ARC FUNDS LIMITED — M&A Activity 2008

Oct 1, 2008

EQUITIES & FREEHOLDS

TAKEOVER OFFER FOR FIRST OPPORTUNITY FUND LIMITED

Equities and Freeholds Limited ( EQF or Bidder ) is today announcing its intention to make a takeover offer for all of the issued shares (each a FOF Share ) of First Opportunity Fund Limited ( FOF or Company ). EQF will offer 11 of its own shares (each an EQF Share ) for every 10 FOF Shares ( Offer ).

Valuation Parameters

The Directors of EQF estimate the net tangible asset backing ( NTA ) per EQF Share at the close of business on Wednesday 1 October to be 54 cents. Accordingly, at this NTA per EQF share, EQF is offering the equivalent of 59.4 cents per FOF Share, representing an 18.8% premium to the last sale price on 26 September 2008 of FOF Shares at 50 cents.

The Directors note that due to the geared nature of EQF’s portfolio, and short term equity market volatility, EQF’s NTA may move significantly during the Bid period.

Background to EQF

EQF is an 86.3% owned subsidiary of Tidewater Investments Limited ( Tidewater ). Tidewater, through its wholly owned subsidiary Loftus Lane Investments Pty. Limited ( Loftus ), is also the largest individual shareholder in FOF, with an interest in 2,069,918 shares or 20.46% of FOF’s issued capital.

EQF is a small, internally managed ASX listed investment company ( LIC ) which has a specific focus on investee companies that trade at a significant discount to net asset value. EQF’s Directors believe there are many opportunities in this area and to date have made 37 investments across eight asset class areas: A‐REITs, property companies and property securities funds; Australian equity LICs; financial operating companies; global equities LICs; hedge funds & funds of hedge funds; LIC and management company investments; private equity LICs and Exchange Traded Funds. EQF uses gearing within its portfolio, with debt currently equivalent to approximately 33% of total assets.

Conditions of Offer

The Offer is not subject to any minimum acceptance condition, but is subject to the usual conditions in relation to material acquisitions and disposals, prescribed occurrences and adverse change in financial condition. The detailed terms of these conditions are outlined in Appendix “A” of this release.

EQUITIES & FREEHOLDS LIMITED phone: (02) 8258 0000 ABN 48 111 695 357

fax: (02) 9230 0922 admin@tidewater.com.au

Level 4, 34 Hunter Street SYDNEY NSW 2000 GPO Box 4870 SYDNEY NSW 2001

EQUITIES & FREEHOLDS

Other Issues

In the event that EQF acquires control of FOF, arrangements will be made to conclude the existing management contract with Investec Wentworth Private Equity Limited, and re‐deploy FOF’s cash reserves to EQF’s investment strategy. The Directors of EQF will also sympathetically analyse the ongoing benefits of retaining FOF’s existing investments in Monarch Winemaking Services Pty. Limited, Monarch Trading Pty. Limited and King Valley Wines Pty. Limited.

In this respect, the EQF Directors believe that FOF can benefit from the knowledge and association with Tidewater Property Management Pty. Limited and Tidewater Funds Management Limited, two wholly owned subsidiaries of Tidewater, who are respectively the asset manager and responsible entity of the ASX listed stapled entity, Cheviot Kirribilly Vineyard Property Group.

A separate arrangement to acquire and extinguish the unlisted options in FOF held by First Capital Partners Pty. Limited will be sought.

EQF has appointed Addisons as its legal advisors.

For further information:

Andrew Brown Chairman (02) 8258 0011 / 0418 215 255

2 October 2008

EQUITIES & FREEHOLDS

Annexure A ‐ Conditions

The offer ( Offer ) by Equities and Freeholds Limited ABN 48 111 695 357 ( Bidder ) under the takeover bid for all of the shares (each an FOF Share ) in the issued capital of First Opportunity Fund Limited ( FOF or Company ) will be subject only to conditions substantially on the terms set out below.

