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Report on aspects of the initial public offering of Vertex Group Holdings Limited in 2002

Liability Provisions in the Securities Act 1978

1. The Securities Act imposes criminal and civil liability for breaches of the Act and for use of offer documents containing untrue statements.
2. The Securities Act provides for both criminal and civil liability where a registered prospectus or advertisement (including and investment statement) contains an "untrue statement". The liability provisions apply to the issuer of the securities and/or its directors.
3. For these purposes an "untrue statement" includes one that is misleading:
   1. In the form and context in which it is includes; or
   2. By reason of the omission of a particular that is material to the statement in the forma and context in which it is included.
4. Under section 56 of the securities act, every person who has signed the registe4red prospectus as a Director of the issue (or who has authorised someone else to sign for him or her) may be liable to compensate anyone who subscribes for securities on the faith of a registered prospectus which contains any untrue statement for any loss or damage sustained by reason of the untrue statement.
5. Under section 56 of the Securities Act, every person who has signed the registered prospectus as a director of the issuer (or who has authorised someone else to sign for him or her) may be liable to compensate anyone who subscribes for securities on the faith of a registered prospectus which contains any untrue statement for any loss or damage sustained by reason of the untrue statement.
6. Section 58 of the Securities Act states that if a registered prospectus containing an untrue statement is distributed then any person who has signed the registered prospectus as a director of the issuer (or who has authorised someone else to sign for him or her) may be liable to be fined or imprisoned.
7. Under section 59 of the Securities At, where an offer of securities is made to the publisher a registered prospectus is distributed, or a security allotted, in contravention of the Securities Act, the issuer and every person who has authorised himself or herself to be named In the registered prospectus as a director of the issuer (and who is named) may be liable.
8. There are certain defences available to liability under each of these provisions. Principally, a person will not be liable under sections 56 or 58 in respect for any untrue statement if that person proves that he or she had reasonable grounds to believe, and did believe, that the statement was true.