Crystal Amber Regulatory News (CRS)

6 March 2014 Crystal Amber Fund Limited ("the Company" or "Crystal Amber") Crystal Amber, a 10% shareholder in Leaf Clean Energy Company (`Leaf'), torequisition an Extraordinary General Meeting of Leaf to change Board andinvestment strategy Reason for calling the EGM Since Crystal Amber acquired its shareholding in Leaf in October 2013, it hasattempted to engage constructively with the Board of Leaf to explore ways toenhance shareholder value. It is Crystal Amber's view that the Board has notadequately addressed three key issues: visibility of the underlying values ofLeaf's investments, the current scale of annual running costs of Leaf, and itsshare price, which as at close of business on 5 March 2014 (49p) traded at a 47per cent discount to the last reported net asset value of 93.80p on 30 June2013. Leaf's track record In July 2007, Leaf raised $386 million (after expenses of approximately $13million) at IPO. Between 2009 and 2012, Leaf purchased 71.3 million of its ownshares at a cost of $79.3 million. Adjusting for these market purchases wouldreduce the net amount originally invested at IPO to $306.7 million. At 30 June2013, net assets were $183.7 million. At 30 June 2013, accumulated retained losses were $123 million, whichrepresents a 40.1 per cent fall in net assets from IPO, after adjusting for theshare buybacks. Leaf reports in US dollars. Accordingly, in sterling terms thedecline in net asset value has been less pronounced as a result of theappreciation in the US Dollar relative to sterling. However, as most of Leaf'sportfolio is concentrated in the US, it is the performance in US dollars onwhich the Board of Leaf should be judged. In the year to 30 June 2013, Leaf's administrative expenses were $5.17 million(2012 - $5.49 million). These expenses include payments to the directors, whichcomprise one executive and three non-executive directors, of $1.17 million inthe year to 30 June 2013 (2012 - $1.25 million). In the year to 30 June 2013,Bran Keogh, Leaf's Chief Executive, earned $750,000, which included a cashbonus of $350,000, and Peter Tom, Leaf's Chairman, earned $200,000, in bothcases the same as in the year to 30 June 2012. Crystal Amber notes that theonly two directors on the Remuneration Committee are Peter Tom and Bran Keogh. Leaf's issued share capital comprises approximately 128.7 million shares. Theboard of Leaf owns, in aggregate, 817,500 shares, which is less than one percent of Leaf's equity. Crystal Amber's dialogue with the Board of Leaf In October 2013, Crystal Amber acquired 8.7 per cent of Leaf's issued sharecapital from two independent institutions. In the following week, Crystal Ambermade market purchases to increase its shareholding to 10 per cent. On 14November, 2013, Crystal Amber met with the Chairman and the Chief Executive ofLeaf. On 2 December 2013, Crystal Amber wrote to the Chairman of Leaf settingout its concerns relating to the scale of the share price discount to net assetvalue and identified two issues, which in its view, needed to be solved.Firstly, using discounted future cash flow forecasts to value businesses whichare currently not cash generative is a wholly assumptions based approachreliant upon estimates of future cash flows. No information on revenues orearnings is provided which would enable market participants to have greatervisibility as to the current financial position of each underlying investment.The second issue is that of mthe scale of Leaf's annual running costs. CrystalAmber also stated that it was baffled by the scale of running costs, given allbut three of Leaf's investments are passive. Crystal Amber subsequently met with the Chief Executive of Leaf on 12 December2013. In January 2014, the Chairman wrote to Crystal Amber stating that theBoard of Leaf is `not happy about the current discount to NAV' and `it is anissue which we have in the front of our minds'. Regarding the scale of runningcosts, the Chairman stated `you should be reassured that the Board continues tobe focussed on cost reduction'. On 31 January 2014, Crystal Amber responded stating that in its assessment Leafshould be placed into an orderly run off mode and that Bran Keogh, the ChiefExecutive should stand down following a three month handover period. CrystalAmber suggested a replacement for the Board's earliest consideration: MarkLerdal, who has an enviable track record in the renewable energy andsustainable technology space. For the last five years, Mark Lerdal has been a partner in MP2 Capital, LLC,which develops, finances operates distributed generation and small-scaleutility solar projects throughout North America. He is also a non-executivedirector of Trading Emissions plc and Onsite Energy Corp. He has been involvedin the energy industry for thirty years