EFTA00611496.pdf

J.P. Morgan China Private Investors LLC J.P. Morgan China Private Investors Offshore L.P. for the purpose of investing indirectly in J.P. Morgan China Private Equity Fund L.P. J.P.Morgan AUGUST 2071 THIS DOCUMENT IS HIGHLY CONFIDENTIAL. HAS BEEN PROVIDED TO YOU FOR INFORMATION PURPOSES ONLY AND MAY NOT BE RELIED UPON BY YOU IN EVALUATING THE MERITS OF INVESTING IN ANY SECURITIES REFERRED TO HEREIN. THIS CONFIDENTIAL DOCUMENT IS NOT AN OFFER OR SOLICITATION WITH RESPECT TO THE PURCHASE OR SALE OF ANY SECURITY IN ANY JURISDICTION. ANY OFFERING WILL BE MADE ONLY BY MEANS OF A CONFIDENTIAL OFFERING MEMORANDUM AND ANY SUPPLEMENTS THERETO THAT WILL CONTAIN DETAILED INFORMATION ABOUT THE ISSUER. THE INTERESTS IN THE ISSUER AND THE MERITS AND RISKS OF THE OFFERING. ANY INVESTMENT DECISION SHOULD BE MADE BASED SOLELY UPON THE INFORMATION CONTAINED IN SUCH CONFIDENTIAL OFFERING MEMORANDUM AND ANY SUPPLEMENTS THERETO. NO SALE WILL BE MADE. NO COMMITMENTS TO INVEST IN J.P. MORGAN CHINA PRIVATE INVESTORS LLC OR JP. MORGAN CHINA PRIVATE INVESTORS OFFSHORE LP. (TOGETHER. THE 'FEEDER FUNDS") WILL BE ACCEPTED AND NO MONEY IS BEING SOLICITED OR WILL BE ACCEPTED. UNTIL THE CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM AND ANY SUPPLEMENTS THERETO OF THE FUND (AS DEFINED BELOW) AND THE CONFIDENTIAL OFFERING MEMORANDUM OF THE APPLICABLE FEEDER FUND AND THE RELATED SUBSCRIPTION MATERIALS ARE MADE AVAILABLE TO PROSPECTIVE INVESTORS. ANY INDICATION OF INTEREST FROM PROSPECTIVE INVESTORS IN RESPONSE TO THIS CONFIDENTIAL DOCUMENT INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND. RECIPIENTS OF THIS DOCUMENT. AS PRIVATE CLIENTS OF JPMORGAN CHASE 6 CO. (TOGETHER WITH ITS AFFILIATES. "JPIAORGAM7. WILL GENERALLY EFFECT THEIR INVESTMENT THROUGH FEEDER FUNDS ADMINISTERED BY JPMORGAN THAT WILL IN INVEST IN THE FUND THROUGH ONE OR MORE INTERMEDIATE VEHICLES ACCORDINGLY. INVESTORS SHOULD UNDERSTAND THAT THEY WILL NOT BE ACQUIRING A DIRECT INVESTMENT IN THE FUND. IN CONNECTION WITH EVALUATING THE MERITS OF A PROPOSED INVESTMENT. A NUMBER OF RISKS SHOULD BE CONSIDERED. CERTAIN OF THESE RISKS ARE DESCRIBED BELOW UNDER 'CERTAIN RISK FACTORS". IN PARTICULAR. SPECIAL RISKS ASSOCIATED WITH INVESTING IN CHINA. INCLUDING ECONOMIC. POLITICAL AND SOCIAL CONDITIONS, THE CHINESE LEGAL SYSTEM. CURRENCY RISKS. CURRENCY EXCHANGE CONTROLS. REGULATIONS GOVERNING FOREIGN INVESTMENTS DIFFICULTIES IN EXITING CHINESE INVESTMENTS COMPETITION FOR INVESTMENTS. CHINESE ACCOUNTING AND DISCLOSURE STANDARDS SUBSEQUENT CHANGES IN THE INVESTMENT ENVIRONMENT AND CHINESE TAXATION WILL INCREASE THE RISKS OF THIS INVESTMENT AND MAY IMPACT THE PERFORMANCE OF THIS FUND. INVESTMENT OVERVIEW J.P. Morgan China Private Equity Fund L.P. (the "Fund") is a new Chinese private equity fund being established by Beijing Equity Investment Development Management Co., Ltd. ("BEIDM"). BEIDM is a joint venture between JPMorgan Asset Management Private Equity (China) LLC ("JPM China"), a special purpose entity formed on behalf of the J.P. Morgan Asset Management Private Equity Group (the "PEG") of J.P. Morgan Investment Management Inc. and Beijing State-owned Capital Operation and Management Center ("BSCOMC"). Certain Chinese strategic investors are expected to participate in the joint venture in the future. The Fund is expected to consist of a diversified portfolio of direct investments in companies formed in, or whose headquarters or principal business operations are located in, the People's Republic of China (excluding Hong Kong. Macau and Taiwan, 'China" or the "PRC"). The Fund will seek to build a portfolio of a select number of PRC companies and businesses across a number of industries, including but not limited to sectors such as consumer and services, media, technology. intemet and mobile, alternative energy, financial services, medical and healthcare. and agriculture. Unless JPM China and the Fund's advisory committee otherwise consent, not more than 10% of the aggregate capital commitments to the Fund will be invested in any one portfolio company. These investments will be made in Renminbi ("RMB"). The Fund will be denominated in US Dollars and is seeking aggregate capital commitments from investors of US$1 billion. INVESTMENT HIGHLIGHTS Access to onshore China private equity for non-PRC investors. The joint venture between BSCOMC and JPM China, together with the newly created Qualified Foreign Limited Partner ("OFLP") program, is expected to enable the Fund to access Chinese companies generally not accessible to non-PRC investors. Under the OFLP program, the Fund will be able to convert an investor's US dollar investment into Chinese RMB. The Fund will then be able to invest in RMIldenominated private equity deals. In addition, the Fund is expected to provide accelerated governmental approval for deals. Favorable macro environment in China. Over the past decade, the Gross Domestic Product ("GDP") of China grew more rapidly than its global peers. In 2010. GDP growth was 10.3% while U.S. and global GDP growth were 2.8% and 5.0%. respectively.' Additionally, China's working population is expected to exceed that of the U.S. and Europe combined, with an expected working age population of 550 million people by 2020.2 Alongside the favorable demographic and economic growth trends is the growth in Chinese middle class consumption. It is expected that middle class consumption will grow from approximately $750 billion in 2009 to over $4.0 trillion in 2020, exceeding