TALIUS GROUP LIMITED — Proxy Solicitation & Information Statement 2014

May 5, 2014

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ASX Announcement

6 May 2014

Listed Convertible Note Holder Notice of Meeting

We attach a Notice of Meeting for listed convertible note holders (AVDG), which has been despatched to all note holders. We also refer to the market announcement on 11 April 2014 in regard to the Company’s proposed recapitalisation process. The note holder meeting is part of this process.

FOR FURTHER INFORMATION CONTACT

Mr Anthony Short (Managing Director) Or Mr David Ballantyne or Roland Berzins (Company Secretary) Telephone: 08 9429 2900 Facsimile: 08 9486 1011

ASX CODE: AVD www.advanceenergyltd.com.au

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ADVANCE ENERGY LIMITED ACN 111 823 762

NOTICE OF MEETING OF NOTEHOLDERS

TIME : 11.00 am (WST) DATE : Monday 19[th] May 2014 PLACE : Suite 4, 16 Ord Street, West Perth, Australia

This Notice of Meeting should be read in its entirety. If Noteholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on +61 8 9429 2900.

CONTENTS
Chairman’s letter to Noteholders	2
Business of the Meeting	5
Explanatory Statement	6
Schedule 1 - Proposed amendments to Terms and Conditions	12
Schedule 2 - Capital Structure	16
Appointment of Proxy Form
Annexure 1 – Draft Shareholder Meeting Notice
IMPORTANT INFORMATION

Time and place of Meeting

Notice is given that the Meeting will be held at:

Suite 2, 16 Ord Street West Perth, Western Australia on Monday 19[th] of May 2014 at 11.00 am (WST)

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

CHAIRMAN’S LETTER TO NOTEHOLDERS

Dear Noteholder

NOTEHOLDERS MEETING RELATING TO PROPOSED CONVERSION OF NOTES INTO SHARES AND OPTIONS

On behalf of the Board of Directors of Advance Energy Limited (ACN 111 823 762) ( Company ), I present the attached resolution, the passing of which is required to facilitate the proposed compulsory conversion of Notes into Shares and Options ( Conversion ).

Shareholders will also be asked to vote on the Conversion together with a series of additional capital restructuring proposals ( Capital Restructuring ) at a subsequent meeting proposed to be held in late May or early June 2014 ( Shareholder Meeting ). The Capital Restructuring proposals are set out in the draft notice of general meeting of the Company which is attached to this Notice ( Draft Shareholder Meeting Notice ).

The Conversion is subject to Shareholder’s approving the Capital Restructuring at the Shareholder Meeting.

The proposed Capital Restructuring (as further described in the Draft Shareholder Meeting Notice) comprises the following:

• (a) ( Consolidation ): a consolidation of the capital of the Company’s issued securities on a one (1) for sixty (60) basis which will result in the number of Shares on issue being reduced from 1,342,333,028 to 22,372,217 (subject to rounding);

• (b) ( Debt for equity conversions ): various debt for equity conversions including:

• (i) the Conversion;

• (ii) the issue of Shares (on a post-Consolidation basis) and Options to various related party creditors ( Related Party Creditors ), at the same conversion ratio proposed under the Conversion, in order to satisfy $481,466 in amounts outstanding. Subject to Shareholder approval of the Capital Restructuring, each of the Related Party Creditors has agreed to the relevant debt for equity conversion contemplated in the Draft Shareholder Meeting Notice; and

• (iii) the issue of up to 1,326,833 Shares (on a post-Consolidation basis) and 1,326,833 Options to consultants and creditors ( Third Party Creditors ), at the same conversion ratio proposed under the Conversion, to satisfy $105,647 in amounts outstanding. Subject to Shareholder approval of the Capital Restructuring, each of the Third Party Creditors has agreed to the relevant debt for equity conversion contemplated in the Draft Shareholder Meeting Notice;

• (c) ( $1.5 million debt finance - Conversion of Unlisted Convertible Notes ): the Company has entered into an agreement to secure up to $1.5 million in additional debt finance through the issue of new Unlisted Convertible Notes. Approval will be sought at the Shareholder Meeting for the conversion of the Unlisted Convertible Notes to Shares (on a post-Consolidation basis).

It is expected that the Unlisted Convertible Notes will be converted as soon as practicable following Shareholder approval for the Capital Restructuring; and

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

• (d) ( $3 million capital raising ): the Company will seek Shareholder approval at the Shareholder Meeting to raise up to $3,000,000 through a placement of up to 1,500,000,000 Shares at an issue price of not less than $0.002 per Share (on a post-Consolidation basis) ( Placement ). The Shareholder approval to be sought in respect of the Placement will give the Company flexibility to raise further funds. The Company has not yet sought or secured any firm commitments for the Placement and there is no certainty that the funds will be raised.

If implemented, the Capital Restructuring should clear all existing debts of the Company and enable the Company to have sufficient working capital to pursue its oil and gas interests.

