Crystal Amber Fund Limited Requisition of EGM for Leaf Clean Energy Company

 
TIDMCRS TIDMLEAF 
 
6 March 2014 
 
                          Crystal Amber Fund Limited 
 
                      ("the Company" or "Crystal Amber") 
 
Crystal Amber, a 10% shareholder in Leaf Clean Energy Company (`Leaf'), to 
requisition an Extraordinary General Meeting of Leaf to change Board and 
investment strategy 
 
Reason for calling the EGM 
 
Since Crystal Amber acquired its shareholding in Leaf in October 2013, it has 
attempted to engage constructively with the Board of Leaf to explore ways to 
enhance shareholder value. It is Crystal Amber's view that the Board has not 
adequately addressed three key issues:  visibility of the underlying values of 
Leaf's investments, the current scale of annual running costs of Leaf, and its 
share price, which as at close of business on 5 March 2014 (49p) traded at a 47 
per cent discount to the last reported net asset value of 93.80p on 30 June 
2013. 
 
Leaf's track record 
 
In July 2007, Leaf raised $386 million (after expenses of approximately $13 
million) at IPO. Between 2009 and 2012, Leaf purchased 71.3 million of its own 
shares at a cost of $79.3 million. Adjusting for these market purchases would 
reduce the net amount originally invested at IPO to $306.7 million. At 30 June 
2013, net assets were $183.7 million. 
 
At 30 June 2013, accumulated retained losses were $123 million, which 
represents a 40.1 per cent fall in net assets from IPO, after adjusting for the 
share buybacks. Leaf reports in US dollars. Accordingly, in sterling terms the 
decline in net asset value has been less pronounced as a result of the 
appreciation in the US Dollar relative to sterling. However, as most of Leaf's 
portfolio is concentrated in the US, it is the performance in US dollars on 
which 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, which 
comprise one executive and three non-executive directors, of $1.17 million in 
the 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 cash 
bonus of $350,000, and Peter Tom, Leaf's Chairman, earned $200,000, in both 
cases the same as in the year to 30 June 2012. Crystal Amber notes that the 
only two directors on the Remuneration Committee are Peter Tom and Bran Keogh. 
 
Leaf's issued share capital comprises approximately 128.7 million shares. The 
board of Leaf owns, in aggregate, 817,500 shares, which is less than one per 
cent 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 share 
capital from two independent institutions. In the following week, Crystal Amber 
made market purchases to increase its shareholding to 10 per cent. On 14 
November, 2013, Crystal Amber met with the Chairman and the Chief Executive of 
Leaf. On 2 December 2013, Crystal Amber wrote to the Chairman of Leaf setting 
out its concerns relating to the scale of the share price discount to net asset 
value and identified two issues, which in its view, needed to be solved. 
Firstly, using discounted future cash flow forecasts to value businesses which 
are currently not cash generative is a wholly assumptions based approach 
reliant upon estimates of future cash flows. No information on revenues or 
earnings is provided which would enable market participants to have greater 
visibility as to the current financial position of each underlying investment. 
The second issue is that of mthe scale of Leaf's annual running costs. Crystal 
Amber also stated that it was baffled by the scale of running costs, given all 
but three of Leaf's investments are passive. 
 
Crystal Amber subsequently met with the Chief Executive of Leaf on 12 December 
2013.  In January 2014, the Chairman wrote to Crystal Amber stating that the 
Board of Leaf is `not happy about the current discount to NAV' and `it is an 
issue which we have in the front of our minds'.  Regarding the scale of running 
costs, the Chairman stated `you should be reassured that the Board continues to 
be focussed on cost reduction'. 
 
On 31 January 2014, Crystal Amber responded stating that in its assessment Leaf 
should be placed into an orderly run off mode and that Bran Keogh, the Chief 
Executive should stand down following a three month handover period. Crystal 
Amber suggested a replacement for the Board's earliest consideration: Mark 
Lerdal, who has an enviable track record in the renewable energy and 
sustainable 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-scale 
utility solar projects throughout North America.  He is also a non-executive 
director of Trading Emissions plc and Onsite Energy Corp.  He has been involved 
in the energy industry for thirty years as an operating executive, investor and 
attorney. 
 
On 13 February 2014, the Chairman's response was that `we continue as a Board 
to keep both strategy and execution under close review and remain focussed on 
the delivery of both' and that he would be happy to meet with Crystal Amber at 
the end of March 2014. 
 
Crystal Amber believes that the current board is not acting in the best 
interests of the shareholders of Leaf as a whole and following the above 
responses feels that it has no alternative but to requisition an Extraordinary 
General Meeting of Leaf in order to seek to address the issues that Crystal 
Amber has identified. A requisition notice will be lodged at the registered 
office 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 that 
Mark Lerdal be given the responsibility of realising Leaf's investment 
portfolio in a timely manner and returning the net assets to shareholders. It 
is proposed that Mark Lerdal is paid a base salary of $250,000 per annum 
together with an increasing incentive fee based on the amount of cash returned 
to shareholders per share. Crystal Amber is also proposing that Stephen Coe is 
appointed 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 Investec 
Trust (Guernsey) Limited. He became self-employed in August 2006 providing 
services to financial services clients and is a director of a number of listed 
and unlisted investment funds and offshore companies including Raven Russia 
Limited, European Real Estate Investment Trust Limited, South African Property 
Opportunities PLC, Weiss Korean Opportunities Fund Limited and Trinity Capital 
PLC (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 the 
investment policy of the Company to the following: "to carry out an orderly 
realisation of the Company's investments in a timely manner and to distribute 
the net proceeds to the Members (subject always to the Company's working 
capital requirements and the Company's ability to make further investments if 
such investments are required in order to protect or enhance the value of any 
of 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 if 
thought fit, pass a special resolution to replace Article 184 of the Articles 
with the following new Article 184: 
 
"The remuneration to be paid to the Directors, if any, shall be such 
remuneration as the Directors shall determine, save that the Members by 
Ordinary Resolution may determine the remuneration of Mark Lerdal and Stephen 
Coe provided that in the absence of any such Ordinary Resolution the Directors 
shall determine the remuneration of Mark Lerdal and Stephen Coe. The Directors 
shall also be entitled to be paid all travelling, hotel and other expenses 
properly incurred by them in connection with their attendance at meetings of 
Directors or committees of Directors, or general meetings of the Company, or 
separate meetings of the holders of any class of Shares or debentures of the 
Company, or otherwise in connection with the business of the Company, or to 
receive a fixed allowance in respect thereof as may be determined by the 
Directors, 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 if 
thought fit, pass an ordinary resolution to approve the remuneration packages 
of Mark Lerdal and Stephen Coe, which will be set out in the appendix to the 
notice. 
 
For further enquiries please contact: 
 
Crystal Amber Advisers (UK) LLP - Investment Adviser 
Richard Bernstein 
Tel: [phone] 
 
Crystal Amber Fund Limited 
William Collins (Chairman) 
Tel: [phone] 
 
Sanlam Securities UK Limited - Nominated Adviser 
David Worlidge/Simon Clements 
Tel: [phone] 
 
Numis Securities Limited - Broker 
Nathan Brown/Hugh Jonathan 
Tel: [phone] 
 
 
 
END