This is a lawsuit on behalf of a Class of purchasers of NovaStar common stock and sellers of NovaStar put options during the period from October 29, 2003 through April 8, 2004, inclusive. The Class alleged that NovaStar and the Individual Defendants, who were controlling officers and/or directors of NovaStar, made materially false and misleading statements and omissions in NovaStar’s public reports and documents disseminated to the investing public, thereby artificially inflating the price of the securities of NovaStar and damaging members of the Class.

The Court in charge of the case is the United States District Court for the Western District of Missouri, and the case is known as In re NovaStar Financial, Inc. Securities Litigation, Case No. 04-0330-CV-W-ODS. This case was assigned to United States District Judge Ortrie D. Smith. The people who sued are called plaintiffs, and the company and the persons they sued, are called the Defendants.

The Court did not resolve the claims in favor of Plaintiffs or Defendants. Instead, both sides, with the assistance of a mediator, agreed to a settlement. Through a settlement, both sides avoid the risks and cost of a trial, and the people affected will more quickly receive compensation. The Class Representatives and their attorneys think the settlement is best for the Class.

The Settlement will provide a $7.25 million-dollar settlement fund less attorneys’ fees and expenses, for the benefit of Class Members.

The Court will hold a Fairness Hearing on April 14, 2009. At the Fairness Hearing, the Court will determine whether the Settlement is fair, reasonable, and adequate, and should be finally approved by the Court. In addition, the Court will consider whether to approve the Plan of Allocation, whether to approve an award of attorney’s fees and expenses, and other such matters as the Court may deem appropriate.These decisions can take some time and we do not know when a decision will be reached. We ask that you please be patient.

You can contact the Claims Administrator toll-free at 1-(877)-556-8144, or check this website for updated information.