THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION The definitions and interpretations commencing on page 3 of this circular apply, mutatis mutandis, throughout this circular. If you are in any doubt as to the action you should take, please consult your broker, CSDP, attorney, accountant, banker or other professional advisor immediately. 1. If you have disposed of all of your shares in Cargo Carriers, then this circular, together with the attached notice of general meeting and form of proxy, should be forwarded to the purchaser to whom, or the broker, agent, CSDP or banker through whom you disposed of your shares. 2. The general meeting convened in terms of this circular will be held at 09:30 on Thursday, 5 May 2016 at the registered office of Cargo Carriers, 11A Grace Road, Mountainview, Observatory, Johannesburg. 3. Certificated shareholders and dematerialised shareholders with “own name” registration, who are unable to attend the general meeting and wish to be represented thereat, must complete and return the attached form of proxy in accordance with the instructions contained therein. Dematerialised shareholders, other than dematerialised shareholders with “own name” registration, who: • are unable to attend the general meeting and wish to be represented thereat, must provide their CSDP or broker with their voting instructions, in terms of the custody agreement entered into between themselves and the CSDP or broker concerned, in the manner and within the time stipulated therein; and • wish to attend the general meeting, must instruct their CSDP or broker to issue them with the necessary letter of representation to attend, in the form of a letter of representation. 4. Cargo Carriers does not accept any responsibility and will not be held liable for any failure on the part of any CSDP or broker of a dematerialised shareholder to notify such shareholder of the general meeting or any business to be concluded thereat. (Incorporated in the Republic of South Africa) (Registration number 1959/003254/06) Share code: CRG ISIN: ZAE000001764 (“Cargo Carriers” or “the Company”) CIRCULAR TO CARGO CARRIERS SHAREHOLDERS regarding: • the specific issue of 1 052 632 new Cargo Carriers shares to EmployeeCo at a price of R11.63 per share for an aggregate amount of R12 246 594, which specific issue of shares to EmployeeCo will be financed by way of a subscription by Cargo Carriers of preference shares and ordinary shares in EmployeeCo; and incorporating: • a notice convening the general meeting; and • a form of proxy for use by certificated Cargo Carriers shareholders and “own name” registered dematerialised shareholders only. Corporate Advisor Independent Expert Sponsor Legal Advisor to Cargo Carriers Independent Reporting Accountants Date of issue: 4 April 2016 Additional copies of this circular, in its printed format, may be obtained from the Sponsor at the address set out in the “Corporate information” section of this circular during normal business hours from Monday, 4 April 2016 up to and including Thursday, 5 May 2016. Copies of this circular, which are available in the English language only, may also be downloaded from the Company’s website, www.cargocarriers.co.za.
Transcript
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
The definitions and interpretations commencing on page 3 of this circular apply, mutatis mutandis, throughout this circular.
If you are in any doubt as to the action you should take, please consult your broker, CSDP, attorney, accountant, banker or other professional advisor immediately.
1. If you have disposed of all of your shares in Cargo Carriers, then this circular, together with the attached notice of general meeting and form of proxy, should be forwarded to the purchaser to whom, or the broker, agent, CSDP or banker through whom you disposed of your shares.
2. The general meeting convened in terms of this circular will be held at 09:30 on Thursday, 5 May 2016 at the registered office of Cargo Carriers, 11A Grace Road, Mountainview, Observatory, Johannesburg.
3. Certificated shareholders and dematerialised shareholders with “own name” registration, who are unable to attend the general meeting and wish to be represented thereat, must complete and return the attached form of proxy in accordance with the instructions contained therein.
Dematerialised shareholders, other than dematerialised shareholders with “own name” registration, who:
• are unable to attend the general meeting and wish to be represented thereat, must provide their CSDP or broker with their voting instructions, in terms of the custody agreement entered into between themselves and the CSDP or broker concerned, in the manner and within the time stipulated therein; and
• wish to attend the general meeting, must instruct their CSDP or broker to issue them with the necessary letter of representation to attend, in the form of a letter of representation.
4. Cargo Carriers does not accept any responsibility and will not be held liable for any failure on the part of any CSDP or broker of a dematerialised shareholder to notify such shareholder of the general meeting or any business to be concluded thereat.
(Incorporated in the Republic of South Africa)(Registration number 1959/003254/06)
Share code: CRG ISIN: ZAE000001764(“Cargo Carriers” or “the Company”)
CIRCULAR TO CARGO CARRIERS SHAREHOLDERS
regarding:
• the specific issue of 1 052 632 new Cargo Carriers shares to EmployeeCo at a price of R11.63 per share for an aggregate amount of R12 246 594, which specific issue of shares to EmployeeCo will be financed by way of a subscription by Cargo Carriers of preference shares and ordinary shares in EmployeeCo;
and incorporating:
• a notice convening the general meeting; and
• a form of proxy for use by certificated Cargo Carriers shareholders and “own name” registered dematerialised shareholders only.
Corporate Advisor Independent Expert Sponsor
Legal Advisor to Cargo Carriers Independent Reporting Accountants
Date of issue: 4 April 2016
Additional copies of this circular, in its printed format, may be obtained from the Sponsor at the address set out in the “Corporate information” section of this circular during normal business hours from Monday, 4 April 2016 up to and including Thursday, 5 May 2016. Copies of this circular, which are available in the English language only, may also be downloaded from the Company’s website, www.cargocarriers.co.za.
Registered Office11A Grace RoadMountainviewObservatory, 2198(Private Bag X555, Houghton, 2041)
Date of incorporation: 10 September 1959Place of incorporation: Pretoria, South Africa
Company SecretaryArbor Capital Company Secretarial Proprietary Limited(Registration number 1998/025284/07)Ground Floor, One Health BuildingWoodmead North Office Park54 Maxwell DriveWoodmead, 2157(Suite #439, Private Bag X29, Gallo Manor, 2052)
Corporate AdvisorNodus Capital Proprietary Limited(Registration number 2007/004535/07)Building 2, Commerce Square Office Park39 Rivonia Road (entrance on Helling Road)Sandhurst, 2196(PO Box 55369, Northlands, 2116)
SponsorArbor Capital Sponsors Proprietary Limited(Registration number 2006/033725/07)Ground Floor, One Health BuildingWoodmead North Office Park54 Maxwell DriveWoodmead, 2157(Suite #439, Private Bag X29, Gallo Manor, 2052)
Independent Professional ExpertMerchantec Proprietary Limited(Registration number 2008/027362/07)2nd Floor, North BlockHyde Park Office TowersCorner 6th Road and Jan Smuts AvenueHyde Park, 2196(PO Box 41480, Craighall, 2014)
Independent Reporting AccountantsErnst & Young Inc(Registration number 2005/002308/21)102 Rivonia Road, Sandton, 2196(Private Bag X14, Sandton, 2146)
Transfer SecretariesComputershare Investor Services South Africa Proprietary Limited(Registration number 2004/003637/07)Ground Floor70 Marshall StreetJohannesburg, 2001(PO Box 61051, Marshalltown, 2107)
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TABLE OF CONTENTS
Page
Corporate information Inside front cover
Important dates and times 2
Definitions and interpretations 3
Circular to Cargo Carriers’ shareholders
1. Introduction 7
2. Nature of Cargo Carriers’ business 7
3. The Transaction 8
4. Financial assistance, solvency and liquidity 10
5. Listings Requirements and related party implications 10
6. Effective date 11
7. Pro forma financial effects 11
8. Shares of Cargo Carriers 12
9. Irrevocable letters of undertaking 13
10. Prospects 13
11. Major shareholders 13
12. Directors of Cargo Carriers 14
13. Material changes 16
14. Material contracts 16
15. Litigation statement 17
16. Opinions and recommendation 17
17. Directors’ responsibility statement 17
18. Experts’ consents 17
19. Costs 18
20. Documents available for inspection 18
21. General meeting 18
22. Information incorporated by reference 19
Annexure 1 Pro forma financial information of Cargo Carriers 20
Annexure 2 Independent reporting accountants’ assurance report on the pro forma financial information 25
Annexure 3 Opinion of the Independent Expert – EmployeeCo Specific Issue 27
Annexure 4 EmployeeCo Participants 32
Annexure 5 Salient features of the EmployeeCo MOI 33
Annexure 6 Share trading history of Cargo Carriers 36
Notice of general meeting 38
Form of proxy Attached
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IMPORTANT DATES AND TIMES
2016
Record date to determine which Cargo Carriers shareholders are entitled to receive the circular Thursday, 24 March
Circular posted to Cargo Carriers shareholders and notice of the general meeting released on SENS on Monday, 4 April
Notice of the general meeting published in the press on Tuesday, 5 April
Last day to trade in order to be eligible to vote at the general meeting Thursday, 21 April
General meeting record date Friday, 29 April
Last day to lodge forms of proxy for the general meeting by 09:30 on Tuesday, 3 May
General meeting to be held at 09:30 on Thursday, 5 May
Results of general meeting released on SENS on Thursday, 5 May
Results of general meeting published in the press on Friday, 6 May
Notes:
1. The above dates and times are subject to amendment. Any such amendment will be released on SENS.
2. Additional copies of this circular in its printed format, may be obtained from the Sponsor at the address set out in the “Corporate
information” section of this circular during normal business hours from Monday, 4 April 2016 up to and including Thursday, 5 May 2016.
