147 Collins Street Melbourne Vic 3000

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1 147 Collins Street Melbourne Vic 3000 GPO Box 2291U Melbourne Vic 3001 Australia ABN: Telephone: Facsimile: DX: Melbourne Our ref _1 Dear Sir/Madam The Unregistered Managed Investment Schemes and Companies associated with Mr Mark Letten to which Receivers and Managers and Liquidators are appointed ( the Letten Schemes ) We refer to our previous circulars to Investors on the progress of the receivership of the Letten Schemes and now provide Investors with a further update on: 1. Update on adjudication of claims 2. Realisations 3. Investigations 4. Receivers remuneration 5. Closure of secure data room 6. Second Investor distribution 1 Update on adjudication of claims As previously advised, on 28 May 2013 we declared an interim distribution to eligible Investors of cents in the dollar claimed. The payment of this distribution was made on 30 May Investors will recall from our August 2013 circular that there were 21 Inventors that had unresolved claims in the receivership at that time and therefore an interim distribution to these Investors was withheld. We have now resolved 16 of the 21 unresolved claims and are working on finalising the remaining 5 unresolved claims. We have identified a means whereby we expect these claims can be resolved and will look to finalise them in the coming weeks. 2 Realisations As indicated in the August 2013 Investor update, substantial progress has been made in finalising the issues outstanding in the receivership. As a result, there are only 2 asset based items that are still to be finalised. Both of these have also progressed in recent months and are nearing completion. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation.

2 Mount Hutt Project This project related to a property in the South Island of New Zealand, on which townhouses were to be developed. The registered proprietor of the Mount Hutt property is Tosswill Limited (a New Zealand company). Tosswill Limited is owned by Mark Letten (on behalf of Investors) and a third party. A liquidator has not been appointed to Tosswill Limited. Various disputes have arisen between the Receivers and the third party shareholder in respect of Investors interests in the Mount Hutt Project. Negotiations are currently taking place with the third party shareholder in an effort to settle these disputes and to realise the Investors interests in the Mount Hutt Project. We expect these to conclude shortly. The final agreement will require the approval of the Federal Court of Australia ( the Court ) before the transaction can be completed. Investors will be advised of the outcome of the negotiations and subsequent application to the Court as soon as it is possible to do so. Moorhouse Shopping Centre project As indicated previously, a New Zealand registered company is the proprietor of the partly constructed Moorhouse Shopping Centre ( the Centre ). The sale of the Centre was initially due to settle three days after the earthquake in Christchurch in February The sale has been delayed due to the earthquake damage sustained by the Centre and the delays in finalising the subsequent insurance claim. We have recently received an update from the New Zealand liquidator who has agreed terms of settlement with the insurer of the Centre. Demolition of the Centre has been approved and settlement with the prospective purchaser is expected to occur in the coming months (subject to demolition occurring). Provided there are no further delays, the liquidator of the New Zealand company will adjudicate on the creditor claims he has received (including a claim from the Common Fund) to enable him to pay a distribution later this year. Due to the extended negotiations with the insurer and the prospective purchaser of the Centre, it is not possible to estimate when settlement may occur. No Court applications are expected to be required to finalise this claim. We will provide Investors with a further update when this issue is finalised _1 2

3 Australian Securities and Investments Commission ( ASIC ) Investigations In December 2011, Mark Letten was charged with 37 criminal charges following an ASIC investigation. Following a committal hearing in December 2012, Mr Letten was committed to stand trial on all charges. Appearing in the County Court of Victoria, Mr Letten pleaded guilty to 27 criminal charges being: 21 charges of operating 21 unregistered managed investment schemes; 1 charge for carrying out financial services business without an Australian Financial Services (AFS) licence, and; 5 charges of breaching directors duties. We understand Mr Letten is facing a maximum sentence of five years imprisonment for each of the unregistered scheme charges and the directors' duties charges. He also faces a maximum two years imprisonment for the charge of carrying on an unlicensed financial services business. Mr Letten s plea hearing occurred at the County Court of Victoria at different times during May At the time of writing no date has been reserved for sentencing. Investors should continue to monitor updates issued by ASIC on its website 3 Investigations Potential claim against parties associated with the Letten Schemes As a result of our ongoing investigations and a review of previous findings of the Court, on 28 March 2014 the Receivers filed an interlocutory application with the Court seeking a direction that the Receivers are justified in paying certain costs from the Common Fund which would be incurred if recovery proceedings were commenced against Mr Letten and Mr Paul Lane in respect of claims relating to their involvement in the operation of the Letten Schemes. This interlocutory application was heard on 11 June On that day the Court ordered the Receivers and Mr Letten to attend a mediation in an attempt to enable the parties to negotiate a settlement. The mediation took place on 19 June 2014 and was unfortunately unsuccessful. This mediation was in addition to the Receivers previous unsuccessful attempts to negotiate settlements with Mr Letten and Mr Lane. On 26 June 2014 the Court made orders and delivered its judgement on the Receivers application. The orders issued were as follows: The Receivers are justified in paying certain costs from the Common Fund which would be incurred in recovery proceedings against Mr Letten and Mr Lane. This includes the barrister s fees and any adverse cost orders made in the litigation; _1 3

