The focus of this new offshore regulated investment fund will be identification and development of young, talented players from known and emerging soccer regions around the world – obtaining the best opportunities and providing the best coaching and training environment for their talent to flourish. Management’s target will be geared to player development in the 16-19 age range, inclusive of high level pro based coaching and, where appropriate, specific educaon of players, thereby achieving significant future contract value for each player and bringing value gains and steady income growth for players and the Fund’s investors. BRINGING POTENTIAL IN TO PLAY INVESTMENT MEMORANDUM
Transcript
The focus of this new offshore regulated investment fund will be identification and development of young, talented players from known and emerging soccer regions around the world – obtaining the best opportunities and providing the best coaching and training environment for their talent to flourish.
Management’s target will be geared to player development in the 16-19 age range, inclusive of high level pro based coaching and, where appropriate, specific education of players, thereby achieving significant future contract value for each player and bringing value gains and steady income growth for players and the Fund’s investors.
Bringing potential in to playinvestment memorandum
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1. Key Parties 5
2. Key Features 6
3. the World oF soccer 8
4. the Fund – ‘Bringing Potential in to Play’ 10
5. the Fund’s Business Model – ‘a two-Footed approach’ 12
6. Facilities For student Players 14
7. the Fund’s ManageMent and Partners 16
8. investMent structure and Financial Projections 18
9. suMMary oF the investMent 22
10. Fees and coMMissions 23
11. suMMary oF the Fund 25
Contents
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1. Key Parties
Football talent FundThird Floor,207 Regent Street, London.W1B 3HH
• target irr oF 12% P.a. (inCome and CaPital growth)
• inCome growth From year 3 and averaging 6.4% yield over First Five years
• total Fund available £5,000,000
2. Key Features
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3. the world oF soCCer
This summer’s festival of football in Brazil has highlighted yet again the worldwide appeal of a sport that attracts billions – both in terms of spectators and participants and of investment and value.
Football is the global game, and a truly global and growing business. In early June, accountants Deloitte published their 17th annual Football Money League and reported that the top 20 clubs in the world saw revenues rise by 8% last year to £5.4 billion. Total revenues for Europe’s top five leagues amounted to almost €10 billion in the same 2012/13 season. Such figures are equivalent to the total annual GDP of many countries, and show a growth rate that outstrips GDP growth in many markets.
FIFA (the sport’s international governing body) records that it has “205 member associations with over 300,000 clubs and 240 million players from around the world”. Some 30 million of those registered professional, semi-professional and amateur players are women, demonstrating soccer’s broad appeal across societies and cultures.
This year’s World Cup has also highlighted the many young players brought into the competing teams. Whilst the average age of squads in the tournament has been put at 27.2 years, several countries fielded teams with a historically low average age – for example, Belgium, Chile, Switzerland, the Nether-lands and England. In fact, England’s squad was the youngest to take part in a World Cup since 1958, according to published data. In 2010, in South Africa, England fielded the oldest squad; that ‘honour’ was taken by Argentina this year.
The other notable statistic from the 2014 World Cup is the fact that almost half of all players in the tournament currently play for European clubs. Like many other professional sports, free agency has resulted in the dramatic increase in player salaries and fees paid for player contract purchases, and a concentration of the best talent in the richest leagues and at the richest clubs.
For example, the employer club whose footballers played the most minutes during World Cup 2014 qualification matches was Real Madrid (10,549 minutes), followed by FC Barcelona (9,549) and Bayern Munich (9,351). The first non-European club, Esteghlal FC of Iran (5,061 minutes), ranked only 14th.
“This finding reflects both the over-representation of Europe-an teams in the World Cup and the high concentration of top level players in the most competitive European leagues. In to-tal, 48.9% of World Cup qualification minutes were played by footballers under contract with top division clubs in England, Spain, Italy, Germany and France.
All national teams qualified fielded players employed by big-5 league clubs. However, the percentage of minutes played by big-5 league footballers was below 25% for Australia, Costa Rica, Ecuador, Honduras, Iran, South Korea and Russia. These nations will most probably struggle to qualify for the knockout stages.
Only about one third of the qualification minutes were played by footballers playing in domestic leagues. This percentage was 0% for Cameroon and the Ivory Coast. The percentage was also under 5% for Uruguay, Bosnia, Ghana and Belgium. At the opposite end of the spectrum, domestic league based footballers played 100% of minutes in the English side. All other qualified nations fielded at least one player under contract with a foreign team.” (Source: CIES 2014 World Cup Preview - The International Centre for Sports Studies (CIES) is an independent study centre located in Neu-châtel, Switzerland. It was created in 1995 as a joint venture between the Fédération Internationale de Football Association (FIFA), the University of Neuchâtel, the City and State of Neuchatel)
Just how long this European dominance will last is questiona-ble, given the high performance of teams from throughout the Americas in this year’s tournament and the rapid rise in both the value and profile of soccer in North America. The strong performance of the USA national side coincides with a massive upsurge in investment into and activity in youth and lower league teams across the States, and many close observers of the game believe the US now provides a major growth market that has the capacity to compete with the European clubs and leagues for the best players.
Managers of the Football Talent Fund believe development of soccer – and thus young players – across the Americas will be commercially significant in the next decade, and take full cognisance of this trend in the Fund’s business strategy, al-though the example of Europe and its dominance in the world game remains significant.