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DEFINITIONS AND INTERPRETATIONS
In this circular, the annexures hereto, the notice of general meeting and form of proxy, unless the context otherwise indicates, references to the singular include the plural and vice versa, words denoting one gender include the others, expressions denoting natural persons include juristic persons and associations of persons and vice versa, and the words in the first column hereunder have the meaning stated opposite them in the second column, as follows:
“B-BBEE Act” the Broad-Based Black Economic Empowerment Act, 2003 (Act 53 of 2003), as amended;
“BEE” Black Economic Empowerment;
“Board” or “Directors” the board of directors of Cargo Carriers at the last practicable date whose details are set out in paragraph 12 of this circular;
“business day” or “business days” any day other than a Saturday, Sunday or a public holiday in South Africa;
“Cargo Carriers” or “Cargo” or “the Company”
Cargo Carriers Limited (Registration number 1959/003254/06), a public company duly registered and incorporated in accordance with the laws of South Africa and currently listed on the Main Board of the JSE;
“Cargo shareholders” or “shareholders”
holders of Cargo shares;
“Cargo shares” or “Ordinary shares” ordinary shares with a par value of R0.01 which Cargo Carriers is authorised to issue;
“certificated shareholder” a holder of certificated shares;
“certificated shares” shares which are not dematerialised, title to which is represented by physical documents of title;
“circular” the printed and electronic versions of this document, dated 4 April 2016, including the annexures hereto and incorporating a notice of general meeting and a form of proxy;
“Companies Act” the Companies Act, 2008 (No. 71 of 2008), as amended;
“Company Secretary” Arbor Capital Company Secretarial Proprietary Limited (Registration number 1998/025284/07), a private company duly registered and incorporated in accordance with the laws of South Africa;
“Corporate Advisor” Nodus Capital Proprietary Limited (Registration number 2007/004535/07), a private company duly registered and incorporated in accordance with the laws of South Africa;
“CSDP” a Central Securities Depository Participant, accepted as a participant in terms of the FMA appointed by an individual shareholder for the purposes of, and in regard to the dematerialisation of documents of title for purposes of incorporation into Strate;
“custody agreement” the custody mandate agreement between a dematerialised shareholder and a CSDP or broker governing their relationship in respect of dematerialised shares held by the CSDP or broker;
“dematerialisation” the process whereby share certificates, certificated transfer deeds, balance receipts and any other documents of title to shares in a tangible form are dematerialised into electronic records for purposes of incorporation into Strate;
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“dematerialised shareholder” a holder of dematerialised shares;
“dematerialised shares” shares which have been incorporated into Strate and which are no longer evidenced by physical documents of title, but the evidence of ownership of which is determined electronically and recorded in the sub-register maintained by a CSDP;
“documents of title” share certificates, certified transfer deeds, balance receipts and/or any other form of acceptable documents of title in respect of shares;
“EmployeeCo” EmployeeCo Proprietary Limited (Registration number 2016/077494/07), a private company duly registered and incorporated in accordance with the laws of South Africa;
“EmployeeCo Agreements” collectively, the EmployeeCo Reciprocal Subscription Agreement and the EmployeeCo Ordinary Shares Subscription Agreements;
“ EmployeeCo Cargo Subscription Shares”
1 052 632 Cargo shares to be issued to EmployeeCo pursuant to the EmployeeCo Reciprocal Agreement, which shares constitute, after their issue, approximately 5% of all the Cargo shares in issue;
“ EmployeeCo Cargo Subscription Price”
an aggregate amount of R12 246 594, calculated at a price of R11.63 per EmployeeCo Cargo Subscription Share, representing a 15% discount to VWAP measured over the 30 business days prior to 12 February 2016 (being the date used for purposes of determining the terms of the EmployeeCo Reciprocal Subscription Agreement) and a 16% discount to the VWAP measured over the 30 business days prior to 8 March 2016 being the date of signature of the EmployeeCo Reciprocal Subscription Agreement;
“ Employee Co “B” Subscription Shares”
1 000 “B” ordinary shares with no par value in EmployeeCo to be issued by EmployeeCo to Cargo Carriers;
“ EmployeeCo “B” Shares Subscription”
the subscription for the EmployeeCo “B” Subscription Shares by Cargo Carriers for the EmployeeCo “B” Shares Subscription Price;
“ EmployeeCo “B” Shares Subscription Price”
an aggregate amount of R1 000, calculated at R1.00 per EmployeeCo “B” Subscription Share;
“ EmployeeCo Ordinary Shares Subscription”
the subscription by EmployeeCo Participants of approximately 100 000 “A” ordinary shares with no par value which EmployeeCo is authorised to issue;
the individual subscription agreements to be entered into between EmployeeCo, on the one hand and EmployeeCo Participants, on the other hand in respect of the EmployeeCo Ordinary Shares Subscription;
“EmployeeCo Participants” South African permanent employees of Cargo Carriers and its wholly-owned South African subsidiaries (other than those executives who are also directors of the Company’s holding company, Cargo Carriers Holdings (Proprietary) Limited), who, via EmployeeCo are afforded the opportunity to acquire an indirect shareholding in Cargo Carriers;
“ EmployeeCo Preference Subscription Shares”
100 non-convertible, cumulative, redeemable, participating preference shares with no par value in EmployeeCo to be issued by EmployeeCo to Cargo Carriers, which preference shares are subject to the rights, privileges and other terms set out in the EmployeeCo MOI;
“ EmployeeCo Preference Shares Subscription”
the subscription for the EmployeeCo Preference Subscription Shares by Cargo Carriers for the EmployeeCo Preference Share Subscription Price;
the reciprocal subscription agreement entered into between Cargo Carriers and EmployeeCo on 8 March 2016 pursuant to which EmployeeCo and Cargo Carriers have agreed on the terms and conditions of the EmployeeCo Specific Issue, the EmployeeCo Preference Share Subscription and the EmployeeCo “B” Shares Subscription;
“EmployeeCo Specific Issue” the specific issue of the EmployeeCo Cargo Subscription Shares to EmployeeCo for the EmployeeCo Cargo Subscription Price;
“EmployeeCo Subscription Date” the first business day following the day on which the suspensive conditions set out in paragraph 3.1.2.1 of this circular have been fulfilled or waived or such other date as Cargo Carriers and EmployeeCo may agree in writing;
“EmployeeCo Transaction” collectively the EmployeeCo Specific Issue, the EmployeeCo Preference Share Subscription, the EmployeeCo “B” Shares Subscription and the EmployeeCo Ordinary Share Subscriptions;
“EmployeeCo MOI” the new memorandum of incorporation of EmployeeCo to be adopted as contemplated in section 16(5)(a) of the Companies Act;
“ Ernst & Young Inc.” or “Independent Reporting Accountants”
Ernst & Young Inc (Registration number 2005/002308/21), registered auditors, a firm of chartered accountants (SA) and the independent reporting accountant to Cargo Carriers reporting on the pro forma financial information set out in paragraph 7 and Annexure 1 of this circular;
“FMA” Financial Markets Act, 2012 (Act 19 of 2012), as amended;
“general meeting” the general meeting of Cargo Carriers shareholders to be held at 09:30 on Thursday, 5 May 2016 at the registered office of Cargo Carriers, 11A Grace Road, Mountainview, Observatory, Johannesburg, which meeting is convened in terms of the notice of general meeting attached to and forming part of this circular;
“Group” Cargo Carriers and its subsidiaries;
“IFRS” International Financial Reporting Standards as issued by the International Accounting Standards Board;
“Independent Expert” Merchantec Proprietary Limited (Registration number 2008/027362/07), a private company duly registered and incorporated in accordance with the laws of South Africa and the Independent Expert appointed to provide the fairness opinion;
“JSE” the exchange, licensed under the FMA, operated by the JSE Limited (Registration number 2005/022939/06), a public company duly incorporated in accordance with the laws of South Africa;
“last practicable date” Friday, 18 March 2016, being the last practicable date prior to the finalisation of this circular;
“Legal Advisors” Webber Wentzel attorneys, a partnership which conducts business as a law firm;
“Listings Requirements” the Listings Requirements of the JSE, as amended from time to time by the JSE;
“MOI” the memorandum of incorporation of a company, as defined in the Companies Act;
“New BEE Codes” The Codes of Good Practice of Broad-Based Black Economic Empowerment dated 11 October 2013, promulgated by the Department of Trade and Industry in accordance with section 9 of the B-BBEE Act;
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“R” South African Rand, the official currency of South Africa;
“SENS” the Stock Exchange News Service of the JSE;
“Solvency and Liquidity Test” the solvency and liquidity test as contemplated in section 4 of the Companies Act;
“South Africa” the Republic of South Africa;
“Sponsor” Arbor Capital Sponsors Proprietary Limited (Registration number 2006/033725/07), a private company duly registered and incorporated in accordance with the laws of South Africa;
“Strate” the settlement and clearance system used by the JSE, managed by Strate Proprietary Limited (Registration number 1998/022242/07), a private company duly incorporated in South Africa on 9 November 1998 having its registered address at 9 Fricker Road, Illovo Boulevard, Illovo and which company is a registered Central Securities Depository in terms of the FMA;
“sub-register” the record of dematerialised shares administered and maintained by a CSDP and which forms part of the Company’s securities register as defined in the Companies Act, excluding nominees;
“subsidiary” a subsidiary as defined in the Companies Act;
“Transaction” the EmployeeCo Transaction;
“Transfer Secretaries” Computershare Investor Services South Africa Proprietary Limited (Registration number 2004/003637/07), a private company duly incorporated in accordance with the laws of South Africa;
“VAT” Value Added Tax, levied in terms of the provisions of the Value Added Tax Act, 1991 (Act 89 of 1991), as amended; and
“VWAP” volume weighted average price.
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(Incorporated in the Republic of South Africa)(Registration number: 1959/003254/06)
Share code: CRG ISIN ZAE000001764(“Cargo Carriers” or “the Company”)
On 10 March 2016, it was announced on SENS that Cargo Carriers has entered into an agreement for the implementation of an employee share participation transaction in terms of which eligible employees of Cargo Carriers will be afforded the opportunity to obtain an indirect shareholding interest in Cargo Carriers.
The purpose of this circular is to provide Cargo Carriers shareholders with relevant information relating to the Transaction and to give notice of a general meeting of Cargo Carriers shareholders in order to enable shareholders to consider and, if deemed fit, to pass the resolutions necessary to approve and implement the Transaction in accordance with the Listings Requirements and the Companies Act.
A notice convening such meeting is attached to, and forms part of, this circular.
2. NATURE OF CARGO CARRIERS’ BUSINESS
Cargo Carriers is a leading specialist provider of supply chain and logistics services and solutions. In operation for almost 60 years, the Company’s business model is premised on providing value-driven service solutions that are always customised to meet clients’ precise needs. The Company, which listed on the JSE in 1987, is committed to the highest standards of corporate governance and ethics and its adherence to internationally recognised standards of quality and environmental stewardship is independently assured.
Cargo Carriers operates from various locations within South Africa and sub-Saharan Africa and its coverage of the SADC region stretches from Cape Town in South Africa to the Democratic Republic of Congo, servicing clients operating in a diverse range of fields.
The Group’s operations are structured around three main divisions:
• the industrial division encompasses the Group’s chemicals, gases, steel, powders, fuel and mining businesses, all operating with extensive fleets of vehicles tailored to clients’ individual needs and products;
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• the agricultural business is currently focused on providing highly efficient and flexible transportation solutions to the sugarcane sector; and
• the supply chain services division offers a cost-effective trading business, consulting services and the supply and deployment of best-in-class logistics software and systems.
Utilising its specialised fleet of vehicles, the Group partners with its 1 083 employees to deliver the solutions-focused quality and consistency that is the hallmark of Cargo Carriers.
3. THE TRANSACTION
3.1 THE EMPLOYEECO TRANSACTION
3.1.1 Introduction and rationale
The Company is well diversified and mature in the industries in which it operates. Innovation and investment in technology and a deep understanding of our clients’ business requirements facilitates the continued provision of cost-effective and appropriate logistics services. The Company’s current low gearing and access to funding positions it favourably to grow during the current challenging economic environment.
The next step in achieving the Company’s business and growth aspirations is the empowerment of employees through sharing in the economic value created by the Company. The employee share participation transaction detailed in this circular aims to achieve this objective.
The Board is of the opinion that the employee share ownership plan will:
• offer a realistic opportunity to create substantial value for the employees of Cargo Carriers;
• foster an ownership culture which is expected to enhance the commitment of employees to Cargo Carriers and keep them focused on achieving the Group’s growth targets; and
• align the interests of employees with those of the shareholders of Cargo Carriers.
3.1.2 EmployeeCo Specific Issue and EmployeeCo Preference Share Subscription
In terms of the EmployeeCo Reciprocal Subscription Agreement:
• EmployeeCo will subscribe for the EmployeeCo Cargo Subscription Shares for the EmployeeCo Cargo Subscription Share Price; and
• to enable EmployeeCo to fund its acquisition of the EmployeeCo Cargo Subscription Shares, Cargo Carriers will subscribe for the EmployeeCo Preference Subscription Shares for the EmployeeCo Preference Shares Subscription Price and the EmployeeCo “B” Subscription Shares for the EmployeeCo “B” Shares Subscription Price.
The EmployeeCo Cargo Subscription Shares will be listed on the JSE and will rank pari passu in all respects with the existing Cargo Carriers shares in issue.
The EmployeeCo Preference Subscription Shares will have certain preferential rights, including the right to a cumulative preference dividend calculated with reference to the distributions received by EmployeeCo from Cargo Carriers during each dividend period less any operating costs, limited to administrative costs, of EmployeeCo during the relevant dividend period (“Net Income”) which dividend shall reduce on a sliding scale over a five-year period as set out in the table below:
PeriodPercentage of Net Income (%)
During the first year following the EmployeeCo Subscription Date 100
During the second year following the EmployeeCo Subscription Date 80
During the third year following the EmployeeCo Subscription Date 60
During the fourth year following the EmployeeCo Subscription Date 40
During the fifth year following the EmployeeCo Subscription Date 20
During the sixth year following the EmployeeCo Subscription Date –
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The rights, privileges and conditions attached to the EmployeeCo Preference Shares are set out in paragraph 15 of the salient features of the EmployeeCo MOI as set out Annexure 5 to this circular.
3.1.2.1 Suspensive conditions to the EmployeeCo Reciprocal Subscription Agreement
The EmployeeCo Reciprocal Subscription Agreement is subject to the fulfilment or waiver on or before 30 June 2016 of the following suspensive conditions:
• the adoption by way of a special resolution by the shareholders of EmployeeCo, and filing at the Companies and Intellectual Property Commission, of the EmployeeCo MOI;
• the Board and Cargo Carriers shareholders passing the resolutions required to approve the EmployeeCo Specific Issue and the resolutions required in terms of sections 44 and/or 45 of the Companies Act to approve any financial assistance which may be provided by Cargo Carriers to EmployeeCo in connection with the EmployeeCo Specific Issue; and
• the conclusion and implementation of the EmployeeCo Ordinary Shares Subscription Agreements.
