RHG Scheme Booklet - ASX · 07/11/2013 · Page 1 of 1 RHG Limited Level 6, 222 Pitt Street SYDNEY NSW 2000 T: +61 2 8028 2333 F: +61 2 9252 0311 RHG Scheme Booklet Further to RHG

ABN 22 055 136 564 ASX CODE: RHG FOR IMMEDIATE RELEASE TO MARKET

7 November 2013

Page 1 of 1

RHG Limited

Level 6, 222 Pitt Street SYDNEY NSW 2000 T: +61 2 8028 2333 F: +61 2 9252 0311

www.rhgl.com.au

RHG Scheme Booklet Further to RHG Limited's release to ASX earlier today, attached is a copy of the Scheme Booklet to be despatched to RHG Shareholders for the Scheme Meeting and the General Meeting. RHG Shareholders should read the Scheme Booklet and the materials accompanying it in their entirety before making a decision on how to vote on the resolutions to be considered at the Scheme Meeting and the General Meeting. For any enquiries about the Scheme, the Scheme Meeting, the General Meeting or voting instructions, please call the RHG Registry on 1300 389 054 (within Australia) or +61 3 9415 4041 (outside Australia) (Monday to Friday 9.00am – 5.00pm (Sydney time)). Media enquiries For media enquiries, please contact: David Symons (+61 410 559 184)

For

per

sona

l use

onl

y

This is an important document and requires your immediate attention.

You should read it carefully and in its entirety before deciding whether or not to vote in favour of the Scheme and the Financial Assistance Resolution.

If you are in any doubt as to what you should do, you should consult your broker, financial adviser or legal adviser immediately.

Scheme Booklet

RHG Limited ABN 22 055 136 564

In relation to a proposal from Australian Mortgage Acquisition Company Pty Limited (AMAC), backed by a guarantee from Resimac Limited (Resimac), to acquire all the ordinary shares in RHG Limited (RHG).

The RHG Directors unanimously recommend that you vote in favour of the Scheme and the Financial Assistance Resolution:

• in the absence of a Superior Proposal; and

• subject to the Independent Expert, who has concluded that the Scheme is in the best interests of RHG Shareholders, maintaining that conclusion.

Each RHG Director intends to vote the RHG Shares they own or control in favour of the Scheme and the Financial Assistance Resolution, subject to the same conditions as their recommendation above.

A Notice of Scheme Meeting is included as Annexure E, a Notice of General Meeting with respect to the Financial Assistance Resolution is included as Annexure F, and a Proxy Form for the Scheme Meeting and General Meeting accompanies this Scheme Booklet.

The Scheme Meeting and the General Meeting will be held at or around the same time commencing at 10.00am (Sydney time) on 18 December 2013 at the Wesley Conference Centre, 220 Pitt Street, Sydney NSW 2000 (unless postponed or adjourned).

FINANCIAL ADVISER AUSTRALIAN LEGAL ADVISER

For

per

sona

l use

onl

y

If you have any questions, about the Scheme, the Meetings or voting instructions, please call the RHG Registry on 1300 389 054 (within Australia) or +61 3 9415 4041 (outside Australia) (Monday to Friday 9.00am – 5.00pm (Sydney time)). For any other queries, please contact your broker or other professional advisers.

RHG registered office Level 6 222 Pitt Street Sydney NSW 2000 RHG Registry Computershare Investor Services Pty Limited Level 4 60 Carrington Street Sydney NSW 2000

For

per

sona

l use

onl

y

Important notices

Nature of this document

This Scheme Booklet provides RHG Shareholders with information about the proposed Acquisition.

If you have sold all of your RHG Shares, please ignore this Scheme Booklet.

Regulatory information

This Scheme Booklet is the explanatory statement for the proposed scheme of arrangement between RHG and the Scheme Participants as at the Scheme Record Date for the purposes of section 412(1) of the Corporations Act. A copy of the proposed Scheme is included in this Scheme Booklet as Annexure C.

A copy of this Scheme Booklet was provided to ASIC for examination in accordance with section 411(2)(b) of the Corporations Act, and was lodged with ASIC for registration under section 412(6) of the Corporations Act. It was then registered by ASIC under section 412(6) of the Corporations Act before being sent to RHG Shareholders.

ASIC has been requested to provide a statement in accordance with section 411(17)(b) of the Corporations Act that ASIC has no objection to the Scheme. If ASIC provides that statement, it will be produced to the Court at the time of the Second Court Hearing to approve the Scheme. Neither ASIC nor any of its officers takes any responsibility for the contents of this Scheme Booklet.

A copy of this Scheme Booklet has been provided to ASX. Neither ASX nor any of its officers takes any responsibility for the contents of this Scheme Booklet.

Important notice associated with Court order under section 411(1) of the Corporations Act

The fact that under subsection 411(1) of the Corporations Act the Court has ordered that a meeting be convened and has approved the explanatory statement required to accompany the notices of the meeting does not mean that the Court:

• has formed any view as to the merits of the proposed Scheme or as to how members should vote (on this matter members must reach their own decision); or

• has prepared, or is responsible for, the content of the explanatory statement.

Responsibility for information

Other than as described below, RHG has been responsible for preparing this Scheme Booklet. AMAC and Resimac (collectively, the Resimac Syndicate) and their respective directors and officers do not assume any responsibility for the accuracy or completeness of this Scheme Booklet, except that:

• AMAC and Resimac have each individually been solely responsible for preparing AMAC Information and Resimac Information, respectively. RHG and its directors and officers do not assume any responsibility for the accuracy or completeness of any AMAC Information or Resimac Information, except to the extent that RHG has provided the Resimac Syndicate with information for the purpose of the Resimac Syndicate preparing information on the acquired entity following implementation of the Scheme.

1

For

per

sona

l use

onl

y

• Deloitte Corporate Finance Pty Limited (Deloitte) has prepared the Independent Expert’s Report in relation to the Scheme and takes responsibility for that report. The Independent Expert’s Report is set out in Annexure A.

Information in this Scheme Booklet in relation to the Financial Assistance Resolution has been prepared on the basis of information and representations provided to RHG by the Resimac Syndicate.

Forward looking information

Certain statements in this Scheme Booklet are about the future.

RHG Shareholders should be aware that there are risks (both known and unknown), uncertainties, assumptions and other important factors that could cause the actual conduct, results, performance or achievements of RHG to be materially different from the future conduct, results, performance or achievements expressed or implied by such statements or that could cause the future conduct, results, performance or achievements to be materially different from historical conduct, results, performance or achievements.

These risks, uncertainties, assumptions and other important factors include, among other things, the risks set out in Sections 5.4 and 6.7.

None of the RHG Group or AMAC or Resimac, nor any of their directors, officers or advisers, or any other person gives any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward looking statements in this Scheme Booklet will actually occur.

RHG Shareholders are cautioned about relying on any such forward looking statements. The forward looking statements in this Scheme Booklet reflect views held only as at the date of this Scheme Booklet. Additionally, statements of the intentions of the Resimac Syndicate reflect present intentions as at the date of this Scheme Booklet and may be subject to change.

Subject to the Corporations Act and any other applicable laws, the RHG Group, AMAC and Resimac each disclaim any duty to update any forward looking statements other than with respect to information that they become aware of prior to the Scheme Meeting and the General Meeting which is material to the making of a decision regarding whether or not to vote in favour of the Scheme and the Financial Assistance Resolution.

Not investment advice

This Scheme Booklet does not take into account the investment objectives, financial situation, tax position or particular needs of any RHG Shareholder or any other person. This Scheme Booklet should not be relied upon as the sole basis for any decision in relation to RHG Shares or any other securities. RHG Shareholders should seek independent advice before making any decision regarding the Scheme or their RHG Shares.

Privacy

The RHG Group and the Resimac Syndicate may collect personal information in the process of implementing the Scheme. This information includes your name, contact details, information on your shareholding in RHG and the name of persons appointed by you to act as a proxy, attorney or corporate representative at the Scheme Meeting. The primary purpose of the collection of personal information is to assist RHG and the Resimac Syndicate to conduct the Scheme Meeting and implement the Scheme. Personal information of the type described above may be disclosed to the RHG Registry, print and mail service providers, authorised securities brokers and Related Bodies Corporate and advisers of RHG, AMAC and Resimac. RHG Shareholders have certain rights to access personal information that has been collected. If you would like to obtain details of information about you held by RHG, please contact the RHG Registry on 1300 389 054 (within Australia) or +61 3 9415 4041 (outside Australia) (Monday to Friday 9.00am - 5.00pm (Sydney time)).

2

For

per

sona

l use

onl

y

Defined terms and interpretation

A number of defined terms are used in this Scheme Booklet. These terms are capitalised and have the meaning set out in Section 11.1.

Section 11.1 also explains how to interpret some of the information included in this Scheme Booklet, for example dollar amounts and references to time.

A number of figures, amounts, percentages, prices, estimates, calculations of value and fractions in this Scheme Booklet are subject to the effect of rounding. Accordingly, their actual calculation may differ from the calculations set out in this Scheme Booklet.

Except where otherwise specifically provided, a reference to a Section or Annexure, is a reference to a section, or annexure, of this Scheme Booklet as relevant.

Further information

If you have any questions about the Scheme, the Meetings or voting instructions, please call the RHG Registry on 1300 389 054 (within Australia) or +61 3 9415 4041 (outside Australia) (Monday to Friday 9.00am – 5.00pm (Sydney time)). The Notice of Scheme Meeting in Annexure E and the Notice of General Meeting in Annexure F also provide information on voting. For any other queries, please contact your broker or other professional advisers.

Date of Scheme Booklet

This Scheme Booklet is dated 7 November 2013.

3

For

per

sona

l use

onl

y

Contents

1 Key dates 5

2 Letter from the Chairman of RHG 7

3 Summary of the reasons to vote in favour of or against the Scheme and Financial Assistance Resolution 10

4 Scheme Proposal overview 11

5 Details of the reasons to vote in favour of or against the Scheme and the Financial

Assistance Resolution and risks relating to an investment in RHG 24

6 Information about RHG 51

7 Information about the Resimac Syndicate 64

8 Implementation of the Scheme 74

9 Taxation implications 83

10 Additional information 86

11 Glossary and interpretation 91

Annexure A – Independent Expert’s Report 107

Annexure B – Confirmed, Consolidated Merger Implementation Deed 177

Annexure C – Scheme 264

Annexure D – Deed Poll 282

Annexure E – Notice of Scheme Meeting 295

Annexure F – Notice of General Meeting 300

Annexure G – RHG corporate structure 308

Annexure H – Information on voting 310

4

For

per

sona

l use

onl

y

1 Key dates1

Event Time and date

Date of this Scheme Booklet Thursday, 7 November 2013

First Court Date Thursday, 7 November 2013

Last time and date for lodgement of Proxy Forms for the Scheme Meeting and the General Meeting

By 10.00am on Monday, 16 December 2013

Time and date for determining eligibility to attend and vote at the Scheme Meeting and General Meeting

7.00pm on Monday, 16 December 2013

Scheme Meeting and General Meeting to be held at the Wesley Conference Centre, 220 Pitt Street, Sydney NSW 2000

10.00am on Wednesday, 18 December 2013

Notice to ASIC of passage of Financial Assistance Resolution

Wednesday, 18 December 2013

Second Court Hearing (for approval of the Scheme)

Friday, 20 December 2013

Outcome of Second Court Hearing announced to ASX


Effective Date Friday, 20 December 2013

Court order lodged with ASIC and announcement to ASX


Last date for trading in RHG Shares on ASX Friday, 20 December 2013

Scheme Record Date 7.00pm on Tuesday, 31 December 2013

Implementation Date Wednesday, 8 January 20142

Scheme Consideration payment commences Wednesday, 8 January 20143

1 This timetable is indicative only and particular dates may be extended taking into account, amongst other factors, the timing

of satisfaction of Conditions Precedent and availability of counsel and hearing dates and are subject to all necessary approvals from the Court and other Regulatory Authorities. Unless otherwise indicated, all times are stated in Sydney time. Any changes to the timetable (which may include an earlier or later date for the Second Court Hearing) will be announced through ASX and notified on RHG’s website at www.rhgl.com.au.

2 The Implementation Date is the later of the third Business Day after the Scheme Record Date and the day that is 14 days after the Financial Assistance Resolution is notified to ASIC, or such other date as is agreed by RHG and the Resimac Syndicate.

3 RHG has given instructions to the RHG Registry to promptly despatch the Scheme Consideration to Scheme Participants after the Implementation Date and expects that Scheme Participants will be paid within 5 Business Days of the Implementation Date.

5

For

per

sona

l use

onl

y

Figure 1 - Timeline of key steps occurring on the Implementation Date

The following Figure 1 sets out the key steps that are proposed to occur during the course of the day on the Implementation Date (see timetable above for the anticipated date)

Implementation Date

Directors of SPVs to be changed

By 11am AMAC to deposit amount required to fund the Scheme Consideration into a trust account for benefit of RHG Shareholders

RHG authorises payment from trust account to RHG Shareholders authorised by RHG

Shares transferred from RHG Shareholders to AMAC

AMAC’s obligation to pay the Scheme Consideration is guaranteed by Resimac

Once payment to RHG Shareholders is authorised, RHG Shares transferred to AMAC and the sale of certain of RHG’s assets and liabilities to Resimac is complete, AMAC uses RHG’s cash to repay its own funding arrangements

6

For

per

sona

l use

onl

y

2 Letter from the Chairman of RHG

Dear RHG Shareholder,

On 18 October 2013, RHG announced that it reached agreement with the Resimac Syndicate (effective from 18 October 2013) on the key terms of a revised offer (Revised Offer) under which it is proposed that AMAC will acquire all of the shares in RHG for cash consideration of $0.501 per RHG Share

4 (Scheme Consideration) by way of a scheme of arrangement

(Scheme)5. On 24 October 2013 RHG and the Resimac Syndicate entered into an amended

Merger Implementation Deed to give effect to the terms of the Revised Offer.

The Scheme Consideration of $0.501 per RHG Share will not be reduced by the fully franked dividend of $0.03 per RHG Share declared on 8 July 2013 and paid on 22 August 2013 (Dividend). Accordingly, RHG Shareholders who were on the RHG Register on the Dividend Record Date (7 August 2013) and who will be on the RHG Register on the Scheme Record Date (7.00pm on 31 December 2013, Sydney time) will have received total cash payments of $0.531 per RHG Share (Total Payments).

The Total Payments of $0.531 per RHG Share represent:

• a 43.5% premium to the closing price of RHG Shares on 21 May 20136;

• a 32.8% premium to the closing price of RHG Shares on 5 July 20137; and

• a 33.8% premium to RHG’s 30 trading day volume weighted average price to 5 July 2013.

7

Unanimous recommendation of Directors

The RHG Directors believe that the Scheme is in the best interests of RHG Shareholders and unanimously recommend that you vote in favour of the Scheme and the Financial Assistance Resolution:


• subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of RHG Shareholders.

Subject to these same qualifications, each of the RHG Directors intends to vote all the RHG Shares owned or controlled by them in favour of the Scheme and the Financial Assistance Resolution.

The key reasons for the RHG Directors’ recommendation of the Scheme and the Financial Assistance Resolution are summarised in Section 3.

4 The Resimac Syndicate has confirmed it will allow a fully franked dividend to be paid by RHG prior to implementation of the

Scheme (with a corresponding reduction of the Scheme Consideration) if the directors of RHG considered it appropriate. However, there is no assurance that the directors of RHG would determine that payment of a dividend is appropriate at that time. If this position changes, supplementary disclosure will be provided by RHG.

5 The agreement announced on 18 October 2013 followed a series of proposals which are described in detail in Section 5.1(d).

6 The trading day prior to the announcement that RHG had received a conditional proposal from the Resimac Syndicate. 7 The trading day prior to the announcement that RHG and the Resimac Syndicate had entered into the Merger

Implementation Deed.

7

For

per

sona

l use

onl

y

Further information about the reasons to vote in favour of or against the Scheme are included in Sections 3 and 5.

In particular, the RHG Directors believe that the Scheme represents an attractive outcome for RHG Shareholders given that the Scheme:

• allows RHG Shareholders to sell their RHG Shares at a significant premium to RHG’s share price trading history as set out in Figure 2 in Section 5.1(c)

8; and

• removes the exposure to risks involved in amortising the Loan Book and winding up RHG (further information on these risks is set out in Section 5.4).

Independent Expert’s conclusion on the Scheme

The Independent Expert, Deloitte Corporate Finance Pty Limited, has concluded that the Scheme is in the best interests of RHG Shareholders.

The Independent Expert has assessed the control value of an RHG Share to be in the range of $0.419 to $0.459 per RHG Share. The Scheme Consideration of $0.501 per RHG Share is $0.042 (or 9.2%) above the top end of the Independent Expert’s valuation range.

The Independent Expert’s Report is included in Annexure A and I strongly encourage you to read it.

Conditions Precedent

The Scheme will only take effect if, amongst other things:

• RHG Shareholder approval is obtained at the Scheme Meeting and the General Meeting (the thresholds for approval are described in Annexure H);

• certain Conditions Precedent are satisfied or waived (see Section 8 for more information); and

• Court approval is obtained following the Scheme Meeting.

Competing Proposals

As announced on 9 September 2013, RHG received a competing proposal from Pepper and Cadence under which Pepper would acquire all the shares in RHG for a combination of cash and Cadence shares

9 (the Pepper/Cadence Proposal). The receipt of an addendum to that

competing proposal was announced by RHG on 11 October 201310

. The RHG Board has unanimously determined that the competing proposal (as updated with the addendum) was not superior to the Scheme Proposal.

On 18 October 2013, Pepper and Cadence were notified that RHG had reached agreement with the Resimac Syndicate on the key terms of the revised Scheme Proposal.

8 On trading days prior to the announcement that RHG had received a conditional proposal from the Resimac Syndicate and

the subsequent announcement that RHG and the Resimac Syndicate had entered into the Merger Implementation Deed. 9 That competing proposal superseded Pepper’s and Cadence’s competing proposal announced on 16 August 2013 which

the RHG directors rejected in favour of the Resimac Syndicate’s counterproposal on 29 August 2013. 10 In their addendum, Pepper and Cadence indicated that Cadence would give eligible shareholders the opportunity to sell

unmarketable parcels of ordinary shares in Cadence without incurring any brokerage or handling costs using a small shareholding sale facility to be made available by Cadence within 6 months of the implementation of the competing proposal. Cadence also indicated that eligible shareholders would be provided with an opportunity to ‘top-up’ their holdings of shares in Cadence, free of brokerage and other transaction costs, through a share purchase plan to be implemented by Cadence within 6 months of the implementation of the competing proposal.

8

For

per

sona

l use

onl

y

On 25 October 2013, Pepper issued a media release which stated that Pepper and Cadence had decided to withdraw the Pepper/Cadence Proposal. This was confirmed by an ASX announcement issued by Cadence on 28 October 2013.

Further details on the competing proposal and a comparison to the Scheme Proposal are set out in Sections 5.1(d) and 5.3. However, the competing proposal has been withdrawn and is not available to RHG Shareholders, even if the Scheme Proposal does not proceed.

Your Vote is important for the Scheme to Proceed

Your vote is important and I encourage you to vote either by attending the Scheme Meeting and the General Meeting, to be held on 18 December 2013 commencing at 10.00am (Sydney time) at the Wesley Conference Centre, 220 Pitt Street, Sydney NSW 2000 or by lodging proxy votes. Further information on how to vote, including instructions on lodging a Proxy Form, is set out in Annexure H.

Further Information

Please read this Scheme Booklet in its entirety before making your decision and voting at the Scheme Meeting and General Meeting. I also encourage you to seek legal, financial or other professional advice before making any investment decision in relation to your RHG Shares.

If you have any questions in relation to the Scheme, the Meetings or voting instructions, please call the RHG Registry on 1300 389 054 (within Australia) or +61 3 9415 4041 (outside Australia) (Monday to Friday 9.00am – 5.00pm (Sydney time)). For any other queries, please contact your broker or other professional advisers.

Yours sincerely

Glenn Goddard

9

For

per

sona

l use

onl

y

10

3 Summary of the reasons to vote in favour of or against the Scheme and Financial Assistance Resolution

3.1 Reasons to vote in favour of the Scheme and Financial Assistance Resolution

� The RHG Directors have unanimously recommended that you vote in favour of the Scheme and the Financial Assistance Resolution

11.

� The Independent Expert has concluded that the Scheme is in the best interests of RHG Shareholders.

� The Total Payments represent a significant premium to RHG’s historical trading prices as set out in Figure 2 in Section 5.1(c)

12.

� No Superior Proposal has emerged since RHG entered into the fourth Deed of Amendment on 24 October 2013.

� The Scheme allows RHG Shareholders to sell their RHG Shares and removes their exposure to the risks involved in amortising the Loan Book and winding up RHG

13.

� The RHG Share price may fall if the Scheme is not implemented.

� Resimac and AMAC have confirmed that they have funding approved for the Scheme Consideration on the conditions outlined in Section 7.3.

� You will not incur any brokerage or stamp duty on the transfer of your RHG Shares under the Scheme.

� The Financial Assistance which is the subject of the Financial Assistance Resolution will not reduce the Scheme Consideration. The Resimac Syndicate has advised the RHG Board that implementation of the Financial Assistance has enabled the Resimac Syndicate to offer the current price to be paid for RHG Shares under the Scheme.

The reasons to vote in favour of the Scheme and the Financial Assistance Resolution are discussed in more detail in Section 5.1.

3.2 Reasons to vote against the Scheme

� You may disagree with the RHG Directors and the Independent Expert and believe that the Scheme is not in your best interests.

� If the Scheme proceeds, you will no longer be an RHG Shareholder and you will not participate in any potential upside that may result from being an RHG Shareholder.

� The tax consequences of the implementation of the Scheme may not be suitable to your financial position.

� You may consider that there is potential for a Superior Proposal to be made.

The reasons to vote against the Scheme are discussed in more detail in Section 5.2.

11

The Directors’ recommendation is provided in the absence of a Superior Proposal and subject to the Independent Expert, who has concluded that the Scheme is in the best interests of RHG Shareholders, maintaining that conclusion.


the subsequent announcement that RHG and the Resimac Syndicate had entered into a Merger Implementation Deed. 13

Discussed in Section 5.4.

For

per

sona

l use

onl

y

4 Scheme Proposal overview

Question Answer Where applicable, for

more information please see…

Questions about the Scheme and what you will receive

What is the Scheme Meeting and what is the General Meeting?

The Scheme Meeting is the meeting of RHG Shareholders at which RHG Shareholders will vote on the Scheme.

The General Meeting is the meeting of RHG Shareholders being held to seek approval of the Financial Assistance Resolution.

Further detail about the Meetings is set out under “Questions about the Meetings and voting at the Meetings” below.

Annexure E – Notice of Scheme

Meeting and Annexure F –

Notice of General Meeting

What is the Scheme?

The Scheme is a scheme of arrangement between RHG and Scheme Participants.

If the Scheme becomes Effective, then AMAC will acquire all RHG Shares that it does not already own and RHG will become a wholly-owned subsidiary of AMAC. Resimac has unconditionally and irrevocably guaranteed AMAC’s obligations under the Scheme, including but not limited to AMAC’s payment of the Scheme Consideration. If the Scheme becomes Effective, RHG will have authority to sign a transfer document on behalf of Scheme Participants in certain circumstances – see “Questions about the implementation of the Scheme” below for further detail.

A scheme of arrangement is a statutory procedure that is commonly used to enable one company to acquire another company. If the Scheme becomes Effective, the outcome of implementation will be similar to a successful 100% takeover bid for RHG.

How does this Scheme Proposal compare against the competing proposal announced on 9 September 2013, as supplemented by the

The RHG Directors consider, on balance, that this Scheme Proposal which relates to an offer by AMAC to acquire all the shares in RHG is a Superior Proposal to the competing proposal from Pepper and Cadence announced on 9 September 2013, as supplemented by the addendum announced by RHG on 11 October 2013.

On 25 October 2013, Pepper issued a media release which stated that Pepper and Cadence had decided to withdraw the Pepper/Cadence Proposal

14. This was confirmed by an ASX

Sections 5.1(d), 5.2(d) and 5.3

(including Figures 4, to 8 in Section

5.3)

14


11

For

per

sona

l use

onl

y



addendum announced by RHG on 11 October 2013?

announcement issued by Cadence on 28 October 2013.

Please see Section 5.3 for further discussion and comparison of the Scheme Proposal and the competing proposal received from Pepper and Cadence and announced to ASX on 9 September 2013, as supplemented by the addendum announced on 11 October 2013.

The comparison in Section 5.3 of the Scheme Proposal is to the Pepper/Cadence Proposal which was withdrawn by Pepper and Cadence on 25 October 2013 and is no longer available to RHG Shareholders. The assessment of the two proposals was carried out by the RHG Board prior to the withdrawal of the Pepper/Cadence Proposal.

What will I receive as the consideration for my RHG Shares (the Scheme Consideration)?

The Scheme Consideration proposed is cash consideration of $0.501 per RHG Share.

Where the aggregate amount of the Scheme Consideration to be paid to a RHG Shareholder would result in the RHG Shareholder becoming entitled to a fraction of a cent, the fractional entitlement will be rounded down to the nearest whole cent.

When will I be paid?

RHG has given instructions to the RHG Registry to promptly despatch the Scheme Consideration to Scheme Participants (or if RHG permits, and subject to any regulatory requirements, in accordance with a Scheme Participant’s directions) after the Implementation Date and RHG expects that Scheme Participants will be paid within 5 Business Days of the Implementation Date.

Section 8.9

How will I be paid?

Payments will be made by direct deposit into your nominated bank account, as advised to the RHG Registry before the applicable record date. If you have not nominated a bank account, payment will be by cheque.

For Scheme Shares held in joint names, RHG will make the payment payable to the joint holders and will send the relevant amount to the joint holders as the names appear in the RHG Register as at the Scheme Record Date.

What if a cheque mailed by RHG is returned or not

If a cheque mailed by RHG is returned or is not presented for payment within six months after the date it was mailed, RHG may cancel the cheque.

12

For

per

sona

l use

onl

y



presented for payment within six months after the date it was mailed?

For one year commencing on the Implementation Date, RHG has instructed the RHG Registry to reissue a cancelled cheque on request from a Scheme Participant after that time. Unclaimed funds will be paid in accordance with RHG’s obligations under the applicable statutory regime.

What is the difference between the Scheme Consideration and the Total Payments?

RHG Shareholders who were on the RHG Register at the Dividend Record Date (7 August 2013) will have received the fully franked Dividend of $0.03 per RHG Share, announced by RHG at the same time as it announced that it had entered into the Merger Implementation Deed with the Resimac Syndicate.

The Total Payments of $0.531 per RHG Share, comprises the Scheme Consideration and the Dividend (which Dividend was paid to RHG Shareholders who were on the RHG Register on the Dividend Record Date).

How is the Scheme Consideration to be paid by AMAC?

Under the Scheme, AMAC must, by no later than 11.00am (Sydney time) on the Implementation Date, pay the aggregate Scheme Consideration payable to Scheme Participants into a trust account nominated by RHG.

The funding arrangements for the Scheme Consideration are subject to a number of conditions outlined in Section 7.3.

Sections 1 (Figure 1), 7.3 and 8.9

How will the Scheme Consideration payable by AMAC be secured?

Resimac irrevocably and unconditionally undertakes for the benefit of each Scheme Participant to guarantee the due and punctual performance and observance by AMAC of all of AMAC’s obligations under the Merger Implementation Deed, including, but not limited to, AMAC’s obligations to pay the Scheme Consideration

15.

Section 8.1(c)

Is the Scheme subject to any Conditions Precedent?

The Scheme (including payment of the Scheme Consideration) is subject to a number of Conditions Precedent, including:

• approval from relevant Regulatory Authorities before 8.00am on the Second Court Date (Sydney time);

• agreement to the Scheme by the Requisite Majorities at the Scheme Meeting;

Sections 5.4, 8.1(a), 8.1(e) and

10.4(b)

Clause 3 and Schedule 2 to the

Merger Implementation

Deed

15

Resimac’s guarantee only extends to AMAC’s compliance with clause 5.5 of the Merger Implementation Deed to the extent that such compliance relates to any employee entitlements or redundancy entitlements.

13

For

per

sona

l use

onl

y



• approval of the Scheme by the Court;

• the Independent Expert continuing to conclude that the Scheme is in the best interests of RHG Shareholders; and

• the Financial Assistance Resolution being approved by a special resolution at the General Meeting.

Further details of the Conditions Precedent are set out in Section 8.1(a).

The Scheme will not proceed unless all the Conditions Precedent are satisfied or waived in accordance with the Merger Implementation Deed. As at the date of this Scheme Booklet, RHG currently believes that the Conditions Precedent are capable of being satisfied, but there are a currently a number of matters which must be resolved. See Sections 5.4(b), 5.4(d) and 10.4(b) in particular.

In addition, in certain limited circumstances the Scheme may be withdrawn before implementation - for instance, if a Superior Proposal emerges (see Section 8.1(e)).

What happens if the Scheme does not proceed?

If the Scheme does not proceed:

• you will not receive the Scheme Consideration;

• RHG will remain listed on ASX;

• you will keep your RHG Shares and continue to participate in the benefits of, and continue to be exposed to the risks associated with, an investment in RHG;

• in the absence of an alternative proposal, for the time being, the RHG Directors will continue to operate RHG as a stand-alone listed entity in accordance with the business plans and financial and operating strategies in place before the announcement of the Scheme; and

• the price of RHG Shares on ASX may fall.

However, if you were on the RHG Register on the Dividend Record Date, you would have still received the Dividend.

Section 6.11

14

For

per

sona

l use

onl

y



What costs has RHG incurred in relation to the Scheme?

Before the Scheme Meeting, RHG estimates it will have incurred or committed to pay transaction costs of approximately $1,650,000 in relation to the Scheme. Those costs will be payable by RHG regardless of whether or not the Scheme becomes Effective. Further costs will be incurred in implementing the Scheme and there are additional transaction costs that are only payable if the Scheme (or a competing proposal) becomes effective, including success fees payable to RHG’s financial adviser which RHG estimates will be approximately $1,892,416. These various costs do not reduce the Scheme Consideration.

If the Scheme does not proceed, a break fee may be payable. However, the RHG Shareholders not voting in favour of the Scheme Resolution does not, of itself, result in a break fee being payable.

8.1(f)(i)

What are the tax implications of the Scheme?

A general summary of the Australian tax implications for Australian residents and non-residents is set out in Section 9.

You should seek your own professional advice on the tax consequences applicable to you.

Section 9

Who are AMAC and Resimac?

AMAC is a special purpose company established by Mr Trevor Loewensohn, a former director of RHG, to acquire RHG Shares under the Scheme and then to facilitate the sale of PIGL and certain assets and liabilities of the RHG Group, RMS and RMC to entities nominated by Resimac.

Resimac is an unlisted public company whose primary activities involve originating, servicing and securitising mortgage assets. Following implementation of the Scheme, Resimac or entities nominated by Resimac will acquire PIGL and certain assets and liabilities of the RHG Group, RMS and RMC.

Resimac has unconditionally and irrevocably guaranteed AMAC’s obligations under the Scheme, including AMAC’s payment of the Scheme Consideration.

Section 7

15

For

per

sona

l use

onl

y



What are the intentions of the Resimac Syndicate?

After the Scheme is implemented, amongst other things, PIGL and certain assets and liabilities of the RHG Group, RMS and RMC will be transferred to entities nominated by Resimac.

AMAC and Resimac have agreed to certain arrangements regarding the ongoing obligations of the RHG Group following the implementation of the Scheme.

Sections 7.4 and 8.1(d)

Questions about the RHG Directors’ recommendations and intentions, and reasons to vote for or against the Scheme and the Financial Assistance Resolution

What do the RHG Directors recommend?

The RHG Directors unanimously recommend that RHG Shareholders vote in favour of the Scheme and the Financial Assistance Resolution:


• subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of RHG Shareholders.

Each RHG Director intends to vote all of the RHG Shares owned or controlled by them in favour of the Scheme and the Financial Assistance Resolution subject to the same conditions as their recommendation in favour of the Scheme Resolution and the Financial Assistance Resolution.

Section 8.3(d)

Why are the RHG Directors recommending that you vote in favour of the Scheme and the Financial Assistance Resolution?

The reasons for the RHG Directors’ recommendations in favour of the Scheme and the Financial Assistance Resolution include

16:

• the Total Payments represent a significant premium to RHG’s historical trading prices as set out in Figure 2 in Section 5.1(c)

17;

• no Superior Proposal has emerged since RHG entered into the fourth Deed of Amendment on 24 October 2013;

• the Scheme allows RHG Shareholders to sell their RHG Shares and removes their exposure to the risks involved in amortising the Loan Book and winding up RHG;

• the RHG Share price may fall if the

Section 5.1.

16 In the absence of a Superior Proposal and subject to the Independent Expert, who has concluded that the Scheme is in the

best interests of RHG Shareholders, maintaining that conclusion. 17 On trading days prior to the announcement that RHG had received a conditional proposal from the Resimac Syndicate and

the subsequent announcement that RHG and the Resimac Syndicate had entered into the Merger Implementation Deed.

16

For

per

sona

l use

onl

y

17



Scheme is not implemented;

• Resimac and AMAC have confirmed that they have funding approved for the Scheme Consideration on the conditions outlined in Section 7.3;

• Scheme Participants will not incur any brokerage or stamp duty on the transfer of their RHG Shares under the Scheme; and

• the Financial Assistance which is the subject of the Financial Assistance Resolution will not reduce the Scheme Consideration. The Resimac Syndicate has advised the RHG Board that implementation of the Financial Assistance has enabled the Resimac Syndicate to offer the current price to be paid for RHG Shares under the Scheme.

The Independent Expert’s Report supports the RHG Directors’ view that the Scheme is in the best interests of shareholders.

18

What are the reasons why I might not want to vote in favour of the Scheme and the Financial Assistance Resolution?

Reasons why you might not want to vote in favour of the Scheme and the Financial Assistance Resolution include:

• you may disagree with the RHG Directors and the Independent Expert and believe that the Scheme is not in your best interests;

• if the Scheme proceeds, you will no longer be an RHG Shareholder and you will not participate in any potential upside that may result from being an RHG Shareholder;

• the tax consequences of the implementation of the Scheme may not be suitable to your financial position;

• you may consider that there is potential for a Superior Proposal to be made.

Section 5.2

18

In the absence of a Superior Proposal, and subject to the Independent Expert, who has concluded that the Scheme is in the best interests of RHG Shareholders, maintaining that conclusion.

For

per

sona

l use

onl

y



If the Scheme does not proceed, what are the risks relating to an investment in RHG?

The risks relating to an investment in RHG include:

• the risk of a loss of Principal Investments (including as a result of some of the risks outlined below);

• the risk of negative consequences for RHG if an event of default arises under one of the Warehouse Facilities or RMBS;

• risks relating to certain terms contained in Warehouse Facilities including an option for a Warehouse Facility provider to acquire underlying mortgages, change of control provisions and amortisation event clauses;

• risks to future income or events beyond RHG’s control;

• the risk of mortgage insurance not covering all loan costs or losses;

• the risk that claims for certain losses may be denied or reduced by mortgage insurers;

• the risk of a downgrade of the credit rating of a mortgage insurer that may affect the correlated credit rating of a Warehouse Facility requiring further cash collateral to be provided;

• the risk of a default or insolvency of a mortgage insurer that may adversely affect the value of Principal Investments;

• servicing costs for the outsourcing of servicing of the Loan Book will increase and there is a risk that, in the future, the servicing agreement may be difficult to renew or replace on reasonably acceptable terms;

• the risk that given RHG’s fixed cost base and the ongoing reduction in revenue in line with the amortisation of the Loan Book, at some point in the future RHG may be compelled to sell or wind up the Loan Book; and

• the risk that changes in consumer legislation and other regulations could adversely affect RHG.

Section 5.4

18

For

per

sona

l use

onl

y



What is the opinion of the Independent Expert?

The Independent Expert has concluded that the Scheme is in the best interests of RHG Shareholders.

The Independent Expert has assessed the control value of an RHG Share to be in the range of $0.419 and $0.459. The Scheme Consideration of $0.501 per RHG Share is $0.042 (or 9.2%) above the top end of the Independent Expert’s valuation range.

A complete copy of the Independent Expert’s Report is included as Annexure A and RHG Shareholders should read the report in full.

Annexure A

Questions about the Meetings and voting at the Meetings

When and where will the Meetings be held?

The Meetings will be held at or around the same time commencing at 10.00am (Sydney time) on 18 December 2013 at the Wesley Conference Centre, 220 Pitt Street, Sydney NSW 2000.

The Scheme Meeting and the General Meeting will be held concurrently. However, as the passage of the Financial Assistance Resolution at the General Meeting is a Condition Precedent to implementation of the Scheme, the Financial Assistance Resolution will be put to the General Meeting for a vote prior to the Scheme Resolution.

Section 8.3 Annexure E –

Notice of Scheme Meeting and Annexure F –


Am I entitled to vote at the Meetings?

Each RHG Shareholder who is registered on the RHG Register at 7.00pm (Sydney time) on 16 December 2013 is entitled to attend and vote at the Meetings.

Annexure H – Information on

voting

How do I vote if I am not able to attend the Meetings?

If you would like to vote but cannot attend the Meetings in person, you should appoint:

• a proxy to vote on your behalf by completing, signing and returning the original personalised Proxy Form sent to you with this Scheme Booklet by 10.00am (Sydney time) on 16 December 2013; or

• an attorney to vote on your behalf by sending any powers of attorney or authority to the RHG Registry or as indicated in the Proxy Form.

The Proxy Form relates to both the General Meeting and the Scheme Meeting – to appoint a proxy, you should complete all parts of the form.

Proxies can be lodged online – see Annexures E and F.


voting

19

For

per

sona

l use

onl

y



When will the results of the Meetings be known?

The results of the Meetings will be available shortly after the conclusion of the Meetings and will be available on ASX’s website at www.asx.com.au and on RHG’s website at www.rhgl.com.au.

Even if the Scheme Resolution is passed by the Requisite Majorities at the Scheme Meeting, the Scheme is subject to the approval of the Court at the Second Court Hearing.


voting

Questions about the voting thresholds

What vote is required to approve the Scheme?

For the Scheme to proceed, the Scheme Resolution must be passed by:

• a majority in number (more than 50%) of Shareholders present and voting on the Scheme Resolution at the Scheme Meeting (either in person or by proxy); and

• at least 75% of the total number of votes cast on the Scheme Resolution at the Scheme Meeting by RHG Shareholders present and voting at the Scheme Meeting (either in person or by proxy).

The Court has the discretion to waive the first of these two requirements if it considers appropriate to do so.


voting

What vote is required to approve the Financial Assistance Resolution?

For the Financial Assistance Resolution to pass, RHG Shareholder approval must be given by a special resolution passed at a general meeting of RHG Shareholders, with no votes being cast in favour of the Financial Assistance Resolution by AMAC or Resimac or by their associates. The Financial Assistance Resolution is in addition to the RHG Shareholder approval required to approve the Scheme.

Annexure F – Notice of General

Meeting


voting

What happens if I vote against the Scheme or don’t vote at all at the Scheme Meeting?

If the Scheme Resolution is passed by the Requisite Majorities at the Scheme Meeting, then, subject to the other Conditions Precedent being satisfied or waived, the Scheme will become Effective and will be binding on all Scheme Participants (including those who did not attend the Scheme Meeting or did not vote, or voted against the Scheme Resolution).


voting

What happens if I vote against the Financial Assistance Resolution or

If the Financial Assistance Resolution fails to pass in the General Meeting, the Scheme will be unable to proceed, unless AMAC and Resimac both agree to waive the passage of the Financial Assistance

Section 8.3(b)

20

For

per

sona

l use

onl

y



don’t vote at all at the General Meeting?

Resolution as a Condition Precedent.

Are the Scheme Resolution and the Financial Assistance Resolution conditional on each other?

The Scheme is conditional on the passage of the Financial Assistance Resolution. The payment (or grant of security) contemplated by the Financial Assistance Resolution will occur after the RHG Registry has initiated despatch of the Scheme Consideration.

Section 8.3(b) and Annexure F – Notice of General

Meeting

Other questions about the Financial Assistance Resolution

What is the Financial Assistance Resolution?

It is a resolution to be put to a general meeting of RHG Shareholders under sections 260A(1)(b) and 260B of the Corporations Act, to approve the payment of amounts by RHG and RHGHL directly or indirectly to AMAC (and, in limited circumstances, the granting of an all assets security by RHG to National Australia Bank Limited (who will provide financing for part of the Scheme Consideration)) after the Scheme is implemented.

Section 8.3(b) and Annexure F – Notice of General

Meeting

Why is a Financial Assistance Resolution needed?

AMAC will borrow funds to pay the Scheme Consideration.

After the Scheme is implemented (if approved), and despatch of Scheme Consideration to RHG Shareholders has been initiated, AMAC proposes to use some of the RHG Group’s funds to repay the funds it borrowed to pay the Scheme Consideration. This would occur after the asset sale described in Section 7.4(c) of this Scheme Booklet has been completed and the sale proceeds have become available.

Additionally, in the limited circumstance where the asset sale does not complete within 2 business days after the implementation of the Scheme, AMAC has an obligation to procure RHG to grant an all assets security in favour of National Australia Bank Limited (who will provide financing for part of the Scheme Consideration) within 4 business days after implementation of the Scheme.

This security and the use of RHG Group’s funds referred to above are forms of “Financial Assistance” under the Corporations Act.


Meeting

21

For

per

sona

l use

onl

y



Does the Financial Assistance reduce the payment to RHG Shareholders?

No – the Financial Assistance does not reduce the Scheme Consideration, or the value being attributed to your RHG Shares.


Meeting

Why should I vote in favour of the Financial Assistance Resolution?

The Financial Assistance Resolution must be passed by RHG Shareholders in order for the Scheme to proceed (unless the condition is waived by AMAC and Resimac).

If you are in favour of the Scheme and wish to receive the Scheme Consideration, you should vote in favour of the Financial Assistance Resolution as well as the Scheme.

The payment (or grant of security) contemplated by the Financial Assistance Resolution will only be made after the Scheme has been implemented and the Scheme Consideration has been despatched to RHG Shareholders.

Section 8.3 and Annexure F –


Questions about the implementation of the Scheme

Do I need to do or sign anything to transfer my RHG Shares?

No. If the Scheme becomes Effective, RHG has authority under the Scheme to sign a transfer document on behalf of Scheme Participants, in relation to the transfer of the Scheme Participants' RHG Shares on the Implementation Date (subject to the change in the board of the SPVs having occurred and RHG procuring AMAC’s payment of the Scheme Consideration).

You should be aware that, if you are a Scheme Participant, you will be deemed to have authorised RHG to warrant to AMAC on your behalf, that:

• all your RHG Shares as at the date of the transfer are fully paid and free from all encumbrances; and

• you have full power and capacity to transfer your RHG Shares to AMAC.

Sections 8.9 and 8.10

Are there any conditions to be satisfied?

The Scheme and the Financial Assistance Resolution must be approved by the Requisite Majorities at the Meetings and, in the case of the Scheme, by the Court.

The Scheme is also subject to a number of conditions discussed at Section 8.1. These conditions (other than Court approval) must be

Section 8.1(a)

22

For

per

sona

l use

onl

y



satisfied or waived for the Scheme to become Effective.

What happens if the Scheme is approved at the Scheme Meeting, but it is not approved by the Court?

If the Scheme is approved at the Scheme Meeting, but the Scheme is not approved by the Court, the Scheme will not proceed and RHG Shareholders will retain their RHG Shares, RHG will continue to operate as a stand-alone entity listed on the ASX and RHG Shareholders will not receive the Scheme Consideration.

Section 6.11

What happens if a Competing Transaction emerges?

If a further Competing Transaction emerges, the RHG Directors will consider the Competing Transaction in accordance with the Merger Implementation Deed, and will advise RHG Shareholders of any Superior Proposal and any revised recommendation accordingly.

However, the Merger Implementation Deed permits the Resimac Syndicate an opportunity to make a Counterproposal within three Business Days of being given material terms and information about, and the identity of the person proposing, the Competing Transaction and must be allowed that opportunity before any other understanding, arrangement or agreement is entered into (see clause 10.8 of the Merger Implementation Deed).

A break fee of $1,638,000 would be payable by RHG if (amongst other things) the RHG Directors recommend a Superior Proposal.

Sections 8.1(b) and 8.1(f) and

clauses 10 and 11 of the Merger

Implementation Deed

Will I have to pay brokerage or stamp duty?

No. Scheme Participants will not incur any brokerage or stamp duty on the transfer of their RHG Shares under the Scheme.

Section 8.1(h)

Further questions

What if I have other questions?

If you have other questions about the Scheme, you should consider seeking independent financial, tax or other professional advice.

You can also call the RHG Registry if you have any questions about the Scheme, the Meetings, voting instructions or privacy information on 1300 389 054 (within Australia) or +61 3 9415 4041 (outside Australia) (Monday to Friday 9.00am – 5.00pm (Sydney time)).

23

For

per

sona

l use

onl

y

5 Details of the reasons to vote in favour of or against the Scheme and the Financial Assistance Resolution and risks relating to an investment in RHG

In considering whether to vote in favour of the Scheme and the Financial Assistance Resolution, the RHG Directors encourage you to:

• read this Scheme Booklet carefully and in full;

• consider the choices available to you outlined in Annexure H;

• have regard to your individual risk profile, portfolio strategy, tax position and financial circumstances; and

• obtain financial advice from your broker or financial adviser on the Scheme, and obtain tax advice on the relevant tax consequences of the Scheme becoming Effective.

5.1 Reasons to vote in favour of the Scheme and the Financial Assistance Resolution:

(a) The RHG Directors unanimously recommend that you vote in favour of the Scheme and the Financial Assistance Resolution.

The RHG Directors believe the Scheme is in the best interests of RHG Shareholders and unanimously recommend that you vote in favour of the Scheme and the Financial Assistance Resolution:

(i) in the absence of a Superior Proposal emerging; and

(ii) subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of RHG Shareholders.

In reaching their recommendation, the RHG Directors have assessed the Scheme having regard to the reasons to vote in favour of, or against, the Scheme and the Financial Assistance Resolution, as set out in this Scheme Booklet.

The RHG Directors believe that the Scheme represents an attractive outcome for RHG Shareholders given that the Scheme:

(i) allows RHG Shareholders to sell their RHG Shares at a significant premium to RHG’s share price trading history as set out in Figure 2 in Section 5.1(c)

19;

and

(ii) removes the risks involved in amortising the Loan Book and winding up RHG.

See Section 5.4 for more information on the risks relating to investments in RHG.


the subsequent announcement that RHG and the Resimac Syndicate had entered into a Merger Implementation Deed.

24

For

per

sona

l use

onl

y

Each RHG Director intends to vote the RHG Shares that they own or control in favour of the Scheme and the Financial Assistance Resolution:

(i) in the absence of a Superior Proposal; and

(ii) subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of RHG Shareholders. The interests of the RHG Directors are set out in Section 10.1.

If a Superior Proposal emerges after the date of this Scheme Booklet, the RHG Directors will carefully reconsider the Scheme and advise you of their recommendation.

(b) The Independent Expert has concluded that the Scheme is in the best interests of RHG Shareholders.

The Independent Expert has assessed the control value of an RHG Share to be in the range of $0.419 and $0.459 per RHG Share. The Scheme Consideration of $0.501 per RHG Share is $0.042 (or 9.2%) above the top end of the Independent Expert’s valuation range.

The Independent Expert has concluded that:

“In our opinion, the Proposed Scheme is fair and reasonable to Shareholders. It is therefore in the best interests of Shareholders”.

A complete copy of the Independent Expert’s Report is included as Annexure A and the RHG Directors encourage you to read the report in full.

(c) The Total Payments of $0.531 per RHG Share represent a significant premium to RHG’s historical share prices as set out in Figure 2 in this Section 5.1(c)

20.

The Total Payments of $0.531 per RHG Share represent:

• a 43.5% premium to the closing price of RHG Shares on 21 May 2013, being the trading day prior to the announcement that RHG had received a conditional proposal from the Resimac Syndicate;

• a 32.8% premium to the closing price of RHG Shares on 5 July 2013, being the trading day prior to the announcement that RHG and the Resimac Syndicate had entered into a Merger Implementation Deed; and

• a 33.8% premium to the RHG’s 30 trading day volume weighted average price to 5 July 2013.


the subsequent announcement that RHG and the Resimac Syndicate had entered into a Merger Implementation Deed.

25

For

per

sona

l use

onl

y

Figure 2 – Premium over historical share prices

Source of RHG Shares trading prices and 30 trading day volume weighted average price: Bloomberg

*Dividend of $0.03 per RHG Share announced on 8 July 2013 in conjunction with the original AMAC and Resimac proposal and paid on 22 August 2013.

Given that the Scheme Consideration is not reduced by the Dividend of $0.03 per RHG Share paid on 22 August 2013, the Total Payments amount enables a comparison to RHG’s historical share prices as set out in Figure 2 in this Section 5.1(c)

21.

(d) The RHG Board has not received a Superior Proposal since RHG entered into the fourth Deed of Amendment with the Resimac Syndicate on 24 October 2013.

The current Scheme Proposal has been preceded by a sequence of offers and counterproposals. This sequence is outlined below.

Original Scheme agreement

On 8 July 2013, following confidential negotiations with the Resimac Syndicate and Pepper, RHG announced that it had entered into a Merger Implementation Deed with the Resimac Syndicate under which AMAC agreed to acquire all the shares in RHG for cash consideration of $0.441 per RHG Share with no reduction in price for the Dividend announced by RHG on 8 July 2013 and paid on 22 August 2013.

Competing proposal from Pepper

On 10 July 2013, RHG announced that it had received a competing proposal from Pepper to acquire all the RHG Shares for cash consideration of $0.46 per RHG Share with no reduction in price for the Dividend announced by RHG on 8 July 2013 and paid on 22 August 2013.

21

On trading days prior to the announcement that RHG had received a conditional proposal from the Resimac Syndicate and the subsequent announcement that RHG and the Resimac Syndicate had entered into a Merger Implementation Deed.

$0.030

$0.400 $0.397$0.370

$0.501

$0.531

Dividend* Scheme

Consideration

Total Payments Closing Price

as at 5 July

2013

30 Trading Day

Volume

Weighted

Average Price

as at 5 July 2013

Closing Price

as at 21 May

2013

32.8%

premium

33.8%

premium43.5%

premium

26

For

per

sona

l use

onl

y

Counterproposal from Resimac Syndicate

On 15 July 2013, RHG announced that it had accepted a counterproposal from the Resimac Syndicate under which AMAC agreed to acquire all the shares in RHG for cash consideration of $0.48 per RHG Share with no reduction in price for the Dividend announced by RHG on 8 July 2013 and paid on 22 August 2013.

Revised competing proposal from Pepper/Cadence

On 16 August 2013, RHG announced that it had received a competing proposal from Pepper and Cadence under which Pepper proposed to acquire all of the shares in RHG for:

(i) in the case of RHG Shareholders other than Cadence (“Non-Cadence RHG Shareholders”), $0.35 cash consideration per RHG Share and shares in Cadence at the ratio of one fully paid ordinary share in Cadence for every 10 RHG Shares

22; and

(ii) in the case of Cadence, $0.49 cash consideration per RHG Share,

with no reduction in price for the Dividend announced by RHG on 8 July 2013 and paid on 22 August 2013 (“16 August 2013 Pepper/Cadence Competing Proposal”).

In addition, Cadence indicated that a fully franked dividend of $0.05 per Cadence share would be payable to RHG Shareholders who become shareholders of Cadence and who remain on the Cadence register as at a record date on or immediately after the implementation date. RHG notes that this statement was made in the context of Cadence having declared a $0.05 dividend to its existing shareholders payable on or about 30 September 2013.

The 16 August 2013 Pepper/Cadence Competing Proposal also obliged RHG to pay a further fully franked dividend to the maximum extent possible, subject to not being in a franking deficit immediately after paying it or immediately before the implementation date, and the scheme consideration would be reduced accordingly. RHG clarified to the market on or about 23 August 2013 that a fully franked dividend of the scale estimated by Cadence would lead to RHG being in a franking deficit immediately after paying the fully franked dividend.

Further counterproposal from Resimac Syndicate

On 29 August 2013, RHG announced that it had agreed to accept a counterproposal from the Resimac Syndicate under which AMAC agreed to acquire all the shares in RHG for cash consideration of $0.495 per RHG Share with no reduction in price for the Dividend announced by RHG on 8 July 2013 and paid on 22 August 2013 (“29 August 2013 Resimac Syndicate Proposal”).

Further competing proposal from Pepper/Cadence23

On 9 September 2013, RHG announced that it had received a further competing proposal from Pepper and Cadence under which Pepper proposed to acquire all of the shares in RHG for:

22

Subject to Cadence shareholder approval (or an ASX waiver or confirmation to the effect that Cadence shareholder approval is not required). Under the proposal, if Cadence shareholder approval was not obtained (or an ASX waiver or confirmation to the effect that Cadence shareholder approval is not required was not obtained), the composition of consideration would adjust to be $0.42 cash consideration per RHG Share and shares in Cadence at the ratio of one fully paid ordinary share in Cadence for every 20 RHG Shares.

23 This proposal is no longer current – see Withdrawal of the Pepper/Cadence Proposal below.

27

For

per

sona

l use

onl

y

(iii) in the case of Non-Cadence RHG Shareholders, $0.36 cash consideration per RHG Share and shares in Cadence at the ratio of one fully paid ordinary share in Cadence for every 10 RHG Shares

24; and

(iv) in the case of Cadence, $0.50 cash consideration per RHG Share,

with no reduction in price for the Dividend announced by RHG on 8 July 2013 and paid on 22 August 2013 (“Pepper/Cadence Proposal”).

The substantial holder notice in relation to RHG released by Pepper to ASX on 10 September 2013 referred to an agreement between Pepper and Cadence which included voting arrangements, exclusivity terms and counterproposal rights.

In addition, Cadence confirmed to RHG on 13 September 201325

that a fully franked dividend of $0.05 per Cadence share would be payable to RHG Shareholders who become shareholders of Cadence and who remain on the Cadence register as at a record date on or immediately after the implementation date.

The Pepper/Cadence Proposal also obliged RHG to pay a further fully franked dividend to the maximum extent possible, subject to not being in a franking deficit immediately before paying it or immediately after the Implementation Date, and the Scheme Consideration would be reduced accordingly.

In addition, the Pepper/Cadence Proposal noted that the board of Cadence had resolved to approve a buyback program for Cadence shareholders of up to 10% of the total Cadence shares on issue (including the new Cadence shares) and Cadence may have implemented the buyback had Cadence’s share price traded materially below net tangible assets.

Takeovers Panel Proceedings

On 26 September 2013, the Takeovers Panel issued a media release which announced that the Resimac Syndicate had submitted an application to the Takeovers Panel in relation to the terms of the Pepper/Cadence Proposal.

The Resimac Syndicate submitted that:

(i) Pepper had offered Cadence collateral benefits to induce it to vote against the Scheme which was to be implemented pursuant to the 29 August 2013 Resimac Syndicate Proposal, thereby denying RHG Shareholders (other than Cadence) a reasonable and equal opportunity to participate in the 29 August 2013 Resimac Syndicate Proposal and that the Resimac Syndicate would be denied the opportunity to compete for corporate control of RHG; and

(ii) Cadence’s announcements in relation to its potential buyback were inadequate

26.

The Resimac Syndicate sought final orders that Cadence be restrained from voting against the 29 August 2013 Resimac Syndicate Proposal unless the RHG Board withdrew its recommendation of the 29 August 2013 Resimac Syndicate Proposal,

24

Subject to Cadence shareholder approval. If Cadence shareholder approval was not obtained, the composition of consideration would adjust to be $0.43 cash consideration per RHG Share and shares in Cadence at the ratio of one fully paid ordinary share in Cadence for every 20 RHG Shares (“Pepper/Cadence Alternate Proposal”).

25 As Pepper and Cadence had previously indicated this in their proposed draft of a merger implementation agreement which

formed part of the Pepper/Cadence Proposal. 26

In its media release dated 9 September 2013 Cadence noted that “The CDM Board has also approved a 10% buyback program for Cadence shareholders which may be implemented should Cadence’s stock price trade materially below net tangible asset value” and that “[t]he pricing for the approved buyback program has not yet been determined and will be announced to ASX if CDM determines to commence the buyback. Any such pricing will be subject to legal requirements”.

28

For

per

sona

l use

onl

y

and that Cadence make additional disclosure in relation to the details of its proposed buyback.

On 3 October 2013, the Takeovers Panel announced that it declined to conduct proceedings on the Resimac Syndicate’s application. The Takeovers Panel concluded there was no reasonable prospect that it would make a declaration of unacceptable circumstances or the final orders sought by the Resimac Syndicate. One of the reasons the Takeovers Panel reached this conclusion was that it did not think it would make an order preventing Cadence from voting on a scheme under which its shares could be expropriated.

Addendum to Pepper/Cadence Proposal

On 11 October 2013, RHG announced that it had received an addendum to the Pepper/Cadence Proposal.

In the addendum, Pepper and Cadence indicated to RHG that Cadence would give eligible shareholders the opportunity to sell unmarketable parcels of ordinary shares in Cadence without incurring any brokerage or handling costs using a small shareholding sale facility to be made available by Cadence within 6 months of the implementation of the Pepper/Cadence Proposal.

Cadence also indicated that it had determined that eligible Cadence shareholders would be provided with an opportunity to ‘top-up’ their holdings of shares in Cadence, free of brokerage and other transaction costs, through a share purchase plan to be implemented by Cadence within 6 months of the implementation of the Pepper/Cadence Proposal.

Further counterproposal from Resimac Syndicate – Current Scheme Proposal

On 15 October 2013, RHG announced that it received a further counterproposal from the Resimac Syndicate.

On 18 October 2013, RHG announced that it and the Resimac Syndicate had agreed (with effect from 18 October 2013) the key terms of a counterproposal from the Resimac Syndicate under which AMAC agreed to acquire all the shares in RHG for cash consideration of $0.501 per RHG Share with no reduction in price for the Dividend announced by RHG on 8 July 2013 and paid on 22 August 2013

27 (the

“Scheme Proposal”).

On 24 October 2013 RHG and the Resimac Syndicate entered into an amended Merger Implementation Deed to give effect to the terms of the Resimac Syndicate’s counterproposal.

As at the date of this Scheme Booklet, no Superior Proposal has emerged since RHG entered into the fourth Deed of Amendment on 24 October 2013 and no RHG Director has received any competing proposal since that date which would cause them to believe that a Superior Proposal is likely to emerge.

27

The Resimac Syndicate:

• confirmed that it would allow a fully franked dividend to be paid prior to implementation of the Scheme (with a corresponding reduction of the Scheme Consideration) if the RHG Board considered it appropriate. However, there is no assurance that the RHG Board would determine that payment of a dividend is appropriate at that time. If this position changes, supplementary disclosure will be provided by RHG; and

• indicated a willingness to work with Cadence to provide an option (with a cash alternative) for RHG Shareholders to take a mix of cash and Cadence shares on the same basis as proposed under the Pepper/Cadence Proposal, providing that it would not delay implementation of the Scheme.

29

For

per

sona

l use

onl

y

Withdrawal of the Pepper/Cadence Proposal



The notice of ceasing to be a substantial holder in relation to RHG released by Pepper to ASX on 30 October 2013 disclosed that the prior agreement between Pepper and Cadence had terminated

28.

(e) Implementation of the Scheme allows RHG Shareholders to sell their RHG Shares and remove their exposure to any ongoing RHG business risks

29.

The Scheme Consideration of $0.501 cash per RHG Share provides RHG Shareholders with the ability to sell their RHG Shares within a designated timeframe. RHG has given instructions to the RHG Registry to promptly despatch the Scheme Consideration to Scheme Participants if the Scheme proceeds.

In contrast, if the Scheme does not proceed, the amount which RHG Shareholders will be able to realise for their investment in RHG Shares will be uncertain and RHG Shareholders will continue to be exposed to the ongoing risks of RHG’s operations.

In particular, RHG Shareholders will continue to be subject to the risks associated with the amortisation of the Loan Book and the winding up of RHG.

The operating expenses of RHG will remain relatively constant as the Loan Book continues to amortise and revenue decreases. It may be possible in the future that revenue decreases to the point that RHG will be forced to sell the Loan Book and/or wind up RHG. It is unknown what value may be placed on the mortgage portfolio in the future as a forced seller.

Furthermore, RHG Shareholders will be exposed to the performance of RHG’s business from time to time, general economic conditions and movements in the share market.

(f) The RHG Share price may fall if the Scheme is not implemented.

RHG’s share price has increased significantly since the announcement that RHG had received a conditional proposal from the Resimac Syndicate on 22 May 2013.

Given that the Loan Book is in amortisation and the payment of dividends by RHG decreases the residual value of RHG over time, the RHG Directors believe that an “Adjusted RHG Share Price” which was determined by reducing RHG’s closing share price on each trading day for the aggregate dollar value of subsequent dividends, provides the most appropriate comparison to the Scheme Consideration (see Note 1 to Figure 3 for further details on how the “Adjusted RHG Share Price” was calculated).

The following Figure 3 sets out the “Adjusted RHG Share Price” relative to the Scheme Consideration.

28

This agreement was referred to in the substantial holder notice released by Pepper to ASX on 10 September 2013 and included voting arrangements, exclusivity terms and counterproposal rights between the parties.

29 These risks include the risks previously identified and disclosed by RHG. The ongoing key risks of RHG’s business are

discussed in Section 5.4 below.

30

For

per

sona

l use

onl

y

31

Figure 3 – RHG Adjusted Share Price(1)

(1) The “Adjusted RHG Share Price” has been calculated by reducing RHG’s closing share price on each trading day for the aggregate dollar value of subsequent dividends. Specifically: • from 3 September 2012 to 25 September 2012 (inclusive): the closing price of RHG Shares has

been reduced by $0.22 per RHG Share for the dividends paid on 17 October 2012, 10 April 2013 and 22 August 2013;

• from 26 September 2012 to 15 March 2013 (inclusive): the closing price of RHG Shares has been reduced by $0.12 per RHG Share, for the dividends paid on 10 April 2013 and 22 August 2013; and

• from 18 March 2013 to 30 July 2013 (inclusive): the closing price of RHG Shares has been reduced by $0.03 per RHG Share for the dividend paid on 22 August 2013.

From 31 July 2013 to 1 November 2013 (inclusive), the closing price of RHG Shares has not been adjusted. Source of RHG Share trading prices prior to adjustments: Bloomberg

The RHG Directors believe that if the Scheme is not implemented and no alternate proposal emerges then, based on the price at which RHG Shares have historically traded, the RHG share price may fall to levels below the current trading price.

The Independent Expert agrees with this conclusion, stating that:

“If the Proposed Scheme is not implemented, it is likely that the share price will fall below the offer price”.

(g) Resimac and AMAC have confirmed that they have funding approved for the Scheme Consideration on the conditions outlined in Section 7.3.

As described in Section 7.3, the Resimac Syndicate has advised RHG that to enable AMAC to pay the Scheme Consideration, Resimac is lending $124,550,072 of the Scheme Consideration to AMAC and Alceon is lending $30,000,000 of the Scheme Consideration to AMAC.

For

per

sona

l use

onl

y

Under the Deed Poll and the Merger Implementation Deed, Resimac has irrevocably and unconditionally undertaken for the benefit of each Scheme Participant to guarantee the due and punctual performance and observance by AMAC of all of AMAC’s obligations under the Merger Implementation Deed, including but not limited to AMAC’s obligations to pay the Scheme Consideration in accordance with the Merger Implementation Deed

30.

Resimac has advised RHG that Resimac has sufficient funds, from an external Bridging Facility and internal resources:

(i) to meet its own obligations to fund the $124,550,072 it is lending to AMAC; and

(ii) to fund its obligations under the guarantee, if required and in relation to the Scheme.

Under the terms of the Deed Poll and the Merger Implementation Deed, Resimac’s guarantee may be enforced against Resimac without a party first having to resort to another guarantee or security interest or other agreement relating to its guarantee.

Under the Merger Implementation Deed, Resimac’s guarantee is given to RHG in its own right and in its capacity as trustee or agent for each Scheme Participant.

The statements in this paragraph (g) are made in reliance on the terms of the Merger Implementation Deed and the representations in the Merger Implementation Deed by Resimac.

(h) The Financial Assistance will not reduce the Scheme Consideration and the Resimac Syndicate has advised the RHG Board that implementation of the Financial Assistance has enabled the Resimac Syndicate to offer the current amount of the Scheme Consideration for the RHG Shares.

The payment (or grant of security) contemplated by the Financial Assistance Resolution will occur after the RHG Registry has initiated despatch of the Scheme Consideration to the Scheme Participants.

In addition, AMAC has undertaken for the benefit of RHG and employees of any member of the RHG Group that following the Implementation Date, the Financial Assistance will be implemented in a manner that:

(i) complies with all applicable laws and does not render any member of the RHG Group insolvent; and

(ii) ensures that all employee entitlements or redundancy entitlements are paid.

(i) You will not incur any brokerage or stamp duty on the transfer of your RHG Shares under the Scheme.

Scheme Participants will not incur any brokerage or stamp duty on the transfer of their RHG Shares under the Scheme.

30

Resimac’s guarantee only extends to AMAC’s compliance with clause 5.5 of the Merger Implementation Deed to the extent that such compliance relates to any employee entitlements or redundancy entitlements.

32

For

per

sona

l use

onl

y

5.2 Reasons to vote against the Scheme

(a) You may disagree with the RHG Directors and the Independent Expert and believe that the Scheme is not in your best interests.

You may disagree with the conclusion of the RHG Directors and the Independent Expert that the Scheme is in the best interests of RHG Shareholders.

(b) If the Scheme proceeds, you will no longer be an RHG Shareholder and you will not participate in any potential upside that may result from being an RHG Shareholder.

If the Scheme proceeds, you will cease to be an RHG Shareholder. As such:

• you will cease to participate in the future financial performance and prospects of RHG’s ongoing business;

• you will forego any future dividends from RHG and no longer participate in any potential share price appreciation; and

• you will lose your voting rights as an RHG Shareholder and, therefore, your ability to influence the future direction of RHG. All future benefits, risks and costs associated with being an RHG Shareholder will accrue exclusively to AMAC, as the sole RHG Shareholder following implementation of the Scheme.

You may believe that RHG will deliver greater returns over the long term by continuing to manage the existing Loan Book. However, if you retain your investment in RHG, you will be exposed to the inherent risks associated with such an investment. Further information regarding these risks is provided in Section 5.4.

(c) The tax consequences of the implementation of the Scheme for you may not be suitable to your financial position.

Implementation of the Scheme will trigger tax consequences for Scheme Participants.

Section 9 provides a general outline of the main Australian taxation implications of the Scheme for certain RHG Shareholders. All RHG Shareholders should consult with their own taxation advisers regarding the Australian and, if applicable, foreign taxation implications of the Scheme given the particular circumstances that apply to them.

(d) You may consider that there is potential for a Superior Proposal to be made.

You may consider that there is the potential that a Superior Proposal could emerge. However, RHG Directors note that:

• before agreeing to the Merger Implementation Deed RHG received a number of confidential approaches, made confidential enquires and explored those possibilities before selecting the Resimac Syndicate as preferred bidder;

• there has subsequently been a sequence of approaches from third parties, with higher counterproposals from the Resimac Syndicate – see details set out in section 5.1(d);

• since RHG entered into the fourth Deed of Amendment on 24 October 2013 and up to the date of this Scheme Booklet, no alternative Superior Proposal has been received;

• the Merger Implementation Deed prohibits RHG from soliciting or responding to proposals for Competing Transactions during the Exclusivity Period (which

33

For

per

sona

l use

onl

y

expires on 28 February 2014). However, there are certain qualifications and exceptions which permit the RHG Directors to respond to an unsolicited Competing Transaction which is reasonably capable of becoming a Superior Proposal. The Merger Implementation Deed permits the Resimac Syndicate an opportunity to make a counterproposal within three Business Days of being given material terms and information about, and the identity of the person proposing, the Competing Transaction and must be allowed that opportunity before any other understanding arrangement or agreement is entered into; and

• the substantial holder notice in relation to RHG released by Pepper to ASX on 10 September 2013 referred to an agreement between Pepper and Cadence which included voting arrangements, exclusivity terms and counterproposal rights. The notice of ceasing to be a substantial holder in relation to RHG released by Pepper to ASX on 30 October 2013 disclosed that the agreement between Pepper and Cadence had terminated.

For further information on RHG’s exclusivity arrangements with the Resimac Syndicate, including qualifications and exceptions to those arrangements, refer to Section 8.1(b).

5.3 Analysis of the Scheme Proposal compared to the Pepper/Cadence Proposal

The assessment of the Scheme Proposal is to the Pepper/Cadence Proposal which was withdrawn by Pepper and Cadence on 25 October 2013 and is no longer available to RHG Shareholders. The assessment of the two proposals was carried out by the RHG Board prior to the withdrawal of the Pepper/Cadence Proposal.

In accordance with the Merger Implementation Deed, the RHG Directors considered the terms and conditions of:

• the competing proposal from Pepper and Cadence under which Pepper proposed to acquire all of the shares in RHG as announced by RHG on 9 September 2013 and described in Section 5.1(d) (the Pepper/Cadence Proposal)

31; and

• the counterproposal from the Resimac Syndicate under which AMAC agreed to acquire all the shares in RHG as announced by RHG on 18 October 2013 and described in Section 5.1(d) (the Scheme Proposal).

Specifically, in accordance with clause 10.8 of the Merger Implementation Deed, the RHG Directors considered whether the Pepper/Cadence Proposal (which had not yet been withdrawn at the time of the RHG Directors’ consideration) was a Superior Proposal.

The RHG Directors unanimously determined that the Pepper/Cadence Proposal (which had not yet been withdrawn at the time of the RHG Directors’ determination) was not a Superior Proposal for the following principal reasons:

• the consideration under the Scheme Proposal was higher than:

− the cash consideration that would have been payable to Cadence under the Pepper/Cadence Proposal; and

31



34

For

per

sona

l use

onl

y

− the implied value of the cash and Cadence share consideration that would have been payable to RHG Shareholders other than Cadence (“Non-Cadence RHG Shareholders”) under the Pepper/Cadence Proposal

32.

• the 100% cash consideration under the Scheme Proposal:

− provided more value certainty for Non-Cadence RHG Shareholders than the cash and Cadence share consideration under the Pepper/Cadence Proposal which would have been exposed to general market risk and Cadence specific business risk;

− would not result in any brokerage costs which may have been incurred by RHG Shareholders who sought to sell the Cadence shares they would have received under the share component of the Pepper/Cadence Proposal; and

− would provide Non-Cadence RHG Shareholders with a greater degree of re-investment choice than would have been available under the share component of the Pepper/Cadence Proposal; and

• the Scheme Proposal was capable of being completed approximately two months earlier than the Pepper/Cadence Proposal (had it not been withdrawn by Pepper and Cadence) which had time value of money benefits for RHG Shareholders.

Further details on each these reasons are set out below.

(a) Comparison of consideration payable to Cadence under the withdrawn Pepper/Cadence Proposal

Under the Pepper/Cadence Proposal, Cadence would have received $0.500 per RHG Share in cash.

The cash consideration of $0.501 per RHG Share under the Scheme Proposal is higher than the cash consideration of $0.500 per RHG Share that would have been payable to Cadence under the Pepper/Cadence Proposal.

(b) Methodology for comparing consideration payable to Non-Cadence RHG Shareholders under the withdrawn Pepper/Cadence Proposal

The implied value of the consideration for Non-Cadence RHG Shareholders under the Pepper/Cadence Proposal was estimated by adding:

• the cash consideration per RHG Share;

• the estimated value of the Cadence share consideration per RHG Share; and

• the fully franked dividend of $0.05 per Cadence share, that would have been payable on or immediately after the implementation of the Scheme.

The RHG Directors calculated the estimated value of the Cadence share consideration based on a range of Cadence share metrics and a discount for liquidity as set out below.

The RHG Directors considered the following range of Cadence share metrics33

:

32 The basis for estimating the implied value of the cash and Cadence share consideration is set out in Section 5.3(b). 33 The RHG Board assessed the two proposals using analysis based on the Cadence closing share price on 15 October 2013,

VWAPs up to and including 15 October 2013, the Cadence NTA as at 30 September 2013 (being the most recent month end result available at that time) and Cadence trading volumes up to and including 15 October 2013. Note that Cadence NTA information is regularly updated and released to the market.

35

For

per

sona

l use

onl

y

• the Cadence closing share price on 15 October 2013;

• the historical volume weighted average price (“VWAP”) of Cadence shares over a range of periods up to and including 15 October 2013; and

• an estimated pro forma net tangible assets (“Pro Forma NTA”) based on Cadence net tangible assets (“NTA”) as at 30 September 2013 adjusted for the impact of the Pepper/Cadence Proposal,

(together the “Cadence Share Metrics”).

Discount for Liquidity

The RHG Directors also considered the potential for the Cadence share price to trade at a discount to the Cadence Share Metrics if a large number of RHG shareholders had sought to sell their Cadence shares shortly after the implementation of the scheme.

Under the Pepper/Cadence Proposal, Cadence proposed that it would issue 27.4 million Cadence shares to Non-Cadence RHG Shareholders (or 22.5% of Cadence shares on issue).

34 Based on Cadence’s average daily turnover over the 90 trading

days up to and including 15 October 201335

, 27.4 million Cadence shares represented 177 trading days of Cadence share trading volume

36.

Given the number of shares that would have been issued and the relative illiquidity of Cadence share trading, the potential existed for an “overhang” in Cadence shares in the market.

The RHG Board noted that under the Pepper/Cadence Proposal (which had not yet been withdrawn at the time of the RHG Directors’ consideration), Pepper and Cadence indicated that the Cadence board had resolved to approve a buyback program for Cadence shareholders in order to address the concern that a large number of RHG Shareholders would seek to sell their Cadence shares shortly after implementation of a scheme.

However, Cadence indicated that:

• it would not commit to the terms on which a buyback would be conducted other than to indicate that a buyback may be implemented should the Cadence stock price trade materially below net tangible assets; and

• the buyback program would only be for up to 10% of the total Cadence shares on issue.

On that basis, the RHG Board did not consider that the buyback program would have adequately addressed the potential for an “overhang” in Cadence shares.

Accordingly, the RHG Directors considered it appropriate to apply a discount to the Cadence Share Metrics to reflect the potential impact of that “overhang” (“Discount

34

This assumed that Cadence shareholder approval was obtained for the issue of the Cadence shares and RHG Shareholders would have received one Cadence share for every 10 RHG Shares held. If this approval was not obtained, the consideration for Non-Cadence RHG Shareholders would have been $0.43 in cash per RHG Share, one Cadence share for every 20 RHG Shares held and a dividend of $0.05 per Cadence share under the Pepper/Cadence Alternate Proposal. Under the Pepper/Cadence Alternate Proposal, Cadence would have issued 13.7 million Cadence shares or 11.2% of Cadence shares on issue.

35 See footnote 33.

36 This assumed that Cadence shareholder approval was obtained for the issue of the Cadence shares and RHG

Shareholders receive one Cadence share for every 10 RHG Shares held. Under the Pepper/Cadence Alternate Proposal, Cadence proposed to issue 13.7 million Cadence shares which represented 88 trading days of Cadence share trading volume.

36

For

per

sona

l use

onl

y

for Liquidity”). Having had regard to a range of analogous market evidence, a discount of 5.0% to the Cadence Shares Metrics was applied by the RHG Board.

The RHG Board notes that the Independent Expert has applied an overall discount of 5.0% to the value of the share component of the consideration that would have been payable under the Pepper/Cadence Proposal

37.

Treatment of imputation credits under the Pepper/Cadence Proposal

The after tax outcome of the proposed fully franked dividend of $0.05 per Cadence share to an RHG Shareholder would have depended on the RHG Shareholder’s individual tax circumstances. Accordingly, the estimated value of the Cadence share consideration did not incorporate any additional value from imputation credits nor did it incorporate any tax costs resulting from the nature of the consideration.

38

(c) Calculation of the estimated value of Cadence share consideration under the withdrawn Pepper/Cadence Proposal

Cadence share trading metrics

The following chart summarises:

• Cadence’s closing share price on 15 October 201339

; and

• the historical VWAP of Cadence shares over a range of periods up to and including 15 October 2013

40.

Figure 4 - Cadence share trading metrics ($ per Cadence Share)

Source: Bloomberg

Cadence Pro Forma NTA

Cadence’s Pro Forma NTA was estimated based on Cadence’s NTA per share of $1.360 as at 30 September 2013 adjusted for the impact of the following components of the Pepper/Cadence Proposal on Cadence’s NTA:

• Cadence having sold 34,791,296 RHG shares to Pepper at $0.50 cash per RHG share;

37 See section 5.6 of the Independent Expert’s Report for a discussion by the Independent Expert of the basis for applying the

5% discount. 38

RHG recommends you obtain independent tax advice on the treatment of dividends. 39 See footnote 33. 40 See footnote 33.