The vast difference in salaries between the new FIFA mem-ber clubs and the older more established soccer clubs has thus far created a rapid outflow of talent of all ages to the higher paying soccer communities, and has caused real concern about how young players are developed everywhere. Although the years ahead may see increased soccer wealth outside Europe, the spotlight is likely to remain on young player development and the flow of talent from grassroots to major clubs – indeed, FIFA has tightened rules and targets for how much clubs must spend on their youth squads, and how young players are treated at home and abroad.
Many observers of the game suggest that current spending on young players is often mismanaged and untargeted, particularly in the UK. For example, critics say that clubs such as Chelsea and Manchester United “play a numbers game” – they take on large numbers of young players at all ages but do not focus on the in-dividual development of each player, but rather hope that just a few will turn into world class stars, with the rest being discarded at the age of 16 or less and after taking little interest in their wider educational and physical development.
In contrast, some clubs in Europe take a more patient approach to the development of young players and appear to get better results; for example, Barcelona rarely lets a player go before the age of 22 or 23 and has the most acclaimed youth academy in the world. In 2010, the three finalists for the Ballon d’Or were all prod-ucts of the Barcelona system – Iniesta, Hernandez and Messi.
Against this background of shifting but growing soccer wealth and resources, and variable success in player development, the Football Talent Fund aims to provide a structured link between the development of young players and the world’s most com-petitive and vibrant professional leagues.
“The Game is about players. All too often young players aren’t taught properly and it is little wonder the conversion rate of young talent to suc-cessful professional footballer is laughable, especially in the UK. With the right teaching and ongoing player development programme I know this prob-lem can be solved. The Football Talent Fund has been formed specifically to address this and in time the impact of its work will also be found in the UK”. Terry Venables
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The Football Talent Fund aims to counteract the perceived inadequacies of youth player development by providing a sup-portive and broad environment in which talented youngsters under the age of 19, and hereafter referred to as ‘the Players’, can develop individually – in terms of their football progres-sion, personal and academic achievement. Most importantly, the Fund will provide them with the opportunity to develop as players in a competitive professional club environment and showcase their footballing ability to higher placed clubs from leading professional leagues around the world.
The Fund’s management team will focus specifically on high level player development in the under-19 age range, bring-ing together a mix of talented international young players with proven football skill sets who can also benefit from early integration of different football cultures. The core business will be managed and delivered within a professional football club environment, based in Portugal (second tier professional league) and hereafter referred to as the Club.
The rationale for choosing the Club in Portugal is based on the country’s colonial background that enables greater freedom for the movement of players (immigration), in par-ticular when dealing with players from South America and Africa, being two of the key continents in which the Fund will operate. The Club also competes in one of Europe’s well recognised leagues (Primeira Liga) and is constantly moni-tored by the big clubs in other more substantial leagues in Europe, including the English Premiership, La Liga, Bundes-liga and Serie A.
Portugal itself produces quality young players and is con-sistently deemed to be a progression region, whereby very talented players are quickly acquired by other higher tier clubs that are looking for the ‘finished article’. The Fund will tap into this supply chain and look to include some young players from Portugal within its recognised squad of Players.
The Fund’s management will utilise its own highly qualified coaches to focus fully on maximising player development and integrate this within the professional training environment of the Club. Any player below the age of 18 will also benefit from a specific and dedicated education program in line with FIFA ‘best practice’, and mindful of Article 19 of FIFA’s rule book, which restricts international transfer of any player under the age of 18 (with the exception of clause 19.2.(a) (b) & (c). The combination of the above is geared to achieving significant future contract value for each Player, and bringing value gains and steady in-come growth for both the Players and the Fund’s investors.
Future and continued supply of young football talent will be achieved via strategic partner relationships - initially with
two specific clubs/academies (being Partner Clubs) in the continents of South America (Chile) and one in Africa. These Partner Clubs wish to secure a player development connection and route to the game’s most developed professional leagues, and view an association with the Club via the Fund as an ideal means of achieving these aims.
The Fund will bring the most talented players that have been nurtured by the Partner Clubs (and the Club), and en-dorsed by the Fund’s coaching team, to its player development programme and into an environment that is totally geared to integrating, developing and eventually showcasing such play-ers to various international professional leagues.
The Fund and the Club will not focus exclusively on non-European players, but will be open also to all young Europe-based players with comparable qualities. Furthermore, the Fund will also retain managerial control over the Under-19 youth team at the Club and continue to invest in its existing player development programme.
The Fund anticipates taking minority equity stakes in the selected Partner Clubs, two of which are currently nearing contract completion; for commercial sensitivity reasons the names of the clubs have not been disclosed in this document.
The Fund will also keep in focus young players in other football emerging territories, including the USA and Eastern Europe. The Fund’s management believes that all the chosen regions offer a wealth of emerging talent and that the ‘Partner Clubs’ structure can provide a valuable filtering process ena-bling the Fund to focus on the very best talent.
The Fund will assist expansion of existing facilities at Partner Clubs to develop both football and general education pro-grammes in a college style environment; the Fund’s manage-ment believes this will increase Partner Clubs’ ability to attract the most talented players in their respective regions.
Participation in competitive league games is a vital part of any player’s development, and key to the Fund’s philosophy. The Fund’s relationship with the Club effectively provides all Players signed by the Fund with three-tier playing oppor-tunities - the Club’s Under-19 team, its Under-23 team and professional First Team. This will provide natural and flexible development progression for all Players.