U.S. middle class consumption'. Experienced investment team. The PEG is one of the largest teams of investment professionals dedicated to building high quality private equity portfolios, with a strategy and process developed and refined over the past 31 years°. The experienced and cohesive team of investment professionals brings a tested skill set in private equity investing. In addition, a number of investment professionals have been active in Asia private equity markets since 1985 and the PEG is a well•respected Source: J.P Morgan: IMF World Eoanornrc Outlook database Apri 2011. Source: Populaban Division ti the Department of Eccnomic aid Social Affairs al the United Nations Seacknal. World Population Prospects: The 2010 Revision. '2020 estimate is cleaved horn assumptions regarding future trends in frailty. mortality. and international immigraban. Source: Wcifensohn Ceder far Deveopmerd it Brookings . Data as of March 2010. Includes tenure al both PEG and AT&T Investment Management Corporation. EFTA00611496 participant in the Asian investment community. Since 2005, the PEG has reviewed over 350 Asian partnership and direct investment opportunities. MARKET OPPORTUNITY BEIDM believes that the Chinese private equity market offers an opportunity to capitalize on China's domestic economy, growing middle class and government initiative to grow businesses by permitting investment in smaller, rapidly growing private companies. China is home to a large and rapidly expanding pool of experienced and repeat entrepreneurs. Although private enterprises have become a significant presence in the overall Chinese economy, the market for financing private businesses in China remains inefficient. Small Private Owned Enterprises (-POE") generally have fewer options for capital as Chinese banks remain focused on funding government-led initiatives. Due to the increase in the number and presence of private companies, competition for growth capital and inefficient financing markets, in BEIDM's view, China has the potential to offer attractive private equity valuations and entry prices relative to its public markets. POEs have had limited access to credit: Short term loans issued b financial institutions5 mom 112.030 g • 9.003 g 6.003 g 3.003 0 The number of POEs and their aggregate profits have si • nificantl • rown6 IPOEs and soll.erreicnedentles •Others 1.200 1111111111 — „ . . . . . • 0 2000 2001 2002 2000 2034 2005 2006 2007 2006 2009 2 1.000 2 2 BOO ce ▪ 603 55- :too • 200 8 8 Total prords of POEC —Numbs of moistened POEs 8 10 s ° 4 FE 2 0 z In addition, the Fund expects to take advantage of the trend towards privatization of State Owned Enterprises (SOE"). Since the mid 1990's, the Chinese govemment has taken an active stance on the reform of SOEs by divesting minority stakes in their operating business to private sector enterprises. The initial privatization phase of SOEs provides an attractive opportunity for private equity funds to make minority investments in established businesses. Wholly State-Owne Enterprises 'Reorganizatio into a commercial structure 7 Initial rivatization a y 1 Broader private sector ownership As a result of the overall growth of the Chinese economy, BEIDM expects the demand for private equity capital to remain strong and create attractive investment opportunities for the Fund. BEIDM also believes that there will be sufficient exit opportunities for the Fund. As compared to international stock exchanges, the domestic stock markets in Asia have provided attractive exit opportunities and significant liquidity for companies that pursue a domestic IPO. In 2010. there were 400 IPOs in China of which 367 were listed on Chinese domestic stock exchanges.' Asia is an increasingly large share of global 'POO •tioihAesece •Aso Paton 'ew Wain Amino •1101.2 East Ifid erica 103% 90% 60% 70% 60% 50% 40% 33% 20% 10% 111 0 11 2001 2001 2001 2005 1006 1111117 2006 2000 111 0 1 Volt O. change in real GDP9 •2009 •2010 02011' •2012' China United Slates Eon Area World S Source: China Nabonal Bureau ol Statistics as ol December 31. 2009. 'Financial Instikbans ',elude the People's Bark al Chin. policy banks. Stancwned commercial banks. shareholding commercial banks. urban commercial tanks. rural commercial barks. rural cooperative banks. urban credt cooperatives, rural credt cooperatives, financial trust and investment companies. finance companies. financial basin companies. breign4ureled financial institutions. and China Postal Savings Bank Short term bark loans have maturities no longer Than I year. %hie mocks-Monger term bark bans have longer maturities but no longer than 3 years. 4 Slate Achinistratenlor Industry 8 Commerce of PRC as ol December 31. 2010: Nabonal Bureau ol Statistics. Chin Statistical Yearbook 2010': POEs include those enterprises with annual revenue from princbal business mar R1AB 5 bilf on. 'Apples to the enterpries with annual revenue kern prinapal business over RIAB 5 bition. "Total ?Kiln are as of November 30. 2010. Source: Factset. as ot IN 2011. ° Source: Renaissance Carnal as ot June 2011. °Source: J.P. Horgan: 11., Wald Economic ChAbokdaabase. Apnl 2011. 