$1.365 $1.367 $1.404 $1.401 $1.416

Closing Price

on 15 October 2013

5 Trading Day VWAP

to 15 October 2013

30 Trading Day VWAP

to 15 October 2013

90 Trading Day VWAP

to 15 October 2013

180 Trading Day VWAP

to 15 October 2013

37

For

per

sona

l use

onl

y

• Cadence having issued 27,369,188 shares to RHG Shareholders and Pepper having paid Cadence $1.40 cash per Cadence share issued to RHG Shareholders

41; and

• Cadence having paid a dividend of $0.05 per Cadence share issued to Non-Cadence RHG Shareholders.

On this basis, the Pro Forma NTA was estimated to be $1.363 per Cadence share42

.

Cadence Share Metrics excluding the Discount for Liquidity

The following chart summarises the Cadence Share Metrics excluding the Discount for Liquidity.

Figure 5 - Cadence Share Metrics excluding the Discount for Liquidity ($ per Cadence Share)

43

Source: Bloomberg for closing prices and VWAPs; Cadence Investment Update September 2013 for NTA per share

The RHG Directors noted that the closing price of Cadence shares was $1.480 on 6 September 2013

44 which was higher than any of the Cadence Share Metrics.

However, the RHG Directors noted that:

• Cadence declared a dividend of $0.05 per Cadence share on 30 July 2013. This dividend was paid on 30 September 2013 with an ex-dividend date of 16 September 2013;

• the Cadence closing share price of $1.480 on 6 September 2013 was higher than Cadence’s VWAP over 5, 30, 90 and 180 trading days to 15 October 2013;

41 This assumed that Cadence shareholder approval was obtained for the issue of the Cadence shares and RHG

Shareholders would have received one Cadence share for every 10 RHG Shares held. Under the Pepper/Cadence Alternate Proposal, it was assumed that Cadence would have issued 13,684,594 shares to RHG Shareholders.

42 This assumed that Cadence shareholder approval was obtained for the issue of the Cadence shares and RHG Shareholders would have received one Cadence share for every 10 RHG Shares held. Under the Pepper/Cadence Alternate Proposal, the Pro Forma NTA was estimated to be $1.364 per Cadence share.

43 This assumed that Cadence shareholder approval was obtained for the issue of the Cadence shares and RHG Shareholders would have received one Cadence share for every 10 RHG Shares held. Under the Pepper/Cadence Alternate Proposal, the Pro Forma NTA was estimated to be $1.364 per Cadence share, however all other Cadence Share Metrics are the same under both scenarios.

44 6 September 2013 was the trading day prior to the date the Pepper/Cadence Proposal was announced and was the date referenced in the offer letter that contained the Pepper/Cadence Proposal.

$1.365 $1.367 $1.404 $1.401 $1.416 $1.363

Closing Price

on 15 October

2013

5 Trading Day

VWAP

to 15 October

2013

30 Trading Day

VWAP

to 15 October

2013

90 Trading Day

VWAP

to 15 October

2013

180 Trading Day

VWAP

to 15 October

2013

Pro Forma NTA per

share

as at 30 Sepember

2013

38

For

per

sona

l use

onl

y

• while the Cadence closing share price on 4 September 2013 and 5 September 2013 was also $1.480, prior to 4 September 2013, the last time that the Cadence share price closed at or above $1.480 was 12 April 2013;

• the Cadence closing share price of $1.480 on 6 September 2013 represented a premium of 8.8% to Cadence’s NTA per share of $1.360 on 30 September 2013; and

• the Cadence closing share price fluctuated during the period from 6 September 2013 to 15 October 2013

45, with a low of $1.35 and a high of

$1.50.

Cadence Share Metrics adjusted for the Discount for Liquidity

The following chart summarises the Cadence Share Metrics adjusted for the Discount for Liquidity.

Figure 6 - Cadence Share Metrics Adjusted for the Discount for Liquidity ($ per Cadence Share)

46


The RHG Board formed its view on the implied value of the Cadence share consideration based on the Cadence Share Metrics and the Discount for Liquidity. However it should be noted that the Cadence share price could have moved up or down prior to the implementation of the scheme under the Pepper/Cadence Proposal.

(d) Implied value of the cash and Cadence share consideration under the withdrawn Pepper/Cadence Proposal

Under the Pepper/Cadence Proposal, Non-Cadence RHG Shareholders would have received $0.36 in cash, one Cadence share for every 10 RHG Shares held and a dividend of $0.05 per Cadence share

47.

45 See footnote 33. 46 This assumed that Cadence shareholder approval was obtained for the issue of the Cadence shares and RHG shareholders

would have received one Cadence share for every 10 RHG shares held. Under the Pepper/Cadence Alternate Proposal, the Pro Forma NTA adjusted for the Discount for Liquidity was estimated to be $1.296 per Cadence share, however all other Cadence Share Metrics adjusted for the Discount for Liquidity are the same under both scenarios.

47 This assumed that Cadence shareholder approval was obtained for the issue of the Cadence shares. If this approval was not obtained, the consideration for Non-Cadence RHG Shareholders would have been $0.43 in cash per RHG Share, one Cadence share for every 20 RHG Shares held and a dividend of $0.05 per Cadence share under the Pepper/Cadence Alternate Proposal. The corresponding analysis on the Pepper/Cadence Alternate Proposal is set out in Section 5.3(e).

$1.297 $1.298 $1.334 $1.331 $1.345

$1.295

Closing Price

on 15 October

2013

5 Trading Day

VWAP

to 15 October

2013

30 Trading Day

VWAP

to 15 October

2013

90 Trading Day

VWAP

to 15 October

2013

180 Trading Day

VWAP

to 15 October

2013

Pro Forma NTA per

share

as at 30 Sepember

2013

39

For

per

sona

l use

onl

y

The following chart shows the cash consideration of $0.501 per RHG Share under the Scheme Proposal relative to:

• the cash consideration of $0.500 per RHG Share that would have been payable to Cadence under the Pepper/Cadence Proposal; and

• the implied value of the cash (including the $0.05 dividend per Cadence share) and Cadence share consideration per RHG Share that would have been payable to Non-Cadence RHG Shareholders under the Pepper/Cadence Proposal based on the Cadence Share Metrics adjusted for the Discount for Liquidity.

Figure 7 - Comparison of Consideration ($ per RHG Share)

Notes to Figure 7:

1) This assumed Non-Cadence RHG Shareholders would have received $0.36 in cash per RHG Share, one Cadence share for every 10 RHG Shares held and a dividend of $0.05 per Cadence share; and

2) The consideration did not incorporate any additional benefit that a Non-Cadence RHG Shareholder who would have been able to utilise imputation credits may have received from imputation credits that would have attached to a fully franked dividend of $0.05 per Cadence share nor the additional tax cost some Non-Cadence RHG Shareholders may have incurred due to the nature of the consideration.


As noted in the preceding chart, the cash consideration of $0.501 per RHG Share under the Scheme Proposal is higher than the implied value of the cash and Cadence share consideration Non-Cadence RHG Shareholders would have received under the Pepper/Cadence Proposal based on the Cadence Share Metrics adjusted for the Discount for Liquidity.

The RHG Board noted that the highest closing price of Cadence shares from 6 September 2013

48 to 15 October 2013

49 was $1.500

50. The implied value of the cash

and Cadence share consideration for Non-Cadence RHG Shareholders under the Pepper/Cadence Proposal based on a Cadence share price of $1.50 and adjusted for

48 See footnote 44. 49 See footnote 33. 50 The Cadence share price closed at $1.50 on 10 September 2013 and 12 September 2013.

$0.501 $0.500 $0.495 $0.495 $0.498 $0.498 $0.500 $0.494

Cash Under

Scheme Proposal

Cash Payable

to Cadence

Under Pepper/

Cadence

Proposal

Cadence Closing

Price

on 15 October

2013

($1.365)

Cadence 5

Trading Day

VWAP

to 15 October

2013

($1.367)

Cadence 30

Trading Day

VWAP

to 15 October

2013

($1.404)

Cadence 90

Trading Day

VWAP

to 15 October

2013

($1.401)

Cadence 180

Trading Day

VWAP

to 15 October

2013

($1.416)

Cadence Pro

Forma NTA per

share

as at 30

September

2013

($1.363)

Cadence Share Consideration Cash (Including Cadence dividend)

40

For

per

sona

l use

onl

y

the Discount for Liquidity was $0.508 per RHG Share, which would have been higher than the cash consideration of $0.501 per RHG Share under the Scheme Proposal.

However, the RHG Board noted that:


• the Cadence closing share price of $1.500 was higher than Cadence’s VWAP over 5, 30, 90 and 180 trading days to 15 October 2013;

• prior to 10 September 2013, the last time that the Cadence share price closed at or above $1.500 was 6 March 2013; and

• the Cadence closing share price of $1.500 represented a premium of 10.3% to Cadence’s NTA per share of $1.360 on 30 September 2013.

The proposed fully franked dividend of $0.05 per Cadence share that would have been payable to all Non-Cadence RHG Shareholders under the Pepper/Cadence Proposal would have carried an imputation credit of $0.021 per Cadence share which would have equated to $0.002 per RHG Share

51.

Accordingly, for those Non-Cadence RHG Shareholders who could have captured the benefit of the imputation credits associated with the fully franked dividend of $0.05 per Cadence share, the implied value of the cash and Cadence share consideration plus the benefit from the imputation credits under the Pepper/Cadence Proposal, would have been higher than the cash consideration of $0.501 per RHG Share under the Scheme Proposal based on Cadence’s 180 trading day VWAP to 15 October 2013 adjusted for the Discount for Liquidity.

However, the cash consideration of $0.501 per RHG Share under the Scheme Proposal was higher than the implied value of the cash and Cadence share consideration plus the benefit from the imputation credits under the Pepper/Cadence Proposal based on the Cadence Share Metrics adjusted for the Discount for Liquidity other than Cadence’s 180 trading day VWAP to 15 October 2013 adjusted for the Discount for Liquidity.

(e) Implied value of the cash and Cadence share consideration under the withdrawn Pepper/Cadence Alternate Proposal

Under the Pepper/Cadence Proposal, if the necessary Cadence shareholder approval was not obtained, Non-Cadence RHG Shareholders would have received $0.43 in cash per RHG Share, one Cadence share for every 20 RHG Shares held and a dividend of $0.05 per Cadence share. This is the “Pepper/Cadence Alternate Proposal”.

The following chart shows the cash consideration of $0.501 per RHG Share under the Scheme Proposal relative to:

• the cash consideration of $0.500 per RHG Share that would have been payable to Cadence under the Pepper/Cadence Alternate Proposal; and

• the implied value of the cash (including the $0.05 dividend per Cadence share) and Cadence share consideration per RHG Share that would have been payable to Non-Cadence RHG Shareholders under the

51 This assumed Non-Cadence RHG Shareholders would have received $0.36 cash per RHG Share, one Cadence share for

every 10 RHG Shares held and a dividend of $0.05 per Cadence share.

41

For

per

sona

l use

onl

y

Pepper/Cadence Alternate Proposal based on the Cadence Share Metrics adjusted for the Discount for Liquidity.

Figure 8 - Comparison of consideration under the Pepper/Cadence Alternate Proposal ($ per RHG Share)

Notes to Figure 8:

1) This assumed Non-Cadence RHG Shareholders would have received $0.43 in cash per RHG Share, one Cadence share for every 20 RHG Shares held and a dividend of $0.05 per Cadence share; and

2) The consideration did not incorporate any additional benefit that a Non-Cadence RHG Shareholder who would have been able to utilise imputation credits may have received from imputation credits that would have attached to a fully franked dividend of $0.05 per Cadence share nor the additional tax cost some Non-Cadence RHG Shareholders may have incurred due to the nature of the consideration.


As noted in the preceding chart, the cash consideration of $0.501 per RHG Share under the Scheme Proposal is higher than the implied value of the cash and Cadence share consideration Non-Cadence RHG Shareholders would have received under the Pepper/Cadence Alternate Proposal based on the Cadence Share Metrics adjusted for the Discount for Liquidity.

The RHG Board noted that the highest closing price of Cadence shares from 6 September 2013

52 to 15 October 2013

53 was $1.500

54. The implied value of the cash

and Cadence share consideration for Non-Cadence RHG Shareholders under the Pepper/Cadence Alternate Proposal based on a Cadence share price of $1.500 and adjusted for the Discount for Liquidity was $0.504 per RHG Share which would have been higher than the cash consideration of $0.501 per RHG Share under the Scheme Proposal.

52 See footnote 44. 53 See footnote 33. 54 The Cadence share price closed at $1.50 on 10 September 2013 and 12 September 2013.

$0.501 $0.500 $0.497 $0.497 $0.499 $0.499 $0.500 $0.497

Cash Under

Scheme Proposal

Cash Payable

to Cadence

Under Pepper/

Cadence

Proposal

Cadence Closing

Price

on 15 October

2013

($1.365)

Cadence 5 Trading

Day VWAP

to 15 October

2013

($1.367)

Cadence 30

Trading Day VWAP

to 15 October

2013

($1.404)

Cadence 90

Trading Day VWAP

to 15 October

2013

($1.401)

Cadence 180

Trading Day VWAP

to 15 October

2013

($1.416)

Cadence Pro

Forma NTA per

share

as at 30

September

2013

($1.364)

Cadence Share Consideration Cash (Including Cadence dividend)

42

For

per

sona

l use

onl

y

However, the RHG Board noted that:


• the Cadence closing share price of $1.500 was higher than Cadence’s VWAP over 5, 30, 90 and 180 trading days to 15 October 2013;

• prior to 10 September 2013, the last time that the Cadence share price closed at or above $1.500 was 6 March 2013; and

• the Cadence closing share price of $1.500 represented a premium of 10.3% to Cadence’s NTA per share of $1.360 on 30 September 2013.

The proposed fully franked dividend of $0.05 per Cadence share that would have been payable to all Non-Cadence RHG Shareholders under the Pepper/Cadence Alternate Proposal would have carried an imputation credit of $0.021 per Cadence share which would have equated to $0.001 per RHG Share

55.

Accordingly, even for those Non-Cadence RHG Shareholders who could have captured the benefit of the imputation credits associated with the fully franked dividend of $0.05 per Cadence share, the cash consideration of $0.501 per RHG Share under the Scheme Proposal would have been higher than the implied value of the cash and Cadence share consideration plus the benefit from the imputation credits under the Pepper/Cadence Alternate Proposal based on the Cadence Share Metrics adjusted for the Discount for Liquidity.

(f) Independent Expert’s opinion

The Independent Expert’s conclusions support the Directors’ views on relative consideration. The Independent Expert states that:

“We have also formed the view that the Proposed Scheme is superior to the Pepper/CDM Offer”.

A complete copy of the Independent Expert’s Report is included as Annexure A and the RHG Directors encourage you to read the report in full.

(g) Evaluation of cash consideration relative to Cadence share consideration under the withdrawn Pepper/Cadence Proposal

Under the Scheme Proposal, RHG Shareholders will receive 100% cash consideration for their RHG Shares. Under the Pepper/Cadence Proposal

56, Non-

Cadence RHG Shareholders would have received a combination of cash and Cadence shares as consideration for their RHG Shares.

The Scheme Proposal’s 100% cash consideration provides a number of benefits for Non-Cadence RHG Shareholders including value certainty, no brokerage costs and re-investment choice.

55 This assumed Non-Cadence RHG Shareholders would have received $0.43 cash per RHG Share, one Cadence share for

every 20 RHG Shares held and a dividend of $0.05 per Cadence share. 56 Note that the Pepper/Cadence Proposal contained two alternative proposals for cash and Cadence share consideration,

depending upon receipt of Cadence shareholder approval. These comments assume that this approval would have been obtained, but still have some relevance if the alternative consideration proposal were to apply.

43

For

per

sona

l use

onl

y

Value certainty

The Scheme Proposal’s 100% cash consideration provides RHG Shareholders with greater certainty in terms of the value RHG Shareholders will receive at the time the Scheme is implemented.

Under the Pepper/Cadence Proposal, Non-Cadence RHG Shareholders would have received an amount of the consideration for their RHG Shares in Cadence shares.

The value Non-Cadence RHG Shareholders would have received for their RHG Shares would have depended on the price of Cadence shares at the time the Scheme was implemented. As a result, Non-Cadence RHG Shareholders would have been exposed to general market risk and Cadence specific business risk until the Implementation Date

57.

This may have resulted in the value of Cadence shares being lower or higher than the current value of Cadence shares.

Brokerage costs

Under the Scheme Proposal, RHG Shareholders will receive 100% cash consideration.

Under the Pepper/Cadence Proposal, Non-Cadence RHG Shareholders would have received an amount of the consideration for their RHG Shares in Cadence Shares. In the event that Non-Cadence RHG Shareholders would have decided to sell their Cadence shares, they would have potentially incurred brokerage costs which would have reduced the value they would have received for their RHG Shares.

While the Pepper/Cadence Proposal would have included a sale facility to allow eligible shareholders to sell unmarketable parcels of Cadence shares without brokerage

58, other RHG Shareholders would still have potentially incurred brokerage

on the sale of their Cadence shares. Furthermore, eligible RHG Shareholders who would have wanted to sell their Cadence shares outside the sale facility would still have potentially incurred brokerage costs.

Re-investment choice

The Scheme Proposal’s 100% cash consideration allows RHG Shareholders to decide how to reinvest their sale proceeds with regard to their individual risk profile, liquidity preferences, tax position, and expectations as to value and future market conditions.

Under the Pepper/Cadence Proposal, Non-Cadence RHG Shareholders would have had no choice whether or not to accept Cadence shares. Cadence is a listed investment company with different characteristics to RHG. Non-Cadence RHG Shareholders who would not have wished to be exposed to the prospects and risk profile of Cadence would have had to sell their Cadence shares assuming that they could do so at an acceptable price and noting that they may have incurred transaction costs in doing so.

(h) Evaluation of time value of money

Based on the current timetable, the Scheme Proposal is expected to be capable of being implemented in early January 2014.

57

By way of example, the RHG Board noted that the Cadence share price fluctuated during the period from 6 September 2013 (the day prior to the date the Pepper/Cadence Proposal was announced and the date referenced in the offer letter containing the Pepper/Cadence Proposal) to 15 October 2013 (see footnote 33), with a low of $1.350 and a high of $1.500.

58 See Section 5.1(d) for further details about the proposed sale facility.

44

For

per

sona

l use

onl

y

The Pepper/Cadence Proposal (had it not been withdrawn) was expected to be capable of being implemented in early March 2014.

RHG Shareholders would have benefited from receiving funds earlier under the Scheme Proposal than under the Pepper/Cadence Proposal (had it not been withdrawn) due to the time value of money. The actual benefit to an RHG Shareholder would be dependent upon:

• the timing difference between the implementation date under the two proposals; and

• an RHG shareholder’s required rate of return.

This becomes less relevant if the implementation of the Scheme Proposal is delayed.

(i) Other considerations

Documentation Terms under the withdrawn Pepper/Cadence Proposal

The legal documentation that had been proposed by Pepper and Cadence in connection with the Pepper/Cadence Proposal contained terms which added complexity to the execution of the proposed transactions, including (amongst other things):

(i) obligations on RHG to use best endeavours to transfer Residual Capital Units prior to the Implementation Date; and

(ii) the inclusion of third party consents as a condition precedent to implementation.

However, the RHG Directors note that this complexity did not determine their assessment of the withdrawn Pepper/Cadence Proposal.

Regulatory issues

In addition, RHG noted that the terms of the agreement between Pepper and Cadence initially disclosed to the market on 19 August 2013 and subsequently updated on 21 August 2013 and 10 September 2013 and the different treatment of Cadence compared to Non-Cadence RHG Shareholders under the Pepper/Cadence Proposal, could have raised some regulatory concerns which could have impacted on the certainty of execution of that proposal. This factor did not determine RHG’s assessment of the Pepper/Cadence Proposal, but RHG was not in a position to satisfactorily resolve this concern at the time.

The notice of ceasing to be a substantial holder in relation to RHG released by Pepper to ASX on 30 October 2013 disclosed that the agreement between Pepper and Cadence had terminated.

Obligations under the Merger Implementation Deed

Under clause 10.8 of the Merger Implementation Deed, once the RHG Board determined that the Scheme Proposal provided a superior outcome for RHG Shareholders as a whole, compared with the Pepper/Cadence Proposal, RHG and the Resimac Syndicate were under an obligation to use their best endeavours to negotiate and execute a fourth Deed of Amendment to implement the Scheme Proposal.

45

For

per

sona

l use

onl

y

5.4 Risks relating to an investment in RHG

There are a number of existing risks relating to RHG’s business and the industry in which it operates. These risks will only continue to be relevant to RHG Shareholders if the Scheme does not proceed and RHG Shareholders retain their current investment in RHG. If the Scheme proceeds, RHG Shareholders will receive the Scheme Consideration, will cease to be RHG Shareholders and will no longer be exposed to the risks set out in this Section 5.4.

There are various risks associated with an investment in RHG, as with any stock market investment, and specifically because of the nature of RHG’s business. This Section identifies the areas that are believed to be the key risks associated with RHG’s business. However, the list of risks set out in this Section 5.4 is not exhaustive. Additional risks and uncertainties that RHG currently considers to be immaterial, may also become important factors that affect its business in the future.

There may be additional risks that RHG is not aware of.

(a) Risk of Loss of Principal Investments

There is a risk of loss of RHG’s Principal Investments referred to Section 6.1 including in particular as a result of:

• the occurrence of events of default under Warehouse Facilities and RMBS, including in the case of Warehouse Facilities, the inability to renew or refinance;

• the exercise of non-standard provisions in Warehouse Facilities such as those described in paragraph (d) below;

• the effect on future income, costs and expenses of factors outside RHG’s control;

• the denial or reduction of claims by mortgage insurers;

• the downgrade of credit ratings of mortgage insurers;

• the default of mortgage insurers;

• an increase in servicing costs, or failure to renew or replace servicer agreements in the future,

as further outlined below in this Section 5.4.

Given the Loan Book is in amortisation, the likelihood of this potential loss of Principal Investments may increase over time.

(b) Events of default

All Warehouse Facilities and RMBS contain standard event of default provisions including failure to make payments, enforceability of transaction documents and the ability of transaction parties to fulfil their obligations under the transaction documents.

The Warehouse Facilities also contain certain additional covenants and events which may result in an event of default occurring. These may include covenants and triggers which are directly or indirectly related to the performance of the loans funded by that Warehouse Facility (for example loans in arrears exceeding a pre-determined level).

46

For

per

sona

l use

onl

y

If a Warehouse Facility is not refinanced or renewed or extended on acceptable terms on its maturity date, the Warehouse Facility will be in default.

In particular, one Warehouse Facility has been extended and matures on 27 December 2013. Negotiations regarding an extension to the term of the Warehouse Facility will occur in the future in accordance with the arrangements between RHG and the warehouse provider. See also Section 5.4(d) below. If this facility is not extended, the warehouse provider can exercise an option

59 and that may be an

impediment to the Scheme proceeding.

An event of default under a Warehouse Facility or RMBS:

• will result in the redirection of all of the net interest margin from that Warehouse or RMBS to accelerate the repayment of the amount owing to the secured creditors of that Warehouse Facility or RMBS rather than RHG;

• may result in the security trustee appointing a receiver to the underlying mortgage assets and a subsequent sale of the underlying mortgage assets. Any reduction in the value of the underlying mortgage assets through any sale may result in a reduction in the value of RHG’s investments in the Securitisation Vehicles; and

• may result in cross defaults being triggered in other Warehouse Facilities.

(c) Servicer risk

Entities in the RHG Group outsource the servicing of the Loan Book to UMP. The agreement between RHG Group entities and UMP has been extended (on terms which enable RHG to comply with its obligations under the Merger Implementation Deed) and expires in December 2014.

If the Scheme is not implemented, further discussions between the RHG Group and UMP would need to be held in connection with the renewal of future arrangements between the parties.

If the RHG Group entities are unable to renew future arrangements with UMP by 30 June 2014, the RHG Group entities will need to engage an alternate servicer for the Loan Book or perform the servicing function in-house and any such transition may take longer than the current contractual transition period from 30 June 2014 to 31 December 2014.

From 2014, the servicing cost per loan will increase, and in subsequent years may increase, compared with the servicing cost today as a result of the fixed costs associated with servicing increasing as a percentage of the Loan Book. The UMP agreement is a “Material NIM Contract” for the purposes of the representations and warranties under the Merger Implementation Deed. Accordingly, the UMP agreement must be in full force and effect on the Second Court Date for the Conditions Precedent to the Scheme to be satisfied.

(d) Risks of certain terms contained in Warehouse Facilities

Warehouse Facilities

RHG’s Warehouse Facility agreements contain some non-standard provisions which may increase the risk that RHG does not realise the value of the investments that RHG has in the Securitisation Vehicles.

59

See Section 5.4(d) for more information.

47

For

per

sona

l use

onl

y

In particular, one Warehouse Facility agreement contains an option for the Warehouse Facility provider to acquire the underlying mortgages in that facility at par at the end of the term of the facility on 27 December 2013 (negotiations regarding an extension to the term of the Warehouse Facility will be undertaken in the future in accordance with the arrangements between RHG and the Warehouse Facility provider). If the term of the Warehouse Facility is not extended and the option is exercised, RHG will no longer be entitled to the excess income from these loans and it may be an impediment to the Scheme. If the Warehouse Facility is renewed or extended, this would likely result in the exercise date of that option being revised to the amended maturity date.

In addition, three Warehouse Facilities contain change of control provisions. While consents have been sought from Warehouse Facility providers for the change in control of RHG arising from implementation of the Scheme, if the Scheme does not proceed fresh consents will be required if a change in control of RHG arises from the implementation of any alternate proposal. If consents are unable to be obtained on terms satisfactory to the Resimac Syndicate, the Resimac Syndicate has confirmed to RHG that this will not be an impediment to implementation of the Scheme.

In addition, some Warehouse Facilities contain standard amortisation event clauses which can lead to a deferral of income or an event of default if triggered.

Other arrangements

A third party portfolio which is managed by RHG, but in which RHG does not have an ultimate beneficial interest, contains change in control provisions. If consent to the change in control of RHG is not obtained from the relevant counterparty, a change in control of RHG will also trigger similar consequences in relation to one of the Warehouse Facilities described above. Consent has been sought by RHG from the relevant counterparty in relation to these change of control provisions. If a consent is unable to be obtained on terms satisfactory to the Resimac Syndicate, the Resimac Syndicate has confirmed to RHG that this will not be an impediment to implementation of the Scheme.

(e) Risk to Future Income of events beyond RHG’s control

RHG’s future income may be impacted by factors outside of RHG’s control. These include cash to bills spread (the variance between BBSW and the cash rate set by the Reserve Bank of Australia). If the spread between BBSW and cash rate increases, the net interest margin received by RHG will be reduced and this in turn will reduce profitability.

Similarly, if the Loan Book prepayment rate is higher than anticipated, the Loan Book will amortise more quickly and the profitability of RHG will be reduced.

RHG’s business depends on obtaining refinancing funding from time to time, which assumes that credit markets are not significantly disrupted for any length of time and that it will be possible to conduct that refinancing on acceptable commercial terms. Significant disruption to credit markets can have a material adverse effect on RHG’s financial performance and viability.

(f) Denial or reduction of claims by mortgage insurers

Origination procedures of RHG required loans to be mortgage insured. However certain loan costs, fees and interest are not covered by the master insurance policies. Certain losses may not be claimable if those losses were incurred from loans that:

(i) for some reason mortgage insurance was not put in place;

(ii) resulted from fraud;

48

For

per

sona

l use

onl

y

(iii) were outside specific lending guidelines;

(iv) were held to be unenforceable; or

(v) the underlying property suffered more than fair wear and tear.

RHG has historically had certain claims denied or reduced by mortgage insurers. Claims denied or reduced were $2.4 million in 2008, $5.9 million in 2009, $1.0 million in 2010, $0.9 million in 2011 and $2.6 million in 2012. The losses from the insurance claims that are denied or reduced are borne by RHG. It is possible losses could be in excess of provisions contained in RHG’s accounts.

The Independent Expert has assumed in its valuation a projected expense for denied claims in line with current provisioning.

(g) Downgrade of mortgage insurers

RHG has an obligation to maintain the credit rating of one of its Warehouse Facilities. The credit rating of this facility is correlated with the credit rating of each mortgage insurer. If a mortgage insurer is downgraded, this may result in a requirement for RHG to provide further cash collateral to support the credit rating.

(h) Mortgage insurance does not cover all loan costs or losses

RHG’s exposure to loss of Principal Investments due to defaults or credit risk on the Loan Book is mitigated substantially by mortgage insurance.

If a mortgage insurer defaulted on mortgage insurance or went into administration, liquidation or other form of insolvency, the value of RHG’s Principal Investments may be adversely affected.

(i) Solvency and Winding-Up Risks

There is a fixed corporate cost involved in maintaining the infrastructure, resources and management of the Loan Book. Given the fixed costs involved, RHG’s profitability will reduce as revenue reduces in line with the amortisation of the Loan Book.

If the Scheme does not proceed, RHG’s revenue over time will decrease to the point that expenses exceed revenue and RHG faces the risk of becoming insolvent. At or prior to this point, RHG may be forced to sell the Loan Book and wind-up RHG. Given that the Loan Book will be significantly smaller at that time, and RHG may be perceived to be a forced seller, it is possible that the Loan Book may be sold for less than par. This may result in RHG incurring significant losses in relation to collateral deposits and subordinated debt.

It is also possible that there could be significant costs involved with winding-up RHG including the payment of staff redundancies, liquidator costs, legal costs, ongoing directors and officers insurance and costs involved in setting aside amounts to cover ongoing representations and warranties made by RHGHL in relation to RMBS issues if they are not refinanced as part of the sale of the Loan Book.

Prior to any sale or wind up of the business, it may become increasingly difficult to retain key staff over time.

49

For

per

sona

l use

onl

y

(j) Consumer legislation and other regulatory risks

The RHG Group and the SPVs are subject to the NCCP and various State and Federal consumer lending, consumer protection, fair trading and privacy legislation.

The regulatory regime governing those entities is subject to change. Changes in laws, regulations and interpretation of those laws and regulations and retrospective application of those laws and regulations, may positively or negatively affect RHG’s profitability.

RHG cannot predict what legislative or regulatory changes will be made in the future, or the impact of future legislative or regulatory change on its business. Any non-compliance with consumer legislation, changes to that legislation or the manner in which it is interpreted by the courts or external dispute resolution (EDR) schemes of which the RHG Group or the SPVs are members could affect the extent to which the terms of its loans could be enforced. This may have an adverse impact on the financial performance of RHG.

(k) Taxation

Federal or State governments may introduce further taxes, duties or other imposts on RHG. The Australian Tax Office may also issue taxation rulings which have an adverse impact on RHG.

(l) Litigation

RHG is not currently involved in any material litigation, and is not aware of any facts or circumstances which may give rise to any material litigation. However, given the nature of RHG’s activities, and the wide range of parties that it deals with, RHG may be exposed to potential claims or litigation from third parties, such as customers, regulators, employees, financial ombudsmen and brokers. To the extent that these risks are not covered by RHG’s insurance policies, litigation and the cost of responding to any threats of legal action or investigation may have an adverse impact on the financial prospects or performance of RHG.

50

For

per

sona

l use

onl

y

6 Information about RHG

The following industry terms are helpful for an understanding of this Section: Amortisation: Amortisation, with respect to a loan, is the process by which the principal balance of the loan is reduced over a period of time through borrower payments. Typically, borrowers are required to make a regular monthly payment which has an interest component and a principal component. As the loan balance reduces, the amount of interest payable on the loan reduces each month which means that the proportion of the regular monthly payment which is principal increases over time. Key factors that can affect the rate of amortisation include: (a) voluntary payments of principal by borrowers - this will speed up the amortisation of a loan; (b) redraws and further advances - this will slow down the amortisation of a loan; and (c) interest rate variations - this will either speed up or slow the amortisation of a loan. This is because the

proportion of interest and principal in the regular monthly payment will be changed given the varied interest rate unless the regular monthly payment is adjusted.

BBSW: BBSW (bank bill swap rate) is a market reference floating interest rate that is used as a benchmark for the determination of interest rates. BBSW can be determined with reference to different periods on any day (for example 1 month, 3 months or 6 months) and is determined by taking an average rate observed by a number of institutions as the rate referable to bank bills and negotiable deposits of the four major banks in Australia. BBSW is quoted on certain electronic screen sources on each business day. Margin: Margin, when used in relation to the interest payable on RHG’s RMBS and Warehouse Facilities, is the percentage margin that must be added to BBSW to determine the overall interest rate for that Warehouse Facility or RMBS. The Margin is usually fixed for the term of the RMBS but may vary in certain limited circumstances. For Warehouse Facilities, it is possible for the Margin to vary during each term and it is also often renegotiated each time the Warehouse Facility is extended. The Margin will vary depending on a number of factors including, the general market appetite for debt at the time the debt is issued, the quality of the assets being financed, the credit risk that the debt represents and the requirements of the particular financier. In determining RHG’s total funding cost across the entire Loan Book, RHG will calculate a “weighted average margin” which takes into account the size of each Margin for each RMBS or Warehouse Facility and also the proportion of the Loan Book funded by such RMBS and Warehouse Facility. Therefore, RMBS and Warehouse Facilities with larger outstanding balances will have a greater impact on the size of the weighted average margin than RMBS and Warehouse Facilities with smaller outstanding balances. This means that if RMBS or Warehouse Facilities with a lower margin amortise or are repaid, the overall weighted average margin on the remaining debt will increase having a negative impact on RHG’s profitability. Prepayment: a payment on a loan over and above the required scheduled payment. Prepayment Rate: the annual rate of Prepayment, defined by:

actual end of year balance = (1 – Prepayment Rate) x scheduled end of year balance Residential Mortgage Backed Securities or RMBS: In the context of RHG’s business, RMBS are transactions where the Securitisation Vehicles issued medium to long term debt obligations to wholesale investors in order to fund the ongoing holding of the Loan Book. RMBS are usually issued in different tranches so that different investors may be offered notes with different features (such as different credit ratings from rating agencies, different subordination profiles and different interest rates). The terms of the RMBS are usually structured so that the RMBS does not fall due for final repayment until a date that is after the final maturity date for the latest maturing loan backing that RMBS, although regular interest payments are required to be made on the RMBS. It is also usually a feature of RMBS that the issuer is entitled to redeem the RMBS prior to the maturity date of that RMBS following the satisfaction of pre-agreed call option conditions (which may be a particular date, the Amortisation of the relevant loans to a particular level, certain tax events or certain other conditions). In relation to RHG’s RMBS, the call date for each of its RMBS transactions has occurred but RHG has not exercised its right to redeem the RMBS. Warehouse Facility: a warehouse facility is a funding facility provided by financiers to the Securitisation Vehicles to allow the Securitisation Vehicles to fund the development and continued holding of the Loan Book prior to using the Loan Book (or a portion of it) for an RMBS. Warehouse facilities usually have a short term or medium term maturity date but the maturity date can be extended by agreement between the parties with any new terms agreed between the parties applying from the extension date. Traditionally “warehouse facilities” are revolving facilities which means that as the facility is paid down, the borrower is permitted to borrow those repaid amounts up to an agreed credit limit. In this way the facility acts in a similar fashion to a “warehouse” for the loans – loans are initially funded by the warehouse facility upon their origination or acquisition with the traditional expectation

51

For

per

sona

l use

onl

y

that those loans would be refinanced with an RMBS transaction (any refinancing then allows the warehouse facility to be used for further originations and acquisitions). In the case of RHG which no longer participates in new RMBS transactions to refinance the warehouse facilities, RHG’s options in relation to repaying the outstanding balance of the warehouse facilities are to either: (a) agree extensions of the maturity date of the warehouse facilities and rely on the amortisation of the Loan

Book; or (b) conduct asset sales to third parties in relation to the assets financed by the warehouse facilities.

6.1 Overview and history

RHG manages a Loan Book of residential home loans in Australia.

RHG was founded in 1991 as a wholesale provider of funds to lenders, initially in the commercial and investment property markets, sourcing loans from external parties. In 1995, RHG expanded from being solely a provider of funds and established its own retail origination business via a sales force of contracted mobile home loan managers.

RHG was listed on the ASX in July 2007. As a consequence of funding difficulties during 2007, RHG sold the “RAMS” brand and other assets (including its distribution network) to Westpac Banking Corporation. The RHG name was adopted after this sale. As part of the sale to Westpac Banking Corporation, RHG agreed not to engage in a business competing with the business sold to Westpac Banking Corporation for a period of three years. This non-compete agreement expired in January 2011. In August 2011, RHG conducted a strategic review and determined not to re-enter the distribution market.

The Loan Book has been in run-off since November 2007. RHG’s operations have been limited to the funding and servicing of the Loan Book that was in existence prior to November 2007, with the exception of some mortgages sold to third parties since then. Specifically, in February 2008, RHG completed the sale of $1 billion of mortgages originated by RHG at par to National Australia Bank Limited as part of the transactions that enabled it to refinance its extendible commercial paper programme. In October 2009, RHG sold a further $440 million of mortgages originated by RHG to National Australia Bank Limited at par.

RHG generates a declining, albeit relatively predictable cashflow (in the financial year ended 30 June 2013, RHG generated $23.8 million of consolidated net cash inflow from operating activities). RHG’s revenue reduces over time in line with the run-off of the Loan Book. The Loan Book had a balance of approximately $2.1 billion as at 30 June 2013.

Receivables Servicing Pty Limited, a subsidiary of RHG, is responsible for the servicing of the Loan Book. It outsources certain loan portfolio servicing activities to UMP for an outsourcing contract fee. UMP provides on-going data management, payment collection and processing redraws, borrower reporting, customer enquiry and arrears management.

The current arrangements with UMP have been extended (on terms which enable RHG to comply with its obligations under the Merger Implementation Deed) and expire on 31 December 2014, subject to any further agreed extension.

As at 30 September 2013, RHG had 13 employees and three contractors. The primary responsibility of these staff is the treasury, legal and compliance, credit and accounting functions associated with the servicing and management of the Loan Book.

The operating expenses of the business include fee and commission expenses, employee benefits, funding expenses, professional services fees, rental expenses and loan impairment expenses.

RHG’s Principal Investments are:

(a) cash or cash equivalents;

52

For

per

sona

l use

onl

y

(b) the Residual Income Units;

(c) the Fees;

(d) collateral deposits and other reserves; and

(e) subordinated debt that Subsidiaries of RHG hold in relation to the funding transactions of the Securitisation Vehicles supporting the Loan Book.

The Residual Income Units and Fees represent RHG’s entitlement to the excess income in relation to the Loan Book (subject to meeting financing costs). The collateral deposits support the insurance claim and loan default risks as determined by a credit rating agency as well as amounts agreed with Warehouse Facility providers. The Residual Income Units and Fees are first loss credit support for RHG’s Warehouse Facilities and RMBS transactions. If there are insufficient Residual Income Units and Fees to cover losses, subordinated debt and reserve accounts are used to cover losses.

In the normal course of business, the subordinated debt and collateral deposits are due to be repaid after the Securitisation Vehicle’s senior financiers are repaid. If the facilities are not refinanced, this repayment may occur in a significant number of years from now and the repayment of the amounts will be in line with repayments of any outstanding mortgages at the time.

6.2 Funding

The Loan Book of approximately $1.9 billion60

is owned and funded by special purpose entities (“SPEs”) which are managed, but not owned, by the RHG Group. This structure has allowed RHG:

• to conduct highly rated asset-backed funding transactions; and

• to structure funding transactions where investors’ recourse is to specific pools of housing loans, with only limited recourse to RHG.

As at 30 September 2013, RHG’s funding mix is comprised of Warehouse Facilities of approximately $1.4 billion and RMBS of approximately $0.5 billion.

(a) Warehouse Facilities

The SPEs have three externally funded Warehouse Facilities with an outstanding balance, at 30 September 2013, of approximately $1.4 billion. A fourth smaller Warehouse Facility exists which is funded by RHG. The weighted average cost of the warehouse funding (excluding the RHG Warehouse Facility) is approximately 191 basis points above BBSW.

The Warehouse Facilities are short to medium term funding facilities that are renewable at the discretion and on the terms agreed with the Warehouse Facility providers and have pre-agreed events of default that may cause them to terminate before the final maturity date.

(b) RMBS

The RMBS securities issued by the SPEs are 30 to 32 year variable rate (fixed margin over BBSW) pass through securities. While these securities are 30 to 32 year securities, they include an option for the issuer to refinance the notes, at the issuer’s discretion, on or prior to the final maturity date. All RMBS issues outstanding today can be repaid at the issuer’s discretion and have 20 to 25 years remaining to maturity.

60 As at 30 September 2013

53

For

per

sona

l use

onl

y

The current weighted average margin of RMBS to the SPEs is approximately 76 basis points above the 30 day BBSW.

Since 2008, margins for new RMBS issues priced above the 30 day BBSW have widened dramatically. Other structural or investor changes to RMBS include the requirement for the issuer to have significantly more exposure to losses through investment in subordinated debt or reserves.

RHG’s ability to issue new RMBS is limited due to its product mix, the fact that RHG has not exercised its option to repay existing RMBS (which investors may have expected) and the wind down position of RHG.

6.3 Corporate structure

RHG’s corporate structure is set out in a diagram in Annexure G of this booklet.

RHG operates through its four subsidiaries (the “Subsidiaries”), as detailed in the following table.

Subsidiary Description

RHG Home Loans Pty Limited (“RHGHL”) Primary income earning subsidiary which holds the residual income of the SPEs and is the employer of all staff

Receivables Servicing Pty Limited Responsible for the servicing of the book, is a party to the outsourcing agreement with UMP and is the holder of Australian Credit Licence (Number 391691)

RHG Treasury Services Pty Limited Responsible for treasury functions and holds an Australian Financial Services Licence

Prime Insurance Group Limited (a subsidiary of RHGHL incorporated in Bermuda) (“PIGL”)

Mortgage insurer of approximately 40% of the Loan Book by book value supported by reinsurance arrangements with American International Assurance (Bermuda) Limited

The Loan Book is owned and funded by the SPEs which are managed, but not owned, by the RHG Group. The principal operations of each of the SPEs are discussed below.

(a) RHG Mortgage Corporation Limited

RHG Mortgage Corporation Limited (“RMC”) was incorporated on 8 August 1994, and from that time until 2002 was the primary funding vehicle for RHG. The issued shares in RHG Mortgage Corporation Limited are held by BNY or officers of BNY. The ultimate beneficial owners of all of the shares in RMC are beneficiaries under a charitable trust.

Since October 1997, RMC has been the lender of record on all loans advanced to borrowers.

RMC has a security structure under which its assets and liabilities are segregated into separate series. The liability of RMC under every transaction document is limited to the assets it has in relation to a particular series. One funding transaction remains that has been created by RMC issuing debt instruments in relation to an RMBS transaction.

54

For

per

sona

l use

onl

y

Members of the RHG Group also derive fee income in relation to loans held with RMC in consideration for services provided in relation to the management and servicing of the Loan Book held by RMC.

(b) RMS Trusts61

The RMS Trusts are established by RHG Mortgage Securities Pty Limited under Master Trust and Security Trust Deeds. The issued share capital of RHG Mortgage Securities Pty Limited is one ordinary share paid up to an amount of $1. The one issued share is held by BNY which in turn holds the beneficial interest in that share on trust for a charitable trust. RHG Home Loans Pty Limited is the holder of the Residual Income Units and receives excess income distributions from the RMS Trusts.

Further funding transactions may be created from time to time by RHG Mortgage Securities Pty Limited establishing a trust under the Master Trust and Security Trust Deed for the RMS Trusts. In respect of that RMS Trust, RHG Mortgage Securities Pty Limited would then enter into funding facility agreements with financial institutions relating to a warehouse transaction or issue debt instruments in relation to a RMBS transaction.

(c) RHG Mortgage Securities Trust

The RHG Mortgage Securities Trust has been established with a similar ownership structure to the RMS Trusts with RHG Home Loan Pty Limited holding a Residual Income Unit and receiving excess income distributions from the RHG Mortgage Securities Trust.

The RHG Mortgage Securities Trust allows assets and liabilities to be segregated into a number of discrete series. The assets and liabilities of each series are accounted for separately from those of any other series established under the Master Trust and Security Trust Deed for the RHG Mortgage Securities Trust and are generally not available to meet any obligations of the RHG Mortgage Securities Trust in respect of any other series.

6.4 RHG Board and senior management

(a) RHG Board

The RHG Board comprises the following Directors.

Director’s name Position

Glenn Goddard Executive Chairman, Director

Paul Jensen Non-Executive Director

John Kean Non-Executive Director

Richard Nott Non-Executive Director

Gabriel Radzyminski Non-Executive Director

61 Including RMS Trust 2002-1, RMS Trust 2004-1E and RMS Warehouse Trust 2007-1 (which is not consolidated to RHG’s

balance sheet )

55

For

per

sona

l use

onl

y

(b) RHG Senior management

The RHG senior management team consists of:

Name Position

Glenn Goddard Chief Executive Officer

David Hadlow Head of Operations

Warren Williams Treasurer

Michael Renshaw Chief Financial Officer

Karen Reid General & Compliance Counsel

6.5 RHG Shares

As at the date of this Scheme Booklet, there are 308,483,177 RHG Shares on issue.

6.6 Material Contracts

RHG has obtained funding for home loans from SPEs which are managed, but not owned, by a related entity of RHG.

The home loans of RHG are held by RMC, the RMS Trusts and the RHG Mortgage Securities Trust, each of which enters into different funding transactions to finance home loans. The origination and financing of the Loan Book is governed by a number of material documents including:

(a) in respect of the RMS Trusts and the RHG Mortgage Securities Trust, a Master Trust and Security Trust Deed. These documents establish each RMS Trust and the RHG Mortgage Securities Trust and provide the terms of each Residual Income Unit issued to RHG Home Loans Pty Limited. These Residual Income Units represent the source of RHG’s entitlement to a significant proportion of the net income derived by RHG in relation to home loans held in the RMS Trusts and the RHG Mortgage Securities Trust;

(b) the Master Management Deed for each SPE. These documents govern the terms and conditions upon which RHG Treasury Services Pty Limited is appointed to perform the day to day administrative, supervision and management functions of each SPE in exchange for a fee for providing those services;

(c) the Master Servicer Deed for each SPE. These documents govern the terms and conditions upon which Receivables Servicing Pty Limited is appointed to service the home loan portfolio of each SPE in exchange for a fee for providing those services. These functions are then outsourced to UMP;

(d) in the case of RMC, the Master Origination Deed. This document governed the way in which RHGHL introduced home loans to RMC in exchange for a fee for providing those services. This deed has been terminated as RHGHL no longer originates new loans. Members of the RHG Group also derive fee income in relation to loans held with RMC in consideration for services provided in relation to the management and servicing of the Loan Book held by RMC; and

(e) documents in respect of specific funding transactions, principally:

(i) for warehousing transactions – loan facility documents, security documents and hedging documents; and

56

For

per

sona

l use

onl

y

(ii) for RMBS transactions – note issuance documents, security documents and hedging documents.

Each funding transaction has market standard events of default. Further, Warehouse Facilities, given their short to medium term nature, are renewable at the discretion of the facility provider and also have pre-agreed events (which may include events that adversely affect the home loans or RHG) that may cause them to terminate before the scheduled termination date.

The occurrence of an event of default or the non-renewal of a Warehouse Facility will result in the possibility of a reduction in the assets (and therefore the future revenue stream on those assets) available to RHG if those assets are realised to repay that transaction. It also may mean that there are insufficient funds available to repay the subordinated debt that RHG holds in the SPEs.

6.7 Risks relating to an investment in RHG

There are a number of risks relating to RHG’s business and the industry in which it operates. These are discussed in Section 5.4. It should be noted that the list of risks set out in Section 5.4 is not exhaustive and additional risks and uncertainties that RHG currently considers to be immaterial may also become important factors that affect its business in the future. There may be additional risks that RHG is not aware of. The risks set out in Section 5.4 will only continue to be relevant to RHG Shareholders if the Scheme does not proceed and RHG Shareholders retain their current investment in RHG.

If the Scheme proceeds, RHG Shareholders will receive the Scheme Consideration, will cease to be RHG Shareholders and will no longer be exposed to the risks set out in Section 5.4.

6.8 Financial information

The financial information set out in this Section is a summary only. Full financial statements for the RHG Group for the financial years ended 30 June 2011, 30 June 2012 and 30 June 2013, were released to ASX and are available free of charge on ASX website at www.asx.com.au or RHG’s website at www.rhgl.com.au. RHG recommends you review the financial statements of RHG and seek professional advice.

The financial statements for the RHG Group for the financial years ended 30 June 2011, 30 June 2012 and 30 June 2013 were audited by RHG’s auditor, PwC. PwC issued an unmodified audit report for these financial statements.

(a) Consolidated income statement

The following table presents a summary of the consolidated income statement for the RHG Group for the years ended, 30 June 2011, 30 June 2012 and 30 June 2013 as extracted from RHG’s audited financial report for those years.

57

For

per

sona

l use

onl

y

Statements of Comprehensive Income

For the year ended 30 June

2011

$’000

2012

$’000

2013

$’000

Revenue from continuing operations

Interest income 405,843 278,291 172,560

Interest expense (297,182) (207,667) (116,800)

Net interest income 108,661 70,624 55,760

Fee and commission income 22,217 3,591 3,833

Total income net of interest expense 130,878 74,215 59,593

Total operating expenses excluding interest

(26,222) (16,068) (16,300)

Profit before income tax 104,656 58,147 43,293

Income tax expense (30,625) (17,447) (12,990)

Profit for the year 74,031 40,700 30,303

Other comprehensive income - - -

Total comprehensive income 74,031 40,700 30,303

Profit for the year attributable to:

Owners of RHG Limited 74,031 40,700 30,303

Total comprehensive income for the year attributable to:

Owners of RHG Limited 74,031 40,700 30,303

TOTAL 74,031 40,700 30,303

58

For

per

sona

l use

onl

y

(b) Consolidated statement of financial position

The following table presents a summary of the consolidated statement of financial position for the RHG Group for the years ended 30 June 2011, 30 June 2012 and 30 June 2013 as extracted from RHG’s audited financial report for those years.

Balance Sheet as at 30 June

2011

$’000

2012

$’000

2013

$’000

Assets

Cash and cash equivalents 266,347 196,378 115,854

Loan assets held at amortised cost 3,813,177 2,790,055 2,071,713

Other assets 4,034 4,803 3,403

Plant and equipment 86 56 119

Deferred tax assets 4,529 3,209 1,164

Total assets 4,088,173 2,994,501 2,192,253

Liabilities

Debt issued at amortised cost 3,797,203 2,773,832 2,067,360

Derivative financial liabilities 83,585 73,211 18,020

Financial liabilities at amortised cost 13,241 10,467 8,041

Other liabilities 21,403 14,291 7,590

Provisions 32,472 4,771 1,622

Total liabilities 3,947,904 2,876,572 2,102,633

Net assets 140,269 117,929 89,620

Equity

Contributed equity 3,584 3,784 3,784

Retained profits 136,483 113,943 85,634

Reserves 202 202 202

Total equity 140,269 117,929 89,620

59

For

per

sona

l use

onl

y

(c) Corporate balance sheet

The consolidated balance sheet in Section 6.8(b) is prepared in accordance with Australian accounting standards. Those standards require the consolidation of a number of items that are not available to RHG Shareholders, including:

(i) some cash which is temporarily held by the Securitisation Vehicles, but which is required to be paid to the funders of those vehicles;

(ii) the balance of the Loan Book along with the liabilities involved in funding the Loan Book.

Therefore, it is appropriate to detail the information used by the RHG Board to monitor the business. The following tables sets out the corporate balance sheet of RHG Group. The corporate balance sheet represents the consolidated balance sheet of RHG Group excluding the Securitisation Vehicles which hold certain mortgages. These Securitisation Vehicles are excluded on the basis that the assets, liabilities and related funding obligations of these Securitisation Vehicles do not represent the rights or obligations of RHG Shareholders except to the extent that excess income is earned. This corporate balance sheet is not prepared in accordance with Australian accounting standards.

60

For

per

sona

l use

onl

y

Corporate Balance Sheet as at 30 June

2011

$’000

2012

$’000

2013

$’000

Cash and cash equivalents and intercompany receivables

105,339 54,533 40,396

Subordinated debt 14,600 14,600 12,000

Collateral deposits 42,497 39,513 24,608

Investment in impaired mortgages 15,000 16,300 12,000

Floats and security deposits 3,337 3,437 2,736

Sundry receivables and accruals 679 609 556

Property, plant and equipment 86 56 119

Total Tangible Assets 181,538 129,048 92,415

Accounts payable and accruals 2,841 6,607 3,038

Provision for losses - Specific 8,127 4,805 4,107

- General 3,091 2,305 1,396

Provision for income tax 30,998 3,233 114

Provision for broker trail expense 13,241 10,467 8,041

Total liabilities 58,298 27,417 16,696

Net tangible assets 123,240 101,631 75,719

Net intangible assets(1)

17,029 16,298 13,901

Shareholders’ equity 140,269 117,929 89,620

(1) Represented predominantly by deferred transaction costs

61

For

per

sona

l use

onl

y

(d) Reconciliation between total assets and total liabilities between the consolidated balance sheet and the corporate balance sheet

2011

$’000

2012

$’000

2013

$’000

Assets Liabilities Assets Liabilities Assets Liabilities

Total per the statutory balance sheet

(2)

4,088,173 3,947,904 2,994,501 2,876,572 2,192,253 2,102,633

Less(3)

(3,906,635) (3,889,606) (2,856,453) (2,849,155) (2,099,838) (2,085,937)

Total tangible assets / liabilities

181,538 58,298 129,048 27,417 92,415 16,696

Net tangible assets

(4)

123,240 101,631 75,719

(2) Total assets and liabilities from consolidated balance sheet in Section 6.8(b)

(3) Includes loans, derivatives, notes and associated balances of the assets of the Securitisation Vehicles

(4) Corresponds to net tangible assets from corporate balance sheet in Section 6.8(c)

The corporate balance sheet does not consider the following factors:

(i) the rights to future income that might be derived from the book of mortgage receivables managed by RHG;

(ii) an ongoing obligation to service the mortgages and bear the costs associated with mortgage servicing;

(iii) the extent to which future losses on the mortgages may exceed the residual income from the mortgages; and

(iv) any actions that may be taken by the Warehouse Facility providers.

6.9 Material changes in RHG’s financial position

To the knowledge of the RHG Directors, and except as disclosed elsewhere in this Scheme Booklet, the financial position of RHG has not materially changed since 30 June 2013, being the date of the last balance sheet laid before the company in general meeting, or sent to RHG Shareholders in accordance with section 314 or 317 of the Corporations Act.

6.10 Outlook

The Loan Book is a closed book and is amortising, and in line with the expected amortisation of the Loan Book, future profits are expected to be materially lower. In calculating the expected amortisation of the Loan Book, and in determining the amortisation costs of various assets on its balance sheet, RHG currently uses a Prepayment Rate of approximately 25%. This differs from the Prepayment Rate used by the Independent Expert – see Section

62

For

per

sona

l use

onl

y

4.2.1 of the Independent Expert’s Report, and Section 4.8 of that report for the impact of the Prepayment Rate on valuation sensitivities.

RHG’s business continues to operate in an uncertain environment and therefore future cashflows of the business may be needed to support the business and various Warehouse Facilities. Therefore the size and timing of any future dividends are uncertain.

RHG has no plans to re-enter the Australian mortgage market either now or in the foreseeable future.

6.11 RHG Directors’ intentions

The Corporations Act requires a statement by the RHG Directors of their intentions regarding RHG’s business.

If the Scheme is implemented, the RHG Board will be reconstituted in accordance with AMAC’s instructions as the sole RHG Shareholder from the Implementation Date.

Accordingly, it is not possible for the RHG Directors to provide a statement of their intentions regarding:

• the continuation of the business of RHG or how the existing business will be conducted;

• major changes, if any, to the assets of RHG; and

• the future employment of the present employees of RHG,

after the Scheme is implemented.

If the Scheme is implemented, AMAC will have 100% ownership and control of RHG and its current intentions in respect of the above matters are set out in Section 7.4.

If the Scheme does not proceed, in the absence of an alternative proposal, for the time being, the RHG Directors will continue to operate RHG as a stand-alone listed entity in accordance with the business plans and financial and operating strategies in place before the announcement of the Scheme.

If the Scheme does not proceed, RHG Shareholders will continue to participate in the benefits of, and continue to be exposed to the risks relating to, an investment in RHG. A summary of the key risks relating to an investment in RHG is set out in Section 5.4.

6.12 Public information available for inspection

RHG is a ‘disclosing entity’ for the purposes of section 111AC(1) of the Corporations Act and is subject to regular reporting and disclosure obligations.

RHG has an obligation under the Listing Rules (subject to some exceptions) to notify ASX immediately of any information concerning it of which it becomes aware that a reasonable person would expect to have a material effect on the price or value of RHG Shares.

RHG’s recent announcements are available from ASX’s website at www.asx.com.au. Further announcements will continue to be made available on this website after the date of this Scheme Booklet.

63

For

per

sona

l use

onl

y

7 Information about the Resimac Syndicate

The information contained in this Section 7 has been prepared by the Resimac Syndicate.

The information concerning AMAC and the intentions, views and opinions of AMAC contained in this Section are the responsibility of AMAC. The information concerning Resimac and the intentions, views and opinions of Resimac contained in this Section are the responsibility of Resimac.

RHG and RHG’s Directors and officers do not assume any responsibility for the accuracy or completeness of this information except to the extent that RHG has provided the Resimac Syndicate with information for the purpose of the Resimac Syndicate preparing information on the merged entity following implementation of the Scheme.

7.1 Overview of AMAC and Resimac

(a) AMAC

AMAC is a special purpose company, and was established by Trevor Loewensohn for the sole purpose of acquiring 100% of the shares in RHG under the Scheme. Mr Loewensohn is the sole shareholder of AMAC.

Trevor Loewensohn is a former director of RHG who resigned from the board on 12 March 2013. Mr Loewensohn is also the managing director of Alceon GT Pty Ltd which ceased to be a substantial shareholder of RHG on 14 March 2013 and does not currently hold any RHG Shares.

(b) Resimac

Resimac commenced operations in 1985, when it was established by the New South Wales state government to service and securitize residential loans for HomeFund, a New South Wales government housing programme under the name of FANMAC.

In 1993, FANMAC Limited established a private residential lending programme via its subsidiary Residential Mortgage Acceptance Corporation Limited. The HomeFund New South Wales Government housing program ceased in 1994 and FANMAC Limited changed its name to RESIMAC Limited in July 2001. As a result of the changes and expansion to the company's business since it acquired its shareholding, the NSW Government indicated its desire to dispose of its investment and this was facilitated by a share buy back in 2003. Since 1995 the Resimac loan book has expanded from $600 million to over 16,000 loans worth $3.1 billion (as at 30 June 2013).

Resimac’s primary activities involve originating, servicing and securitising mortgage assets.

Resimac has a 28 year corporate history in servicing mortgage loans for securitization programmes. Its processing and servicing systems are proprietary and maintained and developed by a team of information technology specialists. The technology infrastructure of Resimac’s servicing platform enables a semi-automated operating environment with data verification, document validation and quality assurance procedures for its mortgage loans.

Resimac is an unlisted public company with the major shareholder Ingot Capital Management (“ICM”) currently holding 86.95% of the shares, initially investing in 1998. ICM acts as the investment manager to two diversified investment funds listed on the London Stock Exchange, Utilico Investments and Utilico Emerging Markets. ICM is ultimately owned 100% by Duncan Saville.

64

For

per

sona

l use

onl

y

(c) History of AMAC and the Resimac Group’s relationship with RHG

Resimac has previously put forward a proposal to RHG regarding a possible asset-level sale of RHG’s Loan Book. However, this proposal was not ultimately pursued because the RHG Directors preferred a transaction that resulted in the acquisition of all RHG Shares rather than a purchase of assets, given that RHG’s Loan Book is a closed book and is operating in wind-down mode.

Following the termination of this proposal, Trevor Loewensohn was well positioned (after resigning from the board of RHG and after Alceon disposed of its shares) to assist in the acquisition of RHG given his deep familiarity with RHG and extensive experience in transactions of this nature.

Resimac and AMAC put a joint proposal to RHG under which AMAC will acquire all of the RHG Shares in accordance with the Scheme, and AMAC will then immediately afterwards cause relevant RHG Group companies and the Securitisation Vehicles to sell the assets referred to in Section 7.4(c) of this Scheme Booklet, with the consequence that management and servicing of the RHG Loan Book will be taken over by Resimac.

(d) AMAC’s and Resimac’s Directors

AMAC


Trevor Loewensohn Sole director and company secretary

Resimac


Warren McLeland CEO, Director

Thomas Ford Director

Susan Hansen Director

Michael Collier Director

7.2 Rationale for the Resimac Syndicate’s proposed Acquisition of RHG

Pursuant to its analysis of the Due Diligence Materials and publicly available information, Resimac has a strong understanding of RHG’s prime mortgage portfolio. It also has a strong track record of managing substantial mortgage portfolios. As a result, Resimac will be able to integrate the RHG portfolio into its existing book and take advantage of the economies of scale available as a result of the significant increase in the size of its portfolio post transaction. Additionally the nature of Resimac’s existing business ensures it is in a unique position, not only to extract synergies from the transaction, but also to continue to deliver quality service to the RHG borrowers.

AMAC's rationale for acquiring the RHG Shares under the Scheme is that immediately after becoming the beneficial owner of all of the shares of RHG, AMAC will cause relevant RHG Group companies and the Securitisation Vehicles to sell those assets to Resimac, AMAC will effectively retain the RHG Group companies and the assets and liabilities of those companies that are not sold to Resimac, and will discharge all of the remaining obligations relating to the RHG Group entities and wind them down as appropriate over time. AMAC expects to have a surplus of net assets available to it following the eventual winding down of the RHG Group entities.

65

For

per

sona

l use

onl

y

7.3 Funding arrangements for Scheme Consideration

(a) Maximum cash consideration

The cash consideration to be provided by AMAC under the terms of the Merger Implementation Deed and the Deed Poll is $154,550,072 based on 308,483,177 Scheme Shares on issue.

The total amount of funding available to AMAC is sufficient to pay the aggregate Scheme Consideration. The Scheme is not conditional on AMAC obtaining debt or equity finance to fund the payment of the Scheme Consideration. The description of AMAC’s funding arrangements below is provided for information purposes to demonstrate that AMAC has arrangements in place to fund payment of the Scheme Consideration in full if the Scheme becomes Effective.

Resimac guarantees the due and punctual performance and observance by AMAC of, amongst other things, AMAC’s obligations to pay the Scheme Consideration under the Scheme. This guarantee is for the benefit of all persons registered as RHG Shareholders as at the Scheme Record Date.

As described in further detail in Section 7.3(b):

(i) Resimac is lending $124,550,072 of the Scheme Consideration to AMAC to enable AMAC to meet part of the Scheme Consideration; and

(ii) Resimac has sufficient funds, from an external Bridging Facility and internal resources:

(A) to meet its own obligations to fund the $124,550,072 it is lending to AMAC; and

(B) to fund its obligations under the guarantee, if required and in relation to the Scheme.

(b) Overview of funding arrangements

AMAC has a binding agreement to obtain loan funding from both Resimac and Alceon GT Pty Ltd (Alceon) in its capacity as trustee of the Alceon Group Trust to satisfy its obligations under the Scheme. Alceon was previously a substantial shareholder in RHG, and is a company of which Mr Loewensohn is an executive.

The shares in Alceon are owned by TFLT Pty Ltd, a company of which Mr Loewensohn is a director, as trustee for the Loewensohn Family Trust, Alceon is the trustee of the Alceon Group Trust, of which the Loewensohn Family Trust is a major unit holder.

The purpose of the Financial Assistance Resolution is to allow RHG and RHGHL to provide some of their funds directly or indirectly to AMAC to repay the loans from Alceon and Resimac following implementation of the Scheme and the subsequent proposed sale of assets to Resimac (and, in the limited circumstance where the asset sale does not complete within 2 business days after the implementation of the Scheme, to allow the grant by RHG of an all assets security in favour of National Australia Bank Limited (who will provide financing for part of the Scheme Consideration)). The funds which RHG and RHGHL (once under the control of AMAC) will provide will predominantly come from existing balance sheet cash, repayment of warehouse credit support and the premium received from Resimac as part of the asset sale.

As shown in the pro forma corporate balance sheet below (which was prepared by AMAC), following implementation of the Scheme, the subsequent proposed sale of

66

For

per

sona

l use

onl

y

assets to Resimac and the provision of funds to AMAC to repay the loans from Alceon and Resimac, AMAC estimates that RHG is expected to have approximately $9.64 million in assets and $5.96 million in identified liabilities inclusive of all employee entitlements including an estimate of the full cost of redundancies. AMAC estimates that the remaining $3.68 million in net assets is expected to be more than sufficient for RHG to meet any ongoing obligations under its licenses, ASIC Settlement Deed, premises lease agreement and costs associated with the ongoing management of relevant RHG entities including winding down the various RHG entities in due course which are estimated to be in the range of $1.5 million to $2.5 million.

RHG pro forma corporate balance sheet62

Pro-forma adjust-ments

Asset sale, completion and financing adjustments

RHG Pro Forma Corporate

Balance Sheet

August 2013

Actual(1)

$’000

Cash move-ment

(2)

$’000

Pro Forma at

Implemen-tation Date

(3)

$’000

Monetisation of sub debt,

deposits, accruals

(4)

$’000

Other transaction

related adjustments

(5)

$’000

Bridge loan repayments

(6)

$’000

Post Asset

Sale and Financing

$’000

Assets

Current Assets Cash & Cash Equivalents 33,644 2,550 36,194 53,109 74,396 (154,550) 9,148

Receivables 3,484 3,484 (3,484) - Other Current Assets 491 491 (114) 377

Total Current Assets 37,619 40,169 9,525 Non Current Assets

Cash Collateral 22,994

22,994 (22,994) -

Other Assets 2,748

2,748 (2,631)

118 Investments & Subordinated Debt 24,000

24,000 (24,000) -

Deferred Transaction Costs 14,552

14,552 (14,552) -

Net EIR Hedging Adjustment (2,832) (2,832) 2,832 - Deferred Tax Asset 1,095

1,095 (1,095) -

Plant & Equipment 113

113 (113) -

Total Non Current Assets 62,670

62,670

118

Total Assets 100,289

102,839

9,643

62

All information set out in the RHG pro forma corporate balance sheet has been prepared or estimated by AMAC.

67

For

per

sona

l use

onl

y

RHG pro forma corporate balance sheet (cont…)63

Pro-forma adjust-ments

Asset sale, completion and financing adjustments

RHG Pro Forma Corporate

Balance Sheet

August 2013

Actual(1)

$’000

Cash move-ment

(2)

$’000

Pro Forma at

Implemen-tation Date

(3)

$’000

Monetisation of sub debt,

deposits, accruals

(4)

$’000

Other transaction

related adjustments

(5)

$’000

Bridge loan repayments

(6)

$’000

Post Asset

Sale and Financing

$’000

Liabilities

Provisions Other

Provisions for Impaired Loans 5,398

5,398 (5,398) -

Other Provisions 1,360

1,360 2,321

3,680

Total Provisions Other 6,757

6,757

3,680

Trail Provision 7,519

7,519 (7,519) -

Accounts Payable 1,954

1,954 (124)

1,830 Provision for Income Tax 453

453

453

Total Liabilities 16,683

16,683

5,963

Net Assets 83,606

2,550

86,156

- 72,074 (154,550)

3,680

Notes to RHG pro forma corporate balance sheet:

(1) Unaudited RHG management accounts as at 31 August 2013 (2) RHG’s estimated post tax cash earnings from 1 September 2013 to 31 December 2013 net of estimated

transaction costs (3)

RHG’s pro forma balance sheet immediately prior to Implementation Date (4)

Repayment of subordinated debt, collateral deposits, investment in impaired mortgages, other deposits and receivables to RHGHL post sale of assets to Resimac entities

(5) Other transaction adjustments as a result of asset sale and revaluation of assets, including the current estimated Resimac premium of $74,996,000 representing payment for rights to future excess spread of mortgage portfolio less $600,000 cash belonging to PIGL

(6) Repayment of loan to AMAC from Resimac ($124,550,072) and Alceon ($30,000,000)

This pro forma corporate balance sheet has not been prepared or approved by the RHG Group.

Alceon funding to AMAC

Alceon, in its capacity as trustee of the Alceon Group Trust, has agreed to lend $30,000,000 to AMAC for the purposes of partially funding the Scheme Consideration (Alceon Funding). Alceon's obligation to AMAC remains conditional only upon:

• the Scheme becoming unconditional; and

• the Resimac Funding (defined below) being available and Resimac satisfying AMAC (acting reasonably) that it is in a position to execute and complete the Asset Sale Deed immediately upon implementation of the Scheme.

All of the Alceon Funding will come from either the assets of the Alceon Group Trust or an entity wholly owned by the Alceon Group Trust, or will be provided by unit

63

All information set out in the RHG pro forma corporate balance sheet has been prepared or estimated by AMAC.

68

For

per

sona

l use

onl

y

holders of the Alceon Group Trust. The unit holders of the Alceon Group Trust are persons, or entities related to persons, that are all employees or consultants of the Alceon group. Those unit holders have entered into funding agreements with Alceon which are conditional only upon the Alceon Funding obligation becoming unconditional, and provide in aggregate for up to $30 million of committed funding with Alceon entitled to draw down up to this amount at its election should its own cash resources be insufficient.

Resimac funding to AMAC

Resimac has agreed to lend $124,550,072 to AMAC for the purposes of partially funding the Scheme Consideration (Resimac Funding). The conditions to the Resimac Funding are that National Australia Bank Limited has provided the loan to Resimac under the Bridging Facility (described below) and that other conditions customary for loans of this kind (for example, confirmation that AMAC has no other existing security interests over its assets) are satisfied or waived.

Resimac will obtain the Resimac Funding from external debt to be provided to Resimac under a new facility (Bridging Facility) with National Australia Bank Limited, which will be available to Resimac for the purpose of financing the Resimac Funding. The funds available to Resimac under the Bridging Facility are sufficient to finance the Resimac Funding. Resimac’s ability to draw down under the Bridging Facility is subject to certain conditions being satisfied or waived including:

(i) evidence that the Scheme has become Effective and is not conditional;

(ii) evidence that the part of the Scheme Consideration which is being funded by the Alceon Funding has been deposited into a nominated bank account prior to the Implementation Date;

(iii) evidence that the Financial Assistance Resolution has been approved, the Financial Assistance Resolution has been notified to ASIC in accordance with section 260B of the Corporations Act and the 14 day notice period has completed on or before the Implementation Date;

(iv) evidence that on and following the Implementation Date, AMAC will own 100% of the RHG Shares and no person other than AMAC will have any right to be issued any marketable securities or have any right convertible to marketable securities in RHG which, in each case, could be effected on or after the Implementation Date;

(v) there has been no misrepresentation by Resimac and AMAC and Resimac and AMAC are not in breach of any undertaking or default under certain transaction documents relevant to the Bridging Facility, the Scheme and the subsequent asset sale and no events of default, cancellation or prepayment under those documents have occurred;

(vi) no event of default or potential event of default (customary for facilities of this kind) has occurred and is subsisting;

(vii) evidence that all conditions precedent under the Resimac Funding (other than the condition precedent that National Australia Bank Limited has provided the loan under the Bridging Facility) have been satisfied or waived; and

(viii) other conditions precedent which are customary for facilities of this kind (for example, the stamping (if required) and registration of, and delivery of title documents under, security granted to National Australia Bank Limited to secure repayment of the Bridging Facility, confirmation that Resimac has no other existing security interests over the property which secures repayment of

69

For

per

sona

l use

onl

y

the Bridging Facility other than as permitted, confirmation that Resimac has no other existing finance debt other than as permitted and payment of fees and expenses).

It is expected that these conditions will be satisfied on or before the Second Court Date (other than the conditions described above which are intended to be satisfied either immediately after the Scheme becomes Effective or concurrently with, or prior to, the Implementation Date).

As at the date of this Scheme Booklet, neither Resimac nor AMAC (respectively) is aware of the existence of any event or circumstance that would or would likely give rise to a breach of any of the representations, warranties or undertakings given by it, or the occurrence of any event of default, cancellation or prepayment applicable to it.

The Resimac Funding and the Alceon Funding will be deposited into a trust account nominated by RHG on the Implementation Date in satisfaction of the obligation of Resimac to provide the Resimac Funding, of Alceon to provide the Alceon Funding and of AMAC to fund the Scheme Consideration.

7.4 AMAC’s and Resimac’s intentions if the Scheme is implemented

(a) RHG Directors

Under the Merger Implementation Deed, the current RHG directors will resign on the Implementation Date and AMAC will appoint its nominated directors, currently intended to be Trevor Loewensohn, Morris Symonds and Adrian Kidd, to replace them.

(b) ASX delisting

AMAC intends to delist RHG from ASX as soon as practical after implementation of the Scheme.

(c) Operations and assets

Following implementation of the Scheme, PIGL and certain assets and liabilities of the RHG Group, RMS and RMC will be transferred to entities nominated by Resimac under the terms of the Asset Sale Deed. The Asset Sale Deed will be executed and completed shortly following the implementation of the Scheme.

To facilitate this:

(i) RHG will procure the replacement of the boards of RMC and RMS with AMAC’s nominees as a step prior to the payment of the Scheme Consideration;

(ii) immediately after the Scheme Consideration is paid, the RHG Board and the board of RHG’s Subsidiaries (other than PIGL) will be replaced with AMAC’s nominees. While PIGL will be transferred, Resimac proposes to make no changes to the board of PIGL for the time being; and

(iii) shortly following implementation of the Scheme, AMAC will exercise its rights as the sole shareholder and controller of RHG to cause the RHG Group (including for this purpose RMC and RMS) to pass all corporate authorisations to approve entry into and to cause the relevant RHG Group members to execute, and to take all necessary steps to execute, the Asset Sale Deed and all other transfer and acquisition documents to effect the sale of the assets described below.

The transactions contemplated under the Asset Sale Deed include:

70

For

per

sona

l use

onl

y

(i) the transfer of the Loan Book and the assumption of the Loan Book Liabilities;

(ii) the assignment of the LMI Contracts;

(iii) the transfer of the Residual Income Units and the assignment of rights, title and interest in Fees;

(iv) the assignment of the Broker Contracts and assumption of all liabilities associated with the Broker Contracts including the obligation to pay all Broker Fees;

(v) transitional servicing arrangements in respect of the Loan Book;

(vi) the assumption of the conduct of the defence of all claims (including Financial Ombudsman claims) which relate to a Mortgage Loan; and

(vii) the transfer of PIGL.

Pursuant to the terms of the Asset Sale Deed, the consideration for:

(i) the transfer of the Loan Book is the Cut-Off Date Balance (estimated to be approximately $1.8 billion) as adjusted in accordance with the Asset Sale Deed; and

(ii) the transfer of the Residual Income Units and the Fees is an amount currently estimated to be $74,996,000 as adjusted in accordance with an agreement between Resimac and AMAC.

Following completion of the Asset Sale Deed, AMAC will continue to own the corporate entities comprising RHG and its subsidiaries together with their post-completion corporate assets and liabilities, and RHG will continue to observe its ongoing obligations, including those under the ASIC Settlement Deed.

On 13 July 2012, RMC, RHGHL and Receivables Servicing Pty Limited entered into a deed with ASIC which sets out an agreement between the parties in relation to refund arrangements in relation to discharge and early termination fees charged to specified customers above specified parameters. The terms of the ASIC Settlement Deed set out the process for RMC varying and waiving the relevant discharge and early termination fees, as well as setting out the process for refunds to be paid to customers. AMAC, through RHG, will continue to maintain and operate the designated account for the payment of refunds to customers and will review and report to ASIC on the status of the refunds reconciliation as required under the current agreement.

With respect to Receivables Servicing Pty Limited and RHG Treasury Services Pty Limited, for credit licensing and Australian Financial Services licensing purposes (respectively), AMAC does not intend to change the responsible managers initially, but will assess any appropriate changes over time. AMAC will take responsibility for the winding up of the residual RHG corporate group, subject to the proper discharge of the group's liabilities and obligations.

A wholly owned subsidiary of Resimac will perform the duties of the manager and servicer of the Loan Book following completion of the Asset Sale Deed. As noted above, Resimac has a strong understanding of RHG’s prime mortgage portfolio and a strong track record of managing substantial mortgage portfolios. Resimac intends to integrate the RHG portfolio into its existing book and take advantage of the economies of scale available as a result of the significant increase in the size of its portfolio post transaction. Additionally the nature of Resimac’s existing business

71

For

per

sona

l use

onl

y

ensures it is in a unique position, not only to extract synergies from the transaction, but also to continue to deliver quality service to the RHG borrowers.

(d) Employees

RHG Group has relatively few employees, as its assets have been in run-off for some years now. AMAC intends that employees will be retained where appropriate to assist in winding down the entities otherwise they will be made redundant in line with their employment contracts and RHG’s human resources policies and procedures and all applicable legal entitlements will be paid to employees.

