Zambeef Products Plc - Circular to Shareholders (March 2015)

ZAMBEEF PRODUCTS PLC – CIRCULAR TO SHAREHOLDERS

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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about the contents of this document or the action you should take, you should seek your own advice from your stockbroker, lawyer, accountant or other professional adviser authorised under the Securities Act, Chapter 354 of the Laws of the Republic of Zambia (“the Securities Act”) and the Lusaka Stock Exchange Listing Rules or under UK Financial Services and Markets Act 2000. If you have sold or otherwise transferred all your shares in Zambeef Products PLC (the “Company”) please forward this document, together with the accompanying Form of Proxy or Form of Instruction (as appropriate), to the purchaser or transferee, or to the bank, stockbroker or other agent, through whom the sale or transfer was effected for transmission to the purchaser or transferee. If you have sold or transferred only part of your holding of shares in the Company, you should retain this document and consult the stockbroker, bank or other agent through whom the sale or transfer was effected. This Disposal Circular has been approved the Lusaka Stock Exchange and the Securities and Exchange Commission of Zambia. The London Stock Exchange has not itself examined or approved the contents of this document. AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to larger or more established companies. AIM securities are not admitted to the Official List and the AIM Rules for Companies are less demanding than those of the Official List.

Proposed Disposal of Zamanita Limited

and Notice of Extraordinary General Meeting

(Incorporated and registered in Zambia under the Companies Act 1994 with registered number

31824; LuSE Share Code: Zambeef; AIM Share Code: ZAM; ISIN Number ZM0000000201)

Date of Issue: 16 March 2015


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Advisers to the Proposed Transaction

THIS CIRCULAR IS ONLY AVAILABLE IN ENGLISH. COPIES OF THIS CIRCULAR MAY BE OBTAINED FROM THE REGISTERED OFFICE OF ZAMBEEF AND FROM THE SPONSORS, THE ADDRESSES OF WHICH ARE SET OUT IN

THE “CORPORATE INFORMATION” SECTION OF THIS CIRCULAR. IN ACCORDANCE WITH THE AIM RULES, THIS DOCUMENT WILL ALSO BE AVAILABLE TO SHAREHOLDERS ON THE COMPANY’S WEBSITE

(WWW.ZAMBEEFPLC.COM) FROM THE DATE OF THIS DOCUMENT, FREE OF CHARGE.

LuSE Sponsoring Broker

Legal Adviser

Independent Reporting Accountant

AIM Nominated and Financial Adviser


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THE DEFINITIONS AND INTERPRETATIONS CONTAINED IN THE “DEFINITIONS” SECTION

COMMENCING ON PAGE 11 OF THIS CIRCULAR APPLY THROUGHOUT THIS CIRCULAR INCLUDING

THIS COVER PAGE (UNLESS THE CONTEXT INDICATES A CONTRARY INTENTION).

Zambeef Products PLC is a public limited company, and in conformity with Part V of the Securities Act (1993), its shares are registered with the Securities and Exchange Commission. The purpose of this document is to inform Shareholders of the Proposed Transaction as stipulated under Section 9.27 (Transactions – Category 1 Requirements) in the Harmonised Listings Requirements of the Lusaka Stock Exchange. The categorisation of the Proposed Transaction is determined by assessing its relative size to that of the market capitalisation of the Company. A percentage ratio of above 25 per cent. implies that the Proposed Transaction falls under the Category 1 Requirements of the LuSE Listing Rules.

Circular to Shareholders in respect of:

the Proposed Transaction involving the disposal by Zambeef of 100 per cent. of its

shareholding in its wholly owned subsidiary, Zamanita Limited, to Cargill Holdings BV.

and incorporating:

a Notice of Extraordinary General Meeting;

a Form of Proxy; and

a Supplement detailing the Joint CEO Long Term Incentive Plan.

ACTION REQUIRED:

If you are in any doubt as to the meaning of the contents of this Circular or as to the

action you should take please consult your accountant, bank manager, stockbroker or

other professional adviser immediately.

If you no longer hold any shares in Zambeef then you should send this Circular, as soon

as possible, to the stockbroker through whom the sale of your shareholding in Zambeef

was effected, for onward transmission to the purchaser or transferee of those Zambeef

Shares.


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CORPORATE INFORMATION: BOARD AND ADVISERS TO THE PROPOSED TRANSACTION

The Directors:

Dr Jacob Mwanza Francis Grogan Dr Carl Irwin Yusuf Koya Dr Lawrence Sikutwa John Rabb Irene Muyenga Adam Fleming Charles Mpundu

Registered Office:

Plot 4970, Manda Road

Industrial Area

Private Bag 17, Woodlands

Lusaka, Zambia

Company Secretary:

Danny Museteka

Plot 4970, Manda Road

Industrial Area


Lusaka, Zambia

LuSE Sponsoring Broker:

Pangaea Securities Limited

Farmers House, Third Floor

Central Park, Cairo Road

P O Box 30163

Lusaka, Zambia

AIM Nominated and Financial Adviser:

Strand Hanson Limited 26 Mount Row London W1K 3SQ

Reporting Accountant:

Deloitte & Touche Chartered Accountants

Abacus Square, Stand 2374/B

Thabo Mbeki Road

P O Box 30030

Lusaka, Zambia

Legal Adviser as to Zambian law: Musa Dudhia & Co 3rd Floor, Mpile Office Park 74 Independence Avenue P O Box 31198 Lusaka, Zambia


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GENERAL ADVISERS

Joint Broker:

Panmure Gordon

One New Change

1 New Change

London EC4M 9AF

Joint Broker:

finnCap Limited 60 New Broad Street London EC2M 1JJ

Auditors: Grant Thornton Zambia 5th Floor, Mukuba Pension House Dedan Kimathi Road P 0 Box 30885 Lusaka, Zambia

Depository: Computershare Investor Services PLC The Pavilions, Bridgwater Road Bristol BS99 6ZY

Central Securities Depository (Zambia):

Lusaka Stock Exchange Limited

Exchange Building

Central Park

PO Box 34523

Lusaka, Zambia

Registrars: Computershare Investor Services (Jersey) Ltd Queensway House, Hilgrove Street St Helier Jersey JE1 1ES

Zambia PR:

Langmead & Baker Limited P O Box 22, P/B E835, Kabulonga Plot 2374 Counting House Square Thabo Mbeki Road Lusaka, Zambia

Financial PR (UK):

Buchanan Communications 107 Cheapside London, EC2V 6DN


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DISCLAIMER

The Company, having made all reasonable enquiries, confirms that this Circular contains all information with respect to itself and the corporate actions proposed therein, which is material in the context of the Proposed Transaction. The Company further confirms that the information contained in this Circular is true and accurate in all material respects and is not misleading, that the opinions and intentions expressed in this Circular are honestly held and that there are no other facts, the omission of which would make any such information or the expression of any such opinions or intentions materially misleading. The Directors of the Company accept responsibility accordingly. Each of the Auditors, Reporting Accountants, Company Secretary, Sponsoring Broker and Legal Advisers to the Company have relied on information provided by the Company. Accordingly, the Auditors, Reporting Accountants, Company Secretary, Sponsoring Broker and Legal Advisers, do not provide assurance for the accuracy or completeness of the information contained in this Circular and therefore do not accept any liability or responsibility in relation to information contained in this Circular. The delivery of this Circular does not at any time imply that the information contained herein is correct at any time subsequent to its date or that any other information supplied in connection with the Proposed Transaction is correct as of any time subsequent to the date indicated in the document containing the same. The Directors, whose names appear in this Circular, accept responsibility for the information contained in this Circular. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this Circular is in accordance with the facts and does not omit anything material likely to affect the import of such information. No person has been authorised to give any information or make any representation other than those contained in this Circular and if given or made, such information or representation should not be relied upon as having been authorised by or on behalf of the Company, the Auditors, Reporting Accountants, Company Secretary, Sponsoring Broker and Legal Advisers. This Circular does not constitute or form part of any offer or invitation to purchase, subscribe for or sell any shares or other securities in the Company nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with any contract therefor. The distribution of this document in jurisdictions other than Zambia and the United Kingdom may be restricted by law and therefore persons into whose possession this document and/or the accompanying Form of Proxy or Form of Instruction comes should inform themselves about and observe such restrictions. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction.


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FORWARD-LOOKING STATEMENTS This document includes “forward-looking statements” which includes all statements other than statements of historical fact, including, without limitation, those regarding the Group’s financial position, business strategy, plans and objectives of management for future operations, or any statements preceded by, followed by or that include the words “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would, “could” or similar expressions or negatives thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Group’s control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group’s present and future business strategies and the environment in which the Group will operate in the future. These forward-looking statements speak only as at the date of this document. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based unless required to do so by applicable law, the LuSE Listing Rules or the AIM Rules.


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ACTION REQUIRED BY ZAMBEEF SHAREHOLDERS The definitions commencing on page 11 of this Circular apply, mutatis mutandis, to this section setting out the action required by Zambeef Shareholders. Please take careful note of the following provisions regarding the action required by Zambeef Shareholders. If you have sold or otherwise transferred all your Zambeef Shares, please forward this document, together with the accompanying Form of Proxy or Form of Instruction (as appropriate), to the purchaser or transferee, or to the bank, stockbroker or other agent, through whom the sale or transfer was effected for transmission to the purchaser or transferee. If you have sold or transferred only part of your holding of shares in the Company, you should retain this document and consult the stockbroker, bank or other agent through whom the sale or transfer was effected. If you are in any doubt as to what action you should take arising from this Circular, please consult your broker, banker, attorney, accountant or other professional adviser. The implementation of the Proposed Transaction is subject, inter alia, to Zambeef Shareholders passing the requisite resolutions at the Extraordinary General Meeting of Zambeef Shareholders to be held at Wednesday 8 April 2015, at Taj Pamodzi Hotel, Church Road, Lusaka, at 10:00am (Zambian time). A notice convening the Extraordinary General Meeting is attached to, and forms part of, this Circular. Shareholders are entitled to attend, or be represented by proxy, and may vote at the Extraordinary General Meeting. If you are unable to attend the Extraordinary General Meeting, but wish to be represented thereat, you must complete and return the attached Form of Proxy, in accordance with the instructions contained therein. Your attention is drawn to the letter from the Chairman of the Company set out in Part B of this document. Shareholders should read the whole of this document. Completion of the Propsosed Transaction/Disposal is conditional, among other things, on approval by Shareholders, which is being sought at the Extraordinary General Meeting of the Company to be held at 10:00am (Zambian time) on Wednesday 8 April 2015, at the Taj Pamodzi Hotel, Church Road, Lusaka, Zambia, notice of which is set out at the end of this document. Shareholders will find enclosed with this document a Form of Proxy. To be valid, the Form of Proxy must be completed, signed and returned in accordance with the instructions printed thereon so as to be received by the Company Secretary at the registered head office, Plot 4970, Manda Road, Industrial Area, P/B 17, Woodlands, Lusaka, as soon as possible and, in any event, by 5:00pm (Zambian time) on Thursday 2 April 2015 (or, in the case of an adjournment of the Extraordinary General Meeting, within 48 hours (excluding weekends and public holidays) before the time appointed for the adjourned Extraordinary General Meeting.


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The completion and return of a Form of Proxy will not preclude Shareholders from attending and voting in person at the Extraordinary General Meeting should they subsequently wish to do so. Depositary Interest holders, to be valid, a completed Form of Instruction must be completed, signed and returned in accordance with the instructions printed thereon so as to be received by the office of the Depositary, Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY, as soon as possible but in any event not later than 4:00pm (UK time) on 1 April 2015 (or, in the case of an adjournment of the Extraordinary General Meeting, not less than 72 hours (excluding weekends and public holidays) before the time appointed for the adjourned Extraordinary General Meeting). If you hold Shares in uncertificated form (that is, in CREST) as Depositary Interests and wish to submit your votes through the CREST electronic proxy appointment service, please follow the instructions detailed in the Notice of Extraordinary General Meeting at the end of this document. Votes submitted via CREST must be received by the issuer’s agent ID 3RA50 by no later than 4:00pm (UK time) on 1 April 2015 (or, in the case of an adjournment of the Extraordinary General Meeting, not less than 72 hours (excluding weekends and public holidays) before the time appointed for the adjourned Extraordinary General Meeting). Completion and return of a Form of Instruction will not preclude you from attending and voting at the Extraordinary General Meeting in person. Should the holder, or a representative of that holder wish to attend the meeting and/or vote at the meeting, they must notify the Depositary in writing or email [email protected] at least 24 hours prior to the meeting date.


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CONTENTS PAGE A: INTRODUCTION AND SUMMARY A.1 DEFINITIONS 11 A.2 SUMMARY OF CORPORATE ACTIONS PROPOSED 15 A.3 STATEMENT OF RESPONSIBILITY BY THE DIRECTORS 18 A.4 INDICATIVE TIMETABLE 19 B: LETTER FROM THE CHAIRMAN OF ZAMBEEF PRODUCTS PLC 20 C: DIRECTORS’ INFORMATION 27 D: STATUTORY INFORMATION IN RESPECT OF THE DISPOSAL 31 E: LITIGATION STATEMENT 34 F: SIGNIFICANT SHAREHOLDERS 35 G: CLASSIFICATION OF THE PROPOSED TRANSACTION 36 H: DOCUMENTS AVAILABLE FOR INSPECTION 37 ANNEXES: ANNEX 1: INDEPENDENT REPORTING ACCOUNTANT’S REPORT ON

THE HISTORICAL FINANCIAL INFORMATION OF ZAMANITA 38 ANNEX 2: INDEPENDENT REPORTING ACCOUNTANT’S REPORT ON THE

UNAUDITED PROFORMA FINANCIAL INFORMATION OF ZAMBEEF 76 ANNEX 3: INDEPENDENT REPORTING ACCOUNTANTS’S OPINION REPORT

ON THE DISPOSAL/PROPOSED TRANSACTION 85 ANNEX 4: NOTICE OF EXTRAORDINARY GENERAL MEETING 89 ANNEX 5: FORM OF PROXY 92 SUPPLEMENT TO THE CIRCULAR 94


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A: INTRODUCTION AND SUMMARY

A.1: Definitions In this document, the following expressions shall have the following meanings unless the context otherwise requires:

“AIM” the Alternative Investment Market of the London Stock Exchange PLC.

“AIM Rules” means together the AIM Rules for Companies and the rules for AIM Nominated Advisers.

“AIM Rules for Companies” the provisions of the AIM Rules for Companies and related guidance notes published by the London Stock Exchange (as amended or reissued from time to time).

“Articles” the Articles of Association of Zambeef as amended from time to time.

“Board” or “Board of Directors” or “Directors”

the Directors of the Company as at the Last Practicable Date, whose names are set out on pages 27-28 of this Circular.

“Business” the business carried on by the Group as at the date of this Circular, including (i) the production, processing, distribution and retailing of beef, pork, chicken, fish, eggs, milk, dairy products, edible oils and flour, (ii) cropping, (iii) the manufacturing of leather and shoes and (iv) development of a palm plantation.

“Cargill” “Cargill Zambia” “Circular”

Cargill Holdings BV, a company founded on 1 January 1985 and incorporated and registered in the Netherlands with company number 33228999 and whose registered office is located at Evert van de Beekstraat 378, 1118CZ, Schiphol, P.O. Box Postbus 75840, 1118ZZ SCHIPHOL, Netherlands. Cargill Zambia (2009) Limited, a private limited company incorporated in Zambia and whose company registration number is 61515 and whose registered office is located at Plot No. 2386, Longolongo Road, P O Box 32421, Lusaka, Zambia. this circular to Shareholders, dated 16 March 2015 together with the annexures hereto, and including the Notice of Extraordinary General Meeting and the Form of Proxy in relation to the Extraordinary General Meeting.


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“COMESA” “Company” or “Zambeef”

Common Market for Eastern and Southern Africa. Zambeef Products PLC, a public limited company incorporated in Zambia on 24 June 1994 as a private limited company, converted into a public limited company on 2 January 2003 and whose company registration number is 31824 and whose registered office is located at Plot 4970, Manda Road, Industrial Area, Lusaka, Zambia.

“Companies Act” The Companies Act, Chapter 388 of the Laws of Zambia.

“Competition and Consumer Protection Commission” or “CCPC” “Completion Date”

regulatory body in Zambia responsible for implementing competition and fair trading laws and policies under the Competition and Consumer Protection Act, 2010 (Act No. 24 of 2010) and the Competition and Consumer Protection (General) Regulations, 2011. the date scheduled for the completion of the Proposed Transaction

being the latter of 1 May 2015 or the first day of the month following

the satisfaction of the Conditions Precedents.

“Conditions Precedent”

the conditions precedent that must be fulfilled prior to completion of the Proposed Transaction.

“CSD” “Depositary” “Depositary Interests” or “Dis” “Depositary Interest Holders”

the Central Shares Depository of the LuSE. Computershare Investor Services PLC. Uncertificated depositary interests issued by the Depositary and representing Shares. Holders of Depositary Interests.

“Extraordinary General Meeting” or “EGM”

The extraordinary general meeting of Shareholders to be held at 10:00am (Zambian time) on Wednesday 8 April, 2015, at the Taj Pamodzi Hotel, Church Road, Lusaka, to consider and, if deemed fit, approve the Proposed Transaction.

“Group” or “Zambeef Group” the Company together with its subsidaries.

“Form of Instruction” “Form of Proxy “

the form of instruction to be completed by Depositary Interest Holders. the form of proxy attached to this Circular for use at the Extraordinary General Meeting.

“Independent Reporting Accountant”

Deloitte & Touche Chartered Accountants, whose registered office is Abacus Square, Stand 2374/B, Thabo Mbeki Road, P O Box 30030, Lusaka, Zambia.


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“ISIN” International Securities Identification Number. “Last Practicable Date” the last practicable date prior to the finalisation of this Circular,

being 11 March 2015.

“LSE” London Stock Exchange plc.

“LuSE” the Lusaka Stock Exchange Limited, a company incorporated in Zambia and licensed to operate as a stock exchange under the Securities Act, Chapter 354 of the Laws of Zambia.

“LuSE Listing Rules” the Lusaka Stock Exchange requirements that govern the activities of that exchange.

“LuSE Sponsoring Broker” or “Pangaea” or “Sponsoring Broker”

Pangaea Securities Limited, a company incorporated in Zambia and regulated by the Securities and Exchange Commission, with company registration number 33424 and registered office at Farmers House, Third Floor, Central Park, Cairo Road, P.O. Box 30163, Lusaka, Zambia.

“Material Adverse Change” “Notice”

means anything that has had a material adverse effect on the business, operations, assets, condition (financial or otherwise) or prospects of the Company taken as a whole and to the extent that such matters have a materially disproportionate effect on the Company compared to other participants in the industries in which the Company operates. the notice of the Extroadinary General Meeting forming part of this Circular.

“Proposed Transaction” or “Disposal”

the disposal by Zambeef of it’s 100 per cent. shareholding in its wholly owned subsidiary, Zamanita, to Cargill.

