Post on 21-Jun-2018
An extraordinary general meeting of the shareholders of Australian Dairy Farms Limited (ACN 047 046 607) and unitholders of the Australian Dairy Farms Trust (ARSN 600 601 689) will be held at 2pm (AEST) on 15 June 2015 at the Ether Conference Centre, The Earth Room, 256 Bourke Street, Melbourne, Victoria.
Australian Dairy Farms Group
This notice of extraordinary general meeting should be read in its entirety. If Securityholders are in any doubt as to how they should vote, they should seek advice from their professional advisor prior to voting.Please contact the Company Secretary on +61 7 3020 3020 or shareholder@adfl.com.au if you wish to discuss any matter concerning the Meeting.
ASX Code: AHF
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Australian Dairy Farms Limited and Australian Dairy Farms Trust (together the “Group”)
Notice of Extraordinary General Meeting
Notice is hereby given that an extraordinary general meeting of the Securityholders of Australian Dairy
Farms Limited (Company) will be held in conjunction with an extraordinary general meeting of
Unitholders of the Australian Dairy Farms Trust (together the Australian Dairy Farms Group or the
Group). The meeting will be held at 2pm (AEST) on Monday 15 June 2015 at the Ether Conference
Centre, The Earth Room, 256 Bourke Street, Melbourne, Victoria (Meeting).
The Explanatory Memorandum to this Notice of Meeting provides additional information on matters
to be considered at the Meeting. The Explanatory Memorandum and Proxy Form are each part of this
Notice of Meeting.
Securityholders are urged to vote by attending the Meeting in person or by returning a completed
Proxy Form. Instructions on how to complete a Proxy Form are set out in the Explanatory
Memorandum.
Proxy Forms must be received by no later than 2pm (AEST) on Saturday 13 June 2015.
Terms and abbreviations used in this Notice and Explanatory Memorandum are defined in Schedule 1
of the Explanatory Memorandum.
Agenda
RESOLUTION 1 RATIFICATION OF PRIOR SECURITIES ISSUE
To consider, and if thought fit, to pass with or without amendment the following resolution as an
ordinary resolution:
“That for the purposes of Listing Rule 7.4 and for all other purposes, Securityholders ratify the
issue of 12,000,000 Stapled Securities on the terms set out in the Explanatory Memorandum.”
A voting exclusion statement is set out below.
RESOLUTION 2 APPROVAL OF SECURITIES ISSUE
To consider, and if thought fit, to pass with or without amendment the following resolution as an
ordinary resolution:
“That for the purposes of Listing Rule 7.1 and for all other purposes, Securityholders approve
the issue of 78,500,000 Stapled Securities at an issue price of $0.20 and otherwise on the terms
set out in the Explanatory Memorandum.”
A voting exclusion statement is set out below.
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RESOLUTION 3 ISSUE OF SECURITIES UNDER THE ADFG INCENTIVE PLAN TO MICHAEL HACKETT
To consider, and if thought fit, to pass with or without amendment the following as an ordinary
resolution:
“That for the purposes of Listing Rule 10.14 and for all other purposes, Securityholders approve
the grant of up to 2,400,000 Performance Rights to Mr Michael Hackett under the Australian
Dairy Farms Group Incentive Plan on the terms and conditions set out in the Explanatory
Memorandum.”
A voting exclusion statement is set out below.
RESOLUTION 4 ISSUE OF SECURITIES UNDER THE ADFG INCENTIVE PLAN TO KEITH JACKSON
To consider, and if thought fit, to pass with or without amendment the following as an ordinary
resolution:
“That for the purposes of Listing Rule 10.14 and for all other purposes, Securityholders approve
the grant of up to 1,200,000 Performance Rights to Mr Keith Jackson under the Australian
Dairy Farms Group Incentive Plan on the terms and conditions set out in the Explanatory
Memorandum.”
A voting exclusion statement is set out below.
RESOLUTION 5 ISSUE OF SECURITIES UNDER THE ADFG INCENTIVE PLAN TO ADRIAN ROWLEY
To consider, and if thought fit, to pass with or without amendment the following as an ordinary
resolution:
“That for the purposes of Listing Rule 10.14 and for all other purposes, Securityholders approve
the grant of up to 2,400,000 Performance Rights to Mr Adrian Rowley under the Australian
Dairy Farms Group Incentive Plan on the terms and conditions set out in the Explanatory
Memorandum.”
A voting exclusion statement is set out below.
