CFI Holdings Limited -Circular to Shareholders - June 2013.pdf

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Action Required:

CIRCULAR TO SHAREHOLDERS

If you are in any doubt as to the action you should take, please consult you stockbroker, bank manager, legal advisor, accountant orother professional advisor immediately. The purpose of this Circular is to provide the shareholders of CFI Holdings Limited withthe requisite statutory and regulatory information regarding a transaction that will result in the dilution of CFI's shareholding inVictoria Foods (Private) Limited to enable them to make an informed decision at the Extraordinary General Meeting. The Notice ofExtraordinary General Meeting containing the resolutions required to implement the Proposed Transaction, is attached to andforms part of this Circular.

1. If you have disposed of your shares in CFI, this Circular should be handed to the purchaser of such shares or thestockbroker, banker or other agent through whom the disposal was effected.

2. CFI Shareholders are entitled to attend the Extraordinary General Meeting for shareholders to vote on the ProposedTransaction which will be held at Royal Harare Golf Club, 5 Street Extension Harare, Zimbabwe at 11:00 hours on Friday26 July 2013. If you are unable to attend the Extraordinary General Meeting or at any adjournment thereof, and wish to berepresented thereat, please complete and return the attached Form of Proxy in accordance with the instructions containedtherein to CFI's Transfer Secretaries, being First Transfer Secretaries (Private) Limited, 1 Armagh Avenue, Eastlea, Harare,so as to be received not later than forty-eight hours before the time of the Extraordinary General Meeting.

REGARDING THE DILUTION OF CFI'S 100% SHAREHOLDING IN VICTORIA FOODS (PRIVATE) LIMITED THROUGH THEISSUE OF 812,841 VICTORIA FOODS (PRIVATE) LIMITED SHARES TO GRINDROD TRADING LIMITED REPRESENTING49% OF ITS ENLARGED ISSUED ORDINARY SHARE CAPITAL

SEEKING SHAREHOLDER APPROVAL FOR:THE DILUTION OF CFI'S 100% SHAREHOLDING IN VICTORIA FOODS (PRIVATE) LIMITED THROUGH THEISSUE OF 812,841 VICTORIA FOODS (PRIVATE) LIMITED SHARES TO GRINDROD TRADING LIMITEDREPRESENTING 49% OF ITS ENLARGED ISSUED SHARE CAPITAL

AND INCORPORATING ANOTICE CONVENING AN EXTRAORDINARY GENERAL MEETING AND THE RELATED FORM OF PROXY;

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ORDINARY

(48)

Financial Advisor

Imara Corporate Finance Zimbabwe (Private) Limited

Sponsoring Broker

Auditors and Independent Reporting Accountants

Imara Edwards Securities (Private) LimitedMEMBERS OF THE ZIMBABWE STOCK EXCHANGE

Deloitte & Touche Chartered Accountants (Zimbabwe)

Legal Advisors

Share Transfer Secretaries

Kantor & Immerman Legal Practitioners

First Transfer Secretaries

(A public company incorporated in the Republic of Zimbabwe on the 6 of May 1996 under registration number 3403/96)th

Date of issue of this circular: Friday 28 June 2013

CONTENTS

PART 1 CHAIRMAN'S LETTER TO THE SHAREHOLDERS OF CFI 7

PART 2 ANNEXURE 1

ANNEXURE 11

ANNEXURE III

PART 3 NOTICES

DEFINITIONS 2 - 3CORPORATE INFORMATION AND ADVISORS 4IMPORTANT DATES AND TIMES 5SALIENT FEATURES 6

1 THE PROPOSED RECAPITALISATION OF VICTORIA FOODS (PRIVATE) LIMITED 72 OVERVIEW OF CFI 8 - 93 CFI AND VICTORIA FOODS FINANCIAL INFORMATION 10 - 174 GROUPS’ FUTURE PROSPECTS 175 COSTS OF THE TRANSACTION 186 RECENT ACQUISITIONS AND DISPOSALS 187 MATERIAL CHANGES 188 FACTS AND EVENTS THAT MAY HAVE A MATERIAL IMPACT ON CFI 189 DIVIDEND POLICY 1910 DIRECTORS, MANAGEMENT AND EMPLOYEES 19 - 2111 DIRECTORS’ INTERESTS 2112 BUSINESS RISK FACTORS 2213 EXTRACTS FROM THE MEMORANDUM AND ARTICLES OF ASSOCIATION 2214 AUTHORISATION AND APPROVALS FOR THE PROPOSED TRANSACTION 2215 OTHER LISTINGS 2316 INCENTIVES AND SKILLS RETENTION ARRANGEMENTS 2317 SHARE CAPITAL 2318 ADEQUACY OF CAPITAL 2319 WORKING CAPITAL AND CASH FLOW 2420 MAJOR SHAREHOLDERS 2421 CAPITAL COMMITMENTS, LEASE COMMITMENTS AND CONTINGENT LIABILITIES 2422 INDEPENDENT REPORTING ACCOUNTANTS 2423 INTEREST BEARING LOANS AND BORROWINGS 2524 MATERIAL CONTRACTS 2525 LITIGATION STATEMENTS 2526 EXPERT CONSENTS 2527 DOCUMENTS AND CONSENTS AVAILABLE FOR INSPECTION 2628 DIRECTORS’ OPINIONS, VOTING RECOMMENDATIONS AND RESPONSIBILITY STATEMENTS 26

REPORT OF THE INDEPENDENT REPORTING ACCOUNTANTS ON THE UNAUDITEDFINANCIAL INFORMATION AND UNAUDITED PRO FORMA FINANCIAL INFORMATIONOF CFI HOLDINGS LIMITED 27 - 28

SALIENT TERMS OF THE SHARE SUBSCRIPTION AND SHAREHOLDERS’ AGREEMENT 29 - 30

SUMMARY OF THE VALUATION OF VICTORIA FOODS BY IMARACORPORATE FINANCE ZIMBABWE 31 - 32

NOTICE OF EGM 33FORM OF PROXY 34 - 36

Page 1

“Articles”

“Board” or “ the Directors”

“Circular”

“CFI” or “the Group”

“CMA”

“Companies Act”

“Conditions Precedent”

“Deloitte”, “Auditors” or “ReportingAccountants”

“EGM”

“Exchange Control Regulations”

“Financial Advisor” or “Imara”

“Grindrod Trading”

“JSE”

“Legal Advisor”

“EGM Notice”

“Farm & City”

“First Transfer Secretaries”

DEFINITIONS

The following definitions apply throughout this Circular unless otherwise stated or the context requires otherwise. In this Circular,unless otherwise indicated, the words or phrases in the left hand column bear the meaning stipulated in the right hand column.Words in the singular shall include the plural and vice versa, words denoting natural persons shall include juristic persons (whethercorporate or incorporate and vice versa) and words in the masculine shall import both the feminine and neuter.

The articles of association of CFI Holdings Limited;

The board of directors of CFI Holdings Limited;

This Circular to CFI Holdings Limited shareholders setting out the terms andconditions of the proposed recapitalisation of Victoria Foods (Private) Limited byCFI Holdings Limited and Grindrod Trading Limited;

CFI Holdings Limited, a company incorporated in of Zimbabwe, an agro industrialholding company listed on the Zimbabwe Stock Exchange;

Collateralised Management Agreement;

The Companies Act (Chapter 24:03) of Zimbabwe;

The conditions precedent set out in paragraph 1.3 of Part 1 of this Circular;

Deloitte and Touche Chartered Accountants (Zimbabwe), the Group's auditorsand reporting accountants to CFI with respect to the Proposed Transaction;

The extraordinary general meeting of CFI Shareholders to be held on Friday 26 July2013, where approval will be sought for the resolutions to give effect to theProposed Transaction;

The Exchange Control Regulations currently in force in Zimbabwe;

Imara Corporate Finance Zimbabwe (Private) Limited, a company incorporated inZimbabwe, the financial advisors to the Group regarding the Proposed Transaction;

The JSE Securities Exchange or JSE Limited, a company duly registered andincorporated with limited liability under the laws of the Republic of South Africa,licensed as an exchange under the Securities Services Act (Act 36 of 2004), asamended;

Kantor & Immerman Legal Practitioners registered legal practitioners andZimbabwean legal advisors to CFI regarding the Proposed Transaction;

The notice convening the Extraordinary General Meeting incorporated in thisCircular;

Consolidated Farming Investments Limited t/a Farm & City Centre, a companyregistered in Zimbabwe, that is engaged in the retail and distribution of agriculturalinputs and chemicals, hardware, building materials and motor accessories;

First Transfer Secretaries (Private) Limited, a company incorporated in Zimbabwewhich provides share transfer secretarial services to CFI;

Grindrod Trading Limited, a limited liability Company incorporated in Mauritiusunder registration no. 102126C1/GBL, the trading subsidiary of Grindrod Limitedthat trades in agricultural products, industrial raw materials and marine fuels andlubricants that is the transacting party with CFI regarding Victoria Foods (Private)Limited;

Page 2

“Poultry Division” or “Crest PoultryGroup”

“Proposed Transaction”

“Proxy Form”

“Retail Division”

“Shareholders”

“Specialised Division”

“Sponsoring Brokers” or “Imara EdwardsSecurities”

“US$”

“Victoria Foods”

“Zimbabwe”

“ZIMRA”

“ZSE Listing Requirements”

“ZSE”

‘'Shareholders Agreement'’

‘'Share Subscription Agreement'’

The division that controls CFI's investments in the poultry sector under CrestPoultry Group (Private) Limited comprising the following strategic business units:Agrifoods, Agrimix, Hubbard Zimbabwe, Suncrest Chickens and Glenara Estates;

The recapitalisation of Victoria Foods (Private) Limited which will be executedthrough the issuance of additional 812,841 ordinary shares in Victoria Foods

representing 49% of the enlarged issued share capitalpost the Proposed Transaction, for a consideration of US$3,250,000 and theprovision of a US$ 2,750,000 shareholders loan;

The form of proxy accompanying this Circular to CFI Shareholders;

The division that holds CFI's investments in the retail sector comprising Farm & CityCentre and CFI’s commercial property investments;

Shareholders of CFI Holdings Limited;

The division that holds CFI's investments in properties, Victoria Foods (Private)Limited, Kobenhavn Logistics (Private) Limited, Maitlands Zimbabwe (Private)Limited and Windmill (Private) Limited;

Imara Edwards Securities (Private) Limited, a company incorporated in Zimbabwe,registered members of the ZSE and Sponsoring Brokers to CFI regarding theProposed Transaction;

United States Dollar, the legal tender of the United States of America in whichmonetary amounts in this Circular are expressed;

Victoria Foods (Private) Limited, a company registered in Zimbabwe that is a 100%subsidiary of CFI that is engaged in maize and wheat milling and the distribution ofFMCG, that is the subject of the Proposed Transaction;

The Republic of Zimbabwe;

The Zimbabwe Revenue Authority;

The Listings Requirements of the ZSE; and

The Zimbabwe Stock Exchange constituted in terms of the Securities Act (Chapter24:25).

toGrindrod Trading Limited,

The agreement between CFI Holdings Limited, Victoria Foods (Private) Limitedand Grindrod Trading Limited pursuant to the Share Subscription Agreement;

The share subscription agreement between CFI Holdings Limited, Victoria Foods(Private) Limited and Grindrod Trading Limited pursuant to which Victoria Foodswill issue 812 841 new ordinary shares to Grindrod Trading Limited constituting49% of the issued share capital;

Page 3

Financial Advisor:

Auditors and Independent Reporting Accountants:

Legal Advisors in Zimbabwe:

Company Secretary:

Imara Corporate Finance Zimbabwe (Private) Limited1st Floor, Block Two, Tendeseka Office Park

Samora Machel Avenue, EastleaHarare, Zimbabwe

(P.O. Box 1475, Harare)

Deloitte & Touche Chartered Accountants (Zimbabwe)Registered Public Auditors

1 Kenilworth Gardens, NewlandsHarare

Zimbabwe


Kantor & ImmermanMacDonald House10 Selous Avenue

Harare


Panganayi HareGroup Company Secretary

CFI Holdings Limited1 Wynne Street

HarareZimbabwe


Business Address and Registered Office:

Sponsoring Broker:

Share Transfer Secretaries in Zimbabwe:

CFI Holdings Limited1 Wynne StreetHarareZimbabwe


Imara Edwards Securities (Private) Limited1st Floor, Block Two, Tendeseka Office ParkSamora Machel AvenueEastlea, HarareZimbabwe


First Transfer Secretaries (Private) LimitedNo 1 Armagh Avenue,Eastlea, HarareZimbabwe


CORPORATE INFORMATION AND ADVISORS

Board of Directors:Simplisius J. Chihambakwe Non-Executive Chairman of the Board of DirectorsGrace Muradzikwa Deputy Chairperson of the Board of DirectorsGodfrey G. Nhemachena Non-Executive DirectorFriedbert Lutz Non-Executive DirectorTimothy Nyika Non-Executive DirectorPatricia S. Bwerinofa Non-Executive DirectorBuzwani D. Mothobi Non-Executive DirectorAlbert J. Nduna Non-Executive DirectorStephen P. Kuipa Group Chief Executive OfficerAcquiline R. Chinamo Group Finance Director

Page 4

IMPORTANT DATES AND TIMES Date

NOTES:

EGM Notice published Friday 28 June 2013Abridged Circular to shareholders published Friday 28 June 2013Circular distributed to CFI shareholders Friday 12 July 2013EGM Record Date for purposes of being entitled to vote in the EGM Wednesday 24 July 2013Last Date for lodging forms or Proxy relating to the EGM (by 13:00 hrs) Wednesday 24 July 2013EGM of CFI shareholders (at 11:00 hrs) Friday 26 July 2013Publication of the Results of the EGM Tuesday 30 July 2013

The above dates are subject to change and any amendments will be published in the Zimbabwean press. All times indicated aboveand elsewhere in this Circular are Zimbabwean local times.