As indicated above there is no certainty that funds will be raised under the proposed Placement. In the event that funds are not raised under the Placement the Capital Restructuring will still proceed as it is expected that funds raised from the issue of Unlisted Convertible Notes (up to $1.5 million) will satisfy current creditors and give the Company sufficient working capital to pursue its oil and gas interests.

To facilitate the proposed Capital Restructuring, the existing Noteholders are being asked to pass a resolution ( Noteholder Resolution ) which, in essence, confirms that Noteholders will accept Shares and Options in the Company in return for their Notes, and approve certain changes to the Trust Deed (under which the Notes were issued) to allow for this.

Approval of the Noteholder Resolution will enable the Company to avoid the need to make a cash payment of up to approximately $6.63 million on the Maturity Date of the Notes, which in the circumstances is likely to be required in order to redeem the Notes.

As it stands, the Company does not have any realistic possibility of repaying all the Noteholders as and when the Notes fall due for repayment at the Maturity Date on 31 December 2014. As such, if the Noteholder Resolution is not approved, it is highly likely that the Company would be forced into administration (with the resultant returns to Noteholders being negligible).

The Directors have considered various alternative methods of dealing with the Notes on the Maturity Date. The Conversion (a key element of the Capital Restructuring) is, in the Board's view, in the best interests of the Company.

In the event that Noteholders do not approve the Noteholder Resolution then Shareholder Approval for the Capital Restructuring will not be sought.

If the Conversion is not approved by Noteholders or the Capital Restructuring is not approved by Shareholders, it will trigger an automatic default event under the terms and conditions of the Unlisted Convertible Notes ( Unlisted Note Default ). Upon the occurrence of an Unlisted Note Default, the holders of the Unlisted Convertible Notes may instruct the Unlisted Convertible Note trustee to demand the immediate repayment by the Company of the face value of the Unlisted Convertible Notes issued ($400,000 as at the date of this Notice) or commence proceedings to wind up the Company. In these circumstances, it is likely that an Unlisted Note Default will result in the Company being placed into administration.

After careful consideration, the Directors believe that the Capital Restructuring (including the Conversion) is in the best interests of the Company. The Capital Restructuring (including the Conversion) will allow the Company to focus on its business and on growing Shareholder value.

The Directors recommend that you read the Meeting Documents carefully and obtain your own independent financial and legal advice in relation to the proposals contained

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

in the Meeting Documents. We also recommend that you read and consider any publically available information released by the Company to the Australian Securities Exchange (ASX) between the date of this document and the date of the Noteholder Meeting, which are available at www.asx.com.au .

I welcome your attendance at the Meeting. If you are unable to attend the meeting please complete the attached proxy from and return it in accordance with the instructions provided.

Yours sincerely

Mr Anthony Short Chairman

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

BUSINESS OF THE MEETING

EXTRAORDINARY BUSINESS

The meeting will be asked to consider and, if in favour, pass the following resolution, as an extraordinary resolution ( Noteholder Resolution ):

“That, subject to Shareholder Approval being obtained, for the purposes of clause 13.2 of the Trust Deed and all other purposes, Noteholders:

• (a) approve the amendments to the Terms and Conditions of the Notes as set out in the Explanatory Statement; and

• (b) authorise the Company and the Trustee to amend the Trust Deed to effect such amendments to the Terms and Conditions in the Trust Deed.

For ease of reference, details of the proposed amendments to the Terms and Conditions of the Notes are set out in Schedule 1 to this Notice.

The Noteholder Resolution is a special resolution requiring a majority of at least 75% of the persons voting at the aggregate nominal value of the Notes held by all Noteholders being entitled to vote, voting in person or by proxy or by corporate representative present at the meeting.

Subject to the Noteholder Resolution being passed and Shareholder Approval being obtained for the Capital Restructuring, the Company proposes to convert all of the Notes held by all Noteholders into Shares and Options.

Additional information concerning the proposed Noteholder Resolution is contained in the Explanatory Statement which accompanies and forms part of this Notice of Meeting.

Dated: 23 April 2014

By order of the Board

DAVID BALLANTYNE COMPANY SECRETARY

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

EXPLANATORY STATEMENT

1. BACKGROUND

The Company has 6,630,500 listed convertible notes ( Notes ) on issue as at the date of this Notice.

• (a) The Terms and Conditions of the Notes currently are as follows:

• (i) Face value: $1.00 per Note;

• (ii) Conversion Price: $0.0008 (0.08 cents) per ordinary share in the Company ( Shares ) on a pre-Consolidation basis;

• (iii) Conversion Rights: at Noteholder election, at the Conversion Price at any time prior to Maturity Date provided that a minimum period of 2 years has expired from the date of issue of the Notes;

• (iv) Maturity Date: 5 years from the date of issue of the Notes; and

• (v) Interest rate: 9.5% per annum,

in each case as set out in the Trust Deed.

• (b) The Company, for the reasons set out in this Explanatory Statement, now seeks Noteholder approval of the Noteholder Resolution to amend the Trust Deed and the Terms and Conditions to authorise the Company to convert all of the Notes into Shares and Options at any time prior to the Maturity Date.

• (c) The specific proposed amendments are detailed in Schedule 1 to this Notice and the amendments will be effected by an amendment to the Trust Deed.

