TOWER Appoint Receivers To Apple Fields Subsidiary

Media statement
19 August 1999
For immediate release

TOWER Trust appoints Receivers to Apple Fields' Subsidiaries

TOWER Trust, trustee of the Rural Super Bonds Superannuation Scheme, today appointed either Receivers or a property manager to 68 Apple Fields' subsidiary companies. These companies each own a share of the eight properties over which the scheme has security.

TOWER Trust Managing Director, Jim Minto, said an agent to manage the sales of all the properties, near Christchurch, had also been appointed.

"TOWER Trust has taken this action to safeguard the interests of the 1300 members of the scheme who are owed nearly $13 million. We want to ensure the value of the members' investments is protected as far as possible," he said.

"The property-owning Apple Fields' subsidiaries have defaulted, since July 1998, on their obligation to pay interest to the trustee on loans made by the scheme. In addition, the companies have not repaid any of the loans, despite our demand for payment last year, and Apple Fields has not made the payments we requested under its guarantee to the scheme."

Mr Minto said TOWER Trust had tried to work constructively with Apple Fields to sell the properties, but had been thwarted by the company's refusal to co-operate and to provide necessary and timely information.

"The process of working with Apple Fields to complete the sales has become increasingly difficult, expensive and risky for the scheme.

"We have achieved some sales but we have had to decline others because of serious reservations about certain aspects of the offers. These include arrangements to delay settlement, unconventional marketing, payments to other parties and payments which are conditional on rezoning land further down the track," he said.

"Such sales are not in our members' best interests in terms of value, timeliness and exposure to on-going risk."

Mr Minto said Apple Fields' refusal to co-operate with TOWER Trust over the sales programme had resulted in an escalation of costs and jeopardised progress. Apple Fields then unsuccessfully sued the trustee, leading to lengthy delays and additional need for professional advisers.

"This is a most unsatisfactory situation, and has led us inevitably to the conclusion that the interests of members and those of Apple Fields are incompatible," he said.

"We are very satisfied with the results of all the court cases to date and we are confident that today's actions will result in a simplified, more cost-effective sales process which will ensure maximum repayment to members in the minimum of time, with minimum risk.

"As a result of our actions, it is possible some prospective buyers may expect the scheme's properties to be available at bargain prices. This is not so. We are committed to an orderly, transparent and fair sales process.

"We are also advised that potential buyers are already aware that Apple Fields may be in financial difficulties and therefore anxious to sell its remaining properties. In these circumstances, TOWER Trust's action will be neutral or even beneficial for sale prices."

The Rural Super Bonds Superannuation Scheme was founded and promoted by Apple Fields in 1992. The assets were largely loans secured by registered first mortgages over land, and charges over farming properties owned by Apple Fields Ltd and Dairy Brands Ltd and companies associated with them. Dairy Brands Ltd has since repaid all loans.

Last November, TOWER Trust (formerly known as The Trustees Executors and Agency Company of New Zealand) resolved to wind up the scheme. So far, members have received some 55 cents in the dollar on their investment.

"The trustee has embarked on this action at this time to ensure all members in the scheme receive the maximum amount possible from the sale of assets, in the shortest possible timeframe, with the least risk," Mr Minto said.

Ends

For further information, please contact:
Jim Minto
Managing Director
TOWER Trust
Telephone: 0-4-499 0995
021-426 249

Attachment: Letter to investors

19 August 1999

Dear Investor

Re: Rural Super Bonds Superannuation Scheme

We are writing to you today to provide more information on the Rural Super Bonds Superannuation Scheme and to explain further how we, as the trustee of the scheme, are working as quickly and effectively as we can to realise the scheme's assets and to repay your funds.

As you are aware, the trustee's role is to protect the interests of all investors in the scheme, spreading repayments, as they become available from the sale of assets, equitably among all members in accordance with the trust deed.

