging in certain transactions, including certain loss transactions above a threshold, may be required to include tax shelter disclosure information with their annual U.S. federal income tax return. It is possible the Fund may engage in transactions that subject the Partnership and potentially Limited Partners to such disclosure. A Limited Partner disposing of an Interest in the Fund at a taxable loss may also be subject to such disclosure. Potential investors should consult their own tax advisors regarding such reporting requirements.

Recently enacted legislation also imposes a 30% withholding tax on certain U.S. source payments made beginning in 2013 to a foreign financial institution unless the foreign financial institution provides the Service with certain information concerning its U.S. account holders. The Partnership and any Feeder are likely to be treated as foreign financial institutions for purposes of this legislation. If the Partnership were to earn U.S. source income, the Partnership and any Feeder may have to provide information about Limited Partners that are U.S. Persons to the Service in order to avoid this 30% withholding tax. Potential investors should consult their own tax advisors regarding this legislation.

Under the Partnership Agreements, the Fund Manager will have considerable authority, subject to certain restrictions, to act on behalf of the Partnership and Feeders in connection with any administrative or judicial review of the tax treatment of items of Partnership’s and any Feeder’s income, gain, loss, deduction or credit and will decide how to report the Partnership’s and Feeder Fund’s items on its tax filings.

Indemnity; Reserves

Each investor in the Fund will be required to indemnify the Partnership, or any Feeder or Intermediary for any withholding or other tax obligations imposed on such entities with respect to such Limited Partner. The Partnership and any Feeder or Intermediary may reserve certain amounts otherwise distributable to Limited Partners in light of such potential obligations. The amount of any taxes paid or withheld from receipts of the Partnership and any Feeder or Intermediary allocable to a Limited Partner may be deemed to have been distributed to such Limited Partner.

Requirement to File Extensions

As soon as practicable after the end of each tax fiscal year of the Fund, a report will be transmitted to each Limited Partner, setting forth information with respect to his or her distributive share of income, gains, losses, credits and other items for U.S. federal income tax



purposes, resulting from the operation of the Fund during that year. The Fund Manager anticipates that tax reports will not be distributed to Limited Partners until after April 15 of each fiscal year. The distribution of tax reports may be further delayed in the event of the late receipt of necessary information from investments held by the Partnership. Accordingly, U.S. Investors will be required to file an extension on their tax returns and will bear any costs associated therewith.

Future Changes in Applicable Law

The foregoing description of U.S. federal income tax consequences of an investment in and the operations of the Fund is based on laws and regulations which are subject to change through legislative, judicial or administrative action. Other legislation could be enacted that would subject the Fund to income taxes or subject Limited Partners to increased income taxes.

Prospective investors should consult their own tax advisors regarding proposed legislation.



VI. Certain Offering Legends THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR OTHER JURISDICTION TO ANY PERSON OR ENTITY TO WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH STATE OR JURISDICTION. THE INTERESTS ARE OFFERED SUBJECT TO THE RIGHT OF THE FUND MANAGER TO REJECT ANY SUBSCRIPTION IN WHOLE OR IN PART.

U.S. INVESTORS GENERALLY

IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE FUND AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE INTERESTS HAVE NOT BEEN RECOMMENDED BY ANY U.S. FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE INTERESTS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

NON‐U.S. INVESTORS GENERALLY

IT IS THE RESPONSIBILITY OF ANY PERSONS WISHING TO SUBSCRIBE FOR INTERESTS TO INFORM THEMSELVES OF AND TO OBSERVE ALL APPLICABLE LAWS AND REGULATIONS OF ANY RELEVANT JURISDICTIONS. PROSPECTIVE INVESTORS SHOULD INFORM THEMSELVES AS TO THE LEGAL REQUIREMENTS AND TAX CONSEQUENCES WITHIN THE COUNTRIES OF THEIR CITIZENSHIP, RESIDENCE, DOMICILE AND PLACE OF BUSINESS WITH RESPECT TO THE ACQUISITION, HOLDING OR DISPOSAL OF INTERESTS, AND ANY NON‐U.S. EXCHANGE RESTRICTIONS THAT MAY BE RELEVANT THERETO.

FOR RESIDENTS OF ARGENTINA

NO APPROVAL HAS BEEN SOUGHT OR RECEIVED FROM THE ARGENTINE NATIONAL SECURITIES COMMISSION (COMISION NACIONAL DE VALORES) SINCE THE TRANSACTION CONTEMPLATED HEREIN IS NOT INTENDED TO BE A PUBLIC OFFERING OF SECURITIES PURSUANT TO THE ARGENTINE PUBLIC OFFERING LAW NUMBER 17,811.

FOR RESIDENTS OF AUSTRALIA

NONE OF THE PARTNERSHIP NOR FEEDERS IS REGISTERED IN AUSTRALIA.

THE PROVISION OF THIS MEMORANDUM TO ANY PERSON DOES NOT CONSTITUTE AN OFFER OF PARTNERSHIP INTERESTS UNLESS THE RECIPIENT IS A SOPHISTICATED OR PROFESSIONAL INVESTOR FOR THE PURPOSE OF SECTION 708 OF THE CORPORATIONS ACT OF AUSTRALIA. THIS DOCUMENT IS NOT A PROSPECTUS OR PRODUCT DISCLOSURE STATEMENT. IT IS NOT



REQUIRED TO CONTAIN, AND DOES NOT CONTAIN ALL THE INFORMATION WHICH WOULD BE REQUIRED IN A PROSPECTUS OR PRODUCT DISCLOSURE STATEMENT. IT HAS NOT BEEN LODGED WITH THE AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION.

THE FUND MANAGER DOES NOT HOLD AN AUSTRALIAN FINANCIAL SERVICES LICENSE, AND INVESTORS IN THE INTERESTS DO NOT HAVE COOLING‐OFF RIGHTS UNDER AUSTRALIAN LAW. ANY OFFER OF THE INTERESTS IN AUSTRALIA MAY BE ARRANGED BY A COMPANY WHICH HOLDS AN AUSTRALIAN FINANCIAL SERVICES LICENSE.

IT IS A TERM OF ISSUE OF PARTNERSHIP INTERESTS THAT THE INVESTOR MAY NOT TRANSFER OR OFFER TO TRANSFER THEIR INTERESTS TO ANY PERSON LOCATED IN AUSTRALIA UNLESS THE PERSON IS A SOPHISTICATED OR PROFESSIONAL INVESTOR FOR THE PURPOSES OF SECTION 708 OF THE CORPORATIONS ACT OF AUSTRALIA.

FOR RESIDENTS OF AUSTRIA

THE INTERESTS MAY ONLY BE OFFERED IN THE REPUBLIC OF AUSTRIA IN COMPLIANCE WITH THE PROVISIONS OF THE AUSTRIAN CAPITAL MARKET ACT AND ANY OTHER LAWS APPLICABLE IN THE REPUBLIC OF AUSTRIA GOVERNING THE OFFER AND SALE OF THE INTERESTS IN THE REPUBLIC OF AUSTRIA. THE INTERESTS ARE NOT REGISTERED OR OTHERWISE AUTHORIZED FOR PUBLIC OFFER UNDER THE AUSTRIAN CAPITAL MARKET ACT OR ANY OTHER RELEVANT SECURITIES LEGISLATION IN AUSTRIA. THE RECIPIENTS OF THIS MEMORANDUM AND OTHER SELLING MATERIAL IN RESPECT OF THE INTERESTS HAVE BEEN INDIVIDUALLY SELECTED AND ARE TARGETED EXCLUSIVELY ON THE BASIS OF A PRIVATE PLACEMENT. ACCORDINGLY, THE MEMORANDUM MAY NOT BE, AND IS NOT BEING, OFFERED OR ADVERTISED PUBLICLY OR OFFERED SIMILARLY UNDER EITHER THE AUSTRIAN CAPITAL MARKET ACT OR ANY OTHER RELEVANT SECURITIES LEGISLATION IN AUSTRIA. THIS OFFER MAY NOT BE MADE TO ANY OTHER PERSONS THAN THE RECIPIENTS TO WHOM THIS MEMORANDUM IS PERSONALLY ADDRESSED.

FOR RESIDENTS OF THE BAHAMAS

THIS FUND IS NOT REGISTERED OR LICENSED UNDER THE PROVISIONS OF THE INVESTMENT FUNDS ACT, 2003 OF THE COMMONWEALTH OF THE BAHAMAS.