“Record Date” the close of business on 13 March 2015.

“Resolutions”

the ordinary resolutions authorising the implementation of the Proposed Transation that will, in compliance with the LuSE Listing Rules, be tabled at the Extraordinary General Meeting for the consideration and, if deemed fit, approval of the Shareholders and which are set out in the Notice.

“Sale and Purchase Agreement” or “SPA”

the conditional agreement concluded between the Company, as seller, and Cargill, as purchaser, on 02 February 2015, in terms whereof the Company has, subject to the fulfilment of the Conditions Precedent, disposed of its entire interest in Zamanita to Cargill for the Sale Consideration.


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“Sale Consideration” the sale consideration for the Proposed Transation of USD25.7 million, payable on Completion Date, and adjusted for estimated closing working capital less estimated net financial debt. All of Zamanita’s third party financial debt will be transferred out of the Group in accordance with the terms of the SPA.

“SEC” the Securities and Exchange Commission of Zambia, a statutory body established under the Securities Act Cap 354 of the Laws of Zambia.

“Securities Act” the Securities Act Chapter 354 of the Laws of Zambia.

“Shares” or “Ordinary Shares” or “Zambeef Shares”

ordinary shares with a par value of ZMW 0.01 each in the issued share capital of the Company.

“Shareholder(s)” certified Shareholder(s) owning shares in the Company, and Depositary Interest Holders.

“Subsidiary Companies”

subsidiary companies (as defined in the Companies Act) of Zambeef.

“USD” or “$” or “dollars

United States Dollars, the official currency of the United States of America.

“ZMW” or “Kwacha” “Zamanita” “ZRA” “ZRA Duty Claim”

the lawful currency of Zambia, being the Zambian Kwacha as rebased or any successor currency. Zamanita Limited, a private company incorporated under the laws of Zambia, with company number 67949, and whose company registration number is 31824 and whose registered office is located at Plot 4970, Manda Road, Industrial Area, Lusaka, Zambia, and which is currently a 100 per cent. owned subsidiary of Zambeef. means the Zambia Revenue Authority, established under the Zambia Revenue Authority Act Chapter 321 of the Laws of Zambia and charged with the responsibility of collecting tax on behalf of the Government of Zambia. means all amounts potentially owed to the ZRA by Zamanita pursuant to the notice of reassessment dated 31 January 2012 for an estimated total exposure of ZMW 65,700,000 (approximately USD 10.5 million as of 11 September 2014 (including but not limited to any interest, penalties, legal costs of and any court costs awarded to ZRA).


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A.2: Summary of corporate actions proposed Shareholders are referred to the announcement by Zambeef published on 03 February 2015 relating to Zambeef confirming its entry into a Sale and Purchase Agreement to dispose of 100 per cent. shareholding in its subsidiary, Zamanita, to Cargill. The purpose of this Circular is to:

provide Zambeef Shareholders with additional information on the Proposed Transaction, as required under a Category 1 Transaction in terms of the LuSE Listing Rules;

convene the Extraordinary General Meeting to consider and, if deemed fit, approve with or without modification, the Resolutions relating to the Proposed Transaction, set out in the Notice attached to, and forming part of, this Circular; and

provide Zambeef Shareholders with additional information regarding the proposed Joint CEO Long Term Incentive Plan (incorporated with this Circular as a Supplement).

Rationale for the Proposed Transaction: Zambeef acquired Zamanita for USD16.0 million in January 2008, as a continuation of its strategy of vertical integration. In addition to its position as a leading edible oil and soybean meal producer, Zamanita owned the only solvent extraction plant in Zambia at the time. The acquisition of Zamanita enabled the Group to add value to edible oil seeds such as soya beans produced by the Zambeef farms, while obtaining a source of supply of soya meal, which is the primary ingredient in animal feed production. Zamanita’s acquisition by Zambeef was a logical diversification, to protect the supply of feed meal and to enter the cooking oil market, which is an important basic commodity, forming part of the essential consumer shopping list in our retail outlets. Over the last five years, the oil seed crushing industry has, together with many other domestic industries, matured and a number of new participants have also entered the market. As a result, it is no longer essential for Zambeef to be involved in this industry in order to secure its required supply of high quality soybean meal at a competitive price. Furthermore, oil seed crushing is a highly specialised and capital intensive business which is subject to fluctuations in foreign exchange rates and commodity prices.

The Disposal will allow Zambeef to focus on growing its core business, which is the retailing of cold chain meat and dairy products, delivered through the Group’s extensive processing, distribution and retail network. Furthermore, the Disposal will allow Zambeef to unlock value, via a reduction in overall gearing (particularly US Dollar denominated debt) and in so doing reduce exchange rate exposure and interest costs. Following the Disposal, there will be no change to the Group’s Board or senior management team and its operational focus will remain unchanged.


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Terms of the Proposed Transaction: Consideration details: Zambeef has agreed to dispose of 100 per cent. of its shareholding in its wholly owned subsidiary, Zamanita, to Cargill for the Sale Consideration of USD25.7 million payable on the Completion Date. The Sale Consideration will be adjusted for estimated closing working capital less estimated net financial debt. All of Zamanita’s third party financial debt will be transferred out of the Group in accordance with the terms of the SPA. Purchaser details: Cargill Holdings BV (“Cargill”) was founded on 1 January 1985 and is incorporated in the Netherlands with limited liability. Cargill is wholly owned by a corporation domiciled in the United States of America (Cargill Incorporated). Cargill currently operates in Zambia as Cargill (2009) Zambia Limited (“Cargill Zambia”). Cargill Zambia is a wholly owned subsidiary of Cargill. Cargill has been active in Zambia since 2006 and has 450 permanent employees based in Lusaka and Chipata. The company is active in cotton origination and ginning, as well as grain and oilseeds origination and trading. Across Zambia, Cargill supports programmes that improve agricultural practices, provide essential financial and technical support, offer better access to crop inputs and help farmers increase their incomes. Cargill Zambia currently has no operations or activities in Zambia involved in oil seed crushing and refining, soya meal and/or stock feed production or retailing of products. The Cargill group is a globally renowned group with a long and successful track record and vast technical knowledge and experience in the oil seed crushing and refining business throughout the world. Cargill provides food, agriculture, financial and industrial products and services to the world. Together with farmers, customers, governments and communities, Cargill help people thrive by applying their insights and 150 years of experience. Cargill has 143,000 employees in 67 countries who are committed to feeding the world in a responsible way, reducing environmental impact and improving the communities in which Cargill operates. For the 2014 fiscal year, Cargill’s accounts show:

Revenues of USD134.9 billion.

Earnings of USD1.9 billion.

Cash flow from operations of USD3.8 billion.

Capital investment of more than USD3.0 billion.

Effective date: In accordance with the terms and conditions of the SPA, completion of the Proposed Transaction will occur on either 1 May 2015 or the first day of the month following the satisfaction of the Conditions Precedent, whichever is later.

http://www.cargill.com/150/


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General Meeting: An Extraordinary General Meeting of Zambeef Shareholders will be held at 10:00am (Zambian time), on Wednesday 8 April 2015 at the Taj Pamodzi Hotel, Church Road, Lusaka, to consider and, if deemed fit, to pass, with or without modification, the Resolutions set out in the Notice attached to this Circular. As a Category 1 Transaction in terms of Section 9 of the LuSE Listing Rules, Zambeef Shareholders are required to approve the Proposed Transaction. This Circular sets out the salient features of the Proposed Transaction and Shareholders are urged to contact the advisers detailed on page 4 if they require additional information on the Proposed Transaction, or their own financial advisers.


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A.3: Statement of responsibility by the Directors The Directors, whose names are given on pages 27-28 of this Circular collectively and individually accept full responsibility for the accuracy of the information given and certify that to the best of their knowledge and belief there are no other facts the omission of which would make any statement false or misleading in any material respect, that they have made all reasonable enquiries to ascertain such facts (where applicable), and that this Circular contains all the material information required by law and the LuSE Listing Rules. The Directors confirm that the particulars in this Circular include all such information within their knowledge (or which it would be reasonable for them to obtain by making enquiries) as investors and their professional advisers would reasonably require and reasonably expect to find for the purpose of making an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Company.


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A.4 Indicative timetable The proposed timetable for completing all the required corporate actions summarised in Section A.2 above is as follows:

The definitions commencing on page 11 of this Circular also apply, mutatis mutandis, to this table of contents.

Record date to be eligible to receive this Circular and the Notice 13 March 2015

Circular, incorporating the Notice and Form of Proxy, posted to

Zambeef Shareholders

16 March 2015

Announcement regarding the time, date and venue of the

Extraordinary General Meeting

16 March 2015

Last day to trade in order to be eligible to vote at the Extraordinary

General Meeting

31 March 2015

Record date to be eligible to vote at the Extraordinary General Meeting 31 March 2015

Extraordinary General Meeting of Zambeef Shareholders held on

Wednesday 8 April, at the Taj Pamodzi Hotel, Church Road, Lusaka at

10:00am (Zambian time)

8 April 2015

Results of the Extraordinary General Meeting released 8 April 2015


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B: LETTER FROM THE CHAIRMAN OF ZAMBEEF PRODUCTS PLC

(Incorporated and registered in Zambia under the Companies Act, 1994 with registered number

31824; LuSE Share Code: Zambeef; AIM Share Code: ZAM; ISIN Number ZM0000000201)

Directors: Registered office Dr Jacob Mwanza Zambeef Products PLC Francis Grogan Plot 4970, Manda Road Dr Carl Irwin Industrial Area Yusuf Koya P/B 17, Woodlands Dr Lawrence Sikutwa Lusaka, Zambia John Rabb Irene Muyenga Adam Fleming Charles Mpundu 16 March 2015

To the holders of Ordinary Shares and for information only to the holders of Options and/or Warrants

Dear Shareholder,

Proposed disposal of Zamanita Limited and Notice of Extraordinary General Meeting 1. INTRODUCTION AND PURPOSE OF THIS CIRCULAR

Zambeef Products PLC is a public limited company, and in conformity with Part V of the

Securities Act (1993), its shares are registered with the Securities and Exchange Commission.

Whilst the Proposed Transaction is not a fundamental change of business as defined in accordance with the AIM Rules, it is classified as a Category 1 Transaction in accordance with Section 9 of the LuSE Listing Rules and, accordingly, approval of the Group’s Shareholders is required to be sought.

The purpose of this document is to inform Shareholders of the Proposed Transaction as

stipulated under Section 9.20 (Transactions – Category 1 Listing Requirements) in the

Harmonised Listings Requirements of the Lusaka Stock Exchange. The categorisation of the

Proposed Transaction is determined by assessing its relative size to that of the market

capitalisation of the Company. A percentage ratio of above 25 per cent implies that the

Proposed Transaction falls under the Category 1 Listing Requirements.


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The purpose of this Circular is to:

a) provide Shareholders with additional information on the Proposed Transaction, as

required under a Category 1 Transaction in terms of the LuSE Listing Rules;

b) convene the Extraordinary General Meeting to consider and, if deemed fit, approve with

or without modification, the Resolutions relating to the Proposed Transaction, set out in

the Notice attached to, and forming part of, this Circular; and

c) provide Zambeef Shareholders with additional information regarding the proposed Joint CEO Long Term Incentive Plan (incorporated with this Circular as a Supplement).

2. ZAMBEEF GROUP OVERVIEW

The Zambeef Group is one of the largest integrated agri-businesses in Zambia. The Group is

principally involved in the production, processing, distribution and retailing of beef, chicken,

pork, milk, dairy products, eggs, edible oils, stock feed and flour.

The Group also has large row cropping operations (principally maize, soya beans and wheat),

with approximately 8,120 Ha of row crops under irrigation and a further 8,480 Ha of rain-

fed/dry-land crops available for planting each year.

The Group also has operations in West Africa (Nigeria and Ghana), as well as developing a

palm project in Zambia.

Zambeef is dual listed on the LuSE and AIM. Zambeef’s subsidiary companies currently include

the following:

a) Zambeef Retailing Limited (100 per cent. subsidiary) – owns and operates the retail

operations of the Group;

b) Zamanita Limited (100 per cent. subsidiary) – owns and operates the edible oils and soya

meal production operations of the Group;

c) Master Pork Limited (100 per cent. subsidiary) – owns and operates a piggery, pork

abattoir and meat processing operations of the Group;

d) Zampalm Limited (100 per cent. subsidiary) – owns a palm plantation that is being

developed in Northern Zambia;

e) Zamleather Limited (100 per cent. subsidiary) – owns and operates a tannery, shoe plant,

and finished leather operations of the Group;

f) Zam Chick Ltd (51 per cent. subsidiary) – owns and operates the chicken broiler, chicken

abattoir and chicken processing plant (49 per cent. shareholder is RCL Foods Ltd,

previously known as Rainbow Chickens Ltd of RSA);

g) Zamhatch Limited - owns and operates the hatchery and breeder farm (51 per cent.

shareholder is RCL Foods Ltd, previously known as Rainbow Chickens Ltd of RSA);

h) Master Meats and Agro Production Company of Nigeria Limited (80 per cent. subsidiary) –

Zambeef’s subsidiary company in Nigeria; and

i) Master Meats Ghana Ltd (90 per cent. subsidiary) – Zambeef’s subsidiary company in

Ghana.


22

3. DETAILS ON ZAMANITA AND RATIONALE FOR THE SALE OF ZAMANITA

Zambeef acquired Zamanita for USD16.0 million in January 2008, as a continuation of its

strategy of vertical integration. In addition to its position as a leading edible oil and soybean

meal producer, Zamanita owned the only solvent extraction plant in Zambia.

The acquisition of Zamanita enabled the Group to add value to edible oil seeds such as soya beans produced by the Zambeef farms, while obtaining a source of supply of soya meal, which is the primary ingredient in animal feed production. Zamanita’s acquisition by Zambeef was a logical diversification, to protect the supply of feed meal and to enter the cooking oil market, which is an important basic commodity, forming part of the essential consumer shopping list in our retail outlets.

Over the last five years, the oil seed crushing industry has, together with many other domestic

industries, matured and a number of new participants have also entered the market. As a

result, it is no longer essential for Zambeef to be involved in this industry in order to secure its

required supply of high quality soybean meal at a competitive price. Furthermore, oil seed

crushing is a highly specialised and capital intensive business which is subject to fluctuations in

foreign exchange rates and commodity prices.

Following the Disposal, there will be no change to the Board or senior management team and

its operational focus will remain unchanged.

For the year ended 30 September 2014, Zamanita’s audited accounts recorded revenue of USD67.9 million (ZMW399.2 million), a gross profit of USD9.9 million (ZMW58.3 million) and a loss after tax of USD2.0 million (ZMW11.5 million). Zamanita’s net assets at 30 September 2014 were USD21.9 million (ZMW137.4 million). The book value of Zamanita in the Group’s accounts was USD26.2 million (ZMW164.0 million).

4. TERMS OF THE SALE

Sale Consideration:

The Sale Consideration payable by Cargill to Zambeef in terms of the SPA is USD25.7 million,

which will be adjusted for estimated closing working capital less estimated net financial debt

at Completion. All of Zamanita’s third party financial debt will be transferred out of the Group

in accordance with the terms of the SPA. The SPA excludes from the Disposal the potential

ZRA Duty Claim tax liability, for which Zambeef will assume full responsibility pending

completion of the ongoing determination proceedings.

Application of the proceeds:

The Disposal will allow Zambeef to focus on growing its core business, which is the retailing of

cold chain meat and dairy products, delivered through the Group’s extensive processing,

distribution and retail network. Furthermore, the Disposal will allow Zambeef to unlock value,

via a reduction in overall gearing, particularly US Dollar denominated debt, and in so doing


23

reduce exchange rate exposure and interest costs. It is anticipated that based on the audited

accounts of Zamanita as at 30 September 2014, the net reduction in debt/gearing will be

approximately USD50 million to the Zambeef Group.

Conditions Precedent:

Completion is subject to the following Conditions Precedent being satisfied (of which none

have yet been):

a) CCPC and/or COMESA Competition Commission providing either negative clearance or

approval for the Disposal, as required;

b) Approval by Shareholders at a duly convened EGM, and approval by Cargill’s board of

directors;

c) Receipt of approval from AIM, LuSE and the SEC where required in each case;

d) The requisite consents and/or waivers from the lenders to the Group for the Disposal and

the change in control of Zamanita;

e) Zambeef and Zamanita having settled all intercompany accounts which at 30 September

2014 showed a net amount due to Zambeef of USD3.4 million (ZMW21.6 million);

f) Zambeef procuring the issuance of a stand-by letter of credit in favour of Zamanita to

cover the potential ZRA Duty Claim;

g) due execution and signing of an agreement relating to certain administrative and support

functions for Zamanita for a transitional period, up to 31 December 2015 (the

“Transitional Services Agreement”); and

h) Zamanita entering into and executing a new lease agreement with Zambia Railways

Limited in respect of Stand number 4816 (private siding number 1143) in Lusaka.

Effective date:

The effective date of the SPA shall be either 1 May 2015 or the first day of the month

following the satisfaction of the Conditions Precedent, whichever is later.

On Completion:

a) Zambeef will transfer 100 per cent. of Zamanita’s issued share capital to Cargill;

b) Zamanita will be acquired by Cargill with the existing Standard Chartered Bank Zambia Plc

bank debt and encumbrances, which as at 30 September 2014 were approximately

USD27.0 million (ZMW169.4 million);

c) Cargill will pay the Sale Consideration to Zambeef on the Completion Date as adjusted for

estimated closing working capital less estimated net debt at Completion;

d) The SPA excludes from the Disposal the potential ZRA Duty Claim tax liability, initially

announced on 3 February 2012, for which Zambeef will assume full responsibility pending

completion of the ongoing determination proceedings;

e) The Conditions Precedent have to be completed before the expiry of six (6) months from

the signature date of the SPA (2 August 2015) unless the date is extended by mutual

consent;


24

f) If at any time before completion of the Proposed Transaction, Cargill considers, acting

reasonably, that a Material Adverse Change has occurred since the signing of the SPA,

then Cargill may either proceed to completion or elect to terminate the SPA by notice to

the Seller;

g) Zambeef has given certain representations, warranties, undertakings and indemnities to

Cargill relating to the general status of Zamanita’s assets and contracts, financial position,

tax matters, environmental compliance and other relevant Zambian legislation; and

h) Following completion of the Proposed Transaction, Cargill will assume sole ownership of

Zamanita’s intellectual property, together with all of its remaining assets and debts, save

as described above.

Categorisation and authority to implement the Proposed Transaction:

The Proposed Transaction is classified as a Category 1 Transaction in terms of the LuSE Listing

Rules. As such, the Company requires the authority of Zambeef Shareholders to implement

the the Proposed Transaction by means of the adoption of the Resolutions, as set out in the

Notice of Extraordinary General Meeting.

5. FINANCIAL INFORMATION

Historical financial information of Zamanita: Extracts of the historical financial information of Zamanita for the last two financial years ended 30 September 2013 and 30 September 2014 appear at Annexure 1. Copies of the full financial statements for those periods will be available for inspection.

