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Emerging Markets Private Equity Fund Structuring, Oversight & Administrative Matters An EMPEA Professional Development Webcast – 5 June 2012

Emerging Markets Private Equity Fund Structuring, Oversight and Administrative Matters

An EMPEA Professional Development Webcast Hosted by Citi Private Equity Services with Citi Venture Capital International (CVCI), Emerging Capital Partners (ECP), International Finance Corporation (IFC) and Orrick Herrington & Sutcliffe LLP

An EMPEA Professional Development Webcast

CVCI Private Equity


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Today’s Agenda

I. Emerging Markets Overview – Pavan Gupte, Chief Strategy Officer, Citi Venture Capital International

II. Overview of Regulatory Considerations for Private Equity Funds Investing in Emerging Markets – Edward G. Eisert, Partner, Orrick Herrington & Sutcliffe LLP

A. Update on Dodd-Frank, Foreign Account Tax Compliance Act (FATCA), Anti-Money Laundering, Foreign Corrupt Practices Act (FCPA)

III. Panelist Introductions

IV. Panel Discussion

A. Structuring Considerations for Emerging Markets Funds

B. Information and Data Flow

C. Establishing An Appropriate Back Office Infrastructure

D. Investor Transparency and Other Reporting Matters

E. Lessons Learned

V. Q&A Session

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Panelist Introductions

Moderator: Joe Patellaro, Managing Director, Global Head of Private Equity Services, Citi Transaction Services

Carolyn Campbell, Managing Director, Founding Partner and General Counsel, Emerging Capital Partners (ECP)

Pavan Gupte, Chief Strategy Officer, Citi Venture Capital International (CVCI) CVCI Private Equity

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Umberto Pisoni, Global Portfolio Head, Private Equity and Investment Funds Department, International Finance Corporation (IFC)


Panelist Introductions (continued)

Quinn Moss, Partner, Orrick Herrington & Sutcliffe LLP

Jim Mercadante, Partner, Orrick Herrington & Sutcliffe LLP

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Edward Eisert, Partner, M&A and Private Equity, Orrick Herrington & Sutcliffe LLP

CVCI Private Equity Emerging Markets Private Equity Fund Structuring, Oversight & Administrative Matters An EMPEA Professional Development Webcast – 5 June 2012

June 2012

Citi Venture Capital International Emerging Markets Investing

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Important Information This confidential presentation is being furnished on a confidential basis by Citi Venture Capital International (“CVCI Private Equity”) to you. This presentation does not constitute an offering document and the statements contained herein are not intended as investment advice. This presentation is meant only to provide a broad overview for discussion purposes. All information provided herein is subject to change and, unless otherwise indicated, is as of the date on the cover page or, in some cases, the end of the prior quarter or financial year. This information herein is provided as a matter of record and should not be construed as an offer of any investment product or service. If and when an investment opportunity is structured, you must obtain and carefully read the relevant offering document, which will contain the information needed to evaluate the potential investment and provide important disclosures regarding risks, fees and expenses. All information provided herein is qualified in its entirety by such relevant offering document and the related subscription agreement. This presentation is confidential and solely for the use of Citigroup Inc., its subsidiaries and affiliates (collectively “Citi”), CVCI, and the existing and potential clients of Citi, CVCI and CVCI Funds (as defined) to whom it has been delivered. By accepting delivery of this presentation, each recipient undertakes not to reproduce or distribute this presentation in whole or in part, nor to disclose any of its contents, without the prior written consent of CVCI. This presentation is being made available confidentially to the recipients on an informational basis only and may not be relied on by any person for any purpose. Alternative investments can be speculative and are not suitable for all investors. Investing in alternative investments is only intended for experienced and sophisticated investors who are willing to bear the high economic risks associated with such an investment. Investors should carefully review and consider potential risks before investing. Certain of these risks may include:

• Loss of all or a substantial portion of the investment due to leveraging, short selling or other speculative investment practices; • Lack of liquidity in that there may be no secondary market for a partnership or any related feeder partnership and none is expected to develop; • Volatility of returns; • Restrictions on transferring interests in any partnership; • Potential lack of diversification and resulting higher risk due to concentration of trading authority with a single advisor or within one of more sectors, industries, countries

or regions; • Absence of information regarding valuations and pricing; • Complex tax structures and delays in tax reporting; • Less regulation and higher fees than other products; and • Investment Manager Risk

Individual products will have specific risks related to their investment programs that will vary from product to product. Investors should review the 'Summary of Key Investor Risks'. The opinions expressed herein may differ from opinions expressed by Citi, and are not intended to be a forecast of future events or a guarantee of future results. Past performance is no guarantee of future results. Real returns may vary. Citi and its employees are not in the business of providing tax or legal advice to any taxpayer outside of Citi. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. While some information used in this presentation has been obtained from various published and unpublished sources considered to be reliable, Citi does not guarantee its accuracy or completeness and accepts no liability for any direct or consequential losses arising from its use. All expressions of opinion herein are as of the date hereof, subject to change without notice, not intended to be a guarantee of future events, and may differ from the views of other businesses of Citi, other than CVCI. Past performance is no guarantee of future results. Actual results may vary.

