Beijing Capital Growth Fund Private Placement Memorandum Summary

CONFIDENTIALPRIVATEPLACEMENTMEMORANDUM
BEIJINGCAPITALGROWTHFUND,L.P.
BEIJINGCAPITALGROWTHFUND

BURNHAM
SECURITIES INC.
June2010
Private Placement Memorandum
Beijing Capital Growth Fund
CONFIDENTIALPRIVATEPLACEMENTMEMORANDUM BEIJINGCAPITALGROWTHFUND,L.P. $100,000,000 OFLIMITEDPARTNERSHIPINTERESTS
THIS CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM (THIS MEMORANDUM) IS BEING PROVIDED BY BEIJING CAPITAL INVESTMENT MANAGEMENT COMPANY (THE FUND MANAGER),ONACONFIDENTIALBASISTOALIMITEDNUMBEROFSOPHISTICATEDINVESTORS FORTHEPURPOSEOFPROVIDINGCERTAININFORMATIONREGARDINGTHEOFFEROFLIMITED 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 TOWHOMITHASBEENDELIVEREDFORPURPOSESOFTHEIREVALUATIONOFANINVESTMENT 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,INWHOLEORINPART,NORMAYITSCONTENTSBEUSEDFORANYOTHERPURPOSE, INEACHCASEWITHOUTTHEPRIORWRITTENCONSENTOFTHEFUNDMANAGERORBEIJING 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 UPONREQUEST. THE FUNDMANAGERRESERVESTHERIGHTTOMODIFYANYOF THETERMSOFTHEOFFERINGANDTHEINTERESTSDESCRIBEDHEREINANDTOSUPPLEMENT ORREVISEANDREISSUETHISMEMORANDUM. THISMEMORANDUMDESCRIBESTHETERMSOFTHELIMITEDPARTNERSHIPAGREEMENTS(OR EQUIVALENTTHEREOF)OFTHEFUND(ASAMENDEDFROMTIMETOTIME,THEPARTNERSHIP AGREEMENT), THE PRINCIPAL DOCUMENTS GOVERNING THE RIGHTS AND OBLIGATIONS OF THE FUND MANAGER AND THE FUNDS 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 MANAGERORITSAFFILIATESRESERVETHERIGHTTOMODIFYTHEPARTNERSHIPAGREEMENT AND/OR ANY OF THE TERMS OF THE OFFERING AND THE INTERESTS PRIOR TO THE INITIAL CLOSINGOFTHEFUND.INADDITION,THEFUNDMANAGERORITSAFFILIATESRESERVETHE RIGHTTOREJECTANYSUBSCRIPTIONINWHOLEORINPART. 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,THISMEMORANDUMHASNOTBEENREVIEWEDBYREPRESENTATIVESOFTHE BEIJING MUNICIPAL GOVERNMENT OR ANY OTHER STATE OR MUNICIPAL GOVERNMENT AGENCY.ALLSTATEMENTSMADEINTHISMEMORANDUMARESOLELYTHOSEOFTHEFUND
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MANAGER AND NO STATEMENT MADE IN THIS MEMORANDUM SHOULD BE CONSTRUED AS HAVING BEEN APPROVED BY ANY STATE OR MUNICIPAL GOVERNMENT AGENCY IN THE PEOPLES REPUBLIC OF CHINA (PRC OR CHINA), NOR SHOULD ANY STATEMENT BE CONSIDEREDTOCONSTITUTEORREFLECTANYOFFICIALORUNOFFICIALPRCSTATEORLOCAL GOVERNMENTPOLICY. THE INTERESTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGECOMMISSION(THESEC)ORANYSTATEOROTHERSECURITIESCOMMISSIONOR REGULATORY AUTHORITY, NOR HAS THE SEC OR ANY SUCH COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATIONTOTHECONTRARYISACRIMINALOFFENSE. THE INTERESTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED(THESECURITIESACT),THESECURITIESLAWS OFANYSTATEORTHE 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 JURISDICTIONSWHERETHEOFFERINGWILLBEMADE.THEFUNDWILLNOTBEREGISTEREDAS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE INVESTMENT COMPANY ACT). CONSEQUENTLY, INVESTORS WILL NOT BE AFFORDED THEPROTECTIONSOFTHEINVESTMENTCOMPANYACT. THERE IS NO PUBLIC MARKET FOR THE INTERESTS AND NO SUCH MARKET IS EXPECTED TO DEVELOPINTHEFUTURE.THEINTERESTSMAYNOTBETRANSFERREDORRESOLDEXCEPTAS PERMITTED UNDER THE SECURITIES ACT AND ANY APPLICABLE NONU.S. SECURITIES LAWS PURSUANTTOREGISTRATIONORANEXEMPTIONTHEREFROM.ASMOREFULLYDESCRIBEDIN THISMEMORANDUM,THETRANSFERABILITYOFTHEINTERESTSWILLBEFURTHERRESTRICTED BYTHETERMSOFTHEPARTNERSHIPAGREEMENT.INMAKINGANINVESTMENTINTHEFUND, PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIALRISKSOFSUCHINVESTMENTFORANINDEFINITEPERIODOFTIME. REPRESENTATIVES OF THE FIRM WILL MAKE THEMSELVES AVAILABLE TO PROSPECTIVE INVESTORS FOR THE PURPOSE OF ANSWERING QUESTIONS REGARDING THE FUND AND THE OFFERINGCONTEMPLATEDHEREBY.HOWEVER,INMAKINGTHEDECISIONTOINVESTINTHE FUND,APROSPECTIVEINVESTORMUSTRELYONITSOWN EXAMINATIONOFTHEFUNDAND THETERMSOFTHISOFFERING,INCLUDINGTHEMERITSANDRISKSINVOLVEDANDTHELEGAL ANDTAXCONSEQUENCESOFSUCHANINVESTMENT.PROSPECTIVEINVESTORSSHOULDNOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM, OR ANY SUPPLEMENTAL INFORMATION PROVIDED TO INVESTORS, AS LEGAL, TAX, REGULATORY, INVESTMENT OR ACCOUNTING ADVICE,ANDEACHPROSPECTIVEINVESTORISURGEDTOCONSULTWITHITSOWNADVISORS WITH RESPECT TO THE LEGAL, TAX, REGULATORY, FINANCIAL AND ACCOUNTING CONSEQUENCESOFITSINVESTMENTINTHEFUND.
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AN INVESTMENT IN THE FUND INVOLVES A HIGH DEGREE OF RISK DUE TO, AMONG OTHER THINGS, THE NATURE OF THE FUNDS INVESTMENTS. PROSPECTIVE INVESTORS SHOULD PAY PARTICULARATTENTIONTOTHEINFORMATIONINPARTVOFTHISMEMORANDUM,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 FUNDS INVESTMENT OBJECTIVES WILL BE ACHIEVED AND AN INVESTOR MUST BE PREPARED TO BEAR CAPITAL LOSSESTHATMIGHTRESULTFROMSUCHINVESTMENT. INCONSIDERINGTHEPRIORPERFORMANCEINFORMATIONCONTAINEDHEREIN,PROSPECTIVE INVESTORSSHOULDBEARINMINDTHATPASTPERFORMANCEISNOTINDICATIVEOFFUTURE RESULTS, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL ACHIEVE COMPARABLE RESULTSORTHATINVESTORSWILLRECEIVEARETURNOFTHEIRCAPITAL.INADDITION,THERE CAN BE NO ASSURANCE THAT UNREALIZED INVESTMENTS WILL BE REALIZED AT THE VALUATIONS SHOWN. ACTUAL REALIZED RETURNS WILL DEPEND ON, AMONG OTHER FACTORS,FUTUREOPERATINGRESULTS,THEVALUEOFTHEASSETSANDMARKETCONDITIONS AT THE TIME OF DISPOSITION, ANY RELATED TRANSACTION COSTS, AND THE TIMING AND MANNEROFSALE,ALLOFWHICHMAYDIFFERENTFROMTHEASSUMPTIONSONWHICHTHE VALUATIONS CONTAINED HEREIN ARE BASED. NOTHING CONTAINED HEREIN SHOULD BE DEEMEDTOBEAPREDICTIONORPROJECTIONOFFUTUREPERFORMANCEOFTHEFUND. CERTAIN INFORMATION CONTAINED IN THIS MEMORANDUM CONSTITUTES FORWARD LOOKING STATEMENTS, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARDLOOKING 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 FORWARDLOOKINGSTATEMENTS. 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 (INCLUDINGTHOSERELATINGTOCURRENTANDFUTUREECONOMICORMARKETCONDITIONS ANDTRENDSINRESPECTTHEREOF)THATARENOTHISTORICALFACTSAREBASEDONCURRENT EXPECTATIONS, ESTIMATES, PROJECTIONS, OPINIONS AND/OR BELIEFS OF THE FUND MANAGER.SUCHSTATEMENTSINVOLVEKNOWNANDUNKNOWNRISKS,UNCERTAINTIESAND OTHERFACTORS,ANDUNDUERELIANCESHOULDNOTBEPLACEDTHEREON.
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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 MUSTNOTBERELIEDUPONASHAVINGBEENAUTHORIZEDBYTHEFUND,THEFIRMORANY OFTHEIRRESPECTIVEAFFILIATES.STATEMENTSINTHISMEMORANDUMAREMADEASOFTHE 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 UPDATETHISMEMORANDUM. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR OTHERJURISDICTIONTOANYPERSONORENTITYTOWHICHITISUNLAWFULTOMAKESUCH OFFER OR SOLICITATION IN SUCH STATE OR JURISDICTION. THE INTERESTS ARE OFFERED SUBJECTTOTHERIGHTOFTHEFUNDMANAGERTOREJECTANYSUBSCRIPTIONINWHOLEOR INPART. ITISTHERESPONSIBILITYOFANYPERSONSWISHINGTOSUBSCRIBEFORINTERESTSTOINFORM THEMSELVES OF AND TO OBSERVE ALL APPLICABLE LAWS AND REGULATIONS OF ANY RELEVANTJURISDICTIONS.PROSPECTIVEINVESTORSSHOULDINFORMTHEMSELVESASTOTHE 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 NONU.S. EXCHANGE RESTRICTIONSTHATMAYBERELEVANTTHERETO. 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 THETRANSACTIONSORMATTERSADDRESSEDHEREINANDISNOTINTENDEDORWRITTENTO BE USED, AND CANNOT BE USED BY ANY PROSPECTIVE INVESTOR, FOR THE PURPOSE OF AVOIDING TAXRELATED PENALTIES UNDER FEDERAL, STATE OR LOCAL TAX LAW. EACH PROSPECTIVE INVESTOR SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROMANINDEPENDENTTAXADVISOR.
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Prospective investors having inquiries with respect to the Fund may contact the following persons: BeijingCapitalInvestment ManagementCompany ChinaArsenalTower 69ZizhuYuan,Suite1808 Haidian,Beijing100089,PRC Attn:OmerOzden Telephone:+861068964806 Facsimile:+861068964810 ozden@beijingcapital.org BurnhamSecuritiesInc. 1325AvenueoftheAmericas 26thFloor NewYork,NY10019 Attn:JoelB.Gardner Telephone:+12123339605 Facsimile:+12126037566 jgardner@bsibam.com
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CONVENTIONSUSEDINTHISMEMORANDUM
Unlessthecontextotherwiserequires,inthisMemorandum: BCG refers to Beijing Capital Group Co., Ltd., the investment conglomerate of the Beijing Government, established under the StateOwned Assets Supervision and Administration CommissionoftheBeijingGovernment. BeijingCapitalreferstoBeijingCapitalInvestmentCo.,Ltd.,theprivateequitysubsidiaryof BCG. TheBeijingGovernmentreferstotheBeijingMunicipalGovernment,PRC. China or the PRC refers to the Peoples Republic of China, excluding, for the purposes of thisMemorandumonly,Taiwan,HongKongandMacau. TheFirmreferstoBeijingCapitalandtheFundManager,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 managementcompanyoftheFund. ThePartnershipreferstoBeijingCapitalGrowthFund,L.P. RMBreferstothelegalcurrencyofChina. $orU.S.dollarsreferstothelegalcurrencyoftheUnitedStates.
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TABLEOFCONTENTS I. EXECUTIVESUMMARY ..............................................................................1

A. B. C. D. CompetitiveAdvantages ....................................................................................... 5 InvestmentStrategy .............................................................................................. 8 InvestmentDecisionProcess ............................................................................... 10 ForeignInvestedPrivateEquitySectorinChina................................................... 13
II.
MANAGEMENTTEAM .............................................................................16
A. ManagingPartners .............................................................................................. 16 B. KeyProfessionals ................................................................................................ 17
III.
TRACKRECORDANDSELECTEDTRANSACTIONSUMMARIES ...................19
A. TrackRecord ....................................................................................................... 20 B. CaseStudiesPerformanceHistory .................................................................... 22
1.NewJialianElectronicsCo.,Ltd.(SZSE:002188) .........................................................................22 2.FulidaFibreCo.,Ltd. ................................................................................................................23 3.DaliTechnologyCo.Ltd.(SZSE:002214) ....................................................................................24 4.JinqiaoRealEstateDevelopment,Limited ................................................................................25 5.NorthGlassTechnologyCo.Ltd.(RecentlyApprovedForListingbytheCSRC)...........................26 6.SunwodaElectronics(SwodaElectronics) .................................................................................27 7.ZhongJiConcretePiles..............................................................................................................28
C. CaseStudiesAdditionalInvestments ................................................................ 29
1.CnlightCorporationLimited(SZSE:002076)...............................................................................30 2.SunvimGroupCo.Limited(SZSE:002083) ................................................................................30 3.NHUCompanyLimited(SZSE:002001)......................................................................................31
IV. V.
SUMMARYOFPARTNERSHIPTERMS.......................................................32 RISKFACTORSANDPOTENTIALCONFLICTSOFINTEREST ........................51

A. B. C. D. PotentialRisksattheFundLevel.............................................................................. 51 PotentialRisksattheInvestmentLevel................................................................... 57 RisksRelatingtotheFundsInvestmentFocus........................................................ 60 PotentialRisksAssociatedwithInvestinginthePRC.............................................. 61
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Private Placement Memorandum E.
PotentialConflictsofInterest................................................................................... 68
VI.
LEGALANDTAXMATTERS.......................................................................71
A. B. C. D. E. SecuritiesLawConsiderations .................................................................................. 72 CertainCaymanIslandsPartnershipLawMatters................................................... 72 ERISAConsiderations ................................................................................................ 72 SummaryofPRCTaxConsiderations ....................................................................... 75 CertainU.S.FederalIncomeTaxConsiderations..................................................... 78
VII.
CERTAINOFFERINGLEGENDS ..................................................................86
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I. ExecutiveSummary
Beijing Capital Investment Co., Ltd. (Beijing Capital), the private equity arm of the Beijing Governmentsinvestmentconglomerate,BeijingCapitalGroupCo.,Ltd.(BCG),isseekingto 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 vehiclesandintermediaryentities,collectively,theFund).TheFundisBeijingCapitalsfourth private equity fund, and its first fund open to Offshore Investors. Beijing Capital and limited partnersinthePRCfromBeijingCapitalsthreepreviousfundswillinvestuptoanadditional $40millionintheFund(foratotalFundsizeofupto$100million)alongsideOffshoreInvestors. The Funds strategy is to make minority investments in high growth, profitable companies locatedthroughoutChinathatoperateinsectorsthathavestrongmacrotrendsandwillbenefit directlyfromgovernmentpolicies.TheFirmbelievesthesecompaniesarethebestcandidates forinitialpublicoffering(IPO)onthe Industry Focus domestic stock exchanges in China. The Firm has identified Clean Energy, Clean Energy Agriculture Technology and Food Processing, Information Technology, Biological Science Agriculture Technology and Food Processing and Pharmaceuticals Industrial Technology and Biological Science and Pharmaceuticals as the primary sectors that fit these criteria, Other High-Growth Industrial Technology Industries althoughitmayinvestinhighgrowth, profitable companies in other sectors Information Technology aswell. Thesehighgrowth,preIPOcompaniesarealsolikelytobenefitthemostfromBeijingCapitals accesstoBCGssubstantialresources,relationshipsandinfrastructure,includingeasieraccess to debt and public equity capital via BCGs inhouse debt guarantee institutions, investment bankandpartnerbanks.AstheinvestmentarmoftheBeijingGovernment,BCGisamongthe largest conglomerates in China, spanning real estate, water/environmental infrastructure projects,informationtechnology,financialservicesandprivateequity.BCGhasover$10billion of assets under management, a network of subsidiaries (six of which are publicly listed, including Beijing Capital Co., Ltd. Strategic Partners (SHSE:600008), HIT Capital China Shanghai Pudong Technology Co., Ltd. Banks Development Bank of Beijing Minsheng Bank Development Bank Bank (SHSE:600857) and Beijing Capital Land Ltd. (SEHK:2868)) and Zhongguancun BCIG Guaranty approximately 6,200 employees Guarantors across its offices in 32 cities in China Cinda Xiangcai Everbright Merchants FirstCapital China,givingBeijingCapital,asthe Security Companies Securities Securities Securities Securities private equity arm of BCG, enormousreachintothepublicandprivatesectorsthroughoutChina.
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Beijing Capital utilizes BCGs infrastructure and strategic partners to provide substantial additionalvaluetoitsportfoliocompanies,particularlywithrespecttonurturingthegrowthof portfoliocompaniesandusheringthemthroughthedomesticIPOprocess.Entrepreneursand investmentbanksadvisingportfoliocompaniesactivelyseekinvestmentsbyBeijingCapitalin ordertoengageapartnerthatcanprovidemorecertaintytoaliquidityeventandothervalue creationbeyondjustinvestedcapital. TheFundhasahighlydifferentiatingadvantageofcombiningfourmajorelementsthattheFirm believesarecriticalforsuccessinChinasprivateequitysector: LocalMarketAcumen; NationwideDealInfrastructure; InternationalExpertise;and GovernmentalSupport. The Funds unique depth in all four of these areas provides it with proprietary deal flow and execution,internationalbestpracticesfordisciplinedandconservativeinvesting,andtheability 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 managementplatformfortheFund,andforanysuccessorfundsmanagedbytheFirminthe future. SuccessfulTrackRecord Beijing Capital and its team of investment professionals have been pioneers in Chinas 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 Capitals 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 RMBprivateequityinvestinginChinaprovidesitwithauniqueearlymoveradvantage,given thatRMBprivateequityinvestingisarelativelyrecentphenomenoninChina. ExtensiveSupportInfrastructure TheFirmsthreeManagingPartnersaresupportedby13additionalinvestmentprofessionalsin Beijing,includingportfoliomanagers,duediligenceanalystsandsectorexpertsdedicatedtothe FundsoperationsaroundChina.TheFirmplanstoopenanofficeinShanghaiaftertheclosing oftheFundforcloseraccesstodealsintheYangtzeRiverDeltaregion.BeijingCapitalisalso supportedbyBCGsresourcesandinfrastructure,includingdealsourcingfromBCGs32offices throughoutChinaaswellasprofessionalstrainedbyBeijingCapitalinsixcitiesinBCGsoffices and external advisory firms assisting Beijing Capital with indepth due diligence and deal
1
See infra note 6 on page 19.
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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.BeijingCapitalalsoutilizestheexpertiseofBCGsinvestmentbankingsubsidiary, First Capital Securities, and strategic partners to determine the viability of a portfolio companysIPOprospectsandassistitthroughtheIPOprocess.Thus,theFundhasaproprietary and comprehensive sourcing to nurturing to liquidity event IPO infrastructure. Additional supportisprovidedby15externaladvisorycompanies,andindustryexpertsselectedfortheir significant experience in the targeted industries, a nationwide network of consultants and economic development groups, and leaders of stateowned and private industrial enterprises who can assist the Firm and the Funds portfolio companies with deal execution, business operationsandexitopportunities. SeasonedManagementTeam The Firms 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,apioneerofChinasRMBprivateequityindustry,helpedthePRCStateCouncildraftits privateequitypolicies,andfoundedBeijingCapitalin1998astheBeijingGovernmentsprivate equityarm.Mr.WanghasledBeijingCapitalsprivateequityinvestmentoperations,including itsthreepriorfunds,sincethattime.Dr.GaryGangKehas25yearsexperienceasahighlevel governmental economic policy advisor, investor, entrepreneur and venture capitalist in China specializinginincubatinghighgrowthcompaniesandhasupgradedBeijingCapitaltooperateat international standards since 2006. Mr. Omer Ozden was formerly a partner at Baker & McKenzieLLPsNewYorkCityofficeleadingtheirChinacapitalmarketsteam,andbringswith him expertise in Westernstyle securities law compliance as well as 14 years of experience in MainlandChinasventurecapitalandprivateequitymarketsasaninvestor,entrepreneurand privatepracticeattorney. StrongCommitmenttoTransparencyandGovernance TheFirmiscommittedtotransparencyandgoodgovernanceonbehalfoftheFundsinvestors 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 independentauditor. Additional protection is also offered to the Funds Offshore Investors. All investment and disposition decisions require the approval of the nonPRC Managing Partners on the Firms investmentcommittee. Furthermore,theFirmbelievestheinclusionofMr.Ozden,aMandarinspeakingU.S.securities lawyer with experience in capital market and corporate governance matters, in the Funds
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managementandinvestmentdecisionprocessisakeydifferentiatorbetweenitandotherRMB funds. AboutBCG BCG is a large scale stateowned 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, BCGs 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 subsidiariesandbusinessgroups,BCG has six publicly listed subsidiaries on the Hong Kong, Shanghai and BCGOffices Shenzhenstockexchanges,inaddition to the various portfolio companies of Beijing Capital that have publicly listed. As BCGs private equity arm, Beijing Capital was established in 1998 and was among the pioneers in Chinas onshore RMB private equity sector. Over the past decade, Beijing Capital has produced some of BCGs most attractive and consistent returns amongstitsvariousbusinessgroups.TheFundrepresentsthefirsttimethatBeijingCapitalis opening its investment opportunities to Offshore Investors and is the Beijing Governments forayintodevelopingrelationshipswithinternationalinvestorsthroughitsprivateequitygroup. BCGbelievesthatbydevelopingrelationshipswiththeforeigninvestmentcommunity,thereis theopportunitytoimportinternationalcapitalmarketandinvestmentmanagementexpertise, share with foreign investors BCGs various investment opportunities in China, including establishing future funds, and over the long term, forge relationships with the international
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communitythatmayexpandtoinvestmentopportunitiesandpartnershipsbeyondChina.The FundisafirststeptowardsOffshoreInvestorsenteringapremierinvestmentcircleinChina.
A.
CompetitiveAdvantages
TheFirmbelievesthatitisparticularlywellpositioned,throughtheBeijingGovernment,BCGs resources and its own relationships and experience, to provide the Fund with significant advantagesinoriginatingcompellinginvestmentopportunities,enhancingthevalueofportfolio companies and supporting their exit events. For specific examples of Beijing Capitals competitiveadvantages,seeIII.TrackRecordandSelectedTransactionSummaries. ProprietaryDealSourcingNetwork 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 BeijingCapitalandproducedealflowthatotherfundsdonotsee.Thesesourcesinclude: BCGs32officesthroughoutChinawithestablishedincentivesforBCGsemployees toactivelydriveproprietaryinvestmentopportunitiestoBeijingCapital. BCGs inhouse investment bank, First Capital Securities Co., Ltd. (First Capital), which is well regarded for its capital raising capabilities for small to mediumsized enterprises,andwhichprovidesBeijingCapitalwithpreferentialaccesstoitsclients andtransactions.Inaddition,BeijingCapitalhasastrongworkingrelationshipwith other investment banks in China, namely, Cinda Securities, Xiangcai Securities, Everbright Securities and China Merchants Securities. These relationships develop investmentopportunities in later stage companies that are typicallywell packaged andfairlyadvancedinthepreIPOprocess. Government agencies and economic/hightech development zones around China. ThisincludestheZhongGuanCun(ZGC)TechZone,knownasChinasSiliconValley, and ZGC Technology Incubator, one of Chinas leading technology incubators of whichBeijingCapitalisashareholder,andwhichhascommittedtoopenitspoolof companies as a source of deal flow to the Fund. ZGC Technology Incubator and
Source of Investment Targets
Partner Banks and InHouse Securities Firm and Guarantee Houses
Government Agencies
Economic/High-tech Development Zones
BCGs 32 Offices Throughout China
Investment Banks, Accounting Firms and Law Offices
State-Owned and Private Industry Partners
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other government supported incubators provide the Fund with early access to hiddengems. Agreements with 15 advisory companies throughout China actively driving transactionopportunitiestoBeijingCapital. Partnerships with large stateowned enterprises and private enterprises in numeroussectorsaroundthecountry. TheFundalreadyhasaconsiderablepipelineofpotentialdeals,differentiatingitselffromother funds.AsofthedateofthisMemorandum,theFundhas15investmentopportunitiesinChina under advanced negotiation awaiting investment. These deals were sourced through Beijing Capitals network after meticulous review of hundreds of opportunities during the fourth quarter of 2009 and first quarter of 2010 by the Firms deal team. The companies all have multipleyearsofprofits,highrevenueandnetincomegrowthrates,andtheFirmbelievesare strong candidates for domestic public listing. The companies are in such sectors as Clean Energy,AgriculturalTechnologyandIndustrialTechnology.ThereisnoassurancetheFundwill consummate all or any of these transactions. However, given these potential investment opportunities, Beijing Capitals established deal team, track record and deal sourcing and IPO infrastructure,theFirmbelievesthatitpresentsinvestorswithafundthatisreadytoquickly deploy,somethinghighlyuniqueforonshoreRMBfundsinChina. EnhancingPortfolioCompanyGrowthandProfitability Beijing Capital provides direct and substantial assistance to enhance the growth and profitability of its portfolio companies. This assistance can be provided by BCGs inhouse guarantee houses, securities company, and partner banks which can significantly ease a portfoliocompanysaccesstodebt andequitycapitaltofuelgrowth.BeijingCapitalcanhelp portfoliocompaniesnavigatethroughgovernmentagenciesintheireffortstoobtainlowertax rates and subsidies. In addition, its relationships with stateowned enterprises and leading companies in private industry in a broad spectrum of sectors can help deliver new sales contracts, and marginincreasing sourcing opportunities for Beijing Capitals portfolio companies,aswellasjointventureandresearchanddevelopmentpartnerships. ExpeditedPathtoExit OneofBeijingCapitalsmajorstrengthsisitsabilitytofacilitateIPOsforitsportfoliocompanies. The Firm has a complete IPO support infrastructure consisting of internal capital markets expertsamongits13investmentprofessionals,accesstoexternalcapitalmarketsexpertsand supportthroughitssubsidiarysecuritieshouse.ThechallengeformanypreIPOcompaniesin Chinaisthatsuccessfullistingonlocalstockexchangesisnotalwaysafunctionofthequality and future prospects of the company, but also the companys ability to obtain government approvals to publicly list through a highly discretionary local listing process. Beijing Capitals
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workingrelationshipsandexperiencecanhelpitguideportfoliocompaniesefficientlythrough theregulatorypubliclistingapprovalprocess. When reviewing investment opportunities, Beijing Capital places significant emphasis on the opinionofitsinternalcapitalmarketsteamandoutsidecapitalmarketsadvisorstodetermine thelikelihoodofasuccessfulpubliclistingexit.BeijingCapital,withitsinternalcapitalmarkets experts,closeinvestmentbankingrelationships,andgovernmentalconnections,providesmore thanjustgrowthcapital,butaproprietaryandcomprehensiveIPOinfrastructuretoitsportfolio companies. BeijingCapital believes it has traditionally been able to negotiate investments at lower multiples because it offers entrepreneurs more certainty towards a liquidity event. In addition, BCGs relationships with a broad spectrum of stateowned and privately owned enterprisescanalsoassistwithtradesalesandothermergerandacquisitionopportunitiesfor itsportfoliocompanies. UniqueBlendofLocalMarket,InternationalandGovernmentalExpertise The Fund has the highly differentiating advantage of combining four major elements that the Firm believes are critical for success in Chinas private equitysector: Localmarketacumen; Nationwidedealinfrastructure; Internationalexpertise;and Governmentalsupport. While other funds may possess one or two of these important qualities, the Fund presents a uniquemixofallfourofthesecriticalelements. The Firms Managing Partners have combined experience in China on over 300 transactions involvingventurecapitalandprivateequityinvestments,initialpublicofferings,debtofferings and mergers and acquisitions with local entrepreneurs in China. The Firms management and investment professionals understand due diligence, establishing rapport and trust with local entrepreneurs,anddealnegotiationandexecutionatapurelylocallevel. Meanwhile, over the past 12 years, BeijingCapital has developed a nationwide infrastructure that,onacosteffectivebasis,encompassestheentirenationresultinginproprietarylocaldeal flow,duediligencecapabilitiesanddealexecutionthroughoutfirst,secondandthirdtiercities. Suchafoundationwouldrequireotherfundmanagersconsiderableexpendituresintimeand capitaltoestablish.
