Leone v. Moore et al

Filing 170

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING FOR NOTICE re 159 Brief, filed by The Southern Improvement Company. Signed by Judge Phyllis J. Hamilton on 1/20/09. (nah, COURT STAFF) (Filed on 1/20/2009)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Joseph J. Tabacco, Jr. (SBN 75484) E-mail: [e-mail] Nicole Lavallee (SBN 165755) E-mail: [e-mail] BERMAN DeVALERIO 425 California Street, Suite 2100 San Francisco, California 94104 Telephone: [phone] Facsimile: [phone] Local Counsel Richard W. Cohen (admitted pro hac vice) E-mail: [e-mail] Barbara J. Hart (admitted pro hac vice) E-mail: [e-mail] David C. Harrison (admitted pro hac vice) E-mail: [e-mail] LOWEY DANNENBERG COHEN & HART, P.C. One North Broadway, Suite 509 White Plains, New York 10601-2310 Telephone: [phone] Facsimile: [phone] Lead Counsel for Plaintiff and the Putative Class UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

IN RE LUMINENT MORTGAGE CAPITAL, INC. SECURITIES LITIGATION

C 07-04073 PJH CLASS ACTION

This Document Relates To: ALL ACTIONS

[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING FOR NOTICE

WHEREAS a consolidated class action is currently pending before the court entitled In re Luminent Mortgage Capital, Inc. Securities Litigation, Master Case No. C 07-04073 (the "Action"). WHEREAS, the Court has received the Stipulation of Settlement dated as of September
{2031 / ORD / 00093468.DOC v1}

[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT & PROVIDING FOR NOTICE (07-04073 PJH)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

10, 2008 (the "Stipulation"), that was entered into by the Lead Plaintiff and Defendants, and the Court has reviewed the Stipulation and its attached Exhibits; and WHEREAS, the parties having made application, pursuant to Federal Rule of Civil Procedure 23(e), for an order preliminarily approving the settlement of this Action, in accordance with the Stipulation which, together with the Exhibits annexed thereto, sets forth the terms and conditions for a proposed settlement of the Action and for dismissal of the Action with prejudice upon the terms and conditions set forth therein; and the Court having read and considered the Stipulation and the Exhibits annexed thereto; and WHEREAS, all defined terms contained herein shall have the same meanings as set forth in the Stipulation; NOW, upon consent of the Parties, after review and consideration of the Stipulation filed with the Court and the Exhibits annexed thereto, and after due deliberation, IT IS HEREBY ORDERED:

1. defined as:

For purposes of this Settlement only, the Court will certify a Settlement Class

All Persons who purchased or otherwise acquired Luminent publicly traded securities or call options on publicly traded Luminent securities, and all persons who sold or otherwise disposed of put options on publicly traded Luminent securities during the period from February 9, 2007 through August 6, 2007 (the "Settlement Period"), and their respective executors, administrators, representatives, agents, attorneys, successors, heirs and/or assigns. Excluded from the Settlement Class are the Defendants; the officers and directors of the Company; members of the immediate families and heirs, successors or assigns of the foregoing; and any firm, trust, corporation, or other entity in which any Defendant has a controlling interest. Also excluded from the Settlement Class are persons who request exclusion from the Settlement Class pursuant to the terms of this Stipulation or order of the Court. 2. The Court finds that certification of the Settlement Class for settlement purposes

only is appropriate because:
[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT & PROVIDING FOR NOTICE (07-04073 PJH)

{2031 / ORD / 00093468.DOC v1}

2

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

(a)

The Settlement Class is so numerous that joinder of all members is

impracticable, satisfying the requirements of Rule 23(a)(1); (b) There are questions of law or fact common to the Settlement Class,

satisfying the requirement of Rule 23(a)(2); (c) The claims of the Lead Plaintiff, The Southern Investment Improvement

Company, VGA, Inc. and Allen Dayton, are typical of the claims of the Settlement Class, satisfying the requirement of Rule 23(a)(3); (d) The representative parties will fairly and adequately protect the interests of

the Settlement Class, satisfying the requirement of Rule 23(a)(4); and (e) Questions of law and fact common to the members of the Settlement Class

predominate over questions affecting only individual members and a class action is superior to other methods available for the fair and efficient adjudication of the controversy, satisfying the requirements of Rule 23(b)(3). 3. The findings in this Paragraph 2 are for purposes of this Settlement only, and shall

have no force or effect for any other purpose or if the Settlement does not become Effective. The Court does hereby preliminarily approve the Stipulation and the Settlement set forth therein, and the Proposed Plan of Allocation described in the Notice, subject to further consideration at the Settlement Fairness Hearing described below. 4. A hearing (the "Settlement Fairness Hearing") shall be held before this Court on

April 29, 2009, at 9:00 a.m., at the United States Courthouse ­ 17th Floor, Courtroom 3, 450 Golden Gate Avenue, San Francisco, California, to determine whether the proposed Settlement of the Action on the terms and conditions provided for in the Stipulation is fair, reasonable and adequate to the Settlement Class and should be approved by the Court; whether a Judgment as provided in the Stipulation should be entered herein; and whether the proposed Plan of Allocation should be approved; and to determine the amount of fees and expenses that should be awarded to Plaintiff's Lead Counsel. 5. The Court approves, as to form and content, the Notice of Class Action

Certification, Proposed Settlement, Motion for Attorneys' Fees and Expenses and Hearing
{2031 / ORD / 00093468.DOC v1}

3

[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT & PROVIDING FOR NOTICE (07-04073 PJH)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Thereon (the "Notice"), the Proof of Claim and Release form (the "Proof of Claim"), and Summary Notice for publication annexed as Exhibits A-1, A-2 and A-3 hereto and finds that the mailing and distribution of the Notice and publishing of the Summary Notice substantially in the manner and form set forth in ¶¶ 6 and 10 of this Order meet the requirements of Federal Rule of Civil Procedure 23 and due process, and is the best notice practicable under the circumstances and shall constitute due and sufficient notice to all Persons entitled thereto. 6. Lead Counsel is hereby authorized to retain the firm of Complete Claim Solutions,

LLC ("Claims Administrator"), and to supervise and administer the notice procedure as well as the processing of claims by the Claims Administrator, as more fully set forth below: (a) The Claims Administrator shall make reasonable efforts to identify all

Persons who are Members of the Settlement Class, including beneficial owners whose shares of Luminent common stock are held by banks, brokerage firms, or other nominees. Luminent shall provide to Lead Plaintiff on or before January 30, 2009, the information available from Luminent's transfer records required by the Claims Administrator to send copies of the Notice to the persons and entities who can be identified through reasonable efforts from the stock transfer records of Luminent. (b) On or before February 9, 2009, (the "Notice Date"), the Claims

Administrator shall cause a copy of the Notice and the Proof of Claim, substantially in the forms annexed as Exhibits A-1 and A-2 hereto, to be mailed by first-class mail to all Settlement Class Members who can be identified with reasonable effort at their last known address appearing in the stock transfer records maintained by or on behalf of Luminent; (c) On or before February 16, 2009, Lead Counsel shall cause the Summary

Notice to be published once in the national edition of The Wall Street Journal; and (d) On or before April 22, 2009, Lead Counsel shall cause to be served on

Defendants' Counsel and filed with the Court proof, by affidavit or declaration, of such mailing and publishing. 7. Defendants shall complete service on the appropriate federal and state government

officials of all notices required under the Class Action Fairness Act, 28 U.S.C. § 1715.
{2031 / ORD / 00093468.DOC v1}

4

[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT & PROVIDING FOR NOTICE (07-04073 PJH)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

8.