Pro forma financial effects of the Zamanita disposal on Zambeef’s financials:

The purpose of the table below is to illustrate the unaudited pro forma financial effects of the Zamanita Disposal and such unaudited pro forma financial effects, as set out below, are the responsibility of the Directors. The unaudited pro forma financial effects are presented in a manner consistent with the basis on which the historical financial information of Zambeef has been prepared and in accordance with Zambeef’s accounting policies. The unaudited pro forma financial effects have been presented for illustrative purposes only and, because of their nature, may not give a fair reflection of Zambeef’s financial position, changes in equity or of the effect on future earnings post the implementation of the Zamanita Disposal.


25

ZMW The Group as at 30.09.2014 The Group on Disposal Change %

EPS (0.10) (0.26) 160%

Headline EPS (*) (0.09) (0.04) 51%

NAVPS 5.42 5.21 -4%

NTAVPS 5.35 5.14 -4%

Ordinary Shares in Issue 247,978,195 247,978,195 (*) Headline EPS is the measurement of a company's earnings based solely on operational and capital investment activities. It specifically excludes any income that may relate to staff reductions, sales of assets, or accounting write-downs.

The Independent Reporting Accountant’s report on the unaudited pro forma financial information appears in Annexure 2 to this Circular.

6. EXPENSES OF THE DISPOSAL

The costs associated with the Disposal are estimated to total approximately ZMW 27 million

(USD 3.85 million), of which over 93 per cent. relates to property transfer tax, competition

commission filing fees and LuSE fees.

7. PROPOSED AMENDMENT TO THE LONG TERM INCENTIVE PLAN (“LTIP”)

At the Annual General Meeting held on 21 December 2012, shareholders approved the rules of the Zambeef Long Term Incentive Plan (“LTIP Scheme”). On 18 February 2015, the Remuneration Committee approved the Joint CEO Long Term Incentive Plan (“JCEO LTIP”). The Joint CEOs (“JCEOs”), being Carl Irwin and Francis Grogan, will be given market value options (“Options”) to acquire Ordinary Shares, up to a maximum of 2.5 per cent. each (ie - combined 5 per cent.) of the current issued share capital of Zambeef (ie - 6.25 million shares each). To facilitate this, the current LTIP Scheme rules will have to be amended to allow the granting by the Company of the JCEO Options to the Joint CEOs to acquire a maximum of 2.5 per cent. each (5 per cent. combined) of the current Zambeef issued share capital and for the annual base value of the shares that may be issued to each Joint CEO under the plan to exceed 300 per cent. of each Joint CEOs’ annual basic salary. Additional information on the LTIP is provided as a Supplement.

8. ADVISERS’ CONSENTS

The parties referred to in the “Corporate Information” section on page 4 of this Circular have

consented in writing to act in the capacities stated and to their names being stated in the

Circular and, in the case of the Independent Reporting Accountants, have consented to the

references to their report in the form and context in which they appear, and have not

withdrawn their consents prior to the publication of the Circular.

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/earnings-1514

http://www.investinganswers.com/financial-dictionary/economics/capital-5749

http://www.investinganswers.com/financial-dictionary/investing/investment-4904

http://www.investinganswers.com/financial-dictionary/personal-finance/income-5798

http://www.investinganswers.com/financial-dictionary/businesses-corporations/sale-5682

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/accounting-835


26

9. DIRECTORS’ RECOMMENDATION

The Directors have considered the terms and conditions of the Proposed Transaction and are

of the opinion that the terms thereof are fair and reasonable and in the interests of Zambeef’s

Shareholders.

The Directors recommend that Zambeef Shareholders vote in favour of the Resolution

approving the Proposed Transaction, to be proposed at the Extraordinary General Meeting.

The Directors, in their personal capacities, intend to vote the Zambeef shares held by them in

favour of the Resolution approving the Proposed Transaction, at the Extraordinary General

Meeting. In aggregate, the Directors hold 33,020,375 Ordinary Shares, which represents

13.31 per cent. of the Company’s issued ordinary share capital as at the Last Practicable Date,

all of which will be voted in favour.

No Director of Zambeef has had any material beneficial interest, directly ot indirectly, in the Proposed Transaction or in the Cargill group.

10. DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors, whose names are given on pages 27-28 of this Circular collectively and

individually accept full responsibility for the accuracy of the information given and certify that

to the best of their knowledge and belief there are no other facts the omission of which would

make any statement false or misleading in any material respect, that they have made all

reasonable enquiries to ascertain such facts (where applicable), and that this Circular contains

all the material information required by law and the LuSE Listing Rules.

11. CONCLUSION

The sale of Zamanita is an important transaction for Zambeef as it consolidates our operational focus, reduces our exposure to foreign currency and commodity price fluctuations and strengthens our balance sheet through the reduction of interest bearing debt. This is in line with the strategic priorities highlighted in our Annual Report for the year ended 30 September 2014.

The Directors and I wish to take this opportunity to thank Shareholders for their continued support and hope that this will continue in the future.

Yours sincerely,


27

C: DIRECTORS’ INFORMATION

Details of Directors The Board of Zambeef currently comprises of three (3) Executive Directors and six (6) Non- Executive Directors, as set out in the table below:

NAME QUALIFICATIONS EXPERIENCE

EXTERNAL APPOINTMENTS

Jacob Mwanza

PhD (Cornell University, USA) MA Economics (W. Germany).

Over 30 years’ business Management experience, both in the public and private sectors. Previously Governor of the Bank of Zambia, currently Chancellor of the University of Zambia.

Has served and is currently serving on several boards, including IMF Advisory Group on Sub‑Sahara African Economic and Social Affairs, Pangaea Securities, David Shepard Foundation and Kafue Sanctuary.

Francis Grogan

BSc Agriculture (Ireland). Over 22 years’ experience in agriculture and meat, both in Ireland and Zambia. Co-founder of Zambeef.

Other directorships include Zambezi Ranching & Cropping Ltd, Fraca Meat Company Ltd and Tractorzam Ltd.

Carl Irwin B. Com (University of Cape Town). FCA (UK). FZICA. Honorary doctorate (Copperbelt University).

Over 20 years’ accounting and finance experience with a number of companies, including Coopers & Lybrand UK. Co-founder of Zambeef.

Other directorships include Proflight Commuter Services Ltd, Zambezi Ranching & Cropping Ltd, Kanyanja Development Company Ltd, Leopard Investment Company Ltd, Fraca Meat Company Ltd and Tractorzam Ltd.

Yusuf Koya BSc in Geology & Economics (Keele University, UK). MSc in Economics (Keele University, UK). AIFS (UK).

Over 25 years’ experience in business management, corporate finance & credit risk management, both in the UK & Zambia. Previously Country Credit Director with Barclays Bank Zambia PLC.

Director of Marhaba Service Station Ltd.

Lawrence Sikutwa

MBA. FCII. Post Grad Diploma in Insurance (UK). Honorary doctorate (University of Lusaka).

Over 30 years’experience in business management. Previously General Manager of Zambia State Insurance Corporation Ltd.

Currently Chairman of Lawrence Sikutwa and Associates Ltd Group of Companies.

John Rabb BSc (Agriculture) MBA (RSA).

Over 30 years’ business management experience. Formerly Managing Director of the Wooltru Group in South Africa, which was listed on the JSE.

Has served on, and is currently serving on, several boards, including Wellspring Ltd.


28

Irene Muyenga

BA (ed). DIS. LIII. FZIBFS. AIIZ.

Over 20 years’ business management experience. Previously CEO and Group Managing Director of Zambia State Insurance Corporation Limited.

Has served and is currently serving on several boards, including Barclays Bank Zambia PLC, University of Zambia, Mulungushi University and African Grey Insurance Co.

Adam Fleming

Over 30 years’ business management and banking experience in London, Hong Kong, Singapore and South Africa. Previously Chairman of Harmony Gold.

Currently Deputy Chairman of Stonehage Fleming Family and Partners and Chairman Zambezi Ranching & Cropping Ltd.

Charles

Mpundu

BSc (hons Actuarial Sciences). MBA.

Over 20 years’ experience in business management. Previously CEO of Workers’ Compensation Fund Control board and currently Director General of National Pension Scheme Authority.

Chairman of Barclays Bank Staff Pension Trust Scheme, President of the Actuarial Society of Zambia and Chairman of East and Central African Social Security Association (ECASSA).

Directors’ service contracts Each Executive Director has entered into a fixed term service agreement on 1 April 2013, for a term of two years, which allows for termination by either party giving six months’ notice. Each of the Non-executive Directors has entered into a letter of appointment with the Company, which allows for termination by either party giving three months’ notice. Directors’ interests on securities The Directors held the following interests in the Company’s Ordinary Shares at the Circular date:

30 September 2014

% Interest As at the Last Practicable Date

% Interest

Jacob Mwanza 1,093,820 0.44% 1,093,820 0.44%

Carl Irwin 2 4,411,445 1.77% 5,406,445 2.18%

Francis Grogan 1 3,596,631 1.45% 4,591,631 1.85%

John Rabb 4 7,868,813 3.17% 12,000,000 4.84%

Lawrence S Sikutwa 115,176 0.04% 115,176 0.04%

Irene M Muyenga 13,129 0.00% 13,129 0.00%

Adam Fleming 5 9,554,692 3.85% 9,554,692 3.87%

Yusuf Koya 3 42,762 0.02 245,482 0.09%

Total 26,696,468 10.77% 33,020,375 13.31%

1 The aggregate interests of Francis Grogan are held as follows: 995,000 held directly and 3,596,631 held indirectly through Banata Ltd.

2 The aggregate interests of Carl Irwin are held as follows: 3,763 held directly, 4,562,682 held indirectly through Tajar Ltd and 840,000

held indirectly through Applegum Pty Ltd. 3 The aggregate interests of Yusuf Koya are held directly and jointly with his spouse. 4 The aggregate interests of John Rabb are held indirectly as follows: 7,868,813 held by Shaka Holdings Inc., acting as nominee for trusts

of which John Rabb is one of the discretionary beneficiaries, and 4,131,187 held by the Wellspring Trust, a trust of which John Rabb is

one of the discretionary beneficiaries. 5 The aggregate interests of Adam Fleming are held indirectly as follows: 6,597,537 shares owned by Rhodora Limited and 2,957,155

held by FF&P.


29

Directors’ interest in the Proposed Transaction No Director of Zambeef has had any material beneficial interest, directly or indirectly, in the Proposed Transaction or in the Cargill group.

Directors’ fees, remuneration and share options as at 20 February 2015

ZMW’000 per annum

Salary/Fees Housing Allowance

Car Allowance

Air Fares Allowance

Medicals LTIP 1 (Shares)

LTIP 2 (Shares)

Non-Executive

Jacob Mwanza 646,154 - - - - -

Lawrence Sikutwa 282,692 - - - - -

Irene Muyenga 282,692 - - - - -

Adam Fleming 161,538 - - - - -

John Rabb 201,923 - - - - -

Charles Mpundu 121,154

Executive

Francis Grogan 2,418,756 Co. House Co. Car 242,304 Yes 370,000

Carl Irwin 2,418,756 - Co. Car 242,304 Yes 275,000

Yusuf Koya 1,941,307 242,308 145,385 201,924 Yes 275,000 275,000

Danny Museteka 964,900 242,308 96,923 - Yes 275,000 275,000

USD per annum (*) Salary/Fees Housing

Allowance Car

Allowance Air Fares

Allowance Medicals LTIP 1

(Shares) LTIP 2

(Shares)

Non-Executive

Jacob Mwanza 92,308 - - - - -

Lawrence Sikutwa 40,385 - - - - -

Irene Muyenga 40,385 - - - - -

Adam Fleming 23,077 - - - - -

John Rabb 28,846 - - - - -

Charles Mpundu 17,308

Executive

Francis Grogan 345,537 Co. House Co. Car 34,615 Yes 370,000

Carl Irwin 345,537 - Co. Car 34,615 Yes 275,000

Yusuf Koya 277,330 34,615 20,769 28,846 Yes 275,000 275,000

Danny Museteka 137,843 34,615 13,846 - Yes 275,000 275,000 (*) Converted at an exchange rate of ZMW7/USD1 (exchange rate on 20 February 2015).

In addition to the above, all Executive Directors are also entitled to a gratuity of 10 per cent. of their gross basic salary paid over the two year contract term, less statutory deductions for tax. The Long Term Incentive Plan 1 (“LTIP 1”) has the following key terms/conditions: a) Structure: performance shares with Earnings Per Share (EPS) growth performance condition; b) Performance condition: three year compound average EPS growth tested once at the end of

the three year period. 25 per cent. of performance shares vest at annual compound EPS growth of average annual inflation rate plus 7 per cent. and vest in full (100 per cent.) at average annual anflation rate plus 17 per cent. compound EPS growth. Straight line vesting between average annual inflation rate plus 7 per cent. and average annual inflation rate plus 17 per cent. compound EPS growth;

c) Vesting period: vest after three years. Delivered to participants on vesting or as a nominal priced option exercisable within one year of vesting;


30

d) Maximum shares: The annual award base value (number of performance shares multiplied by the share price on the date of grant plus number of options multiplied by the exercise price) may not exceed three times the executive’s base salary;

e) Benchmark year: FYE 2012; and f) Performance period: Year 1: FYE 2013; Year 2: FYE 2014; Year 3: FYE 2015.

The Long Term Incentive Plan 2 (“LTIP 2”) has the following key terms/conditions: a) Structure: market value option shares (“Options”); b) Exercise price: 15 pence; c) Maximum shares: The annual award base value (number of shares multiplied by the share

price on the date of grant plus number of Options multiplied by the exercise price) may not exceed three times the Executive’s base salary; and

d) Vesting period: three years from 2015 to 2018; excercisable from 1 March 2018: e) The Options can only be excercised if Zambeef achieves the following targets:

I. If the share price reaches 40 pence, then 25 per cent. of the Options become exercisable. II. If the share price reaches 48 pence, a further 25 per cent. of the Options become

exercisable. III. If the share price reaches 56 pence, a further 25 per cent. of the Options become

exercisable. IV. If the share price reaches 65 pence, the final 25 per cent. of the Options become

exercisable. V. Zambeef achieving a debt-to-equity (gearing) ratio of less than 35 per cent. in the

audited accounts immediately prior to excercising the options. VI. Zambeef achieving a current ratio (current assets divided by current liabilities) of 1.5 in

the audited annual accounts immediately prior to the excercising of the options. VII. Zambeef generating free cash flow.

VIII. The Zambeef share price triggers set above will be considered achieved if in the 14 days immediately prior to excercising the Options, the shares have traded continuously at not less than these prices for 14 days.

IX. The Options will be excercisable at any time for 2 years after the 3 year period from the issue of the Options have lapsed.

X. The Options can only be excercised if the relevant executives are still employed by the Company.


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D: STATUTORY INFORMATION IN RESPECT OF THE DISPOSAL

Material Loans DEBT SUMMARY - ZAMBEEF GROUP (EXCLUDING ZAMANITA) - FYE SEPTEMBER 2014

OVERDRAFT/WORKING CAPITAL

LENDER TYPE BORROWER MARGIN LIMIT (USD) SECURITY

Citibank Overdraft Zambeef 1Y LIBOR + 3.5% 5,000,000 Parri Passu debenture with SCB, Stanbic, Zanaco (RTC ZMW8m & $10m)

Citibank Overdraft Zamleather 1Y LIBOR + 3.5% 100,000 Floating Charge over Zamleather assets & Zambeef Guarantee

Standard Chartered Overdraft Zambeef 1M LIBOR + 3.6% 3,000,000 Parri Passu debenture with Citi, Stanbic, Zanaco (RTC $5.2m)

Standard Chartered CMA Zambeef 1M LIBOR + 3.15% 34,000,000 Chg over grain stocks (RTC $34m); Agric Chg (RTC $24m) & Multi-peril crop insurance (RTC $24m)

ZANACO Bank Overdraft Zambeef 3M LIBOR + 4.25% 4,000,000 Parri Passu debenture with SCB, Stanbic, Citi (RTC ZMW22.5m & $4m)

Stanbic Bank Overdraft Zambeef 3M LIBOR + 3.75% 1,000,000 Parri Passu debenture with Citi, SCB, Zanaco (RTC K47.3m)

Sub-Total USD $47,100,000

LENDER TYPE MARGIN 1 LIMIT (ZMW)

Citibank Overdraft Zambeef BPR + 4.15% 35,000,000 Parri Passu debenture with SCB, Zanaco, SCB (RTC ZMW8m & $10m)

Citibank Overdraft Zamleather BPR + 4.15% 137,000 Floating Charge over Zamleather assets & Zambeef G'tee

ZANACO Bank Overdraft Zambeef BPR + 3% 22,500,000 Parri Passu debenture with Citi, SCB, Stanbic (RTC $4m & ZMK22.5bn)

Standard Chartered Overdraft Zambeef BPR + 2.25% 4,500,000 Parri Passu debenture with Citi, Stanbic, Zanaco (RTC $5.2m)

Stanbic Bank Overdraft Zambeef BPR + 3% 42,000,000 Parri Passu debenture with Citi, SCB, Zanaco (RTC K47.3m)

Sub-Total ZMK ZMK 104,137,000

TERM LOANS

LENDER LIMIT (USD) MARGIN 1 BALANCE (USD) SECURITY

DEG 2 - US$ 25,000,000 Zambeef 6M LIBOR + 4.55% 7,150,000

DEG 3 - US$ 10,000,000 Zambeef 6M LIBOR + 4.25% 10,000,000

IFC 1 - US$ 7,000,000 Zambeef 6M LIBOR + 4.75% 2,545,454

IFC 1 - US$ 3,000,000 Master Meats (Nigeria) 6M LIBOR + 4.75% 1,134,545

IFC 2 - US$ 20,000,000 Zambeef 6M LIBOR + 4.75% 20,000,000

Sub-Total US$ $65,000,000 $40,829,999

LENDER LIMIT (ZMW) MARGIN 1 BALANCE (ZMW) SECURITY

Zanaco Loan - ZMK 46,500,000 Zambeef BPR + 3.75% 46,500,000

IFC 2 Loan - ZMK 49,600,000 Zambeef 91 Day TB + 4.45% + ZMK swap 49,600,000

Sub-Total ZMK ZMK 96,100,000 ZMK 96,100,000

ASSET FINANCE / HIRE PURCHASE

LENDER LIMIT (USD) MARGIN 1 BALANCE (USD) SECURITY

STANBIC BANK - US$ 4,000,000 Zambeef 3M LIBOR + 3.5% 2,350,995

Sub-Total US$ $4,000,000 $2,350,995

1st Fixed Charge over assets financed

1st legal mtge Stockfeed @ 9070, 9071 & 9074 (RTC $11.2m)

Floating charge on assets + Zambeef G'tee

1st legal mtge Mpongwe farms @ 4450, 4451 & 5388 (RTC $42m)

1st legal mtge over Zambeef Head Office (RTC ZMW46.5m)