Beijing Capital
Critical Success Drivers

Local Market Acumen
Nationwide Deal Infrastructure International Expertise Governmental Support
Portfolio Investments
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Thirdly, the Firm has developed a highly disciplined investment decision process through its conservative investment approach and international expertise. In addition to Beijing Capitals stringent investment decision process and responsibility to produce returns for the Beijing Governmentthathavebeendevelopedoverthepast12years,Dr.GaryGangKehasoverthe past four years upgraded Beijing Capitals management to execute transactions based on international standards. In addition, Mr. Omer Ozden brings his experience working with top privateequityfundsandissuersinChinaasaU.S.securitiesattorney,helpingtoinstitutebest practiceinvestmentdecisionmaking,corporategovernanceandtransparency. Finally,theFundhasthedirectsupportofthegovernment,somethingthatisvitaltoflourishin Chinas onshore private equity sector. This significantly helps to facilitate foreign investment, currencyexchangeandrepatriation,taxbreaksforportfoliocompaniesandmostimportantly,a complete infrastructure for public listing on the domestic stock exchanges through Chinas highlydiscretionarylistingapprovalprocess. TheFirmbelievesthatitsgovernmentsupporthelpsbuttressitsabilitytoenforcecontractual obligations of its portfolio companies and also tends to deter any potential fraud that a portfoliocompanyinthePRCmayseektoengageinagainsttheFirm,providinganadditional layerofsecurityforthoseseekingtoinvestintoChina. The Fund represents a unique blend of qualities among private equity funds in China and another pioneering step by Beijing Capital in Chinas private equity sector. The Firm believes thatitistheonlyprivateequityfundinChinasponsoredbyagovernmentaffiliatedenterprise that has nonPRC 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 commitmenttohighstandardsfortheprotectionoflimitedpartnersandfortheprotectionof the reputation of the Beijing Government, an upmost driver of the Firms disciplined and conservative investment approach. The Firm has a distinct home field advantage while recognizing the importance of importing international practices and capital management technologyfromforeigninvestorsandmanagers,providinglimitedpartnerswithaprogressive andcompellingmanagementplatforminChinawithrespecttotheFund,andwithrespectto anysuccessorfundsmanagedbytheFirminthefuture.
B.
InvestmentStrategy
InvestmentCriteria The Funds investment criteria is similar to that of Beijing Capitals prior funds. It intends to acquireaportfolioofminorityinvestmentsinChinabasedcompaniesthat: Demonstrateatleastthreeyearsofprofitsandhighgrowth;
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Operateinsectorsthatbenefitfromstrongmacroeconomictrendsandgovernment policies (Beijing Capital has identified Clean Energy, Agriculture Technology and Food Processing, Information Technology, Industrial Technology, and Biological ScienceandPharmaceuticalsassuchsectorsofinterest); Have strong management with the proven ability to lead a successful, growing company; CanbenefitfromBeijingCapitalspostinvestmentsupport;and Highlikelihoodoflistingondomesticpublicmarkets. TheFirmbelievescompaniesfittingthesecriteriapresentastrongintersectionofrelativesafety andvaluecreationopportunities. InvestmentSafety TheFirmtakesaresponsibleandconservativeapproachtoitsinvestmentdecisionsbyfocusing primarily on safety. The Firm does not need to swing for the fences in order to provide its limitedpartnerswithattractivereturns.Thesafetyofitsinvestmentsisattributableto(i)the portfolio companys historically proven ability to generate positive net income even while supporting growth, (ii) Chinas strong macroeconomic factors, (iii) Beijing Capitals deep understanding and relationships in the targeted industries, and (iv) the propensity of Beijing Capitalsportfoliocompaniestopubliclylist.Thecombinationofthesefactorsofprovidinga 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 consistentbasis,insteadofaimingforhigherreturnsonascatteredbasis,inordertoprovide healthyreturnstoitsinvestors. ValueCreation TheFundfocusesoncompaniesthatcanbenefitfromitsinfrastructure.BeijingCapitalhasthe potentialtohelpthesecompaniescreatevalueinanumberofways,includingaccesstolarge stateowned enterprises and private companies that may serve as potential customers, suppliers or R&D partners, assistance with government agencies and programs that may supportthecompanysexpansionandreducetaxrates,andsupportthroughthepubliclisting approvalprocess. BeijingCapitalbelievesthattheabilitytoprovidethispostinvestmentsupportisanattractive 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.
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Private Placement Memorandum StrongProprietaryDealFlow
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 preIPO process through its network of BCG offices, relationships with high tech zones, government agencies, and state owned enterprises, for whichBeijingCapitaltypicallypaysrelativelylowermultiples,and(ii)companiesthatarewell packaged and much more advanced in the preIPO process through BCGs 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 Capitals deal flow is highly proprietary, and stems from very different sources than those of typical private and offshore fundsoperatinginChina.
C.
InvestmentDecisionProcess
Whenreviewinginvestmentopportunities,theFirmscoreprinciplesare: SafetyfirstDuediligenceisofprincipalimportanceandinvestmentdecisionsare made on verifiable facts concerning a portfolio companys operations, financial performance,managementandonathoroughunderstandingoftheunderlyingrisks to the company and industry. The Firm utilizes its internal professionals, external professionalsthatBeijingCapitalhastrainedinsixcitiesinBCGsofficesandexternal advisoryfirms,anditsrelationshipswithstateownedenterprisesaroundChina,as well as paid external experts from the industry under review to assist with due diligence.Duediligencedoesnotenduntiltheinvestmentisexited. 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,employingitsowninternalcapitalmarketsexpertsaswellastheadviceof external capital markets experts, particularly from BCGs subsidiary investment bank,FirstCapital. Discipline The full, documented investment decision process consists of multiple stepsinvolvingadviceanddecisionsfromvariousparties.Theprocessinvolvesthree major areas: analysis of the companys performance and industry, analysis of the companysviabilityforlisting,andpostinvestmentmonitoringandsupport. These conservative principles derive from 12 years of experience in Chinas private equity sector,responsibilitytopreserveandgrowtheBeijingGovernmentswealth,andtheadoption ofinternationalstandardsoverthepastseveralyears.
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Beijing Capital has applied a sophisticated, multistep investment decision process that incorporates substantial due diligence, including document review, management interviews, industrymarketresearchanduseofoutsideexperts. Step1:OpportunityOriginationandReview BeijingCapitalreviewsthousandsofpotentialdealseachyear.Typically,potentialdealswillbe reviewed by our associates and portfolio managers, which utilize information provided by government agencies, BCGs offices, and advisory companies and investment banks to determineifacompanyisoffurtherinterest. WhenBeijingCapitalidentifiesacompanyoffurtherinterest,itassignsadealteam,typically consistingoftwoBeijingCapitalprofessionals,atleastoneofwhichisaPortfolioManager,and one or two external industry experts, to review the opportunity and any prepackaged informationaboutthecompanysoperations,management,prospectsandfinancials,whichare frequently already audited. During this stage, it is Beijing Capitals professionals who analyze the candidate in terms of industry, region, stage of development, financial information and capitalrequired.Basedontheinformationprovided,opportunitiesarerejectedorselectedfor furtherinvestigation. Step2:SiteVisitsandInitialDiligence The two Beijing Capital professionals on the deal team conduct on site interviews with managementofthecompany,whichusuallyincludesmeetingswiththecompanyschairman, chiefexecutiveofficer,chieffinancialofficerandtechnicalofficers.Thedealteamalsotoursthe companysfacilitiestoreviewtheproductionprocess,productsandqualitycontrolstandards. ThedealteamsinvestigationcanbesupportedbyprofessionalsthatBeijingCapitalhastrained in six cities in BCGs local offices and external advisory firms to collect initial due diligence documents, review materials and follow up with inquiries. The deal team determines the companys core competency, growth potential, and Beijing Capitals ability to create value in the company. In the event the deal team determines to pursue the transaction, a letter of intentwilltypicallybesignedwiththecandidatecompany.
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Private Placement Memorandum Step3:DealQualityAnalysis
BeijingCapitalsupportsitsfinancialanalysisoftheinvestmentopportunitybyconsultingateam of internal and external industry experts and consultants and utilizing its relationships at relevantstateownedandprivateenterprises.Atthispointintime,BeijingCapitalengagesone ortwoexternalindustryexpertstoassistwithanalysisofthedealsquality.Thedealteamalso utilizesexpertsinstateownedenterprisestodeterminetheviabilityofthecompanysbusiness and standing it its sector. Among the factors considered is the companys reputation in its industry and whether it is competitively positioned to expand its market share in a growing industry. Step4:PublicListingFeasibilityAnalysis Beijing Capitals internal capital markets team works with external capital markets experts at BCGssubsidiaryinvestmentbank,FirstCapital,andoneormoreoftheotherfourinvestment bankswithwhichBeijingCapitalhasastrongrelationship,inordertodeterminewhetherthe company is a strong candidate for future public listing on a domestic stock exchange. Beijing Capitalplacesagreatdealofemphasisonthisphaseoftheinvestmentdecisionprocessasthe likelihood of a candidate companys listing on a public exchange is a major factor for Beijing Capitalwhenconsideringaninvestmentopportunity. Step5:InDepthDueDiligence IfacandidatecompanypassesboththeDealQualityAnalysis,andthePublicListingFeasibility Analysis,thedealteamprovidesatermsheettothecandidatecompany,whichisnegotiatedby thePortfolioManagerandoneoftheManagingPartners. Uponsigningofthetermsheet,BeijingCapitalmovesforwardwithindepthduediligence.The dealteam,alongwithotherprofessionalsfromBeijingCapital,conductacomprehensivereview ofthecompanysinternaldocuments,contracts,operationsandassets.BeijingCapitalisableto utilize BCGs 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 BCGs offices and external advisors and industry experts. The full Due Diligence Report, and the Investment Proposal whichincludestheDealQualityandPublicListingFeasibilityAnalysis,arethensubmittedtoa ManagingPartnerforreview. Step6:InvestmentCommitteeReview 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 teamandtheCapitalMarketsteammember.TheInvestmentCommitteeisalsojoinedbythe external industry experts hired to analyze the deal. An investment decision requires majority
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approval by the Investment Committee members, including unanimous support by all of the ManagingPartners.Althoughthedecisionoftheexternalindustryexpertsarenotcountedasa partoftheinvestmentdecision,theiropinionsareapartofthedecisionmaking processand notedintherecordsoftheInvestmentCommittee,providingalevelofexternalindependent reviewandoversightforthedecisionmakingprocessbythosewithexpertiseinthecandidate companys 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 andthedealteam,alongwiththeexternallawyers,executesthetransaction. Step7:PostInvestmentMonitoring Uponclosingoftheinvestment,thePortfolio ManagerandamemberoftheCapitalMarkets team are assigned to actively monitor and report to the Managing Partners on the Funds investment.Thispostinvestmentmonitoringincludesfinancialreportinganduseofproceeds, 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 capitalmarketsteamtodetermineanoptimaltimefortheFundtoexittheinvestment.
D.
ForeignInvestedPrivateEquitySectorinChina
CurrentRegulatoryLandscape:OffshoretoOnshore Since the advent of venture capital and private equity investing in China in the mid 1990s, foreigninvestorshavetraditionallybeenlimitedtoinvestinginChinathroughoffshorefunds. Thesefundsstructuredtheirinvestmentsusingspecialpurposevehiclesestablishedinoffshore jurisdictions,andinvestingunderoffshorelaw,inU.S.dollars,andwithaviewtopubliclistings and other exits in offshore markets such as the NASDAQ or Hong Kong Stock Exchange. Such structuresarecommonlyknownasroundtripinvestments.InSeptember2006,theMinistry ofCommerceinChina(MOFCOM)enactedregulations,widelyreferredtointheindustryas MOFCOMCircular10ortheForeignM&ARules,2significantlylimitingtheavailabilityofthe roundtripinvestmentstructureaswellasoffshorelistings.Since2006,virtuallynoapprovals for round trip investment structures have been granted, and many foreign investors have startedstructuringtheirinvestmentsonshore,andinvestingunderPRClaw,inRMB,andwitha 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 andoffshorerepatriationofinvestmentreturns.
2ProvisionsontheMergerandAcquisitionofDomesticEnterprisesbyForeignInvestors,August2006
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Private Placement Memorandum RecentOffshoreLiberalization
ThegovernmentinChinaatthenationalandprovinciallevelsrecentlytookthreemajorstepsin 2009 and 2010 to liberalize and set a dynamic landscape for Chinas onshore private equity industry. First, in June of 2009, it allowed foreign managers to form domestic fund managementcompaniesinShanghaiandBeijing.3Second,inAugust2009,itreleasedrulesfor theestablishmentofforeigninvestedpartnerships(FIPs),effectiveMarch1,2010,aformof limited partnership in China that permits a traditional investment fund structure and permits limitedpartnershipinterestsheldbybothonshoreandoffshoreinvestorsinthesameentity.4 Third, in October of 2009, it opened the ChiNext, a Nasdaqstyle exchange for high growth smalltomediumsizedcompanies(SMEs),providinganewexitavenueinadditiontoChinas 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 exchangesthatcaterprimarilytolargeandstateownedenterprises,nowhaveamoreviable pathforpublicexitsinChina. 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.ThesefundsarelargerthanforeigninvestedonshoreRMBfundsandarelimitedstrictly toonshoreinvestors.Forexample,inJanuary2010,CarlyleannouncedaRMB5billion($732 million)buyoutfundthatisexclusivetoonshorePRCinvestors. Additionally,theauthorizationofFIPsisexpectedtoprovideamoreefficientvehiclethrough which foreign investors may invest in RMB denominated funds. In 2003, the government authorizedforeigninvestedventurecapitalinvestmententerprises(FIVCIEs),whichallowfor onshoreandforeigninvestorstoparticipateinasingleinvestmententerprise .5Duetocertain tax and regulatory issues, however, including a limited scope of permissible investments, FIVCIEshavetheirlimitations.TheFIPsrepresentthefirsttimeinChinathatforeigninvestors are permitted to establish actual funds with typical fund structures and utilize the term fundintheircorporatenames,asopposedtoinvestmententerprisesaspermittedunderthe 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 investorswithamoreefficientmeanstoinvestinonshorecompanies,exittheseinvestments throughlistingsondomesticexchangesinRMB,convertRMBbackintoforeigncurrency,and
3MeasuresforEstablishingForeignInvestedEquityInvestmentManagementEnterprisesinPudongNewDistrict of Shanghai, June 2009, and Circular for Establishing Foreign InvestedEquity Invested Private Equity Investment FundManagementEnterprisesinBeijing,January2010,amongotherregulations
4 Draft of the Measures on the Administration of the Establishment of Partnership Enterprises in the PRC by ForeignEnterprisesandIndividuals,August2009 5 Administrative Measures on Foreign Invested Venture Capital Investment Enterprise, March 2003
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repatriate investment proceeds. Contributions by Offshore Investors to the Fund, and ultimatelythedistributionsfromtheFundto OffshoreInvestors,willbemadeinU.S.dollars, whilethePartnershipsallocationsanddistributionswillbecalculatedinRMB.Distributionsof 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. dollarsundernormalcircumstancestypicallytakes30to60days. DomesticIPOs ThePRCgovernmentisalsoencouragingadynamicprivateequitymarketthroughtheopening oftheChiNextexchangeforsmallerhighgrowthcompaniesinChina.Highgrowthcompanies nowhavetheavenueoflistingontheShenzhenSMEstockexchange,whichhasbeentradingin April2010atapproximatelya43pricetoearningsmultiple,withahighof55in2010,andsince October2009,alsolistingonthenewChiNextstockexchange,whichhasbeentradinginApril 2010atapproximatelya67pricetoearningsmultiple,withahighof106in2010. InChina,thereiscurrentlyahighlevelofcapitalanddemandseekingtoinvestinonlyalimited number of publicly listed companies. Consequently, the PRC government has been allowing morepubliclistingstoincreasethenumberofcompaniesavailableondomesticexchangesfor 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 October2009,over82mostlysmaller,highgrowthcompanieshavelistedontheChiNext.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 companys ability to obtain government approvals to publicly list throughahighlydiscretionarylocallistingapprovalprocess. Summary Chinas private equity market presents a compelling opportunity for foreign investors. While foreigninvestorshavehistoricallyenteredtheprivateequitymarketinChinathroughoffshore fundsandroundtripinvestments,thePRCgovernmenthasstipulatedaregulatorylandscape overthepastseveralyearsthatdirectsinvestmentstobeconductedonshoreandinRMB,and publicexitstobeconductedondomesticexchanges.Inaddition,over thepastyear,thePRC governmenthassignificantlyliberalizedregulationstoallowforeigninvestorstoparticipatein the onshore private equity market by authorizing FIPs, permitting joint Sinoforeign managementofFIPs,andencouragingpubliclistingsofonshorehighgrowthcompaniesonPRC exchanges.
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II. ManagementTeam
The Firm is managed by three leading private equity professionals with complementary skill setsandcombinedexperienceonover300transactionsinthePRC.TheseManagingPartners are currently supported by 13 additional professionals dedicated to the Fund (the Key Professionals). These 13 Key Professionals include experienced portfolio managers, capital marketsexperts,duediligenceanalystsandsectorexperts.
A.
ManagingPartners
Mr.ShaojunWang,SeniorManagingPartner Mr.WangisapioneerofChinasRMBprivateequityindustry,withabackground in technology and finance and deep relationships with government and technologicaldevelopmentzonesthroughoutChina.Hewasappointedin1992 to the first research group commissioned by the State government to develop policyforChinasprivateequityindustry.Sincethattimehehasmadesignificant contributions towards private equity policy and regulatory changes by Chinas State Council. In the early and mid 1990s, he was director of ZhongGuanCun HighTech Zone (ZGCTechZone),theSiliconValleyofChinalocatedinBeijingsUniversitydistrictwherehewas responsiblefortheincubationofsmallandmediumsizedtechnologyenterprises.In1995,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 BCGs private equity investments and has been manager for three fundssincethen,theBeijingCapitalFund,theShenzhenCapitalGrowthFundandtheXinrong 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 Masters degree from Renmin University of China and a Bachelors of Engineering degree from Naval AeronauticalEngineeringInstitute. Mr.OmerOzden,ManagingPartner Mr. Ozden is a Mandarinspeaking New York attorney with 14 years of experienceinMainlandChinasventurecapitalandprivateequitymarkets.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 indepth experience with SinoForeign direct investmentlaws.HewasformerlyaPartnerwithBaker&McKenzieleadingtheir New York offices 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, DragonTechandNew Margin,aswellasvariouscompaniesincludingNetEase,Baidu,Alibaba andXinyuan.
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Prior to private practice, Mr. Ozden was an investor and entrepreneur, cofounding two businesses in the ZGC Tech Zone: one a business and legal consulting company advising technologystartupsandinvestors;theother,ChinaEVision,aseedinvestorandincubatorfor technologycompaniesfoundedbylocalandforeigninvestors. Mr.OzdenhasaBachelorofCommerceinFinance(Honors)fromtheUniversityofTorontoand a Juris Doctor and LL.B. from the University of Detroit, Michigan and University of Windsor, Ontario,undertakinglawdegreesintheUnitedStatesandCanadaconcurrently.Healsostudied MandarinoninternationalscholarshipatNationalTaiwanNormalUniversityinTaipei. Dr.GaryGangKe,ManagingPartner Dr. Ke has 25 years experience as a high level governmental economic policy advisor,entrepreneurandventurecapitalist.Dr.KeisBCGsassociateengagedin overseas joint venture projects, and domestically works with Beijing Capital on their domestic AShare listings since 2006. He is the founder of Sinosphere Capital Group which advises high growth companies in China seeking offshore listings. Dr.KeformerlyservedasamemberoftheChinacentralgovernmentpolicythink tankandisnowSeniorAdvisortoseveralcentralgovernmenteconomicpolicyandinternational businessdevelopmentinstitutions. HehastestifiedbeforeU.S.Congressonseveraloccasions regardingU.S.economicpoliciestowardsChina. He cofounded China EVision 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 startup technology companies. Dr. Ke also cofounded a media company together with former U.S. television executives, navigating through challenging PRC regulatory approval hurdles to establish and operateaChinaTVlocalsyndicationnetworkthatgrewto76localtelevisionstations. Dr.KeholdsaPh.D.inInternationalEconomyandanM.A.inInternationalRelationsfromthe University of Maryland and a B.A. in Political Economy from the Chinese Academy of Social SciencesinBeijing.
B.
KeyProfessionals
Mr.LukeWenyiLu,VicePresident Mr.LujoinedBeijingCapitalin2002andisresponsibleforreviewinginvestment opportunities,duediligence,dealnegotiations,investmentmonitoringanddeal teamoversight. 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
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managementfirmsandistheGeneralManageroftheShenzhenCapitalGrowthFund.Heisalso theViceChairmanoftheZGCTechnologyIncubator.Mr.Luhasgeneratedimpressivereturns through good and bad markets, demonstrating his ability to identify, operate and exit the portfoliocompanyinvestments. Mr. Lu has a Bachelors degree in physics from ShaanXi Normal University and a Masters degreeinEconomicsfromXianJiaotongUniversity. Ms.HongyingWang,GeneralManagerofCapitalMarkets Ms. Wang joined Beijing Capital in 2002 and is responsible for investment analysisandmonitoring,securitiesresearchandcapitalmarketsanalysis. Ms.WanghelpedestablishBeijingCapitalsXinrongFundandcurrentlyservesas its General Manager. In that capacity, Ms. Wang works closely with the Shenzhen Stock Exchange and securities firms to manage the exit strategy for BeijingCapitalsportfoliocompaniesanddrivetheirIPOprocess. Ms. Wang has a Bachelors degree in literature and Masters degree in history from Beijing NormalUniversity. Mr.GangZhou,GeneralManagerofEquityInvestments Mr. Zhou joined Beijing Capital in 1998 and is responsible for investment opportunity reviews and managing portfolio investments, with a focus on preparingcompaniesforpublicmarketexits. He has twelve years of experience making and managing private equity investments.HehasbeeninvolvedintheinvestmentandoperationofBeijing Capitals three predecessor funds and has been a criticalpart of Beijing Capitalsstrong track record. Mr.ZhouhassubstantialexperiencewithChinascapitalmarketsandadeepunderstandingof the clean tech and advanced manufacturing industries, with five years of operations managementexperience. Mr.ZhouhasaMasterofAccountingfromCentralUniversityofFinanceandEconomicsanda BachelorofEngineeringfromBeijingInstituteofTechnology.
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III. TrackRecordandSelectedTransactionSummaries
BeijingCapitalhassponsoredthreepriorRMBinvestmentfunds,BeijingCapitalFund(FundI), ShenzhenCapitalFundandXinrongFund(collectively,thePredecessorFunds). Included below is an exhibit of five investments that have been made and exited by the PredecessorFunds(FiveExitedInvestments).TheFiveExitedInvestmentswereeachrealized ataprofit,withacombinedIRRofapproximately59%.6FouroftheseFiveExitedInvestments aredescribedinmoredetailinIII.TrackRecordandSelectedTransactionSummariesB.Case StudiesPerformanceHistory. The Predecessor Funds also currently hold seven investments that have not been exited (SevenCurrentInvestments).TheseSevenCurrentInvestmentsarelistedintheexhibitbelow andthreeoftheseSevenCurrentInvestmentsaredescribedinmoredetailinIII.TrackRecord andSelectedTransactionSummariesB.CaseStudiesPerformanceHistory. In addition to the Five Exited Investments and Seven Current Investments, there are four investments(FourAdditionalInvestments)thathavebeenmadeandexitedbyBeijingCapital. BeijingCapitalhasdeterminedthattheseFourAdditionalInvestmentsarenotappropriateto beincludedinitstrackrecordandreturncalculationsbecausetheinvestmentandexitstrategy 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 FiveExitedInvestments,BeijingCapitalstrackrecordandreturncalculationswouldresultina
AllIRRandmultipleofcostreturnspresentedinthisMemorandumarepresentedonagross,realizedbasis,and do not reflect any taxes, carried interest, management fees, and other expenses of the type that are typically bornebyaninvestmentfund,allofwhichwouldreducethereturnsactuallyreceivedbyinvestorsparticipatingin suchinvestments. All IRRs presented in this Memorandum reflect the annual, compounded, gross internal rates of return on the specifiedinvestmentscalculatedbasedonthenetannualinflowsandoutflowsofcapitalwithrespecttotheFive Exited Investmentsfor 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 investmentreturnspresentedinthisMemorandum. The Predecessor Funds are currently valuing each of the Seven Current Investments at cost. Consequently, the FundManagerhasdeterminednottopresentacombinedrealizedandunrealizedIRR.Prospectiveinvestorsare encouragedtodiscusssuchunrealizedinvestmentswithrepresentativesoftheFundManager.Therecanbeno assuranceastotheactualvaluationatwhichunrealizedinvestmentswillberealized.Actualrealizedreturnswill depend on, among other factors, future operating results, the value of the assets and market conditions at the timeofdisposition,anyrelatedtransactioncosts,andthetimingandmannerofsale,allofwhichmaydifferfrom theassumptionsonwhichsuchvaluationsarebased. InconsideringtheperformanceinformationpresentedinthisMemorandum,prospectiveinvestorsshouldbear inmindthatpastperformanceisnotindicativeoffutureresults,andtherecanbenoassurancethattheFund willachievecomparableresults.
6
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slightlyhighercombinedIRRofapproximately60%.ThreeoftheFourAdditionalInvestments aredetailedbelowinIII.TrackRecordandSelectedTransactionSummariesC.CaseStudies AdditionalInvestments.
A.
TrackRecord7
Below is an exhibit providing summary information about the Five Exited Investments, which BeijingCapitalbelievesareappropriateforinclusioninitstrackrecordandreturncalculations.
