Pharos Energy : Circular and Notice of 2023 Annual General Meeting

Notice of the 2023 Annual General Meeting

of Pharos Energy plc

to be held at Storey Club, 100 Liverpool Street, London, EC2M 2AT on

25 May 2023 at 2.00 p.m.

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to what action you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser authorised under the Financial Services and Markets Act 2000.

If you have sold or otherwise transferred all your shares in Pharos Energy plc, please pass this document together with the accompanying documents as soon as possible to the purchaser or transferee, or to the agent through whom the sale or transfer was effected for onward transmission to the purchaser or transferee.

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LETTER FROM THE CHAIR

Registered Office

Eastcastle House

27/28 Eastcastle Street

London

W1W 8DH

United Kingdom

Incorporated in England and Wales. Registered No. 3300821

Directors:

John Martin (Non-Executive Chair)

Jann Brown (Chief Executive Officer)

Sue Rivett (Chief Financial Officer)

Marianne Daryabegui (Non-Executive Director)

Geoffrey Green (Non-Executive Director and Senior Independent Director)

Lisa Mitchell (Non-Executive Director)

20 April 2023

Dear Shareholder,

Pharos Energy plc ("the Company")

Annual General Meeting ("AGM")

After the disruption to our normal meeting format over the last three years, I am pleased to invite shareholders to attend the Company's 2023 Annual General Meeting in person. The meeting will be held at Storey Club, 100 Liverpool Street, London, EC2M 2AT on 25 May 2023 at 2.00 p.m.

For reasons of cost and logistics we are not offering the option of virtual participation in this year's AGM, but the Board recognises that some shareholders may still have reservations about attending the meeting in person. We also recognise that the AGM is an important event for shareholders in the corporate calendar, and we are committed to ensuring that shareholders can exercise their right to vote and ask questions in connection with this meeting. Accordingly, for those shareholders that do not wish to attend, or those that wish to attend and are unable to do so, questions in connection with the business of the AGM can be submitted on reasonable notice in advance of the meeting by email to [e-mail]. In so far as relevant to the business of the meeting questions will be responded to by email and taken into account as appropriate at the meeting itself.

Shareholder voting

Shareholders wishing to vote on any of the matters of business at the AGM are encouraged to submit their votes as soon as possible, and in any event no later than the relevant deadline, through the proxy and electronic voting facilities.

A Form of Proxy for use by shareholders in connection with the AGM has been sent to registered shareholders. You are requested to complete and return the Form of Proxy in accordance with its instructions so that it arrives no later than 2.00 p.m. on 23 May 2023. If you complete and return the Form of Proxy, you can still attend and vote at the AGM in person if you wish. Shareholders can also use the online voting and proxy appointment facility as detailed below.

Members may register their proxy appointments or vote electronically via the www.sharevote.co.uk website, where full details of the procedure are given. Members will need the Voting ID, Task ID and Shareholder Reference Number set out on the Form of Proxy. Alternatively, if members are registered with the Equiniti online portfolio service 'Shareview.co.uk', they can vote by logging on with their usual user ID and password.

Once logged in simply click "View" on the "My Investments" page, click on the link to vote then follow the on-screen instructions. Members are advised to read the terms and conditions of use carefully.

Electronic communication facilities are available to all shareholders and those who use them will not be disadvantaged. The Company will not accept any communication that is found to contain a computer virus.

The Notice of Meeting follows in Appendix II to this letter and sets out the business to be transacted. An explanation of each of the resolutions also follows in Appendix I to this letter. Accompanying this letter is a copy of the Company's Annual Report and Accounts for the year ended 31 December 2022.

Recommendation

Your Directors consider that the proposals outlined are in the best interests of the Company and its shareholders as a whole. Accordingly, your Directors recommend that you vote in favour of all resolutions to be proposed at the AGM, as they intend to do so in respect of their own beneficial holdings, which amount to 2,422,446 ordinary shares representing approximately 0.56% of the current issued ordinary share capital of the Company (excluding treasury shares) on the date of this letter. In making their recommendation, each Director being proposed for re-election abstains in relation to the resolution for their own re-election.

