To the Lenders in Project # 1104
4th Mortgage on 888 Sentinel Drive, West Vancouver
Borrower: George and Sharon Rusin


November 5, 1997

As indicated in our letter to lenders dated October 22, 1997 we will be providing information to lenders through regular project updates. Unfortunately, due to the poor quality of Eron's accounting and lender records we are presently unable to answer all the questions you may have. However, based on our initial findings we can address the frequently asked questions set out below. We stress that the information available to us is subject to verification and accordingly our findings are subject to change as more information becomes available.


Eron was paying me a good rate of return on my money, why was it closed down ?

In many instances payments to lenders were being financed by money received from new lenders or lenders to other projects. Few of Eron's projects were actually producing a return on investment. Our investigations to date indicate that many lenders will incur substantial losses because of these practices. Clearly this situation could not be allowed to continue.


What is the current status of the project ?

This mortgage charge is on a residential property located in the Sentinel Hill area in the District of West Vancouver. The main floor consists of six rooms including kitchen, living room, dining room, family room, den with en suite bathroom and laundry room. The upper floor has four bedrooms, a bathroom and laundry room.

An interest reserve in the amount of $44,000 was taken on this mortgage. This money has been used to cover interest payments up to and including the mortgage expiry date of September 19, 1997. At this date the reserve has been depleted. A demand letter for full payout has been sent to the borrower by Campney and Murphy (the solicitors for the bare trustee). A brief extension was requested by the borrower, and this period has now expired. An appraisal has been ordered. Upon receipt we anticipate commencing foreclosure proceedings.


How much was supposed to be raised for the project ?

$220,000


According to Eron's records how much was actually raised for the project ?

Approximately $220,000.


According to Eron's records how much was advanced to the project ?

Approximately $156,000.


What happened to the rest of the money ?

- $44,000 - sent to Kenneth Taschuk in trust for interest reserve
- $20,000 - brokerage fees taken as per agreement with borrower


What security was taken on the project ?

4th mortgage inter alia over the following property:
- Civic: 888 Sentinel Drive, West Vancouver
- Legal: Lot 13, Block 6, District Lots 1048 & 1049, Plan 7695 (PID 010-371-354)

Deposit Agreement signed by the borrowers assigning the interest reserve to the lender as additional security

Assignment of Rents


Are there any mortgages or other loans in priority to the project security ?

The following mortgages appear to have priority:
- A 1st mortgage held by CIBC in the amount of $1,095,000
- A 2nd mortgage held by Pacific Sunset Development Corp. in the amount of $850,000
(on Omega property interest)
- A 3rd mortgage held by Eron Mortgage Corporation in the amount of $850,000


What is the value of the project ?

We have commissioned a valuation report of the property, which is to be received by the end of October, we prefer not to speculate on the value, rather we will advise you of the result of this report.


Are there any other security or guarantees which might increase recovery on the project ?

No, the underlying property would appear to be the only source of recovery.


Will I get my money back ?

Recovery hinges on the value of the property. We will know the likelihood of recovery shortly, on receipt of the appraisal.


When will I get any money back ?

It is likely to be many months before any money is available to lenders.

We caution you that the information available to us is still incomplete and limited in scope. Nothing in the foregoing should be construed as guaranteeing any return of funds. We will keep you informed on a regular basis and will issue a further project update on or about November 30.

In the meantime if you have any further questions or information concerning the project please contact us in writing at the above noted address or by fax at (604) 688-6128.


Yours truly

Price Waterhouse Limited

Judicial Trustee





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