ARC FUNDS LIMITED — Interim / Quarterly Report 2012

Feb 28, 2012

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HALF YEARLY REPORT AND SALE OF SUBSIDIARIES

Tidewater Investments Limited and its controlled entities (“ Tidewater ” or “ the Company ”) has recorded a pretax loss of $639,365 for the six months to 31 December 2011 compared to a pre-tax profit of $1,082,091 for the six months to 31 December 2010.

The pre-tax loss can be broken down as follows:

	$000 impact	Notes
Adelaide Resources Limited (“ADN”) mark to market	(298)	24%declinefrom9.4centsto7.4cents between 30 June 2011 and31 December 2011
Cheviot Bridge Limited mark to market	(108)	Write-down from 5c per share to4.25cents
Distribution of Merricks Capital Special OpportunityFund shares	(139)	Decline in price from 82c at 30 June2011 to 74.75cents attributed priceof capital return
Gain on consolidation of Continuation investmentsLimited	52	Effectivemarktomarketfrom67.5cents at 30 June 2011 to NTA of71.4cents at 31 December 2011
Other miscellaneous investmentgains	98
Continuation Investments Limited result for two months	(25)	Before minorityinterests
Operating and other costs	(219)	Includes finance costs of $26,000 andlegal fees of$21,000
TOTAL	(639)	Before minorities of($11,000)

Sale of Subsidiary Companies

On Wednesday 29 February 2012, Tidewater has entered into two separate transactions which will assist in simplifying the Company in the future, further reducing operating costs and enhancing net asset value per share.

Firstly, Tidewater has sold its two funds management businesses, Tidewater Funds Management Limited and Tidewater Property Management Pty. Limited to Scunthorpe Holdings Pty. Limited ( SHPL ), a related entity of Andrew Brown, Tidewater’s Managing Director. The consideration for the businesses, being book value as at 28 February 2012, is mainly the assumption of promissory note liabilities, and falls below the threshold of transactions with persons in a position of influence under ASX Listing Rule 10.2. The business operations of the two funds management subsidiaries are expected to be brought to a conclusion, dependent upon the winding up of the trust component of Cheviot Kirribilly Vineyard Property Group, which is expected to be pursued in the next three months. During this period, SHPL has assumed the obligations of the existing service agreements entered into in November 2007 by Tidewater.

Tidewater Investments Limited ABN 52 001 746 710

phone: (02) 9380 9001

Suite 7.06, 14 Kings Cross Road, POTTS POINT NSW 2011 GPO Box 4870 SYDNEY NSW 2001

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Secondly, the Company has, through a corporate advisory group, reached a binding agreement to sell its entire shareholding in Continuation Investments Limited to a number of separate and unrelated investors. This transaction is slated for completion in the first week of March 2012.

Outlook

The two transactions entered into after 31 December 2011 will result in a highly simplified, lower cost company, with a net cash balance of over $650,000 after payment of all creditors and accruals, and remaining investments in ADN and Cheviot Bridge Limited. Unaudited net asset value per share for Tidewater as at 29 February 2012, based on management accounts and at the prevailing market price of ADN at 7.5 cents per share is 9.1 cents per share.

Tidewater has held a number of informal discussions with counterparties in respect of acquiring a significant new business for the Company and continues to review a number of investment and financial services business opportunities No potential transaction is yet at a sufficiently advanced stage to be capable of announcement to ASX.

For further information:

Andrew Brown

(02) 9380 9001 / 0418 215 255