FOR RESIDENTS OF BAHRAIN

THIS OFFER IS AN EXEMPT COLLECTIVE INVESTMENT UNDERTAKING. IT IS NOT SUBJECT TO THE REGULATIONS OF THE CENTRAL BANK OF BAHRAIN THAT APPLY TO PUBLIC OFFERINGS OF SECURITIES AND THE EXTENSIVE DISCLOSURE REQUIREMENTS AND OTHER PROTECTIONS THAT THOSE REGULATIONS CONTAIN. THIS MEMORANDUM IS THEREFORE INTENDED ONLY FOR ACCREDITED INVESTORS.

THE CENTRAL BANK OF BAHRAIN ASSUMES NO RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THE STATEMENTS AND INFORMATION CONTAINED IN THIS MEMORANDUM AND EXPRESSLY DISCLAIMS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS MEMORANDUM.



FOR RESIDENTS OF BELGIUM

NEITHER THE FUND NOR THIS MEMORANDUM HAS BEEN SUBMITTED FOR APPROVAL TO THE BELGIAN BANKING, FINANCE AND INSURANCE COMMISSION, NOR WILL THEY BE. ACCORDINGLY, THE INTERESTS MAY NOT BE DISTRIBUTED BY WAY OF PUBLIC OFFERING IN BELGIUM AND MAY BE SUBSCRIBED BY PROFESSIONAL OR INSTITUTIONAL INVESTORS PURSUANT TO ARTICLE 5, SECTION 3 OF THE BELGIAN ACT OF 20 JULY 2004 ON THE COLLECTIVE MANAGEMENT OF CERTAIN COLLECTIVE INVESTMENT UNDERTAKINGS ONLY. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY INTERESTS IN BELGIUM TO PERSONS OTHER THAN INSTITUTIONAL INVESTORS. ACCORDINGLY, AS FAR AS BELGIAN RESIDENTS ARE CONCERNED, THIS MEMORANDUM IS FOR INFORMATION PURPOSES ONLY. PURSUANT TO THIS MEMORANDUM, THE INTERESTS WILL ONLY BE OFFERED TO, AND SUBSCRIPTIONS WILL ONLY BE ACCEPTED FROM, BELGIAN INSTITUTIONAL INVESTORS ACTING ON THEIR OWN BEHALF.

FOR RESIDENTS OF BRAZIL

THIS IS A STRICTLY PRIVILEGED AND CONFIDENTIAL COMMUNICATION BETWEEN THE FUND AND ITS SELECTED CLIENTS. THIS COMMUNICATION CONTAINS INFORMATION ADDRESSED ONLY TO A SPECIFIC INDIVIDUAL AND IS NOT INTENDED FOR DISTRIBUTION TO, OR USE BY, ANY PERSON OTHER THAN THE NAMED ADDRESSEE. THIS COMMUNICATION (I) IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY, (II) SHOULD NOT BE CONSTRUED IN ANY MANNER AS ANY SOLICITATION OR OFFER TO BUY OR SELL ANY SECURITIES OR ANY RELATED FINANCIAL INSTRUMENTS, AND (III) SHOULD NOT BE CONSTRUED IN ANY MANNER AS A PUBLIC OFFER OF ANY SECURITIES OR ANY RELATED FINANCIAL INSTRUMENTS. IF YOU ARE NOT THE NAMED ADDRESSEE, YOU SHOULD NOT DISSEMINATE, DISTRIBUTE OR COPY THIS COMMUNICATION. PLEASE NOTIFY THE SENDER IMMEDIATELY IF YOU HAVE MISTAKENLY RECEIVED THIS COMMUNICATION.

THE INTERESTS HAVE NOT BEEN, AND WILL NOT BE, REGISTERED WITH THE BRAZILIAN SECURITIES COMMISSION (COMISSÃO DE VALORES MOBILIÁRIOS ‐ CVM). ANY PUBLIC OFFERING OR DISTRIBUTION, AS DEFINED UNDER BRAZILIAN LAWS AND REGULATIONS, OF THE INTERESTS IN BRAZIL IS NOT LEGAL WITHOUT PRIOR REGISTRATION UNDER LAW NO. 6,385 OF DECEMBER 7, 1976, AS AMENDED. DOCUMENTS RELATING TO THE OFFERING OF THE INTERESTS, AS WELL AS INFORMATION CONTAINED THEREIN, MAY NOT BE SUPPLIED TO THE GENERAL PUBLIC IN BRAZIL (AS THE OFFERING OF THE INTERESTS IS NOT A PUBLIC OFFERING OF SECURITIES IN BRAZIL) OR USED IN CONNECTION WITH ANY OFFER FOR SUBSCRIPTION OR SALE OF THE INTERESTS TO THE GENERAL PUBLIC IN BRAZIL.

NOTICE TO RESIDENTS OF CANADA

THE OFFERING IN CANADA, THE FUND IS OFFERING THE INTERESTS ON A PRIVATE PLACEMENT BASIS IN THE PROVINCES OF BRITISH COLUMBIA, ALBERTA, ONTARIO AND QUÉBEC (THE “PRIVATE



PLACEMENT PROVINCES”). THE INTERESTS HAVE NOT BEEN NOR WILL THEY BE QUALIFIED BY PROSPECTUS FOR SALE TO THE PUBLIC UNDER APPLICABLE CANADIAN SECURITIES LAWS AND, ACCORDINGLY, ANY OFFER AND SALE OF THE INTERESTS IN CANADA WILL BE MADE ON A BASIS WHICH IS EXEMPT FROM THE PROSPECTUS REQUIREMENTS OF THOSE SECURITIES LAWS.

THE OFFERING IN THE PRIVATE PLACEMENT PROVINCES IS BEING MADE EXCLUSIVELY THROUGH THIS MEMORANDUM AND NOT THROUGH ANY ADVERTISEMENT OF THE INTERESTS. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS MEMORANDUM AND ANY DECISION TO PURCHASE INTERESTS SHOULD BE BASED SOLELY ON THE INFORMATION CONTAINED IN IT. ALL DOLLAR REFERENCES IN THIS MEMORANDUM ARE TO U.S. DOLLARS, UNLESS OTHERWISE INDICATED.

REPRESENTATIONS AND AGREEMENT BY PURCHASERS EACH PURCHASER OF INTERESTS IN CANADA WILL BE DEEMED TO HAVE REPRESENTED TO THE FUND, THE FUND MANAGER AND THE DEALER, IF ANY, PARTICIPATING IN THE SALE OF THE INTERESTS, THAT THE PURCHASER:

1. IS RESIDENT IN ONE OF THE PRIVATE PLACEMENT PROVINCES AND IS ENTITLED UNDER APPLICABLE PROVINCIAL SECURITIES LAWS TO PURCHASE THE INTERESTS WITHOUT THE BENEFIT OF A PROSPECTUS QUALIFIED UNDER THOSE SECURITIES LAWS AND, IN THE CASE OF PURCHASERS IN PROVINCES OTHER THAN ONTARIO, WITHOUT THE SERVICES OF A DEALER REGISTERED PURSUANT TO THOSE SECURITIES LAWS;

2. HAS REVIEWED AND ACKNOWLEDGES THE TERMS REFERRED TO BELOW UNDER THE HEADING “RESALE RESTRICTIONS”;

3. IF IN ONTARIO IS AN “ACCREDITED INVESTOR” AS DEFINED IN NATIONAL INSTRUMENT 45‐106 (“NI 45‐106”), AND IS NOT AN INDIVIDUAL UNLESS PURCHASING FROM A FULLY REGISTERED DEALER WITHIN THE MEANING OF SECTION 204 OF THE REGULATION TO THE SECURITIES ACT (ONTARIO), AND IS NOT A PERSON CREATED OR BEING USED SOLELY TO PURCHASE OR HOLD SECURITIES AS AN ACCREDITED INVESTOR;

4. IF IN QUEBEC, BRITISH COLUMBIA OR ALBERTA, IS AN “ACCREDITED INVESTOR” AS DEFINED IN NI 45‐106 AND IS NOT A PERSON CREATED OR BEING USED SOLELY TO PURCHASE OR HOLD SECURITIES AS AN ACCREDITED INVESTOR; AND

5. IS EITHER PURCHASING INTERESTS AS PRINCIPAL FOR ITS OWN ACCOUNT, OR IS DEEMED TO BE PURCHASING INTERESTS AS PRINCIPAL FOR ITS OWN ACCOUNT BY VIRTUE OF BEING EITHER (I) A TRUST COMPANY OR TRUST CORPORATION AS FURTHER DESCRIBED IN SUBSECTION (P) OF THE “ACCREDITED INVESTOR” DEFINITION OF NI 45‐106; OR (II) A PERSON ACTING ON BEHALF OF A FULLY MANAGED ACCOUNT MANAGED



BY THAT PERSON AS FURTHER DESCRIBED IN SUBSECTION (Q) OF THE “ACCREDITED INVESTOR” DEFINITION OF NI 45‐106.