FiveExitedInvestments
(RMBinMillions) YearofCashFlows 2001 2002 2003 2004 2005 2006 2007 2008 2009 GrossIRR
BeijingStorageBattery(batterytechnology,M&Aexit) CashInvestment (23.7) CashReturn 2.0 28.2 49.9 NetCashFlow (23.7) 2.0 28.2 49.9 DaliTechnologyCo.Ltd.(SZSE:002214)(thermalimagingtechnology,publiclistingexit) CashInvestment (5.0) CashReturn NetCashFlow (5.0) 0.0 0.0 0.0
62%
24.1 24.1
48%
NewJialianElectronicsCo.,Ltd.(SZSE:002188)(electroacousticcommunicationproducts,publiclistingexit) CashInvestment (9.1) CashReturn 17.0 NetCashFlow (9.1) 0.0 17.0 37% JinqiaoRealEstateDevelopment,Limited(realestate,shareredemptionexit) CashInvestment (11.4) CashReturn NetCashFlow (11.4) FulidaFibreCo.,Ltd.(textiles,shareredemptionexit) CashInvestment CashReturn NetCashFlow CombinedNetCashFlow (23.7) 2.0 28.2 49.9 (5.0) (9.1) (11.4)
0.0 (17.6) (17.6) (0.6)
13.1 13.1
7%
20.8 20.8 57.9
18% 59%
TheFiveExitedInvestments,SevenCurrentInvestmentsandFourAdditionalInvestmentscompriseallofthe investmentsmadebythePredecessorFundssincethebeginningof2001.TheFundManagerhasdeterminedto excludeinvestmentsbyFundImadepriorto2001fromitstrackrecorddeterminations(i)becausetheregulatory frameworkforonshoreprivateequityinvestingpriortothattimedifferedmateriallyfromthecurrentframework, particularlywithrespecttoinvestmentstructuresavailabletoSOEsinvestinginprivatecompaniesandexit strategiesavailablewithrespecttoinvestmentsincompaniespriortotheirpubliclistings,and(ii)dueto subsequentchangestoBeijingCapitalsinvestmentteam.
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Below is an exhibit providing summaryinformation about the Seven Current Investments not yetrealized.
SevenCurrentInvestments
Company BestPrecisionCo.,Ltd. KingoldJewelry,Inc.(OTCBB:KGJI) LuHaiEnvironmentalProtectionIndustryDevelopment NorthGlassTechnologyCo.Ltd. SinoSelenHiTechCo.,Ltd. SunwodaElectronics(SwodaElectronics) ZhongJiConcretePiles Industry Industrialtechnology Jewelry Environmental Industrialtechnology Industrialtechnology Electronics Constructionmaterials Status Notexited Notexited,publiclytrading Notexited Approvedforpubliclisting Notexited Notexited Filedforpubliclisting
BelowisanexhibitprovidingsummaryinformationabouttheFourAdditionalInvestmentsnot includedinBeijingCapitalstrackrecordandreturncalculations.
FourAdditionalInvestments
CnlightCorporationLimited(SZSE:002076)(publiclistingexit) Industry:Electronics CashInvestment(April2004) CashReturn(June2008) HangminLimited(SZSE:600987)(publiclistingexit) Industry:Textiles CashInvestment(June2003) CashReturn(August2005) NHUCompanyLimited(SZSE:002001)(publiclistingexit) Industry:Pharmaceuticals CashInvestment(April2003) CashReturn(June2005) SunvimGroupCo.Limited(SZSE:002083)(publiclistingexit) Industry:Textiles CashInvestment(October2005) CashReturn(March2008) RMB(millions) 3.2 26.7
4.0 7.3
4.2 9.4
4.2 32.8
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B.
CaseStudiesPerformanceHistory
Below are more detailed descriptions of seven investments selected from the Five Exited InvestmentsandSevenCurrentInvestments.
1. NewJialianElectronicsCo.,Ltd.(SZSE:002188)
InvestmentStatus:
FullyexitedShenzhenExchange
BusinessDescription:
New Jialian Electronics Co., Ltd. (ZNJ Electronics) develops and manufactures highperformance electroacoustic communication systems for OEMs including SIEMENS, Panasonic, Woori, VTech and NEC.
Industry:
Electronics
Location: InvestmentThesis:
JiashanCounty,ZhejiangProvince As an early market participant in the electroacoustic industry, ZNJ Electronics demonstrated clear leadership in both technology, with higher fidelity than its competition, and market share, which was in excessof50%domestically.ZNJElectronicswasalsoalikelycandidate forpubliclistingontheShenzhenexchange.
SourceofTransaction: BCGs investment banking subsidiary, First Capital Securities, introduced Beijing Capital to ZNJ Electronics, who wanted a strategic shareholdertofacilitateanIPO.ZNJElectronicsrecognizedthatBeijing Capitals reputation and valueadded relationships with the government, regulatory agencies and industry made them an attractiveinvestor.

InvestmentHistory:
InNovember2006,BeijingCapital,throughFundI,investedRMB9.07 millionfor3.6%ofZNJElectronicsstock.OnNovember8,2007,with support from Beijing Capital, ZNJ Electronics went public on the ShenzhenSMEboard.Aftertheoneyearlockupperiodmandatedby 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 marketinlate2008.
CoInvestors:
ZhengJiang Technology Venture Capital (Beijing Capital was the lead investor)
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BeijingCapitals AdditiontoValue:
BeijingCapitalassistedZNJElectronicswithitsapprovalasahigh techR&Denterprise,qualifyingthecompanyforareducedtaxrate BeijingCapitalintroducedZNJElectronicstooneofChinaslargest telecom equipment companies, leading to the ZNJ Electronics launchingnew,successfulmobilephoneproducts BeijingCapitalintroducedZNJElectronicstoFoxconn(SEHK:2038), leadingtonewsalesthroughFoxconntoMotorola BeijingCapitalhelpedZNJElectronicsentertheTFTmodulemarket throughtheestablishmentofajointventureinTaiwan
2. FulidaFibreCo.,Ltd. InvestmentStatus:
FullyexitedRedemption
Fulida Fibre Co., Ltd. (Fulida Fibre) is the largest producer of new andrecycledviscosefiberinChina.Thecompanysmarginshavebeen higherthanindustrystandardsduetoaggressiveupstreamintegration andinvestmentsinmodernandlargescaleproductionfacilities.
Industry: Location:
Textiles Hangzhou,ZhejiangProvince
InvestmentThesis:
Fulida Fibre is a leader in the viscose fiber industry in China, with strongmanagementandacompellingplantofurtherimprovemargins andcapturemarketshare.
SourceofTransaction: BCGs investment banking subsidiary, First Capital Securities, introducedBeijingCapitaltoFulidaFibre.

InvestmentHistory:
InApril2008,BeijingCapital,throughShenzhenCapitalFund,invested RMB 17.6 million for 0.7% of the Fulida Fibres stock. Subsequent weaknessinthefinancialandconsumermarketsin2008and2009led Beijing Capital to exercise its redemption right, selling its investment backtoFulidaFibreinApril2009forRMB20.8million.
CoInvestors:
RongShengCapital(BeijingCapitalwastheleadinvestor)
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Private Placement Memorandum BeijingCapitals AdditiontoValue:
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 reducedthecostofinputs. BeijingCapitalintroducedseveralnewcustomerstoFulidaFibre. The appeal of Beijing Capitals reputation and relationships allowed it to negotiate favorable investment terms with Fulida Fibre,preservingagainintheinvestmentdespiteweaknessinthe marketduring2008.
3. DaliTechnologyCo.Ltd.(SZSE:002214) InvestmentStatus:
Dali Technology Co. Ltd. (DTech) develops and manufactures thermalimagingandsecuritysurveillancetechnology.
Industry: Location:
Security Hangzhou,ZhejiangProvince
InvestmentThesis:
DTech was the largest company of its kind in China, with a sophisticated infrastructure that included advanced production and R&DcapabilitiesandawellestablishedsalesnetworkinthePRCand internationally. Management also demonstrated their ability to manage rapid growth while maintaining strong profitability and financial stability. DTech was also positioned to win new contracts fromthePRC.
SourceofTransaction: TheBeijingGovernmentintroducedDTechtoBCGandBeijingCapital.

InvestmentHistory:
InAugust2005,BeijingCapital,throughFundI,investedRMB5million for 2% of DTechs stock. With Beijing Capitals assistance, DTech grew rapidly and was publicly listed on the Shenzhen exchange on January18,2008.Aftertheoneyearlockupperiodmandatedbythe Shenzhen exchange, Beijing Capital began divesting its shares in D Tech.BeijingCapitalsoldthelastofitssharesinFebruary2009fora totalreturnofRMB24.1million.
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Private Placement Memorandum CoInvestors:
ZhengJiang Technology Venture Capital (Beijing Capital was the lead investor)
DTech won several major government contracts with the assistanceofBCGsreputation,relationshipsandabilitytoprovide financialguarantees BeijingCapitalsupportedandexpeditedDTechspubliclistingon theShenzhenexchange
4. JinqiaoRealEstateDevelopment,Limited InvestmentStatus:
FullyexitedRedemption
Jinqiao Real Estate Development Limited (Jinqiao Real Estate) is a developer of commercial and residential real estate in JiangSu Province.JinqiaoRealEstateisoneofthefastestgrowingrealestate companiesintheprovince,intermsoflandbankandsales.
Industry: Location:
Realestate Changzhou,JiangsuProvince
InvestmentThesis:
BCGs real estate division confirmed that Jinqiaos land bank was valuable and wellpositioned for appreciation. Most of the property Jinqiao Real Estate was developing was subject to government buybackprograms,makingtheprojectsparticularlylowrisk.
SourceofTransaction: BCGs investment banking subsidiary, First Capital Securities, introducedBeijingCapitaltoJinqiaoRealEstate.

InvestmentHistory:
In December 2007, Beijing Capital, through Shenzhen Capital Fund, invested RMB 11.37 million for 1.5% of Jinqiao Real Estates stock. Subsequentweaknessinthefinancialandrealestatemarketsin2008 led Beijing Capital to exercise its redemption right, selling its investment back to Jinqiao Real Estate in September 2009 for RMB 13.1million.
CoInvestors:
RongShengCapital
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Private Placement Memorandum BeijingCapitals AdditiontoValue:
BeijingCapitalhelpedsecuregovernmentbuybacksofJinqiaoReal Estatesdevelopmentprojects BCGhelpedJinqiaoRealEstatewinseverallongtermnationalreal estateprojects
5. NorthGlassTechnologyCo.Ltd.(RecentlyApprovedForListingbytheCSRC) InvestmentStatus:
Currentportfoliocompany
North Glass Technology Co. Ltd. (North Glass) develops and manufacturesadvancedequipmentforintensiveglassprocessingand alsoproducesindustrialandarchitecturalglassproducts.
Industry: Location:
Capitalequipmentandindustrialgoods Luoyang,HenanProvince
InvestmentThesis:
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 industrysorganicgrowth.
SourceofTransaction: BCGintroducedNorthGlasstoBeijingCapital

InvestmentHistory:
In December 2007, Beijing Capital, through Shenzhen Capital Fund, invested RMB 28.4 million for 2% of North Glasss stock. The China Securities Regulatory Commission (CSRC) has recently granted approvalforapubliclistingandBeijingCapitalexpectstobeeligibleto sellitsstockinNorthGlassinmid2011.
CoInvestors:
RongShengCapital(BeijingCapitalwastheleadinvestor)
Financials,current (LTM):
Revenue:RMB614million EBITDA:RMB118million
BCG helped North Glass win several major national projects, includingconstructionprojectsforthe2008BeijingOlympics
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BCGs relationships with private industry helped North Glass improveitssupplychainefficiencyand,asaresult,grossmargins BCGhelpedNorthGlasswithCSRCapprovalforpubliclistingandis helpingtoexpeditethecompanyspublicoffering 6. SunwodaElectronics(SwodaElectronics) InvestmentStatus:
SUNWODA Electronics (SUNWODA) produces OEM power supply solutions, including batteries, for automobiles and mobile products suchascellphones,powertoolsanddigitalcameras.
Industry: Location:
Electronics Shenzhen,Guangdong
InvestmentThesis:
SUNWODAs strong management, financial strength and proprietary technologiesallowedittosecurelargecontractswithOEMsincluding Lenovo and Haier. SUNWODAs R&D had also made compelling progresstowardsthedevelopmentofenergysavingbatteries.
SourceofTransaction: The Shenzhen city government introduced SUNWODA to BCGs Shenzhenoffice,whichreferredtheopportunitytoBeijingCapital.

InvestmentHistory:
In August 2008, Beijing Capital, through Shenzhen Capital Fund, investedRMB6.75millionfor3%ofSUNWODAsstock.BeijingCapital is currently supporting XWD Technologys application with the CSRC forpubliclistingapproval.
CoInvestors:
None
Financials,current (LTM): BeijingCapitals AdditiontoValue:
Revenue:RMB425million EBITDA:RMB58million BCGhelpedSUNWODAsecuredirectfinancialsupportfrom theShenzhencitygovernment BCG introduced a large auto manufacturer to SUNWODA,
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Private Placement Memorandum resultinginanR&Dpartnership
BCGisactivelysupportingSUNWODAsapplicationforpublic listing
7. ZhongJiConcretePiles InvestmentStatus:
ZhongJi Concrete Piles (ZhongJi Concrete) produces and distributes centrifugalconcretepilesandstubsforbuildingsandinfrastructure
Industry: Location:
Constructionmaterials Shanghai
InvestmentThesis:
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.
SourceofTransaction: BCGsShanghaiofficeintroducedZhongJiConcretetoBeijingCapital

InvestmentHistory:
In August 2008, Beijing Capital invested RMB 24 million for 10% of ZhongJi Concretes stock. Beijing Capital is currently supporting ZhongJi Concretes application with the CSRC for public listing approval.
CoInvestors:
LianTongVentureCapital(BeijingCapitalwastheleadinvestor)
Financials,current (LTM):
Revenue:RMB544million EBITDA:RMB67million
BCG helped ZhongJi Concrete win contracts for three national constructionprojects BCGhassupportedZhongJiConcretesgrowthbydirectlyproviding banklines,debtguaranteesandequipmentleasing BCGisactivelysupportingZhongJiConcretesapplicationforpublic listing
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C.
CaseStudiesAdditionalInvestments
Prior to 2005, companies listed publicly in China had segregated Nontradable Shares and TradableShares.TradableShareswereissuedpursuanttopublicofferingsandwereapartof thetradablefloat.NontradableShareswerenotpermittedtobepubliclytraded,evenifthey were issued by a company that eventually was publicly listed, resulting in wide pricing disparitiesbetweenNontradableSharesandTradableShares.Investorsinaprivatecompany, such as private equity investors, generally held Nontradable Shares and consequently had limited domestic public exit opportunities, until the domestic markets were reformed to eliminatesegregatedshares.InJanuary2004,ChinasStateCouncilannouncedcertainreforms allowing for the public float of Nontradable Shares (the Nontradable Share Reforms).8 In 2005,theCSRCinitiatedapilotprogramwith46companiestotransformNontradableShares 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 reformcompliant companies would be given priority to raise new capital. By the end of 2007, 98% of all listed companies in China had completedtheNontradableShareReforms. The Four Additional Investments involve situations where Beijing Capital purchased Nontradable Shares, which were subsequently transformed into Tradable Shares of public companiesundertheNontradableShareReforms.Thesecasesare:CnlightCorporationLimited (SZSE:002076),SunvimGroupCo.Limited(SZSE:002083),NHUCompanyLimited(SZSE:002001) and Hangmin Limited (SZSE: 600987). Due to the implementation of the Nontradable Share Reforms,BeijingCapitalbenefitedfromasubstantialincreaseinthevaluationofitssharesin thesecompanies,astheywerepurchasedatlowervaluationsaffordedtoNontradableShares, 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 Capitals 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 Chinas 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,identifyandinvestinattractivecompaniesandexitthoseinvestmentsonpubliccapital markets.ThefollowingarebriefsummariesofthreeoftheFourAdditionalInvestments,allof whichhavebeenexited.
Opinions on Promoting the Reform, Opening and Steady Growth of Capital Markets, State Council January 2004.
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Private Placement Memorandum 1. CnlightCorporationLimited(SZSE:002076) InvestmentStatus:
Cnlight Corporation Limited (Cnlight) develops and manufactures optoelectroniclightsandlightingsystemsusingenergysavingLEDand SMDtechnology.
Industry:
Electronics
InvestmentThesis:
Cnlight was a proven leader in both technology and market share in ChinafortheenvironmentallyfriendlyandfastgrowingLEDandSMD 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.
InvestmentHistory:
In April 2004, Beijing Capital invested RMB 3.2 million and in June 2008BeijingCapitalsolditsCnlightholdingsforatotalreturnofRMB 26.7million,anIRRof70.0%.
2. SunvimGroupCo.Limited(SZSE:002083) InvestmentStatus:
Sunvim Group Co. Limited (Sunvim Group) is a large conglomerate specializingintheproductionanddistributionofhighendhousehold fabrics. Sunvim Group sold its products throughout the world. The companyalsoownsandoperateschemicalandthermoelectricplants.
Industry:
Textiles
InvestmentThesis:
SunvimGroupwasthelargestmodernhouseholdtextileenterprisein China,intermsofproductionandsalesofhighendtowels,beddings anddecorativefabrics.Thecompanywasaworldleaderinadvanced manufacturingsystems. Sunvim Group had demonstrated stable growth history and great creativityinproductdevelopment.Thecompanyalsoenjoyedthetax advantagesasanexportorientedbusiness.
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InvestmentHistory:
InOctober2005BeijingCapitalinvestedRMB4.2millionandinMarch 2008,BeijingCapitalsolditsSunvimGroupholdingsforatotalreturn ofRMB32.8million,anIRRof98.5%.
3. NHUCompanyLimited(SZSE:002001) InvestmentStatus:
NHU Company Limited (NHU Company) develops, produces and distributes biomedicines, nutritional products, medical raw materials andfoodadditives.
Industry:
Pharmaceuticals
InvestmentThesis:
NHU Company was a leader in the sector with a broad spectrum of products and patents, and large market shares in China. The companys management demonstrated its ability to generate fast, sustainablegrowth. InApril2003BeijingCapitalinvestedRMB4.2millionandinJune2005 Beijing Capital sold its NHU Company holdings for a total return of RMB9.4million,anIRRof49.3%.
InvestmentHistory:
BeijingCapitalhelpedNHUCompanybecomelistedintheNational Torch Program, earning it preferential business treatments includinggovernmentfunding,contractsandtaxbreaks Beijing Capital helped NHU Company earn local and national governmentfundingforitsR&Dprograms BeijingCapitalprovidedNHUCompanywithlegalandIPexpertise toprotectcompanysintellectualpropertyrights
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SummaryofPartnershipTerms
ThefollowingisasummaryofcertaininformationabouttheFundandaninvestmentinlimited partnershipintereststherein(theInterests).Thissummary(andtermsoftheFunddescribed elsewhereinthisMemorandum)isnotcompleteandissubjecttoandqualifiedinitsentiretyby 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 Funds subscription agreements (the Subscription Agreements) and in other agreements described herein, as each such document may be amended,restatedorsupplementedfromtimetotime.Intheeventofaconflictbetweenthis summaryandtheaforementioneddocuments,suchdocumentsshallcontrol.
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 EnterpriseLaws(collectively,thePartnershipLaws)ofthe Peoples 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 mandatoryrequirementsofthePartnershipLaws. TheFundManager(definedbelow)willalsoorganizeoneor 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),whichwillinvest,directlyorindirectlythrough 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)willinvestdirectlyintothePartnershipandnon PRC investors (Offshore Investors) will invest in the PartnershipthroughaFeeder/Intermediarystructure.Itis furtheranticipatedthatPRCInvestorswillcomprise40%of the Funds aggregate capital commitments and Offshore Investorswillcomprise60%oftheFundsaggregatecapital
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Purpose:
InvestmentFocus:
Sponsor:
FundManager:
commitments(CapitalCommitments),adjustedtoreflect a1%CapitalCommitmentbytheFundManager,although suchratiosmaybeadjustedbytheFundManagerinitssole discretion. AllCapitalCommitmentswillbefundedincash. Each of the PRC Investors and Offshore Investors are referredtohereinasaLimitedPartnerandcollectivelyas the Limited Partners, and together with the Fund Manager, in its capacity as executive/managing partner of thePartnership,asthePartners). ThepurposeofthePartnershipistocarryonthebusiness of investing in accordance with the provisions of the Partnership Agreement and, in particular, of identifying, negotiating, making, monitoring the progress of and realizing,exchangingordistributinginvestmentswhichwill 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/orlongtermcapitalappreciation. The Fund will focus principally on making investments in highgrowthpreIPOcompaniesinthePRC,typicallywithat 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 andPharmaceuticals. BeijingCapitalInvestmentsCo.,Ltd.(BeijingCapital),the private equity arm of Beijing Capital Group Co., Ltd. (BCG), the investment conglomerate of the Beijing MunicipalGovernment,PRC(theBeijingGovernment). 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 havefullcontroloverthebusinessandaffairsoftheFund,
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OfferingOverview:
including responsibility for making all investment and divestment decisions. In exchange for such services, the Fund Manager will receive the management fee described below(theManagementFee). The Fund Manager may engage affiliates or third parties, including Beijing Capital or its affiliates, to provide managementandinvestmentadvisoryservicestotheFund, eitherdirectlytotheFundorasasubadvisortotheFund Manger. AlthoughBeijingCapitalservesastheprivateequityarmof 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 anyoftheiraffiliateswillbeconsideredtobeanaffiliateof theFund,theFundManagerorBeijingCapital. TargetSize.ThetargetsizeoftheFundwillbebetween$75 millionand$100millioninCapitalCommitments.TheFund Manager reserves the right to accept total subscriptions below or above the target amount. All amounts stated hereinareinU.S.dollars,unlessotherwiseindicated. Minimum Commitment. The minimum Capital Commitment of each Limited Partner is $5 million. The FundManagerreservestherighttoacceptsubscriptionsof lesseramounts. First Closing. The first closing of the Fund (the First Closing) will occur on the date selected by the Fund Manager(theFirstClosingDate). Initial Capital Contribution. Each Partner will be required to make a capital contribution to the Partnership in an amountdeterminedbytheFundManageronthetenthday following the First Closing Date (or such later date as determined by the Fund Manager in its sole discretion). Initialcapitalcontributionswillnotbelessthan30%ofthe aggregate Capital Contributions, unless otherwise determinedbytheFundManagerinitssolediscretion.
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InvestmentPeriod:
TermoftheFund:
Subsequent Closings/Final Closing. From time to time after the First Closing, the Fund Manager may schedule additional closings as necessary to accommodate the admissionofadditionalLimitedPartners(each,aClosing). ThefinalClosingoftheFund(theFinalClosing)willoccur 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 FundaftertheFirstClosingwillberequiredtocontributeto theFundanamountequaltotheirproportionateshareof all Capital Commitments funded by previouslyadmitted Partners, plus interest thereon at 8% per annum. The amount contributed by such newlyadmitted Limited Partners (other than amounts attributable to the ManagementFee,whichwillbepaidtotheFundManager) will be distributed to the previouslyadmitted Partners in proportiontotheirfundedCapitalCommitmentsand,other than the interest component, will be added back to such previouslyadmitted 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 therehasbeenamaterialchangeinthevalueoftheFunds assetsthatwouldjustifyadifferentvaluation. The Fund may make new investments during the period (theInvestmentPeriod)commencingontheFirstClosing Date and ending on the third anniversary of the First ClosingDate.FollowingtheendoftheInvestmentPeriod, capital may not be drawn down from the Partners for the purpose of making investments other than to (i) complete investmentsthatwerecommittedtopriortotheendofthe InvestmentPeriodand(ii)tomakefollowoninvestmentsin existing portfolio companies in an aggregate amount not exceeding20%oftotalCapitalCommitments. 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 oneyear periods, subject to the approval of the Limited Partner Advisory Committee (as described in greater detail below, the L.P.
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InvestmentLimitations:
Advisory Committee), in order to provide for the orderly liquidationoftheFund. 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 CapitalCommitments,exceptasprovidedinBridge Investmentsbelow; an investment in publicly traded securities purchasedinanopenmarkettransaction; aninvestmentinablindpoolinvestmentvehicle; 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 FundManagerneutralizestheadditionalcosttothe Fundofsuchcarriedinterestandmanagementfees by reducing the Fund carried interest associated with such investment and/or the Management Fee paidattheFundlevel; 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 Funds investmentinsuchportfoliocompanyatfairmarket value (as determined by the Fund Manager in its reasonablediscretion);or an investment in hedges or derivative securities (otherthanforthepurposeofhedgingcurrencyor otherrisksofaportfolioinvestmentbytheFund).