• (d) Under the Noteholder Resolution, Noteholders are being asked to:

• (i) approve the amendments to the Trust Deed set out in Schedule 1; and

• (ii) authorise the Company and the Trustee to amend the Trust Deed to effect the amendments to the Terms and Conditions in the Trust Deed and authorise the Trustee to enter into a deed of variation of the Trust Deed to effect such amendments to the Trust Deed.

2. PROCEDURE TO AMEND TRUST DEED

2.1 Shareholder Approval

The amendment of the Terms and Conditions of the Notes as contemplated by the Noteholder Resolution is required to facilitate the proposed Capital Restructuring which is subject to Shareholder Approval at the Shareholder Meeting.

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

In the event that Noteholders approve the Noteholder Resolution but Shareholder Approval for the proposed Capital Restructuring is not subsequently obtained, the Noteholder Resolution will not take effect.

If Noteholders do not approve the Noteholder Resolution then:

• (a) Shareholder approval for the proposed Capital Restructuring will not be sought; and

• (b) it will trigger a default event under the terms and conditions of the Unlisted Convertible Notes.

2.2 Requirements to amend the Trust Deed

Clause 13.2 of the Trust Deed provides that the Company and the Trustee may, with the approval of a “special resolution” passed by Noteholders, make any amendment to the Trust Deed.

In addition, clause 17.19 expressly provides that a meeting of Noteholders has the power, by way of a “special resolution” to assent to any modification of the Trust Deed or the Note Conditions and authorise the Trustee to concur in and execute any supplemental deed embodying any such modification.

A “special resolution” for the purposes of clauses 13.2 and 17.19 of the Trust Deed means a resolution passed at the meeting of Noteholders duly convened and held in accordance with the Trust Deed and carried by a majority consisting of not less than 75% of the persons voting at the meeting upon a show of hands or if a poll is duly demanded then by a majority consisting of Noteholders representing not less than 75% of the aggregate value of all the Convertible Notes held by the Noteholders who are present at the meeting in person, by proxy or representative.

In accordance with the requirements of the Trust Deed, the Resolution is intended to be a “special resolution”.

2.3 Trustee

The Trustee is not obliged to consider the merits, or otherwise, of the proposed amendments to the Terms and Conditions and has not done so. Accordingly, the Trustee makes no recommendation as to how Noteholders should vote on the Resolution.

The Trustee has not authorised or caused the issue of the meeting materials. To the maximum extent permitted by law, the Trustee does not assume any responsibility and accepts no liability for the accuracy or completeness of the information contained in the meeting materials.

3. PROPOSED AMENDMENTS TO TERMS AND CONDITIONS

The Company is proposing to amend the Terms and Conditions of the Notes as set out below.

3.1

Conversion at the discretion of the Company

• (a) Clause 12 of the Terms and Conditions of the Notes provides that each Noteholder may convert their Notes by completing and delivering to the Company a Conversion Notice. There is currently no right for the

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

Company to compel the Noteholders to convert their Notes into Shares and Options.

• (b) It is proposed that the Terms and Conditions be amended to authorise the Company to compel Noteholders to convert all of their Notes into Shares and Options at any time prior to the Maturity Date. This will allow the Company to preserve cash and avoid the need to make a payment of approximately $6.63 million to redeem the Convertible Notes at the Maturity Date if the Notes are not otherwise converted earlier.

4. PROPOSED CONVERSION IF NOTEHOLDER RESOLUTION APPROVED

Subject to the Noteholder Resolution being passed and Shareholder Approval being obtained for the Capital Restructuring, the Company proposes to issue Company Conversion Notices immediately with a Conversion Date in late May or early June 2014.

The Company is proposing that all of the Notes held by all Noteholders will be converted into Shares and Options such that a Noteholder would be issued the number of Shares calculated by reference to the Face Value of the Notes held and the Conversion Price of (0.08 cents) per Share (pre-Consolidation) and one Option[1] for each Share issued.

The Company will make application for official quotation by ASX of all Shares issued and allotted upon the Conversion. Such application will be made as soon as reasonably practicable after Shares are so issued and allotted. The Company does not intend to make application for the Options to be listed on ASX.

The potential changes to the capital structure of the Company as a consequence of the Capital Restructuring (including the Conversion) are set out in Schedule 2.

As indicated in the Chairman’s Letter, there is no certainty that funds will be raised under the proposed Placement of up to $3 million. In the event that funds are not raised under the Placement, the Capital Restructuring will still proceed as it is expected that funds raised from the issue of Unlisted Convertible Notes (up to $1.5 million) will satisfy current creditors and give the Company sufficient working capital to pursue its oil and gas interests.

In the event the Noteholder Resolution is passed and the Notes are converted, Noteholders will be issued with Shares and Options. Should the Company experience an insolvency event in the future, the holders of Shares (and Options) will rank behind creditors and other debt (including any Notes) at the relevant time in any distribution of the available property of the Company.

Noteholders should seek their own independent financial and tax advice on the Conversion.