3.1.2.2 Financing of the EmployeeCo Specific Issue Purchase Price
In terms of the EmployeeCo Reciprocal Subscription Agreement, Cargo Carriers has agreed, subject to the fulfilment or waiver of the suspensive conditions set out in paragraph 3.1.2.1 above, to provide financial assistance to fund the EmployeeCo Specific Issue, as follows:
• Cargo Carriers has undertaken to subscribe for the EmployeeCo Preference Subscription Shares on the EmployeeCo Subscription Date for the EmployeeCo Preference Shares Subscription Price;
• Cargo Carriers has undertaken to subscribe for the EmployeeCo “B” Subscription Shares on the EmployeeCo Subscription Date for the EmployeeCo “B” Shares Subscription Price;
• On the EmployeeCo Subscription Date, the obligation of Cargo Carriers in respect of payment of the EmployeeCo Preference Shares Subscription Price and the EmployeeCo “B” Shares Subscription Price shall be settled by setting the amount off in the books of account of EmployeeCo against EmployeeCo’s obligation in respect of the EmployeeCo Cargo Subscription Price;
• EmployeeCo shall be entitled, but not obliged, to redeem the EmployeeCo Preference Subscription Shares at any time after payment in full of any accrued dividends, subject to compliance with the Companies Act and provided that it passes the Solvency and Liquidity Test; and
• After a period of five years from the EmployeeCo Subscription Date, Cargo Carriers shall be entitled to require EmployeeCo to redeem the EmployeeCo Preference Subscription Shares.
In terms of the Listings Requirements, the EmployeeCo Specific Issue is an issue of shares for cash at a 16% discount to the 30-day VWAP as at 8 March 2016, being the signature date of the EmployeeCo Reciprocal Subscription Agreement. As the EmployeeCo Cargo Subscription Shares, which are the subject of the EmployeeCo Specific Issue, are subject to certain restrictions, they are deemed to be issued to “non-public” shareholders.
3.1.3 EmployeeCo Ordinary Shares Subscription
In terms of the EmployeeCo Ordinary Shares Subscription Agreements, EmployeeCo Participants shall initially, in aggregate, subscribe for approximately 100 000 “A” ordinary shares with no par value in EmployeeCo for a subscription price of R0.01 per share, which “A” ordinary shares will have the same voting rights and rights to dividends as the EmployeeCo “B” Subscription Shares, but will be subject to different transfer restrictions, as set out in the EmployeeCo MOI, the salient features of which are detailed in Annexure 5 to this circular.
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The EmployeeCo Ordinary Shares Subscription Agreements are subject to the suspensive conditions that:
• EmployeeCo shareholders (being Cargo Carriers at the time) pass the resolution required in terms of section 41(3) of the Companies Act for the EmployeeCo Ordinary Shares Subscription; and
• to the extent that Cargo Carriers provides any financial assistance to EmployeeCo and/or EmployeeCo provides any financial assistance to EmployeeCo Participants as contemplated in section 44 and/or section 45 of the Companies Act, the Board and Cargo Carriers shareholders and/or the board of directors of EmployeeCo and EmployeeCo shareholders have passed the necessary resolutions to approve the provision of such financial assistance as required by section 44 and/or section 45 of the Companies Act, as the case may be.
EmployeeCo will be the registered shareholder of the EmployeeCo Cargo Subscription Shares and each EmployeeCo Participant will own EmployeeCo Ordinary Shares until such time as these shares have fully vested in the EmployeeCo Participants as detailed in Annexure 5 to this circular. During this time, EmployeeCo will vote the EmployeeCo Cargo Subscription Shares in the manner decided by its board, the majority of which will be appointed by the EmployeeCo Participants owning the EmployeeCo Ordinary Shares. The EmployeeCo Participants can, by ordinary resolution, remove and replace directors from time to time in accordance with the provisions of the Companies Act and the EmployeeCo MOI.
4. FINANCIAL ASSISTANCE, SOLVENCY AND LIQUIDITY
In terms of sections 44(3)(a)(ii) and 45(3)(a)(ii) of the Companies Act, special resolutions authorising Cargo Carriers to provide financial assistance to EmployeeCo in respect of the EmployeeCo Specific Issue and to provide direct or indirect financial assistance to those EmployeeCo Participants who are directors or prescribed officers of Cargo Carriers are required. These special resolutions, as set out in the notice of general meeting included in this circular, will be proposed at the general meeting.
After considering the terms of the Transaction and all reasonably foreseeable financial circumstances of the Company, the Board is satisfied that subsequent to providing the financial assistance described above:
• Cargo Carriers will, for a period of 12 months after having completed the Solvency and Liquidity Test, be able to pay its debts as they become due in the ordinary course of business; and
• the assets of Cargo Carriers, fairly valued, will be in excess of its liabilities, fairly valued. For this purpose, the assets and liabilities have been recognised and measured in accordance with the accounting policies used in the Company’s latest audited consolidated annual financial statements. Furthermore, for this purpose, contingent liabilities have been accounted for as required in terms of section 4(2)(b)(i) of the Companies Act.
5. LISTINGS REQUIREMENTS AND RELATED PARTY IMPLICATIONS
In accordance with paragraph 5.51(f) of the Listings Requirements, if a specific issue of shares for cash is to a related party and is at a discount to the 30-day VWAP prior to the date the issue is agreed, the Board is required to obtain a fairness opinion from an independent expert confirming whether the issue is fair insofar as the shareholders of the issuer are concerned.
As the Chief Financial Officer of Cargo Carriers will be an EmployeeCo Participant and the EmployeeCo Specific Issue is at a 16% discount to the VWAP as at 8 March 2016, the JSE, on a see-through basis, deems the EmployeeCo Specific Issue to be a specific issue of shares for cash to a related party at a discount to the 30-day VWAP.
The Board has accordingly obtained a fairness opinion on the EmployeeCo Specific Issue from the Independent Expert, whose report is included as Annexure 3 to this circular. The Board has considered the report of the Independent Expert and included a statement in paragraph 16.2 below confirming that the EmployeeCo Specific Issue is fair to shareholders.
In terms of the Listings Requirements, the EmployeeCo Specific Issue requires the approval of an ordinary resolution achieving a 75% majority of the votes cast in favour thereof by all shareholders present or represented by proxy at the general meeting, excluding EmployeeCo Participants and their associates.
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6. EFFECTIVE DATE
The effective date of the EmployeeCo Transaction shall be the EmployeeCo Subscription Date.
7. PRO FORMA FINANCIAL EFFECTS
The table below sets out the pro forma financial effects of the Transaction on Cargo Carriers’ basic earnings per share, diluted earnings per share, headline earnings per share, diluted headline earnings per share, net asset value per share and tangible net asset value per share.
The pro forma financial effects have been prepared to illustrate the impact of the Transaction on the published unaudited financial information of Cargo Carriers for the six months ended 31 August 2015, had the Transaction occurred on 1 March 2015 for statement of comprehensive income purposes and on 31 August 2015 for statement of financial position purposes.
The pro forma financial effects have been prepared using accounting policies that comply with IFRS and that are consistent with those applied in the unaudited results of Cargo Carriers for the six months ended 31 August 2015.
The pro forma financial effects, which are the responsibility of the Directors, are provided for illustrative purposes only and, because of their pro forma nature, may not fairly present Cargo Carriers’ financial position, changes in equity, results of operations or cash flow nor the effect and impact of the Transaction going forward.
The full financial effects are included in Annexure 1 to this circular and should be read in conjunction with the reporting accountants’ assurance report on the pro forma financial information of Cargo Carriers as set out in Annexure 2 to this circular.
BeforeEmployeeCo Transaction
Pro forma after
EmployeeCoTransaction
Basic earnings per share (cents) 109.43 (7.04) 102.39Diluted basic earnings per share (cents) 109.43 (7.04) 102.39Headline earnings per share (cents) 92.99 (7.04) 85.95Diluted headline earnings per share (cents) 92.99 (7.04) 85.95Net asset value per share (cents) 2 356.23 (5.48) 2 350.75Tangible net asset value per share (cents) 2 356.23 (5.48) 2 350.75Weighted and diluted average number of shares 19 406 290 – 19 406 290Shares in issue at 31 August 2015 20 000 000 1 052 632 21 052 632
Notes:
1. The “Before” column is based on the published unaudited financial information of Cargo Carriers for the six months ended 31 August 2015, as released on SENS on 27 October 2015 (before the Transaction).
2. The weighted average number of shares at 31 August 2015 excludes the 593 710 treasury shares held by the share incentive trust.
3. The “EmployeeCo Transaction” column relates to the following:
• EmployeeCo will be required to be consolidated by Cargo Carriers in terms of IFRS 10, Consolidated Financial Statements and the EmployeeCo Cargo Subscription Shares held by EmployeeCo will be classified as treasury shares for accounting purposes and consequently no effect is reflected for the accrual of preference dividends between Cargo Carriers and EmployeeCo.
• The shares are also excluded from the weighted average number of shares in issue.
4. Estimated Transaction costs of R1 063 405 have been expensed on the Employee Transaction. These costs are once-off and have been assumed to be non-tax deductible.
5. IFRS 2 costs amounting to R283 104 have been expensed in respect of the EmployeeCo Transaction and are assumed to be non-tax deductible.
6. Finance income reduction of R27 383 due to the reduction in cash balances as a result of the transaction costs, was calculated at 5.15% being the yearly average money market rate. This reduction will have a continuing impact and is considered to reduce taxable income.
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8. SHARES OF CARGO CARRIERS
The authorised and issued shares of Cargo Carriers before and after the Transaction are set out in the table below.
Before the Transaction R’000
Authorised25 000 000 ordinary shares of R0.01 each 250
Issued20 000 000 ordinary shares of R0.01 each 200593 710 treasury shares of R0.01 each (6)
Share premium –
Total share capital 194
After the Transaction R’000
Authorised25 000 000 ordinary shares of R0.01 each 200
Issued21 052 632 ordinary shares of R0.01 each 2101 646 342* treasury shares of R0.01 each (16)
Share premium –
Total share capital 194
* The 1 052 632 EmployeeCo Cargo Subscription Shares will be issued to EmployeeCo but are required to be consolidated by Cargo Carriers for accounting purposes in terms of IFRS 10 as the activities of EmployeeCo will be conducted on behalf of the Company and the EmployeeCo MOI cannot be changed without the approval of Cargo Carriers. The EmployeeCo Cargo Subscription shares will accordingly be treated as treasury shares for accounting purposes and will result in the shares being eliminated on consolidation. The EmployeeCo Cargo Subscription Shares will, however, have full voting rights at all shareholders’ meetings.
EmployeeCo Participants will not be able to transact in the EmployeeCo Ordinary Shares for the first five years from the date of issue. Thereafter they will be entitled, over a three-year period, to put their EmployeeCo Ordinary Shares to EmployeeCo as detailed in paragraph 13 of Annexure 5 of this circular. The purchase consideration payable by EmployeeCo for any EmployeeCo Ordinary Shares put to it shall be settled by the transfer by EmployeeCo of a portion of the EmployeeCo Cargo Subscription Shares to the EmployeeCo Participant exercising the put option in accordance with the valuation model referred to in Annexure 5. The transferred shares will cease to be consolidated.
8.1 Categories of shareholders
The table below sets out the public shareholding in the Company before and after the Transaction.
Directors and Associates 2 137 760 0.69 2 137 760 0.654Shareholders holding more than 10% of issued shares 2 15 726 869 78.63 2 15 726 869 74.703Employees on whom restrictions on trading are imposed – – – 1 1 052 632* 5.000
Total 731 20 000 000 100 732 21 052 632 100.000
* Shares held by EmployeeCo for the ultimate benefit of EmployeeCo Participants. As certain restrictions are placed on EmployeeCo’s ability to trade in the EmployeeCo Cargo Subscription Shares, EmployeeCo is deemed to be a non-public shareholder.