4 The Receivers are justified in entering into proposed no win, no fee agreements with King & Wood Mallesons and KPMG such that no payment of their fees will be made unless there is a successful recovery from the proceedings against Mr Letten and Mr Lane. If a successful recovery is achieved, any such fees will be subject to approval of the Court and will be based on the previous hourly rates approved by the Court multiplied by A copy of the orders and judgement by the Court are available on the Investors website ( As a result of these orders of the Court, the Receivers intend to commence proceedings against Mr Letten and Mr Lane shortly. 4 Receivers Remuneration On 17 June 2013, the Receivers filed an application in respect of their remuneration, costs and expenses incurred in the performance of their duties for the period 1 January 2012 to 31 March 2013 ( Remuneration Application ). On 17 March 2014, Registrar Luxton of the Court held that the Receivers Remuneration Application be discounted by $545,075 ( Remuneration Decision ). On 28 March 2014, the Receivers filed an application for review of the Remuneration Decision ( Remuneration Review Application ). The decision to file the Remuneration Review Application was not taken lightly. The Court has listed the Remuneration Review Application for hearing at 9.30am on 11 August The Court has also made orders for ASIC to brief an independent assisting counsel to assist the Court in respect of the Remuneration Review Application. Full details of the Remuneration Review Application including relevant Court documents are available on the Investors website ( Investors are advised that the Receivers will not seek reimbursement from the Common Fund for any fees or costs associated with the Remuneration Review Application. Investors will be advised of the outcome of the hearing as soon as it is possible to do so. 5 Closure of secure data room As you may recall, the disclosure reports for each of the Schemes were initially uploaded into a secure data room for each of the Schemes and passwords were issued to investors. In addition, during the course of the receivership the Receivers have been communicating with Investors via the dedicated Investor website ( Investor address (lettenschemes@kpmg.com.au) and the Investor hotline (Australia) or (International). While the Investor website remains available, the secure data room is no longer operational _1 4

5 Should any Investors require copies of documents which were previously contained in the secure data room, please make a request via the Investor address or Investor hotline. 6 Second Investor distribution As indicated in our previous update, there were various issues that needed to be resolved before any further distributions could be paid to Investors. A number of these issues have now been progressed or resolved and we are pleased to advise we are able to pay a second distribution to Investors. The Receivers intend to declare the second interim distribution shortly. The method of calculating this distribution will be the same as ordered by the Court and used for the first distribution. This will mean some Investors will receive a distribution while others will not (depending on the level of their pre-receivership distributions). The amount of the distribution will depend on whether any further claims are received from Investors. It is envisaged the second distribution will be approximately 5 cents in the dollar on previously admitted claims. In the absence of substantial additional claims being received it is expected the second distribution will be paid by mid August In paying this distribution we have taken into account: the need to distribute funds in a timely manner; ensuring a meaningful distribution is payable; and the professional costs associated with paying a distribution. Investors and other claimants who have not yet submitted a Formal Proof of Claim Form to the Receivers are required to do so on or before 31 July 2014 to participate in the second interim distribution. Claim forms can be located on the Investor website ( Investors and other claimants who do not submit a claim by this date will be excluded from the benefit of the second interim distribution. Investors and other claimants who have previously submitted a Formal Proof of Claim Form or an Investment Confirmation Form and have had their claims finalised are not required to resubmit either of these forms. While we are paying out the majority of the funds held, subject to the outcome of the small number of outstanding recovery actions, we anticipate being able to pay a small final distribution shortly before the end of the receiverships. The timing and amount of the final distribution is not known as it depends on the finalisation of the residual issues outlined in this update. The significant outstanding matters which need to be finalised before the final distribution can be paid include: Finalising negotiations in relation to Tosswill and the Mt Hutt property; _1 5

6 Receiving a distribution, if any, from the liquidation of the Moorhouse Shopping Centre; and Finalising the outcome of the action against Mr Letten and Mr Lane for their respective involvement in the operation of the Letten Schemes. There are a number of other statutory and Investor activities we continue to undertake while the receiverships continue. These include: Ongoing statutory and bookkeeping tasks; Attending to Investor queries and correspondence (telephone calls, s and letters); Maintenance of the dedicated Investor website (including periodic updates) and 1800 telephone number; and Periodic completion of post appointment receivership tax returns (as required). We will continue to update Investors as and when it is appropriate to do so. Should you have any queries in the meantime please send an to lettenschemes@kpmg.com.au. Yours faithfully Damian Templeton Receiver and Manager _1 6