5. REQUIREMENT FOR APPROVAL BY SHAREHOLDERS

As the Company is listed on ASX, it is subject to certain rules limiting the issue of Shares and Options without Shareholder approval. The Company will therefore

1 The Options are subject to payment of the exercise price of $0.006 (on a post-Consolidation basis) as set out in the Terms and Conditions of Options in Schedule 1.

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

seek Shareholder approval for issue of all Shares and Options proposed to be issued under the Conversion so that it retains the ability to utilise its existing capacity to issue equity securities. It will be required to comply with ASX Listing Rule 7.1 prior to the Conversion.

The relevant Listing Rule provides that (subject to certain exceptions, none of which are relevant here) approval of a meeting of the Company's Shareholders will be required in relation to the Conversion where, as a result of the Conversion, the number of Shares and Options in the Company issued will (when aggregated with other securities issued by the Company during the previous 12 month period), exceed 15% of the total number of Company Shares on issue at the commencement of that 12 month period.

An extraordinary general meeting of Shareholders will be convened shortly to take place immediately after this meeting to seek the approval of Shareholders for the Conversion.

6. FAILURE TO CONVERT

If the Noteholders do not pass the Noteholder Resolution, then the Notes will remain in place on the same terms as are currently provided in the Trust Deed, including the right for each Note to be redeemed at Maturity for an amount equal to the Redemption Amount (calculated in accordance with the Terms and Conditions).

If the Noteholders do pass the Noteholder Resolution, but Shareholder Approval is not obtained, the Notes will remain in place on the same terms as currently provided in the Trust Deed.

If either of the above outcomes occur, with the effect that the Notes remain in place on the same terms as currently provided in the Trust Deed, then it is highly like that the Directors will be forced to place the Company into administration.

In the event the Noteholder Resolution is not passed and the Company experiences an insolvency event in the future, amounts outstanding under the Notes will rank in priority to payments to Shareholders in any distribution of the available property of the Company. However, the Company notes that it now has secured creditors (the Unlisted Convertible Noteholders) in the amount of $400,000 and these creditors will rank ahead of the Noteholders in the event of an administration or winding up scenario. In light of this, an administration scenario is unlikely to see any meaningful return to the Noteholders.

7. WHAT DO YOU HAVE TO DO TO SUPPORT OR VOTE AGAINST THE PROPOSALS?

You can either attend the meeting in person (or as a representative of a body corporate) or mark your voting preference on the attached proxy form allowing you to choose whether to vote in favour or against the Noteholder Resolution or to direct your proxy to the meeting chairman to vote.

The proposed chairman of the meeting, Anthony Short, currently intends to vote any undirected authorities in favour of the Noteholder Resolution.

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

GLOSSARY

$ means Australian dollars.

ASX means ASX Limited and where the context permits the Australian Securities Exchange operated by ASX Limited.

Board means the Company’s current Board of Directors.

Capital Raising means the proposed capital raising of up to $3 million to be undertaken by the Company for which Shareholder approval will be sought at the Shareholder Meeting.

Capital Restructuring has the meaning given to it in the Draft Shareholder Meeting Notice.

Company means Advance Energy Limited ACN 111 823 762.

Company Conversion Notice has the meaning given to it in Schedule 1 paragraph 2 of this Explanatory Statement.

Consolidation means a proposed consolidation of the Company’s shares and options on a one (1) for sixty (60) basis for which Shareholder approval will be sought at the Shareholder Meeting.

Conversion means the conversion of conversion of Notes into Shares and Options as set out in the Explanatory Statement.

Conversion Price means $0.0008 (0.08 cents) per Share on a pre-Consolidation basis ($0.048 on a post Consolidation basis).

Corporations Act means the Corporations Act 2001 (Cth).

Director means a director of the Company and Directors means all of them.

Draft Shareholder Meeting Notice means the notice of general meeting of the Company attached to this Notice.

Explanatory Statement means this explanatory statement accompanying the Notice.

Listing Rules means the listing rules of ASX.

Maturity Date means 5 years from the date of issue of the Notes.

Noteholder Meeting means the meeting of Noteholders to which this Explanatory Statement relates.

Noteholder Resolution has the meaning given to it in the Notice.

Notes means a listed convertible note having the Terms and Conditions.

Notice or Notice of Meeting means the notice of Noteholder Meeting to which this Explanatory Statement is attached.

Options means an option to acquire a Share on the terms and conditions set out in Schedule 1 paragraph 3 of this Explanatory Statement.

Proxy Form means the proxy form attached to this Notice.

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

Redemption Amount has the meaning given to it in the Trust Deed.

Shares means fully paid ordinary shares in the capital of the Company.

Shareholder means a shareholder of the Company.

Shareholder Approval means the approval of the proposed Capital Restructuring at the Shareholder Meeting.

Shareholder Meeting means the proposed meeting of Shareholders at which Shareholder Approval will be sought.

Terms and Conditions means the terms and conditions applicable to the Notes, including the terms and conditions in the Trust Deed and the terms and conditions in Schedule 1 of the Trust Deed.

Trust Deed means the trust deed dated 13 October 2009 between the Company and the Trustee as varied.