Yours sincerely,

John Martin

Chair

Pharos Energy Annual 20 April 2023 Shareholder Circular

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APPENDIX I

Explanation of the resolutions to be proposed at the AGM

1. Resolution 1: To Receive the Annual Report and Accounts
   This resolution is to receive the Annual Report and Accounts for the year ended 31 December 2022, including the Strategic, Directors' and Auditor's Reports and the Directors' Remuneration Report ('the Report and Accounts'), accompanying this circular to shareholders.
2. Resolution 2: To Declare a Dividend
   The Board has recommended a final dividend for the year ended 31 December 2022 of 1 pence per ordinary share, which amounts to approximately $5.46m (applying the average GBP/USD rate of exchange for 2022) and which, if approved at the AGM, will be paid on 12 July 2023 to shareholders on the register at the close of business on 16 June 2023.
3. Resolution 3: To Approve the Directors' Remuneration Policy
   This resolution reflects the regulations that require the Company to offer shareholders a binding vote on the Company's forward-looking Directors' remuneration policy ('the Directors' Remuneration Policy') whenever a new policy, or an amendment to the existing policy, is proposed and, in any event, at least every three years. Following the approval of the current Directors' Remuneration Policy granted at the AGM in 2020, this resolution seeks shareholder approval for the revised Directors' Remuneration Policy, which forms part of the Directors' Remuneration Report and can be found on pages 148 to 155 (inclusive) of the Report and Accounts and, in accordance with the Companies Act 2006 ('the Act'), reflects the requirement for a separate resolution on the Directors' Remuneration Policy part of the Directors' Remuneration Report to be put to a vote by shareholders. The Directors' Remuneration Report also contains a summary of the key changes to the existing Directors' Remuneration Policy in the revised Directors' Remuneration Policy on page 135.
   The vote on the Directors' Remuneration Policy is binding in that, once the policy is approved, the Company will not be able to make a remuneration payment to a Director or prospective Director or a payment for loss of office to a Director or past Director, unless that payment is consistent with the policy or has been specifically approved by a resolution of the Company's shareholders. If this resolution is approved, the effective date of the revised Directors' Remuneration Policy will be 25 May 2023. If the resolution is not passed at the AGM, the Company is required to bring a revised Directors' Remuneration Policy to shareholders for approval within a year.
   Payments will continue to be made to Directors and former Directors (in their capacity as Directors) in line with existing contractual arrangements until that date. Once the Directors' Remuneration Policy is approved, all payments to current, former and prospective Directors (in their capacity as Directors) will be made in line with the Directors' Remuneration Policy or following specific shareholder approval. The Directors' Remuneration Policy will be submitted to shareholders for a vote at least every three years, and at such time that a revision is proposed.
4. Resolution 4: Approval of the Directors' Remuneration Report
   This resolution seeks, in accordance with section 439 of the Act, shareholder approval for the Directors' Remuneration Report (excluding the part containing the summary of the Directors' Remuneration Policy), which can be found on pages 134 to 155 (inclusive) of the Report and Accounts. The Directors' Remuneration Report gives details of the implementation of the current Directors' Remuneration Policy in connection with the performance of the Directors and that of the Company during the year ended 31 December 2022. This vote is advisory and will not affect the way in which the pay policy has been implemented and the Directors' entitlements to remuneration are not conditional upon the resolution being passed.
   The Company's Auditor during the year, Deloitte LLP, have audited those parts of the Directors' Remuneration Report required to be audited and their report may be found on pages 162 to 170 of the Report and Accounts.