1. No prescribed occurrences

None of the following events happens during the period beginning on the date the Bidder's Statement is given to the Company and ending at the end of the offer period, as described in the Bidders’ Statement ( Offer Period ):

• a) the Company converts all or any of its shares into a larger or smaller number of shares;

• b) the Company or a subsidiary of the Company resolves to reduce its share capital in any way;

• c) the Company or a subsidiary of the Company:

• i. enters into a buy‐back agreement; or

• ii. resolves to approve the terms of a buy‐back agreement under section 257C(1) or 257D(1) of the Corporations Act;

• d) the Company or a subsidiary of the Company issues shares or grants an option over its shares, or agrees to make such an issue or grant such an option;

• e) First Capital Partners Pty. Limited disposes of or transfers any of the existing 2,000,000 options issued by the Company that are outstanding with a strike price of $0.60 per FOF Share, expiring on 22 July 2010 ( FOF Options ) other than by agreement with the Bidder;

• f) First Capital Partners Pty. Limited, a nominee or transferee exercises any of the FOF Options other than by agreement with the Bidder;

• g) the Company or a subsidiary of the Company issues, or agrees to issue, convertible notes;

• h) the Company or a subsidiary of the Company disposes, or agrees to dispose, of the whole, or a substantial part, of its business or property;

• i) the Company or a subsidiary of the Company charges, or agrees to charge, the whole, or a substantial part, of its business or property;

• j) the Company or a subsidiary of the Company resolves to be wound up;

• k) a liquidator or provisional liquidator of the Company or of a subsidiary of the Company is appointed;

• l) a court makes an order for the winding up of the Company or of a subsidiary of the Company;

• m) an administrator of the Company, or of a subsidiary of the Company, is appointed under section 436A, 436B or 436C of the Corporations Act;

• n) the Company or a subsidiary of the Company executes a deed of company arrangement; or

• o) a receiver, or a receiver and manager, is appointed in relation to the whole, or a substantial part, of the property of the Company or of a subsidiary of the Company.

EQUITIES & FREEHOLDS

2. No prescribed occurrences between announcement and service

None of the events listed in paragraphs 1(a) to (o) (inclusive) happens during the period beginning on the date of announcement of the Offer ( Announcement Date ) and ending at the end of the day before the Bidder's Statement is given to the Company.

3. No action by Public Authority adversely affecting the Takeover Bid

During the Condition Period:

• (a) there is not in effect any preliminary or final decision, order or decree issued by a Public Authority;

• (b) no action or investigation is instituted, or threatened by any Public Authority with respect to the Company or any subsidiary of the Company; and

• (c) no application is made to any Public Authority (other than an application by the Bidder or any company within the Bidder Group, under section 657G of the Corporations Act, or an application commenced by a person specified in section 659B(1) of the Corporations Act in relation to the Takeover Bid),

in consequence of, or in conjunction with, the Takeover Bid, which restrains or prohibits, or threatens to restrain or prohibit, or may otherwise materially adversely affect, the making of the Takeover Bid or seeks to require the divestiture by the Bidder of any FOF Shares, or the divestiture of any assets by FOF or by any subsidiary of FOF or by any company within the Bidder Group.

4. Approvals by Public Authorities

During the Condition Period, the Bidder receives all approvals which are required by law or by any Public Authority:

• (a) to permit the Offer to be made to and accepted by FOF shareholders; or

• (b) as a result of the Offer or the acquisition of FOF Shares by the Bidder or any related body corporate of the Bidder, and which are necessary for the continued operation of the business of FOF and its subsidiaries or of the Bidder and its subsidiaries,

and those approvals:

• (c) are on an unconditional basis;

• (d) remain in force in all respects; and

• (e) no notice or indication of intention to revoke, suspend, restrict, modify or not renew any of those approvals is issued or threatened to be issued by or on behalf of any Public Authority.