INVESTMENT: - NOT FDIC INSURED - NOT CDID INSURED - NOT GOVERNMENT INSURED - NO BANK GUARANTEE - MAY LOSE VALUE

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Key Points

There is no guarantee or assurance that the CVCI Funds will achieve their investment objectives. Diversification does not ensure against losses. Past performance is no guarantee of future results. Actual results may vary. Gross returns are calculated across multiple private equity funds managed by CVCI that have different structures. Net returns for each fund can be found on “Track Record Summary” that follows. Products discussed herein are closed for subscriptions and are no longer available for offer.

• Attractive, differentiated strategy • Growth capital across Global Emerging Markets • Addressing long-term structural themes:

• Domestic consumption; • Industry consolidation and restructuring; and • Cross-border flows

• Mid-market orientation

• Flexible approach: minority and control positions

• Targeting risk-adjusted returns

• Team

• Broad investing and operating experience across various cycles, in Emerging Markets

• Highly institutionalised heritage, culture and governance; risk-averse mindset

• Fully and solely aligned with Fund’s performance; amplifies risk aversion

• Unified local approach and global investing standards, including responsible investing principles

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Unified Culture, One-Team Approach • Local teams, global standards

• 52 investment professionals with presence in 7 locations, all since 2001 excluding Singapore

• 16 Nationalities; 14 Languages

New York (Total 10)

Singapore (Total 6)

• Dipak Rastogi (CEO) • Marc Desaedeleer (CIO) • Pavan A. Gupte (CSO) • Sunil K. Nair (Managing

Partner) • Other Investment

Professionals: 2

Hong Kong (Total 11)

Chile (Total 2)

India (Total 13)

• Amardeep Singh (Partner) • Rahul Yadav (Partner) • Other Investment

Professionals: 11

Investment Committee

• Dipak Rastogi • Marc Desaedeleer • Bob Khanna • Sunil Nair • Ji Min • Enrique Bascur • Ajit Bhushan • Deepak Sharma * • Senthil Kumar *

London (Total 10)

• Ajit Bhushan (Partner) • Colin Clark (Partner) • Ashwin Roy (Partner) • Other Investment

Professionals: 7

• Bob Khanna (Managing Partner) • Enrique Bascur (Managing

Partner) • Paulo Caldeira (Partner) • Murtaza Moochhala (Partner) • Juan-Pablo Pallordet (Partner) • Other Investment

Professionals: 5

• Ji Min (Managing Partner) • Gordon Lam (Partner) • Jeffrey To (Partner) • Other Investment

Professionals: 8

• Cristian Celis (Partner) • Other Investment

Professionals: 1

* Citi representatives

Information as of May 2012.

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Investment Environment Region 2012F-15F GDP

growth (CAGR) Investment environment

Asia-Pacific 9.9% • China: Continue to invest differently • Increased focus on SE Asia, but Indonesia and Malaysia are currently hot • Interesting dealflow in rest of SE Asia and S.Korea

Emerging Europe

7.0% • Watching potential contagion effect from Western Europe • Turkey: Increased competition • Poland is better now • Balkans and Baltic regions interesting • Greater control orientation to investments

India 10.3% • Cautious due to macro headwinds • Very successful historically, but changed investing style since 2007-08 • Typically greater orientation of minority investing

Latam 5.4% • Brazil: Increased competition in general • Interesting dealflow in Chile, Peru, Columbia • Larger control orientation to investments

Cross-border N.A. • Targeting cross-border trade and capital flows • Strongly differentiated • Sector-focus and control orientation Forecasts for GDP growth are in current US dollars and sourced from the IMF website.

Region (IMF Group) -: Asia Pacific (Developing Asia ex India), Emerging Europe (Central & Eastern Europe), India (India), Latam (Latin America and the Caribbean)

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Lessons Learnt

•High GDP growth potential, but inherent capital markets’ volatility

•Cash is ‘king’

•Focus on core competencies: stage, type, geography

•Structuring of investments is key

•Foreign currency impact

•Corporate governance risks

•Regular monitoring of regulatory aspects

There is no guarantee or assurance that the CVCI Funds will achieve their investment objectives. Diversification does not ensure against losses.

