Confidential. Information and opinion only. You are deemed to have read the NOTICE.
Deal Flow Reports
Market & Geopolitics
: Example Fund Details
information dated 2004
An investment holding company investing privately for premium returns in businesses demonstrating sustainable initiative.
Consumer awareness, regulation and technology are catalysing changes in market behaviour globally. Consumers demand value-for-money, sustainable products and services. Sustainable business models are sought by leading companies. The industrial landscape will have changed to sustainable systems within two decades. GRI Equity's investments in globally responsible businesses are expected to reap attractive, risk adjusted returns.
To be read in conjunction with the full Prospectus and the Agreement.
Now is an excellent time to invest in private equity, particularly for investors with a long term investment horizon. (See "Now is the Time to Invest in Private Equity" by Invesco, in .pdf.) We invest in business demonstrating a sustainable business model and leading business practice. Our business is built on a long, international track record of private equity and venture capital management and industrial operations experience. Our investment strategy offers attractive returns while managing business and financing risks. Our exciting deal flow is global and we add particular value by being able to take small and medium sized businesses on to the world stage. Our portfolio is particularly attractive to investors with a long term investment horizon, both institutional and private, as well as those planning endowments or succession.
GRI Equity achieves superior risk adjusted investment returns. The fund target net IRR is 15% (turns $ 1 million into $ 4 million in 10 years). The company invests in a well diversified portfolio of businesses demonstrating globally responsible initiative. The Company is a self managed investment vehicle. It will provide long term equity linked capital to unlisted businesses.
We invest $ 1.0 million to $ 5 million (all tranches) for a significant minority stake. The company may engineer or participate in syndications. Our capital is used to finance product, market and internal development of selected businesses. We also manage information resources to leverage our own activities and those of our partners. Our expertise in financial engineering and business analysis and our experience in reviewing, working in and working with dynamic businesses are important skills required to successfully select and mentor a portfolio of businesses.
Our investment focus is distinctive: businesses demonstrating sustainable commercial success – built upon globally responsible initiatives. Our investment universe is wide to enable an appropriate risk diversification strategy and the competitive advantage of a globally responsible initiative. We select and nurture business managers and entrepreneurs that are building sustainable enterprises.
Sustainable businesses reflect a cooperative approach to resource sharing which benefit all stakeholders in a business. Businesses that ignore community and environment are being regulated out of business, vilified by media and community and reproached by employees and customers. We consider many dimensions of a business as well as the value of time and capital: capital structure, operating financials, operations management, customer value, community benefits, product evolution, market flexibility and so on. This qualitative evaluation results in quantification of investment risk and return.
Key investment selection criteria are:
While our investment policy is inclusive, our industry focus is in the following areas:
Our geographical focus is not restricted. We have opportunities flowing from Europe, North America and Asia and find that most businesses, even smaller ones, have an international market and/or stakeholders may be from different parts of the world. Additionally, we may benefit our partners by helping them access new international markets, thereby expanding geographical coverage rather than focussing it. Generally, however, we prefer businesses that have adopted international standards of management and governance and jurisdictions that promote free capital flows.
Dealflow is diverse and provides the ability to select a diverse portfolio of businesses, strengthened by the common culture of sustainable business excellence. Please contact us to discuss current opportunities.
Recent turbulence in financial markets has removed "irrational exuberance" from the financial intermediaries and extravagant corporate boards, while liquidity has reduced concurrently. The funding gap in small and medium sized businesses is expanding and business cost structures are becoming more attractive. Many private equity funds active since 1998 are suffering depreciated portfolios and are inexperienced in managing during economic downturns. While concurrently innovation continues, market opportunities are great and long term financial intermediaries, like pension and insurance fiduciaries, seek diversified portfolios. Now is an excellent time to invest in private equity, particularly for investors with a long term investment horizon. (See "Now is the Time to Invest in Private Equity" by Invesco, in .pdf.)
