Clarifications to the Call for expression of interest ref. Western Balkans EDIF: ENIF Fund Manager 2013

Question 1:

Are the amounts secured from the Co-Financing partners?

Answer:

Co-Financing partners have indicatively ear-marked budgetary lines for the benefit of ENIF, however any commitment to ENIF is subject to their individual satisfaction with any due diligence conclusions and legal negotiation with the approved Applicant.

Question 2:

What is the expected total size of the Fund?

Answer:

Total fund size will be in the region of EUR 40m. There is no specific maximum size although justification and viability of final fund size will be assessed during selection / due diligence.

Question 3:

When is the first closing expected?

Answer:

It is envisaged that the first closing of the Fund can occur before year end 2013.

Question 4:

Is the selected Fund manager entitled to obtain additional management fees if Additional

Investors are included?

Answer:

Potentially the Fund Manager is entitled. However, the fees are paid separately from the Fund and the purpose of this is to have as many commitments as possible for investment.

Question 5:

Is it envisioned that the Fund Manager is to invest in the Fund?

Answer:

It is not obligatory but it is a criterion to be assessed for the selection and approval of any Applicant.

Question 6:

Is it envisioned that management team is to invest in the Fund?

Answer:

See question 5.

Question 8:

What is the Hurdle Rate and of what percentage?

Answer:

A hurdle rate is envisaged as a market standard term, but the specific conditions and rate will be subject to discussion in due course.

Question 9:

Will the EUR 6.2 million management fee be included in the Total Capital Commitments?

Answer:

No, they are on top of the Total Capital Commitments.

Question 10:

What is the percentage that will be used to calculate the management fee from the 6th year onwards?

Answer:

The proposed percentage should be included in the Applicant’s proposal and in any case will be subject to final discussion during selection / due diligence and/or legal negotiations.

Question 11:

Is there expectation on number and size of investment directed to early stage equity financing, development and expansion stage per country?

Answer:

The numbers and size of investments should be part of the Applicant’s proposal as a core element of the investment strategy.

Question 12:

Is there a defined allocation of funds-number of investments per Beneficiary economy?

Answer:

The amount of funding and number of investments per Beneficiary economy should be part of the Applicant’s proposal as a core element of the investment strategy.

Question 13:

Principals through an affiliate of the Applicant manage funds that are investing in innovative companies in some of the countries in the Target Geography.  While such funds’ operating agreements permit (either upon certain milestones being met or with explicit investor approval) the fund raising and management of other funds even with similar missions, and we do not see any potential conflict issues, would the submission of an Expression of Interest by such Applicant raise any issues of Eligibility including without limitations those described in Appendix 4 to Annex 1.

Answer:

This will be assessed during the selection/due diligence process of the specific Applicant.

Question 14:

The Applicant must specify the Applicant’s legal form and VAT number.   Further the website indicates “Financial Intermediaries i.e. fund managers, interested to apply for the management of ENIF…”.  In regard to this information request and the website reference, the following questions emerge:

Question 14a:

Can the Applicant submit an Expression of Interest using a fund management or other company organized outside the EU?

Answer:

Yes, however the whole structure proposal will be assessed during the selection / due diligence process of the specific Applicant.

Question 14b:

Must the Applicant PRIOR to application incorporate a regulated EU based legal entity with the right to manage funds (including all regulatory approvals) or is it satisfactory if a regulated EU based legal entity with the right to manage funds will be or is in the process of being incorporated and approved by the regulatory authorities within a reasonable period after an Applicant is accepted? 

Answer:

No, the intended fund management vehicle/structure can also be under incorporation.

Question 14c:

Can the Applicant be a legal entity from the EU that has no special regulatory financial fund management registrations at the time of application?

Answer:

Yes, however the whole structure proposal will be assessed during the selection / due diligence process of the specific Applicant.