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Summary of Key Investor Risks Key Considerations Investment Risk: The investment strategies of any CVCI Fund may include highly speculative investment techniques, highly concentrated portfolios, control and non-control positions and illiquid investments. An investment in any CVCI Fund is not suitable for certain investors and should constitute only a limited part of an investor's total portfolio. Liquidity Risk: Interests in any CVCI Fund will not be readily marketable, are not redeemable, and are not transferable except in limited circumstances in compliance with applicable laws and with the consent of the General Partner. There will be no public market for the interests in any CVCI Fund and no such market is expected to develop. Foreign Exchange Risk: Interests in any CVCI Fund will be denominated in US dollars, while some of its investments may be purchased with and payable in non-US currencies. Therefore, fluctuations in currency rates may adversely affect the performance of CVCI Fund Investments in non-US issuers. The CVCI Funds do not intend to hedge their non-US dollar currency exposures. Furthermore, movements in the foreign exchange rate between US dollars and the currency applicable to particular investors may have an impact upon such investors' returns in their own currencies of account. Foreign Investment Risk: Foreign investments pose a range of potential economic, political and legal risks that might not exist in the US. Reporting, accounting and auditing standards of different countries vary, and the laws of various countries governing business organizations, bankruptcy and insolvency may make legal action difficult and provide little, if any, legal protection for investors. These risks are accentuated in emerging markets.

Conflict of Interest: CVCI and Citigroup, their affiliates and the funds they sponsor may have interests and operations that may conflict with those of the CVCI Funds. Other Funds; Competition for Investment Opportunities: Although Citi has made substantial investments in the CVCI Funds, other business units of Citi may under certain circumstances compete for investment opportunities with the CVCI Funds.

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Summary of Key Investor Risks (continued)

Citi and its affiliates have sponsored and/or advised and expect to continue to sponsor and/or advise investment funds which invest in the Emerging Markets including in the infrastructure areas and such funds will compete with the CVCI Funds for investment opportunities. Neither Citigroup nor any of its affiliates, including any funds sponsored or advised by any of them, is obliged to share any investment opportunity, idea or strategy with the CVCI Funds. Therefore, Citi and its affiliates may sponsor, create, manage or advise multi-regional, sub regional, theme-based, sector specific, country specific, or other investment funds without restriction or become syndicate members, shareholders, or directors of other similarly operated funds and companies and may compete with the CVCI Funds and invest in transactions that meet a CVCI Fund's investment objectives directly or through other funds without restriction. Further, none of the foregoing shall prevent Citi or any of its affiliates, including any funds sponsored or advised by any of them, from making follow-on investments in any companies or other business structures in which any CVCI 2005 Funds invested from time to time. The CVCI Funds may enter into co-investment, referral or right of first refusal arrangements with other funds established by Citi or third parties that relate to investment opportunities in CVCI's Primary Investment Focus. These arrangements may limit the right of the Investment Adviser of a particular CVCI Fund to recommend investment opportunities. Other Activities of the CVCI Investment Professionals: Conflicts of interest may arise in allocating time, services or functions among the CVCI Funds. The appropriate allocation of fees and expenses generated in the course of making and evaluating investments for the CVCI Funds and any Citi entities will be determined by Citi in its sole discretion.

In addition, if CVCI sponsors another fund, certain members of the Investment Adviser's team may devote a substantial portion of their time to such new fund and its launch.

Volcker Rule

Citi and most Citi-affiliated entities investing in a CCA fund (each, a “Citi Investor”) are subject to the provisions of the “Volcker Rule” of the recently enacted Dodd-Frank Wall Street Reform and

Consumer Protection Act the Financial Reform Act”). Among other things, the Volcker Rule will prohibit a banking entity and its affiliates, such as Citi and any Citi Investor, from owning more than 3%

of a fund's shares. If any Citi Investor owns a proportion of the relevant fund's capital, compliance with the Volcker Rule will need to be accomplished via a combination of a redemption of all or part

of Citi’s investment, and an increase in subscriptions from investors unaffiliated with Citi. In the event that the relevant fund is unable to, or elects not to, raise sufficient new capital to reduce the

total ownership by Citi, Citi will be required to redeem a substantial portion of its investment in the relevant fund, potentially subjecting that fund to the consequences discussed under “Effect of

Substantial Redemptions” below, including potential full liquidation of the fund. There can be no assurance that Citi will elect or be able to comply with the requirements of the Volcker Rule with

respect to maintaining any investment in any fund at any point in time. Citi is expected to have until July 2014 (or potentially earlier depending upon the timing of final regulations to be passed by the

federal banking agencies, the SEC and the CFTC) to comply with the above provisions of the Volcker Rule. It should not be assumed that any Citi Investor and/or fund will request and/or be able to

receive an extension of the deadline to comply beyond July 2014.

