Zambeef Prod. Regulatory News (ZAM)

24 March 2016

Zambeef Products plc

("Zambeef" or "the Group")

Acknowledgement of Announcement on JSE

Zambeef notes the following announcement released today by RCL Foods to the Johannesburg Stock Exchange regarding the put options concerning Zam Chick and Zamhatch.

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Release Date: 24/03/2016 12:18:00 Code(s): RCL

Announcement of the exercise of the put options granted to RCL Foods Limited by Zambeef Products plc

RCL FOODS LIMITED

(Incorporated in the Republic of South Africa)

(Registration number: 1966/004972/06)

ISIN: ZAE000179438

Share Code: RCL

ANNOUNCEMENT OF THE EXERCISE OF THE PUT OPTIONS GRANTED

TO RCL FOODS LIMITED BY ZAMBEEF PRODUCTS PLC

IN RESPECT OF ZAM CHICK LIMITED AND ZAMHATCH LIMITED

1. Background

During 2013, RCL Foods Limited ("RCL FOODS"), through its wholly owned subsidiary, Rainbow Farms Investments Proprietary Limited, entered into agreements with Zambeef Products PLC ("Zambeef") regarding investments in its broiler business, Zam Chick Limited ("Zam Chick"), and a greenfield hatchery investment, Zamhatch Limited ("Zamhatch").

RCL FOODS has a 49% interest in Zam Chick and a 51% interest in Zamhatch. Shareholders' agreements were entered into between RCL FOODS and Zambeef in respect of Zam Chick on 1 February 2013 ("the Zam Chick Shareholders' Agreement") and Zamhatch on 29 May 2013 ("the Zamhatch Shareholders' Agreement") (collectively, "the Shareholders' Agreements").

In terms of the Shareholders' Agreements RCL FOODS, as a standard protection mechanism, was granted put options that would require Zambeef to acquire all of the ordinary shares held by RCL FOODS in Zam Chick ("the Zam Chick Option") and Zamhatch ("the Zamhatch Option") (collectively, "the Options").

If the Zam Chick Option is exercised at any time, the value attributable to RCL FOODS' interest in Zam Chick (49%) will be determined as the higher of the following amounts on the date that the Zam Chick Option is exercised:

- 49% of the consolidated earnings before interest, taxation, depreciation and amortisation ("EBITDA") of Zam Chick at an exit enterprise value ("EV") / EBITDA multiple of 7.5 times; or

- the original purchase price paid by RCL FOODS to Zambeef for the Zam Chick shares, expressed in US Dollars ("USD").

Currently, RCL Foods has no shareholder loan account claims against Zam Chick. If the Zamhatch Option is exercised within 3 years of the effective date (31 March 2013), the value attributable to RCL FOODS' interest in Zamhatch (51%) will be determined as the higher of the following amounts on the date that the Zamhatch Option is exercised:

- 51% of the consolidated EBITDA of Zamhatch at an exit EV / EBITDA multiple of 7.5 times;

or

- the invested USD amounts outstanding to RCL FOODS on capital and loan account.

Should the Options be exercised, the purchase consideration in respect of the Zam Chick shares and the Zamhatch shares purchased by Zambeef, shall, at Zambeef's discretion, be payable as

follows:

- in cash; or

- by the transfer by Zambeef to RCL FOODS of Zambeef shares; or

- by the issue and allotment by Zambeef to RCL FOODS of newly issued Zambeef shares; or

- by a combination of Zambeef shares and cash.

The value attributed to the Zambeef shares for purposes of settling the purchase consideration or part thereof in Zambeef shares, will be determined by the Volume Weighted Average Price ("VWAP") of Zambeef shares as quoted on the AIM Stock Exchange for 30 business days immediately preceding the settlement date. The settlement date shall not be later than six months from the date that the Options are exercised. Zambeef's market capitalisation as at 23 March 2016 is USD31.9 million (based on an exchange rate of GBP1.00: USD1.4091).

In terms of each of the Shareholders' Agreements, and in respect of each Option, to the extent that Zambeef is unable to effect the total payment for the Option shares in cash, then it shall effect payment by issuing Zambeef shares to RCL FOODS. For this purpose, Zambeef warranted that it would hold available up to 10% of its issued ordinary share capital (in respect of each Option).

In accordance with Zambian laws and regulations, certain scenarios relating to the acquisition of the shares by Zambeef may require shareholder approval. In addition, the approval of the Competition and Consumer Protection Commission, the Lusaka Stock Exchange and the Securities and Exchange Commission ("SEC") will be required in order for Zambeef to implement the acquisition of all of the ordinary shares held by RCL FOODS in Zam Chick and Zamhatch in accordance with the terms of the Options.

2. Exercise of the Options

Exercise notices in respect of Zam Chick and Zamhatch were delivered to Zambeef on 23 March 2016, informing Zambeef that the Options have been exercised. This action fixes the Option exercise date and commences the six-month period for purposes of determining the settlement date, in accordance with the terms of the Shareholders' Agreements.