1st legal mtge Sinazongwe @ 4906, 18835/M, 18836/M & Chiawa @ 10097, 5063, 8409/M (RTC $40m)

2nd legal mtge Sinazongwe @ 4906, 18835/M, 18836/M & Chiawa @ 10097, 5063, 8409/M (RTC $14m)

1st legal mtge Mpongwe farm @ 4450, 4451 & 5388 (RTC $42m)


32

DEBT SUMMARY – (ZAMANITA) - FYE SEPTEMBER 2014

OVERDRAFT/WORKING CAPITAL

LENDER TYPE MARGIN LIMIT (USD) SECURITY

Standard Chartered Overdraft 1M LIBOR + 3.6% 4,000,000 1st legal mtg Zamanita @ 5001 & 5960 (RTC $8.5m); deb over other assets (RTC $18m); ISR Ins. policy

Standard Chartered FAWR/CMA 1M LIBOR + 3.15% 25,000,000 Fixed charge over Zamanita soya/cotton stock financed (RTC $25m)

Sub-Total USD $29,000,000

LENDER TYPE MARGIN LIMIT (ZMW)

Standard Chartered Overdraft BPR + 2.25% 20,000,000 1st legal mtg Zamanita @ 5001 & 5960 (RTC $8.5m); deb over other assets (RTC $18m); ISR Ins. policy

Sub-Total ZMK ZMK 20,000,000

TERM LOANS

LENDER LIMIT (USD) MARGIN BALANCE (USD) SECURITY

SCB - US$ 8,000,000 3M LIBOR + 4.75% 3,234,969

Sub-Total US$ $8,000,000 $3,234,969

1st legal mtg Zamanita @ 5001 & 5960 (RTC $8.5m); floating chg other assets (RTC $18m); ISR Ins. policy


33

Material contracts Since the last reporting date, being the Annual Report for the year ended 30 September 2014, save for the SPA for the Disposal, no material contracts have been entered into by Zambeef or its Subsidiaries, other than in the normal course of business. Material changes and commissions Save as disclosed in the Company’s 2014 Audited Annual Reports and Financial Statements, there have been no material changes in the Company’s or its Subsidiary Companies since the date of the last audited accounts, and no material adverse changes in the Company’s or its Subsidiary Companies’ financial position since the last reporting date, and no commissions, brokerages, discounts or other special terms have been granted by the Company or its Subsidiary Companies in connection with the issue or sale of any of its share capital. Share capital

Date

Number of shares Nominal value per share (ZMW)

Total Nominal value (ZMW)

Authorised Ordinary share capital

400,000,000 0.01 4,000

Issued Ordinary share capital

247,978,195 0.01 2,480

The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. Unissued shares can be issued from time to time by the approval of an ordinary resolution by Shareholders in general meeting. Working capital statement The Board is of the opinion that the working capital resources of the Zambeef Group are sufficient for the Zambeef Group’s current working capital requirements and will be adequate for a period of 12 months from the date of issue of this Circular. Strategic priorities and outlook Zambeef has an established and proven strategy of providing high quality end products to its customers. Over the past ten years, we have built the Group into a broad, vertically integrated retail and agricultural business with a robust supply chain which creates added value and reduces financial volatility. Zambeef’s strategic priorities, continue to be focused on:

the retailing of cold chain meat and dairy products;

where appropriate, forging strategic alliances and partnerships with acknowledged industry players;

unlocking value and capital gains from within the Group and reducing debt/gearing; and

developing the business into a regional food supplier. The Board believes that the continued execution of the Zambeef’s strategy will position the Group to strongly to take advantage of the growth opportunities available. There remains a number of key long-term growth drivers for Zambeef, which present significant and tangible opportunities: a rapidly expanding consumer base, fuelled by an emerging middle class, increasing per capita income, rapid population growth and high levels of urbanisation.


34

E: LITIGATION STATEMENT

There are no significant or material legal or arbitration proceedings (including to the knowledge of the Directors, any such proceedings which are pending or threatened, by or against the Company or any subsidiary of the Group) which may have or have had, during the 12 months immediately preceding the date of this Circular, a significant and material effect on the financial position or profitability of the Company or any member of the Group, except the potential outstanding ZRA Duty Claim tax liability on Zamanita, which the Group has referred to the Revenue Tribunals Authority as per the announcements to the market on 3 February 2012 and 27 April 2012 respectively.


35

F: SIGNIFICANT SHAREHOLDERS

As at 25 February 2015, the Company had been advised of the following shareholders with an interest greater than 3 per cent. in its ordinary share capital:-

Investor Name Current Position % of Shareholding

M & G Recovery Fund 44,113,908 17.8%

National Pension Scheme Authority (Zambia) 24,979,819 10.0%

SG-SSB Emerging Markets Fund 24,631,080 10.0%

Investec Asset Management (PTY) Ltd 25,245,920 9.9%

SQM Frontier Management 19,764,333 8.0%

Ashmore Emerging Markets Management 16,754,551 6.8%

Templeton Asset Management Ltd 11,645,571 4.7%

Artio Global Management 9,363,990 3.8%

JB Management 8,175,000 3.3%

Shaka Holdings Inc. 7,868,813 3.2%

Apart from these holdings, the Company has not been notified as at 25 February 2015 of any interest of 3 per cent. or more in its ordinary share capital.


36

G: CLASSIFICATION OF THE PROPOSED TRANSACTION

Under Section 9.20 (Transactions – Category 1 Requirements) in the LuSE Listing Rules, the categorisation of the Proposed Transaction must be determined by assessing its relative size to that of the market capitalisation of the Company. A percentage ratio of above 25 per cent. implies that the Proposed Transaction falls under the Category 1 Requirements of the LuSE Listing Rules. As a Category 1 Transaction the Company is required to obtain the approval of the Shareholders in a General Meeting, and any agreement effecting the Proposed Transaction must be conditional upon such approval being obtained and the Circular should include a statement giving the Directors’ opinions on the Proposed Transaction, a recommendation as to how the Shareholders should vote at the Extraordinary General Meeting to approve the Proposed Transaction, and an indication as to how the Directors intend to vote their shares, if applicable, at the Extraordinary General Meeting. The LuSE has confirmed that as this is a Category 1 Transaction under the LuSE Listing Rules, an ordinary resolution at the EGM is required to approve the Proposed Transaction. Further, the LuSE has confirmed that the presentation of financial forecasts in this Circular is not required, because of the dual listing on the AIM where forecasts are not, by convention or regulatory requirement, made public in UK capital market transactions. Forecasts and projections for companies listed on AIM are typically provided through broker research reports, which are prepared in conjunction with the listing company, and are relied on by investors for forecast information. On this premise, the LuSE has allowed for the financial forecasts to be presented through a broker research report.


37

H: DOCUMENTS AVAILABLE FOR INSPECTION

The following documents, or copies thereof, will be available for inspection by Zambeef

Shareholders during normal business hours at the registered office of Zambeef and at the office of

Pangaea Securities (the details of which appear in the “Corporate Information” section of this

Circular) from the date on which this Circular is issued until the date on which the Extraordinary

General Meeting is held (both days inclusive):

the Certificate of Incorporation of Zambeef and the Certificate of Incorporation of Zamanita;

The Articles of Association of Zambeef and the Articles of Association of Zamanita;

the reviewed annual financial statements of Zamanita and the audited annual financial

statements of Zamanita for the financial years ended 30 September 2013 and 30 September

2014;

report of the Independent Reporting Accountant on the historical financial information of

Zamanita referred to above;

the report of the Independent Reporting Accountant on the unaudited pro forma financial

information of Zambeef, as reproduced in Annexure 2;

the consent letter of the Independent Reporting Accountant and all other consent letters

referred to in this Circular;

the Sale and Purchase Agreement; and

a signed copy of this Circular.


38

ANNEX 1: INDEPENDENT REPORTING ACCOUNTANT’S REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF ZAMANITA

18 February 2015

The Directors

Zambeef Products Plc

PLOT 4970, Manda Road

Industrial Area

Private Bag 17

Woodlands

Lusaka

Dear Sirs,

Independent accountants report

We have reviewed the accompanying financial statements of Zamanita Limited set out on pages 4 to 39, that

comprise the statement of financial position as at 30 September 2014, 2013 and 2012, and the statement of

comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and

the notes, comprising a summary of significant accounting policies and other explanatory information.

The financial information set out is based on the audited financial statements of the Company after taking into

account any adjustments we believe were necessary. The audited financial statements are prepared on the basis

of the accounting policies set out under note 3 which conform to operative International Financial Reporting

Standards (IFRS).

Directors’ Responsibility for the Financial Statements

The company’s directors are responsible for the preparation and fair presentation of these financial statements in

accordance with International Financial Reporting Standards (“IFRS”) and the requirements of the Companies

Act, 1994 (as amended), and for such internal control as the directors determine necessary to enable the

preparation of financial statements that are free from material misstatement, whether due to fraud or error. The

Directors are responsible for the contents of the prospectus in which this report is included in accordance with

the LuSE Listing Rules.

Reporting Accountants’ responsibility for the historical information

Our responsibility is to express a conclusion on the accompanying financial statements based on the procedures

we have performed and the evidence we have obtained. We conducted our review in accordance with

International Standard on Review Engagements (ISRE) 2400 (Revised), Engagements to Review Historical

Financial Statements. ISRE 2400 (Revised) requires us to conclude whether anything has come to our attention

that causes us to believe that the financial statements, taken as a whole, are not prepared in all material respects

in accordance with the applicable financial reporting framework. This Standard also requires us to comply with

relevant ethical requirements.

A review of financial statements in accordance with ISRE 2400 (Revised) is a limited assurance engagement.

The practitioner performs procedures, primarily consisting of making inquiries of management and others

within the entity, as appropriate, and applying analytical procedures, and evaluates the evidence obtained.

The procedures performed in a review are substantially less than those performed in an audit conducted in

accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on these

financial statements.


39

Conclusion

Based on the procedures we have performed and the evidence we have obtained, nothing has come to our

attention that causes us to believe that the financial statements do not present fairly, in all material respects, the

financial position of Zamanita Limited as at 30 September 2014, 2013 and 2012 and its financial performance

and cash flows for the year then ended in accordance with the International Financial Reporting Standards and

the requirements of the Companies Act, 1994 (as amended).

Other reports required by the Companies Act

As part of our review of the financial statements for the year ended 30 September 2014, 2013 and 2012, we

have read the Directors’ Report for the purpose of identifying whether there are material inconsistencies

between this report and the reviewed financial statements. The Directors’ Report is the responsibility of the

directors. Based on reading the Directors’ Report we have not identified material inconsistencies between this

report and the reviewed financial statements. However, we have not reviewed the Directors’ Report and

accordingly do not express a conclusion thereon.

Deloitte & Touche

Per Humphrey Mulenga

Partner

ZAMANITA LIMITED REPORTING ACCOUNTANT’S REPORT

40

1. Zamanita Limited

1.1 Statement of financial position

Notes 2014

2013

2012

ASSETS

K'000

K'000

K'000

Non current assets Property, plant and equipment 9

199 839

202 218

112 727

Current assets

258 939

226 661

327 035

Inventories 10

182 376 210 059 188 569

Trade and other receivables 11

30 445

15 011

18 112

Amounts due from related parties 12

45 150

-

117 027

Cash and cash equivalent 16

968 1 591 3 327

Total assets

458 778

428 879

439 762

EQUITY AND LIABILITIES Equity

137 393

148 893

38 533

Share capital 13

12 12 11

Share premium 14

62 709

62 709

62 709

Reserves

74 672 86 172 (24 187)

Non-current liabilities

57 690

67 433

62 720

Interest bearing liabilities 15(a)

16 730 26 254 32 096

Deferred tax liability 8(d)

10 666

10 555

-

Deferred liability

30

-

-

Amounts due from related parties

30 624 30 624 30 624

Current liabilities

263 695

212 913

338 869

Interest bearing liabilities 15(a)

14 212 9 221 3 060

Collateral management agreement 15(b)

94 892

67 555

74 292

Bank overdrafts 16

43 561

39 326

38 181

Trade and other payables 17

74 261

62 982

93 571

Taxation payable 8(a)

263

1 355

-

Amounts due to related parties 18(b).

36 506 32 474 129 765

Total equity and liabilities

458 778

428 879

439 762

Net assets per share

11.45

12.41

3.21


41

1 Financial Statements (continued) 1.2 Statement of comprehensive income

2014

2013

2012

Notes

K'000

K'000

K'000

Revenue 6

399 117

461 871

280 630

Cost of sales

(340 854)

(355 866)

(254 743)

Gross profit

58 263

106 005

25 887

Administration expenses

(50 792)

(54 764)

(53 321)

Other income (expenses)

101

48

(3)

Operating profit (loss)

7 572

51 289

(27 437)

Net exchange losses

(11 631)

(7 704)

(7 603)

Finance costs

(7 327)

(8 057)

(2 323)

(Loss)/profit before taxation 7

(11 386)

35 528

(37 363)

Taxation 8(a)

(114)

(11 910)

-

(Loss)/profit after taxation

(11 500)

23 618

(37 363)

Earnings per share

(0.96)

1.97

(3.40)


42

1 Financial Statements (continued) 1.3 Statement of changes in equity

2014

Share Capital

Share premium

Revenue reserve

Revaluation reserve

Total

K'000

K'000

K'000

K'000

K'000

At 1 Oct 2012

11

62 709

(24 187)

-

38 533

Profit for the year

-

-

23 618

-

23 618

Issue of share capital

1

-

-

-

1

Surplus on revaluation

-

-

-

60 029

60 029

Depreciation write back

-

-

-

26 172

26 172

At 30 Sept 2013

12

62 709

(569)

86 201

148 353

Loss for the year

-

-

(11 500)

-

(11 500)

Transfers

-

-

1 462

-

1 462

At 30 Sept 2014

12

62 709

(10 607)

86 201

138 315


43

2013

Share Capital

Share premium

Revenue reserve

Revaluation

reserve

Total

K'000

K'000

K'000

K'000

K'000

At 1 Oct 2011

11

62 709

13 176

-

75 896

Profit for the year

-

-

(37 363)

(37 363)

At 30 Sept 2012

11

62 709

(24 187)

-

38 533

Profit for the year

-

-

23 618

-

23 618

Issue of share capital

1

-

-

-

1

Surplus on revaluation

-

-

-

60 029

60 029

Depreciation write back

-

-

-

26 712

26 712

At 30 Sept 2012

12

62709

(569)

86 741

148 893


44

2012

Share Capital

Share premium

Revenue reserve

Revaluation reserve

Total

K'000

K'000

K'000

K'000

K'000

At 1 Oct 2010

11

62 709

(11 186)

-

51 534

Profit for the year

-

-

24 362

-

24 362

At 30 Sept 2011

11

62 709

13 176

-

75 896

Loss for the year

-

-

(37 363)

-

(37 363)

At 30 Sept 2012

11

62 709

(24 187)

-

38 533


45

1 Financial Statements (continued) 1.4 Statement of cash flows

2014

2013

2012

Notes ZMW'000

ZMW'000

ZMW'000

Cash flows from operating activities

(41 604)

52 203

(30 440)

(Loss)/profit before taxation

(11 386) 35 528 (37 363)

Interest expense

7 327

8 057

2 323

Depreciation 9 8 772

5 837

4 598

Gain on disposal of property, plant and equipment

(58)

-

-

Net unrealised foreign exchange (gain)/ losses

(46 259) 2 781 2

Cash (outflow)/inflow on operating activities

(18 655)

(29 242)

(21 226)

Decrease/(increase) in inventories

27 683 (21 490) (139 197)

(Increase)/decrease in trade and other receivables

(15 434)

3 101

5 924

(Increase)/decrease in amounts due from related companies (45 150)

117 027

(54 594) Increase/(decrease) in amounts due to related companies

4 032

(97 291)

104 068

Increase/ (decrease) in trade and other payables

11 279

-30 589

62 573

Increase/(decrease) in deferred liability

30

-

-

Taxation (paid)/recovered 5(c) (1 095) - -

Returns on investments and servicing of finance Interest paid

(7 327)

(8 057)

(2 323)

Investing activities

(6 335)

(8 587)

(43 063)

Purchase of property, plant and equipment 9 (6 815) (8 587) (43 160)

Proceeds on sale of plant and equipment 9 480 - 97

Net cash (outflow)/inflow before financing

(73 921)

6 317

(97 052)

Net cash inflow/(outflow) from/(on) financing activities

69 063

(9 198)

101 800

Proceeds from term loan 15(b) 118 275 95 275 101 800

Loan repayment 15(a,b) (49 212)

(104 474)

-

Issue of shares 13 - 1 -

Decrease in cash and cash equivalents

(4 858)

(2 881)

4 748

Cash and cash equivalents at beginning of the year

(37 735)

(34 854)

(39 602)

Cash and cash equivalents at end of the year

(42 593)

(37 735)

(34 854)

Represented by:

Bank balances 16

968

1 591

3 327

Bank overdraft 16 (43 561)

(39 326)

(38 181)

(42 593)

(37 735)

(34 854)


46

NOTES

1. Principal activities The principal activities of the company are the production and sale of vegetable oils, oil seed cake and

margarine.

2. Basis of preparing the financial statements – going concern During the year the company made a loss after taxation of K 11,500 thousand (2013 – loss K 23,618

thousand). The company meets its day to day working capital requirements through funds generated

from its operations.

The financial statements have been prepared on a going concern basis which assumes that the company

will continue in operational existence for the foreseeable future.

The validity of the going concern assumption depends on the management making improvements in the

operations of the company, receiving financial support from various stakeholders, the company being

able to obtain external financial assistance and/or generate sufficient cash flows from its own

operations.

If the company were unable to continue in operational existence for the foreseeable future, adjustments

would have to be made to reduce the Statement of Financial Position values of assets to their

recoverable amounts and to provide for further liabilities that might arise and to reclassify property,

plant and equipment, other non-current assets and non-current liabilities as current assets and liabilities.

Whilst the directors are presently uncertain as to the outcome of the matters mentioned above, they

believe that it is appropriate for the financial statements to be prepared on a going concern basis.

3. Principal accounting policies The principal accounting policies applied by the company in the preparation of these financial

statements are set out below. These policies have been consistently applied to all the periods presented,

unless otherwise stated.

(a) Basis of presentation

The financial statements are prepared in accordance with the provisions of the Companies Act

and International Financial Reporting Standards (IFRS). The financial statements are

presented in accordance with IAS 1 “Preparation of financial statements” (Revised 2007). The

Company has elected to present the “Statement of Comprehensive income” in one statement

namely the “Statement of Comprehensive Income”. They have been prepared under the

historic cost convention, as modified by the revaluation of property, plant and equipment,

available-for-sale financial assets, and financial assets and liabilities at fair value through

profit and loss.

NOTES

3. Principal accounting policies (continued)

(a) Basis of presentation (continued)

The preparation of financial statements in conformity with IFRS requires the use of certain critical

accounting estimates. It also requires management to exercise its judgement in the process of applying

the company’s accounting policies. The areas involving a higher degree of judgement or complexity, or

areas where assumptions and estimates are significant to the financial statements are disclosed in note

4.