RESOLUTION 6 ISSUE OF SECURITIES UNDER THE ADFG INCENTIVE PLAN TO FUTURE DIRECTORS
To consider, and if thought fit, to pass with or without amendment the following as an ordinary
resolution:
“That for the purposes of Listing Rule 10.14 and for all other purposes, Securityholders approve
the grant of up to 1,200,000 Performance Rights to future Directors under the Australian Dairy
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Farms Group Incentive Plan on the terms and conditions set out in the Explanatory
Memorandum.”
A voting exclusion statement is set out below.
VOTING PROHIBITION AND EXCLUSION STATEMENTS
Listing Rule
Under Listing Rule 14.11, the Group will disregard any votes cast on the following Resolutions by the
following persons:
Resolution Persons excluded from voting
Resolution 1 – Ratification of
Prior Securities Issue
Persons who participated in the issue and any associate of those
persons.
Resolution 2 – Issue of Securities Persons who may participate in the proposed issue and a
person who might obtain a benefit, except a benefit solely in
the capacity as a holder of ordinary securities, if the Resolution
is passed, and an associate of that person.
Resolutions 3 to 6 - Issue of
Securities under the Australian
Dairy Farms Group Incentive Plan
to Related Parties
Any Director of the Company or the Responsible Entity except
one who is ineligible to participate in any employee incentive
scheme in relation to the Group and any associates of those
persons.
However, the Group need not disregard a vote if:
(a) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the
direction on the Proxy Form; or
(b) it is cast by the person chairing the Meeting as proxy for the person who is entitled to vote, in
accordance with a direction on the Proxy Form to vote as the proxy decides.
By order of the Board of Directors and the Responsible Entity
Michael Hackett
Michael Hackett Australian Dairy Farms Group 14 May 2015
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Australian Dairy Farms Limited and Australian Dairy Farms Trust
(together the “Group”)
Explanatory Memorandum
1 INTRODUCTION
This Explanatory Memorandum has been prepared for the information of Securityholders in
connection with the business to be conducted at the Meeting to be held at 2pm (AEST) on
Monday 15 June 2015 at the Ether Conference Centre, The Earth Room, 256 Bourke Street,
Melbourne, Victoria. The purpose of this Explanatory Memorandum is to provide information
to Securityholders in deciding how to vote on the Resolutions set out in the Notice.
This Explanatory Memorandum should be read in conjunction with and forms part of the
accompanying Notice.
This Explanatory Memorandum should be read in conjunction with and forms part of the
accompanying Notice, and includes the following:
Action to be Taken by Securityholders 5
Background 6
Resolution 1 - Ratification of Prior Securities Issue 10
Resolution 2 - Approval of Securities Issue 11
Resolutions 3 to 6 - Issue of Securities Under The ADFG Incentive Plan To Related
Parties
12
Any forward looking statements in this Explanatory Memorandum are based on the Group’s
current expectations about future events. They are, however, subject to known and unknown
risks, uncertainties and assumptions, many of which are outside the control of the Group and
the Board, which could cause actual results, performance or achievements to differ materially
from future results, performance or achievements expressed or implied by any such forward
looking statements in this Explanatory Memorandum.
This Explanatory Memorandum does not take into account any person’s investment
objectives, financial situation or particular needs. If you are in any doubt about what to do in
relation to the Meeting you should consult your financial or other professional adviser.
Please contact the Group Secretary on +61 7 3020 3020 or shareholder@adfl.com.au if you
wish to discuss any matter concerning the Meeting.
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2 ACTION TO BE TAKEN BY SECURITYHOLDERS
Securityholders should read the Notice and this Explanatory Memorandum carefully before
deciding how to vote on the Resolutions.
2.1 Proxies
All Securityholders are invited and encouraged to attend the Meeting. If a Securityholder is
unable to attend in person, they can appoint a proxy to attend on their behalf by signing and
returning the Proxy Form (attached to the Notice) to the Group in accordance with the
instructions on the Proxy Form. The Group encourages Securityholders completing a Proxy
Form to direct the proxy how to vote on each Resolution.
The Proxy Form must be received no later than 48 hours before the commencement of the
Meeting, i.e. by no later than 2pm (AEST) on Saturday 13 June 2015. Any Proxy Form received
after that time will not be valid for the Meeting.