EACH PURCHASER OF INTERESTS IN CANADA HEREBY AGREES THAT IT IS THE PURCHASER’S EXPRESS WISH THAT ALL DOCUMENTS EVIDENCING OR RELATING IN ANY WAY TO THE SALE OF THE INTERESTS BE DRAFTED IN THE ENGLISH LANGUAGE ONLY. CHAQUE ACHETEUR AU CANADA DES VALEURS MOBILIÈRES RECONNAÎT QUE C’EST SA VOLONTÉ EXPRESSE QUE TOUS LES DOCUMENTS FAISANT FOI OU SE RAPPORTANT DE QUELQUE MANIÈRE À LA VENTE DES VALEURS MOBILIÈRES SOIENT RÉDIGÉS UNIQUEMENT EN ANGLAIS.

BY PURCHASING THE INTERESTS, THE PURCHASER ACKNOWLEDGES THAT ITS NAME AND OTHER SPECIFIED INFORMATION, INCLUDING THE NUMBER OF INTERESTS IT HAS PURCHASED, MAY BE DISCLOSED TO CANADIAN SECURITIES REGULATORY AUTHORITIES AND BECOME AVAILABLE TO THE PUBLIC IN ACCORDANCE WITH THE REQUIREMENTS OF APPLICABLE LAWS. THE PURCHASER CONSENTS TO THE DISCLOSURE OF THAT INFORMATION.

INDIRECT COLLECTION OF PERSONAL INFORMATION (ONTARIO PURCHASERS) BY PURCHASING THE INTERESTS, THE PURCHASER ACKNOWLEDGES THAT PERSONAL INFORMATION SUCH AS THE PURCHASER’S NAME WILL BE DELIVERED TO THE ONTARIO SECURITIES COMMISSION (THE “OSC”) AND THAT SUCH PERSONAL INFORMATION IS BEING COLLECTED INDIRECTLY BY THE OSC UNDER THE AUTHORITY GRANTED TO IT IN SECURITIES LEGISLATION FOR THE PURPOSES OF THE ADMINISTRATION AND ENFORCEMENT OF THE SECURITIES LEGISLATION OF ONTARIO. BY PURCHASING THE INTERESTS, THE PURCHASER SHALL BE DEEMED TO HAVE AUTHORIZED SUCH INDIRECT COLLECTION OF PERSONAL INFORMATION BY THE OSC. QUESTIONS ABOUT SUCH INDIRECT COLLECTION OF PERSONAL INFORMATION SHOULD BE DIRECTED TO THE OSC’S ADMINISTRATIVE ASSISTANT TO THE DIRECTOR OF CORPORATE FINANCE, SUITE 1903, BOX 55, 20 QUEEN STREET WEST, TORONTO, ONTARIO M5H 3S8 OR TO THE FOLLOWING TELEPHONE NUMBER: (416) 593‐8086.

RESALE RESTRICTIONS THE DISTRIBUTION OF THE INTERESTS IN THE PRIVATE PLACEMENT PROVINCES IS BEING MADE ON A PRIVATE PLACEMENT BASIS. ACCORDINGLY, ANY RESALE OF THE INTERESTS MUST BE MADE: (I) THROUGH AN APPROPRIATELY REGISTERED DEALER OR PURSUANT TO AN EXEMPTION FROM THE DEALER REGISTRATION REQUIREMENTS OF APPLICABLE PROVINCIAL SECURITIES LAWS; AND (II) IN ACCORDANCE WITH, OR PURSUANT TO AN EXEMPTION FROM, THE PROSPECTUS REQUIREMENTS OF APPLICABLE PROVINCIAL SECURITIES LAWS. THESE RESALE RESTRICTIONS MAY IN SOME CIRCUMSTANCES APPLY TO RESALES MADE OUTSIDE OF CANADA. PURCHASERS OF INTERESTS ARE ADVISED TO SEEK LEGAL ADVICE PRIOR TO ANY RESALE OF INTERESTS.



RIGHTS OF ACTION (ONTARIO PURCHASERS) ONTARIO SECURITIES COMMISSION RULE 45‐501 PROVIDES THAT WHEN AN OFFERING MEMORANDUM, SUCH AS THIS MEMORANDUM, IS DELIVERED TO AN INVESTOR TO WHOM SECURITIES ARE DISTRIBUTED IN RELIANCE UPON THE “ACCREDITED INVESTOR” PROSPECTUS EXEMPTION IN SECTION 2.3 OF NI 45‐106, THE RIGHT OF ACTION REFERRED TO IN SECTION 130.1 OF THE SECURITIES ACT (ONTARIO)(“SECTION 130.1”) IS APPLICABLE, UNLESS THE PROSPECTIVE PURCHASER IS:

A CANADIAN FINANCIAL INSTITUTION, MEANING EITHER:

1. AN ASSOCIATION GOVERNED BY THE COOPERATIVE CREDIT ASSOCIATIONS ACT (CANADA) OR A CENTRAL COOPERATIVE CREDIT SOCIETY FOR WHICH AN ORDER HAS BEEN MADE UNDER SECTION 473(1) OF THAT ACT; OR

2. A BANK, LOAN CORPORATION, TRUST COMPANY, TRUST CORPORATION, INSURANCE COMPANY, TREASURY BRANCH, CREDIT UNION, CAISSE POPULAIRE, FINANCIAL SERVICES CORPORATION, OR LEAGUE THAT, IN EACH CASE, IS AUTHORIZED BY AN ENACTMENT OF CANADA OR A JURISDICTION OF CANADA TO CARRY ON BUSINESS IN CANADA OR A JURISDICTION IN CANADA;

3. A SCHEDULE III BANK, MEANING AN AUTHORIZED FOREIGN BANK NAMED IN SCHEDULE III OF THE BANK ACT (CANADA),

4. THE BUSINESS DEVELOPMENT BANK OF CANADA INCORPORATED UNDER THE BUSINESS DEVELOPMENT BANK OF CANADA ACT (CANADA), OR

5. A SUBSIDIARY OF ANY PERSON REFERRED TO IN PARAGRAPHS (1), (2) OR (3), IF THE PERSON OWNS ALL OF THE VOTING SECURITIES OF THE SUBSIDIARY, EXCEPT THE VOTING SECURITIES REQUIRED BY LAW TO BE OWNED BY THE DIRECTORS OF THE SUBSIDIARY.

SECTION 130.1 PROVIDES PURCHASERS WHO PURCHASE SECURITIES OFFERED BY AN OFFERING MEMORANDUM WITH A STATUTORY RIGHT OF ACTION AGAINST THE ISSUER OF SECURITIES AND ANY SELLING SECURITYHOLDER FOR RESCISSION OR DAMAGES IN THE EVENT THAT THE OFFERING MEMORANDUM OR ANY AMENDMENT TO IT CONTAINS A “MISREPRESENTATION”. “MISREPRESENTATION” MEANS AN UNTRUE STATEMENT OF A MATERIAL FACT OR AN OMISSION TO STATE A MATERIAL FACT THAT IS REQUIRED TO BE STATED OR THAT IS NECESSARY TO MAKE ANY STATEMENT NOT MISLEADING IN LIGHT OF THE CIRCUMSTANCES IN WHICH IT WAS MADE.

