Gusbourne Regulatory News (GUS)

Shellproof Limited

Merger with Shellproof PLC and Re-Admission to AIM

Highlights

·; Shellproof Limited announces proposals to merge with Shellproof PLC

·; Shellproof PLC intends to focus on the opportunity in the English sparkling wine industry to develop vineyards, a winery and a sales and marketing operation to take advantage of further anticipated market growth in this sector of the wine industry

·; Shellproof PLC will acquire Halnaker Vineyard, comprising of 13 acres of land which currently has 10 acres of mature vines planted

·; The transaction will provide Shellproof PLC with the financial resources to start developing an English sparkling wine business

For further information contact:

Shellproof Limited

Belize +501 223 5989

UK +44 (0)20 7248 6700

Cenkos Securities plc

Adrian Hargrave +44 (0)20 7973 8900

Introduction

The Directors today announce that they have identified a merger with Shellproof PLC and the acquisition of the Freehold Property as an attractive investment opportunity for Shellproof. Conditional agreements have been entered into to acquire the Freehold Property and to combine these with the financial resources of Shellproof Limited under a merged company, Shellproof PLC, and to seek admission of Shellproof PLC's shares to AIM. This will provide a platform to focus on the opportunity in the English sparkling wine industry to develop vineyards, a winery and a sales and marketing operation to take advantage of further anticipated market growth in this sector of the wine industry.

A circular to Shellproof Limited Shareholders and an admission document prepared by Shellproof PLC in respect of Admission, which, together, provide full details of the proposals, are being despatched to Shellproof Shareholders shortly.

The Merger

Since the admission of Shellproof Limited to AIM, the Directors have been actively seeking investment opportunities for Shellproof Limited. The Directors have now identified an investment opportunity and propose to effect the Merger and seek admission of Shellproof PLC to trading on AIM.

It is proposed that the ultimate holding company of the Enlarged Group should be incorporated in England and Wales. A new company, Shellproof PLC, has therefore been incorporated. It is intended that Shellproof PLC will merge with Shellproof Limited in accordance with Belizean law and also complete the Acquisition Agreement. Further details of the strategy of the Enlarged Group and its plans for expansion are contained in the Admission Document, which has been sent to you with this document.

Terms of the Merger

Prior to the Transactions, it is proposed that Shellproof Limited will merge with Shellproof PLC, a newly incorporated public limited company, so that the Enlarged Group has a holding company incorporated in England and Wales. The Merger will be effected under the IBCA on the terms and subject to the conditions of the Merger Plan, which are set out in Appendix 1 to this document. Shellproof Limited Shareholders will receive new Shellproof PLC shares on the basis of:

One new Shellproof PLC share for each Shellproof Limited Share held immediately prior to the Merger.

The Merger Plan was approved by written resolution of the majority shareholder of Shellproof Limited on 9 October 2012. It is intended that share certificates in respect of the Shellproof PLC shares will be distributed as soon after Admission as is practicable. Admission of Shellproof PLC is conditional on completion of the Merger.

Under the provisions of Part VII of the IBCA, a holder of Shellproof Limited Shares, on dissenting from the terms of the Merger Plan, has the right to be paid the fair value of his shares.

The Acquisition Agreement

The Acquisition Agreement involves the acquisition of a freehold property comprising 13 acres of land in West Sussex which includes 10 acres of mature vines. Further details on the Acquisition Agreement are set out in the Admission Document.

Reasons for the Merger

The Board considers that Shellproof Limited Shareholders will benefit from the Merger through the opportunity to invest in the establishment of an English sparkling wine business which is expected to take advantage of further anticipated market growth in this sector of the wine industry. The Board believes that the business strategy provides shareholders with the potential for long term capital growth in their investment.

Business Strategy

The business strategy is to create a prestigious English sparkling wine production, sales and distribution business. Through the acquisition and establishment of approximately 150 acres of vineyards and the construction of a winery, the Enlarged Group aims to produce leading examples of English sparkling wine.

It is intended that the vineyards and winery will be located in West Sussex within, or in close proximity to the South Downs National Park. The business plan is based on approximately 150 acres of vineyards. In full production these vineyards are expected to produce grapes sufficient for approximately 400,000 bottles of sparkling wine which would make the Enlarged Group one of the leading producers of English sparkling wine.

Market overview

In 2011 total wine sales in the UK amounted to 1,685 million bottles. Sparkling wine accounts for 108 million bottles of this representing 6.4 per cent of all wine consumed in the UK. English wine (including sparkling) accounted for 2.4 million bottles (only 0.1 per cent of total wine sales in the UK).

Of the 2.4 million bottles of English wine sold in the UK in 2011, the Directors believe that English sparkling wine accounts for approximately 60 per cent of this at 1.4 million bottles. This represents approximately 1.3 per cent of the UK sparkling wine market. However, the UK sparkling wine market of 108 million bottles includes a number of categories such as Cava and Prosecco, as well as Champagne and other sparkling wines, which the Directors believe are sold in retail price brackets from under £10 to over £40. Champagne accounts for approximately 35 million bottles overall but even within this sub sector it is estimated that only around two-thirds will be at price levels comparable with English sparkling wine. Thus English sparkling wine could already represent around 6 per cent of the equivalent Champagne market with production trends which Directors believe could potentially double this percentage in the coming years.

