Meson Final Fight Letter Jan20

8/9/2019 Meson Final Fight Letter Jan20

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Its a tough world out there soHONESTY DOESNT ALWAYS MATTER,

what matters is sometimes creativity.- Stan Bharti giving advice to Laurentian University students


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Dear Fellow Shareholder,

Time is running out to save your Aberdeen investment your vote is important.

Stan Bharti is hoping you will let him continue paying himself and his friends millions of dollars of

your money while they siphon off whats left of Aberdeen to themselves and related parties. Ifshareholders dont act now to stop Stan we think the value of your Aberdeen shares could beworthless within two years.

Recently, Institutional Shareholder Services (ISS),a leading independent proxy advisory researchfirm, recommended that Aberdeen Shareholders vote to remove Stan Bharti at the upcomingmeeting and recommended using our GOLD form of proxy when casting your vote. ISS, whoseanalyses and recommendations are relied upon by many major institutional investment firms, mutualfunds and fiduciaries throughout North America,also recommended voting FOR Ryan J Morris.

In its January 16th report, ISS found

By replacing Bharti, who exerts significant Forbes & Manhattan influence on the board and bringing Morrison the boardwill help improve the overall governance structure and true independence level of theboard, with an expectation to provide more transparency and strengthen the independent oversight over relatedparty transactions/loans, effectiveness of cost cutting, etc., which should ultimately benefit the overallshareholder return over the long-term.

ISS went further in expressing their support, stating

Dissident nominee Ryan J. Morris appears most suited to carry out the changes and help add trulyindependent oversight to the board. He is the leader of the dissident group and has over 5% of shareholdingin the company which makes his interest aligned with those shareholders who are not Forbes & Manhattanaffiliated. As the CEO of Meson Capital Partners, LLC, Morris is an experienced investment professional whoseexpertise should be helpful as the company is essentially a merchant bank and who can add different voice on theForbes & Manhattan dominated board in terms of portfolio investment process On the basis of the above, werecommend shareholders vote FOR dissident nominee Ryan J. Morris by removing managementnominee Stan Bharti on the dissident proxy.

In explaining the reasons for its recommendation ISS highlighted many of the same concerns we haveraised with Stan and the way he and his friends are running your company. This has only affirmedwhat we have been saying for some time, namely that urgent change is needed before its too late.

Many of your fellow shareholders have already voted their GOLD proxies to save Aberdeen andmaximize the value of their investment, but every vote is important; we need you to vote today beforeits too late and Stan destroys whats left of your investment.

YOUR GOLD PROXY VOTE WILL END the Culture of Insider Self Enrichment

Stan Bharti says honesty doesnt always matter so we are not surprised that he and his team have

tried to distort the truth about Aberdeen and about us. We know Aberdeen has written to you and

many of the things they have said are simply not true.

The Aberdeen board and Stan Bharti would have you believe that their involvement with Forbes &

Manhattan portfolio companies adds value for shareholders. The reality is that their involvement

often enriches only Stan Bharti, Forbes & Manhattan and the stable of related individuals they install

as directors and officers, often at the direct expense of shareholders. Since Aberdeens inception in

2008, shareholders have accumulated net losses of over $67 million. Where did all that money go?

Stan Bharti, Forbes & Manhattan and other current and former Aberdeen directors have received


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total cash compensation of over $58 million from Aberdeen and the related parties that Aberdeen

has invested in.Over the last three years, the median shareholder return from these same companies

was negative 89%.

Our Plan To Maximize Value for ALL Aberdeen Shareholders

Our plan to save Aberdeen is not a takeover but a liberation that will put cash back into the handsof YOU, the shareholder and fix the mess that Stan and his team have made at Aberdeen, which hasseen the value of your Aberdeen shares decline by 80% since January 31, 2011. So what are weplanning to do?

An immediate Cash Return of $0.15 per share. Aberdeen shareholders havesuffered long enough. Stan and his friends on the board have managed Aberdeen so badlythat they were forced to cancel the companys dividend in 2012. Since then shareholdershavent received a cent from Aberdeen and have suffered a decline of 65% in the value of theirshares. Stan and the rest of the Aberdeen board havent shared your pain though. Insteadinsiders have paid themselves $13 million over the last three years! In contrast to our plan Stanand his team wont commit to returning any cash to shareholders. Why? We think its becauseit would leave less money in the company for Stan and his team to keep paying themselvesmillions. Aberdeen owns $16 million worth of shares in Rio Alto Mining. This shareholdingis a liquid non-core asset; in fact Aberdeen has already sold over $7 million worth of its RioAlto shares in October at prices much lower than todays. Our plan involves completing thesales Aberdeen started in October, but, instead of finding ways to siphon the money to Forbes

& Manhattan, we will return it to you.

