ARC FUNDS LIMITED — AGM Information 2011

Sep 28, 2011

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

THURSDAY 29 SEPTEMBER 2011

Welcome to the second AGM of any 30 June balancing company listed on the ASX for 2011. The Amcil Limited meeting started an hour ago in Melbourne.

As I noted in the annual report, we think our style of investing is better done privately rather than in a publicly listed form, and are moving with purpose to return capital to shareholders and find a better use for the Tidewater structure. This transition is the main basis of today’s discourse.

Tidewater has four remaining sets of investments, one of which, our stake in Merricks Capital Special Opportunity Fund Limited ( MEF ), will be distributed to shareholders in the near future pending the outcome of this meeting. I will touch briefly on the investments before enunciating what we hope to achieve over the next few months.

We are proposing to distribute our 1.935million MEF shares – worth around $1.5million at last night’s closing price – to shareholders on a 1-13 basis. The capital return equates to just under 6cents per Tidewater share. Some of you will end up with very small parcels of MEF shares; we are working with a stockbroker to provide a facility to sell these economically. I hope, however, that many of you will see that MEF is a well-run, unique LIC within the ASX universe of such companies, and trades at a significant discount to net asset backing. This may not change overnight, but neither will the diligence of the Manager to actively invest the capital within MEF. The Manager, Merricks Capital, has a significant stake in MEF on behalf of clients and the principals of their firm, so their money really is where their mouth is. I urge you to take a closer look and not just flip these shares out. I am, of course, the MEF Chairman, so have a vested interest.

I also chair two of Tidewater’s other investee companies. The largest of these is Adelaide Resources Limited ( ADN ) which has had a slightly frustrating past twelve months. In the year to 30 June 2011, ADN spent over $4.2million on exploration; in the past two years ADN has spent $7.5million on exploration compared to $9.3million in the decade before that. The expenditure in the past year produced excellent drilling results at ADN’s wholly owned Rover Gold-Copper Project, 85 kilometers from Tennant Creek, but was not reflected in the price of ADN’s securities. ADN’s net asset value, including the carried forward exploration spend, is over 14cents per share – far higher than the prevailing share price. Marrying these figures up – and more - is the KEY challenge for ADN’s Board over the next twelve months. ADN believes it has a number of corporate opportunities which will yield cumulative value to shareholders well ahead of the current share price, by unlocking some of the nascent tenement value we possess. These are not simple “asset sale” or “JV” type processes, since opportunities exist for tenement amalgamations and acquisitions in certain of ADN’s chosen areas. ADN held over $8.3million in cash as at 30 June 2011, or just under 6cents per share.

From March to May of this year, we saw an opportunity to acquire a significant stake in the “stub” of the previously substantial listed investment company, vanEyk Three Pillars Limited ( VTP ). Since that time, VTP has extinguished the external investment management contract and is currently undertaking an off-market share buy-back, which is most likely to reduce the issued capital by upwards of 40%. It is by no means certain, but likely that Tidewater will move close to a control position of a smaller investment company. At present, VTP is roughly 45% invested in an Australian equities index ETF and 55% in liquids. Since the tender process for the buy-back does not close until tomorrow, and the contractual process will not fully complete until 24 October 2011, we don’t know exactly what our new shareholding percentage will be. We have been approached by several parties seeking to buy our stake in VTP, but nothing concrete or acceptable has emerged. We are more than happy to retain this stake and will announce plans for our shareholding after the completion of the buy-back process.

We have a residual set of investments in the wine industry where the pleasure derived from the product is inversely proportional to the investment return. The wine investments are made up of three components:

• A 10.4% stake in a wine brand owner and distributor, the unlisted company, Cheviot Bridge Limited, which is carried in our books at 5c per share or $725,000;

• An 8.1% stake in Cheviot Kirribilly Vineyard Property Group ( CKP ), a stapled entity which owns six vineyards in South Australia, which is carried in our books at zero; and

• Ownership of the responsible entity and asset manager of CKP, which after elimination of inter-company accounts have an immaterial carrying value on consolidation.

The industry has dramatically changed as a result of declining grape prices, which impact on the latter two components, and a myriad of influences ranging from retailer consolidation to high currencies on the former. CKP has announced its intention to sell its vineyards, and has received some reasonable expressions of interest, which we hope to see made concrete in the near future. Once the vineyards are sold, we should be able to move on the process of wrapping up the two servicing entities. We believe Cheviot Bridge has a significant role to play in the inevitable consolidation of the wine industry given its annualised sales of 445,000 nine-litre equivalent cases.

We have virtually liquidated all non-strategic investments, though do have a residual stake in National Hire Limited, which was fortuitously subject to a very acceptable takeover offer by Seven Group Holdings after the year end. We have a small bank overdraft which can be easily serviced, and repaid in the future.

With numerous initiatives in place, but with confidentiality requirements, it is difficult to be as transparent as we would wish to be. However, our aim is to be able to announce further capital repayments of cash and/or shares later this financial year and complete the transition of Tidewater to a new business, to the maximum benefit of all shareholders. To give you some timing, and with all due respect, I don’t want to be at the AGM next year.