INVESTSMART GROUP LIMITED — Interim / Quarterly Report 2012

Feb 27, 2012

Merricks Capital Special Opportunity Fund Limited ABN 62 111 772 359

TO: COMPANY ANNOUNCEMENTS OFFICE

COMPANY: AUSTRALIAN STOCK EXCHANGE LIMITED

FROM: MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED

DATE: 28th FEBRUARY 2012

NO. OF PAGES TRANSMITTED INCLUDING COVER: 19

RE: 2011 HALF-YEAR RESULTS

In accordance with Listing Rule 4.2A, please find following the Half-Year Appendix 4D and Interim Financial Report for the half-year ended 31 December 2011.

It is recommended that these half-year reports be read in conjunction with the Annual Report for the year ending 30 June 2011 and any public announcements made by the company during the half-year.

Yours sincerely,

Company Secretary

Merricks Capital Special Opportunity Fund Limited ABN 62 111 772 359

APPENDIX 4D

HALF-YEAR REPORT PERIOD ENDED 31 DECEMBER 2011

(PREVIOUS CORRESPONDING PERIOD HALF-YEAR ENDED 31 DECEMBER 2010)

Merricks Capital Special Opportunity Fund Limited ABN 62 111 772 359

RESULTS FOR ANNOUNCEMENT TO THE MARKET HALF-YEAR ENDED 31 DECEMBER 2011

	2011	2010
	Half-Year	Half-Year	% Change	Up/Down
	$'000	$'000	Prior Period
Investment revenue from ordinary activities	605	598	1.17%	UP
Operating (loss)/profit before income tax	(4,670)	2,060	(326.70%)	DOWN
Operating (loss)/profit for the period	(3,258)	1,110	(393.51%)	DOWN
Total comprehensive (loss)/income for the
period	(3,258)	1,110	(393.51%)	DOWN
Net Tangible Assets per share - pre deferred
capital gains tax	$0.962	$1.113	(13.57%)	DOWN
Net Tangible Assets per share - post
deferred capital gains tax	$1.008	$1.103	(8.61%)	DOWN

DIVIDENDS

No dividend was declared subsequent to the half-year end.

Refer to the attached Directors commentary for explanation of the results. All the documents comprise the information required by ASX listing rule 4.2A.

This information should be read in tandem with the most recent financial report and monthly NTA releases lodged with ASX.

This Report is based on accounts which have been subject to independent review by the auditor, Ernst & Young.

MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED

ABN 62 111 772 359

Financial Report for the Half-Year ended

31 December 2011

MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED ABN 62 111 772 359 CONTENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

	Page
Portfolio Shareholdings as at 31 January 2012	2
Directors' Report to the Shareholders	3
Auditor's Independence Declaration	4
Statement of Comprehensive Income	5
Statement of Financial Position	6
Statement of Changes in Equity	7
Statement of Cash Flows	8
Notes to the Financial Statements	9-12
Directors' Declaration	13
Independent Review Report to the Shareholders	14

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MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED ABN 62 111 772 359 PORTFOLIO SHAREHOLDING AS AT 31 JANUARY 2012

SECURITY Loans Melbourne Water At Digital Harbour 990 La Trobe Syndication Financials ING Real Estate Entertainment Fund Materials Aziana Limited Aziana Limited Options Exp 30 Sept 13 Ex 0.25 Energy Molopo Energy Limited Straits Resources Limited Health Care Alchemia Limited Total equities and loans Cash (excludes operating accounts) TOTAL	Gross Market Value $ 1,055,658 6,133,047 3,444,785 78,000 6,600 511,266 13,529,404 1,051,983 25,810,743 425,510 26,236,253	% of portfolio 4.02% 23.38% 13.13% 0.30% 0.03% 1.95% 51.57% 4.01%
		98.38%
		1.62%
		100.00%

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MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED

ABN 62 111 772 359 DIRECTORS' REPORT TO THE SHAREHOLDERS FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

The directors present their report together with the financial report of Merricks Capital Special Opportunity Fund Limited ("the Company") for the halfyear ended 31 December 2011.