In return for investing/supporting the development of its Partner Clubs, the Fund will be able to select up to 12 players a year from each Partner Club and in return receive a fixed percentage of agency rights of all Players that move to the Club. Such rights will cover all aspects of the Players’ future earnings: marketing and promotional income, as well as salary and future transfer fees.
The Fund aims to prepare its Players for top-flight football and also for life after ‘the game’; whether a player retires early because of unforeseen injury or enjoys a full playing career. All Players and the Fund will be insured against potential prema-ture end to their football careers.
Successful Players will have the opportunity to progress through the Partner Clubs to the Club and then into the Club’s first team professional squad and in the process have the real opportunity of showcasing their talent to a broader audience. The ultimate progression target will be a move to a higher
ranked professional club (via transfers/loans). (The structure for Player progression as detailed above is referred to as the ‘System’ elsewhere in this document.)
The Fund, as previously highlighted, is also looking at poten-tial partnerships with other clubs in Eastern Europe and USA and expects over time to increase the number of its Partner Clubs and player development facilities. Any such tie-ups may or may not involve the Fund in making equity or direct invest-ment into the specific clubs, and will be based on potential Player and commercial value.
4. the Fund – ‘bringing Potential in to Play’
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Directors and management of the Football Talent Fund believe firmly that the proper development of young players is now an integral part of the global game and in itself offers substantial revenue and investment opportunities. Indeed, the establish-ment of its System is expected to be just the start; roll-out of the Fund’s model itself has significant potential, especially where current ‘soccer academies’ are clearly failing to provide real player development, instead offering generally a roster of young players without adequate high level player development coaching.
However, a key differentiator for the Fund is that, unlike most similar businesses in the ‘Academy branded’ sector, the Fund will ensure its business has multiple revenue streams and is not, therefore, reliant solely on future Player sales, a formula which, in the view of the Fund’s management, does not work.
The Fund will actively pursue other first class football/club location opportunities that may require, as an example, invest-ment in the enabling development and whereby (through plan-ning gains etc.) the Fund ends up owning not only core sports-based facilities but also all/some of the other facilities needed in that location. This broad investment approach will enable the Fund to generate other commercial revenue streams in parallel with its football model and core revenues.
Primary Aims of the Fund are to:1. Develop its System and wherever possible secure equity
interests in Partner Clubs and thereafter operate the business for nurturing and developing young football tal-ent (up to age 19). The Fund is geared to giving young-sters, who have the aspiration and ability to succeed, a genuine chance to secure playing contracts with leading professional clubs, either in Europe or in other growth football markets. This process will be aided by the Fund’s management team and advisors, all of whom have im-pressive track records in the understanding and workings of professional football on an international scale.
2. Establish the Fund as an asset based business, and en-able the Fund to create more stand-alone Partner Club facilities in line with its commercial template.
A summary of objectives for the Fund’s operations and its business model are:
• To deliver a sound business platform that generates a range of long-term commercial revenues to underpin the develop-ment and operation of its core football business model
• To develop its System, its football business and facilities without the necessity of relying solely on the generation of future Player loan or selling fees from other profes-sional football clubs
• To identify prime locations to enable the Fund to develop its template System and provide first class Player devel-opment coaching, training and educational facilities in a
residential environment as well as (and as importantly) developing other commercial facilities needed in that location – thus generating and maximising secondary revenue streams
As the cost of contracting professional players continues to escalate the need has never been greater for clubs to identify, nurture, develop and secure first class young talented players while the game, at every level, continues to wrestle and balance its finances against ongoing demands for success on the pitch.
The core asset of any club is its players and the current market dictates that professional clubs have the following key targets:
• to maintain the best playing squad and management within their financial resources
• to ensure they continually play at the highest possible level in order to maximise all associated commercial revenues
• to secure, develop and nurture young talent in the most cost-effective and commercially acceptable manner, and in doing so protect the club’s balance sheet and its long term future
The ongoing demands, frustrations and general management of the game lead to many variables to the above, in particular when clubs choose to chase immediate success at any cost. In many instances this is driven and funded by wealthy individu-als who are often prepared to take clubs beyond their natural financial resources. Today, there are many examples where this approach can jeopardise the very existence of a club; in particular when it has become subject to a leveraged deal and thereafter has to meet the terms of high interest loans to ser-vice the debt created by new owners in buying the club.
Whilst the game has recently woken up to the economics of striving for success at any cost, many clubs still, despite having their own Academies (as in the English Premier League), have minimal pull through of home grown young talent to their first teams. Also, many of these clubs remain focused on identify-ing youngsters around the globe, often as early as age 10, and secure their services via various schemes that can by-pass current FIFA guidelines and rules. The knock-on effect is that these clubs, who remain over-active in the transfer market, often have to release quality young players (circa 16+ years of age) that their Academy coaches would prefer to keep, because they are extremely talented but not yet fully devel-oped. It is youngsters such as these that the Fund will look to identify, follow and monitor as potential Players for either its Partner Clubs or the Club.
The Fund aims to provide a sustainable platform for talented young footballers aged under 19 and sourced from around the world (in line with current and future legislation) to develop and enhance their skill sets, and in doing so provide a shop window opportunity for professional clubs to look to secure their future services on a contractual basis, with the Fund retaining third party ownership interest (circa 25% sell-on plus image rights).
5. the Fund’s business model – ‘a two-Footed approach’
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6. FaCilities For Players
It is essential that the Partner Clubs have and develop all the right facilities to give young players full opportunity to develop all their skills. The Fund will assist additional facility develop-ment with this in mind, and will be contracted to enhance all youth player services at our Partner Clubs.