If you have any questions on any aspects of this Circular, please contact your stockbroker, accountant, banker, legal practitioner orother professional advisor, or Sean Gammon and/or Tawanda Masose at Imara Corporate Finance Zimbabwe, 1st Floor, BlockTwo, Tendeseka Office Park, Samora Machel Avenue, Harare, Zimbabwe; Telephone number +263 4 701320; Fax +263 4701319; e-mail: [email protected] and/or [email protected]

Page 5

THIS SUMMARY MUST BE READ AS AN INTRODUCTION TO THIS CIRCULAR AND ANY DECISION TO CASTA VOTE ON THE PROPOSED TRANSACTION SHOULD BE BASED ON A CONSIDERATION OF THE CONTENTSOF THE CIRCULAR AS A WHOLE.

TRANSACTION SUMMARY

In February 2009, the Zimbabwean economy began the process of exiting an economic recession that was characterised by hyper inflation, pricecontrols and the shortage of basic goods and services. The overall effect of the recession on local businesses was the depletion of working capitaland the lack of sufficient investment in capital expenditure. Since 2009, CFI has utilised debt finance to fund its capital requirements, but the highcost and short terms of the debt finance have negatively affected the Group's financial performance. The lack of working capital with tenures andinterest rates that match the Group subsidiary requirements, coupled with operating inefficiencies, have affected operational performanceresulting in operating overheads that current revenues and cash flows are unable to support.

There is a requirement for the Group to raise fresh capital in the form of equity and to restructure the current debt in order to address its capitalrequirements. There is also a requirement to facilitate the entry of new skills into the Group's subsidiaries. These two objectives can be metthrough a dual process of bringing on board strategic investors at a subsidiary level that have the capital and technical skills required to improve thesubsidiary's operational and financial performance.

To meet this objective, CFI seeks to enter into an agreement with Grindrod Limited through its subsidiary Grindrod Trading where by VictoriaFoods will issue 812,841 new ordinary shares to Grindrod Trading, representing 49% of Victoria Foods issued share capital post the ProposedTransaction. The subscription price to be paid by Grindrod is US$ 3,250,000. As part of the transaction, Grindrod Trading will provide VictoriaFoods with a US$ 2,750,000 shareholder loan which will bear interest at a rate of 8% per annum. Grindrod Trading will also sign variouscommercial contracts that will result in Victoria Foods accessing a US$ 12,000,000, 90 day, CMA grain procurement facility for use in itsoperations.

Attend the EGM to approve the resolutions related to the Proposed Transaction. If a CFI shareholder has disposed of all theirshares in CFI, then this Circular should be handed to the transferee of such shares or the stockbroker, banker or other agentthrough whom the disposal was effected.

CFI Shareholders who are unable to attend the EGM, but who wish to be represented thereat, should complete and sign theProxy Form included with this Circular in accordance with the instructions contained therein, and ensure it is either returned orposted to First Transfer Secretaries (Private) Limited, 1 Armagh Avenue, Eastlea, Harare or the registered offices of the Groupbeing, 1 Wynne Street, Harare, so that it is received by the share transfer secretaries by no later than 11:00 hours on Wednesday24 July 2013.

CFI Shareholders may attend the meeting in person, notwithstanding the completion and return of a Proxy Form. In order toattend the EGM, persons who have recently acquired CFI shares which have not been registered in their names should ensurethat such registration is effected on or before the close of business on Wednesday 24 July 2013.

Imara Edwards Securities (Private) Limited1st Floor, Block Two, Tendeseka Office ParkSamora Machel AvenueEastlea, HarareZimbabwe


ACTION TO BE TAKEN BY SHAREHOLDERS

Sponsoring Broker:

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OPINIONS AND RECOMMENDATIONS

INSPECTION OF CIRCULAR

Share Transfer Secretaries:

The Directors have considered the terms of the Proposed Transaction and are of the opinion that they are fair and reasonable to CFIshareholders. Accordingly, the Directors recommend that CFI shareholders vote in favour of the proposed transaction. Those Directors, whoare shareholders of CFI, intend to vote in favour of the Proposed Transaction in respect of the shares in CFI owned, directly or indirectly, by them.

The public may inspect this Circular during normal business hours from Wednesday 10 July 2013 to Wednesday 24 July 2013, at the followingoffices:



Page 6

Financial Advisor:Imara Corporate Finance Zimbabwe (Private) Limited

1st Floor, Block Two, Tendeseka Office ParkSamora Machel Avenue

Eastlea, HarareZimbabwe


PART 1: CHAIRMAN'S LETTER TO SHAREHOLDERS

CFI HOLDINGS LIMITED

Directors:

Address:

Dear CFI Shareholder,

1. THE PROPOSED RECAPITALISATION OF VICTORIA FOODS (PRIVATE) LIMITED

1.1

INFORMATION ON GRINDROD LIMITED AND GRINDROD TRADING LIMITED

(Incorporated in Zimbabwe on 6 May 1996 under registration number 3403/96)

S.J. Chihambakwe (Non-Executive Chairman), G. Muradzikwa, G.G. Nhemachena, F. Lutz, T. Nyika,P.S. Bwerinofa, B.D. Mothobi, A.J. Nduna, S.P. Kuipa (Chief Executive Officer), A.R. Chinamo (Finance Director)

No.1 Wynne Street, Harare, Zimbabwe.

Our company is a holding company listed on the ZSE with shareholdings in subsidiaries and associates involved in poultry, grainmilling, retailing and property development. In February 2009, the Zimbabwean economy began the process of exiting aneconomic recession that was characterised by hyperinflation, price controls and the shortage of basic goods and services. Theoverall effect of the recession on our subsidiary businesses was the depletion of working capital and the lack of sufficient investmentin the requisite infrastructure. Since 2009, CFI has utilised debt finance to fund its capital requirements but the high cost and shorttenure of the debt finance have negatively affected the Group's financial performance.

The lack of working capital with tenures and interest rates that match the Group's subsidiaries' requirements coupled withoperating inefficiencies has negatively affected their operational and financial performance resulting in operating overheads thatcurrent revenues and cash flows are unable to support.

The Group has been actively exploring opportunities through which it can raise fresh capital in the form of equity and to restructureits current debt obligations in order to address the issues stated above. The Board also recognises that along with the injection ofnew capital, there is a requirement to facilitate the entry of new skills and business relationships into the Group's subsidiaries. It isenvisaged that the combined initiatives will result in the Group enhancing its long term financial performance.

CFI will restructure US$ 2,862,245 of its intergroup loan receivable that incorporate short and long term debt owed to it byVictoria Foods into a shareholder loan. This shareholder’s loan will rank in all respects to the Grindrod Tradingshareholder’s loan. The salient terms of the Share Subscription Agreement and Shareholders Agreement appear inAnnexure II to this Circular.

As a result of the transaction CFI's shareholding in Victoria Foods will be diluted to 51%. CFI and Grindrod Trading willconstitute a new board of directors and a new management team for Victoria Foods with Grindrod Trading appointing anequal number of representatives to the board as CFI (two) and representatives to the management team.

Grindrod Limited is a JSE listed South Africa-based holding companythat is involved in the movement of cargo by road, rail, sea and air, through integrated logistics services. The Companyoperates in four divisions: Shipping, Trading, Financial and Freight Services. The Shipping Division's fleet of dry cargo vesselsand product and chemical tankers trade under the banners of Island View Shipping and Unicorn Shipping. The TradingDivision trades in agricultural products, industrial raw materials and marine fuels and lubricants. The Financial Servicesinclude corporate and structured finance, private client services, treasury, lending, financial solutions, specialised financeand property finance. Freight Services include sea freight, ship agencies, logistics transport, logistics clearing and

Mechanics of the proposed transaction

1.2

Victoria Foods is a 100% owned subsidiary housed in the Specialised Division that is a maize and wheat milling company. Itsmain products are bakers’ flour, flour and maize meal marketed under its brand name. Victoria Foods also manufacturessnack foods and down packs a range of FMCGs. CFI seeks to enter into an agreement with Grindrod Trading to recapitalisethis subsidiary. Under the terms of the Proposed Transaction, Victoria Foods will issue 812,841 new shares to GrindrodTrading representing 49% of Victoria Foods issued share capital post the Proposed Transaction. The subscription price to bepaid by Grindrod Trading will be US$ 3,250,000. As part of the Proposed Transaction, Grindrod will provide Victoria Foodswith a US$ 2,750,000 shareholder loan which will bear interest at a rate of 8% per annum. The loan has no fixed tenure andinterest may be varied but subject to the limit set by Reserve Bank. Grindrod Trading will also sign various commercialcontracts that will result in Victoria Foods accessing a US$ 12,000,000 90 day, CMA grain procurement facility for use in itsoperations. The proceeds of the Proposed Transaction will be allocated to debt restructuring, repayment of creditors and toongoing working capital requirements.

pari pasu

Grindrod Trading Limited is a subsidiary of Grindrod Limited.

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Page 8

1.2 INFORMATION ON GRINDROD LIMITED AND GRINDROD TRADING LIMITED (CONTINUED)

forwarding, terminals, specialised terminals, stevedores and travel. Its trading division, Atlas Trading & Shipping, wasformed when Grindrod Limited purchased the agricultural commodity trading and shipping operations of SeaboardCorporation of Kansas City, USA.

The implementation of the Proposed Transaction is conditional uponCFI receiving the relevant shareholder approvals concerning the resolutions tabled at the EGM concerning theProposed Transaction and the issuance of Victoria Foods shares to Grindrod Trading;The approval of the Competition and Tariffs Commission;The approval of the Ministry of Youth Development, Indigenisation and Economic Empowerment;The Reserve Bank of Zimbabwe Exchange Control approval.

CFI is an agro-industrial conglomerate with subsidiaries involved in poultry, grain milling, retailing and propertydevelopment. The Group has its roots in the Farmers' Cooperative Society which was formed in 1908 with the objective ofmarketing maize. CFI acquired the Farmers' Cooperative Society and listed on the ZSE as an agro-industrial holdingcompany in 1997 before further expanding its operations. The Group's operating units now fall under three divisions,namely the Retail division, the Poultry division and the Specialised division. CFI's current group structure is set out below inFigure 1.

Victoria Foods was incorporated as The Midlands Milling Company (Private) Limited and began its wheatand maize milling operations in Gweru. CFI progressively increased its shareholding in Victoria Foods, culminating in theacquisition of its entire issued share capital in 2000. Victoria Foods manufactures maize meal, baker's flour, self raising flourand a variety of snacks for the local market. Victoria Foods also down packs and distributes rice, sugar beans, pop corn andsalt under the Victoria Foods brand. Installed milling capacity currently stands at 147,600 tonnes per annum with the Gweruplant capacity at 49,200 tonnes per annum of maize and 49,200 tonnes per annum of flour and with Harare capacity at 49200 tonnes of flour per annum. Victoria Foods has an in-house distribution network of five depots and two agents inBulawayo and Hwange.