AMAC has undertaken for the benefit of RHG and employees of any member of the RHG Group that following the Implementation Date, the Financial Assistance will be implemented in a manner that ensures that all employee entitlements or redundancy entitlements are paid.

(e) Intentions generally

The above paragraphs set out the current intentions of AMAC and Resimac in relation to the business, major assets and employees of the RHG Group. However, after the Scheme is implemented and AMAC becomes the owner of RHG it intends to conduct a more detailed review of the RHG Group in line with its stated intentions to wind down those entities, and additional or more specific plans may be formed as a result of the findings of that review. However AMAC will not do anything which will result in RHG no longer continuing to observe its ongoing obligations under the ASIC Settlement Deed or its undertaking that following the Implementation Date, the Financial Assistance will be implemented in a manner that complies with all applicable laws and does not render any member of the RHG Group insolvent and ensures that all employee entitlements or redundancy entitlements are paid

64.

7.5 AMAC’s and Resimac’s interests in RHG Shares

As at the date of this Scheme Booklet, neither AMAC, the Resimac Group nor any of their Associates have any:

• Voting Power in any RHG Shares; or

• Relevant Interests in any RHG Shares.

(a) No dealings in RHG Shares in previous four months

Except in respect of the Scheme Consideration, during the period of four months before the date of this Scheme Booklet, neither AMAC, Resimac nor any of their Associates have provided or agreed to provide consideration for any RHG Shares under a purchase or an agreement.

(b) Benefits to holders of RHG Shares

Except as referred to below, during the four months before the date of this Scheme Booklet, neither AMAC, Resimac nor any of their respective associates have given, or offered to give, or agreed to give a benefit to another person where the benefit was likely to induce the other person, or an Associate, to:

(i) vote in favour of the Scheme; or

(ii) dispose of RHG Shares,

64 This undertaking is discussed in Section 8.1(d).

72

For

per

sona

l use

onl

y

which benefit was not offered to all RHG Shareholders.

Following the Takeovers Panel’s decision not to conduct proceedings on the Resimac Syndicate’s application, as referred to in section 5.1(d) of the Scheme Booklet, AMAC and Resimac explored with Cadence approaches under which Cadence might have received differential treatment in return for a commitment to vote in favour of the Scheme. However, no agreement was reached with Cadence in respect of any such differential treatment.

(c) Benefits to RHG Directors

Neither AMAC, Resimac nor any of their associates will be making any payment or giving any benefit to any current member of the RHG Board as compensation or consideration for, or otherwise in connection with, their resignation from the RHG Board, if the Scheme becomes Effective and the RHG Board is accordingly reconstituted.

7.6 Other material information

Except as set out in this Section 7, so far as each of AMAC and Resimac is aware, there is no information relating to:

• AMAC or the Resimac Group; or

• AMAC and the Resimac Group’s intentions regarding RHG, RHG’s employees and funding of the Scheme Consideration,

material to the making of a decision by an RHG Shareholder in relation to the Scheme, being information that is within the knowledge of any directors of AMAC or Resimac or director of any Related Bodies Corporate of AMAC or Resimac at the time of RHG lodging this Scheme Booklet with ASIC for registration, which is not disclosed in this Section 7 or which has not previously been disclosed to RHG Shareholders.

As at the date of this Scheme Booklet, AMAC and Resimac are not aware of any circumstances that would cause any Condition Precedent not to be satisfied.

Mr Trevor Loewensohn ceased to be a director of RHG on 12 March 2013, and is deemed to be a "related party" of RHG for a period of 6 months afterwards. This Scheme Booklet sets out the interests of Mr Loewensohn as sole shareholder in AMAC, and as such his interests in the proposed Scheme.

73

For

per

sona

l use

onl

y

8 Implementation of the Scheme

8.1 Merger Implementation Deed

On 6 July 2013, RHG and the Resimac Syndicate entered into a Merger Implementation Deed under which RHG agreed to propose the Scheme. The Merger Implementation Deed was revised on 15 July 2013, 21 August 2013, 2 September 2013 and 24 October 2013.

The Merger Implementation Deed sets out RHG’s, AMAC’s and Resimac’s obligations in connection with the implementation of the Scheme. A summary of the key elements of the Merger Implementation Deed is set out in this Section 8.1 and a full copy is available on ASX’s website at www.asx.com.au and on RHG’s website at www.rhgl.com.au.

(a) Conditions Precedent

The Conditions Precedent that must be satisfied or waived before the Scheme can be implemented include:

(i) before 8.00am (Sydney time) on the Second Court Date:

(A) ASIC and ASX issuing or providing (and not withdrawing, revoking or varying) such consents, waivers, modifications, and/or approvals or have done such other acts which are necessary or the parties agree are reasonably desirable to implement the Scheme;

65

(B) all other Regulatory Authorities providing consents, waivers and approvals which AMAC and RHG, acting reasonably, consider are necessary or desirable to implement the Scheme are obtained

66; and

(C) no Court or other court of competent jurisdiction or Regulatory Authority issuing or taking steps to issue an order, temporary restraining order, preliminary or permanent injunction, decree or ruling or taken any action enjoining, restraining or otherwise imposing a legal restraint or prohibition preventing the implementation of any material aspect of the Merger and no such order, decree, ruling, other action or refusal is in effect.

(ii) RHG Shareholders approve the Scheme by the Requisite Majorities in accordance with the Corporations Act;

(iii) the Court approves the Scheme in accordance with section 411(4)(b) of the Corporations Act;

(iv) the Independent Expert issues a report which concludes that the Scheme is in the best interest of Scheme Participants and does not change that conclusion or, having reached that conclusion, the Independent Expert’s Report is not withdrawn prior to the Second Court Date;

(v) no RHG Prescribed Event occurs between the date of the Merger Implementation Deed and 8.00am (Sydney time) on the Second Court Date;

(vi) no RHG Material Adverse Change occurs between the date of the Merger Implementation Deed and 8.00am (Sydney time) on the Second Court Date;

(vii) the representations and warranties of each of:

65 If such consents, waivers, modifications and/or approvals are subject to conditions, those conditions must be acceptable to

RHG, AMAC and Resimac (each acting reasonably) 66 If such consents, waivers, and/or approvals are subject to conditions, those conditions must be acceptable to RHG, AMAC

and Resimac (each acting reasonably)

74

For

per

sona

l use

onl

y

(A) RHG, as set out in Schedule 7 to the Merger Implementation Deed;

(B) AMAC, as set out in Schedule 8 to the Merger Implementation Deed; and

(C) Resimac, as set out in Schedule 9 to the Merger Implementation Deed,

are true and correct in all material respects as at the date of the Merger Implementation Deed and as at 8.00am (Sydney time) on the Second Court Date;

(viii) AMAC issues a deed poll benefiting the current and previous directors and officers of any member of the RHG Group in relation to the ongoing provision of directors and officers insurance policies in favour of those directors and officers, on terms that are acceptable to the current directors and officers acting reasonably;

(ix) RHG Shareholders approve the Financial Assistance Resolution by special resolution in accordance with the Corporations Act; and

(x) before 8.00am (Sydney time) on the Second Court Date:

(A) all required regulatory and other approvals (if any) are obtained to permit the retirement of the current RHG Directors and the directors of each of the SPVs and the appointment of AMAC’s nominees to the boards of directors of RHG and the SPVs; and

(B) the board of directors of each SPV resolve to appoint directors to the relevant SPV in accordance with AMAC’s directions and each existing director of each SPV resigns as a director of the relevant SPV with effect from the time that AMAC’s nominees are appointed, subject to the Scheme becoming Effective.

Full details of the Conditions Precedent, the ability of RHG and the Resimac Syndicate to rely on the Conditions Precedent and the provisions relating to satisfaction of the Conditions Precedent are set out in clause 3 and Schedule 2 of the Merger Implementation Deed.

(b) Exclusivity

RHG has agreed that, during the Exclusivity Period, it will comply with certain restrictions in relation to soliciting alternative proposals or Competing Transactions with third parties, responding to approaches by third parties in relation to RHG (but without preventing any RHG Directors from exercising their fiduciary duties as directors of RHG) and giving the Resimac Syndicate the opportunity to respond to any Competing Transaction.

Full details of these exclusivity arrangements are set out in clause 10 of the Merger Implementation Deed.

(c) Resimac guarantee

Resimac has absolutely, irrevocably and unconditionally undertaken for the benefit of each Scheme Participant to guarantee the due and punctual performance and observance by AMAC of all of AMAC’s obligations under the Merger Implementation

75

For

per

sona

l use

onl

y

Deed, including but not limited to AMAC’s obligations to pay the Scheme Consideration in accordance with the Merger Implementation Deed

67.

Resimac’s guarantee may be enforced against Resimac without a party first having to resort to another guarantee or security interest or other agreement relating to its guarantee.

Resimac’s guarantee is given to RHG in its own right and in its capacity as trustee or agent for each Scheme Participant.

Full details of Resimac’s guarantee are set out in clauses 4.4 and 4.5 of the Merger Implementation Deed.

(d) Undertaking in connection with the Financial Assistance Resolution

AMAC has undertaken, in clause 5.5 of the Merger Implementation Deed, for the benefit of RHG and employees of any member of the RHG Group that following the Implementation Date, the Financial Assistance will be implemented in a manner that:

(i) complies with all applicable laws and does not render any member of the RHG Group insolvent; and

(ii) ensures that all employee entitlements or redundancy entitlements are paid.

AMAC’s undertaking is given to RHG in its own right and in its capacity as trustee or agent for the employees of any member of the RHG Group.

(e) Termination

The Merger Implementation Deed may be terminated under clause 15 of the deed:

(i) by any of RHG, AMAC or Resimac, if the Scheme has not become Effective by 28 February 2014;

(ii) by AMAC or Resimac, if at any time prior to 8.00am (Sydney time) on the Second Court Date, any RHG Director changes their recommendation or ceases to recommend to Scheme Participants that they vote in favour of the Scheme Resolution or the Financial Assistance Resolution, including any adverse modification to their recommendation;

(iii) by AMAC or Resimac, if a person (other than a member of AMAC or the Resimac Group) acquires a Relevant Interest in more than 10% of RHG Shares following the date of the Merger Implementation Deed;

(iv) by any of RHG, AMAC or Resimac, if RHG Board determines and publicly announces that a Competing Transaction is a Superior Proposal (without breach of the exclusivity obligations)

68;

(v) if RHG and the Resimac Syndicate are unable to reach agreement on any failure of Condition Precedents in accordance with the Merger Implementation Deed within five Business Days;

(vi) by any of RHG, AMAC or Resimac, if the court refuses to make orders convening the Scheme Meeting or approving the Scheme, and all parties

67 Resimac’s guarantee only extends to AMAC’s compliance with clause 5.5 of the Merger Implementation Deed to the extent

that such compliance relates to any employee entitlements or redundancy entitlements. 68 However, RHG cannot terminate the Merger Implementation Deed until after the procedure of response to a Competing

Transaction under the Merger Implementation Deed has been followed in good faith.

76

For

per

sona

l use

onl

y

agree not to appeal or their external legal advisers indicate the appeal has a less than 50% prospect of success;

(vii) by AMAC or Resimac, if RHG breaches a material term of the Merger Implementation Deed and that breach is not remedied five Business Days

69

after AMAC or Resimac has given notice to RHG to remedy the breach;

(viii) by RHG, if AMAC breaches a material term of the Merger Implementation Deed and that breach is not remedied five Business Days

70 after RHG has

given notice to AMAC to remedy the breach;

(ix) by RHG, if Resimac breaches a material term of the Merger Implementation Deed and that breach is not remedied five Business Days

71 after RHG has

given notice to Resimac to remedy the breach;

(x) by RHG, AMAC or Resimac if any other party or (in the case of termination by AMAC or Resimac only) any Subsidiary of RHG or SPV becomes Insolvent;

(xi) if agreed to in writing by AMAC, Resimac and RHG; or

(xii) by RHG, AMAC or Resimac if a representation or warranty given by another party under the Merger Implementation Deed is or becomes untrue in any material respect

72,

provided, in the case of any termination in circumstances where the terminating party would (or would if the Scheme does not become Effective) be liable to pay the break fee or reverse break fee (discussed below), termination may only occur if the break fee or reverse break fee (as applicable) has been paid or its payment has been secured to the satisfaction of the party which would be entitled to receive it.

(f) Break fee or reverse break fee

A break fee is payable by RHG to the Resimac Syndicate and a reverse break fee is payable by the Resimac Syndicate to RHG in the circumstances described below. Full details of break fee and reverse break fee provisions are set out in clauses 11 and 12 of the Merger Implementation Deed.

(i) Break Fee

RHG must pay $1,638,000, in aggregate, to AMAC and Resimac (in such proportions as they determine) if any of the following circumstances occur:

(A) if any RHG Director fails to recommend the Scheme or the Scheme Resolution or the Financial Assistance Resolution or withdraws or adversely modifies that recommendation except:

(aa) if an RHG Director changes their recommendation following the receipt of the Independent Expert’s Report (or any update of that report) where that report states that in the opinion of the Independent Expert the Scheme is not in the

69 Or any shorter period ending at 8.00am (Sydney time) on the Second Court Date. 70 Or any shorter period ending at 8.00am (Sydney time) on the Second Court Date. 71 Or any shorter period ending at 8.00am (Sydney time) on the Second Court Date. 72 And the breach of the representation or warranty is of a kind that, had it been disclosed to the first party before its entry into

the Merger Implementation Deed, could reasonably be expected to have resulted in that first party either not entering into the Merger Implementation Deed or entering into it on materially different terms (and the terminating party has, if practicable, given notice to the party who gave the warranty setting out the relevant circumstances and the relevant circumstances continue to exist five Business Days (or any shorter period ending at 8.00am (Sydney time) on the Second Court Date) after the time such notice is given).

77

For

per

sona

l use

onl

y

best interests of RHG Shareholders (other than because of a Superior Proposal); or

(ab) as a result of any matter or thing giving RHG the right to terminate when a Termination Event occurs; or

(B) either:

(aa) RHG enters into a legally binding agreement to undertake a Competing Transaction; or

(ab) any RHG Director withdraws or adversely modifies their recommendation of the Scheme or the Scheme Resolution or the Financial Assistance Resolution as a result of a Competing Transaction being made; or

(ac) RHG Board determines or announces that a Competing Transaction is a Superior Proposal; or

(ad) a Competing Transaction is made or announced and at any time before 6 months after 28 February 2014 the proponent of the Competing Transaction (together with its associates) has a Relevant Interest in more than 50% of RHG Shares, or acquires or obtains an economic interest in all or a substantial part of the assets of RHG Group or of the SPVs; or

(C) all of the following are satisfied:

(aa) a:

(AA) RHG Prescribed Event73

; or

(BB) RHG Material Adverse Change74

occurs prior to 8.00am (Sydney time) on the Second Court Date; and

(ab) the Merger Implementation Deed is terminated.

(D) the Merger does not proceed because RHG is in material breach of any clause of the Merger Implementation Deed (including a representation or warranty) and RHG has failed to remedy the breach within five Business Days

75 of receiving notice from AMAC or

Resimac to do so.

However, the RHG Shareholders not voting in favour of the Scheme Resolution does not, of itself, result in a break fee being payable.

(ii) Reverse Break Fee

AMAC and Resimac (in such proportions as they determine, but so that if either of them fails to pay its proportion or any part of it, RHG may recover the shortfall from the other) must pay $1,638,000 to RHG if the Merger does

73 The prevention of which was within the control of RHG, or which RHG fails to rectify within 10 Business Days (or any shorter

period ending at 8.00am (Sydney time) on the Second Court Date) of receiving notice from AMAC or Resimac to do so. 74 Which RHG fails to rectify within ten Business Days (or any shorter period ending at 8.00am (Sydney time) on the Second

Court Date) of receiving notice from AMAC or Resimac to do so. 75 Or any shorter period ending at 8.00am (Sydney time) on the Second Court Date.

78

For

per

sona

l use

onl

y

not proceed because either AMAC or Resimac is in material breach of any clause of the Merger Implementation Deed (including a representation or warranty) and AMAC and Resimac have not remedied the breach within five Business Days

76 of receiving notice from RHG to do so.

(g) Warranties and representations

Each of RHG, AMAC and Resimac has given representations and warranties as set out in Schedules 7, 8 and 9 to the Merger Implementation Deed, that are considered to be normal for a transaction of this nature.

(h) Stamp duty and brokerage

RHG does not expect that any stamp duty will be payable on the transfer of Scheme Shares to AMAC. However, if stamp duty is payable in connection with the Scheme, AMAC has agreed to pay the stamp duty (including any fines, penalties and interest).

Scheme Participants will not incur any brokerage on the transfer of their RHG Shares under the Scheme.

8.2 Deed Poll

On or about the date of this Scheme Booklet, the Resimac Syndicate executed the Deed Poll, under which AMAC agreed, subject to the Scheme becoming Effective, to deposit an amount equal to the aggregate Scheme Consideration payable to all Scheme Participants in a trust account operated by RHG as trustee for the Scheme Participants. Resimac agreed to guarantee AMAC’s due and punctual performance of its obligations in connection with AMAC’s payment of the Scheme Consideration.

Under the Scheme, RHG will pay to each Scheme Participant an amount equal to the Scheme Consideration for each Scheme Share transferred to AMAC by that Scheme Participant on the Implementation Date.

A copy of the Deed Poll is attached as Annexure D.

8.3 Scheme Meeting and General Meeting

(a) Scheme Meeting

In accordance with an order of the Court on or about the date of this Scheme Booklet, RHG has convened the Scheme Meeting to be held at 10:00am (Sydney time) on 18 December 2013 at the Wesley Conference Centre, 220 Pitt Street, Sydney NSW 2000. The Notice of Scheme Meeting is attached as Annexure E.

The purpose of the Scheme Meeting is for RHG Shareholders to consider whether or not to agree to the Scheme.

(b) General Meeting

The Financial Assistance Resolution is a Condition Precedent to implementation of the Scheme. If the Financial Assistance Resolution fails to be passed at the General Meeting, the Scheme will be unable to proceed, unless AMAC and Resimac both agree to waive the passage of the Financial Assistance Resolution as a Condition Precedent.

Pursuant to its obligations under the Merger Implementation Deed, RHG has convened the General Meeting for RHG Shareholders to consider and approve the

76 Or any shorter period ending at 8.00am (Sydney time) on the Second Court Date.

79

For

per

sona

l use

onl

y

Financial Assistance Resolution. The General Meeting will be held at or around the time of the Scheme Meeting at 10:00am (Sydney time) on 18 December 2013 at the Wesley Conference Centre, 220 Pitt Street, Sydney NSW 2000. The Notice of General Meeting is attached as Annexure F.

(c) How to attend and vote at the Meetings

Instructions on how to attend and vote at the Meetings, and the Requisite Majorities to pass the Scheme Resolution and the Financial Assistance Resolution, are set out in Annexure H and in the Notice of Scheme Meeting and Notice of General Meeting.

(d) Recommendation of the RHG Directors

The RHG Directors unanimously recommend that RHG Shareholders vote in favour of the Scheme Resolution:


(ii) subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of RHG Shareholders.

Noting AMAC’s undertaking77

, and subject to the same conditions as their recommendation of the Scheme Resolution, the RHG Directors unanimously recommend that RHG Shareholders vote in favour of the Financial Assistance Resolution.

8.4 Court approval of the Scheme

If:

(a) the Scheme is agreed to by the Requisite Majorities of RHG Shareholders at the Scheme Meeting; and

(b) all Conditions Precedent (other than Court approval) have been satisfied or waived (see Section 8.1(a)),

then RHG will apply to the Court for orders approving the Scheme.

Each RHG Shareholder and any other interested person, with the Court’s permission, has the right to appear at the Second Court Hearing.

8.5 Effective Date

The Scheme will become Effective when an office copy of the Court order from the Second Court Hearing approving the Scheme is lodged with ASIC. This is the Effective Date for the purposes of the Scheme.

On the Effective Date, RHG will notify ASX that the Scheme has become Effective.

RHG intends to apply to ASX for RHG Shares to be suspended from official quotation on ASX from close of trading on the Effective Date.

8.6 Scheme Record Date

Those RHG Shareholders on the RHG Register on the Scheme Record Date, being 7.00pm (Sydney time) on the fifth Business Day after the Effective Date, will be entitled to receive the

77 That following the Implementation Date, the Financial Assistance will be implemented in a manner that complies with all

applicable laws and does not render any member of the RHG Group insolvent and ensures that all employee entitlements or redundancy entitlements are paid. This undertaking is discussed in Section 8.1(d).

80

For

per

sona

l use

onl

y

Scheme Consideration in respect of the RHG Shares they hold as at the Scheme Record Date.

8.7 Dividend

On 8 July 2013, RHG announced that it determined to pay the Dividend, being a fully franked dividend of $0.03 per RHG Share. The dates relevant to payment of the Dividend were as follows:

• Ex Dividend Date: 31 July 2013

• Dividend Record Date: 7 August 2013

• Payment Date: 22 August 2013

If the Scheme proceeds, RHG Shareholders will receive the Scheme Consideration of $0.501 per RHG Share. This amount will not be reduced by the payment of the Dividend

78.

Accordingly, RHG Shareholders who were on the RHG Register at the Dividend Record Date and who are on the RHG Register on the Scheme Record Date will have received Total Payments of $0.531 per RHG share.

8.8 Determination of persons entitled to Scheme Consideration

(a) Dealings on or prior to the Scheme Record Date

For the purposes of determining the Scheme Participants, dealings in RHG Shares will only be recognised if:

(i) in the case of dealings of the type to be effected using CHESS, the transferee is registered in the RHG Register as the holder of the relevant RHG Shares on or before the Scheme Record Date; and

(ii) in all other cases, registrable transfer or transmission applications in respect of those dealings, or valid requests in respect of other alterations, are received on or before the Scheme Record Date at the place where the RHG Register is kept.

RHG will not accept for registration, nor recognise for any purpose, any transfer or transmission application or other request in respect of RHG Shares received after the Scheme Record Date.

(b) Dealings after the Scheme Record Date

For the purpose of determining entitlements to the Scheme Consideration, RHG must maintain the RHG Register in its form as at the Scheme Record Date until the Scheme Consideration has been paid to the Scheme Participants. The RHG Register in this form will solely determine entitlements to the Scheme Consideration.

After the Scheme Record Date:

(i) all statements of holding for RHG Shares will cease to have effect; and

78 The Resimac Syndicate has confirmed it will allow a fully franked dividend to be paid by RHG prior to implementation of the

Scheme (with a corresponding reduction of the Scheme Consideration) if the directors of RHG considered it appropriate. There is no assurance that the directors of RHG would determine that payment of a dividend is appropriate at that time. If this position changes, supplementary disclosure will be provided by RHG.

81

For

per

sona

l use

onl

y

(ii) each entry on the RHG Register will cease to have effect except as evidence of entitlement as at the Scheme Record Date to the Scheme Consideration in respect of the RHG Shares relating to that entry.

8.9 Implementation Date

The Implementation Date is the later of the third Business Day after the Scheme Record Date and the day that is 14 days after the Financial Assistance Resolution is notified to ASIC, or such other date as is agreed by RHG and the Resimac Syndicate.

Under the Merger Implementation Deed, AMAC must, subject to the board change of the SPVs occurring in accordance with AMAC’s direction, pay the aggregate Scheme Consideration payable to Scheme Participants into a trust account nominated by RHG by no later than 11.00am (Sydney time) on the Implementation Date.

On the Implementation Date, RHG will pay the Scheme Consideration received from AMAC to Scheme Participants or if RHG permits, and subject to any regulatory requirements, in accordance with a Scheme Participant’s directions. RHG has given instructions to the RHG Registry to promptly despatch the Scheme Consideration to Scheme Participants. Where the aggregate amount of the Scheme Consideration to be paid to a RHG Shareholder would result in the RHG Shareholder becoming entitled to a fraction of a cent, the fractional entitlement will be rounded down to the nearest whole cent.

Once RHG has paid the Scheme Consideration, the Scheme Shares will be transferred to AMAC without Scheme Participants needing to take any further action.

8.10 Warranties by Scheme Participants

The terms of the Scheme provide that each Scheme Participant is taken to have warranted to AMAC, and appointed and authorised RHG as its agent and attorney to warrant to AMAC, that:

(a) all their Scheme Shares (including any rights and entitlements attaching to those shares) that are transferred under the Scheme will, at the date of transfer, be fully paid and free from all Encumbrances; and

(b) they have full power and capacity to sell and to transfer their Scheme Shares (including any rights and entitlements attaching to those shares) to AMAC under the Scheme.

8.11 Delisting of RHG

On a date after the Implementation Date to be determined by the Resimac Syndicate, RHG will apply for the termination of the official quotation of RHG Shares on ASX and for RHG to be removed from the official list of ASX.

82

For

per

sona

l use

onl

y

9 Taxation implications

9.1 Taxation outline

The following is a general description of the Australian tax consequences of the Scheme (assuming it becomes Effective) and the Dividend for RHG Shareholders. The comments set out in this Section 9 are relevant only to those RHG Shareholders who hold their RHG Shares on capital account. The description is based upon the Australian law and administrative practice in effect at the date of this Scheme Booklet, but is general in nature and is not intended to be an authoritative or complete statement of the laws applicable to the particular circumstances of an RHG Shareholder. RHG Shareholders should seek independent professional advice in relation to their own particular circumstances.

RHG Shareholders who hold their RHG Shares for the purposes of speculation or a business of dealing in securities (e.g. as trading stock), those who are subject to the taxation of financial arrangements (TOFA) rules in respect of their RHG shares, or who acquired their RHG Shares pursuant to an employee share, option or achievement rights plan should also seek their own advice.

RHG Shareholders who are tax residents of a country other than Australia (whether or not they are also residents, or are temporary residents, of Australia for tax purposes) should take into account the tax consequences of the Scheme under the laws of their country of residence, as well as under Australian law.

9.2 Australian resident shareholders

(a) Capital gains tax (CGT)

The Scheme will result in the disposal by RHG Shareholders to AMAC of their RHG Shares. This change in the ownership of the Shares will constitute CGT event A1 for Australian CGT purposes.

The date of disposal of the RHG Shares for CGT purposes will be the Implementation Date.

(b) Calculation of capital gain or capital loss

RHG Shareholders will make a capital gain on the disposal of RHG Shares to the extent that the capital proceeds from the disposal of the RHG Shares are more than the cost base of those RHG Shares. Conversely, RHG Shareholders will make a capital loss to the extent that the capital proceeds are less than their reduced cost base of those RHG Shares.

Cost base

The cost base of the RHG Shares generally includes the cost of acquisition and certain incidental costs of acquisition and disposal that are not deductible to the RHG Shareholder. The reduced cost base of the RHG Shares is usually determined in a similar, but not identical, manner.

Capital proceeds

The capital proceeds received in respect of the disposal of each RHG Share should be $0.501 per RHG Share, reflecting only the Scheme Consideration and will not include the Dividend.

83

For

per

sona

l use

onl

y

Other issues

Individuals, complying superannuation entities or trustees that have held RHG Shares for at least 12 months may be entitled to discount the amount of the capital gain (after application of capital losses) from the disposal of RHG Shares by 50% in the case of individuals and trusts or by 33 1/3% for complying superannuation entities. For trusts the ultimate availability of the discount may depend on a beneficiary’s entitlement to the discount.

Capital gains and capital losses of a taxpayer in a year of income are aggregated to determine whether there is a net capital gain. Any net capital gain is included in assessable income and is subject to income tax. Capital losses may not be deducted against other income for income tax purposes, but may be carried forward to offset against future capital gains.

(c) Taxation consequences of the Dividend

RHG Shareholders who are Australian tax residents and who received the Dividend should include the amount of the Dividend plus the franking credits in their assessable income. The Dividend was fully franked.

An RHG Shareholder may claim a tax offset for the amount of the franking credit where the “holding period” rule is satisfied by the RHG Shareholder. The holding period rule requires that the RHG Shareholder holds their shares “at risk” for a continuous period of at least 45 days during the prescribed period.

The Dividend is not contingent upon or otherwise connected with the Scheme and as such the Dividend should not be subject to the “related payment rule”. Accordingly, the prescribed period is from the day after acquisition of the RHG Shares by the RHG Shareholder until the day before the RHG Shares became ex-dividend.

RHG Shareholders who are individuals should be exempt from applying the holding period rule where their total franking credit tax offset in respect of all distributions for the 2014 income tax year does not exceed $5,000.

If you are an individual or complying superannuation fund and your tax liability for the income year is less than the amount of the franking credits attached to the Dividend, you may be entitled to a refund for the excess franking credits. This does not extend to companies.

9.3 Non-resident shareholders

For an RHG Shareholder who is not a resident of Australia for Australian tax purposes and does not hold their RHG Shares in carrying on a business through a permanent establishment in Australia, the disposal of RHG Shares will generally only result in Australian CGT implications if:

(a) that RHG Shareholder together with its associates held 10 percent or more of the RHG Shares at the time of disposal or for any continuous 12 month period within two years preceding the disposal (referred to as a ‘non-portfolio interest’); and

(b) more than 50% of RHG’s value is due to direct or indirect interests in Australian real property (as defined in the income tax legislation).

If you hold a “non-portfolio interest” in RHG, you should obtain independent advice as to the tax implications of sale, and whether any protection will be available under a relevant double tax treaty.

84

For

per

sona

l use

onl

y

A non-resident RHG Shareholder who has previously been a resident of Australia and chose to disregard a capital gain or loss on ceasing to be a resident will be subject to Australian CGT consequences on disposal of the RHG Shares as set out in Section 9.2.

RHG Shareholders who are not residents of Australia should not be subject to income tax in Australia in respect of the Dividend, provided they do not hold the RHG Shares through an Australian permanent establishment. As the Dividend was fully franked, such shareholders received the full amount of the Dividend free of any Australian dividend withholding tax.

9.4 Goods and services tax (GST)

Holders of RHG Shares should not be liable to GST in respect of a disposal of those RHG Shares.

RHG Shareholders may be charged GST on costs (such as adviser fees relating to their participation in the Scheme) that relate to the Scheme. RHG Shareholders may be entitled to input tax credits or reduced input tax credits for such costs, but should seek independent advice in relation to their individual circumstances.

85

For

per

sona

l use

onl

y

10 Additional information

10.1 Interests of RHG Directors

(a) RHG Directors’ interests in RHG Shares

As at the date immediately before the date of this Scheme Booklet, the RHG Directors and their Associates had the following Relevant Interests in RHG Shares:

Name of RHG Director Number of RHG Shares

Glenn Goddard 1,200,000

Paul Jensen79

0

John Kean 0

Richard Nott 50,000 (indirectly held)

Gabriel Radzyminski 90,000 (as trustee together with other trustees, but does not control that holding)

Each RHG Director intends to vote any RHG Shares held or controlled by him or her in favour of the Scheme Resolution and the Financial Assistance Resolution:


(ii) subject to the Independent Expert, who has concluded that the Scheme is in the best interests of RHG Shareholders, maintaining that conclusion.

(b) RHG Directors’ dealings in RHG Shares

On 15 April 2013, Glenn Goddard disposed of 800,000 RHG shares.

On 16 May 2013 (and prior to becoming a director of RHG on 6 June 2013), Richard Nott acquired 50,000 RHG Shares through Tarwoni Pty Ltd (ACN 003 784 012), in which he holds a 60% interest.

No other RHG Director acquired or disposed of a Relevant Interest in any RHG Shares in the four-month period ending on the date immediately before the date of this Scheme Booklet.

10.2 Interests and dealings in shares in the Resimac Syndicate

(a) Interests in shares in the Resimac Syndicate

As at the date immediately before the date of this Scheme Booklet, no RHG Director had a Relevant Interest in any shares in AMAC or Resimac.

79 ASX-listed WAM Capital Limited (ACN 086 587 395) ("WAM Capital") is a member of the Wilson Asset Management

Group. The Wilson Asset Management Group holds 18,579,692 RHG Shares. Paul Jensen is an independent non-executive director of WAM Capital and holds (both directly and indirectly) approximately 150,000 ordinary shares in aggregate in WAM Capital. RHG understands from Mr Jensen that Wilson Asset Management (International) Pty Ltd, the investment manager of WAM Capital, has discretion over WAM Capital’s investment decisions and that there are information barriers in place, in light of Mr Jensen’s role as a non-executive director of RHG.

86

For

per

sona

l use

onl

y

(b) Dealings in shares in the Resimac Syndicate

No RHG Director acquired or disposed of a Relevant Interest in any shares in AMAC or Resimac in the four month period ending on the date immediately before the date of this Scheme Booklet.

10.3 Benefits and agreements

(a) Benefits in connection with retirement from office

Save as set out in this Scheme Booklet, and redundancy entitlements of executive officers and employees, no payment or other benefit is proposed to be made or given to any director, company secretary or executive officer of RHG (or its Related Bodies Corporate) as compensation for the loss of, or as consideration for or in connection with his or her retirement from, office in RHG or any of its Related Bodies Corporate in connection with the Scheme, other than in his or her capacity as an RHG Shareholder.

AMAC is required, as a Condition Precedent of the Scheme, to issue a deed poll benefiting the current and previous directors and officers of any RHG Group in relation to the ongoing provision of directors and officers insurance policies in favour of those directors and officers, on terms that are acceptable to the current directors and officers acting reasonably.

(b) Agreements connected with or conditional on the Scheme

Except as set out in this Section 10.3(b), there are no agreements or arrangements made between any RHG Director and any other person in connection with, or conditional on, the outcome of the Scheme, other than in their capacity as an RHG Shareholder. Richard Nott is currently a director of PIGL and receives fees under a contract with PIGL in that capacity. RHG notes that the Resimac Syndicate has indicated that, for the time being, it does not intend to make changes to the board of directors of PIGL.

Increase in directors’ fees payable to the non-executive directors of RHG

The non-executive directors of RHG have proposed a one-off increase in directors’ fees payable to the non-executive directors of RHG above their base directors’ fees payable in FY2014 to reflect their increased workload in connection with the transactions being considered and implemented by the RHG Board.

The RHG Board notes that RHG has not increased the directors’ fees payable to the non-executive directors of RHG since any of the current non-executive directors were appointed to the RHG Board, nor have any of the current non-executive directors ever received any one-off directors’ fee payment.

Under the Merger Implementation Deed, any increase in payments to the RHG Directors requires the approval of the Resimac Syndicate. Accordingly, RHG has sought the Resimac Syndicate’s approval to the proposed increase in the directors’ fees payable to the non-executive directors of RHG. However, as at the date of this Scheme Booklet, the Resimac Syndicate has not given its consent to the increase of directors’ fees to be paid to the non-executive directors of RHG and discussions between RHG and the Resimac Syndicate are continuing.

Indemnities

AMAC and Resimac have each indemnified RHG, each of the SPVs and each of their respective officers and employees and Related Bodies Corporate and the officers and employees of each of their Related Bodies Corporate from any claim, demands, damages, losses, costs, expenses and liabilities incurred directly or indirectly as a

87

For

per

sona

l use

onl

y

result of any of the representations and warranties given by them in Schedules 8 and 9 to the Merger Implementation Deed not being true and correct in all material respects.

(c) Interests of RHG Directors in contracts with AMAC or Resimac

Other than as set out elsewhere in this Scheme Booklet, none of the RHG Directors has any interest in any contract entered into by AMAC or Resimac, or any Related Body Corporate of AMAC or Resimac, other than in their capacity as an RHG Shareholder.

(d) Benefits from AMAC

None of the RHG Directors has agreed to receive, or is entitled to receive, any benefit from AMAC or Resimac or any Related Body Corporate of AMAC or Resimac which is conditional on, or is related to, the Scheme, other than in their capacity as an RHG Shareholder or as set out in this Section 10.3.

(e) Employee or executive incentives

RHG does not have any current employee or executive share or option incentive schemes.

Employees and executives receive cash bonuses as part of their remuneration which, in light of the Scheme Proposal, will be payable on 15 December 2013 or the Second Court Date, whichever occurs earlier.

Glenn Goddard is entitled to payments in the event that his employment is terminated or if he is made redundant. RHG understands that these payments may be up to approximately $1,191,284 if his employment is terminated (including redundancy) subject to the relevant circumstances and legal advice at the time.

10.4 Status of regulatory conditions

(a) BNY

Although BNY consent to the appointment of directors to the SPVs in accordance with AMAC’s directions is not required, RHG has notified BNY of the proposal to change the directors of the SPVs, subject to the Scheme becoming Effective.

(b) Bermuda Monetary Authority

Prior to implementation of the Scheme:

(i) RHG is required to obtain the approval of the Bermuda Monetary Authority to a change of “Shareholder Controller” of RHG pursuant to implementation of the Scheme

80; and

(ii) RHG is required to notify the Bermuda Monetary authority of a change of “Controller” of RHG pursuant to implementation of the Scheme

81.

Prior notification of the implementation of the Scheme is also required to be given to the Bermuda Monetary Authority under the Exchange Control Act 1972 of Bermuda.

80 Under Section 30D of the Insurance Act 1978 of Bermuda, where “Shareholder Controller” has the meaning given to that

term under that Act. 81 Under Section 30J of the Insurance Act 1978 of Bermuda where “Controller” has the meaning given to that term under that

Act.

88

For

per

sona

l use

onl

y

RHG has instructed local counsel in Bermuda to act on its behalf to give notice of the implementation of the Scheme to, and to obtain the requisite approval from, the Bermuda Monetary Authority.

As at the date of this Scheme Booklet, RHG currently believes that this Condition Precedent will be satisfied before 8.00am on the Second Court Date (Sydney time).

(c) ASIC

While ASIC has registered this Scheme Booklet, it has a right of appearance at the Second Court Hearing.

10.5 Formal disclosures and consents

The following persons have given, and not withdrawn before the registration of this Scheme Booklet with ASIC, their written consent to be named in this Booklet in the form and context in which they are named:

• Deloitte Corporate Finance Pty Limited as Independent Expert;

• Greenstone Partners as financial adviser to RHG;

• King & Wood Mallesons as Australian legal adviser to RHG;

• PwC as auditor of RHG; and

• Computershare Investor Services Pty Limited as the RHG Registry.

AMAC and Resimac have given, and not withdrawn before the registration of this Scheme Booklet with ASIC, their written consent to the inclusion of the AMAC Information and Resimac Information in the form and context in which it appears in this Scheme Booklet.

Deloitte has given, and not withdrawn before the registration of this Scheme Booklet with ASIC, its written consent to the inclusion of its Independent Expert’s Report as an Annexure to this Scheme Booklet.

Each of the persons named above:

(a) has not authorised or caused the issue of this Scheme Booklet;

(b) does not make or purport to make any statement in this Scheme Booklet nor any statement on which a statement in this Scheme Booklet is based, other than AMAC and Resimac in respect of the AMAC Information and Resimac Information respectively, and Deloitte in respect of the Independent Expert’s Report; and

(c) to the maximum extent permitted by law, disclaims all liability in respect of, makes no representation regarding and takes no responsibility for any part of this Scheme Booklet, other than a reference to its name and any statement included in this Scheme Booklet with the consent of that person as specified in this Section 10.5.

10.6 Foreign jurisdictions

The distribution of this Scheme Booklet outside of Australia may be restricted by law and persons who come into possession of it should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may contravene applicable securities laws. RHG disclaims all liabilities to such persons.

RHG Shareholders who are nominees, trustees or custodians are encouraged to seek independent advice as to how they should proceed.

89

For

per

sona

l use

onl

y

No action has been taken to register or qualify this Scheme Booklet or any aspect of the Acquisition in any jurisdiction outside of Australia.

10.7 Other information material to the making of a decision in relation to the Scheme

Except as set out in this Scheme Booklet, so far as the RHG Directors are aware, there is no information material to the making of a decision by an RHG Shareholder in relation to the Scheme, being information that is within the knowledge of any RHG Director or director of any Related Bodies Corporate of RHG, at the time of lodging this Scheme Booklet with ASIC for registration, which has not been previously disclosed to RHG Shareholders.

10.8 Supplementary disclosure

RHG will issue a supplementary document to this Scheme Booklet if it becomes aware of any of the following between the date of lodgement of this Scheme Booklet for registration by ASIC and the Effective Date:

• a material statement in this Scheme Booklet is false or misleading in a material respect;

• a material omission from this Scheme Booklet;

• a significant change affecting a matter included in this Scheme Booklet; or

• a significant new matter has arisen and it would have been required to be included in this Scheme Booklet if it had arisen before the date of lodgement of this Scheme Booklet for registration by ASIC.

Depending on the nature and timing of the changed circumstances, and subject to obtaining any relevant approvals, RHG may circulate and publish any supplementary document by:

• making an announcement to ASX;

• placing an advertisement in a prominently published newspaper which is circulated generally throughout Australia;

• posting the supplementary document to RHG Shareholders at their registered address as shown in the RHG Register; or

• posting a statement on RHG’s website www.rhgl.com.au,

as RHG in its absolute discretion considers appropriate.

90

For

per

sona

l use

onl

y

11 Glossary and interpretation

11.1 Glossary

In this Scheme Booklet, words have the following meanings, unless the context requires otherwise.

Term Meaning

16 August 2013 Pepper/Cadence Competing Proposal

has the meaning given to that term in Section 5.1(d).

29 August 2013 Resimac Syndicate Proposal


Acquisition the acquisition of RHG by AMAC to be effected by the Scheme in accordance with the Merger Implementation Deed.

Action an action, dispute, cause of action, claim, demand, investigation, inquiry, prosecution, litigation, proceeding, suit, arbitration, mediation or dispute resolution.

Alceon Alceon GT Pty Ltd ACN 122 362 458.

AMAC Australian Mortgage Acquisition Company Pty Limited ACN 163 867 016.

AMAC Group AMAC and its Subsidiaries.

AMAC Information the information regarding AMAC Group provided by AMAC to RHG for inclusion in the Scheme Booklet, being information:

(a) about AMAC Group, its business, its interests and dealings in RHG Shares, its intentions for RHG and RHG’s employees, and funding arrangements; and

(b) required to be included in the Scheme Booklet under the Corporations Act, Corporations Regulations, the Listing Rules or ASIC Regulatory Guide 60.

The AMAC Information does not include information about RHG Group or SPVs except to the extent it relates to any statement of AMAC’s intention relating to the RHG Group or SPVs following the Effective Date, where AMAC has consented in writing to the inclusion of such statements in the Scheme Booklet.

Ancillary Rights and Claims

in relation to a Mortgage Loan or Related Security and any Relevant Documents, all Claims and any other right of RMS (to the extent that the same are capable of being or permitted to be assigned by RMS in contract and under applicable law), whether known or unknown, against each obligor in respect of that Mortgage Loan, Related Security or Relevant Document, or any of its affiliates, agents, representatives, contractors or advisors, or any third party, auditor, legal, tax, financial or other professional advisor of RMS, or any third party broker, agent or originator or other person, that in any way is based upon, arises out of or is related to the Mortgage Loan, Related Security or

91

For

per

sona

l use

onl

y

Term Meaning

Relevant Document, but excludes any Claims or other rights against any officers and employees of RMS and its Related Bodies Corporate.

Asset Sale Deed the asset sale deed to be entered into by RMS, RMC, RHG Home Loans Pty Limited (ACN 053 725 741), entities nominated by Resimac and others immediately following implementation of the Scheme.

Associate has the meaning given to that term in the Corporations Act.

ASIC the Australian Securities and Investments Commission.

ASX ASX Limited ABN 98 008 624 691 and, where the context requires, the financial market that it operates.

BBSW has the meaning given to that term in Section 6.

BNY BNY Trust Company of Australia Limited ACN 050 294 052.

Bridging Facility is defined in Section 7.3(b).

Broker Contracts all broker contracts to which RHGHL is a party and which relate to the Loan Book.

Broker Fees any fee payable to a broker under a Broker Contract.

Business Day means a day:

(a) that is a business day as defined in the Listing Rules;

(b) that is not a public holiday in Sydney, Australia; and

(c) on which banks are open for general banking business in Sydney, Australia.

Cashflow Schedule the cashflow schedule in Annexure D of the Merger Implementation Deed.

Cadence Cadence Capital Limited ACN 112 870 096.

Cadence Share Metrics has the meaning given in Section 5.3.

CGT Capital Gains Tax.

Claim any debt, cause of action, Liability, claim, proceeding, suit or demand of any nature howsoever arising and whether present or future, fixed or unascertained, actual or contingent, whether at law, in equity, under statute or otherwise.

Competing Transaction a transaction which, if completed, would mean a person (other than AMAC or its Related Bodies Corporate or Resimac or its Related Bodies Corporate) would:

(a) directly or indirectly, acquire an interest or Relevant Interest in or become the holder of:

92

For

per

sona

l use

onl

y

Term Meaning

(i) 10% or more of the RHG Shares or more than 50% of the shares in any of RHG’s Subsidiaries; or

(ii) all or a substantial part or a material part of the assets of the Securitisation Vehicles or the business of RHG or any of its Subsidiaries (including, for this purpose, the business of the SPVs),

including by way of takeover bid, scheme of arrangement, capital reduction, reconstruction, sale of assets, sale of shares or joint venture;

(b) acquire control of RHG, within the meaning of section 50AA of the Corporations Act;

(c) other than RHG, be in a position to control the board of directors of an SPV;

(d) otherwise acquire or merge (including by a reverse takeover bid, joint venture or dual listed company structure) with RHG; or

(e) enter into any agreement, arrangement or understanding requiring it to abandon, or otherwise fail to proceed with, the Merger.

Conditions Precedent the conditions precedent to the implementation of the Scheme, a summary of which is set out in Section 8.1(a), and which are fully set out in clause 3.1 of and Schedule 2 to the Merger Implementation Deed.

Consolidated Net Tangible Assets

the consolidated financial position of the RHG Group calculated as follows: net assets plus net EIR hedging adjustment less all deferred transaction costs. For clarity, as at 31 May 2013 the Consolidated Net Tangible Assets were $75,398,000, calculated as $85,320,000 (net assets) plus $2,468,000 (net EIR hedging adjustment) less $12,390,000 (deferred transaction costs).

Corporations Act the Corporations Act 2001 (Cth).

Corporations Regulations

the Corporations Regulations 2001 (Cth).

Counterproposal has the meaning given to that term in clause 10.8(a) of the Merger Implementation Deed.

Court the Federal Court (Sydney registry) or such other court of competent jurisdiction under the Corporations Act agreed in writing by AMAC, Resimac and RHG.

Cut-Off Date the day immediately before the Effective Date.

Cut-Off Date Balance the aggregate amount owing to the sellers of the Loan Book under all Mortgage Loans (including fees and accrued but unpaid interest (as recognised in the Daily Transaction Report) at the

93

For

per

sona

l use

onl

y

Term Meaning

end of the Cut-Off Date.

Daily Transaction Report

a report generated by the mortgage processing system operated in respect of the Mortgage Loans reflecting the accrued and unposted interest charge in respect of each Mortgage Loan calculated at the close of the previous Business Day.

Data Room the electronic data room maintained by Ansarada Pty Ltd in connection with the Merger, an index of which as at 9am on 21 June 2013 was initialled for identification by the parties upon execution of the Merger Implementation Deed, including written responses to requests for further information in the on-line data room.

Deed of Amendment Each Deed of Amendment - Merger Implementation Deed between RHG and the Resimac Syndicate dated 15 July 2013, 21 August 2013, 2 September 2013 and 24 October 2013, respectively. The form of each deed can be obtained from ASX’s website at www.asx.com.au or RHG’s website at www.rhgl.com.au.

Deed Poll the deed poll executed by AMAC and Resimac on or about the date of this Scheme Booklet pursuant to which AMAC and Resimac acknowledge and confirm their respective obligations under the Scheme. The form of the Deed Poll executed by AMAC and Resimac is contained in Annexure D.

Discount for Liquidity has the meaning given to that term in Section 5.3.

Dividend a fully franked dividend of $0.03 for each RHG Share held by RHG Shareholders as at the Dividend Record Date, announced by RHG on 8 July 2013 and paid on 22 August 2013.

Dividend Record Date 7 August 2013.

Due Diligence Materials all documents and information that were at any time during the period ending on 20 June 2013 contained in the Data Room, together with all written answers given to questions submitted by AMAC or Resimac prior to 6 July 2013 (the date of the Merger Implementation Deed) in connection with transactions contemplated by Merger Implementation Deed.

Effective when used in relation to the Scheme, the coming into effect, under section 411(10) of the Corporations Act, of the order of the Court made under section 411(4)(b) in relation to a Scheme, but in any event at no time before an office copy of the order of the Court is lodged with ASIC.

Effective Date the date on which the Scheme becomes Effective.

Encumbrance any:

(a) security for the payment of money or performance of obligations, including a mortgage, charge, lien, pledge, trust, power, or title retention or flawed deposit arrangement and any “security interest” as defined in sections 12(1) or (2) of the Personal Property Securities

94

For

per

sona

l use

onl

y

Term Meaning

Act 2009 (Cwlth); or

(b) right, interest or arrangement which has the effect of giving another person a preference, priority or advantage over creditors including any right of set-off; or

(c) right that a person (other than the owner) has to remove something from land (known as a profit à prendre), easement, public right of way, restrictive or positive covenant, lease, or licence to use or occupy; or

(d) third party right or interest or any right arising as a consequence of the enforcement of a judgment,

or any agreement to create any of them or allow them to exist.

Exclusivity Period means the period from and including 6 July 2013 (the date of the Merger Implementation Deed) to the earlier of:

(a) the termination of the Merger Implementation Deed in accordance with its terms; and

(b) 28 February 2014.

Fees the fees payable by RMC to RHGHL under clause 2.2 of the Replacement Deed.

Financial Assistance payment of amounts by RHG and RHGHL directly or indirectly to AMAC after the Scheme is implemented to assist AMAC in the repayment of financing of the Scheme Consideration (and, in the limited circumstance where the asset sale described in Section 7.4(c) of the Scheme Booklet does not complete within 2 business days after the implementation of the Scheme, the granting of an all assets security in favour of National Australia Bank Limited (who will provide financing for part of the Scheme Consideration)).

Financial Assistance Resolution

the resolution to be put to a general meeting of RHG Shareholders under sections 260A(1)(b) and 260B of the Corporations Act in respect of the Financial Assistance.

First Court Date means the first day on which an application made to the Court, in accordance with the Merger Implementation Deed, for orders under section 411(1) of the Corporations Act convening the Scheme Meeting to consider the Scheme is heard.

Fully Franked Dividend a fully franked dividend which RHG is permitted to pay prior to implementation of the Scheme in accordance with clause 8.7(a) of the Merger Implementation Deed, other than the Dividend.

General Meeting means the general meeting of RHG Shareholders to consider and, if thought fit, to approve the Financial Assistance Resolution, including any adjournment of that meeting.

ICM means Ingot Capital Management.

Implementation Date the later of the third Business Day after the Scheme Record Date and the day that is 14 days after the Financial Assistance

95

For

per

sona

l use

onl

y

Term Meaning

Resolution is notified to ASIC, or such other date as is agreed by RHG and the Resimac Syndicate.

Independent Expert Deloitte Corporate Finance Pty Limited ACN 003 833 127.

Independent Expert’s Report

the report by the Independent Expert dated 5 November 2013, included as Annexure A.

A person is Insolvent if: (a) it is (or states that it is) an insolvent under administration or insolvent (each as defined in the Corporations Act); or

(b) it is in liquidation, in provisional liquidation, under administration or wound up or has had a Controller appointed to any part of its property (where “Controller” has the meaning given to that term in the Corporations Act); or

(c) it is subject to any arrangement, assignment, moratorium or composition, protected from creditors under any statute or dissolved (in each case, other than to carry out a reconstruction or amalgamation while solvent on terms approved by the other parties to this deed); or

(d) an application or order has been made (and in the case of an application, it is not stayed, withdrawn or dismissed within 30 days), resolution passed, proposal put forward, or any other action taken, in each case in connection with that person, which is preparatory to or could result in any of (a), (b) or (c) above; or

(e) it is taken (under section 459F(1) of the Corporations Act) to have failed to comply with a statutory demand; or

(f) it is the subject of an event described in section 459C(2)(b) or section 585 of the Corporations Act (or it makes a statement from which another party to this deed reasonably deduces it is so subject); or

(g) it is otherwise unable to pay its debts when they fall due; or

(h) something having a substantially similar effect to (a) to (g) happens in connection with that person under the law of any jurisdiction.

Liability any liability or obligation (whether actual, contingent or prospective) including for any Loss irrespective of when the acts, events or things giving rise to the liability occurred.

Listing Rules the official listing rules of ASX.

LMI Contract any insurance policy provided by Genworth Financial Mortgage Insurance Pty Limited (ABN 60 106 974 305), Housing Loans Insurance Corporation (known as GE Mortgage Insurance Pty Limited), QBE Lenders’ Mortgage Insurance Limited (ABN 70 000 511 071), Prime Insurance Group Limited or American International Assurance (Bermuda) Limited held in the name of a

96

For

per

sona

l use

onl

y

Term Meaning

Securitisation Vehicle.

Loan Book all of RMS’ and RMC’s right, title, estate, interest and benefit (whether present or future, actual or contingent) under or in connection with each:

(a) Mortgage Loan;

(b) Related Security; and

(c) Relevant Document,

and includes any Ancillary Rights and Claims.

When used in the context of the Merger Implementation Deed, it means all of RMS’ right, title, estate, interest and benefit (whether present or future, actual or contingent) under or in connection with each:

(a) Mortgage Loan;


(c) Relevant Document


Loan Book Liabilities in respect of a relevant seller under the Asset Sale Deed, all of that seller’s liabilities under or in connection with each Mortgage Loan, each Related Security, each Relevant Document and the administration, ownership, use, possession or enjoyment of the Loan Book.

Losses all claims, demands, damages, losses, costs, expenses and liabilities.

Meetings the General Meeting and the Scheme Meeting, or either one of them, as the context may require.

Merger the Acquisition of RHG by AMAC through the implementation of the Scheme.

Merger Implementation Deed

the Merger Implementation Deed between RHG and the Resimac Syndicate dated 6 July 2013 and amended on 15 July 2013, 21 August 2013, 2 September 2013 and 24 October 2013 pursuant to each Deed of Amendment.

A summary of key elements of the deed is set out in Section 8.1, and a confirmed, consolidated copy of the deed which incorporates all of the amendments made pursuant to the Deeds of Amendment is attached as Annexure B. Where amendments in a later-dated Deed of Amendment superseded amendments made earlier, only the most recent amendments are shown.

A copy of the deed (without annexures) can be obtained from ASX’s website asx.com.au or RHG’s website www.rhgl.com.au.

97

For

per

sona

l use

onl

y

Term Meaning

Mortgage Loan all loans which were written in the name of RMC.

NCCP National Consumer Credit Protection Act 2009 (Cth).

Non-Cadence RHG Shareholders

means RHG Shareholders other than Cadence.


the notice in relation to the general meeting of RHG Shareholders convened for the purpose of consideration of the Financial Assistance Resolution, included as Annexure F.

Notice of Scheme Meeting

the notice in relation to the Scheme Meeting, included as Annexure E.

NTA net tangible assets.

Pepper Pepper Australia Pty Limited ACN 094 317 665.

Pepper/Cadence Alternate Proposal

has the meaning given to that term in Section 5.1(d), footnote 24.

Pepper/Cadence Proposal


PIGL Prime Insurance Group Limited (a company incorporated in Bermuda).

Principal Investments has the meaning given to that term in Section 6.1.

Pro Forma NTA has the meaning given to that term in Section 5.3.

Proxy Form the proxy form which relates to both the General Meeting and the Scheme Meeting which accompanies this Scheme Booklet.

PwC PricewaterhouseCoopers Australia.

Regulatory Authority includes:

(a) ASX;

(b) ASIC;

(c) a government or governmental, semi-governmental or judicial entity or authority;

(d) the Bermuda Monetary Authority;

(e) a minister, department, office, commission, delegate, instrumentality, agency, board, authority or organisation of any government; and

(f) any regulatory organisation established under statute.

Related Body Corporate

has the meaning given in section 50 of the Corporations Act.

98

For

per

sona

l use

onl

y

Term Meaning

Related Security in relation to a Mortgage Loan, the rights, title and interest of any Securitisation Vehicle in any mortgage, deed of trust, pledge, assignment, deposit arrangement, lien, charge, claim, security interest, guarantee, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever which is held as security for any amounts owing by an obligor under that Mortgage Loan.

Relevant Document in relation to each Mortgage Loan and Related Security, all of the documents which evidence the obligations of any obligor in respect of that Mortgage Loan and Related Security, and any powers of attorney authorising any signatories to any such documents.

Relevant Interest has the meaning given in sections 608 and 609 of the Corporations Act.

Replacement Deed the RHG Programme Master Mortgage Origination Deed – Termination Deed dated 30 June 2008 between RMC and RHGHL.

Requisite Majorities for the purposes of approval of the Scheme:

(1) a majority in number (more than 50%) of the RHG Shareholders present and voting on the Scheme Resolution at the Scheme Meeting (either in person or by proxy); and

(2) at least 75% of the total number of votes cast on the Scheme Resolution at the Scheme Meeting by the RHG Shareholders present and voting at the Scheme Meeting (either in person or by proxy), and

for the purposes of approval of the Financial Assistance Resolution, at least 75% of the total number of votes cast on the Financial Assistance Resolution at the General Meeting by the RHG Shareholders present and voting at the General Meeting (either in person or by proxy).

Residual Capital Unit has the meaning given to that term in the draft Merger Implementation Agreement which formed part of the Pepper/Cadence Proposal

Residual Income Units 1. the Residual Income Unit issued in the RMS Trust 2002-1 and held by RHGHL;

2. the Residual Income Unit issued in the RMS Trust 2004-1E and held by RHGHL; and

3. the Residual Income Unit issued in the RHG Mortgage Securities Trust and held by RHGHL.

Resimac Resimac Limited ACN 002 997 935.

Resimac Group Resimac and its Subsidiaries.

Resimac Information the information regarding the Resimac Group provided by

99

For

per

sona

l use

onl

y

Term Meaning

Resimac to RHG for inclusion in the Scheme Booklet, being information:

(a) about the Resimac Group, its business, its interests and dealings in RHG Shares, its intentions, and funding arrangements; and


The Resimac Information does not include information about the RHG Group or the SPVs.

Resimac Syndicate AMAC and Resimac collectively and, where the context requires otherwise, each of them individually.

RHG RHG Limited ACN 055 136 564.

RHG Board the board of directors of RHG as constituted from time to time.

RHG Director a director on the RHG Board, being Glenn Goddard, Paul Jensen, John Kean, Richard Nott and Gabriel Radzyminski.

RHG Group RHG and its Subsidiaries.

RHG Information all information contained in the Scheme Booklet other than the AMAC Information, the Resimac Information and the Independent Expert’s Report.

RHG Material Adverse Change

means a Specified Event which individually, or when aggregated with other Specified Events of a similar kind or category, has resulted in, or is reasonably likely to result in:

(a) the Consolidated Net Tangible Assets of the RHG Group as at the Implementation Date being $5,000,000 (or more) less than the amount specified in the Consolidated Net Tangible Assets column of the Cashflow Schedule (adjusted for the amount of the Dividend and any Fully Franked Dividend that is determined and estimated Transaction Costs of $3,600,000 plus applicable GST, provided there is no double counting of these amounts) in respect of that date (and for this purpose, if the Implementation Date is not a date specified in the Cashflow Schedule, then the amount taken to be so specified in respect of it shall be calculated as a pro rata amount, using the amounts as at the two closest specified dates);

(b) a reduction of the aggregate value of the Mortgage Loans by more than the equivalent of 5% per month;

(c) Mortgage Loans in arrears for greater than 30 days rise from current levels to 7.5% or greater (by value) of all Mortgage Loans; or

(d) a material and adverse effect on the business, assets, financial condition, results, operations, reputation or

100

For

per

sona

l use

onl

y

Term Meaning

prospects of the RHG Group (as a whole) including:

(i) any material default by the RHG Group or any member of the RHG Group under their existing financing facilities; or

(ii) any material Action threatened or commenced against any member of the RHG Group or any SPV (including any Action where the amount claimed exceeds $2,000,000) other than an Action relating only to an asset in the Loan Book,

but does not include any matter, event, circumstance or change:

(e) fairly disclosed in the Due Diligence Materials, or that is reasonably foreseeable to arise and has been fairly disclosed in the Due Diligence Materials (however, any Transaction Costs in excess of $3,600,000 plus applicable GST in aggregate are not to be taken to have been fairly disclosed or reasonably foreseeable for the purposes of this paragraph);

(f) occurring as a result of any matter, event or circumstance required by this deed, the Scheme or the transactions contemplated by them (including any reasonable costs incurred as a result of implementing the Scheme, but not including any Transaction Costs in excess of $3,600,000 plus applicable GST in aggregate);

(g) occurring as a result of fluctuations to the working capital of the RHG Group in the ordinary course of business;

(h) occurring as a result of the amortisation of the Loan Book held by the Securitisation Vehicles in the ordinary course;

(i) resulting from changes in the general economic conditions of RHG’s industry or laws in any of the jurisdictions in which RHG operates;

(j) fairly disclosed to ASX or to AMAC and Resimac prior to 6 July 2013 (the date of the Merger Implementation Deed), as a result of a declaration of the Dividend or any Fully Franked Dividend;

(k) that occurs with the written consent of AMAC and Resimac; or

(l) resulting from changes in generally accepted accounting principles or the interpretation of them by any professional body or government agency.

RHG Mortgage Securities Trust

the RHG Mortgage Securities Trust in respect of each funding series.

101

For

per

sona

l use

onl

y

Term Meaning

RHG Prescribed Event except to the extent contemplated by the Merger Implementation Deed or the Scheme, any of the events listed in Schedule 1 of the Merger Implementation Deed provided that a RHG Prescribed Event will not occur where RHG has first consulted with AMAC and Resimac in relation to the event and AMAC and Resimac have approved in writing the proposed event.

RHG Register the share register of RHG.

RHG Registry Computershare Investor Services Pty Limited ACN 078 279 277.

RHG Share an issued fully paid ordinary share in the capital of RHG, together with all Rights attached to that share.

RHG Shareholder each person who is registered in the RHG Register as a holder of RHG Shares.

RHGHL RHG Home Loans Pty Limited ACN 053 725 741.

Rights all accretions, rights or benefits of whatever kind attaching to or arising from the RHG Shares directly or indirectly after 6 July 2013 (the date of the Merger Implementation Deed), including all dividends or other distributions and all rights to receive any dividends or other distributions, or to receive or subscribe for shares or other securities, which are declared, paid or made by RHG or a Subsidiary of RHG, but excludes the Dividend and the Fully Franked Dividend.

RMBS residential mortgage backed securities.

RMC RHG Mortgage Corporation Limited ACN 065 912 932.

RMS RHG Mortgage Securities Limited ACN 094 753 349.

Scheme the scheme of arrangement between RHG and Scheme Participants under which all Scheme Shares will be transferred to AMAC in accordance with Part 5.1 of the Corporations Act, substantially in the form of Annexure C together with any amendment or modification made pursuant to section 411(6) of the Corporations Act.

Scheme Booklet this document, including any annexure to it.

Scheme Consideration a cash payment of $0.501 for each Scheme Share less the amount of any dividend or distribution declared or paid by RHG on or after the date of the Merger Implementation Deed (for avoidance of doubt, other than the Dividend), in accordance with the terms of the Merger Implementation Deed and the terms of the Scheme.

Scheme Meeting the meeting to be convened by the Court at which RHG Shareholders will vote on the Scheme.

Scheme Participant each person who is an RHG Shareholder as at the Scheme Record Date.

Scheme Proposal has the meaning given to that term in Section 5.1(d).

102

For

per

sona

l use

onl

y

Term Meaning

Scheme Record Date 7.00pm (Sydney time) on the fifth Business Day following the Effective Date or such other date (after the Effective Date) as RHG and the Resimac Syndicate agree.

Scheme Resolution the resolution in relation to the Scheme to be voted on at the Scheme Meeting, as set out in the Notice of Scheme Meeting.

Scheme Shares all RHG Shares held by Scheme Participants as at the Scheme Record Date, including any RHG Shares issued on or before the Scheme Record Date.

Second Court Date the day on which the Court makes an order pursuant to section 411(4)(b) of the Corporations Act approving the Scheme.

Second Court Hearing the hearing of the application made to the Court for the order under section 411(4)(b) of the Corporations Act approving the Scheme.

Securitisation Vehicle means RMS and RMC.

Specified Events means an event, occurrence or matter that:

(a) occurs or fails to occur on or after 6 July 2013 (the date of the Merger Implementation Deed);

(b) occurs or fails to occur before 6 July 2013 (the date of the Merger Implementation Deed) but is disclosed to AMAC and Resimac or only announced or publicly disclosed after 6 July 2013 (the date of the Merger Implementation Deed); or

(c) will or is likely to occur or fail to occur on or after 6 July 2013 and which has not been disclosed to AMAC and Resimac or announced or publicly disclosed prior to 6 July 2013 (the date of the Merger Implementation Deed).

SPE special purpose entity.

SPV each of RMC, RMS and Better Servicing Pty Ltd.

Subsidiaries has the meaning given to it in the Corporations Act.

Superior Proposal a bona fide Competing Transaction which the RHG Board, acting reasonably and in good faith, and after receiving written advice from its legal and financial advisers, determines:

(a) is reasonably capable of being completed in a timely basis taking into account all aspects of the Competing Transaction; and

(b) is more favourable to the RHG Shareholders than the Scheme, in the opinion of each RHG Director as at 6 July 2013 (the date of the Merger Implementation Deed), taking into account all terms and conditions of the Competing Transaction.

Termination Event has the meaning given to that term in clause 15.1 of the Merger

103

For

per

sona

l use

onl

y

Term Meaning

Implementation Deed.

Total Payments $0.531 per RHG Share, comprising the Scheme Consideration and the Dividend.

Transaction Costs the costs incurred in relation to the Merger, relating to the expenses incurred by King & Wood Mallesons, the Independent Expert and Greenstone Partners other than costs:

(a) in relation to compliance with clauses 3.8, 8.2(h), 10.9 and 14 of the Merger Implementation Deed; or

(b) relating to any tax ruling, any objection by or negotiations with any Regulatory Authority or failure by the Court to:

(i) convene the Scheme meeting on the First Court Date; or

(ii) approve the Scheme on the Second Court Date; or

(c) costs attributable to the default, failure, delay or lack of reasonable co-operation by AMAC, Resimac or their advisers;

(d) incurred by RHG with the prior consent of AMAC and Resimac that such costs should fall outside the definition of Transaction Costs, such consent not to be unreasonably withheld; or

(e) incurred by RHG prior to 1 June 2013.

UMP Unisys Mortgage Processing (RHG) Pty Limited ACN 147 491 503.

Voting Power has the meaning given in section 610 of the Corporations Act.

VWAP volume weighted average price.

WAM Capital is defined in footnote 79.

Warehouse Facility has the meaning given to that term in Section 6 of this Scheme Booklet.

11.2 Interpretation

In this Scheme Booklet:

(a) other words and phrases have the same meaning (if any) given to them in the Corporations Act;

(b) words of any gender include all genders;

(c) words importing the singular include the plural and vice versa;

(d) an expression importing a person includes any company, partnership, joint venture, association, corporation or other body corporate and vice versa;

104

For

per

sona

l use

onl

y

(e) a reference to a Section or Annexure, is a reference to a section, or annexure, of this Scheme Booklet as relevant;

(f) a reference to any legislation includes all delegated legislation made under it and amendment, consolidations, replacements or re-enactments of any of them;

(g) headings and bold type are for convenience only and do not affect the interpretation of this Scheme Booklet;

(h) a reference to time is a reference to Sydney time;

(i) a reference to dollars, $, A$, AUD, cents and currency is a reference to the lawful currency of the Commonwealth of Australia;

(j) an accounting term is a reference to that term as it is used in accounting standards under the Corporations Act, or, if not inconsistent with those standards, in accounting principles and practices generally accepted in Australia; and

(k) the words ‘include’, ‘including’, ‘for example’ or ‘such as’ when introducing an example, do not limit the meaning of the words to which the example relates to, that example or examples of a similar kind.

105

For

per

sona

l use

onl

y

(e) a reference to a Section or Annexure, is a reference to a section, or annexure, of this Scheme Booklet as relevant;

(f) a reference to any legislation includes all delegated legislation made under it and amendment, consolidations, replacements or re-enactments of any of them;

(g) headings and bold type are for convenience only and do not affect the interpretation of this Scheme Booklet;

(h) a reference to time is a reference to Sydney time;

(i) a reference to dollars, $, A$, AUD, cents and currency is a reference to the lawful currency of the Commonwealth of Australia;

(j) an accounting term is a reference to that term as it is used in accounting standards under the Corporations Act, or, if not inconsistent with those standards, in accounting principles and practices generally accepted in Australia; and

(k) the words ‘include’, ‘including’, ‘for example’ or ‘such as’ when introducing an example, do not limit the meaning of the words to which the example relates to, that example or examples of a similar kind.

106

For

per

sona

l use

onl

y

Annexure A – Independent Expert’s Report

107

For

per

sona

l use

onl

y

RHG Limited

Independent expert’s report and Financial Services Guide 5 November 2013

108

For

per

sona

l use

onl

y

Deloitte Corporate Finance Pty Limited, ABN 19 003 833 127, AFSL 241457 of Level 1 Grosvenor Place, 225 George Street, Sydney NSW 2000

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of

member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed

description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Member of Deloitte Touche Tohmatsu Limited

Financial Services Guide What is a Financial Services Guide?

This Financial Services Guide (FSG) provides

important information to assist you in deciding

whether to use our services. This FSG includes

details of how we are remunerated and deal with

complaints.

Where you have engaged us, we act on your behalf when providing financial services. Where you have not engaged us, we act on behalf of our client when providing these financial services, and are required to give you an FSG because you have received a report or other financial services from us.

What financial services are we licensed to

provide?

We are authorised to provide financial product advice and to arrange for another person to deal in financial products in relation to securities, interests in managed investment schemes, government debentures, stocks or bonds and related regulated emissions units (i.e., carbon) to retail and wholesale clients.

Our general financial product advice

Where we have issued a report, our report contains only general advice. This advice does not take into account your personal objectives, financial situation or needs. You should consider whether our advice is appropriate for you, having regard to your own personal objectives, financial situation or needs.

If our advice is provided to you in connection with the acquisition of a financial product you should read the relevant offer document carefully before making any decision about whether to acquire that product.

How are we and all employees

remunerated?

We will receive a fee of approximately $200,000 exclusive of GST in relation to the preparation of this report. This fee is not contingent upon the success or otherwise of the proposed scheme of arrangement between RHG Limited and the Resimac Syndicate (the Proposed Scheme).

Other than our fees, we, our directors and officers, any related bodies corporate, affiliates or associates and their directors and officers, do not receive any commissions or other benefits.

All employees receive a salary and while eligible for annual salary increases and bonuses based on overall performance they do not receive any commissions or other benefits as a result of the services provided to you. The remuneration paid to our directors reflects

their individual contribution to the organisation and covers all aspects of performance.

We do not pay commissions or provide other benefits to anyone who refers prospective clients to us.

Associations and relationships

We are ultimately controlled by the Deloitte member firm in Australia (Deloitte Touche Tohmatsu). Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu.

What should you do if you have a

complaint?

If you have any concerns regarding our report or service, please contact us. Our complaint handling process is designed to respond to your concerns promptly and equitably. All complaints must be in writing to the address below.

If you are not satisfied with how we respond to your complaint, you may contact the Financial Ombudsman Service (FOS). FOS provides free advice and assistance to consumers to help them resolve complaints relating to the financial services industry. FOS’ contact details are also set out below.

The Complaints Officer Financial Ombudsman Services PO Box N250 GPO Box 3 Grosvenor Place Melbourne VIC 3001 Sydney NSW 1220 [email protected] [email protected] www.fos.org.au Fax: +61 2 9255 8434 Tel: 1300 780 808 Fax: +61 3 9613 6399

What compensation arrangements do we

have?

Deloitte Australia holds professional indemnity insurance that covers the financial services provided by us. This insurance satisfies the compensation requirements of the Corporations Act 2001 (Cth).

109

For

per

sona

l use

onl

y


Deloitte Corporate Finance Pty Limited A.B.N. 19 003 833 127

AFSL 241457

Grosvenor Place 225 George Street

Sydney NSW 2000 PO Box N250 Grosvenor Place

Sydney NSW 1220 Australia

DX 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001

www.deloitte.com.au

The Directors RHG Limited Locked Bag 100 Royal Exchange Sydney NSW 1225 5 November 2013 Dear Directors

Independent expert’s report

Introduction

RHG Limited (RHG or the Company) is a company listed on the Australian Securities Exchange (ASX) that sources funds and services a portfolio of residential home loans in Australia with a value of approximately $1.9 billion as at 30 September 2013.

On 22 May 2013, RHG announced that a syndicate comprising Resimac Limited (Resimac) and Australian Mortgage Acquisition Company Pty Limited (AMAC and collectively with Resimac, the Resimac Syndicate), submitted a proposal under which the Resimac Syndicate would acquire 100% of the issued shares in RHG via a scheme of arrangement (the Proposed Scheme). The consideration payable under the Proposed Scheme has been revised several times as a result of a competing offer. If the Proposed Scheme is approved, holders of RHG shares will receive cash of $0.501 per RHG share upon completion (Scheme Consideration), which is expected to occur on 8 January 2014 (Implementation Date).

On 15 August 2013, Pepper Australia Pty Limited (Pepper) and Cadence Capital Limited (CDM and collectively with Pepper, Pepper/CDM) proposed an alternate transaction to acquire 100% of RHG for a combination of cash and shares in CDM. In addition, CDM proposed paying a dividend to Shareholders of $0.05 per CDM share1 (Pepper/CDM Offer). The Pepper/CDM Offer has been revised several times.

On 25 October 2013, Pepper issued a press release which stated that Pepper and CDM had decided to

withdraw the Pepper/CDM Offer. This was confirmed by an ASX announcement issued by CDM on

28 October 2013. The analysis presented in this report was prepared prior to the withdrawal of the

Pepper/CDM Offer and therefore elements of this report, being those elements specifically concerned with

the evaluation of the Pepper/CDM Offer, are no longer relevant.

At the date of this report, the Directors of RHG (the Directors) recommend that RHG shareholders vote in favour of the Proposed Scheme for the reasons set out in the Scheme Booklet that has been prepared by the board of RHG (Scheme Booklet).

The Scheme Consideration represents an increase to the original conditional offer announced on 22 May 2013 of $0.38 per RHG share and follows a number of revised offers by the Resimac Syndicate in response to counter offers from Pepper/CDM. The Scheme Consideration is also higher than our assessed value of the consideration under the Pepper/CDM Offer (Pepper/CDM Offer Consideration) (which has now been withdrawn).

Upon completion of the Proposed Scheme, RHG will become a wholly owned subsidiary of AMAC and will subsequently be delisted from the ASX. The Scheme Booklet contains detailed terms of the Proposed Scheme and an overview of the Proposed Scheme is provided in Section 1 of our detailed report.

1 The $0.05 per CDM share dividend equates to $0.005 per RHG share under Scenario 1 and $0.0025 per RHG share under Scenario 2 (further detail is provided below and also Section 5)

110

For

per

sona

l use

onl

y

Deloitte: RHG Limited – Independent expert’s report and Financial Services Guide Page 2

Purpose of the report

Whilst an independent expert’s report in respect of the Proposed Scheme is not required to meet any statutory obligations, the Directors have requested that Deloitte Corporate Finance Pty Limited (Deloitte Corporate

Finance) provide an independent expert’s report advising whether, in our opinion, the Proposed Scheme is in the best interests of RHG shareholders (Shareholders).

This independent expert’s report has been prepared in a manner consistent with Part 3 of Schedule 8 of the Corporations Regulations 2001 (Cwlth) (Part 3) to assist Shareholders in their consideration of the Proposed Scheme. We have prepared this report having regard to Part 3 and Australian Securities and Investments Commission (ASIC) Regulatory Guide 111 and ASIC Regulatory Guide 112.

This report is to be included in the Scheme Booklet to be sent to Shareholders and has been prepared for the exclusive purpose of assisting Shareholders in their consideration of the Proposed Scheme. Neither Deloitte Corporate Finance, nor Deloitte Touche Tohmatsu, nor any member or employee thereof, undertakes responsibility to any person, other than the Shareholders and RHG, in respect of this report, including for any errors or omissions however caused.

Basis of evaluation

Schemes of arrangement can include many different types of transactions, including being used as an alternative to a takeover bid.

Where the scheme of arrangement has the same effect as a takeover, the form of analysis used by the expert should be substantially the same as for a takeover bid. The Proposed Scheme has the same effect as a takeover bid and therefore we have analysed it as such.

Summary and conclusion

In our opinion the Proposed Scheme is fair and reasonable and therefore in the best interests of Shareholders. In arriving at this opinion, we have had regard to the following factors:

The Proposed Scheme is fair

According to ASIC Regulatory Guide 111, in order to assess whether the Proposed Scheme is fair, the independent expert is required to compare the fair market value of a share in RHG on a control basis with the fair market value of the Scheme Consideration. The Proposed Scheme is fair if the value of the Scheme Consideration is equal to or greater than the value of the securities subject to the offer.