IN THE EVENT THAT THIS MEMORANDUM, TOGETHER WITH ANY AMENDMENT TO IT, IS DELIVERED TO A PROSPECTIVE PURCHASER OF INTERESTS IN CONNECTION WITH A TRADE MADE IN RELIANCE ON SECTION 2.3 OF NI 45‐106, AND THIS MEMORANDUM CONTAINS A



MISREPRESENTATION WHICH WAS A MISREPRESENTATION AT THE TIME OF PURCHASE OF THE INTERESTS, THE PURCHASER WILL HAVE A STATUTORY RIGHT OF ACTION AGAINST THE PARTNERSHIP FOR DAMAGES OR, WHILE STILL THE OWNER OF THE INTERESTS, FOR RESCISSION, IN WHICH CASE, IF THE PURCHASER ELECTS TO EXERCISE THE RIGHT OF RESCISSION, THE PURCHASER WILL HAVE NO RIGHT OF ACTION FOR DAMAGES, PROVIDED THAT:

1. NO ACTION SHALL BE COMMENCED MORE THAN, IN THE CASE OF AN ACTION FOR RESCISSION, 180 DAYS AFTER THE DATE OF THE TRANSACTION THAT GAVE RISE TO THE CAUSE OF ACTION; OR, IN THE CASE OF ANY OTHER ACTION, THE EARLIER OF: (I) 180 DAYS AFTER THE PLAINTIFF FIRST HAD KNOWLEDGE OF THE FACTS GIVING RISE TO THE CAUSE OF ACTION, OR (II) THREE YEARS AFTER THE DATE OF THE TRANSACTION THAT GAVE RISE TO THE CAUSE OF ACTION;

2. THE DEFENDANT WILL NOT BE LIABLE IF IT PROVES THAT THE PURCHASER PURCHASED THE INTERESTS WITH KNOWLEDGE OF THE MISREPRESENTATION;

3. THE DEFENDANT WILL NOT BE LIABLE FOR ALL OR ANY PORTION OF THE DAMAGES THAT IT PROVES DO NOT REPRESENT THE DEPRECIATION IN VALUE OF THE INTERESTS AS A RESULT OF THE MISREPRESENTATION RELIED UPON;

4. IN NO CASE WILL THE AMOUNT RECOVERABLE EXCEED THE PRICE AT WHICH THE INTERESTS WERE OFFERED TO THE PURCHASER; AND

5. THE STATUTORY RIGHT OF ACTION FOR RESCISSION OR DAMAGES IS IN ADDITION TO AND DOES NOT DEROGATE FROM ANY OTHER RIGHTS OR REMEDIES THE PURCHASER MAY HAVE AT LAW.

THIS SUMMARY IS SUBJECT TO THE EXPRESS PROVISIONS OF THE SECURITIES ACT (ONTARIO) AND THE REGULATIONS AND RULES THEREUNDER AND YOU SHOULD REFER TO SUCH ACT FOR THE COMPLETE TEXT OF THOSE PROVISIONS.

ENFORCEMENT OF LEGAL RIGHTS THE FUND, THE FUND MANAGER, THEIR RESPECTIVE DIRECTORS AND OFFICERS, AS WELL AS THE EXPERTS NAMED HEREIN, ARE OR MAY BE LOCATED OUTSIDE OF CANADA AND, AS A RESULT, IT MAY NOT BE POSSIBLE FOR PURCHASERS TO EFFECT SERVICE OF PROCESS WITHIN CANADA UPON THE FUND, THE FUND MANAGER OR SUCH PERSONS. ALL OR A SUBSTANTIAL PORTION OF THE ASSETS OF THE FUND AND THE ASSETS OF THE FUND MANAGER AND SUCH PERSONS MAY BE LOCATED OUTSIDE OF CANADA AND, AS A RESULT, IT MAY NOT BE POSSIBLE TO SATISFY A JUDGMENT AGAINST THE FUND, THE FUND MANAGER OR SUCH PERSONS IN CANADA OR TO ENFORCE A JUDGMENT OBTAINED IN CANADIAN COURTS AGAINST THE FUND, THE FUND MANAGER OR SUCH PERSONS OUTSIDE OF CANADA.



CANADIAN TAX CONSIDERATIONS PROSPECTIVE PURCHASERS OF INTERESTS WHO ARE RESIDENT IN CANADA AND ARE NOT EXEMPT FROM ORDINARY INCOME TAX UNDER THE INCOME TAX ACT (CANADA) ARE ADVISED THAT NO DETERMINATION HAS BEEN MADE REGARDING THE STATUS OF THE INTERESTS AS A “TAX SHELTER INVESTMENT” FOR THE PURPOSES OF THE INCOME TAX ACT (CANADA) AND THE PARTNERSHIP HAS NOT APPLIED FOR REGISTRATION OR BEEN REGISTERED AS A TAX SHELTER FOR THE PURPOSES OF THE INCOME TAX ACT (CANADA). THIS MEMORANDUM DOES NOT ADDRESS THE CANADIAN TAX CONSEQUENCES OF OWNERSHIP OF THE INTERESTS. PROSPECTIVE PURCHASERS OF INTERESTS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE CANADIAN AND OTHER TAX CONSIDERATIONS APPLICABLE TO THEM INCLUDING WITH RESPECT TO THE APPLICATION OF THE PROPOSED “FOREIGN INVESTMENT ENTITY” PROVISIONS OF THE INCOME TAX ACT (CANADA) WHICH, IF APPLICABLE, MAY RESULT IN A REQUIREMENT TO RECOGNIZE INCOME FOR TAX PURPOSES EVEN THOUGH NO CASH DISTRIBUTION OR PROCEEDS OF DISPOSITION HAVE BEEN RECEIVED.

NOTICE TO RESIDENTS OF CAYMAN ISLANDS

LIMITED PARTNERSHIP INTERESTS MAY BE BENEFICIALLY OWNED BY PERSONS RESIDENT, DOMICILED, ESTABLISHED, INCORPORATED OR REGISTERED IN THE CAYMAN ISLANDS PURSUANT TO THE LAWS OF THE CAYMAN ISLANDS. THE FUND, HOWEVER, WILL NOT UNDERTAKE BUSINESS WITH THE PUBLIC IN THE CAYMAN ISLANDS OTHER THAN SO FAR AS MAY BE NECESSARY FOR THE CARRYING ON OF THE BUSINESS OF THE FUND EXTERIOR TO THE ISLANDS. NO OFFER OF INTERESTS MAY BE MADE TO THE PUBLIC IN THE CAYMAN ISLANDS.

FOR RESIDENTS OF DENMARK

THIS MEMORANDUM DOES NOT CONSTITUTE A PROSPECTUS UNDER ANY DANISH LAWS OR REGULATIONS AND HAS NOT BEEN FILED WITH OR APPROVED BY THE DANISH FINANCIAL SUPERVISORY AUTHORITY (FINANSTILSYNET) AS THIS MEMORANDUM HAS NOT BEEN PREPARED IN THE CONTEXT OF EITHER (I) A PUBLIC OFFERING OF SECURITIES IN DENMARK WITHIN THE MEANING OF THE DANISH SECURITIES TRADING ACT NO. 479/2006 AS AMENDED FROM TIME TO TIME OR ANY EXECUTIVE ORDERS ISSUED IN CONNECTION THERETO OR (II) AN OFFERING OF A COLLECTIVE INVESTMENT SCHEME COVERED BY THE DANISH INVESTMENT ASSOCIATION ACT NO. 55/2006, AS AMENDED FROM TIME TO TIME, OR ANY EXECUTIVE ORDERS ISSUED IN CONNECTION THERETO. THIS MEMORANDUM IS ONLY DIRECTED TO PERSONS OR ENTITIES IN DENMARK WHO ACQUIRE THE INTERESTS IN CIRCUMSTANCES WHICH WILL NOT RESULT IN THE OFFERING BECOMING SUBJECT TO THE DANISH PROSPECTUS REQUIREMENTS PURSUANT TO THE DANISH SECURITIES TRADING ACT, AS AMENDED FROM TIME TO TIME, OR ANY EXECUTIVE ORDERS ISSUED IN CONNECTION THERETO.



FOR RESIDENTS OF DUBAI

THIS PROSPECTUS RELATES TO A PARTNERSHIP WHICH IS NOT SUBJECT TO ANY FORM OF REGULATION OR APPROVAL BY THE DUBAI FINANCIAL SERVICES AUTHORITY (DFSA). THIS PROSPECTUS IS INTENDED FOR DISTRIBUTION ONLY TO PERSONS OF A TYPE SPECIFIED IN THE DFSA'S RULES (IE, QUALIFIED INVESTORS) AND MUST NOT, THEREFORE, BE DELIVERED TO, OR RELIED ON BY, ANY OTHER TYPE OF PERSON. THE DFSA HAS NO RESPONSIBILITY FOR REVIEWING OR VERIFYING THE PROSPECTUS OR OTHER DOCUMENTS IN CONNECTION WITH THIS PARTNERSHIP. ACCORDINGLY, THE DFSA HAS NOT APPROVED THIS PROSPECTUS OR ANY OTHER ASSOCIATED DOCUMENTS NOR TAKEN ANY STEPS TO VERIFY THE INFORMATION SET OUT IN THIS PROSPECTUS, AND HAS NO RESPONSIBILITY FOR IT. THE UNITS TO WHICH THIS PROSPECTUS RELATES MAY BE ILLIQUID AND/OR SUBJECT TO RESTRICTIONS ON THEIR RESALE. PROSPECTIVE PURCHASERS OF THE UNITS OFFERED SHOULD CONDUCT THEIR OWN DUE DILIGENCE ON THE UNITS. IF YOU DO NOT UNDERSTAND THE CONTENTS OF THIS DOCUMENT YOU SHOULD CONSULT AN AUTHORIZED FINANCIAL ADVISOR.