Once the EmployeeCo Cargo Subscription shares have fully vested in the EmployeeCo Participants, as detailed in Annexure 5 to this circular, 277 291 of the EmployeeCo Cargo Subscription shares, being the shares allocated to the CFO, senior and top management will be considered to be held by non-public shareholders, whilst the remainder of the shares will be considered to be held by public shareholders.
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8.2 Share trading history
Annexure 6 to this circular contains the aggregate volume and the highest, lowest and closing prices of Cargo Carriers’ shares traded on the JSE:
• for each month over the previous 12 months; and• for each trading day during the 30-day period ended Friday, 18 March 2016, being the last
practicable day before the finalisation of this circular.
8.3 Share capital changes, issues of shares and repurchases of shares
There have been no consolidations or sub-division of shares over the past three years.
Cargo Carriers has not issued or repurchased any shares over the past three-year period.
9. IRREVOCABLE LETTERS OF UNDERTAKING
For purposes of the general meeting, the Company has received irrevocable letters of undertaking from shareholders. All such shareholders or their representatives have indicated that they will vote in favour, or recommend to their clients to vote in favour, of the Transaction.
The table below sets out the undertakings received:
The irrevocable undertakings set out in the table above represent approximately 65% of the shares eligible to vote on such resolutions (which shares exclude those held as treasury shares) at the general meeting, or any adjournment thereof.
10. PROSPECTS
The Company is well diversified and mature in the industries in which it operates. Innovation and investment in technology and a deep understanding of our clients’ business requirements facilitates the continued provision of cost-effective and appropriate logistics services. The Company’s current low gearing and access to funding positions it favourably to grow during the current challenging economic environment. The next step in achieving the Company’s business and growth aspirations is the empowerment of employees through sharing in the economic value created by the Company. The employee share participation transaction detailed in this circular aims to achieve this objective.
11. MAJOR SHAREHOLDERS
There has been no change in controlling shareholder in either Cargo Carriers or any of its subsidiaries in the preceding five-year period and there will be no new controlling shareholder in Cargo Carriers as a result of the Transaction. Furthermore, there has been no change in the trading objectives of or change in name during the preceding five-year period.
11.1 Major shareholders before the Transaction
Insofar as is known to the applicant, the name of any shareholder, other than a Director, that, directly or indirectly, is beneficially interested in 5% or more of a class of securities issued by the applicant, together with the amount of each such shareholder’s interest is disclosed below:
Those shareholders (excluding Directors whose interests are detailed in paragraph 12.2 below) who, after the Transaction will insofar as is known to Cargo Carriers, directly or indirectly, beneficially hold 5% or more of the issued shares of Cargo Carriers are set out below.
The full names, ages, qualifications, business addresses and functions in the Group of the executive and non-executive Directors of Cargo Carriers at the last practicable date are as follows:
Murray Bolton (58)Qualifications: BCompt (Hons), CA(SA)Business address: 11A Grace Road, Mountainview, Observatory, 2198Function and committees: CEO
Garth Bolton (60)Business address: 11A Grace Road, Mountainview, Observatory, 2198Function and committees: Executive Director: Social and Ethics Committee
12.2.1 Directors’ interests before the Transaction
The direct and indirect beneficial interests of Directors and their associates, including a director who has resigned within the last 18 months, in the issued shares of the Company as at the Last Practicable Date, is set out in the table below:
* Held through Cargo Carriers Holdings (Proprietary) Limited.
There has been no change to the aforementioned Directors’ interests between the financial year ended 29 February 2016 and the last practicable date.
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12.2.2 Directors’ interests after the Transaction
The direct and indirect beneficial interests of Directors and their associates, including a director who has resigned within the last 18 months, in the issued shares of the Company after the transaction, is set out in the table below:
* Held through Cargo Carriers Holdings (Proprietary) Limited.# Indirect shareholding held as a result of the allocation to Mr Kriel of shares in EmployeeCo.
12.3 Directors’ interests in transactions
Save for Mr Kriel who, as an EmployeeCo Participant is interested in the Transaction detailed in this circular, none of the Directors (including those Directors who resigned within the past 18 months) have had any beneficial interest, either directly or indirectly, in any transactions effected by Cargo Carriers during the current or preceding financial year or during any earlier financial year which remains outstanding or unperformed in any respect.
12.4 Directors’ emoluments
As noted in paragraph 22 below, the directors’ remuneration for the financial years ended 28 February 2015 and 28 February 2014 is disclosed in the Company’s Annual Report which can be found on the Company’s website at www.cargocarriers.co.za. Save for Mr J Kriel, who was appointed as an executive director of the Company with effect from 18 January 2016 and who will be an EmployeeCo Participant, the remuneration of Directors will not be varied as a result of the Transaction.
13. MATERIAL CHANGES
Save for the effects of the Transaction which have been disclosed in the pro forma financial information set out in paragraph 7 above and in Annexure 1 to this circular, at the last practicable date, there have been no material changes in the financial or trading position of the Company since the reported financial information of Cargo Carriers for the six months ended 31 August 2015. In addition, there have been no material changes to the business of Cargo Carriers or its subsidiaries during the past five years.
14. MATERIAL CONTRACTS
The dates, nature of and the parties to every material contract entered into either verbally or in writing by Cargo Carriers, any of its major subsidiaries or by any subsidiary where it is material to the Company, entered into within two years prior to the date of this circular or at any time and containing an obligation or settlement that is material to the Company or its subsidiaries, and being a contract entered into otherwise than in the ordinary course of the business carried on, or proposed to be carried on, by the Company or any of its subsidiaries are disclosed below:
On 1 December 2015 it was announced on SENS that Cargo Carriers had entered into an agreement for the disposal of its 55% shareholding in BHL Zambia, and its 51% shareholding in BHL Namibia to
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Beefco Limited (“the disposal”), a company duly incorporated and registered in accordance with the laws of Zambia (“the purchaser”), for an aggregate purchase consideration of $1 943 000 (one million nine hundred and forty three thousand USD). The controlling shareholder of the purchaser is the 45% and 49% shareholders in BHL Zambia and BHL Namibia respectively, but the purchaser is not considered to be a related party to Cargo Carriers as defined in the JSE Listings Requirements. The disposal, which remains subject to approval by the Zambian Competition authority, is a Category 2 transaction in terms of paragraph 9.5(a) of the Listings Requirements and accordingly, no shareholder approval is required.
Shareholders were advised by means of a SENS announcement on 10 November 2015 that the Company has entered into non-binding heads of agreement in respect of the proposed formation of a new company, which company will purchases the assets and liabilities of a division of Cargo Carriers and the assets and liabilities of an undisclosed third party. The proposed transaction remains subject to due diligence investigations by the respective parties and the signing of definitive agreements. The Company has released various cautionary announcements on SENS advising shareholders to continue to exercise caution when dealing in the shares of the Company until such time as a further announcement regarding this proposed transaction has been made.
Neither the Company nor any of its subsidiary companies is a party to any restrictive funding agreement or arrangement.
15. LITIGATION STATEMENT
There are no legal or arbitration proceedings, pending or threatened, of which the Cargo Carriers Group is aware, that may have or have had, in the 12-month period preceding the last practicable date, a material effect on the financial position of the Cargo Carriers Group.
16. OPINIONS AND RECOMMENDATIONS
16.1 Report of the Independent Expert
Taking into consideration the terms and conditions of the EmployeeCo Specific Issue, the Independent Expert is of the opinion that such terms and conditions are fair to Cargo Carriers shareholders and has advised the Board of the Company accordingly. Shareholders are referred to Annexure 3 to this circular which sets out the full text of the report of the Independent Expert regarding the EmployeeCo Specific Issue.
16.2 View of the Board
The Board, having considered the terms and conditions of the transaction and the Report of the Independent Expert, is of the opinion that the transaction is fair to shareholders of the Company. The Directors, individually, intend to vote in favour of the resolutions in respect of the shares held by them.
17. DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors, whose names are given in the corporate information section of this circular, collectively and individually, accept full responsibility for the accuracy of the information given and certify that, to the best of their knowledge and belief, there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the circular contains all information required by law and the Listings Requirements.
18. EXPERTS’ CONSENTS
The Sponsor, Corporate Adviser, Legal Advisor, Independent Reporting Accountants, Independent Expert, Company Secretary and the Transfer Secretaries have consented in writing to act in the capacities stated and to their names being stated in this circular and, where applicable, to the inclusion of their reports in the form and context in which they have been reproduced in Annexure 2 and Annexure 3 to this circular, and have not, prior to the last practicable date, withdrawn their consents prior to publication of this circular.
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19. COSTS
The total estimated costs of the Transaction, which amount to approximately R1 063 405 excluding VAT, are detailed in the table below:
The following documents, or copies thereof, will be available for inspection at the registered office of the Company, 11A Grace Road, Mountain View, Observatory, 2198, and at the office of the Sponsor which address is set out in the “Corporate information” section of the circular, during normal business hours from Monday, 4 April 2016 up to and including Thursday, 5 May 2016:
• the Memoranda of Incorporation of the Company and its subsidiaries;• the EmployeeCo MOI;• the EmployeeCo Reciprocal Subscription Agreement;• the EmployeeCo Ordinary Shares Subscription Agreements;• copies of the irrevocable letters of undertaking referred to in paragraph 9 above;• the service contracts entered into between the executive Directors and the Company;• the signed Independent Reporting Accountants’ reasonable assurance report on the pro forma
financial information of the Company, the text of which is included as Annexure 2 to this circular;• a copy of the Opinion of the Independent Expert, the text of which is included as Annexure 3 to this
circular;• the written consent letters referred to in paragraph 18 above; and• a signed copy of this circular.
21. GENERAL MEETING
A general meeting of Cargo Carriers shareholders will be held at 09:30 on Thursday, 5 May 2016 at the registered office of Cargo Carriers, 11A Grace Road, Mountainview, Observatory, 2198, in order to consider and approve the resolutions set out in the notice of general meeting included in this circular.
A notice convening the general meeting and a form of proxy for use by certificated shareholders and dematerialised shareholders with “own name” registration who are unable to attend the general meeting, form part of this circular.
Certificated shareholders and dematerialised shareholders with “own name” registration, who:
• are unable to attend the general meeting and wish to be represented thereat, must complete and return the attached form of proxy in accordance with the instructions contained therein.
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Dematerialised shareholders, other than dematerialised shareholders with “own name” registration, who:
• are unable to attend the general meeting and wish to be represented thereat, must provide their CSDP or broker with their voting instructions, in terms of the custody agreement entered into between themselves and the CSDP or broker concerned, in the manner and within the time stipulated therein; and
• wish to attend the general meeting, must instruct their CSDP or broker to issue them with the necessary written letter of representation to attend.
22. INFORMATION INCORPORATED BY REFERENCE
The following information is incorporated by reference into, and forms part of, this circular. This information is available for inspection at no charge, during business hours, at the registered office of the Company and the offices of the Company’s sponsor, which addresses are set out in the “Corporate information” section of this circular, as well as on the Company’s website: www.cargocarriers.co.za, from 4 April 2016 up to and including Thursday, 5 May 2016.
Information incorporated by reference Reference document
Signed on behalf of all of the Directors of the Company in terms of powers vested in him by powers of attorney with full power of substitution given by each of the Directors of the Company in favour of Mr Bolton.
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ANNEXURE 1
PRO FORMA FINANCIAL INFORMATION OF CARGO CARRIERS
The table below sets out the pro forma financial effects of the Transaction on Cargo Carriers’ basic earnings per share, diluted earnings per share, headline earnings per share, diluted headline earnings per share, net asset value per share and tangible net asset value per share.
The pro forma financial effects have been prepared to illustrate the impact of the Transaction on the published unaudited financial information of Cargo Carriers for the six months ended 31 August 2015, had the Transaction occurred on 1 March 2015 for statement of comprehensive income purposes and on 31 August 2015 for statement of financial position purposes.
The pro forma financial effects have been prepared using accounting policies that comply with IFRS and that are consistent with those applied in the unaudited results of Cargo Carriers for the six months ended 31 August 2015.
The pro forma financial effects, which are the responsibility of the directors, are provided for illustrative purposes only and, because of their pro forma nature may not fairly present Cargo Carriers’ financial position, changes in equity, results of operations or cash flow nor the effect and impact of the Transaction going forward.