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Limitations on Investments from Certain Jurisdictions Disclaimer – Introduction The introduction to this disclaimer is relevant to all recipients of this communication. In addition country-specific sections are also relevant to recipients in those jurisdictions.

This document is intended to provide information to professional investors and certain sophisticated investors who are familiar with and capable of evaluating the merits and risks associated with investments of the kind described. The products and services to which this document relates are only available to such persons and any other persons should not act on it or rely on it. Nothing in the disclaimer excludes any liability, which Citi Capital Advisors (“ CCA” ) is not permitted to exclude by applicable law.

This document is not to be construed as an offer, invitation or solicitation for any investment product in any jurisdiction, and is not being and will not be made available to the public. Any future investment will be subject to and made on the terms of the legal agreements relating thereto. Investment strategies referred to in this document have not and will not be offered to the public, and any investor commits himself not to offer the investment products to the public upon resale and to contractually bind any other investor not to offer the investment products to the public.

Any investments referred to may not be registered with any regulator, regulatory body or similar organization or institution in any jurisdiction. Potential investors should verify whether products are listed on any stock exchange. Before making an investment, you should consider taking independent professional advice about the unregistered and potentially unlisted status of any product.

The information contained is based upon a number of sources and believed to be correct, but cannot be guaranteed. Any opinions and estimates are judgments as of this date and are subject to change without notice. Indications of the potential return of the investment have been given in good faith but are not guaranteed and are subject to uncertainties beyond control and should not be relied upon by investors in forming investment decisions.

No representation is made regarding the legal, accounting, regulatory or tax treatment of an investment in any jurisdiction relevant to a recipient of this document.

Except to the extent, if any, specifically agreed otherwise in writing with a Citi entity: • Citi is not providing you with investment advice. Even if we possess information as to your objectives in relation to any transaction, series of transactions or trading strategy,

this will not be deemed sufficient for any assessment of suitability for you of any transaction series of transactions or trading strategy • Citi makes no recommendation as to the suitability of any product or transactions mentioned in this document • Citi is not acting as your advisor, fiduciary or agent and is not managing your account. Prior to entering into any transaction, you should determine, without reliance on Citi,

the economic risks or merits, as well as the legal, tax and accounting characteristics and consequences of the transaction and that you are able to assume these risks Any trading or investment decisions you take are in reliance on your own analysis and judgment and/or that of your advisors and not in reliance on us This document contains proprietary information and is confidential to its recipient and, subject to applicable law requiring its disclosure by the recipient, may not be reproduced or redistributed by any recipient to any person other than the recipient's professional advisors.

For investors in Australia No prospectus or other disclosure document, as defined in the Corporations Act 2001 (Commonwealth of Australia) ("Corporations Act"), in relation to shares in funds is required to be lodged with the Australian Securities and Investments Commission ("ASIC"). Shares in the funds have not been offered or sold and may not be offered, sold or delivered directly or indirectly in Australia unless: (i) the aggregate minimum consideration payable by each offeree is at least A$500,000 or its equivalent in other currencies (but disregarding moneys lent by the offeror or its associates) or the offer or invitation otherwise does not require disclosure to investors under Part 6D.2 of the Corporations Act; (ii) such action complies with all applicable laws, regulations and directives; and (iii) such action does not require any document to be lodged with ASIC.

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Limitations on Investments from Certain Jurisdictions (continued)

Shares in the funds may only be issued or sold to “wholesale clients” as defined in section 761G of the Corporations Act (“Wholesale Clients”) and this presentation is intended only for Wholesale

Clients. In no circumstances may this presentation be made available to a “retail client” as defined in section 761G of the Corporations Act.

Citigroup Global Markets Australia Pty Limited (ACN 003 114 832) (Australian financial services licence (“AFS licence”) No.240992) is the sole provider of this presentation in Australia and is

responsible for its contents. No other Citigroup company, including Citigroup Alternative Investments LLC (“CAI”), provides this presentation in Australia.

CAI is exempt from the requirement to hold an AFS licence under the Corporations Act in respect of financial services it provides to Australian clients. CAI accordingly does not hold an AFS licence.

This presentation does not take into account any person's objectives, financial situation or needs.

