WESTERN AUSTRALIA
XANADU WINES LIMITED
ACN 086 435 136
PROSPECTUS FOR THE PLACEMENT OF
4,111,039 SHARES AT 35 CENTS PER SHARE
CORPORATE DIRECTORY
Directors
Ross Norgard
Andrew Moore
Conor Lagan
Ken Richards
Trevor Clohessy
William Crappsley
Share Registry
Chairman
Managing Director
Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Computershare Investor Services Pty Limited
Level 2, 45 St Georges Terrace
Perth WA 6000
Telephone: (08) 9323 2000
Facsimile: (08) 9323 2033
Auditors
Company Secretary
Jay Stephenson
Hall Chadwick
140 St Georges Terrace
Perth WA 6000
Registered Office
C/- Norgard Clohessy
10 Ord Street
West Perth WA 6005
Corporate Advisors
Norvest Corporate Pty Ltd
10 Ord Street
West Perth WA 6005
Business Office
16 Ord Street
West Perth WA 6005
Telephone: (08) 9322 8533
Facsimile: (08) 9322 4850
Email: [email protected]
Solicitors
Freehills
140 St Georges Terrace
Perth WA 6000
Winery
Boodjidup Road
Margaret River WA 6285
IMPORTANT NOTICES
This Prospectus is dated 8 March 2001 and will expire 4 months later on 7 July 2001. No Placement
Shares will be issued on the basis of this Prospectus later than 7 July 2001. A copy of this Prospectus
was lodged with ASIC on 8 March 2001. Neither ASIC nor ASX takes any responsibility for the
contents of this Prospectus.
Xanadu will apply within 7 days after the date of this Prospectus for admission to the official list of
ASX and for the Placement Shares offered by this Prospectus, together with all other Shares proposed
to be on issue at the time of listing, to be granted official quotation on ASX. The fact that ASX may
admit Xanadu to its official list should not be taken in any way as an indication of the merits of Xanadu
or the Placement Shares offered pursuant to this Prospectus.
This Prospectus does not constitute a public offer of Shares. The Placement under this Prospectus will
be offered to the specific parties identified in Sections 2.1 and 2.2.
1
SECTION
CONTENTS
PAGE
Corporate Directory & Important Notices
1
Xanadu Background
3
1.
Company Highlights
4
2.
Details of the Placement
8
3.
Strategic View of the Future
11
4.
Industry Background
19
5.
Directors and Management
23
6.
Financial Information
27
7.
Business and Investment Risks
34
8.
Material Contracts
36
9.
Additional Information
45
10.
Directors’ Statement
53
11.
Definitions
54
12.
Application Form and Instructions
55
Annexure A
Annexure B
Annexure C
Independent Review Report for the Proforma Balance Sheet
Reviewed Half-year Accounts for the six months ended 31 December 2000
Audited Accounts for the year ended 30 June 2000
KEY DATES
These dates are indicative only. Xanadu reserves the right to vary these dates.
Lodge Prospectus with ASIC
8 March 2001
Lodge Listing Application with ASX
8 March 2001
Initial Exposure Period Expires
15 March 2001
Placement Opens
19 March 2001
Placement Closes/Allotment of Placement Shares
20 March 2001
Despatch Holding Statements
20 March 2001
Commencement of trading of Shares on ASX
22 March 2001
2
XANADU BACKGROUND
When Dr John Lagan and his wife, Dr Eithne
Sheridan, purchased the land that now comprises the
Xanadu vineyards and winery, they did so because it
was regarded as having the most suitable soils for
the production of quality table wines, as well as
having highly desirable north-facing slopes.
MARGARET RIVER
WESTERN AUSTRALIA
Thirty years ago the Margaret River area was only
just being considered as potentially one of the finest
wine producing regions in the world and Dr Lagan
and Dr Sheridan were encouraged and inspired to
develop a vineyard by Dr Tom Cullity who had just
completed his first vine plantings at Vasse Felix.
Their vision then was to produce quality wines that,
in time, the Margaret River region and Australia
would be proud of.
They never lost sight of this vision despite the
difficulties associated with founding a vineyard and
winery in a region that had traditionally relied on the
timber, beef and dairy industries for its existence.
The fact that the wines carrying the Xanadu label are
now recognised Australia wide and internationally
for their high quality is a source of great pride to the
Lagan family.
So, too, is the knowledge that the Xanadu winery has
played some part in ensuring the Margaret River area
has fulfilled its dream of 30 years ago by becoming
one of the world’s finest wine producing regions.
With that pride came the recognition that, if Xanadu
was to develop to its full potential, an expansion
program significantly beyond the resources of a
family owned and operated winery would be
required.
The family, therefore, accepted a proposal by
Norgard Clohessy Equity Limited to expand the
capital base allowing further development of the
vineyards and winery while retaining ongoing
involvement.
The ownership restructure in 1999 and substantial
injections of capital have enabled Xanadu to
significantly increase the capacity of the winery,
building upon the reputation of producing high
quality wines for which the Xanadu winery is world
renowned.
3
SECTION 1 – COMPANY HIGHLIGHTS
The information contained in this section is not intended to be comprehensive and should be read in
conjunction with the full text of this Prospectus.
1.1
THE COMPANY
Xanadu is a public company with over 800 shareholders and will have approximately
87 million Shares on issue following the successful completion of the Placement and the exercise of the
Options. The major shareholder with a holding of approximately 27% is Growth Capital Australia Ltd
(“GCA”), a registered pooled development fund with investments in various industries including wine,
agribusiness and personnel recruitment. The original founding Lagan family will retain a shareholding
interest of approximately 14%.
1.2
THE WINERY
The Xanadu winery is located in the world-renowned Margaret River region and has forged an
international reputation as one of the pre-eminent wine producers of Margaret River. The dress circle
location of the winery has meant that Xanadu is extremely well located for tourists, enabling it to
capitalise on retail sales at the cellar door. A significant program to refurbish and expand the winery is
being pursued. The winery capacity has already expanded to process approximately 1,000 tonnes of
fruit, more than three times its original capacity. Further expansion is planned taking full advantage of
economies of scale.
1.3
THE WINES
In the twenty plus years since the winery was founded, the Xanadu label has been a consistent winner
of awards. This success has culminated in the awarding to Xanadu of Australia’s most prestigious
George Mackey Memorial Trophy on 6 December 2000. This achievement was won for Xanadu’s
1998 Chardonnay against almost 8,000 wines. Xanadu is also recognised as the producer of one of the
top twenty Cabernet Sauvignons in Australia, one of the top twenty Semillons in Australia, and its 1997
Chardonnay was named in the top one hundred wines at the Sydney International Wine Competition.
International awards have included two gold medals at the 1999 Intervin International Wine Show in
New York for the 1996 Cabernet Reserve and the 1997 Cabernet Sauvignon. This has been followed
most recently at the 2000 Intervin International Wine Show in New York with five silver and 2 bronze
medals for Xanadu.
1.4
THE MARKET
Xanadu has a strong network of national accounts and existing export channels into Europe, Asia, and
Canada. International opportunities have been enhanced with the distribution arrangements reached
with Private Liquor Brands Ltd, one of the United Kingdom’s largest distributors of Australian wine.
The chart below shows the approximate breakdown of case sales as at 31 December 2000 between the
key distribution channels.
In addition, the brand management contract with Grolsch Breweries, Holland, has also provided the
Company with Grolsch contacts worldwide.
Case Distribution Channels
Direct
13%
Cellar Sales
5%
Export
23%
Domestic
59%
4
1.5
ASX LISTING
Xanadu will apply for admission to the official list of ASX and for all of its issued shares, including the
Placement Shares, to be granted official quotation on ASX. The fact that ASX may admit Xanadu to
the official list is not to be taken in any way as an indication of the merits of Xanadu (refer to Section
2.6 for further details).
1.6
FUTURE STRATEGY
The strategic plan for Xanadu is to increase sales from the 2000 financial year level of approximately
25,000 cases to a level of 155,000 cases by 2005, excluding bulk wine sales, making Xanadu a
significant producer by volume in the Margaret River region and allowing it to further pursue
international markets.
Key components of the strategic plan include the continued and increased flow of a quality fruit supply,
winery expansion and refurbishment, development of economies of scale, improved use of the winery’s
dress circle address, branding of both premium wines and the substantial ‘drink-now’ market,
continued development of international markets and the acquisition of WAVS.
TOTAL CASE SALES BY YEAR
160,000
140,000
120,000
100,000
80,000
60,000
40,000
1.7
Target
2005
Target
2004
Target
2003
Target
2002
Forecast
2001
Actual
2000
-
Actual
1999
20,000
SHAREHOLDER LOYALTY PROGRAM
The Directors of Xanadu encourage shareholders to become part of the broader life of the winery by
participating in loyalty benefits.
Some of the loyalty benefits Xanadu currently offers shareholders with a minimum shareholding of at
least 10,000 Shares are:
• Discounted wines - discounts of up to 25% on retail prices on Xanadu wines
• Special wine offers
• Special tastings
• Shareholders card - offering discounts on accommodation and food in the Margaret River region
• Preference on new releases
• Special shareholder functions related to wine - new releases, vintages, etc
• Wine appreciation and education courses
• Tours of the Margaret River region wineries
5
1.8
CAPITAL RAISINGS
More than $18 million will have been raised by Xanadu in share capital over the last two years
following the successful completion of the Placement under this Prospectus:
Share Issues
Note
Date
Shares
Scheme 1 Prospectus
Share Offer Prospectus
Scheme 2 Prospectus
Exercise of Options
Placement
(i)
(ii)
(i)
(iii)
(iv)
May 1999
October 1999
April 2000
March 2001
March 2001
40,952,850
12,293,833
2,130,000
22,134,850
4,111,039
Totals
81,622,572
Price
(note v)
20 cents
30 cents
30 cents
20 cents
35 cents
Capital Raised
$
8,190,570
3,688,150
639,000
4,426,970
1,438,864
$18,383,554
(i)
Both these prospectuses involved the offer of interests in vinelots through tax-effective
agriculture investments as well as the offer of shares in Xanadu.
(ii)
This prospectus involved the offer of shares in Xanadu only.
(iii)
As part of the initial acquisition and restructure of the Xanadu winery, Xanadu granted a total of
22,134,850 Options exercisable at 20 cents on or before 31 December 2003. However, the
existence of such a substantial number of Options was seen as a possible impediment to the
proposed listing of Xanadu.
Almost 87% of these Options were held by GCA and Lagan Holdings. Due to their already
significant shareholdings in Xanadu and the takeover provisions of the Corporations Law, GCA
and Lagan Holdings were not able to exercise their Options directly as their respective holdings
in Xanadu would increase by more than permitted levels.
Accordingly, a proposal was put in place for the sale and exercise of the Options in order to
remove them from Xanadu’s capital structure prior to the proposed listing on ASX. The
effective sale price for the Options was 35 cents, representing 15 cents to purchase each Option
and 20 cents to exercise it. The sale of the Options was implemented by way an offer not
requiring a disclosure document under Section 708 of the Corporations Law.
(iv)
Under the Placement, GCA and Lagan Holdings or their nominees will be entitled to reinvest at
least 50% of the proceeds from the sale of their Options (being at least 7.5 cents per Option)
back into Xanadu via the issue of the Placement Shares at a price of 35 cents each under this
Prospectus. This reinvestment demonstrates their commitment to Xanadu, their confidence in
the pricing of the Placement Shares and their belief in Xanadu’s future.
(v)
It is noted that shares in Xanadu were issued under the last two prospectuses in October 1999
and April 2000 at 30 cents per Share while the 22,134,850 Options were still outstanding. Since
those share issues, Xanadu has experienced significant growth:
•
Winery capacity has expanded to process approximately 1,000 tonnes of fruit.
•
Xanadu’s current level of wine sales has reached 38,000 cases per annum based on the
12 months to December 2000, more than double the 1999 level of 18,000 cases.
•
More than $3.9 million has been spent on capital expansion programs in the last
12 months expanding and improving the winery.
•
Xanadu has acquired WAVS which should introduce a diversified revenue stream and
additional profits.
•
Funds of approximately $5.4 million (after capital raising and listing costs) are expected
to be raised through the exercise of the Options and the Placement as referred to in notes
(iii) and (iv) above. These funds will enable Xanadu to bring forward the completion of
the capital expansion program detailed in Section 3.5.
6
1.9
FINANCIAL VIABILITY
Following the successful completion of the Placement and the exercise of the Options, Xanadu will
have a strong balance sheet with net assets of approximately $25.3 million and minimal debt. The
Board believes that increasing production levels through the ongoing capital expansion program should
see revenues expand significantly over future years with improving profitability gained through
economies of scale. The funds to be raised through the Placement and the exercise of the Options will
provide Xanadu with sufficient capital to complete the planned capital expansion program within the
next 12 months.
The recent acquisition of WAVS has provided Xanadu with contracted, diversified cashflows for
approximately 12 years, with the potential to promote future vineyard schemes (refer Section 3.15).
1.10
CAPITAL STRUCTURE AND OWNERSHIP OF XANADU
Upon listing on ASX, Xanadu will have approximately 87 million Shares on issue. Xanadu also has an
existing Employee Option Plan (refer to Section 9.3 for further details). The proforma issued capital
assumes the completion of the following Share issues:
22,134,850
4,111,039
Shares upon exercise of the Options
Shares under the Placement
26,245,889
Total Shares to be Issued
The table below provides details of the major shareholders of Xanadu and their shareholdings at the
date of this Prospectus and upon listing (assuming the above share issues are completed).
Shareholders
GCA
Lagan Holdings
NCE
Other
Current
Shares
23,289,000
11,194,950
5,500,000
20,892,733
Total Shares
60,876,683
%
38
18
9
35
100%
Proforma
Shares
23,289,000
12,565,296
5,500,000
45,768,276
87,122,572
%
27
14
6
53
100%
7
SECTION 2 – DETAILS OF THE PLACEMENT
2.1
The Placement
A total of 4,111,039 Placement Shares are offered under this Prospectus at 35 cents each, of which:
•
•
2,740,693 Placement Shares are offered to GCA or its nominees; and
1,370,346 Placement Shares are offered to Lagan Holdings or its nominees.
The Placement Shares are of the same class and will rank equally in all respects with the existing issued
shares of Xanadu. The Placement Shares will represent approximately 4.7% of the proforma issued
capital of Xanadu.
2.2
Placement Limited to Specific Parties
As stated previously, this Prospectus does not constitute a public offer of shares in Xanadu. The
Placement under this Prospectus is to be made to the specific parties referred to above or their
nominees.
In this regard, Lagan Holdings has notified Xanadu that it intends to take up the offer of the Placement
Shares to which it is entitled in its own name. GCA has notified Xanadu that it intends to nominate its
shareholders to take up the offer of the Placement Shares to which it is entitled in proportion to their
current shareholdings in GCA as follows:
Name
Brian Colin Peat
Beverley Norman
Jon Whittle
Richard Lynn
Clint Auty
Dean Clark
Ross Norgard
Longfellow Nominees
Trevor Clohessy
Janet Clohessy
TJ & JL Clohessy
Ellen Richards
Total Placement Shares for GCA
2.3
Number of
Placement Shares
361,587
476,788
116,808
138,687
107,135
101,972
533,638
2,073
153,720
379,919
2,073
366,293
2,740,693
Application of Placement Monies and Option Monies
The successful completion of the Placement will raise total proceeds of $1,438,864. Xanadu intends to
combine these Placement Monies with the Option Monies of $4,426,970, representing total funds of
$5,865,834, which will be applied as follows:
Capital expansion program (refer to Section 3.5 for details)
Reduction in overall debt
General working capital
Payment of associated capital raising and ASX listing costs
Total funds to be raised
$million
3.04
1.00
1.36
0.46
5.86
Following the Placement and exercise of the Options, Xanadu will have sufficient capital available to
complete the capital expansion program within the next 12 months.