5. Resolutions 5, 6, 7, 8, 9 and 10: Reappointment of Directors
   Resolutions 5-10 are for the reappointment as Directors of John Martin, Jann Brown, Sue Rivett, Marianne Daryabegui, Geoffrey Green and Lisa Mitchell, each of whom will retire at this AGM as explained on page 126 of the Report and Accounts and are being proposed for reappointment.
   The reappointment of each Director is recommended by the Board in consideration of the results of their individual performance evaluation and demonstration of their continued commitment and effectiveness as confirmed by the Chair in respect of the Non-Executive Directors and by the Senior Independent Director in respect of the Chair. Biographical details of all Directors are set out on pages 113 to 114 of the Report and Accounts.
6. Resolution 11: Reappointment of Auditor
   The Act requires that auditors be appointed at each general meeting at which accounts are laid to hold office until the next such meeting. The appointment of Deloitte LLP as Auditor of the Company terminates at the conclusion of the AGM. This is a resolution to reappoint Deloitte LLP as Auditor of the Company to hold office from the conclusion of this AGM until the conclusion of the next AGM at which accounts are laid before the Company. The Audit and Risk Committee keeps under review the independence and objectivity of the external auditors and further information can be found in the Report and Accounts on page 133. After considering the relevant information, the Audit and Risk Committee has recommended to the Board that Deloitte LLP be reappointed as Auditor. As noted in the report of the Audit and Risk Committee on pages 132 to 133 of the Report and Accounts, the financial year ending 31 December 2023 will, subject to the passing of the resolution for their reappointment, be Deloitte LLP's final year as Auditor of the Company.
7. Resolution 12: Auditor's Remuneration
   It is normal practice for shareholders to resolve at the AGM to authorise the Directors to determine the level of remuneration of the Auditor for the audit work to be carried out by them in the next financial year. The amount of the remuneration paid to the Auditor for the next financial year will be disclosed in the next audited accounts of the Company and this resolution proposes that such remuneration will be agreed by the Audit and Risk Committee on behalf of the Directors.
8. Resolution 13: Directors' Authority to Allot Securities
   Your Directors may allot new shares, or grant rights to subscribe for or convert any security into shares in the Company, only if authorised to do so by shareholders. The Directors were so authorised at the Company's AGM in 2022, with such authorisation to expire at the conclusion of this AGM.
   Resolution 13 will be proposed as an ordinary resolution to grant new authorities (in substitution for all existing authorities) to allot: (a) shares, or grant rights to subscribe for or convert any security into shares, up to an aggregate nominal amount of £7,188,302 (representing 143,766,040 ordinary shares of £0.05 each), and (b) equity securities up to an aggregate nominal amount of £7,188,302 (representing 143,766,040 ordinary shares of £0.05 each), where the allotment is in connection with a rights issue.
   In accordance with guidance issued by the Investment Association, these amounts in aggregate represent approximately two thirds of the issued ordinary share capital of the Company (excluding 9,122,268 treasury shares of £0.05 each which represent 2.07% of the issued ordinary share capital) as at
   20 April 2023, the latest practicable date prior to the publication of this Notice of Meeting. Of this amount, £7,188,302 (representing approximately one third of the Company's issued ordinary share capital excluding treasury shares) can only be allotted pursuant to a rights issue. If granted, these authorities will expire at the AGM in 2024 (or, if earlier, at the close of business on 30 June 2024). The Directors have no present intention of issuing shares pursuant to this authority, except under Resolution 13(a) to satisfy the exercise of options under the Company's employee share option schemes, but the Directors wish to ensure that the Company has maximum flexibility in managing the Company's capital resources.