2011 and 2012 are projeaed GOP growth estimates. CONFIDENTIAL • NOT FOR PUBLIC DISTRIBUTION 2 EFTA00611497 INVESTMENT STRATEGY & STRUCTURE The investment objective of the Fund is to realize capital appreciation through identifying and selecting attractive minority venture capital, growth equity and corporate finance investments in PRC domestic unlisted companies using RMB as currency. There can be no assurance that the Fund will achieve its investment objective. The Funds investments are expected to be sourced primarily through the general partners and sponsors of partnerships with whom BEIDM, BSCOMC and certain strategic investors in the Fund have business relationships. BSCOMC was established in December 2008 as a wholly-owned SOE and is among one of the ten largest Chinese enterprises. As one of China's largest asset managers, BSCOMC is the Beijing Municipal Governments largest holding company and controls equity stakes in a portfolio of companies in the automobile, steel, property, electronics, consumer, energy, financial services, and agricultural sectors. BSCOMC is a key local partner as it is one of the largest and most prestigious asset management organizations in China. By virtue of its position in the market. BSCOMC has a deep network of contacts and relationships in the private equity markets that are expected to generate proprietary deal flow for the Fund. In addition, the PEG has longstanding relationships with private equity firms in China and, through these firms, often has strong relationships with the portfolio companies in which these firms invest. BEIDM believes that these relationships will help provide access to investment opportunities in private companies that many other investors are unable to access. By leveraging these access points, the Fund will seek to acquire interests in private companies with a strategic plan for eventual exit from these interests. BEIDM expects to follow a rigorous and disciplined investment selection process that seeks to ensure that all investment opportunities are properly screened and only the most attractive opportunities are considered for investment. The process takes a bottom-up approach designed to assess the probability of an investments future success, and focuses on the company's strategy and business, management team, industry and competitive landscape, and the terms of the transaction. The Fund will focus exclusively on minority growth equity investments in partnership with local private equity funds. The partnership with experienced local private equity funds is expected to provide third party validation of pricing and structure and enhance ongoing management of portfolio companies. In addition to being the general partner and manager of the Fund, BEIDM manages a RMB-denominated fund of private equity funds for PRC investors (the 'RMB Fund-of-Funds").10 Currently, BSCOMC has committed $375 million to the RMB Fund-of-Funds. Beijing Equity Investment Development Management Company, Ltd. CBEIDPv1' or the -Management Company') Alarm venture between JP COW: I PRC investors Tweeting RMB Fund-of-Funds I J.P. Morgan China Private Equity Fund L.P. Non-PRC Investors Targeting I I RMB 6.5 billion USS1 billion in (USS1 -80% partnership investments - 100% direct co-investment commitments from I in comrritments - 20% direct co.investment J.P. Morgan clients I RMB Fund-olfunds is a PRC-ceganized [railed partnership solely for Chinese investors seeking to invest in R1/11.denorninak‘l partnetslips that are loaned on iivestin in Crum. CONFIDENTIAL • NOT FOR PUBLIC DISTRIBUTION 3 EFTA00611498 INVESTMENT TEAM BEIDM is a joint venture between JPM China, a special purpose entity formed on behalf of the PEG, and BSCOMC. Certain Chinese strategic investors are expected to participate in the joint venture in the future. The team at BSCOMC is led by its President, Mr. Yin Rongyan, who manages the day-to-day investment activities and operations of BSCOMC. Mr. Yin has extensive experience in IPOs, re-capitalizations, mergers and acquisitions, and equity investment with over 10 years of roles overseeing large China financial institutions. The PEG is comprised of investment professionals with extensive private equity and venture capital knowledge and experience, certain of whom have been active in the Asia private equity markets since 1985. Globally, the PEG currently manages approximately US$22 billion" in private equity assets, and has investment relationships with more than 350 private equity sponsors and is actively involved with more than 50 direct co•investments. The PEG's professionals have built and maintained strong relationships throughout the Chinese and Asian private equity communities. Mr. Lawrence M. Unrein heads the PEG. Mr. Yin and Mr. Unrein will serve as Chairman and Vice Chairman, respectively, of the board of directors of BEIDM. The Fund will have an Investment Committee. initially consisting of four members. with two members appointed by each of BSCOMC and JPM China. Investments will be subject to the prior approval of 75% of the Investment Committee. rence Unrein man el BEIDM and mentor of Invest Head of the J.P. Morgan Asset Management Private Equity Group ■ Chairman of the J.P. Morgan Asset Management Investment Committee ■ 31 years of private equity experience Eric Chan Board of Director of BE1DMend member of Investment Committee of the Fund ■ PEG Managing Director ■ 15 years of pan-Asian private equity experience ■ Former partner at Pantheon Group (8 years) responsible for Asian private equity investment programs u President of BSCOMC • Previously Managing Director of China Securities Co. and Head of Investment Banking • Over 20 years of experience in China SOE and financial institutions , extensive experience in domestic IPOs, re-capitalizations, M&A, and equity investments Zhao Jifeng Board of Director of BEIDM and member of Investment Committee of the Fund ■ Vice President of BSCOMC ■ Over 15 years of experience in SOE reform, incorporation and spin-out, M&A, domestic and international market IPOs, and private equity investments "As of December 31. 