A Proxy Form may be lodged in the following ways:
By Mail GPO Box 6, Brisbane, Queensland 4001
By Facsimile +61 7 3020 3081
By Hand Level 1, 41 Edward Street, Brisbane QLD 4000
By Email shareholder@adfl.com.au
Securityholders lodging a Proxy Form are not precluded from attending and voting in person
at the Meeting.
2.2 Corporate representatives
Securityholders who are bodies corporate may appoint a person to act as their corporate
representative at the Meeting by providing that person with a certificate or letter executed in
accordance with the Corporations Act authorising him or her to act as the body corporate’s
representative. The authority may be sent to the Group and/or registry in advance of the
Meeting or handed in at the Meeting when registering as a corporate representative.
An appointment of corporate representative form is available from the website of the Group’s
registry (www.linkmarketservices.com.au).
2.3 Eligibility to vote
The Directors have determined that, for the purposes of voting at the Meeting,
Securityholders are those persons who are the registered holders of Stapled Securities at
7.00pm (AEST) on Saturday 13 June 2015.
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3 BACKGROUND
3.1 Introduction
As announced on 13 May 2015, the Group is seeking to raise up to $17.7 million through a
$15.7 million placement (May 2015 Placement or Placement) and a $2 million share purchase
plan to eligible Securityholders (SPP); both at an issue price of $0.20 per new Stapled Security
(the Placement and SPP are together the Capital Raising). Funds raised under the Capital
Raising will be used to purchase up to 3 target farms (Target Farms), stock, plant and
equipment and improvements, and for transaction costs. See sections 3.2 and 3.3 for details.
To comply with the Listing Rules, Securityholder approval is sought to ratify prior Stapled
Security issues and the proposed Placement.
In addition and as a form of remuneration that will result in the Directors’ interests being more
closely aligned with Securityholders’ interests, approval is sought to issue up to 7.2 million
Performance Rights to current and future Directors, with vesting subject to meeting certain
production targets.
3.2 Highlights of the transaction
The Group has entered into binding call option agreements under which it has the right to
purchase 3 Target Farms located in South West Victoria, Australia for $16 million. The
acquisitions are being made on an estimated purchase price multiple of 9.2x EV/EBITDA1.
The Group expect acquisitions to be approximately 25% EPS accretive in first full year of
production, with annual milk production expected to increase from approximately 10 million
litres p.a to approximately 20 million litres p.a.
The Target Farms are expected to be highly synergistic given their close proximity to the
Group’s existing operations. It is expected post transaction that the Group will be one of the
top milk producers by volume in SW Victoria, with additional milk price volume bonuses from
Target Farms, validating its model of aggregating dairy farms.
In a normal full production year at a price of $6.44kg/ms, the Target Farms are expected to
generate approximately $2.44 million EBITDA per annum.
Net debt post transaction will be approximately $6.63 million (total liabilities less cash and
assuming $2 million is raised under the SPP Offer), providing balance sheet capacity to debt
fund additional acquisitions, further improving EPS outcomes for Securityholders.
The Group is seeking to achieve its stated target of reaching 50 million litres p.a. rate of
production within 2 years of listing (October 2016), and expects to commence distributions
and dividends in FY16.
1 See section 3.4 for an explanation of how the EBITDA was calculated and full details of assumptions underpinning the
forecast financial information.
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Farm Location Map
3.3 Indicative use of funds from the Capital Raising
The proposed use of funds from the Capital Raising, assuming $2 million is raised under the
SPP, is as follows:
Use of funds (approximately) $(‘000)
Acquisition of 3 Target Farms 16,007
Further acquisitions1 588
Costs of the Capital Raising 1,105
Total use of funds 17,700
1 The Group will continue to review acquisitions in accordance with its investment criteria.
3.4 Forecast financial and pro forma annual production information
The acquisition is transformational for the Group, with annual milk production expected to
double from 10m litres pa to over 20m litres pa, making it one of the largest milk producers
by volume in Southwest Victoria.
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On a pro-forma 12 month basis the Target Farms are expected to more than double the
Group’s Earnings Before Interest and Tax (“EBITDA”) and Net Profit After Tax (“NPAT”). The
Group expects the transaction to be about 25% EPS accretive.
Assumptions
This is a pro-forma forecast for a full 12 months of production and not an FY16 forecast and
assumes a
(a) All 3 options over the farms are exercised.
(b) Milking herds and annual litres per milker of between 7,200 and 7,400 are assumed
based upon an assessment by Group management having regard to historical Target
Farm herd size, a review of the Target Farms and industry averages.