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BridgeInvestments:
InvestmentStructuring:
Borrowings:
ManagementFee:
PortfolioCompanyFees:
The Fund may provide interim financing (a Bridge Investment) to a Fund portfolio company in connection with the Funds investment therein. The total investment by the Fund, including any Bridge Investment, in such portfolio company may not exceed 25% of total Capital Commitments. The Fund Manager may form an alternative investment vehicle(anAlternativeVehicle)forthepurposeofmaking 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 respecttosuchinvestment. The Fund may (i) borrow money to pay reasonable expenses of the Fund, to provide shortterm 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 purchaseofaportfoliocompanypriortotheFundsreceipt ofcapitalcontributionsand(ii)guaranteetheobligationsof portfolio companies and their affiliates, provided that the aggregate outstanding amount of such borrowings and guarantees may not exceed 15% of total Capital Commitments.Nonrecourseguaranteesoftheobligations of a portfolio company and its affiliates secured solely by theFundsinvestmentinsuchportfoliocompanywillnotbe includedinthe15%limitation. 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 amountsotherwiseavailablefordistributiontotheLimited Partners. The Fund Manager will not pay Management Fees. BCG and its affiliates may receive monitoring fees, directors fees, transaction fees, breakup fees and other
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Expenses:
fees from portfolio companies or prospective portfolio companies of the Fund (Fee Income). Such fees will be fortheaccountofBCGandsuchaffiliates. In the event the Firm or its affiliates receives Fee Income, suchFeeIncomewillbeallocatedamongtheFundandany 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 Funds allocable share of such Fee Income will be used to reduce future ManagementFeespayabletotheFundManager. FundManagerExpenses.TheFirmwillberesponsiblefor the payment of its normal operating overhead, including but not limited to the salaries of its employees and office rental,secretarial,clericalandbookkeepingexpenses. Organizational Expenses. The Fund will bear up to $475,000oflegalandotherexpensesincurredbytheFirm (anditsaffiliates)inconnectionwiththeorganizationofthe Fund (the Organizational Expenses). Organizational ExpensesinexcessofthisamountwillbepaidbytheFund but borne by the Fund Manager through a 100% offset againsttheManagementFee. OtherFundExpenses.TheFundwillalsoberesponsiblefor thepaymentofallplacementfeesandcosts,expensesand liabilities relating to its operations, including, but not limitedto:(i)theManagementFee;(ii)accounting,counsel, consulting and other outofpocket 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 andcustodycostsandhedgingcostschargedtotheFund); (iii)indemnificationamountspayabletopersonsentitledto indemnification under the Partnership Agreement; (iv) all taxesimposedontheFundandalllitigationexpenses(and any judgments or settlements paid in connection therewith)andotherextraordinaryexpenses;(v)thecosts of forming and maintaining any Alternative Vehicle; (vi) insurance costs; (vii) commitment fees payable in connectionwithcreditfacilities;(viii)thereasonableoutof
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pocket expenses of the members of the L.P. Advisory Committeeinconnectionwiththeirservices;(ix)thecosts of the annual meetings of Limited Partners; (x) ongoing expensesofanyFeederorIntermediary;and(xi)auditand Fund accounting expenses and all other costs incurred in connection with the administration of the Fund (including thecostsofthirdpartyfundadministratorsretainedbythe Firm)orthatareauthorizedbythePartnershipAgreement 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). CapitalContributionsand Foreign exchange laws and policies, and currency FundInvestments: preferences of portfolio companies may change over the term of the Fund. The Fund Manager will have the discretiontodetermineandmanagecurrencyexchangesby the Fund and the currency with which it invests as it reasonablydeterminesappropriatetakingintoaccountthe interestsofallPartners. Subject to the foregoing, it is anticipated that Onshore InvestorswillmakecapitalcontributionstothePartnership inRMBandPRCInvestorswillmakecapitalcontributionsto 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 Investors capital contribution to the Partnership inRMBbasedontheaverageofthepurchaseandsalerates publishedbytheheadofficeofthePeoplesBankofChina for RMB/ U.S. dollar exchanges as of the date the drawdownnoticeforsuchcapitalcontributionissenttothe Partners. After distributions are calculated in accordance with the distribution priorities outlined under Distributions, the Fund Manager will calculate each Offshore Investors allocable share of such distributions in U.S.dollarsbasedontheactualratesofexchangeobtained bytheFund,or,iftheFundmakessuchdistributionsfrom fundsheldbythePartnershipdenominatedinU.S.dollars, calculated based on the average of the purchase and sale ratespublishedbytheheadofficeofthePeoplesBankof
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Distributions:
China for RMB/ U.S. dollar exchanges as of the date such distributiondeterminationsaremadebythePartnership. 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 Partnershipwillnotexchangeallcapitalcontributionsmade byOffshoreInvestorstoRMB,andmaymakeinvestments inRMB,U.S.dollarsoracombinationofbothcurrencies.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 resultofcurrencyexchangerates. After the payment of all Fund Expenses (including taxes), andtheestablishmentofstatutoryreservesasrequiredby the laws of the PRC and appropriate reserves for reasonably anticipated liabilities, obligations and commitmentsoftheFund,proceeds(Proceeds)fromany Fund investment will be apportioned among the Partners (including the Fund Manager) according to the capital contributionsmadebythemtofundsuchinvestment.The amount apportioned to each Limited Partner will be distributed to such Limited Partner and the Carry Partner (definedbelow)asfollows: (i) ReturnofCapitalandFundExpenses:First,100%to such Limited Partner until it has received distributions equal to (a) its capital contributions withrespecttoalldisposedinvestments,plusitspro ratashareofallnetunrealizedlossesonwritedowns with respect to the Funds other investments and (b)itscapitalcontributionswithrespecttoallFund Expenses that have been allocated to disposed investments;
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(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),ontheamountsdistributedtoitpursuant to clause (i) above, calculated from the date such contributedcapitalisinvested(orexpended)bythe Fund to the date the Fund receives Proceeds representingareturnofsuchcontributedcapital; (iii) FundManagerCatchUp:Third,100%totheCarry Partner as a Carried Interest distribution until cumulativedistributionstotheCarryPartnerunder 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 receivedcumulativedistributionsequaltoa30%per annumrateofreturn,compoundedannually,onthe amounts distributed to it pursuant to clause (i) above, calculated from the date such contributed capitalisinvested(orexpended)bytheFundtothe date the Fund receives Proceeds representing a returnofsuchcontributedcapital;and (v) Fifth,40%totheCarryPartnerasaCarriedInterest distributionand60%tosuchLimitedPartner. The Fund Manager may receive Carried Interest distributions in respect of its interest as executive/managing partner of the Partnership, or may designateoneormoreaffiliatesoftheFundManager,the Managing Partners (defined below) or Beijing Capital to receivealloraportionoftheCarriedInterestdistributions through a special limited partnership interest in the Partnership(therecipientsofCarriedInterestdistributions, collectively,theCarryPartner).
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IftheFunddisposesofonlyaportionofitsinvestmentina portfolio company, the portion sold will be treated as a separate investment from the portion retained for purposesofdistributingtheproceedsofsuchdispositionas describedabove. TheFundmaymakedistributions,ascashadvancesagainst regulardistributions,totheCarryPartner(totheextentof 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 Fundstaxablenetincome. TheFundwilluseitsbesteffortsnottodistributesecurities in kind unless they are marketable securities or such distribution is in connection with the liquidation of the Fund.IfthereceiptofsuchsecuritiesbyaLimitedPartner would violate law applicable to a Limited Partner or if a LimitedPartnerhasadvisedtheFundinwritinginadvance ofitsadmissiontotheFundthatitdoesnotwishtoreceive distributionsinkind,then,subjecttoapplicablecontractual 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 LimitedPartnerwillbeartheriskofanylossorgainonsuch sale. Reinvestmentof Distributions in respect of the capital portion of any Proceeds: 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 Funds unfunded CapitalCommitmentsandmaybedrawndownagainbythe Fund. AllocationsofProfitsand Profits and losses of the Fund will be allocated among Losses: Partners in a manner consistent with the foregoing distribution provisions and the requirements of the PartnershipLaws CarryPartnerClawback: If, following the dissolution of the Fund, (a) the Carry Partner has received Carried Interest distributions with
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AllPartnerGiveback:
CoInvestmentPolicy:
respecttoaLimitedPartnerthatexceedthesumof(i)20% of the Funds cumulative net profits attributable to such Limited Partner up to an amount equal to 30%, compounded annually, on such Limited Partners contributed capital, calculated from the date such contributedcapitalisinvested(orexpended)bytheFundto thedatetheFundreceivesProceedsrepresentingareturn of such contributed capital, and (ii) 40% of the Funds cumulativenetprofitsattributabletosuchLimitedPartner 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,theExcessCarriedInterest 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 FundfordistributiontosuchLimitedPartnerthegreaterof 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 contributedmaynotexceedtheamountofCarriedInterest distributionsreceivedbytheCarryPartnerwithrespectto suchLimitedPartner,reducedbythetaxespaidorpayable bytheCarryPartner(oritsbeneficialowners)withrespect tosuchCarriedInterestdistributionsandincreasedbythe amountofanytaxbenefitsutilizedbytheCarryPartner(or its beneficial owners) as a result of such payment in the year of payment (in each case based on an assumed tax rate). The Fund Manager may require the Partners to return certaindistributionsforthepurposeofsatisfyingtheFunds indemnification obligations and other Fund obligations, subject to the limitations set forth in the Partnership Agreement. The Fund Manager may (but is not obligated to) offer availablecoinvestmentopportunitiestoLimitedPartners.
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L.P.AdvisoryCommittee: The L.P. Advisory Committee will consist of at least five Limited Partner representatives, at least two of which will berepresentativesofthePRCInvestors,andatleastthree of which will be representatives of the Offshore Investors. TheL.P.AdvisoryCommitteewillhavetheauthorityto:(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 besubmittedtotheL.P.AdvisoryCommitteeassetforthin 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 BCGnortheBeijingGovernment(ortheiraffiliates)willbe consideredaffiliatesoftheFundortheFirm. The Fund will indemnify the members of the L.P. Advisory Committeefortheirservicesassuchandwillreimbursethe members for their reasonable outofpocket expenses in connection with such services. The Fund Manager will be entitledtorelyexclusivelyontheL.P.AdvisoryCommittees determination that a potential conflict of interest transaction or matter should be waived on behalf of the Fund. LimitedPartner KeyPerson.AKeyPersonEventwilloccurifanytwoof Remedies: 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 180days,duringwhichtimenoinvestmentsmaybemade by the Fund other than followon investments (in an amount not exceeding 20% of total Capital Commitments) andinvestmentscommittedtopriortothecommencement of the suspension period. A majority in interest of the Limited Partners may elect in writing prior to the end of such180dayperiodtoreinstatetheInvestmentPeriodor,
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SuccessorFunds:
in the alternative, to make the suspension period permanentandtoterminatetheInvestmentPeriod.Inthe absence of any such election, the suspension period will terminate(andtheInvestmentPeriodwillbeautomatically reinstated)attheendofsuch180dayperiod. Cause Removal. The Fund Manager may be removed for CausewiththeunanimouswrittenconsentoftheLimited Partners. Cause will include the following: (i) the willful breach by the Fund Manager of any material obligation it hasunderthePartnershipAgreement(ii)themisconductor 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 adverseeffectonthebusinessoftheFund;(iii)revocation oftheFundManagersbusinesslicense,andthemandatory closure,thebankruptcyorinsolvencyoftheFundManager; (v)FundManagersfailuretoqualifyasapartnerunderthe PartnershipLaws;or(vi)forfeiturebyaPRCcourtofallof the Fund Managers interest in the Partnership. The determinationofwhetherCausehasoccurredwilltakeinto accountcurativeactionstakenbytheFundManager. In the event the Firm forms a private equity investment fund with investment objectives that are substantially similar to the Funds investment objectives (a Successor Fund), other than an Alternative Vehicle, and less than 70% of the total Capital Commitments of the Fund have beendrawndown,committedforinvestmentsorreserved for followon investments and expenses, the Fund will co invest with such Successor Fund in any investment consistentwiththeinvestmentcriteriaoftheFund.Anyco investmentbytheFundandaSuccessorFundwillbemade pro rata in accordance with capital commitments to the Fund or the Successor Fund, as applicable, subject to reasonableadjustmentsbytheFundManagertotakeinto account factors such as the Funds aggregate undrawn Capital Commitments, reserves for followon investments and operating expenses, statutory reserve requirements, thelikelyholdingperiodofsuchinvestmentandsuchother factors as the Fund Manager reasonably determines are relevant.
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TimeandAttention:
Indemnification:
Each of the Managing Partners and investment professionalsdesignatedbytheFirmasKeyProfessionals 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 theinvestmentcriteriaoftheFund.Forpurposesofclarity, acompanyplanningapubliclistingofitssecuritiesoutside ofthePRCisnotwithintheFundsinvestmentcriteria. Mr. Wangwill devotesubstantially allofhis businesstime and attention to the affairs of the Fund, the Predecessor Funds and any additional funds sponsored or managed by theFirm(OtherFunds).Dr.KeandMr.Ozdenwilldevote suchtimeasisreasonablyrequiredtofulfilltheirdutiesto the Fund, the Predecessor Funds and the Other Funds, whichisexpectedtoconstituteamajorityoftheirbusiness timeandattention.OtherbusinessactivitiesofDr.Keand 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 anticipatesthatMessrs.KeandOzdenwillreducethetime devoted to other business activities and increase the time devotedtofundssponsoredandmanagedbytheFirm.The termsandconditionsofsuchanticipatedtransitionwillbe determinedatsuchtime. NeithertheFundManager,BeijingCapital,noranypartner, 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 asaresultofsuchpersonsactionsonbehalfoftheFundor otherwisearisingoutoforinconnectionwiththeFundand its portfolio companies unless such relevant conduct constituted gross negligence or willful misconduct. The Fund will pay the expenses incurred by any such
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CapitalCalls;Defaults; OptOutsandExclusions:
indemnifiedpersonindefendingacivilorcriminalactionin 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. 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 respectoftheirproratashareofFundExpenses(including ManagementFeesforthefirstquarter)andOrganizational Expenses,and(ii)thepurchasepriceofanyinvestmentthat theFundexpectstoacquirewithinninetybusinessdaysof 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. CapitalCallDefaults.TheFundwillbeentitledtoenforce theobligationsofeachLimitedPartnertomakeitsrequired capitalcontributionstotheFund.AttheoptionoftheFund 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%oftheinterest(oranyportionthereof)ofsuchLimited 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)causetheLimitedPartnertoassign its interest in the Fund (or any portion thereof) to any personatapriceequalto50%oftheaggregateamountof the capital contributions by such Limited Partner (or the allocableportionthereof)lessanyexpenses,deductionsor losses (including write downs) allocated to such Limited Partner.TheFundManageralsohastherighttoterminate thecapitalcommitmentofadefaultingLimitedPartnerand
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Transfersand Withdrawals:
Termination/Dissolution ofthePartnership:
has certain other remedies available to it, as more fully describedinthePartnershipAgreement. OptOuts/Exclusions. Subject to the terms of the PartnershipAgreement,LimitedPartnerswillbepermitted 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,theotherLimitedPartnerswillbeobligated,subject to certain limitations, to make additional capital contributions,proratabasedontheircapitalcommitments, to cover the shortfall caused by such opting out Limited Partner(s). Limited Partners may not sell, transfer or pledge their interestintheFund,exceptwiththepriorwrittenconsent of the Fund Manager (which consent may be withheld in the Fund Managers 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 Managers sole discretion). Any sale, transfer or pledge of a Limited PartnersinterestintheFundwillbesubjecttocompliance with the other terms and conditions set forth in the PartnershipAgreement. LimitedPartnersmaynotwithdrawfromtheFund. TheFundManagerwillnothavetherighttowithdrawfrom theFundortransferitsinterestasaFundManagerwithout thepriorapprovalofeightypercent(80%)ininterestofthe Limited Partners or as otherwise provided in the PartnershipAgreement. The Partnership will terminate upon happening of any of the following events and the consent of twothirds in interest of the Limited Partners: (i) at any time after the expirationoftheInvestmentPeriod,upondeterminationby the Fund Manager in its sole discretion, provided that all investments have been realized; (ii) the occurrence of a liquidationeventassetforthinthePartnershipAgreement;
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Liquidation:
Reports:
AnnualMeetings:
(iii) upon a resolution by all Partners in respect of the termination or dissolution of the Partnership; (iv) the numberofthePartnersislessthanthenumberasrequired bythePartnershipLaws,andsuchsituationhaslastedfora periodofthirty(30)days;(v)thepurposeofthePartnership has been achieved or is not able to be achieved; (vi) revocationofthePartnershipsbusinesslicenseoranotice by the competent government entities to close the Partnership; (vii) the bankruptcy, insolvency, expulsion, dissolution,liquidation,removalorwithdrawaloftheFund Manager; (viii) the election of such termination by the PartnersuponaneventofCausewithrespecttotheFund ManagerpursuanttothePartnershipAgreement;or(ix)as otherwiserequiredbytherelevantPRClaws. Upon termination of the Partnership, the Fund Manager willactastheliquidatingtrusteeunlessotherwiseprovided in the Partnership Agreement, under which circumstances theLimitedPartnersmaydesignateanotherperson(s)who hasdueskillandauthoritytoactasaliquidatingtrustee(s). Theproceedsoftheliquidation,includingallavailablecash 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. Audited annual financial statements, unaudited quarterly reportsandannualtaxinformationwillbeprovidedtoeach Limited Partner. The quarterly reports will include a summary of investments made by the Fund during such quarterly period and a statement of the Partners consolidatedcapitalaccounts. 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 Funds investmentactivitiesandportfolio.
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Private Placement Memorandum Amendments:
ERISAConsiderations:
LegalCounsel:
Auditors:
Ingeneral,consentbytheFundManagerandamajorityin interestoftheLimitedPartnersintheFundwillberequired for amendments to the Partnership Agreement. Certain amendments will require the consent of each Limited Partnerthatisadverselyaffected. 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,limittheparticipationofbenefitplaninvestorsin the Fund so that such participation is not significant withinthemeaningoftheDepartmentofLaborregulations, asqualifiedbySection3(42)ofERISAsothattheassetsof 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 monitorcompliancewithsuchpolicy.Investorssubjectto Title I of ERISA should carefully review the ERISA Considerations section contained in Part VI of this Memorandumbelowandconsultwiththeirownadviseras totheeffectofERISAonaninvestmentintheFund. Guangsheng&PartnerswillactasPRClegalcounseltothe FundandtheFundManager.Covington&BurlingLLPwill actasU.S.legalcounseltotheFundandtheFundManager. Bernstein&PinchukLLP/BDOSeidmanAlliance
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IV. RiskFactorsandPotentialConflictsofInterest
AninvestmentintheFundinvolvesahighdegreeofrisk.Thepossibilityofpartialortotallossof 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 describedbelow. CertainoftheriskfactorsdescribedbelowhavebeenidentifiedbytheFundManagerasrisksan investor may face (i) in connection with an investment in a limited partnership formed in the PRCand(ii)inconnectionwithinvestmentsbytheFundincompanieslocatedinthePRC.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 consideredtoconstituteorreflectanyofficialorunofficialPRCgovernmentpolicy.
A.
PotentialRisksattheFundLevel
NoOperatingHistory AlthoughtheManagingPartnersandKeyProfessionalshaveexperienceinvestingintheprivate equitymarket(includingthroughthePredecessorFunds),theFundandtheFundManagerare newlyformedwithnooperatinghistoryuponwhichtoevaluatelikelyperformance. CompetitionforInvestmentOpportunities 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 investmentopportunitiesgenerallywillbesubjecttomarketconditionsaswellastheprevailing regulatoryorpoliticalclimate.TheFundwillbecompetingforinvestmentswithotherprivate equityinvestmentvehicles,aswellasotherinstitutionalandstrategicinvestors,manyofwhich have been in business for a significant period of time and have greater management and financialresourcesthantheFundortheFirm.Furthermore,itisexpectedthatanincreasing 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 assurancethattheFundwillbeabletolocatesuitableinvestmentopportunities,acquirethem for an appropriate level of consideration, achieve its investment objective, or fully invest its committedcapital. ConcentrationofInvestments AlthoughthePartnershipAgreementlimitstheamountofcapitalthattheFundmayinvestina single portfolio company, the Fund may only make a limited number of investments. As a
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consequence,theaggregatereturnoftheFundmaybesubstantiallyadverselyaffectedbythe 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 investmentsector,investmentsmaybecomemoresusceptibletofluctuationsinvalueresulting from adverse economic or business conditions applicable to such region, type of security or investmentsector. RiskofLossofCapital Therecanbenoassurancethat(i)theFundManagerwillbeabletochoose,makeandrealize investmentsonbehalfoftheFundinanyparticularcompanyorportfolioofcompanies,(ii)the FundwillbeabletogeneratereturnsforitsPartnersorthatthereturnswillbecommensurate withtherisksofinvestinginthetypeofcompaniesandtransactionsdescribedhereinor(iii)a Partner will receive any distributions from the Fund. Accordingly, an investment in the Fund shouldonlybeconsideredbypersonswhocanaffordalossoftheirentireinvestment. RestrictionsonTransfers;NoMarketforInterests TheInterestsaresubjecttosubstantialrestrictionsontransferability.Ingeneral,theInterests generallymaynotbetransferredwithoutthepriorwrittenconsentoftheFundManager.In addition,theInterestswillnotberegisteredundertheSecuritiesAct,orthesecuritieslawsof any states or any other jurisdictions and, therefore, cannot be resold unless they are subsequentlyregisteredundersuchlawsorregistrationthereunderisnotrequiredpursuantto anexemptionfromsuchregistrationorotherwise.Itisnotcontemplatedthatregistrationof theInterestsundertheSecuritiesActorothersecuritieslawswilleverbeeffected.Thereisno public market for the Interests and one is not expected to develop. The Interests are not redeemableandLimitedPartnerswillnothavetherighttowithdrawtheircapitalexceptinthe extremelylimitedcircumstancesprovidedforinthePartnershipAgreement.LimitedPartners mustbepreparedtobeartheriskofowningInterestsforanindefiniteperiodoftime. ItisanticipatedthatcertainLimitedPartnerswillmaketheirinvestmentsintheFunddirectly 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 LimitedPartnermadeitsinvestmentintheFundislessthanoptimal. RelianceonInvestmentProfessionalsoftheFirm ThesuccessoftheFunddepends,insubstantialpart,upontheskillandexpertiseoftheFirms investmentprofessionalsandtheirabilitytoidentifyandconsummatesuitableinvestments,to improvetheoperatingperformanceofportfoliocompaniesandtodisposeofinvestmentsata
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profit. There can be no assurance that these investment professionals will continue to be associatedwith 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 Funds investment activities. The loss of key personnel could have a materialadverseeffectontheFund. NoControlbyLimitedPartners In order to maintain their limited liability status under applicable law with respect to the liabilitiesandobligationsoftheFund,LimitedPartnerswillhavenorightorpowertotakepart in the management or control of the Fund and will have no opportunity to participate in investmentanddispositiondecisions.Accordingly,nopersonshouldpurchaseInterestsinthe FundunlesssuchpersoniswillingtoentrustallaspectsofthemanagementoftheFundtothe FundManager. RelianceonPortfolioCompanyManagement Although the Firm will monitor the performance of each investment, it will be primarily the responsibility of portfolio companylevel management to operate the portfolio companies of theFundonadaytodaybasis.AlthoughtheFundManagerintendsfortheFundtoinvestin 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 successfullyoperateaFundportfoliocompany.Someportfoliocompanieswilldependfortheir success on the management talents and efforts of one person or a small group of persons whosedeath,disabilityorresignationwouldadverselyaffecttheirbusinesses. 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 misappropriationofsuchassets,andsuchrisksmaybemoresignificantinthePRCcompared with more developed economies. Such misappropriations may be difficult to identify in a timelymannerand,onceidentified,adequatelegalremediesmaynotbeavailable,ormaybe ineffectiveiftheassetsorproceedsinquestionarenotrecoverable. ConsequencesofaLimitedPartnersFailuretoMakeCapitalContributions EachLimitedPartnerisrequiredtomakecapitalcontributionstotheFunduponnoticefromthe FundManager.IfaLimitedPartnerfailstomakearequiredcapitalcontributiontotheFund, the Fund Manager may pursue certain remedies available to it under the Partnership AgreementagainstthedefaultingLimitedPartner.Inaddition,ifaLimitedPartnerfailstomake a required capital contribution to the Fund, and the capital contributions made by non defaultingLimitedPartnersandborrowingsbytheFundareinadequatetocoverthedefaulted capitalcontribution,theFundmaybeunabletoconsummateapendinginvestmentorpayits obligationswhendue,whichcouldmateriallyadverselyaffectnondefaultingLimitedPartners.
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Private Placement Memorandum RecoursetotheFundsAssets
TheFundsassets,includinganyinvestmentsmadebytheFundandanycash,cashequivalents andotherfundsheldbytheFund,areavailabletosatisfyallliabilitiesandotherobligationsof theFund,including,butnotlimitedto,theindemnificationobligationsoftheFundtotheFirm and each other indemnitee provided for under the Partnership Agreement. The amount of such liabilities and obligations may be materialin amount. If the Fund becomes subject to a liability, parties seeking to have the liability satisfied may have recourse to the Funds 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 Fundsassetsadverselyaffectedbyaliabilityarisingoutofaninvestmentinwhichtheydidnot participate. RequirementtoReturnDistributions Subject to the terms and conditions of the Partnership Agreement, the Fund Manager may requireeachPartnertoreturndistributionspreviouslymadetosuchPartnerforthepurposeof fundingsuchPartnersproratashareofcertainliabilitiesorobligationsoftheFund(including, withoutlimitation,Fundindemnificationobligations). ReinvestmentofDistributedAmounts Distributions in respect of the capital portion of any investment (including any Bridge Investment)disposed(orpartiallydisposed)within18monthsofthedatesuchinvestmentwas mademayinthesolediscretionoftheFundManagerbeaddedbacktotheFundsunfunded Capital Commitments and may be either drawn down again by the Fund or retained and reinvestedbytheFund.Accordingly,duringthetermoftheFund,aPartnermayberequiredto makecapitalcontributionsinexcessofitscapitalcommitmentand,totheextentsuchrecalled orretainedamountsarereinvestedininvestments,aPartnerwillremainsubjecttoinvestment andotherrisksassociatedwithsuchinvestments. InsufficientCapitalforFollowOnInvestments Followingitsinitialinvestmentinaportfoliocompany,theFundmayhavetheopportunityto increaseitsinvestmentinsuccessfuloperationsormaybeaskedtoprovideadditionalfundsto suchportfoliocompany.AlthoughtheFundManagerintendstoestablishsufficientreservesfor Fundfollowonactivities,therecanbenoassurancethattheFundwillhavesufficientundrawn capital to make such followon investments. The Funds inability to make a followon investmentmayresultinamissedopportunitytoparticipateinanattractiveinvestmentorit mayhaveasubstantialnegativeimpactonaportfoliocompanyinneedofsuchinvestment. DilutionfromSubsequentClosings 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 LimitedPartnerstherein.AlthoughsuchLimitedPartnerswillcontributetheirproratashareof
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previouslymadecapitalcontributions(plusinterestthereonatarateof8%perannum),there can be no assurance that this payment will reflect the fair value of the Funds existing investmentsatthetimesuchadditionalLimitedPartnerssubscribeforInterests. DistributionsinKind 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 indefiniteperiodoftime. LimitationsonPotentialInvestorsResultingfromERISAConsiderations TheFundintendstopermitparticipationofbenefitplaninvestorsintheFundsuchthattheir 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,theFundsassetsmayconstituteplanassetswithinthemeaningofthePlanAssets Regulations,whichcouldhavesignificantadverseconsequencesfortheFundandtheLimited Partners.SeePartVIofthisMemorandum,LegalandTaxMattersERISAConsiderations. CertainTaxRisks GeneralRisks Certain risks and other information related to tax matters are discussed in Section VI of this Memorandum,LegalandTaxMattersSummaryofTaxConsequencesforLimitedPartners, whichprospectiveinvestorsarerequestedtoreadcarefully.Prospectiveinvestorsareurgedto consulttheirowntaxadvisorswithrespecttotheeffectsofaFundinvestmentinthecontextof their own tax situation. There can be no assurance that the structure of the Fund or any investmentsbytheFundwillbetaxefficientforanyparticularinvestor.Therecanalsobeno assurance that the Fund will distribute sufficient cash to cover the full tax liabilities of a particularpartnersproratashareofthetaxableincomeoftheFund.Ingeneral,taxlaws,rules and procedures are extremely complex and are subject to change, which in some cases may haveretroactiveeffect. WithholdingTaxes To the extent that the Fund is required to withhold and pay certain amounts to taxing authoritiesonbehalfoforwithrespecttoitsPartners,(i)iftheamountrequiredtobewithheld orpaidbytheFundonbehalfoforwithrespecttoaPartnerexceedstheamountavailablefor distributiontosuchPartner,suchPartnerwillberequiredtopaysuchamounttotheFundand (ii)eachLimitedPartnerwillindemnifytheFundandtheFundManager,andholdthemeach harmless,foranyliabilitywithrespecttotaxes,penaltiesorinterestrequiredtobewithheldor paidtoanytaxingauthoritybytheFundortheFundManager.