Set out in the table below is a comparison of our assessment of the fair market value of a RHG share with the Scheme Consideration.

Table 1: Evaluation of fairness

Low

$ High

$

Estimated fair market value of a RHG share 0.419 0.459

Scheme Consideration 0.501 0.501

Source: Deloitte Corporate Finance analysis

The Scheme Consideration is above the range of our estimate of the fair market value of a RHG share. Accordingly it is our opinion that the Proposed Scheme is fair.

The Resimac Syndicate may have identified characteristics in the loan book and additional synergy benefits that will allow it to generate higher cash flows than that assessed in our valuation of RHG.

Valuation of a RHG share

We have estimated the fair market value of a RHG share on a control basis to be in the range of $0.419 to $0.459, by aggregating the estimated fair market value of the assets and liabilities of RHG on a sum of the parts basis and deducting the capitalised value of corporate overheads. A number of assumptions were adopted in arriving at the value of a RHG share. Adopting different assumptions, in particular those relating to prepayment rates, could materially alter the value of a RHG share. The impact on value of using different assumptions is discussed in greater detail below.

111

For

per

sona

l use

onl

y


We have used the discounted cash flow method to estimate the fair market value of RHG’s primary non-cash assets (in particular, the future servicing rights (FSR) associated with RHG’s existing loan book and other investments in the trusts which own RHG’s loan book).

The discounted cash flow method requires the projection of future cash flows and the determination of an appropriate discount rate. We selected a nominal after tax discount rate in the range of 10.0% to 11.0% to discount RHG’s estimated future cash flows to their present value.

A detailed financial model prepared by the management of RHG (Management) formed the basis of our estimated future cash flows. We have undertaken work to assess whether the financial projections and the underlying model are suitable for the purposes of assessing the fairness and reasonableness of the Proposed Scheme in accordance with Regulatory Guide 111. We have made amendments to the underlying assumptions, where appropriate. A summary of our valuation analysis and conclusions is set out in the table below.

Table 2: Summary of valuation – sum of the parts analysis

Value of Company Value of a share

Section

Low

($ million)

High

($ million)

Low

($) High ($)

FSR Section 4.2 65.60 72.10 0.213 0.234

Other Investments Section 4.3 38.80 41.30 0.126 0.134

Cash Section 4.4 32.55 32.55 0.106 0.106

Corporate overheads Section 4.5 (11.04) (8.18) (0.036) (0.027)

Fair market value at Valuation Date 125.91 137.77 0.408 0.447

Value increment to Implementation Date Section 4.6 3.42 3.74 0.011 0.012

Fair market value of RHG 129.33 141.51 0.419 0.459

Notes: The figures in the table may be subject to rounding


The value of the FSR is estimated by discounting the net cash flows that RHG anticipates receiving from the portfolio of underlying home loans. RHG is entitled to the residual cash flows after paying for administration and collection costs and after servicing the debt used to fund the loan book.

Other Investments largely comprise cash provided as collateral and subordinated loan notes which will be realised as the loan book is wound down.

RHG maintained a substantial cash balance, which totalled $32.5 million2 as at 30 September 2013 (the Valuation Date).

The present value of corporate overheads is estimated on the basis of ongoing corporate overheads as assumed by RHG management. RHG management has factored in overhead savings in its projections as the loan book is collected progressively. Allowance is also made for wind up costs and legal and liquidation costs when the loan book reduces to $500 million, at which point there is a risk it will become uneconomical to manage. For the purposes of our valuation, we have assumed that a prospective purchaser is likely to avoid between 50% and 75% of these costs.

As the Proposed Scheme will not be implemented until 8 January 2014 we have allowed for the value that we would expect to accrue to Shareholders between the Valuation Date and the Implementation Date.

The equity value of a RHG share applying different prepayment rates and allowing for changes in the net interest margin is summarised below.

2 We have reduced the amount reflected as the cash balance of $36.2 million by $2.7 million as this represents an intercompany receivable owing to RHG from the SPEs and which is required to be included in the cash balance under accounting standards (the associated cash flow

is included in the FSR Projections), and $1.0 million to account for accruals as at 30 September 2013

112

For

per

sona

l use

onl

y


Table 3: Sensitivity of the value of a RHG share to changes in net interest margin and prepayment rate using the mid-point of the selected discount rate range

Change in net interest margin

(15 bps) (10 bps) (5 bps) - 5 bps 10 bps 15 bps

Pre

pay

me

nt

rate

(%

)

20.0% 0.419 0.425 0.431 0.437 0.443 0.449 0.455

22.5% 0.402 0.408 0.413 0.419 0.425 0.430 0.436

25.0% 0.387 0.392 0.397 0.402 0.407 0.412 0.418

Notes: bps = basis point where 1 bps equals 0.01%


Our valuation is highly sensitive to prepayment rates. The sensitivity arises because the level of prepayments assumed has a significant impact on the rate at which the loan book amortises. We have used a prepayment rate assumption of 20% in forming our view on the value of a RHG share. Our selected prepayment rate is lower than the historically observed prepayment rate for the RHG loan book (as set out in Table 15) and having regard to these historical observations, RHG management consider a prepayment rate of 25% more appropriate.

We are of the opinion that it may be possible for a prospective purchaser to implement actions that would slow down the prepayment rate. The selection of the prepayment rate involves subjectivity. As can be seen from the above, selection of a prepayment rate of 25% (in line with historical trends and RHG management’s view of a reasonable prepayment rate) would reduce the value of a RHG share by 3.5 cents (or 7.9%) to 40.2 cents (at the mid-point).

The net interest margin that RHG is able to generate on the loan book reflects the premium over the cash rate and any difference between the cash rate and the relevant BBSW. The net interest margin adopted in our valuation does not have a material impact as the spread above BBSW incorporated in the funding rate represents only a small component of the net interest margin. In the above table, we sensitise our valuation by both decreasing and increasing the net interest margin by increments of 5 bps up to 15 bps. Based on our analysis, the value of a RHG share increases by approximately 4.2% or 1.8 cents per RHG share if the net interest margin increases by 15 bps.

The value of the shares assuming higher and lower discount rates and corporate overhead savings is also summarised in the table below.

Table 4: Sensitivity of value of a RHG share (at mid-point of our low and high value range) to changes in discount rate and corporate overhead savings

Overhead savings (%)

0% 25% 50% 62.5% 75% 90% 100%

Dis

co

un

t ra

te

(%)

9.5% 0.382 0.406 0.430 0.442 0.453 0.468 0.477

10.5% 0.379 0.402 0.425 0.436 0.448 0.462 0.471

11.5% 0.376 0.398 0.420 0.431 0.443 0.456 0.465


Our assessment of fair market value assumes that a prospective purchaser prices in between 50% and 75% of the overhead savings. To the extent a particular purchaser is able to avoid more than this level of overheads, the value to them may be higher. In addition, to the extent that a prospective purchaser has an alternative view on risk attaching to the portfolio (or the risk added to their existing portfolio), their assessment of the discount rate applicable to RHG may change and this may also have an impact on value.

113

For

per

sona

l use

onl

y


The Proposed Scheme is reasonable

In accordance with ASIC Regulatory Guide 111 an offer is reasonable if it is fair. On this basis, in our opinion the Proposed Scheme is reasonable. We have also considered the following factors in assessing the reasonableness of the Proposed Scheme:

Shareholders are receiving a premium to RHG’s share price prior to the announcement of the Proposed Scheme

The Resimac Syndicate’s offer of $0.501 is above the recent trading price on the ASX prior to the announcement of the Proposed Scheme (30 day volume weighted average price of $0.3613 before the conditional offer on 22 May 2013). If the Proposed Scheme is not implemented, it is likely that the share price will fall below the offer price.

The consideration being offered is greater than our assessment of the stand-alone value of RHG shares

We have assessed the value of RHG shares on a stand-alone basis to be in the range of $0.383 to $0.391. The stand-alone value of RHG is significantly lower than the Scheme Consideration because, in our opinion, the Scheme Consideration includes some level of synergies that will be extracted by the Resimac Syndicate. Specifically, the difference between the low end of our valuation range ($0.419) and the estimated low end on a stand-alone basis ($0.383) is the result of the 50% of corporate costs assumed to be avoided by a potential purchaser.

In addition, because there is greater risk of a default event with respect to RHG’s warehouse facilities if it remains independent, the value of RHG shares could be even lower. Based on discussion with RHG management, we are of the view that the current likelihood of warehouse facility defaults is low but this risk will always exist while it operates on a stand-alone basis (without the support of a third party) and continues to run-off its portfolio. Our analysis is set out in the table below:

Table 5: Value of a share assuming RHG is unable to rollover its warehouse facilities at different times ($)

Low value2 High value

2

RHG stand-alone value 0.383 0.391

Warehouse default in year 51 0.323 0.328




Notes:

1. Year in which the relevant warehouse facilities are not rolled over

2. Based on low and high discount rate


Further detail on our valuation of RHG on a stand-alone basis is set out in Section 4.9.

Having regard to the above, Shareholders are receiving a premium relative to the value they may realise if RHG continues to operate on a stand-alone basis.

The Proposed Scheme allows Shareholders to realise their investment in RHG and removes uncertainty associated with the refinancing of the warehouse facilities

The Proposed Scheme allows Shareholders to immediately realise their investment in RHG at a premium to the traded security price before the binding offer announcement date. The offer removes the execution risk involved in collecting the loan book and winding up RHG.

There is a risk that the warehouse facilities totalling $1.4 billion may not be rolled over or rolled over on more onerous terms with providers requiring increased margins, the payment of one off-fees and / or additional collateral if the credit rating of the underlying loan book deteriorates. The Proposed Scheme removes the uncertainty associated with the refinancing of the warehouse facilities.

3 RHG 30 day volume weighted average price of $0.391 before the conditional offer on 22 May 2013 adjusted for the $0.03 dividend paid in

August 2013

114

For

per

sona

l use

onl

y


Implementation of the Proposed Scheme will mean Shareholders will lose the ability to

participate in upside should net interest margins increase or prepayments slow

The value of the FSR is dependent upon net interest margins and prepayment rates on the loan book. If the Proposed Scheme goes ahead, Shareholders will not be able to benefit from an increase in the value of the FSR (above the premium to be received from the Scheme Consideration) if net interest margins improve or prepayments rates slow.

RHG is unable to issue residential mortgage backed securities to replace warehouse funding

RHG is unable to issue residential mortgage backed securities (RMBS) to replace warehouse facilities as the business is winding down. This creates uncertainty for potential investors. Furthermore, the requirements of the credit rating agencies have become more stringent in relation to the amount of collateral required to support a minimum rating.

The Scheme Consideration captures only part of the synergy benefits that the Resimac Syndicate may be able to realise

Our market valuation may not reflect all of the potential synergy benefits that may be available to the Resimac Syndicate and it is possible that they may be able to extract further value from RHG’s loan book through one or more of the following:

· reduce the overhead costs associated with managing the loan book even further. Our assessment of market value assumes a market purchaser is able to remove between 50% and 75% of the corporate overheads. The Resimac Syndicate may be able to reduce corporate overheads further

· the Resimac Syndicate may be able to replace the warehouse facilities with cheaper financing and thereby increase the net interest margin it generates

· the Resimac Syndicate may be able to, directly or indirectly, lower prepayment rates and thereby increase the life of the loan book which, in turn, would increase the value of RHG. Our assessment of market value assumes that prepayment rates stabilise at 20%.

The sensitivity of our market valuation as a result of adopting different assumptions is set out in Section 4.8.

The Scheme Consideration is a result of a competitive process in which each of the interested parties involved have considered the synergies that are available. The current offer price is higher than our valuation and this is likely to be a result of the Resimac Syndicate valuing the synergies over and above that assessed by us.

The Proposed Scheme is the best offer available to shareholders

The Directors have formed the view that the Proposed Scheme is superior to any other offer currently available to RHG shareholders, and in particular the Pepper/CDM Offer (which has now been withdrawn).

Given the withdrawal of the Pepper/CDM Offer the analysis presented below is no longer relevant.

We have also formed the view that the Proposed Scheme is superior to the Pepper/CDM Offer. As the Proposed Scheme Consideration is only marginally higher than our presently assessed value of the Pepper/CDM Offer Consideration and given the CDM share price is likely to fluctuate, we have also considered a number of other factors specific to the Pepper/CDM Offer. We believe the Proposed Scheme provides greater certainty, is less complex and is likely to crystallise value for Shareholders sooner than the Pepper/CDM Offer. Taking all these matters into account, in the absence of a material and sustained increase in the price of CDM shares, we are of the opinion that the Proposed Scheme is the best offer currently available to Shareholders.

We have assessed the value of the Pepper/CDM Offer Consideration as being in the range of $0.493 to $0.498 if CDM obtains approval to issue additional shares (Scenario 1) and $0.497 to $0.499 if CDM does not obtain approval to issue additional shares (Scenario 2). Therefore, the value of the Scheme Consideration is marginally higher than the Pepper/CDM Offer Consideration.

The value of the Pepper/CDM Offer Consideration will vary depending on the price of CDM shares which we have assessed to be in the range of $1.35 to $1.40. A material and sustained increase in the price of CDM shares may increase the value of the Pepper/CDM Offer Consideration so that it exceeds the value of the Proposed Scheme Consideration.

115

For

per

sona

l use

onl

y


Our valuation of the Pepper/CDM Offer Consideration also incorporates a discount of 5% to reflect the transaction costs, market trading overhang (especially recognising the low liquidity in the trading of CDM shares on the ASX) and other factors that may adversely impact the ability of a RHG shareholder to realise the cash value of the CDM shares they receive. We have also considered the fact that a discount to NAV has been observed historically in CDM’s traded price and in the LIC sector generally. If shareholders were to adopt the view that the discount warranted is lower than 5%, then the value of the Pepper/CDM Offer Consideration would increase (up to $0.505 if no discount is applied).

The value of the Pepper/CDM Offer Consideration is sensitive to the assumptions with respect to the value of a CDM share and the assumed discount. The figures below present the impact of adopting different assumptions for these two factors:

Table 6: Value of a Pepper/CDM Offer Consideration using different CDM share price and discount assumptions (Scenario 1)

Assumed CDM share price

$1.300 $1.325 $1.350 $1.375 $1.400 $1.425 $1.450

Assu

med

dis

co

un

t (%

)

5% 0.489 0.491 0.493 0.496 0.498 0.500 0.503

4% 0.490 0.492 0.495 0.497 0.499 0.502 0.504

3% 0.491 0.494 0.496 0.498 0.501 0.503 0.506

2% 0.492 0.495 0.497 0.500 0.502 0.505 0.507

1% 0.494 0.496 0.499 0.501 0.504 0.506 0.509

0% 0.495 0.498 0.500 0.503 0.505 0.508 0.510




$1.300 $1.325 $1.350 $1.375 $1.400 $1.425 $1.450

Assu

med

dis

co

un

t (%

)

5% 0.494 0.495 0.497 0.498 0.499 0.500 0.501

4% 0.495 0.496 0.497 0.499 0.500 0.501 0.502

3% 0.496 0.497 0.498 0.499 0.500 0.502 0.503

2% 0.496 0.497 0.499 0.500 0.501 0.502 0.504

1% 0.497 0.498 0.499 0.501 0.502 0.503 0.504

0% 0.498 0.499 0.500 0.501 0.503 0.504 0.505


In order for the Pepper/CDM Offer Consideration to be greater than the Scheme Consideration and assuming a 5% discount, CDM’s share price would need to be greater than $1.435 under Scenario 1 and $1.45 under Scenario 2.

We also note that:

· The Proposed Scheme is also less complex and more certain than the Pepper/CDM Offer because it is entirely cash consideration. Under the Proposed Scheme, Shareholders will receive cash consideration and be taxed on that consideration based on their personal circumstances. Conversely, the Pepper/CDM Offer involves a combination of cash and scrip in CDM which is still to be determined (the ultimate proportions of cash and scrip will depend on whether CDM obtains approval from the ASX and/or CDM shareholders to issue additional shares), the value of the Pepper/CDM Offer will vary depending on the CDM share price and the different components (the cash and scrip) will be taxed differently

· in the Pepper/CDM Offer announced on 9 September 2013, Pepper/CDM indicated a share buyback program for CDM shareholders of up to 10% of the total CDM shares on issue (includes the new CDM shares issued to RHG shareholders). The buyback program may be implemented if CDM’s share price

116

For

per

sona

l use

onl

y


trades materially below net tangible asset value. However, CDM have not provided any clarity on what they regard as material

· depending on the number of RHG shares held, some shareholders may receive a non-marketable parcel of shares in CDM.4 In an addendum to the Pepper/CDM Offer announced 11 October 2013, Pepper/CDM indicated a small shareholding sale facility will be implemented to give eligible RHG shareholders who receive a non-marketable parcel of CDM shares the opportunity to dispose of their CDM shares within six months of the implementation of the Pepper/CDM Offer without any brokerage or handling costs.

In the same addendum, CDM also state they will provide the opportunity to eligible RHG shareholders to buy more CDM shares, free of brokerage and other transaction costs, through a share purchase plan to be implemented within six months of implementation of the Pepper/CDM Offer.

Pepper/CDM have not indicated whether any discounts or premiums will apply to the sale or acquisition of shares under such facilities and in the intervening period shareholders could be exposed to fluctuations in the price of the CDM shares they receive

· RHG Management have informed us that CDM intended to pay a dividend of $0.05 per CDM share to RHG shareholders. The precise mechanism that CDM proposed to employ to effect this dividend payment was not disclosed. Our valuation of the Pepper/CDM Offer Consideration includes the value of this dividend and assumes that there is no material impact on CDM’s net asset value (and therefore the value of its shares) and the payment of such a dividend would not result in any adverse tax consequences for RHG Shareholders relative to receiving the cash equivalent

· our valuation analysis assumes that there is an equivalent timetable for both the Resimac Syndicate and Pepper/CDM schemes of arrangement. The Directors are of the view that it is unlikely the Pepper/CDM scheme could be put to Shareholders for approval with the same timetable as the Proposed Scheme owing to its complexity. The present value of the Pepper/CDM Offer Consideration will therefore be lower on a like for like basis as Shareholders will only receive the consideration for their RHG shares at a later date (as compared to the Proposed Scheme).

As there is likely to be a longer time frame required to implement the Pepper/CDM scheme, there is also increased risk the value of the Pepper/CDM Offer Consideration may change as a result of movements in the value of the CDM shares arising from changes in the nature of its underlying investments.

Our detailed analysis of the Pepper/CDM Offer (which has now been withdrawn) is set out in Section 5.

Taxation

Implementation of the Proposed Scheme may trigger tax consequences for Shareholders earlier than would have been the case otherwise. The taxation consequences of the Proposed Scheme for Shareholders will depend on the personal taxation and financial circumstances of each Shareholder. We recommend Shareholders consider consulting an independent adviser who will have regard to their individual circumstances.

Conclusion on reasonableness

On balance, and notwithstanding that the offer is fair, there are sufficient reasons for Shareholders to accept the offer in the absence of a superior proposal and therefore the Proposed Scheme is also reasonable.

Other matters

The intentions of the Directors

It is the intention of the Directors to unanimously recommend acceptance of the Proposed Scheme, in the absence of a superior proposal.

Break fees

A break fee equal to $1.638 million is payable to the Resimac Syndicate in certain circumstances if the Proposed Scheme does not proceed. A reverse break fee of $1.638 million is payable to RHG in certain circumstances.

4 Out of approximately 4,600 shareholders, we have calculated that this will apply to 32% of shareholders under Scenario 1 and 48% under

Scenario 2

117

For

per

sona

l use

onl

y


Opinion

In our opinion, the Proposed Scheme is fair and reasonable to Shareholders. It is therefore in the best interests of Shareholders.

An individual shareholder’s decision in relation to the Proposed Scheme may be influenced by his or her particular circumstances. If in doubt the shareholder should consult an independent adviser, who should have regard to their individual circumstances.

This opinion should be read in conjunction with our detailed report which sets out our scope and findings.

Yours faithfully

Tapan Parekh Nicki Ivory

Director Director Deloitte Corporate Finance Pty Limited Deloitte Corporate Finance Pty Limited

118

For

per

sona

l use

onl

y


Contents

1 Overview of the Proposed Scheme ........................................................................................................ 12

1.1 Summary ......................................................................................................................................... 12

1.2 The Resimac Syndicate’s intentions ................................................................................................. 12

1.3 Key conditions of the Proposed Scheme ........................................................................................... 12

2 Scope of the report ................................................................................................................................ 13

2.1 Purpose of the report ........................................................................................................................ 13

2.2 Basis of evaluation........................................................................................................................... 13

2.3 Limitations and reliance on information ........................................................................................... 14

3 Profile of RHG....................................................................................................................................... 15

3.1 Overview ......................................................................................................................................... 15

3.2 Company history ............................................................................................................................. 15

3.3 Legal structure ................................................................................................................................. 15

3.4 Key agreements ............................................................................................................................... 16

3.5 Loan book ....................................................................................................................................... 16

3.6 Funding ........................................................................................................................................... 18

3.7 Collateral funds, subordinated debt and other assets ......................................................................... 20

3.8 Employees ....................................................................................................................................... 20

3.9 IT Systems ...................................................................................................................................... 20

3.10 Capital Structure .............................................................................................................................. 21

3.11 Share price performance .................................................................................................................. 21

3.12 Financial performance ..................................................................................................................... 23

3.13 Financial position ............................................................................................................................ 24

4 Valuation of RHG.................................................................................................................................. 26

4.1 Selection of valuation methodologies ............................................................................................... 26

4.2 Valuation of the FSR ....................................................................................................................... 26

4.3 Valuation of Other Investments ........................................................................................................ 29

4.4 Cash balance ................................................................................................................................... 29

4.5 Corporate overheads ........................................................................................................................ 30

4.6 Valuation Date to Implementation Date ............................................................................................ 30

4.7 Summary of our valuation of RHG ................................................................................................... 30

4.8 Sensitivity analysis .......................................................................................................................... 31

4.9 Value of RHG in the absence of the Proposed Scheme ..................................................................... 31

119

For

per

sona

l use

onl

y


5 Evaluation of the Pepper/CDM Offer ................................................................................................... 33

5.1 Overview of the Pepper/CDM Offer ................................................................................................. 33

5.2 Profile of Pepper .............................................................................................................................. 33

5.3 Profile of CDM................................................................................................................................ 34

5.4 Valuation of the Scrip Component ................................................................................................... 39

5.5 Valuation of the Dividend Component and CDM Dividend .............................................................. 41

5.6 Valuation of the Pepper/CDM Offer Consideration .......................................................................... 42

Glossary ........................................................................................................................................................ 45

Appendix A: Residential mortgage industry ................................................................................................ 47

Appendix B: Valuation methodology ........................................................................................................... 55

Appendix C: Discount Rate .......................................................................................................................... 56

Appendix D: Sources of information ............................................................................................................ 64

Appendix E: Qualifications, declarations and consents ............................................................................... 65

120

For

per

sona

l use

onl

y


1 Overview of the Proposed Scheme

1.1 Summary

RHG is a company listed on the ASX that sources funds and services a portfolio of residential home loans in Australia with a carrying value of approximately $1.9 billion as at 30 September 2013. RHG also manages the securitisation vehicles used to house the mortgage book. The securitisation vehicles do not form part of the RHG group.

RHG entered into a Merger Implementation Deed (MID) with the Resimac Syndicate on 6 July 2013 (released on 8 July 2013). Under the terms of the original MID, the Resimac Syndicate proposed to acquire 100% of the ordinary shares in RHG for a cash consideration of $0.441 per share.

Following a number of revised offers from the Resimac Syndicate in response to counter offers from Pepper/CDM, the Scheme Consideration of $0.501 per share was announced on 18 October 2013.

1.2 The Resimac Syndicate’s intentions

Upon completion of the Proposed Scheme, RHG would become a wholly owned subsidiary of AMAC and would subsequently be delisted from the ASX.

AMAC intends to sell the majority of the assets and liabilities of RHG to Resimac and then wind down the entities associated with RHG over time.

Resimac intends to integrate the assets and liabilities of RHG into its existing book and take advantage of economies of scale and resulting synergy benefits.

Further details of the Resimac Syndicate’s intentions are provided in Section 7 of the Scheme Booklet.

1.3 Key conditions of the Proposed Scheme

A number of conditions need to be satisfied or waived before the Proposed Scheme can be implemented, including:

· shareholder approval by the requisite majorities

· passage of the Financial Assistance Resolution5

· court approval

· consent from the providers of the warehouse facilities being obtained in respect of change of control provisions pursuant to the Proposed Scheme

· no material adverse changes to the RHG business.

Further details regarding the conditions precedent that must be satisfied or waived before the Proposed Scheme can be implemented are set out in Section 8 of the Scheme Booklet.

5 AMAC has borrowed or will borrow funds to pay the Scheme Consideration. After the Proposed Scheme is implemented (if approved), AMAC proposes to use some of RHG’s funds to repay its borrowing. This is a form of “Financial Assistance” under the Corporations Act,

requiring approval of RHG Shareholders by passing a Financial Assistance Resolution.

121

For

per

sona

l use

onl

y


2 Scope of the report

2.1 Purpose of the report

Section 411 regulates schemes of arrangement between companies and their shareholders. Part 3 prescribes the information to be provided to shareholders in relation to schemes of arrangement.

Whilst an independent expert’s report in respect of the Proposed Scheme is not required to meet any statutory obligations, the Directors have requested that Deloitte Corporate Finance provide an independent expert’s report advising whether, in our opinion, the Proposed Scheme is in the best interests of Shareholders. This independent expert’s report has been prepared in a manner consistent with Part 3 to assist Shareholders in their consideration of the Proposed Scheme.

This report is to be included in the Scheme Booklet to be sent to Shareholders and has been prepared for the exclusive purpose of assisting Shareholders in their consideration of the Proposed Scheme. Neither Deloitte Corporate Finance, nor Deloitte Touche Tohmatsu, nor any member or employee thereof, undertakes responsibility to any person, other than the Shareholders and RHG, in respect of this report, including for any errors or omissions however caused.

Deloitte Corporate Finance confirms that it is independent of RHG for the purposes of preparing this report.

2.2 Basis of evaluation

2.2.1 Guidance

Schemes of arrangement can include many different types of transactions, including being used as an alternative to a Chapter 6 takeover bid. The basis of evaluation selected by the expert must be appropriate for the nature of each specific transaction.

Section 640 of the Corporations Act 2001 requires an independent expert’s report in connection with a takeover offer to state whether, in the expert’s opinion, the takeover offer is fair and reasonable. Where the scheme of arrangement has the same effect as a takeover, the form of analysis used by the expert should be substantially the same as for a takeover bid, however, the opinion reached should be whether the proposed scheme is ‘in the best interests of the members of the company’. Accordingly, if an expert were to conclude that a proposal was ‘fair and reasonable’ if it was in the form of a takeover bid, it will also be able to conclude that the proposed scheme is in the best interests of the members of the company.

In our assessment as to whether the Proposed Scheme is fair and reasonable and therefore in the best interests of the members of the company, we have had regard to common market practice and to Regulatory Guide 111 issued by ASIC in relation to the content of independent expert’s reports.

ASIC Regulatory Guide 111

This regulatory guide provides guidance in relation to the content of independent expert’s reports prepared for a range of transactions.

ASIC Regulatory Guide 111 refers to a ‘control transaction’ as being the acquisition (or increase) of a controlling stake in a company that could be achieved, for example, by way of a takeover offer, scheme of arrangement, approval of an issue of shares using Section 611(7), a selective capital reduction or selective buy back under Chapter 2J.

In respect of control transactions, under ASIC Regulatory Guide 111 an offer is:

· fair, when the value of the consideration is equal to or greater than the value of the securities subject to the proposed scheme. The comparison must be made assuming 100% ownership of the target company (i.e. including a control premium)

· reasonable, if it is fair, or, despite not being fair, after considering other significant factors, shareholders should accept the offer under the proposed scheme, in the absence of any higher bids before the close of the offer.

To assess whether the Proposed Scheme is in the best interests of Shareholders, we have adopted the tests of whether the Proposed Scheme is either fair and reasonable, not fair but reasonable, or neither fair nor reasonable, as set out in ASIC Regulatory Guide 111.

122

For

per

sona

l use

onl

y


2.2.2 Fairness

ASIC Regulatory Guide 111 defines an offer as being fair if the value of the offer price is equal to or greater than the value of the securities the subject of the offer. The comparison must be made assuming 100% ownership of the target company.

Accordingly we have assessed whether the Proposed Scheme is fair by comparing the value of the consideration being offered pursuant to the Proposed Scheme with the value of a RHG ordinary share on a control basis. We have assessed the value of each RHG ordinary share by estimating the current value of RHG on a control basis and dividing this value by the number of ordinary shares on issue.

The RHG ordinary shares have been valued at fair market value, which we have defined as the amount at which an ordinary share would be expected to change hands between a knowledgeable and willing but not anxious buyer and a knowledgeable and willing but not anxious seller, neither of whom is under any compulsion to buy or sell. Special purchasers may be willing to pay higher prices to reduce or eliminate competition, to ensure a source of material supply or sales, or to achieve cost savings or other synergies arising on business combinations, which could only be enjoyed by the special purchaser. Our valuation of a RHG ordinary share has not been premised on the existence of a special purchaser.

2.2.3 Reasonableness

ASIC Regulatory Guide 111 considers an offer in respect of a control transaction, to be reasonable if either:

· the offer is fair

· despite not being fair, the expert believes there are sufficient reasons for shareholders to accept the offer in the absence of a higher bid.

To assess the reasonableness of the Proposed Scheme we considered the following significant factors in addition to determining whether the Proposed Scheme is fair:

· the likely market price of RHG ordinary shares in the absence of the Proposed Scheme

· any special value available to the Resimac Syndicate upon achieving 100% ownership of RHG

· the likelihood of an alternative offer being made

· other implications associated with RHG shareholders rejecting the Proposed Scheme.

2.3 Limitations and reliance on information

We have evaluated the Proposed Scheme for Shareholders as a whole and have not considered the effect of the Proposed Scheme on the particular circumstances of individual Shareholders. Due to their particular circumstances, individual Shareholders may place a different emphasis on various aspects of the Proposed Scheme from the one adopted in this report. Accordingly, individual Shareholders may reach different conclusions to ours on whether the Proposed Scheme is fair and reasonable and therefore in the best interests of Shareholders. If in doubt Shareholders should consult an independent adviser, who should have regard to their individual circumstances.

The opinion of Deloitte Corporate Finance is based on economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly over relatively short periods of time.

This report should be read in conjunction with the declarations outlined in Appendix E.

123

For

per

sona

l use

onl

y


3 Profile of RHG

3.1 Overview

RHG is the group of entities formerly known as “RAMS Home Loans Group Limited”. The RHG name was adopted after selling the RAMS brand name, distribution network and other assets to Westpac Banking Corporation in November 2007. RHG continues to manage and service the loan book that was in existence prior to November 2007, with the exception of some home loans (approximately $1.4 billion) sold to third parties since that date.

The balance of the loan book was approximately $1.9 billion as at 30 September 2013. It is funded through warehouse facilities of approximately $1.4 billion and residential mortgage backed securities (RMBS) of approximately $0.5 billion. The business has continued to use warehouse facilities as a continuing source of funds.

The primary operational asset of RHG is the Future Servicing Rights (FSR) to this loan book. It also owns a number of other related assets.

An overview of the residential mortgage industry is provided at Appendix A.

3.2 Company history

RHG was founded in 1991 and commenced operations as a wholesale provider of funds to borrowers in the commercial and investment property markets. The business later expanded its operations from being solely a provider of funds to having its own retail mortgage origination business.

In July 2007, RHG was listed on the ASX and just one month after listing it announced it was not able to rollover its extendible commercial paper programs which funded its activities as a result of the first implications of the credit squeeze subsequently referred to and which evolved into the global financial crisis.

As a consequence of ongoing funding difficulties, in October 2007 RHG announced the sale of its distribution network and brand name to Westpac for $140 million (the Westpac Transaction). As part of the Westpac Transaction, RHG agreed not to engage in a business competing with the business sold to Westpac for a period of three years from completion, throughout Australia. This non-compete agreement expired on 4 January 2011. RHG is not originating any new loans and continues to run down its loan book.

Since the Westpac Transaction, RHG’s operations have been limited to the funding and servicing of the loan book that was in existence prior to November 2007. In February 2008, RHG completed the sale at par of approximately $1 billion of mortgages originated by RHG. Another $440 million of loans were sold to National Australia Bank in October 2009.

In 2012, ASIC completed enquiries after receiving complaints in relation to early termination fees. As a result, RHG would refund over $3.3 million in early termination and discharge fees (the $3.3 million has been fully funded and does not impact the Proposed Scheme). RHG also agreed to reduce its discharge fees on existing loans and to the staggered removal of early termination fees.

RHG continues to operate its loan book as a closed book and, after conducting a strategic review in August 2011, has decided not to return to the mortgage market to originate new loans. The board of the Company has determined that the appropriate course of action for RHG is to continue operating under this business model. Potential strategies considered included the realisation of the Company’s assets and distribution of all funds to shareholders before the company is wound up.

3.3 Legal structure

RHG operates through its four subsidiaries (the Subsidiaries), as described below:

· RHG Home Loans Pty Limited: primary income earning subsidiary which receives the residual income from a number of special purpose entities (refer below)

· Receivables Servicing Pty Limited: responsible for the servicing of the book and holds a contract with Unisys Mortgage Processing (RHG) Pty Limited (UMP)

· RHG Treasury Services Pty Limited: responsible for treasury functions and holds an Australian financial services licence (AFSL)

124

For

per

sona

l use

onl

y


· Prime Insurance Group Limited (PIGL): RHG Home Loans Pty Limited purchased 100% of the shares in PIGL on 30 April 2010 for one dollar and recapitalised the business with an investment of $0.6 million, so as to exceed the capital requirements of the business. PIGL insures 40.4% of the loan book by book value.

There are also a number of funding special purpose entities (SPEs) that are bankruptcy remote securitisation vehicles through which all mortgage receivables are funded. Whilst RHG is a beneficiary of these SPEs and receives distributions, RHG does not own the assets and liabilities of these SPEs.

3.4 Key agreements

There are a variety of agreements that the Subsidiaries have entered into with the SPEs in order to manage funding, manage the SPEs and to provide other services related to management of the loan book.

RHG outsources loan portfolio servicing activities to UMP which provides on-going data management, payment collection and processing redraws, borrower reporting, customer enquiry and arrears management. The current contract with UMP expires in December 2013. UMP and RHG are currently in negotiations and it is expected the contract with UMP will be extended on materially similar terms and conditions.

RHG pays UMP monthly fees which are expected to decrease progressively as the loan book runs off until it reaches a floor at which point it becomes a fixed cost.

3.5 Loan book

3.5.1 Overview of the loan book

As at 30 September 2013, the SPEs funded 12,171 loans with an average loan balance of $156,720. The loan book has been running off since the completion of the Westpac Transaction, and the number of outstanding mortgages have approximately halved compared to 31 December 2010 (24,808 loans).

The figures below show the geographic breakdown of the loan book and distribution of loans based on the balance outstanding within each loan to value ratio (LVR) band.

Figure 1: Geographic breakdown as at 30 September 2013

Figure 2: Loan balance by LVR band as at 30 September 2013

Source: RHG Source: RHG

40%

21%

19%

16%

4%

N.S.W. Q.L.D. VIC. W.A. Others

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

Less than 55% 55% to 80% 80% to 95% Greater than95%

Lo

an

ba

lan

ce (

$ m

illi

on

)

LVR Band

Greater than $500K $300K to $500K Less than $300K

125

For

per

sona

l use

onl

y


3.5.2 Loan book composition

The key features and composition of the loan book are summarised in the table below.

Table 8: Overview of loan book

31-Dec-10 30-Sep-13

Key features

Number of loans 24,808 12,171

Average loan balance 179,015 156,720

Weighted average LVR 73.4% 70.0%

Weighted average variable rate 8.5% 6.5%

Weighted average fixed rate 8.3% 6.9%

Loan book composition

Owner Occupied (Investment) 73% (27%) 76% (24%)

Purchase (Refinance) 63% (37%) 61% (39%)

Full Doc (Low Doc) 65% (35%) 63% (37%)

Variable (Fixed rate) 95% (5%) 99% (1%)

Principal and interest (Interest only) 72% (28%) 93% (7%)

Source: RHG

Documentation (Full Doc vs Low Doc)

As at 30 September 2013, the loan book comprised 63.3% Full Doc loans and 36.7% Low Doc loans by the amount outstanding. Low Doc loans are distinguished from Full Doc loans by the inability or refusal of the borrower to provide the traditional documentary evidence of income such as pay slips and group certificates. Low Doc loans are therefore viewed as higher risk than Full Doc loans. Low Doc loans are also less likely to refinance.

Weighted average LVR

The weighted average LVR of the loan book, as at 30 September 2013, was 70.0%. The LVR of a housing loan is calculated by dividing the current principal value of the loan by the value of the property against which it is secured (based on the most recent valuation undertaken). The lower the LVR, the lower the risk of suffering a loss on the loan book.

Fixed / variable loans

As at 30 September 2013, 99.4% of the loan book was comprised of variable rate loans, with the remainder being fixed rate loans. The number and value of fixed rate loans within the loan book has dropped significantly and is now negligible.

Customer investment profile

RHG’s clients consist of home loan borrowers that can be split into owner-occupied and investor categories. As at 30 September 2013, the loan book balance was predominantly owner-occupied customers. Generally speaking owner occupied borrowers are less likely to repay their loans early relative to investor borrowers.

Purchase / Refinance

Residential property owner-occupiers and investors use a mortgage loan to finance property purchases. Subsequently, mortgages can be refinanced to reflect property revaluations. As at 30 September 2013, 60.5% of the loan book was comprised of loans taken out for purchases, with the remainder being for refinance purposes.

Tenure

All loans have been in existence for at least five years. While early repayment fees have been abolished, account keeping and discharge fees still apply.

126

For

per

sona

l use

onl

y


Term to maturity

The loan book’s term to maturity, based on the balance outstanding as at 30 September 2013, indicates that 13.0% of the outstanding balance (assuming no prepayment of the loan book) will mature in between 15 years and 20 years, and 83.4% will mature in more than 20 years, illustrating a long run-off period.

However, borrowers may choose to repay part or the entire loan earlier than scheduled. Historically there has been a tendency amongst borrowers to do so. Outside of personal circumstances, there are a number of reasons borrowers may be inclined to repay ahead of schedule:

· interest rate cuts: lower interest rates provide incentives for borrowers to refinance their existing loan by repaying the existing loan with funding sourced from taking out a new loan at a lower interest rate

· consumer confidence: sustainable increases in gross domestic product would positively impact consumer confidence and gradually drive up asset values as the economy improves. As property values increase, there is a propensity for borrowers to refinance and upgrade to a larger property

· increased competition: a more competitive home loan market would offer borrowers a wider range of products, lower interest rates, lower fees and greater loan flexibility. Increases in competition would attract borrowers to the more favourable products being offered and provide greater opportunities to refinance

· removal of exit fees: exit fees are banned on new variable home loans from 1 July 2011 making it easier to switch mortgage providers and take advantage of more favourable rates and conditions. For existing loans taken out prior to July 2011, some lenders have voluntarily removed exit fees or have offered to pay the exit fees on existing home loans if customers were willing to make the switch

· property sales: demand for housing is impacted by the above factors and also by the supply of existing properties for sale and the availability of new developments. As demand for property purchases increases, the sales price of a property tends to increase which may increase the supply of properties for sale. This will also result in existing properties churning and consequently early repayment or refinancing of home loans.

Principal and interest (P&I) / interest only

RHG had offered borrowers interest only products with a maximum 10 year term predominantly from settlement. As the closed loan book continues to run off, the proportion of interest only loans is expected to continue to decline.

3.5.3 Mortgage insurance

RHG’s policy is to take out 100% lenders mortgage insurance on all of its loans. RHG uses external insurance providers and PIGL which it acquired in April 2010. PIGL has a reinsurance arrangement with American International Assurance (Bermuda) Limited. The PIGL acquisition was a defensive move as the previous owner was looking to exit the business. PIGL has been in wind down for a number of years.

3.6 Funding

3.6.1 Funding types

RHG funds its home loans entirely through the SPEs which are managed but not owned by the Company. The funding is sourced by the SPEs through warehouse facilities and RMBS:

· Warehouses: typically short term funding facilities provided by financiers which the SPE uses to finance loans on an interim basis. The warehouse facilities are used to fund mortgages for periods up to three years

· RMBS: long term funding transactions in the debt capital markets. They are known as residential mortgage backed securities issued by the SPEs.

Warehouses

RHG’s warehouse facilities are short term rolling facilities. One warehouse facility with a mortgage balance of approximately $504.5 million as at 30 September 2013, is a 30 year rated facility but with a periodic review mechanism (the 30 Year Warehouse Facility) and an ongoing obligation to maintain its rating. The 30 Year

127

For

per

sona

l use

onl

y


Warehouse Facility is not subject to rollover risk, rather it is subject to changes in pricing and to future loss of income from changes in margin.

The table below sets out a summary of the warehouse facilities as at 30 September 2013.

Table 9: Summary of warehouse facilities

Warehouse Provider

Refinance Date

Documentation (%)

Full Doc Low Doc

Mortgage Rate (%)

Average Seasoning

(months)

Mortgage Balance

($ million)

Provider 1 27-Dec-13 63.6% 36.4% 6.61% 75.02 193.9

Provider 2 20-Dec-13 66.5% 33.5% 6.46% 95.30 504.5

Provider 3 03-Feb-14 13.8% 86.2% 7.07% 88.27 8.5

Provider 4 31-Mar-15 51.8% 48.2% 6.59% 94.15 674.0

Total 1,380.9

Source: RHG

To date, RHG has been successful in renewing its warehouse facilities. If a warehouse facility cannot be renewed and the mortgage book cannot be refinanced, this would result in a default event. Such a default could result in a higher margin, and all principal, interest and fee collections (after payment of security trustee, servicer and manager expenses on mortgages which are funded through the warehouse) being returned to the warehouse facility provider in order to accelerate repayment of the facility. As a result, the cash flow available to RHG from excess spread would be deferred until the facility is repaid in full.

RHG remains in discussion with its various warehouse providers in regards to the maturity of the facilities. RHG may in the future be required to provide further support to some of its warehousing facilities in the form of cash collateral and subordinated debt. This is discussed further in Section 3.7.

Apart from credit enhancements supplied by RHG, each warehouse facility has been structured so that if it is not renewed there is only limited impact on RHG. If a warehouse facility is not renewed and the related assets are liquidated, the primary impact for RHG would be the loss of some future servicing rights and possibly the loss of some subordinated debt or collateral.

RMBS

As at 30 September 2013, approximately $0.5 billion of the loan book was funded via the RMBS market. The RMBS securities are 30 to 32 year variable rate (known margin over BBSW) securities. The RMBS issued by the SPEs are rated by international credit rating agencies.

The table below sets out a summary of the RMBS securities as at 30 September 2013.

Table 10: Summary of RMBS securities as at 30 September 2013

Call Date

Documentation (%)

Full Doc Low Doc

Mortgage Rate (%)

Average Seasoning

(months)

Mortgage Balance

($ million)

Series 11 17-Jun-08 92.6% 7.4% 6.37% 155.58 60.9

Trust 2002-1 19-Apr-08 93.8% 6.2% 6.38% 154.07 42.6

Trust 2004-1 21-Oct-10 37.2% 62.8% 6.80% 119.80 78.5

Trust 2006-1 14-Oct-11 43.8% 56.2% 6.55% 90.86 108.4

RMS Trust 2007-1HE 16-Oct-11 100.0% 0.0% 6.04% 84.75 87.1

RMS Trust 2007-2H 13-Dec-11 99.5% 0.5% 6.04% 80.54 101.1

RMS Trust 2007-3 22-Oct-12 79.3% 20.7% 6.34% 103.67 48.5

Total 527.0

Source: RHG

Each RMBS may be repaid at RHG’s option on or after its relevant call date. All of RHG’s RMBS issuances have passed their call date.

128

For

per

sona

l use

onl

y


3.7 Collateral funds, subordinated debt and other assets

As at 30 September 2013, RHG had invested $51.1 million in collateral funds, subordinated debt and other assets. These investments are discussed in further detail below.

3.7.1 Collateral funds

RHG has invested $24.4 million in collateral funds. These are cash amounts that are required to be held on deposit as credit support to various warehouse providers. On the 30 Year Warehouse Facility RHG has an ongoing requirement to support a minimum rating and therefore may be required to increase this commitment in the future. The required collateral is reviewed by the rating agencies regularly. These funds could be repaid, subject to raters’ approval, if mortgage insurers are re-rated positively. Funds would also be repayable if the facility was repaid. If an event of default was to occur in these facilities, which led to the sale of the underlying assets at a loss, the collateral funds are unlikely to be recoverable.

3.7.2 Subordinated debt

RHG has invested $12.0 million in subordinated debt as credit support to some warehouse facilities. This debt is available for charge off of losses, if excess spread is insufficient to cover losses. As currently documented, the subordinated debt can only be released when the facilities are repaid in full. If an event of default was to occur in these facilities, which led to the sale of the underlying assets at a loss, the subordinated debt is unlikely to be recoverable.

3.7.3 Investment in impaired mortgages

As at 30 September 2013, an amount of $12.0 million was invested in an impaired asset trust established by RHG (the Impaired Asset Trust). This trust primarily contains mortgages that are in default, which are going through foreclosure and are expected to be repaid in the near term. Any shortfall on realisation will either be covered by lenders mortgage insurance or will be charged against the provision for bad loans.

3.7.4 Floats and other assets

As at 30 September 2013, RHG had $2.7 million of cash support backing the Company’s clearing house for transactions such as automated teller machine redraws.

3.8 Employees

RHG’s current staff complement comprises of 13 employees and three contractors responsible for treasury, credit, legal and compliance, and accounting functions associated with servicing, refinancing and subsequent management of the loan book. Staff members also serve the various funding providers and are responsible for ASX reporting and investor relations.

3.9 IT Systems

RHG has significantly reduced its in-house IT requirements since it began outsourcing servicing requirements to UMP. Accordingly, RHG’s IT system now only services the head office desktop computing requirements.

129

For

per

sona

l use

onl

y


3.10 Capital Structure

RHG’s largest twenty shareholders and their respective holdings are given in the table below.

Table 11: Top 20 shareholders as at 30 September 2013

# Name Shares held Proportion

(%)

1 CITICORP Nominees Pty Limited1 69,720,339 22.60

2 JP Morgan Nominees Australia Limited 10,624,023 3.44

3 RBC Investor Services Australia Nominees Pty Limited 10,414,901 3.38

4 KTAP Pty Limited 8,769,903 2.84

5 UBS Nominees Pty Ltd 8,684,695 2.82

6 HSBC Custody Nominees (Australia) Limited 8,010,633 2.60

7 HSBC Custody Nominees (Australia) Limited – A/C 3 7,423,450 2.41

8 Dirdot Pty Limited 4,243,380 1.38

9 Ktap Pty Ltd 4,140,064 1.34

10 Rudie Pty Ltd 3,699,103 1.20

11 National Nominees Limited 3,676,546 1.19

12 Mr. Peter Alexander Brown 3,582,322 1.16

13 CS Fourth Nominees Pty Ltd 3,550,000 1.15

14 Suburban Holdings Pty Ltd 3,507,742 1.14

15 J P Morgan Nominees Australia Limited 3,124,784 1.01

16 FJP Pty Ltd 3,000,000 0.97

17 Mr David Clarke & Mrs Judith Clarke 2,600,000 0.84

18 UBS Wealth Management Australia Nominees Pty Ltd 2,492,859 0.81

19 C E Consultants Pty Ltd 2,329,796 0.76

20 Colvend Pty Ltd 2,130,000 0.69

Top 20 shareholders of ordinary shares 165,724,540 53.73

Total shares outstanding 308,483,177 100.00

Note:

1. A substantial component of this represents shares held by CDM and its associates, who hold 17.1% of the total shares outstanding.

Source: Computershare, ASX announcements

There are over 4,500 RHG shareholders recorded on the share register. The proportion of shares held by the twenty largest shareholders is 53.7% as at 30 September 2013. We note that there are many small shareholders who typically invest for yield and franked distributions.

3.11 Share price performance

The share price movement and trading volumes together with notes to key events over the last two years are presented graphically in the figure below.

130

For

per

sona

l use

onl

y


Figure 3: RHG stock activity on ASX to 15 October 2013

Source: RHG announcements on ASX website, Deloitte Corporate Finance analysis

Table 12: RHG Share trading history

Reference Date Note

1 28 April 2011 A share buyback had been voted down and RHG announced a fully franked dividend of $0.79 per share. The stock price reached a high of $1.32 on 12 May 2011

2 13 May 2011 13 May 2011 was the ex-entitlement date of the fully franked cash dividend of $0.79 per share announced previously in April 2011

3 25 September 2011 Moody's downgraded the ratings on a number of RHG's term bonds

4 28 October 2011 to

11 November 2011

Stock price rise following a series of positive public announcements from October to November 2011, including the declaration of a fully franked special dividend of $0.06 per share, the appointment of Mr Trevor Loewensohn as a director and Mr Glenn Goddard as Managing Director and Chairman of the board of directors

5 26 Sep 2012 Ex-entitlement date of 26 September 2012 in relation to a dividend of $0.10 per share

6 12 March 2013 The resignation of Mr Trevor Loewensohn as a director, together with Alceon, an entity associated with him, ceasing to be a substantial shareholder. Dakota Capital also ceased to be a substantial shareholder

7 18 March 2013 Ex-entitlement date in relation to a fully franked dividend of $0.09 per share

8 22 May 2013 Announcement of Resimac Syndicate’s conditional offer of $0.38 per share

9 8 July 2013 to 18 October 2013

Announcement of Resimac Syndicate’s binding offer of $0.441 per share on 8 July 2013. Following a number of revised offers from the Resimac Syndicate in response to counter offers from Pepper/CDM, the Scheme Consideration of $0.501 per share was announced on 18 October 2013.

Source: RHG announcements on ASX website, Deloitte Corporate Finance analysis

We note that it is difficult to compare the historical price of RHG shares compared to the current price given the substantial dividends and capital returns the Company has made and the fact that its business activities are in run-off.

In relation to trading volume, for the three month period prior to the announcement of the conditional offer on 22 May 2013, approximately 47.4% of RHG shares on issue were traded. For the 12 months prior to the conditional offer on 22 May 2013, there were 266 million shares traded representing approximately 86.2% of total RHG shares outstanding. In addition, during the 12 month period to 22 May 2013, there were 23 days where less than 100,000 shares changed hands per day. Overall, trading in RHG shares was relatively liquid over the 12 months prior to the announcement of the conditional offer.

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Jan 2011 Apr 2011 Jul 2011 Oct 2011 Jan 2012 Apr 2012 Jul 2012 Oct 2012 Jan 2013 Apr 2013 Jul 2013 Oct 2013

$

Volume traded Closing security price

1 2

3

4

5

6

7

8

9

131

For

per

sona

l use

onl

y


3.12 Financial performance

The consolidated income statement consolidates the income statement of the SPEs into the ASX-listed RHG. The consolidated income statement of RHG for the periods ended 30 June 2011, 30 June 2012 and 30 June 2013 are summarised in the table below.

Table 13: Consolidated income statement

$ million

30 June 2011

Audited

30 June 2012

Audited

30 June 2013

Audited

Revenue from continuing operations

Interest income 405.8 278.3 172.6

Interest expense (297.2) (207.7) (116.8)

Net interest income 108.6 70.6 55.8

Fee and commission income 22.2 3.6 3.8

Total income net of interest expense 130.8 74.2 59.6

Operating expenses (excluding interest) (26.2) (16.1) (16.3)

Profit before income tax 104.6 58.1 43.3

Income tax expense (30.6) (17.4) (13.0)

Total comprehensive income 74.0 40.7 30.3

Revenue growth (%) (12.7%) (31.4%) (38.0%)

Interest margin (%)1 26.8% 25.4% 32.3%

Operating expenses as a % of net interest income 24.1% 22.8% 29.2%

Profit before income tax margin (%) 25.8% 20.9% 25.1%

Effective tax rate 29.3% 29.9% 30.0%

Net income margin (%) 18.2% 14.6% 17.6%

Notes:

1. Interest margin = (interest income – interest expense) / interest income

Source: RHG

We note the following with regards to RHG’s financial performance:

· RHG generates revenue from interest and fees. Net interest income was the largest revenue source, representing around 94% of total income in the financial year ended 30 June 2013 (FY13). The interest income earned by RHG is derived from interest paid by customers on RHG’s mortgage products. Interest income declined by 38.0% in FY13 as a result of the closed and amortising loan book and the reducing mortgage rate

· fee income includes account keeping fees, service fees and discharge fees. Fee income decreased by 83.8% in FY12 in accordance with the decline in the number of loans, the removal of early termination fees and reduction in discharge fees

· interest expense includes any interest funding costs payable by RHG, gains/losses arising on derivatives and adjustments to hedged items. Interest expense reduced significantly in FY13 as a result of the loan book run off and also due to the reduction in official interest rates from 3.5% in June 2012 to 2.5% in August 2013

· operating expenses consist of trail commissions payable to brokers, asset impairments expensed in the period, funding and trustee costs and other operational costs such as employee benefits and professional services fees. Operating expenses dropped by 38.5% in FY12 due to the removal of a large loan impairment provision of $6.4 million in FY11, and a decrease in professional expenses and other funding costs contributed to the decline in operating expenses.

132

For

per

sona

l use

onl

y


3.13 Financial position

The SPEs are bankruptcy remote securitisation vehicles through which all mortgage receivables are funded. Whilst RHG is the residual beneficiary of these SPEs and receives distributions, the Company does not own the assets of these entities. However, accounting standards require the group to consolidate the SPEs. For the purposes of this valuation we consider the corporate balance sheet, excluding SPEs to be more relevant.

The corporate balance sheet includes collateral cash, subordinated debt, impaired asset trust and other assets ($51.3 million as at 30 June 2013 as detailed in Section 3.7 above) the majority of which would be expected to be released on the refinancing of the warehouse facilities (assuming no losses).

Table 14: Corporate balance sheet

$ million 30 June 2011 30 June 2012 30 June 2013

Assets

Cash and cash equivalents1 105.3 54.5 40.4

Subordinated debt 14.6 14.6 12.0

Collateral deposits 42.5 39.5 24.6

Investment in impaired mortgages 15.0 16.3 12.0

Floats and security deposits 3.3 3.4 2.7

Sundry receivables and accruals 0.7 0.6 0.6

Property, plant and equipment 0.1 0.1 0.1

Total assets 181.5 129.0 92.4

Liabilities

Accounts payable and accruals 2.8 6.6 3.0

Provision for losses – Specific 8.1 4.8 4.1

Provision for losses – General 3.1 2.3 1.4

Provision for income tax 31.0 3.2 0.1

Provision for broker trail expense 13.2 10.5 8.0

Total liabilities 58.3 27.4 16.7

Net tangible assets 123.2 101.6 75.7

Net intangible assets2 17.0 16.3 13.9

Shareholder’s equity / Net assets 140.3 117.9 89.6

Notes:

1. Cash and cash equivalents includes intercompany receivables due from the SPEs

2. Net intangible assets predominantly consists of deferred transaction costs

Source: RHG

The above information has been extracted from Note 2 to the audited accounts of RHG Limited. We note the following with regards to the above corporate balance sheet:

· the Company had cash collateral deposits of $24.6 million and subordinated debt of $12.0 million as at 30 June 2013

· the RHG investment in impaired mortgages of $12.0 million largely comprised of loans in arrears or undergoing collections with this balance sheet amount expected to be repaid within 12 months

· floats and security deposits include rental bonds, card fee float and cheque fee float

· accounts payable and accruals relate to future obligations such as employee entitlements (annual leave, long service leave and bonuses) and expense accruals

· deferred transaction costs relate to capitalised direct and incremental costs associated with the origination of mortgages and are amortised over time. We note there was a change in the estimated loan amortisation period in FY12 resulting in an increase in deferred transaction costs that year

· net corporate assets of RHG dropped from $140.3 million as at 30 June 2011 to $89.6 million as at 30 June 2013. The reduction over this period is due predominantly to dividend distributions being paid out of retained earnings as net profit reduces each year in line with the amortising loan book. The

133

For

per

sona

l use

onl

y


dividends paid in FY11 were $242.1 million, dividends in FY12 were $63.2 million and FY13 dividends have been $58.6 million.

134

For

per

sona

l use

onl

y


4 Valuation of RHG

4.1 Selection of valuation methodologies

Details of the valuation methodologies typically used are provided at Appendix B.

We have estimated the fair market value of RHG by aggregating the estimated fair market value of RHG on a sum of the parts basis primarily comprising:

· the FSR associated with RHG’s existing loan book

· subordinated debt, collateral funds, the Impaired Assets Trust, floats and other assets (the Other

Investments)

· adding cash

· deducting the capitalised value of corporate overheads

· deducting dividends to be paid.

The application of this valuation method results in a value which includes a premium for control.

We are of the opinion that the most appropriate methodology to value the FSR associated with RHG’s existing loan book, the Other Investments and RHG’s corporate overheads is the discounted cash flow method due to the following factors:

· RHG management have prepared cash flow projections for the loan book and corporate overheads

· the discounted cash flow method is commonly accepted as the most appropriate method for valuing financial assets

· given the Directors decision not to re-engage in the mortgage origination business, RHG is operating in a run-off mode. Consequently, the FSR has a finite life and as such the capitalisation of maintainable earnings method is not an appropriate valuation approach

· the value of the Other Investments is dependent upon the future performance of the loan book.

For the purpose of our opinion fair market value is defined as the amount at which a RHG share would be expected to change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither being under a compulsion to buy or sell. On this basis, our valuation includes our assessment of synergies generally available to potential bidders but not those available to a specific bidder.

4.2 Valuation of the FSR

The value of the FSR has been estimated by discounting the net cash flows that RHG anticipates receiving from the portfolio of underlying home loans. RHG is entitled to the residual cash flows after paying administration and collection costs and after servicing the debt used to fund the loan book.

We have estimated the value of the FSR using cash flow projections prepared by RHG management (the FSR

Projections). The FSR Projections extend for a period from the Valuation Date until the loan book reduces to approximately $500 million (expected to occur in April 2019), when the loan book is assumed to be sold at par. The $500 million threshold approximates a breakeven point for the business as certain of its operating costs are fixed. It is our opinion that the loan book will become more difficult to sell as it reduces in size (potentially leading to a sale at below face value).

We have performed an analysis of the FSR Projections that has included:

· analysing the financial model provided by RHG management, including limited procedures regarding the mathematical accuracy of the model (but neither a review nor an audit of the model)

· reviewing the basis of the underlying assumptions such as interest margins, prepayment rates, servicing costs and other expenses

· holding discussions with RHG’s management concerning the preparation of the projections and their views regarding the assumptions on which they are based.

Our work did not constitute an audit or review of the projections in accordance with Auditing and Assurance Standards Board standards and accordingly we do not express any opinion as to the reliability of the projections

135

For

per

sona

l use

onl

y


or the reasonableness of the underlying assumptions. As a result of our limited work, nothing has come to our attention that suggests that the assumptions on which the projections are based have not been prepared on a reasonable basis.

Since the projections relate to the future, they may be affected by unforeseen events and they depend, in part, on the effectiveness of RHG management’s actions in executing its business plan. Accordingly, actual results are likely to be different from those projected because events and circumstances frequently do not occur as expected, and those differences may be material.

4.2.1 FSR Projections

The value of the FSR is principally dependent upon the interest margins that RHG is able to generate on the loan book, prepayment rates and expenses incurred in managing the portfolio. We discuss these and other relevant assumptions below.

Interest margins

Almost all of the home loans in RHG’s current loan book are variable rate loans and our discussion below therefore focusses on these loans.

The net interest margin that RHG is able to generate on the loan book, which is funded by way of warehouse facilities or RMBS, is dependent upon:

· the interest rate that RHG charges – variable rate loans pay a margin over the cash rate

· the interest rate that RHG pays on its warehouse facilities or RMBS – the interest rate on the warehouse facilities or RMBS is priced at a margin over BBSW (usually 30 day BBSW but in the case of one warehouse facility, 90 day BBSW).

Therefore, the net interest margin reflects the premium over the cash rate and any difference between the cash rate and the relevant BBSW (which we refer to as the cash rate to bank bill spread).

The cash rate to bank bill spread is assumed to be 10 bps and 15 bps for 30 day and 90 day rates, respectively. This has been based on an analysis of the historical spread over the long term. However, we note that recent spreads have been lower (refer Figure 16 and Figure 17). During September 2013, the average cash rate to bank bill spread was approximately 8.0 bps and 7.6 bps for 30 day and 90 day rates, respectively. As such, we have also considered the impact on value as a result of adopting different spread assumptions. Our analysis is set out in Section 4.8.

Prepayment rates

The weighted average age of the loan book was 8.0 years as at 30 September 2013 with all loans older than five years. For the purposes of our valuation we have analysed the historical reduction in the number of loans and the reduction in the balance of the loan book as proxies for prepayments (the rate of prepayment would include defaults).

Table 15: Historical reduction in the loan book

Date Number of loans

Annual attrition rate (based on number of

loans) Loan book balance

($’million)

Annual attrition rate (based on loan book

balance)

30 June 2008 57,643 n/a1 11,528 n/a

1

30 June 2009 42,469 (26%) 8,102 (30%)

30 June 20102 29,249 (31%) 5,374 (34%)

30 June 2011 21,833 (25%) 3,810 (29%)

30 June 2012 16,731 (23%) 2,787 (27%)

30 June 2013 12,952 (23%) 2,065 (26%)

Notes:

1. n/a = not applicable

2. The annual attrition rate for the year ending 30 June 2010 is artificially high due to the sale of $440 million of loans to National

Australia Bank

Source: RHG, Deloitte Corporate Finance analysis

136

For

per

sona

l use

onl

y


Whilst the percentage of loans reducing is indicative of early prepayments, the percentage of loan value also includes normal repayments (regular amortisation). Excluding normal repayments, the percentage of loan value would be lower.

The above suggests the prepayment rate is currently about 25% per annum. However, based on our experience we would expect the prepayment rate to drop to about 20% as the loan book matures and if no initiatives are employed to slow the prepayment rate.

The value of the FSR is sensitive to the prepayment rate assumption. A sensitivity analysis on our valuation assuming differing prepayment rates is presented at Section 4.8.

Operating assumptions

We deal with the key operating assumptions below.

Table 16: Operating assumptions

Operating Cost Basis of assumptions

Bad debts Based on expectations that RHG will have some exposure to non-performing loans (notwithstanding mortgage insurance)

Servicing costs Expected to gradually decrease to reflect the shrinking size of the overall loan book. The contract with UMP is set to expire in December 2013. For modelling purposes, Management has assumed that they expect the contract with UMP will be extended on similar terms and conditions until the end of the projection period, namely April 2019

Trailing commissions A broker trail commission of 24 bps is payable on a large part of the loan book (approximately 57% of the loan book as at September 2013)

Other Other costs include trustee fees, credit rating fees, collection fees and administration fees. Trustee fees and credit rating fees are assumed to be a fixed percentage of the total loan balance while other fees are projected based on historical experience


Tax expense

We have assumed a corporate tax rate of 30%.

Summary of FSR Projections

The figure below sets out the monthly net interest income and post-tax cash flows deriving from the loan book together with the size of the loan book at the beginning of each period.

Figure 4: Cash flow profile


-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

-

500

1,000

1,500

2,000

2,500

Oct 2

013

Ja

n 2

01

4

Apr

20

14

Ju

l 20

14

Oct 2

014

Ja

n 2

01

5

Apr

20

15

Ju

l 20

15

Oct 2

015

Ja

n 2

01

6

Apr

20

16

Ju

l 20

16

Oct 2

016

Ja

n 2

01

7

Apr

20

17

Ju

l 20

17

Oct 2

017

Ja

n 2

01

8

Apr

20

18

Ju

l 20

18

Oct 2

018

Ja

n 2

01

9

$ m

illi

on

Lo

an

bo

ok

ba

lan

ce

($

mil

lio

n)

Total Loan Book balance Net interest income Net cashflow after tax

137

For

per

sona

l use

onl

y


4.2.2 Discount rate

The discount rate used to equate the future cash flows to a present value reflects the risk adjusted rate of return demanded by a hypothetical investor. We have selected a nominal after tax discount rate in the range of 10.0% to 11.0% to discount the future cash flows of the loan book to their present value. The details underlying our discount rate selection are set out in Appendix C.

4.2.3 Terminal value

For the purpose of our valuation, we have assumed that mortgages will be sold for face value when the loan book reduces to $500 million and RHG would wind up and distribute any cash proceeds to Shareholders.

As the FSR Projections assume that the loan book is sold when it reaches $500 million, no value is attributed to the FSR beyond April 2019 under our low case scenario. However, a purchaser of the loan book with a fixed overhead cost base may be willing to attribute some value to the cash flows after this date. As a proxy for the value a purchaser may attribute, we have incorporated the cash flow from the FSR beyond April 2019 for a further five years until April 2024 in determining the market value of RHG shares under our high case scenario. The size of the loan book is projected to be approximately $130 million at April 2024 when it is assumed to be sold (the present value of the FSR beyond April 2024 is not material).

4.3 Valuation of Other Investments

As at the Valuation Date, RHG had a number of other investments associated with the loan book with a total face value of $51.1 million, broken down as follows:

· subordinated debt of $12.0 million

· Impaired Assets Trust of $12.0 million

· cash provided as collateral of $24.4 million

· floats and other assets of $2.7 million.

A detailed description of these investments is set out in Section 3.7.

For the purpose of our valuation analysis, we have assumed that the Other Investments are realised at face value at the following times:

· subordinated debt and other floats will be recovered in April 2019

· the Impaired Assets Trust will be repaid over the coming 12 months

· a small amount of cash provided as collateral will be recovered progressively during the FSR Projections period to reflect the assumption that collateral fund requirements will diminish as the loan book amortises and loans are repaid in accordance with the assumed prepayment rates. There is one warehouse facility with collateral of approximately $19 million that is assumed to be recovered in April 2019 in line with the terms of the facility.

The discount rate adopted for the Other Investments is in line with the range assumed for the FSR valuation.

In Section 4.2.3 above, we have made some assumptions to attribute a value to the loan book which reaches $500 million in 2019. Extending this assumption reduces the value of the Other Investments as the receipt of the cash proceeds from the investments is assumed to be delayed. Whilst we consider this to be a reasonable assumption for RHG on a stand-alone basis, we consider that a purchaser of the loan book would be able to avoid this delay due to their own credit rating, larger size and long term view on operating activities.

4.4 Cash balance

RHG maintains a substantial cash balance. The cash balance was approximately $32.5 million6 as at the Valuation Date (30 September 2013).

6 We have reduced the amount reflected as the cash balance of $36.2 million by $2.7 million as this represents an intercompany receivable owing to RHG from the SPEs and which is required to be included in the cash balance under accounting standards (the associated cash flow

is included in the FSR Projections), and $1.0 million to account for accruals as at 30 September 2013.

138

For

per

sona

l use

onl

y


4.5 Corporate overheads

RHG management consider that corporate overheads will amount to approximately $6.2 million in FY13, down from approximately $8.2 million in FY12 predominantly due to the decreased size of the loan book. The fixed corporate overheads include salary costs, professional services fees such as legal and audit and other administration costs. There would be further overhead savings over the period of the FSR Projections as the size of the loan book continues to decrease.

RHG management also consider that the Company will incur wind up costs. The wind up costs are assumed to be incurred when the loan book reduces to $500 million.

Whilst the above costs reflect the costs likely to be incurred by the Company on a stand-alone basis, we consider that a prospective buyer of the Company with existing operations in the mortgage industry will be able to avoid the majority of these costs. The high end of our valuation assumes 75% of corporate overheads can be avoided whilst the low end assumes that 50% of the costs can be avoided.

4.6 Valuation Date to Implementation Date

We have conducted our sum of the parts analysis as at 30 September 2013. As the Proposed Scheme will not be implemented until 8 January 2014, we have allowed for the value that we would expect to accrue to Shareholders between the Valuation Date and the Implementation Date using our selected discount rate as a basis for calculating the increment.

4.7 Summary of our valuation of RHG

Having regard to the above, we have estimated the fair market value of a RHG share, on a control basis, to be in the range of $0.419 to $0.459. The table below sets out the results of our sum of the parts analysis.

Table 17: Summary of RHG valuation – sum of the parts analysis

Value of Company Value of a share

Section

Low

($ million)

High

($ million)

Low

($) High ($)

FSR Section 4.2 65.60 72.10 0.213 0.234

Other Investments Section 4.3 38.80 41.30 0.126 0.134

Cash Section 4.4 32.55 32.55 0.106 0.106

Corporate overheads Section 4.5 (11.04) (8.18) (0.036) (0.027)

Fair market value at Valuation Date 125.91 137.77 0.408 0.447

Value increment to Implementation Date Section 4.6 3.42 3.74 0.011 0.012

Fair market value of RHG 129.33 141.51 0.419 0.459

Notes: The figures in the table may be subject to rounding


In calculating the value per share, we have used the number of shares currently on issue, as set out in Section 3.10, being 308.5 million shares.

139

For

per

sona

l use

onl

y


4.8 Sensitivity analysis

The equity value of a share applying higher and lower prepayment rates and allowing for changes in the net interest margin is summarised below.

Table 18: Value of a RHG share using the mid-point of the selected discount rate range

Change in net interest margin

(15 bps) (10 bps) (5 bps) - 5 bps 10 bps 15 bps

Pre

pay

me

nt

rate

(%

)

20.0% 0.419 0.425 0.431 0.437 0.443 0.449 0.455

22.5% 0.402 0.408 0.413 0.419 0.425 0.430 0.436

25.0% 0.387 0.392 0.397 0.402 0.407 0.412 0.418


Our valuation is highly sensitive to prepayment rates. The sensitivity arises because the level of prepayments assumed has a significant impact on the rate at which the loan book amortises. We have used a prepayment rate assumption of 20% in forming our view on the value of a RHG share. Our selected prepayment rate is lower than the historically observed prepayment rate for the RHG loan book (as set out in Table 15) and having regard to these historical observations, RHG management consider a prepayment rate of 25% more appropriate. We are of the opinion that it may be possible for a prospective purchaser to implement actions that would slow down the prepayment rate. The selection of the prepayment rate involves subjectivity. As can be seen from the above, selection of a prepayment rate of 25% (in line with historical trends and RHG management’s view of a reasonable prepayment rate) would reduce the value of a RHG share by 3.5 cents (or 7.9%) to 40.2 cents (at the mid-point).

The net interest margin adopted in our valuation does not have a material impact as the spread above BBSW incorporated in the funding rate represents only a small component of the net interest margin. In the above table, we sensitise our valuation by both decreasing and increasing the net interest margin by increments of 5 bps up to 15 bps. Based on our analysis, the value of a RHG share increases by approximately 4.2% or 1.8 cents per RHG share if the net interest margin increases by 15 bps.

The value of the shares assuming higher and lower discount rates and corporate overhead savings is also summarised in the table below.

Table 19: Sensitivity of value of a RHG share (at mid-point of our low and high value range) to changes in discount rate and corporate overhead savings

Overhead savings (%)

0% 25% 50% 62.5% 75% 90% 100%

Dis

co

un

t ra

te

(%)

9.5% 0.382 0.406 0.430 0.442 0.453 0.468 0.477

10.5% 0.379 0.402 0.425 0.436 0.448 0.462 0.471

11.5% 0.376 0.398 0.420 0.431 0.443 0.456 0.465


As mentioned above, a prospective buyer of the Company with existing operations in the mortgage industry may be able to avoid the majority of corporate costs currently incurred by RHG. Our assessment of fair market value assumes they are able to avoid between 50% and 75% of the corporate costs. To the extent a particular purchaser is able to avoid more than this level of overheads, the value to them may increase by 2.4 cents.

In addition, we have assumed that the risk characteristics of the portfolio are such that a prospective buyer would ascribe a discount rate of between 10% and 11% (mid-point of 10.5%). To the extent that a prospective buyer has an alternative view on risk attaching to the portfolio (or the risk added to their existing portfolio), their assessment of the discount rate applicable to RHG may change and this may also have an impact on value.

4.9 Value of RHG in the absence of the Proposed Scheme

We have also considered the value of a RHG share in the absence of the Proposed Scheme where RHG continues to operate on a stand-alone basis and therefore continues to run down the loan book and continues to incur corporate overheads. Similar to the low end of our valuation range, in estimating the value of RHG on a

140

For

per

sona

l use

onl

y


stand-alone basis we assume the loan book is sold when it reaches $500 million and no value is attributed to the FSR beyond April 2019.

On this basis, we have assessed the value of RHG shares on a stand-alone basis to be in the range of $0.383 to $0.391. The stand-alone value of RHG is significantly lower than the consideration being offered because, in our opinion, the consideration being offered includes some level of synergies that will be extracted by the Resimac Syndicate. Specifically, the difference between the low end of our valuation range ($0.419) and the estimated low end on a stand-alone basis ($0.383) is the result of the 50% of corporate costs assumed to be avoided by a potential purchaser under our market valuation in Section 4.7 above.

In this stand-alone scenario, it should be recognised that wholesale funding markets are still volatile and there is a risk that RHG may not be able to roll over warehouse facilities. Based on discussion with RHG management, we are of the view that the current likelihood of warehouse facility defaults is low but this risk will always exist while as it operates on a stand-alone basis (without the support of a third party) and continues to run-off its portfolio.

To analyse the impact of potential warehouse defaults on our valuation, we have undertaken calculations in which we assume that all warehouse facilities default at future points in time (or suffer implications which are similar to those resulting from a default, i.e. loss of any future spread income7).

Table 20: Value of a share assuming RHG is unable to rollover its warehouse facilities at different times ($)

Low value2 High value

2

RHG stand-alone value 0.383 0.391





Notes:

1. Year in which the relevant warehouse facilities are not rolled over

2. Based on low and high discount rate


7 This refers to the only ‘long term’ warehouse facility (a 30 year facility with a current balance of approximately $548.5 million and referred to as the 30 year Warehouse Facility). If an event of default occurs, the future income from the associated loan book will be paid

to the warehouse facility provider.

141

For

per

sona

l use

onl

y


5 Evaluation of the Pepper/CDM Offer

5.1 Overview of the Pepper/CDM Offer

On 16 August 2013 Pepper and CDM announced the Pepper/CDM Offer whereby Pepper and CDM propose to acquire 100% of RHG for a combination of cash, CDM scrip and a RHG Dividend under a scheme of arrangement.

On 25 October 2013, Pepper issued a press release which stated that Pepper and CDM had decided to

withdraw the Pepper/CDM Offer. This was confirmed by an ASX announcement issued by CDM on

28 October 2013.

Given the withdrawal of the Pepper/CDM Offer the analysis presented in this section is no longer

relevant.

The key terms of the Pepper/CDM Offer (following the amendment announced on 9 September 2013) are as follows:

· Pepper will pay RHG shareholders cash consideration (Cash Component) whilst CDM will issue shares to RHG shareholders other than CDM (Eligible Shareholders) (Scrip Component)

· RHG must declare and pay a fully franked dividend (Dividend Component) before 31 October 2013 and after the date on which RHG pays its tax for the quarter ending 30 September 2013. The dividend must be the maximum amount that will not result in RHG being in a franking deficit immediately after payment or before the implementation of the Pepper/CDM Offer. The Cash Component will be reduced by the quantum of the Dividend Component

· CDM will pay RHG shareholders a $0.05 fully franked dividend for each CDM share they receive under the Pepper/CDM Offer

· the Cash Component, the Scrip Component and the CDM Dividend will depend on whether CDM obtains approval from the ASX or CDM shareholders to issue more than 15% of its existing share capital to Eligible Shareholders as set out below:

Table 21: Summary of Cash Component, Scrip Ratio and CDM Dividend under different approval scenarios

Scenario 1¹ Scenario 2²

Cash Component & Dividend Component $0.36 $0.43

Scrip Component: Scrip Ratio 1 CDM share for every 10 RHG shares 1 CDM share for every 20 RHG shares

CDM Dividend $0.0050 $0.0025

Notes:

1. Scenario 1: CDM obtains approval from the ASX or CDM shareholders to issue more than 15% of its existing share capital to Eligible

Shareholders in which case CDM will issue 1 CDM share for every 10 RHG shares held.

2. Scenario 2: CDM does not obtain approval from the ASX or CDM shareholders to issue more than 15% of its existing share capital to

Eligible Shareholders in which case CDM will issue 1 CDM share for every 20 RHG shares held.

Source: ASX announcements, Deloitte Corporate Finance analysis

CDM is RHG’s largest shareholder, holding a 11.3% direct interest and a 17.1% interest when including interests held by associates. As such, given CDM cannot own shares in itself, CDM will not receive the above consideration but will rather receive from Pepper cash consideration of $0.50 per RHG share owned by CDM.

5.2 Profile of Pepper

Pepper operates as a non-bank lender in Australia, focusing on providing residential mortgage loans to customers who do not meet the acceptance criteria of banks, building societies, credit unions, and traditional non-bank lenders. Pepper also engages in servicing residential and commercial mortgages, third-party residential and commercial mortgage loans and lease portfolios, equipment and auto leases, and unsecured loans.

