Requisition of EGM and resignation of directors

RNS Number : 3269L

Aurora Russia Limited

29 July 2011

 



Posting of notice of Requisitioned Extraordinary General Meeting and unanimous Board recommendation to vote AGAINST the proposed Resolutions and announcement of resignation of Directors

·      Aurora Russia (the "Company") is today posting a circular convening a Requisitioned Extraordinary General Meeting ("EGM") at 2.00pm on 24 August 2011 at the request of Timothy Slesinger.

·      Timothy Slesinger has proposed the removal of the Chairman, Dan Collinson Koch, and three other independent Directors, namely, Grant Cameron, John Richard Whittle and Alexandr Dumnov.
 

·      Mr Slesinger has proposed the appointment of Peregrine Moncreiffe and Timothy Slesinger as new Directors.

·      These resolutions would result in the removal of four independent Directors and the appointment of two individuals who represent significant shareholders. 

·      Timothy Slesinger holds in excess of 10 per cent of the capital of the Company and Peregrine Moncreiffe serves on the management board, and is a director, of two funds managed by Metage Capital Limited which holds 7.2% of the Company's shares.

Changes to the Board

·      Having held extensive further discussions with Shareholders and in accordance with the Board's undertaking to consider a reduction in the number of Directors, Dan Collison Koch and Alexandr Dumnov have today tendered their resignations as Directors. This will thereby reduce the number of Directors from seven to five.

·      Geoff Miller, one of the newly appointed Non-Executive Directors, will take over as Non-Executive Chairman.

The Board believes that it is NOT in the interests of Shareholders as a whole that the remaining Requisitioned Resolutions be approved, namely:

·      the removal of Grant Cameron and John Whittle, two of the Independent Directors; and

·      the appointment of Timothy Slesinger and Peregrine Moncreiffe, two individuals who if appointed would not be wholly Independent Directors as they represent significant Shareholders.

The Board firmly believes that maintaining independence from both the Manager and from control of the major shareholders gives the Company as strong a hand as possible in negotiating transactions to optimise returns for all shareholders and for its dealings with the Manager.

Geoff Miller, Independent Director and Chairman elect, said: "The Board has undertaken extensive consultations with Shareholders, including Mr Slesinger and has implemented a number of significant actions to meet shareholders' requests.  This has included recently reinforcing the Board's independence.  The resolutions undermine this and are not in the best interests of the Company or its shareholders as a whole.  Consequently, the Board is unanimously recommending that shareholders vote AGAINST the proposed resolutions."

For further information please contact:

Aurora Russia 

Geoff Miller                                            [phone]

Numis Securities

Hugh Jonathan

Nominated Adviser                                 [phone]

Rupert Krefting / Nathan Brown

Corporate Broking                                  [phone]/1426

Financial Dynamics

Ed Gascoigne-Pees                               [phone]

Jack Hickey                                            [phone]

Below is the full text of the circular to shareholders:

1.         Notice of Requisitioned Extraordinary General Meeting

I am writing to give you the notice of a Requisitioned Extraordinary General Meeting of the Company, which is to be held at the registered office of the Company, Trafalgar Court, Admiral Park, St. Peter Port, Guernsey, GY1 2JA at 2.00p.m. on 24 August 2011.

This letter provides Shareholders with details of the resolutions that are to be put to Shareholders at the Requisitioned Extraordinary General Meeting and sets out the Board's response to the Requisitioned Resolutions.

The Board believes that the Requisition is not in the best interests of the Company and Shareholders as a whole and is recommending that you vote against a number of the resolutions to be proposed at the Requisitioned Extraordinary General Meeting.

You will find set out at the end of this document the Notice of the Requisitioned Extraordinary General Meeting, at which such resolutions will be proposed. Each of the Requisitioned Resolutions will be proposed as ordinary resolutions, which would require a simple majority of those Shareholders voting to be passed.

2.         Background

As announced on 11 July 2011, on 8 July 2011 the Company received a requisition from Timothy Slesinger requiring the Directors to convene a general meeting of the Company to propose resolutions which if passed would:

·      remove Dan Koch, Grant Cameron, John Whittle and Alexandr Dumnov as Independent Directors; and

·      appoint Peregrine Moncreiffe and Timothy Slesinger as new Directors.

This would result in the removal of four Independent Directors and the appointment of two individuals who represent significant Shareholders.