The Transaction is fully funded through the subscription by Cargo Carriers of 100 non-convertible cumulative redeemable preference shares and 1 000 “B” ordinary shares in EmployeeCo.
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PRO FORMA STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31 AUGUST 2015
Profit for the period 18 011 000 (1 366 225) 16 644 775Other comprehensive income:Items not to be reclassified to profit or loss in subsequent periods:Revaluation of owner occupied properties – – –Income tax effect – – –Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Exchange differences on translation of foreign operations (2 173 000) – (2 173 000)
Other comprehensive income, net of tax (2 173 000) – (2 173 000)
Total comprehensive income, net of tax 15 838 000 (1 366 225) 14 471 775
Profit for the period attributable to:Equity holders of the parent 21 237 000 (1 366 225) 19 870 775Non-controlling interest (3 226 000) – (3 226 000)
18 011 000 (1 366 225) 16 644 775
Total comprehensive income, net of tax attributable to:Equity holders of the parent 19 064 000 (1 366 225) 17 697 775Non-controlling interest (3 226 000) – (3 226 000)
15 838 000 (1 366 225) 14 471 775
Reconciliation between basic earnings and headline earningsBasic earnings 21 237 000 (1 366 225) 19 870 775Profit on disposal of property, plant and equipment (net of tax) (4 995 360) – (4 995 360)Impairment of assets 1 804 000 – 1 804 000
Shares in issue at 31 August 2015 20 000 000 1 052 632 21 052 632Ordinary shares in issue (closing and weighted average) 19 406 290 – 19 406 290Basic earnings per share (cents) 109.43 (7.04) 102.39Diluted earnings per share (cents) 109.43 (7.04) 102.39Headline earnings per share (cents) 92.99 (7.04) 85.95Diluted headline earnings per share (cents) 92.99 (7.04) 85.95
Notes:
1. The “Before” column is based on the published unaudited financial information of Cargo Carriers for the six months ended 31 August 2015, as released on SENS on 27 October 2015.
2. The “EmployeeCo Transaction” column relates to the following:
a. EmployeeCo will be required to be consolidated by Cargo Carriers in terms of IFRS 10, Consolidated Financial Statements and the EmployeeCo Cargo Subscription Shares held by EmployeeCo will be classified as treasury shares for accounting purposes and consequently no effect is reflected for the accrual of preference dividends between Cargo Carriers and EmployeeCo.
b. The shares are also excluded from the weighted average number of shares in issue.
3. Transaction costs of R1 063 405 have been expensed on the Employee Transaction. These costs are once-off and have been assumed to be non-tax deductible.
4. IFRS 2 costs amounting to R283 104 have been expensed in respect of the Employee Transaction and are assumed to be non-tax deductible.
The employee share participation transaction is classified as an equity-settled share-based payment in terms of IFRS 2: Share-based payment. The IFRS 2 charge has been determined using the Black Scholes valuation model. There will be an expense debited to the Statement of Comprehensive Income and the corresponding credit will be equity in the Statement of Financial Position. The IFRS 2 charge will be amortised over a period of eight years, until all of the shares have fully vested.
The total IFRS 2 charge has been calculated as R3 872 633. The annual charges to Cargo Carriers’ Statement of Comprehensive Income are as follows:
5. Finance income reduction of R27 383 due to the reduction in cash balances as a result of the transaction costs was calculated at 5.15% being the yearly average money market rate. This reduction will have a continuing impact and is considered to reduce taxable income.
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PRO FORMA STATEMENT OF FINANCIAL POSITION AT 31 AUGUST 2015
Total equity and liabilities 863 951 000 (1 063 405) 862 887 595
24
R BeforeEmployeeCo Transaction
Pro forma after
EmployeeCoTransaction
Shares in issue at 31 August 2015 20 000 000 1 052 632 21 052 632Ordinary shares in issue (closing and weighted average) 19 406 290 – 19 406 290Net asset value per share (cents) 2 356.23 (5.48) 2 350.75Net tangible asset value per share (cents) 2 356.23 (5.48) 2 350.75
Notes:
1. The “Before” column is based on the published unaudited financial information of Cargo Carriers as at 31 August 2015, as released on SENS on 27 October 2015.
2. The “EmployeeCo Transaction” column relates to the following:
• EmployeeCo will be required to be consolidated by Cargo Carriers in terms of IFRS 10, Consolidated Financial Statements and the EmployeeCo Cargo Subscription Shares held by EmployeeCo will be classified as treasury shares for accounting purposes and consequently no effect is reflected for:
– the issue of 1 052 632 new Cargo shares at a subscription price of R11.63 being a 15% discount to a 30-day VWAP of 13.69 as at 12 February 2016, amounting to R12 246 594 and a 16% discount to a 30-day VWAP of R13.86 as at 8 March 2016, being the signature date of the EmployeeCo Reciprocal Subscription Agreement;
– the subscription for 100 EmployeeCo Preference Shares in EmployeeCo by Cargo Carriers amounting to R12 245 594;
– the subscription for 1 000 EmployeeCo Subscription “B” Ordinary Shares in EmployeeCo by Cargo Carriers amounting to R1 000; and
– Transaction costs of R1 063 405 have been expensed on the EmployeeCo Transaction and paid out of cash resources. These costs are once-off and have been assumed to be non-tax deductible.
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ANNEXURE 2
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE PRO FORMA FINANCIAL INFORMATION
The DirectorsCargo Carriers Limited11A Grace RoadMountainviewObservatorySouth Africa
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF THE PRO FORMA FINANCIAL INFORMATION INCLUDED IN A CIRCULAR
We have completed our assurance engagement to report on the compilation of pro forma financial information of Cargo Carriers Limited by the Directors. The pro forma financial information, as set out in Annexure 1 on pages 20 to 24 of the circular relating to Cargo Carriers Limited’s proposed implementation of a BEE transaction through incorporation of an Employee Share Participation scheme, consists of the statement of comprehensive income for the interim six-month period ended 31 August 2015, the statement of financial position at 31 August 2015 and the pro forma financial effects (collectively the “pro forma financial information”). The pro forma financial information has been compiled by the Directors on the basis of the applicable criteria specified in the JSE Limited (JSE) Listings Requirements.
The pro forma financial information has been compiled by the Directors to illustrate the impact of the transaction, described in paragraph 7 on page 11 of the circular, on the Company’s financial position as at 31 August 2015, and the Company’s financial performance for the six-month period then ended, as if the transaction had taken place at 1 March 2015. As part of this process, information about the Company’s financial position and financial performance has been extracted by the Directors from the Company’s interim annual financial results for the period ended 31 August 2015, on which no audit or review report has been published.
Directors’ responsibility for the pro forma financial information
The Directors are responsible for compiling the pro forma financial information on the basis of the applicable criteria specified in the JSE Listings Requirements as described in paragraph 7 on page 11 of the circular. The Directors of Cargo Carriers Limited are also responsible for the financial information from which it has been prepared.
Our independence and quality control
We have complied with the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants and the Code of Professional Conduct for Registered Auditors issued by the Independent Regulatory Board for Auditors, which includes independence and other requirements founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
In accordance with International Standard on Quality Control 1, Ernst and Young Inc maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
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Reporting accountants’ responsibility
Our responsibility is to express an opinion about whether the pro forma financial information has been compiled, in all material respects, by the Directors on the basis specified in the JSE Listings Requirements. We conducted our engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro forma Financial Information Included in a Prospectus which is applicable to an engagement of this nature. This standard requires that we comply with ethical requirements and plan and perform our procedures to obtain reasonable assurance about whether the Directors have compiled the pro forma financial information, in all material respects, on the basis specified in the JSE Listings Requirements.
For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information.
As the purpose of pro forma financial information included in a circular is solely to illustrate the impact of a significant corporate action or transaction on unadjusted financial information of the entity as if the transaction had occurred or had been undertaken at an earlier date selected for purposes of the illustration, we do not provide any assurance that the actual outcome of the transaction at 31 August 2015 would have been as presented.
A reasonable assurance engagement to report on whether the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the pro forma financial information provides a reasonable basis for presenting the significant effects directly attributable to the transaction, and to obtain sufficient appropriate evidence about whether:
• the related pro forma adjustments give appropriate effect to those criteria; and
• the pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.
Our procedures selected depend on our judgement, having regard to our understanding of the nature of the Company, the transaction in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances.
Our engagement also involves evaluating the overall presentation of the pro forma financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria specified by the JSE Listings Requirements and described in paragraph 7 on page 11 of the circular.
Ernst & Young Inc.Director: Sarel Jacobus Johannes Strydom CA(SA)Registered AuditorReporting Accountant Specialist
Date: 23 March 2016
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ANNEXURE 3
OPINION OF THE INDEPENDENT EXPERT – EMPLOYEECO SPECIFIC ISSUE
The DirectorsCargo Carriers Limited11A Grace RoadMountainview, ObservatoryJohannesburg2198
23 March 2016
Dear Sirs
INDEPENDENT EXPERT REPORT IN RESPECT OF THE EMPLOYEECO SPECIFIC ISSUE
Introduction
This independent expert report is to be read in conjunction with the circular to Cargo shareholders dated 4 April 2016. Capitalised terms shall have the same meaning defined therein unless otherwise stated.
The Board has recognised the importance of employee ownership within the Group. In order to facilitate the improvement of the Ownership element and Cargo’s compliance with the New BEE Codes, the Board has implemented the Transaction. Accordingly, EmployeeCo has been incorporated to enable all employees of Cargo (other than those executives that are also directors of the Company’s holding company, Cargo Carriers Holdings Proprietary Limited) to collectively acquire an indirect 5% shareholding in Cargo.
The indicative impact of the Transaction on Cargo’s Ownership element is an increase in score from 6.15 to 15.58 points, based on the existing 9.07% ownership together with the 5% ownership by EmployeeCo in Cargo Carriers. Should the Transaction not be implemented, Cargo’s Ownership element is expected to remain a challenge with a score of approximately 6.15 points. In addition, Cargo will also not comply with the Ownership priority element which will cause it to drop a level.
The EmployeeCo Specific Issue and EmployeeCo Preference Shares Subscription
In terms of the EmployeeCo Reciprocal Subscription Agreement:
• EmployeeCo will subscribe for 1 052 632 Cargo shares, representing 5% of the issued share capital of Cargo (EmployeeCo Cargo Subscription Shares), at a price of R11.63 per share for an aggregate amount of R12 246 594.00; and
• to enable EmployeeCo to fund the acquisition of the EmployeeCo Cargo Subscription Shares, Cargo will subscribe for 100 non-convertible, cumulative, redeemable participating preference shares in EmployeeCo (EmployeeCo Preference Subscription Shares) for an aggregate amount of R12 245 594 and 1 000 “B” ordinary shares in EmployeeCo (EmployeeCo “B” Subscription Shares) for an aggregate amount of R1 000.00.
The EmployeeCo Cargo Subscription Shares will be listed on the JSE and will rank pari passu in all respects with the existing Cargo shares in issue.
The EmployeeCo Preference Subscription Shares will have certain preferential rights, including the right to a cumulative preference dividend calculated with reference to distributions received by EmployeeCo from Cargo during each dividend period less any operating costs, limited to administrative costs, of EmployeeCo during the relevant dividend period (“Net Income”) which dividend shall reduce on a sliding scale over a five-year period as follows:
Period Percentage of Net Income (%)
During the first year following the date of issue 100During the second year following the date of issue 80During the third year following the date of issue 60During the fourth year following the date of issue 40During the fifth year following the date of issue 20From the sixth year following the date of issue and thereafter –
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Financing of the EmployeeCo Specific Issue
In terms of the EmployeeCo Reciprocal Subscription Agreement, Cargo has agreed, subject to the fulfilment or waiver of the suspensive conditions set out in such agreement, to provide financial assistance to fund the the EmployeeCo Specific Issue, as follows:
• Cargo has undertaken to subscribe for the EmployeeCo Preference Subscription Shares on the EmployeeCo Subscription Date for the EmployeeCo Preference Shares Subscription Price;
• Cargo has undertaken to subscribe for the EmployeeCo “B” Subscription Shares on the EmployeeCo Subscription Date for the EmployeeCo “B” Shares Subscription Price;
• On the EmployeeCo Subscription Date, the obligation of Cargo in respect of payment of the EmployeeCo Preference Shares Subscription Price and the EmployeeCo “B” Shares Subscription Price shall be settled by setting the amount off in the books of account of EmployeeCo against EmployeeCo’s obligation in respect of the EmployeeCo Cargo Subscription Price;
• EmployeeCo shall be entitled, but not obliged, to redeem the EmployeeCo Preference Shares at any time after payment in full of any accrued dividends, subject to compliance with the Companies Act and provided that it passes the Solvency and Liquidity Test; and
• After a period of five years from the EmployeeCo Subscription Date of issue of the EmployeeCo Preference Shares, Cargo shall be entitled to require EmployeeCo to redeem its unredeemed EmployeeCo Preference Shares.