The Fund’s proposed Partner Clubs already have functioning football academies which the Fund will work with in identify-ing appropriate players that its Coaches believe have the best opportunity to develop and make a career in professional football in Europe or elsewhere. As highlighted, the Fund will also look to assist, develop and invest in players and facilities where necessary. The Partner Club in Chile already attracts young players from all across South America and needs to de-velop options outside of the territory for players to progress or move on to, and sees a contractual relationship with the Fund as solving this issue.
Africa, being a strong and fast emerging football continent, is where the Fund currently has another Partner Club op-portunity, and is in discussions with high profile individuals in a leading West African country who are keen to secure a similar relationship to that of our proposed Partner Club in Chile. Our potential partners in Africa are led by an English Premier League player whom, because of his playing status, his national government would like to support in further development of his current football academy. His academy already draws play-ers from a number of other countries, but has limited outlets for its very best talent. By helping to solve this dilemma, the Fund can improve the current position significantly and add value to the academy.
The Fund’s key Club in Portugal wishes to develop its youth team structure and offer, and the proposed relationship with the Fund provides a valued solution, whereby the Fund will also operate and manage the Under-19 Club youth team (plus future Under-23 team) as well as the overseas player integra-tion and development programme.
Monies from the Fund will, where appropriate and ap-proved, be put toward improving facilities at all locations and to giving young players improved coaching and physical development on a tailored small group and individual basis. The aim will be to produce well-rounded, highly skilled players ready to progress to the Club teams and thereafter into top tier football clubs.
The Football Talent Fund will ensure that the Club and each Partner Club fully focus on providing better training and other add-on facilities that can also be used and hired locally on a commercial basis. Such facilities will only get investment from the Fund if the Fund can justify such support on commercial grounds and if other development funding is in place – e.g., grants and local investment.
ownershiPIt is the intention, where possible, to own and manage various facilities except those licensed or via a joint venture relation-ship. The Fund’s interest in facilities or equity stakes in indi-vidual clubs will always be held via the Fund, or via subsidiaries of the Fund set up specifically for developing a venture and/or for investment purposes.
Community integrationEach facility is also expected to integrate fully with the local community. This will be enhanced by the fact that each facility will also have commercial facilities that had been previously been identified as a key need/requirement for the area; and thus generate significant footfall.
identiFiCationEach Partner Club facility will be highly visible with strong FTF branding and signage, coupled with road directional signage.
CoaChingThe Fund will employ, to work at the Club, the following personnel on a full time basis, all of whom must have a track record for specific player development skill sets:
• Head Coach: (UEFA Pro or ‘A’ Licence)• 2 x Assistant Coaches: (minimum UEFA ‘A’/‘B’ Licence)• Managing Director: Hugo Ribeiro (strong management
skill sets and industry background in player development and responsible for the Fund’s day to day operations)
• Other supporting positions will be provided through the contractual relationship with the Club
Only top qualified football coaches will be employed to provide the required level and intense training programmes necessary. As an absolute minimum, the Head Coach will be UEFA ‘Pro’/‘A’ qualified, and his Assistant Coaches, who will work under his guidance, to have minimum UEFA ‘B’ quali-fication. Each will require CRS accreditation as per the legal guidelines used in the UK.
The Fund’s minimum ratio of Coaches to Players will be 1 to 8.
eduCationIt will be compulsory for the Fund to provide Players under age 18 with an educational programme, to be delivered by qualified tutors at either (i) the Club, or (ii) via an arrange-ment with local schools, colleges or universities. There will be a requirement to study certain subjects, in particular English language which is now viewed internationally as an asset for any player whether they remain within the game or not. Total tuition will comprise of a minimum of 15 hours per week.
The Fund is in contractual discussions to appoint, where appropriate, recognized and fully registered language teach-ers. The appointed organization will coordinate and manage tutor provision and tailored programmes for those Players. All tutors must comply with relevant local qualifications and CRB (Criminal Records Bureau) or their equivalent clearance.
The level of educational courses offered either in-house or via local school, college or university or similar will be equiva-lent to:
(i) BTEC National in Sport – Level 3 Certificate, being a two year course requiring 15 hours per week and is the equivalent of two A levels.
(ii) BTEC National in Sport – Diploma, being a two year course requiring 16+hours per week and is the equiva-lent to three A levels
(iii) Two year Foundation Degree (+Three year BSc (Hons) Degree)
Being a Degree in Sports Performance and Coaching(iv) ‘Apprenticeship in Sporting Excellence’ (ASE), being
an English Premiership League requirement and is a daily diary-style review/blog made by the Players during their time at the Club
In addition to the above, Players will be able to study through distant learning a range of other subjects, ranging from football related sports science or medicine, or the more traditional subjects such as mathematics, sciences, economics, history etc.
Importantly, it is the objective of the Fund also to offer all Players the opportunity to undertake specific Football Coaching courses (and Preliminary Referee Courses) in the event that some Players may not progress in the profes-sional game but would retain the opportunity to develop a career in related areas.
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7. the Fund’s management and advisors
Management of the Fund is led by Hugo Ribeiro, who will manage the day to day operations of the Fund’s business and its interface with the Partner Clubs and Club. Supporting Hugo, will be Chile-based Michael Black, who will also provide addi-tional managerial support relating to the American markets.