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Private Placement Memorandum AuditRisk
TaxingauthoritiesmayaudittheFundandchallengeanyofthepositionstakeninregardtoits formation,itsinvestmentsoroperations,andsuchauditmayresultinanauditofaPartners owntaxreturnsandpossiblyadjustmentstothetaxliabilityreflectedthereon. PRCTaxLaw Tax laws and practice in the PRC are at an early stage of development and are not as clearly establishedasinWesternnations.ThetaxationsysteminthePRCmaybesubjecttovarying interpretations, frequent changes and inconsistent enforcement at the federal, regional and locallevels,andasaresult,thetaxburdeninthePRCmaybehigherthananticipated.ThePRC governmentcontinuestoreviseitstaxlaws,anditisreportedtoberenegotiatingcertaintax 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 investmentsbytheFundwillbetaxefficientforanyparticularinvestor.Prospectiveinvestors areurgedtoconsulttheirowntaxadvisorswithreferencetotheirspecifictaxsituations. CompliancewithAntiMoneyLaunderingRequirements 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 PartnerholdsanInterest.TheFundManagermayberequiredtoprovidethisinformationto appropriate governmental authorities, in certain circumstances without notifying the Limited Partnersthattheinformationhasbeenprovided.TheFundManagerwilltakesuchstepsasit determines to be necessary to comply with applicable law, regulations, orders, directives or specialmeasures.Governmentalauthoritiesarecontinuingtoconsiderappropriatemeasures toimplementandatthispointitisunclearwhatstepstheFundManagermayberequiredto take; however, these steps may include prohibiting a Limited Partner from making further contributionsofcapitaltotheFund,depositingdistributionstowhichaLimitedPartnerwould otherwisebeentitledinanescrowaccountorcausingthewithdrawalofaLimitedPartnerfrom theFund. PossibleExclusionfromParticipationinCertainInvestments TheFundManagermayreduceorprohibitaLimitedPartnersparticipationinanyoneormore investmentstobemadebytheFundundercertaincircumstances,whichcouldhaveanadverse affectonsuchLimitedPartner.
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B.
PotentialRisksattheInvestmentLevel
UncertainNatureofInvestments The Fund may enter into highrisk investment opportunities. Companies in which the Fund investsmaynotachievetheirexpectedoperationalobjectivesandmightexperiencesubstantial fluctuations in their operating results. In all such cases, the Fund will be subject to the risks associatedwiththeunderlyingbusinessesengagedinbyportfoliocompanies,includingmarket conditions,changesinregulatoryenvironment,generaleconomicandpoliticalconditions,the lossofkeymanagementpersonnelandotherfactors.Interestrates,generallevelsofeconomic activity,thepriceofsecuritiesandparticipationbyotherinvestorsinthefinancialmarketsmay affectthevalueandnumberofinvestmentsmadebytheFundorconsideredforprospective investment.PotentialinvestorsshouldrealizethattheFundManagermaydeterminetodelay realization events to the Limited Partners as a result of general economic and market conditions, illiquidity of portfolio investments, contractual prohibitions or other reasons mentionedherein.Whileundernormalcircumstancesdistributionswillbemadeincash,itis possible that certain distributions to the Partners may be made in kind and could constitute securitiesforwhichthereisnoreadilyavailablepublicmarketandwithrespecttowhichthere aresubstantialtransferrestrictions. IlliquidandLongTermInvestments AlthoughinvestmentsbytheFundoccasionallymaygeneratesomecurrentincome,thereturn ofcapitalandtherealizationofgains,ifany,fromaninvestmentgenerallywilloccuronlyupon thepartialorcompletedispositionofsuchinvestment.Ingeneral,theFundManagerexpects theFundtoholditsinvestmentsforanextendedperiodoftimeaftertheirinitialacquisition, whichmeansthatdispositionsofFundinvestmentsarenotlikelytooccuruntilthelateryears oftheFundsterm.Inmany(ifnotmost)cases,itisunlikelythattherewillinitiallybeapublic market for the securities acquiredby the Fund, and such securities may require asubstantial lengthoftimetoliquidate.TheFundgenerallywillnotbeabletosellthesesecuritiespublicly unlesstheirsaleisregisteredunder,orexemptfrom,applicablesecuritieslaws.Inmanycases theFundwillbelegallyorcontractuallyprohibitedfromsellingsuchsecuritiesevenaftertheir registrationormayotherwiseberestrictedfromdisposingofsuchsecurities. Practical limitations may inhibit the Funds ability to liquidate certain of its investments in portfoliocompaniessincetheportfoliocompanywillbeprivatelyheldand,inmanyinstances, the Fund may own a relatively large percentage of the portfolio companys equity securities. Salesmayalsobelimitedbymarketconditions,whichmaybeunfavorableforsalesofsecurities ofparticularcompaniesinparticularindustries.TheabovelimitationsonliquidityoftheFunds investmentscouldpreventasuccessfulsalethereof,resultindelayofanysale,orreducethe amountorproceedsthatmightotherwiseberealized.
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Private Placement Memorandum Inflation
Inflation and rapid fluctuations in inflation rates could have negative effects on portfolio companiesandsecuritiesmarkets.Therecanbenoassurancethatinflationwillnotbecomea seriousprobleminthefutureandthushaveanadverseimpactontheFundsreturns. CurrentEconomicCrisis 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,includingcompaniesinwhichtheFundmayinvest.Amongotherthings,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). FinancialMarketFluctuations. Generalfluctuationsinthemarketpricesofsecuritiesmayaffectthevalueoftheinvestments heldbytheFund.Instabilityinthesecuritiesmarketsmayalsoincreasetherisksinherentin theFundinvestments. CoInvestmentsWithThirdParties TheFundmaycoinvestwiththirdpartiesthroughpartnerships,jointventures,orotherpooled investmentvehicles.Suchinvestmentsmayinvolverisks notpresentininvestmentswherea third party is not involved, including the possibility that a third party investor may have economicorbusinessinterestsorgoalsthatareinconsistentwiththoseoftheFund,ormaybe in a position to take (or block) action in a manner that is contrary to the Funds investment objectives.Inaddition,theFundmayincertaincircumstancesbeliableforactionsofitsthird party coinvestors. In those circumstances where such third parties involve a management group,suchthirdpartiesmayreceivecompensationarrangementsrelatingtosuchinvestments, includingincentivecompensationarrangements. MinorityInvestments 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 interestsorgoalsthatareinconsistentwiththoseoftheFund,andtheFundmaynotbeina position to limit or otherwise protect the value of the Funds investment in such portfolio company. BridgeFinancings Fromtimetotime,andtotheextentpermittedunderPRClaws,theFundmaylend(directlyor in collaboration with a bank) to portfolio companies on a shortterm, unsecured basis or
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otherwiseinvestonaninterimbasisinportfoliocompaniesinanticipationofafutureissuance ofequityorlongtermdebtsecuritiesorotherrefinancingorsyndication.However,convertible debt to equity arrangements are not typical for foreign invested entities in China, and for reasons not always in the Funds control, such longterm securities issuance or other refinancingorsyndicationmaynotoccurandsuchbridgeloansandinteriminvestmentsmay remainoutstanding.Insuchevent,theinterestrateonsuchloansorthetermsofsuchinterim investmentsmaynotadequatelyreflecttheriskassociatedwiththepositiontakenbytheFund. TroubledCompanyInvestments The Fund may make new investments or followon investments in nonperforming or other troubledcompaniesthatinvolveahighdegreeofrisk. RiskofEarlyStageInvestments Althoughinvestmentsinearlystagecompaniesoffertheopportunityforsignificantgains,such investments also involve a high degree of business and financial risk and can result in substantiallosses.Amongtheserisksarethegeneralrisksinvolvedwithinvestingincompanies atanearlystageofdevelopmentwithlittleornooperatinghistory,companiesoperatingata 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 fromcompanieswithgreaterfinancialresources,moreextensivedevelopment,marketingand servicecapabilitiesandalargernumberofqualifiedmanagerialandtechnicalpersonnel.Early stagecompaniesoftenexperienceunexpectedproblemsintheareasofproductdevelopment, marketing, financing, and general management which, in some cases, cannot be adequately solved. The risk of investing in earlystage companies is much greater than is customarily associatedwithinvestmentinlarger,moreestablishedcompanies,ventures,andbusinesses. LeveragedInvestmentRisks TheFunddoesnotintendtousesubstantialfinancialleverage.However,totheextentthatany investment is made in a company with a leveraged capital structure, such investment will be subjecttoincreasedexposuretoadverseeconomicfactorssuchasasignificantriseininterest rates,aseveredownturnintheeconomyordeteriorationintheconditionofsuchcompanyor its industry. In the event that such a company is unable to generate sufficient cash flow to meetprincipalandinterestpaymentsonitsindebtedness,thevalueoftheFundsinvestmentin suchportfoliocompanycouldbesignificantlyreducedoreveneliminated. InvestmentsLongerthanTerm TheFundmaymakeinvestmentsthatmaynotbeadvantageouslydisposedofpriortothedate the Fund is required to be dissolved, either by expiration of the Funds term or otherwise. Although the Fund Manager expects that Fund investments will be disposed of prior to dissolutionorwillbesuitableforinkinddistributionatdissolution,theFundmayhavetosell,
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distribute or otherwise dispose of investments at a disadvantageous time as a result of dissolution. PossibleHedgingActivities The Fund Manager or the Fund may, but is not required to, use certain hedging strategies in ordertominimizetheriskofadecreaseinthevalueofoneormoreinvestments.Theuseof hedgingstrategiesisahighlyspecializedactivityandtherecanbenoassurancethattheiruse willachievetheintendedresult.ThesehedgingstrategiesmaylimittheabilityoftheFundto profit from the increase in the value of an investment above a certain price. While such hedgingtransactionsmayreducecertainrisks,suchtransactionsthemselvesmayentailcertain otherrisks,including(butnotlimitedto)counterpartycreditriskandmarketliquidityrisk.In addition, if judgments made with respect to future stock prices, exchange rates, market conditionsortrendsarenotcorrect,thesehedgingstrategiescouldresultinlossestotheFund. ContingentLiabilitiesonDispositionsofInvestments Inconnectionwiththedispositionofaninvestmentinaportfoliocompany,theFundmaybe required to make representations about the business and financial affairs of such portfolio companytypicalofthosemadeinconnectionwiththesaleofabusinessormayberesponsible forthecontentsofdisclosuredocumentsunderapplicablesecuritieslaws.TheFundmayalso be required to indemnify the purchasers of such investment to the extent that any such representationsturnouttobeinaccurateormisleading.Thesearrangementsmayresultinthe 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 PartnershipAgreement. ChangesintheRegulatoryandLegalEnvironment Legal,taxandregulatorychangescouldoccurduringthetermoftheFundthatmayadversely affecttheFundsinvestmentactivities.
C.
RisksRelatingtotheFundsInvestmentFocus
FocusedInvestmentStrategy The Fund will be focused primarily on investments in the Renewable Energy, Agritech/Food Processing, Information Technology, Industrial Technology and Biological Science and PharmaceuticalsectorsinthePRC,andmaynotenjoythereducedrisksofabroadlydiversified portfolio. A specific investment focus is inherently more risky and could cause the Funds 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,thatismorediversifiedorhasabroaderfocus.
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D.
PotentialRisksAssociatedwithInvestinginthePRC
TheFundManagerexpectsthatalloftheFundsassetswillconsistofinvestmentsincompanies located in the PRC. In general, the PRCs 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 Funds ability to achieveitsinvestmentobjectives.Theserisksinclude,amongotherrisks:(i)currencyexchange risks, controls on, and changes in controls on, foreign investment and limitations on repatriationofinvestedcapitalandontheFundsabilitytoexchangeRMBandU.S.dollars;(ii) differences between PRC securities markets and those in the U.S. , including potential price volatilityinandrelativeilliquidityofsomesecuritiesmarkets,(iii)changesintaxtreaties;and (iv)thepossibleimpositionofPRCtaxesonincomeandgainsrecognizedwithrespecttoFund investments.Additionally,investorsshouldconsidertheriskfactorsdescribedbelow. 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 consideredtoconstituteorreflectanyofficialorunofficialPRCgovernmentpolicy. EconomicFactors GeneraleconomicconditionsmayaffecttheFundsactivities.Interestrates,generallevelsof economic activity, the price of securities and participation by other investors in the Funds marketsmayaffectthevalueandnumberofinvestmentsmadebytheFundorconsideredfor prospectiveinvestment. TheeconomyofthePRCmayperformfavorablyorunfavorablycomparedwithmoredeveloped economies in such respects as growth of gross domestic product, rate of inflation, currency controls,currencyappreciationordepreciation,capitalreinvestment,resourceselfsufficiency and balance of payments. The economy of the PRC generally is heavily dependent upon internationaltradeand,accordingly,maybeaffectedadverselybyprotectivetradebarriersand economicconditionsinthecountrieswithwhichtheytrade.Inaddition,thePRCseconomyis vulnerabletofluctuationsofworldwidecommodityprices. Morespecifically,aportfoliocompany,particularlyearlyorgrowthstageenterprises,maybe adverselyimpactedbytheviolationoflawbycertainotherenterprise(s)inthesameorrelated industry, which may lead to a significant change of market conditions or regulatory environmentinresponsetosuchviolations. ContinuedStateInvolvementinthePRCEconomy In the past, the PRCs economy was a planned economy subject to one and fiveyear state plansadoptedbythecentralPRCgovernmentauthoritiesandimplemented,toalargeextent, 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 statecontrolled economytoamarketdriveneconomy.Overthisperiod,thePRCgovernmenthasimplemented
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measures emphasizing the utilization of market forces for economic reform, the reduction of stateownershipofproductiveassetsandtheestablishmentofsoundcorporategovernancein businessenterprises.However,despitethesemeasures,asubstantialportionoftheproductive 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 PRCs economicgrowththroughtaxation,theallocationofresources,controllingpaymentofforeign currency denominated obligations, setting monetary policy, imposing credit policy for commercialbanksandprovidingpreferentialtreatmenttoparticularindustriesorcompanies. 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 economicgrowthwillnothavenegativeeffectsonbusinessesinwhichtheFundinvests.Many of the reformoriented policies and measures implemented by the PRC government are unprecedentedorexperimentalandareexpectedtoberefinedandimprovedovertime,and therecanbenoassurancethatthesereformswillnotleadtofiscaldeficits,inflation,orother economicimbalances.SomeofthesereformsormeasuresbenefittheoverallPRCeconomy, butmayalsohaveanegativeeffectontheFundsinvestmentsinthePRC.For example,the financial condition and results of operations of the Funds 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 courseofreform.Thegovernmentmaymodify,suspend,delayorreverseanyofthemeasures 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. Factorsthatmaycausethegovernmenttomodify,suspend,delayorreversethe implementation of existing marketoriented 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. ExpectedassistanceofBCGandtheBeijingGovernmenttotheFund AsdiscussedintheExecutiveSummary,theFirmbelievesthattheFundwillbenefitfromand 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 factorsincluding,butnotlimitedto,changesinpoliticalleadership,economicpolicies,national andlocalpriorities,lawsandregulations,andinternationalrelationscouldhaveanimpacton any decision by BCG or the Beijing Government to provide the support and resources to the FundcontemplatedbytheFirminthisMemorandum.
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Private Placement Memorandum DevelopingNatureofPRCsLegalSystem
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 PRCs legal system is relatively new, and the government is still in the process of developing a comprehensivesystemoflaws,aprocessthathasbeenongoingsince1979. Theoveralleffectoflegislationoverthepast30yearshasenhancedtheprotectionsaffordedto variousformsofforeigninvestmentinthePRC.However,theFundmaybeadverselyaffected bynewlaws,frequentchangestoexistinglaws(orinterpretationsthereof)andpreemptionof provincial or local regulations by national laws or regulations. Moreover, the administrative and judicial interpretation and implementation of laws and the resolution of commercial disputesmaybesubjecttotheexerciseofconsiderablediscretionbybothadministrativeand judicial officials and may be influenced by external forces unrelated to the legal merits of a particularmatterordispute. These uncertainties could limit the legal protections available to the Fund and its portfolio companiesinthePRC.Inaddition,itisdifficulttopredicttheeffectoffuturedevelopmentsin the PRC legal system, particularly with regard to equity and equityrelated investments by foreign investors, including the promulgation of new laws, changes to existing laws or the interpretationorenforcementthereof,orthepreemptionoflocalregulationsbynationallaws. Even where adequate laws exist and contractual terms are clearly stated, there can be no assuranceofaswiftandequitableenforcementoftheFundslegalrights. Bankruptcy TheenactmentinAugust2006ofanewBankruptcyLawofthePRCexpandedthescopeofPRC bankruptcy law from stateowned enterprises to include private companies, as well as gave prioritytotherightsofsecuredcreditorsintheforeclosureofsecuredassets.However,despite these advances, PRC bankruptcy law remains underdeveloped as compared to the United States and other member countries of the Organization for Economic Cooperation and Development. These factors, together with the lack of transparency in judicial system of the PRCandlocalprotectionism,maypreventtheFundfromaccuratelyanticipatingtheoutcomeof anybankruptcyproceedingsinthePRC. NewFormofOwnershipStructure Theforeigninvestedpartnership(FIP)structurethattheFundwilladoptisanewownership structurepromulgatedwitheffectundertheProvisionsontheAdministrationoftheForeign InvestedPartnershipRegistrationonMarch1,2010.Whiletherearesignificantadvantagesto theFIPstructure,suchaspermittingonshoreandoffshoreinvestorstoinvestinthesamefund vehicle and not needing to obtain investmentbyinvestment approval (as is the case with an offshorefund),theparametersoftheFIPstructurearenotyetclearlydefinedandsignificant legalambiguityexistsatthisstage.Forexample,theabilityofaFIPtoconvertforeigncurrency toRMBislessclearthanunderotherownershipstructures.ThetimerequiredtoconvertRMB
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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 industriesandaprohibitiononinvestmentinpublicsecurities.FIPsarealsolimitedtomaking investmentsinthePRC. AlthoughtheFundexpectstobenefitfromtheFIPstructureandcertainregulationsandpolicies issuedbylocalgovernments,includinggovernmentsponsorshipandtaxpreferencegrantedby theBeijingGovernment,therecanbenoassuranceastosuchpoliciesthatthePRCgovernment ortheBeijingGovernmentmaypursueinthefuture. 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 andtherecanbenoassurancethattherulesandregulationsthataredevelopeddowntheline willbefavorabletotheFundanditsoperationalstructure. LimitationonStateOwnedEnterpriseActingasGeneralPartner ThePartnershipLawissuedbythePRCgovernmentonAugust27,2006prohibitsastateowned enterprise(SOE)fromactingasthegeneralpartnerofapartnership.CircularoftheOpinions 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 interestsofwhicharepartiallyheldbyaSOEtoactasthegeneralpartnerofapartnershipfund. 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 respectofitspositionintheGeneralPartner,whilesuchownershipissubjecttocertainfurther approvalsfrom,andregistrationwith,therelevantBeijingGovernmentauthorities. IndustryInvestmentLimitations ThePRCplacescertainlimitsandrestrictions,andincertaincasesprohibitions,oninvestments by offshore investors in certain industries. The State Administration for Industry and CommercerecentlyissuedregulationsthatapplysuchforeigninvestmentrestrictionstoFIPs. 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. CurrencyExchange TheFIPrulesgenerallyrequirethatforeignexchangemattersrelatedtoaFIPcomplywithother relevantlaws,regulationsandadministrativerulesofthePRC.Currently,however,thereexists nodetailedprovisioneitherintheFIPrulesorinothergovernmentregulationsindicatingwhich law,regulationoradministrativerulethataFIPcanfollowwithrespecttotheconversionand repatriationofitsforeignexchangecapital.Additionally,theStateAdministrationforForeign Exchangehasbeensilentontheissue.Consequently,mattersrelatedtoaFIP,openingforeign
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currencyaccounts,settlementofforeigncapitalcontributionsandrepatriationofproceedsto overseasinvestor,includingthetimingrequiredtocompletethesesteps,remainuncertain. ContributionsbyOffshoreInvestorstotheFund,andultimatelythedistributionsfromtheFund to Offshore Investors, will be made in U.S. dollars. The Partnerships allocations and distributions,however,willbecalculatedinRMB,andhencethevalueofsuchinvestmentswill dependinpartontherelativestrengthoftheU.S.dollarcomparedtotheRMB,aswellasthe transaction costs associated with currency conversion. The Fund and its investors may be affectedfavorablyorunfavorablybyexchangecontrolregulationsorchangesintheexchange rate between the RMB and the U.S. dollar. Changes in foreign currency exchange rates may alsoaffectthevalueofdividendsandinterestearned,andthelevelofgainsandlossesrealized onthesaleofsuchinvestments.SeePartIVofthisMemorandum,SummaryofPrincipalFund TermsCapitalContributionsandFundInvestments. TherecentpolicyofthePeoplesBankofChina(theBank)hasbeentosettheRMBexchange rateagainstabasketofcurrencies(theJapaneseyen,theKoreanwon,theU.S.dollarandthe euro), generally permitting a 0.3% fluctuation up or down on any given day. Nevertheless, under the PRCs 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 significantinternationalpressureonthePRCgovernmenttoadoptasubstantialliberalizationof itscurrencypolicy,whichcouldresultinafurtherandmoresignificantappreciationinthevalue oftheRMBagainsttheU.S.dollar.Asaresult,thereremainsconsiderableuncertaintyabout 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,changesinthevalueoftheRMBmayhaveanimpactontheresults ofsuchportfoliocompaniesandtheFund. MarketConditions The marketability and exit strategies of the Funds investments will be subject to market conditionsinthePRCandabroad.Althoughthereisanexpectationthateconomicgrowthin thePRCandabroadwillleadtogreaterdemandinthesectorsinwhichtheFundwillinvest,itis not possible to predictwith certainty that such growth in demand will occur andat the pace thatisanticipatedbytheFund.Further,social,political,economiclegalandotherfactorsmay affectthegrowthofdemandintheseareas.Forexample,subsidiesorotherincentivesdirected attypesoftechnologyorinnovationnotfavoredbytheFundsportfoliocompaniescouldleave them at a competitive disadvantage financially and operationally, as well as from an exit strategyperspective. The Funds 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
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impacting tax or other investment incentives, ability to consummate transactions or environmentalliabilities);availabilityandcostoffinancing(includinglimitationsontheamount and timing of financing); natural disasters; and perceptions by prospective buyers of the convenienceandattractivenessofholdingassetsinthePRC. PotentialPricetoEarningsRatioVolatility Private equity investments are often priced based on a ratio of such price to a prospective portfoliocompany'searnings.Inmoredevelopedmarketssuchpricetoearningsratiostypically fluctuate within a range of accepted pricing based on factors including, but not limited to, industry,projectedgrowthandinvestordemand.InthePRC,thereismorevolatilityinpriceto earnings ratios for a variety of reasons, and the Firm expects such volatility to continue. For example,asmoreinvestorspenetratethePRCprivateequitymarket,theFirmexpectstosee 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 policyweretobecomelessinvestorfavorable,pricesrelativetoearningscouldfallasaresultof decreasedinvestorcompetition,makingitdifficultfortheFundtoexitinvestmentsatpriceto 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 bothinvestmentsandexits. SecuritiesMarketsandExitStrategies With respect to the Funds 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 andinternationalfinancialmarketsmayimpacttheabilityofcompaniestosuccessfullylisttheir securities on a stock exchange or for investors to find strategic buyers to purchase such securitiesinaprivatetransaction.TheFundmaynotbeabletosuccessfullyexititsinvestments inportfoliocompaniesthroughPRCstockexchangesuntilsuchtimeastheportfoliocompany lists publicly and after the expiration of any lockup periods required by relevant PRC regulations.TradingactivityonPRCexchangesmayvaryinsubstantialwaysfromoperationson larger,moreinternationalpublicmarkets,andmaybelessliquidandmorevolatile.Thismay affecttheFundsabilitytodisposeofsecuritiesatfavorablepricesandtiming.TheChiNextis anticipatedtobeoneofthemajorexitavenuesforinvestmentsmadebytheFund.However, theChiNextwasestablishedonlyrecently,inOctober2009,andhasexperiencedhighlyvolatile tradingactivitysinceitsinception.AlthoughstockstradingontheChiNexthavegenerallybeen 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 blocksofsecurities.CommissionsfortradingonstockexchangesinthePRCcanbehigherthan commissionsfortradingonstockexchangesincertainothereconomies.
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The PRC Company Lawrequires there be only one class ofshares in the publicmarket in the PRC. Consequently, the Fund will not be permitted to hold preferred shares in a portfolio companyatthetimeofitspublicofferinginthePRC. 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 marketconditionsinothersecuritiesmarketsinAsiagenerally.Althougheconomicconditions aredifferentineachcountry,investorsreactiontodevelopmentsinonecountrycanaffectthe securities of issuers in other countries in Asia. There can be no assurance that individual securitiesmarketswillnotcontinuetobeaffectednegativelybyeventselsewhere,orthatsuch eventwillnotadverselyaffectthevalueoftheFundsinvestments. PRCBankingSystem ThebankingsystemofthePRCissubjecttoavarietyofrisksincluding:theinsolvencyofbanks due to concentrated debtor risk; a high rate of nonperforming loans and poor creditrisk analysis;agenerallackofcommerciallyprofitablelinesofbusinessthatarenotdependenton inefficienciesinthelocaleconomies;andtheeffectofinefficiencyandfraudonbanktransfers. Inaddition,bankshavenotdevelopedtheinfrastructuretochanneldomesticsavingstoentities inneedoffinance.Suchentitiestherebyexperiencedifficultyinobtainingworkingcapital.Any disruption or other adverse development in the PRCs banking system could have a negative impactontheFundsportfoliocompanies. PRCAccountingandDisclosureStandards Accounting, auditing, financial, and other reporting standards, practices and disclosure requirementsinthePRCarenotequivalenttothoseintheUnitedStatesandcertainWestern Europeancountriesandmaydifferinfundamentalways.Theassetsandprofitsappearingon thefinancialstatementsofacompanyinthePRCmaynotreflectitsfinancialpositionorresults ofoperationsinthewaytheywouldbereflectedhadsuchfinancialstatementsbeenprepared in accordance with U.S. generally accepted accounting principles. Accordingly, information available to the Fund, including both general economic and commercial information and informationconcerningspecificenterprisesorassets,maybelessreliable,lessdetailedandless accuratethaninformationavailableinmoreeconomicallysophisticatedcountries. Inaddition,incertaininstances,theFundmaynothaveaccesstoallavailableinformationto determinefullytheorigination,creditappraisalandunderwritingpracticesutilizedwithrespect to the investments or the manner in which the investments have been serviced and/or operated.Asaresult,theFirmsduediligenceactivitiesmayprovidelessinformationthandue 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. AlthoughtheFundwillendeavortoconductappropriateduediligenceinconnectionwitheach investment,noguaranteecanbegiventhattheywillobtaintheinformationorassurancesthat
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an investor in a more sophisticated economy would obtain before proceeding with an investment. ImpactofNaturalDisasters Thedevelopmentofinfrastructure,disastermanagementplanningagencies,disasterresponse andreliefsources,organizedpublicfundingfornaturalemergencies,andnaturaldisasterearly warningtechnologymaybeimmatureandunbalancedamongdifferentregionswithinthePRC. Consequently,thenaturaldisastertollonanindividualportfoliocompanyorthebroaderlocal economy may be significant. Prolonged periods may pass before essential communications, electricityandotherpowersourcesarerestoredandoperationsoftheportfoliocompanycan beresumed.Additionally,themanagersandemployeesofanaffectedportfoliocompanycould alsobeatgreaterpersonalriskintheeventofanaturaldisaster.
E.
