MESOBLAST LTD — Capital/Financing Update 2004

Dec 13, 2004

Mesoblast Limited

ACN 109 431 870

Satisfaction of conditions for admission to the ASX Official List

Mesoblast Limited ACN 109 431 870 (Company) is pleased to confirm that it has closed its offer under its prospectus dated 16 November 2004 (Prospectus) and supplementary prospectus dated 30 November 2004 and raised in excess of \$21 million.

ASX Listing Conditions - In addition, the Company has now satisfied all conditions prescribed by the Australian Stock Exchange Limited (ASX) for the Company's admission to the ASX Official List.

Issue of First Tranche Preference Shares in Angioblast Systems Inc - The first tranche of the Company's investment in Angioblast Systems Inc (as outlined in section 9.4(a)(i) of the Prospectus) has now been completed, and the Company has been issued with 100,000 preferred shares in Angioblast Systems Inc.

Shareholder Distribution Schedule - A distribution schedule of the number of ordinary shareholders in the Company on its listing, and the names of the top 20 shareholders in the Company (including the number and percentage of ordinary shares held) are attached as Annexures A and B.

Escrow Arrangements - As part of the Company's underwriting arrangements, all its pre-IPO shareholders (holding 51.51 million ordinary shares out of the total 93.51 million shares on issue after the IPO and 4.32 million options) have agreed to a voluntary escrow of all of their securities for a period ranging from 3 to 24 months from the date of listing of the Company. This voluntary escrow overlaps with the escrow restrictions imposed by ASX on the pre-IPO shareholders and on the 1.1 million options to be issued to the directors and a nominee of the underwriter. The security restrictions are summarised as follows:

ASX Escrow

• $\mathbf{1}$ . A total of 46.79 million ordinary shares and 1.1 million options to be subject to escrow for the period of 24 months from the date of listing of the Company;
• $\overline{2}$ . a total of 2.16 million ordinary shares and 4.32 million options to be subject to escrow for the period of 12 months from the date of issue of those securities, namely for the period 29 September 2004 - 29 September 2005;
• 1. a total of 360,000 ordinary shares to be subject to escrow for the period of 12 months from the date of issue of those securities, namely for the period 9 June 2004 - 9 June 2005.

Voluntary Escrow

• A total of 44 million ordinary shares to be subject to escrow for the period of 24 months from 4. the date of listing of the Company;
• A total of 3.755 million ordinary shares and 2.16 million options to be subject to escrow for 5. the period of 12 months from the date of listing of the Company;
• a total of 1.18 million ordinary shares and 1.08 million options to be subject to escrow for 6. the period of 6 months from the date of listing of the Company;
• a total of 2.575 million ordinary shares and 1.08 million options to be subject to escrow for 7. the period of 3 months from the date of listing of the Company.

Executive Share Option Plan - The Company also has in place an executive share option plan to reward its performing employees as outlined in the Prospectus. A brief outline of the terms and conditions of that plan is attached as Annexure C.

Options Issued to Directors, COO and Underwriter - The Company will issue a total of 1.34 million options to its directors, the chief operating officer, and a nominee of the underwriter, as outlined in sections 9.5(a) and 9.8(b) of the Prospectus. A brief outline of those terms and conditions is attached as Annexure D.

Dated | Pr December 2004

$\sim$ $\sim$

Name: KENIN ACSILINGS WEET

Position COMPARY SECRETARY

Annexure A - Distribution
Shareholders in the Company Distribution Schedule $\frac{1}{2}$ the
Number of Ordinary

$\sim$

STANDARD

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14/12/2004
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responsible.