• Pharos Energy Annual 20 April 2023 Shareholder Circular

1. Resolutions 14 and 15: Disapplication of Pre-Emption Rights
   Resolutions 14 and 15 seek to renew the existing authority from shareholders to the Directors to allot equity securities and/or sell treasury shares where they propose to do so for cash and otherwise than in accordance with the statutory pre-emption rights of shareholders. Under section 561(1) of the Act, if the Directors wish to allot shares, or grant rights to subscribe for, or convert securities into shares, or sell treasury shares for cash (other than pursuant to an employee share scheme), the shares must first be offered to existing shareholders pro rata to their holdings. Resolutions 14 and 15 seek a limited waiver or disapplication of this requirement.
   In line with institutional shareholder guidance and, in particular, in accordance with the Pre-Emption Group's Statement of Principles, as updated in November 2022 (the 'Statement of Principles'), Resolutions 14 and 15 will be proposed as two separate special resolutions.
   Resolution 14 is proposed in three parts.
   The first part of Resolution 14 (paragraph (a)) is limited to the allotment of shares for cash on a pre-emptive basis to allow the Directors to make appropriate exclusions and other arrangements in connection with a rights issue, where application of section 561(1) of the Act could result in fractional entitlements to shares arising or require the issue of shares where this would be impractical because of legal or regulatory requirements in any given overseas jurisdiction.
   The second part of Resolution 14 (paragraph (b)) is limited to the allotment of shares for cash (or, as the case may be, the sale of treasury shares for cash) up to an aggregate of 43,129,800 ordinary shares of £0.05 each. This number represents approximately 10% of the issued ordinary share capital of the Company (excluding treasury shares) as at 20 April 2023 (the latest practicable date prior to publication of this Notice of Meeting) and is in line with the Statement of Principles.
   The third part of Resolution 14 (paragraph (c)) applies to the allotment of shares for cash (or, as the case may be, the sale of treasury shares for cash) for the purposes of a follow-on offer when an allotment of shares or sale of treasury shares has been made under the second part of Resolution 14 ("follow- on offer" having the meaning given to it in the Statement of Principles). The third part of Resolution 14 is limited to the allotment of shares (or, as the case may be, the sale of treasury shares) having an aggregate nominal value of up to 20% of the nominal value of any shares allotted or sold under the authority conferred by the second part of Resolution 14.
   Resolution 15 is proposed in two parts.
   The first part of Resolution 15 (paragraph (a)) is limited to the allotment of shares for cash (or, as the case may be, the sale of treasury shares for cash) up to an additional 43,129,800 ordinary shares of £0.05 each. This number represents approximately 10% of the issued ordinary share capital of the Company (excluding treasury shares) as at 20 April 2023 (the latest practicable date prior to publication of this Notice of Meeting). Consistent with the Statement of Principles, this authority may only be used in connection with an acquisition or specified capital investment which is announced contemporaneously with the allotment or sale, or which has taken place in the preceding twelve-month period and is disclosed in the announcement of the allotment or sale.
   The second part of Resolution 15 (paragraph (b)) applies to the allotment of shares for cash (or, as the case may be, the sale of treasury shares for cash) for the purposes of a follow-on offer when an allotment of shares or sale of treasury shares has been made under the first part of Resolution 15. The second part of Resolution 15 is limited to the allotment of shares (or, as the case may be, the sale of treasury shares) having an aggregate nominal value of up to 20% of the nominal value of any shares allotted or sold under the authority conferred by the first part of Resolution 15.
   In exercising the authorities conferred by the second or third parts of Resolution 14, or the first or second parts of Resolution 15, the Directors intend to adhere to the shareholder protections and other provisions set out in the Statement of Principles.
   The Directors have no present intention to exercise the authorities conferred by Resolutions 14 and 15, if passed. However, the Directors consider it desirable to have the maximum flexibility permitted by corporate governance guidelines to respond to market developments and to enable allotments to take place to finance business opportunities without making a pre-emptive offer to existing shareholders.
   Furthermore, if any of the authorities are exercised, the Company will publish in the next Annual Report and Accounts:
2. • The actual level of discount achieved;
   • The net proceeds raised;
   • How those net proceeds were used; and
   • The percentage increase in issued ordinary share capital due to non-pre-emptive issuance for cash over the three-year period preceding the issue.

If granted, the authorities contained in Resolutions 14 and 15 will expire at the conclusion of the AGM in 2024, (or, if earlier, at the close of business on 30 June 2024) unless previously renewed, varied or revoked by the Company in general meeting.

1. Resolution 16: Authority for the Company to Buy Back Shares
   This resolution will give the Company authority to purchase its own shares in the market up to a limit of 10% of its issued ordinary share capital (excluding treasury shares) at 20 April 2023, the latest practicable date prior to the publication of this Notice of Meeting. The maximum and minimum prices, exclusive of expenses, are stated in the resolution.
   Your Directors believe that it is advantageous for the Company to have this flexibility to make market purchases of its own shares. As announced on
   12 January 2023, the Company has committed up to US$3 million (net of expenses) to its current on-market share repurchase programme and, subject to the passing of this resolution, it intends to continue this programme. Other than the continuation of the programme, the Directors have no present intention for the Company to exercise the authority granted by this resolution, and will exercise this authority only if they are satisfied that a purchase would result in an increase in expected earnings per share and would be in the interests of shareholders generally.
   Shares purchased by the Company pursuant to this authority may be held in treasury or may be cancelled. The Company will consider holding repurchased shares pursuant to the authority as treasury shares. This would give the Company the ability to re-issue treasury shares quickly and cost effectively and would provide the Company with additional flexibility in the management of its capital base. Any issues of treasury shares for the purposes of the Company's employee share schemes will be made within the 10% anti-dilution limit set by the Investment Association.
   As at 20 April 2023 (the last practicable date prior to publication of this Notice of Meeting), the total number of options over ordinary shares of £0.05 each that were outstanding under all of the Company's share option plans was 27,872,126, which if exercised would represent 6.46% of the Company's issued ordinary share capital at that date (excluding treasury shares). In practice it is anticipated that 2,126,857 options would be satisfied by shares

Pharos Energy Annual 20 April 2023 Shareholder Circular

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