A reduction in compensation of at least 80%. We think company executives andboard members should be compensated based on performance, and we intend to make sureAberdeen is run that way. Its unexplainable how Stan and his friends on the board think itsreasonable to have paid themselves $13 million while the Aberdeen stock price has declined80%. Our plan will put an immediate stop to this for the benefit of all shareholders. Incontrast to our plan, Stan and his team wont make any specific commitments regardingreducing compensation.

A reduction in operating costs of approximately 60%. Over the past 12 months


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Aberdeen has spent 2-3 times more on operating expenditures than comparable companiesi.Our plan will eradicate this wasteful behavior and align Aberdeens operating costs tocomparable companies, saving a significant amount of shareholder money. In contrast to ourplan Stan and his team wont commit to a specific expense reduction target.

Recover ill-gotten gains from Stan and his friends for the benefit of allshareholders. We think Aberdeen has completed a number of questionable transactions

with Stan, Forbes & Manhattan and parties related to them. Our plan will be to investigatethese transactions and seek to recover ill-gotten gains for the benefit of all Aberdeenshareholders. For example, Aberdeen completed a highly dilutive private placement to Stan,his friends on the board and parties related to them in November 2014. We calculate that thistransaction transferred approximately $0.03 per Aberdeen share (or approximately 20% of thecurrent Aberdeen share price) away from shareholders like you to Stan and his friends thatparticipated in the transaction. We have already commenced court proceedings in relation tothis transaction, which if successful will benefit all Aberdeen shareholders. Stan and his teamare fighting our efforts to recover this value as hard as they can, so dont expect them to doanything in the future to recover ill-gotten gains for your benefit if they remain in control ofyour company.

A thorough review of Aberdeens portfolio and actions to maximize value.

Stan and his team have done an abysmal job of investing your money, generatingaccumulated net losses of $101 million since January 31, 2011. Our plan is to complete athorough review of all portfolio investments and determine the best way to fix the mess Stanhas created and maximize the value of each investment in the portfolio. We think there issignificant potential value in Aberdeens portfolio and our team has the skills and experienceto fully realize it. In contrast, given their track record of significant losses and the lack of a planfor change, we dont think Stan and his team can be trusted to do anything different in futurefrom the disastrous results they have delivered in the past.

We believe there is significant intrinsic value in Aberdeen, and our plan will maximize it for thebenefit of all shareholders. In short, we think the combination of immediate significant costreductions, creative ideas for portfolio value maximization as well as focused efforts on other valuerecovery and value creation has the potential to deliver total value to shareholders well in excess of

Aberdeens current share price.

Aberdeen Net Asset Value Per Share


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Note: numbers may not add due to rounding. Share prices represent closing prices on January 16, 2015.

(1) Market value of Aberdeens Rio Alto shareholding. Based on Aberdeens share ownership of Rio Alto as disclosed in its most recentfinancial statements.

(2) Based on 87,349,422 shares outstanding as at 31 October 2014.(3) Represents book value of all assets and liabilities (other than Rio Alto shareholding) as disclosed in Aberdeens most recent financial

statements.(4) Represents fully diluted net assets per share post completion of the private placement. Uses Total before private placement as the

starting point and assumes Aberdeens pro forma net assets increase by $2 million from the placement proceeds plus $3 million fromwarrant exercise. Assumes 107,349,422 shares outstanding (i.e. 10 million additional shares from shares issued in private placement plus10 million additional shares issued pursuant to exercise of warrants).

Stan Bharti Says Honesty Doesnt Always Matter so why would you believe him

now?

We know Aberdeen has written to you and many of the things they have said are simply not true.While honesty doesnt always matter for Stan, it does matter for us so we want to set the recordstraight once and for all on a number of misstatements Stan and his team have made.

We are not engaged in vote buying. In an apparent act of desperation Stan and histeam falsely accused us of vote buying, which we have publicly confirmed we will not doin the whitepaper we published at www.freeaberdeen.ca. We would also like to highlightthat unlike us Stan and his team have yet to publicly confirm they will not be engaged invote buying, and have left the door open in their circular to do so with your money.

Ryan Morris investment returns have significantly outperformedAberdeen. Since its inception in February 2009 through Sept 30, 2014 which Aberdeenuses in its circular chart, Meson Capital has delivered net investment returns of 225%,outperforming the S&P 500 Index and dramatically outperforming Aberdeen by 250%.Aberdeen sneakily chose the time period they presented in their materials to mislead youand were likely embarrassed about their own abysmal investment returns.

