Foresight 3 & 4 merger

[127tolmers]

Foresight 3 & 4 have just released half year results. Starting with F3:

http://www.investegate.co.uk/foresight- ... 0308H0744/

NAV up 3.7p or 6.2%.

New investments unlikely in short term unless realisations or new share issue.

Recent investments doing well.

Board confident it can maintain dividend and will increase if good portfolio performance and it is prudent to so so.

Merger terms reiterated. Expect a regular programme of buybacks at 10% discount. Post merger a tender offer is envisaged and a dividend payment.

Shareholder questionnaire on merger enclosed with half year reports with advisory vote.

Net current assets still very low vs net assets at about 2.7p/share.

Full report not yet on website.

Shares marked up another 1p this afternoon and are at a 12 month high at 50.5p and are up 33% on the low of 38p in August.

Turnround appears to be underway at last.

[127tolmers]

Moving on to F4:

http://www.investegate.co.uk/foresight- ... 0551H0746/

NAV up 2.2p or 3.1% over 6 months and up 5.7% over 9 months.

New investments unlikely in short term unless greater liquidity.

Recent investments doing well.

Board confident it can maintain dividend and will increase if good portfolio performance and it is prudent to so so.

Merger terms reiterated. Expect a regular programme of buybacks at 10% discount. Post merger a tender offer is envisaged and a dividend payment.

Shareholder questionnaire on merger enclosed with half year reports with advisory vote.

Net current assets still very low vs net assets at about 4.0p/share.

Full report not yet on website.

Shares marked up another 1p this afternoon and are at a 12 month high at 58.0p and are up 30% on the low of 44.5p in August.

Turnround here also appears to be underway at last.

[127tolmers]

I probably should have spelled out the current discounts relative to the anticipated 10% buybacks and tenders.

F3 NAV 63.3p, Mid price 50.5p; discount 20%

F4 NAV 72.6p, Mid price 58.0p; discount 20%

Also there are some governance issues on F4 that are worth a read

http://www.investegate.co.uk/foresight- ... 0551H0746/

Board Composition

Following the Annual General Meeting, where a number of the resolutions, including that of Director re-election, were passed by a narrow majority the following changes will be made in the coming weeks and months:

With respect to my own position as Chairman and Director, I intend to retire from the Board on the earlier of a new independent Chairman being appointed, the completion of a corporate action or 31 March 2017.

Peter Dicks has also indicated his intention to retire from the Board on the earlier of a corporate action or the annual general meeting in 2017.

A specialist recruitment firm has been engaged by the Board to assist in identifying suitable candidates for appointment.

The intention would be to have only the independent Directors, including any new appointments to the Board, to consider the options available to the Company before any recommendations are made to Shareholders.

Potential Merger with Foresight 3 VCT plc

In the annual report and accounts I mentioned that the Board had been considering whether a merger and the benefits therefrom would be in Shareholders' long term interests. As an update, the Board announced on 20 October 2016 that it had been in discussions with Foresight 3 VCT plc ('Foresight 3') regarding a potential merger and the principal details of a potential merger, should it proceed and be approved by Shareholders, are set out below:

A combined VCT with assets of approximately £70 million;
Based on the costs of the merger being in the region of £450,000, a payback period of approximately 12 months is expected;
A reduction in the aggregate number of Board directors from six to four, possibly to three over time;
A reduction in the annual management fee from 2.25% to 2.0% of net assets;
A portfolio of over 25 companies, many of which are making good progress and are profitable and which have delivered the recent improvements in NAV in the Company;
A reduction in the annual expenses cap from 3.5% to 2.95% of net assets;
An enlarged entity better positioned to raise further funds and continue with the current investment strategy; and
The ability to consider realisations within an enlarged entity to assist with creating liquidity events for Shareholders and support dividend payments.

A merger will create an enlarged VCT with enough critical mass which should generate sufficient income and realisations to meet an attractive dividend target, as well as maintaining a regular program of share buybacks aimed at maintaining a discount to NAV in the region of 10%.

It should be noted that a tri-partite merger between Foresight VCT plc, Foresight 3 and the Company would not be possible without the divestment of significant holdings including many of the new investments which, together, being over 50%, would otherwise be non-qualifying under the VCT rules..........

.........With respect to a potential merger with Foresight 3, the Board wishes to seek Shareholders' views before incurring any significant merger costs and has enclosed with these interim accounts details of a simple online advisory vote open to all Shareholders, which will be carefully considered by the Board in addition to all other options.

Following the advisory vote a recommendation on the preferred option of the independent Directors of the Board will be sent to Shareholders for their consideration.

[BusyBumbleBee]

With respect to my own position as Chairman and Director, I intend to retire from the Board on the earlier of a new independent Chairman being appointed, the completion of a corporate action or 31 March 2017.

Peter Dicks has also indicated his intention to retire from the Board on the earlier of a corporate action or the annual general meeting in 2017.

so Timbo's hard work (along with dome others has born fruit. We all owe him a vote of thanks for this - BBB

[timbo003]

so Timbo's hard work (along with some others has born fruit.