PotentialConflictsofInterest
Investors should be aware that there will be occasions when the Firm and its affiliates may encounterpotentialconflictsofinterestinconnectionwiththeFundsactivities.Byacquiringan InterestintheFund,eachLimitedPartnerwillbedeemedtohaveacknowledgedtheexistenceof anysuchactualorpotentialconflictsofinterestandtohavewaivedanyclaimwithrespectto anyliabilityarisingfromtheexistenceofanysuchconflictofinterest.Thefollowingdiscussion describescertainpotentialconflictsofinterestthatshouldbecarefullyevaluatedbeforemaking aninvestmentintheFund. EffectofCarriedInterest TheexistenceofCarriedInterestmaycreateanincentivefortheFundManagertomakemore speculativeinvestmentsonbehalfoftheFundthanitwouldotherwisemakeintheabsenceof such performancebased compensation, although the substantial Capital Commitment of the FundManagerandBeijingCapitaland,andtheCarryPartnerclawback,shouldtendtoreduce thisincentive. DiverseLimitedPartnerGroup TheLimitedPartners,whichareexpectedtoincludeU.S.taxableandtaxexemptentities,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 withdecisionsmadebytheFundManager,includingwithrespecttothenatureorstructuring 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 investors individual tax situation. In selectingandstructuringinvestmentsappropriatefortheFund,theFundManagerwillconsider
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theinvestmentobjectivesoftheFundandthePartnersasawhole,andwillnotbeobligatedto considertheinvestment,taxorotherobjectivesofanyparticularLimitedPartner. AllocationofPersonnel Certain employees of the Firm mayspend 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 concerningtheallocationoftime,servicesandfunctionsbetweentheFirmandtheFund,and suchotherfundsandcompanies. BeijingGovernment 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 conglomerateoftheBeijingGovernment,neitherBCGnor theBeijingGovernment(oranyof their affiliates) will be considered affiliates of the Fund or the Firm. BCG and the Beijing GovernmentmayengageinactivitiesadversetoandindirectcompetitionwiththeFundand/or theFirm,includingsponsoringotherprivateequityfunds. To the extent that the Beijing Government is required to provide regulatory approval in connectionwithaninvestmentbytheFund,ortotheextenttheBeijingGovernmentorBCGis awareofapotentialinvestmentthatwouldmeettheinvestmentcriteriaoftheFund,BCG,the BeijingGovernmentandtheiraffiliateswillhavethediscretiontotakeintoaccounttheirown interests,interestsofotherfundstheysponsor,andanyotherintereststhatmayconflictwith theinterestsoftheFundanditsPartners. It is expected that the Fund and the Firm will enter into arrangements with BCG, the Beijing Governmentandtheiraffiliates.Inconnectionwithsucharrangements,itisexpectedthatBCG, the BeijingGovernment and theiraffiliates will take their own interests into account and not theinterestsoftheFundortheFirm.AlthoughtheinterestsofBCG,theBeijingGovernment and their affiliates may conflict with the interests of the Fund and the Firm in such cases, neithertheFundnortheFirmwillberestrictedfromenteringintosucharrangements. MaterialNonPublicInformation 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 nonpublic informationorberestrictedfrominitiatingtransactionsincertainsecurities.TheFundwillnot befreetoactuponanysuchinformation.Duetotheserestrictions,theFundmaynotbeable to initiate a transaction that it otherwise might have initiated and may not be able to sell an investmentthatitotherwisemighthavesold. ConflictingInvestmentInterests The Fund may invest or propose to invest in a portfolio company of a Predecessor Fund or OtherFund.Suchinvestmentsmaybemadeinthesameorsimilarsecuritiesasthoseheldby
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suchfund,butmaybeacquiredatdifferenttimesatlowerorhigherprices.Suchinvestments mayalsobeinsecuritiesthatdiffersignificantlyfromthesecuritiesheldbysuchfund,including withrespecttoseniority,dividends,votingrightsandparticipationinliquidationproceeds.The differentpricespaidfor,ortermsof,securitiesheldbysuchinvestorsmaycreateconflictsof interest. Such investors will be acting in their own interest, and may take actions that are adversetotheinterestsoftheFund. ManagementFeePayableRegardlessofFundPerformance TheManagementFeeisrequiredtobepaidtotheFundManagereveniftheFundexperiences net losses in a particular year or over the term of the Fund and even if the Fund Manager is unabletosourceandcloseinvestmentsoversomeperiodoftime(orsourceandcloseenough investmentstofullydeploytheFundsinvestablecapital). FormationofSuccessorFunds 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.SeePartIVofthisMemorandum,SummaryofPrincipalFundTermsSuccessorFunds. There can be no assurance that the creation of such additional funds will not give rise to conflictsofinterestbetweenthelimitedpartnersoftherespectivefunds.IntheeventtheFund Manager raises another private equity fund other than a Successor Fund, and an investment opportunitymaybeappropriateforsuchfundandtheFund,theallocationofsuchinvestment opportunity will be made by the Fund Manager or Beijing Capital, as applicable, in a manner thatitdeterminestobeequitableunderthecircumstances.
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Private Placement Memorandum V. LegalandTaxMatters
A.
SecuritiesLawConsiderations
SecuritiesAct 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 REGULATIOND. Eachinvestorwillberequiredtomakecustomaryprivateplacementrepresentations,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 InterestscannotbetransferredorresoldexceptaspermittedundertheSecuritiesActandany applicablestateornonU.S.securitieslawspursuanttoregistrationoranexemptiontherefrom. ItisextremelyunlikelythattheInterestswilleverberegisteredundertheSecuritiesAct. InvestmentCompanyAct 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 intendstorelyontheexemptionscontainedinSections3(c)(1)and/or3(c)(7)oftheInvestment 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 prospectiveinvestorsinordertoensurethattheconditionsoftheapplicableexemptionsare met. SecuritiesExchangeActof1934 It is not expected that any of the Fund entities will be required to register their limited partnershipinterestsoranyothersecurityoftheFundentitiesundertheSecuritiesExchange Actof1934(ExchangeAct).Asaresult,theFundentitieswouldnotbesubjecttotheperiodic 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 PartnershipAgreement.
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B.
CertainCaymanIslandsPartnershipLawMatters
CertainFeedersandIntermediariesestablishedinconnectionwiththeFundmaybeorganized 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).UnderCaymanIslandslaw,asageneralmatter,alimitedpartnersliabilityfordebtsand obligationsofanexemptedlimitedpartnershipwillbelimitedinwhatevermannertherelevant partnershipagreementspecifies,whichinthecaseoftheFundmeanstotheextentofaLimited Partnerscapitalcontributions,unless(i)itbecomesinvolvedinthemanagementoftheFunds business, or (ii) it is obligated pursuant to section 14(1) of the Partnership Law to return a contributionwheretheFundisinsolvent,or(iii)itisobligatedtoreturndistributionsasfurther describedabove.
C.
ERISAConsiderations
Thefollowingisasummarydiscussionofcertainconsiderationsassociatedwithaninvestment in the Fund by a pension, profitsharing or other employee benefit plan subject to TitleI of ERISA, a plan subject to Section4975 of the U.S. Internal Revenue Code, as amended (the Code),includingtaxqualifiedretirementplansdescribedinSection401(a)oftheCode,tax qualified annuity plans described in Section403(b) of the Code and individual retirement accounts or individual retirement annuities described in Section408 of the Code (each such employee benefit plan under ERISA or plan under Section4975, a Plan) and any entity whose underlying assets include plan assets by reason of a Plans investment in such entity pursuanttothePlanAssetsRegulationsasdefinedbelow)(together,BenefitPlanInvestors). Employee benefit plans that are governmental plans (as defined in Section3(32) of ERISA), churchplans(asdefinedinSection3(33)ofERISA),andnonU.S.plans(asdescribedinSection 4(b)(4)ofERISA)arenotsubjecttoTitleIofERISAandSection4975oftheCode,butmaybe subjecttootherlawsthatimposerestrictionsontheirinvestments. Thisdiscussionisnecessarilygeneralanddoesnotaddressallaspectsofissuesthatmayarise 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. GeneralFiduciaryMatters ERISAimposescertaindutiesonpersonswhoarefiduciariesofaPlan.Ingeneral,underERISA, 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 assetsofaPlanorBenefitPlanInvestor,orwhorendersinvestmentadvicetothePlanforafee orothercompensation,isgenerallyconsideredtobeafiduciaryofthePlan. Particularly in light of the risks and lack of liquidity inherent in an investment in the Fund, beforepurchasingFundInterestswiththeassetsofaBenefitPlanInvestor,afiduciaryofany
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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 investmentisinaccordancewiththePlansinvestmentpoliciesandgoverningdocuments,(iii) therolethatinvestmentintheFundwillplayintheBenefitPlanInvestorsoverallinvestment portfolio,and(iv)whethertheFundwillholdplanassetssubjecttoERISAorSection4975of the Code pursuant to the U.S. Department of Labor Regulation 29 C.F.R. 2510.3101, as modifiedbySection3(42)ofERISA(thePlanAssetsRegulations).AfiduciaryofanyBenefit PlanInvestorshouldalsoconsiderwhetherthepurchaseorownershipofFundInterestswould constituteorgiverisetoaprohibitedtransactionunderERISAortheCode,asdiscussedbelow. Inparticular,thefiduciarymustmakeanindependentinvestmentdecisionwithrespecttothe BenefitPlanInvestorsinvestmentintheFundandmustnotrelyontheFund,theFirmortheir affiliatesforinvestmentadviceregardingthisinvestment.Afiduciarycanbepersonallyliable forlossesincurredbyaBenefitPlanInvestorresultingfromabreachofitsfiduciarydutiesand forcertainbreachesbycofiduciaries. ProhibitedTransactions CertainprovisionsofERISAandSection4975oftheCodeprohibitspecifictransactionsinvolving theassetsofaPlanandpersonswhohavecertainspecifiedrelationshipstothePlan(partiesin interestunderERISAanddisqualifiedpersonsunderSection4975oftheCode).Anypartyin interest(includingafiduciary)thathasengagedinaprohibitedtransactionwouldberequired to(i)restoretothePlananyprofitrealizedonthetransaction,and(ii)reimbursethePlanfor anylossessufferedbythePlanasaresultofsuchtransaction.Thepartyininterestwouldalso 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 amountinvolvedifthetransactionisnotcorrectedwithinacertaintimeperiod. 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 transactionsunderERISAortheCode. PlanAssets Benefit Plan Investors that are considering an investment in the Fund should also consider whetheraninvestmentintheFundInterestswillcausetheunderlyingassetsoftheFundtobe deemed plan assets within the meaning of the Plan Assets Regulations. If the underlying assetsoftheFundweredeemedtobeplanassets,amongotherconsequences,theprudence andotherfiduciarystandardsofERISAwouldapplytoinvestmentsmadebysuchentities,and certain transactions that such entity might enter into in the ordinary course of business and operationmightconstituteprohibitedtransactionsunderERISAandtheCode.
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ERISAandtheCodedonotdefineplanassets.ThePlanAssetsRegulationsgenerallyprovide that when a Benefit Plan Investor acquires an equity interest in an entity that is neither a publiclyoffered security nor a security issued by an investment company registered under theInvestmentCompanyAct,theBenefitPlanInvestorsassetsincludeboththeequityinterest and an undivided interest in each of the underlying assets of the entity. Exceptions to this lookthroughruleapplyif(i)equityparticipationintheentitybyBenefitPlanInvestorsisnot 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 participationinanentityisnotsignificantiflessthan25%ofthevalueofeachclassofequity interests in the entity is held by Benefit Plan Investors, disregarding equity interests held by persons(otherthanBenefitPlanInvestors)withdiscretionaryauthorityordiscretionarycontrol overtheassetsoftheentityorwhoprovideinvestmentadviceforafee(directorindirect)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 Investors equity interestthatconstitutesplanassetswillbetakenintoaccount. TheFundManagerintendstolimitparticipationbyBenefitPlanInvestorstolessthan25%of thevalueofeachclassofequityinterestsintheFund(excludinginterestsintheFundheldby 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 exceptionapplies,BenefitPlanInvestorsthatinvestintheFundwouldbedeemedtohaveas planassetsboththeirFundInterestsandundividedinterestsintheFundsassets. IftheassetsoftheFund,weretobedeemedtobeplanassets,thentheprohibitedtransaction 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 enteredintobytheFundasthoughsuchtransactionsweredirectlyenteredintobyBenefitPlan Investors.Thiscouldresultin,amongotherconsequences,(i)theapplicationoftheprudence 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 prohibitedtransactionsorotherviolationsasaresultoftheirinvestmentintheFund,orasco fiduciaries for actions taken by or on behalf of the Fund. With respect to an individual retirementaccount(IRA)thatinvestsintheFund,theoccurrenceofaprohibitedtransaction involvingtheindividualwhoestablishedtheIRA,orhisorherbeneficiaries,couldcausetheIRA toloseitstaxexemptstatus. Each Plan fiduciary should consult its own legal advisor regarding the considerations discussedabovebeforepurchasingFundInterests.
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D.
SummaryofPRCTaxConsiderations
The following general guidance is based on the Fund Managers 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 affectaninvestorsposition. ThisSection:SUMMARYOFPRCTAXCONSIDERATIONSissetoutasfollows,witheachsection belowprovidinggeneralguidanceonthetaxtreatmentoftheFundandoftheinvestorsinthe Fund: 1. PrincipalRulesinconnectionwithIncomeTax 2. ForeignInvestedPartnership(FIP)asaTaxPayer 3. IncomeTaxofaForeignPartnerofaFIP 4. IncomeTaxinconnectionwithTransferofFIPPartnershipInterestbyaForeignPartner ThisMemorandumisnotintendedtoprovideacomprehensiveguidetothetaxationtreatment ofinvestors.Allinvestors,andinparticularthosefromjurisdictionsotherthanPRCreferredto 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 interestandreceivingdistributionsfromtheFund.NeithertheFundnoranyofitsadviserscan takeanyresponsibilityinthisregard. PrincipalRulesinconnectionwithIncomeTax AccordingtotheEnterpriseIncomeTax(EIT)LawofChina(EITL)anditsimplementingrules, anenterpriseoranorganization(collectivelyreferredtoasenterprisesundertheEITL)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 (theSAT)jointlyissuedtheNoticeontheIncomeTaxofaPartnerofaPartnershipEnterprise (CaiShui[2008]No.159)(Circular159).Circular159providesthateachpartner(enterprise ornaturalperson)ofapartnershipenterpriseshallbeataxpayer. AccordingtotheEITL,inordertodetermineEIT,ataxauthorityshallfirstdeterminewhether anenterpriseisaresidententerprise(RE)oranonresidententerprise(NRE)andwhether 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 referstoanenterprisethatisestablishedunderthelawofaforeigncountryorregionandits actual institution of management is not located inside China, but has a PE inside China or derivesincomesfromsourcesinChinaeventhoughithasnoPEinChina.
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An RE shall pay EIT on its incomes derived both from within and outside China. For a NRE havingaPEinChina,itshallbesubjecttoEITonthePEsincomesderivedfromChinaaswellas incomesderivedoutsideChinabutwhichhaveactualconnectionwithitsPEinChina.TheEIT rateisaflatrateof25%.Incomparison,foraNREhavingnoPEinChina,itshallpayEITonits incomesderivedfromsourcesinChina,forinstance,dividend,interest,rentalandroyalty.The tax rate is 10% unless specifically exempt or reduced by the PRC State Council or a bilateral treaty. Asforindividualincometax(IIT),accordingtotheIndividualIncomeTaxLaw(IITL)andits implementing rules, an individual, who is domiciled within China or is not domiciled but has residedwithinChinaforatleastoneyear,isaresidenttaxpayerandshallpayIITonincomes 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 nonresident taxpayer shall only pay IIT on income derived from sourceswithinChina. FIPasaTaxPayer 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),thispartnermaybesubjecttoEIT.Forexample,anyIntermediarythroughwhichaFeeder investsinthePartnershipmaybesubjecttoEIT.AFIPitselfisnotsubjecttoEIT. Inthecourseofbusiness,aFIPmayneedtopayBT,stampduty,propertytax,deedtaxandso forth in connection with its operation in China although a FIP is not subject to EIT. In this regard,aFIP,asaChineseenterprise,isnodifferentfromanyotherChineseenterprises. IncomeTaxofaForeignPartnerofaFIP AccordingtoCircular159,regardlessofwhetherapartnershipenterprisedistributesitsprofits topartnersornot,partnersshouldpayincometax.Thetaxableincomeofapartnershallbe based on its sharing percentage of the partnership income according to the partnership agreementexecutedbythepartners. EITofaForeignEnterpriseasaPartnerofaFIP ForeignEnterpriseastheLPofaFIPAccordingtotheabovementionedrules,aFE,actingas thelimitedpartner(LP)ofaFIP,shallpayEITatarateof25%ifitisdeemedasanREoraNRE butwithaPEwithinChina.IfitisaNREwithoutaPEwithinChina,theEITrateshallbe10%. Additionally,accordingtothePELofChina,aLPdoesnothavethepowerandrighttorunthe businessofaFIPandisnotallowedtorepresentaFIP.GeneralpracticeisthataLPonlyinvests intoaFIPanditsincomefromaFIPispassiveincome.Therefore,aLPshallnotberegardedas
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havingaPEwithinChinajustbecauseofitsinvestmentintoaFIP. Accordingly,anIntermediarythroughwhichaFeederinvestsinthePartnershipasanLPwillbe subjecttoEITatarateof10%. IndividualIncomeTaxofaForeignIndividualasaPartnerofaFIP According to the IITL, its implementation rules and other relevant regulations and rules, for a foreignindividual(FI),regardlessofhis/herresidentstatusorhis/herresponsibilityasaGPor LP in a FIP, his/her dividend income from a FIP is deemed as income originating from China, whichshallbesubjecttoIIT. 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, dividendsobtainedbyapartnershipenterprisefromitsinvestmentsinportfoliocompaniesshall 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 individualinvestorshallpayIITatarateof20%forobtaineddividends. Other than the investment profits from portfolio companies, a FIP may also obtain income which comes from noninvestment activities such as production proceeds and other income. AccordingtotheRegulationfortheImpositionofIITuponInvestorsinSoleProprietorshipsand Partnerships (Cai Shui [2000] No. 91) which is jointly issued by the SAT and the MOF, post deductionofcostsandexpenses,netincomeofaFIPfromnoninvestmentsshallbedeemedas 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 commerceandshallbetaxedatprogressiveratesrangingfrom5%to35%.Forinstance,income overRMB50,000willbetaxedatarateof35%. ItcanbeseenthattheSATandtheMOFbelievethatthetaxrateshouldbedeterminedbythe natureoftheincomeobtainedbyanindividualpartnerfromapartnershipenterprise.Whether anindividualpartnerisaGPorLPdoesnotaffectthetaxrateinconnectionwiththeincome obtainedfromapartnershipenterprise. TheFundanticipatesthatallnonPRCinvestorswillinvestthroughaFeederandIntermediary. Asaresult,nononPRCindividualwillbeadirectpartnerinthePartnershipandthuswillnotbe subject to IIT. Instead, the Feeder or Intermediary through which the investor invests in the PartnershipwillbesubjecttoEITassummarizedabove. IncomeTaxinconnectionwithTransferringFIPInterests Basedonthecurrentviews,ifaforeignpartnertransfersitspartnershipinterestsinaFIP,itshall be deemedas 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 transfersitspartnershipinterestsinaFIP,itshallbeshallbesubjecttoEIT.Again,theEITrate
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willdependonwhetherthisFEisanREoraNREandwhetherornotthisFEhasaPEwithin China.TheEITrateshallbeeither25%or10%.
E.
CertainU.S.FederalIncomeTaxConsiderations
ToensurecompliancewithInternalRevenueServiceCircular230,youareherebynotifiedthat
anydiscussionoftaxmatterssetforthinthisMemorandumwaswritteninconnectionwith 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 taxrelated penalties under federal, state or local tax law. Each prospective investor should seek advice based on its particular circumstances from an independenttaxadvisor. General ThefollowingisadiscussionofcertainoftheanticipatedU.S.federalincometaxconsiderations relevant to a prospective investor in the Fund arising from the purchase, ownership, and dispositionofInterests.Unlessspecifiedotherwise,thisdiscussionappliesonlytoaprospective LimitedPartnerthatisaU.S.Person.AU.S.Personiseither(i)acitizenorresidentoftheU.S., (ii)acorporationorotherentitytreatedasacorporationforU.S.federalincometaxpurposes createdororganizedinorunderthelawsoftheU.S.oranypoliticalsubdivisionthereof,(iii)an estatetheincomeofwhichissubjecttoU.S.federalincometaxationregardlessofitssource,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 substantialdecisionsofthetrust.Ifapartnership(orotherentitytreatedasapartnershipfor U.S.federalincometaxpurposes)holdsInterests,thenthetaxtreatmentofapartnerinsuch 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 consequencesofholdingInterests. Prospective investors should consult their tax advisors to determine this discussions applicationtotheirownparticularcircumstances.Thediscussionisbasedonprovisionsofthe Code,ontheregulationspromulgatedthereunderandonpublishedadministrativerulingsand judicialdecisionsnowineffect,allofwhicharesubjecttochangeordifferentinterpretations. InviewofthenumberofdifferentjurisdictionswherelocallawsmayapplytoLimitedPartners 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 urgedtoconsulttheirownadvisorsindeterminingthepossibletax,exchangecontrolorother consequencestothemunderthelawsofthejurisdictionsofwhichtheyarecitizens,residents, domiciliariesorinwhichtheyconductbusiness. IncomeorgainsfromsecuritiesheldbytheFundmaybesubjecttowithholdingtaxesorother taxes.
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ThefollowingdiscussionassumesthattheexpectedtaxtreatmentofthePartnershipandany FeederandIntermediary,andanytaxelectionsmadebysuchentitiesortaxpositionstakenby the Fund, are respected for U.S. federal income tax purposes. The Internal Revenue Service (theService),however,coulddisagreewiththetaxpositionstakenbytheFundorotherwise failtorespectthestructure.Ifthisweretooccur,thetaxconsequencesofowninganInterest in the Fund could be materially different than those described below. The remainder of this discussionassumesthatthestructuredescribedhereinandthetaxpositionstakenbytheFund willberespectedforU.S.federalincometaxpurposes. Each prospective investor is urged to consult its own tax advisor with respect to the U.S. federal,state,localandforeigntaxconsequencesofthepurchaseandownershipofInterests. ClassificationofthePartnership,FeedersandIntermediaries Subject to the discussion of publicly traded partnerships and checkthebox elections set forth below, an entity, such as the Partnership and each Feeder, will, in the absence of an electiontothecontrary,betreatedasapartnershipforU.S.federalincometaxpurposes.The classification of an entity as a partnership for U.S. federal income tax purposes may not be respectedforstateorlocaltaxpurposes. 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 Partnershipsonosuchentitywillbetreatedasapubliclytradedpartnership.Anentitythatis classified as a partnership for U.S. federal income tax purposes is not subject to U.S. federal incometaxitself,althoughitmustfileanannualinformationreturn. 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 incometaxpurposes(asocalledchecktheboxelection).Itiscurrentlyanticipatedthatthe FundManagerwillestablishatleastoneFeederthatwillbeclassifiedasapartnershipforU.S. federalincometaxpurposesregardlessofwhetheracorporateFeederisestablished. AnyIntermediaryestablishedthroughwhichaFeederwillmakeinvestmentsinthePartnership will,eitherbydefaultorbymakingachecktheboxelection,beclassifiedaseitheranentity disregardedasseparatefromitsowner(iftheIntermediaryhasonlyoneFeederasitsowner) or as a partnership (if the Intermediary has multiple owners) for U.S. federal income tax purposes. It is intended that each Feeders, each Intermediarys and the Partnerships affairs will be conducted such that income realized by the Fund will not generally be effectively connected withtheconductofaU.S.tradeorbusinessorotherwisesubjecttoregularU.S.federalincome taxationonanetbasis,althoughnoassurancecanbegiveninthisregard.Thus,itisintended that NonU.S. Investors who are not currently subject to regular U.S. federal income taxation
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willnotbesubjecttoregularU.S.federalincometaxationsolelybyreasonofaninvestmentin theFund,althoughnoassurancescanbegiveninthisregard. ForthesepurposesthetermNonU.S.Investormeansanyperson(otherthanapartnership) thatisnotaU.S.Personforfederalincometaxpurposes,asdefinedabove. 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 realizedbytheFundwillbeeffectivelyconnectedwiththeconductofaU.S.tradeorbusiness orotherwisesubjecttoregularU.S.federalincometaxationonanetbasis. TaxTreatmentofU.S.LimitedPartners For U.S. federal income tax purposes, a Limited Partners 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 accordancewithsuchPartnersinterestinthePartnership.ThePartnershipbelievesthat,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 resultingallocationstoaparticularLimitedPartnerforU.S.federalincometaxpurposesmaybe lessfavorablethantheallocationssetforthinthePartnershipAgreement. Each Limited Partner will (subject to certain limits discussed below) be entitled to deduct its allocableshareofthePartnershipslossestotheextentofitstaxbasisinitsInterestattheend ofthetaxyearofthePartnershipinwhichsuchlossesarerecognized.ALimitedPartnerstax basisinitsInterestinthePartnershipis,ingeneral,equaltotheamountofcashthePartnerhas contributedtothePartnership,increasedbythePartnersproportionateshareofincomeand liabilitiesofthePartnership,anddecreasedbythePartnersproportionateshareofreductions insuchliabilities,distributions,andlosses. 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 purposeanyreductioninthatPartnersshareoftheliabilitiesofthePartnership,exceedsthat PartnersshareofthetaxableincomeofthePartnershipforthatyear,theexcesswillreduce thetaxbasisofthatPartnersInterestandanydistributioninexcessofsuchbasiswillresultin 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 Partners Interest by the amountofthePartnershipsbasisinsuchpropertyimmediatelybeforeitsdistributionbutwill notresultintherealizationoftaxableincometothePartner.