(b) New and revised standards that are effective for annual periods beginning on or after 1 January

2014

A number of new and revised standards are effective for annual periods beginning on or after 1 January

2014. Information on these new standards is presented below.


47

IFRIC 21 ‘Levies’

IFRIC 21 clarifies that:

the obligating event that gives rise to the liability is the activity that triggers the payment of

the levy, as identified by the government’s legislation. If this activity arises on a specific date

within an accounting period then the entire obligation is recognised on that date; and

the same recognition principles apply in the annual and interim financial statements.

IFRIC 21 has no material effect on the annual financial statements but affects the allocation of the cost

of certain property taxes between interim periods. The Company’s past practice was to spread the cost

of property taxes payable annually over the year, resulting in the recognition of a prepayment at interim

reporting dates. The application of IFRIC 21 requires the Company to recognise the entire obligation as

an expense at the beginning of the reporting period, which is the date specified in the relevant

legislation. IFRIC 21 has been applied retrospectively in accordance with its transitional provisions and

had no material effect on the financial statements for any period presented.

Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)

These amendments clarify the application of certain offsetting criteria in IAS 32, including:

the meaning of ‘currently has a legally enforceable right of set-off’; and

that some gross settlement mechanisms may be considered equivalent to net settlement.

The amendments have been applied retrospectively in accordance with their transitional provisions. As

the Company does not currently present any of its financial assets and financial liabilities on a net basis

using the provisions of IAS 32, these amendments had no material effect on the financial statements for

any period presented.

NOTES


(b) New and revised standards that are effective for annual periods beginning on or after 1 January

2014 (continued)

Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)

These amendments clarify that an entity is required to disclose the recoverable amount of an asset (or

cash generating unit) whenever an impairment loss has been recognised or reversed in the period. In

addition, they introduce several new disclosures required to be made when the recoverable amount of

impaired assets is based on fair value less costs of disposal, including:

additional information about fair value measurement including the applicable level of the fair

value hierarchy, and a description of any valuation techniques used and key assumptions

made; and

the discount rates used if fair value less costs of disposal is measured using a present value

technique.

The amendments have been applied retrospectively in accordance with their transitional Provisions and

had no material effect on the financial statements for any period presented.

Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)

The Company has adopted ‘Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)’.

These amendments are effective for annual periods beginning on or after 1 July 2014 and:

clarify the requirements of IAS 19 relating to contributions from employees or third parties;

and


48

introduce a practical expedient such that contributions that are independent of the number of

years of service may be treated as a reduction of service cost in the period in which the related

service is rendered.

The Company has applied the practical expedient as its accounting policy. This treatment is consistent

with the Company’s previous practice before the Amendments to IAS 19. Therefore, the initial

application of the amendments has no effect on the Company’s financial statements.

(c) Standards, amendments and interpretations to existing standards that are not yet effective and

have not been adopted early by the Company

At the date of authorisation of these financial statements, certain new standards, and amendments to

existing standards have been published by the IASB that are not yet effective, and have not been

adopted early by the Company. Information on those expected to be relevant to the Company’s

financial statements is provided below.


49

NOTES


(c) Standards, amendments and interpretations to existing standards that are not yet effective and

have not been adopted early by the Company (continued)

Management anticipates that all relevant pronouncements will be adopted in the Company’s accounting

policies for the first period beginning after the effective date of the pronouncement.

New standards, interpretations and amendments not either adopted or listed below are not expected to

have a material impact on the Company’s financial statements.

IFRS 9 ‘Financial Instruments’ (2014)

The IASB recently released IFRS 9 ‘Financial Instruments’ (2014), representing the completion of its

project to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’. The new standard

introduces extensive changes to IAS 39’s guidance on the classification and measurement of financial

assets and introduces a new ‘expected credit loss’ model for the impairment of financial assets. IFRS 9

also provides new guidance on the application of hedge accounting.

The Company’s management have yet to assess the impact of IFRS 9 on these financial statements.

The new standard is required to be applied for annual reporting periods beginning on or after 1 January

2018.

IFRS 15 ‘Revenue from Contracts with Customers’

IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 ‘Revenue’, IAS

11 ‘Construction Contracts’, and several revenue-related Interpretations. The new standard establishes

a control-based revenue recognition model and provides additional guidance in many areas not covered

in detail under existing IFRSs, including how to account for arrangements with multiple performance

obligations, variable pricing, customer refund rights, supplier repurchase options, and other common

complexities.

IFRS 15 is effective for reporting periods beginning on or after 1 January 2017. The Company’s

management have not yet assessed the impact of IFRS 15 on these financial statements.

Amendments to IFRS 11 Joint Arrangements

These amendments provide guidance on the accounting for acquisitions of interests in joint operations

constituting a business. The amendments require all such transactions to be accounted for using the

principles on business combinations accounting in IFRS 3 ‘Business Combinations’ and other IFRSs

except where those principles conflict with IFRS 11. Acquisitions of interests in joint ventures are not

impacted by this new guidance.

The amendments are effective for reporting periods beginning on or after 1 January 2016.


50

NOTES


(d) Revenue recognition

(i) Revenue is recognised when significant risks and rewards of ownership have been transferred

to the buyer and no significant uncertainties remain regarding the derivation of consideration,

associated costs or the possible return of goods; and

(ii) Interest and other income are recognised as they are accrued.

(e) Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes

expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as

appropriate, only when it is probable that future economic benefits associated with the item will flow to

the company and the cost of the item can be measured reliably. All other repairs and maintenance are

charged to the statement of comprehensive income during the financial period in which they are

incurred.

Increases in the carrying amount arising on revaluation of property, plant and equipment are credited to

the revaluation surplus in shareholders’ equity. Decreases that offset previous increases of the same

asset are charged against fair value reserves directly in equity; all other decreases are charged to the

statement of comprehensive income. Each period, the difference between depreciation based on the

revalued carrying amount of the asset charged to the statement of comprehensive income and

depreciation based on the asset’s original cost, net of any related deferred income tax, is transferred

from the revaluation surplus to retained earnings.

Depreciation is calculated to write off the cost or valuation of property, plant and equipment over their

expected useful lives. The principal annual rates used for this purpose are:

Leasehold properties 2%

Plant and machinery 5 -10%

Motor vehicles 20%

Furniture, fittings and equipment 10 - 20%

Computers 20%

Capital work in progress is not depreciated.

Assets obtained under finance leases are depreciated over the remaining life of the asset or the lease

period, whichever is shorter.

The assets’ residual values and useful lives are reviewed at each reporting date and adjusted if

appropriate.

NOTES


(e) Property, plant and equipment (continued)

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s

carrying amount is greater than its recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount.

These are included in the statement of comprehensive income in the other operating income. When

revalued assets are sold, the amounts included in the revaluation surplus relating to these assets are


51

transferred to retained earnings.

Impairment of property, plant and equipment

At each reporting date, the company reviews the carrying amounts of its tangible and intangible assets

to determine whether there is any indication that those assets have suffered an impairment loss. If any

such indication exists, the recoverable amount of the asset is estimated in order to determine the extent

of the impairment loss, if any.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value

in use, the estimated future cash flows are discounted to their present value using a pre-tax discount

rate that reflects current market assessments of the time value of money and the risks specific to the

asset.

If the recoverable amount of an asset is estimated to be less than the carrying amount, the carrying

amount of the asset is reduced to its recoverable amount. An impairment loss is recognised

immediately in the statement of comprehensive income, unless the relevant asset is carried at a

revalued amount, in which case the impairment loss is treated as revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the

revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed

carrying amount that would have been determined had no impairment been recognised for the asset in

the previous years. A reversal of an impairment loss is recognised immediately in the statement of

comprehensive income unless the relevant assets are carried at a revalued amount in which case the

reversal of the impairment loss is treated as a revaluation increase.

(f) Financial assets

The company classifies its investments into the following categories: financial assets at fair value

through income, trade and other receivables, held-to-maturity financial assets and available-for-sale

financial assets. The classification depends on the purpose for which the investments were acquired.

Management determines the classification of its investments at initial recognition and re-evaluate this

at every reporting date.


52

NOTES


(f) Financial assets (continued)

(i) Financial assets at fair value through income

This category has two sub-categories: financial assets held for trading and those designated at fair

value through profit or loss at inception.

A financial asset is classified into the ‘financial assets at fair value through income’ category at

inception if acquired principally for the purpose of selling in the short term, if it forms part of a

portfolio of financial assets in which there is evidence of short term profit taking, or if so designated by

management.

Financial assets designated as at fair value through profit or loss at inception are those that are:

held in internal funds to match investment contracts liabilities that are linked to the changes in

fair value of these assets. The designation of these assets to be at fair value through profit or

loss eliminates or significantly reduces a measurement or recognition inconsistency that

would otherwise arise from measuring assets or liabilities or recognising the gains and losses

on them on different bases;

managed and whose performance is evaluated on a fair value basis. Assets that are part of

these portfolios are designated upon initial recognition at fair value through profit or loss.

(ii) Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments

that are not quoted in an active market other than those that the company intends to sell in the short

term or that it has designated as at fair value through income or available for sale. Trade and other

receivables are recognised at fair value, less provision for impairment. A provision for impairment of

trade and other receivables is established when there is objective evidence that the company will not be

able to collect all amounts due according to their original terms.

(iii) Held-to-maturity financial assets

Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable

payments and fixed maturities other than those that meet the definition of trade and other receivables

that the company’s management has the positive intention and ability to hold to maturity. These assets

are recognised initially at fair value, less provision for impairment. A provision for impairment is

established when there is objective evidence that the company will not be able to collect all amounts

due according to their original terms.

(iv) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated in this

category or not classified in any of the other categories.


53

NOTES


(f) Financial assets (continued)

Financial assets are derecognised when the rights to receive cash flows from them have expired or

where they have been transferred and the company has also transferred substantially all risks and

rewards of ownership.

Available-for-sale financial assets and financial assets at fair value through profit or loss are

subsequently carried at fair value. Trade and other receivables and held-to-maturity financial assets

are carried at fair value. Realised and unrealised gains and losses arising from changes in the fair value

of the ‘financial assets at fair value through profit or loss’ category are included in the statement of

comprehensive income in the period in which they arise. Unrealised gains and losses arising from

changes in the fair value of non-monetary securities classified as available for sale are recognised in

equity. When securities classified as available for sale are sold or impaired, the accumulated fair value

adjustments are included in the statement of comprehensive income as net realised gains or losses on

financial assets.

Interest on available-for-sale securities calculated using the effective interest method is recognised in

the statement of comprehensive income. Dividends on available-for-sale equity instruments are

recognised in the statement of comprehensive income when the company’s right to receive payments is

established.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset

is not active, the company establishes fair value by using valuation techniques.

(g) Impairment of assets

(i) Financial assets carried at amortised cost

The company assesses at each reporting date whether there is objective evidence that a financial asset

or group of financial assets is impaired. A financial asset or group of financial assets is impaired and

impairment losses are incurred only if there is objective evidence of impairment as a result of one or

more events that have occurred after the initial recognition of the asset (a 'loss event’) and that loss

event (or events) has an impact on the estimated future cash flows of the financial asset or group of

financial assets that can be reliably estimated. Objective evidence that a financial asset or group of

assets is impaired includes observable data that comes to the attention of the company about the

following events:

significant financial difficulty of the issuer or debtor;

a breach of contract, such as a default or delinquency in payments;

it becoming probable that the issuer or debtor will enter bankruptcy or other financial

reorganisation; or

observable data indicating that there is a measurable decrease in the estimated future cash

flow from a group of financial assets since the initial recognition of those assets, although the

decrease cannot yet be identified with the individual financial assets in the company,

including:

adverse changes in the payment status of issuers or debtors in the company.


54

NOTES


(g) Impairment of assets (continued)

(i) Financial assets carried at amortised cost (continued)

national or local economic conditions that correlate with defaults on the assets in the

company.

The company first assesses whether objective evidence of impairment exists individually for financial

assets that are individually significant. If the company determines that no objective evidence of

impairment exists for an individually assessed financial asset, whether significant or not, it includes the

asset in a group of financial assets with similar credit risk characteristics and collectively assesses them

for impairment. Assets that are individually assessed for impairment and for which an impairment loss

is or continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred on trade and other receivables

or held-to-maturity investments carried at fair value, the amount of the loss is measured and the

carrying amount of the asset is reduced through the use of an allowance account, and the amount of the

loss is recognised in the statement of comprehensive income.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related

objectively to an event occurring after the impairment was recognised, the previously recognised

impairment loss is reversed by adjusting the allowance account. The amount of the reversal is

recognised in the statement of comprehensive income.

(ii) Financial assets carried at fair value

The company assesses at each reporting date whether there is objective evidence that an available-for-

sale financial asset is impaired. If any such evidence exists for available-for-sale financial assets, the

cumulative loss – measured as the difference between the acquisition cost and current fair value, less

any impairment loss on the financial asset previously recognised in profit or loss – is removed from

equity and recognised in the statement of comprehensive income. Impairment losses recognised in the

statement of comprehensive income on equity instruments are not subsequently reversed. The

impairment loss is reversed through the statement of comprehensive income, if in a subsequent period

the fair value of a debt instrument classified as available for sale increases and the increase can be

objectively related to an event occurring after the impairment loss was recognised in profit or loss.

(iii ) Impairment of other non-financial assets

Assets that have an indefinite useful life, for example land, are not subject to amortisation and are

tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment

whenever events or changes in circumstances indicate that the carrying amount may not be

recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount

exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs

to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest

levels for which there are separately identifiable cash flows (cash-generating units).


55

NOTES


(h) Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term

highly liquid investments and balances held with banks.

(i) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are

subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs)

and the redemption value is recognised in the statement of comprehensive income over the period of

the borrowings using the effective interest method.

(j) Short/long term indebtedness

Short term indebtedness includes all amounts due to be repaid within twelve months from the reporting

date, including instalments due on loans of longer duration. Long term indebtedness represents all

amounts repayable more than twelve months from the reporting date.

(k) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. Tax currently

payable is based on the results for the period as adjusted for items which are non-assessable or

disallowed for tax purposes.

Deferred taxation liabilities are recognised for all taxable temporary differences. Temporary

differences can arise from the recognition for tax purposes of items of income or expense in a different

accounting period from that in which they are recognised for financial accounting purposes. The tax

effect of these temporary timing differences is computed by applying enacted statutory tax rates to any

differences between carrying values per the financial statements and their tax base, and accounted for

as deferred tax.

Deferred taxation assets are recognised for all deductible temporary differences to the extent that it is

probable that taxable profit will be available against which the deductible temporary differences can be

utilised.

(l) Employee benefits

(i) Pension obligations

The company has a plan with National Pension Scheme Authority (NAPSA) where the company pays

an amount equal to the employee’s contributions. Employees contribute 5 per cent of their gross

earnings up to the statutory cap.


56

NOTES


(l) Employee benefits (continued)

(ii) Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or

whenever an employee accepts voluntary redundancy in exchange for these benefits. The company

recognizes termination benefits when it is demonstrably committed to either terminating the

employment of current employees according to a detailed formal plan without possibility of

withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary

redundancy.

(m) Foreign currencies

(i) Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic

environment in which the company operates (the ‘functional currency’). The financial statements are

presented in Zambian Kwacha, which is the company’s presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the rates of exchange

prevailing at the date of transaction. Foreign exchange gains and losses resulting from the settlement

of such transactions and from the translation at period end exchange rates of monetary assets and

liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

Translation differences on non-monetary items, such as equity at fair value through profit and loss, are

reported as part of the fair value gain or loss. Translation differences on non-monetary items, such as

equities classified as available-for-sale financial assets, are included in fair value reserve in equity.

(n) Provisions

Provisions are recognised when the company has a present legal or constructive obligation as a result

of past events, it is probable that an outflow of resources embodying economic benefits will be

required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

(o) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated on a first in first

out basis. Cost includes transport and handling costs. In the case of manufactured products, cost

includes all direct expenditure and production overheads based on normal level of activity. Net

realisable value takes into account all further costs to completion and all directly related costs to be

incurred in marketing, selling and distribution. Where necessary, provision is made for obsolete, slow

moving and defective inventories.


57

NOTES


(p) Equity and reserves

Share capital represents the nominal value of shares that have been issued.

Share premium includes any premiums received on issue of share capital. Any transaction costs

associated with the issuing of shares are deducted from share premium, net of any related income tax

benefits.

4. Critical accounting estimates and judgements The company makes estimates and assumptions that affect the reported amounts of assets and liabilities

within the next financial year. Estimates and judgements are continually evaluated and based on

historical experience and other factors, including expectations of future events that are believed to be

reasonable under the circumstances.

In the process of applying the company’s accounting policies, management has made judgements in

determining:

(a) the classification of financial assets;

(b) whether assets are impaired;

(c) estimation of provision and accruals; and

(d) recoverability of trade and other receivables.

5. Management of financial risk

5.1 Financial risk

The company is exposed to a range of financial risks through its financial assets and financial

liabilities. The most important components of this financial risk are interest rate risk and credit risk.

These risks arise from open positions in interest rate and business environments, all of which are

exposed to general and specific market movements.

The company manages these positions with a framework that has been developed to monitor its

customers and return on its investments.

5.1.1 Financial risk

The company is exposed to a range of financial risks through its financial assets and financial

liabilities. The most important components of this financial risk are interest rate risk and credit risk.

These risks are from open positions in interest rate and business environments, all of which are

exposed to general and specific market movements.

The company manages these positions with a framework that has been developed to monitor its

customers and return on its investments.


58

NOTES

5. Management of financial risk (continued)

5.1 Financial risk (continued)

5.1.2 Credit risk

The company has exposure to credit risk, which is the risk that a counterparty will be unable to pay

amounts in full when due. Key area where the company is exposed to credit risk is on amounts due

from customers.

The company structures the levels of credit risk it accepts by placing limits on its exposure to the level

of credit given to a single customer. Such risk is subject to an annual or more frequent review. Limits

on the level of credit risk by category and territory are approved annually by the Board of Directors.

5.1.3 Capital management

The company’s objective when managing capital is to safeguard the company’s ability to continue as a

going concern so that it can continue to provide returns for shareholders and benefits for other

stakeholders.

The company sets the amount of capital in proportion to its overall financing structure. The company

manages the capital structure and makes adjustments to it in the light of the economic conditions and

the risk characteristic of the underlying assets. In order to maintain or adjust the capital structure, the

company may adjust the amount of the dividends paid to shareholders, return capital to shareholders,

issues new shares, or sell assets to reduce debt.

Capital structure

2014

2013

2012

K'000

K'000

K'000

Cash and cash equivalents (42 593)

(37 735)

(34 854)

Interest bearing liabilities (125 834)

(103 030)

(109 448)

Equity 137 392

148 893

38 533

(31 035)

8 128

(105 769)

5.1.4 Foreign exchange risk

The company is exposed to foreign exchange risk arising from exchange rate fluctuations. Foreign

currency denominated purchases and sales together with foreign denominated statement of financial

position items comprise the currency risk of the company.