$\cdot$

MESOBLAST LIMITED

INVESTOR RANGES
TUESDAY 14 DECEMBER 2004

Ranges	Investors	Securities	% Issued Capital
Security Group: MSB ORDINARY
Holding Type : Issuer Sponsored
1 - 1000 1001 - 5000 5001 - 10000 10001 - 100000 100001 and Over Total	ο -46.	Ð 189,000 109 1.017,000 128 4,394,000 21 54,944,000 304 60,544,000	.00. .20 1.09 4.70 58,76 64.75
Holding Type: CHESS
$1 - 1000$ 1001 - 5000 5001 - 10000 10001 - 100000 100001 and Over Total	Ð 7. 95. 24 253.	o 29,000 127 1,112,000 3,512,000 28,313,000 32.966.000	.00 -03 1.19 3.76 30.28 35.25
Totals for Security Group MSB
$1 - 1000$ 1001 - 5000 5001 - 10000 10001 - 100000 100001 and Over Total	0 53 45. 557	o 218,000 236 2,129,000 223 7,906,000 83,257,000 93.510.000	-00 .23 2.28 8.46 89.04 100.00

end of report

Annexure B - Names of the Top 20 Shareholders in the Company
(including the Number and Percentage of Ordinary Shares Held)

$\mathbf{1}$

$\frac{3}{2}$ ł

MESOBLAST LIMITED

TOP 20 INVESTORS REPORT TUESDAY 14 DECEMBER 2004

Rank	Investor	Current Balance	% Issued Capital
	Sec. Group: MSB - ORDINARY
1	PROFESSOR SILVIU ITESCU	43,120,000	46.11%
2	INVIA CUSTODIAN PTY LIMITED	3,200,000	3.42%
3	NATIONAL NOMINEES LIMITED	3.061.592	3.27%
4	QUEENSLAND INVESTMENT CORPORATION	2,910,366	3.11%
5	MEDVET SCIENCE PTY LTD	2,790,000	2.98%
6	J P MORGAN NOMINEES AUSTRALIA LIMITED	2,760,078	2.95%
7	EQUITY TRUSTEES LIMITED	2,600,000	2.78%
8	AMP LIFE LIMITED	2,500,000	2.67%
9	WESTPAC CUSTODIAN NOMINEES LIMITED	2,018,780	2.16%
10	J G M INVESTMENT GROUP PTY LTD	1,920.000	2.05%
11	ANZ NOMINEES LIMITED	1,889,000	$2.02\%$
12	THORNEY HOLDINGS PTY LTD	1,400,000	1.50%
13	RBC GLOBAL SERVICES AUSTRALIA NOMINEES PTY LIMITED	1,127,595	1.21%
14	EQUITY TRUSTEES LIMITED	1,111,625	1.19%
15	CITICORP NOMINEES PTY LIMITED	1,000,000	1.07%
16	MR MICHAEL SCHUSTER	880,000	.94%
17	JAM INVESTMENTS PTY LTD	820,000	.88%
18	DR ANNE SPOONER	640,000	.68%
19	BENEFUND LTD	600,000	.64%
19	JETAN PTY LTD	600,000	.64%

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REPORT DATE: $\bar{z}$ 14/12/2004 REPORT TIME: 11.59.36

MESOBLAST LIMITED

TOP 20 INVESTORS REPORT TUESDAY 14 DECEMBER 2004

Rank . .	Investor	Current Balance	% Issued Capital
20	COGENT NOMINEES PTY LIMITED	550,000	.59%
Sales and Contract Service	anna an aitheil ann an 1970 an 1970. Tha an 1970 agus an 1970 an 1970 an 1970. Tha an 1970, ann an 1971 an 1971 an 1971 an 1971.		--------------------------------------- Investors

TOTAL IN THIS REPORT: TOTAL OTHER INVESTORS: GRAND TOTAL:

77,499,036 21 $82.88%$ 16,010,964
93,510,000 536 17.12% 557 100.00%

Ė Control

l,

end of report

Annexure C - Outline of Terms and Conditions of the Company's Executive Share Option Plan

The Company has adopted an executive share option plan (Plan) to foster an ownership culture within the Company and to motivate senior management and directors to achieve performance targets of the Company and/or their respective business units. As at the date hereof, except for the options to be issued to the directors and COO (as outlined in section 9.8(b) of the prospectus). no shares or options have been issued under the Plan, which is to be administered by the directors. Selected senior management of the Company and its subsidiaries (Group) and the directors (collectively the Participants) are eligible to participate in the Plan at the absolute discretion of the Company's board of directors (Board). Except as outlined in section 9.8(b) of the prospectus, no options or shares will be issued under this Plan to any directors without the prior approval of the Mesoblast shareholders.