Crest Poultry Group is a leading vertically integrated broiler producer whose operations includestock feed production, a hatchery, broiler breeding, slaughter and distribution of dressed chickens and the commercialproduction of table eggs. The division also provides products and technical support services to third party broilerproducers. The division conducts its poultry operations from four sites; Hubbard Zimbabwe, Crest Breeders International,

1.3 CONDITIONS PRECEDENT

2. OVERVIEW OF CFI

2.1 HISTORY OF CFI

Figure 1: Current CFI group structure

2.2 CURRENT OPERATIONS AND BUSINESS UNITS

Victoria Foods:

Crest Poultry Group:

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CFI holds 100% shareholding in the various subsidiaries listed above unless stated otherwise

100%RETAIL DIVISION

Farm & City

Vetco


Crest Poultry Group t/a:

Agrifoods

Agrimix

Hubbard Zimbabwe

Crest Breeders

Suncrest

Glenara Estates

100%POULTRY DIVISION

100%SPECIALISED DIVISION

Properties

Victoria Foods

Kobenhavn Logistics

Maitlands

Windmill (14%)

(45%)

2.2 CURRENT OPERATIONS AND BUSINESS UNITS (CONTINUED)

Glenara Estates and the Suncrest abattoir. Agrifoods operates two mills in Harare and Bulawayo and provides Crest PoultryGroup with its stock feed requirements. Agrifoods also sells its products to third party livestock producers engaged inpoultry, beef and piggery production.

Farm & City is a leading distributor of agricultural inputs, agricultural chemicals, hardware and building materials. Theretailer has one distribution centre and 36 branches located in selected cities and major agricultural centres of Zimbabwe,presenting a key distribution channel for the nation's major agricultural inputs, mechanical and chemical manufacturers.Farm & City's main product offerings include:

Maize, soya beans and wheat seed;Fertilizers and crop chemicals;Building materials; andMechanical farming implements.

The majority of CFI's property portfolio is managed from this division.

CFI also holds investments in agricultural input manufacturers and agricultural service providers that the Board nowconsiders to be non-core to operations and which have been placed into a controlled disposal process. These investmentsinclude:

a 14% shareholding in Windmill, a fertilizer, agro chemicals, animal stock feeds manufacturing and distributioncompany.

The disposal of the assets listed above is under consideration by the directors and any proceeds from the sales will bereinvested into the Group's remaining operations.

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Page 9

3. CFI FINANCIAL INFORMATION AND VICTORIA FOODS FINANCIAL INFORMATION

UNAUDITED FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

UNAUDITED AUDITED AUDITED AUDITED AUDITED6 months to year to year to year to year to

` 31.03.2013 30.09.2012 30.09.2011 30.09.2010 30.09.2009US$ US$ US$ US$ US$

REVENUE

GROSS PROFIT 10,212,860 18,699,399 21,649,776 18,803,324 8,633,224

OPERATING LOSS (696,427) (3,459,984) (2,783,418) (1,432,204) (1,189,721)

LOSS BEFORE TAX (2,390,644) (6,867,939) (5,542,429) (3,588,067) (1,355,511)

LOSS FOR THE PERIOD (1,764,077) (3,992,433) (4,099,207) (2,473,830) (86,798

DISCONTINUED OPERATIONS

LOSS FOR THE PERIOD (1,764,077) (3,380,521) (4,521,010) (2,473,830) (86,798)

OTHER COMPREHENSIVE (LOSS)INCOME, NET OF TAX

(709,589) 6,215,588 3,600 1,930,761 3,040,553

TOTAL COMPREHENSIVE (LOSS) INCOMEFOR THE PERIOD (2,473,666) 2,835,067 (4,517,410) (543,069) 2,953,755

LOSS FOR THE PERIOD ATTRIBUTABLE TO:

(1,764,077) (3,380,521) (4,521,010) (2,473,830) (86,798)

TOTAL COMPREHENSIVE INCOME (LOSS)ATTRIBUTABLE TO:

(2,473,666) 2,835,067 (4,517,410) (543,069) 2,953,755

Below are extracts from the financial statements of CFI for the half year ended 31 March 2013 and the audited financialinformation for the years ended 30 September 2009 - 2012. The information in this paragraph should be read in conjunctionwith Part 2 Annexure 1 – The Independent Reporting Accountants' Report.

48,047,191 92,381,366 98,086,654 73,326,432 30,494,314Cost of sales (37,834,331) (73,681,967) (76,436,878) (54,523,108) (21,861,090)

Other operating income 1,864,128 7,663,097 2,210,350 1,742,572 1,728,432Selling, marketing and distribution (2,899,763) (6,567,642) (6,072,255) (4,616,280) (2,454,032)Administrative and other operating expenses (9,873,652) (23,254,838) (20,571,289) (17,361,820) (9,097,345)

Net financing costs (1,694,217) (3,407,955) (2,759,011) (2,155,863) (165,790)

Income tax credit 626,567 2,875,506 1,443,222 1,114,237 1,268,713

Profit (loss) from discontinued operations - 611,912 (421,803) - -

Net value loss (gain) on available-for-sale investments (708,050) (35,211) 3,600 2,732 1,753,885(Losses) gains on revaluation of properties (1,539) 6,250,799 - 1,928,029 1,286,668

Equity holders of the parent (1,764,077) (3,346,534) (4,493,983) (2,451,047) (92,698)Non-controlling interests - (33,987) (27,027) (22,783) 5,900

Equity holders of the parent (2,473,666) 2,815,173 (4,490,383) (534,787) 2,947,740Non-controlling interests - 19,894 (27,027) (8,282) 6,015

CONTINUING OPERATIONS

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Page 10

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

UNAUDITED AUDITEDAs at 31-Mar-13 31-Mar-12 30-Sep-12

US$ US$ US$Non-current assets

Total non-current assets 63,313,086 55,876,545 65,600,928

Current assets

Total current assets 22,381,101 34,906,290 26,402,705

TOTAL ASSETS 85,694,187 90,782,835 92,003,633

EQUITY AND LIABILITIES

TOTAL EQUITY 42,665,593 39,549,938 45,139,259

Non-current liabilities

Total non-current liabilities 7,824,401 7,680,921 8,756,343

Current liabilities

35,204,193 43,537,569 38,108,031

Total current liabilities 35,204,193 43,551,976 38,108,031

TOTAL EQUITY AND LIABILITIES 85,694,187 90,782,835 92,003,633

Property, plant and equipment 60,026,644 51,810,103 61,564,485Investments 3,286,442 4,066,442 4,036,443

Inventories and biological assets 15,376,261 20,239,220 17,289,674Trade and other receivables 6,152,757 9,877,361 7,069,743Investments 257,219 220,201 259,614Cash and bank balances 594,864 4,281,293 1,783,674

22,381,101 34,618,075 26,402,705Non-current assets classified as held for sale - 288,215 -

Issued share capital 1,055,009 1,055,009 1,055,009Share premium 73,440 73,440 73,440Share options reserve 156,004 156,004 156,004Non-distributed reserves 53,529,479 46,338,864 54,239,068Accumulated losses (12,148,339) (8,247,164) (10,384,262)Non-controlling interests - 173,785 -

Long term borrowings 2,695,277 1,694,505 2,695,277Deferred tax liabilities 5,129,124 5,986,416 6,061,066

Trade and other payables 20,953,032 29,097,038 24,306,295Short term borrowings 12,670,165 14,073,481 13,107,951Bank overdraft 1,173,497 428 532,226Current tax liabilities 407,499 366,622 161,559

Liabilities associated with non-current assets classified as held for sale - 14,407 -

Page 11

CONSOLIDATED STATEMENT OF CASHFLOWS

AUDITEDyear to

31-Mar-13 31-Mar-12 30-Sep-12US$ US$ US$

CASH FLOWS FROM OPERATING ACTIVITIES

CASH GENERATED FROM (UTILISED IN) OPERATING ACTIVITIES

NET CASH (UTILISED IN) OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

NET CASH (UTILISED IN) RECEIVED FROM INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

NET CASH (UTILISED) GENERATED FROM FINANCING ACTIVITIES

NET CASH (OUTFLOW) INFLOW

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS AT END OF PERIOD

Loss before tax from continuing and discontinued operations (2,390,644) (2,084,789) (6,256,316)Adjustments for:-Impairments of property, plant and equipment 19,709 4,058 401,845Depreciation expense 1,230,015 926,733 1,818,683Change in fair value of biological assets (59,824) 34,303 (32,176)Loss on disposal of interest in subsidiary - - 40,450Decrease (increase) in fair value of listed investments 2,396 - (5,213)Dividends received from investments - - (1,934)Net financing cost 1,694,217 1,453,334 3,407,955Loss (profit) on disposal of property, plant and equipment 334,591 (3,006,467) (5,301,697)

830,460 (2,672,828) (5,928,403)Decrease in inventories and biological assets 1,973,237 504,053 3,277,652Decrease (Increase) in trade and other receivables 916,986 (1,971,079) (289,327)(Increase) decrease in trade and other payables (3,353,270) 4,600,179 857,349

367,413 460,325 (2,082,729)

Net financing cost (1,694,217) (1,453,334) (3,407,955)Income taxes paid (19,014) (31,835) (263,406)

(1,345,818) (1,024,844) (5,754,090)

Dividends received from investments - - 1,934Proceeds from disposal of investments - - 354,405Payments for property, plant and equipment (261,640) (2,468,117) (5,003,553)Proceeds from disposal of property, plant and equipment 215,163 4,385,358 8,223,356

(46,477) 1,917,241 3,576,142

Net proceeds from long term loans - 1,255,599 2,256,371Net (settlement of) proceeds from short term loans (437,786) 854,645 (105,199)

(437,786) 2,110,244 2,151,172

(1,830,081) 3,002,641 (26,776)

1,278,224 1,278,224

(578,633) 4,280,865 1,251,448

OPERATING CASH IN (OUT) FLOWS BEFORE WORKING CAPITAL CHANGES

1,251,448

Page 12

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VICTORIA FOODS (PRIVATE) LIMITED

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

UNAUDITED AUDITED AUDITED AUDITED6 months to year to year to year to31.03.2013 30.09.2012 30.09.2011 30.09.2010

US$ US$ US$ US$

REVENUE 6,087,509 13,236,397 24,498,389 21,807,204

GROSS PROFIT 1,446,969 1,642,444 4,525,107 4,175,830

OPERATING INCOME (LOSS) 660,568 (3,572,199) (739,718) (121,158)

PROFIT (LOSS) BEFORE TAX 121,193 (4,481,052) (2,065,222) (686,614)

PROFIT (LOSS) BEFORE TAX 182,273 (3,274,972) (1,449,999) (692,147)

OTHER COMPREHENSIVE INCOME, NET OF TAX

- 1,557,050 - 292,722

TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD 182,273 (1,717,922) (1,449,999) (399,425)

Cost of sales (4,640,540) (11,593,953) (19,973,282) (17,631,374)

Other operating income 1,056,813 50,485 14,699 4,687Selling, marketing and distribution (255,445) (1,017,782) (972,017) (314,155)Administrative and other operating expenses (1,587,769) (4,247,346) (4,307,507) (3,987,520)

Net financing costs (539,375) (908,853) (1,325,504) (565,456)

Income tax credit 61,080 1,206,080 615,223 (5,533)

Gains on revaluation of plant and properties - 2,093,293 - -Deferred tax on revaluation of plant and properties - (536,243) - 292,722

Page 14

VICTORIA FOODS (PRIVATE) LIMITED

STATEMENTS OF FINANCIAL POSITION

Unaudited Audited Audited Audited31-Mar-13 2012 2011 2010

US$ US$ US$ US$

ASSETS

Non-current assets

Total non-current assets 10,688,018 11,010,238 8,205,416 8,044,912

Current assets

Total current assets 5,004,279 3,157,296 5,237,903 7,682,602

Total assets 15,692,297 14,167,534 13,443,319 15,727,514


Capital and reserves

Total equity 1,421,875 1,251,602 2,969,524 4,419,523


Current liabilities

Total current liabilities 14,130,641 12,715,071 9,603,096 9,822,069

Total equity and liabilities 15,692,297 14,167,534 13,443,319 15,727,514

Property, plant and equipment 9,981,576 10,303,796 7,498,974 7,478,470Investments 706,442 706,442 706,442 566,442