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Private Placement Memorandum RestrictionsonDeductibilityofExpenses
ItisanticipatedthatthePartnershipsexpenseswillbeinvestmentexpensesor,totheextent allocabletothePartnershipsinvestmentsinoperatingpartnershipsandtheManagementFee paidbythePartnershiptotheFundManager,passiveactivitylosses.Inthecaseofinvestment expenses, any individual who is a Limited Partner (directly or through a partnership or other passthroughentity)willbeentitledtodeductsuchindividualsshareofsuchexpensesonlyto the extent that such share, together with such individuals other miscellaneous itemized deductions,exceeds2%ofsuchindividualsadjustedgrossincome.Inaddition,inthecaseof anindividualLimitedPartnerwhoseadjustedgrossincomeexceedsacertainthresholdamount, otherwiseallocableitemizeddeductionswillbereduced,butnotmorethan80%,byanamount equalto3%oftheexcessofsuchLimitedPartnersadjustedgrossincomeoverthethreshold amount.Thisadditionaloveralllimitationhasbeenphasedoutasof2010,butisscheduledto befullyreinstatedin2011.InthecaseofindividualLimitedPartnerssubjecttothealternative minimum tax, no deduction is allowed for miscellaneous itemized deductions in computing alternativeminimumtaxableincome. IfthePartnershipinvestsinoperatingpartnerships,thepassivelossandatriskrulescould limit the deductibility of expenses allocable to such investments. In addition, a Limited PartnersallocableshareoftheManagementFeepaidbythePartnershiptotheFundManager 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 passthrough entity) on indebtedness incurred to financesuchLimitedPartnersinvestmentinthePartnership,andsuchLimitedPartnersshare ofthePartnershipsexpensesallocabletotheoperatingpartnershipsandtheexpensesofthe operating partnerships. Under the passive loss rules, a noncorporate taxpayers losses, creditsanddeductionsfrompassiveactivitiesarelimitedtothetaxpayerspassiveincome. 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 atrisk rules, noncorporate and certain corporate taxpayers may deductlossesfromabusinessactivityonlytotheextenttheyareatriskwithrespecttothe activity at the end of the taxable year. A taxpayer is generally atrisk to the extent the taxpayer contributes money to an activity or is personally liable for amounts borrowed with respecttotheactivity. SpecialLimitationonDeductibilityofInterest 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 attributabletothedispositionofpropertyheldforinvestment.Thislimitationcouldapplyto limit the deductibility of interest paid by a noncorporate person that is a Limited Partner (directly or through a partnership or other passthrough entity) on indebtedness incurred to
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financesuchpersonsinvestmentinthePartnershiporthedeductibilityofsuchpersonsshare ofinterestexpense(ifany)ofthePartnership. ForeignTaxCredit AnyPRCorothernonU.S.taxeswithheldfromallocationsordistributionstoaLimitedPartner orpaidbyanIntermediaryorFeederwillbeeligibleforaforeigntaxcredit,subjecttogenerally applicable limitations depending on the Limited Partners own circumstances. Income, gain, loss and deductions of the Fund may be passive income or general category income for foreigntaxcreditpurposes. SaleorDispositionofLimitedPartnerInterests ALimitedPartnerthatsellsorotherwisedisposesofanInterestinthePartnershipinataxable transaction generally will recognize gain or loss equal to the difference, if any, between the adjustedbasisoftheInterestandtheamountrealizedfromthesaleorexchange.Theamount realizedfromthesaleorexchangewillincludethePartnersshareofthePartnershipsliabilities outstandingatthetimeofthesaleorexchange.Gainorlosswillgenerallybecapitalgainor lossandwillbelongtermcapitalgainorlossiftheInterestwasheldformorethan1yearon thedateofsuchsaleorexchange. ControlledForeignCorporationsandPassiveForeignInvestmentCompanies 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 foreigncorporation(CFC)orapassiveforeigninvestmentcompany(PFIC)forU.S.federal incometaxpurposes.IfthePartnershipinvestsinaCFCorPFIC,aLimitedPartnersallocable shareofincome,gain,lossanddeductionattributabletotheinvestmentmaybeaffectedbythe CFCorPFICantideferralregimes.LimitedPartnersshouldconsulttheirowntaxadvisorswith respecttotheCFCandPFICrules. TaxationofNonU.SInvestors ForU.S.federalincometaxpurposes,undercurrentlawanInvestorintheFundwhoisaNon 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,thatthedistributionsorgainsarenotattributabletoanofficeorfixedplace of business maintained by the Limited Partner in the United States or otherwise effectively connectedwiththeconductofatradeorbusinessbytheLimitedPartnerintheUnitedStates. SpecialrulesmayapplyinthecaseofNonU.S.Investors(i)thathaveanofficeorfixedplaceof business in the United States to which dividends or gain in respect of the Interests are attributable,(ii)thathaveataxhomeintheUnitedStatesor(iii)thatareformercitizensof the United States, controlled foreign corporations, nonU.S. insurance companies that hold Interests in connection with their U.S. business, passive foreign investment companies or
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corporations which accumulate earnings to avoid U.S. federal income tax. Such persons are urgedtoconsulttheirU.S.taxadvisorsbeforeinvestinginthePartnership. In the case of Interests held in the United States by a custodian or nominee for a NonU.S. Investor,U.S.backupwithholdingtaxesmayapplytodividendsinrespectofInterestsrealized by such Investor unless such Investor properly certifies as to its nonU.S. status or otherwise establishesanexemptionfrombackupwithholding. CertainConsiderationsforTaxExemptLimitedPartners OrganizationsthatareotherwiseexemptfromU.S.federalincometaxunderSection501ofthe Code, including ERISA plans, are subject to tax on their unrelated business taxable income (UBTI). UBTIisgenerallydefinedasgrossincomefromanyunrelatedtradeorbusinessregularlycarried on by a tax exempt entity less any deductions attributable thereto. An unrelated trade or businessconsistsofanytradeorbusinesstheconductofwhichisnotsubstantiallyrelatedto the organizations exempt purpose or function. UBTI generally does not include dividends, interest,royaltiesorcapitalgains.UBTIalsoincludesunrelateddebtfinancedincome(UDFI). UDFI includes income derived from debtfinanced property during the taxable year and may includeincomederivedfromasaleorotherdispositionofdebtfinancedpropertyiftherewas acquisition indebtedness outstanding with respect to such property during the 12month period ending with the date of sale or other disposition. Acquisition indebtedness generally includesanydebtincurreddirectlyorindirectlytopurchasesuchproperty. IfUBTIwereearnedbythePartnership(forexample,byreasonofinvestmentsinentitiesthat are treated as partnerships for U.S. federal income tax purposes), a taxexempt Limited Partnersallocableshareofsuchincomegenerallywouldbesubjecttofederalincometax.The Partnership may also generate UDFI if it borrows funds, including in respect of certain short term borrowings. In addition, if a taxexempt Limited Partner borrows to fund its Capital Commitment, some or all of its distributive share of income from the Partnership could be UBTI,whichwouldbetaxabletosuchtaxexemptLimitedPartner. Anybreakupfeesortransactionoradvisoryfeesfromportfoliocompanieswillbepaiddirectly totheFundManager,whichwillinturnbeanoffsettoManagementFees.Thereisariskthat theServicemighttakethepositionthatthePartnershipdidreceiveaportionofsuchfeesand that each taxexempt Limited Partners share of such fees should be treated as UBTI. Tax exemptLimitedPartnersareurgedtoconsultwiththeirowntaxadvisorsconcerningtheU.S. taxconsequencesofaninvestmentinthePartnership. CertainReportingRequirements U.S. Persons may be subject to substantial penalties if they fail to comply with special informationreportingrequirementswithrespecttotheirinvestmentinanonU.S.partnership
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suchasthePartnershiporanyFeeder.Forexample,recentlyenactedlegislationimposesnew reportingrequirementsontheholdingofcertainforeignfinancialassetsiftheaggregatevalue of all of these assets exceeds $50,000. Interests are expected to constitute foreign financial assetssubjecttotheserequirementsunlesstheInterestsareheldinanaccountatadomestic financialinstitution.U.S.Personsshouldconsulttheirtaxadvisorsregardingtheapplicationof thislegislation.Inaddition,U.S.Personsthatownstockinforeigncorporations,includingCFCs andPFICs,maybesubjecttospecialinformationreportingrequirements.Taxpayersengaging incertaintransactions,includingcertainlosstransactionsaboveathreshold,mayberequired toincludetaxshelterdisclosureinformationwiththeirannualU.S.federalincometaxreturn.It is possible the Fund may engage in transactions that subject the Partnership and potentially LimitedPartnerstosuchdisclosure.ALimitedPartnerdisposingofanInterestintheFundata taxable loss may also be subject to such disclosure. Potential investors should consult their owntaxadvisorsregardingsuchreportingrequirements. Recently enacted legislation also imposes a 30% withholding tax on certain U.S. source paymentsmadebeginningin2013toaforeignfinancialinstitutionunlesstheforeignfinancial 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 purposesofthislegislation.IfthePartnershipweretoearnU.S.sourceincome,thePartnership andanyFeedermayhavetoprovideinformationaboutLimitedPartnersthatareU.S.Persons to the Service in order to avoid this 30% withholding tax. Potential investors should consult theirowntaxadvisorsregardingthislegislation. UnderthePartnershipAgreements,theFundManagerwillhaveconsiderableauthority,subject tocertainrestrictions,toactonbehalfofthePartnershipandFeedersinconnectionwithany administrativeorjudicialreviewofthetaxtreatmentofitemsofPartnershipsandanyFeeders income, gain, loss, deduction or credit and will decide how to report the Partnerships and FeederFundsitemsonitstaxfilings. Indemnity;Reserves Each investor in the Fund will be required to indemnify the Partnership, or any Feeder or Intermediaryforanywithholdingorothertaxobligationsimposedonsuchentitieswithrespect tosuchLimitedPartner.ThePartnershipandanyFeederorIntermediarymayreservecertain amountsotherwisedistributabletoLimitedPartnersinlightofsuchpotentialobligations.The amount of any taxes paid or withheld from receipts of the Partnership and any Feeder or IntermediaryallocabletoaLimitedPartnermaybedeemedtohavebeendistributedtosuch LimitedPartner. RequirementtoFileExtensions 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 distributiveshareofincome,gains,losses,creditsandotheritemsforU.S.federalincometax
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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 eachfiscalyear.Thedistributionoftaxreportsmaybefurtherdelayedintheeventofthelate receiptofnecessaryinformationfrominvestmentsheldbythePartnership.Accordingly,U.S. Investors will be required to file an extension on their tax returns and will bear any costs associatedtherewith. FutureChangesinApplicableLaw TheforegoingdescriptionofU.S.federalincometaxconsequencesofaninvestmentinandthe operationsoftheFundisbasedonlawsandregulationswhicharesubjecttochangethrough legislative, judicial or administrative action. Other legislation could be enacted that would subjecttheFundtoincometaxesorsubjectLimitedPartnerstoincreasedincometaxes. Prospectiveinvestorsshouldconsulttheirowntaxadvisorsregardingproposedlegislation.
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VI. CertainOfferingLegends
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR OTHERJURISDICTIONTOANYPERSONORENTITYTOWHICHITISUNLAWFULTOMAKESUCH OFFER OR SOLICITATION IN SUCH STATE OR JURISDICTION. THE INTERESTS ARE OFFERED SUBJECTTOTHERIGHTOFTHEFUNDMANAGERTOREJECTANYSUBSCRIPTIONINWHOLEOR INPART. U.S.INVESTORSGENERALLY INMAKINGANINVESTMENTDECISION,INVESTORSMUSTRELYONTHEIROWNEXAMINATION OF THE FUND AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.THEINTERESTSHAVENOTBEENRECOMMENDEDBYANYU.S.FEDERALORSTATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIESHAVENOTCONFIRMEDTHEACCURACYORDETERMINEDTHEADEQUACYOFTHIS MEMORANDUM.ANYREPRESENTATIONTOTHECONTRARYISACRIMINALOFFENSE. THE INTERESTS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOTBETRANSFERREDORRESOLDEXCEPTASPERMITTEDUNDERTHESECURITIESACTOF1933, ASAMENDED,ANDTHEAPPLICABLESTATESECURITIESLAWS,PURSUANTTOREGISTRATIONOR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEARTHEFINANCIALRISKSOFTHISINVESTMENTFORANINDEFINITEPERIODOFTIME. NONU.S.INVESTORSGENERALLY ITISTHERESPONSIBILITYOFANYPERSONSWISHINGTOSUBSCRIBEFORINTERESTSTOINFORM THEMSELVES OF AND TO OBSERVE ALL APPLICABLE LAWS AND REGULATIONS OF ANY RELEVANTJURISDICTIONS.PROSPECTIVEINVESTORSSHOULDINFORMTHEMSELVESASTOTHE 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 NONU.S. EXCHANGE RESTRICTIONSTHATMAYBERELEVANTTHERETO. FORRESIDENTSOFARGENTINA NOAPPROVALHASBEENSOUGHTORRECEIVEDFROMTHEARGENTINENATIONALSECURITIES COMMISSION (COMISION NACIONAL DE VALORES) SINCE THE TRANSACTION CONTEMPLATED HEREIN IS NOT INTENDED TO BE A PUBLIC OFFERING OF SECURITIES PURSUANT TO THE ARGENTINEPUBLICOFFERINGLAWNUMBER17,811. FORRESIDENTSOFAUSTRALIA NONEOFTHEPARTNERSHIPNORFEEDERSISREGISTEREDINAUSTRALIA. THE PROVISION OF THIS MEMORANDUM TO ANY PERSON DOES NOT CONSTITUTE AN OFFER OF PARTNERSHIP INTERESTS UNLESS THE RECIPIENT IS A SOPHISTICATED OR PROFESSIONAL INVESTORFORTHEPURPOSEOFSECTION708OFTHECORPORATIONSACTOFAUSTRALIA.THIS DOCUMENT IS NOT A PROSPECTUS OR PRODUCT DISCLOSURE STATEMENT. IT IS NOT
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REQUIREDTOCONTAIN,ANDDOESNOTCONTAINALLTHEINFORMATIONWHICHWOULDBE REQUIRED IN A PROSPECTUS OR PRODUCT DISCLOSURE STATEMENT. IT HAS NOT BEEN LODGEDWITHTHEAUSTRALIANSECURITIESANDINVESTMENTSCOMMISSION. THE FUND MANAGER DOES NOT HOLD AN AUSTRALIAN FINANCIAL SERVICES LICENSE, AND INVESTORSINTHEINTERESTSDONOTHAVECOOLINGOFFRIGHTSUNDERAUSTRALIANLAW. ANY OFFER OF THE INTERESTS IN AUSTRALIA MAY BE ARRANGED BY A COMPANY WHICH HOLDSANAUSTRALIANFINANCIALSERVICESLICENSE. ITISATERMOFISSUEOFPARTNERSHIPINTERESTSTHATTHEINVESTORMAYNOTTRANSFER OROFFERTOTRANSFERTHEIRINTERESTSTOANYPERSONLOCATEDINAUSTRALIAUNLESSTHE PERSONISASOPHISTICATEDORPROFESSIONALINVESTORFORTHEPURPOSESOFSECTION708 OFTHECORPORATIONSACTOFAUSTRALIA. FORRESIDENTSOFAUSTRIA THE INTERESTS MAY ONLY BE OFFERED IN THE REPUBLIC OF AUSTRIA IN COMPLIANCE WITH THEPROVISIONSOFTHEAUSTRIANCAPITALMARKETACTANDANYOTHERLAWSAPPLICABLE IN THE REPUBLIC OF AUSTRIA GOVERNING THE OFFER AND SALE OF THE INTERESTS IN THE REPUBLICOFAUSTRIA.THEINTERESTSARENOTREGISTEREDOROTHERWISEAUTHORIZEDFOR 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. FORRESIDENTSOFTHEBAHAMAS THIS FUND IS NOT REGISTERED OR LICENSED UNDER THE PROVISIONS OF THE INVESTMENT FUNDSACT,2003OFTHECOMMONWEALTHOFTHEBAHAMAS. FORRESIDENTSOFBAHRAIN THISOFFERISANEXEMPTCOLLECTIVEINVESTMENTUNDERTAKING.ITISNOTSUBJECTTOTHE REGULATIONS OF THE CENTRAL BANK OF BAHRAIN THAT APPLY TO PUBLIC OFFERINGS OF SECURITIESANDTHEEXTENSIVEDISCLOSUREREQUIREMENTSANDOTHERPROTECTIONSTHAT THOSE REGULATIONS CONTAIN. THIS MEMORANDUM IS THEREFORE INTENDED ONLY FOR ACCREDITEDINVESTORS. THE CENTRAL BANK OF BAHRAIN ASSUMES NO RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESSOFTHESTATEMENTSANDINFORMATIONCONTAINEDINTHISMEMORANDUM ANDEXPRESSLYDISCLAIMSANYLIABILITYWHATSOEVERFORANYLOSSHOWSOEVERARISING FROMRELIANCEUPONTHEWHOLEORANYPARTOFTHECONTENTSOFTHISMEMORANDUM.
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Private Placement Memorandum FORRESIDENTSOFBELGIUM
NEITHERTHEFUNDNORTHISMEMORANDUMHASBEENSUBMITTEDFORAPPROVALTOTHE 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 COLLECTIVEMANAGEMENTOFCERTAINCOLLECTIVEINVESTMENTUNDERTAKINGSONLY.THIS MEMORANDUMDOESNOTCONSTITUTEANOFFERTOSELLORASOLICITATIONOFANYOFFER TO BUY ANY INTERESTS IN BELGIUM TO PERSONS OTHER THAN INSTITUTIONAL INVESTORS. ACCORDINGLY,ASFARASBELGIANRESIDENTSARECONCERNED,THISMEMORANDUMISFOR INFORMATION PURPOSES ONLY. PURSUANT TO THIS MEMORANDUM, THE INTERESTS WILL ONLY BE OFFERED TO, AND SUBSCRIPTIONS WILL ONLY BE ACCEPTED FROM, BELGIAN INSTITUTIONALINVESTORSACTINGONTHEIROWNBEHALF. FORRESIDENTSOFBRAZIL THIS IS A STRICTLY PRIVILEGED AND CONFIDENTIAL COMMUNICATION BETWEEN THE FUND AND ITS SELECTED CLIENTS. THIS COMMUNICATION CONTAINS INFORMATION ADDRESSED ONLYTOASPECIFICINDIVIDUALANDISNOTINTENDEDFORDISTRIBUTIONTO,ORUSEBY,ANY PERSON OTHER THAN THE NAMED ADDRESSEE. THIS COMMUNICATION (I) IS PROVIDED FOR INFORMATIONALPURPOSESONLY,(II)SHOULDNOTBECONSTRUEDINANYMANNERASANY SOLICITATION OR OFFER TO BUY OR SELL ANY SECURITIES OR ANY RELATED FINANCIAL INSTRUMENTS,AND(III)SHOULDNOTBECONSTRUEDINANYMANNERASAPUBLICOFFEROF 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 (COMISSO DE VALORES MOBILIRIOS CVM). ANY PUBLIC OFFERINGORDISTRIBUTION,ASDEFINEDUNDERBRAZILIANLAWSANDREGULATIONS,OFTHE INTERESTSINBRAZILISNOTLEGALWITHOUTPRIORREGISTRATIONUNDERLAWNO.6,385OF 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 GENERALPUBLICINBRAZIL(ASTHEOFFERINGOFTHEINTERESTSISNOTAPUBLICOFFERING OFSECURITIESINBRAZIL)ORUSEDINCONNECTIONWITHANYOFFERFORSUBSCRIPTIONOR SALEOFTHEINTERESTSTOTHEGENERALPUBLICINBRAZIL. NOTICETORESIDENTSOFCANADA THEOFFERING INCANADA,THEFUNDISOFFERINGTHEINTERESTSONAPRIVATEPLACEMENTBASISINTHE PROVINCES OF BRITISH COLUMBIA, ALBERTA, ONTARIO AND QUBEC (THE PRIVATE
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PLACEMENTPROVINCES).THEINTERESTSHAVENOTBEENNORWILLTHEYBEQUALIFIEDBY PROSPECTUSFORSALETOTHEPUBLICUNDERAPPLICABLECANADIANSECURITIESLAWSAND, ACCORDINGLY,ANYOFFERANDSALEOFTHEINTERESTSINCANADAWILLBEMADEONABASIS WHICHISEXEMPTFROMTHEPROSPECTUSREQUIREMENTSOFTHOSESECURITIESLAWS. THE OFFERING IN THE PRIVATE PLACEMENT PROVINCES IS BEING MADE EXCLUSIVELY THROUGHTHISMEMORANDUMANDNOTTHROUGHANYADVERTISEMENTOFTHEINTERESTS. 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, UNLESSOTHERWISEINDICATED. REPRESENTATIONSANDAGREEMENTBYPURCHASERS EACHPURCHASEROFINTERESTSINCANADAWILLBEDEEMEDTOHAVEREPRESENTEDTOTHE FUND, THE FUND MANAGER AND THE DEALER, IF ANY, PARTICIPATING IN THE SALE OF THE INTERESTS,THATTHEPURCHASER: 1. ISRESIDENTINONEOFTHEPRIVATEPLACEMENTPROVINCESANDISENTITLEDUNDER APPLICABLEPROVINCIALSECURITIESLAWSTOPURCHASETHEINTERESTSWITHOUTTHE BENEFIT OF A PROSPECTUS QUALIFIED UNDER THOSE SECURITIES LAWS AND, IN THE CASEOFPURCHASERSINPROVINCESOTHERTHANONTARIO,WITHOUTTHESERVICES OFADEALERREGISTEREDPURSUANTTOTHOSESECURITIESLAWS; 2. HAS REVIEWED AND ACKNOWLEDGES THE TERMS REFERRED TO BELOW UNDER THE HEADINGRESALERESTRICTIONS; 3. IFINONTARIOISANACCREDITEDINVESTORASDEFINEDINNATIONALINSTRUMENT 45106(NI45106),ANDISNOTANINDIVIDUALUNLESSPURCHASINGFROMAFULLY 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 SOLELYTOPURCHASEORHOLDSECURITIESASANACCREDITEDINVESTOR; 4. IF IN QUEBEC, BRITISH COLUMBIA OR ALBERTA, IS AN ACCREDITED INVESTOR AS DEFINED IN NI 45106 AND IS NOT A PERSON CREATED OR BEING USED SOLELY TO PURCHASEORHOLDSECURITIESASANACCREDITEDINVESTOR;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 VIRTUEOFBEINGEITHER(I)ATRUSTCOMPANYORTRUSTCORPORATIONASFURTHER DESCRIBEDINSUBSECTION(P)OFTHEACCREDITEDINVESTORDEFINITIONOFNI45 106;OR(II)APERSONACTINGONBEHALFOFAFULLYMANAGEDACCOUNTMANAGED
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BY THAT PERSON AS FURTHER DESCRIBED IN SUBSECTION (Q) OF THE ACCREDITED INVESTORDEFINITIONOFNI45106. EACH PURCHASER OF INTERESTS IN CANADA HEREBY AGREES THAT IT IS THE PURCHASERS EXPRESSWISHTHATALLDOCUMENTSEVIDENCINGORRELATINGINANYWAYTOTHESALEOF THE INTERESTS BE DRAFTED IN THE ENGLISH LANGUAGE ONLY. CHAQUE ACHETEUR AU CANADADESVALEURSMOBILIRESRECONNATQUECESTSAVOLONTEXPRESSEQUETOUS LES DOCUMENTS FAISANT FOI OU SE RAPPORTANT DE QUELQUE MANIRE LA VENTE DES VALEURSMOBILIRESSOIENTRDIGSUNIQUEMENTENANGLAIS. BY PURCHASING THE INTERESTS, THE PURCHASER ACKNOWLEDGES THAT ITS NAME AND OTHERSPECIFIEDINFORMATION,INCLUDINGTHENUMBEROFINTERESTSITHASPURCHASED, MAY BE DISCLOSED TO CANADIAN SECURITIES REGULATORY AUTHORITIES AND BECOME AVAILABLETOTHEPUBLICINACCORDANCEWITHTHEREQUIREMENTSOFAPPLICABLELAWS. THEPURCHASERCONSENTSTOTHEDISCLOSUREOFTHATINFORMATION. INDIRECTCOLLECTIONOFPERSONALINFORMATION(ONTARIOPURCHASERS) BY PURCHASING THE INTERESTS, THE PURCHASER ACKNOWLEDGES THAT PERSONAL INFORMATION SUCH AS THE PURCHASERS 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 OSCS ADMINISTRATIVE ASSISTANT TO THE DIRECTOROFCORPORATEFINANCE,SUITE1903,BOX55,20QUEENSTREETWEST,TORONTO, ONTARIOM5H3S8ORTOTHEFOLLOWINGTELEPHONENUMBER:(416)5938086. RESALERESTRICTIONS THEDISTRIBUTIONOFTHEINTERESTSINTHEPRIVATEPLACEMENTPROVINCESISBEINGMADE 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 RESALERESTRICTIONSMAYINSOMECIRCUMSTANCESAPPLYTORESALESMADEOUTSIDEOF CANADA. PURCHASERS OF INTERESTS ARE ADVISED TO SEEK LEGAL ADVICE PRIOR TO ANY RESALEOFINTERESTS.
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RIGHTSOFACTION(ONTARIOPURCHASERS) ONTARIO SECURITIES COMMISSION RULE 45501 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 45106, THE RIGHT OF ACTION REFERRED TO IN SECTION 130.1 OF THE SECURITIES ACT (ONTARIO)(SECTION 130.1) IS APPLICABLE, UNLESS THE PROSPECTIVEPURCHASERIS: ACANADIANFINANCIALINSTITUTION,MEANINGEITHER: 1. AN ASSOCIATION GOVERNED BY THE COOPERATIVE CREDIT ASSOCIATIONS ACT (CANADA) OR A CENTRAL COOPERATIVE CREDIT SOCIETY FOR WHICH AN ORDER HAS BEENMADEUNDERSECTION473(1)OFTHATACT;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 CANADAORAJURISDICTIONINCANADA; 3. ASCHEDULEIIIBANK,MEANINGANAUTHORIZEDFOREIGNBANKNAMEDINSCHEDULE IIIOFTHEBANKACT(CANADA), 4. THEBUSINESSDEVELOPMENTBANKOFCANADAINCORPORATEDUNDERTHEBUSINESS DEVELOPMENTBANKOFCANADAACT(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. SECTION130.1PROVIDESPURCHASERSWHOPURCHASESECURITIESOFFEREDBYANOFFERING 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 OFFERINGMEMORANDUMORANYAMENDMENTTOITCONTAINSAMISREPRESENTATION. 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 NECESSARYTOMAKEANYSTATEMENTNOTMISLEADINGINLIGHTOFTHECIRCUMSTANCESIN WHICHITWASMADE. 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 45106, AND THIS MEMORANDUM CONTAINS A
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MISREPRESENTATIONWHICHWASAMISREPRESENTATIONATTHETIMEOFPURCHASEOFTHE 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. NOACTIONSHALLBECOMMENCEDMORETHAN,INTHECASEOFANACTIONFOR RESCISSION,180DAYSAFTERTHEDATEOFTHETRANSACTIONTHATGAVERISETO THECAUSEOFACTION;OR,INTHECASEOFANYOTHERACTION,THEEARLIEROF:(I) 180DAYSAFTERTHEPLAINTIFFFIRSTHADKNOWLEDGEOFTHEFACTSGIVINGRISE TO THE CAUSE OF ACTION, OR (II) THREE YEARS AFTER THE DATE OF THE TRANSACTIONTHATGAVERISETOTHECAUSEOFACTION; 2. THE DEFENDANT WILL NOT BE LIABLE IF IT PROVES THAT THE PURCHASER PURCHASEDTHEINTERESTSWITHKNOWLEDGEOFTHEMISREPRESENTATION; 3. THEDEFENDANTWILLNOTBELIABLEFORALLORANYPORTIONOFTHEDAMAGES THAT IT PROVES DO NOT REPRESENT THE DEPRECIATION IN VALUE OF THE INTERESTSASARESULTOFTHEMISREPRESENTATIONRELIEDUPON; 4. IN NO CASE WILL THE AMOUNT RECOVERABLE EXCEED THE PRICE AT WHICH THE INTERESTSWEREOFFEREDTOTHEPURCHASER;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 PURCHASERMAYHAVEATLAW. THIS SUMMARY IS SUBJECT TO THE EXPRESS PROVISIONS OF THE SECURITIES ACT (ONTARIO) ANDTHEREGULATIONSANDRULESTHEREUNDERANDYOUSHOULDREFERTOSUCHACTFOR THECOMPLETETEXTOFTHOSEPROVISIONS. ENFORCEMENTOFLEGALRIGHTS 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,ITMAYNOTBEPOSSIBLEFORPURCHASERSTOEFFECTSERVICEOFPROCESSWITHIN CANADAUPONTHEFUND,THEFUNDMANAGERORSUCHPERSONS.ALLORASUBSTANTIAL PORTIONOFTHEASSETSOFTHEFUNDANDTHEASSETSOFTHEFUNDMANAGERANDSUCH PERSONSMAYBELOCATEDOUTSIDEOFCANADAAND,ASARESULT,ITMAYNOTBEPOSSIBLE TO SATISFY A JUDGMENT AGAINST THE FUND, THE FUND MANAGER OR SUCH PERSONS IN CANADAORTOENFORCEAJUDGMENTOBTAINEDINCANADIANCOURTSAGAINSTTHEFUND, THEFUNDMANAGERORSUCHPERSONSOUTSIDEOFCANADA.
