Letter to Shareholders

3 January 2012
Dear Fellow Securityholder,
On 14 December 2011, RCL Group Limited ('RCL') received a Requisition by three securityholders being Payce Industries Pty Ltd, LTHC Pty Limited (a wholly owned subsidiary of Babcock & Brown International Pty Ltd) and Lanox Pty Limited (Brian Boyd- sole director) ('Requisitioning Shareholders') for a General Meeting to seek the removal of Richard Gelski and myself, Robert Wright, as Directors of RCL and to appoint Michael Larkin (former
CEO of Babcock & Brown Limited (in liquidation), current director of Babcock and Brown International Pty Ltd and current CFO and director of LTHC Pty Limited) and Brian Bailison (CFO and Company Secretary of Payce Industries Pty Ltd) as replacement Directors.
The General Meeting ('Meeting') will be held at the Grace Hotel, 77 York Street Sydney NSW on 15 February 2012 at 11.00am and the Notice of Meeting and Proxy Forms are attached.
The Directors of RCL make the following recommendations in respect of the Resolutions to be considered at the Meeting:
1. Resolution 1- Removal of Robert Wright as a Director: : The Directors (other than Mr Wright and Mr McTigue) recommend that you VOTE AGAINST this resolution. Mr Wright has abstained due to his personal interest in the resolution and Mr McTigue has abstained as he does not wish to make a recommendation to shareholders on this resolution.
2. Resolution 2- Removal of Richard Gelski as a Director: The Directors (other than Mr
Gelski and Mr McTigue) recommend that you VOTE AGAINST this resolution. Mr
Gelski has abstained due to his personal interest in the resolution and Mr McTigue has abstained as he does not wish to make a recommendation to shareholders on this resolution.
3. Resolution 3- Appointment of Michael Larkin as a Director: The Directors (other than Mr McTigue) recommend that you VOTE AGAINST this resolution. Mr McTigue has abstained as he does not wish to make a recommendation to shareholders on this resolution.
4. Resolution 4- Appointment of Brian Hilton Bailison as a Director: The Directors (other than Mr McTigue) recommend that you VOTE AGAINST this resolution. Mr McTigue has abstained as he does not wish to make a recommendation to shareholders on this resolution.

1

The reason for the above recommendations are as follows :

1. The Recommending Directors do not believe that the Requisitioning Shareholders have put forward any substantial case for the removal of two highly-qualified, experienced and independent directors, particularly at a time when a proposal to recapitalise RCL is under negotiation between the Board and Torchlight Real Estate Fund Limited ('Torchlight').
2. The Recommending Directors believe that Richard Gelski and Robert Wright have more suitable experience and expertise to act as directors of RCL than Michael Larkin and Brian Bailison, and are better placed to act in the interests of all RCL securityholders. Both Richard Gelski and Robert Wright have served on the Board since listing in 2006 and have intimate knowledge of the group's operations and governance and a deep working relationship with management. Mr Gelski was recently re-elected to the Board by shareholders at the 2011 Annual General Meeting by 99.1 % of votes cast, including with the support of the Requisitioning Shareholders.
3. The disproportionate level of Board representation sought by the Requisitioning
Shareholders. According to the Substantial Holder Notice lodged with the ASX on
15 December 2011, the Requisitioning Shareholders together hold approximately
18.5% of the issued capital of RCL, yet are seeking to nominate 50% of the RCL
Board. The Directors consider this level of Board representation to be disproportionate to the size of the Requisitioning Shareholders' interests in RCL and undesirable to RCL securityholders from a corporate governance perspective.
4. As officers of substantial holders of RCL, Mr Larkin and Mr Bailison will not be independent directors for the purposes of the ASX Corporate Governance Principles. As a result, if the Resolutions contained in the Notice of Meeting are approved, the company will no longer comply with the ASX Corporate Governance Principles' recommendation that a majority of the directors are independent. Although it is not mandatory to comply with that recommendation, RCL will be required to disclose in its annual report why it has departed from it. The Recommending Directors are not aware of any reason why RCL should depart
from compliance with this recommendation and believe that the interests of all
RCL securityholders will be better represented through an independent board.
5. The fact that LTHC Pty Limited (a wholly owned subsidiary of Babcock & Brown International Pty Ltd) is both a subordinated lender to, and substantial holder of RCL. Accordingly, the Recommending Directors are concerned that this may give rise to potential conflicts of interest for Mr Larkin (as the nominee of LTHC Pty Limited) in his capacity as a RCL Director. As a result of these potential conflicts,
Mr Larkin may be precluded from participating in deliberations, and voting on, key decisions of the RCL Board. This may inhibit Mr Larkin's ability to make an effective contribution to the RCL Board.
The fact that LTHC Pty Limited, as the subordinated creditor, has had access to detailed information on RCL's financial position and its performance and has always had a right to seek additional information and engage with RCL to suggest