59

NOTES

6. Revenue Revenue comprises turnover, which excludes VAT and represents the invoiced value of both goods

manufactured and imported.

2014

2013

2012

K'000

K'000

K'000

Oil seed cake/soya beans/cotton seed 206 503

247 122

70 349

Margarine 829

3 394

4 826

Cooking oil 189 382

211 355

205 455

Plastics 2 403

-

-

399 117

461 871

280 630

7. (Loss)/profit before taxation

(Loss)/profit before taxation is stated after charging:

2014

2013

2012

K'000

K'000

K'000

Audit fees -

(24)

105

Depreciation 8 772

5 837

4 598

Directors' remuneration -

-

100

Net exchange losses 46 259

2 781

2

Finance costs 7 327

8 057

2 323

8. Taxation

Zamanita Limited has been granted the following company income tax incentive under the Income Tax

act and the Zambia Development Agency Act.

a) The income earned in the first five years commencing charge year 2008/2009, 2009/2010,

2010/2011, 2011/2012 and 2012/2013 shall be taxed at the rate of zero per cent.

b) The income earned in the next three years commencing 2013/2014, 2014/2015 and 2015/2016

shall be taxed at the rate of (50%) fifty per cent of the respective tax rate applicable.

c) The income earned in the last two years commencing 2016/2017 and 2017/2018 shall be taxed at

the rate of (75%) seventy-five per cent of the respective tax rate applicable.

d) The income earned after the tenth year commencing 2018/2019 shall be taxed at the rate of (100%)

hundred per cent of the respective tax rates applicable.


60

NOTES

8. Taxation (continued)

(a) Charge/ (Credit) for taxation is made up as follows:

2014

2013

2012

K'000

K'000

K'000

Income tax on the taxable profit: - for the year at 50% of 35% ( 2013 – 0%) 3

1 355

-

Deferred tax 111

10 555

-

114

11 910

-

(b) Reconciliation of tax charge:

Loss /(profit) before tax charge (11 386)

35 528

(37 363) Taxation at current rate on accounting profit/(loss) 3

1 338

-

Income taxed separately -

17

-

3

1 355

-

(c) Movement in tax account

Movement on account Taxable payable 1 355

-

-

Charge for the year 3

1 355

-

Tax paid (1 095)

-

-

Taxation payable as at 30 September 263

1 355

-

(d) Deferred taxation

Analysis of movements At 1 October 10 555

-

-

Charge to profit or loss (note 8) 111

10 555

-

At 30 September 10 666

10 555

-


61

NOTES

9. Property, plant and equipment

2014

Leasehold land

Plant &

Motor

Furniture &

Work in

& buildings

machinery

vehicles

equipment

progress

Total

K'000

K'000

K'000

K'000

K'000

K'000

Cost/valuation

At 1 October 2012

33 549

53 801

5 921

1 489

38 842

133 602

Additions

-

2 217

30

46

6 294

8 587

Transfers

856

40 978

1 513

12

(43 359)

-

Revaluation

21 798

41 790

(3 251)

(308)

-

60 029

At 30 September 2013

56 203

138 786

4 213

1 239

1 777

202 218

Additions

-

50

-

42

6 723

6 815

Disposals

-

-

(460)

(20)

-

(480)

Transfers

-

37

-

44

-81

-


56 203

138 873

3 753

1 305

8 419

208 553

Depreciation

At 1 October 2012

3 152

13 293

3 205

1 224

-

20 874

Charge for the year

675

3 988

1 034

141

-

5 837

Adjusted on revaluation

(3 827)

(17 281)

(4 239)

(1 365)

-

(26 712)


-

-

-

-

-

(100)

Charge for the year

892

6 945

806

129

-

8 772

Disposals

-

-

(56)

(2)

-

(58)


892

6 945

750

127

-

8 614

Carrying amount


55 311

131 928

3 003

1 178

8 419

199 839


56 203

138 786

4 213

1 239

1 777

202 218


62

NOTES

9. Property, plant and equipment (continued)

2013

Leasehold land

Plant &

Motor

Furniture &

Work in

& buildings

machinery

vehicles

equipment

progress

Total

K'000

K'000

K'000

K'000

K'000

K'000

Cost/valuation At 1 October 2011

33 549

51 392

4 312

1 477

166

90 896

Additions

-

2 409

2 063

12

38 676

43 160

Transfers

-

-

(454)

-

-

(454) Revaluation

-


33 549

53 801

5 921

1 489

38 842

133 602

Additions

-

2 217

30

46

6 294

8 587

Revaluation

21 798

41 790

(3 251)

(308)

-

60 029

Transfers

856

40 978

1 513

12

(43 359)

-


56 203

138 786

4 213

1 239

1 777

202 218

Depreciation At 1 October 2011

2 481

10 484

2 729

938

-

16 632

Charge for the year

671

2 809

831

287

-

4 598

Disposals

-

-

(355)

-

-

(355)


3 152

13 293

3 205

1 225

-

20 875

Charge for the year

675

3 988

1 034

140

-

5 837

Adjusted on revaluation

(3 827)

(17 281)

(4 239)

(1 365)

-

(26 712)


-

-

-

-

-

-

Carrying amount At 30 September 2013

56 203

138 786

4 213

1 239

1 777

202 218


30 397

40 508

2 716

264

38 842

112 727


63

NOTES


2012

Leasehold land

Plant &

Motor

Furniture &

Work in

& buildings

machinery

vehicles

equipment

progress

Total

K'000

K'000

K'000

K'000

K'000

K'000

Cost/valuation At 1 October 2010

33 445

45 728

4 496

1 435

2 784

87 888

Additions

-

3 082

134

45

1 642

4 903

Transfers

104

4 155

-

-

(4 259)

-

Disposals

-

(1 573)

(318)

(3)

-

(1 894)


33 549

51 392

4 312

1 477

167

90 897

Additions

-

2 409

2 063

12

38 675

43 160

Disposals

-

-

(454)

-

-

(454)


33 549

53 801

5 921

1 489

38 842

133 603

Depreciation At 1 October 2010

1 814

8 292

2 064

657

-

12 827

Charge for the year

667

2 481

869

282

-

4 299

Disposals

-

(288)

(204)

(2)

-

(494)


2 481

10 485

2 729

937

-

16 632

Charge for the year

671

2 808

831

287

-

4 598

Disposals

-

-

(354)

-

(354)


3 152

13 293

3 206

1 224

-

20 876

Carrying amount At 30 September 2012

30 397

40 508

2 715

265

38 842

112 727


31 068

40 907

1 583

540

167

74 265


64

NOTES


Assets are encumbered as security for bank facilities (notes 15 and 16).

10. Inventories

2014

2013

2012

K'000

K'000

K'000

Raw materials 165 876

169 505

180 667

Finished goods 16 500

39 754

5 934

Consumables -

800

1 968

182 376

210 059

188 569

11. Trade and other receivables

Trade receivables 28 819

14 009

17 808

Prepayments 1 347

712

304

Other receivables 279

290

-

30 445

15 011

18 112

12. Amounts due from related parties

Novatek Limited 45 150

-

-

Zambeef Retailing Limited -

-

117 027

45 150

-

117 027

13. Share capital

Authorised, issued and fully paid 12,000 (2013: 12,000, 2012:11,000,000) ordinary shares of K1 (2013: K1, 2012: K0.001) each 12

12

11

The Government passed Act 8 of 2012 called the Re-denomination Act commonly known as Rebasing

of the Kwacha. PACRA, meanwhile issued instructions on the implementation of rebasing which

required to be complied with before 31 December 2013. The fillings of requirements are yet to be

completed as shareholders’ approval is required: a matter to be tabled at the AGM.


65

NOTES

14. Share premium

2014

2013

2012

K'000

K'000

K'000


62 709

62 709

15(a). Interest bearing liabilities

Standard Chartered Bank (Zambia) Plc

At 1 October 35 475

35 156

8 126

Obtained during the year -

1 966

27 030

Repayment during the year (10 304)

(3 282)

-

Exchange loss/(gain) 5 771

1 635

-


35 475

35 156

Repayable within one year 14 212

9 221

3 060

Repayable between two and four years 16 730

26 254

32 096

The company has a medium term facility of US$4.934 million (2013 – US$6,668 million) with

Standard Chartered Bank (Zambia) PLC and is secured over a floating debenture over all assets of

the company and a fixed legal mortgage relating to stands 5960 and 5001 Mumbwa Road, Lusaka.

Interest on the loan is 3 months LIBOR plus 5% margin per annum payable monthly in arrears. The

principal is repayable in 16 equal quarterly instalments

15 (b) Collateral Management Agreement

Standard Chartered Bank (Zambia) Plc At 1 October 67 555

74 292

19 196

Obtained during the year 118 275

93 309

55 096


(101 192)

-

Exchange loss/(gain) (52 030)

1 146

-


67 555

74 292

Repayable within one year 94 892

67 555

74 292

Repayable after one year -

-

-

The company has a structured agricultural finance facility of up to US$25 million with Standard

Chartered Bank (Zambia) PLC. Interest on the loan is 3 months LIBOR plus 4% margin per annum.

The purpose of the facility is the financing of soya beans stocks under a collateral management

agreement.

The facility is secured by a charge over the soya beans stocks


66

NOTES

16. Cash and cash equivalents

2014

2013

2012

K'000

K'000

K'000

Cash in hand and at bank 968

1 591

3 327

Bank over drafts (43 561)

(39 326)

(38 181)

(42 593)

(37 735)

(34 854)

Bank overdraft – Standard Chartered Bank (Zambia) Limited. The terms of the bank overdraft

facility available to the company as at 30 September 2014 (2013 and 2012) are:

Limit: US$4,000,000

Interest rate: 3 months LIBOR + 4.5%

Expiry: the overdraft is an annual revolving facility.

The facility is secured by first legal mortgage over stands 5960 and 5001 Mumbwa Road, Lusaka and a

floating debenture over all other assets.

17. Trade and other payables

2014

2013

2012

K'000

K'000

K'000

Trade payables 9 138

7 745

38 259

Accruals and provisions 65 123

55 237

55 312

74 261

62 982

93 571

18. Amounts due to related parties

(a) Payable within one year

Zambeef Products Plc 29 373

32 474

129 575

Zambeef Retailing Limited 7 133

-

-

Zamleather Limited -

-

190

36 506

32 474

129 765

(a) Payable after one year Loan from Zambeef Products Plc 30 264

30 264

30 264


67

NOTES

19. Contingent liabilities

Certain legal cases are pending against the company in the Courts of Law. In the opinion of the

directors, and the company’s lawyers, none of these cases will result in any material loss to the

company for which a provision is required.

20. Fair value measurement

Fair value measurement of financial instruments

Financial assets and financial liabilities measured at fair value in the statement of financial position are

grouped into three Levels of a fair value hierarchy. The three Levels are defined based on the

observability of significant inputs to the measurement, as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the

asset or liability, either directly or indirectly.

Level 3: unobservable inputs for the asset or liability.

The following table shows the Levels within the hierarchy of financial assets and liabilities measured at

fair value on a recurring basis at 30 September 2014, 30 September 2013, and 1 October 2012.

2014 Level 1

Level 2

Level 3

Total

ZMW'000

ZMW'000

ZMW'000

ZMW'000

Financial assets Listed securities and debentures -

-

-

-

Money market funds -

-

-

- US-dollar forward contracts cash flow hedge -

-

-

-

Other forward exchange contracts inventory (CMA) -

94 892

-

94 892

Total assets -

94 892

-

94 892

Financial liabilities US dollar loans -

-

( 30942)

(30 942)

Contingent consideration -

-

-

-

-

-

(30 942)

(30 942)

Net fair value -

94 892

(30 942)

( 63 950)


68

NOTES

20. Fair value measurement (continued)

2013 Level 1

Level 2

Level 3

Total

K'000

K'000

K'000

K'000


-

-

-


-

-

- US-dollar forward contracts cash flow hedge

-

-

-

- Other forward exchange contracts inventory (CMA) -

67555

-

67 555

Total assets -

67555

-

67 555

Financial liabilities

US dollar loans -

-

(35475)

(35 475)


-

-

-

-

-

(35475)

(35 475)

Net fair value -

67555

(35 475)

32 080

2012 Level 1

Level 2

Level 3

Total

K'000

K'000

K'000

K'000


-

-

-


-

-

- US-dollar forward contracts cash flow hedge

-

-

-

- Other forward exchange contracts inventory (CMA) -

77 352

-

77 352

Total assets -

77 352

-

77 352


US dollar loans -

-

(32 096)

(32 096)


-

-

-

-

-

(32 096)

(32 096)

Net fair value -

77 352

(32 096)

45 256

There were no transfers between Level 1 and Level 2 in 2014 (2013: nil, 2012:nil)


69

NOTES


Measurement of fair value of financial instruments

The Company’s finance team performs valuations of financial items for financial reporting purposes,

including Level 3 fair values, in consultation with third party valuation specialists for complex

valuations. Valuation techniques are selected based on the characteristics of each instrument, with the

overall objective of maximising the use of market-based information. The finance team reports directly

to the Chief Financial Officer and to the audit Committee.

Valuation processes and fair value changes are discussed among the audit committee and the valuation

team at least every year, in line with the Company’s reporting dates. The valuation techniques used for

instruments categorised in Levels 2 and 3 are described below:

Foreign currency forward contracts (Level 2)

The Company’s foreign currency forward contracts are not traded in active markets. These have been

fair valued using observable forward exchange rates and interest rates corresponding to the maturity of

the contract. The effects of non-observable inputs are not significant for foreign currency forward

contracts.

US-dollar loans (Level 2)

The fair values of the US-dollar loans are estimated using a discounted cash flow approach, which

discounts the contractual cash flows using discount rates derived from observable market interest rates

of similar loans with similar risk. The interest rate used for this calculation is 4.81% (2013 4.81%).

Contingent consideration (Level 3)

The Company did not have any contingent consideration during the year.

Fair value measurement of non-financial assets

The following table shows the Levels within the hierarchy of non-financial assets measured at fair

value on a recurring basis at 30 September 2014, 30 September 2013, and 1 October 2012:

2014 Level 1

Level 2

Level 3

Total

K'000

K'000

K'000

K'000

Property, plant and equipment: Land held for production in Zambia -

-

11 600

11 600

Office buildings in Zambia -

-

4 912

4 912

2013 Land held for production in Zambia -

-

11 600

11 600


-

5 013

5 013


-

6 497

6 497


-

1 341

1 341


70

NOTES


Fair value measurement of non-financial assets (continued)

2014 Level 1

Level 2

Level 3

Total

USD'000

USD'000

USD'000

USD'000

Property, plant and equipment: Land held for production in Zambia -

-

1 850

1 850


-

783

783


-

2 180

2 180


-

942

942


-

1 271

1 271


-

262

262

Fair value of the Company’s main property assets is estimated based on appraisals performed by

independent, professionally-qualified property valuers -Fairworld Properties Limited . The significant

inputs and assumptions are developed in close consultation with management. The valuation processes

and fair value changes are reviewed by the board of directors and audit committee at each reporting

date.

Land held for production in Zambia (Level 3)

The appraisal was carried out using a market approach that reflects observed prices for recent market

transactions for similar properties and incorporates adjustments for factors specific to the land in

question, including plot size, location, encumbrances and current use. In 2014, a negative adjustment of

7.5% was incorporated for these factors. The land was revalued on 23 November 2014. The land was

previously revalued in November 2011.

The significant unobservable input is the adjustment for factors specific to the land in question. The

extent and direction of this adjustment depends on the number and characteristics of the observable

market transactions in similar properties that are used as the starting point for valuation. Although this

input is a subjective judgement, management considers that the overall valuation would not be

materially affected by reasonably possible alternative assumptions.

The fair values of the office buildings are estimated using an income approach which capitalises the

estimated rental income stream, net of projected operating costs, using a discount rate derived from

market yields implied by recent transactions in similar properties. When actual rent differs materially

from the estimated rents, adjustments has been made to the estimated rental value. The estimated rental

stream takes into account current occupancy level, estimates of future vacancy levels, the terms of in-

place leases and expectations for rentals from future leases over the remaining economic life of the

buildings. The office buildings are revalued annually on 31December.


71

NOTES


Fair value measurement of non-financial assets (continued)

The most significant inputs, all of which are unobservable, are the estimated rental value, assumptions

about vacancy levels, and the discount rate. The estimated fair value increases if the estimated rental

increases, vacancy levels decline or if discount rate (market yields) decline. The overall valuations are

sensitive to all three assumptions. Management considers the range of reasonably possible alternative

assumptions is greatest for rental values and vacancy levels and that there is also an interrelationship

between these inputs.

21. Capital commitments

The company had no capital commitments and had not contracted at the end of the year (2013 K 6.9

thousand and 2012:K5.8 thousand).

22. Related party transactions

The ultimate parent company for Zamanita Limited is Zambeef Products Plc, a company incorporated

in Zambia and listed on the Lusaka Stock Exchange and Alternative Investment Market (“AIM) –

London.

Zamleather Limited – Fellow subsidiary, a company incorporated in Zambia;

Novatek Limited – Fellow subsidiary incorporated in Zambia; and

Zambeef Retailing – Fellow subsidiary, a company incorporated in Zambia.

(a) The company made the following purchases from related parties:

2014

2013

2012

K'000

K'000

K'000


168 372

46 965

Zamleather Limited 70

86

53

Novatek Limited 118

-

-

Zambeef Retailing Limited 6

7 342

9 667

168 566

175 800

56 685

All purchases were made at market prices.


72

NOTES

22. Related party transactions (continued)

(b) The company made the following sales to related parties:

2014

2013

2012

K'000

K'000

K'000


86 854

48 257

Zamleather Limited 124 837

158 824

124 057

Novatek Limited 85 216

-

-

Zambeef Retailing Limited -

2

2

213 048

245 680

172 316

Sales of goods to related parties were made at the company’s usual list prices

(c) Key management compensation

2014

2013

2012

K'000

K'000

K'000

Salaries and employee benefits 9 052

9 052

6 007

The remuneration of directors and key executives is determined by the remuneration committee having

regard to the performance of individuals and market trends.

(d) There were no loans to related parties and key management personnel.

23. Financial instruments

Financial assets

The company’s principal financial assets are bank balances and cash, related company debtors and

trade debtors. The company maintains its bank accounts with major banks in Zambia of high credit

standing. Debtors are stated at amounts reduced by appropriate allowances for estimated irrecoverable

amounts.


The company’s financial liabilities are trade creditors loans and related company payables. Financial

liabilities are classified according to the substance of the contractual arrangements entered into. Trade

and other payables and related company payables are stated at their nominal value.

The table below shows the extent to which the company has monetary assets and liabilities in

currencies other than their local currency


73

NOTES

23. Financial instruments (continued)

2014 K'000

Financial assets 28 877

Financial liabilities (62 766)

(33 889)

2013 Financial assets 5 134

Financial liabilities (173 955)

(168 821)

2012 Financial assets -

Financial liabilities -

-

(a) Price risk

(i) Currency risk

The company is exposed to currency risk since some of the financial instruments are

in US dollars.