(c) Farm gate milk price of $6.44 per kg milk solid on an annualised basis is assumed,
being the current estimated farm gate price based upon production of 20 million litres
of milk per annum.
(d) Milk quality is assumed to be consistent with existing Group production.
(e) Farm operational costs are based on existing operational costs and industry averages
from South West Victoria region (sourced from Red Sky).
(f) Administration and other corporate overhead expenses increase by $126,000 over
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current level.
(g) Net debt excludes any capital raising under the SPP Offer.
3.5 Indicative capital structure following the Capital Raising
The proposed capital structure following the Capital Raising will be as follows:
Stapled Securities currently on issue1 71,477,603
Stapled Securities to be issued under the Placement 78,500,000
Stapled Securities to be issued under the SPP1 10,000,000
Total Stapled Securities on issue following the Capital Raising 159,977,603
Loyalty Options (exercisable at $0.25 on or before 31 March 2016) 24,789,114
Convertible Notes each with a face value of $10,000 and
conversion price of $0.20
235
Performance Rights (subject to Securityholders approving
Resolutions 3 to 6)
Up to 7,200,000
1 This assumes no further Stapled Securities are issued prior to the Record Date.
3.6 Indicative timetable for the Capital Raising
The indicative timetable for the SPP is as follows:
Record Date 12 May 2015
Announcement Date 13 May 2015
Offer Document lodged with ASIC and ASX 15 May 2015
Offer Document with application form dispatched 17 May 2015
Opening date of SPP Offer 18 May 2015
Closing date of SPP Offer (Closing Date) 29 May 2015
Issue and trading of new securities under the SPP 3 June 2015
Securityholder meeting to approve the Placement 15 June 2015
Issue and trading of new securities under the Placement 22 June 2015
Expected settlement of the purchase of 3 Target Farms August 2015
The Directors reserve the right to extend the Closing Date without notice.
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3.7 Consolidated Pro-Forma Statement of Financial Position
Set out in Schedule 2 is the Pro-Forma Consolidated Statement of Financial Position of the
Group, including the Consolidated Statement of Financial Position as at 31 December 2014 as
reviewed by the Group’s Auditor, based on the following assumptions:
(a) the acquisition of the Ignatios Farm (as first announced to ASX on 17 November 2014)
for an additional $1,775,000 (with the initial deposit having been paid in November
2014);
(b) the acquisition of the Brucknell No 3 Farm (as first announced to ASX on 22 November
2014) for $2,650,000 (with the initial deposit having been paid in December 2014) and
stamp duty of $90,000);
(c) outflow of cash as a result of net trading and capital works (excluding acquisitions of
Ignatios and Brucknell No 3 Farms) for the period 1 January 2015 to 31 March 2015 of
$543,000;
(d) the Capital Raising (Placement and SPP Offer) is fully subscribed and was effective on
31 December 2014;
(e) the Group borrows and additional $1,000,000 and repays the interim finance facility
of $450,000
(f) no further Stapled Securities are issued (including by way of exercise of Options) other
than under the Capital Raising;
(g) completion for the acquisition of 3 Target Farms (including plant and equipment,
consumables, livestock, feed and stamp duty) occurred on 31 December 2014; and
(h) total fundraising, duty and other transaction costs of $1,105,000.
The significant accounting policies upon which the Statement of Financial Position and the
Pro-Forma Statement of Financial Position are based are contained in the annual financial
report for year ended 30 June 2014.
3.8 Other terms of the SPP
Full details of the SPP are contained in the Offer Document which will be mailed to all eligible
Securityholders who are registered on the Record Date. The Offer Document is also available
on both the ASX website (www.asx.com.au) and the Group’s website (www.adfl.com.au).
Securityholders eligible to participate should read the Offer Document carefully and if in doubt
as to the value of the SPP should contact their financial adviser.
4 RESOLUTION 1 - RATIFICATION OF PRIOR SECURITIES ISSUE
4.1 Introduction
On 29 December 2014 the Group issued 12,000,000 Stapled Securities to sophisticated and
professional investors at an issue price of $0.24 per Stapled Security to raise $3 million
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(December 2014 Placement). The funds were used to assist the purchase of the Brucknell No.
3 Farm, which adjoins the Group’s existing Brucknell No. 2 Farm, for $2.813 million and
working capital.
Bell Potter Securities Limited acted as Sole Lead Manager for the December 2014 Placement
and was paid 6% of the amount raised. All other material terms of the December 2014
Placement were set out in the Group’s announcement dated 22 December 2014.