5. No material acquisitions, disposals, etc

Except for any proposed transaction publicly announced by the Company before the Announcement Date and any transaction undertaken by FOF or any subsidiary of FOF in its ordinary course of business, none of the following events occur during the period from the Announcement Date to the end of the Offer Period without the written consent of Bidder:

• (a) FOF, or any subsidiary of FOF, acquires, offers to acquire or agrees to acquire one or more companies or assets (or an interest in one or more companies or assets) for an amount of consideration that is in aggregate equal to or greater than $500,000 or makes, or is obliged or required to make, an announcement about such an acquisition;

EQUITIES & FREEHOLDS

• (b) FOF, or any subsidiary of FOF, disposes, offers to dispose or agrees to dispose of one or more companies or assets (or an interest in one or more companies or assets) for an amount of consideration that is in aggregate equal to or greater than $500,000 or makes, or is obliged or required to make, an announcement about such a disposal;

• (c) FOF, or any subsidiary of FOF, enters into, offers to enter into or announces that it proposes to enter into any joint venture or partnership involving a current or future commitment that is equal to or greater than $500,000 or makes, or is obliged or required to make, an announcement about such a commitment; or

• (d) FOF, or any subsidiary of FOF, incurs or commits to, or grants to another person a right the exercise of which would involve FOF or any subsidiary of FOF incurring or committing to any capital expenditure or liability for one or more related items that is equal to or greater than $500,000 or makes, or is obliged or required to make, an announcement about such a commitment.

6. No material failings in filings

The Bidder does not become aware, during the Condition Period, that any document filed by or on behalf of the Company with ASX or ASIC contains a statement which is incorrect or misleading in any material particular or from which there is a material omission.

7. No break/inducement fees

• (a) Subject to Section 9(b), during the Condition Period none of FOF, and any body corporate which is or becomes a subsidiary of FOF, pays or provides or agrees (whether conditionally or contingently) to pay or provide any benefit to any person, or foregoes or otherwise reduces any payment or benefit or agrees to forgo or reduce any payment or benefit to which it would otherwise be entitled, in connection with any person making or agreeing to participate in, or enter into negotiations concerning:

• i. a takeover offer for FOF or any body corporate which is or becomes a subsidiary of FOF; or

• ii any other proposal to acquire any interest (whether equitable, legal, beneficial or economic) in shares in, or assets of, FOF or any body corporate which is or becomes a subsidiary of FOF, or to operate FOF as a single economic entity with another body corporate.

• (b) Section 7(a) does not apply to a payment, benefit or agreement:

• i for providing professional advisory services to FOF;

• ii which is made in the ordinary course of business of FOF or any subsidiary of FOF and that is not in excess of $50,000;

• iii which is approved by a resolution passed at a general meeting of FOF; or

• iv which is made to, provided to, owed by or made with the Bidder.

8. Non‐existence of certain rights

No person has or will acquire any right (whether contingent, subject to conditions or not) as a result of the Bidder acquiring FOF Shares to:

• (a) acquire, or require FOF or a subsidiary of FOF to dispose of, or offer to dispose of, any material asset of FOF or a subsidiary of FOF; or

• (b) terminate or vary any material agreement with FOF or a subsidiary of FOF.

EQUITIES & FREEHOLDS

9. Conduct FOF's business

During the Condition Period, none of FOF, or any body corporate which is or becomes a subsidiary of FOF, without the written consent of the Bidder:

• (a) declares, or distributes any dividend, bonus or other share of its profits or assets;

• (b) issues or grants options over, or agrees to issue or grant options over, or otherwise makes any commitments regarding any shares or other securities, or alters its capital structure or the rights attached to any of its shares or other securities, or issues or agrees to issue any convertible notes;

• (c) passes any special resolution, including without limitation any special resolution that has the effect or intent of makes any changes in or to FOF’s constitution or the constitution of any subsidiary of FOF;

• (d) gives or agrees to give any Encumbrance over any of its assets otherwise than in the ordinary course of business or securing indebtedness that is in excess of $100,000;

• (e) borrows or agrees to borrow any money (except for temporary borrowing from its bankers in the ordinary course of business or that is less than $100,000);

• (f) releases, discharges or modifies any obligation to it of any person, firm or corporation or agrees to do so otherwise than in the ordinary course of business or which obligation is in excess of $100,000;

• (g) has appointed any additional director to its board of directors whether to fill a casual vacancy or otherwise;

• (h) enters into, modifies, varies or extends any agreement with any person for the provision of management services to FOF or any subsidiary of the FOF;