DIRECTORS

The names of the Directors who held office during or since the end of the half-year:

Period of Directorship Mr Andrew Brown (Chairman, Director) Commenced 22/12/2005 Mr John Reynolds (Non Executive Director) Commenced 30/06/2008 Mr Henry Adam Lindell (Director) Commenced 02/08/2010 Mr Adrian Redlich (Director) Commenced 02/08/2010

REVIEW OF OPERATIONS AND OPERATING RESULTS

The Company’s total comprehensive income for the half-year is a loss of $3,257,848 (2010: gain of $1,110,156) equivalent to loss 16.36 cents per share (2010: gain of 7.22 cents per share).

The net asset backing of the company’s shares, which includes 100% of the current market value of investments less capital gains tax, decreased 8.66% to $1.0075 (2010: $1.1030) at the 31[st] December, 2011.

No Interim dividend was declared during the period ended 31 December 2011.

AUDITOR’S INDEPENDENCE DECLARATION

The lead auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 4 for the half-year ended 31 December 2011.

This report is signed in accordance with a resolution of the Board of Directors.

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Andrew Brown Director

SYDNEY, this 28th day of February, 2012.

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Auditor’s Independence Declaration to the Directors of Merricks Capital Special Opportunity Fund Limited

In relation to our review of the financial report of Merricks Capital Special Opportunity Fund Limited for the half-year ended 31 December 2011, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

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Ernst & Young

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Jonathan Pye Partner Sydney 28 February 2012

Liability limited by a scheme approved under Professional Standards Legislation

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MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED ABN 62 111 772 359 STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

Notes Investment revenue 2 Expenses Administrative expenses Management fees Audit fees Company secretarial fees Directors' fees Share registry fees Legal fees ASX Listing fees Other Operating (loss)/profit before income tax Income tax expense Operating (loss)/profit for the period 5 Change in fair value of financial assets and liabilities at fair value through profit or loss Basic and diluted earnings per share (cents per shares) Total comprehensive (loss)/income for the period	Half-year ended 31 December 2011 $ 604,500 (28,854) (185,330) (43,810) (11,000) (36,850) (14,794) (4,253) (12,312) (32,003) (369,206) (4,905,072) (4,669,778) 1,411,930 (3,257,848) (3,257,848) (16.36 cents)	Half-year ended 31 December 2010 $ 598,062
		(29,084) (193,568) (20,604) (10,250) (36,850) (24,275) (7,584) (12,118) (42,018)
		(376,351) 1,838,318 2,060,029 (949,873)
		1,110,156
		1,110,156
		7.22 cents

This statement of comprehensive income should be read in conjunction with the notes to the financial statements which follow.

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MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED

ABN 62 111 772 359

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2011

Current assets Cash and cash equivalents Trade and other receivables Investments at market value Loans Prepayments Total current assets Non-current assets Loans Deferred tax assets Total non-current assets Total assets Current liabilities Trade and other payables Total current liabilities Non-current liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Retained earnings Total equity	31 December 2011 $ 590,893 12,689 19,030,339 7,049,328 41,352 26,724,601 - 2,191,679 2,191,679 28,916,280 89,497 89,497 195,521 195,521 285,018 28,631,262 28,629,952 1,310 28,631,262	30 June 2011 $ 3,205,861 142,585 21,878,307 - 9,680
		25,236,433
		6,133,047 708,094
		6,841,141
		32,077,574
		80,309
		80,309
		108,155
		108,155
		188,464
		31,889,110
		28,629,952 3,259,158
		31,889,110

This statement of financial position should be read in conjunction with the notes to the financial statements which follow.