• Investments in shares in the funds are subject to investment risk, including possible delays in repayment and loss of income and principal invested

• Investments in shares in the funds do not represent deposits or other liabilities of Citigroup Pty Limited or Citibank, N.A.

• None of Citigroup Pty Limited, Citibank, N.A. or any other member of the Citigroup group stands in any way behind the capital value and/or performance of the shares in the fund or its assets

EU This document is communicated by Citibank International plc, Citibank N.A. London branch, or Citigroup Global Markets Limited in the EU.

UK In the United Kingdom, this document is issued by Citi Capital Advisors Limited (“CCAL”) which is authorized and regulated by the Financial Services Authority (“FSA”), only to, and/or is directed only

at persons who fall within Chapter 4.12 of the FSA’s Conduct of Business Rules or the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) Order 2001 (“SPO”). This

relevantly includes the following:

(a) persons who have been classified as professional clients or eligible counterparties (as defined by the FSA’s Conduct of Business Rules).

(b) a client of CCAL for whom it has taken reasonable steps to ensure that an investment in the relevant scheme would be suitable.

(c) a person in relation to whom (in general terms) CCAL has undertaken an assessment of their expertise, experience and knowledge, and concluded that they are capable of making their

own investment decisions and understanding the risks involved.

(d) investment professional with the meaning of Article 14 of the SPO – In particular, it is only directed at persons having experience in matters relating to investments (or, if applicable, in

participating in regulated collective investments schemes).

To the extent that this document is issued by CCAL interest are only available to such persons and this document must not be relied upon or acted upon by any other persons.

Singapore

This document is distributed for informational purposes only and does not constitute an offer or invitation of any product or service. This document is not a prospectus as defined in the Securities

and Futures Act, Chapter 289 of Singapore. Accordingly, statutory liability under the Act in relation to the content of prospectuses would not apply. This document may not be reproduced in any form

or transmitted to any person other than the person to whom it is addressed.

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Contact Information

Singapore London

Citi Venture Capital International Capital Square, 9th Floor 23 Church Street Singapore 049481

T: +65-6328-7332 F: +65-6328-2140

Dipak Rastogi, Chief Executive Officer

Direct: +65-6328-8816 Email: [email protected]

Pavan A. Gupte, Chief Strategy Officer

Direct: +65-6328-4434 Email: [email protected]

Citi Venture Capital International 43-45 Portman Square, 4th Floor London, W1H 6LY United Kingdom

T: +44-207-508-1330 F: +44-207-500-1498

Miguel Hernandez, Limited Partner Relationships

Direct: +44-207-500-0166 Email: [email protected]

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Contact Information

Citi Capital Advisors

New York

Donald Leitch Direct: +1-212-783-1404 Email: [email protected] Lisa Anderson Direct: +1-212-559-1275 Email: [email protected]

London

Michael Weston Direct: +44-207-508-8042 Email: [email protected]

Dubai

Saad Ashraf Direct: +971-4-604-4102 Email: [email protected]

Singapore

John Sievers Direct: +65-6328-5956 Email: [email protected] Jinyeul Park Direct: +65-6328-5493 Email: [email protected]

Tokyo

Ichiro Iitaka Direct: +81-3-6270-7442 Email: [email protected]

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June 5, 2012 EDWARD G. EISERT

Overview of Regulatory Considerations for Private Equity Funds Investing in Emerging Markets – the U.S. Perspective



• The Dodd-Frank Act

• Foreign Account Tax Compliance Act (“FATCA”)

• Anti-Money Laundering

• Foreign Corrupt Practices Act (“FCPA”)

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The Dodd-Frank Act: Registration of Investment Advisers

– The Dodd-Frank Act affects investment advisers that have their principal office and place of business outside of the United States if they have advisory clients that are “U.S. Persons” or if they advise an investment fund (whether or not organized in the United States) that has investors who are U.S. Persons.

– As a result of the Dodd-Frank Act advisers now are subject to the registration requirements of the Advisers Act unless they can take advantage of one of the new exemptions available to: “foreign private advisers;” “private fund advisers;” or “venture capital fund advisers.”

– Advisers that qualify as “private fund advisers” or “venture capital fund advisers” must nevertheless maintain certain records and file certain information with the U.S. Securities and Exchange Commission (“SEC”).

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The Dodd-Frank Act: The Volcker Rule

• A Non-U.S. domiciled banking organization that generally is subject to U.S. banking regulation because it has a U.S. branch is subject to the Volcker Rule if a member of the organization “sponsors,” acquires, or retains an equity interest in, a hedge fund or private equity fund (a “Covered Fund”).