2010. ',dudes pnvaSe equty commingled vehicles and managed accoures rathin JOMorgan Asset Management Represents 9402010 AUM actuated for cash movements and applying results of PEGS year end valuation estensbon project trough a sway al General Partners. CONFIDENTIAL • NOT FOR PUBLIC DISTRIBUTION 4 EFTA00611499 J.P. Morgan China Private Equity Fund L.P. PRELIMINARY SUMMARY OF TERMS OF THE FUND Please refer to the Confidential Private Placement Memorandum and the Agreement of Limited Partnership of the Fund and the applicable Feeder Fund documentation (collectively, the 'Fund Documents") for a more detailed discussion of terms. The following is a brie) summary of selected principal terms and is qualified entirely by reference to the Fund Documents. J.P. Morgan Legal structure: General Partner and Manager of the Fund: Target Fund Size: Investment Period: Term: Investment restrictions: Investment Committee: Advisory Committee: Management Fee: J.P. Morgan China Private Equity Fund L.P. is a foreign-invested limited partnership enterprise formed in Beijing in accordance with the Partnership Enterprise Law of the People's Republic of China ('PRC'). the Measures for the Administration of the Establishment of Partnership Enterprises in China by Foreign Enterprises or Individuals and other relevant laws and regulations (the 'Fund). It is anticipated that J.P. Morgan private clients will participate in the Fund through one or more feeder funds (the 'Feeder Funds') administered by J.P. Morgan Investment Management Inc. ('JPMIM"). Beijing Equity Investment Development Management Co.. Ltd.. a Sino-foreign equity joint venture under the Law of the People's Republic of China on Sino-Foreign Equity Joint Ventures ('BEIDM'). Beijing State-owned Capital Operation and Management Center ('BSCOMC') and JPMorgan Asset Management Private Equity (China) LLC ('JPM China") together will own a majority in interest of the outstanding equity interests of BEIDM and will have the power to elect a majority of the members of the board of directors of BEIDM. BEIDM will also be retained as the manager of Beijing Equity Investment Development Center L.P. (the -RMB Fund-of-Funds'), a limited partnership enterprise formed in Beijing in accordance with the Partnership Enterprise Law of the People's Republic of China. The RMB Fund-of- Funds is a private equity fund•at-funds for BSCOMC and other PRC institutional investors. The Fund is seeking aggregate capital commitments of $1 billion. Three years from the earlier of (i) the date the Fund commits to its first long-term investment and (ii) a date selected by BEIDM (the 'Activation Datel, subject to extension by BEIDM of up to two successive one- year periods. The Fund may make follow-on investments after such period. Ten years from the Activation Date with up to two one-year extensions at the election of the General Partner. Investments will be made only in companies organized in. or whose headquarters or principal business operations are located in. the PRC. Generally, the Fund will co-invest with the RMB Fund-of-Funds in a ratio of five (for the Fund) to one (for the RMB Fund-of-Funds). The Fund will be subject to restrictions applicable to private equity funds established for "qualified foreign limited partners". The Investment Committee will initially consist of 4 members: Yin Rongyan. Zhao Jifeng. Lawrence Unrein and Eric Chan. The Fund will have an advisory committee composed of investors in the Fund and the Feeder Funds or their designees (the "Advisory Committee"). The size of the Advisory Committee will be determined from time to time by BEIDM. The Advisory Committee will advise BEIDM with respect to certain significant decisions. including any extension of the term of the Fund, and matters relating to valuation policies and conflicts of interest. Annual management fee of 2.0% of aggregate capital commitments payable quarterly in advance during the Investment Period. Thereafter. the management fee will be reduced to an amount equal to 2.0% of aggregate capital contributions in respect of investments (excluding investments disposed of or written-off in full). The management fee will be payable as an amount in addition to capital commitments. and will not reduce the amount of such commitments. CONFIDENTIAL • NOT FOR PUBLIC DISTRIBUTION 5 EFTA00611500 Distributions; Each investors share of net cash available for distribution will be distributed as follows: Carried Interest: First. 100% to such investor until the cumulative distributions to such investor equal the sum of: a) the capital contributions of such investor used to acquire realized investments. plus such investor's proportionate share of any writedowns of unrealized investments. as of that time: and a) a portion of the capital contributions of such investor used to pay organizational expenses and expenses incurred in connection with the investments of the Fund, to the extent allocated to realized investments and writedowns of unrealized investments: Second. 100% to such investor until the cumulative distributions to such investor are sufficient to provide such investor with an 8% rate of return. compounded annually, on the capital contributions of such investor described in clause First, Third. 