ARC FUNDS LIMITED — AGM Information 2007

Oct 24, 2007

MANAGING DIRECTOR’S COMMENTARY TO THE ANNUAL GENERAL MEETING OF TIDEWATER INVESTMENTS LIMITED

25 OCTOBER 2007

Good Morning and thank you for attending our Annual General meeting.

The 2007 financial year was one where we put the difficulties of the two preceding years behind us and mostly made up the financial losses of 2005 and 2006.

Fiscal 2007’s pre tax profit of just over $3.5million enabled us to pay our maiden dividend of 2.5cents fully franked; after recent dividend receipts, we currently have close to 5cents a share in franking credits available to be paid at an appropriate time. The results, aided by the $4.1million raising of new equity last year significantly strengthened Tidewater’s capital base, which closed the year at just over $13.25million. Together with our debt facility, that gave us $15.75million of total capital to use as at 30 June 2007.

The 2008 financial year is about putting this capital to use within our business in a way which will assist the growth of annuity income streams. In the past, Tidewater has tended to focus on principal investments – where we have been reasonably successful outside of the retail debacles – but which will only yield a security trading around its net asset value.

We have consistently noted in the past year that our capital will be primarily directed towards:

• Agency funds management where we invest in our own product, including the seeding of new funds;

• Discount financial investments where we use our expertise to make financial sector related investments; and

• Investments in our distribution and network partners – those folks we can grow with and mutually assist.

The ideas dovetail with our revised corporate vision – that of a “boutique investment manager focusing on tailored niche products… where we align our interests by coinvesting in selected opportunities and partnering with like minded enterprises.” This vision ensures that Tidewater has a genuine role as a public company by marrying together a capital base and access to capital markets with specialist investment skills and niche product design. We are not aiming to be a manager of me-too Australian equity products for the institutional market.

This renewed corporate vision has been manifested since the end of June with some new initiatives.

Most obviously, we have agreed to acquire Cheviot Asset Management Pty. Limited and Cheviot Kirribilly Limited, respectively the asset manager and responsible entity for the $46million Cheviot Kirribilly Vineyard Property Group, a stapled entity which is listed on the ASX under the ticker code CKP. We believe there is significant scope to build CKP but to do so, recognise that the shares must far better reflect the stated NTA of the entity; a share price of around $1.45 against stated NTA of around $2.60 requires some work to be done.

We expect the Cheviot deal to close at the end of November, since it requires neither Cheviot Bridge Limited (the vendor) nor Tidewater to secure shareholder approval. We will gain an enhanced income stream as well as two good executives to join the Tidewater team. We also retain an approximate 10% shareholding in the vendor, which represents a sensible shareholding in a key partner who will provide the viticultural maintenance and grape contract sales required by CKP. We also think Cheviot Bridge shares are very undervalued, especially after taking into account this deal.

In respect of CKP, we believe the experiences gleaned with the Fat Prophets Australia Fund are relevant. Together with the board and other executives, we have assisted in closing a discount gap to fully diluted NTA down from as high as 15% to about 6% with a mixture of share buybacks, fully franked dividend increases, and other capital management moves. There are a couple of new initiatives with the Fat Fund which will be unveiled in due course, which are not generally prevalent within the Australian LIC scene – and should be. Performance of the fund has improved significantly from the period prior to our appointment.

We have put a proposition to GoldLink GrowthPlus (ASX code: GLC) with a view to turning the company into an LIC through the purchase of Discount Assets Limited, a Tidewater subsidiary which holds a number of investments in LIC type companies. We are now represented on the board of GLC, through myself and Clare Porta, our company secretary. Whilst keen to pursue our proposal, it has to be noted that Clare and I have director’s duties and obligations to GLC shareholders in this role. These shareholders last Thursday decided to stick with the incumbent board of Directors rather than add two nominees of Gulf Resources Limited, but this meeting represents merely the first step towards rehabilitating GLC. There is little doubt we will receive numerous proposals to make use of the available $4.5million in cash resources, but with Tidewater owing 8% of GLC, we will be keen to adopt something of substance.

To make sure that we can focus on building Tidewater, I have stepped down from my role as Chairman of Snowball; my job there was pretty much done, after assisting the exceptional executive team in building an $8million company with a good idea, into a $115million business with strong earnings. The company still has vast potential from where it currently resides, but it is up to others with a greater vested interest to see this realised. We still hold about 1% of the shares of Snowball.

Over the course of the current year, we expect to deploy a greater amount of our capital into products and companies where we have a strong business, management or contractual relationship. We are looking to grow our funds under management with an emphasis on either retail or contracted (closed end) type products. Subject to the quantum of exercises of the $30million of outstanding $1.00 options of the Fat Prophets Australia Fund, which expire on 20 April 2008, we hope to have around $150million of retail, closed end, contracted or sub-contracted funds under management by 30 June 2008.

There is some expense involved in establishing these products, which will inflate our cost base over the year, but the bottom line of the company, in the current year, will still depend upon the investment results produced by our capital base. We hold a number of securities which are neglected by the market, despite improving their underlying businesses to a significant degree over the past 12-24 months. The current share price of Tidewater still places minimal value on our funds management activities, franking credits, tax losses or the public company shell.

I would like to thank the board for their wise counsel over the course of the past year as well as the sterling efforts of the Tidewater team. We hope to continue the recovery of value and return to our capital providers – of which the board represent about one third. We have clear and sensible plans as to how to earn a good return on your investment into the future. As with most companies, the trick will be in ensuring their execution.