Ryan Morris and Meson Capital have a history of successfully improvinggovernance and creating value for ALL shareholders. Aberdeen highlightsMorriss sole failure as a corporate insider at Lucas Energy. Despite successfully decreasingSG&A and operating expenses by over 40% at Lucas Energy, collapsing oil prices resultedin a 75% stock decline.

In fact, of a total of four times as a corporate insider, Ryan Morris and Meson have createdtremendous value for shareholders with a dramatically higher success rate than Stan Bharti.Ryan Morris and Meson Capital only profit when investors make money first!

Shareholder return during Ryan Morris & Meson Capitals activist involvement:


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We are not proposing a fire sale of assets. Aberdeen correctly highlights that theinvestments Stan and his team have made have lost 80 to 90% of their value, a sorrowfulreflection of their competence. Aberdeen has already arranged to sell materially all of itsinvestment portfolio to Landmark Partners LLC. Our plan is to try and undo as much ofStans damage to your investment as possible. This involves firstly completing a detailedreview of Aberdeens whole investment portfolio. This is not a sale as Aberdeen falselystates in their attempt to scare you. We are planning to complete the review within 60 daysand once its complete we will communicate the results to all shareholders. Rest assured,our interests are completely aligned with yours because unlike Stan and his team that gettheir shares given to them from Aberdeen without having to pay any cash we have boughtall of our shares on market, just like you have, so we will be doing everything we can tomaximise value for all shareholders.

We can return $0.15 per share in cash to you and we plan to do thisimmediately.We think shareholders have suffered enough and deserve some return ofcash. Aberdeens liquid non-core shareholding in Rio Alto Mining can be easily sold andreturned to shareholders without any detrimental impact on its value. Its regrettable thatStan and his team are trying to keep this money for themselves instead of returning to itsrightful owners, YOU. Stan and his team are trying every trick in the book, including tryingto award themselves $6.2 million of your money as change of control payments. WhenStan and his team try to scare you with talk about scorched wallets they dont tell youthat most of what they are talking about are these change of control payments! We thinkthese payments, which represent over 45% of Aberdeens current market value, are illegal,and we have already commenced court proceedings, which, if successful, will benefit allshareholders. This compensation awarded by the same people who were removed to

improve Corporate Governance reflects the insider mentality of heads I win, tails you losethat this board is determined to entrench itself into

We do understand Aberdeens loans to related parties and how valuedestructive this has been for Aberdeen shareholders. While we cantunderstand why Stan and his team made some of the investments they made, we dounderstand the investments themselves. For example, Valencia Ventures, which is onecompany Aberdeen invested your money in, in-turn made a loan to a company whosesole shareholder was Stans wife and whose sole director was Stans son. This loan wassubstantially written off within 12 months, resulting in a substantial loss to the shareholdersof Valencia Ventures, including Aberdeen. Stan was the chairman of Valencia Ventures atthe time and John Begeman and Bernard Wilson were both also directors and on Valenciasaudit committee. Aberdeen claims they structure their investments to ensure we are

protecting our shareholders but then Stan has also said honesty doesnt always matter. Stan and his team did pay themselves $13 million over the past 3 years,

including bonus payments of $3.3 million in 2013. While we cant understandhow this level of compensation is justified considering how much shareholder value Stanand his team destroyed, the fact it was paid is irrefutable and is there for all to see inAberdeens regulatory filings. Aberdeen claims no bonuses were paid in the last twoyears but their own regulatory filings show incentive compensation of $3.3 million paidin the 2013 fiscal year. Perhaps honestly doesnt always matter when it comes to tellingshareholders about compensation?


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We did not only become interested in Aberdeen in the last three months.Nightscape has been a shareholder of Aberdeen for a number of years and has beenproactively trying to persuade Aberdeen to behave in a more shareholder friendly fashionsince as early as 2012. Sadly, these efforts have not been successful which is why we havebeen forced to call the meeting.

Aberdeens investment failures overwhelm its few investment successes.

Aberdeen highlights a very small number of successful investments as evidence that itsproven capital growth model works. This is yet another attempt to mislead you. Thetruth is that Stan and his team suffer a very large number of investment losers for everywinner they stumble across. Aberdeen has made over 90 investments with your money,most of which have lost money. In fact, Aberdeen has lost money every year for the pastthree years and unfortunately is also very likely to lose money again this year. Total lossesStan and his team have delivered for Aberdeen shareholders since January 31, 2011 equal$101million.