8
2.4
How to Apply
Applications for Placement Shares may only be made on the Application Form contained in this
Prospectus. The Corporations Law prohibits any person passing onto another person an Application
Form unless it is attached to a hard copy of this Prospectus.
Application Forms must be accompanied by a cheque in Australian dollars for the full amount of the
application. Cheques must be made payable to “Xanadu Wines Limited Share Offer” and should be
crossed “Not Negotiable”. All Placement Monies will be paid into a trust account.
Instructions on how to complete the Application Form are provided in Section 12. Completed
Application Forms and cheques must be received by Xanadu before 5.00pm WST on the day following
the opening of the offer for the Placement Shares.
2.5
Indicative Timetable
These dates are indicative only. Xanadu reserves the right to vary these dates.
Placement Opens
Placement Closes/Allotment of Shares
Despatch Holding Statements
Commencement of trading of Shares on ASX
2.6
19 March 2001
20 March 2001
20 March 2001
22 March 2001
ASX Listing
Xanadu will apply within 7 days after the date of this Prospectus for admission to the official list of
ASX and for the Placement Shares offered by this Prospectus, together with all other Shares proposed
to be on issue at the time of listing, to be granted official quotation on ASX. The fact that ASX may
admit the Company to its official list should not be taken in any way as an indication of the merits of
Xanadu or the Placement Shares offered pursuant to this Prospectus.
It is a requirement of the Corporations Law, that the Placement Shares be quoted within 3 months of
the date of this Prospectus. If the Placement Shares are not admitted to quotation on ASX within this
timeframe, none of the Placement Shares will be issued, and all Placement Monies will be refunded
without interest within the required 4 month time period.
2.7
Uncertificated Holdings
Xanadu will apply to participate in the clearing house electronic sub-register system (“CHESS”)
operated by ASX Settlement and Transfer Corporation Pty Ltd (“ASTC”). Under CHESS,
shareholders of Xanadu will receive a statement of their holding in the Company (as opposed to a
share certificate), together with an explanation of sale and purchase procedures under CHESS.
If a shareholder is broker sponsored, ASTC will send them a CHESS statement which will set out the
number of Placement Shares issued to the shareholder under this Prospectus, and provide details of
their holder identification number and sponsoring issuer number.
If a shareholder is registered on the issuer sponsored sub-register, Xanadu’s share registry will send
them a statement containing the number of Placement Shares issued to them under this Prospectus
together with their security holder reference number.
If a shareholding changes during a month, an updated statement will be sent to the relevant shareholder
at the end of that month. Shareholders may also request statements at any other time although
Xanadu’s share registry may charge an administration fee for additional statements.
Applicants are responsible for determining their allocation prior to trading in the Placement Shares on
ASX, and applicants selling Placement Shares before obtaining their statement do so at their own risk.
9
2.8
Investment Risks
As with any share investment, there are risks associated with investing in Xanadu. The risk factors that
could affect the financial and market performance of Xanadu are detailed in Section 7 of this
Prospectus. The Placement Shares offered under this Prospectus carry no guarantee with respect to
payment of dividends, future value of the Placement Shares or any return on capital invested.
10
SECTION 3 – STRATEGIC VIEW OF THE FUTURE
3.1
Acquisition of the Xanadu Winery
Xanadu was incorporated on 24 February 1999 for the sole purpose of acquiring the property and
business of the Xanadu winery. The acquisition of the vineyard land and improvements, winemaking
facilities and wine label from the Lagan family was effected on 8 April 1999. The total consideration
provided was approximately $8.5 million of which approximately $1.78 million was satisfied by the
issue of Shares. As part of the restructure, GCA invested $3.55 million into Xanadu. A summary of
the Xanadu Purchase Contract is provided in Section 8.1.
3.2
Growth Experienced to Date
In the short time since acquisition:
•
Xanadu will have raised more than $18 million in share capital (including the Placement Monies
and the Option Monies) and now has over 800 shareholders.
•
Xanadu has become a substantial landholder of prime Margaret River vineyard property. This
landholding includes 160 hectares at the winery itself and an additional 106 hectare property in
Kudardup approximately 35 kilometers from the Margaret River township and within the Margaret
River appellation. Total land under vine on Xanadu owned land is 127 hectares (110 hectares of
this total is subject to leasehold interests by growers under the Vineyard Schemes).
•
Winery capacity has been expanded to process approximately 1,000 tonnes of fruit, more than
three times its original capacity. Further expansion of the winery is planned as detailed in the next
section.
•
The strategic plan was to increase the 1998/99 sales of approximately 18,000 cases per annum to a
level making Xanadu a significant producer by volume in the Margaret River region and allowing
it to further pursue international markets. Xanadu’s sales are now 38,000 cases per annum to 31
December 2000, and are ahead of its plan to have sales of 155,000 cases per annum by 2005,
excluding bulk wines sales.
3.3
Expanded New Winery
The plans for the three-staged winery expansion have been finalised, with the first and second stages
completed and the third stage well underway. The expansion program has resulted in the processing
capacity of the winery increasing from its original capacity of approximately 300 tonnes to the current
level of approximately 1,000 tonnes. The third stage is planned to be finalised by the 2002 vintage
providing a processing capability of 2,000 tonnes.
The expansion has been planned to encompass usage of all of the current facilities, although their future
use may vary from their current use. This will allow expansion to take place with negligible
interruption. By the completion of stage three, Xanadu will enjoy modern winery facilities suitable for
use well into the next century.
3.4
Economies of Scale
One of the main advantages of expanding production is the expected decrease in average cost of
production through economies of scale.
It is predicted that the wine industry, especially at the lower end of the market, will become more
competitive. Xanadu’s Secession label, with a recommended retail price around $15, competes in this
category. The decreased costs of production through economies of scale will assist Xanadu to increase
its volume and competitive edge, especially in the Secession label.
11
The above pictures depict the Xanadu winery following the completion of the proposed capital
expansion program.
12
3.5
Proposed Capital Expenditure
Set out below is a breakdown of the capital expansion program proposed over the next 12 months and
estimated costings. The total capital expenditure is expected to be funded from the Placement Monies
and the Option Monies to be raised by Xanadu.
Item
Amount
($000)
Administration
- Entry Statement
35
Vineyard/Property
- Irrigation Upgrade/Dam
- Roadworks
Winery
- Fruit receival
- Roof over fermenters
- Barrel store
- Covered Area
Property Buildings
- Café and Refurbishment
- Gallery
- Tasting Room/Administration
- Collenade
- Playground
- Carpark
- Landscaping
- Entry Statement
Total Capital Expenditure
3.6
90
200
290
196
130
750
212
1,288
540
75
420
240
25
32
70
25
1,427
3,040
Production Targets
Set out below is a summary of the production targets based on estimated grape quantities that Xanadu
will be supplied with for processing. As referred to previously in this Prospectus, the capital expansion
program will enable the increase in processing capacity at the Xanadu winery. However, in order to
fulfil the additional production targets set out below, Xanadu presently hires and will continue to hire
temporary tanks to supplement the winery’s own capacity as required.
Grapes Tonnage
Case Equivalent
2001
2002
2003
2004
2005
1,441
108,875
1,676
126,662
2,067
156,173
2,499
188,804
2,609
197,106
•
Grape tonnages are based on existing contracts with WAVS and Acacia Ridge Management
Limited, together with budget tonnages provided by the owners of 13 other smaller vineyards plus
the fruit taken off the Xanadu property.
•
Case equivalents assume that on average 680 litres of wine is derived per tonne of grapes and there
are 9 litres of wine per case.
•
The year in which the case equivalents are processd is not the same year the cases are ready for
sale. For example, a wine from the 2001 vintage may not be sold until later years because of the
processing time required. As such, the production targets will not equate to the case sales targets
referred to in this Prospectus.
13
3.7
Quality Fruit Supply
The first stage in Xanadu’s strategic plan is to ensure that an adequate level of premium fruit is
available for the projected growth in production. To secure a source of quality Margaret River region
fruit, Xanadu has contracted to purchase fruit from the Vineyard Schemes.
The Vineyard Schemes incorporate managed investment schemes whereby the investors lease a vinelot
from Xanadu and pay management fees to WAVS for the ongoing management, production and
harvesting of grapes. Xanadu undertakes to purchase the grapes for a minimum period at a fixed price
subject to the terms of the formal agreements (refer to Section 8.2).
The Vineyard Schemes were established by Xanadu in conjunction with WAVS which acts as the
responsible entity of the schemes. To date, two schemes have been implemented:
•
Scheme 1 in June 1999 involved the planting of 68 hectares of new vineyards in Margaret River on
behalf of the growers which allowed for increased grape production of approximately 680 tonnes.
Fruit from this vineyard is 94% red varieties (59% Cabernet Sauvignon) and the first crop should
be available for the 2002 vintage; and
•
Scheme 2 in June 2000 involved the planting of 42 hectares of new vineyards at Kudardup, in the
Margaret River appellation, on behalf of the growers which allowed for increased grape production
of approximately 420 tonnes. The first significant crop should be available for the 2003 vintage.
Xanadu has also contracted to buy fruit from approximately 56 hectares of the Acacia Ridge vineyard
in Frankland, part of the Great Southern wine region. The varieties to be supplied through this contract
are Cabernet Sauvignon, Shiraz, Merlot and Cabernet Franc. Fruit from the Acacia Ridge vineyard
should be available for the 2001 vintage.
The chart below shows the approximate breakdown of grape supply areas for Xanadu by the 2003
vintage, at which time Xanadu should be processing grapes from both the Vineyard Schemes.
GRAPE SUPPLY AREAS
Other Margaret
River
7%
Frankland
35%
Xanadu Margaret
River
39%
Xanadu Kudardup
19%
3.8
Accumulating Capital Gain on Landholding
Xanadu owns the land upon which the vineyards are being established including those under the
Vineyard Schemes. As such, when the vineyard leases expire (in approximately 14 years from the
commencement of Scheme 1), Xanadu will own the vineyards unencumbered together with the
vineyard cash flows. In the meantime, Xanadu will enjoy the rental flow from the growers throughout
the terms of the leases. A summary of the key terms of the Lease and Management Agreements for the
Vineyard Schemes is provided in Section 8.3. At present the annual rentals are budgeted at
approximately $280,000 per annum for Scheme 1 and $168,000 per annum for Scheme 2, and will
increase through CPI increments each year.
14
3.9
Dress-Circle Winery Access
Being the closest winery to the township of Margaret River, Xanadu is extremely well located.
However, the access in the past has been quite indirect. As part of the vineyard expansion and growth
strategy, a new entrance has been constructed on Boodjidup Road providing Xanadu with a dress-circle
address and close entry proximity to wineries such as Leeuwin Estate and Voyager Estate. This new
Xanadu entrance leads visitors to the cellar door through the new vineyard. This high profile
positioning has resulted in a significant increase in Xanadu’s cellar door traffic.
3.10
Branding
Xanadu’s wine is branded either as “Lagan Estate”, " Xanadu" or "Secession".
The current releases for the Lagan Estate label include Cabernet Reserve and Semillon, and for the
Xanadu label: Cabernet Sauvignon, Merlot, Shiraz, Chardonnay, Semillon and a Semillon Sauvignon
Blanc blend. These wines have a recommended retail price ranging from $14 to $60 per bottle.
The current releases in the Secession label are the white and red blends. One of the growth strategies
for Xanadu’s Secession label has already been implemented with the finalisation of a new label design
and the retail price being re-positioned at just under $15 per bottle (or £5.99 in the United Kingdom)
for the ‘drink now’ market.
In the future, Xanadu may also consider establishing a joint venture with other parties on normal
industry terms for the development, production, marketing, distribution and sale of other branded wine
separate to the Xanadu label.
15
3.11
Bulk Wine Markets
Xanadu has entered into an agreement with Bill Crappsley (a non-executive director of Xanadu) to act
as the bulk wine market liaison for Xanadu. A summary of the key terms of this arrangement are
provided in Section 9.4. Bill is widely regarded as one of Western Australia’s top winemakers and
wine personalities, and is one of the most respected wine personnel in Australia. He has extensive
experience in the wine industry and has won many hundreds of awards. Xanadu expects to utilise
Bill’s expertise and contacts in the wine industry to secure future bulk wine sales agreements which
should effectively provide higher profit levels on a more timely basis.
3.12
Grolsch Contract
Xanadu has entered into a brand management contract with Grolsch Breweries, Holland for the
management of the Grolsch brand in Australia and New Zealand. This enables Xanadu to have
Grolsch contacts worldwide. A summary of the key terms of this contract are provided in Section 8.6.
3.13
National Distribution Channels
National Distributors include:
New South Wales, Queensland, Victoria and the ACT– Aria Wine Co.
Xanadu was the first wine to be included in the portfolio of Aria Wine Co., established in 1989 by
Dougal James-Robertson. Dougal built Aria Wine Co. into a major on and off premise wine distributor
in NSW and the ACT before moving into Queensland in 1993. Commencing January 2001 Aria Wine
Co. has represented Xanadu in Victoria ensuring that Xanadu has a strong east coast supplier which
allows sales avenues for greater change.
Western Australia – Western Wines
Established in 1993 Western Wines’ philosophy was to only select the best premium wineries from the
best regions in Australia. With a focus on premium wine labels, Western Wines has grown from a
small agency business to a large, reliable supplier to the finest restaurants, hotels and retail stores in
W.A. The company is continuing to grow annually in terms of its client base and personnel so as to
meet the expansion plans for Xanadu in the future.
South Australia – Jonathan Tolley Wine Merchants
Jonathan Tolley Wine Merchants was established in 1996 and has targeted specific accounts for both
Xanadu premium and Secession labels. Selecting and focusing on cafes and bottle shops with the
Secession range has proven successful. They have identified premium accounts such as restaurants,
international hotels and premium bottle shops and sales success has been achieved with Semillon and
Cabernet in particular.
3.14
International Markets
An important platform of Xanadu’s growth strategy is the expansion of international sales. As the fruit
supply is increased over the next three years, significant emphasis will be placed on further
development of Xanadu’s international markets, with an initial focus on identifying those markets
offering the greatest potential and formulating sound entry strategies for those specific markets.
As part of this strategy, and having identified the United Kingdom as an initial target market, Xanadu is
now distributing its wines through Private Liquor Brands Ltd, one of the United Kingdom’s largest
distributors of Australian wine. At this stage, Xanadu is negotiating distribution arrangements for the
United States and sees this as a major growth opportunity.
16
Xanadu’s Managing Director, Andrew Moore, will be directly responsible for guiding Xanadu’s
international development strategy, both in terms of expanding current markets and identifying and
formulating entry strategies for potential new markets. Andrew brings considerable experience and
expertise to this aspect of his role, having previously worked in international sales, marketing and
brand strategy development in the premium wine, spirit and beer markets. He has successfully fulfilled
upper-management responsibilities with Western Australian wholesaler Lionel Samson & Sons,
national fine wine wholesaler Tucker Seabrook Pty Ltd and Holland’s premium beer producer Grolsch
Export B.V.
Xanadu’s International Distribution network includes:
United Kingdom
Founded in 1982, Private Liquor Brands Ltd supplies wines, beers and spirits from Europe and the new
world, under both producers’ and clients’ labels to customers in the United Kingdom and Ireland.
Private Liquor Brands sells to, and is registered as a supplier to, virtually every supermarket, specialist,
cash and carry and brewery in the United Kingdom. Representing 5 of the top brands from Australia,
in their first year of representing Xanadu they have already achieved listings in 3 of the major
supermarket chains - Oddbins, Tesco and ASDA.
Switzerland
Established in 1898, Zweifel has become one of the leading importers for new world wines in
Switzerland. Zweifel is also a producer of a wide range of local wines.