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MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED

ABN 62 111 772 359

STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

Total equity as at 1 July 2010 Adjustment on adoption of revised AASB 9 Adjusted equity as at 1 July 2010 Shares bought back Total transactions with shareholders Profit for the period Total comprehensive (loss)/income for the period Total equity as at 31 December 2010 Total equity as at 1 July 2011 Loss for the period Total comprehensive (loss)/income for the period Total equity as at 31 December 2011	28,690,067 682,995 825,795 248,421 30,447,278 - (682,995) (825,795) 1,508,790 - Retained Earnings $ Total $ Investment portfolio revaluation reserve Realised capital profits reserve Share Capital $
	28,690,067 - - 1,757,211 30,447,278 (60,115) - - - (60,115)
	(60,115) - - - (60,115)
	- - - 1,110,156 1,110,156
	- - - 1,110,156 1,110,156
	28,629,952 - - 2,867,367 31,497,319
	28,629,952 - - 3,259,158 31,889,110
	- - - (3,257,848) (3,257,848)
	- - - (3,257,848) (3,257,848)
	28,629,952 - - 1,310 28,631,262

This statement of changes in equity should be read in conjunction with the notes to the financial statements which follow.

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MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED ABN 62 111 772 359 STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

Cash flows from operating activities Interest received Dividends received Investment manager's fees paid Other expenses paid Net cash flows (used in)/from operating activities Cash flows from investing activities Proceeds from sale of investments Purchase of investments Net cash flows (used in)/from investing activities Cash flows from financing activities On market buyback of shares Net cash used in financing activities Net (decrease)/increase in cash held Cash and cash equivalents at the beginning of period Effects of exchange rate fluctuations on cash and cash equivalents Cash and cash equivalents at end of the period	Half-year ended 31 December 2011 $ 52,338 - (190,625) (163,009) (301,296) 735,709 (3,081,455) (2,345,746) - - (2,647,042) 3,205,861 32,074 590,893	Half-year ended 31 December 2010 $ 390,012 423,428 (171,041) (236,765)
		405,634
		29,255,938 (12,352,505)
		16,903,433
		(60,115)
		(60,115)
		17,248,952 870,469 -
		18,119,421

The statement of cash flows should be read in conjunction with the notes to the financial statements which follow.

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MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED ABN 62 111 772 359

NOTES TO THE FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Accounting

The half-year financial statements are a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards including AASB 134: Interim Financial Reporting .

This interim financial report is intended to provide users with an update on the latest financial statements of Merricks Capital Special Opportunity Fund Limited. As such, it does not contain information that represents relatively insignificant changes occurring during the half-year.

It is recommended that this half-year financial report be read in conjunction with the Annual Financial Report for the year ended 30 June 2011 and any public announcements made by the company during the half-year in accordance with any continuous disclosure obligations arising under the Corporations Act 2001 .

The accounting policies and methods of computation have been consistently applied by the company and are consistent with those applied in the 30 June 2011 Annual Financial report, unless otherwise stated.

Reporting Basis and Conventions

The half-year financial report has been prepared on an accrual basis, and are based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.

Adoption of New and Revised Accounting Standards

The Company has adopted all of the new and revised standards and interpretations issued by the Australian Accounting Standards Board that are relevant to its operations and effective for the current reporting period.

The adoption of these new and revised standards and interpretations has resulted in changes to the presentation of the half year financial statements in the following areas:

(i) The Company has elected to early adopt Phase 1 of AASB 9 Financial Instruments from 1 July 2010. This new standard has been adopted because it includes requirements for the classification and measurement of financial assets which improve and simplify the approach when compared with the requirements of the previous Accounting Standard AASB 139 Financial Investments: Recognition and Measurement .

Investments in equity instruments, which were previously classified as available for sale financial assets, are from 1 July 2010 classified as equity instruments revalued through profit or loss. All gains and losses on equity instruments are recognised in the profit or loss including the tax effect thereof, which prior to the restatement were being taken to the other comprehensive income as previously required under AASB 139. Consequently, adoption of AASB 9 has no effect on the valuation of the Funds' net assets.

Opening balances of the prior period at 1 July 2010 have been restated as disclosed below to transfer the balance of investment portfolio revaluation reserve to retained earnings.

Statement of Financial Position, Statement of Comprehensive Income and income items, other than those mentioned below, were not affected by the adoption of AASB 9.

the adoption of AASB 9.
				Revaluation		Restated
		Balance		gains		balance
		1 July 2010		reclassified		1 July 2010
Investment portfolio revaluation reserve	$	682,995	$	(682,995)	$	-
Realised capital profits reserve	$	825,795	$	(825,795)	$	-
Retained earnings	$	248,421	$	1,508,790	$	1,757,211

Loans are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans have a fixed maturity and are measured at amortised cost less any impairment.