EmployeeCo Ordinary Shares Subscription
In terms of the EmployeeCo Ordinary Shares Subscription Agreements:
• the EmployeeCo Participants shall initially, in aggregate, subscribe for approximately 100 000 “A” ordinary shares with no par value in EmployeeCo for a subscription price of R0.01 per share, which “A” ordinary shares will have the same voting rights and rights to dividends as the EmployeeCo “B” Subscription Shares, but will be subject to different transfer restrictions, as set out in the EmployeeCo MOI.
Fairness opinion required in terms of the JSE Listings Requirements
In accordance with paragraph 5.51(f) of the Listings Requirements, if a specific issue of shares for cash is to a related party and is at a discount to the 30-day VWAP prior to the date the issue is agreed, the Board is required to obtain a fairness opinion from an independent expert confirming whether the issue is fair insofar as the shareholders of the issuer are concerned.
As one of the executive directors of Cargo Carriers will be an EmployeeCo Participant and the EmployeeCo Specific Issue is at a 16% discount to the VWAP as at 8 March 2016, Cargo has obtained a fairness opinion on the EmployeeCo Specific Issue from the Independent Expert.
Definition of the term “fair”
The assessment of fairness is primarily based on quantitative issues. For illustrative purposes the Transaction may be said to be fair if the share issue price of R11.63 is greater than or equal to the fair value of the Cargo share and the value/benefit received by Cargo in terms of the Transaction is more than or equal to the cost of the Transaction (including the financing thereof). Conversely, the Transaction may be said to be unfair if the share issue price of R11.63 is less than the fair value of the Cargo share and/or the cost of the Transaction (including the financing thereof) exceeds the benefits from the Transaction.
In preparing our opinion we will apply the aforementioned principle.
Responsibility and scope
The responsibility of Merchantec Capital is to prepare a report in respect of the fairness of the Transaction. Compliance with the Listings Requirements are the responsibility of the Directors of Cargo. Our responsibility is to report on whether or not the terms and conditions of the Transaction as they relate to Cargo shareholders are fair.
Information and sources of information
In the course of our analysis, we relied upon financial and other information obtained from Cargo and their advisors, together with other information available in the public domain. Our conclusion is dependent on such information being accurate in all material respects.
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The principle sources of information used in formulating our opinion regarding the Transaction which is relevant to Cargo include:
• historical financial information of Cargo for the financial years ended 28 February 2015; 28 February 2014 and 28 February 2013;
• historical interim financial information of Cargo for the six-month period ended 31 August 2015;
• management accounts for the six-month period ended 29 February 2016;
• management prepared forecast assumptions for Cargo up to 28 February 2019;
• terms and conditions as set out in the circular and agreements;
• information and assumptions made available by and discussions held with management and representatives of Cargo regarding the future operations to be undertaken by Cargo;
• information on similar recent transactions;
• publicly available information relating to Cargo and the industry that we deemed to be relevant; and
• on-line databases covering financial markets, share prices, volumes traded and other industry related news.
Procedures performed
In arriving at our opinion, amongst other things, we have undertaken the following procedures in evaluating the fairness of the transaction:
• reviewed the final terms of the EmployeeCo Agreements;
• considered the underlying rationale for the Transaction;
• analysed the audited consolidated annual financial statements for Cargo for the three financial years ended 28 February 2015; 28 February 2014 and 28 February 2013;
• analysed the interim financial statements for Cargo for the six months ended 31 August 2015;
• analysed management accounts for the six-month period ended 29 February 2016;
• analysed and reviewed the financial forecast assumptions for Cargo to the financial year ended 28 February 2019, as presented by management;
• considered the circular, which details the terms of the Transaction;
• based on the above, performed a valuation of Cargo. The discounted cash flow methodology was the primary valuation methodology employed in respect of the valuation. Sensitivity analyses were performed considering key assumptions, key internal and external valuation drivers in arriving at a valuation range. Key internal valuation drivers for the valuation included:
– a reduction in rate agreed with some of Cargo’s key clients in order to maintain economic viability for such customers in the current economic environment leading to a reduction in revenue and profits in the 2017 financial year;
– Cargo’s satisfaction of its current and new client base’s requirements through the provision of new products and services; and
– the opening of a new branch based on the needs of existing clients.
• Key external valuation drivers included the discount rate and the inflation rate. Company specific risks have been included in the discount rate which increases the discount rate and decreases the value of the Company, one of the key company specific risks being the potential change in BEE level of Cargo;
• prepared an estimate of the financial benefit of the Transaction, in so doing we performed the following procedures:
– reviewed the potential cash flow effects of the Transaction from having improved BEE credentials. In order to quantify the benefits, the Company specific risk was reduced, thus lowering the weighted average cost of capital and increasing the value of Cargo;
– considered management’s analysis on possible savings in employee costs as a result of a reduction of staff turnover, should the Transaction lead to improved retention of employees;
– reviewed the potential cash flow benefits from the ability to attract and retain higher quality managers for Cargo;
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– compiled a financial model using our forecasts of the potential cash flow effects of the benefits of the Transaction to derive a discounted cash flow valuation of the benefit; and
– performed sensitivity analysis on the key assumptions in the cash flow, specifically by applying probability factors to the cash flow effects;
• prepared an estimate of the cost of the Transaction. In so doing we performed the following procedures:
– held discussions with management to determine the cash flow impact of not concluding the Transaction (including loss of contracts from lower BEE credentials);
– reviewed the Transaction costs as detailed in the circular; and – performed a valuation of the value and cost of the preference share to Cargo included in the financing
structure using the appropriate valuation model; and
• considered other facts and information relevant to concluding this opinion.
Assumptions
Our opinion is based on the following key assumptions:
• current economic, regulatory and market conditions will not change materially;
• Cargo is not involved in any material legal proceedings;
• there are no known undisclosed contingencies that could have a material effect on the value of Cargo;
• that the Transaction will have the legal, accounting and taxation consequences as described in discussions with, and materials furnished to us by the representatives and advisors of Cargo; and
• relied on the assumptions in the information available made by Cargo’s representatives during the course of forming this opinion.
Limiting conditions
This report and opinion is provided to the Board of directors of Cargo in connection with and for the purposes of the Transaction. The opinion does not purport to cater for each individual shareholder’s perspective, but rather that of the general body of Cargo shareholders. Should a Cargo shareholder be in doubt as to what action to take, he or she should consult an independent adviser.
We have relied upon and assumed the accuracy of the information used by us in deriving our opinion. While our work has involved an analysis of, inter alia, the annual financial statements, financial forecasts and other information provided to us, our engagement does not constitute, nor does it include, an audit conducted in accordance with International Standards on Auditing, this information has, however, been tested for reasonableness.
Where relevant, forward-looking information on Cargo relates to future events and is based on assumptions that may or may not remain valid for the whole of the forecast period. Consequently, such information cannot be relied upon to the same extent as that derived from audited financial statements for completed accounting periods. We accordingly express no opinion as to how closely actual results will correspond to those forecasted.
We have also assumed that the Transaction will have the legal, accounting and taxation consequences described in discussions with, and materials furnished to us by, representatives of Cargo and we express no opinion on such consequences. We have assumed that all agreements that have been entered into in regard to the Transaction will be legally enforceable. None of the statements above invalidate the work done as per this opinion and the conclusion of the fairness opinion below.
Independence
In terms of Schedule 5.1(a) of the Listings Requirements, we confirm that we have no material direct or indirect interest in Cargo shares.
Furthermore, we confirm that our professional fees are not contingent upon the success of the Transaction.
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Opinion
Merchantec Capital has considered the terms and conditions as well as the material effects and adverse effects of the Transaction. Based on the valuation performed above, the fair value range of a Cargo share is between R9.85 and R12.04. The issue price of R11.63 is within this range and therefore the EmployeeCo Specific Issue is fair to Cargo shareholders.
In order for the benefit of the Transaction (being an increased discounted cash flow valuation of Cargo, based on a reduced company specific risk due to an improved BEE rating) to exceed the cost of the Transaction, the Company specific risk need only be reduced by 0.62% to 3.38% from 4%. We foresee a greater reduction of the Company specific risk should the Transaction be implemented as well as higher growth in revenue which would also increase the value of Cargo for all shareholders. As such it would produce a benefit to the shareholders of Cargo in excess of the cost of the Transaction. Accordingly, the Transaction is fair to Cargo shareholders.
Subsequent developments may affect this opinion, which we are under no obligation to update, revise or re-affirm.
Consent
We consent to the inclusion of this letter and the reference to our opinion in the circular to be issued to shareholders in the form and context in which they appear.
Yours faithfully
Marcel Goncalves CA(SA)Director
Merchantec Capital2nd Floor, North BlockHyde Park Office TowersCorner 6th Road and Jan Smuts AvenueHyde Park2196
Total number of shares 583 476 51 223 28 539 389 393 1 052 632 100.0
Percentage of total shares allocated per group 55.43 4.87 2.71 36.99 100 100
* The Chief Financial Officer of Cargo Carriers.
The EmployeeCo Participants will consist of all South African employees of Cargo Carriers. The allocation per group is based on the Group’s Employment Equity Plan submissions to the Department of Labour and, within each employee category, an average salary was taken to determine the number of shares to award each employee within that group.
On implementation of the Transaction, the EmployeeCo Participants will be issued “A” ordinary shares in EmployeeCo. Once these “A” ordinary shares have been issued to the EmployeeCo Participants they will be entitled, by way of a vote at an EmployeeCo shareholders’ meeting, to appoint the majority of the Directors of EmployeeCo. Cargo Carriers, as a “B” ordinary shareholder, will only be entitled to appoint one director out of a minimum of three and a maximum of six directors of EmployeeCo. The balance and majority of the directors of EmployeeCo will be appointed by the EmployeeCo Participants voting their “A” ordinary shares in EmployeeCo.
Prior to the issue of the “A” ordinary shares to the EmployeeCo Participants, the sole director of EmployeeCo is Mr MJ Bolton the CEO of Cargo Carriers. This appointment has been made to ensure the implementation of the Transaction as contemplated in this circular. For so long as Mr MJ Bolton remains the sole director of EmployeeCo, the JSE will regard the EmployeeCo Cargo Subscription Shares as treasury shares and the shares will accordingly not be able to vote at any meeting of the shareholders of Cargo Carriers. Once the Board of EmployeeCo has been restructured, as detailed above, the EmployeeCo Cargo Subscription Shares will have full voting rights at all meetings of the shareholders of Cargo Carriers.
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ANNEXURE 5
SALIENT FEATURES OF THE EMPLOYEECO MOI
The salient features of the EmployeeCo MOI are set out below:
1. Authorised shares
1.1 1 000 000 “A” ordinary shares with no par value;
1.2 10 000 “B” ordinary shares with no par value; and
2. “A” ordinary shares and “B” ordinary shares rank pari passu in all respects, save for differences in their rights relating to, amongst others, restrictions on transfer, pre-emptive rights, forced sales and put and call options.
3. Valuation Model – the model used to determine both the number of Cargo shares represented by each “A” ordinary share and a fair market value per “A” ordinary share (“Settlement Value”) on an annual basis, which shall be a function of the value of EmployeeCo’s shareholding interest in Cargo, the value of the preference shares in the issued share capital of EmployeeCo, potential capital gains tax and other liabilities of EmployeeCo. The model is set out in Schedule 2 of the EmployeeCo MOI and shall be updated and used to calculate the Settlement Value on an annual basis for each financial year within four months of the beginning of such financial year of Cargo and EmployeeCo based on the audited annual financial statements of Cargo and EmployeeCo for the previous financial year.