Germany
Weinhandlung Martin Apell was founded in 1993, specialising from the very beginning in new world
wines. The idea was always to import wines from selected wineries and distribute them on an
exclusive basis. Weinhandlung Martin Apell only works together with high class small to midsize
wineries from Australia, New Zealand and California. In the last four years the portfolio has been
strongly biased towards Australia, experiencing tremendous growth each year. The Australian
portfolio is considered to be the best in Germany, including Henschke, Noon, Fox Creek, Veritas and
Xanadu, to name only a few. The wines are sold nationwide via a mailing list and through local
distributors on trade as well as off trade.
First Growth Asia
First Growth Asia is effectively the 'representative office' or 'area manager' for a selected and very
limited group of premium brands in Asia. The company represents leading wineries from most of the
classic European Appellations as well as major New World Regions, - through its negociants in
Bordeaux, First Growth Asia works with the top classified chateaus. Over the last 5 years, the company
has established an extensive network covering all Asian markets, except for Japan. Commencing
January 1st 2001, Xanadu will be the only Australian brand represented by the company, who will be
working with our existing agents as well as seeking new agencies throughout Asia.
Singapore
Fine Wines specialises in the import and retail of premium boutique wines from Western Australia,
such as Xanadu. Established in 1995, Fine Wines has since harvested a strong well-bodied variety of
Margaret River wine enthusiasts in Singapore. Fine Wines is also associated with HC wines, which
since its founding in 1987, has been importing and distributing leading brands from Australia, the
United States, France, Germany and Italy.
Hong Kong
Ponti Trading Ltd’s wine business was established in 1987. Today, it is one of the leading wine
importers and distributors in Hong Kong with a network of customers ranging from hotels, restaurants,
club houses to retail stores. Its facilities are 24-hour temperature controlled and security monitored,
with storage space of over 25,000 square feet and a capacity to handle up to 80,000 cases of wines per
annum. It also operates three retail wine stores in Hong Kong.
17
Japan
Pieroth Japan KK is a direct marketing company established in Japan in 1969. The company carries
over 1,700 kinds of wines from Germany, France, Italy, Spain, Switzerland, Hungary, the United
States/California, China, New Zealand, Chile, Argentina, South Africa, Romania, Ukraine and
Australia. Head Office is located in Germany, where the Pieroth family have been engaged in the
growing and production of wines since 1675.
Canada
B&W Wines has represented Xanadu in the Ontario market since 1996. Howard Wasserman has
strong links to the Australian wine industry since he studied Wine Marketing at Roseworthy
Agricultural College in South Australia in the early 90’s and Jim Lisser, an MBA graduate, has an
extensive business background lead. B&W Wines now specialises in representing a select group of
premium Australian vineyards as well as wines from other new world regions.
Dougal James-Robertson, the principal of our east coast agency Aria Wine Company, formed Aria
Wine International in 1998. This enabled Aria Wine Co. to represent their carefully selected portfolio
of quality Australian vineyards in various markets around the world. Aria Wines International
represents Xanadu in British Columbia, Canada, from their Vancouver office, first shipping wines in
2000.
North America
Xanadu is currently in negotiations with three major suppliers that all have national representation in
the United States, and should be in a position to announce it’s United States distribution network
shortly.
3.15
WAVS Acquisition
On 7 December 2000, Xanadu acquired 90% of the issued share capital of WAVS from NCE in
exchange for the issue of 5,500,000 shares in Xanadu. A summary of the key terms of the contract are
provided in Section 8.5.
As mentioned previously, WAVS is the responsible entity of the Vineyard Schemes and performs its
duties in accordance with the constitutions of those schemes on behalf of investors/growers. Under
contracts with the growers, WAVS is required to establish, maintain and supervise the vineyard in
accordance with good viticultural practices in return for an annual management fee.
The Directors of Xanadu believe the acquisition of WAVS provides a number of strategic benefits:
•
WAVS should provide a relatively predictable earnings stream through “contracted” cashflow and
earnings over the remaining 12 year period from the Vineyard Schemes providing diversified
earnings for Xanadu.
•
WAVS will provide Xanadu with the regulatory and management infrastructure to develop
additional vineyard investment schemes. Any future schemes should provide Xanadu with an
additional new long term fruit source. This will assist in the further growth of Xanadu’s wine
operation, in an “off balance sheet” structure significantly reducing the capital required by
Xanadu to achieve this growth.
•
WAVS and its relationship with NCE provide a successful track record of establishing vineyard
schemes that can be leveraged for future new schemes. The relationship with NCE provides an
established marketing and distribution network for the raising of capital from investors.
•
Xanadu will also have the benefit of viticultural project development and management skills of
Peter Gherardi, a director of WAVS (refer Section 5.2 for Peter Gherardi’s profile).
3.16
Other Opportunities
Xanadu will continue to consider other business opportunities within the wine industry as they arise.
18
SECTION 4 – INDUSTRY BACKGROUND
by Ray Jordan-wine writer for the West Australian
The Australian Wine Industry
The Australian wine industry has maintained its impressive growth of recent years as world markets
continue to absorb the wide range of quality and value for money wines being offered by Australian
producers. The increasing demand for Australian wine has sparked a big increase in vine plantings
throughout Australia, resulting in a significant increase in wine grape production.
Plantings are not restricted to existing traditional areas where new vineyards are being planted. Many
new areas are opening up and are only now starting to produce significant amounts of fruit. Much of
these new vineyard plantings are only now starting to have an impact on production figures.
According to ABARE, Australian wine production is forecast to increase to be about 1.4 million tonnes
by 2001-2002, though this could be as high as 1.6 million tonnes.
ABARE has also reported that wineries are planning for a sharp increase in grape intake to increase
production and meet the increasing demand for wine especially in international markets.
In particular, the strong demand for red wine will probably result in increasing demand for red grapes
rather than white grapes. In fact production of red grapes in the 1999 - 2000 vintage has been projected
to increase by about 30 per cent to more than 500,000 tonnes, while white wine varieties are expected
to increase by about five per cent in the three years to 2001-2002.
For Australian wine producers this will present new challenges, especially in the short-term. With the
expected dramatic increase in tonnage as new plantings come into production, markets, both
domestically and overseas, will have to be developed.
Although there has been some increase in per capita consumption of bottled Australian wine
domestically, this will not absorb the production increases expected. Australian wine producers will
have to continue to develop international markets and aim to repeat, and probably, exceed the growth
experienced in the last few years.
The growth in exports has been the principal reason for the rapid expansion of the Australian wine
industry in general.
The consistent growth in exports of Australian wine continued during 1999 - 2000 when 288 million
litres were exported, representing records for volume and value. This was 71 million litres more than
the previous year’s export volumes, and the biggest single increase in exports yet achieved by the
Australian wine industry.
With the increase in grape production in the coming few years, Australian exporters will have to
achieve similar increases to absorb the grape crush.
During 1998-99 Australia’s winemakers exceeded the one million tonnes crush for the first time,
processing a record 1.1 million tonnes of grapes.
Between 1999-2000 and 2009-10, Australian wine production is expected to increase from 701 million
litres to nearly 1.2 billion litres, and of that, after allowing for an incremental increases in domestic
consumption, there will about 700 million litres available for export - compared with 288 million litres
exported in 1999-00.
During the past few years, red wine exports exceeded white wine exports for the first time. Recent
plantings have been focused on red grapes and this should ensure that red exports continue to lead the
way.
19
White wine exports increased from six million litres in 1985-86 to 130 million litres in 1999-2000,
whereas in the same period, red wine sales increased from four million litres to 143 million litres.
The total sales of Australian red wine increased from 48 million litres to 257 million litres in the same
period.
Official figures show slightly more than 6000 hectares of red grapes being planted in 1999-2000, as
compared to nearly 1400 hectares of white grapes.
During the 1999 season the area under vine in Australia grew to a record 123,000 hectares, with the
total area under vine in each State increasing. The biggest increases were in South Australia, New
South Wales and Victoria.
Winemaking in Australia is highly concentrated among a few producers. While 276 winemaking
companies crushed 50 or more tones of grapes in 1998-99, the biggest 10 of these companies crushed
68 per cent of grapes and produced 70 per cent of the wine.
Australian wine drinkers started to drink more wine with per capita consumption rising to 19.8 litres,
though this is still short of the record level of 21.6 litres in 1985-86. Importantly for Australian
producers, wine imports have fallen so that per capital consumption is being driven by increased
consumption of Australian wine.
In fact, strong growth in wine exports and a fall in imports resulted in a widening of the trade surplus in
wine. Australia exported 216 million litres of wine valued at $1.068 billion and imported just 24
million litres worth about $103 million.
There has been a significant switch from bulk bag-in-box consumption to bottle consumption. While
bag-in-box wine casks are still popular the growing sophistication of wine consumers and the growing
popularity of wine with meals in the bistro scene in particular, has driven the switch to bottled wines.
It has also been a catalyst in driving up demand for premium wines, with red wine in particular,
increasing in price quite significantly.
While the Australian wine industry will face many challenges, it will also see much opportunity.
Having been through a period of significant investment in vineyard and equipment, the next period will
certainly be one of marketing.
This has been recognised by the industry.
At Wine Australia in Melbourne late last year the Marketing Decade, a comprehensive marketing
strategy which aims to lift Australian wine sales to $5 billion over the next 10 years, was launched
during the 2000 Wine Industry Outlook Conference.
The Marketing Decade, is a "wine marketing roadmap" which will assist Australia’s wineries meet the
challenges of 21st century globalisation.
Highlights of The Marketing Decade include a focus on new international markets especially the
United States, Germany, Switzerland and Japan; an undertaking to establish Australia as a global leader
in the super-premium (AUS$10-15 per bottle) segment by 2010; and a renewed commitment to
promote wine as a lifestyle beverage to Australian consumers, particularly the occasional wine drinker
Central to the achievement of the strategy’s sales target of $5 billion will be a commitment to increase
brand values, lift margins and boost investment in the collaborative promotion of wine brand
"Australia", which has established a unique selling proposition of flavour, consistency and value for
money worldwide.
The strategy makes it clear that to be successful and meet the aims of the Marketing Decade, grape
growers and winemakers must focus on quality, to meet the global economic and competition
challenges in the next few years.
20
Chairman of the Marketing Reference Committee which developed the strategy Paul van der Lee said
that over the last two decades the Australian wine industry had been able to leverage its heritage of
quality vineyards and winemaking infrastructure to successfully grow the Australian market and
achieve dramatic export penetration overseas.
"The next decade, however, will be a more formidable challenge than the last - we do not expect the
world economy to repeat the robust performance of the 1990s and we are already aware of the global
trend towards retail and wholesale consolidation which means fewer and larger wine retailers and
wholesalers," he said.
Mr van der Lee said the Australian wine industry was well placed to meet the challenges of the future.
"The industry has made a substantial investment in its production capability - extensive vineyards, state
of the art wineries and innovative, well trained winemakers and viticulturists,” he said.
"We have also developed a strong international wine brand "Australia" but this now requires a major
focus and investment to make marketing the important third tier in our bid to become the most
influential wine supplier in the world. Marketing, and more specifically, branding will drive
profitability and make Australian wine even more successful."
The West Australian Industry
The growth of the West Australian wine industry has been one of the shining lights in the State's
development in recent years.
Although Western Australia has had a wine industry for more than a century it was the seminal
document by the Department of Agriculture's Dr John Gladstones in the mid 60s that was the catalyst
that has brought a modern and vibrant wine industry to the State.
That document pointed the way to the cooler southern areas of the State as being ideal for producing
premium quality grapes. First a trickle of pioneers, around Mount Barker and Margaret River in
particular, drew attention to the possibilities with a few remarkable early wines.
Since those early days entire new areas of the South West have opened up to viticulture that is really
only now beginning to realise its true potential.
During the last few years the industry has galloped along at a pace that has astounded even the most
optimistic and bullish. The quality of wines continues to improve and the number of high quality wines
is also growing.
The success of the West Australian industry and its push to develop markets for its premium product is
reflected in the 50 per cent increase in wine exports for the 12 months to the end of June 2000,
compared with the previous 12 months.
Although the total value only increased from $15.3 million to $22.96 million, (small numbers
compared to the $1.4 billion exported nationally) this partly reflects the strong demand for West
Australian wines in the Eastern States, where more than half the State’s wine is sold.
The average net value of West Australian wine exported was $10.56 per litre compared to the national
average of $4.70 per litre.
Of the total exported, $13.14 million ($11.28 per litre) was red wine and $9.36 million ($9.70 per litre
was white wine).
The major markets for Western Australian wine exports were the United Kingdom ($6.57 million at
$9.89 per litre), the the United States ($5.98 million at $11.05 per litre), Switzerland ($1.92 million at
$10.11 per litre), Japan ($1.35 million at $10.90 per litre) and Singapore ($1.21 million at $13.26 per
litre).
21
With the estimated West Australian crush from vintage 2000 of 39,626 tonnes expected to increase to
more than 60,000 tonnes by 2005 (figures provided in the recent National Utilisation Survey), WA’s
exports will need to increase significantly within the next five years and beyond as new plantings come
into production.
Most of the plantings are of course in the cool climate vineyard areas of the State's South West and
Great Southern. At places like Frankland River, Margaret River, Manjimup and Pemberton.
There continues to be a high level of investment in the wine industry in Western Australia. Existing
producers are seeking new vineyards to satisfy the high demand for their wines. A considerable amount
of this investment is focused around Margaret River and Frankland River.
Of course the West Australian wine industry makes up only a fraction of Australia's total crush. The
State's 1999 vintage of about 33,000 tonnes was about 2.5 per cent of the Australian vintage, but in
value terms it represents considerably more than that percentage.
For instance, the 1998/99 figures for farm gate/agent’s prices (it is lower than the wholesale price) for
the value of sales of WA wine was $179 million, of which only 33 per cent was sold in WA. This was
up from $123 million in 1997/98 and it means that the retail value of WA wine is probably more than
$350 million, which equates to about 8 - 10 per cent of the national figure.
This reinforces that much of WA’s wine is sold at the premium high value add end of the market. From
the beginning of the modern era of WA winemaking in the '60s, the focus has been on producing
premium wines. The cost of fruit is high but then so is the quality, with the premium cool climate areas
leading the way. The result is that very little West Australian wine is sold in the competitive bargain
basement range between $10 and $12.
The future of the State's industry is looking healthy. West Australian wine is recognised for its quality
and this will continue to provide a strong marketing point of difference. Its ongoing success will
continue to rest with producing premium wines and niche marketing them to the wine hungry
consumers of the world.
22
SECTION 5 - DIRECTORS AND MANAGEMENT
The Directors and senior management of Xanadu bring both commercial acumen and viticulture
knowledge that provides a dynamic pool of resources, from which the Company can draw and benefit.
The Board of Xanadu comprises:
Ross Norgard (Chairman)
Andrew Moore (Managing Director)
Conor Lagan (Executive Director)
Ken Richards (Non Executive Director)
Trevor Clohessy (Non Executive Director)
Bill Crappsley (Non Executive Director)
Senior Management
Jurg Muggli (Chief Winemaker)
Jay Stephenson (Chief Operating Officer and Company Secretary)
Peter Gherardi (Viticulturalist)
Profiles of each member of the Board and Senior Management are provided below.
5.1
Board of Directors
Ross Norgard (Chairman)
Ross is a Chartered Accountant and was a senior Partner of Arthur Andersen and one of its predecessor
firms KMG Hungerfords from 1980 to 1992. In 1992 Ross co-founded the accountancy practice of
Norgard Clohessy and subsequently the listed company Norgard Clohessy Equity Limited and the
pooled development fund, Growth Capital Australia Ltd.
Ross has held numerous positions on committees including Chairman of the Professional Standards &
Development Committees of the Institute of Chartered Accountants and a former committee member of
the Graduate School of Management of UWA. He is currently Chairman of the Friends of the Duke of
Edinburgh’s Award Scheme. He is also Chairman of a number of public companies including Norgard
Clohessy Equity Limited and QPSX Limited.
