Key Points:

About 7000 investors who had $457 million locked up in six investment trusts in 2006 have been told more than 20 per cent of the value has been written off.

First Step investment trust investors received a letter from the trustee this week telling them $59.7 million in "non-recoverable investment losses" had been accounted for in the 2008 year.

The 2008 write-off comes on top of a $38 million loss reported for the 2007 financial year and brings the total write-down to $97.7 million.

The trusts were sold exclusively through financial advisory group Money Managers, which closed them in October 2006 after more investors began pulling out of the funds than joining them.

It told investors it would pay them out over a two-year period while it liquidated assets.

So far the trusts have paid back just $213.5 million.

First Step trustee chairman Edward Russell said the latest losses were "extremely disappointing".

He put some of the $59.7 million loss down to a drop in the property market but said the majority - a $35 million loss - related to loans it made to car finance company Club Finance.

"While some of the shortfall is sadly an uncontrollable inevitability in the current economic climate, the losses from Club are particularly disturbing."

Russell said it had employed liquidation experts Kordametha as well as legal experts to review the Club Finance business last year and had reported its concerns to the police and the Securities Commission.

It was now waiting to hear back from the commission and was hoping to take legal action pending the result of the investigation.

He would not say what the concerns were.

Altogether the trusts lent $60 million to the car finance company which is still operating, although it has stopped lending.

Club Finance is half owned by Doug Somers-Edgar through holding company F&I Holdings. Somers-Edgar is also the founder of Money Managers which sold the First Step investment trusts exclusively.

Russell said Somers-Edgar would not be the subject of the legal action.

He said the trustees hoped to make a further payment to investors by March but could not put a figure on how much they would get back. Russell said the trustees were waiting on the outcome of the sale of a geothermal project which First Step had lent money to.

The trusts are thought to have lent $79 million to the developers of the Taupo geothermal project but it never got off the ground and ended up going to the receivers.

Russell said it had a conditional contract to sell the development but completion had been held up by the Christmas holidays.

"We are hoping that will be back on track now everyone is back to work."

Russell said it hoped to continue making quarterly payments to investors but it was difficult to predict how much would be paid back. "As you would expect, once you close something down the better loans come in first."

It planned to give a further update to investors by March.

* 7000 investors
* Closed in October 2006 with a balance of $457 million
* $213.5 million paid back so far
* $97.7 million written off