2

or put forward a proposal to add value for securityholders. LTHC Pty Limited has so far failed to do this and has chosen to have very little contact with RCL. In addition to the information regularly provided to the subordinated lender, RCL
has provided business plans and budgets. RCL also allowed access to a third party on behalf of LTHC Pty Limited to undertake an extensive review of all assets, out
of which LTHC Pty Limited made no material suggestion to improve on RCL's
current strategy.
6. RCL has in the past, engaged with Payce Industries Pty Ltd in a series of discussions in relation to the performance and future of RCL. As part of these discussions, Payce Industries Pty Ltd recommended that RCL appoint Mr McTigue as an independent Director of RCL. Mr McTigue was appointed as a Director on
27 April 2011
7. Other than reconstituting the Board of the Responsible Entity, the Requisitioning Shareholders have not declared any intentions or strategy for the future affairs of RCL (including its capital and debt structure). They have indicated to RCL that these matters will be determined after a review of RCL's assets, projects and capital structure. The Recommending Directors believe this is material information to RCL securityholders and that it is not appropriate to elect the Requisitioning Shareholders' nominees until RCL securityholders have some understanding of the Requisitioning Shareholders' intentions in relation to the future conduct of RCL's affairs.
8. The opportunistic timing of the Requisition. It was served:
a. Just two weeks after RCL's Annual General Meeting at which Mr Gelski was re-elected as a director of RCL by 99.1% of votes cast, including with the support of the Requisitioning Shareholders; and
b. Less than one month after the announcement by RCL that RCL's primary financiers, BOS International (Australia) Limited and Capital Finance Australia Limited had entered into an agreement to novate and assign their project and corporate debt facilities to Torchlight and that Torchlight had approached RCL with an incomplete recapitalisation proposal, which
is the subject of current discussions and negotiation with the RCL Board
('Torchlight Proposal').

RCL Strategy

In the Requisition, the Requisitioning Shareholders assert that the Board has not identified a new strategy to address the issues facing the Company. The Directors do not agree.
As CEO, David Wightman and I advised securityholders at RCL's AGM in November 2011, RCL continues to experience the effects of a so-called "perfect storm"; a confluence of adverse market conditions (in part a legacy of the "GFC") and inclement weather, especially in Victoria, which impacted operational revenue in FY 2011 and our ability to reduce debt over FY 2011.

3

The Board has in place a firm strategy to rebuild the balance sheet and to return value to securityholders despite current economic uncertainty. The Board and management are fully focussed on developing our property portfolio.

We have clearly stated in the past that there is very little depth in the market to sell development sites and that the best strategy has been to develop out the portfolio. This strategy has been successful to date and between 1 July 2009 and 30 June 2011, consolidated and non consolidated debt has been reduced from $531 million to $342 million. We continue to reduce debt and as at October 2011, consolidated and non- consolidated debt has been further reduced by $45 million.
In addition, we commenced FY 2012 with a strong pre-sales book. As well, by separating the Babcock & Brown group from the management of the business, we have consistently reduced operating costs.

Capital initiatives

The major challenge RCL has faced has been accessing to working capital to develop its quality property portfolio and return value to all securityholders. It is important to note that RCL has been able to access debt financing to develop its projects during a period where it has been particularly difficult for property developers to source debt capital. The Board considers that an important part of gaining access to debt markets has been the separation of RCL from the Babcock & Brown group. The Board is concerned that the advent of a Babcock & Brown group officer to the Board of RCL may be perceived as the Babcock & Brown group returning to manage and drive the strategic direction of RCL.
The Board is working towards a sustainable capital structure to provide long-term flexibility for the business to develop its assets and manage its portfolio. As noted above, on 17 November 2011 RCL announced that it had been advised that its primary financiers BOS International (Australia) Limited and Capital Finance Australia Limited had entered into an agreement to novate and assign their project and corporate debt facilities to Torchlight.
On that date, RCL also announced that it had been approached by Torchlight in relation to an incomplete proposal to recapitalise RCL (Torchlight Proposal). It is the Board's
objective to negotiate and, if in the best interests of all shareholders, agree a proposal to present to securityholders that will provide a longer-term and more flexible capital structure and support RCL's value-adding objective. The Board is concerned that if the resolutions contained in the notice of meeting are approved by RCL securityholders, Mr Larkin and Mr Bailison may have the power to prevent the Torchlight Proposal being agreed and put to RCL securityholders for approval. This could mean that RCL securityholders are denied the right to vote on any Torchlight Proposal and enjoy any benefits that may have otherwise accrued to RCL shareholders from the Torchlight Proposal (if it was put to and approved by RCL securityholders).
Further, any proposed changes to the composition of the Board can be subject to review by the primary lender whether that be BOS International (the current lender) or Torchlight (the proposed lender). If the primary lender is unsatisfied with the review it can exercise its right to declare an event of default and thereby jeopardise the future of RCL Group.

4

For the reasons outlined above, the Recommending Directors does not consider it is an appropriate time to replace two qualified, independent and experienced Directors who are an integral part of RCL's strategy to develop a long-term, sustainable capital structure
for RCL and who were instrumental in severing the relationship with the Babcock & Brown group at a time when the financial future of RCL was in jeopardy

Summary

RCL continues to pursue strategies to reduce costs and lower debt, to improve efficiency and simplify its business model and to negotiate and, if in the best interests of all shareholders, agree a proposal to present to securityholders that will provide a longer- term and more flexible capital structure and support RCL's value-adding objective. The Board is of the strong belief that now is not the time to reconstitute it by replacing two experienced and capable independent directors with untried non-independent candidates who are associated with substantial holders of RCL, and who have not declared any intentions in relation to the future conduct of RCL's affairs.
Yours sincerely
Robert Wright Chairman
On behalf of the RCL Board

5