The Requisitioning Shareholder has informed the Board that he holds in aggregate 14,310,977 Ordinary Shares, representing in excess of 10 per cent of the capital of the Company that carries voting rights at general meetings of the Company. Peregrine Moncreiffe serves on the management board, and is a director, of two funds managed by Metage Capital Limited which holds 7.2% of the Ordinary Shares.

Biographies of the Independent Directors and biographies supplied by the proposed new Directors are set out in Part II of this document.

The Requisitioned Resolutions are subject to there being a minimum number of two directors and the majority of the Directors not being resident in the United Kingdom for the purposes of United Kingdom taxation, at the conclusion of the general meeting at which such resolutions are proposed.

The Board is required under Guernsey law to convene an extraordinary general meeting within 21 days of receipt of the Requisition. 

3.         Board's response to the Requisition

The Board and the Manager are committed to seeking realisations of the Company's assets and the Manager is actively engaged in detailed discussions with a number of parties about transactions involving some of the investments in the portfolio including detailed discussions on a potential exit.

The Board remains committed to ensuring that it maximises value for all Shareholders and is open to considering any recommendations which will benefit all Shareholders. 

In advance of and subsequent to the passing of the continuation resolution of the Company at the 2010 Annual General Meeting, the Board undertook extensive consultations with Shareholders, including the Requisitioning Shareholder, and the Board has taken significant actions to meet Shareholders' requests:

·      The Board has recently reinforced its independence and strongly believes that it is in the Company's best interests that the Board remains independent in accordance with best standards of corporate governance;

·      In June of this year, the Board appointed two new Independent Directors, Gilbert Chalk and Geoffrey Miller. They bring combined expertise in private equity, in Russia and other emerging markets and in the investment company arena. They have already held discussions with a number of Shareholders and other interested parties;

·      John McRoberts and James Cook, who represented the Manager, no longer serve on the Board and as a result there are no remaining representatives of the Manager on the Board;

·      The Board has undertaken to consider a reduction in the number of Directors.

·      The annual management fee payable to the Manager has been reduced from 2% to 1.5% of the Company's net asset value;

·      A new incentive scheme has been implemented to better align the Manager with Shareholders' wishes that the Company realise its assets; and

·      The Board has resolved to exit one of the Company's investments, Kreditmart, in order to stop its cash burn. The most recent management accounts for Kreditmart show a loss before depreciation of £0.4 million in the calendar year to end of June 2011.

The Board has repeatedly discussed with the Manager Kreditmart's disappointing financial performance. More fundamentally the Board has also repeatedly questioned Kreditmart's prospects; in particular that Kreditmart has not made sufficient inroads into the Russian mortgage markets to a level that will allow a sustainable profit without either the introduction of new capital or the injection of a new business. The Board reached the conclusion that Kreditmart is unlikely to be a sustainable business model on its own in the foreseeable future.  The Board's decision to exit Kreditmart was contrary to the wishes of James Cook, but was supported by the remaining Directors and members of the Manager. The optimal method of exiting Kreditmart continues to be investigated, but the Board's priority is to stop the cash burn and enable the Manager to focus on investments that are capable of generating a substantial cash return for Shareholders.

Having held extensive further discussions with Shareholders and in accordance with the Board's undertaking to consider a reduction in the number of Directors, Alexandr Dumnov and I have today tendered our resignations as Directors. These will take effect from 1 August 2011, thereby reducing the number of Directors from seven to five. Geoff Miller will take over as Non-Executive Chairman.

The Board will as required propose all of the Resolutions at the Requisitioned Extraordinary General Meeting, but clearly the resolutions to remove Alexandr Dumnov and me will have no effect if passed.

The Board considers that it is not in the interests of Shareholders as a whole that the remaining Requisitioned Resolutions be passed, namely:

·      the removal of Grant Cameron and John Whittle, two of the Independent Directors; and

·      the appointment of Timothy Slesinger and Peregrine Moncreiffe, who if appointed would not be wholly independent as they represent significant Shareholders.

Having consulted extensively with Shareholders since the Requisition, the Board acknowledges that there are concerns amongst Shareholders as to the method, timing and value of realisations, although the Board believes that such concerns are not based on valid underlying facts.

To address these concerns the Board intends to ensure as open a dialogue as is possible with Shareholders and the wider market in the future to communicate the approach being taken, regarding the individual investments and the overall corporate strategy.