100% to the General Partner and certain associated persons (collectively. the "Carry Recipients") or 100% to such investor until the Carry Recipients have received in respect of such investor 20% of the excess of (a) the cumulative distributions made to such investor and to the Carry Recipients in respect of such investor over (b) the capital contributions of such investor described in clause First and Thereafter. 80% to such investor and 20% to the Carry Recipients (the distributions to the Carry Recipients described in clause Third and this clause being referred to as the "Carried Interest). Clawback: If. upon liquidation of the Fund, it is determined that over the term of the Fund the Carry Recipients have received Carried Interest in respect of an investor in excess of 20% of the excess of co the cumulative distributions made to such investor and to the Carry Recipients in respect of such investor over (ii) the amount of such investor's capital contributions used to acquire investments and to pay expenses incurred in connection with investments and organizational expenses, then the Carry Recipients will return the excess amount to the Fund for distribution to such investor. provided. however, that no Carry Recipient will be obligated to pay an amount hereunder in excess of the aggregate distributions it has received on account of its Carried Interest. less any taxes related thereto determined at the maximum marginal combined tax rates applicable to individuals or corporations (whichever is higher). Borrowings: The Fund may borrow money from time to time to fund any investment or expenses. but the aggregate borrowings outstanding at any one time with respect to the Fund Ml not exceed 10% of the capital commitments of the investors to the Fund. and will be required to be repaid within 90 days after the date of borrowing. Diversification: Unless JPM China and the Advisory Committee otherwise consent. not more than 10% of the aggregate capital commitments to the Fund will be invested in any one portfolio company. Unless JPM China and the Investment Committee otherwise consent. the Fund will not acquire interests representing more than 10% of the ownership interests in any portfolio company. Expenses: As a pan of their capital commitment. investors in the Fund will be responsible for their pro rata share of organizational, offering and operating costs and expenses of the Fund. the Feeder Funds and intermediate vehicles (other than taxes payable by such a Feeder Fund or intermediate vehicle. which taxes will be borne by such entity and in turn by any investor that invests through such entity). The amount of organizational and offering costs and expenses to be borne by investors will not exceed 0.25% of the aggregate capital commitments to the Fund. although investors in a Feeder Fund established for private banking clients may be responsible for an additional portion of the organizational and offering costs and expenses of such Feeder Fund. Tax ConsIderatIons: An investment in the Fund involves complex U.S. federal. state. local and non-US income tax considerations that will differ for each investor. For instance, the PRC imposes withholding tax on investments in the PRC by non-PRC investors. which may be reduced if a bilateral income treaty applies. Prospective investors are urged to consult their tax advisors with respect to their particular tax situations and the effects of an investment in the Fund. CONFIDENTIAL • NOT FOR PUBLIC DISTRIBUTION 6 EFTA00611501 CERTAIN ADDITIONAL TERMS RELATING TO THE FEEDER FUNDS Please refer to the applicable Feeder Fund documentation for a more detailed discussion of the terms. Minimum Commitment: J.P. Morgan origination fee: Feeder Funds expenses: U.S. tax reporting: Placement agent: The minimum commitment amount required to acquire an interest in the Feeder Fund is $500,000. Subscription amount Fee (% of commitment) $10,000.000 and above $5.000.000 $9.999.999 $2.500.000 $4.999.999 $1.000.000 - $2.499.999 Less than $1.000.000 0.0% 0.5% 1.0% 1.5% 2.0% The origination fee will be paid by investors to an affiliate of J.P. Morgan at the closing and will be in addition to. and not in reduction of. capital commitments. The origination fee is in addition to fees charged by the Feeder Fund. Investors in the Feeder Funds may be responsible for a portion of the organizational and offering costs and expenses of the Feeder Funds. The payment of such costs and expenses by investors will be in addition to. and not in reduction of. the capital commitments of investors. JPMIM will use its reasonable efforts to send to investors. within 250 days after the end of each fiscal year. information necessary for the completion of U.S. federal, state and local tax returns, subject to reasonable delays in the event of the late receipt of any necessary information from portfolio investments of the Fund. Investors should be prepared to file for extensions of time to file any federal and state tax returns. J.P. Morgan Securities LLC and certain of its affiliates IRS CIRCULAR 230 DISCLOSURE JPMorgan Chase a Co. and its affiliates do not provide tax advice. Accorcingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used. and cannot be used, in connection vtith the promotion. marketing or recommendation by anyone unaffikated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. CONFIDENTIAL • NOT FOR PUBLIC DISTRIBUTION 7 EFTA00611502 CERTAIN RISK FACTORS The following considerations. which summarize some. but not all. of