FOR RESIDENTS OF FINLAND

THIS MEMORANDUM DOES NOT CONSTITUTE A PROSPECTUS (ARVOPAPERIESITE) UNDER THE FINNISH SECURITIES MARKETS ACT OF 1989 (AS AMENDED) OR A FUND PROSPECTUS (RAHASTOESITE) UNDER FINNISH INVESTMENT FUNDS ACT OF 1999 (AS AMENDED), NOR HAS IT BEEN FILED WITH OR APPROVED BY THE FINNISH FINANCIAL SUPERVISION AUTHORITY (RAHOITUSTARKASTUS). PARTNERSHIP INTERESTS MAY BE OFFERED IN FINLAND ONLY IN CIRCUMSTANCES WHICH DO NOT REQUIRE THE PUBLICATION OF A PROSPECTUS UNDER THE FINNISH SECURITIES MARKETS ACT.

FOR RESIDENTS OF FRANCE

POTENTIAL INVESTORS DOMICILED IN FRANCE ARE HEREBY ADVISED THAT THIS MEMORANDUM HAS NOT BEEN SUBMITTED TO THE FRENCH AUTORITÉ DES MARCHÉS FINANCIERS FOR APPROVAL. ACCORDINGLY, THE MARKETING OF PARTNERSHIP INTERESTS AND THE DISTRIBUTION OF THIS MEMORANDUM IS RESTRICTED IN FRANCE.

IN PARTICULAR, NO DIRECT OR INDIRECT OFFER TO PURCHASE THE INTERESTS HAS BEEN, OR SHALL BE, MADE TO THE PUBLIC IN FRANCE, AND NEITHER THE MEMORANDUM NOR ANY OTHER MATERIAL RELATING TO PURCHASE OR TRANSFER OF THE INTERESTS MAY BE DISTRIBUTED OR CAUSED TO BE DISTRIBUTED TO THE PUBLIC IN FRANCE. ANY SUBSEQUENT TRANSFER OF THE INTERESTS WILL BE SUBJECT TO APPLICABLE RESTRICTIONS RELATING TO PUBLIC OFFERS OF SECURITIES IN FRANCE.

ALL SUCH OFFERS TO PURCHASE OR TRANSFER THE INTERESTS HAVE BEEN AND SHALL ONLY BE MADE IN FRANCE TO: (I) QUALIFIED INVESTORS (INVESTISSEURS QUALIFIÉS); (II) A RESTRICTED CIRCLE OF INVESTORS (CERCLE RESTREINT D’INVESTISSEURS), ACTING FOR THEIR OWN ACCOUNT; AND/OR (III) PERSONS CARRYING OUT THE ACTIVITY OF PORTFOLIO MANAGEMENT



ON BEHALF OF THIRD PARTIES (GESTION DE PORTEFEUILLE POUR COMPTE DE TIERS), ALL AS DEFINED IN, AND IN ACCORDANCE WITH, ARTICLES D. 411‐1, D. 411‐2, D. 734‐1, D. 744‐1, D. 754‐1 AND D. 764‐1 OF THE FRENCH MONETARY AND FINANCIAL CODE.

INTERESTS MAY ONLY BE OFFERED TO BE PURCHASED FROM THE PUBLIC IN FRANCE IN ACCORDANCE WITH ARTICLES L. 411‐1, L. 411‐2, L. 412‐1 AND L. 621‐8 ET SEQ., OF THE FRENCH MONETARY AND FINANCIAL CODE (FORMERLY, ARTICLES 6 AND 7 OF ORDINANCE NO. 67‐833 OF SEPTEMBER 28, 1967, AS AMENDED).

FOR RESIDENTS OF GERMANY

THE OFFERED INTERESTS MAY ONLY BE DISTRIBUTED OR ACQUIRED WITHIN THE FEDERAL REPUBLIC OF GERMANY IN ACCORDANCE WITH THE GERMAN INVESTMENT ACT (INVESTMENTGESETZ – “INVG”), THE GERMAN SALES PROSPECTUS ACT (WERTPAPIER‐VERKAUFSPROSPEKT‐GESETZ – “VERKPROSPG”) AND THE GERMAN SECURITIES PROSPECTUS ACT (WERTPAPIERPROSPEKTGESETZ – “WPPG”) AND ANY OTHER LAWS AND REGULATIONS APPLICABLE IN THE FEDERAL REPUBLIC OF GERMANY GOVERNING THE ISSUE, OFFERING, DISTRIBUTION AND SALE OF THE OFFERED INTERESTS. THE DISTRIBUTION OF THE OFFERED INTERESTS HAS NOT BEEN NOTIFIED, AND THE OFFERED INTERESTS ARE NOT REGISTERED OR AUTHORIZED FOR PUBLIC DISTRIBUTION IN THE FEDERAL REPUBLIC OF GERMANY. THIS MEMORANDUM HAS NOT BEEN FILED OR DEPOSITED WITH THE FEDERAL FINANCIAL SUPERVISORY AUTHORITY (BUNDESANSTALT FÜR FINANZDIENSTLEISTUNGSAUFSICHT – “BAFIN”). THEREFORE, THE OFFERED INTERESTS MUST NOT BE DISTRIBUTED (I) BY WAY OF A PUBLIC OFFER, PUBLIC ADVERTISEMENT OR IN ANY SIMILAR MANNER WITHIN THE MEANING OF SECTION 2 (11) OF THE INVG OR (II) BY THE WAY OF PUBLIC OFFERING WITHIN THE MEANING OF SECTION 8(F) OF THE VERKPROSPG OR (III) BY THE WAY OF PUBLIC OFFERING WITHIN THE MEANING OF SECTION 2 NO. 4 OF THE WPPG NOR SHALL THIS MEMORANDUM CONSTITUTE SUCH PUBLIC OFFER, PUBLIC ADVERTISEMENT OR SIMILAR OFFER. NO GERMAN PROSPECTUS WITHIN THE MEANING OF THE INVG, THE VERKPROSPG OR THE WPPG HAS BEEN OR WILL BE PREPARED, PUBLISHED OR OTHERWISE PROVIDED. THIS MEMORANDUM SHALL ONLY BE ADDRESSED TO RECIPIENTS TO WHOM THIS MEMORANDUM IS PERSONALLY ADDRESSED AND DOES NOT CONSTITUTE AN OFFER OR ADVERTISEMENT TO THE PUBLIC, NOR MAY IT BE SUPPLIED TO THE PUBLIC IN THE FEDERAL REPUBLIC OF GERMANY OR USED IN CONNECTION WITH ANY OFFER FOR SUBSCRIPTION OF THE OFFERED INTERESTS TO THE PUBLIC IN GERMANY. THE OFFERED INTERESTS MAY FALL WITHIN THE SCOPE OF THE GERMAN INVESTMENT TAX ACT (INVESTMENTSTEUERGESETZ – “INVSTG”). THEREFORE, IT CANNOT BE EXCLUDED THAT GERMAN INVESTORS MAY BE FACED WITH TAXES PURSUANT TO THE INVSTG. PLEASE NOTE THAT IT IS NOT CONTEMPLATED TO PROVIDE OR ISSUE CERTAIN INFORMATION DESIGNATED IN THE INVSTG.



ALL PROSPECTIVE GERMAN INVESTORS ARE URGED TO SEEK INDEPENDENT TAX ADVICE. THIS MEMORANDUM DOES NOT CONTAIN ANY TAX INDICATIONS, ADVICE OR AN EXPLANATION ABOUT THE POSSIBLE TAX CONSEQUENCES OF AN INVESTMENT.

FOR RESIDENTS OF HONG KONG

WARNING: THE CONTENTS OF THIS MEMORANDUM HAVE NOT BEEN REVIEWED BY ANY REGULATORY AUTHORITY IN HONG KONG. YOU ARE ADVISED TO EXERCISE CAUTION IN RELATION TO THE OFFER. IF YOU ARE IN ANY DOUBT ABOUT ANY OF THE CONTENTS OF THIS MEMORANDUM, YOU SHOULD OBTAIN INDEPENDENT PROFESSIONAL ADVICE.

THIS MEMORANDUM IS DISTRIBUTED ON A CONFIDENTIAL BASIS. NO INTEREST WILL BE ISSUED TO ANY PERSON OTHER THAN THE PERSON TO WHOM THIS MEMORANDUM HAS BEEN SENT. NO PERSON IN HONG KONG OTHER THAN THE PERSON TO WHOM A COPY OF THIS MEMORANDUM HAS BEEN ADDRESSED MAY TREAT THE SAME AS CONSTITUTING AN INVITATION TO HIM/HER TO INVEST. THIS MEMORANDUM MAY NOT BE REPRODUCED IN ANY FORM OR TRANSMITTED TO ANY PERSON OTHER THAN THE PERSON TO WHOM IT IS ADDRESSED.

