Prime Trust Action Group Unitholder Update No. 11 – 28 November 2011

Administrators’ Report Dated 15 November 2011

As the Administrators’ Report, inclusive of the Remuneration Report and some other documents, is very lengthy, quite detailed in places and runs to some 66 pages, a number of unitholders have asked us to summarise the main findings. With that in mind, we would suggest that the key issues from the Administrators’ Report are as follows:

• The Financial Position of the Trust as at October 2010 (page 17 of Report) shows realisable assets of $114 million versus creditors’ claims of $230 million, a deficit of $116 million

- the Financial Position of the Trust would be substantially improved if the management rights to the retirement villages were returned to the Trust (the figures used in the Report suggest that the valuation of the villages with management rights, notwithstanding that there may be issues with these valuations, may be as much as $238 million higher than the currently estimated realisable values)

- the Financial Position of the Trust appears to fail to allow for the value of villages held in subsidiary companies, even though the full amount of the debt attached to these villages has been included. We have raised this issue with the Administrator and suggested that a consolidated financial position would be more useful to creditors and unitholders alike.

• The Financial Position of APCH (as Responsible Entity in its own right) as at October 2010 (page 15 of Report) shows realisable assets of $5 million versus creditors’ claims of $36 million, a deficit of $31 million.

• The Administrator has indicated his willingness to pursue a legal action against Lend Lease Primelife, the current owner of the Trust’s management rights, in an arrangement that would be funded by Mr Lewski and with Mr Lewski positioning himself to receive a success fee from any recovery. As Mr Lewski is a potential defendant to a number of legal actions contemplated in attempts to recover funds for creditors and unitholders, we remain strongly opposed to such a course of action and have made numerous submissions to the Administrator on this point.

• ASIC remains closely interested in the Trust and in the results of various investigations.

• Unitholders will be allowed to vote as unsecured creditors at the Second Creditors’ Meeting for a total potential voting entitlement of $330 million.

• The Administrators have dropped their Court challenge to the claims submitted by unitholders to the Financial Ombudsman Service and are now awaiting a Determination by FOS.

• The Administrator has issued Letters of Demand to ten former directors of APCH demanding compensation for losses caused by the listing fee, the restructure and sale of the village management rights, the payment of distributions from unrealized capital gains, etc.

• Following the receipt of advice from Senior Counsel, the Administrator expects to issue Court proceedings in relation to the listing fee claim in the near future.

• The Administrator expects that a number of other parties are likely to face legal action, including, but not limited to, Madgwicks Lawyers, Pitcher Partners, Kidder Williams, Balmain Commercial, Rees Partners Pty Ltd, various valuers etc.

Creditors’ Meeting

At the Creditors’ Meeting on 23 November 2011, a number of Resolutions were voted upon. Thanks to the overwhelming support from unitholders, PTAG attended the Creditors’ Meeting armed with more than 2,150 proxies representing a voting entitlement of more than $110 million.

Resolution re Company’s Future

Creditors (including unitholders) voted to place the Trust in liquidation and appoint Mr Stirling Horne and Mr Petr Vrsecky (the current Administrators) as Liquidators.

Resolution re Administrators’ Remuneration

Previously PTAG had indicated that it was likely to oppose the Resolution on Administrators’ Remuneration but that it was prepared to negotiate to see if a reasonable level of fees could be agreed upon. The Resolution which had been circulated sought approval of Administrators’ Fees of $1,212,000 (including GST).

Following discussions between PTAG and the Administrator prior to the Creditors’ Meeting, the following adjustments were negotiated (all figures include GST):

• On 22 November 2011, following discussion of various points, the Administrator agreed to reduce fees by $456,000;
• On 22 November 2011, following our representations, the Administrator acknowledged that fees claimed for the period 1 April to 31 May 2011 of $232,000 (which had been included in the Resolution seeking payment of $1,212,000) had in fact already been paid and would therefore be deducted from the amount sought;
• On 23 November 2011, following further discussion of various points, the Administrator agreed to reduce fees by a further $85,000.