Businesses engaging in globally responsible business practices are leaders in building value. Long term value is accrued by innovative businesses that are responding to technological opportunity and consumer trends which underpin rapid market growth. The Fund is one of these innovative businesses and will share in the growth of this market by providing capital to these businesses. GRI Equity fills the funding gap that would otherwise restrict business growth. GRI Equity also offers contributes its finance and business expertise and access to a web based enterprise that can leverage the assets of a business.
Asset managers are unfamiliar with today's heightened requirements: not just financial skills, but also understanding of environment, technology, governance and regulation all of which impact the risk-return profile of assets. GRI Equity has the technology, skills and experience to successfully manage assets in this market.
The following summarises the new market dynamics.
Confluence of factors make attractive market growth prospects for globally responsible investment. Investment timing appears to be good.
In the last 30 years scientific understanding of the impact of human systems on the biosphere has grown phenomenally. In 1997, the first Global Environment Outlook was published by the United Nations Environment Programme concluding that global imbalances are at critical levels and disruption threatens life on earth. (The UNEP motto is "for Life on Earth".) GEO3 has been published with similarly responsible concerns, concluding that consumption patterns must become more sustainable or nature will be compromised.
Media coverage of problems with traditional industrial and consumer behaviour increasingly maintains awareness of the need and opportunity to adopt globally responsible consumption patterns. Events like mad-cow disease, Enron, analyst ratings, oil spills, SARS and so on are assimilated by increasingly affluent and educated consumers demanding authenticity between product/service advertising and performance.
Timing for investment appears to be optimum. Globally responsible industrial development appears to be at the "take-off" stage in the standard "S-curve" pattern of industrial evolution. (We liken this window of opportunity to that of investing in computers in the early/mid 1980s and realising superlative returns ten years later.) During the next decades industry will adopt sustainable solutions as demanded by consumers. While margins will be eroded as sustainable technology becomes a commodity rather than an specialty, today wide margins are supported by unsatisfied demand and the lag of industrial incumbents reacting to market demand and implementing sustainable business models.
Attractive investment opportunities.
Globally responsible businesses are established in all industrial sectors, spread across many countries and adopt practices that are globally acceptable. The high level of similarity and integration of economic systems allows GRI Equity to standardise investment procedures globally offering the opportunity to build a risk diversified portfolio of businesses.
The Manager has dealflow of companies serving globally responsible industrial and consumer markets. Examples may be shown in many sectors including agriculture, food, housing, materials, IT, energy, waste, transport, white goods, education, banking, and so on.
Today's globally responsible enterprises are likely to be the market leaders in the coming years. As the market substitutes sustainable technology for traditional methods today's sustainable businesses will supplant traditional providers. Many of these companies require development and expansion equity capital to realise this growth as consumers demand sustainable substitutes. We invest new capital in these type of businesses and provide financial and management expertise to help their development. In addition, we may provide structured mechanisms for realising appreciation in enterprise value to be arranged with financial partners.
Investment in listed businesses (directly or indirectly) is expected to benefit from attractive valuations on acquisition, long term enterprise growth and attractive exits. While the universe of sustainable listed companies (illustrated by DJSI, FTSE4Good, Domini Index and others) is large, many of these are included in indicies because they do not breach certain requirements, rather than because they have taken initiative. GRI Equity may invest Commitments in selected listed businesses demonstrating globally responsible initiative.
Experienced management and refined investment process
Tom Butler is the principal manager and draws on a global network of professional as required. He is experienced in global private equity investing, entrepreneurial management and has demonstrated enlightened action in business and private endeavour. He has reviewed over 300 private equity opportunities, over a quarter of which were sourced personally, and has invested in over a dozen private enterprises. His ability to help resolve development challenges on tight budgets supports the success of our partners.