FOR RESIDENTS OF IRELAND

PARTNERSHIP INTERESTS MAY NOT BE OFFERED OR SOLD BY ANY PERSON:

(A) OTHERWISE THAN IN A MANNER THAT DOES NOT CONSTITUTE AN OFFER FOR SALE TO THE PUBLIC WITHIN THE MEANING OF SECTION 9 OF THE UNIT TRUSTS ACT, 1990 OR SECTION 256(8) OF THE COMPANIES ACT, 1990; OR

(B) IN ANY WAY WHICH WOULD REQUIRE THE PUBLICATION OF A PROSPECTUS UNDER THE INVESTMENT FUNDS, COMPANIES AND MISCELLANEOUS PROVISIONS ACT, 2005 AND ANY REGULATIONS ADOPTED PURSUANT THERETO.

FOR RESIDENTS OF ISRAEL

THIS MEMORANDUM WILL BE DISTRIBUTED TO ISRAELI RESIDENTS IN A MANNER THAT WILL NOT CONSTITUTE AN OFFER TO THE PUBLIC IN ACCORDANCE WITH SECTIONS 15 AND 15A OF THE SECURITIES LAW, 1968. NAMELY, THIS MEMORANDUM MAY ONLY BE DISTRIBUTED TO INVESTORS OF THE TYPES LISTED IN THE FIRST ADDENDUM OF THE SECURITIES LAW, 1968 AND IN ADDITION TO NOT MORE THAN 35 OTHER INVESTORS DURING ANY GIVEN 12‐MONTH PERIOD.

THIS MEMORANDUM IS INTENDED SOLELY FOR ITS DESIGNATED RECIPIENT. THE DESIGNATED RECIPIENT OF THIS MEMORANDUM MAY NOT TRANSFER, DISCLOSE OR OTHERWISE CONVEY THIS MEMORANDUM OR ANY OF THE INFORMATION INCLUDED HEREIN TO ANY OTHER PERSON.



NOTHING IN THIS MEMORANDUM SHALL BE CONSTRUED OR DEEMED AS INVESTMENT ADVICE. EACH RECIPIENT SHOULD INDEPENDENTLY ASSESS THIS INVESTMENT AND CONSULT WITH ANY PROFESSIONALS IT DEEMS APPROPRIATE.

FOR RESIDENTS OF ITALY

THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE INTERESTS IN THE ITALIAN JURISDICTION. ACCORDINGLY, WHERE DIRECTED TO AN ITALIAN RESIDENT, THIS MEMORANDUM IS FOR INFORMATION PURPOSES ONLY. PURSUANT TO THIS MEMORANDUM, THE INTERESTS MAY NOT BE OFFERED AND ANY CIRCULAR, ADVERTISEMENT OR OTHER DOCUMENT OR OFFERING MATERIAL RELATING TO SUCH INTERESTS MAY NOT BE PUBLISHED, DISTRIBUTED OR MADE AVAILABLE IN THE REPUBLIC OF ITALY OR TO ANY ITALIAN RESIDENT INVESTOR IN CIRCUMSTANCES WHICH WOULD BE IN BREACH OF RELEVANT ITALIAN LAWS AND REGULATIONS. THE INTERESTS TO BE OFFERED PURSUANT TO THIS MEMORANDUM HAVE NEITHER BEEN NOR WILL BE REGISTERED UNDER THE RELEVANT SECURITIES LAWS OF ITALY.

FOR RESIDENTS OF JAPAN

THE INTERESTS HAVE NOT BEEN REGISTERED UNDER ARTICLE 4, PARAGRAPH 1 OF THE SECURITIES AND EXCHANGE LAW OF JAPAN (THE “SEL”) BY VIRTUE OF THE FACT THAT THE INTERESTS ARE BEING OFFERED IN ACCORDANCE WITH ARTICLE 2, PARAGRAPH 3, ITEM 2B OF THE SEL.

A PROSPECTIVE JAPANESE INVESTOR IS NOT ABLE TO TRANSFER THE INTERESTS TO ANY OTHER PERSON OTHER THAN TO TRANSFER THE ENTIRE INTERESTS TO ONE PERSON OR ONE LEGAL ENTITY AT ONE TIME.

FOR RESIDENTS OF KOREA

NEITHER THE FUND NOR NEUBERGER BERMAN IS MAKING ANY REPRESENTATION WITH RESPECT TO THE ELIGIBILITY OF ANY RECIPIENTS OF THIS MEMORANDUM TO ACQUIRE THE INTERESTS REFERRED TO HEREIN UNDER THE LAWS OF KOREA, INCLUDING, WITHOUT LIMITATION, THE FOREIGN EXCHANGE TRANSACTION ACT AND REGULATIONS THEREUNDER. THE INTERESTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES AND EXCHANGE ACT OF KOREA OR THE INDIRECT INVESTMENT ASSET MANAGEMENT BUSINESS ACT OF KOREA AND NONE OF THE INTERESTS MAY BE OFFERED OR SOLD TO ANY PERSON FOR RE‐OFFERING OR RESALE, DIRECTLY OR INDIRECTLY, IN KOREA OR TO ANY RESIDENTS OF KOREA, EXCEPT PURSUANT TO APPLICABLE LAWS AND REGULATIONS OF KOREA.

FOR RESIDENTS OF KUWAIT

THE INTERESTS HAVE NOT BEEN LICENSED FOR OFFERING IN KUWAIT BY THE MINISTRY OF COMMERCE AND INDUSTRY OR THE CENTRAL BANK OF KUWAIT OR ANY OTHER RELEVANT



KUWAITI GOVERNMENT AGENCY. THE OFFERING OF THE INTERESTS IN KUWAIT ON THE BASIS OF A PRIVATE PLACEMENT OR PUBLIC OFFERING IS, THEREFORE, RESTRICTED IN ACCORDANCE WITH DECREE LAW NO. 31 OF 1990, AS AMENDED, AND MINISTERIAL ORDER NO. 113 OF 1992, AS AMENDED. NO PRIVATE OR PUBLIC OFFERING OF THE INTERESTS IS BEING MADE IN KUWAIT, AND NO AGREEMENT RELATING TO THE SALE OF THE INTERESTS WILL BE CONCLUDED IN KUWAIT. NO MARKETING OR SOLICITATION OR INDUCEMENT ACTIVITIES ARE BEING USED TO OFFER OR MARKET THE INTERESTS IN KUWAIT.

FOR RESIDENTS OF LUXEMBOURG

THIS MEMORANDUM DOES NOT CONSTITUTE A PROSPECTUS APPROVED BY THE LUXEMBOURG COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER AND MAY ACCORDINGLY NOT BE USED FOR OFFERING OR RESELLING THE INTERESTS TO THE PUBLIC IN LUXEMBOURG, UNLESS SUCH OFFERING OR RESALE OCCURS IN COMPLIANCE WITH LUXEMBOURG LAW. IN ADDITION, THE FUND DOES NOT CONSTITUTE A LUXEMBOURG UNDERTAKING FOR COLLECTIVE INVESTMENT IN ACCORDANCE WITH THE LUXEMBOURG LAW DATED 20 DECEMBER 2002 ON UNDERTAKINGS FOR COLLECTIVE INVESTMENT.

FOR RESIDENTS IN MEXICO

THE INTERESTS OFFERED MAY NOT BE PUBLICLY OFFERED OR TRADED IN MEXICO UNLESS THE SAME ARE OFFERED OR TRADED PURSUANT TO THE PROVISIONS OF THE MEXICAN LEY DEL MERCADO DE VALORES (SECURITIES MARKET LAW) AND REGULATIONS ISSUED THEREUNDER. THE INFORMATION CONTAINED IN THIS MEMORANDUM IS THE EXCLUSIVE RESPONSIBILITY OF THE ISSUER AND HAS NEITHER BEEN REVIEWED NOR AUTHORIZED BY THE COMISIÓN NACIONAL BANCARIA Y DE VALORES (NATIONAL BANKING AND SECURITIES COMMISSION) (“CNBV”) OF THE UNITED MEXICAN STATES.

THE INTERESTS OFFERED HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE REGISTRO NACIONAL DE VALORES (NATIONAL SECURITIES REGISTRY) OF THE CNBV. NEITHER THIS MEMORANDUM NOR ANY OTHER OFFERING MATERIAL RELATED TO THE OFFERING OF THE INTERESTS MAY BE UTILIZED IN CONNECTION WITH ANY GENERAL OFFERING TO THE PUBLIC WITHIN MEXICO FOR THE PURPOSE OF THE SALE OF THE INTERESTS. ANY INVESTOR OF MEXICAN NATIONALITY WHO ACQUIRES THE INTERESTS WILL DO SO UNDER HIS/HER/ITS OWN RESPONSIBILITY.

