ARC Capital Holdings Ltd

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BUCHANG PHARMACEUTICAL Date of Investment: June 2011 Initial Investment Cost: US$13.0 million Investment Instrument: Common Equity Shareholding: 0.3% Date of Exit: n/a Exit Type: n/a Current Value: US$13.0 million (1) 1. As at 30 June 2012 Brief Description • Buchang is a leading non-SOE (state owned enterprise) pharmaceutical company in China and the largest TCM (Traditional Chinese Medicine) company in China by net profit in 2009. The company is mainly engaged in the R&D, production and sales of TCM for cardiovascular disease, holding the largest number of patents, a large product portfolio, leading market share (7%), the largest number of sales staff and a leading sales network amongst all the pharmaceutical companies in China. BEIJING SCIENCE TECHNOLOGY Date of Investment: December 2007 Initial Investment Cost: US$21.9 million Investment Instrument: Debt Shareholding: n/a Date of Exit: n/a Exit Type: n/a Current Value: US$11.8 million (1) 1. As at 30 June 2012 Transaction Description Brief Description • ARCH completed arbitration with the company and its founder • The Beijing court Science approved Technology ARCH’s Management asset preservation College application to freeze was established certain assets in 1985 of the and company is the third and largest its founder during the arbitration private university in Beijing. • ARCH received a favorable arbitration award in December 2011 for the full investment amount plus interest at the prevailing 1 year bank savings rate • A judge has been designated to handle the auction of the frozen assets (Sanyimiao campus). Financial Performance • 2011 – YoY Sales: +45% – YoY Net Profit: +5% Business Update Quarterly Newsletter Q2 2012 • The company completed its conversion to a joint stock company in March 2012, which is required for an eventual A-share IPO. • ARCH attended a shareholder meeting at the end of June 2012 where the company’s management indicated IPO progress is on track. • ARCH maintains a positive outlook for the company in preparation for its a-share IPO, however is wary that certain delays may occur during the filing process. Valuation • The investment is valued at cost. Transaction Update • At the end of June 2012, the court appointed an appraiser to conduct the valuation assessment of the frozen assets. It is expected that the valuation of the assets will take approximately 3 months to complete. ARCH has requested that the court and the appraiser release the valuation report as soon as possible. • Following the courts administrative procedures leading to the auction, ARCH expects the auction process to start in late September 2012, if there are no further delays. The auction process could still be frustrated by the school’s owner as he will have the right to challenge the valuation stated in the valuation report. Barring any disputes to the valuation, the court will proceed to auction the properties. • ARCH will continue to focus its efforts to expedite the legal process to ensure repayment of the loan, which may be in 2013 based on conservative estimates. Valuation • There has been no change to the valuation of the loan which is valued at 0.5x cost. www.arch-fund.com ©2012 ARCH Page 8 of 10
UCCAL Date of Investment: December 2006 Initial Investment Cost: US$10.8 million Investment Instrument: Debt Shareholding: n/a Date of Exit: June 2012 Exit Type: Trade Sale Current Value: US$0.0 million (1) 1. As at 30 June 2012. Fully realised on 5 June 2012. Brief Description • UCCAL is principally engaged in the business of international apparel brand retailing, wholesaling and distribution in China. ORIENT HOME INVESTMENT DEPOSIT Date of Investment: December 2010 Initial Investment Cost: US$72.1 million Investment Instrument: Investment Deposit Shareholding: n/a Date of Exit: n/a Exit Type: n/a Current Value: US$75.9 million (1) 1. As at 30 June 2012. Difference in value versus cost due to RMB fluctuation. Brief Description • Orient Home Retail is a home improvement retailer founded in China in 1999. As of June 2011, Orient Home Retail had 24 chain stores in cities including Beijing, Shenyang and Chengdu. Transaction Update • In January 2012, following the sale of Orient Home Retail, ARCH issued, an official demand letter to Orient Home Co, the holding company of Orient Home’s property portfolio, requiring the full repayment of the RMB480m investment deposit made in December 2010. Orient Home Co then issued a formal confirmation letter to KPMG (ARCH’s auditors) on 26 March 2012, acknowledging its outstanding liability. Since then, ARCH entered a tri-party agreement with Orient Group on 15 May 2012 which acknowledges ARCH’s right to the RMB480m investment deposit and outlines an arrangement for ARCH to recover the deposit, either in the form of a pro rata equity interest in OH Property or installment payments from OH Property cash flows for the full amount of the deposit. Transaction Description Quarterly Newsletter Q2 2012 • Originally structured as an equity and non-interest-bearing loan • Equity was sold to a third party in December 2009 and loan was converted into an interest-bearing loan • To date, all principal and interest has been paid. Business Update • On 5 June 2012, ARCH received the final outstanding payment of US$3.2m, fully realising its investment in the company. Together with the US$792K partial payment received on 27 April 2012, a total of US$3.3m was included for distribution to ARCH’s shareholders through a tender offer. Valuation • Fully realised as of 5 June 2012. Transaction Update (cont’d) • Up to RMB600m in debt may be attributed to OH Property but has not been transferred from the Orient Group’s balance sheet. ARCH’s RMB480m investment deposit has been acknowledged to receive its full credit and the value of any OH Property shares received by ARCH will have already taken into account a maximum of RMB600m in transferred debt. • KPMG have qualified their audit opinion in respect of the RMB480m investment deposit in Orient Home Co as highlighted in ARCH’s 2011 Annual Report. • The tri-party agreement is still in effect as OH Group continues to work with the third party purchaser of the properties. ARCH has started a parallel effort to negotiate directly with OH Group on possibly selling the properties individually to recover the investment deposit. ARCH met with OH Group on 25 July 2012 to discuss alternative procedures to sell the properties directly with OH Group, if the sale to the third party (as per the tri-party agreement) is delayed or fails to complete. • ARCH has started discussions with independent valuers to assess the properties and expects to appoint a valuer shortly. Valuation • As there have been no major developments since the signing of the tri-party agreement, ARCH’s Valuation Committee will continue to value the investment deposit at cost unless any new developments have a material affect on the recovery of the investment deposit. www.arch-fund.com ©2012 ARCH Page 9 of 10
Page 1 and 2: ARC Capital Holdings Fund Details B
Page 3 and 4: FUNTALK Date of Investment: Novembe
Page 5 and 6: XIAJIN DAIRY Date of Investment: Ap
Page 7: HUIYIN Date of Investment: November

ARC Capital Holdings Ltd

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