On or before January 30, 2009, Defendants shall pay or cause to be paid the sum of

$100,000 into the Class Escrow Fund to be used for actual costs of notice and administration of the Settlement. In the event that these funds are exhausted, Plaintiff's Lead Counsel may, prior to the Effective Date, expend from the Settlement Fund, without further approval from Defendants or the Court, an additional $100,000, to be used exclusively to pay the expenses associated with the notice and administration of the Settlement. 9. All reasonable expenses incurred in identifying and notifying Settlement Class

Members, as well as administering the Settlement Fund, shall be paid as set forth in the Stipulation. In the event the Settlement is not approved by the Court, or otherwise fails to become effective, Lead Plaintiff, Lead Counsel, and the Settlement Class shall not be responsible for any expenses validly disbursed or reimbursed in accordance with this Stipulation from the Class Notice and Administration Fund, and if the Class Notice and Administration Fund was exhausted, up to a maximum of $100,000 from the Settlement Fund, pursuant to ¶¶ 13 and 18(d) of the Stipulation and ¶ 8 of this Order. 10. Pursuant to the Notice, nominees who purchased publicly traded securities of

Luminent for the beneficial ownership of Settlement Class Members during the Settlement Class Period shall send the Notice and the Proof of Claim to all beneficial owners of such publicly traded Luminent securities within ten (10) days after receipt thereof, or send a list of the names and addresses of such beneficial owners to the Claims Administrator within ten (10) days of receipt thereof, in which event the Claims Administrator shall promptly mail the Notice and Proof of Claim to such beneficial owners. Such holders of record shall be reimbursed from the Gross Settlement Fund, upon receipt by the Claims Administrator of proper documentation, for the reasonable expense of providing notice to beneficial owners who are Settlement Class Members out of the Settlement Fund, which expenses would not have been incurred except for the sending of such Notice, subject to further order of this Court with respect to any dispute concerning such compensation. 11. All Members of the Settlement Class shall be bound by all determinations and

judgments in the Action concerning the Settlement, whether favorable or unfavorable to the
{2031 / ORD / 00093468.DOC v1}

5

[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT & PROVIDING FOR NOTICE (07-04073 PJH)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Settlement Class. 12. Settlement Class Members who do not timely and validly effect their exclusion from

the Settlement Class and who wish to submit a claim for recovery from the Settlement Fund shall complete and submit timely, valid Proof of Claim forms to the Claims Administrator at the Post Office Box indicated in the Notice, postmarked not later than June 9, 2009. Such deadline may be further extended by Court order. Proofs of Claim shall be deemed to have been submitted when postmarked, if mailed by first-class, registered, or certified mail, postage prepaid, addressed in accordance with the instructions given in the Proof of Claim. All other Proofs of Claim shall be deemed to have been submitted at the time they are actually received by the Claims Administrator. To be valid, a Proof of Claim must (a) be completed in a manner that permits the Claims Administrator to determine the eligibility of the claim as set forth in the Proof of Claim; (b) include the release by the claimant of all Released Parties as set forth in the Stipulation; and (c) be signed with an affirmation that the information is true and correct. All Members of the Settlement Class who do not submit valid and timely Proofs of Claim shall be forever barred from receiving any payments from the Settlement Fund, but will in all other respects be subject to and bound by the provisions of the Stipulation and the Order and Final Judgment, if entered. Notwithstanding the foregoing, Plaintiff's Lead Counsel shall have discretion to accept latesubmitted claims for processing by the Claims Administrator so long as the distribution of the Settlement Fund is not materially delayed thereby. 13. Any Member of the Settlement Class may enter an appearance in the Action, at their

own expense, individually or through counsel of their own choice, in which case such counsel must file with the Clerk of the Court and deliver to Plaintiff's Lead Counsel and Defendants' Counsel a notice of such appearance. If they do not enter an appearance, they will be represented by Plaintiff's Lead Counsel. 14. Any Person falling within the definition of the Settlement Class may, upon request,

be excluded from the Settlement Class. Any such Person must submit to the Claims Administrator a request for exclusion ("Request for Exclusion"), received no later than April 9, 2009. A Request for Exclusion must: (a) state the name, address, and telephone number of the
{2031 / ORD / 00093468.DOC v1}

6

[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT & PROVIDING FOR NOTICE (07-04073 PJH)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Person requesting exclusion; (b) identify the Person's purchases and sales of publicly traded Luminent securities made during the Settlement Class Period, including the dates of purchase or sale, the number of publicly traded securities purchased and/or sold, and the price paid or received per share for each such purchase or sale; (c) provide proper evidence of the Person's purchases and sales of publicly traded Luminent securities during the Settlement Class Period; and (d) state that the Person wishes to be excluded from the Settlement Class. All Persons who submit valid and timely Requests for Exclusion in the manner set forth in this paragraph shall have no rights under the Stipulation, shall not share in the distribution of the Net Settlement Fund, and shall not be bound by the Stipulation or the Judgment entered in the Action. 15. Any Member of the Settlement Class may appear and show cause, if he, she or it has

any reasons why the proposed Settlement of the Action should or should not be approved as fair, reasonable and adequate, why a judgment should or should not be entered thereon, why the Plan of Allocation should or should not be approved, why attorneys' fees and expenses should or should not be awarded to counsel for the plaintiff, or why the expenses of the Lead Plaintiff should or should not be awarded. Settlement Class Members must, on or before April 9, 2009, file with the clerk of the court and send by first-class mail to counsel listed below, a written statement of their objections. A letter or other informal document is sufficient. Lead Counsel for Lead Plaintiff and the Class: Richard W. Cohen David C. Harrison Barbara J. Hart Lowey Dannenberg Cohen & Hart, P.C. David C. Harrison One North Broadway, Suite 509 White Plains, NY 10601-2310 Counsel for Defendants: Michael Rugen Sidley Austin LLP 555 California Street San Francisco, CA 94104 The objection should include the following information: (a) the full name, address, and phone number of the objecting Settlement Class Member; (b) a list of all of the Settlement Class Member's Settlement Class Period transactions in publicly traded Luminent securities, including
{2031 / ORD / 00093468.DOC v1}