(ii) Interest rate risk

Financial assets and liabilities are exposed to the risk that their value will fluctuate

due to changes in market interest rates as all borrowings are at floating interest rates.

(iii) Market risk

The company is not exposed to the risk of the value of its financial assets fluctuating

as a result of changes in market prices.

(b) Credit risk

The company is exposed to varying degrees of credit risk, in the following significant

concentrations:

(i) Trade debtors

The directors believe the credit risk of debtors is low. The credit risk is managed by

selective granting of credit and limits.


74

NOTES

23. Financial instruments (continued)

(b) Credit risk (continued)

(ii) Related company debtors

The related credit risk on related company debtors is deemed to be low.

(c) Liquidity risk

The company may be exposed to some risk due to inability to sell certain financial assets

quickly at close to their fair value. This risk is however deemed low.

(d) Cash flow risk

The company is not exposed to the risk that future cash flows associated with monetary

financial instruments will fluctuate in amount.

24. Events subsequent to the reporting date

There has not arisen since the reporting date any item, transaction or event of a material and unusual

nature likely, in the opinion of the directors of the company and the company, to affect substantially

the operations of the company, the results of those operations or the state of affairs of the company in

subsequent financial years.

25. Net assets per share

The ratio of net assets per share is calculated by dividing net assets by the number of shares in issue at

each respective balance sheet date, as required by section 8.11 of the Lusaka Stock Exchange listing

rules.

26. Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the

Company by the weighted average number of ordinary shares outstanding. There were no potentially

dilutive shares outstanding at 30 September 2014. Diluted earnings per share are therefore the same as

basic earnings per share.

2014 2013 2012

K'000

K'000

K'000

(Loss) profit attributable to equity holders of the Company (11 500)

23 618

(37 363)

Weighted average number of ordinary shares in issue 12 000

12 000

11 000

Basic earnings per share (Kwacha per share) (0.96)

1.97

(3.40)


75

NOTES

27. Dividends per share

No dividend was paid in the year ended 30 September 2014 and the years ended 30 September 2013

and 2012 respectively.

28. Additional information

There were loan receivables issued by the company during the years ended 30 September 2014, 2013

and 2012.

Loans taken out and security pledged have been disclosed under note 15(a) and 15(b). This disclosure

is per section 8.11 of the LuSE listing rules.

29. Statement of adjustments

All adjustments in the financial statements are in respect of rearrangement of notes and have no

financial impact


76

ANNEX 2: INDEPENDENT REPORTING ACCOUNTANT’S REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF ZAMBEEF

18 February 2015

The Directors



Industrial Area

Private Bag 17

Woodlands

Lusaka

Dear Sirs,

Independent reporting accountant’s assurance report on the compilation of the pro forma

financial information

Zambeef Products Plc (“Zambeef” or the “Company”) is issuing a circular (the “Circular”) to

shareholders in relation to the proposed sale of its 100% interest in Zamanita Limited (“Zamanita”).

We have completed our assurance engagement to report on the compilation of pro forma financial

information of Zambeef by the directors. The pro forma financial information, as set out in annex 2 of

the Circular dated 11 March 2015 consists of the consolidated statement of proforma comprehensive

income for the year ended 30 September 2014, consolidated statement of proforma financial position

as at 30 September 2014 and the related notes. The pro forma financial information has been

compiled on the basis of the applicable criteria specified in the Lusaka Stock Exchange Securities

(“LuSE”) listings requirements.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the

corporate action, described in paragraph G of the Circular, on the Company’s financial position as at

30 September 2014, and the Company’s financial performance for the period then ended, as if the

corporate action or event had taken place at 1 October 2013, being the commencement date of the

financial period for the purposes of the statement of comprehensive income and at 30 September

2014, being the last day of the financial period for the purposes of the statement of financial position.

As part of this process, information about the Company’s financial position and financial performance

has been extracted by the Directors from the Company’s financial statements for the period ended 30

September 2014, on which an auditor’s report was issued on 24 November 2014.


77

Directors’ Responsibility for the Pro Forma Financial Information

The Directors are responsible for compiling the pro forma financial information on the basis of the

applicable criteria specified in the LuSE listings requirements.

Reporting Accountant’s Responsibility

Our responsibility is to express an opinion about whether the pro forma financial information has been

compiled, in all material respects, by the directors on the basis specified in the LuSE listings

requirements based on our procedures performed. We conducted our engagement in accordance

with the International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to

Report on the Compilation of Pro Forma Financial Information included in a Prospectus. This standard

requires that we comply with ethical requirements and plan and perform our procedures to obtain

reasonable assurance about whether the pro forma financial information has been compiled, in all

material respects, on the basis specified in the LuSE listing requirements.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or

opinions on any historical financial information used in compiling the pro forma financial information,

nor have we, in the course of this engagement, performed an audit or review of the financial

information used in compiling the pro forma financial information.

As the purpose of pro forma financial information included in a prospectus is solely to illustrate the

impact of a significant corporate action or event on unadjusted financial information of the entity as if

the corporate action or event had occurred or had been undertaken at an earlier date selected for

purposes of the illustration, we do not provide any assurance that the actual outcome of the event or

transaction at 30 September 2014 would have been as presented.

A reasonable assurance engagement to report on whether the pro forma financial information has

been compiled, in all material respects, on the basis of the applicable criteria involves performing

procedures to assess whether the applicable criteria used in the compilation of the pro forma financial

information provides a reasonable basis for presenting the significant effects directly attributable to

the corporate action or event, and to obtain sufficient appropriate evidence about whether:

• The related pro forma adjustments give appropriate effect to those criteria; and

• The pro forma financial information reflects the proper application of those adjustments to the

unadjusted financial information.

Our procedures selected depend on our judgment, having regard to our understanding of the nature

of the company, the corporate action or event in respect of which the pro forma financial information

has been compiled, and other relevant engagement circumstances.

Our engagement also involves evaluating the overall presentation of the pro forma financial

information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.


78

Opinion

In our opinion, the pro forma financial information has been compiled, in all material respects, on the

basis of the applicable criteria specified by the LuSE listings requirements and described in paragraph

G of the Circular.

Deloitte & Touche


Partner


79

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

K’000

Zambeef

Effect of

Proforma

As at

Disposal of

As at

ASSETS Notes 30 Sept 2014

Zamanita

30 Sept 2014

Non – current assets Goodwill

15 699

-

15 699

Property, plant and equipment 3 1 456 087

(199 839)

1 256 248

Plantation development expenditure

67 913

-

67 913

Investment

23 827

-

23 827

Biological assets

20 202

-

20 202

Deferred tax assets

28 802

-

28 802

1 612 530

(199 839)

1 412 691

Current assets Biological assets

142 001

-

142 001

Inventories 4 444 453

(182 376)

262 077

Trade and other receivables 5 122 343

(19 197)

103 146

Amounts due from related companies 6 11 533

21 622

33 155

Taxation recoverable

4 098

-

4 098

Cash and cash equivalents 7 -

34 195

34 195

724 428

(145 756)

578 672

Total assets

2 336 958

(345 595)

1 991 363

EQUITY AND LIABILITIES Capital and reserves Share capital

2 480

-

2 480

Share premium

506 277

-

506 277

Reserves 8 811 240

(52 253)

758 987

1 319 997

(52 253)

1 267 744

Non – controlling interest

23 341

23 341

1 343 338

(52 253)

1 291 085

Non – current liabilities Interest bearing liabilities 9 353 209

(16 730)

336 479

Obligations under finance lease

14 602

-

14 602

Deferred liability

7 476

(30)

7 446

Deferred income tax liabilities 10 22 070

(10 666)

11 404

397 357

(27 426)

369 931


80

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONT’D)

K’000 Zambeef Effect of Proforma

As at Disposal of As at

Current liabilities Notes 30 Sept 2014 Zamanita 30 Sept 2014

Interest bearing liabilities 9 66 416

(14 212)

52 204

Collateral Management Agreement 11 155 677

(94 892)

60 785

Obligations under finance lease

4 974

-

4 974

Trade and other payables 12 218 298

(8 681)

209 617

Taxation payable 13 3 030

(263)

2 767

Cash and cash equivalents 7 147 868

(147 868)

-

596 263

(265 916)

330 347

Total equity and liabilities

2 336 958

(345 595)

1 991 363

Net Asset Value (“NAV”) per share

5.42

(0.21)

5.21

Notes:

1. The proforma financial information illustrates the effect of the sale of Zamanita had it been

effected at 30 September 2014.

2. They have been compiled for illustrative purposes only and as such may not fairly present

Zambeef’s financial position, financial performance, changes in equity, results of operations

or cashflows.

3. Property, plant and equipment

Cost at 30 Sept 14 208 553

Accumulated depreciation (8 714)

Carrying amount at 30 Sept 14 199 839

4. Inventories

Raw materials 165 876

Finished goods 16 500

182 376


81

K’000

5. Trade and other receivables

As at 30 Sept 14 122 343 Trade receivables* (103 146)

Zamanita balance 19 197

* The trade receivables balance excludes the Zamanita balance before reclassification as a result of the disposal

6. Amounts due from related parties

As at 30 Sept 14 11 533

Amounts due from related parties (33 155)

Zamanita intercompany loan (21 622)

7. Cash and cash equivalent

Net proceeds from sale of Zamanita 139 470

Cash and cash equivalent – Zamanita (968)

Overdraft in Zambeef (147 868)

Overdraft in Zamanita 43 561

34 195

8. Retained earnings/loss on disposal

Net proceeds from disposal of Zamanita 139 470

Net asset value of Zamanita (per annual report 30 Sept. 14) (137 393)

ZRA Tax liability (54 599)

(52 522)

Net exchange loss 269

(52 253)

9. Interest bearing liabilities

This relates to the medium term facility Zamanita has with Standard Chartered Bank

(Zambia) Plc that is secured over a floating debenture over all assets of the company and a

fixed legal mortgage relating to stands 5960 and 5001 Mumbwa Road, Lusaka. Interest on

the loan is 3 months LIBOR plus 5% margin per annum payable monthly in arrears. The

principal is repayable in 16 equal quarterly instalments. This will be taken over by 30

September 2014 as a result of the sale.


82

K’000

10. Deferred tax liabilities

This relates to deferred tax liability eliminated due to the sale of Zamanita.

11. Collateral Management Agreement

At 1 Oct 13 67 555

Obtained during the year 118 275


Exchange loss (52 030)

At 30 Sept 14 94 892

The Group had structured agricultural facilities with Standard Chartered Bank Zambia Plc.

The purpose of the facilities is the financing of wheat, soya, beans, maize and barley under

collateral management agreements / facilities against warehouse receipts and is for 365

days. The balance at 30 September 2014 was ZMW155.7 million (USD24.83 million).

12. Trade and other payables

At 30 Sept 14 218 298

Amounts reclassified resulting from the sale of Zamanita (209 617)

8 681

13. Taxation payable

This relates to the tax liability in Zamanita being eliminated on the disposal.

14. Bank overdraft

This relates to the bank overdraft in Zambeef being eliminated from the resultant sale of

Zamanita.


83

2.0 CONSOLIDSTED STATEMENT OF COMPREHENSIVE INCOME

Zambeef

Effect of

Proforma

for the year ended

disposal of

for the year ended

K’000 Notes 30 Sept 2014

Zamanita

30-Sep-14

Revenue 15 1 643 253

(399 117)

1 244 136

Net gain arising from price changes in fair value of biological assets 770

-

770

Cost of sales (1 089 013)

340 855

(748 158)

Gross profit 555 010

(58 262)

496 748

Administrative expenses (494 116)

50 791

(443 325)

Other income 2 848

(101)

2 747

Operating Profit 63 742

(7 572)

56 170

Exchange losses on translating foreign currency transactions and balances (34 302)

11 631

(22 671)

Finance costs (50 599)

7 327

(43 272)

Loss on disposal of Zamanita 16

(52 522)

(52 522)

Profit before taxation (21 159)

(41 136)

(62 295)

Taxation (charge)/credit 959

114

1 073

Group profit for the year (20 200)

(41 022)

(61 222)

Group profit attributable to: Equity holders of the parent (24 609)

(41 022)

(65 631)

Non-controlling interest 4 409

-

4 409

(20 200)

(41 022)

(61 222)

Other comprehensive income:

Exchange losses on translating presentational currency

10 408

270

10 678

Total comprehensive income for the year

(9 792)

(40 752)

(50 544)

Total comprehensive income for the year attributable to:

Equity holders of the parent

(13 747)

(40 752)

(54 499)

Non-controlling interest

3 955

0

3 955

(9 792)

(40 752)

(50 544)

Earnings Per Share (ZMW)

(0.10)

(0.17)

(0.26)


84

K’000

15 Revenue

Oil seed/soya/cotton see 206 503

Margarine 829

Cooking Oil 189 382

Plastic 2 403

399 117

16. Loss on disposal

Loss on disposal of Zamanita was calculated as follows:

Net proceeds from disposal of Zamanita 139 470

Net asset value of Zamanita (per annual report 30 Sept. 14) (137 393)

ZRA Tax liability (54 599)

(52 522)


85

ANNEX 3: INDEPENDENT REPORTING ACCOUNTANT’S OPINION REPORT ON THE DISPOSAL/PROPOSED TRANSACTION

Deloitte Abacus Square, Stand 2374/B Thabo Mbeki Rd PO Box 30030 Lusaka Zambia Tel: +260 211 228 677 Fax: +260 211 228 744

The Directors



Industrial Area


Lusaka

18 February 2015

Dear Sirs,

Independent fair and reasonable opinion report on the proposed disposal of Zamanita Limited to Cargill Holdings BV

Introduction

Zambeef Products Plc (“Zambeef”, the “Company”, or, together with its subsidiaries the “Group”) is one of the largest integrated agri-businesses in Zambia.

The Group is principally involved in the production, processing, distribution and retailing of beef, chicken, pork, milk, dairy products, eggs, edible oils, stock feed, and flour. The Group also has large cropping operations, principally maize, soya beans and wheat.

Zambeef acquired Zamanita Limited (“Zamanita”) , a wholly owned subsidiary for USD16.0 million in January 2008, as a continuation of its strategy of vertical integration. In addition to its position as an edible oil and soybean meal producer, Zamanita owned the only solvent extraction plant in Zambia at the time.

Zamanita owns and manages an edible oil crushing plant, which manufactures edible oil and soya meal. Other Zamanita products include margarine and mineral water.

Management state that over the last five years, the oil seed crushing industry has, together with many other domestic industries, matured and a number of new participants have also entered the market. As a result, it is no longer essential for Zambeef to be involved in this industry in order to secure its required supply of high quality soybean meal at a competitive price.

Furthermore, oil seed crushing is a highly specialised and capital intensive business which is subject to fluctuations in foreign exchange rates and commodity prices.


86

On account of the reasons above, the Board of Directors of Zambeef has made a decision to dispose off the 100 per cent shareholding in Zamanita and have subsequently received an offer from Cargill Holdings BV (“Cargill”). Accordingly, the Board of Directors of Zambeef has appointed Deloitte & Touche as the Independent Financial Adviser to:

• Perform a valuation of Zamanita Limited as at 30 September 2014 and use the results of the valuation to present the fair and reasonable opinion to Board of Directors of Zambeef in regard to the Cargill Offer.

• Authorise Zambeef to refer to or include the fair and reasonable opinion in the circular to shareholders (the “Circular”) on the Cargill offer.

Definition of value

For purposes of this engagement, we define fair market value, as “the amount for which an asset could be exchanged, a liability settled or an equity instrument granted could be exchanged, between knowledgeable willing parties in an arm’s length transaction.”

The conclusion of fair market value reached is therefore a reasonable estimate of the price at which an asset may change hands between two willing parties. It should be understood that the actual price paid in any transaction involving Zamanita may differ from the appraised fair market value due to factors such as the motivation of the parties, the negotiation skills of the parties, the structure of the transaction or other factors unique to the transaction.

We have valued Zamanita under the premise of a going-concern business enterprise. This premise of value considers that the management of Zamanita will implement only those prospective financial and operational strategies that will maximise the value of the business entity. Additionally, it assumes that there is no uncertainty about future events, such as recurring operating losses or financial difficulties, that would call into question the fundamental assumption that Zamanita can continue to operate as a going-concern.

Sources of information

In preparing the valuation we have had access to the following sources of information:

Audited financial statements for the years ended 30 September 2014;

Zamanita’s projections for the four years ending 30 September 2018;

Management representations of information about Zamanita; and

Other publicly available information relevant to Zamanita and the industry in which Zamanita operates.

Scope and limitations of review

The scope of our work has been limited to the matters set out in our terms of reference and to reviewing only the information made available to us by Zambeef and Zamanita Management as shown above. Our report is limited to only those matters arising that would appear to us to be of significance in arriving at a valuation for Zamanita.

Our procedures and enquiries did not include verification work or constitute an audit in accordance with generally accepted auditing standards. Therefore, we do not express any opinion on any financial data or other information referred to in this report.

Insofar as our work related to forecasts, we have reviewed their compilation to satisfy ourselves that they have been prepared on the basis of the underlying assumptions. However, those forecasts and assumptions are the sole responsibility of the directors of the Company. We have commented on those assumptions where appropriate but accept no responsibility for them, or the ultimate accuracy and realisation of the forecasts. Furthermore, you should note that there will usually be differences between forecast and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material.

You should not assume that all information which you may have produced to other partners or staff of the firm has been made available to the personnel engaged in preparing this report. This report is issued on the understanding that you have drawn our attention to all matters of which you are


87

aware concerning the Company financial position or the proposed transaction which may have an impact on our report up to the date of sign off.

We reserve the right to review all calculations included or referred to in our report and, if we consider it necessary, to revise our opinion in the light of any information existing at the valuation date which becomes known to us after the date of the valuation report. We have no responsibility to update the report for events and circumstances occurring after the date of this report.

This report has been prepared solely for your use and for the purpose outlined above. It should not be quoted or referred to or used for any other purpose.

We shall, therefore, not be responsible for financial or other consequences flowing from any error in, or omission from, our report resulting from the limitations in scope referred to in this letter and you agree to hold us harmless from the effects of any such error or omission unless caused by bad faith on our part.

Management confirmation of facts

We provided this report to the Management of the Company and they have confirmed that to the best of their knowledge and belief:

the facts as stated, so far as they are aware, are accurate in all material aspects;

they have made available to us all significant information relevant to the report of which they have knowledge; and

they are not aware of any material matters relevant to our terms of reference that have been excluded.

Indicative valuation

We performed an independent indicative valuation as at 30 September 2014. We have considered market and economic conditions up to the date of issue of this report.

Our valuation is primarily based on the Discounted Cash Flow (“DCF”) valuation methodology under the income approach. In addition, we have used two other valuation methods (cost approach and the market approach), in brief, to contrast or collaborate the DCF findings.

The DCF method is based on the premise that the value of the business enterprise is the present value of the future economic income to be derived by the owners of the business. Cash flows attributable to shareholders are derived by deducting interest paid and loan repayments from free cash flows and discounted at the equity cost of capital.

