To the Lenders currently identified in Project #1187
Valleyview Heights Development
Borrower: 493711 BC Ltd.

November 6, 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 ?

Valleyview Heights is a 299 acre subdivision in Prince George, BC. Eron Mortgage Corporation has funded the land purchase and Phase II of this development. Phase II consists of a 25 lot subdivision, is substantially complete and reporting sales. Construction schedule dates for Phase II of this project appear to be on time including lot layout, city hall requirements, construction tendering and underground work.

The first charge on this property expires on October 11, 1998. At this date the borrower is in good standing however the mortgage has not been fully advanced. Funds from one lot sale are being held in trust with the borrower's lawyer. The borrower is requesting these funds be advanced towards the project as there is currently work that must be done on the project prior to ground freeze. We are in discussion with the borrower's lawyer as to the appropriate use of these funds.


How much was supposed to be raised for the project ?

$5,375,000


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

Approximately $5,077,198.


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

Approximately $3,021,456.


What happened to the rest of the money ?

It was used by Eron to pay commissions or legal fees. Also, a ten month interest reserve of $650,000 was taken.


When will you know where my money went ?

It will be at least one month before we are able to account for all funds received by Eron.


What security was taken on the project ?

A 1st mortgage in the amount of $5,375,000.


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

It would appear that there are no prior claims on the property.


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 November. 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 ?

Yes, the following additional security would appear to be available:
- Assignment of purchase agreement appraisals
- Assignment of all sales pending from Phase I
- Unrestricted personal guarantee of Fred Jaremchuk
- Liability insurance, Deposit agreement, Security agreement

The value of this collateral is not yet known, we anticipate gathering this information by the end of November.


Will I get my money back ?

It is too early to tell definitively how much of your money will be recovered. However, at this early stage it appears possible that a significant portion of funds invested in this project will be recovered.


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, clearly marking your correspondence as relating to the "Valleyview Heights Project".


Yours truly

Price Waterhouse Limited

Judicial Trustee





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