Inventories and biological assets 1,481,113 1,069,922 1,899,782 3,491,439Trade and other receivables 2,948,334 1,633,500 2,920,829 3,098,987Amounts receivable from Group Companies 533,075 367,634 247,942 909,728Cash and bank balances 41,757 86,240 169,350 182,448

Issued share capital 8,460 8,460 8,460 8,460Non-distributable reserves 5,746,802 5,746,802 4,189,752 4,189,752Accumulated losses (4,333,387) (4,503,660) (1,228,688) 221,311

Deferred tax liabilities 139,781 200,861 870,699 1,485,922

Trade and other payables 5,790,883 5,671,012 5,948,516 5,219,579Amounts payable to Group Companies 8,339,758 7,044,059 3,654,580 4,602,490

Page 15

PRO FORMA FINANCIAL INFORMATION

Group31 Mar 2013 adjustments injection restructuring 31 Mar 2013

US$ US$ US$ US$ US$Note 1 Note 2 Note 3 Note 4 Note 5

ASSETSNon-current assets

Total non-current assets 63,313,086 4,125,000 400,000 - 67,838,086

Current assets

Total current assets 22,381,101 - 2,318,000 - 24,699,101

Total assets 85,694,187 4,125,000 2,718,000 - 92,537,187


Total equity 42,665,590 3,062,812 3,068,000 - 48,796,402


Total non-current liabilities 7,824,401 1,062,188 2,750,000 2,000,000 13,636,589

Current liabilities

Total current liabilities 35,204,196 - (3,100,000) (2,000,000) 30,104,196

Total equity and liabilities 85,694,187 4,125,000 2,718,000 - 92,537,187

Net asset value per share 0.40 0.46

The information set out in this paragraph should be read in conjunction with the eport of the Independent Reporting Accountantson the Unaudited Pro forma Financial Information of CFI in Part 2, Annexure 1. The Pro Forma financial information presentedbelow is for illustrative purposes only and due to its nature, cannot give a complete picture of the financial position of the Groupafter the Proposed Transaction.

Property, plant and equipment 60,026,644 4,125,000 400,000 - 64,551,644Investments 3,286,442 - - - 3,286,442

Inventories and biological assets 15,376,261 - 2,318,000 - 17,694,261Trade and other receivables 6,152,757 - - - 6,152,757Investments 257,219 - - - 257,219

ank balances 594,864 - - - 594,864

Capital and reservesIssued share capital 1,055,009 - - - 1,055,009Share premium 73,440 - - - 73,440Share options reserve 156,004 - - - 156,004Non-distributable reserves 53,529,479 3,062,812 - - 56,592,291Accumulated losses (12,148,342) - (182,000) - (12,330,342)Non-controlling interests - 3,250,000 - 3,250,000

Deferred tax liabilities 5,129,124 1,062,188 - - 6,191,312Long-term borrowings 2,695,277 - 2,750,000 2,000,000 7,445,277

Trade and other payables 20,953,032 - (2,100,000) - 18,853,032Short-term borrowings 12,670,165 - (1,000,000) (2,000,000) 9,670,165Bank overdraft 1,173,497 - - - 1,173,497Current tax liabilities 407,502 - - - 407,502

Effect ofUNAUDITED Assets

valuation Capital Loans ProformaUNAUDITED

Cash and b

Page 16

NOTES TO THE UNAUDITED CONSOLIDATED PRO-FORMA STATEMENT OF FINANCIAL POSITION

4. GROUPS’ FUTURE PROSPECTS

Figure 2: CFI group structure post the Proposed Transaction

Note 1 Represents the unaudited consolidated statement of financial position as at 31 March 2013.

Note 2 Represents the effect of the change in accounting estimate on land and improvements (properties) owned byVictoria Foods. The subsidiary is changing the valuation base from carrying properties on the basis of market value todepreciated replacement cost, which is in line with industry peers and more appropriate for a business withspecialised properties.

Note 3 Represents the application of the anticipated US$6 million proceeds in line with agreed priorities covering:investment in additional property, plant and equipment – US$0.4 million, funding critical working capitalrequirements – US$2.4 million, servicing overdue creditors – US$2.1 million, repayment of bank borrowings –

US$1 million and funding transaction costs.

Note 4 Represents the effect of the conversion of the Victoria Foods – CFI Holdings Limited intergroup loan to ashareholder's loan – US$ 2,9 , the reassignment of bank borrowings amounting to US$2 from theGroup to Victoria Foods.

Note 5 Represents the unaudited consolidated proforma statement of financial position after the injection of theUS$ 6 , the effect of agreed valuation adjustments and loans restructuring initiatives as explained above.

The injection of long term capital into Victoria Foods and the restructuring of debt is projected to have an immediatepositive impact on its financial performance with the enhanced working capital position positively impacting inventory levelsand revenue generation. Management is confident of Victoria Foods future performance and views an investment inworking capital as strategic in maintaining and possibly improving its market position. The enhancing of current grainprocurement processes will provide a lower cost base and ensure consistency in throughput and product supply to themarket.

Overall, the long term prospects of the Group's operations are positive. The trading environments for the majorsubsidiaries continue to be attractive with strong local demand and legislation that continues to support the local productionand processing of food. CFI has access to the assets and human resources required to leverage off the growth expected inagricultural production and food consumption. The refurbishment of infrastructure and introduction of technical skills atCrest Poultry Group will allow for better bird performance and ultimately lower costs and improved throughput.

Non-core assets or assets in which CFI does not have sufficient control to direct operations for the benefit of the largerGroup potentially act as diversions of management attention and financial resources. CFI will continue to seek to exit theseinvestments and will inject the proceeds of such disposals into continuing operations along with capital raised from theongoing transactions. This will result in a more focused, better capitalised Group going forward. Figure 2 below provides anoverview of the Group's structure post the Proposed Transaction.

million million

million

CFI holds 100% shareholding in the various subsidiaries listed above unless stated otherwise

100%RETAIL DIVISION

Farm & City

Vetco


Crest Poultry Group t/a:

Agrifoods

Agrimix

Hubbard Zimbabwe

Crest Breeders

Suncrest

Glenara Estates

100%POULTRY DIVISION

100%SPECIALISED DIVISION

Properties

Kobenhavn Logistics

Victoria Foods (51%)

Maitlands

Windmill (14%)

(45%)

Page 17

5. COSTS OF THE TRANSACTION

Costs Amount US$

Total 182,000

6. RECENT ACQUISITIONS AND DISPOSALS

7. MATERIAL CHANGES

8. FACTS AND EVENTS THAT MAY A MATERIAL IMPACT ON CFI

Fluctuations in grain commodity prices and in the availability of raw materials, especially feed grains and otherinputs could negatively impact the Group's revenue and margins

Market demand and the prices we receive for our products may fluctuate due to competition from domesticand regional producers

Outbreaks of livestock diseases

Government regulations

Potential for supply chain disruption

The costs incidental to the Proposed Transaction, or incurred for the purposes of bringing the Proposed Transaction intoeffect including; printing, publishing and fees payable to professional advisors which will amount to approximatelyUS$ 182,000 will be borne by the Group and are summarised below:

Professional fees and regulatory charges 147,000Printing and publishing costs 35,000

CFI has not made any recent material disposals or acquisitions.

Save as discussed in this Circular, between 31 March 2013 and the date of this Circular, there have been no material adversechanges in CFI’s financial position, operations, and no commissions, brokerages or other special terms have been granted byCFI in connection with the issue or sale of its share capital.

As a conglomerate with subsidiaries involved in broiler production and processing, grain milling, retail and property, theGroup has recognised a number of factors that may have a material impact on the Group's operations and financialperformance. Factors that could influence the production of the Group's products and demand for the Group's servicesinclude continuing fluctuations in feed costs, changes in consumer disposable incomes and the related demand for goodsand services, labour costs and other macroeconomic factors affecting consumer spending behaviour. More specific risksand threats are summarised below.

The Poultry division's operations and results are dependent on the cost and supply of raw materials such as feed grains and anumber of other inputs, as well as the selling prices for final products. Maize and soya meal are major production costs,representing approximately 75% to 80% of the final cost of dressed chickens. As a result, fluctuations in prices for thesefeed ingredients can adversely affect revenue and profitability.

CFI Poultry and Victoria Foods face competition from domestic and regional broiler and food processors. Demand for CFI’sproducts also affected by competitors' promotional spending, the effectiveness of CFI's advertising and the availability orpricing of alternative meats.

Output and demand for the Group's products can be adversely impacted by outbreaks of poultry diseases which can have asignificant impact on financial results. Efforts are taken to control disease risks by adherence to good production practicesand precautionary measures designed to ensure the health of the poultry flock. However, outbreaks of disease couldsignificantly affect output of products.

The poultry and milling operations are subject to regulations by authorities that oversee the importation of competingproducts from foreign markets. A negative change in the regulations governing the industry sectors may leave the Groupunprotected from cheaper foreign imports.

Farm & City sources products from various regional and local manufacturers that may from time to time experiencedisruptions in production and supply, which may adversely affect the subsidiaries' performance.

is

Page 18

9. DIVIDEND POLICY

10. DIRECTORS, MANAGEMENT AND EMPLOYEES

10.1 BOARD

Composition of the Board

Audit Committee

Human Resources and Remuneration Committee

Finance and Investment Committee

DIRECTORS DETAILS

Full Names Residential Address Position

The Directors may from time to time declare and pay to the members such dividends and interim dividends as appear to theDirectors to be justified by the profits of the Group. The Group in general meetings may declare dividends but no dividendshall exceed the amount recommended by the Directors.

The primary responsibility of the Board is to discharge its fiduciary responsibility to the shareholders of the Group. TheBoard is accordingly the highest policy organ of the Group and also acts to direct strategy. Meeting regularly, with aminimum of six scheduled meetings annually, the Board receives key information pertaining to the operations of CFI frommanagement, the business division heads and Board Committees. In the execution of its mandate, the Board is effectivelysupported by its Audit, Human Resources and Remuneration, Finance and Investment Committees.

The Board consists of a Non-Executive Chairman, two Executive Directors and eight Independent Non-ExecutiveDirectors, comprising a cross-section of professionals with proven track records and a wide range of different skills andexperience, which they employ for the Group's benefit. The Non-Executive Directors also provide crucial independenceand guidance to the Group's strategic decision making process and corporate governance practices.

The Board is assisted in the discharge of its duties and responsibilities by a number of Board Committees as indicated above.These Committees are accountable to the Board and are chaired by Non Executive Directors. Senior executives are invitedto attend meetings of the Committees where considered appropriate.

The Audit Committee, comprising representation by independent non executive directors is chaired by an independentnon- executive director. The internal and external auditors have unrestricted access to the Committee and, in addition,have representatives that attend all Audit Committee meetings. The Audit Committee reviews the effectiveness of internalcontrols in the Group with reference to the findings of internal and external auditors. Other areas covered include thereview of important accounting issues, specific disclosures in the financial statements, financial reports and major auditrecommendations.

The Human Resources and Remuneration Committee comprises non executive directors and executive directors with aNon Executive Director chairing. The terms of reference of the Committee are to determine the Group's policy on theremuneration of executive directors, including individuals salaries, share options and other terms of remunerationpackages.

The Finance and Investment Committee comprises a majority of non executive directors. The Committee's objective is toassist the Board of Directors in fulfilling its overall responsibilities with respect to the financial affairs of the Group. Specificareas relate to the Group's investment policies and guidelines, capital needs and financing arrangements, major assetacquisitions or enhancement or asset disposal as well as evaluation of the Group's risk management framework.