The aggregate number of shares which may be issued pursuant to the Plan (Plan Shares), and all other share purchase plans shall not at any time exceed 5% of the total number of issued shares of the Company.

Shares allotted and issued under the Plan must rank equally in all respects with other shares from the date of allotment and issue, subject to the satisfaction of any applicable disposal restrictions.

The exercise period in relation to an option means the period in which the option may be exercised specified by the Board.

The exercise price is the greater of \$0.20 and in relation to an option granted on or before the date of the official quotation of the Company's shares, an amount per share that is 20% higher than the offer price of \$0.50; and in relation to an option granted after the official quotation of the Company's shares, the volume weighted market price of a share sold on the ASX on the 5 trading days immediately before the date a participant was invited to complete an application form relating to the option, or any other amount that is specified by the Board subject to any adjustment.

Annexure D – Outline of Terms and Conditions of the Options Granted to the Company's Directors, COO and a Nominee of the Underwriter

$1.$ Options Granted to Directors

The Company will issue options to the directors as follows:

• to Michael Spooner 400,000 unlisted options to acquire 400,000 unissued ordinary $(a)$ shares in the capital of the Company;
• to Byron McAllister 150,000 unlisted options to acquire 150,000 unissued ordinary $(b)$ shares in the capital of the Company;
• to Donal O'Dwyer 150,000 unlisted options to acquire 150,000 unissued ordinary $(C)$ shares in the capital of the Company;

upon the following terms:

• the options must be exercised before the $4^th$ anniversary of the Company's $(i)$ listing date;
• the exercise price for each option will be \$0.60 per share; $(ii)$
• the first 50% of the options will progressively vest 12 months after the listing $(iii)$ date and the second 50% of the options will progressively vest 24 months after the listing date;
• the options may not be sold or transferred except with the prior written $(iv)$ consent of the Company;
• if the director ceases to be a director of the Company: $(v)$
• $(A)$ any options which have not vested will immediately lapse;
• any options which have vested but have not been exercised will lapse $(B)$ within four weeks of the date of such cessation: and
• otherwise on the terms and conditions of the Company's Executive Share $(vi)$ Option Plan.

$2.$ Options Granted to COO

The Company has also agreed to issue to the COO (Mr Paul Rennie) after the Company's listing, 240,000 unlisted options to acquire 240,000 unissued ordinary shares in the capital of the Company on the following terms:

• the exercise price for each option will be \$0.60 per share; $(a)$
• the options will progressively vest/become exercisable in 3 tranches as follows: $(b)$
• Tranche A 80,000 options, on achieving an SOP (Standard Operating $(i)$ Procedure) for the manufacture of cells;
• Tranche B 80,000 options on completing human preclinical trials for a $(ii)$ Mesoblast Orthopaedic Application of the licensed technology; and

• Tranche C 80,000 options, approval of Mesoblast's FDA IND (Investigative $(iii)$ New Drug) approval;

• an option which has vested (ie the exercise conditions have been satisfied) must be $(c)$ exercised within 12 months of its vesting date;

• the options may not be sold or transferred except with the prior written consent of the $(d)$ Company;
• if the COO ceases to be employed by the Company for any reason: $(e)$
• any options which have not vested will immediately lapse; $(i)$
• $(ii)$ any options which have vested and continue to be exercisable but have not been exercised, may be exercised by the COO within 4 weeks of the COO's cessation of employment, after which those options will lapse;
• otherwise on the terms and conditions of the Company's Executive Share Option $(f)$ Plan.

3. Options Granted to Underwriter's Nominee

The Company has also agreed to issue to a nominee of the underwriter, Thorney Holdings Pty Ltd, 240,000 unlisted options to acquire 240,000 unissued ordinary shares in the capital of the Company on the following terms:

• $(a)$ each option may only be exercised within the 14 day period beginning on the 3rd anniversary of the Company's listing date. If the option is not exercised during that period it will lapse;
• the exercise price for each option will be \$0.55 per share. $(b)$