Andrew Moore (Managing Director)
Andrew has twelve years of wide ranging experience in roles encompassing the sales, marketing and
brand strategies of wine, spirit and beer producers nationally and internationally. This experience has
led to Andrew’s recent appointment to the Australian Wine Export Council (AWEC).
In 1989 he joined Western Australian wine wholesaler, Lionel Samson & Sons as their Key Account
Representative. He represented such wine and champagne producers as Xanadu, Henschke Wines, Jim
Barry Wines, De Bortoli Wines, Berri Remano Limited and Louis Roederer Champagne (France).
In 1993 Andrew was appointed State Manager and director of national fine wine wholesaler at Tucker
Seabrook (W.A.) Pty Ltd and later moved to Victoria as State Manager of Tucker Seabrook Pty Ltd. In
these positions he represented the following Australian wine producers: Bannockburn, Brokenwood,
Tahbilk, Coldstream Hills, Cockatoo Ridge, Henschke, Petaluma, Pikes and Kingston Estate. He also
represented International wine and champagne producers Bollinger Champagne (France) Joseph
Drouhin (France), Frescobaldi (Italy) and Nederburg (South Africa).
In addition, Andrew was Brand Manager, responsible for marketing and brand building strategies, for
Ashbrook, Cullen, Mosswood, Chatsfield and Smith Brook. He was also a committee member of West
Australian Wine Press Club.
23
In 1996 Andrew joined Grolsch Export B.V., a premium beer producing brewery from Holland, as their
regional director for Asia Pacific based in Singapore. He established their Sales and Distribution
Operation in China and was responsible for all activities in the region, including strategic planning and
alliances with such countries as Japan, Taiwan and Hong Kong. He was an active member of the
Grolsch Exports Senior Management Team responsible for world wide sales, marketing and strategic
plans for such major markets as Europe, North America and Asia.
Conor Lagan (Executive Director)
Conor has grown up with the Margaret River wine industry from the time Xanadu was established by
his parents John and Eithne in 1977. From the age of 12 he spent much of his school holidays working
in the vineyard assisting with vineyard establishment and maintenance. On finishing school, Conor
worked in premium wine retailing at the Hermitage Wine Cellar Perth for 18 months before
undertaking winemaking and viticultural studies at Roseworthy Agricultural College, South Australia.
On completion of his oenology degree in 1988, Conor returned to Margaret River and Xanadu and
immediately took up the position of General Manager. It is in this role that significant viticulture,
winemaking and marketing initiatives were implemented by Conor seeing the winery rise to its now
eminent position as one of Australia’s leading premium wine producers.
Conor has also taken a leading role in local, state and national wine industry issues. He is the President
of the Margaret River Wine Industry Association, a past Executive Board Member of the Wine
Industry Association of Western Australia and a Governing Councillor of the South West Regional
College of TAFE.
Now 36 years old and a resident of Margaret River for the past 31 years, Conor has an intimate
knowledge and understanding of the region, the issues, the opportunities and challenges confronting the
Western Australian wine industry as it seeks to move forward globally towards the new millennium.
Ken Richards (Non Executive Director)
Ken has Bachelor of Commerce and Master of Business Administration degrees from the University of
Western Australia. He is a fellow of the Australian Institute of Company Directors and an Associate of
the Securities Institute of Australia.
Ken’s commercial experience has been gained at the general manager or managing director level in the
finance industry. He co-founded Richards Lyon Limited, Western Australia’s first mortgage bank,
growing it to $120 million in funds under management in three years against the competition of the
major banks and building societies.
He is currently Managing Director of Norgard Clohessy Equity Limited, a listed company specialising
in raising development capital for agribusiness projects. Ken is also a director of a number of public
companies including Growth Capital Australia Limited (a registered pooled development fund), Olea
Australis Limited, F.R.V. Management Ltd (the manager for Frankland River vineyards), and Acacia
Ridge Management Limited/Acacia Ridge Holdings Pty Ltd (the manager and holding company
respectively for Acacia Ridge vineyard).
Trevor Clohessy (Non Executive Director)
Trevor is a Chartered Accountant and has over 20 years experience in taxation. Trevor has consulted
extensively on all aspects of taxation and is now closely associated with structured fundraising with
particular emphasis on the taxation aspects. He was a taxation partner of Arthur Andersen prior to cofounding the specialist firm of Norgard Clohessy and subsequently Norgard Clohessy Equity Limited.
He is a member of the Institute of Chartered Accountants and the Australian Society of Certified
Practising Accountants as well as a fellow of the Taxation Institute of Australia. He holds a Bachelor
of Business Studies (Accounting) Degree from Curtin University.
24
Trevor is also a director of a number of public companies including Norgard Clohessy Equity Limited,
Olea Australis Limited, Integrated Workforce Limited, Growth Capital Australia Ltd, a registered
pooled development fund, FRV Management Ltd/Frankland River Vineyards Holdings Ltd (the
manager and holding company respectively for Frankland River vineyards), Acacia Ridge Management
Ltd/Acacia Ridge Holdings Pty Ltd (the manager and holding company respectively for Acacia Ridge
vineyard).
William Summers Crappsley (Non Executive Director & Bulk Wine Consultant)
Bill started his career in 1964 as a cellar hand with the Houghton Wine Company, working under Jack
Mann. Bill joined a winery consulting firm and spent 2 years working vintages at Seaview and
d’Arenberg at McLaren Vale, Redmans in Coonawarra and Tullochs in the Hunter. He worked a total
of seven harvests in two years with Ben Chaffey (Seaview), d’Arry Osborn (d’Arenberg), Owen
Redman (Redmans) and Dickson Morris (Tullochs).
1971 saw Bill move to Renmark where he was Assistant Wine Maker for one vintage before he joined
Basedow’s of the Barossa as Wine Maker/Winery Manager. During his six vintages there the winery
production level rose from 400 to 1200 tonnes and Bill won over 350 show awards and trophies for a
number of different wine styles. He gained a reputation for producing elegant Shiraz styles and in 1974
produced the first Basedow White Burgundy, a partially oak matured Semillon.
Whilst working at Basedow’s, Bill consulted to John Tate, co-founder of Evans & Tate and was
instrumental in the development of Gnangara Shiraz. He returned to Western Australia to live at the
end of 1977 and took up the position of Wine Maker/Winery Manager at Evans & Tate, once again
overseeing a major increase in production. In addition to the Gnangara Shiraz, Bill was involved in the
development of the highly regarded Margaret River Classic. The company achieved approximately
500 show awards including twenty trophies whilst Bill was in charge of winemaking.
1993 saw Bill accept yet another challenge - the rejuvenation of Sandalford Wines, Western Australia’s
largest family owned wine company with vineyards in Margaret River, Mount Barker, Pemberton and
the Swan Valley. As Senior Wine Maker, Bill has revolutionised the wine styles achieving tremendous
success with the Chardonnay (dual gold medal winner at the 1993, 1994 and 1996 Sydney
International) and Shiraz (Gold medal at the 1996 Wine Magazine International Challenge, London) in
particular. Under his command the company’s winery located at its Caversham vineyard, has increased
in production to well over a million litres in capacity. Bill oversaw an extensive modernisation
programme incorporating major vineyard improvements, modernisation of the winery, restaurant
functions and tourism developments.
Career Highlights
•
•
•
•
•
•
5.2
First major achievement: P T Browne Trophy at Adelaide Wine Show 1973, for the best one year
old red wine.{Basedow’s 1972 Barossa Valley Hermitage}
Founding chairman Barossa Valley Wine Show
Member of undefeated, 4 person, Western Australian Wine Options Team
Associate Wine Judge - Perth Wine Show, 1985,1986,1987,1989
Sheraton Hotel Awards 1989 - Most successful exhibitor and Chairman’s Trophy for the best wine
{1989 Margaret River Semillon}
Winner of the 1999 George Mulgrue Award for contribution to the Wine Industry in Western
Australia.
Senior Management
Jurg Muggli (Chief Winemaker)
Jurg trained and worked as a chef before studying Viticulture and winemaking at Wadenswil in his
native Switzerland. He worked in vineyards and wineries around Zurich and helped establish three
new vineyards in the area. He immigrated to Australia in 1989 joining Brokenwood Wines at Pokolbin
in NSW, and moved to Xanadu in 1990.
25
Jurg’s extensive experience in winemaking and vineyard management has been highly valuable in the
continued development of the Xanadu product. He has refined wine styles and been instrumental in
new product development, including labelling, promotions and establishing of new markets. Jurg has
also developed an organic fertiliser and finalised permaculture in old vineyard blocks. He has instituted
changes to trellising to optimise profitability, trialled root stocks and undertaken bench grafting trials.
Through Jurg’s initiatives, further steps are being taken towards organic viticulture, super premium
wine production, and the introduction of new wines. A new grape receival and crushing facility is also
being planned. An integral part of the Xanadu operation, Jurg is a proactive participant in the business
planning.
Mr Jay Stephenson (Chief Operating Officer and Company Secretary)
Jay has a Bachelor of Commerce degree from the University of Alberta in Canada, a Master of
Business Administration from the Edinburgh School of Business, and is a Certified Management
Accountant qualified in Canada. Jay held a number of jobs in accounting and finance in Canada and
Australia before joining Sandalford Wines in 1994 as Financial Controller and Company Secretary.
Jay was a key component in the growth of Sandalford during his 5 years as Financial Controller.
Jay joined Xanadu in July 2000 as Chief Operating Officer and is responsible for all financial and
operations of Xanadu.
Mr Peter Gherardi (Viticulturalist)
Peter has an impressive history within the viticulture and winery worlds. He qualified at the University
of WA with a Bachelor of Science majoring in Agriculture in 1972 and subsequently was granted a
Master of Science from the University of WA and a Bachelor of Applied Science from Charles Sturt
University (NSW) specialising in Wine Making. He is a member of the Australian Society of
Viticulture and Oenology, the Australian Association of Agricultural Consultants and the Margaret
River Wine Industry Association.
Peter joined the Western Australian Department of Agriculture in 1979 as a Viticultural and
Oenological Research Officer. During this period he supplied technical advice to grape growers in the
Swan Valley, Margaret River, Pemberton-Manjimup and Great Southern wine growing regions of WA.
He is the author of the following publications:
•
•
•
Viticulture in Western Australia
Managing the Costs of Grape Growing
Wine Industry Newsletter
He has conducted the following research projects:
• Phenological studies of the effect of salt and wine on vine growth in Margaret River
• Effect of time of pruning and pruning method on Chardonnay
• Improved bud burst in three premium varieties in Margaret River
In 1978 Peter established his own vineyard and winery in Margaret River - Freycinet Estate. Freycinet
was an 11 hectare vineyard with a winery that produced top quality wines. The 1986 and 1987
Cabernet Sauvignon were judged in the Top 100 wines in the Sydney International Wine Competition.
Freycinet Estate was sold in 1991 and renamed Voyager Estate. In 1991 Peter consulted to the $10
million redevelopment of a winery in the Languerdoc region of France and for the last four years has
worked as a winemaker at Vingnelaure in Provence France.
Peter continues to supply expert services to WAVS under a 4-year consultancy agreement. Through
this agreement Peter agrees to provide certain consultancy services to WAVS, including the
management control and coordination of certain establishment works to develop and prepare the
Xanadu vineyard at Kudardup. Thereafter to carry out ongoing operational works on the vineyard
including the planting, trellising, irrigation, pruning and cultivating of the grape vines.
26
SECTION 6 - FINANCIAL INFORMATION
6.1
Introduction
As mentioned previously Xanadu was established in February 1999 to acquire the property and
business of the Xanadu winery. The acquisition was effected on 8 April 1999, and accordingly, only
limited historical information is available for the Company.
Copies of the reviewed half-year accounts for Xanadu to 31 December 2000 and the audited accounts
for the year ended 30 June 2000 are attached to this Prospectus as Annexures B and C respectively.
Section 6.2 summarises the balance sheet of Xanadu at 31 December 2000 together with the proforma
balance sheet which shows Xanadu’s financial position following the successful completion of the
Placement and exercise of the Options. Xanadu will have proforma net assets of approximately $25.3
million, with Xanadu’s landholding representing approximately 65% of that balance. The financial
position of Xanadu does not incorporate any value for the “Xanadu” brandname.
The proforma balance sheet has been reviewed by Hall Chadwick, Xanadu’s auditors, who have
provided their Independent Review Report which is attached to this Prospectus as Annexure A.
Section 6.3 sets out the forecast for Xanadu for the year ending 30 June 2001. The forecast
incorporates actual results for Xanadu for the six months ended 31 December 2000 and forecasts for
the last six months to 30 June 2001. It also incorporates the results of WAVS for approximately seven
months from December 2000 when it was acquired by Xanadu. The major assumptions used in
preparing the forecast are detailed in Section 6.4.
The forecast has been prepared by Xanadu management based on the Company’s Five Year Plan and
various assumptions relating to future events. The forecast has been prepared with due care and
attention, and is based on management’s assessment of present economic and operating conditions.
By their very nature, forecasts are subject to significant uncertainties, contingencies and unexpected
events, many of which are outside the control of Xanadu and its Directors. In addition, anticipated
events and circumstances often do not occur as expected. Accordingly, the actual performance of the
Company is likely to vary from that forecast and the variance could be material. Under the
circumstances, the Directors and management of Xanadu cannot and do not provide any assurance or
guarantee that the forecast will be achieved.
6.2
Consolidated Balance Sheet
Set out below is the consolidated balance sheet of Xanadu as at 31 December 2000. Further details of
the balance sheet items are provided in the half-year accounts for Xanadu attached as Annexure B to
this Prospectus. Also set out below is the proforma consolidated balance sheet which has been
prepared based on the actual balance sheet of Xanadu as at 31 December 2000 adjusted for the
following events:
•
•
•
•
The issue of 22,134,850 Shares pursuant to the exercise of the Options;
The issue of 4,111,039 Placement Shares pursuant to this Prospectus;
The raising of net funds after associated capital raising and listing costs from the above share
issues of approximately $5.4 million; and
The reduction of overall debt of $1 million.
27
XANADU FINANCIAL POSITION
Current Assets
Cash
Receivables
Inventory
Other
Total Current Assets
Reviewed
31 December 2000
$000
Proforma
31 December 2000
$000
327
1,371
5,262
457
7,417
4,735
1,371
5,262
457
11,825
Non Current Assets
Receivables
Property, Plant & Equipment
Vines
Goodwill on WAVS Acquisition
Other
Total Non Current Assets
159
17,346
1,861
1,606
281
21,253
159
17,346
1,861
1,606
281
21,253
Total Assets
28,670
33,078
Current Liabilities
Accounts Payable
Borrowings
Provisions
Total Current Liabilities
1,450
4,313
1,383
7,146
1,450
3,313
1,383
6,146
Non Current Liabilities
Borrowings
Total Non Current Liabilities
1,575
1,575
1,575
1,575
Total Liabilities
8,721
7,721
Net Assets
19,949
25,357
Equity
Issued Capital
Reserves
Retained Profits
Minority Interests
13,557
4,724
1,658
10
18,965
4,724
1,658
10
Total Equity
19,949
25,357
The results for Xanadu for the six months ended 31 December 2000 showed a profit after tax of
$98,210 on total revenue for the six months of $2,386,808 (refer to Annexure B for further details).
The results for Xanadu for the year ended 30 June 2000 showed a loss, after tax benefits, of $46,438 on
total revenue for the year of $2,897,590 (refer to Annexure C for further details).