Stapled Securities issued under the December 2014 Placement were issued to unrelated
parties of the Group and within the 15% annual limit permitted by Listing Rule 7.1; and
therefore without the need for Securityholder approval. The effect of Securityholders passing
Resolution 1 and ratifying the issue will be to restore the Group’s ability to issue further capital
to the maximum 15% limit during the next 12 months.
4.2 Information required by Listing Rule 7.5
For the purposes of Listing Rule 7.5, the following information is provided about the issue:
(a) The number of securities issued by the Group was 12,000,000.
(b) The price at which the securities were issued was $0.24 per Stapled Security.
(c) The securities issued are stapled fully paid ordinary shares in the capital of the
Company and fully paid units in the Trust, and will rank equally with all existing Stapled
Securities on issue.
(d) The securities were issued without disclosure to clients of Bell Potter, being
sophisticated and professional investors who were not related parties of the Group.
(e) The funds were used to purchase the Brucknell No. 3 Farm, which adjoins the Group’s
existing Brucknell No. 2 Farm, for $2.813 million and for working capital.
(f) A voting exclusion statement is included in the Notice.
4.3 Directors’ recommendation
The Board unanimously recommends that Securityholders vote in favour of Resolution 1. This
will restore the 15% annual limit permitted by Listing Rule 7.1 and allow the Group to issue
further securities without Securityholder approval.
5 RESOLUTION 2 - ISSUE OF SECURITIES
5.1 Introduction
Resolution 2 seeks Securityholder approval to issue 78.5 million Stapled Securities at $0.20
per Stapled Security under the May 2015 Placement to raise up to $15.7 million.
The effect of passing Resolution 2 will be to allow the Directors to issue securities in
accordance with the Resolution without those securities being included in the 15% limit in
Listing Rule 7.1.
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5.2 Information required by Listing Rule 7.3
For the purposes of Listing Rule 7.3, the following information is provided about the issue:
(a) The maximum number of securities to be issued is 78.5million.
(b) The securities will be issued no later than 3 months after the date of the Meeting (or
such later date to the extent permitted by any ASX waiver or modification of the
Listing Rules) and it is intended that issue will occur on the same date.
(c) The issue price of the securities is intended to be $0.20.
(d) It is intended that the securities will be issued to sophisticated and professional
investors who are clients of Bell Potter.
(e) The securities to be issued are stapled fully paid ordinary shares in the capital of the
Company and fully paid units in the Trust, and will rank equally with all existing Stapled
Securities on issue.
(f) The use of funds is set out in section 3.3.
(g) A voting exclusion statement is included in the Notice.
5.3 Directors’ recommendation
The Board unanimously recommends that Securityholders vote in favour of Resolution 2. This
will allow the Group to issue securities and raise funds whilst preserving the Group’s 15%
annual limit permitted by Listing Rule 7.1.
6 RESOLUTIONS 3 TO 6 - ISSUE OF SECURITIES UNDER THE ADFG INCENTIVE PLAN TO RELATED PARTIES
6.1 Introduction
On 1 September 2014 the Group’s Securityholders approved the Australian Dairy Farms Group
Incentive Plan, the details of which are set out in the Company’s notice of meeting dated 1
August 2014 (a copy of which is available from www.asx.com.au).
The Directors propose to grant up to 7.2 million Performance Rights collectively to current
and (subject to ASX approval – see below) future Directors as a form of incentive and to better
align their interests to Securityholders’, with the rights to vest to Stapled Securities upon the
Group achieving specified production targets over 6 month periods.
Under Listing Rule 10.14, no director or their associates can acquire securities under an
employee incentive scheme without securityholder approval. Performance Rights constitute
securities for the purposes of the Listing Rules. In accordance with the rules of the ADFG
Incentive Plan, one Stapled Security will be issued for each Performance Right vesting.
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Messrs Hackett and Rowley will each be issued 2.4 million Performance Rights, Mr Jackson
will be issued 1.2 million Performance Rights and the remaining 1.2 million Performance
Rights will be issued to future Directors at the Board’s discretion.
