Further open letter to T1 shareholders and board

 

TIDMGEM 
 
 
Gemfields PLC 
16 April 2009 
 
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Gemfields plc 
Further open letter to the shareholders and board of TanzaniteOne Limited 
16 April 2009 
 
 
Gemfields plc ("Gemfields" or "the Company", Ticker "GEM"), Amarivest Limited 
and Rox Conduit Limited present a further open letter to the shareholders and 
board of TanzaniteOne Limited ("T1"). The letter notes the following: 
  *  Given the inability of A Class shareholders to vote at the SGM (due to a failure 
  by T1 to provide correct proxy forms) and the possible use by the T1 directors 
  of the B Shares they created to block a takeover by Gemfields, the T1 directors 
  could control in excess of 66% of the SGM vote (as opposed to less than 20% in a 
  fair representation of T1's shareholder base); and 
  *  The T1 Board justify continuing with the SGM based on legal advice despite 
  having seemingly relied erroneously on advice during the original issuance of 
  the B Shares. 
 
 
 
 
 
ENQUIRIES: 
 
 
Media and analysts:  College Hill Associates 
UK:  Paddy Blewer [phone] 
SA:Johannes Van Niekerk [phone] 
 
Gemfields plcRichard James, CFO 
[phone] 
[e-mail] 
 
 
Amarivest Ltd    Mark Summers, CFO 
[phone] 
[e-mail] 
 
 
Canaccord Adams LimitedMike Jones/Tarica Mpinga+44 (0)20 7050 6500 
 
FURTHER OPEN LETTER TO ALL SHAREHOLDERS OF TANZANITEONE LIMITED 
 
 
CC:     The Directors 
            TanzaniteOne Limited 
           Clarendon House 
            2 Church Street 
            Hamilton, HM 11 
            Bermuda 
 
 
16 April 2009 
 
 
Dear T1 Shareholders, 
 
 
The Special General Meeting ("SGM") re-scheduled for 16 April 2009 
 
 
Amarivest Ltd ("Amarivest"), Gemfields plc ("Gemfields") and Rox Conduit Ltd 
("Rox") note the announcement issued by TanzaniteOne Limited ("T1") on 15 April 
2009 in response to Gemfields' open letter dated 14 April 2009. 
 
 
SGM RESOLUTION VOTING AND SHAREHOLDINGS 
 
 
The following table summarises the T1 shareholding structure should the T1 
directors conduct the SGM in a manner fairly reflecting T1's shareholder base 
(which would mean, in our opinion, not voting the B Shares and allowing A Class 
shareholders to vote, the effect of which would be that the proposed SGM 
resolutions to amend T1's bye-laws and increase T1's authorised share capital 
could not be passed): 
 
 
+-------------------+---------------+--------------------------------------+--------------------------------------+ 
| VOTES             | VOTING SHARES | %                                    | NOTE                                 | 
+-------------------+---------------+--------------------------------------+--------------------------------------+ 
| AGAINST THE       |    13,960,000 |                                  17% | A Class shares (convertible into T1  | 
| RESOLUTIONS (34%) |               |                                      | common shares) controlled by         | 
|                   |               |                                      | Amarivest                            | 
+                   +---------------+--------------------------------------+--------------------------------------+ 
|                   |        11,668,330 |           14% | Common shares beneficially owned by  | 
|                   |                   |               | Gemfields                            | 
+                   +-------------------+---------------+--------------------------------------+ 
|                   |         2,100,000 |            3% | Common shares beneficially owned by  | 
|                   |                   |               | Rox Conduit Ltd                      | 
+-------------------+-------------------+---------------+--------------------------------------+ 
| FOR THE           |    14,688,774 |                                  18% | Shares disclosed as beneficially     | 
| RESOLUTIONS (18%) |               |                                      | owned by T1 directors (including     | 
|                   |               |                                      | Michael Adams, former Chairman and   | 
|                   |               |                                      | T1 director)                         | 
+-------------------+---------------+--------------------------------------+--------------------------------------+ 
| POSITION UNKNOWN  |     3,343,088 |                                   4% | Other A Class shares                 | 
| (48%)             |               |                                      |                                      | 
+                   +---------------+--------------------------------------+--------------------------------------+ 
|                   |        36,139,808 |           44% | Other common shares                  | 
+-------------------+-------------------+---------------+--------------------------------------+ 
|                   |    81,900,000 |                                 100% | "Issued Share Capital" as per T1     | 
|                   |               |                                      | website and T1 announcement of 18    | 
|                   |               |                                      | March 2009                           | 
+-------------------+---------------+--------------------------------------+--------------------------------------+ 
 
 
Due to their fundamental importance to the protection of shareholder rights, 
amendments to company bye-laws (and increases in authorised share capital) 
generally require a high threshold of shareholders (not directors) to approve 
changes. In the case of T1, a 75% shareholder approval threshold is required. 
Naturally this implies that shareholders controlling 25% of the vote can block 
the proposed changes to the bye-laws and the increase in the share capital. 
Amarivest, Gemfields and Rox control more than 30% of the vote (excluding the B 
Shares controlled by the T1 directors) and, therefore, as is clear from the 
table above, it should be impossible for any of the resolutions to be passed at 
the SGM. 
 
 
Amarivest and Gemfields, the two largest shareholders in T1, and Rox have 
clearly, directly and publicly made their opposition to all the proposed SGM 
resolutions widely known. Furthermore, should any doubt exist in the minds of 
the T1 Board, and notwithstanding any technical matters the T1 Board might seek 
to identify, Amarivest, Gemfields and Rox hereby advise the T1 Board of their 
wish that all necessary steps be taken to ensure that all of their respective 
shares are voted against the resolutions to be proposed at the SGM. 
 