142

For

per

sona

l use

onl

y


5.3 Profile of CDM

CDM is a listed investment company (LIC) which listed on the ASX in December 2006. CDM is actively managed with a mandate to invest long or short in domestic and international listed securities. CDM has tended to invest directly in securities listed on the ASX and benchmarks the performance of its portfolio against the All Ordinaries Accumulation Index (the Benchmark). CDM is managed by Cadence Asset Management Pty Ltd (CAM) and had a market capitalisation of $165.0 million as at 17 October 2013.

5.3.1 Overview

The key features of CDM are summarised below:

Table 22: CDM key features

Investment style Active long-short manager with long bias. Investments are based on both:

· fundamental bottom up analysis

· technical analysis

Permitted investments Domestic and international listed securities

Portfolio concentration Typically between:

· 20 to 40 core investments based primarily on fundamental analysis

· 0 to 40 trading opportunities based primarily on technical analysis Gross exposure¹ Typically between 70% and 140%. Maximum of 140%

Net exposure² Typically between 50% and 100%. Maximum of 140%

Benchmark All Ordinaries Accumulation Index

Asset Manager CAM

Term of IMA³ 10 years from listing on the ASX and renewed by ordinary shareholder resolution

Management fees 1% of gross portfolio value per annum paid monthly

Performance fees 20% of gross annual outperformance paid annually

No fees are paid where the portfolio decreases in value, regardless of outperformance

Dividend Policy Targets semi-annual distributions

Notes: 1. Long exposure plus the absolute value of short exposure as a percentage of net portfolio

2. Long exposure less the absolute value of short exposure as a percentage of net portfolio

3. IMA = Investment management agreement.


5.3.2 Investment portfolio

CDM’s net investment portfolio as at 30 September 2013 is summarised below.

Figure 5: CDM net investment portfolio as at 30 September 2013

Source: S&P CapitalIQ, Deloitte Corporate Finance analysis

RHG is CDM’s largest individual investment and has historically comprised a larger proportion of CDM’s portfolio. The proportionate holding in RHG has reduced more recently due to various dividends paid by RHG.

10%

9%

7%

6%

5%

12%

51%

RHG

Macquarie Group Limited

Henderson Group Plc

National Australia Bank Ltd

Arrium Limited

Cash

Other listed equities

143

For

per

sona

l use

onl

y


CDM previously held a significant interest in McMillan Shakespeare Ltd, which it recently reduced due to the uncertainty surrounding fringe benefits tax legislation.

5.3.3 Capital Structure

CDM’s largest twenty shareholders and their respective holdings are set out in the table below.

Table 23: Top 20 shareholders as at 17 October 2013

# Name Shares held Proportion (%)

1 Siegling, Karl Peter 7,999,166 6.6%

2 Yarandi Investments Pty Ltd 6,585,245 5.4%

3 Berg Family Foundation 3,800,410 3.1%

4 Plummer, Victor John 2,496,622 2.1%

5 Teoh, David 2,481,034 2.0%

6 Bannaby Investments Pty Ltd 2,381,219 2.0%

7 Golden Words Pty Ltd 959,790 0.8%

8 Best & Morgan Pty Ltd 779,500 0.6%

9 McFarlane, Cameron 720,000 0.6%

10 Mitchell, Valerie 687,500 0.6%

11 Quirk, Aaron Francis 666,123 0.5%

12 Robinson Page Management Pty Ltd 599,999 0.5%

13 Mahoney, M 502,414 0.4%

14 Kavangh, A 502,414 0.4%

15 Gubbins, Bridget 495,165 0.4%

16 Gubbins, Stephen 495,165 0.4%

17 Davies, Wayne 269,442 0.2%

18 Hancock AM, Ronald Ernest 139,860 0.1%

19 Rimwage Pty Ltd 132,000 0.1%

20 Ktap Pty Ltd 50,000 0.0%

Top 20 shareholders of ordinary shares 32,743,068 26.9%

Total shares outstanding 121,738,400 100.0%

Source: S&P Capital IQ, Deloitte Corporate Finance analysis

CDM has a relatively dispersed shareholder base and is characterised by many small shareholders who typically invest for franked distributions and yield.

Since January 2010, the number of issued shares has increased from 27.1 million to 121.7 million at the date of this report, primarily as a result of the following:

· a 1 for 1 bonus issue of options on 30 August 2011, giving shareholders the option to purchase one CDM share for each CDM share held at an exercise price of $1.25, a 3.8% discount to the share price on 30 August 2011 and a 3.1% discount to the one month volume weighted average price (VWAP) of CDM at 30 August 2011. Approximately 26.9 million of the 27.6 million options issued were exercised, raising approximately $33.7 million

· a private placement undertaken on 3 October 2012 of 8.3 million shares, raising $11.4 million at $1.37 per share, a discount of 4.9% to the share price on 3 October 2012 and a 4.1% discount to the one month VWAP of CDM at 3 October 2012

· a placement undertaken on 11 March 2013 of 29.5 million shares, raising $42 million at $1.43 per share, a 4.0% discount to the share price as at 11 March 2013 and a 4.5% discount to the one month VWAP of CDM at 11 March 2013

· a placement undertaken on 10 April 2013 of 20.9 million shares, raising $30 million at $1.43 per share, a 3.4% discount to the share price on 10 April 2013 and a 2.7% discount to the one month VWAP of CDM at 10 April 2013.

144

For

per

sona

l use

onl

y


If the Pepper/CDM Offer is implemented, the number of issued CDM shares will increase to between 134.2 million and 147.9 million with Eligible Shareholders holding between 10.1% and 18.4% of issued shares, as set out below:

Table 24: CDM shareholder composition if the Pepper/CDM Offer is implemented

Scenario 1 Scenario 2

CDM shares currently outstanding 121,738,400 121,738,400

Proposed shares issued under Pepper/CDM Offer 27,369,188 13,684,594

CDM shares if Pepper/CDM Offer implemented 149,107,588 135,422,994

Percentage held by Eligible Shareholders 18.4% 10.1%

Source: S&P Capital IQ, ASX Announcements, Deloitte Corporate Finance analysis

5.3.4 Returns

The comparative returns of CDM and the Benchmark over the past two years, inclusive of share price appreciation and dividends but excluding franking credits, are outlined in the following figure:

Figure 6: CDM historical comparative returns with Benchmark


The total return achieved by CDM shareholders has been broadly in line with the Benchmark over the past two years. However, CDM shares have significantly outperformed the Benchmark since listing, generating annual returns (excluding franking credits) of 8.4% compared to 4.0% by the Benchmark, although this outperformance has been attributable in part to the performance of RHG.

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

CDM Benchmark CDM outperformance/underperformance

145

For

per

sona

l use

onl

y


Dividends have comprised a significant component of CDM’s historical returns since listing as set out below:

Table 25: CDM historical dividend distributions (cents per share)

Calendar year Interim Final Special Total

Gross yield including

franking credits

2007 2.0 2.0 2.0 6.0 8.6

2008¹ 2.5 0.0 0.0 2.5 3.6

2009 0.0 2.0 0.0 2.0 2.9

2010 2.0 2.0 0.0 4.0 5.7

2011 3.0 3.0 3.0 9.0 12.9

2012 4.0 4.0 4.5 12.5 17.8

2013 5.0 5.0 1.0 11.0 15.7

Total 18.5 18.0 10.5 47.0 67.1

Note:

1. Excludes distribution received in off market equal access buyback


5.3.5 Share price performance

The comparative performance of CDM’s share price and the reported post-tax net asset value (NAV) and pre-tax NAV over the past two years is outlined in the following figures:

Figure 7: Share price performance and NAV


The recent drop in CDM’s share price reflects the shares trading ex-dividend. Post-tax NAV has historically been higher than pre-tax NAV due to deferred tax assets arising from tax losses and fair value adjustments. Post-tax NAV and pre-tax NAV have converged more recently which is due to an increase in deferred tax liabilities arising from fair value adjustments.

$1.00

$1.10

$1.20

$1.30

$1.40

$1.50

$1.60

Share price NAV pre-tax NAV post-tax

146

For

per

sona

l use

onl

y


Figure 8: Premium/discount to post tax NAV


CDM’s average share price discount to NAV calculated over the past two years has been 4.0% but recently CDM’s shares have traded above its reported post-tax NAV, trading at an average premium of 2.3% over the past twelve months. The discount prior to June 2012 may have been impacted by a number of factors including liquidity (CDM undertook a number of material capital raisings during the 2013 financial year), company size, investor sentiment and volatility in global equity markets.

5.3.6 Liquidity

The average daily turnover of CDM, RHG and the ASX as a percentage of market capitalisations in each month since October 2011 are set out in the figure below:

Figure 9: Average daily turnover of CDM, RHG and the ASX (monthly)

Source: S&P Capital IQ, Reserve Bank of Australia, Deloitte Corporate Finance analysis

As set out above, between October 2011 and August 2013 CDM’s average daily turnover as a percentage of market capitalisation has been consistently lower than that of the ASX and has also been lower than RHG in all

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Oct

-11

Nov-1

1

Dec-1

1

Jan

-12

Feb-1

2

Mar-

12

Ap

r-12

May-

12

Jun

-12

Jul-1

2

Au

g-1

2

Se

p-1

2

Oct

-12

Nov-1

2

Dec-1

2

Jan

-13

Feb-1

3

Mar-

13

Ap

r-13

May-

13

Jun

-13

Jul-1

3

Au

g-1

3

Se

p-1

3

Oct

-13

Discount/premium to post-tax NAV (LHS) Average discount to post-tax NAV: 2 year average (RHS)

Average discount to post-tax NAV: 1 year average (RHS)

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2.00%

CDM ASX RHG

147

For

per

sona

l use

onl

y


but three months (August 2012, September 2012 and February 2013). Given this, we consider the liquidity in CDM to be low relative to both RHG and the broader domestic market.

5.3.7 Financial position

The financial position of CDM as at 30 June 2011, 30 June 2012 and 30 June 2013 is set out below.

Table 26: CDM financial position

$ million (unless otherwise stated) 30 June 2011 30 June 2012 30 June 2013

Assets

Cash 11.4 15.2 66.3

Receivables 0.3 0.2 1.5

Financial assets 29.9 34.9 98.0

Deferred tax assets 1.6 3.1 3.7

Total assets 43.2 53.4 169.6

Liabilities

Payables 3.1 1.2 0.7

Financial liabilities 0.0 0.0 2.6

Deferred tax liabilities 0.0 0.0 1.8

Total liabilities 3.1 1.2 5.2

Net assets 40.1 52.2 164.4

Net assets per share pre-tax ($ per share) $1.397 $1.295 $1.347

Net assets per share post-tax ($ per share) $1.457 $1.378 $1.364

Source: CDM annual reports, Deloitte Corporate Finance analysis

The significant increase in net assets over the observed period is primarily due to various capital raising initiatives undertaken by CDM (with issue prices ranging from $1.25 to $1.43) and positive investment returns.

5.4 Valuation of the Scrip Component

As the Pepper/CDM Offer Consideration comprises both cash and CDM shares, it is necessary to make an assessment of the fair market value of the CDM shares being offered in order to attribute a value to the Pepper/CDM Offer Consideration. In this regard, the relevant measure is the expected market value of the shares in CDM being offered as consideration subsequent to the implementation of the Pepper/CDM Offer, as opposed to the current or pre-bid price.

In valuing the scrip component of an offer the following methodologies are generally applied:

· the market price of the scrip being offered as consideration (in this case CDM shares)

· the underlying value of the entity is estimated and a discount is then applied to reflect a portfolio interest or other factors. As CDM is an investment company, the particular valuation methodology used to value CDM which is most appropriate is the net assets on a going concern basis.

In many instances, the traded price of an entity in a liquid market is likely to provide a reliable estimate of value given market prices (particularly for entities that are closely followed by a wide range of market analysts) usually incorporate the influence of all publicly available information on an entity’s prospects, future earnings and risks.

However, we note that:

· CDM shares have relatively low liquidity. As such its share price may be unduly influenced by supply and demand and other short term factors which are not reflective of CDM’s underlying value

· CDM is not included in any of the key Australian indices

· CDM is not followed by any brokers.

148

For

per

sona

l use

onl

y


Consequently, the CDM share price may not necessarily represent fair value in an informed market and therefore we considered the share price of CDM alongside the value of the net assets of CDM. It is possible to accurately estimate the net assets of CDM with a reasonable degree of certainty because:

· CDM’s portfolio primarily comprises listed securities, which are held at their last traded market price, and cash

· CDM releases an estimate of pre-tax and post-tax NAV on a monthly basis.

Given the above, in estimating the listed market price of CDM shares subsequent to the implementation of the Pepper/CDM Offer, we have had regard to both recent share trading and CDM’s estimated net asset position.

Our analysis is discussed in further detail below.

5.4.1 Recent share trading in CDM

Based on recent share trading, we are of the opinion that $1.35 to $1.40 is a reasonable estimate of the market price of CDM shares as illustrated in the figure below:

Figure 10: Estimated share price of CDM based on recent share trading

Source: ASX announcements, S&P Capital IQ, Deloitte Corporate Finance analysis

Whilst our selected range of $1.35 to $1.40 appears to be lower than trading in the shares prior to September 2013, the historical share trading reflects trading in CDM shares on a cum-dividend basis and therefore is not comparable to trading in the shares post 16 September 2013 when the company’s shares went ex-dividend.

5.4.2 Net assets of CDM

We have estimated the Adjusted NAV of CDM to be $1.36 per CDM share. For the purpose of estimating the net assets of CDM we have adopted the post-tax NAV of CDM as at 30 September 2013 adjusted for the impact of the Pepper/CDM Offer (Adjusted NAV). A post-tax estimate has been adopted given CDM’s deferred tax assets or liabilities are likely to be realised over a reasonably short time frame.

We have also estimated CDM’s NAV at 21 October 2013. The NAV increased by 2.9% (on a post-tax basis) from $1.36 at 30 September 2013 to $1.40 at 21 October 2013.

Whilst CDM is currently trading in line with its post-tax NAV, it has previously traded at a discount (particularly before June 2012). There has been a change in the company’s circumstances since June 2012 (net assets have increased materially) and the discounts observed prior to that time may not be entirely relevant. As noted at paragraph 5.3.5 above, there are a number of factors that may account for the discount/premium to NAV including liquidity and size considerations. The relative cost of managing an LIC is likely to decrease as assets increase. Investor sentiment and global equity market volatility are also likely to play a role.

$1.20

$1.25

$1.30

$1.35

$1.40

$1.45

$1.50

$1.55

Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13

Share price Likely trading range - low Likely trading range - high

149

For

per

sona

l use

onl

y


Figure 11: Historical discount/premium of share price to post-tax NAV for CDM and comparable LICs¹

Note:

1. Comparable LICs include ASX listed LICs invested primarily in Australian equities with a market capitalisation in excess of $40

million as at 30 September 2013

Source: ASX announcements, S&P Capital IQ, Deloitte Corporate Finance analysis

Having regard to the above, we consider it appropriate to adopt a small discount to NAV, but we have included this discount in the overall discount we assess in Section 5.6 below.

Based on the foregoing, the implied value of CDM shares is $1.36 to $1.40.

5.4.3 Conclusion as to the value of the Scrip Component

A summary of our valuation of the Scrip Component is set out in the table below:

Table 27: Assessed value of Scrip Component


Low High Low High

Estimated share price - recent share trading ($) 1.350 1.400 1.350 1.400

Estimated share price - net assets as a going concern ($) 1.360 1.400 1.360 1.400

Assessed value of the Scrip Component per CDM Share ($) 1.350 1.400 1.350 1.400

CDM shares offered per RHG share 0.100 0.100 0.050 0.050

Assessed value of the Scrip Component per RHG share ($) 0.135 0.140 0.068 0.070


5.5 Valuation of the Dividend Component and CDM Dividend

5.5.1 Dividend Component

We have not attributed any value specifically to the Dividend Component because if RHG pays the Dividend Component the Cash Component will be reduced by the Dividend Component. Its value is therefore captured as part of the combined Dividend Component and Cash Component.

-40.0%

-35.0%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

Median Australian equity focused LIC discount/premium CDM discount/premium

150

For

per

sona

l use

onl

y


It should also be noted that we have attributed no additional value to the potential tax benefit of franking credits attached to the Dividend Component given:

· companies cannot benefit directly from franking credits and only their Australian resident shareholders benefit from franking credits

· Australian resident shareholders must hold the shares in a company for 45 days (subject to certain exemptions) to claim the benefit of franking credits

· the tax payable from receiving a fully franked dividend is not fully offset by the franking credit for those individual shareholders on a marginal tax rate greater than 30%.

It should also be noted that if the Pepper/CDM Offer is implemented, and given the pre-condition in the Pepper/CDM Offer that RHG must not fall into a franking account balance deficit following the payment of any dividend, RHG has estimated that it would not be in a position to pay the Dividend Component.

5.5.2 CDM Dividend

If the Pepper/CDM Offer is implemented, and notwithstanding the ex-dividend date of 16 September 2013 has passed, RHG Management have informed us CDM has undertaken to pay RHG shareholders a $0.05 fully franked dividend for each CDM share they will hold8.

5.6 Valuation of the Pepper/CDM Offer Consideration

Under the Pepper/CDM Offer, RHG Shareholders would receive some portion of their consideration in CDM shares. RHG Shareholders would need to convert the CDM shares into cash in order to be in a comparable cash position to the Scheme Consideration where they are receiving cash consideration. Given the sizeable holding they will have (relative to the liquidity of CDM shares) there may be an overhang of CDM shares in the market (i.e. the volume of shares being offered for sale may exceed the volume of shares willing to be bought).

In order to recognise these issues, as well as the fact that a discount to NAV has been historically observed in CDM’s traded price and in the LIC sector generally, we consider an overall discount of 5% of the valuation of the Scrip Component to be appropriate.

Based on a value range for CDM shares of $1.35 to $1.40 and a 5% discount (applied to the Scrip Component only), we have assessed the value of the Pepper/CDM Offer as follows:

Table 28: Assessed value of Pepper/CDM Offer Consideration per RHG share


Low High Low High

Cash Component & Dividend Component ($) 0.360 0.360 0.430 0.430

Scrip Component (gross) ($) 0.135 0.140 0.068 0.070

Discount to Scrip Component 5.0% 5.0% 5.0% 5.0%

Scrip Component (net) ($) 0.128 0.133 0.064 0.067

CDM $0.05 dividend 0.0050 0.0050 0.0025 0.0025

Value of Pepper/CDM Offer Consideration ($) 0.493 0.498 0.497 0.499

Discount to Proposed Scheme Consideration 1.5% 0.6% 0.9% 0.4%


Having regard to the above, we consider the value of the Pepper/CDM Offer Consideration to be in the range of $0.493 to $0.498 per RHG share under Scenario 1 and in the range of $0.497 to $0.499 per RHG share under Scenario 2.

8 The $0.05 per CDM share dividend equates to $0.005 per RHG share under Scenario 1 and $0.0025 per RHG share under Scenario 2

151

For

per

sona

l use

onl

y


The value of the Pepper/CDM Offer Consideration is sensitive to the assumptions with respect to the value of a CDM share and the assumed discount. The figures below present the impact of adopting different assumptions for these two factors:



$1.300 $1.325 $1.350 $1.375 $1.400 $1.425 $1.450

Assu

med

dis

co

un

t (%

)

5% 0.489 0.491 0.493 0.496 0.498 0.500 0.503

4% 0.490 0.492 0.495 0.497 0.499 0.502 0.504

3% 0.491 0.494 0.496 0.498 0.501 0.503 0.506

2% 0.492 0.495 0.497 0.500 0.502 0.505 0.507

1% 0.494 0.496 0.499 0.501 0.504 0.506 0.509

0% 0.495 0.498 0.500 0.503 0.505 0.508 0.510




$1.300 $1.325 $1.350 $1.375 $1.400 $1.425 $1.450

Assu

med

dis

co

un

t (%

)

5% 0.494 0.495 0.497 0.498 0.499 0.500 0.501

4% 0.495 0.496 0.497 0.499 0.500 0.501 0.502

3% 0.496 0.497 0.498 0.499 0.500 0.502 0.503

2% 0.496 0.497 0.499 0.500 0.501 0.502 0.504

1% 0.497 0.498 0.499 0.501 0.502 0.503 0.504

0% 0.498 0.499 0.500 0.501 0.503 0.504 0.505


In order for the Pepper/CDM Offer Consideration to be greater than the Scheme Consideration and assuming a 5% discount, CDM’s share price would need to be greater than $1.435 under Scenario 1 and $1.45 under Scenario 2.

We also note that:

· in the Pepper/CDM Offer announced on 9 September 2013, Pepper/CDM indicated a share buyback program for CDM shareholders of up to 10% of the total CDM shares on issue (includes the newly issued CDM shares to RHG shareholders). The buyback program may be implemented if CDM’s share price trades materially below net tangible asset value. However, CDM have not provided any clarity on what they regard to be material

· depending on the number of RHG shares held, some shareholders may receive a non-marketable parcel of shares in CDM. Out of approximately 4,600 shareholders, we have calculated that this will apply to 32% of shareholders under Scenario 1 and 48% under Scenario 2. Effectively, if a RHG shareholder holds less than approximately 3,600 shares under Scenario 1 and 7,300 shares under Scenario 2, they will receive a non-marketable parcel of CDM shares. In an addendum to the Pepper/CDM Offer announced 11 October 2013, Pepper/CDM indicated a small shareholding sale facility will be implemented to give eligible RHG shareholders who receive a non-marketable parcel of CDM shares the opportunity to dispose of their CDM shares within six months of the implementation of the Pepper/CDM Offer without any brokerage or handling costs.

In the same addendum, CDM also state they will provide the opportunity to eligible RHG shareholders to buy more CDM shares, free of brokerage and other transaction costs, through a share purchase plan to be implemented within six months of implementation of the Pepper/CDM Offer.

152

For

per

sona

l use

onl

y


Pepper/CDM have not indicated whether any discounts or premiums will apply to the sale or acquisition of shares under such facilities and in the intervening period shareholders could be exposed to fluctuations in the price of the CDM shares they receive

· RHG Management have informed us that CDM intended to pay a dividend of $0.05 per CDM share to RHG shareholders. The precise mechanism that CDM proposed to employ to effect this dividend payment was not disclosed. Our valuation of the Pepper/CDM Offer Consideration includes the value of this dividend and assumes that there is no material impact on CDM’s net asset value (and therefore the value of its shares) and the payment of such a dividend would not result in any adverse tax consequences for RHG Shareholders relative to receiving the cash equivalent

· our valuation analysis assumes that there is an equivalent timetable for both the Resimac Syndicate and Pepper/CDM schemes of arrangement. The Directors are of the view that it is unlikely the Pepper/CDM scheme could be put to Shareholders for approval with the same timetable as the Proposed Scheme owing to its complexity. The present value of the Pepper/CDM Offer Consideration will therefore be lower on a like for like basis as Shareholders will only receive the consideration for their RHG shares at a later date (as compared to the Proposed Scheme).

As there is likely to be a longer time frame required to implement the Pepper/CDM scheme, there is also increased risk the value of the Pepper/CDM Offer Consideration may change as a result of movements in the value of the CDM shares.

153

For

per

sona

l use

onl

y


Glossary

Reference Definition

$ Australian dollars

30 Year Warehouse Facility A 30 year rated warehouse facility with an annual repricing mechanism

ADI Authorised deposit taking institution

Adjusted NAV Post-tax NAV of CDM as at 30 September 2013 adjusted for the impact of the Pepper/CDM Offer

AFSL Australian Financial Services Licence

AMAC Australian Mortgage Acquisition Company Pty Limited

AOFM Australian Office of Financial Management

APRA Australian Prudential Regulatory Authority

ASIC Australian Securities and Investments Commission

ASX Australian Securities Exchange

ATO Australian Taxation Office

BBSW Bank bills swap rate

Benchmark All Ordinaries Accumulation Index

bps Basis points

CDM Cadence Capital Limited

Cash Component Cash consideration Pepper has offered to pay RHG shareholders under the Pepper/CDM Offer

Company RHG Limited

DCF Discounted cash flow

Deloitte Corporate Finance Deloitte Corporate Finance Pty Limited

Directors Directors of RHG

Dividend Fully franked dividend of $0.03 per share paid in August 2013

Dividend Component Dividend RHG is required to declare prior to 31 October 2013 under the Pepper/CDM Offer

Eligible Shareholders RHG shareholders excluding CDM

FSR Future servicing rights associated with RHG’s existing loan book and other investments in the trusts which own RHG’s loan book

FSR Projections Cash flow projections from the Valuation Date

FY Financial year ending 30 June

IER Independent expert’s report

Impaired Assets Trust An impaired asset trust established and funded by RHG

Implementation Date Completion date of the Proposed Scheme expected to occur by 8 January 2014

LIC Listed investment company

LVR Loan to value ratio

MID Merger Implementation Deed

Management RHG management

NAV Net asset value

Other Investments Subordinated debt, collateral funds, the Impaired Assets Trust, floats and other assets

P&I Principal and interest

Pepper Pepper Australia Pty Limited

Pepper/CDM Offer The offer by Pepper and CDM announced on 16 August 2013

Pepper/CDM Offer Consideration

The proposed consideration under the Pepper/CDM Offer

PIGL Prime Insurance Group Limited

Proposed Scheme A scheme of arrangement via which the Resimac Syndicate will purchase all the shares of RHG

RBA Reserve Bank of Australia

Resimac Resimac Limited

Resimac Syndicate A syndicate comprising Resimac and AMAC

RHG RHG Limited

RHG share Ordinary shares of RHG

RMBS Residential mortgage backed securities

Scenario 1 Scenario under the Pepper/CDM Offer where CDM obtains approval from the ASX or CDM shareholders to issue more than 15% of its existing share capital to Eligible Shareholders in which case CDM will issue 1 share to Eligible Shareholders for every 10 RHG shares held.

Scenario 2 Scenario under the Pepper/CDM Offer where CDM does not obtain approval from the ASX or CDM shareholders to issue more than 15% of its existing share capital to Eligible Shareholders in which case CDM will issue 1 share to Eligible Shareholders for every 20 RHG shares held.

154

For

per

sona

l use

onl

y


Reference Definition

Scheme Booklet Scheme booklet issued by the board of RHG containing the detailed terms of the Proposed Scheme

Scheme Consideration Resimac Syndicate’s revised offer of $0.501 per RHG share

Scrip Component Shares CDM will issue to Eligible Shareholders under the Pepper/CDM Offer

Share Ordinary shares of RHG

Shareholders RHG shareholders

SPE Special Purpose Entity

Subsidiaries RHG’s subsidiaries

UMP Unisys Mortgage Processing (RHG) Pty Limited

VWAP Volume weighted average price

Valuation Date 30 September 2013

Westpac Westpac Banking Corporation

Westpac Transaction Sale of RHG’s distribution network and RAMS brand name to Westpac in October 2007 (completed in January 2008)

155

For

per

sona

l use

onl

y


Appendix A: Residential mortgage industry

Industry overview

The Australian residential mortgage industry comprises mortgage-backed loan offerings used to finance the purchase of residential properties for investment and owner-occupied purposes. Interest is charged on mortgages and the repayments are usually set such that the principal amortises over a period of time, usually ranging from 25 to 30 years. Owner-occupiers make up the largest proportion of the market, currently accounting for 67%9. Investors account for 33% of the market and can be classified as borrowers who purchase real estate for the purpose of generating returns from properties.

Mortgages have historically been funded by traditional lenders that are authorised deposit taking institutions (ADIs) such as banks, credit unions and building societies. During the 1990s, non-traditional lenders emerged in the market, as a result of government deregulation and the development of third party distribution channels. In the early 2000s, residential and large scale commercial mortgage securitisation became increasingly prevalent in the market as an alternative source of funding, particularly for non-bank lenders who finance most of their loans through wholesale securitisation markets.

Non-traditional lenders have historically competed by offering lower interest rates, less stringent lending criteria and faster loan approval times. They have also continued to build their own distribution networks over the past decade and established wider market reach at lower capital costs compared to traditional lenders.

The Australian mortgage industry experienced robust growth through to FY07 as a credit boom and strong conditions in the housing market underpinned demand for mortgages. Industry revenue plunged in the following years as the demand for credit fell sharply and the housing market stalled as a result of the global financial crisis. The industry rebounded strongly in FY12 on the back of sharp cuts to interest rates, government support and pent-up demand for housing. The home loan refinancing market was also boosted by the interest rate cuts with the number of refinanced owner occupied dwellings increasing by 12% over the two year period from 2010 to 201210.

Unlike other mature international markets, such as the USA and United Kingdom, Australia’s mortgage sector has maintained momentum and continues to grow. This stability is a defining feature of the Australian mortgage landscape as illustrated in the figures below which set out the trend in residential loans in terms of commitments and value of loans outstanding.

Figure 12: Residential lending commitments11 in Australia Figure 13: Residential loans outstanding in Australia

Source: RBA, Deloitte Corporate Finance analysis Source: RBA, Deloitte Corporate Finance analysis

As mentioned above, the impact of the global financial crisis resulted in a decrease in lending commitments in 2008 before a recovery in 2009 as investor confidence returned.

9 IBIS World Pty Ltd 10 Australian Bureau of Statistics 11 A lending commitment is a firm offer to provide finance which has been or is normally expected to be accepted by the borrower (excludes

construction commitments)

$0m

$5,000m

$10,000m

$15,000m

$20,000m

$25,000m

2006 2007 2008 2009 2010 2011 2012

Owner Investment

$0b

$200b

$400b

$600b

$800b

$1,000b

$1,200b

2006 2007 2008 2009 2010 2011 2012

Owner-occupied Investors

156

For

per

sona

l use

onl

y


Structure of the industry

A simplified structure of the Australian residential mortgage industry is set out below.

Figure 14: Structure of the residential mortgage industry

Note: In a number of cases broking and management activities are also undertaken by the lenders


RHG was a non-traditional lender, however, since the sale of its distribution network and brand name to Westpac (announced in October 2007 and completed in January 2008), RHG does not originate or distribute loans. Its only activity consists of managing an existing portfolio of loans which involves securing the funding for various trusts that own the loans.

Consolidation in the industry is evident with a number of large banks making significant investments in large broking networks. The Australian Competition and Consumer Commission is currently looking into Commonwealth Bank of Australia’s proposed 100% acquisition of Aussie Home Loans, the second-largest mortgage broker in Australia. The Commonwealth Bank of Australia also holds a 17% share in the third largest mortgage broker Mortgage Choice. Similarly, National Australia Bank is a participant in the mortgage broker sector through investments held by its Advantedge business, including PLAN and Choice Homes Loans12.

Loan origination

The primary aspects of a loan origination role include:

· product manufacture: product manufacturers provide the infrastructure and systems to support the mortgage products

· credit approval: criteria are subject to lender policies and it is the responsibility of each financial institution to determine its own lending criteria. Generally this will include a LVR and consideration of the income and repayment ability of the applicant in question. Credit approval criteria of most non-bank lenders were driven directly by mortgage insurers’ guidelines

· application processing: the administrative processes which includes submitting the loan from underwriting through to settlement.

RHG no longer undertakes origination activities.

12 IBIS World Pty Ltd

Traditional Lenders

(banks, building societies,

credit unions, that can apply

their own funds from deposits

to originate loans)

Non-traditional Lenders

(mortgage funds,

securitisation companies that

source funds from investors)

Mortgage brokers

(mortgage brokers may

belong to an aggregator or

franchise group and upon

becoming accredited with

various lenders, sell loan

products to borrowers)

Borrowers

(acquire loan products from

traditional and non-traditional

lenders directly or through

mortgage brokers)

Mortgage managers

(specialise in the origination,

management and

administration of loans on

behalf of lenders and can

provide own range of loan

products)

Mortgage products

Management and

administration services

on settled mortgages

Mortgages

157

For

per

sona

l use

onl

y


Home loan servicing

The management of loans post settlement includes maintaining and managing all loan data, receiving and recording payments, preparation of customer statements, operating a call centre and managing arrears when customers encounter difficulties in making payments.

RHG outsources all home loan servicing activities to UMP.

Distribution

The different distribution models of the Australian home loan market can be classified as either:

· proprietary: where the lender who funds the underlying mortgage sells its products through a channel which it owns or has control over

· third party: where the lender relies upon an independent channel to source home loan customers.

Third party distribution is primarily represented by mortgage brokers.

Brokers typically offer a range of home loan products that are sourced from a number of lenders, including major banks, regional banks, foreign banks and non-traditional lenders. Customers deal directly with the mortgage brokers who help to identify the loan products that best fit their needs. Brokers are typically paid upfront fees and trail commissions by lenders and thus do not generally charge borrowers a fee. Brokers operate through a number of business models, with the most prevalent being:

· aggregator model: brokers operate their own business under their own name, but utilise the wholesale lender panel agreement of an aggregator to obtain better loan products and commissions. Aggregation is a relatively new part of the mortgage value chain. Acting on behalf of broker groups, aggregators source products and negotiate better terms from the manufacturers and/or packagers. Aggregators may also provide distribution services

· franchise model: brokers operate their business under the franchisor’s brand and also receive support services similar to that available from an aggregator.

RHG no longer undertakes distribution activities.

Funding

Funding activity relates to the provision of loan funds to mortgage lenders. The sources of funding can vary significantly.

Mortgages and home loans have traditionally been funded by ADIs such as banks that have a depositor base. However, mortgage securitisation is an alternative source of funding for mortgages and is particularly relevant for non-bank lenders.

Securitisation is used by financial institutions to pool assets, receivables and financial instruments into securities termed “asset backed securities”. Securitisation involves the originator creating a pool of financial assets (i.e. residential mortgage loans), and selling them to a specially created investment vehicle that issues bonds backed by those financial assets. Securitisation may allow the transfer of risks from the entity that originated the assets to a third party allowing the originator to quarantine risks and free up capital to underwrite new loans. Securitisation has become the major financing source for the non-bank lenders.

The debt securities or bonds issued as part of a securitisation program are assigned credit ratings by rating agencies such as Standard & Poor’s and Moody’s. The credit ratings assist investors in determining the credit risk of debt securities and bond issues.

The credit rating of a particular issue is directly related to the risk profile of that issue and, in particular, to the risk imposed on the debt holder of not receiving timely payment of principal and interest on their specific debt security. Rating agencies also rate the providers of lenders mortgage insurance and may also require the provision of subordinated debt to a particular issue to obtain a higher rating. As such, credit ratings play an essential role in pricing securities and are often used as a benchmark for setting investment guidelines. Credit ratings can affect the issuer’s access to capital, the structure of the particular transactions and the ability of others to make investments in the financial products.

Mortgage lenders

ADIs have been able to fund their loan portfolios at a much lower cost compared to non-bank lenders, who have traditionally sought funding from wholesale markets. Furthermore, ADIs have been able to secure funding from depositors, which represents a more stable source of funding in times of market turmoil.

158

For

per

sona

l use

onl

y


The number of mortgage lenders in Australia has dropped from 189 in 2008 to 146 in 201313 as a result of weak market conditions and consolidation amongst lenders. Australia’s major banks have increased their market share to 79.4% of variable loans as at March 2013, up from 75.7% in September 2012, and hold an 84.5% share of the fixed loan market. The bigger banks are increasingly dominating the first-home buyer market with 77.9% of the market as at March 2013, compared to 74.4% in September 201214.

RMBS

RHG traditionally sources its funding from the wholesale market (in particular, from the RMBS market) and from warehouse facilities which are debt facilities provided by banks and historically used to ‘store’ originated loans before packaging them for the RMBS market. Warehouse facilities are currently used by RHG as a continuing source of funding.

The RMBS market provides long term funding that generally matches the length of the loan (i.e. 25 to 30 years). RMBS securities have similar characteristics to bonds in that they are issued in the debt capital markets and pay investors a coupon out of the cash flows.

In 2009, annual RMBS issuance dropped to its historical low of approximately $14 billion. The Australian Office of Financial Management (AOFM), the government's debt agency, launched a RMBS program in late 2008 to bolster the securitisation market and support competition in Australia's mortgage markets in the wake of the global financial crisis and the resulting credit freeze. Many mortgage funders had relied heavily upon the AOFM for funding with the agency investing approximately $20 billion from 2009 to 2012.

In April 2013, the Treasurer Wayne Swan announced that the AOFM will halt further investments in RMBS as investors had returned to the market. RMBS issuers have been active in tapping into new issuance opportunities, emboldened by renewed offshore investor interest for the asset class and improved pricing. We note that the Australian legislative framework for covered bonds15 came into effect in late 2011 and major banks have issued more than $42 billion in covered bonds since then. The launch of covered bonds to the offshore market has contributed to heightened awareness of Australian residential mortgages and their performance at a time when there was limited supply to meet investor needs.

The market has benefitted from generally stronger sentiment for securitisation and international investors' growing interest in Australia as an investment destination. The Australian RMBS market has also benefitted from a lack of competing new issuances from Europe due to the European Central Bank's liquidity support. However, a return to issuance by European issuers may increase the competition to secure longer-term investor interest.

The figure below illustrates the trend in residential mortgages funded by RMBS issuance in the past decade.

Figure 15: Residential mortgages funded by RMBS issuance (per annum)

Note: RMBS issuances for 2013 are for the four months period to 1 May 2013

Source: Standard & Poor’s, Deloitte Corporate Finance analysis

13 IBIS World Pty Ltd 14 Australia Finance Group, the largest Australian mortgage broker 15 Covered bonds are debt securities backed by cash flows from mortgages or public sector loans. They are similar in many ways to RMBS

created in securitization. The key difference is the covered bonds assets remain on the issuer’s book

-

$10,000m

$20,000m

$30,000m

$40,000m

$50,000m

$60,000m

$70,000m

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

159

For

per

sona

l use

onl

y


A total of $16.8 billion of RMBS were issued in 2012, compared with more than $20 billion in each of the previous two years. The decrease was partly due to the successful launch of Australian covered bonds which dominated in the first half of 2012.

More than $8 billion in Australian RMBS has been issued or marketed since the start of 2013. The issuance so far in 2013 is already more than 50% of the total issuance recorded in all of 2012 indicating deal flow is rebounding as investor confidence recovers. According to Standard & Poor’s, the strong issuance levels seen in the past few months are expected to continue in 2013, potentially pushing total RMBS issuance volume beyond $20 billion. We note that issuers of RMBS may be required to provide additional subordinated debt and/or collateral funds (in order to secure funding) and the recoverability of these additional funds would be uncertain.

Recent RMBS issues of AAA rated notes in the Australian market are summarised in the table below.

Table 31: Recent issues of RMBS in the Australian market (AAA-rated notes)

Date Issue Tranche Amount

($ million)

Weighted average life

(years)

Spread to 30 day BBSW for AAA-rated

notes (bps)1

14-Feb-13 Bendigo and Adelaide Bank Class A 790.0 3.6 95

15-Feb-13 Westpac Class A 1,932.0 3 85

18-Mar-13 Liberty Financial Class A - 1 40.0 0.4 50

Class A - 2 70.0 1.8 110

Class A - 3 58.4 3.6 165

12-Apr-13 Pepper Class A - 1 245.0 2.3 120

Class A - 2 38.9 2.3 165

Class A - 3 18.2 3.8 240

Class A - 4 17.2 3.8 Undisclosed

10-Apr-13 Liberty Financial Class A - 1 100.0 0.3 50

Class A - 2 175.0 1.7 110

Class A - 3 150.0 3.6 165

30-Apr-13 IMB Class A-1 279.0 3.5 100

Class AB 15.0 6.8 170

6-May-13 Suncorp Bank Class A - 1 1,069.5 3.4 95

Class A - 2 63.3 5.9 170

12-Jun-13 CUA Class A 627.8 3.5 100

7-Oct-13 P&N Bank Class A 276.0 2.9 105

Class AB 16.5 4.8 215

12-Oct-13 ME Bank Class A 621.8 3.0 125

15-Oct-13 Macquarie PUMA 2013-1 Trust Class A 1,150.0 3.5 100

Class AB 75.0 5.6 Undisclosed

16-Oct-13 AMP Bank Class A 598.0 3.6 100

Class AB 39.0 6 190

17-Oct-13 Pepper Class A-1 227.5 2.4 120

Class A-2 48.7 2.4 165

18-Oct-13 Commonwealth Bank Class A-1 2,011.0 2.4 80

Class A-2 525.0 3.5 90

Class A-3 400.0 4.95 115

21-Oct-13 ING Direct Class A 920.0 2.9 100

Class AB 30.0 5.6 165

Note 1: bps = basis point where 1 bps equals 0.01%

Source: Publicly available information, Deloitte Corporate Finance analysis

Notwithstanding the renewed RMBS activity, RHG’s ability to capitalise on the market is impeded by:

· the Company not originating new loans. In comparison, all recent issuers actively write new loans

· the loan book is in wind down. Potential investors in any new RMBS issued by RHG will likely face a situation where the company is wound up before the maturity of the RMBS. This situation would provide investors with uncertainty regarding representations and warranties that would be made by RHG in an RMBS issue

160

For

per

sona

l use

onl

y


· limited rating agencies that cover PIGL and its reinsurer American International Assurance (Bermuda) Limited, that may require onerous criteria potentially unfavourable to RHG given the loan book is in wind down

· RHG’s loan book comprises of approximately 37% Low Doc loans. RMBS issues that have included Low Doc loans are marketed as non-conforming issues which can include portfolios with impaired borrowers.

Cash rate to bills rate

The interest rate payable to RHG by its customers in respect of the Company’s home loan products is based on a margin above the Reserve Bank of Australia (RBA) target cash rate. Most of RHG’s home loan products are on a variable rate and there is political, regulatory and commercial pressure not to vary rates out of line with RBA movements in the target cash rate. Therefore movements in the spread between the target cash rate and BBSW have an impact on RHG’s profitability through its effect on RHG’s cost of funding.

The figures below illustrate the interest rate spread between the RBA target cash rate to 30 day BBSW spread and 90 day BBSW spread to 17 October 2013.

Figure 16: RBA target cash rate to 30 day BBSW spread Figure 17: RBA target cash rate to 90 day BBSW spread

Note: Cash rate to BBSW spread = 30 day BBSW rate – 30 day cash

rate

Source: RBA, Deloitte Corporate Finance analysis

Note: Cash rate to BBSW spread = 90 day BBSW rate – 90 day

cash rate


RHG’s net interest margin is the difference between its customer margin and its funding margin. Since RHG’s customer margin is effectively a spread above the RBA target cash rate and its funding margin is a spread above 30 day BBSW (or 90 day BBSW), the higher the spread between the RBA target cash rate and 30 day BBSW (or 90 day BBSW), the lower the net interest margin RHG generates due to the higher cost of funds.

Regulation

The Australian mortgage industry is primarily regulated or monitored by the following authorities:

· the Australian Securities and Investments Commission (ASIC): regulates the overall financial services sector in Australia and also regulates persons engaged in consumer credit activities, including monitoring licensees for ongoing compliance and taking action where the law is breached

· the Australian Prudential Regulatory Authority (APRA): regulates and monitors the conduct of all ADIs such as Australian owned banks, subsidiaries of foreign banks, credit unions and building societies

· the Mortgage and Finance Association of Australia: a non-government body that provides services and representation to mortgage lenders (both banks and non-banks) and mortgage brokers to promote industry standards.

The National Credit Code regulates Australian non-bank lenders and mortgage brokers, promotes transparency in the consumer lending industry through ensuring that all details of the credit being provided are disclosed. The scope of credit products covered by the code has been extended from 1 July 2012 to include mortgages over residential investment properties as well as loans for personal or domestic purposes.

-90

-80

-70

-60

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

70

Jan-2006 Jan-2007 Jan-2008 Jan-2009 Jan-2010 Jan-2011 Jan-2012 Jan-2013

bp

s

-130

-120

-110

-100

-90

-80

-70

-60

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

70

80

90

100

110

120

Jan-2006 Jan-2007 Jan-2008 Jan-2009 Jan-2010 Jan-2011 Jan-2012 Jan-2013

bp

s

161

For

per

sona

l use

onl

y


Prudential Standard 120 (Securitisation) aims to ensure that ADIs adopt prudent practices in managing the risks associated with securitisation and that sufficient regulatory capital is held against credit risk.16 APRA has proposed changes to the standard in an effort to keep the benefits of securitisation while reducing past issues. The major proposed changes are set out below:

· cater explicitly for funding-only securitisation, subject to some prudential limits

· simplify the overall prudential regime.

In addition, the RBA is introducing new reporting standards for RMBS to obtain more comprehensive and standardised information on RMBS. The RBA also intends to promote broader transparency in the securitisation market by requiring RMBS data be made available to potential investors and researchers.

The government banned exit fees on new home loans from 1 July 2011 as part of the reforms in the banking sector announced in December 2010. The removal of exit fees on all new mortgages was touted as a win for smaller lenders, with big banks criticised for locking customers in to long-term loans which prevented them from switching to a competitor. Total fee income earned by Australian banks on housing loans fell by 11.3% in 2011 (despite outstanding housing loans growing by 8%), after growing at an average annual growth rate of 11.4% between 2005 and 2010.17

From the perspective of RHG, the banning of exit fees is potentially negative because if RHG’s borrowers choose to switch to another provider, RHG will not be able to charge the borrower an exit fee and cannot replace the loan so all future income is lost. However, RHG has agreed to the staggered removal of early termination fees.

Industry drivers

The overall residential mortgage lending market is driven by the following factors:

· real household disposable income: Disposable income levels determine the level of funds available to make mortgage repayments. This influences the size, location and type of property purchased. The proportion of disposable income used to meet interest repayments affects the ability of households to service existing debt obligations and to take on debt. A high interest to disposable income ratio represents an increasing debt burden on households, limiting their ability to take on additional debt and increasing the risk of default

· housing affordability: Housing affordability refers to the ease with which potential home buyers are able to purchase a home, by comparing wages to house prices. Changes in housing affordability can affect demand for home purchases and demand for mortgages

· residential housing loan rates: Interest rates charged on home loans can have two effects on industry revenue. Higher interest rates reduce the demand for mortgages, which negatively affects revenue. However, a higher rate also generates more interest income for lenders on loans issued

· residential property yields: The property investment returns yielded influence investor confidence and affect the demand for home loan products. With investors making up a significant proportion of the market for mortgage finance, the returns yielded can heavily influence industry revenue

· general economic activity: economic activity has an influence on the level of savings, demand for credit, the quality of lending portfolios and the volume of lending transactions. Increased economic activity has a tendency to result in a rise in lending activity

· cost of rental property: an increase in rental prices for residential properties would increase property purchasing activity and hence mortgage lending. Moreover, the returns from investment in property influence investor confidence and in turn affect the demand for home loan products

· other macroeconomic factors: It includes unemployment rate, population demographics and fiscal policies (e.g. new building approvals, government policies).

16 APRA 17 RBA Banking Fees in Australia Bulletin, June quarter 2012, “Banking Fees in Australia”

162

For

per

sona

l use

onl

y


Future expectations

Whilst there are a number of macroeconomic drivers expected to positively influence demand for mortgages, set out below are some factors that are expected to specifically impact the mortgage refinancing market and the quality of loan portfolios:

· most investors and market participants have become more pessimistic about global economic and credit conditions than they were in 2012

· further interest rate cuts. The cash rate target has been trimmed down to 2.50% from 4.75% in November 201118. Whilst the low interest rate environment has further stimulated the demand for new mortgages, it is also expected to drive refinancing activity

· an increase in the nation's unemployment may reduce the performance of the loan portfolios as it affects the ability of borrowers to service their mortgages and could ultimately impact house prices

· greater than expected slowdown in China, contagion from the unresolved European debt crisis and excessive fiscal tightening in the U.S. may impact the Australian economy and negatively impact internal demand, delinquencies and asset values.

18 RBA

163

For

per

sona

l use

onl

y


Appendix B: Valuation methodology

Valuation methodologies To estimate the fair market value of the shares in RHG we have considered common market practice and the valuation methodologies recommended by ASIC Regulatory Guide 111, which provides guidance in respect of the content of independent expert’s reports. These are discussed below.

Market based methods

Market based methods estimate a company’s fair market value by considering the market price of transactions in its securities or the market value of comparable companies. Market based methods include:

· capitalisation of maintainable earnings

· analysis of a company’s recent security trading history

· industry specific methods.

The capitalisation of maintainable earnings method estimates fair market value based on the company’s future maintainable earnings and an appropriate earnings multiple. An appropriate earnings multiple is derived from market transactions involving comparable companies. The capitalisation of maintainable earnings method is appropriate where the company’s earnings are relatively stable.

The most recent security trading history provides evidence of the fair market value of the securities in a company where they are publicly traded in an informed and liquid market.

Industry specific methods estimate market value using rules of thumb for a particular industry. Generally rules of thumb provide less persuasive evidence of the market value of a company than other valuation methods because they may not account for company specific factors.

Discounted cash flow methods

Discounted cash flow methods estimate market value by discounting a company’s future cash flows to a net present value. These methods are appropriate where a projection of future cash flows can be made with a reasonable degree of confidence. Discounted cash flow methods are commonly used to value early stage companies or projects with a finite life.

Asset based methods

Asset based methods estimate the market value of a company’s securities based on the realisable value of its identifiable net assets. Asset based methods include:

· orderly realisation of assets method

· liquidation of assets method

· net assets on a going concern basis.

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to security holders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the company is wound up in an orderly manner.

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the company may not be contemplated, these methods in their strictest form may not necessarily be appropriate. The net assets on a going concern basis method estimates the market values of the net assets of a company but does not take account of realisation costs.

These asset based methods ignore the possibility that the company’s value could exceed the realisable value of its assets as they ignore the value of intangible assets such as customer lists, management, supply arrangements and goodwill. Asset based methods are appropriate when companies are not profitable, a significant proportion of a company’s assets are liquid, or for asset holding companies.

164

For

per

sona

l use

onl

y


( ) ( )WACCE

VKe

D

VKd

= + -* * ( )1 tc( ) ( )WACCE

VKe

D

VKd

= + -* * ( )1 tc( ) ( )WACCE

VKe

D

VKd

= + -* * ( )1 tc

ab ++= - )( fmfe RRRK

Appendix C: Discount Rate The discount rate used to equate the future cash flows to their present value reflects the risk adjusted rate of return demanded by a hypothetical investor for the asset or business being valued.

Selecting an appropriate discount rate is a matter of judgement having regard to relevant available market pricing data and the risks and circumstances specific to the asset or business being valued.

Whilst the discount rate is in practice normally estimated based on a fundamental ground up analysis using one of the available models for estimating the cost of capital (such as the Capital Asset Pricing Model (CAPM)), market participants often use less precise methods for determining the cost of capital such as hurdle rates or target internal rates of return and often do not distinguish between investment type or region or variances over economic cycles.

Since our definition of fair market value is premised on the estimated value that a knowledgeable willing buyer would attribute to the asset or business, our selection of an appropriate discount rate needs to consider that buyers incorporate other alternatives to the typical CAPM approach in estimating the cost of capital.

For ungeared cash flows, discount rates are determined based on the cost of an entity’s debt and equity weighted by the proportion of debt and equity used. This is commonly referred to as the weighted average cost of capital (WACC).

The WACC can be derived using the following formula:

The components of the formula are:

Ke = cost of equity capital

Kd = cost of debt

tc = corporate tax rate

E/V = proportion of enterprise funded by equity

D/V = proportion of enterprise funded by debt

The adjustment of Kd by (1- tc) reflects the tax deductibility of interest payments on debt funding. The corporate tax rate has been assumed to be 30%, in line with the Australian corporate tax rate.

Cost of equity capital (Ke)

The cost of equity, Ke, is the rate of return that investors require to make an equity investment in a firm.

We have used the CAPM to estimate the Ke for RHG. CAPM calculates the minimum rate of return that the company must earn on the equity-financed portion of its capital to leave the market price of its shares unchanged. The CAPM is the most widely accepted and used methodology for determining the cost of equity capital.

The cost of equity capital under CAPM is determined using the following formula:

The components of the formula are:

Ke = required return on equity

Rf = the risk free rate of return

Rm = the expected return on the market portfolio

β = beta, the systematic risk of a stock

α = specific company risk premium

Each of the components in the above equation is discussed below.

165

For

per

sona

l use

onl

y


Risk free rate (Rf)

The risk free rate compensates the investor for the time value of money and the expected inflation rate over the investment period. The frequently adopted proxy for the risk free rate is the long-term government bond rate.

In determining Rf we have taken the three month average to 30 September 2013 of the zero coupon 10-year Australian Government Bond yield of 4.0%.

The 10-year bond rate is a widely used and accepted benchmark for the risk free rate in Australia. This rate represents a nominal rate and thus includes inflation. Since there is no zero-coupon government bond issued by the Australian Government, we have utilised the zero coupon bond yield sourced from the RBA, which excludes the coupon payments from the 10-year Australian Government Bond.

Equity market risk premium (EMRP)

The EMRP (Rm – Rf) represents the risk associated with holding a market portfolio of investments, that is, the excess return a shareholder can expect to receive for the uncertainty of investing in equities as opposed to investing in a risk free alternative. The size of the EMRP is dictated by the risk aversion of investors – the lower (higher) an investor’s risk aversion, the smaller (larger) the equity risk premium.

The EMRP is not readily observable in the market and therefore represents an estimate based on available data. There are generally two main approaches used to estimate the EMRP, the historical approach and the prospective approach, neither of which is theoretically more correct or without limitations. The former approach relies on historical share market returns relative to the returns on a risk free security; the latter is a forward looking approach which derives an estimated EMRP based on current share market values and assumptions regarding future dividends and growth.

In evaluating the EMRP, we have considered both the historically observed and prospective estimates of EMRP.

Historical approach

The historical approach is applied by comparing the historical returns on equities against the returns on risk free assets such as Government bonds, or in some cases, Treasury bills. The historical EMRP has the benefit of being capable of estimation from reliable data; however, it is possible that historical returns achieved on stocks were different from those that were expected by investors when making investment decisions in the past and thus the use of historical market returns to estimate the EMRP would be inappropriate.

It is also likely that the EMRP is not constant over time as investors’ perceptions of the relative riskiness of investing in equities change. Investor perceptions will be influenced by several factors such as current economic conditions, inflation, interest rates and market trends. The historical risk premium assumes the EMRP is unaffected by any variation in these factors in the short to medium term.

Historical estimates are sensitive to the following:

· the time period chosen for measuring the average

· the use of arithmetic or geometric averaging for historical data

· selection of an appropriate benchmark risk free rate

· the impact of franking tax credits

· exclusion or inclusion of extreme observations.

The EMRP is highly sensitive to the different choices associated with the measurement period, risk free rate and averaging approach used and as a result estimates of the EMRP can vary substantially.

We have considered the most recent studies undertaken by the Securities Industry Research Centre of Asia-Pacific Limited, Morningstar Inc, ABN AMRO/London Business School and Aswath Damodaran. These studies generally calculate the EMRP to be in the range of 5% to 8%.

However, we are of the view that since the start of the global financial crisis in mid-2007 and the subsequent periods of increased volatility in equity and debt instruments, the meaningfulness of historical observations and long term average measures has substantially weakened. As a result, we have increasingly placed more weight on prospective approaches to assess the EMRP.

166

For

per

sona

l use

onl

y


Prospective approach

The prospective approach is a forward looking approach that is current, market driven and does not rely on historical information. It attempts to estimate a forward looking premium based on either surveys or an implied premium approach.

The survey approach is based on investors, managers and academics providing their long term expectations of equity returns. Survey evidence suggests that the EMRP is generally expected to be in the range of 6% to 8%.

The implied approach is based on either expected future cash flows or observed bond default spreads and therefore changes over time as share prices, earnings, inflation and interest rates change. The implied premium may be calculated from the market’s total capitalisation and the level of expected future earnings and growth.

In particular, we estimate the EMRP based on current share market values and assumptions regarding future dividends and growth. This analysis involves the setting of several variables and can only be considered indicative. As a result, Deloitte also uses other market indicators as reference points to the prospective EMRP including spreads observed on domestic and foreign corporate bonds and volatility observed in equity instruments.

Selected EMRP

Based on our analysis, we have selected an EMRP of 7%.

Beta estimate (β)

Description

The beta coefficient measures the systematic risk or non-diversifiable risk of a company in comparison to the market as a whole. Systematic risk, as separate from specific risk as discussed below, measures the extent to which the return on the business or investment is correlated to market returns. A beta of 1.0 indicates that an equity investor can expect to earn the market return (i.e. the risk free rate plus the EMRP) from the investment (assuming no specific risks). A beta of greater than one indicates greater market related risk than average (and therefore higher required returns), while a beta of less than one indicates less risk than average (and therefore lower required returns).

Betas will primarily be affected by three factors which include:

· the degree of operating leverage employed by the firm in that companies with a relatively high fixed cost base will be more exposed to economic cycles and therefore have higher systematic risk compared to those with a more variable cost base

· the degree of financial leverage employed by a firm in that as additional debt is employed by a firm, equity investors will demand a higher return to compensate for the increased systematic risk associated with higher levels of debt

· correlation of revenues and cash flows to economic cycles, in that companies that are more exposed to economic cycles (such as retailers), will generally have higher levels of systematic risk (i.e. higher betas) relative to companies that are less exposed to economic cycles (such as regulated utilities).

167

For

per

sona

l use

onl

y


The betas of various Australian industries listed on the ASX are reproduced below and provide an example of the relative industry betas for a developed market.

Figure 18: Betas for various industries (as at 30 June 2013)

Source: Securities Industry Research Centre of Asia-Pacific Limited

The differences are related to the business risks associated with the industry. For example, the above diagram indicates transportation companies are more correlated to overall market returns with a beta close to 1.0 whereas telecommunications and other infrastructure companies (in particularly those that are regulated) typically have betas lower than 1.0.

The geared or equity beta can be estimated by regressing the returns of the business or investment against the returns of an index representing the market portfolio, over a reasonable time period. However, there are a number of issues that arise in measuring historical betas that can result in differences, sometimes significant, in the betas observed depending on the time period utilised, the benchmark index and the source of the beta estimate. For unlisted companies it is often preferable to have regard to sector averages or a pool of comparable companies rather than any single company’s beta estimate due to the above measurement difficulties.

Market evidence

In estimating an appropriate beta for RHG we have considered the levered betas of listed companies that are comparable to RHG.

-

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

Con

sum

er

du

rab

les

& a

ppa

rel

Ca

pita

l go

od

s

Me

tals

& m

inin

g

Rea

l est

ate

exc

lud

ing

RE

ITs

Ba

nks

Com

me

rcia

l se

rvic

es &

su

pplie

s

En

erg

y

Te

chno

logy, h

ard

ware

& e

qu

ipm

en

t

Reta

ilin

g

Insu

ran

ce

Au

tom

ob

ile &

co

mpo

nen

ts

Div

ers

ified

fin

an

cials

Ma

teria

ls e

xclu

din

g m

eta

ls &

min

ing

So

ftw

are

& s

erv

ices

Tra

nspo

rta

tion

Me

dia

Co

nsu

me

r se

rvic

es

RE

ITs

Fo

od

& s

taple

s re

taili

ng

an

d h

ou

seh

old

&p

ers

ona

l pro

ducts

He

alth

care

eq

uip

me

nt

& s

erv

ice

s

Ph

arm

ace

utic

als

, b

iote

chn

olo

gy &

life

sci

en

ces

Utilit

ies

Fo

od

, be

vera

ge &

to

ba

cco

Te

leco

mm

unic

atio

n s

erv

ice

s

168

For

per

sona

l use

onl

y


Table 32: Analysis of betas for listed companies with comparable operations to RHG

Company name Market capitalisation

1

($ million) Beta

RHG Limited 148 0.37

Regional Banks

Bank Of Queensland Limited 3,449 1.31

Bendigo And Adelaide Bank Limited 4,152 1.17

National Banks

Australia And New Zealand Banking Group Limited 83,568 1.34

Commonwealth Bank Of Australia 114,353 1.02

National Australia Bank Limited 78,988 1.28

Westpac Banking Corporation 101,206 1.34

Building Societies

MyState Limited 406 0.55

Wide Bay Australia Ltd 179 0.88

Other lending related companies

Flexigroup Limited 1,317 1.08

Homeloans Limited 92 0.65

Mortgage Choice Limited 337 0.69

Median

Regional Banks 1.24

National Banks 1.31

Building Societies 0.72

Other lending related companies 0.69

Overall Median 1.08

Average

Regional Banks 1.24

National Banks 1.25

Building Societies 0.72

Other lending related companies 0.81

Overall Average 1.03

Notes:

1. Market capitalisation as at 30 September 2013

Source: Capital IQ, Securities Industry Research Centre of Asia-Pacific Limited, Deloitte Corporate Finance analysis

Selected beta (β)

In selecting an appropriate beta for RHG we have considered the following:

· RHG's observed levered beta has a very low statistical relevance so we have therefore placed limited weight on this observation

· the building societies have mortgage focussed operations, however, are comparatively small in terms of market capitalisation and are generally thinly traded with very low correlated betas and cannot therefore be considered relevant for purposes of selecting a beta

· the regional banks have significant mortgage operations

· the national banks have considerably more diversified operations and have far larger market capitalisations than RHG, however, they do all operate in the mortgage lending sector

· the other lending related companies provide an additional reference point in the lending sector, and in particular the mortgage lending sector. In addition, Homeloans Limited and Mortgage Choice Limited, in particular are smaller in size and therefore more comparable in this respect

169

For

per

sona

l use

onl

y


· all selected comparable entities operate as a going concern in comparison to RHG’s finite loan book in run off mode. RHG’s cash flows are likely to be less susceptible to changes in market conditions including the outlook for the wide industry.

In our opinion, having regard to the above points and in particular the fact that the loan book is being wound down, we have selected a levered beta of 0.80 to 0.90 for RHG.

Specific company risk premium (α)

The specific company risk premium adjusts the cost of equity for company specific factors, including unsystematic risk factors such as:

· company size (which we discuss in detail below)

· depth and quality of management

· reliance on one key individual or a few key members of management

· reliance on key customers

· reliance on key suppliers

· product diversity (limits on potential customers)

· geographic diversity

· labour relations, quality of personnel (union/non-union)

· capital structure, amount of leverage

· existence of contingent liabilities.

The CAPM assumes, amongst other things, that rational investors seek to hold efficient portfolios, that is, portfolios that are fully diversified. One of the major conclusions of the CAPM is that investors do not have regard to specific company risks (often referred to as unsystematic risk). There are several empirical studies that demonstrate that the investment market does not ignore specific company risks. In particular, studies show that on average, smaller companies have higher rates of return than larger companies (often referred to as the size premium).

We have not applied a specific company risk premium to RHG as the Company has predictable cash flows, its mortgages are geographically diversified and the loan book is being wound down.

Specific market risk premium

The premise of CAPM is that risky investments demand a premium to the return available on risk free investments. Setting the quantum of this premium can be difficult when the return on risk free investments exhibits significant volatility in response to current market conditions.

The return on Australian risk free investments has recently declined sharply due to progressive decreases in the RBA’s target for the cash rate and a ‘flight to quality’ of global capital to AAA-rated Australian Government bonds. The figure below shows the yield on 10-year zero coupon Australian Government bonds since 2000.

170

For

per

sona

l use

onl

y


Figure 19: 10-year zero coupon Australian Government bonds yields


While the return on Australian Government bonds has declined, we do not consider there is sufficient evidence to suggest that investors have reduced their view of overall required returns. As such, the specific risk premium has been adjusted upwards to reflect this.

We have therefore selected a specific risk premium of 0.5% which relates to short term market risk factors.

Dividend imputation

Dividends paid by Australian corporations may be franked, unfranked, or partly franked. A franked dividend is one that is paid out of company profits which have borne tax at the company rate, currently 30%. Where the shareholder is an Australian resident individual or complying superannuation fund, it will generally be entitled to a tax credit (called an imputation credit) in respect of the tax paid by the company on the profits out of which the dividend was paid. If the recipient of the dividend is another company, the dividend will give rise to a credit in that company’s franking account thereby increasing the potential of the company to pay a franked dividend at a later stage.

We have not adjusted the cost of capital or the projected cash flows for the impact of dividend imputation due to the diverse views as to the value of imputation credits and the appropriate method that should be employed to calculate this value. Determining the value of franking credits requires an understanding of shareholders’ personal tax profiles to determine the ability of shareholders to use franking credits to offset personal income. Furthermore, the observed EMRP already includes the value that shareholders ascribe to franking credits in the market as a whole. In our view, the evidence relating to the value that the market ascribes to imputation credits is inconclusive.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Spot rate Moving average

171

For

per

sona

l use

onl

y


Conclusion on cost of equity

Based on the above factors we arrive at a cost of equity, Ke, as follows:

Table 33: Ke applied to valuation of RHG

Input Low High

Risk free rate (%) 4.0% 4.0%

EMRP (%) 7.0% 7.0%

Beta 0.80 0.90

Specific company risk premium (%) 0.0% 0.0%

Specific market risk premium (%) 0.5% 0.5%

Ke – calculated 10.1% 10.8%

Ke – selected 10.0% 11.0%


172

For

per

sona

l use

onl

y


Appendix D: Sources of information In preparing this report we have had access to the following principal sources of information:

· Merger Implementation Deed

· Scheme Booklet

· audited consolidated financial statements for RHG for the years ending 30 June 2010, 30 June 2011, 30 June 2012 and 30 June 2013

· consolidated financial statements for RHG for the six months ending 31 December 2012

· corporate balance sheet (excluding SPEs) as at 30 June 2010, 30 June 2011, 30 June 2012 and 30 June 2013

· RHG’s cash flow projections for the loan book as at 30 September 2013

· historical RHG loan book data and statistics from November 2007

· websites for RHG, RBA, ASIC, the Australian Government Treasury and AOFM

· publicly available information on comparable companies and market transactions published by ASIC, Capital IQ, Thompson research, Financial markets, SDC Platinum and Mergermarket

· IBIS World Pty Ltd company and industry reports

· other publicly available information, media releases and brokers reports on RHG, comparable companies and the mortgage industry.

In addition, we have had discussions and correspondence with certain directors and executives, including Glenn Goddard, Chief Executive Officer; Michael Renshaw, Chief Financial Officer; Warren Williams, Treasurer; and Hal Benson, Treasury Manager; in relation to the above information and to current operations and prospects.

173

For

per

sona

l use

onl

y


Appendix E: Qualifications, declarations and

consents The report has been prepared at the request of the Independent Directors of RHG and is to be included in the Scheme Booklet to be given to Shareholders for approval of the Proposed Scheme. It represents solely the expression by Deloitte Corporate Finance of its opinion as to whether the Proposed Scheme is in the best interests of Shareholders. Accordingly, it has been prepared only for the benefit of the Directors and for Shareholders in their assessment of the Proposed Scheme outlined in the report and should not be used for any other purpose. Neither Deloitte Corporate Finance, nor Deloitte Touche Tohmatsu, nor any member or employee thereof, undertakes responsibility to any person, other than RHG Shareholders, in respect of this report, including for any errors or omissions however caused.

This engagement has been conducted in accordance with professional standard APES 225 Valuation Services issued by the Accounting Professional and Ethical Standards Board Limited.

Statements and opinions contained in this report are given in good faith but, in the preparation of this report, Deloitte Corporate Finance has relied upon the completeness of the information provided by RHG and its officers, employees, agents or advisors which Deloitte Corporate Finance believes, on reasonable grounds, to be reliable, complete and not misleading. Deloitte Corporate Finance does not imply, nor should it be construed, that it has carried out any form of audit or verification on the information and records supplied to us. Drafts of our report were issued to RHG management for confirmation of factual accuracy.

In recognition that Deloitte Corporate Finance may rely on information provided by RHG and its officers, employees, agents or advisors, RHG has agreed that it will not make any claim against Deloitte Corporate Finance to recover any loss or damage which RHG may suffer as a result of that reliance and that it will indemnify Deloitte Corporate Finance against any liability that arises out of either Deloitte Corporate Finance’s reliance on the information provided by RHG and its officers, employees, agents or advisors or the failure by RHG and its officers, employees, agents or advisors to provide Deloitte Corporate Finance with any material information relating to the Proposed Scheme.

To the extent that this report refers to prospective financial information we have considered the prospective financial information and the basis of the underlying assumptions. The procedures involved in Deloitte Corporate Finance’s consideration of this information consisted of enquiries of RHG personnel and analytical procedures applied to the financial data. These procedures and enquiries did not include verification work nor constitute an audit or a review engagement in accordance with standards issued by the Auditing and Assurance Standards Board or equivalent body and therefore the information used in undertaking our work may not be entirely reliable.

Based on these procedures and enquiries, Deloitte Corporate Finance considers that there are reasonable grounds to believe that the prospective financial information for RHG included in this report has been prepared on a reasonable basis in accordance with ASIC Regulatory Guide 111. In relation to the prospective financial information, actual results may be different from the prospective financial information of RHG referred to in this report since anticipated events frequently do not occur as expected and the variation may be material. The achievement of the prospective financial information is dependent on the outcome of the assumptions. Accordingly, we express no opinion as to whether the prospective financial information will be achieved.

Following the issue of our draft final report to ASIC, the Proposed Scheme was revised by the Resimac Syndicate. We made amendments to our analysis and report to reflect these revisions. In addition, because of the passage of time and changes to RHG’s loan portfolio that occurred between the date of the draft final report provided to ASIC and this report, our opinion on the value of an RHG share also changed. Our approach to evaluation of the transactions, valuation methodologies and opinion did not change as a consequence of these amendments.

Deloitte Corporate Finance holds the appropriate Australian Financial Services Licence to issue this report and is owned by the Australian Partnership Deloitte Touche Tohmatsu. The employees of Deloitte Corporate Finance principally involved in the preparation of this report were Tapan Parekh, M.Com, B.Bus, F.Fin, CA; Nicki Ivory, B.Com (Hons), CA, CFA; Darryl Dorfan, B.Com, CA, Mark Huynh, M.Com, B.ActS and Andrew Ford, BEc, LLB, LLM. Tapan and Nicki are Directors, Darryl is an Associate Director and Mark and Andrew are Managers of Deloitte Corporate Finance. Each has many years’ experience in the provision of corporate financial advice, including specific advice on valuations, mergers and acquisitions, as well as the preparation of expert reports.

174

For

per

sona

l use

onl

y


Deloitte Touche Tohmatsu is the external auditor of Resimac. No individuals involved with the audit of Resimac were involved in the preparation of this report.

Consent to being named in disclosure document

Deloitte Corporate Finance Pty Limited (ACN 003 833 127) of 225 George Street, Sydney, NSW, 2000 acknowledges that:

· RHG proposes to issue a Scheme Booklet in respect of the Proposed Scheme between RHG and the Resimac Syndicate

· the Scheme Booklet will be issued in hard copy and be available in electronic format

· it has previously received a copy of the draft Scheme Booklet (draft Scheme Booklet) for review

· it is named in the Scheme Booklet as the ‘independent expert’ and the Scheme Booklet includes its independent expert’s report at Annexure A to the Scheme Booklet.

On the basis that the Scheme Booklet is consistent in all material respects with the draft Scheme Booklet received, Deloitte Corporate Finance Pty Limited consents to it being named in the Scheme Booklet in the form and context in which it is so named, to the inclusion of its independent expert’s report at Annexure A to the Scheme Booklet and to all references to its independent expert’s report in the form and context in which they are included, whether the Scheme Booklet is issued in hard copy or electronic format or both.

Deloitte Corporate Finance Pty Limited has not authorised or caused the issue of the Scheme Booklet and takes no responsibility for any part of the Scheme Booklet, other than any references to its name and the independent expert’s report as included at Annexure A to the Scheme Booklet.

175

For

per

sona

l use

onl

y


About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte's approximately 182,000 professionals are committed to becoming the standard of excellence.

About Deloitte Australia

In Australia, the member firm is the Australian partnership of Deloitte Touche Tohmatsu. As one of Australia’s leading professional services firms, Deloitte Touche Tohmatsu and its affiliates provide audit, tax, consulting, and financial advisory services through approximately 5,700 people across the country. Focused on the creation of value and growth, and known as an employer of choice for innovative human resources programs, we are dedicated to helping our clients and our people excel. For more information, please visit Deloitte’s web site at www.deloitte.com.au.


© 2013 Deloitte Corporate Finance Pty Limited

176

For

per

sona

l use

onl

y

Annexure B – Confirmed, Consolidated Merger Implementation Deed

Marked up with changes made pursuant to the Deeds of Amendments dated 15 July 2013, 21 August 2013, 2 September 2013 and 24 October 2013, respectively. Where amendments in a later-dated Deed of Amendment superseded amendments made earlier, only the most recent amendments are shown.

177

For

per

sona

l use

onl

y

Confirmed, Consolidated Merger Implementation Deed Dated 6 July 2013 (marked up with changes made pursuant to the Deeds

of Amendments dated 15 July 2013, 21 August 2013, 2 September 2013

and 24 October 2013, respectively. Where amendments in a later-dated

Deed of Amendment superseded amendments made earlier, only the

most recent amendments are shown)

Australian Mortgage Acquisition Company Pty Limited (ACN 163 867 016) (“Acquirer”) Resimac Limited (ACN 002 997 935) (“Resimac”) RHG Limited (ABN 22 055 136 564) (“Target”)

King & Wood Mallesons

Level 61

Governor Phillip Tower

1 Farrer Place

Sydney NSW 2000

Australia

T +61 2 9296 2000

F +61 2 9296 3999

DX 113 Sydney

www.kwm.com

02-5506-5000

SF:AB:SC

178

For

per

sona

l use

onl

y

Confirmed, Consolidated Merger Implementation Deed Contents


Confirmed, Consolidated Merger Implementation Deed

i

Details 1

General terms 4

1 Definitions and interpretation 4

1.1 Definitions 4

1.2 References to certain general terms 17

1.3 Next day 18

1.4 Next Business Day 18

1.5 Headings 18

2 Agreement to propose Scheme and implement Merger 18

2.1 Target to propose Scheme 18

2.2 Acquirer and Resimac to assist with Scheme 18

2.3 Agreement to implement Merger 18

3 Conditions Precedent 18

3.1 Conditions Precedent 18

3.2 Benefit of certain Conditions Precedent 18

3.3 Waiver of Conditions Precedent 19

3.4 Best endeavours 19

3.5 Regulatory matters 19

3.6 Notices in relation to Conditions Precedent 20

3.7 Effect of waiver or non-fulfilment 20

3.8 Consultation on failure of Condition Precedents 20

3.9 Failure to agree 21

4 Outline of Scheme 21

4.1 Scheme 21

4.2 Payments 21

4.3 Scheme Consideration 21

4.4 Resimac guarantee 22

4.5 Undertakings held as agent or trustee 23

4.6 Payment to Scheme Participants 23

4.7 Appointment of the Acquirer Nominee 23

5 Co-operation and timing 24

5.1 General obligations 24

5.2 Transaction Implementation Working Group 24

5.3 Access 25

5.4 Acquirer’s and Resimac’s right to separate representation 25

5.5 Acquirer’s undertaking 25

6 Implementation obligations of the parties 26

6.1 Target's obligations 26

6.2 Acquirer’s obligations 26

6.3 Resimac’s obligations 26

179

For

per

sona

l use

onl

y



ii

6.4 Recommendation 26

6.5 Withdrawal or modification of recommendation 26

6.6 Duties to Target Shareholders 27

7 Scheme Booklet 27

7.1 Preparation 27

7.2 Content of Scheme Booklet 28

7.3 Acquirer information 30

7.4 Resimac Information 30

7.5 Scheme Booklet responsibility statements 30

7.6 Disagreement on content 31

7.7 Verification 31

8 Conduct of business 31

8.1 Overview 31

8.2 Specific obligations 31

8.3 Prohibited actions 33

8.4 Conduct of business in respect of Loan Book 35

8.5 Permitted acts 36

8.6 Appointment and retirement of Target Directors 36

8.7 Fully Franked Dividend 37

9 Standstill 37

10 Exclusivity 38

10.1 (in the deed of amendment dated 15 July 2013, parties

acknowledged and agreed the Target has complied with this

clause, and accordingly, the provisions of this clause are no

longer of any force and effect). 38

10.2 No-shop 38

10.3 No-talk 38

10.4 Due diligence information 39

10.5 Notice of unsolicited approach 39

10.6 Exceptions 39

10.7 Further exceptions 40

10.8 Response to Competing Transaction 40

10.9 Enforcement of ‘standstill’ obligations 41

11 Reimbursement of Acquirer and Resimac costs 41

11.1 Background 41

11.2 Payment by Target to Acquirer and Resimac 41

11.3 No amount payable if Scheme becomes Effective 43

11.4 Timing of payment 43

11.5 Nature of payment 43

11.6 Survival 43

11.7 Notice to be given by Acquirer and Resimac 43

12 Reimbursement of Target costs 43

12.1 Background 43

12.2 Payment by Acquirer to Target 44

12.3 No amount payable if Scheme becomes Effective 44

12.4 Timing of payment 44

12.5 Nature of payment 44

12.6 Survival 44

180

For

per

sona

l use

onl

y



iii

13 Representations and warranties 45

13.1 Target's representations and warranties 45

13.2 Target’s indemnity 45

13.3 Target warranty certificate 45

13.4 Acquirer’s representations and warranties 45

13.5 Acquirer’s indemnity 45

13.6 Acquirer warranty certificate 45

13.7 Resimac’s representations and warranties 46

13.8 Resimac’s indemnity 46

13.9 Resimac warranty certificate 46

14 Court proceedings 46

14.1 Appeal process 46

14.2 Defence of proceedings 46

14.3 Costs 46

15 Termination 46

15.1 Termination events 46

15.2 Termination 48

15.3 Effect of Termination 48

15.4 Damages 48

16 Public announcements 48

16.1 Public announcement of Scheme 48

16.2 Required disclosure 48

16.3 Other announcements 48

17 Confidential Information 49

17.1 Disclosure of Acquirer Confidential Information and Resimac

Confidential Information 49

17.2 Use of Acquirer Confidential Information and Resimac

Confidential Information 49

17.3 Disclosure of Target Confidential Information 49

17.4 Use of Target Confidential Information 50

17.5 Disclosure by recipient of Confidential Information 50

17.6 Excluded Information 50

17.7 Confidentiality Agreement 50

17.8 Termination 50

18 Notices and other communications 50

18.1 Form - all communications 50

18.2 Form - communications sent by email 50

18.3 Delivery 50

18.4 When effective 51

18.5 When taken to be received 51

18.6 Receipt outside business hours 51

19 Goods and services tax (GST) 51

19.1 Consideration GST exclusive 51

19.2 Payment of GST 51

19.3 Reimbursements 52

19.4 Calculation of payments 52

19.5 Interpretation 52

181

For

per

sona

l use

onl

y



iv

20 Miscellaneous 52

20.1 Discretion in exercising rights 52

20.2 Partial exercising of rights 52

20.3 No liability for loss 52

20.4 Approvals and consents 53

20.5 Conflict of interest 53

20.6 Remedies cumulative 53

20.7 Variation and waiver 53

20.8 No merger 53

20.9 Indemnities 53

20.10 Enforceability 53

20.11 Knowledge and belief 53

20.12 Release 53

20.13 Further steps 54

20.14 Construction 54

20.15 Costs 54

20.16 Entire agreement 54

20.17 Assignment 54

20.18 No undisclosed principals or undisclosed trusts 54

20.19 No representation or reliance 54

20.20 Governing law 55

20.21 Counterparts 55

20.22 Notification 55

Schedule 1 - Target Prescribed Events 56

Schedule 2 - Conditions Precedent (clause 3.1) 58

Schedule 3 - Timetable (clause 5.1) 62

Schedule 4 - Target’s Obligations (clause 6.1) 63

Schedule 5 - Acquirer’s Obligations (clause 6.2) 66

Schedule 6 - Resimac’s Obligations (clause 6.3) 68

Schedule 7 - Target’s representations and warranties (clause 13.1) 69

Schedule 8 - Acquirer’s representations and warranties (clause 13.4) 73

Schedule 9 - Resimac’s representations and warranties (clause 13.7) 75

Signing page 77

Annexure A - Announcement (clause 16.1) 78

Annexure B - Scheme (clause 1.1) 79

Annexure C - Deed Poll (clause 1.1) 80

Annexure D – Cashflow Schedule (clause 1.1) 81

182

For

per

sona

l use

onl

y


11502862_2 Confirmed, Consolidated Merger Implementation Deed

1

Details

Parties Acquirer, Resimac and Target

Acquirer Name Australian Mortgage Acquisition Company

Pty Limited

ACN 163 867 016

Incorporated in Victoria

Address Suite 511, Level 5, 434 St Kilda Road,

Melbourne VIC 3004

Telephone (02) 8023 4000

Fax (02) 8023 4001

Email [email protected]

Attention Trevor Loewensohn

Resimac Name RESIMAC LIMITED

ACN 002 997 935

Incorporated in New South Wales

Address Level 9, 45 Clarence Street Sydney NSW 2000

Australia

Telephone (02) 9248 0300

Fax (02) 9248 2304


Attention Mary Ploughman

Target Name RHG Limited

ABN 22 055 136 564

Incorporated in Australian Capital Territory

Address Level 6, 222 Pitt Street, Sydney NSW 2000

Telephone (02) 8028 2333

Fax (02) 9252 0311

183

For

per

sona

l use

onl

y



2


Attention Glenn Goddard

Target Shares 308,483,177 fully paid ordinary shares being all of the RHG issued

ordinary shares as at the Record Date.

