Liquidators’ First Report on the State of Affairs of Taratahi Agricultural Training Centre (Wairarapa) Trust Board (in Liquidation) 8 March 2019 Contents Introduction 2 Statement of Affairs 4 Creditors 5 Proposals for Conducting the Liquidation 6 Creditors' Meeting 7 Estimated Date of Completion of Liquidation 8 Appendix A – Statement of Affairs 9 Appendix B – Schedule of known creditors 10 Appendix C – Creditor Claim Form 38 Appendix D - DIRRI 40 Liquidators First Report Taratahi Agricultural Training Centre (Wairarapa) Trust Board (in Liquidation) 1 Introduction David Ian Ruscoe and Malcolm Russell Moore, of Grant Thornton New Zealand Limited (Grant Thornton), were appointed joint and several Interim Liquidators of the Taratahi Agricultural Training Centre (Wairarapa) Trust Board (in Liquidation) (the “Trust” or “Taratahi”) by the High Count in Wellington on 19 December 2018. Mr Ruscoe and Mr Moore were then appointed Liquidators of the Trust on 5th February 2019 at 10.50am by Order of the High Court. The Liquidators and Grant Thornton are independent of the Trust. The Liquidators’ Declaration of Independence, Relevant Relationships and Indemnities (“DIRRI”) is attached to this report as Appendix D. The Liquidators set out below our first report on the state of the affairs of the Companies as required by section 255(2)(c)(ii)(A) of the Companies Act 1993 (the “Act”). Restrictions This report has been prepared by us in accordance with and for the purpose of section 255 of the Act. It is prepared for the sole purpose of reporting on the state of affairs with respect to the Trust in liquidation and the conduct of the liquidation. This report is not intended for general circulation, nor is it to be reproduced or used for any purpose without the liquidators’ written permission in each specific instance. The liquidators, their employees and agents do not assume any responsibility or liability for any losses occasioned to any party for any reason including as a result of the circulation, publication, reproduction or use of this report contrary to the provisions of this paragraph. The liquidators reserve the right (but will be under no obligation) to review this report and, if considered necessary, to revise the report in light of any information existing at the date of this report which becomes known to them after that date. Details of the Trust Act Taratahi Agricultural Training Centre (Wairarapa) Trust Board was constituted pursuant to s 3(1) of the Taratahi Agricultural Training Centre (Wairarapa) Act 1969. Current Registered Address 529 Cornwall Road, Carterton Date of Interim Liquidation 19 December 2018 Date of Liquidation 5 February 2019 Background Taratahi, a Private Training Establishment (PTE), provided agricultural education to over 2,500 students and employed 250 staff. Taratahi owns and manages 8 farms throughout the country Taratahi faced financial difficulties caused by declining student numbers resulting in a reduction in the funding it received for its educational business. It invested heavily in student support and learning, while it reduced its other operating expenses. However, despite both government funding and profit generated from its farming operations, the cost of educating each student significantly exceeded the cash flow generated. Liquidators First Report Taratahi Agricultural Training Centre (Wairarapa) Trust Board (in Liquidation) 2 Taratahi was placed in Interim Liquidation on Wednesday, 19 December 2019, at the request of its Board of Trustees, by the High Court. The Interim Liquidators role was limited to the protection of the Trust’s assets until the liquidation application was determined. As such the Interim Liquidators operated Taratahi’s farms on a “business as usual basis” to maintain the value of the farming assets and operations and to ensure appropriate animal welfare and health and safety standards were adhered to. With insufficient funding for educational purposes, the decision was made that Taratahi could no longer provide educational activities. All academic and most administrative staff were suspended without pay pending viable proposals being received to either continue to operate the educational side of the Trust or to obtain value for the Trust’s intellectual property and, if possible, to provide employment opportunities for the Trust’s education staff. On 5 February 2019 at 10.50am, by a High Court Order, the Trust was placed into Liquidation and the Interim Liquidation came to an end. Liquidators First Report Taratahi Agricultural Training Centre (Wairarapa) Trust Board (in Liquidation) 3 Statement of Affairs Attached, as at Appendix A, is a statement of the Trusts’ affairs as at the date of liquidation prepared by the Liquidators in accordance with section 255 of the Companies Act 1993. The Liquidators have not carried out an audit of the information that has been provided to them, nor have they subjected the information provided to detailed verification procedures. While they believe the statement, based on the information provided to them, reasonably reflects the position of the