S.J. Chihambakwe 112 Harare Drive, Chisipite, Harare ChairmanG. Muradzikwa 1 Yellow Wood Lane, Kambanji, Glenlorne, Harare Deputy ChairpersonS.P. Kuipa 49 Arnold Edmonds Road, Glen Lorne, Harare Group Chief Executive OfficerA.R. Chinamo 1 Godfrey King Road, Borrowdale, Harare Group Finance DirectorG.G. Nhemachena 1 Whitesale Road, Gweru Non-Executive DirectorT. Nyika 50 Kent Road, Chisipite, Harare Non-Executive DirectorF. Lutz 10 Duthie Avenue, Belgravia, Harare Non-Executive DirectorP.S. Bwerinofa Sherwood Farm, Gweru Non-Executive DirectorB.D. Mothobi 48 Follyjon Crescent, Glen Lorne, Harare Non-Executive DirectorA.J. Nduna 128 Rye Hill, Greystone Park, Harare Non-Executive Director

Page 19

10. DIRECTORS, MANAGEMENT AND EMPLOYEES (CONTINUED)

Simplisius J. Chihambakwe (68) (Zimbabwean) – Non Executive Chairman of the Board

Grace Muradzikwa – (51) (Zimbabwean) – Non Executive Director and Deputy Chair of the Board

Friedbert Lutz (71) (German) – Non Executive Director

Patricia S. Bwerinofa (66) (Zimbabwean) – Non Executive Director

Timothy Nyika (44) (Zimbabwean) – Non Executive Director

Albert J. Nduna (63) (Zimbabwean) – Non Executive Director

Godfrey G. Nhemachena (67) (Zimbabwean) – Non Executive Director

Ambassador Buzwani D. Mothobi (74) (Zimbabwean) – Non Executive Director

Simplisius is the senior partner at the law firm, Chihambakwe, Mutizwa & Partners legal Practitioners in Harare. He holds aBachelor of Law degree from the University of London. He specialises in mergers and acquisitions, corporate andcommercial law, mining and mineral law, conveyancing, property and insurance law. He is a councillor of the Law Society ofZimbabwe and a member of the African Bar Association, Commonwealth Lawyers Association, and the International BarAssociation.

Grace is the Chief Executive Officer of NicozDiamond Insurance Limited. She holds a Bachelor of Administration degreeand a Masters in Business Administration from the University of Zimbabwe. In addition, she is an Associate of the InsuranceInstitute of South Africa (AISA) and Fellow of the Insurance Institute of South Africa. She also holds an IPM Diploma inPersonnel Management. She has been at the helm of NicozDiamond Insurance Limited for many years and has over 2decades of insurance experience spanning all facets of short-term and reinsurance. Grace holds directorships in variouslocal and regional companies and is a member of different professional affiliations.

Friedbert is a member of the Institute of Directors and has held executive positions with a number of companies inZimbabwe. Friedbert is working as an independent consultant and serves on the Boards of private and public companieswhich include PG Industries (Zimbabwe) Limited and Dyno Nobel Zimbabwe (Private) Limited.

Patricia is a farmer. She held a number of senior positions in the Ministry of Local Government, Rural and UrbanDevelopment from 1980 to 1988. She holds a Bachelor of Arts degree (History) from Mount Holyoke College in the USAand a Masters of Arts Degree (Education) from the University of Massachusetts, USA. She also holds a diploma inManagement Studies from Harare Polytechnic and is a member of the Chartered Institute of Secretaries (CIS).

Timothy is the Chief Financial Officer for ZimRe Holdings Limited and is a qualified Chartered Accountant. He holds aBachelor of Accountancy degree from the University of Zimbabwe and is a member of the Institute of CharteredAccountants of Zimbabwe. He served articles with Deloitte & Touche Chartered Accountants (Zimbabwe). Timothy alsoserves on the boards of ZimRe Holdings Limited and its subsidiaries.

Albert is the Chief Executive Officer of ZimRe Holdings Limited. He is a graduate of the University of Lancaster in UnitedKingdom in Accounting and Finance and holds a Masters in Business Administration from Bradford University in the UnitedKingdom. Albert serves on the boards of ZimRe Holdings Limited subsidiaries and associates in Zimbabwe, Malawi,Mozambique, South Africa and Uganda.

Godfrey Nhemachena has a Bachelor of Science (Sociology) degree from the University of Zimbabwe and a Diploma inManagement of Urban Development from the University of Birmingham, United Kingdom. He served in local governmentadministration 26 years and as the Town Clerk for the City of Gweru.

Ambassador Mothobi is a retired ambassador having served as the ambassador to Japan and the Republic of Korea in 1994 -1998. His diplomatic service includes serving as the High Commissioner of Zimbabwe to Kenya and Uganda in 1998 -2001as well as being a permanent representative to the United Nations Environment Programme and the United NationsCommission on Human settlement/habitat, Nairobi, Kenya in 1998 – 2001. Buzwani holds an M.A in Philosophy PoliticalEconomy from the University of Toronto, Canada, an M.A International affairs, 1969, Carleton University, Ottawa, Canadaand a B.A. General (London) 1962, University College of Rhodesia and Nyasaland. His career spans both public sector workand private sector work at very senior levels. He has worked for TA Holdings Limited and Morewear Industries in executiveroles. In the public sector he was a permanent secretary for National Supplies (1985 -1987), Labour, manpower planningand social welfare (1982 -1985), Transport (1982 – 1984). Prior to this Buzwani was a lecturer with the University ofZimbabwe.

Page 20

10. DIRECTORS, MANAGEMENT AND EMPLOYEES (CONTINUED)

Stephen P. Kuipa – (61) Zimbabwean - Group Chief Executive Officer

Acquiline R. Chinamo – (42) Zimbabwean - Group Financial Director

11. DIRECTORS’ INTERESTS

11.1 INTERESTS IN ORDINARY SHARES

Director Number of CFI Shares held

Total shares 302,674 297,512

Directors service contracts and remuneration

Company management

Management Position

Stephen is the Group Chief Executive Officer of CFI. Steve has extensive experience gained in various positions in industryfrom Delta Corporation Limited and Food & Industrial Processors (Private) Limited. He serves on the boards of SchweppesZimbabwe (Private) Limited, Cimas Medical Aid Society, Windmill (Private) Limited and Beira Grain Terminal. Steve holds aBachelor of Science (Sociology) Degree from the University of Zimbabwe and has attended a number of executivedevelopment programmes, including the executive programme at Templeton College (Oxford) in England.

Acquiline is the Group's Financial Director. Acquiline joined the Group in February 2002 as Group Financial Controller andwas promoted to Company Secretary and Group Treasurer in July 2003. She is a qualified Chartered Accountant and holdsa Bachelor of Accounting Science (B. Compt) Degree from the University of South Africa. She is a member of the Institute ofChartered Accountants of Zimbabwe. Acquiline served articles with Deloitte & Touche Chartered Accountants(Zimbabwe).

As at Friday 28 June 2013 (being the Last Practicable Date before the publication of this document), the Directors, directlyand/or indirectly, held beneficial interests aggregating approximately 302,674 CFI shares representing 0,28% of the issuedshare capital of the Group. Details of the direct and indirect interests held by the CFI Directors in CFI shares are set outbelow:

28 June 2013 30 September 2012S.J. Chihambakwe - -G. Muradzikwa - -S.P. Kuipa 276,674 271,512A.R. Chinamo - -G.G. Nhemachena - -T. Nyika 26,000 26,000F. Lutz - -P.S. Bwerinofa - -B.D. Mothobi - -A.J. Nduna - -

No Director shall be disqualified by his/her office from contracting with the Group either as a vendor, purchaser or lender.At this time none of the Directors have an interest in any contracts of significance relating to services provided to CFI bythird parties. The remuneration of Directors shall, from time to time be determined by the shareholders at a Generalmeeting. However the Director's remuneration will not change as a result of this transaction.

The key members of the Group's executive management team are listed in the table below:

Stephen Kuipa Group Chief Executive OfficerAcquiline Chinamo Group Financial DirectorEdwin Murwira Group Human Resources DirectorPrisca Mupfumira Group Marketing Director (currently Acting Managing Director – Victoria Foods)Panganayi Hare Group Company SecretaryChesternoel Mutevhe Group Financial Controller / TreasurerSmile Changa Group Internal Audit ManagerTaurai Shava Group Procurement Manager/Group AccountantDr. Ignatius Mpezeni Managing Director - Poultry DivisionPeggy Rambanapasi Managing Director – Retail Division

Page 21

12. BUSINESS RISK FACTORS

Financial Risk Management

Interest Rate Risk

Foreign Currency Risk

Credit Risk

Liquidity risk

Fair valuation risk

Biological assets risk management policies

13. EXTRACTS FROM THE MEMORANDUM AND ARTICLES OF ASSOCIATION

14. AUTHORISATION AND APPROVALS FOR THE PROPOSED TRANSACTION

The Group's financial instruments include bank loans and over-drafts and short term deposits. The main purpose of thesefinancial instruments is to raise finance for the Group's operations and to achieve a return on surplus short term funds. TheGroup has various other financial assets and financial liabilities such as trade receivables and trade payables, which arisedirectly from its operations. The main risks arising from the Group's financial instruments are interest rate risk, foreigncurrency risk and credit risk.

The Group's exposure to risk for changes in market interest rates relates primarily to variable short term overdraft rates.The Group's policy is to manage its finance cost by limiting exposure to overdrafts and where borrowings are required, toborrow at favourable and fixed rates of interest.

As a result of the state of industry in Zimbabwe, the Group relies heavily on importations of cereals and other products fromSouth Africa mainly and other countries, exposing the Group significantly to movements in foreign currency exchange rates.The Group also has transactional currency exposures. The Group limits exposure to exchange rate fluctuations by eitherpre-paying for purchases or retaining stock until the foreign currency to settle the related liability has been secured. Inaddition, on major cereal imports, the Group manages its risk when dealing with Commodity brokers by fixing its contractprices in United States Dollars, which is the Group's functional currency.

The Group trades only with recognised, creditworthy third parties. It is the Group's policy that all customers who wish totrade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an on-going basis with the result that the Group's exposure to bad debts is not significant.

The Group's objective is to maintain a balance between continuity of funding through a well-managed portfolio of short-term investments and/or flexibility through the use of bank overdrafts, bank loans and finance leases.

The Group is exposed to movement in fair value of listed equities. Investments in equities are valued at fair value and aretherefore susceptible to market fluctuations. Comprehensive measures and limits are in place to control the exposure ofthe Group's equity investments to fair value risk.

The Group Treasury office is tasked with the responsibility of performing research into potential opportunities in order toprovide suggestions for investment to the Board of Directors. This office monitors the performance of the investmentportfolio and reports to the Board of Directors.

Biological assets are living animals or plants that are managed by the Group. Agricultural produce is the harvested product ofthe biological asset. Biological assets of the Group include breeding chickens, broilers, layers, cattle, crops and vegetables.These biological assets are exposed to various risks, which include, disease/infection outbreaks, theft of livestock, pricefluctuations and marketing risk. The Group has put in place measures and controls to safeguard losses due to the aboverisks. These measures and controls include among other things, insurance against theft and natural deaths, implementationand maintenance of bio-security measures on farms, vaccination to prevent infections and regular evaluation of prices.

The relevant provisions in CFI’s Memorandum and Articles of Association concerning the appointment, qualification,remuneration, borrowing, voting powers and retirement relating to the Directors are available to be viewed along with theother documentation available for inspection as outlined in Paragraph 27 of this Document.

Authorisation for Proposed Transaction will be sought from shareholders at the EGM scheduled for Friday 26 July 2013. Anyregulatory approvals required for the Proposed Transaction will be sought by the Board. Naturally, the ProposedTransaction can only be implemented once those approvals have been obtained.

Page 22

15. OTHER LISTINGS

16. INCENTIVES AND SKILLS RETENTION ARRANGEMENTS

17. SHARE CAPITAL

Shares in issue Number of shares

Nominal value of shares US$ 0,01

Authorised but unissued Share Capital

Allocation of unissued shares

Unissued shares as at 31 March 2013 94,499,125

Variation of Rights

17.1 Preferential rights in respect of shares

17.2 Voting Rights

18. ADEQUACY OF CAPITAL

The Group's shares are not listed on any other stock exchange.

The Group issues equity settled and cash settled share based payments to certain key employees. Equity settled share basedpayments are measured at fair value excluding the effects of non market based vesting conditions at the date of grant. Thefair value determined at the grant date of equity settled share based payments is expensed on a straight-line basis over thevesting period, based on the Group's estimate of the shares that will eventually vest adjusted for the effect of non market-based vesting conditions, with a corresponding increase in equity. 9,200,000 share options were granted to the EmployeeShare Option Scheme by shareholders at an EGM held on the 15th of September 2008. This Scheme will be in operationuntil September 2013.

It is intended that together with the Proposed Transaction, Victoria Foods will be able to up skill its workforce in the criticalareas of logistics, procurement, milling, marketing and other areas where the technical partner in Grindrod Trading has corecompetencies. The Victoria Foods Board will be responsible for defining additional strategies to ensure that satisfactoryreturns are derived from this investment.

