EMAIL DETAILS

Jason
I am in total agreement with Devon that we have a Board Call ASAP to
discuss this matter and our path forward.
I am available for a Monday morning Beijing time call.
Jimmy

On Saturday, March 7, 2015, Devon Archer <darcher@rosemontcapital.com>
wrote:

> Jason,
> Thank you for the unfortunate explanation. We need to do everything in
> our power to ensure BHR doesn't get named here, and if we do get named we
> must place the blame fluidly and immediately onto the said LP. This has
> potential to be a major credibility hit with the US Embassy and SACAC which
> will be very unhelpful in our development if BHR is named.
>
> Can we please schedule a Board call soonest so we can discuss and
> understand further the remedies and ramifications of this. I suggest your
> Monday morning Beijing time. Please advise.
>
> Devon
>
> Devon D. Archer
> 646 436 3745
>
> On Mar 7, 2015, at 9:55 AM, Jason Zhu <jason.zhu@bhrpe.com
> <javascript:_e(%7B%7D,'cvml','jason.zhu@bhrpe.com');>> wrote:
>
> 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: jason.zhu@bhrpe.com
> <javascript:_e(%7B%7D,'cvml','jason.zhu@bhrpe.com');>
>
>
>
>

--
James J. Bulger
Chairman
Thornton Group LLC
14 Beacon Street, Suite 804A
Boston, MA 02108
Office tel: 617.248.944