As a result of adoption of AASB 9 and the accounting policy change, the following adjustments were made to the financial statements:

As of 1 July 2010:

Decrease in investment portfolio revaluation reserve: $682,995 Decrease in realised capital profits reserve: $825,795

Increase in retained earnings: $1,508,790

As of and for the half-year ended 31 December 2010:

Increase in Change in fair value of financial assets and liabilities at fair value through profit or loss: $899,355 Decrease in Net realised (losses)/gains on Investment Portfolio: $1,864,147

Increase in Income Tax benefit/(expense) on Investment Portfolio: $946,711 Increase in Net unrealised losses on Investment Portfolio: $25,829 Decrease in Tax on unrealised losses on Investment Portfolio: $7,748 Decrease in Investment portfolio revaluation reserve: $196,160 Decrease in Realised capital profits reserve: $2,626,518 Increase in Retained earnings: $2,822,678

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MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED

ABN 62 111 772 359

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(a) Basis of Accounting (continued) Adoption of New and Revised Accounting Standards

(ii) Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective 1 January 2011)

In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures . It is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The revised standard removes the requirement for governments-related entities to disclose details of all transactions with the government and other governments-related entities and clarifies and simplifies the definition of a related party. The revised standard requires the Company to disclose any transactions between its subsidiaries and its associates. However, as the Company does not have any subsidiaries and associates, the amendment will not have any effect on the Company's financial statements.

With effect from 1 July 2011, the Company has adopted the revised Standards. No adjustments have been necessary as a result of applying the revised standard.

(iii) AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets (effective for annual reporting periods beginning on or after 1 July 2011)

In November 2010, the AASB issued AASB 2010-6 Disclosures on Transfers of Financial Assets which amends AASB 1 First-time Adoption of Australian Accounting and AASB 7 Financial Instruments: Disclosures to introduce additional disclosures in respect of risk exposures arising from transferred financial assets. The amendments will affect particularly entities that sell, factor, securitise, lend or otherwise transfer financial assets to other parties.

With effect from 1 July 2011, the Company has adopted the revised Standards. No adjustments have been necessary as a result of applying the revised rules.

(iv) Amendments to AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective for annual reporting periods beginning on or after 1 July 2010 / 1 January 2011)

(b) Investments at market value

The Company's investments are all measured at fair value through profit or loss in accordance with AASB 9: Financial Instruments . All its investments are listed equities, and their fair value is determined from the amount quoted on the primary exchange of the country of domicile. Changes in the fair value of investments are recognised in the Statement of Comprehensive Income.

Transaction costs directly attributable to the acquisition of investments are expensed in the Statement of Comprehensive Income as incurred.

Determination of Fair Value

Australian Accounting Standards defines fair value for the purpose of valuing holdings of securities that are listed or traded on an exchange to be based on quoted "bid" prices for securities prevailing at the close of business on the balance date.

(c) Foreign currency translation

Transactions in foreign currencies are translated into Australian Dollars at the foreign currency exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to Australian Dollars at the foreign currency closing exchange rate ruling at the statement of financial position date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to Australian dollars at the foreign currency closing exchange rates ruling at the dates that the values were determined.

Foreign currency exchange differences arising on translation and realised gains and losses on disposals or settlements of monetary assets and liabilities are recognised in the Statement of Comprehensive Income. Foreign currency exchange differences relating to investments at fair value through profit or loss and derivative financial instruments are included in gains and losses on investments and net gain/(loss) on derivatives, respectively. All other foreign currency exchange differences relating to monetary items, including cash and cash equivalents are presented separately in the Statement of Comprehensive Income.

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MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED ABN 62 111 772 359 NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d)

Taxation

The income tax expense/(benefit) for the period comprises current income tax expense/(benefit) and deferred tax expense/ (benefit).