 
In light of the above, if any of the resolutions are passed at today's SGM, one 
or both of the following will have occurred: 
 
 
  *  the T1 Board will have elected to vote the B Shares (which are controlled by the 
  T1 Board and therefore represent the views of directors rather than 
  shareholders); and/or 
 
 
 
  *  the omission by T1 to send the correct proxy forms to A Class shareholders will 
  have resulted in the wishes of A Class shareholders (including Amarivest) not 
  being taken into account. 
 
 
 
If the B Shares are voted by the T1 Board (and given the A Class shareholders 
cannot validly vote because T1 failed to provide the correct proxy forms), 
voting at the SGM could take the following form: 
 
 
+-------------------+---------------+--------------------------------------+--------------------------------------+ 
| VOTES             | VOTING SHARES |                  %                   | NOTE                                 | 
+-------------------+---------------+--------------------------------------+--------------------------------------+ 
| AGAINST THE       |    11,668,330 |                                   8% | Common shares beneficially owned by  | 
| RESOLUTIONS (9%)  |               |                                      | Gemfields                            | 
+                   +---------------+--------------------------------------+--------------------------------------+ 
|                   |         2,100,000 |            1% | Common shares beneficially owned by  | 
|                   |                   |               | Rox Conduit Ltd                      | 
+-------------------+-------------------+---------------+--------------------------------------+ 
| FOR THE           |    83,739,976 |                                  56% | B Shares controlled by the T1 Board  | 
| RESOLUTIONS (66%) |               |                                      | (issued to a T1 subsidiary on 25     | 
|                   |               |                                      | October 2008 in order to block       | 
|                   |               |                                      | Gemfields' attempted takeover and    | 
|                   |               |                                      | which expire on 25 April 2009)       | 
+                   +---------------+--------------------------------------+--------------------------------------+ 
|                   |        14,688,774 |           10% | Shares disclosed as beneficially     | 
|                   |                   |               | owned by T1 directors (including     | 
|                   |                   |               | Michael Adams, former Chairman and   | 
|                   |                   |               | T1 director)                         | 
+-------------------+-------------------+---------------+--------------------------------------+ 
| POSITION UNKNOWN  |   36, 139,808 |                                  24% | Other common shares                  | 
| (24%)             |               |                                      |                                      | 
+-------------------+---------------+--------------------------------------+--------------------------------------+ 
|                   |   148,336,888 |                                 100% | "Issued Share Capital" less A Class  | 
|                   |               |                                      | shares plus B Shares                 | 
+-------------------+---------------+--------------------------------------+--------------------------------------+ 
 
 
By voting the B Shares, and inhibiting the ability of A Class shareholders to 
vote by dispatching incorrect proxy forms, the T1 Board could control up to 66% 
of the votes capable of being cast at the SGM (very close to the 75% threshold 
required to pass the resolutions). In reality, the percentage of the votes 
controlled by the T1 Board is likely to be even higher given that many T1 
shareholders (shown in the tables as "Position Unknown") will not have voted. In 
our opinion, this cannot be a fair representation of the wishes of shareholders. 
 
 
LEGAL ADVICE AND THE A CLASS SHARES 
 
 
Notwithstanding the inability of A Class shareholders to vote due to omissions 
by T1, we note that T1 justify proceeding with the SGM on the grounds that "The 
Board has received confirmation from its legal advisers that the Special General 
Meeting ("SGM") has been convened in the appropriate manner and in compliance 
with all necessary procedures." 
 
 
As shareholders are no doubt aware, we consider that the T1 Board erroneously 
relied on legal advice in relation to the original implementation of the B Share 
Scheme: 
 
 
  *  On 29 October 2008, Gemfields issued an open letter advising T1 of its belief 
  that the B Share Scheme contravened South African exchange control provisions 
  (the B Shares were issued to a T1 South African subsidiary, as can be confirmed 
  by T1's announcement of 25 October 2008). 
 
 
 
  *  In response, on 29 October 2008, T1 issued a statement (available from the T1 
  website) stating that: "[the T1 Board] confirms it has been advised that the 
  issuance of B shares announced on 25th October 2008 does not contravene the 
  Exchange Control Regulations of South Africa." 
 
 
 
  *  In its letter to T1 shareholders on 4 November 2008, T1 reiterated its view that 
  "The Board is also satisfied that, as announced on 29 October 2008, the issue of 
  the B Shares does not contravene the Exchange Control Regulations of South 
  Africa." 
 
 
 
  *  Only when Amarivest obtained a letter directly from the South African Reserve 
  Bank stating that the B Share Scheme clearly contravened South African exchange 
  control provisions (available at 
  www.amariholdings.com/docs/Di5520811280845.PDF), did T1 appear to remedy the 
  breach by transferring the B Shares from its South African structure to its 
  Bermudan subsidiary (as can be confirmed by the announcement on T1's website 
  dated 3 December 2008). 
 
 
 
Given this history of seemingly erroneous reliance on external advice, we 
presume that each T1 director has personally satisfied himself that T1 has 
complied materially with the correct procedures in relation to voting at the SGM 
by A Class shareholders. 
 
 
In addition, the relevant legal advisors are cordially invited to contact Mr 
Mark Summers of Amarivest (on [phone]) who would be happy to explain the 
material errors that have been made. 
 
 
Yours sincerely, 
 
 
Sean Gilbertson     Mark Summers    Clive Harris 
Executive Director    CFO    Director 
Gemfields plc     Amarivest Limited   Rox Conduit Limited 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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