7

[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT & PROVIDING FOR NOTICE (07-04073 PJH)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

brokerage confirmation receipts or other competent documentary evidence of such transactions; (c) a written statement of all grounds for the objection accompanied by any legal support for the objection, signed by the objector or its counsel; (d) copies of any papers, briefs, or other documents upon which the objection is based; and (e) a statement of whether the objector intends to appear at the Settlement Fairness Hearing. If the objector intends to appear at the Settlement Fairness Hearing through counsel, the objection should also state the identity of all attorneys who will appear at the Settlement Fairness Hearing. 16. All funds held by the Escrow Agent shall be deemed and considered to be in

custodia legis of the Court, and shall remain subject to the jurisdiction of the Court, until such time as such funds shall be distributed pursuant to the Stipulation and/or further order(s) of the Court. 17. All papers in support of the Settlement, the Plan of Allocation, and any application

by counsel for the plaintiff for attorneys' fees or reimbursement of expenses or by Lead Plaintiff for reimbursement of their expenses shall be filed on or before April 15, 2009. 18. Defendants and Defendants' Counsel shall have no responsibility for the Plan of

Allocation or any application for attorneys' fees or reimbursement of expenses submitted by plaintiff's counsel, Lead Counsel or the Lead Plaintiff, and such matters will be considered separately from the fairness, reasonableness and adequacy of the Settlement. 19. At or after the Settlement Fairness Hearing, the Court shall determine whether the

Plan of Allocation proposed by Plaintiff's Lead Counsel, and any application for attorneys' fees or reimbursement of expenses shall be approved. 20. Neither the Stipulation, nor any of its terms or provisions, nor any of the

negotiations or proceedings connected with it, nor this Order, shall be construed as an admission or concession by Defendants of the truth of any of the allegations in the Action, or of any liability, fault, or wrongdoing of any kind. 21. Pending final determination of whether the Settlement should be approved, Lead

Plaintiff, all Settlement Class Members, and anyone who acts or purports to act on their behalf, shall not institute, commence or prosecute any action which asserts Settled Class Claims against
{2031 / ORD / 00093468.DOC v1}

8

[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT & PROVIDING FOR NOTICE (07-04073 PJH)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

any Released Party. 22. Pending final determination of whether the Settlement should be approved, all

proceedings and all discovery with respect to the Defendants in the Class Actions are stayed pending further order of the Federal Court. 23. The Court reserves the right to adjourn the date of the Settlement Fairness Hearing

without further notice to the Members of the Settlement Class, and retains jurisdiction to consider all further applications arising out of or connected with the proposed Settlement. The Court may approve the Settlement, with such modifications as may be agreed to by the Settling Parties, if appropriate, without further notice to the Settlement Class. IT IS SO ORDERED.

January 20 Dated: ____________________, 2009

UNIT ED

S

S DISTRICT TE C TA

ER

N

F D IS T IC T O R

{2031 / ORD / 00093468.DOC v1}

9

[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT & PROVIDING FOR NOTICE (07-04073 PJH)

A

C

LI

FO

Ju

llis J. H dge Phy

amilton

R NIA

THE HONORABLEORDE J. HAMILTON S SO PHYLLIS UNITED IT I STATES DISTRICT COURT JUDGE

RED

RT U O

NO

RT

H

EXHIBIT A-1

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

EXHIBIT A-1

IN RE LUMINENT MORTGAGE CAPITAL, INC. SECURITIES LITIGATION

C 07-04073 PJH

NOTICE OF CLASS ACTION CERTIFICATION, PROPOSED SETTLEMENT, MOTION FOR ATTORNEYS' FEES AND EXPENSES AND HEARING THEREON
IF YOU PURCHASED OR OTHERWISE ACQUIRED PUBLICLY TRADED LUMINENT MORTGAGE CAPITAL, INC. SECURITIES OR CALL OPTIONS ON PUBLICLY TRADED LUMINENT SECURITIES OR SOLD OR OTHERWISE DISPOSED OF PUT OPTIONS ON PUBLICLY TRADED LUMINENT SECURITIES DURING THE PERIOD FROM FEBRUARY 9, 2007 THROUGH AUGUST 6, 2007, INCLUSIVE, YOU COULD RECEIVE A PAYMENT FROM A CLASS ACTION SETTLEMENT. A Federal Court authorized this notice. This is not a solicitation from a lawyer. This is not a notice that you have been sued. $ This settlement (the "Settlement") of a lawsuit will provide $8,000,000 in cash, plus interest (the "Settlement Fund"), to pay claims from investors who acquired the common stock of Luminent Mortgage Capital, Inc. ("Luminent") or engaged in certain transactions in put or call options on publicly traded Luminent securities, from February 9, 2007 through August 6, 2007 (the "Settlement Class Period"), and suffered losses. Depending on the number of eligible shares purchased by investors who elect to participate in the Settlement and when those shares were purchased and sold, the average distribution is estimated to be $0.245 per damaged share (and may be somewhat less, depending on the number of call options purchasers and put options sellers who file claims) before deduction of Court-approved fees and expenses described below. A further description of the Plan of Allocation is on pages _____ to _____ below. The Settlement, subject to court approval, resolves a class action lawsuit in federal court over whether Luminent and several of its senior executive officers made false and misleading statements about Luminent's financial condition, its liquidity, the safety of its dividend, and the quality of its portfolio. The Settlement avoids costs and risks to you and the class from continuing the lawsuit, it pays money to investors like you, and it releases Luminent and several of its senior executive officers (identified at page _____) from liability.

$

{2031 / NOT / 00093471.DOC v1}

$

If the Settlement is approved by the Court, the Court-appointed lawyers for investors, Lowey Dannenberg Cohen & Hart, P.C., will apply to the Court for an award of attorneys' fees not to exceed 25% of the Settlement Fund, which amounts to approximately $2.0 million, and for reimbursement of expenses not to exceed $120,000 incurred in investigating the facts, prosecuting the case, and negotiating the Settlement. These payments, if approved, will come out of the $8,000,000 Settlement Fund, and are estimated to be an average of $0.065 per damaged share. Lead Plaintiff and Luminent do not agree on the average amount of damages per share that would be recoverable if the Lead Plaintiff were to have prevailed on each claim alleged. The issues on which the parties disagree include: (1) the amount by which Luminent securities were allegedly artificially inflated (if at all) during the Settlement Class Period; (2) the extent to which external factors, such as general market and industry conditions, including the seizing up of credit markets in early August 2007, influenced the trading price of Luminent securities at various times during the Settlement Class Period; (3) the extent to which the various matters that Lead Plaintiff alleged were materially false or misleading or omitted influenced (if at all) the trading price of Luminent securities at various times during the Settlement Class Period; and (4) whether the statements made or facts allegedly omitted were material, false, misleading or otherwise actionable under the securities laws. If you are a Settlement Class Member (as the term is defined below), your legal rights are affected by the Settlement, regardless of whether you act or do not act. Read this notice carefully.