English sparkling wines have won a number of prestigious awards recently against competition from Champagne and other sparkling wines. Ridgeview has won the best international sparkling wine trophy on three separate occasions and in 2012 took both a trophy and gold medal at the International Wine Competition (IWC. The English sparkling wine sector has also enjoyed significant and positive media coverage in recent years). It is understood that English sparkling wines also featured at the Royal Wedding and Jubilee celebrations and it was reported that Waitrose sales of English sparkling wine increased five-fold over the Jubilee period.

Production of English wines has increased significantly in the last 9 years and from 2002 to 2011 total domestic production increased by 57 per cent (source: HMRC Alcohol bulletin May 2012). This growth in sales has also been reflected in UK vineyard growth with planting in the UK up by around 75 per cent in the last 3 years to approximately 1,400 hectares (equivalent to 3,460 acres) from the previous level of around 800 hectares (equivalent to 1,980 acres). The Directors believe that sparkling wine grape varieties form the bulk of new plantings.

In terms of competition, there are currently relatively few large producers of English sparkling wine and the Directors believe that there are only a few companies estimated to be producing more than 400,000 bottles of English sparkling wine per year. Availability nationwide is currently restricted to a few national retailers such as Waitrose and more recently Tesco, with retail price points in the range of £15 - £30 with some examples in excess of that. The Directors believe that direct retail sales via farm shops, online and mail order represent a significant proportion of distribution in the English sparkling wine market and for smaller producers this is likely to be their only outlet.

Business description

There are three principal components involved in developing the business to be operated by the Enlarged Group:

i. The Vineyards

These will contain or be planted with grape varieties suitable for English sparkling wine such as Pinot Noir, Pinot Meunier and Chardonnay. The 150 acre target is expected to come from:

• The Freehold Property - 13 acres, of which 10 acres are planted with mature vines, to be acquired in accordance with the terms of the Acquisition Agreement as a freehold purchase.

• The FBT Site - 27 acres.

• Other sites locally, up to a further 110 acres, which are expected to be on similar long term farm business tenancies similar to the FBT will be identified and planted over the course of the next few years.

During the early years, in order to meet its production plans, the Enlarged Group will continue to buy in grapes and process these in other local wineries on a contract basis. The Enlarged Group currently has stocks of approximately 25,000 bottles.

The Enlarged Group may also consider the acquisition of freehold land and mature vineyards if suitable opportunities arise.

ii. The Winery

The Enlarged Group intends to build a winery on one of its target sites, subject to obtaining the relevant planning consents. It is likely that the winery would be acquired via a leasehold arrangement with commencement contingent on planning. The winery would be expected to be commissioned towards the end of 2014. The winery and related storage facility would carry out grape crushing, juice extraction, fermentation, secondary fermentation and other processes involved in the production of sparkling wine. The buildings would also accommodate bottling and storage facilities as well as a small visitor centre.

iii. Sales & Marketing

At a mature production level of approximately 400,000 bottles, the business is expected to be positioned as one of the leading producers of English sparkling wine. Sales and marketing will include:

• Branding and related support:

A brand name or names will be chosen to reflect the perceived brand values of the product. The Directors believe that branding will be assisted by the perceived quality of the region's "terroir". This region on which Shellproof Wines is based already has established vineyards for some of the leading English sparkling wine producers. The region benefits from an attractive setting with particular soil and climatic conditions which have already produced a number of award winning sparkling wines.

• Distribution:

Distribution will include direct sales via a visitor centre, other local direct sales, online and mail-order purchases, export sales and selected national distribution.

Admission, Settlement and CREST

It is expected that on or about 25 October 2012, Shellproof PLC Shares will be admitted to trading on AIM and that dealings will commence on that date. It is intended that, where applicable, definitive share certificates in respect of Shellproof PLC Shares will be distributed as soon thereafter as is practicable.

Shellproof PLC Shares are issued in registered form and may be held either in certificated or uncertificated form.

The Company has applied for the Shellproof PLC Shares to be admitted to CREST with effect from Admission. CREST is a paperless settlement procedure enabling securities to be evidenced otherwise than by a certificate and transferred otherwise than by a written instrument. The articles of association of the Company permit the holding of Shellproof PLC Shares under the CREST system. Accordingly, settlement of transactions in Shellproof PLC Shares following Admission may take place within the CREST system if any shareholder so wishes.

CREST is a voluntary system and holders of Shellproof PLC Shares who wish to receive and retain share certificates will be able to do so.

Circular and admission document

A copy of the circular and admission document have been sent to Shellproof Limited Shareholders today and will be available to view on the Company's website shortly at www.shellprooflimited.com.

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