These two will be supported by Terry Venables and John Mitchell, both former professional players and consultants to the Fund - John fulfilling a strategic and commercial advisory role, and Terry providing specific consultancy on coaching and scouting requirements and structures.
Biographies of each of the above are detailed below.The Fund intends to appoint a dedicated Financial Director in
due course to assist Hugo and the Fund’s independent auditors and advisors.
hugo ribeiro, Founder and managing direCtorHugo is a former professional footballer who represented Por-tugal at the age of 18. His club career started at Benfica (where he broke into the first team at just 17 years old), and pro-gressed to Atletico Madrid and Paris Saint-Germain. Despite showing great talent at a young age, at just 22 he suffered a serious knee injury from which he struggled to recover over subsequent seasons.
Hugo has experienced first-hand the ‘feeder’ system operat-ing in large parts of Europe (as both a player and a coach) and many of the challenges which players face when they are on the books of major clubs at a young age.
Immediately following his retirement as a player and up until April 2013, he was promoted through a succession of youth team coaching and scouting roles at Portugal’s top soccer clubs, including Benfica and Sporting Lisbon. Over the past decade he has gained extensive experience of running sports academies and is a fully qualified teacher, having also run physical educa-tion classes at university level in Portugal. Hugo is currently General Manager of HDR Sports Management Group, and an official sports adviser to one of the political districts of Lisbon. He has held this latter role since the start of 2014.
terry venables, CoaChing and sCouting ConsultantTerry Venables is not only the elder statesman of British Football but also arguably the finest English Coach of his and subsequent generations. Terry’s illustrious playing career saw him sign for Chelsea at 15 before becoming Club Captain at 19, the youngest ever First Division Captain, before spells at Spurs, QPR and Crystal Palace. In the process Terry won a host of International Caps and he remains to this day the only player to represent England at every level.
It was at Crystal Palace that he hung up his boots and became a Coach and his young Third Division team became known as “the team of the eighties” as they combined at-tractive football with the ability to win promotion to the First Division. He repeated this feat with Second Division QPR winning them promotion, an FA Cup Final place and European Qualification. Little wonder that European giants Barcelona gambled on him as their first ever foreign coach where he secured them the La Liga title at the first time of trying and Barca’s first title win in 14 years. He took Barcelona to the European Cup Final and World Soccer Magazine voted him The Manager of The Year in 1985.
Six years in charge of Tottenham Hotspur (including an FA Cup win), two and an half years as Coach of the England national team in the mid-1990s (where he led England to a semi-final place in Euro ’96) and management of the Aus-tralian national squad in 1996/7 then followed. Terry is an accomplished Author, newspaper and television pundit and as keen a student now of the game he loves as he was at the start of his career.
John mitChell, Founder and industry advisorJohn has an extensive marketing background with specific skill sets in the business of sport and sport asset development, and throughout his post-soccer business career he has consulted on various investment opportunities for leisure funds primarily in sport, leisure and media related businesses.
His playing career spanned almost 15 years, and he was a professional footballer with Fulham FC (circa nine years), scoring the semi-final goals in 1975 to take Fulham to the FA Cup Final at Wembley. During his playing career he continued with his studies and secured a business sports management diploma, and set up a small sports franchise (merchandise) business that was eventually sold to a UK plc just prior to his early retirement through injury in 1979.
John has since had a varied and active business life. Here are some of the highlights:
• The aforementioned sports business was acquired in the early 1980s by Blue Arrow, and John was subsequently asked to set up and manage a conference and incentive division that turned over £2.2m in its first year of trading, winning a prestigious industry award in that first year of operation.
• Appointed Marketing Director to Peter de Savary’s British America’s Cup Challenge and secured over £10m spon-sorship support for the campaign.
• Consulted on the creation and implementation of the Football League Play Offs, working with the client (Barclays, who were then the Football League sponsor).
• In 1992 was lead consultant with Bobby Moore (OBE) to MasterCard’s FIFA World Cup sponsorship securement and member bank exploitation programme. Also advised on the contracting with FIFA and the appointment of Pele as World Ambassador - sponsorship still operational.
• Developed and sold (to Sony) on behalf of The Football Association the theme tune rights to ‘Three Lions on your Shirt’ (Euro ’96).
• Appointed CEO Luton Town FC and secured new stadium site and the development funding (£35m). After two years, resigned due to a FA charge relating to an arms-length association (rather than involvement) with inap-propriate payments made to players by another director of the Club and unknown to the other board members and Club Secretary.
miChael blaCK, investment advisor (ameriCas)Michael has extensive international experience in the sports industry - from working with one of the top global sponsors in sports (Coca-Cola), to one of the largest sports bodies in the world (FIFA) and in some of the top global sports mar-keting agencies (Octagon and Santa Monica). He brings with him an impressive multi-cultural experience, having studied and worked in all of Latin America, the US, Europe and Australasia. Michael speaks fluent Spanish and English, and conversational German. His experience ranges from strategic communications, marketing, sponsorship sales and activa-tion, TV rights acquisitions, events and management and he retains a unique experience in combining sports and social development and Corporate Social Responsibility.
Michael headed up a team that completed the first IPO of a football club in the Americas (Colo-Colo, Chile, 2005). The IPO raised over US$35 million and for a while was the number one share in Chile. A former professional footballer, Michael con-tinued to do sports analysis and commentating on radio, TV as well as writing for several newspapers and magazines, mostly in his home country, Chile, where he still resides. He has also taught at a couple of Universities in Chile, and has lectured at Universities in the US on sports marketing and sports and social development and has advised Cytori on its international sports interest and developments.