$

$

YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT:
SUBMIT A CLAIM FORM B The only way to get a payment from the Settlement. Deadline: June 9, 2009. EXCLUDE YOURSELF B You get no payment from the Settlement. This is the only option that might allow you to bring an individual lawsuit against the Defendants asserting the legal claims being released in this case, if you have a valid and timely claim. Deadline: April 9, 2009. OBJECT B You may write to the Court if you do not like this Settlement, the Plan of Allocation, and/or the Request for Attorneys' Fees and Expenses. Deadline: April 9, 2009. GO TO A HEARING B You may ask to speak in Court about the fairness of the Settlement. Hearing Date: April 29, 2009.

2
{2031 / NOT / 00093471.DOC v1}

DO NOTHING B You get no payment and give up your rights relating to the claims described in this Notice. $ $ These rights and options B and the deadlines to exercise them B are explained in this Notice. The Court in charge of this case must decide whether to approve the Settlement. If approved, payments will be made to claimants from the Settlement Fund on the Effective Date, i.e., after the Court approves the Settlement and enters judgment, and after all appeals and subsequent proceedings (if any) are resolved.

WHAT THIS NOTICE CONTAINS [insert page numbers]
BASIC INFORMATION 1. 2. 3. 4. Why did I get this Notice package? What is this lawsuit about? What is a class action? Why is there a Settlement? Page

WHO IS INCLUDED IN THE SETTLEMENT? 5. 6. 7. How do I know if I am a Settlement Class Member? Are there any exceptions to being included as a Settlement Class Member? I am still not sure if I'm included.

THE SETTLEMENT BENEFITS 8. 9. 10. 11. 12. 13. What does the Settlement provide? How much will my payment be? How can I get a payment? When will I receive my payment? What am I giving up to get a payment or stay in the Settlement Class? How does Luminent's bankruptcy affect the Settlement?

EXCLUDING YOURSELF FROM THE SETTLEMENT 14. 15. 16. How do I exclude myself from the Settlement? If I don't exclude myself, can I sue defendants for the same things later? If I exclude myself, can I get money from this Settlement?

THE LAWYERS REPRESENTING YOU 17. 18. Do I have a lawyer in this case? How will the lawyers be paid? 3
{2031 / NOT / 00093471.DOC v1}

THE COURT'S SETTLEMENT FAIRNESS HEARING 19. 20. When and where will the Court decide whether to approve the Settlement? Do I have to come to the hearing?

OBJECTING TO THE SETTLEMENT 21. 22. How do I tell the Court that I do not like the Settlement? What's the difference between objecting and excluding?

IF YOU DO NOTHING 24. What happens if I do nothing at all?

OBTAINING MORE INFORMATION 25. Are there more details about the Settlement?

SPECIAL NOTICE TO NOMINEES 26. Special Notice to Banks, Trustees, Brokerage Firms or Other Nominees

UNDERSTANDING YOUR PAYMENT -- THE PLAN OF ALLOCATION 1. Why did I get this Notice package?

You or someone in your family may have purchased Luminent common stock or call options on publicly traded Luminent securities or sold put options on publicly traded Luminent securities during the period from February 9, 2007 through August 6, 2007. The Court caused this Notice to be sent to you because you have a right to know about a proposed settlement of a class action lawsuit, a hearing to be held by the Court to consider the fairness, reasonableness and adequacy of the settlement, and about all of your options, before the Court decides whether to approve the settlement. If the Court approves it and after any objections or appeals are resolved, a claims administrator appointed by the Court will make the payments that the settlement allows. This Notice explains this lawsuit, the Settlement, your legal rights, what benefits are available, who is eligible for them, and how to get them. It is not an expression of any opinion by the Court with respect to the truth of the allegations of the litigation or the merits of the claims or defenses asserted. The Court in charge of the case is the United States District Court for the Northern District of California, and the case is known as In re Luminent Securities Litigation, Master File No. C 07-04073 PJH (the "Action"). U.S. District Judge Phyllis J. Hamilton is the judge in charge of 4
{2031 / NOT / 00093471.DOC v1}

this class action. The people who are suing are called the "Lead Plaintiff." The company which was sued, Luminent, and the individuals who are being sued, Luminent former officers and directors Gail Seneca, S. Trezevant Moore, and Christopher J. Zyda (together, the "Individual Defendants"), are collectively referred to as the "Defendants."

2.

What is this lawsuit about?

Defendant Luminent is a publicly traded real estate investment trust which invested primarily in assets secured by residential real estate mortgages. On August 6, 2007, Luminent announced that contrary to certain prior assurances about the Company's ample liquidity and its intention to pay a dividend for the June 2007 quarter, it was suspending its dividend and was facing a liquidity crisis. Luminent's stock price immediately dropped 85% over the next two days, closing at $0.95 on August 8, 2007, the day the dividend was supposed to have been paid. Beginning on August 8, 2007, six actions were filed in the United States District Court for the Northern District of California, which were consolidated into a single action by the Court. On November 21, 2007, the Court appointed Allen Dayton, the Southern Improvement Company, and VSA, Inc. as the Lead Plaintiff, and approved Lead Plaintiff's choice of Lowey Dannenberg Cohen & Hart, P.C. as Plaintiff's Lead Counsel in this class action. On February 15, 2008, Lead Plaintiff filed a Consolidated Class Action Complaint ("Complaint") on behalf of investors in Luminent common stock and put options from June 25, 2007 through August 6, 2007 against Luminent and the Individual Defendants. The Complaint alleges violations of Section 10(b) of the Securities Exchange Act and Securities Exchange Commission Rule 10b-5 against all Defendants, and violations of Section 20(a) of the Securities Exchange Act against the Individual Defendants. Please note that the Complaint asserts a shorter Class Period than the period in the Settlement Class Period, which is from February 9, 2007 through August 6, 2007. The longer Settlement Class Period was negotiated with the Defendants. The Complaint alleges that Defendants made misleading statements regarding Luminent's financial condition and performance, including specifically its liquidity, the quality of its mortgage-backed securities ("MBS") portfolio, and the safety of its dividend for the second quarter of 2007, payable August 8, 2007, which artificially inflated the market price of Luminent securities. The Complaint alleges Defendants failed to disclose adverse facts, and alleges that the Company's financial condition was deteriorating such that Defendants' statements were materially misleading. Among other things, the Complaint alleges that Defendants knowingly or recklessly failed to disclose margin calls on its MBS portfolio, a write-down of its portfolio and significant exposure to subprime debt that negatively impacted the Company's liquidity. The Complaint asserts claims for violations of Section 10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5, 17 C.F.R. § 240.10b-5, against all Defendants. On March 31, 2008, Defendants moved to dismiss the Complaint. Lead Plaintiff filed their opposition to Defendants' motion to dismiss on June 5, 2008. Lead Plaintiff and Luminent reached an agreement to settle the case before the Court decided the motion to dismiss. 5
{2031 / NOT / 00093471.DOC v1}

3.