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CANADIANTAXCONSIDERATIONS PROSPECTIVE PURCHASERS OF INTERESTS WHO ARE RESIDENT IN CANADA AND ARE NOT EXEMPTFROMORDINARYINCOMETAXUNDERTHEINCOMETAXACT(CANADA)AREADVISED THATNODETERMINATIONHASBEENMADEREGARDINGTHESTATUSOFTHEINTERESTSASA TAXSHELTERINVESTMENTFORTHEPURPOSESOFTHEINCOMETAXACT(CANADA)ANDTHE PARTNERSHIPHASNOTAPPLIEDFORREGISTRATIONORBEENREGISTEREDASATAXSHELTER FOR THE PURPOSES OF THE INCOME TAX ACT (CANADA). THIS MEMORANDUM DOES NOT ADDRESS THE CANADIAN TAX CONSEQUENCES OF OWNERSHIP OF THE INTERESTS. PROSPECTIVEPURCHASERSOFINTERESTSSHOULDCONSULTTHEIROWNTAXADVISORSWITH RESPECT TO THE CANADIAN AND OTHER TAX CONSIDERATIONS APPLICABLE TO THEM INCLUDING WITH RESPECT TO THE APPLICATION OF THE PROPOSED FOREIGN INVESTMENT ENTITYPROVISIONSOFTHEINCOMETAXACT(CANADA)WHICH,IFAPPLICABLE,MAYRESULT IN A REQUIREMENT TO RECOGNIZE INCOME FOR TAX PURPOSES EVEN THOUGH NO CASH DISTRIBUTIONORPROCEEDSOFDISPOSITIONHAVEBEENRECEIVED. NOTICETORESIDENTSOFCAYMANISLANDS 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 MAYBENECESSARYFORTHECARRYINGONOFTHEBUSINESSOFTHEFUNDEXTERIORTOTHE ISLANDS.NOOFFEROFINTERESTSMAYBEMADETOTHEPUBLICINTHECAYMANISLANDS. FORRESIDENTSOFDENMARK 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 WITHINTHEMEANINGOFTHEDANISHSECURITIESTRADINGACTNO.479/2006ASAMENDED FROMTIMETOTIMEORANYEXECUTIVEORDERSISSUEDINCONNECTIONTHERETOOR(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 PERSONSORENTITIESINDENMARKWHOACQUIRETHEINTERESTSINCIRCUMSTANCESWHICH WILL NOT RESULT IN THE OFFERING BECOMING SUBJECT TO THE DANISH PROSPECTUS REQUIREMENTS PURSUANT TO THE DANISH SECURITIES TRADING ACT, AS AMENDED FROM TIMETOTIME,ORANYEXECUTIVEORDERSISSUEDINCONNECTIONTHERETO.
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Private Placement Memorandum FORRESIDENTSOFDUBAI
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 PROSPECTUSISINTENDEDFORDISTRIBUTIONONLYTOPERSONSOFATYPESPECIFIEDINTHE DFSA'SRULES(IE,QUALIFIEDINVESTORS)ANDMUSTNOT,THEREFORE,BEDELIVEREDTO,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 THISPARTNERSHIP.ACCORDINGLY,THEDFSAHASNOTAPPROVEDTHISPROSPECTUSORANY 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 PROSPECTUSRELATESMAYBEILLIQUIDAND/ORSUBJECTTORESTRICTIONSONTHEIRRESALE. PROSPECTIVE PURCHASERS OF THE UNITS OFFERED SHOULD CONDUCT THEIR OWN DUE DILIGENCEONTHEUNITS.IFYOUDONOTUNDERSTANDTHECONTENTSOFTHISDOCUMENT YOUSHOULDCONSULTANAUTHORIZEDFINANCIALADVISOR. FORRESIDENTSOFFINLAND THISMEMORANDUMDOESNOTCONSTITUTEAPROSPECTUS(ARVOPAPERIESITE)UNDERTHE FINNISH SECURITIES MARKETS ACT OF 1989 (AS AMENDED) OR A FUND PROSPECTUS (RAHASTOESITE)UNDERFINNISHINVESTMENTFUNDSACTOF1999(ASAMENDED),NORHAS 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 FINNISHSECURITIESMARKETSACT. FORRESIDENTSOFFRANCE POTENTIAL INVESTORS DOMICILED IN FRANCE ARE HEREBY ADVISED THAT THIS MEMORANDUM HAS NOT BEEN SUBMITTED TO THE FRENCH AUTORIT DES MARCHS FINANCIERSFORAPPROVAL.ACCORDINGLY,THEMARKETINGOFPARTNERSHIPINTERESTSAND THEDISTRIBUTIONOFTHISMEMORANDUMISRESTRICTEDINFRANCE. INPARTICULAR,NODIRECTORINDIRECTOFFERTOPURCHASETHEINTERESTSHASBEEN,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 PUBLICOFFERSOFSECURITIESINFRANCE. ALLSUCHOFFERSTOPURCHASEORTRANSFERTHEINTERESTSHAVEBEENANDSHALLONLYBE MADEINFRANCETO:(I)QUALIFIEDINVESTORS(INVESTISSEURSQUALIFIS);(II)ARESTRICTED CIRCLE OF INVESTORS (CERCLE RESTREINT DINVESTISSEURS), ACTING FOR THEIR OWN ACCOUNT;AND/OR(III)PERSONSCARRYINGOUTTHEACTIVITYOFPORTFOLIOMANAGEMENT
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ON BEHALF OF THIRD PARTIES (GESTION DE PORTEFEUILLE POUR COMPTE DE TIERS), ALL AS DEFINEDIN,ANDINACCORDANCEWITH,ARTICLESD.4111,D.4112,D. 7341, D.7441,D. 7541ANDD.7641OFTHEFRENCHMONETARYANDFINANCIALCODE. INTERESTS MAY ONLY BE OFFERED TO BE PURCHASED FROM THE PUBLIC IN FRANCE IN ACCORDANCEWITHARTICLESL.4111,L.4112,L.4121ANDL.6218ETSEQ.,OFTHEFRENCH MONETARYANDFINANCIALCODE(FORMERLY,ARTICLES6AND7OFORDINANCENO.67833 OFSEPTEMBER28,1967,ASAMENDED). FORRESIDENTSOFGERMANY 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 VERKAUFSPROSPEKTGESETZ 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, DISTRIBUTIONANDSALEOFTHEOFFEREDINTERESTS. THEDISTRIBUTION OFTHEOFFEREDINTERESTSHASNOT BEENNOTIFIED,ANDTHEOFFERED INTERESTSARENOTREGISTEREDORAUTHORIZEDFORPUBLICDISTRIBUTIONINTHEFEDERAL REPUBLICOFGERMANY.THISMEMORANDUMHASNOTBEENFILEDORDEPOSITEDWITHTHE FEDERAL FINANCIAL SUPERVISORY AUTHORITY (BUNDESANSTALT FR FINANZDIENSTLEISTUNGSAUFSICHT BAFIN). THEREFORE, THE OFFERED INTERESTS MUST NOT BE DISTRIBUTED (I) BY WAY OF A PUBLIC OFFER, PUBLIC ADVERTISEMENT OR IN ANY SIMILARMANNERWITHINTHEMEANINGOFSECTION2(11)OFTHEINVGOR(II)BYTHEWAY OFPUBLICOFFERINGWITHINTHEMEANINGOFSECTION8(F)OFTHEVERKPROSPGOR(III)BY THEWAYOFPUBLICOFFERINGWITHINTHEMEANINGOFSECTION2NO.4OFTHEWPPGNOR 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 THEOFFEREDINTERESTSTOTHEPUBLICINGERMANY. THEOFFEREDINTERESTSMAYFALLWITHINTHESCOPEOFTHEGERMANINVESTMENTTAXACT (INVESTMENTSTEUERGESETZ INVSTG). THEREFORE, IT CANNOT BE EXCLUDED THAT GERMAN INVESTORS MAY BE FACED WITH TAXES PURSUANT TO THE INVSTG. PLEASE NOTE THATITISNOTCONTEMPLATEDTOPROVIDEORISSUECERTAININFORMATIONDESIGNATEDIN THEINVSTG.
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ALLPROSPECTIVEGERMANINVESTORSAREURGEDTOSEEKINDEPENDENTTAXADVICE.THIS MEMORANDUM DOES NOT CONTAIN ANY TAX INDICATIONS, ADVICE OR AN EXPLANATION ABOUTTHEPOSSIBLETAXCONSEQUENCESOFANINVESTMENT. FORRESIDENTSOFHONGKONG WARNING: THE CONTENTS OF THIS MEMORANDUM HAVE NOT BEEN REVIEWED BY ANY REGULATORY AUTHORITY IN HONG KONG. YOU ARE ADVISED TO EXERCISE CAUTION IN RELATIONTOTHEOFFER.IFYOUAREINANYDOUBTABOUTANYOFTHECONTENTSOFTHIS MEMORANDUM,YOUSHOULDOBTAININDEPENDENTPROFESSIONALADVICE. THISMEMORANDUMISDISTRIBUTEDONACONFIDENTIALBASIS.NOINTERESTWILLBEISSUED TOANYPERSONOTHERTHANTHEPERSONTOWHOMTHISMEMORANDUMHASBEENSENT. 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 INVITATIONTOHIM/HERTOINVEST.THISMEMORANDUMMAYNOTBEREPRODUCEDINANY FORM OR TRANSMITTED TO ANY PERSON OTHER THAN THE PERSON TO WHOM IT IS ADDRESSED. FORRESIDENTSOFIRELAND PARTNERSHIPINTERESTSMAYNOTBEOFFEREDORSOLDBYANYPERSON: (A) OTHERWISETHANINAMANNERTHATDOESNOTCONSTITUTEANOFFERFORSALETO THEPUBLICWITHINTHEMEANINGOFSECTION9OFTHEUNITTRUSTSACT,1990ORSECTION 256(8)OFTHECOMPANIESACT,1990;OR (B) INANYWAYWHICHWOULDREQUIRETHEPUBLICATIONOFAPROSPECTUSUNDERTHE INVESTMENT FUNDS, COMPANIES AND MISCELLANEOUS PROVISIONS ACT, 2005 AND ANY REGULATIONSADOPTEDPURSUANTTHERETO. FORRESIDENTSOFISRAEL THIS MEMORANDUM WILL BE DISTRIBUTED TO ISRAELI RESIDENTS IN A MANNER THAT WILL NOTCONSTITUTEANOFFERTOTHEPUBLICINACCORDANCEWITHSECTIONS15AND15AOF THE SECURITIES LAW, 1968. NAMELY, THIS MEMORANDUM MAY ONLY BE DISTRIBUTED TO INVESTORSOFTHETYPESLISTEDINTHEFIRSTADDENDUMOFTHESECURITIESLAW,1968AND IN ADDITION TO NOT MORE THAN 35 OTHER INVESTORS DURING ANY GIVEN 12MONTH PERIOD. THISMEMORANDUMISINTENDEDSOLELYFORITSDESIGNATEDRECIPIENT.THEDESIGNATED RECIPIENT OF THIS MEMORANDUM MAY NOT TRANSFER, DISCLOSE OR OTHERWISE CONVEY THIS MEMORANDUM OR ANY OF THE INFORMATION INCLUDED HEREIN TO ANY OTHER PERSON.
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NOTHINGINTHISMEMORANDUMSHALLBECONSTRUEDORDEEMEDASINVESTMENTADVICE. EACHRECIPIENTSHOULDINDEPENDENTLYASSESSTHISINVESTMENTANDCONSULTWITHANY PROFESSIONALSITDEEMSAPPROPRIATE. FORRESIDENTSOFITALY THISMEMORANDUMDOESNOTCONSTITUTEANOFFERTOSELLORASOLICITATIONOFANY OFFERTOBUYTHEINTERESTSINTHEITALIANJURISDICTION.ACCORDINGLY,WHEREDIRECTED 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 SUCHINTERESTSMAYNOTBEPUBLISHED,DISTRIBUTEDORMADEAVAILABLEINTHEREPUBLIC 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 THERELEVANTSECURITIESLAWSOFITALY. FORRESIDENTSOFJAPAN 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 INTERESTSAREBEINGOFFEREDINACCORDANCEWITHARTICLE2,PARAGRAPH3,ITEM2BOF THESEL. APROSPECTIVEJAPANESEINVESTORISNOTABLETOTRANSFERTHEINTERESTSTOANYOTHER PERSON OTHER THAN TO TRANSFER THE ENTIRE INTERESTS TO ONE PERSON OR ONE LEGAL ENTITYATONETIME. FORRESIDENTSOFKOREA 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. THEINTERESTSHAVENOTBEENREGISTEREDUNDERTHESECURITIESANDEXCHANGEACTOF 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 REOFFERING OR RESALE, DIRECTLY OR INDIRECTLY, IN KOREA OR TO ANY RESIDENTS OF KOREA, EXCEPT PURSUANTTOAPPLICABLELAWSANDREGULATIONSOFKOREA. FORRESIDENTSOFKUWAIT 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
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KUWAITIGOVERNMENTAGENCY.THEOFFERINGOFTHEINTERESTSINKUWAITONTHEBASIS OFAPRIVATEPLACEMENTORPUBLICOFFERINGIS,THEREFORE,RESTRICTEDINACCORDANCE WITHDECREELAWNO.31OF1990,ASAMENDED,ANDMINISTERIALORDERNO.113OF1992, AS AMENDED. NO PRIVATE OR PUBLIC OFFERING OF THE INTERESTS IS BEING MADE IN KUWAIT,ANDNOAGREEMENTRELATINGTOTHESALEOFTHEINTERESTSWILLBECONCLUDED IN KUWAIT. NO MARKETING OR SOLICITATION OR INDUCEMENT ACTIVITIES ARE BEING USED TOOFFERORMARKETTHEINTERESTSINKUWAIT. FORRESIDENTSOFLUXEMBOURG THISMEMORANDUMDOESNOTCONSTITUTEAPROSPECTUSAPPROVEDBYTHELUXEMBOURG COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER AND MAY ACCORDINGLY NOT BE USEDFOROFFERINGORRESELLINGTHEINTERESTSTOTHEPUBLICINLUXEMBOURG,UNLESS SUCHOFFERINGORRESALEOCCURSINCOMPLIANCEWITHLUXEMBOURGLAW.INADDITION, THE FUND DOES NOT CONSTITUTE A LUXEMBOURG UNDERTAKING FOR COLLECTIVE INVESTMENT IN ACCORDANCE WITH THE LUXEMBOURG LAW DATED 20 DECEMBER 2002 ON UNDERTAKINGSFORCOLLECTIVEINVESTMENT. FORRESIDENTSINMEXICO THEINTERESTSOFFEREDMAYNOTBEPUBLICLYOFFEREDORTRADEDINMEXICOUNLESSTHE SAME ARE OFFERED OR TRADED PURSUANT TO THE PROVISIONS OF THE MEXICAN LEY DEL MERCADODE VALORES (SECURITIES MARKETLAW) ANDREGULATIONS ISSUEDTHEREUNDER. THEINFORMATIONCONTAINEDINTHISMEMORANDUMISTHEEXCLUSIVERESPONSIBILITYOF THE ISSUER AND HAS NEITHER BEEN REVIEWED NOR AUTHORIZED BY THE COMISIN NACIONAL BANCARIA Y DE VALORES (NATIONAL BANKING AND SECURITIES COMMISSION) (CNBV)OFTHEUNITEDMEXICANSTATES. THEINTERESTSOFFEREDHAVENOTBEENANDWILLNOTBEREGISTEREDWITHTHEREGISTRO 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 MEXICANNATIONALITYWHOACQUIRESTHEINTERESTSWILLDOSOUNDERHIS/HER/ITSOWN RESPONSIBILITY. FORRESIDENTSOFTHENETHERLANDS THE INTERESTS DESCRIBED HEREIN MAY NOT, DIRECTLY OR INDIRECTLY, BE OFFERED IN THE NETHERLANDS,EXCEPTTOORBYINDIVIDUALSORENTITIESTHATAREQUALIFIEDINVESTORS WITHINTHEMEANINGOFARTICLE1:1OFTHEDUTCHFINANCIALSUPERVISIONACT(WETOP HET FINANCIEEL TOEZICHT, WFT) AND/OR TO FEWER THAN 100 PERSONS NOT BEING QUALIFIEDINVESTORSWITHINTHEMEANINGOFTHEWFT.
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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 BANKINCLUDINGPRUDENTIALANDMARKETCONDUCTSUPERVISION. FORRESIDENTSOFNORWAY THIS MEMORANDUM HAS NOT BEEN PRODUCED IN ACCORDANCE WITH THE PROSPECTUS REQUIREMENTS LAID DOWN IN THE NORWEGIAN SECURITIES TRADING ACT 1997. THIS MEMORANDUMHASNOTBEENAPPROVEDORDISAPPROVEDBY,ORREGISTEREDWITH,THE OSLO STOCK EXCHANGE, KREDITTILSYNET NOR THE NORWEGIAN REGISTRY OF BUSINESS ENTERPRISES.THEINTERESTSDESCRIBEDHEREINHAVENOTBEENANDWILLNOTBEOFFERED 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 MEMORANDUMISFORTHERECIPIENTONLYANDMAYNOTINANYWAYBEFORWARDEDTO ANYOTHERPERSONORTOTHEPUBLICINNORWAY. FORRESIDENTSOFPANAMA THEINTERESTSHAVENOTANDWILLNOTBEREGISTEREDWITHTHECOMISIONNACIONALDE VALORES(THENATIONALSECURITIESCOMMISSION)OFTHEREPUBLICOFPANAMAUNDER CABINETDECREENO.247OF1970(PANAMASECURITIESLAW)ANDMAYNOTBEOFFERED ORSOLDINPRIMARYOFFERINGWITHINPANAMA,EXCEPTINCERTAINTRANSACTIONSEXEMPT FROMTHEREGISTRATIONREQUIREMENTSOFPANAMASSECURITIESLAWS. FORRESIDENTSOFPORTUGAL THE FUND WILL NOT DIRECTLY OR INDIRECTLY TAKE ANY ACTION OR OFFER, ADVERTISE, GATHER INVESTMENT INTENTIONS, SELL, DELIVER OR OTHERWISE MAKE AVAILABLE ANY OF THEINTERESTSTHISMEMORANDUMREFERSTOINCIRCUMSTANCESWHICHCOULDQUALIFY AS A PUBLIC OFFERING OF SECURITIES PURSUANT TO THE PORTUGUESE SECURITIES CODE (CDIGO DOS VALORES MOBILIRIOS AS AMENDED, THE PSC) AND IN CIRCUMSTANCES WHICH COULD QUALIFY THE ISSUANCE OF THE INTERESTS AS AN ISSUANCE IN THE PORTUGUESEMARKETORSPECIFICALLYADDRESSEDTOENTITIESRESIDENTINPORTUGALOR HAVING A PERMANENT ESTABLISHMENT LOCATED THEREIN OR OTHERWISE THAN IN ACCORDANCEWITHALLAPPLICABLELAWSANDREGULATIONS,BEINGTHESUBSCRIPTIONOF SUCHINTERESTSADDRESSEDEXCLUSIVELYTOQUALIFIEDINVESTORSASDEFINEDINTHEPSC. THE FUND SHALL AT ALL TIMES COMPLY WITH ANY APPLICABLE LAWS AND REGULATIONS APPLICABLETOITINRELATIONHERETO. FORRESIDENTSOFQATAR THIS MEMORANDUM IS BEING DELIVERED FOR INFORMATIONAL PURPOSES ONLY WITH RESPECTTOALIMITEDNUMBEROFINSTITUTIONALANDPRIVATEINVESTORSINQATAR,AND
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ISNOTANOFFEROFTHEINTERESTSTOTHEGENERALPUBLICINQATAR.THISMEMORANDUM HAS NOT BEEN FILED WITH, APPROVED OR REVIEWED BY OR REGISTERED WITH QATARI GOVERNMENTAUTHORITIES,WHETHERUNDERLAWNO.25(2002)CONCERNINGINVESTMENT FUNDS,CENTRALBANKRESOLUTIONNO.15(1997)ASAMENDEDCONCERNINGSUPERVISION RULES AND INSTRUCTIONS FOR INVESTMENT COMPANIES, OR ANY OTHER RELEVANT QATAR GOVERNMENTALBODYORSECURITIESEXCHANGE,NORANYFOREIGNGOVERNMENTALBODY OR SECURITIES EXCHANGE. ALL APPLICATIONS FOR INVESTMENT SHOULD BE RECEIVED, AND ANYALLOTMENTSMADE,FROMOUTSIDEQATAR. FORRESIDENTSOFSAUDIARABIA THISMEMORANDUMISBEINGPROVIDEDSOLELYFORINFORMATIONALPURPOSES; RECEIPTOFTHISMEMORANDUMTHEREFOREDOESNOTCONSTITUTEANOFFERTOBUYTHE INTERESTSREFERREDTOHEREIN. FORRESIDENTSOFSPAIN 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 COMMISSIONPASSEDUPONTHEACCURACYORADEQUACYOFTHEINFORMATIONCONTAINED HEREIN. FORRESIDENTSOFSWEDEN 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 OPERATIONSINSWEDENUNDERTHESWEDISHINVESTMENTFUNDSACT(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 GUARANTEETHATALLOFTHECAPITALYOUINVESTWILLBEREPAID. FORRESIDENTSOFSWITZERLAND THEFUNDHASNOTBEENAPPROVEDBYTHEFEDERALBANKINGCOMMISSIONASAFOREIGN COLLECTIVE INVESTMENT SCHEME PURSUANT TO ARTICLE 120 OF THE SWISS COLLECTIVE INVESTMENTSCHEMEACTOFJUNE23,2006(THECISA).ACCORDINGLY,THEINTERESTSMAY NOTBEPUBLICLYOFFEREDINORFROMSWITZERLANDANDNEITHERTHISMEMORANDUMOR ANY OTHER OFFERING MATERIALS RELATING TO THE INTERESTS MAY BE DISTRIBUTED IN
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CONNECTIONWITHANYSUCHPUBLICOFFERING.INTERESTSMAYONLYBEOFFEREDANDTHIS MEMORANDUM MAY ONLY BE DISTRIBUTED IN OR FROM SWITZERLAND TO QUALIFIED INVESTORS(ASDEFINEDINTHECISAANDITSIMPLEMENTINGORDINANCE)ANDTOALIMITED NUMBEROFOTHEROFFEREESWITHOUTANYPUBLICOFFERING. FORRESIDENTSOFTAIWAN THEINTERESTSARENOTREGISTEREDINTAIWANANDMAYNOTBESOLD,ISSUEDOROFFERED INTAIWAN.NOPERSONORENTITYINTAIWANHASBEENAUTHORIZEDTOOFFER,SELL,GIVE ADVICE REGARDING OR OTHERWISE INTERMEDIATE THE OFFERING AND SALE OF THE INTERESTSINTAIWAN. FORRESIDENTSOFTHAILAND 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 THEPROVISIONOFINVESTMENTMANAGEMENTSERVICESINTHAILANDORTOTHAIENTITIES MAYBESUBJECTTOLEGALPROHIBITION,RESTRICTIONSORCONDITIONS. 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 CONNECTEDWITHTHEOFFER,SALEORRESALEORINVITATIONTOSUBSCRIBEORPURCHASE 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 ACTUALLYACQUIREINTERESTS,THEYCONFIRMTHATTHEYHAVEACTIVELYSOUGHTOUTALL INFORMATIONTHEYHAVERECEIVEDWITHOUTSOLICITATIONONTHEPARTOFTHEFUNDAND THATSUCHINFORMATIONWASRECEIVEDBYSUCHINVESTORSOUTSIDEOFTHAILANDFROM SOURCES SITUATED OUTSIDE OF THAILAND. FURTHER, SUCH PERSONS ACKNOWLEDGE THAT ANYSUBSEQUENTTRANSFEROFALLORANYOFTHEINTERESTSINTHAILANDWILLLIKELYBE SUBJECTTOLEGALPROHIBITION,RESTRICTIONSORCONDITIONS. NO CONSENT, APPROVAL, AUTHORIZATION, REGISTRATION, FILING OR DECLARATION WITH ANY GOVERNMENTAL AUTHORITY, INCLUDING THE THAI SECURITIES AND EXCHANGE COMMISSION(THESEC)ORTHEBANKOFTHAILAND,HASBEENMADE/OBTAINEDINRELATION TOTHISMEMORANDUM. INVESTMENTBEARSHIGHRISK.INVESTORSSHOULDSTUDYALLRELEVANTDATATHOROUGHLY BEFORE INVESTING. BEFORE DECIDING TO INVEST IN THE INTERESTS, AN INVESTOR SHOULD CAREFULLYCONSIDERANDSTUDYALLDATAABOUTTHEPARTNERSHIP,ASWELLASALLTERMS
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AND CONDITIONS OF THE INTERESTS. FURTHER, THE INVESTOR SHOULD ALSO TAKE THE SUITABILITYOFINVESTMENTANDALLPOSSIBLERISKSINTOACCOUNT. BEFORE DECIDING TO INVEST IN THE INTERESTS, AN INVESTOR SHOULD SEEK ADVICE IN RELATIONTOTHEPURCHASEOFFOREIGNCURRENCYANDTHEREMITTANCEOFPARTNERSHIPS FORPAYMENTOFTHEINTERESTSOUTOFTHAILANDASITMAYBEPROHIBITEDORRESTRICTED 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 CIRCUMSTANCESANDWITHRESPECTTOTHEELIGIBILITYOFTHEINTERESTSFORINVESTMENT BYTHEINVESTORSUNDERRELEVANTTHAILEGISLATIONANDREGULATIONS. NOTICETORESIDENTSOFSINGAPORE 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;ITISBEINGMADEAVAILABLEFORINFORMATIONONLYTOALIMITEDNUMBEROF PERSONS. IN PARTICULAR, THIS MEMORANDUM IS ONLY FOR THE PERSON NAMED IN THE COVER LETTER ACCOMPANYING THIS MEMORANDUM AND MAY NOT BE CIRCULATED OR DISTRIBUTEDTOANYOTHERPERSON.INADDITION,NOINTERESTSMAYBEMADE,NORMAY ANY INVITATION TO SUBSCRIBE THEREFOR BE MADE, IN SINGAPORE TO PERSONS (OTHER THANTHEABOVEMENTIONEDINTENDEDRECIPIENTS). NOTICETORESIDENTSOFUNITEDARABEMIRATES 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,DEPOSITEDORREGISTEREDWITHANYLICENSINGAUTHORITYORGOVERNMENTAL AGENCY IN THE UNITED ARAB EMIRATES, AND IS BEING ISSUED TO A LIMITED NUMBER OF INSTITUTIONALINVESTORS/HIGHNETWORTHINDIVIDUALSANDMUSTNOTBEPROVIDEDTO ANYPERSONOTHERTHANTHEORIGINALRECIPIENTANDMAYNOTBEREPRODUCEDORUSED FOR ANY OTHER PURPOSE. THE FUND MAY NOT BE OFFERED OR SOLD DIRECTLY OR INDIRECTLYTOTHEPUBLICINTHEUNITEDARABEMIRATES.
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Beijing Capital Growth Fund Private Placement Memorandum Summary

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Private Placement Memorandum