28
6.3
Forecast Results
Forecast
Year Ending
30 June 2001
58,397
Sales Volume
(Number of Case Equivalents)
$000
Sales Revenue
4,532
Cost of Goods Sold
(2,839)
Gross Profit
1,693
Other Revenue from Ordinary Activities
1,792
Sales and Marketing Expenses
Administration Expenses
Other Expenses
Net Borrowing Costs
Goodwill Amortisation Expense
Depreciation Expense
(748)
(840)
(641)
(345)
(50)
(27)
Profit from Ordinary Activities
834
Tax Expense
(284)
Net Profit after Tax
6.4
6.4.1
550
Major Assumptions Used in Preparing the 2001 Forecast
Sales Revenue and Margins
Case Equivalent Sales
2001
Forecast
58,397
Revenue
$4,532,581
Margins
37.4%
Bulk Wine Sales – per litre
$4.50
Revenue per Case
Secession
Premium
Average per Case
(excluding bulk wine equivalents)
$71
$133
$93
Breakdown of
Case Equivalent Sales
Domestic
International
Cellar Sales
Direct
Bulk Wine Sales
Total Case Equivalent Sales
2001
Forecast
22,657
12,420
2,070
4,250
17,000
58,397
Sales revenue on wine and merchandise for the six months ended 31 December 2000 was $1,744,713.
The sales in the second half of the 2001 financial year are anticipated to be more than double those in
the first six months. This is a result of more red wine being available for sale and the bulk wine which
will be available for sale from the 2001 vintage.
29
The major product group that will be contributing to the growth in sales will be the Secession label.
Traditionally the Secession label has been made from contract fruit sources. There is also some
anticipated growth in the higher contribution labels such as the Xanadu and Xanadu Lagan Estate
products.
•
Case Sales are based on the production levels of the winery and target release dates of that wine.
•
Wine is sold within 12 months of release.
•
Pricing is based on today’s prices for domestic, export, retail and direct.
•
Cost of wine is budgeted to be 70% of wholesale price less distributors discount. For example, if
the wine wholesales at $100 per case and the distributor’s margin is 30%; the cost of wine would
be 70% of $70 or $49.
6.4.2
Cost of Goods Sold
The cost of goods sold and inventory values incorporate full absorption costing of all vineyard, winery,
production and distribution costs (including depreciation on plant and equipment used in these areas).
Vineyard
The vineyard operations for Xanadu have been contracted to WAVS for a fee of $10,800 per annum
per hectare for the 17 hectares not under lease and management agreements to WAVS. The fee of
$10,800 per hectare is included in the cost of acquiring grapes.
Winery
Operating expenses for the winery include direct costs for wine making, repairs and maintenance of the
winery buildings and equipment and labour costs. These costs to a large extent are variable and have
been adjusted based on prior years to reflect the level of production that is anticipated. For the purposes
of the profit forecasts we have assumed that the majority of the winery costs are variable. There will be
economies of scale achieved as a result of the larger vintages, however these have not been taken into
account in the forecasts.
Warehouse
Xanadu stores wines in contract warehouses whilst it is maturing in bottle prior to release. It is these
warehouse costs which are included as part of the cost of sales. The warehouse costs are variable based
on levels of production.
Bottling and Fruit Wine Purchases
•
Bottlings include the cost to bottle the wine plus all packaging requirements and are based on when
the wine is to be sold.
•
Fruit and wine purchases are forecast using budget tonnages of all vineyards and the estimated
market price or known contract price of the grapes.
6.4.3 Other Revenue from Ordinary Activities
Rental Income
Rental income represents revenue that is derived by Xanadu as a result of the lease agreements with the
growers in relation to the Vineyard Schemes.
30
Grolsch Management Income
The agreement reached between Grolsch International B.V. and Xanadu provides that a monthly fee of
$10,000 will be paid for the period of 2 years, expiring 30 June 2002 for the brand management of
Grolsch and Amsterdam beers in Australia and New Zealand. An annual bonus of up to $30,000 can
also be earned if preset volume targets are satisfied. These targets have been satisfied and this bonus is
included in the accounts.
SGARA Income
Accounting Standard AASB 1037: Self-Generating and Regenerating Assets has been adopted by
Xanadu from 1 July 2000 and requires a revaluation of inventory (vineyards). Where this gives rise to
initial adjustments which would otherwise be recognised in the profit and loss statement, the net
amount of those adjustments, including any adjustments to deferred income tax balances, must, in
accordance with Accounting Standard AASB 1018: Profit and Loss Accounts, be adjusted against
retained profits or accumulated losses as at the beginning of the financial year in which this standard is
first applied. This has resulted in an adjustment to opening retained profits as at 1 July 2000 of
$1,637,668. The grapes on the Xanadu owned vines (ie not the Vineyard Schemes) have also been
valued at 31 December 2000. This figure is included in the forecast as a revenue item.
WAVS Revenue
The 2001 profit forecast includes WAVS revenue for only seven months from date of acquisition.
The revenue represents management fees and trellising income.
6.4.4
Expenses from Ordinary Activities
Net Borrowing Costs
Xanadu will operate four credit facilities: An overdraft facility, a $1.25 million facility reducing by
$157,000 per quarter, an interest only $1.25 million facility, and an interest only $1million facility.
Interest on the overdraft facility has been calculated at 9.5% per annum and 8.5% per annum on the
other facilities.
Depreciation
Plant and equipment has been depreciated at an average rate of 25% per annum. The Directors believe
this to be a conservative view of the useful life of these assets.
Amortisation of Goodwill
Goodwill on consolidation arose on the acquisition by Xanadu of a 90% interest in WAVS in
December 2000. Goodwill is amortised on a straight line basis over the period of 20 years. The 2001
profit forecast includes amortisation for only seven months from the date of acquisition of WAVS.
WAVS Expenditure
The 2001 profit forecast includes WAVS expenditure for only seven months from date of acquisition.
31
6.4.5 Sensitivity Analysis
The forecast for the year ending 30 June 2001 is not significantly sensitive to any key assumptions as it
comprises actual results for the first six months to 31 December 2000. The following sensitivity
analysis table sets out the sensitivity of sales revenue and profit before tax to sales volume and pricing
assumptions. Care must be taken when interpreting these sensitivities. Each movement in an
assumption is treated in isolation to the others and assumes no management response to changes. The
effect on sales revenue and profit before tax presented for each sensitivity does not represent or predict
the minimums or maximums likely to be experienced in practice. Further, the analysis, which is of
necessity theoretical in nature, assumes that all other assumptions remain constant. In practice, this is
unlikely to occur.
Sensitivy Analysis
Increase Case Sales 10%
Decrease Case Sales 10%
Increase Average Price per Case 10%
Decrease Average Price per Case 10%
Increase Bulk Price 10%
Decrease Bulk Price 10%
6.4.6
2001 Forecast
Change in
Sales Revenue
$000
%
215
4.7%
-215
-4.7%
2001 Forecast
Change in
Profit before Tax
$000
%
80
9.6%
-80
-9.6%
215
-215
4.7%
-4.7%
80
-80
9.6%
-9.6%
68
-68
1.5%
-1.5%
65
-65
7.8%
-7.8%
Capital Expenditure
Estimated capital expenditure planned over the next 12 months is set out below with detail provided in
Section 3.5.
Item
Administration Area
Vineyard/Property
Winery
Property Buildings
$000
35
290
1,288
1,427
Total Capital Expenditure
3,040
6.5
Banking Arrangements
As at the date of this Prospectus, Xanadu had in place the following facilities:
•
•
•
•
A business option overdraft - business assets facility to a limit of $2.6 million subject to annual
review but otherwise expressed to be repayable on demand;
Commercial bill line - $1 million variable expiring October 2005.
Commercial bill line – $1.25 million fixed for a term of 5 years expiring April 2004.
Commercial bill line - $779,000 variable reducing by $157,000 per quarter expiring April 2002.
The facilities are secured by the following securities:
(a)
Registered first mortgage over Xanadu’s vineyard and winery;
(b)
Registered first mortgage debenture over all Xanadu’s assets and undertakings;
(c)
Registered first mortgage over the Kudardup property.
32
Xanadu has given undertakings, representations and warranties to the bank that would usually be
expected to be given by a corporation to its bankers in support of a significant banking and credit
facility. The facility documentation includes provisions including (without limitation) the delivery of
information to the bank, events of default, responsibility for costs and expenses, accelerated rights of
review and termination of the facility in certain circumstances, and in addition, certain other affirmative
undertakings concerning financial ratios and debt gearing thresholds.
6.6
Leasing Arrangements
In addition to the capital expenditure detailed in Section 3.5 to be funded from the Placement Monies
and Option Monies, Xanadu has entered into various leasing arrangements for approximately $800,000
of plant and equipment for the winery expansion.
33
SECTION 7 – BUSINESS AND INVESTMENT RISKS
Xanadu operates in the wine industry, an industry that encompasses the primary production of grapes
together with the production and marketing of wine. The long term nature of operations and the fact
that the business may be affected adversely by unforeseen events and events beyond the control of
Xanadu, makes the business relatively speculative. There are many risks associated with these
endeavours and they include, but are not limited to, the following:
7.1
Agricultural Risks
•
Disease and insect infestation
•
Lack of rainfall
•
Level of water salinity
•
Frost, hail, storm or other damage
•
Quality and quantity of grapes available
7.2
Market Risks
•
Changes in demand for wine grapes, which may affect the value of the grapes harvested from
the vineyard or the price at which additional grapes have to be purchased for the winery
•
Changes in demand for wine
- In the product mix between varieties and styles
- In the quality mix from cask to ultra premium
- In the product mix from wine to other beverages
- Influenced by adverse changes in consumer attitudes to wine consumption
- Influenced by drink driving laws
- Influenced by labelling laws and standards
•
Pressure on the pricing of wine
•
Inability to source markets for bulk wine
•
Loss of domestic or international distribution agencies
•
Increased competition from other new world wine producers such as Chile, South Africa and
others
•
Increased competition from revitalised wine industries in the old world countries such as Spain
and Italy
7.3
Production Risks
•
Access to infrastructure, including irrigation and transport
•
Production risks in the winery
•
Environmental risks associated with the operation of the winery
•
Loss of key staff
34
7.4
Financial Risks
•
Changes in government legislation which may affect the viability or profitability of the winery
•
Changes in the Australian dollar exchange rate and impact of inflation
•
Changes in the taxation laws affecting the wine industry including, but not limited to Goods and
Services Tax (GST) and Wine Equalisation Tax (WET)
7.5
Other Business Risks
•
The ability of WAVS to meet its obligations as responsible entity of the Vineyard Schemes, and
the payment by growers of their annual contributions under the Vineyard Schemes
•
Other normal or usual risks attaching to long-term agricultural projects
•
Other commercial risks associated with the production and marketing of wine
7.6
Investment/Sharemarket Risks
•
There are risks associated with any share investment
•
Shares in Xanadu carry no guarantee as to the payment of dividends, return of capital, or the
price at which they may trade on ASX
•
Listed companies experience share price and volume fluctuations that are often unrelated and
disproportionate to the operating performance of such companies
7.7
Native Title Claim
A native title claim submitted by the Noongar Land Council covering an area of about 10,000 square
kilometres in the South West has passed the registration test. Certificates of Freehold Title for existing
land held by Xanadu were granted in 1989 for Sussex location 821 and in 1968 for Sussex location
2169 which fall within the area under claim by the Noongar Land Council. As the Xanadu land is
freehold it is understood that Native Title has been extinguished.
Sussex location 3874 was converted from a perpetual lease to freehold title in 1999. The perpetual
lease over this area was granted in 1960 under the War Services Land Settlement Scheme Act 1954.
The Native Title Act 1993 (Cth) and the Titles (Validation) and Native Title (Effect of Past Acts) Act
1995 (WA) confirm that the grant of this lease was a previous exclusive possession act and had the
effect of extinguishing native title. As native title was extinguished in relation to Sussex location 3874
in 1960, the transfer of the perpetual lease to freehold in 1999 will have been valid.
35
SECTION 8 – MATERIAL CONTRACTS
The following pages contain summaries of the principal terms of material contracts entered into by
Xanadu. These material contracts are:
•
Xanadu Purchase Contract
•
Grapes Sale and Purchase Agreements
•
Lease and Management Agreements
•
Dealing Agreements
•
WAVS Share Sale Agreement
Grolsch Agreement
•
8.1
Xanadu Purchase Contract
(a)
The agreement is dated 9 March 1999 and was entered into between Xanadu, Lagan Holdings
Pty Ltd ACN 008 828 760, Chateau Xanadu (1997) Pty Ltd ACN 078 967 432 (“CX1997”),
Norgard Clohessy Equity Pty Ltd ACN 071 707 232 and Growth Capital Australia Limited
ACN 070 264 854.
(b)
The principal effect of the agreement is to give effect to the sale and transfer of:
(i)
the land, buildings and improvements comprising in the aggregate approximately 160
hectares of Sussex locations 821 and 2169, including the winery buildings, office, store,
residence, nursery and vines from Lagan Holdings Pty Ltd to Xanadu; and
(ii) the business of growing, harvesting and processing grapes and producing, bottling,
distributing, marketing and selling wine and ancillary produce conducted by CX1997
under the name Xanadu (including all relevant plant and equipment, stock, trademarks,
benefits of existing contracts and goodwill of the business), from CX1997 to Xanadu.
(c)
Settlement of the transactions took place on 8 April 1999.
(d)
The total consideration passing in money or monies worth from Xanadu to Lagan Holdings Pty
Ltd and CX1997 was approximately $8.5 million of which approximately $1.78 million was
satisfied by the issue to Lagan Holdings Pty Ltd of ordinary fully paid shares in Xanadu at an
issue price of 20 cents each. Further shares were issued to Growth Capital Australia Ltd such
that as a result of the contract 15,561,620 fully paid $0.20 shares, 11,123,230 partly paid shares
and 26,684,850 options were issued.
(e)
Provisions are included in the agreement limiting the rights of Xanadu and others with respect to
claims against Lagan Holdings Pty Ltd and CX1997 on the basis that Xanadu (and the others)
shall have made their own enquiries and investigations concerning the business acquired. In
particular, written notice of any claim must be given by 8 April 2000, any single claim is subject
to a minimum $50,000 threshold, and the maximum aggregate amount recoverable from
CX1997 in respect of all claims is capped at $3.15 million.
(f)
Pursuant to the agreement a series of other agreements were entered into including:
(i)
Xanadu’s contracts with WAVS for the purchase from it of grapes from the plantings from
the Vineyard Schemes;
(ii) Xanadu’s 10 year contract dated 23 August 1999 to purchase fruit from 25 hectares of
vineyard planted by Acacia Ridge Management Ltd (in the Frankland River locality) for
$1,600 per tonne. Xanadu has entered into an additional agreement dated 16 October 2000
to purchase fruit from a further 30.6 hectares planted by Acacia Ridge Management Ltd for
$1,600 per tonne;
(iii) Xanadu will, if requested by NCE, also produce wine from five hectares of fruit for the
benefit of the Acacia Ridge vineyard; and
(iv) Conor Lagan’s two year employment contract with Xanadu.
(g)
There are provisions to restrain certain members of the Lagan family from competing directly
with Xanadu or to allow the Lagan family name to be used to compete with the business of
Xanadu for certain designated periods set out in the document.
36
(h)
Until such time as the shares in Xanadu are listed on the official list of ASX and whilst not less
than 5% of the issued capital base of Xanadu is held by Lagan Holdings Pty Ltd or any other
associate of the Lagan Family, Growth Capital Australia Limited and Norgard Clohessy Equity
Pty Ltd have agreed to vote all and any shares owned or controlled by them so as to ensure that
Conor Lagan or, if he is unable or unwilling to so act, another person appointed by the Lagan
Family is a member of the Board of Directors of Xanadu.
(i)
Norgard Clohessy Equity Pty Ltd was entitled to certain fees for its role in the arrangements
under the agreement including a fee of 0.65% of the total amount payable to Lagan Holdings Pty
Ltd or CX1997 (approximately $55,000), and a placement fee of $83,333.
(j)
The agreement includes a number of other provisions which in substance customarily appear in
commercially negotiated agreements of a like nature.
8.2
Grapes Sale and Purchase Agreements
Xanadu has entered into two agreements with WAVS as the responsible entity for the Vineyard
Schemes whereby the Company agrees to purchase certain grapes at fixed prices.