In issue as at 31 March 2013 105,500,875In issue as at 30 September 2012 105,500,875In issue as at 31 March 2012 105,320,875

The authorised but unissued share capital of CFI is allocated as follows:

Zimbabwe Farmers Union buying scheme 1,600,000Executive management share option scheme 11,512,880Under control of the directors 81,386,245

9,200,000 share options were granted to the Employee share option scheme by shareholders at an EGM held on the 15th ofSeptember 2008. This scheme will be in operation until September 2013.

According to Article 27 of CFI's Articles of Association, the rights attached to any class of securities issued by the companymay be modified, abrogated or varied with the consent in writing of the holders of three-fourths of the nominal amount ofthe issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of the holdersof the shares of that class.

There are no CFI shares with preferred rights in respect of the Group's share capital.

All existing authorised but unissued and issued CFI ordinary shares are of the same class and rank pari passu in every respect.

The Directors of CFI Holdings Limited believe that the execution of this transaction will fully resolve the working capitalrequirements for Victoria Foods for the foreseeable future. Further capital raising transactions combining an appropriatemix of equity injection and long term debt are however still necessary to enhance the Group’s ability to service its financialobligations as they fall due.

Page 23

19. WORKING CAPITAL AND CASH FLOW

20. MAJOR SHAREHOLDERS

21. CAPITAL COMMITMENTS

Unaudited Audited31-Mar-13 31-Mar-12 30-Sep-12

US$ US$ US$

22. INDEPENDENT REPORTING ACCOUNTANTS

The Directors believe that the working capital and cash flow requirements for the Group will be greatly assisted by theexecution of the Proposed Transaction.

According to the information received by the Directors, the following table details the Groups shareholding structurehighlighting the top ten shareholders as at Friday 28 June 2013 being the Last Practicable Date:

The Directors confirm that there will be no changes in the CFI shareholding structure as a result of this transaction.

The Group has the following capital commitments as at 31 March 2013:

Authorised but not contracted for - 1,565,004 3,448,665Contracted for 3,299,645 1,185,212 253,221

3,299,645 2,750,216 3,701,886

Capital commitments will be financed from available Group resources and borrowings.

The information set out in Paragraph 3 should be read in conjunction with the report of The Independent ReportingAccountants which is set out in Part 2 Annexure 1 of the Circular.

Shareholders Shares held % of Total

Total 105,500,875

Stalap Investments (Private) Limited 29,771,320 28.23National Social Security Authority 13,583,720 12.87E.F.E. Securities Nominees (Private) Limited - NNR 7,591,305 7.20E.F.E Securities Nominees (Private) Limited 4,794,909 4.54Old Mutual Life Assurance Company Of Zimbabwe Limited 6,989,026 6.63Mining Industry Pension Fund 6,875,493 6.51Zimcor Limited 3,427,143 3.25Dunnet Investments (Private) Limited 2,000,517 1.90Zimbabwe Electricity Industry Pension Fund 1,800,805 1.71KHM Trust 1,615,386 1.53Top ten shareholders 78,359,624 74.37Remaining shareholders 27,141,251 25.63

100.00

Page 24

23. INTEREST BEARING LOANS AND BORROWINGS

Borrowing powers of the Directors

Material Borrowings

Unaudited Audited31 March 2013 31 March 2012 30 Sept. 2012

US$ US$ US$Long term borrowings

Short term borrowings

Total borrowings 15,365,442 15,767,986 15,803,228

Notes:

24. MATERIAL CONTRACTS

25. LITIGATION STATEMENTS

26. EXPERT CONSENTS

Authority is granted in the Articles for the Directors to borrow a sum not exceeding three times the aggregate of the issuedshare capital of the Group and all its reserves including capital and revenue reserves except with the consent of the Group inan Annual General Meeting by ordinary resolution.

As at 31 March 2013 CFI had borrowings amounting to US$ 15,365,442.

PTA offshore borrowings 2,695,277 1,694,505 2,695,277

Bank acceptance credits and other short term loans (unsecured) 11,910,165 13,651,276 12,347,951Current portion of long term PTA offshore borrowings (secured) 760,000 422,205 760,000

12,670,165 14,073,481 13,107,951

The short term borrowings outstanding at half year end had tenures not exceeding 180 days and were at effective interestrates ranging from 10.5% p.a. to 25% p.a. All the borrowings accessed by the Group were sourced from the local marketon an unsecured basis, with the exception of the current portion of long term borrowings.

The long term borrowings at year-end relate to the PTA offshore loan with a tenure of 5 years drawn at an effective interestrates of 10.5 % p.a. The total facility of the loan is US$3.8 million and is secured by mortgage bond over a property in theRetail Division with a carrying amount of US$7 million (2012 - US$7 million) in the Retail Division

At the date of issue of this Circular, CFI had not entered into any material contracts, other than in the ordinary course ofbusiness.

25.1 CFI Retail entered into a franchise agreement with Upridge Trading (Private) Limited t/a Afrofoods whereby Afrofoodswould absorb CFI Retail's employees during the Franchise period. In years subsequent to entering the Franchise agreement,Afrofoods breached its duties and obligations as required under the agreement. Afrofoods was liquidated. There is apotential liability to CFI Retail attributable to employee benefits accrued during the employees' tenure with Afrofoods. Thematter was referred to arbitration and the outcome of the arbitration is still pending.

25.2 Victoria Foods is the subject of a liquidation application by Dominion Trading Limited FZ-LLC based on an outstandingcredit payment which at the time amounted to approximately US$ 6 . The application for the liquidation of VictoriaFoods is contested on various grounds including the fact that the amount claimed by Dominion Trading FZ-LLC is disputed.The matter is yet to be heard at the High Court of Zimbabwe. Meanwhile, post the application for the liquidation, VictoriaFoods made payments amounting to US$ 2.1 towards what Victoria Foods believes to be the correct outstandingamount. The Proposed Transaction should accelerate payments to this and other suppliers. The Directors are of theopinion that the claim can be resolved successfully by the Group.

25.3 Litigation is in progress against a former customer, Superbake Bakeries (Private) Limited, for an amount of US$460 000 plusinterest and costs. The Directors are of the opinion that the case will be successfully concluded by the Group.

The Legal Advisor, Financial Advisor, Transfer Secretaries, Auditors and Independent Reporting Accountants andSponsoring Brokers have submitted their written consents to act in the capacities stated and to their names being stated inthis Circular, and these consents have not been withdrawn as at Friday 28 June 2013.

The above mentioned consents are available for inspection by interested parties in terms of Paragraph 27.

(secured)

million

million

Page 25

27. DOCUMENTS AND CONSENTS AVAILABLE FOR INSPECTION

Between Wednesday 10 July 2013 and Wednesday 24 July 2013, copies of the following documents will be available forinspection, during normal working hours, at the Group's offices at the address set out in the “Corporate Information”

section at the beginning of this document:

The Memorandum and Articles of Association of CFI;Significant contracts of the Group;The CFI, Grindrod Trading, Victoria Foods Share Subscription Agreement;The CFI, Grindrod Trading Shareholders Agreement;Latest valuations of immovable property of the Group;

The audited financial statements for CFI for the years ended 30 September 2009, 2010, 2011 and 2012;The unaudited financial statements for CFI for the half years ended 31 March, 2010, 2011 and 2012;The Independent Accountants Report on the unaudited financial information and Pro forma financialinformation on CFI set out in ; andSigned letters of consent from all experts and advisors.

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Victoria Foods Annual Financial Statements for the years ended 30 September 2010, 2011 and 2012;Victoria Foods Valuation Report by Imara Corporate Finance Zimbabwe;

unauditedPart II - Annexure 1

Yours faithfully

The Directors consider the Proposed Transaction to be fair and reasonable in so far as CFI shareholders are concerned andrecommend that the shareholders vote in favour of the Proposed Transaction.

The Directors of CFI, whose names are given below collectively and individually accept full responsibility for the accuracy ofthe information given and certify that to the best of their knowledge and belief there are no other facts the omission of whichwould make any statement false or misleading, that they have made all reasonable enquiries to ascertain such facts and (ifapplicable) that the Circular contains all information required by law.

Signed on the original document at Harare this Friday 28 June 2013 by the Directors:

S.J. Chihambakwe Chairman __________________________________

G. Muradzikwa Deputy Chairperson __________________________________

S.P. Kuipa Group Chief Executive Officer __________________________________

A.R. Chinamo Group Finance Director __________________________________

G.G. Nhemachena Non-Executive Director __________________________________

T. Nyika Non-Executive Director __________________________________

F. Lutz Non-Executive Director __________________________________

P.S. Bwerinofa Non-Executive Director __________________________________

B.D. Mothobi Non-Executive Director __________________________________

A.J. Nduna Non-Executive Director __________________________________

S.J. ChihambakweNon-Executive Chairman of the Board of Directors of CFI

28 DIRECTORS’ OPINIONS, VOTING RECOMMENDATIONS AND RESPONSIBILITY STATEMENTS

Director Position Signature

Page 26

PART II: ANNEXURE 1

28 June 2013The DirectorsCFI Holdings Limited1 Wynne StreetHarare

Dear Sirs

At your request and for the purposes of the Circular dated 28 June 2013, issued to provide the shareholders of CFI Holdings Limted withthe requisite statutory and regulatory information in connection with the proposed transaction that will result in the dilution of CFI'sshareholding in Victoria Foods (Private) Limited to enable them to make an informed decision at the EGM, and In terms of Section 8.3 ofthe Zimbabwe Stock Exchange (“ZSE”) Listing requirements, as applicable to this transaction, we report hereunder on the unauditedfinancial information comprising the unaudited consolidated statement of financial position at 31 March 2013 and the unauditedconsolidated statement of comprehensive income for the six month period then ended, and pro forma statement of financial position ofCFI Holdings Limited laid out from page 10 to 17 of the Circular. The pro forma statement of financial position has been prepared inaccordance with the requirements of the ZSE Listing Requirements for illustrative purposes only, to provide information about how theTransaction might have affected the reported financial information presented, had the Transaction been undertaken at the date of the proforma balance sheet being reported on (See page 3 for the Group structure after the proposed transaction).

Deloitte and Touche Chartered Accountants were the auditors of the Group and Victoria Foods (Private) Limited for the year ended 30September 2012 and the preceding five years. The audit of the Group and Victoria (Private) Foods for the year ended 30 September 2012resulted in an emphasis of matter relating to the going concern assumption for both the Group and Victoria Foods (Private) Limited.

Included in this circular is financial information in respect of Victoria Foods (Private) Limited, comprising of the audited statements ofcomprehensive income and the statements of financial position for the years ended September 2010 to September 2012 and theunaudited statements of comprehensive income and the statements of financial position for the period ended 31 March 2013 appearingon pages 14 -15 as requested by the ZSE.

We performed agreed upon procedures for the six months ended 31 March 2013 on the unaudited financial information. Ourengagement for this interim financial information was undertaken in accordance with the International Standard on Related Services(ISRS) 4400, Engagements to Perform Agreed-Upon Procedures Regarding Financial Information.

We performed limited assurance procedures on the pro forma statement of financial position information. We conducted our assuranceengagement in accordance with the international Standard on Assurance Engagements applicable to Assurance Engagements other thanAudits or Reviews of Historical Financial Information. This standard requires us to obtain sufficient appropriate evidence on which to baseour conclusion.

We do not accept any responsibility for any reports previously given by us on any information used in the compilation of the unaudited proforma financial information beyond that owed to those whom the reports were addressed at their dates of issue.

The Directors are responsible for the preparation and for the fair presentation of the unaudited financial statements from which theaccountants' report has been prepared, in accordance with International Financial Reporting Standards (IFRS) and in the manner requiredby the Companies Act (Chapter 24:03). This responsibility includes: designing, implementing and maintaining internal control relevant tothe preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error;selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

The Directors are responsible for compilation, contents and the presentation of the unaudited pro forma statement of financial positioncontained in the Circular and for the financial information from which it has been prepared. Their responsibility includes determining that:the pro forma financial information has been properly compiled on the basis stated; the basis is consistent with the accounting policies ofCFI; and the pro forma adjustments are appropriate for the purposes of the pro forma financial information disclosed in terms of the ZSEListing Requirements.

