Investment strategy

KOINVEST II

(hereinafter referred to as the Fund)

Request for investment

Investment geography

The Fund can invest in companies operating in the Republic of Lithuania or another EU Member State, provided those investment benefits accrue to the Republic of Lithuania as stipulated in the Guidelines on the eligibility of costs of financial instruments published online at http://www.esinvesticijos.lt/lt/dokumentai/finansiniu-priemoniu-islaidu-tinkamumo-finansuoti-rekomendacijos. However, such investment in companies operating in another EU Member State cannot exceed 15% of the Fund AUM.

 

Criteria for the companies

  1. The Fund can invest in companies, which meet all of the state aid requirements at the time of investment. In the case of these investments, the rules on the allocation of income with a limited maximum Fund’s return apply (see below).
  2. The Fund can invest in micro, small or medium enterprises, which fail to comply with state aid requirements at the time of investment. In the case of these investments, the rules on the pari passu allocation of income between the private investor and the Fund apply (see below).

State aid requirements can be found here. The status of the company is determined according to the small and medium-sized enterprise (SME) status declaration.

 

Maximum Fund contribution to investment per company

  1. If an investment is made in a micro/small enterprise, which meet all of the state aid requirements, the Fund’s contribution to the specific investment can be:
    • Up to 70% if the company is registered in Vilnius, Kaunas or Klaipėda and operates in areas other than smart specialisation or implements and intends to run projects other than those in R&D;
    • Up to 80% if the company is registered in a town other than Vilnius, Kaunas or Klaipėda or the company is registered in Vilnius, Kaunas or Klaipėda and operates in the area of smart specialisation;
    • Up to 90% if the company is registered in a town other than Vilnius, Kaunas or Klaipėda and also operates in the area of smart specialisation.
  2. If an investment is made in micro, small or medium enterprises, which fail to comply with state aid requirements, the Fund’s contribution to the specific investment must not exceed 50%.

The Fund acquires the financial instruments (if any) issued by the company together with the private investor, each in proportion to their investment.

 

Fund’s investment per company

  • The total amount of the Fund’s investment in one micro or small enterprise, which meet all of the state aid requirements, may not exceed EUR 0.8 million.
  • The total amount of the Fund’s investment in one innovative micro or small enterprise, which meet all of the state aid requirements, may not exceed EUR 0.928 million. The definition of innovative company is provided in Article 2(80) of Commission Regulation (EU) No 651/2014.
  • The total amount of the Fund’s investment in one medium-sized or micro/small enterprise, which fail to comply with state aid requirements, may not exceed EUR 0.928 million.

 

Allocation of Fund’s investments

At least 50% of the Fund must be invested in companies implementing or intending to undertake R&D projects in the areas of smart specialisation[1] which will have to comply with the provisions of the programme implementing the priority axes of research and development (social, cultural) and innovation development (smart specialisation) and their priorities approved by Resolution No 411 of 30 April 2014 of the Government of the Republic of Lithuania (the “Programme”) and the action plan of at least one of the Programme’s priorities.

 

Ineligible investments

  1. Cases specified in Article 1(2-5) of the Commission Regulation (EU) No 651/2014;
  2. Investments in companies operating in the areas referred to in Article 3(3) of Regulation No 1301/2013;
  3. Investments in companies directly operating in the production, processing and trade in weapons and ammunition; tobacco and tobacco products, distilled spirits and related products;
  4. Investments in companies engaged in the organisation of gambling;
  5. Investments in companies operating in the natural sciences sector, whose activities are related to human cloning;
  6. Investment intended for refinancing or restructuring of existing loans or leasing obligations of the company or another undertaking;
  7. Investment in operations which are completed or fully implemented on the date the investment decision is adopted;
  8. Investment intended for financing a non-monetary contribution;
  9. Investment where more than 10% of the amount is intended for land acquisition;
  10. Investment intended for real estate acquisition where such acquisition is not directly related to the principal activity of the company selected for investment;
  11. Investments in companies carrying out purely financial activities or real estate development, when this activity is carried out as a financial investment activity;
  12. Investments intended to cover the costs already financed (covered) by EU Funds, other EU financial assistance instruments or other international support resulting in some costs being financed more than once.

Investments can be combined with grants and other financial instruments but the aggregate amount of all forms of financing of specific costs cannot exceed 100% of the amount of these costs as stipulated in the Rules on the Implementation of Financial Instruments.

 

Investment income sharing

I. Allocation of income with a limited maximum Fund’s return

The rules of this paragraph apply to the allocation of income from the company between the Fund and the private investor in the case of investment in a micro/small enterprise, which meet all of the state aid requirements at the time of investment.

Income from the company is allocated between the Fund and the private investor as follows:

  1. Firstly, all the amounts invested in the company are refunded to the Fund and the private investor;
  2. Secondly, income from the investment in the company is allocated to the Fund and the private investor in the following way:

Scenario one of the first case: If the company is not a participant in the alternative First North market

  • If the company, prior to the Fund’s initial investment or within 12 months after the Fund`s investment, has not raised additional funds through the alternative First North market (through distribution of shares to investors), the income is allocated between the Fund and the private investor until both of them receive 6% of annual compound interest pro rata to their investments in the company;
  • The amount of income allocated to the Fund up to 6% of annual compound interest is the cap on the Fund’s return  (the “cap on return excluding funding from First North”);

Scenario two of the first case: If the company is a participant in the alternative First North market

  • If the company, prior to the Fund’s initial investment or within 12 months after the Fund`s investment, has raised additional funds through the alternative First North market (through distribution of shares to investors), the income is allocated between the Fund and the private investor until both of them receive 4% of annual compound interest pro rata to their investments in the company;
  • The amount of income allocated to the Fund up to 4% of annual compound interest is the cap on the Fund’s return  (the “cap on return including funding from First North”);
  1. Thirdly, all the remaining unallocated income is attributed solely to the private investor.

 

II. Pari passu allocation of income between the private investor and the Fund

The rules of this paragraph apply to the allocation of income from the company between the Fund and the private investor in the case of investment in a micro/small or medium enterprise, which fail to comply with state aid requirements at the time of investment.

Income from the company which is classified as a medium-sized enterprise or micro/small enterprise not subject to state aid requirements is allocated between the Fund and the private investor on the pari passu basis, i.e. income from the company is allocated pro rata to the amount invested by each party.

 


[1] http://www.sumani2020.lt/apie-sumania-speciaizacija/prioritetai

Request for investment