+++++++++++++++++++++++++ Tuart provides the following information to the market further to its announcement that it is negotiating a debt facility.
On Friday, 26 July 2002 Tuart obtained formal approval from financiers which subject to documentation is for a total borrowing of $4.75 million for Southern Wine Corporation and the Fernvale Unit Trust.
Drawdown of the first $950,000 was intended to be utilised to re-finance the existing Commonwealth Bank Secured Mortgage over the vineyard at Preston Vale owned by the Fernvale Unit Trust.
The balance of the funds will be borrowed upon approval by the unit holders of the Fernvale Unit Trust. In this regard a meeting will be convened as soon as practicable to seek that consent.
As previously indicated however a condition of the loan will require Southern Wine Corporation Ltd to compromise the outstanding tax liability that arises in respect of the period prior to the acquisition of control of Southern Wine by Tuart.
On Friday, 26 July 2002, Southern Wine Corporation Ltd resolved to convene a meeting of the growers of the SWC Managed Investment Scheme. At this meeting growers will be asked to vote on a range of proposals namely:
(a) whether the growers individually contribute $1,800 per growers unit (raising a total of $2 million) to fund the shortfall in management expenses likely to occur in the current financial year; or
(b) the growers resolve to authorise Southern Wine to borrow the funds on behalf of the growers secured against the growers interest in the scheme to meet the ongoing expenses; or
(c) whether the growers vote to terminate the managed investment scheme.
In the event that no resolution is passed by the growers, South Wine Corporation has resolved to initiate procedures underthe Corporations Act to terminate the managed investment scheme. Termination of the scheme will not affect the ownership of the land upon which the vineyard is situated. Southern Wine will continue to own approximately 60% of the units in the Fernvale Unit Trust with the balance being owned by growers.
A copy of Southern Wine Corporation's letter to each of the growers is annexed to each announcement.
Further, since the date of the last announcement the Australian Securities and Investments Commission had indicated that it holds concerns as to the compliance by Southern Wine Corporation Ltd with its security dealers' licence and unless Tuart addresses those concerns will apply for the appointment of a provisional liquidator. An application by ASIC seeking an order in those terms has been lodged by ASIC in the Supreme Court.
To resolve ASIC's concerns and to formalise a compromise with the ATO the directors of Tuart required the directors of Southern Wine Corporation Ltd to take steps today to appoint Mr Mark Reilly and Mr Glen Featherby as joint and several voluntary administrators of Southern Wine.
From initial discussions with the administrators of Southern Wine Tuart believes it is still the intention of the administrators to proceed with the meeting of growers described above.
During this period of time:
1 Tuart will take steps to attempt to finalise the leading. We are uncertain as to the impact the appointment of an administrator will have on the finance approval.
2 The lending proposal will form the basis for a Deed of Company Arrangement to be put to creditors on the basis that upon compromising of various debts the company's administration can be terminated and returned to the control of Tuart.
3 In the meantime if growers vote to provide additional equity funds to finance the shortfall in management expenses then the financial position of Southern Wine will be improved considerably. Alternatively, if the growers vote to terminate the scheme then the ownership structure of the vineyard will be simplified and this will enable Tuart to more readily deal with its beneficial interest in the Vineyard.
In summary, the board of Tuart believes that the step of placing Southern Wine in administration is a necessary step to resolve the historic debts inherited by the company when it took over the Nelson Ridge Croup.
Tuart hopes that the financepackage it secured can be maintained.
The process of administration should ensure that the funds raised from lenders are applied for the current economic interests of the growers and Southern Wine (as a subsidiary of Tuart) and are not utilised in paying out historic debts.
M Bennett CHAIRMAN
MORE TO FOLLOW
TUART RESOURCES LIMITED 2002-07-29 ASX-SIGNAL-G
HOMEX - Perth
+++++++++++++++++++++++++ CHAIRMAN'S LETTER
MEETING OF MEMBERS OF SWC MIS
I write to you in my capacity as chairman of Southern Wine Corporation Ltd, the Responsible Entity of the SWC MIS and enclose a Notice of Meeting in relation to a meeting of scheme members to be held on Tuesday, 20 August 2002.
The SWC MIS is currently entering its fourth year. To date the Preston Vale vineyard property has been established to world-class standards and is in excellent operational condition. April 2002 marked the completion of the first significant growing year with over 1,000 tonnes of grapes grown.
Although the 2002 growing season produced a harvest yield consistent with prospectus forecasts, the receipts for grape sales were significantly affected by the major over supply conditions in Australia for red grapes. The white grape varieties were readily sold for good prices but the whites only represent approximately 20%-30% of the total crop. The Responsible Entity managed to secure sales for a significant proportion of its red grapes, but unfortunately the failure of one buyer to take delivery of a significant quantity of grapes meant a large quantity of grapes could not be harvested. In addition, prices for those red grapes sold were lower than prices for comparable produce in recent years.