The purchase price owing by Zambeef to RCL FOODS in terms of the Options is as follows:

- in respect of Zam Chick - USD 14,250,000.00; and

- in respect of Zamhatch - USD 4,000,000.00 capital plus USD 6,159,174.53 of shareholder

loans, (collectively, "the Settlement Consideration").

3. Dispute

There is a dispute between RCL FOODS and Zambeef with regard to the computation of the purchase price to be paid for the Zamhatch shares by Zambeef. Zambeef contends that the portion of the purchase price payable by it for the capital contribution by RCL FOODS to Zamhatch should comprise the Zambian Kwacha value of the capital contribution at the time that it was originally paid (in USD) by RCL FOODS. This amounts to ZMW 24,800,000.00. RCL FOODS contends that the amount payable to it ought to be the USD amount originally paid, being USD 4,000,000.00. On the Zambeef version, this results in a reduction in the amount payable to RCL FOODS of approximately USD 1,807,250.22 (based on an exchange rate of USD 1.00: ZMW 11.31 as at 23 March 2016).

In addition, Zambeef argues that a portion of the RCL FOODS loan account in Zamhatch was paid in Euros, and ought to be denominated in Euros as opposed to USD. The Euro amount paid by RCL FOODS was Euro 3,301,849.53. Again, RCL FOODS is of the view that this amount should also be denominated in USD as at the date of payment, being USD 4,159,174.53. On the Zambeef version, this results in a reduction in the amount payable to RCL FOODS of approximately USD 466,656.60 (based on an exchange rate of USD1.00: Euro 0.8942 as at 23 March 2016).

If the matter is not resolved, RCL FOODS will pursue its contractual remedies in terms of the

Shareholders' Agreements.

4. Rationale for the exercise of the Options

RCL FOODS is of the opinion that its interests in Zambeef (indirectly held through Zam Chick and Zamhatch) would be better aligned with the shareholders of Zambeef if RCL FOODS' indirect investments were to be exchanged for a direct interest in Zambeef, the listed holding company of the Zambeef group of companies. Hence, the RCL FOODS board of directors ("the Board") took the decision that the Options should be exercised.

Zambeef has indicated that the exchange mechanism provided for in the terms of the Options may be considered by some Zambeef shareholders as unduly dilutive for such shareholders. As a result, the Board proposed that, subject to certain considerations, the existing Zambeef shareholders should be given the opportunity of reducing the potential dilution to which they would be exposed if some, or all, of the Settlement Consideration is settled by way of new Zambeef shares. In order to counter any potential dilution, existing Zambeef shareholders will be given the opportunity to buy back a portion of the new Zambeef shares issued to RCL FOODS, by way of a claw-back offer. In terms of the claw-back offer, existing Zambeef shareholders will, in proportion to their respective shareholdings in Zambeef, be able to buy back some of the Zambeef shares received by RCL FOODS. Should the Settlement Consideration result in RCL FOODS holdingmore than 25.1% in Zambeef, it will make available for the claw-back offer, RCL FOODS' interest above 25.1%. The shares made available by RCL FOODS for purposes of the claw-back offer will be offered to Zambeef shareholders at the same price that such shares have been issued to RCL FOODS, except for any potential costs and taxes associated witrh the claw-back offer, which will be for the account of participating Zambeef shareholders.

From an administrative and regulatory point of view, RCL FOODS will issue a circular to all Zambeef shareholders, detailing the termsof the claw-back offer. RCL FOODS will liaise with the management of Zambeef and the SEC in Zambia in this regard. RCL FOODS will also seek a dispensation from the SEC to ensure that, in the event that the Settlement Consideration results in RCL FOODS is holding more than 35% of Zambeef, it will be granted the opportunity to sell down sufficient shares so as not to trigger a mandatory offer to the Zambeef shareholders.

5. General

RCL FOODS is aware that Zambeef management has been mandated by its board of directors to actively work towards reducing Zambeef's current debt position. Over the past few months RCL FOODS has been in discussions with Zambeef management in respect of possible mechanisms to inject capital into Zambeef. The Board is of the view that should RCL FOODS become a shareholder in Zambeef, RCL FOODS would like to continue with these discussions. RCL FOODS is of the opinion that Zambeef is an attractive business that, pursuant to an injection of new capital, could materially improve its overall performance. RCL FOODS thus remains interested in considering opportunities that could lead to a more substantial transaction between RCL FOODS and Zambeef.

The transaction referred to above is not subject to JSE Limited ("JSE") Listings Requirements due to its size being below the JSE category thresholds, and is only subject to a number of non-material conditions precedent. Shareholders are advised that Zambeef is also today publishing an announcement simultaneously on the AIM and Lusaka Stock Exchanges.

Durban

24 March 2016

Sponsor

RAND MERCHANT BANK (A division of FirstRand Bank Limited)

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For more information please visit www.zambeefplc.com or contact:

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