the risks. should be carefully evaluated before making an investment in the Feeder Fund. The information set forth under "Risk Factors" and "Potential Conflicts of Interest" in the Confidential Private Placement Memorandum of each of the Fund and the Feeder Fund must be reviewed in its entirety prior to making a decision to invest in the Feeder Fund. General. An investment in the Fund involves a high degree of risk as a result of (i) the types of investments expected to be made by the Fund. (ii) special risks associated with .vestments in China and (iii) the structure of the Fund. Risks associated with investments in China. The Fund intends to focus its investments in portfolio companies organized in. or whose headquarters or principal business operations are located in. Chive. Such investments present a variety of risks not presented by investments in portfolio companies n developed countries. including but not Invited to risks associated with: (I) economic. political and social conditions: (i) the Chinese legal system: (iii) currency risks related to the Renminbi: (iv) currency exchange controls: (v) regulations goven-ing foreign investments: (vi) cifficulties in exiting Chinese .vestments: (vii) competition for .vestments: (viii) Chinese accounting and disclosure standards: (ix) public health risks and natural disasters: (x) subsequent changes in the investment environment: and (xi) Chinese taxation. In general terms. the investment cimate in China is less mature than in developed countries. While BEIDM believes that the Chinese iwestment climate will develop in a favorable manner. there can be no assurance that this veil occur. and an investment n the Fund should be considered riskier than an investment in a fund that .vests in developed countries. Prospective investors should consider an investment ri the Fund only if they have .dependently determined based upon their own analysis that the risks and challenges of China-related investments are outweighed by the potential benefits. Risks of private equity investments. The venture capital companies in which the Fund will seek to invest may be in a conceptual or early stage of development. may not have a proven operating history and may have products that are not yet developed or ready to be marketed or that have no established market. Investments made in connection with acquisition transactions are subject to a variety of special risks. including the risk that the acquiring company has paid too much for the acquired business, the risk of unforeseen liabilities. the risks associated with new or unproven management or new business strategies and the risk that the acquired business will not be successfully integrated with existing businesses or produce the expected synergies. No assurance of investment returns. The Fund is speculative and involves a high degree of risk. The Fund's task of identifying investment opportunities in China'based portfolio companies. managing such investments and realizing an attractive rate of return for investors will be difficult. There is no assurance that the Fund will be able to invest its capital on attractive terms or generate positive returns for its investors. Further. there is no assurance of any al:cations of any profit or any distributions to the limited partners of the Fund at any time and fielded partners may lose part or al of thei investment in the Fund. Valuation. II will be difficult to value interests in portfolio companies, as there is no established market for these types of interests. The overall performance of the Fund will be significantly affected by the acquisition price paid by the Fund for its interests in portfolio companies. which will be negotiated with the issuers or other sellers of the interests. Risks associated with minority portfolio investments. The Fund will hold a minority. non-controlling interest in each portfolio company in which it directly invests and may acquire securities that are subordinated vis-a-vis other securities as to economic. management or other attributes. Accordingly. the Fund's investments will be subject to the risk a portfolio company may make business. Mandel or management decisions with which BEIDM does not agree. or that the majority stakeholders or management of a portfolio company may take risks or otherwise act in a mariner that does not serve the interests of the Fund Availability of investment opportunities and information The market for venture capital. growth equity and corporate finance direct investments is limited and competitive. Identifying attractive investment opportunities is difficult and involves a high degree of uncertainty. Moreover. .vestments are from lime to tine oversubscribed. and it may not be possible to make investments that have been identified as attractive opportunities. There can be no assurance that the Fund will be able to invest fully its committed capital. Many investment decisions made on behalf of the Fund will be dependent upon the ability of BEIDM's representatives and agents to obtain relevant information from non-pudic sources, and BEIDM often will be requaed to make decisions without complete information or in reliance upon information provided by third parties that is impracticable or impossible to verify. Long-term and illiquid investment; penally for default. A commitment to the Fund is a long-tern investment. There will be no market for interests irk the Fund. substantial restrictions on transfer of interests and no right to withdraw