Trustee means The Trust Company (Australia) Limited (formerly, Trust Company Fiduciary Services Limited) ACN 000 000 993.

Unlisted Convertible Noteholder has the meaning given to it in the Draft Shareholder Meeting Notice.

Unlisted Convertible Notes has the meaning given to it in the Draft Shareholder Meeting Notice.

WST means Western Standard time as observed in Perth, Western Australia.

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

SCHEDULE 1 - PROPOSED AMENDMENTS TO TRUST DEED TERMS AND CONDITIONS

1. Proposed amendment to clause 1.1

The proposed amendment to clause 1.1 of the Trust Deed is to:

• (a) insert a definition for “Option” as follows:

• “ Option means an option to acquire a Share on the terms and conditions set out in Schedule 3.”

2. Proposed amendments to Terms and Conditions to effect Conversion

The proposed amendments to the Terms and Conditions in schedule 1 to the Trust Deed are as follows:

• (b) that clause 12 be amended by adding a sub-heading above clause 12(a) as follows:

“ 12.1 Conversion at the election of Convertible Noteholder

• (c) that clause 12 be further amended by inserting a new sub-heading and clauses immediately below clause 12(i) to read as follows:

“ 12.2 Conversion at the election of Company

• (a) The Company may at its discretion and at any time prior to the Maturity Date of the Convertible Notes require that a Convertible Noteholder convert all of the Convertible Notes (together with any accrued interest) held by them into Shares and Options by completing and delivering to the Convertible Noteholder a conversion notice ( Company Conversion Notice ) which shall specify the date on which the conversion shall take place ( Company Conversion Date ), which shall be within 14 days of the date on which the Company Conversion Notice is delivered, the Face Value of the Convertible Notes to be converted and the number of Shares and Options the Convertible Noteholder will receive on Conversion.

• (b) On the Company Conversion Date, the Company will proceed to issue the Convertible Noteholder that number of Shares as calculated in accordance with paragraph 13. The Convertible Noteholder will also be entitled to receive the number of Options equal to the number of Shares to be issued (calculated in accordance with paragraph 13) on a 1 for 1 basis.

• (c) The issue of Shares and Options on the Company Conversion Date will be deemed for all purposes to be in full satisfaction and discharge of the Face Value owing to the Convertible Noteholder (together with accrued interest) pursuant to the relevant Convertible Notes held by that Convertible Noteholder.

• (d) The Shares issued upon the Company Conversion Date pursuant to this paragraph will rank equally in all respects with all Shares issued at the Company Conversion Date. The terms and conditions of the Options are set out in Schedule 3.

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

• (e) The Company will make application for official quotation by ASX of all Shares issued on the Company Conversion Date. Such application will be made as soon as reasonably practicable after the Shares are issued and in any event within any period prescribed by the Listing Rules. The Company does not intend to apply for the Options to be listed on ASX.

• (f) Within 10 Business Days of the issue of the Shares and Options to a Convertible Noteholder, the Company will deliver to the Convertible Noteholder a holding statement in respect of the Shares and Options issued.

• (g) If the Company delivers a Company Conversion Notice to the Noteholders, interest on the Notes will cease to be payable or accrue after 31 March 2014.”

3.

Proposed addition of new Schedule 3

It is proposed to insert a new Schedule 3 (Terms and Conditions of Options) to the Trust Deed as follows:

(a)

Entitlement

Each Option entitles the holder to subscribe for one Share upon exercise of the Option.

(b)

Exercise Price

Subject to paragraph (j), the amount payable upon exercise of each Option will be $0.006 (post the proposed Consolidation) ( Exercise Price )

(c)

Expiry Date

Each Option will expire at 5:00 pm (WST) on 31 March 2015 ( Expiry Date ). An Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.

(d)

Exercise Period

The Options are exercisable at any time on or prior to the Expiry Date ( Exercise Period ).

(e) Notice of Exercise

The Options may be exercised during the Exercise Period by notice in writing to the Company in the manner specified on the Option certificate ( Notice of Exercise ) and payment of the Exercise Price for each Option being exercised in Australian currency by electronic funds transfer or other means of payment acceptable to the Company.

(f)

Exercise Date

A Notice of Exercise is only effective on and from the later of the date of receipt of the Notice of Exercise and the date of receipt of the payment of the Exercise Price for each Option being exercised in cleared funds ( Exercise Date ).

• (g) Timing of issue of Shares on exercise

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

Within 15 Business Days after the later of the following:

• (i) the Exercise Date; and

• (ii) when excluded information in respect to the Company (as defined in section 708A(7) of the Corporations Act) (if any) ceases to be excluded information,

but in any case no later than 20 Business Days after the Exercise Date, the Company will:

• (i) allot and issue the number of Shares required under these terms and conditions in respect of the number of Options specified in the Notice of Exercise and for which cleared funds have been received by the Company;

• (ii) if required, give ASX a notice that complies with section 708A(5)(e) of the Corporations Act, or, if the Company is unable to issue such a notice, lodge with ASIC a prospectus prepared in accordance with the Corporations Act and do all such things necessary to satisfy section 708A(11) of the Corporations Act to ensure that an offer for sale of the Shares does not require disclosure to investors; and

• (iii) if admitted to the official list of ASX at the time, apply for official quotation on ASX of Shares issued pursuant to the exercise of the Options.