Michael Black, Investment Advisor (Americas)
Terry Venables, Coaching and Scouting Consultant
Hugo Ribeiro, Founder and Managing Director
John Mitchell, Founder and Industry Advisor
Hugo Ribeiro, Founder and Managing Director
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8. investment struCture andFinanCial ProJeCtions
The Football Talent Fund seeks to raise up to £5,000,000 through the issue of 5,000 Units at a per Unit price of £1,000, and has a minimum target fund raising of £1,000,000. Invest-ment will be by way of subscription for Units, with a minimum subscription of £5,000 per investor.
The lifespan of the Fund is expected to be not less than five years, but the directors reserve the right to redeem the Fund’s Units earlier, should this be considered appropriate – for example, in the event of a third party offer. The Directors also expect to consider listing of the Units on a regulated exchange at a suitable point in the Fund’s development.
The investment opportunity is structured to provide annual yield and growth, with the first yield payment commencing in year three and rising steadily thereafter. This reflects the de-velopmental nature of the business in regard to both individual contracted Players and facility improvements and related com-mercial developments.
FinanCial ProJeCtionsAlthough the Directors and management of the Fund expect to generate multiple revenue streams over time, all income and future dividend forecasts in this document are based solely on potential expenditure in relationship to the Club and Partner Clubs and revenues from the initial group of engaged Players. The projections also only take account of the Fund running two Partner Club associations.
Any future revenues from Player sales or facility related commercial activities have not been taken into account, although all projected annualised expenditure at the two Part-ner Clubs and at the Club in Portugal have been forecast and checked against current market costs.
Given the nature of the Fund and its strategic investment in soccer player development and associated facilities, the Fund and its advisors do not expect the Fund to make any dividend payment to investors before 2017. However, asset apprecia-tion in regard to the value of the Fund’s portfolio of Players, club and facility investments is expected to accrue from year one. A full Net Asset Value figure will be reported to investors at the end of the first full financial year, and will be arrived at by independent auditors and valuers. The Fund’s financial year will end on 30th June.
revenue and ProFit From Player salesIn return for its investment in developing the selected Players (who will be contracted to a minimum 2-year term), the Fund
will acquire a minimum 25% interest in the playing, transfer and commercial rights of all such Players contracted to the Club. A maximum of up to 24 Players will secure a contract with the Fund at the Club at any one time, with new Players taken on as others progress or leave – the specific target being first team football at the Club or a transfer to other profes-sional clubs.
As an example, the Fund acquires 25% of Player A’s owner-ship rights, with contracts governed by English law. Player A is subsequently sold from Club 1 (the club to which the Fund is attached and in which the Fund has a minority shareholding) to Club 2 (third party buyer) for £1,925,000; therefore, 25% of £1,925,000 (£482,000) is generated directly for the Fund.
Thus, on one individual player and based upon one trade over approximately five years, the gross revenue generated for the Fund is £482,000.
It should be noted that the Fund bases projections upon fees expected to be generated from transfers to a variety of football clubs around the world and not the highest trans-fer fees paid, for example, in respect of transfers to Premier League clubs in the UK, La Liga in Spain or the Bundesliga in Germany (currently amongst the top five leagues in Europe). Nor is the Fund budgeting for profits generated from substan-tial one-off transfers. Projections are based upon estimated moderate fees involving clubs in the lower English and Euro-pean Leagues. The number of transfers on which projections are based also does not allow for the natural expansion of the list of the Fund’s total contracted players via steady through-put of Players from the Partner Clubs.
ForeCast inCome over 5 years The Fund has prepared a forecast of anticipated returns only from owning transfer rights in young and developing football-ers at the Club. Likely income from additional commercial rights or other commercial activities associated with each Part-ner Club or Club is not included in these figures, although the Directors and management of the Fund believe such income will be significant in the years ahead.
The Fund will secure ownership/contractual rights in respect of up to 24 Players at the Club in year one. Whilst there will be no direct cost to the Fund in acquiring these rights, the Fund’s expenditure on players is calculated on the basis of an average annual maintenance cost per Player sustained for a minimum of two years. Clearly, the actual cost per Player will vary depending on the educational courses each under age 18 Player takes or needs; the Fund expects the number of Players
under the age of 18 will not exceed eight. Despite clear vari-ables in terms of the age balance and needs of the selected Player squad, the Fund believes it is able to make a reliable forecast of costs given the experience of its industry advisors and management team, coupled with the Partner Clubs’ youth team financial data.
The Fund has budgeted for a 66% failure rate (approximately 16 out of 24 Players in any one year). The reasons for failure could be lack of required progress, loss of form, inability to settle in a new environment, injury, general de-motivation etc. Whilst the potential failure rate is likely to be reduced by the positive environment and professional support offered through the player development programme, it is likely that any year’s intake will see a majority of the young Players not completing their courses or professional football development. Whilst the Fund’s managers anticipate only a minimal failure rate (compared to published drop-out rates at UK football academies, for example) the Fund has deliberately adopted what it believes is a conservative assumption incorporating a substantial failure rate.
The Fund has initially projected approximately £3,850,000 gross revenue over a 5-year period from Player trading. This is calculated using the same assumptions as in the earlier illustration for an individual footballer set out above. The as-sumptions are:
(1) The Company secures an average of 25% of the owner-ship/contractual rights of 24 Players.