Recitals A The Target Group funds and services residential home loans

in Australia, managing the Securitisation Vehicles (which do

not form part of the Target Group).

B The Target and the Acquirer have agreed to merge by

means of a members’ scheme of arrangement under Part

5.1 of the Corporations Act, under which the Acquirer will

acquire the Target Shares.

C The Target and the Acquirer have agreed to implement the

Scheme on the terms and conditions of this deed and

Resimac has guaranteed the Acquirer’s obligations under

the Scheme.

D The Acquirer and Resimac have entered into a separate

agreement where they have agreed to arrangements as to

how the Loan Book Assets will be dealt with following

completion of this deed.

E The parties have executed this document as a deed, and for

the mutual promises contained herein and other valuable

consideration (receipt of which each of them acknowledges).

F First Counterproposal Amending Deed

This deed was amended pursuant to the provisions of a deed

of amendment executed by the parties on 15 July 2013 to

reflect the terms of a revised offer by the Acquirer and

Resimac dated 14 July 2013 to acquire the Scheme Shares

for a cash payment of $0.48 per Scheme Share less the

amount of any dividend or distribution declared or paid by the

Target on or after the date of the deed.

G Second Amending Deed


of amendment executed by the parties on 21 August 2013 to

reflect that the directors of the SPVs may appoint the

Acquirer’s nominees to the boards of directors of the SPVs

and the consent of BNY Trust Company of Australia Limited

in relation to those appointments is not required.

H Second Counterproposal Amending Deed


of amendment executed by the parties on 2 September 2013

to reflect the terms of a revised offer by the Acquirer and

Resimac dated 23 August 2013 to acquire the Scheme

Shares for a cash payment of $0.495 per Scheme Share less

the amount of any dividend or distribution declared or paid by

the Target on or after the date of the deed.

184

For

per

sona

l use

onl

y



3

I Third Counterproposal Amending Deed


of amendment executed by the parties on 24 October 2013

(the “Third Counterproposal Amending Deed”) to reflect

the terms of a revised offer by the Acquirer and Resimac

dated 14 October 2013 (and supplemented on 15 October

2013) to acquire the Scheme Shares for a cash payment of

$0.501 per Scheme Share less the amount of any dividend or

distribution declared or paid by the Target on or after the date

of the deed.

Governing law New South Wales, Australia

Date of deed See Signing page

185

For

per

sona

l use

onl

y




4

General terms

1 Definitions and interpretation

1.1 Definitions

These meanings apply unless the contrary intention appears.

Accounting Standards means:

(a) accounting standards as that term is defined in the Corporations Act;

(b) the requirements of the Corporations Act in relation to the preparation and content of financial reports; and

(c) if and to the extent that any matter is not covered by the accounting standards or requirements referred to in paragraphs (a) or (b), other relevant accounting standards and generally accepted accounting principles applied from time to time in Australia for a business similar to the Target.

Acquirer has the meaning given in the Details.

Acquirer Board means the board of directors of the Acquirer as constituted from time to time.

Acquirer Confidential Information means all confidential, non-public or proprietary information regardless of how the information is stored or delivered, exchanged between the parties before, on, or after the date of this deed relating to the business, ownership, intentions or other affairs of the Acquirer.

Acquirer Group means the Acquirer and its Subsidiaries.

Acquirer Indemnified Parties means the Acquirer, its officers and employees, its Related Bodies Corporate and the officers and employees of each of its Related Bodies Corporate.

Acquirer Information means the information regarding the Acquirer Group provided by the Acquirer to the Target for inclusion in the Scheme Booklet, being information:

(a) about the Acquirer Group, its business, its interests and dealings in Target Shares, its intentions for the Target and Target’s employees, and funding arrangements; and


For the avoidance of doubt, the Acquirer Information does not include information about the Target Group or SPVs except to the extent it relates to any statement of the Acquirer’s intention relating to the Target Group or SPVs following the Effective Date, provided the Acquirer has consented in writing to the inclusion of such statements in the Scheme Booklet.

Acquirer Nominee means:

186

For

per

sona

l use

onl

y



5

(a) the Acquirer; or

(b) a body corporate nominated by the Acquirer pursuant to clause 4.7, all of the issued shares of which are or will on the Implementation Date be directly or indirectly owned by the Acquirer.

Action means an action, dispute, cause of action, claim, demand, investigation, inquiry, prosecution, litigation, proceeding, suit, arbitration, mediation or dispute resolution.

Ancillary Rights and Claims means in relation to a Mortgage Loan or Related Security and any Relevant Documents, all Claims and any other right of RMS (to the extent that the same are capable of being or permitted to be assigned by RMS in contract and under applicable law), whether known or unknown, against each obligor in respect of that Mortgage Loan, Related Security or Relevant Document, or any of its affiliates, agents, representatives, contractors or advisors, or any third party, auditor, legal, tax, financial or other professional advisor of RMS, or any third party broker, agent or originator or other person, that in any way is based upon, arises out of or is related to the Mortgage Loan, Related Security or Relevant Document, but excludes any Claims or other rights against any officers and employees of RMS and its Related Bodies Corporate.

ASIC means the Australian Securities & Investments Commission.

ASX means ASX Limited (ABN 98 008 624 691) or the Australian Securities Exchange, as appropriate.

Authorised Investment means any deposit, bank bill or other debt instrument issued by an “authorised deposit-taking institution” (as that term is defined under the Banking Act 1959 (Cwlth)) incorporated in Australia.

Authorised Officer means, in respect of a party, a director or secretary of the party or any other person appointed by a party to act as an Authorised Officer under this deed.

Benefit Plans means each severance, incentive, bonus, retention, redundancy, change in control, retirement, long service leave, vacation or paid-time-off, benefit plan, policy, program, agreement or arrangement that is maintained, sponsored by or contributed to by the Target or its Subsidiaries or with respect to which the Target or its Subsidiaries have any liability (if any).

BNY means BNY Trust Company of Australia Limited.

Business Day means a day:

(a) that is a business day as defined in the Listing Rules;

(b) that is not a public holiday in Sydney, Australia; and

(c) on which banks are open for general banking business in Sydney, Australia.

Cashflow Schedule means the cashflow schedule in Annexure D.

Claim means any debt, cause of action, Liability, claim, proceeding, suit or demand of any nature howsoever arising and whether present or future, fixed or unascertained, actual or contingent, whether at law, in equity, under statute or otherwise.

187

For

per

sona

l use

onl

y



6

Competing Transaction means a transaction which, if completed, would mean a person (other than the Acquirer or its Related Bodies Corporate or Resimac or its Related Bodies Corporate) would:

(a) directly or indirectly, acquire an interest or Relevant Interest in or become the holder of:

(i) 10% or more of the Target Shares or more than 50% of the shares in any of the Target’s Subsidiaries; or

(ii) all or a substantial part or a material part of the assets of the Securitisation Vehicles or the business of the Target or any of its Subsidiaries (including, for this purpose, the business of the SPVs),

including by way of takeover bid, scheme of arrangement, capital reduction, reconstruction, sale of assets, sale of shares or joint venture;

(b) acquire control of the Target, within the meaning of section 50AA of the Corporations Act;

(c) other than the Target, be in a position to control the board of directors of an SPV;

(d) otherwise acquire or merge (including by a reverse takeover bid, joint venture or dual listed company structure) with the Target; or

(e) enter into any agreement, arrangement or understanding requiring it to abandon, or otherwise fail to proceed with, the Merger.

Conditions Precedent means the conditions precedent set out in Schedule 2.

Confidentiality Agreements means the confidentiality agreements:

(a) between the Target and the Acquirer dated on or around 29 May 2013 2013; and

(b) between the Target and Resimac in its amended form as at around 24 May 2013.

Confidential Information means the Acquirer Confidential Information, Resimac Confidential Information or the Target Confidential Information.

Consolidated Net Tangible Assets means the consolidated financial position of the Target Group calculated as follows: net assets plus net EIR hedging adjustment less all deferred transaction costs. For clarity, as at 31 May 2013 the Consolidated Net Tangible Assets were $75,398,000, calculated as $85,320,000 (net assets) plus $2,468,000 (net EIR hedging adjustment) less $12,390,000 (deferred transaction costs). These amounts were sourced from the document number 08.06.06 in the Data Room.

Controller has the meaning it has in the Corporations Act.

Corporations Act means the Corporations Act 2001 (Cwlth).

Corporations Regulations means the Corporations Regulations 2001 (Cwlth).

Court means the Federal Court of Australia (Sydney registry), or such other court of competent jurisdiction under the Corporations Act agreed in writing by the parties.

188

For

per

sona

l use

onl

y



7

Cut-Off Data Tape means the data tape in a form satisfactory to Resimac (acting reasonably) of each Mortgage Loan as at a date no more than 1 Business Day prior to the Implementation Date, containing the same data fields as are in the existing data tape that is in the Data Room plus fields for “Broker Name” and “Broker Trail Rate”, where applicable.

Data Room means the electronic data room maintained by Ansarada Pty Ltd in connection with the Merger, an index of which as at 9am on 21 June 2013 has been initialled for identification by the parties upon execution of this deed, including written responses to requests for further information in the on-line data room.

Deed Poll means a deed poll substantially in the form of Annexure C to this deed.

Details means the section of this deed headed “Details”.

Due Diligence Materials means all documents and information that were at any time during the period ending on 20 June 2013 contained in the Data Room, together with all written answers given to questions submitted by the Acquirer or Resimac prior to the date of this deed in connection with transactions contemplated by this deed.

Effective, when used in relation to the Scheme, means the coming into effect, pursuant to section 411(10) of the Corporations Act, of the order of the Court made under section 411(4)(b) of the Corporations Act in relation to the Scheme, but in any event at no time before an office copy of the order of the Court is lodged with ASIC.

Effective Date in relation to the Scheme means the date on which the Scheme becomes Effective.

Encumbrance means any:

(a) security for the payment of money or performance of obligations, including a mortgage, charge, lien, pledge, trust, power, or title retention or flawed deposit arrangement and any “security interest” as defined in sections 12(1) or (2) of the Personal Property Securities Act 2009 (Cwlth); or





End Date means 28 February 2014 the date which is four months from the date of this deed or such other date as is agreed by the Acquirer, Resimac and the Target.

Excluded Information means Confidential Information which:

189

For

per

sona

l use

onl

y



8

(a) is in or becomes part of the public domain other than through breach of this deed or an obligation of confidence owed to the party providing the Confidential Information;

(b) the recipient of the Confidential Information can prove by contemporaneous written documentation was already known to it at the time of disclosure by the party providing the Confidential Information (unless such knowledge arose from disclosure of information in breach of an obligation of confidentiality); or

(c) the recipient of the Confidential Information acquires from a source other than the party providing the Confidential Information or any Related Body Corporate or Representative of the party providing the Confidential Information where such source is entitled to disclose it.

Exclusivity Period means the period from and including the date of this deed to the earlier of:

(a) the termination of this deed in accordance with its terms; and

(b) the End Date.

Financial Assistance Resolution means the resolution put to a general meeting of Target Shareholders under section 260A(1)(b) and 260B of the Corporations Act in respect of payment of amounts by Target and RHGHL directly or indirectly to Acquirer after the Scheme is implemented to assist in the repayment of financing of the Scheme Consideration (and where the Mortgage Asset Acquisition Agreement does not complete within 2 business days after the implementation of the Scheme, the granting of an all assets security by the Target in favour of National Australia Bank Limited (who will provide financing for part of the Scheme Consideration)).Financial Assistance Resolution means the resolution put to a general meeting of Target Shareholders under sections 260A(1)(b) and 260B of the Corporations Act in respect of payment of amounts by Target to Acquirer after the Scheme is implemented and the Mortgage Asset Acquisition Agreement is completed to assist in the repayment of financing of the Scheme Consideration.

First Court Date means the first day on which an application made to the Court, in accordance with item 8 of Schedule 4, for orders under section 411(1) of the Corporations Act convening the Scheme Meeting to consider the Scheme is heard.

Fully Franked Dividend means a fully franked dividend which the Target is permitted to pay prior to implementation of the Scheme in accordance with clause 8.7(a), other than the July Dividend.

Implementation Date means:

(a) the third Business Day following the Record Date; or

(b) if later than the date in (a), the day that is 14 days after the Financial Assistance Resolution is notified to ASIC in accordance with section 260B(6) of the Corporations Act; or

(c) such other date as is agreed by the Acquirer, Resimac and the Target.

Incoming Directors means each person nominated in writing by the Acquirer to the Target prior to the Second Court Date to be appointed to the Target Board.

Independent Expert means Deloitte Corporate Finance Pty Limited.

190

For

per

sona

l use

onl

y



9

Independent Expert’s Report means the report prepared by the Independent Expert stating whether, in the Independent Expert’s opinion the Scheme is in the best interest of the Target Shareholders.

A person is Insolvent if:

(a) it is (or states that it is) an insolvent under administration or insolvent (each as defined in the Corporations Act); or

(b) it is in liquidation, in provisional liquidation, under administration or wound up or has had a Controller appointed to any part of its property; or

(c) it is subject to any arrangement, assignment, moratorium or composition, protected from creditors under any statute or dissolved (in each case, other than to carry out a reconstruction or amalgamation while solvent on terms approved by the other parties to this deed); or

(d) an application or order has been made (and in the case of an application, it is not stayed, withdrawn or dismissed within 30 days), resolution passed, proposal put forward, or any other action taken, in each case in connection with that person, which is preparatory to or could result in any of (a), (b) or (c) above; or

(e) it is taken (under section 459F(1) of the Corporations Act) to have failed to comply with a statutory demand; or

(f) it is the subject of an event described in section 459C(2)(b) or section 585 of the Corporations Act (or it makes a statement from which another party to this deed reasonably deduces it is so subject); or

(g) it is otherwise unable to pay its debts when they fall due; or

(h) something having a substantially similar effect to (a) to (g) happens in connection with that person under the law of any jurisdiction.

July Dividend means a fully franked dividend of 3 cents per Target Share which the Target is permitted to pay prior to implementation of the Scheme.

Liability means any liability or obligation (whether actual, contingent or prospective) including for any Loss irrespective of when the acts, events or things giving rise to the liability occurred.

Listing Rules means the Listing Rules of ASX.

LMI Contract means any insurance policy provided by Genworth Financial Mortgage Insurance Pty Limited (ABN 60 106 974 305), Housing Loans Insurance Corporation (known as GE Mortgage Insurance Pty Limited), QBE Lenders’ Mortgage Insurance Limited (ABN 70 000 511 071), Prime Insurance Group Limited or American International Assurance (Bermuda) Limited held in the name of a Securitisation Vehicle.

Loan Book Contracts means any of the following deeds, agreements or commitments:

(a) any LMI Contracts;

(b) any Relevant Documents; and

191

For

per

sona

l use

onl

y



10

(c) each insurance, and reinsurance contract, to which Prime Insurance Group Limited or American International Assurance (Bermuda) Limited are a party.

Loan Book means all of RMS’ right, title, estate, interest and benefit (whether present or future, actual or contingent) under or in connection with each:

(a) Mortgage Loan;


(c) Relevant Document,


Losses means all claims, demands, damages, losses, costs, expenses and liabilities.

Material Contract means a contract, deed or commitment to which any Target Group entity or SPV is party and which is material to the business of the Target Group (including, for this purpose, the business of the SPVs) taken as a whole, other than the Loan Book Contracts, and includes Material NIM Contracts.

Material NIM Contract means a contract, deed or commitment:

(a) to which any Securitisation Vehicle is a party, including any contract evidencing any NIMs; or

(b) in relation to servicing arrangements with Unisys Mortgage Processing (RHG) Pty Limited (including any guarantee provided by Unisys Credit Services Pty Limited),

other than any Loan Book Contracts.

Merger means the acquisition of the Target by the Acquirer through the implementation of the Scheme.

Mortgage Asset Acquisition Agreement means an agreement to be entered into on or about the date of this deed under which the Acquirer agrees to procure the sale and transfer of the Mortgage Assets (on the Implementation Date immediately after completion of the purchase of the Target Shares under the Scheme) to, or to an entity or entities nominated by, Resimac and includes any related agreements.

Mortgage Assets means:

(a) the Loan Book; and

(b) all of RMS’ and RMC’s right, title, estate, interest and benefit (whether present or future, actual or contingent) under or in connection with the LMI Contracts.

Mortgage Loans means all loans which were written in the name of RMC.

NIMs means, in relation to:

(a) the Securitisation Trusts, the 1 Residual Income Unit and the 9 Residual Capital Units owned by RHG Home Loans Pty Ltd and any rights that RHG Treasury Services Pty Limited and Receivables Servicing Pty Limited have to receive any fees from RMS under any Material NIM Contract; and

192

For

per

sona

l use

onl

y



11

(b) RMC, the rights RHG Home Loans Pty Ltd has to any fees or other income associated with its role as originator and any rights that RHG Treasury Services Pty Limited and Receivables Servicing Pty Limited have to receive any fees from RMC under any Material NIM Contract.

Outgoing Directors means each person nominated in writing by the Acquirer to the Target prior to the Second Court Date as being required to resign from the Target Board.

Quarter means a calendar quarter, commencing on 1 January, 1 March, 1 July and 1 October.

Record Date means 7.00pm on the fifth Business Day following the Effective Date or such other date (after the Effective Date) as the Target, Resimac and the Acquirer agree.

Register means the register of members of the Target maintained by or on behalf of the Target in accordance with section 168(1) of the Corporations Act and Registry has a corresponding meaning.

Regulator’s Draft means the draft of the Scheme Booklet which is provided to ASIC for approval pursuant to section 411(2) of the Corporations Act.


(a) ASX;

(b) ASIC;





Regulatory Review Period means the period from the date on which the Regulator’s Draft is submitted to ASIC to the date on which ASIC confirms that it does not intend to make any submissions at the Court hearing on the First Court Date or otherwise object to the Scheme.

Related Body Corporate has the meaning it has in the Corporations Act.

Relevant Document means in relation to each Mortgage Loan and Related Security, all of the documents which evidence the obligations of any obligor in respect of that Mortgage Loan and Related Security, and any powers of attorney authorising any signatories to any such documents.

Related Security means, in relation to a Mortgage Loan, the rights, title and interest of any Securitisation Vehicle in any mortgage, deed of trust, pledge, assignment, deposit arrangement, lien, charge, claim, security interest, guarantee, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever which is held as security for any amounts owing by an obligor under that Mortgage Loan.

Relevant Interest has the same meaning as given by sections 608 and 609 of the Corporations Act.

193

For

per

sona

l use

onl

y



12

Representative means, in relation to a party:

(a) a Related Body Corporate;

(b) a director, officer or employee of the party or any of the party’s Related Bodies Corporate; or

(c) an adviser to the party or any of the party’s Related Bodies Corporate, where an “adviser” means, in relation to an entity, a financier, financial adviser, corporate adviser, legal adviser, or technical or other expert adviser or consultant who provides advisory services in a professional capacity and who has been engaged by that entity.

Resimac has the meaning given in the Details.

Resimac Board means the board of directors of the Resimac as constituted from time to time.

Resimac Confidential Information means all confidential, non-public or proprietary information regardless of how the information is stored or delivered, exchanged between the parties before, on, or after the date of this deed relating to the business, ownership, intentions or other affairs of Resimac.

Resimac Group means Resimac and its Subsidiaries.

Resimac Indemnified Parties means Resimac, its officers and employees, its Related Bodies Corporate and the officers and employees of each of its Related Bodies Corporate.

Resimac Information means the information regarding the Resimac Group provided by Resimac to the Target for inclusion in the Scheme Booklet, being information:

(a) about the Resimac Group, its business, its interests and dealings in Target Shares, its intentions, and funding arrangements; and


For the avoidance of doubt, the Resimac Information does not include information about the Target Group or the SPVs.

Resolutions means the resolution to approve the Scheme and the Financial Assistance Resolution.

RHG Mortgage Securities Trust means the RHG Mortgage Securities Trust in respect of each of the following Series:

(a) the RMS Warehouse Series (GSF) 2004-1;

(b) the RMS Series 2009-1 (formerly the Titan Conduit Series 1);

(c) the Warehouse Series 2008 W1; and

(d) the RHG Series.

RHGHL means RHG Home Loans Pty Limited ACN 053 725 741.

RHGHL Resolution means the resolution to be passed by the Target under section 260B of the Corporations Act in respect of payment of amounts by

194

For

per

sona

l use

onl

y



13

RHGHL directly or indirectly to the Target or the Acquirer after the Scheme is implemented to assist in the repayment of financing of the Scheme Consideration.

Rights means all accretions, rights or benefits of whatever kind attaching to or arising from the Target Shares directly or indirectly after the date of this deed, including all dividends or other distributions and all rights to receive any dividends or other distributions, or to receive or subscribe for shares or other securities, which are declared, paid or made by the Target or a Subsidiary of the Target, but excludes the July Dividend and the Fully Franked Dividend.

RMC means RHG Mortgage Corporation Limited (ABN 48 065 912 932).

RMS means RHG Mortgage Securities Limited (ABN 30 094 753 349) in its capacity as trustee of each Securitisation Trust.

Scheme means the scheme of arrangement between the Target and Scheme Participants under which all the Scheme Shares will be transferred to the Acquirer under Part 5.1 of the Corporations Act substantially in the form of Annexure B together with any amendment or modification made pursuant to section 411(6) of the Corporations Act.

Scheme Booklet means, in respect of the Scheme, the information booklet to be approved by the Court and despatched to the Target Shareholders which must:

(a) include the Scheme, the Deed Poll, the Independent Expert’s Report, an explanatory statement complying with the requirements of the Corporations Act, notices of the Scheme Meeting and of a general meeting of Target Shareholders (to be held immediately after the Scheme Meeting) to pass the Financial Assistance Resolution and proxy forms; and

(b) comply with the Corporations Act, Corporations Regulations, ASIC Regulatory Guide 60 and the Listing Rules.

Scheme Consideration means a cash payment of $0.501 for each Scheme Share less the cash amount of any Fully Franked Dividend (if any) (but, for the avoidance of doubt, excluding the value of any franking credits associated with the Fully Franked Dividend) and any other dividend or distribution declared or paid by the Target on or after the date of this deed (for avoidance of doubt, other than the July Dividend), in accordance with the terms of this deed and the terms of the Scheme.

Scheme Consideration means a cash payment of $0.441 for each Scheme Share less the amount of any dividend or distribution declared or paid by Target on or after the date of this deed (for avoidance of doubt, other than the July Dividend), in accordance with the terms of this deed and the terms of the Scheme.

Scheme Meeting means the meeting to be convened by the Court at which the Target Shareholders will vote on the Scheme.

Scheme Participants means each person who is a Target Shareholder at the Record Date.

Scheme Shares means all Target Shares held by Scheme Participants as at the Record Date and for the avoidance of doubt includes any Target Shares issued on or before the Record Date.

Second Court Date means the day on which the Court makes an order pursuant to section 411(4)(b) of the Corporations Act approving the Scheme.

195

For

per

sona

l use

onl

y



14

Second Shortfall Financing Option Deed means the deed entitled “Second Shortfall Financing Option Deed” dated 27 August 2009 between RMC, RMS, National Australia Bank Limited, BNY, Permanent Custodians Limited, RHG Treasury Services Pty Limited, Receivables Servicing Pty Limited and RHG Home Loans Pty Limited (as amended).

Securitisation Trusts means the RMS Trust 2002-1, the RMS Trust 2004-1E and the RHG Mortgage Securities Trust.

Securitisation Vehicle means RMS and RMC.

Specified Events means an event, occurrence or matter that:

(a) occurs or fails to occur on or after the date of this deed;

(b) occurs or fails to occur before the date of this deed but is disclosed to the Acquirer and Resimac or only announced or publicly disclosed after the date of this deed; or

(c) will or is likely to occur or fail to occur on or after the date of this deed and which has not been disclosed to the Acquirer and Resimac or announced or publicly disclosed prior to the date of this deed.

SPV means each of RMC, RMS and Better Servicing Pty Ltd.

Subsidiaries has the meaning it has in the Corporations Act.

Superior Proposal means a bona fide Competing Transaction which the Target Board, acting reasonably and in good faith, and after receiving written advice from its legal and financial advisers, determines:

(a) is reasonably capable of being completed in a timely basis taking into account all aspects of the Competing Transaction; and

(b) is more favourable to the Target Shareholders than the Scheme, in the opinion of the Target Persons, taking into account all terms and conditions of the Competing Transaction.

Target has the meaning given in the Details.

Target Board means the board of directors of the Target as constituted from time to time.

Target Confidential Information means all confidential, non-public or proprietary information regardless of how the information is stored or delivered, exchanged between the parties before, on or after the date of this deed relating to the business, technology or other affairs of the Target Group and SPVs.

Target Director means a director on the Target Board, being Glenn Goddard, Richard Nott, John Kean, Gabriel Radzyminski and Paul Jensen as at the date of this deed.

Target Group means the Target and its Subsidiaries.

Target Group Director means a member of the board of a company which is a member of the Target Group.

Target Indemnified Parties means the Target, each of the SPVs and each of their respective officers and employees and Related Bodies Corporate and the officers and employees of each of their Related Bodies Corporate.

196

For

per

sona

l use

onl

y



15

Target Information means all information contained in the Scheme Booklet other than the Acquirer Information, Resimac Information and the Independent Expert’s report.

Target Material Adverse Change means a Specified Event which individually, or when aggregated with other Specified Events of a similar kind or category, has resulted in, or is reasonably likely to result in:

(a) the Consolidated Net Tangible Assets of the Target Group as at the Implementation Date being $5,000,000 (or more) less than the amount specified in the Consolidated Net Tangible Assets column of the Cashflow Schedule (adjusted for the amount of the July Dividend and any Fully Franked Dividend that is determined and estimated Transaction Costs of $3,600,0002,500,000 plus applicable GST, provided there is no double counting of these amounts) in respect of that date (and for this purpose, if the Implementation Date is not a date specified in the Cashflow Schedule, then the amount taken to be so specified in respect of it shall be calculated as a pro rata amount, using the amounts as at the two closest specified dates);

(b) a reduction of the aggregate value of the Mortgage Loans by more than the equivalent of 5% per month;

(c) Mortgage Loans in arrears for greater than 30 days rise from current levels to 7.5% or greater (by value) of all Mortgage Loans; or

(d) a material and adverse effect on the business, assets, financial condition, results, operations, reputation or prospects of the Target Group (as a whole) including:

(i) any material default by the Target Group or any member of the Target Group under their existing financing facilities; or

(ii) any material Action threatened or commenced against any member of the Target Group or any SPV (including any Action where the amount claimed exceeds $2,000,000) other than an Action relating only to an asset in the Loan Book,

but does not include any matter, event, circumstance or change:

(e) fairly disclosed in the Due Diligence Materials, or that is reasonably foreseeable to arise and has been fairly disclosed in the Due Diligence Materials (however, any Transaction Costs in excess of $23,6500,000 plus applicable GST in aggregate are not to be taken to have been fairly disclosed or reasonably foreseeable for the purposes of this paragraph);

(f) occurring as a result of any matter, event or circumstance required by this deed, the Scheme or the transactions contemplated by them (including any reasonable costs incurred as a result of implementing the Scheme, but not including any Transaction Costs in excess of $23,6500,000 plus applicable GST in aggregate);

(g) occurring as a result of fluctuations to the working capital of the Target Group in the ordinary course of business;

(h) occurring as a result of the amortisation of the Loan Book held by the Securitisation Vehicles in the ordinary course;

197

For

per

sona

l use

onl

y



16

(i) resulting from changes in the general economic conditions of the Target’s industry or laws in any of the jurisdictions in which the Target operates;

(j) fairly disclosed to ASX or to the Acquirer and Resimac prior to the date of this deed, as a result of a declaration of the July Dividend or any Fully Franked Dividend;

(k) that occurs with the written consent of the Acquirer and Resimac; or

(l) resulting from changes in generally accepted accounting principles or the interpretation of them by any professional body or government agency.

Target Prescribed Event means, except to the extent contemplated by this deed or the Scheme, any of the events listed in Schedule 1 provided that a Target Prescribed Event will not occur where the Target has first consulted with the Acquirer and Resimac in relation to the event and the Acquirer and Resimac has approved in writing the proposed event.

Target Share means an issued fully paid ordinary share in the capital of the Target (the aggregate number of which as at the date of this deed is set out in the Details), together with all Rights attached to that share.

Target Shareholder means each person registered in the Register as a holder of Target Shares.

Target Persons means each Target Director as at the date of this deed.

Timetable means the timetable set out in Schedule 1 of the Third Counterproposal Amending Deedagreed by the Acquirer, Resimac and Target at or around the time of the Second Counterproposal Amending Deed set out in Schedule 3, subject to any amendments as the Acquirer, Resimac and Target may agree in writing in accordance with clause 5.1(b) and provided that, at the time of development of the Scheme Booklet, the parties will seek to agree in good faith a more detailed timetable which must be as expeditious as possible.

Transaction Costs means the costs incurred in relation to the Merger, relating to the expenses incurred by King & Wood Mallesons, the Independent Expert and Greenstone Partners other than costs:

(a) in relation to compliance with clauses 3.8, 8.2(h),10.9 and 14 of this deed; or

(b) relating to any tax ruling, any objection by or negotiations with any Regulatory Authority or failure by the Court to:

(i) convene the Scheme meeting on the First Court Date or

(ii) approve the Scheme on the Second Court Date; or

(c) costs attributable to the default, failure, delay or lack of reasonable co-operation by the Acquirer, Resimac or their advisers;

(d) incurred by the Target with the prior consent of the Acquirer and Resimac that such costs should fall outside the definition of Transaction Costs, such consent not to be unreasonably withheld; or

(e) incurred by the Target prior to 1 June 2013.

198

For

per

sona

l use

onl

y



17

Transaction Implementation Working Group means a working group, who reporting to the full Target Board, is to be made up of:

(a) management of each of the Target, the Acquirer and Resimac;

(b) representatives from each of the legal advisers of the Target, the Acquirer and Resimac; and

(c) such other persons as the parties may agree from time to time.

Trust Account means the trust account referred to in clause 4.6(a).

Unisys Contract means each Material NIM Contract referred to in paragraph (b) of the definition of Material NIM Contract.

Westpac Subscription Agreement means the deed entitled “RHG Mortgage Securities Trust Warehouse Series 2008-W1 Warehouse Subscription Agreement” dated 27 October 2007 between, amongst others, RMS, Westpac Banking Corporation, RHG Home Loans Pty Limited, RHG Treasury Services Pty Limited and Receivables Servicing Pty Limited (as amended).

1.2 References to certain general terms

Unless the contrary intention appears, a reference in this deed to:

(a) (variations or replacement) a document (including this deed) includes any variation or replacement of it;

(b) (clauses, annexures and schedules) a clause, annexure or Schedule is a reference to a clause in or annexure or Schedule to this deed;

(c) (reference to statutes) a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them;

(d) (law) law means common law, principles of equity, and laws made by parliament (and laws made by parliament include State, Territory and Commonwealth laws and regulations and other instruments under them, and consolidations, amendments, re-enactments or replacements of any of them);

(e) (singular includes plural) the singular includes the plural and vice versa;

(f) (person) the word “person” includes an individual, a firm, a body corporate, a partnership, a joint venture, an unincorporated body or association, or any Regulatory Authority;

(g) (executors, administrators, successors) a particular person includes a reference to the person’s executors, administrators, successors, substitutes (including persons taking by novation) and assigns;

(h) (reference to a group of persons) a group of persons or things is a reference to any two or more of them jointly and to each of them individually;

(i) (dollars) Australian dollars, dollars, A$ or $ is a reference to the lawful currency of Australia;

(j) (calculation of time) a period of time dating from a given day or the day of an act or event, is to be calculated exclusive of that day;

199

For

per

sona

l use

onl

y



18

(k) (reference to a day) a day is to be interpreted as the period of time commencing at midnight and ending 24 hours later;

(l) (accounting terms) an accounting term is a reference to that term as it is used in Accounting Standards;

(m) (meaning not limited) the words “include”, “including”, “for example” or “such as” when introducing an example, do not limit the meaning of the words to which the example relates to that example or examples of a similar kind; and

(n) (time of day) time is a reference to Sydney, New South Wales time.

1.3 Next day

If an act under this deed to be done by a party on or by a given day is done after 5.30pm on that day, it is taken to be done on the next day.

1.4 Next Business Day

If an event must occur on a stipulated day which is not a Business Day then the stipulated day will be taken to be the next Business Day.

1.5 Headings

Headings (including those in brackets at the beginning of paragraphs) are for convenience only and do not affect the interpretation of this deed.

2 Agreement to propose Scheme and implement Merger

2.1 Target to propose Scheme

The Target agrees to propose the Scheme on and subject to the terms and conditions of this deed.

2.2 Acquirer and Resimac to assist with Scheme

The Acquirer and Resimac agree to assist the Target to propose the Scheme on and subject to the terms and conditions of this deed.

2.3 Agreement to implement Merger

The parties agree to implement the Merger on the terms and conditions of this deed.

3 Conditions Precedent

3.1 Conditions Precedent

Subject to this clause 3, the Scheme will not become Effective and the obligations of the Acquirer and Resimac under clause 4.3 are not binding unless each of the Conditions Precedent contained in Schedule 2 are satisfied or waived to the extent and in the manner set out in clauses 3.2 and 3.3.

3.2 Benefit of certain Conditions Precedent

A Condition Precedent may only be waived in writing by a party entitled to the benefit of that Condition Precedent as noted in the table set out in Schedule 2 and will be effective only to the extent specifically set out in that waiver.

A party entitled to waive the breach or non-fulfilment of a Condition Precedent under this clause 3.2 may do so in its absolute discretion.

200

For

per

sona

l use

onl

y



19

3.3 Waiver of Conditions Precedent

If the Target, the Acquirer or Resimac waives the breach or non-fulfilment of a Condition Precedent in accordance with this clause, then:

(a) subject to subclause 3.3(b), that waiver precludes that party from suing the other parties for any breach of this deed arising as a result of the breach or non-fulfilment of that Condition Precedent or arising from the same event which gave rise to the breach or non-fulfilment of that Condition Precedent; but

(b) if the waiver of the Condition Precedent is itself conditional and the other party or parties:

(i) accept the condition, then the terms of that condition apply notwithstanding any inconsistency with subclause 3.3(a); or

(ii) do not accept the condition, then the Condition Precedent has not been waived.

3.4 Best endeavours

Each of the Target, the Acquirer and Resimac agree to use their best endeavours to procure that:

(a) each of the Conditions Precedent for which they are responsible, as noted in the table set out in Schedule 2:

(i) is satisfied as soon as practicable after the date of this deed; and

(ii) where a Conditions Precedent is required to be satisfied:

(A) over a stated period, continues to be satisfied at all times until the last time it is to be satisfied as noted in the table set out in Schedule 2 (as the case may require); and

(B) at a specific time, at that time; and

(b) there is no occurrence that would prevent the Conditions Precedent for which they are responsible, as noted in the table set out in Schedule 2, being satisfied.

3.5 Regulatory matters

Without limiting clause 3.4, each party:

(a) (approvals) must promptly apply for all consents, waivers and approvals of a Regulatory Authority which the Acquirer, Resimac and the Target, acting reasonably, consider are necessary or desirable to implement the Scheme (“Regulatory Approvals”) and take all steps it is responsible for as part of the approval process for the Scheme, including responding to requests for information at the earliest practicable time, but the parties are not required to take any action which would require the divestiture of material assets of the Target, the SPVs, the Acquirer or Resimac or their Subsidiaries except in accordance with the transactions contemplated by this deed;

(b) (representation) has the right to be invited to be represented and make submissions at any proposed meeting with any Regulatory Authority relating to any Regulatory Approval; and

201

For

per

sona

l use

onl

y



20

(c) (consultation) must use its best endeavours to consult with the other parties in advance in relation to all material communications (whether written or oral, and whether direct or via a Representative) with any Regulatory Authority relating to any Regulatory Approval (“Communications”) and, without limitation:

(i) provide the other parties with drafts of any material written Communications to be sent to a Regulatory Authority and make such amendments as the other parties reasonably require; and

(ii) provide copies of any material written Communications sent to or received from a Regulatory Authority to the other parties promptly upon despatch or receipt (as the case may be),

in each case to the extent it is reasonable to do so.

3.6 Notices in relation to Conditions Precedent

Each party must:

(a) (notice of satisfaction) promptly notify the others of satisfaction of a Condition Precedent and must keep the others informed of any material development of which it becomes aware that may lead to the breach or non-fulfilment of a Condition Precedent;

(b) (notice of failure) immediately give written notice to the others of a breach or non-fulfilment of a Condition Precedent, or of any event which will prevent a Condition Precedent being satisfied; and

(c) (notice of waiver) upon receipt of a notice given under subclause 3.6(b), give written notice to the other parties as soon as possible (and in any event before 8.00am on the Business Day before the Second Court Date) as to whether or not it waives the breach or non-fulfilment of any Condition Precedent resulting from the occurrence of that event, specifying the Condition Precedent in question.

3.7 Effect of waiver or non-fulfilment

A waiver of such breach or non-fulfilment in respect of one Condition Precedent does not constitute:

(a) a waiver of the breach or non-fulfilment of any other Condition Precedent resulting from the same event; or

(b) a waiver of the breach or non-fulfilment of that Condition Precedent resulting from any other event.

3.8 Consultation on failure of Condition Precedents

If:

(a) there is a breach or non-fulfilment of a Condition Precedent which is not waived in accordance with this deed by the earlier of the End Date and the time or date specified in this deed for the satisfaction of the Condition Precedent;

(b) there is an act, failure to act or occurrence which will prevent a Condition Precedent being satisfied by the time or date specified in this deed for the satisfaction of the Condition Precedent (and the breach or non-fulfilment which would otherwise occur has not already been waived in accordance with this deed); or

202

For

per

sona

l use

onl

y



21

(c) if the Scheme has not become Effective by the End Date,

then the parties must consult in good faith with a view to determining whether:

(d) the Merger may proceed by way of alternative means or methods;

(e) to extend the relevant time for satisfaction of the Condition Precedent or to adjourn or change the date of an application to the Court; or

(f) to extend the End Date.

3.9 Failure to agree

If the parties are unable to reach agreement under clause 3.8 within five Business Days (or any shorter period ending at 8.00am on the Business Day before the Second Court Date):

(a) subject to subclause 3.9(b), any of the parties may terminate this deed (and such termination will be in accordance with clause 15.1(e)(i)); or

(b) if a Condition Precedent may be waived and exists for the benefit of one party only, that party only may waive that Condition Precedent or terminate this deed (and such termination will be in accordance with clause 15.1(e)(ii)),

in each case before 8.00am on the Second Court Date. A party will not be entitled to terminate this deed pursuant to this clause 3.9 if the relevant Condition Precedent has not been satisfied or agreement cannot be reached as a result of a breach of this deed by that party.

4 Outline of Scheme

4.1 Scheme

Subject to the terms and conditions of this deed, the Target agrees to propose the Scheme to Scheme Participants under which:

(a) all of the Scheme Shares will be transferred to the Acquirer; and

(b) Scheme Participants will receive the Scheme Consideration from the Acquirer for each Scheme Share.

4.2 Payments

Pursuant to the Scheme, Scheme Participants will receive the Scheme Consideration for each Scheme Share in accordance with the Scheme and the Deed Poll.

4.3 Scheme Consideration

(a) The Acquirer covenants in favour of the Target (in its own right and on behalf of each Scheme Participant) that in consideration of the transfer to the Acquirer of each Scheme Share held by a Scheme Participant, the Acquirer will, on the Implementation Date (but subject to clause 8.6(c)), pay to that Scheme Participant the Scheme Consideration for each Scheme Share and for that purpose will pay the Scheme Consideration into the Trust Account for despatch as soon as is practicable.

(b) By the First Court Date, the Acquirer will have available to it, and will provide the Target with written evidence of, sufficient cash amounts whether from:

203

For

per

sona

l use

onl

y



22

(i) internal cash resources; or

(ii) external funding arrangements; or

(iii) a combination of both (i) and (ii),

to satisfy its obligation to pay the Scheme Consideration in accordance with clause 4.3(a).

4.4 Resimac guarantee

(a) Resimac guarantees the due and punctual performance and observance by the Acquirer of all of the Acquirer’s obligations under this deed, including but not limited to the Acquirer’s obligations to pay the Scheme Consideration in accordance with clause 4.3(a) (provided that Resimac’s guarantee only extends to the Acquirer’s compliance with clause 5.5 to the extent that such compliance relates to any employee entitlements or redundancy entitlements) (Guaranteed Obligations).

(b) The obligations of Resimac under clause 4.4(a) remain unaffected despite:

(i) an amendment to this deed;

(ii) a rule of law or equity to the contrary;

(iii) an insolvency event affecting a person or the death of a person;

(iv) a change in the constitution, membership or partnership of a person;

(v) the Guaranteed Obligations not being enforceable at any time (whether by reason of a legal limitation, disability or incapacity on the part of Resimac and whether this deed is void ab initio or is subsequently avoided) against Resimac; or

(vi) another thing happening that might otherwise release, discharge, or affect the obligations of Resimac under this deed.

(c) Resimac must make all payments required by it under this clause 4.4, in full, without set off and free and clear of any withholding or deduction. If Resimac is required to withhold or deduct any tax, duty, impost, charge, withholding, rate, levies or other governmental imposition of any nature together with associated costs, charges, interest, penalties, fines or expenses (Taxes) so that the beneficiaries of the guarantee would not actually receive on the due date the full amount then Resimac must ensure that the amount payable is increased so that, after making that deduction and deductions applicable to additional amounts payable under this paragraph, the beneficiaries of the guarantee are entitled to receive, and does receive, the amount it would have received if no deductions had been required. Resimac must ensure any deductions required are made and pay the full amount deducted to the relevant governmental body in accordance with applicable law.

(d) Resimac’s obligations under this clause 4.4 are absolute, unconditional and irrevocable. The liability of Resimac under this clause 4.4 extends to and is not affected by any circumstance, act or omission which, but for this paragraph, might otherwise affect it at law or in equity. The guarantee in this clause 4.4 is a continuing security, and remains in full force until all of the Guaranteed Obligations have been fully paid and satisfied.

204

For

per

sona

l use

onl

y



23

(e) Resimac agrees that if a payment or other transaction relating to the Guaranteed Obligations is void, voidable, unenforceable or defective for any reason or a related claim is upheld, conceded or settled (each an Avoidance), then even though the beneficiaries of the guarantee should have known of the Avoidance:

(i) each right, power, discretion or remedy of the beneficiaries of the guarantee and Resimac’s liability under this clause 4.4 will be what it would have been, and will continue, as if the payment or transaction the subject of the Avoidance had not occurred; and

(ii) Resimac will immediately execute and do anything necessary or required by the beneficiaries of the guarantee to restore the beneficiaries of the guarantee to its position immediately before the Avoidance.

(f) This clause 4.4 is:

(i) a principal obligation and is not to be treated as ancillary to another right or obligation; and

(ii) independent of and not in substitution for or affected by another security interest or guarantee or other document or agreement which the beneficiaries of the guarantee or another person may hold concerning the Guaranteed Obligations.

(g) The beneficiaries of the guarantee may enforce this clause 4.4 against Resimac without first having to resort to another guarantee or security interest or other agreement relating to the Guaranteed Obligations.

(h) Resimac acknowledges providing this guarantee and incurring obligations and rights under this deed for valuable consideration.

4.5 Undertakings held as agent or trustee

The Target acknowledges that the undertakings by the Acquirer and Resimac in clause 4.3, 4.4 and 5.5 are given to the Target in its own right and in its capacity as trustee or agent for each Scheme Participant and employees of any member of the Target Group.

4.6 Payment to Scheme Participants

The Target must:

(a) receive in a trust account in accordance with the Scheme and as agent for each Scheme Participant the amount paid in accordance with clause 4.3;

(b) pay to each Scheme Participant or, if the Target permits and subject to any regulatory requirements, in accordance with a Scheme Participant’s directions such moneys as each Scheme Participant is entitled to receive in accordance with the Scheme; and

(c) otherwise comply with its obligations under the Scheme.

4.7 Appointment of the Acquirer Nominee

On or before the date which is five Business Days before the Second Court Date, the Acquirer may by written notice to the Target nominate the Acquirer Nominee. If the Acquirer Nominee is not the Acquirer all references in this deed to the Acquirer acquiring the Scheme Shares and paying the Scheme Consideration are to be construed as if references to the Acquirer were replaced with

205

For

per

sona

l use

onl

y



24

references to the nominated Acquirer Nominee, except that the Acquirer shall remain responsible for the performance of those obligations with the Acquirer Nominee.

5 Co-operation and timing

5.1 General obligations

(a) The Target and the Acquirer must each:

(i) use their best endeavours and commit necessary resources (including management and the resources of external advisers); and

(ii) procure that its officers and advisers work in good faith and in a timely and co-operative fashion with the other parties (including by attending meetings and by providing information),

to produce the Scheme Booklet as soon as reasonably practicable and to implement the Scheme substantially in accordance with the Timetable and in any event, by 6 January 2014.to produce the Scheme Booklet and implement the Scheme as soon as reasonably practicable and substantially in accordance with the Timetable.

(b) The Target, the Acquirer and Resimac agree to negotiate in good faith and agree reasonable variations to the Timetable if necessary or appropriate having regard to availability of the Court or senior counsel, requirements or requests of ASX or ASIC, or reasonable requests of the parties, but subject always to the principle that the Scheme is to be implemented as expeditiously as possible. However, to avoid doubt, nothing in this clause requires any party to agree to any variation of the End Date.

(b)(c) The Parties agree that they (and they will procure that their advisers) will work together in good faith and in a timely and co-operative manner to develop and prepare a reasonable plan to minimise the corporate costs of the Target between the date on which the Target Shareholders approve the Scheme (“Approval Date”) and Implementation Date, and the Target agrees to implement the requirements of the plan, and in doing so to take account of the reasonable directions of the Acquirer and Resimac to the Target after the Approval Date as to the operation of the Target, which directions are intended to minimise the Target's corporate costs.

5.2 Transaction Implementation Working Group

(a) The parties must establish a Transaction Implementation Working Group as soon as reasonably practicable after the date of this deed. The role of the Transaction Implementation Working Group will be to act as a forum for consultation and planning by parties to:

(i) implement the Merger; and

(ii) subject to subclause 5.2(b), ensure the smooth transition of the management of the business and affairs of the Target Group and SPVs to the Acquirer, and a smooth implementation of the transactions contemplated by the Mortgage Asset Acquisition Agreement, following the implementation of the Scheme.

(b) Subject to this deed, nothing in this clause requires a party to act at the direction of another party. The business of each party will continue to operate independently from the other and representatives of each party

206

For

per

sona

l use

onl

y



25

will report to the full board of their respective appointors until the Implementation Date. The parties agree that nothing in this deed constitutes the relationship of a partnership or a joint venture between the parties.

5.3 Access

(a) Between the date of this deed and the earlier of the Implementation Date and the date this deed is terminated, the Target must:

(i) as soon as reasonably practicable provide the Acquirer, Resimac and their Representatives with any documents, records and other information (subject to any existing confidentiality obligations owed to third parties, or applicable laws) reasonably requested by them; and

(ii) provide the Acquirer, Resimac and their officers, employees and advisers with reasonable access to the Target’s officers, employees and advisers which the Acquirer and Resimac reasonably require, including for the purposes of:

(A) understanding the Target’s business, financial position (including its cashflow and working capital position, and matter relating to the Mortgage Assets), trading performance and management control systems;

(B) implementing the Scheme;

(C) preparing for carrying on the business of the Target following implementation of the Merger, and implementing the transactions contemplated by the Mortgage Asset Acquisition Agreement; and

(D) any other purpose which is agreed in writing between the parties,

provided in every case that such access does not place an unreasonable burden on the ability of the Target to run its business or to perform its obligations under this deed.

(b) Clause 5.3(a) ceases to operate upon a majority of the Target Board changing or withdrawing their recommendation that Target Shareholders vote in favour of the Scheme, or recommending a Competing Transaction, in each case in accordance with this deed.

5.4 Acquirer’s and Resimac’s right to separate representation

The Acquirer and Resimac are entitled to separate representation at all Court proceedings relating to the Scheme. Nothing in this deed is to be taken to give Target any right or power to make or give undertakings to the Court for or on behalf of the Acquirer or any nominated Acquirer Nominee or Resimac.

5.5 Acquirer’s undertaking

The Acquirer undertakes for the benefit of the Target and employees of any member of the Target Group that following the Implementation Date, the financial assistance the subject of the Financial Assistance Resolution and the Mortgage Asset Acquisition Agreement will be implemented in a manner that:

(a) complies with all applicable laws and does not render any member of the Target Group insolvent; and

207

For

per

sona

l use

onl

y



26

(b) ensures that all employee entitlements or redundancy entitlements are paid.

6 Implementation obligations of the parties

6.1 Target's obligations

The Target must comply with the obligations of the Target set out in Schedule 4 and take all reasonable steps that are necessary or reasonably requested by the Acquirer or Resimac to implement the Scheme as soon as is reasonably practicable and in the most efficient manner for the Scheme Participants and in any event prior to the End Date.

6.2 Acquirer’s obligations

The Acquirer must comply with the obligations set out in Schedule 5 and take all reasonable steps that are necessary or reasonably requested by the Target to assist the Target to implement transactions contemplated by this deed as soon as is reasonably practicable and in the most efficient manner for the Scheme Participants and in any event prior to the End Date.

6.3 Resimac’s obligations

Resimac must comply with the obligations set out in Schedule 6 and take all reasonable steps that are necessary or reasonably requested by the Target to assist the Target to implement the transactions contemplated by this deed as soon as is reasonably practicable and in the most efficient manner for the Scheme Participants and in any event prior to the End Date.

6.4 Recommendation

Each Target Director, in the joint public announcement to be issued in accordance with clause 16.1, the Scheme Booklet and any other material public statement made after the signing of this deed and relating to the Scheme or the Merger must make a statement that, in the absence of a Superior Proposal and subject to the Independent Expert concluding and continuing to conclude that the Scheme is in the best interests of the Target Shareholders:

(a) each member of the Target Board recommends that the Target Shareholders vote in favour of the Resolutions; and

(b) confirms that each member of the Target Board intends to vote the Target Shares in which they have a Relevant Interest in favour of the Resolutions.

6.5 Withdrawal or modification of recommendation

Subject to clause 6.6, the Target must use best endeavours to ensure that:

(a) each member of the Target Board intends to vote any Target Shares in which they have a Relevant Interest in favour of the Resolutions in the absence of a Superior Proposal and subject to the Independent Expert concluding and continuing to conclude that the Scheme is in the best interests of the Target Shareholders; and

(b) no member of the Target Board:

(i) withdraws or adversely modifies their recommendation of the Scheme as contemplated by clauses 6.4(a) and 6.4(b); or

(ii) makes any statement to the effect that they no longer recommend that the Target Shareholders vote in favour of the Resolutions in the absence of a Superior Proposal and subject to

208

For

per

sona

l use

onl

y



27

the Independent Expert concluding and continuing to conclude that the Scheme is in the best interests of Target Shareholders.

6.6 Duties to Target Shareholders

A member of the Target Board may withdraw or adversely modify their recommendation or any other material public statement of the Scheme, and not vote any Target Shares in which they have a Relevant Interest in favour of the Resolutions, if the Target has complied at all times with its obligations under clause 10 and:

(a) the Target Board determines in good faith and acting reasonably, having received expert advice in writing from its legal and financial advisors, that a Competing Transaction constitutes a Superior Proposal and the Target has notified the Acquirer and Resimac in writing that one or more members of the Target Board intends to withdraw or adversely modify their recommendation of the Scheme and three Business Days has passed since that notification is given;

(b) the Target Board has determined in good faith and acting reasonably, having received expert advice in writing from its legal and financial advisors, that they must do so because of their fiduciary or statutory duties to Target Shareholders; or

(c) the Independent Expert concludes that the Scheme is not in the best interests of Target Shareholders, or adversely changes its previously given opinion that the Scheme is in the best interests of the Target Shareholders.

7 Scheme Booklet

7.1 Preparation

Without limiting clauses 6.1, 6.2 or 6.3:

(a) (preparation) the Target is generally responsible for the preparation of the Scheme Booklet but will:

(i) provide drafts of the Scheme Booklet to the Acquirer and Resimac in accordance with clause 7.2(a); and

(ii) obtain the prior written approval of the Acquirer and Resimac in accordance with clauses 7.2(e) and 7.2(f) before:

(A) providing the Regulator’s Draft to ASIC for approval pursuant to section 411(2) of the Corporations Act; and

(B) requesting that ASIC register the explanatory statement included in the Scheme Booklet in accordance with item 9 of Schedule 4; and

(iii) rely on the Acquirer, with respect to the Acquirer Information in the Scheme Booklet, and rely on Resimac, with respect to the Resimac Information in the Scheme Booklet.

(b) (compliance - Target) the Target must take all necessary steps to endeavour to ensure that the Target Information:

(i) complies with the requirements of:

(A) the Corporations Act;

209

For

per

sona

l use

onl

y



28

(B) the Corporations Regulations;

(C) ASIC Regulatory Guide 60; and

(D) the Listing Rules; and

(ii) is not, having regard to applicable disclosure requirements, misleading or deceptive in any material respect (including because of any material omission);

(c) (compliance - Acquirer) the Acquirer must take all necessary steps to endeavour to ensure that the Acquirer Information:






(ii) is not, having regard to applicable disclosure requirements, misleading or deceptive in any material respect (including because of any material omission); and

(d) (compliance - Resimac) Resimac must take all necessary steps to endeavour to ensure that the Resimac Information:






(ii) is not, having regard to applicable disclosure requirements, misleading or deceptive in any material respect (including because of any material omission)..

7.2 Content of Scheme Booklet

Without limiting clause 6.1, the Target must:

(a) (consult Acquirer and Resimac):

(i) as soon as reasonably practicable after the date of this deed, provide to the Acquirer and Resimac an initial draft of the Scheme Booklet for the purpose of enabling the Acquirer and Resimac to review and comment on that draft document;

(ii) provide to the Acquirer and Resimac amended drafts of the Scheme Booklet as reasonably agreed for the purpose of enabling the Acquirer and Resimac to review and comment on those draft documents;

210

For

per

sona

l use

onl

y



29

(iii) provided that the Target retains absolute discretion in relation to the Target Information, take comments made by the Acquirer and Resimac into account in good faith when producing a revised draft of the Scheme Booklet; and

(iv) provide to the Acquirer and Resimac a revised penultimate draft of the Scheme Booklet within a reasonable time before the Regulator’s Draft is finalised and to enable the Acquirer and Resimac to review the Regulator’s Draft at least three Business Days before its submission;

(b) (penultimate draft Scheme Booklet) take such comments made by the Acquirer and Resimac in relation to the penultimate draft of the Scheme Booklet into account in good faith (provided that the Target retains absolute discretion in relation to the Target Information) prior to finalising the Regulator’s Draft;

(c) (approval of Regulators Draft) as soon as reasonably practicable after finalisation of an advanced draft of the Regulator’s Draft suitable for review by ASIC, procure that a meeting of the Target Directors is convened to consider approving the Regulator’s Draft as being in a form appropriate for provision to ASIC for review (and the Acquirer and Resimac must also provide confirmation that they do not object to such submission, or if they do object, details of the basis of their objection);

(d) (Regulatory Review Period) during the Regulatory Review Period:

(i) promptly provide to the Acquirer and Resimac, and include in a revised draft of the Scheme Booklet, any new information not included in the Regulator’s Draft which is required by the Corporations Act, Corporations Regulations, ASIC Regulatory Guide 60 or the Listing Rules to be included in the Scheme Booklet; and

(ii) keep the Acquirer and Resimac informed of any matters raised by ASIC in relation to the Scheme Booklet (and copies of all relevant correspondence) and use best endeavours, in co-operation with the Acquirer and Resimac, to resolve any such matters;

(e) (Acquirer Information) obtain approval from the Acquirer, which approval must not be unreasonably withheld or delayed, for the form and context in which the Acquirer Information appears in the Scheme Booklet before:

(i) providing the Regulator’s Draft to ASIC for approval pursuant to section 411(2) of the Corporations Act; and

(ii) requesting that ASIC register the explanatory statement included in the Scheme Booklet in accordance with item 9 of Schedule 4; and

(f) (Resimac Information) obtain approval from Resimac, which approval must not be unreasonably withheld or delayed, for the form and context in which the Resimac Information appears in the Scheme Booklet before:

(i) providing the Regulator’s Draft to ASIC for approval pursuant to section 411(2) of the Corporations Act; and

(ii) requesting that ASIC register the explanatory statement included in the Scheme Booklet in accordance with item 9 of Schedule 4.

211

For

per

sona

l use

onl

y



30

7.3 Acquirer information

Without limiting clause 6.2, the Acquirer:

(a) consents to the inclusion of the Acquirer Information in the Scheme Booklet; and

(b) acknowledges that:

(i) it is responsible for ensuring that the Acquirer Information is not misleading or deceptive in any material respect (whether by omission or otherwise) and that the Target will not verify or edit the final form of that information in the Scheme Booklet; and

(ii) the Scheme Booklet will state that the Acquirer is responsible for the Acquirer Information, in accordance with clause 7.5.

7.4 Resimac Information

Without limiting clause 6.3, Resimac:

(a) consents to the inclusion of the Resimac Information in the Scheme Booklet; and

(b) acknowledges that:

(i) it is responsible for ensuring that the Resimac Information is not misleading or deceptive in any material respect (whether by omission or otherwise) and that the Target will not verify or edit the final form of that information in the Scheme Booklet; and

(ii) the Scheme Booklet will state that Resimac is responsible for the Resimac Information, in accordance with clause 7.5.

7.5 Scheme Booklet responsibility statements

The responsibility statement to appear in the Scheme Booklet, in a form to be agreed by the parties, will contain words to the effect of:

(a) the Target has prepared, and is responsible for, the Target Information in the Scheme Booklet, and that the Acquirer, Resimac and their directors and officers do not assume any responsibility for the accuracy or completeness of that Target Information except to the extent that the Acquirer or Resimac has provided the Target with information for the purpose of the Target preparing such information;

(b) the Acquirer has prepared, and is responsible for, the Acquirer Information specific to the Acquirer in the Scheme Booklet, and that the Target, Resimac and their directors and officers do not assume any responsibility for the accuracy or completeness of that Acquirer Information except to the extent that the Target or Resimac has provided the Acquirer with information for the purpose of Acquirer preparing such information;

(c) Resimac has prepared, and is responsible for, the Resimac Information specific to the Acquirer in the Scheme Booklet, and that the Target, the Acquirer and their directors and officers do not assume any responsibility for the accuracy or completeness of that Resimac Information except to the extent that the Target or the Acquirer has provided Resimac with information for the purpose of Resimac preparing such information; and

212

For

per

sona

l use

onl

y



31

(d) the Independent Expert has prepared and is responsible for the Independent Expert’s Report and:

(i) the Target and its directors and officers do not assume any responsibility for the accuracy or completeness of the Independent Expert’s Report;

(ii) the Acquirer and its directors and officers do not assume any responsibility for the accuracy or completeness of the Independent Expert’s Report; and

(iii) Resimac and its directors and officers do not assume any responsibility for the accuracy or completeness of the Independent Expert’s Report.

7.6 Disagreement on content

If the Acquirer, Resimac and the Target disagree on the form or content of the Scheme Booklet, they must consult in good faith to try to settle an agreed form of the Scheme Booklet. If complete agreement is not reached after reasonable consultation, then:

(a) if the disagreement relates to the form or content of the Acquirer Information contained in the Scheme Booklet, the Target will make such amendments as the Acquirer reasonably requires;

(b) if the disagreement relates to the form or content of the Resimac Information contained in the Scheme Booklet, the Target will make such amendments as Resimac reasonably requires; and

(c) if the disagreement relates to the form or content of any other part of the Scheme Booklet, the Target Board will, acting in good faith, decide the final form or content of the disputed part of the Scheme Booklet.

7.7 Verification

Each party must undertake appropriate verification processes for the information prepared by that party for the Scheme Booklet.

8 Conduct of business

8.1 Overview

From the date of this deed up to and including the Implementation Date, the Target must conduct its business (including, for this purpose, the business of the SPVs) in the ordinary and proper course consistent with applicable laws, the business plans made public or disclosed to the Acquirer and Resimac prior to execution of this deed, and in substantially the same manner as conducted over the previous 3 years, and must regularly consult with the Acquirer and Resimac on the manner of conduct of the business.

8.2 Specific obligations

Without limiting clause 8.1 and other than with the prior written approval of the Acquirer and Resimac or as required by this deed, the Target must and must procure that its Subsidiaries and the SPVs, during the period contemplated by clause 8.1, use reasonable endeavours to:

(a) (business and assets) maintain the condition of its business and assets, including without limitation so as to ensure there is no adverse impact on its rights (including rights of recourse) under any LMI Contract;

213

For

per

sona

l use

onl

y



32

(b) (officers, employees and contractors) keep available the services of its officers, employees and contractors;

(c) (relationships) preserve its relationships with customers, suppliers, licensors, licensees, joint venturers and others with whom it has business dealings;

(d) (change of control provisions) identify any change of control or similar provisions in any Material Contracts and obtain the consents of relevant persons who have rights in respect of those persons to the transactions contemplated by the Merger, provided that:

(i) it must consult with the Acquirer and Resimac in relation to any such provisions and consents and must, if the Acquirer or Resimac so requests, involve them in the discussions and negotiations with the relevant third parties; and

(ii) this does not extend to:

(A) obtaining any consent in relation to paragraph (a) of the definition of “Amortisation Event” (as defined in the Westpac Subscription Agreement) (in relation to which Resimac will be responsible for obtaining the consent required from Westpac within the 30 days after the relevant change in control as contemplated by paragraph (a) of the definition of Amortisation Event); and

(B) obtaining a confirmation from National Australia Bank Limited that it will not exercise its rights to acquire assets from RMS under the Second Shortfall Financing Option Deed as a result of the change of control of any member of the RHG Group (which Resimac will be required to obtain in connection with its negotiation of its financing facilities)”;

provided that the Target must, and must procure that its Subsidiaries and the SPVs, co-operate with Resimac (and entities nominated by Resimac) and provide reasonable assistance in connection with obtaining those consents and confirmations referred to in (A) and (B) above;

(e) (cash) ensure there is no material decrease in the amount of cash in the Target Group and SPVs other than:

(i) as used in the ordinary course of business; or

(ii) as a result of reasonable costs incurred directly in relation to the transactions contemplated by the Merger (provided that the Target uses reasonable endeavours to keep the Transaction Costs below $3,600,000 plus applicable GST2,500,000); or

(iii) where agreed between the parties and consistent with the Financial Assistance Resolution; or

(iv) as payment of the July Dividend or any Fully Franked Dividend, or

(v) as a result of complying with any obligation of a member of the Target Group or SPV under any Material NIM Contract;

214

For

per

sona

l use

onl

y



33

(f) (claims) promptly notify the Acquirer and Resimac of any Action (including, without limitation, before a court or Regulatory Authority) which may be threatened, brought, asserted or commenced against any member of the Target Group or their Officers or an SPV, and consult with the Acquirer and Resimac in relation to such matter to the extent they reasonably require, other than an Action relating only to an asset in the Loan Book;

(g) (insurance) have in place, and maintain until the Implementation Date, insurance over its assets and business (including, for this purpose, the business of the SPVs) to at least the same extent as that in place at the date of this deed;

(h) (cash available in SPV structures) co-operate with the Acquirer and Resimac to assist in ensuring that the cash available to the Target Group (including from release of collateral and repayment of subordinated notes) on the refinancing of the Target Group’s warehouse financing arrangements is released to the Target and available to it on the Implementation Date subject to any legally binding requirements to other funders requiring monies to be retained by the SPV; and

(i) (proposed Unisys Contract extension) procure the extension of the Unisys Contract for a period of 12 months from 1 January 2014 on substantially similar terms (and in respect of timing, pricing and economic matters, not materially less favourable terms) as in the document titled “Proposed UCS Servicing Contract Terms” provided by the Target to Resimac’s Representatives on 21 June 2013 and the Target will consult with Resimac on, and agree on, any such less favourable terms.

8.3 Prohibited actions

Other than with the prior written approval of the Acquirer and Resimac or as required by this deed the Target must not, and must procure that its Subsidiaries do not and, to the extent within their power, procure that the SPVs do not, during the period referred to in clause 8.1:

(a) (Target Prescribed Event) take any action which would be reasonably expected to give rise to a Target Prescribed Event;

(b) (Target Prescribed Event agreement) agree to do anything which would be reasonably expected to give rise to a Target Prescribed Event;

(c) (Material Contracts) enter into or terminate, or roll over, a Material Contract other than:

(i) any extension of the Unisys Contract for a period of 12 months from 1 January 2014 on substantially similar terms (and in respect of timing, pricing and economic matters, on not materially less favourable terms) as in the document titled “Proposed UCS Servicing Contract Terms” provided by the Target to Resimac’s Representatives on 21 June 2013 noting that the Target will consult with Resimac on, and agree on, any such less favourable terms; or

(ii) any other Material Contract which both:

(A) has been disclosed to the Acquirer and Resimac; and

(B) the Acquirer and Resimac has agreed in writing to the entry into, termination or roll-over of such specific disclosed Material Contract;

215

For

per

sona

l use

onl

y



34

(iii) a contract or commitment entered into for the extension, or roll over, of any contract or commitment between any Securitisation Vehicle and any of its financiers, including any warehouse facilities or term funding and associated hedging arrangements in the ordinary course of the business of any Securitisation Vehicle; or

(iv) pursuant to this deed;

(d) (Loan Book Contracts) ensure that no Securitisation Vehicle enters into, terminates, varies or waives or releases any of its rights or obligations under any Loan Book Contract other than, in relation to a Mortgage Loan or Related Security:

(i) in accordance with the usual business practices of the Target Group and each Securitisation Vehicle or as required by any law or direction provided by any Court, regulatory body or ombudsman; or

(ii) in accordance with any instruction or direction from any party which any member of the Target Group or any Securitisation Vehicle is contractually obliged to comply with;

(e) (employment agreements) except as approved in writing by the Acquirer and Resimac,

(i) increase the remuneration of (including with regard to superannuation benefits) or benefits other than bonuses provided to employees, by 5% or more than the amount paid to employees of the Target in the financial year ending 30 June 2012; or

(ii) pay an aggregate employee bonus amount which is 25% more than the aggregate bonus amount paid by the Target in the financial year ending 30 June 2012

(iii) amend any employment or consultancy arrangement.

(f) (new employment agreements) employ any person on terms and conditions not approved in writing by the Acquirer and Resimac;

(g) (termination of employees) terminate the employment of any employee other than for cause;

(h) (accelerate rights) accelerate the rights of any of its directors or employees to benefits of any kind (except under terms of existing contracts where the proposed acceleration was disclosed to the Acquirer and Resimac before the date of this deed);

(i) (transaction based payments) other than as agreed with the Acquirer and Resimac, or pursuant to terms of existing contracts where the proposed payment was disclosed to the Acquirer and Resimac before the date of this deed, enter into any contract or commitment (including any employment contract), or renew or amend any existing contract or commitment, to provide for a payment to be made to the counterparty directly or indirectly as a result of:

(i) the Target, the Acquirer or Resimac entering into this deed;

(ii) the Acquirer, Acquirer Nominee or both acquiring a Relevant Interest in the Target Shares; or

216

For

per

sona

l use

onl

y



35

(iii) the Scheme or a transaction evidenced by this deed or the Scheme;

(j) (financial advisers) amend in any material respect any arrangement with its financial advisers in respect of the transactions contemplated by this deed (including, without limitation any amendment which increases the amount payable to a financial adviser);

(k) (dividends) announce, declare or pay any dividends (other than the July Dividend or any Fully Franked Dividend or as otherwise agreed); or

(l) (agreement) agree to do any of the matters set out above.

8.4 Conduct of business in respect of Loan Book

Without limiting clause 8.1 and other than with the prior written approval of the Acquirer and Resimac or as required by this deed, the Target must and must procure that its Subsidiaries and the SPVs, during the period contemplated by clause 8.1:

(a) service, or procure the servicing of, the Loan Book in a manner consistent with the servicing procedures of the Target in relation to the Material NIM Contracts, which have been disclosed in the Due Diligence Materials;

(b) notify the Acquirer and Resimac if it becomes aware of the creation or existence of any Encumbrance in relation to any part of the Loan Book that competes with the Acquirer or Resimac’s interest, or the interest of the Target or an SPV, in the Loan Book, other than any Encumbrance in connection with a Material NIM Contract, which has been disclosed in the Due Diligence Materials;

(c) duly and punctually perform each of its material obligations in respect of the Loan Book;

(d) not do anything that would give an obligor, in respect of a Mortgage Loan, a right to withhold, set-off or make a counterclaim under or in connection with a Mortgage Loan or Relevant Document, except as ordered by a regulatory body, required by law, conducted in accordance with servicing procedures of the Target in relation to the Material NIM Contracts, which have been disclosed in the Due Diligence Materials, or as contemplated under or as otherwise disclosed in the Due Diligence Materials;

(e) not amend, grant any waiver of, or vary or discharge, a Mortgage Loan, Relevant Document or Related Security except in connection with the full repayment of a Mortgage Loan by the relevant obligor, refinance of a Mortgage Loan by a third party financier, as ordered by a regulatory body, as required by law or as conducted in accordance with servicing procedures of the Target in relation to the Material NIM Contracts, which have been disclosed in the Due Diligence Materials;

(f) except as required by law or as contemplated by this document, not (and must not direct any other party to) do or omit to do anything which would have the effect of rendering the rights of the Acquirer or Resimac in a Mortgage Loan liable to forfeiture, cancellation, avoidance or which would otherwise prejudicially affect the rights of the Acquirer or Resimac in and to the Mortgage Loans in a material respect taken as a whole, except in connection with the full repayment of a Mortgage Loan by the relevant obligor or refinance of a Mortgage Loan by a third party financier; and

217

For

per

sona

l use

onl

y



36

(g) hold regular discussions with the Acquirer and Resimac in relation to the management of the Loan Book.

8.5 Permitted acts

(a) Nothing in clause 8 restricts any member of the Target Group from doing anything:

(i) that is contemplated in this deed;

(ii) that is fairly disclosed in the Due Diligence Materials or in any prior disclosure to ASX; or

(iii) approved by the Acquirer and Resimac in writing, such approval not to be unreasonably withheld or delayed;

(b) Nothing in clause 8 operates so as to restrict or prevent:

(i) an obligor from anything which it is entitled or permitted to do or omit to do (as the case may be) under applicable law or under the terms of the relevant Mortgage Loan; or

(ii) any agreement to which the Target or an SPV is a party that is executed prior to the date of this deed pursuant to which the repayment of any Mortgage Loan is rescheduled or any Relevant Document is otherwise amended and which has been fully disclosed to the Acquirer and Resimac before the date of this deed.

8.6 Appointment and retirement of Target Directors

(a) As soon as practicable after the Second Court Date, and subject to but no later than immediately after the Scheme Consideration being paid to Scheme Participants, the Target must:

(i) cause the appointment of each Incoming Director to the Target Board;

(ii) procure that each of the Outgoing Directors retire from the Target Board and provide (subject to payment of any outstanding termination payment and remuneration) written notice to the effect that they have no claim outstanding for loss of office, remuneration or otherwise against the Target; and

(iii) reconstitute the boards of each other member of the Target Group in accordance with such directions (if any) given by the Acquirer to the Target.

(b) As soon as practicable, and in any event no later than 8.00 am on the Second Court Date, the Target must use all reasonable endeavours to:

(i) obtain any required regulatory approvals to permit the steps referred to in paragraphs (i), (ii) and (iii) above;

(ii) procure the resolution of the board of directors of each SPV to appoint directors to the relevant SPV in accordance with the Acquirer’s directions and procure the resignation of the existing directors of each SPV with effect from the time the Acquirer’s nominees are appointedBNY to remove the directors of the SPVs and replace them with directors in accordance with the Acquirer’s directions, subject to the Scheme becoming Effective; and

218

For

per

sona

l use

onl

y



37

(iii) obtain any required regulatory or other approvals to permit the retirement and appointment of directors to the SPVs in accordance with the Acquirer’s directions.

(c) The Target will be obliged under the Scheme to use reasonable endeavours to procure such retirement and appointment of directors to the SPVs as set out in clause (8.6(b)8.5(b), as a step prior to the payment of the Scheme Consideration (and the Scheme Consideration will only be payable on the Implementation Date once such retirement and appointment has been procured).

8.7 Fully Franked Dividend

(a) Dividend

Subject to the Corporations Act, the Target may (but is not required to) announce, determine and pay a Fully Franked Dividend to the maximum extent possible provided that the payment and franking of the Fully Franked Dividend does not result in the Target being (or being taken to be) in a franking deficit immediately before the Implementation Date.

