Hastings Capital Limited ACN: (Receivers and Managers Appointed) (In Liquidation) ( HCL ) Update to Debenture holders

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1 Hastings Capital Limited ACN: (Receivers and Managers Appointed) (In Liquidation) ( HCL ) Update to Debenture holders We refer to our previous circulars to debenture holders and now provide you with a further update on the receivership of HCL. This update covers the following matters: Fourth interim repayment to debenture holders; Outstanding Director loans; Borrower update; and Further repayments to debenture holders and next steps. Fourth interim repayment to debenture holders Please find attached a cheque (in respect of each of your accounts with HCL) representing your entitlement to the fourth interim repayment to debenture holders calculated at the rate of 7.5 cents in the dollar on your total investment balance as at 20 August 2008 (the date of our appointment as Receivers and Managers). As with previous payments and in accordance with the class ruling issued by the Australian Taxation Office on 30 September 2009, this distribution represents a repayment of principal. Outstanding Director loans As previously reported, as at the date of our appointment, HCL was owed approximately $1.2 million in respect of loans advanced to its Directors; Mark Kovac, Charlie Nakamura and Alexander Garrow. An update on each loan is as follows: Mark Kovac ($680,000): HCL obtained judgement from the District Court of New South Wales against Mr Kovac for the full amount outstanding plus interest and costs. Further to ongoing dialogue with Mr Kovac in relation to the repayment of his loan, on 22 March 2010, we received notification from Mr Kovac of his intention to file a debtors petition for his bankruptcy. In the event that Mr Kovac becomes bankrupt, we will liaise with his Trustee in bankruptcy in relation to the recovery of the loan. Charlie Nakamura ($340,000): Legal proceedings have been commenced in the District Court of New South Wales against Mr Nakamura in relation to his outstanding loan. We will keep debenture holders informed of any developments. Alexander Garrow ($150,000): Mr Garrow has settled his outstanding indebtedness to HCL. 1

2 Borrower update As at the date of our appointment, HCL was owed approximately $33 million by seven borrowers secured by seven properties. These loans were guaranteed by 15 individual guarantors. As previously reported, each of HCL s loans were in default at the time of our appointment or shortly thereafter. Since our appointment we have: Realised four underlying security properties; and Obtained either judgement (including default judgement) or ceased proceedings (due to bankruptcy) in respect of 13 of the 15 loan guarantors. A summary of the status of each loan/security property is attached as Annexure A hereto. Further detail on developments since our last circular (for those properties that had not been realised at the time of our last circular) follows below. Scarborough property At the time of our appointment, a conditional sale contract had been exchanged for the sale of this property. The sale did not complete and we subsequently afforded the borrower approximately 9 months to procure a repayment proposal or refinance of HCL s facility. The borrower was unable to procure a repayment proposal and subsequently HCL took possession of the property and offered it for sale by tender in May Following an unsuccessful sale by tender process, the property was offered for sale by private treaty. The property was sold on 21 December 2009 for $4.84 million (inclusive of GST). HCL has filed and served a Statement of Claim against the loan guarantor in respect of the shortfall to HCL of circa $4.5 million. The matter is listed for further directions on 20 April Elermore Vale property This security property was a partially completed construction project in Newcastle, NSW. Following the insolvency of the incumbent builder, HCL sought quotes for the costs to complete construction from a number of alternative builders. The quotes received indicated a significant escalation in costs. Further to considering the feasibility of completing construction and having regard to significant interest shown by parties wishing to purchase the property on an as is basis, the property was offered for sale by public tender in December Contracts for the sale of the property were exchanged on 23 December 2009 and settlement subsequently occurred on 17 February The sale price was $2.7million (inclusive of GST). HCL has obtained judgment against the three loan guarantors. One of the guarantors is bankrupt and we are in dialogue with the remaining guarantors in relation to repayment proposals. 2

