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November Update from Logic Funds

November 4, 2011

Dear Credit Sails Community,

We are writing to inform you of the upcoming actions we foresee in the Credit Sails timeline and the rationale behind our limited communications over the winter months.

Along with the rest of the New Zealand financial industry, we at Logic Fund Management were required by law to comply with new regulatory changes.  We endorse the new regulation but in saying so had to focus internally during this time period causing a minor disruption in our Credit Sails work.

From December of last year we felt that we had completed stage one in Credit Sails due to the investigations opened by the Securities Commission, Commerce Commission and NZX.  Rather than rely on these investigations alone we continued researching US CDO lawsuits involving products that were designed around the same time period with similar players in order to bolster our case.  There have been two recent outcomes of note, first CITI Bank agreed to pay $285m to settle a civil fraud case brought on by the SEC in relation to their involvement in selling CDO’s.  Second and more importantly, Loreley Finance vs. Credit Agricole (Calyon) was settled.  As this went unreported, we contacted the head litigator for Loreley Financing and although he had to keep the results from the case confidential we were delighted to hear that Calyon had settled out of court considering that most companies facing $60 million lawsuits do not take this course of action unless there is damaging information hiding behind closed doors that could tarnish the brand.

We were seeking a result such as this before moving forward with our plan to utilize the rights granted to investors as stated in the Master Trust Deed.  As secured creditors we have the right to call a meeting and appoint a committee by extraordinary resolution; in doing so we would initially seek to accomplish two goals.  First we would de-list Credit Sails from the NZX in order to re-coup listing fees and earmark the remaining funds for potential legal costs that may arise.  And second, appoint a committee with the ability to review all the paper work held by the Trustee and direct them to carry out their rightful duties.

We plan to proceed with this action in the next 60 days and are calling upon you to support this motion.  In order to pass an extraordinary resolution, we will need 25% majority, which is currently represented in the Community.  Your support can be pledged either in person on the meeting day (TBD) or through a proxy form that we will mail out in the following weeks.  If you are interested in becoming more involved and feel you have the time and skill to do so, please contact us in the near future.   We look forward to your support on this action.

Yours truly,

 

Greg Marshall

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