Current income tax expense/ (benefit) charged to the profit or loss is the tax payable on taxable income calculated using the applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the half-year as well as unused tax losses.

Current and deferred income tax expense/ (benefit) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective assets and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

Additional income taxes that arises from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

INVESTMENT REVENUE Revenue from investment portfolio Dividends and Trust distributions received Interest Income	Half-year ended 31 December 2011 $ - 604,500 604,500	Half-year ended 31 December 2010 $ 213,690 384,372
		598,062

2. INVESTMENT REVENUE

3. SHARE CAPITAL

Another share buyback was announced to the market on 5 October 2011 to buy back 2,853,593 shares for the period of 12 months commencing 29 October 2011. During the reporting period, the Company did not elect to buyback ordinary shares under the share buy back plan (financial year 30 June 2011: 68,235).

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MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED

ABN 62 111 772 359 NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

4. DIVIDENDS PAID OR PROVIDED FOR

There were no dividends declared or paid during the half-year ended 31 December 2011 (2010: nil).

5. EARNINGS PER SHARE

	Half-year ended	Half-year ended
	31 December	31 December
	2011	2010
Basic and diluted earnings per share (cents per shares)
(including net realised gains/losses on investment portfolio)	(16.36 cents)	7.22 cents
Net profit/(loss) attributable to ordinary shareholders for basic
and diluted earnings per share calculations	(4,669,778)	2,060,029
Weighted average number of ordinary shares used in the
calculation of basic earnings per share	28,535,436	28,540,865
Weighted average number of ordinary shares used in the	28,535,436	28,540,865
calculation of diluted earnings per share

6. SEGMENT INFORMATION

The Company has only one reportable segment. The Company is engaged solely in investment activities conducted in Australia, deriving revenue from dividend income, interest income and from the sale of its investments.

7. CONTINGENT LIABILITIES

There are no contingent liabilities as at 31 December 2011.

8. SUBSEQUENT EVENTS

On 17 February 2012, the Company agreed to subscribe for 2,500,000 shares of Straits Resources Limited ("Straits") as part of an institutional placement by Straits at $0.60 per share. This further investment in Straits, at a cost of $1,500,000 is subject to ratification and approval by Straits shareholders at a meeting to held on 22 March 2012. The increased investment in Straits is being funded from cash resources and other portfolio sales.

No other matters or circumstances have arisen since the end of the reporting period which have significantly affected or may significantly affect the operations of the Company, the result of those operations of the state of affairs of the Company in subsequent financial periods.

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MERRICKS CAPITAL SPECIAL OPPORTUNITY FUND LIMITED ABN 62 111 772 359

DIRECTORS' DECLARATION

The directors’ of Merricks Capital Special Opportunity Fund Limited declare that:

1. The financial statements and notes, as set out on pages 5 to 12 are in accordance with the Corporations Act 2001 , including:

2. (a) complying with Accounting Standard AASB 134: Interim Financial Reporting and the Corporation Regulations 2001 ; and

3. (b) giving a true and fair view of the financial position of the Company as at 31[st] December 2011 and of its performance for the half-year ended on that date.

4. In the directors opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

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Andrew Brown Director

Dated at Sydney this 28th day of February, 2012

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To the members of Merricks Capital Special Opportunity Fund Limited

Report on the Condensed Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Merricks Capital Special Opportunity Fund Limited (the “Company”), which comprises the statement of financial position as at 31 December 2011, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the Company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls that the directors determine are necessary to enable the preparation of the condensed half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of Interim and other Financial Reports Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Company’s financial position as at 31 December 2011 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Merricks Capital Special Opportunity Fund Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 . We have given to the directors of the Company a written Auditor’s Independence Declaration, a copy of which is attached to the Directors’ Report.

Liability limited by a scheme approved under Professional Standards Legislation

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Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Merricks Capital Special Opportunity Fund Limited is not in accordance with the Corporations Act 2001 , including:

• a. giving a true and fair view of the Company’s financial position as at 31 December 2011 and of its performance for half-year ended on that date; and

• b. complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

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Ernst & Young

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Jonathan Pye Partner Sydney 28 February 2012

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