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Dear all,


In reference to the SMC Capital Increase deal, we would like to update
everyone as follows:


- following the signing of all relevant subscription and investment
agreements in September 12, 2014 for a total subscription amount of RMB6
billion, Sinopec finally issued its capital call notice on February 2, 2015
requesting that all funds be fully invested by February 13, 2015


- by closing of business on February 13, 2015, BHR transferred a total of
RMB3.75 billion to Sinopec whereas the remaining RMB2.25 billion was not
made available at the time due to the withdrawal of funds by one of our
original LPs (the “Defaulting LP”). Sinopec agreed to extend BHR’s
closing date to March 4, 2015


- as we continued to negotiate with the Defaulting LP, we immediately
launched alternative fundraising efforts despite the intervening Chinese New
Year holiday (which meant many of our contacts were either unavailable to
not able procure the necessary funds in time). By the closing of March 4,
2015, we were able to raise an additional RMB0.2 billion, bringing BHR’s
total investment amount to RMB3.95 billion


- as of March 6, 2015, Sinopec officially closed its subscription accounts,
also terminating BHR’s rights to make any further subscriptions beyond the
RMB3.95 invested


This unfortunate incident caught each of us by surprise and despite the
team’s best efforts, we were not able to raise the defaulted amount given
the extremely tight timing from first receiving the capital call on February
2 to being notified at the very last minute before the original Feb. 13
closing date of the Defaulting LP’s funding withdrawal and finally to the
closing of the subscription window on the morning of March 6.


Sinopec issued an announcement in relation to the closing of the SMC Capital
Increase last night which touched upon the failure to fund by an investor
but did not name BHR. All involved parties understand and agree that BHR's
failure to fund the entire amount is an isolated event which is solely
attributable to liquidity difficulties with an LP and should not serve as a
testament of BHR’s abilities. While we are confident that this incident
will not have any adverse effect in the long run, we must deal with the
possibility of short-term credibility issues once the market picks up the
story (which will be soon). Our position is that we maintain our support
for the SMC deal as attested by our RMB3.95 billion subscription amount but
given the deal fund structure of this particular transaction, we were not
able to maneuver other committed funds to cover the deficiency caused by the
Defaulting LP.


For now, we must deal with the legal aftermath of the situation. On the one
hand, we are, vis-à-vis Sinopec, in breach of our funding obligations in
respect of the RMB2.05 billion uninvested amount, which may involve monetary
damages of up to RMB63.5 million. On the other hand, we are pursuing all
remedies against the Defaulting LP for its breach of relevant LP agreements,
which directly caused our breach of the Sinopec agreements.


Finally, we are in close discussions with Sinopec to coordinate our efforts
and to mitigate any spillover effect this incident may have on our SOE
fundraising efforts or on our ability to partake in future SOE reform
opportunities. We ask that all inquiries in relation to this transaction be
directed to Mr. Xia Yu, who will be the house speaker on this matter on
behalf of BHR.


Regards,


诸晨刚 Jason Zhu

执行董事 Executive Director


渤海华美（上海）股权投资基金管理有限公司

Bohai Harvest RST (Shanghai) Equity Investment Fund Management Co., Ltd.

北京市朝阳区建国路79号华贸中心写字楼2座31层3101室 邮编：100025

31/F, Unit 3101, Tower 2, China Central Place, 79 Jianguo Road,

Chaoyang District, Beijing 100025, China

Cellphone: 136 8169 7246

Tel: 86 10 5969 5858

Fax: 86 10 5969 6123

Email: <mailto:jason.zhu@bhrpe.com> jason.zhu@bhrpe.com