Scheme 1
The agreement for Scheme 1 is dated 8 April 1999 and was conditional on a minimum of 65 hectares of
vinelots being subscribed for by growers. Scheme 1 has an effective term of 10 years from the first
harvest of grapes produced from plantings on Sussex locations 821 and 2169, which was in Spring
2000. Grapes to be supplied include Cabernet Sauvignon, Cabernet Franc, Merlot, Shiraz and Semillon
and there is a stated expectation per tonnes per hectare of each variety. The purchase price for the
grapes under Scheme 1 is a base price of $2,450 per tonne for all varieties other than Cabernet
Sauvignon, which is $3,000 per tonne. The purchase price per tonne is to be adjusted based on CPI
increases but with a minimum escalation of not less than 3% per annum.
Scheme 2
The agreement for Scheme 2 is dated 13 April 2000 and has an effective term of 14 years from the first
harvest of grapes produced from plantings on Sussex location 3874. The agreement expires on 30 June
2014. Grapes to be supplied include Cabernet Sauvignon, Petit Verdot, Merlot, Shiraz, Pinot Noir,
Viognier and Chardonnay and there is a stated expectation per tonnes per hectare of each variety. The
purchase price for the grapes under Scheme 2 is a base price of $2,400 per tonne. The purchase price
per tonne is to be adjusted based on CPI increases but with a minimum escalation of not less than 3%
per annum. The stated terms of the agreement were conditional on a minimum of 45 hectares of
vinelots being subscribed for by growers. If less than 45 hectares were subscribed for, then the terms
of the agreement would be adjusted pro rata in proportion to the ratio which the hectares actually
subscribed for bear to 45 hectares. Upon closure of the Scheme 2 prospectus, a total of 42 hectares was
subscribed for by growers and therefore the base terms will be adjusted in accordance with the
agreement.
Other material terms of the agreements include:
(a)
During the term of the agreements, WAVS is obliged to supply and sell and Xanadu is obliged
to accept and purchase harvested grapes which meet the specifications at the purchase price
specified or determined in the terms of the agreements.
(b)
There is a restriction on WAVS supplying and selling any harvested grapes to any person until
WAVS obligations under the agreements have been satisfied.
(c)
Ownership, title and risk in the grapes pass on delivery of the grapes. The purchase price is to be
paid within 30 days of WAVS invoice.
(d)
The agreements contain detailed specifications as to the quality and nature of the grapes to be
supplied. Specifications are reflective of industry norms within the Margaret River region.
(e)
Produce not meeting specifications will either be subject to a purchase price down grade or to
rejection.
37
(f)
WAVS undertakes to use all reasonable measures necessary to produce sufficient quantities of
grapes for the purposes of the agreements and to apply “best viticultural practice” prevailing in
the Margaret River region to its production.
(g)
There are rights for Xanadu to inspect the vineyards.
(h)
Events of force majeure will relieve a party of its obligations for the duration of the force
majeure although a party must use all reasonable efforts and endeavours to mitigate the impact
of the event of force majeure.
(i)
The agreements are governed by the laws of Western Australia and each party submits to the
jurisdiction of the courts of Western Australia and the Commonwealth of Australia.
(j)
There is a restriction on either party assigning its rights under or the benefits of the agreements.
(k)
Either party has the right to terminate the agreements if the other party does not fulfil any of the
obligations under the agreements.
(l)
The agreements contain other terms and conditions that could reasonably be expected to be
found in commercial documents of like nature.
8.3
Lease and Management Agreements
Xanadu has entered into Lease and Management Agreements in relation to the Vineyard Schemes with
WAVS, as the responsible entity, and the growers participating in the Schemes.
Under the
agreements, Xanadu as the lessor agrees to lease vinelots to the growers for the purpose of commercial
viticulture and WAVS agrees to manage and maintain the vinelots on behalf of the growers. The
agreements for both Vineyard Schemes are essentially the same although the description and, in some
cases, the structure of services to be provided by WAVS differ.
Material terms of the agreements for Scheme 1 and Scheme 2 include:
(a)
Rent, Rates and Taxes and Variable Outgoings
Each year during the term of the Lease and Management Agreement, the grower must pay rent
the amount of which is set out in the Lease and Management Agreement and any applicable
goods and services tax or similar value added tax to Xanadu in respect of the use of the land the
subject of the Lease. The amount of rent payable after the first payment of rent (to be made at a
time specified in the agreements) of $800 per vinelot is indexed, and is the greater of:
(i)
the immediately previous year's indexed rent, increased by 3%; and
(ii)
the immediately previous year's indexed rent, increased by the CPI for the 12 months
ending the immediate previous year.
All rates and taxes and variable outgoings in respect of each vinelot, including public liability
insurance premiums, will be payable by WAVS out of its own funds.
(b)
Grower's Right to Land
Each grower has full right, title and interest in the land produce in respect of its vinelot and the
right to have the land produce sold for its benefit, subject to the terms of the Lease and
Management Agreement.
(c)
Use of Vinelot
The grower may only use the vinelot for the purpose of commercial viticulture and is not
entitled to reside permanently or temporarily on the vinelot or use it for any residential,
recreational or tourism purposes. The grower must pay annual insurance premiums in respect of
the vinelot and improvements thereon and not do anything which will vitiate or avoid any
insurance.
38
(d)
Assignment
The grower is not permitted to assign, sub-let or part with possession of or grant any licence
affecting the vinelot or the improvements during the term of the lease unless:
(e)
(i)
the grower can prove to the satisfaction of Xanadu that the proposed assignee is a
respectable, responsible and solvent person;
(ii)
the assignee enters into a covenant with Xanadu that it will perform and observe the
covenants and agreements on the grower's part contained in the Lease;
(iii)
the grower and the assignee enter into a deed in the form required by Xanadu under
which the grower releases Xanadu from all claims against it in respect of or in any way
arising out of the Lease and Management Agreement; and
(iv)
the grower shall be released from the grower's liability under the agreement by reason of
an approved assignment or transfer.
Default and Termination
If the grower fails to pay any money due and payable under the Lease and Management
Agreement, then the grower must pay interest on the overdue amount from the date due for
payment until payment.
If the grower breaches any of the obligations contained in the Lease and Management
Agreement, and the breach continues for 7 days in the case of the obligation to pay money, and
in any other case for 14 days, after the grower has been given notice of the breach in writing,
then Xanadu or WAVS (as the case requires) has the following rights:
(i)
recover any money due plus interest from the grower's Proportional Share of the
Proceeds Fund;
(ii)
affirm or terminate the Lease and Management Agreement;
(iii)
commence legal proceedings (a) to recover any money due plus interest, or for damages,
or for both; and (b) for any other cause of action or remedy which Xanadu or WAVS
may have.
Upon termination of the Lease and Management Agreement:
(f)
(i)
Xanadu may enter into the vinelot and again have possession of the vinelot as its former
estate, and pay a future annual management fee due to WAVS. All right, title and
interest in the vines situated on the vinelot shall be deemed to be assigned and transferred
to Xanadu;
(ii)
the grower must return to WAVS the grower's copies of the Lease and Management
Agreement;
(iii)
the grower is not entitled to a refund of any of the rent, annual management fee,
irrigation costs or the trellising costs paid by the grower before the Lease and
Management Agreement was terminated; and
(iv)
the grower ceases to have any further claim or rights in relation to the vinelot and the
land produce.
Xanadu's Covenants
Xanadu, as the lessor, agrees to allow the grower quiet enjoyment of the vinelot without any
interruption or disturbance from Xanadu subject to the grower complying with its obligations
under the lease. Xanadu also covenants that there are no mining claims or tenements over the
grower's vinelot which adversely affect the grower's interests.
39
(g)
Registration of Lease and Management Agreement
The grower may register the Lease and Management Agreement at the Department of Land
Administration or, in the alternative, lodge a subject to claim caveat to protect their interest. If
the grower caveats the whole certificate of title to the land which contains the vinelot (rather
than just its interest), it shall at its expense withdraw the caveat on the expiry or sooner
determination of the term or on any assignment of the lease.
(h)
Western Australian Planning Commission Approval
Xanadu must, within three (3) months of the date of the Lease and Management Agreement
apply to the Western Australian Planning Commission for consent to the lease if required under
Section 20(1) of the Town Planning and Development Act 1928. The lease is conditional upon
that consent being obtained within twelve (12) months of the date of the lease.
(i)
Insurance
WAVS will use its best endeavours to arrange insurance of the vinelot and the improvements
thereon annually on behalf of the grower providing cover in respect of the interests of the
grower against destruction or damage to the vinelot and the improvements by fire and/or other
usual risks. However, each grower is responsible for the costs of the insurance. Public liability
insurance is the responsibility of WAVS.
On receipt by WAVS of insurance proceeds in respect of a successful claim made pursuant to a
policy of insurance, WAVS shall determine the grower's proportional interest of insurance
proceeds by reference to the quality and quantity (if relevant) of the grower's land produce to
which the insurance proceeds relate. Insurance proceeds in respect of any successful claim are
held by WAVS on behalf of the grower.
WAVS shall, from the grower's insurance proceeds, pay itself 5% of the grower's insurance
proceeds by way of further remuneration and pay to Xanadu an amount equal to any unpaid rent
and rent for the current year as rent for the vinelot. If all of the vinelot or the improvements are
destroyed, the Lease and Management Agreement will terminate and the grower will no longer
be a grower for the purposes of the agreement or the Scheme Constitution.
If part of the vinelot or the improvements remaining is of sufficient quantity or quality to
warrant WAVS continuing to provide the services, the Lease and Management Agreement will
continue to apply in that part of the vinelot and the grower's interest will be reduced
proportionately to reflect the smaller size of the vinelot. If no part of the vinelot of the grower is
destroyed, but the vinelots of one or more other grower's leased areas has been affected, the
grower's proportional interest and the grower's proportional share shall be increased with regard
to the proportion the grower's vinelot bears to all undamaged vinelots.
(j)
Management of Vinelot
Under the Lease and Management Agreement the grower appoints WAVS to establish and
maintain the grower's vinelot and cultivate, develop, manage and maintain their vinelot or
vinelots for the duration of the term of the Lease and Management Agreement.
WAVS agrees to perform the management services in a proper and efficient manner and
covenants that it has access to and will maintain access to such staff, personnel, consultants and
other specialist services which may be reasonably necessary for it to perform the management
services.
The services to be performed by WAVS are the supervision and management of all commercial
viticultural activities to be carried on by the grower on the vinelot, including:
(i)
plant suitable vine rootlings (or if not obtainable, cuttings) on the vinelot at a rate of
approximately 2,970 per hectare for Scheme 1 and approximately 1,852 per hectare for
Scheme 2;
40
(ii)
establish and maintain a trickle irrigation system to the vines in the vinelot;
(iii)
erect and maintain suitable trellising systems to support the vines;
(iv)
cultivate, tend, train, prune, fertilise, replant, spray and otherwise care for the vines as
and when required;
(v)
keep in good repair access laneways within the vinelot;
(vi)
use all reasonable measures to keep the vinelot free of, and protect the land produce
from, vermin, noxious weeds, pests and diseases;
(vii)
maintain in good repair and condition adequate fire-breaks in and about the vinelot;
(viii) maintain the vinelot according to good viticultural practices;
(ix)
other than irrigation costs and trellising costs and harvesting costs, pay all costs and
expenses of establishing and maintaining the vineyard on the vinelot;
(x)
replace any vines that fail to establish or die during the first 3 years of the Scheme;
(xi)
harvest all grapes grown on the vinelot and deliver them up for sale; and
(xii)
if applicable, enter into sales agreements as agent on behalf of the grower.
WAVS is entitled to delegate all or any of its obligations under the Lease and Management
Agreement to other persons. WAVS is not released from liability under the Lease and
Management Agreement by virtue of delegation.
(k)
Harvesting of the Land Produce
WAVS will arrange for the land produce to be harvested at a suitable time at its discretion or as
specified in an ordinary resolution of the relevant growers at a meeting of growers.
The grower may make one election on or before 30 August 1999 for Scheme1 and 30 August
2000 for Scheme 2, or one month after the grower lodges their application (whichever date is
later) to take their land produce. In a case where a grower has decided to collect their land
produce, WAVS will notify the grower that the produce will be available for collection on a
specified day.
If such an election is made, the grower must collect their land produce on the day specified by
WAVS and pay the relevant unpaid costs at that time (including harvesting costs, rent to Xanadu
and WAVS' annual management fee, irrigation costs and trellising costs.) If any of these costs
cannot be ascertained, the grower will pay WAVS' estimate and an adjustment will be made
once the actual costs are determined.
Otherwise, WAVS will process and sell all land produce harvested on behalf of the growers and
will be paid out of the gross proceeds of sale. This will happen also if a grower who has elected
to take their own land produce fails to collect it or fails to pay the costs, rent or fees required
under the Lease and Management Agreement.
The gross proceeds of sale, after deduction of any unpaid fees payable to WAVS and rent
payable to Xanadu, will be held in the proceeds fund on trust for the growers.
(l)
Annual Management Fee Payable by Grower
The grower must pay WAVS the annual management fee specified in the Lease and
Management Agreement for the performance by WAVS of the specified services.
41
Scheme 1
The amount of the annual management fee due to be paid by 30 June 2002 for the year ending
30 June 2003 is indexed, and is the greater of:
(i)
(ii)
$2,128 increased by 3%; and
$2,128 increased by the CPI for the 12 months ending 30 June 2002.
Scheme 2
The amount of the annual management fee due to be paid by 31 March 2003 for the year ending
30 June 2003 is $2192. The amount of the annual management fee due to be paid by 31 March
2004 for the year ending 30 June 2004 is indexed, and is the greater of:
(i)
(ii)
$2,192 increased by 3%; and
$2,192 increased by the CPI for the 12 months ending 30 June 2003.
For both Scheme 1 and 2, the amount of the annual management fee for each subsequent year
thereafter, is indexed, and is the greater of:
(i)
(ii)
(m)
the immediately previous year's annual management fee, increased by 3%; and
the immediately previous year's annual management fee, increased by the CPI for the 12
months ending the immediate previous year.
Irrigation Costs and Trellising Costs
The grower must pay those costs specified in the Lease and Management Agreement in relation
to irrigation costs for the cost of establishing an irrigation system to supply water to and through
a grower's vinelot and the trellising costs for establishing trellising on a grower's vinelot. The
grower must pay any applicable goods and services tax or similar value added tax on the
irrigation costs and trellising costs.
(n)
Bonus Payable by Grower to WAVS
WAVS is entitled to be paid a bonus, being 25% of the value of the land produce received each
year in excess of the projected total returns per vinelot as set out in the relevant prospectus. The
WAVS bonus will be borne by growers in proportion to their grower's proportional interest, and
paid out of the gross proceeds of sale. Even if the responsible entity at the time of harvesting of
the land produce is not WAVS, all of the bonus will be still be paid to WAVS.
(o)
Removal and Retirement of WAVS
A responsible entity may only be removed or retire in accordance with the Corporations Law.
In this event, any management fees payable to WAVS are apportioned pro rata.
(p)
Sale of Land Produce
WAVS must use its best endeavours to arrange for the sale of land produce of non-electing
growers and the grower is taken to have irrevocably appointed WAVS, to the exclusion of itself
and other persons, as the grower’s agent for the purpose of negotiating and making the
maximum practical price available for sales of its land produce including entering into any sale
agreement with the purchaser on such terms and conditions as WAVS considers appropriate,
whether prior to or after the planting occurs.
WAVS may sell the land produce to a person associated with WAVS if the price to be paid is
the maximum practicable price available at the date of sale and WAVS acts in utmost good faith
to the grower.
(q)
Statement to Growers
WAVS shall prepare a statement within 14 days of receipt of the gross sale proceeds stating:
(i)
the gross sale proceeds;
42
(ii)
the gross proceeds of sale of the land produce sold by WAVS;
(iii)
the total weight of the land produce included in the sale;
(iv)
the number of vinelots (or fractional parts of vinelots, where relevant) producing land
produce included in the sale; and
(v)
the amount of any payments made from the gross sale proceeds.