REPORT OF THE INDEPENDENT ACCOUNTANTS ON THE UNAUDITED FINANCIAL INFORMATION ANDUNAUDITED PRO FORMA STATEMENT OF FINANCIAL POSITION OF CFI HOLDINGS LIMITED (“CFI” OR “THEGROUP”)

Introduction

Directors' responsibilities

Unaudited financial information

Unaudited Pro forma statement of financial position

Page 27

REPORT THE INDEPENDENT ACCOUNTANTS ON THE UNAUDITED FINANCIAL INFORMATION AND UNAUDITED PROFORMA STATEMENT OF FINANCIAL INFORMATION OF CFI HOLDINGS LIMITED (“CFI” OR “THE GROUP”) (CONTINUED)

ScopeUnaudited financial information

Unaudited pro forma statement of financial position

Conclusion

Unaudited financial information

Unaudited Pro forma statement of financial position

Contingent liabilities and commitments

Exclusion of notes and accounting policies

Consent

Our procedures on the unaudited financial information, signed by the directors, as at 31 March 2013 included:Review of management application of the significant group accounting policies in the preparation of the interim financial statements forthe half year ended 31 March 2013 press release;Review of the consolidation workings for accuracy and consistency; andReview of the areas of judgement for reasonableness.

Our report shall not in any way constitute recommendations regarding the completion of the transaction or the issue of the circular toshareholders.

Our procedures consisted primarily of comparing the unadjusted financial information with the source documents, considering the pro formaadjustments in light of the accounting policies of CFI, considering the evidence supporting the pro forma adjustments and discussion of theadjusted pro forma financial information with the directors of CFI in respect of the transaction that is subject of this Circular.

In arriving at our conclusion, we have relied upon financial information prepared by the Directors of CFI and other information from variouspublic, financial and industry sources.

Because the above procedures do not constitute either an audit or a review made in accordance with International Standards on Auditing, we donot express any assurance on the fair presentation of the unaudited pro forma financial information. Had we performed additional procedures orhad we performed an audit or review of the financial information in accordance with International Standards on Auditing, other matters mighthave come to our attention that would have been reported to you.

In a limited assurance engagement, the evidence-gathering procedures are more limited than for a reasonable assurance engagement andtherefore less assurance is obtained than in a reasonable assurance engagement. We believe our evidence obtained is sufficient and appropriate toprovide a basis for our conclusion.

Based on our examination, nothing has come to our attention that causes us to believe that, in all material respects:The interim financial information has not been properly compiled on the basis stated; andSuch basis is inconsistent with the accounting policies of CFI.

Subsequent to 31 March 2013 no events have been identified which may materially impact on the Group.

Based on our examination of the evidence obtained, nothing has come to our attention that causes us to believe that, in terms of section 8.3 of theZSE Listings Requirements:

The pro forma financial information has not been properly compiled on the basis stated,Such basis is inconsistent with the accounting policies of the Group; andThe adjustments are not appropriate for the purposes of the pro forma financial information as disclosed.

Particulars of material contingent liabilities and commitments have been disclosed per part 21 and part 24 of this circular respectively.

At the request of the Group, and with the approval of the ZSE, the notes to the financial information and the accounting policies have beenexcluded from this circular, but are available for inspection in the full audited set of financial statements for the 12 months ended 30 September2012 at the registered office of the Group.

We consent to the inclusion of this report, which will form part of the circular to the shareholders of CFI, dated Friday 28 June 2013, in the formand context in which it appears.

Deloitte and Touche Chartered Accountants (Zimbabwe)28 June 2013

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ANNEXURE II - SALIENT TERMS OF THE CFI HOLDINGS LIMITED, GRINDROD TRADING LIMITED, VICTORIA FOODS(PRIVATE) LIMITED SHARE SUBSCRIPTION AND SHAREHOLDERS AGREEMENTS

Share Subscription Agreement

Suspensive Conditions

Share Subscription

Subscription Price and Payment

Shareholders Agreement

Introduction

Suspensive Conditions

Shareholding

Grindrod agrees to subscribe for the Subscription Shares on the terms and subject to the conditions of this Agreement so that thereafterGrindrod will own 49% (forty nine percent) and CFI will hold 51% (fifty one percent) of the issued shares in the Company.

Grindrod completing, and being satisfied with the results of the financial, legal, tax and commercial due diligence it has alreadycommenced into the Company, and any other reports and investigations which Grindrod considers are necessary in connection with thesubscription of the Subscription Shares provided that such due diligence shall be completed by no later than the day immediatelypreceding the Subscription Date;the board of directors of Grindrod agreeing to Grindrod subscribing for the Subscription Shares for the Subscription Price;the board of directors of CFI agreeing to Grindrod subscribing for the Subscription Shares for the Subscription Price and agreeing towaive any rights it may have whether under the Act and/or the Constitutive Documents or otherwise, to have any of the SubscriptionShares offered to it for purchase or subscription;approval by the board of directors and the shareholders of the Company of the allotment of the Subscription Shares to Grindrod for theSubscription Price in accordance with the terms of this Agreement (the “Company Resolutions”);receipt by Grindrod and the Company of an approval from the Competition and Tariffs Commission of Zimbabwe with respect to theproposed subscription by Grindrod for the Subscription Shares in accordance with Competition Act [Chapter 14:28] of the Republic ofZimbabwe (the “Competition Commission Approval”);receipt by the Company of an exchange control approval from the Reserve Bank of Zimbabwe with respect to the subscription byGrindrod for the Subscription Shares (the “Reserve Bank Approval”);receipt by Grindrod of an approval from the Minister of Economic Planning and Investment with respect to the subscription by Grindrodfor the Subscription Shares;receipt by Grindrod of an approval from the Zimbabwe Investment Authority with respect to the subscription by Grindrod for theSubscription Shares (the “Investment Authority Approval”);receipt by the Company of an approval from the Minister of Youth Development Economic Empowerment and Indigenization withrespect to the proposed subscription by Grindrod for the Subscription Shares (the “Indigenization Approval”);execution of the Ancillary Agreements comprising of the loan agreement between CFI and the Company (“CFI Loan Agreement”), theloan agreement between Grinrod and the Company (“Grindrod Loan Agreement”) and the procurement agreement between GrindrodAsia and the Company (“Procurement Agreement”) collectively the “Ancillary Agreements”;there being no material adverse change in the business, operations, assets, position (financial, trading or otherwise), profits or prospectsof the Company between the Signature Date and the Subscription Date;the sale or transfer or disposal or otherwise by the Company of its transport business and related assets and liabilities, known asKobenhaven Logistics, to an affiliate of CFI for a consideration not less than the net carrying value of such assets and liabilities as evidencedin the Reference Accounts; andreceipt by Grindrod of the revised shareholder register, or such other document from Beira Grain Terminal (“BGT”) to the satisfaction ofGrindrod, evidencing that the Company holds 10% (ten percent) of the entire issued share capital of BGT .

CFI agrees to waive any rights it may have whether under the Act and/or the Constitutive Documents or otherwise, to have any of theSubscription Shares offered to it for purchase or subscription.

The subscription price to be paid by Grindrod for the Subscription Shares is US$3,250,000 (three million two hundred and fifty thousandDollars);The Subscription Price shall, subject to satisfaction (or waiver) of the Suspensive Conditions and fulfilment by the Company of itsobligations, be payable by Grindrod in United States Dollars into the Company's Bank Account on the Subscription Date by electronictransfer of immediately available and freely transferable funds free of any deductions or set-off whatsoever.

The Parties conclude this Agreement to govern the basis upon which the Company will operate and to regulate the relationship between theParties as Shareholders with effect from the Effective Date.

The Agreement is subject to satisfaction of the following conditions:completion of the allotment of the Subscription Shares to Grindrod in accordance with the terms of the Subscription Agreement;execution of the Ancillary Agreements; andCompliance with all relevant regulatory and statutory requirements and approvals.

As at the Effective Date the entire issued share capital of the Company shall be held by the Shareholders as follows:CFI - 846,018 shares of US$ 8,460.18 each representing 51% (fifty one percent) of the entire issued share capital; andGrindrod - 812,841 shares of US$ 8,128.41 each representing 49% (forty nine percent) of the entire issued share capital.

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Appointment of Directors

Limits of Authority

Board Meetings

Shareholders' Meetings

Declaration Of Dividends By The Company

Tag Along

No Partnership Or Quasi Partnership

Disputes

Governing Law And Jurisdiction

Each Shareholder shall be entitled for each tranche of 20% (twenty percent) of the issued shares that it holds, to nominate one (1) director forappointment to the Board.As at the Signature Date Board shall comprise of a minimum of 5 (five) directors appointed as follows:

Grindrod (who holds 49% (forty nine percent) of the issued Shares) shall be entitled, by written notice to the Company, to nominate 2(two) persons for appointment as directors of the Company;CFI (who hold 51% (fifty one percent) of the issued Shares) shall be entitled, by written notice to the Company, to nominate 2 (two)persons for appointment as directors of the Company;the fifth director, who shall also act as the chairman of the Board, shall be mutually appointed by Grindrod and CFI (the “Chairman”).

Notwithstanding any provision to the contrary in the Shareholders Agreement, the Limits of Authority listed in the annexure to the ShareholdersAgreement shall govern the basis upon which all decisions are made by or in respect of the Company and the Board's and Shareholders' powersshall be limited accordingly.

There shall be at least 4 (four) Board meetings held in each Financial Year and a Board meeting may be convened by any director or the secretaryof the Company on not less than 14 (fourteen) Business Days' notice to all of the directors, alternate directors and the secretary of the Company(unless all of the directors agree in writing to waive such notice period).

Directors shall resign by rotation once in every three years and may make themselves available for re-election immediately

There shall be at least 1 (one) Shareholders' meeting in each Financial Year and Shareholders' meetings may be convened by any Shareholder orthe secretary of the Company on not less than 20 (twenty) Business Days' notice to all of the Shareholders and the secretary of the Company(unless all of the Shareholders agree in writing to waive such notice period).

Subject to the Board being reasonably satisfied as to the requirements of solvency and liquidity, having been adhered to as required in terms of theAct and the Company having sufficient cash flow to meet its immediate and projected liabilities, the Shareholders and the Company shall procurethat the Company shall, in respect of each Financial Year, declare dividends in accordance with the recommendations of the Board, subject alwaysto the Limits of Authority.

If a third party offers to purchase the Equity of a Shareholder (for purposes of this clause alone “Selling Shareholder”) (after first having compliedwith the relevant provisions of the agreement and the other share holder/s having refused to purchase all of the Equity offered to it/them in termsof the agreement, then the other Shareholder/s shall have the right to require that its Shares are included in the sale of the Selling ShareholderShares for the same price and under the same payment terms as offered by the third party to the Selling Shareholder

The relationship between the Shareholders as such shall not be construed as that of partners or quasi partners and nothing herein contained shallbe construed as creating joint and several liability as between the Parties.

Notwithstanding any other provision of this Agreement, the Parties agree that any dispute, controversy or claim arising out of or relating to thisAgreement, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the Arbitration Act (Chapter 7:15)as amended from time to time by one arbitrator appointed in accordance with the Rules.

This Agreement shall be governed by and interpreted, and otherwise applied, in all respects, in accordance with the laws of the Republic ofZimbabwe.

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ANNEXURE III – SUMMARY OF THE VALUATION OF VICTORIA FOODS

VALUATION OPINION REGARDING VICTORIA FOODS (PRIVATE) LIMITED

1 Purpose of the Valuation

2 Information Review

3 Valuation Methodologies Applied

3.1 DCF valuation methodology

3.1.1 CompCo valuation methodology

28 June 2013

The DirectorsCFI Holdings Limited1 Wynne StreetHarare, Zimbabwe

Dear Mr. Kuipa

The Directors of CFI Holdings Limited ( CFI”) mandated Imara Corporate Finance Zimbabwe (Private) Limited (“Imara”) to provide avaluation report on the indicative fair equity value of Victoria Foods (Private) Limited (“Victoria Foods”).

This valuation report sets out a summary of Imara's fair market value opinion. The valuation opinion is valid for the purpose of assisting theDirectors in reviewing potential offers for the acquisition of a shareholding in Victoria Foods by selected investors.

Imara has relied on the accuracy and veracity of the information made available to it during discussions and correspondence with themanagement of CFI and Victoria Foods. Whilst Imara has no reason to doubt the accuracy or veracity of such information, Imara has notperformed an independent review on the information provided and consequently Imara does not accept any responsibility whatsoeverfor the accuracy or veracity of such information.