FOR RESIDENTS OF THE NETHERLANDS

THE INTERESTS DESCRIBED HEREIN MAY NOT, DIRECTLY OR INDIRECTLY, BE OFFERED IN THE NETHERLANDS, EXCEPT TO OR BY INDIVIDUALS OR ENTITIES THAT ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 1:1 OF THE DUTCH FINANCIAL SUPERVISION ACT (WET OP HET FINANCIEEL TOEZICHT, WFT) AND/OR TO FEWER THAN 100 PERSONS NOT BEING QUALIFIED INVESTORS WITHIN THE MEANING OF THE WFT.



THE FUND IS NOT LICENSED BY THE NETHERLANDS AUTHORITY FOR FINANCIAL MARKETS (“AFM”) AND IS NOT SUBJECT TO THE SUPERVISION OF THE AFM AND THE DUTCH CENTRAL BANK INCLUDING PRUDENTIAL AND MARKET CONDUCT SUPERVISION.

FOR RESIDENTS OF NORWAY

THIS MEMORANDUM HAS NOT BEEN PRODUCED IN ACCORDANCE WITH THE PROSPECTUS REQUIREMENTS LAID DOWN IN THE NORWEGIAN SECURITIES TRADING ACT 1997. THIS MEMORANDUM HAS NOT BEEN APPROVED OR DISAPPROVED BY, OR REGISTERED WITH, THE OSLO STOCK EXCHANGE, KREDITTILSYNET NOR THE NORWEGIAN REGISTRY OF BUSINESS ENTERPRISES. THE INTERESTS DESCRIBED HEREIN HAVE NOT BEEN AND WILL NOT BE OFFERED OR SOLD TO THE PUBLIC IN NORWAY, AND NO OFFERING OR MARKETING MATERIALS RELATING TO THE SHARES MAY BE MADE AVAILABLE OR DISTRIBUTED IN ANY WAY THAT WOULD CONSTITUTE, DIRECTLY OR INDIRECTLY, AN OFFER TO THE PUBLIC IN NORWAY. THIS MEMORANDUM IS FOR THE RECIPIENT ONLY AND MAY NOT IN ANY WAY BE FORWARDED TO ANY OTHER PERSON OR TO THE PUBLIC IN NORWAY.

FOR RESIDENTS OF PANAMA

THE INTERESTS HAVE NOT AND WILL NOT BE REGISTERED WITH THE COMISION NACIONAL DE VALORES (THE “NATIONAL SECURITIES COMMISSION”) OF THE REPUBLIC OF PANAMA UNDER CABINET DECREE NO. 247 OF 1970 (“PANAMA SECURITIES LAW”) AND MAY NOT BE OFFERED OR SOLD IN PRIMARY OFFERING WITHIN PANAMA, EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF PANAMA’S SECURITIES LAWS.

FOR RESIDENTS OF PORTUGAL

THE FUND WILL NOT DIRECTLY OR INDIRECTLY TAKE ANY ACTION OR OFFER, ADVERTISE, GATHER INVESTMENT INTENTIONS, SELL, DELIVER OR OTHERWISE MAKE AVAILABLE ANY OF THE INTERESTS THIS MEMORANDUM REFERS TO IN CIRCUMSTANCES WHICH COULD QUALIFY AS A PUBLIC OFFERING OF SECURITIES PURSUANT TO THE PORTUGUESE SECURITIES CODE (“CÓDIGO DOS VALORES MOBILIÁRIOS” AS AMENDED, THE “PSC”) AND IN CIRCUMSTANCES WHICH COULD QUALIFY THE ISSUANCE OF THE INTERESTS AS AN ISSUANCE IN THE PORTUGUESE MARKET OR SPECIFICALLY ADDRESSED TO ENTITIES RESIDENT IN PORTUGAL OR HAVING A PERMANENT ESTABLISHMENT LOCATED THEREIN OR OTHERWISE THAN IN ACCORDANCE WITH ALL APPLICABLE LAWS AND REGULATIONS, BEING THE SUBSCRIPTION OF SUCH INTERESTS ADDRESSED EXCLUSIVELY TO QUALIFIED INVESTORS AS DEFINED IN THE PSC. THE FUND SHALL AT ALL TIMES COMPLY WITH ANY APPLICABLE LAWS AND REGULATIONS APPLICABLE TO IT IN RELATION HERETO.

FOR RESIDENTS OF QATAR

THIS MEMORANDUM IS BEING DELIVERED FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO A LIMITED NUMBER OF INSTITUTIONAL AND PRIVATE INVESTORS IN QATAR, AND



IS NOT AN OFFER OF THE INTERESTS TO THE GENERAL PUBLIC IN QATAR. THIS MEMORANDUM HAS NOT BEEN FILED WITH, APPROVED OR REVIEWED BY OR REGISTERED WITH QATARI GOVERNMENT AUTHORITIES, WHETHER UNDER LAW NO. 25 (2002) CONCERNING INVESTMENT FUNDS, CENTRAL BANK RESOLUTION NO. 15 (1997) AS AMENDED CONCERNING SUPERVISION RULES AND INSTRUCTIONS FOR INVESTMENT COMPANIES, OR ANY OTHER RELEVANT QATAR GOVERNMENTAL BODY OR SECURITIES EXCHANGE, NOR ANY FOREIGN GOVERNMENTAL BODY OR SECURITIES EXCHANGE. ALL APPLICATIONS FOR INVESTMENT SHOULD BE RECEIVED, AND ANY ALLOTMENTS MADE, FROM OUTSIDE QATAR.

FOR RESIDENTS OF SAUDI ARABIA THIS MEMORANDUM IS BEING PROVIDED SOLELY FOR INFORMATIONAL PURPOSES; RECEIPT OF THIS MEMORANDUM THEREFORE DOES NOT CONSTITUTE AN OFFER TO BUY THE INTERESTS REFERRED TO HEREIN.

FOR RESIDENTS OF SPAIN

THE OFFERING OF THE INTERESTS HAS NOT BEEN APPROVED OR DISAPPROVED BY OR REGISTERED WITH THE SPANISH SECURITIES AND EXCHANGE COMMISSION (COMISION NACIONAL DEL MERCADO DE VALORES) NOR HAS THE SPANISH SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED HEREIN.

FOR RESIDENTS OF SWEDEN

THIS MEMORANDUM HAS NOT BEEN NOR WILL IT BE REGISTERED WITH OR APPROVED BY FINANSINSPEKTIONEN (THE SWEDISH FINANCIAL SUPERVISORY AUTHORITY). ACCORDINGLY, THIS MEMORANDUM MAY NOT BE MADE AVAILABLE, NOR MAY THE INTERESTS OFFERED HEREUNDER BE MARKETED AND OFFERED FOR SALE IN SWEDEN, OTHER THAN UNDER CIRCUMSTANCES WHICH ARE DEEMED NEITHER TO REQUIRE A PROSPECTUS UNDER THE SWEDISH FINANCIAL INSTRUMENTS TRADING ACT (1991:980) NOR TO CONSTITUTE FUND OPERATIONS IN SWEDEN UNDER THE SWEDISH INVESTMENT FUNDS ACT (2004:46).

PAST PERFORMANCE IS NOT A GUARANTEE OF A PARTICULAR RETURN IN THE FUTURE. THE MONEY INVESTED IN THE FUND CAN INCREASE OR DECREASE IN VALUE, AND THERE IS NO GUARANTEE THAT ALL OF THE CAPITAL YOU INVEST WILL BE REPAID.

FOR RESIDENTS OF SWITZERLAND

THE FUND HAS NOT BEEN APPROVED BY THE FEDERAL BANKING COMMISSION AS A FOREIGN COLLECTIVE INVESTMENT SCHEME PURSUANT TO ARTICLE 120 OF THE SWISS COLLECTIVE INVESTMENT SCHEME ACT OF JUNE 23, 2006 (THE “CISA”). ACCORDINGLY, THE INTERESTS MAY NOT BE PUBLICLY OFFERED IN OR FROM SWITZERLAND AND NEITHER THIS MEMORANDUM OR ANY OTHER OFFERING MATERIALS RELATING TO THE INTERESTS MAY BE DISTRIBUTED IN



CONNECTION WITH ANY SUCH PUBLIC OFFERING. INTERESTS MAY ONLY BE OFFERED AND THIS MEMORANDUM MAY ONLY BE DISTRIBUTED IN OR FROM SWITZERLAND TO QUALIFIED INVESTORS (AS DEFINED IN THE CISA AND ITS IMPLEMENTING ORDINANCE) AND TO A LIMITED NUMBER OF OTHER OFFEREES WITHOUT ANY PUBLIC OFFERING.