WAVS shall deliver the statement to non-electing growers within 14 days of the preparation of
the statements.
(r)
No Partnership
Each Lease and Management Agreement confers individual rights on each grower. The
agreement does not create any association or partnership between the grower, WAVS and other
persons having an interest in the vineyard.
8.4
Dealing Agreements
(a)
The agreements provide that NCE, as a holder of an appropriate dealer’s licence under the
Corporations Law, will perform all activities constituting dealing in securities within the
meaning of the Corporations Law for Xanadu and WAVS with respect to the public capital
raising to fund the subscription of securities in Xanadu and interests in the Vineyard Schemes.
Under the agreements, Xanadu and WAVS indemnified NCE.
(b)
The agreement for Scheme 1 was dated 7 May 1999 between Xanadu, WAVS and NCE. NCE
was entitled to certain agreed expense reimbursement to a maximum of $20,000 and a
commission of 8% on subscriptions raised over the initial two years of Scheme 1.
(c)
The agreement for the Xanadu share offer was dated 13 October 1999 between Xanadu and
NCE. NCE was entitled to certain agreed expense reimbursements to a maximum of $25,000
and a 5% commission on capital raised.
(d)
The agreement for Scheme 2 was dated 13 April 2000 between Xanadu, WAVS and NCE. NCE
was entitled to certain agreed expense reimbursements to a maximum of $20,000 and a 10%
commission on funds raised from the capital raising over the initial two years of Scheme 2.
(e)
NCE was also paid fees for assisting with the preparation of the prospectuses.
8.5
WAVS Share Sale Agreement
(a)
On 11 October 2000, Xanadu entered into a conditional Share Sale Agreement with NCE
whereby it agreed to acquire 90% of the issued share capital of WAVS from NCE for a purchase
price of $1,650,000. The purchase price was satisfied by Xanadu issuing to NCE 5,500,000
shares in Xanadu at an effective issue price of 30 cents per share . As Xanadu and NCE are
related parties for the purposes of Chapter 2E of the Corporations Law the Share Sale
Agreement was conditional upon each party receiving shareholder approval for the transaction.
Shareholder approvals were subsequently obtained and the acquisition settled on 7 December
2000.
(b)
As mentioned previously, WAVS is the responsible entity of the Vineyard Schemes.
(c)
Under the agreement Xanadu agrees that, in the event that WAVS registers two further managed
investment schemes and lodges a prospectus for each with ASIC, Xanadu will procure WAVS
to enter into an agreement with NCE to market each prospectus. Such an agreement may be
subject to approval of shareholders pursuant to Chapter 2E of the Corporations Law (approval, if
necessary, will be sought closer to the time of entering into any such agreement). The agreement
provides that NCE, in return for marketing each prospectus, will be paid:
43
•
a fee equal to 25% of the net profit before tax made by WAVS from acting as the
responsible entity of the scheme in the financial year in which Xanadu’s shareholders
approve of the marketing contract under Chapter 2E of the Corporations Law; plus
•
a commission of 10% of the amount subscribed by investors for interests in the schemes
and other securities within 13 months of the meeting of shareholders for the purposes of
Chapter 2E.
(d)
The Share Sale Agreement was also conditional on NCE obtaining shareholder approval to enter
into a management agreement with WAVS. The approval was obtained and a management
agreement subsequently entered into between WAVS and NCE. Under the management
agreement WAVS agreed to pay a management fee of $300,000 to NCE in exchange for
corporate and management services provided to WAVS between 1 July 2000 and settlement of
the acquisition under the Share Sale Agreement, as well as a dividend of $[insert] to its
shareholders prior to settlement of the agreement. The Share Sale Agreement acknowledged the
obligation to pay the management fee on the date of settlement.
(e)
Following a review of the forecast future profit of WAVS, which formed the basis of the sale to
Xanadu, it has been agreed that NCE will pay future expenses of WAVS up to a total of
$300,000 in compensation for lower than anticipated future profits.
8.6
Grolsch Agreement
(a)
The agreement is dated 4 July 2000 and is entered into between Xanadu and Grolsch
International B.V.
(b)
As part of the consultancy agreement, Xanadu will earn management fees of $10,000 per month
for the management of Grolsch and Amsterdam beers in Australia and New Zealand.
(c)
Bonuses of up to $30,000 annually can also be achieved upon the satisfaction of certain volume
requirements under this agreement.
(d)
The agreement is only effective while Andrew Moore is employed with Xanadu.
(e)
The term of the agreement is for 2 years and expires on 30 June 2002.
(f)
Either party has the right to terminate the agreement if the other party does not fulfil any of the
obligations under the agreement.
44
SECTION 9 - ADDITIONAL INFORMATION
9.1
Shareholders Registry
The register of members of Xanadu is maintained by Computershare Investor Services Pty Limited in
Western Australia and is available for inspection in accordance with the Corporations Law.
9.2
Rights Attaching to Shares in Xanadu
The share capital of Xanadu is comprised of ordinary shares. Following is a broad summary (though
not necessarily an exhaustive or definitive statement) of the rights attaching to the shares as set out in
the Constitution of Xanadu, which is available for review at the registered office of Xanadu.
Voting Rights
Subject to any special rights or restrictions for the time being attached to any class or classes of shares:
(i)
(ii)
(iii)
at meetings of members, each member entitled to vote may vote in person or by proxy, attorney
or representative; and
on a show of hands, every member present in person or by proxy, attorney or representative has
one vote; and
on a poll every member present in person or by proxy, attorney or representative has one vote
for each ordinary share that member holds.
Dividend Rights
Subject to the rights of holders of shares issued with any special or preferential rights (at present there
are none), the Board of Directors may declare an interim or a final dividend to be paid out of the profits
of Xanadu. No interest is payable by Xanadu in respect of any dividend. A transfer of shares does not
pass the right to a dividend declared on those shares before registration of that transfer.
Rights on Winding Up
Subject to Section 501 of the Corporations Law and upon the voluntary winding up of Xanadu, the
property of Xanadu is to be applied in satisfaction of its liabilities equally and subject to that
application and the Constitution of Xanadu, to be distributed among the members according to their
rights and interests in Xanadu.
A liquidator may, subject to the rights of holders of shares issued upon special terms and conditions (at
present there are none), with the sanction of a special resolution of the members of Xanadu, divide
among the members in specie the whole or any part of the property of Xanadu and for that purpose
may:
(i)
(ii)
set such value as the liquidator considers fair on any property to be divided; and
determine how the division is to be carried out as between the members or different classes of
members.
The liquidator may also, with the sanction of a special resolution of the members of Xanadu, vest the
whole or any part of the property of Xanadu in trustees on such trusts for the benefit of the
contributories as the liquidator thinks fit, but so that no member is compelled to accept any share or
other security in respect of which there is any liability.
Transfer of Shares
Subject to the Constitution of Xanadu, the Corporations Law and any other laws, the ordinary shares in
Xanadu are fully transferable, but the Board of Directors may refuse to register a transfer of shares if
Xanadu has a lien over the shares.
45
Future Issues
Xanadu may by ordinary resolution increase Xanadu’s authorised share capital. The shares issued as a
result of such a resolution shall be issued on the terms and conditions and with the rights and privileges
attached to those shares as the general meeting resolving the creation of those shares directs, or if no
direction is given, as the Board determines.
Variation of Rights
Unless otherwise provided by the terms of issue of shares of a certain class (at present there are no such
shares), the rights attached to shares of that class, may, whether or not Xanadu is being wound up, be
varied or abrogated with the consent in writing of the holders of three quarters of the issued shares of
the relevant class, or with the sanction of a special resolution passed at a meeting of the holders of the
shares of that class.
9.3
Employee Option Plan
The following Employee Options have been granted by Xanadu as part of the Employee Option Plan.
Employee
Number of
Employee Options
Exercise Price
(cents)
Expiry Date
1,000,000
30
28 October 2005
Jurg Muggli
Gerlinde Watson
Glen Goodall
Len Russell
Natalie Nilsson
400,000
200,000
160,000
100,000
160,000
30
30
30
30
30
28 October 2005
28 October 2005
28 October 2005
28 October 2005
28 October 2005
Kelly Renouf
Jay Stephenson
Andrew Moore
160,000
500,000
500,000
30
40
40
28 October 2005
28 October 2005
31 December 2005
Andrew Moore
TOTAL
3,180,000
The exercise period for Employee Options issued under the plan shall be at the discretion of the
Directors but may not exceed such period (if any) from the date of issue of the Employee Options as is
specified by the Corporations Law or Listing Rules.
An employee may only exercise their Employee Options as set out in the following table or as
otherwise determined by the Directors and specified in the offer notice. Each Employee Option will
automatically lapse if not exercised within 5 years of the date of issue.
Time Frame
% of Employee
Options that may be
exercised
After the first 31 October following the issue of the Employee Options
25%
After the second 31 October following the issue of the Employee Options
50%
After the third 31 October following issue of the Employee Options
75%
After the fourth 31 October following the issue of the Employee Options
but before the expiry of the exercise period
100%
46
The total number of Shares which could be issued by Xanadu in respect of the Employee Options,
when aggregated with the total number of Shares and Employee Options which have been issued in the
past 12 months under the Employee Option Plan, may not exceed 5% of the issued capital of Xanadu at
the time of issue of the Employee Options.
There are no participating rights or entitlements inherent in the Employee Options with respect to new
issues of capital by Xanadu, other than bonus issues by way of capitalisation of profits or reserves. In
the event of a prorata issue by Xanadu (other than a bonus issue) the number of Shares over which an
Employee Option exists and the exercise price will be adjusted in accordance with the ASX Listing
Rules.
9.4
Interests of Directors
Except as disclosed below or elsewhere in this Prospectus:
• no Director, or proposed director, or entity in which a Director is a member or partner, has or
during the last 2 years has had, any interest in the formation or promotion of the Company, or in
property acquired or proposed to be acquired by the Company; and
• no amount of any kind has been paid or agreed to be paid, and no benefit has been given or agreed
to be given, to any Director, or proposed director, or to any entity of which a Director is a member
or partner to induce him to become, or to qualify him as a Director, or otherwise for services
rendered by him or the entity in connection with the promotion or formation of the Company.
Related Directorships
(a)
Ross Norgard, Trevor Clohessy and Ken Richards are directors and major shareholders of NCE.
(b)
Trevor Clohessy and Ken Richards are directors of WAVS, which is 90% owned by Xanadu.
(c)
Peter Gherardi, who owns the 10% shareholding in WAVS, is a director of WAVS.
(d)
Ross Norgard, Trevor Clohessy and Ken Richards are directors and major shareholders of
GCA.
(e)
Conor Lagan is a director of Lagan Holdings Pty Ltd.
Interests in Shares and Options of Xanadu
Under the Constitution of Xanadu, the Directors are not required to hold any Shares. As at the date of
this Prospectus, the Directors have the following interests in the Shares and the Options, held either
directly or indirectly through associated parties:
Note
Ross Norgard
Trevor Clohessy
Ken Richards
Andrew Moore
William Crappsley
GCA
Lagan Holdings
NCE
(i)
(ii)
(iii)
(iv)
(i)
(ii)
(iii)
(iv)
Number of Shares
440,000
440,000
100,000
43,000
Nil
23,289,000
11,194,950
5,500,000
% Held
<1%
<1%
<1%
<1%
Nil
38%
18%
9%
Number of Options
Nil
Nil
Nil
Nil
Nil
12,789,900
6,394,950
Nil
% Held
Nil
Nil
Nil
Nil
Nil
58%
29%
Nil
Andrew Moore is also entitled to Employee Options as referred to in Section 9.3.
Ross Norgard, Trevor Clohessy and Ken Richards (or their associates) are directors and
shareholders in GCA.
Conor Lagan has a beneficial interest in the Xanadu shares and options held by Lagan Holdings.
Ross Norgard, Trevor Clohessy and Ken Richards (or their associates) are directors and
shareholders in NCE.
47
Interests in Shares of NCE
As at the date of this Prospectus, the Directors of Xanadu also have the following interests in the shares
and options of NCE, held either directly or indirectly through associated parties:
Note
Ken Richards
Ross Norgard
Trevor Clohessy
Andrew Moore
GCA
(i)
(i)
Number of Shares
33,188,333
33,053,333
33,053,334
26,000
15,000,000
% Held
15%
15%
15%
<1%
7%
Number of Options
2,000,000
2,537,000
2,468,000
Nil
Nil
% Held
7%
9%
9%
Nil
Nil
Ross Norgard, Trevor Clohessy and Ken Richards (or their associates) are directors and
shareholders in GCA.
Directors’ Remuneration
The Constitution of Xanadu as to the remuneration of the Directors provides that the Directors may be
paid out of the funds of the Company, as remuneration for their ordinary services as directors, such sum
as may be determined by Xanadu in general meeting. Such remuneration, in the case of non-executive
directors, shall be by fixed sum and not by a commission on or percentage of the operating revenue of
the Company or its profits. The sum so fixed may be divided among the Directors in such proportion
as they agree from time to time, or in the absence of any such agreement, equally.
Presently, the aggregate sum is fixed at $75,000 per annum for the non-executive Directors of Xanadu
to be divided as follows: $30,000 per annum for the Chairman and $15,000 per annum for each nonexecutive Director. The executive directors of Xanadu are entitled to salaries.
A Director may, in addition to remuneration, be paid travelling and other expenses properly incurred by
that Director in connection with their attendance at Board meetings and otherwise in the execution of
their duties as directors. A director’s remuneration will accrue from day to day.
Where the Directors perform extra services beyond the ordinary duties of a director, they will be
remunerated either by a fixed sum or a salary as may be determined by the Directors and such
remuneration may be either in addition to or in substitution for the directors fees referred to above.
Mr Andrew Moore, the managing director of Xanadu, is entitled to a remuneration package of
$200,000 per annum inclusive of superannuation plus the use of a company vehicle, and is also entitled
to certain Employee Options referred to in Section 9.3.
Mr Conor Lagan, executive director of Xanadu, is entitled to a remuneration package of $51,000 per
annum inclusive of superannuation by agreement between West Coast Wine Consultants Pty Ltd
(“WCWC”) and Xanadu dated 8 April 1999, as varied on 11 May 2000. Key terms of the Consultancy
Agreement include:
(a)
WCWC will also be entitled to reimbursement of expenses incurred at the request of Xanadu or
in carrying on, promoting and maintaining the business of Xanadu.
(b)
WCWC agrees to provide certain consulting services to Xanadu including the management of
Xanadu’s business at an operational and strategic level, and such other services as agreed
between the parties from time to time, it being acknowledged that the role of WCWC shall
include the part-time dedication of Conor Lagan and that the role will evolve over time in
accordance with the needs of the business and the requirements of both parties, and also
includes the duties of Conor Lagan as a Director of Xanadu.
(c)
The period of the consultancy will be for two years or until terminated on not less than three
months prior written notice by either party, whichever occurs first.
48
(d)
There is a restraint of trade provision effectively requiring Conor Lagan not to compete directly
or indirectly with the business of Xanadu within the Margaret River region during the term of
the consultancy and also for a period of 12 months afterwards, except with the prior written
approval of Xanadu.
Mr William Crappsley, a non-executive director of Xanadu, has entered into a consultancy agreement
with Xanadu dated 20 November 2000 to provide bulk wine consultancy services to Xanadu. Key
terms of the Consultancy Agreement include:
(a)
Mr Crappsley will provide to the Company, on an exclusive basis, the services of bulk wine
sales and marketing, advice in the pricing of bulk wine, and advice and assistance with
negotiation of bulk wine contracts.
(b)
The consultancy will initially be for a period of two years, with the right to extend for a further
two years upon notification by Xanadu. Either party may terminate the agreement with 30 days
written notice.