4. The issue of additional shares require the approval of the holder of preference shares.
5. Quorum requirement for shareholders’ meetings: 60% of shares in issue, provided that, for so long as Cargo holds at least 5% of the ordinary shares, it is present.
6. Ordinary resolutions require support of more than 50% of the voting rights exercised on the resolution.
7. Special resolutions require support of at least 75% of the voting rights exercised on the resolution, provided that the “B” shareholder votes in favour of such resolution.
8. Various matters require approval by special resolution of EmployeeCo’s shareholders, including any disposal of EmployeeCo’s shareholding interest in Cargo, or part thereof (other than a sale pursuant to the put option referred to in 13.3 below at fair value determined in accordance with the Valuation Model) and any material change to the Valuation Model.
9. The Board shall consist of a minimum of three Directors and a maximum of six Directors who shall be elected by the Shareholders, provided that the “B” shareholder shall, for so long as it holds any ordinary shares, be entitled to appoint and remove one Director to the Board as contemplated in section 66(4)(a)(i) (which appointment or removal shall be operative as soon as such written notice is received by the Company).
10. EmployeeCo shall not declare any dividends to the holders of ordinary shares, until such time as all outstanding dividends declared or deemed to be declared in respect of the preference shares have been paid in full.
11. Restrictions on transfer
11.1 No shareholder shall pledge, cede or otherwise encumber any of his shares or Shareholders’ Loans.
11.2 During the first 60 months following the date of issue, no “A” shareholder may dispose of any “A” ordinary shares, otherwise than pursuant to the forced sale or call option provisions referred to below.
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11.3 After such 60-month period, an “A” shareholder may dispose of up to one third of his “A” ordinary shares subject to the other provisions of the MOI, including the pre-emptive rights, the put option and the call option referred to below.
11.4 After a period of 72 months following the date of issue, an “A” shareholder may dispose of up to two thirds of his “A” ordinary shares, subject to the other provisions of the MOI, including the pre-emptive rights, the put option and the call option referred to below.
11.5 After a period of 84 months following the date of issue, an “A” shareholder may sell any of his “A” ordinary shares, subject to the other provisions of the MOI, including the pre-emptive rights, the put option and the call option referred to below.
11.6 A “B” shareholder may at any time sell any “B” ordinary shares, but only to a then current employee of Cargo or to a trust or other entity nominated to hold such shares or interest on behalf of any number of employees of Cargo.
11.7 The Shareholders may only sell any of their Shares if, in the same transaction, they sell a proportionate part of their Shareholders’ Loans (if any) and may not sell to third parties unless such sale and third party is approved by the Board and the “B” shareholder.
12. Forced sales
12.1 If a shareholder resigns or is dismissed from employment with Cargo (other than a dismissal based on the operational requirements of Cargo), he is deemed to have offered his shares to the “B” shareholder or its nominee at a price of R0.01 per share.
12.2 If a shareholder dies, retires from employment on or after reaching the prescribed retirement age or is dismissed based on the operational requirements of Cargo, he is deemed to have offered his shares to the “B” shareholder or its nominee at the Settlement Value for the then current financial year.
13. Put option
13.1 The holders of “A” ordinary shares have a put option to require EmployeeCo or its nominee to purchase all their “A” ordinary shares.
13.2 The put option is exercisable by an “A” shareholder, provided that shareholder is still in the employ of Cargo at the time:
13.2.1 at any time after a period of 60 months from the date of issue, in respect of up to one third of his “A” ordinary shares;
13.2.2 at any time after a period of 72 months from the date of issue, in respect of up to two thirds of his “A” ordinary shares; and
13.2.3 at any time after a period of 84 months from the date of issue, in respect of any number of his “A” ordinary shares.
13.3 The price shall be the Settlement Value for the then current financial year and shall be payable by EmployeeCo in exchange for the transfer of Cargo shares held by EmployeeCo, unless determined otherwise by Cargo in its discretion.
14. Call option
14.1 The “B” shareholder has a call option to purchase from the “A” shareholders their “A” ordinary shares, which call option is exercisable by the “B” shareholder or its nominee on seven days’ written notice to that effect to the relevant shareholders, provided that there is no impediment to its exercise of the call option pursuant to section 48(2)(b) or otherwise under the Companies Act or if there is such impediment the call option may be exercised by an employee of Cargo or nominee of the “B” shareholder designated for such purpose in writing by the “B” shareholder.
14.2 The price shall be the Settlement Value for the then current financial year and shall be payable by Cargo in exchange for the issue of Cargo shares, unless determined otherwise by Cargo in its discretion.
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15. Preference shares
15.1 The preference share shall be entitled to a cumulative preference dividend out of the net income of EmployeeCo available for distribution arising from EmployeeCo’s shareholding interest in Cargo during the relevant dividend period, as follows:
15.1.1 during year 1, 100% of the net income;
15.1.2 during year 2, 80% of the net income;
15.1.3 during year 3, 60% of the net income;
15.1.4 during year 4, 40% of the net income;
15.1.5 during year 5, 20% of the net income; and
15.1.6 during year 6 and thereafter, 0% of the net income.
15.2 The Company shall be entitled but not obliged, at any time after payment in full of all accrued but unpaid preference dividends, to apply all further available cash (after provision for taxes (both existing and reasonably anticipated)) held by it from time to time to redeem some or all of the Preference Shares at the redemption amount, subject to compliance with the Companies Act and provided that it passes the Solvency and Liquidity Test. For purposes hereof, the Company shall be obliged to furnish the Holder with all information required by the Holder relating to the availability or otherwise of such cash.
15.3 After the expiry of period of five years from the date of issue, the holder shall be entitled to require EmployeeCo to redeem the preference shares.
15.4 Holders of preference shares shall be entitled to receive notice of and be present at any shareholders’ meetings of EmployeeCo but not to vote in respect of the preference shares unless, amongst others, a resolution is proposed which directly affects any of the rights or privileges attaching to the preference shares or the interest of the holder, including the disposal of a material part of the assets of EmployeeCo and any amendment to the EmployeeCo MOI.
The above represents a summary of the key terms of the EmployeeCo MOI and does not constitute a comprehensive review of all of terms of the EmployeeCo MOI, a copy of which is available for inspection.
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ANNEXURE 6
SHARE TRADING HISTORY OF CARGO CARRIERS
The highest, lowest and closing price of shares of Cargo Carriers on the JSE for each month commencing from 1 January 2015 to 31 January 2016 and aggregated monthly volume and value is as follows:
MonthHigh
(cents)Low
(cents)Close(cents) Volume Value
January 2015 2 425 2 150 2 150 421 9 890
February 2015 2 300 2 150 2 200 2 385 52 561
March 2015 2 200 1 520 1 775 23 231 388 660
April 2015 1 800 1 700 1 700 4 171 72 400
May 2015 1 898 1 600 1 700 4 481 74 182
June 2015 1 700 1 500 1 550 2 506 38 993
July 2015 1 600 1 191 1 500 4 164 63 078
August 2015 1 500 1 200 1 400 8 469 109 297
September 2015 1 400 1 200 1 250 25 085 307 384
October 2015 1 500 1 250 1 400 26 731 389 360
November 2015 1 400 1 116 1 400 12 449 166 771
December 2015 1 455 1 122 1 351 2 777 34 369
January 2016 1 390 1 350 1 390 2 863 39 187
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The highest, lowest and closing price of shares of Cargo Carriers on the JSE, for the last 30 trading days, for each day commencing from 8 February to 18 March 2016 (being the last practicable date prior to the finalisation of this circular) and the daily volume and value are as follows:
DayHigh
(cents)Low
(cents)Close(cents) Volume
Value(R)
8 February 2016 1 390 1 390 1 390 2 28
9 February 2016 1 390 1 390 1 390 – –
10 February 2016 1 390 1 390 1 390 – –
11 February 2016 1 390 1 390 1 390 – –
12 February 2016 1 390 1 390 1 390 – –
15 February 2016 1 390 1 390 1 390 – –
16 February 2016 1 390 1 390 1 390 – –
17 February 2016 1 390 1 390 1 390 – –
18 February 2016 1 390 1 390 1 390 – –
19 February 2016 1 385 1 384 1 384 2 000 27 684
22 February 2016 1 385 1 385 1 385 – –
23 February 2016 1 385 1 385 1 385 – –
24 February 2016 1 385 1 385 1 385 – –
25 February 2016 1 385 1 385 1 385 – –
26 February 2016 1 385 1 385 1 385 – –
29 February 2016 1 385 1 385 1 385 – –
1 March 2016 1 385 1 385 1 385 – –
2 March 2016 1 385 1 385 1 385 – –
3 March 2016 1 385 1 385 1 385 – –
4 March 2016 1 385 1 385 1 385 – –
7 March 2016 1 385 1 385 1 385 – –
8 March 2016 1 400 1 400 1 400 177 2 478
9 March 2016 1 400 1 400 1 400 – –
10 March 2016 1 400 1 400 1 400 – –
11 March 2016 1 400 1 400 1 400 – –
14 March 2016 1 400 1 400 1 400 – –
15 March 2016 1 400 1 400 1 400 – –
16 March 2016 1 400 1 400 1 400 – –
17 March 2016 1 400 1 400 1 400 – –
18 March 2016 1 400 1 400 1 400 – –
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(Incorporated in the Republic of South Africa)(Registration number 1959/003254/06)
Share code: CRG ISIN: ZAE000001764(“Cargo Carriers” or “the Company”)
NOTICE OF GENERAL MEETING
If you are in any doubt as to what action you should take in respect of the following resolutions, please consult your Central Securities Depository Participant (“CSDP”), broker, banker, attorney, accountant or other professional advisor immediately.
The board of directors of the Company (“the Board”) has determined that, in terms of section 62(3)(a), as read with section 59 of the Companies Act, 2008 (Act 71 of 2008), as amended (“Companies Act”) the record date for the purposes of determining which shareholders of the Company are entitled to participate in and vote at the general meeting is Friday, 29 April 2016. Accordingly, the last day to trade in Cargo Carriers shares in order to be recorded in the Company’s securities register to be entitled to vote will be Thursday, 21 April 2016.
Notice is hereby given that a general meeting of shareholders of the Company will be held at 09:30 on Thursday, 5 May 2016 at the registered office of Cargo Carriers, 11A Grace Road, Mountainview, Observatory, 2198, to consider, and, if deemed fit, to pass, with or without modification, the special and ordinary resolutions set out hereunder.
ORDINARY RESOLUTION NUMBER 1 – EMPLOYEECO SPECIFIC ISSUE FOR CASH
“RESOLVED THAT, subject to the passing of Special Resolution Numbers 1 and 2, the specific issue of 1 052 632 ordinary shares in the Company (“EmployeeCo Cargo Subscription Shares”) to EmployeeCo Proprietary Limited (“EmployeeCo”) at a discounted subscription price of R11.63 per share for a total subscription consideration of R12 246 594 (“EmployeeCo Specific Issue”), in accordance with the reciprocal subscription agreement entered into between the Company and EmployeeCo on 8 March 2016, a copy of which has been tabled at this general meeting and the front page of which has been initialled by the Chairperson of the general meeting for purposes of identification (“EmployeeCo Reciprocal Subscription Agreement”), be and is hereby approved.”
Explanatory note
Paragraph 5.51 of the Listings Requirements requires shareholders (excluding any participants and their associates) to approve a specific issue for cash, by way of an ordinary resolution which achieves a 75% (seventy-five percent) majority of votes cast in favour thereof.
Accordingly, Ordinary Resolution Number 1 requires the approval of a 75% (seventy-five percent) majority of the votes cast in favour thereof by all shareholders present or represented by proxy at the general meeting, excluding any parties and their associates participating in the EmployeeCo Specific Issue.