The Board firmly believes that maintaining independence from both the Manager and the control of major Shareholders gives the Company as strong a hand as possible in negotiating transactions to optimise returns for all Shareholders and for its dealings with the Manager.

4.         Requisitioned Extraordinary General Meeting

You will find set out at the end of this document a notice convening the Requisitioned Extraordinary General Meeting to be held at Trafalgar Court, Admiral Park, St. Peter Port, Guernsey GY1 2JA, Channel Islands at 2.00 p.m. on 24 August 2011.

5.         Action to be taken

Shareholders will find enclosed with this document a Form of Proxy for use in connection with the Requisitioned Extraordinary General Meeting.

Shareholders, whether or not they propose to attend the Requisitioned Extraordinary General Meeting in person, are requested to complete, sign and return the enclosed Form of Proxy, in accordance with the instructions printed thereon, so as to be received by the registrars of the Company, Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, but in any event so as to be received by Capita Registrars no later than 2.00 p.m. on 22 August 2011. Completion and return of a Form of Proxy will not preclude Shareholders from attending and voting in person at the Requisitioned Extraordinary General Meeting should they so wish.

6.         Recommendation

The Board makes no recommendation regarding resolutions 1 and 4 to remove Alexandr Dumnov and me as these resolutions will have no effect if passed.

The Directors consider that it is not in the best interests of Shareholders as a whole that the following resolutions be passed at the Requisitioned Extraordinary General Meeting:

·      the removal of Grant Cameron and John Whittle, two of the Independent Directors; and

·      the appointment of Timothy Slesinger and Peregrine Moncreiffe, who if appointed would not be wholly independent as they represent significant Shareholders.

Accordingly, the Board unanimously recommend that Shareholders VOTE AGAINST RESOLUTIONS 2, 3, 5 AND 6 to be proposed at the Requisitioned Extraordinary General Meeting.

The Directors intend to follow the Board's recommendations in respect of their own shareholdings which in aggregate amount to 925,000 Ordinary Shares, representing 0.8% of the Company's issued share capital as at the date of this letter.

Yours sincerely

Dan Koch
Chairman
AURORA RUSSIA LIMITED

PART II

RELEVANT BIOGRAPHIES

DIRECTORS OF THE COMPANY

Dan Collinson Koch (Non-executive Chairman) (UK resident)

Mr Koch retired as Chairman of Deloitte & Touche CIS (Deloitte, the Firm) in May 2009. He lived and worked in Russia for 11 years having been CEO and Managing Partner and latterly Chairman of Deloitte during that period. Under Mr Koch's leadership Deloitte in Russia and the CIS experienced unprecedented success, growing from a small predominantly audit practice with approximately 150 professionals into a full service, multi functional, multi office practice with approximately 3,000 professionals.

Mr Koch has over 30 years of public accounting and international executive experience having been based in Canada prior to his Russian experience. In Russia Mr Koch had direct overall responsibility for the Firm's major clients including Norilsk Nickel, AFK Sistema and MTS.

Grant Cameron (Non-executive Director) (Guernsey resident)

Mr Cameron is Managing Director of Investec Asset Management Guernsey Limited. He is a member of the South African Institute of Chartered Accountants and the Financial Planners Association of South Africa. In 1988 Mr Cameron joined KPMG South Africa and was transferred in 1991 to KPMG's Miami office, where he held the position of Manager of Financial Services. Mr Cameron moved to Investec Group in 1996 and was Operations Director of Investec Fund Managers SA Limited from January 1996 until February 2001. Mr Cameron acts as a Director of a number of investment funds, and was previously chairman of the Guernsey Investment Funds Association. Mr Cameron is the chairman of Investec Asset Management's Global Valuation Committee. He graduated with a B.Comm in 1987 and a B.Acc in 1989 from the University of Witwatersrand.

Gilbert Chalk (Non-executive Director) (UK resident)

Mr Chalk is Chairman of Castle Private Equity AG a leading Private Equity and Venture Capital Fund of Funds that is managed by LGT Capital Partners and listed on the Zurich Stock Exchange. In addition he is a Director of Constantine Group Plc, a substantial Private Group with interests in Logistics, Manufacturing, Property and Alternative Energy and Vantage Goldfields Limited, a South African Gold producing company, listed on the ASX. From 2000 to 2010 he was Chairman of the Baring English Growth Fund and its Investment Committee. The Fund invested in small and mid cap buy-outs in the UK. Previously he was the Founder and Managing Director of Hambro European Ventures, subsequently named Duke Street Capital. He has served as a Council Member of the British Venture Capital Association and as Chairman of its Taxation Committee conceived and formulated Venture Capital Trusts. He has also worked as Head of Corporate Finance at ABSA Bank (UK) and as a Corporate Finance executive at Hill Samuel Bank and Brandts Limited. He holds an M.B.A. from Columbia University, New York.