We can convene a board meeting if our nominees are elected. After waitingin the weeds for a month after Aberdeen received our meeting requisition, Stan and histeam are now trying to suggest there is a technical matter related to the by-laws that willresult in our nominees not being able to convene a board meeting if elected. This is in stark

contrast to Mr. Bhartis response with its investment in Dacha Strategic Metals Inc. when histeam proposed to add foreign directors and had no issue with that companys by-laws. Thetruth is (and Stan and his advisors know this) there are a number of ways to easily addressthis issue. The easiest solution is for Aberdeen to amend its by-laws prior to or at themeeting to remove the unusual and unnecessary 50% Canadian residency requirement fordirectors. We proposed this solution to Aberdeen and its independent counsel in ourcontinued efforts to allow shareholders to focus their considerations on the merits of therespective director nominees, but Stan and his team have again demonstrated their trueintentions and disregard for shareholder democracy by refusing to do so. This new tactic byStan and his team is particularly concerning given that it clearly violates the mostfundamental principle for the upcoming meeting namely, that shareholders be given anopportunity to vote for whomever they believe are the best directors to lead Aberdeen. Itappears Stan and his team disagree and are at a point where they are now grasping for

every tactic possible to entrench themselves and, in the process, attempting to robshareholders of their basic voting rights. If Stan and his team continue to refuse to addressthis matter in a mutually agreeable manner before the meeting, we intend to bring a motionat the meeting to have the by-laws amended to remove this unusual restriction and toensure the voting rights of our fellow shareholders are respected and enforced at themeeting. Rest assured that we will vote the GOLD proxy in respect of any other matterspresented for action at the meeting to ensure that you can vote for our full slate of nomineesand we can convene a board meeting once our nominees are elected.

Dont Be Fooled by Aberdeens Excuses

In an attempt to avoid accountability for the astonishing value destruction they have overseenAberdeen flippantly stated some things are beyond our control. We were shocked to read this,

especially as there are a number of things directly in Stan and his teams control that have costshareholders tens of millions of dollars. Consider the following:

Stan and his team compensated themselves $13 million over the past three fiscal years

Aberdeen made no fewer than 20 loans to related parties that were written off, costingAberdeen shareholders $22 million

Aberdeen has invested in at least 60 related parties, and the group of related parties that arepublic companies have had a median shareholder return of negative 90%

Aberdeens current and past directors have received an additional $37 million in cash


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compensation from 30 of these (publicly traded) related parties where YOUR money wastransferred as an investment to fund the consulting fees paid to Forbes & Manhattanand other related parties

Aberdeen has chosen to use an auditor that the Public Company Accounting OversightBoard has publicly reprimanded multiple times for deficiencies in its audit practices

Stop Aberdeens Culture of Entrenchment Before Its Too LateStan and his team have engaged in a number of actions which we believe are intended to make itmore difficult for shareholders to exercise their democratic rights to remove them. We believe theseactions will only accelerate if Stan and his team are not replaced immediately. Consider thefollowing:

Buying Aberdeen shares with your money and giving them to Stan andhis team. After Stan sold outall but 15,000 of his shares, during the 2014 financial yearAberdeen spent $3 million of shareholder money buying 9.1 million Aberdeen shares in theopen market. Between then and now Stan and his team have awarded those shares tothemselves in the form of restricted share units for which the company (and you as ashareholder) received no cash payment. The large majority of these vested quickly allowingStan and the members of his team that were given these shares to vote them to keepthemselves in office

Highly dilutive private placement to insiders and friends of Stan . InNovember 2014 Aberdeen completed a private placement of 10 million shares and a further10 million warrants. This transaction diluted your shareholding in Aberdeen by 23%,transferred $0.03 per share of value away from you (or approximately 20% of the currentAberdeen share price), and transferred even more votes into Stan Bharti-friendly hands.This issuance of new shares comes in advance of managements own planned sharerepurchase in January and despite significant liquidity in its portfolio. Managements onlyrationale was to secure more votes for themselves at your expense. The following parties(all either current Aberdeen directors or related parties) are the only ones Stan and his teamallowed to participate in the placement:

o Current Aberdeen Directors: Stan Bharti, David Stein, George Faught

o Sulliden Mining Capital: a related party of Aberdeen which is controlled by StanBharti and shared 4 of 7 Aberdeen's directors (Stan Bharti, David Stein, GeorgeFaught, and Pierre Pettigrew) at the time of the placement. The other two Sullidendirectors (Justin Reid and Peter Tagliamonte) also have extensive connections toForbes & Manhattan and Stan Bharti

o 2378083 Ontario Inc.: the sole shareholder and sole director of this company isFrederic Leigh who is the Chief Investment Officer and an Executive Committeemember of Forbes & Manhattan

ISS, in its January 16threport, also criticized this private placement and expressedsignificant concern regarding the subscription of the private placement.