(c)
Xanadu has agreed to pay a commission to Mr Crappsley of 5% of the contracted value of the
bulk wine contracts. The Company also agrees to pay for work outside the bulk wine contracts
at an hourly rate of $200. Xanadu will also reimburse all reasonable travelling and general
expenses incurred in the performance of Mr Crappsley’s duties.
Interests in Contracts
(a)
Through their shareholdings in NCE and Growth Capital Australia Ltd, Ken Richards, Ross
Norgard and Trevor Clohessy or their associates have an interest in the original Xanadu
purchase agreement summarised in Section 8.1 of this Prospectus.
(b)
Conor Lagan is a potential beneficiary of a family trust that has interests in the original Xanadu
purchase agreement summarised in Section 8.1.
(c)
Xanadu has entered into two grape supply contracts with WAVS as discussed in Section 8.2.
(d)
Xanadu has entered into two lease and management contracts with WAVS as discussed in
Section 8.3.
(e)
Through their shareholdings in NCE, Ken Richards, Ross Norgard and Trevor Clohessy or their
associates have an interest in the various Dealing Agreements between Xanadu and NCE
discussed in Section 8.4.
(f)
Through their shareholdings in NCE, Ken Richards, Ross Norgard and Trevor Clohessy or their
associates have an interest in the share sale agreement with respect to WAVS summarised in
Section 8.5 of this Prospectus.
(g)
Ken Richards, Ross Norgard and Trevor Clohessy are each potential beneficiaries of family
trusts that each own 16.66% of Acacia Ridge Management Limited, the management company
of the Acacia Ridge vineyard and they or associated parties are also growers in the vineyard
which has a contract to supply grapes to Xanadu.
(h)
Ken Richards, Ross Norgard and Trevor Clohessy are each potential beneficiaries of family
trusts that each own 11.11% of F.R.V. Management Limited, the management company of the
Frankland River vineyard and they or associated parties are also growers in the vineyard which
is currently negotiating to supply grapes to Xanadu. The negotiations are being progressed by
the independent directors of Xanadu on normal commercial arms length terms. The agreed
supply arrangement between the parties will be subject to formal documentation.
(i)
Xanadu processes small quantities of fruit on behalf of Bill Crappsley and Peter Gherardi on
normal commercial terms.
(j)
Xanadu maintains and pays the premium for a Directors and Officers Insurance Policy on behalf
of the Directors and officers of Xanadu.
49
(k)
Peter Gherardi, a director of WAVS, is a potential beneficiary of a family trust, Gherardi
Holdings Pty Ltd ACN 052 974 795 as trustee for The Gherardi Family Trust (“Gherardi”)
which has entered into two Consultancy Agreements dated 15 April 1999 and 10 April 2000
with WAVS. Key terms of the Consultancy Agreements include:
(i)
Gherardi agrees to provide certain consultancy services to WAVS in relation to the
Vineyard Schemes including the management control and coordination of certain
establishment works to develop and prepare the vineyard for the planting of grape vines
and, thereafter, to carry out ongoing maintenance and operational works on the vineyard
including the planting, trellising, irrigation, pruning and cultivating of the grape vines.
(ii)
The term of arrangement is the later of 4 years from the date the funds for the Vineyard
Schemes were raised and the expiry of 12 months notice in writing given by a party to
the other at any time.
(iii)
The consultancy fee comprises a fee of $25,000 for the completion of the establishment
works and, thereafter, a fee for ongoing works calculated by reference to the aggregate of
the area of the vineyards upon which the establishment works have been completed:
•
$800 per hectare for the period 1 July 2000 to 30 June 2001 (for Scheme 1);
•
$1,000 per hectare for the period 1 July 2000 to 30 June 2001 (for Scheme 2);
• $800 per hectare adjusted for CPI for the period 1 July 2001 to 30 June 2002 (for
Scheme 1);
•
$800 per hectare for the period 1 July 2001 to 30 June 2002 (for Scheme 2); and
• thereafter for the remainder of the terms of both Schemes 1and 2 the rate of $800 per
hectare adjusted annually to CPI.
Gherardi will also be entitled to reimbursement of expenses including those incurred at
the request of WAVS but excluding the cost of contractors engaged on behalf of WAVS
and the acquisition of any item of plant or equipment or other consumables necessary to
undertake the establishment works and the maintenance works at the vineyard.
Other Interests
Ross Norgard, Trevor Clohessy, Ken Richards and Conor Lagan (or their associated parties), as
founding directors and shareholders of Xanadu, are entitled to additional discounts on the purchase of
wines over and above the shareholder loyalty program referred to in Section 1.7 of this Prospectus.
Directors’ Interests in Firms Engaged by Xanadu
Ross Norgard and Trevor Clohessy, Directors of Xanadu, are partners in the accounting firm Norgard
Clohessy and are directors and shareholders (through associated parties) of the corporate advisory firm
Norvest Corporate Pty Ltd.
Xanadu has paid or has agreed to pay Norgard Clohessy fees totalling approximately $69,000 over the
last two years based on normal professional terms.
Norvest Corporate Pty Ltd has acted as corporate advisor to Xanadu in relation to its proposed public
listing on ASX and other transactions/matters over the last two years including professional services
rendered in relation to this Prospectus. In consideration for these services, Xanadu has paid or has
agreed to pay Norvest Corporate Pty Ltd fees totalling approximately $145,000 based on normal
professional terms.
Further fees may be payable by Xanadu and WAVS for future services rendered based on normal
professional terms.
50
9.5
Interests of Experts
Except as disclosed below or elsewhere in this Prospectus:
• no expert or any entity in which an expert is a member or partner, has or during the last two years
has had, any interest in the formation or promotion of the Company, or in property acquired or
proposed to be acquired by the Company; and
• no amount of any kind has been paid or agreed to be paid, and no benefit has been given or agreed
to be given, to any expert, or to any entity of which an expert is a member or partner, for services
rendered by him or the entity in connection with the promotion or formation of the Company.
During the last two years, Hall Chadwick (or its associated entities) has been paid or will be paid
professional fees by Xanadu of approximately $30,000. In addition, Hall Chadwick will be paid an
estimated fee of approximately $2,000 by Xanadu for the preparation of the Independent Review
Report for the proforma balance sheet attached as Annexure A.
During the last two years, Ray Jordan has been paid or will be paid professional fees of approximately
$2,000 by Xanadu. In addition, Ray Jordan will be paid an estimated fee of approximately $1,000 by
Xanadu for the preparation of the “Industry Background” included as Section 4 of this Prospectus.
During the last two years, Freehills has been paid or will be paid professional fees of approximately
$32,000 by Xanadu. In addition, Freehills will be paid an estimated fee of approximately $12,000 by
Xanadu for professional services rendered in relation to this Prospectus.
9.6
Consents and Disclaimers of Responsibility
The following written consents have been given in accordance with the Corporations Law with respect
to this Prospectus:
Hall Chadwick have given, and have not before lodgement of this Prospectus withdrawn, their written
consent to be named as Auditors of Xanadu in this Prospectus, and to the inclusion of their
Independent Review Report on the proforma balance sheet of Xanadu, their Independent Review
Report in relation to the accounts for the half-year ended 31 December 2000 and their Independent
Audit Report in relation to the accounts for the year ended 30 June 2000 in Annexures A, B and C
respectively to this Prospectus in the form and context in which they are included, together with all
references to those reports in this Prospectus. Hall Chadwick do not accept responsibility for the
contents of this Prospectus other than their specified reports.
Ray Jordan has given, and has not before lodgement of this Prospectus withdrawn, his written consent
to the inclusion of Section 4 entitled “Industry Background” in the form and context in which it is
included. Ray Jordan does not accept responsibility for the contents of this Prospectus other than
Section 4.
Norvest Corporate Pty Ltd (“Norvest”) has given, and has not before lodgement of this Prospectus
withdrawn, its written consent to be named as corporate advisor to Xanadu in this Prospectus. Norvest
does not make the offer of the Placement Shares under this Prospectus. The offer of the Placement
Shares is made by Xanadu. Norvest does not make a statement in this Prospectus, nor is a statement in
this Prospectus based on a statement made by Norvest. Norvest does not accept responsibility for the
contents of this Prospectus.
Freehills has given, and has not before lodgement of this Prospectus withdrawn, its written consent to
be named as solicitors to Xanadu in this Prospectus. Freehills does not make the offer of the Placement
Shares under this Prospectus. The offer of the Placement Shares is made by Xanadu. Freehills does
not make a statement in this Prospectus, nor is a statement in this Prospectus based on a statement made
by Freehills. Freehills does not accept responsibility for the contents of this Prospectus.
51
Computershare Investor Services Pty Limited (“Computershare”) has given, and has not before
lodgement of this Prospectus withdrawn, its written consent to be named as the share registry of
Xanadu in this Prospectus. Computershare does not make the offer of the Placement Shares under this
Prospectus. The offer of the Placement Shares is made by Xanadu. Computershare does not make a
statement in this Prospectus, nor is a statement in this Prospectus based on a statement made by
Computershare. Computershare does not accept responsibility for the contents of this Prospectus.
9.7
ASX Listing and Associated Capital Raising Expenses
The total estimated amount of expenses in relation to the capital raising under this Prospectus and the
sale and exercise of the Options, together with the listing of Xanadu on ASX is approximately
$458,000 including all legal and experts fees.
9.8
Litigation
There is no known litigation of a material nature pending or threatened that may significantly affect
Xanadu.
52
SECTION 10 - DIRECTORS’ STATEMENT
The Directors of Xanadu state that in their opinion, since 31 December 2000, being the date of the last
financial statements attached to this Prospectus, no circumstances have arisen that materially affect or
may be expected to materially affect the assets or liabilities, financial position or profits and losses of
Xanadu, except as disclosed elsewhere in this Prospectus.
The Directors have consented to the lodgement of this Prospectus dated 8 March 2001.
Andrew Moore
Managing Director
53
SECTION 11 - DEFINITIONS
In this Prospectus, unless the contrary intention appears, the following words have the following
meanings.
“ASIC” means Australian Securities and Investments Commission.
“ASX” means Australian Stock Exchange Limited ACN 008 624 691.
“Board” means the directors of Xanadu.
“Company” means Xanadu Wines Ltd ACN 086 435 136.
“Director” means a director of Xanadu Wines Ltd ACN 086 435 136.
“Employee Options” means the options over unissued shares in Xanadu Wines Ltd that are
exercisable at various dates and prices per the terms of the Employee Option Plan in Section 9.3 of this
Prospectus.
“GCA” means Growth Capital Australia Ltd ACN 070 264 854.
“Lagan Holdings” means Lagan Holdings Pty Ltd ACN 008 828 760.
“NCE” means Norgard Clohessy Equity Limited ACN 071 707 232.
“Options” means the options over unissued shares in Xanadu Wines Ltd that are exercisable at
20 cents on or before 31 December 2003.
“Option Monies” means the amount of 20 cents per Share payable upon exercise of the Options.
“Placement” means the invitation to specific parties to subscribe for 4,111,039 Placement Shares at a
price of 35 cents each.
“Placement Monies” means the amount of 35 cents per Placement Share applied for under this
Prospectus.
“Placement Shares” means the 4,111,039 fully paid ordinary shares in Xanadu Wines Ltd offered for
subscription to specific parties under this Prospectus.
“Prospectus” means this Prospectus dated 8 March 2001 issued by Xanadu Wines Ltd for the
Placement.
“Scheme 1” means the Xanadu Vineyard Scheme (ARSN 086 936 585).
“Scheme 2” means the Xanadu Vineyard Scheme (ARSN 091 603 548).
“Shares” means ordinary fully paid shares in the capital of Xanadu Wines Ltd.
“Vineyard Schemes” means the two managed investment schemes known as the Xanadu Vineyard
Scheme (ARSN 086 936 585) (“Scheme 1”) and the Xanadu Vineyard II Scheme (ARSN 091 603 548)
(“Scheme 2”) between the growers, WAVS as the responsible entity and Xanadu, whereby growers
lease a vinelot and pay management fees for the ongoing management, production and harvesting of
grapes.
“WAVS” means Western Australian Viticulture Services Ltd ACN 085 983 366.
“WST” means Western Standard Time.
“Xanadu” means Xanadu Wines Ltd ACN 086 435 136.
54
SECTION 12 - HOW TO APPLY
Set out below are instructions for completing the attached Application Form.
1.
Read this Prospectus dated 8 March 2001.
2.
Complete the attached Application Form using BLOCK LETTERS.
3.
Insert the total number of Placement Shares to be applied for.
4.
Insert the total amount of Placement Monies being 35 cents per Placement Share applied for.
5.
Make cheques payable to “Xanadu Wines Ltd Share Offer” and cross “Not Negotiable”.
6.
Xanadu will apply to ASX to participate in CHESS per Section 2.7 of this Prospectus. If you are
already a participant in CHESS, you may complete this section. Otherwise leave the section blank.
7.
Joint applicants will be deemed to be holding their Placement Shares as joint tenants unless
requested to the contrary.
8.
The completed Application Form and cheque should be forwarded to Mr Jay Stephenson at
Xanadu Wines Ltd:
16 Ord Street
West Perth WA 6005
9.
OR
PO Box 783
West Perth WA 6872
By completing and submitting the Application Form, the applicant acknowledges and agrees that:
The Corporations Law prohibits any person from passing on to another person an application form
unless it is attached to or accompanied by a complete and unaltered Prospectus.
The applicant has read this Propectus in its entirety.
The application is for Placement Shares upon the terms of this Prospectus.
Following the lodgement of this Prospectus with ASIC, the Prospectus is subject to a minimum
exposure period of 7 days. Applicants acknowledge that:
• Xanadu will not process any applications received until after the exposure period;
• no preference will be conferred on applications received in the exposure period;
• the purpose of the exposure period is to enable this Prospectus to be examined by market
participants prior to raising the Placement Monies;
• that examination may result in the identification of deficiencies in this Prospectus; and
• in those circumstances, any application that has been received may need to be dealt with in
accordance with Section 724 of the Corporations Law.
55
XANADU WINES LTD
ACN 086 435 136
APPLICATION FORM
Important
This Application Form relates to the Prospectus dated 8 March 2001 pursuant to which Xanadu is
offering 4,111,039 Placement Shares at 35 cents each. This Prospectus does not constitute a public
offer of the Placement Shares. The Placement is offered to the specific parties identified in Sections
2.1 and 2.2. This Prospectus will expire on 7 July 2001 and no Placement Shares will be issued on the
basis of this Prospectus after that date.
This Prospectus contains important information and applicants should read this Prospectus in its
entirety. Applications should be completed and lodged in accordance with the instructions on the
previous page including the acknowledgements made by the applicant.
Returning the Application Form will constitute your offer to subscribe for Placement Shares and your
acceptance of the acknowledgements set out in Section 12.
NO SIGNATURE IS REQUIRED
APPLICATION FOR PLACEMENT SHARES
I/we wish to subscribe for……………………………..Placement Shares.
Insert Number
PLACEMENT MONIES
I/we tender the sum of $……………………..being 35 cents per Placement Share applied for.
Insert Dollar Amount
DETAILS OF THE APPLICANT(S)
Dr/Mr/Mrs/Miss/Ms…………………………………………………………………………………….
Insert Full Names of Applicant # 1
Dr/Mr/Mrs/Miss/Ms…………………………………………………………………………………….
Insert Full Names of Applicant # 2
Company Name…………………………………………………..ACN:………………………………
Address…………………………………………………………………………………………………
City…………………………………..State………………………………..P/Code………………….
CHESS HIN (where applicable)…………………………………………..
56
ANNEXURE A
INDEPENDENT REVIEW REPORT FOR THE PROFORMA
BALANCE SHEET
57
ANNEXURE B
REVIEWED HALF YEAR ACCOUNTS FOR THE SIX MONTHS
ENDED 31 DECEMBER 2000
58
ANNEXURE C
AUDITED ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2000
59