Details of the Performance Rights proposed to be granted are as follows:
Director
Production target to be achieved by the Group (on an annualised basis) over a 6 month period within 5 years of issue
Litres of milk
25,000,000 50,000,000 75,000,000
Michael Hackett1 400,000 1,000,000 1,000,000
Adrian Rowley1 400,000 1,000,000 1,000,000
Keith Jackson 400,000 400,000 400,000
Future Directors 400,000 400,000 400,000
Total Rights 1,600,000 2,800,000 2,800,000
1 These Performance Rights will, in the event Security Holder approval is obtained, be
issued on or shortly after 1 July 2015. The remaining Performance Rights may not be
issued any later than 3 years after Securityholder approval.
The terms of the Performance Rights are set out in Schedule 3.
Resolution 6 (which seeks Securityholder approval for the grant of Performance Rights to
future Directors) is subject to ASX granting a waiver. See section 6.4(i) for details.
6.2 Requirement for Securityholder approval
Listing Rule 10.14
Listing Rule 10.14 prohibits an entity from issuing securities to a director of the entity or their
associates under an employee incentive scheme without securityholder approval.
If securityholder approval is obtained under Listing Rule 10.14, securityholder approval is not
required under Listing Rule 7.1 and the proposed issue will be included in 15% annual limit
permitted by Listing Rule 7.1.
Chapter 2E of the Corporations Act
Chapter 2E of the Corporations Act (as modified by Party 5C.7) prohibits a public company
from giving a financial benefit to a related party of the company or giving a financial benefit
out of scheme property to a related party by a responsible entity of a registered scheme unless
either:
(a) the giving of the financial benefit falls within one of the exceptions to the provision,
including where the benefit is remuneration to a related party as an officer or
employee of the public company or the responsible entity of the registered scheme
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and to give the remuneration would be reasonable given the circumstances of the
public company or the responsible entity of the registered scheme giving the
remuneration and the related party’s circumstances (including the responsibilities
involved in the office or employment); or
(b) prior securityholder approval is obtained to the giving of the financial benefit.
The:
(a) Company’s Directors; and
(b) the independent directors of the Responsible Entity, Messrs Kerry Daly and Nathan
Leman,
consider the financial benefit given by the Group under the Australian Dairy Farms Group
Incentive Plan to be reasonable remuneration given the circumstances of the Group and the
Directors’ circumstances (including the Directors’ responsibilities) so that securityholder
approval is not required under Chapter 2E from the Group’s Securityholders.
6.3 Directors’ remuneration and other interests
Since the Group was admitted to the Official List of ASX in October 2014, the Directors have
received the following fees and payments, and currently hold the following Stapled Securities:
Director Fees and payments (annualised)
Stapled Securities held
Loyalty Options held
Michael Hackett $30,000 4,549,065 2,274,533
Keith Jackson $30,000 0 0
Adrian Rowley $30,000 1,546,987 773,494
6.4 Information required by Listing Rule 10.15A
For the purposes of Listing Rule 10.15A, the following information is provided about the
proposed issue:
(a) Each Director of the Company and their nominees may participate in the Australian
Dairy Farms Group Incentive Plan. The current Directors are Michael Hackett, Keith
Jackson and Adrian Rowley.
(b) The maximum number of securities to be issued is 7.2 million Performance Rights.
Each Performance Right entitles the holder, upon satisfaction of the relevant
production target, to be issued one Stapled Security.
(c) The Performance Rights will be issued to incentivise Directors and align their interests
with Securityholders’ interests, and will not have an issue price.
(d) As the Group was listed on ASX in October 2014, to date no securities have been
issued under the Plan to Directors or associates of Directors.
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(e) The Directors and associates of Directors who are entitled to participate in the Plan
are as follows:
(i) Michael Hackett;
(ii) Keith Jackson; and
(iii) Adrian Rowley.
(f) A voting exclusion statement is included in the Notice.
(g) No loans will be provided in relation to the Australian Dairy Farms Group Incentive
Plan.
(h) Details of any securities issued under the Australian Dairy Farms Group Incentive Plan
and a statement that approval for the issue of securities was obtained under Listing
Rule 10.14 will be published in each annual report of the Group relating to the period
in which securities have been issued.
(i) A waiver is being sought from ASX so that any additional persons who may, from time
to time, become non-executive Directors and are therefore entitled to participate in
the Australian Dairy Farms Group Incentive Plan after Resolution 6 is approved be
issued securities under the Plan without Securityholder approval. Pending the waiver
being granted (which may not occur), any additional persons who may become
entitled to participate in the Australian Dairy Farms Group Incentive Plan by reason of
holding office as a Director after Resolution 6 is approved (and therefore are not
named in this Explanatory Memorandum) will not participate until approval is
obtained under Listing Rule 10.14.