capital. The expected term of the Fund will be the lesser of (i) ten years from the earlier of the Activation Date. with up to two one-year extensions and f) fifteen years. Although the Fund expects to make distributions prior to its termination. there can be no assurance as to the amount or timing of any such distributions. After the Fund makes a distribution to an Oterniediate entity, there may be a substantial delay before such intermediate entity, in tum. is able to make a distribution to another intermedate entity or Feeder Fund. The Fund may draw down the capital commitments of investors al any time during the term of the Fund. Thus, there will be a substantial period of time during which investors may be obligated to provide capital without receiving any return and regardless of the performance of the Fund. M investor that defaults in any payment with respect to its capital commitment to the Fund will be subject to substantial penalties. Illiquidity of private equity investments. The Funds private equity investment portfolio will consist primarily of illiquid securities of private companies. There may be no readily available market for the Fund's investments. many of which will be difficult to value. and the disposal of a portfolio investment by the Fund may be prohibited or delayed due to legal. contractual or practical reasons. The Fund will be limited n its ability sell liquidate. distribute or otherwise transfer its interests in portfolio companies. Lack of diversification. The Fund may make only a limited number of iwestments and. as a consequence. the aggregate retum on the Funds investments may be substantially adversely affected by the unfavorable performance of one or a small number of the Fund's investments. PEG does not control Fund investment decisions. While members of the PEG will be part of the leadership and investment committee of BEIDM. the PEG will not control decisions regarding makng, managing and disposing of investments made by the Fund. Lack of operating history. While members of the PEG who will be involved in managing the Fund's investments have substantial experience in private equity investments. the Fund was only recently formed. does not as yet have any operating history and has not made any investments. Further. whie members of each of the PEG and BSCOMC who will be involved in the leadership. investment committee and administration of BEIDM have substantial experience in private equity investing. BEIDM was only recently formed and does not as yet have any operating history. Potential conflicts of interest. Affiliates of BEIDM provide a broad range of financial advisory services. While these relationships and activities might enable BEIDM to offer attractive opportunities and services to the Fund these relationships and activities also may from time to time give rise to conflicts of interest with the Fund. BSCOMC. the largest owner of BEIDM. is a govemment-owned entity and this relationship could give rise to conflicts of interest with the Fund. Risks associated with the OFLP structure. The OFLP structure is a new type of private equity find ovmership structure and the parameters of the OFLP structure are not clearly defined and legal uncertainty exists. Parameters goveming the ability of funds adoptrig the OFLP structure are less clear than under other ownership structures. Funds adopting the OFLP structure may be required to focus on certain ndustries and geographic sectors. In addition, further governmental registrations and approvals are expected before a fund adopting the OFLP structure may engage in cedar, activities. 8 EFTA00611503 IMPORTANT INFORMATION This presentation has been prepared for investors who are legally eligible and are suitable to invest in the type of investment described herein. Generally, they would include investors who are "accredited investors" within the meaning of Rule 501 under the Securities Act. and either (I) "qualified purchasers' within the meaning of Section 2(a)(51) under the US Investment Company Act of 1940, as amended. or (ii) non US persons within the meaning of Regulation S under the Securities Act who purchase their interest in a non•US Feeder Fund in an offshore transaction. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. These materials have been prepared by J.P. Morgan Securities LLC ("JPMS') and provided to you solely for information purposes and may not be relied upon by you in evaluating the merits of Investing in the Fund or Feeder Funds. All information in this presentation is subject to and qualified in its entirety by reference to the more detailed information appearing in the offering. disclosure, subscription, constituent. closing and other documents of the Fund and the Feeder Funds (the -Fund Documents'). An otter or solicitation of an investment in the Feeder Fund will only be made pursuant to the Fund Documents and only the information in the Fund Documents should be relied upon when making an investment decision. This material is not intended to provide, and should not be relied on for accounting, legal or tax advice, or investment recommendations. You should consult your tax or legal advisor about the issues discussed herein and review carefully the Fund Documents in their entirety before participating in the investment. JPMS and its affiliates believe that the information provided herein is reliable, but does not guarantee its accuracy or completeness. Certain information contained herein has been obtained from