What is a class action?

In a class action, the Lead Plaintiffs sue on behalf of numerous persons who have similar claims. The Lead Plaintiffs act as representatives of the class of similarly situated persons, and here they have negotiated a settlement for the benefit of the class. All persons with similar claims constitute a Settlement Class, and each one is a Settlement Class member. The Court will resolve the claims of all Settlement Class members, except for those who properly exclude themselves from the Settlement Class.

4.

Why is there a Settlement?

Instead of litigating the Action through trial, Lead Plaintiff and the Defendants, after arm's length negotiations supervised by an experienced mediator, have agreed to a compromise of the claims for $8.0 million in cash to be paid by the insurance carriers for Luminent and its directors and officers ("D&O Policy"). Lead Plaintiff thus avoids the possibility that their Complaint would be dismissed, as well as the risks and costs of a trial and possible appeals. Class members who lost money will get some compensation. Moreover, Luminent's stock has nominal value, and Lead Plaintiff was concerned that Luminent may become insolvent, if it is not already. As of March 31, 2008, the Company's liabilities exceeded its assets by more than $200 million, and Luminent may have been in default on its obligations to several creditors. These circumstances could have resulted in a voluntary or involuntary bankruptcy filing by Luminent, which could delay and/or jeopardize the Class'' claim to the proceeds from the D&O Policy covering these claims. Subsequent to reaching an agreement on the principal terms of the Settlement on September 5, 2008, Luminent and its wholly owned subsidiaries filed for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland. The consolidated case is entitled In re Luminent Capital Mortgage, Inc., Debtor, Case No. 08-21389 (D. Md. Bankr.). On December 2, 2008, the Bankruptcy Court issued an order authorizing Defendants' insurance carrier to fund the Settlement Fund and for the parties to take all other action reasonably necessary to effectuate the Settlement in the Northern District of California. Lead Plaintiff and its counsel believe that the proposed Settlement is an excellent recovery and is in the best interests of the Settlement Class. At the time this Settlement was reached, Defendants had filed a separate motion to dismiss the Complaint. Because of risks associated with continuing to litigate and proceeding to trial, it was possible that the Settlement Class would not have prevailed on any of its claims, in which case the Settlement Class would receive nothing. The amount of damages recoverable by the Settlement Class was and is challenged by Defendants. Recoverable damages in this case are limited to losses caused by the alleged wrongdoing. The Settlement Class may not recover for stock losses caused by changes in global financial markets, or in this case, by the world-wide credit crisis. Had the litigation gone to trial, Luminent would have asserted that all or most of the losses of 6
{2031 / NOT / 00093471.DOC v1}

Settlement Class Members were caused not by fraud, but rather by market, industry or general economic factors B most notably, the seizing up of the credit markets in early August 2007, which Defendants claim caused the Company's stock to lose 85% of its value in the course of two days, and prevented Luminent (and numerous other mortgage companies) from obtaining the financing necessary to continue its mortgage investment business. In fact, Luminent has argued that the absence of a causal connection between the alleged misstatements and the drop in value of Luminent stock requires complete dismissal of the case. Luminent also has asserted that Lead Plaintiff had not and could not meet their stringent pleading requirements for alleging a fraud claim under the Private Securities Litigation Reform Act ("PSLRA"), and that the alleged misrepresentations were not actionable under the PSLRA's safe harbor provisions, which grant protection to forward-looking statements that are accompanied by meaningful risk disclosures. Defendants deny the allegations of the Complaint and intend to reassert their motion to dismiss the Complaint if the Action does not settle. In the event Lead Plaintiff's Complaint (or an amended complaint) is upheld by the Court, the Action would proceed to discovery, and potentially trial and appeal, the costs of which would be paid by Defendants' insurance coverage, which will reduce the amount available to pay a judgment in the event that Lead Plaintiff ultimately prevails. Plaintiff's Lead Counsel has thoroughly investigated and litigated the case. They also have the benefit of limited document discovery provided by Defendants in advance of the mediation. Plaintiff's Counsel also retained experienced industry and financial experts to assist them in assessing the strengths and weaknesses of their claims and potential recoverable damages. Based upon their extensive investigation, their consultation with experts and their evaluation of the claims of the Settlement Class Members against the Defendants and defenses that might be asserted, Plaintiff's Lead Counsel believe that the Settlement is fair, reasonable and adequate and in the best interests of the Settlement Class. The Settlement provides an immediate and certain recovery. By settling, Lead Plaintiff and Defendants avoid the cost, uncertainty, and delay of continued litigation. The parties engaged in extensive negotiations that led to the Settlement described in this Notice. Plaintiff's Lead Counsel believe the Settlement is fair because they were not certain that the Settlement Class would win on any of the claims and even if they did win, they might not get any more money than the $8.0 million, plus interest, that Luminent's insurance carriers have agreed to pay to settle the lawsuit, for a number of reasons. Luminent's lawyers believe the Settlement is fair because even though Defendants deny Lead Plaintiff's claims, Defendants avoid the cost of continued litigation and risk of losing at trial.

WHO IS INCLUDED IN THE SETTLEMENT
5. How do I know if I am a Settlement Class Member?

For the purposes of settlement, everyone who fits the following description is a Settlement Class Member: 7
{2031 / NOT / 00093471.DOC v1}

$

All persons and entities who purchased or otherwise acquired publicly traded Luminent securities and call options for publicly traded Luminent securities or sold put options for publicly traded Luminent securities from February 9, 2007 through August 6, 2007 (the "Settlement Class Period"). The Settlement Class excludes Defendants; all individuals who are officers and/or directors of Luminent; members of the immediate families and heirs, successors or assigns of the foregoing; and any firm, trust, corporation, or other entity in which any Defendant has a controlling interest. Also excluded from the Settlement Class are persons who request exclusion from the Settlement Class pursuant to the terms of the Stipulation of Settlement or order of the Court.

$

"Person" means an individual, corporation, partnership, limited partnership, association, joint stock company, estate, legal representative, trust, unincorporated organization, and any other type of legal entity, and their respective executors, administrators, representatives, agents, attorneys, heirs, successors, and/or assigns.

6.

Are there any exceptions to being included as a Settlement Class Member?

Yes. As mentioned in the description above, you are not a Settlement Class Member if any of the following applies to you: $ $ $ $ $ $ You do not meet the definition of the Settlement Class above. You exclude yourself from the Settlement Class. You are a Defendant. You are an officer and/or director of Luminent. You are a member of the immediate family or an heir, successor or assign of the foregoing. You are a firm, trust, corporation, or other entity in which any Defendants have a controlling interest.

7.

I'm still not sure whether I'm included.