Question 14d:

Does the wording “preferably be established within the European Union” apply to the jurisdiction of the establishment of the ENIF legal entity itself as well as to “Fund related entities”?  Can ENIF be established in a non-European Union tax efficient jurisdiction of the Applicant's choice without negative implications in the selection criteria (as per Part II “Selection Criteria for the Enterprise Innovation Fund”)?

Answer:

Proposed legal structures will be assessed and discussed during the selection / due diligence process of the specific Applicant.

Positive or negative conclusions will be drawn during the selection / due diligence process. It has to be noted that EIF is fully committed to tax transparency and pays particular attention not to support tax evasive structures. Any cross-border structure should be based on an economic not tax motivation.

Question 14e:

Can the ENIF legal entity invest into a portfolio company that qualifies as an Eligible SME if (i) the final structure of such investment creates a newly established holding company in the EU outside of the Target Geographies; (ii) prior existing owners of the Eligible SME contribute their ownership in the Eligible SME to such newly established holding company, which becomes 100% (or less) owner of the Eligible SME; and (iii) investment by the ENIF is made into such newly established holding company, which in turn funds the Eligible SME?

Answer:

The SME definition and qualifying criteria are sufficiently documented and no further clarification can be provided for specific examples at this stage.

Question 15:

Does the definition of Eligible SMEs include “seed stage” companies that have no revenue?

Answer:

Yes.

Question 16:

What preference rights and other rights, if any, will Additional Investors have versus Co-Financing Partners? If Additional Investors in aggregate do not reach a “minimum proportion of the Fund’s total commitments”, do these Additional Investors receive any minority protective provisions against possible detrimental actions of the Co-Financing Partners?

Answers:

All Investors are pari passu in all operations of the Fund’s governance and financial operations.

Question 17:

On the EIF website (http://www.eif.org/what_we_do/resources/wbedif/index.htm) there is a statement that the ENIF is expected to create a portfolio of more than 20 investments. Is this stated preference to be considered as part of the Call for Expression of Interest or can the Applicant propose any strategy that they deem appropriate in terms of the number of investments?

Answer:

Applicants should propose an investment strategy that they deem appropriate and provide any supporting rationale for the strategy.

Question 18:

Please share the anticipated timing of the expected finalization of the Selection Process through to the date of actual funding availability?  

Answer:

There is no deadline for the incorporation/implementation of the funding vehicle. Where appropriate, Applicants will be kept informed of progress which is dependent on a number of factors, not all of which may be in the control of any individual party.

Question 19:

There have been EU funded local government fund management tenders that have specifically excluded the fund management experience of fund management companies and their professionals outside of that local jurisdiction. We assume that the accumulated knowledge of the fund management company and its professionals outside the Target Geography will be given at least equal weighting to that experience inside the Target Geography. Is this true?

Answer:

All information provided in Expressions of Interest will be assessed accordingly.

Question 20:

Can the ENIF funds be used to purchase all or a portion of existing ownership interests in Eligible SMEs from their existing owners with and/or without a capital infusion from the ENIF?

Answer:

The ENIF funding is intended to be for the injection of new capital into SMEs in exchange for new shares to amongst other things promote the development of products or technologies and growth of the company.

Question 21:

Can the ENIF funds invested into an Eligible SME be used by that Eligible SME for the strategic acquisition of other SMEs in and/or outside of the Target Geography?

Answer:

See answer to question 20.

Question 22:

Please clarify what is meant by (page 11, Item 9 Operational Provisions) “…the Approved Applicant shall accordingly be responsible for the fund raising (including liaising with Co-financing Partners and the closing of ENIF).”?

Answer:

While Applicants are responding to a Call in order to be selected and approved, fundraising activities which will include the coordination and negotiation as required with the Co-financing Partners will be the responsibility of the Applicant (and/or when appropriate the Fund Manager). None of the Co-financing Partners is expected to play any part in the fundraising process to attract other investors. The legal structuring of the Fund will be the responsibility of the Applicant (and/or when appropriate the Fund Manager) who will be expected to appoint its own legal counsel, administrators, custodians and other bodies as necessary.