Thanks for the feedback BBB, many hands made light work in this case.

The action group intend to put out a note commenting on the latest announcements from Foresight 3 and 4, either later today or tomorrow.

Meanwhile for completeness, here are the links to the old Motley Fool thread on the subject and to the ShareSoc Foresight 4 VCT action group web page:

http://boards.fool.co.uk/foresight-4-vc ... e#13454790

http://www.sharesoc.org/foresight4.html

[timbo003]

We have now belatedly included a form to register your interest in the campaign on the ShareSoc Foresight 4 Shareholder action page, so if you are an F4 shareholder could you please take a minute to complete the form, even if you have previously had correspondence from Sharesoc on this subject, as it assists up in building up an email database of shareholders.

TIA

http://www.sharesoc.org/foresight4.html

[UncleEbenezer]

We have now belatedly included a form to register your interest in the campaign on the ShareSoc Foresight 4 Shareholder action page, so if you are an F4 shareholder could you please take a minute to complete the form, even if you have previously had correspondence from Sharesoc on this subject, as it assists up in building up an email database of shareholders.

TIA

http://www.sharesoc.org/foresight4.html

From the form:

*Note: telephone number can be omitted if you prefer but we do need a postal address as we may need to send you forms for signature if we requisition an EGM or resolutions. It also helps us to know the number of shares you hold.

That raises the barrier, as many people are cautious about sharing that information.

Shouldn't it be sufficient (as an option) to supply just an email address, to which you can then send correspondence, including pointers to where any EGM forms or other paperwork can be downloaded? Or best of all, an RSS feed to which one could subscribe anonymously and receive all such updates?

[timbo003]

That raises the barrier, as many people are cautious about sharing that information.

Shouldn't it be sufficient (as an option) to supply just an email address, to which you can then send correspondence, including pointers to where any EGM forms or other paperwork can be downloaded? Or best of all, an RSS feed to which one could subscribe anonymously and receive all such updates?

Thanks for the feedback UncleE, we will give that point some thought.

[timbo003]

That raises the barrier, as many people are cautious about sharing that information.

Shouldn't it be sufficient (as an option) to supply just an email address, to which you can then send correspondence, including pointers to where any EGM forms or other paperwork can be downloaded? Or best of all, an RSS feed to which one could subscribe anonymously and receive all such updates

The format for the campaign registration form is the standard format used for all ShareSoc campaigns, there are a number of reasons for requesting a postal address. For example:

1. ShareSoc have the share register of the company, but it only contains postal addresses. Without a postal address being supplied, ShareSoc have no way of knowing that an email address is linked to an address on the register, or is some unknown shareholder. We might end up having to post information to people repeatedly if we cannot link the email address to an address on the register.
2. People regularly change their email address without telling folks, or emails bounce for various reasons. Without a postal address, we have no way of contacting them to see if they are dead, or whatever

Anyone unwilling to supply a postal address is being somewhat paranoid as ShareSoc do hold the complete register, For Foresight 4 (and for most VCTs in general) shareholder’s names and addresses are detailed on the register, and ShareSoc do take great care to secure the contact database info.

Finally it’s also worth remembering that ShareSoc is a not for profit organisation run by volunteers, it is providing a valuable service to shareholders without requiring them to become paid members to benefit from the service, so asking them to reciprocate by providing a few confirmatory details should not be considered unreasonable.

[UncleEbenezer]

The format for the campaign registration form is the standard format used for all ShareSoc campaigns, there are a number of reasons for requesting a postal address. For example:

1. ShareSoc have the share register of the company, but it only contains postal addresses. Without a postal address being supplied, ShareSoc have no way of knowing that an email address is linked to an address on the register, or is some unknown shareholder. We might end up having to post information to people repeatedly if we cannot link the email address to an address on the register.
2. People regularly change their email address without telling folks, or emails bounce for various reasons. Without a postal address, we have no way of contacting them to see if they are dead, or whatever

I have to take issue with much of that.

Sure, the company register contains postal addresses. But ...

1. That excludes nominee accounts, some of whom might be the most paranoid people of all (witness protection programme, refuges for battered wives, and the like?). Do you want to exclude those holders from the campaign? If you allow user-supplied email addresses, you get around that hurdle.
2. How would you post information repeatedly? The only way you'd post it even once is using the address from the register. Unless you had my address more than once.
3. People change postal addresses too. I've had seven postal addresses in two countries within the lifetime of the email address you have for me (that's my strong reason to prefer email). A permanent email address is much easier to manage than where you live.
4. Better still, an RSS feed works without the subscriber having to update any address, nor any risk of something bouncing.

Anyone unwilling to supply a postal address is being somewhat paranoid as ShareSoc do hold the complete register,

The registrar is important enough to get notified next time I change address. Happily they provide the facility to notify them (except Crapita, where one has to repeat for every bloomin' holding that's not in a nominee account). Sharesoc is much more likely to be overlooked. An email address I might give you doesn't have that problem.

Oh, and I'm saving you the cost of a stamp and the effort of stuffing an envelope. When 1000 shareholders do that, it looks to me like a real benefit!