published and non-published sources and has not been independently verified by JPMS or the Fund or their respective affiliates. Except where otherwise indicated herein, the information provided herein is based on matters as they exist as of the date of preparation. and may not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after the date hereof. Certain information contained herein constitutes forward-looking statements, which can be identified by the use of terms such as 'may', 'will". "should', 'expect'. "anticipate', 'project", 'estimate', 'intend', 'continue' or 'believe" (or the negatives thereof) or other variations thereof. Due to various uncertainties and actual events. Including those discussed herein and in the Fund Documents, actual results or performance of the Feeder Fund and Fund may differ materially from those reflected or contemplated in such forward-looking statements. As a result, investors should not rely on such forward-looking statements in making their investment decisions. JPMS and its affiliates have no duty to update or amend such forward looking statements. An investment in the Fund has not been recommended or approved by any US Federal or state or any non-US securities commission or regulatory authority. Furthermore, the foregoing authorities have not passed upon the accuracy or determined the adequacy of this summary. My representation to the contrary is a criminal offense. JPMS or Its affiliates may be compensated based on subscriptions received by the Feeder Fund from clients of J.P. Morgan's Private Bank. During the ordinary course of its business, JPMS or any of its affiliates may seek to perform investment banking services, and other services for, and to receive customary compensation from the Fund or its portfolio companies. JPMS or its affiliates may also hold a position, act as market maker or be a counterparty in the financial Instruments of any such portfolio company, or act as an underwriter, placement agent, advisor or lender to the Fund or any such portfolio company. An investment in the Feeder Funds or Fund and the obligations of JPMS and its affiliated broker dealers are not deposits and are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other govemmental agency. The Feeder Funds, JPMS and its affiliated broker dealers are not banks, and are separate legal entitles from their bank and thrift affiliates. The obligations of JPMS and its affiliated broker dealers are not obligations of their bank or thrift affiliates (unless explicitly stated otherwise), and these affiliates are not responsible for securities sold, offered, or recommended by JPMS and its affiliated broker dealers. JPMS or one of its affiliates acts as one of the Fund's prime brokers. The deduction of management and other fees and expenses and incentive lees and allocations reduces an investor's return. Actual performance will vary depending on the size of investment and applicable fee schedule. Past performance is not indicative of future performance. JPMS will act as the Feeder Funds' placement agent in the US. JPMS is a broker-dealer registered with the SEC and a member of the NYSE and other national and regional exchanges. FINRA and SIPC. This product has not been approved by the Swiss Financial Market Supervisory Authority (FINMA) for distribution in or from Switzerland. This product is subject to the private placement rules of the Swiss fund legislation. This material has been approved for issue in the U.K. by J.P. Morgan International Bank Limited, which is authorized and regulated by the Financial Services Authority. This material is distributed in France by JPMorgan Chase Bank. N.A. Paris branch, which is regulated in France by the Autorite de Controls Prudential (ACP) and Autorites des Marches Financiers (AMF). This material is distributed in Hong Kong by JPMorgan Chase Bank, NA. Hong Kong branch. which is regulated by the Hong Kong Monetary Authority as an authorized institution. This material is distributed in Singapore by JPMorgan Chase Bank. N.A. Singapore branch, which is regulated by the Monetary Authority of Singapore. The contents of this document have not been reviewed by any regulatory authority in Hong Kong or Singapore. Please exercise caution in relation to this document. This presentation is for information purposes only. is confidential and may not be reproduced or distributed. Notwithstanding anything to the contrary, each recipient of this presentation, and each employee, representative or other agent of such recipient may disclose to any and all persons, without limitation of any kind, the US income and franchise tax treatment and the US income and franchise tax structure of the transactions contemplated hereby and all materials of any kind (Including opinions or other tax analyses) that are provided to such recipient relating to such tax treatment and tax structure insofar as such treatment and/or structure relates to a US income or franchise tax strategy provided to such recipient by JPMorgan Chase & Co. and its subsidiaries. Additional information is available upon request. Bank products and services are offered by JPMorgan Chase Bank NA. and its affiliates. Securities products and services are offered by J.P. Morgan Securities LLC. member FINRA, NYSE,SIPC, and other affiliates globally as local legislation permits. © 2011 JPMorgan Chase & Co. Inveetrnemt Products: • Not FDIC Insured No Bank Guarantee • Mae Lose Value CONFIDENTIAL • NOT FOR PUBLIC DISTRIBUTION 9 EFTA00611504