The screening of investments follows a prescribed process to ensure completeness, but is flexible in its application to ensure fit between The Fund and Holdings. Other factors being acceptable, the Manager selects for appropriately resourced management teams, provides capital and director level input. The ongoing relationship with our partners is important to us - it enables us to transfer and leverage our business and financial skills into our partners' enterprises.
The web based enterprise management systems adopted by the Manager offer lower overheads and leverage the knowledge resources of the Manager, partners and Holdings.
The Fund structure is an offshore limited company managed by a wholly owned subsidiary of The Fund ("GRI Managers").
Fund Size Committed Funds are intended to be US$ 30 million.
Commitments Commitments will be in units of US$ 50,000, with a minimum of US$ 250,000 (subject to adjustment at the discretion of the Board). The Sponsor has made a total commitment of [US$ 150,000 ] to The Fund.
Drawdown All funds may be drawn down immediately and up to 90% will be invested in listed equities from a preselected portfolio of businesses within 6 months of final closing.
Distribution All realisations to be distributed as soon as practicable after the investment is realised, with any net income distributed quarterly, subject in each case to a minimum distribution of US$ 250,000 in aggregate and subject also to capital invested being retained for reinvestment for 5 years from Closing Date at the Manager’s option.
Fees Management fee on Committed Funds payable monthly in advance as follows:
A performance fee will not be payable. However, executives compensation will be partly in shares of the Fund. The Fund will also make available shares for purchase by all staff of The Manager.
Administration fees of [ ..%] will be payable by the Fund. Custodian fees will be payable by the Fund.
Establishment Costs At First Closing, The Manager is to be paid a fee of US$ [250,000] by The Fund to reimburse the costs of the formation of The Fund and the issue of the Securities, including the Manager’s costs, legal, professional and other fees. The majority of this fee will be paid out to third parties who may or may not be associates of The Fund.
Placement agent fees will not be paid by The Fund.
Reporting Summary quarterly reports and full annual reports for Shareholders.
First Closing Date [ 2004] Further closings at The Fund's discretion annually within 3 months of fiscal year end.
The following paragraphs highlight competitive advantages of GRI Equity.
The team has the skills, attitude and experience to do the job. The principal has a good understanding of a broad range of professions including primary, secondary and tertiary sectors, across business stages and legal environments, built upon aptitude in arts and science. This combined with a solid grounding in the principles of finance and easy access to information are the basic ingredients required to manage assets successfully.
The investment process combines the benefits of portfolio systems and private equity due diligence. The investment process is successful because it provides a simple yet rigorous roadmap which screens inappropriate opportunities early, focuses stakeholders on key issues, outsources specialised skills e.g. legal, technical, audit, market research, thus keeping overhead low while maintaining great breadth and depth of professional expertise. The post-investment mentoring relationship allows us to add-value to our partners' operations as we leverage the senior executive experience of our team and advisors for the benefit of partners.
Operating infrastructure is a low cost, highly productive web based enterprise management system enabling high productivity and reducing costs. GRI Equity archives a global footprint with a small commitment of resources. IT systems are open source and cross-platform to mitigate against redundancy.
We have demonstrable deal flow and exit opportunities through industrial networks and WBEM distribution channels.
The investment policy is flexible regarding geography, industry and stage enabling opportunity maximisation and greater risk diversification. It obtains the benefits of top down perspective and bottom-up detail.
Valuable combination of global economic and political perspective, industry knowledge and investment and entrepreneurial skills enable GRI Equity to identify, target and evaluate portfolio opportunities while the investment window is most attractive.
Fees are competitive and apparent. No performance fees - incentive created by compensation in shares of the fund.
Uniquely, GRI Equity directly aligns interests of managers with those of investors: the management company is a subsidiary of the investment fund; investors control the fund. The legal structure reflects the resource commitment, risk sharing and the timing of economic costs and benefits to the stakeholders.
BVI limited holding company, also owns manager. Tax transparency for the global market opportunity is intended so that double taxation is avoided. International investors are treated equally. Investment structure flexibility is maintained.