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ARC Capital : ARCH – update on Orient Home and Funtalk

In December 2010 ARC Capital lent Orient Home Co Limited RMB480m ($79m) so that it could buy Orient Home Industrial Co. but, although “Orient Home Co failed to comply with the conditions precedent set out in the Agreement” which should have meant that the loan should have been repaid, it wasn’t.

In July 2013 ARC Capital was granted a property preservation order against Orient Home Co by
the Beijing First Immediate People’s Court (pictured) for RMB280m ($45.9m) and this is the value ARC uses in its accounts to value the loan.

ARC is now going after its investment manager – saying “the Investment Manager has been negligent and/or breached its investment management agreement with the Company”. The Board says it hopes the matter can be resolved without the need for litigation.

The ARC Board has also been in discussions about selling its holding in Funtalk but say that, to date, the terms for a disposal put forward by the investment manager have not been acceptable to the Board and the investment manager has not told the Board whether and, if so, on what terms the investment manager has sold its position in Funtalk.

Given the various conflicts of interest, the Board has asked Chris Gradel, a representative of the investment manager, to leave the Board.

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