If a notice delivered under (g)(ii) for any reason is not effective to ensure that an offer for sale of the Shares does not require disclosure to investors, the Company must, no later than 20 Business Days after becoming aware of such notice being ineffective, lodge with ASIC a prospectus prepared in accordance with the Corporations Act and do all such things necessary to satisfy section 708A(11) of the Corporations Act to ensure that an offer for sale of the Shares does not require disclosure to investors.

• (h) Shares issued on exercise

Shares issued on exercise of the Options rank equally with the then issued shares of the Company.

• (i) Quotation of Shares issued on exercise

If admitted to the official list of ASX at the time, application will be made by the Company to ASX for quotation of the Shares issued upon the exercise of the Options.

(j)

Reconstruction of capital

If at any time the issued capital of the Company is reconstructed, all rights of an Optionholder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.

(k) Participation in new issues

There are no participation rights or entitlements inherent in the Options and holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options without exercising the Options.

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

(l) Change in exercise price

An Option does not confer the right to a change in Exercise Price or a change in the number of underlying securities over which the Option can be exercised.

(m) Unquoted

The Company will not apply for quotation of the Options on ASX.

(n) Transferability

The Options are transferable subject to any restriction or escrow arrangements imposed by ASX or under applicable Australian securities laws.

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

SCHEDULE 2 – PROPOSED CAPITAL STRUCTURE

Assuming that Shareholder Approval is obtained for the proposed Capital Restructuring, the capital structure of the Company immediately following the Capital Restructuring will be as follows:

Capital Structure		Shares	Shares	Options	Options		Convertible	Convertible	Convertible
									notes
	Current Capital Structure
				nil					Listed
							Convertible
									Notes
Shares, Options and Convertible Notes currently on issue (i.e. pre- Capital Restructuring)
						convertible to
			1,342,333,028			a maximum of
						9,116,406,250
							Shares and
						9,116,406,250
								Options
	Post Capital Restructuring
		22,372,217 (0.88% of share capital)****		nil				nil
Post 1 for 60 Consolidation
Issue of Shares and Options upon conversion of all Listed Convertible Notes
		151,940,120 (6.01% of share capital)
				151,940,120				nil
Issue of Shares and Options in lieu of various amounts outstanding		11,351,375 (0.45% of share capital)
				11,351,375				nil
Issue of Shares upon conversion of Unlisted Convertible Notes *		843,333,333 (33.35% of share capital)
				nil				nil
		1,500,000,000 (59.31% of share capital)		nil				nil
$3m Placement**
Total after completion of all Resolutions		2,528,997,045
				163,291,495				nil
Total after Capital Restructuring on a fully diluted basis***		2,692,288,540
				nil				nil

• Assumes conversion of all Unlisted Convertible Notes.

** Assumes Placement is fully subscribed.

*** Assumes conversion of all Unlisted Convertible Notes and exercise of all Options.

**** Percentages assume all Resolutions are approved and completed and the Placement is fully subscribed.

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SCHEDULE 3 - PROVISIONS GOVERNING THE CONVENING, AND CONDUCT, OF NOTEHOLDER MEETINGS

(Extracted from Trust Deed)

17. Meetings of Convertible Noteholders

The Trustee or the Company may call a meeting of Convertible Noteholders in the manner provided in this clause 17 and those meetings will be conducted and have the powers as are in this clause 17.

17.1 Convening meetings

• (a) The Trustee or the Company may at any time convene a meeting of Convertible Noteholders.

• (b) The Company must summon a meeting of Convertible Noteholders if requested in writing to do so by persons holding Convertible Notes representing not less than 10% in value of the Principal Amount in accordance with section 283EA of the Corporations Act.

• (c) Meetings are to be held in Perth or at such other place as the Trustee and the Company may agree.

17.2 Notice

• (a) Convertible Noteholders and the Auditor must be given at least 21 days notice of a meeting.

• (b) The period of notice is to be determined exclusive of the day on which the Notice is served or deemed to be served and of the day for which it is given.

17.3 Provision of notices

• (a) Notices to Convertible Noteholders may be given:

• (i) to a Convertible Noteholder personally;

• (ii) by sending it by post to the address for the Convertible Noteholder in the Register;

• (iii) by sending it by facsimile to the facsimile number nominated by the Convertible Noteholder;

• (iv) by the Company posting, at the request of the Trustee, the Notice on its internet website or by the Trustee posting such Notice on its internet website; or

• (v) by any other means that the Company and the Trustee agree in writing and notify to the Convertible Noteholder.

• (b) A notice of meeting must specify the place, day and hour of the meeting and the general nature of the business to be transacted but it is not necessary to specify in the notice the precise terms of the resolutions to be proposed.

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• (c) A copy of the notice must be promptly sent by post to the Trustee unless the meeting has been convened by the Trustee and to the Company unless the meeting has been convened by the Company.