Trust, they cannot be held responsible for inaccuracies in the report arising from deficiencies in the information or explanations provided to them. Liquidators First Report Taratahi Agricultural Training Centre (Wairarapa) Trust Board (in Liquidation) 4 Creditors Attached as Appendix B is a full list of names and addresses in accordance with Section 255 (2) (c) (ii) (c) of the Act. Notice to Creditors to Prove Debts or Claims The Liquidators have given notice that on or before the 5 March 2019 any creditors of the Trust are to prove their debts or claims and to establish any priority that their claims may have under Section 312 of the Companies Act 1993, or to be excluded from the benefit of any distribution made before their claims are made, or as the case may be, from objecting to any distribution. If any creditor wishes to make a claim, a Creditor Claim form is attached in Appendix C. Secured Creditors Secured Creditors are detailed in the list of Creditors in Appendix B. Westpac New Zealand Limited has a registered security interest over the Trust in respect of a General Security Agreement dated 22 January 2009. On Liquidation there were 286 specific security financing statements (Purchase Money Security Interests (PMSIs)) registered. The Liquidators have contacted all registered PMSI holders and are liaising with them to determine the amounts due. Preferential Creditors Based on the Trust’s, employee preferential entitlements at the date of Liquidation are estimated at $2,090m. The Trust records indicate that Inland Revenue have a preferential claim in relation to PAYE and GST of $0.655m. Following the sale of sufficient livestock, the Liquidators’ expect that preferential liabilities will be paid in full. Unsecured Creditors The Trusts’ electronic records indicate there are 1,194 unsecured creditor claims totalling $15,863m. Liquidators First Report Taratahi Agricultural Training Centre (Wairarapa) Trust Board (in Liquidation) 5 Proposals for Conducting the Liquidation As discussed earlier, throughout the period of Interim liquidation and to date the liquidators’ have operated Taratahi’s farms on a business as usual basis to maintain the value of the farming operations and ensure that appropriate animal welfare and health and safety standards were adhered to. In respect of this, the Liquidators apointed farm experts to assist them in running Taratahi’s farming operations. While in Interim Liquidation, the Interim Liquidators did not receive a viable proposal to maintain education operations at the Wairarapa or regional Campuses. However, the Interim Liquidators did commence negotiations with the Southern Institute of Technology in relation to operating an education business from the Telford Campus, negotiations are ongoing at the time of issuing this report. The Interim Liquidators engaged certain Taratahi staff to assist them in the collection of assets and the completion of educational filing requirements. The Liquidators are currently obtaining an independent valuation of all remaining plant and equipment and will be commencing a sale program for the various plant and equipment located in centres away from and at the Wairarapa campus. Debtors are being collected and shares will be sold subject to requirements to hold certain shares to continue to operate (such as Fonterra). In relation to the farms, the Liquidators have prepared the Mangarata farm for sale and a marketing campaign has commenced. The Liquidators are looking to sell certain leasehold interests were possible (including stock and plant and equipment) and continue to operate the Home Dairy farm and certain leased properties. The Wairarapa Campus and Home Dairy farm land are subject to the Taratahi Agricultural Training Centre (Wairarapa) Act 1969. Any sale of this property requires the approval of the Minister of Agriculture. The Liquidators are liaising with the Ministry of Primary industries in regard to this. Liquidators First Report Taratahi Agricultural Training Centre (Wairarapa) Trust Board (in Liquidation) 6 Creditors' Meeting It is too early at this stage to consider holding a meeting as the information relevant to answering the queries of creditors is still being compiled. Once sufficient information is available, and the state of the Trust’s affairs becomes clearer, the Liquidators will reconsider whether convening a meeting of creditors is appropriate. Accordingly, under section 245 of the Companies Act 1993 the Liquidators consider at this stage that no such meeting will be convened. A meeting will not be called unless within 10 working days after receiving this notice, a creditor gives notice in writing to the liquidators requiring a meeting to be called. In accordance with section 314 of the Companies Act 1993 a creditor or a shareholder may request the liquidators to call a meeting of the creditors or of the shareholders at any time during the course of the liquidation: a To vote on a proposal that a Liquidation Committee be appointed to act with the Liquidators; and b If it is decided to have a Committee, to choose the members of the Committee.