FOR RESIDENTS OF TAIWAN

THE INTERESTS ARE NOT REGISTERED IN TAIWAN AND MAY NOT BE SOLD, ISSUED OR OFFERED IN TAIWAN. NO PERSON OR ENTITY IN TAIWAN HAS BEEN AUTHORIZED TO OFFER, SELL, GIVE ADVICE REGARDING OR OTHERWISE INTERMEDIATE THE OFFERING AND SALE OF THE INTERESTS IN TAIWAN.

FOR RESIDENTS OF THAILAND

THE FUND MANAGER (INCLUDING ITS AFFILIATES) DOES NOT MAINTAIN ANY LICENSES, AUTHORIZATIONS OR REGISTRATIONS IN THAILAND, NOR IS THE FUND REGISTERED IN THAILAND. INTERESTS MAY, THEREFORE, NOT BE OFFERED OR SOLD WITHIN THAILAND AND THE PROVISION OF INVESTMENT MANAGEMENT SERVICES IN THAILAND OR TO THAI ENTITIES MAY BE SUBJECT TO LEGAL PROHIBITION, RESTRICTIONS OR CONDITIONS.

THE INTERESTS BEING OFFERED ARE NOT, NOR ARE THEY INTENDED TO BE, REGARDED AS SECURITIES UNDER THAI LAW. IN ADDITION, THIS MEMORANDUM DOES NOT, NOR IS IT INTENDED TO, CONSTITUTE OR FORM PART OF A PROSPECTUS OR AN OFFER TO SELL OR AN INVITATION TO SUBSCRIBE OR PURCHASE ANY SECURITIES. ACCORDINGLY, THIS MEMORANDUM AND ANY OTHER DOCUMENT OR MATERIAL WHICH RELATES TO OR IS CONNECTED WITH THE OFFER, SALE OR RESALE OR INVITATION TO SUBSCRIBE OR PURCHASE INTERESTS MAY NOT BE CIRCULATED OR DISTRIBUTED (WHETHER DIRECTLY OR INDIRECTLY EITHER IN WHOLE OR IN PART) TO PERSONS IN THAILAND NOR MAY THE INTERESTS BE MARKETED IN THAILAND. IN THE EVENT THAT ANY PERSONS SITUATED IN THAILAND DO ACTUALLY ACQUIRE INTERESTS, THEY CONFIRM THAT THEY HAVE ACTIVELY SOUGHT OUT ALL INFORMATION THEY HAVE RECEIVED WITHOUT SOLICITATION ON THE PART OF THE FUND AND THAT SUCH INFORMATION WAS RECEIVED BY SUCH INVESTORS OUTSIDE OF THAILAND FROM SOURCES SITUATED OUTSIDE OF THAILAND. FURTHER, SUCH PERSONS ACKNOWLEDGE THAT ANY SUBSEQUENT TRANSFER OF ALL OR ANY OF THE INTERESTS IN THAILAND WILL LIKELY BE SUBJECT TO LEGAL PROHIBITION, RESTRICTIONS OR CONDITIONS.

NO CONSENT, APPROVAL, AUTHORIZATION, REGISTRATION, FILING OR DECLARATION WITH ANY GOVERNMENTAL AUTHORITY, INCLUDING THE THAI SECURITIES AND EXCHANGE COMMISSION (THE SEC) OR THE BANK OF THAILAND, HAS BEEN MADE/OBTAINED IN RELATION TO THIS MEMORANDUM.

INVESTMENT BEARS HIGH RISK. INVESTORS SHOULD STUDY ALL RELEVANT DATA THOROUGHLY BEFORE INVESTING. BEFORE DECIDING TO INVEST IN THE INTERESTS, AN INVESTOR SHOULD CAREFULLY CONSIDER AND STUDY ALL DATA ABOUT THE PARTNERSHIP, AS WELL AS ALL TERMS



AND CONDITIONS OF THE INTERESTS. FURTHER, THE INVESTOR SHOULD ALSO TAKE THE SUITABILITY OF INVESTMENT AND ALL POSSIBLE RISKS INTO ACCOUNT.

BEFORE DECIDING TO INVEST IN THE INTERESTS, AN INVESTOR SHOULD SEEK ADVICE IN RELATION TO THE PURCHASE OF FOREIGN CURRENCY AND THE REMITTANCE OF PARTNERSHIPS FOR PAYMENT OF THE INTERESTS OUT OF THAILAND AS IT MAY BE PROHIBITED OR RESTRICTED BY THE EXCHANGE CONTROL REGULATIONS IN THAILAND. IN ADDITION, INVESTORS SHOULD CONSULT THEIR OWN LEGAL AND TAX ADVISERS WITH RESPECT TO THE TAX AND LEGAL CONSEQUENCES OF AN INVESTMENT IN THE FUND IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES AND WITH RESPECT TO THE ELIGIBILITY OF THE INTERESTS FOR INVESTMENT BY THE INVESTORS UNDER RELEVANT THAI LEGISLATION AND REGULATIONS.

NOTICE TO RESIDENTS OF SINGAPORE

THIS MEMORANDUM HAS NOT BEEN REGISTERED WITH THE MONETARY AUTHORITY OF SINGAPORE AND THE INTERESTS MAY NOT BE OFFERED OR SOLD, NOR MAY THIS MEMORANDUM OR ANY DOCUMENT OR OTHER MATERIAL IN CONNECTION WITH THE INTERESTS BE ISSUED, CIRCULATED OR DISTRIBUTED, EITHER DIRECTLY OR INDIRECTLY, TO PERSONS IN SINGAPORE OTHER THAN UNDER CIRCUMSTANCES IN WHICH SUCH OFFER OR SALE DOES NOT CONSTITUTE AN OFFER OR SALE OF THE INTERESTS TO THE PUBLIC IN SINGAPORE. ACCORDINGLY, THIS MEMORANDUM DOES NOT CONSTITUTE ANY OFFER OR INVITATION FOR AN OFFER FOR SUBSCRIPTION OR PURCHASE OF THE INTERESTS OR OTHER SECURITIES; IT IS BEING MADE AVAILABLE FOR INFORMATION ONLY TO A LIMITED NUMBER OF PERSONS. IN PARTICULAR, THIS MEMORANDUM IS ONLY FOR THE PERSON NAMED IN THE COVER LETTER ACCOMPANYING THIS MEMORANDUM AND MAY NOT BE CIRCULATED OR DISTRIBUTED TO ANY OTHER PERSON. IN ADDITION, NO INTERESTS MAY BE MADE, NOR MAY ANY INVITATION TO SUBSCRIBE THEREFOR BE MADE, IN SINGAPORE TO PERSONS (OTHER THAN THE ABOVE‐MENTIONED INTENDED RECIPIENTS).

NOTICE TO RESIDENTS OF UNITED ARAB EMIRATES

THE FUND WILL BE SOLD OUTSIDE THE UNITED ARAB EMIRATES, IS NOT PART OF A PUBLIC OFFERING AND IS BEING OFFERED TO A LIMITED NUMBER OF INSTITUTIONAL AND PRIVATE INVESTORS IN THE UNITED ARAB EMIRATES. THE FUND AND RELEVANT DOCUMENTS HAVE NOT BEEN REVIEWED, APPROVED OR LICENSED BY THE UAE CENTRAL BANK OR ANY OTHER RELEVANT LICENSING AUTHORITIES OR GOVERNMENTAL AGENCIES IN THE UNITED ARAB EMIRATES. THIS DOCUMENT IS STRICTLY PRIVATE AND CONFIDENTIAL AND HAS NOT BEEN REVIEWED, DEPOSITED OR REGISTERED WITH ANY LICENSING AUTHORITY OR GOVERNMENTAL AGENCY IN THE UNITED ARAB EMIRATES, AND IS BEING ISSUED TO A LIMITED NUMBER OF INSTITUTIONAL INVESTORS/HIGH NET WORTH INDIVIDUALS AND MUST NOT BE PROVIDED TO ANY PERSON OTHER THAN THE ORIGINAL RECIPIENT AND MAY NOT BE REPRODUCED OR USED FOR ANY OTHER PURPOSE. THE FUND MAY NOT BE OFFERED OR SOLD DIRECTLY OR INDIRECTLY TO THE PUBLIC IN THE UNITED ARAB EMIRATES.

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