DORCHESTER IMPACTED BY PROPERTY FINANCE MARKET

25 June 2008

Dorchester Pacific today announced that Dorchester Finance will withdraw and not renew its prospectus and will seek the approval of debenture holders and note holders to a deferred repayment plan, but with continued interest payments.

Chairman of Dorchester Finance, Mr Barry Graham said:

“As a result of the rapid decline in the property finance market and a continuing fall in reinvestment rates the Board has formed the view that there is now a risk of a cash flow shortfall arising in future months.”

Mr Graham added:

“A deferred repayment plan should give us time to realise property loan positions in an orderly way and ensure full repayment to debenture holders and note holders.”

As at 24 June 2008, Dorchester Finance had $168 million in debenture stock secured against total assets of $212 million, including $18 million in cash. In addition it had $8 million in subordinated notes on issue.

The Board intends to work closely with both trustees, Perpetual Trust Limited and New Zealand Permanent Trustees Limited, and has engaged Grant Samuel and Associates Limited as an independent adviser to assist in the preparation of a proposal for investors to consider as soon as practicable.

Mr Graham said:

“The intention of the deferred repayment plan is to allow us to repay principal owed to investors over a period of approximately two years. Although the details are yet to be formulated and agreed with the Trustees, Dorchester Finance intends to continue to make interest payments. Repayments of debenture and subordinated note maturities will be suspended from Thursday 26 June 2008.

“Clearly, taking proactive measures in the current economic environment is the best way to ensure full return of investors’ funds and to preserve value for stakeholders.”

Ends

A copy of the letter to investors accompanying quarterly interest payment notices can be viewed by clicking here.