This matter relates to the deferred settlement of the repurchase of REPOS contracts which we have chased to title Sale and Repurchase Contracts. You will no doubt recall a significant number of contracts were honoured in 2009 and some more in early 2010, but since then there has been a backlog of contract settlements. This, in the main, has been caused by the restriction of a sizeable amount of money withheld in Cape Verde by the Reserve Bank. In October of this year I visited the offices of The President of Cape Verde Investments who acknowledged that, at that point, ARCK was owed approximately €1.4 Million which had been retained by the Reserve Bank but confirmed was due. Since that date, and without fail, he personally, has been sent an email by me and by our legal representatives each and every Monday morning requesting both and update and release of these funds. Only 1 reply has ever come forth and we are now considering our next move. This, in turn, has a direct effect on the CEPP investors as, without the Cape Verdean Government honouring their statements, we are reluctant to move to the next stage of the overall development plan of the hotel – this is something we have clearly stated and, in a time when elections are due ( January 2011), you would think the local mayor and the President would wish to be seen to be providing employment and inward investment to the country. We continue to pursue this route with vigour. Moving backwards in time, approximately two years ago now, ARCK LLP came across a potential method of capital raising which was via the securitisation and distribution of a series of Notes (Corporate Bonds) underpinned by a portfolio of Senior Life Settlement Policies. In the first instance any proceeds from this trade was going to be used by ARCK LLp for it’s own purposes but, in October 2009 we offered this trade up as a method buying interested parties out of their contracts and us taking over their liabilities. A large number of SARP holders took up this offer via the Deed of Assignment document. In July of 2009 this series of Notes was significantly funded via institutional means but there was a small shortfall. To try and close this transaction, and after consultation with the IFA community, we commissioned the creation of a Listed investment offer to subscribe the shortfall thus allowing the trade to close and the mechanism to fulfil its aims. Sadly, despite extensive marketing to both existing and new investors, this offer fell very short of subscription. Two main reasons were provided by intermediaries as to why, lack of commission despite a 5% initial plus a 0.5% per annum, and a term of 7 years which was perceived as too long. This offer was extended to 17th December 2010 but, to date, it remains well under subscribed and will be closed this coming Friday with subscriptions being repaid. Trying not to let this fail, and in our ongoing desire to assist in bringing this matter to an end, we worked closely with some consulting actuaries to bring out another offer which, we hoped, would be more successful. This was a 1 year offer paying a high return with reasonable commission and carrying guarantees. This offer, in the early weeks, was very successful and raised almost a third of the funds required. It has slowed somewhat but, from information provided, it is apparent the offer should be fully, or nearly fully subscribed just before or after the holiday period. From our perspective, if this offer is supported to the full, we have everything in place to move forward to a successful trade which will lead to an arbitrage value over and above that required to allow ARCK LLP to purchase out SARP contract holders if they so wish. The final subscription date will trigger the trade date and what is referred to as the ‘Ramp Up Period’ for the arbitrage to be made. If is from the arbitrage value that the funds are released to allow ARCK LLP to step into the contracts. As far as timings are concerned, this should happen within 14 to 21 days of trade. Therefore, if the offer is closed on say 1st January 2011, ARCK LLP should be in possession of some, if not all, of the funds required to turn on the taps of SARP repurchase. Again, as I say, current information from the IFA community is such that this offer should be in a position to close very soon leading to the above process. As the arbitrage value comes through, the SARP contracts will be our primary settlement objective. In respect of CEPP clients, the market is extremely different. When the CEPP’s were established money flows were very easy to obtain and there had not been a financial crisis. There has never been a defined date of repurchase of loan notes under this offer, only ever a target objective. We have seen recently how difficult it is to raise funds against a branded hotel in the UK, let alone a new build in a place such as Cape Verde. At this stage the best opportunity that is in place Is for ARCK LLP, through it’s capital raising program, to consider, if funds allow, to make an offer to share and loan note holders alike. The CEPP has honoured its obligations as it has ownership of a hotel on the islands of Cape Verde, it is just, at this moment, and entirely due to the World financial market, unable to obtain any form of regearing against this asset. The Directors of the CEPP continue to explore options for this funding but most routes appear very closed. In short, we are now in the hands of those intermediaries who have signed up to support our current revised offer to fully subscribe as soon as possible. Once this is complete we are able to move to closure and trade which should release sufficient funds, hopefully in mid to late January 20100, for the SARP Assignment process to take place. I hope this overall statement assists those IFA’s to confirm to their clients the latest position and that we can all look to a very happy conclusion in January. Kind regards Richard A Clay Managing Member ARCK LLP O: +44 (0) 115 968 2177 M: +44 (0) 7971 480316 Head Office: City Office: Westgate House Gallery 4 3 The Triangle Lloyds of London