As a result of the above negotiations, the amount sought by the Administrator reduced from $1,212,000 to $439,000, a reduction of $773,000 or 64%.

In view of the very substantial reduction in Administrators’ Remuneration, PTAG decided to vote in favour of the amended Resolution, which was duly carried.

Resolution re Committee of Inspection

It was agreed at the meeting to form a Committee of Inspection.

Resolution re Membership of Committee of Inspection

It was agreed that the following persons be appointed to the Committee of Inspection:

Previously, on the Creditors’ Committee (which has now been disbanded), we had only one representative. With 10 of 13 Committee Members being unitholders and/or PTAG Members, we are now in a very strong position to exert some influence over the liquidation and keep some control over costs in the interests of all unitholders.

Resolution re Liquidators’ Remuneration

There was no discussion of this item and no resolution passed. We expect that this matter will be referred to the Committee of Inspection in due course.

Costs of Administrators’ Legal Advisers

Following discussions between PTAG and the Administrators’ Legal Advisers on 23 November 2011, it was agreed that the fees charged by the latter would be reduced by $189,000 (including GST).

Prime Action Support Group

We continue to build a fighting fund to strengthen the legal claims that can be made against various parties whose acts we believe contributed to the demise of the Trust. To date, we have raised approximately $150,000 but need considerably more to best represent the interests of unitholders. We would like to record our sincere thanks to all those who have contributed to date. For those that have not yet done so, we would encourage you to make a contribution (which we would expect would be tax deductible) as soon as possible. The attached document (“Prime Trust Action Group Request for Contributions”) gives details of payment options.

We suggest that all unitholders consider making a contribution of $100 and we would encourage larger unitholders to consider a larger contribution. We would also suggest that financial advisers consider a contribution of $100 for each client invested in the Trust.

Social Security Entitlements

We have received a number of enquiries from unitholders about the value that should be ascribed to Prime Trust units in statements of assets made for social security purposes. PTAG is not able to give advice about this matter to unitholders but is prepared to express the following view.

Our opinion is that no value needs to be ascribed to the value of any units in Prime Trust for social security purposes unless and until a statement is made by the Liquidator or another person or organization competent to make a relevant statement, quantifying the amount and timing of a return to unitholders. The units in the Trust have been delisted from ASX and are not expected to be re-listed. The units have no realisable value at this time.

At a later date, Lawler Draper Dillon, the Liquidators of Prime Trust might make a statement about the amounts and timing of returns to unitholders arising from the liquidation process. These amounts would include the net proceeds to the Trust of legal actions expected to be mounted against certain persons and organizations whose improper and/or illegal acts contributed to the collapse of the Trust. Such returns could only be made after the satisfaction of claims that rank ahead of returns to unitholders. Unitholders’ statements of assets for social security purposes will need to be revised if and when such a statement is made by the Liquidator or another competent person or organization.

We have sought confirmation of our view from the Federal Minister for Human Services and we will relay the Minister's response in due course.

Thank you for your continued support of the Prime Trust Action Group. A special thank you to everyone who took the time and trouble to complete and return their proxy forms as our strong voting position enabled us to achieve a substantial reduction in costs as outlined above (a total reduction of $962,000 including the reduction in legal costs) and to secure a strong representation on the Committee of Inspection going forward.

Prime Trust Action Group
28 November 2011

Member Unitholder? PTAG Member? Representing
Mr John Beurle Yes Yes
Mr David Byron Macquarie Bank
Mr Matthew Driscoll Yes Yes
Mr Robert Green Yes Yes
Mrs Wendy Hertzog Yes Yes
Mr Neil Killion Yes Yes
Mr Hamish McKinnon Kidder Communities
Mr Leonard Mitcham Yes Yes
Mr Steve O'Reilly Yes Yes
Mr Roger Pratt Yes
Mr Michael Toi Yes Yes
Mr Dennis Turner Brentwood Village
Mr Michael Zimbler Yes Yes
TOTAL 9 10

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