Change of Control Payments. Stan and his friends on the board inappropriatelyadopted change of control arrangements that, if permitted to stand, could transferapproximately $6.2 million (or in excess of 45% of Aberdeens current market capitalization)from Aberdeen shareholders into the pockets of Stan and his friends. These change ofcontrol payments are in addition to the $13 million of compensation paid to Stan and hisfriends over the past three fiscal years and were granted in spite of the significantdestruction of shareholder value these individuals have overseen. All the members of thecompanys compensation committee have been removed by Aberdeen itself to improvecorporate governance, but the new independent directors have yet to take action toremove these outrageous payments for the benefit of YOU, Aberdeen shareholders.


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Meeting Tactics to Frustrate the Shareholder Democratic Process. Inaddition to the large number of mistruths Stan and his team have peddled, they have alsoengaged in a variety of sneaky tactics designed to frustrate the shareholder democraticprocess and make it difficult for the meeting to be fair and open. Consider the following:

o Ambush Over Proxy Forms. We requisitioned a meeting of Aberdeenshareholders on December 16, 2014. On December 24, 2014, Aberdeen called the

requisitioned meeting without raising any issues about our nominees. Only after (i)two weeks of trying to engage in discussions with Aberdeen, (ii) we pointed out toAberdeen, that the initial Aberdeen form of proxy was non-responsive to themeeting requisition and (iii) we mailed our circular, did the purported independentdirectors of Aberdeen identify their issue with our proposed nominees.Aberdeen corrected its invalid form of proxy and offered us an opportunity tocorrect ours. However, before we had an opportunity to even consider whether acorrection was necessary, the revised Aberdeen form of proxy was filed and mailedand once again included the supposedly invalid nominees. So it is not clear whatAberdeen is really intending. What is clear is that Aberdeen is making this processconfusing

o Excessive and Unreasonable Fees. Aberdeen required we pay $5,000 for an outdatedphoto copy of the shareholder list, claiming this was a reasonable fee. Our

enquiries indicate this fee is up to 5 times what a reasonable fee should beo Unreasonable Refusal to Provide Information. Aberdeen refused to provide us with

a copy of the US NOBO list, representing shareholders owning approximately 20%of the issued and outstanding shares of Aberdeen, until court action was threatened(and then materially delaying delivery of this list for a tactical advantage)

We continue to believe the election of our nominees to the board will be in the best interests ofAberdeen and all of its shareholders and hope Stan and his friends on the board will do the rightthing in ensuring that all Aberdeen shareholders voices are heard. Failing that, we will dowhatever is necessary to ensure Aberdeen conducts a fair election in which all shareholders ofAberdeen are enfranchised, to ensure a fair and democratic result.

You Must Act Now Vote The GOLD Proxy To Save Your AberdeenYou must vote now before its too late. At the current rate at which Stan Bharti and his team aredestroying value at Aberdeen your shareholding could be worthless within 2 years.

VOTING INSTRUCTIONS

Aberdeen Shareholders who have voted the management proxy and wish tosupport the Concerned Shareholders have the right to change their vote bysimply executing a GOLD proxy. A later-dated GOLD proxy replaces apreviously recorded vote.

Time is of the essence, GOLD proxies must be returned no later than 5:00 p.m.(Toronto time) on January 29, 2015 to FREE ABERDEEN.

For assistance and ease with voting your GOLDproxy, please contact D.F.

King Canada (toll-free) at 1-800-926-7043 or visit www.freeaberdeen.cawhere

the GOLDproxy can be easily voted by clicking on the Vote Now button.


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Sincerely

Ryan J. Morris

Ryan J. Morris

Meson Capital Partners LLC

Elio LombardiElio Lombardi

Nightscape Capital (UK) LLP

iCalculated as operating, general and administrative expenses as a percentage of investments. Comparable

companies include Marret Resource Corp., Humbolt Capital, Sprott Resource Corp, Pinetree Capital and 49

North Resources


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Any questions and requests for assistance may be directed toD.F. King Canada:

North American Toll Free Phone:

1-800-926-7043

Outside North America, Banks, Brokers and Collect Calls: 1-201-806-7301

Email: [email protected]

North American Toll Free Facsimile: 1-888-509-5907

Facsimile: 1-647-351-3176

Meson Final Fight Letter Jan20

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Transcript of Meson Final Fight Letter Jan20