(2) Eight Players are subsequently traded once as outlined in the first illustration, generating an average revenue of £482,000 per player (8 x £482,000 = £3,850,000)
The average development and maintenance cost per Player is put at £15,000, generating a ‘cost of sale’ of £360,000 (24 x £15,000 = £360,000). (This average cost is based on a 2-year college enrolment per Player at the Club’s location and as-suming each player takes a minimum of two courses (includ-ing English and at least one technical subject). The average maintenance cost per player also allows for the 66% drop-out rate and irrecoverable costs associated with uncompleted courses.
Therefore, the gross profit generated from these transac-tions = £3,490,000.
The Fund will also incur additional running costs, adminis-tration costs and general overheads. These costs have been estimated at approximately £50,000 per annum over five years per Partner Club and £100,000 per annum at the Club. These are average repeated cost figures across all facilities, and do not take account of capital or investment costs. In addition,
the Fund will need to pay certain sales commissions and other fees – such as legal and insurance fees. These costs have been budgeted at £30,000 a year per facility.
Therefore, over five years the total management fees, commissions and overheads are budgeted at £1,450,000. This leaves net profits (on player transactions alone) of £2,040,000, or roughly £400,000 per annum averaged over a 5-year period.
Therefore, on the assumptions above and after requisite tax considerations in the appropriate jurisdictions (Portugal 23% and Chile 20% currently, for example), £1,601,000 (net of full averaged tax rate of 21.5%) will be available to be voted as a dividend over the first five years of the life of the Fund. On the maximum subscription of £5,000,000 this gives a gross 5-year return in excess of 32%, or 6.4% annually on average.
As the illustration above indicates, the Fund generates income and therefore makes profits available for distribu-tion, when players are bought and sold by clubs. These transactions are unlikely to be spread evenly over the 5-year period, or any period. Accordingly, the availability of profits for distribution is likely to be uneven over the 5-year period. The Fund forecasts that the majority of such player transac-tions will occur from year 2 onwards, and for this reason proposes to make the first distribution of income in year 3 and annually thereafter.
No other secondary commercial revenue has been included in the projections.
Tax has been estimated on a ‘top rate scenario’, even though in certain jurisdictions trading profits for the Fund may not be subject to taxation or may be mitigated by specific allowances and incentives.
Given that the above figures take no account of profits from additional revenue streams, or of any inflation in player and commercial rights values, the Directors and Management believe these to be ‘base’ income assumptions prepared on a conservative set of estimates.
8.1 borrowingIt is possible that the Fund will, where required, arrange bor-rowing from banks and/or third parties in order to assist with individual project costs or any short-term funding require-ments. Such borrowings will not exceed 50% of the market value of any project, although the Fund retains the right to vary this limit if and when needed. Project-linked borrowings, in any case, will be on behalf of special purpose, limited liabil-ity companies set up for specific projects and may or may not be underwritten by the Fund itself.
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8.2 returnsThe returns are based on the Fund paying investors yield pay-ments annually in arrears. At the end of the investment period of five years the Fund intends to redeem all Units issued by the Fund. Upon redemption it is intended investors will receive the return of their original capital plus growth.
8.3 exit strategyIt is expected that at the end of the fifth year of the invest-ment period the Fund will have enough capital to redeem the Units issued to investors in full.
8.4 the Fund managersCavendish Fund Management Limited (“Cavendish”), who are authorized and regulated by the Financial Services Commission (“FSC”), are responsible for advising the Fund’s Directors in connection with the investment opportunities.
The Fund Manager may, in its discretion, delegate the provision of certain services to other persons or to commission the services of advisers or other investment professionals and experts.
Financial Controller: All accountancy and audit functions for the Fund will be filled by Rochesters LLP, at a fixed annual fee, while day-to-day book keeping for each Partner Club will be in-corporated within each Partner Club’s accounting procedures.
8.5 net asset valueAnnual calculation of Net Asset Value per Unit of the Fund will be undertaken by Rochesters LLP in conjunction with appropri-ate independent consultants. The first such NAV calculation will be undertaken at the end of the Fund’s first full year of operation. The Fund expects to work to a 30th June year end, giving a 30th June 2016 first NAV calculation date. The NAV will be published as part of the annual report for that year and annually thereafter.
8.6 the Fund administratorsFootball Talent Fund (Hong Kong) Limited (“FTF(HK)”) will be responsible for the administration of the Fund. This will include handling the investor annual valuation statements and regular Fund updates.
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9. summary oF the investment
Founders and management of the Fund have identified player development in the 16-19 age range as an area of weakness for many clubs in Europe and elsewhere, and offer the Fund as a means of strengthening resources in that category via the establishment of dedicated, young player development, coach-ing and playing facilities in key locations.
The Fund will also seek to maximize on the potential in growing markets for soccer – for example, in North America, where enthusiasm for the game now means more youngsters in the States play soccer than any other sport, and to the extent that demand for suitable facilities (stadia, league fran-chises etc) is outstripping current supply.
Overall, the Football Talent Fund will seek to invest in and maximize returns from player development and related activi-ties and services.
In regard to players under contract with the Fund and its Partner Clubs, the Fund will have the following objectives:
In related facilities and services, the Fund will have the fol-lowing objectives:
• Secure advantageous locations and partners• Identify needed facilities for both club and community
use (leisure, medical, retail)• Fully secure and contracted relationships with all parties• Independent valuations to underpin all investments and
developments
As a result, the Fund expects to generate strong revenue streams and income growth over the medium to long terms, and to maximize asset value.