– Generally, a Banking Entity must be in compliance with the Volcker Rule not later than July 21, 2014, subject to possible extensions that may be granted on a discretionary basis (the “Compliance Date”).

– As is the case with U.S. domiciled Banking Entities, the Volcker Rule requires that a Non-U.S. domiciled Banking Entity implement an effective compliance program to ensure that all activities with respect to a Covered Fund are brought into compliance with the requirements of the Volcker Rule no later than the Compliance Date.

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Foreign Account Tax Compliance Act: Background

• FATCA was enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act of 2010.

– Imposes a new 30% U.S. withholding tax on all payers and recipients of certain U.S. source payments and proceeds of instruments that produce U.S. source amounts, if certain reporting requirements are not satisfied.

– Applies to payments to foreign financial institutions (“FFIs”) and non-FFIs (non-financial foreign entities).

– The IRS announced that it has entered into agreements with France, Germany, Italy, Spain and the UK and issued a joint statement stating they are exploring information sharing arrangements.

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Foreign Account Tax Compliance Act: Effective Dates

• Originally applied to payments made after December 31, 2012.

– The IRS has delayed implementation until 2014 (and later).

– Applies to gross proceeds on or after January 1, 2015 from the sale or retirement of property that produces U.S. source interest or dividend payments.

– Applies to pass-thru payments on or after January 1, 2017.

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Anti-Money Laundering: Application to Investment Advisers

• Although U.S. private equity funds and investment advisers are not directly subject to anti-money laundering (“AML”) requirements under the USA PATRIOT Act (the “Patriot Act”) or the rules of the Financial Crimes Enforcement Network of the Department of the Treasury (“FinCEN”), for a number of practical reasons U.S. domiciled advisers to private equity funds should implement AML procedures comparable to those required of broker-dealers subject to the Patriot Act.

• An investment adviser may outsource administration of its AML program to an independent fund administrator and rely on customer identification procedures of financial institutions subject to AML requirements, but the adviser must remain responsible for oversight and compliance with the requirements of the Patriot Act.

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Anti-Money Laundering: OFAC and FATF Compliance

• Private equity funds and their advisers are subject to the requirements of the Office of Foreign Assets Control of the Department of the Treasury (“OFAC”) which oversees the enforcement of federally mandated economic sanctions against certain non-U.S. governments, financial institutions, and “specially designated nationals.”

• Advisers should ensure that investor funds do not originate from a jurisdiction that is not compliant with the Recommendations of the Financial Action Task Force (“FATF”), unless special due diligence procedures are satisfactorily completed.

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Foreign Corrupt Practices Act: Coverage

ANTI-BRIBERY PROVISION

• Prohibits bribery of foreign government or political officials for the purpose of obtaining or retaining business or securing an improper business advantage

BOOKS & RECORDS PROVISION

• Requires SEC-registered or reporting issuers to make and maintain accurate books and records and to implement adequate internal accounting controls

• A private equity fund and its adviser are subject to the FCPA’s anti-bribery

provision if they are considered to be a “domestic concern.”

• All employees of the companies are subject to the FCPA if they are: (1) U.S. citizens, nationals, and residents; or (2) commit an act in furtherance of the violation within U.S. territory.

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Foreign Corrupt Practices Act: Hot Spots • Every company subject to the FCPA must assess their potential risk and take steps to

minimize that risk.

• Areas for corrupt behavior:

– High risk operations;

– Foreign government interactions;

– Third party agents;

– Foreign investment;

– Overseas travel; and

– Gift giving.

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Appendix

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EMPEA Webcast Series Launched in 2008, EMPEA has hosted over 25 webcasts to date drawing more than 3,000 participants from 70 countries and more than 530 unique firms.

Webcast Topics have included: • LP Outlook for Emerging Markets: Preview of EMPEA’s 2012 LP Survey Results

• Anti-Corruption Policies: What Every EM PE Practitioner Should Know

• Investment Spotlights: Emerging Europe & Mexico

• Changing Landscape of EM PE Fund Formation

• The MENA Region: An Overview and Update

• The Impact of the AIFM Directive on PE and VC in Emerging Markets

• Private Equity in North Africa: What Every LP Must Know

• The Impact of the Dodd-Frank Act on Investment Adviser Regulation in the U.S.

• Private Equity Investing in the Middle East, North Africa and South Asia

• Evolving Key Terms & Conditions in Today’s EM PE

• Managing Environmental and Social Risks and Opportunities

• How Will the ILPA Principles Shape GP-LP Relationships in Emerging Markets?