The downturn in the red grape market is a serious issue for the Scheme. The Constitution of the Scheme provides that Management Fees for Year 4 onwards are to be in the first instance recouped by the Responsible Entity from grape sales. There is however a shortfall between grape sales and Management Fees of approximately $2 million for the 2002/2003 financial year, representing $1,800 per Licensed Area.
The shortfall has been exacerbated by the fact that a small but significant number of members of the SWC MIS have defaulted in the payment of prior year Licence and Management Fees and repayment of loans taken out to finance their investment in the Project. These defaults have meant that the Responsible Entity has been left to fund the prior year shortfall in receipts from its own resources.
Under the terms of the Licence and Management Agreement (forming part of the Scheme Constitution), where a shortfall occurs the Responsible Entity may request members to make additional contributions, subject to approval at a meeting of members.
If the resolution to require an additional contribution is passed all members are bound to contribute and will be invoiced accordingly. In the event that individual members do not pay their contribution, the Responsible Entity has a number of choices available including terminating the defaulting member's interest it) the SWC MIS.
If members do not wish to make additional contributions to fund ongoing management of the vineyard they have essentially two choices.
Firstly, they can resolve for the SWC MIS to be wound up. In accordance with the Constitution, winding up would involve the appointment of a registered company liquidator essentially to sell the assets of the scheme, pay off any debts, and return the surplus (if any) to members. The principal asset of the SWC MIS is the lease of the Preston Vale vineyard from the Fernvale Unit Trust MIS, which lease runs to 30 June 2019. The principal liability of the SWC MIS is the money currently owed to the Responsible Entity for unpaid Management Fees, which the Responsible Entity has a right to recoup from any sale proceeds of the assets of the SWC MIS. In the event of winding up of the SWC MIS, members will still retain their membership of the Fernvale Unit Trust MIS, which owns the land on which the Preston Vale vineyard is planted.
The other option available is resolve to authorise the Responsible Entity to seek to borrow funds secured against the future Project Income, failing which the Scheme will be wound up. The Responsible Entity has been for some time seeking to borrow funds in this manner and has received at least two proposals, which have progressed to an advanced stage. Whilst the Responsible Entity is hopeful that one of these proposals will come to fruition by the end of September 2002 given the current market volatilities this is by no means guaranteed. The borrowing of funds will almost certainly also require the Fernvaie unit Trust to agree to a mortgage of the vineyard land. To this end, once any borrowing proposal is finalised, the Responsible Entity will convene a meeting of the members of the Fernvale Unit Trust to consent to this security. Full details of any proposal will be included in any Notice of Meeting sent to members of the Fernvale Unit Trust.
It is important to note that ifmembers resolve to pay the additional Management Fees, this does not preclude the Responsible Entity also borrowing additional funds.
In addition to the circumstances outlined above (namely the default in payment of management fees by a small but significant number of growers, the need for the Responsible Entity to fund the operations of the scheme from its own funds and the reduced receipt from the sale of grapes), the Responsible Entity has received a significant assessment for tax which raises a real issue as to the solvency of the Responsible Entity.
For that reason the directors of the Responsible Entity intend to appoint a voluntary administrator (Mr John Carrello of PKF Chartered Accountants) to administer the affairs of the Responsible Entity pending the holding of the Meeting the subject of the enclosed Notice.
During the period of voluntary administration the Responsible Entity will also be seeking to compromise its principal debts and particularly the assessment issue by the Australian Tax Office.
In summary, members of the SWC MIS are essentially being given the choice to:
1. contribute more funds to enable the Scheme to continue operating for another year and therefore protecting the investment they have already made in the Scheme;
2. elect for the Scheme to be wound up with the possibility (but again without any guarantee) that members will receive a dividend in the winding up; or
3. rely solelyon the possibility of the Responsible Entity to borrow funds to avoid the winding up of the Scheme.
M Bennett CHAIRMAN
TUART RESOURCES LIMITED 2002-07-29 ASX-SIGNAL-G
HOMEX - Perth
+++++++++++++++++++++++++ NOTICE OF MEETING OF SCHEME MEMBERS
Notice is hereby given that a Meeting of the members of the SWC MIS will be held at 1st Floor, BGC Centre, 28 The Esplanade, Perth, Western Australia on Tuesday, 20 August 2002 at 10.00am (WST).
AGENDA
The meeting is to consider and, if thought fit, to pass one only of the following three resolutions for the purpose of Clause 12.6 of the Licence and Management Agreement entered into by each member of the SWC MIS and forming part of the Constitution of the SWC MIS;
1. That the members be required to make additional contributions pursuant to Clause 12.1(e) of the Licence and Management Agreement in the amount of $1,800 per Licensed Area, to make up the shortfall in Management Fees for the 2002/2003 financial year.
OR
2. That the SWC MIS bewound up in accordance with its Constitution.
OR
3. That the Responsible Entity seek to borrow funds secured against the future Project Income, or if the Responsible Entity is unable to borrow such funds on or before 30 September 2002 on terms considered by the Responsible Entity to be reasonable in the interests of the members the SWC MIS be wound up in accordance with its Constitution.
R Kestel COMPANY SECRETARY OF THE RESPONSIBLE ENTITY