(j) It is intended that 6 million Rights will be issued to the Directors on or shortly after 1
July 2015 and in any event no later than 3 years after the date of the Meeting. If the
waivers of Listing Rules 10.15A.5 and 10.15A.8 are approved the remaining
Performance Rights may be issued to future Directors at the Board’s discretion no
later than 3 years after the date of the Meeting.
6.5 Further information
The following further information is provided to Securityholders to enable them to assess the
merits of the resolution:
(a) The related party to whom Resolutions 3 to 6 would permit the benefit to be given:
(i) the existing Directors of the Group, Michael Hackett, Keith Jackson and Adrian
Rowley;
(ii) future Directors who may participate in the Australian Dairy Farms Group
Incentive Plan.
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(b) The nature of the financial benefit
The proposed financial benefits to be given are the issue of 2.4 million Performance
Rights to Messrs Hackett and Rowley respectively and the issue of 1.2 million
Performance Rights to Mr Keith Jackson. The remaining 1.2 million Performance
Rights will be issued to future Directors’ at the Board’s discretion, subject to ASX
granting a waiver or Securityholder approval. Details of the terms of the Performance
Rights are set out in section 6.1 to this Explanatory Memorandum.
(c) Reasons for giving the benefit
The Board has determined that the issue of:
(i) 2.4 million Performance Rights to each of Messrs Hackett and Rowley;
(ii) 1.2 million Performance Rights to Mr Keith Jackson; and
(iii) up to a further 1.2 million Performance Rights to future Directors,
respectively is reasonable and in recognition of the skills and value that the Directors
bring to the Group.
(d) Related parties’ existing relevant interest
The related parties’ existing relevant interests are set out in section 6.3.
(e) Total remuneration package
Details of the Directors’ remuneration packages are set out in section 6.3.
(f) Dilution
The Group’s issued capital will not change as a result of the issue of up to 7.2 million
Performance Rights to Directors. Assuming 88,500,000 Stapled Securities are issued
under the Capital Raising and all Performance Rights vest and 7.2 million Stapled
Securities are issue, the dilutive effect of the Performance Rights will be 4.31%.
(g) Valuation of the financial benefit to be given
The value of the financial benefit given to each Director is set out in Schedule 4.
(h) Corporate governance
The guidelines in the ASX Corporate Governance Council’s Corporate Governance
Principals and Recommendations (3rd edition) recognise that it is generally
acceptable for non-executive directors to receive securities as part of their
remuneration to align their interest with the interest of other security holders,
however suggest that non-executive directors generally should not receive options
with performance hurdles attached or performance rights as part of their
remuneration as it may lead to bias in their decision making and compromise their
objectivity. The Principals and Recommendations are not mandatory or prescriptive.
The Board has departed from the guidelines for non-executive remuneration in
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respect of the issue or proposed issue of performance rights to non-executive
directors and considers that in the circumstances of the Company it is appropriate to
do so in order to attract and retain high calibre and well credentialed non-executive
directors through incentivisation in furtherance of the continued growth of the Group.
(i) Other Information
The Directors are not aware of any other information that is reasonably required by
Securityholders to allow them to make a decision on whether it is in the best interests
of the Group to pass Resolutions 3 to 6.
6.6 Directors’ recommendation
Given their interest in Resolutions 3 to 6, the Directors each decline to make a
recommendation on Resolutions 3 to 7.
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SCHEDULE 1 DEFINITIONS
In this Notice and Explanatory Memorandum:
ADFG Incentive Plan means the Australian Dairy Farm Group long term incentive plan
detailed in the Company’s meeting booklet dated 1 August 2014 and
approved by the Company’s Shareholders on 1 September 2014.
AEST means Australian Eastern Standard Time.
ASX means ASX Limited or the Australian Securities Exchange operated by
ASX Limited, as the context requires.
Board means the board of Directors.
Capital Raising means the Placement and SPP.
Company means the Australian Dairy Farms Limited (ACN 057 046 607).
Corporations Act means the Corporations Act 2001 (Cth) as amended.
December 2014 Placement
has the meaning given in section 4.1.
Director means a director of the Company or the Responsible Entity.
Explanatory Memorandum
means this explanatory memorandum.
Forecast Information has the meaning given in section 3.4.
Group means the Company and Trust.
Listing Rule means the listing rules of the ASX.