Today's developments

Today, we took two specific steps which are intended to maximise or improve the repayment prospects of bondholders. Under the legal powers contained in the security documents:

1. We have appointed Receivers or a property manager as appropriate to 68 Apple Fields' subsidiary companies which own a share of the properties over which the scheme has security; and

2. We have appointed an agent to manage the sales of all eight properties in which the scheme has an interest.

We have embarked on this action at this time to ensure all bondholders in the scheme receive the maximum amount possible from the sale of assets, in the shortest possible timeframe, with the least risk. We are endeavouring to protect the value of your investment.

The background to events

You will recall that the decision to wind up the scheme was made last November. A significant reason for this was because all the land-owning companies have been in default of their obligation to pay interest to the trustee, since July 1998. In addition, the companies have not repaid the loans, even though they were due before the end of last year, and Apple Fields has not made the payments we requested under its guarantee to the scheme.

Our original plan was to work with Apple Fields to achieve the orderly sale of properties in which the scheme has an interest, so that Apple Fields could then repay the loans.

As part of that process, we retained independent advisers to monitor Apple Fields' progress, to ensure the sales programme was given the importance and urgency it deserves and to ensure the best possible recovery for all scheme members.

We have paid out 55 cents in the dollar to all investors so far but some of the remaining assets may be more difficult to sell. We want the best possible sales outcome for these assets.

Recent developments

Unfortunately, in recent months, the process of working with Apple Fields to complete the sale of the properties has become increasingly difficult, expensive and risky for the scheme.

Apple Fields has presented the trustee with offers for the sale of all or part of the properties and many of the offers have been accepted. Others we have declined because of serious reservations about aspects of the offers, such as payments to parties other than the scheme, unconventional marketing, delayed settlement, and payments conditional on rezoning the land to be sold.

We have declined these offers on the basis that sales on such terms would not be in investors' best interests with regard to value, timeliness and exposure to on-going risk.

In addition, working with Apple Fields has significantly increased the costs of winding up the scheme.

For instance, Apple Fields' refusal to co-operate with us in the property sales process has jeopardised progress and escalated costs. Further, Apple Fields has unsuccessfully sued the trustee over actions we have taken to recover your investment. We are very satisfied with the results of all the court cases and while the outcome in each case has confirmed our ability to control the wind up process, the court action has resulted in delays and more costs. Apple Fields has lodged appeals against all decisions which, although unlikely to be successful, will increase costs further.

It has now become clear that the interests of investors and those of Apple Fields are not compatible and we have therefore decided to take the following steps.

Details of our actions

We have appointed Bruce Irvine and Bruce McAlister of Deloitte Touche Tohmatsu, Christchurch, as Receivers or the property manager of all the property owning companies over which the scheme holds security. This means Apple Fields will no longer have a role in the sale of the scheme properties.

We have also appointed PricewaterhouseCoopers as our agent to manage the sale of all eight properties.

We want to assure you that the sale process will be conducted in an orderly manner. While we anticipate it may take some time to complete the sales, the repayment of the loans and the winding up of the scheme, our actions will ensure that bondholders' best interests are protected and risks to your investment are minimised.

As a result of today's actions, it is possible that some prospective buyers may expect the scheme properties to be available at bargain prices. However, we are advised that potential buyers are already aware that Apple Fields may be in a difficult financial position and therefore keen to sell its properties. In these circumstances, our action will be neutral or even beneficial for sale prices.

The scheme may have to pay some of the Receivers' costs. However, we believe this will ultimately be cheaper than continuing to work with Apple Fields.

The benefits of the trustee's actions

We have taken this course of action today because we are confident that it will:

· Greatly simplify the sales process.

· Reduce costs.

· Ensure the maximum value from each sale is returned to the scheme for payment to bondholders.

· Ensure the scheme's properties are marketed in a fair, open and transparent manner.

· Offer you the best opportunities of maximum repayments in the minimum of time, with minimum risk.

Conclusion

We will continue to act in the best interests of all investors in the scheme.

Our actions may not be well received by Apple Fields' management and shareholders. However, our role is to protect your interests and the interests of all other scheme members.

We will continue to keep you informed.

If you have any questions, please phone Philip Dyer or Glenn Clark on 0-4-495-0995.

Yours sincerely
TOWER TRUST

Jim Minto
MANAGING DIRECTOR

ENDS

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