ARC Capital Holdings Ltd

Investment Objective
ARC Capital Holdings Limited (ARCH) is a private equity fund
focused on investing in retail and consumer products companies
primarily in Greater China. ARCH is traded on the AIM market of
the London Stock Exchange.
Since inception, ARCH has developed a portfolio of 16
investments and has realised 10 to date. ARCH continues to be
focused on enhancing the operational capabilities and value of its
remaining investee companies as it realises its portfolio.
Management Update
During the second quarter of 2012, ARCH held its first annual
general meeting (“AGM”) on 25 April 2012, where the following
resolutions were passed:
� Resolution 1 – ordinary resolution to adopt a permanent
share buy-back authority for the Board of Directors: To
facilitate the return of capital and income to shareholders,
ARCH proposed to establish a permanent share buy-back
authority. This authority would give the Board the ongoing
ability to make both on-market and off-market purchases of
ordinary shares, including by way of a capital reduction, and
the flexibility and discretion to set the parameters for such
purchases.
� Resolution 2 – ordinary resolution to adopt the Board’s
Discount Control Policy for 2012: To distribute all net
proceeds under ARCH’s investment policy in a way that
reduces the share discount to net asset value per share.
Such distributions are expected to be made using tender
offers and/or capital reductions, or a combination of these
methods, together with share buy backs if they are
considered by the Board to be highly accretive to the net
asset value per share.
Following the newly adopted realisation strategy, ARCH
distributed a shareholder circular on 6 June 2012 detailing a
tender offer to purchase up to 7.27% of the issued and
outstanding ordinary shares of ARCH at a price of US$1.01 per
share. The tender offer closed on 6 July 2012, representing
approximately US$28.1 million (US$25 million from ARCH’s cash
reserves plus US$3.1 million final payment from the UCCAL
portfolio investment received on 5 June 2012). Together with
previous distributions, ARCH has distributed a total of US$92.8
million to date.
On 7 June 2012, ARCH announced the appointment of Mr. Tian-
Cho (TC) Chu as an Independent Non-Executive Director of the
Board. Mr. Chu was formerly at McKinsey & Company, Inc. as a
Senior Partner and the leader of its Greater China Healthcare,
Consumer and Retail practices. Mr. Chu had been with McKinsey
for over 27 years and has held numerous leadership positions
within the firm’s Hong Kong and Greater China offices. Further
details of Mr. Chu’s biography are available on the ARCH website.
Quarterly Newsletter Q2 2012
Management Update (continued)
With the appointment of Mr. Chu, Mr. Michael Guy Hilliard Heald
stepped down as an Independent Non-Executive Director and Mr.
Steven Feniger was appointed as Chairman of the Board and Ms.
Helen Wong was appointed as Vice Chair.
Economy
During the second quarter of 2012, China’s YoY GDP grew 7.6%,
slowing from the previous quarter’s YoY GDP growth of 8.1%.
Despite being in line with analyst expectations, this growth figure
was the slowest in three years, increasing concerns of a slowdown
in China’s economy. Fixed asset investment increased 20.4% YoY
during the first half of 2012. The Chinese government’s monetary
policies to control inflation have shown results as inflation rose only
2.9% YoY during the quarter. Retail sales reported 13.9% YoY
growth during the second quarter of 2012 as domestic consumption
remained steady.
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