If you are still not sure whether you are included, you can ask for free help. You can contact the Claims Administrator at [insert contact information] or you can fill out the claim form described in question 10, to see if you qualify. You can also contact Plaintiff's Lead Counsel, Lowey Dannenberg Cohen & Hart, P.C., at One North Broadway, Suite 509, White Plains, New York 10601-2310, telephone: [phone]; e-mail [e-mail]. 8
{2031 / NOT / 00093471.DOC v1}

THE SETTLEMENT BENEFITS
8. What does the Settlement provide?

The Defendants, through their insurance carriers, paid $8.0 million into an escrow account that is earning interest for the benefit of the Settlement Class. Defendants have also paid $100,000 for the costs of this notice to Class Members and for costs to administer the Settlement. The balance of this fund, after payment of court-appointed attorneys' fees and expenses, taxes, and the costs of claims administration, including the costs of printing and mailing this Notice and the cost of publishing newspaper notice (the "Net Settlement Fund"), will be divided among all Settlement Class Members who submit valid claim forms.

9.

How much will my payment be?

If you are entitled to a payment, you will receive a pro rata share of the Settlement Fund. Your share of the Settlement Fund will depend on the number of valid and timely claim forms that Settlement Class Members send in, how many shares of Luminent stock or call options you bought or put options on Luminent shares you sold, and when you bought and sold these securities. You should look at the Plan of Allocation section of this notice that appears on pages _____ to _____ below for a description of the calculations to be made in computing the "Recognized Loss" of the "Authorized Claimants," that is, those investors who submit valid and timely Proof of Claim and Release forms establishing that they are Settlement Class Members.

10.

How can I get a payment?

To qualify for payment, you must timely send in a Proof of Claim and Release form that is received by the Claims Administrator. A Proof of Claim and Release form is attached to this Notice. Read the instructions carefully, fill out the form, include all the documents the form asks for, sign it, and mail it postmarked no later than June 9, 2009. Unless the Court orders otherwise, if you do not timely submit a Proof of Claim, you will be barred from receiving any payments from the Net Settlement Fund, but will in all other respects be bound by the Final Judgment in the case.

11.

When will I receive my payment?

The Court will hold a hearing on April 29, 2009, to decide whether to approve the Settlement. If the Court approves the Settlement, there may be appeals. If there are any appeals, it is uncertain when these appeals will be resolved, and resolving them can take time, typically more than a 9
{2031 / NOT / 00093471.DOC v1}

year. The Claims Administrator will also need time to process the submitted claims before any distribution can be made to Authorized Claimants. The claim administration process is complicated and will take many months, even when there is no delay due to an appeal. Please be patient.

12.

What am I giving up to get a payment and stay in the Settlement Class?

Unless you exclude yourself, you are a member of the Settlement Class. That means that you will give up and release any claims you might have against Defendants relating to any of the claims brought by Lead Plaintiff in this Action, as described more fully below. It also means that all of the Court's orders will apply to you and legally bind you. If you sign the Proof of Claim and Release form, you will agree to a "Release of Claims," attached to the Proof of Claim form, which describes exactly the legal claims that you give up if you stay in the Settlement Class. If the proposed Settlement is approved, the Court will enter a Final Judgment and Order of Dismissal with Prejudice ("Judgment"). The Judgment will dismiss the Released Claims with prejudice as to all Released Persons. The Judgment will provide that all Settlement Class Members shall be deemed to have released and forever discharged all Released Claims against all Released Persons and that the Released Persons shall be deemed to have released and discharged all Settlement Class Members and counsel to the Lead Plaintiff from all claims arising out of the prosecution and settlement of the Action or the Released Claims. "Released Claims" means any and all claims, demands, rights, actions or causes of action, liabilities, damages, losses, obligations, judgments, suits, fees, expenses, costs, matters and issues of any kind or nature whatsoever, whether known or unknown, contingent or absolute, suspected or unsuspected, disclosed or undisclosed, hidden or concealed, matured or unmatured, that have been, could have been, or in the future can or might be asserted in the Action or in any court, tribunal or proceeding (including, but not limited to, any claims arising under federal or state statutory or common law) by or on behalf of Lead Plaintiff or any member of the Settlement Class, against the "Released Persons," whether or not any such Released Persons were named, served with process or appeared in the Action, arising out of, or relating in any manner to the allegations, facts, events, acquisitions, matters, acts, occurrences, statements, representations, misrepresentations, omissions, or any other matter, thing or cause whatsoever, or any series thereof, through and including the Effective Date of this Settlement, which have been or could have been alleged in the Action or which are embraced, involved, set forth in, referred to, or otherwise related in any way to the purchase, or purchase and sale, or other acquisition, of publicly traded Luminent securities or call options on publicly traded Luminent securities, or to the sale or other disposition of put options on publicly traded Luminent securities by the Lead Plaintiff or any Class Member during the Settlement Class Period; and any claims arising out of, relating to, or in connection with the settlement or resolution of this Action. Nothing herein is intended to release the exclusively derivative claims asserted on behalf of Luminent in the pending derivative suit, Brett v. Moore, et al., Case No. CGC-07-466824 (San Francisco). "Released Persons" means each and all of the Defendants and each of their Related Parties. 10
{2031 / NOT / 00093471.DOC v1}

"Related Parties" means each Defendant's past or present directors, officers, employees, partners, insurers, co-insurers, reinsurers, controlling shareholders, attorneys, accountants or auditors, personal or legal representatives, predecessors, successors, parents, subsidiaries, divisions, joint ventures, assigns, spouses, heirs, related or affiliated entities, any entity in which a Defendant has a controlling interest, any member of any Individual Defendant's immediate family, or any trust of which any Individual Defendant is the settlor or which is for the benefit of any Individual Defendant's family. "Unknown Claims" means any Released Claims which the releasing party does not know or suspect to exist in his, her or its favor at the time of the release of the released persons which, if known by him, her or it, might have affected his, her or its settlement with and release of the released persons, or might have affected his, her or its decision not to object to or to seek exclusion from this Settlement. With respect to any and all Released Claims, the Settling Parties stipulate and agree that, upon the Effective Date, the Lead Plaintiff shall expressly and each of the Settlement Class Members shall be deemed to have, and by operation of the Judgment shall have, expressly waived the provisions, rights and benefits of California Civil Code ' 1542, which provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor. The Lead Plaintiff shall expressly and each of the Settlement Class Members shall be deemed to have, and by operation of the Judgment shall have, expressly waived any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law, which is similar, comparable or equivalent to California Civil Code '1542. The Lead Plaintiff and any Settlement Class Member may hereafter discover facts in addition to or different from those which he, she or it now knows or believes to be true with respect to the subject matter of the Released Claims, but each Lead Plaintiff shall expressly and each Settlement Class Member, upon the Effective Date, shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever settled and released any and all Released Claims, without regard to the subsequent discovery or existence of such different or additional facts. The Lead Plaintiff acknowledges, and the Settlement Class Members shall be deemed by operation of the Judgment to have acknowledged, that the foregoing waiver was separately bargained for and a key element of the settlement of which this release is a part.