• (i) enters or agrees to enter into any contract of service or varies or agrees to vary any existing contract of service with any director or manager, or pays or agrees to pay any retirement benefit or allowance to any director, manager or other employee, or makes or agrees to make any substantial change in the basis or amount of remuneration of any director, manager or other employee (except as required by law or provided under any superannuation, provident or retirement scheme as in effect on the Announcement Date);

• (j) conducts its business otherwise than in the ordinary course of its business;

• (k) has threatened or commenced against it any material claims or proceedings in any court or tribunal (including a petition for winding up or an application for appointment of a receiver or receiver and manager); or

• (l) executes a deed of company arrangement or passes any resolution for liquidation, or has appointed or becomes susceptible to the appointment of an administrator, a receiver, a receiver and manager or a liquidator, or becomes subject to investigation under the Australian Securities and Investments Commission Act 2001 (Cth) or any corresponding legislation.

10. No force majeure event

During the Condition Period no act of war (whether declared or not) or terrorism, mobilisation of armed forces, civil commotion or labour disturbance, fire or natural disaster, or other event beyond the control of FOF or the relevant subsidiary of FOF occurs which has or is likely to have a materially adverse effect on the assets, liabilities, financial position, performance, profitability or prospects of FOF and its subsidiaries taken as a whole or of any of them.

EQUITIES & FREEHOLDS

11. No material adverse change to the Company

During the Condition Period, no change occurs, is discovered or becomes public which has or could reasonably be expected to have a materially adverse effect on the assets, liabilities, financial position, performance, profitability or prospects of FOF and its subsidiaries taken as a whole or of any of them including:

• (a) any creditor demanding repayment of a debt of $250,000 or more;

• (b) the Target or a subsidiary of the Target entering into an agreement (including an option agreement) in relation to acquiring or disposing of assets the price or aggregate unencumbered value of which is $500,000 or more; or

• (c) any person having, as a result of the Bidder acquiring FOF Shares, the right (which may be subject to conditions) to:

• i. acquire, or require FOF or a subsidiary of FOF to dispose of, or offer to dispose of, any asset of FOF or a subsidiary of FOF; or

• ii. terminate any agreement with FOF or a subsidiary of FOF.

12. Definitions

The following definitions apply in the conditions set out above:

Announcement Date means 29 September 2008.

Bidder Group means Bidder and each of its related bodies corporate.

Bidder’s Statement means the Bidder’s statement for the Takeover Bid.

Company means First Opportunity Fund Limited ABN 96 084 115 499.

Company Shares means the ordinary shares in the capital of the Company.

Condition Period means the period beginning on the Announcement Date and ending on and including the last day of the Offer Period.

Encumbrance means:

• (a) a mortgage, charge, pledge, lien, hypothecation or a title retention arrangement;

• (b) a notice under section 255 of the Income Tax Assessment Act 1936 (Cth), subdivision 260‐A in schedule 1 to the Taxation Administration Act 1953 (Cth) or any similar legislation;

• (c) any other interest in or right over property (including a right to set off or withhold payment of a deposit or other money);

• (d) any other thing that prevents, restricts or delays the exercise of a right over property, the use of property or the registration of an interest in or dealing with property; or

• (e) an agreement to create anything referred to above or to allow any of them to exist.

Offer means each offer to be made by the Bidder for any of all of the FOF Shares and includes a reference to any offer as varied in accordance with the provisions of the Corporations Act.

Offer Period mean the period during which the Offer is open for acceptance.

EQUITIES & FREEHOLDS

Public Authority means any government or any governmental, semi‐governmental, administrative, statutory or judicial entity, authority or agency, whether in Australia or elsewhere, including the Australian Consumer and Competition Commission (but excluding the Takeovers Panel, ASIC and any court that hears or determines proceedings under section 657G of the Corporations Act or proceedings commenced by a person specified in section 659B(1) of the Corporations Act in relation to the Takeover Bid). It also includes any self‐regulatory organisation established under statute or any stock exchange.

Takeover Bid means the takeover bid constituted by the Offers.