3 Calliope property This property has suffered a significant decline in value due to property market conditions in North Queensland. Accordingly, the property has not been offered for sale to date. One of the loan guarantors has offered a repayment proposal which requires the release of HCL s mortgage over the property. In order to properly consider the repayment proposal (as against the market value of the property), we will be offering the property for sale by public tender. There are two loan guarantors in respect of this loan. One of the guarantors is bankrupt (following the filing of a debtor s petition) and we have commenced legal action against the other guarantor. Erowal Bay property This property has a range of zoning and development restrictions rendering a sale of the property difficult at this time. We are continuing to liaise with town planners on strategies to maximise the value of the property. Valuation advice received subsequent to our appointment indicates that the valuation obtained by HCL in support of its advances to this borrower was significantly overstated. We are continuing to investigate the circumstances giving rise to this loan including whether action should be taken against the incumbent valuer or any other parties. We have obtained judgement against the loan guarantor and are now taking steps to petition for the guarantor s bankruptcy. Gosford property This property has suffered a significant decline in value due to general market conditions in the Central Coast area. We do not intend to offer the property for sale until there is an improvement in market conditions. In the meantime, legal action has been commenced against the loan guarantor. Further repayments to debenture holders and next steps Since our appointment as Receivers of HCL approximately 18 months ago, we have made four repayments to debenture holders totalling 28.5 cents in the dollar. Key decisions throughout the course of the receivership have been made in close consultation with the Trustee. Further repayments will be made as additional loan recoveries occur/security properties are realised. Debenture holders should note that the remaining security properties (Calliope, Gosford and Erowal Bay) have suffered the most significant decline in value and accordingly, these properties may have to be held for some time to avoid substantial losses to HCL and debenture holders. We will keep debenture holders informed of further developments in the receivership and continue to liaise closely with the Trustee going forward. 3

4 Should you wish to discuss any aspects of the above, please do not hesitate to contact the Receivers Debenture holder liaison representative, Mr Mitchell Mansfield on (02) or Dated 7 April 2010 Joseph Hayes Receiver and Manager 4

5 Hastings Capital Limited ACN ( HCL ) (Receivers and Managers Appointed) (In Liquidation) Summary of underlying security properties Underlying security Description property Gosford, NSW Four parcels of cleared land totaling 2,958 square metres. Development approval for 30 residential units. Construction has not commenced. Calliope, QLD 20 hectares of land with development approval for 109 residential lots in 3 stages and a 219 site mobile park. Sub-division works for initial stage at 17% completion. Erowal Bay, NSW Englobo land. Consists of 288 lots on separate titles. No development approval granted. "Annexure A" Borrower in Current status default? Yes Default notices issued against the borrower and guarantor. Statement of Claim issued against the guarantor. Matter is listed for directions on 30 April Due to significant decline in Central Coast property prices, this property will be 'held' until market conditions improve. Yes Default notices issued against the borrower and guarantors. Statement of Claim issued against the guarantors. Taken possession of the property. Agents' submissions being sought for the marketing and sale of the underlying security property in order to assess repayment proposal procured by guarantor. Yes Default judgement obtained against the guarantor. Creditor's petition filed. Trustee in Bankruptcy to be appointed to investigate the guarantor's affairs. Considering action against valuer and other parties. Scarborough, WA 3 level, dilapidated residential unit building comprising 15 apartments. Development approval granted for 8 storey apartment building. Yes Property sold on 21 December 2009 for $4.84 million (incl GST). Judgement being sought against the guarantor. Elermore Vale, NSW Burradoo, NSW Woorim, QLD 17 residential townhouses. Approximately 85% complete. 6 detached strata villas of 3 and 4 bedrooms. HCL was mortgagee in possession. Yes Property sold on 17 February 2010 for $2.7 million (incl GST). Pursuing guarantors for loan shortfall. Yes Villas sold at auction on 6 January 2009 for $2.1 million. Liaising with guarantor's Trustee in bankruptcy concerning claims for shortfall. Completed 4 level, 29 apartment building. n/a Loan balance (inclusive of interest and default management fees) recovered in full.