Loyalty Option means an option to subscribe for a Stapled Security in the Group, the
terms and conditions of which are set out in the loyalty option offer
document announced to ASX on 17 November 2014.
May 2015 Placement or Placement
has the meaning given in section 3.1.
Meeting means the meeting convened by this Notice (as adjourned from time
to time).
Notice means this notice of meeting.
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Offer Document means the prospectus and product disclosure statement prepared by
the Group and under which the SPP will be offered to eligible
Securityholders, and dated 15 May 2015 and lodged with ASIC on that
day.
Official List means the official list of ASX.
Performance Right means a performance right issued under the ADFG Incentive Plan.
Placement has the meaning given to it in section 4.1 in the Explanatory
Memorandum.
Proxy Form means the proxy form attached to this Notice.
Record Date has the meaning in section 3.6.
Resolution means a resolution set out in the Notice.
Responsible Entity means Trustees Australia Limited as the responsible entity of the
Trust.
Securityholder means a holder of Stapled Securities.
Share means a fully paid ordinary share in the capital of the Company.
SPP has the meaning given in section 3.1.
Stapled Security means a Share stapled to a Unit.
Target Farm has the meaning given in section 3.1.
Trust means the Australian Dairy Farms Trust (ARSN 600 601 689).
Unit means a fully paid ordinary unit in the Trust.
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SCHEDULE 2 CONSOLIDATED PRO-FORMA STATEMENT OF FINANCIAL POSITION
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SCHEDULE 3 TERMS OF PERFORMANCE RIGHTS
1. The Performance Right will be granted for no consideration.
2. No application will be made for quotation of Performance Rights on ASX.
3. Subject to satisfaction of the following performance criteria (Performance Criteria), the
Performance Right entitles the holder to be issued 1 Stapled Securities per Performance Right
held:
Production target to be achieved by the Group (on an annualised basis) over a 6 month period (litres)
25,000,000 50,000,000 75,000,000
4. The expiry date of the Performance Rights is 5 years from issue (End Date).
5. All Stapled Securities issued upon satisfaction of the Performance Criteria will rank equally in
all respects with the Group's then issued Stapled Securities. The Group must apply to the ASX,
in accordance with the Listing Rules, for all Stapled Securities pursuant to the satisfaction of
Performance Rights to be admitted to quotation.
6. There are no participating rights or entitlements inherent in the Performance Rights and the
holders will not be entitled to participate in new issues or pro-rata issues of capital to
Securityholders during the term of the Performance Rights. The Performance Right holder has
no rights to a change in the number of Stapled Securities issued upon satisfaction of the
Performance Criteria except in the event of a bonus issue.
7. If from time to time on or prior to the Expiry Date the Group makes a bonus issue of securities
to holders of Stapled Securities in the Group (Bonus Issue), then upon satisfaction of the
Performance Criteria of his or her Performance Rights a holder will be entitled to have issued
to him or her (in addition to the Stapled Securities which he or she is otherwise entitled to
have issued to him or her upon such exercise) the number of securities which would have been
issued to him or her under that Bonus Issue if the Performance Criteria had been satisfied
before the record date for the Bonus Issue.
8. In the event of any reconstruction (including consolidation, subdivisions, reduction or return)
of the authorised or issued capital of the Group, all rights of the Performance Right holder
shall be reconstructed (as appropriate) in accordance with the ASX Listing Rules.
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SCHEDULE 4 VALUATION OF FINANCIAL BENEFIT
Production Target (‘000)1 25,000 litre 50,000 litre 75,000 litre Expected Number of Performance Rights to
Vest3
Value of Each Performance Right4 Total Valuation
Probability of Achievement2 100% 50% 75%
Michael Hackett 400,000 1000,000 1000,000 1,800,000 $0.25 $450,000
Adrian Rowley 400,000 1000,000 1000,000 1,800,000 $0.25 $450,000
Keith Jackson 400,000 400,000 400,000 1,200,000 $0.25 $300,000
Other Directors (both current and future)
400,000 400,000 400,000 900,000 $0.25 $225,000
Total Valuation $1,425,000
1 Production target to be achieved by the Group (on an annualised basis) over a 6 month period (litres of milk) within 5 years of issue.
2 An estimate likelihood of achieving each production target as at 29 April 2015 (Valuation Date).
3 This is calculated by multiplying the probability of achieving each production target by the number of Performance Rights issued.
4 Being the last traded price of Stapled Securities on the Valuation Date.
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