australian dairy farms group - asx · michael hackett australian dairy farms group 14 may 2015 for...

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 [email protected] if you wish to discuss any matter concerning the Meeting.

ASX Code: AHF

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Australian Dairy Farms Group Limited – Notice of General Meeting Page 1

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.”


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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:


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.”


RESOLUTION 4 ISSUE OF SECURITIES UNDER THE ADFG INCENTIVE PLAN TO KEITH JACKSON


resolution:


the grant of up to 1,200,000 Performance Rights to Mr Keith Jackson under the Australian


Memorandum.”


RESOLUTION 5 ISSUE OF SECURITIES UNDER THE ADFG INCENTIVE PLAN TO ADRIAN ROWLEY


resolution:


the grant of up to 2,400,000 Performance Rights to Mr Adrian Rowley under the Australian


Memorandum.”


RESOLUTION 6 ISSUE OF SECURITIES UNDER THE ADFG INCENTIVE PLAN TO FUTURE DIRECTORS


resolution:


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.”


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 [email protected] 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 [email protected]

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.


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.


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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