13.

How does Luminent's bankruptcy affect the Settlement?

The terms of the Settlement against Luminent and the Individual Defendants are governed by the Settlement Agreement. The Settlement Agreement provides that in the event of a bankruptcy filing, the parties will seek approval of the Bankruptcy Court to fund the Settlement and to take any other actions reasonably necessary to effectuate the Settlement. On September 5, 2008, Luminent and its subsidaries filed for bankruptcy protection in the United States Bankruptcy Court of the District of Marylad (Baltimore). Pursuant to the Settlement Agreement, on October 11
{2031 / NOT / 00093471.DOC v1}

3, 2008, Luminent filed a motion in the Bankruptcy Court to (1) lift the automatic stay to permit the parties to consummate the Settlement Agreement in this Court, and (2) approve the Settlement under the Bankruptcy Code as in the best interest of the debtor. On December 2, 2008, the Bankruptcy Court approved the Luminent's application and authorized the parties to proceed with the Settlement.

EXCLUDING YOURSELF FROM THE SETTLEMENT
If you do not want to be bound by the Judgment or recover money from the Settlement Fund, and instead want to keep any claims you may have and any right you may have to sue the Defendants on your own about the legal issues in this case, then you must take steps to get out. This is called excluding yourself from B or opting out of B the Settlement Class. You should not assume that you have any claim against any Defendant because you have received this Notice. This Notice is not a representation or warranty that you do possess a valid or timely claim against any Defendant, or that you would prevail in any individual action on such claim. Moreover, under Section 362 of the U.S. Bankruptcy Code, there is an automatic stay of all pending claims against Luminent in other courts, and new claims may be filed against Luminent only in the U.S. Bankruptcy Court, while the bankruptcy action remains pending. If you have questions about whether you do have a valid and timely claim, and whether you would pursue such a claim individually in lieu of participating in the Settlement Class, you should consult an attorney about your particular circumstances.

14.

How do I exclude myself from the Settlement?

If you do not wish to be included in the Settlement Class and you do not wish to participate in the proposed Settlement described in this Notice, you may request to be excluded. To do so, you must submit a written request for exclusion that must be postmarked on or before April 9, 2009 and must: (a) include the name, address, and telephone number of the person(s) requesting exclusion; (b) include identification of each of the person's purchases and sales of publicly traded Luminent securities made during the Settlement Class Period, including the dates of purchase or sale, the number of shares or call options purchased and/or put options sold, and the price paid or received per security for each such purchase or sale; (c) provide proper evidence of the person's purchases and sales of Luminent securities during the Settlement Class Period; and (d) state that the person wishes to be excluded from the Settlement Class. No request will be considered valid unless all of the information described above is included in the request. The request must be addressed as follows: Luminent Securities Litigation c/o Complete Claim Solutions, LLC P. O. Box ___________ Palm Beach Gardens, FL 33416 12
{2031 / NOT / 00093471.DOC v1}

You cannot exclude yourself by phone or by e-mail. If you ask to be excluded from the Settlement Class, you will not get any settlement payment. If you exclude yourself, you will not be legally bound by anything that happens in this Action. You might be able to sue (or continue to sue) Luminent and the other Defendants in the future about the claims in this Action, but your claims may not be timely, valid, or you may not prevail.

15.

If I don't exclude myself, can I sue Defendants for the same things later?

No. Unless you exclude yourself, you give up any right to sue any of the Defendants about the claims that this Settlement resolves. If you have a pending lawsuit, speak to your lawyer in that case immediately. You must exclude yourself from this Settlement Class to continue or file any lawsuit alleging the same claims as are alleged herein. As a result of the automatic stay provisions under the U.S. Bankruptcy Code, any claims against Luminent may only be asserted in the U.S. Bankruptcy Court, while the bankruptcy action remains pending, unless the Bankruptcy Court orders otherwise. Remember, the exclusion deadline is April 19, 2009. See also Question No. 12: "What am I giving up to get a payment or stay in the Settlement Class?"

16.

If I exclude myself, can I get money from this Settlement?

NO. If you exclude yourself, you will not be entitled to receive any money from the Settlement Fund. If you exclude yourself, do not send in a Proof of Claim and Release form to ask for any money.

THE LAWYERS REPRESENTING YOU
17. Do I have a lawyer in this case?

The Court appointed the law firm of Lowey Dannenberg Cohen & Hart, P.C. to represent you and the other Settlement Class Members. This law firm is called Lead Counsel. You will not be individually charged for these lawyers. If you want to be represented by your own lawyer, you may hire one at your own expense. You can send any questions to Lead Counsel at Lowey Dannenberg Cohen & Hart, P.C., One North Broadway, Suite 509, White Plains, NY 10601-2310 (telephone: [phone]; e-mail: [e-mail], [e-mail], or [e-mail]), or to the Claims Administrator at In re Luminent Securities Litigation, Complete Claim Solutions, LLC, P. O. Box _________, Palm Beach Gardens, FL 33416. 13
{2031 / NOT / 00093471.DOC v1}

18.

How will the lawyers be paid?

Lead Counsel will apply to the Court for attorneys' fees not to exceed 25% of the Settlement Fund and for reimbursement of their out-of-pocket expenses not to exceed $120,000 (collectively, an average of $.065 per share of common stock) incurred in prosecuting the case, plus interest on such fees and expenses at the same rate as earned by the Settlement Fund. Such sums as may be approved by the Court will be paid from the Settlement Fund. Settlement Class Members are not personally liable for any such fees or expenses. The attorneys' fees and expenses requested will be the only payment to Plaintiff's Counsel for their efforts in achieving this Settlement and for their risk in undertaking this representation on a wholly contingent basis. To date, Plaintiff's Counsel have not been paid anything for their services for conducting this litigation on behalf of the Plaintiff and the Settlement Class nor for their substantial out-of-pocket expenses. The fee requested will compensate Plaintiff's Counsel for their work in achieving the Settlement Fund and is within the range of fees often awarded to class counsel under similar circumstances in other cases of this type, given the substantial risks undertaken by counsel of no payment. The Court may, however, award less than this amount in its discretion.

THE COURT'S SETTLEMENT FAIRNESS HEARING
19. When and where will the Court decide whether to approve the Settlement?

The Court will hold a Settlement Fairness Hearing at 9:00 a.m. on April 29, 2009 before the Honorable Phyllis J. Hamilton, United States District Judge, at the United States District Court for the Northern District of California, Courtroom 3, 17th Floor, United States Courthouse, 450 Golden Gate Avenue, San Francisco, CA 94102. At this hearing the Court will consider whether the Settlement, the Plan of Allocation, and the Application for Attorneys' Fees and Reimbursement of Expenses are fair, reasonable, and adequate. If there are objections, the Court will hear them. The Court will listen to people who have made a written request to speak at the hearing. The Court may reschedule the Settlement Fairness Hearing at any time, so if you plan to attend or participate, you should check with the Clerk of the Court to know whether there have been any changes of the place, date and time for the hearing.