• Catching the Rising Tide of Chinese RMB Funds

• Strategies to Address and Prevent LP Defaults

• Broken BRICs (a four-part series)

• Role of the Secondaries Industry in Emerging Markets Private Equity

• Corporate Governance in Emerging Markets Private Equity

• Marketing Your Fund to LPs in Today’s Market Conditions

• Risk Management in Emerging Markets Private Equity

• Recruiting and Talent Management in Emerging Markets Private Equity

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EMPEA Contact Information

For follow-up questions on this or other webcasts, please contact Shannon Stroud at [email protected] or +1.202.333.8171. For Members-Only Research Requests, please contact [email protected] or +1.202.333.8171. Please also visit www.empea.net for further information.

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We invite you to contact us to learn more about Citi. For more information contact: New York: Andrew Hoemann 917-472-5975 / Virginia Volpe 212-723-5197 Chicago: Mike Coyne 312-876-3355 Latin America: Marcia Rothschild 212-816-6478 London: Kamran Anwar 011-44-207-500-5972 Hong Kong: Robert Humann 011-842-2868-7714

About Citi Private Equity Services

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Citi Private Equity Services is a leading global provider of outsourced services to the private equity industry. We offer highly customized shared-service solutions, experienced management, client service teams with great industry knowledge and a client-centric service model. Our focus has been exclusively dedicated to private equity funds and investors for over 18 years, servicing a variety of types of investors and funds, including buyout, fund of funds, venture capital, real estate and mezzanine debt. We are currently serving over 800 funds with more than $160 billion in committed capital. Administering today’s private equity funds has never been more demanding. With limited resources, increased need for transparency and added regulatory compliance, managing your back office and evolving needs can be challenging. Whether you are a sponsor, investor or advisor, Citi can help you succeed.


The Dodd-Frank Act: Volcker Rule

• A Non-U.S. domiciled banking organization that generally is subject to U.S. banking regulation because it has a U.S. branch is subject to the Volcker Rule if a member of the organization “sponsors,” acquires, or retains an equity interest in, a hedge fund or private equity fund (a “Covered Fund”). The general partner or managing member of a Covered Fund that is an affiliate of a “Banking Entity” (an “Affiliated Manager”) may, in its own right, be deemed to be a Banking Entity and subject to the Volcker Rule.

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The Dodd-Frank Act: Volcker Rule (continued)

– Banking Entity – The term “banking entity” means: A. any insured depository institution (as defined in Section 3 of the Federal Deposit

Insurance Act);

B. any company that controls an insured depository institution; or

C. that is treated as a bank holding company for purposes of Sec. 8 of the International Banking Act of 1978; and

D. any affiliate or subsidiary of any such entity.

– Sponsor – The term to “sponsor” a fund means:

A. to serve as a general partner, managing member, or trustee of a fund;

B. in any manner to select or to control (or to have employees, officers, or directors, or agents who constitute) a majority of the directors, trustees, or management of a fund; or

C. to share with a fund, for corporate, marketing, promotional, or other purposes, the same name or a variation of the same name.

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The Dodd-Frank Act: Volcker Rule (continued)

• Generally, a Banking Entity must be in compliance with the Volcker Rule not later than July 21, 2014, subject to possible extensions that may be granted on a discretionary basis (the “Compliance Date”).

• As is the case with U.S. domiciled Banking Entities, the Volcker Rule requires that a Non-U.S. domiciled Banking Entity implement an effective compliance program to ensure that all activities with respect to a Covered Fund are brought into compliance with the requirements of the Volcker Rule no later than the Compliance Date. These requirements are subject to interpretation and numerous unresolved questions have arisen as to how they will be interpreted and applied by the U.S. regulatory agencies.

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Foreign Account Tax Compliance Act

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FATCA: Background

• FATCA was enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act of 2010.

• It is designed to combat tax evasion by U.S. persons (and is, in part, a response to the issues with UBS).

• It imposes a new 30% U.S. withholding tax and certain reporting requirements.

• Who is affected by FATCA? • All payers and recipients of “withholdable payments”

– Withholdable payments generally are certain U.S. source payments and proceeds of instruments that produce U.S. source amounts.

• FATCA applies to payments to foreign financial institutions (“FFIs”) and non-FFIs (non-financial foreign entities).

• FATCA also extends to payments of foreign source income by FFIs to certain other FFIs under the “passthru payment” provisions.

– A passthru payment is a payment made by an FFI that is:

» A withholdable payment (including a withholdable payment received by an FFI as an agent or custodian); or

» Any other payment to extent “attributable to” a withholdable payment.