• (d) A notice sent to a Convertible Noteholder is taken to be given 3 days after it is posted if posted within Australia (or 7 days after it is posted if posted to or from a place outside Australia), or on the next Business Day if sent by facsimile or other electronic means.

17.4 Failure to give notice does not invalidate

The accidental omission to give notice to or the non-receipt of notice by any of the Convertible Noteholders does not invalidate the proceedings at any meeting but where notice of a meeting convened by the Company or Trustee is not received by the other of them all business transacted and all resolutions passed at the meeting will be void and of no effect unless such notice is waived by such other of them.

17.5 Quorum

At any meeting a quorum for the transaction of business will be formed by at least two Convertible Noteholders present in person or by proxy or being a corporation by proxy or duly authorised representative holding Convertible Notes in aggregate representing at least 10% in value of the Principal Amount.

17.6 Adjournment in the absence of quorum

• (a) If within 30 minutes from the time appointed for the meeting a quorum is not present the meeting convened upon the requisition of Convertible Noteholders will be dissolved. In any other case it will stand adjourned to such day and time not being less than 14 days thereafter or in the case of an adjourned meeting of Convertible Noteholders at which a Special Resolution is to be submitted 21 days thereafter and to such place as may be appointed by the relevant chairman.

• (b) At an adjourned meeting in accordance with clause 17.6(a), the Convertible Noteholders present and entitled to vote whatever the value of the Convertible Notes held by them will be a quorum for the transaction of business including the passing of Special Resolutions.

• (c) Notice of any adjourned meeting of Convertible Noteholders at which a Special Resolution is to be submitted must be given in the same manner as of an original meeting and such notice must state that the Convertible Noteholders present at the adjourned meeting whatever their number and the amount of Convertible Notes held by them will form a quorum.

17.7 Chairman

• (a) The Trustee or some other person nominated in writing by the Trustee is entitled to be the chairman at every meeting but if no such person is nominated or if at any meeting the person nominated will not be present within 15 minutes after the time appointed for the holding the meeting the Convertible Noteholders present may choose one of their number to be chairman.

• (b) The Trustee and the solicitors to the Trustee and any director or officer of a corporation being the Trustee and any director and the secretary and

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solicitors of the Company and any other person authorised by the Company, may attend any meeting and be heard.

17.8 Adjournment by chairman

The chairman of any meeting may with the consent of any meeting at which a quorum is present (such consent being obtained if the Trustee so requires on a poll) and must if directed by the meeting so resolving on a poll, adjourn the meeting from time to time and from place to place but no business may be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting from which the adjournment took place.

17.9 Voting

• (a) At any meeting a resolution put to the vote of the meeting will be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded by the meeting's chairman, the Trustee or the Company or in writing by one or more Convertible Noteholders present in person or by proxy holding or representing 5% in value of the Principal Amount.

• (b) Unless a poll is so demanded in accordance with clause 17.9(a), a declaration by the meeting's chairman that a resolution has been carried or carried unanimously or by a particular majority or lost is conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution.

• (c) A determination of the number of proxies received in order to determine the number of valid proxies received in respect of any meeting or resolution to be put to a vote will be made by the Auditor or an independent third party agreed to by the Company and the Trustee.

17.10 Casting vote

In the case of an equality of voles whether on a show of hands or on a poll the chairman of the meeting at which the show of hands takes place or at which the poll is demanded has no casting vote in addition to the votes (if any) to which he may be entitled as a Convertible Noteholder.

17.11 Poll demands

• (a) A poll demanded on the election of a chairman or on a question of adjournment is to be taken at the meeting without adjournment.

• (b) A poll demanded on any question other than in clause 17.11(a) is to be taken either immediately or, with consent of the Trustee, at such other time (not being more than thirty days from the date of the meeting) and place as the meeting's chairman may direct No notice need be given of a poll not taken immediately.

• (c) The demand for a poll will not prevent the continuance of a meeting for the transaction of any business other than the question on which the poll has been demanded.

• (d) The result of a poll will be deemed to be the resolution of the meeting at which the poll was demanded.

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

17.12 Voting entitlements

On a show of hands every Convertible Noteholder who being an individual is present in person or by attorney or being a corporation is present by proxy or attorney or by its authorised representative has one vote and on a poll every Convertible Noteholder who is present in person or by proxy has one vote for every Convertible Note with respect to which he is the registered holder.

17.13 Joint holders

In the case of joint registered holders of Convertible Notes the vote of the senior who tenders a vote whether in person or by proxy is to be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority is determined by the order in which the names appear in the Register in respect of the joint holding.

17.14 Convertible Noteholder entitled to more than one vote

On a poll votes may be given either personally or by proxy and a Convertible Noteholder entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

17.15 Convertible Noteholder which is a corporation

A Convertible Noteholder which is a corporation may be represented at a meeting of Convertible Noteholders or may vote at the meeting or on a poll or in relation to any resolution of Convertible Noteholders by proxy or by attorney or by representative appointed in accordance with the provision of section 250D of the Corporations Act as if references to member or members in that section were references to Convertible Noteholder or Convertible Noteholders.