Anyway, my point isn't whether or not it's reasonable to ask for a postal address, but rather that you're raising the bar to participating in the campaign.

[Karellan]

I feel that a merger is academic in just making it a bit less bad. In my view its new investment expertise that we need here.

[BusyBumbleBee]

Hi Tim

Are you pointing the shareholders here and to ShareSoc?

kind regards - John

[Kidman]

This morning's post has brought me the Foresight 3 interim report which includes the results of their shareholder survey, and a link for shareholders to "express their opinion" on the proposed merger.

[Kidman]

I feel that a merger is academic in just making it a bit less bad. In my view its new investment expertise that we need here.

Karellan, I totally agree with you.

What puzzles me is why there is such a push for the merger, dividends are stopped until we have agreed to it and we are being tempted by a tender. They seem to be like our local council, run a consultation or two and then push on with whatever they want to do regardless.
If half the combined shareholders want to get out at near NAV, where are they going to get the money for a tender from? Is this just a lure and in practice it will be a 1 in 10 tender?
They talk of making £450,000 savings in just one year post merger. How do they get to that figure by having two directors fewer, saving one listing fee and auditors fee, having a reduced management fee etc?

[Karellan]

I suppose that I see it as more political now. If you offer people alternatives then you obscure the fact that there are other possibilities. Then when the alternatives dont work you can say that it was a shareholder decision and not managements fault. They have had 10 years to make some money but there is precious little unlike most of my other VCT holdings.

[UncleEbenezer]

I feel that a merger is academic in just making it a bit less bad. In my view its new investment expertise that we need here.

I'm going to take issue with that. The merger and the performance are more-or-less orthogonal. The merger won't fix performance, but that doesn't invalidate the reasons for it. That is, the same reasons that gave us the Baronsmead merger of just a week ago, and others in the industry.

The main red flag I can see is that a quick glance at theaic shows F4 overall charges as significantly higher than F3's. And of course F4 being the bigger fund, it would seem logical to merge F3 into it rather than vice versa. Whoops! That could be a useful focus now for the shareholder action group. In fact, I may write to them saying I support the merger but only if the charges converge downwards!

[Karellan]

As I see it they need to be seen to be doing something and this makes them seem busy but it is just kicking the problem along for a bit longer.

I notice that the paper forms with the details of how to "express their opinion" talks about an "online survey" and "invaluable feedback" but it looks remarkably like a vote to me. I am sure that the merger will go ahead and will be branded a great success.

[Kidman]

In fact, I may write to them saying I support the merger but only if the charges converge downwards!

It is proposed that post-merger the management secretarial charge will be reduced to 2% according to the recent interim reports.

My concern rests with the tender. I wrote to Foresight as invited by the letter accompanying the interim report and got a very timely and helpful reply from a lady in the investor relations section. A far cry to the never reply policy of Gary Fraser! The reply includes the following:-

The tender offer is an area where the Board have had feedback from investors and this will be factored into any decisions on the size and discount at which the tender offer is made.

I would hope the discount would be in the order of NAV less 2-3% but it is the "size" that concerns me. I would like to take advantage of the tender but don't want either to miss out or end up with a reduced holding. We will have to await the guidance that will be provided with the merger documentation.

[timbo003]

The Action Group has issued a new note commenting on the latest correspondence sent out by the Foresight 4 VCT Board of Directors which requested shareholder feedback on the proposed merger with Foresight 3 VCT

http://www.sharesoc.org/Foresight-4-Merger-Response.pdf


Foresight 4 VCT Consultation Response

The Foresight 4 VCT interim report was sent to shareholders earlier this week along with an enclosed
letter reminding shareholders that the boards of Foresight 4 and Foresight 3 were considering a
potential merger. The letter also asked shareholders to express their opinion on this matter via the
registrar’s online voting site http://www.investorcentre.co.uk/eproxy  

The online voting site asks just one question:

Are you in favour of the merger between Foresight 3 VCT and Foresight 4 VCT plc based on the likely
terms and benefits of the merger as set out in the Chairman’s statement? Yes/No

There is no provision to leave any comment to qualify why you made the decision, or whether your
decision assumed that the directors (led by a new Chairman) would negotiate improved terms with
the manager.

The Foresight 4 Action group believe that a merger under the right terms could be beneficial, but the
provisional terms as outlined in the Chairman’s statement need to be improved. For example, given
that it has been partly Foresight’s poor investment strategies which have caused the losses and lack
of cash liquidity, it would be logical for Foresight as a gesture of goodwill, to bear the costs of the
merger.

For this reason, the Action Group are not issuing a voting recommendation at this stage, but will
await the appointment of the new Chairman and the publication of the final terms of the proposed
merger before considering a recommendation on the merger proposal.

[UncleEbenezer]

The Action Group has issued a new note commenting on the latest correspondence sent out by the Foresight 4 VCT Board of Directors which requested shareholder feedback on the proposed merger with Foresight 3 VCT

Good response. Thanks for the efforts!

I was indeed disappointed to find myself called on to vote on something so vague (brexit, anyone?), and that the facility to comment was just a generic pointer to their contact details.