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FATCA: Joint Governmental Statement

• The IRS announced that it has entered into agreements with France, Germany, Italy, Spain and the UK and issued a joint statement stating they are exploring information sharing arrangements:

– “FATCA partner country” FFIs will be able to report to local authorities rather than directly to the IRS (may overcome potential legal conflicts);

– However, “FATCA partner country” FFIs may have to withhold on passthru payments to FFIs in other countries;

– This will eliminate the need for entities in any such jurisdiction to enter into an FFI agreement; and

– Many other countries have indicated an intent to enter negotiations.

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FATCA: Grandfathered Obligations and Effective Dates • Payments made with respect to “grandfathered obligations” are not subject

to FATCA. – “Obligation” includes any legal agreement that produces or could produce

withholdable payments other than any instrument treated as equity for U.S. tax purposes or any legal agreement that lacks a definitive expiration or term.

– An obligation is grandfathered if it is outstanding on January 1, 2013 and is not materially modified thereafter.

– Revolving credit lines are grandfathered, provided that, on their issue date, the agreement must fix the material terms (including a stated maturity date) under which the credit will be provided.

• Effective Dates: originally applied to payments made after December 31, 2012.

– The IRS delayed implementation until 2014 (and later).

– Applies to gross proceeds on or after January 1, 2015 from the sale or retirement of property that produces U.S. source interest or dividend payments.

– Applies to pass-thru payments on or after January 1, 2017.

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Anti-Money Laundering

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Anti-Money Laundering: Application to Investment Advisers • Although U.S. private equity funds and investment advisers are not directly subject to

anti-money laundering (“AML”) requirements under the USA PATRIOT Act (the “Patriot Act”) or the rules of the Financial Crimes Enforcement Network of the Department of the Treasury (“FinCEN”), U.S. domiciled advisers to private equity funds should implement AML procedures comparable to those required of broker-dealers subject to the Patriot Act because:

– The adoption and implementation of an effective AML program is demanded by counterparties that are subject to the AML requirements of the Patriot Act, e.g., bank custodians;

– The SEC permits U.S. registered broker-dealers to rely upon registered investment advisers to perform some or all of its Customer Identification Program obligations only if the adviser has implemented an AML program that complies with the requirements of the Patriot Act;

– Advisers must comply with the AML requirements of those non-U.S. jurisdictions in which they manage funds (e.g., the UK); and

– The SEC de facto requires registered investment advisers to implement AML programs by making an adequate AML compliance program part of its examination program.

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Anti-Money Laundering: Program Elements and Outsourcing

• The Patriot Act generally requires that covered financial institutions implement AML programs that include the following elements:

– the development of internal policies, procedures and controls designed to detect and prevent money laundering;

– the designation of a compliance officer to oversee the AML program;

– an ongoing employee training program on detecting and preventing money laundering; and

– an independent audit function to test the AML program.

• An investment adviser may outsource administration of its AML program to an independent fund administrator and rely on customer identification procedures of financial institutions subject to AML requirements, but the adviser must remain responsible for oversight and compliance with the requirements of the Patriot Act.

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Anti-Money Laundering: OFAC and FATF

• Private equity funds and their advisers are subject to the requirements of the Office of Foreign Assets Control of the Department of the Treasury (“OFAC”) which oversees the enforcement of federally mandated economic sanctions against certain non-U.S. governments, financial institutions, and “specially designated nationals.”

• Advisers should ensure that investor funds do not originate from a jurisdiction that is not compliant with the Recommendations of the Financial Action Task Force (“FATF”), unless special due diligence procedures are satisfactorily completed.

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FOREIGN CORRUPT PRACTICES ACT

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FCPA: Coverage

ANTI-BRIBERY PROVISION

• Prohibits bribery of foreign government or political officials for the purpose of obtaining or retaining business or securing an improper business advantage

BOOKS & RECORDS PROVISION

• Requires SEC-registered or reporting issuers to make and maintain accurate books and records and to implement adequate internal accounting controls

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FPCA: Applicability

• A private equity fund and its adviser are subject to the FCPA’s anti-bribery provision if they are considered to be a “domestic concern.”

• Includes entities that are organized under the laws of the U.S. or that have their principal place of business in the U.S.

– All employees of the companies are subject to the FCPA if they are: (1) U.S. citizens, nationals, and residents; or (2) commit an act in furtherance of the violation within U.S. territory.

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FPCA: Anti-Bribery Provision • It is unlawful for:

– an issuer, domestic concern, or any person acting within the jurisdiction of the U.S.;

– with corrupt intent;

– to directly or indirectly;

– offer, pay, promise to pay, or authorize payment;

– of anything of value;

– to a foreign official;

– for the purpose of obtaining or retaining business or securing an improper advantage.

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