Under the cost approach, we relied on the audited balance sheet as at 30 September 2014. Our analysis relied wholly on the face value of assets as indicated on the audited accounts, in order to arrive at an indicative valuation of Zamanita.

For purposes of the market approach, we were unable to identify listed companies in the Southern Africa region which are sufficiently comparable to Zamanita, to facilitate a meaningful comparator analysis.

Based on the valuation methodologies utilised in the valuation analysis and assumptions used, we believe that the open market value for 100% shareholding in Zamanita as at 30 September 2014, will be in the region of USD23.7million. Due to the inherent uncertainty in predicting future events, the market value could vary from a low of USD17.3million on a pessimistic view to USD27.4 million on an optimistic view

Opinion

According to the signed sale and purchase agreement dated 2 February, the agreed purchase price between Zambeef and Cargill for 100% shareholding of Zamanita is a cash price of USD25.7 million. The purchase price will be adjusted for estimated closing working capital less estimated net financial debt at the completion date of 1 May 2015.

Based on the information considered and our indicative valuation results, we are of the opinion that the Offer is fair and reasonable, to the extent the final purchase price adjusted for estimated closing


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working capital less estimated net financial debt at the completion date of 1 May 2015, falls within the valuation range above.

Consent

We hereby consent to the inclusion of this opinion in whole and references thereto, in the form and context in which they appear, in the Circular.

Yours faithfully,

Deloitte & Touche


Partner, Advisory Services


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ANNEX 4: NOTICE OF EXTRAORDINARY GENERAL MEETING

ZAMBEEF PRODUCTS PLC (“Zambeef” or “the Company”)

NOTICE OF AN EXTRAORDINARY GENERAL MEETING

OF HOLDERS (“SHAREHOLDERS”) OF ORDINARY SHARES IN ZAMBEEF (“ORDINARY SHARES”)

NOTICE OF EXTRAORDINARY GENERAL MEETING

Notice is hereby given that an Extraordinary General Meeting of the Shareholders of Zambeef will be held at the Taj Pamodzi Hotel, Church Road, Lusaka, at 10:00am (Zambian time), on Wednesday 8 April 2015, for the purpose of conducting the following business: AGENDA

1) TO READ THE NOTICE OF THE MEETING AND CONFIRM A QUORUM IS PRESENT

2) TO PASS THE FOLLOWING RESOLUTIONS:

a) ORDINARY RESOLUTION NUMBER 1 – AUTHORITY TO IMPLEMENT THE PROPOSED TRANSACTION (SALE OF 100 PER CENT. SHAREHOLDING IN ZAMANITA LIMITED TO CARGILL HOLDINGS BV) AN ORDINARY RESOLUTION, in terms of the LuSE Listing Rules, that the Company be and is hereby authorised to implement the Proposed Transaction of the sale of 100 per cent. shareholding in Zamanita which constitutes a Category 1 Transaction for the purposes of the LuSE Listing Rules.

b) ORDINARY RESOLUTION NUMBER 2 – AUTHORITY OF DIRECTORS AN ORDINARY RESOLUTION that any Director of the Company be and is hereby authorised to do all such things and sign all such documentation as are necessary to give effect to the resolution set out in this notice, hereby ratifying and confirming all such things already done and documentation already signed.


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c) SPECIAL RESOLUTION NUMBER 1 – AMENDMENT OF THE LTIP SCHEME RULES i. A SPECIAL RESOLUTION to amend the Rules of the Zambeef Products PLC 2012 Long Term

Incentive Plan in order to make allowance for the annual base value of the shares that may be issued to each Joint CEO under the scheme to exceed 300 per cent. of each Joint CEOs’ annual basic salary.

ii. A SPECIAL RESOLUTION to amend the Rules of the Zambeef Products PLC 2012 Long Term Incentive Plan in order to make allowance for the granting by the Company of the Options to the Joint CEO’s to acquire a maximum of 2.5 per cent. each (5 per cent. combined) of the current Zambeef issued share capital, subject to the terms and conditions set out in the attached Supplement.

d) SPECIAL RESOLUTION NUMBER 2 - SHARE BUY BACK

A SPECIAL RESOLUTION to authorise the Board of Directors to amend the Articles to allow for the Company to buy back its Shares.

e) SPECIAL RESOLUTION NUMBER 3 – IMPLEMENTATION OF THE JOINT CEO LONG TERM INCENTIVE

PLAN A SPECIAL RESOLUTION that the Board of Directors be and is hereby given the authority and discretion to:

i. implement the Joint CEO Long Term Incentive Plan through the repurchase of the Company’s shares on the Market; or

ii. to issue and/or allot shares of the Company for the purpose of implementing the Joint CEO Long Term Incentive Plan.

Danny Museteka 16 March 2015 Company Secretary Lusaka Notes: 1. A member of the Company is entitled to appoint one or more persons as his/her proxy to

attend and vote and speak in his/her stead. A proxy need not be a member of the Company. 2. The Company’s Articles of Association provide that instruments of proxy must be deposited at

the registered office of the Company, Plot 4970, Manda Road, Industrial Area, P/B 17, Woodlands, Lusaka, Republic of Zambia, not less than 48 hours before the time appointed for the holding of the meeting.

3. Details of how to appoint a proxy using the Form of Proxy or Form of Instruction (as appropriate) are set out in the notes to the Form of Proxy or Form of Instruction (as appropriate).

4. To change your proxy instructions or to revoke a proxy instruction you will need to comply with the terms set out in the notes to the Form of Proxy or Form of Instruction (as appropriate).

5. Depositary Interest Holders who are CREST members and who wish to issue an Instruction through the CREST electronic voting appointment service may do so by using the procedures described in the CREST manual (available from www.euroclear.com/CREST). CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting services provider(s), who will be able to take the appropriate action on their behalf. In order for


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instructions made using the CREST service to be valid, the appropriate CREST message (a CREST Voting Instruction) must be properly authenticated in accordance with the specifications of Euroclear UK & Ireland Limited (EUI) and must contain the information required for such instructions, as described in the CREST Manual (available via www.euroclear.com/CREST).

6. The message, regardless of whether it relates to the voting instruction or to an amendment to the instruction given to the Depositary must, in order to be valid, be transmitted so as to be received by the issuer’s agent ID 3RA50 no later than 4:00pm UK time on 1 April 2015. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the CREST Voting Instruction by the CREST applications host) from which the issuer’s agent is able to retrieve the CREST Voting Instruction by enquiry to CREST in the manner prescribed by CREST.

7. CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the transmission of CREST Voting Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that the CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a CREST Voting Instruction is transmitted by means of the CREST service by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

8. The Company may treat as invalid a CREST Voting Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.

Issued shares and total voting rights As at the last Practicable Date, the Company’s issued share capital comprised 247,978,195 Ordinary Shares each fully paid. Each Ordinary Share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights in the Company is 247,978,195.


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ANNEX 5: FORM OF PROXY

ZAMBEEF PRODUCTS PLC Form of Proxy

I/We, Of Being a member/s of and the registered holder/s of..................................... shares in the above named Company, hereby appoint: of Or, in his/her absence, the Chairman of the Company As my/our proxy to vote for me/us on my/our behalf at the Extraordinary General Meeting of the Company to be held on the 8 April 2015 And at any adjournment of that meeting. In favour of/against In Favour Against a) ORDINARY RESOLUTION NUMBER 1 – AUTHORITY TO IMPLEMENT THE

PROPOSED TRANSACTION (SALE OF 100 PER CENT. SHAREHOLDING IN ZAMANITA LIMITED TO CARGILL HOLDINGS BV)

AN ORDINARY RESOLUTION, in terms of the LuSE Listing Rules, that the Company be and is hereby authorised to implement the Proposed Transaction of the sale of 100 per cent. shareholding in Zamanita, which constitutes a Category 1 Transaction for the purposes of the LuSE Listing Rules. ------------------------------------------------------------------------------------------------------------- b) ORDINARY RESOLUTION NUMBER 2 – AUTHORITY OF DIRECTORS AN ORDINARY RESOLUTION that any Director of the Company be and is hereby authorised to do all such things and sign all such documentation as are necessary to give effect to the resolution set out in this notice, hereby ratifying and confirming all such things already done and documentation already signed. ------------------------------------------------------------------------------------------------------------- c) SPECIAL RESOLUTION NUMBER 1 – AMENDMENT OF THE LTIP SCHEME

RULES i. A SPECIAL RESOLUTION to amend the Rules of the Zambeef Products PLC

2012 Long Term Incentive Plan in order to make allowance for the annual base value of the shares that may be issued to each Joint CEO under the scheme to exceed 300 per cent. of each Joint CEOs’ annual basic salary.

------------------------------------------------------------------------------------------------------------- ii. A SPECIAL RESOLUTION to amend the Rules of the Zambeef Products PLC

2012 Long Term Incentive Plan in order to make allowance for the granting by the Company of the Options to the Joint CEO’s to acquire a maximum of 2.5 per cent each (5 per cent. combined) of the current Zambeef issued share capital, subject to the terms and conditions set out in the attached Supplement.

------------------------------------------------------------------------------------------------------------- d) SPECIAL RESOLUTION NUMBER 2- SHARE BUY BACK A SPECIAL RESOLUTION to authorise the Board of Directors to amend the Articles to allow for the Company to buy back its Shares.

-------------- -------------- -------------- --------------

------------- ------------- ------------- -------------


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e) SPECIAL RESOLUTION NUMBER 3 – IMPLEMENTATION OF THE JOINT CEO LONG TERM INCENTIVE PLAN

A SPECIAL RESOULTION that the Board of Directors be and is hereby given the authority and discretion to:

i. implement the Joint CEO Long Term Incentive Plan through the repurchase of the Company’s shares on the Market; or

------------------------------------------------------------------------------------------------------------- ii. to issue and/or allot shares of the Company for the purpose of

implementing the Joint CEO Long Term Incentive Plan.

----------------------------------------------------------------------------------------------

-------------- --------------

------------- -------------

Unless otherwise instructed, the proxy will vote as he/she thinks fit Signed:

Name: Date: Witness by: Signature:

Name: Address: 1. A Shareholder may insert the name of a proxy or the names of two alternative proxies of

his/her choice in the space provided, with or without deleting “the chairman of the general meeting”. The person whose name stands first on the Form of Proxy and who is present at the EGM will be entitled to act as proxy to the exclusion of those whose names follow. Any such proxy, who need not be a shareholder of the Company, is entitled to attend, speak and vote on behalf of the Shareholder.

2. A proxy is entitled to one vote on a show of hands and, on a poll, one vote for each share held. A Shareholder’s instructions to the proxy must be indicated in the appropriate spaces.

3. If a Shareholder does not indicate on this instrument that the proxy is to vote in favour of or against any resolution or to abstain from voting or gives contradictory instructions, or should any further resolution/s or any amendment/s which may be properly put before the EGM be proposed, the proxy shall be entitled to vote as he/she thinks fit.

4. This Form of Proxy must be received by the Company Secretary at the registered head office, Plot 4970, Manda Road, Industrial Area, P/B 17, Woodlands, Lusaka, within 48 hours of the time appointed for holding the EGM.

5. Documentary evidence establishing the authority of the person signing the proxy in representative capacity must be attached hereto unless previously recorded by the Company’s transfer secretaries.

6. The completion and lodging of this Form of Proxy will not preclude a Shareholder from attending the EGM and speaking and voting in person thereat to the exclusion of any proxy appointed in terms of this proxy form.

7. Any alteration or correction made to this Form of Proxy must be initialled by the signatory/ies. 8. The Chairman of the meeting may accept or reject any Form of Proxy, which is completed

and/or received other than in accordance with these notes.


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(Incorporated and registered in Zambia under the Companies Act 1994) (Registration number 31824) (LuSE Share Code: Zambeef)

(AIM Share Code: ZAM) (ISIN Number ZM0000000201)

Supplement relating to: • the approval of the Joint CEO Long Term Incentive Plan (“JCEO LTIP”) • the amendment to the rules of the Zambeef Products PLC Long Term Incentive Plan

LuSE Sponsoring Broker Legal Adviser


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SUPPLEMENT TO ZAMBEEF SHAREHOLDERS OUTLINING DETAILS ON THE JOINT CEO LONG TERM INCENTIVE PLAN 1. PURPOSE OF THIS SUPPLEMENT The purpose of this Supplement is to provide Zambeef Shareholders with the relevant information relating to the Joint CEO Long Term Incentive Plan (“JCEO LTIP”), and to enable Shareholders to make an informed decision as to whether or not they should vote in favour of the resolutions set out in the Notice of the Extraordinary General Meeting (“EGM”) which forms part of the Zamanita Disposal Circular. 2. INTRODUCTION AND DETAILS ON THE JOINT CEO LONG TERM INCENTIVE PLAN

On 18 February, the Remunaration Committee approved the Joint CEO Long Term Incentive Plan

(“JCEO LTIP”) as detailed below:-

Market Value Share Option Scheme for the Joint CEO’s: The two Joint CEO’s (“JCEO’s”) will be given Market Value Share Options (“Options”) to acquire Zambeef Shares, up to a maximum of 2.5 per cent. each (combined 5 per cent.) of the current Zambeef issued share capital (ie – 6.25 million shares each). The period of the Options would be three years and as a result the JCEO’s would each sign three year contracts and would only be able to exercise their Options after 3 years from the issue of the Options. The Option Price, being the price at which the JCEO’s can buy the Shares after 3 years, would be set at the average AIM quoted price in the 90 days immediately prior to the date of issue of the Options. The Share Options would only be excercisable under the following conditions/circumstances:

a) If the Zambeef Share price reaches 40 pence, 25 per cent. of the Options become

exercisable;

b) If the Zambeef Share price reaches 48 pence, a further 25 per cent. become exercisable;

c) If the Zambeef Share price reaches 56 pence, a further 25 per cent. become exercisable;

d) If the Zambeef Share price reaches 65 pence, the final 25 per cent. become exercisable;

e) Zambeef achieving a Debt : Equity (gearing) ratio of less than 35 per cent. in the audited

accounts immediately prior to excercising the Options;

f) Zambeef achieving a current ratio (current assets divided by current liabilities) of 1.5 in the

audited accounts immediately prior to the excercising of the Options;

g) Zambeef generating free cash;

h) The price targets set in (a) to (d) above will be considered achieved if in the 14 days

immediately prior to excercising the Options the Shares have traded continuously at not

less than these prices for 14 days;


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i) The Options will be excercisable at any time for 2 years after the 3 year period from the

issue of the Options have lapsed; and

j) The Options can only be excercised if the JCEO’s are still employed by the Company.

The Shares for the Share Options can either be through the issue of new shares or through the Company buying back shares on the market and this will be at the Board of Directors discretion. Reduction in Salary for the Joint CEO’s In order to be eligible for this JCEO’s Share Option Scheme, the two JCEO’s will have to take a 20 per cent. pay cut for the three year period. The JCEO’s will sign a three year contract at this revised salary which will not be renegotiable during the three year period.

Changes to the existing rules of the Zambeef Long Term Incentive Plan In order to effect the Joint CEO LTIP, there is a requirement for the Shareholders to approve the amendment to the existing Rules of the Long Term Incentive Plan (“LTIP Rules”) which was approved by shareholders in December 2012. Currently, the LTIP Rules provides that: “ that annual award base value (number of performance shares multiplied by the share price on the date of grant plus number of options multiplied by the exercise price) may not exceed three times the individual’s base salary.” This would be breached by the proposed JCEO’s Share Option Scheme. Therefore, there is need for the Shareholders to approve an amendment to the existing LTIP Rules to allow for exclusion of the Joint CEOs from the above requirement. 3. RESOLUTIONS REQUIRED FOR APPROVAL BY ZAMBEEF SHAREHOLDERS The Resolutions outlined in the EGM Notice on pages 89-90 forming part of the Zamanita Disposal Circular aim to:

amend the current LTIP Rules to cover the proposed JCEO’s LTIP Scheme

The amendment of the Rules of the Zambeef Products PLC 2012 Long Term Incentive Plan will allow for the annual base value of the shares that may be issued to each Joint CEO under the scheme to exceed 300 per cent. of each Joint CEOs’ annual basic salary. Additionally, the amendment of the Rules of the Zambeef Products PLC 2012 Long Term Incentive Plan will make allowance for the granting by the Company of the Options to the Joint CEO’s to acquire a maximum of 2.5 per cent. each (5 per cent. combined) of the current Zambeef issued share capital, subject to the terms and conditions set out in section 2 above of this Supplement.

implement the Joint CEO Long Term Incentive Plan through the repurchase of the Company’s

shares on the market; or through the issue and/or allot shares of the Company for the purpose

of implementing the Joint CEO Long Term Incentive Plan; and

to authorise the Board of Directors to amend the Articles to allow for the Company to buy

back its Shares which will facilitate the implementation of the Share Options under the Joint

CEO Long Term Incentive Plan.


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4. RATIONALE FOR THE JOINT CEO LTIP SCHEME

In order to drive Zambeef forward towards becoming a high performing and successful organization, we need to ensure that we attract, retain and motivate the best quality staff across the entire group, especially at senior management level. General LTIP awards within the existing LTIP Rules have already been allocated to over 300 staff across the business. The purpose of the JCEO LTIP scheme is to develop a bespoke scheme for the two Joint CEOs (who are both the co-founders of Zambeef), as we believe that the continued involvement of these two Joint CEOs will be critical in Zambeef’s future success. In our view, the proposed JCEO LTIP Scheme:

balances the interests of shareholders fairly.

strengthens the link between remuneration/reward and outcomes for shareholders.

benefits the Joint CEOs only if shareholders have also seen a financial benefit in terms of an

increased share price.

shows strong commitment from the 2 Joint CEOs, as evidenced by the substantial (20 per

cent.) salary reduction for the next 3 years.

is in close compliance with the following key areas of governance best practice:

working within the 10 per cent. 10 year rolling dilution limit.

awards only exercisable after 3 years, and then only for a period of 2 years.

applying stretching and challenging trigger points/targets.

5. DIRECTORS’ RECOMMENDATION The Directors recommend that Zambeef Shareholders vote in favour of the resolutions

approving the proposed JCEO LTIP scheme at the Extraordinary General Meeting.

The Directors, in their personal capacities, intend to vote the Zambeef Ordinary Shares held by

them in favour of the resolutions approving the proposed Joint CEO LTIP Scheme at the

Extraordinary General Meeting.

6. DIRECTORS’ RESPONSIBILITY STATEMENT The Directors, whose names are given on pages 27-28 of the Disposal Circular collectively and individually accept full responsibility for the accuracy of the information given and certify that to the best of their knowledge and belief there are no other facts the omission of which would make any statement false or misleading in any material respect, that they have made all reasonable enquiries to ascertain such facts (where applicable), and that this Supplement contains all the material information required for Shareholders to make an informed decision.

For and on behalf of the Board of Directors Zambeef.

Investor Relations

Zambeef Products Plc - Circular to Shareholders (March 2015)