as an operating executive, investor andattorney. On 13 February 2014, the Chairman's response was that `we continue as a Boardto keep both strategy and execution under close review and remain focussed onthe delivery of both' and that he would be happy to meet with Crystal Amber atthe end of March 2014. Crystal Amber believes that the current board is not acting in the bestinterests of the shareholders of Leaf as a whole and following the aboveresponses feels that it has no alternative but to requisition an ExtraordinaryGeneral Meeting of Leaf in order to seek to address the issues that CrystalAmber has identified. A requisition notice will be lodged at the registeredoffice of Leaf in the Cayman Islands later today. Resolutions to be proposed at the Extraordinary General Meeting Crystal Amber is proposing that Leaf be placed into orderly run off and thatMark Lerdal be given the responsibility of realising Leaf's investmentportfolio in a timely manner and returning the net assets to shareholders. Itis proposed that Mark Lerdal is paid a base salary of $250,000 per annumtogether with an increasing incentive fee based on the amount of cash returnedto shareholders per share. Crystal Amber is also proposing that Stephen Coe isappointed as a non-executive director of the Company, at an annual fee of$70,000. Stephen Coe is a chartered accountant. After leaving Price Waterhouse in 1997,he worked in the fiduciary services industry with Bachmann Group and InvestecTrust (Guernsey) Limited. He became self-employed in August 2006 providingservices to financial services clients and is a director of a number of listedand unlisted investment funds and offshore companies including Raven RussiaLimited, European Real Estate Investment Trust Limited, South African PropertyOpportunities PLC, Weiss Korean Opportunities Fund Limited and Trinity CapitalPLC (and serves as Chairman of the Audit Committee for these companies). The resolutions are as follows: A. To Replace Directors of the Company Pursuant to Article 142 of the Articles: 1. to consider, and if thought fit, pass an ordinary resolution to remove Bran Keogh as a director with immediate effect; 2. to consider, and if thought fit, pass an ordinary resolution to remove Peter Tom as a director with immediate effect; 3. to consider, and if thought fit, pass an ordinary resolution to appoint Mark Lerdal as a director with immediate effect; and 4. to consider and if thought fit, pass an ordinary resolution to appoint Stephen Coe as a director with immediate effect. B. Amendment of the Investment Policy of the Company To consider, and if thought fit, pass an ordinary resolution to amend theinvestment policy of the Company to the following: "to carry out an orderlyrealisation of the Company's investments in a timely manner and to distributethe net proceeds to the Members (subject always to the Company's workingcapital requirements and the Company's ability to make further investments ifsuch investments are required in order to protect or enhance the value of anyof the Company's existing investments)". C. Amend the Articles and Approve Director Remuneration 1. Pursuant to Article 85.2 of the Articles, to consider, and ifthought fit, pass a special resolution to replace Article 184 of the Articleswith the following new Article 184: "The remuneration to be paid to the Directors, if any, shall be suchremuneration as the Directors shall determine, save that the Members byOrdinary Resolution may determine the remuneration of Mark Lerdal and StephenCoe provided that in the absence of any such Ordinary Resolution the Directorsshall determine the remuneration of Mark Lerdal and Stephen Coe. The Directorsshall also be entitled to be paid all travelling, hotel and other expensesproperly incurred by them in connection with their attendance at meetings ofDirectors or committees of Directors, or general meetings of the Company, orseparate meetings of the holders of any class of Shares or debentures of theCompany, or otherwise in connection with the business of the Company, or toreceive a fixed allowance in respect thereof as may be determined by theDirectors, or a combination partly of one such method and partly the other.". 2. If the resolution at C). 1 above is passed, to consider, and ifthought fit, pass an ordinary resolution to approve the remuneration packagesof Mark Lerdal and Stephen Coe, which will be set out in the appendix to thenotice. For further enquiries please contact: Crystal Amber Advisers (UK) LLP - Investment AdviserRichard BernsteinTel: 020 7478 9080 Crystal Amber Fund LimitedWilliam Collins (Chairman)Tel: 01481 716 000 Sanlam Securities UK Limited - Nominated AdviserDavid Worlidge/Simon ClementsTel: 020 7628 2200 Numis Securities Limited - BrokerNathan Brown/Hugh JonathanTel: 020 7260 1426