Prime Trust Action Group Unitholder Update No. 20 – 21 November 2012

ASIC Proceedings

Unitholders will recall that in August 2012 ASIC commenced civil penalty proceedings in the Federal Court seeking disqualification orders and pecuniary penalties against certain former APCH Directors and a declaration that APCH breached its statutory duties. We are currently expecting that the Court proceedings in relation to this matter will commence in April/May 2013.

Listing Fee Compensation Proceedings

The Listing Fee Compensation Proceedings commenced by one of the Receivers, seeking the return of the $33m listing fee plus interest, are expected to be delayed until after the ASIC Proceedings have been determined.

Public Examinations

A second round of Public Examinations was conducted in the Supreme Court of Victoria during October 2012 and the following parties were summoned to provide evidence:

Mr William Lewski, former APCH Managing Director
Mrs Roslyn Lewski, wife of Mr William Lewski, and director of various entities associated with Mr Lewski
Dr Michael Wooldridge, former APCH Chairman
Mr Peter Clarke, former APCH Director
Mr Philip Powell, former APCH Managing Director and adviser to APCH through Kidder Williams Ltd
Mr Mark Butler, former APCH Director
Mr Kim Jaques, former APCH Director
Ms Lorna Gelbert, Partner of Madgwicks (advisers to APCH and Mr Lewski)
Mr Rick Goldberg, Partner of Madgwicks (advisers to APCH and Mr Lewski)
Mr John Brazzale, Partner of Pitcher Partners (advisers to APCH and Mr Lewski)
Mr Peter Gillies, Manager at Pitcher Partners (advisers to APCH and Mr Lewski)

The Examinations focused on the acquisition of the village management rights (a Trust asset) for no consideration by interests associated with Mr Lewski and their subsequent on-sale for $60m. Many matters came to light during the course of the Examinations, including the following:

• At least one former APCH Director accepted under examination that, at the time the management rights were transferred to Mr Lewski’s Retirement Guide Pty Ltd for no consideration, the rights were valuable;
• Several former APCH Directors gave evidence that the villages had to be managed by an entity other than the Trust to enable unitholders to continue receiving tax advantaged income. However, representatives from Pitcher Partners gave evidence that it was possible for a stapling structure to be used as early as 2004 so that the unitholders would be able to benefit from the financial gains arising from the management rights and still receive the tax benefits;
• Several former directors gave evidence that no independent advice was sought, or obtained, before APCH committed the Trust to the restructure of the management rights;
• A number of Directors gave evidence that, when valuations obtained by APCH following the restructure demonstrated that the values of the villages had declined substantially as a result of the loss of the management rights, that they did not consider what had caused the decline;
• Several of the agreements to manage retirement villages were only oral in nature and capable of being terminated at any time. Notwithstanding this, it appears that Mr Lewski’s Retirement Guide was able to sell these rights to a third party with a 25 year tenure;
• A number of the Directors gave evidence that no formal arrangements were made to put the management agreements out to tender, or to seek unitholder approval as required by the Corporations Act for providing any financial benefit to a related party;
• Several Directors failed to recall any discussion at Board Meetings concerning the granting of management agreements to Mr Lewski’s company;
• Evidence suggested on occasions a Director with an interest in matters being considered by the Board remained present during the discussion and put a resolution to the Board for approval;
• Evidence given by some APCH Directors differed from or sought to alter evidence they had given at the Public Examinations conducted in August 2011;
• Directors repeatedly stated that they relied upon advisers, and advisers repeatedly stated that they relied upon instructions from the Directors.

We are currently reviewing all of the material that came to light during the Public Examinations and determining which elements may be able to be incorporated into our unitholder strategy. As our website and these updates are known to be monitored by various parties, we are unable to provide full details at present but can assure unitholders that we will make appropriate announcements as and when we are able. In developing this unitholder strategy, we have incurred a substantial amount of legal costs over the course of 2012 and intend to provide an update of our funds and expenditure in our next Unitholder Update.

Media Coverage

There was significant media coverage of the Public Examinations and a selection of articles is available by clicking on the following links:

Collapsed Company Board 'Ignored Conflict of Interest'

Clarke Overlooked Lewski Deals

Lewski Gives Prime Admissions

Thank you once again for your continued support of the Prime Trust Action Group.

Prime Trust Action Group
www.primetrustactiongroup.com
21 November 2012

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