SPECIAL RESOLUTION NUMBER 1 – APPROVAL OF FINANCIAL ASSISTANCE TO EMPLOYEECO
“RESOLVED THAT, subject to the passing of Ordinary Resolution Number 1 and the passing of the relevant resolutions by the board of directors of Cargo Carriers in accordance with the provisions of sections 44(2) and/or 45(2) of the Companies Act, the provision of direct or indirect financial assistance by the Company to EmployeeCo by the Company subscribing for 100 non-convertible cumulative redeemable participating preference shares and 1 000 “B” ordinary shares in EmployeeCo for a total subscription consideration of R12 246 594, the proceeds of which will be used by EmployeeCo to subscribe for the EmployeeCo Subscription Shares, in accordance with the terms of the EmployeeCo Reciprocal Subscription Agreement, be and is hereby approved.”
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Explanatory note
The reason for Special Resolution Number 2 is to permit the granting by the Company of financial assistance to EmployeeCo in connection with its subscription of the EmployeeCo Subscription Shares.
In terms of the Companies Act, Special Resolution Number 1 requires the approval of at least 75% (seventy-five percent) of the voting rights exercised on the resolution.
SPECIAL RESOLUTION NUMBER 2 – AUTHORITY FOR EMPLOYEECO SPECIFIC ISSUE IN TERMS OF SECTION 41(1) OF THE COMPANIES ACT
“RESOLVED THAT, in accordance with the provisions of section 41(1) of the Companies Act, the issue of the EmployeeCo Subscription Shares to EmployeeCo, which is or may become an inter-related company to some of the Directors and/or prescribed officers of Cargo Carriers, at a subscription price of R11.63 per share for a total subscription consideration of R12 246 594, in accordance with the terms of the EmployeeCo Reciprocal Subscription Agreement, be and is hereby approved.”
Explanatory note
The reason for this Special Resolution Number 2 is to permit the Company to effect the EmployeeCo Specific Issue in accordance with the provisions of section 41(1) of the Companies Act as EmployeeCo is or may in the future be deemed to be a related or inter-related persons to certain of the Directors and/or prescribed officers of the Company.
In terms of the Companies Act, Special Resolution Number 2 requires the approval of at least 75% (seventy-five percent) of the voting rights exercised on the resolution.
ORDINARY RESOLUTION NUMBER 2 – AUTHORITY GRANTED TO DIRECTORS
“RESOLVED THAT, each director of Cargo Carriers be and is hereby individually authorised, on behalf of the Company, to enter into, sign and/or dispatch any and all such agreements, documents and notices, as may be necessary, expedient or desirable (in each case in the opinion of such director) and do all such other things and procure the doing of all such things as may be necessary for or incidental to the implementation of the EmployeeCo Transaction and should any such agreements, documents or notices have been signed, or any such action been taken before the date of this Ordinary Resolution Number 2, such signature or action be and is hereby ratified and approved.”
Explanatory note
Unless otherwise stated in relation to any particular resolution, ordinary resolutions to be adopted at this general meeting require the support of a simple majority, which is more than 50% of the voting rights exercised on the resolutions.
The adoption of this Ordinary Resolution Number 2 will authorise any director of the Company to execute all documents and do all such further acts and things as he may in his discretion consider appropriate to implement and give effect to the resolutions set out in this notice of general meeting.
VOTING AND PROXIES
It must be noted that shares held by the Company’s trust/s or share scheme/s or subsidiaries will not have their votes taken into account for resolution approval purposes.
A shareholder entitled to attend and vote at the general meeting is entitled to appoint a proxy or proxies to attend, speak and vote in his/her stead. A proxy need not be a member of the Company. For the convenience of registered shareholders of the Company, a form of proxy is enclosed herewith.
The attached form of proxy is only to be completed by those shareholders who:
– hold Cargo Carriers shares in certificated form; or– are recorded on the electronic sub-register in “own name” dematerialised form.
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Shareholders who hold dematerialised shares which are registered in their name or if they are the registered holder of certificated shares may attend the general meeting in person, alternatively, they may appoint a proxy or proxies, who need not be a shareholder of the Company to represent them at the general meeting by completing the attached form of proxy in accordance with the instructions it contains. Forms of proxy should be forwarded to reach the transfer secretaries of the Company, Computershare Investor Services Proprietary Limited, at Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) at least 48 hours, excluding Saturdays, Sundays and South African public holidays, before the time of the general meeting. Any form of proxy not delivered by this time may be handed to the chairman of the general meeting immediately before the appointed proxy exercises any of the shareholder’s votes at the general meeting.
Meeting participants, which includes proxies, are required in terms of section 63(1) of the Companies Act to provide identification reasonably satisfactory to the Chairperson of the general meeting before being entitled to attend, participate in or vote at a shareholders’ meeting. The Company will regard the presentation of participants’ original drivers’ licences, identity documents or passports to be satisfactory “identification”.
By order of the Board
Arbor Capital Company Secretarial Proprietary LimitedCompany Secretary
Johannesburg23 March 2016
Registered office11A Grace RoadMountainviewObservatory, 2198(Private Bag X555, Houghton, 2041)
(Incorporated in the Republic of South Africa)(Registration number 1959/003254/06)
Share code: CRG ISIN: ZAE000001764(“Cargo Carriers” or “the Company”)
FORM OF PROXY
For use only by shareholders who:
• hold shares in certificated form (“certificated shareholders”); or• have dematerialised their shares (“dematerialised shareholders”) and are registered with “own name” registration,
at the General Meeting of shareholders of the Company to be held at 09:30 on Thursday, 5 May 2016 at the registered office of Cargo Carriers, 11A Grace Road, Mountainview, Observatory, 2198.
Dematerialised shareholders holding shares other than with “own name” registration, who wish to attend the general meeting must inform their CSDP or broker of their intention to attend the general meeting and request their CSDP or broker to issue them with the relevant letter of representation to attend the general meeting in person or by proxy and vote. If they do not wish to attend the general meeting in person or by proxy, they must provide their CSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and the CSDP or broker. These shareholders must not use this form of proxy.I/We (full name/s in block letters)
of (address)
Telephone work ( ) Telephone home ( )
Cellphone number Email address
being the holder/custodian of shares of the Company, hereby appoint (see note):
1. or failing him/her,
2. or failing him/her,
3. the Chairperson of the general meeting,as my/our proxy to attend and act for me/us and on my/or behalf at the general meeting of the Company convened for purpose of considering and, if deemed fit, passing, with or without modification, the resolutions to be proposed thereat and at each postponement or adjournment thereof, and to vote for and/or against such resolutions, and/or to abstain from voting for and/or against the resolutions, in respect of the shares registered in my/our name in accordance with the following instructions:
Number of shares
For Against Abstain
Ordinary Resolution Number 1EmployeeCo Specific Issue for CashSpecial Resolution Number 1Approval of financial assistance to EmployeeCoSpecial Resolution Number 2Authority for EmployeeCo Specific Issue in terms of section 41(1) of the Companies ActOrdinary Resolution Number 2Authority granted to Directors
Please indicate instructions to proxy in the space provided by the insertion therein of the relevant number of votes exercisable.
Signed at on 2016
Signature
Assisted by (where applicable)
Each shareholder is entitled to appoint one or more proxies (who need not be a shareholder of the Company) to attend, speak and vote in place of that shareholder at the general meeting.
NOTES TO THE FORM OF PROXY
1. Summary of rights contained in section 58 of the Companies Act, 2008 (Act 71 of 2008), as amended (“Companies Act”).In terms of section 58 of the Companies Act:
• a shareholder may, at any time and in accordance with the provisions of section 58 of the Companies Act, appoint any individual (including an individual who is not a shareholder) as a proxy to participate in, and speak and vote at, a shareholders’ meeting on behalf of such shareholder;
• a proxy may delegate her or his authority to act on behalf of a shareholder to another person, subject to any restriction set out in the instrument appointing such proxy;
• irrespective of the form of instrument used to appoint a proxy, the appointment of a proxy is suspended at any time and to the extent that the relevant shareholder chooses to act directly and in person in the exercise of any of such shareholder’s rights as a shareholder;
• irrespective of the form of instrument used to appoint a proxy, any appointment by a shareholder of a proxy is revocable, unless the form of instrument used to appoint such proxy states otherwise;
• if an appointment of a proxy is revocable, a shareholder may revoke the proxy appointment by: (i) cancelling it in writing, or making a later inconsistent appointment of a proxy and (ii) delivering a copy of the revocation instrument to the proxy and to the company; and
• a proxy appointed by a shareholder is entitled to exercise, or abstain from exercising, any voting right of such shareholder without direction, except to the extent that the relevant company’s memorandum of incorporation, or the instrument appointing the proxy, provides otherwise (see note 7).
2. The form of proxy must only be used by shareholders who hold shares in certificated form or who are recorded on the sub-register in electronic form in “own name”.
3. All other beneficial owners who have dematerialised their shares through a CSDP or broker and wish to attend the general meeting must provide the CSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and the CSDP or broker.
4. A shareholder entitled to attend and vote at the general meeting may insert the name of a proxy or the names of two alternate proxies of the shareholder’s choice in the space provided, with or without deleting “the Chairperson of the general meeting”. The person whose name stands first on the form of proxy and who is present at the general meeting will be entitled to act as proxy to the exclusion of such proxy(ies) whose names follow.
5. A shareholder is entitled to one vote on a show of hands and, on a poll, one vote in respect of each ordinary share held. A shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that shareholder in the appropriate space provided. If an “X” has been inserted in one of the blocks to a particular resolution, it will indicate the voting of all the shares held by the shareholder concerned. Failure to comply with this will be deemed to authorise the proxy to vote or to abstain from voting at the general meeting as he/she deems fit in respect of all the shareholder’s votes exercisable thereat. A shareholder or the proxy is not obliged to use all the votes exercisable by the shareholder or by the proxy, but the total of the votes cast and in respect of which abstention is recorded may not exceed the total of the votes exercisable by the shareholder or the proxy.
6. A vote given in terms of an instrument of proxy shall be valid in relation to the general meeting, notwithstanding the death, insanity or other legal disability of the person granting it, or the revocation of the proxy, or the transfer of the shares in respect of which the proxy is given, unless notice as to any of the aforementioned matters shall have been received by the Company’s transfer secretaries, Computershare Investor Services Proprietary Limited (“transfer secretaries”), not less than 48 (forty-eight) hours before the commencement of the general meeting.
7. If a shareholder does not indicate on this form of proxy that his/her proxy is to vote in favour of or against any resolution or to abstain from voting, or gives contradictory instructions, or should any further resolution(s) or any amendment(s) which may properly be put before the general meeting be proposed, such proxy shall be entitled to vote as he/she thinks fit.
8. The Chairperson of the general meeting may reject or accept any form of proxy which is completed and/or received other than in compliance with these notes.
9. A shareholder’s authorisation to the proxy including the Chairperson of the general meeting, to vote on such shareholder’s behalf, shall be deemed to include the authority to vote on procedural matters at the general meeting.
10. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof.
11. Documentary evidence establishing the authority of a person signing the form of proxy in a representative capacity must be attached to this form of proxy, unless previously recorded by the transfer secretaries or is waived by the Chairperson of the general meeting.
12. A minor or any other person under legal incapacity must be assisted by his/her parent or guardian, as applicable, unless the relevant documents establishing his/her capacity are produced or have been registered by the transfer secretaries.
13. Where there are joint holders of shares: – any one holder may sign the form of proxy; – the vote(s) of the senior shareholders (for that purpose seniority will be determined by the order in which the names of shareholders appear in the Company’s register of ordinary shareholders) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint shareholder(s).
14. Forms of proxy should be lodged with or mailed to the transfer secretaries:
Hand deliveries to: Postal deliveriesComputershare Investor Services (Proprietary) Limited Computershare Investor Services (Proprietary) LimitedGround Floor PO Box 6105170 Marshall Street MarshalltownJohannesburg 21072001
to be received by no later than 09:30 on Tuesday, 3 May 2016 or 48 (forty-eight) hours before any adjournment of the general meeting which date, if necessary, will be notified on the Stock Exchange News Service of the JSE or may be handed to the Chairperson of the meeting immediately before the appointed proxy exercises any of the shareholder’s votes at the general meeting.
15. A deletion of any printed matter and the completion of any blank space need not be signed or initialled. Any alteration or correction must be signed and not merely initialled.
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