Alexandr Dumnov (Non-executive Director) (Russian resident)

Mr Dumnov is a Russian national and has considerable experience working for and advising Russian companies. He also has strong experience serving on the boards of both UK and Russian companies. Most recently, Mr Dumnov was a member of the Board of Deloitte & Touche CIS from 1998 to 2007, after which he became a Non Executive Director of Trans-Siberian Gold plc, until 2009. He also served as a Non Executive Director of Siberian Mining and Metallurgical Alliance from 2003 until May 2010 and is presently a Non Executive Director of MDM Bank.

Geoffrey Miller (Non-executive Director) (Guernsey resident)

Mr. Miller is an investment professional with over twenty years experience in the investment company industry, and has also worked in Russia. Now an Executive Director of Greenwich Loan Income Fund Limited, a Guernsey-based investment company, he has been an analyst, fund manager and non-executive director of investment companies since 1987. He has worked in many other areas of financial services, having been a director of both private client wealth manager Brewin Dolphin and asset manager Exeter Asset Management. In the investment banking arena he was Director, Research of London-based Bridgewell Securities Limited and Head of Research Marketing at Russian investment bank Troika Dialog in Moscow. Mr. Miller now sits on the advisory board of silkroutefinancial, the first emerging markets focused merchant banking firm dedicated exclusively to the financial services sector. Mr Miller is a resident of Guernsey.

Ben Morgan (Non-executive Director) (Guernsey resident)

Mr Morgan is a partner with Carey Olsen in Guernsey in the Corporate Group. He qualified as a solicitor in 1992 and practised with the City law firm Norton Rose, during which time he spent time in Russia, before joining Carey Olsen in 1999. Mr Morgan is a Director of a number of Guernsey investment funds.

John Richard Whittle (Non-executive Director) (Chairman of Audit and Valuation Committees) (Guernsey resident)

Mr Whittle is a Chartered Accountant and holds the IOD Diploma in Company Direction. After qualifying in 1978 he joined Price Waterhouse in London before embarking on a career in business services, predominantly telecoms. He co-led the business turnaround of Talkland International (now Vodafone Retail) and was directly responsible for the strategic shift into retail distribution and its subsequent implementation; he subsequently worked on the £20 million private equity acquisition of Ora Telecom. He has served on the boards of 3 listed companies. He was until May 2009 Finance Director of Close Fund Services where he successfully initiated a restructuring of client financial reporting services and was a key member of the business transition team.

PROPOSED DIRECTORS OF THE COMPANY

Peregrine David Moncreiffe (not resident in the UK)

For ten years after leaving Oxford, Mr Moncreiffe held various corporate finance and trading positions in New York, London and East Asia within the CSFB group ending up as an Executive Director of CSFB in London in 1982. He held a number of trading management roles at Lehman Brothers as a Managing Director in New York and London until 1986 when he joined E F Hutton as Managing Director of International Capital Markets before it was acquired by Shearson Lehman in 1988. In 1990 he co-founded Buchanan Partners Ltd, a proprietary investment company and hedge fund manager. He was responsible for Russian equity trading and investments. In 1998 he became Chairman of UA Group, the agricultural services and property investment business sold to Elphinstone in 2005. He is Chairman of North Atlantic Smaller Companies Investment Trust.

He lives in Jersey and works for Mazzaro Consultancy Limited, which advises a number of international investment companies.

He has been on the board of a number of companies with investments in Russia and has a working knowledge of the Russian language.

Timothy James Slesinger (UK resident)

Mr Slesinger founded OSG Records Management ZOA in Moscow in 1998. The company grew during the 12 years he was CEO and then Director to become the market leader in both physical document and on-line data management in Central & Eastern Europe with offices in eight countries and 21 cities. OSG's clients ranged from international Fortune 500 companies, highly regarded businesses local to the region and governments. The integrity and confidentiality of the data was an absolute priority and Mr Slesinger was involved in implementing the systems that safeguarded it both physically and electronically. He sold OSG to the Company in 2009.

 

END

 

 

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