Target returns:(1) Minimum annual dividends equivalent to 6.4% over first
five years of the life of the Fund, rising thereafter(2) Asset value rising in line with average annual global
growth rate for soccer revenues – put at 8% for 2012/13 season by Deloitte in regard to world’s top 20 clubs and estimated at 6% per annum for the Fund in the mini-mum total target returns
Management led by Hugo Ribeiro and John Mitchell – Hugo has extensive experience of player development and the feeder club structure in Portugal and Spain, and full profes-sional qualifications at youth team level. Combined with John’s club management and commercial experience in the UK and US and Michael Black’s in-depth knowledge of the game and of all commercial and investment aspects of sport, across the Americas and internationally, they lead a competent and quali-fied team.
Terry Venables provides a wealth of additional high level coaching and player development coaching experience, as well as an understanding of the game that only a handful of coaches worldwide can claim. Terry also brings a wealth of commercial expertise that widens the Fund’s contact network throughout the global game.
10. Fees and Commissions
10.1 arrangement FeeThe Fund will pay a one-off arrangement fee to Cavendish As-set Management Limited (“the “arrangement fee”) equal to 1% of all monies raised in consideration of the introduction of opportunities to the Fund.
10.2 annual management Fee The Fund shall pay an annual management fee to Cavendish Asset Management Limited (the “Management Fee”), pay-able monthly in arrears by the Fund, which is equal to two per cent (2%) per annum of the total Units in issue. Caven-dish shall be responsible for providing all office personnel, office space and office facilities required for the performance of their services.
10.3 annual administration FeeThe Fund shall pay an annual administration fee to Football Tal-ent Fund (Hong Kong) Limited (“the Administration fee”) equal to 1% of all monies raised in consideration of the introduction of opportunities to the Fund. FTF (HK) shall be responsible for providing all office personnel, office space and office facilities required for the performance of their services.
10.4 CommissionsCommissions of 6% of the total amount invested in Units shall be paid by the Fund to authorized and regulated finan-cial advisors who have introduced investors to and advised investors on the Football Talent Fund opportunity.
10.5 marKeting and Promotional CostsThe Fund will appoint a marketing agency to assist with all fund raising and public relation activities connected to the Fund. The agency will be remunerated depending on the suc-cess of the Fund issue and to a pre-agreed maximum.
10.6 other Fees and exPensesSave as set out above, the Fund will bear all of its initial and ongoing operating costs and expenses including, the costs and expenses of:
(i) all transactions carried out by it or on its behalf; and(ii) the initial establishment and ongoing administration of
the Fund, including:(a) the charges and expenses of legal advisers, ac-
countants and auditors, including in relation to due diligence, planning and acquisition costs of the underlying investments;
(b) all taxes and corporate fees payable to governments or agencies;
(c) Director’s reasonable expenses (if any);(d) interest on borrowings (if any);(e) the cost of insurance (if any) for the benefit of the
Director;(f) litigation and indemnification expenses and extraor-
dinary expenses not incurred in the ordinary course of business; and
(g) all other organizational and operating expenses of the Fund.
The Fund will cap these fees at £100,000.
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11. summary oF the Fund
Offered for subscription will be 5,000 unsecured Units, which will each have a principal value of £1,000. The minimum investment level will be £5,000 (5 units).
The Units have been constituted by a resolution of the Fund Board and created by the share register that has been executed as a deed by the Fund’s directors.
Fund Units are unsecured shares issued by the Fund. In the event of an annual dividend (yield) being paid, the sum invested by the unitholders (investors) will be repaid at matu-rity in five years if the unitholders elect to redeem the Fund in its entirety (unless the Fund’s Directors opt to redeem the Fund early), plus any growth of the Fund’s value on realisation, proportioned accordingly, if yield is reinvested. Otherwise, the Fund remains outstanding, and Fund unitholders will continue to receive any dividend/yield payments until they choose to re-deem it on a subsequent anniversary. In the meantime, Fund unitholders will receive annual yield payments on their original subscription as applicable.
11.1 transFer oF Fund unitsExcept for the transfer:
(a) from a pension scheme to a beneficiary of such scheme or to replacement trustees;
(b) by a beneficial owner to a nominee of that beneficial owner (or vice versa); or
(c) between nominees for the same beneficial owner;
Investors should therefore be aware that they are effectively ‘locked in’ to the investment for the intended timescale out-lined in this Document.
11.2 redemPtionThe Fund Units will be redeemable at any time on 14 days’ written notice to the investors at par together with all accruals of yield on the Units.
The Fund Units also become immediately redeemable by the Fund and due on demand:
(a) on the 5th anniversary of their issue; or(b) if there is an insolvency event in respect of the Fund.
On redemption all accrued yield will become payable.
11.3 yield PaymentThe holders of Units do not have an automatic right to a yield payment. However, it is the intent of the Directors of the Fund to declare yield payments from Year 3 onwards. To the extent that when a yield payment is declared, it will be paid to inves-tors pro-rata to their holdings of Fund Units and in compliance with any applicable laws.
11.4 redemPtion PaymentThe Fund will pay a redemption figure equivalent to the origi-nal investment into the Fund, plus any excess value, to those Unit holders on the register at the end of Year 5.