17.16 Proxy

• (a) The instrument appointing a proxy must be in writing under the hand of the appointor or of his attorney duly authorised in writing or if the appointor is a corporation either under its common seal or as otherwise authorised by the Corporations Act or under the hand of an officer or attorney so authorised and need not be witnessed.

• (b) A person appointed to act as proxy need not be a Convertible Noteholder.

• (c) The proxy will be deemed to include the right to demand or join in demanding a poll.

• (d) Unless the contrary is stated on the instrument of proxy, a proxy is valid for any adjournment of the meeting to which it relates.

17.17 Deposit of proxies

• (a) The Instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of the power or authority, must be deposited at such place as the Trustee or the Company may in the notice convening the meeting direct, or if no such place is appointed.

• (b) Then at the registered office of the Company not less than 48 hours before the time appointed for holding the meeting or adjourned

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meeting (or In the case of a poll before the time appointed for taking of the poll) at which the person named in the instrument proposes to vote and in default the instrument of proxy will not be treated as valid.

• (c) No instrument appointing a proxy is valid after the expiration of 12 months from the date named in it as the date of its execution.

17.18 Proxy voting

A vote given in accordance with the terms of an instrument of proxy is valid notwithstanding the previous death or insanity of the principal, revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the Convertible Notes in respect of which the proxy is given, provided that no notice in writing of such death, insanity, revocation, or transfer has been received by the Company at its registered office before the commencement of the meeting or adjourned meeting at which the proxy is used.

17.19 Powers of meeting of Convertible Noteholders

Without limiting the rights of Convertible Noteholders, the Company and the Trustee pursuant to this Deed, a meeting of Convertible Noteholders has in addition to all other powers, the following powers exercisable by Special Resolution only:

• (a) power to sanction any modification or compromise or any arrangement in respect of the rights of the Convertible Noteholders against the Company whether such rights will arise under this Deed, the Conditions or otherwise;

• (b) power to assent to any modification of the provisions contained in this Deed or the Conditions and to authorise the Trustee to concur in and execute any supplemental deed embodying any such modification;

• (c) power to give any sanction, direction or request which under any of the provision of this Deed is required to be given with the consent of the Convertible Noteholders;

• (d) power to give and release in respect of anything done or omitted to be done by the Trustee; and

• (e) power to remove a trustee.

17.20 Special Resolution binding

A Special Resolution passed at a meeting of the Convertible Noteholders duly convened and held in accordance with this Deed is binding upon all the Convertible Noteholders whether or not present at the meeting and each Convertible Noteholder is bound to give effect to it accordingly.

17.21 Special Resolution - definition

The expression Special Resolution when used in this Deed means a resolution passed at a meeting of the Convertible Noteholders duly convened and held in accordance with this Deed and carried by a majority consisting of not less than 75% of the persons voting at the meeting upon a show of hands or if a poll is duly demanded then by a majority consisting of the holders of Convertible Notes representing not less than 75% in value of the Principal Amount held by the

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holders of Convertible Notes who are present at the meeting in person, by proxy or representative.

17.22 Minutes

Minutes of all resolutions and proceedings at every meeting must be made and duly entered in the books to be from time to time provided for that purpose by the Company and any minute if purporting to be signed by the chairman of the meeting at which a resolution was passed or proceedings were held or by the chairman of the next succeeding meeting of Convertible Noteholders is prima facie evidence of the matters stated in it.

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

APPOINTMENT OF PROXY FORM

ADVANCE ENERGY LIMITED ACN 111 823 762

NOTEHOLDER MEETING

I/We

of: being a Noteholder entitled to attend and vote at the Meeting, hereby appoint:

Name:

OR: the Chair of the Meeting as my/our proxy.

or failing the person so named or, if no person is named, the Chair, or the Chair’s nominee, to vote in accordance with the following directions, or, if no directions have been given, and subject to the relevant laws as the proxy sees fit, at the Meeting to be held at Suite 4, 16 Ord Street, West Perth, Australia, on Monday 19[th] May 2014 at 11.00 am, and at any adjournment thereof.

The Chair intends to vote undirected proxies in favour of the Noteholder Resolution.

Voting on business of the Meeting FOR AGAINST ABSTAIN Resolution: Noteholder Resolution

Please note : If you mark the abstain box for the Noteholder Resolution, you are directing your proxy not to vote on the Noteholder Resolution on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

==> picture [477 x 130] intentionally omitted <==

----- Start of picture text -----

If two proxies are being appointed, the proportion of voting rights this proxy represents is: %
Signature of Noteholder(s):
Individual or Noteholder 1 Noteholder 2 Noteholder 3
Sole Director/Company Secretary Director Director/Company Secretary
Date:
Contact name: Contact ph (daytime):
E-mail address: Consent for contact by e-mail: YES NO
----- End of picture text -----

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)

ATTACHMENT

DRAFT SHAREHOLDER MEETING NOTICE

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AVD - Notice of Meeting - Noteholders (Final 23 April 2014)