(b) Tax ruling

(1) If the Target intends to announce, determine and pay a Fully Franked Dividend:

(A) the Target must inform the Acquirer and Resimac of its intention in writing; and

(B) if the Target so requests, the Acquirer and the Target must work in good faith to seek and obtain, on behalf of the Target Shareholders, a draft class ruling in a form acceptable to the Acquirer and the Target (both acting reasonably) given by the Australian Taxation Office in relation to the tax implications of payment of the Fully Franked Dividend to Target Shareholders (Tax Ruling).

(c)(2) The parties acknowledge and agree that matters relating to the Fully Franked Dividend are subject to further consultation and agreement between the parties. The parties must discuss and co-operate in good faith with each other in reaching agreement with respect to these matters. These matters include, but are not limited to, the form and manner of payment of any Fully Franked Dividend. A Fully Franked Dividend may only be paid if the Acquirer and Resimac agree that such payment can be made without prejudice to either of them.

9 Standstill

For a period of four months from the date of this deed, the Acquirer, Resimac and their Representatives must not without the prior written consent of the Target:

(a) subscribe, acquire, or offer to subscribe or acquire, or assist or induce any other person to acquire, any securities in the Target, other than pursuant to the Scheme;

(b) enter, or assist or induce any other person to enter, into any agreement or arrangement which confers rights, the economic effect of which is equivalent, or substantially equivalent to, the acquisition, holding or

219

For

per

sona

l use

onl

y



38

disposal of any securities in the Target, other than pursuant to the Scheme;

(c) solicit proxies from holders of securities in the Target, or otherwise try and influence or control the management of the Target, other than in connection with the Scheme Meeting or pursuant to this deed;

(d) assist (including by providing Target Confidential Information), encourage, counsel, induce, instruct or ask any other person to do anything in clauses (a), (b) or (c) above.

Nothing in this clause 9 prevents the Acquirer or Resimac from proposing a control transaction at a higher financial value and on terms more favourable to the Target Shareholders to a control transaction proposed by a third party and acquiring securities in the Target on the terms of such a proposal.

10 Exclusivity

10.1 Termination of discussions (in the deed of amendment dated 15 July 2013, parties acknowledged and agreed the Target has complied with this clause, and accordingly, the provisions of this clause are no longer of any force and effect).

The Target undertakes that promptly following execution of this deed and release to ASX of the announcement in Annexure A the Target will notify any other person with which it has been in negotiations or discussions in respect of any Competing Transaction immediately prior to entry into this deed that any such negotiations or discussions previously in existence are terminated.

10.2 No-shop

Subject to clause 10.7, during the Exclusivity Period, the Target must ensure that neither it nor any of its Related Bodies Corporate nor any of its or their Representatives directly or indirectly:

(a) solicits, invites, encourages or initiates any enquiries, negotiations or discussions; or

(b) communicates any intention to do any of these things,

in respect of obtaining or in response to any offer, proposal or expression of interest from any person in relation to, or which may be reasonably expected to lead to, a Competing Transaction.

10.3 No-talk

Subject to clauses 10.6 and 10.7, during the Exclusivity Period, the Target must ensure that neither it nor any of its Related Bodies Corporate nor any of its or their Representatives:

(a) negotiates or enters into; or

(b) participates in negotiations or discussions with any other person regarding,

a Competing Transaction or any offer, proposal or expression of interest from any person in relation to, or which may be reasonably expected to lead to, a Competing Transaction.

220

For

per

sona

l use

onl

y



39

10.4 Due diligence information

Subject to clauses 10.6 and 10.7, during the Exclusivity Period, the Target must ensure that neither it nor any of its Related Bodies Corporate nor any of its or their Representatives:

(a) solicits, invites, initiates, encourages, permits or, facilitates any other person other than the Acquirer, Resimac and their Representatives to undertake due diligence investigations on any member of the Target Group or their businesses or operations (including, for this purpose, the business of the SPVs) (provided that the Target may permit any counterparty to a Material NIM Contract to undertake due diligence investigations which it requests and which it is contractually entitled undertake, provided it only does so on a confidential basis in accordance with the terms of the relevant Material NIM Contract and not in connection with a Competing Transaction or any offer, proposal or expression of interest from any person in relation to, or which may be reasonably expected to lead to, a Competing Transaction, and provided further that the Target has first given the Acquirer and Resimac details of the requested due diligence); or

(b) makes available to any other person or permits any other person to receive other than the Acquirer, Resimac and their Representatives (in the course of due diligence investigations or otherwise) any non-public information relating to any member of the Target Group or their businesses or operations (including, for this purpose, the business of the SPVs).

If, as a result of the operation of clauses 10.6 or 10.7, any such information is made available to any other person, the same information must immediately be made available to the Acquirer and Resimac.

10.5 Notice of unsolicited approach

During the Exclusivity Period, the Target must promptly notify the Acquirer and Resimac if it or any of its Related Bodies Corporate or Representatives receives (directly or indirectly) any unsolicited approach, enquiry, proposal or attempt to initiate any negotiations or discussions with respect to any Competing Transaction and must disclose to the Acquirer and Resimac the fact that such an approach has been made and the nature of the approach, including the price or consideration proposed. A material variation to a previous approach or proposal is taken to be a new approach or proposal for the purposes of this clause.

10.6 Exceptions

Clauses 10.3 and, where relevant, clause 10.4 and (to the extent it relates to disclosure of identity only) clause 10.5, do not apply to the extent that they restrict the Target or the Target Board from:

(a) considering a Competing Transaction;

(b) taking or refusing to take any action with respect to a Competing Transaction; or

(c) responding to a new or revised proposal from a bidder who had engaged with the Target prior to the date of this deed, or any person approached by the Target prior to the date of this deed;

provided in each case that the Competing Transaction or proposal was not solicited, invited, encouraged or initiated by the Target in contravention of clause 10.2 and that the Target Board has determined, in good faith and acting reasonably that:

221

For

per

sona

l use

onl

y



40

(d) after consultation with its financial advisors, such a Competing Transaction could reasonably be considered to be, or to be capable of becoming, a Superior Proposal; and

(e) after receiving written advice from external legal advisers, that failing to respond to such a Competing Transaction would:

(i) be reasonably likely to constitute a breach of the Target Board’s fiduciary or statutory obligations; or

(ii) otherwise be unlawful to not undertake such action,

and subject always to clause 10.7.

10.7 Further exceptions

Nothing in this deed prevents the Target from:

(a) continuing to make normal presentations to, and to respond to enquiries from, brokers, portfolio investors and analysts in the ordinary course in relation to the Merger or its business generally; or

(b) fulfilling its continuous disclosure requirements.

10.8 Response to Competing Transaction

(a) The Target Board must not enter into any legally binding agreement, arrangement or understanding with respect to a Competing Transaction or publicly change or withdraw its recommendation of the Scheme or the Resolutions unless the Target has first provided the Acquirer and Resimac with:

(i) the identity of the person proposing the Competing Transaction;

(ii) the material terms of the Competing Transaction; and

(iii) any material information provided to the person making the Competing Transaction that has not either been publicly disclosed or previously provided to the Acquirer and Resimac,

and has given the Acquirer and Resimac three Business Days to amend the terms of the Merger (a Counterproposal) so that the Counterproposal would provide an outcome that is superior for Target Shareholders as a whole compared with the Competing Transaction.

(b) The Target Board, acting reasonably and in good faith, must consider any Counterproposal, and if the Counterproposal would provide an outcome that is superior for Target Shareholders as a whole compared with the Competing Transaction, taking into account all the terms and conditions of the Counterproposal, then the Target, the Acquirer and Resimac must use their best endeavours to agree the amendments to this deed which are reasonably necessary to reflect the Counterproposal and to implement the Counterproposal, in each case as soon as reasonably practicable.

(c) This clause 10.8 does not apply to the extent that it requires the Target or the Target Board to take, or omit to take, any action in respect of a Competing Transaction (which was not solicited, facilitated, encouraged, invited or initiated by the Target or any of its Representatives in breach of clause 10.2) where the Target Board has determined, in good faith and acting reasonably after receiving written advice from external lawyers, that taking, or omitting to take, such action would constitute a

222

For

per

sona

l use

onl

y



41

breach of the directors’ fiduciary or statutory obligations, or would otherwise be unlawful.

10.9 Enforcement of ‘standstill’ obligations

The Target agrees not to terminate or waive, and to enforce, any ‘standstill’ obligation owed to it by any third party, except that it may waive such an obligation only to the extent necessary to permit a Competing Proposal:

(a) that the Target Board has determined in accordance with clause 6.6(a) is a Superior Proposal;

(b) that was not solicited, invited, encouraged or initiated by the Target in contravention of clause 10.2; and

(c) in respect of which the Target has otherwise complied with clause 10, including clause 10.8.

The Target confirms that it has not agreed to terminate or waive such an obligation in the month prior to the date of this deed.

11 Reimbursement of Acquirer and Resimac costs

11.1 Background

This clause 11 has been agreed in circumstances where:

(a) the Acquirer, Resimac and the Target believe that the Merger will provide significant benefits to the Acquirer, Resimac, the Target and their respective shareholders, and the Acquirer, Resimac and the Target acknowledge that, if they enter into this deed and the Scheme is subsequently not implemented, the Acquirer and Resimac will incur significant costs;

(b) the Acquirer and Resimac requested that provision be made for the payments outlined in clause 11.2, without which the Acquirer and Resimac would not have entered into this deed;

(c) the Target Board, the Acquirer Board and the Resimac Board each believe that it is appropriate for all parties to agree to the payment referred to in this clause 11 to secure the Acquirer and Resimac’s participation in the Merger; and

(d) the parties have received legal advice on this deed and the operation of this clause 11.

11.2 Payment by Target to Acquirer and Resimac

The Target agrees to pay $1,638,0001,200,000, in aggregate, to the Acquirer and Resimac (in such proportions as they determine) if any of the following circumstances occur:

(a) (withdrawal or modification of recommendation) any Target Director:

(i) fails to recommend the Scheme or the Resolutions as contemplated by clauses 6.4(a) and 6.4(b); or

(ii) withdraws or adversely modifies that recommendation;

except:

223

For

per

sona

l use

onl

y



42

(iii) if a Target Director changes their recommendation following the receipt of the Independent Expert’s Report (or any update of that report) where that report (or any update of that report) states that in the opinion of the Independent Expert the Scheme is not in the best interests of Target Shareholders (other than because of a Superior Proposal to which clause 11.2(b) applies); or

(iv) as a result of any matter or thing giving the Target the right to terminate under clause 15.1;

(b) (Competing Proposal) either:

(i) the Target enters into a legally binding agreement to undertake a Competing Proposal; or

(ii) any Target Director withdraws or adversely modifies their recommendation of the Scheme or the Resolutions as contemplated by clauses 6.4(a) and 6.4(b) as a result of a Competing Proposal being made; or

(iii) the Target Board determines or announces that a Competing Proposal is a Superior Proposal; or

(iv) a Competing Proposal is made or announced and at any time before 6 months after the End Date the proponent of the Competing Proposal (together with its associates, as that term is defined with reference to Chapter 6 of the Corporations Act) has a Relevant Interest in more than 50% of the Target Shares, or acquires or obtains an economic interest in all or a substantial part of the assets of the Target Group or of the SPVs.

(c) (Target Prescribed Event or Target Material Adverse Change) all of the following are satisfied:

(i) a Target Prescribed Event or a Target Material Adverse Change occurs prior to 8.00am on the Second Court Date; and

(ii) this deed is terminated in accordance with clause 15; and

(iii) all of the following apply in relation to the Target Prescribed Event or the Target Material Adverse Change:

(A) in the case of a Target Material Adverse Change, the prevention of the Target Material Adverse Change was within the control of the Target; and

(B) the Target has failed to rectify the Target Prescribed Event or Target Material Adverse Change within 10 Business Days (or any shorter period ending at 8.00am on the Second Court Date) after receipt of notice from the Acquirer or Resimac requiring the Target to do so;

(d) (material breach) the Merger does not proceed because the Target is in material breach of any clause of this deed (including a representation or warranty), provided that the Acquirer or Resimac has, if practicable, given notice to the Target setting out the relevant circumstances and the relevant circumstances continue to exist five Business Days (or any shorter period ending at 8.00am on the Second Court Date) after the time such notice is given.

224

For

per

sona

l use

onl

y



43

11.3 No amount payable if Scheme becomes Effective

Notwithstanding the occurrence of any event under clause 11.2 no amount is payable under clause 11.2 if the Scheme becomes Effective.

11.4 Timing of payment

The Target must pay the Acquirer and Resimac the amount referred to in clause 11.2 within 10 Business Days of receipt by the Target of a valid written demand for payment from the Acquirer or Resimac. The demand may only be made:

(a) after the occurrence of an event referred to in clauses 11.2(a), 11.2(b) or 11.2(d); or

(b) if all of the circumstances referred to in clause 11.2(c)occur;

and in each case, the basis for the demand is set out in the notice.

11.5 Nature of payment

The amount payable by the Target to the Acquirer and Resimac under clause 11.2 is an amount to compensate the Acquirer and Resimac for:

(a) advisory costs (including costs of advisers other than success fees);

(b) costs of management and directors’ time;

(c) out-of-pocket expenses; and

(d) reasonable opportunity costs incurred by the Acquirer and Resimac in pursuing the transactions contemplated by this deed or in not pursuing other alternative acquisitions or strategic initiatives which the Acquirer and Resimac could have developed to further its business and objectives,

but is without prejudice to and does not limit any rights which the Acquirer, Resimac, any Acquirer Indemnified Party, Resimac Indemnified Party or any shareholder of the Acquirer or Resimac may have against the Target, other than reduction of damages in light of the payment towards costs, opportunity costs and expenses.

11.6 Survival

Any accrued obligations under this clause 11 survive termination of this deed.

11.7 Notice to be given by Acquirer and Resimac

A notice under this clause 11 must be given by the Acquirer and Resimac to be valid.

12 Reimbursement of Target costs

12.1 Background

This clause 12 has been agreed in circumstances where:

(a) the Acquirer, Resimac and the Target believe that the Merger will provide significant benefits to the Acquirer, Resimac, the Target and their respective shareholders, and the Acquirer, Resimac and the Target acknowledge that, if they enter into this deed and the Scheme is subsequently not implemented, the Target will incur significant costs;

225

For

per

sona

l use

onl

y



44

(b) the Target requested that provision be made for the payments outlined in clause 12.2, without which the Target would not have entered into this deed;

(c) the Acquirer Board, the Resimac Board and the Target Board believe that it is appropriate for both parties to agree to the payment referred to in this clause 12 to secure Target’s participation in the Merger; and

(d) the parties have received legal advice on this deed and the operation of this clause 12.

12.2 Payment by Acquirer to Target

The Acquirer and Resimac (in such proportions as they determine, but so that if either of them fails to pay its proportion or any part of it, the Target may recover the shortfall from the other) agrees to pay to the Target $1,638,0001,200,000 if the Merger does not proceed because the Acquirer or Resimac is in material breach of any clause of this deed (including a representation or warranty), provided that the Target has, if practicable, given notice to the Acquirer and Resimac setting out the relevant circumstances and the relevant circumstances continue to exist five Business Days (or any shorter period ending at 8.00am on the Second Court Date) after the time such notice is given.

12.3 No amount payable if Scheme becomes Effective

Notwithstanding the occurrence of any event under clause 12.2 no amount is payable under clause 12.2 if the Scheme becomes Effective.

12.4 Timing of payment

The Acquirer and Resimac must pay Target the amount referred to in clause 12.2 within 10 Business Days of receipt by the Acquirer and Resimac of a valid written demand for payment from the Target, provided that the Target has provided the Acquirer and Resimac with all information and documentation reasonably requested by the Acquirer and Resimac for the purpose of verifying the amount referred to in clause 12.2. The demand may only be made after the occurrence of the event referred to in clause 12.2.

12.5 Nature of payment

The amount payable by the Acquirer and Resimac to the Target under clause 12.2 is an amount to compensate the Target for

(a) advisory costs (including costs of advisers other than success fees);

(b) costs of management and directors’ time;

(c) out-of-pocket expenses; and

(d) reasonable opportunity costs incurred by the Target in pursuing the transactions contemplated by this deed or in not pursuing other alternative acquisitions or strategic initiatives which the Target could have developed to further its business and objectives,

but is without prejudice to and does not limit any rights which the Target, any Target Indemnified Party or any shareholder of the Target may have against the Acquirer or Resimac, other than reduction of damages in light of the payment towards costs, opportunity costs and expenses.

12.6 Survival

Any accrued obligations under this clause 12 survive termination of this deed.

226

For

per

sona

l use

onl

y



45

13 Representations and warranties

13.1 Target's representations and warranties

(a) The Target represents and warrants to the Acquirer and Resimac (on its own behalf and separately as trustee or nominee for each of the Acquirer directors and Resimac directors) that each of the statements set out in Schedule 7 is true and correct in all material respects as at the date of this deed and as at 8.00am on the Second Court Date.

(b) The Acquirer and Resimac acknowledge and agree that the Target has disclosed or is deemed to have disclosed against the statements set out in Schedule 1 and Schedule 7, and the Acquirer and Resimac are aware of, and will be treated as having actual knowledge of, all facts, matters and circumstances that:

(i) are provided for or described in this deed;

(ii) are fairly disclosed in the Due Diligence Materials or ASX announcement; or

(iii) were, prior to 21 June 2013 (in the case of the Acquirer or Resimac) or the date of this deed (in the case of the Target), within the actual knowledge of the party seeking to rely on the relevant statement or its Related Bodies Corporate.

13.2 Target’s indemnity

The Target indemnifies the Acquirer Indemnified Parties and Resimac Indemnified Parties against all Losses incurred directly as a result of any of the representations and warranties in clause 13.1 not being true and correct in all material respects.

13.3 Target warranty certificate

The Target must provide to the Acquirer and Resimac by 8.00am on the Second Court Date a certificate signed by a Target Director and made in accordance with a resolution of the Target Board stating, as at that date, that the representations or warranties given by the Target in clause 13.1 remain true and correct or, if any such representation or warranty is not true and correct as at that date, providing complete particulars of the facts and matters which make the representation or warranty untrue or incorrect.

13.4 Acquirer’s representations and warranties

The Acquirer represents and warrants to the Target (on its own behalf and separately as trustee or nominee for each of the Target Directors) that each of the statements set out in Schedule 8 is true and correct in all material respects as at the date of this deed and as at 8.00am on the Second Court Date.

13.5 Acquirer’s indemnity

The Acquirer indemnifies the Target Indemnified Parties against all Losses incurred directly as a result of any of the representations and warranties in clause 13.4 by the Acquirer not being true and correct in all material respects.

13.6 Acquirer warranty certificate

The Acquirer must provide to the Target by 8.00am on the Second Court Date a certificate signed by a director of the Acquirer and made in accordance with a resolution of the Acquirer Board stating, as at that date, that the representations and warranties given by the Acquirer in clause 13.4 remain true and correct or, if any such representation or warranty is not true and correct as at that date,

227

For

per

sona

l use

onl

y



46

providing complete particulars of the facts and matters which make the representation or warranty untrue or incorrect.

13.7 Resimac’s representations and warranties

Resimac represents and warrants to the Target (on its own behalf and separately as trustee or nominee for each of the Target Directors) that each of the statements set out in Schedule 9 is true and correct in all material respects as at the date of this deed and as at 8.00am on the Second Court Date.

13.8 Resimac’s indemnity

Resimac indemnifies the Target Indemnified Parties against all Losses incurred directly as a result of any of the representations and warranties in clause 13.7 by the Acquirer not being true and correct in all material respects.

13.9 Resimac warranty certificate

Resimac must provide to the Target by 8.00am on the Second Court Date a certificate signed by a director of Resimac and made in accordance with a resolution of the Resimac Board stating, as at that date, that the representations and warranties given by Resimac in clause 13.7 remain true and correct or, if any such representation or warranty is not true and correct as at that date, providing complete particulars of the facts and matters which make the representation or warranty untrue or incorrect.

14 Court proceedings

14.1 Appeal process

If the Court refuses to make orders convening the Scheme Meeting or approving the Scheme, the Acquirer, Resimac and the Target must appeal the Court’s decision to the fullest extent possible except to the extent that:

(a) the parties agree otherwise; or

(b) external legal advisers representing that party in relation to the Scheme indicates that, in their opinion, an appeal would likely have less than a 50% prospect of success,

in which case any of the parties may terminate this deed in accordance with clause 15.1(e)(iii).

14.2 Defence of proceedings

The Acquirer, Resimac and the Target must vigorously defend, or must cause to be vigorously defended, any lawsuits or other legal proceeding brought against it (or any of its Subsidiaries or an SPV) challenging this deed or the completion of the Merger. The Acquirer, Resimac and the Target will not settle or compromise (or permit any of its Subsidiaries or an SPV to settle or compromise) any claim brought in connection with this deed without the prior written consent of the other parties, such consent not to be unreasonably withheld.

14.3 Costs

Any costs incurred as a result of the operation of this clause 14 will be borne in equal shares by each party.

15 Termination

15.1 Termination events

Without limiting any other provision of this deed (including clauses 3.9 and 14.1), this deed may be terminated:

228

For

per

sona

l use

onl

y



47

(a) (End Date) by any party, if the Scheme has not become Effective by the End Date;

(b) (lack of support) at any time prior to 8.00am on the Second Court Date by the Acquirer or Resimac if any Target Director who was a Target Director as at the date of this deed changes their recommendation or ceases to recommend to Scheme Participants that they vote in favour of the Resolutions as contemplated by clauses 6.4(a) or 6.4(b), including any adverse modification to their recommendation as contemplated by clauses 6.4(a) or 6.4(b);

(c) (competing interest) by the Acquirer or Resimac, if a person (other than a member of the Acquirer Group or Resimac Group) acquires a Relevant Interest in more than 10% of the Target Shares following the date of this deed;

(d) (Competing Transaction) by any party if the Target Board determines and publicly announces that a Competing Transaction (without breach of clause 10) is a Superior Proposal. However, Target cannot terminate this deed until after the procedure is clause 10.8 has been followed in good faith;

(e) (consultation, appeal failure) in accordance with and pursuant to:

(i) clause 3.9(a);

(ii) clause 3.9(b); or

(iii) clause 14.1;

(f) (material breach by Target) by the Acquirer or Resimac, if the Target breaches a material term of this deed and the Acquirer or Resimac has, if practicable, given notice to the Target setting out the relevant circumstances and the relevant circumstances continue to exist five Business Days (or any shorter period ending at 8.00am on the Second Court Date) after the time such notice is given;

(g) (material breach by the Acquirer) by the Target, if the Acquirer breaches a material term of this deed and the Target has, if practicable, given notice to the Acquirer setting out the relevant circumstances and the relevant circumstances continue to exist five Business Days (or any shorter period ending at 8.00am on the Second Court Date) after the time such notice is given;

(h) (material breach by Resimac) by the Target, if Resimac breaches a material term of this deed and the Target has, if practicable, given notice to Resimac setting out the relevant circumstances and the relevant circumstances continue to exist five Business Days (or any shorter period ending at 8.00am on the Second Court Date) after the time such notice is given;

(i) (Insolvency) by any party if any other party or (in the case of termination by the Acquirer or Resimac only) any Subsidiary of the Target or SPV becomes Insolvent;

(j) (agreement) if agreed to in writing by the Acquirer, Resimac and the Target; or

(k) (representation or warranty) by any party if a representation or warranty given by another party under clause 13 is or becomes untrue in any material respect and the breach of the representation or warranty is

229

For

per

sona

l use

onl

y



48

of a kind that, had it been disclosed to the first party before its entry into this deed, could reasonably be expected to have resulted in that first party either not entering into this deed or entering into it on materially different terms (and the terminating party has, if practicable, given notice to the party who gave the warranty setting out the relevant circumstances and the relevant circumstances continue to exist five Business Days (or any shorter period ending at 8.00am on the Second Court Date) after the time such notice is given),

provided, in the case of any termination in circumstances where the terminating party would (or would if the Scheme does not become Effective) be liable to pay an amount under clause11 or clause 12, termination may only occur if such amount has been paid or its payment has been secured to the satisfaction of the party which would be entitled to receive it.

15.2 Termination

Where a party has a right to terminate this deed, that right for all purposes will be validly exercised if the party delivers a notice in writing to the other parties stating that it terminates this deed (and, if relevant, complies with the proviso at the end of clause 15.1).

15.3 Effect of Termination

In the event that a party terminates this deed, or if this deed otherwise terminates in accordance with its terms, then in either case all further obligations of the parties under this deed, other than the obligations set out in clauses 11, 12, 14, 15.4, 16, 17, 18 and 19 will immediately cease to be of further force and effect without further liability of any party to the other, provided that nothing in this clause releases any party from liability for any pre-termination breach of this deed.

15.4 Damages

In addition to the right of termination under clause 15.1 where there is no appropriate remedy for the breach of this deed (other than termination), the non-defaulting party is entitled to damages for Losses suffered by it and expenses incurred by it as a result of the breach of this deed. Any award of damages will be reduced by any payment made under clause 11 or 12 (if any).

16 Public announcements

16.1 Public announcement of Scheme

Immediately after signing this deed, the Target, the Acquirer and Resimac will issue a joint public announcement of the proposed Merger in the form contained in Annexure A.

16.2 Required disclosure

Where a party is required by law, the Listing Rules or a memorandum of understanding with a Regulatory Authority to make any announcement or make any disclosure relating to a matter the subject of the Merger, it may do so only to the extent required and after it has given the other parties as much notice as possible and has consulted to the fullest extent possible in the circumstances with the other parties and their legal advisers.

16.3 Other announcements

Subject to clauses 16.1 and 16.2, no party may make any public announcement or disclosure in connection with the Merger (including disclosure to a Regulatory Authority) other than in a form approved by each party (acting reasonably), subject to any approval by the other party being promptly given to ensure

230

For

per

sona

l use

onl

y



49

disclosure is made in the time required by the Listing Rules (if applicable) or the requirements of any Regulatory Authority. Each party will use its best endeavours to provide such approval as soon as practicable.

17 Confidential Information

17.1 Disclosure of Acquirer Confidential Information and Resimac Confidential Information

No Acquirer Confidential Information or Resimac Confidential Information may be disclosed by the Target to any person except:

(a) Representatives of the Target or its Related Bodies Corporate requiring the information for the purposes of this deed; or

(b) for the purposes of preparing the Scheme Booklet, associated documentation, pleadings, evidence and submissions for the Court hearings; or

(c) with the consent of the Acquirer in respect of the Acquirer Confidential Information or Resimac in respect of the Resimac Confidential Information which consent may be given or withheld in its absolute discretion; or

(d) if the Target is required to do so by law or by a stock exchange (but only to the extent required and if the requirement was not caused by a voluntary action of the Target); or

(e) if the Target is required to do so in connection with legal proceedings relating to this deed.

17.2 Use of Acquirer Confidential Information and Resimac Confidential Information

The Target must use the Acquirer Confidential Information and Resimac Confidential Information exclusively for the purpose of due diligence and preparing the Scheme Booklet (and other documentation referred to in clause 17.1(b)) and for no other purpose (and must not make any use of any the Acquirer Confidential Information or Resimac Confidential Information to the competitive disadvantage of the Acquirer, Resimac or any of their Related Bodies Corporate).

17.3 Disclosure of Target Confidential Information

No Target Confidential Information may be disclosed by the Acquirer or Resimac to any person except:

(a) Representatives of the Acquirer or Resimac or their Related Bodies Corporate requiring the information for the purposes of this deed; or

(b) for the purposes of pleadings, evidence and submissions for the Court hearings (where applicable); or

(c) with the consent of the Target which consent may be given or withheld in its absolute discretion; or

(d) if the Acquirer or Resimac is required to do so by law or by a stock exchange (but only to the extent required); or

(e) if the Acquirer or Resimac is required to do so in connection with legal proceedings relating to this deed.

231

For

per

sona

l use

onl

y



50

17.4 Use of Target Confidential Information

The Acquirer and Resimac must use the Target Confidential Information exclusively for the purpose of due diligence, commenting on the Scheme Booklet (or for preparing or commenting on other documentation referred to in clause 17.3(b) where applicable) and for no other purpose (and must not make any use of any the Target Confidential Information to the competitive disadvantage of the Target or any of its Related Bodies Corporate).

17.5 Disclosure by recipient of Confidential Information

Any party disclosing information under clause 17.1(a) or 17.1(c) or clause 17.3(a) or 17.3(c) must use reasonable endeavours to ensure that persons receiving Confidential Information from it do not disclose the information except in the circumstances permitted in clause 17.1 or clause 17.3.

17.6 Excluded Information

Clauses 17.1, 17.2, 17.3, 17.4 and 17.5 do not apply to the Excluded Information.

17.7 Confidentiality Agreement

Each party acknowledges and agrees that it continues to be bound by the Confidentiality Agreements (for so long as that document remains in force) in respect of all information received by it from the other parties on, before or after the date of this deed.

17.8 Termination

This clause 17 will survive termination (for whatever reason) of this deed.

18 Notices and other communications

18.1 Form - all communications

Unless expressly stated otherwise in this deed, all notices, certificates, consents, approvals, waivers and other communications in connection with this deed must be:

(a) in writing;

(b) signed by the sender (if an individual) or an Authorised Officer of the sender; and

(c) marked for the attention of the person identified in the Details or, if the recipient has notified otherwise, then marked for attention in the way last notified.

18.2 Form - communications sent by email

Communications sent by email need not be marked for attention in the way stated in clause 18.1. However, the email:

(a) must state the first and last name of the sender; and

(b) must be in plain text format or, if attached to an email, must be an Adobe Portable Document Format (pdf) file.

Communications sent by email are taken to be signed by the named sender.

18.3 Delivery

Communications must be:

232

For

per

sona

l use

onl

y



51

(a) left at the address set out or referred to in the Details;

(b) sent by prepaid ordinary post (airmail if appropriate) to the address set out or referred to in the Details;

(c) sent by fax to the fax number set out or referred to in the Details;

(d) sent by email to the address set out or referred to in the Details; or

(e) given in any other way permitted by law.

However, if the intended recipient has notified a changed address, fax number or email address, then communications must be to that address, fax number or email address.

18.4 When effective

Communications take effect from the time they are received or taken to be received under clause 18.5 (whichever happens first) unless a later time is specified.

18.5 When taken to be received

Communications are taken to be received:

(a) if sent by post, three days after posting (or seven days after posting if sent from one country to another);

(b) if sent by fax, at the time shown in the transmission report as the time that the whole fax was sent; or

(c) if sent by email;

(i) when the sender receives an automated message confirming delivery; or

(ii) four hours after the time sent (as recorded on the device from which the sender sent the email) unless the sender receives an automated message that the email has not been delivered,

whichever happens first.

18.6 Receipt outside business hours

Despite clauses 18.4 and 18.5, if communications are received or taken to be received under clause 18.5 after 5.00pm in the place of receipt or on a non-Business Day, they are taken to be received at 9.00am on the next Business Day and take effect from that time unless a later time is specified.

19 Goods and services tax (GST)

19.1 Consideration GST exclusive

Unless expressly stated otherwise in this deed, all amounts payable or consideration to be provided under this deed are exclusive of GST.

19.2 Payment of GST

If GST is payable on any supply made under this deed, for which the consideration is not expressly stated to include GST, the recipient agrees to pay to the supplier an additional amount equal to the GST payable at the same time that the consideration for the supply, or the first part of the consideration for the supply (as the case may be), is to be provided. However:

233

For

per

sona

l use

onl

y



52

(a) the recipient need not pay the additional amount until the supplier gives the recipient a tax invoice or an adjustment note; and

(b) if an adjustment event arises in respect of the supply, the additional amount must be adjusted to reflect the adjustment event and the recipient or the supplier (as the case may be) must make any payments necessary to reflect the adjustment.

19.3 Reimbursements

If a party is required under this deed to indemnify another party, or pay or reimburse costs of another party, that party agrees to pay the relevant amount less any input tax credits to which the other party (or to which the representative member for a GST group of which the other party is a member) is entitled, except to the extent that the relevant event is a taxable supply for GST purposes.

19.4 Calculation of payments

If an amount payable under this deed is to be calculated by reference to:

(a) the price to be received for a taxable supply then, for the purposes of that calculation, the price is reduced to the extent that it includes any amount on account of GST; and

(b) the price to be paid or provided for an acquisition then, for the purposes of that calculation, the price is reduced to the extent that an input tax credit is available for the acquisition.

19.5 Interpretation

For the purposes of this clause 19:

(a) a term which has a defined meaning in the GST Act has the same meaning when used in this clause 19;

(b) “GST Act” means the A New Tax System (Goods and Services Tax) Act 1999 (Cwlth); and

(c) each periodic or progressive component of a supply to which section 156-5(1) of the GST Act applies will be treated as though it is a separate supply.

20 Miscellaneous

20.1 Discretion in exercising rights

A party may exercise a right or remedy or give or refuse its consent in any way it considers appropriate (including by imposing conditions), unless this deed expressly states otherwise.

20.2 Partial exercising of rights

If a party does not exercise a right or remedy fully or at a given time, the party may still exercise it later.

20.3 No liability for loss

A party is not liable for loss caused by the exercise or attempted exercise of, failure to exercise, or delay in exercising a right or remedy under this deed.

234

For

per

sona

l use

onl

y



53

20.4 Approvals and consents

By giving its approval or consent a party does not make or give any warranty or representation as to any circumstance relating to the subject matter of the consent or approval.

20.5 Conflict of interest

The parties’ rights and remedies under this deed may be exercised even if it involves a conflict of duty or a party has a personal interest in their exercise.

20.6 Remedies cumulative

The rights and remedies in this deed are in addition to other rights and remedies given by law independently of this deed.

20.7 Variation and waiver

A provision of this deed or a right created under it, may not be waived or varied except in writing, signed by the party or parties to be bound.

20.8 No merger

The warranties, undertakings and indemnities in this deed do not merge on the Implementation Date.

20.9 Indemnities

The indemnities in this deed are continuing obligations, independent from the other obligations of the parties under this deed and continue after this deed ends. It is not necessary for a party to incur expense or make payment before enforcing a right of indemnity under this deed.

20.10 Enforceability

For the purpose of this deed:

(a) the Target is taken to be acting as agent and trustee on behalf of and for the benefit of all Target Indemnified Parties;

(b) the Acquirer is taken to be acting as agent and trustee on behalf of and for the benefit of all Acquirer Indemnified Parties; and

(c) Resimac is taken to be acting as agent and trustee on behalf of and for the benefit of all Resimac Indemnified Parties,

and all of those persons are to this extent taken to be parties to this deed.

20.11 Knowledge and belief

The parties agree that any statement made in this deed by a Target Person on the basis of their knowledge, information, belief or awareness, is made on the basis of matters that a Target Person:

(a) is actually aware of; and

(b) should reasonably be expected to be actually aware of having regard to their experience and their past and current position and responsibilities.

20.12 Release

Subject to section 199A of the Corporations Act, no party, and no officer or director of a party, shall be liable for anything done or purported to be done in connection with the Scheme in good faith, but nothing in this clause shall exclude

235

For

per

sona

l use

onl

y



54

any liability which may arise from a fraudulent or grossly negligent act or omission on the part of such a person. Each party receives and holds the benefit of this release, to the extent that it relates to its officers or directors, as agent for them.

20.13 Further steps

Each party agrees, at its own expense, to do anything reasonable that any other party asks (such as obtaining consents, signing and producing documents and getting documents completed and signed):

(a) to bind the party and any other person intended to be bound under this deed; or

(b) to show whether the party is complying with this deed.

20.14 Construction

No rule of construction applies to the disadvantage of a party because that party was responsible for the preparation of, or seeks to rely on, this deed or any part of it.

20.15 Costs

Subject to clauses 11 and 12, the parties agree to pay their own legal and other costs and expenses in connection with the preparation, execution and completion of this deed and other related documentation.

20.16 Entire agreement

This deed constitutes the entire agreement of the parties about its subject matter and supersedes all previous agreements, understandings and negotiations on that subject matter.

20.17 Assignment

Subject to clause 4.7, a party may not assign or otherwise deal with its rights under this deed or allow any interest in them to arise or be varied in each case, without the consent of the other parties (except that the Acquirer may grant an Encumbrance in favour of Resimac over all or any of its rights under this deed).

20.18 No undisclosed principals or undisclosed trusts

Except as expressly stated in writing in this deed, no person enters into this deed as an agent for any other person or as trustee of any trust or on behalf or for the benefit of any other person.

20.19 No representation or reliance

Each party acknowledges that:

(a) no party (nor any person acting on its behalf) has made any representation or other inducement to it to enter into this deed, except for representations or inducements expressly set out in this deed;

(b) it does not enter into this deed in reliance on any representation or other inducement by or on behalf of any other party, except for any representation or inducement expressly set out in this deed; and

(c) clauses 20.19(a) and 20.19(b) above do not prejudice any rights a party may have in relation to information which had been filed by any other party with ASIC or ASX.

236

For

per

sona

l use

onl

y



55

20.20 Governing law

This deed is governed by the law in force in the place specified in the Details. Each party submits to the non-exclusive jurisdiction of the courts of that place.

20.21 Counterparts

This deed may be executed in counterparts. All counterparts when taken together are to be taken to constitute one instrument.

20.22 Notification

Each party will promptly advise the other parties in writing if it becomes aware of any fact, matter or circumstance that constitutes or may constitute:

(a) a breach of any of the representations and warranties given by it under this deed;

(b) a Target Prescribed Event;

(c) an event which results or may result in another party having a right to terminate this deed under clause 15.1; or

(d) a breach by it of this deed.

EXECUTED as a deed

237

For

per

sona

l use

onl

y




56

Schedule 1 - Target Prescribed Events

(a) (Conversion) the Target converts all or any of its securities into a larger or smaller number of securities.

(b) Reduction of share capital) the Target resolves to reduce its share capital in any way or reclassifies, combines, splits or redeems or repurchases directly or indirectly any of its shares.

(c) (Buy-back) the Target:

(i) enters into a buy-back agreement; or

(ii) resolves to approve the terms of a buy-back agreement under the Corporations Act.

(d) (Distribution) other than the July Dividend or any Full Franked Dividend, or otherwise than as agreed in connection with the Scheme, or where permitted under clause 8.2(e) or clause 8.2(h), the Target or any SPV makes or declares, or announces an intention to make or declare, any distribution (whether by way of dividend, capital reduction or otherwise and whether in cash or in specie).

(e) (Issuing or granting securities or options) the Target or any of its Subsidiaries or any SPV:

(i) other than as part of refinancing, extending or rolling over its warehouse facilities or term funding in the ordinary course, issues new securities;

(ii) grants an option over its securities; or

(iii) agrees to make such an issue or grant such an option (including under any employment contract),

in each case to a person outside the Target Group.

(f) (Convertible Securities or other instruments) the Target or any of its Subsidiaries or any SPV:

(i) issues securities or other instruments that (in each case) are convertible into equity or debt securities; or

(ii) agrees to issue securities or other instruments convertible into equity or debt securities (including under any employment contract),

in each case to a person outside the Target Group.

(g) (Constitution) the Target or any of its Subsidiaries or any SPV adopts a new constitution or modifies or repeals its constitution or a provision of it.

238

For

per

sona

l use

onl

y



57

(h) (Disposals) the Target, any of its Subsidiaries or any SPV disposes, or agrees to dispose of the whole or a material or substantial part of its or the Target Group’s business or property.

(i) (Acquisitions, disposals or tenders) the Target, any of its Subsidiaries or any SPV:

(i) acquires or disposes of;

(ii) agrees to acquire or dispose of;

(iii) offers, proposes, announces a bid or tenders for,

any business, assets, entity or undertaking of the Target Group or the SPVs, the value of which exceeds $2,000,000 (in aggregate, in the case of acquisitions or disposals of Mortgage Loans), other than:

(iv) renewal, rollover or refinancing of the Material NIM Contracts; or

(v) Authorised Investments.

(j) (Encumbrances) other than as part of refinancing, extending or rolling over its warehouse facilities or term funding in the ordinary course, the Target, any of its Subsidiaries or any SPV creates, or agrees to create, any Encumbrance over the whole or a material or substantial part of its business or property or over any part of the Mortgage Assets.

(k) (Commitments and settlements) the Target or any of its Subsidiaries or any SPV:

(i) enters into any contract or commitment requiring payments by one or more members of the Target Group or SPV (separately or taken as a whole) in excess of $500,000 (after taking into account amounts available by claiming on any LMI Contract) or any other onerous or long term contract or commitment, other than payments of employee bonus amounts or entry into the Unisys Contract;

(ii) waives any material third party default;

(iii) accepts as a settlement or compromise of a material matter (relating to an amount in excess of $2,000,000) less than the full compensation due to the Target or a Subsidiary of the Target or an SPV, other than a matter relating only to an asset in the Loan Book; or

(iv) becomes subject to (or threatened with) a material claim (relating to an amount in excess of $2,000,000), other than a claim relating only to an asset in the Loan Book.

(l) (Insolvency) the Target, any of its Related Bodies Corporate or an SPV becomes Insolvent.

(m) (Breach of law) any member of the Target Group or an SPV takes or omits to take action which would result in a material breach of law (resulting in costs, charges, interest, penalties, fines or expenses in excess of $2,000,000).

(n) (Change in accounting policy) any member of the Target Group changes any accounting policy applied by them to report their financial position.

239

For

per

sona

l use

onl

y




58

Schedule 2 - Conditions Precedent (clause 3.1)

Condition Party entitled to benefit

Party responsible

1. Regulatory approvals

Before 8.00am on the Second Court Date:

(a) (ASIC and ASX) ASIC and ASX have issued or provided (and not withdrawn, revoked or varied) such consents, waivers, modifications, and/or approvals or have done such other acts which are necessary or the parties agree are reasonably desirable to implement the Scheme. If such consents, waivers, modifications and/or approvals are subject to conditions those conditions must be acceptable to the Target, Resimac and the Acquirer (each acting reasonably);

All

All

(b) (Regulatory Authority) all other consents, waivers and approvals of a Regulatory Authority which the Acquirer and the Target, acting reasonably, consider are necessary or desirable to implement the Scheme are obtained. If such consents, waivers and/or approvals are subject to conditions those conditions must be acceptable to the Target, Resimac and the Acquirer (each acting reasonably); and

All All

(c) (Court orders) no Court or other court of competent jurisdiction or Regulatory Authority has issued or taken steps to issue an order, temporary restraining order, preliminary or permanent injunction, decree or ruling or

All All

240

For

per

sona

l use

onl

y



59


Party responsible

taken any action enjoining, restraining or otherwise imposing a legal restraint or prohibition preventing the implementation of any material aspect of the Merger and no such order, decree, ruling, other action or refusal is in effect.

2. Scheme approval

The Target Shareholders approve the Scheme by the requisite majorities in accordance with the Corporations Act.

Cannot be waived Target

3. Court approval

The Court approves the Scheme in accordance with section 411(4)(b) of the Corporations Act.

Cannot be waived Target

4. Independent Expert

The Independent Expert issues a report which concludes that the Scheme is in the best interests of the Target Shareholders before the date on which the Scheme Booklet is lodged with ASIC and does not change that conclusion or, having reached that conclusion, withdraws the Independent Expert’s Report prior to the Second Court Date.

Target Target

5. No Target Prescribed Event

No Target Prescribed Event occurs between the date of this deed and 8.00am on the Second Court Date.

Acquirer and Resimac

Target

6. No Target Material Adverse Change

No Target Material Adverse Change occurs between the date of this deed and 8.00am on the Second Court Date.


Target

7. Target representations and warranties

The Target’s representations and warranties set out in Schedule 7 are true and correct in all material respects as at the date of this deed and as at 8.00am on the Second Court Date.


Target

8. Acquirer representations and Target Acquirer

241

For

per

sona

l use

onl

y



60


Party responsible

warranties

The Acquirer’s representations and warranties set out in Schedule 8 are true and correct in all material respects as at the date of this deed and as at 8.00am on the Second Court Date.

9. Resimac representations and warranties

Resimac’s representations and warranties set out in Schedule 9 are true and correct in all material respects as at the date of this deed and as at 8.00am on the Second Court Date.

Target Resimac

10. Deed Poll – D&O insurance

The Acquirer issues a deed poll benefiting the current and previous directors and officers of any Target Group in relation to the ongoing provision of directors and officers insurance policies in favour of those directors and officers, on terms that are acceptable to the current directors and officers acting reasonably.

Target Acquirer

11. Financial assistance resolution

The Target Shareholders approve the Financial Assistance Resolution by special resolution in accordance with the Corporations Act.


Target

12. Board changes

Before 8.00am on the Second Court Date:

(a) (Target Group) all required regulatory approvals (if any) are obtained to permit the steps referred to in paragraphs (a), (b) and (c) of clause 8.6;

(b) (SPVs - BNY) the board of directors of each SPV resolve to appoint directors to the relevant SPV in accordance with the Acquirer’s directions and each existing director of each SPV resigns as a director of the relevant SPV with effect from the time that the Acquirer’s nominees are appointed,BNY resolves to


Target

242

For

per

sona

l use

onl

y



61


Party responsible

remove the directors of the SPVs and appoint directors to the SPVs in accordance with the Acquirer’s directions subject to the Scheme becoming Effective,

(c) (SPVs – Other) any required regulatory or other approvals are obtained to permit the retirement and appointment of directors to the SPVs in accordance with the Acquirer’s directions.

243

For

per

sona

l use

onl

y




62

Schedule 3 - Timetable (clause 5.1)

The current timetable set out in Schedule 1 of the Third Counterproposal Amending Deed

244

For

per

sona

l use

onl

y




63

Schedule 4 - Target’s Obligations (clause 6.1)

1 (Target Information) ensure that the Target Information included in the Scheme

Booklet complies with the Corporations Act, the Corporations Regulations, the Listing Rules and ASIC Regulatory Guide 60.

2 (Further Target Information) provide to the Acquirer, Resimac and Scheme Participants such further or new Target Information as may arise after the Scheme Booklet has been despatched until the date of the Scheme Meeting as may be necessary to ensure that the Target Information contained in the Scheme Booklet is not, having regard to applicable disclosure requirements, false, misleading or deceptive in any material respect (including because of any material omission) and does not omit any information required by law.

3 (Independent Expert) promptly appoint the Independent Expert and provide any assistance and information reasonably requested by the Independent Expert to enable it to prepare the Independent Expert’s Report for the Scheme Booklet.

4 (Provide a copy of the Independent Expert’s Report) on receipt, provide the Acquirer and Resimac with a copy of all drafts of the Independent Expert’s Report received by the Target from the Independent Expert from time to time for review for factual accuracy.

5 (Promote merits of the Merger) participate in and ensure that the Target Board participates in efforts reasonably requested by the Acquirer and Resimac to promote the merits of the Merger, including meeting with key Target Shareholders at the reasonable request of the Acquirer or Resimac, unless and until the recommendations of the Target Directors contemplated by clauses 6.4(a) or 6.4(b) are withdrawn or adversely modified because of a Superior Proposal or because the Independent Expert concludes that the Scheme is not in the best interests of the Target Shareholders.

6 (Registry details) subject to the terms of the Scheme:

(a) provide all necessary information about the Scheme Participants to the Acquirer and Resimac which the Acquirer or Resimac requires in order to assist the Acquirer or Resimac to solicit votes at the Scheme Meeting; and

(b) provide all necessary directions to the Registry to promptly provide any information that the Acquirer or Resimac reasonably requests in relation to the Register, including any sub-register, and, where requested by the Acquirer or Resimac, the Target must procure such information to be provided to the Acquirer or Resimac in such electronic form as is reasonably requested by the Acquirer or Resimac.

7 (Section 411(17)(b) statement) apply to ASIC for the production of a statement pursuant to section 411(17)(b) of the Corporations Act stating that ASIC has no objection to the Scheme.

8 (Court application and representation) apply to the Court for an order under section 411(1) of the Corporations Act directing Target to convene the Scheme Meeting and engage counsel reasonably experienced in schemes of

245

For

per

sona

l use

onl

y



64

arrangement to represent Target in all Court proceedings related to the Scheme and provide drafts and consult with the Acquirer and Resimac in relation to the content of any document required for the purpose of the Scheme (including originating process, affidavits, submissions and draft minutes of Court orders) and take into account all reasonable comments provided for and on behalf of the Acquirer and Resimac in relation to such documents.

9 (Registration of explanatory statement) request ASIC to register the explanatory statement included in the Scheme Booklet in relation to the Scheme in accordance with section 412(6) of the Corporations Act.

10 (Send Scheme Booklet) send the Scheme Booklet to Target Shareholders as soon as practicable after the Court orders the Target to convene the Scheme Meeting and otherwise substantially in accordance with the Timetable.

11 (Resolutions) convene the Scheme Meeting in accordance with any such orders made by the Court, and convene a general meeting of Target Shareholders (to be held immediately after the Scheme Meeting) to pass the Financial Assistance Resolution, and seek the approval of the Target Shareholders for the Resolutions and, for this purpose, the Target Directors must participate in reasonable efforts to promote the merits of the Scheme, including meeting with key Target Shareholders at the reasonable request of the Acquirer and Resimac.

12 (RHGHL Resolution) on the day of the Scheme Meeting, immediately after the Target Shareholders pass the Financial Assistance Resolution, pass the RHGHL Resolution and procure that RHGHL gives notice to ASIC of the passage of the RHGHL Resolution (and otherwise complies with the requirements of the Corporations Act in relation to the RHGHL Resolution) and give notice to the Acquirer and Resimac on the day of lodgement with ASIC that this has occurred, on the express basis that the new board of RHG confirm (following implementation of the Scheme and before the financial assistance is provided) that resolution and confirm that the proposed financial assistance will not cause any company in the RHG Group to become insolvent

1213 (Proxy reports) request the Registry to report to it and the Acquirer and Resimac and their Representatives on the status of proxy forms received by the Registry for the Resolutions, at 10 Business Days before the Scheme Meeting, at each subsequent Business Day up to the deadline for receipt of proxy forms and at such deadline. Provide to the Acquirer and Resimac such other information as it may receive concerning the voting intentions of the Target Shareholders.

1314 (Financial Assistance Resolution) Give notice to ASIC of passage of Financial Assistance Resolution once that has occurred and otherwise comply with the requirements of the Corporations Act in relation to the Financial Assistance Resolution.

1415 (Court order) apply to the Court for an order approving the Scheme in accordance with sections 411(4)(b) and 411(6) of the Corporations Act (and, if relevant and the Acquirer so requests, an order in accordance with section 411(4)(a)(ii)(A) of the Corporations Act dispensing with the need for the Resolution in relation to the Scheme to be passed by a majority in number of the members present and voting (either in person or by proxy)).

1516 (Certificate) provide the Court on the Second Court Date with a certificate confirming (in respect of matters within its knowledge) whether all the conditions precedent as set out in Schedule 2 (other than the condition relating to Court approval of the Scheme - item 3) have been satisfied or waived in accordance with the terms of this deed.

246

For

per

sona

l use

onl

y



65

1617 (Lodge) on the Second Court Date lodge with ASIC an office copy of any such Court order approving the Scheme as approved by the Target Shareholders at the Scheme Meeting in accordance with section 411(10) of the Corporations Act.

1718 (Register information) close the Register as at 7.00pm on the Record Date.

1819 (Registration) register all transfers of the Target Shares to the Acquirer on the Implementation Date.

1920 (Listing) take all reasonable steps to maintain the Target’s listing on ASX, notwithstanding any suspension of the quotation of the Target Shares, up to and including the Implementation Date, including making appropriate applications to ASX and ASIC.

2021 (Compliance with laws) use its best endeavours to do everything reasonably within its power to ensure that the transactions contemplated by this deed are effected in accordance with all laws and regulations applicable in relation to the Scheme.

2122 (Suspension of incentive plans) with effect from date of this deed, suspend all of its executive and employee incentive plans and any other plans that will or could result in securities in the Target being issued to any person.

2223 (Termination of incentive plans) subject to Court approval of the Scheme, but with effect from the Implementation Date or such later date agreed by the parties acting reasonably, terminate all of its executive and employee incentive plans and any other plans (if any) that will or could result in securities in the Target being issued to any person.

2324 (Other steps) do all other things necessary to give effect to the Scheme and the orders of the Court approving the Scheme.

2425 (Adviser fees) on reasonable written request from the Acquirer or Resimac, provide the Acquirer and Resimac with details of fees and disbursements incurred by the Target, with its financial and legal advisers.

2526 (Consents, approvals and confirmations) co-operate with Resimac (and entities nominated by Resimac) and provide reasonable assistance in connection with obtaining consents, approvals and confirmations as may be required by Resimac or its nominated entities in relation to, or under or in connection with this deed and the transactions contemplated by it, including applications for regulatory approval (including foreign), and any other assistance reasonably requested by Resimac or its nominated entities.

2627 (Cut-Off Data Tape) deliver to Resimac the Cut-Off Data Tape at or about 10.00am on the Implementation Date, prior to the payment of the Scheme Consideration on the Implementation Date.

2728 (Data Room) deliver a complete copy of the Data Room to the Acquirer and Resimac on or by the Implementation Date.

247

For

per

sona

l use

onl

y




66

Schedule 5 - Acquirer’s Obligations (clause 6.2)

1 (Acquirer Information) prepare and promptly provide to the Target for inclusion

in the Scheme Booklet such Acquirer Information as the Target reasonably requires to prepare and issue the Scheme Booklet (including any information required under the Corporations Act, Corporations Regulations, the Listing Rules or ASIC Regulatory Guide 60 and information regarding sources of funding for the Scheme Consideration).

2 (Review of Scheme Booklet) review the drafts of the Scheme Booklet prepared by the Target and provide comments as soon as practicable.

3 (Further Acquirer Information) promptly provide to the Target such further or new Acquirer Information as may arise after the Scheme Booklet has been sent until the date of the Scheme Meeting as may be necessary to ensure that the Acquirer Information contained in the Scheme Booklet is not, having regard to applicable disclosure requirements, false, misleading or deceptive in any material respect (including because of any material omission) and does not omit any information required by law.

4 (Independent Expert information) provide any assistance or information reasonably requested by the Independent Expert in connection with the preparation of the Independent Expert’s report to be included in the Scheme Booklet.

5 (Representation) procure that it is represented by counsel at the Court hearings convened for the purposes of section 411(4)(b) of the Corporations Act, at which, through its counsel the Acquirer must undertake (if requested by the Court) to do all such things and take all such steps within its power as may be necessary in order to ensure the fulfilment of its obligations under this deed and the Scheme.


7 (Deed Poll) prior to the Scheme Booklet being sent to the Target Shareholders, sign and deliver the Deed Poll.

8 (Share transfer) if the Scheme becomes Effective, accept a transfer of the Target Shares as contemplated by clause 4.1(a) and the Scheme.

9 (Consideration) if the Scheme becomes Effective, procure the payment of the Scheme Consideration to the Target in the manner and amount contemplated by clause 4.3(a) and the Deed Poll.


248

For

per

sona

l use

onl

y


Confirmed, Consolidated Merger Implementation Deed 5 November 2013

67

11 (Other steps) do all other things necessary to give effect to the Scheme and the orders of the Court approving the Scheme.

249

For

per

sona

l use

onl

y




68

Schedule 6 - Resimac’s Obligations (clause 6.3)

1 (Resimac Information) prepare and promptly provide to the Target for inclusion in the Scheme Booklet such Resimac Information as the Target reasonably requires to prepare and issue the Scheme Booklet (including any information required under the Corporations Act, Corporations Regulations, the Listing Rules or ASIC Regulatory Guide 60).

2 (Review of Scheme Booklet) review the drafts of the Scheme Booklet prepared by the Target and provide comments as soon as practicable.

3 (Further Resimac Information) promptly provide to the Target such further or new Resimac Information as may arise after the Scheme Booklet has been sent until the date of the Scheme Meeting as may be necessary to ensure that the Resimac Information contained in the Scheme Booklet is not, having regard to applicable disclosure requirements, false, misleading or deceptive in any material respect (including because of any material omission) and does not omit any information required by law.

4 (Independent Expert information) provide any assistance or information reasonably requested by the Independent Expert in connection with the preparation of the Independent Expert’s report to be included in the Scheme Booklet.

5 (Representation) procure that it is represented by counsel at the Court hearings convened for the purposes of section 411(4)(b) of the Corporations Act, at which, through its counsel Resimac must undertake (if requested by the Court) to do all such things and take all such steps within its power as may be necessary in order to ensure the fulfilment of its obligations under this deed.



250

For

per

sona

l use

onl

y



69

Schedule 7 - Target’s representations and warranties (clause 13.1)

1 (Incorporation) it is a valid existing corporation registered under the laws of its

place of incorporation.

2 (Execution) the execution and delivery of this deed has been properly authorised by all necessary corporate action of the Target.

3 (Corporate power) it has full corporate power and lawful authority to execute and deliver this deed and to consummate and perform or cause to be performed its obligations under this deed in accordance with its terms.

4 (Binding obligations) (subject to laws generally affecting creditors’ rights and the principles of equity) this deed constitutes legal, valid and binding obligations on it.

5 (Target Information) the Target Information provided in accordance with this deed and included in the Scheme Booklet, as at the date of the Scheme Booklet, will not contain any material statement which is misleading or deceptive in any material respect nor contain any material omission having regard to applicable disclosure requirements and will comply in all material respects with the requirements of the Corporations Act, the Corporations Regulations, the Listing Rules and ASIC Regulatory Guide 60.

6 (Due diligence) to the best of the knowledge of each Target Person as at the date of this deed, all Due Diligence Materials were prepared in good faith, are true and correct in all material respects and are not misleading in any material respect, whether by way of omission or otherwise.

7 (Reliance) the Target Information contained in the Scheme Booklet will be included in good faith and on the understanding that the Acquirer and Resimac and their directors will rely on that information for the purposes of considering and approving the Acquirer Information and Resimac Information in the Scheme Booklet before it is despatched, approving the entry into the Deed Poll and implementing the transactions contemplated by this deed.

8 (Further information) the Target will, as a continuing obligation, provide to the Acquirer and Resimac all such further or new information which may arise after the date of the Scheme Booklet until the date of the Scheme Meeting which may be necessary to ensure that there would be no breach of item 5 of this schedule if it applied as at the date upon which that information arose.

9 (Continuous disclosure) the Target is not in breach of its continuous disclosure obligations under the Corporations Act and the Listing Rules in any material respect and is not relying on the carve-out in Listing Rule 3.1A to withhold any material information from disclosure.

10 (Periodic disclosure) the periodic financial disclosures made by the Target in its annual financial report and half-yearly financial report were not misleading or deceptive in any material respect when made and are prepared in accordance with the Corporations Act and with all relevant Accounting Standards in all material respects and give a true and fair view of the financial position and

251

For

per

sona

l use

onl

y



70

performance of the Target Group and Securitisation Vehicles as at the date they were made.

11 (Opinions) any statement of opinion or belief contained in the Target Information is honestly held and there are reasonable grounds for holding the opinion or belief.

12 (Provision of information to the Independent Expert) all information provided by or on behalf of the Target to the Independent Expert to enable the Independent Expert’s report to be included in the Scheme Booklet to be prepared and completed will be provided in good faith and on the understanding that the Independent Expert will rely upon that information for the purpose of preparing the Independent Expert’s report.

13 (Compliance) it and its Subsidiaries and the SPVs have complied in all material respects with all Australian and foreign laws and regulations applicable to them and orders of Australian and foreign governmental agencies having jurisdiction over them and have all material licenses, permits and franchises necessary for them to conduct their respective businesses as presently being conducted.

14 (Insolvency) no member of the Target Group or the SPV is Insolvent.

15 (No default - Group) neither it nor any of its Subsidiaries nor any SPV is in material default under any document, agreement or instrument binding on it or its assets nor has anything occurred which is or would with the giving of notice or lapse of time constitute an event of default, prepayment event or similar event, or give another party thereto a termination right or right to accelerate any right or obligation, under any such document or agreement with such an effect, and to the best of the knowledge of each Target Person, no other party to any such document, agreement or instrument is in material breach thereof or material default thereunder, where such breach or default will, or would reasonably be likely to have a material adverse effect on the Target.

16 (Material NIM Contracts) each Material NIM Contract is in full force and effect and constitutes a valid and binding obligation of any member of the Target Group or an SPV which is party thereto and is enforceable against such member of the Target Group or SPV in accordance with its terms. To the best of the knowledge of each Target Person, each Material NIM Contract is a valid and binding obligation of each other party thereto and enforceable against such other party in accordance with its terms.

17 (Securities) the Target’s issued securities as at the date of this deed are 308,483,177 fully paid ordinary shares quoted on ASX, and the Target has not issued, or agreed to issue, any other securities or instruments which are still outstanding and which may convert into Target Shares or any other securities in the Target.

18 (No Encumbrances) there is no Encumbrance over all or any of its assets or revenues, other than as disclosed.

19 (Current Actions) neither the Target nor any of its Subsidiaries nor any SPV is:

(a) a party to or the subject of any Action other than:

(i) any Action which the Target believes, acting reasonably, to be inconsequential; and

(ii) which is in relation to, or in connection with, the enforcement of any individual Mortgage Loan or related security; or

252

For

per

sona

l use

onl

y



71

(b) the subject of any ruling, judgement, order or decree by any Regulatory Authority or any other person.

20 (Pending, threatened or anticipated Actions) to the best of the knowledge of each Target Person, there is no Action, judgment, order or decree pending, threatened or anticipated, against the Target or any of its Subsidiaries or any SPV, other than:

(a) any Action which the Target believes, acting reasonably, to be inconsequential; and

(b) which is in relation to, or in connection with, the enforcement of any individual Mortgage Loan or related security.

21 (Benefit plans)

(a) The Due Diligence Materials include a list of all Benefit Plans and complete and accurate copies of all such Benefit Plans.

(b) Each Benefit Plan, other than any redundancy plan, has been funded and maintained, in form and operation, in accordance with its terms, applicable labour agreements and applicable law in all material respects.

(c) Neither the Target nor any of its Subsidiaries maintains, contributes to or has any liability with respect to any defined benefit pension plan, defined benefit superannuation fund or any plan or arrangement that requires (or could require) the Target or its Subsidiaries to provide post-employment welfare benefits (other than as required under applicable laws).

(d) No Actions are pending or threatened with respect to any Benefit Plan.

(e) The consummation of the transactions contemplated by this deed will not accelerate the time of the payment or vesting of, or increase the amount of, or result in the forfeiture of compensation or benefits under any Benefit Plan, other than any redundancy plan.

22 (Disclosure) the Due Diligence Materials include all material information requested in writing by the Acquirer, Resimac or their Representatives in connection with the transactions contemplated by this deed which is actually known to the Target Persons as at the date of this deed and has not knowingly modified or withheld any information from the Acquirer or Resimac.

23 (Change of control provisions) the Due Diligence Materials include all Material Contracts which result in, or could result in:

(a) any monies borrowed by any member of the Target Group or any SPV being or becoming repayable or being capable of being declared repayable immediately or earlier than the repayment date stated in such agreement;

(b) any such agreement being terminated or modified or any action being taken or arising thereunder;

(c) the interest of any member of the Target Group or any SPV in any firm, joint venture, trust, corporation or other entity (or any arrangements relating to such interest) being terminated or modified; or

(d) the business of any member of the Target Group or any SPV with any other person being adversely affected,

253

For

per

sona

l use

onl

y



72

as a result of the Target entering into this deed or the transactions contemplated by it including the acquisition of the Target Shares by the Acquirer.

24 (Cut-Off Data Tape) the Cut-Off Data Tape will be prepared in good faith, and will be true and correct and will not be misleading whether by way of omission or otherwise.

254

For

per

sona

l use

onl

y




73

Schedule 8 - Acquirer’s representations and warranties (clause 13.4)

The representations and warranties set out in this Schedule 8 are given by the Acquirer except where otherwise expressly stated. 1 (Incorporation) it is a valid existing corporation registered under the laws of its


2 (Execution) the execution and delivery of this deed has been properly authorised by all necessary corporate action of the Acquirer.



5 (Reliance) the Acquirer Information provided to the Target for inclusion in the Scheme Booklet will be provided in good faith and on the understanding that the Target and its directors will rely on that information for the purposes of preparing the Scheme Booklet and proposing and implementing the transactions contemplated by this deed in accordance with the Corporations Act.

6 (Acquirer Information) the Acquirer Information provided in accordance with this deed and included in the Scheme Booklet, as at the date of the Scheme Booklet, will not contain any material statement which is misleading or deceptive nor contain any material omission having regard to applicable disclosure requirements and will comply in all material respects with the requirements of the Corporations Act, the Corporations Regulations, the Listing Rules and ASIC Regulatory Guide 60.

7 (Further information) the Acquirer will, as a continuing obligation, provide to the Target all such further or new information which may arise after the date of the Scheme Booklet until the date of the Scheme Meeting which may be necessary to ensure that there would be no breach of item 6 of this Schedule if it applied as at the date on which that information arose.

8 (Opinions) any statement of opinion or belief contained in the Acquirer Information is honestly held and there are reasonable grounds for holding the opinion or belief.

9 (Provision of information to Independent Expert) all information provided by or on behalf of the Acquirer to the Independent Expert to enable the Independent Expert’s report to be included in the Scheme Booklet to be prepared and completed will be provided in good faith and on the understanding that the Independent Expert will rely upon that information for the purpose of preparing the Independent Expert’s report.

10 (Funding) on and from 8.00am on the First Court Date the Acquirer will have available to it, and on the date of execution of this deed and at all times before

255

For

per

sona

l use

onl

y


Confirmed, Consolidated Merger Implementation Deed 74

the First Court Date the Acquirer has reasonable grounds for believing it will have available to it, sufficient cash amounts (whether from internal cash resources or external funding arrangements or a combination of both) to satisfy its obligation to pay the Scheme Consideration in accordance with the obligations under this deed, the Deed Poll and the Scheme and to provide the Target with funding in accordance with clause 4.3(a) of this deed.

256

For

per

sona

l use

onl

y



Schedule 9 - Resimac’s representations and warranties (clause 13.7)

The representations and warranties set out in this Schedule 9 are given by Resimac except where otherwise expressly stated. 1 (Incorporation) it is a valid existing corporation registered under the laws of its


2 (Execution) the execution and delivery of this deed has been properly authorised by all necessary corporate action of Resimac.



5 (Reliance) the Resimac Information provided to the Target for inclusion in the Scheme Booklet will be provided in good faith and on the understanding that the Target and its directors will rely on that information for the purposes of preparing the Scheme Booklet and proposing and implementing the transactions contemplated by this deed in accordance with the Corporations Act.

6 (Resimac Information) the Resimac Information provided in accordance with this deed and included in the Scheme Booklet, as at the date of the Scheme Booklet, will not contain any material statement which is misleading or deceptive nor contain any material omission having regard to applicable disclosure requirements and will comply in all material respects with the requirements of the Corporations Act, the Corporations Regulations, the Listing Rules and ASIC Regulatory Guide 60.

7 (Further information) Resimac will, as a continuing obligation, provide to the Target all such further or new information which may arise after the date of the Scheme Booklet until the date of the Scheme Meeting which may be necessary to ensure that there would be no breach of item 6 of this Schedule if it applied as at the date on which that information arose.

8 (Opinions) any statement of opinion or belief contained in the Resimac Information is honestly held and there are reasonable grounds for holding the opinion or belief.

9 (Provision of information to Independent Expert) all information provided by or on behalf of Resimac to the Independent Expert to enable the Independent Expert’s report to be included in the Scheme Booklet to be prepared and completed will be provided in good faith and on the understanding that the Independent Expert will rely upon that information for the purpose of preparing the Independent Expert’s report.

10 (Guarantee) Resimac guarantees the due and punctual performance and observance by the Acquirer of all of the Acquirer’s obligation under this deed, including but not limited to the Acquirers obligations to pay the Scheme Consideration in accordance with clause 4.3(a) of this deed. However, Resimac’s

257

For

per

sona

l use

onl

y



guarantee only extends to the Acquirer’s compliance with clause 5.5 to the extent that such compliance relates to any employee entitlements or redundancy entitlements

11. (Financial capacity and means) Resimac has the financial capacity and means to satisfy its guarantee obligations under clause 4.4 of this deed.

12. (Refinancing) Resimac has term sheets in the agreed form in respect of the warehouse refinancing negotiations.

258

For

per

sona

l use

onl

y




77

Signing page

DATED: 6 July 2013 EXECUTED as a deed SIGNED, SEALED AND DELIVERED BY AUSTRALIAN MORTGAGE ACQUISITION COMPANY PTY LIMITED by its attorney: ............................................................... Signature of attorney ............................................................... Name of attorney (block letters)

) ) ) ) ) ) ) ) ) ) ) )

in the presence of ............................................................... Signature of witness ............................................................... Name of witness

SIGNED, SEALED AND DELIVERED BY RESIMAC LIMITED by its attorney: ............................................................... Signature of attorney ............................................................... Name of attorney (block letters)

) ) ) ) ) ) ) ) ) )


EXECUTED as a deed by RHG LIMITED in accordance with section 127(1) of the Corporations Act 2001 (Cwlth) by authority of its directors: ............................................................... Signature of director ............................................................... Name of director (block letters)

) ) ) ) ) ) ) ) ) ) ) )

............................................................... Signature of director/company secretary* *delete whichever is not applicable ............................................................... Name of director/company secretary* (block letters) *delete whichever is not applicable

259

For

per

sona

l use

onl

y




78

Annexure A - Announcement (clause 16.1)

260

For

per

sona

l use

onl

y




79

Annexure B - Scheme (clause 1.1)

261

For

per

sona

l use

onl

y




80

Annexure C - Deed Poll (clause 1.1)

262

For

per

sona

l use

onl

y



Confirmed, Consolidated Merger Implementation Deed 5 November 2013

81

Annexure D – Cashflow Schedule (clause 1.1)

Date Net cashflow during relevant month*

Consolidated Net Tangible Assets*

31 May 2013 $75,398,000

30 June 2013 $1,800,000 $77,198,000

31 July 2013 $1,700,000 $78,898,000

31 August 2013 $1,650,000 $81,440,000$80,548,000

30 September

2013

$1,600,000 $83,040,000$82,148,000

31 October 2013 $1,550,000 $84,590,000$83,698,000

30 November 2013 $1,400,000 $85,990,000

31 December 2013 $1,300,000 $87,290,000

31 January 2014 $1,200,000 $88,490,000

28 February 2014 $1,150,000 $89,640,000

The parties note that these figures represent an agreed framework and are not a forecast.

* Assumes no dividend paid, so these figures must be adjusted for the amount of

the July Dividend and any Fully Franked Dividend and estimated Transaction

Costs of $3,600,000 plus applicable GST2,500,000, provided there is no double

counting of these amounts

263

For

per

sona

l use

onl

y

Annexure C – Scheme

264

For

per

sona

l use

onl

y

Scheme of Arrangement Dated [ ] 2013

RHG Limited (ABN 22 055 136 564) (“Target”)

Each person registered as a holder of issued fully paid ordinary shares in

the capital of the Target as at 7.00pm on the Record Date (“Scheme

Participants”)


Level 61


1 Farrer Place

Sydney NSW 2000

Australia

T +61 2 9296 2000

F +61 2 9296 3999

DX 113 Sydney

www.kwm.com

265

For

per

sona

l use

onl

y

Scheme of Arrangement Contents

King & Wood Mallesons 11594607_4

Scheme of Arrangement

i

Details 1

General terms 2


1.1 Definitions 2

1.2 Reference to certain general terms 5

1.3 Headings 6

2 Preliminary 6

2.1 Target 6

2.2 Acquirer 6

2.3 Resimac 6

2.4 If Scheme becomes Effective 6

2.5 Merger Implementation Deed 7

2.6 Deed Poll 7

3 Conditions precedent 7

3.1 Conditions precedent to Scheme 7

3.2 Conditions precedent and operation of clause 5 7

3.3 Certificate in relation to conditions precedent 7

4 Scheme 8

4.1 Effective Date 8

4.2 End Date 8

5 Implementation of Scheme 8

5.1 Lodgement of Court orders with ASIC 8

5.2 Transfer and registration of Target Shares 8

5.3 Entitlement to Scheme Consideration 8

5.4 Title and rights in Target Shares 9

5.5 Scheme Participants’ agreements 9

5.6 Warranty by Scheme Participants 9

5.7 Transfer free of encumbrances 9

5.8 Appointment of Acquirer as sole proxy 9

6 Scheme Consideration 10

6.1 Consideration under the Scheme 10

6.2 Satisfaction of obligations 10

6.3 Payment of Scheme Consideration 10

6.3A Fractional Entitlements 10

6.4 Unclaimed monies 11

6.5 Orders of a court 11

6.6 Joint holders 11

7 Dealings in Scheme Shares 11

7.1 Determination of Scheme Participants 11

7.2 Register 11

7.3 No disposals after Effective Date 12

266

For

per

sona

l use

onl

y



ii

7.4 Maintenance of Target Register 12

7.5 Effect of certificates and holding statements 12

7.6 Details of Scheme Participants 12

7.7 Quotation of Target Shares 12

8 General Scheme provisions 12

8.1 Power of attorney 12

8.2 Variations, alterations and conditions 13

8.3 Further action by Target 13

8.4 Authority and acknowledgement 13

8.5 No liability when acting in good faith 13

8.6 Enforcement of Deed Poll 13

8.7 Stamp duty 13

8.8 Notices 13

9 Governing law 14

9.1 Governing law 14

9.2 Jurisdiction 14

267

For

per

sona

l use

onl

y




1

Details

Parties Target and Scheme Participants

Target Name RHG Limited

ABN 22 055 136 564

Incorporated in Australian Capital Territory

Address Level 6, 222 Pitt Street, Sydney NSW 2000

Telephone (02) 8028 2333

Fax (02) 9252 0311


Attention Glenn Goddard

Scheme

Participants Name Each person registered as a holder of fully paid

ordinary shares in the Target as at 7.00pm on

the Record Date


268

For

per

sona

l use

onl

y



2

General terms


1.1 Definitions

In this Scheme:

ACCC means the Australian Competition and Consumer Commission.

Acquirer means Australian Mortgage Acquisition Company Pty Limited (ACN 163 867 016).

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited (ABN 98 008 624 691), Australian Securities Exchange or the Australian Stock Exchange, as appropriate.

Business Day means a business day as defined in the Listing Rules.

CHESS means the Clearing House Electronic Subregister System operated by ASX Clear Pty Limited (ABN 48 001 314 503) and ASX Settlement Pty Limited (ABN 49 008 504 532).

Corporations Act means the Corporations Act 2001 (Cwlth).

Court means the Federal Court of Australia (Sydney registry), or such other court of competent jurisdiction under the Corporations Act agreed in writing by the parties to the Merger Implementation Deed.

Deed Poll means the deed poll executed by the Acquirer and Resimac substantially in the form of Annexure C of the Merger Implementation Deed or as otherwise agreed by the Acquirer, the Target and Resimac under which the Acquirer covenants in favour of each Scheme Participant to perform its obligations under this Scheme and Resimac covenants in favour of each Scheme Participant to guarantee the Acquirer’s obligations under the Scheme including its obligations to pay the Scheme Consideration.

Details means the section of this Scheme headed “Details”.

Effective means the coming into effect, pursuant to section 411(10) of the Corporations Act, of the order of the Court made under section 411(4)(b) of the Corporations Act in relation to this Scheme, but in any event at no time before an office copy of the order of the Court is lodged with ASIC.

Effective Date means the date on which the Scheme becomes Effective.

Encumbrance means any:

(a) security for the payment of money or performance of obligations, including a mortgage, charge, lien, pledge, trust, power, or title retention or flawed deposit arrangement and any “security interest” as defined in sections 12(1) or (2) of the Personal Property Securities Act 2009 (Cwlth); or

269

For

per

sona

l use

onl

y



3





End Date means the date which is four months from the date of the Merger Implementation Deed or such other date as is agreed by the Acquirer, Resimac and the Target.

Financial Assistance Resolution means the resolution put to a general meeting of the Target Shareholders under sections 260A(1)(b) and 260B of the Corporations Act in respect of payment of amounts by the Target to the Acquirer after the Scheme is implemented and the Mortgage Asset Acquisition Agreement is completed to assist in the repayment of financing of the Scheme Consideration.

Implementation Date means:

(a) the third Business Day following the Record Date; or

(b) if later than the date in (a), the day that is 14 days after the Financial Assistance Resolution is notified to ASIC in accordance with section 260B(6) of the Corporations Act; or

(c) such other date as is agreed by the Acquirer, Resimac and the Target.

July Dividend means a fully franked dividend of 3 cents per Target Share which the Target is permitted to pay prior to implementation of the Scheme.

Listing Rules means the Listing Rules of the ASX.

Merger Implementation Deed means the merger implementation deed dated on or about 6 July 2013 between the Target, the Acquirer and Resimac under which, amongst other things, the Target has agreed to propose this Scheme to the Target Shareholders, and each of the Acquirer and the Target has agreed to take certain steps to give effect to this Scheme.

Record Date means the fifth Business Day following the Effective Date or such other date (after the Effective Date) as the Target, Resimac and the Acquirer agree.

Register means the register of members of the Target maintained by or on behalf of the Target in accordance with section 168(1) of the Corporations Act and Registry has a corresponding meaning.

Registered Address means, in relation to a Target Shareholder, the address shown in the Register.