Any valuation exercise is a matter of applying sound commercial sense to the results of technical evaluation. In performing the indicativevaluation of Victoria Foods, Imara adopted an income-based approach through the application of a Discounted Cash Flow (“DCF”)valuation methodology. In order to corroborate the results of the DCF methodology, Imara cross checked the DCF results through theapplication of the Market Approach through the application of the Comparable Company valuation methodology (“CompCo”).

The DCF valuation methodology is considered the most appropriate standard of valuation used for a grain milling and FMCGdistribution company. The following limiting conditions were taken into account when applying the DCF valuation methodology andin determining the Imara conclusion on the valuation range:

The DCF methodology has been used to derive an equity value for Victoria Foods by computing the future free cash flows ofVictoria Foods and discounting the free cash flows at the weighted average cost of capital (“WACC”);DCF models are typically highly sensitive to target debt to equity ratio, consequent WACC applied, as well as the projectedterminal growth rate. Slight changes in the WACC and terminal growth rate results in significant movement in the terminalvalue and consequent enterprise value;Determining free cash flows requires careful analysis of what forms part of working capital. In our analysis, working capitalhas been derived from the Victoria Foods balance sheets and information received from management during discussions;Deriving an equity value from an enterprise value requires a judgement on what forms debt in the pure sense as opposed tomere intercompany balances; andGiven the sensitivity of the valuation model to changes in the risk free rate and expected growth rate to perpetuity, inderiving the valuation range, a sensitivity analysis has been performed by increasing and reducing the calculated risk free rateand expected growth rate to perpetuity.

The CompCo valuation approach makes use of valuation multiples based on historical and forecast earnings, which were obtained fromcomparable companies in Africa.

There is one directly comparable Zimbabwe Stock Exchange listed grain milling and FMCG distribution company;We have also selected the multiples of regional companies engaged in grain milling and FMCG distribution. The businessmodels, markets, and financial performance of these companies maybe different from those of Victoria Foods. In addition theeconomies in which these companies operate in may have widely different economic, social and political factors influencingthem when compared to Victoria Foods and Zimbabwe; andRisk and market growth expectations in the different countries may differ from those on the ZSE which may result in higheror lower multiples.

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4 Our methodology and procedures

5 Valuation Results and conclusion

In determining the value of Victoria Foods, two valuation methodologies were used. These are the Income Approach, in this case,the DCF methodology and the Market Approach, in this case the CompCo methodology. In the course of our analysis, we reliedupon financial and other information obtained from CFI's management team and from various public, financial and industry sources.Our conclusion is dependent on such information being accurate in all material respects.

The principal sources of information used in formulating our valuation opinion:

information and assumptions made available by and from discussions held with the management of CFI and Victoria Foods;Valuation multiples derived from comparable listed companies obtained from research on the internet, OneSource, 4traders.com, Thompson Reuters and Bloomberg;CFI and Victoria Food's management's input on the forecast financial statements for Victoria Foods as set out in Appendix Bof the valuation report; andVictoria Foods audited financial statements for the years ended 30 September 2010, 2011 and 2012;

We held discussions with CFI management and reviewed the Victoria Foods forecast financial statements and the basis of theassumptions therein including the prospects of the businesses. This review included:

an assessment of the recent historical performance to date as well as the reasonableness of the outlook assumed based ondiscussions with management; andpublicly available information relating to other companies in the grain milling sectors that we deemed to be relevant,including company announcements, analyst' reports and media articles.

Where practical, we have corroborated the reasonability of the information provided to us for the purpose of our opinion, includingpublicly available information, whether in writing or obtained in discussions with management.

In arriving at our opinion, we have,considered information made available by CFI management and from discussions held with the management of CFI andVictoria Foods;discussed the future prospects of Victoria Foods with management and considered the qualitative benefits of the potentialcapital raise transaction that will occur in Victoria Foods;assessed the long-term potential of Victoria Foods;evaluated the relative risks associated with Victoria Foods and the industry in which it operates;reviewed the methodologies available for performing valuations of businesses operating in this industry sector;compiled a detailed financial model valuing Victoria Foods ordinary shares using the forecast financial information preparedby the management of Victoria Foods and applied the assumptions of cost of capital and assumptions relating to yields onassets and liabilities, other revenues, cost increase and growth in assets; andperformed an additional valuation of Victoria Foods using a market comparable method using local and regional peers ofVictoria Foods .

Our procedures and enquiries did not constitute an audit in terms of International Standards on Auditing. Accordingly we cannotexpress an opinion on the financial data or other information used in arriving at our opinion.

Based on the work performed, the implied equity value of Victoria Foods ranges from a low of US$ 1,819,871 to a high of US$4,819,251 with the appropriate indicative value being US$ 3,000,000.

Notwithstanding this, we stress that the valuation would be materially different in the event that one or more of the fundamentalassumptions discussed earlier do not prove to be valid and should there be a fundamental improvement or deterioration in theZimbabwean economy. The valuation is a function of the assumptions incorporated within the valuation methodology. In particular,the valuation assumes that the future projections as indicated by management and set out in Appendix B of the valuation report arerealisable.

The true value negotiated between parties on a willing buyer willing seller basis may differ from this value as it is dependent uponconsiderations, including but not limited to, relative positions of strength, emotive issues, differing views on trading projections,growth potential, different assessments of risk, human resource issues, warranty conditions and other factors all of which can only bedetermined through the process of negotiation.

Yours sincerely,

Imara Corporate Finance Zimbabwe (Private) Limited

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inter alia:

NOTICE OF EGM


NOTICE CONVENING AN EXTRAORDINARY GENERAL MEETING

AS A SPECIAL RESOLUTION:

RESOLUTION 1:

AS AN ORDINARY RESOLUTION:

RESOLUTION 2:

P. HareCOMPANY SECRETARYBY ORDER OF THE BOARD

NOTE 1:

NOTE 11:

PART 111: NOTICES

(Incorporated in Zimbabwe on the 6 of May 1996 under registration number 3403/96)

Notice is hereby given that an Extraordinary General Meeting of the shareholders of CFI Holdings Limited will be held at 11:00hours on Friday 26 July 2013 at the Royal Harare Golf Club, 5th Street Extension in Harare, Zimbabwe to consider and, if thoughtfit, to adopt, with or without amendment, the following resolutions:

THAT, subject to regulatory approval the Directors of the Group be authorised to enter into the Share Subscription Agreementand the Shareholders Agreement with Grindrod Trading Limited pursuant to which Victoria Foods shall issue 812 841 ordinaryshares to Grindrod Trading Limited constituting 49% of the issued share capital.

THAT, the Directors of the Group (or any duly authorised committee thereof) be, and are, hereby authorised to do all such thingsthat they may consider necessary or desirable to give effect to, or pursuant to, or in connection with, the Proposed Transaction.

A member of the Group entitled to attend and vote, is entitled to appoint a proxy to attend, vote and speak in his place atthe meeting on his behalf, and that proxy need not also be a member of the Group.

To be valid, Proxy Forms should be completed and returned so as to reach the registered office of the Company inHarare not less than 48 hours before the time of the meeting. Completion of the Proxy Form does not preclude a person fromsubsequently attending and voting in person.

th

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FORM OF PROXY

OFFICE OF THE SHARE TRANSFER SECRETARIES

A form of proxy, in which are set out the relevant instructions for its completion, is attached hereto, for use by such shareholder ofthe Company who is unable to attend the EGM but who wishes to be represented thereat. Completion of a form of proxy will notpreclude such shareholder of the Company from attending and voting (in preference to the appointed proxy) at the EGM.

The instrument appointing a proxy and the authority (if any) under which it is signed must be received by the Company's transfersecretaries or at the Company's registered offices (Attention the Company Secretary) at the addresses given below no later than48 (Forty-eight hours) before the time appointed for the holding of the EGM.


(P. O. Box 11 Harare)

Page 34

REGISTERED OFFICE OF THE COMPANYCFI Holdings Limited

1 Wynne StreetHarare

Zimbabwe

(P. O. Box 510, Harare)

FORM OF PROXY


RESOLUTIONS For Against Abstain

(Incorporated in Zimbabwe on 6 May 1996 under registration number 3403/96)

For use by the Group's Shareholders at the EGM of Shareholders to be held at 11:00 hours on Friday 26 July 2013 at the RoyalHarare Golf Club, 5th Street Extension in Harare, Zimbabwe.

I/We ______________________________________________________________________________________(Name inblock letters)

Of ___________________________________________________________________________________________________

Being the holder of _____________________________________________________ shares in the Company hereby appoint

1.____________________________________________ of _______________________________________ or failing him/her

2.___________________________________________ of _________________________________________ or failing him/her

3. the Chairman of the EGMAs my/our proxy to act for me/us at the EGM for the purpose of considering and, if deemed fit, passing, with or withoutmodification, the resolutions to be proposed thereat, and at each adjournment or postponement thereof, and to vote forand/or against the resolutions and/or abstain from voting in respect of the shares in the issued share capital of the Groupregistered in my/our name (see NOTE per notice of EGM) in accordance with the following instructions:

1 THAT, subject to regulatory approvals, the directors of the Group beauthorised to enter into the Share Subscription Agreement andShareholders Agreement pursuant to which Victoria Foods (Private) Limitedshall issue 812,841 new ordinary shares to Grindrod Trading Limited,constituting 49% of the issued share capital.

2 THAT, the directors of the Group (or any duly authorised committee thereof)be, and are, hereby authorised to do all such things that they may considernecessary or desirable to give effect to, or pursuant to, or in connection with,the Proposed Transaction.

Every person present and entitled to vote at the EGM shall, on a show of hands, have one vote only, but in the event of a poll, everyshare shall have one vote.

Each member entitled to attend and vote at the EGM is entitled to appoint one person as his proxy, who need not be a member ofthe Group, to attend, speak and vote in his/her stead at the EGM.

Signed at_______________________ on _________________________________________________________________2013

Signature(s)____________________________________________________________________________________________

Assisted by me __________________________________________________________________________________________Full name(s) of signatory/ies if signing in a representative capacity (see NOTE per notice of EGM)(please use block letters).

Page 35

Notes to the form of proxy

INSTRUCTIONS FOR SIGNING AND LODGING THIS FORM OF PROXY

OFFICE OF THE SHARE TRANSFER SECRETARIES

1. A shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder's choice in thespace provided, with or without deleting “the Chairman of the EGM”, but any such deletion must be initialled by theshareholder. The person whose name appears first on the form of proxy will, unless his/her name has been deleted, beentitled to act as proxy to the exclusion of those whose names follow.

2. A shareholder's instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable bythat shareholder in the appropriate space/s provided as well as by means of a cross whether the shareholder wishes to vote,for, against or abstain from the resolutions. Failure to comply with the above will be deemed to authorise the proxy to voteor abstain from voting at the EGM as he/she deems fit in respect of all the shareholder's votes exercisable there at. Ashareholder or his/her proxy is not obliged to use all the votes exercisable by the shareholder or by his/her proxy, or castthem in the same way.

3. A deletion of any printed matter and the completion of any blank spaces need not be signed or initialled. Any alteration orcorrection must be initialled by the signatory/ies.

4. The Chairman shall be entitled to decline to accept the authority of a person signing the proxy form:i. under a power of attorneyii. on behalf of a companyunless that person's power of attorney or authority is deposited at the offices of the Company's transfer secretaries, or theregistered office of the Company, not less than 48 hours before the meeting.

5. If two or more proxies attend the meeting then that person attending the meeting whose name appears first on the proxyform and whose name is not deleted, shall be regarded as the validly appointed proxy.

6. When there are joint holders of shares, any one holder may sign the form of proxy. In the case of joint holders, the seniorwho tenders a vote will be accepted to the exclusion of other joint holders. Seniority will be determined by the order inwhich names stand in the register of members.

7. The completion and lodging of this form of proxy will not preclude the member who grants this proxy form from attendingthe EGM and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof should suchmember wish to do so.

8. In order to be effective, completed proxy forms must reach the Company's transfer secretaries or the registered office ofthe Company not less than 48 hours before the time appointed for the holding of the EGM.

9. Please ensure that name(s) of the member(s) on the form of proxy and the voting form are exactly the same as those on theshare register.

10. Please be advised that the number of votes a member is entitled to be determined by the number of shares recorded on theshare register 48 hours before the time appointed for the holding of the meeting.


(P. O. Box 11 Harare)

Page 36

REGISTERED OFFICE OF THE COMPANYCFI Holdings Limited

1 Wynne StreetHarare

Zimbabwe

(P. O. Box 510, Harare)