20.

Do I have to come to the Settlement Fairness Hearing?

No. Lead Counsel will answer questions the Judge may have. But you are welcome to come at your own expense, and the Court will give you the opportunity to be heard. If you decide to send an objection, the Court will consider it. You don't have to come to Court to talk about it. You may also pay your own lawyer to attend, but it's not necessary. 14
{2031 / NOT / 00093471.DOC v1}

OBJECTING TO THE SETTLEMENT
21 How do I tell the Court that I do not like the Settlement?

If you are a Settlement Class Member and do not exclude yourself, you can object to the Settlement at the Settlement Fairness Hearing if you do not like any part of it. In order for the Court to fairly consider your objection, Settlement Class Members must send a written statement no later than April 9, 2009, to the Court and counsel at the addresses listed below, saying that you object to the Settlement in In re Luminent Mortgage Capital, Inc. Securities Litigation, No. C 07-04073 (PJH). The written objection may be by an informal letter or any other format. Class members do not need to hire an attorney in order to file any objections. The objection should include (a) your name, address and telephone number, your signature(s), (b) the number of shares or call options purchased and/or put options sold from February 9, 2007 through August 6, 2007, (c) the reasons you object to the Settlement, (d) copies of any papers, briefs, or other documents upon which the objection is based, and also (e) advise the Court if you intend to appear at the Settlement Fairness Hearing, and if you will be represented by counsel, the names and address of your attorneys Please send your objections to the Settlement to the following: Court: Clerk of the Court United States District Court Northern District of California 450 Golden Gate Avenue San Francisco, CA 94102 Plaintiff's Lead Counsel: Richard W. Cohen Barbara J. Hart David C. Harrison Lowey Dannenberg Cohen & Hart, P.C. 1 North Broadway, Suite 509 White Plains, NY 10601-2310 Tel.: [phone] [e-mail] Counsel for Defendants: Michael Rugen Sidley Austin LLP 555 California Street San Francisco, CA 94104 Tel.: [phone]

15
{2031 / NOT / 00093471.DOC v1}

22.

What's the difference between objecting and excluding?

Objecting is simply telling the Court that you don't like something about the Settlement, the Plan of Allocation, or the Application for Attorneys' Fees and Reimbursement of Expenses. Excluding yourself is telling the Court that you don't want to be part of the Settlement Class.

IF YOU DO NOTHING
23. What happens if I do nothing at all?

If you do nothing, you'll get no money from this Settlement. You must file a Proof of Claim and Release form to be eligible to receive anything from the Settlement. Also, unless you exclude yourself, you will be bound by the judgment and will have released the Released Claims against the Released Persons. This means you won't be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against the Defendants relating to the Released Claims.

OBTAINING MORE INFORMATION
24. Are there more details about the Settlement?

This Notice summarizes the most important aspects of the proposed Settlement, but it is not a complete description of the Settlement. You can get a copy of the Stipulation by writing to David C. Harrison, Esq., Lowey Dannenberg Cohen & Hart, P.C., 1 North Broadway, Suite 509, White Plains, NY 10601-2310, or e-mailing him at [e-mail]. You can also call the Claims Administrator toll-free at [insert number], or contact it by mail or through its website at the address listed below in item no. 25 to find answers to common questions about the Settlement and obtain information about the status of the Settlement approval process. You can also review a copy of the entire Settlement Agreement and other documents filed in the Action during normal business hours at the office of the Clerk of the Court, United States Courthouse, Northern District of California, 450 Golden Gate Avenue, San Francisco, CA 94102 (refer to case No. 07-04073). PLEASE DO NOT CALL THE COURT OR THE CLERK'S OFFICE ABOUT THIS SETTLEMENT.

16
{2031 / NOT / 00093471.DOC v1}

SPECIAL NOTICE TO NOMINEES
25. Special Notice to Banks, Trustees, Brokerage Firms or Other Nominees

If you hold publicly traded Luminent securities or call options purchased or put options sold during the Settlement Class Period as nominee for a beneficial owner, the Court has directed that within ten (10) days after you receive this Notice, you must either: (1) send a copy of this Notice and the Proof of Claim by first class mail to all such Persons; or (2) provide a list of the names and addresses of such Persons to the Claims Administrator: Luminent Securities Litigation c/o Complete Claim Solutions, LLC P. O. Box __________ Palm Beach Gardens, FL 33416 Toll-Free Phone: 877-_____________ E-Mail: [e-mail]. If you choose to mail the Notice and Proof of Claim and Release form yourself, you may obtain from the Claims Administrator (without cost to you) as many additional copies of these documents as you will need to complete the mailing. Regardless of whether you choose to complete the mailing yourself or elect to have the mailing performed for you, you may obtain reimbursement for, or advancement of, reasonable costs actually incurred or expected to be incurred in connection with forwarding the Notice and Proof of Claim and which would not have been incurred but for the obligation to forward the Notice and Proof of Claim, upon submission of appropriate documentation to the Claims Administrator.

UNDERSTANDING YOUR PAYMENT B THE PLAN OF ALLOCATION
Please note that the approval of the Settlement is separate from and not conditioned on the Court's approval of the Plan of Allocation. The $8,000,000 Settlement Fund, less all taxes, approved costs, fees, and expenses (the "Distribution Amount"), shall be distributed to Class Members (or the representative of such Class Members, including, without limitation, agents, administrators, executors, heirs, predecessors, successors, affiliates (as defined in 17 C.F.R. Part 210.1-02.b) and assigns) who submit a Proof of Claim in such form and manner, and within such time, as the Court shall prescribe that are allowed by the Court ("Authorized Claimants"). The following proposed Plan of Allocation reflects the contention of the Settlement Class that because of misrepresentations and omissions about Luminent's financial condition and prospects, the prices of Luminent stock and options were inflated artificially during the Settlement Class Period (February 9, 2007 through August 6, 2007). Lead Plaintiff further contends that the decrease in the prices of publicly traded Luminent securities resulted from disclosures of facts exposing Defendants' prior misstatements and omissions.

17
{2031 / NOT / 00093471.DOC v1}

The Court has not made any finding that the Settling Defendants are liable to the Class or that the Class has suffered any compensable damages, nor has the Court made any finding as to the measure of damages. The Claims Administrator shall determine each Authorized Claimant's pro rata share of the Distribution Amount based upon each Authorized Claimant's ARecognized Claim@ from transactions on publicly traded Luminent securities during the entire Class Period. The Recognized Claim formulas set forth below are not intended to be an estimate of the amount that a Class Member might have been able to recover after a trial; nor is the Recognized Claim an estimate of the amount that will be paid to Authorized Claimants pursuant to the Settlement. The Recognized Claim formulas are the basis upon which the Distribution Amount will be proportionately allocated to the Authorized