(a) ASX;

(b) ASIC;

270

For

per

sona

l use

onl

y



4





Related Body Corporate has the meaning it has in the Corporations Act.

Resimac means RESIMAC LIMITED (ACN 002 997 935).

Rights means all accretions, rights or benefits of whatever kind attaching to or arising from the Target Shares directly or indirectly after the date of the Merger Implementation Deed, including all dividends or other distributions and all rights to receive any dividends or other distributions, or to receive or subscribe for shares or other securities, which are declared, paid or made by the Target, but excludes the July Dividend.

Scheme means this scheme of arrangement between the Target and Scheme Participants under which all of the Scheme Shares will be transferred to the Acquirer under Part 5.1 of the Corporations Act as described in clause 6 of this Scheme, in consideration for the Scheme Consideration, subject to any amendments or conditions made or required by the Court pursuant to section 411(6) of the Corporations Act to the extent they are approved in writing by the Target, the Acquirer and Resimac in accordance with clause 8.2 of this Scheme.

Scheme Consideration means a cash payment of $0.501 for each Scheme Share less the cash amount of any Fully Franked Dividend (if any) (but, for the avoidance of doubt, excluding the value of any franking credits associated with the Fully Franked Dividend) and any other dividend or distribution declared or paid by the Target on or after the date of this deed (for avoidance of doubt, other than the July Dividend), in accordance with the terms of the Merger implementation Deed and the terms of this Scheme.

Scheme Meeting means the meeting of the Target Shareholders, ordered by the Court to be convened pursuant to section 411(1) of the Corporations Act at which the Target Shareholders will vote on this Scheme.

Scheme Participant means each person who is a Target Shareholder as at 7.00pm on the Record Date.

Scheme Share means a Target Share held by a Scheme Participant as at the Record Date and, for the avoidance of doubt, includes any Target Shares issued on or before the Record Date.

Second Court Date means the day on which the Court makes an order pursuant to section 411(4)(b) of the Corporations Act approving the Scheme.

Share Scheme Transfer means, for each Scheme Participant, a duly completed and executed proper instrument of transfer of the Scheme Shares held by that Scheme Participant for the purposes of section 1071B of the Corporations Act, which may be a master transfer of all Scheme Shares.

SPV has the meaning given in the Merger Implementation Deed.

SPV Board Change has the meaning given in clause 2.4 of this Scheme.

Subsidiary has the meaning it has in the Corporations Act.

271

For

per

sona

l use

onl

y



5

Target has the meaning given in the Details.

Target Share means a fully paid ordinary share in the capital of the Target, together with all Rights attached to that share.

Target Shareholder means each person registered in the Register as a holder of Target Shares.

Trust Account means the trust account operated by or on behalf of the Target to hold the Scheme Consideration on trust for the purpose of paying the Scheme Consideration to the Scheme Participants in accordance with clause 6.3 of this Scheme.

1.2 Reference to certain general terms

Unless the contrary intention appears, a reference in this Scheme to:

(a) (variations or replacement) a document, agreement or instrument is a reference to that document, agreement or instrument as amended, consolidated, supplemented, novated or replaced;

(b) (clauses, annexures and schedules) a clause, annexure or schedule is a reference to a clause in or annexure or schedule to this Scheme;

(c) (reference to statutes) a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them;

(d) (law) law means common law, principles of equity, and laws made by parliament (and laws made by parliament include State, Territory and Commonwealth laws and regulations and other instruments under them, and consolidations, amendments, re-enactments or replacements of any of them);

(e) (singular includes plural) the singular includes the plural and vice versa;

(f) (party) a party means a party to this Scheme;

(g) (person) the word “person” includes an individual, a firm, a body corporate, a partnership, a joint venture, an unincorporated body or association, or any Regulatory Authority;

(h) (executors, administrators, successors) a particular person includes a reference to the person’s executors, administrators, successors, substitutes (including persons taking by novation) and assigns;

(i) (dollars) Australian dollars, dollars, A$ or $ is a reference to the lawful currency of Australia;

(j) (calculation of time) a period of time dating from a given day or the day of an act or event, is to be calculated exclusive of that day;

(k) (reference to a day) a day is to be interpreted as the period of time commencing at midnight and ending 24 hours later;

272

For

per

sona

l use

onl

y



6

(l) (meaning not limited) the words “include”, “including”, “for example” or “such as” when introducing an example, do not limit the meaning of the words to which the example relates to that example or examples of a similar kind; and

(m) (time of day) time is a reference to Sydney time.

1.3 Headings

Headings (including those in brackets at the beginning of paragraphs) are for convenience only and do not affect the interpretation of this Scheme.

2 Preliminary

2.1 Target

Target is:

(a) a public company limited by shares;

(b) incorporated in Australia and registered in Australian Capital Territory; and

(c) admitted to the official list of the ASX and Target Shares are officially quoted on the stock market conducted by ASX.

As at 5 July 2013, the Target’s issued securities were 308,483,177 Target Shares.

2.2 Acquirer

The Acquirer is:

(a) a proprietary company limited by shares; and

(b) incorporated in Australia and registered in Victoria.

2.3 Resimac

Resimac is:

(a) an unlisted public company limited by shares; and

(b) incorporated in Australia and registered in New South Wales.

2.4 If Scheme becomes Effective

If this Scheme becomes Effective, the retirement and appointment of directors to the SPVs in accordance with schedule 2, condition 12 of the Merger Implementation Deed (the SPV Board Change) will take effect, as a step prior to the payment of the Scheme Consideration (and so that the Scheme Consideration will only be payable once the SPV Board Change has occurred). Once this has occurred:

(a) in consideration of the transfer of each Scheme Share to the Acquirer, the Target will procure the Acquirer to provide the Scheme Consideration to the Target on behalf of each Scheme Participant in accordance with the terms of this Scheme;

(b) all Scheme Shares will be transferred to the Acquirer on the Implementation Date; and

273

For

per

sona

l use

onl

y



7

(c) the Target will enter the name of the Acquirer in the Register in respect of all Scheme Shares transferred to the Acquirer in accordance with the terms of this Scheme.


The Target, the Acquirer and Resimac have agreed by executing the Merger Implementation Deed to implement the terms of this Scheme.

2.6 Deed Poll

(a) The Acquirer has executed the Deed Poll for the purpose of covenanting in favour of the Scheme Participants to perform (or procure the performance of) its obligations as contemplated by this Scheme, including to provide the Scheme Consideration.

(b) Resimac has executed the Deed Poll for the purposes of covenanting in favour of the Scheme Participants to guarantee the obligations of the Acquirer to perform its obligations under this Scheme, including its obligation to provide the Scheme Consideration.

3 Conditions precedent

3.1 Conditions precedent to Scheme

This Scheme is conditional on, and will have no force or effect until, the satisfaction of each of the following conditions precedent:

(a) as at 8.00am on the Second Court Date, neither the Merger Implementation Deed nor the Deed Poll having been terminated;

(b) all of the conditions precedent in schedule 2 of the Merger Implementation Deed (other than the condition precedent in the Merger Implementation Deed relating to Court approval of this Scheme) having been satisfied or waived (other than those conditions precedent which cannot be waived) in accordance with the terms of the Merger Implementation Deed by 8.00am on the Second Court Date;

(c) the Court having approved this Scheme, with or without any modification or condition, pursuant to section 411(4)(b) of the Corporations Act, and if applicable, the Target, the Acquirer and Resimac having accepted in writing any modification or condition made or required by the Court under section 411(6) of the Corporations Act;

(d) such other conditions made or required by the Court under section 411(6) of the Corporations Act in relation to this Scheme and agreed to by the Acquirer, the Target and Resimac having been satisfied or waived; and

(e) the coming into effect, pursuant to section 411(10) of the Corporations Act, of the orders of the Court made under section 411(4)(b) of the Corporations Act (and, if applicable, section 411(6) of the Corporations Act) in relation to this Scheme.

3.2 Conditions precedent and operation of clause 5

The satisfaction of each condition of clause 3.1 of this Scheme is a condition precedent to the operation of clause 5 of this Scheme.

3.3 Certificate in relation to conditions precedent

(a) The Target, the Acquirer and Resimac must provide to the Court on the Second Court Date a certificate confirming (in respect of matters within

274

For

per

sona

l use

onl

y



8

their knowledge) whether or not all of the conditions precedent set out in clause 3.1 of this Scheme (other than the conditions precedent in clause 3.1(c), 3.1(d) and clause 3.1(e) of this Scheme) have been satisfied or waived as at 8.00am on the Second Court Date.

(b) The certificates referred to in this clause 3.3 will constitute conclusive evidence of whether the conditions precedent referred to in clause 3.1 of this Scheme (other than the conditions precedent in clause 3.1(c), 3.1(d) and 3.1(e) of this Scheme) have been satisfied or waived as at 8.00am on the Second Court Date.

4 Scheme

4.1 Effective Date

Subject to clause 4.2, this Scheme will come into effect pursuant to section 411(10) of the Corporations Act on and from the Effective Date.

4.2 End Date

This Scheme will lapse and be of no further force or effect if the Effective Date does not occur on or before the End Date.

5 Implementation of Scheme

5.1 Lodgement of Court orders with ASIC

If the conditions precedent set out in clause 3.1 of this Scheme (other than the condition precedent in clause 3.1(e) of this Scheme) are satisfied, the Target must lodge with ASIC in accordance with section 411(10) of the Corporations Act an office copy of the Court order approving this Scheme by 5:00pm on the day on which the Court approves this Scheme or such later time as the Acquirer, the Target and Resimac agree in writing.

5.2 Transfer and registration of Target Shares

On the Implementation Date, but subject to the SPV Board Change having occurred and the provision of the Scheme Consideration for the Scheme Shares in accordance with clauses 6.1 to 6.3 of this Scheme and the Acquirer having provided the Target with written confirmation thereof:

(a) the Scheme Shares, together with all rights and entitlements attaching to the Scheme Shares as at the Implementation Date, will be transferred to the Acquirer without the need for any further act by any Scheme Participant (other than acts performed by the Target as attorney and agent for Scheme Participants under clause 8.1 of this Scheme) by:

(i) the Target delivering to the Acquirer a duly completed and executed Share Scheme Transfer executed on behalf of the Scheme Participants; and

(ii) the Acquirer duly executing the Share Scheme Transfer and delivering it to the Target for registration; and

(b) immediately following receipt of the duly executed Share Scheme Transfer, the Target must enter the name of the Acquirer in the Register in respect of all Scheme Shares transferred to the Acquirer in accordance with the terms of this Scheme.

5.3 Entitlement to Scheme Consideration

On the Implementation Date, and following the SPV Board Change having occurred, in consideration for the transfer to the Acquirer of the Scheme Shares,

275

For

per

sona

l use

onl

y



9

each Scheme Participant will be entitled to receive the Scheme Consideration in respect of each of their Scheme Shares in accordance with clause 6 of this Scheme.

5.4 Title and rights in Target Shares

Subject to the provision of the Scheme Consideration for the Scheme Shares as contemplated by clause 6 of this Scheme, on and from the Implementation Date, the Acquirer will be beneficially entitled to the Scheme Shares transferred to it under the Scheme, pending registration by the Target of the Acquirer in the Register as the holder of the Scheme Shares.

5.5 Scheme Participants’ agreements

Under this Scheme, each Scheme Participant agrees to the transfer of their Scheme Shares, together with all rights and entitlements attaching to those Scheme Shares, in accordance with the terms of this Scheme.

5.6 Warranty by Scheme Participants

Each Scheme Participant warrants to the Acquirer and is deemed to have authorised the Target to warrant to the Acquirer as agent and attorney for the Scheme Participant by virtue of this clause 5.6, that:

(a) all their Scheme Shares (including any rights and entitlements attaching to those shares) transferred to the Acquirer under the Scheme will, as at the date of the transfer, be fully paid and free from all Encumbrances; and

(b) they have full power and capacity to sell and to transfer their Scheme Shares (including any rights and entitlements attaching to those shares) to the Acquirer under the Scheme.

The Target will provide such warranty to the Acquirer as agent and attorney of each Scheme Shareholder.

5.7 Transfer free of encumbrances

To the extent permitted by law, all Target Shares (including any rights and entitlements attaching to those shares) which are transferred to the Acquirer under this Scheme will, at the date of the transfer of them to the Acquirer, vest in the Acquirer free from all Encumbrances and interests of third parties of any kind, whether legal or otherwise, and free from any restrictions on transfer of any kind not referred to in this Scheme.

5.8 Appointment of Acquirer as sole proxy

Subject to the provision of the Scheme Consideration for the Scheme Shares as contemplated by clauses 5.2 and 6.1 of this Scheme, on and from the Implementation Date until the Target registers the Acquirer as the holder of all of the Target Shares in the Register, each Scheme Participant:

(a) irrevocably appoints the Target as attorney and agent (and directs the Target in such capacity) to appoint the Acquirer and each of its directors from time to time (jointly and each of them individually) as its sole proxy and where applicable, corporate representative, to attend shareholders’ meetings, exercise the votes attaching to the Target Shares registered in its name and sign any shareholders resolution, and no Scheme Participant may itself attend or vote at any of those meetings or sign any resolutions, whether in person, by proxy or by corporate representative (other than pursuant to this clause 5.8(a)); and

276

For

per

sona

l use

onl

y



10

(b) must take all other actions in the capacity of the registered holder of the Target Shares as the Acquirer directs.

The Target undertakes in favour of each Scheme Participant that it will appoint the Acquirer and each of its directors from time to time (jointly and each of them individually) as that Scheme Participant’s proxy or, where applicable, corporate representative in accordance with clause 5.8(a) of this Scheme.

Each Scheme Shareholder acknowledges and agrees that in exercising the powers referred to in this clause 5.8, the Acquirer and any director, officer, secretary or agent nominated by the Acquirer under clause 5.8 may act in the best interests of the Acquirer as the intended registered holder of the Scheme Shares.

6 Scheme Consideration

6.1 Consideration under the Scheme

On the Implementation Date, and following the SPV Board Change having occurred, the Target must use its best endeavours to procure the Acquirer to pay (or procure the payment of) the Scheme Consideration to the Scheme Participants in accordance with clauses 6.2, 6.3 and 6.4 of this Scheme.

6.2 Satisfaction of obligations

The obligation of the Target to use its best endeavours to procure payment of the Scheme Consideration pursuant to clause 6.1 of this Scheme will be satisfied by the Target procuring the Acquirer no later than 11:00am on the Implementation Date to deposit (or procure the deposit of) in immediately available funds the aggregate amount of the Scheme Consideration payable to all Scheme Participants into the Trust Account (except that the amount of any interest on the amount deposited (less bank fees and other charges) will be to the Acquirer’s account).

6.3 Payment of Scheme Consideration

As soon as practicable, and within 5 Business Days after the Implementation Date, subject to receipt of the Scheme Consideration from the Acquirer in accordance with clause 6.2 of this Scheme, the Target must pay or procure payment to each Scheme Participant or, if the Target permits and subject to any regulatory requirements, in accordance with a Scheme Participant’s directions an amount equal to the Scheme Consideration for each Scheme Share transferred to the Target on the Implementation Date by that Scheme Participant.

Unless otherwise directed by the Scheme Participants before the Record Date, the amounts referred to in this clause 6.3 of this Scheme must be paid by direct credit (to their bank accounts for receipt of Target dividends) or sending a cheque drawn on an Australian bank in Australian currency on the Implementation Date to each Scheme Participant by pre-paid ordinary post (or, if the address of the Scheme Participant in the Register is outside Australia, by pre-paid airmail post) to their address recorded in the Register at 7.00pm on the Record Date.

6.3A Fractional Entitlements

Where the calculation of the Scheme Consideration to be issued to a particular Scheme Participant would result in the Scheme Participant becoming entitled to a fraction of a cent, the fractional entitlement will be rounded down to the nearest whole cent.

277

For

per

sona

l use

onl

y



11

6.4 Unclaimed monies

The Target may cancel a cheque issued under clause 6.3 of this Scheme if the cheque:

(a) is returned to the Target; or

(b) has not been presented for payment within six months after the date on which the cheque was sent.

During the period of one year commencing on the Implementation Date, on request from a Scheme Participant, the Target must reissue a cheque that was previously cancelled under this clause 6.4.

6.5 Orders of a court

In the case of notice having been given to the Target (or the Registry) of an order made by a court of competent jurisdiction:

(a) which requires payment to a third party of a sum in respect of Scheme Shares held by a particular Scheme Participant, which would otherwise be payable to that Scheme Participant in accordance with clause 6.3 of this Scheme, then the Target shall procure that payment is made in accordance with that order; or

(b) which would prevent the Target from dispatching payment to any particular Scheme Participant in accordance with clause 6.3 of this Scheme, the Target will retain an amount, in Australian dollars, equal to the number of Scheme Shares held by that Scheme Participant multiplied by the Scheme Consideration until such time as payment in accordance with clause 6.3 of this Scheme is permitted by law.

6.6 Joint holders

In the case of Scheme Shares held in joint names any bank cheque required to be paid to Scheme Participants must be payable to the joint holders and be forwarded to the holder whose name appears first in the Register as at 7.00pm on the Record Date.

7 Dealings in Scheme Shares

7.1 Determination of Scheme Participants

To establish the identity of the Scheme Participants, dealings in Scheme Shares will only be recognised by the Target if:

(a) in the case of dealings of the type to be effected using CHESS, the transferee is registered in the Register as the holder of the relevant Scheme Shares on or before 7.00pm on the Record Date; and

(b) in all other cases, registrable transmission applications or transfers in registrable form in respect of those dealings are received on or before 7.00pm on the Record Date at the place where the Register is kept.

7.2 Register

The Target must register any registrable transmission applications or transfers of the Scheme Shares received in accordance with clause 7.1(b) of this Scheme on or before 7.00pm on the Record Date.

278

For

per

sona

l use

onl

y



12

7.3 No disposals after Effective Date

If this Scheme becomes Effective, a holder of Scheme Shares (and any person claiming through that holder) must not dispose of or purport or agree to dispose of any Scheme Shares or any interest in them after the Effective Date in any way except as set out in this Scheme and any such disposal will be void and of no legal effect whatsoever.

The Target will not accept for registration or recognise for any purpose any transmission, application or transfer in respect of Scheme Shares received after 7.00pm on the Record Date or received prior to that times but not in registrable or actionable form (except a transfer to the Acquirer pursuant to this Scheme and any subsequent transfer by the Acquirer or its successors in title).

7.4 Maintenance of Target Register

For the purpose of determining entitlements to the Scheme Consideration, the Target will maintain the Register in accordance with the provisions of this clause 7.4 until the Scheme Consideration has been paid to the Scheme Participants and Acquirer has been entered in the Register as the holder of all the Scheme Shares. The Register in this form will solely determine entitlements to the Scheme Consideration.

7.5 Effect of certificates and holding statements

Subject to provision of the Scheme Consideration and registration of the transfer to the Acquirer contemplated in clauses 5.2 and 6.1 of this Scheme, any statements of holding in respect of Scheme Shares will cease to have effect after 7.00pm on the Record Date as documents of title in respect of those shares (other than statements of holding in favour of the Acquirer and its successors in title). After 7.00pm on the Record Date, each entry current on the Register as at 7.00pm on the Record Date (other than entries in respect of the Acquirer or its successors in title) will cease to have effect except as evidence of entitlement to the Scheme Consideration in respect of the Scheme Shares relating to that entry.

7.6 Details of Scheme Participants

Within 3 Business Days after the Record Date, the Target will ensure that details of the names, Registered Addresses and holdings of Scheme Shares for each Scheme Participant, as shown in the Register at 7.00pm on the Record Date are available to the Acquirer in such form as the Acquirer reasonably requires.

7.7 Quotation of Target Shares

(a) Suspension of trading on ASX in the Target Shares will occur from the close of trading on ASX on the Effective Date.

(b) After the Scheme has been fully implemented, on a date determined by the Acquirer, the Target will apply:

(i) for termination of the official quotation of the Target Shares on ASX; and

(ii) to have itself removed from the official list of the ASX.

8 General Scheme provisions

8.1 Power of attorney

Each Scheme Participant, without the need for any further act by any Scheme Participant, irrevocably appoints the Target and each of its directors and secretaries (jointly and each of them individually) as its attorney and agent for the purpose of:

279

For

per

sona

l use

onl

y



13

(a) executing any document necessary or expedient to give effect to this Scheme including the Share Scheme Transfer; and

(b) enforcing the Deed Poll against the Acquirer and Resimac,

and the Target accepts such appointment.

8.2 Variations, alterations and conditions

The Target may, with the consent of the Acquirer and Resimac (which cannot be unreasonably withheld), by its counsel or solicitor consent on behalf of all persons concerned to any variations, alterations or conditions to this Scheme which the Court thinks fit to impose.

8.3 Further action by Target

The Target will execute all documents and do all things (on its own behalf and on behalf of each Scheme Participant) necessary or expedient to implement, and perform its obligations under, this Scheme.

8.4 Authority and acknowledgement

Each of the Scheme Participants:

(a) irrevocably consents to the Target, the Acquirer and Resimac doing all things necessary or expedient for or incidental to the implementation of this Scheme; and

(b) acknowledges that this Scheme binds the Target and all Scheme Participants (including those who do not attend the Scheme Meeting or do not vote at that meeting or vote against the Scheme at that Meeting) and, to the extent of any inconsistency and to the extent permitted by law, overrides the constitution of the Target.

8.5 No liability when acting in good faith

None of the Target, the Acquirer or Resimac, nor any of their respective officers, will be liable for anything done or omitted to be done in the performance of this Scheme in good faith.

8.6 Enforcement of Deed Poll

The Target undertakes in favour of each Scheme Participant to enforce the Deed Poll against the Acquirer and Resimac on behalf of and as agent and attorney for the Scheme Participants.

8.7 Stamp duty

The Acquirer will:

(a) pay all stamp duty (including any fines, penalties and interest) in respect of this Scheme and the Deed Poll, the performance of the Deed Poll and each transaction effected by or made under or in connection with this scheme and the Deed Poll; and

(b) indemnify each Scheme Participant against any liability arising from the Acquirer’s failure to comply with this clause 8.7.

8.8 Notices

(a) If a notice, transfer, transmission application, direction or other communication referred to in this Scheme is sent by post to the Target, it will not be taken to be received in the ordinary course of post or on a date and time other than the date and time (if any) on which it is actually

280

For

per

sona

l use

onl

y



14

received at the Target’s registered office or at the office of the registrar of the Target Shares.

(b) The accidental omission to give notice of the Scheme Meeting or the non-receipt of such a notice by any Target Shareholder shall not, unless so ordered by the Court, invalidate the Scheme Meeting or the proceedings of the Scheme Meeting.

9 Governing law

9.1 Governing law

This Scheme is governed by the law in force in New South Wales, Australia.

9.2 Jurisdiction

Each party irrevocably and unconditionally:

(a) submits to the non-exclusive jurisdiction of the courts of that place.

(b) waives, without limitation, any claim or objection based on absence of jurisdiction or inconvenient forum.

281

For

per

sona

l use

onl

y

Annexure D – Deed Poll

282

For

per

sona

l use

onl

y

Deed Poll

Dated 2013

Given by Australian Mortgage Acquisition Company Pty Limited (ACN

163 867 016) (ACN 163 867 016) (“Acquirer”) and Resimac Limited

(ACN 002 997 935) (“Resimac”)

In favour of each registered holder of fully paid ordinary shares in RHG

Limited (ABN 22 055 136 564) (“Target”) as at 7.00 pm on the Record

Date (“Scheme Participants”)


Level 61


1 Farer Place

Sydney NSW 2000

Australia

T +61 9296 2000

F +61 9296 3999

DX 113 Sydney

www.kwm.com

02-5506-5000

283

For

per

sona

l use

onl

y

Deed Poll Contents


Deed Poll

i

Details 1

General terms 3


1.1 Definitions 3

1.2 Interpretation 3

1.3 Headings 3

1.4 Nature of deed poll 3

2 Conditions precedent and termination 3

2.1 Conditions precedent 3

2.2 Termination 4

2.3 Consequences of termination 4

3 Performance of Acquirer’s obligations generally 4

4 Scheme Consideration 4

4.1 Scheme Consideration 4

4.2 Manner of payment 4

5 Resimac guarantee 4

6 Representations and warranties 6

7 Continuing obligations 6

8 Notices 6

8.1 Form - all communications 6

8.2 Delivery 6

8.3 When effective 7

8.4 When taken to be received 7

8.5 Receipt outside business hours 7

9 General 7

9.1 Stamp duty 7

9.2 Waiver 7

9.3 Variation 8

9.4 Remedies cumulative 8

9.5 Merger Implementation Deed 8

9.6 Assignment 8

9.7 Governing law and jurisdiction 8

9.8 Counterparts 8

9.9 Further action 9

Signing page 10

284

For

per

sona

l use

onl

y

Deed Poll


Deed Poll

1

Details

Parties Acquirer and Resimac

Acquirer Name Australian Mortgage Acquisition Company

Pty Limited

ACN 163 867 016

Incorporated in Victoria

Address Suite 511, Level 5, 434 St Kilda Road,

Melbourne VIC 3004

Telephone (02) 8023 4000

Fax (02) 8023 4001


Attention Trevor Loewensohn

Resimac Name RESIMAC LIMITED

ACN 002 997 935

Incorporated in New South Wales

Address Level 9, 45 Clarence Street, Sydney NSW 2000

Australia

Telephone (02) 9248 0300

Fax (02) 9248 2304


Attention Mary Ploughman

In favour of Each registered holder of fully paid ordinary shares in the Target as

at 7.00 pm on the Record Date.

Recitals A The directors of the Target have resolved that the Target

should propose the Scheme.

B The effect of the Scheme will be that all Scheme Shares will

be transferred to the Acquirer.

C The Target, Resimac and the Acquirer have entered into the

Merger Implementation Deed.

285

For

per

sona

l use

onl

y


Deed Poll 5 November 2013

2

D In the Merger Implementation Deed, the Acquirer agreed

(amongst other things) to provide the Scheme Consideration

to the Target on behalf of the Scheme Participants, subject

to the satisfaction of certain conditions.

E In the Merger Implementation Deed, Resimac agreed for the

benefit of the Target and Scheme Participants to guarantee

the due and punctual performance and observance by the

Acquirer of all of the Acquirer’s obligations under the Merger

Implementation Deed (subject to a proviso in relation to its

guarantee of the Acquirer’s compliance with clause 5.5

thereof), including the Acquirer’s obligations to pay the

Scheme Consideration.

F The Acquirer and Resimac are each entering into this deed

poll for the purpose of covenanting in favour of Scheme

Participants to perform their respective obligations in relation

to the Scheme.


Date of agreement

See Signing page

286

For

per

sona

l use

onl

y

Deed Poll


Deed Poll

3

General terms


1.1 Definitions

In this deed poll (unless the context otherwise requires):

(a) Authorised Officer means, in respect of a party, a director or secretary of the party or any other person appointed by a party to act as an Authorised Officer under this deed poll;

(b) Merger Implementation Deed means the merger implementation deed dated on or about 6 July 2013 and amended by way of deeds of amendment executed on 15 July 2013, 21 August 2013, 2 September 2013 and 24 October 2013, respectively, between the Target, the Acquirer and Resimac under which, amongst other things, the Target has agreed to propose the Scheme to the Scheme Participants, and each of the Acquirer and the Target has agreed to take certain steps to give effect to the Scheme;

(c) Scheme means the proposed scheme of arrangement between the Target and Scheme Participants under which all the Scheme Shares will be transferred to the Acquirer under Part 5.1 of the Corporations Act, substantially in the form of Annexure A to this deed poll, or as otherwise agreed by the Acquirer, the Target and Resimac, subject to any amendments or conditions made or required by the Court pursuant to section 411(6) of the Corporations Act, to the extent they are approved in writing by the Target, the Acquirer and Resimac in accordance with clause 8.2 of the Scheme; and

(d) all other words and phrases used in this deed poll have the same meaning as given to them in the Merger Implementation Deed.

1.2 Interpretation

Clause 1.2 of the Scheme applies to the interpretation of this deed poll except that references to “this Scheme” in that clause are to be read as references to “this deed poll”.

1.3 Headings

Headings (including those in brackets at the beginning of paragraphs) are for convenience only and do not affect the interpretation of this deed poll.

1.4 Nature of deed poll

Each of the Acquirer and Resimac acknowledges that this deed poll may be relied on and enforced by any Scheme Participant in accordance with its terms even though the Scheme Participants are not a party to it.

2 Conditions precedent and termination

2.1 Conditions precedent

The Acquirer’s and Resimac’s respective obligations in respect of the Scheme and pursuant to this deed poll are each subject to the Scheme becoming Effective.

287

For

per

sona

l use

onl

y


Deed Poll

4

2.2 Termination

The Acquirer’s and Resimac’s obligations under this deed poll will automatically terminate and the terms of this deed poll will be of no further force or effect if:

(a) the Scheme has not become Effective on or before the End Date; or

(b) the Merger Implementation Deed is terminated in accordance with its terms.

2.3 Consequences of termination

If this deed poll is terminated under clause 2.2, then, in addition and without prejudice to any other rights, powers or remedies available to Scheme Participants:

(a) each of the Acquirer and Resimac is released from its respective obligations to further perform this deed poll except those obligations contained in clause 9.1 and any other obligations which are specifically stated to survive termination; and

(b) each Scheme Participant retains the rights, powers or remedies they have against the Acquirer and Resimac in respect of any breach of this deed poll which occurs before it is terminated.

3 Performance of Acquirer’s obligations generally

The Acquirer must:

(a) comply with its obligations under the Scheme; and

(b) do all acts and things necessary or desirable on its part to give full effect to the Scheme.

4 Scheme Consideration

4.1 Scheme Consideration

Subject to clause 2, the Acquirer undertakes in favour of each Scheme Participant to pay the Scheme Consideration to the Trust Account on behalf of each Scheme Participant in accordance with the Scheme.

4.2 Manner of payment

The Acquirer’s obligation to provide the Scheme Consideration to the Target on behalf of each Scheme Participant is satisfied by the Acquirer, no later than 11.00am on the Implementation Date, depositing in immediately available funds the aggregate amount of the Scheme Consideration payable to all Scheme Participants into the Trust Account (except that the amount of any interest on the amount deposited (less bank fees and other charges) will be to the Acquirer’s account).

5 Resimac guarantee

(a) Subject to clause 2, Resimac undertakes for the benefit of each Scheme Participant to guarantee the due and punctual performance and observance by the Acquirer of all of the Acquirer’s obligations under the Scheme, including but not limited to the Acquirer’s obligations to pay the Scheme Consideration in accordance with the Scheme (Guaranteed Obligations).

288

For

per

sona

l use

onl

y


Deed Poll

5

(b) The obligations of Resimac under this clause 5 remain unaffected despite:

(i) an amendment to the Merger Implementation Deed;

(ii) a rule of law or equity to the contrary;

(iii) an insolvency event affecting a person or the death of a person;

(iv) a change in the constitution, membership or partnership of a person;

(v) the Guaranteed Obligations not being enforceable at any time (whether by reason of a legal limitation, disability or incapacity on the part of Resimac and whether this deed is void ab initio or is subsequently avoided) against Resimac; or

(vi) another thing happening that might otherwise release, discharge, or affect the obligations of Resimac under this deed or under the Merger Implementation Deed.

(c) Resimac must make all payments required by it under this clause 5, in full, without set off and free and clear of any withholding or deduction. If Resimac is required to withhold or deduct any tax, duty, impost, charge, withholding, rate, levies or other governmental imposition of any nature together with associated costs, charges, interest, penalties, fines or expenses (Taxes) so that the Target would not actually receive on the due date the full amount then Resimac must ensure that the amount payable is increased so that, after making that deduction and deductions applicable to additional amounts payable under this clause, the Target is entitled to receive, and does receive, the amount it would have received if no deductions had been required. Resimac must ensure any deductions required are made and pay the full amount deducted to the relevant governmental body in accordance with applicable law.

(d) Resimac’s obligations under this clause 5 are absolute, unconditional and irrevocable. The liability of Resimac under this clause 5 extends to and is not affected by any circumstance, act or omission which, but for this clause, might otherwise affect it at law or in equity. The guarantee in this clause 5 is a continuing security, and remains in full force until all of the Guaranteed Obligations have been fully paid and satisfied.

(e) Resimac agrees that if a payment or other transaction relating to the Guaranteed Obligations is void, voidable, unenforceable or defective for any reason or a related claim is upheld, conceded or settled (each an Avoidance), then even though the Target should have known of the Avoidance:

(i) each right, power, discretion or remedy of the Target and Resimac’s liability under this clause 5 will be what it would have been, and will continue, as if the payment or transaction the subject of the Avoidance had not occurred; and

(ii) Resimac will immediately execute and do anything necessary or required by the Target to restore the Target to its position immediately before the Avoidance.

(f) This clause 5 is:

(i) a principal obligation and is not to be treated as ancillary to another right or obligation; and

289

For

per

sona

l use

onl

y


Deed Poll

6

(ii) independent of and not in substitution for or affected by another security interest or guarantee or other document or agreement which the Target or another person may hold concerning the Guaranteed Obligations.

(g) This clause 5 may be enforced against Resimac without a party first having to resort to another guarantee or security interest or other agreement relating to the Guaranteed Obligations.

6 Representations and warranties

Each of the Acquirer and Resimac represents and warrants in respect of itself that:

(a) it is a corporation validly existing under the laws of its place of registration;

(b) it has the corporate power to enter into and perform its obligations under this deed poll and to carry out the transactions contemplated by this deed poll;

(c) it has taken all necessary corporate action to authorise its entry into this deed poll and has taken or will take all necessary corporate action to authorise the performance of this deed poll and to carry out the transactions contemplated by this deed poll; and

(d) this deed poll is valid and binding upon it and enforceable against it in accordance with its terms.

7 Continuing obligations

This deed poll is irrevocable and, subject to clause 2, remains in full force and effect until:

(a) each of the Acquirer and Resimac (if applicable) has fully performed its obligations under this deed poll; or

(b) the earlier termination of this deed poll under clause 2.2.

8 Notices

8.1 Form - all communications

Unless expressly stated otherwise in this deed poll, all notices, certificates, consents, approvals, waivers and other communications in connection with this deed poll must be:

(a) in writing;

(b) signed by the sender (if an individual) or an Authorised Officer of the sender; and

(c) marked for the attention of the person identified in the Details or, if the recipient has notified otherwise, then marked for attention in the way last notified.

8.2 Delivery

Communications must be:

290

For

per

sona

l use

onl

y


Deed Poll

7

(a) left at the address set out or referred to in the Details;

(b) sent by prepaid ordinary post (airmail if appropriate) to the address set out or referred to in the Details;

(c) sent by fax to the fax number set out or referred to in the Details; or

(d) given in any other way permitted by law.

However, if the intended recipient has notified a changed address or fax number, then communications must be to that address or fax number.

8.3 When effective

Communications take effect from the time they are received or taken to be received under clause 8.4 (whichever happens first) unless a later time is specified.

8.4 When taken to be received

Communications are taken to be received:

(a) if sent by post, three days after posting (or seven days after posting if sent from one country to another); or

(b) if sent by fax, at the time shown in the transmission report as the time that the whole fax was sent.

8.5 Receipt outside business hours

Despite clauses 8.3 and 8.4, if communications are received or taken to be received under clause 8.4 after 5.00pm in the place of receipt or on a non-Business Day, they are taken to be received at 9.00am on the next Business Day and take effect from that time unless a later time is specified.

9 General

9.1 Stamp duty

The Acquirer must:

(a) pay all stamp duty (including fines, penalties and interest) payable and assessed on or in connection with this deed poll, the performance of this deed poll, or any instruments entered into under this deed poll and in respect of a transaction effected by or made under the Scheme and this deed poll; and

(b) pay bank fees or similar costs in respect of its obligations under the Scheme (including in connection with the transfer of the Target Shares to the Acquirer in accordance with the terms of the Scheme); and

(c) indemnify on demand each Scheme Participant against any liability arising from failure to comply with clauses 9.1(a) or 9.1(b).

9.2 Waiver

(a) A waiver of any right arising from a breach of this deed poll or of any right, power, authority, discretion or remedy arising upon default under this deed poll must be in writing and signed by the party giving the waiver.

(b) A failure or delay in exercise, or partial exercise, of:

291

For

per

sona

l use

onl

y


Deed Poll

8

(i) a right arising from a breach of this deed poll; or

(ii) a right, power, authority, discretion or remedy created or arising upon default under this deed poll,

does not result in a waiver of that right, power, authority, discretion or remedy.

(c) A party is not entitled to rely on a delay in the exercise or non-exercise of

a right, power, authority, discretion or remedy arising from a breach of this deed poll or on a default under this deed poll as constituting a waiver of that right, power, authority, discretion or remedy.

(d) A party may not rely on any conduct of another party as a defence to exercise of a right, power, authority, discretion or remedy by that other party.

9.3 Variation

A provision of this deed poll or any right created under it may not be varied, altered or otherwise amended unless:

(a) the variation is agreed to by the Target, the Acquirer and Resimac in writing; and

(b) the Court indicates that the variation, alteration or amendment would not itself preclude approval of the Scheme,

in which event the Acquirer and Resimac must each enter into a further deed poll in favour of the Scheme Participants giving effect to the variation, alteration or amendment.

9.4 Remedies cumulative

The rights, powers and remedies of the Acquirer, Resimac and the Scheme Participants under this deed poll are cumulative and are in addition to, and do not exclude any, other rights, powers and remedies given by law independently of this deed poll.


Without limiting clause 9.4, this deed poll operates in addition to, and does not supersede, the Merger Implementation Deed, which remains in full force and effective according to its terms.

9.6 Assignment

The rights and obligations of the Acquirer, Resimac and each Scheme Participant under this deed poll are personal and must not be assigned, encumbered or otherwise dealt with at law or in equity except as permitted under clause 20.17 of the Merger Implementation Deed.

9.7 Governing law and jurisdiction

This deed poll is governed by the law in force in New South Wales. The Acquirer and Resimac each irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of that place.

9.8 Counterparts

This deed may be executed in counterparts. All counterparts when taken together are to constitute one instrument.

292

For

per

sona

l use

onl

y


Deed Poll

9

9.9 Further action

The Acquirer and Resimac must each execute all deeds and other documents and do all things (on its own behalf or on behalf of each Scheme Participant) necessary or expedient to give full effect to this deed poll and the transactions contemplated by it.

EXECUTED as a deed poll

293

For

per

sona

l use

onl

y

Deed Poll


Deed Poll

10

Signing page

DATED:______________________ EXECUTED AS A DEED BY AUSTRALIAN MORTGAGE ACQUISITION COMPANY PTY LIMITED in accordance with section 127 of the Corporations Act 2001 (Cth) by: ............................................................... Signature of sole director and sole company secretary ............................................................... Name (block letters)

) ) ) ) ) ) ) ) ) ) ) )

SIGNED, SEALED AND DELIVERED BY RESIMAC LIMITED by its attorney: ............................................................... Signature of attorney ............................................................... Name of attorney (block letters)

) ) ) ) ) ) ) ) ) ) ) )


294

For

per

sona

l use

onl

y

Annexure E – Notice of Scheme Meeting

RHG Limited (‘RHG”) ABN 22 055 136 564

Notice is given that, by an order of the Federal Court pursuant to section 411(1) of the Corporations Act, a meeting of RHG Shareholders will be held at the Wesley Conference Centre, 220 Pitt Street, Sydney NSW 2000 on 18 December 2013 at 10.00am (Sydney time). The Scheme Meeting and the General Meeting will be held concurrently. However, as the passage of the Financial Assistance Resolution at the General Meeting is a Condition Precedent to implementation of the Scheme, the Financial Assistance Resolution will be put to the General Meeting for a vote prior to the Scheme Resolution. Purpose of the Scheme Meeting The purpose of the Scheme Meeting is to consider and, if thought fit, to agree to a scheme of arrangement (with or without amendment or any alterations or conditions required by the Court to which RHG and AMAC and Resimac agree) proposed to be made between RHG and RHG Shareholders (the Scheme). A copy of the Scheme and a copy of the explanatory statement required by section 412 of the Corporations Act in relation to the Scheme are contained in the Scheme Booklet, of which this notice forms part. Resolution The Scheme Meeting will be asked to consider and, if thought fit, pass (with or without amendment) the following resolution (the Scheme Resolution):

‘That, pursuant to and in accordance with the provisions of section 411 of the Corporations Act 2001 (Cth), the scheme of arrangement proposed between RHG Limited and the holders of its ordinary shares (other than certain excluded shareholders), as contained in and more particularly described in the scheme booklet of which the notice convening this meeting forms part, is agreed to, with or without alterations or conditions as approved by the Federal Court to which RHG Limited and AMAC and Resimac agree.’

Chairman The Court has directed that Glenn Goddard is to act as Chairman of the Scheme Meeting (and that, if Glenn Goddard is unable or unwilling to attend, John Kean is to act as Chairman of the Scheme Meeting) and has directed the Chairman to report the result of the Scheme Resolution to the Court. Explanatory statement RHG Shareholders are referred to the explanatory statement accompanying and forming part of this notice of meeting. By order of the Court and the RHG Board

Nicholas J V Geddes Company Secretary 7 November 2013

295

For

per

sona

l use

onl

y

Explanatory Statement:

1. General

This Notice of Scheme Meeting relates to the Scheme and should be read in conjunction with the Scheme Booklet of which this notice forms part. The Scheme Booklet contains important information to assist you in determining how to vote on the Scheme Resolution.

A copy of the Scheme is set out in Annexure C of the Scheme Booklet and a summary of the Scheme is set out in section 4.

Capitalised terms used but not defined in this Notice of Scheme Meeting have the defined meanings set out in section 11 of the Scheme Booklet, unless the context otherwise requires.

2. Shareholder approval

For the proposed Scheme to be binding in accordance with section 411 of the Corporations Act, the Scheme Resolution must be agreed to by:

• unless the Court orders otherwise, a majority in number of Shareholders present and voting (either in person or by proxy, attorney or, in the case of corporate RHG Shareholders, body corporate representative) at the Scheme Meeting; and

• at least 75% of the votes cast on the Resolution (either in person or by proxy, attorney or, in the case of corporate RHG Shareholders, body corporate representative).

3. Court approval

Under section 411(4)(b) of the Corporations Act, the Scheme (with or without amendment or any alteration or condition required by the Court) is subject to the approval of the Court. If the Scheme Resolution is agreed to by the Requisite Majorities and the other Conditions Precedent to the Scheme (other than approval by the Court) are satisfied or waived by the time required under the Scheme, RHG intends to apply to the Court for the necessary orders to give effect to the Scheme.

In order for the Scheme to become Effective, it must be approved by the Court and an office copy of the orders of the Court approving the Scheme must be lodged with ASIC.

4. Entitlement to vote

The time for determining eligibility to vote at the Scheme Meeting is 7:00pm (Sydney time) on 16 December 2013. Only those RHG Shareholders entered on the RHG Register at that time will be entitled to attend and vote at the Scheme Meeting, either in person, by proxy or attorney, or in the case of a corporate RHG Shareholder, by a body corporate representative. The remaining comments in this explanatory statement are addressed to RHG Shareholders entitled to attend and vote at the Scheme Meeting.

5. How to vote

Voting will be conducted by poll.

If you are an RHG Shareholder entitled to vote at the Scheme Meeting, you may vote by:

• attending and voting in person;

• appointing one or two proxies to attend and vote on your behalf, using the Proxy Form that accompanied this Scheme Booklet;

• appointing an attorney to attend and vote on your behalf, using a power of attorney; or

• in the case of a body corporate, appointing a body corporate representative to attend the meeting and vote on your behalf, using a certificate of appointment of body corporate representative.

296

For

per

sona

l use

onl

y

6. Attendance

If you or your proxies, attorneys or representative(s) plan to attend the Scheme Meeting, please arrive at the venue at least 30 minutes before the scheduled time for commencement of the meeting, so that your shareholding can be checked against the RHG Register, any power of attorney or certificate of appointment of body corporate representative verified, and your attendance noted.

7. Jointly held securities

If you hold RHG Shares jointly with one or more other persons, only one of you may vote. If more than one of you attempts to vote in person at the Scheme Meeting, only the vote of the holder whose name appears first on the RHG Register will be counted.

See also the comments in paragraph 8.2 below regarding the appointment of a proxy by persons who jointly hold RHG Shares.

8. Voting

8.1 Voting in person

To vote in person, you must attend the Scheme Meeting.

Eligible RHG Shareholders who wish to attend and vote at the meeting in person will be admitted and given a voting card at the point of entry to the meeting, once they have disclosed their name and address.

8.2 Voting by proxy

You may appoint one or two proxies. Your proxy need not be another RHG Shareholder. Each proxy will have the right to vote on the poll and also to speak at the Scheme Meeting.

To appoint a proxy, you should complete and return the Proxy Form that accompanied this Scheme Booklet in accordance with the instructions on that form. You must deliver the signed and completed Proxy Form to the RHG Registry by 10.00am (Sydney time) on 16 December 2013 (or, if the Scheme Meeting is adjourned or postponed, no later than 48 hours before the resumption of the Scheme Meeting in relation to the resumed part of the Scheme Meeting) in any of the following ways:

(a) by post to the RHG Registry:

GPO Box 242, Melbourne VIC 3001

(b) by hand delivery to the RHG Registry:

Level 4, 60 Carrington Street, Sydney NSW 2000

(c) by fax to the RHG Registry on:

1800 783 447 (within Australia) or +61 3 9473 2555 (outside Australia).

(d) For Intermediary Online Subscribers Only (custodians) www.intermediaryonline.com

Alternatively, you can lodge your proxy online at www.investorvote.com.au.

Completed Proxy Forms received after this time will be invalid.

If a Proxy Form is completed under power of attorney or other authority, the power of attorney or other authority, or a certified copy of the power of attorney or other authority, must accompany the completed Proxy Form unless the power of attorney or other authority has previously been noted by the RHG Registry.

If you wish to appoint a second proxy, a second Proxy Form should be used and you should clearly indicate on the second Proxy Form that it is a second proxy and not a revocation of your first proxy. You can obtain a second Proxy Form from the RHG Registry. Replacement Proxy Form can also be obtained from the RHG Registry.

297

For

per

sona

l use

onl

y

If you appoint two proxies, each proxy should be appointed to represent a specified proportion of your voting rights. If you do not specify the proportions in the Proxy Forms, each proxy may exercise half of your votes with any fractions of votes disregarded.

If you hold RHG Shares jointly with one or more other persons, in order for your proxy appointment to be valid, each of you must sign the Proxy Form.

You should consider how you wish your proxy to vote. That is, whether you want your proxy to vote ‘for’ or ‘against’, or abstain from voting on, the Scheme Resolution, or whether to leave the decision to the proxy after he or she has considered the matters discussed at the meeting.

If you do not direct your proxy how to vote on an item of business, the proxy may vote, or abstain from voting, as he or she thinks fit. If you instruct your proxy to abstain from voting on an item of business, he or she is directed not to vote on your behalf, and the shares the subject of the proxy appointment will not be counted in computing the required majority.

If you return your Proxy Form:

• without identifying a proxy on it, you will be taken to have appointed the Chairman of the meeting as your proxy to vote on your behalf; or

• with a proxy identified on it but your proxy does not attend the meeting, the Chairman of the meeting will act in place of your nominated proxy and vote in accordance with any directions on your Proxy Form.

The Chairman of the meeting intends to vote all valid undirected proxies which nominate the Chairman in favour of the Scheme Resolution, in the absence of a Superior Proposal.

Proxies of eligible RHG Shareholders will be admitted to the Scheme Meeting and given a voting card on providing at the point of entry to the meeting written evidence of their name and address.

Your appointment of a proxy does not preclude you from attending in person, revoking the proxy and voting at the Scheme Meeting.

8.3 Voting by attorney

You may appoint an attorney to attend and vote at the Scheme Meeting on your behalf. Your attorney need not be another RHG Shareholder. Each attorney will have the right to vote on the poll and also to speak at the meeting.

The power of attorney appointing your attorney to attend and vote at the meeting must be duly executed by you and specify your name, the company (that is, RHG), and the attorney, and also specify the meetings at which the appointment may be used. The appointment may be a standing one.

The power of attorney, or a certified copy of the power of attorney, should be lodged at the registration desk on the day of the meeting or with the RHG Registry by 10:00am (Sydney time) on 16 December 2013 (or, if the Scheme Meeting is adjourned or postponed, no later than 48 hours before the resumption of the Scheme Meeting in relation to the resumed part of the Scheme Meeting) in any of the following ways:







Attorneys of eligible RHG Shareholders will be admitted to the Scheme Meeting and given a voting card on providing at the point of entry to the Scheme Meeting, written evidence of their appointment, their name and address, and the name of their appointers.

298

For

per

sona

l use

onl

y

Your appointment of an attorney does not preclude you from attending in person and voting at the Scheme Meeting.

8.4 Voting by corporate representative

If you are a body corporate, you may appoint an individual to act as your body corporate representative. The appointment must comply with the requirements of section 250D of the Corporations Act, meaning that RHG will require a certificate of appointment of body corporate representative to be executed by you in accordance with the Corporations Act. A form of certificate may be obtained from the RHG Registry by calling 1300 389 054 (within Australia) or +61 3 9415 4041 (outside Australia). The certificate of appointment may set out restrictions on the representative’s powers.

The certificate should be lodged at the registration desk on the day of the Scheme Meeting or with the RHG Registry before 10:00am (Sydney time) on 16 December 2013 (or, if the meeting is adjourned or postponed, no later than 48 hours before the resumption of the Scheme Meeting in relation to the resumed part of the Scheme Meeting) in any of the following ways:







If a certificate is completed under power of attorney or other authority, the power of attorney or other authority, or a certified copy of the power of attorney or other authority, must accompany the completed certificate unless the power of attorney or other authority has previously been noted by the RHG Registry.

Body corporate representatives of eligible RHG Shareholders will be admitted to the Scheme Meeting and given a voting card on providing at the point of entry to the Scheme Meeting, written evidence of their appointment, their name and address and the name of their appointers.

9 Advertisement

Where this Notice of Scheme Meeting is advertised unaccompanied by the Scheme Booklet, a copy of the Scheme Booklet can be obtained by anyone entitled to attend the Scheme Meeting from RHG’s website (www.rhgl.com.au) or by contacting the Company Secretary of RHG or the RHG Registry.

299

For

per

sona

l use

onl

y

Annexure F – Notice of General Meeting

RHG Limited

ABN 22 055 136 564 Notice of General Meeting

Notice is hereby given that the General Meeting of members of RHG Limited will be held at the Wesley Conference Centre, 220 Pitt Street, Sydney NSW 2000 on 18 December 2013 at 10.00am (Sydney time).

The Scheme Meeting and the General Meeting will be held concurrently. However, as the passage of the Financial Assistance Resolution at the General Meeting is a Condition Precedent to implementation of the Scheme, the Financial Assistance Resolution will be put to the General Meeting for a vote prior to the Scheme Resolution.

Business - Financial Assistance Resolution To consider, and if thought fit, pass the following as a special resolution (the Financial Assistance Resolution): ‘That:

1 for the purposes of sections 260A(1)(b) and 260B of the Corporations Act 2001 (Cth) (“Corporations Act”), approval is given for RHG Limited and RHG Home Loans Pty Limited (ACN 053 725 741) to give financial assistance as described in the Explanatory Statement annexed to this Notice of General Meeting; and

2 RHG Limited and RHG Home Loans Pty Limited (ACN 053 725 741) may enter into and give effect to the documents required to implement the financial assistance as described in the Explanatory Statement annexed to this Notice of General Meeting.’

For further information, please refer to the Explanatory Statement made in accordance with section 260B(4) of the Corporations Act, which forms part of this Notice of General Meeting.

Explanatory Statement

RHG Shareholders are referred to the explanatory statement accompanying and forming part of this Notice of General Meeting.

By order of the RHG Board

Nicholas J V Geddes Company Secretary 7 November 2013

300

For

per

sona

l use

onl

y

Explanatory Statement:

RHG Shareholders should read the explanatory statement accompanying, and forming part of, this Notice of General Meeting for more details on the Financial Assistance Resolution to be voted on at the General Meeting, as well as important information to assist you in determining how to vote on the Financial Assistance Resolution. The information provided is intended to assist RHG Shareholders in understanding the reasons for the Financial Assistance Resolution and its effect if passed.

The information concerning AMAC and the intentions, views and opinions of AMAC contained in this explanatory statement are the responsibility of AMAC. The information concerning Resimac and the intentions, views and opinions of Resimac contained in this explanatory statement are the responsibility of Resimac.

RHG and RHG’s Directors and officers do not assume any responsibility for the accuracy or completeness of the information concerning AMAC and Resimac (and their intentions, views and opinions) except to the extent that RHG has provided the Resimac Syndicate with information for the purpose of the Resimac Syndicate preparing information on the merged entity following implementation of the Scheme.

RHG has relied on information, statements and undertakings from AMAC and Resimac for the purposes of this disclosure. In particular, AMAC has given RHG an undertaking that following the Implementation Date, the Financial Assistance will be implemented in a manner that complies with all applicable laws and does not render any member of the RHG Group insolvent and ensures that all employee entitlements or redundancy entitlements are paid. This undertaking is discussed in Section 8.1(d) of the Scheme Booklet.

Capitalised terms used but not defined in this Notice of General Meeting have the defined meanings set out in Section 11, unless the context otherwise requires.

1 Background to the requirement for the Financial Assistance Resolution

1.1 Passage of the Financial Assistance Resolution as a Condition Precedent to the implementation of the Scheme

RHG announced on 8 July 2013 that it had entered into a Merger Implementation Deed with the Resimac Syndicate which was revised on 15 July 2013, 21 August 2013, 2 September 2013 and 24 October 2013. Under the Merger Implementation Deed, it is proposed that AMAC will acquire all of the RHG Shares by way of a scheme of arrangement for a consideration of $0.501 per RHG Share.

AMAC has borrowed or will borrow funds to pay the Scheme Consideration. After the Scheme is implemented (if approved), and despatch of Scheme Consideration to RHG Shareholders has been initiated, the asset sale described in Section 7.4(c) of the Scheme Booklet will occur and the sale proceeds from the asset sale will become available. Following this, AMAC proposes to use some of RHG and RHG Home Loans Pty Limited’s (RHGHL) funds to repay the funds it has borrowed to pay the Scheme Consideration. Those funds will predominantly come from existing balance sheet cash, repayment of warehouse credit support and the premium received from Resimac as part of the asset sale. Additionally, in the limited circumstance where the asset sale does not complete within 2 business days after the implementation of the Scheme, AMAC has an obligation to procure RHG to grant an all assets security in favour of National Australia Bank Limited within 4 business days after implementation of the Scheme (who will provide financing for part of the Scheme Consideration). This security and the use of RHG and RHGHL’s funds referred to above are forms of “Financial Assistance” under the Corporations Act, requiring approval of the RHG Shareholders by passing the Financial Assistance Resolution (Financial Assistance).

Passage of the Financial Assistance Resolution is a Condition Precedent to the implementation of the Scheme. If the Financial Assistance Resolution is not passed, the Scheme will be unable to proceed, unless AMAC and Resimac both agree to waive the passage of the Financial Assistance Resolution as a Condition Precedent.

1.2 Restrictions on companies giving “financial assistance”

Pursuant to section 260A(1) of the Corporations Act, a company may financially assist a person to acquire shares (or units of shares) in the company or a holding company of the company only if:

(a) giving the assistance does not materially prejudice:

(i) the interests of the company or its shareholders; or

(ii) the company’s ability to pay its creditors; or

301

For

per

sona

l use

onl

y

(b) the assistance is approved by shareholders under section 260B of the Corporations Act; or

(c) the assistance is exempted under section 260C of the Corporations Act.

The requirements for shareholder approval under section 260B of the Corporations Act are described in Section 1.3 below.

1.3 Shareholder approval of “financial assistance”

Under sections 260B(1) and (2) of the Corporations Act, for a company to financially assist a person to acquire shares (or units of shares) in itself or its holding company, the financial assistance must be approved by:

(a) a special resolution passed at a general meeting of the company (and at a general meeting of any listed Australian holding company of the company), with no votes being cast in favour of the resolution by the person acquiring the shares (or units of shares) or by their associates; or

(b) a resolution agreed to, at a general meeting, by all ordinary shareholders.

The purpose of this explanatory statement is to explain in further detail the proposed Financial Assistance Resolution set out in the Notice of General Meeting which must be passed under sections 260B(1) and (2) of the Corporations Act to enable RHG and RHGHL to provide the Financial Assistance, and to provide the information required to be disclosed by section 260B(4) of the Corporations Act.

2 Particulars of the Financial Assistance proposed to be given

Particulars of the Financial Assistance proposed to be given are as follows:

AMAC has obtained short term acquisition funding of $154,550,072 from Alceon and Resimac to fund the aggregate Scheme Consideration. Resimac will obtain the amount it is lending to AMAC from National Australia Bank Limited under a Bridging Facility. Alceon will obtain the amount it is lending to AMAC from one of the following sources: the assets of the Alceon Group Trust or an entity wholly owned by the Alceon Group Trust; or from unit holders of the Alceon Group Trust. See Section 7.3(b) of the Scheme Booklet for details of these loans.

Following completion of the sale of certain assets of the RHG Group and the Securitisation Vehicles to Resimac Group as described in detail in Section 7.4(c) of the Scheme Booklet and after implementation of the Financial Assistance (including repayment of the short term funding to Alceon and Resimac), it is expected that the RHG Group will still have sufficient cash and other assets to satisfy in full their obligations to creditors and employees (on the basis of an undertaking from AMAC - see Section 2.2 of this explanatory statement below).

The Financial Assistance will involve RHGHL paying an amount in the form of a dividend or loan to RHG and RHG paying an amount in the form of a dividend or loan to AMAC, which will in aggregate equal the amount of the total Scheme Consideration. The Financial Assistance will be used by AMAC to repay loans of $154,550,072 which AMAC will at that point owe to Resimac and Alceon. It is currently the intention that AMAC will give payment instructions to RHGHL to make the payments described above directly to National Australia Bank Limited (as lender to Resimac under the Bridging Facility) and Alceon (as lender to AMAC). The cash used to make these payments is expected to predominately come from RHGHL from a combination of:

(a) repayment of Cash Collateral (approximately $22,994,000), Investments and Subordinated Debt (approximately $24,000,000) and Other Assets (approximately $2,748,000), Current Receivables (approximately $3,484,000) less rental bonds of approximately $118,000 (which form part of the Other Assets set out in the RHG pro-forma corporate balance sheet in section 7.3(b) of the Scheme Booklet) which will remain part of RHGHL post sale of assets to Resimac entities. These amounts totalled approximately $53,109,000 as at 31 August 2013;

(b) the premium received from Resimac as part of the asset sale, an amount currently estimated to be $74,996,000 as adjusted in accordance with an agreement between Resimac and AMAC; and

(c) the balance from existing balance sheet cash.

The form and method of the financial assistance will be determined by the new boards of those entities, following implementation of the Scheme.

If the sale of the assets described in Section 7.4(c) of the Scheme Booklet does not complete within 2 business days after the implementation of the Scheme, the Financial Assistance may take the form of RHG giving an all

302

For

per

sona

l use

onl

y

assets security in favour of National Australia Bank Limited to secure the amount of $124,550,072 which will be owing to National Australia Bank Limited by Resimac under the Bridging Facility until the sale of the assets occurs.

At the General Meeting, the shareholders of RHG will be asked to vote on a resolution under section 260B(1) of the Corporations Act in relation to RHG and section 260(B)(2) of the Corporations Act in relation to RHGHL, to approve the Financial Assistance described above. Immediately after the shareholders of RHG pass the Financial Assistance Resolution, the shareholder of RHGHL, being RHG, will also pass a resolution under section 260B(1) of the Corporations Act to approve the Financial Assistance described above (and on the same day will notify ASIC of the resolution under section 260B(6) of the Corporations Act), on the express basis that the new board of RHG confirm (following implementation of the Scheme and before the Financial Assistance is provided) that resolution and confirm that the proposed Financial Assistance will not cause any company in the RHG Group to become insolvent.

2.1 Reasons for the proposal for Financial Assistance

RHG Group's business is in run-off and has been for some years. This means that it generates cash from the progressive realisation of its assets, and has no need to reinvest that cash in new business. By using this cash, together with cash from the sale of assets to Resimac Group, to repay short term acquisition funding, the financing costs of AMAC can be lowered, therefore enabling the best available price to be paid for RHG Shares under the Scheme. If a bidder for RHG Shares was unable to access the RHG Group's cash, then it is expected that higher funding costs could result in a lower price offered to RHG Shareholders. The present proposal optimises the Scheme outcome for RHG Shareholders while still leaving RHG and the RHG Group with sufficient cash and other assets to satisfy in full their obligations.

2.2 Effect of the proposed Financial Assistance on RHG and the RHG Group1

Following implementation of the Scheme, the subsequent proposed sale of assets to Resimac and the provision of the Financial Assistance, AMAC estimates that RHG is expected to have approximately $9.64 million in assets and $5.96 million in identified liabilities inclusive of all employee entitlements including an estimate of the full cost of redundancies. AMAC estimates that the remaining $3.68 million in net assets is expected to be more than sufficient for RHG to meet any ongoing obligations under its licenses, ASIC Settlement Deed, premises lease agreement and costs associated with the ongoing management of relevant RHG entities including winding down the various RHG entities in due course which are estimated to be in the range of $1.5 million to $2.5 million.

The Financial Assistance will result in a substantial reduction in the assets (including in the case of any payments as described above in Section 2 of this explanatory statement, cash resources) of the RHG Group. However, it is expected (on the basis of an undertaking from AMAC – see below) that RHG, RHGHL and the RHG Group will still have sufficient cash and other assets to satisfy in full their obligations to creditors and employees.

To support the solvency of RHG, RHGHL and the RHG Group, AMAC has undertaken in the Merger Implementation Deed that it will only implement the Financial Assistance in a manner that would not render any member of the RHG Group insolvent, and in particular that it will do so in a manner which ensures all employee entitlements and redundancy entitlements are paid. Further, Resimac has agreed in the Merger Implementation Deed to guarantee AMAC's obligations to ensure all employee entitlements and redundancy entitlements are paid.

2.3 Advantages of the proposed Financial Assistance

The Resimac Syndicate has advised RHG that by using the Financial Assistance structure to repay short term acquisition funding, the financing costs of AMAC were lower than they otherwise would have been and therefore the Financial Assistance enables the Resimac Syndicate to offer the current price to be paid for RHG Shares under the Scheme. AMAC has undertaken for the benefit of RHG and employees of any member of the RHG Group that the Financial Assistance will be implemented in a manner that complies with all applicable laws and does not render any member of the RHG Group insolvent and ensures that all employee entitlements or redundancy entitlements are paid.

3 Financial Assistance Resolution

To summarise, it is proposed that the giving by RHG and RHGHL of the Financial Assistance in connection with the Scheme be approved by RHG Shareholders passing the Financial Assistance Resolution pursuant to section 260B(1) (and in relation to RHGHL, section 260B(2)) of the Corporations Act. The Financial Assistance Resolution is set out in the Notice of General Meeting accompanying this explanatory statement.

1 The RHG Group has not prepared or approved AMAC's estimates.

303

For

per

sona

l use

onl

y

RHG Shareholders may vote for or against the Financial Assistance Resolution. For the proposed Financial Assistance Resolution to be passed, in accordance with section 260B(1)(a) (and in relation to RHGHL, section 260B(2)) of the Corporations Act, RHG Shareholder approval must be given by a special resolution passed at the General Meeting (ie, by at least 75% of the total number of votes cast on the Financial Assistance Resolution at the General Meeting by the RHG Shareholders present and voting at the General Meeting (either in person or by proxy) with no votes being cast in favour of the Financial Assistance Resolution by AMAC, Resimac or their Associates.

4 Prior notice to ASIC

As required by section 260B(5) of the Corporations Act, copies of the Notice of General Meeting and this explanatory statement were lodged with ASIC before their despatch to the RHG Shareholders.

5 Directors recommendation

Noting:

(a) AMAC’s undertaking in clause 5.5 of the Merger Implementation Deed that following the Implementation Date, the Financial Assistance will be implemented in a manner that complies with all applicable laws and does not render any member of the RHG Group insolvent and ensures that all employee entitlements or redundancy entitlements are paid; and

(b) that the Financial Assistance will only be implemented once there is a change in control of RHG pursuant to the transfer of all of the RHG Shares to AMAC,

the RHG Directors have unanimously approved this explanatory statement and recommend the RHG Shareholders approve the Financial Assistance Resolution set out in the Notice of General Meeting.

6 Entitlement to vote

The time for determining eligibility to vote at the General Meeting is 7:00pm (Sydney time) on 16 December 2013. Only those RHG Shareholders entered on the RHG Register at that time will be entitled to attend and vote at the General Meeting, either in person, by proxy or attorney, or in the case of a corporate RHG Shareholder, by a body corporate representative. The remaining comments in this explanatory statement are addressed to RHG Shareholders entitled to attend and vote at the General Meeting.

7 How to vote

Voting will be conducted by poll.

If you are an RHG Shareholder entitled to vote at the General Meeting, you may vote by:

• attending and voting in person;

• appointing one or two proxies to attend and vote on your behalf, using the Proxy Form that accompanied this Scheme Booklet;

• appointing an attorney to attend and vote on your behalf, using a power of attorney; or

• in the case of a body corporate, appointing a body corporate representative to attend the meeting and vote on your behalf, using a certificate of appointment of body corporate representative.

8 Attendance

If you or your proxies, attorneys or representative(s) plan to attend the General Meeting, please arrive at the venue at least 30 minutes before the scheduled time for commencement of the meeting, so that your shareholding can be checked against the RHG Register, any power of attorney or certificate of appointment of body corporate representative verified, and your attendance noted.

9 Jointly held securities

If you hold RHG Shares jointly with one or more other persons, only one of you may vote. If more than one of you attempts to vote in person at the General Meeting, only the vote of the holder whose name appears first on the RHG Register will be counted.

304

For

per

sona

l use

onl

y

See also the comments in paragraph 11.2 below regarding the appointment of a proxy by persons who jointly hold RHG Shares.

10 Voting

10.1 Voting in person

To vote in person, you must attend the General Meeting.

Eligible RHG Shareholders who wish to attend and vote at the meeting in person will be admitted and given a voting card at the point of entry to the meeting, once they have disclosed their name and address.

10.2 Voting by proxy

You may appoint one or two proxies. Your proxy need not be another RHG Shareholder. Each proxy will have the right to vote on the poll and also to speak at the General Meeting.

To appoint a proxy, you should complete and return the Proxy Form that accompanied this Scheme Booklet in accordance with the instructions on that form. You must deliver the signed and completed Proxy Form to the RHG Registry by 10.00am (Sydney time) on 16 December 2013 (or, if the General Meeting is adjourned or postponed, no later than 48 hours before the resumption of the General Meeting in relation to the resumed part of the General Meeting) in any of the following ways:







(d) For Intermediary Online Subscribers Only (custodians) www.intermediaryonline.com

Alternatively, you can lodge your proxy online at www.investorvote.com.au.

Completed Proxy Forms received after this time will be invalid.

If a Proxy Form is completed under power of attorney or other authority, the power of attorney or other authority, or a certified copy of the power of attorney or other authority, must accompany the completed Proxy Form unless the power of attorney or other authority has previously been noted by the RHG Registry.

If you wish to appoint a second proxy, a second Proxy Form should be used and you should clearly indicate on the second Proxy Form that it is a second proxy and not a revocation of your first proxy. You can obtain a second Proxy Form from the RHG Registry. Replacement Proxy Form can also be obtained from the RHG Registry.

If you appoint two proxies, each proxy should be appointed to represent a specified proportion of your voting rights. If you do not specify the proportions in the Proxy Forms, each proxy may exercise half of your votes with any fractions of votes disregarded.

If you hold RHG Shares jointly with one or more other persons, in order for your proxy appointment to be valid, each of you must sign the Proxy Form.

You should consider how you wish your proxy to vote. That is, whether you want your proxy to vote ‘for’ or ‘against’, or abstain from voting on, the Financial Assistance Resolution, or whether to leave the decision to the proxy after he or she has considered the matters discussed at the meeting.

If you do not direct your proxy how to vote on an item of business, the proxy may vote, or abstain from voting, as he or she thinks fit. If you instruct your proxy to abstain from voting on an item of business, he or she is directed not to vote on your behalf, and the shares the subject of the proxy appointment will not be counted in computing the required majority.

305

For

per

sona

l use

onl

y

If you return your Proxy Form:

• without identifying a proxy on it, you will be taken to have appointed the Chairman of the meeting as your proxy to vote on your behalf; or

• with a proxy identified on it but your proxy does not attend the meeting, the Chairman of the meeting will act in place of your nominated proxy and vote in accordance with any directions on your Proxy Form.

The Chairman of the meeting intends to vote all valid undirected proxies which nominate the Chairman in favour of the Financial Assistance Resolution, in the absence of a Superior Proposal.

Proxies of eligible RHG Shareholders will be admitted to the General Meeting and given a voting card on providing at the point of entry to the meeting written evidence of their name and address.

Your appointment of a proxy does not preclude you from attending in person, revoking the proxy and voting at the General Meeting.

10.3 Voting by attorney

You may appoint an attorney to attend and vote at the General Meeting on your behalf. Your attorney need not be another RHG Shareholder. Each attorney will have the right to vote on the poll and also to speak at the meeting.

The power of attorney appointing your attorney to attend and vote at the meeting must be duly executed by you and specify your name, the company (that is, RHG), and the attorney, and also specify the meetings at which the appointment may be used. The appointment may be a standing one.

The power of attorney, or a certified copy of the power of attorney, should be lodged at the registration desk on the day of the meeting or with the RHG Registry by 10.00am (Sydney time) on 16 December 2013 (or, if the General Meeting is adjourned or postponed, no later than 48 hours before the resumption of the General Meeting in relation to the resumed part of the General Meeting) in any of the following ways:







Attorneys of eligible RHG Shareholders will be admitted to the General Meeting and given a voting card on providing at the point of entry to the General Meeting, written evidence of their appointment, their name and address, and the name of their appointers.

Your appointment of an attorney does not preclude you from attending in person and voting at the General Meeting.

10.4 Voting by corporate representative

If you are a body corporate, you may appoint an individual to act as your body corporate representative. The appointment must comply with the requirements of section 250D of the Corporations Act, meaning that RHG will require a certificate of appointment of body corporate representative to be executed by you in accordance with the Corporations Act. A form of certificate may be obtained from the RHG Registry by calling 1300 389 054 (within Australia) and +61 3 9415 4041 (outside Australia). The certificate of appointment may set out restrictions on the representative’s powers.

The certificate should be lodged at the registration desk on the day of the General Meeting or with the RHG Registry before 10.00am (Sydney time) on 16 December 2013 (or, if the meeting is adjourned or postponed, no later than 48 hours before the resumption of the General Meeting in relation to the resumed part of the General Meeting) in any of the following ways:

306

For

per

sona

l use

onl

y







If a certificate is completed under power of attorney or other authority, the power of attorney or other authority, or a certified copy of the power of attorney or other authority, must accompany the completed certificate unless the power of attorney or other authority has previously been noted by the RHG Registry.

Body corporate representatives of eligible RHG Shareholders will be admitted to the General Meeting and given a voting card on providing at the point of entry to the General Meeting, written evidence of their appointment, their name and address and the name of their appointers.

11 Advertisement

Where this Notice of General Meeting is advertised unaccompanied by the Scheme Booklet, a copy of the Scheme Booklet can be obtained by anyone entitled to attend the General Meeting from RHG’s website (www.rhgl.com.au) or by contacting the Company Secretary of RHG or the RHG Registry.

307

For

per

sona

l use

onl

y

Annexure G – RHG corporate structure

308

For

per

sona

l use

onl

y

Source: RHG

309

For

per

sona

l use

onl

y

Annexure H – Information on voting

310

For

per

sona

l use

onl

y

1 Your vote is important for both Meetings

The Scheme will only become Effective and be implemented if it is:

• agreed to by the RHG Shareholders at the Scheme Meeting;

• approved by the Court at the Second Court Hearing; and

• and the Conditions Precedent are satisfied or waived.

Agreement by RHG Shareholders requires the Scheme Resolution to be approved by:

• a majority in number (more than 50%) of the RHG Shareholders present and voting on the Scheme Resolution at the Scheme Meeting (either in person or by proxy); and

• at least 75% of the total number of votes cast on the Scheme Resolution at the Scheme Meeting by RHG Shareholders present and voting at the Scheme Meeting (either in person or by proxy).

The Court has discretion to waive the first of these two requirements if it considers it appropriate to do so.

For the Financial Assistance Resolution to be approved, as it is a special resolution it must be passed by at least 75% of the votes cast by RHG Shareholders entitled to vote on the Financial Assistance Resolution at the General Meeting with no votes being cast in favour of the Financial Assistance Resolution by AMAC or Resimac or their associates (as holders of RHG Shares, if applicable).

2 Notices of the Meetings

The Notice of Scheme Meeting is contained in Annexure E.

The Notice of General Meeting is contained in Annexure F.

3 Location of the Meetings

The Scheme will be voted on by RHG Shareholders at the Scheme Meeting to be held at 10.00am (Sydney time) on 18 December 2013 at the Wesley Conference Centre, 220 Pitt Street, Sydney NSW 2000. The Financial Assistance Resolution will be voted on by RHG Shareholders at the General Meeting to be held at or around the time of the Scheme Meeting on 18 December 2013.

4 Voting procedure

You may vote on both the Financial Assistance Resolution and the Scheme by attending the Meetings in person, by proxy, by attorney or, in the case of a corporation which is an RHG Shareholder, by corporate representative. Voting at the Meetings will be by poll.

Voting is not compulsory.

(a) Voting in person

If you are entitled to vote at both of the Meetings and wish to do so in person, you should attend each of the Meetings. An entitled RHG Shareholder who wishes to

311

For

per

sona

l use

onl

y

attend and vote in person will be admitted to the Meetings and given a voting card at the point of entry to the Meetings upon disclosing their name and address.

(b) Voting by proxy

If you are entitled to vote at each of the Meetings and wish to appoint a proxy to attend and vote on your behalf, you must complete and return the Proxy Form by no later than 10.00am (Sydney time) on 16 December 2013 in accordance with the instructions on the form. You can also lodge your proxy online at www.investorvote.com.au.

(c) Voting in person through an attorney or body corporate representative

If you are entitled to vote at each of the Meetings, you may have an attorney or, if you are a body corporate, a body corporate representative attend and vote on your behalf.

5 Voting entitlement

Each RHG Shareholder who is registered on the RHG Register at 7:00pm (Sydney time) on 16 December 2013 is entitled to attend and vote at each of the Meetings, either in person, by proxy, by attorney or, in the case of a body corporate, by its corporate representative appointed in accordance with section 250D of the Corporations Act.

In the case of RHG Shares held by joint holders, only one of the joint shareholders is entitled to vote. If more than one RHG Shareholder votes in respect of jointly held RHG Shares, only the votes of the RHG Shareholders whose name appears first in the RHG Register will be counted.

6 Your choices

As an RHG Shareholder, you currently have three choices available to you. These choices are set out below:

(a) Vote at each of the Meetings

You can vote at each of the Meetings in person, by attorney, by proxy or, in the case of corporate shareholders, by corporate representative in respect of some or all of your RHG Shares. Details of how to vote at the Meetings are set out in Annexure H. You may vote in favour of or against the Scheme and the Financial Assistance Resolution.

Please note:

(i) if you vote against the Financial Assistance Resolution and the Financial Assistance Resolution is not approved by the Requisite Majority, unless both AMAC and Resimac agree to waive the approval of the Financial Assistance Resolution as a Condition Precedent, the Scheme will be unable to proceed.

(ii) if you vote against the Scheme and the Scheme is approved and becomes Effective, then any RHG Shares held by you on the Scheme Record Date will be transferred to AMAC, and Scheme Participants will receive the Scheme Consideration, notwithstanding that you have voted against the Scheme.

(b) Sell your RHG Shares on market

You can sell your RHG Shares on ASX at any time before the close of trading on the day that the Scheme becomes Effective. This is expected to occur on the Effective Date. If you sell your RHG Shares on ASX, you may incur brokerage costs. Any disposal of RHG Shares on market or otherwise may result in a CGT liability (see

312

For

per

sona

l use

onl

y

Section 9 for more information). If the Scheme becomes Effective, the trading of RHG Shares will be suspended on ASX at close of trading on the Effective Date.

RHG Shareholders who wish to sell some or all of their RHG Shares on ASX should contact their broker for information on how to effect that sale.

(c) Do nothing

If you do not wish to vote for or against the Scheme or the Financial Assistance Resolution, or sell your RHG Shares on ASX, you may choose to do nothing.

RHG Shareholders should note that if they do nothing and the Scheme and the Financial Assistance Resolution are approved and the Scheme becomes Effective, then any Scheme Shares held by Scheme Participants on the Scheme Record Date will be transferred to AMAC, and Scheme Participants are expected to be paid the Scheme Consideration on or shortly after the Implementation Date, notwithstanding that they may not have voted for or against the Scheme.

313

For

per

sona

l use

onl

y

317

For

per

sona

l use

onl

y